BHP Billiton Aluminium. Presentation to the Investment Community November 2005

Transcription

1 BHP Billiton Aluminium Presentation to the Investment Community November 2005

2 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 has been prepared on the basis of a number of assumptions which may prove to be incorrect. This presentation must not be relied upon as a recommendation or forecast by BHP Billiton. Page 2

3 Agenda Topic Overview Strategy Marketing Operations Technical Finance Summary Presenter Alex Vanselow Rod Kinkead-Weekes Julius Matthys Xolani Mkhwanazi Ian Jacobson Vince Nicoletti Alex Vanselow Position President Aluminium VP Strategy Aluminium Marketing Director Aluminium COO Southern Africa Aluminium VP Technical Aluminium CFO Aluminium President Aluminium Page 3

4 Setting the Context Sustainable perspective Portfolio of quality operations and people Value growth Future options Page 4

5 Sustainability CIFR 12MMA BHP Billiton Aluminium CSG FY02 FY03 FY04 FY05 Safety Felt leadership Behavioural Based Safety Community Health Environment Page 5

6 Aluminium CSG FY05 Equity Production Alumar 495kt Suriname 874kt Suriname 2,022kt MRN 2,338kt Alumar 176kt Valesul 43kt Mozal 260kt Hillside 685kt Bayside 166kt Worsley 2,813kt Boddington 9,890kt Bauxite Mines Refineries Smelters Page 6

7 Setting Production Records in FY05 Alumar 495kt Suriname 874kt Suriname 2,022kt MRN 2,338kt Alumar 176kt Valesul 43kt Mozal 260kt Hillside 685kt Bayside 166kt Worsley 2,813kt Boddington 9,890kt Bauxite Mines Refineries Smelters Page 7

8 Delivering Value 500 (Indexed to 100 Base FY95) FY95 FY96 FY97 FY98 FY99 FY00 FY01 FY02 FY03 FY04 FY05 BHP Billiton Aluminium Production BHP Billiton Alumina Production BHP Billiton Aluminium EBIT LME Price BHP Billiton Aluminium Turnover Page 8

9 Aluminium Growth Projects B R O W N F I E L D Alumar Worsley E&G Bauxite Alumina Aluminium Worsley DCP Mozal 3 High Amps Suriname Successor Mines Suriname Next Generation Mines CY Size of bubble indicates capital expenditure; bold border signifies sanctioned project $US 100M Refining Options Smelting Options Page 9 G R E E N F I E L D

10 Agenda Topic Overview Strategy Marketing Operations Technical Finance Summary Presenter Alex Vanselow Rod Kinkead-Weekes Julius Matthys Xolani Mkhwanazi Ian Jacobson Vince Nicoletti Alex Vanselow Position President Aluminium VP Strategy Aluminium Marketing Director Aluminium COO Southern Africa Aluminium VP Technical Aluminium CFO Aluminium President Aluminium Page 10

11 Key Messages Upstream and low-cost strategy maintained Strong demand fundamentals; supply-side issues Disciplined investment in growth Page 11

12 2005 Alumina and Aluminium Cash Cost Curves Page 12

13 The China-Driven Demand Opportunity Global primary aluminium consumption 51mt 10mt 19mt 1 32mt 7 China Rest of world Page 13

14 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 Page 14 * Tier 1 city defined as registered population >4.5 m and GDP/capita >US$3,000, Tier 2 city defined as either registered population >4.5 m or GDP/capita >US$3,000, Tier 3 city defined as registered population m and GDP/capita US$1,500-US$3,000 Source: WEFA-WMM; China macro model; McKinsey analysis

15 by 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 Page 15 * Tier 1 city defined as registered population >4.7 m and GDP/capita >US$3,800, tier 2 city defined as either registered population >4.7 m or GDP/capita >US$3,800, tier 3 city defined as registered population m and GDP/capita US$1,900-US$3,800 Source: WEFA-WMM; China macro model; McKinsey analysis

16 and by 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 interior provinces occurs Tier 1 Tier 2 Tier 3 Page 16 * Tier 1 city defined as registered population >5.1 m and GDP/capita >US$5,900, tier 2 city defined as either registered population >5.1 m or GDP/capita >US$5,900, tier 3 city defined as registered population m and GDP/capita US$3,000-US$5,900 Source: WEFA-WMM; China macro model; McKinsey analysis

17 Urbanisation A Common Theme Tier 1-3 cities in CHINA and INDIA 2003 Tier 1-3 cities in CHINA and INDIA Tier 1 cities 19 Tier 2 cities 22 Tier 3 cities 18 Tier 1 cities 89 Tier 2 cities 40 Tier 3 cities 5 Tier 1 cities 28 Tier 2/3 cities Tier 1 Tier 2 Tier 3 13 Tier 1 cities 60 Tier 2/3 cities Page 17 * Tier 1 city defined as registered population >5.1 m and GDP/capita >US$5,900, tier 2 city defined as either registered population >5.1 m or GDP/capita >US$5,900, tier 3 city defined as registered population m and GDP/capita US$3,000-US$5,900 Source: WEFA-WMM; China macro model, McKinsey analysis

