Slide 1: Australian Site Tour
For personal use only Australian Site Tour Stainless Steel Materials CSG Jimmy Wilson President, Stainless Steel Materials 28 October 2008
Slide 2: Important notices
Important notices Reliance on third party information The views expressed here contain infor mation that have been derived from publicly For personal use only available sources that have not been independently verified. No representation or warranty is made as to the accuracy, completeness or reliab
Slide 3: Key messages
For personal use only Key messages • Safely run 100% of our assets at 100% capacity, 100% of the tim e • Delivering on committed projects • Options for low cost stable operations • Sound long run margins • Substantial resource base • Superior technology advantages • Part of BHP Billiton and hence ab
Slide 4: Agenda
For personal use only Agenda Overview of our Business Stainless Steel Materials Performance Growth Options Competitive Advantages Slide 4
Slide 5: Stainless Steel Materials in the BHP Billiton portfolio
Stainless Steel Materials in the BHP Billiton portfolio Underlying EBIT Underlying EBIT Margin(a) For personal use only (FY2008, US$bn) (FY2008) 25 Petroleum 67% Petroleum Energy (27%) Energy Coal 30% 20 Energy Coal Aluminium 31% Aluminium Base Metals 62% 15 Diamonds and Non Ferrous 20% Base Metals
Slide 6: SSM global footprint
For personal use only SSM global footprint Russia The Hague Cerro Matoso Singapore Mount Keith Nickel Indonesia Leinster Nickel Yabulu Operations Kalgoorlie Nickel New Caledonia Exploration JVs Smelter Development Options Kambalda Nickel Nickel West Fremantle Port Concentrator Marketing Offices Kwin
Slide 7: Experienced management team
For personal use only Experienced management team Jimmy Wilson President Nickel West Yabulu Cerro Matoso Human Resources Wayne Isaacs Neil Meadows Alan Pangbourne Mick Wheeler President & COO General Manager President Vice President • 30 years resources • 23 years resources • 26 years resources • 20
Slide 8: Focus to deliver value
Focus to deliver value Safely run assets at full potential For personal use only • Continuously driving a Zero Harm culture • Continuous focus on business optimisation and reliable production • Recruit, develop and retain the right people Deliver current projects • Ramp-up Ravensthorpe / Yabulu exte
Slide 9: Focus on safety
Focus on safety SSM – Total Recordable Injury Frequency Rate¹ For personal use only (TRIFR) • Key areas of focus 16 – Elimination of fatal risks 14 – Elimination of catastrophic risks – Creating operational stability, key 12 driver to improve safety 10 performance 8 – Improving the quality of our Fi
Slide 10: Agenda
For personal use only Agenda Overview of our Business Stainless Steel Materials Performance Growth Options Competitive Advantages Slide 10
Slide 11: SSM financial performance
SSM financial performance EBIT For personal use only (US$m) 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 0 FY01 FY02 FY03 FY04 FY05 FY06 FY07 Cost Efficiencies Exchange FY08 Exploration Inflation Other Price Volume Note: FY02 to FY05 shown on the basis of UKEAAP subsequent periods are calculated un
Slide 12: Agenda
For personal use only Agenda Overview of our Business Stainless Steel Materials Performance Growth Options Competitive Advantages Slide 12
Slide 13: SSM growth options in the pipeline
For personal use only SSM growth options in the pipeline Maruwai NWS NWS CMSA CMSA Heap Heap Angola Angola Macedon Macedon CMSA CMSA HeapHeap Cerrejon Stage 2 T5 T5 WA CW CW Africa Africa DRC DRC Leach Olympic OlympicDam Dam && DRC DRC Leach Leach 11 Opt Exp WA Iron Iron Ore Ore Exploration Smelter
Slide 14: Exploration focused on tier opportunities
For personal use only Exploration focused on tier 1 opportunities Norilsk Alliance Indonesia Colombia Western Australia Sulphide Exploration Laterite Provinces • Brownfields exploration to expand our WA and Colombia production • Greenfields exploration of Tier 1 opportunities Slide 14
Slide 15: Agenda
For personal use only Agenda Overview of our Business Stainless Steel Materials Performance Growth Options Competitive Advantages Slide 15
Slide 16: BHP Billiton ranks as the No. 3 nickel producer
BHP Billiton ranks as the No. 3 nickel producer Production in year ending June 2008 For personal use only (kt Ni) 350 294.0 300 253.8 250 200 167.9 150 117.1 116.3 100 54.3 54.2 50 37.2 0 1 1 Norilsk Nickel Vale BHP Billiton Xstrata Jinchuan Eramet Sumitomo Anglo American Source: Company Annual and
Slide 17: Resources to fulfil our future growth aspirations
Resources to fulfil our future growth aspirations Ni contained For personal use only (mt) 30 Resources Reserves 25.1 25 22.1 20 15 11.9 9.7 10 8.2 5 2.6 2.3 0 1 2 3 4 5 6 7 Vale Norilsk Nickel BHP Billiton Xstrata Eramet (SLN) Rio Tinto Anglo American 1 Reserves 2007 Annual report; Resources July 20
Slide 18: Our competitive advantages
