Bhp Group Ltd · ASX:BHP
Bhp — RIO Tinto — Merger or Acquisition (November 2007)
41 slides from Bhp's merger presentation, Nov 13, 2007
Slide 1: Rule 425 filing notice
Filed by: BHP Billiton Plc and BHP Billiton Limited Pursuant to Rule 425 under the Securities Act of 1933 Subject Company: Rio Tinto Plc Commission File No.: 001-10533 And Rio Tinto Limited Commission file No.: 000-20122 Date: 12 November 2007 The following are slides comprising an investor presenta
Slide 2: BHP Billiton and Rio Tinto: Unlocking Value
BHP Billiton and Rio Tinto Unlocking Value 12 November 2007
Slide 3: Disclaimer
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 reviewing/attending this pres
Slide 4: Disclaimer (Continued)
Disclaimer (Continued) Thereareseveralfactorswhichcouldcauseactualresultsor performance todiffermateriallyfromthoseexpressed orimpliedin theforward-looking statements.Factorsthatcouldcause actualresultsor performance todiffermateriallyfromthosedescribed intheforward-looking statements include,butare
Slide 5: Agenda
Agenda I. The proposal II. Market environment III. Unlocking value IV. Creating a minerals industry ‘super-major’ V. Attractive and deliverable proposal VI. Conclusion: a unique combination to unlock value Page 4
Slide 6: I. The proposal
I. The proposal Page 5
Slide 7: BHP Billiton and Rio Tinto: Creating a minerals industry 'super-major'
BHP Billiton and Rio Tinto: Creating a minerals industry ‘super-major’ • BHP Billiton approached Rio Tinto on November 1 with a proposal to combine the two companies • Rio Tinto has not agreed to engage in discussions • The proposal sets out a unique opportunity to unlock value for shareholders – Op
Slide 8: Summary of key elements of the proposal
Summary of key elements of the proposal • All share proposal of 3 BHP Billiton shares for 1 Rio Tinto share – Attractive value at a premium of 28% to the combined volume-weighted average marketcapitalisation overtheonemonthpre-approach (a) – Proposal values Rio Tinto’s issued ordinary shares at $153
Slide 9: II. Market environment
II. Market environment Page 8
Slide 10: China is industrialising, India following
China is industrialising, India following • China’s rate of industrialisation is strong and growing • India’s GDP currently 10-15 years behind China • BHP Billiton’s equivalent sales volume to India in FY2007 was greater than to China in FY2002 (a) GDP ($B) 5,000 4,500 4,000 3,500 China 3,000 2,500
Slide 11: Chinese growth is driving global materials demand
Chinese growth is driving global materials demand Crude steel production Crude steel production growth (1996-2006) (mt) (mt) 1,250 100% = 494 China 1,000 Other 20% 750 USA India Japan 6% Europe 500 4% Japan Europe 65% 4% India 1% USA 250 China Other 0 1996 2006 Source: IISI and BHP Billiton estimate
Slide 12: Demand growth to continue
Demand growth to continue Steel intensity per capita (kg Steel/Capita) 1,200 USA (1900-2005) Japan (1950-2005) S. Korea (1970-2005) 1,000 Taiwan (1970-2005) China (1970-2005) 800 India (2005) 600 400 200 0 0 5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000 45,000 GDP/Capita (PPP, Jan. 2006 $)
Slide 13: III. Unlocking value
III. Unlocking value Page 12
Slide 14: Keys to unlocking value
Keys to unlocking value 1 Optimising mineral basin positions and infrastructure – Lower cost, more efficient production – Unlocking volume through matching reserves with infrastructure 2 Enhanced platform for future growth – Deployment of scarce resources to highest value opportunities – Greater abi
Slide 15: Optimising mineral basin positions and infrastructure
1 Optimising mineral basin positions and infrastructure 47 2 1 15 56 1 55 45 57 16 19 4814 15 20 46 59 12 3 60 49 4 5213 61 8 51 58 Queensland 7 21 9 5 6 2 50 65 10 26 11 17 18 Coal 3 24 48 Ekati 26 Diavik South Hail Creek Water Creek 7 Goonyella 26 Dalrymple 5 62 4 6 63 Riverside 4848 48 Poitrel Ha
Slide 16: Example: matching reserves and infrastructure (WAIO)
