Bhp Group Ltd · ASX:BHP
Bhp — RIO Tinto — Merger or Acquisition (September 2008)
71 slides from Bhp's merger presentation, Sep 2, 2008
Slide 1: Investor Presentation September 2008
Investor Presentation September 2008
Slide 2: Disclaimer
Disclaimer By viewing this presentation you agree to be bound by the following conditions. The directors of BHP Billiton Limited and BHP Billiton Plc (“ BHP Billiton ") accept responsibility for the information contained in this presentation. Having taken all reasonable care to ensure that such is t
Slide 3: Disclaimer continued
Disclaimer continued No statement 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 financial years wi
Slide 4: The largest mining company by market capitalisation
The largest mining company by market capitalisation Market Capitalisation as at 11 August 2008 (US$bn) BHP Billiton *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 **Market value may be unreliable due to a high percentage of non free
Slide 5: With a diversified global portfolio
With a diversified global portfolio Stainless Steel Materials #3 global nickel producer Iron Ore #3 global supplier of seaborne iron ore Manganese #1 global supplier of seaborne manganese ore Metallurgical Coal #1 global supplier of seaborne traded metallurgical coal Base Metals #3 global producer o
Slide 6: Our strategy: Focus on value creation
Our strategy Focus on value creation • People • Run current assets at full potential • Accelerate development projects • Create future options Growth options Project pipeline Financial strength and discipline World-class assets Licence to operate People
Slide 7: Overview – Year ended June 2008
Overview – Year ended June 2008 • Outstanding operating and financial results – Annual production records set in 7 commodities – Underlying EBITDA up 22% to US$28.0 billion – Underlying EBIT up 21% to US$24.3 billion – Attributable profit of US$15.4 billion, up 12% – Earnings per share of 275 US cen
Slide 8: Outstanding results driven by strategy and execution
Outstanding results driven by strategy and execution 9.6 14.7 3.1 3.5 5.5 9.9 15.3 20.1 24.3 FY2002 FY2003 FY2004 FY2005 FY2006 FY2007 FY2008 Notes: a) FY2002 to FY2005 calculated on the basis of UKGAAP. Subsequent periods calculated under IFRS. Underlying EBIT (a) (US$bn) H2 H1
Slide 9: A track record of project delivery
A track record of project delivery Copper equivalent production growth (a) (Indexed, 100=FY2001) • Projects successfully delivered: – 44 since the DLC merger – 10 completed in FY2008 • 10% growth estimated in FY2009 • Completed projects ramping up in FY2009 – Atlantis South, Genghis Khan, Samarco, R
Slide 10: Diversity = Stability and Strength
Diversity = Stability and Strength % EBIT Margin (1) FY2002 FY2003 FY2004 FY2005 FY2006 FY2007 FY2008 H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 Petroleum Aluminium Base Metals D&SP SSM Iron Ore Manganese Met Coal Energy Coal BHP Billiton (1) FY2002 to FY2005 are calculated under UKGAAP. Subsequent p
Slide 11: Short-term global challenges exist
Short-term global challenges exist • Global economic activity is moderating • Financial market instability, housing market decline and inflationary pressures • Emerging economies not immune – Inflationary pressures – Some decline in fixed asset investment growth (isolated to a small number of indust
Slide 12: Long-term fundamentals of emerging economies remain intact
However, long-term fundamentals of emerging/developing economies remain intact 2.8% 2.3% 1.3% 2.9% 3.5% 6.4% 6.7% 7.0% 9.8% 10.1% 9.4% 10.1% 0% 2% 4% 6% 8% 10% 12% Average historical growth CY1990-CY2000 Average historical growth CY2001-CY2007 Average forecast growth CY2008-CY2009 Average forecast g
Slide 13: Urbanisation and industrialisation drive steelmaking raw materials demand
Urbanisation and industrialisation has resulted in a huge call on steelmaking raw materials CY1970 CY1980 CY1990 CY2000 CY2007 CY2015E United States China Source: International Iron & Steel Institute (World Steel in Figures, 2008), US Geological Survey (Iron and Steel Statistics, 3 January 2008) and
Slide 14: Supply-side constraints are limiting the industry's response
