Bhp Group Ltd · ASX:BHP
Bhp — BHP Billiton — Corporate Update (November 2008)
62 slides from Bhp's corporate update, Nov 3, 2008
Slide 1: Australian Site Tour
Australian Site Tour Stainless Steel Materials CSG Jimmy Wilson President, Stainless Steel Materials 28 October 2008
Slide 2: Important notices
Important notices Reliance on third party information The views expressed here contain information that have been 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 informatio
Slide 3: Key messages
Key messages Safely run 100% of our assets at 100% capacity, 100% of the time Delivering on committed projects Options for low cost stable operations Sound long run margins Substantial resource base Superior technology advantages Part of BHP Billiton and hence ability to invest countercyclical to ni
Slide 4: Agenda
Agenda Overview of our Business Stainless Steel Materials Performance Growth Options Competitive Advantages
Slide 5: Stainless Steel Materials in the BHP Billiton portfolio
Stainless Steel Materials in the BHP Billiton portfolio Underlying EBIT (FY2008, US$bn) 25 20 15 10 5 0 Petroleum Energy Coal Aluminium Base Metals Diamonds and Specialty Products Stainless Steel Materials Iron Ore Manganese Metallurgical Coal Energy (27%) Non Ferrous (44%) Steelmaking Materials (29
Slide 6: SSM global footprint
SSM global footprint Russia The Hague Cerro Matoso Singapore Mount Keith Nickel Indonesia Leinster Nickel Yabulu Operations Kalgoorlie Nickel New Caledonia Exploration JVs Smelter Development Options Kambalda Nickel Nickel West Fremantle Port Concentrator Marketing Offices Kwinana Nickel Esperance P
Slide 7: Experienced management team
Experienced management team Jimmy Wilson President Nickel West Wayne Isaacs President & COO 30 years resources experience 11 years with BHP Billiton Yabulu Neil Meadows General Manager 23 years resources experience 4 years with BHP Billiton Cerro Matoso Alan Pangbourne President 26 years resources e
Slide 8: Focus to deliver value
Focus to deliver value Safely run assets at full potential Continuously driving a Zero Harm culture Continuous focus on business optimisation and reliable production Recruit, develop and retain the right people Deliver current projects Ramp-up Ravensthorpe / Yabulu extension Nickel West growth proje
Slide 9: Focus on safety
Focus on safety SSM – Total Recordable Injury Frequency Rate¹ (TRIFR) 14 12 10 8 6 4 2 0 FY05 FY06 FY07 FY08 Key areas of focus Elimination of fatal risks Elimination of catastrophic risks Creating operational stability, key driver to improve safety performance Improving the quality of our Field Lea
Slide 10: Agenda
Agenda Overview of our Business Stainless Steel Materials Performance Growth Options Competitive Advantages
Slide 11: SSM financial performance
SSM financial performance (US$m) 0 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 EBIT FY01 FY02 FY03 FY04 FY05 FY06 FY07 Price Cost Efficiencies Volume Exchange Exploration Inflation Other FY08 Note: FY02 to FY05 shown on the basis of UKEAAP subsequent periods are calculated under IFRS. FY05 include
Slide 12: Agenda
Agenda Overview of our Business Stainless Steel Materials Performance Growth Options Competitive Advantages
Slide 13: SSM growth options in the pipeline
SSM growth options in the pipeline CW Africa Exploration Escondida 3rd Conc CMSA Pyro Expansion Puma Blackwater UG NWS WFGH Nimba DRC Smelter RBM Thebe Olympic Dam Expansion 3 Wards Well Knotty Head Mount Keith Talc Cannington Life Ext Potash Gabon Mt Arthur Coal (MACX) Olympic Dam Expansion 2 CMSA
Slide 14: Exploration focused on tier 1 opportunities
Exploration focused on tier 1 opportunities Norilsk Alliance Colombia Indonesia Western Australia Sulphide Exploration Laterite Provinces Brownfields exploration to expand our WA and Colombia production Greenfields exploration of Tier 1 opportunities
Slide 15: Agenda
Agenda Overview of our Business Stainless Steel Materials Performance Growth Options Competitive Advantages
Slide 16: BHP Billiton ranks as the No. 3 nickel producer
BHP Billiton ranks as the No. 3 nickel producer Production in year ending June 2008 (kt Ni) 300 250 200 150 100 50 0 294.0 253.8 167.9 117.1 116.3 54.3 54.2 37.2 Norilsk Nickel Vale BHP Billiton Xstrata Jinchuan1 Eramet Sumitomo1 Anglo American Source: Company Annual and Production reports. All prod
