BHP Billiton Affival Nordic Cored Wire & Alloy Market Seminar 7 September 2006
Manganese Industry Overview Manganese Value System Overview Manganese End Use Markets Crude Steel Manganese Alloy Industry Manganese Ore Industry BHP Billiton Manganese Page 2
But First, a Little About BHP Billiton
Structure driven by customer needs Petroleum Aluminium Base Metals Carbon Steel Materials Diamonds & Spec Prod Energy Coal Stainless Steel Materials Page 4
Strategic drivers Our core purpose is to create long-term value through the discovery, development and conversion of natural resources, and the provision of innovative customer and market-focused solutions. Growth Options Project Pipeline Financial Strength and Discipline The BHP Billiton Way (Value Added Processes) World Class Assets Licence to Operate People Page 5
Deep inventory of growth projects BROWNFIELD BMA Phase 2 Blackw ater CPP Zamzama Phase 2 Douglas Middelburg Koala UG Yabulu WA Iron Ore RGP 3 Atlantis North Alumar GEMCO Samarco NWS T5 NWS Angel As at 30 June 2006 Size of bubble indicates proposed capital expenditure; bold outer border signifies sanctioned project.. Worsley E&G $US 200M WA Iron Ore RGP 4+ CY2007 2008 2009 2010 Spence Neptune Stybarrow Shenzi Pyrenees Atlantis South Ravensthorpe GREENFIELD Page 6 Alumina Base Metals Iron Ore Met. Coal Mn Ore Diamonds Energy Coal Nickel Petroleum Maruwai
Manganese Industry Overview
Manganese Industry Overview Manganese Value System Overview Manganese End Use Markets Crude Steel Manganese Alloy Industry Manganese Ore Industry BHP Billiton Manganese Page 8
The Manganese Value Chain Mining Crushing and screening (sizing, lumpy and fines) Dense Media Separation (mineral from gangue) Sintering (increase Mn unit value per ton) Reductive smelting (alloying) & casting increase Mn unit value per ton further) Any one or more of these steps may be bypassed if the grade is high enough Logistics Page 9
Manganese Industry Overview Manganese Value System Overview Manganese End Use Markets Crude Steel Manganese Alloy Industry Manganese Ore Industry BHP Billiton Manganese Page 10
Manganese End Use Markets End Use Purpose 94% Bulk Alloying Capacity Crude Steel Ore Producers 6% Specialty Processing Chemical and other uses of Mn metal Page 11 Source: Roskill
Effect of Mn on Steel Product Properties Use of Manganese in steel results in increased: Strength Hardness Toughness/impact resistance Wear resistance (e.g. rail steels) Machinability Ability to be heat treated for superior strength and hardness Page 12
Manganese Industry Overview Manganese Value System Overview Manganese End Use Markets Crude Steel Manganese Alloy Industry Manganese Ore Industry BHP Billiton Manganese Page 13
Global Steel Production Continues in New Golden Age New age of steel firmly established, parallels between post 1945 and post 1995 industrialization of China. 1200 New golden age 1000 Oil Shocks Fall of Berlin Wall Million Tonnes 800 600 400 200 The emerging age pre 1945 2.8%pa The golden age 1945 1973 6.2%pa The efficiency age 1974 1995 0.2%pa The China age. Followed by BRICS. 0 1920 1930 1940 1950 1960 1970 1980 1990 2000 Page 14 Source IISI, BHP Billiton
Chinese Steel Import / Export Kt 5,000 4,000 3,000 2,000 1,000 Net Flat Imports Net Finished Imports Net Long Imports Net Pipe Imports China Steel Imports and Exports Imports Exports Exports 0-1,000 1998 1999 2000 2001 2002 2003 2004 2005 2006 Page 15 Data source: CMMA, BHP Billiton calculations
