10 March 2011 Asia Pacific/Australia Equity Research CREDIT SUISSE Diversified Metals & Mining
BHP Billiton Limited (BHP.AX/BHPAU) Rating NEUTRAL* 0 ; i°NCREASE.TA.RGET PRICE ~- ...... Price (09 Mar 11, A$) 46.00 '-.L ~ 7" - • •-- - ~ ~ - -- • - - I ...... - - - - • Target price (A$) (from 52.50) 55.00' Market cap. (A$mn) 254,612.82 Filling the capex pipeline Yr avg. mthly trading (US$mn) 12,691 Last month's trading (US$mn) 14,273 Projected return: • BHP recently guided to US$80bn in growth capex between now and FY15. Capital gain (%) 19.6 In this note we have modelled the growth projects we expect to be approved in Gross yield (%) 3.2 the next 12-24 months to identify the value add. In line with BHP's long-term Total return (%) 22.8 basin-growth strategy a number of the projects we have assessed have a 52-week price range (A$) 47.36 - 36.28 • Stock ratings ate ,e/ativeto the televantcountry benchmark. modest NPV impact at initial production rates but open up long-term brownfield 'Targetprice is for 12 months expansion options (that are potentially very high returning). Target prices increased to A$55/GB£31.5 (from A$52.5/GB£30) in line with higher Research Analysts valuation. We retain a NEUTRAL investment rating. Paul McTaggart 61 2 8205 4698 • The growth projects we now incorporate have added 7% or ~US$17bn [email protected] to our valuation. The contributions to the net increase in valuation are: Met James Gurry coal projects: US$5bn, Escondida OPG1 and OGP2 US$4bn, Jansen 61 2 8205 4779 [email protected] Potash US$1.7bn, Olympic Dam Expansion Stage 1: US$4bn. Michael Shillaker • Minor forecast changes: We have added the shale gas acquisition (nil EPS 44 20 7888 1344 accretion at initial production rates), increased capex spend in FY12 and FY13 [email protected] capex to US$20bn and US$19bn respectively (from US$16bn and US$12bn). Liam Fitzpatrick Changes to earnings changes are minor: -1% in FY11, -1% in FY12 and -0.5% 44 20 7883 8350 [email protected] in FY13. The first production from the new growth projects we have modelled is
Specialist sales: Julian McCormack FY13 with the bulk of new production commencing in FY16 and FY17. +612 8205 4419 • Investment case is attractive: BHPB trades on attractive forward multiples, [email protected] is investing significantly in its future production growth and is actively Specialist sales: James McGeoch returning cash to shareholders. Our target price of A$55/GB£31.5 share +44 20 7888 0751 [email protected] imply attractive shareholder returns. • Catalysts: A series of significant capex announcements over next 12-24 months. Other: A$5bn Ltd off-market buyback pricing period ends 8-April. • Valuation: We set our target price of A$55/GB£31.5 in line with our discounted cash flow (DCF) sum-of-parts (SOP) valuation. Share price performance Financial and valuation metrics Year 06/10A 06/11E 06/12E 06/13E -Price (LHS) - RebasedRel (RHS) Revenue (US$mn) 48,721.0 67,119.5 74,271.8 68,273.3 EBITDA (US$mn) 24,513.0 39,185.4 47,910.8 42,444.9 EBIT (US$mn) 19,719.0 34,502.0 42,699.2 36,609.2 :~:: Net income (US$mn) 12,469.0 23,798.7 29,036.9 24,959.1 EPS (CS adj.) (USc) 222.86 428.54 539.15 472.82 Ma--09 Jul-09 Nov-09 Ma--10 Ju~10 Na,-10 ~=M Change from previous EPS (%) n.a. -0.72 -0.98 -0.50 Theprice telative chart measurespelformance against the Consensus EPS (USc) n.a. 406.10 477.40 475.10 AustraliaS&P/ASX 200 index which dosed at 4767.Bon EPS growth (%) 16.4 92.3 25.8 -12.3 09/0J/11 P/E (x) 20.9 10.9 8.7 9.9 On 09/0J/11 the spot exchangerate was A$ 99/US$1 Dividend (USc) 86.00 96.00 107.50 112.88 Performance Over 1M 3M 12M Dividend yield(%) 1.8 2.1 2.3 2.4 Absolute (%) -1.6 1.2 6.0 P/B (x) 5.4 4.1 3.2 2.5 Relative(%) 1.2 0.7 7.1 Net debVeguity (%) 6.7 1.5 net cash net cash Source:Company data, ASX. Credit Suisseestimates, • Adj. for goodwill,notionalinterest and unusualitems. Re/allvePIE against ASX'S&P200based on pre GW in AUD. CompanyPE ca/cu/allonis based on displayedEPS Currency
DISCLOSURE APPENDIX CONTAINS ANALYST CERTIFICATIONS AND THE STATUS OF NON-US ANALYSTS. U.S. Disclosure: Credit Suisse does and seeks to do business with companies covered in its research reports. As a result, 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. CREDIT SUISSE 1 0 March 2011
Figure 1: Financial Summa~ In USDmn, unless olherwise stated Year ending 30 Jun Share Price: 46.00 Profit& Loss 2009A 2010A 2011F 2012F 2013F Financial Summary 2009A 2010A 2011F 2012F 2013F Sales revenue 50,800 48,721 67,119 74,272 68,273 Reported NPAT mn 5,877 12,722 23,623 29,037 24,959 EBITDA 22,085 24,513 39,185 47,911 42,445 Credit Suisse NPAT mn 10,722 12,469 23,799 29,037 24,959 Depr. & Amort. 3,871 4,794 4,683 5,212 5,836 Credit Suisse EPS C 192 223 429 539 473 Goodwill amort. EPS growth % 16.4 92.3 25.8 -12.3 EBIT 18,214 19,719 34,502 42,699 36,609 P/E X 24.2 20.8 10.8 8.6 9.8 Associates P/Eamings Growth X 1.3 0.1 0.3 nm Net interest 543 459 528 55 - 46 Reported PBT 12,826 19,513 33,798 42,644 36,655 Dividend payout ratio % 42.8 38.6 22.4 19.9 23.9 Income tax 6,488 6,504 9,508 12,793 10,997 DPS C 82.0 86.0 96.0 107.5 112.9 Profit after tax 11,183 12,756 24,466 29,851 25,659 Yield % 1.8 1.9 2.1 2.3 2.4 Minorities 461 287 667 814 700 Franking % 100.0 100.0 100.0 100.0 100.0 Preferred dividends NonmallzedNPAT 10,722 12,469 23,799 29,037 24,959 Operating CFPS C 337 320 559 655 577 Adjustments -4,845 253 -176 0 0 P/OCF X 13.8 14.5 8.3 7.1 8.1 Reported NPAT 5,877 12,722 23,623 29,037 24,959 EV/EBITDA X 11.0 9.9 6.2 5.1 5.7 FCF lield % 6.5 6.2 11.3 13.1 11.3 Balance Sheet Financial Ratios Cash & equivalents 10,833 12,456 13,250 11,842 15,256 ProfltabllltyRatios Inventories 4,821 5,334 5,620 5,620 5,620 EBITDA margin % 43.5 50.3 58.4 64.5 62.2 Receivables 5,153 6,543 7,876 7,876 7,876 EBIT margin % 35.9 40.5 51.4 57.5 53.6 Other current assets 1,679 801 926 926 926 