BHP Billiton Base Metals - Investor Presentation June 2007
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BHP Billiton Base Metals Investor Presentation June 2007
Disclaimer The views expressed here 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 has been prepared on the basis of a number of assumptions which may prove to be incorrect. This presentation should not be relied upon as a recommendation or forecast by BHP Billiton. Nothing in this release should be construed as either an offer to sell or a solicitation of an offer to buy or sell shares in any jurisdiction. BHP Billiton results are reported under International Financial Reporting Standards (IFRS). References to Underlying EBIT and EBITDA exclude net finance costs and taxation for jointly controlled entities, and exceptional items. All references to dollars are to US dollars. Slide 2
Base Metals Global Footprint
Antamina 33.75%
Operatio ns
Projects
Offices
Marketing
Cerro Colorado
Spence Escondida 57.5% Olympic Dam Cannington
Slide 3
Base Metals - Vision
To create value for our stakeholders through being the pre-eminent base
metals supplier.
Pre-eminent means:
– Zero Harm embedded, an industry leading Health, Safety, Environment and
Community performance
– Sustained superior financial returns
– A great workforce
– World-class operating practices in cost, production and marketing
– New technologies that provide a competitive advantage
– A portfolio of high-quality, long-life mining assets with a global pipeline of
exploration targets and new projects under development
– The respect and cooperation of our customers, business partners and
communities
Slide 4
Base Metals - Strategic Focus
Olympic Dam, Resolution, Exploration Sulphide Leach,
Spence
Leading BHP Billiton CSG Growth
in terms of Business Options
Excellence savings First half operating
margins of 62% and
Project Pipeline EBIT of over US$2.9B
Numerous Financial Strength
awards and Discipline Largest copper mine
and recognition and largest silver mine
for community, The BHP Billiton Way
(Value Added Processes) in the world
safety and
environment
World Class Assets 27,000 employees,
operations and
project contractors
‘Licence to Operate’ (incl. Antamina)
People
Slide 5Slide 6
0.0
2.1
4.2
6.3
8.4
10.5
12.7
Ju
n-0
4
3.06
Ju
5.51
l- 04
Au
g -0
4
Se
p -0
4
Oc
t- 0
4
No
v-0
De 4
c-0
4
Jan
-0 5
Fe
b- 0
Ma 5
r-0
Ap 5
r -0
5
Base Metals - Safety
Ma
y- 0
5
Ju
n-0
5
2.70
4.33
Jul
- 05
Au
g -0
5
Se
12 MRA TRIFR BM TOTAL
2005
p -0
5
Oc
Olympic Dam
t- 0
5
No
starts reporting July
v-0
5
De
c-0
5
Ja
n-0
Fe 6
b- 0
6
Ma
r-0
6
Ap
r -0
6
12 MRA CIFR BM TOTA L
Ma
y- 0
6
Ju
Safe ty P erformance TRIFR & CIFR 12 M/Roll ing
n-0
6
5.13
6.78
Ju
l- 0
Au 6
g -0
6
Se
p -0
6
Oc
t- 0
2006
No 6
v-0
Tintaya ends
6
reporting June
De
c-0
6
Ja
n-0
Fe 7
b- 0
7
Ma
r-0
Ap 7
r -0
7
4.41
6.65Base Metals - A key contributor to total Underlying EBIT
Half year ended December (US$M) 2006 2005% %
Change
Change
Petroleum 1,612 1,436 +12
Aluminium 840 406 +107
Base Metals 2,905 1,893 +54
Diamonds & Specialty Products 105 261 -60
Stainless Steel Materials 1,436 374 +284
Iron Ore 1,406 1,243 +13
Manganese 105 85 +24
Metallurgical Coal 659 947 -30
Energy Coal 243 205 +19
Group & Unallocated Items (1) (177) (179)
BHP Billiton (Total) 9,134 6,671 +37
(1) Includes Exploration & Technology
Slide 7Base Metals – Overview
• Market demand remains healthy while stocks continue at low levels
• Particularly susceptible to supply disruptions
• TC/RC softened as the concentrate market moved into deficit
• Escondida delivering exceptional returns
• Commissioning of Spence and Sulphide Leach delivered production growth at the right time
• Cannington rehabilitation program complete and back to full production
• Olympic Dam focusing on lifting mine production while understanding the full potential of this
world class resource
• Cerro Colorado production improvement impacted in short term by clay content in ore
• Power and Water availability in Northern Chile will remain critical
• Continue to develop long term growth options through targeted exploration
