Bhp Group Ltd · ASX:BHP
Bhp — BHP Billiton — Investor Day (November 2017)
84 slides from Bhp's investor day presentation, Nov 28, 2017
Slide 1: Minerals Australia: Realising value and improving returns across our portfolio
BHP Minerals Australia Realising value and improving returns across our portfolio Mike Henry President Operations, Minerals Australia 28 November 2017 Jimblebar
Slide 2: Disclaimer: Forward-looking statements
Disclaimer Forward-looking statements This presentation contains forward-looking statements, which may include statements regarding: trends in commodity prices and currency exchange rates; demand for commodities; plans, strategies and objectives of management; closure or divestment of certain operat
Slide 3: Key messages
Key messages Large, long-life, low-cost ore bodies close to key Asian customers Portfolio Portfolio quality, simplicity and optionality supports current margins and future opportunities Maximise Productivity gains of >US$1.6 billion to be delivered over the next two years cash flow Targeting >10% re
Slide 4: Our strategy
Our strategy Value and returns are at the centre of everything we do Simple portfolio Distinctive enablers Shareholder value and Diversified exposure to preferred Charter Values and commodities returns culture of connectivity Safety, productivity and Tier 1 upstream assets operational excellence Tec
Slide 5: Simple portfolio with valuable optionality
Simple portfolio with valuable optionality High-margin upstream assets competitively placed on the cost curve • Quality resource Minerals Australia portfolio (FY17 EBITDA margin, %) – average Fe grade of 61%1; ~25% lump; strip ratio of 1.3x 1 Western Australia – premium hard coking coal (coke streng
Slide 6: Safety is our first priority
Safety is our first priority We must continue to drive to eliminate fatalities and injuries Safety performance (12-month rolling average TRIF) • Fatal incident at Goonyella (August 2017) 8.0 7% reduction • Continued reduction in TRIF1 to 6.2 in FY17 Our approach to improve safety 6.0 • Safety Field
Slide 7: Contributing to our communities
Contributing to our communities • Significant contribution to the Australian economy US$15 billion in total economic contribution in FY17 – US$15 billion1 in FY17 Communities Shareholders – includes US$3.8 billion of taxes and royalties paid to the Australian government (Federal 47%, State 30% and L
Slide 8: Improving returns by driving performance
Improving returns by driving performance Specific plans to improve after tax Return On Capital Employed to ~30% by FY22 (at FY17 prices) Western Australia Queensland Coal NSW Energy Coal Olympic Dam Minerals Iron Ore Australia FY17 – ROCE 26% 23% 22% 1% ~20% Improved truck Improved truck and Improve
Slide 9: Technology improves safety, costs and unlocks resource
Technology improves safety, costs and unlocks resource Digital technologies will remove overloading and variability providing a stable base for safety and improvement MINING & FOUNDATIONS GEOSCIENCE PLANNING RAIL PORT MARKETING PROCESSING Improving safety Delivering productivity Unlocking resource R
Slide 10: Reducing costs through productivity
Reducing costs through productivity Delivers sustained incremental cash flows • Benchmarking with one enterprise system, better integration of operational data and improved efficiency with standardised equipment • >US$9 billion productivity gains delivered since FY12 and >50% reduction in copper equ
Slide 11: Further to go on our productivity journey
