Stability Throughout the Cycle - BHP/media/bhp/documents/investors/...Exane BNP Paribas 11th...

Iron Ore, Newman, Australia

Stability Throughout the Cycle

Exane BNP Paribas – 11th European SeminarAlberto Calderon, Chief Commercial Officer10 June 2009

Exane BNP Paribas 11th European Seminar, June 2009 Slide 2

Disclaimer

The views expressed in this presentation are based on information derived from publicly available sources that have not been independently verified. No representation, warranty or undertaking, express or implied, is made or given as to the fairness, accuracy, completeness or reliability of that information. This presentation should not be relied upon as a recommendation or forecast by BHP Billiton. Any participant is responsible for making its own credit analysis and its own independent assessment. All estimates and projections in this presentations are illustrative only and are based on the assumptions described herein.BHP Billiton’s actual results may be materially affected by changes in economic or other circumstances which cannot be foreseen. Nothing in this presentation is, or should be relied on as, a promise or representation either as to future results or events or as to the reasonableness of any assumption or view expressly or impliedly contained herein.

Forward Looking StatementsThis presentation includes forward-looking statements within the meaning of the U.S. Securities Litigation Reform Act of 1995 regarding future events and the future financial performance of BHP Billiton. These forward-looking statements are not guarantees or predictions of future performance, and involve known and unknown risks, uncertainties and other factors, many of which are beyond our control, and which may cause actual results to differ materially from those expressed in the statements contained in this presentation. For more detail on those risks, you should refer to the sections of our annual report on Form 20-F for the year ended 30 June 2008 entitled “Risk factors” , “Forward looking statements” and “Operating and financial review and prospects” filed with the U.S. Securities and Exchange Commission.

No Offer of SecuritiesNothing in this presentation should be construed as either an offer to sell or a solicitation of an offer to buy or sell BHP Billiton securities in any jurisdiction. The material provided in this presentation is (a) provided for the information of participants and does not constitute an invitation or inducement to such persons to enter into any investment activity relating to BHP Billiton Limited or BHP Billiton Plc securities and (b) is otherwise intended only for persons outside the UK or for persons in the UK who are investment professionals or to whom it may otherwise lawfully be communicated.

Non-GAAP Financial InformationBHP Billiton results are reported under International Financial Reporting Standards (IFRS). References to Underlying EBIT and EBITDA exclude net finance costs and taxation for jointly controlled entities, and exceptional items. A reconciliation to statutory EBIT is contained within the profit announcement, available at our website www.bhpbilliton.com.

Agenda

An Unchanged Strategy

Current Economic Conditions and Our Response

Exane BNP Paribas 11th European Seminar, June 2009


Large, low-cost, long-life Tier 1 assets

Export oriented

Upstream focused

Diversified by commodity, customer and geography

Committed to a solid ‘A’ credit rating

Deep inventory of growth options

Ethics, safety, environmental practice and community engagement

Employer of choice and a preferred partner

Environmental RehabilitationNorwich Park, Australia

Seaborne Iron Ore Cost Delivered to China – 2015(US¢/dmtu, CFR)

Source: CRU, including BHP Billiton weighted average 2015 cost.

Petroleum Cash Operating Costs(US$/boe) BHP Billiton average

cash operating cost

0

5

10

15

20

25

CY05 CY06 CY07 CY08

Peers

0

50

100

150

200

250

300

BHP Billiton weighted average

2015 cost

Source: BHP Billiton estimates.


A Balanced Portfolio

Steelmaking MaterialsSteelmaking Materials

Iron Ore

Metallurgical Coal

Manganese

Iron Ore

Metallurgical Coal

Manganese

Non-Ferrous Products Non-Ferrous Products

Copper

Aluminium

Nickel

Diamonds

Copper

Aluminium

Nickel

Diamonds

EnergyProductsEnergyProducts

Petroleum

LNG

Energy Coal

Uranium

Petroleum

LNG

Energy Coal

Uranium


Low Operational Leverage from Low Cost Assets

10

20

30

40

50

Jun 2004 Dec 2004 Jun 2005 Dec 2005 Jun 2006 Dec 2006 Jun 2007 Dec 2007 Jun 2008 Dec 2008

Source: Company interim and annual reports of BHP Billiton and its key peers. EBIT excludes exceptional items, third party trading and discontinued trading, as applicable.

