Bhp Group Ltd · ASX:BHP
Bhp — BHP Billiton — Investor Presentation (December 2006)
71 slides from Bhp's investor presentation, Dec 14, 2006
Slide 1: Olympic Dam Analyst Presentation
Olympic Dam Analyst Presentation Roxby Downs, South Australia 14 December 2006
Slide 2: Disclaimer
Disclaimer The views expressed here contain information derived in part 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 present
Slide 3: Agenda
Agenda Copper and Uranium Marketing • John Crofts - Marketing Director - Base Metals Olympic Dam Expansion • Roger Higgins - VP and Chief Operating Officer Olympic Dam Overview Finance • Dean Dalla Valle - Asset Leader • Paul Dunn - VP Finance
Slide 4: Copper Marketing
Copper Marketing John Crofts Marketing Director Base Metals 14 December 2006
Slide 5: Spence first cathode harvest
Spence first cathode harvest
Slide 6: Copper deficit moving into surplus beyond 2007
Deficit now seen in 2006 and 2007 much closer to balance, but seen moving into surplus beyond that Balance - '000 tonnes 1000 800 600 400 200 0 -200 Brook Hunt - October 2004 -400 Brook Hunt - July 2006 Brook Hunt - Oct 2006 -600 CRU - October 2004 -800 CRU - July 2006 CRU - Oct 2006 -1000 2004 2005
Slide 7: China forecast to drive refined copper demand growth
China forecast to account for over half of World refined Cu demand growth from 2005-2010 Refined copper - ‘000 tonnes Average growth from 2005-2010 forecast at 4.2% p.a. 20000 For 2000-2010 average would be 3% p.a. Long term we consider 3.5% p.a. normal CIS 15000 Asia excl. China China 10000 Oceania
Slide 8: Manufacture of copper containing goods has picked up
Manufacture of copper containing goods has picked up. Growth of these and semis suggest destocking at cathode level. % change year-on-year 40 35 30 25 20 15 10 5 0 Aircons Freezers Fridges Washing Power Gen Elec. Motors Semi-Cond. Electricity Copper Apparent machines Equip Prod. Semis Refined Cu Out
Slide 9: China apparent consumption of refined copper
China’s apparent consumption of refined copper now 3% higher year-on-year for Jan-Oct 06. Demand growth has re-accelerated since middle of 2006. ‘000 tonnes Cu Monthly Chinese apparent refined copper demand 350 300 250 200 150 100 50 0 An increase in stocks is taken off consumption, whilst a fall is
Slide 10: Chinese semi-fabricator capacity expansion
Chinese semi-fabricators expected to bring on close to 3m tpy of capacity by end of 2008 ‘000 tonnes 2000 1500 SSP Brass Rod 1000 Wirerod Tube 500 0 2006 2007 2008 Data: CRU
Slide 11: SFE-LME arb has recovered
The arb – difference between SFE price and equivalent LME price - has recovered in past three months. Imports lag by about two to three months. $/tonne 100 -100 -300 The Thearb arbisiscalculated calculatedbybytaking takingcash cashLME LMEand andadding adding2%2%duty duty -500 and andthen then17%17%V
Slide 12: Exchange stocks of refined copper at low levels
Exchange stocks of reined copper have risen from lows in mid-2005 but still are at very low levels LME 3-month copper price – US$/tonne Copper stocks – ‘000 tonnes 8000 800 700 7000 600 LME LME3-month 3-month 6000 copper copperprice price 500 5000 400 SH FE 300 4000 Co me 200 x 3000 100 LME 2000 0 J
Slide 13: Spot premia in Europe and China
Spot premia in Europe have weakened (seasonality?), but in China they have strengthened US$/tonne - nom inal 160 Codelco Annual - 140 Europe 120 100 Codelco Annual - Spot Shanghai Taiwan 80 Spot Europe 60 40 20 0 J- M M J S N J- M M J S N J- M M J S N J- M M J S N J- M M J S N J- M M 02 03 04 05 06
Slide 14: Results of Network Substitution Survey
RESULTS OF NETWORK SUBSTITUTION SURVEY Threat of substitution: high medium low Application and share of Substitution threat Cu demand (100% = 13.9Mt) 2005 assessment (CRU, March 06) 2006 survey (ICA, May- June 2006) 2005 à 2006 Building wire • No significant evidence • Low and stable level of substi
Slide 15: Cathode book will double from 2005 to 2008
With addition of OD, Escondida expansion and Spence, cathode book will double from CY 2005 to 2008 Cathode sales - tonnes 1,000,000 Third party 900,000 Spence 800,000 Olympic Dam Tintaya 700,000 Cerro Colorado 600,000 Escondida 500,000 400,000 300,000 200,000 100,000 0 2003 2004 2005 2006 2007 2008
