Deutsche Bank Research
Australasia Industry Date Australia 3 July 2019
Australian Mining M&M - Diversified Industry Update Resources
Iron ore clad dividends
James Gurry This reporting season dividends is something to hang on for Research Analyst +61-3-9270-4104 We are forecasting a dividend bonanza from the iron ore names this reporting sea- son not only because of high prices but also we see the use of buybacks now Chris Gawler restricted. So on top of ordinary payouts, special dividends are also likely to feature Research Associate +61-3-9270-4474 heavily. The most significant surprise is likely from FMG who we think can now afford yet another dividend so soon after its surprise May payment, and at the major Key Changes miners BHP and Rio Tinto, capex is increasing but relatively controlled, and both are Company Target Price Rating facing limations on buybacks due to different reasons. RIO.AX 89.80 to 91.00 - We forecast yields of 4% for BHP, 5% for Rio Tinto and another 3% for FMG on the Source: Deutsche Bank
June half year payment alone. Taking into account December half years would, con- Top Picks servatively, see the total yield at 7%, 8% and 8% respectively, and our recent China South32 (S32.AX),AUD3.20 Buy trip suggested that iron ore prices plateau at the top for longer than we previously Whitehaven Coal (WHC.AX),AUD3.65 Buy expected ( note ). Source: Deutsche Bank
While we think iron ore prices eventually normalise, we also see fundamental value Companies featured where expectations are low, but dividends still respectable at buy rated Whitehaven BHP (BHP.AX),AUD41.68 Sell and South32. Rio Tinto (RIO.AX),AUD104.75 Hold Fortescue Metals (FMG.AX),AUD9.15 Hold We have marked to market our commodity prices for the June quarter with earnings South32 (S32.AX),AUD3.20 Buy changes included within. Whitehaven Coal (WHC.AX),AUD3.65 Buy
Source: Deutsche Bank
Figure 1: Special dividends expected from the iron ore majors, and all 5 larger caps trading at mid-to-high single digit divi- dend yields even after the share price rises in the iron ore producers.
Dividend summary Unit RIO FMG S32 WHC Ordinary cps AU 121 / US 85 AU 270 / US 191 AU 28 / US 20 AU 6 / US 4 AU 13 / US 9 Special cps AU 56 / US 39 AU 288 / US 204 AU 60 / US 42 na na Total Jun-half dividend cps AU 177 / US 125 AU 559 / US 395 AU 88 / US 62 AU 6 / US 4 AU 13 / US 9 Yield % 4.2% 5.3% 3.2% (unpaid portion) 1.7% 3.5%
Jun-half dividend cps AU 177 / US 125 AU 559 / US 395 AU 28 / US 20 (unpaid) AU 6 / US 4 AU 13 / US 9 Dec-half dividend cps AU 100 / US 72 AU 240 / US 172 AU 45 / US 32 AU 9 / US 6 AU 15 / US 10 2H CY19 buyback cps na AU 64 / US 46 na AU 6 / US 4 na Fwd 12m dividend / buyback cps AU 277 / US 197 AU 863 / US 612 AU 73 / US 52 AU 20 / US 14 AU 27 / US 19 Yield % 6.6% 8.1% 8.1% 6.1% 7.6%
Source : Deutsche Bank, Company data
Deutsche Bank AG/Sydney Deutsche Bank does and seeks to do business with companies covered in its research reports. Thus, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. DISCLOSURES AND ANALYST CERTIFICATIONS ARE LOCATED IN APPENDIX 1. MCI (P) 066/04/2019. 3 July 2019 M&M - Diversified Resources Australian Mining
Figure 2: DBe now ~25% above consensus for FY19 divi- Figure 3: BHP and RIO capital management history dends
2018 (RIO): US$3.3bn on-market and (A$ cps) 200 US$2.1bn off-market buy-back completed; 799 US$0.6bn and US$1.1bn to be bought back 118 through Feb-2019 and Feb-2020; Feb-2019: 395 160 Dec-2018 (BHP): US$5.2bn off- Nov-2007 (BHP): market buy-back and special US$23bn off- dividends of US$5.2bn (Jan-2020) market buy-back Aug-2010 (RIO): US$9.2bn buy-back Apr-2015 (RIO): Feb-2018 (RIO): 120 announced US$0.4bn off-market US$1.0bn buy- buy-back back announced 325 628 95 Mar-2007 (BHP): US$2.8bn off- market buy-back Sep-2017 (RIO): 80 US$1.9bn buy-back announced
40
Apr-2011 (BHP): US$6.3bn off-market buy- back
BHP RIO FMG 0
Jul-18
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Jan-07 Jan-06 Consensus DBe Jan-05
BHP share price (A$) RIO share price (A$)
Source : Deutsche Bank, Bloomberg Finance LP Source : Deutsche Bank, Bloomberg Finance LP
Figure 4: BHP dividend summary Figure 5: RIO dividend summary
300 (USc/sh) Includes US Onshore sale 160% 600 (USc/sh) 140% proceeds 250 500 120% Progressive policy 120% scrapped 100% 200 400 80% 80% 150 300 40% 60% 100 200 40% 0% 50 100 20% 0 -40%
0 0%
2018
2017
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2011
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2005
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2021E
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2019E
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2020E 2019E Special DPS Ordinary DPS Ordinary DPS Special DPS Payout ratio - RHS Minimum payout (50% of EPS) - RHS Payout ratio - RHS Target payout (40-60% of EPS)
Source : Deutsche Bank estimates, Company data. *Note: 2015 Payout ratio is 346% (De-merger of S32) Source : Deutsche Bank estimates, Company data
Figure 6: Iron ore has strongly outperformed oil and cop- Figure 7: Sector capex rising but not yet aggressive per YTD
130 (US$/t) 50,000 (US$m) 120 +52% 40,000 110
100 30,000
90 +10% 20,000 80 - 10,000 70
60 0 Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19
Iron ore (62% Fe, CFR) Brent oil (indexed to iron ore)
2021
2020
2019
2018
2017
2016
2015
2014
2013
2012
2011
2010
2009 2008 LME copper (indexed to iron ore) BHP RIO S32 FMG WHC
Source : Bloomberg Finance LP Source : Deutsche Bank, Company data
Page 2 Deutsche Bank AG/Sydney 3 July 2019 M&M - Diversified Resources Australian Mining
Dividend sweeping iron ore prices
This reporting season looks to be a dividend bonanza from the iron ore names not only because of high prices but also we see the use of buybacks now restricted by thresholds already hit. Special dividends therefore are likely to feature heavily we think.
Iron ore still makes up the majority of earnings across the sector however the base metals bear lurks and its only that iron ore has been the focus of the market. While iron ore prices have been the highest in years, the rest of the mining and resources sector has had a mixed year, base metals prices are depressed and oil prices have been volatile.
The effects of stimulus induced Chinese steel demand and restricted supply (noting Rio Tinto's recent downgrade) should see iron ore supported into Q3 of 2019 and we think management and boards will possess a level of strong foresight on 2H cashflows.
We think the biggest surprise will come from FMG who can now afford yet another "dividend rebate" to investors when they report results in late August this so soon after paying the out of cycle surprise dividend in May, we now factor in
n FMG: A$28c up from 10c previously, for a 2H yield of 3.2% and a forward yield of 8.1%.
Thus far the outlets for excess capital via extra capex investment let alone growth via acquisition remain largely subdued from the major companies BHP and Rio Tin- to. Incidently they are both up against buyback thresholds for different reasons (BHP on the 10% over 12 months rule, and Rio Tinto due to its largest shareholder creep) restricting this as an outlet.
We now expect
n Rio Tinto: A$559c for a 1H yield of of 5.3% and a forward yield of 8.1% on a 12 month view. n BHP: A$177c in 2H FY19, for a 2H yield of 4.2% and a forward yield of 6.6% on a 12 month view.
Deutsche Bank AG/Sydney Page 3 3 July 2019 M&M - Diversified Resources Australian Mining BHP
Top down discipline should result in more special dividends After completing the sale of its US Onshore shale oil business BHP completed a $5.2bn off-market buyback of BHP Ltd shares (Nov-2018; 8% of Ltd share count) and a $5.2bn special dividend (Jan-19).
We forecast BHP can pay a AU 56cps / US 39 cps special dividend at its full-year results on 20 August (Q4 production 17 July), on top of a AU 121cps / US 85 cps ordinary dividend. We note that BHP is limited on buybacks as it approaches the 10% cap on the repurchase of Ltd shares on a rolling 12-month basis per s257B(4) and 257B(5) of the Corporations Act (Cth.), having repurchased 8% of Ltd shares in November 2018.
With two capital allocation strategy updates in 7 months we expect predictability and conservatism from BHP.
Figure 8: BHP could pay a A$56 cps special dividend at its full year results
BHP 30-June 31-Dec Net debt US$m 9,006 10,240 Target net debt US$m 11,000 Surplus cash to target US$m 1,994
Ordinary dividend (DBe) US$m 4,317 Special dividend (DBe) US$m 1,994 Total 2H dividends (DBe) US$m 6,312 1H19 ordinary dividend cps AU 76 / US 55 1H19 special dividend cps AU 142 / US 102 2H19 ordinary dividend (DBe) cps AU 121 / US 85 2H19 special dividend (DBe) cps AU 56 / US 39 Total FY19 dividends cps AU 395 / US 282 2H19 div yield % 4.2% FY19 EPS (DBe) cps AU 275 / US 197 FY19 ordinary div payout ratio % 72% FY19 special div payout ratio % 72% FY19 total div payout ratio % 143%
2H19 dividend (DBe) cps AU 177 / US 125 1H20 dividend (DBe) cps AU 100 / US 72 Fwd 12m DPS (DBe) cps AU 277 / US 197 Fwd 12m div yield % 6.6%
Source : Deutsche Bank, Company data
Dividend policy "The Group adopted a dividend policy in February 2016 that provides for a minimum 50% payout of underlying attributable profit at every reporting period."
Sourced from: Company website .
Page 4 Deutsche Bank AG/Sydney 3 July 2019 M&M - Diversified Resources Australian Mining
Figure 9: BHP capex profile Figure 10: Dividend summary
Includes US Onshore sale (US$m) Guidance: Guidance: 300 (USc/sh) 160% <$8bn <$8bn proceeds 8,000 250 7,174 120% 6,946 6,874 Progressive policy scrapped 6,152 200 6,000 80% 4,979 4,863 150 4,252 4,000 40% 100
0% 2,000 50
0 -40%
0
2018
2017
2016
2015
2014
2013
2012
2011
2010
2009
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2007
2006
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2004
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2021E 2020E 2016 2017 2018 2019e 2020e 2021e 2022e 2019E Special DPS Ordinary DPS Payout ratio - RHS Minimum payout (50% of EPS) - RHS
Source : Deutsche Bank, Company data Source : Deutsche Bank estimates, Company data. *Note: 2015 Payout ratio is 346% (De-merger of S32)
Deutsche Bank AG/Sydney Page 5 3 July 2019 M&M - Diversified Resources Australian Mining Rio Tinto
Capped out on further buybacks RIO paid its first special dividend since 2006 at the FY results in February 2019 ($4.0bn). RIO also completed $2.0bn on-market buyback between Feb-2018 and Feb-2019 as well as a $2.1bn off-market buyback in Nov-2018. RIO is currently undertaking an on-market buyback for $1.1bn (expected to complete by Feb-2020) with ~$750m remaining.
We expect excess capital to continue to be returned via special dividends given buy- backs of the past few years have pushed the largest shareholder towards threshold limits. Chinalco owns 14.5% of the RIO Plc shares representing 11.2% of the group, noting that the Australian government in 2009 set a 15% ownership limit on Chinal- co before requiring foreign investment approval.
With its 1-Aug half year results (2Q production 16 July) we forecast RIO to pay ~A$5.60 in dividends split ~50/50 ordinary and special, for a yield on this payment alone of ~5.3%.
Figure 11: RIO could pay a A$2.88 special dividend at its half year results
RIO 30-June 31-Dec Net debt US$m 3,676 6,996 Target net debt US$m 7,000 Surplus cash to target US$m 3,324
Ordinary dividend (DBe) US$m 3,116 Special dividend (DBe) US$m 3,324 Total 1H dividends (DBe) US$m 6,440 1H19 ordinary dividend (DBe) cps AU 270 / US 191 1H19 special dividend (DBe) cps AU 288 / US 204 Total 1H19 dividends (DBe) cps AU 559 / US 395 1H19 div yield % 5.3% 1H19 EPS (DBe) cps AU 451 / US 318 1H19 ordinary payout ratio % 60% 1H19 special payout ratio % 64% 1H19 total payout ratio % 124%
1H19 dividend (DBe) cps AU 559 / US 395 2H19 dividend (DBe) cps AU 240 / US 172 2H19 buyback ($750m remaining) cps AU 64 / US 46 2019 div yield % 8.1%
Source : Deutsche Bank, Company data
Dividend policy - Comprehensive and providing maximum flexibility Our big issue with RIO's dividend policy is it implies a maximum. Dividend policy in our view should guide investors to a minimum expectation.
"At the end of each financial period, the board will determine an appropriate total level of ordinary dividend per share...The intention is that the balance between the interim and final dividend is weighted to the final dividend.
The board expects total cash returns to shareholders over the longer term to be in a range of 40 to 60 per cent of underlying earnings in aggregate through the cycle.
...Acknowledging the cyclical nature of the industry, in periods of strong earnings and cash generation, it is the board’s intention to supplement the ordinary dividends with additional returns to shareholders."
Page 6 Deutsche Bank AG/Sydney 3 July 2019 M&M - Diversified Resources Australian Mining
Sourced from: Company website .
Figure 12: RIO capex profile Figure 13: Dividend summary
Guidance: 600 (USc/sh) 140% (US$m) $6.5bn Guidance: Guidance: $6.5bn 8,000 7,207 500 120% $6.0bn 6,761 6,018 100% 5,430 400 6,000 4,482 4,542 80% 300 3,114 60% 4,000 3,012 200 40%
2,000 100 20% 2,904 0 0% 0
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2020E 2019E 1H19 2H19 Ordinary DPS Special DPS Payout ratio - RHS Target payout (40-60% of EPS)
Source : Deutsche Bank, Company data Source : Deutsche Bank estimates, Company data
Deutsche Bank AG/Sydney Page 7 3 July 2019 M&M - Diversified Resources Australian Mining Fortescue Metals Group
Yet another dividend FMG already announced a A$60 cps special dividend in May. Post election the cur- rent franking regime will remain in place and as a result of strong iron ore prices we believe there is potential for FMG to pay up to an additional A$28 cps at the 26-Au- gust full year results (4Q production 25-July; DBe previously was for A$10 cps). We believe FMG will continue to return cash to shareholders via dividends (rather than share buybacks) with the current buyback program still on hold noting the high share price, a prudent and commendable move given so often buybacks are pro- cyclical, catching a high share price and killing accretion.
Figure 14: FMG can pay an additional A$28 cps at the full year to move the pay- out ratio closer to 100%
FMG 30-June 31-Dec Net debt US$m 2,681 3,336 Target net debt US$m 3,300 Surplus cash to target US$m 619
Special already paid US$m 1,305 Ordinary dividend (DBe) US$m 619 Total 2H dividends US$m 1,924 2H special already paid cps AU 60 / US 42 2H ordinary (DBe) cps AU 28 / US 20 1H ordinary dividend cps AU 19 / US 14 1H special cps AU 11 / US 8 Total FY19 dividends cps AU 118 / US 85 FY19 EPS (DBe) AU cps AU 129 / US 92 Ordinary div payout ratio % 37% Special div payout ratio % 55% Total div payout ratio % 92%
2H19 dividend to be paid cps AU 28 / US 20 2H19 div yield % 3.2%
2H19 dividend to be paid (DBe) cps AU 28 / US 20 1H20 dividend (DBe) cps AU 45 / US 32 Fwd 12m DPS (DBe) cps AU 73 / US 52 Fwd 12m div yield % 8.1%
Source : Deutsche Bank, Company data
Dividend policy "The dividend pay-out ratio policy remains at 50 to 80 per cent of net profit after tax, with payment dates expected to revert to March/April for interim dividends and Sep- tember/October for final dividends."
Sourced from: ASX release - Fully franked dividend of A$0.60 per share declared, payable on 14 June 2019 .
Page 8 Deutsche Bank AG/Sydney 3 July 2019 M&M - Diversified Resources Australian Mining
Figure 15: FMG has materially higher capex in FY20 due to Figure 16: Dividend summary Queens / Ironbridge
(US$m) 90 (USc/sh) 100% 2,500 2,397 80 90% 70 80% 2,000 1,950 70% 60 Guidance: 60% 1,500 $1.2bn 1,373 50 50% 40 1,048 40% 1,000 30 30% 500 20 20% 10 10% 0 0 0% 2016 2017 2018 2019e 2020e 2021e 2022e 2011 2012 2013 2014 2015 2016 2017 2018 2019E 2020E 2021E
Ordinary DPS Special DPS Payout ratio - RHS
Source : Deutsche Bank, Company data Source : Deutsche Bank estimates, Company data
Deutsche Bank AG/Sydney Page 9 3 July 2019 M&M - Diversified Resources Australian Mining Whitehaven Coal
Dividends and funded growth WHC only returned to paying dividends in 2017 and rewarded investors with a spe- cial dividend in FY18 and 1H19. We believe WHC has the balance sheet capacity and cash flow generation to fund its mine developments and continue paying ~50% of NPAT as dividends going forward, with special dividends the preferred method to return surplus cash.
Figure 17: We do not believe WHC will pay a special dividend but it offers inves- tors an ~8% yield over the next 12 months
WHC 30-June 31-Dec Net debt A$m 155 -317 Target net debt A$m 0 Surplus cash to target A$m -155
Ordinary dividend (DBe) A$m 130 Special dividend (DBe) A$m 0 Total 2H19 dividends A$m 130 1H19 special dividend cps AU 5 / US 4 1H19 ordinary dividend cps AU 15 / US 11 2H19 ordinary dividend (DBe) cps AU 13 / US 9 Total FY19 dividends cps AU 33 / US 23 2H19 div yield % 3.5% FY19 EPS (DBe) cps AU 55 / US 39 FY19 special div payout % 9% FY19 ordinary div payout % 50% FY19 total div payout % 59%
2H19 dividend (DBe) cps AU 13 / US 9 1H20 dividend (DBe) cps AU 15 / US 10 Fwd 12m DPS cps AU 27 / US 19 Fwd 12m div yield % 7.6%
Source : Deutsche Bank, Company data; 4Q19 production report 11-Jul, FY19 results 15-Aug
Dividend policy "The dividend policy of the company is generally to pay 25-40% of EPS plus surplus capital or special dividends per the balance sheet and outlook in each period.
