Aluminium CSG
65
Aluminium CSG BHP Billiton Aluminium Aspiring to be the best aluminium company in the world Sydney - London November 2003
Transcript of Aluminium CSG
Aluminium CSG
BHP Billiton AluminiumAspiring to be the best aluminium company in the world
Sydney - LondonNovember 2003
Aluminium CSG
Key Messages
• Quality of asset portfolio - Upstream• Opportunity for significant further improvement• Still brownfield opportunities to harvest• Change in growth emphasis Aluminium to Alumina
– Response to supply / demand evolution in China– Where we believe the greatest source of future rent lies
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MetalAlumina
Aluminium CSG
Speakers
• Introduction and Strategy Mike Salamon
• Marketing Rod Kinkead-Weekes
• Industry Issues Paul Everard
• Smelting Operations & Continuous Improvement Mahomed Seedat
• Refining Operations & Continuous Improvement Colin Agnew
• Future Growth Ian Jacobson
• Finance / Value Alex Vanselow
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Aluminium CSG
Introduction• Aspiring to be the best aluminium
company in the world:The scorecard
– Zero harm in HSEC– Lowest unit cash costs– Growth and Sustainability– Size / Materiality– Value– Cash generation
• How we measure up– Zero harm is the focus– Lowest metal & alumina system cash
costs – but we can and will improve our relative advantage
– Strong growth track record, but industry consolidation makes future M&A value based growth challenging
– No. 2 in 3rd party aluminium (after RusAl) & No. 4 in 3rd party alumina (after Alcoa, Chalco and Glencore)
– No. 4 in ROC in calendar 2002 after Comalco, Alcoa & Chalco
– NPV large and growing
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Aluminium CSG
Aluminium CSG(Total Production in ‘000t in fiscal years)
Valesul
AlumarMozal
BaysideHills ide
Worsley
Suriname
MRN
Production ('000 tonnes) 1999/00 2000/01 2001/02 2002/03 2003/04 2004/05Aluminium 883 981 992 1,074 1,250 1,300Alumina 1,878 2,939 3,942 4,092 4,200 4,300Bauxite 5,744 9,795 13,097 13,669 14,000 14,000
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Aluminium CSG
BHP Billiton Strategic Framework - Progress
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Long-term non-LME linked alumina salesMetal sales into China
Customer-Centric Marketing
335kA and beyondSlotted anodesProcess control
Innovation
Mozal II and Hillside III deliveredParanam 2.3mtpa expansion approvedWorsley 3.5mtpa feasibility by Q4 FY04
Growth
CIFR down 20% and Improv ingMetal creep of 82,000 tons and normalised costs down by 7% (2002 to 2003 FY)Alumina creep of 149,000 tons and normalised costs down by 3% (2002 to 2003 FY)
Outstanding Assets
PERFORMANCEVALUE DRIVERS
Aluminium CSG
HSEC – How We Compare
A Fundamental Part of “World’s Best”
CIFR Benchmarking
-
5.0
10.0
15.0
20.0
25.0
30.0
35.0
40.0
1998 1999 2000 2001 2002
Cla
ssifi
ed In
jury
Fre
quen
cy R
ate
BHP Billiton - All CSG Total BHP Billiton Alumini um CSG
Australian Mining Industr y (CIFR esti mated) US Mining Industr y (CIFR estimated)
-
5.0
10.0
15.0
20.0
25.0
30.0
35.0
40.0
1998 1999 2000 2001 2002
BHP Billiton - All CSG Total BHP Billiton Alumini um CSG
-
5.0
10.0
15.0
20.0
25.0
30.0
35.0
40.0
1998 1999 2000 2001 2002
BHP Billiton - All CSG Total BHP Billiton Alumini um CSG
Australian Mining Industr y (CIFR esti mated) US Mining Industr y (CIFR estimated)
-
5.0
10.0
15.0
20.0
25.0
30.0
35.0
40.0
1998 1999 2000 2001 2002
BHP Billiton - All CSG Total BHP Billiton Alumini um CSG
Current CSG Performance
-
5.0
10.0
15.0
20.0
25.0
30.0
35.0
40.0
1998 1999 2000 2001 2002
BHP Billiton - All CSG Total BHP Billiton Alumini um CSG
Australian Mining Industr y (CIFR esti mated) US Mining Industr y (CIFR estimated)
-
5.0
10.0
15.0
20.0
25.0
30.0
35.0
40.0
1998 1999 2000 2001 2002
BHP Billiton - All CSG Total BHP Billiton Alumini um CSG
-
5.0
10.0
15.0
20.0
25.0
30.0
35.0
40.0
1998 1999 2000 2001 2002
BHP Billiton - All CSG Total BHP Billiton Alumini um CSG
Australian Mining Industr y (CIFR esti mated) US Mining Industr y (CIFR estimated)
-
5.0
10.0
15.0
20.0
25.0
30.0
35.0
40.0
1998 1999 2000 2001 2002