Slide 16: Geographical split
Geographical split Customers by Region 100% 90% Australia 80% SE Asia NE Asia 70% China 60% South America 50% US East Coast/Canada US Gulf (incl Mex) 40% Eastern Med / Middle East 30% Southern Europe 20% Northern Europe 10% 0% 2001 2004 2007 Data: BHP Billiton Numbers are total cathode marketed and
Slide 17: Our Geographical Coverage - Equity
Our Geographical Coverage - Equity
Slide 18: Contract terms less volatile than spot terms
Contract terms have historically been less volatile than spot terms and current contract reflect renewed tightness in the market World Cu concentrate market balance Quarterly average spot and contract TC/RCs Balance – ‘000 tonnes TC/RC – Nominal Cents/lb 500 50 400 45 40 300 35 200 30 100 Contract 2
Slide 19: Concentrate Update
Concentrate Update • Structural smelting overcapacity due to recent significant expansions (China/India but others as well) • Exacerbated by chronic mine underperformance • 2004 and (to a lesser extent) 2005 were soft years for miners (TC/RC’s) but the tables turned in 2006 and the next few years lo
Slide 20: Copper Market Summary
Copper Market Summary • Market has moved back closer to balance but with stocks low is very vulnerable to supply disruptions • Risk of disruptions remains higher than normal due to equipment, energy, water shortages • More new projects in coming years are in riskier countries and resource nationalis
Slide 21: Uranium Marketing
Uranium Marketing John Crofts Marketing Director Base Metals 14 December 2006
Slide 22: Uranium supply and demand: historical look
Supply and demand: historical look 1985-2003 1970-1984 Inventory liquidation era 90 1945-1969 Commercial inventory Commercial Commercial UU Weapons procurement era accumulation demand demand 80 70 Production ('000 t U3O8) 60 50 40 30 Others FSU + China (est) 20 10 USA Canada Australia 0 1945 1950 19
Slide 23: Uranium spot price: historical look
Uranium spot price: historical look US US embargo embargo Government GovernmentFloor Floor Prices: Prices: 1959 1959 -- 1974 1974 Australia Australia 1980-89 1980-89 US$30/lb US$30/lb 160 1998: 1998: USEC USEC privatization privatization 140 –– sale sale of ofgov. gov.stocks stocks 120 Russian Russi
Slide 24: Uranium supply and demand: outlook
Supply and demand: outlook 160 Requirements Other secondary supplies Tails re-enrichment HEU (WNA upper Continued growth in Russia & East Asia case) 140 HEU deal ends 2013 y Requirements 120 il le db be f oje c ts (WNA reference Inventory reduction To pr new case) ('000 t U 3O8) 100 Secondary suppli
Slide 25: Nuclear growth will be especially strong in Asia
Nuclear growth will be especially strong in Asia Under construction - 27 Planned – > 80 Operational - 441 Source: WNA, International Nuclear Safety Center
Slide 26: Nuclear share of electricity supply by country
Nuclear plays an important role in supplying electricity to many industrialised countries France 78% Belgium 55% Sweden 52% Ukraine 51% Switzerland 40% Korea 38% Germany 32% Japan 29% Finland 27% Spain 23% USA 20% UK 19% Russia 16% Canada 15% India 3% China 2% World 16% 0% 20% 40% 60% 80% 100% Sourc
Slide 27: BHP Billiton uranium customer base
BHP Billiton uranium customer base WNA Forecast to 2030: (Upper case) 80,000 Current BHP Billiton sales split by volume 70,000 60,000 ('000 t U3O8) 50,000 40,000 30,000 20,000 Europe & 10,000 Russia Asia 0 36% 30% 2005 2010 2015 2020 2025 2030 Asia Europe North America North America 2005 - 2030 34%
Slide 28: Olympic Dam will fuel the nuclear renaissance
Olympic Dam will play a significant role fuelling the nuclear renaissance Top 20 known uranium resources 1,800 World known recoverable resources 1,600 Resource ('000 t U3O8) 1,400 Operating Construction 1,200 Olympic Undeveloped World, 62% Dam, 38% 1,000 800 600 400 200 0 Streltsovskoye Elkonsky Bud
Slide 29: Uranium contracting and industry trends