Return on equity % 26.8 25 7 383 37 8 26.0 Cunrent assets 22,486 25,134 27,672 26,264 29,678 Returnon assets % 136 140 22 5 24 5 18.4 Property, plant & equip 49,032 55,576 69,493 83,921 97,162 ROIC % 26 0 25 7 40 2 397 28.8 Intangibles 1,059 687 778 778 778 Effective tax rate % 506 33 3 28.1 300 30.0 Other non-current assets 6,193 7,455 7,742 7,742 7,742 Non.currant assets 56,284 63,718 78,013 92,441 105,682 Balance Sheet Ratios Total assets 78,770 88,852 105,686 118,704 135,361 Net debt mn 5,586 3309 946 -146 -5,560 Payables 5,619 6,467 6,743 6,743 6,743 Net debVEquity % 13 7 6.7 15 -02 -5.7 lnte'\!st bearing debt 16,419 15,765 14,196 11,696 9,696 Net debVCapital % 121 63 15 -02 -6.0 Other liabilities 16,021 17,292 21,444 21,662 20,618 Interestcover 33 5 43 0 65 3 778 0 -791.1 Total llabllltles 38,059 39,524 42,383 40,101 37,057 Capex/Sales % 18.4 20 0 186 25 2 26.4 Net assets 40,711 49,328 63,302 78,603 98,304 Capex/Depn % 241 2 205 2 2665 358 4 309.4 Ordinary equity 39,954 48,525 62,134 76,821 96,022 Working capital/Sales % 1.4 -2 2 -2.0 00 0.0 Minority interests 757 803 1,168 1,782 2,282 Preferred capital Share Items Total shareholderfunds 40.711 49,328 63,302 78,603 98,304 Eguiv FPO (~riod avs ) mn 5,598 0 5,595 0 5,553 5 5,385 6 5,278.8 Cashflow Share Price Performance 52wk range: 36.28-47 .36 EBIT 18,214 19,719 34,502 42,699 36,609 7000 Net interest -314 -421 0 0 0 Depr&Amort 3,871 4,794 4,683 5,212 5,836 60.00 Tax paid -5,129 -4,379 -5,234 -11,318 -10,960 Wor1 Source: Company data, Credit Suisse estimates BHP Billiton Limited (BHP.AX/ BHP AU) 2 CREDIT SUISSE 1O March 2011 Capex pipeline BHP Billiton is guiding to US$80bn of capex over the five years to end FY15. We have reviewed the project outlook to estimate where the US$80bn shall be spent and we can account for $68billion. Figure 2: BHP Billiton capex guidance FY11-FY15 l\ianganese SSM f;;norgy Coal Alun 11um D&SP Me1AllurgIcaI C-Ofll Polmlour:n lmnOw o+--..---1...-,------~------.. Future Execution O;hel' Growth Total Sp€!1id 0pl;l0m;. C1;1pox FY 11 t.Q~Y1 ~ Source: Company releases The largest valuation additions from the growth projects we have now added to our forecasts are in base metals and met coal. Our new BHP valuation is US$48.5/share. F'Iqure 3 : BHP va Iua f I0n Valuation summary Starting valuation Growth project additions New valuation NPV(US$'m) US$/share NPV(US$'m) US$/share NPV(US$'m) USS/share Petroleum 53,567 10.3 -1,000 0.19 54,567 10.4 Aluminium 7,445 1.4 - - 7,445 1.4 Base Metals 50,728 9.7 -8,000 1.53 58,728 11.2 Iron ore 62,716 12.0 -1,100 0.21 63,816 12.2 Manganese 6,332 1.2 - - 6,332 1.2 Metallurgical Coal 23,033 4.4 -5,000 0.96 28,033 5.4 Diamonds & Specialty 5,584 1.1 -1,700 0.33 7,284 1.4 Energy Coal 19,915 3.8 - - 19,915 3.8 Stainless Steel Materials 7,860 1.5 - - 7,860 1.5 Group and unallocated items -440 -0.1 - - -440 -0.1 Total 236,739 45.4 16,800 3.15 253,539 48.5 Net debt (cash) -200 - - - -200 -0.04 BHP DCF valuation 236,939 45.4 16,800 3.15 253,739 48.6 Source: Credit Suisse estimates BHP Billiton Limited (BHP.AX/ BHP AU) 3 CREDIT SUISSE 10 March 2011 The law of diminishing returns ... Before considering each growth option and what it might add to our BHP valuation we should take a check of our starting position and ponder what sort of project BHP needs to invest in to make a meaningful difference to its current valuation. Our starting base before adding any of the expected growth projects is an equity valuation of US$236bn or US$46 per share. To add 5% to our valuation BHP needs to invest in projects that we assess to have a NPV of ~US$12bn or greater (remembering this is after development capex). Figure 4: NPV of value adding projects needed to materially increase BHP valuation Incremental value to NPV needed from project BHP valuation be added from a US$mn US$/share US$mn USS/share new project 236,054 45.1 5% 11,803 2.3 247,857 47.4 7.50% 18,589 3.6 254,643 48.7 10% 26,645 5.1 262,699 50.2 15% 43,964 8.4 280,018 53.5 Source: Credit Suisse estimates Projects that generate an NPV of US$12bn require a significant capital investment and a resource body that would support such a large NPV is by definition large and rare. Let's consider a generic commodity project taking iron ore as an example: Figure 5: Generic project returns (using greenfield iron ore Australia as an example) Input: Output: Total capex (US$mn) 7,500 IRR: 11.8% Capex per tonne installed capacity (US$/t) 150 Installed capacity (mtpa) 50 NPV at 5.0% disc rate US$mn 7,779 Life of project (years) 30 NPV at 7.5% disc rate US$mn 3,887 Resource size (mt) 1,500 NPV at 10.0% disc rate US$mn 1,519 Operating cost per unit of production (US$/t): 30.0 NPV at 12.0% disc rate US$mn 278 Royalty rate(% on revenue) 5.7% Long term iron ore price (US$/t FOB Australia) 70.0 Payback period (years) 7 Company income tax rate (allows for future increases) 33.0% Source: Company data, Credit Suisse estimates This 50mtpa iron ore project would have an NPV of only US$1.5bn at a 10% discount rate. To generate a US$12bn NPV and increase the BHP valuation by 5% the project metrics (for a 30 year life) would have to increase significantly to 150mtpa of iron ore output, have a 4.5bn tonne resource and development capex of US$22bn. That's the problem for BHP investors - any project that meaningfully moves the dial needs to be very large indeed I BHP Billiton Limited (BHP.AX/ BHP AU) 4 CREDIT SUISSE 10 March 2011 BHP's imminent growth options We are all familiar with BHP's "bubble chart" of growth options. With high commod ity prices and surplus capital we expect BHP to be giving final approval to a number of these in the next 12- 24 months. Figure 6: BHPB Billiton future growth options Future options 1 Feas bilk ~ El(e<:ution ~ - 0:!lff ~·~ C SG • P6oltull 04SP 0 Jia,,t",.,-a Um.,.,~ Source: BHP Billiton presentation 16-Feb-2011 The projects we