To view the PDF file, sign up for a MySharenet subscription.

BHP BILLITON PLC - BHP Billiton 2014 Investor and Analyst Briefing Presentations update

Release Date: 24/11/2014 07:05
Code(s): BIL     PDF:  
Wrap Text
BHP Billiton 2014 Investor and Analyst Briefing Presentations update

BHP Billiton Plc
Registration number 3196209
Registered in England and Wales
Share code: BIL
ISIN: GB0000566504




NEWS RELEASE

Release Time IMMEDIATE
Date              24 November 2014
Number            20/14

                FOCUSING ON OPERATING AND CAPITAL PRODUCTIVITY

 •     BHP Billiton is now targeting US$4 billion of annualised productivity gains in its core
       portfolio by the end of the 2017 financial year, a US$500 million increase on previous
       guidance.
 •     Improved capital productivity will allow planned investment to be reduced from
       US$14.8 billion to US$14.2 billion in the 2015 financial year and to US$13 billion in the
       2016 financial year with no change to expected production growth.
 •     In Copper, productivity initiatives including low cost debottlenecking projects are
       expected to offset grade decline over the medium term.
 •     In Coal, we have re-established our competitive advantage by closing high-cost
       capacity and sustainably reducing costs.



BHP Billiton today increased its target for productivity gains within its core portfolio and
provided new guidance that highlighted its ability to reduce investment without compromising
growth. It also provided updates on its Copper and Coal businesses.

BHP Billiton Chief Executive Officer Andrew Mackenzie said: “By significantly simplifying the
portfolio the proposed demerger will allow us to redesign BHP Billiton and create an
organisation that supports better productivity. The Group’s core assets generated more than
96 per cent of its operating profit in the 2014 financial year, so we can cut complexity and
lower costs without losing the benefits of scale and diversity.

“Put simply, we can organise a company that operates 12 large, core assets differently to
one with 30 operated assets of varying sizes across a broader range of commodities. We
can bring senior management closer to the operations, reduce duplication and cut functional
costs to maximise shareholder value,” Mr Mackenzie said.

“By focusing on the productivity of our largest businesses, we can deliver a step-change
improvement in performance. Since announcing our plans, we have been able to define the
potential benefits in more detail. We are now targeting annualised productivity-led gains of at
least US$4 billion within the core portfolio by the end of the 2017 financial year – an increase
of US$500 million on previous guidance. This includes a minimum reduction in cash costs of
US$2.6 billion per annum.”


Mr Mackenzie added: “Our commitment to a solid A credit rating and a progressive dividend
policy has underpinned sector-leading shareholder returns. From this strong foundation we
will strike the right balance between investment in high return opportunities and returning
cash to shareholders.

“Improved capital productivity gives us additional flexibility. We are reducing the cost of
bringing on new production and can lower our investment without slowing volume growth. As
a result, we will reduce planned capital and exploration expenditure from US$14.8 billion to
US$14.2 billion in the 2015 financial year and expect to invest US$13 billion in the 2016
financial year,” he said.


Maximising operating and capital productivity in Copper

The outlook for copper remains strong. Industry production will be increasingly challenged
by structural factors including grade decline and higher strip ratios, with the availability of
power and water a significant constraint in several countries. This is likely to result in a
significant supply deficit by 2018.

BHP Billiton is not immune to these challenges, but the Company is well positioned to
respond. Operational performance continues to improve, with unit costs at Escondida
expected to fall by 30 per cent in the three years to the end of the 2015 financial year.
Meanwhile productivity initiatives, including low cost debottlenecking projects at Escondida,
Spence and Olympic Dam, are expected to offset grade decline within the Copper business
over the medium term. And longer-term growth projects at Olympic Dam and Spence could
support total copper production capacity of well over 2.0 Mtpa with first quartile average C1
costs.

After three years of strong growth at Escondida, production is expected to fall in the 2016
financial year as a result of significant grade decline. This is expected to mark the low point
in production for the remainder of the decade. The life extension of the Los Colorados
concentrator and the completion of the Water Supply Project in 2017 will allow Escondida to
run three concentrators and maintain production for a decade, without the need for any
major investment.

