BHP Billiton Ltd. Annual Fiscal 2007 Earnings Call Transcript

BHP Billiton Ltd. (NYSE:BHP) Preliminary Results 2007 August 22, 2007 3:30 AM ET

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Executives

Charles Goodyear - Chief Executive Officer and Executive Director
Marius Kloppers – Group Executive and Chief Executive Non-Ferrous and Executive Director
J. Michael Yeager – Group Executive and Chief Executive Petroleum
Alexandre Vanselow – Group Executive and Chief Financial Officer

Analysts

Neil Goodwill – Goldman Sachs JBWere
Unidentified Analyst – Morgan Stanley
Vicky Binns – Merrill Lynch
Jason Fairclough – Merrill Lynch
Heath Jansen – Citigroup
Sylvain Brunet – Exane BNP Paribas
Ross Gardner – J.P. Morgan
[Karen Daily] – [Investing Securities]
Lawrence [Quake] – Quarry Bank
Tim Gerrard - Austock
Eddie Myer – Channel 10 News
John Mackinnon – Deutsche Bank
Sam Catalano – Macquarie Bank
Jeremy Gray – Credit Suisse
Grant Sporre - UBS
[Tobias Lerner] – (inaudible) Global

Chip Goodyear

Ladies and gentlemen, my name is Chip Goodyear, Chief Executive Officer of BHP Billiton, and welcome to our presentation today of our financial results for the 2007 fiscal year. I’m here in Sydney, and with me in Sydney is Marius Kloppers. Marius is the Chief Executive of our Non-Ferrous materials business. And as you know, he will be taking over for me as Chief Executive Officer on the first of October. Marius and I have some prepared comments today, as will Alex Vanselow. Alex, as you know, is our Chief Financial Officer. Alex is in London, and he will be speaking to us from there. And we also have Mike Yeager with us today. Mike is the Chief Executive Petroleum. He’s in Johannesburg where he’s going to be doing a road show. And so Mike, Alex, and Marius will all join you in answering questions later today.

So let’s move on to our highlight slide, slide number four. And as usual, I’ll begin with safety. Now in 2007, we saw a 17% decrease in our injury frequency rate. We saw an improvement in all but one of our business units, and we had some outstanding performances in petroleum, aluminium, stainless steel materials, and diamond and specialty products. But, unfortunately, we had eight fatalities in our business in 2007.

Now obviously that’s not only measured in terms of the devastating human impact of that, but it also is an indication that poor performance in safety is also represented in poor performance in our operations. So we often found where there were safety issues in a business, those businesses also had the most difficulty in meeting their operating objectives. In 2008, you’ll see this company focus more intently on the implementation of our fatal risk control protocols, as well as continuing to push down that injury frequency, and injury frequency rate.

Now moving on to our financial results; Great financial outcomes have their foundation in strong operating performance, and 2007 was no different. It comes on the [hop] of a strategy which was developed a number of years ago, where we focus on the essential elements of running our business. Those are making sure we operate reliably with consistency, we move to share knowledge across our business, and we also find opportunities to continue to reinvest in what we know and we understand.

That has resulted in 2007, producing record results in eight of our commodities, and 17 of our assets across our business. When you combine those strong operating results with the kind of markets we’re in today, obviously we’re going to generate strong financial performance. Our EBITDA was up 27% to $23 billion. Our underlying EBIT was up to $20.1 billion, up 31%. Attributable profit came in at $13.7 billion. That’s up 35%, and it’s seven times what our number was just five years ago.

And earnings per share came in at a 39% increase, for $4.34 per share. That number, with regard to EPS, grew faster than attributable profit, due to our share buyback program. Despite cost pressures in our industry, we continue to see an excellent flow through of revenue to the bottom line. Alex is going to talk about that in more detail, but I want to focus on two numbers that I’ve talked to you about for some time.

These statistics are EBIT margin, and our return on capital employed, which set records again in 2007. And that’s the sixth consecutive year both of those statistics have set records. This is an outstanding achievement in our industry, and in any industry. It is truly a spectacular outcome. We continue to approve new projects in line with our market demand. Our project pipeline now stands at 33 projects, with almost $21 billion of growth.

And we’ve seen strong growth in our volumes over the last six years, and in 2007 we saw a number of important steps. We saw the startup of Spence. We saw the continued ramp up of Escondida sulfide. But 2008 looks to be quite a spectacular year in terms of volume growth. We’ll see that across petroleum, stainless steel materials, iron-ore, and in base metals.

We continue to look for new options to grow, and last year we acquired interest in the Genghis Khan oil field in the Gulf of Mexico, which is adjacent to Shenzi. We also acquired the Guinea Aluminium project in Guinea. Now the outlook remains strong in our businesses, and I’ll talk about that in a few minutes. We continue to see developing economies urbanized and industrialized. And as we have in the past, we continue to invest strongly in growth in those businesses that we know and understand.

Having said that, we are producing more cash that we can effectively put to use in our business. In line with that strategy, we do return surplus cash to shareholders, as it’s appropriate to do. And this year we’ve announced about $13 billion to share buybacks. We’re about halfway through that program, and we’d expect to complete that by August of 2008.

We’ve always said that our base dividend is determined based on our expectation for earnings and cash flow growth over time. And therefore, I’m pleased to announce a re-basing of that dividend. We’ve moved the final dividend for this year to $0.27 per share. This final payment for the year is up 46% from our final payment in 2006, and 35% ahead of our interim dividend that we declared earlier this year.

It’s from this new base that we’ll continue our progressive dividend policy. We believe that this re-basing of our dividend reflects our confidence in the outlook for our business in the years ahead. The operating and financial results, the dividend growth, the capital management program all illustrate how BHP Billiton continues to lead our industry.

The next slide reviews our profits over the last six years. On first scan, you might look at this and see this is about price, and there’s no doubt price has been important. But it’s by no means the only story. Volume growth has been a major contributor of earnings. Over the last six years, we’ve seen a 55% increase in our volume growth. Portfolio management has allowed us to improve the quality of our assets, and focus on what we do well. That’s lead us to increasing the margins, and enhancing our focus on those assets which we consider best in class.

And then, cost and efficiency, absolutely critical in our business. Through business excellence, our supplier relationships, economies to scale, knowledge sharing, our customer relationships, we’ve effectively managed cost in what is a very challenging environment. Now in a minute, Marius is going to talk about some of the things that he sees going forward, and how he looks to build on this as he takes over as Chief Executive. And I’m going to talk a little about our outlook, but before I did, I wanted to show what I consider to be a fun slide.

Now, the delivery of our strategy has been a critical driver to the performance of this business, and many of you have heard me talk about that for a long time, and what is our strategy. We focus on large, low cost, long reserve life, expandable assets, diversified by products, geography, and markets. And we believe this gives us sustainable growth and earnings in cash flow, and generates a relatively stable cash flow that allows us to re-invest in our business, pretty simple.

So let’s take a look at how we’ve done. On the left hand margin, or on the Y-axis, we have the EBIT margin. And across the X-axis, we have time. And we’ve taken the last six years, and divided it by reporting periods. So, let’s start with iron ore. If you look at just the iron ore business, this is what our margin would have looked like in our iron ore business, if that was the only business we were in. There were certainly good times, and less good times. If we were only in the met coal business, our margin would have looked like this. And if we were only in manganese, it would look like this.

Energy coal, petroleum, stainless steel materials, base metals, aluminium, diamonds and specialty products. Now we call this our Jackson Pollock diagram. Now like a Jackson Pollock, sometimes you need a little help to understand the message, and our message is the next one. The black line is BHP Billiton’s margin over the last twelve periods. This, ladies and gentlemen, is the strength of our strategy. What this demonstrates is that although the underlying commodities are indeed volatile, that the right portfolio, well managed, executing value added growth opportunities, can indeed create a new investment proposition in the natural resource business.

