Bhp Group Ltd · ASX:BHP
Bhp — BHP Billiton — Investor Day (December 2015)
85 slides from Bhp's investor day presentation, Dec 1, 2015
Slide 1: BHP Billiton Copper: Strong fundamentals, unrivalled resource, world-class operations
bhpbilliton BHP Billiton Copper Strong fundamentals, unrivalled resource, world-class operations Daniel Malchuk President, Copper Escondida
Slide 2: Disclaimer: Forward-looking statements
Disclaimer Forward-looking statements This presentation contains forward-looking statements, including statements regarding: trends in commodity prices and currency exchange rates; demand for commodities; plans, strategies and objectives of management; closure or divestment of certain operations or
Slide 3: Statement of Mineral Resources
Statement of Mineral Resources Mineral Resources The information in this presentation that relates to the FY2015 Mineral Resources (inclusive of Ore Reserves) was first reported by the Company in compliance with the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore R
Slide 4: Mineral Inventory classifications
Mineral Inventory classifications Mineral Resources Asset Deposit Ore Type Measured Resource (Mt) Indicated Resource (Mt) Inferred Resource (Mt) FY15 ROM production (Mt) BHP Billiton interest (%) Copper Escondida Cluster Escondida1 All 5,870 @ 0.64% Cu 3,230 @ 0.50% Cu 10,100 @ 0.50% Cu Pampa Escond
Slide 5: Experienced and diverse leadership team
Experienced and diverse leadership team President Daniel Malchuk Copper Business Graham Tiver Vice President Finance Hilmar Rode Asset President Escondida Vicky Binns Vice President Marketing Copper Alex Jaques Vice President Human Resources María Olivia Recart Vice President Corporate Affairs Kevin
Slide 6: Key themes
Key themes We value safe and sustainable operations above all else Attractive fundamentals expected to support long-term prices – robust long-term demand growth and industry-wide supply challenges point to structural deficit We have the largest resource base – large, long-life, expandable assets com
Slide 7: Keeping our people and operations safe
Sustainability Attractive market fundamentals Productivity and operating excellence High-return latent capacity Compelling longer-term options Keeping our people and operations safe Despite our goal to achieve zero fatalities BHP Billiton tragically lost five colleagues in FY15 – Copper Business suf
Slide 8: Committed to sustainable development
Sustainability Attractive market fundamentals Productivity and operating excellence High-return latent capacity Compelling longer-term options Committed to sustainable development Focused on environmental sustainability The Kelar gas-fired power plant will support less emissions-intensive growth Red
Slide 9: Copper – a key pillar of BHP Billiton
Sustainability Attractive market fundamentals Productivity and operating excellence High-return latent capacity Compelling longer-term options Copper – a key pillar of BHP Billiton Our Copper business continues to deliver exceptional returns – 23% of Group production1 – 24% of Group Underlying EBIT
Slide 10: Industry fundamentals are attractive
Sustainability Attractive market fundamentals Productivity and operating excellence High-return latent capacity Compelling longer-term options Industry fundamentals are attractive Modest surplus in the short term Demand growth moderating due to economic rebalancing in China Limited reaction from hig
Slide 11: Supply challenges support long-run prices
Sustainability Attractive market fundamentals Productivity and operating excellence High-return latent capacity Compelling longer-term options Supply challenges support long-run prices Grade decline from aging orebodies and longer cycle times expected to impact the cost of global supply – industry g
Slide 12: A simple portfolio of large, long-life assets
Sustainability Attractive market fundamentals Productivity and operating excellence High-return latent capacity Compelling longer-term options A simple portfolio of large, long-life assets A portfolio of some of the largest assets... FY15 attributable copper production, Mt 2 1 0 Peer 1 Peer 2 BHP Bi
Slide 13: Our strong margins have significant upside
Sustainability Attractive market fundamentals Productivity and operating excellence High-return latent capacity Compelling longer-term options Our strong margins have significant upside We are competitively placed on the cost curve – steep tail underpins attractive margins for low-cost producers in
Slide 14: Our differentiated water and power solutions
