Investor Presentation

Transcription

1 Investor Presentation Mahomed Seedat President, Energy Coal June 2006

2 2 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 must not be relied upon as a recommendation or forecast by BHP Billiton.

3 3 Agenda Energy Coal CSG overview HSEC Markets Financials Ingwe

4 Energy Coal CSG overview

5 5 Our Energy Coal business 14,000 + People 10 Operating assets 4 Continents 84,000,000 tonnes Coal produced, more than 2,000PJ 850,000,000 tonnes Dirt moved 30 products to customers via marketing contracts

6 BHP Billiton Energy Coal Position ( ) 33 Mtpa New New Mexico Mtpa Mtpa 3 Mtpa (2%) (56%) 26 Mtpa (42%) 6 Colombia 4 9 Mtpa Mtpa Export Domestic Source: BHP Billiton analysis Operated Non operated Pt Pt Arutmin Mtpa Mtpa QLD/NSW Coal Coal 3 4 Mtpa Mtpa Ingwe Hunter Valley Mtpa Mtpa Mtpa Mtpa Export marketed

7 Energy Coal organisation President Energy Energy Coal Coal Mahomed Seedat Seedat Chief Chief Commercial Officer Officer Jon Jon Dudas Dudas President & COO COO New New Mexi Mexi co co Coal Coal Wayne Wayne Isaacs Isaacs President & COO COO Mt Mt Arthur Arthur Coal Coal Stephen Stephen David David Asset Asset Leader Leader Colombia & Business Manager Manager Americas Manie Manie Dreyer Dreyer President & COO COO Ingwe Ingwe Collieries Eliphus Eliphus Monkoe Monkoe VP VP Finance Finance Clayton Clayton Whipp Whipp (Ron (Ron Langford) Acting Acting VP VP HSEC HSEC & VP VP Bus Bus Improvmt. Henry Henry White White VP VP Strategy Strategy Energy Energy Coal Coal Craig Craig Renner Renner (Julian (Julian Beere) Beere) Chief Chief Information Officer Officer Louis Louis Retief Retief Sth Africa USA Australia The Hague 7 ( ):- new SA based incumbent

8 Energy Coal Reserves Distribution of Marketable Reserves by Asset Ingwe 51% New Mexico 17% Hunter Valley 13% Colombia 19% Total Reserves Mt Ingwe 879Mt NMC 304Mt MAC 231Mt Colombia 334 Mt Colom bia HVEC Other MAC NMC Ingwe Other Ingwe Ops 1000 Export and Domestic Split Domestic Export Marketable Reserves Measured Resources Indicated Resources Inferred Resources 8 0 Ingwe NMC MAC Colombia Note: Colombia data shown as BHP Billiton share (33.3% )

9 9 BHP Billiton Strategic Framework Leverage Global Brand and Footprint Cross-CS G Collaboration Technology Growth Options Global Capabilities, Local Presence Opportunity Discovering/Capture Opportunity Retention Approval Process Risk Managem ent Forecasting, Planning and Targets Expert Services Approval Process Customer-Centric Marketing EWRM Portfolio Management Value-Added Growth Stakeholder Relationships Win Win Relationships Quality Brand Project Execution Market Driven Project Pipeline Financial Strength and Discipline The BHP Billiton Way (Business Excellence and Knowledge Networks) World Class Assets Licence to Operate Project Definition Project Prioritisation Portfolio Model Strong A Credit Capital Managem ent People Processes Zero Harm Business Excellence Knowledge Networks Effici ent and Effective Operations Predictable Continuous Improvement Benchmarking Sustainable Development Zero Harm Guide to Business Conduct Diversity People Employer of Choice Global Capability Talent Development Performance-based Culture

10 10 Energy Coal Strategy Strategic Pillars BHP Billiton s Black Diamond 3. Grow and Optimise the Portfolio 4. Extend Our Marketing Advantage ( The Perfect Cut ) 5. Address Longer Term Discontinuities 2. Well Run Operations 1. Engaged People and Enhanced Organisational Capabilities

11 HSEC

12 12 The HSEC journey Energy Coal where we have come from Fatalities Classified Injury Frequency Rate FY02 FY03 FY04 FY05 FY FY96 FY97 FY98 FY99 FY00 FY01 FY02 FY03 FY04 FY05 FY Focus on leading and lagging indicators KPI TRIFR Reduction Behaviour Based Safety Systems PL4 near miss reporting Fatal Risk Control Protocols Health targets and plan Environmental targets and plan Community targets and plan HSEC Standards Compliance

13 Financial performance

14 14 Energy Coal EBIT by Business Unit Half year ended 31 December % Change (US$M) Dec 2005 Dec 2004 % Change Ingwe New Mexico Hunter Valley Colombia Divisional Activities Total from Operations Third party products Energy Coal (total) (6) (7)

15 EBIT Trends U nfav orable price/ FX/inflation and portfolio changes offset by volume and cost improv ement Fav orable pric e, volume and cost performance offs et partially by portfolio changes, FX and inflation Fav orable pric e v arianc e partially offset by FX and inflationary pressure particularly in Sth Africa 308 1H 06 v 1H 05: Fav orable v olume, F X and third party trading offset by price, cost pressure in Australia and Sth Africa, inflationary pressure partic ularly in Sth Africa and increase amortis ation H 1H Realised export price (RBCT FOB) $30.51 $25.14 $31.96 $45.79 $41.80 Rand A$

16 Operations and Growth

17 Portfolio actions to build long term performance BHP Billiton Merger Mt Arthur North approv ed Intercor acquisition Lake Mines divestment Rietspruit closure Sales of Delmas to Black Empowerment Positioned to deal in conv ergent European energy market Klipspruit minipit approv ed MAC South Pit Ex pansion Feasibility endors ed NC IG w ins tender for Newcastle 3 rd Port Agreement to div est ZAC Middelburg Middlings plant approv ed Anticipated Koornfontein sale Secured 75% of Arutmin marketing PT Arutmin divestment Establish H ague & Singapore marketing hubs Integrated C errejón C oal fully functional C omplete firs t structured marketing deal Secured 100% of Arutmin marketing C olombian ex pansion to 28Mtpa approved Move to One Book Agreement to div est Wy ong Sale of v arious resources to BEE parties Awarded tender for Caroona deposit 17 New Projec ts Portfolio Actions M arketing ac tivities

18 Energy Coal project pipeline Brownfield expansions/projects Greenfield expansions/projects Cerrejon Optimal Naudesbank Leandra New Mexico Coal Optimum Project NSW Port Project MAC Underground Douglas/MMS Optimisation Cerrejon to 32Mtpa MAC South Pit Expansion 18 Klipspruit Concept through Pre-feasibility Feasibility Execution

19 19 Ingwe - Location Richards Bay Type Capacity Life Klipspruit Ingwe Operations O/C mine 1.5 Mtpa Refer project PRETORI A JOHANNESBURG Type VEREENIGING Capacity Life Khutala U/G mine 14.2Mtpa 29 yrs Western Complex Klipspruit Project Type Capacity Life Khutala Douglas U/G O/Cmine 6.8 Mtpa (84% ) 29 yrs Type Capacity 15 Mtpa (84% ) Life Middelburg Douglas O/C mine 29 yrs Central Complex Middelburg Koornfontein Richards Bay Rail Line MPUMALANGA Optimum Type O/C mine Capacity 14.9 Mtpa Life 10 yrs Optimum Type Capacity Life Koornfontein Type Capacity U/G mine 5.6 Mtpa 3 yrs RBCT *multi-product Export port 26.2 Mtpa

20 20 Ingwe- key issues Ingwe Recovery Plan Eskom contracts Ingwe growth projects Portfolio optimisation

21 21 Ingwe Recovery Plan Safety first Started with Optimum Now being rolled out to the rest of the operations Key challenges Significant management changes on all sites Abnormal unseasonal rainfall Exposure of coal chain weaknesses Opportunities: Significant cost reduction Revenue improvement (volume/yield) Resizing and relocation of the Ingwe Corporate Centre

22 22 Ingwe Eskom Contracts Eskom Sale Volumes (Mtpa) and Prices (ZAR) YTD Duvha Kendal Hendrina Majuba Average price [RHS] Contract Pricing The Duvha, Hendrina and Majuba contracts are based upon fixed prices with escalation based on certain costs and inflation indices. The Kendal contract is a cost plus arrangement based on a formula that includes a return on invested capital and inflation prices escalation Contracted volumes Duvha 8.4Mtpa (10Mtpa 100%) supplied by Middelburg until the end of calendar Customer's option to extend for two additional 10 year periods to Hendrina 6.5Mtpa supplied by Optimum until the end of calendar Customer's option to extend for two additional 5 year periods to Kendal base 13.3Mtpa supplied by Khutala until November 30, The customer has option to extend based on available coal resources. Majuba: 2.7Mtpa until June 30, 2009

