Bhp Group Ltd · ASX:BHP
Bhp — BHP Billiton — Investor Day (November 2014)
84 slides from Bhp's investor day presentation, Nov 24, 2014
Slide 1: Maximising value and shareholder returns
Jimblebar For personal use only Maximising value and shareholder returns 24 November 2014
Slide 2: Disclaimer
Disclaimer For personal use only Forward-looking statements This presentation contains forward-looking statements, which may include statements regarding: trends in commodity prices and currency exchange rates; demand for commodities; plans, strategies and objectives of management; closure or divest
Slide 3: Disclaimer (continued)
Disclaimer (continued) For personal use only Non-IFRS financial information BHP Billiton results are reported under International Financial Reporting Standards (IFRS) including Underlying EBIT and Underlying EBITDA which are used to measure segment performance. This release may also include certain
Slide 4: Agenda
Agenda For personal use only Maximising value and shareholder returns Andrew Mackenzie Chief Executive Officer Marketing: Uniquely placed to resource the future Mike Henry President – HSE, Marketing and Technology Question time Break Coal: Improving productivity and sustainably Dean Dalla Valle lowe
Slide 5: Maximising value and shareholder returns
Eagle Ford For personal use only Maximising value and shareholder returns Andrew Mackenzie Chief Executive Officer 24 November 2014
Slide 6: Key themes
Key themes For personal use only • We are delivering on our commitments • A simplified portfolio will maximise value for our shareholders • Now targeting at least another US$4.0 billion of productivity-led gains from our core portfolio • Safety is paramount • Managing our assets in a sustainable way
Slide 7: We are delivering on our commitments
We are delivering on our commitments For personal use only Our FY14 scorecard Portfolio simplification • Announced proposed demerger having completed more than US$6.5 billion in divestments over the last two years at attractive valuations • Record low Total Recordable Injury Frequency of 4.2 per
Slide 8: We pursue simplification when it maximises value for shareholders
We pursue simplification when it maximises value for shareholders For personal use only • We have been progressively simplifying our A track record of maximising value and returns portfolio for more than a decade (cumulative transaction proceeds1, US$ billion) 8 Thousands – major transactions totall
Slide 9: A simpler and more productive organisation
A simpler and more productive organisation For personal use only BHP Billiton core portfolio1 Non core Operated Non-operated Minerals Western Australia Olympic Dam Escondida Pampa Norte Samarco Antamina Nickel West Iron Ore Queensland Coal2 NSW Energy Coal Jansen project Cerrejón New Mexico Coal Pet
Slide 10: Our existing structure has worked well
Our existing structure has worked well For personal use only Functions • Our existing organisational design has enabled us to develop and operate a Petroleum 5 Businesses Copper Iron Ore Coal AM&N complex, diversified portfolio of substantial & Potash scale and geographical spread 41 Assets1 (30 ope
Slide 11: The demerger will enable us to fundamentally redesign the business
The demerger will enable us to fundamentally redesign the business For personal use only Functions • The proposed demerger will provide the opportunity to make a step-change Petroleum 4 Businesses Copper Iron Ore Coal improvement in performance while retaining & Potash the benefits of scale and dive
Slide 12: Now targeting at least US$4.0 billion of productivity-led gains
Now targeting at least US$4.0 billion of productivity-led gains from our core portfolio For personal use only • Our simplified portfolio with substantial scale Productivity-led volume and cost efficiencies1 concentrated in four pillars will enable faster (US$ billion) performance improvements across
Slide 13: The creation of a new high-quality global metals and mining company
The creation of a new high-quality global metals and mining company For personal use only NewCo • The portfolio selected for NewCo includes 11 operated assets primarily in Australia and Southern Africa and a joint venture interest in Brazil • By tailoring its approach to optimise GEMCO Worsley Canni
Slide 14: A dedicated board and management team