And over the last seven years, that’s exactly what we’ve done. And, I’ll talk a minute about pictures, but in a word, a picture can speak a thousand words. And I can think of no other diagram that more effectively describes the objectives and outcomes of our strategy than this one that you see here.

Now we move on to the outlook. Over the years, I’ve talked to you about economics, statistics; I’ve talked to you about intensity of use curves, I’ve talked to you about our global footprint, and how we use our customer centric marketing organization to try to get a sense of what’s happening in our marketplace. We’ve talked about secular changes. We’ve talked about how billions of people have an aspiration for a better quality of life, and how resource demand is critical to that. Now I’m not going to repeat the words today, but as I say, a picture speaks a thousand words. And when Deng Xiaoping said, “It doesn’t matter if the cat is black or white, if it catches mice, it’s a good cat.” When he said that, the world changed.

We believe that the industrialization and urbanization that has driven China’s growth will continue for several decades, as billions of people strive for a better quality of life. This growth is resource intensive, and it represents a step change in resource demand. Once people get a view of a better way of life, and governments see that as a good thing, it’s very difficult to put the genie back in the bottle. And while we talk about China, India has a number of fundamental drivers that are quite similar. We also say that we see India as being ten or fifteen years behind China, but as you can see from the chart, they’ve begun that journey.

Now this growth in demand is happening in an environment where our industry, and those that service our industry, have underinvested for the last 30 years, and this will not change overnight. It’s created shortages in just about all the commodities, certainly that we produce. When combined with increased demand, and with the appropriate regulatory scrutiny, you see that that supply/demand issues and the shortages are certainly illustrated by this lengthening time period in which it takes new projects to be developed. And those items, we believe, will lead not only to a multi period of time when we expect to see the average price of raw materials to be higher than we’ve seen historically, but it will come with increased volatility. As inventories fall, volatility in our markets can increase dramatically.

Now while the U.S. market remains important, it’s certainly not as important to commodity markets, as we saw 10 or 20 years ago. The growth that we’ve seen in India and China dwarfs the incremental movements in commodity demand in the United States.

Therefore we do find it curious, that on days when sub-prime markets and private equity debt seems to go into a meltdown, our industry underperforms financial services stocks in the United States and in Europe. Many investors have simply failed to appreciate that China and India are domestic economies. In the last week, we’ve had an opportunity to survey our customer base, we’ve talked to a huge number of people around the world, across all markets, to try to assess how recent credit issues in the United States, and perhaps in Europe, have impacted what they see as their business opportunity going forward.

And we can certainly talk about that in detail, in some of your questions. But the answers as you expect, within the United States, they’ve seen a moderation of growth that’s going back as the housing market has come off over the last year and a half or two years, but when you talk to people in China and India, they’re focused on strong demand growth, they’re focused on the shortage of raw materials, they are focused on their domestic market. Their fundamentals remain very much intact. As I say, this is based on a survey over the last five or six days. So our business is a long-term business, it’s driven by long-term fundamentals and those that recognize that have been well rewarded over the last six or seven years, as they’ve looked at the performance of this company.

So with that, what I’d like to do is now hand it over to Alex, who will talk us through some of the numbers. Thank you.

Alex Vanselow

Thanks Chip, and welcome to everyone. Once again we are delivering another outstanding set of results. We have set records across all key measures. And importantly, these records are not limited to the financials. We achieved record production from continued operations for natural gas, aluminium, alumina, copper, nickel, iron ore, manganese ore, and metallurgical coal.

Now on to summarize our financial results. We regenerated $47.5 billion in revenue, which is up 21%. Our underlying EBIT was $20.1 billion, up 31%, resulting in attributable growth profit of $13.7 billion. We had record net operating cash flow of $15.6 billion, which was an increase of 49%. Our balance sheet is very strong, with underlined gearing of 25%. This, despite record capital investments, increased share buybacks, and a progressive dividend policy. This provided us with enormous flexibility to continue to invest in growth, as well as return funds to our shareholders.

In fiscal 2007, we also saw continued growth in records, at both EBIT margins and returns. As Chip said, our EBIT margin was 48%, and return on capital employed was 38%. This remarkable metrics are a reflection of the consistent execution of our strategy over the last six years.

The key performance drivers are as follows. Great assets, which are high in quality, large and low on the cost curve; a superior resource position that allows us to grow production in a high-margin, low-risk way; an exceptional commodity mix in terms of diversification and scale; a high-margin oil and gas business that will deliver significant high value, near- and long-term growth; a marketing structure on a global freight (inaudible) which lowers risk and adds value to our customers; a focus on business excellence and operation efficiency that ensures we operate assets consistently and predictably; investing in expanding array of capacity, providing a significant infrastructure advantage; and continually reviewing our portfolio and divesting of operations that are not aligned with our strategic drivers.

In summary, a continued focus on returns and margins, combined with strong demand for our products, underpin these outstanding results. Now we’ll review each of the CSGs in more detail, starting with petroleum, which had record EBITs. Despite no major project startups, we achieved flat production in 2007. We offset the impact of natural fuel decline with improved operating performance. Near-term production growth is very strong, with Genghis Khan, Atlantis, Neptune, Stybarrow, and Zamzama Phase 2 all scheduled to commission in the coming six months.

Proved reserves replacement of production, excluding divestments, was 103%, with proved and probable reserves now standing above 2 billion barrels of oil equivalent. The review of the Atlantis and Neptune projects has finalized, with no change to delivery schedules, and an increase in budgets. Full details are included in our profit announcement.

Aluminium delivered record EBIT of $1.9 billion, up 56%. EBIT margins improved significantly to 40% from 30% last year despite higher costs. This reflects an intensive focus on cost containment for various business excellence initiatives.

Record production of sales of both alumina and aluminium were achieved. We completed the ramp-up of Worsley refinery expansion, and acquired one-third interest in the Guinea Alumina Project, one of the most advanced projects of its kind. Base metals underlying EBIT rose 28% to a record $6.9 billion. Spence together with Sulphide Leach provided 135 thousand tons additional production. We expect opportunistic restart of Pinto Valley operations during the next six months. At full capacity this will provide an additional 70,000 tons of copper per annum.

Diamonds and specialty products EBIT was $261 billion. Richards Bay Minerals performed well and the market was firm. The Ekati Diamond Mine continued to be impacted by the processing of lower margin material. This will gradually revert as the Koala Underground development is commissioned in fiscal 2008. This project continues to track to schedule and budget. Corridor Sands is currently scheduled to move into feasibility during calendar 2008. And we have begun a concept study for a potash mine in Saskatchewan.

The stainless steel materials EBIT was up 310% to $3.7 billion, which was an all-time record. Higher EBIT was driven by record nickel prices during the period, and higher volumes from the Yabulu refinery. The growth outlook remains solid. The Yabulu expansion is complete and will commission ahead of first production from Ravensthorpe. Ravensthorpe is progressing well and coal commission has commenced. It remains on track to deliver first production to Yabulu this calendar year. Looking to the future, we have increased our exploration activity, largely in Western Australia, Colombia, and Guatemala.

Iron ore delivered another record result. Higher prices and record sales volume drove an 8% increase to underlying EBITs to $2.7 billion. WA Iron Ore recorded its highest ever production. Our near-term growth in iron ore is significant. Over the next few months we complete construction of RGP 3, which adds 20 million tons per annum. We will also be commissioning the Samarco Third Pellet Plant at 7.6 million tons per annum of pellet on a 100% basis. Longer term we plan to have capacity installed for 300 million tons per annum at our WA Iron Ore.

