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United Kingdom

Billiton Plc

A world leader in mineral resources

Annual Report 1998

Billiton Annual Report 1998

Billiton’s aim to deliver real growth forshareholders rests on its unrivalled portfolio ofassets, diversified by commodity and by country;on its quality operations, characterised by their low cost, scale and long lives; on a majorprogramme of growth throughout the Group; and on the Company’s proven technical expertise and strong management team.

flap Group Profile

1 Financial Highlights

2 Chairman’s Review

6 Financial Review

11 Growth Opportunities

15 Aluminium

17 Quality Operations

19 Base Metals

21 Coal

23 Marketing and Trading

25 New Business and Technology

26 Diversity of Operations

29 Nickel

32 Steel and Ferroalloys

33 Technical Expertise

36 Titanium Minerals

38 Health, Safety and the Environment

43 Social and Community Involvement

45 Board and Executive

47 Financial Contents

Contribution to 1998Area Business Description Attributable Profit

Base Metals

Coal

Marketingand Trading

New Businessand Technology

Nickel

Steel andFerroalloys

TitaniumMinerals

Billiton’s aluminium business is active in every stage ofthe primary aluminium production process: bauxitemining, alumina refining and aluminium smelting. It isone of the world’s major producers of both alumina andaluminium, with total attributable capacities of 1.7 mtpaof alumina and 883 ktpa of aluminium.

This unit concentrates on base metals other thanaluminium and nickel. The two current operations, Les Mines Selbaie and Pering Mine, are both near the end of their lives, and the focus is on generating new growth opportunities.

Billiton’s coal business comprises its holding in publicly-quoted Ingwe Coal Corporation of South Africa. Ingwe is the world’s largest exporter of steam coal. It operates 11 mines in Mpumalanga and KwaZulu-Natal provinces,South Africa and four mines in New South Wales, Australia.It holds a 42.3% share in the Richards Bay Coal Terminal,South Africa.

Billiton Marketing and Trading BV (BMT) is responsible for the marketing of a substantial part of the Group’sattributable production, and trades third-party products.BMT has a major presence in the aluminium, alumina andnickel markets. Billiton Metals Limited is a ring-dealingmember of the London Metal Exchange (LME).

New Business and Technology is focused on theacquisition and development of growth opportunities forthe Group, particularly in copper, zinc, nickel and iron ore.Its activities cover: exploration, minerals technology,mergers and acquisitions, and technical services.

Billiton’s nickel business comprises the Group’s 52.4%holding in publicly-quoted QNI Limited of Australia. QNI isone of the world’s top five nickel producers. Its operationsconsist of the Yabulu laterite nickel refinery in Queensland,Australia, and the Cerro Matoso mine and ferronickelsmelter in Colombia.

Steel and Ferroalloys consists of the Group’s 54.6% holdingin publicly-quoted Samancor of South Africa. Samancor isthe world’s largest integrated producer of chrome andmanganese ores and ferroalloys. Its mines and plants arelocated in South Africa, and the majority of its output is exported to the global steel industry.

Operations consist of a 50% share of Richards BayMinerals (RBM) of South Africa. RBM is the world’sleading producer of titanium dioxide slag for the titaniumdioxide pigment industry. High purity pig iron, zircon andrutile are important co-products.

Group Profile

US$17m

US$49m

US$27m

US$12m

US$33m

US$96m

US$279m

Aluminium

-US$68m

Hillside smelter South Africa 100% owned, 504 kt of aluminiumBayside smelter South Africa 100% owned, 174 kt of aluminiumWorsley mine/refinery Australia 30% interest, 516 kt of aluminaMRN mine Brazil 15% interest, 1.5 mt of bauxiteAlumar refinery Brazil 36% interest, 380 kt of aluminaAlumar smelter Brazil 46% interest, 162 kt of aluminium Valesul smelter Brazil 46% interest, 43 kt of aluminiumBMS mining JV Suriname 76% interest, 1.9 mt of bauxiteBMS refining JV Suriname 45% interest, 792 kt of alumina

Operations Ownership(1) and 1998 Production Growth Projects

Les Mines Selbaie Canada 100% owned: 14 kt of copper 56 kt of zinc

Pering Mine South Africa 100% owned: 26 kt of zinc6 kt of lead

Ingwe Coal Corporation South Africa 47.6% effective holding, 67.2 mt of coalCoal Mines Australia Ltd Australia 100% owned by Ingwe, 4.7 mt of coal

Offices located in The Netherlands, France, Germany, UK, Singapore, China, Japan, Australia, Chile

Regional exploration offices located in: Beijing (China), Johannesburg (Africa), Melbourne (Australasia), Santiago (Latin America)

QNI Limited Australia 52.4% ownedCerro Matoso Colombia 98.9% owned by QNI, 27.1 kt of nickel

in ferronickelYabulu Refinery Australia 100% owned by QNI, 26.9 kt of nickel

1.3 kt of cobalt

Samancor South Africa 54.6% owned: 2086 kt of manganese ore3240 kt of chrome ore409 kt of manganese alloys935 kt of chrome alloys

Columbus Stainless South Africa 33.3% owned by Samancor, 319 kt of stainless steel

Richards Bay Minerals South Africa 50% interest, approximately 1 mtof titanium dioxide slag

� Mozal: new 250 ktpa aluminium smelter in Mozambique. Group interest 47%,completion 2001.

� Worsley: 82% expansion of refinery to 3.1 mtpa. Group interest 30%, completion2000.

� Zinc refinery: potential new 250 ktpa zinc refinery in Eastern Cape, South Africa.Group interest 40%.

� Mount Arthur North, Australia: newworld-class mine in Hunter Valley, 600 mtreserve, adjacent to Group’s existingBayswater mine. Completion 2002/3.

� Middelburg, South Africa: Maintain exportsales of 5.3 mtpa. Completion end 2000.

� Douglas, South Africa: Expand export salesby 2.3 mtpa. Completion end 2000.

� Cerro Matoso Line 2: feasibility onexpansion of Cerro Matoso, to raise QNI’stotal nickel capacity to 85 kt by 2001.Decision by QNI Board end 1998.

� Portfolio of copper, zinc and nickelexploration properties across all stages of development.

� A range of cost reduction and efficiencyimprovement programmes.

� Pelletising project at Ferrometals to reducedependency on lumpy ore, reduce costs andincrease furnace capacity by 60 ktpa.

� RBM 5th mining plant: new mining siteand plant upgrade to maintain long termoutput levels.

� TiGen: major minerals sands resource inMozambique, 100% owned by Billiton. At feasibility stage.

(1) Ownership percentages as at 30 June 1998 kt: thousand tonnes mt: million tonnes

Financial Highlights

Billiton Annual Report 1998 1

US$ million 30 June 1998 30 June 1997 % change

Turnover (including share of joint ventures) 6,060 5,815 4

Attributable profit excluding exceptional items 481 335 44

Attributable profit including exceptional items 481 537 (10)

Attributable net assets(1) 4,582 3,014 52

US cents per share

Earnings per ordinary share excludingexceptional items 22.9 19.6 17

Earnings per share including exceptional items 22.9 35.5 (35)

(1) Attributable net assets at 30 June 1997 are presented on a pro-forma basis as though the establishment of the Company (but not the Initial Public Offering) had taken place at that date.

� Sound results in Billiton’s inaugural year as a UK-based public company

� Nickel interests merged with QNI Limited to create one of the world’s top five nickel producers

� Construction commenced at Mozal aluminium smelter and Worsley alumina refinery

� Additional growth projects approved at Ingwe and Richards Bay Minerals; on-going projects at Samancor

� Strong financial position allows pursuit of additional value-enhancing opportunities

� Innovative mechanism proposed for share buy-back

� Announcement of proposed buy out of minorities in Ingwe and Trans-Natal

� Final dividend of seven US cents per ordinary share, giving a full year dividend of 10.5 US cents.

Chairman’s Review

I am pleased to report sound results for Billiton’s first financial year as a Plc. Attributableprofits reached US$481 million, representing a 44% increase over the US$335 million,excluding exceptional items, earned in the previous year, and a record performance whencompared with the results of the former Gencor Limited, which owned the businessespreviously. The net cash flow from operating activities was nearly US$1.1 billion, and ourcash holdings increased by US$1.5 billion. Significantly, the Group held nearly US$2 billionin cash at year end.

At a per share level, earnings excluding exceptional items were 22.9 cents, 17% higher than in the preceding year. The Directors have declared a final dividend of 7 cents per ordinary share, which brings the total for the year to 10.5 US cents per share.

These results were achieved despite the adverse market conditions arising from theupheaval in the Asian economies. Sales levels were maintained and most of our operationscontinued to derive competitive benefit from their relatively low production costs. As almostall of Billiton’s sales are priced in US dollars, our competitive position is likely to be evenstronger in the year ahead since the local currencies in a number of the countries where weoperate have weakened significantly.

The Operations There were good operating performances at all of our businesses. We maintained a strongfocus on the control of costs. In local currency terms, Group operating costs, excluding theimpact of increased sales volumes, rose by 3%, well below the underlying rate of domesticinflation averaged across our operations. In US dollar terms, the costs fell by 2%, whichrepresents a considerable achievement on the part of the operational management.

Detailed reviews of the individual operations appear in the reports that follow.

Corporate Activity The 1998 financial year was a very active one for Billiton. It began with the purchase ofGencor Limited’s non-precious metals businesses, the raising of US$1.5 billion of new equitycapital via an Initial Public Offering (IPO), and the listing on the London Stock Exchange.These moves were fundamental to our objective of achieving real growth as one of theworld’s foremost natural resource companies.

With good timing, a US$1.5 billion syndicated revolving credit facility was arrangedshortly afterwards, on terms which, in the light of subsequent developments in the worldfinancial markets, are clearly attractive. This facility, together with the proceeds of the IPO,has substantially increased Billiton’s financial flexibility, and established its capacity to pursuemajor new investment opportunities worldwide.

Investing for Growth During the year, Billiton approved new capital projects with a total value of US$2.7 billion,to develop the existing assets and exploit new opportunities, and to broaden our geographicaland commodity base. Almost all of the projects that we signalled at the time of the IPO havenow been successfully launched, as indeed have others identified subsequently:� We completed the merger of Billiton’s nickel assets with those of QNI Limited, theAustralian nickel producer. This has created the world’s fifth largest nickel company, in whichBilliton has a 52.4% holding. A decision on the development of a second line at Cerro Matosowill be made shortly.

2 Billiton Annual Report 1998

� The US$600 million expansion of the Worsley alumina refinery in Western Australia hasbegun. This will raise capacity by 82% to 3.1 mtpa. Worsley, in which Billiton holds a 30%interest, is already one of the lowest-cost producers in the industry, and this project whencompleted in 2000 will reduce its unit costs still further.� The US$1.3 billion Mozal project has been approved and construction has commenced.This is a new world-class aluminium smelter, located in Maputo, Mozambique, and plannedfor commissioning in 2001 with an initial capacity of 250,000 tpa. Alongside the expectedbenefits for our shareholders, Mozal will provide a powerful stimulus to the Mozambiqueeconomy by developing the industrial base and export potential of the region. Billiton leadsthe project and will hold 47% of the equity.� Work on the fifth mining plant at Richards Bay Minerals has commenced. The project,with a capital cost of approximately US$150 million, will maintain annual slag production of one million tonnes for a period of 15 years.� The US$56 million Pelletising project at Samancor’s Ferrometals will increase furnacecapacity and reduce the cost of production.� At Ingwe new projects totalling US$216 million will expand export sales at Douglas by 3 mtpa initially and maintain Middelburg’s export sales of some 5.3 mtpa.� Coal Mines Australia Limited (the Australian subsidiary of Ingwe Coal Corporation)successfully tendered for the Mount Arthur North coal development area in New SouthWales. Mount Arthur North is adjacent to the Company’s existing Bayswater mine, and isexpected to produce up to 8 mtpa from 2003.� The recent weakness in the rand provided an opportunity to buy-out the minorityinterests in Ingwe and Trans-Natal on terms attractive to all parties. Given the favourableundertakings received from shareholders, including Liberty Life, Old Mutual and Sanlam, the offer will be accepted at scheme meetings on Monday 14 September 1998. This transactionwill give Billiton full control of Ingwe’s free cash flows, while enhancing earnings per share.It will also provide the platform for Ingwe to pursue large-scale international opportunities.

There have been two disappointments in our intended investment programme. We devotedconsiderable effort to preparing a consortium bid for the state-owned aluminium assets inVenezuela. After two failed attempts, our consortium finally withdrew at the beginning ofSeptember, principally because a legally binding agreement between the consortium partnerscould not be achieved in the face of deteriorating financial markets. Also, progress on theproposed zinc smelter in South Africa’s Eastern Cape has not been what we hoped, and westill await from government a clear definition of the fiscal and other arrangements that willapply to the entire industrial development zone and port complex.

We remain alert for a major opportunity, and our Mergers and Acquisitions group hasbeen busy during the past year. To date, the Executive Committee has judged that variousopportunities put forward for approval would become more attractive with the passage oftime. This judgment has so far proved sound, as deteriorating commodity and financialmarkets have progressively depressed the values of mining assets. Billiton, its financialresources intact at this low point in the commodity cycle, is well placed to profit from these circumstances.