Further to go on our productivity journey Focused on key productivity enablers across the business Improvement in WAIO port outflow capacity Outflow Primary haul truck operating hours1 (Tonnes per shiploader/hour) (Mt) (Hours) 6,000 300 8,000 5,000 225 4,000 4,000 150 0 FY13 FY14 FY15 FY16 FY17 FY18
Slide 12: Simple portfolio with valuable optionality: investment options
Simple portfolio with valuable optionality Attractive options well-suited to the commodity price outlook but subject to strict capital allocation framework tests Sustaining Latent capacity Brownfield Greenfield Future optionality WAIO • South Flank • Creep to 290 Mtpa • Resource to support beyond 29
Slide 13: WAIO: Maximising value from installed infrastructure
WAIO: Maximising value from installed infrastructure • Pathway to 290 Mtpa run rate by end FY19 Improving product mix with South Flank2 (Grade, Fe %) – ramp up of additional primary crusher and conveying capacity at Jimblebar 65 – rail capacity improvement through scheduling optimisation, 64 Peer 1
Slide 14: QCoal: Latent capacity and expansion opportunities
QCoal: Latent capacity and expansion opportunities • Caval Ridge Southern Circuit latent capacity project tracking to plan Productivity offsets closed operations – 10 Mtpa (100% basis) wash plant capacity enabled through (Production2, Mtpa) project execution 50 – IRR1 >80% and capital investment of
Slide 15: NSWEC: Managing monocline challenge
NSWEC: Managing monocline challenge • Potential increase in bypass coal with volumes expected to Multiple Elevated Roadways (MERs) reduces cycle times1 increase to ~22 Mtpa in the medium term (Average cycle time, minutes) – ‘Path to Value’ study concluded in CY17 40 – re-opening Ayredale Pit in FY18
Slide 16: Nickel West: Extending life and increasing margins
Nickel West: Extending life and increasing margins • Production sustained by the discovery and development of Potential to debottleneck refinery capacity resources at Venus, Yakabindie and Leinster B11 (Capacity, ktpa) – increasing confidence of life extension to 2040 90 • Kwinana Refinery debottlen
Slide 17: Key messages
Key messages Large, long-life, low-cost ore bodies close to key Asian customers Portfolio Portfolio quality, simplicity and optionality supports current margins and future opportunities Maximise Productivity gains of >US$1.6 billion to be delivered over the next two years cash flow Targeting >10% re
Slide 18: Appendix
BHP Appendix
Slide 19: BHP guidance
BHP guidance Copper FY18e Olympic Dam Production (kt) 150 Major smelter maintenance campaign is phased through August to December 2017. Unit cash costs (US$/lb) ~2.10 Iron Ore FY18e Western Australia Iron Ore Production (Mt, 100% basis) 275 – 280 Unit cash costs (US$/t) <14 Excludes freight and roya
Slide 20: WAIO: Asset snapshot
WAIO: Asset snapshot Overview of asset Western Australia Iron Ore (WAIO) is an integrated system of four processing hubs and five mines, connected by more than 1,000 kilometres of rail infrastructure and port facilities in the Pilbara region of northern Western Australia. At each mining hub – Newman
Slide 21: Queensland Coal: Asset snapshot
Queensland Coal: Asset snapshot Overview of asset Queensland Coal comprises the BHP Mitsubishi Alliance (BMA) and BHP Mitsui Coal (BMC) assets in the Bowen Basin in Central Queensland, Australia. BMA operates seven Bowen Basin mines (Goonyella Riverside, Broadmeadow, Daunia, Peak Downs, Saraji, Blac
Slide 22: NSWEC: Asset snapshot
NSWEC: Asset snapshot Overview of asset New South Wales Energy Coal (NSWEC) consists of the Mt Arthur Coal open-cut energy coal mine in the Hunter Valley region of New South Wales, Australia. The site produces coal for domestic and international customers in the energy sector. BHP interest is 100%.
