Filed by: BHP Billiton Plc
and BHP Billiton Limited
Pursuant to Rule 425 under the Securities Act of 1933
Subject Company: Rio Tinto Plc
Commission File No.: 001-10533
The following are slides comprising an investor presentation that was first given on March 5, 2008.
 February
2008 Investor Presentation |
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2 Disclaimer This document has been prepared by BHP Billiton Ltd and BHP Billiton Plc (“BHP Billiton") and comprises the written materials/slides for a presentation concerning BHP Billiton's offer for Rio Tinto Ltd and Rio Tinto plc (“Rio Tinto”). By reviewing/attending this presentation you agree to be bound by the following conditions. The directors of BHP Billiton accept responsibility for the information contained in this presentation. Having taken all reasonable care to ensure that such is the case, the information contained in this presentation is, to the best of the knowledge and belief of the directors of BHP Billiton, in accordance with the facts and contains no omission likely to affect its import. Subject to the above, neither BHP Billiton nor any of its directors, officers, employees or advisers nor any other person makes any representation or warranty, express or implied, as to, and accordingly no reliance should be placed on, the fairness, accuracy or completeness of the information contained in the presentation or of the views given or implied. To the extent permitted by law, neither BHP Billiton nor any of its directors, officers, employees or advisers nor any other person shall have any liability whatsoever for any errors or omissions or any loss howsoever arising, directly or indirectly, from any use of this information or its contents or otherwise arising in connection therewith. This presentation is for information purposes only and does not constitute or form part of any offer or invitation to acquire, sell or otherwise dispose of, or issue, or any solicitation of any offer to sell or otherwise dispose of, purchase or subscribe for, any securities, nor does it constitute investment advice, nor shall it or any part of it nor the fact of its distribution form the basis of, or be relied on in connection with, any contract or investment decision, nor does it constitute a proposal to make a takeover bid or the solicitation of any vote or approval in any jurisdiction, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction (or under an exemption from such requirements). No offering of securities shall be made into the United States except pursuant to registration under the US Securities Act of 1933, as amended, or an exemption therefrom. Neither this presentation nor any copy of it may be taken or transmitted or distributed or redistributed (directly or indirectly) in Japan. The distribution of this document in other jurisdictions may be restricted by law and persons into whose possession this document comes should inform themselves about, and observe, any such restrictions. This presentation is directed only at persons who (i) are persons falling within Article 49(2)(a) to (d) ("high net worth companies, unincorporated associations etc.") of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (as amended) (the "Order") or (ii) have professional experience in matters relating to investments falling within Article 19(5) of the Order or (iii) are outside the United Kingdom (all such persons being referred to as "relevant persons"). This presentation must not be acted on or relied on by persons who are not relevant persons. Information about Rio Tinto is based on public information which has not been independently verified. Certain statements in this presentation are forward-looking statements. The forward-looking statements include statements regarding contribution synergies, future cost savings, the cost and timing of development projects, future production volumes, increases in production and infrastructure capacity, the identification of additional mineral Reserves and Resources and project lives and, without limitation, other statements typically containing words such as "intends", "expects", "anticipates", "targets", "plans", "estimates" and words of similar import. These forward-looking statements speak only as at the date of this presentation. These statements are based on current expectations and beliefs and, by their nature, are subject to a number of known and unknown risks and uncertainties that could cause actual results, performance and achievements to differ materially from any expected future results, performance or achievements expressed or implied by such forward-looking statements. The forward-looking statements are based on numerous assumptions regarding BHP Billiton's present and future business strategies and the environments in which BHP Billiton and Rio Tinto will operate in the future and such assumptions may or may not prove to be correct. There are a number of factors that could cause actual results or performance to differ materially from those expressed or implied in the forward-looking statements. Factors that could cause actual results or performance to differ materially from those described in the forward-looking statements include, but are not limited to, BHP Billiton's ability to successfully combine the businesses of BHP Billiton and Rio Tinto and to realise expected synergies from that combination, the presence of a competitive proposal in relation to Rio Tinto, satisfaction of any conditions to any proposed transaction, including the receipt of required regulatory and anti-trust
approvals, Rio Tinto’s willingness to enter into any proposed transaction,
