Bhp Group Ltd · ASX:BHP
Bhp — RIO Tinto — Merger or Acquisition (April 2008)
77 slides from Bhp's merger presentation, Apr 23, 2008
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Slide 2: Disclaimer
Disclaimer BHP Billiton China 2008-4-18 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 offers for Rio Tinto Limited and Rio Tinto plc (“Rio Tinto”). By reviewing/att
Slide 3: Disclaimer (continued)
Disclaimer (continued) BHP Billiton China 2008-4-18 There are a number of factors that could cause actual results or performance to differ materially from those expressed or implied in the forward-looking statements. Factors that could cause actual results or performance to differ materially from th
Slide 4: The largest mining company by market capitalisation
The largest mining company by market capitalisation BHP Billiton China 2008-4-18 US$B Market Capitalisation as at 31 January 2008 *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.
Slide 5: Structure driven by customer needs
Structure driven by customer needs BHP Billiton China 2008-4-18 Petroleum Energy Coal Metallurgical Coal Manganese Iron Ore Stainless Steel Materials Base Metals Aluminium Diamonds & Spec Prod Note: Location of dots indicative only
Slide 6: Core strategy is unchanged Focus on value creation
Core strategy is unchanged Focus on value creation BHP Billiton China 2008-4-18 • 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
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Slide 8: China is a continental economy supported by six growth drivers
China is a continental economy supported by six growth drivers Housing Manufacturing Rising Incomes Urbanization Rural Development Reform BHP Billiton China 2008-4-18
Slide 9: But economic activity still concentrated in the east
But economic activity still concentrated in the east BHP Billiton China 2008-4-18 West Mid East 2007 GDP (%) 13,157 14,328 33,986 GDP per capita (RMB) Pop. (mn) Data: Economist Intelligence Unit. Note: Whilst every effort has been taken to verify the accuracy of this information, neither the Economi
Slide 10: The economy is diversified and increasingly stable
The economy is diversified and increasingly stable BHP Billiton China 2008-4-18 0% 10% 20% 30% 40% 1980 1985 1990 1995 2000 2005 Nominal GDP GDP Index Data: CEIC
Slide 11: China's growth is driven by domestic demand
China’s growth is driven by domestic demand. Net Exports have risen cyclically in recent years but are expected to decline in 2008 BHP Billiton China 2008-4-18 Data: CEIC Composition of GDP Contribution to GDP Growth -5 Consumption Investment Inventories Net Exports -20 Consumption Investment Net Ex
Slide 12: Investment expected to be sustainable due to high private sector savings
Investment expected to be sustainable due to high private sector savings BHP Billiton China 2008-4-18 Data: CEIC China Fixed Asset Investment: Source of Funds 10,000,000 20,000,000 30,000,000 40,000,000 50,000,000 60,000,000 70,000,000 80,000,000 90,000,000 2004 2005 2006 2007 Other Self-Raised Fore
Slide 13: Higher inflation is expected to have a moderate effect on growth in '08
Higher inflation is expected to have a moderate effect on growth in ‘08 BHP Billiton China 2008-4-18 Data: CEIC Consumer Price Index Jan-06 Jan-07 Jan-08 CPI CPI Core (Ex. Food & Energy) CPI Food Purchasing Price Index Jan-06 Jan-07 Jan-08 PPI: Fuels & Power PPI: Ferrous Metals PPI: Non Ferrous Meta
Slide 14: China's export growth to North America is declining
China's export growth to North America is declining. Asia is China’s largest export market by far. BHP Billiton China 2008-4-18 24% 21% 2% 4% 3% 9% 47% Europe Asia North America Oceania Latin America Africa Export Growth -10 Jan-06 Sep-06 May-07 Jan-08 Asia Europe North America Data: CEIC Export Sha
Slide 15: Low value-added processing and assembled products dominate China's exports
Low value-added processing and assembled products dominate China’s exports BHP Billiton China 2008-4-18 Composition Of Exports 0% 25% 50% 75% 100% Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Ordinary Trade Processing & Assembly Processing with Imported Components Other -50 Feb-00 Feb-02 Feb-04 Feb-06 Feb-08
Slide 16: China
China BHP Billiton China 2008-4-18 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 • Cur
Slide 17: China's copper, nickel, aluminium and iron ore demand and share of world demand
China’s copper, nickel, aluminium and iron ore demand and its percentage share of world demand BHP Billiton China 2008-4-18 Data: Brook Hunt Aluminium Metal Service, February 2008 Data: IISI – Steel Statistical Yearbook (Dec. 2007); China Customs data ( www.customs.gov.cn ); CRU - "The Iron Ore Mark
Slide 18: China accounts for a major share of world commodity demand
China accounts for a major share of world commodity demand BHP Billiton China 2008-4-18 Share of World Commodity Demand - 2007 0% 25% 50% 75% 100% Other Europe Japan USA India China Notes: Iron ore is demand for seaborne imports. Steel data are for crude steel production. Coal includes all coal type
Slide 19: BHP Billiton interim results
BHP Billiton interim results