Annual capacity at Olympic Dam is expected to increase by approximately 50 kt from the
2018 financial year upon completion of a low cost debottlenecking project, which will also
significantly reduce unit costs. Over the longer term, BHP Billiton is evaluating a low-risk
underground expansion with significantly lower capital intensity than the previous open cut
design. This has the potential to deliver over 450 kt of copper production a year at first
quartile C1 costs by the middle of next decade.


Improving productivity and sustainably lowering costs in Coal

In metallurgical coal, high-cost, uneconomic supply has remained resilient although we do
expect to see an increasing number of production cuts, particularly in the United States.
Given robust underlying demand growth for premium hard coking coals, pricing for our
products is likely to be well supported in the medium and longer term.

The thermal coal market remains well supplied, prolonging the weaker pricing environment.
While demand from key importing regions remains steady, prices are unlikely to respond
until uneconomic supply exits the market.

BHP Billiton’s Coal business has re-established its competitive advantage by closing high-
cost capacity and sustainably reducing costs. All of our Coal operations remain cash positive
despite the low price environment and are well placed for margin expansion when prices are
expected to recover in the medium term.

Productivity in the Coal business has improved significantly in the last two years, with unit
costs cut by 37 per cent in metallurgical coal and by 21 per cent in energy coal. The Group
is targeting a further 10 per cent reduction in unit costs at Queensland Coal in the 2015
financial year and a 15 per cent decline in unit costs at New South Wales Energy Coal by the
end of the 2016 financial year.


Further information on BHP Billiton can be found at: www.bhpbilliton.com.


Sponsor: Merrill Lynch South Africa Proprietary Limited


Media Relations                                                        Investor Relations

Australia                                                              Australia

Emily Perry                                                            Tara Dines
Tel: +61 3 9609 2800 Mobile: +61 477 325 803                           Tel: +61 3 9609 2222 Mobile: +61 499 249 005
email: Emily.Perry@bhpbilliton.com                                     email: Tara.Dines@bhpbilliton.com

Paul Hitchins                                                          Andrew Gunn
Tel: + 61 3 9609 2592 Mobile: + 61 419 315 001                         Tel: +61 3 9609 3575 Mobile: +61 402 087 354
email: Paul.Hitchins@bhpbilliton.com                                   email: Andrew.Gunn@bhpbilliton.com

Eleanor Nichols                                                        United Kingdom and South Africa
Tel: +61 3 9609 2360 Mobile: +61 407 064 748
email: Eleanor.Nichols@bhpbilliton.com                                 Jonathan Price
                                                                       Tel: +44 20 7802 4131 Mobile: +44 7990 527 726
United Kingdom and Americas                                            email: Jonathan.H.Price@bhpbilliton.com

Ruban Yogarajah                                                        Dean Simon
Tel: +44 20 7802 4033 Mobile: +44 7827 082 022                         Tel: +44 20 7802 7461 Mobile: +44 7717 511 193
email: Ruban.Yogarajah@bhpbilliton.com                                 email: Dean.Simon@bhpbilliton.com

Jennifer White                                                         Americas
Tel: +44 20 7802 7462 Mobile: +44 7827 253 764
email: Jennifer.White@bhpbilliton.com                                  James Agar
                                                                       Tel: +1 212 310 1421 Mobile: +1 347 882 3011
                                                                       email: James.Agar@bhpbilliton.com

                                                                       Joseph Suarez
                                                                       Tel: +1 212 310 1422 Mobile: +1 646 400 3803
                                                                       email: Joseph.Suarez@bhpbilliton.com

BHP Billiton Limited ABN 49 004 028 077                                BHP Billiton Plc Registration number 3196209
Registered in Australia                                                Registered in England and Wales
Registered Office: Level 16, 171 Collins Street                        Registered Office: Neathouse Place
Melbourne Victoria 3000 Australia                                      London SW1V 1LH United Kingdom
Tel +61 1300 55 4757 Fax +61 3 9609 3015                               Tel +44 20 7802 4000 Fax +44 20 7802 4111

                                   Members of the BHP Billiton Group which is headquartered in Australia

Date: 24/11/2014 07:05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). 
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
 the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct, 
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
 information disseminated through SENS.

Share This Story