the successful completion of any transaction, as well as additional factors such as changes in global, political, economic, business, competitive, market or regulatory forces, future exchange and interest rates, changes in tax rates, future business combinations or dispositions and the outcome of litigation and government actions. Additional risks and factors that could cause BHP Billiton results to differ materially from those described in the forward-looking statements can be found in BHP Billiton's filings with the US Securities and Exchange Commission ("SEC"), including BHP Billiton's Annual Report on Form 20-F for the fiscal year-ended June 30, 2007, and Rio Tinto’s and Alcan's filings with the SEC, including Rio Tinto’s Annual Report on Form 20-F for the fiscal year-ended December 31, 2006 and Alcan’s Annual Report on Form 20-F for the fiscal year-ended December 31, 2006, which are available at the SEC's website (http://www.sec.gov). Other unknown or unpredictable factors could cause actual results to differ materially from those in the forward-looking statements. The information and opinions expressed in this presentation are subject to change without notice and BHP Billiton expressly disclaims any obligation (except as required by law or the rules of the UK Listing Authority and the London Stock Exchange, the UK Takeover Panel, or the listing rules of ASX Limited) or undertaking to disseminate any updates or revisions to any forward-looking statements contained herein to reflect any change in BHP Billiton’s expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based. BHP Billiton Offer for Rio Tinto |
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3 Disclaimer (continued) None of the statements concerning expected cost savings, revenue benefits (and resulting incremental EBITDA) and EPS accretion in this presentation should be interpreted to mean that the future earnings per share of the enlarged BHP Billiton group for current and future financial years will necessarily match or exceed the historical or published earnings per share of BHP Billiton, and the actual estimated cost savings and revenue benefits (and resulting EBITDA enhancement) may be materially greater or less than estimated. Information Relating to the US Offer for Rio Tinto plc BHP Billiton plans to register the offer and sale of securities it would issue to Rio Tinto plc US shareholders and Rio Tinto plc ADS holders by filing with the SEC a Registration Statement (the “Registration Statement”), which will contain a prospectus (“Prospectus”), as well as other relevant materials. No such materials have yet been filed. This communication is not a substitute for any Registration Statement or Prospectus that BHP Billiton may file with the SEC. U.S. INVESTORS AND U.S. HOLDERS OF RIO TINTO PLC SECURITIES AND ALL HOLDERS OF RIO TINTO PLC ADSs ARE URGED TO READ ANY REGISTRATION STATEMENT, PROSPECTUS AND ANY OTHER DOCUMENTS MADE AVAILABLE TO THEM AND/OR FILED WITH THE SEC REGARDING THE POTENTIAL TRANSACTION, AS WELL AS ANY AMENDMENTS AND SUPPLEMENTS TO THOSE DOCUMENTS, WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION. Investors and security holders will be able to obtain a free copy of the Registration Statement and the Prospectus as well as other relevant documents filed with the SEC at the SEC's website (http://www.sec.gov), once such documents are filed with the SEC. Copies of such documents may also be obtained from BHP Billiton without charge, once they are filed with the SEC. Information for US Holders of Rio Tinto Ltd Shares BHP Billiton Ltd is not required to, and does not plan to, prepare and file with the SEC a registration statement in respect of the Rio Tinto Ltd Offer. Accordingly, Rio Tinto Ltd shareholders should carefully consider the following: The Rio Tinto Ltd Offer will be an exchange offer made for the securities of a foreign company. Such offer is subject to disclosure requirements of a foreign country that are different from those of the United States. Financial statements included in the document will be prepared in accordance with foreign accounting standards that may not be comparable to the financial statements of United States companies. Information Relating to the US Offer for Rio Tinto plc and the Rio Tinto Ltd Offer for Rio Tinto shareholders located in the US It may be difficult for you to enforce your rights and any claim you may have arising under the U.S. federal securities laws, since the issuers are located in a foreign country, and some or all of their officers and directors may be residents of foreign countries. You may not be able to sue a foreign company or its officers or directors in a foreign court for violations of the U.S. securities laws. It may be difficult to compel a foreign company and its affiliates to subject themselves to a U.S. court's judgement. You should be aware that BHP Billiton may purchase securities of either Rio Tinto plc or Rio Tinto Ltd otherwise than under the exchange offer, such as in open market or privately negotiated purchases. References in this presentation to “$” are to United States dollars unless otherwise specified. BHP Billiton Offer for Rio Tinto |
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4 The largest mining company by market capitalisation US$B Market Capitalisation as at 31 January 2008 0 20 40 60 80 100 120 140 160 180 200 220 *Rio Tinto Market Cap = Market Cap of Rio Tinto Plc + 62.6% of Market Cap of Rio Tinto Ltd
(due to Rio Tinto Plc’s approximate 37.4% holding of Rio Tinto Ltd, as per www.riotinto.com/investors/590 data book.asp)
**Market value may be unreliable due to a high percentage of non free-float shares. Sources: Investments and Value Management, Datastream, Bloomberg
|
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5 Structure driven by customer needs Petroleum Energy Coal Metallurgical Coal Manganese Iron Ore Stainless Steel Materials Base Metals Aluminium Diamonds & Spec Prod Note: Location of dots indicative only |
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6 Core strategy is unchanged Focus on value creation • People • Run current assets at full potential • Accelerate development projects • Create future options People ‘Licence to Operate’ World Class Assets The BHP Billiton Way (Value Added Processes) Financial Strength and Discipline Project Pipeline Growth Options People ‘Licence to Operate’ World Class Assets The BHP Billiton Way (Value Added Processes) Financial Strength and Discipline Project Pipeline Growth Options |
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7 Highlights – Half year ended December 2007 • Strong operating and financial results • Cost control focus is yielding excellent results • Project delivery – first production from seven new projects • Healthy volume growth from new production expected in FY 2008 • A further four projects approved • Interim dividend increased 45% to 29 US cents per share • Longer term fundamentals remain strong |
