Bhp Group Ltd · ASX:BHP
Bhp — BHP Billiton — Merger or Acquisition (November 2007)
40 slides from Bhp's merger presentation, Nov 12, 2007
Slide 1: BHP Billiton and Rio Tinto: Unlocking Value
For personal use only BHP Billiton and Rio Tinto Unlocking Value 12 November 2007
Slide 2: Disclaimer
For personal use only Disclaimer This document has been prepared by BHP Billiton Ltd and BHP Billiton Plc (“ BHP Billiton") and comprises the written materials/slides for a presentation concerning BHP Billiton and its proposed combination with Rio Tinto Ltd and Rio Tinto plc (“ Rio Tinto” ). By revi
Slide 3: Disclaimer (Continued)
For personal use only Disclaimer (Continued) There are several factors which could cause actual results or performance to differ materially from those ex pressed or implied in the forward-looking statements. Factors that could cause actual results or performance to differ materially from those descr
Slide 4: Agenda
For personal use only Agenda I. The proposal II. Market environment III. Unlocking value IV. Creating a minerals industry ‘super-major’ V. Attractive and deliverable proposal VI. Conclusion: a unique combination to unlock value Page 4
Slide 5: I. The proposal
For personal use only I. The proposal Page 5
Slide 6: BHP Billiton and Rio Tinto: Creating a minerals industry 'super-major'
BHP Billiton and Rio Tinto: For personal use only Creating a minerals industry ‘super-major’ • BHP Billiton approached Rio Tinto on November 1 with a proposal to combine the two companies • Rio Tinto has not agreed to engage in discussions • The proposal sets out a unique opportunity to unlock value
Slide 7: Summary of key elements of the proposal
For personal use only Summary of key elements of the proposal • All share proposal of 3 BHP Billiton shares for 1 Rio Tinto share – Attractive value at a premium of 28% to the combined volume-weighted average market capitalisation over the one month pre-approach(a) – Proposal values Rio Tinto’s issu
Slide 8: II. Market environment
For personal use only II. Market environment Page 8
Slide 9: China is industrialising, India following
For personal use only China is industrialising, India following • China’s rate of industrialisation is strong and growing • India’s GDP currently 10-15 years behind China • BHP Billiton’s equivalent sales volume to India in FY2007 was greater than to China in FY2002(a) GDP ($B) 5,000 4,500 4,000 3,5
Slide 10: Chinese growth is driving global materials demand
For personal use only Chinese growth is driving global materials demand Crude steel production Crude steel production growth (1996-2006) (mt) (mt) 1,250 100% = 494 China 1,000 Other 20% 750 USA India Japan 6% Europe 500 4% Europe Japan 65% 4% India 1% USA 250 China Other 0 1996 2006 Source: IISI and
Slide 11: Demand growth to continue
Demand growth to continue Steel intensity per capita For personal use only (kg Steel/Capita) 1,200 USA (1900-2005) Japan (1950-2005) S. Korea (1970-2005) 1,000 Taiwan (1970-2005) China (1970-2005) 800 India (2005) 600 400 200 0 0 5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000 45,000 GDP/Capi
Slide 12: III. Unlocking value
For personal use only III. Unlocking value Page 12
Slide 13: Keys to unlocking value
For personal use only Keys to unlocking value 1 Optimising mineral basin positions and infrastructure – Lower cost, more efficient production – Unlocking volume through matching reserves with infrastructure 2 Enhanced platform for future growth – Deployment of scarce resources to highest value oppor
Slide 14: Optimising mineral basin positions and infrastructure
For personal use only 21 Optimising mineral basin positions and infrastructure Selected existing BHP Billiton and Ri o Tinto assets, projects and concessions. Page 14
Slide 15: Example: matching reserves and infrastructure (WAIO)
For personal use only 1 Example: matching reserves and infrastructure (WAIO) Iron ore volume growth options unlocked(a) Port BHP Billiton deposit / mine / port Rio Tinto deposit / mine / port BHP Billiton railway Pilbara Rio Tinto rail way Rio Tinto rail way (proposed ) 2010 2012 2013 2015 2017 2018