Slide 23: Olympic Dam: Asset snapshot
Olympic Dam: Asset snapshot Overview of asset Olympic Dam is one of the world’s largest ore bodies. Located 560 kilometres north of Adelaide, it is one of the world’s largest deposits of copper, gold and uranium, and it also has a significant deposit of silver. Olympic Dam operates a fully integrate
Slide 24: Nickel West: Asset snapshot
Nickel West: Asset snapshot Overview of asset Nickel West is a fully integrated mine-to-market nickel business. All nickel operations (mines, concentrators, a smelter and refinery) are located in Western Australia. The integrated business adds value throughout our nickel supply chain, with the major
Slide 25: Bulk operations material moved and strip ratios
Bulk operations material moved and strip ratios BMA NSW Energy Coal (Material moved, Bt) (Strip ratio1, x) (Material moved, Bt) (Strip ratio1, x) 3.0 18.0 0.4 8.0 1.5 9.0 0.2 4.0 0.0 0.0 0.0 0.0 FY13 FY14 FY15 FY16 FY17 FY18e FY19e FY13 FY14 FY15 FY16 FY17 FY18e FY19e BMC Western Australia Iron Ore
Slide 26: Further productivity initiatives to reduce unit costs
Further productivity initiatives to reduce unit costs WAIO – High margins driven by product mix and improvement initiatives (Unit cost, US$ per tonne) • FY17 costs of US$14.60/t includes rail program (US$0.20/t), stock 16 write offs (US$0.15/t), exploration (US$0.30/t), and private royalties (US$0.3
Slide 27: On the journey to sustainable unit cost
On the journey to sustainable unit cost NSWEC – Mitigating geological constraints (Unit cost, US$ per tonne) • FY17 cash costs of US$41/t 50 • FY18 cost of US$46/t as we mine through the monocline structure and additional buy-in stripping costs in Southern pit areas 25 • Medium-term guidance of ~US$
Slide 28: Optimised mine plan at NSWEC mitigates adverse cost impacts
Optimised mine plan at NSWEC mitigates adverse cost impacts Reduces truck cycle times delivering sustainable margin improvement Without MERs With MERs New Mine Plan—a fundamental change • Exploits resource strengths to overcome its challenge – large constant strip ratio post monocline enables long-t
Slide 29: BHP
BHP
Slide 30: Marketing Minerals: Bringing commercial insight to all steps of the value chain
Marketing Minerals Bringing commercial insight to all steps of the value chain Vicky Binns Vice President, Marketing Minerals 28 November 2017
Slide 31: Disclaimer: Forward-looking statements
Disclaimer Forward-looking statements This presentation contains forward-looking statements, which may include statements regarding: trends in commodity prices and currency exchange rates; demand for commodities; plans, strategies and objectives of management; closure or divestment of certain operat
Slide 32: Key messages
Key messages Commercial Leveraging market intelligence from mine to customer to drive value creation acumen Using commercial expertise to ensure products are placed with the right customers for the best price Global Sustained growth in global steel demand over the next decade steel Long-term demand
Slide 33: Our approach to value creation is end to end
Our approach to value creation is end to end Supply Marketing Total cost of Shareholder Value-in-use ownership Revenue Unit cost reduction value and enhancement Economies of scale returns Product placement and scope Inbound supply chain Product quality optimisation Parts and service Upstream resourc
Slide 34: China's winter restrictions
China’s winter restrictions Will cut steel production but support stronger steel profitability Map of “2+26” cities in China with winter restriction Market share of “2+26” cities in China (%) 50 25 0 Coking capacity Blast furnace Fixed asset Industrial GDP capacity investment China steel gross profi
Slide 35: Structural reform in China
Structural reform in China Underpins long-term demand for high quality iron ore and metallurgical coal Iron ore fines price realisation relative to Value in Use Metallurgical coal portfolio skewed towards premium quality ($/wmt FOB Basis) (BHP supply in the seaborne metallurgical coal market, pictor
Slide 36: Emerging Asia to drive long-term steel demand
Emerging Asia to drive long-term steel demand Enabled by China’s Belt and Road Initiative Global finished steel demand growth breakdown Map of new integrated steel plants2 (million tonnes finished steel) 2,000 1.7% CAGR Silk Road Economic Belt 3.1% CAGR 1,500 21st Century Maritime 1,000 Silk Road 50
Slide 37: Shorter-term copper market drivers
Shorter-term copper market drivers Copper market expected to remain finely balanced over the next few years Chinese consumption by source – 2016 Copper concentrate shortfall 2017-2020 (Mt Copper in concentrate) Blister imports 2 Scrap imports Domestic scrap (Cat 7) ~1.5Mt Scrap imports (Cat 6) Domes
Slide 38: Strong longer-term copper fundamentals
Strong longer-term copper fundamentals Structural deficit to emerge in the early 2020s as additional supply is required to meet growing demand Significant capital investment required to meet supply gap Two-thirds of the world have significant upside in consumption Grade decline, increased input cost
Slide 39: Electric Vehicles – positive for long-term copper demand
Electric Vehicles – positive for long-term copper demand EVs contain four times as much copper as a conventional medium sized car Global light duty EV annual sales forecast (2018-2030) BEV copper intensity by car segment in China – 2016 (kg/unit) ‘Green’ EV sales (~40% CAGR) Buses Executive cars Lar
Slide 40: Renewables – positive for long-term copper demand
Renewables – positive for long-term copper demand Attractive long-run economics and the importance of decarbonisation drive a sustained high-growth path for wind and solar Global power generation capacity Cu intensity by power generation type (TW) (kg/KW) 12.0 Wind + Solar: 29% Wind—Offshore ~10 10.