Steel and Raw Material Impact of Non-China Growth In addition to China steel growth will be driven by other countries, with a majority favouring the BF route. Low cost steel producer Major steel exporter Domestic steel demand increasing Domestic iron ore ore Domestic met coal Russia New steel capacity planned Large importer (50Mtpa) Strong demand growth Imported iron ore ore Domestic met coal India SE Asia Low per per capita steel consumption Low cost steel production base, export semis Domestic iron ore ore Imported met coal Page 16 Brazil Low steel per per capita 35kg 50+ Mt Mt capacity planned Construction/automotive/ consumer growth Domestic iron ore ore Imported met coal
Steel Process Trends (Mt) EAF 34% 1400 1200 1000 800 600 400 200 0 1998 1999 OH 8% 2000 BOF 58% 2001 EAF 31% OH EAF BOF 2002 2003 2004 OH 3% 2005 BOF 66% 2006Fcst BOF maintaining share of total global steel production OH declining, being replaced by BOF, EAF EAF growing in industrialised countries. BOF primary growth in developing countries Page 17 Source CRU 2000 2006f
Manganese Industry Overview Manganese Value System Overview Manganese End Use Markets Crude Steel Manganese Alloy Industry Manganese Ore Industry BHP Billiton Manganese Page 18
Manganese Alloy Products Chemical Formula %Mn Produced in EAF Produced in BF Comments High Carbon Ferromanganese HCFeMn FeMn 65%-79% Requires high % of high grade ore Silicomanganese SiMn 60%-77% Can be produced from lower grade ore Refined MCFeMn, LCFeMn 80%-81% Produced from HCFeMn via OBC* route or SiMn via electrothermic route * Oxygen Blown Converter Page 19
World Manganese Alloy Production 2005 Product Split ~ 10.6 Million tons HCFeMn 33% SiMn 57% MCFeMn 10% Page 20 Source: IMnI
World Manganese Alloy Production 2005 ~10.6 million tons Refined SiMn HCFeMn Mt 2500 2000 1500 1000 500 0 Europe 355 619 203 Mt 2500 2000 1500 1000 500 0 China 1420 2750 279 2500 2000 1500 1000 500 0 Mt 406 CIS 1250 40 Asia Other 0 500 1000 1500 2000 Americas Africa/MEast 2500 2000 1500 1000 500 0 Mt 541 284 158 Mt 2500 2000 1500 1000 500 0 155 473 181 2500 2000 1500 1000 500 0 Mt 370 177 143 2500 2000 1500 1000 500 0 Mt India 255 477 20 Page 21 Source: IMnI, BHP Billiton
Manganese Alloy Production 5000 4500 4000 3500 3000 2500 2000 1500 1000 500 0 China Other Nikopol Eramet BHP Billiton Privat CVRD India Assmang Kt Page 22 Source: IMnI & other industry sources
Manganese Alloy Uses In Steel Mainly used in Crude / Mild steel Desulphurisation / strengthening 5-10kg Mn/mt steel Consumed in the form of : FeMn SiMn MCFeMn % Mn Tons high grade ore / ton alloy Electricity (kwh/mt) 78% 2.1 2 600 65% 1.85 4 000 80% 2.5 3 100 Page 23 Source: Roskill, CRU
Manganese Alloy Uses In Steel 100% 80% 60% 40% 20% 0% 2% 12% 38% 42% 32% 81% 30% 56% 49% 32% 9% 17% Integrated Minimill Flat Minimill Long Speciality HCFeMn SiMn MCFeMn Page 24 Source: Monitor
Manganese Alloy Supply/Demand Strong growth in Mn alloy demand on the back of strong growth in crude steel production 12,000 Mn Alloy (Kt) Demand Supply 10,67110, 735 10,777 10,554 10,000 9,115 9,179 8,000 7,519 7,388 8,188 8,210 6,000 4,000 2,000 0 2001 2002 2003 2004 2005 Page 25 Source: IMnI
Impact of Crude Steel Industry Dynamics On Manganese Use The steel industry is continually changing due to the impact of new technology, ongoing capacity rationalisation and shifts in customer demand. Drivers that will impact on Manganese demand: Changes in steel making technology Type of steel making process being used integrated steel plants Vs mini mills New steel grade designs Page 26
Manganese Alloy Industry Alloy Production Cost Structure While ore is the dominant cost component, processing costs which vary by location are also significant. The location of alloy plants relate directly to both electricity and labour costs. Direct Costs Other Costs Rail Costs 3% Other Costs 12% Labour 13% Electricity 20% Other Raw Materials 14% Ore 38% Trade barriers Tariffs Anti-dumping duties Social dimensions Environmental costs Socio-political factors Average cost structure across major alloyers Page 27 Source: CRU
