Bhp Group Ltd · ASX:BHP
Bhp — BHP Billiton — Investor Presentation (September 2005)
52 slides from Bhp's investor presentation, September 2005
Slide 1: BHP Billiton Stainless Steel Materials
BHP Billiton Stainless Steel Materials Presentation to the Investment Community September 2005
Slide 2: Disclaimer
Disclaimer The views expressed herein 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
Slide 3: Introduction
Introduction Chris Pointon President Stainless Steel Materials September 2005
Slide 4: Overview of Today's Briefing
Overview of Today’s Briefing Introduction Chris Pointon – President SSM Markets Steve Williams – Marketing Director SSM Gautam Varma – Manager Market Development Asset Delivery Chris Pointon – President SSM Financial Performance Brendan Gill - Chief Financial Officer SSM Future Challenges Chris Camp
Slide 5: BHP Billiton Stainless Steel Materials is a major nickel producer
BHP Billiton Stainless Steel Materials is a major nickel producer, with a significant market presence QNI QNI Yabulu Yabulu Refinery Refinery 32ktpa 32ktpa 77ktpa 77ktpa from from 2007 2007 Cerro Cerro Matoso Matoso Colombia Colombia 50ktpa 50ktpa Nickel Nickel West West 110ktpa 110ktpa Ravensthorpe
Slide 6: What is different with Nickel West?
What is different with Nickel West? • Improved production balance • Increased production flexibility • Lower business risk Increased Market Presence Increased Product Diversity Rest Chrome Sherrit Norilsk Cobalt 13% Agency Pamco 3% 18% 3% Ni Intermediate 1% 3% FeNi Products 26% OMG 21% 3% Cuba 4% In
Slide 7: Nickel Market
Nickel Market Stephen Williams – Marketing Director SSM Gautam Varma – Manager Market Development SSM
Slide 8: Marketing offices rationalised into Singapore and The Hague
London, Toronto and Brisbane offices rationalised – marketing consolidated in the hubs of Singapore and The Hague QNI Yabulu Refinery 32ktpa nickel The TheHague Hague London Toronto LEGEND Operations Maj or Project BHP Billiton Marketing Cerro M atoso Singapore Singapore Colombia 50ktpa nickel South
Slide 9: Continuing strategic focus on stainless steel customers
Continuing strategic focus on stainless steel customers • Integrated Nickel West marketing into BHP Billiton customer-centric marketing organisation • Broadened customer base and complemented our suite of product offerings with nickel intermediate and specialty products • Distribution synergies comi
Slide 10: China now the most significant stainless steel market participant
China now the most significant stainless steel market participant Stainless consumption (2004) Stainless production (2004) Others Asia ex Others 17% China 7% 31% Asia ex China 42% Europe Europe 40% 30% China China 22% 11% 6,000 China stainless consumption 30% China SS Consumption Kt '000 China as %
Slide 11: BHP Billiton nickel sales well aligned with the growth markets
BHP Billiton nickel sales well aligned with the growth markets Global nickel consumption (2004) SSM nickel sales by region (FY 05-06) Others Others 21% Europe 7% Europe China 33% 33% 25% China 12% Asia ex Asia ex China Chinese refined nickel China 34% consumption 35% 160 CAGR 1998-04: 23 % 20% China
Slide 12: Chinese stainless consumption and intensity of use
Chinese stainless consumption and intensity of use – broadly, three pillars of demand 2004 (4.6 Mt) • Industrial usage: Chemicals, petro- chemicals, pharmaceuticals, food & beverage, pulp & paper, refining, power – Substitution from 300 series limited by Industrial usage application 35% • Consumer d
Slide 13: SSM has developed a sound understanding of this market
SSM has developed a sound understanding of this market & is engaging key players, many of whom are already customers 12,000 • A healthy 9% annual growth 10,000 expected over the next 10 years • Grade substitution has already 8,000 400 series taken place – no significant grade re-distribution expecte
