p. 1

concise annual report 2008

[close]

p. 2

for several years now asian economies have been driven by a fundamental shift in the rate of industrialisation and urbanisation of their massive populations these economies have accounted for more global growth than has the united states this growth will drive the course of the world economy for years to come bhp billiton produces and supplies world markets including the developing asian and other economies with many of the natural resources they rely on to fuel their growth these resources include iron ore copper nickel alumina manganese coal uranium oil and gas as the world s leading natural resources company we are central to the growth of the world s developing economies we really are resourcing the future contents 1 key information group highlights 2008 five-year summary chairman s review chief executive officer s report bhp billiton locations customer sector group performance 2 2 4 6 8 10 4 board of directors and group management committee 6 remuneration report 7 directors report 8 legal proceedings 9 summary financial report 10 glossary 11 shareholder information corporate directory 26 44 56 68 71 85 88 5 corporate governance statement 31 2 information on the company 3 operating and financial review and prospects resourcing the future world-class assets our people sharing value growth 16 18 20 22 24 ibc this concise annual report is issued subject to the important notices appearing on the inside back cover of this concise annual report bhp billiton is a dual listed company comprising bhp billiton limited and bhp billiton plc the two entities continue to exist as separate companies but operate as a combined group known as bhp billiton the headquarters of bhp billiton limited and the global headquarters of the combined bhp billiton group are located in melbourne australia bhp billiton plc is located in london uk both companies have identical boards of directors and are run by a unified management team throughout this concise annual report the boards are referred to collectively as the board shareholders in each company have equivalent economic and voting rights in the bhp billiton group as a whole throughout this concise annual report the terms bhp billiton the company and the group refer to the combined group including both bhp billiton limited and subsidiary companies and bhp billiton plc and subsidiary companies the term `the merger has a corresponding meaning bhp billiton limited abn 49 004 028 077 registered in australia registered office 180 lonsdale street melbourne victoria 3000 australia bhp billiton plc registration number 3196209 registered in england and wales registered office neathouse place london sw1v 1bh uk

[close]

p. 3

[close]

p. 4

section 1 group highlights 2008 · record attributable profit delivered for the seventh consecutive year · underlying earnings before interest taxation depreciation and amortisation ebitda up 22.1 per cent · attributable profit up 12.4 per cent to us$15.4 billion and earnings per share eps up 17.5 per cent benefiting from buy-backs both measures excluding exceptionals to us$28.0 billion and underlying earnings before interest and taxation ebit up 21.0 per cent to us$24.3 billion · record underlying ebit in the petroleum base metals iron ore manganese and energy coal customer sector groups · strong underlying ebit margin of 47.5 per cent despite unexpected disruptions and accelerated cost inflation · return on capital employed of 37.5 per cent despite unprecedented level of capital investments · record net operating cash flow of us$18.2 billion up 13.8 per cent · annual production records for petroleum copper iron ore manganese ore and alloy alumina and molybdenum · commissioning of six major growth projects and other volume growth in our high-margin oil and gas iron ore and manganese businesses expected in fy2009 production commenced at 10 major projects during fy2008 a significant 150 per cent increase in annual dividend over the past three years · final dividend rebased to 41 us cents per share a strong signal of our confidence in the outlook we delivered five-year summary us$m 2008 a b 2007 a b 2006 a b 2005 a b 2004 a revenue underlying ebit c attributable profit ­ excluding exceptional items attributable profit ­ including exceptional items net operating cash flow d basic eps ­ excluding exceptional items us cents per share basic eps ­ including exceptional items us cents per share dividend per share e bhp billiton plc us cents bhp billiton limited us cents underlying ebitda interest coverage c gearing per cent a b 59,473 24,282 15,368 15,390 18,159 274.9 275.3 70.0 70.0 49.4 17.8 47,473 20,067 13,675 13,416 15,957 233.9 229.5 47.0 47.0 43.6 25.0 39,099 15,277 10,154 10,450 11,325 168.2 173.2 36.0 36.0 33.6 27.2 31,150 9,921 6,426 6,396 9,117 104.9 104.4 28.0 28.0 35.6 32.8 24,943 5,488 3,510 3,379 5,100 56.4 54.3 26.0 26.0 21.1 25.7 f c d e f information for the years 2008 to 2005 is stated under ifrs 2004 is prepared in accordance with ukgaap and has not been restated on 1 july 2007 the group adopted the policy of recognising its proportionate interest in the assets liabilities revenues and expenses of jointly controlled entities within each applicable line item of the financial statements all such interests were previously recognised using the equity method comparative figures for the years 2007 to 2005 have been restated underlying ebit is earnings before net finance costs and taxation and any exceptional items underlying ebitda is underlying ebit before depreciation impairments and amortisation we believe that underlying ebit and underlying ebitda provide useful information but should not be considered as an indication of or alternative to attributable profit as an indicator of operating performance or as an alternative to cash flow as a measure of liquidity net operating cash flow is after net interest and taxation three dividends were declared for the year ended 30 june 2004 compared to two dividends declared in 2008 to 2005 underlying gearing is net debt over net debt plus net assets the measure is inclusive of continuing operations of group companies and jointly controlled entities 2 bhp billiton plc concise annual report 2008