BHP Billiton - All CSG Total BHP Billiton Alumini um CSG
Current CSG Performance
DuPont Performance
Current CSG Performance
DuPont Performance
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Aluminium CSG
HSEC – Avg. Fluoride & CO2 Equiv. Emissions / Tonne
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Improved Process Contr ol and Fume Capture1.57
1.38
0.790.65
0.000.200.400.600.801.001.201.40
1.601.80
2001 2002 2003 2004 FC
0
5
10
15
20
25
30
Hillside Bayside Mozal
2001
2002
2003
2004
FC
2001
2002
2003
2004
FC
2002
2003
2004
FC
Total Smelter Fluoride E mission
CO2 Equivalent Emiss ions
Aluminium CSG
BHP Billiton Aluminium and Alumina Production
Aluminium Production Alumina Production
• Mozal 1 s tart-up in FY 01
• Mozal 2 s tart-up in FY 03
• Hillside 3 s tart-up in FY04
• Worsley brownfield expansion from 1.8mtpa to 3.1mtpa
• Acquisition of 56% of Worsley
• Worsley brownfield expansion to 3.5mtpa and beyond 4.0mtpa
• Suriname “creep” from 1.9mtpa to 2.3mtpa
• Process control and optimisation
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300.0
500.0
700.0
900.0
1100.0
1300.0
1500.0
99/00 00/01 01/02 02/03 03/04 04/05 05/06
Hillside Mozal Bayside Alumar Valesul
200.0
1200.0
2200.0
3200.0
4200.0
5200.0
99/00 00/01 01/02 02/03 03/04 04/05 05/06
Worsley Suriname A lumar
Aluminium CSG
CSG Sources of EBIT Since BHP – Billiton Merger
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Sources of EBIT
(20)0
20 40 60 80
100 120 140 160 180
200
Dec-01 Mar-02 Jun-02 Sep-02 Dec-02 Mar-03 Jun-03 Sep-03
Quarters since Merger
US$
mill
ions
Other Smelters Refineries
LME Cash 1,381 1,316 1,381 1,356 1,311 1,351 1,396 1,381 1,436
Aluminium CSG
Refinery Cash Costs – How We Compare (Brook Hunt)
Refinery Cash Costs 2003
0
50
100
150
200
250
0 10000 20000 30000 40000 50000 60000Cumulative production (tpa)
$/t
Alu
mar
Wor
sley
Para
nam
Cash cost Production (mt)BHPB 103 4.1
Alcoa (WMC) 130 13.7
Alcan 141 4.2
Global 142 57.2
MRN Dividend
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Copyright: Brook Hunt
Aluminium CSG
Smelter Cash Costs – How We Compare (Brook Hunt)
Smelter Cash Costs 2003
0
200
400
600
800
1000
1200
1400
1600
1800
2000
0 5000 10000 15000 20000 25000Cumulative production (tpa)
$/t
Moz
alHi
llsid
e
Bays
ide
Alu
mar
Val
esul
Cash cost Production(mt)BHPB 894 1.1
Alcoa 1,211 3.6
Alcan 1,068 2.4
Global 1,124 25
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Copyright: Brook Hunt
Aluminium CSG
Operating Excellence – People, Process & Technology
CAPITAL EFFICIENCY
TECHNOLOGY
LEADERSHIP FOCUS
NETWORKS
COMMUNITIES OF PRACTICE
CONTINUOUS IMPROVEMENT
TRANSFORMATIONAL CHANGE
REVE
NUE GRO
WTH (v
olume a
nd pr
ice)
COST REDUCTION
TRANSFORMINGENHANCING
PEOPLE
PROCESSES
TECHNOLOGY
COMMERCIALActivities
Z E
R O
H
A R
M
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Aluminium CSG
BHP Billiton Aluminium Options
Embedded• Worsley 3.5mtpa brownfield• Suriname 2.3mtpa brownfield• Alumar 1.5mtpa creep• Smelter current increase - 350kA• Restructuring• BHP Billiton Way
Challenging for the best
• Control of New Bauxite• More Stranded Power• Large scale & opportunistic
M&A
Scale
Val
ue
(capital efficiency / creep of current asset base)
New InitiativesAlumina/Bauxite• Suriname Bakhuis greenfield• Worsley > 4.0mtpa brownfield • Alumar 3.0mtpa brownfield
Southern Africa Optimisation• Additional pots • Mozal III / Hillside IIIb• Additional power contract
Marketing • Alumina Rent / China
(stretch asset/business base)
(step-change growth)
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Aluminium CSG
Marketing
Rod Kinkead-WeekesMarketing Director
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Aluminium CSG
Marketing StrategyMetal• Maximise net premiums• Divers ify and promote flexibility• Build on s trong physical base…plus actively
trade within specified limits• Understand, manage and control r isks
Status• Number 2 in non-integrated
primary metal sales• Global market reach
Alumina• Supply increasing internal requirements• Position for fur ther growth • Maximise margins• Actively trade• Supply new markets• Understand, manage and control r isks
