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BHP Billiton Aluminium
Presentation to the Investment Community
November 2005
Page 2
Disclaimer
The views expressed herein contain information derived from publicly available sources that have not been independently verified. No representation or warranty is made as to the accuracy, completeness or reliability of the information. Any forward-looking information in this presentation has been prepared on the basis of a number of assumptions which may prove to be incorrect. This presentation must not be relied upon as a recommendation or forecast by BHP Billiton.
Page 3
Agenda
Alex Vanselow
Vince Nicoletti
Ian Jacobson
Xolani Mkhwanazi
Julius Matthys
Rod Kinkead-Weekes
Alex Vanselow
Presenter
VP Strategy AluminiumStrategy
President Aluminium Summary
CFO AluminiumFinance
VP Technical AluminiumTechnical
COO Southern Africa AluminiumOperations
Marketing Director AluminiumMarketing
President Aluminium Overview
PositionTopic
Page 4
Setting the Context
• Sustainable perspective
• Portfolio of quality operations and people
• Value growth
• Future options
Page 5
012345678
FY02 FY03 FY04 FY05
BHP Billiton Aluminium CSG
Sustainability
Community
Felt leadershipBehavioural Based Safety
SafetyCIFR 12MMA
Health Environment
Page 6
Aluminium CSG FY05 Equity Production
Suriname 874kt
RefineriesBauxite Mines Smelters
MRN 2,338kt
Alumar 495kt
Valesul 43kt
Mozal 260ktHillside 685ktBayside 166kt
Alumar 176ktSuriname
2,022kt
Worsley 2,813kt Boddington
9,890kt
Page 7
Setting Production Records in FY05
RefineriesBauxite Mines Smelters
Suriname 874kt
MRN 2,338kt
Alumar 495kt
Valesul 43kt
Mozal 260ktHillside 685ktBayside 166kt
Alumar 176ktSuriname
2,022kt
Worsley 2,813kt Boddington
9,890kt
Page 8
Delivering Value
0
50
100
150
200
250
300
350
400
450
500
FY95 FY96 FY97 FY98 FY99 FY00 FY01 FY02 FY03 FY04 FY05
BHP Billiton Aluminium Production LME PriceBHP Billiton Alumina Production BHP Billiton Aluminium TurnoverBHP Billiton Aluminium EBIT
(Indexed to 100 – Base FY95)
Page 9
Aluminium Growth Projects
B R O W N F I E L DAluminiumAluminaBauxite
G R E E N F I E L D
Refining OptionsRefining Options
Size of bubble indicates capital expenditure; bold border signifies sanctioned project
$US 100M$US 100M
High Amps
CY2006 2007 2008
Smelting OptionsSmelting Options
SurinameSuccessor
Mines
Alumar
2009 2010 2011 2012
Mozal 3
Worsley DCPWorsley DCP
WorsleyE&G
Suriname NextGeneration Mines
Page 10
Agenda
Alex Vanselow
Vince Nicoletti
Ian Jacobson
Xolani Mkhwanazi
Julius Matthys
Rod Kinkead-Weekes
Alex Vanselow
Presenter
VP Strategy AluminiumStrategy
President Aluminium Summary
CFO AluminiumFinance
VP Technical AluminiumTechnical
COO Southern Africa AluminiumOperations
Marketing Director AluminiumMarketing
President Aluminium Overview
PositionTopic
Page 11
Key Messages
• “Upstream and low-cost“ strategy maintained
• Strong demand fundamentals; supply-side issues
• Disciplined investment in growth
Page 12
2005 Alumina and Aluminium Cash Cost Curves
Page 13
35
16
25
7
The China-Driven Demand Opportunity
19701990
2005
10mt19mt
32mt51mt
2015
18
1
10Rest of world
China
Global primary aluminium consumption
Page 14
Today 45 Tier 1-3 cities provide China’s growth impetus…
* Tier 1 city defined as registered population >4.5 m and GDP/capita >US$3,000, Tier 2 city defined as either registered population >4.5 m or GDP/capita >US$3,000, Tier 3 city defined as registered population 1.5-4.5 m and GDP/capita US$1,500-US$3,000Source: WEFA-WMM; China macro model; McKinsey analysis