Slide 14: China's refined nickel consumption expected to continue growing
China’s total refined nickel consumption is expected to continue growing strongly on the back of stainless growth 500 400 382 kt 300 200 146 kt 73% 73% 49% 100 49% 0 2004 2010 Stainless steel Electroplating Alloys Batteries Others • CAGR of 17% expected from 2004 to 2010 • Driving force will be grow
Slide 15: Supply shortfall will be resolved by substitution in the short-term
.. And the supply shortfall will be resolved by substitution in the short-term Global Stainless Production by Series 30000 27 mt 24.7 mt 25.6 mt 8.9% 25000 9% 8.9% 28.1% 28.3% 20000 27.6% 15000 10000 63.4% 63% 62.8% 5000 0 2004 2005 2006 300 Series 400 Series 200 Series • Share of 200 series has sta
Slide 16: Nickel supply situation remains tight
Nickel supply situation remains tight World consumption and production of primary nickel, 1990-2015 2.0 Existing Production Brownfield Expansions 1.8 Highly Probable Greenfield Projects Additional Output Required Consumption 1.6 Million tonnes per annum 1.4 1.2 1.0 0.8 0.6 0.4 0.2 0.0 1990 1995 2000
Slide 17: Existing Asset Delivery
Existing Asset Delivery Chris Pointon President Stainless Steel Materials
Slide 18: Yabulu – Ravensthorpe Project Review
Yabulu – Ravensthorpe Project Review Ravensthorpe Atmospheric Leach Beneficiation Acid Plant SSM CSG Analyst Briefing Page 18 September 2005
Slide 19: Cost escalation driven by external effects in WA market
Cost escalation has been driven by increases in external effects, particularly in the WA market Overall Yabulu - Ravensthorpe Project Cost Growth since Mar04 Commitment : 28% Construction Labour Cost FX effects 18% 22% Contractor Raw Materials Margins 33% 27% SSM CSG Analyst Briefing Page 19 Septemb
Slide 20: The projects remain on schedule
The projects remain on schedule Progress to end August 2005 Ravensthorpe 35% complete Yabulu Expansion 18% complete March 2004 Sept 2005 Approval Review Capital Expenditure (US$M) Ravensthorpe 1,050 1,340 Yabulu Expansion 350 460 Total 1,400 1,800 Milestones First MHP Shipment Q2 2007 Q2 2007 First
Slide 21: Nickel West
Nickel West Nickel Nickel West West SSM CSG Analyst Briefing Page 21 September 2005
Slide 22: Nickel West Overall Flow Sheet FY2005
Nickel West Overall Flow Sheet FY2005 Mt Keith Leinster Third Party Operations Operations Producers Nickel in concentrate 41kt 46kt 32kt Kalgoorlie Nickel Smelter Nickel in matte 105kt Ni Kwinana Nickel Refinery CONC SALES – 10kt Ni METAL SALES - 66kt MATTE SALES - 34kt Ni INTERMEDIATE PRODUCTS SSM
Slide 23: Nickel West is cost competitive
Nickel West is cost competitive Key Variances ($/lb) 4.00 2000-05 US$/lb Ni (Real 2005) 3.88 C3 Cost 3.00 MKO OB Removal 0.11 2.40 2.84 LNO Ore Costs 0.11 C1 Cost Third Party Feed 0.60 2.00 Mtce and Labour 0.15 1.33 FX 0.53 1.00 Total 1.50 FY00 FY01 FY02 FY03 FY04 FY05 Year Ending June Critical Issu
Slide 24: Nickel West key activities at each strategy horizon
Nickel West key activities at each strategy horizon Securing the future & growth High return development • Utilisation of current stockpiles of existing assets • Resource acquisitions • Exploration & long term project pipeline • Integrated development of Mt Business foundations Keith/Yakabindie • Le
Slide 25: Cerro Matoso SA
Cerro Matoso SA Cerro Cerro Matoso Matoso SSM CSG Analyst Briefing Page 25 September 2005
Slide 26: Cerro Matoso successful exploration maintains the reserves base
Cerro Matoso– successful exploration maintains the reserves base 80.00 Resources at a 1.1% nickel cutoff 8.55 70.00 1.23 1.28 5.5 14.9 60.00 5,98 50.00 Ore DTM 40.00 30.00 20.00 10.00 -1.04 -1.11 -1.10 -2.42 -2.69 0.00 -2.00 -2.72 1998 1999 2000 2001 2002 2003 2004 -10.00 Ore to Plant Resources insi
Slide 27: Exploration for additional reserves