expect to be approved are: • HPX3 Queensland Coal Port expansion (Met coal); • Daunia (Met coal); • Caval Ridge (Met coal); • RGP6 (and scope change to RGP5) and first stages for Port Headland Outer Harbour (Iron ore Western Australia); • Samarco P4P Expansion project (Iron Ore Brazil) • Escondida high grade ore access and Organic Growth Project 1 (Base metals); • Olympic Dam open pit pre-strip and first production (Base metals); • Jansen Potash Project (Diamonds and Specialty Products). BHP Billiton Limited (BHP.AX/ BHP AU) 5 CREDIT SUISSE 1O March 2011 Figure 7: Growth eroject summa~: Capex (US$mn) BHP Production at 100% Expected construction Prod Incremental value Division Project Total BHP interest level start (calendar year) start added to DCF 100% share 4mtpa of premium hard Met coal Daunia 50% 750 2,250 coking coal 2H 2011 2H 2012 -US$1.5bn 5.5mtpa of premium Caval Ridge 50% 4,500 2,250 hard coking coal 1H2012. 2H 2013 ~US$3.5bn Project facilitates Dredging already 11 mtpa of incremental Daunia, Caval Ridge Hay Point 50% 1,000 500 underway. General 2013 port capacity and future met coal construction from 2H 2011 ex ansions. Increase total Base concentrator capacity to H Min(m~I -_consid_ered Escondida OGP1 57.5% 1,500 863 1 H 2012 1 2015 metals 100mtpa from 82mtpa. optImIsatIon proJect. Increase total Escondida OGP2 57.5% 4,000 2,300 concentrator capacity to 1 H 2013 2H 2016 ~US$4bn 150mtpa from 1OOmtpa. Pre strip to begin: Olympic Dam 20mtpa ore 2H 2011. 100% 2,100 2,100 2H 2016 -US$4bn Phase 1 (phase 2 40mtpa, Ore production from : ehase 3 60mtea) 2H 2012 Adding 35mtpa for total Iron Ore RGP6 -85% 3,500 2,980 2H 2011 2H 2013 (already included in WA capacity 240mtpa base valuation) Samarco 50% 1,500 750 30.Smtpa pellets 2H 2011 1 H 2013 US$1.1bn Pre final approval work Greenfield development has begun. Expect full Potash Jansen - Phase 1 100% 4,000 4,000 1H 2015 US$850mn to 2mtpa . scope development from 2H 2011. US$1. 7bn in total for Jansen - Phase 2 100% 3,000 3,000 Expand to 4mtpa . 1 H 2016 2H 2018 Phase 1+2. From 415MMcf/day to US$1bn Petroleum Fayett~ Shale - 100% 4,000 4,000 1 H 2011 1 H 2014 production growth 750MMcf/day TOTAL $23.Sbn $19.Bbn US$17bn Source: Company data, Credit Suisse estimates We have excluded the Western Australia Iron ore Port Hedland Outer Harbour project from the analysis as project costs are unknown (they could be as large as US$150- US$200 per tonne) and we believe that only the dredging work and initial construction are the only capex items likely to be spent before FY15. BHP Billiton Limited (BHP.AX/ BHP AU) 6 CREDIT SUISSE 1O March 2011 Met Coal Figure 8: BHP Billiton's met coal position FY09 MH:.ur9'd, lndiRwcl & lnl'erre-d Resaurcef.11fcJ 12 Re5ource-life (ye.irsJ~Xal Source: BHP presentation 10-Feb-2010, Notes: (a) Bubble size depicts relative coal resource size on a 100% basis. (b) 'Resource Life' is indicative only. (c) The resource and reserve information in this slide was compiled from the BHP Billiton 2009 Annual Report. Daunia Project Project Description The Daunia mine, part of BMA, is to be a multi-seam open cut coal mine, planned for the northern Bowen basin in Queensland. The mine is expected to produce semi-hard coking coal and PCI coal with a coal handling and preparation plant at the site. The coal will be transported by rail to Hay Point Coal Terminal. Operational expenditure for the project will be A$200mn-$250mn p.a. based on the estimated project life of 21 years. Development Stage Daunia mine received the environmental approval (EIS approval) in November 2009 and Commonwealth Approval in December 2009. The construction is expected to take 18-24 months once approved (we expect approval later this calendar year). Production capacity Estimated to be 4mtpa with total production of 85mt over 21 years. On an average the production will be 60% hard coking coal and 40% PCI. BHP Billiton Limited (BHP.AX/ BHP AU) 7 CREDIT SUISSE 1O March 2011 Capex An initial capital investment of US$625mn but we model $750mn to allow for development cost inflation since 2008. Key catalysts • Environmental Approval (EA) from the Department of Environment and Resource Management (DERM); • Construction of a new airport to replace the existing Moranbah airport facility; • Commencement of Construction. How we have modelled it: • Assume approval in 1H or early 2H CY2011. • 18- to 24-month development phase with first production Dec-2012 half of 1mt ramping to full production of 2mt by Dec-2013. BHP share is 50%. • Total capex of $750mn, a 20% increase on the $625mn estimate from a couple of years ago and equating to $187 per tonne of annual production . • Based on the estimated annual running costs of ~$250mn the cost per tonne is expected to be ~$63/t. What will It add to our forecasts? • Adds 5% to attributable met coal production and increases met coal valuation by ~$1.5bn. Caval Ridge Project Project Description We expect another of BMA's growth projects, The Caval Ridge mine, to be approved in 2012. Like Duania, Caval Ridge is located in northern section of the Bowen Basin. The mine is located near Moranbah and adjacent to BMA's existing Peak Downs Mine. The mine will produce high quality hard coking coal and this will be transported by rail to Hay Point and Dalrymple Bay Coal Terminals for export. Operational expenditure will be about A$450mn-$500mn per annum during the estimated mine life. The coal handling and preparation plant is to be designed to a capacity of Bmtpa, above Caval Ridge requirements, as it is intended 2.5mtpa of Peak Downs expansion tonnes will also be processed there . If the Northern Missing Link rail line is constructed Caval Ridge coal will be shipped via the Abbot Point Coal Terminal. BMA is to operate the mine directly (i.e. not use a mining contractor) . Development Stage In August 2010 the Environmental Impact