BHP Billiton Iron Ore - A Growth Story Michiel Hovers Vice President, Iron Ore Marketing 28 th February 2012
Disclaimer Forward-Looking Statements This presentation includes forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995 regarding future events, conditions, circumstances and the future financial performance of BHP Billiton, including for capital expenditures, production volumes, project capacity, and schedules for expected production. Often, but not always, forward-looking statements can be identified by the use of the words such as plans, expects, expected, scheduled, estimates, intends, anticipates, believes or variations of such words and phrases or state that certain actions, events, conditions, circumstances or results may, could, would, might or will be taken, occur or be achieved. These forward-looking statements are not guarantees or predictions of future performance, and involve known and unknown risks, uncertainties and other factors, many of which are beyond our control, and which may cause actual results to differ materially from those expressed in the statements contained in this presentation. For more detail on those risks, you should refer to the sections of our annual report on Form 20-F for the year ended 30 June 2011 entitled Risk factors, Forward looking statements and Operating and financial review and prospects filed with the U.S. Securities and Exchange Commission. All estimates and projections in this presentation are illustrative only. Our actual results may be materially affected by changes in economic or other circumstances which cannot be foreseen. Nothing in this presentation is, or should be relied on as, a promise or representation either as to future results or events or as to the reasonableness of any assumption or view expressly or impliedly contained herein. No Offer of Securities Nothing in this presentation should be construed as either an offer to sell or a solicitation of an offer to buy or sell BHP Billiton securities in any jurisdiction. Reliance on Third Party Information The views expressed in this presentation contain information that has been 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. This presentation should not be relied upon as a recommendation or forecast by BHP Billiton. Slide 2
Disclaimer Mineral Resources and Ore Reserves This presentation includes information on Mineral Resources (inclusive of Ore Reserves) and Ore Reserves. These have been compiled by: P Whitehouse (MAusIMM) Western Australian Iron Ore (WAIO) who is employed by BHP Billiton at the time of reporting. This is based on information in the BHP Billiton Annual Reports from 2007 to 2011 and other investor presentations which can be found at www.bhpbilliton.com, All information is reported under the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves, 2004 (the JORC Code). The Compiler verifies that this report is based on and fairly reflects the Mineral Resources and Ore Reserve information in the supporting documentation and agrees with the form and context of information presented. Ore Reserve and Mineral Resource classification are contained in Table 1. Table 1 Proved Reserve (Bt) Probable Reserve (Bt) Measured Resource (Bt) Indicated Resource (Bt) Inferred Resource (Bt) FY2011 1.4 2.1 2.2 3.9 13.2 FY2010 1.3 2.0 1.9 3.5 10.7 FY2009 1.3 1.8 1.8 3.2 7.5 FY2008 1.5 1.5 2.0 2.9 6.8 FY2007 1.3 1.1 1.7 2.1 4.2 Slide 3
Structural drivers of demand remain intact Cautious on the short term economic outlook for the developed world and Europe in particular No simple solution for the structural imbalances and high levels of sovereign indebtedness in the OECD The longer term structural drivers of industrialisation and urbanisation in the developing world remain intact Commodities demand will evolve as emerging economies transition from construction to consumption based growth As a uniquely diversified resources company, BHP Billiton is well positioned for this transition Chinese GDP growth by province (% year on year, 2010) 10% 8-9% <8% Source: EIU, BHP Billiton analysis. Slide 4