China’s tiered city structure* – 2003
Today, China has 45 t ier 1-3 cities, mainly in coastal provinces
Tier 1
Tier 2
Tier 3
Page 15
… by 2010 … 86 tier 1-3 cities …
* Tier 1 city defined as registered population >4.7 m and GDP/capita >US$3,800, tier 2 city defined as either registered population >4.7 m or GDP/capita >US$3,800, tier 3 city defined as registered population 1.6-4.7 m and GDP/capita US$1,900-US$3,800Source: WEFA-WMM; China macro model; McKinsey analysis
China’s tiered city structure* – 2010
By 2010, Tier 1-3 cities will have grown to 86 in number, still largely driven by coastal provinces
Today, China has 45 t ier 1-3 cities, mainly in coastal provinces
Tier 1
Tier 2
Tier 3
Page 16
… and by 2025 … 147 tier 1-3 cities
* Tier 1 city defined as registered population >5.1 m and GDP/capita >US$5,900, tier 2 city defined as either registered population >5.1 m or GDP/capita >US$5,900, tier 3 city defined as registered population 1.7-5.1 m and GDP/capita US$3,000-US$5,900Source: WEFA-WMM; China macro model; McKinsey analysis
China’s tiered city structure* – 2025
By 2025, there will be 147 Tier 1-3 cities as urbanization in interior provinces occurs
By 2010, Tier 1-3 cities will have grown to 86 in number, still largely driven by coastal provinces
Today, China has 45 t ier 1-3 cities, mainly in coastal provinces
Tier 1
Tier 2
Tier 3
Page 17
Urbanisation – A Common Theme
Tier 1
Tier 2
Tier 3
* Tier 1 city defined as registered population >5.1 m and GDP/capita >US$5,900, tier 2 city defined as either registered population >5.1 m or GDP/capita >US$5,900, tier 3 city defined as registered population 1.7-5.1 m and GDP/capita US$3,000-US$5,900Source: WEFA-WMM; China macro model, McKinsey analysis
Tier 1-3 cities in CHINA and INDIA – 2003 Tier 1-3 cities in CHINA and INDIA – 2025• 4 Tier 1 cities• 19 Tier 2 cities• 22 Tier 3 cities
• 5 Tier 1 cities• 28 Tier 2/3 cities
• 18 Tier 1 cities• 89 Tier 2 cities• 40 Tier 3 cities
• 13 Tier 1 cities• 60 Tier 2/3 cities
Page 18
Aluminium Industry – Supply-side challenges
0
100
200
300
400
500
600
Jan-02 May-02 Sep-02 Jan-03 M ay-03 Sep-03 Jan-04 M ay-04 Sep-04 Jan-05 May-05 Sep-05
Spot AluminaCaustic soda(US Gulf)Energy (Henry Hub)
• Cost pressures• European and US smelter closures• Chinese capacity• Project delays• Challenging geographies
Indexed to 100 – Jan 2002
Page 19
Investing in Tier 1 Assets for Value
B R O W N F I E L D AluminiumAlumina
G R E E N F I E L D
• Size of bubble indicates BHP Billiton share of capital expenditure• US$/t inside bubble indicates unit capital cost (or unit acquis ition cost)
$US 200M$US 200M
CY1996 2001
Hillside 500ktpa$2,848/t
Hillside 500ktpa$2,848/t
2003 2004 2005 2006
$2,400/t$2,400/t
Worsley acquisition$858/t
Worsley acquisition$858/t
Mozal 1 - 275ktpa$3,775/t
Mozal 1 - 275ktpa$3,775/t
$800/t$800/t
Worsley DCP3.25-3.5mtpa
$3,114/t$3,114/t
2000 2002
Worsley 3.1mtpa
$530/t$530/t
Mozal 2 - 275ktpa
Hillside 3 - 132ktpa
• Indicated expansion volume is on 100% basis
Page 20
Aluminium Growth ProjectsB R O W N F I E L D
AluminiumAluminaBauxite
G R E E N F I E L D
Refining OptionsRefining Options
Size of bubble indicates capital expenditure; bold border signifies sanctioned project
$US 100M$US 100M
High Amps
CY2006 2007 2008