Comparative Electricity Prices 60 55 1 mill = US$0.1/KWh 50 45 40 35 30 25 20 15 10 5 0 Kazakhstan Russia RSA Norway Australia USA Ukraine Poland Macedonia China Romania Japan Mexico SKorea India US mills/kwh Page 28 Source: CRU
$2,000 $1,800 $1,600 $1,400 $1,200 $1,000 $800 $600 $400 $200 Q1-95 Q4-95 Q3-96 Q2-97 Q1-98 Q4-98 Q3-99 Q2-00 Q1-01 Q4-01 Q3-02 Q2-03 Q1-04 Q4-04 Q3-05 Q2-06 Manganese Alloy Industry Pricing Trends US Dealer Fob Warehouse $/t (Nominal) HCFeMn SiMn Page 29 Source: CRU
Manganese Industry Overview Manganese Value System Overview Manganese End Use Markets Crude Steel Manganese Alloy Industry Manganese Ore Industry BHP Billiton Manganese Page 30
World Manganese Ore Supply 25.5 Mt ore In 2003 --> 29.8 Mt ore in 2004 > 44%Mn >30% and <44% Mn < 30%Mn Americas 13, 000 11, 000 9, 000 7, 000 5, 000 3, 000 1, 000-1, 000 2003 2004 200 5 12, 000 10, 000 8, 000 6, 000 4, 000 2, 000 0 Africa/MEast 2003 2004 200 5 13, 000 11, 000 9, 000 7, 000 5, 000 3, 000 1, 000-1, 000 13,000 11,000 9,000 7,000 5,000 3,000 1,000-1,000 CIS 2003 2004 200 5 2003 2 004 2 005 India 13,000 11,000 9,000 7,000 5,000 3,000 1,000-1,000 2003 2 004 2 005 13, 000 11, 000 9, 000 7, 000 5, 000 3, 000 1, 000-1, 000 China 20 03 2004 200 5 Asia Other* *Australia, Burma, Indonesia, Phillipppines, Taiwan, Vietnam, Korea Page 31 Source: IMnI
Manganese Ore Supply/Demand 000 tons Mn contained 12,000 Demand Supply 11,801 10,78410,715 10,749 10,000 8,000 7,389 7,881 7,687 8,133 8,637 8,619 6,000 4,000 2,000 0 2001 2002 2003 2004 2005 Page 32 Source: IMnI
Manganese Ore Industry Price Trends $/mtu (Fob, 48% Mn) $4.50 $4.00 $3.50 $3.00 $2.50 $2.00 $1.50 $1.00 $0.50 $- 72 76 80 84 88 92 96 '00 '04 Japan FY Page 33 Source: Tex report
Manganese Industry Overview Manganese Value System Overview Manganese End Use Markets Crude Steel Manganese Alloy Industry Manganese Ore Industry BHP Billiton Manganese Page 34
Management Structure BHP Billiton Anglo American Samancor Ltd Samancor Manganese Mines Alloys MMC Vessels Mamatwan Gemco Metalloys Temco Marketing Page 35
Business Overview Samancor Operations Ore Ferroalloy Metalloys HOTAZEL FeMn 390ktpa SiMn 100ktpa GEMCO 3.2Mtpa Advalloy Mamatwan 2Mtpa Wessels 1Mtpa MC FeMn 75ktpa TEMCO SiMn 120ktpa FeMn 130ktpa Sinter 330ktpa Page 36
Business Overview South African Operations AFRICA Hotazel. Johannesburg Meyerton LEGEND Towns Mines Ports Mn Field Railway lines RSA Wessels Mine Hotazel Hotazel Saldanha Bay Mamatwan Mine Kuruman ±. 900 km. Port Elizabeth ±. 1050 km. +-700 km. Durban Metalloys Smelter Advalloy Smelter Page 37
Business Overview Australian Operations GROOTE EYLANDT TEMCO Page 38
Mn Resource base June 2005 CSM Manganese deposits JORC resources (Mt) JORC reserves (Mt) Reserve life (years) GEMCO 173.3 103.5 15.7 (Australia) Wessels 24.7 12.5 17.9 (South Africa) Mamatwan 69.3 38.5 12.8 (South Africa) LOM based on ROM tonnes: GEMCO 6.6Mtpa, Wessels (HG only) 0.7 Mtpa, Mamatwan 3.0 Mtpa Page 39
Metalloys / Advalloy Temco Metalloys / Advalloy Temco 7 Furnaces 82MVA SiMn (4F) 2x75MVA FeMn 1x81MVA FeMn MC Converter Capacity 390,000tpa FeMn 100,000tpa SiMn 75,000tpa MCFeMn 4 Furnaces 33MVA FeMn/SiMn 36MVA FeMn/SiMn 54MVA SiMn 3x15MVA SiMn 1000tpd Sinter Plant Capacity 130,000tpa FeMn 120,000tpa SiMn 330,000tpa Sinter Page 40
In conclusion. BHP Billiton via Samancor is: A producer of High Grade Manganese Ore An Integrated Alloyer supplying the global market with high quality Manganese alloy products, such as MCFeMn, HCFeMn & SiMn over the long term Backed by long life reserves providing a sustainable future Page 41