Bhp Group Ltd · ASX:BHP
Bhp — RIO Tinto — Merger or Acquisition (June 2008)
71 slides from Bhp's merger presentation, Jun 30, 2008
Slide 1: Investor Presentation June/July 2008
Investor Presentation June/July 2008
Slide 2: Disclaimer
Disclaimer Slide This document has been prepared by BHP Billiton Limited and BHP Billiton Plc (“BHP Billiton") and comprises the written materials/slides for a presentation concerning BHP Billiton's offer for Rio Tinto Limited and Rio Tinto plc (“Rio Tinto”). By reviewing/attending this presentation
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 *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/590_data_book.asp ) **Market value may be unrelia
Slide 5: BHP Billiton's business is truly global in scope and scale
BHP Billiton’s business is truly global in scope and scale… Stainless Steel Materials Nickel Iron Ore Iron Ore Manganese Manganese Ore, Manganese Alloy Metallurgical Coal Coking Coal, Thermal Coal Base Metals Copper, Lead, Silver, Uranium, Zinc Aluminium Alumina, Aluminium Energy Coal Thermal Coal P
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 Source: CEIC Data Co. Ltd (February 2008), BHP Billiton Estimates for CY2007 Composition of Chinese GDP (RMB trillions) Destination of Chinese exports 24% 46% 21% 9% Europe Other North America Asia 1990 1
Slide 12: Can Chinese consumption growth offset the US slow down?
Can Chinese consumption growth offset the shorter term slow down in the US? Slide 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 Statistical Yearbook (December 2007); BP Statis
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Slide 18: Maintenance of a deep diversified inventory of growth options
Maintenance of a deep diversified inventory of growth options Slide Boffa/Santou Refinery As at 2 May 2008 Proposed capital expenditure <$500m $501m-$2bn $2bn+ SSM Energy Coal D&SP Iron Ore Base Metals Petroleum Met Coal CSG Manganese Aluminium Pyrenees Samarco Neptune Shenzi Alumar Atlantis North K
Slide 19: Development spend in high margin businesses
Development spend in high margin businesses Slide Note: Represents pipeline projects in execution, feasibility does not include pre-feasibility projects. EBITDA margins for business in months to December 2007 not for individual projects. EBITDA margin excluded third party trading. Source: BHP Billit
Slide 20: Strong cash flow - delivering value to shareholders
Strong cash flow - delivering value to shareholders Slide 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 18,000 FY2002 FY2003 FY2004 FY2005 FY2006 FY2007 FY2008 H1 H2 1500 3000 4500 6000 7500 9000 FY2002 FY2003 FY2004 FY2005 FY2006 FY2007 FY2008 Organic Growth (US$m) Return to Shareholders (US$
Slide 21: 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 22: BHP Billiton's offer to acquire Rio Tinto
BHP Billiton’s offer to acquire Rio Tinto
Slide 23: 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 24: 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 25: 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 26: 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 27: 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 31: 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 36: 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 37: 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$m 9,134 1,635 (506) (206) (199) (61) (222) (413) 9,623 (1) In
Slide 38: Impact of major volume changes
Impact of major volume changes Half year ended Dec 2007 vs Dec 2006 Slide -250 -150 -50 US$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 39: Impact of major commodity price
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 $154m of price-linked costs impact.
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Slide 41: Developing world metals demand to show significant growth
Developing world metals demand to show significant growth Slide US$ expenditure (per capita) GDP per capita (US$’000)* Aluminium Copper Iron Ore Coking Coal * 1 January 2008 real US dollars Sources of data: CRU Quarterly Reports (January 2008); Brook Hunt Aluminium Metal Service (February 2008); IIS
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Slide 45: Dollar value of oil intensity per capita vs non-ferrous metals
But, the dollar value of oil intensity per capita is 10 times that of non ferrous metals Slide US$ 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 46: 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 47: 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 51: 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 52: China's copper, nickel, aluminium and iron ore demand
China’s copper, nickel, aluminium and iron ore demand and its percentage share of world demand Slide 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 – Steel Sta
Slide 53: China and India share of world commodity demand
China and India account for a major share of world commodity demand Slide Notes: Iron ore is demand for seaborne imports. Steel data are for crude steel production. Coal includes all coal types. Source: CRU Quarterly Reports (January 2008), Brook Hunt Aluminium Metal Service (February 2008), BP Stat
Slide 54: Aluminium - GDP per capita vs consumption per capita
Aluminium - GDP per capita vs consumption per capita Slide Al 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 project of similar growth p
Slide 55: Copper – GDP per capita vs consumption per capita
Copper – GDP per capita vs consumption per capita Slide 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 project of similar growth
Slide 56: Steel – GDP per capita vs consumption per capita
Steel – GDP per capita vs consumption per capita Slide 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 projec
Slide 57: Energy – GDP per capita vs energy use per capita
Energy – GDP per capita vs energy use per capita Slide Primary energy use (toll equiv/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 project of similar
Slide 58: Inventories 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 59: 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 60: 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 62: 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 63: Sanctioned development projects (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 64: Sanctioned development projects (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 65: 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 66: Development projects in feasibility (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$600m)
Slide 67: Development projects commissioned since July 2001
Development projects commissioned since July 2001 Project Initial Production Date Our Share of Capex Actual Budget Actual US$m Budget US$m Slide Q1 CY04 Q2 CY04 Products & Capacity Expansion (Australia) – 85% Q1 CY04 Q1 CY04 Cerrejon Zona Norte (Colombia) – 33.3% Q4 CY03 Q4 CY03 Ohanet (Algeria) – 4
Slide 68: Development projects commissioned since July 2001
Development projects commissioned since July 2001 Project Initial Production Date Our Share of Capex Actual Budget Actual US$m Budget US$m Slide Q2 CY06 Q1 CY06 Worsley Development Capital Project (Australia) – 86% Q4 CY05 Q3 CY05 Paranam Refinery Expansion (Suriname) – 45% Oct 2005 Q4 CY05 Escondid
Slide 69: Development projects commissioned since July 2001
Development projects commissioned since July 2001 Project Initial Production Date Our Share of Capex Actual Budget Actual US$m Budget US$m 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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