When it can, the company has chosen to return excess capital via special dividends. We think this also is the preference of the substantial holders that have been with the company over many years."
The company only recently returned to dividend payments after the 2012 merger with Aston Coal and the investment capital that entailed to develop Narrabri and Maules Creek.
Page 10 Deutsche Bank AG/Sydney 3 July 2019 M&M - Diversified Resources Australian Mining
Figure 18: WHC capex ramps up in 2021 as it begins Figure 19: Dividend summary development of Vickery and Winchester South
(A$m) 60 (Ac/sh) 60% 750 50 50%
40 40% 500 30 30%
298 20 20% 250 76 190 10 10% 153 0 0 0%
2016 2017 2018 2019e 2020e 2021e 2022e
2018
2017
2016
2015
2014
2013
2012
2011
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2021E 2020E Capex Acquisitions 2019E Interim Final Special Payout ratio (RHS)
Source : Deutsche Bank, Company data Source : Deutsche Bank estimates, Company data
Deutsche Bank AG/Sydney Page 11 3 July 2019 M&M - Diversified Resources Australian Mining South32
A consistent returns program with conservative buyback S32 employs a combination of ordinary dividends, special dividends and on-market share buybacks to return cash to shareholders. S32 has returned ~$900m since 2017 through on-market buybacks, and we expect this to continue with $200m in 2H CY19. S32 paid a US 1.7cps special dividend at its 1H19 results but we do not expect an additional special dividend at the full year.
Figure 20: We expect S32 to continue the buyback with $200m in 2H CY20
S32 30-June 31-Dec Net debt / (cash) US$m -570 -1,069 Target net debt US$m -600 Surplus cash to target US$m -30
Ordinary dividend (DBe) US$m 198 Special dividend (DBe) US$m 0 Total 2H dividends US$m 198 1H19 special dividend cps AU 2 / US 2 1H19 ordinary dividend cps AU 7 / US 5 2H19 ordinary dividend (DBe) cps AU 6 / US 4 Total FY19 dividends cps AU 15 / US 11 2H19 div yield % 1.7% FY19 EPS (DBe) cps AU 32 / US 23 FY19 ordinary div payout ratio % 40% FY19 special div payout ratio % 7% FY19 total div payout ratio % 48%
2H19 dividend (DBe) cps AU 6 / US 4 1H20 dividend (DBe) cps AU 9 / US 6 1H20 $200m buyback (DBe) cps AU 6 / US 4 Fwd 12m DPS + buyback cps AU 20 / US 14 Fwd 12m div yield % 6.1%
Source : Deutsche Bank, Company data; 4Q19 production report 18-Jul, FY19 results 22-Aug
Dividend policy "The South32 dividend policy will be determined by its Board at its discretion, having regard to South32’s first two priorities for cash flow, being a commitment to maintain safe and reliable operations and an investment grade credit rating through the cycle.
South32 intends to distribute a minimum 40% of Underlying Earnings as dividends to its shareholders following each six-month reporting period. South32 will distribute dividends with the maximum practicable franking credits for the purposes of the Aus- tralian dividend imputation system."
Sourced from: Company website .
Page 12 Deutsche Bank AG/Sydney 3 July 2019 M&M - Diversified Resources Australian Mining
Figure 21: S32 has relatively stable capex with growth Figure 22: Dividend summary coming from Met Coal, Cerro Mataoso and Hermosa
(US$m) 16 (USc/sh) 60% 1,000 Guidance: 14 <$762m 50% 12 750 40% 10
8 30% 500 6 20% 250 4 10% 2 0 0 0% 2016 2017 2018 2019e 2020e 2021e 2022e 2016 2017 2018 2019E 2020E 2021E
Dividend per share Payout ratio - RHS
Source : Deutsche Bank, Company data Source : Deutsche Bank estimates, Company data
Deutsche Bank AG/Sydney Page 13 3 July 2019 M&M - Diversified Resources Australian Mining
Earnings changes
Note that we marked to market S32 in our note "A line in the sand" (28-Jun-19) and we have made no subsequent changes to our model.
Figure 23: BHP summary of changes Figure 24: RIO summary of changes
Summary of changes Unit 2H19 FY19 FY20 FY21 Summary of changes Unit 1H19 2H19 FY19 FY20 FY21 Revenue Revenue Old US$m 19,631 20,871 40,502 41,627 40,989 Old US$m 23,771 44,683 46,611 45,214 New US$m 21,013 20,846 41,859 41,627 40,989 New US$m 24,498 45,410 46,633 45,214 Diff. % 7.0% -0.1% 3.4% 0.0% 0.0% Diff. % 3.1% 1.6% 0.0% 0.0% EBITDA Old US$m 9,326 9,836 19,162 19,260 18,164 EBITDA New US$m 10,513 9,810 20,323 19,261 18,165 Old US$m 13,210 23,749 25,635 23,178 Diff. % 12.7% -0.3% 6.1% 0.0% 0.0% New US$m 13,893 24,432 25,637 23,152 Old US$ cps 271.9 286.5 558.4 551.7 498.4 Diff. % 5.2% 2.9% 0.0% -0.1% New US$ cps 318.4 286.0 604.4 547.7 494.5 Diff. % 17.1% -0.2% 8.2% -0.7% -0.8% Old US$ cps 112.3 185.9 220.0 190.1 New US$ cps 121.9 195.5 219.8 189.1 Old US$ cps 163.2 171.9 335.1 386.2 348.9 New US$ cps 394.8 171.6 566.4 383.4 346.1 Diff. % 8.5% 5.2% -0.1% -0.5% Diff. % 141.9% -0.2% 69.0% -0.7% -0.8% NPV Old US$ cps 78.6 235.6 132.0 114.1 Old A$/sh 88.30 New A$/sh 91.07 New US$ cps 124.8 281.8 131.9 113.5 Diff. % 3.1% Diff. % 58.7% 19.6% -0.1% -0.5% NPV Old A$/sh 27.68 New A$/sh 28.36 Diff. % 2.5%
Source : Deutsche Bank, Company data Source : Deutsche Bank, Company data
Figure 25: FMG summary of changes Figure 26: WHC summary of changes
Summary of changes Unit 2H19 FY19 FY20 FY21 Summary of changes Unit 2H19 FY19 FY20 FY21 Revenue Revenue Old US$m 5,125 8,665 8,418 7,667 Old A$m 1,187 2,459 2,449 2,729 New US$m 5,935 9,475 8,826 8,111 New A$m 1,174 2,444 2,449 2,729 Diff. % 15.8% 9.4% 4.8% 5.8% EBITDA Diff. % -1.1% -0.6% 0.0% 0.0% Old US$m 3,063 4,692 4,149 3,303 EBITDA New US$m 3,882 5,511 4,377 3,531 Old A$m 549 1,100 1,026 1,029 Diff. % 26.7% 17.4% 5.5% 6.9% New A$m 547 1,098 1,046 996 Diff. % -0.4% -0.2% 2.0% -3.2% Old US$ cps 52.2 73.1 59.4 38.2 New US$ cps 71.1 92.0 63.6 41.7 Old A$ cps 28.9 58.7 53.3 52.2 Diff. % 36.2% 25.9% 7.0% 9.2% New A$ cps 25.4 55.2 54.1 49.3 Old US$ cps 49.9 71.6 39.6 19.1 Diff. % -12.1% -6.0% 1.5% -5.4% New US$ cps 62.5 84.2 42.4 20.8 Diff. % 25.3% 17.6% 7.3% 9.2% Old A$ cps 14.4 34.4 26.6 26.1 NPV New A$ cps 12.7 32.7 27.1 24.7 Old A$/sh 7.09 Diff. % -12.1% -5.1% 1.5% -5.4% New A$/sh 7.42 NPV Diff. % 4.7% Old A$/sh 5.06 New A$/sh 5.09 Diff. % 0.7%
Source : Deutsche Bank, Company data Source : Deutsche Bank, Company data
Page 14 Deutsche Bank AG/Sydney 3 July 2019 M&M - Diversified Resources Australian Mining
Figure 27: BHP operational and financial summary
FX/COMMODITIES (Nominal) FY17A FY18A FY19F FY20F FY21F FY22F Market Data Ltd Plc Total AUDUSD 0 .75 0.78 0.72 0.72 0.72 0.72 Ticker BHP.AX BHPB.L Oil - Brent (US$/bbl) Share price (local) 41.68 20.33 Oil - WTI (US$/bbl) 49 59 61 59 59 63 Share price (USD equivalent) 29.04 25.71 Copper (US$/lb) 2 .45 3.06 2.79 2.91 2.77 2.77 Price difference 13% -11% Iron ore - lump (US$/t) - CIF 76 87 101 89 81 73 Shares on issue (m) 2,945 2,112 5,057 Iron ore - fines (US$/t) - CIF % of shares split Ltd v Plc 58% 42% Coking coal (US$/t) Spot FX (AUD:USD) (USD:GBP) 0.70 1.27 Thermal coal (US$/t) - contract 67 91 102 94 88 85 Market Cap (USDm) 85,512 54,308 139,820 US natural gas (US$/mmBtu) 3 .04 2.88 2.99 3.08 3.20 3.23 % of mkt cap split 61% 39%
KEY FINANCIAL METRICS NPV (HD19) US$M US$/sh A$/sh Underlying Earnings (US$M) 6 ,732 8,933 9,918 11,151 9,595 9,248 Iron ore 59,637 11.79 15.72 EPS (USc) 126 167 196 220 189 182 Base Metals (Copper) 17,966 3.55 4.74 EPS Change (%) 5 0 0 0 (0) (0) Petroleum 17,760 3.51 4.68 DPS (USc) 83 118 282 132 113 109 Met Coal 17,828 3.52 4.70 Payout ratio (%) 66% 70% 144% 60% 60% 60% Potash - Jansen (capex value) 2,800 0.55 0.74 CASH FLOW Energy Coal (NSW & Colombia) 5,753 1.14 1.52 Operating Cash Flow (US$M) 16,804 18,461 17,947 17,886 17,653 17,115 Nickel West (gross) 1,577 0.31 0.42 Capex and exploration expenditure (US$M) (5,220) (5,802) (7,749) (8,080) (7,060) (5,772) Samarco -1,800 -0.36 -0.47 Other investing cash flows (incl. divestments) (US$M) 1,059 (119) 9,823 - - - Group & Unallocated -1,209 -0.24 -0.32 Free Cash Flow (US$M) - before dividends 1 2,643 12,540 9,621 9,806 10,593 11,343 Provisions and rehab -8,200 -1.62 -2.16 Dividend (US$M) (2,921) (5,220) (11,760) (9,977) (6,046) (5,663) H2 FY19 dividends (DBe) 6,331 1.25 1.67 Share Buybacks (US$M) - - (5,220) - - - Less: Net debt -10,240 -2.02 -2.87 Free Cash Flow (US$M) - before debt 9 ,722 7,320 3,041 (171) 4,547 5,679 Total 108,203 21.39 28.36 Free Cash Flow yield (%) 8.2% 8.1% 6.5% 6.7% 7.2% 7.7% P/FCF 12 12 15 15 14 13 WACC (nominal) Shares 5,058M
BALANCE SHEET AND RETURNS Net Debt (US$M) 1 6,321 10,934 9,006 9,615 5,426 Valuation (HD19) Gearing (ND/ND+E - %) ROE (%) 12% 16% 19% 23% 19% 17% Iron ore ROA (%) 48% ROCE (%) Nickel West (gross) PRODUCTION 1% Copper (kt)- consolidated 1 ,326 1,753 1,672 1,762 1,789 1,926 Copper (kt)- equity 998 1,238 1,193 1,253 1,273 1,415 Energy Coal Iron ore (Mt) - Attributable (incl Jimblebar) 228 234 227 251 259 256 (NSW & `
Iron ore (Mt) - Pilbara (100%) Colombia) Petroleum (Mmboe) - US Onshore 80 72 20 - - - 5% Base Metals Petroleum (% Liquids) - US Onshore 43% 40% 37% 0% 0% 0% (Copper) Petroleum (Mmboe) - Conventional 128 120 118 105 103 109 Potash - 15% Petroleum (Mmboe) - Total Jansen (capex Coal - Hard coking (Mt) - Attributable 39.8 42.6 44.5 46.5 48.1 49.1 value) Petroleum Coal - Hard coking (Mt) - Qld (100%) 7 1.2 75.5 78.3 83.5 86.6 88.6 2% Met Coal 14% Coal - Thermal (Mt) 29.6 29.2 28.5 28.4 28.4 28.4 15% Nickel (kt) 85 93 82 87 87 87 Copper Eq Production (Mt) 6 .1 6.3 6.7 6.7 6.8 7.1 Change (%) -7.0% 2.1% 6.8% 0.2% 1.8% 3.4%
CAPEX (US$M) Growth capex split (2019F) Growth Petroleum - US Onshore 575 - - - - - Iron Ore Petroleum - Conventional 697 442 544 1,300 864 578 31% Coal Petroleum 1,272 1,300 3% Copper 596 812 1,163 1,400 750 600 Iron Ore - - 920 1,000 1,100 250 Potash Coal (4) (3) 75 150 150 50 8% Potash 162 230 240 180 - - Total Growth Capex 2,026 1,481 2,942 4,030 2,864 1,478 Petroleum - Sustaining Capex 2,227 3,508 3,877 3,144 3,289 3,386 Conventional Consolidated Capex 4,252 4,979 6,874 7,174 6,152 4,863 18% Exploration 968 823 875 906 907 909 Copper Total capex incl. Exploration 5,220 5,802 7,749 8,080 7,060 5,772 40% Guidance (consolidated excluding share from mid FY19) 6,900 <8,000 <8,000
EBITDA (US$M) EBITDA split (2019F) Petroleum - US Onshore 1,004 - - - - - Petroleum - Conventional 3,059 3,341 4,108 3,574 3,749 4,194 Petroleum 4,063 3,341 4,108 3,574 3,749 4,194 Copper 3,545 6,522 4,607 5,967 4,917 5,390 Coal Iron Ore 9,077 8,930 10,730 10,816 9,661 8,773 20% Coal 3,784 4,397 4,924 4,771 4,082 3,529 Iron Ore 44% G&A (corporate, Nickel West, Potash) (173) (7) 62 509 743 107 G&A (corporate, Total 20,296 23,183 24,432 25,637 23,152 21,993 Nickel West, Potash) EBIT (US$M) 0% Petroleum - US Onshore (777) - - - - - Petroleum - Conventional 1,343 1,546 2,606 2,128 2,313 2,677 Petroleum 1,546 2,606 2,128 2,313 2,677 Petroleum - Conventional Copper 2,006 4,389 2,579 3,885 2,719 3,151 Copper 17% Iron Ore 7,197 7,195 9,029 9,075 7,931 6,975 19% Coal 3,050 3,682 4,263 4,138 3,471 2,903 G&A (corporate, Nickel West, Potash) (430) (250) (302) 330 442 339 Total 12,389 16,562 18,175 19,555 16,877 16,045
Source : Deutsche Bank estimates, Company data
Deutsche Bank AG/Sydney Page 15 3 July 2019 M&M - Diversified Resources Australian Mining
Figure 28: RIO operational and financial summary
COMMODITY & CURRENCY (Nominal) CY16A CY17A CY18A CY19F CY20F CY21F CY22F Market Data Ltd Plc Total AUD/USD 0.74 0.77 0.75 0.71 0.72 0.72 0.72 Ticker RIO.AX RIO.L Iron ore - lump (US$/t) - CIF Share price (local) 104.75 49.16 Iron ore - fines (US$/t) - CIF Share price (USD equivalent) 72.97 62.19 Aluminium (US$/lb) 0.73 0.89 0.96 0.90 1.00 1.07 1.11 Price difference 17% -15% Bauxite (US$/t) - CIF Shares on issue (m) 371 1,278 1,649 Copper (US$/lb) 2.21 2.80 2.96 2.90 2.81 2.72 2.81 % of shares split Ltd v Plc 23% 77% 100% Thermal Coal (US$/t) - contract Spot FX (AUD:USD) (USD:GBP) 0.70 1.27 Coking Coal (US$/t) 114 210 208 202 170 170 145 Market Cap (USDm) 27,088 79,489 106,577 Uranium (US$/lb) - term 57 59 62 64 65 66 59 % of mkt cap split 25% 75% Rutile (US$/t) 1,006 1,095 Zircon (US$/t) 1,303 1,408 1,441 1,358 1,369 NPV (HD19) US$M US$/sh A$/sh Gold (US$/oz) 1,249 1,259 1,269 1,322 1,375 1,430 1,450 Pilbara Iron ore 67,880 41.94 55.92 Bauxite and Alumina 11,841 7.32 9.75 KEY FINANCIAL METRICS Aluminium (North America) 11,981 7.40 9.87 Underlying Earnings (US$m) 5,100 8,627 8,808 9,870 8,865 8,003 8,113 Oyu Tolgoi (34%) 8,585 5.30 7.07 EPS (USc) 284 486 522 604 548 494 501 Escondida (30%) 4,696 2.90 3.87 EPS Change (%) 13% 72% 7% 16% -9% -10% 1% Kennecott (100%) 3,089 1.91 2.54 DPS including special (USc) 170 290 550 566 383 346 351 Minerals(TiO2, borates, other) 5,987 3.70 4.93 Payout ratio (%) 60% 60% 105% 94% 70% 70% 70% IOC Canada (57%) 1,976 1.22 1.63 CASH FLOW Diamonds 527 0.33 0.43 Operating Cash Flow (includes interest) (US$m) 8,465 13,884 11,821 14,628 14,168 13,310 13,771 Pacific Aluminium 193 0.12 0.16 Capex (US$m) -3,012 -4,482 -5,430 -6,018 -7,207 -6,761 -4,542 Winu copper 300 0.19 0.25 Acquisitions, divestments and other (US$m) 908 2,109 6,751 -744 0 0 0 Other properties (Winu copper, Uranium, others) -1,242 -0.77 -1.02 Free Cash Flow - before dividends (US$m) 6,361 11,511 13,142 7,866 6,961 6,549 9,229 Corporate (corp, pensions, rehab) -4,710 -2.91 -3.88 Dividend - cash basis (US$m) -2,725 -4,250 -5,356 -13,417 -5,897 -5,878 -5,641 1H19 dividends (DBe) 6,440 3.98 5.31 Share buybacks (US$m) 0 -2,083 -5,386 -1,700 0 0 0 Net (debt)/cash -6,996 -4.32 -5.76 Other cashflow movements (US$m) 147 -43 188 0 0 0 0 Total 110,547 68.30 91.07 Free Cash Flow - before debt (US$m) 3,783 5,135 2,588 -7,251 1,064 3,588 0 Free Cash Flow yield (%) P/FCF (x) 20.6 11.2 9.4 15.2 17.0 18.0 12.8 WACC (nominal) Shares 1,619M