Our competitive advantages Global Nickel Resources For personal use only • Significant expansion options around (mt Ni) existing assets 100 (61%) – Cerro Matoso – Nickel West 75 • Operating know-how across all technologies (39%) – Both sulphide and laterite smelting 50 and leaching process employed
Slide 19: Technology is a critical success factor for the Nickel industry
For personal use only Technology is a critical success factor for the Nickel industry Sulphide Ores – proven “simple” technology, but exploration driven Nickel metal Mining Concentrating Nickel concentrate Smelting Matte Refining (Co, Cu, PGM by-products) Key considerations: • Discovery • M ining /
Slide 20: Key messages
For personal use only Key messages • Safely run 100% of our assets at 100% capacity, 100% of the tim e • Delivering on committed projects • Options for low cost stable operations • Sound long run margins • Substantial resource base • Superior technology advantages • Part of BHP Billiton and hence ab
Slide 21: Nickel and stainless steel market review
For personal use only Australian Site Tour Nickel and stainless steel market review Stephen Williams Marketing Director, Stainless Steel Materials October 2008
Slide 22: Agenda
For personal use only Agenda Demand and substitution Supply Outlook Slide 22
Slide 23: Nickel and stainless steel market review
For personal use only Nickel and stainless steel market review • Stainless steel consumption is the key driver for nickel demand • Stainless steel and nickel are cyclical businesses with pronounced stocking and de-stocking cycles • Stainless steel demand is expected to remain robust over the long te
Slide 24: Stainless steel is the key driver of nickel demand
For personal use only Stainless steel is the key driver of nickel demand Nickel Use by Application (CY 2007) • Nickel improves durability and corrosion resistance of steel Other inc. Foundry • Two main types of stainless steel: Batteries 3% 8% – Austenitic or nickel containing Plating 8% (200 and 30
Slide 25: Emerging markets are driving this global growth
For personal use only Emerging markets are driving this global growth Stainless Steel Production Growth Stainless Steel Capacity Growth by Region (CY 2007, kt) (%) 45,000 40,000 35,000 30,000 Global CAGR 1998-2007: 5.9% China 69% 69% China 25,000 India 20,000 Other Asia 15,000 7% India 10,000 Europe
Slide 26: China's self sufficiency in stainless steel production
For personal use only China’s self sufficiency in stainless steel production China Import and Export (‘000 mt) (%) Net Import position 8,000 85% Finished Production Consumption 75% 7,000 Net Import% 65% 6,000 55% 5,000 45% 4,000 35% 3,000 25% 2,000 15% 1,000 5% 0 -5% 1995 1996 1997 1998 1999 2000 20
Slide 27: Stainless steel is a cyclical business with pronounced stocking cycles
Stainless steel is a cyclical business with pronounced stocking and de-stocking cycles Mining / Refining For personal use only 1. Global stainless steel production, quarterly 2. 1993-2009, y-o-y change % 30% % Change 25% Quarterly moving average Stainless steel mills 20% 15% 10% Distributors/ Semi-F
Slide 28: The high and volatile prices encouraged substitution
For personal use only The high and volatile prices encouraged substitution Stainless Market Share (%) 80 • 300 series stainless steel is durable, weldable and formable and is the 70 workhorse of the stainless steel industry 60 300s • We expect the rate of substitution to decline 50 as ‘easier’ subst
Slide 29: Emerging economies will underpin stainless steel over the long term
Emerging economies will underpin stainless steel over the For personal use only long term Stainless Steel Consumption (kg per capita) 25 20 China 2028 Europe 15 2028 2015 Other Asia 2007 10 2015 2028 2015 America 5 2007 2028 India 2007 2015 0 0 5,000 10,000 15,000 20,000 25,000 30,000 Source: SMR. G
Slide 30: Agenda
For personal use only Agenda Demand and substitution Supply Outlook Slide 30
Slide 31: LME stocks have risen but remain low in historical terms
For personal use only LME stocks have risen but remain low in historical terms Number of Weeks of Consumption & LME Stocks (kt) (Number of weeks consumption) 180 Total LME 10 No. of weeks consumption Total market additions in 2007 160 New supply has been dominated by Nickel Pig Iron 9 140 8 7 120 6
Slide 32: Nickel pig iron responded as supply source and is now declining
Nickel pig iron responded as supply source and is now For personal use only declining Ore imports by origin (mt) 2.5 New Caledonia Wet Wet Recent decline Philippines Season Season in supply Indonesia 2.0 1.5 1.0 0.5 0.0 Aug-06 Nov-06 Aug-07 Nov-07 Jan-06 Jan-06 Mar-06 Apr-06 May-06 Jun-06 Jul-06 Sep
Slide 33: Higher cost supply is coming under pressure
Higher cost supply is coming under pressure as the marginal producer is squeezed (>120ktpa announced) Existing operations suspended: For personal use only Nickel C1 cost and price (US$/lb) • Falcondo (11ktpa) • Ufaley/Rehz (5ktpa) 18 Avg 4th quartile C1 costs • Cawse (8ktpa) 16 LME price (avg annual
Slide 34: Future supply growth: disruption a feature of new supply growth?