Chairman’s Review


The Share Repurchase The only blemish on Billiton’s corporate landscape has been the poor performance of ourshare price. Two factors are responsible. We have borne – along with all mining companiesworldwide – the impact of negative investor sentiment arising from the economic turmoil in Asia. We have also been uniquely affected by abnormally high selling from South Africaninstitutions. The reasons for the latter deserve comment.

In the past, South African portfolio managers have typically held near full weightings in resource stocks which, thanks to their dollar-based revenue streams, provide a hedgeagainst weakness in the rand currency. Recent South African exchange control practice hasallowed domestic financial institutions to invest overseas up to 15% of their funds undermanagement, by way of asset swaps. Such swaps diversify South African risk, whilemaintaining the rand hedge benefit. Billiton, one of the largest resource stocks quoted on the Johannesburg Stock Exchange (JSE), has been particularly targeted for such swaps, sinceits FTSE 100 status provides the genuine liquidity sought by institutional investors on theother side of the swap transaction. In addition, in May 1998, our largest shareholder, Sanlam, reduced its stake in Billiton from 15.7% to 10.7% in a portfolio restructuringdesigned to facilitate its own demutualisation and listing. The net effect of all of this has been that more than 20% of Billiton’s issued share capital has flowed from South Africa tointernational (principally UK) investors during the past year.

This “asset swap” problem might be coming to an end. It has been estimated that SouthAfrican institutions collectively already have some 12% (out of the maximum of 15%) of theirfunds under management invested in overseas assets. Also, because of its weighting in themain JSE indices, Billiton is likely to again attract buying attention from those sameinstitutions at the first positive change in sentiment towards resource stocks.

Notwithstanding this now more favourable prognosis, it was and remains clearlydesirable that a remedy be found for these unique circumstances. Therefore, in June 1998, we announced our intention to seek approval from shareholders to repurchase up to 10% of the issued share capital. At the current depressed share price, a repurchase would create a more efficient capital structure for the Group, with a resultant lower cost of capital, andwould enhance both earnings per share and net assets per share.

However, a conventional buy-back would result in an immediate cancellation of theshares repurchased, and hence a permanent reduction in the financial resources that we haveso carefully established. This we were reluctant to do, as we believe that those resources willin due course be soundly invested in new opportunities. Happily, an innovative mechanismhas been developed by Billiton Finance BV, one of our offshore subsidiary companies, whichprovides that the shares will not be cancelled immediately after purchase but will be available,for a period of three years following shareholder approval, either to be cancelled or to be again placed in the market. This provides great flexibility, allowing the capital to be re-deployed when it is in shareholders’ interests to do so. In addition, it enables a share purchase programme to commence immediately following shareholder approval, anticipatedon 14 October 1998.

Full details of the share repurchase proposal are set out in a circular to shareholdersposted with this report.


Directors and The Board has been strengthened by two Management appointments. Dr Steve Kesler joined as

Executive Director responsible for NewBusiness, Technology and Base Metals. Hebrings international skills and base metalsexperience to further our growth ambitions.On 1 July 1998, Mr Cor Herkströter joined asa Non-Executive Director. He retired recentlyfrom his executive positions as President ofthe Royal Dutch Petroleum Company andChairman of the Committee of ManagingDirectors of the Royal Dutch/Shell Group of Companies. His experience, internationalperspective and personal familiarity with theBilliton assets will be of great value to us.

Mr Adriaan du Plessis resigned from the Board on 1 March 1998, following Sanlam’scorporate reorganisation and sale of part of its holding in Billiton. I thank him for hissignificant contribution to our past development and wish him every future success.

Mr Ian Fraser was appointed our Group Human Resources Director on 1 March 1998,and is a member of the Executive Committee.

The end of the first year as a Plc is a milestone. I pay tribute to the employees ofBilliton – and to the members of the Executive Committee – for their dedication and hardwork during this challenging time. Thanks to their efforts, the foundations are well laid forfuture success.

Brian GilbertsonChairman and Chief Executive

Billiton chairman Brian Gilbertson discusses the modelof the Mozal project with Mozambique Prime MinisterPascoal Mocumbi (left) and South African Vice PresidentThabo Mbeki (centre).

Basis of presentation Billiton’s financial statements are presented in accordance with UK generally acceptedof financial statements accounting principles. The reporting currency is US dollars, the dominant currency in which

Billiton and the companies in which it has holdings operate.The Group was formed by the purchase of Gencor’s non-precious metals businesses for

the issue of Billiton shares which were distributed to the shareholders of Gencor in July 1997.The sale of the non-precious metals businesses to Billiton has been treated in accordance withthe principles of merger accounting. This has the effect that the financial statements reflect the Group as though the constituent businesses had been part of the Group since their originalacquisition by Gencor. Further details are set out on page 64.

Billiton currently sets off purchased goodwill arising on acquisitions against reserves asallowed by currently applicable accounting standards. With effect from 1 July 1998 Billitonwill adopt FRS 10 which will require purchased goodwill to be capitalised and amortised.Billiton intends to adopt the revised treatment only in respect of acquisitions taking place onor after 1 July 1998 without restatement of prior periods.

Transactions Billiton merged its nickel assets with QNI Limited, an Australian public company. during the year The transaction resulted in Billiton holding a 52.4% interest in the enlarged QNI, which

was consolidated from 5 September 1997. The partial disposal of the nickel assets resulted inan unrealised gain of US$158 million which has been included in the consolidated statement of total recognised gains and losses.

Billiton’s holdings in Ingwe Coal Corporation and Samancor were increased during the year through purchases in the market. At 30 June 1998 Billiton held an effective 47.6% of Ingwe (1997: 42.3%), and 54.6% of Samancor (1997: 52.6%).

Results for the 1998 Group turnover (including the Group share of joint ventures) rose by 4% to US$6,060 million. financial year This increase primarily reflects the merger with QNI Limited and the inclusion of Cerro Matoso

as a subsidiary for a full year. Operating profit including the share of joint ventures rose from US$801 million to

US$811 million. Operating profit benefitted from higher volumes, primarily in the coal division.The fall in commodity prices during the year had a negative impact on the coal, nickel andbase metals profits, although this was partly offset by higher average realised prices in aluminium.The movement in average exchange rates, particularly the 8% depreciation of the rand and the15% depreciation of the Australian dollar against the US dollar, made a positive contributionto profit. Operating costs, excluding the impact of increased sales volumes, rose by 3% in localcurrency terms, which is below the domestic inflation rate averaged across our operations. InUS dollar terms, the benefit of the weaker exchange rates resulted in these costs falling by 2%.

Profit before tax and exceptional items reached US$838 million, 16% above the previousyear’s figure of US$723 million. This result was helped by two factors: the issue of US$1.5 billionof new equity in July 1997 resulted in a sharp fall in net interest payable from US$131 millionto US$72 million; and foreign exchange gains on net debt increased from US$26 million to US$91million following the marked depreciation of the rand against the US dollar.

Lower profits at Ingwe, coupled with the increase in our investments in both Ingwe andSamancor, resulted in a reduction of equity minority interests. This left attributable profitbefore exceptional items 44% up at US$481 million, compared with US$335 million for 1997.

Financial Review



There were no exceptional items in 1998, compared with a profit from fixed asset disposals(net of business closures) in 1997 of US$220 million before tax, equivalent to US$202 millionat the net attributable level.

The breakdown of attributable profit (excluding exceptional items) by business segment is asfollows: 1998 1997

US$m US$m

Aluminium 279 193Steel and ferroalloys 33 19Nickel 12 20Titanium minerals 96 96Coal 49 67Base metals 17 23Marketing and trading 27 19New business and technology (68) (94)Central costs and investment 36 (8)Attributable profit 481 335

Adjusted earnings per share before exceptional items increased by 17% from 19.6 centsin 1997 (based on 1,707 million shares) to 22.9 cents in 1998 (based on 2,105 million shares).At the year end there were 2,138 million shares in issue.

Profit fromunlisted operations

The proportion of attributable profit (excluding exceptional items) from unlisted operationsrose from 75% in 1997 to 81% in 1998.

Reconciliation of As public companies, Ingwe, Samancor and QNI present their own financial statements underquoted subsidiaries local accounting standards. The major difference compared with UK GAAP relates to the treatment

of deferred tax. Deferred tax is provided on a partial basis in the UK, versus full provision basis in South Africa and Australia. In addition the Group accounts for fair values onacquisitions which generally results in higher values of assets and hence depreciation charges.

The impact of these differences on the published attributable profits for 1998 issummarised as follows overleaf:

Attributable profit from unlisted operations %

� Unlisted operations� Listed subsidiaries

Pro-forma 1998 figure including 100% of Ingwe for illustrative purposes1998 1997

25 9

91

19

81 75

Ingwe Samancor QNI

Published attributable profit (local currency) SAR552m SAR323m A$9mUS$m US$m US$m

Published attributable profit 113 66 6UK GAAP adjustments:

Deferred taxation 13 3 –Other (2) – 4

Depreciation of fair value adjustments (14) (6) 3Pre-acquisition adjustments – – 2Minority share (61) (30) (3)Attributable to Billiton 49 33 12

Taxation The tax charge for the year was US$254 million. As a percentage of profit before taxation andexceptional items, this represents an effective tax rate of 30.3% compared to 36.0% in theprevious year. The decline in the rate is primarily due to an increase in non-taxable income(particularly the exchange gains) and increased contribution to profit from lower tax jurisdictions.

The UK tax charge mainly arises on dividends received from overseas companies, with double tax relief given for the underlying foreign taxes paid on the profits out of whichthe dividends are distributed.

The interim and final dividends for 1998 were declared as Foreign Income Dividends (FIDs).Payment of a FID allows Advance Corporation Tax (ACT) payable on that dividend to be refundedto the Company to the extent that the dividend is paid out of foreign profits. The ability torecover ACT in this manner prevents the possibility of double taxation occuring on dividends fromprofits earned overseas. The Finance Act 1998 has abolished ACT with effect from 6 April 1999.

Dividends The Board has proposed a final dividend of 7 US cents per share, making a total dividend for the year of 10.5 US cents per share. This dividend is covered 2.18 times by earnings.

As the Company generates cash flows primarily in US dollars, dividends are also declared inUS dollars. They are payable in sterling to shareholders on the United Kingdom section of the register,and in South African rand to shareholders on the South African section of the register. The rates ofexchange applicable two business days before the declaration date are used for conversion.

Cash flow The following table summarises the major elements of the Group’s cash flow:1998 1997US$m US$m

Net cash flow from operations (after tax, including dividends received) 976 1,085Investment in fixed assets (net of disposals) and exploration (436) (487)Net interest paid (59) (64)Dividends paid (135) (204)Free cash flow 346 330Net acquisitions of businesses and investments (145) (61)Net cash inflow before management of liquid resources and financing 201 269Share issue proceeds 1,496 10Foreign exchange adjustment 187 38Other (119) (112)Movement in net funds 1,765 205Net debt at start of period (1,274) (1,479)Net funds/(debt) at end of period 491 (1,274)

Financial Review



The free cash flow line represents the balance of cash flow left after servicing the ongoingrequirements of the business, the capital expenditure programme, and the providers of finance.The Group generated a free cash surplus of US$346 million in 1998, a sound performance ina period of weak prices.

In summary, the Group began the year with net debt of US$1,274 million. The operationsgenerated a free cash surplus of US$346 million after capital expenditure and exploration.The Initial Public Offering in July 1997 raised US$1,496 million, US$145 million was investedin subsidiaries, joint ventures and investments, and other items reduced debt by US$68 million.At the year end, the Group was accordingly left with net funds of US$491 million. This netfunds figure comprises US$1,978 million of cash including money market deposits, offset byUS$1,487 million of total debt, mainly in the operating companies.

Treasury management Billiton’s treasury is based in the Netherlands and operates as a service centre to the Group.The main areas of functionality provided are:� Risk management (covering foreign exchange rate, commodity price and interest rate exposure)� Debt management� Liquidity management

Exposures are reported to the Billiton Executive Committee on a monthly basis, or morefrequently if required. Treasury operates within strict limits and parameters laid down by theBilliton Executive Committee and approved by the Board.

Liquidity and financing At 30 June 1998 total cash including money market deposits at the Group centre amounted to US$1,610 million, offset by US$176 million of overdrafts, leaving US$1,434 millionavailable. The location of the Group’s cash including money market deposits is shown in thefollowing table:

US$m

Group centre 1,610

Wholly-owned subsidiaries 150

Listed subsidiaries: Samancor 108

Ingwe 83

QNI 27

Total cash including money market deposits 1,978

The funds raised from the listing were invested in Billiton Finance BV by way of a capitalcontribution.

Surplus funds are as far as possible retained in US dollars. Exceptions to this arise in thecase of impending known requirements in another currency, and where regulations in certainjurisdictions require conversion to the local currency.