Smelting OptionsSmelting Options
Alumar
2009 2010 2011 2012
Mozal 3
Worsley DCPWorsley DCP
WorsleyE&G
Suriname NextGeneration Mines
SurinameSuccessor
Mines
Page 21
Deep Inventory of Growth ProjectsB R O W N F I E L D
G R E E N F I E L D
SpenceSpence
Atlantis SouthAtlantis South
As at 24 August 2005Size of bubble indicates proposed capital expenditure;bold outer border signifies sanctioned project
$US 200M$US 200M
Paranam
BlackwaterCPP
Worsley
RavensthorpeRavensthorpe
BMAPhase 1
Esc’daNorte
Esc’daNorte
BMA Phase 2
WA Iron OreRGP 2
WA Iron OreRGP 2
SamarcoSamarco
NeptuneNeptune
NWS T5NWS T5
StybarrowStybarrow
NWS Angel
Koala UG
ZamzamaPhase 2
WA Iron OreRGP 4+
WA Iron OreRGP 4+
NickelPetroleum
Diamonds
Alumina
Iron OreBase Metals
Met. Coal
ShenziShenzi
AtlantisNorth
YabuluYabulu
20092007 2008CY2006 2010
Esc’daSulphideEsc’da
Sulphide
WA Iron OreRGP 3
WA Iron OreRGP 3
MaruwaiMaruwai
AlumarAlumar
Esc’daCPR
Page 22
Agenda
Alex Vanselow
V Nicoletti
I Jacobson
Xolani Mkhwanazi
Julius Matthys
Rod Kinkead-Weekes
Alex Vanselow
Presenter
VP Strategy AluminumStrategy
President Aluminium Summary
CFO AluminiumFinance
VP Technical AluminiumTechnical
COO Southern Africa AluminiumOperations
Marketing Director AluminiumMarketing
President Aluminium Overview
PositionTopic
Page 23
Key Messages
• Demand and Supply fundamentals are attractive
• Alumina market to remain tight for 2006
• Falling Chinese Aluminium exports support Asian premiums
• Third party product activity is delivering benefits
Page 24
55,000
65,000
75,000
85,000
95,000
105,000
115,000
CY05 CY06 CY07 CY08 CY09 CY10 CY11 CY12 CY13 CY14 CY15
ktAlumina Demand and Supply Outlook
Demand
Base and capacity creep
New Production
Page 25
Alumina - Market Update
• What we see “on the ground”– Strong Chinese demand continues and alumina stocks decline– Spot Prices being supported by supply constraints– Favourable market for sellers
• Alumina Price – Benchmark Australian spot prices > $550/tonne FOB. – Prolonged tightness will influence contract negotiations
Page 26
Aluminium Demand and Supply Outlook
25,000
30,000
35,000
40,000
45,000
50,000
55,000
CY05 CY06 CY07 CY08 CY09 CY10 CY11 CY12 CY13 CY14 CY15
kt
Base and capacity creep
New Production
Demand
Calendar Years
Page 27
Aluminium - Market Update
• What we see “on the ground”– Lower level of LME stocks – Slowing primary metal exports from China – The need for restocking apparent in some markets – Europe.– Potential smelting closures in Europe and the US
• Aluminium Price – Chinese aluminium consumption continues to show double digit
growth rates
Page 28
Third Party Products – $2,057m Revenue in FY05
• Low risk: All within trading mandates; no large speculative positions
Benefits
• Margin optimization
• Operational risk mitigation
• Market intelligence
• Customer service
• $21m EBIT in FY05
Risk Mitigation17%
Quality swaps11%
JV Partners17%
Tolling Agreement
9%
Trade9%
Location/freight swaps37%
Page 29
Agenda
Alex Vanselow
Vince Nicoletti
Ian Jacobson
Xolani Mkhwanazi
Julius Matthys
Rod Kinkead-Weekes
Alex Vanselow
Presenter
VP Strategy AluminiumStrategy
President Aluminium Summary
CFO AluminiumFinance
VP Technical AluminiumTechnical
COO Southern Africa AluminiumOperations
Marketing Director AluminiumMarketing
President Aluminium Overview
PositionTopic
Page 30
Key Messages
• Consecutive production records
• Benchmark AP30 performance
• Delivery of growth projects
