Upload
others
View
1
Download
0
Embed Size (px)
Citation preview
National Diamond StrategyMontreal, 25-26 May 2005
The view from the “rough” end of the business…
Presentation by Serge Pelletier
5/30/2005Page 2BHP Billiton Diamonds Inc
This document contains certain forecasts and forward-looking information. Such forecasts and information are not a
guarantee of future performance and involve unknown risks and uncertainties, as well as other factors, many of which are beyond the control of BHP Billiton. Actual results may differ
materially from those expressed in this document.
5/30/2005Page 3BHP Billiton Diamonds Inc
Presentation Outline
• Who are we • Our diamond business• Finding rough diamonds • The impact of exploration on the diamond industry
5/30/2005Page 4BHP Billiton Diamonds Inc
Angl
o Am
erica
n
Alco
a
CVRD
Newm
ont
Alca
n
Noril
sk
Barri
ck
Xstra
ta
Phelp
s Dod
ge
Angl
ogol
d
Angl
oPlat
Cam
eco
Inco
Teck
Com
inco
WMC
Res
ourc
es
Free
port
Plac
er D
ome
Chalc
o
BHPB
Rio
Tint
o
05
101520253035404550556065707580859095
100
The largest company in a consolidating sectorMa
rket
Cap
. on
05/04
/05 (U
S$Bn
)
Market value of minerals industry US$576bnValue of Top Five US$238bnValue of BHP Billiton US$ 93bn
Market value of minerals industry >US$570bnValue of Top Five US$221bnValue of BHP Billiton US$ 85bn
5/30/2005Page 5BHP Billiton Diamonds Inc
The world’s largest diversified resources company….
Energy CoalDiamonds & Spec Prod
Aluminium
Carbon Steel Materials
Base Metals
Petroleum
Stainless Steel Materials
5/30/2005Page 6BHP Billiton Diamonds Inc
Diamonds and Specialty Products• Diamonds and Specialty
Products encompass the existing businesses of diamonds, titanium minerals, Integris and Exploration & Technology
• Produces approximately five million carats of rough gem quality diamonds annually, supplying nearly four per cent (4%) of current world diamond production by weight and six per cent (6%) by value
5/30/2005Page 7BHP Billiton Diamonds Inc
A number of distribution channels in order to compare results and add value……
Antwerp
office
Ekati
Regular Rough Sales
Roug
h Di
amon
dsOther sources
Contract Polish CanadaMark/Aurias Brands
Polishing Ventures and Other Contractual Supply
Agreements
Regular Sales Channels
Sales to Retailers
Set in Jewellery
CanadaMark Licensing Sales
Window/Tender Sales
Sales to Retailer
NWT Customers
CanadaMark Licensing Sales
5/30/2005Page 8BHP Billiton Diamonds Inc
CanadaMark™ Diamonds
� “If a Diamond product carries the CanadaMarkhallmark:
� It is a high quality diamond that is natural and untreated;
� It originates from mines located in Canada’s
� It has been tracked from mine to customer to ensure its integrity;
� It provides assurance of ethical standards throughout the supply chain;
� It has a unique identity number laser inscribed on the girdle and recorded in a central registry.
� CanadaMark is being used to support individual store or retail outlet brands, polished diamond brands or diamond jewellery brands.
BHP Billiton Diamonds is the first mining company to guarantee the origin of polished diamonds from its mining operations.
5/30/2005Page 9BHP Billiton Diamonds Inc
Growing our minerals business - geographic focusMinerals exploration spend by region (2004)
Source: Global data is sourced from the Metals Economics Group, Corporate Exploration Strategies 2004BHP Billiton expenditure is direct expenditure only, not leveraged funds
Industry total BHP Billiton (FY04)
Australia North America Africa Latin AmericaPacific/SE Asia Europe Rest of World
12%
51%
2%
20%
12%1% 1%
15%
28%
16%
22%
4%
15%
5/30/2005Page 10BHP Billiton Diamonds Inc
Growing our mineral business - commodity focusMinerals exploration spend by target (2004)
Source: Global data is sourced from the Metals Economics Group, Corporate Exploration Strategies 2004)BHP Billiton expenditure is direct expenditure only, not leveraged funds
Industry total BHP Billiton (FY04)
Gold Base metals Diamonds PGM Other
49%
25%
26%
DiamondsDiamonds51%
26%
13%
4%6%
DiamondsDiamonds
5/30/2005Page 11BHP Billiton Diamonds Inc
Why are we exploring for diamonds?