Bank and other loans and finance leases were US$1,487 million, located as follows: Currency, fixed/floating US$m

Alusaf Rand, fixed rate 369

Billiton Australia Pty (BAPL) US$, floating rate 200

Billiton Metais (Brazil) US$, fixed rate 53

Samancor: Rand, floating rate 19

Convertible bonds, US$, fixed rate 94

Ingwe Almost all rand, fixed rate 243

QNI Predominantly US$, fixed rate 257

Billiton SA Rand, floating rate 193

Finance leases 59

Total 1,487

A new US$1.5 billion syndicated revolving credit facility was signed in December 1997.This facility refinanced the existing US$650 million revolving credit arrangement, and willprovide for Billiton’s core banking needs. The term of the facility is seven years, with repaymentin five equal semi-annual instalments commencing 29 December 2002. Pricing is at a marginover LIBOR of 0.25% for years 1-5, rising to 0.325% for years 6-7; the commitment fee is0.125% for years 1-5 and 0.15% for years 6-7. US$200 million was utilised at the year end, by BAPL.

Apart from BAPL’s drawdown under the revolving credit facility, none of the otherborrowings by Group companies have recourse to the centre or to any other Group company.

Going concern The Directors, having made appropriate enquiries, consider that the Company and the Group have adequate resources to continue in operational business for the foreseeable future,and have therefore adopted the going concern basis in preparing financial statements.

Hedging Hedges are in most cases entered into in those circumstances where certainty of future cashflows needs to be assured; this generally arises with new projects that carry debt and when werequire certainty of cash flows.

In anticipation of short-term weakness in the aluminium price, about 170,000 tonnes of aluminium were sold forward in November 1997, at a price above US$1,600/t. An after-taxprofit of US$14 million was realised in the financial year, and is included in the aluminiumresults. At the year end, 60,000 tonnes remained outstanding, which would have produced an after-tax profit of US$11 million if realised on 30 June 1998.

Financial Review



Growth Opportunities


The major current projects and privatisation opportunities are summarised below:

TotalCost

Commodity Project Location Completion US$m Effect on production

ApprovedAluminium Mozal smelter Mozambique 2001 1340 250 ktpa new capacity

Worsley refinery Australia 2000 623 82% expansion including

debottlenecking to 3.1 mtpa

Coal Mount Arthur North Australia 2003 360 Up to 8 mtpa new output

Douglas Pillars South Africa 2000 118 Expanding export sales by 2-3 mtpa

Middelburg South Africa 2000 98 Maintains export sales at 5 mpta

Ingwe minorities 1998 470 Increases Billiton share

Steel and Ferroalloys Pelletising Project South Africa 1998 56 Additional 60 ktpa FeCr and

reduces cost of production

Titanium Minerals RBM 5th Mining Plant South Africa 2000 150 Maintains current output

Under ConsiderationNickel CMSA Expansion Colombia 2001 353 20 ktpa expansion

Titanium Minerals TiGen Mozambique 2003 275 Possible 400 ktpa new slag output

Zinc East Cape Refinery South Africa 2002 580 250 ktpa new refined zinc output

Coal Carbocol Colombia

One of Billiton’s primary objectives is the pursuit of value-

enhancing growth opportunities across a spectrum embracing:

Greenfield projects. The US$1.3 billion Mozal aluminium

smelter is now under construction. The full feasibility study for

the zinc refinery project in South Africa is well-advanced and

awaiting government decisions. The Mount Arthur North coal

development is expected to come onstream in 2003.

Brownfield expansions. The US$623 million expansion at

Worsley, with plant debottlenecking, will lift annual capacity by

82%. The full feasibility study is complete for the second

production line at the Cerro Matoso to raise QNI’s capacity by

30%. Major capital projects under way at Ingwe and Samancor

will reduce unit operating costs and expand output.

Mergers and acquisitions. Billiton devotes considerable effort

to assessing potential mergers and acquisitions, ranging from

pre-feasibility projects to privatisations of mature companies.

The last financial year saw the merger of Billiton’s nickel assets

with QNI Limited, and substantial preparation work for the

ultimately unsuccessful Venezuelan aluminium privatisation. In

early July 1998 the proposed buy-out of the minority interests

in Ingwe and Trans-Natal was announced.

Exploration and development. Exploration success is the

highest-value entry route for the expansion and replenishment

of our resource base. Particular emphasis is being placed on

copper, zinc, nickel and iron ore targets.

Since Billiton’s flotation on the London Stock Exchange in July

1997, the list of approved and potential projects has

lengthened substantially. The total capital programme now

potentially amounts to US$1.9 billion (excluding privatisation

opportunities), and when completed will result in significant

increases in the scale of some of our operations.

Financial Review

Additions to Additions to fixed assets in 1998 totalled US$539 million, as follows:fixed assets US$m

Aluminium: Worsley expansion 30

Suriname 21

Other 54

Aluminium total 105

Steel and Ferroalloys: Pelletising/preheating project 29

Other 81

Steel and Ferroalloys total 110

Coal: Moonee/Bayswater expansion 33

Middelburg mining equipment 13

Other 118

Coal total 164

Nickel: Cerro Matoso debottlenecking 21

Other 11

Nickel total 32

Exploration 63

Other 17

Total additions to tangible fixed assets 491Fixed asset investments: Samancor (Columbus) 40

Other 8

Total additions to fixed assets 539

For the current year, investment in major projects is expected to result in a substantial risein capital expenditure. The 1999 budget figure for total additions to fixed assets isapproximately US$1 billion, which includes the following major elements:� US$300 million on the Mozal aluminium smelter project.� US$120 million on the Worsley alumina refinery expansion.� US$50 million on the Bayswater expansion/Mount Arthur North coal project.� US$50 million on the Middelburg coal reserves utilisation project.

Currency Currency fluctuations affect the profit and loss account in two ways.Sales are predominantly based on US dollar-pricing (the principal exception being Ingwe’s

sales to Eskom and other South African customers). However, a proportion of operating costs(particularly labour) arise in the local currency of the operations, most significantly the SouthAfrican rand, but also the Brazilian real, Australian dollar, and Colombian peso. Accordingly,changes in the exchange rates between these currencies and the US dollar can have asignificant impact on the Group’s reported margin.

Certain of the Group’s subsidiaries maintain their accounting records in local currency, whichare then translated into their functional currency (US dollars) for reporting purposes. The temporalmethod is used to convert their accounts from local currency to their functional currency (US dollars):fixed assets and other non-monetary assets and liabilities are converted at historical rates, andmonetary assets and liabilities at the closing rate. The resultant differences are accounted for in theconsolidated profit and loss account in accordance with UK GAAP. The most significant impacton profit is on the South African subsidiary Alusaf, which has a US dollar functional currency


and carries substantial rand-denominated debt. The resultant gain for Alusaf in 1998 was US$91 million (1997: US$20 million), reflecting the sharp depreciation of the rand towards the year end.

The following exchange rates have been utilised in this report:

Versus US dollar 1998 average 30 June 1998 30 June 1997

South African rand 4.886 5.890 4.518

Australian dollar 1.475 1.628 1.342

Impact of the Euro Accounting and financial reporting of the Group’s European operations is in US dollars. Local costs are incurred in local currencies. In these circumstances the introduction of the Eurowill have little effect on the Group’s business. Accounting and trading systems will deal with the Euro in the same way as any other foreign (non-US dollar) currency.

Millennium The challenges to Billiton of the Year 2000 date problem, which are similar to those faced bymost businesses, are fully recognised by the Board of Directors. Formal procedures have beenput in place world-wide to identify the full impact on the Group. Particular emphasis is beingplaced on those systems and operating equipment which are essential to the safety and wellbeing of employees, protection of the environment and continuity of the business. Detailedprocedures include:� The identification, testing and, where necessary, the replacement of critical systems andoperating equipment to ensure that they operate correctly over the millennium change;� Liaison with our key trading partners, suppliers and customers to ensure that the supplychains we depend on and are involved in continue to operate without disruption.

A Year 2000 project team was established 18 months ago to facilitate, co-ordinate,monitor and report to the Board of Directors and Audit Committee on a regular basis.

Formal plans and timetables have been established at all significant operations to ensure that critical systems and operating equipment will have been made compliant in a timely andeffective manner. In addition, Group companies operate through a number of joint venturesand joint arrangements where they do not have sole control over those operations. However,through representation on management committees, they use their influence to encourage andmonitor the development and implementation of Year 2000 strategies.

The Group operates a number of continuous processes within their businesses where the continuity of supply of utilities such as electricity and water are critical. These companiescannot take responsibility for the actions of third party suppliers, customers or trading partners but as far as possible they continue to encourage and monitor the development andimplementation of Year 2000 strategies.

The total Group costs of the Year 2000 compliance programme, including costs to date of US$17 million, are estimated to be US$36 million, a significant proportion of whichwill be charged to the profit and loss account. These costs include expenditure of at leastUS$23 million on the acceleration of strategic projects which were likely to be implemented in any case over the next 2-3 years, notwithstanding the Year 2000 problem.

Billiton believes that it and all other Group companies are acting responsibly and takingappropriate timely steps to identify and correct non-compliant systems or operating equipmentwhich are critical to their business. To date, the Group has not identified any critical systems


Financial Review

or operating equipment under its control that cannot be rectified before Year 2000. However,due to the nature of the Year 2000 issue, neither Billiton nor any other Group company canprovide categorical assurances as to its Year 2000 compliance.

Share price Billiton shares were listed on the London Stock Exchange on 28 July 1997 following performance an international placing of 431.25 million shares at 220p (equivalent Johannesburg price

1,720 SA cents). They peaked at 249.5p on 19 September 1997 (Johannesburg peak of 1,890 SA cents on 28 August 1997), then fell back over the remainder of the year, closing at 121p(1,170 SA cents) on 30 June 1998.

Share register A positive result of the South African selling, which is discussed in the Chairman’s Review, hasbeen a welcome broadening of our shareholder base. Immediately after the flotation 22% ofour shares were held on the London register. At 30 June 1998 the London registerproportion had risen to 37%, and had reached 41% at the date of this report.

Billiton Share Price and MSCI Non-Ferrous Metals Index


100

150

200

250

300

Billiton Share Price p MSCI Non-Ferrous Metals Index

AugJulyJuneMayAprMarFebJanDecNovOctSepAug

1997 1998

Operating Review


Billiton’s aluminium interests constitute one of the world’s major producers of both aluminiumand alumina. Its operations are currently located in South Africa, Australia, Brazil and Suriname.In financial year 1998 its total equity aluminium production was 883 kt (1997: 890 kt), and itstotal equity alumina production was 1.69 mt (1997: 1.65 mt).

Billiton’s aluminium business aims to produce the lowest cost aluminium and alumina, and achieve real growth in shareholder value through participation in world class aluminiumand alumina projects.

In common with other Billiton commodity interests, Billiton Aluminium has successfullydemonstrated its ability to work in developing economies and with local communities. Asevidenced by our success at Hillside, our creation of world class aluminium facilities providesbenefits to Billiton shareholders, numerous opportunities for the countries in which weoperate, and quality and value to the consumers of aluminium and alumina. Our aim is torepeat this experience, through our leadership of the largest ever investment in Mozambique.

Aluminium’s 1998 attributable profit of US$279 million represents a healthy increase of45% compared to US$193 million in 1997. The 1998 profit includes a currency adjustment of US$91 million (1997: US$20 million), mainly reflecting the impact of the randdepreciation on the rand denominated debt. The after-tax gain from aluminium hedging in1998 was US$14 million. About 60 kt of aluminium is hedged for the 1999 financial year atan average price greater than US$1,600/t. This is consistent with our policy of hedging aportion of production when LME prices are considered to be reasonably attractive.

Market Review The LME cash aluminium price in the 1998 financial year averaged US$1,510/t, compared to US$1,512/t in the previous year. The average price in the first six months was US$1,609/t,falling to US$1,413/t in the second half of the year as the effects of the Asian economicturmoil began to bite. Billiton’s average realised price (including value-added products) in1998 rose to US$1,589/t, compared to US$1,531/t in 1997.

The economic downturn in the Far East in the latter half of 1997 continues to have anadverse impact on world consumption. Strong European and US aluminium consumption hashelped to offset the reduced Asian demand. However, Japanese aluminium demand is likely to be 9-10% less in calendar 1998 than 1997. The prospects for aluminium in part depend on economic recovery in Japan, and the indirect positive effects upon other Asian demand.

With the downturn in Asia, aluminium production is temporarily running ahead of demand.

Aluminium US$m 1998 1997

Turnover 1,647 1,584

Attributable profit 279 193

Net operating assets 2,565 2,509

Operating cash flow 412 n/a

Capital expenditure 105 107

Share of attributable profit 58% 58%

Share of net operating assets 47% 48%

Production Sales(thousand tonnes) 1998 1997 1998 1997

Alumina 1,688 1,650 1,682 1,704

Aluminium 883 890 878 904

Attributable profit TurnoverUS$million US$million

97 98 97 98


Capacity additions (mainly brownfield expansions) added nearly 550 ktpa in 1997 and will addclose to 400 ktpa in 1998. In addition, the improved operating capability of existing capacity,together with restarts of idled capacity, are estimated to add an additional 130 ktpa to productionin 1998. The medium to long term demand for aluminium is anticipated to rise by 2.4% orabout 500,000 tonnes per annum, which will underpin higher levels of aluminium production.

