Bhp Group Ltd · ASX:BHP
Bhp — RIO Tinto — Merger or Acquisition (March 2008)
66 slides from Bhp's merger presentation, Mar 5, 2008
Slide 1: Investor Presentation February 2008
Investor Presentation February 2008
Slide 2: Disclaimer
Disclaimer Slide 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's offer for Rio Tinto Ltd and Rio Tinto plc (“Rio Tinto”). By reviewing/attending this presentation you agr
Slide 3: Disclaimer (continued)
Disclaimer (continued) Slide None of the statements concerning expected cost savings, revenue benefits (and resulting incremental EBITDA) and EPS accretion in this presentation should be interpreted to mean that the future earnings per share of the enlarged BHP Billiton group for current and future
Slide 4: The largest mining company by market capitalisation
The largest mining company by market capitalisation Slide US$B Market Capitalisation as at 31 January 2008 *Rio Tinto Market Cap = Market Cap of Rio Tinto Plc + 62.6% of Market Cap of Rio Tinto Ltd (due to Rio Tinto Plc’s approximate 37.4% holding of Rio Tinto Ltd, as per www.riotinto.com/investors/
Slide 5: Structure driven by customer needs
Structure driven by customer needs Slide Petroleum Energy Coal Metallurgical Coal Manganese Iron Ore Stainless Steel Materials Base Metals Aluminium Diamonds & Spec Prod Note: Location of dots indicative only
Slide 6: Core strategy is unchanged Focus on value creation
Core strategy is unchanged Focus on value creation Slide • People • Run current assets at full potential • Accelerate development projects • Create future options People ‘Licence to Operate’ World Class Assets The BHP Billiton Way (Value Added Processes) Financial Strength and Discipline Project Pip
Slide 7: Highlights – Half year ended December 2007
Highlights – Half year ended December 2007 Slide • Strong operating and financial results • Cost control focus is yielding excellent results • Project delivery – first production from seven new projects • Healthy volume growth from new production expected in FY 2008 • A further four projects approve
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Slide 9: Declining rate of cost increase
Declining rate of cost increase Slide H1 FY2005 and H2 FY2005 are shown on the basis of UKGAAP. Other periods are calculated under IFRS. All periods excluded third party trading. 4.0% 2.2% 3.0% 1.7% 5.5% 8.4% 5.9% 4.5% 4.3% 5.8% 6.7% 5.6% 4.9% 3.9% 0% 1% 2% 3% 4% 5% 6% 7% 8% 9% H1 FY2005 H2 FY2005 H
Slide 10: Outlook – long term fundamentals strong, shorter term more fluid
Outlook – long term fundamentals strong, shorter term more fluid Slide 1,000 2,000 3,000 4,000 5,000 India China Jan-07 Apr-07 Jul-07 Oct-07 Gross domestic product (US$bn) ISM purchasing manufacturers index Source: International Monetary Fund Source: Thomson Financial
Slide 11: China's growth driven by domestic demand
China’s growth driven by domestic demand… Asian export markets more important than the US Slide 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007F Consumption Investment Inventories Net Exports Source: CEIC Data Co. Ltd (February 2008), BHP Billiton Estimates
Slide 12: Can Chinese consumption growth offset the slow down in the US?