Slide 16: Enhanced platform for future growth
For personal use only 2 Enhanced platform for future growth Unlocking value from future mineral provinces Selected existing BHP Billiton and Ri o Tinto project pipeli ne and expl oration permits. Source: Rio Tinto Fact Book 2007, Rio Tinto press releases (03-Jul-2007, 28-Jun-20 07, 02-Aug-200 7), Ri
Slide 17: Example: efficient infrastructure development
For personal use only 23 Example: efficient infrastructure development Guinea Bauxite • A major source of Guinea Iron Ore the world’s bauxite potential resources • Large, undeveloped high-quality deposits • BHP Billiton leading its development • Deposits under development by BHP Billiton and Rio Tin
Slide 18: Unique synergies and combination benefits
For personal use only 3 Unique synergies and combination benefits • Material quantifiable synergies and financial benefits • Unique to this combination due to substantial overlap in neighbouring and jointly-owned operations • Incremental EBITDA im pact growing to estim ated $3.7B(a)* – $1.7B* nomina
Slide 19: Anticipated cost savings EBITDA impact of $1.7B
For personal use only 3 Anticipated cost savings EBITDA impact of $1.7B Cost savings achievable • $1.7B* EBITDA impact per annum from cost ($B*) savings expected by Year 3(a) Total = 1.7 • Operating costs Divisional non-operating – Economies of scale in operations and costs procurement of goods and
Slide 20: Anticipated further EBITDA enhancement of $2.0B
For personal use only 3 Anticipated further EBITDA enhancement of $2.0B • $2.0B* further EBITDA enhancement per annum expected by Year 7(a) • Accelerate tonnage produced by optimising key mineral basins, assets and infrastructure – Match infrastructure and resources in iron ore – Other asset optim i
Slide 21: Unlocking value: conclusions and observations
For personal use only Unlocking value: conclusions and observations • This combination unlocks a very material and unique pool of value – More production, faster and lower cost; enhanced future growth options; traditional synergies – Quantifiable value; incremental EBITDA impact growing to estim ate
Slide 22: IV. Creating a minerals industry 'super-major'
For personal use only IV. Creating a minerals industry ‘super-major’ Page 22
Slide 23: Consistent with our strategy and investment proposition
For personal use only Consistent with our strategy and investment proposition • Our strategy – Large, low-cost assets which are consistently profitable through the cycle – Focus on the extraction of upstream natural resources – Portfolio diversified by commodity, customer and geography reducing the
Slide 24: Portfolio of tier assets: low cost
For personal use only Portfolio of tier 1 assets: low cost Iron ore CIF cost curve Hard coking coal FOB cost curve ($/dmt) ($/t) 80 100 Corumb a Mesa J (Robe River) 80 IOC Broadmeadow Grego ry 60 Mt. Newman Peak Downs Samarco Hamersley Norwi ch Park Westcl iff Goonyell a Saraji 60 Bl ackwater Hi Yan
Slide 25: Unique portfolio of tier assets: scale
Unique portfolio of tier 1 assets: scale 2006 Production For personal use only Iron ore (Mt) Copper mines (Kt) Bauxite mines (Kt) 0 50 100 150 0 500 1000 1500 0 7, 000 14,000 21,000 CVRD South Escondida Hu ntly BHPB - Trombetas Co delco Norte Pilb ara (26.8%) Rio - Grasb erg (a ) Weipa Hamersley (40
Slide 26: Portfolio of tier assets: product diversification
For personal use only Portfolio of tier 1 assets: product diversification Underlying EBITDA (12 months to Jun-2007) ($B) 40.2 3% Other 4% Diamonds & Specialty Products 5% Energy Coal 9% Petroleum 10% Stainless Steel Materials 23.0 16% Aluminium 2% 4% 16% 17.2 6% 22% Iron Ore, Manganese & Met Coal 17
Slide 27: Portfolio of tier assets: geographic diversity and fiscal stability
Portfolio of tier 1 assets: geographic diversity and fiscal For personal use only stability Pro forma assets by geography ($B) 100% = 91.4 South America, Southern Africa and Other • High proportion of core assets 12% in fiscally stable countries Europe • A sound foundation for future 11% ventures in