[close]

p. 5

underlying ebit 25,000 us us million 15,000 10,000 5,000 15.4b 2005 2007 2008 2006 2004 us million 24.3b returns to shareholders since 2001 20,000 attributable profit ­ excluding exceptional items 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 2005 2007 2007 2007 2004 2006 2008 us 0 0 10,000 dividends 4,000 3,500 3,000 us million 2,500 2,000 1,500 1,000 500 2005 8,000 us 32.1b us million us 6,000 4,000 3.9b 2002 2003 2004 2005 2006 2007 2008 dividends buy-backs demerger of bhp steel 2,000 market capitalisation at 30 june us million 250,000 200,000 community contributions us million 150 us 150,000 us 120 225b 700 600 500 400 300 200 100 0 june 03 june 04 100,000 141m 2005 2007 2008 2006 2004 90 60 50,000 30 2005 relative share price performance index ­ five year bhp billiton limited bhp billiton plc asx 200 ftse 100 s&p 500 june 05 june 06 june 07 2004 2006 june 08 2008 0 0 2004 2006 2008 0 0 bhp billiton plc concise annual report 2008 3

[close]

p. 6

section 1 chairman s review shareholder value our strategy is to ensure we have a suite of long-life low-cost assets diversified by geography and commodity that can be expanded and are largely export oriented this has proven to be successful in delivering consistent results for all our stakeholders don argus chairman 4 bhp billiton plc concise annual report 2008

[close]

p. 7

this year we reported another record profit of us$15.4 billion the seventh consecutive full-year profit increase this represents a 602 per cent increase in attributable profit since 2001 over the same period total shareholder returns the movement in our share price plus dividends have increased by 863 per cent reflecting progressive dividend increases and the market value of the company we also rebased our dividend for the second successive year this represents a 150 per cent increase over the past three years unfortunately mining stocks have seen a significant de-rating since may this year on the back of short-term uncertainty this is disappointing for the management and shareholders of bhp billiton while we expect commodity markets to remain volatile in the short term we are confident that longer-term market fundamentals should support growth in commodity demand and therefore our revenues margins and cash flow will be impacted by cost inflation but our strategy to ensure we have a suite of long-life low-cost assets diversified by geography and commodity that can be expanded and are largely export oriented is proving successful at delivering consistent results for all our stakeholders to fully appreciate the role bhp billiton and the resources industry generally is playing today it is essential to look at what is happening to the world s economies central to the world s economic growth is the development of the new economies ­ china in particular russia india and to a lesser extent brazil counteracting these forces is the relative shrinkage of the united states economy and the lessening influence of the united kingdom and europe asia is becoming increasingly dominant today accounting for nearly 30 per cent of global gross domestic product gdp these economic shifts are having many consequences for bhp billiton rapid and continuing asian growth has put pressure on demand for our products which are essential for the building and production of city infrastructure and personal goods that characterise asia s urbanisation and industrialisation i have no doubt that economic growth in the asian region will slow at some point but if i look at china specifically the slow down is concentrated in regions oriented to the light export sector the sectors of the economy oriented more towards domestic consumption are still performing well despite increasing input costs particularly for energy we expect asian demand for our products to continue our response has been to streamline our business to enable us to produce as much product as fast as possible within the non-negotiable framework of the highest safety and environmental standards in operating our business at full capacity and continually seeking opportunities to increase the volumes of product available to our customers it is the board s duty to ensure we are creating real and tangible value for shareholders we are proud to report that during the year we continued to deliver new projects to boost product volumes and we achieved strong profit margins across our businesses it is not only demand for our products that is being impacted by global economic shifts as the world s largest diversified resources company we are watching the creation of competitor companies that are spearheading the economic emergence of countries like russia brazil and china it is in this global context that the board endorsed a proposal to combine bhp billiton and rio tinto two leading resources companies that together could help meet the developing economies demand for resources better and faster than the two companies do apart a combined company would have a greater ability to develop the next generation of large-scale projects to provide greater volumes of product for the benefit of its customers the communities in which it operates and its shareholders in making the pre-conditional offer for rio tinto the board remains absolutely focused on value for shareholders we are confident that both sets of shareholders would share the value of a combined company on behalf of the board i want to thank our senior management team for their efforts this year they have performed magnificently and under the new leadership of marius kloppers the company has stepped up efforts to meet a new realm of global challenges and opportunities board renewal building an exceptional board is a cornerstone of an effective corporate governance system and planning for board renewal is a continuous process the process of putting together the best board for the business has to start with the business strategy and an assessment of the strengths and weaknesses of current members new non-executive directors must fill an essential role in line with the strategic intent of the business and bring to the company the skills determined by the board attracting exceptional people will not of itself create exceptional directors the candidates have to fit together as a team bhp billiton has an exceptional group of high-performing skilful professional people diverse in knowledge gender and geography who have overseen incredible growth in the business over the last seven years the tone at the top and within the board has fostered an environment in which we are committed to high ethical standards fairness full compliance with legal requirements and resistance to market pressures for short-term results during the year we engaged external search firms to assist with board renewal which resulted in the appointment of david morgan keith rumble and alan boeckmann these non-executive directors have the required functional expertise they are independent of thought and satisfy the independence test of the various jurisdictional codes of corporate governance we also completed a review of the board committees including an examination of the respective committee charters and a performance review of each director including the chairman to ensure that our board criteria is maintained these reviews were facilitated by external advisers in conclusion it has been a stellar year for the company and its stakeholders and i compliment my board colleagues and senior management team for their commitment and dedication to the delivery of our strategy don argus chairman bhp billiton plc concise annual report 2008 5