Higher sales, record ore production, and excellent cost containment drove manganese underlying EBIT of 92% to $253 million. An expansion of our Groote Eylandt manganese ore operation is currently on feasibility.

In metallurgical coal, underlying EBIT was $1.3 billion. We achieved record annual production. The BMA Phase 2 expansion is complete, and first production was achieved at Poitrel. We also had record throughput at our Hay Point Coal terminal. The latest expansion of Hay Point, which will increase capacity to 44 million tons per annum, is currently being commissioned.

Underlying EBIT for energy coal increased by 48%, to $484 million. Export prices were strong, and we increased production over last year. Hunter Valley Energy Coal achieved record production and sales, and performance at the Colombia and New Mexico operation was solid.

We continue to reshape our South African business. During the year we divested of the Koornfontein mine, and moved to sell the optimal operation. In June next year we will cease operation at our Douglas underground mine. We have good growth opportunities in the U.S., Australia, Colombia, and South Africa, pretty much in line with out multi-sourcing strategy.

Turning now to price variance capture. Our EBIT for the year was $20.1 billion. This is 31.4% higher than the $15.3 billion delivered last year. The net impact of higher prices netted $6.1 billion.

In the first half, we had price variance of $3.4 billion, and captured 72% in EBIT. In the June 2007 half our price variance was lower, at $2.7 billion, but we increased our CapEx to 85%. This is an outstanding achievement in the current environment, and is a reflection of having a superior mix of commodities in our portfolio and delivering strong production. Overall we captured an estimated 78% of this increased revenue, to EBIT, over the year. Asset performance, supplier relationships, value growth, and business excellence all contribute to this outstanding result.

In total, cash cost pressures impacted EBIT by $714 million. This is on a pre-tax basis. This is 3.6% higher than last year, which continues our trend of a decreasing rate of cost increases. But overall costs have risen. Our cost management continues to show real benefits. In fact, the June half, we achieved the lowest rate of half and half increase, since cost pressures begun more than three years ago. We have now achieved a declining rate of three consecutive half-years.

However, the pressure on cost does remain, as others in the industry have noted. Managing cost is a key focus for every employee at BHP Billiton. In general, dissecting these cost increases is a very positive story, as 41% of the year’s increase lists investing in the following areas; first, maintenance, being critical to continue operating at full capacity, and second, our people. As pay levels are increasing, we are being proactive to ensure that we retain, recruit and motivate the best talent in the industry.

29% of the cost increases related to costs that are largely recouped in our revenue lines, such as fuel and energy, which we are as structurally more than 90% long, and raw materials which are usually correlated to our products. Approximately 15% of our cost increases are related to largely non-recurrent type of activities, such as the rehabilitation work at Cannington, which is now completed, and the strike activity at Escondida. $129 million relates to other items, while $60 million, or 7%, of our total cost increase relates to the merge incurred by our Australian bulk commodity business. We estimate that 15% of this year’s total cost increases are structural, with the remaining 85% being caused by either run-offs or the hidden market. This is an improvement on previous years.

Now I’m going to turn to our returns to shareholders. Our priorities for cash flow aren’t changed. First is to re-invest in value accretive opportunities in the business, and assuming that our capital structure is supportive, we’d then return funds to shareholders.

Today we announced the rebase of our dividends. Our final dividend is up a very substantial 46% over last year’s final dividends. This is our 11th consecutive dividend increase, and our compound annual dividend growth rate over the last six years is 24%. We continue the $13 billion buy-back capital management initiative that we announced during the year, and have so far executed $6.3 billion. In the past 12 months we repurchased 305 million shares, and more than 85% of these shares have already been canceled. Our intention is to cancel all these shares.

Since November 2004 we have executed $10 billion of buy-backs, we’ve repurchased more than 600 million shares representing approximately 10% of our share and issue. We’ve achieved excellent and timely execution on all initiatives. We aim to complete to the remaining $6.7 billion by August 2008. Based on the current share price, when the current program is complete, we will have repurchased approximately 14% of our shares.

Overall, another outstanding year for BHP Billiton. And with that, I’ll hand you over to Marius.

Marius Kloppers

Thank you very much Alex. Before I go into my formal comments, I’d just like to note how great it is to be taking over from Chip at this time and how fortunate I am. And for those of you that know Chip well, will know that this transition has been planned in his customary meticulous way, so that I’ll be hitting the ground at absolutely full-speed.

I’m going to concentrate in my comments today primarily about the forward outlook for the company, and particularly as it pertains to growth. Now, Chip has indicated, and Alex has reinforced, that the results that we have announced today are based on very solid operating performance, as well as growth rates of product to our customers.

Over the past six years, we’ve approved $23 billion of organic growth projects. We’ve completed 33 projects, we’ve added the WC acquisition and several other small acquisitions, and we stand here today, really benefiting from the volume growth out of that predominately organic growth pipeline. And this is where preparation meets opportunity, and we can benefit from a strong demand and high prices that we see today.

But it is instructive on a portfolio that is as diversified as ours, to look at growth on a common basis. What we’ve done here is we’ve used a series of B methodology and we’ve rebased the growth since 2001 by starting and taking 2001 as 100, and then taking from there, we have grown the volumes by 55%. That is a 9% year-on-year growth rate over that period. So the growth in our portfolio has been very, very significant. And given where we are on the demand conditions, prices, and so on, have been extremely value (inaudible) for our shareholders.

Let’s take a look going forward. And Chip has commented that the next year is a very interesting one, with a number of growth projects being commissioned. On a year-on-year basis, we’re going to continue that trend with a 9% growth in volumes for FY-‘07 to FY-‘08.

What I’d like to point out also, what happens going forward, and if we look forward, our part line remains very robust. What we’ve got here is a slide that you’ve become accustomed to. We’ve got here 33 projects, $21 million of CapEx. And as is our habit, the size of each bubble relates to the size of the project scaled on the scale that you can see on the slide, and the color relates to the commodity that we’re investing in.

So you’ve seen this before. But what I want to introduce to you today is a new way of looking at our longer term pipeline in order to show you some of the longer term growth that we’ve got in our portfolio. BHP Billiton has the preeminent set of growth options in its portfolio. What we’ve done here is we’ve taken the funnel of growth projects and we’ve divided that into three segments.

On the right we’ve got projects that we’ve already approved and that are in execution. This is $14.3 billion of projects in 19 discrete projects. In the middle we’ve got projects in feasibility where they are being optimized the head of approval. There are currently another 14 projects, representing another $6.6 billion of investment.

And then, on the left-hand side, we’ve shown what we call future options. Future options are a selection of non-commercially sensitive projects that we’ve selected and that we are looking at and that we control. Not all of these options will manifest in exactly the way that we have envisaged currently, but together they represent over $50 million worth of investments, and they’re still working on it today. And I should note that most of these options were acquired at very, very low historical costs.

Now based on these sets of options that we own, it’s our expectation that we can maintain, or exceed the growth rates that we’ve shown in the last six years. Just by comparison, over the last three years, we’ve invested $5 million per annum in pure organic growth. That excludes maintenance and so on and so forth.

Based on the options that we’ve got in our portfolio, we believe that, together with that market that we’ve spoken about, the opportunities exist to deploy $8 billion or more per annum, as a strong continuation of an unchanged strategy, to continue to invest in value adding organic growth. I also want to point out that the bias of these options is towards low risk, fast, brand fuel expansions of existing assets. And these options cover the Pilbara iron ore assets, metallurgical coal, the Gulf of Mexico, Escondida, Olympic Dam, Cerro Matoso, Worsley, and other assets.

Again, no other company has got this growth pipeline. No other company has got this preeminent resource position. And these options lead us excellently positioned to benefit from the structural change in demand that Chip has spoken about and that we are seeing today.

