National Diamond Strategy - MERNmern.gouv.qc.ca/.../publications/mines/p3-bhpbilliton.pdfNational Diamond Strategy Montreal, 25-26 May 2005 The view from the “ rough ” end of the

National Diamond StrategyMontreal, 25-26 May 2005

The view from the “rough” end of the business…

Presentation by Serge Pelletier

5/30/2005Page 2BHP Billiton Diamonds Inc

This document contains certain forecasts and forward-looking information. Such forecasts and information are not a

guarantee of future performance and involve unknown risks and uncertainties, as well as other factors, many of which are beyond the control of BHP Billiton. Actual results may differ

materially from those expressed in this document.


Presentation Outline

• Who are we • Our diamond business• Finding rough diamonds • The impact of exploration on the diamond industry


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BHPB

Rio

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05

101520253035404550556065707580859095

100

The largest company in a consolidating sectorMa

rket

Cap

. on

05/04

/05 (U

S$Bn

)

Market value of minerals industry US$576bnValue of Top Five US$238bnValue of BHP Billiton US$ 93bn

Market value of minerals industry >US$570bnValue of Top Five US$221bnValue of BHP Billiton US$ 85bn


The world’s largest diversified resources company….

Energy CoalDiamonds & Spec Prod

Aluminium

Carbon Steel Materials

Base Metals

Petroleum

Stainless Steel Materials


Diamonds and Specialty Products• Diamonds and Specialty

Products encompass the existing businesses of diamonds, titanium minerals, Integris and Exploration & Technology

• Produces approximately five million carats of rough gem quality diamonds annually, supplying nearly four per cent (4%) of current world diamond production by weight and six per cent (6%) by value


A number of distribution channels in order to compare results and add value……

Antwerp

office

Ekati

Regular Rough Sales

Roug

h Di

amon

dsOther sources

Contract Polish CanadaMark/Aurias Brands

Polishing Ventures and Other Contractual Supply

Agreements

Regular Sales Channels

Sales to Retailers

Set in Jewellery

CanadaMark Licensing Sales

Window/Tender Sales

Sales to Retailer

NWT Customers

CanadaMark Licensing Sales


CanadaMark™ Diamonds

� “If a Diamond product carries the CanadaMarkhallmark:

� It is a high quality diamond that is natural and untreated;

� It originates from mines located in Canada’s

� It has been tracked from mine to customer to ensure its integrity;

� It provides assurance of ethical standards throughout the supply chain;

� It has a unique identity number laser inscribed on the girdle and recorded in a central registry.

� CanadaMark is being used to support individual store or retail outlet brands, polished diamond brands or diamond jewellery brands.

BHP Billiton Diamonds is the first mining company to guarantee the origin of polished diamonds from its mining operations.


Growing our minerals business - geographic focusMinerals exploration spend by region (2004)

Source: Global data is sourced from the Metals Economics Group, Corporate Exploration Strategies 2004BHP Billiton expenditure is direct expenditure only, not leveraged funds

Industry total BHP Billiton (FY04)

Australia North America Africa Latin AmericaPacific/SE Asia Europe Rest of World

12%

51%

2%

20%

12%1% 1%

15%

28%

16%

22%

4%

15%


Growing our mineral business - commodity focusMinerals exploration spend by target (2004)

Source: Global data is sourced from the Metals Economics Group, Corporate Exploration Strategies 2004)BHP Billiton expenditure is direct expenditure only, not leveraged funds

Industry total BHP Billiton (FY04)

Gold Base metals Diamonds PGM Other

49%

25%

26%

DiamondsDiamonds51%

26%

13%

4%6%

DiamondsDiamonds


Why are we exploring for diamonds?

� Favourable industry structure� Favourable supply-demand outlook


Why are we exploring for diamonds? Industry Structure….

�Supply is concentrated in the hands of few producers

Rough production value

Total rough supply to market

Wholesale value of polished from local production

Wholesale value of diamond jewelleryRetail diamond jewellery

11

12

17

33

66

Alrosa2.0

Alrosa2.0

BHPB0.8

BHPB0.8

Rio0.7

Rio0.7

Others0.8

Others0.8

De Beers5.0*

De Beers5.0*

OtherDealersOther

DealersSightholderDealers

SightholderDealers

OtherManufacturers

OtherManufacturersSightholder

ManufacturersSightholder

Manufacturers

PolishedDealers

PolishedDealers

Other JewelleryManufacturers

Other JewelleryManufacturers Jewellery Importers

& DistributorsJewellery Importers

& DistributorsSightholder JewelleryManufacturers

Sightholder JewelleryManufacturers

RETAILERSRETAILERS

STAGE US$ Billion (CY2004)

*Production from own mines.

+ + Plus sales from inventory + price increases+ +5.7

Angola0.9

Angola0.9

DRC0.7

DRC0.7


Why are we exploring for diamonds? Supply-demand outlook….