1 Example: matching reserves and infrastructure (WAIO) (a) Iron ore volume growth options unlocked Port BHP Billiton deposit / mine / port Rio Tinto deposit / mine / port BHP Billiton railway Pilbara Rio Tinto railway Rio Tinto railway (proposed) Rio Tinto BHP Billiton Incremental BHP Billiton o per
Slide 17: Enhanced platform for future growth
2 Enhanced platform for future growth Unlocking value from future mineral provinces Nickel 67 67 47 9 33 67 1 2 50 29 67 67 1 43 51 4 5 Copper 51 6 28 52 31 32 7 167 34 3 3 2 Iron Ore, 2 41 Bauxite 5 4 39 6 15 148 49 6 39 Bauxite 67 67 67 38 46 55 01 46 34 52 37 42 47 53 Coal 54 7 7 68 Iron Ore 18 3
Slide 18: Example: efficient infrastructure development
2 Example: efficient infrastructure development Senegal Mali Guinea-Bissau Guinea Guinea Bauxite • A major source of Guinea Iron Ore the world’s bauxite potential resources •Large, undeveloped high-quality deposits • BHP Billiton leading Sierra Leone its development •Deposits under development by BH
Slide 19: Unique synergies and combination benefits
3 Unique synergies and combination benefits • Material quantifiable synergies and financial benefits • Unique to this combination due to substantial overlap in neighbouring and jointly-owned operations • Incremental EBITDAimpactgrowingtoestimated $3.7B(a)* – $1.7B*nominalperannumfromcostsavingsexpec
Slide 20: Anticipated cost savings EBITDA impact of $1.7B
3 Anticipated cost savings EBITDA impact of $1.7B Cost savings achievable • $1.7B* EBITDA impact per annum from cost ($B*) (a) 3 savings expected by Year Total = 1.7 • Operating costs Divisional non-operating – Economies of scale in operations and costs procurement of goods and services 26% • Corpor
Slide 21: Anticipated further EBITDA enhancement of $2.0B
3 Anticipated further EBITDA enhancement of $2.0B (a) • $2.0B* further EBITDA enhancement per annum expected by Year 7 • Accelerate tonnage produced by optimising key mineral basins, assets and infrastructure – Match infrastructure and resources in iron ore – Other asset optimisations (NSW coal, Can
Slide 22: Unlocking value: conclusions and observations
Unlocking value: conclusions and observations • This combination unlocks a very material and unique pool of value – More production, faster and lower cost; enhanced future growth options; traditional synergies – Quantifiable value;incremental $3.7B(a)* EBITDAimpactgrowingtoestimated (before realisat
Slide 23: IV. Creating a minerals industry 'super-major'
IV. Creating a minerals industry ‘super-major’ Page 22
Slide 24: Consistent with our strategy and investment proposition
Consistent with our strategy and investment proposition • Our strategy – Large, low-cost assets which are consistently profitable through the cycle – Focus on the extraction of upstream natural resources – Portfolio diversified by commodity, customer and geography reducing the volatility of cash flo
Slide 25: Portfolio of tier 1 assets: low cost
Portfolio of tier 1 assets: low cost Iron ore CIF cost curve Hard coking coal FOB cost curve ($/dmt) ($/t) 80 100 80 60 60 40 40 20 20 0 0 0% 25% 50% 75% 100% 0% 25% 50% 75% 100% Copper C1 cash cost curve Alumina C1 cash cost curve (c/lb) ($/t) 200 350 160 300 120 250 80 200 40 150 0 100 25% 50% 75%
Slide 26: Unique portfolio of tier 1 assets: scale
Unique portfolio of tier 1 assets: scale 2006 Production Iron ore (Mt) Copper mines (Kt) Bauxite mines (Kt) 0 50 100 150 0 500 1000 1500 0 7,000 14,000 21,000 CVRD South Escondida Huntly BHPB - Trombetas Codelco Norte Pilbara (26.8%) Rio - Grasberg (a) Weipa Hamersley (40%) Boké CVRD North Collahuas
Slide 27: Portfolio of tier 1 assets: product diversification
Portfolio of tier 1 assets: product diversification Underlying EBITDA (12 months to Jun-2007) ($B) 40.2 3% Other 4% Diamonds & Specialty Products 5% Energy Coal 9% Petroleum 10% Stainless Steel Materials 23.0 16% Aluminium 2% 4% 16% 17.2 6% 22% Iron Ore, Manganese & Met Coal 17% 7% 7% 9% 25% 20% 24%
Slide 28: Portfolio of tier 1 assets: geographic diversity and fiscal stability
Portfolio of tier 1 assets: geographic diversity and fiscal stability Pro forma assets by geography ($B) 100% = 91.4 South America, Southern Africa and Other • High proportion of core assets 12% in fiscally stable countries Europe • A sound foundation for future 11% ventures into new mineral provinc