The alumina market has held up well despite the decline in the LME aluminium price. Thebenchmark Australian alumina price has so far been in the range of US$190-200/t in calendar 1998.

Market opportunities remain for high quality alumina investments, such as the significantnew expansion of the Worsley refinery to 3.1 mtpa by mid 2000, and other expansionsunderway in Australia. After these expansions, the next big additions to capacity are likely to be in India and again in Australia.

Operations The Hillside smelter provided the operating highlight of the year by producing a record503,700 t of metal, improving on the remarkable level of 499,600 t achieved in 1997. In addition,Hillside conversion costs rose by a mere 0.9% in 1998, despite a significant programmed increasein maintenance costs due to it entering a full maintenance cycle. Hillside is the only AP30smelter not to have experienced cathode failure. This favourable situation is expected to continueover the next year. Hillside’s bake and casthouse furnaces are being converted from heavy fueloil to gas, which will lead to improved environmental performance. The US$8 million casthouseupgrade project commenced, and will provide greater labour productivity and improvedproduct quality. The low operating cost of Hillside positions it well for further expansion andthe attainment of even lower unit costs.

The Bayside smelter made further progress with its cost reduction initiatives. Controllableconversion costs per tonne were reduced by 5%. An ongoing program of rationalisation continuedwith personnel decreasing by some 15% over the year. However, output was lower due to atemporary decline in potroom A performance. The programme to increase production of value-

Raw materials conveyor and silos at the Hillside smelter. Hillside has operated consistently above design capacitysince commissioning.


added products was successfully initiated in conjunction with Billiton Marketing and Trading BV,with the aim to convert Bayside to predominantly value added production. A project costingUS$18 million to rebuild Bayside’s Riedhammer furnace to a modern open design was approved.Once completed it will lower energy conversion costs and improve environmental performance.

The Valesul smelter (Billiton 45.5% and Aluvale 54.5%) had a successful year. Valesuldelivered high financial returns that are usually expected from a much larger facility. Valesulalso took steps to manage its long-term energy requirements. Construction of the Machadinhohydro-electricity project commenced, which will be a cost-effective way of regulating peakdemand energy prices and reducing overall energy costs. Valesul has equity of 8.8%, or66MW, in Machadinho. Power taken from the Brazilian grid will be reduced from 80% to55% of the total used. The average cash cost of power to Valesul will almost halve as a result.

Lower current efficiency and a higher number of pots being out of operation led to theoperational underperformance of the Alumar smelter. A gradual improvement to the smelter’shistoric high levels of efficiency is expected as alumina quality from the refinery improves,and the pot relining program is stabilised.

Billiton’s weighted average aluminium unit cost of production rose by 1.6% compared to 1997. Billiton’s weighted average alumina unit cost of production fell by 4.2% compared to 1997.

The reduction in unit costs that occurred across Billiton’s refineries in financial year 1998reflected improved efficiencies at the Suriname refinery, lower caustic soda prices and theweaker Australian dollar. The technical difficulties experienced in bringing the Alumarrefinery debottlenecking on-stream, combined with unplanned maintenance of boilers andcalciners, resulted in a shortfall in expected production and product quality from the refinery.Corrective measures are being taken by implementing modifications to the calciners.

Scale of operations. Each of Billiton’s major commodity divisions ranks among the world leaders

in their respective industries. In terms of volumes, we are:

– 5th in primary aluminium

– 1st in integrated ferroalloys

– 1st in exported steam coal

– 2nd in titanium dioxide slag

– 5th in nickel

Low cost structure. All of our major businesses have costs below the industry average, and we

invest continually to drive their costs lower. Our unit cash production costs for aluminium, alumina,

ferromanganese, titanium dioxide slag, and export coal are in the lowest quartile of their respective

industry cost curves.

Long reserve lives. The scale of the Group’s reserves and resources is one of our major assets. Apart from

the advantage of long-term security, this enables continued investment to upgrade and expand the

operations. At current extraction rates, the approximate lives for our major operations are:

Bauxite: Brazil 40 years

Suriname 8 years

Australia 40 years

Manganese Over 100 years

Chrome Over 100 years

Coal Over 25 years

Mineral sands 25 years

Nickel (Colombia) 30 years

Quality Operations

Operating Review


Billiton’s share of alumina production at Suriname increased by 40 kt in 1998 due to operational improvements. The Lelydorp III bauxite mine commenced in November 1997 on time and within budget. Production is above plan and costs are below budget. Therelationship between the Government of Suriname and the Refining Joint Venture has beenmixed throughout its history. This relationship again appears to be entering a difficult phasethat could adversely impact upon the cost structure of the refinery.

Raw materials supply and associated logistics form an important cost component withinBilliton’s aluminium operations. A major effort in the upcoming years will be to look forsynergies and cost reduction opportunities in this area by better coordination on a global basis.

Developments Final approval was given in May 1998 for construction of the Mozal project, a 250 ktpa smelter inMozambique, at a total cost of US$1.3 billion. The first aluminium metal is scheduled to be producedin early 2001. Billiton is the largest equity investor in the project with 47% (US$245 million),with Mitsubishi holding 25%, IDC 24% and the Government of Mozambique 4%. Mozal isexpected to provide a major impetus to the economic development of the Maputo area.

Mozal will utilise the same Pechiney AP30 technology as Hillside, and will benefit fromthe experience obtained in Hillside’s development. The plant will initially comprise one potline,and is designed to accommodate a second line when market conditions permit. Long term supplycontracts for alumina and electricity will assist in providing Mozal with a competitive cost structure.

Construction work on the expansion of the Worsley Alumina refinery (in which Billitonhas a 30% interest) commenced in October 1997. The US$600 million expansion will raisetotal capacity from 1.88 mtpa in mid-1998 to 3.1 mtpa. Completion is scheduled for the firsthalf of 2000. Worsley is already one of the lowest-cost producers in the industry, and theexpansion will further improve its competitive position.

Aluminium’s recent review of strategy concluded that the industry outlook and structureclearly create further investment opportunities, and that Billiton is well positioned to play asignificant role in this regard.

Alumar port facilities – Part ofSouth America’s most sophisticatedalumina/aluminium complex.

Aluminium billets are among a multitude of customised items produced by the Bayside Smelter.


Base Metals is the smallest of the Billiton business segments, with mining operations at Les MinesSelbaie in Quebec, Canada and Pering Mine in Northern Cape, South Africa. These are open pitmines with flotation mills to produce concentrates for the custom smelting markets. The majorcommodity produced is zinc, with co-product copper in Selbaie and lead in Pering. The Selbaiecopper concentrate contains a significant amount of gold and silver.

Both mines are approaching the end of their lives, with regional exploration programmescompleted without significant addition to ore reserves. Closure plans have been prepared forboth operations, with the Pering plan already approved by the regulatory authorities, andfunding of provisions for both operations has started. It is expected that the Selbaie plan willbe approved this year. In 1998 Base Metals contributed US$17 million to Billiton’s profit,compared with US$23 million for the previous year.

Markets The base metal markets were all negatively impacted by the Asian crisis in late 1997. Theslowdown has continued in 1998, causing a significant reduction in demand from the regionin the first half of the year. Consumption of zinc grew by slightly over 2% in 1997, driven by strong growth in the major OECD economies, especially the USA. This has resulted insignificant decreases to exchange stocks of refined zinc, reducing the excess inventory availableto more normal levels by mid 1998. Supply and demand are in balance which has resulted inzinc being affected less than copper in terms of price decline over the period. Zinc averagedUS$1,227/t in financial year 1998 compared to US$1,127/t in financial year 1997.

The average copper price decreased from 103¢/lb in financial year 1997 to 86¢/lb in1998. Supply of refined copper grew faster than the increase in consumption of 1.7% in 1997,with stocks increasing during 1997 and early 1998. The custom concentrate markets forcopper and zinc reflect the supply situation with copper treatment and refining chargeshaving decreased markedly for spot contracts in 1998, whereas treatment charges for zinc have generally remained constant.

Base Metals US$m 1998 1997

Turnover 128 95


Net operating assets 31 23





Production Sales1998 1997 1998 1997

Selbaie – Copper (kt) 14.2 21.0 13.7 24.3

– Zinc (kt) 56.3 43.4 56.6 42.1

– Gold (‘000oz) 36.5 55.6 42.2 56.5

– Silver (‘000oz) 2,349 2,263 2,424 1,895

Pering – Zinc (kt) 26.2 24.8 26.2 24.8

– Lead (kt) 5.7 5.7 3.8 4.5

Note: production at Selbaie and Pering is in the form of concentrate. The table shows the contained payable metal.


97 98 97 98

Operating Review


Operations Payable zinc production totalled 82 kt in 1998, an increase of 21% from 1997, whereaspayable copper production was 14 kt in 1998, a decrease of 32% from 1997 as Selbaie movedinto predominantly zinc ore. Lead production from Pering remained constant at 6 kt.Operating performance has been maintained at a high standard at both mines which hasresulted in the sound financial results in difficult market conditions. Head grades have beendecreasing at Selbaie and methods are being sought to increase throughput in the mill tomaintain zinc production levels. The mines market their concentrates through long termcontractual arrangements with major custom smelters.

The mines have excellent safety records which includes the outstanding performance of never having had a fatality in their entire operating life.

Developments The feasibility study for the Eastern Cape Zinc Refinery is approaching completion. We are nowawaiting confirmation of the financial incentives put in place by the South African governmentfor its proposed Industrial Development Zone at Coega, near Port Elizabeth. The plant wouldhave a capacity of 250 ktpa of refined zinc produced from custom concentrates sourced globally.The design for the plant has been chosen to make use of modern efficient unit processes at largescale. With the benefit of economies of scale, favourable shipping costs, and South Africa’scost-competitive electricity, the plant would be one of the world’s lowest-cost producers. The application of modern technology would ensure that the environmental impact of the refinerywould be significantly lower than any existing operation, and would exceed the most exactinginternational standards. Air pollution controls would be state-of-the-art, solid waste – acompletely benign clinker, and effluent water treated to comply with the rigorous South Africanrequirements.

Billiton would take a 40% share in the project, with the two Mitsui companies having24.5% and the Industrial Development Corporation of South Africa holding the remainder(35.5%). Construction and commissioning time is projected to be 32 months.

The acquisition of assets, either in operation or in the final stages of development, is being actively pursued to accelerate the growth of Base Metals in the Billiton Group.

The Pering zinc mine in South Africa maintains one of the highestsafety standards in the Group.

Zinc production in 1997 exceededexpectation at the Selbaie mine in Canada.

Billiton’s coal interests comprise an effective 47.6% stake in Ingwe Coal Corporation of South Africa.Ingwe is the world’s largest steam coal exporter. It operates eleven mines in Mpumalanga andKwaZulu-Natal provinces, South Africa, and four in New South Wales, Australia. Ingwe holds a 42.3%share in the Richards Bay Coal Terminal, the major exit point for its coal to the rest of the world.

Attributable profit fell from US$67 million for 1997 to US$49 million for 1998. This was largely due to a decline of US$3.50/t in the average export price for seaborne thermal coal andsignificant demurrage costs incurred during the first six months at both Richards Bay CoalTerminal, South Africa, and Newcastle Port, Australia. Both terminals returned to normaloperation during the second half of the year. The weaker SA rand and Australian dollar partlycompensated for the lower export prices.

Markets Ingwe supplied Eskom, its largest customer, with attributable sales of 35.5 mt, an increase of1.0 mt on the previous year.

Ingwe’s South African inland bituminous sales amounted to 6.3 mt for the 1998 financialyear. Demand for high grade coal remainedbuoyant but sales of low grade coal decreasedduring the period.

Export sales by Ingwe during the periodunder review increased by 0.5 mt to 25.3 mt.Growth of the seaborne steamcoal market in 1997 was lower than anticipated at some 9 mt in the Atlantic Basin. Growth in thePacific Basin continued at 9 mt. The totalwas significantly below the expected rate,helping to create an oversupply situation,which in turn has led to a decline in dollardenominated export prices.


Coal US$m 1998 1997



Net operating assets 1,015 1,201





Production Sales(million tonnes) 1998 1997 1998 1997

South Africa – Export – – 25.3 24.8

– Eskom – – 35.5 34.5

– Inland – – 6.3 6.5

– Total 67.2 66.8 67.1 65.8

Australia – Export – – 4.2 2.1

– Local utility – – 0.7 0.2

– Total 4.7 2.4 4.9 2.3

Total 71.9 69.2 72.0 68.1


97 98 97 98

The tandem tipplers at Richards Bay Coal Terminal canunload up to 3,000 rail wagons per day.

Operating Review


Operations Total sales volumes grew by almost 4 mt fromthe previous year. Coal Mines Australia Limited(CMAL), which was included for seven and ahalf months from the date of its acquisition lastyear, increased its sales volume by 2.6 mt to 4.9 mt. Approximately half of this rise can beattributed to CMAL’s inclusion for the full year.