Slide 41: Risks – China substitution and emergence of scrap
Risks – China substitution and emergence of scrap Risks from aluminium substitution in power cable and growing use of scrap Tracking substitution developments China semis copper demand and old scrap generation National Key Draft National Design Code1 to codification recommend not using AluminiumAllo
Slide 42: Uranium outlook muted in the short term
Uranium outlook muted in the short term Reliable supplier despite subdued short-term market conditions Operating reactors (# reactors) • Low spot price exposes many mines despite long-term contracts 800 Forecast – many producers are “out of the money” at spot prices • Inventory overhang prevails
Slide 43: Key messages
Key messages Commercial Leveraging market intelligence from mine to customer to drive value creation acumen Using commercial expertise to ensure products are placed with the right customers for the best price Global Sustained growth in global steel demand over the next decade steel Long-term demand
Slide 44: BHP
BHP
Slide 45: Maintenance Centre of Excellence: A distinctive enabler
Maintenance Centre of Excellence A distinctive enabler Brandon Craig Vice President, Maintenance 28 November 2017
Slide 46: Disclaimer: Forward-looking statements
Disclaimer Forward-looking statements This presentation contains forward-looking statements, which may include statements regarding: trends in commodity prices and currency exchange rates; demand for commodities; plans, strategies and objectives of management; closure or divestment of certain operat
Slide 47: Key messages
Key messages Safety and Maintenance Centre of Excellence (MCoE) to drive step-change in safety and productivity productivity Analysing data and designing processes to reduce unplanned work and accelerate continuous improvement Data analytics applied to a single enterprise-wide system leverages BHP’s
Slide 48: Why a Maintenance Centre of Excellence?
Why a Maintenance Centre of Excellence? A critical enabler to delivering a step-change in safety, operating and capital costs ~35% US$3.5 billion p.a. 10,000 people of injuries occur in maintenance spend (16% of Group maintenance (~30% of operational spend) workforce) Over 3,000 780,000 machines ~1.
Slide 49: BHP's Maintenance Centre of Excellence
BHP’s Maintenance Centre of Excellence A fundamentally different way of partnering with our operations • Operating Model increases specialisation of maintenance professionals – global hub and spoke model Houston (in planning) – drives improved performance across each stage of the maintenance value c
Slide 50: Harnessing our systems to enhance safety and culture
Harnessing our systems to enhance safety and culture Designing for safety across maintenance work • Targeting a significant reduction in BHP’s total recordable injury A more controlled and stable working environment frequency (TRIF) (Schedule adherence to the week1, %) 90 – maintenance represents ~3
Slide 51: Data analysis to accelerate improvement
Data analysis to accelerate improvement Leveraging our enterprise-wide system to extract value from millions of data points Data science and analytical techniques enable optimised Current maximum component ages for Caterpillar 793F haul truck fleet equipment strategies (thousand hours) 25 • Automate
Slide 52: Maintenance planning hubs deliver improved performance
Maintenance planning hubs deliver improved performance Planning, scheduling and executing optimised work strategies leads to improved performance and reduced cost Quality planning turns our maintenance strategies into reality 793F schedule accuracy (Minerals Australia) • Optimises the supply chain w
Slide 53: Value-driven pipeline of work
Value-driven pipeline of work A standardised, repeatable process applied to our most critical equipment first to create new global strategies Completed Cat 793F trucks US$8.6m in cost savings in FY18 and US$88m over the life of BHP’s existing Minerals Australia fleet (20% reduction) Leibherr T282 tr
Slide 54: Case study: Caterpillar 793F haul trucks
Case study: Caterpillar 793F haul trucks Caterpillar 793F maintenance strategy outcomes at Yandi (Western Australia Iron Ore) Improved maintenance Optimised Inputs into data analysis Maintenance execution strategy and planning supply chain 85% 13% Safety 2m 200k • Multiple catastrophic failure modes
Slide 55: Key messages