Supply-side constraints are limiting the industry’s response Existing Supply Future Supply Grow th • Equipment stress • Industrial action and wage disputes • Labour shortages • Equipment shortages • Significant cost pressures, including fuel • Energy and power constraints • Declines in ore-grade lev
Slide 15: Accelerating growth from a diversified portfolio of projects
Accelerating growth from a diversified portfolio of projects 45% 37% 18% 2,000 4,000 6,000 8,000 10,000 12,000 14,000 CY2007 CY2008 CY2009F CY2010F CY2011F CY2012F % of growth CY2007-2012 (Estimated & unrisked) Production in copper equivalent tonnes (Copper equivalent tonnes '000s) Steelmaking Mater
Slide 16: Focused on low risk volume growth from existing assets
Focused on low risk volume growth from existing assets, high margin CSGs and known regions 87% 13% 88% 12% 3% 97% 63% 37% By project type (b) Brownfield Greenfield By region (c) Existing New By country risk (d) Lower Higher By high margin vs lower margin CSGs (e) > 50% < 50% Projected growth in prod
Slide 17: Strong cash flow - delivering value to shareholders
Strong cash flow - delivering value to shareholders 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 18,000 20,000 FY2002 FY2003 FY2004 FY2005 FY2006 FY2007 FY2008 H1 H2 1500 3000 4500 6000 7500 9000 FY2002 FY2003 FY2004 FY2005 FY2006 FY2007 FY2008 Organic Growth Return to Shareholders (1) Includ
Slide 18: Summary
Summary Liverpool Bay • Excellent operating and financial results • Long-term demand outlook remains strong despite some short-term economic uncertainty • Supply-side constraints are limiting the ability for the industry to respond to demand growth • BHP Billiton’s portfolio of assets focused in sta
Slide 19: BHP Billiton's offer to acquire Rio Tinto
BHP Billiton’s of fer to acquire Rio Tinto
Slide 20: Overview of BHP Billiton Offer for Rio Tinto
Overview of BHP Billiton Offer for Rio Tinto • BHP Billiton has made a pre-conditional offer for Rio Tinto, it will be capable of acceptance by shareholders following completion of regulatory processes and posting of offer documents • Subject to pre-conditions relating to certain anti-trust clearanc
Slide 21: Detail on BHP Billiton offer for Rio Tinto
Detail on BHP Billiton offer for Rio Tinto 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:
Slide 22: Unlocking further value through a combination with Rio Tinto
Unlocking further value through a combination with Rio Tinto • Optimising mineral basin positions and infrastructure – Lower cost, more efficient production – Unlocking volume through matching reserves with infrastructure • Enhanced platform for future growth – Deployment of scarce resources to high
Slide 23: Indicative Timetable for the Offer
Indicative Timetable for the Offer 2009 2008 Offer Announcement Satisfaction of Regulatory Approval Pre-conditions Offer Period Feb Mar Nov Dec Jan Oct Sep Aug Jul Jun May Apr Mar Feb Jan 6-Feb-2008 • BHP Billiton announced pre- conditional offers for all of the outstanding shares of Rio Tinto • 30-
Slide 24: cdl
cdl bhpbilliton resourcing the future
Slide 25: 2008 Financial highlights
2008 Financial highlights 2007 % Change Year ended June (US$m) Revenue 59,473 47,473 25.3 Underlying EBITDA 28,031 22,950 22.1 Underlying EBIT 24,282 20,067 21.0 Attributable profit (excluding exceptionals) 15,368 13,675 12.4 Attributable profit 15,390 13,416 14.7 Net operating cash flow 18,159 15,9
Slide 26: Return on capital and margins
Return on capital and margins (1) FY2005 to FY2008 are shown on the basis of IFRS. Prior periods are calculated under UKGAAP. All periods exclude third party trading. 35% 38% 38% 44% 48% 48% 29% 21% 13% 11% 40% 30% 24% 20% 0% 10% 20% 30% 40% 50% 60% FY2002 FY2003 FY2004 FY2005 FY2006 FY2007 FY2008 R
Slide 27: Strong Return On Capital Employed despite record capital investments
Strong Return On Capital Employed despite record capital investments FY2002 FY2003 FY2004 FY2005 FY2006 FY2007 FY2008 0% 5% 10% 15% 20% 25% 30% 35% 40% Capex (LHS) Capitalised Exploration (LHS) Acquisitions (LHS) ROCE (RHS) Capital and exploration expenditure (US$bn) Notes: FY2002 to FY2005 are show
Slide 28: Our portfolio is diversified and balanced across high margin commodities