Slide 8Base Metals- China a key driver of global copper demand
kt
18,000
China 22%
15,000
USA 13%
12,000 10% India
21% Japan
9,000
Europe
6,000
3,000 Other
0
1996 2006
Source: CRU, Brook Hunt, BP Statistical Review, IISI, BHP Billiton
Slide 9Base Metals - China copper consumption growth set to continue
following the path of other developed economies
Copper Intensity per Capita
USA (1878-2005)
30.0
Japan (1950-2005)
S. Korea (1970-2005)
25.0 Germany (1950-2005)
Taiwan (1970-2005)
China (1950-2005)
Kg Copper/Capita
20.0 India (2005)
15.0
10kg x 1.4 billion = 14 Mt
10.0
5.0
China’s GDP (PPP) is expected to reach
US$15,000 per capita around 2015
0.0
0 5000 10000 15000 20000 25000 30000 35000 40000 45000
GDP/Capita (PPP, Jan. 2006 US$'000)
Source: World Bank, OECD (GDP at Purchasing Power Parity), CRU
Slide 10Escondida
• The largest single copper mine in the 800
Escondida Copper Production (BHPBilliton Share 57.5%)
world 700 Cathode
600 Concentrate
• EBIT in H1 FY07 of US$ 1,774
000 tonnes
500
million (BHP Billiton share) 400
300
• Two pits feeding two concentrators 200
• Two leaching operations : oxide heap
100
0
leach and bacterial assisted sulphide FY02 FY03 FY04 FY05 FY06 FY07
March YTD
leach
• Sulphide Leach ramping up to full
production after start up in H1 FY07
• Labour negotiations concluded in
CY2006
• Bidding process for long term power
requirements
• Growth options
Slide 11Cannington
• The largest single Silver producer in 60
Cannington Production
the world Silver
million ounces silver
50
• EBIT in H1 FY07 of US$ 198 million 40
30
• Rehabilitation of ground support
20
program was undertaken in FY06 - 10
FY07 and is now complete 0
• The mine is better positioned post - FY02 FY03 FY04 FY05 FY06 FY07
March YTD
rehabilitation to maintain production,
offsetting natural grade decline
Slide 12Cerro Colorado
Cerro Colorado Copper Production
• Combined oxide-sulphide leach 140
operation 120
100
000 tonnes
• EBIT in H1 FY07 of US$ 255 million 80
60
• Current mine plan sees production 40
through 2016 20
0
• Work continues evaluating the FY02 FY03 FY04 FY05 FY06 FY07
March YTD
extent of a hypogene resource and
other development option to extend
life of mine
• Production improvement in the shor t
term impacted by high clay content
in ore
Slide 13Antamina
• JV with 33.75% BHP Billiton Antamina Production (BHP Billiton Share 33.75%)
140
ownership. 120 Copper
• EBIT in H1 FY07 of US$ 387 100
Zinc
000 tonnes
million (BHP Billiton share) 80
60
• Plant consistently exceeding 40
design throughput 20
• Voluntary Contribution Fund for 0
FY02 FY03 FY04 FY05 FY06 FY07
community assistance established March YTD
in FY07
Slide 14Spence
Spence Copper Production Ramp-Up (Annualized)
• Greenfield mine development at
250
Sierra Gorda in Northern Chile 200
• Successfully completed on time and
000 Tonnes
150
on budget 100
• First cathode produced in Dec 2006 50
and in ramp up to full production -
Jun-2007 Dec-2007 Dec-2008
• FY07 copper production 80 - 85 k
tonnes
Administration Building
Slide 15Olympic Dam
Olympic Dam Copper Production
• World class mineral resource is the largest 250
WMC BHPB
known Uranium mineral deposit and sixth 200
largest Copper deposit
000 ton nes
150
• EBIT in H1 FY07 of US$ 360 million 100
• Mine is critical path constraining production 50
before major expansion
0
• Uranium leaching circuit reliability and FY 02 FY03 FY04 FY 05 FY06 FY07
March YTD
recovery improvements underway
• WMC fixed price for majority of Uranium
production through FY 2010
• OD Expansion project Pre-feasibility
ongoing
• Current resource supports a >50 year mine
life at increased rate
• Operation of expanded facilities – ramp up
from end 2013 to 2015
Slide 16Why is Olympic Dam so valuable?
US$ Gross average revenue per tonne of resource
120
100
Molybdenum
80
Zinc
Silver
60 Gold
Uranium
40 Copper
20
0
Escondida Antamina Olympic Dam
a) Resources, metal grades and recover rates obtained from the
FY2006 Annual Report (except for Moly).
b) Moly recovery rates for Antamina provided by Base Metals.
