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BHP Billiton Minerals Exploration

Overview
We are BHP Billiton, a leading global resources company. Our purpose is to create long-term value through the discovery, development and conversion of natural resources, and the provision of innovative customer and market-focused solutions. BHP Billiton is among the world’s top producers of major commodities, including aluminium, energy coal and metallurgical coal, copper, manganese, iron ore, uranium, nickel, silver and titanium minerals, and we have substantial interests in oil, gas, liquefied natural gas and diamonds. Formed from a merger between BHP and Billiton, we value our heritage and the strong foundations on which our company is built. BHP was one of Australia’s oldest and largest companies, and began as a silver, lead and zinc mine in Broken Hill in New South Wales. Billiton was a global leader in the metals and mining sector, and began when the company acquired the concession to a tin-rich island in the Indonesian archipelago near Sumatra. The island was called Billiton (now Belitung), from where the company took its name. Headquartered in Melbourne, Australia, BHP Billiton Limited has a primary listing on the Australian Securities Exchange and BHP Billiton Plc has a premium listing on the London Stock Exchange, with a secondary listing on the Johannesburg Stock Exchange. In addition, BHP Billiton has two American Depositary Receipt listings on the New York Stock Exchange.

We are distinguished from other resource companies by the quality of our assets; our deep inventory of growth projects; our customer-focused marketing; our diversification across countries, commodities and markets; and our Petroleum business.

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Resourcing the future
Led by Asia, emerging economies have driven demand growth for raw materials in recent years. This has not always been the case. History shows that economic cycles cause fluctuations in demand for raw materials. Until the turn of this century, the mining industry experienced a 30-year period of declining commodity prices. This was a result of low demand growth and reducing production costs due to increasing scale and efficiency of mines, bulk processing of ore and significant near-surface mineral discoveries in the most accessible parts of the earth’s crust. With high demand growth for our products and resources now being depleted at unprecedented rates, BHP Billiton is looking to secure a foundation for future growth. This growth will come from expanding existing operations; new mine developments in emerging regions; through technology, exploration and mergers and acquisitions. BHP Billiton’s strategy is clear. We focus on large, long-life, low-cost, upstream high-quality assets, diversified by commodity, geography and markets. Our approach ensures that we remain profitable throughout economic cycles. Many of our existing assets are in the traditional resource-rich regions of Australia, South Africa, South America and North America. However, we also have significant experience in exploring for, developing and operating mines in emerging regions – regions that we expect will play an increasingly central role in resource development.

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Minerals Exploration
The BHP Billiton Minerals Exploration Group is responsible for undertaking all greenfield mineral exploration activities, including identifying and acquiring greenfield early and advanced stage exploration projects. We are focused on discovering or acquiring new world-class mineral deposits that will support the economic and social development of our host communities and provide long-term value to our shareholders. Our Petroleum business operates its own dedicated exploration function, as the specialised techniques used, particularly in offshore exploration, are distinct to those used in mineral exploration. Because Minerals Exploration teams explore for opportunities around the world, we are one of the truly global teams within BHP Billiton. Our generative geoscientists and project acquisitions team continually look for opportunities to expand our exploration portfolio, while our regional early stage and program operations teams are responsible for evaluating and progressing opportunities through to delineation. All of our exploration activities are supported by expertise in safety and risk management, community and environmental management, project management, information management, supply, commercial, legal, finance and human resources.

Minerals Exploration plays an important role in replenishing BHP Billiton’s resource base and creating opportunities for future growth.

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A company of choice
Working with integrity Wherever we operate, we do so with integrity – making the right decisions and doing things the right way. The BHP Billiton Charter and the BHP Billiton Code of Business Conduct set the standard for our commitment to working with integrity and provide guidance for everyone who works for, or on behalf of, BHP Billiton. The Code outlines how we conduct our business activities, and places priority on upholding high ethical standards and establishing trust with our stakeholders. Working safely Paramount to the way we operate is growing our business safely, in an environmentally sound manner and in a way that demonstrates our unqualified commitment to working with integrity. We believe that through strong, accountable leadership and a focus on identifying hazards and implementing appropriate controls, we can be a business that does not have serious injuries, illnesses and fatalities. Working with governments and communities, partners and suppliers We aim to be a valued member of our host communities, and it is important for us to demonstrate to our stakeholders our track record of successfully delivering large-scale quality projects, while also making a long-term sustainable contribution to the social and economic development of the communities in which we operate. We strive to create mutually beneficial relationships with partners, contractors and suppliers. We recognise the value of our activities to local economies and, wherever possible, we employ local labour, contractors and suppliers. Working towards a better environment Respect for the environment is central to our commitment towards sustainability. We aim to explore for, develop and mine our products responsibly. We work with industry, government, non-government organisations and consumer and community groups to minimise the environmental, health and safety impacts of the production, use and disposal of our products. Working as part of a global team With a global workforce working across 100 operations in 25 countries, we offer outstanding career opportunities in one of the world’s most exciting industries. Our working environment goes beyond borders and languages. We value diversity of gender, skill, thought, nationalities, experience and style. We provide our people with career development through on-the-job experience and professional development programs, and we offer the opportunity to work across a range of roles, geographies and cultures.