Status• Strong market presence• Significant 3rd party player• Growing in China
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Aluminium CSG
Historical Global Consumption and Real 2003 Price
Source: Metal Bulletin, King and Brook Hunt
Aluminium
-
5,000
10,000
15,000
20,000
25,000
30,000
1983 1986 1989 1992 1995 1998 2001
k to
nnes
-5001,000
1,5002,000
2,5003,000
3,5004,000
$/t
Aluminium Consumption Aluminium LME price
Alumina
-
10,000
20,000
30,000
40,000
50,000
60,000
1983 1986 1989 1992 1995 1998 2001
k to
nnes
-
100
200
300
400
500
600
700
$/t
Smelter grade Alumina Consumption Alumina price (MB/King)
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9% 11%
28% 8%13%
20%19%
11%
Aluminium CSG
Aluminium Sales by Destination
Actual 2003 Forecast 2004
Europe55%
Far East17%
Japan22%
US - Midwest1%
Other5%
Europe46%
Far East16%
Japan17%
US - Midw est9%
Other12%
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Aluminium CSG
Alumina Sales by Destination
Europe14%
China31%
Other Far East0%
N America12%
S Africa5%
Others10%
Equity Smelters28%
Europe14%
China21%
Other Far East3%
N America9%
S Africa8%
Others10%
Equity Smelters35%
Actual 2003 Forecast 2004
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Aluminium CSG
Evolution of Global Alumina Market
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0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
2002 2003 2004 2005 2006 2007 2008 2009 2010
kton
nes
Integrated Third party legacy contracts Third party discretionary
Aluminium CSG
China – Aluminium Demand
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-
2,000
4,000
6,000
8,000
10,000
12,000
2000 2003 2007
k to
nnes
Power Construction & real estate Capital goods & machinery
Packaging Durables Auto Other
-
2,000
4,000
6,000
8,000
10,000
12,000
2000 2003 2007
k to
nnes
Power Construction & real estate Capital goods & machinery
Packaging Durables Auto Other
Aluminium CSG
China – Construction Industry DriversChange in population from rural
to urban
0.00%10.00%20.00%30.00%40.00%50.00%60.00%70.00%80.00%90.00%
100.00%
'85 '90 '95 '00 '01 '02 '03 '04 '05 '06 '07
'85 '90 '95 '00 '01 '02 '03 '04 '05 '06 '07
Assumptions
Assume 1% pa population growthAssume floor space per capita continues to grow at 4% per annum based on historical trends
Assume 4.5% pa “urbanisation” rate based on recent history
Assume 40 y ear life cycle for average accommodation
Gross floor space per capita - Urban(sq m/capita)
Population(millions)
Urbanisation of rural population
Urban population grow th
Urban renewal of housing stock
1,3551,286
F/cast
Underlying demand for residential floor space(million sq metres)
2001 200 2 2003 2004 2005 2006 2007
705
506 522 553 586 622 662
Rur al
76% to 54% over time
Ur ban
24% to 46% over time
02468
101214161820
'85 '95 '01 '03 '05 '07
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Aluminium CSG
Asian Metal Consumption – Evolution (Macquarie)
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Aluminium Use and GDP per Capita
0
5
10
15
20
25
0 5 10 15 20 25 30 35 40 45
GDP per capita (US$’000)
kg p
er c
apita
Japan (1950-2002) Korea (1970-2002) Taiwan (1976-2002)China (1975-2002) China (2003-2010)
Aluminium CSG
Asian Metal Consumption - Evolution (Macquarie)
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GDP and Al Consumption Per Capita
0
5
10
15
20
25
30
35
40
45
50
0 10000 20000 30000 40000 50000
Japan
Belgium
AustriaGermany
France
USAAustralia
Korea
Spain
Taiwan
UK
Italy
IndiaMexico
BrazilCIS
China (normal GDP)
China PPP GDP
Constant US$ (2002) GDP / Capita
Met
al Co
nsum
ptio
n: k
g pe
r cap
ita
Aluminium CSG
Chinese Aluminium and Alumina Production
Chinese Aluminium Production
0
1,000
2,000
3,000
4,000
5,000
6,000
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
k to
nnes
0%
5%
10%
15%
20%
25%
% G
loba
l Mar
ket S
hare
Chinese Alumina Production
0
1,000
2,000
3,000
4,000
5,000
6,000
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
k to
nnes
0%
2%
4%
6%
8%
10%
12%
% G
loba
l Mar
ket S
hare
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Aluminium CSG
Chinese Annual Alumina Imports – the Future?