BALANCE SHEET AND RETURNS NPV split (HD19) Net Debt (US$m) 9,587 3,845 -255 6,996 5,932 5,261 1,672 Gearing (ND/ND+E - %) -1% ROE (%) 13% 21% 20% 24% 22% 19% 18% ROA (%) ROCE (%) Net Debt/EBITDA (x) 0.8 0.2 0.0 0.4 0.3 0.3 0.1 Bauxite and Aluminium (North Alumina America) PRODUCTION 10% 10% Copper - refined (kt) 250 197 275 236 250 250 232 Copper - mined (kt) Iron ore (Mt) - attributable 281 282 291 281 310 311 316 Oyu Tolgoi (34%) Iron ore (Mt) - Pilbara (100%) - prodn 8% Iron ore (Mt) - Pilbara (100%) - sales Iron ore (Mt) - Global (100%) production 348 349 353 343 378 379 384 Escondida (30%) Iron ore (Mt) - Global (100%) shipments 4% Coal - Hard and Semi soft coking (Mt) 12 10 4 0 0 0 0 Coal - Thermal (Mt) 17 14 3 0 0 0 0 Kennecott (100%) Bauxite (Mt) 3% Alumina (Mt) 8 8 8 8 8 8 8 Aluminium (Mt) 4 4 3 3 3 3 3 Minerals(TiO2, Uranium (kt) 3 3 3 3 0 0 0 borates, other) Pilbara Iron ore 5% Diamonds (Mcts) 18 22 18 16 17 17 17 60% Gold (koz) 293 260 639 359 371 370 370 Titanium dioxide feedstock (kt) 1,049 1,316 1,117 1,316 1,360 1,360 1,360 Copper Eq Production (Mt) 6 6 6 6 6 6 6 Copper Eq (% change) 0 0 0 0 0 0 0
CONSOLIDATED CAPEX (US$m) EBITDA split (2019F) Growth Aluminium (includes bauxite and alumina) 409 886 921 733 460 160 160 Copper 618 1,050 1,509 1,590 1,740 1,520 1,100 Aluminium Diamonds 68 80 20 80 80 0 0 (includes bauxite Minerals 0 0 0 0 0 0 0 and alumina) Energy 0 0 0 0 0 0 0 14% Iron Ore 173 518 441 1,040 2,140 2,020 0 Total Growth Capex 1,268 2,534 2,892 3,443 4,420 3,700 1,260 Copper 8% Sustaining Capex 1,581 1,944 2,073 2,575 2,787 3,061 3,282 Total Capex 2,849 4,478 4,965 6,018 7,207 6,761 4,542 Diamonds 1% Guidance 5,500 6,000 6,500 6,500 Minerals Energy 4% EBITDA (US$m) 0% Aluminium (includes bauxite and alumina) 2,472 3,423 3,095 2,971 3,876 4,316 4,553 Copper 1,148 1,617 2,475 1,602 1,952 2,235 3,172 Diamonds 239 287 301 252 252 255 258 Iron Ore 555 804 748 934 960 1,006 1,060 Minerals 73% Energy 916 1,229 859 -8 -7 0 0 Iron Ore 8,861 12,290 11,911 15,668 13,346 11,496 10,253 Others (includes associates and JVs) -681 -1,070 -1,253 -1,096 -1,119 -1,143 -954 Total 13,510 18,580 18,136 20,323 19,261 18,165 18,342
EBITDA margins (%) Aluminium 26% 31% 25% 25% 29% 31% 31% Copper 29% 39% 43% 32% 34% 36% 44% Diamonds 39% 41% 43% 42% 40% 40% 40% Minerals 24% 31% 28% 34% 33% 34% 34% Energy 29% 37% 59% -2% -7% 0% 0% Iron Ore 56% 61% 59% 67% 62% 58% 55% Total
Source : Deutsche Bank estimates, Company data
Page 16 Deutsche Bank AG/Sydney 3 July 2019 M&M - Diversified Resources Australian Mining
Figure 29: FMG operational and financial summary
COMMODITY & CURRENCY (Nominal) 2016A 2017A 2018A 2019F 2020F 2021F 2022F Market Data AUD USD FX AUDUSD 0.73 0.75 0.78 0.72 0.72 0.72 0.72 Price (A$ / US$ / FX (AUD:USD)) 9.15 6.37 0.70 Iron Ore Fines Index Price (62% Fe, $/t) 51 69 69 80 68 62 63 Mkt Cap 28,173 19,626 Iron Ore Fines Price (58% Fe, $/t) 42 46 40 55 54 49 50 Net debt 3,912 2,725 FMG realised price (CIF, US$/t) 45 53 44 62 54 49 52 Other (minority) 0 0 Discount to Index (after adj for grade, %) -6% -18% -32% -20% -15% -15% -15% EV 32,085 22,352 Product grade (% Fe) 57.5% 57.4% 57.3% 57.4% 57.5% 57.4% 57.8% Ticker(s) / Shares out FMG 3,079
Production Substantial Holders Shares % Ore shipment (Mwmt, attributable) 167 170 170 168 178 180 184 Minderoo 1,090 35.4% Ore shipment (Mdmt, attributable) 153 156 155 154 163 165 169 Hunan SOASAC 402 13.1% Shipment guidance (Mwmt, product) 170 165-170 Free Float 52% Ore shipment by product (Mwmt, attributable) Fortescue Blend (FB) 75 67 59 40 35 NPV (FY19) US$M US$ps A$ps (%) Super Special Fines (SSF) 80 75 83 99 90 Chichester (Cloud Break/ Christmas Creek) 8,965 2.91 3.88 52% West Pilbara Fines (WPF) 0 9 20 25 40 Solomon & Western Hub (incl. Eliwana) 10,026 3.26 4.34 58% Kings Fines and other 15 18 16 16 16 Iron Bridge Magnetite JV (60.7%) 2,092 0.68 0.91 12% Magnetite concentrate 0 0 0 0 4 Corporate and other (610) (0.20) (0.26) -4% Total 170 168 178 180 184 Provisions (605) (0.20) (0.26) -4% Net (debt)/cash (2,725) (0.89) (1.18) -16% Port Hedland allocated capacity (A&B) - 120Mtpa 120 120 120 120 120 TOTAL 17,143 5.57 7.42 100% Port Hedland Class D - Mtpa 50 48 58 60 64 TOTAL (A$m) 23,450 Train unloaders capacity (3x60) 180Mtpa 180 180 180 180 180 Price Target (A$, 1x NPV) 7.70 Rail capacity (Solomon spur line bottleneck) +180Mtpa 180 180 180 180 180 WACC (Nominal) 10.0% AUD/USD assumption 0.75 Ore processed (Mwmt, attributable) Cloud Break (40Mtpa) 40 40 35 36 40 36 32 Christmas Creek (55Mtpa) 51 61 62 68 59 58 58 Kings (45Mtpa) 51 46 42 40 47 46 46 Firetail (30Mtpa) 26 26 27 27 32 25 20 Eliwana (Western Hub) (30Mtpa) 0 0 0 0 0 16 25 Iron Bridge JV (22Mtpa) 0 0 0 0 0 0 4 TOTAL 168 172 166 171 178 180 184 Moisture (%) -8.7% -8.4% -8.5% -8.5% -8.5% -8.5% -8.5%
Financials (June year end) NPV split (FY19) Chichester Hub 1,706 2,848 1,824 3,122 2,295 1,678 1,725 Solomon Hub 1,533 1,946 1,404 2,295 2,167 1,941 2,110 Iron Bridge Magnetite Iron Bridge JV 0 0 0 0 0 0 201 JV (60.7%) Corporate, other costs etc (US$m) -44 -50 -46 97 -86 -89 106 Solomon & 10% Group EBITDA $m 3,195 4,744 3,182 5,515 4,377 3,531 4,144 Western Hub (incl. EBITDA margin 44% 56% 46% 58% 49% 43% 45% Eliwana) Underlying Earnings (US$m) 984 2,093 879 2,832 1,957 1,284 1,519 48% EPS (US¢) 31.6 67.3 28.2 92.0 63.6 41.7 49.3 Ordinary DPS (US¢) (Annual policy 50-80%) 11.0 33.9 17.8 76.2 42.4 20.8 24.7 Special DPS (US¢) 0.0 0.0 0.0 8.0 0.0 0.0 0.0 Ordinary DPS (A¢) (Annual policy 50-80%) 15.1 45.0 23.0 106.6 59.3 29.1 34.4 Special DPS (A¢) 0.0 0.0 0.0 11.1 0.0 0.0 0.0 Total DPS (A¢) 15.1 45.0 23.0 117.7 59.3 29.1 34.4 Dividend yield - ordinary (%) 13% 6% 3% 4% Payout ratio - ordinary (%) 50% 63% 83% 67% 50% 50% CASH FLOW Chichester (Cloud Operating Cash Flow (includes interest) (US$m) 2,418 4,256 1,601 3,802 2,247 2,757 2,958 Break/ Christmas Capex (incl. exploration) and divestments (US$m) -358 -715 -936 -986 -2,397 -1,950 -1,373 Creek) Free Cash Flow - before dividends (US$m) 2,060 3,541 665 2,816 -150 808 1,585 42% Dividend (US$m) -114 -755 -874 -2,244 -1,604 -631 -676 Other cashflow movements (US$m) -26 -47 -278 -36 0 0 0 Free Cash Flow - before debt (US$m) 1,920 2,786 -209 572 -1,754 176 909 Free Cash Flow yield (%) 10% 18% 3% 14% -1% 4% 8% P/FCF (x) 10 6 30 7 -131 24 12 EBITDA split (FY19) Dividend yield (%) 7% 13% 6% 3% 4% Solomon BALANCE SHEET AND RETURNS 59% Net Debt (US$m) 5,188 2,633 3,156 2,725 4,479 4,303 3,394 Gearing (ND/E, %) 62% 27% 32% 27% 42% 38% 28% ROE (%) 12% 23% 9% 28% 19% 12% 13% ROA (%) 11% 20% 11% 25% 17% 12% 13% ND/ EBITDA 0.6 1.0 0.5 1.0 1.2 0.8
STRIP RATIOS AND PLANT RECOVERIES Cloud Break strip ratio (waste:ore) 1.3 1.6 2.0 1.7 1.8 1.9 1.9 Christmas Creek strip ratio (waste:ore) 1.2 0.8 1.6 1.8 1.8 1.9 1.9 Iron Bridge JV Average Chichester strip ratio (w:o) 1.3 1.1 1.8 1.8 1.8 1.9 1.9 0% Firetail strip ratio (waste:ore) 0.5 0.6 1.0 1.3 1.3 1.3 1.3 Western Hub (Eliwana) strip ratio (waste:ore) 0.0 - - - - 1.2 1.2 Corporate, other Kings strip ratio (waste:ore) 1.0 1.1 1.0 1.1 1.3 1.3 1.3 Chichester Hub costs etc (US$m) Avg. Solomon + Western Hub strip ratio (w:o) 0.9 0.9 1.0 1.2 1.3 1.2 1.2 56% 2% Avg Iron Bridge JV strip ratio (w:o) 0.0 0.0 0.0 0.6 Average Group SR (waste:ore) 1.1 1.0 1.4 1.5 1.6 1.5 1.5 Guidance 1.4 1.5 1.6 1.6 1.6 Cloud Break recovery (%) 90% 90% 90% 90% 90% 90% 90% Christmas Creek recovery (%) 90% 90% 90% 90% 90% 90% 90% Capex split (FY19) Firetail recovery (%) 100% 100% 100% 100% 100% 100% 100% Exploration & Eliwana (Western Hub) recovery (%) ----- 100% 100% Evaluation Kings recovery (%) 91% 83% 90% 77% 90% 88% 88% 9% Iron Bridge magnetite concentrate recovery (%) 0% 0% 0% 30% Growth capex AVERAGE CASH COSTS (C1) (Solomon and Mining Costs (US$/wmt) 8.8 7.4 7.3 8.3 9.2 9.3 9.1 Western Hub) 18% Processing Costs (US$/wmt) 3.7 3.1 2.9 2.5 2.4 2.5 2.6 Transporting & Ship loading costs (US$/wmt) 2.4 2.2 2.1 2.2 2.1 2.2 2.3 Operating leases (US$/wmt) 0.5 0.2 0.0 0.0 0.0 0.0 0.0 Total C1 cost (US$/wmt) 15.4 12.8 12.4 12.9 13.8 13.9 14.0 Sustaining capex Guidance 15.0 12-12.5 13-13.5 (SIB only) Royalty (US$/wmt) 2.7 3.2 2.5 3.7 3.2 2.8 2.9 55% Growth capex (Iron Shipping (US$/wmt) 4.7 5.5 6.8 6.7 7.6 8.3 8.3 Bridge JV) Corporate (US$/wmt) 0.3 0.3 0.4 0.5 0.5 0.5 0.5 10% Sustaining capex (US$/wmt) 1.8 2.1 2.6 3.4 4.0 3.5 3.6 Net interest (US$/wmt) 2.8 2.8 3.7 1.6 1.6 2.0 1.9 Other capex All-in costs (US$/wmt) 27.7 26.7 28.2 28.9 30.5 30.9 31.1 8% Change in costs -38% -3% 6% 2% 6% 1% 1% Breakeven price (US$/dmt) 27.1 30.0 38.2 33.2 33.1 33.5 33.7
CAPEX & EXPLORATION (US$m) Exploration & Evaluation 20 39 67 100 145 103 106 Growth capex (Chichester hub) 0 0 0 0 0 0 0 Growth capex (Solomon and Western Hub) 0 40 90 188 1,000 346 28 Growth capex (Iron Bridge JV) 0 0 0 100 550 870 580 Other capex 34 305 300 80 0 0 0 Sustaining capex (SIB only) 306 354 433 580 702 630 660 Total 360 738 890 1,048 2,397 1,950 1,373 Guidance (sustaining) 304 510 580 Guidance (Total) 900 1,200
Source : Deutsche Bank estimates, Company data
Deutsche Bank AG/Sydney Page 17 3 July 2019 M&M - Diversified Resources Australian Mining
Figure 30: WHC operational and financial summary
FX/COMMODITYASSUMPTIONS FY17A FY18A FY19F FY20F FY21F FY22F Market Data A$ US$ AUDUSD 0.75 0.78 0.72 0.70 0.70 0.70 Ticker WHC High Vol PCI US$/t 123 119 124 120 111 102 Share price (/sh) 3.65 Export Thermal US$/t 80 99 100 85 83 76 Shares on issue (m) 1,026 Semi-Soft US$/t 123 119 124 120 111 102 Market cap (m) 3,745 2,609 Price differential (Semi soft /Thermal) (%) 153% 121% 124% 141% 134% 135% Free float 71% 71% Weighted Avg. Realised price US$/t 87 110 109 97 93 87 Net debt/(cash) (m) 413 288 Weighted Avg. Realised price A$/t 115 142 153 139 133 124 Minority interests (m) 0 0 Avg revenue (excl. Purch coal & Royalties) A$/t 104 125 141 129 124 115 EV (m) 4,158 2,897
KEY FINANCIAL METRICS FY17A FY18A FY19F FY20F FY21F FY22F Key shareholders Shares (m) % EBITDA (Equity share) A$m 714 1,011 1,098 1,046 996 947 AMCI & Associates 172 17% Underlying Earnings A$m 367 524 566 555 506 463 Farallon Capital 146 14% EPS A¢ 39.5 51.1 55.2 54.1 49.3 45.1 AET SFS Pty Ltd
BALANCE SHEETAND RETURNS FY17A FY18A FY19F FY20F FY21F FY22F Valuation (HD19) Net debt (incl. IFRS 16 lease impact) A$m 311 476 279 -366 -585 -555 Net debt (excl. IFRS 16 lease impact) A$m 311 270 155 -400 -585 -555 Vickery - 4.5Mtpa Gearing (ND/E) (10-15% target range) % 9% 14% 8% -10% -14% -13% Werris Creek ROM Winchester South - Headroom for cash availibility to 15% gearing limit A$m 255 941 1,196 1,196 1% 9% Undeveloped value Total debt (with A$1.0bn drawable line of credit) A$m 398 588 357 267 233 333 Gunnedah 7% ND/EBITDA x 0.4 0.5 0.3 -0.3 -0.6 -0.6 3% ROE % 12% 15% 16% 15% 13% 11% Vickery - 10Mtpa ROM ROIC % 13% 14% 14% 14% 13% 11% 10%
PRODUCTION (100%) FY17A FY18A FY19F FY20F FY21F FY22F Winchester South ROM PRODUCTION (100%) (6Mtpa) - 50% risked Gunnedah Open Cuts (5Mtpa) 6.1 5.7 4.8 4.7 4.7 5.0 1% Maules Creek - Guidance Mt 4.6-5.0 13Mtpa ROM Narrabri (6.5Mtpa; 1 LW changeover per year) Mt 7.3 6.3 5.9 6.5 6.5 6.5 41% Maules Creek - Guidance Mt 5.6-6.0 6.2-6.6 7.7-8.1 16Mtpa ROM - 50% Maules Creek (13Mtpa ROM current capacity) Mt 9.7 11.0 11.6 13.0 16.0 16.0 risked Guidance Mt 11.6-11.8 10% Vickery (10Mtpa) Mt 0.0 0.0 0.0 0.0 1.3 5.0 Winchester South (6Mtpa) Mt 0.0 0.0 0.0 0.0 0.0 0.0 Narrabri TOTAL ROM Production Mt 23.1 22.9 22.3 24.2 28.5 32.5 18% Guidance 21.8-22.8 Saleable product (100%) Mt 20.8 20.9 19.6 22.4 26.2 29.7 Guidance Mt 20.5-21.0 21.0 24.0 26.0 Saleable product (equity) Mt 15.4 16.0 16.0 17.6 20.5 23.3 Purchased coal Mt 0.3 0.7 0.0 0.0 0.0 0.0
SALES (Equity), Low Vol PCI/ Semi Soft sales Mt 3.3 3.5 3.9 5.4 6.6 7.9 Thermal coal sales Mt 12.1 12.5 12.0 12.2 13.8 15.4 TOTAL Mt 15.4 16.0 16.0 17.6 20.5 23.3 Thermal coal sales % 79% 78% 75% 69% 68% 66%
Port Capacity (100%) Mt 19.0 17.2 17.2 17.2 17.2 17.2 Coal stocks at period end Mt 2.8 3.0 3.0 2.8 2.8 2.8
Source : Deutsche Bank estimates, Company data
Page 18 Deutsche Bank AG/Sydney 3 July 2019 M&M - Diversified Resources Australian Mining
Figure 31: WHC operational and financial summary (continued)