Slide 28: Portfolio of tier assets: deep project pipeline
For personal use only Portfolio of tier 1 assets: deep project pipeline Base Diamonds Metals Iron Ore Petroleum Aluminium & SP Nickel Energy(a) Met Coal Manganese Execution • KUC Pushback • WA Iron Ore RGP 3 • Neptune • Alumar Refinery • Ekati Koala UG • Cliffs • Rössing • GEMCO Exp • Northparkes •
Slide 29: Creating a minerals industry 'super-major'
Creating a minerals industry ‘super-major’ Top 10 metals & mining companies For personal use only Market capitalisation as at 9-Nov-2007 ($B) 0 100 200 300 400 Combined Company (a) • Top 5 company in the world by Shenhua market value(a) CVRD • Pro forma FY2007 annual underlying Anglo American EBITDA
Slide 30: V. Attractive and deliverable proposal
For personal use only V. Attractive and deliverable proposal Page 30
Slide 31: Compelling proposal for Rio Tinto shareholders
For personal use only Compelling proposal for Rio Tinto shareholders • 28% premium to the combined volume-weighted average market capitalisation over the one month pre-approach (a) • 41% share of combined group for Rio Tinto shareholders(b) • Pro rata exposure to post combination synergies – Increme
Slide 32: Value enhancing for BHP Billiton shareholders
For personal use only Value enhancing for BHP Billiton shareholders • Pro-rata exposure to post combination synergies – Incremental EBITDA growing to estimated $3.7B (a) per annum • Strengthened asset portfolio and future growth • Cashflow per share accretive from the first full fiscal year followin
Slide 33: Broader stakeholders will benefit
For personal use only Broader stakeholders will benefit • Customers – Increased product volumes to market more quickly – Expanded product, shipping and delivery options – improved security of supply – Low cost, reliable producer through the cycle • Communities, employees and developing countries – G
Slide 34: Value of corporate renewal
For personal use only Value of corporate renewal BHP Billiton Ltd and Rio Tinto Ltd total shareholder return(a) • BHP Billiton DLC merger was a catalyst Index – June 2001 = 100 for corporate renewal and created a 600 superior platform for long term value growth BHP Billiton • Total shareholder retur
Slide 35: A natural fit – low integration risk
For personal use only A natural fit – low integration risk • Similar heritage, culture, values and strategy • ‘Best of breed’ management • Optimal deployment of scarce labour resources • Successful track record of integration Page 35
Slide 36: A deliverable proposal
For personal use only A deliverable proposal • Following a thorough anti-trust analysis, we believe any possible regulatory concerns can be readily addressed without im pacting benefits in a meaningful way • Likely the regulatory focus will fall primarily on iron ore – Combined share of contestable
Slide 37: Summary of key terms of the proposal
For personal use only Summary of key terms of the proposal • All share proposal of 3 BHP Billiton shares for every Rio Tinto share • Rio Tinto Ltd shareholders will receive BHP Billiton Ltd shares • Rio Tinto plc shareholders will receive 80% BHP Billiton Plc shares and 20% BHP Billiton Ltd shares (
Slide 38: Summary of key terms of the proposal
For personal use only Summary of key terms of the proposal Intended • Intended initial share buy-back of approximately $30B(a) following completion share buy-back • Future capital management consistent with a single A rating target • Separate interconditional schemes of arrangement for each of Rio T
Slide 39: VI. Conclusion: a unique combination to unlock value
For personal use only VI. Conclusion: a unique combination to unlock value Page 39
Slide 40: BHP Billiton and Rio Tinto – unlocking value
For personal use only BHP Billiton and Rio Tinto – unlocking value • Compelling value opportunity for Rio Tinto shareholders through an all-share proposal – 41% share of combined group for Rio Tinto shareholders(a) – Pro-rata exposure to EBITDA synergies growing to estimated $3.7B (b) per annum • At