-26-‘000 tonnes
US$
Alu
min
a Sp
ot P
rice
0
50
100
150
200
250
300
350
90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 100
2,000
4,000
6,000
8,000
10,000
12,000
14,000
18%
8%
14%
20%
11%
19%
Current Spot PriceGramercy
Aluminium CSG
China – Global Market Implications
• Metal• Continuing to grow strongly and will continue to grow• Despite strong consumption growth – a net exporter
• Alumina• Not keeping pace with metal growth• Where will it come from / will it be available?
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Aluminium CSG
Industry Issues
Paul EverardDeputy President - Aluminium
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Aluminium CSG
The Industry - Turnover & Lowest Quartile EBITDA Margins
-29-
0
5
10
15
20
25
30
35
40
45
50
Total Alumina Primary aluminium Rolling Extrusions Castings & other
Turn
over
US$
bn
0%
10%
20%
30%
40%
50%
60%
70%
EBIT
DA
mar
gin
%
Aluminium CSG
Key Industry Factors
• China• Automotive growth• Recycling• The environment
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• Power• Technological breakthrough• Entry and exit barriers• Industry structure
Aluminium CSG
Alumina Capacity - Inducement Price Curve
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0
50
100
150
200
250
300
350
400
0
1,25
0
2,50
0
3,75
0
5,00
0
6,25
0
7,50
0
8,75
0
10,0
00
11,2
50
12,5
00
13,7
50
15,0
00
16,2
50
k tonnes of ne w capacity
$/t
0%
5%
10%
15%
20%
25%
% L
ME
Aluminium CSG
Smelting Operations& Continuous Improvement
Mahomed SeedatVice President and Chief Operating Officer – Southern Africa
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Aluminium CSG
Richards Bay
Southern African Smelters
267 000tpa 536 000tpa
535 000tpa 660 000tpa
180 000tpa
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Aluminium CSG
Mozal II and Hillside III - Forecast Completion KPIs
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Mozal IIHillside III
Zero
21
660
Zero
1.0
Actual
Zero
18
416
Zero
0.6
Forecast
2.5
27
860
Zero
5.0
Budget
2.5
27
449
Zero
5.0
Budget
Man hours lost %
Months
US$ millions
Injuries / million man hours
Injuries / million man hours
Unit
IR
Schedule to first metal
Capex
Fatalities
LTIFR
KPI
Aluminium CSG
96.2095.80
95.5095.00
94.50 94.40 94.40 94.20
93.30
91.5092.0092.5093.0093.5094.0094.5095.0095.5096.0096.50
Moz
al
Hill
side
II
Hill
side
I
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AP30 Pre-Bake BenchmarksAP30 Pot Output AP30 Current
AP30 Current Efficiency13.52
13.22 13.2113.14
13.0913.04 13.04 13.00
12.92
12.6012.7012.8012.9013.0013.1013.2013.3013.4013.5013.60
Hill
side
I
Hill
side
II
Moz
al
2596 2584 2571 2557 2548 2544 2535 2530
2393
225023002350240024502500255026002650
Moz
al
Hill
side
II
Hill
side
I
336.7 336.2 336.0 336.0 334.9 334.8 334.7
330.0
315.8
305
310
315
320325
330
335
340
Hill
side
II
Hill
side
I
Moz
al
AP30 Energy Consumption
• Combination of higher amperage, current efficiency and low energy consumption is the goal
• Innov ation is a major contributor• Process control and elimination of variation critical
Aluminium CSG
Organizational Synergy – Project Simunye
Business Processes Asset
OptimisationOrganisation
Design
23
4
Hills ide
Bayside
MozalBusiness Model1
US$ 1.7M
US$ 5.9M
• Significantly improved HR Service delivery• Optimisation of overall staff compliment• Shared HR business model • Standardisation of systems• Improv ed governance• Consolidated systems development
• Lev eraging of combined purchasing power • Ex ploit excess carbon capacity through sales of
anodes and paste (not yet included in NPV)
Human Resources
Business Solutions
Raw Materials
Service Function Service Value-add
US$ 4.1M
Indicative NPV
US$ 11.7M
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Continuous Improvement Projects a part of the way we do business…
..74 CI projects currently being
implemented and tracked at Hillside
and Mozal..