�Current forecasts indicate a scenario where supply is unable to keep pace with demand growth

6,000

8,000

10,000

12,000

14,000

16,000

18,000

20,000

1994199519961997199819992000200120022003200420052006200720082009201020112012201320142015

Roug

h de

man

d / s

uppl

y (US

$m)

Rough diamond demand

Rough diamond supply


Global Diamond Group Land Holdings WorldwideApprox. 671,000 sq km under license

Canada:157,000km2

India:55,000km2

Australia:40,300km2

Mauritania:82,300km2

Sierra Leone:9,700km2

Gabon:48,000km2

DRC:100,000km2

Zambia:33,000km2

Botswana:125,000km2

Angola:3000km2

S Africa:1,000km2

Includes both direct holding and holdings via JVs

Namibia:16,700km2

5/30/2

005

Page

15BH

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Diam

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How

do w

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Corp

orate

diam

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xplor

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budg

ets (2

004)

Sour

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onom

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roup

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Stra

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s 200

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020406080100

120

140

De Beers Group Alrosa BHP Billiton DiamondsRio Tinto Group Petra Diamonds Trans Hex Group Shore Gold Ashton Mining CanadaStornaway DiamondsSoquemSouthernEraLesotho DiamondGravity CapitalLeviev GroupCVRD Diamondex Resources Teck Cominco Shear Minerals Tahera DiamondsStriker ResourcesBlina DiamondsDiagem InternationalKimberley Diamond Namakwa Diamond Tawana ResourcesReefton MiningConquest MiningAfrican DiamondsAfri- Can Marine European DiamondsOther juniors

US$m

Prod

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non p

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Tota

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Sustained, massive exploration expenditure required toreplace reservesOn average the industry reinvests 10% of EBIT into exploration

*Exploration expenditure/EBITSource: Company annual reports (most recent financial year)

0%

5%

10%

15%

20%

25%

30%

35%

Implats

Freeport

Falconbridge

Amplats

Anglo American

Inco

Teck Cominco

Rio TintoGroup

BarrickGold

BHP Billiton

Goldcorp

AngloGold

BHPB Diamonds

Alrosa Trans Hex Group NewcrestMining

NewmontMining Group

De BeersGold Fields

Placer Dome

Meridian GoldPl

ough

-bac

k rati

o

Average


Exploration probabilities and the Ekati experience

>4000 known kimberlites

Diamondiferouskimberlites (10%)

Economic kimberlites (3%)

> 150 known kimberlites

Economic kimberlites (7%)

Diamondiferous kimberlites (24%)

Worldwide totalWorldwide totalEkati totalEkati total

Sourced from company data


Significant $$$ and time required From discovery to production…

0 2 4 6 8 10 12 14

OrapaLetlhakane

CatocaArgyle

Finsch

EkatiThe Oaks

DiavikJwanengVenetia

Udachny

Years between discovery and production

On average it takes eight years from discovery to production…Source: Circular to holders of De Beers Linked Units, 10 April 2001; Alrosa Finance S.A. Bond Prospectus, 2 May 2003; www.argylediamonds.com.au


Our Growth thrust is in leveraging Exploration funds and Technology…by sharing risk and rewardThe Botswana example: $21m to explore >100,00sqkm of land

Synergistic commercial deal between Kalahari and BHP Billiton• Kalahari initial risk funding• BHPB technology and land package• BHPB option to buy back 60% project interest

& fund further development

Optimum initial Kalahari shareholding structure • BHPB 20%• International Finance Corporation 10%• Diamond companies• Institutions

Supportive Government & Administration


-

500

1,000

1,500

2,000

2,500

3,000

3,500

1970

1972

1974

1976

1978

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

050100150200250300350400450500

Despite exploration expenditure trending up… reserves are declining

*Post 1996 exploration expenditure figures sourced from MEG and pre-1996 figures are estimates derived from De Beers’ published exploration expendituresSource: Company annual reports; Circular to holders of De Beers Linked Units, 10 April 2001; Alrosa Finance S.A. Bond Prospectus, 2 May 2003; Metals Economics Group

Orapa Jwaneng Argyle

Jubilee VenetiaCatocaAnabar

Estim

ated

rese

rves

of m

ajor o

pera

ting

min

es (m

cts)

Estim

ated

expl

orat

ion

expe

nditu

re (U

S$m

)*

Reserves Exploration expenditure

Ekati Diavik


Remaining reserves at current production: +/- 20 years

• Despite having spent an average of US$290M p.a. on exploration over the past five years, no major new discoveries have been made

-

10

20

30

40

50

60

70

80

90

19701971197219731974197519761977197819791980198119821983198419851986198719881989199019911992199319941995199619971998199920002001200220032004

Rese

rves

of m

ajor o

pera

ting

min

es/a

nnua

l pro

duct

ion

1971: Orapa Starts production

1982: Jwaneng and Argyleenter production

1986: Argyle (AK1) starts full production

1983: Jwaneng and Argyle start to ramp up production

Ekati Diavik

Source: Company annual reports; Circular to holders of De Beers Linked Units, 10 April 2001; Alrosa Finance S.A. Bond Prospectus, 2 May 2003; Metals Economics Group


CANADIAN DIAMONDSAre they cold or simply COOL…….

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Documents

National Diamond Strategy - MERNmern.gouv.qc.ca/.../publications/mines/p3-bhpbilliton.pdfNational Diamond Strategy Montreal, 25-26 May 2005 The view from the “ rough ” end of the