The average unit cost of sales for theSouth African operations increased by 8.2%year on year. This was largely caused byongoing production problems at Welgedachtand significant production cutbacks to avoidoverstocking at Middelburg and Delmas.Middelburg is now back to normal production. Delmas, however, has been restructured sothat it can operate effectively at lower production levels to meet current market conditions.

After reviewing Welgedacht Mine’s performance, remaining reserves, and the part it playsin Ingwe’s core business, Ingwe agreed to sell the mine to Kangra with effect from 1 July 1998for US$10.6 million, which includes 800 kt of Richards Bay export entitlement.

CMAL’s unit cost of sales decreased year on year by 4% in Australian dollar terms.This was a result of the successful commissioning of the Moonee longwall in December 1997,the downsizing of Chain Valley, and ongoing efficiency improvements at Bayswater.Consequently, CMAL’s contribution to Ingwe increased to US$4.7 million from 1997’s US$3.0 million for 7.5 months.

Capital expenditure for the year amounted to US$164 million, of which US$33 millionwas spent at CMAL, mainly to bring the Moonee Colliery longwall into production, and onmobile earthmoving equipment at Bayswater. In South Africa Ingwe commissioned theKoornfontein south shaft (US$2 million), purchased major new mobile equipment for Middelburg(US$13 million), and spent some US$4 million on the preliminary phases of the MiddelburgCoal Reserve Utilisation (Phase Two) project and the Douglas Pillars project. The balance ofthe capital was incurred mainly on development to maintain production capacity.

Developments Despite the current depressed markets, Ingwe made significant progress during the year inpositioning itself to meet the growing demand for coal by acquiring low-cost, world-classassets and increasing shareholder value.

In South Africa, Phase Two of the Coal Reserve Utilisation Project at Middelburg Minewill maintain the export potential (over 5 mtpa for at least fifteen years) of the colliery and meetthe long-term contractual requirements of Eskom’s Duvha power station. The Boschmanskransproject to mine pillars at Douglas Colliery will ensure Douglas remains at the lower end ofthe South African cost curve, and maintains its current production profile. It provides thepotential to increase exports by up to 2 mtpa for the next five years and thereafter ensuresproduction remains at current levels.

In February 1998, CMAL was awarded the tender for the Mount Arthur North (MAN)

coal development area in New South Wales, Australia. The MAN area, which is adjacent toBayswater mine, is the last major unexploited opencast reserve in the Hunter Valley, holding

The MV “Wallarah” is a self-discharging vesseltransporting thermal coal from CMAL’s LakeMacquarie mines to Newcastle for export.


over 600 mt of export quality thermal coal. The tender was won on the basis of CMAL

offering the lowest priced five-year supply agreement to the nearby Macquarie power station.Beginning in 2002, the supply agreement is for 3 mtpa of thermal coal.

The project team is now planning the optimal mine plan for the joint Bayswater/MAN

complex, having put the previously envisaged Bayswater expansion on hold until the result ofthe MAN tender was known. While the anticipated capital cost of the joint operation should notexceed 30% more than the A$300 million for the original Bayswater expansion, the resultantworld-class colliery will potentially have double the capacity and a life in excess of 30 years.

Exploration continued during the year on the Wyong coal development area in NewSouth Wales and at Togara South in the Bowen Basin, Queensland. All indications are positiveon both projects.

Ingwe is proceeding with preliminary exploration in two areas in Kalimantan, Indonesia.Despite the instability in the region, it is Ingwe’s view that Indonesia will remain a preferredsupplier to the growing markets of the Far East. Ingwe also continues to monitor the potentialprivatisation of Carbocol, which owns 50% of the Cerrejón Norte mine in Colombia.

Following the year end, it was announced that Ingwe and Amcoal will inject assets into anew company (New Coal) which will be the vehicle for a South African and Black Empowerment-based coal company. Assets of Ingwe which will be included in this arrangement are its 50% shareof Matla Colliery, and Glisa Colliery.

The unit is responsible for the marketing of a substantial part of the equity production of theGroup. In addition, it trades products produced by third parties where this offers potential toamplify its market impact and business results. The unit includes Billiton Marketing and TradingB.V., its marketing network and representative offices in various key countries as well asbrokerage activities headed by Billiton Metals Limited, a ring-dealing member of the LME.

During the year under review, the unit strengthened its position as the marketer of theGroup’s alumina and aluminium production. In addition, an agreement was reached with QNI,with effect from 1 July 1998, to market ferronickel (provided by Cerro Matoso) and Yabulu’s

US$m 1998 1997







Sales(kt) 1998 1997

Alumina 3056 2845

Aluminium 936 688

Bauxite 418 579

Nickel 28 26

Zinc metal 33 83

Zinc concentrates 234 243

Tin 11 9


97 98 97 98


Operating Review


rondelles to the stainless steel industry, under an exclusive seven year agreement. In basemetals, the unit continued to trade non-equity zinc metal and concentrate along with tin,pending success of the Group’s efforts to establish equity positions in base metals.

Operations Attributable profit rose to US$27 million, up from US$19 million in the previous year,despite generally lower metal prices. The contribution from aluminium metal marketing andtrading activities increased by 70% over the previous year. This was due to increased volumes,higher premia and improved position results. Approximately 66% of aluminium metal salesvolumes originated from Group equity sources in South Africa and Brazil compared with 50% in the previous year.

Alumina margins were slightly below the level of the previous year due to a lowerpercentage commission earned from sales on behalf of Group refineries, while third partytrading performance exceeded that of the previous year. Approximately 50% of the aluminaturnover by volume related to product originating from Group equity sources in both years.

Nickel margins, which are largely commission dependent, declined due to the substantialdip in prices. The contribution from base metals was adversely affected by losses incurred inzinc metal trading activities during the backwardation that arose in September 1997, alongwith reduced margins from zinc concentrate and tin trading activities. The brokerage businessunits contended well with quiet Asian markets and reduced scope for commission earning.Operating costs were contained at the previous year’s levels and working capital was reduced.

Developments � A new strategic marketing forum was set up, whose purpose is to coordinate and guidethe commercial activities of the Group.� As a result of deteriorating economic and credit conditions in Far Eastern markets, themarketing emphasis was shifted more to European and American markets.� The development of centralised marketing, administration and risk management systems,along with migration to a new computer operating environment, are well advanced.

Given the unstable economic situation as a result of the Asian debt crisis, the outlook is oneof lower growth and weakening demand. Trading conditions in the current year mighttherefore be more difficult than in the recent past.


Billiton's new business and technology strategy is to acquire and develop low cost, world classmineral deposits to enhance and grow the value of Billiton’s mineral properties and resourceholdings. New business is primarily focused on growth opportunities for Billiton's emergentcommodity businesses in copper, zinc, nickel and iron ore.

Following Billiton’s listing in July 1997, New Business and Technology began the implementationof a strategic review to redirect activities from a largely gold focused program towardsincreasing the value of the Billiton’s base metals interests. Key activities encompass: � Exploration: regionally focused programs in Latin America, Africa, Southeast Asia and China; � Minerals Technology: the development of biohydrometallurgical processes for nickel(BioNIC®) and copper (BioCOP);� Mergers and Acquisitions: the acquisition of later stage and corporate opportunities via strategic sales and privatisations; and � Technical Services: engineering and technical support for growth projects.

New Business and Technology’s expenditure on new business activities for the year ended30 June 1998 was US$68 million compared to US$94 million in the previous year. The significantreduction in expenditure largelyresulted from the transfer ofcertain exploration anddevelopment activities to QNI,Ingwe, and other Billitonoperating divisions, whichspent a further US$18 million.

Exploration During the past year Billiton’sexploration teams were activein four continental scaleexploration programs whilstmaintaining a smallentrepreneurial central teamto evaluate opportunitiesthroughout the rest of the

Much of the Group’s exploration activity is conducted in difficult andinaccessible terrain, such as the Andean Cordillera (left). In Ecuador, one of the exploration camps is a five hour mule trek but only 10 minutesby helicopter from the nearest road.

New Businessand Technology

Expenditure US$m 1998 1997

Exploration: Latin America 13 9

Africa 10 4

Australasia 4 13

China 2 –

Other 2 2

Total 31 28

Minerals Technology 5 5

Mergers, Acquisitions and Corporate 13 16

Technical Services 5 5

Other Divisional Projects 14 40

Total 68 94

Exploration by region %

� Latin America � Africa� Australasia � China� Other

42

32

13

67


Geographical breakdown of net operating assets

Product division breakdown of net operating assets

Diversity of Operations

� Billiton’s portfolio already covers a broad spread of commodities: aluminium, coal, nickel,

ferroalloys, steel, titanium minerals and base metals. Aluminium, the largest division, accounts

for less than half of Group operating assets.

� One of Billiton’s strategic objectives is to increase the degree of diversification. Emphasis will be

placed on expanding the Base Metals division, with copper, zinc and iron ore particular targets.

� Geographically, Billiton has operations in Australia, Brazil, Canada, Colombia, South Africa,

Suriname, a project in Mozambique and its marketing base in Europe. Exploration programmes

are under way in a number of other countries, with centres located in Latin America, Australasia,

China and Africa.

� As a natural consequence of Billiton’s historical development, about 60% of its net assets

are currently located in South Africa. This proportion will decline as a result of the international

investment programme.

Selbaie London

BeijingTokyo

Singapore

Samancor

Pering IngweHillsideBayside

Johannesburg

RBM

QNI

CMALWorsley Melbourne

The Hague

Alumar

BMS

MRN

Valesul

Cerro Matoso

Santiago

AluminiumKey

TitaniumMinerals

NickelCoal Steel andFerroalloys


Base Metals

Head Office (London)Regional Offices

� Aluminium 47%

� Coal 18%

� Nickel 17%

� Steel & ferroalloys 13%

� Titanium minerals 4%

� Base metals 1%

� South Africa 61%

� Australia 20%

� Latin America 19%


world. In addition the exploration team provides support to QNI, reporting of the Groupmineral reserves, and research and development programmes on geophysics and geology.

Programme highlights CopperThe copper porphyry exploration programme expenditure of US$13 million along theAndean Cordillera in Argentina, Chile, Peru and Ecuador has resulted in the discovery of alarge copper porphyry system with the potential for large scale economic mineral resources.In Ecuador, two centres of significant copper mineralisation have been identified by drilling. A more detailed drilling program to define resources is planned in the coming year.

In Africa, the Democratic Republic of Congo, Zambia and Sudan have been the main activity areas for copper exploration and related acquisitions. Billiton is activelypursuing acquisition targets in the Congo and has an 8% interest in the Kolwezi consortium.Significant drilling activity was undertaken in Zambia on a number of targets that arecurrently being evaluated. In Sudan, a Billiton company has entered into an agreement withthe Sudanese Government to perform exploration activities on the Hofrat en Nahas copperdeposit. Billiton spent US$10 million on exploration and acquisitions related to copper inAfrica this year and is expected to spend a similar amount in the coming year.

In Indonesia, exploration and drilling activities continued to delineate resource targetson Romang Island, and early stage exploration work continued on Billiton’s Contracts ofWork in Kalimantan. A process of identifying and acquiring promising mid-stage copper/goldproperties in the Philippines has also commenced. Newly commenced activity in China hasdeveloped a reconnaissance programme with the Yunnan Bureau of Geology and MineralResources to screen 4,000 km2 of prospective ground in Yunnan province, China. Annualexpenditures in South East Asia and China were US$6 million in the past year and areexpected to increase to approximately US$8 million.

Billiton’s exploration teams were active on four continental scale exploration programmes during the past year.


Zinc Zinc exploration programmes are under way in Burkina Faso, Australia, Peru, China, Zambia,Ireland and Canada. A prefeasiblity study to evaluate development options for the high gradePerkoa deposit in Burkina Faso has recently been completed and is being evaluated. Resultsof the exploration programme on the Moate project in Ireland, in which Billiton has an optionto earn at least a 50% interest, are promising and an initial assessment is expected in thelatter part of 1998. Discussions are in final stages to enter into joint venture arrangements toearn a 51% interest in a number of prospective concessions in Newfoundland. This area ishighly prospective for zinc and it is intended to apply Billiton’s proprietary geophysical methodsto rapidly delineate drill targets. US$6 million was spent on zinc related activities.

Nickel Exploration for all laterite nickel exploration is now undertaken by QNI. Exploration for nickelsulphide deposits is undertaken on a 50/50 basis with QNI. Early stage sulphide exploration istaking place in Australia, Canada and China. A nickel exploration joint venture with JinchuanNickel in the Gansu province, China, is currently being discussed.

Mergers and The Mergers and Acquisitions unit is a dedicated function within New Business and Technology Acquisitions responsible for the identification, initiation and implementation of project, corporate and strategic

mining and metal transactions able to contribute to Billiton’s growth ambitions. The unitcomprises a team of professionals with experience drawn from both mining and financial sectors.

