110310 Credit Suisse (Incl. NPV Build Up)

8/2/2019 110310 Credit Suisse (Incl. NPV Build Up)

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DISCLOSURE APPENDIX CONTAINS ANALYST CERTIFICATIONS AND THE STATUS OF NON-US ANALYSTS. U.S.Disclosure: Credit Suisse does and seeks to do business with companies covered in its research reports. As a result,investors should be aware that the Firm may have a conflict of interest that could affect the objectivity of this report. Investorsshould consider this report as only a single factor in making their investment decision.

10 March 2011 Asia Pacific/Australia

Equity ResearchDiversified Metals & Mining

BHP Billiton Limited (BHP.AX / BHP AU) INCREASE TARGET PRICE

Filling the capex pipeline BHP recently guided to US$80bn in growth capex between now and FY15.

In this note we have modelled the growth projects we expect to be approved inthe next 1224 months to identify the value add. In line with BHPs long-termbasin-growth strategy a number of the projects we have assessed have amodest NPV impact at initial production rates but open up long-term brownfieldexpansion options (that are potentially very high returning). Target pricesincreased to A$55/GB31.5 (from A$52.5/GB30) in line with higher valuation. We retain a NEUTRAL investment rating.

The growth projects we now incorporate have added 7% or ~US$17bnto our valuation. The contributions to the net increase in valuation are: Metcoal projects: US$5bn, Escondida OPG1 and OGP2 US$4bn, JansenPotash US$1.7bn, Olympic Dam Expansion Stage 1: US$4bn.

Minor forecast changes: We have added the shale gas acquisition (nil EPSaccretion at initial production rates), increased capex spend in FY12 and FY13capex to US$20bn and US$19bn respectively (from US$16bn and US$12bn).Changes to earnings changes are minor: -1% in FY11, -1% in FY12 and -0.5%in FY13. The first production from the new growth projects we have modelled isFY13 with the bulk of new production commencing in FY16 and FY17.

Investment case is attractive: BHPB trades on attractive forward multiples,

is investing significantly in its future production growth and is activelyreturning cash to shareholders. Our target price of A$55/GB31.5 shareimply attractive shareholder returns.

Catalysts: A series of significant capex announcements over next 1224months. Other: A$5bn Ltd off-market buyback pricing period ends 8-April.

Valuation: We set our target price of A$55/GB31.5 in line with our discounted cash flow (DCF) sum-of-parts (SOP) valuation.

Share price performance

20

40

60

Mar-09 Jul- 09 No v-09 M ar- 10 Ju l-10 Nov -1080

100

120Pr ice (L HS ) Rebased Rel (RHS)

The price relative chart measures performance against the

Australia S&P/ASX 200 index which closed at 4767.8 on09/03/11On 09/03/11 the spot exchange rate was A$.99/US$1

Performance Over 1M 3M 12M Absolute (%) -1.6 1.2 6.0Relative (%) 1.2 0.7 7.1

Financial and valuation metrics

Year 06/10A 06/11E 06/12E 06/13ERevenue (US$mn) 48,721.0 67,119.5 74,271.8 68,273.3EBITDA (US$mn) 24,513.0 39,185.4 47,910.8 42,444.9EBIT (US$mn) 19,719.0 34,502.0 42,699.2 36,609.2Net income (US$mn) 12,469.0 23,798.7 29,036.9 24,959.1

EPS (CS adj.) (USc) 222.86 428.54 539.15 472.82Change from previous EPS (%) n.a. -0.72 -0.98 -0.50Consensus EPS (USc) n.a. 406.10 477.40 475.10EPS growth (%) 16.4 92.3 25.8 -12.3P/E (x) 20.9 10.9 8.7 9.9Dividend (USc) 86.00 96.00 107.50 112.88Dividend yield (%) 1.8 2.1 2.3 2.4P/B (x) 5.4 4.1 3.2 2.5Net debt/equity (%) 6.7 1.5 net cash net cash Source: Company data, ASX, Credit Suisse estimates, * Adj. for goodwill, notional interest and unusual items. Relative P/E against

ASX/S&P200 based on pre GW in AUD. Company PE calculation is based on displayed EPS Currency

Rating NEUTRAL*Price (09 Mar 11, A$) 46.00Target price (A$) (from 52.50) 55.00Market cap. (A$mn) 254,612.82Yr avg. mthly trading (US$mn) 12,691Last month's trading (US$mn) 14,273Projected return:Capital gain (%) 19.6Gross yield (%) 3.2Total return (%) 22.852-week price range (A$) 47.36 - 36.28* Stock ratings are relative to the relevant country benchmark.Target price is for 12 months.

Research Analysts

Paul McTaggart61 2 8205 [email protected]

James Gurry61 2 8205 4779

[email protected]

Michael Shillaker 44 20 7888 1344

[email protected]

Liam Fitzpatrick44 20 7883 8350

[email protected]

Specialist sales: Julian McCormack+612 8205 4419

[email protected]

Specialist sales: James McGeoch+44 20 7888 0751

[email protected]


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10 March 2011

BHP Billiton Limited (BHP.AX / BHP AU) 2

Figure 1: Financial SummaryIn USDmn, unless otherwise stated Year ending 30 Jun Share Price: 46.00

Profit & Loss 2009A 2010A 2011F 2012F 2013F Financial Summary 2009A 2010A 2011F 2012F 2013FSales revenue 50,800 48,721 67,119 74,272 68,273 c_I_RE Reported NPAT mn 5,877 12,722 23,623 29,037 24,959EBITDA 22,085 24,513 39,185 47,911 42,445 c_I_NP Credit Suisse NPAT mn 10,722 12,469 23,799 29,037 24,959Depr. & Amort. 3,871 4,794 4,683 5,212 5,836 c_EPS* Credit Suisse EPS c 192 223 429 539 473Goodwill amort. - - - - - EPS growth % 16.4 92.3 25.8 -12.3EBIT 18,214 19,719 34,502 42,699 36,609 c_PE P/E x 24.2 20.8 10.8 8.6 9.8

Associates - - - - - 0 P/Earnings Growth x 1.3 0.1 0.3 nmNet interest 543 459 528 55 46-Reported PBT 12,826 19,513 33,798 42,644 36,655 (c_DPS/ Dividend payout ratio % 42.8 38.6 22.4 19.9 23.9Income tax 6,488 6,504 9,508 12,793 10,997 c_DPS* DPS c 82.0 86.0 96.0 107.5 112.9Profit after tax 11,183 12,756 24,466 29,851 25,659 c_DPS/ Yield % 1.8 1.9 2.1 2.3 2.4Minorities 461 287 667 814 700 c_FRAN Franking % 100.0 100.0 100.0 100.0 100.0Preferred dividends - - - - - Normalized NPAT 10,722 12,469 23,799 29,037 24,959 c_CPS* Operating CFPS c 337 320 559 655 577

Adjustments -4,845 253 -176 0 0 SHARE P/OCF x 13.8 14.5 8.3 7.1 8.1Reported NPAT 5,877 12,722 23,623 29,037 24,959 EV/EBITEV/EBITDA x 11.0 9.9 6.2 5.1 5.7

EP_NPAT c_FCF_ FCF yield % 6.5 6.2 11.3 13.1 11.3

Balance Sheet Financial RatiosCash & equivalents 10,833 12,456 13,250 11,842 15,256 Profitability RatiosInventories 4,821 5,334 5,620 5,620 5,620 EBITDA EBITDA margin % 43.5 50.3 58.4 64.5 62.2Receivables 5,153 6,543 7,876 7,876 7,876 EBIT_M EBIT margin % 35.9 40.5 51.4 57.5 53.6Other current assets 1,679 801 926 926 926 c_ROE* Return on equity % 26.8 25.7 38.3 37.8 26.0Current assets 22,486 25,134 27,672 26,264 29,678 c_ROA* Return on assets % 13.6 14.0 22.5 24.5 18.4

Property, plant & equip. 49,032 55,576 69,493 83,921 97,162 c_ROIC ROIC % 26.0 25.7 40.2 39.7 28.8Intangibles 1,059 687 778 778 778 c_TAX_ Effective tax rate % 50.6 33.3 28.1 30.0 30.0Other non-current assets 6,193 7,455 7,742 7,742 7,742 Non-current assets 56,284 63,718 78,013 92,441 105,682 Balance Sheet RatiosTotal assets 78,770 88,852 105,686 118,704 135,361 c_NET_ Net debt mn 5,586 3,309 946 -146 -5,560Payables 5,619 6,467 6,743 6,743 6,743 (c_NET Net debt/Equity % 13.7 6.7 1.5 -0.2 -5.7Interest bearing debt 16,419 15,765 14,196 11,696 9,696 (c_NET Net debt/Capital % 12.1 6.3 1.5 -0.2 -6.0Other liabilities 16,021 17,292 21,444 21,662 20,618 I_EBIT/ Interest cover x 33.5 43.0 65.3 778.0 -791.1Total liabilities 38,059 39,524 42,383 40,101 37,057 (c_C_C Capex/Sales % 18.4 20.0 18.6 25.2 26.4Net assets 40,711 49,328 63,302 78,603 98,304 (c_C_C Capex/Depn % 241.2 205.2 266.5 358.4 309.4Ordinary equity 39,954 48,525 62,134 76,821 96,022 ALT(c_ Working capital/Sales % 1.4 -2.2 -2.0 0.0 0.0Minority interests 757 803 1,168 1,782 2,282 Preferred capital - - - - - Share ItemsTotal shareholder funds 40,711 49,328 63,302 78,603 98,304 c_EPS_ Equiv. FPO (period avg.) mn 5,598.0 5,595.0 5,553.5 5,385.6 5,278.8