Sustainability Attractive market fundamentals Productivity and operating excellence High-return latent capacity Compelling longer-term options Our differentiated water and power solutions Our proactive approach to securing sustainable water and power supply will emerge as a key competitive advantage
Slide 15: Our differentiated approach to productivity
Sustainability Attractive market fundamentals Productivity and operating excellence High-return latent capacity Compelling longer-term options Our differentiated approach to productivity We have embedded US$3.2 billion of annualised productivity gains since FY12 We are methodically re-setting our co
Slide 16: Step change in productivity across all assets: Escondida
Sustainability Attractive market fundamentals Productivity and operating excellence High-return latent capacity Compelling longer-term options Step change in productivity across all assets Escondida 7% reduction in unit costs at Escondida to US$1.01/lb1 in FY15 – supported by operational improvement
Slide 17: Step change in productivity across all assets: Pampa Norte and Olympic Dam
Sustainability Attractive market fundamentals Productivity and operating excellence High-return latent capacity Compelling longer-term options Step change in productivity across all assets Pampa Norte Significantly reduced unit costs at Spence – targeting a 10% reduction to US$0.87/lb by FY171 – dry
Slide 18: Releasing latent capacity at low cost: Escondida
Sustainability Attractive market fundamentals Productivity and operating excellence High-return latent capacity Compelling longer-term options Releasing latent capacity at low cost Escondida ~1.2 Mtpa average production capacity for a decade from FY16 – guidance maintained at 940 kt in FY16 – ~15% p
Slide 19: Releasing latent capacity at low cost: Olympic Dam and Spence
Sustainability Attractive market fundamentals Productivity and operating excellence High-return latent capacity Compelling longer-term options Releasing latent capacity at low cost Olympic Dam Access to higher-grade SMA ore optimises utilisation of existing surface infrastructure – low-cost accelera
Slide 20: Releasing latent capacity at low cost
Sustainability Attractive market fundamentals Productivity and operating excellence High-return latent capacity Compelling longer-term options Releasing latent capacity at low cost Total production expected to return to 1.7 Mt by FY17 Mt 2.0 1.5 1.0 0.5 0.0 FY12 FY13 FY14 FY15 FY16e FY17e Escondida
Slide 21: A compelling long-term growth pipeline: Spence Growth Option
Sustainability Attractive market fundamentals Productivity and operating excellence High-return latent capacity Compelling longer-term options A compelling long-term growth pipeline Spence Growth Option Development of the 2.3 Bt hypogene resource The project has advanced to feasibility with final Bo
Slide 22: A compelling long-term growth pipeline: Olympic Dam Underground Expansion
Sustainability Attractive market fundamentals Productivity and operating excellence High-return latent capacity Compelling longer-term options A compelling long-term growth pipeline Olympic Dam Underground Expansion Underground expansion to increase ore hoisted to ~20 Mtpa through an additional shaf
Slide 23: Working to expand our long-term options: Exploration
Sustainability Attractive market fundamentals Productivity and operating excellence High-return latent capacity Compelling longer-term options Working to expand our long-term options Exploration Increasing our long-term copper options is a strategic priority – greenfield exploration budget of US$65
Slide 24: Key themes
Key themes We value safe and sustainable operations above all else Attractive fundamentals expected to support long-term prices – robust long-term demand growth and industry-wide supply challenges point to structural deficit We have the largest resource base – large, long-life, expandable assets com
Slide 25: bhpbilliton
bhpbilliton
Slide 26: Copper Marketing: Attractive industry fundamentals
bhpbilliton Copper Marketing Attractive industry fundamentals Vicky Binns, Vice President Marketing, Copper Andrew Arthur, Vice President Strategy and Development, Copper Port Coloso
Slide 27: Disclaimer: Forward-looking statements
Disclaimer Forward-looking statements This presentation contains forward-looking statements, including statements regarding: trends in commodity prices and currency exchange rates; demand for commodities; plans, strategies and objectives of management; closure or divestment of certain operations or
Slide 28: Key themes
