Bhp Group Ltd · ASX:BHP
Bhp — BHP Billiton — Investor Presentation (June 2003)
23 slides from Bhp's investor presentation, June 2003
Slide 1: Stainless Steel Materials
Stainless Steel Materials South African Fund Manager Presentation : June 2003 Dr Chris Pointon – President, Stainless Steel Materials Customer Sector Group
Slide 2: SSM already has an established production and marketing presence
SSM already has a established production and marketing presence The Hague - Marketing QNI Yabulu Refinery Philippines New Indonesia Caledonia Western Cerro Matoso Australia Colombia Operations South Africa Exploration Samancor Chrome SSM SA Fund Manager Presentation Ni/Cr marketing office Page 2 Jun
Slide 3: Stainless Steel Value Chain
Stainless Steel Value Chain Raw Materials Melting by Grade Product Form End Use 4.5 Mt 75% Austenitic 70% Stainless 30% Process US$ 2.5 Bn Steel Scrap Plant 12 Mt Flat products 10% Building & AISI 300 series US$ 24 Bn construction Sheet/Strip/Plate 18% Cr 650 kt 8% Ni 25% Transport Primary Nickel US
Slide 4: Stainless Steel is the fastest growing major use of metals
Stainless Steel is the fastest growing major use of metals, and will continue to grow strongly Stainless Slab Production – million tonnes 25 25 20 China 20 15 Russia Other 15 10 Japan 10 W. Europe 55 00 USA 1970 1970 1975 1975 1980 1980 1985 1985 1990 1990 1995 1995 2000 2000 SSM SA Fund Manager Pre
Slide 5: Chrome Value Chain – >80% of ore converted to FeCr
Chrome Value Chain – >80% of ore converted to FeCr, and 75% of FeCr used in stainless steels Independent Low-carbon 5% Alloyers ferrochrome Other uses 25% 15% Medium-carbon Ore 3% ferrochrome Production 82% Integrated High-carbon Alloyers ferrochrome & Stainless Steel Production 75% 85% Charge chrom
Slide 6: Austenitic Stainless has maintained a strong growth trend
Austenitic Stainless has maintained a strong growth trend. Primary Ni and FeCr inputs will grow proportionately faster as scrap supply is constrained Primary Growth - Rising to 5%pa Secondary Growth - Exceeding Primary CAGR Projections 1989-2002 2003-2010 6,000 16000 5.4% >5% 14000 6.7% >4.5% 5,000
Slide 7: The primary nickel supply business has high barriers to entry
The primary nickel supply business has high financial and technical barriers to entry High Capital Intensity, Technical Barriers to entry Complexity HIGH Capital Efficient Growth Industry Supplier power rivalry Buyer power HIGH MODERATE TO HIGH MODERATE TO HIGH Market demand growing @ 4-5%pa Threat
Slide 8: A primary nickel supply gap is set to emerge
A primary nickel supply gap is set to emerge over the present decade. Only three major projects at Feasibility. Lead times for new projects are 7-10 years. The majority of current production is from sulphide mines, but most new nickel projects will be from laterite ores. Mt Nickel reserves Nickel pr
Slide 9: Cerro Matoso Project – Colombia – 99.8% Ownership
Cerro Matoso Project – Colombia – 99.8% Ownership Production History 50,000 2.50 US$/lb Ni (Real 2003) 45,000 40,000 35,000 2.00 30,000 25,000 20,000 1.50 15,000 10,000 5,000 0 1.00 83 88 93 98 2000 2001 2002 2003 1998 1999 2000 2001 2002 2003 Reserves : 46.9Mt @ 1.93% Ni Year Ending June Resources
Slide 10: The QNI strategy
The QNI strategy Ore processing plants Optimise Yabulu margins at world class orebodies with • Incremental value-added expansion of refinery Stabilise Yabulu operation part of Yabulu product development. • Incremental Ni and Co • Zero harm • Phase I: production increases: • Catch-up maintenance. Con
Slide 11: QNI Yabulu – Australia - 100% Ownership
QNI Yabulu – Australia - 100% Ownership 32,000 9 LTIFR 31,000 8 7 30,000 Tonnes Ni 6 LTIFR 29,000 5 28,000 4 3 27,000 Nickel - Tonnes 2 26,000 1 25,000 0 1998 1999 2000 2001 2002 2003 Year Ending June Yabulu Site Cash Cost of Production after Cobalt Credits 3.25 US$ / lb 3.00 2.75 Normalised on FY03
Slide 12: YER nickel project benchmarks well against competitors
YER nickel project benchmarks well and enhances the competitiveness of Yabulu Central Refinery 3.50 3.00 Higher capex has eroded US$/lb (C3 Costs 2005) 2.50 C3 position 2.00 Inco Sudbury SLN Expaned By-product Ni Voisey's Bay Mt Keith Expanded Yabulu + YER Murrin Murrin 1.50 Yabulu Pamco PT Inco CMS