Cashflow Share Price Performance 52wk range: 36.28-47.36EBIT 18,214 19,719 34,502 42,699 36,609Net interest -314 -421 0 0 0

Depr & Amort 3,871 4,794 4,683 5,212 5,836Tax paid -5,129 -4,379 -5,234 -11,318 -10,960Working capital 726 -1,055 -1,343 0 0Other 1,495 -738 -1,552 -1,313 -1,035Operating cashflow 18,863 17,920 31,056 35,280 30,450Capex -9,336 -9,766 -12,482 -18,679 -18,056

Acquisitions & Invest -122 -376 0 0 0 Asset sale proceeds 17 0 0 0 0Other -1,610 -873 -5,340 -960 -1,021Investing cashflow -11,051 -11,015 -17,822 -19,639 -19,077Dividends paid -4,563 -4,618 -5,063 -5,519 -5,758Equity raised 29 0 -4,736 -8,831 0Net borrowings 3,929 -485 -1,998 -2,500 -2,000Other -575 -204 -475 -200 -200Financing cashflow -1,180 -5,307 -12,272 -17,050 -7,958Total cashflow 6,632 1,598 963 -1,409 3,415 Source: Reuters Share price as of 10-Mar-11, 06:05

Adjustments 26 26 3 0 0Net Change in Cash 6,658 1,624 966 -1,409 3,415

0.00

10.00

20.00

30.00

40.00

50.00

60.00

70.00

Feb-10 May-10 Aug-10 Nov-10 Feb-11

BHP.AX XJO XSR

Source: Company data, Credit Suisse estimates


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10 March 2011


Capex pipelineBHP Billiton is guiding to US$80bn of capex over the five years to end FY15. We havereviewed the project outlook to estimate where the US$80bn shall be spent and we canaccount for $68billion.

Figure 2: BHP Billiton capex guidance FY11-FY15

Source: Company releases

The largest valuation additions from the growth projects we have now added to our forecasts are in base metals and met coal. Our new BHP valuation is US$48.5/share.

Figure 3: BHP valuationValuation summary Starting valuation Growth project additions New valuation

NPV (US$'m) US$/share NPV (US$'m) US$/share NPV (US$'m) US$/share

Petroleum 53,567 10.3 ~1,000 0.19 54,567 10.4 Aluminium 7,445 1.4 - - 7,445 1.4Base Metals 50,728 9.7 ~8,000 1.53 58,728 11.2Iron ore 62,716 12.0 ~1,100 0.21 63,816 12.2Manganese 6,332 1.2 - - 6,332 1.2Metallurgical Coal 23,033 4.4 ~5,000 0.96 28,033 5.4Diamonds & Specialty 5,584 1.1 ~1,700 0.33 7,284 1.4Energy Coal 19,915 3.8 - - 19,915 3.8Stainless Steel Materials 7,860 1.5 - - 7,860 1.5Group and unallocated items -440 -0.1 - - -440 -0.1Total 236,739 45.4 16,800 3.15 253,539 48.5Net debt (cash) -200 - - - -200 -0.04BHP DCF valuation 236,939 45.4 16,800 3.15 253,739 48.6

Source: Credit Suisse estimates


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10 March 2011


The law of diminishing returnsBefore considering each growth option and what it might add to our BHP valuation weshould take a check of our starting position and ponder what sort of project BHP needs toinvest in to make a meaningful difference to its current valuation.

Our starting base before adding any of the expected growth projects is an equity valuationof US$236bn or US$46 per share. To add 5% to our valuation BHP needs to invest inprojects that we assess to have a NPV of ~US$12bn or greater (remembering this is after development capex).

Figure 4: NPV of value adding projects needed to materially increase BHP valuation NPV needed from project BHP valuationIncremental value to

be added from anew project

US$mn US$/share US$mn US$/share

236,054 45.15% 11,803 2.3 247,857 47.4

7.50% 18,589 3.6 254,643 48.710% 26,645 5.1 262,699 50.215% 43,964 8.4 280,018 53.5

Source: Credit Suisse estimates

Projects that generate an NPV of US$12bn require a significant capital investment and aresource body that would support such a large NPV is by definition large and rare. Letsconsider a generic commodity project taking iron ore as an example:

Figure 5: Generic project returns (using greenfield iron ore Australia as an example)Input: Output:Total capex (US$mn) 7,500 IRR: 11.8%Capex per tonne installed capacity (US$/t) 150Installed capacity (mtpa) 50 NPV at 5.0% disc rate US$mn 7,779Life of project (years) 30 NPV at 7.5% disc rate US$mn 3,887Resource size (mt) 1,500 NPV at 10.0% disc rate US$mn 1,519Operating cost per unit of production (US$/t): 30.0 NPV at 12.0% disc rate US$mn 278Royalty rate (% on revenue) 5.7%Long term iron ore price (US$/t FOB Australia) 70.0 Payback period (years) 7Company income tax rate (allows for future increases) 33.0%


This 50mtpa iron ore project would have an NPV of only US$1.5bn at a 10% discount rate.To generate a US$12bn NPV and increase the BHP valuation by 5% the project metrics(for a 30 year life) would have to increase significantly to 150mtpa of iron ore output, havea 4.5bn tonne resource and development capex of US$22bn.

Thats the problem for BHP investors any project that meaningfully moves the dial needs to be very large indeed !


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BHPs imminent growth optionsWe are all familiar with BHPs bubble chart of growth options. With high commodityprices and surplus capital we expect BHP to be giving final approval to a number of thesein the next 1224 months.

Figure 6: BHPB Billiton future growth options

Source: BHP Billiton presentation 16-Feb-2011

The projects we expect to be approved are:

HPX3 Queensland Coal Port expansion (Met coal);

Daunia (Met coal);

Caval Ridge (Met coal);

RGP6 (and scope change to RGP5) and first stages for Port Headland Outer Harbour (Iron ore Western Australia);

Samarco P4P Expansion project (Iron Ore Brazil)

Escondida high grade ore access and Organic Growth Project 1 (Base metals);

Olympic Dam open pit pre-strip and first production (Base metals);

Jansen Potash Project (Diamonds and Specialty Products).


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Figure 7: Growth project summary:Capex (US$mn)

Division Project BHPinterest Total100%

BHPshare

Production at 100%level

Expected constructionstart (calendar year)

Prodstart

Incremental valueadded to DCF

Met coal Daunia 50% 750 2,2504mtpa of premium hard

coking coal 2H 2011 2H 2012 ~US$1.5bn

Caval Ridge 50% 4,500 2,2505.5mtpa of premium

hard coking coal 1H 2012. 2H 2013 ~US$3.5bn

Hay Point 50% 1,000 500 11mtpa of incrementalport capacity

Dredging alreadyunderway. General

construction from 2H 20112013

Project facilitatesDaunia, Caval Ridgeand future met coal

expansions.

Basemetals Escondida OGP1 57.5% 1,500 863

Increase totalconcentrator capacity to100mtpa from 82mtpa.

1H 2012 1H 2015 Minimal considered

optimisation project.

Escondida OGP2 57.5% 4,000 2,300Increase total

concentrator capacity to150mtpa from 100mtpa.

1H 2013 2H 2016 ~US$4bn

Olympic DamPhase 1 100% 2,100 2,100

20mtpa ore(phase 2 40mtpa,phase 3 60mtpa)

Pre strip to begin:

2H 2011.Ore production from:

2H 2012

2H 2016 ~US$4bn

Iron Ore RGP6 ~85% 3,500 2,980 Adding 35mtpa for totalWA capacity 240mtpa 2H 2011 2H 2013-

(already included inbase valuation)

Samarco 50% 1,500 750 30.5mtpa pellets 2H 2011 1H 2013 US$1.1bn

Potash Jansen Phase 1 100% 4,000 4,000 Greenfield developmentto 2mtpa.

Pre final approval workhas begun. Expect full

scope development from2H 2011.

1H 2015 US$850mn

Jansen Phase 2 100% 3,000 3,000 Expand to 4mtpa. 1H 2016 2H 2018 US$1.7bn in total for Phase 1+2.

Petroleum Fayette Shale production growth 100% 4,000 4,000

From 415MMcf/day to750MMcf/day 1H 2011 1H 2014

US$1bn

TOTAL $23.6bn $19.8bn US$17bn


We have excluded the Western Australia Iron ore Port Hedland Outer Harbour projectfrom the analysis as project costs are unknown (they could be as large as US$150US$200 per tonne) and we believe that only the dredging work and initial construction arethe only capex items likely to be spent before FY15.


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Met CoalFigure 8: BHP Billitons met coal position

Source: BHP presentation 10-Feb-2010, Notes: (a) Bubble size depicts relative coal resource size on a100% basis. (b) Resource Life is indicative only. (c ) The resource and reserve information in this slide wascompiled from the BHP Billiton 2009 Annual Report.