Statement for Caval Ridge was approved by Government authorities. EIS approval saw BHPB launch another set of feasibility studies which are expected to be completed by late 2011. Once approved expectation is that development of the mine should take around 22 months. Production capacity Production capacity is expected to be 5.5mtpa of high quality hard coking coal (BHP's share is 50%). Development of Caval Ridge will also facilitate an increase in production at the nearby Peak Downs mine of 2.5mtpa to 8mtpa. The increased production at Peak Downs is to be processed through the coal handling and preparation plant to be constructed at the Caval Ridge site. BHP Billiton Limited (BHP.AX/ BHP AU) 8 CREDIT SUISSE 1O March 2011 Expected first production The mine is currently expected to start production in 2013 but we model production from 2014 to allow for the additional feasibility studies currently underway. Mine life The mine life is currently expected to be 30+ years but will be subject to change in the feasibility study. Capex An initial capital investment of approximately US$4bn which we model at US$4.5bn to allow for cost inflation. This equates to a capex intensity of over $700/t. Capex intensity is high as the project requires a coal handling and preparation plant above Caval Riclge mine output, a rail spur from Blair Athol to the load-out facility, creek diversions, a highway overpass, new power transition lines amongst other development items. Caval Ridge is the largest development in the area. How we have modelled it: • Based on the estimated annual running costs of ~$550mn the cost per tonne is expected to be ~$70/t. • Production commencing from 40 2013 ramping up over 12-18 months to full capacity of 5.5mtpa (100% level). • We have allowed capex of $4.5bn over 22 months (starting 1H 2012). Key catalysts • Completion of the proposed Northern Missing Link rail line linking Bowen Basin to the Abbot Point port . What will it add to our base case valuation? Expected to add US$3.5bn to our BHP valuation. Hay Point Coal Terminal Expansion To support the expansion of the BMA business the Hay Point Coal port is to be expanded from 44mtpa to 55mtpa by constructing a third berth - the HPX3 project. The key aspects of the expansion are: • Dredging which commenced in 201 0 and is normally conducted in a window from April to September); • Construction of a new third berth; • Existing trestle conveyors and surge bins to be replaced, overland conveyors will be constructed to transfer coal from the stockpile to the jetty; • Construction of a new quarry to allow rock and fill to be extracted for use in reclamation works. • A shiploader will be constructed on the new third berth. Project stage: Commonwealth and State Government Environmental approvals for the project were granted in May 2010 for maximum expansion to 75mtpa (current plan is to 55mtpa). Initial works including dredging began in mid 2010. BHP Billiton Limited (BHP.AX/ BHP AU) 9 CREDIT SUISSE 1O March 2011 The general development of the project is expected to commence in 1H 2011. Capex: In January 2010 BHP approved $267mn (BHP share so $534mn at 100%) for pre approval capex for Caval Ridge and HPX3. We expect the whole HPX3 project to cost US$1 bn (BHP share ~$500mn). Valuation: We do not include the project itself as a valuation item but the expansion facilitates the expansion of Caval Ridge, Daunia and future met coal mines. Source: BHP Billiton website. BHP Billiton Limited (BHP.AX/ BHP AU) 10 CREDIT SUISSE 1O March 2011 Base Metals Division BHPB's growth strategy in base metals is to focus on Escondida, the largest producing copper mine in the world and which already represents over 20% of Chilean copper production. Escondida is operated by BHPB which has a 57.5% share (Rio Tinto 30%, and Japanese interests and the World Bank the balance). Most mined sulphide ore is processed through the two concentrators Los Colorados and Laguna Seca which have a combined capacity of 225kt per day (115ktpa Los Colorados, 110ktpa Laguna Seca). Other ore is processed via sulphide bio leach and oxide acid leach methods. Escondida: Organic Growth Project 1 (OPG1) The next phase of Escondida is OGP1 which is designed to bring forward access to high grade ore that lies in and around the current Los Colorados concentrator. It is expected to result in a small increase in ore processing capacity from the current ~82mtpa to 100mtpa. Further expansions OPG2 and OGP3 are being studied and would bring processing up to ~150mtpa and ~205mtpa. Additional Production: The concentrator to replace Los Colorados is expected to have a processing capacity of 160ktpd (above Laguna Seca 110ktpa). The most recent example of the capital cost of a concentrator is the Oyu Tolgoi concentrator to be built to a capacity of 100ktpa and later expanded to 158ktpa. The capital costs have been estimated to be ~$1.5bn ($945mn to stage 1). The previously considered expansion of Escondida (labelled Phase V) was estimated to cost $3.25bn but envisaged adding a third concentrator and new tailings dam. We now consider these will be included in OPG2 and beyond. Expected first production We expect a final decision on OGP1 by end of 2011 or beginning 2012 with production expected from 2015. Capex For OGP1 we have allowed $1.5bn starting in 2012 and complete by end 2014. Valuation Valuation increment from OPG1 is very small (a few hundred million $s) as the project merely opens up access to ore and increases the concentrator processing capacity by 17% which helps offset subsequent grade decline. Organic Growth Projects 2 and 3 Further expansions OPG2 and OGP3 are being studied and would bring processing up to ~150mtpa and ~205mtpa. They will also require additional power resources, a desalination plant and a tailings dam. OPG2 and OPG3 are expected to cost +$4bn. Additional