may 2003 base metals houstons.p
TRANSCRIPT
Base Metals Exploration
Ken Pickering
CDO Base Metals
Houston, May 2003
Longer Term Value Creation•BHP Billiton Base Metals has the most attractive suite of brownfield and greenfield development projects in the industry.
•Longer term, exploration success and break throughsin New Technology development is key to creating value.
– Technology development, focused on copper ore leaching, is proprietary and commercially sensitive
– Focus on exploration– Advanced Project – Resolution– Grass roots projects – Application of Falcon airborne gravity to
the discovery of base metals– 80 regional targets with 30 ready to drill
•There is no certainty that exploration targets will lead to the discovery of economic mineralisation
Superior – Resolution Project
• Mineralisation
– 1400 - 2300 meters depth
– Temperatures - 75-80o C
– Block cave
• Potential synergy - Pinto Valley processing facilities
• Kennecott (RioTinto) Earn-In Agreement.
– $25 million to earn a 55% interest
• Conceptual study
Mantos Blancos180Mt @ 1.5% Cu
Manto Verde85Mt @ 0.82% Cu
Candelaria400Mt @ 1% Cu(0.2 g/t Au, 4.5 g/t A
El Soldado130Mt @ 1.5% Cu
Marcona Discovery1,400Mt @ >50% Fe+ (Cu, Ag, Au)
Raul y Condestable
Known FeOx-Cu-Au Mines(IOCG)
Lima
FALCON™ICA Project
FALCON™Candelaria Project
5.
g)
20 kms
Toq
uepa
laM
ine
Act
ive
volc
anoe
s
Target AreaUnder cover
Pacific Ocean
Note: Vertical scale exaggerated
Generalized Cross SectionSouthern Peru Porphyry Belt
Porphyry copper search – utilizing New Technology
100 km
Arirahua (Au)
Cerro Verde
Cuajone
Toquepala
Cerro Colorado
Mollendo
Arequipa
Ilo
Tacna
Arica
Iquique
Tarapacá
CC Ext.
Jewel Sur
Jewel Alto
Jewel Norte
Falcon Fly BlocksPerú and Chile Falcon Tarapacá
Preliminary Gd Resultsand Retained Property
-6.0-5.0-4.0-3.0-2.5-2.0-1.5-1.0-0.50.00.51.01.52.02.53.03.54.04.55.06.0
mGals
Cerro Colorado
Mocha
25 km
Geochemistryanomaly
Property boundary(blue retained)
FALCON™ Chile/PeruPorphyry Project
1
2
3
4
56
7
8
9
3.
SogaIP anomalies
ChintuyaIP anomalies
100 km
Arirahua (Au)
Cerro Verde
Cuajone
Toquepala
Cerro Colorado
Mollendo
Arequipa
Ilo
Tacna
Arica
Iquique
Tarapacá
CC Ext.
Jewel Sur
Jewel Alto
Jewel Norte
Falcon Fly BlocksPerú and Chile Falcon Tarapacá
Preliminary Gd Resultsand Retained Property
-6.0-5.0-4.0-3.0-2.5-2.0-1.5-1.0-0.50.00.51.01.52.02.53.03.54.04.55.06.0
mGals
Cerro Colorado
Mocha
25 km
Geochemistryanomaly
Property boundary (blue retained)
Piedemont IP anomalySouthern Peru
Regional Geology and Mineral Deposits
Copperbeltlineament
KalahariCover
Secondlineament
8.
Proposed Falcon Survey BlocksLuamata Mwinilunga, Zambia*
km20Luamata PL146
Airborne magnetics RTP
20km
MusangilaBlock2200km2400m line spacing
Kakoma Block3070km2, 800m line spacing
Musangila Mwinilunga PL66
Luamata PL146
K2
Airfield
*Note: Entire area covered by Kalahari sands
Drill Targets•Musangila (2)•K2 (1)•Airfield (1)
9.
Page 2Minerals Exploration
Drill Holes
Mineral Occurrences
Alvsbyn GEOTEMSurvey
Jokkmokk Project – Alvsbyn Area, VD1 Magnetics and Historical EM
(yellow/orange is typical ore/culture response, blue is typical river/lake response
(smelter)
BHPB Tenements
Jokkmokk GEOTEM
SnarkolonTarget
SvartlaTarget
12
3
45
6
11.