Daunia ProjectProject Description

The Daunia mine, part of BMA, is to be a multi-seam open cut coal mine, planned for thenorthern Bowen basin in Queensland. The mine is expected to produce semi-hard cokingcoal and PCI coal with a coal handling and preparation plant at the site. The coal will betransported by rail to Hay Point Coal Terminal. O perational expenditure for the projectwill be A$200mn$250mn p.a. based on the estimated project life of 21 years.

Development Stage

Daunia mine received the environmental approval (EIS approval) in November 2009 andCommonwealth Approval in December 2009. The construction is expected to take 1824months once approved (we expect approval later this calendar year).

Production capacity

Estimated to be 4mtpa with total production of 85mt over 21 years. On an average theproduction will be 60% hard coking coal and 40% PCI.


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Capex

An initial capital investment of US$625mn but we model $750mn to allow for developmentcost inflation since 2008.

Key catalysts

Environmental Approval (EA) from the Department of Environment and ResourceManagement (DERM);

Construction of a new airport to replace the existing Moranbah airport facility;

Commencement of Construction.

How we have modelled it:

Assume approval in 1H or early 2H CY2011.

18- to 24-month development phase with first production Dec-2012 half of 1mtramping to full production of 2mt by Dec-2013. BHP share is 50%.

Total capex of $750mn, a 20% increase on the $625mn estimate from a couple of years ago and equating to $187 per tonne of annual production.

Based on the estimated annual running costs of ~$250mn the cost per tonne isexpected to be ~$63/t.

What will it add to our forecasts?

Adds 5% to attributable met coal production and increases met coal valuation by~$1.5bn.

Caval Ridge ProjectProject Description

We expect another of BMAs growth projects, The Caval Ridge mine, to be approved in2012. Like Duania, Caval Ridge is located in northern section of the Bowen Basin. The

mine is located near Moranbah and adjacent to BMAs existing Peak Downs Mine. Themine will produce high quality hard coking coal and this will be transported by rail to HayPoint and Dalrymple Bay Coal Terminals for export. Operational expenditure will beabout A$450mn$500mn per annum during the estimated mine life. The coal handlingand preparation plant is to be designed to a capacity of 8mtpa, above Caval Ridgerequirements, as it is intended 2.5mtpa of Peak Downs expansion tonnes will also beprocessed there. If the Northern Missing Link rail line is constructed Caval Ridge coalwill be shipped via the Abbot Point Coal Terminal. BMA is to operate the mine directly(i.e. not use a mining contractor).

Development Stage

In August 2010 the Environmental Impact Statement for Caval Ridge was approved byGovernment authorities. EIS approval saw BHPB launch another set of feasibility studies

which are expected to be completed by late 2011. Once approved expectation is thatdevelopment of the mine should take around 22 months.

Production capacity

Production capacity is expected to be 5.5mtpa of high quality hard coking coal (BHPsshare is 50%).

Development of Caval Ridge will also facilitate an increase in production at the nearbyPeak Downs mine of 2.5mtpa to 8mtpa. The increased production at Peak Downs is to beprocessed through the coal handling and preparation plant to be constructed at the CavalRidge site.


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Expected first production

The mine is currently expected to start production in 2013 but we model production from2014 to allow for the additional feasibility studies currently underway.

Mine life

The mine life is currently expected to be 30+ years but will be subject to change in thefeasibility study.

Capex

An initial capital investment of approximately US$4bn which we model at US$4.5bn toallow for cost inflation. This equates to a capex intensity of over $700/t. Capex intensity ishigh as the project requires a coal handling and preparation plant above Caval Ridge mineoutput, a rail spur from Blair Athol to the load-out facility, creek diversions, a highwayoverpass, new power transition lines amongst other development items. Caval Ridge isthe largest development in the area.

How we have modelled it:

Based on the estimated annual running costs of ~$550mn the cost per tonne isexpected to be ~$70/t.

Production commencing from 4Q 2013 ramping up over 1218 months to full capacityof 5.5mtpa (100% level).

We have allowed capex of $4.5bn over 22 months (starting 1H 2012).

Key catalysts

Completion of the proposed Northern Missing Link rail line linking Bowen Basin tothe Abbot Point port.

What will it add to our base case valuation?

Expected to add US$3.5bn to our BHP valuation.

Hay Point Coal Terminal ExpansionTo support the expansion of the BMA business the Hay Point Coal port is to be expandedfrom 44mtpa to 55mtpa by constructing a third berth the HPX3 project. The key aspectsof the expansion are:

Dredging which commenced in 2010 and is normally conducted in a window from Aprilto September);

Construction of a new third berth;

Existing trestle conveyors and surge bins to be replaced, overland conveyors will beconstructed to transfer coal from the stockpile to the jetty;

Construction of a new quarry to allow rock and fill to be extracted for use inreclamation works.

A shiploader will be constructed on the new third berth.

Project stage:

Commonwealth and State Government Environmental approvals for the project weregranted in May 2010 for maximum expansion to 75mtpa (current plan is to 55mtpa). Initialworks including dredging began in mid 2010.


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The general development of the project is expected to commence in 1H 2011.

Capex:

In January 2010 BHP approved $267mn (BHP share so $534mn at 100%) for pre approvalcapex for Caval Ridge and HPX3. We expect the whole HPX3 project to cost US$1bn(BHP share ~$500mn).

Valuation:

We do not include the project itself as a valuation item but the expansion facilitates theexpansion of Caval Ridge, Daunia and future met coal mines.

Figure 9: HPX3 expansion plan:

Source: BHP Billiton website.


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Base Metals DivisionBHPBs growth strategy in base metals is to focus on Escondida, the largest producingcopper mine in the world and which already represents over 20% of Chilean copper production. Escondida is operated by BHPB which has a 57.5% share (Rio Tinto 30%, andJapanese interests and the World Bank the balance). Most mined sulphide ore isprocessed through the two concentrators Los Colorados and Laguna Seca which have a

combined capacity of 225kt per day (115ktpa Los Colorados, 110ktpa Laguna Seca).Other ore is processed via sulphide bio leach and oxide acid leach methods.

Escondida:

Organic Growth Project 1 (OPG1)The next phase of Escondida is OGP1 which is designed to bring forward access to highgrade ore that lies in and around the current Los Colorados concentrator. It is expected toresult in a small increase in ore processing capacity from the current ~82mtpa to 100mtpa.Further expansions OPG2 and OGP3 are being studied and would bring processing up to~150mtpa and ~205mtpa.

Additional Production:

The concentrator to replace Los Colorados is expected to have a processing capacity of 160ktpd (above Laguna Seca 110ktpa). The most recent example of the capital cost of aconcentrator is the Oyu Tolgoi concentrator to be built to a capacity of 100ktpa and later expanded to 158ktpa. The capital costs have been estimated to be ~$1.5bn ($945mn tostage 1). The previously considered expansion of Escondida (labelled Phase V) wasestimated to cost $3.25bn but envisaged adding a third concentrator and new tailings dam.We now consider these will be included in OPG2 and beyond.


We expect a final decision on OGP1 by end of 2011 or beginning 2012 with productionexpected from 2015.

Capex

For OGP1 we have allowed $1.5bn starting in 2012 and complete by end 2014.

Valuation

Valuation increment from OPG1 is very small (a few hundred million $s) as the projectmerely opens up access to ore and increases the concentrator processing capacity by17% which helps offset subsequent grade decline.

Organic Growth Projects 2 and 3Further expansions OPG2 and OGP3 are being studied and would bring processing up to~150mtpa and ~205mtpa. They will also require additional power resources, a desalinationplant and a tailings dam. OPG2 and OPG3 are expected to cost +$4bn.

Additional Production:

The declining Esondida copper head grade is to be offset by increasing processingcapacity to 150mtpa in OPG1 and 205mtpa in OFP2. The reserve grade is 1.02%compared to current mining head grades of 1.2-1.3% so there is a significant anticipateddrop in average grades through time.


With production from OGP1 expected in 2015 we anticipate that plans for OGP2 will befinalised and approved by 2013 with production from 2017.


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10 March 2011


Capex

We include US$4bn (100% level) for OGP2 capex (BHP share 57.5%).

Valuation

OPG2 adds US$4bn to our NPV or 75 cents per BHP share.

Figure 10: Escondida expected growth in processing capacity from growth projects

Source: BHP Billiton presentation 27-Sept-2010

Olympic Dam Phase 1

We do not expect an imminent approval of Olympic Dam but we think the pre stripping andother preparation works would commence in 2012 or 2013.

According to the Draft EIS the expansion of OD is to be a six fold increase on currentproduction levels to be done in three stages over 11 years. The work will include thedevelopment of the large open pit mine, expansion of existing smelter, new concentrator and hydrometallurgical plants added (for leaching lower grade ore).