[close]

p. 8

section 1 chief executive officer s report record result for the seventh consecutive year we have achieved record attributable profit driven by excellent operating performance cost control and the delivery of high-margin growth projects into strong market conditions marius kloppers chief executive officer 6 bhp billiton plc concise annual report 2008

[close]

p. 9

bhp billiton shareholders can look back on the 2008 financial year with a real sense of pride in what we ve achieved and in the performance of our people since my appointment as ceo in october 2007 we have continued to follow our strategy to own and operate world-class assets across a diverse range of mineral metal and energy products focused on the upstream end of the production process from the combination of our strategy the efforts of our people and a favourable commodity price environment we have been able to deliver record financial performance while we can report financial success i regret to report we have not performed well on safety in fy2008 11 of our employees died at work many more lives will have been impacted some forever by these tragic and avoidable events we have reflected deeply on what more we must do to reach our goal of zero harm in fy2009 we are making even greater efforts to improve our safety performance despite turbulent global economic conditions we continue to see enormous opportunity for the company while continuing to further our existing strategy we have refined our operational focus in order to give maximum clarity of responsibility to our operating units we are also embracing the concept of `simplicity even more deeply ensuring that we focus our effort and resources on key opportunities and value drivers for our shareholders this means the company is easier to understand more focused and more valuable in the past year our strategy has produced stronger annual production in 13 of our commodities with record production in seven of those this was achieved in an environment of industry-wide supply disruptions and input cost pressures our strong track record of project delivery also continued through the year enabling for example our western australia iron ore business to post an eighth consecutive annual production record a record performance in our petroleum business reflected the successful commissioning of three new major projects we expect volume growth from our petroleum business to continue at around 10 per cent a year a significant value creator at a time of historically high oil prices ten major projects spanning five commodities started production during the year the board approved a further seven for development bringing our total number of projects in either execution or feasibility to 28 representing an expected capital investment of us$24.8 billion we also have other medium-term growth options with expected capital commitments in excess of us$90 billion spanning our existing commodity range and beyond our results were outstanding in the context of a challenging supply environment which was characterised by unexpected disruptions rising input prices skills shortages and the further devaluation of the us dollar our strong performance demonstrates the power of our uniquely diversified and high-margin portfolio across the energy steelmaking and non-ferrous product suites given this future growth pipeline you may question why we are pursuing a combination with rio tinto within our industry the two companies are uniquely complementary and as such we believe a combined company would unlock synergies and provide greater value than the two companies can provide separately bhp billiton does not need rio tinto to have a great future but we believe the two companies combined will be better placed to meet the world s future need for our products we have a critical role in providing the raw materials for growth that so many economies need economies going through industrialisation and urbanisation on a scale and intensity not experienced before we are resourcing the future i have been fortunate to take the helm of a well-run business focused on its customers needs with a great team responding well to the opportunities for our sector in a year s time i hope to report we have been able to improve our company even further marius kloppers chief executive officer bhp billiton plc concise annual report 2008 7