23 Ingwe Eskom Contracts cont. Ingwe s fixed price contracts (Hendrina and Duvha) are subject to PPI and CCI ( Cost of Coal ) inflation indices with an efficiency factor, as well as a bonus/penalty structure dependent on quality parameters As a result, the prices achieved lag the long term inflationary environment. Analysis - Hendrina 6.5Mtpa 2 40% 2 30% 2 20% 2 10% % 1 90% 1 80% 1 70% 1 60% 1 50% 1 40% 1 30% 1 20% 1 10% 1 00% 90% Jan-93 Jul-93 Jan-94 Jul-94 Jan-95 Jul-95 Jan-96 Jul-96 Jan-97 Jul-97 Jan-98 Jul-98 Jan-99 Jul-99 Jan-00 Jul-00 Jan-01 Jul-01 Jan-02 Jul-02 Jan-03 Jul-03 Jan-04 Jul-04 Jan-05 Jul-05 Base Price adj for CCI Base Price adj for PPI Base Price adj for CPI Adjusted Base 6.5

24 24 Ingwe Growth Projects Ingwe Project Status Total volume 49mtpa Feasibility Concept Pre-feasibility Export and Domestic Split Domestic Export DMO Optimum Leandra Klipsruit Naudesbank Feasibility Pre-feasibility Concept

25 25 Ingwe Portfolio Optimisation Douglas and Middelburg to be combined ZAC divested Koornfontein sale process currently underway (BEE transaction) Significant other transactions completed around reserve/resources sales (11) and others in process (4)

26 26 Hunter Valley Energy Coal

27 27 Mt Arthur Coal Growth Opportunities Mined Out Open Cut Areas

28 28 Mt Arthur Coal Growth Opportunities Focus on Process Improvement Mined Out Open Cut Areas Open Cut Reserve Area - 33 Yr

29 29 Mt Arthur Coal Growth Opportunities South Pit project Small capital investment Low cost incremental tonnes Mined Out Open Cut Areas Open Cut Reserve Area - 33 Yr Incremental Growth - Open Cut Area

30 30 Mt Arthur Coal Growth Opportunities Mt Arthur U/G Early assessment phase Very long life Low cost highwall access Mined Out Open Cut Areas Open Cut Reserve Area - 33 Yr Incremental Growth - Open Cut Area Major Growth Mt Arthur Underground Reserve Area

31 31 NSW Infrastructure Infrastructure constraints In CY 2004, a quota system was introduced by Port Waratah Coal Services ( PWCS ) Establishment of the Newcastle Coal Infrastructure Group ( NCIG ) NCIG proposal to lift coal loading capacity successful Rail constraints are being addressed by the Australian Rail Track Corporation (ARTC)

32 32 Caroona Coal Project Gunnedah Basin 350km 2 Exploration Area 260km to Newcastle Port BHP Billiton won competitive tender from NSW Government Too early for JORC resource number Exploration and assessment 4 to 5 years Initial coal quality 6300kcal/kg ar 10% ash <0.5% Sulphur Some coking properties

33 33 Chaco Wash New Mexico Coal COLORADO NEW MEXICO ARIZONA NAVAJO INDIAN RESERVATION Shiprock FOUR CORNERS POWER PLANT San San Juan Juan Mine Mine San Juan Generating Station UTE MOUNTAIN UTE INDIAN RESERVATION DEEP LEASE EXTENSION PILOT MINE San Juan River Navajo Navajo Mine Mine Permit Permit Area Area La Plata Haul road DEEP LEASE La Plata River Farmington La La Plata Plata Mine Mine Animas River Navajo Navajo Lease Lease Boundary Boundary Burnham Trading Post Approximate Scale 0 5 Miles

34 34 Desert Rock Energy Project DREP Desert Rock Energy Project up to 1500 MW mine-mouth power plant. Navajo Coal Company (BNCC) will be the coal supplier. Sithe Global s schedule shows financial close in late Q2 of CY2007, startup of first 750 MW unit in June 2010 and second 750 MW unit in June Transition to feasibility scheduled Q3 CY2006

35 35 Cerrejón - Location

36 36 Cerrejón Expansion to 32 Mtpa Estimated Total Cost of US$127M (100% terms) Major Mining Equipment 3 Komatsu PC8000 Hydraulic Excavators 14 Euclid-Hitachi EH5000 Haul Trucks 5 Caterpillar 789 Coal Trucks Locomotive & Railcars 2 GE Locomotives 80 Railcars Railway Upgrade 0.3 km extension of 3 sidings New 2.6 km siding Port Upgrade In Loading Upgrade Stockyard Expansion Out Loading Upgrade

37 37 Cerrejón Coal Optimal Expansion Capacity Expansion Schedule Expansion to 45Mtpa Prefeasability Study to be completed CY 2006 BHP Billiton execution approval to be completed Late 2007 Optimal Expansion production possible by 2010 Mine Infrastructure, Rail, and Port Facilities Key Environmental Issues Dust mitigation Rio Ranchería river diversion Relocation of Roche, Patilla, & Chancleta communities