Figure 11: Production at Olympic Dam current and full expansionCurrent capacity Additional capacity

to be addedCapacity of expandedoperation

% Increase

Ore mined (mtpa) 12 60 72 500%Copper concentrate production (ktpa) 600 1,800 2,400 300%Refined copper (ktpa) 235 515 750

219%Uranium oxide (ktpa) 4.5 14.5 19 322%Gold bullion (kOzpa) 100 700 800 700%Silver bullion (kOzpa) 800 2,100 2,900 263%Source: Company data

Project scale huge

The OD expansion is a large project indeed. Some of the required items will be:

Five to six years of pre stripping work to remove 300350mt of overburden material;

New copper concentrator;


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10 March 2011


Expand existing smelter capacity to 800ktpa of concentrate to produce ~350ktpa of refined copper;

A 280 megalitre per day (ML/d) coastal desalination plant;

New power sources: either an additional 270km electricity transmission line from Port Augusta, or a gas pipeline from Moomba and a new gas-fired power station at OlympicDam, or a hybrid solution;

A 105km rail line;

A new airport at Olympic Dam.

Figure 12: The expected phases of Olympic Dam expansion per Draft EIS 2009 Stage Scale Timing (year) Description

1 0-20Mtpa ore 0-6 Development of pre mine infrastructure and establish new open pit mineat deliver 20mtpa of ore to new concentrator.Extract 390mt of rock and 20mtpa of ore following pre strip.Build new concentrator.Build hydrometallurgical plant for extracting additional uranium.

2 20-40Mtpa ore 6-9 Expand open pit mine, concentrator and hydro plant to support mining40mtpa of ore.

Expand current existing smelter to process up to 800ktpa of copper concentrate.Expand infrastructure to support 40mtpa of production.

3 40-60Mtpa 7-11 Expand open pit mine, concentrator and hydro plant to support mining60mtpa of ore.Expand infrastructure to support 60mtpa of production.

Source: Company data

Figure 13: Olympic Dam Expansion: components and schedule per Draft EIS 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Project component 2H 1H 2H 1H 2H 1H 2H 1H 2H 1H 2H 1H 2H 1H 2H 1H 2H 1H 2H 1H 2HOverburden removal X X X X X X X X X X X XMining of first ore X X X X X X X X XMetallurgical plant

20Mtpa X X X X X X X40Mtpa X X X X X X X60Mtpa X X X X X X X X

Water Supply Pipeline X X X X X XDesalination plant

70 ML/day for ODplus 80 ML/d for Govt

X X X X X X

Adding 135 ML/d X X X Adding 200 ML/d X X X X

Gas power plant/pipeline X X X X X X X X

Source: Company data, Credit Suisse estimates. NB: Calendar year estimates.


In 2009 when BHP submitted its Draft Environmental Impact Statement for considerationthe development schedule included beginning the pre strip in 2H 2010. We understand thepre strip has not yet commenced and we model first commercial production of ore from theopen pit to commence in 2018. We therefore model the pre strip capex from 1H 2012.

Capex

We expect BHP to demonstrate its commitment to this key growth project by announcingpre final approval capex expenditure (like it has for iron ore RGP6) either late in 2011 or early 2012. Our estimate is that it will costs around US$4.50 per bank cubic metre to


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move material at Olympic Dam. With around 70mt per year to move this equates toUS$350mn in annual pre strip costs or US$2.1bn for the pre strip.

As we expect the pre strip to commence within 12 months we include it in our capexnumbers. At this stage we have not included a full scale expanded Olympic Dam butinclude the resource base in our valuation at US$6bn or US$85 per tonne of containedcopper.

Adding to valuationWe include the OD expansion in our valuation at US$4bn or 75 cents per BHP share.

Iron Ore

Western Australia Iron Ore beyond RGP6RGP5 (scope being revised) and RGP6 (early capex has been approved)

Rapid growth project 6 (RGP6) is expected to increase BHPBs iron ore capacity to240mtpa during 2013 by adding 35mtpa. BHP committed US$1.93bn to RGP6 early capexitems in January-2010 before final approval of the project which was initially expected in2H CY2010 but we now expect approval before in 2011 along with the final scope revisionto RGP5.

RGP5 is 90% complete on its original scope to increase iron ore system capacity by50mtpa. RGP6 involves the expansion of the inner harbour at Port Headland and rail trackduplication. We already factor in RGP6 into our current valuation and forecast.

Figure 14: BHP Billiton Iron Ore Rapid Growth Projects (to 240mtpa)

Source: BHP Presentation March-2010

As the expected output and cost of the Quantum Projects is uncertain at this stage and fullscale development and production ramp up is not expected until beyond FY15 we havenot yet included it in our forecasts.


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Figure 15: WA Iron ore expansion projects at 100% level (US$mn) Iron OreProject

Additionalcapacity

(mt)

Total cost at100% level(US$mn)

Capex per tonneof install

capacity (US$/t)

BHPBshare

Totalcapacity

Comment

RGP4 26mt 2,150 83 86.2% 155mtpa Complete

RGP5 50mt 5,650 113 85% 205mtpa

Production due 2H CY2011. Double trackNewman rail line, two new shipping berths.Project is 90% complete as of 31-Dec-2010

but scope of development sequence under review.

RGP6 35mt 3,500 100 90% 240mtpa Pre approval capex US$1.93bn.

Additionalexpenditure - 635 115* 90% 240mtpa

Announced Nov-2010 for ongoingdevelopment of port, rail and Jimblebar mineinfrastructure.

Outer Harbour 110mt US$16.5bn toUS$22bn150-200

(CS estimate) 85% 350mtpaEstimate, expect it to be done in 50mtpastages in line with ship loader builders

Source: Company data, Credit Suisse estimates, *Combined capex per tonne of RGP5, RGP6 and theadditional iron ore growth project costs announced in Nov-2010 for a total of 85mtpa of capacity.

Further expansion in Western Australia: Beyond rapid growth to quantum

The ultimate aim for BHPB WA operations is to reach capacity of 350mtpa via two stages:Quantum 1 and Quantum 2. This would see BHPB develop the Port Headland Outer Harbour Port. The Outer Harbour development requires significant dredging and other deep water infrastructure. It is likely to be significantly more expensive than any of theprevious RGP steps.

We expect the Quantum Projects to be approved and developed in 4050mtpa stages at acost in the range of US$150/tUS$200/t or US$16.5bn to US$22bn in total.

Valuation impact?

We already include RGP6 in our base case valuation. We have not added the Outer Harbour to our valuation at this stage as only the development work is expected to havecommenced by FY15 and further project details are expected to be announced in next 1218 months. We expect the first stage of the Outer Harbour to be ~US$9bn capex project.

Samarco Brazil iron ore JV, P4P ExpansionOne of the projects that BHP was openly speaking of at the latest half year results was theP4P expansion project at the 50/50 BHP/Vale Samarco Iron Ore Pellets JV.

We understand the project is in the last stages of feasibility and governmental approvaland final go ahead for the project could be given before end of 2011. The project isexpected to boost production capacity to 30.5mt from current 22.25mtpa by adding:

A third concentrator at Gemano;

A third pipeline parallel to the two pipelines already operating;

A fourth pelletizing plant at Ponta Ubu.

We include the P4P project at a cost of US$120 per tonne costing US$1bn at the 100%level (50% BHP share). This capex estimate equates to the size of its bubble (the$500mn-$2bn) in the growth projects bubble map.

The project adds US$1.5bn or 30 cents per share to our BHP valuation.


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Diamonds and Specialty Products

Jansen Potash ProjectProject description

The Jansen Project is a greenfield project in the province of Saskatchewan, Canadainvolving development of an underground potash mining site and processing plant. This isBHPBs first potash mining venture and is expected to take 10 years to ramp up to fullproduction.

In February 2011 BHPB announced that Jansen project had advanced to Feasibility Studystage and depending on the timing of EIS approval (submitted Dec-2010) we would expecta decision to proceed with the project in late 2011.

BHP acquired Athabasca Potash in January 2010 for US$320mn. This gave BHPB anadditional 6900km 2 of potential exploration ground in the Saskatchewan potash basinand also the Burr potash development project that adjoins BHPs Jansen Project. TheBurr project includes a 2mt per year mine that is expected to start production 2013 with aramp of 5.5 years.

The 2008 capital cost estimate for the Burr project was C$2bn. In June 2010 BHP, as thenew owners of the Burr, withdrew the project from the Environmental Impact Assessmentprocess in June-2010. We expect Burr to be developed later as part of a larger Jansenproject.

Development Stage

Now in feasibility study stage with EIS submission to the Saskatchewan Ministry of Environment in December 2010. BHP has already committed over $240mn to earlydevelopment capex for the project including drilling and site preparation for groundfreezing required prior to sinking the production and service shafts. We expect finalapproval and development construction to commence in 2H CY2011.

Current development work is underway at Jansen including (as of November-2010):

Power substation nearing completion;

Drilling of freeze holds for the production shaft and the service shaft (expected to becomplete by Q2 or Q3 CY2011.

We understand refrigeration units are on site for the cooling of the brine with the plantexpected to have been commissioned in February-2010.

Production capacity

At 100% production, expected capacity is 8mt of agricultural grade potash (BHP hasestimated this to equate to 9% of world production in 2020).

We expect initial build to a modest rate of around 2mtpa and ramp up over time, say 10years, to 8mtpa.


Current expectation is for the Jansen mine is expected to start production in January 2015(at a capacity of 2mtpa) and ramp up to full production (8mtpa) by February 2026.

Mine life

The project is expected to have a 70-year mine life.