Key themes Our proprietary view on the copper market is supported by deep fundamental analysis Robust copper demand expected from China and non-OECD countries – copper demand is sustained across the economic development cycle – continued displacement of copper through substitution is a risk Supply i
Slide 29: Our copper market analysis is rigorous
Our copper market analysis is rigorous Our outlook is based on a granular understanding of key global trends – sectoral consumption patterns – technological innovation – evolving policy landscape Proprietary analysis underpins our understanding of market dynamics – product substitution and recycling
Slide 30: China is rebalancing towards sustainable growth
China is rebalancing towards sustainable growth Short term Expecting a trade-off between growth and government reforms in CY16 Growth target for the 13th Five Year Plan for period CY16-CY20 expected to be ~6.5% per annum Longer term We expect China will continue to rebalance to slower, more sustaina
Slide 31: China's shift to consumption supports copper demand
China’s shift to consumption supports copper demand Continued urbanisation and greater prosperity… – a further 240 million people are expected to urbanise by CY30 – growing middle class will increase consumption …driving copper demand from all sectors of the economy – refurbishment and fit out of ne
Slide 32: China's consumption of primary copper is increasing
China’s consumption of primary copper is increasing China will continue to require additional primary units – primary copper consumption is expected to grow by ~2% per annum to CY30 An increasing share of China’s demand is expected to be satisfied by scrap – currently ~30% of copper consumed – poten
Slide 33: Consumption growth ex-China remains robust
Consumption growth ex-China remains robust Total demand in non-OECD countries is expected to grow at ~3.6% per annum to CY30 – infrastructure build-out is a key government focus in India – substantial scope for urban development in other developing countries such as Indonesia and Vietnam Total deman
Slide 34: Opportunities and threats to copper demand
Opportunities and threats to copper demand Copper demand is resilient across different scenarios, including a low-carbon environment – rising demand for energy efficient technologies – copper-intensive solutions in the power and machinery sectors Substitution risks from aluminium in power cable and
Slide 35: New copper supply growing in the near term
New copper supply growing in the near term… Projects executed in high price environment over the past decade are starting to ramp up – ~2.7 Mt of potential net additional output anticipated by CY17 To date the supply response to lower prices has been limited – exchange rate movements have partially
Slide 36: …but a significant structural deficit is forecast
…but a significant structural deficit is forecast 2% annual potential supply reduction is expected following peak production in CY17, equivalent to ~400 kt per annum – grade has reduced by 19% since CY00 – grades expected to decline a further 17% by CY25 due to maturing porphyry orebodies Depletion
Slide 37: Higher cost of new supply expected to support stronger long-term prices
Higher cost of new supply expected to support stronger long-term prices New supply expected to come from higher-cost projects facing increasing challenges – higher capital for infrastructure such as desalination capacity to manage water constraints in Chile – power and logistics will require signifi
Slide 38: Increasing transparency to enhance value
Increasing transparency to enhance value We continue to drive market transparency and improve price realisation – we report to price index providers to facilitate price transparency – shifting away from annual benchmark pricing for TCRCs1 and cathode premiums – increasing proportion of sales utilisi
Slide 39: Realising the fair value of our products
Realising the fair value of our products The value of Escondida’s concentrate to customers depends on individual smelter constraints and our grade relative to others Value-in-use (VIU) is mainly determined by the composition of the copper concentrate – copper grade – slag to copper ratio – sulphur t
Slide 40: Key themes
Key themes Our proprietary view on the copper market is supported by deep fundamental analysis Robust copper demand expected from China and non-OECD countries – copper demand is sustained across the economic development cycle – continued displacement of copper through substitution is a risk Supply i
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bhpbilliton
Slide 42: Copper Financial Performance: Strong margins through the cycle