Slide 17 c) Prices as at 31 Jan as per Financial times and Global InfoMine.Nuclear growth will be especially strong in Asia
Under construction - 27 Planned – > 80 Operational - 441
Mtoe
Slide 18Base Metals – Power in Northern Chile
Considering the gas fired power generation installed in the SING and the uncertainty in the
natural gas supply, Base Metals is working to ensure electricity supply at the lowest possible
cost :
Interim Solution (2007-2010):
Running pre-feasibility studies for different alternatives:
• Self generation (Local Diesel Generators)
• On Shore LNG Terminal (Regasification On Shore & Floating Storage)
• Off Shore LNG Terminal (FSRU - Floating Storage Regasification Unit)
Long-term Power Supply (2010-2026):
Subscribe Power Purchase Agreements with power generation companies based in coal
fired generation.
The agreements involve the construction and operation of a coal fired thermoelectric plant of
at least 400 MW connected to the SING.
Slide 19SING Generation in the near future (2006 – 2010).
Power MW
Installed
3000 --
Generation
GAS
3,600 MW GAS 2,100 MW
2,100 MW
Gas or
Diesel
2000 -- generation Dual-Diesel
needs
800 MWmax
D-FO
Diesel- FO 300 MW
300 MW
BHPB
1 1 1 2100
2,120 MW
1000 -- 7 8 9 New Coal
SING MW
Without 5 5 5
Demand Gas COAL Plant
0 0 0
1,650 MW COAL 1,600 MW
M M M
1,200 MW W W W
Slide 20 2006 2010
2007 2008 2009Base Metals – Water in Northern Chile
• Water is a scarce resource in Northern Chile
• Availability of new underground water is increasingly limited
• Environmental sensitivity is increasing
• Learning curve on technical environmental management and policies of the topic
• However, BHP Billiton is well positioned :
– Management of current resources (recovery, reutilization, consumption
reduction)
– Carefully monitoring the impacts of underground extraction
– Developed desalination alternative (expandable)
– Looking for new underground resources (i.e. Pampa Colorada)
Slide 21Summary
• Consistent execution of strategy
• Delivering increase volumes
• Record results
• With a portfolio than can perform in a low price environment and deliver exceptional
returns at times of high prices
• Growth potential through development of world class resources
• Demand outlook remains positive
• Inventories low and supply constrained
Slide 22Appendix Slide 23
Base Metals Refined Copper Market
2007 mixed views, surplus beyond that
Balance - '000 tonnes Brook Hunt - July 2006
1000 Brook Hunt - Oct 2006
Brook Hunt - Feb 2007
800 CRU - July 2006
CRU - Oct 2006
CRU - Feb 2007
600
400
200
0
-200
-400
2006 2007 2008 2009
Data: CRU, BHExchange stocks of refined copper have risen from lows
but are still at very low levels
LME 3-month copper price – US$/tonne Copper stocks – ‘000 tonnes
8000 800
7600
7200 700
6800
6400 600
6000
500
5600
5200
400
4800
4400
300
4000
3600 200
3200 SHFE
2800
Comex
100
2400 LME
2000 0
J- F M A M J J A S O N D J- F M A M J J A S O N D J- F M A M J J A S O N D J F
04 05 06
Data: LM E, Comex, SHFERefined Copper Market Summary
• Market is moving from deficit to a modest surplus but remains very vulnerable to
supply disruptions and problematic ramp-up of new production
• Current view is still very positive for refined demand
– Growth in China, SE Asia, CIS, Middle East, India
– World is becoming ever more electrified
• Scrap market now tight again as per 12-15 months ago, bare bright scrap trading a
premium over the exchange prices again. Refiners forced to buy cathode instead as
scrap supplies too tight.