CASH COSTS FY17A FY18A FY19F FY20F FY21F FY22F EBITDA Split (2019F) Narrabri (6.5Mtpa; 1 LW changeover per year) A$/t 49.2 59.8 48.7 66.0 68.0 70.0 Maules Creek A$/t 58.8 63.0 47.1 63.8 65.2 59.3 Vickery A$/t 0.0 0.0 0.0 0.0 82.4 80.1 Average cash costs A$/t 56.3 63.4 65.7 73.1 74.2 73.3 Guidance A$/t 67.0 Head office A$/t 1.6 1.4 1.5 1.4 1.2 1.0 Others (incl. Royalties, other costs & non-operating income A$/t 11.3 13.7 17.0 5.3 9.3 9.4 unallocated) Gunnedah Average cost of sales A$/t 69.2 78.5 84.3 79.8 84.7 83.8 3% 14% Interest A$/t 3.3 1.9 2.3 1.4 1.2 1.0 Sustaining capex A$/t 2.0 3.3 3.3 3.5 3.1 3.3 All in costs A$/t 74.5 83.6 89.9 84.7 89.0 88.1 Werris Creek 7% EBITDA margin on coal sales* A$/t 52 70 83 61 50 42 EBITDA A$/t 46 63 69 59 49 41 EBITDA A$m 714 1,011 1,098 1,046 996 947 Cash margin A$/t 41 58 63 55 44 36
CAPEX (growth and sustaining) Gunnedah A$m 4 6 4 6 3 6 Werris Creek A$m 3 5 4 4 4 5 Narrabri A$m 55 57 61 60 23 23 Narrabri Maules Creek A$m 14 17 25 30 30 31 30% Vickery A$m 0 0 0 35 159 195 Winchester South A$m 0 0 71 20 60 400 Others (incl. unallocated) A$m 16 69 40 0 0 0 TOTAL A$m 92 153 205 155 279 660 Guidance 167-185
EBITDA Gunnedah A$m 98 213 155 115 87 55 Werris Creek A$m 65 137 76 13 0 -22 Narrabri A$m 237 224 335 210 193 145 Maules Creek A$m 252 299 502 608 645 605 Vickery A$m 0 0 0 0 34 146 Winchester South A$m 0 0 0 0 0 0 Others (incl. unallocated) A$m 63 138 30 100 36 19 Group EBITDA A$m 714 1,011 1,098 1,046 996 947
EBITDA margin Gunnedah % 31% 50% 30% 29% 23% 16% Werris Creek % 38% 49% 27% 6% 0% -10% Narrabri % 46% 44% 58% 38% 36% 29% Maules Creek % 35% 34% 53% 47% 43% 44% Vickery % 0% 0% 0% 0% 30% 32% Winchester South % 0% 0% 0% 0% 0% 0% Group EBITDA margin % 40% 45% 45% 43% 37% 33%
Source : Deutsche Bank estimates, Company data
Deutsche Bank AG/Sydney Page 19 3 July 2019 M&M - Diversified Resources Australian Mining
Figure 32: S32 operational and financial summary
FX/COMMODITIES (Nominal) FY17A FY18A FY19F FY20F FY21F FY22F Market Data ASX LSE JSE AUDUSD 0.75 0.78 0.72 0.72 0.72 0.72 Ticker S32.AX S32.L S32J.J ZARUSD 13.60 12.85 14.19 14.35 14.50 14.50 Share price (local) 3.20 1.76 31.12 BRLUSD 3.23 3.32 3.86 3.95 4.00 4.00 Share price (USD equivalent) 2.23 2.23 2.21 Zinc (US¢/lb) 115 144 121 112 113 115 Shares on issue (m) 5,038 Lead (US¢/lb) 96 110 90 93 85 83 Market Cap (AUDm) 16,122 Silver (US$/oz) 17.9 16.7 15.0 17.3 19.1 21.2 Market Cap (USDm) 11,231 Aluminium (USc/lb) 80 97 87 98 104 109 2018 YTD average daily volume (m) 28.5 2.9 1.1 Alumina (US$/t) - Index 295 422 436 365 344 343 2018 YTD average daily liquidity (USDm) 78.5 7.9 0.4 Nickel (US$/lb) 4.6 5.7 5.6 8.8 9.2 9.5 Net debt/(cash) (USDm) -678 Hard coking coal (US$/t) 193 197 204 185 170 158 Minority interests (USDm) -1 SA export coal price (US$/t) 78 94 86 0 0 0 EV (USDm) 10,552 Newcastle export coal price (US$/t) 67 91 99 92 88 85 Spot FX (AUD/USD) (GBP/USD) (USD/ZAR) 0.70 1.27 14.08 SA domestic thermal coal price (US$/t) 21 24 27 0 0 0 Manganese ore (US$/dmtu) 5.8 6.9 6.7 5.9 4.7 4.2 NPV (HD19) US$M A$/sh GBP/sh % Net Sum Manganese alloy (US$/t) - ferromanganese 1,144 1,526 1,373 1,126 1,028 1,043 Alumina Worsley Refinery (WA) (86%) 3,910 1.06 0.59 27% 1.24 Alumar (Brazil) (Refinery (36%) & idle smltr (40%)) 761 0.21 0.11 5% 1.45 KEY FINANCIAL METRICS Aluminium Mozal (Mozambique) (47.1%) 797 0.22 0.12 6% 1.66 Underlying Earnings (US$M) 1,146 1,327 1,141 1,378 1,155 1,184 Aluminium Hillside (South Africa) 2,065 0.56 0.31 14% 2.22 EPS (USc) 22 26 23 28 24 24 Manganese (South Africa) (Ore 44.4%; Alloy 60%) 548 0.15 0.08 4% 2.37 EPS (excl. SAEC) 19 22 22 28 24 24 Manganese (Australia) (60%) 1,539 0.42 0.23 11% 2.79 EPS Change (%) 18% -2% 31% -16% 2% Cannington (Ag, Zn, Pb) (Aust) 664 0.18 0.10 5% 2.97 DPS (USc) 10 14 11 11 9 10 Hermosa (Zn, Pb, Ag) (USA, Arz) 1,344 0.36 0.20 9% 3.33 Payout ratio (%) 46% 52% 47% 40% 40% 40% Illawarra (Met Coal) (NSW Aust) 1,362 0.37 0.20 10% 3.70 CASH FLOW Eagle Downs (Met/Thermal) (Qld, Aust) 430 0.12 0.06 3% 3.82 Operating Cash Flow (US$M) 2,132 1,717 1,882 1,877 1,812 1,946 Operations Sub Total 13,420 3.63 2.02 Capex (incl. exploration) and divestments (US$M) -289 -301 -738 -422 -668 -852 Cerro Matoso (Nickel) (Colombia) 968 0.26 0.15 7% Free Cash Flow (US$M) - before dividends 1,843 1,416 1,144 1,455 1,144 1,095 Cerro Matoso (Nickel) (Colombia) (Provisions) -99 -0.03 -0.01 -1% Dividend (US$M) -244 -708 -657 -497 -486 -470 Cerro Matoso (Nickel) (Colombia) (Net) 869 0.24 0.13 6% 4.05 Buyback (US$M) -211 -254 -432 -200 0 0 Trilogy Metals (shareholding) 40 0.01 0.01 Other Cash flow (US$M) -27 -84 0 0 0 0 Provisions, rehab, corp costs -391 -0.11 -0.06 Acquisitions (US$M) 0 0 -1,507 -150 0 -27 Net (debt)/cash (Dec-2019) (incl. SAEC proceeds) 1,069 0.29 0.16 Free Cash Flow (US$M) - before debt 1,361 370 -1,451 608 658 598 TOTAL 15,007 4.06 2.26 Free Cash Flow yield (%) 10% 13% 10% 10% WACC (nominal)/ Shares on issue (m) 10% 4,926 P/FCF 9.8 7.7 9.8 10.3 FX assumptions 0.75 1.35 Effective tax rate (%) 30% 25% 44% 30% 31% 31% Net sum = running sum of asset values less debt, shading denotes share price below sum total. Growth Capex (US$M) 36 62 210 176 290 472 Sustaining Capex (US$M) 340 433 532 497 393 395
BALANCE SHEET AND RETURNS Valuation (HD19) Net Debt (US$M) -1,640 -2,041 -570 -1,178 -1,836 -2,434 Gearing (ND/(ND+E) - %) -19% -24% -6% -11% -15% -19% ROE (%) 12% 13% 11% 12% 10% 9% Eagle Downs Illawarra (Met Coal) ROA (%) 13% 15% 13% 15% 13% 13% (Met/Thermal) 10% Cerro Matoso Excess to target net debt ($500m) $m 2,140 2,541 1,070 1,678 2,336 2,934 3% 6% Excess to target net debt ($500m) % of mkt cap 10% 15% 21% 26% Hermosa 9% PRODUCTION Alumina Worsley Alumina (kt) - total 5,221 5,068 5,080 5,335 5,362 5,388 Cannington 27% Alumina (kt) - third party sales 3,251 3,102 3,102 3,349 3,376 3,402 5% Aluminium (kt) 985 983 989 993 993 993 Manganese Ore (kt) 4,502 4,983 5,076 4,867 4,948 4,948 Manganese Alloy (kt) 201 223 200 205 204 205 Manganese (Australia) Nickel (kt) 37 44 40 36 30 30 11% Illawarra Met Coal (Mt) 7.1 4.2 6.5 7.0 8.0 8.3 Alumar (Brazil) Thermal Coal (Mt) - total 28.9 27.3 26.2 0.0 0.0 0.0 Manganese (South Africa) 5% Thermal Coal (Mt) - exports 11.8 12.5 10.7 0.0 0.0 0.0 4% Silver (Moz) - payable 15.6 12.5 11.8 10.9 11.6 12.0 Aluminium Mozal Lead (kt) - payable 132 104 98 95 98 102 Aluminium Hillside 6% Zinc (kt) - payable 70 41 51 57 48 49 14% Copper Eq Production (Mt) 1.43 1.36 1.38 1.11 1.12 1.13 Copper Eq YoY growth (%) -5% -5% 2% -20% 1% 1%
Source : Deutsche Bank estimates, Company data
Page 20 Deutsche Bank AG/Sydney 3 July 2019 M&M - Diversified Resources Australian Mining
Figure 33: S32 operational and financial summary (continued)
COSTS FY17A FY18A FY19F FY20F FY21F FY22F EBITDA split (FY19E) Absolute (US$M) - excludes Manganese 4,684 5,082 5,165 4,530 4,792 4,817 Unit costs (US$/lb Cu Eq) - incl. royalties 1.5 1.7 1.7 1.8 1.9 1.9 Nickel Change in unit costs (%) 3% 14% 0% 9% 5% 0% 4% Lead/Silver/Zinc Unit costs by assets 3% Coal Cerro Matoso (US$/lb) 3.8 3.7 4.1 4.5 4.6 5.5 23% Guidance 4.1 SA coal exports (US$/t) 44 54 58 0 0 0 SA coal domestic (US$/t) 19 22 25 0 0 0 SA coa total (US$/t) 29 36 38 0 0 0 Aluminium/Alumina Guidance 38 38% Aluminium (US$/lb) 0.67 0.84 0.96 0.90 0.90 0.85 Worsley alumina (US$/t) 203 235 226 221 227 213 Manganese Guidance 227 32% Alumina total (US$/t) 201 240 235 229 234 225 Illawarra coal (US$/t) 80 142 98 96 88 82 Guidance 97 Cannington (US$/t) 139 144 129 117 104 105 Guidance 129 Australia Manganese (US$/dmtu) 1.69 1.88 1.57 1.67 1.69 1.71 Guidance 1.57 South Africa Manganese (US$/dmtu) 2.08 2.54 2.56 2.19 1.93 1.91 EBITDA split (FY22E) Guidance 2.56 Manganese ore (US$/t) 79 90 82 79 76 77 Manganese alloy (US$/t) 834 924 983 871 882 892 Nickel Lead/Silver/Zinc 10% 9% NPAT (US$M) Alumina 157 386 668 496 290 256 Coal Aluminium 191 155 -168 68 161 311 18% Manganese (60%) 210 311 326 258 175 142 Nickel -10 72 17 176 155 122 Met Coal 251 -37 228 209 247 224 Energy Coal 153 196 63 0 0 0 Aluminium/Alumina Lead/silver/zinc 216 128 21 80 113 139 46% Corporate and unallocated -21 116 -12 91 14 -11 Total 1,146 1,327 1,141 1,378 1,155 1,184 Manganese 17% EBITDA (US$M) Alumina 452 801 1,186 956 664 622 Aluminium 397 397 -59 283 420 633 Manganese (60%) 661 925 963 781 557 465 EBITDA margins (%) Nickel 74 209 116 341 306 262 Met Coal 548 103 504 466 527 502 70% Energy Coal 273 353 172 0 0 0 Lead/silver/zinc 364 230 83 164 208 248 60% Corporate & unallocated (excl. manganese) -358 -502 -494 -420 -339 -306 Total (adjusted for EAUs) 2,411 2,516 2,472 2,571 2,343 2,425 50% EBITDA margins Alumina 32% 40% 50% 44% 35% 34% Aluminium 22% 18% -3% 13% 18% 25% 40% Manganese 53% 57% 61% 57% 49% 44% Nickel 20% 37% 24% 49% 50% 42% 30% Met Coal 48% 15% 44% 41% 43% 43% Energy Coal 25% 26% 15% 0% 0% 0% Lead/silver/zinc 47% 39% 20% 36% 45% 50% 20% FY17A FY18A FY19F FY20F FY21F FY22F S32 Group 37% 36% 37% 44% 40% 42% Aluminium/Alumina Manganese Coal CAPEX (US$M) Nickel/Lead/Silver/Zinc S32 Group (pre-corp & other) Alumina 63 64 92 126 70 63 Aluminium 27 38 38 56 53 57 Capex (US$m) Manganese (60%) 40 65 82 111 75 75 Nickel 14 22 37 50 40 40 Met Coal 104 89 128 100 101 106 866 Energy Coal 56 102 100 0 0 0 Lead/silver/zinc 36 51 55 54 54 54 742 Group & Unallocated 0 2 0 0 0 0 673 683 Total Sustaining Capex 340 433 532 497 393 395 210 472 Energy Coal discontinued operations 101 103 105 176 Sustaining Capex Guidance (incl. Manganese & SA Coal) 545 550-650 495 290 Alumina 0 0 0 0 0 0 62 Aluminium 0 0 0 0 0 0 376 Manganese (60%) 20 0 0 0 0 0 36 Nickel 0 0 0 0 100 0 532 Met Coal 8 0 0 106 60 242 497 433 393 395 Energy Coal 8 62 140 0 0 0 340 Lead/silver/zinc 0 0 70 70 130 230 Total Growth Capex 36 62 210 176 290 472 Growth Capex Guidance (incl. Manganese) 217 Consolidated Capex (includes Manganese) 376 495 742 673 683 866 FY17A FY18A FY19F FY20F FY21F FY22F Consolidated Capex (excludes Manganese) 316 430 662 562 608 792 Sustaining capex Growth capex
Source : Deutsche Bank estimates, Company data
Deutsche Bank AG/Sydney Page 21 3 July 2019 M&M - Diversified Resources Australian Mining Appendix
Figure 34: The balance of shares UK and Australia… Figure 35: ...unlikely to be impacted by buybacks BHP Group shares (5,058m as at 30-Jun) Rio Tinto shares (1,631m as at 30-Jun-2019)
Plc shares Plc shares on issue on issue 42% 77% Ltd shares Ltd shares on issue on issue 23% 58%
Source : Bloomberg Finance LP Source : Bloomberg Finance LP
BHP
Figure 36: Previous Capital Management - did not include a Special Dividend
Description Date Date Shares Cost (local Cost (US$ Ratio commenced completed repurchased currency) million) Ltd Plc August 2004 program Off-market buy-back of BHP Group Ltd shares 23-Nov-04 180,716,428 A$2,272m US$1,780m 100% 0% February 2006 program Off-market buy-back of BHP Group Ltd shares 3-Apr-06 95,950,979 A$2,250m US$1,600m 80% 20% On-market buy-back of BHP Group Plc shares 27-Apr-06 16-May-06 18,820,000 £217m US$409m Total under February 2006 program 114,770,979 US$2,009m February 2011 expanded program On-market buy-back of BHP Group Plc shares (1) 7-Sep-06 14-Dec-07 243,625,800 £3,012m US$6,002m 32% 68% Off-market buy-back of BHP Group Ltd shares (1) 26-Mar-07 141,098,555 A$3,501m US$2,817m Off-market buy-back of BHP Group Ltd shares (2) 11-Apr-11 146,899,809 A$6,000m US$6,340m 63% 37% On-market buy-back of BHP Group Plc shares (2) 16-Nov-10 29-Jun-11 94,935,748 £2,275m US$3,677m Total under February 2011 expanded program 626,559,912 US$18,836m 49% 51% November 2018 program Off-market buy-back of BHP Group Ltd shares 17-Dec-18 265,839,711 A$7,348m US$5,220m 100% 0% Special dividend Special dividend of US$1.02/sh 30-Jan-19 US$5,200m Notes: (1) On 23 August 2006, BHP Group announced its intention to return US$3 billion to shareholders over the next 18 months through a series of share buy-backs. On 7 February 2007, a US$10 billion extension to this program was announced. At that date, 93,435,000 shares in BHP Group Plc had been repurchased under the August 2006 program at a cost of US$1.7 billion, leaving US$1.3 billion to be carried forward and added to the February 2007 program. On-market purchases of BHP Group Plc shares continued until 14 December 2007, when the program was suspended until further notice (DB note: offer to acquire Rio Tinto commenced around this time) (2) On 15 November 2010, BHP Group announced its intention to continue the company's strong track record of returning excess capital to shareholders by reactivating the remaining US$4.2 billion component of its previously suspended US$13 billion buy-back program. On 16 February 2011, BHP Group announced an expanded total US$10 billion capital management program (which includes the US$4.2 billion reactivated on 15 November 2010) which was completed on 29 June 2011.