18 Aluminium Industry Supply-side challenges Spot Alumina Caustic soda(us Gulf) Energy (Henry Hub) Jan-02 May-02 Sep-02 Jan-03 May-03 Sep-03 Jan-04 May-04 Sep-04 Jan-05 May-05 Sep-05 Cost pressures European and US smelter closures Chinese capacity Project delays Challenging geographies Indexed to 100 Jan 2002 Page 18

19 Investing in Tier 1 Assets for Value B R O W N F I E L D Mozal 2-275ktpa Alumina Aluminium Worsley 3.1mtpa $530/t $2,400/t Hillside 3-132ktpa $3,114/t Worsley DCP mtpa $800/t CY Hillside 500ktpa $2,848/t Mozal 1-275ktpa $3,775/t Worsley acquisition $858/t Size of bubble indicates BHP Billiton share of capital expenditure US$/t inside bubble indicates unit capital cost (or unit acquisition cost) Indicated expansion $US volume is on 100% basis 200M Page 19 G R E E N F I E L D

20 Aluminium Growth Projects B R O W N F I E L D Alumar Worsley E&G Bauxite Alumina Aluminium Worsley DCP High Amps Suriname Successor Mines Mozal 3 Suriname Next Generation Mines CY Size of bubble indicates capital expenditure; bold border signifies sanctioned project $US 100M Refining Options Smelting Options Page 20 G R E E N F I E L D

21 Paranam BMA Phase 1 Deep Inventory of Growth Projects B R O W N F I E L D Esc da Norte Worsley BMA Phase 2 Esc da Sulphide Blackw ater CPP WA Iron Ore RGP 2 Esc da CPR Zamzama Phase 2 Atlantis North Yabulu Koala UG Alumar Samarco NWS T5 WA Iron Ore RGP 3 NWS Angel WA Iron Ore RGP 4+ CY Atlantis South Spence Ravensthorpe Neptune Stybarrow Shenzi Maruwai Alumina Base Metals Iron Ore Met. Coal Diamonds Nickel Petroleum G R E E N F I E L D Page 21 As at 24 August 2005 Size of bubble indicates proposed capital expenditure; bold outer border signifies sanctioned project $US 200M

22 Agenda Topic Overview Strategy Marketing Operations Technical Finance Summary Presenter Alex Vanselow Rod Kinkead-Weekes Julius Matthys Xolani Mkhwanazi I Jacobson V Nicoletti Alex Vanselow Position President Aluminium VP Strategy Aluminum Marketing Director Aluminium COO Southern Africa Aluminium VP Technical Aluminium CFO Aluminium President Aluminium Page 22

23 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

24 Alumina Demand and Supply Outlook 115, ,000 Demand 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

25 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 influence contract negotiations Page 25

26 Aluminium Demand and Supply Outlook 55,000 50,000 Demand 45,000 kt 40,000 35,000 30,000 New Production 25,000 Base and capacity creep CY05 CY06 CY07 CY08 CY09 CY10 CY11 CY12 CY13 CY14 CY15 Calendar Years Page 26

27 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 to show double digit growth rates Page 27

28 Third Party Products $2,057m Revenue in FY05 Tolling Agreement 9% Trade 9% Risk Mitigation 17% Benefits Margin optimization JV Partners 17% Quality swaps 11% Operational risk mitigation Market intelligence Customer service Location/freight swaps 37% $21m EBIT in FY05 Low risk: All within trading mandates; no large speculative positions Page 28

29 Agenda Topic Overview Strategy Marketing Operations Technical Finance Summary Presenter Alex Vanselow Rod Kinkead-Weekes Julius Matthys Xolani Mkhwanazi Ian Jacobson Vince Nicoletti Alex Vanselow Position President Aluminium VP Strategy Aluminium Marketing Director Aluminium COO Southern Africa Aluminium VP Technical Aluminium CFO Aluminium President Aluminium Page 29

30 Key Messages Consecutive production records Benchmark AP30 performance Delivery of growth projects Page 30

31 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

32 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

33 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

34 BHP Billiton Smelters Benchmark Performance PRODUCTION : Prod / pot/ day (kg) COST : Energy Consumption (KWhr/ton) 2700 H2 H3 H1 M1 M H2 H1 H3 M2 M QUALITY : Iron Content (ppm Fe) COST : Current Efficiency (CE%) Lower impurities H2 H3 M1 H1 M M2 H3 M1 H2 H Page 34 Data presented as 6 month averages, from Mar 2005 Aug 2005 Hillside Mozal

35 Agenda Topic Overview Strategy Marketing Operations Technical Finance Summary Presenter Alex Vanselow Rod Kinkead-Weekes Julius Matthys Xolani Mkhwanazi Ian Jacobson Vince Nicoletti Alex Vanselow Position President Aluminium VP Strategy Aluminium Marketing Director Aluminium COO Southern Africa Aluminium VP Technical Aluminium CFO Aluminium President Aluminium Page 35