Key messages Safety and Maintenance Centre of Excellence (MCoE) to drive step-change in safety and productivity productivity Analysing data and designing processes to reduce unplanned work and accelerate continuous improvement Data analytics applied to a single enterprise-wide system leverages BHP’s
Slide 56: BHP
BHP
Slide 57: Olympic Dam: A world-class resource with valuable optionality
Olympic Dam A world-class resource with valuable optionality Jacqui McGill Asset President, Olympic Dam 28 November 2017
Slide 58: Disclaimer: Forward-looking statements
Disclaimer Forward-looking statements This presentation contains forward-looking statements, which may include statements regarding: trends in commodity prices and currency exchange rates; demand for commodities; plans, strategies and objectives of management; closure or divestment of certain operat
Slide 59: Statement of Mineral Resources
Statement of Mineral Resources Mineral Resources The information in this presentation that relates to the FY2017 Mineral Resources (inclusive of Ore Reserves) was first reported by the Company in compliance with the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore R
Slide 60: Key messages
Key messages Unique World’s third largest copper equivalent deposit offers scale and optionality resource Copper grade to average >2.5% (~3.6% CuEq)1 over next 30 years Maximise Detailed plans to improve operational reliability underway cash flow Move into the Southern Mine Area will see copper grad
Slide 61: Staged resource development strategy
Overview Resource Base operations BFX ODEP Staged resource development strategy Resource development via staged, independent, investment options, subject to strict capital allocation framework tests Stabilisebase operations Brownfield expansion option (BFX)2 ODEP optionality2 1 2 3 IRR >50%1 IRR >20
Slide 62: Our relentless pursuit to improve safety
Overview Resource Base operations BFX ODEP Our relentless pursuit to improve safety • Our goal is zero fatalities Safety performance and Field Leadership activities (12-month rolling average TRIFper million hours worked) (Number of activities) – committed to reducing TRIF by systematically managing
Slide 63: Building social investment and community partnership
Overview Resource Base operations BFX ODEP Building social investment and community partnership • Supportive policy environment in South Australia – South Australia’s Copper Strategy aims to produce 1 Mtpa by 2030 • Secure tenure under the Roxby Downs (Indenture Ratification) Act • Raising profile o
Slide 64: Experienced leadership and workforce
Overview Resource Base operations BFX ODEP Experienced leadership and workforce Asset Leadership Team Jacqui McGill | Asset President Olympic Dam • Bringing the best talent from across our portfolio with global • 25+ years of industry experience • Underground / open cut mining expertise and proven t
Slide 65: A unique resource with valuable optionality
Overview Resource Base operations BFX ODEP A unique resource with valuable optionality • Large, polymetallic ore body: 10.1 Bt at 0.78% Cu (1.18% CuEq)1,2 Resource size – third largest copper equivalent deposit in the world (Contained copper equivalent, Mt)1 160 – largest uranium and third largest g
Slide 66: Resource modelling supports more efficient development
Overview Resource Base operations BFX ODEP Resource modelling supports more efficient development Increased understanding supports optimal mine development Very wide-spaced holes 100m blocks • Ore body is well defined (>3,200 km resource drilling in over 11,000 drill holes, >1 million drill core sam
Slide 67: Mine development
Overview Resource Base operations BFX ODEP Mine development • Significant volume of untapped mineralisation, particularly in the SMA • Resource continues to be open at depth in parts of the SMA and laterally in the NMA Existing and near-term mine development (Year 2025) BFX Life of Mine development
Slide 68: Yet to realise Olympic Dam's full potential
Overview Resource Base operations BFX ODEP Yet to realise Olympic Dam’s full potential • Infrastructure integrity issues and external factors have affected EBITDA and copper equivalent production1 historical financial performance (EBITDA, US$ million) (Copper equivalent production, kt) 1,000 300 – a
Slide 69: Sustainably lowering costs and investing in stability