I also wanted to highlight and speak a little bit about energy and how that fits within our portfolio. Energy, again, is a critically important part of our portfolio and we’re very fortunate to be endowed with a world-class portfolio of assets; petroleum, where we’ve got major positions in Australia and the Gulf of Mexico, and some exciting emerging opportunities in some other places, energy coal, where we’re a leading seaborne coal exporter, and uranium, where we sit on nearly 40% of the world’s economically recoverable uranium resource.

Our [pre-feasibility] study for Olympic Dam continues, this oil body is an absolutely world-class mineral resource. And we’re very pleased by the significant increase in the resource base which we will be reporting and following further drilling and development.

We are taking long-term view of the development of this asset, and it’s important as we open up what is probably a hundred year asset, we start with the right configuration.

Now, the industry has seen an increase in capital costs. This project is no different, and what we are doing is we’re looking at a way to develop this asset which is intrinsically more capital efficient. Now, given this additional work, this work is taking a little bit longer than originally envisaged.

But, to emphasize, we remain absolutely confident that your Olympic Dam will be the preeminent supplier of uranium, underpinning much of the nuclear renaissance that is being experienced as a response to the greenhouse concerns that the world is currently seeking solutions for.

In summary, no other company in the world is positioned across the energy product spectrum in this way. And whichever way the world goes in terms of energy usage mix, it’s clear that we are going to be able to serve our customers in ever increasing ways.

If I may then distill what I’ve said in the last couple of charts in a couple of simple messages; we are a track record of project delivery. We own or control the base set of growth options in the industry. Most of these options are low-risk, continuations of expansions, using existing, ready operating teams that are in place. These options span a diverse range of commodities, assets, geographies, limiting the risk to any one given area. No one in the industry can match these attributes.

And to conclude, I’d like to talk about what I see as the priorities for the business as we planned the leadership transition. There will be no change to our strategy, which is to operate upstream, long-life, low cost, expandable, high margin, export oriented assets, diversified by commodity and geography. We will continue to operate and expand these assets in a value-adding way, continue to serve our customers better.

In addition, we will opportunistically execute M&A as it fits in the strategy as we’ve done before. This strategy has served as extremely well over the last six years, and it will be an appropriate foundation for us going forward.

However, as Chip has said, we are experiencing a stiff change in commodities demand. Our focus is therefore to maximize the opportunity or benefiting from the opportunity presented by the market environment. It’s a very simple strategy. It entails focusing all of our organizational energy and efforts on two very straightforward, very simple, but value-adding activities.

Firstly, to run 100% of our assets, 100% of the time at 100% of the potential, and do so safely and in line with our environmental responsibilities. If we do that well, as we have done, that’ll continue to kick out the cash flow that underpins all of our other plans and that allows us to continue to invest throughout the cycle.

Secondly, to accelerate these options that I’ve shown you and that we’ve got in our portfolio. And, in particular, focus on the larger opportunities. We’ve spoken about some of them. Volume growth in our portfolio has been exceptional over the last six years. However, we are probably going to have a higher degree of organization focus that we’ve even seen in the past, and we’re going to step up that durative growth going forward.

So to conclude, same strategy, more focus and hence more speed. Thank you, Chip.

Chip Goodyear

Thank you, Marius. Just a brief summary. Last year has proven to be a truly outstanding year for BHP Billiton, setting a number of records across the operating and financial aspects of our business. This is the result of providing a sustainable value-added strategy and executing that strategy over the last six or seven years.

Now I’ve said before and I’ll say it again. Results like this occur when preparation meets opportunity. And there’s no doubt that the pricing and volume demand that we’ve seen has created the opportunity. But if we didn’t produce the buyers, if we didn’t manage the costs, that opportunity would be lost, and we have not lost that opportunity.

If you look forward to 2008, it is already shaping up to be an excellent year for the company. We see significant volume growth across the portfolio. We said the market outlook remains positive with good global growth, underpinned by strong growth in China. Supply side continued to be constrained. We believe that this combination demand and supply will keep prices above historical levels.

We continue to invest heavily in our growth pipeline. I hope the conversation that Marius took you through today illustrates some of the things beyond what we’ve traditionally shown. I’ve traditionally just talked about project and execution feasibility. But the projects that are behind that are the things that will power the company for many, many years to come.

No other company in our industry has developed more projects over the last six years than BHP Billiton. So our track record is there. We have the technical skills. We have the recourses, and we have the ability to deliver those projects. And once again, increasing returns to shareholders is a key driver for us all at BHP Billiton. And we do that in terms of dividends. We do that in terms of capital management, and obviously the share price reflects those things as time goes on. And I think that combination of running your business well, reinvesting in those things that you know and understand, and making sure you have a financial strategy that lays over all of that, it gives you’re the opportunity to create a 100% complete investment proposition.

Now, as you know, this is my twenty third and last presentation of financial results for BHP Billiton. It has certainly been a privilege to be a part of this organization for the last eight or nine years. The company plays a central role in providing the raw materials that make economic and social development possible. And the aspirations of billions of people around the world require the access to raw materials at a reasonable cost.

Now being part of an organization that understands what its role is, delivers that, but delivers that with a win-win philosophy. It has truly been a great honor to be associated with an organization that thinks that way. Now no company, even a physical asset company like ourselves, would be successful without talented and dedicated people to make that happen. And I have been very fortunate to work with some of the best people and people from all over the world.

I’d like to take this opportunity to thank our employees, thank our contractors for their hard work, for the energy, for the effort, the contribution that they have made to the success of this organization over the last, as I said six, seven, and for me nine years.

I certainly leave knowing that the company is well positioned for its next phase of growth. Marius, as you know, is well versed in all the key aspects of our business, lots of energy, excellent strategic perspective. But I think one of the things that gives me the most pleasure is being able to turn over the company to someone who comes from inside BHP Billiton. Because Marius, like others inside the company, they know our strategy, they know our people, and they know the opportunities that this company has. And so needless to say, I think Marius will make an outstanding CEO of BHP Billiton.

And as a final word, I certainly wish all the executives and all the members of the BHP Billiton family all the best for the years to come. So with that, we will go to questions. What I’d like to do is have you direct your questions to me, and then what I’ll do is I’ll pass it around to our team as appropriate. We’ll start here in Sydney and ask a few questions here, and then we’ll move around to London, Johannesburg, and the telephone, and we’ll handle it in that way. If you could just wait for the microphone to come to you so that the others on the video call can hear. Neil, why don’t we start with you?

Question-and-Answer Session

Neil Goodwill – Goldman Sachs JBWere

Just from the presentation that you’ve just given, can we take it that you’re actually no good a target of 9% growth for ongoing forward? And could you just foreshow, I mean the iron ore up to 300 million tons per annum is a huge number. Can you just give some idea of what is actually required to get you to those sort of levels in terms of reserve or resources and things like that? And also, on Olympic Dam, could you just give us some—or just flesh out a bit more what’s causing the delays? And also, aluminium smelting is not that prominent on your list. Can you just give us a few on aluminium, given that corporate activity’s occurred in [Arsota]?

Chip Goodyear

Well, Neil, I usually like to take three questions and move on, I guess you just swallowed all of them. I think as I probably will do regularly here, I think I’ll turn those questions over to Marius, starting with the 9% target and the iron ore, and so on.

Marius Kloppers

Neil, as you’ve seen in our results over the last couple of years, I wouldn’t say that it’s a target. These things aren’t exactly predicable on a year-on-year basis. What is a target though, is to try and meet the market with those opportunities that we’ve got in our portfolio and I think the capital guidance that I’ve given should be taken as guidance.