The present metals business climate has resulted in a growing number of project,corporate and merger opportunities and the objective is to turn these into successfultransactions which meet Billiton’s strategic objectives of geographical and commoditydiversification whilst demonstrating increasing shareholder value. A number of potentialtransactions are currently under review, some of which are at an advanced stage.

Minerals Technology Minerals Technology aims to develop technology leadership in specific areas that enhance theability to extract maximum value from resources. In particular, Billiton is recognised for itsexpertise in biohydrometallurgy and plasma arc smelting (see report on Technical Expertise,page 33). The biohydrometallurgy programme has therefore concentrated on nickel andcopper. In keeping with Billiton’s policy to restrict central activities to a strategic core, BillitonLaboratories, the Group’s analytical facility situated in South Africa, was sold to SGS. Netexpenditure on minerals technology for the year was US$5 million.

BioNIC The BioNIC® and GenNIC technologies were included in the QNI transaction andresponsibility for their further development now lies with QNI. Billiton Process Researchhowever will continue to provide the specialised expertise under appropriate technologysupply agreements. A BioNIC® pilot plant is being installed at QNI’s Yabulu refinery to treatconcentrate from the Emily Ann and Maggie Hays deposits.

BioCOP The BioCOP pilot plant, operated under a co-operation agreement with Codelco’sChuquicamata mine, has been working continuously since November 1997, with veryencouraging results. This technology has particular application to high arsenic copper


mineralisation present in Chile and Peru. A larger demonstration plant is underconsideration. Significant developments are also being made in the scale up of so-calledthermophile processes (high temperature bacteria) for the extraction of copper fromchalcopyrite. These would facilitate the economic processing of such ores currently nottreatable by mesophilic bacteria as used in the BIOX® and BioNIC® processes.

Technical Services During the year Technical Services was incorporated into the New Business division. The previously centralised purchasing function was decentralised to the operating divisions.Technical Services provides engineering and project management support for all major projects and in particular provides technical resources to undertake prefeasibility andfeasibility studies for New Business and the growing Base Metals business.

The major development in the past year was the merger of Billiton’s nickel interests with the Australian nickel and cobalt producer, QNI Limited, with effect from 5 September 1997. This merger has given Billiton a 52.4% interest in QNI, one of the world’s top five nickel producers. Attributable profits for 1998 were US$12 million, on revenue of US$320 million.

Markets The steep and continuous fall in the London Metal Exchange (LME) nickel cash price fromUS$3.12/lb in July 1997 to US$1.94/lb in June 1998 was unexpected, given the record level ofdemand and the lack of a significant physical surplus. LME inventories rose over the periodfrom 52 kt to 59 kt, reaching a peak of 67 kt in November 1997, and both producer andconsumer inventories were low.The major factors contributing to this severe price decline were:� increased Russian exports of primary nickel in calendar 1997 by around 50 kt to 220 kt;� record levels of Russian exports of stainless scrap and nickel alloy estimated at some 50 kt of contained nickel;� lower, though still positive, forecasts for stainless steel production growth as a result of the Asian economic crisis and recession in Japan;� a perception that the three new pressure acid leach projects in Western Australia couldchange the industry cost structure; � heavy selling by ‘hedge funds’ against a perception of over-supply.

Nickel US$m 1998 1997

Turnover 320 89







Production Sales(thousand tonnes) 1998 1997 1998 1997

CMSA – Ferronickel 27,1 22,6 27,4 24,9

Yabulu – Nickel in all forms 26,9 25,2 26,5 25,7

– Cobalt 1,3 1,5 1,4 1,4


97 98 97 98

Operating Review

However, the longer-term outlook for nickel is good. Demand growth for stainless steel,which accounts for two-thirds of nickel demand, is projected to exceed that of all other metalsand to exceed growth in industrial production. After a number of false starts, electric andhybrid vehicle production is now close, largely as a result of US environmental legislation,and nickel is likely to play a role regardless of what battery technologies are used as theirpower source. Long-term nickel demand growth of around 3.5% is expected, implying thatsome 35 kt of new primary nickel will be required annually.

Global cobalt demand was at a peak level in the 1998 financial year of around 31 kt. The two largest first uses, chemicals and super-alloys, accounted for around 60% of demandand experienced strong growth, so prices reflected the tightness of supply. The London MetalBulletin price quoted for 99.3% cobalt content metal was firm during the year, averagingUS$19.70/lb, marginally below the previous year.

Demand for cobalt is set to increase further, although the projected new supply from the Western Australian nickel projects now under construction and eventually from Africancopper projects, means that in the medium-term, prices are likely to be significantly belowtoday’s levels.

Operations Total nickel production for the year was substantially expanded by the merger with QNI, andreached 53,972 t. Cerro Matoso’s production was an all-time record at 27,117 t, up 20% onthe previous year.

The Yabulu Refinery also improved its production at 26,855 t, up 7% on the previousyear. Cobalt production was similar to 1997 levels at 1,337 t. From March 1998, all cobaltproduction is now the new QN ChemGrade Cobalt product, resulting in higher achieved prices.

Despite these gains in production volume, QNI’s operating profits have beendramatically affected by the sharply declining nickel price. QNI has responded to the marketdownturn by focusing on reducing unit costs through stable but steadily rising output and on managing cash flow.


High quality nickel metal rondelleproducts account for 32% of QNI’s nickelproduction.

QNI’s Cerro Matoso smelter achieved its highest ever nickel productionin 1998.


Considerable progress has been made.Cerro Matoso’s cash costs of production for 1998, including all operating, marketing,freight and royalty costs decreased fromUS$2.41/lb to US$1.92/lb. The YabuluRefinery’s cash costs decreased fromUS$2.48/lb to US$2.03/lb after cobalt credits.The majority of these reductions wereachieved in the second half of the year, and in particular during the last quarter, as a result of reduced operating costs, highervolumes and more consistent plant operation,and, for the Yabulu Refinery, a weakerAustralian currency.

Demand for QNI’s nickel products continues to be strong, and although prices are weak,its sales volumes have not been affected by the Asian economic crisis. The new QN ChemGradeCobalt product has been well received in the high growth but demanding cobalt chemicalsmarket. On 1 July 1998, QNI announced a new marketing agreement that combines the skillsand services of QNI and Billiton, to provide cost savings and give QNI a more focusedmarketing structure.

Developments QNI’s most important development project is the proposed Cerro Matoso Line II Expansion.This expansion will increase QNI’s total production capacity to 85 ktpa by 2001. A majorstrength of this project is the significantly lower unit operating costs it will bring for QNI,and the very low technical risk involved.

Results received to date indicate that the proposed Cerro Matoso expansion will providea profitable investment opportunity even under low nickel prices, will underpin the future ofthat operation, and will realise true value for shareholders. Similarly, investments being madeat the Yabulu Refinery will ensure that this low-cost and versatile refinery can add value tofuture mine developments.

At the Maggie Hays Project, which includes the Roundtop, Lake Johnston and LakePercy joint ventures, considerable progress was made on exploration and optimisation studiesduring the year.

Nickel exploration is under way in Western Australia, Canada, Colombia and also inCuba, where initial drilling results from the San Felipe project have been encouraging.

QNI, in association with Billiton Process Research, is continuing to develop and improvenickel metallurgical technology. A major advance has been made with the completed pilottesting of the BioNIC® bacterial leaching technology. The next stage is to integrate thistechnology into the Yabulu refinery to process sulphide concentrate as a high-grade feed forfurther refining.

QNI’s plans for the next financial year and beyond are focused on further reducing costsand improving margins. The objective is to ensure QNI’s operations remain robust in anincreasingly competitive industry.

QNI has a growing market for its QN HiGrade Rondelles(99.5% Ni) in the foundry and alloy-steel market segments.

Operating Review

Billiton’s Steel and Ferroalloys interests comprise its 54.6% holding in Samancor Limited of South Africa. The 74% increase in the Billiton share of Samancor’s attributable profit, from US$19 million to US$33 million (excluding exceptional items), was mainly due to improvedferrochrome prices and volumes, together with lower US dollar operating costs.

Markets Manganese ore and alloysTotal world carbon steel production increased by 6% in calendar 1997. This representeda significant increase in demand for manganese (some 95% of which is consumed by steelproduction) from 6.7 mt in 1996 to 7.0 mt contained manganese for calendar 1997.

Unfortunately this improved demand did not translate into higher prices for manganesealloys as there was a significant increase in Chinese manganese alloys exports for 1997. In addition, the Asian crisis has caused steel production and economic prospects to declinesignificantly in the Far East since the beginning of 1998. However, since the beginning of1998, Chinese manganese alloy exports have dropped sharply, and conversions of ore intoalloy in the CIS and Eastern Europe are also declining significantly.

Prices for medium carbon ferromanganese appear to have stabilised, and lower availablehigh carbon ferromanganese supply indicates some scope for price increases. The prospects for alloy prices depend largely on the effects that the turmoil in the Far Eastwill have on steel production. If current levels of output are maintained then overall prospectsare positive in spite of significant reductions in steel production in Japan and Korea.

Chrome ore and alloysIn calendar 1997 stainless steel production grew by 9% to 16.7 mt. After this strong growth,total production in 1998 is expected to remain static as reduced offtake in the Far East isanticipated to offset increases in the rest of the world. The 2% increase in stainless steelproduction for the six months to June 1998 is now expected to be countered by lowerproduction during the second half of the year.

The negative impact of the Asian crisis was offset by the lower supply of ferrochromefrom Kazakhstan during the first half of 1998, and as a result ferrochrome supply and demand


Steel andFerroalloys

US$m 1998 1997








Saleable production (thousand tonnes)

Manganese ore 2,086 2,314

Manganese alloys 409 470

Chrome ore 3,240 2,705

Chrome alloys 935 881

Silicon metal 34 30

Manganese metal 42 41


97 98 97 98


Technical Expertise

� Billiton, together with its forerunners, has traditionally been recognised as a leader in mineral

processing and technology. It was one of the pioneers in applying the MacArthur/Forrest cyanidation

process back in the 1890’s, and in 1952 built the world’s first commercial ion-exchange plant for the

recovery of uranium. The 1950’s also saw Union Corporation pioneer autogenous milling which today

is recognised as the norm in comminution plant design and operation.

� Today the Group utilises state-of-the-art Pechiney AP30 technology at its Hillside aluminium

smelter, and Columbus Stainless Steel has adopted a combination of the latest stainless steel

production technology. Plasma smelting of ore was pioneered by Samancor, which now operates

the two largest furnaces in the world: the original 40MVA unit at Palmiet Ferrochrome and the

new 63MVA unit at Middelburg Ferrochrome.

� The Group is a world leader in alumina precipitation technology and in bio-hydrometallurgy.

Billiton’s Minerals Technology unit aims to maintain Billiton’s international recognition for its

technological capability in extracting maximum value from ore resources.

� The unit focuses on new technologies which have the potential to bring about major shifts

in production performance and ore resource utilisation. Emphasis is being placed on utilising

the technical knowledge base as a tradeable asset to gain equity participation in late-stage

development projects.

� The unit’s position in bio-hydrometallurgy arose from its development of the BIOX® process

to recover gold from refractory sulphide ores. The BIOX® process, which today is commercially

well proven, was retained by Gencor at the establishment of Billiton. Billiton’s efforts are now

concentrated on developing similar technologies for the extraction of nickel and copper.

� The BioNIC® process has undergone considerable development. Its advantages include

the ability to treat low-grade and chemically difficult ores, viability for small-scale production,

and low environmental impact. Leveraging off BioNIC® enabled the Group to obtain its stake in

the Maggie Hays project in Australia. The technology also resulted in a value benefit for Billiton

shareholders in the terms of the QNI merger. QNI has now assumed responsibility for further

development of BioNIC®.

� More recently, the preliminary development of BioCOP, a similar technique for the extraction

of copper, has yielded very encouraging results. The environmental cleanliness of the process

is expected to result in growing demand for its use. A key advantage of BioCOP is its ability to extract

copper from arsenic-contaminated ores, which could not be commercially processed by conventional

smelting. A pilot BioCOP plant has been set up at Codelco’s Chuquicamata mine in Northern Chile,

and other commercial opportunities are being pursued.

Operating Review


remained in balance. Benchmark prices were stable at around 47¢/lb for the financial year.The ferrochrome supply from Kazakhstan has now returned to normal levels, resulting in amarginal oversupply, causing downward pressure on the market. Prices for the first quarter ofthe 1999 financial year have decreased by some 1.5¢/lb compared with the last quarter of thereview period.

Operations and Manganese alloysdevelopments In high carbon ferromanganese, output from the three larger furnaces at Meyerton (M10,

M11 and M12) started approaching planned levels during the final quarter of the financialyear. This can be mainly attributed to:� The high percentage sinter in the feed mix that prevents furnace eruptions, resulting inhigher furnace availability and stable operations.� Revised maintenance procedures.� Improved saleable yields.

The rebuild of the large MIO furnace at the beginning of the new financial year and theoverall stabilising of the Metalloys operation should result in further cost improvementsduring the new financial year.