Uranium contracting and industry trends Security Securityofofsupply supply concerns concerns havehave increased increased 140 contracting contracting activity activity inin spot spotand and long long term term market market 120 100 ('000 t U3O8) 80 Spot Term Spot market 60 • Consumers, producers and
Slide 30: BHP Billiton uranium marketing
BHP Billiton uranium marketing • BHP Billiton is currently in negotiations with customers for post OD expansion uranium sales contracts. • BHP Billiton is negotiating contracts with the following terms and conditions: – Volumes are conditional upon the Olympic Dam project expansion – Floating price
Slide 31: Uranium market - summary
Uranium market - summary • Market remains tight in the near term: – Production delays have shifted some supply out farther – Demand is poised to grow with many countries embarking on massive nuclear expansion plans. – Many utilities are now buying uranium for their initial fuel cores putting additio
Slide 32: Olympic Dam Expansion Project
Olympic Dam Expansion Project Roger J Higgins Vice President and Chief Operating Officer 14 December 2006
Slide 33: Base Metals Australia
Base Metals Australia Base Metals Australia was established following the acquisition of Olympic Dam • Regional Office located in Adelaide replacing activities in WMC Melbourne and Adelaide offices. Sharing the same building as BHP Billiton Shared Services and enjoying synergies • Responsible for :
Slide 34: Agenda
Agenda • Expansion Potential • Pre-Feasibility work • Major components • Expansion Schedule • Government approvals • Community issues • Conclusion
Slide 35: Olympic Dam
Olympic Dam • World-class copper-uranium-gold-silver mineral resource. • 34% of world’s uranium reserves. • BHP Billiton ideally placed to meet increasing demand for uranium. • Increased global demand and reducing secondary supplies provide excellent opportunity for Olympic Dam to fill supply gap ‘0
Slide 36: Olympic Dam Expansion Potential
Olympic Dam Expansion Potential • Mineral resource – 4,430 million tonnes at 1.1% copper, 0.4 kilograms/tonne uranium and 0.5 grams/tonne gold • Resource at time of acquisition – 3,970 million tonnes at 1.1% copper, 0.4 kilograms/tonne uranium and 0.4 grams/tonne gold. • Drilling program continuing
Slide 37: June 06 Resource
June 06 Resource 1% Cu Grade Shell 400ppm U308 Grade Shell
Slide 38: Expansion Pre-Feasibility Work
Olympic Dam Expansion – Pre-Feasibility Work • High level front-end loading and risk assessment • Ore resource delineation • Mine planning – open pit preferred option • Ore processing options • Major infrastructure (water, power, rail, township expansion) in a remote and arid area
Slide 39: Expansion Major Components 2009-2013
Olympic Dam Expansion – Major Components – 2009 - 2013 • Open pit mine – 350 million tonnes per year • New ore processing plant – 4 times capacity of existing • New 90 km rail line, Olympic Dam to Pimba • New electricity transmission line – 270 km • New airport with 737 jet and night flying capacity
Slide 40: Olympic Dam Expansion Schedule
Olympic Dam – Expansion Schedule • Pre-Feasibility tollgate – Q2 2008 • Feasibility tollgate – Q2 2009 • Execution Phase – 2009 – 2013 • Operation of Expanded Facilities – ramp up from end 2013 into 2015
Slide 41: Expansion Government Approvals
Olympic Dam Expansion – Government Approvals • Environmental Impact Statement published in 2007 – to seek approvals from Federal and South Australian Governments – extensive public consultation already underway • Indenture Agreement with South Australian Government – sets regulatory regime and provi
Slide 42: Expansion Community Issues
Olympic Dam Expansion – Community Issues • Aboriginal Native Title and Heritage issues • Life of Mine land access agreement being negotiated • Community benefits for Aboriginal communities including education, training, employment, health, aged care and community capacity building • Product Stewards
Slide 43: Olympic Dam Expansion Summary
Olympic Dam Expansion Summary Current Proposed (est.) Mine Production Ore 10m tonnes Ore 40m tonnes (per year) Copper 200,000 tonnes Copper 500,000 tonnes Uranium 4,500 tonnes Uranium 15,000 tonnes Gold 80,000 ounces Gold 500,000 ounces Silver 800,000 ounces Silver 2,900,000 ounces Energy 120 MW fro
