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BHP Billiton Base Metals BHP Billiton Base Metals CSG Briefing 13 October 2004 Disclaimer The views expressed here contain information derived from publicly available sources that have not been independently verified. No representation or warranty is made as to the accuracy, completeness or reliability of the information. Any forward looking information in this presentation has been prepared on the basis of a number of assumptions which may prove to be incorrect. This presentation should not be relied upon as a recommendation or forecast by BHP Billiton. Nothing in this release should be construed as either an offer to sell or a solicitation of an offer to buy or sell shares in any jurisdiction. Page No 2 Agenda Introduction and Strategy Diego Hernandez, President Financial Overview Glenn Kellow, VP & CFO Market Overview John Crofts, Marketing Director Operations Diego Hernandez, President Ian Ashby, VP & Chief Operating Officer Growth Diego Hernandez , President Question and Answer Page No 3 Purpose of Today’s Briefing • Summary of key messages to close • An update on the CSG’s performance • To discuss some of the key issues facing the CSG and the industry • To demonstrate our continuous optimisation of the existing asset base • To highlight our value enhancing organic growth projects, helping to meet increased global demand for our commodities Page No 4 BHP Billiton Base Metals Base Metals M arketing, The Hague M arketing presence in Shanghai, Tokyo and Seoul Resolution Project, Arizona Antamina, Peru Cerro Colorado Chile Tintaya, Peru Cannington, Escondida, Chile Spence Project, Chile Australia CSG Head Office Page No 5 Santiago, Chile Strategic focus Base Metals’ mission is to create value for BHP Billiton shareholders through its exposure to the base metals value chain. The clear strategy is to create a demand-focused, low cost production base with a bias towards efficient open cut mining and direct leaching technologies. Numerous Due Diligence and evaluations completed Divestment HVC & Robinson FY 2004 M&A Achievements Bolt-on Acq. Resolution JV Ongoing exploration effort ACL Pilot Start Up (45%) Growth Pipeline Norte Execution Sulphide Leach Approved CPR Spence Feasibility Six Sigma Freight management Savings and Effici encies $45M EBIT $32M EBIT benefits AES Norgener Power benefits Renegotiation Annual record tonnes to Record Production pad Low Cost, High Quality Assets Antamina Labour agreements at all Cerro Colorado assets completed Record Production Record Production Tintaya Sulphide Cannington Escondida Operations Restarted Production records in mine rates, Annual Mine, Mill Mine rate, Concentr ators mill rates and annual oxide production & concentrate rate, mine production and Page No 6 production shipped oxide annual production Aug-0 4 Ju l-0 4 Ju n-0 4 May-0 4 Apr-04 Mar-04 Fe b-0 4 Jan -04 Dec -03 No v-03 Oc t-03 CIFR Contractor Sep-03 Aug-0 3 NO PROJECTS NO Ju l-0 3 Ju n-0 3 May-0 3 Employee CIFR Apr-03 CIF employee employee CIF contractor / 12M Rolling Avg Avg 12M Rolling Mar-03 Fe b-0 3 Jan -03 Dec -02 Combined CIFR No v-02 Oc t-02 Sep-02 Aug-0 2 Ju l-0 2 6 5 4 3 HSEC Harm operate. valuedMetals as a good to aims be corporate citizen each ofin the communitieswe which in operate • Base Metals is committed to Zero Zero to • committed is Metals Base • Environment – to license our • Community – Base Billiton BHP Page No 7 No Page Production (BHP Billiton Share - payable) Copper Production Silver Production 45 1,200 Concentrate Cathode 1,000 40 800 s s 600 000 tonne 000 400 35 million ounce million 200 0 30 FY2002 FY2003 FY2004 FY2002 FY2003 FY2004 Lead Production Zinc Production 260 250 250 200 240 150 230 100 000 tonnes 000 tonnes 220 50 210 200 0 FY2002 FY2003 FY2004 FY2002 FY2003 FY2004 Page No 8 BHP Billiton’s ranking in base metals mine pr Top Copper Miners - 2003 1 800 s 1 600 1 400 1 200 1 000 800 600 Attributable400 mine prod. - '000 tonne 200 0 Code lco Top Silver Miners – 2003 Phel ps Dodge 60 BHP Billiton 50 Rio Tinto 40 30 Grupo Mexico 20 Top Lead Miners- 2003 Page No 9 30 0 Attributable mine prod. - Mozs 10 25 0 0 20 0 oduction Penoles 15 0 10 0 BHP Billiton Attributable50 mine prod. - '000 tonnes KGHM Polska Miedz 0 Rio T into Doe Run Grupo Mexic o BHP Billiton Top Zinc Miners - 2003 80 0 MI M (Xstrat a) 70 0 o 60 0 Teck C mi nco 50 0 Pasminco 40 0 30 0 20 0 Attributable mine prod. - '000 tonnes 10 0 0 Zi n afex Teck C ominco Nor anda Hindustan Z inc Anglo American Volcan Gl encor e BHPBilliton Penoles Boliden Data: CRU Calendar Years Competitive Position