carbon steel materials performance and prospects
TRANSCRIPT
Carbon Steel MaterialsPerformance and Prospects
8 May 2002UBS Resources ConferenceStefano Giorgini – Vice President & CDOCarbon Steel Materials
8 May 2002 UBS Page 2
CSM19% = US$2,492M22% ex BHPS
CSM34% = US$831M36% ex BHPS
CSM EBIT ROC = 44%
Carbon Steel Materials Contribution9 months to March 2002
Group EBIT US$2,412MGroup Sales US$13,176M
8 May 2002 UBS Page 3
Carbon Steel Materials Assets
WA Iron Ore (65-100%)Prod: 70mtNO 3 SEABORNE SUPPLIER
QLD Coal (50-80%)Prod: 50mt NO 1 SEABORNE SUPPLIER
Samarco (50%)Prod: 12mtLOW COST PELLET PRODUCER
Illawarra (100%)Prod: 7mt NICHE SUPPLIER
Port Hedland HBI (100%)Prod: 1.8mt
Manganese (60 %)Prod: Ore 3.5mt Alloy etc 0.6mt NO 1 SEABORNESUPPLIER
100% nominal production capacity
8 May 2002 UBS Page 4
Carbon Steel Materials Assets
WA Iron Ore (65-100%)
34 Years2377mt
QLD Coal (50-80%)
53 Years 2642mt
Samarco (50%)
37 Years55mt
Illawarra (100%)44 Years
307mtManganese (60 %)
Aust 40mt / 25 YearsSouth Africa
40mt / 30 Years Years = Current reserves / Nominal productionReserves = 100% Million tonnes
8 May 2002 UBS Page 5
BHPB Marketing FranchiseAsia
CHINABB: Major supplier of iron ore & manganese
JAPANBB: Premier supplier of CSMs
- reliable, consistent quality- supplier of high VIU product
KOREA / TAIWANBB: Premier supplier of CSMs
- reliable, consistent qualityINDIABB: Competitive supplier of coking coals
8 May 2002 UBS Page 6
BHPB Marketing FranchiseEurope and South America
EUROPEBB: Premium supplier of HQCC Supplier of manganeseMarket for lump ores and pellets
BRAZILBB: Core supplier of HCC
8 May 2002 UBS Page 7
Operating ExcellenceWA Iron Ore
8 May 2002 UBS Page 8
Seaborne Iron Ore Cost CurveCa
sh C
osts
(US$
/T)
Pellets
YandiGoldsworthy
Whaleback
Samarco
Jimblebar
OB 23/25MACestim
30
20 Fine + Lump
10
00 100 500 600200 300 400
Cumulative Production (Mtpa Fe)
Source: BHPB, AME
8 May 2002 UBS Page 9
WAIOImproved Productivity
1,2001,4001,6001,8002,000
YEM97 YEM98 YEM99 YEJ00 YEJ01 YTD02Employee numbers
Numb
er of
Emp
loyee
s
20,000
25,000
30,000
35,000
Tonnes Sold per Employee
Tonn
es so
ld pe
r Emp
loyee
2,800 50,0002,600
45,0002,4002,200 40,000
1,000
8 May 2002 UBS Page 10
Railroad Operating Improvements
240190Train
Length(no of cars)
131
1972 1984 Current
40
1972
36
1990
TrainCycle Time
(hours)
28
Current
8 May 2002 UBS Page 11
Gross Loading Rate – Nelson Point
6000
5109
4000
4500
5000
Tonn
es pe
r Hou
r 5500
3500Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun YTD
AvgYEJ00 average YEJ01 average YEJ02 actual
8 May 2002 UBS Page 12
Operating ExcellenceWA Iron OreSamarco
Samarco
BRASILIA
• RIO DE JANEIROIRON
QUADRANGLE
• VITÓRIA
ESPÍRITO SANTO
40º 4’40’W
Tubarão
Vitória20º46”48”S
ATLANTIC OCEAN
SAMARCO Mine
SLURRY PIPELINE396 Km
CVRD Rail
road
IRON QUADRANGLE
Belo Horizonte
MINAS GERAIS FEDE
RAL
Railr
oad
RIO DE JANEIRO
Rio de JaneiroSepetiba
SÃO PAULO
PONTA UBU TERMINAL
8 May 2002 UBS Page 14
Samarco Improving Productivity
1997 1998 1999 2000 20010
2500
5000
7500
Numb
er of
Emp
loyee
s
Tonn
es so
ld pe
r Emp
loyee
1600 12500
100001200
800
400
0
Tonnes Sold / EmployeeEmployee Numbers
8 May 2002 UBS Page 15
Operating ExcellenceWA Iron OreSamarcoQueensland Coal
8 May 2002 UBS Page 16
Seaborne Hard Coking Coal Cost Curve
Norwich Park, Blackwater, Peak Downs
West Cliff, Tower, Appin