� Favourable industry structure� Favourable supply-demand outlook
5/30/2005Page 12BHP Billiton Diamonds Inc
Why are we exploring for diamonds? Industry Structure….
�Supply is concentrated in the hands of few producers
Rough production value
Total rough supply to market
Wholesale value of polished from local production
Wholesale value of diamond jewelleryRetail diamond jewellery
11
12
17
33
66
Alrosa2.0
Alrosa2.0
BHPB0.8
BHPB0.8
Rio0.7
Rio0.7
Others0.8
Others0.8
De Beers5.0*
De Beers5.0*
OtherDealersOther
DealersSightholderDealers
SightholderDealers
OtherManufacturers
OtherManufacturersSightholder
ManufacturersSightholder
Manufacturers
PolishedDealers
PolishedDealers
Other JewelleryManufacturers
Other JewelleryManufacturers Jewellery Importers
& DistributorsJewellery Importers
& DistributorsSightholder JewelleryManufacturers
Sightholder JewelleryManufacturers
RETAILERSRETAILERS
STAGE US$ Billion (CY2004)
*Production from own mines.
+ + Plus sales from inventory + price increases+ +5.7
Angola0.9
Angola0.9
DRC0.7
DRC0.7
5/30/2005Page 13BHP Billiton Diamonds Inc
Why are we exploring for diamonds? Supply-demand outlook….
�Current forecasts indicate a scenario where supply is unable to keep pace with demand growth
6,000
8,000
10,000
12,000
14,000
16,000
18,000
20,000
1994199519961997199819992000200120022003200420052006200720082009201020112012201320142015
Roug
h de
man
d / s
uppl
y (US
$m)
Rough diamond demand
Rough diamond supply
5/30/2005Page 14BHP Billiton Diamonds Inc
Global Diamond Group Land Holdings WorldwideApprox. 671,000 sq km under license
Canada:157,000km2
India:55,000km2
Australia:40,300km2
Mauritania:82,300km2
Sierra Leone:9,700km2
Gabon:48,000km2
DRC:100,000km2
Zambia:33,000km2
Botswana:125,000km2
Angola:3000km2
S Africa:1,000km2
Includes both direct holding and holdings via JVs
Namibia:16,700km2
5/30/2
005
Page
15BH
P Bi
lliton
Diam
onds
Inc
How
do w
e com
pare
with
our p
eers
Corp
orate
diam
ond e
xplor
ation
budg
ets (2
004)
Sour
ce: C
ompa
ny an
nual
repo
rts an
d Meta
ls Ec
onom
ics G
roup
, Cor
pora
te E
xplor
ation
Stra
tegie
s 200
4
020406080100
120
140
De Beers Group Alrosa BHP Billiton DiamondsRio Tinto Group Petra Diamonds Trans Hex Group Shore Gold Ashton Mining CanadaStornaway DiamondsSoquemSouthernEraLesotho DiamondGravity CapitalLeviev GroupCVRD Diamondex Resources Teck Cominco Shear Minerals Tahera DiamondsStriker ResourcesBlina DiamondsDiagem InternationalKimberley Diamond Namakwa Diamond Tawana ResourcesReefton MiningConquest MiningAfrican DiamondsAfri- Can Marine European DiamondsOther juniors
US$m
Prod
ucer
sJu
niors/
non p
rodu
cers
Tota
l diam
ond
expl
orat
ion
spen
d by
all ju
nior
s = th
at o
f the
four
majo
r pro
duce
rs
5/30/2005Page 16BHP Billiton Diamonds Inc
Sustained, massive exploration expenditure required toreplace reservesOn average the industry reinvests 10% of EBIT into exploration
*Exploration expenditure/EBITSource: Company annual reports (most recent financial year)
0%
5%
10%
15%
20%
25%
30%
35%
Implats
Freeport
Falconbridge
Amplats
Anglo American
Inco
Teck Cominco
Rio TintoGroup
BarrickGold
BHP Billiton
Goldcorp
AngloGold
BHPB Diamonds