Source : Company data
Figure 37: Capital management summary
BHP Units 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019E Capital and exploration expenditure US$bn 3.8 2.9 2.9 3.0 4.4 6.6 7.9 8.9 10.7 10.7 11.4 19.2 22.5 15.5 12.1 7.3 4.6 5.2 7.6 Acquisitions US$bn 2.3 0.4 0.1 0.0 6.5 0.6 0.7 0.3 0.3 0.7 5.0 12.9 0.6 1.2 0.1 0.0 0.2 -0.2 0.4 Cash dividends US$bn 0.6 1.2 0.8 1.5 1.4 2.1 2.3 3.1 4.6 4.6 5.1 5.9 6.2 6.4 6.5 4.1 2.9 5.2 11.8 Buy-back US$bn 0.0 0.0 0.0 0.0 1.8 2.0 5.7 3.1 0.0 0.0 9.9 0.1 0.0 0.0 0.0 0.0 0.0 0.0 5.2 Debt repayments US$bn 1.7 4.1 4.8 1.5 2.0 7.5 5.8 10.2 3.7 1.2 2.2 4.5 2.0 7.0 4.1 2.8 7.1 4.2 2.8 Net oerating cash flows US$bn 3.8 4.0 3.7 5.3 8.6 7.8 13.3 14.5 18.9 17.9 30.1 24.4 20.2 25.4 19.3 10.6 16.8 18.5 17.9 Debt raising US$bn 2.9 4.1 3.7 0.4 5.8 6.3 7.4 9.5 7.3 0.6 1.6 13.3 9.2 6.0 3.4 7.2 1.6 0.5 0.2 Net gearing (ND/(ND+E)) - RHS % 40.1 31.5 31.7 21.2 32.8 25.2 25.0 17.8 12.1 6.3 9.2 26.0 26.8 23.2 25.7 30.3 20.6 15.3 14.4
Source : Deutsche Bank, Company data
Page 22 Deutsche Bank AG/Sydney 3 July 2019 M&M - Diversified Resources Australian Mining
Figure 38: Capital management history
50 50
40 40
30 30
20 20 Net gearing(%)
10 10 Sourcesusesand cashof (US$bn)
0 0 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019E
Capital and exploration expenditure Acquisitions Cash dividends Buy-back Debt repayments Net oerating cash flows Debt raising Net gearing (ND/(ND+E)) - RHS
Source : Deutsche Bank, Company data
Figure 39: Capital returns over time to FY17
Source : Company data - Response to Elliott proposals Apr 2017
Figure 40: Capital allocation framework: Debt reduction largely done, expect additional dividends and limited scope for buybacks. We do not see BHP in a strong position to do acquisitions
Source : Company data - 2019 Strategy briefing presentation .
Deutsche Bank AG/Sydney Page 23 3 July 2019 M&M - Diversified Resources Australian Mining
Figure 41: BHP significant events - We highlight the significant capital allocation decisions of recent years
Date Event 13-Feb-19 Approves Atlantis Phase 3 project and funding for additional Trion appraisal well 30-Jan-19 Paid a special dividend of US$1.02/sh amounting US$5.2bn from the net proceeds of US Onshore sale 17-Dec-18 Successfully completed off-market buy-back of 265.8m BHP Group Ltd shares amounting US$5.2bn from the net proceeds of US Onshore sale 20-Nov-18 Change of name to BHP Group 08-Nov-18 BHP successful in bids for Blocks in the offshore orphan basin in Easter Canada 01-Nov-18 BHP announces US$10.4bn shareholder return program split 50/50 off market Ltd buyback and subsequent Special Dividend. 27-Jul-18 Sells US On shore shale assets for a gross consideration of US$10.5bn in cash to BP (deal closes in November). 14-Jun-18 A M S F I O P M Y BHP Approval came sooner than originally guided. 01-Sep-17 Ken MacKenzie to succeed Jac Nasser as Chairman 17-Aug-17 Approves $2.5bn to extend life of Spence Copper mine Chile US activist fund Elliot discloses shareholding and calls for change including selling petroleum, unifying the dual listing structure and returning more cash to shareholders via Mar-17 buybacks. Feb-16 Drops long held progressive dividend policy in place of 50% of EPS plus additional as can afford. 05-Nov-15 S BHP I O JV B V Oct-15 Issue hybrid debt $6.5bn that matures 2075 with varying interest rates up to 6.25%. Spins off new company South 32 made up of a collection of assets producing alumina, aluminium, coal, manganese, nickel, silver, zinc and lead across Australia, South 15-May-15 Africa and South America. Sells 15% stake in Jimblebar iron ore operation WA for $1.5bn to existing JV partners Itochu and Mitsui, thereby aligning interests across BHP WAIO business. 21-Jun-13 07-Jun-13 Sells interest in Browse oil/gas JV for pre tax profit $1.5bn 29-Apr-13 Pinto Valley Copper (USA) sold for $650m. The open-pit copper mining operation is located east of Phoenix in the Globe-Miami district of Arizona. 10-May-13 Andrew Mackenzie appointed as CEO, previously Chief Executive Non Ferrous. 2013 Work stops on plans for Port Hedland Outer-Harbour Iron Ore expansion and Olympic Dam open cut expansions that were said to cost ~$20bn each. 14-Nov-12 BHP sells diamonds business to Harry Winston Diamond Mines for US$500mn 14-Feb-12 BHP approves US$2.6bn investment for the Escondida mine for the Organic growth Project 1 (OGP1) and the Oxide Leach Area Project (OLAP) 01-Feb-12 BHP exits Titanium minerals industry after selling its 37% non-operated interest in Richards Bay Minerals (RBM) to Rio Tinto 12-Oct-11 BHP announces US$1.2bn in pre-commitment capital to fund the first phase of the Olympic Dam Project to develop an open pit mine in South Australia 15-Jul-11 BHP acquires Petrohawk Energy Corp for US$12.1bn, which provides BHP with operated positions in the Permian Basin, Eagle Ford, and Haynesville shales 02-May-11 Samarco approves US$3.5bn (BHP share US$1.75bn) for iron ore operations in Fourth Pellet Plant Project, Samarco, Brazil 24-Mar-11 BHP approves US$7.4bn of CAPEX to fuel production growth in the WA Iron Ore operations 24-Mar-11 BHP approves US$2.5bn for three met coal projects in the Bowen Basin, Queensland 22-Feb-11 BHP acquires Chesapeake Energy Corp's interests in the Fayetteville Shale, USA for US$4.75bn 22-Feb-11 BHP announces off-market buyback that will form part of its expanded US$10bn capital management initiative Nov-10 BHP withdraws from Potash Corp takeover after Canadian Investment Review rejection Nov-10 BHP reactivates buyback Oct-10 BHP Billiton and Rio Tinto drop plans for Western Australia Iron Ore JV following concerns from regulators in Europe and Asia Aug-10 BHP makes cash offer for Potash Corp of Saskatchewan at US$130/share for US$40bn 2010 BHP Billiton acquires Athabasca Potash in Canada Jun-09 Rio Tinto and BHP Billiton sign a non-binding agreement to establish a production JV covering Western Australian Iron Ore assets 2009 First oil and natural gas production from the Shenzi development in the deepwater Gulf of Mexico 2009 BHP Billiton celebrates the opening of the "Newman Mining Hub" at its Western Australia Iron Ore operations 2009 First production from the expansion of the Alumar alumina refinery in Brazil Nov-08 BHP withdraws offer for Rio Tinto 17-Jul-08 Acquires New Saraji Coal project in Queensland for US$1.2bn Feb-08 BHP increases Rio offer to 3.4 shares Dec-07 BHP suspends on market buyback Nov-07 BHP proposes to merge with Rio Tinto, offering three BHP shares for one Rio share. Rio rejects approach 31-May-07 Marius Kloppers succeeds Chip Goodyear as Chief Executive Officer 26-Mar-07 BHP completes US$3.5bn off market buy-back 03-Apr-06 BHP completes A$2.25bn (US$1.6bn) off-market share buy-back 2006 BHP Billiton agrees to sell its Australian Coal Bed Methane (CBM) interests to The Australian Gas Light Company (AGL) for US$687mn 29-Aug-05 BHP extends on market buyback by 12 months to 30-Sep-06 and nearly doubles the number of shares to be bought back to 356mn from 186mn. 2005 Oil and natural gas production begins from the Mad Dog in the deepwater Gulf of Mexico BHP Billiton acquired Western Mining Corporation (WMC) for A$7.85 per share (A$9.2bn), adding key assets Olympic Dam (copper/gold in South Australia) and Nickel 2005 West (Western Australia) 2004 BHP Billiton approves US$870mn for Escondida Sulphide Leach Copper Project in Chile 2004 BHP Billiton approves US$990 million for Spence copper project in Northern Chile 2003 Chip Goodyear appointed as BHP Billiton Chief Executive 2003 First oil and gas production from the Boris field in the deepwater Gulf of Mexico 2002 BHP Billiton completes withdrawal from the Ok Tedi copper mine in PNG 2002 Demerger of BHP Steel 2001 Antamina Copper-Zinc project in Northern Peru achieves commercial production 2001 Ekati Diamond Mine in Canada starts Misery Pipe production 2001 BHP Billiton merger approved
Source : Company data
Page 24 Deutsche Bank AG/Sydney 3 July 2019 M&M - Diversified Resources Australian Mining
Rio Tinto
Figure 42: Capital management program summary
Description Date Date Shares Cost Cost Ratio commenced completed repurchased (m) (A$m) (US$m) Ltd Plc Ltd Plc 2011 share buy-back program Buy-back of Rio Tinto Plc shares Feb-11 Mar-12 116.9 6,975 100% 0% 2015 share buy-back program Off-market buy-back of Rio Tinto Ltd shares Apr-15 425 On-market buy-back of Rio Tinto Plc shares Dec-15 1,576 21% 79% 2017 share buy-back program On-market buy-back of Rio Tinto Plc shares Mar-17 Dec-17 500 On-market buy-back of Rio Tinto Plc shares Aug-17 Dec-17 1,000 Off-market buy-back of Rio Tinto Ltd shares Nov-17 575 On-market buy-back of Rio Tinto Plc shares Dec-17 Dec-18 2,500 2018 share buy-back program On-market buy-back of Rio Tinto Plc shares Feb-18 Dec-18 1,000 100% On-market buy-back of Rio Tinto Plc shares Aug-18 Feb-19 1,000 100% Off-market buy-back of Rio Tinto Ltd shares Nov-18 41.2 2,871 2,081 2019 share buy-back program On-market buy-back of Rio Tinto Plc shares Feb-19 Feb-20 1,119 100% Special Dividend Special dividend of 243 US cents per share Apr-19 4,000
Source : Company data
Figure 43: Chinalco acquisition of shares in Rio Tinto - Approval by Deputy PM Wayne Swan subject to 15% threshold
Source : Australian Government - The Treasury
Figure 44: RIO has acknowledged the threshold now an issue in its last earnings call
Source : Company data - Q4 2018 call transcript Page 6
Deutsche Bank AG/Sydney Page 25 3 July 2019 M&M - Diversified Resources Australian Mining
Figure 45: Capital allocation framework
Source : Company data - BAML 2019 presentation . Note: *Cash generated defined as operating cash flow plus disposals. Shareholder returns defined as share buy-backs and special dividends (executed and announced during that period) plus dividends paid during the period less pro- ceeds from share issuances to company shareholders ** Simple average of peers comprising Anglo American, BHP, Glencore and Vale
Page 26 Deutsche Bank AG/Sydney 3 July 2019 M&M - Diversified Resources Australian Mining
Figure 46: RIO significant events - We highlight the significant capital allocation decisions of recent years
Year Event Jun-2019 Updated Pilbara shipments guidance for 2019 to 320-330Mt due to mine operational challenges Apr-2019 Paid a special dividend of 243 US cents per share (amounting US$4.0bn) Apr-2019 Approves an additional $302m investment in Resolution copper project Apr-2019 Approves $463m investment in Zulti South Apr-2019 Updated Pilbara shipments guidance for 2019 to 338-350Mt due to Cyclone Veronica
Dec-2018 Completes sale of Dunkerque aluminium smelter to Liberty House for $500m Nov-2018 Approves $2.6bn investment in Koodaideri iron ore mine Nov-2018 Agrees sale of its stake in Rossing Uranium Ltd. to China National Uranium Corporation for up to $106.5m Nov-2018 Successfully completed off-market buy-back of 41.2m Rio Tinto Ltd shares at an aggregate cost of A$2,871m (US$2,081m) Sep-2018 Signs binding agreement for sale of Grasberg interest to PT Indonesia for $3.5bn Announced a US$3.2bn new share buy-back programme from the net disposal proceeds from the divestments of Hail Creek and Valeria, Kestrel and Winchester South. The programme includes an off-market buy-back of up to 41.2m of Rio Tinto Ltd shares (~A$2.7bn at the closing market price of A$75.40 as of 19-Sep-2018 and a buy- back discount of 14%) and the remainder on-market buy-bcak of Rio Tinto plc shares. The off-market buy-back is expected to be completed on 12-Nov-2018. The on- Sep-2018 market buy-back is in addition to the existing Rio Tinto plc buy-back programmes (of which US$1.7bn in shares remain to be purchased as of 19-Sep-2018) and is expected to be completed by 27-Feb-2019.
Hydro withdrew its offer to acquire the US$345m ISAL smelter in Iceland, following initial feedback from the European Commission. The sale was initially expected to Sep-2018 complete in Q3 2018. Completed the sale of remaining coal assets in Queensland, Australia for a pre-tax disposal proceeds of US$3.95bn, including US$1.7bn for Hail Creek and Valeria and Aug-2018 US$2.25bn for Kestrel. The company generated a post-tax disposal proceeds of US$3.2bn from the sale of its Queensland coal assets, including Winchester South (pre- tax US$0.2bn completed in Jun-2018). Aug-2018 Interim dividend 127c or US$2.2bn at 50% of earnings, additional US$1bn buyback, in sum 73% if underlying earnings. Aug-2018 Supplements returns with commitment to return US$4bn of agreed asset sale proceeds to shareholders when cash received. Aug-2018 Sale of its 100% interest in Dunkerque aluminium smelter in France to Liberty House is expected to complete in Q3 2018. Jul-2018 Announces agreement to sell interest in Grasberg Copper mine Indonesia for $3.5bn, to Government related entities, details to be finalised. Full year DPS 290c or $5.2bn (including final div 180c or $3.2bn) and $1bn buyback boost to existing $1bn buyback program. Payout 83% of earnings. Net debt only Feb-2018 $3.8bn. Dec-2017 Completed total buy-back of US$2,075m in 2017, including off-market buy-back of US$575m of Rio Tinto Ltd shares. Boosts buyback program with "supplementary" US$2.5bn after receiving asset sale proceeds (Coal & Allied sold to Yanzhou US$2.69bn after contested bidding from rival Sep-2017 Glencore). Aug-2017 Interim dividend 110c ($2bn) plus $1bn buyback. Shareholder returns 75% of earnings, well above policy. Feb-2017 Full year DPS 170c plus on market buyback $500m. Nov-2016 Completed sale of its 100% interest in Lochaber aluminium smelter to SIMEC for US$410m. Mar-2016 Copper chief Jean-Sébastien Jacques replaces Sam Walsh as CEO (3 year tenure). Mar-2016 Completed sale of its 40% interest in the Bengalla thermal coal mine to New Hope Corporation for US$616.7m. Feb-2016 Moody's downgrade credit rating to Baa1 amid downturn in iron ore prices. Feb-2016 Scraps progressive dividend policy in place of new 40-60% payout policy including dividends and buybacks on average through time. Completed total buy-back of US$2.0bn in 2015, including off-market buy-back of US$425m of Rio Tinto Ltd shares. Plc on market buyback was completed at Feb-2015 GBP25/share. May-2014 Completed sale of its 50.1% interest in the Clermont thermal coal mine to to GS Coal Pty Ltd for US$1.0bn. Feb-2014 15% increase in progressive dividend second year in a row Acquired additional shares to reach a majority 50.8% interest in Turquoise Hill under the rights offering at a total consideration over a number of years C$1.3bn. Jan-2014 Dec-2013 Completed sale of its 80% interest in Northparkes mine to China Molybdenum Co. Ltd for US$820m. Completed sale of its 57.7% interest in Palabora Mining Company to a consortium of South African and Chinese entities for US$373m. Jul-2013 Completed sale of its 100% interest in the Eagle nickel-copper project to Lundin Mining Corp for US$315m. May-2013 Completed sale of its interests in Constellium (formerly Alcan Engineered Products) in two tranches for US$671m. Apr-2013 Board member and former Transurban, BHP and Alcoa executive Chris Lynch appointed CFO. Feb-2013 15% increase in progressive dividend Jan-2013 Sam Walsh appointed CEO after significant impairments of Riversdale Mining assets booked. Sep-2012 Increased its holding in Richards Bay Minerals (RBM) from 37% to 74% at a consideration of US$1.7bn. Completed formation of Simandou JV with Chalco. To earn-in to a 44.65% net economic interest in the Simandou project, Chalco made a payment to Rio Tinto of Apr-2012 US$1.35bn. Mar-2012 Completes buyback (116,862,405 shares at avg GBP 37.47). Completed buy-back of US$5.5bn of Rio Tinto plc shares in 2011. Dec-2011 Increased its interest from 40.3% to 49.0% in Ivanhoe Mines for an aggregate consideration of US$1.86bn. Jul-2011 Acquired 100% interest in Riversdale Mining Ltd at a net consideration of US$3.69bn (net of cash acquired). Aug-2011 $2bn increase to buyback to $7bn total to be complete Q1 2012. Apr-2011 S&P upgrades credit rating to A- from BBB+ Feb-2011 Announces $5bn buyback over 2 years to end 2012 Dec-2010 Acquires Riversdale Mining (owner of prospective coal project in Mozambique) for $3.9bn Standstill agreement with TSX listed Ivanhoe Mines (owner of Oyu Tolgoi copper mine Mongolia) at 49%. Agreement encompasses Rio investing $4.2bn in Ivanhoe over Dec-2010 years 2006-2012. Oct-2010 Drops iron ore JV plans with BHP Billiton after significant opposition from Asian and European regulators. Sep-2010 Internal buyback simplifying where Tinto Holdings (UK) ceases to own shares in Rio Tinto Ltd ($9.2bn). Aug-2010 Completes $3.6bn of divestments in 2010 and in total $10.3bn of asset sales since 2008 in on-going effort to reduce debt. Rio terminates Chinalco deal and launches $15.2bn rights issue ($14.8bn net proceeds) and proposed iron ore JV with BHP Billiton to join their respective iron ore assets Jun-2009 in Pilbara region of Western Australia. Rio agrees transactions with Chinalco including selling interests in key iron ore and copper assets for $19.5bn to address elevated debt levels. Dec-2009
Source : Deutsche Bank, Company data
Deutsche Bank AG/Sydney Page 27 3 July 2019 M&M - Diversified Resources Australian Mining
Figure 47: RIO significant events - We highlight the significant capital allocation decisions of recent years
Year Event World financial crisis looms, BHP offer for Rio Tinto lapses (BHP withdraws) putting significant strain on Rio Tinto share price due to debt concerns (Rio debt $41bn at the Nov-2008 time). Feb-2008 BHP announces scrip bid for Rio Tinto offering 3.4 shares for 1 Rio share. Aluminium Corp of China (Chinaclo) and minority partner Alcoa (who subequently divested) acquires 12% of Rio Tinto plc (equating to ~9% of total shares) via entity Feb-2008 Shining Prospect Pte. Nov-2007 BHP approaches Rio Tinto to discuss possible combination (Rio's net debt was a modest $2.6bn or 13% gearing at time). Rio Tinto completes acquisition of Alcan Alumininum in Canada for $38bn cash. Subsequently net debt approaches $40bn+ from <$3bn previously. Oct-2007 May-2007 Tom Albanese appointed CEO Oct-2006 Boosted capital management program to $7bn from $4bn (all on mkt buyback except for the $1.5bn special div) Apr-2006 $1.5bn special dividend paid as part of $4bn capital management program. May-2005 $1bn off market Ltd buyback completed at $36.7/share, 14% disc to mkt price. Mar-2004 Freeport (re)purchases Rio Tinto's 12% stake in Freeport using $1bn from the sale of preferred shares. Rio bought the stake in 1995 for $20.90 a share, or $500.2m (trading $42/share in March-2004), netting Rio a $518m profit on the share investment. 1998 Disaster at Lassing talc mine in Austria took the lives of ten employees. RTZ made $500 investment in Freeport for 11.9% stake in the company and agreed to finance a $184m expansion of Grasberg mine in return for 40% of production above Feb-1995 agreed expanded levels (and 40% of the mine beyond 2021). 1995 RTZ Corp and CRA Ltd merge as a dual listed company (DLC) called RTZ-CRA, after 2 years adopted name Rio Tinto. 1989 R T BP 1968 Rio Tinto purchased US Borax. The generated profits helped purchase the mining assets of BP Minerals when BP quit mining in 1989. 1966 Opening of Mt Tom Price iron ore mine in Pilbara region of Western Australia to supply Japanese steel smelters. The array of UK and Australia-based companies related to Rio Tinto and Zinc Corporation merged into RTZ Corp and CRA Limited. In 1995, RTZ and CRA became a single 1962 company. The Commonwealth Aluminium Corporation Pty Ltd (Comalco) formed to exploit bauxite deposits of Weipa Qld (initially 50/50 with Kaiser Aluminum, by 2000 Rio Tinto 1956 became sole owner). After 80 years, 2/3rd of the now low-yielding Rio Tinto mine was sold; proceeds financed exploration companies in Africa, Australia and Canada, producing uranium, 1954 copper and other metals. Imperial Smelting Corp. and The Zinc Corp., merged to become The Consolidated Zinc Corp. Its Australian arm, Consolidated Zinc Proprietary, developed the Rum Jungle 1949 and Mary Kathleen uranium mines and the Weipa bauxite deposit. Management team led by chairman Sir Auckland Campbell-Geddes, with a series of JVs, technological developments and overseas expansions, transformed Rio Tinto into 1925 a global essential materials powerhouse. Mining engineer Herbert Hoover joined associates to form The Zinc Corp., which developed a new process to extract zinc from residues left after the extraction of silver 1905 and lead from ores from Broken Hill in Australia. The Rio Tinto (Red River) mines sold by Spanish Govt. to a British-European syndicate. The mine became world's #1 copper producer from 1877 to 1891. 1873
Source : Deutsche Bank, Company data
Page 28 Deutsche Bank AG/Sydney 3 July 2019 M&M - Diversified Resources Australian Mining
Whitehaven Coal
Capital management From WHC's recent investor presentation (25-28 March):
"Whitehaven has committed to returning excess cash to shareholders and does not intend to build cash on the balance sheet.