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2006 % Change Underlying EBIT by Customer Sector Group 2007 Half year ended December (US$m) Petroleum 1,972 1,612 +22 Aluminium 680 840 -19 Base Metals (including Uranium) 3,367 2,889 +17 Diamonds & Specialty Products 72 78 -8 Stainless Steel Materials 799 1,427 -44 Iron Ore 1,673 1,404 +19 Manganese 431 105 +311 Metallurgical Coal 523 657 -20 Energy Coal 277 242 +15 Group & Unallocated Items (1) (171) (120) BHP Billiton (Total) 9,623 9,134 +5 (1) Includes Technology |
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9 Declining rate of cost increase H1 FY2005 and H2 FY2005 are shown on the basis of UKGAAP. Other periods are calculated under IFRS. All periods excluded third party trading. 4.0% 2.2% 3.0% 1.7% 5.5% 8.4% 5.9% 4.5% 4.3% 5.8% 6.7% 5.6% 4.9% 3.9% 0% 1% 2% 3% 4% 5% 6% 7% 8% 9% H1 FY2005 H2 FY2005 H1 FY2006 H2 FY2006 H1 FY2007 H2 FY2007 H1 FY2008 Total Excl Non-Cash Operating cost increase relative to preceding half year |
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10 Outlook – long term fundamentals strong, shorter term more fluid 0 1,000 2,000 3,000 4,000 5,000 India China 40 42 44 46 48 50 52 54 56 58 Jan-07 Apr-07 Jul-07 Oct-07 Gross domestic product (US$bn) ISM purchasing manufacturers index Source: International Monetary Fund Source: Thomson Financial |
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11 China’s growth driven by domestic demand… Asian export markets more important than the US 0 5 10 15 20 25 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007F Consumption Investment Inventories Net Exports Source: CEIC Data Co. Ltd (February 2008), BHP Billiton Estimates for CY2007
Composition of Chinese GDP (RMB trillions) Destination of Chinese exports 24% 46% 21% 9% Europe Other North America Asia |
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12 Can Chinese consumption growth offset the shorter term slow down in the US? 0 10 20 30 40 50 60 70 80 90 100 Iron Ore Copper Energy China India USA Europe Share of Consumption (2007, %) China Share of Incremental Demand (1997-2007, %) 0 10 20 30 40 50 60 70 80 90 100 Iron Ore Copper Energy Sources of data: CRU Quarterly Reports (January 2008); IISI – Steel Statistical Yearbook (December 2007); BP Statistical Review of World Energy June 2007 |
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13 A unique balance across high margin CSM, non ferrous and energy commodities 0% 10% 20% 30% 40% 50% 60% 70% 80% Diamonds Aluminium Nickel Copper Ag/Pb/Zn Energy Coal Petroleum Met Coal Manganese Iron Ore Note: EBITDA margin excludes third party trading. EBITDA excluded third party trading and Group and Unallocated. EBITDA margin H1 FY 2008 EBITDA H1 FY 2008 (Total = US$11.4bn) CSM Energy Non Ferrous Other 49% 24% 26% 1% Non Ferrous CSM Energy Other |
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14 Future growth from high quality opportunities Future Options 2010 2008 As at 6 February 2008 Proposed capital expenditure <$500m $501m-$2bn $2bn+ Feasibility Execution Scarborough SSM Petroleum D&SP Energy Coal Aluminium Iron Ore Base Metals Met Coal Manganese CSG 2013 Guinea Alumina Samarco 4 Nimba Worsley E&G Pyrenees Samarco Perseverance Deeps Navajo Sth Ekati Canadian Potash Thebe Browse LNG WA Iron Ore Quantum 2 CW Africa Exploration CW Africa Exploration Goonyella Expansions GEMCO Exp CMSA Pyro Expansion Olympic Dam Expansion 1 Puma Puma CMSA Heap Leach 2 Olympic Dam Expansion 2 Olympic Dam Expansion 3 Neptune Shenzi WA Iron Ore RGP 4 NWS T5 Cliffs Cerrejon Opt Exp Escondida 3rd Conc Angola & DRC Caroona WA Iron Ore RGP 5 SA Mn Ore Exp Resolution Corridor Sands I Angostura Gas NWS Angel WA Iron Ore Quantum 1 Saraji MKO Talc Gabon Newcastle Third Port Alumar Atlantis North Yabulu Klipspruit Kipper GEMCO Zamzama Phase 2 Macedon Maruwai Stage 1 Turrum Neptune Nth CMSA Heap Leach 1 Knotty Head Eastern Indonesian Facility Red Hill UG Kipper Ph 2 NWS CP Corridor Sands II Wards Well RBM Daunia Boffa/Santou Refinery Peak Downs Exp Shenzi Nth Maya Nickel DRC Smelter Mad Dog SWR KNS Exp Cannington Life Ext Hallmark Blackwater UG NWS WFG Kennedy Douglas- Middelburg NWS Nth Rankin B Mt Arthur Coal UG Bakhuis Maruwai Stage 2 |
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15 Development spend in high margin businesses Note: Represents pipeline projects in execution, feasibility does not include pre-feasibility
projects. EBITDA margins for business in 12 months to 31 December 2007 not for individual projects. EBITDA margin excluded third party trading. Source: BHP Billiton estimates. 0% 10% 20% 30% 40% 50% 60% 70% 80% Petroleum Iron Ore Aluminium Development pipeline capex (Total US$16.1bn) EBITDA margins (12 months to December 2007) Petroleum Aluminium Iron Ore Other 24% 33% 28% 15% |
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16 Strong cash flow - delivering value to shareholders 0 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 18,000 FY2002 FY2003 FY2004 FY2005 FY2006 FY2007 FY2008 H1 H2 0 1500 3000 4500 6000 7500 9000 FY2002 FY2003 FY2004 FY2005 FY2006 FY2007 FY2008 Available Cash Flow (US$m) Available Cash Flow (US$m) Organic Growth¹ (US$m) Return to Shareholders² (US$m) (1) Capital and Exploration FY expenditures (exclude acquisitions). (2) Dividends paid and share buy-backs. (3) FY2005, FY2006, FY2007 and H1 FY2008 have been calculated on the basis of the IFRS. Prior periods have been calculated on the basis of UKGAAP. 0 1500 3000 4500 6000 7500 9000 FY2002 FY2003 FY2004 FY2005 FY2006 FY2007 FY2008 |
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17 Summary • Continued excellent operating and financial results • Unique portfolio balance provides stability • Project pipeline and global footprint to support future growth • Longer term outlook for global growth remains robust |
 BHP
Billiton’s offer to acquire Rio Tinto |
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19 Background to the offer • Early 2007: BHP Billiton discussed a merger of equals. This concept was
rejected by Rio Tinto • 1 November 2007: BHP Billiton made a confidential proposal to combine the companies. Rio Tinto rejected the proposal and refused to enter discussions • 8 November 2007: BHP Billiton confirmed it had approached Rio Tinto with a