Aluminium CSG
Hillside Mozal Bayside A
Shareholding 100% 47% 100%Pots 720 576 240Pot output (kg/day) 2,525 2,592 1,062Current (kA) 333 335 145Current efficiency (%) 94.6% 96.2% 92.9%
EBIT sensitivity (US$ 'millions)5kA increase 7 3 21% CE 5 2 110 extra pots 7 4 3
NPV effect post 30% tax (US$ millions)5kA increase 67 30 201% CE 47 21 610 extra pots 62 35 24
Understanding the Levers in Our Smelting Business
Note: Example Excludes Capital Requirement
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350kA project at Hillside will deliver an additional 15kA, or
three times this benefit
Aluminium CSG
Refining Operations& Continuous Improvement
Ian JacobsonVice President – TechnicalChief Operating Officer
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Aluminium CSG
Worsley - Alumina Calcined Production
-39-
Worsley now operating at 3.25mtpa versus “nameplate” capacity of 3.1mtpaApproximate EBITDA benefit of 150ktpa = US$18 million per year
1.97
2.933.14 3.19 3.25
1.501.701.902.102.302.502.702.903.103.303.50
2000 2001 2002 2003 2004 FCST
Expansion to 3.1mtpa Process / Continuous Improvement
Aluminium CSG
Operating Improvement via Plant Flow & Yield
-40-
Yield Improvements:- Impurities control- Higher in tank solids
Flow Improvements:- Mud Handling- Operating Factor- Powerhouse
Plant Yield
61.061.5
62.0
62.5
63.0
63.5
64.0
64.565.0
2001 2002 2003 2004 FCST
g/L
ƒ (Flow x Yield) ƒ (Flow x Yield) Production = Production =
1 GPL Yield, or 100 m3 Flow = US$6 million EBIT impact
Plant Flow
5,500
5,600
5,700
5,800
5,900
6,000
6,100
6,200
2001 2002 2003 2004 FCST
m3/
hr
Aluminium CSG
The KPI / Value Driver TreeThe KPI Process Map is designed to :• Measure deviations from target (KPO’s)• Analyse the deviations to determine corrective actions (KPD’s)• Measure the economic impact on EBIT by not correcting variances
TARGET PLAN ACTION
MEASURE
-ve
The KPI Process Map lies within a gener ic negative feedback loop, and identifies “defects” so that they can be corrected ( targets
change over time to reflect continuous improvement)
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Aluminium CSG
KPI Process Map Tool – Example: Overall Performance Tree
Capital Charge (USD)EBIT (USD)
ESVA (USD)
Capital Employed (tUSDm)Capital Rate (%)
Fixed Assets (USDm)Op Cost (USDm) Working Capital (USDm)
Cash Op Cost (A$m)
Al Price (USD/t) Depreciation (USD)
-
x
+
x
x +
Alumina Sold (t)
Alumina Calcined (t)
Plant Flow (m3/hr)
Run Down of FG (t)
Plant Yield (g/L)
+
Maintenance (A$k) Other Consumables (A$k)
x
+
Ops Costs (A$ki)Soda (A$k)Energy (A$k)
++ +
-42-
COGS (USDm)Revenue (USDm)
-
Constant
x
Exchange Rate
Refinery (A$k)
+
Bauxite (A$k) Overheads (A$k)
+
Aluminium CSG
KPI Process Map Tool – Example: Caustic Soda Loss
Soda Consumed (t)Soda Average Price ($/t)
Soda Cost ($)
Alumina Input (t)Soda Consumption(kg/t)
Other Losses (kg/t)Losses with Residue (kg/t)
Gross Physical Losses (kg/t)Chemical in Residue (kg/t) Product (kg/t)Oxalate (kg/t)Sulphate (kg/t)
x
+
x
++
+
Credit Input (kg/t)
GPL Variance from Base Case Model (kg/t)
GPL Variance due to Soda inDilution Water (kg/t)
Budget GPL(kg/t)
GPL Variance due to PlantPerformance (kg/t)
+
CCD (kg/t) Final Washer (kg/t)
+
+
Train 1 Performance (kg/t)Settler Performance (kg/t) Train 2 Performance (kg/t)
Ave. Solids in U/F (%) No. of Tanks Online (#)
Tank 1 (%) Tank 2 (%) Tank 3 (%) Tank 4 (%)
+ +
f
Mud Level (m) Flocculent (g/t) Pump Flow (m3/h)
+
Filter Building (kg/t)Sands Classifier (kg/t)Input Conditions (kg/t)++ +
