Africa Mining July 2006 - BHP · – Sustainable development and – Harnessing Africa’s huge...
Transcript of Africa Mining July 2006 - BHP · – Sustainable development and – Harnessing Africa’s huge...
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BHP BillitonMining in Africa:Opportunities and challenges
Dr Vincent Maphai
July 2006
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DisclaimerThe views expressed here contain information derived from publicly available sources that have not been independently verified. Norepresentation 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.
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0102030405060708090
100110120130140
Mark
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The largest company in the resources sector
Market value of minerals industry US$795bnValue of Top Four US$329bn Value of BHP Billiton US$130bn
Source: Datastream and Bloomberg (data as at 21 April 2006)1. Market Capitalisation on 21 April 20062 .Market Capitalisation on 28 June 2001
BHP Billiton Market Cap 2006 (1) 2001(2)
US$ bn $130.3 $29.5
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The world’s largest diversified resources companyPetroleum
Aluminium
Base Metals
Carbon Steel Materials Diamonds & Spec Prod Energy Coal Stainless Steel Materials
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The resources sector• The global resources sector is changing:
– Consolidation has changed the industry considerably over the past five years
– The consolidation trend is likely to continue, and there is likely to be continued M&A activity at the small to medium end for some time
– Increased demand has led to greater production and projects across the industry, which has meant higher returns
– Emerging and urbanising markets of China and India playing a greater role – high demand for raw materials has led to higher commodity prices
• The outlook remains positive:– While there will be peaks and troughs, the outlook for the industry is
one of continued strength
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Creating value at a local level – our communities• Sustainable development at every level is fundamental to
our success – our licence to operate depends on the responsible operation of all aspects of our business:
– A strong track record of being valued by our communities will contribute to us being considered a ‘company of choice’ by governments, business partners and communities
– We are in a better position to attract and retain a skilled and motivated workforce
– Our reputation as an ethical, responsible business will assist in our ability to attract capital to continue to grow our business
We aim to be a business that creates a positive legacy
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Strategic drivers
“Our core purpose is to create long-term value through the discovery, development and conversion of natural resources, and the provision of innovative customer and market-focused solutions.”
World Class Assets
The BHP Billiton Way(Value Added Processes)
People
‘Licence to Operate’
Financial Strength and Discipline
Project Pipeline
Growth Options
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10%
14% 16%12%
28%11%9%
27%6% 34%
19%3%6%5%
The portfolio effect: diversification remains a key focusBy CommodityCustomer Sector Group Underlying EBIT:
Carbon Steel Materials
Petroleum
Energy Coal
Aluminium
Diamonds & Spec. Prod.
Base Metals
Stainless Steel Materials
Data for the half year ended 31 December 2005
By MarketSales:
By GeographyNet Operating Assets:
South America
Australia
Southern Africa
North America
Rest of World
EuropeJapanChinaOther AsiaNorth AmericaAustraliaRest of World
12%8% 6% 20%
54%
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BHP Billiton in summary• World’s largest diversified resources company• Sustainable development is integral to our business• Our people are our most significant asset and number one priority – Zero
Harm drives all our operations• Our large base of low-cost, high quality assets provides stable cash flow
and visibility to new opportunities across the world• Our size and diversity means we can generate benefits through
Operational Excellence• Our growth pipeline distinguishes us from our competitors – our current
project pipeline includes 25 projects with expenditure of US$14.4 billion
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Southern African Assets
CoalKhutala
CoalKoornfonteinDouglasMiddelburgOptimum
Richards Richards BayBay
DurbanDurban
WitbankWitbankJohannesburgJohannesburg
Cape Cape TownTown
BloemfonteinBloemfontein
ManganeseManganeseHotazel Hotazel Manganese Manganese MinesMines
AluminiumHillsideBayside
Richards Bay Minerals Richards Bay Minerals
MaputoMaputo
ManganeseManganeseManganese Metal Manganese Metal CompanyCompany
AluminiumMozal
ManganeseManganeseMetalloysMetalloys
Port Port ElizabethElizabeth
MozambiqueMozambique
South AfricaSouth Africa
Petroleum ExplorationPetroleum ExplorationBlock 3B/4B, Block 3A/4ABlock 3B/4B, Block 3A/4A
CoalRichards Bay Coal Terminal
Petroleum Exploration Petroleum Exploration NamibiaNamibiaNorthern Block, Southern Northern Block, Southern BlockBlock
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• Aluminium:Hillside, Bayside & Mozal (47%) smelters, total 1.3 Mtpa;axis contributes 7% of world aluminium.