Exploration for additional reserves QUERESA-SANTA ROSA Scout drilling - 1999 Existing Operations Area FALCON SURVEY FY05-FY06 NEW EXPLORATION LICENSE UNDER APPLICATION Ou t line and infill drilling URE Scout drilling - 2004 Exploration License GFL-141 Exploration License GFL-143 SSM CSG Analyst Brie
Slide 28: Cerro Matoso is the lowest cost major nickel producer
Cerro Matoso is the lowest cost major nickel producer, with a premium product. Operating improvements are continuing to be won 2.50 Key Variances ($/lb) 2000-05 US$/lb Ni (Real 2005) 2.16 1.95 C3 Cost Energy 0.08 2.00 FX (0.01) Total 0.07 1.57 C1 Cost 1.54 1.50 Royalties 0.16 Depreciation 0.06 Total
Slide 29: QNI Yabulu Refinery
QNI Yabulu Refinery Yabulu Yabulu Refinery Refinery SSM CSG Analyst Briefing Page 29 September 2005
Slide 30: Yabulu improved safety and production performance
Yabulu - improved safety and production performance – success of OE programme YEP tie-ins 35,000 30 30,000 25 25,000 20 Tonnes Ni 20,000 CIFR 15 15,000 10 10,000 5,000 5 0 0 2000 2001 2002 2003 2004 2005 Nickel - Tonnes CIFR Source : BHP Billiton SSM CSG Analyst Briefing Page 30 September 2005
Slide 31: Yabulu cost improvements despite higher ore and oil costs
Yabulu cost improvements despite impact of higher nickel price-linked ore and oil costs 5.00 Variances ($/lb) 4.25 2000-05 US$/lb Ni (Real 2005) C3 Cost 4.00 3.51 3.74 Ore Supply 3.00 3.11 C1 Cost Nickel Price 0.22 2.69 Cobalt Price (0.16) 2.17 2.00 Net 0.06 Refinery Cost Oil price 0.20 FX 0.24 1.00
Slide 32: Objective for Yabulu to become leading nickel & cobalt refinery in Australasia
Our objective is for Yabulu to become the leading nickel & cobalt refinery in Australasia Central Refinery Strategy Optimise Yabulu margins Phase I: Stabilise Yabulu operation Develop Ravensthorpe as “front end” and expand Yabulu. • De-bottlenecking to • Phase II: increase nickel and cobalt • Safety
Slide 33: Financial Performance
Financial Performance Brendan Gill Chief Financial Officer – Stainless Steel Materials
Slide 34: Improved EBIT
Improved EBIT Influence of price, FX and inflation and a significant 1,000 contribution from Chrome asset sale 900 104 862 800 758 -38 700 -11 -15 -15 -15 23 22 EBIT (USD M) 600 571 500 236 400 300 200 100 0 Opening Price Price linked Exchange Inflation Costs Ceased Profit/(Loss) Ni West EBIT Except
Slide 35: Cashflow variance FY05 versus FY04 (excluding Nickel West)
Cashflow variance FY05 versus FY04 (excluding Nickel West) Positive free cash flow contribution to the Group US$M 900 831 457 800 700 9 162 600 500 462 400 (221) 300 (38) 200 100 0 Cashflow to Cash Working Change in Growth Sustaining Proceeds from Cashflow to June 2004 Profit Working Capital Capex C
Slide 36: BHP Billiton nickel is cost competitive on marginal and full cost basis
BHP Billiton nickel is cost competitive on both a marginal and full cost basis Source : Brook Hunt, including Norilsk 2004 Brook Hunt data flexed on 2005 Year-to- August Prices & Costs SSM CSG Analyst Briefing Page 36 September 2005
Slide 37: Earnings Sensitivities
Earnings Sensitivities Nickel Price (Revenue Effect) +/- -99 99 US$0.25/lb US$:A$ FX Rate +/- 10 % -88 88 Nickel Recovery +/- 1 % -26 26 Nickel Price (Cost Effect) +/- -17 17 US$0.25/lb US$:Col Peso FX Rate +/- 10 % -10 10 Cobalt Price +/- US$1/lb -5 5 -150 -100 -50 0 50 100 150 SSM EBIT Variance (U
Slide 38: Secure Platform Now in Place to Deliver Future Growth
Secure Platform Now in Place to Deliver Future Growth Chris Campbell Chief Development Officer – Stainless Steel Materials
Slide 39: Improved capability and optionality for growth
Improved capability and optionality for growth, with ability to extract value from all nickel resources globally Resources – Western Australia – South and Latin America – SE Asia – Exploration Operational Technology – Open pit + Underground – HPAL, AL, Caron Mining Capability – Laterite and Sulphide
Slide 40: Nickel West – keep smelter full, increase nickel output
