Bhp Group Ltd · ASX:BHP
Bhp — BHP Billiton — Merger or Acquisition (December 2007)
39 slides from Bhp's merger presentation, Dec 12, 2007
Slide 1: BHP Billiton and Rio Tinto: A Matter of Value
For personal use only BHP Billiton and Rio Tinto A Matter of Value 12 December 2007
Slide 2: Disclaimer
For personal use only Disclaimer This document has been prepared by BHP Billiton Ltd and BHP Billiton Plc (“BHP Billiton") and comprises the written materials/slides for a presentation concerning BHP Billiton and its proposed combination with Rio Tinto Ltd and Rio Tinto plc (“Rio Tinto”). By reviewi
Slide 3: Disclaimer (Continued)
Disclaimer (Continued) There are a number of factors that could cause actual results or performance to differ materially from those expressed or implied in the forward-looking statements. Factors that could cause actual results or performance to differ materially from those described in the forward-
Slide 4: Agenda
For personal use only Agenda 1. BHP Billiton: Superior shareholder value creation 2. BHP Billiton: World class growth assets 3. BHP Billiton’s proposal to Rio Tinto Page 4
Slide 5: BHP Billiton: Superior shareholder value creation
For personal use only 1. BHP Billiton: Superior shareholder value creation Page 5
Slide 6: Superior market value growth
For personal use only Superior market value growth Market capitalisation (US$B) BHP Billiton 240 CAGR: 37% US$230B 210 180 150 Rio Tinto CAGR: 29% US$122B 120 90 60 US$31B 30 US$24B 0 29-Jun-2001 28-Jun-2002 30-Jun-2003 30-Jun-2004 30-Jun-2005 30-Jun-2006 29-Jun-2007 31-Oct-2007 Source: Datastream a
Slide 7: BHP Billiton's drivers of value
For personal use only BHP Billiton’s drivers of value • Ownership of a portfolio of Tier 1 assets • Track record of – Continued investment in development throughout the cycle – Execution on time and on budget – Delivering production growth • Translates to – Earnings per share growth – Dividend per s
Slide 8: BHP Billiton has invested more capital into development
For personal use only BHP Billiton has invested more capital into development Total capital expenditure on completed projects (US$B since Jul-2001) BHP Billiton Rio Tinto Total = US$11.2bn Total = US$4.9bn 3.0 2.5 2.0 1.5 1.0 0.5 Nil Nil 0.0 CY2007(a) CY2001 CY2002 CY2003 CY2004 CY2005 CY2006 CY2007
Slide 9: Strong execution performance
For personal use only Strong execution performance Major minerals development projects commissioned since July 2001(a) 140% Over Budget Cost Behind Schedule Schedule 120% 100% 80% Under Budget 60% Ahead of Schedule 40% 20% 0% Mozal 2 Hillside 3 Escondida Escondida Escondida Spence Mount Arthur Minin
Slide 10: Superior production growth
For personal use only Superior production growth Excl. production from sold/ceased operations Incl. production from sold/ceased operations(a) (Index: FY2001 production = 100) (Index: FY2001 production = 100) 170 170 160 BHP Billiton 160 8% CAGR 150 150 140 140 BHP Billiton 5% CAGR Rio Tinto 130 130
Slide 11: Superior EPS growth
For personal use only Superior EPS growth Earnings per share (Index: FY2002 = 100; US$) 800 BHP Billiton 700 50% CAGR 600 500 Rio Tinto 37% 400 CAGR 300 200 100 0 FY2002 FY2003 FY2004 FY2005 FY2006 FY2007 Source: BHP Billiton and Rio Tinto annual and half-yearly reports. No adjustments made for any
Slide 12: Superior dividend growth
For personal use only Superior dividend growth Declared ordinary dividends per share (Index: FY2002 = 100; US$) 400 BHP Billiton 29% CAGR 300 200 Rio Tinto 11% CAGR 100 0 FY2002 FY2003 FY2004 FY2005 FY2006 FY2007 Source: BHP Billiton and Rio Tinto annual and half-yearly reports. Note: Rio Tinto’s or
Slide 13: Superior total shareholder return
For personal use only Superior total shareholder return BHP Billiton Ltd and Rio Tinto Ltd TSR(a) (Index: Jun-2001 = 100) • Total shareholder return: 600 – BHP Billiton Ltd TSR 30% CAGR, BHP Billiton 433% cumulative growth 30% CAGR 500 – Rio Tinto Ltd TSR 23% CAGR, 276% cumulative growth 400 • A$10,
Slide 14: BHP Billiton: World class growth assets
For personal use only 2. BHP Billiton: World class growth assets Page 14
Slide 15: Simplicity, scale and growth...