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Capex

BHP has already committed US$240mn for development during the first stages of theproject. We expect the project will require significant capital investment of US$4bn over short term (to initial production of 2mtpa) and up to US$17bn over 25 years.

Key catalysts

Environmental and Ministerial Approval for the project expected later this year.

Ground freezing work expected late 2011.

Commencement of Construction later in 2011 or 2012.

What will it add to our base case valuation?

We value the project at US$1.7bn or 30 cents per BHP share. This is based on the initialbuild to 2mtpa, a later expansion to 4mtpa, potash price of US$500 per tonne, operatingcosts of US$120 per tonne and standard royalty rates for potash mines in Saskatchewan.

Figure 16: Jansen Project Proposed Implementation Schedule: production in 2015

Source: BHP Billiton website


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Figure 17: BHP Billiton: Detailed financialsMarket data Group Ltd Plc Valuation summary NPV (US$'m) US$/share A$/share GB/share %Ticker $US BHP.AX BLT.L Petroleum 54,567 10.4 10.3 6.5 22%Share prices (local) (A$/GB) 46.00 23.83 Aluminium / alumina 7,445 1.4 1.4 0.9 3%Share price $US equivalent 43.61 46.44 38.51 Base Metals 58,728 11.2 11.1 7.0 23%Plc / Ltd Premium/(discount) 0.21 0.17- Iron ore 63,816 12.2 12.1 7.6 25%Market cap (US$'mn) 227,768 155,950 71,818 Manganese 6,332 1.2 1.2 0.8 2%Market cap (%) 100% 68% 32% Metallurgical Coal 28,033 5.4 5.3 3.3 11%Market cap (local) (GB / A$) (million) 154,48244,442 Diamonds & Spec (Po tash ) 7 ,284 1.4 1.4 0.9 3%Shares on issue (mn) 5,223 3,358 1,865 Energy Coal 19,915 3.8 3.8 2.4 8%

Shares (%) 100% 64% 36% Stainless Steel Materials 7,860 1.5 1.5 0.9 3%Net debt (cash) (US$mn) -200 Group and unallocated i tem -440 -0.1 -0.1 -0.1 0%En ter pr is e v al ue (EV ) ( $U S' mn) 2 27, 96 8 Total 253,539 48.5 48.1 30.0 100%FX rate (AUD:USD) & (GBP:USD) 1.01 1.62 Net debt (cash) -200 -0.04 0.0 0.0

BHP DCF valuation 253,739 48.6 48.1 30.1 Price / NPV 90% 90% 0.96x 0.79x

Key assumptions FY08 FY09 FY10 FY11F FY12F FY13F FY14F FY15F 1H09 2H09 1H10 2H10 1H11 2H11FExchange rate (AUD / USD) 0.89 0.75 0.88 0.97 0.95 0.91 0.86 0.84 0.78 0.71 0.87 0.89 0.95 0.98 Exchange rate (USD / GBP) 1.99 1.62 1.58 1.55 1.54 1.54 1.57 1.57 1.74 1.49 1.64 1.53 1.57 1.54 Aluminium (US$/lb) 1.21 0.84 0.92 1.09 1.19 1.15 1.15 1.15 1.04 0.65 0.87 0.97 1.01 1.18 Alumina (US$/t) 311 299 309 353 390 410 411 415 401 198 289 330 337 370 Copper (US$/lb) 3.55 2.22 3.03 4.06 4.83 4.03 3.75 3.65 2.61 1.83 2.84 3.23 3.61 4.50 Iron Ore fines (Usc/dmtu) 59 75 103 240 256 201 177 145 60 90 60 146 222 258 Iron Ore lump (Usc/dmtu) 80 89 120 254 294 231 203 166 72 107 72 167 226 282 Iron ore, lump (US$/t) 80 89 89 163 188 148 130 106 72 107 72 107 145 181 Iron ore, fines (US$/t) 59 75 75 149 159 125 109 90 60 90 60 90 137 160 Coking coal (US$/t) 150 260 153 234 215 178 169 168 305 215 125 180 235 233 Coking coal semi (US$/t) 108 250 134 237 204 169 162 161 295 205 115 153 207 266 Thermal coal (US$/t) 73 111 77 103 123 128 115 100 125 97 70 84 97 109 Manganese (US$/t) 413 513 314 399 375 294 271 216 774 252 257 370 397 400 Gold (US$/oz) 825 876 1,076 1,334 1,363 1,338 1,313 1,305 835 918 1,000 1,153 1,294 1,375 Zinc (US$/lb) 1.18 0.63 0.94 0.99 1.15 1.55 1.65 1.66 0.67 0.60 0.90 0.98 0.99 1.00 Oil, WTI 97 70 75 83 85 83 80 81 88 51 72 78 81 85