On the iron ore side, we believe that the resources are in place, that the plans are in place, and as we progress in the year during the visits and the analyst presentations with that business, we’ll make the various breakpoints in that business a little bit more sharper. But I think it’s entirely consistent with what Ian has said a couple of months ago, Ian Ashby, that is. In terms of what it means, I don’t know. I’m an engineer, so I ramble; $100 a ton, 200 million tons, $20 billion of investment, roughly speaking, to get there.

Olympic Dam—we have seen capital cost increases in the general industry. It costs more to build the same thing. Therefore, it is more important to make sure that the footprint of what you build is as technically efficient as possible. What we’re trying to do is to mature a number of technologies that are going to allow us to take major pieces of kit out of the footprint of that asset. And again, we’re planning for 100 years here, so we want to make sure that we do it right.

Aluminium smelting—we are in the upstream business. We are in the rent business. We like aluminium smelting as long as there’s rent captured in it, and I think that you’ll see us grow our portfolio there opportunistically where there are real rent capturing opportunities as presented by truly stranded energy. Truly stranded energy has rent and those are the things that we will be investing in, not more. So those questions are answered now.

Operator

Thank you. (Operator’s instructions)

Unidentified Analyst – Morgan Stanley

(inaudible) from Morgan Stanley. Congratulations on the results. A couple of questions just following on from Neil. Firstly, with this higher growth rate, it’s obviously a vision that you have—is it because India is now accelerating perhaps faster than you’d previously been estimating, that it’s starting to show upon [Kebler] intensity charts. Secondly, on some of the projects that you mentioned there, in potash and titanium dioxide, given the size of the company earnings now, it would seem to have what is meaningful impact what is would have say five years ago to fit these projects into such a big portfolio.

Marius Kloppers

I think accelerating your capital bold program is a little bit like building a house. You’ve got to put the foundation down, nobody sees that, and we’ve done that over the last six years. It’s putting the project managers in place, building up the capability, accelerating and so on. And where we are today is we probably have the solid foundation built, we’ve got a couple of walls up, but for those of you that have built a house, the next set of walls actually go up very quickly.

And I think, that’s sort of where we stand today. We’ve got the teams, they’ve been working. We need to get them to do more. And it is in response to how we see the market. Clearly India is growing, there’s been a change. We’re selling almost as much product to India as a percentage of our volume as we did to China at the time of the merger, just a percent or so less.

Then to the second question. Potash and titanium—we look at the quality of an overall industry and the quality of our resource base and the quality of our opportunity within that. We don’t have a scale cutoff other than the overall industry potential must be material. And I think that both of those things that you mentioned are material. We believe that certainly in a little bit more advanced stage for Corridor Sands and the potash, that we’ve got a fantastic set of opportunities, and they deserve our attention.

Chip Goodyear

Okay, thanks, Craig. Vicky?

Vicky Binns – Merrill Lynch

Hi. I’m Vicky Binns, from Merrill Lynch. I also would like to talk about growth and I remember several years ago, probably five or six years ago, we were talking about growth in the iron ore business and how you were concerned you weren’t going to grow or over provide the iron ore industry and you weren’t going to do a big jump from 100 to 150. You were going to do it in three phases. In retrospect, that hasn’t been a good decision given the enormous run-in on all prices, I guess you can talk about cash flow upfront versus cash flow three years.

And what I’m hearing about Olympic Dam, where you’re talking about capital staging by the sounds of it, stages of production by the sound of it. I don’t know maybe stage one to 500, stage two to 750 or a million tons. Is that what we’re looking for there, or is it just trying to optimize the massive size that that pit needs to be to deliver a million tons a year?

Chip Goodyear

Let me try to just hit the iron ore question briefly and Marius can build on that and he’ll handle the Olympic Dam.

Yes, a couple of years ago we decided to phase some of the iron ore construction, and now was that a good decision or not? The question at the time was it was a huge capital number. And if we went ahead and did that, was that marketplace going to allow us to absorb that, and could we deliver it on time?

We’ve always said a project that you plan and don’t deliver isn’t worth anything. So we have to be confident that we can deliver it. Would it be nice to have the production? Sure it would. The only thing I’d say is you probably will find over time it’s not a huge amount of tons because you miss it by maybe a year, 18 months. That’s the delta on the incremental production, because we have moved forward with that. So again, it’d be great to have it, but you have to trade off against the risks that it would take to do that obviously in that market. Marius?

Marius Kloppers

Yeah, Vicky, on Olympic Dam, obviously an enormous oil body. It wouldn’t surprise me if it turns out to be the second largest base metals oil body ever discovered, we’re still drilling. But it is a complex oil body, in terms of metallurgical constituents and flow sheet, and heavier or new set of water sulfuric acid and so on and so on. Anything we can do to diminish sulfuric acid usage, water usage, etc., etc., will take out capital. And together with a large bite that you’ve got to take to open up the oil body, we just want to make sure that we do it right, that the technology will work, that the scale up factors are the right ones, and so on.

Once you’ve taken that first bite, you can probably take a little bit more of a relaxed view. You’ve got your flow sheet, you know what you’re going to do, you know whether it works, hopefully, or not. And then as uranium demand materializes, you know you continue from there. So that’s the way I look at it and we really do need to—I think it is a slightly different situation from the iron ore one, even in that you’ve got to make sure you do it right, because you’re really starting a business, not from scratch, but in a materially different way, and it’s going to be there for generations, and you’re laying the foundation for that.

Chip Goodyear

Okay, let’s move to London and see if there’s some questions here. And questions in London will circle back here. So Alex, I might turn it over to you and see if there’s anything there.

Jason Fairclough – Merrill Lynch

It’s Jason Fairclough, from Merrill Lynch. Just a quick question on China and India. You spoke about your focus on export assets. Perhaps you could talk a little bit about your attitude or your aspirations to development of projects inside India and China.

Chip Goodyear

Yes, I’ll talk about what we focused on, and then as Marius mentioned and I’ve talked about large low cost, low reserve assets. And China has certainly good assets in the area of coal, but another area is today, it’s been difficult to find things that fit our corporate strategy. So we continue to focus on that market, but until we find a resource that fits our long term objective, it’s going to be difficult to find a good investment opportunity.

India is a little different. India is both a market and a potential production region. It does have good resource and number barriers, particularly in iron ore and bauxite. The key is you’ve got to be able to develop those in an economic fashion. And today India is very much focused on vertical integration and downstream processing of local raw materials. We see that as a domestic market. We think that those materials will go into that marketplace. If there’s an opportunity for us to participate there and obviously create a world-class business servicing some of the resource demands in India, we’d participate, but again, it’s got to not only be a nice resource, we’ve got to make an economic opportunity out of it.

Marius Kloppers

Can I add something to that? Perhaps my choice of words was unfortunate. Let’s call them globally priced commodities. And let me use the example that illustrates the point. Mike has got in his portfolio a number of petroleum assets, for which not a single drop of that petroleum is ever going to leave the Gulf of Mexico. However, that petroleum is priced on global supply demand fundamentals and in line with global price metrics. Those are the types of businesses that we like to be in, not cost contract mining, etc., etc. And it was really aimed at that, that my comment was.

Chip Goodyear

Okay, Alex, another question from London?

Alex Vanselow

Yes, we have another one. Chip.

Heath Jansen – Citigroup

Hi, Heath Jansen here from Citigroup. Two questions, first of all on capital management. You’ve got $6.7 billion outstanding with trying to complete by August 2008. Just wondering whether you might look to sort of expedite that, or going forward, to time those buybacks given the turmoil you’ve seen in say, the sub-prime markets and impact on your stock price, to take advantage of and bring forward some of that buyback.

