carbon steel materials performance and prospects

Carbon Steel MaterialsPerformance and Prospects

8 May 2002UBS Resources ConferenceStefano Giorgini – Vice President & CDOCarbon Steel Materials

8 May 2002 UBS

CSM19% = US$2,492M22% ex BHPS

CSM34% = US$831M36% ex BHPS

CSM EBIT ROC = 44%

Carbon Steel Materials Contribution9 months to March 2002

Group EBIT US$2,412MGroup Sales US$13,176M

8 May 2002 UBS

Carbon Steel Materials Assets

WA Iron Ore (65-100%)Prod: 70mtNO 3 SEABORNE SUPPLIER

QLD Coal (50-80%)Prod: 50mt NO 1 SEABORNE SUPPLIER

Samarco (50%)Prod: 12mtLOW COST PELLET PRODUCER

Illawarra (100%)Prod: 7mt NICHE SUPPLIER

Port Hedland HBI (100%)Prod: 1.8mt

Manganese (60 %)Prod: Ore 3.5mt Alloy etc 0.6mt NO 1 SEABORNESUPPLIER

100% nominal production capacity

8 May 2002 UBS

Carbon Steel Materials Assets

WA Iron Ore (65-100%)

34 Years2377mt

QLD Coal (50-80%)

53 Years 2642mt

Samarco (50%)

37 Years55mt

Illawarra (100%)44 Years

307mtManganese (60 %)

Aust 40mt / 25 YearsSouth Africa

40mt / 30 Years Years = Current reserves / Nominal productionReserves = 100% Million tonnes

8 May 2002 UBS

BHPB Marketing FranchiseAsia

CHINABB: Major supplier of iron ore & manganese

JAPANBB: Premier supplier of CSMs

- reliable, consistent quality- supplier of high VIU product

KOREA / TAIWANBB: Premier supplier of CSMs

- reliable, consistent qualityINDIABB: Competitive supplier of coking coals

8 May 2002 UBS

BHPB Marketing FranchiseEurope and South America

EUROPEBB: Premium supplier of HQCC Supplier of manganeseMarket for lump ores and pellets

BRAZILBB: Core supplier of HCC

8 May 2002 UBS

Operating ExcellenceWA Iron Ore

8 May 2002 UBS

Seaborne Iron Ore Cost CurveCa

sh C

osts

(US$

/T)

Pellets

YandiGoldsworthy

Whaleback

Samarco

Jimblebar

OB 23/25MACestim

30

20 Fine + Lump

10

00 100 500 600200 300 400

Cumulative Production (Mtpa Fe)

Source: BHPB, AME

8 May 2002 UBS

WAIOImproved Productivity

1,2001,4001,6001,8002,000

YEM97 YEM98 YEM99 YEJ00 YEJ01 YTD02Employee numbers

Numb

er of

Emp

loyee

s

20,000

25,000

30,000

35,000

Tonnes Sold per Employee

Tonn

es so

ld pe

r Emp

loyee

2,800 50,0002,600

45,0002,4002,200 40,000

1,000

8 May 2002 UBS

Railroad Operating Improvements

240190Train

Length(no of cars)

131

1972 1984 Current

40

1972

36

1990

TrainCycle Time

(hours)

28

Current

8 May 2002 UBS

Gross Loading Rate – Nelson Point

6000

5109

4000

4500

5000

Tonn

es pe

r Hou

r 5500

3500Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun YTD

AvgYEJ00 average YEJ01 average YEJ02 actual

8 May 2002 UBS

Operating ExcellenceWA Iron OreSamarco

Samarco

BRASILIA

• RIO DE JANEIROIRON

QUADRANGLE

• VITÓRIA

ESPÍRITO SANTO

40º 4’40’W

Tubarão

Vitória20º46”48”S

ATLANTIC OCEAN

SAMARCO Mine

SLURRY PIPELINE396 Km

CVRD Rail

road

IRON QUADRANGLE

Belo Horizonte

MINAS GERAIS FEDE

RAL

Railr

oad

RIO DE JANEIRO

Rio de JaneiroSepetiba

SÃO PAULO

PONTA UBU TERMINAL

8 May 2002 UBS

Samarco Improving Productivity

1997 1998 1999 2000 20010

2500

5000

7500

Numb

er of

Emp

loyee

s

Tonn

es so

ld pe

r Emp

loyee

1600 12500

100001200

800

400

0

Tonnes Sold / EmployeeEmployee Numbers

8 May 2002 UBS

Operating ExcellenceWA Iron OreSamarcoQueensland Coal

8 May 2002 UBS

Seaborne Hard Coking Coal Cost Curve

Norwich Park, Blackwater, Peak Downs

West Cliff, Tower, Appin

Goonyella

Elouera

CrinumSaraji, Riverside

Gregory

Cash

Cos

ts (U

S$/T

)