Slide 20: Highlights – Half year ended December 2007
Highlights – Half year ended December 2007 BHP Billiton China 2008-4-18 • 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 furthe
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Slide 22: Declining rate of cost increase
Declining rate of cost increase BHP Billiton China 2008-4-18 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
Slide 23: Outlook – long term fundamentals strong, shorter term more fluid
Outlook – long term fundamentals strong, shorter term more fluid BHP Billiton China 2008-4-18 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 24: Can Chinese consumption growth offset the shorter term slow down in the US?
Can Chinese consumption growth offset the shorter term slow down in the US? BHP Billiton China 2008-4-18 Iron Ore Copper Energy China India USA Europe Share of Consumption (2007, %) China Share of Incremental Demand (1997-2007, %) Iron Ore Copper Energy Sources of data: CRU Quarterly Reports (Januar
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Slide 30: Development spend in high margin businesses
Development spend in high margin businesses BHP Billiton China 2008-4-18 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 trad
Slide 31: Strong cash flow - delivering value to shareholders
Strong cash flow - delivering value to shareholders BHP Billiton China 2008-4-18 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 ¹ (US$m) Re
Slide 32: Summary
Summary BHP Billiton China 2008-4-18 • 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 33: BHP Billiton's offer to acquire Rio Tinto
BHP Billiton’s offer to acquire Rio Tinto
Slide 34: Background to the offer
Background to the offer BHP Billiton China 2008-4-18 • 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
Slide 35: BHP Billiton offer for Rio Tinto
BHP Billiton offer for Rio Tinto BHP Billiton China 2008-4-18 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 T
Slide 36: BHP Billiton offer for Rio Tinto
BHP Billiton offer for Rio Tinto BHP Billiton China 2008-4-18 • 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 respec
Slide 37: Unlocking value – Why a combination with Rio Tinto?
Unlocking value – Why a combination with Rio Tinto? BHP Billiton China 2008-4-18 • 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 fall
Slide 38: Indicative timetable
Indicative timetable BHP Billiton China 2008-4-18 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 f
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Slide 42: Return on capital and margins
Return on capital and margins BHP Billiton China 2008-4-18 (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%
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Slide 47: EBIT margin by Customer Sector Group
EBIT margin (1) by Customer Sector Group BHP Billiton China 2008-4-18 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 48: Underlying EBIT analysis Half year ended Dec 2007 vs Dec 06
Underlying EBIT analysis Half year ended Dec 2007 vs Dec 2006 BHP Billiton China 2008-4-18 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) (
Slide 49: Impact of major volume changes Half year ended Dec 2007 vs Dec 2006
Impact of major volume changes Half year ended Dec 2007 vs Dec 2006 BHP Billiton China 2008-4-18 -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 previ
Slide 50: Impact of major commodity price Half year ended Dec 2007 vs Dec 2006
Impact of major commodity price Half year ended Dec 2007 vs Dec 2006 BHP Billiton China 2008-4-18 -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 $154m of price-linked costs im
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Slide 52: Developing world metals demand to show significant growth
Developing world metals demand to show significant growth BHP Billiton China 2008-4-18 * 1 January 2008 real US dollars Sources of data: CRU Quarterly Reports (January 2008); Brook Hunt Aluminium Metal Service (February 2008); IISI – Steel Statistical Yearbook (December 2007); World Bank (World Deve
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Slide 56: Dollar value of oil intensity per capita is times that of non ferrous metals
But, the dollar value of oil intensity per capita is 10 times that of non ferrous metals BHP Billiton China 2008-4-18 US$ 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 (Ja
Slide 57: Broad exposure to carbon steel sector demand
Broad exposure to carbon steel sector demand BHP Billiton China 2008-4-18 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 p
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Slide 59: Well positioned to meet energy demand regardless of fuel mix
Well positioned to meet energy demand regardless of fuel mix BHP Billiton China 2008-4-18 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 60: China's intensity of aluminium use is rising…but it has much further to climb
China’s intensity of aluminium use is rising…but it has much further to climb BHP Billiton China 2008-4-18 Aluminium - GDP per capita vs consumption per capita 5000 10000 15000 20000 25000 30000 35000 40000 45000 50000 GDP/Capita (Jan. 2008 Constant US Dollars) China Germany India Japan Korea, Rep.