New project capex expected to be funded from cash flow and potential sell down to joint venture partners."
WHC is entering a period of capital commitment as Vickery (A$650m; 100%) and Winchester South (A$740m; 100%) projects approach. In our view, WHC is likely to try sell down 20% (2x 10% stakes) in each project, realising ~A$300m for Vickery in FY20 and ~A$160m for Winchester South in FY22. We estimate that WHC will be able to cover its capital requirements comfortably through operating cash flow and planned sell down proceeds, and will comfortably remain cash flow positive even while maintaining a dividend payout of 50% (at the high end of its 20-50% dividend policy).
Figure 48: Capital requirements easily covered over the Figure 49: Slightly negative cash flow in FY21-22 if no sell- next 3 years down, but net cash position retained
1,200 (A$m) 1,200 (A$m)
1,000 1,000 274
800 267 800 80
600 77 600 240 473 473 231 260 501 400 262 400 400 93 280 93 280 64 63 155 200 112 205 185 200 219 196 258 258 100 183 100 195 229 183 156 146 101 103 101 104 0 35 0 44 FY19E FY20E FY21E FY22E FY23E FY24E FY25E FY19E FY20E FY21E FY22E FY23E FY24E FY25E Dividends (50% of EPS) Sustaining and other capex Dividends (50% of EPS) Sustaining and other capex Winchester South growth capex Vickery growth capex Winchester South growth capex Vickery growth capex Operating cash flow plus sale proceeds Net operating cash flow
Source : Deutsche Bank, Company data Source : Deutsche Bank, Company data
Figure 50: Large accumulation of cash assuming sell- Figure 51: Comfortable level of debt should there be no down sell-down
400 (A$m) 10% 400 (A$m) 20%
279 279 0% 82 10% 0 0 -61 8 -366 -244 -10% -396 0% -585 -555 -685 -400 -400 -837 -1,069 -20% -10% -800 -1,471 -800 -30% -20%
-1,200 -1,200 -40% -30%
-1,600 -50% -1,600 -40% FY19E FY20E FY21E FY22E FY23E FY24E FY25E FY19E FY20E FY21E FY22E FY23E FY24E FY25E
Net debt (LHS) Net gearing - ND/(ND+E) (RHS) Net debt (LHS) Net gearing - ND/(ND+E) (RHS)
Source : Deutsche Bank, Company data Source : Deutsche Bank, Company data
Deutsche Bank AG/Sydney Page 29 3 July 2019 M&M - Diversified Resources Australian Mining
South32
Figure 52: Shareholder returns
Source : Company data - BAML May 2019 presentation . Note: (b) Net cash number is unaudited and should not be considered as an indication of or alternative to an IFRS measure of profitability, financial performance or liquidity.
Figure 53: ROIC summary
Source : Company data - BAML May 2019 presentation .
Page 30 Deutsche Bank AG/Sydney 3 July 2019 M&M - Diversified Resources Australian Mining
Figure 54: Capital management program
Source : Company data - S32 1H19 presentation .
Deutsche Bank AG/Sydney Page 31 3 July 2019 M&M - Diversified Resources Australian Mining
Model updated: 02 July 2019 Fiscal year end 30-Jun 2016 2017 2018 2019E 2020E 2021E Running the numbers Financial Summary Australasia DB EPS (USD) 0.23 1.26 1.67 1.96 2.20 1.89 Reported EPS (USD) -1.20 1.10 0.69 1.96 2.20 1.89 Australia DPS (USD) 0.30 0.83 1.18 2.82 1.32 1.13 M&M - Diversified Resources BVPS (USD) 10.20 10.76 10.44 9.59 9.82 10.52 BHP Valuation Metrics Price/Sales (x) 2.5 2.5 2.7 3.2 3.1 3.2 Reuters: BHP.AX Bloomberg: BHP AU P/E (DB) (x) 64.8 14.0 13.3 14.9 13.2 15.4 P/E (Reported) (x) nm 16.0 32.1 14.8 13.2 15.4 P/BV (x) 1.3 1.6 2.5 3.0 2.9 2.7 Sell FCF yield (%) 5.0 14.0 11.4 7.6 7.3 7.8 Dividend yield (%) 2.0 4.7 5.3 9.7 4.5 3.9 Price (1 Jul 19) AUD 41.68 EV/Sales 3.6 3.2 3.2 3.6 3.5 3.5 Target Price AUD 28.00 EV/EBITDA 8.9 6.0 6.8 6.7 6.3 6.9 EV/EBIT 31.7 9.7 10.1 9.1 8.3 9.5 52 Week range AUD 30.43 - 41.95 Income Statement (USDm) Market cap (m) AUDm 210,814 Sales 30,912 38,285 43,638 45,240 46,633 45,214 USDm 146,864 EBITDA 12,340 20,296 20,262 24,139 25,637 23,152 EBIT 3,469 12,389 13,641 17,882 19,555 16,877 Company Profile Pre-tax profit -7,259 10,322 11,830 16,740 18,780 16,177 BHP Billiton Limited is an international resources company. The Net income -6,385 5,890 3,705 9,950 11,151 9,595 company's principal business lines are mineral and petroleum production, including coal (thermal and coking), iron ore, Cash Flow (USDm) copper, and oil & gas (conventional and unconventional, LNG). Cash flow from operations 10,625 16,804 18,461 17,947 17,886 17,653 Net Capex -6,673 -3,607 -4,890 -6,772 -7,174 -6,152 Free cash flow 3,952 13,197 13,571 11,175 10,712 11,500 Equity raised/(bought back) 0 0 0 -5,220 0 0 Dividends paid -4,130 -2,921 -5,220 -11,760 -9,977 -6,046 Price Performance Net inc/(dec) in borrowings 4,451 -5,543 -3,660 -2,676 -4,460 -2,000 45 Other investing/financing cash flows -372 -543 -2,740 8,676 -438 -358 40 Net cash flow 3,664 3,510 1,649 -696 -5,069 2,189 Change in working capital -207 352 118 727 394 -612 35 30 Balance Sheet (USDm) 25 20 Cash and cash equivalents 10,319 14,153 15,871 15,373 10,304 12,492 Jul '17 Jan '18 Jul '18 Jan '19 Jul '19 Property, plant and equipment 83,975 80,497 67,182 64,209 65,302 65,179 Goodwill 2,480 2,389 468 595 874 1,154 BHP ALL ORDINARIES (Rebased) Other assets 22,179 19,967 28,472 20,214 20,448 19,965 Total assets 118,953 117,006 111,993 100,390 96,927 98,789 Margin Trends Debt 36,421 30,474 26,805 24,379 19,919 17,919 60 Other liabilities 22,461 23,806 24,518 22,601 21,881 21,749 Total liabilities 58,882 54,280 51,323 46,979 41,800 39,667 40 Total shareholders' equity 60,071 62,726 60,670 53,411 55,128 59,122 Net debt 26,102 16,321 10,934 9,006 9,615 5,426 20 Key Company Metrics 0 16 17 18 19E 20E 21E Sales growth (%) -30.7 23.9 14.0 3.7 3.1 -3.0 DB EPS growth (%) -82.9 452.6 32.7 16.8 12.4 -14.0 EBITDA Margin EBIT Margin Payout ratio (%) nm 75.0 169.5 143.2 59.8 59.8 Growth & Profitibility EBITDA Margin (%) 39.9 53.0 46.4 53.4 55.0 51.2 40 40 EBIT Margin (%) 11.2 32.4 31.3 39.5 41.9 37.3 20 30 ROE (%) 2.0 12.1 15.8 19.1 22.7 18.7 0 20 Net debt/equity (%) 43.5 26.0 18.0 16.9 17.4 9.2 -20 10 Net interest cover (x) 3.4 8.7 11.0 18.0 25.2 24.1 -40 0 16 17 18 19E 20E 21E DuPont Analysis
Sales growth (LHS) ROE (RHS) EBIT margin (%) 11.2 32.4 31.3 39.5 41.9 37.3 x Asset turnover (x) 0.3 0.3 0.4 0.4 0.5 0.5 Solvency x Financial cost ratio (x) 0.7 0.9 0.9 0.9 1.0 1.0 60 30 x Tax and other effects (x) -2.6 0.5 0.3 0.6 0.6 0.6 = ROA (post tax) (%) -5.2 5.0 3.2 9.4 11.3 9.8 x Financial leverage (x) 2.0 2.1 2.0 2.0 2.0 1.9 40 20 = ROE (%) -10.7 10.6 6.6 19.1 22.7 18.7 annual growth (%) na na -37.8 191.2 18.8 -17.9 20 10 x NTA/share (avg) (x) 11.2 10.5 10.6 10.3 9.7 10.1 0 0 = Reported EPS -1.20 1.10 0.69 1.96 2.20 1.89 16 17 18 19E 20E 21E annual growth (%) na na -37.1 182.5 12.1 -14.0 Net debt/equity (LHS) Net interest cover (RHS) Source: Company data, Deutsche Bank estimates James Gurry +61 3 9270-4104 [email protected]
Page 32 Deutsche Bank AG/Sydney 3 July 2019 M&M - Diversified Resources Australian Mining Investment Thesis
Risks
Key upside risks include higher commodity prices, weaker FX, operational outper- formance and better cost out than what we currently forecast.
Valuation
We value BHP Billiton using life-of-mine cash flows with a nominal WACC of 9%. Our target price is set broadly in line with our NPV, which assumes a long-term AUD/ USD of 0.75, Brent oil of US$65/bbl, WTI oil of US$60/bbl, US natural gas of US$3.0/ mmBtu, iron ore fines of US$57/t, coking coal of US$130/t, copper US$2.99/lb (all real in 2019$).
Outlook
The long-term BHP Billiton story is (as we define it): 1. Production, earnings and cash flow growth from their low cost mining and oil projects through further cost out, efficiency gains, automation, and brownfields expansions, 2. Continued port- folio simplification by selling non-core assets (US Onshore, possibly small met coal, thermal coal, small copper), and selling down assets (possibly Jansen), and 3. Growing by approving more high returning projects (Spence, Olympic Dam UG expansion, met coal creep) and adding more projects to the portfolio. The compa- ny's capital allocation strategy remains: 1. Balance sheet management (maintain- ing the A credit rating), 2. Paying out 50% of underlying earnings through the cycle. 3. Investing counter-cyclically by reducing debt, organic growth, M&A, buy-backs, special dividends etc. BHP Billiton's assets are mostly long life, low operating cost, and in low to moderate risk countries (Australia, North America, Brazil, Chile) and overall are considered premium quality relative to the minerals sector, offering above average returns and operating margins. The stock is trading above our target price; therefore we rate BHP a SELL on valuation.
Deutsche Bank AG/Sydney Page 33 3 July 2019 M&M - Diversified Resources Australian Mining
Model updated: 02 July 2019 Fiscal year end 31-Dec 2016 2017 2018 2019E 2020E 2021E Running the numbers Financial Summary Australasia DB EPS (USD) 2.84 4.86 5.22 6.04 5.48 4.94 Reported EPS (USD) 2.57 4.94 8.08 6.04 5.48 4.94 Australia DPS (USD) 1.70 2.90 5.50 5.66 3.83 3.46 M&M - Diversified Resources BVPS (USD) 21.84 25.48 26.49 23.75 25.58 26.90 Rio Tinto Valuation Metrics Price/Sales (x) 1.9 2.2 2.4 2.8 2.9 2.9 Reuters: RIO.AX Bloomberg: RIO AU P/E (DB) (x) 12.7 10.3 11.2 12.1 13.3 14.8 P/E (Reported) (x) 14.0 10.1 7.2 12.1 13.3 14.8 P/BV (x) 2.0 2.3 2.2 3.1 2.9 2.7 Hold FCF yield (%) 9.0 10.8 7.1 7.4 5.9 5.5 Dividend yield (%) 4.7 5.8 9.4 7.8 5.3 4.7 Price (1 Jul 19) AUD 104.8 EV/Sales 2.5 2.5 2.6 3.1 3.2 3.2 Target Price AUD 91.00 EV/EBITDA 6.8 5.6 6.4 6.6 7.2 7.6 EV/EBIT 11.1 7.3 8.5 8.4 9.6 10.5 52 Week range AUD 69.68 - 106.26 Income Statement (USDm) Market cap (m) AUDm 171,160 Sales 33,781 40,030 40,522 41,859 41,627 40,989 USDm 119,239 EBITDA 12,260 18,306 16,576 19,510 18,385 17,294 EBIT 7,466 13,931 12,561 15,306 13,811 12,561 Company Profile Pre-tax profit 6,343 12,816 18,167 14,697 13,049 11,814 Rio Tinto is a global diversified mining company with interests Net income 4,617 8,762 13,638 9,870 8,865 8,003 in aluminum, borax, coal, copper, diamonds, gold, iron ore, titanium dioxide feedstock, and uranium. Rio Tinto's key mining Cash Flow (USDm) operations are located in Australia, Mongolia, South Africa, South America, the United States, Europe, and Canada. Cash flow from operations 8,465 13,884 11,821 14,628 14,168 13,310 Net Capex -2,658 -4,344 -4,844 -5,861 -7,207 -6,761 Free cash flow 5,807 9,540 6,977 8,766 6,961 6,549 Equity raised/(bought back) 0 -2,083 -5,386 -1,700 0 0 Dividends paid -2,725 -4,250 -5,356 -13,417 -5,897 -5,878 Price Performance Net inc/(dec) in borrowings -4,948 -2,777 -2,246 0 -817 -776 120 Other investing/financing cash flows 701 1,919 6,234 -900 0 0 Net cash flow -1,165 2,358 342 -7,251 247 -105 100 Change in working capital -719 182 -172 -1 0 0 80 60 Balance Sheet (USDm) 40 Cash and cash equivalents 8,201 10,550 10,773 3,522 3,769 3,664 Jul '17 Jan '18 Jul '18 Jan '19 Jul '19 Property, plant and equipment 58,855 62,093 56,361 58,018 60,651 62,680 Goodwill 951 1,037 912 912 912 912 Rio Tinto ALL ORDINARIES (Rebased) Other assets 21,256 22,046 22,903 23,967 23,660 23,309 Total assets 89,263 95,726 90,949 86,419 88,992 90,566 Margin Trends Debt 17,788 14,395 10,518 10,518 9,701 8,925 50 Other liabilities 25,745 30,216 30,608 31,083 31,307 31,323 Total liabilities 43,533 44,611 41,126 41,601 41,008 40,248 40 Total shareholders' equity 45,730 51,115 49,823 44,817 47,985 50,318 Net debt 9,587 3,845 -255 6,996 5,932 5,261 30 Key Company Metrics 20 16 17 18 19E 20E 21E Sales growth (%) -3.0 18.5 1.2 3.3 -0.6 -1.5 DB EPS growth (%) 13.2 71.6 7.3 15.8 -9.3 -9.7 EBITDA Margin EBIT Margin Payout ratio (%) 66.2 58.7 68.1 93.8 70.0 70.0 Growth & Profitibility EBITDA Margin (%) 36.3 45.7 40.9 46.6 44.2 42.2 20 25 EBIT Margin (%) 22.1 34.8 31.0 36.6 33.2 30.6
10 20 ROE (%) 13.3 20.5 19.9 24.0 22.2 18.8 Net debt/equity (%) 21.0 7.5 -0.5 15.6 12.4 10.5 0 15 Net interest cover (x) 7.3 19.7 41.5 94.3 45.1 44.8
-10 10 16 17 18 19E 20E 21E DuPont Analysis
Sales growth (LHS) ROE (RHS) EBIT margin (%) 22.1 34.8 31.0 36.6 33.2 30.6 x Asset turnover (x) 0.4 0.4 0.4 0.5 0.5 0.5 Solvency x Financial cost ratio (x) 0.9 0.9 1.0 1.0 1.0 1.0 30 100 x Tax and other effects (x) 0.7 0.7 1.1 0.7 0.7 0.7 = ROA (post tax) (%) 5.1 9.5 14.6 11.1 10.1 8.9 20 75 x Financial leverage (x) 2.4 2.2 2.1 2.2 2.2 2.1 = ROE (%) 12.0 20.9 30.9 24.0 22.2 18.8 10 50 annual growth (%) na 73.1 47.9 -22.1 -7.6 -15.1 0 25 x NTA/share (avg) (x) 21.3 23.7 26.2 25.1 24.7 26.2 -10 0 = Reported EPS 2.57 4.94 8.08 6.04 5.48 4.94 16 17 18 19E 20E 21E annual growth (%) na 92.5 63.5 -25.2 -9.3 -9.7 Net debt/equity (LHS) Net interest cover (RHS) Source: Company data, Deutsche Bank estimates James Gurry +61 3 9270-4104 [email protected]
Page 34 Deutsche Bank AG/Sydney 3 July 2019 M&M - Diversified Resources Australian Mining Investment Thesis
Risks
Key risks to our view include higher or lower iron ore, copper, coal and aluminium prices and movement in FX than what we currently forecast.