Bedrock
Operator control levers
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Sept 03 Actual Target $ EffectTank 3 U/F solids (%) 37.1 41.0 A$19kInformation available to Primary Work Group
Aluminium CSG
Benefits from Monthly Feedback – Caustic Soda SavingSettler 451
A$0k
A$76k
A$93k
A$238k
A$173k
A$32kA$37kA$42k
-A$12k
A$0k
-A$13k-A$28k
-A$5k -A$8k
A$4k
-A$4k -A$8k -A$2k
A$31kA$13k
A$0k A$2k
-A$23k
A$0k
-A$10k-A$23k
52
53
54
55
56
57
58
59
60
01 01
Sep
01
Oct
01
Nov Ja
n02
Feb
Mar Apr
02
May
02
Jun
02
Jul
02
Aug
02
Sep
02
Oct
02
Nov
02
Dec
02 03 03 03 03 03
Jun
03
Jul0
3
Aug
03
Sep
03
U/F
% S
olid
s
EBIT Variance (A$k) U/F % solids Target
US$520k EBIT benefit from reduced caustic losses by increasing solids from 54.5% to 58% solids
Settler 451
A$0k
A$93k
A$238k
A$32kA$37kA$42k
-A$12k
A$0k
-A$13k-A$28k
-A$5k -A$8k
A$4k
-A$4k -A$8k -A$2k
A$31kA$13k
A$0k A$2k
-A$23k
A$0k
-A$10k-A$23k
52
53
54
55
56
57
58
59
60
U/F
% S
olid
s
EBIT Variance (A$k) U/F % solids Target
US$520k EBIT benefit from reduced caustic losses by increasing solids from 54.5% to 58% solids
Settler 451
A$0k
A$82k A$93k
A$238k
A$32kA$37kA$42k
-A$12k
A$0k
-A$13k-A$28k
-A$5k -A$8k
A$4k
-A$4k -A$8k -A$2k
A$31kA$13k
A$0k A$2k
-A$23k
A$0k
-A$10k-A$23k
52
53
54
55
56
57
58
59
60
U/F
% S
olid
s
EBIT Variance (A$k) U/F % solids Target
US$520k EBIT benefit from reduced caustic losses by increasing solids from 54.5% to 58% solids
Settler 451
A$0k
A$93k
A$238k
A$32kA$37kA$42k
-A$12k
A$0k
-A$13k-A$28k
-A$5k -A$8k
A$4k
-A$4k -A$8k -A$2k
A$31kA$13k
A$0k A$2k
-A$23k
A$0k
-A$10k-A$23k
52
53
54
55
56
57
58
59
60
U/F
% S
olid
s
EBIT Variance (A$k) U/F % solids Target
US$520k EBIT benefit from reduced caustic losses by increasing solids from 54.5% to 58% solids
01 01De
c
02 02
Jan
Feb
Mar Apr
MayJul
Aug
Settler 451
A$0k
A$76k
A$93k
A$238k
A$173k
A$32kA$37kA$42k
-A$12k
A$0k
-A$13k-A$28k
-A$5k -A$8k
A$4k
-A$4k -A$8k -A$2k
A$31kA$13k
A$0k A$2k
-A$23k
A$0k
-A$10k-A$23k
52
53
54
55
56
57
58
59
60
01 01
Sep
01
Oct
01
Nov Ja
n02
Feb
Mar Apr
02
May
02
Jun
02
Jul
02
Aug
02
Sep
02
Oct
02
Nov
02
Dec
02 03 03 03 03 03
Jun
03
Jul0
3
Aug
03
Sep
03
U/F
% S
olid
s
EBIT Variance (A$k) U/F % solids Target
US$520k EBIT benefit from reduced caustic losses by increasing solids from 54.5% to 58% solids
Settler 451
A$0k
A$93k
A$238k
A$32kA$37kA$42k
-A$12k
A$0k
-A$13k-A$28k
-A$5k -A$8k
A$4k
-A$4k -A$8k -A$2k
A$31kA$13k
A$0k A$2k
-A$23k
A$0k
-A$10k-A$23k
52
53
54
55
56
57
58
59
60
U/F
% S
olid
s
EBIT Variance (A$k) U/F % solids Target
US$520k EBIT benefit from reduced caustic losses by increasing solids from 54.5% to 58% solids
Settler 451
A$0k
A$82k A$93k
A$238k
A$32kA$37kA$42k
-A$12k
A$0k
-A$13k-A$28k
-A$5k -A$8k
A$4k
-A$4k -A$8k -A$2k
A$31kA$13k
A$0k A$2k
-A$23k
A$0k
-A$10k-A$23k
52
53
54
55
56
57
58
59
60
U/F
% S
olid
s
EBIT Variance (A$k) U/F % solids Target
US$520k EBIT benefit from reduced caustic losses by increasing solids from 54.5% to 58% solids
Settler 451
A$0k
A$93k
A$238k
A$32kA$37kA$42k
-A$12k
A$0k
-A$13k-A$28k
-A$5k -A$8k
A$4k
-A$4k -A$8k -A$2k
A$31kA$13k
A$0k A$2k
-A$23k
A$0k
-A$10k-A$23k
52
53
54
55
56
57
58
59
60
U/F
% S
olid
s
EBIT Variance (A$k) U/F % solids Target
US$520k EBIT benefit from reduced caustic losses by increasing solids from 54.5% to 58% solids
01 01De
c
02 02
Jan
Feb
Mar Apr
MayJul
Aug
-44-
Aluminium CSG
BCS - Bauxite Residue Disposal Solids
• Increase in Bauxite Residue Disposal Solids from 61% to 63%.