Page 31
Worsley
• Consecutive records in production– 3.271mt (100% basis, FY05)
• Business Improvement– Advanced Process Management– Applied technology– Bunbury Port– OPEX focus
• Delivering growth– DCP expansion to 3.5mtpa in
development phase– E&G expansion to 4.3mtpa in
feasibility phase
Page 32
South America
Alumar Refinery
MRN
• Consecutive records in production– MRN 16,409mt (100% basis, FY05)
• Alumar refinery– Expansion to 3.5mtpa (100% basis)
• Suriname – Optimize performance– Successor mines– Next Generation mines
• Portfolio management– Valesul
Page 33
Southern Africa• Consecutive records in production
– Hillside 685kt (FY05)– Mozal 551kt (100% basis, FY05)
• Benchmark AP30 performance
• Business improvement– All employees
• Bayside Potline A– Fully operational
• Capacity creep
Page 34
BHP Billiton Smelters – Benchmark Performance
450
650
850
1050
1250
1450
12700
12900
13100
13300
13500
13700
2300
2400
2500
2600
2700
QUALITY : Iron Content (ppm Fe)
COST : Energy Consumption (KWhr/ton)PRODUCTION : Prod / pot/ day (kg)
Data presented as 6 month averages, from Mar 2005 – Aug 2005
M1 M2H3H2 H1
M2 M1H3
H2
H1
H1 H3M1M2
H2
MozalHillside
80
85
90
95
100
COST : Current E fficiency (CE%)
H2 M1H3 M2H1Lower impurities
Page 35
Agenda
Alex Vanselow
Vince Nicoletti
Ian Jacobson
Xolani Mkhwanazi
Julius Matthys
Rod Kinkead-Weekes
Alex Vanselow
Presenter
VP Strategy AluminiumStrategy
President Aluminium Summary
CFO AluminiumFinance
VP Technical AluminiumTechnical
COO Southern Africa AluminiumOperations
Marketing Director AluminiumMarketing
President Aluminium Overview
PositionTopic
Page 36
Key Messages
• Using technology to create sustainable value
• Technical programs focused on key business drivers
• Business improvement creating culture of excellence
Page 37
Technical Excellence in Aluminium
Amperage ( kA )
FY96
FY97
FY98
FY99
FY00
FY01
FY02
FY03
FY04
FY05
YTD 06
FYF 06
310
320
330
340
350
360
Mozal Hillside
• High Amperage– Increases metal production– Improves capital efficiency
• Raw materials– Ensure long term
competitiveness
• Environmental performance– Consistent improvement
• Technology– Continuous availability and
improvement
Hillside Smelter
Page 38
Technical Excellence in Alumina
• Bauxite transport– Competitive transportation– Increase resource options
• Bauxite upgrading– Improve potential resource value– Reduce processing costs
• In-plant applications– Increase efficiency– Improve quality– Support projects
Worsley digestion pilot plant
Page 39
Business Improvement
• Measurable benefits
• All employees contributing
• Business Excellence programme
• Technology teams356
280
106113
Investigation Implementation Control Period Realisation
Num
ber o
f pro
ject
s
Aluminium CSG Improvement Projects
Worsley & Mozalinteraction
Page 40
Agenda
Alex Vanselow
Vince Nicoletti
Ian Jacobson
Xolani Mkhwanazi
Julius Matthys
Rod Kinkead-Weekes
Alex Vanselow
Presenter
VP Strategy AluminumStrategy
President Aluminium Summary
CFO AluminiumFinance
VP Technical AluminiumTechnical
COO Southern Africa AluminiumOperations
Marketing Director AluminiumMarketing
President Aluminium Overview
PositionTopic
Page 41
Key Messages
• Financial discipline in operations and growth
• Margins maintained in challenging environment
• Maintaining growth and improving ROC trajectory
Page 42
Hillside30%
Mozal16%
Alumar R3%
Worsley36%
Marketing3%
Bayside4%
Suriname2%
