BHP Billiton Carbon Steel Materials. June 2002

Transcription

1 BHP Billiton Carbon Steel Materials June 2002

2 Introduction and Strategy Bob Kirkby President Carbon Steel Materials

3 Presenters Introduction and Strategy Marketing WA Iron Ore & Boodarie Iron Queensland Coal Other Assets Conclusion Bob Kirkby Andrew Offen Graeme Hunt Dave Murray Bob Kirkby Bob Kirkby

4 Question & Answer Louis Irvine Stefano Giorgini Wayne Isaacs John Raubenheimer Melbourne Melbourne Melbourne Melbourne

5 BHP Billiton Diversification (9 months to March 2002) Turnover - Geographic Origin EBIT - CSG South America 15% Southern Africa 15% North America 12% Europe 4% Rest of World 12% Australia 42% Aluminium 11% Stainless Steel & Other 3% Energy Coal 16% Base Metals 4% Steel 3% Expln, Tech & New Business 3% Petroleum 30% Carbon Steel Materials 30% Total Turnover $13.2bn Total CSG EBIT $2.8bn* *EBIT contribution excludes group and unallocated items

6 BHP Billiton Context - CSM Key Attributes Significant, stable and attractive returns Critical mass and cost competitive Long life, high quality resources World class infrastructure Experienced and progressive teams Value adding growth opportunities

7 Carbon Steel Materials Assets Port Hedland HBI (100%) Prod: 1.8Mt WA Iron Ore (65-100%) Prod: 70Mt Years of Life: 35 No 3 Seaborne supplier QLD Coal (50 80%) Prod: 50Mt Years of Life: 50 No 1 Seaborne supplier Samarco Iron Ore (50%) Prod: 12Mt Years of Life: 40 Low cost pellet producer Manganese (60%) Prod: Ore 3.5Mt Alloy etc 0.6Mt Years of Life: Aust 25 SA 30 No 1 Seaborne Supplier 100% nominal production capacity Illawarra Coal (100%) Prod: 7Mt Years of Life: 45 Niche supplier

8 Asset Overview EBIT Contribution to CSM Earnings (FYTD) 400 US$M WAIO Samarco Qld Coal Illawarra Coal Manganese Boodarie Iron

9 EBIT ROC Asset Contribution (Based on 2001/2002 reported EBIT 9 months to March) 60% 50% 40% % 20% 10% 0% WAIO Samarco Qld Coal Illawarra Coal Manganese (Note: 10 month weighted average net operating assets)

10 CSM Strategy - Focus 2002/5 Customer Focused Marketing CSM Strategy Operating Excellence Prudent Growth

11 Marketing Andrew Offen Marketing Director Carbon Steel Materials

12 CSM - Background Environment Steel Industry Steel industry continues long term growth - continued steel demand >2%pa; based on GDP/IP growth No major substitution of other materials, plastics, light metals BF/BOF remains major steelmaking route: BOF share sustained around 61% EAF growth only in selected regions US Continued customer consolidation & rationalisation, emerging mega steel company(ies), Arcelor, (Europe) JFE (Japan) Intense cost pressures ongoing tension between highly profitable suppliers & unprofitable customers % share of total production Crude Steel Production Growth Source: IISI, BHPB 12.5 Total Crude Steel Production 750Mt 799Mt 777Mt 788Mt 847Mt 846Mt ~860Mt 13.1 Share of top 5 producers Source:Metal Bulletin, BHPB

13 Market Structure - Met Coal Rio Tinto 2% Other 18% BMA BHPB 29% The top 10 seaborne producers of met coal account for 79% of the total market. Total HCC exports : 125Mt Jim Walter 3% Yakutz 3% Luscar 4% Note: some of these producers also export significant volumes of weak met coal: CONSOL 4% TECK 4% RAG 5% Anglo 8% MIM 8% Fording 12% Rio Tinto 9.4 Mt p.a. BMA-BHPB 7.7 Mt p.a. Fording 2.5 Mt p.a. Anglo 1.5 Mt p.a. Source: BHPB

14 Market Structure Iron Ore LKAB 3% SNIM 2% Others 11% BHP Billiton 16% Top 3 exporters account for 72% of the total market Total IO exports 453Mtpa Iscor 4% India 8% Rio Tinto 22% CVRD 34% Seaborne iron ore market divided into Atlantic, dominated by CVRD and Pacific dominated by Australian suppliers, BHPB and Rio Tinto Source: BHPB