Overview Resource Base operations BFX ODEP Sustainably lowering costs and investing in stability • Cost out and transformation initiatives underpin a ~50% • Systematic review of infrastructure risk undertaken, improvement improvement in unit costs since FY12 plans developed and being executed • Targ
Slide 70: Investing in operating stability on the surface
Overview Resource Base operations BFX ODEP Investing in operating stability on the surface • Delivering stability through ~US$0.8 billion (FY18-FY21e) planned Ore milled, concentrate smelted investment1 in surface infrastructure (Index, FY17=100) 180 – smelter campaign maintenance in FY18 (>80% comp
Slide 71: Investing in operating stability in the mine
Overview Resource Base operations BFX ODEP Investing in operating stability in the mine • Delivering stability and a strong foundation for growth through planned Ore hoist2 and grade investment of ~US$1.3 billion1 (FY14-FY22e) in the mine (Mt) (Cu grade %) 13 3.3 – expansion into SMA commenced in 20
Slide 72: BFX option: the second stage of the Olympic Dam story
Overview Resource Base operations BFX ODEP BFX option: the second stage of the Olympic Dam story • BFX would accelerate planned development into SMA to access BFX project IRR Investment1 Payback more ore at higher grade (12 Mtpa at 3% Cu), increasing copper (nominal) (US$bn nominal) (years) producti
Slide 73: BFX option: improving cost and capital competitiveness
Overview Resource Base operations BFX ODEP BFX option: improving cost and capital competitiveness • Targeting first quartile cost curve position in the medium term • Attractive capital intensity despite additional investment required – higher metal volumes would dilute our fixed cost base for downst
Slide 74: BFX option: investment in the mine to access grade
Overview Resource Base operations BFX ODEP BFX option: investment in the mine to access grade • BFX mine investment of US$1.0 billion would include Underground development and copper grade (km) (%) – increase in resource production drilling (18 drill rigs) 80 4.0 – new mining blocks development – mi
Slide 75: BFX option: would utilise existing latent surface capacity
Overview Resource Base operations BFX ODEP BFX option: would utilise existing latent surface capacity Simplified BFX flowsheet • ~70% of planned BFX surface plant spend is in the primary copper production stream • Increases ore throughput towards limit of current water / power Copper capacity and Go
Slide 76: BFX option: would utilise existing latent surface capacity
Overview Resource Base operations BFX ODEP BFX option: would utilise existing latent surface capacity Courtesy Outotec. Olympic Dam: A world-class resource with valuable optionality 28 November 2017 20
Slide 77: BFX option: power and water solutions in place
Overview Resource Base operations BFX ODEP BFX option: power and water solutions in place Power Power requirements (MW, 10-year average FY23-32) • Existing power infrastructure expected to meet BFX requirements 300 • South Australian government working hard to resolve power issues 200 • Demand reduc
Slide 78: ODEP option: longer-term development being evaluated
Overview Resource Base operations BFX ODEP ODEP option: longer-term development being evaluated Indicative ODEP mine schematic • Long-term options under study to identify highest returning alternative NMA SMA Logistics Shaft SMA Clark Shaft Whenan Shaft SMA Shaft Rock – subject to strict capital all
Slide 79: Key messages
Key messages Unique World’s third largest copper equivalent deposit offers scale and optionality resource Copper grade to average >2.5% (~3.6% CuEq)1 over next 30 years Maximise Detailed plans to improve operational reliability underway cash flow Move into the Southern Mine Area will see copper grad
Slide 80: Appendix
BHP Appendix
Slide 81: Production
Production Production (Copper equivalent production, kt)1 300 250 200 150 100 50 0 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 Copper Gold Uranium 1. Copper equivalent production based on FY17 average realised prices. Olympic Dam: A world-class resource with valuable optionality 28 N
Slide 82: Current / BFX Flowsheet
Current / BFX Flowsheet Olympic Dam: A world-class resource with valuable optionality 28 November 2017 26
Slide 83: ODEP potential flowsheet
ODEP potential flowsheet Olympic Dam: A world-class resource with valuable optionality 28 November 2017 27
Slide 84: BHP
BHP SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. BHP Billiton Limited and BHP Billiton Plc Date: November 28, 2017 By: /s/ Margaret Taylor Name: Mar