Production schedule (attributable) FY08 FY09 FY10 FY11F FY12F FY13F FY14F FY15F 1H09 2H09 1H10 2H10 1H11 2H11FTotal Petroleum products, Mmboe 130 137 159 161 189 189 195 210 68 69 81 78 80 80 Crude oil & condensat e, MM bbls 57,444 66,328 84,343 84,760 88,805 92,777 95,384 96,220 32,192 34,136 42,154 42,189 42,739 42,021 Alumina ('000 tonnes) 4,554 4,396 3,841 4,135 5,060 5,375 5,425 5,475 2,237 2,159 1,858 1,983 2,025 2,110 Aluminium ('000 tonnes) 1,298 1,233 1,241 1,228 1,243 1,289 1,303 1,310 619 614 626 615 628 600 Copper ('000 tonnes) 1,376 1,207 1,075 1,194 1,310 1,273 1,235 1,281 617 590 555 520 594 600 Zinc ('000 tonnes) 144,490 163,215 198,279 171,309 206,045 211,337 211,337 211,337 79,631 83,584 106,260 92,019 77,142 94,167 U rani um o xi de concen tr at e (t on nes) 4 ,1 44 4,007 2,279 4,867 5,800 5,800 5,800 5,800 1,970 2,037 1,478 801 1,967 2,900 Nickel ('000 tonnes) 168 173 176 165 175 170 170 170 77 96 87 89 82 83 Iron Ore (Mt) (g lobal) (att ribu table) 112 ,260114,415 124,962 135,849 151,500 167,700 181,000 191,000 59,179 55,236 62,555 62,407 65,649 70,200 Iron Ore (Mt) (global) (100%) 139,041141,456 156,150 169,360 187,294 206,353 224,471 237,059 73,276 67,550 78,133 78,017 82,243 87,118 I ro n O re ( Mt ) ( WA ) ( at tr ib ut abl e) 112 ,2 60114,415 124,962 135,849 151,500 167,700 181,000 191,000 54,207 51,890 57,043 56,825 59,567 64,700 Iron Ore (Mt) (WA) (100%) 122,113124,820 133,962 146,196 165,294 184,353 196,471 207,059 63,332 60,858 67,109 66,853 70,079 76,118 Manganese ore ('000 tonnes) 6,575 4,475 6,124 6,701 6,300 6,700 7,100 7,100 3,242 1,233 2,693 3,431 3,951 2,750 Manganese alloy ('000 tonnes) 775 513 583 766 770 780 780 780 384 129 194 389 391 375 M etallurgical (c oki ng) Coal (M t) 35, 193 36,416 37,381 34,943 38,200 40,175 43,300 46,425 19,360 17,056 18,297 19,084 18,086 16,857 Energy Coal (Mt) 80,868 68,206 66,131 66,619 68,000 68,500 70,000 70,000 35,272 32,934 33,519 32,612 33,619 33,000 P&L ($US'mn) FY08 FY09 FY10 FY11F FY12F FY13F FY14F FY15F 1H09 2H09 1H10 2H10 1H11 2H11FPetroleum 9,547 7,211 8,782 10,604 11,378 11,349 11,942 12,364 4,212 2,999 4,177 4,605 4,905 5,699 Aluminium 5,746 4,151 4,353 4,184 4,203 4,447 4,505 4,560 2,518 1,633 2,004 2,349 2,343 1,841 Base Metals 14,774 7,105 10,409 14,106 16,112 13,720 12,662 12,712 3,286 3,819 5,471 4,938 7,067 7,039 Diamonds and Specialty Products 969 896 1,272 1,179 1,186 1,305 1,305 1,305 457 439 566 706 675 504 Stainless Steel Materials 5,088 2,355 3,617 3,741 3,580 3,164 3,026 2,932 1,101 1,254 1,655 1,962 1,905 1,836 Iron Ore 9,455 10,048 11,139 20,822 24,601 21,424 20,448 17,684 6,020 4,028 4,478 6,661 9,382 11,440 Manganese 2,912 2,536 2,150 2,859 3,518 3,135 3,091 2,707 1,916 620 888 1,262 1,196 1,663 Metallurgical Coal 3,941 8,087 6,059 7,393 7,304 6,533 6,669 7,002 4,913 3,174 2,715 3,344 3,952 3,441 Energy Coal 6,560 6,524 4,265 5,010 5,531 6,000 5,762 5,004 4,363 2,161 2,142 2,123 2,561 2,449 G rou p and i nt er s egm en t adj us tm en t 4 81 1,298 752 430 500 500 500 500 994 304 480 272 180 250 BHP Billiton Group revenue 59,473 50,211 52,798 70,329 77,913 71,578 69,910 66,770 29,780 20,431 24,576 28,222 34,166 36,163 Third party revenue -7,555 -6,098 -4,605 -3,738 -4,141 -3,805 -3,716 -3,549 -4,352 -1,746 -2,381 -2,224 -1,816 -1,922 Net BHP Billiton revenue 51,918 44,113 48,193 66,590 73,772 67,773 66,194 63,221 25,428 18,685 22,195 25,998 32,350 34,240 Total operating expenses 24,024 22,028 23,680 27,405 25,861 25,328 25,119 25,469 16,251 5,777 11,357 7,718 15,046 12,359 EBITDA - Underlying 27,894 22,085 24,513 39,185 47,911 42,445 41,075 37,752 9,177 12,908 10,838 18,280 17,304 21,881 Depreciation & amortisation -3,612 -3,871 -4,794 -4,683 -5,212 -5,836 -6,471 -7,164 -1,953 -1,918 -2,336 -7,063 -2,475 -2,208 Underlying EBIT 24,282 18,214 19,719 34,502 42,699 36,609 34,604 30,588 7,224 10,990 8,502 11,217 14,829 19,673 Net interest + other -662 -543 -459 -528 -55 48 147 54 -332 -211 -232 -227 -371 -157 Profit before tax 23,620 17,671 19,260 33,974 42,644 36,657 34,751 30,642 6,892 10,779 8,270 10,990 14,458 19,516 Company income taxation -7,680 -6,488 -6,504 -9,508 -12,793 -10,997 -10,078 -8,886 -3,888 -2,600 -2,497 -4,007 -3,458 -6,050 OEI -572 -461 -287 -667 -814 -700 -673 -593 -387 -74 -71 -216 -300 -367 Underlying NPAT 15,368 10,722 12,469 23,799 29,037 24,960 24,000 21,163 2,617 8,105 5,702 6,767 10,700 13,099 Net significant items (post tax) 22 -4,845 253 -176 - - - - - -4,845 433 -180 -176 - Reported NPAT 15,390 5,877 12,722 23,623 29,037 24,960 24,000 21,163 2,617 3,260 6,135 6,587 10,524 13,099 EPS - basic underlying (US cents) 275 193 224 429 542 476 457 403 47 146 102 121 192 237 Dividends Per Share - (US cents) 70 82 86 96 108 113 123 130 41 41 42 44 46 50 Business unit EBIT FY08 FY09 FY10 FY11F FY12F FY13F FY14F FY15F 1H09 2H09 1H10 2H10 1H11 2H11FPetroleum 5,489 4,085 4,573 6,955 7,619 7,533 7,733 7,868 2,675 1,410 2,326 2,247 2,854 4,101 Aluminium 1,465 192 406 222 857 1,119 1,219 1,250 289 -97 154 252 17 205 Base Metals 7,989 1,292 4,632 8,113 11,261 8,855 8,028 8,091 -111 1,403 2,462 2,170 3,580 4,533 Diamonds and Specialty Products 189 145 485 507 709 844 881 881 79 66 170 315 221 286 Stainless Steel Materials 1,275 -854 668 997 1,175 945 892 806 -752 -102 200 468 357 640 Iron Ore 4,631 6,229 6,001 13,436 15,766 12,137 11,197 7,961 4,143 2,086 2,091 3,910 5,811 7,625 Manganese 1,644 1,349 712 934 874 996 836 459 1,245 104 190 522 430 504 Metallurgical Coal 937 4,711 2,053 2,777 2,903 2,263 2,165 2,251 3,123 1,588 772 1,281 1,453 1,324 Energy Coal 1,057 1,460 730 1,039 2,036 2,417 2,152 1,520 1,072 388 332 398 334 705 Other and adjustments -394 -395 -541 -478 -500 -500 -500 -500 -4,539 4,144 -195 -346 -228 -250 Total BHP Billiton Group 24,282 18,214 19,719 34,502 42,699 36,609 34,604 30,588 7,224 10,990 8,502 11,217 14,829 19,673 Petroleum contribution 22% 22% 23% 20% 18% 20% 21% 24% 23% 21% 27% 19% 19% 21% Aluminium contribution 6% 1% 2% 1% 2% 3% 3% 4% 2% -1% 2% 2% 0% 1%Base Metals contribution 32% 7% 23% 23% 26% 24% 25% 28% -1% 20% 28% 19% 24% 23%Diamonds and Specialty Products contrib 1% 1% 2% 1% 2% 2% 2% 3% 1% 1% 2% 3% 1% 1%Stainless Steel Materials contribution 5% -5% 3% 3% 3% 3% 3% 3% -6% -1% 2% 4% 2% 3%Iron Ore contribution 19% 33% 30% 38% 36% 33% 35% 39% 35% 30% 24% 34% 39% 38%Manganese contribution 7% 7% 4% 3% 2% 3% 3% 3% 11% 2% 2% 5% 3% 3%Metallurgical Coal contribution 4% 25% 10% 8% 7% 6% 6% 7% 27% 23% 9% 11% 10% 7%Energy Coal contribution 4% 8% 4% 3% 5% 7% 7% 8% 9% 6% 4% 3% 2% 4%Total BHP Billiton Grou contribution 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%



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Figure 18: BHP Billiton: Detailed financials (continued)Cashflows ($US'mn) FY08 FY09 FY10 FY11F FY12F FY13F FY14F FY15F 1H09 2H09 1H10 2H10 1H11Operating cashflows 18,159 18,863 17,920 30,871 35,280 30,452 30,908 28,440 13,094 5,769 5,716 12,204 12,193 18,678 Capex - sustaining -1,832 -2,028 -1,703 -2,043 -2,622 -2,864 -3,090 -3,228 -1,024 -1,004 -772 -931 -853 -1,190 Free cash flow (sustaining) 16,327 16,835 16,217 28,829 32,659 27,587 27,819 25,212 12,070 4,765 4,944 11,273 11,340 17,489 FCF per share 2.92 3.03 2.91 5.22 6.10 5.26 5.30 4.80 2.17 0.86 0.89 2.02 2.04 3.17 Capex - exploration -1,350 -1,243 -1,333 -904 -960 -1,021 -1,089 -1,084 -620 -623 -439 -894 -452 -452 Capex - growth projects -6,097 -7,308 -8,063 -10,439 -16,058 -15,192 -14,222 -11,990 -4,124 -3,184 -3,974 -4,089 -4,303 -6,136

Free cash flow (all capex) 8,883 8,287 6,824 17,491 15,647 11,380 12,513 12,143 7,328 959 532 6,292 6,587 10,904 FCF per share 1.59 1.49 1.23 3.16 2.92 2.17 2.38 2.31 Other investing cashflows -1,135 -1,715 -1,249 -5,340 -960 -1,021 -1,089 -1,084 -1,157 -558 -484 -765 -138 -5,202 Dividend payments -3,135 -4,563 -4,618 -5,063 -5,514 -5,752 -6,040 -6,790 -2,281 -2,282 -2,282 -2,336 -2,506 -2,557 Other financing cashflows -2,861 4,621 640 -6,313 -10,463 -1,186 -1,519 877 -756 5,379 -247 888 -259 -6,051 Net increase in cash 1,754 6,632 1,598 778 -1,287 3,423 3,868 5,148 3,134 3,498 -2,481 4,079 3,684 -2,906 Cash at end of the year 4,173 10,831 12,455 13,236 11,950 15,372 19,241 24,388 7,216 10,874 8,380 12,457 16,142 13,236 Total capex spend -9,279 -10,579 -11,099 -13,386 -19,639 -19,077 -18,400 -16,302 -5,768 -4,811 -5,185 -5,914 -5,608 -7,778

Balance Sheet ($US'm) FY08 FY09 FY10 FY11F FY12F FY13F FY14F FY15F 1H09 2H09 1H10 2H10 1H11Cash 4,237 10,833 12,456 13,250 11,964 15,386 19,255 24,402 7,195 10,833 8,382 12,456 16,156 13,250 Receivables 9,801 5,153 6,543 7,876 7,876 7,876 7,876 7,876 5,020 5,153 6,196 6,543 7,876 7,876 Inventories 2,054 4,821 5,334 5,620 5,620 5,620 5,620 5,620 4,883 4,821 5,056 5,334 5,620 5,620 Plant & equipment 47,332 49,032 55,576 69,493 83,921 97,162 109,092 118,229 46,739 49,032 52,206 55,576 59,174 69,493 Deferred tax assets 3,044 3,512 4,053 4,177 4,177 4,177 4,177 4,177 3,416 3,512 3,822 4,053 4,177 4,177 Intangibles 625 661 687 778 778 778 778 778 652 661 670 687 778 778 Other assets 8,796 4,758 4,203 4,491 4,491 4,491 4,491 4,491 5,384 4,758 5,221 4,203 4,491 4,491 Assets 75,889 78,770 88,852 105,686 118,827 135,491 151,288 165,574 73,289 78,770 81,553 88,852 98,272 105,686 Payables 6,774 5,619 6,467 6,743 6,743 6,743 6,743 6,743 5,533 5,619 5,515 6,467 6,743 6,743 Provisions 1,596 1,887 1,899 1,972 1,972 1,972 1,972 1,972 1,286 1,887 1,669 1,899 1,972 1,972 Tax liabilities 2,022 1,931 1,685 5,455 5,673 4,629 4,393 3,913 2,055 1,931 588 1,685 2,451 5,455