• Energy Coal:SA’s largest coal producer at 54 Mtpa;31.28Mt to Eskom power utility, remainder exported via RBCT
• Richards Bay Coal Terminal: (37% shareholding)• Manganese: Samancor, 60/40 with Anglo American, operated by
BHP Billiton. Ores and alloys• Richards Bay Minerals: Titanium producer, 50/50 with Rio Tinto• Exploration: Oil & Gas; Diamonds (Falcon); other.
Activities
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BHP Billiton SA: Who are we?• Robust pedigree.• Listed on Johannesburg Stock Exchange.• Corporate Centre in Johannesburg; Led by SA Chairman.• About 17 000 employees.• Empowerment Initiatives advanced;
• Mineral and Petroleum Resources Development Act;• Employment Equity• Procurement
• HSEC;• Health (HIV/Aids)• Safety• BHP Billiton Development Trust
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Africa’s rich mineral endowment• Despite being under-explored Africa has approximately 30% of the planet’s
mineral resources. New mining opportunities are likely to come from the following countries:
– Iron Ore: Guinea, Liberia, Mauritania, CAR– Bauxite: Guinea, Sierra Leone, Ghana– Copper/Cobalt: DRC, Zambia, Mauritania, Botswana, Tanzania– Zinc-Lead-Silver: South Africa, Zambia, Tunisia– Nickel: Tanzania, Angola, Madagascar, Ivory Coast– Platinum: South Africa, Zimbabwe– Ferrochrome: South Africa– Manganese: South Africa, Gabon, DRC– Gold: Ghana, Mali, Burkina Faso, DRC, Tanzania, Algeria, South Africa– Diamonds: Angola, DRC, Botswana, Zimbabwe, Namibia, Mauritania– Mineral Sands: Mozambique, Madagascar– Agricultural Minerals: Kenya, Republic of Congo, DRC– Uranium: Namibia, Malawi
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BHP Billiton Africa Minerals Exploration: main 2005-06 projects
BauxiteDiamondsSed CopperIron OreIOCGNickelManganese
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Geographic Exploration Spend as a % of annual total
0102030405060708090
100
FY04 FY05 FY06 FY07FORECAST
GlobalAfrica
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Major mining projects in Africa – opportunities and challenges
• Africa an important producer of commodities needed to fuel worldgrowth
• Africa: strategic exporter of commodities for the forseeable future• Africa relatively under-exploited• Challenges and blockages persist … but the picture is improving
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The greatest challenges• The greatest challenges:
– Common ground to benefit all stakeholders– Sustainable development and– Harnessing Africa’s huge hydropower potential
• The need to foster a stable economic and political environment in order to attract private investment
• Good Governance (transparent legislation and decision-making)• The presence of a substantial and reputable investor
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Resources in Africa: Key success story - Mozal
• Mozambique emerged from the ravages of a bitter civil war in the1990s
• Capital investment approx US$ 2-billion• Production more than 500,000 tpa primary aluminium• Shareholding: BHP Billiton (operator) 47%; Mitsubishi 25%; IDC
24%; GoM 4%
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Mozal Benefits: Integrated Development
ECONOMIC ENERGY• Regional Economy: $105 million pa• Export Earnings: Doubled to US$811 million pa• Local infrastructure upgrade: US$ 31 million
JOB CREATION• Permanent job creation on site: 1150• Contractors: 1600• Indirect job creation: approx 10,000
QUALITY OF LIFE• Mozal Community Development Trust: $2.5million pa• Over 200 projects: US$10 million• Health, small enterprise, education, sports, culture• Partnering approach with NGOs
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DRC
• Rich in minerals and emerging from decades of civil war.• Has potential to become a leading African nation• World Bank sponsored Mining Code promulgated by parliament in
July 2002 has sparked unprecedented demand for exploration licences.
