Customer Sector Group highlights
- Commodity markets remain strong, underpinned by supply restrictions and a generally constructive global economy.
- Record annual production volumes at 14 of our assets right across our commodity range, including record production in five key commodities: aluminium, copper, iron ore, nickel and natural gas at a time of high prices and tight demand.
- We continue to approve new projects in line with market demand. This year, four major growth projects were completed and seven major growth projects approved, resulting in volume growth in high margin operations and representing a forecast total capital spend of just over US$5 billion. This together with new projects added in the feasibility phase brings our project pipeline to 23 projects with investment approaching US$13.8 billion.
PetroleumUnderlying EBIT increased 24%
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Our Petroleum Customer Sector Group’s principal activities are oil and natural gas exploration, production and development. We produce and market crude oil and condensates, natural gas, liquefied natural gas (LNG), liquefied petroleum gas (LPG) and ethane.
We market a range of mostly premium light sweet crude oils and condensates to refining and petrochemical customers in the Asia Pacific and Atlantic regions. We sell gas via pipelines into local markets in Australia, the UK, Pakistan and the US. The markets for LNG from our North West Shelf operations are Japan, Korea and China.
Results
Underlying earnings before interest and tax (EBIT) were US$3 billion, compared with US$2.4 billion in 2005, an increase of US$573 million. This increase was mainly attributable to higher average realised prices for all petroleum products. Aside from price, volumes from new operations were a significant contributor with full year contributions from ROD, Mad Dog, Angostura and Minerva adding US$360 million to EBIT.
Highlights
Three major projects were sanctioned during the year, Stybarrow, Angel and Shenzi, bringing the total Petroleum pipeline to nine projects in development or feasibility at a capital cost of US$5.2 billion. Pyrenees advanced into feasibility during the period. We produced record annual volumes of natural gas due to the commissioning of Minerva and North West Shelf Train 4.
AluminiumUnderlying EBIT increased 24%
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Our Aluminium Customer Sector Group mines bauxite, refines bauxite into alumina and smelts alumina into aluminium metal. We are the world’s sixth largest producer of primary aluminium, with a total operating capacity of approximately 1.3 million tonnes of aluminium. We sell aluminium metal to customers around the world, generally at prices linked to the London Metal Exchange (LME) price.
Results
Underlying earnings before interest and tax (EBIT) were US$1.2 billion, compared with US$959 million in 2005, an increase of US$232 million. This increase was mainly attributable to higher prices for aluminium and alumina, adding US$591 million to EBIT.
Highlights
The benefits of our technical expertise are clearly evident at the Mozal and Hillside smelters where consecutive production records were again achieved from the same number of pots. Commissioning has been successfully completed at our Worsley expansion and we will see the benefits of increased alumina production in future periods.
Base MetalsUnderlying EBIT increased 149%
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Our Base Metals Customer Sector Group mines copper, silver, lead, zinc, uranium, molybdenum and gold. We provide base metal concentrates to smelters worldwide, copper cathodes to rod and brass mills and casting plants, and uranium oxide to power utilities. Our portfolio of large, low-cost mining operations includes the Escondida mine in Chile, the world’s largest source of copper, and the Olympic Dam copper, uranium and gold mine in South Australia.
Results
Underlying earnings before interest and tax (EBIT) were US$5.4 billion, compared with US$2.2 billion in 2005, an increase of US$3.2 billion. This increase was mainly attributable to higher prices for copper, silver, zinc and lead.
Highlights
We had record copper production during the period with the highest ever production from both Escondida and Antamina. The integration of Olympic Dam was successfully completed, also making a significant contribution to the higher result. During the year the Escondida Sulphide Leach and Norte projects were completed on schedule.
Carbon Steel MaterialsUnderlying EBIT increased 61%
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Our Carbon Steel Materials Customer Sector Group is a leading supplier of core raw materials and services to the global steel industry, producing and marketing a full range of steelmaking raw materials – iron ore, coking coal and manganese ore and alloys. BHP Billiton is the world’s largest supplier of seaborne metallurgical coal, marketing almost 50 per cent of global production.