bhpbilliton Copper Financial Performance Strong margins through the cycle Graham Tiver Vice President Finance, Copper Escondida
Slide 43: Disclaimer: Forward-looking statements
Disclaimer Forward-looking statements This presentation contains forward-looking statements, including statements regarding: trends in commodity prices and currency exchange rates; demand for commodities; plans, strategies and objectives of management; closure or divestment of certain operations or
Slide 44: Key themes
Key themes Our Copper Business delivers strong margins through the cycle average Underlying EBIT margin of 37% over the last three years Sustainable productivity gains offsetting grade decline and industry cost pressures targeting unit costs of US$1.08/lb1 by FY17 >US$1 billion of supply savings exp
Slide 45: A high-margin business with strong returns
A high-margin business with strong returns Over the last three years the Copper Business has delivered consistently strong results average copper production of 1.7 Mtpa average Underlying EBIT margin of 37% average return on net operating assets of 20%1 EBIT contribution by asset is diversified by p
Slide 46: Mitigating lower grades and prices through productivity
Mitigating lower grades and prices through productivity We are offsetting the impact of lower grades and prices through greater productivity US$3.2 billion of annualised productivity gains since FY12 Focused cost and productivity programs are delivering results across all our assets employee and con
Slide 47: Achieving significant cost efficiencies
Achieving significant cost efficiencies We expect our sustainable productivity programs to more than offset industry-wide cost pressures we will improve our position on the cost curve We are moving more material at lower costs to offset grade decline 27% increase in material movement from FY12 to FY
Slide 48: A step change in people productivity
A step change in people productivity All assets are delivering a step change in people productivity supported by FTE1 reductions in FY162 implementation of Voluntary Redundancy Program and contractor optimisation drives 28% reduction at Escondida insourcing contractor activities will contribute to a
Slide 49: >US$1 billion of supply savings by FY17
>US$1 billion of supply savings by FY17 We expect to achieve >US$1 billion of sustainable annualised supply savings by FY171 ~45% of targeted savings have been achieved as at 31 October 2015 further upside to come from a robust pipeline of opportunities We are resetting our cost base by challenging
Slide 50: Maximising plant and equipment utilisation
Maximising plant and equipment utilisation Our focus on maximising the underlying performance of our plant and equipment is delivering results each incremental tonne further dilutes the fixed cost base and delivers a cash margin of ~70%1 Overall Equipment Effectiveness (OEE) improved for Ultra Class
Slide 51: Improving our capital efficiency
Improving our capital efficiency Maintenance capital We will not compromise the integrity of our plant and equipment reduction in maintenance capital supported by improved equipment and people productivity Minor and improvement capital We are unlocking latent capacity at very low capital intensity t
Slide 52: Contributing to our communities
Contributing to our communities Our Copper Business is a substantial tax contributor we are the largest private tax payer in Chile with US$1.1 billion paid in CY14 Olympic Dam pays royalties of ~US$60 million1 per annum to the State of South Australia Where possible we source products and services l
Slide 53: Key themes
Key themes Our Copper Business delivers strong margins through the cycle average Underlying EBIT margin of 37% over the last three years Sustainable productivity gains offsetting grade decline and industry cost pressures targeting unit costs of US$1.08/lb1 by FY17 >US$1 billion of supply savings exp
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bhpbilliton
Slide 55: Appendix: Unit cash cost calculations
Appendix: Unit cash cost calculations Operated Copper unit costs (US$ million) FY12 FY13 FY14 FY15 FY16e FY17e Revenue 11,258 12,382 11,658 10,500 Underlying EBITDA 5,125 6,261 5,838 5,106 Cash costs (gross) 6,133 6,121 5,820 5,394 Less: one-off items 206 103 - 188 Less: by-product credits 813 795 6
Slide 56: Olympic Dam: Realising our full potential
bhpbilliton Olympic Dam Realising our full potential Daniel Malchuk President, Copper Olympic Dam
Slide 57: Disclaimer: Forward-looking statements