• BHP Billiton exploring for diamonds and copper.• BHP Billiton establishing an office in Kinshasa.
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Africa will become increasingly important as a major producer ofcommodities needed to fuel world growth• The emerging economies of China, Taiwan and Korea require
huge imports of raw materials for urbanisation and associated infrastructure
• The growth of China has caused an upswing in demand for commodities
• Consumption of Alumina, Iron Ore, Copper and Nickel in China doubles each decade
• China’s growth is not a short-term phenomenon• Increasing world consumption + strong commodity prices will
support the African mining industry
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0250500750
1,0001,2501,5001,7502,0002,2502,5002,7503,000
FY02 H1 03 H2 03 H1 04 H2 04 H1 05 H2 05 H1 06Petro leum Aluminium Base Metals CSM Energy Coal SSM
China• Sales into China increasing but diversification remains• Currently 16.2% of total company revenues, up from 12.6% in FY05
US$M
431
7851,075
1,357
371
1,588
Europe
Japan
Other AsiaNth America
China
Australia
ROW
2,407
2,946
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Major challenges to mining investment in Africa• Challenges and blockages facing the mining industry will persist, but the situation
is generally improving and some countries have made remarkable progress• Challenges to mining investment:
– Political and sovereign risk– Health and Safety– Environmental protection– Poor infrastructure– Corruption– War, civil unrest and personal security– Lack of skills– Non-transparent or unfavourable mining and investment codes– Inefficient and unjust judicial system– Uncompetitive base costs– Community involvement and poverty.
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Key Learnings• The continent will continue to witness huge problems related to
disease, war, civil unrest, corruption, poor infrastructure and political risks
• Marked pockets of improvement evident.• Making wise investments in the mining business requires boldness
on the part of the investor, and thorough understanding and management of the risks.
• Social investment an integral part of the growth plan
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Black Economic Empowerment (BEE)
• The Act covers Ingwe, Samancor Cr and Mn and RBM, but not aluminium smelters at Richards Bay.
• 15% in 5 years and 26% in 10 years.• The objective is to create Black mining house through skills
development, Mentoring and sale/JV of business or assets.• Transactions in Coal, RBM and Cr.• Building on a positive relationship with Department of Minerals and
Energy to ensure a smooth transition.• We will be doing a number of transactions over a period of time.
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Group BEE Spend as @ FY06 3rd Quarter
294
916
1535 1542
0
200
400
600
800
1000
1200
1400
1600
1800
FY03 FY04 FY05 FY06 3rd Quarter
Val
ue o
f Spe
nd (R
m)
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HDSA Representation in Management & Female Representation in Workforce
14.7
21.7
24.8
29
32.3
0
5
10
15
20
25
30
35
Y 2000 Y 2001 Y 2002 Y 2003 Y 2005
HDSA Representation in Management (Target 40% by 2006)
Female Representation in Wor kforce (Tar get: 10% by 2006)
5.6
10.7 10.8
13.1
9.9
0
2
4
6
8
10
12
14
Y2000 Y2001 Y2002 Y2003 Y2005
CHALLENGES1.Shortage of Skills in some functions i.e. engineering & technical2.Ensure we attract and retain the best talent3.Black professionals moving from formal sector to starting up own businesses4.Focus on internal development
MILESTONES1.Formalised Transformation Charter2.BHP Billiton Development Program3.Retention Strategy Developed4.Talent Management across commodities & functions
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Group practice: 1% of pre-tax profit over 3-year average• Expenditure for year ended 30/06/05: R46m /US$7.4m
R32.3m/US$5.2m on 29 projects valued at R81.6m/US$13.1mR13.7m/US$2.2m spent on donations
• The BHP Billiton Development Trust (BBDT):Managing body representing all CSGsCOOs acting as trustees
• Funding Criteria:SustainabilityValue-add
Social Responsibility
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