Can Chinese consumption growth offset the shorter term slow down in the US? Slide Iron Ore Copper Energy China India USA Europe Share of Consumption (2007, %) China Share of Incremental Demand (1997-2007, %) Iron Ore Copper Energy Sources of data: CRU Quarterly Reports (January 2008); IISI – Steel S
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Slide 18: Development spend in high margin businesses
Development spend in high margin businesses Slide Note: Represents pipeline projects in execution, feasibility does not include pre-feasibility projects. EBITDA margins for business in months to December 2007 not for individual projects. EBITDA margin excluded third party trading. Source: BHP Billit
Slide 19: Strong cash flow - delivering value to shareholders
Strong cash flow - delivering value to shareholders Slide 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 18,000 FY2002 FY2003 FY2004 FY2005 FY2006 FY2007 FY2008 H1 H2 1500 3000 4500 6000 7500 9000 FY2002 FY2003 FY2004 FY2005 FY2006 FY2007 FY2008 Available Cash Flow (US$m) Available Cash Flow (U
Slide 20: Summary
Summary Slide • Continued excellent operating and financial results • Unique portfolio balance provides stability • Project pipeline and global footprint to support future growth • Longer term outlook for global growth remains robust
Slide 21: BHP Billiton's offer to acquire Rio Tinto
BHP Billiton’s offer to acquire Rio Tinto
Slide 22: Background to the offer
Background to the offer Slide • Early 2007: BHP Billiton discussed a merger of equals. This concept was rejected by Rio Tinto • 1 November 2007: BHP Billiton made a confidential proposal to combine the companies. Rio Tinto rejected the proposal and refused to enter discussions • 8 November 2007: BHP
Slide 23: BHP Billiton offer for Rio Tinto
BHP Billiton offer for Rio Tinto Slide Rio Tinto plc Offer: • Rio Tinto plc shareholders will receive 3.4 BHP Billiton shares for every Rio Tinto plc share held – 80% in BHP Billiton Plc shares – 20% in BHP Billiton Ltd shares • Separate US offer (which forms part of the Rio Tinto plc Offer) to: – U
Slide 24: BHP Billiton offer for Rio Tinto
BHP Billiton offer for Rio Tinto Slide • Offers are inter-conditional • Subject to pre-conditions relating to certain anti-trust clearances in the EU, the US, Australia, Canada and South Africa and FIRB approval in Australia • Conditional on more than 50% acceptances in respect of publicly-held shar
Slide 25: Unlocking value – Why a combination with Rio Tinto?
Unlocking value – Why a combination with Rio Tinto? Slide • Combined entity will have a unique portfolio of tier 1 assets – Enhanced ability to optimise and high-grade portfolio – Greater diversity and reduced value at risk – Combination makes sense in both a rising and a falling market • Uniquely p
Slide 26: Indicative timetable
Indicative timetable Slide Event Date Satisfaction of regulatory approval pre-conditions Second half of 2008 Posting of offer documents for Rio Tinto plc Offer and Rio Tinto Ltd Offer to shareholders Day 0 (Within 28 days after the pre-conditions are satisfied) Last date for fulfilment of minimum ac
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Slide 30: Return on capital and margins
Return on capital and margins Slide (1) H1 2008 is calculated on an annualised basis. (2) FY2005, FY2006, FY2007 and H1 2008 are shown on the basis of Underlying EBIT. Prior periods are calculated under UKGAAP. All periods excluded third party trading. 35% 38% 30% 44% 48% 44% 29% 21% 13% 11% 40% 30%
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Slide 35: EBIT margin by Customer Sector Group
EBIT margin (1) by Customer Sector Group Slide 0% 10% 20% 30% 40% 50% 60% 70% Petroleum Aluminium Base Metals Diamonds & Specialty Products Stainless Steel Materials Iron Ore Manganese Met Coal Energy Coal 2005 2006 2007 H1 2008 (1) All periods excluded third party trading.
Slide 36: Underlying EBIT analysis Half year ended Dec 2007 vs Dec 2006
Underlying EBIT analysis Half year ended Dec 2007 vs Dec 2006 Slide 3,000 4,000 5,000 6,000 7,000 8,000 9,000 10,000 11,000 12,000 Dec-06 Net Price Volume Exchange Inflation Cash Costs Non Cash Costs Exploration & Bus. Dev Other Dec-07 US$m 9,134 1,635 (506) (206) (199) (61) (222) (413) 9,623 (1) In
Slide 37: Impact of major volume changes Half year ended Dec 2007 vs Dec 2006
Impact of major volume changes Half year ended Dec 2007 vs Dec 2006 Slide -250 -150 -50 US$m Total volume (1) variance US$ 461 million Copper Met Coal Iron Ore Aluminium/ Alumina D&SP Energy Coal (9) Petroleum (25) Nickel (226) Other (1) Volume variances calculated using previous year margin and inc
Slide 38: Impact of major commodity price Half year ended Dec 2007 vs Dec 2006
Impact of major commodity price Half year ended Dec 2007 vs Dec 2006 Slide -200 -100 Total price variance US$1,635 million (1) US$m Petroleum Base Metals Manganese Iron Ore Energy Coal SSM Diamonds (23) Aluminium (44) Met Coal (198) (1) Including $154m of price-linked costs impact.