Disclaimer Forward-looking statements This presentation contains forward-looking statements, including statements regarding: trends in commodity prices and currency exchange rates; demand for commodities; plans, strategies and objectives of management; closure or divestment of certain operations or
Slide 58: Statement of Mineral Resources and Mineral Inventory Classifications
Statement of Mineral Resources and Mineral Inventory Classifications Mineral Resources The information in this presentation that relates to the FY2015 Mineral Resources (inclusive of Ore Reserves) was first reported by the Company in compliance with the ‘Australasian Code for Reporting of Exploratio
Slide 59: Key themes
Key themes Creating safe and stable operations with a focus on material risk management We are releasing latent capacity through low-risk, capital-efficient underground expansions – accessing the Southern Mine Area (SMA) will enable full utilisation of smelter and refinery – ~200 ktpa of copper prod
Slide 60: Relentless focus on safety
Relentless focus on safety Tragically we lost one of our colleagues in FY15 We have intensified our efforts to enhance our material risk management systems – improving incident investigation for significant events with serious potential – identifying and assessing all fatality risks with controls im
Slide 61: Making a positive contribution
Making a positive contribution Environment 60 square km conservation and research Arid Recovery initiative adjacent to Olympic Dam – four species of locally extinct mammals have been reintroduced Evaluating technologies that could lead to step reductions in greenhouse gas emissions Community Locally
Slide 62: A Tier 1 Resource
A Tier 1 Resource An attractive 10 Bt poly-metallic Resource1 – fifth largest copper deposit in the world – largest uranium deposit – third largest gold deposit Sublevel open stoping underground mine allows selective access to specific grades Underground operations UG Mining UG broken stock Hoisting
Slide 63: Unlocking Resource potential starts with operational stability
Unlocking Resource potential starts with operational stability Surface operations geared to production capacity of ~220 ktpa of copper – milling processes are stable with a focus on improving uptime – concentrate blending and burner modifications have improved smelting capability – operational stabi
Slide 64: Continued improvements in productivity
Continued improvements in productivity ~40% more units of copper per employee in FY16 YTD with further improvements planned1 – targeting ~50% by FY171 Manufacturing process rigour will underpin improved operational performance – targeting ~57% improvement in truck productivity by FY171 – targeting ~
Slide 65: A staged approach delivering more value
A staged approach delivering more value Delivering value from our installed infrastructure1 Near-term copper production guidance and aspirational capacity, ktpa Debottleneck underground mine Fully utilise smelter and refinery 1 2 Optimisation Restoring stability and improving efficiency and producti
Slide 66: Rapidly expanding our mine footprint
Rapidly expanding our mine footprint We are accessing the high-grade Southern Mine Area (SMA) which contains ~70% of the total Resource – expected increase in ore supply will move bottleneck to the smelter and refinery plants by FY18 We expect to achieve successive records in material movement in FY
Slide 67: Delivering more metal production capacity
Delivering more metal production capacity Accessing the SMA and shifting the bottleneck to the plant supports higher forecast metal production – ~200 ktpa copper production from FY16 – ~220 ktpa copper production capacity by FY19 – ~20% lift in copper grade to >2.2% from FY211 – ~18% improvement in
Slide 68: Transitioning a Tier 1 Resource into a Tier 1 operation
Transitioning a Tier 1 Resource into a Tier 1 operation Higher metal volumes will dilute our fixed cost base Expect to reduce unit cash costs by ~34% in FY161 – targeting a position near the first segment of the cost curve in the short term Transforming our cost base with an expected total reduction
Slide 69: Substantial long-term growth optionality
Substantial long-term growth optionality Underground expansion expected to double ore hoisting capacity through an additional shaft – potential to deliver ~450 ktpa1 of copper production capacity from CY25 – considering staged investment approach to optimise capital efficiency – progress to pre-feas
Slide 70: Key themes
Key themes Creating safe and stable operations with a focus on material risk management We are releasing latent capacity through low-risk, capital-efficient underground expansions – accessing the Southern Mine Area (SMA) will enable full utilisation of smelter and refinery – ~200 ktpa of copper prod