15 Market Structure Mn Ore and Alloy Alloy Market Mn Ore Market Other 19% BHP Billiton 9% Other 18% BHP Billiton 22% Autlan 2% Eramet* 12% CIS 17% Japan 7% CML 3% Ghana 5% Autlan 2% CIS LG 11% O&M 2% China 28% CVRD 4% Eramet* 12% O&M 8% CVRD 8% China 11% *Includes China JV s Source: BHPB

16 CSM Market Position - Asia Major supplier of iron ore & manganese - fines, lump - technical support Strong Growth Market Customers - Baosteel, OMR Premier supplier of CSMs - reliable, consistent quality - technical market, seek VIU Static Market Customers - Nippon Steel, JFE Competitive supplier of coking coals - HCC, WCC, blends Growth Market Customers - TISCO, SAIL Premier supplier of CSMs - reliable, consistent quality Static/Weak Growth Market Customers - POSCO China Steel

17 CSM Market Position Atlantic Premium supplier of HQCC - high customer reliance - high market share Supplier of manganese Small market for lump ores Growth Market Customers - Usinor, CORUS, TKS Ferroatlantica Supplier of Ferro Alloys to US Steel Industry Core supplier of HCC - selective key customers - small market share Growth Market Customers - CSN, Usiminas Core supplier of HCC & Manganese to Iscor

18 CSM Revenue by Region EE/M East 1% Americas 5% Australia 9% Africa 2% Japan 34% Western Europe 20% Othre Asia 5% China 7% Taiwan 6% Korea 11%

19 CSM Marketing Strategy What is our goal? To maximize long term margins To protect our market position To achieve sustainable market share growth

20 CSM Marketing Strategy How are we going to achieve that goal? Improving our customer focus and pushing to the position of the pre-eminent supplier of raw materials to the steel industry Optimising our customer & geographic mix, product portfolio and pricing levels to maximize value Improving our industry structure Capturing the synergies inherent in our CSM business grouping Enhancing our merchanting/commercial skills and the systems required to implement them

21 The Marketing Model Pittsburgh Rio De J Santiago Houston London Base Metals Stainless Energy Coal Aluminium Freight Reg. Office for Europe Hague Hub Swiss Principal Sing Hub Carbon Steel Petroleum Energy Reg. Office for Asia Tokyo Seoul Shanghai Delhi Islamabad Underlying Principles Common Customer Groupings Centralised one book Model

22 The CSM Competitive Advantage Stronger customer relationships value propositions Improved capability to position in the market and maximize margins Improved opportunities to package products/services Improved information capture, sharing & analysis Experience and understanding of concentrated international markets

23 The CSM Competitive Advantage (cont d) Use of technical support to capture value v.i.u., product differentiation, new markets Global spread of operations and offices Minimal use of intermediaries Dedicated logistics solutions and freight trading

24 West Australian Iron Ore Graeme Hunt President WA Iron Ore & Boodarie Iron

25 Great Northern Highway BHP Billiton WA Iron Ore Business North West Boodarie Iron Plant Coastal Highway To Perth Finucane Is. Nelson Point PORT HEDLAND Great Northern Highway To Broome Nimingarra Yarrie Area of WA Iron Ore Operations Yandi Mine HAMERSLEY RANGE Mining Area C Ore Body 23/25 Mt Whaleback NEWMAN Jimblebar

26 WA Iron Ore Key Statistics Mt Whaleback shipped 900Mt of high quality Brockman ore since 1969 Yandi Fines high VIU (value-in-use) sees growing market demand shipped + 200Mt since 1992 Yandi Lump high quality pisolite lump product shipped 2.5Mt since 2000 Future Resources 1400Mt of low Phos Brockman resources still available in Newman area 1320Mt Pisolite and 1885Mt Marra Mamba ore types 1755Mt high Phos Brockman ore if market emerges Key Infrastructure 5 mines, 400km railway, 2 stockyards, 3 berths, 1,700 employees

27 Seaborne Iron Ore FOB Cost Curve Pellets US$/T Fines + Lump Samarco MACestim OB 23/25 Yandi Whaleback Jimblebar Goldsworthy Cumulative Production (Mtpa Fe)