[close]

p. 10

64 47 36 48 35 27 8 34 38 63 offices 30 65 11 81 37 49 40 39 petroleum aluminium base metals diamonds and specialty products stainless steel materials iron ore manganese metallurgical coal energy coal 46 79 69 16 52 62 59 61 60 56 51 53 19 25 18 17 2 1 10 71 9 32 80 54 55 74 66 33 offices ref country 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 angola angola australia australia australia australia australia belgium brazil burundi canada chile china china china colombia drc gabon guinea india indonesia japan kazakhstan korea liberia mongolia netherlands new caledonia philippines russia singapore south africa south africa switzerland uk uk us us location saurimo luanda adelaide brisbane melbourne global headquarters newcastle perth antwerp rio de janeiro bujumbura vancouver santiago beijing lanzhou shanghai bogota kinshasa and lubumbashi libreville and franceville conakry new delhi jakarta tokyo almaty seoul monrovia ulaanbaatar the hague noumea manila moscow singapore johannesburg richards bay baar london sheffield houston pittsburgh 12 bhp billiton locations petroleum ref country 39 algeria 40 algeria 41 australia 42 australia 43 australia 44 australia site/asset ohanet rod bass strait minerva north west shelf offshore western australia zamzama description ownership wet gas development 45 onshore oil development comprising 45 development and production of six oil fields production of oil condensate 50 lpg natural gas and ethane operator of gas field development 90 in the otway basin one of australia s largest resource 8.33­16.67 projects producing liquids lng and domestic gas operator of griffin and stybarrow 45­71.43 oil and gas development and operator of pyrenees project currently under development operator of onshore gas development operator of oil and gas field oil and gas production in the uk north sea operator of oil and gas developments in the irish sea interests in several producing assets including atlantis neptune and shenzi genghis khan developments and a significant exploration acreage position 38.5 45 16­31.83 46.1 4.95­100 45 pakistan 46 trinidad angostura and tobago 47 uk bruce/keith 48 uk 49 us liverpool bay gulf of mexico corporate centres marketing offices minerals exploration offices 8 bhp billiton plc concise annual report 2008

[close]

p. 11

26 23 14 13 24 15 45 20 22 diamonds and specialty products ref country 64 canada 65 canada site/asset ekati potash description diamond mine in northwest territories greenfield potash project near saskatoon saskatchewan integrated titanium smelter/mineral sands mine ownership 80 100 50 29 66 south africa richards bay minerals 31 21 77 stainless steel materials ref country 67 australia site/asset nickel west description nickel assets including mt keith and leinster operations kalgoorlie nickel smelter and concentrator kwinana nickel refinery kambalda nickel concentrator and ravensthorpe nickel mine and processing facility laterite nickel and cobalt processing plants northwest of townsville integrated ferronickel mining and smelting complex in northern colombia ownership 100 72 43 44 70 58 68 57 76 78 3 5 42 41 73 4 6 75 28 68 australia 69 colombia yabulu refinery cerro matoso 100 99.94 7 67 50 iron ore ref country 70 australia 71 brazil site/asset western australia iron ore samarco description integrated mine rail and port operations in the pilbara integrated mine pipeline and port operations producing iron ore pellets ownership 85­100 50 manganese ref country 72 australia 73 australia site/asset gemco temco description producer of manganese ore in the northern territory producer of manganese alloys in tasmania integrated producer of manganese ore hotazel manganese mines alloy metalloys and manganese metal manganese metal company ownership 60 60 60 aluminium ref country 50 australia 51 brazil 52 brazil 53 guinea site/asset worsley alumar mrn guinea alumina description integrated alumina refinery bauxite mine alumina refinery and aluminium smelter bauxite mine integrated alumina refinery/bauxite mine currently in definition stage aluminium smelter two aluminium smelters alumina refinery and bauxite mines ownership 86 36­40 14.8 33.3 47.1 100 45 74 south africa samancor manganese metallurgical coal ref country 75 australia site/asset illawarra coal description three underground coal mines supplying metallurgical coal primarily to steel industry production of metallurgical coal for steel industry including new loading terminal at hay point deposit in central and east kalimantan currently in development with first production expected mid-2009 ownership 100 54 mozambique mozal 55 south africa hillside/bayside 56 suriname paranam 76 australia queensland coal maruwai 50­80 base metals ref country 57 australia 58 australia 59 chile 60 chile 61 chile 62 peru 63 us site/asset cannington olympic dam cerro colorado escondida spence antamina pinto valley description silver lead and zinc mine in northwest queensland underground copper/uranium mine in south australia open-cut mine producing copper cathode copper mines located in northern chile open-cut mine producing copper cathode copper and zinc mine copper mine ownership 100 100 100 57.5 100 33.75 100 77 indonesia 100 energy coal ref country 78 australia 79 colombia site/asset hunter valley energy coal cerrejón description mt arthur coal open-cut mine export coal mine in la guajira province three energy coal mines mine-mouth operations ownership 100 33.3 84­100 100 80 south africa energy coal south africa 81 us new mexico coal bhp billiton plc concise annual report 2008 9