proposal • 12 November 2007: BHP Billiton announced the proposal following market speculation. Since then: – Global roadshow has indicated a clear understanding of the industrial logic of the
combination – Rio Tinto has refused to engage to discuss the proposal • 21 December 2007: BHP Billiton required to “put up or shut up” by 6 February 2008 • 1 February 2008: Chinalco acquires a c.12% stake in Rio Tinto plc • 6 February 2008: BHP Billiton announced offers for all of the outstanding shares of
Rio Tinto BHP Billiton Offer for Rio Tinto |
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20 BHP Billiton offer for Rio Tinto Rio Tinto plc Offer: • Rio Tinto plc shareholders will receive 3.4 BHP Billiton shares for every Rio Tinto plc
share held – 80% in BHP Billiton Plc shares – 20% in BHP Billiton Ltd shares • Separate US offer (which forms part of the Rio Tinto plc Offer) to: – US resident shareholders of Rio Tinto plc shares – All holders of Rio Tinto plc ADRs • UK CGT rollover relief expected to be available for UK resident shareholders accepting the
Rio Tinto plc Offer if there are approximately 70% acceptances under the Rio Tinto plc Offer Rio Tinto Ltd Offer: • Rio Tinto Ltd shareholders will receive 3.4 BHP Billiton Ltd shares for every Rio Tinto Ltd
share held • If compulsory acquisition is reached in the Rio Tinto Ltd Offer, then Australian CGT rollover relief is expected to be available for Australian resident shareholders accepting the Rio Tinto Ltd Offer (a) With a “mix and match” facility Notes: a) To reach the compulsory acquisition thresholds in respect of Rio Tinto Ltd, some or all of the Rio Tinto plc holding in Rio Tinto Ltd will need to be accepted into the Rio Tinto Ltd Offer by Rio Tinto plc or ASIC will need to provide relief from the Australian Corporations Act. ASIC has indicated that it would consider an
application for this relief, if it becomes apparent that the Rio Tinto plc holding is having a clear defensive effect. BHP Billiton Offer for Rio Tinto |
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21 BHP Billiton offer for Rio Tinto • Offers are inter-conditional • Subject to pre-conditions relating to certain anti-trust clearances in the EU, the
US, Australia, Canada and South Africa and FIRB approval in Australia
• Conditional on more than 50% acceptances in respect of publicly-held shares • Subject to BHP Billiton shareholder approval and other terms and conditions set out in the offer announcement • Maintenance of BHP Billiton’s progressive dividend policy • Proposed initial share buyback of up to US$30bn following completion if the offer is
successful (a) – Buyback and any refinancing of Rio Tinto’s borrowings to be funded through a combination of a US$55bn committed bank financing facility, cash flow from operations, asset disposal proceeds and, if required, debt financing • Target single A credit rating • DLC structure maintained Notes: a) i.e. if BHP Billiton acquires 100% of the shares in Rio Tinto Limited and Rio Tinto plc on the 3.4:1 offer terms announced offer terms. BHP Billiton Offer for Rio Tinto |
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22 Unlocking value – Why a combination with Rio Tinto? • Combined entity will have a unique portfolio of tier 1 assets – Enhanced ability to optimise and high-grade portfolio – Greater diversity and reduced value at risk – Combination makes sense in both a rising and a falling market • Uniquely positioned to meet the growing demands of the global economy – largely driven by China growth • Expected material quantifiable synergies and financial benefits unique to this
combination (a) – US$1.7bn nominal per annum from cost savings – US$2.0bn additional nominal per annum primarily from volume acceleration – Other combination benefits • Broader stakeholders will benefit – Customers – more product, more quickly and more efficiently – Communities, employees and developing countries Notes: a) Estimated incremental EBITDA based on publicly available information. To be read in conjunction with the notes in Appendix IV of BHP Billiton’s announcement dated 6-Feb-2008. Full run rate synergies expected by year 7. BHP Billiton Offer for Rio Tinto |
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23 Indicative timetable Event Date Satisfaction of regulatory approval pre-conditions Second half of 2008 Posting of offer documents for Rio Tinto plc Offer and Rio Tinto Ltd Offer to shareholders Day 0 (Within 28 days after the pre-conditions are satisfied) Last date for fulfilment of minimum acceptance condition in Rio Tinto plc Offer Day 60 Last date for fulfilment of all conditions to the Rio Tinto plc Offer and all conditions to the Rio Tinto Ltd Offer (because offers are inter-conditional) Day 81 First date for delivery of consideration under the offers Within 14 days after the offers become wholly unconditional BHP Billiton Offer for Rio Tinto |
 Appendix |
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25 2006
2007 Financial highlights Half year ended December (US$m) Revenue 25,539 22,113 +15 Underlying EBITDA 11,167 10,494 +6 Underlying EBIT 9,623 9,134 +5 Attributable profit (excluding exceptionals) 5,995 6,168 -3 Attributable profit 6,017 6,168 -2 Net operating cash flows 7,870 7,116 +11 EPS (excluding exceptionals) (US cents) 106.8 103.9 +3 Dividends per share (US cents) 29 20 +45 % Change |
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26 Cash flow Operating cash flow and dividends (1) 11,600 10,188 Net interest paid (313) (231) Tax paid (2) (3,417) (2,841) Net operating cash flow 7,870 7,116 Capital expenditure (3,753) (3,466) Exploration expenditure (598) (312) Purchases of investments (153) (31) Proceeds from sale of fixed assets & investments 134 298 Net cash flow before dividends and funding 3,500 3,605 Dividends paid (3) (1,571) (1,122) Net cash flow before funding & buy-backs 1,929 2,483 2007 2006 Half year ended December (US$m) (1) Operating cash flow includes dividends received. (2) Includes royalty related taxes paid. (3) Includes dividends paid to minority interests. |
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27 Return on capital and margins (1) H1 2008 is calculated on an annualised basis. (2) FY2005, FY2006, FY2007 and H1 2008 are shown on the basis of Underlying EBIT. Prior periods are calculated under UKGAAP. All periods excluded third party trading.