A dedicated board and management team will bring renewed focus to this portfolio For personal use only Board1 David Crawford (Chairman) Xolani Mkhwanazi Keith Rumble Chief Executive Officer2 Graham Kerr Chief Legal Officer Chief Operating Chief Operating Chief Financial Chief Commercial and Company
Slide 15: The proposed demerger
The proposed demerger For personal use only • It is intended that NewCo would – be an Australian incorporated company listed on the Australian Securities Exchange (ASX) – have an inward secondary listing on the Johannesburg Stock Exchange (JSE) – pursue a Standard listing on the UK Listing Authority
Slide 16: Safety is paramount
Safety is paramount For personal use only Total Recordable Injury Frequency (TRIF) (number of recordable injuries per million hours worked) 10 8 down 51% 6 4 2 0 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 YTD Andrew Mackenzie, Chief Executive Officer, 24 November 2014 Slide 16
Slide 17: Managing our assets in a sustainable way
Managing our assets in a sustainable way for the benefit of all stakeholders For personal use only • We aim to minimise our environmental impacts Minimising our greenhouse gas emissions2 and deliver enduring benefits to biodiversity, (Mt CO2-e) ecosystems and other environmental resources 60 FY06 ba
Slide 18: Managing our assets in a sustainable way
Managing our assets in a sustainable way for the benefit of all stakeholders For personal use only • We engage regularly and openly with those interested in and affected by our operations • We support partnerships that promote social and economic development for the benefit of the broader community
Slide 19: Delivering more volume from existing infrastructure
Delivering more volume from existing infrastructure and our growth projects ahead of schedule For personal use only • Our core portfolio is on track to deliver production1 Production1 growth from our core portfolio growth of 23% over the two years to the end of (% change) FY15 (16% from the broader
Slide 20: Cost efficiencies of US$1.9 billion delivered in FY14
Cost efficiencies of US$1.9 billion delivered in FY14 with more to come For personal use only • Our commitment to further improve the Further reduction in unit costs expected in FY15 competitive position of our assets underpinned a (% change, FY15 versus FY14) US$1.9 billion reduction in controllabl
Slide 21: Our framework to maximise shareholder returns
Our framework to maximise shareholder returns For personal use only • Our purpose when allocating capital is to maximise total shareholder returns • Our strategy is to own and operate large, long-life, low-cost, expandable, upstream assets diversified by commodity, geography and market • Our capital
Slide 22: Our strong balance sheet ensures access to capital
Our strong balance sheet ensures we have access to capital at a consistently lower cost For personal use only Return excess Strong balance • We remain committed to our solid A credit to shareholders sheet & solid A rating credit rating – we manage to a single A1 or A21 through the cycle by consideri
Slide 23: An unbroken dividend with a higher growth rate
An unbroken dividend with a higher growth rate For personal use only Strong balance Return excess • By having a strong balance sheet and to shareholders sheet & solid A credit rating investing in our best businesses we have delivered superior growth in our base dividend – increased at a CAGR of 17%1
Slide 24: Disciplined investment process to maximise value and returns
Disciplined investment process to maximise value and returns For personal use only Strong balance Return excess • Our rigorous process considers all to shareholders sheet & solid A credit rating alternatives for capital – continued investment in our business – portfolio simplification – the growth r
Slide 25: Improving capital productivity
Improving capital productivity For personal use only • Our opportunity-rich portfolio remains a key point of differentiation • By operating within a disciplined framework Maximise and by testing all investment decisions shareholder against challenging criteria we will increase returns the capital ef
Slide 26: Our strategy and balance sheet have delivered superior returns
Our strategy and strong balance sheet have delivered superior returns for our shareholders For personal use only Strong balance Key enablers for total shareholder returns Return excess sheet & solid A to shareholders credit rating BHP Metrics over 10 Billiton Peer Peer years1 A+ A- BBB Cost of fundi
