BHP Billiton. Industry Trends - Consolidation & Diversification. Chip Goodyear - Executive Director and Chief Development Officer

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1 BHP Billiton Industry Trends - Consolidation & Diversification Chip Goodyear - Executive Director and Chief Development Officer Morgan Stanley Basic Materials Conference London September 2002

2 Billiton IPO Industry Consolidation Gold Fields-Driefontein restructure Placer Dome - Getchell Newmont acquires Santa Fe Valepar acquires CVRD (42%) Alcoa Acquires Alumax Anglo acquires Minorco MINERALS M&A (Deals above US$1B) Anglo acquires Shell coal assets Alcoa merger with Reynolds Phelps Dodge acquires Cyprus Amax Grupo Mexico acquires Asarco Barrick-Homestake merger Rio acquires North Ltd. Alcan merger with Alusuisse Billiton increases stake in Worsley 86% Billiton acquires Rio Algom BHP merges with Billiton BP & Amoco Repsol & YPF BP & Arco Phillips & ARCO s Alaskan interests (from BP/Amoco) Chevron & Texaco Agip & Phillips & LASMO Conoco & Tosco D/S Gulf Canada Total SA & FINA Exxon & Mobil Total FINA & ELF Anadarko & Union Pacific Resources PETROLEUM M&A (Deals above US$5B) M&A Deals in : Oil & Gas ~US$600 billion Mining and Metals ~US$100 billion Source: John S Herold M&A Database (Petroleum), Goldman Sachs (Minerals), RMG Database, Bloomberg

3 1990 Industry Structure In 1990 the top five companies accounted for less than 25% of total resource equity market value Market Cap. at end of 1990 (US$B) BHP Rio Tinto Anglo Am. Market value of minerals industry US$150 bn Value of Top Five US$36 bn De Beers Gencor Alcoa Newmont Alcan Amplats Placer Dome Reynolds Driefontein WMC Barrick GFSA Noranda Minorco Inco Pechiney MIM 0

4 Industry Structure Top five companies account for around 50% of resource equity market value double their share of 10 years ago Market Cap. on 16/09/02 (US$B) BHPB Rio Tinto Alcoa Anglo Newmont CVRD Alcan AngloGold WMC Placer Dome Market value of minerals industry US$235 bn Value of Top Five US$110 bn Impala Inco Pechiney Phelps Dodge Xstrata Noranda Freeport Lonmin Falconbridge Teck Cominco

5 Mining Industry Return Analysis Consolidation driving better share growth return for Top Four 195% Top Four share movement 175% 155% 135% 115% 95% Mid & Small Cap Minerals Index (excl. Gold/PGMs) 01/04/99 21/10/99 11/05/00 30/11/00 21/06/01 10/01/02 01/08/02 Source: Datastream

6 A Global Footprint Stainless Steel Aluminium Carbon Steel Petroleum Energy Coal Base Metals Diamonds

7 Outstanding Diversification By Commodity Customer Sector Group EBIT: 13% 15% 7% 6% 29% 30% Carbon Steel Materials Petroleum Energy Coal Aluminium Diamonds & Spec. Prod. Base Metals Stainless Steel Materials South America By Geography Net Operating Assets: 20% 8% 5% 33% 34% Australia Southern Africa North America Rest of World By Market Sales: 13% 14% 11% 15% 28% 19% Europe Other Asia North America Japan Rest of World Australia Data for FY2002 (continuing operations)

8 Diversified Portfolio Reduces Overall Cash Flow at Risk Undiversified Cash Flow at Risk Risk Factor WTI Copper Aluminium AUD:USD Energy Coal - RBM Nickel Interest Rates ZAR:USD Metallurgical Coal Freight Rates Fuel Ferro Chrome Iron Ore Energy Coal Henry Hub Gas LPG HBI Diamonds LNG Ferro Manganese Silver Zinc Manganese Ore Lead Alumina BHP Billiton

9 Diversified Portfolio Reduces Overall Cash Flow at Risk 1500 Lead up to Gulf War Q4 FY02 Cashflow Applying Historical Price Changes Cyclical peak in GDP & Industrial Production Opec dominance Cashflow (US$ millions) Aftermath of Gulf War, Global recession Hamanaka induced fall in copper prices Asia Crisis, Russian debt default, $10 oil US and Japanese recession, September 11 0 Aug-87 Aug-89 Aug-91 Aug-93 Aug-95 Aug-97 Aug-99 Aug-01 Applying historical price changes Q4 FY02 Actuals

10 Diversified Stocks Perform Better Diversifieds index (1) Aluminium Index (2) Copper Index (3) Nickel Index (4) Sep- 99 Dec- 99 Mar- 00 Jun- 00 Sep- 00 Jan- 01 Apr- 01 Jul- 01 Oct- 01 Feb- 02 May- 02 Aug- 02 Indices comprise: (1) BHP Billiton, Rio Tinto and Anglo American; (2) Alcoa, Alcan and Pechiney; (3) Phelps Dodge, Grupo Mexico, and KGHM; (4) Inco, Falconbridge and Eramet. All indices adjusted for market cap weights Source: Bloomberg

11 Pyramid Of Opportunity M&A Incremental Value Added Bolt-on Acq. Growth Pipeline Cost Savings Low Cost, High Quality Assets

12 Secular v Cyclical Mining has been amongst the best industries in terms of earnings reliability Market EPS growth has averaged 6% pa over the last 10 years. We expect that BHP Billiton can deliver above market long run EPS growth on flat commodity prices Oddly, in our opinion, the diversified miners trade at a PER discount to the UK market. Morgan Stanley - 27 May 2002 The much anticipated commodity price recovery continues to be delayed We believe that companies with diverse earnings will be relatively better placed. Morgan Stanley - 25 July 2002

13 The Case For Re-rating? Total Shareholder Returns BHP Billiton Rio Tinto Anglo FTSE 100 S&P Industrials Dow Jones Industrials 0 01/04/99 28/10/99 25/05/00 21/12/00 19/07/01 14/02/02 Source: Datastream

14 Shareholder Returns Not Reflected In The Market Rating Price-Earnings Ratios BHP Billiton Rio Tinto Anglo FTSE 100 S&P Industrials Dow Jones Industrials /04/99 28/10/99 25/05/00 21/12/00 19/07/01 14/02/02 Source: Datastream

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