Our portfolio is diversified and balanced across high margin commodities Underlying EBIT Margin (a) (FY2008) Notes: a) EBIT Margin excludes third party trading activities. 67% 30% 31% 62% 20% 25% 24% 48% 51% 58% Underlying EBIT (FY2008, US$bn) Energy (27%) Non Ferrous (44%) Steelmaking Materials (29
Slide 29: Underlying EBIT by Customer Sector Group: Petroleum
Underlying EBIT by Customer Sector Group 2008 Neptune Petroleum 5,489 3,014 +82.1 • Record EBIT and production • Operating cash costs held under US$5 per BOE • 3 new major projects commissioned and volume growth expected to continue • Strong operational performance - Stybarrow continued to produce a
Slide 30: Underlying EBIT by CSG: Aluminium and Base Metals
Underlying EBIT by Customer Sector Group 2008 Worsley Escondida Aluminium 1,465 1,856 -21.1 Base Metals 7,989 6,875 +16.2 2007 % Change Year ended June (US$m) • Record alumina production • South African power situation will continue to impact metal production • Worsley E&G approved • Record copper p
Slide 31: Underlying EBIT by CSG: Diamonds and Stainless Steel Materials
Underlying EBIT by Customer Sector Group Ekati 2008 Ravensthorpe Diamonds & Specialty Products -4.1 2007 % Change Year ended June (US$m) • Koala Underground ramping up strongly • Anglo Potash acquisition adding flexibility for future growth Stainless Steel Materials 1,275 3,675 -65.3 • EBIT impacted
Slide 32: Underlying EBIT by CSG: Manganese and Iron Ore
Underlying EBIT by Customer Sector Group 2008 Mount Newman GEMCO Manganese 1,644 +549.8 2007 % Change Year ended June (US$m) • Record production due to successful project execution • Exceptional local currency cost control at Western Australia Iron Ore • Strong volume growth expected in FY2009 • Gro
Slide 33: Underlying EBIT by CSG: Metallurgical and Energy Coal
Underlying EBIT by Customer Sector Group 2008 Illawarra Coal Hunter Valley Coal Metallurgical Coal 1,247 -24.9 2007 % Change Year ended June (US$m) • Strong recovery from flood impacts in Queensland • Costs impacted by recovery activities • Great outlook for margins • Market remains tight • Growth p
Slide 34: Underlying EBIT analysis
Underlying EBIT analysis Year ended June 08 vs June 07 5,000 10,000 15,000 20,000 25,000 30,000 Jun-07 Net Price Volume Exchange Inflation Cash Costs Non Cash Costs Exploration & Bus Dev Other Jun-08 US$m 20,067 6,559 1,828 (1,133) (532) (967) (216) (404) (920) 24,282 (1) Including $134m of price-li
Slide 35: High capture of price benefit to EBIT
High capture of price benefit to EBIT 64% 20,067 US$m 6,559 4,215 (1) Net price variance includes the impact of price-linked costs. Price-linked costs is defined as any costs which fluctuate in line with movements in price such as royalties, TC/RC and LME linked costs. 24,282 2,000 4,000 6,000 8,000
Slide 36: Impact of major commodity price
Impact of major commodity price Year ended June 08 vs June 07 -1500 -1000 -500 1000 1500 2000 2500 Total price variance US$6,559 million (1) US$m Petroleum 1,684 Copper Manganese 1,465 Iron Ore 2,134 Energy Coal 1,062 Nickel (1,066) Diamonds Aluminium (51) Met Coal (1) Net of $134m of price-linked c
Slide 37: Impact of major volume changes
Impact of major volume changes Year ended June 08 vs June 07 -400 -200 1000 1200 1400 US$m Total volume (1) variance US$1,828 million Petroleum Met Coal (47) Iron Ore Aluminium/ Alumina D&SP Energy Coal Copper Nickel (313) Other (1) Volume variances calculated using previous year margin and includes
Slide 38: Rate of cost increase
Rate of cost increase FY2005 is shown on the basis of UKGAAP. Other periods are calculated under IFRS. All periods exclude third party trading and non cash costs. 0% 1% 2% 3% 4% 5% 6% 7% FY2005 FY2006 FY2007 FY2008 Other Costs Raw Materials Fuel & Energy Operating cost increase relative to preceding
Slide 39: Cash cost increase mostly recouped in revenue
Cash cost increase mostly recouped in revenue -250 -150 -50 Maintenance US$m People Fuel & Energy Shipping & Freight Raw Materials QCoal Rain Impact CMSA Strike (225) (1) Excluding non-cash costs of US$216m (mostly depreciation on growth capital). KNS Furnace Rebuild Recouped in Revenue $645m Invest
Slide 40: bhpbilliton
ol bhpbilliton curing the future