And then, just secondly, could you just give us some quick update as some of your growth projects such Ravensthorpe and (inaudible) still on track for deliveries at the end of this year and early next year on those projects? Thanks.

Chip Goodyear

Okay, why don’t I ask Alex to answer your question about the buybacks and how we’re approaching that, and then in terms of asking about, or asking questions about Ravensthorpe and projects in Marius’ area, we’ll ask Marius to do that. And then Mike, I might ask you to briefly comment on how you’re doing in the petroleum area. We can do that starting with you, Alex.

Alex Vanselow

Okay, thanks Chip. As you know, and I mentioned on the speeches, that we have a track record of the dividends capital management programs ahead of schedule and we plan to continue maintaining that track record. What we use for this current program is a combination of on-market and off-market. We have done an off-market in Australia. We are currently doing on-market and will continue to consider this, too. But our target is to be complete, at the latest, by August 2008.

Chip Goodyear

Okay, Marius, comments on some of the products in your area?

Marius Kloppers

Chip, there’s a very good picture there of the last year. Team has affectedly kept schedule and cost. Since our last reporting period, we continue to give guidance that in the first quarter of next year we will have final product popping out the backend in Yabulu. That means that on Ravensthorpe itself we are in very advanced stage of commissioning, with people filling up the plant, testing the various subsystems, and we have no reason to believe that we need to update anything that we’ve said before.

Chip Goodyear

Okay, Mike, if we can go to you and just thought you’ve got quite a number of projects in your area, might get you to answer some of the things about petroleum.

Mike Yeager

Okay, Chip. Thank you very much. In regards to the question on Atlantis, certainly we’re in the process of commissioning the topsides, continuing to drill. We have seven wells down now and ready to go. As we continue to provide guidance around starting up before the end of the year, we’re very confident in that regard. Obviously, as we enter the hurricanes season here in full force, things like that are still big variables that could bite us. But certainly, we feel like we are at the end of a long journey there, and hopefully we’ll capture our 44% of that very large 200 thousand barrels a day. That will be ours, some of the very best fiscal terms in the world there, in the U.S. Gulf of Mexico, and of course in a robust market also.

So, the fundamentals there are moving forward. We feel very confident. More broadly, as you mentioned, there are four other additional projects that we will be bringing online in the next six months. Zamzama, Genghis Khan, Neptune, and [Stybarrow], all those are reported, and we’re clearly moving down the pathway that gives us great confidence that everything we put forward here will happen, and happen as we’ve described it.

So, a very opportune time, building a work force that is required to operate all this. All these are BHP Billiton operated, with the exception of Atlantis. So, some very big changes for us, and we’re very excited. And once again, should be a good next six months.

Chip Goodyear

Okay, thank you. Alex, one more question for you, and then we’ll move down to Mike in Johannesburg and see if there are some questions there.

Alex Vanselow

Okay, we have a few hands raised here, so…

Sylvain Brunet – Exane BNP Paribas

Thank you, this is Sylvain Brunet with Exane BNP Paribas. Maybe a follow-up question for you, Mike on your volume growth targets for ’08 or ’09. Could you confirm the numbers? And one strategic question on PGM’s interest, and to know your views, Marius’s views perhaps, on whether PGM would foot the bill with high margin exportable commodity assets. Thank you.

Chip Goodyear

Okay well those are pretty clear. Mike, why don’t you handle the thoughts on the petroleum numbers, then we’ll come to Marius, thinking about PGMs?

Mike Yeager

Okay Chip. In regards to petroleum, as most of you know, we did report in our production report in the last few weeks that in this fiscal year we had volumes that were very slightly above our previous fiscal year, at about 116 million barrels a day. We’re extremely proud of that, to be able to offset what is normally a 5-8% base decline. And the fact that we were counting on Atlantis starting up during this fiscal year, and it did not. So the ability to offset all that was a very significant achievement by our organization. Being able to find additional opportunities, get our development drilling cranked up, try to move products through our facilities and get our facility run time, which, by the way, got up to 93% across our entire portfolio, and we’re very proud of that.

So, we’ve got a good base for these new projects to land on. Obviously we’re very hesitant to provide an exact number in regards to going forward. As I mentioned, whether it be hurricanes, whether it be the fact that these things are in 5,000 feet of water, miles below the ground, there are many variables that could go wrong there. I do notice, though, that it looks like most of the analysts are saying something in the mid 130’s in regards to millions of barrels this year. I don’t think we have any reaction to that, it’s very negative. Certainly three are lot of things that could happen that would cause that to be lower. Some things could cause it to be higher. But, right now we’re just going to get these things online, and it’s a very busy time for us. And if we do it right, we’ll have substantial growth here in the next fiscal year.

Chip Goodyear

Thank you, Mike. Marius, PGMs?

Marius Kloppers

PGMs, we’ve got a line on what the type of assets are that we’d like to own. I should add to that, or emphasize again, where Chip started off today; safety and environmentally responsible. Provided that we can achieve that, I don’t see any reasons -- the industry structure, size, the nature of the product, and so on, that there would be any reasons to exclude PGMs from the bookends.

Chip Goodyear

Thanks, Marius, and just adding to Mike’s comments, I think it’s important to note that Atlantis is so significant that a movement of a little bit -- a month or two, one way or another, does have an important impact, because it’s unlike having a lot of small things. Some are a little early, some are a little late. One big thing coming early or late can impact the numbers, so please keep that in mind. Okay, I think we’ve done three in London, let’s try Johannesburg and Mike, if there are any questions down there that we can answer.

Mike Yeager

Thank you. Yes, we have a question.

Ross Gardner – J.P. Morgan

Thank you, Ross Gardner here with J.P. Morgan. If I could just ask a question about the cost increases, they’re reduced to 3.6% and the business excellence part, the $203 million negative that you had managed to achieve. Is part of that due to the renegotiations of the smelters agreements that you’ve had from the Chinese? I mean the Japanese moving into the Chinese smelters. And is that ongoing or is that because the negotiations just happened? Are we going to see more savings coming through in that regard?

And, to maybe continue along that line with structural changes and pricing, CIF pricing versus FOB pricing -- especially for the iron ore industry which was mentioned a couple of years ago. With this sort of growth in iron ore, obviously a lot of this going to head into the Chinese market, are we going to see more emphasis put back onto CIF pricing in that market?

Chip Goodyear

Thanks Ross. What I’d like to do is maybe ask Alex to talk a little bit about the savings, and then perhaps if Marius, you’d like to add anything about either TC/RC’s or about central location differential and iron ore. So Alex, can I turn that over to you?

Alex Vanselow

Ross, no, the renegotiations of smelter agreements are not part of that $203 million. What you have there is hundreds of small projects. I think the average is something like $200 thousand per project. They have been delivered. That really shows the focus that everybody in the company contributed to that. What you see there, as well, is the proliferation and sharing of best practices, or special practices that allows us to save in any specific components. For example, tires. We used that example a few times.

So what you see is what has been the difference this year in terms of cost savings. What’s not in there is things that have been delivered in terms of revenue enhancement, or cost avoidance that are on top of that $200 million. And on the back of those hundreds of projects that have been delivered, there are thousands of projects that we’re still working on. So, it’s that focus on cost that I mentioned earlier that you’re seeing translating into the bottom line.

Chip Goodyear

Thank you, Alex. And Marius, comments on TC/RC and iron ore?

Marius Kloppers

Yes, the TC/RC’s, the way our contracts are structured is that they are bricked, and you should be able to work out from the numbers what we saved, in terms of TC/RC’s this year. You just look at a normal brick contract, sort of three years. You’ve got to figure that there’s probably another two thirds to roll through, and in this first half, January ’08, we should be substantially out of any PP. So I hope that gives guidance for us.