The Advalloy plant was commissioned within budget and the ultra low carbonsilicomanganese and ultra low carbon ferromanganese furnaces have reached their designedoutput levels. The oxygen blown converter, for the production of medium and low carbonferromanganese, has reached 50% of design output levels and is expected to reach designlevels during the new financial year.

Manganese minesSamancor operates two manganese mines – Wessels, an underground mine and Mamatwan,an open pit mine, located near Hotazel in the Northern Cape. During the financial year 2.1mt of ore was produced. This represents a 19% decrease on the previous year’s 2.3 mt.

Capital expenditure was US$5.0 million. This amount includes US$1.6 million of theUS$17 million budgeted for the Sinter Plantupgrade. The remaining capital expenditure(US$3.4 million) was spent on maintainingcurrent infrastructure and complying withsafety and environmental standards.

Chrome alloysSamancor’s chrome alloy division benefitedfrom 8% higher alloy prices and increasedalloy sales of 12%. The strategy to reducecost of production in real terms wasadvanced by the implementation of a formal performance improvement program at all four plants. Benefits from this program will accumulate over the next three years.

Output improved at the three larger furnaces atSamancor’s Meyerton manganese alloy operations.


At the Ferrometals plant, the loweravailabilities experienced on the ferrochromefurnaces during the previous year started toimprove towards the latter half of the currentfinancial year as a result of a focusedmaintenance program. Intermediate carbonferrochrome production was at record levels at 93% of capacity and in line with marketdemand. Further debottlenecking of the IC3 facility will take place during the nextfinancial year.

The Ferrometals pelletising andpreheating project is progressing withinbudget. Commissioning of the pelletising plant, the rebuild of furnace no. 4 and installationof the pre-heater was completed during July 1998. The rebuild of furnace no. 5 andinstallation of its pre-heater should be completed by October 1998. The new facility willreduce the dependency of furnaces on lumpy ore, increase capacity and reduce the variablecost of production.

Furnace utilisation at Tubatse Ferrochrome was low during the year. Furnace no. 3 was rebuilt towards the end of the review period and furnaces 1 and 2 will be rebuilt during the first half of the current year. This should enable Tubatse to operate at its full potential.

At Middelburg Ferrochrome, product from the chrome direct reduction kiln wassuccessfully fed to the DC arc furnace during the year and a substantial decrease in specificenergy consumption, as well as an increase in throughput, was achieved. The two submergedarc furnaces were successfully rebuilt and record production levels were achieved towardsyear-end.

The technology transfer from Showa Denko KK to Middelburg Technochrome (MTC) was successfully completed and MTC is now capable of producing all special grades.Customer acceptance for the special grades has been achieved.

A substantial improvement was achieved at Palmiet Ferrochrome after upgrading the DC arc furnace, with production at record levels at a much reduced cost of production. The two submerged arc furnaces were fully utilised. Planned major repairs commenced on No. 3 furnace in June 1998 which will lead to improved furnace performance.

Chrome oreChrome ore production for 1998 of 3.2 mt was well above the previous year’s 2.7 mt.Development at the mines at 19,777 metres was marginally less than the previous year. Unit production cost for the year was 7.3% below the previous year figure mainly as a resultof mining productivity improvements and rationalisation of non-core activities.

At Western Chrome Mines, the Buffelsfontein Section was closed at year-end, thisproduction capacity being replaced with additional output from the Mooinooi Section whereadequate available ore reserves allowed this rationalisation. Expansion of the Millsellmechanised operation to include the Waterkloof and other contiguous reserves, is currently

Performance at Samancor’s Metalloys operations hasimproved during the second half of 1998.


Operating Review

underway. An opencast operation was established adjacent to the Mooinooi Section on theElandskraal orebody, and contractor mining is currently proceeding satisfactorily.

Development at Eastern Chrome Mines was marginally higher than the previous yearand targeted at generating additional ore reserves at the Doornbosch, Lannex and TweefonteinSections. Mineable reserves at the Montrose Section are now largely depleted, and due tohigh operating costs, this section is to be closed during the current financial year.

Total capital expenditure on the chrome mines of US$11.2 million was 7% higher thanthe previous year. It was mainly applied to establishment of the Elandskraal Opencast,replacement of machinery and other measures to increase production capacity.

Columbus StainlessResults for the Columbus Stainless joint venture improved progressively during the year, andin the last quarter a small profit before interest and depreciation was achieved. Over-supply in the global stainless steel market resulted in a 7% fall in the average realised price.However, conversion margins were maintained due to an increased proportion of higher-value products and the falling nickel price. Overall product yield averaged 79% for the year(1997: 72%), and reached 82% for the final quarter. Total sales rose by 23% to 319 kt.Samancor’s share of the Columbus loss for the year was US$14.8 million after tax.

Billiton’s interests in titanium minerals comprise a 50% shareholding in Richards Bay Minerals(RBM) in South Africa and 100% ownership of the TiGen mineral sands project in Mozambique.

At US$96 million, RBM attributable profit in 1998 was unchanged from 1997 andrepresents 20% of total Group attributable profit.

Operations and RBM maintained its good operating performance during the year and annual titanium dioxidemarkets slag production again exceeded one million tonnes. The demand for titanium feedstocks

remained strong during the year, mainly due to growth in the production of titanium dioxidepigment. Titanium dioxide feedstock prices remained firm during 1998.

The commissioning of new feedstock production projects during 1997 raises the prospectof increased supplies and somewhat weaker market conditions. However, in some cases, thesehave not achieved their planned production levels. The combination of increased supplies fromthese new projects as well as weaker demand for pigment in Asia could result in more difficultmarket conditions during the latter part of the current year. The pigment industry itselfunderwent significant restructuring during the year with chloride technologists acquiringsulphate capacity. This may translate into increased future demand for chlorinatable feedstocks

Titanium Minerals US$m 1998 1997

Turnover 317 314






97 98 97 98


as expansion would probably be in their known areas of specialisation.The consumption of zircon was affected by the Asian crisis, due to its significant use in

the South East Asian ceramics industry. Consequently, zircon markets have weakened andprices have declined from the peak levels experienced in early 1997. The immediate outlookfor zircon consumption remains subdued, although declining production in Australia mayhelp to offset this.

The market for pig iron has also been negatively affected by the Asian crisis and generalglobal lethargy in the iron and steel industry. A surplus of competitive product and lowersteel scrap prices is expected to result in erosion of iron prices.

Developments RBM is continuing with the development of a new mining site, Pond-E, to the north of theexisting mining operations, at a capital cost of approximately US$150 million. This projectalso includes an upgrade of the existing mineral processing plant. Commissioning of the newproject will allow RBM to maintain an annual slag output of one million tonnes as ore gradesgradually decline. The plant should be in operation by late 1999.

The TiGen coastal mineral sands project in Northern Mozambique has been the subjectof a detailed feasibility study. Some 43,000 metres of exploration drilling have delineated aresource base of two billion tonnes containing 31 mt of titanium dioxide. Detailed metallurgicaltestwork has confirmed the feasibility of the production of chlorinatable slag, zircon, rutileand pig iron. A process to reduce radioactivity in the slag to acceptable levels has beendeveloped and is currently being refined. Preliminary results from the detailed environmentalimpact assessment confirm that there appear to be no environmental flaws associated with theproject. A decision whether to proceed with the detailed design and engineering of the minewill be taken during the current year.

Richards Bay Minerals is theworld’s foremost producer oftitanium minerals.

Richards Bay Minerals’ dredge mining plant with the dredger in the foregroundand concentrator behind.

Health, Safety and the Environment


During the past year, we developed a new Health, Safety and Environment (HSE) Policy that affirms our responsibility to our people and the environment.

Each company within the Group is:� responsible for all health, safety and environmental matters relating to its particularbusiness; and� required to implement systems and strategies that are consistent with Billiton’s policy.

In exercising corporate governance, these systems are monitored by the HSE Department.

Companies in which the Group has a shareholding but not a direct managementresponsibility are actively encouraged to develop their own policies to be consistent with that of Billiton.

Health, Safety Billiton is committed to achieving excellence in all business activities, including and Environment health, safety and environmental management. To realise this objective, every Group

Group policy company shall:� comply with all relevant laws, regulations and standards and, in the absence ofappropriate legislation, apply standards reflecting Billiton’s commitment to best practice;� communicate openly with its employees and affected parties and promote initiatives tocontinuously reduce the safety, health and environmental risks associated with the company’sbusiness activities;� monitor the health, safety and environmental effects of its activities on employees andaffected parties and on the environment, and review performance regularly;� ensure that all employees are committed to meeting the health, safety and environmentalmanagement requirements related to the company’s activities and are competent to do so intheir areas of responsibility;� minimise the impact of operations on the environment and pursue the efficient use ofnatural resources;� implement health, safety and environmental management systems based oninternationally recognised standards.

A

B

C

Three stages of development of rehabilitation following bauxite mining at Worsley – tree seedlings are planted (A)and after four years develop a thick cover over the ground (B). After eight years rehabilitation has formed a canopynow dominating the site (C).

The Board has established a Health,Safety and Environment Committee,which functions as a sub-committee of the main board and is chaired by a non-executive director, Lord Renwick of Clifton. The majority of the members of the Committee are independentinternational experts who advise theGroup on best international practice andmonitor compliance with group policies.

Health and Safety Key concepts of the HSE policy are propagated throughout the organisation and we aredeveloping information systems designed to improve performance measurement of Billitoncompanies in accordance with our policy. Health and safety management systemsimplemented by operating companies are based on internationally recognised standards suchas the British Standards Institute BS8800:1996 guideline.

The health and safety of all people at operating sites is of the highest priority. We regretto report that 16 employees and 8 contractor employees lost their lives in work-relatedaccidents during the financial year, which equates to 1.8 fatalities per 10 million man-hours.

Comparison of fatality frequency rates in the mining industry

All fatalities occurred within the Coal and Steel and Ferroalloys divisions of our SouthAfrican operations, and these two divisions continue to make concerted efforts to improveperformance. All the other divisions were able to report a fatality-free year and Worsley Aluminawon the Australian 1998 Minerals Industry Excellence Award for Safety and Health.

All accidental deaths and major incidents, including those involving contractors, arereported immediately to the Billiton Executive Committee. Each case is fully investigated and the action that is taken to prevent similar incidents from occurring again is reviewed andcommunicated to all other companies in the Group.

Formalised occupational health and safety risk assessments have been completed in fiveof the six divisions. Nickel will complete its assessment in the forthcoming year. Theseassessments highlight the major hazards, namely:� Moving machinery � Falls of ground� Dust � Noise

1996/971995/96 1997/98

USA Australia South Africa Billiton

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2.5

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1.5

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Lord Renwick (centre), non-executive director of Billiton andchairman of the HSE Committee, reviewing HSE systems withMiklos Salamon (left), executive director of Billiton Plc andJohn Ferreira, General Manager at Middelburg Ferrochrome.



Occupational Health Risk Profileperiod July 97 – June 98

Major Safety Risksperiod July 95 – June 98

The operating companies are implementing strategies to manage and reduce these risks.Guidelines, based on best international practice, are developed to assist operating companiesin this process.

Progress in improving systems and technology with which to manage health and safety isroutinely reviewed and we actively contribute towards research that could provide technologicaladvances in the prevention of accidents and ill health.

Verification After examining the safety profiles of the operations of Group companies, the HSE

Committee required audits to be undertaken of the highest risk activities.

Ingwe Audit

In common with all coal mining activities, a number of significant hazards associated withproduction activities were found.

The auditors found that Ingwe was making impressive progress in safety, education andtraining, though much remained to be done.

Technical issues represented a significant hazard. Mine ventilation issues in previouslyworked underground areas and the presence of mineral oils in some electrical undergroundequipment were highlighted. Attention was being given to these problems and also to healthrisks from dust contamination.

Samancor Audit

Samancor is a diverse company that operates chrome and manganese and a range of alloysmelting plants. The audit included a visit to a chrome mine and a ferrochrome smelter.

It was recommended that the training and education facilities available to the workforce,and the general safety culture, be improved.

Practical improvements to deal with the control of vehicle movements at smelters, theprotection of employees exposed to risks associated with hot metal at furnaces, protectionfrom hazards due to working at heights and the possible dangers from flammable gases inunderground situations in mines were included among the recommendations.

Professors A W Davies and M D G Salamon

� Moving machinery 41%

� Falls of ground 31%

� Fire and explosion 12%

� Inrushes 6%

� Slipping and falling 5%

� Electricity 5%

� Noise induced 39%

hearing loss

� Lung disease 29%

� Repeated trauma 14%

� Skin diseases 6%

� Other 12%

Environmental Billiton supports the philosophy of sustainable development and views it as a business management approach to achieve realistic economic, social and environmental goals that can sustain

the needs of future generations. To this end Billiton is committed to further improve itsenvironmental management and communication performance.

Priority areas to be focused on during the next financial year include:� Improving existing reporting guidelines to align and standardise reporting requirementsand to monitor Group companies’ progress towards achieving their goals.� To develop new, and improve current guidelines, to ensure that environmental and socialissues integrate with business activities.