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Slide 40: Developing world metals demand to show significant growth
Developing world metals demand to show significant growth Slide US$ expenditure (per capita) GDP per capita (US$’000)* Aluminium Copper Iron Ore Coking Coal * 1 January 2008 real US dollars Sources of data: CRU Quarterly Reports (January 2008); Brook Hunt Aluminium Metal Service (February 2008); IIS
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Slide 42: Dollar value of oil intensity per capita vs non ferrous metals
But, the dollar value of oil intensity per capita is 10 times that of non ferrous metals Slide US$ Expenditure (per capita) GDP per capita (US$’000)* Crude Oil Aluminium/Copper China: $2,000 per capita * 1 January 2008 real US dollars Sources of data: CRU Quarterly Reports (January 2008); Brook Hunt
Slide 43: China
China Slide 1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500 5,000 5,500 FY02 H1 03 H2 03 H1 04 H2 04 H1 05 H2 05 H1 06 H2 06 H1 07 H2 07 H1 08 Petroleum Aluminium Base Metals Iron Ore Met Coal Manganese Energy Coal SSM Other • Diversification remains for sales into China • Currently 20% of total com
Slide 44: Broad exposure to carbon steel sector demand
Broad exposure to carbon steel sector demand Slide But so is Metallurgical coal • Leading position in the seaborne market • 100% BMA owned Hay Point limits impact of infrastructure constraints • Significant growth options Iron Ore is an important part of the mix • Geographic proximity to the growing
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Slide 46: Well positioned to meet energy demand regardless of fuel mix
Well positioned to meet energy demand regardless of fuel mix Slide Source: EIA International Energy Outlook 2007 WNA Global Nuclear Fuel Market 2007 2007 2010 2015 2020 2025 2030 Energy Demand Renewables Nuclear Gas Oil Coal 2007 = 100 Projected world primary energy demand
Slide 47: China's copper, nickel, aluminium and iron ore demand share of world
China’s copper, nickel, aluminium and iron ore demand and its percentage share of world demand Slide ‘000 tonnes Data: CRU Copper Quarterly, January 2008 ‘000 tonnes Data: CRU Nickel Quarterly, January 2008 Data: Brook Hunt Aluminium Metal Service, February 2008 ‘000 tonnes million tonnes Data: IISI
Slide 48: China and India account for a major share of world commodity demand
China and India account for a major share of world commodity demand Slide Share of World Commodity Demand - 2007 0% 25% 50% 75% 100% Other Europe Japan USA India China Notes: Iron ore is demand for seaborne imports. Steel data are for crude steel production. Coal includes all coal types. Source: CRU
Slide 49: China's intensity of aluminium use is rising
China’s intensity of aluminium use is rising…but it has much further to climb Slide Aluminium - GDP per capita vs consumption per capita 5000 10000 15000 20000 25000 30000 35000 40000 45000 50000 GDP/Capita (Jan. 2008 Constant US Dollars) China Germany India Japan Korea, Rep. United States Taiwan No
Slide 50: China's intensity of copper use is rising
China’s intensity of copper use is rising…but it has much further to climb Slide Copper - GDP per capita vs consumption per capita 5000 10000 15000 20000 25000 30000 35000 40000 45000 50000 GDP/Capita (Jan. 2008 Constant US Dollars) China Germany India Japan Korea, Rep. United States Taiwan *Note: B
Slide 51: China's intensity of steel use is rising
China’s intensity of steel use is rising…but it has much further to climb Slide Steel - GDP per capita vs consumption per capita 1000 1200 5000 10000 15000 20000 25000 30000 35000 40000 45000 50000 GDP/Capita (Jan. 2008 Constant US Dollars) China Germany India Japan Korea, Rep. United States Taiwan
Slide 52: China's energy use has far to grow
China’s energy use has far to grow, providing strong opportunities for suppliers of energy raw materials Slide Energy - GDP per capita vs energy use per capita 5000 10000 15000 20000 25000 30000 35000 40000 45000 50000 GDP/Capita (Jan. 2008 Constant US Dollars) China Germany India Japan Korea, Rep.