Slide 44: Expansion Conclusion
Olympic Dam Expansion- Conclusion • Successful execution will transform this world class orebody into a world class mining and mineral processing operation • We may be conducting the largest Pre Feasibility plus Feasibility study undertaken in mining industry • Required by scale and complexity of pr
Slide 45: Olympic Dam
Olympic Dam Dean Dalla Valle Asset Leader Olympic Dam 14 December 2006
Slide 46: Location – Olympic Dam South Australia
Location – Olympic Dam South Australia After Key statistics Current Expansion Permanent Jobs 3,000 4,000 Indirect Jobs (Industry multiplier 1:5) 15,000 20,000 Exports (% of total annual SA exports by value) 12% 15% Gross State Product (pa) US$1.3b ~US$3.3b Royalties (3.5% of gross) (pa to SA Governm
Slide 47: Olympic Dam 1.6 billion years ago
Olympic Dam 1.6 billion years ago Schematic Paleogeographic Reconstruction Showing Possible Environment of Olympic Dam Mineralisation Lake } Gawler Range Volcanics Felsic Mafic Olympic Dam Deposit Early Proterozoic deformed granitoids and meta-sediments Roxby Downs Granite Late stage granitoid (?) M
Slide 48: Geology
Geology • 6th largest copper deposit • Largest uranium deposit
Slide 49: Mineralogy of ore mined FY07 YTD
Overall calculated mineralogy of the ore mined from the underground stopes for FY07 YTD (1 Jul -28 Nov 06) Mined stope ore mineralogy FY07 YTD (July-November) % barite, 0.9 hematite, 34.8 % fluorite, 2.8 % bornite, 1.65 % siderite, 0.6 sulphides, 3.8 % chalcocite, 0.17 % quartz, 21.5 % pyrite, 0.06
Slide 50: Production
a STOPES IN PRODUCTION FOR FY2007 DEVELOPMENT SHOWN IS ONLY PART OF TOTAL UNDERGROUND DEVELOPMENT "4 ROBINSON SHAFT pecunee ETN ew g SIR LINDESAY CLARK SHAFT WHENAN SHAFT sue 326 uve s08 Scanter 346 OLYMPIC DAM Snowe ars cuve sre Scanuat see UNDERGROUND MINE ~ 1] evan ast naman a0 rere ODM-ADM-241 F
Slide 51: A Complex Operation
A Complex Operation PRIMARY Olympic Dam Corporation Ore Processing Flow Diagram Orage Ponds Counter Sorte copper Extemctton Bkuacton Fasrremce rormeces Stew wreriey : Packaging Trans, de bhphilliton
Slide 52: Road to Zero Harm
Road to Zero Harm To provide a workplace where it is possible to work without adverse impact on people, the Plant and Systems environment or the Equipment, community Workplace Charter Conditions HSEC Policy Procedures/ Leadership Zero Zero Harm Harm Practices Future State Principle To develop our pe
Slide 53: Total Recordable Injury Frequency Rate
Total Recordable Injury Frequency Rate – Olympic Dam
Slide 54: The Journey to Zero Harm Continues - The Big Five
The Journey to Zero Harm Continues - The Big Five 2006 / 2007 • BHP Billiton Health Safety Environment Community (HSEC) Management Standards Implementation – Gap Analysis and Action Plans developed. S curve being developed • BHP Billiton Fatal Risk Control Protocols (FRCP) Implementation – Gap Analy
Slide 55: Olympic Dam – So What's New
Olympic Dam – So What’s New • Safety Improvement • Goal Alignment • Mine development and production drilling at 10mtpa rate (MOS) • Optimise Throughput • Long Term Planning • LoM Version 1 • Smelter Shut (Incl IR) • Commenced demolition • Management of USX • Accommodation and Camps Upgrade • Recruit
Slide 56: Current Challenges
Current Challenges The Issue The Answer Status • Mine bottleneck to be site output • Underground Development • Complete • Depleted underground accessible ore • Stope Production Drilling • Complete • Blasting • Underway / Improving • People • Build the right team to take • Well advanced Olympic Dam f
Slide 57: Mine underground stocks
Mine underground stocks (Jan 05 – Oct 06) Mine Stock levels (Mt) 12 10 Broken Stocks 8 6 Drilled for Blasting Partially Drilled 4 Current Dev'd for Drilling 2 Current Partially Dev'd 0 Jun 05 Sep 05 Jun 06 Jul 06 Jan 05 Feb 05 Ma y 05 Jul 05 Aug 05 Nov 05 Jan 06 Feb 06 Sep 06 Mar 05 Apr 05 Oct 05 De
Slide 58: Underground Operation, Long hole open stope mining
Underground Operation, Long hole open stope mining
Slide 59: How big is BIG?