Slide 17: Resources to fulfil our future growth aspirations
Resources to fulfil our future growth aspirations Ni contained (mt) 30 25 20 15 10 5 0 25.1 22.1 11.9 9.7 8.2 2.6 2.3 Vale1 Norilsk Nickel2 BHP Billiton3 Xstrata4 Eramet (SLN)5 Rio Tinto6 Anglo American7 Resources Reserves 1 Reserves 2007 Annual report; Resources July 2007 Investor presentation. 2,4
Slide 18: Our competitive advantages
Our competitive advantages Global Nickel Resources (mt Ni) 100 75 50 25 0 (39%) (61%) Sulphide Laterite South East Asia Significant expansion options around existing assets Cerro Matoso Nickel West Operating know-how across all technologies Both sulphide and laterite smelting and leaching process em
Slide 19: Technology is a critical success factor for the nickel industry
Technology is a critical success factor for the Nickel industry Sulphide Ores – proven “simple” technology, but exploration driven Mining Concentrating Nickel concentrate Smelting Matte Refining Nickel metal (Co, Cu, PGM by-products) Key considerations: Discovery Mining / deposit depth/grade Laterit
Slide 20: Key messages
Key messages Safely run 100% of our assets at 100% capacity, 100% of the time Delivering on committed projects Options for low cost stable operations Sound long run margins Substantial resource base Superior technology advantages Part of BHP Billiton and hence ability to invest countercyclical to ni
Slide 21: Nickel and stainless steel market review
Australian Site Tour Nickel and stainless steel market review Stephen Williams Marketing Director, Stainless Steel Materials October 2008
Slide 22: Agenda
Agenda Demand and substitution Supply Outlook
Slide 23: Nickel and stainless steel market review
Nickel and stainless steel market review Stainless steel consumption is the key driver for nickel demand Stainless steel and nickel are cyclical businesses with pronounced stocking and de-stocking cycles Stainless steel demand is expected to remain robust over the long term underpinned by urbanisati
Slide 24: Stainless steel is the key driver of nickel demand
Stainless steel is the key driver of nickel demand Nickel Use by Application (CY 2007) Other inc. Foundry 8% Batteries 3% Plating 8% Non-Ferrous 14% Alloys 5% Alloy Steels 62% Stainless Steel Nickel improves durability and corrosion resistance of steel Two main types of stainless steel: Austenitic o
Slide 25: Emerging markets are driving global growth
Emerging markets are driving this global growth Stainless Steel Production Growth (CY 2007, kt) 0 5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000 45,000 Global CAGR 1998-2007: 5.9% 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008F 2009F 2010F 2011F 2012F China India Other Asia Europe Am
Slide 26: China's self sufficiency in stainless steel production
China’s self sufficiency in stainless steel production China Import and Export (‘000 mt) 0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 Finished Production Consumption Net Import% 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008F (%) Net Import position -5% 5% 15% 25% 35% 45%
Slide 27: Stainless steel is a cyclical business
Stainless steel is a cyclical business with pronounced stocking and de-stocking cycles 1. Global stainless steel production, quarterly 2. 1993-2009, y-o-y change % -15% -10% -5% 0% 5% 10% 15% 20% 25% 30% % Change Quarterly moving average 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 20
Slide 28: High and volatile prices encouraged substitution
The high and volatile prices encouraged substitution Stainless Market Share (%) 0 3005 4005 2005 10 20 30 40 50 60 70 80 2001 2002 2003 2004 2005 2006 2007 300 series stainless steel is durable, weldable and formable and is the workhorse of the stainless steel industry We expect the rate of substitu
Slide 29: Emerging economies will underpin stainless steel over the long term
Emerging economies will underpin stainless steel over the long term Stainless Steel Consumption (kg per capita) 0 5 10 15 20 25 China 2028 2015 India Other Asia 2028 2015 2007 Europe 2007 2015 2028 America 2007 2015 2028 0 5,000 10,000 15,000 20,000 25,000 30,000 GDP in US$ per capita Source: SMR.