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The minerals commodities business
BHP Billiton’s main assets, and our focus for new investments, are in the largest global commodity markets by value and those with strong growth potential, including iron ore, coal, copper, potash, bauxite, nickel, manganese and diamonds. Our main markets are in developing economies where industrialisation, urbanisation, energy demand, transport and investment in infrastructure are driving demand for commodities. As an example, iron ore, coking coal and manganese are all components of steel, which is used for reinforcing in buildings and in vehicles and whitegoods. Copper demand is also driven by urbanisation through its uses in electrical wiring, plumbing and components in electrical goods. BHP Billiton produces and sells raw materials and products in their basic stages of processing: • Raw materials with little or no processing, e.g. lump iron ore, thermal coal, manganese ore. • Partially processed at the mine site, e.g. copper concentrate, ferronickel, alumina, washed coking coal, iron ore pellets, uranium oxide. • Fully processed metal sold at international standard specifications, e.g. LME quality copper metal 99.99 per cent Cu. • Finished products such as diamonds, which are cut and polished before being sold as individually priced gems destined for the international jewellery market.

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Exploration is based on an understanding of the fundamentals of geological processes and the earth’s history. Studies of how the earth is evolving allow us to predict which metallogenic provinces or basins have the best potential to host tier one resources.

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Beginning exploration
Exploration is based on an understanding of the fundamentals of geological processes and the earth’s history. Studies of how the earth is evolving allow us to predict which metallogenic provinces or basins have the best potential to host tier one resources. As the easier and most obvious discoveries have already been made, attention is now turning to the deeper or hidden deposits that are both more difficult and expensive to find and develop. An area of interest is first identified by looking at prospective geology, known mineral occurrences, the maturity of previous exploration and likely residual potential. Generally speaking, the best place to start exploring is close to known mineral deposits in what is known as brownfield exploration. Brownfield exploration involves looking deeper or laterally for extensions or repetitions of mineralisation at, or close to, existing mine operations. Greenfield exploration takes place outside the area of known deposits and requires more creativity, persistence and some luck to find a significant discovery. In choosing where to explore, nature’s distribution of resources needs to be weighed against our technical ability to make a discovery. We also need to evaluate the relevant country risk, which involves considering the laws, regulations and practices governing the minerals industry in that country.

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Selecting deposit types
BHP Billiton is a large company and works best with resources suitable for development as large-scale operations. Mechanisation and highly efficient use of equipment enable operations to benefit from the economies of scale. Consequently, there are many mineral deposits that BHP Billiton excludes, either because they have a low probability of being built at large scale, they cannot be developed and operated safely or with respect for the environment, or they are inherently high cost due to their geological complexity.

Acquiring mineral title
Before an area of interest can be explored, it is necessary to acquire a legal right to explore for and develop any contained minerals, known as mineral title. Very little ground-based exploration is carried out without holding mineral title, either because it is not permitted or it is simply too risky to spend time or money exploring without holding the legal and commercial rights to any potential discovery. Mineral title carries certain rights and obligations, typically including specific time frames for completing exploration activities, relinquishing ground so that others can re-explore, and requirements to develop mining operations in a safe and environmentally sound manner. The attractiveness of an exploration opportunity is closely linked to the transparency of the mineral title process, as well as the ability to retain ownership as exploration mineral title is converted through the development and production stages. This allows larger mining projects to be defined and developed with certainty.

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Early stage exploration
Exploration starts with collating known geological information, including national geological survey data and accessing company reports containing prior proprietary knowledge. Remote sensing techniques, using satellite or air photo images, are used to detect anomalous patterns and tones that could indicate unusual mineral concentrations or vegetation features reflecting subsurface geology. Large-scale structural trends, potentially controlling mineralisation, may also be identified through this analysis. The main activities of the geologist are field mapping and sampling. There is nothing better than ‘boots on the ground’ in assessing outcropping geology for its potential. However, many targets are obscured by intense weathering, soil cover or more recent deposits and have to be detected through their remote geophysical or geochemical responses, as the mineralisation cannot be seen at the surface. Geophysics uses the physical properties of rocks, such as their density, electrical conductivity, chargeability, radioactivity or magnetism, to detect very subtle differences. This can be done from the ground or the air. Airborne surveys are a fast and effective way to scan large areas. Geochemistry detects trace quantities of metals or associated elements shed from a mineral resource into the natural environment over a long period of time. Rocks are broken down at or near the earth’s surface into constituent minerals. Some minerals are soluble and are rapidly dispersed by rainwater, e.g. salt. Others are chemically stable, physically resilient and can remain for millions of years in the weathering environment, and are commonly concentrated in streams and rivers, e.g. diamonds, tin, gold. Different techniques can be used to detect variations in the minute levels of the elements, and these anomalies lead the geoscientist to a source. Samples can be collected from streams, soils, gravels left by ice sheets, desert sands, vegetation and water bores. This phase of exploration results in the definition of anomalies, which are unusual coincidences of geophysical, geochemical and geological features that could signal the presence of mineralisation.