40

30

20

10

00 10 20 30 40 50 60 70 80 90 100 110

Cumulative Production (Mtpa Fe)

Source: BHPB, AME

8 May 2002 UBS

Queensland Coal Ownership Structure

BiloelaThangool

YeppoonCapella Tieri

Dalrymple Bay Coal TerminalEungella Dam

Fairbairn Dam

MACKAY

BLACKWATER

Springsure

ROCKHAMPTON

Moura

Nebo

SarinaGlenden

GREGORY

GOONYELLA

CORAL

SEA

Clermont

Collinsville

BlackwaterEMERALD

Moranbah

Bingegang Weir

SARAJI

CRINUM

RG Tanna Coal TerminalBarney Point Coal Terminal

Dysart

RIVERSIDE

AUSTRALIA AREA OF MAPQLD

NSW

WA

VIC

T

SA

NT

SOUTH WALKER CREEK

BM Alliance

Coal

BM Alliance

Coal

CQCA JV:

Peak Downs MineGoonyella MineNorwich Park MineSaraji MineBlackwater MineHay Point Terminal

Gregory JV:

Gregory MineCrinum Mine

BHP Mitsui Coal P/L:

Riverside MineSouth Walker Creek Mine

Management &

Marketing

BHP BillitonBHP

Billiton

Mitsubishi DevelopmentMitsubishi

Development

20%

50%

80%

50%

Mitsui & Co.

Mitsui & Co.

8 May 2002 UBS

Queensland Coal Improved Productivity

0

1000

2000

3000

YEM97 YEM98 YEJ99 YEJ00 YEJ01 YTD020

3000

6000

9000

Numb

er of

Emp

loyee

s

Tonn

es so

ld pe

r Emp

loyee

180005000

150004000

12000


8 May 2002 UBS

Operating ExcellenceWA Iron OreSamarcoQueensland CoalIllawarra

8 May 2002 UBS

IllawarraIncreasing scale of operations

Elouera

Appin

West CliffCordeaux

Tower

Dendrobium

01234

6

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

5Mt

789

8 May 2002 UBS

IllawarraImproved Productivity

500

1,000

YEM97 YEM98 YEM99 YEJ00 YEJ01 YTD02Employee numbers

Numb

er of

Emp

loyee

s

0

2,500

5,000

Tonnes Sold per Employee

Tonn

es so

ld pe

r Emp

loyee

10,0002,000

7,5001,500

0

8 May 2002 UBS

Operating ExcellenceWA Iron OreSamarcoQueensland CoalIllawarraManganese

8 May 2002 UBS

Manganese industry structure

EndUseCustomers

Integrated alloy smelters (30%)

Independent alloy smelters (70%)

Steel producers (94%)

Chemical and metallurgical segments (6%)

OreProducers

Integrated Alloyers

Alloy Producers Steel Producers

Independent Alloyers

Ore Producers

Industry segmented by ore characteristics:

— High grade ore

– Low grade ore

Source: Monitor, SAMMN

8 May 2002 UBS

Manganese Ore - Cash Cost Curve

$/mtu

Mamatwan Wessels Gemco

Represents 75% of total world output

Azul

Mar

gane

tsU

G

Mam

atw

an

Zuny

i

Wes

sels

Moa

nda

Gha

na

Nch

wan

in

Glo

ria

Gem

co

Xian

gtan

CM

L

Mar

gane

ts

Autla

n

Ord

zhon

ikid

ze

Prod cost* Pre-FOB cost*Excludes depreciation

g

Source: BHPB, CRU 2000, Updated Apr’02

8 May 2002 UBS

Manganese Ferro Alloy - HCFeMn Cash Cost Curve78% Mn Equivalent

$/t

Metalloys

Temco

0

Hira

Zuny

iEl

kem

PXi

angta

nEl

kem

SMe

talloy

sFe

rallo

ysXi

nyu

Temc

oSE

ASSi

bra

Mizu

Guan

gxi

SFPO

Fera

t C Bayi

Pauli

sta B

Dong

buSh

aoxin

gMa

ringa

Pauli

sta R

Fera

t BEm

eiHa

n Hap

Dong

ilND

KAu

tlan

Niko

pol

OFZ

Italgh

isaCD

KZa

poro

zhye

Elke

m M

KSL

Forn

ilegh

eTis

co Jilin

Shan

xiME

LKF

A

Conv Cost FOB DelOre Input

Source: BHPB, CRU 2000, Updated Apr’02

8 May 2002 UBS

Manganese Improved Productivity

2000

YEM97 YEM98 YEM99 YEJ00 YEJ012000

2500

3000

Tonn

es so

ld pe

r Emp

loyee

4000

Numb

er of

Emp

loyee

s

1500 3500

1000

500

0


8 May 2002 UBS

Business Growth & Product Development

8 May 2002 UBS

Project Pipeline

PREFEASIBILITY FEASIBILITY EXECUTION

Westcliff Longwall

Yandi Long Term Optimisation

PACE Stage 2

Project

Goonyella Underground

Universal Dragline

Project

PACE 81South Blackwater Integration 13.5

MAC 15

Yandi Lump 4Dendrobium 5

Project Tonnage(Mtpa)

Samarco Roller Press 2

Blackwater -Central processing

Yandi Lump

• Low capital, high value project• Modification of No. 2 Ore Handling

Plant• Additional 4Mtpa Lump Product• Customer LOI’s in place• Commission July 2002

8 May 2002 UBS

Mining Area C

Rail Spur

C Deposit Pit Outline

Airstrip

Electricity Substation

11 Blending stockpiles

Village

Bulk Sample Pit

8 May 2002 UBS

Mining Area C• More than 800 million tonnes of iron ore in seven

separate deposits

• US$213m (100%) capital expenditure (mine, processing & rail spur)

• 740,000 tonne bulk sample April 2002

• Bulk sample product railed and processed

• First shipment scheduled to POSCO

• Production target – late 2003

• Capacity to 15mtpa

• Ramp up in line with market demand

• POSMAC JV

8 May 2002 UBS

Products & Capacity Expansion Project (PACE)Western Stockyard Works

Stage 1• US$351m (100%) capital

expenditure (port, mainline, environment)

• Upgrade under harbourtunnel to 10,000tph

• New berth approach jetty and conveyors

• Extend existing berth north and upgrade conveyor

• New 10,000tph shiploader• New Western Stockyard

1.65Mt and Lump Re-screening Plant

• Water and power supplies upgraded

• Environmental berm• Foundation for Long Term

optimisation

8 May 2002 UBS

Samarco Roller Press• Capacity round out: increasing plant capacity at Ubu pellet

plant by 2 mtpa (to 14 mtpa)

• Modest capex (US$25M, 100%)

• Converts low margin concentrates to high margin pellets

• Commission May 2003

8 May 2002 UBS

Dendrobium

Care and Maintenance

WONGAWILLI

O'BRIEN'S DRIFT

TOWER

APPIN

CORDEAUX

ELOUERA

DENDROBIUM

NEBOPORT KEMBLA

COAL TERMINAL

WOLLONGONG

Port Kembla Steelworks

MACARTHUR• Maintain high quality No.2 seam

• Drive next phase of cost productivity

• Expand production to > 8mtpa

• Long term supply to BHP steel

Lease boundary

Mined area

Current mining ar a

Portal

8 May 2002 UBS

• Universal Dragline (UDD) is a modified hoisting system that BMA is testing

• Productivity gains of >20% may be possible• Gains in productivity are based on:

– Decrease in equipment weight. Converted to payload

– Reduced cycle time. Bucket can now be picked up when full.

– Improved physical characteristics. Increase in dump height, boom length and dig depth.

– Expected productivity benefits in new bench designs.

• Trials in progress.

Universal Dragline

8 May 2002 UBS

Goonyella Underground

• Development of low capital low risk punch longwall in Goonyella middle seam

• Equipment - low capex options

• Flexible production

• Gain experience in north Bowen Basin longwall mining

8 May 2002 UBS

Carbon Steel Materials – Value Add

• Operating excellence - Plans in place across all sites to achieve cost

targets

• Customer focus – Marketing hubs established

• Knowledge based

8 May 2002 UBS

Carbon Steel Materials – Prospects

• Steady – prudent growth

• Attractive industry structure – but challenges

• China – opportunity & threat

• Pre-eminent resource base and assets

• Further efficiency and productivity opportunities

• Solid project pipeline

carbon steel materials performance and prospects

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