Goonyella
Elouera
CrinumSaraji, Riverside
Gregory
Cash
Cos
ts (U
S$/T
)
40
30
20
10
00 10 20 30 40 50 60 70 80 90 100 110
Cumulative Production (Mtpa Fe)
Source: BHPB, AME
8 May 2002 UBS Page 17
Queensland Coal Ownership Structure
BiloelaThangool
YeppoonCapella Tieri
Dalrymple Bay Coal TerminalEungella Dam
Fairbairn Dam
MACKAY
BLACKWATER
Springsure
ROCKHAMPTON
Moura
Nebo
SarinaGlenden
GREGORY
GOONYELLA
CORAL
SEA
Clermont
Collinsville
BlackwaterEMERALD
Moranbah
Bingegang Weir
SARAJI
CRINUM
RG Tanna Coal TerminalBarney Point Coal Terminal
Dysart
RIVERSIDE
AUSTRALIA AREA OF MAPQLD
NSW
WA
VIC
T
SA
NT
SOUTH WALKER CREEK
BM Alliance
Coal
BM Alliance
Coal
CQCA JV:
Peak Downs MineGoonyella MineNorwich Park MineSaraji MineBlackwater MineHay Point Terminal
Gregory JV:
Gregory MineCrinum Mine
BHP Mitsui Coal P/L:
Riverside MineSouth Walker Creek Mine
Management &
Marketing
BHP BillitonBHP
Billiton
Mitsubishi DevelopmentMitsubishi
Development
20%
50%
80%
50%
Mitsui & Co.
Mitsui & Co.
8 May 2002 UBS Page 18
Queensland Coal Improved Productivity
0
1000
2000
3000
YEM97 YEM98 YEJ99 YEJ00 YEJ01 YTD020
3000
6000
9000
Numb
er of
Emp
loyee
s
Tonn
es so
ld pe
r Emp
loyee
180005000
150004000
12000
Tonnes Sold / EmployeeEmployee Numbers
8 May 2002 UBS Page 19
Operating ExcellenceWA Iron OreSamarcoQueensland CoalIllawarra
8 May 2002 UBS Page 20
IllawarraIncreasing scale of operations
Elouera
Appin
West CliffCordeaux
Tower
Dendrobium
01234
6
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
5Mt
789
8 May 2002 UBS Page 21
IllawarraImproved Productivity
500
1,000
YEM97 YEM98 YEM99 YEJ00 YEJ01 YTD02Employee numbers
Numb
er of
Emp
loyee
s
0
2,500
5,000
Tonnes Sold per Employee
Tonn
es so
ld pe
r Emp
loyee
10,0002,000
7,5001,500
0
8 May 2002 UBS Page 22
Operating ExcellenceWA Iron OreSamarcoQueensland CoalIllawarraManganese
8 May 2002 UBS Page 23
Manganese industry structure
EndUseCustomers
Integrated alloy smelters (30%)
Independent alloy smelters (70%)
Steel producers (94%)
Chemical and metallurgical segments (6%)
OreProducers
Integrated Alloyers
Alloy Producers Steel Producers
Independent Alloyers
Ore Producers
Industry segmented by ore characteristics:
— High grade ore
– Low grade ore
Source: Monitor, SAMMN
8 May 2002 UBS Page 24
Manganese Ore - Cash Cost Curve
$/mtu
Mamatwan Wessels Gemco
Represents 75% of total world output
Azul
Mar
gane
tsU
G
Mam
atw
an
Zuny
i
Wes
sels
Moa
nda
Gha
na
Nch
wan
in
Glo
ria
Gem
co
Xian
gtan
CM
L
Mar
gane
ts
Autla
n
Ord
zhon
ikid
ze
Prod cost* Pre-FOB cost*Excludes depreciation
g
Source: BHPB, CRU 2000, Updated Apr’02
8 May 2002 UBS Page 25
Manganese Ferro Alloy - HCFeMn Cash Cost Curve78% Mn Equivalent
$/t
Metalloys
Temco
0
Hira
Zuny
iEl
kem
PXi
angta
nEl
kem
SMe
talloy
sFe
rallo
ysXi
nyu
Temc
oSE
ASSi
bra
Mizu
Guan
gxi
SFPO
Fera
t C Bayi
Pauli
sta B
Dong
buSh
aoxin
gMa
ringa
Pauli
sta R
Fera
t BEm
eiHa
n Hap
Dong
ilND
KAu
tlan
Niko
pol
OFZ
Italgh
isaCD
KZa
poro
zhye
Elke
m M
KSL
Forn
ilegh
eTis
co Jilin
Shan
xiME
LKF
A
Conv Cost FOB DelOre Input
Source: BHPB, CRU 2000, Updated Apr’02
8 May 2002 UBS Page 26
Manganese Improved Productivity
2000
YEM97 YEM98 YEM99 YEJ00 YEJ012000
2500
3000
Tonn
es so
ld pe
r Emp
loyee
4000
Numb
er of
Emp
loyee
s
1500 3500
1000
500
0
Tonnes Sold / EmployeeEmployee Numbers
8 May 2002 UBS Page 27
Business Growth & Product Development
8 May 2002 UBS Page 28