Urbanisation and industrialisation drive long-term commodity demand Projected urbanisation of India, China and Rest of World (billion people) Total Population (billion people) 0.9 1.1 3.3 1.2 1.4 4.3 1.5 1.5 5.4 1.6 1.4 6.1 Urbanisation 25% 27% 53% 30% 47% 57% 40% 62% 63% (%) Source: Population Division of the Department of Economic and Social Affairs of the United Nations Secretariat, McKinsey 2010. 54% 73% 71% Slide 5
China s cities will entail higher rise living than in most other countries as land p pressures grow g Paris: 7 7,877,000 877 000 people 893 km2 Jakarta: 14,908,000 people 2,942,9 km2 Berlin: 4,212,000 people 1,176 km2, Moscow: 8,543,000 people 470 km2 Shanghai: 7,397,000 people 244 km2 London: 6,626,000 people 1,062 km2 New York: 10,752,000 people 2,674 km2 Source: Chreod Michiel Hovers, Vice President Iron Ore Marketing, 28th February 2012 Slide 6
Many large Chinese provinces are still in the early stages of the steel intensity curve Chinese steel intensity by province vs. GDP per capita Finished steel consumption per capita 2010 (kg) Shanghai 19m Sichuan 82m Guizhou 38m Shandong 95m Henan 95m Zhejiang 52m Jiangsu 77m Guangdong 96m Tianjin 12m Beijing 18m Avg Eastern region = 759kg Country Average = 445kg Avg Western region = 297kg Avg Central region = 295kg GDP per capita 2010 (US$) Note: Bubble size reflects 2010 population of each province. Source: DRC Report, NBS, BHP Billiton analysis. Slide 7
Despite strong growth, China s 2025 projections still lag current US comparables China annual car production (million units) +155% Car penetration density (number of cars per thousand persons) China urban residential floor space (year-end stock, billion square metres) +100% Urban residential floor space per capita (square metres/capita) Source: Global insight, BHP Billiton. Sources: Country statistics bureau, McKinsey, BHP Billiton. Factors and Figures of US Automobile Industry 1920, www.demographia.com. Slide 8
Global seaborne iron ore demand to grow strongly gy China and ROW total iron ore consumption vs. Seaborne iron ore demand (Index, 2000 Seaborne Trade as 100) 600 500 400 300 CAGR 2000-2010 2010-2020 World Iron Ore Consumption 6.1% 3.5% World Seaborne Iron Ore Demand 8.4% 4.4% ROW Iron Ore Consumption World Seaborne Iron Ore Demand 200 100 China Iron Ore Consumption - 2000 2005 2010 2015 F 2020 F Source: GTIS, IISI, BHP Billiton Slide 9
Supply likely to underperform, industry wide capital cost pressures are real Seaborne traded supply growth has failed to meet expectations (Mtpa) Australian iron ore project conveyor belt (capital intensity, US$ per tonne) ~ 55% supply growth not delivered Note: Aspirational iron ore supply based on BHP Billiton analysis as of early 2008. Source: BHP Billiton analysis. Source: Company announcements and BHP Billiton. Note: Bubble size represents annual production capacity. Slide 10
Optimum position on the cost curve Cost curve for iron ore fines (US$/t, CIF China Equivalent basis) Supply shortages have resulted in high cost marginal producers filling the supply base BHP Billiton retained a favourable position on the cost curve despite industry wide cost pressures Competitive position is underscored dby the quality of our resources BHP BHP Billiton Billiton Cumulative volume (million tonnes) Source: Macquarie Research, January 2012 Slide 11
Supported by a world class resource base Mineral resource more than doubled in 5 years......within a concentrated geography BHP Billiton WAIO resources and reserves 2007-2011 (wet billion tonnes) Port Hedland Outer Harbour Finucane Island Boodarie Nelson Point YARRIE Port Hedland Newman Railway 0 100km Yandi MAC South Flank Existing Future Marillana Jinidi OB 23/25 OB 18 Newman Jimblebar Wheelarra ~250km Note: Refer to disclaimer on slides 3 Slide 12
BHP Billiton s WAIO is in a phase of unprecedented growth to meet increased demand BHP Billiton s Western Australia Iron Ore (WAIO) production profile (Mtpa, 100%) 500 450 400 350 Fully utilise allocated Inner Harbour capacity (approved 220Mtpa + debottlenecking to 240Mtpa) Growth mines (Jinidi, South Flank, Marillana) and launch Outer Harbour ~350 Scale the Outer Harbour ~450 2 300 250 200 150 Future growth options 155Mtpa to +220Mtpa investment 144 1 100 50 0 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 1. Including approved expansion to 220Mtpa and debottlenecking incremental investment to 240Mtpa. 2. Subject to further studies and optimisation. Slide 13