Borrowings 9,234 15,325 13,573 12,225 9,725 7,725 5,325 5,325 9,207 15,325 14,935 13,573 14,125 12,225 Other liabilities 17,220 13,297 15,900 15,988 15,988 15,988 15,988 15,988 15,559 13,297 14,245 15,900 15,988 15,988 Liabilities 36,846 38,059 39,524 42,383 40,101 37,057 34,421 33,941 33,640 38,059 36,952 39,524 41,279 42,383

Net Assets 39,043 40,711 49,328 63,302 78,726 98,434 116,867 131,633 39,649 40,711 44,601 49,328 56,993 63,302

Valuation metrics (31-DecYE) FY08 FY09 FY10 FY11F FY12F FY13F FY14F FY15F 1H09 2H09 1H10 2H10 1H11Underlying earnings (US$bn) 15,368 10,722 12,469 23,799 29,037 24,960 24,000 21,163 2,617 8,105 5,702 6,767 10,700 Average shares on issue (basic, millions) 5,590 5,565 5,565 5,527 5,356 5,248 5,248 5,248 5,565 5,565 5,564 5,589 5,563 5,524 EPS USc / shr (underlying) 275 193 224 431 542 476 457 403 47 146 102 121 192 2EPS Gth Y-o-Y 20% -30% 16% 92% 26% -12% -4% -12% -56% -13% 118% -17% 88%PER, Ltd 16.9x 24.1x 20.7x 10.8x 8.6x 9.8x 10.2x 11.5x 0.0x 24.1x 18.7x 20.8x 14.8x 10.PER, Plc 14.0x 20.0x 17.2x 8.9x 7.1x 8.1x 8.4x 9.6x 0.0x 20.0x 15.5x 17.2x 12.3x 9.0DPS, ordinary (USD) 70.0 82.0 86.0 96.0 107.5 112.9 122.9 130.0 41.0 41.0 42.0 44.0 46.0 50.0 DPS, ordinary (AUD spot) 69.3 81.2 85.2 95.1 106.5 111.8 121.7 128.8 40.6 40.6 41.6 43.6 45.6 49.5 Payout ratio, ordinary 25% 43% 38% 22% 20% 24% 27% 32% 87% 28% 41% 36% 24% 2Dividend Yield, Ltd stock, ordinary 1.5% 1.8% 1.9% 2.1% 2.3% 2.4% 2.6% 2.8% 0.0% 1.8% 1.8% 1.9% 1.9%EV / EBITDA, fixed 8.2x 10.3x 9.3x 5.8x 4.8x 5.4x 5.6x 6.0x 0.0x 10.3x 9.6x 7.8x 6.4xFCF / share, USD, sustai ning capex 3. 13 3.22 3.10 5.52 6.25 5.28 5.33 4.83 - 3.22 1.86 3.10 4.33 5.52 FCF / share, USD, all capex 1.70 1.59 1.31 3.35 3.00 2.18 2.40 2.32 - 1.59 0.29 1.31 2.47 3.35 FCF yield, sustaining capex, Ltd 7.2% 7.4% 7.1% 12.7% 14.3% 12.1% 12.2% 11.1% 0.0% 7.4% 4.3% 7.1% 9.9%Price / cash earnings, Ltd 13.7x 26.5x 14.8x 9.1x 7.3x 7.9x 8.0x 8.6x 56.5x 49.9x 30.5x 28.7x 19.9x 1

Price / Book, Ltd stock 6.6x 6.4x 5.3x 4.0x 3.1x 2.5x 2.1x 1.9x 6.4x 6.4x 5.8x 5.3x 4.5xROE (%) 39% 14% 26% 37% 37% 25% 21% 16% 13% 16% 28% 27% 37% 41Gearing FY08 FY09 FY10 FY11F FY12F FY13F FY14F FY15F 1H09 2H09 1H10 2H10 1H11 2Net Debt (net cash) 8,458 5,586 3,309 806 -408 -5,830 -12,099 -17,246 4,168 5,586 7,915 3,309 -200 806 Net Debt / (Net Debt + Equity) (%) 18% 12% 6% 1% -1% -6% -12% -15% 10% 12% 15% 6% 0%Net Debt / Equity (%) 22% 14% 7% 1% -1% -6% -10% -13% 11% 14% 18% 7% 0%Interest cover (x) (EBITDA) 42 41 53 74 873 -882 -280 -697 28 61 47 81 47 139 Margins FY08 FY09 FY10 FY11F FY12F FY13F FY14F FY15F 1H09 2H09 1H10 2H10 1H11 2EBITDA margin 54% 50% 51% 59% 65% 63% 62% 60% 36% 69% 49% 70% 53% 6EBIT margin 47% 41% 41% 52% 58% 54% 52% 48% 28% 59% 38% 43% 46% 5NPAT margin 30% 24% 26% 36% 39% 37% 36% 33% 10% 43% 26% 26% 33% 3Tax rate 33% 37% 34% 28% 30% 30% 29% 29% 56% 24% 30% 36% 24% 31Carbon Emissions FY08 FY09 FY10 FY11F FY12F FY13F FY14F FY15F 1H09 2H09 1H10 2H10 1H11 2CO2 Emissions Scope 1 (mt) 9.0CO2 Emissions Scope 2 (mt) 5.5CO2 Scope 1+2 (mt) 14.5Impact of $30 carbon tax ($mn) 435Impact of $30 carbon tax on EBIT -2%


Companies Mentioned (Price as of 08 Mar 11) BHP Billiton (BLT.L, 2443.00 p, NEUTRAL, TP 3150 p, OVERWEIGHT)BHP Billiton Limited (BHP.AX, A$46.00, NEUTRAL, TP A$55)Rio Tinto (RIO.AX, A$82.38, OUTPERFORM, TP A$110.00)Rio Tinto (RIO.L, 4210.00 p, OUTPERFORM, TP 6000.00 p, OVERWEIGHT)Vale (VALE, $33.23, OUTPERFORM, TP $47.00)


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Disclosure AppendixImportant Global DisclosuresI, Paul McTaggart, certify that (1) the views expressed in this report accurately reflect my personal views about all of the subject compsecurities and (2) no part of my compensation was, is or will be directly or indirectly related to the specific recommendations or views ex

this report.See the Companies Mentioned section for full company names. 3-Year Price, Target Price and Rating Change History Chart for BLT.LBLT.L Closing

PriceTarget

Price Initiation/Date (p) (p) Rating Assumption01-Dec-08 1082 1500 O X15-Jan-09 1137 1420 N22-Jan-09 1162 135023-Jan-09 X23-Mar-09 1507 1300 U28-May-09 1431 160006-Jul-09 1,287.5 N31-Jul-09 1563 1750

11-Nov-09 1,816.5 215004-Feb-10 1,853.5 2450 O19-Apr-10 2162 260022-Jun-10 1988 230019-Jul-10 1,816.5 N20-Oct-10 2,192.5 250007-Jan-11 2,492.5 3000

150014201350 1300

16001750

2150

24502600

23002500

3000

1-Dec-0823-Jan-09

NO

N

U

NO

752

1252

1752

2252

2752

1 0 - M a

r - 0 8

1 0 - M a

y - 0 8

1 0 - J u l

- 0 8

1 0 - S e p

- 0 8

1 0 - N o

v - 0 8

1 0 - J a n

- 0 9

1 0 - M a

r - 0 9

1 0 - M a

y - 0 9

1 0 - J u l

- 0 9

1 0 - S e p

- 0 9

1 0 - N o

v - 0 9

1 0 - J a n

- 1 0

1 0 - M a

r - 1 0

1 0 - M a

y - 1 0

1 0 - J u l

- 1 0

1 0 - S e

p - 1 0

1 0 - N o

v - 1 0

1 0 - J a n

- 1 1

Closing Price Target Price Initiation/Assumption Rating

O=Outperform; N=Neutral; U=Underperform; R=Restrict ed; NR=Not Rated; NC=Not Covered

3-Year Price, Target Price and Rating Change History Chart for BHP.AXBHP.AX Closing

PriceTarget

Price Initiation/Date (A$) (A$) Rating Assumption29-Apr-08 X01-Dec-08 29.9 38 O X15-Jan-09 28.9 33.5 N22-Jan-09 29.14 32

23-Mar-09 33.32 28 U28-May-09 34.02 3609-Jun-09 36.5 3806-Jul-09 32.62 N31-Jul-09 37.85 4211-Nov-09 39.1 4504-Feb-10 40.99 50 O20-Apr-10 42.8 5223-Jun-10 39.14 4520-Jul-10 38.3 N21-Oct-10 41.22 47.511-Jan-11 44.61 52.5