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Slide 72: Antamina: A safe and highly productive Tier 1 asset
bhpbilliton Antamina A safe and highly productive Tier 1 asset Andrew Arthur Vice President Strategy and Development, Copper Antamina
Slide 73: Disclaimer: Forward-looking statements
Disclaimer Forward-looking statements This presentation contains forward-looking statements, including statements regarding: trends in commodity prices and currency exchange rates; demand for commodities; plans, strategies and objectives of management; closure or divestment of certain operations or
Slide 74: Statement of Mineral Resources and Mineral Inventory Classifications
Statement of Mineral Resources and Mineral Inventory Classifications Mineral Resources The information in this presentation that relates to the FY2015 Mineral Resources (inclusive of Ore Reserves) was first reported by the Company in compliance with the ‘Australasian Code for Reporting of Exploratio
Slide 75: Key themes
Key themes Outstanding safety performance supported by continuous improvement in material risk management Strong relationships with government and community Asset quality and leading cost curve position supports strong margins copper unit cash cost of US$0.56/lb1 expected in FY16 FY16 production gui
Slide 76: A world-class orebody
A world-class orebody Antamina is among the world’s largest copper deposits Polymetallic skarn orebody (copper, zinc, molybdenum, silver and lead) Resources of ~2.4 Bt1 • 0.89% copper and 0.75% zinc2 Independently operated by Compañía Minera Antamina Joint venture partners – BHP Billiton 33.75% – Gl
Slide 77: Our safety and risk management focus
Our safety and risk management focus TRIF1 consistently <2.0 over the last five years CY15 YTD at ~2.2 with two lost time injuries2 Continued enhancement of mature risk management processes independent verification of Antamina’s risk management process adoption of best practices in material risk man
Slide 78: Environmental and social responsibility
Environmental and social responsibility Environment Antamina recognised for “Environmental Protection Efforts”1 Industry-leading water practices – recycling 99.3% of process water, targeting 100% by CY17 Community Recognised as one of the most respected companies in Peru2 Committed to sustainable de
Slide 79: A world class operation
A world class operation Commenced mining in 2001 with resources expected to support >40 years of mining operations Copper and zinc concentrate produced in one concentrator plant molybdenum and lead concentrates and silver credits add incremental value Current equipment capacity optimised to realise
Slide 80: Benchmark plant and equipment productivity
Benchmark plant and equipment productivity Antamina has increased crusher throughput from 130 ktpd to 145 ktpd for minimal capital – potential to realise >165 ktpd based on recent performance – record throughput expected in CY15 Availability and utilisation metrics for mine fleet at internal benchma
Slide 81: Transition to higher grades further supports production
Transition to higher grades further supports production Production guidance1 for FY16 of ~402 kt of copper and 106 kt of by-products copper grade expected to increase from 0.77% in FY15 to 0.92% in FY16 copper grades will average 0.94% over the next five years zinc grades will average 0.97% over the
Slide 82: Strongly positioned on the cost curve
Strongly positioned on the cost curve Antamina is well positioned at the bottom of the cost curve significant by-product credits from zinc and silver C1 cost of US$0.56/lb expected in FY161 strong earnings and margin generation, although historic margins under pressure Cost-saving initiatives have r
Slide 83: Significant Resource potential
Significant Resource potential High-grade 2.4 Bt Resource1 – 0.89% copper, 0.75% zinc, 11 g/t silver and 0.019% molybdenum – >40 years of mining operations expected Working to unlock medium and long-term development opportunities – considering simultaneous open pit life extension and underground ope
Slide 84: Key themes
Key themes Outstanding safety performance supported by continuous improvement in material risk management Strong relationships with government and community Asset quality and leading cost curve position supports strong margins copper unit cash cost of US$0.56/lb1 expected in FY16 FY16 production gui
Slide 85: Signatures
bhpbilliton 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: December 1, 2015 By: /s/ Rachel Agnew Name: