Bhp Group Ltd · ASX:BHP
Bhp — BHP Billiton — Investor Presentation (November 2005)
55 slides from Bhp's investor presentation, November 2005
Slide 1: BHP Billiton Aluminium Presentation to the Investment Community
BHP Billiton Aluminium Presentation to the Investment Community November 2005
Slide 2: Disclaimer
Disclaimer The views expressed herein contain information derived from publicly available sources that have not been independently verified. No representation or warranty is made as to the accuracy, completeness or reliability of the information. Any forward-looking information in this presentation
Slide 3: Agenda
Agenda Topic Presenter Position Overview Alex Vanselow President Aluminium Strategy Rod Kinkead-Weekes VP Strategy Aluminium Marketing Julius Matthys Marketing Director Aluminium Operations Xolani Mkhwanazi COO Southern Africa Aluminium Technical Ian Jacobson VP Technical Aluminium Finance Vince Nic
Slide 4: Setting the Context
Setting the Context • Sustainable perspective • Portfolio of quality operations and people • Value growth • Future options Page 4
Slide 5: Sustainability
Sustainability CIFR 12MMA Safety BHP Billiton Aluminium CSG 8 Felt leadership 7 6 Behavioural Based Safety 5 4 3 2 Community 1 0 FY02 FY03 FY04 FY05 Health Environment Page 5
Slide 6: Aluminium CSG FY05 Equity Production
Aluminium CSG FY05 Equity Production Alumar 495kt Suriname 874kt Alumar 176kt Suriname 2,022kt Mozal 260kt MRN 2,338kt Hillside 685kt Valesul 43kt Bayside 166kt Worsley Boddington 2,813kt 9,890kt Bauxite Mines Refineries Smelters Page 6
Slide 7: Setting Production Records in FY05
Setting Production Records in FY05 Alumar 495kt Suriname 874kt Alumar 176kt Suriname 2,022kt Mozal 260kt MRN 2,338kt Hillside 685kt Valesul 43kt Bayside 166kt Worsley Boddington 2,813kt 9,890kt Bauxite Mines Refineries Smelters Page 7
Slide 8: Delivering Value
Delivering Value (Indexed to 100 – Base FY95) 500 450 400 350 300 250 200 150 100 50 0 FY95 FY96 FY97 FY98 FY99 FY00 FY01 FY02 FY03 FY04 FY05 BHP Billiton Aluminium Production LME Price BHP Billiton Alumina Production BHP Billiton Aluminium Turnover BHP Billiton Aluminium EBIT Page 8
Slide 9: Aluminium Growth Projects
Aluminium Growth Projects BROW NFIELD Bauxite Worsley Alumina E&G Aluminium Alumar Worsley Worsley DCP DCP Mozal 3 High Suriname Suriname Next Amps Successor Generation Mines Mines CY2006 2007 2008 2009 2010 2011 2012 Smelting Smelting Options Options Size of bubble indicates capital expenditure; $$
Slide 10: Agenda
Agenda Topic Presenter Position Overview Alex Vanselow President Aluminium Strategy Rod Kinkead-Weekes VP Strategy Aluminium Marketing Julius Matthys Marketing Director Aluminium Operations Xolani Mkhwanazi COO Southern Africa Aluminium Technical Ian Jacobson VP Technical Aluminium Finance Vince Nic
Slide 11: Key Messages
Key Messages • “Upstream and low-cost“ strategy maintained • Strong demand fundamentals; supply-side issues • Disciplined investment in growth Page 11
Slide 12: 2005 Alumina and Aluminium Cash Cost Curves
2005 Alumina and Aluminium Cash Cost Curves Page 12
Slide 13: The China-Driven Demand Opportunity
The China-Driven Demand Opportunity Global primary aluminium consumption 51mt 32mt 19mt China 10mt 1 7 16 Rest of 10 world 18 1970 25 1990 35 2005 2015 Page 13
Slide 14: Today 45 Tier 1-3 cities provide China's growth impetus
Today 45 Tier 1-3 cities provide China’s growth impetus… China’s tiered city structure* – 2003 Today, China has 45 tier 1-3 cities, mainly in coastal provinces Tier 1 Tier 2 Tier 3 * Tier 1 city defin ed as registered popula tion >4.5 m and GDP/capita >US$3,000, Tier 2 city defined as either registe
Slide 15: By 2010 86 tier 1-3 cities
… by 2010 … 86 tier 1-3 cities … China’s tiered city structure* – 2010 Today, China has 45 tier 1-3 cities, mainly in coastal provinces By 2010, Tier 1-3 cities will have grown to 86 in number, still largely driven by coastal provinces Tier 1 Tier 2 Tier 3 * Tier 1 city defin ed as registered popula
Slide 16: By 2025 147 tier 1-3 cities
… and by 2025 … 147 tier 1-3 cities China’s tiered city structure* – 2025 Today, China has 45 tier 1-3 cities, mainly in coastal provinces By 2010, Tier 1-3 cities will have grown to 86 in number, still largely driven by coastal provinces By 2025, there will be 147 Tier 1-3 cities as urbanization in
Slide 17: Urbanisation – A Common Theme
Urbanisation – A Common Theme Tier 1-3 cities in CHINA and INDIA – 2003 Tier 1-3 cities in CHINA and INDIA – 2025 • 4 Tier 1 cities • 18 Tier 1 cities • 19 Tier 2 cities • 89 Tier 2 cities • 22 Tier 3 cities • 40 Tier 3 cities • 5 Tier 1 cities • 13 Tier 1 cities • 28 Tier 2/3 cities Tier 1 • 60 Tie
Slide 18: Aluminium Industry – Supply-side challenges
Aluminium Industry – Supply-side challenges 600 500 400 Spot Alumina Caustic soda(US Gulf) 300 Energy (Henry Hub) 200 100 0 Jan-02 May-02 Sep-02 Jan-03 M ay-03 Sep-03 Jan-04 M ay-04 Sep-04 Jan-05 May-05 Sep-05 Indexed to 100 – Jan 2002 • Cost pressures • European and US smelter closures • Chinese ca
Slide 19: Investing in Tier 1 Assets for Value
Investing in Tier 1 Assets for Value Alumina BROW NFIELD Aluminium Mozal 2 - 275ktpa $2,400/t $2,400/t Worsley 3.1mtpa Hillside 3 - 132ktpa Worsley DCP $530/t 3.25-3.5mtpa $530/t $3,114/t $3,114/t $800/t $800/t CY1996 2000 2001 2002 2003 2004 2005 2006 Worsley • Size of bubble indicates BHP Hillside
Slide 20: Aluminium Growth Projects
Aluminium Growth Projects BROW NFIELD Bauxite Worsley Alumina E&G Aluminium Alumar Worsley Worsley DCP DCP Mozal 3 High Suriname Suriname Next Amps Successor Generation Mines Mines CY2006 2007 2008 2009 2010 2011 2012 Smelting Smelting Options Options Size of bubble indicates capital expenditure; $$
Slide 21: Deep Inventory of Growth Projects
Deep Inventory of Growth Projects BROW NFIELD Koala UG NWS NWS T5 T5 BMA Phase 2 Atlantis North NWS Samarco Samarco Angel Paranam Yabulu Yabulu Esc’da Esc’da Worsley Sulphide Sulphide BMA Esc’da Phase 1 WA WA Iron Iron Ore Ore WA WA Iron Ore CPR Iron Ore WA WA Iron Iron Ore Ore RGP RGP 4+ 4+ RGP RGP
Slide 22: Agenda
Agenda Topic Presenter Position Overview Alex Vanselow President Aluminium Strategy Rod Kinkead-Weekes VP Strategy Aluminum Marketing Julius Matthys Marketing Director Aluminium Operations Xolani Mkhwanazi COO Southern Africa Aluminium Technical I Jacobson VP Technical Aluminium Finance V Nicoletti
Slide 23: Key Messages
Key Messages • Demand and Supply fundamentals are attractive • Alumina market to remain tight for 2006 • Falling Chinese Aluminium exports support Asian premiums • Third party product activity is delivering benefits Page 23
Slide 24: Alumina Demand and Supply Outlook
Alumina Demand and Supply Outlook 115,000 Demand 105,000 95,000 kt 85,000 75,000 New Production 65,000 Base and capacity creep 55,000 CY05 CY06 CY07 CY08 CY09 CY10 CY11 CY12 CY13 CY14 CY15 Page 24
Slide 25: Alumina - Market Update
Alumina - Market Update • What we see “on the ground” – Strong Chinese demand continues and alumina stocks decline – Spot Prices being supported by supply constraints – Favourable market for sellers • Alumina Price – Benchmark Australian spot prices > $550/tonne FOB. – Prolonged tightness will influ
Slide 26: Aluminium Demand and Supply Outlook
Aluminium Demand and Supply Outlook 55,000 Demand 50,000 45,000 kt 40,000 35,000 New Production 30,000 Base and capacity creep 25,000 CY05 CY06 CY07 CY08 CY09 CY10 CY11 CY12 CY13 CY14 CY15 Calendar Years Page 26
Slide 27: Aluminium - Market Update
Aluminium - Market Update • What we see “on the ground” – Lower level of LME stocks – Slowing primary metal exports from China – The need for restocking apparent in some markets – Europe. – Potential smelting closures in Europe and the US • Aluminium Price – Chinese aluminium consumption continues t
Slide 28: Third Party Products – $2,057m Revenue in FY05
Third Party Products – $2,057m Revenue in FY05 Tolling Trade Benefits Agreement 9% Risk Mitigation 9% 17% • Margin optimization JV Partners • Operational risk mitigation 17% Quality swaps 11% • Market intelligence • Customer service Location/freight swaps • $21m EBIT in FY05 37% • Low risk: All with
Slide 29: Agenda
Agenda Topic Presenter Position Overview Alex Vanselow President Aluminium Strategy Rod Kinkead-Weekes VP Strategy Aluminium Marketing Julius Matthys Marketing Director Aluminium Operations Xolani Mkhwanazi COO Southern Africa Aluminium Technical Ian Jacobson VP Technical Aluminium Finance Vince Nic
Slide 30: Key Messages
Key Messages • Consecutive production records • Benchmark AP30 performance • Delivery of growth projects Page 30
Slide 31: Worsley
Worsley • Consecutive records in production – 3.271mt (100% basis, FY05) • Business Improvement – Advanced Process Management – Applied technology – Bunbury Port – OPEX focus • Delivering growth – DCP expansion to 3.5mtpa in development phase – E&G expansion to 4.3mtpa in feasibility phase Page 31
Slide 32: South America
South America • Consecutive records in production – MRN 16,409mt (100% basis, FY05) • Alumar refinery – Expansion to 3.5mtpa (100% basis) Alumar Refinery • Suriname – Optimize performance – Successor mines – Next Generation mines • Portfolio management – Valesul MRN Page 32
Slide 33: Southern Africa
Southern Africa • Consecutive records in production – Hillside 685kt (FY05) – Mozal 551kt (100% basis, FY05) • Benchmark AP30 performance • Business improvement – All employees • Bayside Potline A – Fully operational • Capacity creep Page 33
Slide 34: BHP Billiton Smelters – Benchmark Performance
BHP Billiton Smelters – Benchmark Performance PRODUCTION : Prod / pot/ day (kg) COST : Energy Consumption (KWhr/ton) 13700 H2 H3 H1 2700 M1 M2 13500 2600 13300 M2 M1 2500 H3 13100 H1 H2 2400 12900 2300 12700 QUALITY : Iron Content (ppm Fe) COST : Current Efficiency (CE%) 1450 100 s p u ritie H2 H3 M
Slide 35: Agenda
Agenda Topic Presenter Position Overview Alex Vanselow President Aluminium Strategy Rod Kinkead-Weekes VP Strategy Aluminium Marketing Julius Matthys Marketing Director Aluminium Operations Xolani Mkhwanazi COO Southern Africa Aluminium Technical Ian Jacobson VP Technical Aluminium Finance Vince Nic
Slide 36: Key Messages
Key Messages • Using technology to create sustainable value • Technical programs focused on key business drivers • Business improvement creating culture of excellence Page 36
Slide 37: Technical Excellence in Aluminium
Technical Excellence in Aluminium 360 Amperage ( kA ) • High Amperage 350 – Increases metal production Mozal Hillside 340 – Improves capital efficiency 330 • Raw materials 320 – Ensure long term 310 competitiveness FY96 FY97 FY98 FY99 FY00 FY01 FY02 FY03 FY04 FY05 Y TD 06 FYF 06 • Environmental perf
Slide 38: Technical Excellence in Alumina
Technical Excellence in Alumina • Bauxite transport Worsley digestion pilot plant – Competitive transportation – Increase resource options • Bauxite upgrading – Improve potential resource value – Reduce processing costs • In-plant applications – Increase efficiency – Improve quality – Support projec
Slide 39: Business Improvement
Business Improvement • Measurable benefits • All employees contributing Worsley & Mozal interaction • Business Excellence programme 356 Aluminium CSG Improvement Projects • Technology teams 280 Number of projects 113 106 Investigatio n Implementation Control Period Realisation Page 39
Slide 40: Agenda
Agenda Topic Presenter Position Overview Alex Vanselow President Aluminium Strategy Rod Kinkead-Weekes VP Strategy Aluminum Marketing Julius Matthys Marketing Director Aluminium Operations Xolani Mkhwanazi COO Southern Africa Aluminium Technical Ian Jacobson VP Technical Aluminium Finance Vince Nico