36 Key Messages Using technology to create sustainable value Technical programs focused on key business drivers Business improvement creating culture of excellence Page 36

37 Technical Excellence in Aluminium Mozal Hillside Amperage ( ka ) High Amperage Increases metal production Improves capital efficiency Raw materials Ensure long term competitiveness FY96 FY97 FY98 FY99 FY00 FY01 FY02 FY03 FY04 FY05 YTD 06 FYF 06 Environmental performance Consistent improvement Hillside Smelter Technology Continuous availability and improvement Page 37

38 Technical Excellence in Alumina Worsley digestion pilot plant Bauxite transport Competitive transportation Increase resource options Bauxite upgrading Improve potential resource value Reduce processing costs In-plant applications Increase efficiency Improve quality Support projects Page 38

39 Business Improvement Measurable benefits All employees contributing 356 Worsley & Mozal interaction Aluminium CSG Improvement Projects 280 Business Excellence programme Technology teams Number of projects Page 39 Investigation Implementation Control Period Realisation

40 Agenda Topic Overview Strategy Marketing Operations Technical Finance Summary Presenter Alex Vanselow Rod Kinkead-Weekes Julius Matthys Xolani Mkhwanazi Ian Jacobson Vince Nicoletti Alex Vanselow Position President Aluminium VP Strategy Aluminum Marketing Director Aluminium COO Southern Africa Aluminium VP Technical Aluminium CFO Aluminium President Aluminium Page 40

41 Key Messages Financial discipline in operations and growth Margins maintained in challenging environment Maintaining growth and improving ROC trajectory Page 41

42 Net Operating Assets and EBIT at 30 June 2005 Worsley 36% Marketing 3% Hillside 30% Net Operating Assets US$5.4 billion Alumar R 3% Alumar S 5% Valesul 1% Suriname 2% Mozal 16% Bayside 4% Worsley 25% Marketing 4% Hillside 31% EBIT US$977 million Alumar R 6% Alumar S 9% Valesul 1% Suriname 4% Mozal 18% Bayside 2% Page 42

43 EBIT Variance Analysis (US$M) FY04 FY05 1,400 1,200 1, FY04 Price FX Volume Raw Materials Energy Labor Pot Relining Maintenance Other costs EBIT pre buyback Contract Buyback FY05 Price increase net of LME linked costs Page 43

44 FY06 EBIT Sensitivities BRL /$ E-rate (10%) (20) 15 Rand/$ E-rate (10%) (35) 30 AUD/$ E-rate (10%) (40) 30 LME Price ($100/t) (140) 140 (200) (150) (100) (50) US$ Million Page 44

45 FY05 Metal Cash Costs Maintenance & Sustaining Capex 5% Labour 8% Other Consumables 6% Other Costs 7% Alumina 40% Pot Relining 3% Electricity 6% US$ based costs Electricity 16% Local currency based costs Pitch 2% Coke 7% Maintenance & Sustaining Capex 5% Labour 8% Other Consumables 6% Other Costs 7% Alumina 40% Pot Relining 3% Pitch 2% Coke 7% Fixed costs Electricity 22% Variable costs Page 45

46 FY05 Alumina Cash Costs Other Cons umables 5% Contract Services 3% Other Costs 9% Bauxite 21% Maintenance & Sustaining Capex 19% Caustic Soda 11% Labour 13% Electricity 15% Electricity 4% US$ based costs Local currency based costs Other Consumables 5% Contract Services 3% Other Costs 9% Bauxite 21% M aintenance & Sust aining Capex 19% Labour 13% Electricit y 19% Caustic Soda 11% Fixed costs Variable costs Page 46

47 Pot Relining 90 $ Million FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 Hillside Bayside Mozal Alumar Valesul Page 47 Average annual cost

48 EBITDA Margins % 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

49 Aluminium Production BHP Billiton 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

50 Alumina Production 200 BHP Billiton 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

51 Capital Expenditure 700 $ Million FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 Development Capex Improvement Capex Sustaining Capex Page 51 FY01 excludes the acquisition of 56% of Worsley for $1.5bn. Development capital expenditure includes unapproved brownfield projects at Worsley, Alumar Refinery, Suriname M ine and M ozal.

52 EBIT ROC Actual Results and Future Scenarios 30% 25% 20% 15% 10% 5% 0% FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 $2,000/t Page 52

53 Agenda Topic Overview Strategy Marketing Operations Technical Finance Summary Presenter Alex Vanselow Rod Kinkead-Weekes Julius Matthys Xolani Mkhwanazi Ian Jacobson Vince Nicoletti Alex Vanselow Position President Aluminium VP Strategy Aluminium Marketing Director Aluminium COO Southern Africa Aluminium VP Technical Aluminium CFO Aluminium President Aluminium Page 53

54 Key Messages Sustainable perspective Portfolio of quality operations and people Value growth Future options Page 54

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