28 WAIO Improved Productivity Number of Employees 2,800 2,600 2,400 2,200 2,000 1,800 1,600 1,400 1,200 1,000 YEM97 YEM98 YEM99 YEJ00 YEJ01 YTD02 Employee numbers Tonnes Sold per Employee 50,000 45,000 40,000 35,000 30,000 25,000 20,000 Tonnes sold per Employee

29 Success from Operating Excellence - Gross Loading Rate (Nelson Point) 6000 Tonnes per Hour YTD average 5086 YEJ01 average YEJ00 average Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun YTD Avg YEJ02 Actual

30 Success from Operating Excellence Loco Fuel Consumption 0.39 Monthly Fuel Consumption 0.37 Average Fuel (L/T) Feb-01 Mar-01 Apr-01 May-01 Jun-01 Jul-01 Aug-01 Sep-01 Month Oct-01 Nov-01 Dec-01 Jan-02 Feb-02 Mar-02

31 Adopting New Technology World s Longest Train Total Length Gross mass Total Mass (exc. Locomotives) Nett mass of Ore Total distance travelled Total running time kilometres 99,732.1 Tonnes 98,164.5 Tonnes 82,262.5 Wet Tonnes 276 kilometres 10 hours 4 minutes

32 Future Growth Strategy Incremental expansion of Newman and Yandi mines Develop new, high Value-in-Use products to provide steelmakers with competitive advantage: Yandi Lump MAC TM Lump and Fines Products & Capacity Expansion (PACE) Expanding rail and port capacity to meet market growth

33 Mining Area C Rail Spur Bulk Sample Pit 11 Blending stockpiles Electricity Substation Village Airstrip C Deposit Pit Outline

34 Mining Area C More than 800 million tonnes of iron ore in seven separate deposits US$213M (100%) capital expenditure (mine, processing & rail spur) 740,000 tonne bulk sample April 2002 Bulk sample product railed and processed First shipment scheduled to POSCO Production target late 2003 Capacity to 15Mtpa Ramp up in line with market demand POSMAC JV

35 Products & Capacity Expansion Project (PACE) Western Stockyard Works Stage 1 US$351M (100%) capital expenditure (port, mainline, environment) Upgrade under harbour tunnel to 10,000tph New berth approach jetty and conveyors Extend existing berth north and upgrade conveyor New 10,000tph shiploader New Western Stockyard 1.65Mt and Lump Rescreening Plant Water and power supplies upgraded Environmental berm Foundation for long term optimisation

36 Boodarie Iron The Way Forward

37 BMA Queensland Coal Dave Murray Chief Executive Officer BHP Billiton Mitsubishi Alliance (BMA)

38 BMA Queensland Coal Location of Assets Queensland Hard Coking Coal Exports Darwin Area of Assets Other Queensland Suppliers 37% Brisbane Perth Adelaide Melbourne Sydney Canberra BMA 63% Source: BHPB

39 BMA - Queensland Coal Operations Glenden Eungella Dam MACKAY Dalrymple Bay Coal Terminal Hay Point Coal SarinaTerminal Goonyella O/C ~8Mtpa Moranbah Nebo Peak Downs O/C ~8Mtpa Clermont Fairbairn Dam Capella EMERALD Dysart Saraji O/C ~5Mtpa Tieri Norwich Park O/C ~4Mtpa Gregory O/C ~1Mtpa Crinum U/G ~4Mtpa Bingegang Weir Blackwater Blackwater O/C ~14Mtpa Yeppoon ROCKHAMPTON RG Tanna Coal Terminal Barney Point Coal Terminal Springsure

40 BMA Business Structure BHP Billiton Mitsubishi 50% 50% BMA Owners Council CQCA JV: Gregory JV: Marketing; Peak Downs Mine Norwich Park Mine Blackwater Mine Goonyella Mine Saraji Mine Hay Point Terminal Gregory Mine Crinum Mine Singapore Brisbane

41 BHPB-Mitsui Business Glenden Riverside O/C ~3Mtpa Goonyella O/C ~8Mtpa Moranbah Eungella Dam Sth Walker Creek O/C ~4Mtpa Nebo MACKAY Dalrymple Bay Coal Terminal Hay Point Coal SarinaTerminal Peak Downs O/C ~8Mtpa Clermont Fairbairn Dam Capella EMERALD Dysart Saraji O/C ~5Mtpa Tieri Norwich Park O/C ~4Mtpa Gregory O/C ~1Mtpa Crinum U/G ~4Mtpa Bingegang Weir Blackwater Blackwater O/C ~14Mtpa Yeppoon ROCKHAMPTON RG Tanna Coal Terminal Barney Point Coal Terminal Springsure