Simplicity, scale and growth... CSG For personal use only As at 11-Dec-2007 Petroleum D&SP Manganese Proposed capital expenditure Aluminium SSM Met Coal Base Metals Iron Ore Energy Coal <US$500m US$501m US$501m <US$500m US$2B+ US$2B+ -US$2B -US$2B Olympic OlympicDam Dam Expansion Macedon Expansion22
Slide 16: World class growth assets – some examples
For personal use only BHP Billiton: World class growth assets – some examples • Pilbara iron ore – A tier 1 asset – Mineralisation positions to support 50+ years – Strong growth profile supported by existing and proposed infrastructure • Olympic Dam – A world class resource – Significant brownfield
Slide 17: Pilbara iron ore: Tier 1 asset
For personal use only Pilbara iron ore: Tier 1 asset • Resource and mineralisation that supports production for more than 50 years • High level of equity ownership in underlying Resources (85% - 100%) • Large high grade ore bodies, concentrated around key infrastructure • Very low cost curve positio
Slide 18: Pilbara iron ore: Mineralisation to support 50+ years
Pilbara iron ore: Mineralisation to support 50+ years (Billion tonnes, 100% basis) For personal use only Pilbara Reserves and Resources(a)(b) BHP Billiton Rio Tinto BHP Billiton Pilbara iron ore(a) Rio Tinto Pilbara iron ore(b) 8.0 14.2 Targeted Targeted additional Reserves & Resources Reserves & Re
Slide 19: Pilbara iron ore: Mineralisation on an equity basis
For personal use only Pilbara iron ore: Mineralisation on an equity basis Pilbara Reserves & Resources Targeted additional Pilbara Mineralisation(a) (Billion tonnes, equity share) (Billion tonnes, equity share) 16 - 27 15 - 23 ~11 7 BHP Billiton (b) Rio Tinto (c) BHP Billiton (b) Rio Tinto (est.) (d
Slide 20: Pilbara iron ore: Resources in large ore bodies and clusters
Pilbara iron ore: BHP Billiton’s Resources are in large ore For personal use only bodies and located in clusters Port Hedland • Reserves and Resources of Dampier Cape Lambert 7bt at 60.2% Fe (equity share) • Large, low cost and high grade Deposit size scale (equity share) ore bodies 2.0bt • Clustere
Slide 21: Pilbara iron ore: mineralisation clustered around infrastructure
Pilbara iron ore: BHP Billiton’s mineralisation assets are For personal use only individually large and clustered around its infrastructure Port Hedland • BHP Billiton’s mineralisation is Dampier Cape Lambert also largely clustered around its infrastructure Deposit size scale • Rio Tinto’s “develope
Slide 22: Pilbara iron ore: Infrastructure planning is well advanced
BHP Billiton’s Pilbara iron ore: Infrastructure planning is For personal use only well advanced Port Hedland harbour development(a),(b) New Existing channel channel • Clear growth path ~400Mtpa ~ 320Mtpa • Port: Inner harbour expansion to 155 mtpa in progress; planning for an additional 50+ mtpa to
Slide 23: Pilbara iron ore: Production 1990-2006 actual and 2007-2018 forecast
Pilbara iron ore: Production 1990-2006 actual and For personal use only 2007-2018 forecast Pilbara iron ore production growth – 100% basis BHP Billiton (Index: 100 = 1990 production, mtpa) Organic Growth 1,200 CY1990 – CY2018 Production Historical CAGR (CY1990-CY2006) 8.4% CAGR 100% Equity 1,000 Bas
Slide 24: Olympic Dam: A world class resource
For personal use only Olympic Dam: A world class resource mt Copper kt U3O8 moz Au 160 2500 400 ~1100 4th largest copper The largest uranium 5th largest gold 140 deposit in the world deposit in the world 1050 350 deposit in the world 2000 120 1000 300 100 250 1500 80 200 1000 60 150 40 100 500 20 50
Slide 25: Olympic Dam relative to Rio Tinto's undeveloped copper projects
Olympic Dam relative to Rio Tinto’s undeveloped For personal use only copper projects Contained copper equivalent mineralisation – Mt Copper equivalent grade - % Cu (Equity basis) 160 2.0 140 120 1.5 100 80 1.0 60 40 0.5 20 0 0.0 Olympic Dam Resolution (a) La Granja Oyu Tolgoi (b) Pebble Olympic Dam
Slide 26: Olympic Dam: Exposure to strong nuclear demand growth
For personal use only Olympic Dam: Exposure to strong nuclear demand growth Existing operational power plants and future development of nuclear power reactors(a),(b) Operational (power plants) – 439 reactors(c) Planned (reactors) – > 94 reactors(c) Under construction (reactors) – 33 reactors(c) Prop