Slide 27: Key themes
Key themes For personal use only • We are delivering on our commitments • A simplified portfolio will maximise value for our shareholders • Now targeting at least another US$4.0 billion of productivity-led gains from our core portfolio • Safety is paramount • Managing our assets in a sustainable way
Slide 28: For personal use only
cdl bhpbilliton resourcing the future
Slide 29: Uniquely placed to resource the future
For personal use only Nelson Point Uniquely placed to resource the future Mike Henry President – HSE, Marketing and Technology 24 November 2014
Slide 30: Disclaimer
Disclaimer For personal use only Forward-looking statements This presentation contains forward-looking statements, which may include statements regarding: trends in commodity prices and currency exchange rates; demand for commodities; plans, strategies and objectives of management; closure or divest
Slide 31: Key themes
Key themes For personal use only • Virtuous cycle of industrialisation, urbanisation and consumption in emerging economies is expected to continue to underpin long-term commodities demand growth • We retain a margin advantage for our steelmaking raw materials based on our quality and cost position •
Slide 32: We consider divergent yet plausible scenarios
We consider divergent yet plausible scenarios in our portfolio decisions For personal use only • Our corporate planning process is Scenario analysis underpinned by scenario analysis – encompasses a spectrum of potential outcomes for key global uncertainties – considers technical, economic, political
Slide 33: Emerging economies will continue to drive global growth
Emerging economies will continue to drive global growth and commodities demand For personal use only • Demand for our commodities continues to be Continued momentum in the emerging economies… strong, underpinning the long-term outlook (GDP, US$ trillions, 2010 Purchasing Power Parity) for our portfo
Slide 34: The urbanisation and industrialisation of the developing world
The urbanisation and industrialisation of the developing world is far from complete For personal use only • Urbanisation and industrialisation in the Urbanisation rates 2015-50 UN projected increase in developing world continues to underpin (%) urban population 2015-50 commodities demand 100 0.2bn –
Slide 35: We retain a margin advantage for steelmaking raw materials
We retain a margin advantage for our steelmaking raw materials For personal use only Iron ore The iron ore cost curve is flattening (CIF China equivalent basis, US$/t, nominal) • Growth in low-cost seaborne supply will continue to outpace demand and the cost curve will flatten CY13 CY15 • Longer ter
Slide 36: Copper will remain supply constrained
Copper will remain supply constrained and a deficit is expected beyond 2018 For personal use only • The outlook for copper demand remains Strong consumption growth from Asia (ex-Japan) compelling as emerging economies (copper semis, Mt) transition to consumption-led growth 30 – Chinese copper semis
Slide 37: Energy demand growth will remain positive
Energy demand growth will remain positive… For personal use only • Increasing energy demand is projected under a The global energy complex will remain diverse variety of scenarios, with electrification and (growth in primary energy supply, index, 2010=100) transport leading the growth 140 • Electric
Slide 38: Shape of future energy demand is difficult to predict
… although the shape of future energy demand is difficult to predict For personal use only • Asia is expected to account for two thirds Energy balances by region of energy demand growth to 2030 – growth in China and India will be CIS equivalent to current US energy Asia demand Europe North America 2
Slide 39: Population growth and higher protein diets
Population growth and the shift towards higher protein diets will require more productive crops For personal use only • The long-term demand fundamentals for People fed per hectare of arable land agricultural products remain attractive (number of people) 5.1 – growing global population 4.5 4.8 4.0 –
Slide 40: A diversified portfolio resourcing the future