Slide 53: Inventories remain low; Real LME metal prices still high
Inventories remain at historically low levels; Real LME metal prices are still high Slide Monthly Real LME Metal Prices and Stocks LME Price Index (left scale) Stocks (right scale) Source: Macquarie Capital Securities Research, February 2008. * London Metal Exchange (LME) prices and stocks of Al, Cu
Slide 54: Global Copper Prices in 1880-2007
Global Copper Prices in 1880-2007 Slide 1920-1945 Great Depression World War II High military demand Investment dries up Prices collapse and stagnate 1975-2007 Emerging Market growth Maturing of Japan 1990: Collapse of USSR “Re-birth” of US economy Productivity & IT revolution “Commodification” Cost
Slide 55: Capital & exploration expenditure
Capital & exploration expenditure Slide 0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0 8.0 9.0 10.0 FY 2002 FY 2003 FY 2004 FY 2005 FY 2006 FY 2007 FY 2008 Exploration Sustaining Capex Growth Expenditure US$bn 9.9 7.4 6.4 4.3 3.1 3.0 3.2 Total 1.3 0.8 0.8 0.5 0.5 0.3 0.4 Exploration (1) 1.5 1.4 1.4 1.2 0.8 0.7 0.9
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Slide 57: Sanctioned development projects (US$9.6bn)
Sanctioned development projects (US$9.6bn) Production Capacity (100%) Progress Initial Production Target Date Share of Approved Capex US$m Commodity Minerals Projects Slide Sanctioned Third coal berth capable of handling an estimated 30 million tpa End CY10 Energy Coal Newcastle Third Port (Australi
Slide 58: Sanctioned development projects (US$9.6bn) cont.
Sanctioned development projects (US$9.6bn) cont. Production Capacity (100%) Progress Initial Production Target Date Share of Approved Capex US$m Commodity Petroleum Projects Production Capacity (100%) Progress Initial Production Target Date Share of Approved Capex US$m Commodity Minerals Projects (c
Slide 59: Sanctioned development projects (US$9.6bn) cont.
Sanctioned development projects (US$9.6bn) cont. Production Capacity (100%) Progress Initial Production Target Date Share of Approved Capex US$m Commodity Petroleum Projects (cont’d) Slide Sanctioned 10,000 bpd condensate and processing capacity of 80 million cubic feet gas per day CY11 Oil/Gas Kipp
Slide 60: Development projects in feasibility (US$6.5bn)
Development projects in feasibility (US$6.5bn) Project Capacity (100%)* Forecast Initial Production* Estimated Share of Capex* US$m Commodity Minerals Projects (US$4.7bn) Slide 3.2 million tpa H2 CY11 1,000 Alumina Guinea Alumina Project (Guinea) – 33.3% 1 million tpa clean coal End CY08 Met Coal Ma
Slide 61: Development projects in feasibility (US$6.5bn) cont.
Development projects in feasibility (US$6.5bn) cont. Project Capacity (100%)* Forecast Initial Production* Estimated Share of Capex* US$m Commodity Minerals Projects (US$4.7bn) Project Capacity (100%)* Forecast Initial Production* Estimated Share of Capex* US$m Commodity Petroleum Projects (US$600m)
Slide 62: Development projects commissioned since July 2001
Development projects commissioned since July 2001 Project Initial Production Date Our Share of Capex Actual Budget Actual US$m Budget US$m Slide Q1 CY04 Q2 CY04 Products & Capacity Expansion (Australia) – 85% Q1 CY04 Q1 CY04 Cerrejon Zona Norte (Colombia) – 33.3% Q4 CY03 Q4 CY03 Ohanet (Algeria) – 4
Slide 63: Development projects commissioned since July 2001
Development projects commissioned since July 2001 Project Initial Production Date Our Share of Capex Actual Budget Actual US$m Budget US$m Slide Q2 CY06 Q1 CY06 Worsley Development Capital Project (Australia) – 86% Q4 CY05 Q3 CY05 Paranam Refinery Expansion (Suriname) – 45% Oct 2005 Q4 CY05 Escondid
Slide 64: Development projects commissioned since July 2001
Development projects commissioned since July 2001 Project Initial Production Date Our Share of Capex Actual Budget Actual US$m Budget US$m Slide Q4 CY07 Q4 CY07 (1) Pinto Valley (USA) – 100% Q4 CY07 Q4 CY07 1,300 (1) 1,300 Western Australia Iron Ore RGP3 (Australia) – 86.2% Q4 CY07 Q1 CY08 2,079 (1)
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