Future supply growth: Disruption a feature of new supply growth? Expected future production from committed and highly probable nickel developments For personal use only (kt) Ni 300 Upcoming projects include: Greenfield projects (Q4 06) • Vale (Onça Puma; Goro) Greenfield projects (Q3 08) 250 • Xstra
Slide 35: All major Nickel projects have experienced significant capital cost escalation
All major Nickel projects have experienced significant For personal use only capital cost escalation. Most of them yet to be completed Nickel Project Capital Intensity (US$ / tonne of Nickel) Original Estimate Latest Public Estimate 70,000 ? Quasi- True Greenfields 47% 75% 60,000 ? ? Brownfield 73%
Slide 36: Agenda
For personal use only Agenda Demand and substitution Supply Outlook Slide 36
Slide 37: Short term cyclical swings and supply side correction
For personal use only Short term cyclical swings and supply side correction 2003 2004 2005 2006 2007 2008F 2009F Global Supply (kt) 1286 1276 1281 1346 1432 1407 1497 % change (0.9)% 0.4% 5.1% 6.4% (1.8)% 6.4% Global Consumption 1239 1256 1239 1399 1335 1384 1450 (kt) % change 1.4% (1.4)% 12.9% (4.6
Slide 38: Key messages
For personal use only Key messages • Stainless steel and nickel are cyclical commodities with a strong underlying growth trend • They are responsive markets as evidenced by the rapid introduction of nickel pig iron and now a supply side correction • Stainless steel and nickel growth continues to loo
Slide 39: Australian Site Tour: Nickel West
For personal use only Australian Site Tour Nickel West Wayne Isaacs Nickel West President and Chief Operating Officer October 2008
Slide 40: Agenda
For personal use only Agenda Key Messages Sustainability Business Overview Growth Options Slide 40
Slide 41: Key Messages
For personal use only Key Messages • Operating assets safely • Focussing on efficiency and reducing costs • Exploring to find reserves to support long-life assets • Assessing next phase of projects Slide 41
Slide 42: Agenda
For personal use only Agenda Key Messages Sustainability Business Overview Growth Options Slide 42
Slide 43: Safety and Health – Nickel West
Safety and Health – Nickel West Nickel West – Total Recordable Injury Frequency Rate¹ For personal use only (TRIFR) 25 • A safety culture driven by – Fatality prevention (FRCP) 20 – Strong leadership – Safe behaviours and equipment 15 – Compliance, audit and governance 10 • Health and fit-for work p
Slide 44: Sustainable environment and community programs
Sustainable environment and community programs • Sustainability priorities include : For personal use only – Increased indigenous employment – Indigenous education and training – Community development partnerships – Active employee community participation teams – Uniform certified environmental prog
Slide 45: Agenda
For personal use only Agenda Key Messages Sustainability Business Overview Growth Options Slide 45
Slide 46: Nickel West – Operations
For personal use only Nickel West – Operations • World’s third largest producer of nickel-in-concentrate Mount Keith Nickel • Produced 107 kt1 contained nickel in Leinster Nickel FY 2008 • Approximately 3,500 employees and Kalgoorlie Nickel Smelter operational contractors Kambalda Nickel Concentrato
Slide 47: Nickel West flowchart
For personal use only Nickel West flowchart Mount Keith Leinster Nickel Ravensthorpe Third Party Mines Operation Operation Nickel Operation Mixed Nickel-in- 30-45 ktpa 40-50 ktpa 35-45 ktpa Hydroxide Up to 50 ktpa concentrate Product Mount Keith Leinster Kambalda concentrator concentrator concentrat
Slide 48: Leinster Mines and Concentrator
For personal use only Leinster Mines and Concentrator Mines • Perseverance underground – ore reserves of 11 mt @ 1.85% Ni¹ – life to ~2014 • Satellite operations now in production – Cliffs – Rocky’s Reward Concentrator Leinster Mine Feed • Mill throughput ~3 mtpa (Ore kt) 3,000 • Recovery of ~85% 2,
Slide 49: Kambalda Nickel Concentrator