A diversified portfolio resourcing the future For personal use only • Our core portfolio1 reflects our differentiated Diversified by commodity, geography and market strategy (core portfolio, FY14 % contribution) 100 RoW Coal North – large, long-life, low-cost, expandable, North America America Austr
Slide 41: Key themes
Key themes For personal use only • Virtuous cycle of industrialisation, urbanisation and consumption in emerging economies is expected to continue to underpin long-term commodities demand growth • We retain a margin advantage for our steelmaking raw materials based on our quality and cost position •
Slide 42: For personal use only
édl bhpbilliton resourcing the future
Slide 43: Improving productivity and sustainably lowering costs
For personal use only Queensland Coal Improving productivity and sustainably lowering costs Dean Dalla Valle President – Coal 24 November 2014
Slide 44: Disclaimer
Disclaimer For personal use only Forward-looking statements This release contains forward-looking statements, including statements regarding: trends in commodity prices and currency exchange rates; demand for commodities; plans, strategies and objectives of management; closure or divestment of certa
Slide 45: Statement of JORC resources
Statement of JORC resources For personal use only Coal Resources This presentation includes information on Coal Resources (inclusive of Coal Reserves). Coal Resources are compiled by J Field (MAusIMM). J Field is a full time employee of BHP Billiton, has sufficient experience that is relevant to the
Slide 46: Key themes
Key themes For personal use only • Driving ongoing improvement in our health, safety, environment and community performance • Our business is underpinned by a large, high-quality resource base • We have re-established our competitive advantage by closing high-cost capacity and sustainably reducing c
Slide 47: We value safe and sustainable operations above all else
We value safe and sustainable operations above all else For personal use only • We continue to improve TRIF1 as an indicator Improving our safety performance of our safety leadership (12 month rolling average TRIF per million hours worked) 12 • Our focus is on elimination of fatalities and 9 serious
Slide 48: Coal – a key pillar of BHP Billiton
Coal – a key pillar of BHP Billiton For personal use only • Strong performance over the last five years Share of BHP Billiton production1 reflects the underlying quality of our coal (%) assets 20 – 17% of total BHP Billiton production1 15 – over US$10 billion of Underlying EBIT, 10 representing 8% o
Slide 49: Our business is underpinned by a high-quality resource base
Our business is underpinned by a high-quality resource base For personal use only Coal resources1,2 (Bt, 100% basis) 40 +11% 30 20 10 0 FY10 FY14 New Mexico Coal Energy coal Metallurgical coal Cerrejón Coal IndoMet Coal project Queensland Coal3 (QCoal) Energy Coal South Africa NSW Energy Coal Core p
Slide 50: We have re-established our competitive advantage by reducing costs
We have re-established our competitive advantage by sustainably reducing costs For personal use only • Our Coal business has embedded Significant reduction in unit cash costs US$2.4 billion of cost and volume (US$/t) efficiencies1, representing over one third of 200 total savings achieved by the Gro
Slide 51: Leveraging our marketing expertise to maximise margins
Leveraging our marketing expertise to maximise margins For personal use only • Our marketing team is a major contributor to Spot PLV price realisation vs Platts PLV index1 Coal’s productivity agenda (index, Platts PLV=100) – transparent pricing to enable full value recognition for our high-quality r
Slide 52: Our people are becoming more productive
Our people are becoming more productive For personal use only • People productivity is a key value driver Breakdown of FY14 costs2 (QCoal) (NSWEC) – labour and contractors represent 8% 8% approximately half our operating costs 21% 27% 14% 14% – we reduced our total labour spend by 23% in FY14 13% –
Slide 53: We will continue to improve our equipment utilisation
We will continue to improve our equipment utilisation For personal use only • Our initiatives continue to deliver more Improving QCoal ultra class haul truck performance volume from existing equipment at lower unit (hours, 12 month moving average, index, July 2013=100) costs 125 • Improved truck per
Slide 54: Peak Downs: delivering benchmark productivity