EBIT Margin(%)

BHP Billiton

KeyPeers


Tier 1 Assets: A Preference for Basin Plays

Invest for the long term

Ability to benefit from scale

Two Examples

Iron Ore: Pilbara, Western Australia

Potash: Saskatchewan & Manitoba, Canada

Slide 7Exane BNP Paribas 11th European Seminar, June 2009

N0 5 10 20 30 40 50km

Scale 1: 1 000 000

BHP Billiton’s Tenements

BHP Billiton’s railway

Mining Area C

YandiEast Pilbara: 5bt Resource + 8-13bt potential mineralisation

Mt WhalebackOB 23/25 OB18

Jimblebar

JinayriArea C

West South

Roy Hill

Upper Marillana

Coondewana

Opthalmia

Prairie Downs

Caramulla

Central Pilbara: 7bt Resource + 12-20bt potential mineralisation

BHP Billiton Resource and Potential Mineralisation(bt, 100% basis)

Source: Resource base: BHP Billiton News Release and CSG Presentation June 2008; Equity terms: Central Pilbara: 6bt Resource + 11-18bt Potential Mineralisation; East Pilbara: 4bt Resource + 7-12bt Potential Mineralisation.The Potential Mineralisation (Exploration Target) is based on probabilistic assessment of areas across the Pilbara using surface mapping, geophysics, known regional geology and some limited drill results acquired over the last 40 years of exploration. The target range is conceptual in nature, there has not been sufficient exploration to define a Mineral Resource and it is uncertain if further exploration will result in the determination of a Mineral Resource.

RGP3

RGP4 RGP6

RGP5

Quantum

Yandi Hub

Central Hub

Eastern Hub

Iron Ore: A Significant Resource Position

Slide 8

Ministers North

Marillana


Seaborne Iron Ore Cost Delivered to China – 2015(US¢/dmtu, CFR)

Source: CRU, including BHP Billiton weighted average 2015 cost.

Industry Leading Cost Position

0

50

100

150

200

250

300

BHP Billiton weighted average

2015 cost

Low operating costs driven by:

Large, Tier 1 high grade ore bodies concentrated around key infrastructure and developed as integrated mining hubs

First class infrastructure

Close proximity to the Asian markets


Installed Capacity RGP4 RGP5 Studies

Planning

Construction

Completed

Iron Ore: The Ability to Achieve Scale

Western Australia Iron Ore Growth Path(100% basis)

(a) All studies and estimated capacity remain under review until they are approved for execution.

(a)

26 mtpa

50 mtpa

129 mtpa

145 mtpa 350 mtpa


Iron Ore: Unlocking Scale Benefits from a World Class Resource Basin

Exciting new joint venture with Rio Tinto announced on 5 June

In principle agreement to form 50:50 joint venture of Pilbara iron ore assets to leverage benefits of scale

Expected benefits include:

Substantial and unique production and development synergies of over $10 billion NPV (100% basis)

• Efficient use of infrastructure

• Blending opportunities

• Optimising future growth

Slide 11

[Map of BHP/Rio Pilbara assets]


0

20

40

60

80

100

120

140

160

180

2004 2005 2006 2007 2008

Source: BHP Billiton estimates.

54% YoY

Seaborne Iron Ore Spot Transacted(mt)

5 year CAGR 28%

Rapid Evolution to Transparent Pricing

Transparent and regular pricing allows customers to mitigate risks on short, medium and long term contracts

Developments since the start of 2008:

• Increased liquidity

• Three internationally recognised independent reference price providers

• Two 24 month quoted forward curves, providing industry risk mitigation tools

• Development of SGX OTC clearing mechanism

• Paper-based counter party trades


BHP Billiton is an Active Market Participant

OTC Financi

al Swap

Time

Financial swaps enable ‘price risk’ to be

managed separately from ‘supply risk’

Counter-parties trade directly

with each other

Prices set by negotiation

Liqu

idity

& T

rans

pare

ncy

OTC ForwardDelivery

Bench-markpricing

OTC Financial

Swap

Transparency encourages the most efficient producers

Regular and transparent market pricing is consistent with BHP Billiton’s strategy

BHP Billiton’s proactive approach to transparent market pricing enables:

• Greater understanding of market conditions

• Realisation of market prices

• Reduced counter-party risk

• Informed production decisions through the cycle

• Maintenance of customer relationships through index based contracts


Potash: Another Basin Play?