42 Queensland Coal Business Structure BHP Billiton Mitsubishi 50% 50% BMA Owners Council Illawarra Coal CQCA JV: Gregory JV: Marketing; Peak Downs Mine Norwich Park Mine Blackwater Mine Goonyella Mine Saraji Mine Hay Point Terminal Gregory Mine Crinum Mine Singapore Brisbane BHP Billiton Mitsui & Co 80% 20% BHP Mitsui Coal P/L: Riverside Mine South Walker Creek Mine

43 BMA Business Key Statistics Annual Sales (100% terms) YEM90 (FY02 Projected) HCC 25.7Mt 35.2Mt WCC 3.1Mt 9.5Mt Thermal 1.2Mt 5.3Mt Total 30.0Mt 50.0Mt Employees 8,629 3,012 Marketable Reserves Operating Undeveloped 1,860Mt 151Mt Equipment Draglines Electric Shovels Haul Trucks Coal Haulers Dozers Other Mobile Equipment

44 Productivity Improvement BMA HCC Operations Illawarra Coal Operations FOB Cash Cost (US$/T) Appin Blackwater Tower Gregory/Crinum Norwich Park Riverside Peak Saraji Goonyella Downs Elouera West Cliff Cumulative Tonnes Exported (Millions) Source: BHPB, Barlow Jonker, Hill & Associates

45 Adopting New Technology - Universal Dragline (UDD) 32 Draglines ~70% of total material movement Current Dragline Movement 330 Million BCM s pa ~ 700 Million tonnes pa Projected 20% productivity improvement Potential Improvement Equivalent to 6 additional draglines Equivalent to new 10Mtpa mine at 1/3 capital cost STEP STEP CHANGE IN IN PRODUCTIVITY

46 Success from Operating Excellence YEJ01 4 completed projects (Increased plant yield, drill improvement [2 projects], dragline rope life projects) Actual Annualised Savings US$0.57M US$0.87M Revenue Increase US$1.08M US$4.34M FY02 11 completed projects, (Overburden drills, coal blasting, pre-strip improvement, automated stacker, dump station, increased ship loading, train loading [5] projects) Actual Annualised Savings/Revenue Increase US$1.24M US$2.68M FY02 31 active projects, (Train loadout and rail rebate optimisation ~US$3.25M pa) Savings/Revenue Increase Projected US$8.75M Full Time Coaches 6 Part Time Coaches 13 Total Actual Savings/Revenue Increases = US$9.9M

47 CAPRICORN HIGHWAY Future Growth Projects Goonyella Underground Development of low-capital, low-risk punch longwall in GMS Equipment ex:kenmare (3,000 tph) Flexible production Coal on Tap Gain experience in north Bowen Basin longwall mining Comet New Central Coal Processing Plant Expand production developing Kennedy area or additional tonnages for existing pits Town of Blackwater ML TCP COOK CPP Industrial Facility ML ML 1760 ML NCPP Proposed New CHPP COOK ML ML 1800 ML1 771 ML17 92 ML ML Mining Lease Mineral Development Licence Mined area Future mining ML1773 SCPP ML ML17 67 ML1 772 ML1 829 ML ML 139 ML70091 Kennedy Area MDL15 5 ML M DL1 55 MD L 189 Date

48 Illawarra Coal

49 BHP Billiton - Illawarra Coal Operations TOWER 123Mt Resource APPIN 316Mt Resource WEST CLIFF 246Mt Resource Care and Maintenance CORDEAUX 221Mt Resource 0 10 DENDROBIUM 359Mt Resource KILOMETRES Mined Area Current Mining Area Portal ELOUERA 150Mt Resource O BRIEN S DRIFT Kemira Valley Wollongong PORT KEMBLA COAL TERMINAL PORT KEMBLA STEELWORKS

50 Export Hard Coking Coal FOB Cost Curve BMA HCC Operations Illawarra Coal Operations FOB Cash Cost (US$/T) Blackwater Norwich Park Gregory/Crinum Riverside Goonyella Appin Peak Downs Tower Saraji Elouera West Cliff Source: BHPB, Barlow Jonker, Hill & Associates Cumulative Tonnes Exported (Millions)