Exploration starts with collating known geological information, including national geological survey data and accessing company reports containing prior proprietary knowledge.

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Discovery
Discovery is the crucial moment of exploration when the first unequivocal high-grade, and potentially economic, mineralisation is encountered. Some discoveries are obvious from the first outcrop or drill hole, while others are only made after dozens or even hundreds of drill holes and often after the project has passed through many owners, each finding subtle and elusive signals without discovering the prize. Often, the significance of a discovery is not immediately understood, and it may be some time, after follow up drilling, before the true potential of a resource is recognised and appreciated. Only a small number of discoveries ever lead to large-scale mines that make a material difference to the producer, customers, host government and community. The industry average across all commodities is that one world-class discovery is made globally every two years. Once the source of the anomaly has been broadly identified, geologists can interpret the likely size, shape and form of a subsurface target. Drill holes are then made to test for significant mineral concentrations. Some types of deposit, such as coal, bauxite, manganese and potash, were formed in sedimentary environments and tend to be planar and semi continuous. They are spatially larger and more predictable than vertical pipe or sheet-like orebodies of diamonds and some types of copper and nickel. For example, a diamond mine may have a footprint or surface area of only several hundred square metres, a significant copper or nickel mine may cover 1–2 square kilometres, whereas a bauxite or coal mine may extend over 10–15 square kilometres. Drilling, and recovery of solid rock core from the drill holes, provides the information required to construct a three-dimensional visualisation, or model, of the potentially economic zones of the deposit. The type and density of drilling and sampling required to accurately construct a three-dimensional model, and predict the value of a resource, varies considerably. A diamond deposit may be economically viable with ultra-low grade concentrations of less than one carat per tonne (0.00002 per cent), whereas some types of iron ore deposit may require more than 60 per cent iron content to be viable. Complex distributions of discrete high-value minerals are much more difficult to assess and value than regular deposits, and the costs of evaluation rise significantly. A diamond project may cost US$50–100 million to carry out a full exploration program because of the need to first find the rare diamond-bearing pipes and then take a large enough sample to assess the small but potentially high-value diamond content. Whereas, the cost to carry out a full exploration program on a bulk commodity, such as coal, may only cost US$15–20 million because this deposit type is spatially larger and more predictable.

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Resources and reserves
Geologists establish the full extent of the mineralised ground, but only the part that is sampled with some confidence and likely to be economic is called a mineral resource. As the number of drill holes increases, confidence in the grade and tonnage improves. There is generally a trade-off between tonnes and grade. International standards govern the skills and experience of the competent person and the data density and quality required to define resources. Responsible mining companies will spend substantial effort in upfront planning to determine the optimal scale of the mine and rate of mining. Although sufficient mineral resources and ore reserves are a prerequisite for the development of any mine, there are a number of other factors that determine whether a resource is economic and can be extracted profitably. These include the size of initial investment in equipment and infrastructure required, the cost of extraction and transportation, commercial terms, such as royalties and corporate income tax, and sustainability considerations, such as rehabilitation. The attractiveness of the host country is influenced by economic stability, the rule of law and regulatory framework and is also considered when assessing whether a resource can be developed into an operating mine. Before mining starts, an optimised life-of-mine plan is developed, which is a view of likely rate of production, operating costs and economic potential of the operation and, ultimately, closure planning.

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A large mine may require a decade or more to progress from discovery to production, allowing time to fully delineate the resource, conduct environmental baseline and impact studies, complete feasibility studies and detailed engineering design, secure permitting, construct the mine, establish transport routes, and ramp up production.