• Soda Consumption lowered by 4,700 tonnes/year at FY04 Standard Soda Price of AU$219/tonne
Recurring Benefit of AU$1.0 million (pre-tax)
-45-
Continuous Improvement Projects a part of the way we do business…(216 projects currently being implemented and tracked at Worsley)
Aluminium CSG
KPI Review Process – The Visual Workplace
Primary Work Groupson the shop floor
KPI Review L1KPI Review L1 Align:- Start of shift Toolbox Meeting
# Level 1 Teams:WAPL BHA BBA MOZ
101 86 59 55
KPI Review L2KPI Review L2Cross-functional teams led by Area Coordinators
Align:- Area Morning Meetings- Coordinator’s Weekly Meeting
KPI Review L3KPI Review L3The EMT led by the General Manager
Align:- Weekly EMT Meeting - Monthly KPI Map Review
-46-
Aluminium CSG
Future Growth
Ian JacobsonVice President – TechnicalChief Operating Officer
-47-
Aluminium CSG
Southern African Brownfield Expansion Opportunities
020406080
100120140160180
Mozal 1& 2(36 Pots)
Mozal 3 (144 Pots)
Mozal 3 (336 Pots)
Hillside 3+ (54 Pots)
Hillside 3+(144 Pots)
Addi
tiona
l ktp
a (B
HPB
Sha
re)
Hillside & Mozal• Increase current to at least 350kA,
increasing production by 5% or more at little capital cost
• Improve current efficiency
• Extend existing potlines subject to power constraints
-48-
Aluminium CSG
Worsley Expansion to 3.5mtpa• Complete feasibility study Q4 FY04• Estimated cost < US$500 per annual tonne• Production would commence Q3 FY06
• Constrained by capacity of overland conveyor system, but expect > 4.0mtpa• Presently undertaking a conceptual study• A similar cost to the 3.5mtpa expansion is expected
Worsley Expansion beyond 3.5mtpa
-49-
Aluminium CSG
Brazil
• Alumar Refinery creep from 1.3mtpa to 1.5mtpa by 2007• Further potential for Alumar Refinery expansion to 3.0mtpa• The bauxite for our share of the Alumar Refinery expansion is in place• Alumar Smelter Line II full production by Q3 FY04• Potentially short of power – BHP Billiton addressing by pursuing own
generation capacity, in conjunction with its JV partners (Machadinho, Estreito)
MRN ALUMAR
▓São Paulo VALESUL
-50-
Aluminium CSG
Suriname• Alignment of BHP Billiton & Alcoa Interests under new agreement gives
BHP Billiton access to new bauxite areas & cost efficiencies• Paranam refinery creep / expansion from 1.95mtpa to 2.3mtpa by Q1
FY06 (US$65 million total, BHP Billiton US$29 million)• Ongoing cost improvement initiatives and evaluation of further
expansion potential• Western Suriname (Bakhuis) exploration under way
Tarakuli
Bakhuis Horst
Coermotibo
Nassau
Lely
Bakhuis Area
-51-
Aluminium CSG
BHP Billiton Aluminium and Alumina Production
Aluminium Production Alumina Production
• Mozal III
• Hillside III – add 54 pots
• Current to at least 350kA
• Worsley to 4.1mtpa
• Alumar to 3.0mtpa
• Suriname to 2.3mtpa
-52-
300.0
500.0
700.0
900.0
1100.0
1300.0
1500.0
1700.0
99/00 00/01 01/02 02/03 03/04 04/05 05/06 09/10
Hillside Mozal Bayside Alumar Valesul
200.0
1200.0
2200.0
3200.0
4200.0
5200.0
6200.0
99/00 00/01 01/02 02/03 03/04 04/05 05/06 09/10
Worsley Suriname A lumar
How our portfolio might look in 2010, after harvesting our brownfield potential
Aluminium CSG
Finance