Slide 41: Key Messages
Key Messages • Financial discipline in operations and growth • Margins maintained in challenging environment • Maintaining growth and improving ROC trajectory Page 41
Slide 42: Net Operating Assets and EBIT at 30 June 2005
Net Operating Assets and EBIT at 30 June 2005 Marketing Worsley 3% Hillside 36% 30% Net Operating Assets US$5.4 billion Bayside Alumar R Mozal 4% 3% Alumar S 16% 5% Valesul Suriname 1% 2% Marketing 4% Hillside Worsley 31% 25% EBIT Alumar R Bayside US$977 million 6% 2% Alumar S Mozal 9% 18% Valesul S
Slide 43: EBIT Variance Analysis (US$M)
EBIT Variance Analysis (US$M) FY04 FY05 1,400 70 50 1,200 384 38 18 16 35 9 11 1013 36 977 1,000 776 800 600 400 200 0 FY04 Price FX Volume Raw Materials Energy Labor Pot Relining Maintenance Other costs EBIT pre Contract FY05 buyback Buyback Price increase net of LME linked costs Page 43
Slide 44: FY06 EBIT Sensitivities
FY06 EBIT Sensitivities BRL /$ E-rate (10%) (20) 15 Rand/$ E-rate (10%) (35) 30 AUD/$ E-rate (10%) (40) 30 LME Price ($100/t) (140) 140 (200) (150) (100) (50) 0 50 100 150 200 US$ Million Page 44
Slide 45: FY05 Metal Cash Costs
FY05 Metal Cash Costs Other Consumables Other Costs Maintenance & 6% 7% Sustaining Capex 5% Alumina Labour 40% 8% Pot Relining 3% Electricity 6% Coke Electricity Pitch 7% 16% 2% Other Consumables Other Costs 6% 7% Maintenance & US$ based costs Sustaining Capex Alumina 40% 5% Local currency based cos
Slide 46: FY05 Alumina Cash Costs
FY05 Alumina Cash Costs Other Cons umables Other Costs 5% 9% Bauxite Contract Services 21% 3% Maintenance & Sustaining Capex 19% Caustic Soda 11% Electricity Labour Electricity 4% 13% 15% US$ based costs Other Co sts Ot her Co nsum ables Local currency based costs 9% B auxit e 5% 21% Co ntract Servi
Slide 47: Pot Relining
Pot Relining $ Million 90 80 70 60 50 40 30 20 10 0 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 Hillside Bayside Mozal Alumar Valesul Average annual cost Page 47
Slide 48: EBITDA Margins
EBITDA Margins 45 40 35 30 25 % 20 15 10 5 0 CY98 CY99 CY00 CY01 CY02 CY03 CY04 Industry Sample * BHP Billiton Aluminium * Industry sample comprises Alcoa, Alcan, Norsk Hydro Aluminium, Rio Tinto Aluminium, Chalco, Century, Pechiney (to 2002), Kaiser (to 2002) and Reynolds (to 2000) Page 48
Slide 49: Aluminium Production
Aluminium Production 200 160 BHP Billiton 120 80 CY00 CY01 CY02 CY03 CY04 (Indexed to 100 – Base CY00) Sample of companies include : Rio Tinto Aluminium, Chalco, Alcoa, AWAC, Alcan, CVRD, Norsk Hydro, Rusal, Sual Page 49
Slide 50: Alumina Production
Alumina Production BHP Billiton 200 160 120 80 CY00 CY01 CY02 CY03 CY04 (Indexed to 100 – Base CY00) Sample of companies include : Rio Tinto Aluminium, Chalco, Alcoa, AWAC, Alcan, CVRD, Norsk Hydro, Rusal, Sual Page 50
Slide 51: Capital Expenditure
Capital Expenditure 700 $ Million 600 500 400 300 200 100 0 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 Development Capex Improvement Capex Sustaining Capex FY01 excludes the acquisition of 56% of Worsley for $1.5bn. Development capital expenditure includes unapproved brownfield projects at Wo
Slide 52: EBIT ROC – Actual Results and Future Scenarios
EBIT ROC – Actual Results and Future Scenarios 30% 25% 20% 15% 10% 5% 0% FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 @ $1,600/t @ $2,000/t Page 52
Slide 53: Agenda
Agenda Topic Presenter Position Overview Alex Vanselow President Aluminium Strategy Rod Kinkead-Weekes VP Strategy Aluminium Marketing Julius Matthys Marketing Director Aluminium Operations Xolani Mkhwanazi COO Southern Africa Aluminium Technical Ian Jacobson VP Technical Aluminium Finance Vince Nic
Slide 54: Key Messages
Key Messages • Sustainable perspective • Portfolio of quality operations and people • Value growth • Future options Page 54
Slide 55: OMpodilliton
6de OMpodilliton