Production: The declining Esondida copper head grade is to be offset by increasing processing capacity to 150mtpa in OPG1 and 205mtpa in OFP2. The reserve grade is 1.02% compared to current mining head grades of 1.2-1.3% so there is a significant anticipated drop in average grades through time. Expected first production With production from OGP1 expected in 2015 we anticipate that plans for OGP2 will be finalised and approved by 2013 with production from 2017. BHP Billiton Limited (BHP.AX/ BHP AU) 11 CREDIT SUISSE 1O March 2011 Capex We include US$4bn (100% level) for OGP2 capex (BHP share 57.5%). Valuation OPG2 adds US$4bn to our NPV or 75 cents per BHP share. Figure 10: Escondida expected growth in processing capacity from growth projects F',oci,tss.ingcapacity l,M~ ) 600 , Source : BHP BIiiiton presentat ion 27-Sept-2010 Olympic Dam Phase 1 We do not expect an imminent approval of Olympic Dam but we think the pre stripping and other preparation works would commence in 2012 or 2013. According to the Draft EIS the expansion of OD is to be a six fold increase on current production levels to be done in three stages over 11 years. The work will include the development of the large open pit mine, expansion of existing smelter, new concentrator and hydrometallurgical plants added (for leaching lower grade ore). Figure 11: Production at Olympic Dam current and full expansion Current capacity Additional capacity Capacity of % Increase to be added expanded o eration Ore mined (mtpa) 12 60 72 500% Copper concentrate production (ktpa) 600 1,800 2,400 300% Refined copper (ktpa) 235 515 750 219% Uranium oxide (ktpa) 4.5 14.5 19 322% Gold bullion (kOzpa) 100 700 800 700% Silver bullion (kOzpa) 800 2,100 2,900 263% Source : Company data Project scale - huge The OD expansion is a large project indeed. Some of the required items will be: • Five to six years of pre stripping work to remove 300-350mt of overburden material; • New copper concentrator; BHP Billiton Limited (BHP.AX/ BHP AU) 12 CREDIT SUISSE 1O March 2011 • Expand existing smelter capacity to 800ktpa of concentrate to produce ~350ktpa of refined copper; • A 280 megalitre per day (MUd) coastal desalination plant; • New power sources: either an additional 270km electricity transmission line from Port Augusta, or a gas pipeline from Moomba and a new gas-fired power station at Olympic Dam, or a hybrid solution; • A 105km rail line; • A new airport at Olympic Dam. Figure 12: The expected phases of Olympic Dam expansion per Draft EIS 2009 Stage Scale Timing (year) Description Development of pre mine infrastructure and establish new open pit mine 0-20Mtpa ore 0-6 at deliver 20mtpa of ore to new concentrator . Extract 390mt of rock and 20mtpa of ore following pre strip. Build new concentrator . Build hydrometallurgical plant for extracting additional uranium . Expand open pit mine , concentrator and hydro plant to support mining 2 20-40Mtpa ore 6-9 40mtpa of ore. Expand current existing smelter to process up to 800ktpa of copper concentrate . Expand infrastructure to support 40mtpa of production . Expand open pit mine, concentrator and hydro plant to support mining 3 40-60Mtpa 7-11 60mtpa of ore. Expand infrastructure to support 60mtpa of production . Source : Company data onents and schedule er Draft EIS 2009 2013 2014 2015 2016 2017 2018 2019 2020 Project component Overburden removal X XXXXXXXXXXX Mining of first ore X X X X X X X X X Metallurgical plant 20Mtpa X X X X X X X 40Mtpa X X X X X X X 60Mtpa X X X X X X X X Water Supply Pipeline X X X X X X Desalination plant 70 MUday for OD X X X X X X plus 80 MUd for Govt Adding 135 ML/d X X X Adding 200 ML/d X X X X Gas power planVpipeline X X X X X X X X Source: Company data, Credit Suisse estimates . NB: Calendar year estimates . Expected first production In 2009 when BHP submitted its Draft Environmental Impact Statement for consideration the development schedule included beginning the pre strip in 2H 2010. We understand the pre strip has not yet commenced and we model first commercial production of ore from the open pit to commence in 2018. We therefore model the pre strip capex from 1H 2012. Capex We expect BHP to demonstrate its commitment to this key growth project by announcing pre final approval capex expenditure (like it has for iron ore RGP6) either late in 2011 or early 2012. Our estimate is that it will costs around US$4.50 per bank cubic metre to BHP Billiton Limited (BHP.AX/ BHP AU) 13 CREDIT SUISSE 1O March 2011 move material at Olympic Dam. With around 70mt per year to move this equates to US$350mn in annual pre strip costs or US$2.1bn for the pre strip. As we expect the pre strip to commence within 12 months we include it in our capex numbers. At this stage we have not included a full scale expanded Olympic Dam but include the resource base in our valuation at US$6bn or US$85 per tonne of contained copper. Adding to valuation We include the OD expansion in our valuation at US$4bn or 75 cents per BHP share. Iron Ore Western Australia Iron Ore - beyond RGP6 RGP5 (scope being revised) and RGP6 (early capex has been approved) Rapid growth project 6 (RGP6) is expected to increase BHPB's iron ore capacity to 240mtpa during 2013 by adding 35mtpa. BHP committed US$1.93bn to RGP6 early capex items in January-201O before final approval of the project which was initially expected in 2H CY201O but we now expect approval before in 2011 along with the final scope revision to RGP5. RGP5 is 90% complete on its original scope to increase iron ore system capacity by 50mtpa. RGP6 involves the expansion of the inner harbour at Port Headland and rail track duplication. We already factor in RGP6 into our current valuation and forecast. Figure 14: BHP Billiton Iron Ore Rapid Growth Projects (to 240mtpa) BHP 8lJlll:OrlW/lt lt(III 0.