Slide 41: Delivering superior returns to shareholders
Delivering superior returns to shareholders Ordinary dividends per share (US cents per share) FY2005 FY2006 FY2007 FY2008 H1 H2 FY2005 FY2006 FY2007 FY2008 Earnings per share (US cents per share) Note: BHP Billiton’s EPS represents reported underlying EPS for the financial year ending 30 June. CAGR
Slide 42: Bog
Bog Boag og ol bhpbilliton ing the future
Slide 43: Resourcing the Future – BHP Billiton's response
Resourcing the Future – BHP Billiton’s response Port Hedland • BHP Billiton has not been immune from supply constraint issues • But our scale, global presence and diversification provides significant competitive advantages • We are focused on the disciplined execution of the core strategy • And on p
Slide 44: bhpbilliton
7 a a " 8 bhpbilliton curing the future
Slide 45: China and India account for a major share of world commodity demand
China and India account for a major share of world commodity demand Notes: Iron ore represents imports. Coal includes all coal types. Europe excludes former Soviet Union. Source: CRU International Ltd, Quarterly Reports (April-June 2008); Brook Hunt Aluminium Metal Service (July 2008); BP Statistica
Slide 46: China's commodity demand and share of world demand
China’s commodity demand and its percentage share of world demand ‘000 tonnes Data: CRU Copper Quarterly, April 2008 ‘000 tonnes Data: CRU Nickel Quarterly, June 2008 Data: Brook Hunt Aluminium Metal Service, July 2008 ‘000 tonnes million tonnes Data: IISI – Steel Statistical Yearbook (Dec. 2007); C
Slide 47: Copper – GDP per capita vs consumption per capita
Copper – GDP per capita vs consumption per capita Copper consumption (kg/capita) 5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000 45,000 50,000 GDP/Capita (Jan 2008 Constant US Dollars) China Germany India Japan Korea, Rep. United States Taiwan *Note: Based on a projection of similar growth pa
Slide 48: Global Copper Prices in 1880-2008
Global Copper Prices in 1880-2008 1975-2008 Emerging Market growth Maturing of Japan 1990: Collapse of USSR Productivity & IT revolution Commodification Cost benefits from technology and economies of scale Emerging Markets and China’s long boom Renewed “call” on copper resources 10-Year Moving Avera
Slide 49: Energy – GDP per capita vs energy use per capita
Energy – GDP per capita vs energy use per capita Primary energy use (toe/capita) 5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000 45,000 50,000 GDP/Capita (Jan 2008 Constant US Dollars) China Germany India Japan Korea, Rep. United States Taiwan *Note: Based on a projection of similar growth pa
Slide 50: Emerging markets are driving energy consumption growth
Emerging markets are driving energy consumption growth 36% 9% 5% 50% 10% 17% 30% 26% 30% 27% 30% 31% China Other Europe North America Source: BP Statistical Review of World Energy 2008. Notes: Primary energy comprises commercially traded fuels only. Oil consumption measured in million tonnes, other
Slide 51: Strong long-term global growth in energy demand
Strong long-term global growth in energy demand 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 2000 2010 2020 2030 Energy demand growth (CAGR) (mmtoe) +1.6% +2.4% +1.4% Oil Gas Coal Nuclear Hydro Renewables Source : IEA World Energy Outlook
Slide 52: Steel – GDP per capita vs consumption per capita
Steel – GDP per capita vs consumption per capita Finished steel consumption (kg/capita) 1,000 1,200 5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000 45,000 50,000 GDP/Capita (Jan 2008 Constant US Dollars) China Germany India Japan Korea, Rep. United States Taiwan *Note: Based on a projection o
Slide 53: China is the world's largest steel producer
China is the world’s largest steel producer 66% 20% 5% 4% 5% Source: IISI and BHP Billiton estimates. Note crude steel production growth calculated based on the change in annual production between years ended 1996 and 2007. 1,000 1,250 1,500 1996 2007 Crude steel production (mt) China USA Japan Euro
Slide 54: bhpbilliton
bhpbilliton source ing the future
Slide 55: BHP Billiton has a leading position in the steelmaking commodities
BHP Billiton has a leading position in the steelmaking commodities 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 proximit