51 Illawarra Coal Optimisation of Operations Mt Actual Production Tonnes Forecast Production Tonnes Elouera Dendrobium 6 5 Tower 4 3 Cordeaux West Cliff 2 1 Appin

52 Future Growth Strategies Rationalisation and Consolidation of Operations Appin-West Cliff hub New longwall equipment at West Cliff Dendrobium Development Underpinned by: 30 Year Coal Supply Contract with BHP Steel 30 year contract valued in excess of US$4 Billion

53 Manganese

54 BHP Billiton Manganese Operating Units MMC MMC Nelspruit Krugersdorp Hotazel Johannesburg Meyerton Metalloys Advalloy Saldanha Bay SOUTH AFRICA Port Elizabeth AUSTRALIA GEMCO Groote Eylandt TEMCO Bell Bay

55 Manganese Ore FOB Cost Curve US$/mtu Mamatwan Wessels Gemco Cumulative Production ('000tMn) Source: BHPB

56 Manganese Ferro Alloy HCFeMn Cash Cost Curve (78% Mn equivalent) US$/t Metalloys Temco Cumulative Production (Kt) Note: Represents approximately 70% of current market Source: BHPB

57 Manganese - Improved Productivity Number of Employees Tonnes sold per Employee 0 YEM97 YEM98 YEM99 YEJ00 YEJ01 Employee Numbers Tonnes Sold / Employee 0

58 Samarco Iron Ore

59 Samarco Iron Ore Operations IRON QUADRANGLE Belo Horizonte CVRD Railroad SAMARCO Mine Tubarão Vitória ATLANTIC OCEAN SLURRY PIPELINE 396 Km PONTA UBU TERMINAL BRASILIA Rio de Janeiro IRON QUADRANGLE VITÓRIA RIO DE JANEIRO

60 Seaborne Iron Ore FOB Cost Curve Pellets US$/T Fines + Lump Samarco MACestim OB 23/25 Yandi Whaleback Jimblebar Goldsworthy Cumulative Production (Mtpa Fe)

61 Conclusion

62 Cost Savings (FYTD) Actual vs 2% Real Target 50% 40% 30% Actual Target 20% 10% 0% 10 yr 5 yr 10 yr 5 yr Iron Ore Met Coal

63 Cost Reduction Ways to reduce costs Drivers for cost reduction Maintain Margins (LT Price fl) 3 year target (US$500M) Sustainable Activities Investment in Technology Re-engineering - Organisation - Process Operation Optimisation Portfolio Management Management focus / leadership (Currency devaluation) Avoidance / Deferral Activities To reduce unit costs Universal dragline Electronic Detonators Upgrade Equipment P, Operating Excellence EBIT Model, Outsourcing, SBS Illawarra, RSA Mn Synergy Extraction Divest High Cost Operations Performance Targets, Appropriate Overheads Reduce Sustaining Capital, Maintenance, Support activities(eg training), Squeeze Working Capital, etc By overriding margins Pump Tonnes

64 Sensitivities FX Impact on CSM EBIT Australian Dollar (US 1 / A$) WA iron Ore US$10.0M Queensland Coal US$16.5M Illawarra Coal US$3.0M Manganese US$2.0M South African Rand (10 Rand / US$) Manganese US$1.0M

65 CSM Prudently Grow Business Value Plan to grow Business Value by US$1 billion plus by More than 50% of target in execution NPV US$M Growth Projects Total Manganese Illawarra QLD Coal Samarco Iron Ore Yandi Lump MAC-PACE Dendrobium Future Projects Total Other Pipeline Projects

66 BACKUP SLIDES

67 Carbon Steel Materials Financial Results (FYTD comparison) Nine Months to March 2002 Turnover EBITDA Depn & Amort EBIT Capex WAIO Samarco Total Iron Ore Queensland Illawarra Total Met Coal Manganese Boodarie Iron 122 (75) (75) 23 Divisional Adjust (36) (12) (12) 3rd party products 17 Total Nine Months to March 2001 Turnover EBITDA Depn & Amort EBIT Capex WAIO Samarco Total Iron Ore Queensland Illawarra Total Met Coal Manganese Boodarie Iron 51 (101) (101) 25 Divisional Adjust (22) (1) (1) 3rd party products 29 Total