35% 38% 30% 44% 48% 44% 29% 21% 13% 11% 40% 30% 24% 20% 0% 10% 20% 30% 40% 50% 60% FY 2002 FY 2003 FY 2004 FY 2005 FY 2006 FY 2007 H1 2008 Return on Capital EBIT Margin (2) (1) |
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28 2006 % Change Underlying EBIT by Customer Sector Group 2007 Half year ended December (US$m) • Record half year EBIT • Record half year production from global continuing operations • Cash costs flat with comparative half • Three major new projects on line in first half: Stybarrow, Atlantis and Genghis Khan • Exploration – successful drilling of Thebe and acreage captured in Gulf of Mexico and Falklands Shenzi Petroleum 1,972 1,612 +22.3 |
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29 2006 % Change Underlying EBIT by Customer Sector Group 2007 • Production at record levels • Softer prices for metals and cost impacted by weaker US$ • South African power situation will impact metal production Half year ended December (US$m) • Record copper concentrate production • Contribution of 96,000 tonnes from new projects • Olympic Dam pre-feasibility study progressing well Mozal Olympic Dam • Production and sales volumes improved second quarter • Ravensthorpe ramping up as expected Nickel West Aluminium 680 840 -19.0 Base Metals 3,367 2,889 +16.5 Stainless Steel Materials 799 1,427 -44.0 |
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30 2006 % Change Underlying EBIT by Customer Sector Group 2007 Half year ended December (US$m) • Record Half Year EBIT • Record production and shipments • RGP3 commissioned and RGP4 on schedule • Record production and shipments • Groote Eylandt expansion approved lifting capacity to 4.2mtpa of ore and concentrate • Record shipments benefiting from expanded Hay Point Terminal • EBIT impacted by lower prices • Severe flooding in Queensland will impact production TEMCO BMA Mount Newman Metallurgical Coal 523 657 -20.4 Manganese 431 105 +310.5 Iron Ore 1,673 1,404 +19.2 |
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31 2006 % Change Underlying EBIT by Customer Sector Group 2007 • Higher export prices driven by strong demand • Record annual production at Hunter Valley and Cerrejon • Approval of Klipspruit (+1.8mtpa export coal) and Newcastle third port Half year ended December (US$m) BECSA • Koala Underground completed ahead of schedule and budget • Increased exploration activity on diamond targets in Angola and potash opportunity in Canada Ekati Energy Coal 277 242 +14.5 Diamonds & Specialty Products 72 78 -7.7 |
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32 0% 10% 20% 30% 40% 50% 60% 70% Petroleum Aluminium Base Metals Diamonds & Specialty Products Stainless Steel Materials Iron Ore Manganese Met Coal Energy Coal 2005 2006 2007 H1 2008 EBIT margin (1) by Customer Sector Group (1) All periods excluded third party trading. |
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33 Underlying EBIT analysis Half year ended Dec 2007 vs Dec 2006 3,000 4,000 5,000 6,000 7,000 8,000 9,000 10,000 11,000 12,000 Dec-06 Net Price Volume Exchange Inflation Cash Costs Non Cash Costs Exploration & Bus. Dev Other Dec-07 US$m 9,134 1,635 461 (506) (206) (199) (61) (222) (413) 9,623 (1) Including $154m of price-linked costs impact. (2) Including $324m due to increase in volume from new operations. (1) (2) |
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34 -250 -150 -50 50 150 250 350 450 Impact of major volume changes Half year ended Dec 2007 vs Dec 2006 US$m Total volume (1) variance US$461 million Copper 387 Met Coal 83 Iron Ore 81 Aluminium/ Alumina 44 D&SP 24 Energy Coal (9) Petroleum (25) Nickel (226) Other 102 (1) Volume variances calculated using previous year margin and including $324m due to increase in volume from new operations. |
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35 Impact of major commodity price Half year ended Dec 2007 vs Dec 2006 -200 -100 0 100 200 300 400 500 Total price variance US$1,635 million (1) US$m Petroleum 466 Base Metals 350 Manganese 346 Iron Ore 333 Energy Coal 308 SSM 97 Diamonds (23) Aluminium (44) Met Coal (198) (1) Including $154m of price-linked costs impact. |
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36 Developing world metals demand to show significant growth US$ expenditure (per capita) 10 20 30 40 50 GDP per capita (US$’000)* 10 20 30 40 Aluminium Copper Iron Ore Coking Coal * 1 January 2008 real US dollars Sources of data: CRU Quarterly Reports (January 2008); Brook Hunt Aluminium
Metal Service (February 2008); IISI – Steel Statistical Yearbook (December 2007); World Bank (World Development Indicators Online Database, February 2008); BHP Billiton analysis China: $2,000 per capita |
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37 But, the dollar value of oil intensity per capita is 10 times that of non ferrous metals US$ Expenditure (per capita) 100 200 300 400 500 GDP per capita (US$’000)* 10 20 30 40 Crude Oil Aluminium/Copper China: $2,000 per capita * 1 January 2008 real US dollars Sources of data: CRU Quarterly Reports (January 2008); Brook Hunt Aluminium
Metal Service (February 2008); IISI – Steel Statistical Yearbook (December 2007); World Bank (World Development Indicators Online
Database, February 2008); BP Statistical Review of World Energy June 2007; BHP
Billiton analysis |
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38 0 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500 5,000 5,500 FY02 H1 03 H2 03 H1 04 H2 04 H1 05 H2 05 H1 06 H2 06 H1 07 H2 07 H1 08 Petroleum Aluminium Base Metals Iron Ore Met Coal Manganese Energy Coal SSM Other China • Diversification remains for sales into China • Currently 20% of total company revenues US$m 431 785 1,075 1,357 371 1,588 Europe Japan Other Asia Nth America China ROW Australia 2,407 2,946 3,611 3,999 5,293 5,013 |
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39 But so is Metallurgical coal • Leading position in the seaborne market • 100% BMA owned Hay Point limits impact of infrastructure constraints • Significant growth options Iron Ore is an important part of the mix • Geographic proximity to the growing Asian market • Record H1 production and shipments • Plans underway to expand WAIO to 300mtpa by 2015 And Manganese is a significant contributor • Largest supplier of seaborne manganese ore from high quality resource base • Manganese ore and alloy assets operating at record production levels in a strong demand environment Broad exposure to carbon steel sector demand 20% 64% Total Carbon Steel Sector H1 FY 2008 EBIT (Total = US$2.6bn) 16% Manganese Met Coal Iron Ore |
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40 Source: EIA International Energy Outlook 2007 WNA Global Nuclear Fuel Market 2007 Well positioned to meet energy demand regardless of fuel mix 90 100 110 120 130 140 150 160 170 180 2007 2010 2015 2020 2025 2030 Energy Demand Renewables Nuclear Gas Oil Coal 2007 = 100 Projected world primary energy demand |
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41 China’s copper, nickel, aluminium and iron ore demand and its percentage share of world demand ‘000 tonnes Data: CRU Copper Quarterly, January 2008 ‘000 tonnes Data: CRU Nickel Quarterly, January 2008 Data: Brook Hunt Aluminium Metal Service, February 2008 ‘000 tonnes million tonnes Data: IISI – Steel Statistical Yearbook (Dec. 2007); China Customs data (www.customs.gov.cn); CRU - "The Iron Ore Market Service" Interim Report, December 2007; The Tex Report (February 2008); Iron ore data are seaborne traded, based on import statistics Copper Nickel Aluminium Iron Ore 0 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500 5,000 95 96 97 98 99 00 01 02 03 04 05 06 07 0% 5% 10% 15% 20% 25% 30% Chinese refined copper consumption % share of world refined copper consumption (right hand scale) 0 50 100 150 200 250 300 350 95 96 97 98 99 00 01 02 03 04 05 06 07 0% 5% 10% 15% 20% 25% 30% Chinese primary nickel consumption % share of world primary nickel consumption (right hand scale) 0 50 100 150 200 250 300 350 400 450 95 96 97 98 99 00 01 02 03 04 05 06 07 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% Chinese iron ore imports % share of global seaborne iron ore (right hand scale) 0 2,000 4,000 6,000 8,000 10,000 12,000 14,000 95 96 97 98 99 00 01 02 03 04 05 06 07 0% 5% 10% 15% 20% 25% 30% 35% Chinese aluminium consumption % share of global aluminium consumption (right hand scale) |
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42 China and India account for a major share of world commodity demand Share of World Commodity Demand - 2007 0% 25% 50% 75% 100% Other Europe Japan USA India China Notes: Iron ore is demand for seaborne imports. Steel data are for crude steel
production. Coal includes all coal types. Source: CRU Quarterly Reports
(January 2008), Brook Hunt Aluminium Metal Service (February 2008), BP Statistical Review of World Energy June 2007, IISI – Steel Statistical Yearbook (December 2007); BP Statistical Review of World Energy June 2007 |
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43 China’s intensity of aluminium use is rising…but it has much
further to climb Aluminium - GDP per capita vs consumption per capita 0 5 10 15 20 25 30 0 5000 10000 15000 20000 25000 30000 35000 40000 45000 50000 GDP/Capita (Jan. 2008 Constant US Dollars) China Germany India Japan Korea, Rep. United States Taiwan Note: Based on a project of similar growth patterns to the other nations shown Source: World Bank (World Development Indicators Online Database, February 2008);
Government Statistics for Taiwan (www.stat.gov.tw); Brook Hunt Aluminium Metal Service (February 2008) |
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44 China’s intensity of copper use is rising…but it has much further to
climb Copper - GDP per capita vs consumption per capita 0 5 10 15 20 0 5000 10000 15000 20000 25000 30000 35000 40000 45000 50000 GDP/Capita (Jan. 2008 Constant US Dollars) China Germany India Japan Korea, Rep. United States Taiwan *Note: Based on a project of similar growth patterns to the other nations shown Source: World Bank (World Development Indicators Online Database, February 2008);
Government Statistics for Taiwan (www.stat.gov.tw); CRU Copper Quarterly (January 2008) |
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45 China’s intensity of steel use is rising…but it has much further to
climb Steel - GDP per capita vs consumption per capita 0 200 400 600 800 1000 1200 0 5000 10000 15000 20000 25000 30000 35000 40000 45000 50000 GDP/Capita (Jan. 2008 Constant US Dollars) China Germany India Japan Korea, Rep. United States Taiwan *Note: Based on a project of similar growth patterns to the other nations shown Source: World Bank (World Development Indicators Online Database, February 2008);
Government Statistics for Taiwan (www.stat.gov.tw); IISI – Steel Statistical Yearbook
(Dec. 2007) |
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46 China’s energy use has far to grow, providing strong opportunities