Slide 61: China's intensity of copper use is rising…but it has much further to climb
China’s intensity of copper use is rising…but it has much further to climb BHP Billiton China 2008-4-18 Copper - GDP per capita vs consumption per capita 5000 10000 15000 20000 25000 30000 35000 40000 45000 50000 GDP/Capita (Jan. 2008 Constant US Dollars) China Germany India Japan Korea, Rep. United
Slide 62: China's intensity of steel use is rising…but it has much further to climb
China’s intensity of steel use is rising…but it has much further to climb BHP Billiton China 2008-4-18 Steel - GDP per capita vs consumption per capita 1000 1200 5000 10000 15000 20000 25000 30000 35000 40000 45000 50000 GDP/Capita (Jan. 2008 Constant US Dollars) China Germany India Japan Korea, Rep
Slide 63: China's energy use has far to grow
China’s energy use has far to grow, providing strong opportunities for suppliers of energy raw materials BHP Billiton China 2008-4-21 Energy - GDP per capita vs energy use per capita 5000 10000 15000 20000 25000 30000 35000 40000 45000 50000 GDP/Capita (Jan. 2008 Constant US Dollars) China Germany I
Slide 64: Inventories remain at historically low levels; Real LME metal prices are still high
Inventories remain at historically low levels; Real LME metal prices are still high BHP Billiton China 2008-4-18 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) pric
Slide 65: Global Copper Prices in 1880-2007
Global Copper Prices in 1880-2007 BHP Billiton China 2008-4-18 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
Slide 66: Capital & exploration expenditure
Capital & exploration expenditure BHP Billiton China 2008-4-18 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
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Slide 68: 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 BHP Billiton China 2008-4-18 Sanctioned Third coal berth capable of handling an estimated 30 million tpa End CY10 Energy Coal Newcast
Slide 69: Sanctioned development projects (US$9.6bn) 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 70: Sanctioned development projects (US$9.6bn) 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) BHP Billiton China 2008-4-18 Sanctioned 10,000 bpd condensate and processing capacity of 80 million cubic feet gas pe
Slide 71: 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) BHP Billiton China 2008-4-18 3.2 million tpa H2 CY11 1,000 Alumina Guinea Alumina Project (Guinea) – 33.3% 1 million tpa clean co
Slide 72: Development projects in feasibility (US$6.5bn) 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$600m)
Slide 73: Development projects commissioned since July 2001
Development projects commissioned since July 2001 Project Initial Production Date Our Share of Capex Actual Budget Actual US$m Budget US$m BHP Billiton China 2008-4-18 Q1 CY04 Q2 CY04 Products & Capacity Expansion (Australia) – 85% Q1 CY04 Q1 CY04 Cerrejon Zona Norte (Colombia) – 33.3% Q4 CY03 Q4 CY
Slide 74: Development projects commissioned since July 2001
Development projects commissioned since July 2001 Project Initial Production Date Our Share of Capex Actual Budget Actual US$m Budget US$m BHP Billiton China 2008-4-18 Q2 CY06 Q1 CY06 Worsley Development Capital Project (Australia) – 86% Q4 CY05 Q3 CY05 Paranam Refinery Expansion (Suriname) – 45% Oc
Slide 75: Development projects commissioned since July 2001
Development projects commissioned since July 2001 Project Initial Production Date Our Share of Capex Actual Budget Actual US$m Budget US$m BHP Billiton China 2008-4-18 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
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