Valesul1%
Alumar S5%
Hillside31%
Bayside2%
Suriname4%
Mozal18%
Marketing4%
Worsley25%
Alumar R6%
Alumar S9%
Valesul1%
Net Operating AssetsUS$5.4 billion
EBITUS$977 million
Net Operating Assets and EBIT at 30 June 2005
Page 43
EBIT Variance Analysis (US$M)FY05FY04
Price increase net of LME linked costs
776
97736 101311 35 16 18 50 70 384
9 38
0
200
400
600
800
1,000
1,200
1,400
FY04 Price FX Volume Raw Materials Energy Labor Pot Relining Maintenance Other costs EBIT prebuyback
ContractBuyback
FY05
Page 44
(20)
(35)
(40)
(140) 140
30
30
15
(200) (150) (100) (50) 0 50 100 150 200
LME Price ($100/t)
AUD/$ E-rate (10%)
Rand/$ E-rate (10%)
BRL /$ E-rate (10%)
FY06 EBIT Sensitivities
US$ Million
Page 45
Alumina40%
Other Costs7%
Other Consumables6%
Maintenance & Sustaining Capex
5%
Labour8%
Pot Relining3%
Pitch2% Coke
7% Electricity22%
Alumina40%
Coke7%Pitch
2%
Electricity16%
Electricity6%
Pot Relining3%
Labour8%
Maintenance & Sustaining Capex
5%
Other Consumables
6%Other Costs
7%
FY05 Metal Cash Costs
Fixed costs
Variable costs
US$ based costs
Local currency based costs
Page 46
Bauxite21%
Electricity19%
Labour13%
Caustic Soda
11%
Other Costs9%
Other Consumables5%
M aintenance & Sustaining Capex
19%
Contract Services3%
US$ based costs
Local currency based costs
Fixed costs
Variable costs
FY05 Alumina Cash Costs
Bauxite21%
Electricity4%
Other Costs9%
Caustic Soda11%
Other Consumables5%
Contract Services3%
Labour13%
Maintenance & Sustaining Capex
19%
Electricity15%
Page 47
Pot Relining
0
10
20
30
40
50
60
70
80
90
FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10
Hillside Bayside Mozal Alumar Valesul
$ Million
Average annual cost
Page 48
EBITDA Margins
0
5
10
15
20
25
30
35
40
45
CY98 CY99 CY00 CY01 CY02 CY03 CY04
Industry Sample * BHP Billiton Aluminium
%
* Industry sample comprises Alcoa, Alcan, Norsk Hydro Aluminium, Rio Tinto Aluminium, Chalco, Century, Pechiney (to 2002), Kaiser (to 2002) and Reynolds (to 2000)
Page 49
Aluminium Production
(Indexed to 100 – Base CY00)
80
120
160
200
CY00 CY01 CY02 CY03 CY04
BHP Billiton
Sample of companies include: Rio Tinto Aluminium, Chalco, Alcoa, AWAC, Alcan, CVRD, Norsk Hydro, Rusal, Sual
Page 50
Alumina Production
80
120
160
200
CY00 CY01 CY02 CY03 CY04
(Indexed to 100 – Base CY00)
BHP Billiton
Sample of companies include: Rio Tinto Aluminium, Chalco, Alcoa, AWAC, Alcan, CVRD, Norsk Hydro, Rusal, Sual
Page 51
0
100
200
300
400
500
600
700
FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10
Development Capex Improvement Capex Sustaining Capex
Capital Expenditure
FY01 excludes the acquisition of 56% of Worsley for $1.5bn. Development capital expenditure includes unapproved brownfield projects at Worsley, Alumar Refinery, Suriname Mine and Mozal.
$ Million
Page 52
EBIT ROC – Actual Results and Future Scenarios
0%
5%
10%
15%
20%
25%
30%
FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10
@ $1,600/t @ $2,000/t
Page 53
Agenda
Alex Vanselow
Vince Nicoletti
Ian Jacobson
Xolani Mkhwanazi
Julius Matthys
Rod Kinkead-Weekes
Alex Vanselow
Presenter
VP Strategy AluminiumStrategy
President Aluminium Summary
CFO AluminiumFinance
VP Technical AluminiumTechnical
COO Southern Africa AluminiumOperations
Marketing Director AluminiumMarketing
President Aluminium Overview
PositionTopic
Page 54
Key Messages
• Sustainable perspective
• Portfolio of quality operations and people
• Value growth
• Future options