38

3432

28

3638

42

45

5052

4548

53

29-Apr-08 1-Dec-08

NO

NUNO

21

26

31

36

41

46

51

1 0 - M a

r - 0 8

1 0 - M a

y - 0 8

1 0 - J u l

- 0 8

1 0 - S e p

- 0 8

1 0 - N o

v - 0 8

1 0 - J a n

- 0 9

1 0 - M a

r - 0 9

1 0 - M a

y - 0 9

1 0 - J u l

- 0 9

1 0 - S e p

- 0 9

1 0 - N o

v - 0 9

1 0 - J a n

- 1 0

1 0 - M a

r - 1 0

1 0 - M a

y - 1 0

1 0 - J u l -

1 0

1 0 - S e p

- 1 0

1 0 - N o

v - 1 0

1 0 - J a n

- 1 1

Closing Price Target Price Initiation/Assumption Rating

$

O=Outperform; N=Neutral; U=Underperform; R=Restrict ed; NR=Not Rated; NC=Not Covered

The analyst(s) responsible for preparing this research report received compensation that is based upon various factors including Credit Suirevenues, a portion of which are generated by Credit Suisse's investment banking activities.Analysts stock ratings are defined as follows:Outperform (O): The stocks total return is expected to outperform the relevant benchmark* by at least 10-15% (or more, depending on perisk) over the next 12 months.Neutral (N):The stocks total return is expected to be in line with the relevant benchmark* (range of 10-15%) over the next 12 months.Underperform (U): The stocks total return is expected to underperform the relevant benchmark* by 10-15% or more over the next 12 month *Relevant benchmark by region: As of 29th May 2009, Australia, New Zealand, U.S. and Canadian ratings are based on (1) a stocks absolute totalreturn potential to its current share price and (2) the relative attractiveness of a stocks total return potential within an analysts coverage universe*with Outperforms representing the most attractive, Neutrals the less attractive, and Underperforms the least attractive investment opportunitieSome U.S. and Canadian ratings may fall outside the absolute total return ranges defined above, depending on market conditions and industryfactors. For Latin American, Japanese, and non-Japan Asia stocks, ratings are based on a stocks total return relative to the average total return othe relevant country or regional benchmark; for European stocks, ratings are based on a stocks total return relative to the analyst's coverageuniverse**. For Australian and New Zealand stocks a 22% and a 12% threshold replace the 10-15% level in the Outperform and Underperform sto


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rating definitions, respectively, subject to analysts perceived risk. The 22% and 12% thresholds replace the +10-15% and -10-15% levels in tNeutral stock rating definition, respectively, subject to analysts perceived risk.**An analyst's coverage universe consists of all companies covered by the analyst within the relevant sector.Restricted (R): In certain circumstances, Credit Suisse policy and/or applicable law and regulations preclude certain types of communincluding an investment recommendation, during the course of Credit Suisse's engagement in an investment banking transaction and in cercircumstances.Volatility Indicator [V]:A stock is defined as volatile if the stock price has moved up or down by 20% or more in a month in at least 8 of thmonths or the analyst expects significant volatility going forward.

Analysts coverage universe weightings are distinct from analysts stock ratings and are based on the expectedperformance of an analysts coverage universe* versus the relevant broad market benchmark**:Overweight: Industry expected to outperform the relevant broad market benchmark over the next 12 months.Market Weight: Industry expected to perform in-line with the relevant broad market benchmark over the next 12 months.Underweight: Industry expected to underperform the relevant broad market benchmark over the next 12 months.*An analysts coverage universe consists of all companies covered by the analyst within the relevant sector.**The broad market benchmark is based on the expected return of the local market index (e.g., the S&P 500 in the U.S.) over the next 12 months.

Credit Suisses distribution of stock ratings (and banking clients) is:Global Ratings Distribution

Outperform/Buy* 46% (63% banking clients)Neutral/Hold* 41% (59% banking clients)Underperform/Sell* 11% (52% banking clients)Restricted 2%

*For purposes of the NYSE and NASD ratings distribution disclosure requirements, our stock ratings of Outperform, Neutral, and Underperform most closely correspond toHold, and Sell, respectively; however, the meanings are not the same, as our stock ratings are determined on a relative basis. (Please refer to definitions above.) An investodecision to buy or sell a security should be based on investment objectives, current holdings, and other individual factors.

Credit Suisses policy is to update research reports as it deems appropriate, based on developments with the subject company, the sectormarket that may have a material impact on the research views or opinions stated herein.Credit Suisse's policy is only to publish investment research that is impartial, independent, clear, fair and not misleading. For more detail please rSuisse's Policies for Managing Conflicts of Interest in connection with Investment Reshttp://www.csfb.com/research-and-analytics/disclaimer/managing_conflicts_disclaimer.htmlCredit Suisse does not provide any tax advice. Any statement herein regarding any US federal tax is not intended or written to be used, anbe used, by any taxpayer for the purposes of avoiding any penalties.See the Companies Mentioned section for full company names. Price Target: (12 months) for (BLT.L)

Method: We set our target price of A$55/GB31.5 in line with our discounted cash flow (DCF) sum-of-parts (SOP) valuation. Weighted avof capital (WACC) of 9%. We model (principally) in USD and over life-of-mine for BHP's long life operations. Valuation includes our asthe Australian Government's proposed new mining taxes.Risks: Risks to our BHP price targets of A$55/GB31.5 include commodity price risk (from changing world and especially Chineexpectations), mining operational risk and regulatory risk (taxes and royalty rates, and possible future carbon taxes).Price Target: (12 months) for (BHP.AX)Method: We set our target price of A$55/(GB31.5) in line with our discounted cash flow (DCF) sum-of-parts (SOP) valuation. Weightecost of capital (WACC) of 9%. We model (principally) in USD and over life-of-mine for BHP's long life operations. Valuation includes ouof the Australian Government's proposed new mining taxes. Our 12 month target price is set by rolling forward our US$46/share valuatiocapital, translating at forward FX rates (0.95 AUD) and taking into account the on-going share buy-back program.Risks: Risks to our BHP price targets of A$55/GB31.5 include commodity price risk (from changing world and especially Chineexpectations), mining operational risk and regulatory risk (taxes and royalty rates, and possible future carbon taxes).Please refer to the firm's disclosure website at www.credit-suisse.com/researchdisclosures for the definitions of abbreviations typically utarget price method and risk sections.

See the Companies Mentioned section for full company names. The subject company (BLT.L, BHP.AX) currently is, or was during the 12-month period preceding the date of distribution of this reportCredit Suisse.Credit Suisse provided investment banking services to the subject company (BLT.L, BHP.AX) within the past 12 months.Credit Suisse provided non-investment banking services, which may include Sales and Trading services, to the subject company (BLT.L,within the past 12 months.Credit Suisse expects to receive or intends to seek investment banking related compensation from the subject company (BLT.L, BHP.AX) next 3 months.Credit Suisse has received compensation for products and services other than investment banking services from the subject company BHP.AX) within the past 12 months.


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Important Regional DisclosuresSingapore recipients should contact a Singapore financial adviser for any matters arising from this research report.The analyst(s) involved in the preparation of this report have not visited the material operations of the subject company (BLT.L, BHP.AXpast 12 months.Restrictions on certain Canadian securities are indicated by the following abbreviations: NVS--Non-Voting shares; RVS--Restricted VotiSVS--Subordinate Voting Shares.Individuals receiving this report from a Canadian investment dealer that is not affiliated with Credit Suisse should be advised that this repo

contain regulatory disclosures the non-affiliated Canadian investment dealer would be required to make if this were its own report.For Credit Suisse Securities (Canada), Inc.'s policies and procedures regarding the dissemination of equity research, pleashttp://www.csfb.com/legal_terms/canada_research_policy.shtml.Credit Suisse Securities (Europe) Limited acts as broker to RIO.AX, RIO.L.The following disclosed European company/ies have estimates that comply with IFRS: BLT.L, RIO.AX, RIO.L. As of the date of this report, Credit Suisse acts as a market maker or liquidity provider in the equities securities that are the subject of this r

Principal is not guaranteed in the case of equities because equity prices are variable.Commission is the commission rate or the amount agreed with a customer when setting up an account or at anytime after that.To the extent this is a report authored in whole or in part by a non-U.S. analyst and is made available in the U.S., the following aredisclosures regarding any non-U.S. analyst contributors:The non-U.S. research analysts listed below (if any) are not registered/qualified as research analysts with FINRA. The non-U.S. researchlisted below may not be associated persons of CSSU and therefore may not be subject to the NASD Rule 2711 and NYSE Rule 472 restri

communications with a subject company, public appearances and trading securities held by a research analyst account. Paul McTaggart, non-U.S. analyst, is a research analyst employed by Credit Suisse Equities (Australia) Limited. Michael Shillaker, non-U.S. analyst, is a research analyst employed by Credit Suisse Securities (Europe) Limited. James Gurry, non-U.S. analyst, is a research analyst employed by Credit Suisse Equities (Australia) Limited. Liam Fitzpatrick, non-U.S. analyst, is a research analyst employed by Credit Suisse Securities (Europe) Limited. Matthew Cross, non-U.S. analyst, is a research analyst employed by Credit Suisse Equities (Australia) Limited.Where this research report is about a non-Taiwanese company, written by a Taiwan-based analyst, it is not a recommendation to buysecuritiesFor Credit Suisse disclosure information on other companies mentioned in this report, please visit the website at wwwsuisse.com/researchdisclosures or call +1 (877) 291-2683.Disclaimers continue on next page.


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Equity Research

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