Slide 27Base Metals Copper Concentrate Market
Contract terms have historically been less volatile than spot terms -
current contracts reflect renewed tightness in the market
World Cu concentrate market gap Quarterly average spot and contract TC/RCs
Theoretical balance – ‘000 tonnes TC/RC – Nominal Cents/lb
500 50
World Balance - BHPB Mar 2007
400 45
Spot TC/RC
300 40 Contract TC/RC/PP
200 35
100 30
25
0
20
-100
15
-200
10
-300
5
-400
0
Q1-92
Q3
Q1-93
Q3
Q1-94
Q3
Q1-95
Q3
Q1-96
Q3
Q1-97
Q3
Q1-98
Q3
Q1-99
Q3
Q1-00
Q3
Q1-01
Q3
Q1-02
Q3
Q1-03
Q3
Q1-04
Q3
Q1-05
Q3
Q1-06
Q3
Q1-07
-500
2003 2004 2005 2006 2007 2008 2009
Note: Contract terms show annual and mid-year settlements. Mid-years in 2006 had capped PP and
2007 annuals do not have PP. Data: BHP Billiton, CRU, BHConcentrate 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
look very tight
• Commercial terms reflect this
– CY06 - $95/dmt and 9.5 c/lb with uncapped PP basis 90 cents
– MY06/07 - $60/dmt and 6 c/lb with PP capped at 6 c/lb (120-180 c/lb)
– CY07 - $60/dmt and 6 c/lb – no PP
– MY07/08 – to be negotiated starting May 07
• At $2.75/lb copper, the delta between CY06 and CY07 terms is
almost 27 c/lb (at 34% Escondida grade)Concentrate Update (continued)
• Theoretical concentrate deficit for the next two to three years is
greater than what can practically transpire (insufficient stocks left to
satisfy the deficit)
• But it continues to be a dynamic market …
600
400
200
0
- 200
World Ba lance - BHPB De c 2 0, 200 4
- 400 World Ba lance - BHPB Mar ch 9, 2005
World Ba lance - BHPB J une 30, 20 05
World Ba lance - BHPB Se pt 15th 2005
- 600
World Ba lance - BHPB Nov 23rd 2005
World Ba lance - BHPB May 8, 2006
- 800 World Ba lance - BHPB Se pt 25, 2 006
World Ba lance - BHPB Mar ch 15, 2007
-1000
2004 2005 2006 2007 2008 2009
• We expect some volatility but upside to TC/RC’s should be limitedBase Metals Uranium Market
Supply and demand: historical look
1985-2003
1970-1984
Inventory liquidation era
Commercial inventory
1945-1969 accumulation
90 Weapons procurement era
80
FSU + China (est)
70
Others
60
Production ('000 t U3O8)
USA
50 Canada
40 Australia
Commercial U demand
30
20
10
0
1945
1950
1955
1960
1965
1970
1975
1980
1985
1990
1995
2000
2005
Source: WNA, UxC
Slide 33Uranium spot price: historical look
Government Floor Prices:
US embargo Australia 1980-89 US$30/lb
160 1998: USEC privatization
1959 - 1974 – sale of gov. stocks
140
120 Russian U3O8 import
through Nuexco
US $/lb U3O8
(2005 real $)
100 Supply disruptions and
long term supply
80 concerns
60
1994: HEU I Deal
Energy
40
Crisis
20
0
70
72
74
76
78
80
82
84
86
88
90
92
94
96
98
00
02
04
06
19
19
19
19
19
19
19
19
19
19
19
19
19
19
19
20
20
20
20
Slide 34Source: BHPB, UxC, WNASupply 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
supplies
80
Rossing offici al closure 2016 (could be extended)
60
Olympic Dam expansion 2013 / 2014 (revised WNA – 2010) Primary
production
40 Kazakhstan expansion
Cigar Lake development (delayed from WNA – 2007)
20
Rabbit Lake & McCl ean Lake closures 2008
0
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
Slide 35 Source: WNA, BHPBNuclear 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%
Slide 36 Source: WNA; UxC, Tradetech, AbareOlympic Dam will play a significant role fuelling the
nuclear renaissance
Top 20 known uranium resources
1,800 World known recoverable resources
1,600
1,400
Resource ('000 t U3O8)
1,200 Operating Olympic
World, 62% Dam, 38%
Construction
1,000
Unde veloped
800
600
400
200
0
Streltsovskoye
McClean Lake
Kharassan
Elkonsky
Zarechnoye
Lagoa Real
Budenovskoe
Jabiluka
Cigar Lake
Rabbit Lake
Olympic Dam
Itataia
Mynkuduk
Rossing
Imouraren
Kanzhugan
McArthur River
Ranger
Inkai
Dominion
Slide 37 Source: Company annual reports, IBR, NACUranium 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
additional strain on near term requirements
– Security of supply concerns and new reactors build lead to increased
inventory builds
• Term market is very active as utilities look to secure their forward uranium
requirements
• Continued interest from hedge funds and investors
• Increased exploration activity worldwide especially in Australia, Canada and
Kazakhstan
• Our current view of the uranium market remains positive
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