Valuation
We value Rio Tinto using discounted cash flow analysis of each of its assets and applying WACC of 9%. We set our target price in line with our DCF-derived net present valuation.
Outlook
Rio Tinto has a high-quality suite of assets that is generally low operating cost, long life, expandable, and mostly located in low-risk countries, offering above-average returns and operating margins. Rio is pushing ahead with a clear strategy under its new CEO J-S Jacques to reduce costs (sustaining capex, operating costs, head office and exploration expenditure), keep the best growth at the lowest capital intensity, and pursue copper and bauxite growth, pay down debt (gearing is now at the bottom of the 20-30% target range), and pay out between 40-60% of earnings in dividends each year. Successful execution of the strategy has driven a re-rating relative to peers and we think the longer term risks to iron ore demand will limit the re-rating potential from here. We rate the stock a Hold, trading close to our NPV.
Deutsche Bank AG/Sydney Page 35 3 July 2019 M&M - Diversified Resources Australian Mining
Model updated: 02 July 2019 Fiscal year end 30-Jun 2016 2017 2018 2019E 2020E 2021E Running the numbers Financial Summary Australasia DB EPS (USD) 0.32 0.67 0.28 0.92 0.64 0.42 Reported EPS (USD) 0.32 0.67 0.28 0.92 0.64 0.42 Australia DPS (USD) 0.11 0.34 0.18 0.84 0.42 0.21 M&M - Other Metals BVPS (USD) 2.70 3.12 3.12 3.31 3.42 3.63 Fortescue Metals Valuation Metrics Price/Sales (x) 0.7 1.5 1.8 2.1 2.2 2.4 Reuters: FMG.AX Bloomberg: FMG AU P/E (DB) (x) 5.2 6.1 13.7 6.9 10.0 15.3 P/E (Reported) (x) 5.2 6.1 13.7 6.9 10.0 15.3 P/BV (x) 0.9 1.3 1.1 1.9 1.9 1.7 Hold FCF yield (%) 40.5 27.9 6.5 14.5 nm 4.6 Dividend yield (%) 6.7 8.2 4.6 13.2 6.7 3.3 Price (1 Jul 19) AUD 9.15 EV/Sales 1.6 2.0 2.2 2.4 2.6 3.0 Target Price AUD 7.70 EV/EBITDA 3.5 3.5 4.7 4.1 5.3 6.8 EV/EBIT 5.8 4.8 7.9 5.2 7.5 11.0 52 Week range AUD 3.53 - 9.22 Income Statement (USDm) Market cap (m) AUDm 28,173 Sales 6,923 8,335 6,775 9,474 8,826 8,111 USDm 19,626 EBITDA 3,195 4,744 3,182 5,515 4,377 3,531 EBIT 1,951 3,501 1,905 4,320 3,079 2,187 Company Profile Pre-tax profit 1,354 2,967 1,245 4,042 2,796 1,834 Fortescue produces and ships c. 165Mtpa of iron ore fines from Net income 984 2,093 879 2,832 1,957 1,284 the Pilbara region in NW Australia. Cash Flow (USDm) Cash flow from operations 2,418 4,256 1,601 3,802 2,247 2,757 Net Capex -340 -688 -818 -948 -2,252 -1,846 Free cash flow 2,078 3,568 783 2,854 -5 911 Equity raised/(bought back) 0 -27 0 -101 0 0 Dividends paid -114 -755 -874 -2,244 -1,604 -631 Price Performance Net inc/(dec) in borrowings -2,695 -2,453 -474 19 737 -13 10 Other investing/financing cash flows -47 -39 -343 27 0 0 Net cash flow -775 259 -961 453 -1,017 163 8 Change in working capital 152 152 83 -790 175 119 6 4 Balance Sheet (USDm) 2 Cash and cash equivalents 1,583 1,838 863 1,317 300 464 Jul '17 Jan '18 Jul '18 Jan '19 Jul '19 Property, plant and equipment 16,422 15,680 15,376 15,993 16,949 17,451 Goodwill 0 0 0 0 0 0 Fortescue Metals ALL ORDINARIES (Rebased) Other assets 1,332 1,597 1,654 1,480 1,532 1,531 Total assets 19,337 19,115 17,893 18,791 18,780 19,446 Margin Trends Debt 6,771 4,471 4,019 4,043 4,780 4,767 60 Other liabilities 4,160 4,910 4,142 4,550 3,449 3,475 Total liabilities 10,931 9,381 8,161 8,593 8,229 8,241 50 Total shareholders' equity 8,406 9,734 9,732 10,198 10,552 11,204 40 Net debt 5,188 2,633 3,156 2,725 4,479 4,303 30 Key Company Metrics 20 16 17 18 19E 20E 21E Sales growth (%) -17.5 20.4 -18.7 39.8 -6.8 -8.1 DB EPS growth (%) 211.4 112.8 -58.0 225.9 -30.9 -34.4 EBITDA Margin EBIT Margin Payout ratio (%) 34.7 50.4 63.2 91.6 66.8 50.0 Growth & Profitibility EBITDA Margin (%) 46.2 56.9 47.0 58.2 49.6 43.5 60 30 EBIT Margin (%) 28.2 42.0 28.1 45.6 34.9 27.0 40 25 ROE (%) 12.4 23.1 9.0 28.5 18.9 11.8 20 20 0 15 Net debt/equity (%) 61.7 27.0 32.4 26.7 42.4 38.4 -20 10 Net interest cover (x) 4.2 7.2 3.0 15.9 11.0 6.2 -40 5 16 17 18 19E 20E 21E DuPont Analysis
Sales growth (LHS) ROE (RHS) EBIT margin (%) 28.2 42.0 28.1 45.6 34.9 27.0 x Asset turnover (x) 0.4 0.4 0.4 0.5 0.5 0.4 Solvency x Financial cost ratio (x) 0.8 0.9 0.7 0.9 0.9 0.8 80 20 x Tax and other effects (x) 0.7 0.7 0.7 0.7 0.7 0.7 = ROA (post tax) (%) 5.1 10.9 4.9 15.1 10.4 6.6 60 15 x Financial leverage (x) 2.4 2.1 1.8 1.9 1.8 1.8 = ROE (%) 12.4 23.1 9.0 28.5 18.9 11.8 40 10 annual growth (%) 195.3 86.9 -60.9 214.7 -33.6 -37.4 20 5 x NTA/share (avg) (x) 2.6 2.9 3.1 3.2 3.4 3.5 0 0 = Reported EPS 0.32 0.67 0.28 0.92 0.64 0.42 16 17 18 19E 20E 21E annual growth (%) 211.4 112.8 -58.0 225.9 -30.9 -34.4 Net debt/equity (LHS) Net interest cover (RHS) Source: Company data, Deutsche Bank estimates James Gurry +61 3 9270-4104 [email protected]
Page 36 Deutsche Bank AG/Sydney 3 July 2019 M&M - Diversified Resources Australian Mining Investment Thesis
Risks
Key upside and downside risks to our view include movements in iron ore price, FX and changes to discounts and strip ratios than what we currently forecast.
Valuation
Our price target is set on forward price fundamentals ($70/tonne) and a narrower discount to the benchmark price (15%). We use DCF analysis over the life of the mine/resource using a nominal WACC of 10% and assumes long run price realisa- tion of US$45/dmt real or 80% of our US $57/dmt (62%, real) and AUD/USD of 0.75.
Outlook
FMG is performing well operationally, shipping at a steady 170Mtpa, and driving down costs through cost cutting, automation, and optimisation of strip ratios utilis- ing recent upgrades of the processing plants. We think that current all-in costs of ~US$30/wmt and maintenance capex of US$3-4/wmt are sustainable over the medium term (next 3 years). Over the past few years, the discount for FMG's lower grade 57.5-58% Fe material has widened vs. the 62% Index. FMG has, for the first time, provided a detailed break up of its product mix with the Q1 FY19 results, with Fortescue Blend (58.2% Fe) and Super Special Fines (56.4% Fe) accounting for ~90% of total shipments. The product mix is likely to gradually weighted towards higher grade Fe products, with the start of production of West Pilbara Fines, a 60.1% Fe grade product, in Dec-2018. We now expect West Pilbara Fines to contrib- ute ~23-24% of the total shipments from FY22 onwards. This is likely to improve the overall Fe grade to ~58% from FY22 onwards, up from the current level of ~57%. We rate FMG a HOLD on valuation.
Deutsche Bank AG/Sydney Page 37 3 July 2019 M&M - Diversified Resources Australian Mining
Model updated: 27 June 2019 Fiscal year end 30-Jun 2016 2017 2018 2019E 2020E 2021E Running the numbers Financial Summary Australasia DB EPS (USD) 0.03 0.22 0.26 0.23 0.28 0.24 Reported EPS (USD) -0.30 0.23 0.26 0.23 0.28 0.24 Australia DPS (USD) 0.01 0.10 0.14 0.11 0.11 0.09 M&M - Diversified Resources BVPS (USD) 1.77 1.94 2.09 2.17 2.34 2.48 South32 Valuation Metrics Price/Sales (x) 1.0 1.4 1.8 1.5 1.6 1.6 Reuters: S32.AX Bloomberg: S32 AU P/E (DB) (x) 40.3 8.8 10.2 9.8 7.9 9.4 P/E (Reported) (x) nm 8.2 10.1 9.8 7.9 9.4 P/BV (x) 0.6 1.0 1.3 1.0 0.9 0.9 Buy FCF yield (%) 11.6 18.1 9.6 11.0 12.1 11.1 Dividend yield (%) 1.0 5.3 5.2 4.8 5.0 4.2 Price (1 Jul 19) AUD 3.20 EV/Sales 1.0 1.3 1.5 1.3 1.5 1.4 Target Price AUD 4.10 EV/EBITDA 5.1 3.9 4.6 3.9 4.0 4.1 EV/EBIT 17.3 5.9 6.5 5.6 5.2 5.6 52 Week range AUD 3.04 - 4.25 Income Statement (USDm) Market cap (m) AUDm 15,891 Sales 5,812 6,950 7,549 7,566 6,974 7,009 USDm 11,070 EBITDA 1,100 2,290 2,509 2,482 2,571 2,343 EBIT 325 1,527 1,767 1,739 1,949 1,708 Company Profile Pre-tax profit -1,545 1,624 1,619 1,603 1,788 1,551 South32 is a mid cap diversified miner. The company's asset Net income -1,615 1,224 1,332 1,134 1,378 1,155 portfolio includes Illawarra met coal, the Cannington silver/ lead/zinc mine, the Cerro Matoso nickel mine, The Groote Cash Flow (USDm) Eylandt manganese mine, Samancor manganese (Hotazel and Metalloys), the Worsley and Alumar alumina refineries, the Cash flow from operations 1,030 2,132 1,717 1,882 1,877 1,812 Hillside, Mozal, Bayside and Alumar aluminium smelters and Net Capex -383 -321 -430 -662 -562 -608 Energy coal South Africa. Operations are located in Australia Free cash flow 647 1,811 1,287 1,220 1,315 1,204 (along with head office), South Africa, Mozambique, Brazil and Equity raised/(bought back) 0 -211 -254 -432 -200 0 Columbia. Dividends paid 0 -244 -708 -657 -497 -486 Price Performance Net inc/(dec) in borrowings -96 89 -73 -58 0 0 4.5 Other investing/financing cash flows 34 7 47 -1,547 50 0 Net cash flow 589 1,450 297 -1,509 608 658 4 Change in working capital -811 247 330 -92 -107 6 3.5 3 Balance Sheet (USDm) 2.5 Cash and cash equivalents 1,225 2,675 2,970 1,457 2,065 2,723 Jul '17 Jan '18 Jul '18 Jan '19 Jul '19 Property, plant and equipment 8,651 8,373 8,196 9,882 9,832 9,865 Goodwill 0 0 0 0 0 0 South32 ALL ORDINARIES (Rebased) Other assets 3,498 3,685 3,967 3,668 3,616 3,675 Total assets 13,374 14,733 15,133 15,007 15,513 16,263 Margin Trends Debt 913 1,035 929 887 887 887 40 Other liabilities 3,039 3,463 3,495 3,350 3,175 3,256 Total liabilities 3,952 4,498 4,424 4,237 4,062 4,143 30 Total shareholders' equity 9,422 10,235 10,709 10,769 11,451 12,120 20 Net debt -312 -1,640 -2,041 -570 -1,178 -1,836 10 Key Company Metrics 0 16 17 18 19E 20E 21E Sales growth (%) -24.9 19.6 8.6 0.2 -7.8 0.5 DB EPS growth (%) -76.0 729.9 19.8 -11.6 23.9 -16.2 EBITDA Margin EBIT Margin Payout ratio (%) nm 43.0 51.9 47.2 39.8 40.0 Growth & Profitibility EBITDA Margin (%) 18.9 32.9 33.2 32.8 36.9 33.4 40 20 EBIT Margin (%) 5.6 22.0 23.4 23.0 27.9 24.4 20 15 ROE (%) 1.3 11.7 12.7 10.6 12.4 9.8 0 10 Net debt/equity (%) -3.3 -16.0 -19.1 -5.3 -10.3 -15.1 -20 5 Net interest cover (x) 3.1 8.9 17.7 15.9 12.1 10.9 -40 0 16 17 18 19E 20E 21E DuPont Analysis
Sales growth (LHS) ROE (RHS) EBIT margin (%) 5.6 22.0 23.4 23.0 27.9 24.4 x Asset turnover (x) 0.4 0.5 0.5 0.5 0.5 0.4 Solvency x Financial cost ratio (x) 0.7 0.9 0.9 0.9 0.9 0.9 0 25 x Tax and other effects (x) -7.3 0.9 0.8 0.7 0.8 0.7 = ROA (post tax) (%) -11.2 8.7 8.9 7.5 9.0 7.3 -5 20 x Financial leverage (x) 1.4 1.4 1.4 1.4 1.4 1.3 -10 15 = ROE (%) -15.8 12.5 12.7 10.6 12.4 9.8 -15 10 annual growth (%) na na 2.1 -17.0 17.5 -21.0 -20 5 x NTA/share (avg) (x) 1.9 1.9 2.0 2.1 2.3 2.4 -25 0 = Reported EPS -0.30 0.23 0.26 0.23 0.28 0.24 16 17 18 19E 20E 21E annual growth (%) na na 11.9 -12.5 24.6 -16.2 Net debt/equity (LHS) Net interest cover (RHS) Source: Company data, Deutsche Bank estimates James Gurry +61 3 9270-4104 [email protected]
Page 38 Deutsche Bank AG/Sydney 3 July 2019 M&M - Diversified Resources Australian Mining Investment Thesis
Risks
The key downside risks include sever drop in grades, changes in South African oper- ating legislations (BEE) and power cost increases, lower commodity prices and stronger FX rates than what we currently forecast.
Valuation
We value South32 using discounted cash flow analysis of each of its assets and applying WACC of 10%. We set our target price in line with our DCF-derived net present valuation.
Outlook
South32 is a global mid-cap mining company with a strong balance sheet and rea- sonable cash flow from a diversified asset base. We think the group's four most valuable assets are the Worsley and Alumar alumina refineries, the GEMCO manga- nese mine, and the Hillside aluminium smelter. We forecast South32's copper equivalent production to fall around 2-3% per year after FY18, so commodity prices, fixed cost reductions and currency depreciation are the key drivers of earnings growth. The two areas of upside are cost-cutting and mine-life extensions. We are positive on the outlook for zinc, silver and nickel over the medium term but are cau- tious on manganese, thermal coal, alumina and aluminium. With strong FCF driven by a rebound in most of S32's key commodities, together with a strong balance sheet, we rate South32 a BUY on valuation.