Environmental management is an integral part of all new business, operating and closuresactivities. Best international practice based on guidelines produced by various internationalorganisations, including the International Association for Impact Assessment, World Bank, UnitedNations Environment Programme and others, is applied in assessing the potential ecological andsocial impacts of new Billiton projects. This allows environmental impact mitigation measuresto be incorporated into the design, construction and operational phases of development.

Group policy requires each operating division to implement environmental managementsystems based on best international practice. Almost all operating divisions have opted to basetheir management systems on ISO 14001, the majority deciding to aim for formal certification.To date Samancor’s Tubatse and Middelburg Ferrochrome plants and the Tisand section ofRichards Bay Minerals have achieved external certification. A number of other operationshave made significant progress with the implementation of ISO 14001 and it is expected thatat least four more operating units will be certified during the next year.

The impact of international conventions such as the Basle and Biodiversity Conventionsand the Framework Convention on Climate Change, including the Kyoto Protocol, areassessed on an ongoing basis.

Operating companies are continuously striving to develop effective closure strategies formines that have reached the end of their working life. In a number of cases, such as Samancor’sChemfos Mine at Langebaan on South Africa’s Cape west coast, the minimum objective oflegal compliance and rehabilitation has been replaced by exciting and innovative new approachesto mine closure.


Rehabilitation at RBM – The dunes are shaped from the tailings left after the mining process, leaving a bare dunesimilar to those formed by nature. Wind breaks are erected to protect the emerging seedlings from wind damage. A cover crop of fast growing cereals, grasses and indigenous seeds is sown into the topsoil, which dies off afterabout 12 months leaving only indigenous species behind.



HSE Provisions Operating companies fund fully all closure liabilities over the operating life of an asset with theadequacy of provisions subject to corporate review. To this end operating companies have madeprovisions for the known and estimated environmental liabilities of closure costs.

Closure of Samancor’s Fossils were first discovered at Langebaanweg Chemfos Mine at in the late 1950’s during phosphate mining

Langebaan on South operations. Over the past 40 years, the South Africa’s Cape west coast African Museum has forged an excellent

working relationship with the mine to ensure that the palaeontological wealth of the site was properly sampled.

When mining operations ceased in 1995,the South African Museum, together withSamancor, recognised the potential for developing a West Coast Fossil Park incorporating theexisting 14 ha old mine floor area, which has been proclaimed a National Heritage Site.

The aims of the Fossil Park are to:� ensure protection of the Heritage Site and in collaboration with the National MonumentsCouncil to develop its research, educational and tourism potential� offer students, schoolchildren and eco-tourists a “hands-on” fossil experience� provide facilities that will enable visitors to learn about environmental changes that havetaken place in the West Coast region over the last 5 million years� use the area surrounding the fossil centre as a model for rehabilitation programmes thatminimise environmental impact.

The mine closure strategy adopted has ensured that an important international fossil sitehas been preserved.

Social and Community Involvement

Billiton’s operations are committed to engaging as good corporate citizens both with the localcommunities as well as with the wider society in which they operate. In keeping with Billitonguidelines, Group companies take responsibility for managing their own corporate socialinvolvement (CSI) programmes and policies, which are designed to meet local needs andcircumstances. The majority of Billiton’s CSI efforts are concentrated on education, healthcare and the improvement of socio-economic conditions and infrastructure.

Where the Company carries out exploration activities, it has engaged the services of an international consultancy with experience in social and development issues to investigatecommunity issues and help management develop programmes to address local needs inconsultation with local authorities, community representatives, non-governmentalorganisations (NGOs) and other relevant stakeholders.

Billiton encourages the involvement of its employees in the implementation of its CSIprogrammes.

Total investment for the Group amounted to over US$13 million in 1997/98. Someexamples of Billiton’s world-wide CSI activities include:

Brazil Together with its joint venture partners at MRN, Alumar and Valesul, BMSA is involved invarious projects ranging from education to the restoration of historical monuments.

Colombia In Colombia, QNI’s Cerro Matoso provides over US$1 million in annual funding for theFundación San Isidro, an independently managed entity engaged primarily in fostering localsocial welfare and micro-economic development projects in the communities in and aroundthe town of Montelíbano, in the province of Cordoba. Several significant community developmentprogrammes, designed to contribute to the wellbeing of the neighbouring communities,particularly in the population’s poorest segments, are in place. These programmes range fromloans to micro-enterprises, to garbage recycling and environmental improvement projects. Inaddition, Cerro Matoso provides approximately US$3 million per year for the FundaciónEducativa Montelíbano, a school providing education in both Spanish and English toUniversity entrance level for some 1,100 students, and employing 80 teachers. Cerro Matosois the only sponsor of this school.

South Africa The Billiton Development Trust (BDT)implements, co-ordinates and manages the CSIinitiatives of Billiton’s South African operationsand those of Billiton companies, such asSamancor and Ingwe, which participate in the Trust. The Trust adopts a unique approachin implementing its projects by aligningdevelopment initiatives with those of the SouthAfrican Government, adopting a catalytic andfacilitating role and involving all relevantinterested parties such as employees, NGOsand local community representatives.

Development projects cover a wide spectrum


QNI’s Cerro Matoso funds the Fundación EducativaMontelíbano which provides education to universityentrance level for some 1,100 students.

Social and Community Involvement


ranging from health care, education andtraining, water supply, housing to youth andwomen development. Over US$3 million wasused for projects during the 1997/98 financialyear with well over half the amount allocated toeducation. In addition approximately US$2.7million was committed to the MasifundeProject, a school improvement programmebenefiting 45,000 children in sixty schools inSouth Africa which will be implemented over aperiod of three years.

A key feature of a number of BDT projectsis their close link to the business objectives ofBilliton’s operating companies. This builds a strategic relationship between the project, thecommunity and the Company. One such project, pioneered by BDT, is the provision ofhousing to low-income owners, which has resulted in 550 homes being built in Belfast, in thevicinity of one of Ingwe’s operations. BDT conceptualised the project, provided bridgingfinance and facilitated a process, which brought different role players together.

A similar strategic investment to alleviate unemployment and to secure productionrequirements is BDT’s charcoal production project in the Eastern Cape. The project, which is established as an independent co-operative enterprise, employs 120 people and will employeven more when two additional burning sites are commissioned. All charcoal produced (160tonnes per month) is utilised by Samancor’s Silicon Smelters in their production process.

South African CSI activities are not confined to BDT. Group companies operating in South Africa also engage in CSI directly. Examples are the Hillside and Bayside AluminiumSmelters, who together with other local organisations in Richards Bay established theZululand Chamber of Business Foundation; and Samancor Limited which established theSamancor Foundation. These organisations implement CSI programmes in partnership withlocal stakeholders such as employees, union representatives, NGOs, other Billiton or localcompanies, and government or community structures.

Suriname In Suriname, Billiton Maatschappij Suriname invests in projects mainly concentrated on education.

The Belfast housing project has provided 550 homesfor low-income home owners.

Board and Executive

Executive DirectorsBrian Gilbertson, MSc, MBL, aged 54, is Chairman and Chief Executive of Billiton Plc. His careerin the mining industry started in 1970 when he joined Johannesburg Consolidated InvestmentCompany (JCI), becoming a director in 1986. Two years later he joined Gencor as an executivedirector and was appointed executive Chairman in 1992. In addition to the directorships he holdsin Group companies, he is a director of Engen Limited and the South African Reserve Bank.

Michael Davis, BCom (Hons), CA (SA), aged 40, is Chief Financial Officer of Billiton andChairman of Ingwe Coal Corporation Limited. He joined Gencor in early 1994 from Eskom, theSouth African electricity utility, where he was an executive director. He was appointed ExecutiveChairman of Ingwe in 1995. Responsibilities: Finance, Coal

Steven Kesler, BSc, PhD, FIMM, aged 47, joined Billiton on 1 October 1997 and brings to Billitonextensive international experience, including executive positions at Rössing Uranium in Namibia,at Escondida and Collahuasi in Chile and, most recently as Chief Executive of Pacific NickelLimited in the Philippines. Responsibilities: Base Metals, New Business and Technology

David Munro, ACSM, MBA, aged 43, joined the Gencor Group in 1981 and gained extensiveexperience in the gold, coal and ferroalloys industries. He was appointed managing director ofBilliton in 1994. In 1997, following the company’s restructuring, he was appointed an executivedirector of Billiton. Responsibilities: Aluminium, Marketing and Trading

Miklos Salamon, BSc Mining, MBA, aged 43, began his career in diamond mining and in 1985 joined Trans-Natal Coal (now Ingwe) where he was appointed managing director in 1989.Four years later he became executive Chairman of Samancor. He is also Deputy Chairman ofColumbus Stainless Steel Joint Venture and QNI.Responsibilities: Steel and Ferroalloys, Nickel, Titanium Minerals


Board and Executive


Non-Executive DirectorsDavid Brink, MSc (Engineering, Mining), aged 59, is Executive Chairman of Murray & RobertsHoldings Limited, Chairman of Unitrans Limited and Deputy Chairman of ABSA Bank Limited.His directorships include the Industrial Development Corporation of South Africa, Sanlam andSappi Limited. He is a board member and councillor of the South African Foundation.Remuneration Committee Member

Cornelius Herkströter, MCom, CA, aged 60, joined the Board on 1 July 1998, following hisretirement as President of Royal Dutch Petroleum Company and Chairman of the Committee of Managing Directors of the Royal Dutch/Shell Group of Companies. He was recently appointeda Professor of Economics at Amsterdam University.Chairman of the Nominations Committee, Audit Committee Member

John Jackson, BA, LLB, aged 69. Since 1980 he has joined the Boards of a number of companies ina wide range of industries including electronics, engineering, pharmaceuticals and fine chemicals,biotechnology, hotels, property, racing, retailing and printing. He is currently Chairman ofLadbroke plc, Oxford Technology Venture Capital Trust Plc, Celltech Group plc, WyndehamPress Group plc and Xenova Group plc. He is also a director of WPP Plc.Chairman of the Remuneration Committee, Nominations Committee Member

Derek Keys, CA (SA), FIBSA, aged 67. In 1992, on retiring as Chairman of Gencor, he joined theSouth African cabinet as Trade and Industry Minister. Four months later Finance was added to hisportfolio. After the transition he continued as Minister of Finance until released by President Mandelaat the end of 1994. He then rejoined the Group as an executive director until his retirement in 1997.Chairman of the Audit Committee

Lord Renwick of Clifton, KCMG, MA, aged 60, served as British Ambassador to South Africa from1987 to 1991 and as British Ambassador to the United States from 1991 to 1995. He is currentlydirector of Robert Fleming Holdings Limited and Robert Fleming Incorporated. He is alsoChairman of Fluor Daniel and a director of British Airways, Compagnie Financiére Richemont,Canal Plus, Liberty International and West Rand Consolidated Mines.Chairman of the Health, Safety & Environmental Committee, Remuneration Committee Member,

Nominations Committee Member

Matthys Visser, BCom(Hons), CA(SA), aged 44, joined Rupert International (Pty) Limited, a service company of the Rembrandt Group in 1980. He was appointed managing director ofRembrandt Group Limited in 1992 and is currently serving on the Boards of Rembrandt GroupLimited, Rembrandt Controlling Investments Limited, Hunt Leuchars & Hepburn HoldingsLimited, Malbak Limited, Perskor Group Limited, Rainbow Chicken Limited and RothmansInternational BV.Audit Committee Member, Remuneration Committee Member

Registered Office and Head Office1-3 StrandLondon WC2N 5HAUnited KingdomTelephone: +44 171 747 3800Facsimile: +44 171 747 3900

Regional OfficesAfrica Australasia6 Hollard Street Level 1, 4 Riverside QuayJohannesburg 2000 Melbourne(PO Box 61820, Marshalltown 2107) Southbank, Victoria 3006Republic of South Africa AustraliaTelephone +27 11 376 9111 Telephone +61 3 9690 1420

Latin America ChinaMatilde Salamanca 736 Room 1064/106650 Piso Office Tower, Poly PlazaProvidencia 14, Dongzhimen NandajieSantiago Dong Cheng DistrictChile Beijing 100027Telephone +56 2 246 8511 China

Telephone +86 10 03 5797

Registrar and Transfer OfficeUnited Kingdom South AfricaLloyds Bank Registrars Mercantile Registrars Limited The Causeway 8th FloorWorthing 11 Diagonal StreetWest Sussex BN99 6DA Johannesburg, 2001Telephone: +44 1903 502541 (P O Box 1053, Johannesburg 2000)Facsimile: +44 1903 702481 Telephone: +27 11 333 8181

Facsimile: +27 11 333 4547

InternetA selection of regularly updated Company information, including press releases is available on the Billiton website www.billiton.com.

1999 Shareholders’ Diary DividendsFinancial year end 30 June InterimAnnual General Meeting 15 October 1999 � Date of declaration March

� Date of payment AprilReports and Financial StatementsInterim Report March FinalProfit announcement September � Date of declaration SeptemberAnnual Report September � Date of payment October

Billiton Plc registered in England and Wales. Registered number 3196209Des

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Billiton Plc

A world leader in mineral resources

Annual Report 1998

Billiton Annual Report 1998

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