-e Pn1ci11ctlonfolls1ory ll.11,.Ytor fi"!llt ~ NM e & f'AC:1; RQP1 Ran RQP:J. •1$N:1 •1<-Mt •BWJ +:2'DMI ~l;lpil1-1,19ri •1"11 -- ..."="~~---U.--~ti!t>.ud ....._...-, ...... ,..__,.,.__.a.-_...... wr...,_,....,,....,_..,,~-.-. t, ... ~ ...... ,___...... ",_..,_ai,i,_...,~ Source: BHP Presentation March-2010 As the expected output and cost of the Quantum Projects is uncertain at this stage and full scale development and production ramp up is not expected until beyond FY15 we have not yet included it in our forecasts. BHP Billiton Limited (BHP.AX/ BHP AU) 14 CREDIT SUISSE 1O March 2011 Figure 15: WA Iron ore expansion projects at 100% level (US$mn) Iron Ore Additional Total cost at Capex per tonne BHPB Total Comment Project capacity 100% level of Install share capacity (mt) (US$mn) capacity (US$/t) RGP4 26mt 2,150 83 86.2% 155mtpa Complete Production due 2H CY2011. Double track Newman rail line, two new shipping berths. RGP5 50mt 5,650 113 85% 205mtpa Project is 90% complete as of 31-Dec-201O but scope of development sequence under review. RGP6 35mt 3,500 100 90% 240mtpa Pre approval capex US$1.93bn. Announced Nov-201O for ongoing Additional 635 115* 90% 240mtpa development of port, rail and Jimblebar mine expenditure infrastructure. 0mt US$16.5bn to 150-200 % mtpa Estimate, expect it to be done in 50mtpa Outer Harbour 11 85 350 US$22bn (CS estimate) stages in line with ship loader builders Source: Company data, Credit Suisse estimates, *Combined capex per tonne of RGP5, RGP6 and the additional iron ore growth project costs announced in Nov-2010 for a total of 85mtpa of capacity. Further expansion in Western Australia: Beyond rapid growth to quantum ... The ultimate aim for BHPB WA operations is to reach capacity of 350mtpa via two stages: Quantum 1 and Quantum 2. This would see BHPB develop the Port Headland Outer Harbour Port. The Outer Harbour development requires significant dredging and other deep water infrastructure. It is likely to be significantly more expensive than any of the previous RGP steps. We expect the Quantum Projects to be approved and developed in 40-50mtpa stages at a cost in the range of US$150/t-US$200/t or US$16.5bn to US$22bn in total. Valuation impact? We already include RGP6 in our base case valuation. We have not added the Outer Harbour to our valuation at this stage as only the development work is expected to have commenced by FY15 and further project details are expected to be announced in next 12- 18 months. We expect the first stage of the Outer Harbour to be ~US$9bn capex project. Samarco - Brazil iron ore JV, P4P Expansion One of the projects that BHP was openly speaking of at the latest half year results was the P4P expansion project at the 50/50 BHPNale Samarco Iron Ore Pellets JV. We understand the project is in the last stages of feasibility and governmental approval and final go ahead for the project could be given before end of 2011. The project is expected to boost production capacity to 30.5mt from current 22.25mtpa by adding: • A third concentrator at Gemano; • A third pipeline parallel to the two pipelines already operating; • A fourth pelletizing plant at Ponta Ubu. We include the P4P project at a cost of US$120 per tonne costing US$1 bn at the 100% level (50% BHP share). This capex estimate equates to the size of its bubble (the $500mn-$2bn) in the growth projects 'bubble map'. The project adds US$1.5bn or 30 cents per share to our BHP valuation. BHP Billiton Limited (BHP.AX/ BHP AU) 15 CREDIT SUISSE 1O March 2011 Diamonds and Specialty Products Jansen Potash Project Project description The Jansen Project is a greenfield project in the province of Saskatchewan, Canada involving development of an underground potash mining site and processing plant. This is BHPB's first potash mining venture and is expected to take 10 years to ramp up to full production. In February 2011 BHPB announced that Jansen project had advanced to Feasibility Study stage and depending on the timing of EIS approval (submitted Dec-2010) we would expect a decision to proceed with the project in late 2011. BHP acquired Athabasca Potash in January 2010 for US$320mn. This gave BHPB an additional 6900km 2 of potential exploration ground in the Saskatchewan potash basin and also the Burr potash development project that adjoins BHP's Jansen Project. The Burr project includes a 2mt per year mine that is expected to start production 2013 with a ramp of 5.5 years. The 2008 capital cost estimate for the Burr project was C$2bn. In June 2010 BHP, as the new owners of the Burr, withdrew the project from the Environmental Impact Assessment process in June-2010. We expect Burr to be developed later as part of a larger Jansen project. Development Stage Now in feasibility study stage with EIS submission to the Saskatchewan Ministry of Environment in December 201 0. BHP has already committed over $240mn to early development capex for the project including drilling and site preparation for ground freezing required prior to sinking the production and service shafts. We expect final approval and development construction to commence in 2H CY2011. Current development work is underway at Jansen including (as of November-2010): • Power substation nearing completion; • Drilling of freeze holds for the production shaft and the service shaft (expected to be complete by Q2 or Q3 CY2011. • We understand refrigeration units are on site for the cooling of the brine with the plant expected to have been commissioned in February-2010. Production capacity At 100% production, expected capacity is Bmt of agricultural grade potash (BHP has estimated this to equate to 9% of world production in 2020). We expect initial build to a modest rate of around 2mtpa and ramp up over time, say 10 years, to Bmtpa. Expected first production Current expectation is for the Jansen mine is expected to start production in January 2015 (at a capacity of 2mtpa) and ramp up to