Slide 29: Portfolio of tier 1 assets: deep project pipeline
Portfolio of tier 1 assets: deep project pipeline Base Diamonds Iron Ore Petroleum Aluminium & SP Nickel (a) Energy Met Coal Manganese Metals Execution• KUC Pushback • WA Iron Ore RGP•3 Neptune • Alumar Refinery• Ekati Koala UG • Cliffs • Rössing • GEMCO Exp • Northparkes • WA Iron Ore RGP•4 NWS Ang
Slide 30: Creating a minerals industry 'super-major'
Creating a minerals industry ‘super-major’ Top 10 metals & mining companies Market capitalisation as at 9-Nov-2007 ($B) 0 100 200 300 400 Combined Company (a) • Top 5 company in the world by Shenhua market value (a) CVRD • Pro forma FY2007 annual underlying Anglo American EBITDA of approximately(b)
Slide 31: V. Attractive and deliverable proposal
V. Attractive and deliverable proposal Page 30
Slide 32: Compelling proposal for Rio Tinto shareholders
Compelling proposal for Rio Tinto shareholders • 28% premium to the combined volume-weighted average market capitalisation over the one (a) month pre-approach (b) • 41% share of combined group for Rio Tinto shareholders • Pro rata exposure to post combination synergies – Incremental EBITDA $3.7B(c)
Slide 33: Value enhancing for BHP Billiton shareholders
Value enhancing for BHP Billiton shareholders • Pro-rata exposure to post combination synergies – Incremental EBITDA $3.7B(a) perannum growingtoestimated • Strengthened asset portfolio and future growth (b) completion • Cashflow per share accretive from the first full fiscal year following (c) • Ear
Slide 34: Broader stakeholders will benefit
Broader stakeholders will benefit • Customers – Increased product volumes to market more quickly – Expandedproduct,shipping anddeliveryoptions– improved securityof supply – Low cost, reliable producer through the cycle • Communities, employees and developing countries – Global leader in safety, comm
Slide 35: Value of corporate renewal
Value of corporate renewal BHP Billiton Ltd and Rio Tinto Ltd total shareholderreturn(a) • BHP Billiton DLC merger was a catalyst Index –June 2001 = 100 600 for corporate renewal and created a superior platform for long term value growth 500 BHP Billiton • Total shareholder return: – BHP Billiton Lt
Slide 36: A natural fit – low integration risk
A natural fit low – integration risk • Similar heritage, culture, values and strategy • ‘Best of breed’ management • Optimaldeployment ofscarcelabourresources • Successful track record of integration Page 35
Slide 37: A deliverable proposal
A deliverable proposal • Following a thorough anti-trust analysis, we believe any possible regulatory concerns can be readily addressed without impacting benefits in a meaningful way • Likely the regulatory focus will fall primarily on iron ore (a) – Combined share of contestable iron ore sales appr
Slide 38: Summary of key terms of the proposal
Summary of key terms of the proposal • All share proposal of 3 BHP Billiton shares for every Rio Tinto share • Rio Tinto Ltd shareholders will receive BHP Billiton Ltd shares • Rio Tinto plc shareholders will receive 80% BHP Billiton Plc shares and 20% BHP Billiton Ltd shares (subject to mix and mat
Slide 39: Summary of key terms of the proposal
Summary of key terms of the proposal Intended $30B(a) followingcompletion • Intendedinitialsharebuy-backofapproximately share buy-back • Future capital management consistent with a single A rating target • Separate interconditional schemes of arrangement for each of Rio Tinto plc Process and Rio Tin
Slide 40: VI. Conclusion: a unique combination to unlock value
VI. Conclusion: a unique combination to unlock value Page 39
Slide 41: BHP Billiton and Rio Tinto: unlocking value
BHP Billiton and Rio Tinto unlocking – value • Compelling value opportunity for Rio Tinto shareholders through an all-share proposal (a) – 41% share of combined group for Rio Tinto shareholders (b) – Pro-rata exposure to EBITDA synergies growing to estimated per annum $3.7B • Attractive value propos