Slide 30: Agenda
Agenda Demand and substitution Supply Outlook
Slide 31: LME stocks have risen but remain low
LME stocks have risen but remain low in historical terms Number of Weeks of Consumption & LME Stocks (kt) 0 20 40 60 80 100 120 140 160 180 Total LME No. of weeks consumption Total market additions in 2007 New supply has been dominated by Nickel Pig Iron (Number of weeks consumption) 1992 1993 1994
Slide 32: Nickel pig iron responded as supply source and is now declining
Nickel pig iron responded as supply source and is now declining Ore imports by origin (mt) 0.0 0.5 1.0 1.5 2.0 2.5 Wet Season Wet Season Recent decline in supply Jan-06 Jan-06 Mar-06 Apr-06 May-06 Jun-06 Jul-06 Aug-06 Sep-06 Oct-06 Nov-06 Dec-06 Jan-07 Feb-07 Mar-07 Apr-07 May-07 Jun-07 Jul-07 Aug-0
Slide 33: Higher cost supply is coming under pressure
Higher cost supply is coming under pressure as the marginal producer is squeezed (>120ktpa announced) Nickel C1 cost and price (US$/lb) Avg 4th quartile C1 costs LME price (avg annual) 0 2 4 6 8 10 12 14 16 18 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008F Existing opera
Slide 34: Future supply growth
Future supply growth: Disruption a feature of new supply growth? Expected future production from committed and highly probable nickel developments (kt) Ni 300 250 200 150 100 50 0 2006 2007 2008F 2009F 2010F 2011F 2012F Greenfield projects (Q4 06) Greenfield projects (Q3 08) Forecast production Q4 2
Slide 35: Major nickel projects have experienced capital cost escalation
All major Nickel projects have experienced significant capital cost escalation. Most of them yet to be completed Nickel Project Capital Intensity (US$ / tonne of Nickel) 70,000 60,000 50,000 40,000 30,000 20,000 10,000 0 Onça Puma RNO Ambatovy Ramu Koniambo Goro Quasi-Brownfield 106% ? 110% ü True G
Slide 36: Agenda
Agenda Demand and substitution Supply Outlook
Slide 37: Short term cyclical swings and supply side correction
Short term cyclical swings and supply side correction 2003 2004 2005 2006 2007 2008F 2009F Global Supply (kt) 1286 1276 1281 1346 1432 1407 1497 % change (0.9)% 0.4% 5.1% 6.4% (1.8)% 6.4% Global Consumption (kt) 1239 1256 1239 1399 1335 1384 1450 % change 1.4% (1.4)% 12.9% (4.6)% 3.7% 4.7% Surplus/(
Slide 38: Key messages
Key messages Stainless steel and nickel are cyclical commodities with a strong underlying growth trend They are responsive markets as evidenced by the rapid introduction of nickel pig iron and now a supply side correction Stainless steel and nickel growth continues to look promising in the long term
Slide 39: Australian Site Tour Nickel West
Australian Site Tour Nickel West Wayne Isaacs Nickel West President and Chief Operating Officer October 2008
Slide 40: Agenda
Agenda Key Messages Sustainability Business Overview Growth Options
Slide 41: Key Messages
Key Messages Operating assets safely Focussing on efficiency and reducing costs Exploring to find reserves to support long-life assets Assessing next phase of projects
Slide 42: Agenda
Agenda Key Messages Sustainability Business Overview Growth Options
Slide 43: Safety and Health – Nickel West
Safety and Health – Nickel West Nickel West – Total Recordable Injury Frequency Rate¹ (TRIFR) 20 15 10 5 0 FY05 FY06 FY07 FY08 A safety culture driven by Fatality prevention (FRCP) Strong leadership Safe behaviours and equipment Compliance, audit and governance Health and fit-for work programs Fatig
Slide 44: Sustainable environment and community programs
Sustainable environment and community programs Sustainability priorities include : Increased indigenous employment Indigenous education and training Community development partnerships Active employee community participation teams Uniform certified environmental programs Understanding our energy foot
Slide 45: Agenda
Agenda Key Messages Sustainability Business Overview Growth Options
Slide 46: Nickel West – Operations
Nickel West – Operations World’s third largest producer of nickel-in-concentrate Produced 107 kt1 contained nickel in FY 2008 Approximately 3,500 employees and operational contractors Nickel West’s business Mining, concentrating, smelting, and refining A major operation is being ramped-up at Ravenst
Slide 47: Nickel West flowchart