Project Pipeline
PREFEASIBILITY FEASIBILITY EXECUTION
Westcliff Longwall
Yandi Long Term Optimisation
PACE Stage 2
Project
Goonyella Underground
Universal Dragline
Project
PACE 81South Blackwater Integration 13.5
MAC 15
Yandi Lump 4Dendrobium 5
Project Tonnage(Mtpa)
Samarco Roller Press 2
Blackwater -Central processing
Yandi Lump
• Low capital, high value project• Modification of No. 2 Ore Handling
Plant• Additional 4Mtpa Lump Product• Customer LOI’s in place• Commission July 2002
8 May 2002 UBS Page 30
Mining Area C
Rail Spur
C Deposit Pit Outline
Airstrip
Electricity Substation
11 Blending stockpiles
Village
Bulk Sample Pit
8 May 2002 UBS Page 31
Mining Area C• More than 800 million tonnes of iron ore in seven
separate deposits
• US$213m (100%) capital expenditure (mine, processing & rail spur)
• 740,000 tonne bulk sample April 2002
• Bulk sample product railed and processed
• First shipment scheduled to POSCO
• Production target – late 2003
• Capacity to 15mtpa
• Ramp up in line with market demand
• POSMAC JV
8 May 2002 UBS Page 32
Products & Capacity Expansion Project (PACE)Western Stockyard Works
Stage 1• US$351m (100%) capital
expenditure (port, mainline, environment)
• Upgrade under harbourtunnel to 10,000tph
• New berth approach jetty and conveyors
• Extend existing berth north and upgrade conveyor
• New 10,000tph shiploader• New Western Stockyard
1.65Mt and Lump Re-screening Plant
• Water and power supplies upgraded
• Environmental berm• Foundation for Long Term
optimisation
8 May 2002 UBS Page 33
Samarco Roller Press• Capacity round out: increasing plant capacity at Ubu pellet
plant by 2 mtpa (to 14 mtpa)
• Modest capex (US$25M, 100%)
• Converts low margin concentrates to high margin pellets
• Commission May 2003
8 May 2002 UBS Page 34
Dendrobium
Care and Maintenance
WONGAWILLI
O'BRIEN'S DRIFT
TOWER
APPIN
CORDEAUX
ELOUERA
DENDROBIUM
NEBOPORT KEMBLA
COAL TERMINAL
WOLLONGONG
Port Kembla Steelworks
MACARTHUR• Maintain high quality No.2 seam
• Drive next phase of cost productivity
• Expand production to > 8mtpa
• Long term supply to BHP steel
Lease boundary
Mined area
Current mining ar a
Portal
8 May 2002 UBS Page 35
• Universal Dragline (UDD) is a modified hoisting system that BMA is testing
• Productivity gains of >20% may be possible• Gains in productivity are based on:
– Decrease in equipment weight. Converted to payload
– Reduced cycle time. Bucket can now be picked up when full.
– Improved physical characteristics. Increase in dump height, boom length and dig depth.
– Expected productivity benefits in new bench designs.
• Trials in progress.
Universal Dragline
8 May 2002 UBS Page 36
Goonyella Underground
• Development of low capital low risk punch longwall in Goonyella middle seam
• Equipment - low capex options
• Flexible production
• Gain experience in north Bowen Basin longwall mining
8 May 2002 UBS Page 37
Carbon Steel Materials – Value Add
• Operating excellence - Plans in place across all sites to achieve cost
targets
• Customer focus – Marketing hubs established
• Knowledge based
8 May 2002 UBS Page 38
Carbon Steel Materials – Prospects
• Steady – prudent growth
• Attractive industry structure – but challenges
• China – opportunity & threat
• Pre-eminent resource base and assets
• Further efficiency and productivity opportunities
• Solid project pipeline