Peak Downs: delivering benchmark productivity For personal use only • Peak Downs increased production by 8% Maximising Peak Downs production from existing infrastructure and reduced (Mtpa, 100% basis) operating costs by 18% in FY14 10.0 – nearing wash-plant benchmark 9.5 performance of 8,000 hours p
Slide 55: Poitrel: optimising mine plans to lower costs
Poitrel: optimising mine plans to lower costs For personal use only • A significant improvement in coal recovery at Progression through the mine plan Poitrel was underpinned by an 11% reduction (September 2013 to August 2014) in overburden during FY14 – improved blast hole charge placements, depth,
Slide 56: NSWEC: improved equipment utilisation and mine planning
NSWEC: improved equipment utilisation and mine planning delivering tangible benefits For personal use only • Equipment productivity will deliver further cost Excavator dig rates are increasing savings (bcm/hour, rolling 14 day average) 1,800 – increasing digging rates and hours will enable a reducti
Slide 57: Systematically targeting our external spend
Systematically targeting our external spend For personal use only • Our supply expenditure has reduced by Annualised supply savings relative to FY12 ~US$400 million relative to FY12 with (US$ million) additional savings to come 800 • We continue to focus on lowering external supply expenditure – red
Slide 58: Our plans will deliver significant cost reductions
Our plans will deliver significant cost reductions For personal use only • We expect further cost reductions across our Targeting further reductions in QCoal unit costs1 operations (US$/t) 200 – targeting a 10% reduction in unit costs in FY151 at Queensland Coal to below 150 US$90/t 100 – targeting
Slide 59: Maximising the utilisation of installed capacity
Maximising the utilisation of installed capacity For personal use only • Record metallurgical coal volumes of 47 Mt Targeting 4% growth in metallurgical coal production1 anticipated in FY15 (Mtpa) 55 – Caval Ridge operating at full capacity – continued improvement in equipment utilisation across all
Slide 60: Our major growth projects are nearing completion
Our major growth projects are nearing completion For personal use only • Two major capital projects delivered first Coal capital and exploration expenditure1 production in FY14 (US$ billion) 4.0 – 5.5 Mtpa Caval Ridge hard coking coal project delivered three months ahead of schedule and under budget
Slide 61: Simplification of the portfolio will provide additional opportunity
Simplification of the portfolio will provide additional opportunity For personal use only • The proposed demerger will further simplify the South Walker Creek Coal Business and accelerate productivity gains – enhanced focus on fewer large, long-life assets with a reduction in core operations1 from 1
Slide 62: Key themes
Key themes For personal use only • Driving ongoing improvement in our health, safety, environment and community performance • Our business is underpinned by a large, high-quality resource base • We have re-established our competitive advantage by closing high-cost capacity and sustainably reducing c
Slide 63: For personal use only
édl bhpbilliton resourcing the future
Slide 64: Maximising the potential of our unique orebodies
Escondida For personal use only Maximising the potential of our unique orebodies Peter Beaven Chief Financial Officer 24 November 2014
Slide 65: Disclaimer
Disclaimer For personal use only Forward-looking statements This release contains forward-looking statements, including statements regarding: trends in commodity prices and currency exchange rates; demand for commodities; plans, strategies and objectives of management; closure or divestment of certa
Slide 66: Statement of JORC resources
Statement of JORC resources For personal use only Mineral Resources The information in this presentation that relates to the FY2014 Mineral Resources (inclusive of Ore Reserves) was first reported by the Company in compliance with the ‘Australasian Code for Reporting of Exploration Results, Mineral
Slide 67: Mineral Inventory classifications
Mineral Inventory classifications Mineral Resources For personal use only Table 1 Table 1 FY14 ROM Measured Resource Indicated Resource Inferred Resource Resource Life3 BHP Billiton interest Deposit Ore Type production (Mt) (Mt) (Mt) (Years) (%) (Mt) Copper 5,750 @ 4,070 @ Escondida1 All 16,400 @ 0.