Growth Master Plan: Roadmap to 350mtpa and beyond Existing Future Port Hedland Outer Harbour Finucane Island Boodarie Nelson Point Yarrie Port Hedland Newman Railway Marillana BHP Billiton Yandi MAC Jinidi South Flank OB 23/25 Jimblebar Newman OB 18 Wheelarra 0 100km Board approved +220mtpa expansion Fully utilise Inner Harbour: Additional two berths at Burgess Point Car Dumper 5 at Finucane Island Mooka marshalling yards Inner Harbour optimisation to 240mtpa currently under study Growth tonnes: Jimblebar mine expansion Study phase: 350mtpa expansion Outer Harbour development: Optionality for port blending Supporting rail expansions Growth tonnes: Jinidi, Marillana and South Flank Expansion to ~450mtpa Expand the Outer Harbour Greenfield portfolio of mines Further studies and optimisation Slide 14
Inner Harbour development: Fulfilling our allocated capacity US$7.4 billion 1 to relieve the bottleneck at port, unlocking latent capacity at mine and rail Mine US$3.4 billion Delivers additional mining capacity Jimblebar mine expansion and associated infrastructure to deliver 35mtpa of additional mining capacity Embedded options for expansion to 55mtpa 2 for marginal incremental capital investment Port US$2.3 billion Increases port system capacity Two additional berths and shiploaders at Burgess Point (Nelson Point) and additional car dumper capacity at Finucane Island Optim misation US$1.7 billion Increases resource utilisation and facilitates further growth Port blending facilities at Nelson Point and Finucane Island Rail marshalling yards at Mooka Enables ore blending All figures quoted in 100% terms. 1. Approved March 2011. Excludes pre-commitment funding and investment in debottlenecking. 2. Relates to expansion from 220mtpa to 240mtpa. Slide 15
Outer Harbour development: Unlocking the next phase of growth Designed as a robust, scalable operating system to be constructed in stages Boodarie stockyards enable the port blending strategy at higher tonnages to support resource rce optimisation Marine capacity (channel and harbour) supports expansion to ~450mtpa 1 pp p p Strong support from State Government Public Environmental Review / Draft Environmental Impact Statement submitted in FY11 Pre-commitment funding of US$917 million 2 has been approved in February 2012 1. Including optimisation. 2. BHP Billiton share US$779 million Slide 16
Yandi mining hub Yandi mining hub: Remote primary crushers Ore handling plant 3 (OHP3) Stockpiling facilities Non-process infrastructure including accommodation village, offices, and workshops to support mining activities Yandi mining hub As at 26 July 2011 Slide 17
Jimblebar mining hub Jimblebar mine project: power facilities Jimblebar mine project: accommodation village Slide 18
Mainline duplication Mainline duplication: 285km+ of double tracking Ore cars and locomotives Upgrades to railroad signalling, controls and communication systems Mainline duplication As at 27 July 2011 Michiel Hovers, Vice President Iron Ore Marketing, 28th February 2012 Slide 19
Port Developments Inner harbour Finucane Island: 2 New Berths/Shiploaders commissioned in 2011 Nelson Point: 2 New Berths/Shiploaders under construction Slide 20
Finucane Island car dumper 5 cell assembly Car Dumper 5 Cell Assembly Slide 21
Finucane Island car dumper 5 earthworks As at 15 October 2011 Slide 22
New berths and shiploaders at Nelson Point Nelson Point: Burgess Point preparing for Shiploader 6 As at 15 October 2011 Slide 23
Infrastructure constructed in China Chinese suppliers are heavily engaged in supplying key infrastructure facilities and major equipment Mining Camp (for 1000 people) installed at Port Haven in WA Ship-loader assembled in China Slide 24
Short-term pricing provides more transparency and efficiency BHP Billiton contract structure Before Now Annual priced LTC Monthly index LTC Quarterly index LTC Spot Spot Market evolution BHP Billiton is an active participant in spot market We remain committed to long-term contracts BHP Billiton is together with a group of steel mills, traders and other producers supporting the establishment of a physical trading platform, which will bring increased transparency to the spot market 100% of long-term contracts converted to index linked pricing Slide 25