Unit Costs - 2004 (all Data from and copyright Brook Hunt) C1 Pro-rata Costing (1) (1) Assumes by-products share costs Page No 10 Key Issues •Market – Demand – China is the key growth market – Supply – Reactivation of shuttered capacity and new mine development – Base metals’ prices, TC/RC’s and freight • Royalties – Escondida the largest single first category tax payer in Chile – over US$2B paid in first 14 years of operations –Peru • Chile – gas and power status Page No 11 Finance Glenn Kellow Base Metals CSG EBIT Summary by Asset (pre-exceptionals) FY2004 FY2003 Variance $US m % EBIT ($US millions) Escondida 808 217 591 272% Tintaya 75 (30) 105 Cerro Colorado 82 28 54 193% Antamina 103 34 69 203% Alumbrera 0 40 (40) Cannington 171 92 79 86% Highland Valley Copper 7 (3) 10 Other Businesses (90) (92) 2 Total CSG (pre-exceptionals) 1,156 286 870 304% Page No 13 EBIT Variances – FY03 to FY04 EBIT Variances 1,500 881 (103) 45 (17) (19) (5) (36) 1156 1,200 900 600 124 $US Millions 286 300 0 FY03 EBIT Volume Price/ Exch Infl Six Sigma Grade Costs Expl. Ceased/ FY04 TCRCs Sold/ EB IT Other Page No 14 EBIT Sensitivity (FY05) EBIT Sensitivities Commodity Prices $US m illions 1 cent change in Copper Price 22 10 cent change in Silver Price 4 1 c change in Zinc Price 2 Exchange Rates 1 cent change in $A rate 2 10 peso movement in CHP rate 6 Copper Price and Chilean Peso Comparison FY02 FY03 FY04 Realised Copper Price ($US/lb.) 0.69 0.73 1.14 Average Chilean Peso Exchange Rate 672 719 634 Page No 15 EBIT Comparison – Base Metals CSG EBIT and Copper Price Revenue by Commodity 4,000 Copper Silver Lead Zi n c Gold 1500 EBIT Copper Price $1.20 1156 $1.00 3,000 1000 $0.80 2,000 $0.60 500 $0.40 millions $US 1,000 $US millions $US 286 198 $0.20 Realized$US/lb. Price 0 $0.00 0 FY02 FY03 FY04 FY2002 FY2003 FY2004 Cash Flow and Capex EBIT ROC Free Cash Flow before Tax Capital Expenditure 35% 1200 30% 900 25% 600 20% 300 15% 0 millions $US 10% $US millions$US -300 5% -600 0% FY2002 FY2003 FY2004 FY2002FY2003FY2004 Page No 16 Investing in Profitable Future Growth Base Metals Forecast Major Projects Capex (Escondida Norte, Escondida Sulphide Leach, Spence) 900.0 800.0 700.0 600.0 500.0 US$M 400.0 300.0 200.0 100.0 - FY 2004 FY 2005 FY 2006 FY 2007 Actual Budget Forecast Forecast Page No 17 Southwest Copper During FY04, a charge was taken against profit of $425 million, in order to provide for: • higher capital closure costs • expected ongoing costs (overheads and water management) which were previously expensed Page No 18 Marketing John Crofts World refined copper production and BHP Billiton managed sales by region World refined copper production by type BHP Billiton Cu Concs sales by region (Total production in CY04 = 16 Mt) Secondary China 13% Japan 11% Other SXEW Primary refined 21% (Integrated) Asia 17% 14% 44% Americas Includes all Cu Primary refined 25% Europe Concs marketed (Custom) 29% for Escondida, 26% Tintaya, Antamina agency, BMAG BHP Billiton attributable copper production BHP Billiton copper cathode sales by region (Total output in FY04 = 0.95 Mt ) Americas China Cathode 16% 16% 27% Other Copper-in-Concentrates Asia Europe Includes all Cu (payable) 37% 31% cathodes marketed 73% for Escondida, Tintaya, BM AG Page No 20 Copper’s intensity of use has recovered from the shocks of the 1970s World Copper Consumption and GDP Per Capita …The growth of 1950-2003 China’s economy, and 130 Emerging Market economic expansion in other growth. China’s 2000 industrialisation gathers pace 120 emerging markets are Post-WWII emergence and growth of Japan. US and responsible. Despite 1979 110 European consumer booms 1973 1997 unpredictable major 1990 global economic 100 1966 shocks, copper 1982 2003 90 1993 2.5 kg Cu per per son intensity of GDP shows a strong, 80 persistent upward 1955 1973 and 1979 Oil Price Shocks Collapse of Soviet trend 70 and 1982 Inflationary Recession central economy and Major focus on reduced unit use 1993 recession of metals, including copper Metal Intensity Per Capita (1985=100) Note: A steeper slope repr esents 60 a stronger rise in use of copper in 1950 relation to economic activity – a 50 1.2 kg Cu per per son gentle slope indicates lower ‘intensity of use’ y = 0.6038x + 42.324 R2 = 0.8502 40 40 50 60 70 80 90 100 110 120 130 140 US$GDP(1995) Per Capita (1985=100) Page No 21 China accounts for more than 20% of world refined copper demand Refined Copper Consumption, 1950-2004, ('000 tonnes) 18000 16000 World demand – back to …Asia now accounts for 14000 “normal” after the Oil approx.
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