Slide 68: Key themes
Key themes For personal use only • We value safe and sustainable operations above all else • We have a unique portfolio of four large, long-life, low-cost, expandable assets concentrated in Chile, Peru and Australia • Our proactive approach to address industry-wide challenges is a key differentiator
Slide 69: We value safe and sustainable operations above all else
We value safe and sustainable operations above all else For personal use only Operating safely and in control A strong and stable safety performance (12 month rolling average TRIF1 per million hours worked) • We have a strong and stable safety performance 8 record underpinned by our focused approach
Slide 70: Copper – a key pillar of BHP Billiton
Copper – a key pillar of BHP Billiton For personal use only • Our Copper business has delivered A major contributor to production1 exceptional returns over the last five years (% of BHP Billiton production) 25 – 21% of total BHP Billiton production1 20 – average Underlying EBIT margin of 42% 15 – US
Slide 71: A simple portfolio of unrivalled quality
A simple portfolio of unrivalled quality A portfolio of some of the largest… long-life, expandable… low-cost assets in the industry For personal use only (FY14 attributable production, Mt) (net equity ownership resources, Mt) (CY14 C1 cash costs, US$/lb) 2 30 20 1 10 0 0 Cerro Colorado Olympic Dam S
Slide 72: Industry-wide challenges
Industry-wide challenges For personal use only • As copper porphyries mature, a significant Copper grade decline will lead to a deficit market1 deficit is expected to emerge beyond 2018 (Mt) (% Cu in the mill) 4 1.10 – grade decline, higher strip ratios and 0 1.05 longer cycle times underpin an attr
Slide 73: Maximising the utilisation of installed capacity
Maximising the utilisation of installed capacity For personal use only • We are leveraging our common systems and Improving mill performance at Escondida processes to drive continuous performance (ktpd, index, FY12=100) +1% improvement 160 +9% (YTD) +13% • Our focus on maximising bottleneck throughp
Slide 74: We remain cost competitive despite grade decline
We remain cost competitive despite grade decline For personal use only • We are preserving our competitive cost Moving more tonnes at lower cost position despite declining grades across the (index, total Copper business, FY12=100) Copper business 120 – FY15 material mined is expected to be 100 13% h
Slide 75: Addressing grade variability at Escondida
Addressing grade variability at Escondida For personal use only • Following three years of strong production growth Grade decline will impact volumes in the short term at Escondida, expected year on year grade (Mt, Escondida) (% Cu in the mill) decline of 24% in FY16 will impact volumes 1.5 1.8 • FY
Slide 76: Our three concentrator strategy will offset grade decline
Our three concentrator strategy will offset grade decline at Escondida For personal use only • We are considering extending the life of the We will retain access to higher grade ore Los Colorados concentrator to FY30 – enables utilisation of three concentrators with Los Colorados a combined throughp
Slide 77: Our water and power solutions are key enablers
Our water and power solutions are key enablers For personal use only • Water availability is the bottleneck at Escondida Water Supply (EWS) project Escondida until FY18 • Our US$3.4 billion (100% basis) desalination facility at Escondida is on schedule for commissioning in CY17 – enables our three c
Slide 78: Debottlenecking Olympic Dam capacity
Debottlenecking Olympic Dam capacity to 235 ktpa For personal use only • We plan to increase copper production capacity Expanding our mining footprint at Olympic Dam at Olympic Dam by ~50 ktpa1 from FY18 Northern Mining Area – expanding mine footprint into the Southern ~ 30% of resource Mining Area
Slide 79: Low-cost recovery optimisation at Spence
Low-cost recovery optimisation at Spence For personal use only • Our Spence Recovery Optimisation project has Accelerating heap leach performance at Spence the potential to increase copper recoveries by (%, copper recoveries) ~14% from FY16 100 75 – acceleration of heap leach kinetics and increased
Slide 80: A compelling suite of longer-term growth projects
A compelling suite of longer-term growth projects For personal use only Spence Growth Option Current mine footprint • We are studying the development of the hypogene 1,670 m resource at Spence – accesses ore beneath the current mine 3,950 m 230 m Spence Growth Option footprint, eliminating the need
Slide 81: A compelling suite of longer-term growth projects
A compelling suite of longer-term growth projects For personal use only Olympic Dam 21 Mtpa Underground Expansion • We are evaluating a low-risk, capital-efficient underground expansion at Olympic Dam – supported by current stope mining method with significantly smaller footprint than prior open-cut
Slide 82: Deep optionality within our high-quality resource base
Deep optionality within our high-quality resource base For personal use only • We have a strong pipeline of longer-term We have a focused greenfield exploration program development options – further organic growth options at Escondida (additional concentrators and a high-grade underground mine) – po
Slide 83: Key themes
Key themes For personal use only • We value safe and sustainable operations above all else • We have a unique portfolio of four large, long-life, low-cost, expandable assets concentrated in Chile, Peru and Australia • Our proactive approach to address industry-wide challenges is a key differentiator
Slide 84: For personal use only
édl bhpbilliton resourcing the future