Slide 13: The FeCr industry has high internal rivalry, low barriers to entry
The FeCr industry has high internal rivalry, low barriers to entry, but growth is strong and there is no substitute, except for scrap Low capital cost per tonne FeCr capacity Barriers to Entry LOW Depends upon SS cycle SA to remain ore-long and scrap availability Industry Supplier power Buyer power
Slide 14: Ferrochrome demand growth outlook is robust
Ferrochrome demand growth outlook is robust – supply side is thus the issue 14,000 50,000 Ferrochrome Demand (LHS) Stainless Steel Production (RHS) 45,000 12,000 •Stainless growth 2005 – 2020: assumed 5% per annum •Ferrochrome demand = Stainless + other uses consumption 40,000 •Growth rate of second
Slide 15: South Africa dominates the primary FeCr sector
South Africa dominates the primary FeCr sector and will have the major share of future expansions Kazakhstan World Chrome Ore Reserves Zimbabwe India 7% Finland 1% 1% Other 19% 2% South Africa 70% Asia Other 12% 8% Samancor World Primary Chrome Zimbabwe 16% Supply 7% Xstrata 20% ASA 1% Scandinavia H
Slide 16: Ferrochrome falling price trend is a continuing challenge
Ferrochrome falling price trend is a continuing challenge to the industry USc/lb (Real) 160 CAGR Price (80 - 00) = -3.24% Largest risk s to cost 140 •Reductants •Electricity 120 100 80 60 40 CAGR Cost (80 - 00) = -4.3% 20 80 85 90 95 00 19 19 19 19 20 SSM SA Fund Manager Presentation Page 16 June 20
Slide 17: South Africa has failed to create industry discipline for FeCr growth
South Africa has failed to create industry discipline for FeCr growth, and has exported most of the value of its dominant supplier position Index SA production and Revenue (1996-2002) SA Accounted for the 100% of net increase in FeCr world Revenue in real US$ based on CRU US Import list price – 50
Slide 18: BEE and the Ferrochrome business
BEE and the Ferrochrome business 6000 700 • The historic trend in SA capacity growth will 5500 600 Capacity continue. Entry barriers will be lower, as 500 additions producers will not be able to retain unutilised 5000 400 Demand (kt) resources. 4500 300 Supply • However, costs will rise - Rand, redu
Slide 19: Samancor Chrome (60% Ownership): a Turnaround Asset
Samancor Chrome (60% Ownership) : a Turnaround Asset PRODUCTION FACILITIES SOUTH AFRICA ! ! ! ! WCM ! ! ! ! Tubatse (incl ECM) ! MFC/MTC ! ! ! ! ! ! ! Ferrometals/IC3 ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! Chrome Ore ! ! ! ! ! ! ! Ferrochrome ! ! ! ! ! ! ! ! ! ! ! ! Reserves : 40Mt @ 42.4% Cr Resources
Slide 20: Restructuring of Chrome Division by a 3 Horizon Strategy
Restructuring of Chrome Division by a 3 Horizon Strategy Reposition in Future Optimise value chain Industry Context through prudent •Understand emerging industry dynamics. Manufacturing mindset to investment •Understand SA Government •Understand future customer approach to FeCr industry. reposition
Slide 21: Variable cost drivers + results against benchmark show positive trends
Variable cost drivers + results against benchmark show positive trends. Cost Driver FY00 FY01 FY02 FY03 SEC (k/Wh/ton) 3.98 4.08 3.79 3.90 Ore (t/t) 2.43 2.58 2.54 2.49 Reductant (t/t) 0.64 0.65 0.63 0.64 Cr Recovery (%) 79.24 72.23 74.1 76.51 Cr content (%) 51.3 51.1 50.9 50.9 Smelter Cost (R/t Rea
Slide 22: Supply and demand balance – Samancor production
Supply and demand balance – Samancor production 1400 900 Cumulative Balance (Right-hand scale) Production Demand 800 1300 700 600 1200 500 (000’t) 400 (000’t) 1100 300 Forecast 200 1000 100 900 0 -100 800 -200 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2000 2000 2000 2000 2001 2001
Slide 23: Conclusion
Conclusion • Stainless steel – the highest growth major use of metals – provides a strong market for primary FeCr and Nickel • A looming nickel supply gap is becoming apparent, a result of high entry barriers and inadequate returns on capital in 1990s • SA will provide new FeCr capacity to meet the