for suppliers of energy raw materials Energy - GDP per capita vs energy use per capita 0 2 4 6 8 10 0 5000 10000 15000 20000 25000 30000 35000 40000 45000 50000 GDP/Capita (Jan. 2008 Constant US Dollars) China Germany India Japan Korea, Rep. United States Taiwan *Note: Based on a project of similar growth patterns to the other nations shown Source: World Bank – World Development Indicators Online Database (February 2008), Government Statistics for
Taiwan (www.stat.gov.tw); BP Statistical Review of
World Energy June 2007 |
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47 Inventories remain at historically low levels; Real LME metal prices are still high Monthly Real LME Metal Prices and Stocks 0 20 40 60 80 100 120 140 160 180 200 0 2 4 6 8 10 12 14 16 18 20 LME Price Index (left scale) Stocks (right scale) Source: Macquarie Capital Securities Research, February 2008. * London Metal Exchange (LME) prices and stocks of Al, Cu, Zn, Pb, Ni Stock/consumption ratios very low |
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48 1920-1945 Great Depression World War II High military demand Investment dries up Prices collapse and stagnate 1975-2007 Emerging Market growth Maturing of Japan 1990: Collapse of USSR “Re-birth” of US economy Productivity & IT revolution “Commodification” Cost benefits from technology and economies of scale China’s long boom Renewed “call” on copper resources Global Copper Prices in 1880-2007 0.00 0.50 1.00 1.50 2.00 2.50 3.00 3.50 4.00 1880 1890 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 10-Year Moving Average Real Annual Cu Price 1880-1914 Second Industrial Revolution & US economic expansion Electrification Colonial/imperial raw materials networks Rising real prices Expansion of US copper mining Expansion in African Copperbelt Expansion in Chile/Peru Escondida & Freeport Flotation, open-pit mining and mechanisation Flash smelting Birth of Sx/Ew WWI WWII Twin Oil Shocks Collapse of USSR Wall Street Crash 1920-2007 Sources of data: CRU Quarterly Reports (January 2008, and archives), US Geological Survey
– Metal Prices in the US Through 1998 (http://minerals.usgs.gov/minerals), US Bureau of Economic Analysis (US CPI Database) China’s Boom 1970s Oil Shocks Inflation/recession Demand slumps Substitution LME pricing Costs and prices fall from peaks Vietnam War 1950-1973 Post-war boom Japan’s “economic miracle” High demand growth Nationalisation in Chile, Peru, Mexico and Africa Costs and prices rise Producer pricing Korean War |
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49 0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0 8.0 9.0 10.0 FY 2002 FY 2003 FY 2004 FY 2005 FY 2006 FY 2007 FY 2008 Exploration Sustaining Capex Growth Expenditure Capital & exploration expenditure US$bn 9.9 7.4 6.4 4.3 3.1 3.0 3.2 Total 1.3 0.8 0.8 0.5 0.5 0.3 0.4 Exploration (1) 1.5 1.4 1.4 1.2 0.8 0.7 0.9 Sustaining & Other 7.1 5.2 4.2 2.6 1.8 2.0 1.9 Growth 2008F 2007 2006 2005 2004 2003 2002 US$ Billion (1) 2008 Forecast includes US$600m for Petroleum F |
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50 Portfolio management – US$6.1bn of disposals 0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 Sale Proceeds Base Metals D&SP Energy Coal SSM Petroleum Steel Other 139 Dec 2007 444 FY 2007 6,146 Total proceeds 845 FY 2002 2,472 FY 2003 (1) 277 FY 2004 1,035 FY 2005 934 FY 2006 US$m Proceeds from sale of assets (1) Includes BHP Steel demerger and BHP Steel loans (net of cash disposed and costs) US$m |
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51 Sanctioned development projects (US$9.6bn) Sanctioned Third coal berth capable of handling an estimated 30 million tpa End CY10 390 Energy Coal Newcastle Third Port (Australia) – 35.5% Sanctioned Incremental 1.8 million tpa export coal Incremental 2.1 million tpa domestic H2 CY09 450 Energy Coal Klipspruit – 100% Sanctioned Additional 1 million tpa manganese concentrate H1 CY09 110 Mn Ore GEMCO (Australia) – 60 % On time and budget. Increase system capacity to 155 million tpa H1 CY10 1,850 Iron Ore Western Australia Iron Ore RGP 4 (Australia) – 86.2% On time and budget. 7.6 million tpa H1 CY08 590 Iron Ore Samarco Third Pellet Plant (Brazil) – 50% On time and budget. 2 million tpa Q2 CY09 725 Alumina Alumar Refinery Expansion (Brazil) – 36% Production Capacity (100%) Progress Initial Production Target Date Share of Approved Capex US$m Commodity Minerals Projects |
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52 Sanctioned development projects (US$9.6bn) cont. On revised schedule and budget 150 million cubic feet gas per day H1 CY08 46 Gas Zamzama Phase 2 (Pakistan) – 38.5% On time and budget. LNG processing capacity 4.2 million tpa Late CY08 350 LNG North West Shelf 5th Train (Australia) – 16.67% On time and budget. 50,000 barrels and 50 million cubic feet gas per day Q1 CY08 405 Oil/Gas Neptune (US) – 35% Production Capacity (100%) Progress Initial Production Target Date Share of Approved Capex US$m Commodity Petroleum Projects On revised schedule and budget 45,000 tpa nickel Q1 CY08 556 Nickel Yabulu (Australia) – 100% On time and budget. 360,000 tpa nickel ore H1 CY08 139 Nickel Cliffs (Australia) – 100% Production Capacity (100%) Progress Initial Production Target Date Share of Approved Capex US$m Commodity Minerals Projects (cont’d) |