Nickel West – keep smelter full, increase nickel output, add value through optimization of existing Capital Base. • Develop existing equity projects in line with optimization of asset base – Cliffs, Yakabindie/Mt Keith optimization, Perseverance Deeps. • Work with partners in our backyard to leverag
Slide 41: Increased global exploration footprint for all nickel types
Increased global exploration footprint for all nickel types European Nickel Jinchuan Philippines Cerro Indonesia Matoso Nickel West Activity Centres Ni Laterites SSM SSM CSG Analyst Briefing Ni Sulphides SSM/Partner Page 41 September 2005
Slide 42: The Way Forward – optimize existing assets and continue to grow
The Way Forward – optimize existing assets, whilst strengthening our position to continue to grow in the future. Short Term Medium Term Long Term South America, Western Australia, Philippines, Indonesia, Africa, Other Global Exploration Additional Fr ont End Projects Cliffs Mt Keith/Yakabindie Integ
Slide 43: SSM well positioned for the future
SSM well positioned for the future • Nickel remains fundamentally an attractive industry – Solid growth to continue underpinned by China – Supply constrained in medium-to-long term • BHP Billiton now a stronger nickel industry player – Top 3 in size, competitive operating costs, good product portfol
Slide 44: SSM CSG Analyst Briefing Page 44 September 2005
SSM CSG Analyst Briefing Page 44 September 2005
Slide 45: Appendix
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Slide 46: 70% of global stainless steel melting growth in 2004 took place in Asia
70% of global Stainless Steel melting growth in 2004 took place in Asia Total growth of 1,670 kt China Rest of World 26% 30% Rest of Asia 8% South Korea India 23% 13% • In 2005, the growth will be further skewed towards China Source: BHP Billiton SSM CSG Analyst Briefing Page 46 September 2005
Slide 47: The scrap market will not be a major source of new nickel units
The scrap market will not be a major source of new nickel units 45.00% 7 40.00% External austenitic scrap ratio (LHS) 6 35.00% 5 30.00% 4 US$ per lb 25.00% 20.00% 3 15.00% Average Nickel price (RHS) 2 10.00% 5.00% 1 0.00% 0 1990 1992 1994 1996 1998 2000 2002 2004 SSM CSG Analyst Briefing Source: BHP
Slide 48: Monthly Average 6-4 Bulk Weldable Ti Scrap Spot Price
Monthly Average 6-4 Bulk Weldable Ti Scrap Specialty Processor (Dealer) USA SPOT (US$/lb) 14 12 10 May Average to 23 May 2005 $9.563 8 Definitive Feasibility 6 Study Estimate 4 2 0 2002 2003 2004 2005 Source: MetalPrices.com SSM CSG Analyst Briefing Page 48 September 2005
Slide 49: Key construction commodity prices have risen significantly
Key construction commodity prices have risen significantly in past 18 months Price Index for Construction Materials from 1990-2004 Definitive Feasibility Study 150 Estimate 2003 Steel in Res Construc 140 INDEX (1989-90=100) 130 Structural steel 120 110 Decking & cladding 100 Rebar & mesh QUARTERS FR
Slide 50: Nickel West
Nickel West WILUNA Mt Keith Cliffs ** Yakabindie Leinster AGNEW LAVERTON LEONORA MENZIES KALGOORLIE COOLGARDIE Smelter Kambalda KWINANA Refinery SSM CSG Analyst Briefing Page 50 September 2005
Slide 51: Nickel West resource base remains strong
Nickel West resource base remains strong Nickel West Historical Resources 8,000,000 0.80 Measured Indicated Inferred % Ni 7,000,000 0.70 6,000,000 Nickel Metal ( kt ) 0.60 5,000,000 % Ni 4,000,000 0.50 3,000,000 0.40 2,000,000 0.30 1,000,000 - 0.20 2000 2001 2002 2003 2004 1999 Source: WMC Annual Re
Slide 52: SSM's improving financial performance
SSM’s improving financial performance US$M FY05 FY04 FY03 Turnover 2132 1753 1106 EBIT CMSA 513 363 167 Yabulu 156 134 24 Nickel West 23 Samancor 102 117 8 Profit from Operations 794 614 199 Development -16 -9 -10 Corporate -10 -11 -7 Fair Value Amortisation -22 -22 -22 Other 12 -1 -11 EBIT before E
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