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From exploration to production
Once we are confident that a partially defined resource has the potential to meet BHP Billiton’s thresholds for development, our exploration team transfers accountability to a development team whose role it is to undertake the pre-development process. This pre-development process involves studies to detail the scope of the potential mining operation and a wide range of technical, environmental, social, market and other considerations. Some of this work starts early in the exploration process. For example, environmental baseline studies for an exploration site start as soon as a BHP Billiton team enters an area. The pre-development process starts with an identification (or concept) study, which involves forming an initial view on whether or not there is the potential for a viable mining operation. A strong focus of the identification study is to extensively drill the deposit to determine its extent and scale. The next phase of the process is a selection (or pre-feasibility) study, which involves assessing the different configurations and mining methods that could be used to mine the resource, leading to the selection of a preferred development configuration. Having selected a preferred development configuration, the final phase of the process is to undertake a definition (or feasibility) study. The definition study focuses on demonstrating the viability of the preferred development configuration. Detailed design and costing along with all of the operational and risk management aspects are examined, ultimately leading to a final investment decision by BHP Billiton. The pre-development process for a major resource development project can take five to ten years and cost hundreds of millions of dollars to complete, depending on the complexity of the project. Final construction of major resource development projects often requires an investment of billions of dollars, and there must be absolute confidence in the investment decision before committing to an investment of this size.

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From production to delivery
For many of our products, mining and processing is only part of our stewardship. The products must be delivered to the customer. This may require public or proprietary rail, road, barge, port and marine shipping facilities. The construction and operation of transport infrastructure and facilities is an important part of a successful project. All mines generate waste material, normally in the form of mined waste rock and processed tailings that are stored in dams or large ponds. Careful consideration is given to the physical and chemical stability of these temporary land forms and every effort is made to minimise the environmental, health and safety impacts of the production, use and disposal of our products.

Other routes to mines
BHP Billiton has a proud history of discovering and developing resources. Many of our current resources were discovered by our own geologists; others were acquired from third parties or developed jointly with partners. Future growth may also come from mergers and acquisitions and we recognise the talents of other specialist exploration and partner companies across the world. In joint venturing and sharing risk through exploration ventures, we are able to offer our partners BHP Billiton’s depth of experience and capability, balance sheet strength and global networks to jointly bring their discoveries to realisation. This includes exploration, project development, mining, processing, logistics and global marketing expertise.

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Glossary
Exploration and mining related terms Alumina Aluminium oxide (Al2O3). Alumina is produced from bauxite as a first step in the refining process. Alumina is then converted (reduced) in an electrolysis cell to produce aluminium metal. Anomaly A volume of rock, soil, sediments, water or other material with distinctly different geological, geophysical and/or geochemical characteristics suggesting the presence of mineralisation. Area of interest A defined geographic area over which certain obligations apply. Bauxite Hydrous aluminium oxides, the chief ore of aluminium. Brownfield An exploration or development project located within an existing mineral province that can share infrastructure and management with an existing operation. Coking coal By virtue of its carbonisation properties, is used in the manufacture of coke, which is used in the steelmaking process. Coking coal may also be referred to as metallurgical coal. Delineation Field geological work designed to define the volume, geometry, thickness and grade continuity and mineralogical and metallurgical characteristics of a target with sufficient confidence to determine if conceptual development design and engineering studies are warranted. Energy coal Used as a fuel source in electrical power generation, cement manufacture and various industrial applications. Energy coal may also be referred to as steaming or thermal coal. Environmental Baseline Study A comprehensive study of flora, fauna, air, water and all relevant environmental factors carried out before any material mineral exploration or mineral development or mining is carried out. Footprint The area at surface that reflects either the actual areal extent, or the upward vertical projection, of the mineral deposit or resources in question. Grade The relative quantity or the percentage of the desired metal or mineral content in an ore body. Greenfield The development or exploration located outside the area of influence of existing mine operations/infrastructure. Metallurgical coal A broader term than coking coal, which includes all coals used in steelmaking, such as coal used for the pulverised coal injection process. Mineral Resource That part of a mineralised volume of rock that is currently expected to be capable of eventual economic extraction, but is not yet demonstrated to be so. Ore Reserves That lesser part of a mineral deposit or Mineral Resource that is estimated to be capable of legal and economic exploitation. Almost always a smaller subset of Mineral Resources. Tier one resource An exceptional mineral deposit or group of deposits that will ultimately host one or more large, long-life, low-cost mining operation. Often the largest in their class, they have embedded options (for example, future extensions, expansions and tie-ins) and have a lasting impact on the industry, investors, governments and societies.

BHP Billiton Limited Australia BHP Billiton Centre 180 Lonsdale Street Melbourne VIC 3000 Telephone +61 3 9609 3333 Facsimile +61 3 9609 3015 BHP Billiton Plc United Kingdom Neathouse Place London SW1V 1BH Telephone +44 20 7802 4000 Facsimile +44 20 7802 4111 BHP Billiton Minerals Exploration Marina Bay Financial Centre #50-01 Tower 2 10 Marina Boulevard Singapore 018983 Telephone +65 6421 6000 Facsimile +65 6421 7000 minerals.exploration@bhpbilliton.com www.bhpbilliton.com