On CIF pricing, we remain convinced that products should be priced on its delivered value and use [parity]. We note that the spot price yawns larger than ever over the Australian delivered contract price, given record high freight market.

So, I think it’s going to continue, as we’ve indicated over the last two years. We think it’s going to continue to remain a discussion item, until the day we price the product properly in that market.

Chip Goodyear

And just quickly for those who are not familiar with that, that means that our contracts, which may be two or three years long -- and we stagger them, so they don’t all come off every year. So it’s important to remember that. And PP is price participation. So as you know, if you followed that at all, we have worked very hard to eliminate price participation, particularly when you see the prices that we have today, relative to where that prior sharing level commits. So that’s been a very important part of our strategy in that area.

Chip Goodyear

Okay, Mike. Thank you for that, Ross. Mike, is there some other question down in Johannesburg?

Mike Yeager

Yes, Chip, we’ve got another one for you.

[Karen Daily] – [Investing Securities]

Hi, [Karen Daily] here from [Investing Securities]. So I’ve got a question on metallurgical coal. Looks like the metallurgical coal prices were on a pretty steady downward trend from 2005’s peak. The expectation now is that prices are going to increase, certainly next year if not the year after as well. But in your project pipeline, there’s very view near-term (inaudible) coal projects except for Indonesia and Maraway. So the question really is, one, what’s happening with Maraway? And two, is there potential to bring that forward at a larger scale, I think, as the larger plan, and are there other projects similarly that could be brought forward to meet that better (inaudible) for the met coal market?

Chip Goodyear

Marius, why don’t I ask you to take that?

Marius Kloppers

Karen, I think the core of our operations for the foreseeable future is going to be [a bound bison]. You should note that we’ve got two projects that are being ramped up at the moment, farther expansion. We’ve also got the coal prep plant which is being ramped up, and I think the way to look at our burn basin portfolio, I think Dave Murray described it a couple of years ago as we’ve got everybody lined—all of the opportunities lined up, we’ve got to decide which one we’ve got to kiss first. And that situation is unchanged. As that market matures, as we become more confident, I think we’re going to execute those infrastructures and mining projects to meet that demand.

We are very optimistic about that market. We think that the fundamentals are very good. And I think we’re doing a lot of preparations to make sure that we appropriately respond as the market leader in that business.

Chip Goodyear

Mike, one more down there, and then we’ll go to the telephones.

Mike Yeager

Another question here in Johannesburg for Chip? Chip, I think we’ll turn it back to you.

Chip Goodyear

Okay, very good. On the telephone, we’ve got some questions there?

Operator

(Operator instructions) At this stage, we seem to have no questions from the phone.

Chip Goodyear

That’s great. We answered every single question, that’s perfect. We’ll come back here and we’ll see if anything shows up on the phone. Lawrence, why don’t we go to you first, and then we’ll go from there.

Lawrence [Quake] – Quarry Bank

Lawrence [Quake] from Quarry Bank. I’d like to ask a question about over timing internalizing common change costs. And I’m wondering what impact that may have on your path to Costcos and various divisions which might be affected for the most either positively or negatively.

Chip Goodyear

Yeah, that’s a huge question, and we could spend lots of time, particularly if you want to buy a business, so we’re not going to do that to everybody. I guess what I would say, is there’s no doubt that carbon emissions are a critical global issue, and we responded to that by setting our next set of challenges and policy around carbon emissions—we have done that now since 1995. Many people woke up last September and said, oh my gosh, we’ve got an issue. They went back to see us. We’ve had targets that begin in ’96, and then we had another five year challenge that just ended in June. So that’s why we updated it.

What we would like to try to do is we would like to be in a position where the savings we get from energy consumption deal with the costs of getting there. And that may be an optimistic target, but we’ve sent some very good performance in Acadie, when there was an issue with the ice road. I think we took our diesel usage down by 12%. So we can do it. We can make that happen. But that’s our target for our businesses. Now there will be some that will be better off than others. Marius talked about energy, he talked about the role of nuclear power will play. We’re obviously involved in the LNG business, in the natural gas business, but we’re also in the coal business. And we certainly believe clean coal technology is something that involves intense focus from I’d say industry, government, obviously education and research parts of the world.

So, what I would say is we’re very attuned to it, we’re focused on the economic impact, but we do want to create and set targets around that. And we do want to make sure that our organization doesn’t look at it as an excuse to increase cost, but use that as an opportunity to create efficiency. So beyond that, Lawrence, perhaps we can have some conversation about that, maybe offline, but it is something that an organization like ours simply has to be up to speed on and involved in. Tim?

Tim Gerrard - Austock

Yeah, Tim Gerard from Austock. Two questions Chip. The first is back to Mike on Atlantis, and when you talk about an eventual target of 200 thousand barrels per day, I wonder if you could just split that out, roughly, in a time period for us, irrespective of the cyclone season. And secondly, some comments please, just on the Newcastle Coal infrastructure group, and a most likely timing for the commencement of the construction of that port. Thank you.

Chip Goodyear

Mike, we’ll obviously let you take the Atlantis question. Marius, you want to do Newcastle?

Marius Kloppers

I’ll try.

Chip Goodyear

Okay. Let’s try. Mike, why don’t we move to you first for the question about timing of the ramp-up of Atlantis, in a normal case.

Mike Yeager

Okay, Chip. Well, as everyone knows, we have a number of wells that we will have pre-drilled and we’ll have the opportunity to bring those on in a fairly substantial manner. Once we do commission and say the first oil is safe to bring on board. These wells are going to range from 10,000 to 20,000 barrels a day, and as I mention right now we have seven down. We have others that are active and we will continue to drill, so we’re going to come on in a good strong way there. Obviously how each and every well behaves and how that works, we’ll have some variability to it. We will stagger that, we will be collecting very important data of the reservoir as we bring these wells on, being able to measure how far we can see into the reservoir, and helping update our geologic models and the place for the future wells going on.

So I think Tim, the best thing that I could tell you right now that we hope sometime during this fiscal year, probably the middle of the second half, to get to full production. We think that will take about 11 wells in order to be maximized, and we’re drilling now and clearly we’ll be coming on with these first seven and then adding these additional four during the tail end of the year. So that’s probably the very best guidance I can give you right now.

Chip Goodyear

Marius? Newcastle?

Marius Kloppers

Chip, of course you’ve got to embarrass yourself at least once during conference, but luckily I’ve got Dave Murray here to crib from , and he’s used some sign language to tell me that it’s sometime next year.

Chip Goodyear

Oh, that’s right, obviously, you all particularly here in Australia are very familiar with the infrastructure issues, and we obviously have desired to meet some of that market demand, and expansion of infrastructure is quite important. Dave and his team have been working very hard and obviously we think we have a way to begin doing that, but obviously that volume capacity, to the extent that we are successful, is going to take some time to develop. Okay, maybe, one question in the back. Let’s beg for the microphone here if we can.

Eddie Myer – Channel 10 News

Eddie Myer from Channel 10 News. Just wondering, Australian workplace agreements, how important will they be to maintain here, and what pressure have you put on the opposition, should there be a change of government to maintain those workplace agreements?

Chip Goodyear

Sure, let me just briefly answer. The key, we don’t care what you call our relationships with our employees, we have all kinds of relationships. We have workplace agreements, we have union contracts, we have many other things around the world. What is critical to us is that we have a direct relationship with our employees, not through an intermediary. So we’re not anti-union, it doesn’t matter to us, again, we have all kinds of relationships, but it’s critical that relationship is a direct one, where we can keep those channels open, and obviously create the efficiency that we need and obviously the market needs.