Alrosa Trans Hex Group NewcrestMining
NewmontMining Group
De BeersGold Fields
Placer Dome
Meridian GoldPl
ough
-bac
k rati
o
Average
5/30/2005Page 17BHP Billiton Diamonds Inc
Exploration probabilities and the Ekati experience
>4000 known kimberlites
Diamondiferouskimberlites (10%)
Economic kimberlites (3%)
> 150 known kimberlites
Economic kimberlites (7%)
Diamondiferous kimberlites (24%)
Worldwide totalWorldwide totalEkati totalEkati total
Sourced from company data
5/30/2005Page 18BHP Billiton Diamonds Inc
Significant $$$ and time required From discovery to production…
0 2 4 6 8 10 12 14
OrapaLetlhakane
CatocaArgyle
Finsch
EkatiThe Oaks
DiavikJwanengVenetia
Udachny
Years between discovery and production
On average it takes eight years from discovery to production…Source: Circular to holders of De Beers Linked Units, 10 April 2001; Alrosa Finance S.A. Bond Prospectus, 2 May 2003; www.argylediamonds.com.au
5/30/2005Page 19BHP Billiton Diamonds Inc
Our Growth thrust is in leveraging Exploration funds and Technology…by sharing risk and rewardThe Botswana example: $21m to explore >100,00sqkm of land
Synergistic commercial deal between Kalahari and BHP Billiton• Kalahari initial risk funding• BHPB technology and land package• BHPB option to buy back 60% project interest
& fund further development
Optimum initial Kalahari shareholding structure • BHPB 20%• International Finance Corporation 10%• Diamond companies• Institutions
Supportive Government & Administration
5/30/2005Page 20BHP Billiton Diamonds Inc
-
500
1,000
1,500
2,000
2,500
3,000
3,500
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
050100150200250300350400450500
Despite exploration expenditure trending up… reserves are declining
*Post 1996 exploration expenditure figures sourced from MEG and pre-1996 figures are estimates derived from De Beers’ published exploration expendituresSource: Company annual reports; Circular to holders of De Beers Linked Units, 10 April 2001; Alrosa Finance S.A. Bond Prospectus, 2 May 2003; Metals Economics Group
Orapa Jwaneng Argyle
Jubilee VenetiaCatocaAnabar
Estim
ated
rese
rves
of m
ajor o
pera
ting
min
es (m
cts)
Estim
ated
expl
orat
ion
expe
nditu
re (U
S$m
)*
Reserves Exploration expenditure
Ekati Diavik
5/30/2005Page 21BHP Billiton Diamonds Inc
Remaining reserves at current production: +/- 20 years
• Despite having spent an average of US$290M p.a. on exploration over the past five years, no major new discoveries have been made
-
10
20
30
40
50
60
70
80
90
19701971197219731974197519761977197819791980198119821983198419851986198719881989199019911992199319941995199619971998199920002001200220032004
Rese
rves
of m
ajor o
pera
ting
min
es/a
nnua
l pro
duct
ion
1971: Orapa Starts production
1982: Jwaneng and Argyleenter production
1986: Argyle (AK1) starts full production
1983: Jwaneng and Argyle start to ramp up production
Ekati Diavik
Source: Company annual reports; Circular to holders of De Beers Linked Units, 10 April 2001; Alrosa Finance S.A. Bond Prospectus, 2 May 2003; Metals Economics Group
5/30/2005Page 22BHP Billiton Diamonds Inc
CANADIAN DIAMONDSAre they cold or simply COOL…….
Copied from the Canadian Mining Journal