full production (Bmtpa) by February 2026. Mine life The project is expected to have a 70-year mine life. BHP Billiton Limited (BHP.AX/ BHP AU) 16 CREDIT SUISS~ 10 March 2011 Capex BHP has already committed US$240mn for development during the first stages of the project. We expect the project will require significant capital investment of US$4bn over short term (to initial production of 2mtpa) and up to US$17bn over 25 years. Key catalysts • Environmental and Ministerial Approval for the project expected later this year. • Ground freezing work expected late 2011. • Commencement of Construction later in 2011 or 2012. What will it add to our base case valuation? We value the project at US$1.7bn or 30 cents per BHP share. This is based on the initial build to 2mtpa, a later expansion to 4mtpa, potash price of US$500 per tonne, operating costs of US$120 per tonne and standard royalty rates for potash mines in Saskatchewan. Figure 16: Jansen Project Proposed Implementation Schedule: production in 2015 11,tRlil,:l:f,,.,..ltl I ,... !!"'.;,..,, • TQ!lljil(_lll!i!.,.µj, • 'Ht"'ffN~ei • t,,w,:i., ""1W""'"'""""'A•....t ~,..•,u.,_ JS' ltil l'!i11 lt 1 J :.JI JC, . .. • "1!llr,..... ;-:11 :-'u. :•'" t•• J ., '...... , ..•, ...' Source: BHP Billiton website BHP Billiton Limited (BHP.AX/ BHP AU) 17 CREDIT SUISSE 1O March 2011 17: BHP Billit; ;+;: De~ Jled ElMme ~ganciatif,@j'41$9kl'B§MM'¢ ffi h¼ii·M&l#:i,f;. 5 r..., SUS BHP.AX BLT.L Petroleum 54,567 10• 103 6.5 221' Sh.,. pric:e,(looal)(ASIGBE) '800 2383 M.mrm.mI alumtna 7,445 14 14 09 311 S....pricoSUS- •361 .... 38 51 Ba,eMetalt 53,728 112 111 70 2311 Pie/ Lid ~m/(dixounl) 017 lroncn 63,816 122 121 76 2511 Mftet tap l\JSS'mn) 227,76& 155,950 71,111 Manganese 6,!32 1.2 12 o.8 2% MMe BHP Billiton Limited (BHP.AX/ BHP AU) 18 CREDIT SUISSE 1O March 2011 Fi ure 18: BHP Billiton: Detailed financials continued Operatingcashlows 18,159 18,863 17,920 30,871 35,280 30,452 30,908 28,440 13,094 5,769 5,716 12,204 12,193 1B,67B Capex- sustalmng ·1,832 -2,028 -1,703 ·2,043 ·2,622 -2,864 -3,090 -3,228 -1,024 ·1,004 .m -931 -853 -1,190 FrH cash flow(sustaining) 15,327 1&,135 18,217 28,129 32,659 27,587 27,819 25,212 12,070 4,765 4,944 11,273 11,340 17,419 FCFper sham 2 92 3.03 2.91 5.22 6.10 5.26 5.30 4.80 2.17 0.86 0.89 2.02 204 3.17 Capex• exploration ·1,350 ·1,243 ·1,333 .904 .960 ·1,021 -1,089 ·1,084 -620 -623 -439 -894 -452 -452 jcapex • growthprojecls -6,097 -7,308 -8,063 -10,439 -16,058 -15,192 ·14,222 -4,124 -3,164 -3,974 -4,089 -4,303 .5,135i --,.,,..------....,.,,....-..,.,.,....- ...... - ...... -,..,...... - ...... --..,.,--•1,,.1 .,.990.,...1• Free cash flow(all capex) 1,883 1,287 1,824 17,491 15,647 11,380 12,513 12,143 !.__-=------7,328 959 532 6,292 6,517 ...... 10,904 FCFper sham 1.59 1.49 123 3.16 2 92 2.17 238 2.31 Otherinvesting cashflows -1,135 -1,715 ·1,249 -5,340 .960 -1,021 -1,089 ·1,064 ·1,157 .556 -464 -765 -138 -5,202 Di~dendpaymenls -3,135 -4,563 -4,618 -5,063 -5,514 -5,752 -6,040 -6,790 -2,2B1 ·2,282 ·2,282 ·2,336 ·2,506 ·2,557 Otherfinancing cashflows ·2,B61 4,621 640 -6,313 -10,463 -1,1B6 -1,519 an -756 5,379 -247 BBB -259 -6,051 Netlncrvas1 In cash 1,754 1,632 1,598 778 -1,217 3,423 3,858 5,148 3,134 3,498 ·2,411 4,079 3,114 -2,906 Cash al andof the year 4,173 10,831 12,455 13,236 11,950 15,372 19,241 24,388 7,216 10,B74 B,380 12,457 16,142 13,236 jr otal capexspend -9,279 -10,579 ·11,099 -13,316 -19,639 -19,077 -11,400 -5,718 -4,811 -5,185 -5,914 -5,808 -7,778j ..... = ...... ======"""""------"----'------"----·1_6,_30_.2 i ..I ------.. BalanceShoot (SUS'm) FYOS FY09 FY10 FY11F FY12F FY13F FY14F FY15F 1H09 2H09 1H10 2H10 1H11 2H11F Cash 4,237 10,B33 12,456 13,250 11,964 15,386 19,255 24,402 7,195 10,B33 B,382 12,456 16,156 13,250 Receivables 9,B01 5,153 6,543 7,B76 7,B76 7,B76 7,B76 7,B76 5,020 5,153 6,196 6,543 7,B76 7,B76 Inventories 2,054 4,821 5,334 5,620 5,620 5,620 5,620 5,620 4,BBJ 4,B21 5,056 5,334 5,620 5,620 Plant& equipment 47,332 49,032 55,576 69,493 BJ,921 97,162 109,092 11B,229 46,739 49,032 52,206 55,576 59,174 69,493 Defenedtax assets J,044 J,512 4,053 4,177 4,177 4,177 4,177 4,177 3,416 3,512 J,B22 4,053 4,177 4,177 Intangibles 625 661 687 77B 77B 77B 77B 77B 652 661 670 687 778 77B Otherassets B,796 4,756 4,203 4,491 4,491 4,491 4,491 4,491 5,384 4,756 5,221 4,203 4,491 4,491 Asnts 75,119 78,770 81,152 105,686 118,827 135,491 151,211 185,574 73,289 78,770 81,553 18,852 98,272 105,886 Payables 6,774 5,619 6,467 6,743 6,743 6,743 6,743 6,743 5,533 5,619 5,515 6,467 6,743 6,743 Provisions 1,596 1,887 1,B99 1,972 1,972 1,972 1,972 1,972 1,286 1,887 1,669 1,B99 1,972 1,972 Taxliabilities 2,022 1,931 1,685 5,455 5,673 4,629 4,393 J,913 2,055 1,931 588 1,685 2,451 5,455 Borrowings 9,234 15,325 13,573 12,225 9,725 7,725 5,325 5,325 9,207 15,325 14,935 13,573 14,125 12,225 Otherliabilities 17,220 13,297 15,900 15,988 15,988 15,988 15,988 15,988 15,559 13,297 14,245 15,900 15,988 15,988 Llabllltin 36,846 38,059 39,524 42,383 40,101 37,057 34,421 33,941 33,840 38,059 36,952 39,524 41,279 42,363 Ne!Assots 39,043 40,711 49,328 63,302 78,728 98,434 118,867 131,633 39,649 40,711 44,601 49,328 58,993 63,302 Valual;On motrocs(31 OocYEJ fVOa FY09 FY10 FY11F FYtlF fYtJf FY14F fY15F 1H09 2H09 1H10 2H10 1H11 2H11F Underl~ngearnings (US$bn) 15,366 10,722 12,469 23,799 29,037 24,960 24,000 21,163 2,617 B,105 5,702 6,767 10,700 13,099 Averageshares oo issue (basic,millioos) 5,590 5,565 5,565 5,527 5,356 5,248 5,248 5,24B 5,565 5,565 5,564 5,569 5,563 5,524 EPS USc/ shr (underi~ng) 275 193 224 431 542 476 457 403 47 146 102 121 192 237 EPSGthY-o-Y 20% -30% 16% 92% 26% -12% -4% -12% -56% -13% 11B% -17% 88% 96% PER,Ltd 16.9x 24.1x 20.7x 10.Bx 8.6x 9.lx 10.2x 11.5x 0.0x 24.1x 11.7x 20.Bx 14.Bx 10.8x PER,Pie 14.0x 20.0x 17.2x 8.9x 7.1x 8.1x 8.4x 9.