And pressure on the opposition, we don’t put pressure on anybody. We recognize that we operate at the pleasure of those that own resources, and we obviously team with all kinds of governments around that. What do we do? We obviously talk to all interested parties and make our point known. And that’s exactly what we do with the government, with the opposition, and that’s here in Australia and that’s around the world. Okay, let’s see. Why don’t we do John, and then we’ll go to London, Alex, and see if there’s anything there.

John Mackinnon – Deutsche Bank

Thanks, Chip. John Mackinnon from Deutsche Bank. I guess just two questions. Just one, I guess, when you look at your steady earnings growth that you’ve had over half on half, and then you threw that margin chart up which just showed that margin expansion, how do you explain the share price volatility over the last eight or nine months? The market forgot about you through most of last year and sort of re-awoke this year. I guess the second part of that, just the multiples that, I think it was 12 months ago you were aggrieved about the multiple that the company was carrying. I think that’s probably gone down since that time, how do you explain that?

Chip Goodyear

Listen, if you ask me to exchange...

John Mackinnon – Deutsche Bank

What’s the market missing?

Chip Goodyear

Oh, listen John, I’m going to turn that question right back to you. All I can tell you is we run the business, we understand, we’ve talked about it a million times. What is our strategy, execute that strategy and go from there. We can’t every day or every hour determine how the market’s going to react. And there are a lot of strange things going on, and as we’ve talked about before, time frame for investors has shrunk to nanoseconds, and that’s not our business. We can’t run our business that way. So I can’t really explain that, but I think many of the points you’ve made are right. We’ve powered on through what is multiple years, certainly multiple six-month periods of performance, and again, for somebody who’s observed that, it’s been a wonderful performance, it’s been a wonderful demand. Is it priced right? Listen, I need to turn that back to you guys. Eventually it will be. Okay, Alex, maybe back to London. See what we have there.

Alex Vanselow

Yes, Chip, we have a few hands up here.

Sam Catalano – Macquarie Bank

Yeah, hi. It’s Sam Catalano with Macquarie Bank. Just a question on the aggregated CapEx guidance that Marius gave, talking about $8 billion, ahead of around five the last few years. That delta of three, do you have a feel for how much of that is step change in project building capabilities and how much is the capital inflation? And secondly on the $8 billion figure, what’s the limiting factor on that? Is it construction capability, is it the market demand, what’s the cap on that?

Chip Goodyear

Okay, and obviously Marius.

Marius Kloppers

Yes, Sam, I don’t think I’ve broken that out, in the inflating of unit efficiency of capital. That’s not a piece of analysis that we’ve done when we came up with the $8 billion. I think that’s a number that we feel comfortable that on average we can deploy over the next couple of years, given the capability that we’ve got. I should point out that it’s going to be lumpy. Lumpy projects get approved and then the cash flows follow, so again, that’s an average guidance and it’s based on the portfolio, the market, and what we can execute.

Chip Goodyear

Thank you, Sam. Alex, another question in London?

Alex Vanselow

Yes, we have another question on the back and then here on the front.

Jeremy Gray – Credit Suisse

Jeremy Gray from Credit Suisse. When you’ve completed Spence and Sulphide Leach, you’ll probably go into a bit of a holding pattern on copper, which in your defense is a similar thing that your competitors also have, which is a lack of growth to 2010, at least, but with the sell-off in equities and some of these names in the Congo area, which have had massive sell-off, and realistically provide big volumes near-term, are you in discussion with any of these producers that some of your competitors are also?

Chip Goodyear

I could answer that but I’ll turn it over to Marius, and give him some practice.

Marius Kloppers

No comments on specific opportunities, Jeremy, but perhaps a couple of comments about the copper market. Firstly, we always look at the growth in the portfolio, not the growth in any one particular product. Second comment, perhaps all of these very green-field, new geography projects are taking longer than people anticipate, and it’s not clear that they are actually in the time frame that you talk about. And then lastly, anything we look at, it’s got to fit with the strategy that we outlined.

Chip Goodyear

Okay, Alex, another question from London?

Alex Vanselow

Got one more here.

Grant Sporre - UBS

It’s Grant Sporre from UBS. Building on what Sam asked, in terms of CapEx, can you give us any guidance on your ability on sustaining CapEx? You’ve given us some guidance on growth CapEx. And then the second question, if I may, on aluminium, which areas in the world would you consider to have stranded power, as you called it?

Chip Goodyear

I’ll tell you what Alex. Maybe I might turn the maintenance CapEx to you, and then maybe Marius might just talk about stranded power. Alex?

Alex Vanselow

I’ll talk on sustaining, which is quite interesting, because the sustaining that we’re seeing for next year is pretty flat compared to this year, despite new production, despite plants being operational 100% of the time, we’re seeing very flat sustaining.

Chip Goodyear

I think that number Alex, was about $1.4 billion?

Alex Vanselow

That includes all specifics. The chart can provide the specific number for sustaining.

Chip Goodyear

Okay, good, similar level. Marius?

Marius Kloppers

Grant, good to see you. Boy, if I could answer that question in one line, I’d say our business development guy is in a lot of trouble. But in general, stranded power is where you have power and no alternative use for it. And I think that’s as much as I can do to describe it. So it’s something where you can use the power for an extended period of time, for nothing else but in a power intensive industry.

Chip Goodyear

Okay, let’s try and see if there’s anything in Johannesburg with Mike, and then we will try the phones again, so if there are questions there we’ll try that, and then we’ll see where we are on time. So Mike, is there anything else there?

Mike Yeager

Ladies and gentlemen, anything else for Chip? Marius? Chip I think we’ve answered it all here?

Chip Goodyear

Okay, telephones? Anything on the telephones? And here in Sydney? Anything else? London, last time, Alex, anything else there?

[Tobias Lerner] – (inaudible) Global

Just one more final question. This is [Tobias Lerner] from (inaudible) Global here. I read, with some amusement this morning, your assessment of the credit concerns and the impact on your business, and I fully agree with that. But one angle I would ask myself is if you wanted to do deals of a larger nature, given your opportunistic strategy, do you think now that would be a little bit more difficult? That’s the first part of the question. Secondly, one of your peers has done an acquisition which stretches his balance sheet significantly. I just wanted to hear from Marius what sort of stretch you could see yourself in, or would allow yourself, if the opportunity that you talk about, arose?

Chip Goodyear

Certainly I’ll ask Marius to answer the second part of your question. The question, I would guess, your first one is, given the credit issues around the world, would financing be more difficult? Listen, I mean, I guess that I’d say a couple things. First of all, certainly financial markets are somewhat in turmoil, but I would also say that our financial position is as strong as it’s ever been, and our capability to manage financial exposure is quite significant. So I don’t really want to answer your question directly, because I think that would, certainly, in almost any size range, we certainly have plenty of access to financial capability, but obviously markets are in turmoil and I think that’s just something to note, but I have to say, for what we see as an opportunity set, I think that this company has shown that it can manage itself operationally and financially in a very strong way. Marius?

Marius Kloppers

Yeah, Chip just to add, 50% class margins, $16 billion of cash flow, the absolute quality of the quality in the industry, and a high level of discretion about how you spend that cash. You know, I certainly don’t see that financing per say is going to be a constraint for whatever we choose to look at. More important in strategy, quality, [fit] and so on.

Chip Goodyear

Okay, well thank you Marius, and it sounds like we have run out of questions at this point. We’re also at the hour and a half time limit, so thank you for your attention. Again, it has been an outstanding year for the company, built on six or seven years of a significant strategy that’s been well executed. I think the platform, going forward, is outstanding in a long-term outlook, and Marius and the team will build and take what we have today, and build to the next set of opportunities in the years ahead. Thank you very much and if we can answer more questions through Jane and Mark and Allison and Tracy around the world, we’re certainly glad to do that. So thanks again.