Exploration - Summary•Exploration success is a clear path to long term value creation
•Identification of prospective drill targets does not guarantee success, it is simply a pre-requisite for success
– Exploration is potentially a high risk and high reward activity
•Falcon is another tool that has the potential to improve the probability of locating mineral resources – and thus may offer BHPB a competitive advantage in base metal exploration
•Base Metals works closely with BHPB Exploration to identify areas of high prospectivity, in regions where BHPB can work in accordance with its Charter, to apply our expertise to create shareholder value
Capital Approvals Process
Glenn Kellow
CFO Base Metals
May 2003
Deep inventory of projects - Base Metals is Significant
2004 2005CY2003 2006 2007
SpenceSpence
Esc’daSulphideEsc’da
SulphideEsc P4Esc P4
CnntonCnnton
B R O W N F I E L DEsc’daNorte
Esc’daNorte
Size of bubble indicatesproposed capital expenditure; bold outer border signifies sanctioned project
$US200m$US200m
As at April 2003G R E E N F I E L D
BHP Billiton has put in place a rigorous review and tollgating process for its investments
The purpose of the Investment System is to ensure;
• Investments are aligned with Company priorities, strategies and values
• Investments are optimised to maximise shareholder value (returns are above cost of capital) with acceptable risk profiles
• Investments have the best probability of success
• Decisions are made on a consistent basis
• Risks are identified and evaluated and appropriate mitigation strategies are in place
Key Features of the Process
• Clear guidelines• Tollgating• Multi-tiered authority structure• Standard price protocols & other economic assumptions• Independent Review & Challenge• Assessment of Key Risks (EWRM)• Valuation Analysis• PIRs and Learning/Feedback Loops
InvestmentProcess Map
GROUPDevelop Agreed
Strategy Develop Corporate Strategy
Conduct Feasibility Study & Prepare
Board Submissions
Execute
Operate
Spec
ialis
t Sup
port
Gov
erna
nce
Base Metals Exco & Board Approval
IRC Pre-feasibility tollgate forInvestments > US$100m
IRC Feasibility endorsement & Reviewof Board Submission for Investments
> US$100m
Project Close Out Review, IRC informed & approve review team for investments > US$100m
Post Investment Review, IRC informed & approve review team for
investments > US$100m
Monitor against performance targets
Iterative Support and Governance as required
Iterative Support and Governance as required
IND
EPEN
DEN
T PE
ER R
EVIE
W
P
Base Metals Exco & Board Approval
BHPB Executive Committee
Approvals Reviews/EndorsementsDevelop Concept
IRC Informed & briefing note issued for investments >
US$100m, IPR Leader appointedConduct Pre-
feasibility Study
Base Metals Exco & Board Approval
BHPB Board Approval
Risk Management An Integral Part of Investment
• EWRM methodology used to assess key project risks in the IPR process
• Gross exposure, severity rating and risk control effectiveness are evaluated for major risks and mitigation strategies developed
0102030405060708090
100
Se
rio
us
inju
ry /
fata
lity
inco
nst
ruct
ion
Ge
o-
tech
nic
al
con
diti
on
sn
ot
be
ing
as
Re
cove
rie
sa
re lo
we
rth
an
fo
reca
st
Me
talu
rgic
al
Pe
rfo
rma
nce
Ina
pp
rop
ria
tep
roje
ctm
an
ag
em
en
tst
ruct
ure
Ab
ility
to
ma
inta
inco
nce
ntr
ate
qu
alit
yIn
ab
ility
to
reta
in k
ey
pro
ject
pe
rso
nn
el
Risk Issue
Ris
k R
ati
ng
0%
5%
10%
15%
20%
25%
30%
35%
Co
ntr
ol
Ga
p(%
)
Rating
Risk Control Gap
Example Only
Value is the key driver and understanding / mitigating risks a key focus
• Impact of major sensitivities on investment value is established
• The top 5 sensitivities are used as a basis of a probabilistic distribution of expected value
Frequency Chart
Certainty is 90.19% from 0 to +Infinity US$ MM
Mean = 243.000
.004
.008
.012
.016
0
40
80
120
160
-250 125 500 875 1,250
10,000 Trials 0 OutliersForecast: NPV
LOW
MID
HIGH
0
NPV IRR
P90 5 8.2%
P50 234 18.3%
P10 504 23.4%
Mean 243 18.7%
(US$ MM)-400 -200 0 200 400 600 800
Uptime
Opex
Tax Rate
Delay
Capex
Forex
Volume
Price
Project NPV (US$ MM)
-425
LH
L
L
-305
-250
-200
-195
-155
-95
-65
+315
+225
+170
+150
+80
+450
+140
+70
H
H
Mid NPV $ 230 MM
Example Only
Examples of Base Metals Projects at Various Stages of Tollgating
•Escondida Norte Feasibility
•Escondida Sulphide Leach Feasibility
•Spence Feasibility
•Cannington North Block Execution
•Escondida Phase IV Operation
Capital Approval Process – Conclusions
•Strong portfolio of projects currently in Tollgating
•Key considerations in project timing will be market conditions and internal hurdles
•Rigorous and disciplined review process – focus on value & risks
Conclusion
BHP Base Metals•The CSG has delivered improving performance since its formation in 2001
•Base Metals has developed major projects on time and on budget
•As market conditions improve, Base Metals will increase capacity utilisation to significantly increase copper production, increasing revenues and lowering unit costs
•Over the medium term, Base Metals will develop its suite of major projects that pass through the rigorous tollgating processes
•Over the longer term Base Metals aims to create shareholder value through improving leaching technology and exploration success