&x 0.0x 20.0x 15.Sx 17.2x 12.3x 9.0x DPS,ordinary (USO) 70.0 82.0 B6.0 96.0 107.5 112.9 122.9 130.0 41.0 41.0 42.0 44.0 46.0 50.0 DPS,ordinary (AUD spot) 69.3 B1.2 B52 95.1 106.5 111.B 121.7 12B.B 40.6 406 41.6 43.6 45.6 49.5 Payoulratio, ordinary 25'11 43% 38% 22% 20% 24% 27% 32% 87% 26% 41% 36% 24% 21% Di~dendYield, Ltd stock, ordinary 1.5% 1.6% 1.9% 2.1% 2.3% 2.4% 2.6% 2.B% 0.0% 1.B% 1.6% 1.9% 1.9% 2.1% EV/ EBITDA,fixed B.2x 10.3x 9.3x 5.Bx 4.Bx 54x 5.6x 6.0x O.Ox 10.3x 96x 7.Bx 64x 5.Bx FCF/ sham,USO, sustaining capex 313 3.22 3.10 5.52 6 25 5 2B 5.33 4.B3 3.22 1.B6 3.10 4.33 5.52 FCF/ share, USO,all capox 170 1.59 1.31 3.35 3.00 2.1B 2.40 2.32 1.59 0.29 1.31 2.47 3.35 FCF~eld, sustaining capex, Ltd 72% 7.4% 7.1% 12.7% 14.3% 121% 12.2% 11.1% 0.0% 7.4% 43% 71'11 9.9% 12.7'11 Pnoe/ cash earnings,Ltd 137x 26.5x 14.Bx 91x 7.3x 7.9x BOx B.6x 56.5x 49.9x 30.5x 2B7x 19.9x 16.Bx Pnoe/ Book,Ltd stock 66x 6.4x 5.3x 4.0x J.1x 2.5x 2.1x 1.9x 6.4x 6.4x 5.Bx 5.3x 4.5x 4.0x ROE(%) 39% 14% 26% 37% 37% 25% 21% 16'11 13% 16% 28% 27% 37% 41% Goanng FYOB FY09 FY10 FY11F FY12F FY13F FY14F FY15F 1H09 1H09 11<10 lHIO IH11 1Ht1F NetDebt (net cash) B,456 5,586 3,309 B06 -408 -5,B30 -12,099 -17,246 4,168 5,566 7,915 3,309 -200 B06 NelDebt/ (NetDebt + Equily)(%) 1B% 12% 6% 1% -1% -6% -12% -15% 10% 12% 15% 6% 0% 1% NelDebt/ Equity(%) 22% 14% 7% 1% -1% -6% -10% -13% 11% 14% 1B% 7% 0% 1% Interestoover (x) (EBITDA) 42 41 53 74 B73 -882 -2B0 -697 2B 61 47 81 47 139 Margins FYOB FY09 FY10 FY11F FY12F FY13F FY14F FY15F 1H09 2H09 1H10 2H10 1H11 2H11F EBITDAmargin 54% 50% 51% 59% 65% 63% 62% 60% 36% 69% 49% 70% 53% 64'11 EBITmargin 47% 41% 41% 52% 56% 54% 52% 48% 28% 59% 3B% 43% 46% 57% NPATmargin 30% 24% 26% 36% 39% 37% 36% 33% 10% 43% 26% 26'11 33% 38% Taxrale 33% 37% 34'11 28% 30% 30% 29% 29% 56% 24% 30% 36% 24% 31% CarbonEm1Sslons FYOS FY09 FY10 FY11F FY12F FY13F FY14F FY15F IHO Companies Mentioned (Price as of 08 Mar 11) BHP Billiton (BLT.L, 2443.00 p, NEUTRAL, TP 3150 p, OVERWEIGHT) BHP Billiton Limited (BHP.AX, A$46.00, NEUTRAL, TP A$55) Rio Tinto (RIO.AX, A$82.38, OUTPERFORM, TP A$110.00) Rio Tinto (RIO.L, 4210.00 p, OUTPERFORM, TP 6000.00 p, OVERWEIGHT) Vale (VALE, $33.23, OUTPERFORM, TP $47.00) BHP Billiton Limited (BHP .AX/ BHP AU) 19 CREDIT SUISSE 1O March 2011 Disclosure Appendix Important Global Disclosures I, PaulMcTaggart, certify that (1) the viewsexpressed in this reportaccurately reflect my personalviews about all of the subjectcompanies and securitiesand (2) no partof mycompensation was, is or will be directlyor indirectlyrelated to the specificrecommendations or views expressed in thisreport. Seethe Companies Mentioned section for full companynames. 3-Year Price, Target Price and Rating Change History Chart for BL T.L BLT.L Closing Target 3000• Price Price Initiation/ 2752 Date (p) (p) Rating Assumption 2500 • 01-Dec-08 1082 1500 0 X 2450 • 2500 • ~•., ..-: J 14''\ 2252 2300 • 15-Jan-09 1137 1420 N 2150• .l' 22-Jan-09 1162 1350 •0 ' • t N 23-Jan-09 X 1752 ' ·, I 1750 • 23-Mar-09 1507 1300 u ••'.. 1500&. ~1tp0 _•., • ' 28-May-09 1431 1600 1252 ~"3oo• t· • N 06-Jul-09 1,287.5 N • • -o• N' • 31-Jul-09 1563 1750 1-C..~\0'09 • o 752 ~~~-~---~--~~----~------11-Nov-09 1,816.5 2150 04-Feb-10 1,853.5 2450 0 19-Apr-10 2162 2600 22-Jun-10 1988 2300 19-Jul-10 1,816.5 N O=OutJ)8,'fonn,N•Neu,~; U=Unde,perfonn,R=Raancted, NR=Not Rated , NC=NotCovered 20-Oct-10 2,192.5 2500 07-Jan-11 2,492.5 3000 3-Year Price, Target Price and Rating Change History Chart for BHP.AX BHP.AX Closing Target 53 Price Price Initiation/ 51 52 • • 50. Date (A$) (A$) Rating Assumption 48 46 • V 29-Apr-08 X 45 • 45 • ,, . 01-Dec-08 29.9 38 0 X 41 42 • • b 15-Jan-09 28.9 33.5 N -." .f • N, 22-Jan-09 29.14 32 23-Mar-09 33.32 28 u 31 28-May-09 34.02 36 09-Jun-09 36.5 38 26 06-Jul-09 32.62 N 4S ~~--06 • 1-C..o-06;• 31-Jul-09 37.85 42 11-Nov-09 39.1 45 /✓~✓ ~~/?~ ✓~~// ✓~~~ 04-Feb-10 40.99 50 0 '"' ·"' ,i" '"' .<# ,.,; '"' •.:! ,i" '"' .<# ,.,; '"' ·"' o$t ,<:? .<# ,or ClosingPrice • Ta,getPrice O tnitiation/As&umption • Rating 20-Apr-10 42.8 52 23-Jun-10 39.14 45 O=Outperfonn,N=Neu,al U=Unde,pertam,R=Raancted; NR=Not Rated; NC=Not Covered 20-Jul-10 38.3 N 21-Oct-10 41.22 47.5 11-Jan-11 44.61 52.5 Theanalyst(s) responsible for preparingthis research report received compensation that is basedupon various factors including Credit Suisse's total revenues,a portionof whichare generated by Credit Suisse's investment banking activities. Analysts' stock ratings are defined as follows: Outperform(0): Thestock's total return is expectedto outperformthe relevantbenchmark* by at least10-15% (or more,depending on perceived risk)over the next 12 months. Neutral(N): The stock's total return is expectedto be in linewith the relevant benchmark* (range of ±10-15%)over the next 12 months. Underperform(U): The stock's total return is expectedto underperforrnthe relevant benchmark* by 10-15%or moreover the next 12 months. *Relevantbenchmark by region:As of 29th May2009, Australia, New Zealand, U.S. and Canadian ratings are based on (1) a stock'sabsolute total returnpotential to its currentshare price and (2) therelative attractiveness of a stock'stotal return potential within an analyst'scoverage universe••, with Outperformsrepresenting the mostattractive, Neutrals the less attractive,and Underperformsthe leastattractive investment opportunities. SomeU.S. and Canadianratings may fall outsidethe absolutetotal return ranges defined above, depending on marketconditions and industry factors.For Latin American, Japanese, and non-Japan Asia stocks, ratings are based on a stock'stotal return relative to theaverage total return of the relevantcountry or regionalbenchmark; for Europeanstocks, ratings are basedon a stock'stotal return relative to the analyst'scoverage universe**.For Australian and New Zea/and stocks a 22%and a 12%threshold replace the 10-15%level in theOutperform and Underperform stock BHP BIiiiton Limited (BHP.AX/ BHP AU) 20