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53 Sanctioned development projects (US$9.6bn) cont. Sanctioned 10,000 bpd condensate and processing capacity of 80 million cubic feet gas per day CY11 500 Oil/Gas Kipper (Australia) – 32.5%-50% On time and budget. 96,000 barrels of oil and 60 million cubic feet gas per day H1 CY10 1,200 Oil/Gas Pyrenees (Australia) – 71.43% On time and budget. Tie-back to Atlantis South H2 CY09 100 Oil/Gas Atlantis North (US) – 44% On time and budget. 100,000 barrels and 50 million cubic feet of gas per day Mid CY09 1,940 Oil/gas Shenzi (US) – 44% On time and budget. 800 million cubic feet gas per day and 50,000 bpd condensate End CY08 200 Oil/Gas North West Shelf Angel (Australia) – 16.67% Production Capacity (100%) Progress Initial Production Target Date Share of Approved Capex US$m Commodity Petroleum Projects (cont’d) |
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54 Development projects in feasibility (US$6.5bn) 3.2 million tpa H2 CY11 1,000 Alumina Guinea Alumina Project (Guinea) – 33.3% 1 million tpa clean coal End CY08 50 Met Coal Maruwai Stage 1 (Indonesia) – 100% 6.9 million tpa bauxite H2 CY09 320 Bauxite Bakhuis (Suriname) – 45% Optimisation of existing reserve base H1 CY08 1,000 Energy Coal Douglas-Middelburg Optimisation (South Africa) – 84% 5 million tpa clean coal H2 CY10 405 Met Coal Maruwai (Indonesia) – 100% 1.1 million tpa End CY10 1,750 Alumina Worsley Efficiency and Growth (Australia) – 86% Project
Capacity (100%)* Forecast Initial Production* Estimated Share of Capex* US$m Commodity Minerals Projects (US$4.7bn) * Indicative only |
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55 Development projects in feasibility (US$6.5bn) cont. 5.7 million tpa saleable coal End CY10 480 Energy Coal Navajo South Mine Extension (USA) – 100% Maintain Nickel West system capacity H2 CY13 500 Nickel Perseverance Deeps (Australia) – 100% 7 million tpa saleable coal End CY10 475 Energy Coal Mt Arthur Coal UG (Australia) – 100% Project
Capacity (100%)* Forecast Initial Production* Estimated Share of Capex* US$m Commodity Minerals Projects (US$4.7bn) LNG processing capacity 2.5 million tpa H2 CY12 600 LNG NWS North Rankin B – 16.67% Project
Capacity (100%)* Forecast Initial Production* Estimated Share of Capex* US$m Commodity Petroleum Projects (US$600m) * Indicative only |
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56 Development projects commissioned since July 2001 Q1 CY04 Q2 CY04 266 299 Products & Capacity Expansion (Australia) – 85% Q1 CY04 Q1 CY04 33 50 Cerrejon Zona Norte (Colombia) – 33.3% Q4 CY03 Q4 CY03 464 464 Ohanet (Algeria) – 45% Q4 CY03 Q2 CY04 411 449 Hillside 3 (South Africa) – 100% Q4 CY03 Q4 CY03 380 411 Mt Arthur North (Australia) – 100% Q3 CY03 Q4 CY03 171 181 Area C (Australia) – 85% Q2 CY03 Q3 CY03 40 40 Zamzama (Pakistan) – 38.5% Q2 CY01 Q2 CY01 752 775 Antamina (Peru) – 33.75% Q4 CY02 Q2 CY03 34 50 Bream Gas Pipeline (Australia) – 50% Q3 CY02 Q3 CY02 543 600 Escondida Phase IV (Chile) – 57.5% Q3 CY02 Q3 CY02 143 146 San Juan Underground (US) – 100% Q2 CY02 Q2 CY02 120 138 Tintaya Oxide (Peru) – 99.9% Q3 CY01 Q3 CY01 114 128 Typhoon (US) – 50% Mozal 2 (Mozambique) – 47.1% Project Q2 CY03 Q4 CY03 311 405 Initial Production Date Our Share of Capex Actual Budget Actual US$m Budget US$m |
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57 Development projects commissioned since July 2001 Q2 CY06 Q1 CY06 188 165 Worsley Development Capital Project (Australia) – 86% Q4 CY05 Q3 CY05 33 29 Paranam Refinery Expansion (Suriname) – 45% Oct 2005 Q4 CY05 251 230 Escondida Norte (Chile) – 57.5% Mid CY05 Mid CY05 100 90. BMA Phase 1 (Including Broadmeadow) (Australia) – 50% April 2005 Mid CY05 200 200. Dendrobium (Australia) – 100% April 2005 Early CY05 139 146 Panda Underground (Canada) – 80% Jan 2005 End CY04 337 327 Angostura (Trinidad) – 45% Q2 CY04 Q2 CY04 80 83 WA Iron Ore Accelerated Expansion (Australia) – 85% Jan 2005 End CY04 370 368. Mad Dog (US) – 23.9% Q4 CY04 Q4 CY04 132 . 132 GoM Pipelines Infrastructure (US) – 22/25% Q4 CY04 Q4 CY04 101 95 Western Australia Iron Ore RGP (Australia) – 85% Q4 CY04 Q4 CY04 192 192 ROD (Algeria) – 36% Mid CY04 Mid CY04 252 247 NWS Train 4 (Australia) – 16.7% Minerva (Australia) – 90% Project Jan 2005 Q4 CY04 157 150. Initial Production Date Our Share of Capex Actual Budget Actual US$m Budget US$m |
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58 Development projects commissioned since July 2001 Q4 CY07 Q4 CY07 144 (1) 140 Pinto Valley (USA) – 100% Q4 CY07 Q4 CY07 1,300 (1) 1,300 Western Australia Iron Ore RGP3 (Australia) – 86.2% Q4 CY07 Q1 CY08 2,079 (1) 2,200 Ravensthorpe (Australia) – 100% End CY07 End CY07 176 200 Koala Underground (Canada) – 80% Q2 CY08 Q2 CY08 380 (1) 380 Stybarrow (Australia)- 50% H2 CY07 H2 CY07 1,630 (1) 1,630 Atlantis South (US) – 44% H2 CY07 H2 CY07 365 (1) 365 Genghis Khan (US) – 44% H1 CY07 Mid CY07 140 (1) 100 Blackwater Coal Preparation (Australia) – 50% Q4 CY06 H2 CY06 88 (1) 88 BMA Phase 2 (Australia) – 50% Q4 CY06 Q4 CY06 1,100 990 Spence (Chile) – 100% Q2 CY06 H2 CY06 566 500 Escondida Sulphide Leach (Chile) – 57.5% Q2 CY06 H2 CY06 501 489 Western Australia Iron Ore RGP2 (Australia) – 85% Project Initial Production Date Our Share of Capex Actual Budget Actual US$m Budget US$m (1) Actual cost subject to finalisation. |
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59 Key net profit sensitivities US$1/t on iron ore price 60 US$1/bbl on oil price 30 US$1/t on metallurgical coal price 25 USc1/lb on aluminium price 25 USc1/lb on copper price 25 US$1/t on energy coal price 25 USc1/lb on nickel price 2 AUD (USc1/A$) Operations (2) 65 RAND (0.2 Rand/US$) Operations (2) 35 (US$m) Approximate impact (1) on FY 2008 net profit after tax of changes of: (1) Assumes total volumes exposed to price. (2) Impact based on average exchange rate for the period.
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