Deutsche Bank AG/Sydney Page 39 3 July 2019 M&M - Diversified Resources Australian Mining
Model updated: 02 July 2019 Fiscal year end 30-Jun 2016 2017 2018 2019E 2020E 2021E Running the numbers Financial Summary Australasia DB EPS (AUD) 0.02 0.36 0.51 0.55 0.54 0.49 Reported EPS (AUD) 0.02 0.36 0.51 0.55 0.54 0.49 Australia DPS (AUD) 0.00 0.20 0.40 0.33 0.27 0.25 Emerging Companies BVPS (AUD) 2.82 3.21 3.39 3.47 3.74 3.97 Whitehaven Coal Valuation Metrics Price/Sales (x) 0.8 1.5 1.9 1.5 1.5 1.4 Reuters: WHC.AX Bloomberg: WHC AU P/E (DB) (x) 43.1 7.2 8.1 6.6 6.7 7.4 P/E (Reported) (x) 43.1 7.2 8.1 6.6 6.7 7.4 P/BV (x) 0.4 0.9 1.7 1.1 1.0 0.9 Buy FCF yield (%) 9.5 19.6 16.1 21.5 16.8 12.9 Dividend yield (%) 0.0 7.7 9.6 9.0 7.4 6.8 Price (1 Jul 19) AUD 3.65 EV/Sales 1.5 1.8 2.1 1.7 1.5 1.2 Target Price AUD 5.00 EV/EBITDA 7.9 4.5 4.6 3.8 3.5 3.3 EV/EBIT 19.0 5.6 5.8 4.9 4.5 4.5 52 Week range AUD 3.60 - 5.89 Income Statement (AUDm) Market cap (m) AUDm 3,745.1 Sales 1,168 1,773 2,257 2,444 2,449 2,729 USDm 2,609.0 EBITDA 224 714 1,011 1,098 1,046 996 EBIT 94 580 808 848 816 734 Company Profile Pre-tax profit 28 475 758 804 793 723 Whitehaven is a coal producer in the Gunnedah Basin and Net income 20 367 524 566 555 506 currently operates four open cut mines in the region ( Rocglen, Tarrawonga, Maules Creek and Werris Creek) and one Cash Flow (AUDm) underground mine (Narrabri). These mines produced 14.6Mt of saleable coal in FY15 (100% basis) and the company is Cash flow from operations 172 608 831 970 785 760 targeting an increase to 25Mtpa by FY19. The company also Net Capex -88 -88 -142 -164 -155 -279 has an 11% interest in the Newcastle Coal Infrastructure Group Free cash flow 84 519 689 805 630 481 (NCIG coal terminal). Equity raised/(bought back) -1 -8 0 0 0 0 Dividends paid 0 0 -188 -473 -280 -262 Price Performance Net inc/(dec) in borrowings -64 -501 -11 -245 -90 -34 7 Other investing/financing cash flows -14 -19 -456 -96 294 0 6 Net cash flow -1 -14 25 -33 554 185 Change in working capital 42 -45 48 -56 0 -6 5 4 Balance Sheet (AUDm) 3 2 Cash and cash equivalents 101 87 112 79 633 818 Jul '17 Jan '18 Jul '18 Jan '19 Jul '19 Property, plant and equipment 3,498 3,442 3,747 3,777 3,407 3,425 Goodwill 0 0 0 0 0 0 Whitehaven Coal ALL ORDINARIES (Rebased) Other assets 496 437 767 903 904 943 Total assets 4,095 3,967 4,626 4,758 4,944 5,186 Margin Trends Debt 961 398 588 357 267 233 50 Other liabilities 246 276 555 843 843 874 40 Total liabilities 1,207 675 1,143 1,200 1,110 1,108 Total shareholders' equity 2,889 3,292 3,483 3,559 3,834 4,078 30 Net debt 859 311 476 279 -366 -585 20 10 Key Company Metrics 0 16 17 18 19E 20E 21E Sales growth (%) 51.5 51.8 27.3 8.3 0.2 11.5 DB EPS growth (%) na 1,692.1 42.7 8.1 -2.0 -8.8 EBITDA Margin EBIT Margin Payout ratio (%) 0.0 55.9 78.3 59.2 50.0 50.0 Growth & Profitibility EBITDA Margin (%) 19.2 40.3 44.8 44.9 42.7 36.5 100 20 EBIT Margin (%) 8.0 32.7 35.8 34.7 33.3 26.9 80 15 ROE (%) 0.7 11.9 15.5 16.1 15.0 12.8 60 10 40 5 Net debt/equity (%) 29.7 9.5 13.7 7.8 -9.5 -14.3 20 0 Net interest cover (x) 1.4 11.6 20.1 19.6 35.3 65.5 0 -5 16 17 18 19E 20E 21E DuPont Analysis
Sales growth (LHS) ROE (RHS) EBIT margin (%) 8.0 32.7 35.8 34.7 33.3 26.9 x Asset turnover (x) 0.3 0.4 0.5 0.5 0.5 0.5 Solvency x Financial cost ratio (x) 0.3 0.9 1.0 0.9 1.0 1.0 60 75 x Tax and other effects (x) 0.7 0.7 0.7 0.7 0.7 0.7 = ROA (post tax) (%) 0.5 9.3 11.3 11.9 11.2 9.8 40 50 x Financial leverage (x) 1.4 1.3 1.4 1.4 1.3 1.3 = ROE (%) 0.7 11.9 15.5 16.1 15.0 12.8 20 25 annual growth (%) na 1,568.2 30.2 4.0 -6.6 -14.8 0 0 x NTA/share (avg) (x) 2.8 3.0 3.3 3.4 3.6 3.9 -20 -25 = Reported EPS 0.02 0.36 0.51 0.55 0.54 0.49 16 17 18 19E 20E 21E annual growth (%) na 1,692.1 42.7 8.1 -2.0 -8.8 Net debt/equity (LHS) Net interest cover (RHS) Source: Company data, Deutsche Bank estimates James Gurry +61 3 9270-4104 [email protected]
Page 40 Deutsche Bank AG/Sydney 3 July 2019 M&M - Diversified Resources Australian Mining Investment Thesis
Risks
The key downside risks include lower thermal and semi-soft/PCI coal prices, strong- er FX, and higher operating costs than what we currently forecast.
Valuation
Our price target is set broadly in line with our NPV, which is calculated using a long- term real thermal coal price of US$67/t for 6,000kcal, US$85/t for semisoft and HV PCI, and 0.75 for AUD/USD. We use a DCF approach (life of mine operating cash flows) discounting at a 10% nominal WACC.
Outlook
WHC has an organic growth profile with the objective of increasing saleable coal production from 14.6Mtpa in FY15 to above 25Mtpa by FY19, and increasing pro- duction of higher quality PCI and semi-soft coal. The company's key projects are the Maules Creek (10Mtpa ROM) and Narrabri mines (8Mtpa ROM). They also operate the Tarrawonga, Rocglen, and Werris Creek open pit mines. The 13.5Mtpa Maules Creek project is ramping-up and Narrabri continues to improve through productivi- ty gains. WHC is a compelling volume and cost reduction story and the outlook for thermal, semi-soft and PCI coal has recently improved due to the a policy change in China (276d policy) which has the potential to support prices over the near to medium term. With these positive drivers, we rate WHC a BUY based on valuation.
Deutsche Bank AG/Sydney Page 41 3 July 2019 M&M - Diversified Resources Australian Mining Appendix 1
Important Disclosures *Other information available upon request
Disclosure checklist Company Ticker Recent price* Disclosure BHP BHP.AX 41.68 (AUD) 01 Jul 2019 14 Fortescue Metals FMG.AX 9.15 (AUD) 01 Jul 2019 NA Rio Tinto RIO.AX 104.75 (AUD) 01 Jul 2019 7 South32 S32.AX 3.2 (AUD) 01 Jul 2019 NA Whitehaven Coal WHC.AX 3.65 (AUD) 01 Jul 2019 7, 14 *Prices are current as of the end of the previous trading session unless otherwise indicated and are sourced from local exchanges via Reuters, Bloomberg and other vendors . Other information is sourced from Deutsche Bank, subject companies, and other sources. For disclosures pertaining to recommendations or estimates made on securities other than the primary subject of this research, please see the most recently published company report or visit our global disclosure look-up page on our website at https://research.db.com/Research/Disclosures/ CompanySearch. Aside from within this report, important risk and conflict disclosures can also be found at https://research.db.com/Research/Topics/Equities?topicId=RB0002. Investors are strongly encouraged to review this information before investing. Important Disclosures Required by U.S. Regulators Disclosures marked with an asterisk may also be required by at least one jurisdiction in addition to the United States.See Important Disclosures Required by Non-US Regulators and Explanatory Notes. 7. Deutsche Bank and/or its affiliate(s) has received compensation from this company for the provision of investment banking or financial advisory services within the past year. 14. Deutsche Bank and/or its affiliate(s) has received non-investment banking related compensation from this company within the past year.
Important Disclosures Required by Non-U.S. Regulators Disclosures marked with an asterisk may also be required by at least one jurisdiction in addition to the United States.See Important Disclosures Required by Non-US Regulators and Explanatory Notes. 7. Deutsche Bank and/or its affiliate(s) has received compensation from this company for the provision of investment banking or financial advisory services within the past year. For disclosures pertaining to recommendations or estimates made on securities other than the primary subject of this research, please see the most recently published company report or visit our global disclosure look-up page on our website at https://research.db.com/Research/Disclosures/CompanySearch Analyst Certification The views expressed in this report accurately reflect the personal views of the undersigned lead analyst about the subject issuers and the securities of those issuers. In addition, the undersigned lead analyst has not and will not receive any compensation for providing a specific recommendation or view in this report. James Gurry.
Page 42 Deutsche Bank AG/Sydney 3 July 2019 M&M - Diversified Resources Australian Mining
Historical recommendations and target price: BHP (BHP.AX) (as of 07/01/2019) 50.00 Current Recommendations Buy Hold 15 40.00 16 Sell Not Rated 10 11 14 8 1213 Suspended Rating 5 6 9 30.00 7 4 ** Analyst is no longer at 2 3 1 Deutsche Bank
20.00 Security price
10.00
0.00 Sep '17 Jan '18 May '18 Sep '18 Jan '19 May '19 Date
1. 07/05/2017 Buy, Target Price Change AUD 27.50 Paul-D Young** 9. 09/10/2018 Downgraded to Hold, Target Price Change AUD 34.50 James Gurry 2. 08/22/2017 Buy, Target Price Change AUD 28.00 Paul-D Young** 10. 10/02/2018 Hold, Target Price Change AUD 36.00 James Gurry 3. 10/06/2017 Buy, Target Price Change AUD 28.50 Paul-D Young** 11. 01/08/2019 Downgraded to Sell, Target Price Change AUD 29.60 James Gurry 4. 10/12/2017 Buy, Target Price Change AUD 29.50 Paul-D Young** 12. 01/16/2019 Sell, Target Price Change AUD 28.20 James Gurry 5. 01/15/2018 Buy, Target Price Change AUD 34.50 Paul-D Young** 13. 01/22/2019 Sell, Target Price Change AUD 28.00 James Gurry 6. 02/20/2018 Downgraded to Hold, Target Price Change AUD 31.50 14. 01/31/2019 Sell, Target Price Change AUD 28.30 James Gurry Paul-D Young** 7. 04/10/2018 Upgraded to Buy, Target Price Change AUD 32.00 Paul- 15. 04/09/2019 Sell, Target Price Change AUD 28.80 James Gurry D Young** 8. 07/12/2018 Buy, Target Price Change AUD 36.00 Liam Fitzpatrick 16. 04/17/2019 Sell, Target Price Change AUD 28.00 James Gurry §§§§$$$$$§§§§§
Deutsche Bank AG/Sydney Page 43 3 July 2019 M&M - Diversified Resources Australian Mining
Historical recommendations and target price: Fortescue Metals (FMG.AX) (as of 07/01/2019) 12.50 Current Recommendations Buy Hold 10.00 Sell Not Rated Suspended Rating 14 7.50 ** Analyst is no longer at Deutsche Bank 13 4 1 2 3 12 5.00 56 7 910 11 Security price 8
2.50
0.00 Sep '17 Jan '18 May '18 Sep '18 Jan '19 May '19 Date
1. 07/27/2017 Hold, Target Price Change AUD 5.50 Paul-D Young** 8. 09/10/2018 Downgraded to Sell, Target Price Change AUD 3.70 James Gurry 2. 10/06/2017 Hold, Target Price Change AUD 5.00 Paul-D Young** 9. 10/02/2018 Sell, Target Price Change AUD 4.00 James Gurry 3. 10/26/2017 Hold, Target Price Change AUD 4.70 Paul-D Young** 10. 10/15/2018 Sell, Target Price Change AUD 3.80 James Gurry 4. 01/15/2018 Hold, Target Price Change AUD 5.00 Paul-D Young** 11. 10/31/2018 Sell, Target Price Change AUD 3.70 James Gurry 5. 04/03/2018 Upgraded to Buy, Target Price Change AUD 5.50 Paul- 12. 01/08/2019 Sell, Target Price Change AUD 3.30 James Gurry D Young** 6. 04/11/2018 Buy, Target Price Change AUD 5.70 Paul-D Young** 13. 01/31/2019 Sell, Target Price Change AUD 4.90 James Gurry 7. 07/12/2018 Buy, Target Price Change AUD 5.80 Tim Hoff** 14. 04/01/2019 Upgraded to Hold, Target Price Change AUD 7.70 James Gurry §§§§$$$$$§§§§§
Page 44 Deutsche Bank AG/Sydney 3 July 2019 M&M - Diversified Resources Australian Mining
Historical recommendations and target price: Rio Tinto (RIO.AX) (as of 07/01/2019) 125.00 Current Recommendations Buy 14 Hold 100.00 Sell Not Rated 13 9 Suspended Rating 5 12 6 78 11 4 10 75.00 1 23 ** Analyst is no longer at Deutsche Bank
50.00 Security price
25.00
0.00 Sep '17 Jan '18 May '18 Sep '18 Jan '19 May '19 Date
1. 09/12/2017 Buy, Target Price Change AUD 75.00 Paul-D Young** 8. 04/18/2018 Buy, Target Price Change AUD 89.00 Matthew Greene** 2. 10/06/2017 Buy, Target Price Change AUD 77.00 Paul-D Young** 9. 06/11/2018 Downgraded to Hold, Target Price Change AUD 89.00 Liam Fitzpatrick 3. 10/12/2017 Buy, Target Price Change AUD 80.00 Paul-D Young** 10. 09/10/2018 Hold, Target Price Change AUD 78.00 James Gurry 4. 12/04/2017 Buy, Target Price Change AUD 79.00 Paul-D Young** 11. 10/02/2018 Hold, Target Price Change AUD 84.00 James Gurry 5. 01/15/2018 Buy, Target Price Change AUD 83.50 Paul-D Young** 12. 01/08/2019 Hold, Target Price Change AUD 80.00 James Gurry 6. 02/08/2018 Buy, Target Price Change AUD 84.00 Paul-D Young** 13. 01/31/2019 Hold, Target Price Change AUD 82.50 James Gurry 7. 04/11/2018 Buy, Target Price Change AUD 86.00 Paul-D Young** 14. 04/09/2019 Hold, Target Price Change AUD 89.80 James Gurry §§§§$$$$$§§§§§
Deutsche Bank AG/Sydney Page 45 3 July 2019 M&M - Diversified Resources Australian Mining
Historical recommendations and target price: South32 (S32.AX) (as of 07/01/2019) 5.00 Current Recommendations Buy Hold 5 11 Sell 4.00 8 14 4 6 9 Not Rated 10 13 7 12 Suspended Rating 3 16 2 15 1 3.00 ** Analyst is no longer at Deutsche Bank
2.00 Security price
1.00
0.00 Sep '17 Jan '18 May '18 Sep '18 Jan '19 May '19 Date
1. 08/31/2017 Hold, Target Price Change AUD 2.75 Paul-D Young** 9. 07/12/2018 Hold, Target Price Change AUD 3.80 Patrick Jones** 2. 09/12/2017 Hold, Target Price Change AUD 2.90 Paul-D Young** 10. 09/10/2018 Upgraded to Buy, Target Price Change AUD 4.10 James Gurry 3. 10/19/2017 Hold, Target Price Change AUD 2.85 Paul-D Young** 11. 10/02/2018 Buy, Target Price Change AUD 4.40 James Gurry 4. 11/06/2017 Downgraded to Sell, Target Price Change AUD 2.80 12. 01/08/2019 Buy, Target Price Change AUD 4.20 James Gurry Paul-D Young** 5. 01/15/2018 Sell, Target Price Change AUD 3.10 Paul-D Young** 13. 01/17/2019 Buy, Target Price Change AUD 4.15 James Gurry 6. 02/15/2018 Sell, Target Price Change AUD 3.00 Paul-D Young** 14. 04/09/2019 Buy, Target Price Change AUD 4.30 James Gurry 7. 04/11/2018 Sell, Target Price Change AUD 3.10 Paul-D Young** 15. 06/18/2019 Buy, Target Price Change AUD 4.20 James Gurry 8. 04/18/2018 Upgraded to Hold, Target Price Change AUD 3.40 Paul- 16. 06/27/2019 Buy, Target Price Change AUD 4.10 James Gurry D Young** §§§§$$$$$§§§§§
Page 46 Deutsche Bank AG/Sydney 3 July 2019 M&M - Diversified Resources Australian Mining
Historical recommendations and target price: Whitehaven Coal (WHC.AX) (as of 07/01/2019) 8.00 Current Recommendations Buy Hold Sell 6.00 6 Not Rated 7 9 Suspended Rating 10 45 8 11 12 ** Analyst is no longer at 3 13 Deutsche Bank 4.00 2 1514 1 Security price
2.00
0.00 Sep '17 Jan '18 May '18 Sep '18 Jan '19 May '19 Date
1. 08/17/2017 Hold, Target Price Change AUD 2.60 Paul-D Young** 9. 10/02/2018 Buy, Target Price Change AUD 6.00 James Gurry 2. 08/31/2017 Hold, Target Price Change AUD 3.60 Paul-D Young** 10. 11/08/2018 Buy, Target Price Change AUD 6.20 James Gurry 3. 10/12/2017 Hold, Target Price Change AUD 3.50 Paul-D Young** 11. 01/08/2019 Buy, Target Price Change AUD 5.50 James Gurry 4. 01/15/2018 Hold, Target Price Change AUD 4.40 Paul-D Young** 12. 02/15/2019 Buy, Target Price Change AUD 5.20 James Gurry 5. 01/18/2018 Hold, Target Price Change AUD 4.10 Paul-D Young** 13. 04/09/2019 Buy, Target Price Change AUD 5.10 James Gurry 6. 07/12/2018 Hold, Target Price Change AUD 5.30 Tim Hoff** 14. 06/16/2019 Buy, Target Price Change AUD 4.80 James Gurry 7. 07/25/2018 Hold, Target Price Change AUD 5.40 Tim Hoff** 15. 06/17/2019 Buy, Target Price Change AUD 5.00 James Gurry 8. 09/10/2018 Upgraded to Buy, Target Price Change AUD 5.70 James Gurry §§§§$$$$$§§§§§
Equity Rating Key Equity rating dispersion and banking relationships
Buy: Based on a current 12- month view of total share-holder return (TSR = percentage change in share price from current price to projected target price plus pro-jected dividend yield ) , we recommend that investors buy the stock. Sell: Based on a current 12-month view of total share-holder return, we recommend that investors sell the stock. Hold: We take a neutral view on the stock 12-months out and, based on this time horizon, do not recommend either a Buy or Sell.
Newly issued research recommendations and target prices supersede previously published research.
Deutsche Bank AG/Sydney Page 47 3 July 2019 M&M - Diversified Resources Australian Mining
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Deutsche Bank AG/Sydney Page 51 David Folkerts-Landau Group Chief Economist and Global Head of Research
Pam Finelli Michael Spencer Steve Pollard Global Chief Operating Officer Head of APAC Research Head of Americas Research Research Global Head of Equity Research
Anthony Klarman Kinner Lakhani Joe Liew Global Head of Head of EMEA Head of APAC Debt Research Equity Research Equity Research
Jim Reid Francis Yared George Saravelos Peter Hooper Global Head of Global Head of Rates Research Head of FX Research Global Head of Thematic Research Economic Research
Andreas Neubauer Spyros Mesomeris Head of Germany Research Global Head of Quantitative and QIS Research
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