Slide 27: Olympic Dam: Multi staged expansion
Olympic Dam: Multi staged expansion CONCEPTUAL For personal use only Stages Output Mining Concentrating Smelting Cu U308 Au (ktpa) (ktpa) (kozpa) 9mtpa 0mtpa 10mtpa 10mtpa 0 Current 180 4 100 (500ktpa con) Under- 1.1 Optimise 200 4.5 120 underground while ground pre-stripping open pit +3Mtpa +2Mtpa
Slide 28: Nickel: A major global producer with growth potential
For personal use only Nickel: A major global producer with growth potential Top 10 global nickel producers(a) Development pipeline(b) (ktpa, 2006 saleable nickel production) 350 Hallmark Hallmark Project Project CMSA CMSAHeapHeap 300 Leach LeachLine Line 11 250 Yabulu Yabulu Eastern Eastern Maya May
Slide 29: Nickel: Cerro Matoso – fully integrated pyro/hydro operation
Nickel: Cerro Matoso – A fully integrated pyro/hydro operation CONCEPTUAL For personal use only Mining Processing Stages Output Cont’d Nickel (ktpa) 3Mtpa +3Mtpa Power plant 0 Current 50 1Mtpa 50 ktpa Ferronickel Coal +40 ktpa Ferronickel 1.1 Expand smelting capacity plus L3,4 mine open pit coal min
Slide 30: Petroleum: Strong growth
For personal use only Petroleum: Strong growth Volume growth to 2010 underpinned with BHP Billiton estimated future production firm projects in execution (Attributable MMboe, mid-point forecast) • Stybarrow – Online, capacity 80kbd (50% equity 180 10.5% interest) CAGR 170 • Atlantis – Online, capaci
Slide 31: Petroleum: Exploration success, solid long term growth prospects
Petroleum: Exploration success, solid long term growth For personal use only prospects Significant exploration success over the last 5 years Development pipeline post 2010 – Deep Water Gulf of Mexico – Neptune, Shenzi, Atlantis, Mad Dog, Puma, Knotty Head – Trinidad – Angostura Thebe Thebe – West Au
Slide 32: BHP Billiton: Superior assets
For personal use only BHP Billiton: Superior assets • Pilbara iron ore – Similar targeted additional Mineralisation quantity and, based on our analysis, larger on an equity basis than Rio Tinto – Large ore bodies efficiently clustered around key infrastructure – Not constrained by lack of port optio
Slide 33: BHP Billiton's proposal to Rio Tinto
For personal use only 3. BHP Billiton’s proposal to Rio Tinto Page 33
Slide 34: Relative value
For personal use only Relative value • From a similar size in June 2001, BHP Billiton had grown the market capitalisation gap to US$108B by 31-Oct-2007(a) • On measures we consider relevant to shareholder value, BHP Billiton has outperformed Rio Tinto • Growth prospects are clearly superior in quant
Slide 35: Why a combination with Rio Tinto?
For personal use only Why a combination with Rio Tinto? • Material quantifiable synergies and financial benefits unique to this combination – US$1.7B nominal per annum from cost savings(a) – US$2.0B additional nominal per annum primarily from volume acceleration(a) – Other combination benefits expec
Slide 36: Rio Tinto's lower relative contribution post Alcan
Rio Tinto’s lower relative contribution post Alcan Exchange ratio For personal use only Rio Tinto Rumours of Rio Tinto BHP Billiton confirms approach 2006 results offer for Alcan to Rio Tinto Board 3.1x 3.00 2.9x BHP Billiton proposal: Rio Tinto 3-for-1 2.7x 1H 2007 28% premium(a) Exchange Ratio (x)
Slide 37: BHP Billiton's proposal to Rio Tinto
BHP Billiton’s proposal to Rio Tinto • Under BHP Billiton’s proposal, Rio Tinto shareholders would gain exposure to a stronger, more For personal use only profitable company AND they would get a substantial premium – Immediate value uplift through the 28% premium(a) – Overall 15% premium based on cl
Slide 38: Summary
For personal use only Summary • BHP Billiton’s shares have delivered outstanding returns to shareholders. We have excellent prospects • As an all share proposal, we are offering to share BHP Billiton’s upside and the synergies • The benefits of this combination cannot be replicated • Our proposal in
Slide 39: BHP Billiton and Rio Tinto: A Matter of Value
For personal use only BHP Billiton and Rio Tinto A Matter of Value Page 39