Alex VanselowVice President and Chief Financial Officer
-53-
Aluminium CSG
Net Operating Assets and EBIT– June 2003 Year End
Hillside30%
Bayside3%
Mozal16%Alumar S
5%
Marketing3%Worsley
38%
Alumar R3%
Valesul1%
Suriname1%
Hillside37%
Bayside10%Mozal
9%
Worsley21%
Marketing5%
Valesul2%
Alumar R2%
Suriname2%
Alumar S12%
Net Operating Assets
EBIT-54-
$5.1billion
$582 million
Aluminium CSG
EBIT Variance Analysis ($M)
-55-
492 53
441
(35)(23)7
106 (18)582
400
450
500
550
600
FY02 Price(incl. linked
costs)
Exchange Inflation AdjustedEBIT
Volume Cost Other FY03
Aluminium CSG
EBIT Sensitivity Analysis
(12)
(20)
(24)
(118)
11
16
20
118
(150) (100) (50) 0 50 100 150
LME Price ($100/t)
AUD/$ E-rate (10%)
Rand/$ E-rate (10%)
BRL/$ E-rate (10%)
$m
-56-
Aluminium CSG
85%
90%
95%
100%
105%
2001 2002 2003 2004
% o
f 200
1 co
st
Aa Act/Plan Aa Target
Unit Cost Performance (Normalized)
-57-
Alumina
Metal
85%
90%
95%
100%
105%
2001 2002 2003 2004
% o
f 200
1 co
st
Al Act/Plan Al Target
Normalized for LME, Exchange and Inflation
Aluminium CSG
Metal Cash Costs
-58-
Other Costs 7%Maintenance
& Sustaining Capex 6%
Labour 8%Pot relining
2%Pitch 3%
Coke 7%Electricity
25%
Alumina 37%
US$ based costsLocal currency based costs
Other Consumable
Costs 5%
Alumina 37%
Electricity 25%
Coke 7%Pitch 3%
Pot relining 2%
Labour 8%
Other Consumable
Costs 5%
Other Costs 7%
Fixed costsVariable costs
Maintenance & Sustaining
Capex 6%
Aluminium CSG
Alumina Cash Costs
-59-
Maintenance & sustaining capex 18%
Bauxite 21%
Caustic Soda 12%
Labour 13% Electricity 19%
Contract services 2%
Other Consumable Costs 6%
Other Costs 9%
US$ based costs
Local currency based costs
Local currency and US$ based costs
Other Costs 9%
Other Consumable
Costs 6%Contract services 2%
Electricity 19%Labour 13%
Bauxite 21%
Fixed costs
Variable costs
Maintenance & sustaining capex 18%
Caustic Soda 12%
Aluminium CSG
Capital Expenditure
-
50
100
150
200
250
300
350
400
450
2001 2002 2003 2004 2005 2006 2007 2008
Development Capex Improvement Capex Sustain ing Capex
Excludes 56% of Worsley for $1.5bn
-60-
Aluminium CSG
EBIT ROC based upon different real prices in 2005-08
-61-
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
2001 2002 2003 2004 2005 2006 2007 2008
@ $1,300/t @ $1,450/t @ $1,600/t
June Year End
Aluminium CSG
BHPB Aluminium Growth Indexed to 100 (Base Year 1995)
-62-
0
50
100
150
200
250
300
350
1995 1996 1997 1998 1999 2000 2001 2002 2003
LME cash
-23%
Production - Metal units
+228%
EBIT
+155%
Revenue
+138%
Aluminium CSG
EBITDA Margins (Calendar Years)
0%
10%
20%
30%
40%
50%
1998 1999 2000 2001 2002 H12003
Year
% Industry Sample *BHPB Aluminium
* Alcoa, A lcan, Pechiney, Norsk Hydro A luminium, Comalco, Chalco, Kaiser, Century and Reynolds
-63-
Aluminium CSG
Conclusion
Mike SalamonExecutive DirectorSenior Minerals ExecutivePresident Aluminium
-64-
Aluminium CSG
Key Messages
• Quality of asset portfolio - Upstream• Opportunity for significant further improvement• Still brownfield opportunities to harvest• Change in growth emphasis Aluminium to Alumina
– Response to supply / demand evolution in China– Where we believe the greatest source of future rent lies
-65-
MetalAlumina