Nickel West flowchart Nickel-in-concentrate Mount Keith Operation 30-45 ktpa Mount Keith concentrator Leinster Nickel Operation 40-50 ktpa Leinster concentrator Third Party Mines 35-45 ktpa Kambalda concentrator Mixed Hydroxide Product Ravensthorpe Nickel Operation Up to 50 ktpa Nickel-in-concentrat
Slide 48: Leinster Mines and Concentrator
Leinster Mines and Concentrator Mines Perseverance underground – ore reserves of 11 mt @ 1.85% Ni¹ – life to ~2014 Satellite operations now in production Cliffs Rocky’s Reward Concentrator Mill throughput ~3 mtpa Recovery of ~85% Production 40-50 ktpa nickel in concentrate @ ~11.5% Ni grade Leinster
Slide 49: Kambalda Nickel Concentrator
Kambalda Nickel Concentrator Concentrator Mill throughput >1.6 mtpa 35-45 ktpa Ni in concentrate @ ~13% Ni grade Output driven by third party resource base Partnerships with third party producers to sustain a viable future for Kambalda KNC Mine Feed (Ore kt) 2,000 1,500 1,000 500 0 FY06 FY07 FY08
Slide 50: Kalgoorlie Nickel Smelter
Kalgoorlie Nickel Smelter Smelter 750 ktpa concentrate throughput capacity Furnace re-build June to Sept 2008 Completed ahead of schedule Successful ramp-up Improved operational flexibility Positions smelter for next 15 years
Slide 51: Kwinana Nickel Refinery
Kwinana Nickel Refinery Refinery Based on Sherritt-Gordon technology Efficient, low cost producer Premium briquette product Competes with global refineries for matte Furnace rebuild an opportunity for KNR shutdown Work set up the refinery for four years’ operation before the next planned shutdown Pr
Slide 52: Historical Nickel West Production
Historical Nickel West Production Saleable Nickel Production (ktpa) 120 100 80 60 40 20 0 101 62 38 1 105 54 50 1 107 65 37 5 FY2006 FY2007 FY2008 Metal Ni intermediates Ni in con Export Notes: Nickel intermediates in FY2008 includes production from Ravensthorpe.
Slide 53: FY2008 Cost Structure
FY2008 Cost Structure Cash operating cost (%) Others Royalties Chemicals / Additives Contractors Labour Fuel and Energy Maintenance TPP 12% 2% 4% 3% 9% 14% 44% 12% Key value drivers Volume Cost reduction Excludes RNO (In ramp-up) 90% of cost base is in $AUD (excluding TPP)
Slide 54: Input Cost Pressures
Input Cost Pressures Salaries & Wages (%) 135 125 115 105 95 FY06 FY07 FY08 Diesel (%) 175 155 135 115 95 FY06 FY07 FY08 Electricity (%) 135 125 115 105 95 FY06 FY07 FY08 Maintenance (%) 135 125 115 105 95 FY06 FY07 FY08 Xanthate (%) 135 125 115 105 95 FY06 FY07 FY08 Explosives (%) 135 125 115 105 9
Slide 55: Agenda
Agenda Key Messages Sustainability Business Overview Growth Options
Slide 56: Delivering on our commitments
Delivering on our commitments Status of projects discussed at your last visit Project Cliffs Rocky’s Reward II Mount Keith Stage H Smelter Rebuild Ravensthorpe Perseverance Deeps Yakabindie Status Operational Operational Operational Operational Ramp Up Definition Under study
Slide 57: Growth options
Growth options Keeping focus on finding and acquiring resources to fill our growing downstream capability Prioritising our focus on developing existing resources Building on our technology processing advantages Our strategy is to Leverage exploration success Capture value of technology advances Plan
Slide 58: Exploration strategy – building resources
Exploration strategy – building resources Exploration Spend (US$m) 45 40 35 30 25 20 15 10 5 0 4.4 17.6 40.0 FY2006 FY2007 FY2008 Five-year exploration program Producing promising results Focus on low-risk brownfields targets near existing operations Currently second full year of program Work starte
Slide 59: Leinster Asset Life Extension
Leinster Asset Life Extension Perseverance Deeps Extension of Leinster beyond 2014 Follows development of Cliffs and Rocky’s Reward Feasibility study to be completed 2H FY 2009
Slide 60: Extension of Kambalda opportunities
Extension of Kambalda opportunities Objectives Extended life and output of Kambalda region Successful long term partnerships Majority of contracts have options to 2019 Current Status and Future Growth Concentrator progressively de-bottlenecked to more than1.6 mtpa capacity Kambalda exploration start
Slide 61: Conclusion
Conclusion Operating assets safely Focussing on efficiency and reducing costs Exploring to find reserves to support long-life assets Assessing next phase of projects
Slide 62: bhpbilliton resourcing the future
bhpbilliton resourcing the future 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: 3 November 2008 By: J