Results
Underlying earnings before interest and tax (EBIT) were US$4.5 billion, compared with US$2.8 billion in 2005, an increase of US$1.7 billion. This increase was mainly driven by higher prices and record sales volumes for iron ore as well as increased prices for metallurgical coal.
Highlights
With seven Carbon Steel Materials projects in our pipeline, volume growth will continue to be delivered in all three commodities (iron ore, metallurgical coal and manganese). Returns for this business continue to be excellent and margins were outstanding at both WA Iron Ore and Queensland Coal. These were the highest year-on-year margin expansions at any of our operations. With continued strong demand and prices for these key commodities largely locked in until April next year, the outlook continues to be very positive.
Diamonds and Specialty ProductsUnderlying EBIT decreased 38%
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The Diamonds and Specialty Products Customer Sector Group encompasses our diamonds and titanium minerals businesses. The cornerstone of our diamonds business is the EKATI Diamond Mine. Annual sales represent around 3 per cent of current world rough diamond supply by weight and 6 per cent by value.
Our interest in titanium minerals consists of a 50 per cent effective interest in Richards Bay Minerals (RBM) in South Africa, a leading producer of titanium slag, high purity pig iron, rutile and zircon from mineral sands, and the Corridor Sands and TiGen minerals sands projects in Mozambique. The zircon, rutile and pig iron are sold as end products. Approximately 90 per cent of the titanium dioxide slag is sold internationally.
Results
Underlying earnings before interest and tax (EBIT) were US$345 million, compared with US$560 million in 2005, a decrease of US$215 million. This decrease was mainly impacted by the processing of lower grade and lower value material at our EKATI Diamond Mine. Diamond revenues were positively impacted by sales from inventories carried over from 2005.
Highlights
EBIT for EKATI in this current financial year will continue to be impacted by the processing of lower grade and lower value material and will not benefit from sale of back stocks. In the medium term, however, increasing underground production from Panda and Koala will help restore profitability to historical levels.
Energy CoalUnderlying EBIT decreased 44%
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Our Energy Coal Customer Sector Group is one of the world’s largest producers and marketers of export thermal coal. We mine energy coal in South Africa, Australia, Colombia and the US. Most of our energy coal sales are under medium and long-term contracts with power generation companies and utilities in domestic markets and export markets in Europe, Asia and the US.
Results
Underlying earnings before interest and tax (EBIT) were US$327 million, compared with US$587 million in 2005, a decrease of US$260 million. Prices and volumes were largely flat but cost pressures experienced across the industry also affected all Energy Coal assets.
Highlights
Annual production records were achieved at both Cerrejon Coal and New Mexico operations. A recovery plan at Ingwe is starting to take hold and we are looking for an improved result in the medium term.
Stainless Steel MaterialsUnderlying EBIT increased 27%
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Our Stainless Steel Materials Customer Sector Group is the world’s third largest nickel producer. The group primarily services the stainless steel industry through its wide range of high-quality nickel products. In addition, we supply nickel and cobalt to other markets including the specialty alloy, foundry, chemicals, and refractory material industries. For the year, approximately 80 per cent of our sales were to the stainless steel industry under a mix of long-term and medium-term contracts with prices linked to the relevant LME prices.
We produce nickel in the form of compacts, high purity nickel briquettes and powders, high purity ferronickel granules and chemical-grade nickel oxide; and cobalt in the form of Chemgrade cobalt oxide hydroxide and electrolytic cobalt cathodes. We also market chrome and ferrochrome produced by the chrome business we owned until June 2005.
Results
Underlying earnings before interest and tax (EBIT) were US$901 million, compared with US$712 million in 2005, an increase of US$189 million. This increase was mainly attributable to the inclusion of a full year of results from the Nickel West operations (Australia), acquired in June 2005.
Highlights
The successful integration of Nickel West has been completed and we are now looking to optimise this business. Cerro Matoso had record annual production and we are looking to further increase production in the medium term from improved recoveries of metal from slag. The Yabulu expansion is on track for delivery early next year and the gas conversion project at this refinery is now completed and is expected to have a positive impact on costs for the 2007 year. While it is disappointing that the budget and schedule for Ravensthorpe are under review, this project will enable us to deliver increased nickel volumes into a structurally tight nickel market.