Slide 56: Existing supply: Equipment shortages are continuing
Existing supply: Equipment shortages are continuing CY2004 CY2005 CY2006 CY2007 CY2008 CY2009 Tyres and Trucks Draglines & Shovels Ammonium Nitrate Grinding Mills Tyres (2004) • OEM underinvestment • Radial tyre market undersupply >30% Trucks (2007) • Access to castings, forgings • Effect of non-min
Slide 57: Future industry supply growth: New projects are encountering delays
Future industry supply growth: New projects are encountering delays Source: Brook Hunt. Note: “Forecast production as at 2008 Q2” represents the expected future production as at 2008 Q2 from those copper developments classified as highly probable and probable as at 2006 Q1. It excludes new developme
Slide 58: bhpbilliton
bhpbilliton recoutcing the future
Slide 59: Slide 59
Slide 60: Slide 60
Slide 61: Maintenance of a deep diversified inventory of growth options
Maintenance of a deep diversified inventory of growth options Boffa/Santou Refinery As at 14 August 2008 Proposed capital expenditure $500m $501m-$2bn $2bn+ SSM Energy Coal D&SP Iron Ore Base Metals Petroleum Met Coal CSG Manganese Aluminium 2009 Execution Atlantis North 2013 Feasibility Worsley E&G
Slide 62: Capital & exploration expenditure
Capital & exploration expenditure 0.0 3.0 6.0 9.0 12.0 15.0 FY2002 FY2003 FY2004 FY2005 FY2006 FY2007 FY2008 FY2009F Exploration Sustaining Capex Growth Expenditure US$bn (1) FY2009 includes US$700m for Petroleum FY2002 to FY2005 are shown on the basis of UKGAAP. Subsequent periods are calculated un
Slide 63: Sanctioned development projects (US$12.4bn)
Sanctioned development projects (US$12.4bn) Production Capacity (100%) Progress Initial Production Target Date Share of Approved Capex US$m Commodity Minerals Projects On schedule and budget 1-2 million tpa Mid CY09 Met Coal Maruwai Stage 1/Haju (Indonesia) – 100% On schedule and budget Third coal b
Slide 64: Sanctioned development projects (US$12.4bn) cont.
Sanctioned development projects (US$12.4bn) cont. Production Capacity (100%) Progress Initial Production Target Date Share of Approved Capex US$m Commodity Petroleum Projects On schedule and budget 2,500 million cubic feet gas per day CY12 LNG NWS North Rankin B (Australia) – 16.67% On schedule and
Slide 65: Development projects in feasibility (US$12.4bn)
Development projects in feasibility (US$12.4bn) Project Capacity (100%)* Forecast Initial Production* Estimated Share of Capex* US$m Commodity Minerals Projects (US$4.7bn) Maintain Nickel West system capacity H2 CY13 Nickel Perseverance Deeps (Australia) – 100% 5.7 million tpa saleable coal CY 2013
Slide 66: Development projects in feasibility (US$12.4bn)
Development projects in feasibility (US$12.4bn) Project Capacity (100%)* Forecast Initial Production* Estimated Share of Capex* US$m Commodity Petroleum Projects (US$600m) * Indicative only 280 million cubic feet gas per day H1 CY11 Gas Angostura Gas (Trinidad & Tobago) – 45% 60,000 barrels of oil a
Slide 67: Development projects commissioned since July 2001
Development projects commissioned since July 2001 Project Initial Production Date Our Share of Capex Actual Budget Actual US$m Budget US$m Q2 CY04 Q2 CY04 WA Iron Ore Accelerated Expansion (Australia) – 85% Mid CY04 Mid CY04 NWS Train 4 (Australia) – 16.7% Q1 CY04 Q2 CY04 Products & Capacity Expansi
Slide 68: Development projects commissioned since July 2001
Development projects commissioned since July 2001 Project Initial Production Date Our Share of Capex Actual Budget Actual US$m Budget US$m Q2 CY06 H2 CY06 Escondida Sulphide Leach (Chile) – 57.5% Q2 CY06 H2 CY06 Western Australia Iron Ore RGP2 (Australia) – 85% Q4 CY06 Q4 CY06 1,100 Spence (Chile) –
Slide 69: Development projects commissioned since July 2001
Development projects commissioned since July 2001 Project Initial Production Date Our Share of Capex Actual Budget Actual US$m Budget US$m H1 CY08 H1 CY08 (1) Cliffs (Australia) – 100% Q1 CY08 Q1 CY08 Yabulu Extension (Australia) – 100% H1 CY08 H1 CY08 (1) Samarco (Brazil) – 50% Q3 CY08 Q1 CY08 Nept
Slide 70: bhpbilliton
dl bhpbilliton -sourcing the future
Slide 71: cdl
cdl bhpbilliton rcing the future