Slide 14

Jansen Project

Boulder

Young

Key target areas

Secondary priority areas


Jansen Project: A Potential Mega Mine

The most advanced of our project areas

Exploration work comprising drilling and 3D seismic program has recently been completed

Nearby operations in the mining corridor -favourable grades, ground conditions and infrastructure

Pre Feasibility phase – project team moving to 55 plus > 200 contractors

~600 km2 area of interest

Potential 4 – 8 mtpa mine

Execution decision anticipated in late 2011

Jansen Drilling, July 2008

Slide 15

Potash core from Jansen 01 drill hole


Agenda


Current Economic Conditions and Our Response


(2)

0

2

4

6

8

10

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

OECD Unemployment Rate SADJ

GDP YoY Growth

What does the World Look Like?

OECD Unemployment and GDP Growth(%)

OECD Retail Trade(YoY % Change, Volumes)

(8)

(6)

(4)

(2)

0

2

4

6

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

Source: OECD.


China Trade Performance Still Unclear

(60)

(40)

(20)

0

20

40

60

Jan 2007 Apr 2007 Jul 2007 Oct 2007 Jan 2008 Apr 2008 Jul 2008 Oct 2008 Jan 2009

Exports

Imports

Trade Performance in China (% Change YoY)

Source: CEIC.


Why We Remain Positive on the Resources Sector in the Long Term

Urbanisation trends to continue

More sophisticated manufacturing

Increasing middle class wealth

More commercially built flats requiring steel

Chongqing, China


113142 155

188 196 222 21427

3843

5666

72 85

23

2328

3637

45 43

17

2125

28 32

16

13 2

44

55

6 73328

2622

1615

11

12

1110

87

6

13

195

246272

338367

414426

2002 2003 2004 2005 2006 2007 2008

OthersMetal GoodsConsumer DurablesTransportationInfrastructureMachineryConstruction

YoY Growth % 11% 24% 9% 13% 3%26%

Construction Share: - Residential - 56%- Commercial - 12%- Industrial - 22%- Public Utilities - 10%

Source: CISA, McKinsey analysis.

China’s Annual Steel Demand has Doubled from 195mt in 2002 to 426mt in 2008

Slide 20

China Finished Steel Demand by Sector 2003-08(mt)

Implied CAGR 13.9%


An average of 17 million people added to China’s urban population each year between 2000-25

An average of 17 million people added to China’s urban population each year between 2000-25

0

0.4

0.8

1.2

1.6

2000 2005 2010 2015 2020 2025

Urban Population

Rural Population

Source: BHP Billiton estimates, McKinsey analysis.

Urbanisation and Industrialisation Are the Key Drivers of China’s Growing Annual Steel Demand

Slide 21

China Population Breakdown 2000-25(billion)

China GDP Breakdown 2000-25(Real 2000 RMB trillion)

China’s Industry GDP estimated to increase three-fold between 2008-25

China’s Industry GDP estimated to increase three-fold between 2008-25

0

20

40

60

80

2000 2005 2010 2015 2020 2025

Agriculture GDPService GDPIndustry GDP

x3

7.2%8.6%Total GDP6.1%7.5%Industry GDP8.6%10.1%Services GDP

2015-252009-15

Average Real Growth (%pa)


Buildings Likely to Get Higher

Random sampling of newly constructed buildingswithin Hongkou district in downtown Shanghai. All buildings sampled are ~30+ floors in height.

35+ floor buildings expected to increase.

Random sampling of newly constructed buildingswithin Hongkou district in downtown Shanghai. All buildings sampled are ~30+ floors in height.

35+ floor buildings expected to increase.

Source: BHP Billiton primary research.

Hefei skyline and construction activity –government imposing minimum height

requirements.

Hefei skyline and construction activity –government imposing minimum height

requirements.


BHP Billiton: Stability Throughout the Cycle

A clear strategy

Tightening the organisation in uncertain times

Commitment to simplicity, accountability and effectiveness

Continue to invest in growth

Opportunistic M&A

We are well positioned to create value from long term demand growth and short term market volatility


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