How big is BIG? Our largest stope is about 75% of the Chrysler Building size 260m to viewing platform The tallest stope to be mined this year will be Cyan355: 242m
Slide 60: Olympic Dam Performance
Olympic Dam Performance Paul Dunn Vice President Finance Olympic Dam 14 December 2006
Slide 61: What's Changed?
Whats Changed? • Asset based accountability – Asset accountable for results and self-sufficient in key services (EBIT Model) • Alignment with other BHP Billiton Base Metals assets • marketing reflects portfolio approach • policies and procedures aligned • Movement of service functions (Finance, IT,
Slide 62: Olympic Dam Historical EBIT
Olympic Dam - Historical EBIT 650 Olympic Dam EBIT 550 450 350 USD $m 250 150 50 -50 CY01 CY02 CY03 CY04 FY05 FY06
Slide 63: Financial Outcomes
Financial Outcomes Basis of Accounting Sensitivity to … (USUS$M) FY06 different to WMC Exchange rate: reporting results: Revenue 1,408 AUD/USD +/- 1c will result in US$8.9M change in EBIT EBITDA 741 • Inventory Valuation Cu Price: +/- 1 Cent Depn & Amortisation 196 (US) will result in • Accounting P
Slide 64: Olympic Dam Historical Head Grade
Olympic Dam Historical Head Grade 2.6 2.52 2.49 1.0 2.45 2.44 2.4 Copper (Cu) 2.27 2.23 2.18 2.22 2.2 Uranium (U3O8) 2.14 0.72 0.67 0.64 0.71 0.61 Au (g/t), Cu/S (ratio) 0.61 Cu (%), U3O8 (kg/t) 2.03 2.0 1.90 1.84 1.83 0.57 0.56 1.8 0.55 0.44 0.5 0.51 0.48 0.46 0.44 1.6 1.58 Gold (Au) 1.4 Copper Sul
Slide 65: Historical Production
Historical Production 240 5 220 200 4 Copper 180 UOC Packed ('000t) Copper ('000t) 160 UOC Packed 3 140 Fire Fireat atOD ODSolvent Solvent Initial InitialOD OD(OEP) 120 (OEP) Expansion Extraction ExtractionPlant Plant 2 Expansion 100 80 1 1999 2000 2001 2002 2003 2004 2005 2006 Financial Year
Slide 66: 2006 Ore Resource & Reserve Declaration
2006 Ore Resource & Reserve Declaration Olympic Dam – 2006 Ore resource and Reserve Tonnes Cu U3O8 kg/t Au Ag Cu Million % g/t g/t Equiv % Resources (inclusive of Ore reserves) Measured 680 1.5 0.5 0.5 3.1 2.5 Indicated 1,360 1.1 0.4 0.4 2.4 1.9 Inferred 2,390 0.9 0.3 0.5 1.9 1.6 Total 4,430 1.1 0.4
Slide 67: Cost Structure – FY06
Cost Structure – FY06 Other Salaries & Wages Total Cash Costs US$713Mill 6% 18% Admin 18% Fixed Variable Split (excl: TPPs) 60:40 Key Value Drivers Contractors 19% • Volume Maintenance • Recoveries 16% • Cost Reduction Energy & Utilities Operating 8% Supplies • Business Excellence Projects
Slide 68: Input Cost Pressures
Input Cost Pressures Contractors Salaries & Wages 200% 30% * 200% 180% 180% 160% 160% 14% * 140% 140% 120% 120% 100% 100% 80% 80% 60% 60% 40% 40% 20% 20% 0% 0% FY 2004 FY 2005 FY 2006 FY 2004 FY 2005 FY 2006 Operating Supplies Maintenance 200% 200% 180% 17% * 180% 10% * 160% 160% 140% 140% 120% 120%
Slide 69: Cost Reduction & Revenue Increase offsetting cost pressures
Cost Reduction & Revenue Increase offsetting current cost pressures • Short Term – Margin Improvement Program - Jul/06 to Jun/07 – Prioritisation and Implementation with rigorous discipline – Value driver trees analysis – Results and Actions Review Meetings with Managers and VPs – Benefits Capturing
Slide 70: Business Improvements – Project examples
Business Improvements – Project examples • Revenue Increasing – Uranium Extraction Improvement – Revert Slag Smelting – Once off redundant equipment/material sales • Cost Reduction – Reduction of light vehicle hire (US$456k/annum) – Reduced maintenance cost through centralised planning & scheduling
Slide 71: 2007 Major Capital Projects
2007 Major Capital Projects • Smelter – major maintenance works • Housing – release of land, additional camp rooms • Tanks – refurbishment • Raisebores – Support of 5 year mine plan • MP & D