For personal use only Kambalda Nickel Concentrator Concentrator • Mill throughput >1.6 mtpa • 35-45 ktpa Ni in concentrate @ ~13% Ni grade • Output driven by third party resource base KNC Mine Feed (Ore kt) • Partnerships with third party 2,000 producers to sustain a viable 1,500 future for Kambalda
Slide 50: Kalgoorlie Nickel Smelter
Kalgoorlie Nickel Smelter Smelter For personal use only • 750 ktpa concentrate throughput capacity • Furnace re-build June to Sept 2008 – Completed ahead of schedule – Successful ramp-up – Improved operational flexibility – Positions smelter for next 15 years Slide 50
Slide 51: Kwinana Nickel Refinery
Kwinana Nickel Refinery Refinery For personal use only • Based on Sherritt-Gordon technology • Efficient, low cost producer • Premium briquette product • Competes with global refineries for matte • Furnace rebuild an opportunity for KNR shutdown • Work set up the refinery for four years’ operation b
Slide 52: Historical Nickel West Production
For personal use only Historical Nickel West Production Saleable Nickel Production (ktpa) 120 107 105 101 100 80 Metal 54 65 62 60 40 50 Ni intermediates 37 20 38 5 Ni in con Export 0 1 1 FY2006 FY2007 FY2008 Notes: Nickel intermediates in FY2008 includes production from Ravensthorpe. Slide 52
Slide 53: FY2008 Cost Structure
FY2008 Cost Structure Cash operating cost For personal use only (%) • Key value drivers Others Royalties 2% – Volume Chemicals / Additives 3% – Cost reduction 4% Contractors • Excludes RNO (In ramp-up) 9% • 90% of cost base is in $AUD 44% (excluding TPP) Labour 14% TPP 12% Fuel and 12% Energy Mainte
Slide 54: Input Cost Pressures
For personal use only Input Cost Pressures Salaries & Wages Diesel Electricity (%) (%) (%) 135 175 135 125 155 125 115 135 115 105 115 105 95 95 95 FY06 FY07 FY08 FY06 FY07 FY08 FY06 FY07 FY08 Maintenance Xanthate Explosives (%) (%) (%) 135 135 135 125 125 125 115 115 115 105 105 105 95 95 95 FY06 F
Slide 55: Agenda
For personal use only Agenda Key Messages Sustainability Business Overview Growth Options Slide 55
Slide 56: Delivering on our commitments
For personal use only Delivering on our commitments Status of projects discussed at your last visit Project Status Cliffs Operational Rocky’s Reward II Operational Mount Keith Stage H Operational Smelter Rebuild Operational Ravensthorpe Ramp Up Perseverance Deeps Definition Yakabindie Under study Sl
Slide 57: Growth options
For personal use only Growth options • Keeping focus on finding and acquiring resources to fill our growing downstream capability • Prioritising our focus on developing existing resources • Building on our technology processing advantages • Our strategy is to – Leverage exploration success – Capture
Slide 58: Exploration strategy – building resources
For personal use only Exploration strategy – building resources Exploration Spend (US$m) 45 • Five-year exploration program 40.0 40 • Producing promising results 35 • Focus on low-risk brownfields targets 30 near existing operations 25 • Currently second full year of program 20 17.6 • Work started o
Slide 59: Leinster Asset Life Extension
Leinster Asset Life Extension Perseverance Deeps For personal use only • Extension of Leinster beyond 2014 • Follows development of Cliffs and Rocky’s Reward • Feasibility study to be completed 2H FY 2009 RR CB1 Existing Pit RR CB2 Slide 59
Slide 60: Extension of Kambalda opportunities
For personal use only Extension of Kambalda opportunities Objectives • Extended life and output of Kambalda region • Successful long term partnerships • Majority of contracts have options to 2019 Current Status and Future Growth • Concentrator progressively de-bottlenecked to more than1.6 mtpa capac
Slide 61: Conclusion
For personal use only Conclusion • Operating assets safely • Focussing on efficiency and reducing costs • Exploring to find reserves to support long-life assets • Assessing next phase of projects Slide 61
Slide 62: For personal use only
cdl Ohpbilliton sourcing the future