[close]

p. 12

section 2 csg performance bhp billiton operates nine customer sector groups csgs aligned with the commodities we extract and market the nine csgs are petroleum aluminium base metals diamonds and specialty products stainless steel materials iron ore manganese metallurgical coal and energy coal · ecordannualproductionat14ofourassets,including r western australia iron ore gemco temco illawarra coal hunter valley energy coal minerva and worsley all australia escondida chile samarco and alumar both brazil samancor south africa cerrejón coal colombia zamzama pakistan and paranam suriname · ecordproductioninsevencommodities,includingpetroleum r copper iron ore manganese ore and alloy alumina and molybdenum annual production also increased in crude oil and condensate uranium lead zinc silver and diamonds · econtinuetodevelopanddeliverworld-classprojects w that add significant shareholder value first product was delivered from 10 major projects across five commodities during the year a further seven major projects spanning four commodities were approved by the board for development during the period stybarrow australia 10 bhp billiton plc concise annual report 2008

[close]

p. 13

four new petroleum projects were brought online in fy2008 genghis khan atlantis stybarrow and zamzama phase ii we also have a deep portfolio of projects for future growth j michael yeager petroleum underlying ebit increased 82.1 revenue underlying ebit capital expenditure net operating assets us million 9,547 5,489 2,116 8,936 four new projects were brought online in fy2008 genghis khan atlantis stybarrow and zamzama phase ii we ve also built a deep portfolio of growth projects that will carry us forward petroleum achieved 117 per cent reserve replacement during fy2008 we made our largest exploration discovery in the last five years with the discovery of the thebe field offshore of western australia we significantly increased our acreage position especially in the gulf of mexico where we were successful in two lease sales and we are now actively exploring in nine countries fy2008 saw the best safety performance ever achieved in petroleum with only three lost time incidents ltis and zero fatalities for the year the improved lti rate compared to six ltis for fy2007 and 20 ltis in fy2006 was achieved during a period of greater drilling and project construction activity levels atlantis gulf of mexico the production of 129.5 million barrels of oil equivalent boe a 13 per cent year-on-year volume growth puts us well on our way to achieving an expected annual compound growth rate of 10 per cent over the next four to five years of equal significance is the fact that we are growing volumes in a high-demand environment and in some of the safest and most fiscally stable countries in the world our disciplined approach enabled us to achieve 93.8 per cent production uptime versus maximum daily possible production petroleum unit operating costs were held at us$4.92 per boe which when adjusted for foreign exchange is lower than fy2007 bhp billiton plc concise annual report 2008 11

[close]

p. 14

annual production and sales records for alumina were achieved for the second consecutive year all alumina operations achieved record annual output record underlying ebit of us$7,989 million was achieved as new and increasing production was delivered during a period of high prices jon dudas diego hernandez aluminium underlying ebit decreased base metals underlying ebit increased 21.1 revenue underlying ebit capital expenditure net operating assets us million 5,746 1,465 556 6,364 16.2 revenue underlying ebit capital expenditure net operating assets us million 14,774 7,989 989 11,159 aluminium ingots mozal mozambique copper cathode sheets escondida chile record alumina production 4.6 mt southern african smelter aluminium production operated at reduced levels to comply with the region s mandatory reduction in power consumption this was in part offset by record annual aluminium production from alumar the efficiency and growth expansion project at worsley alumina in western australia was approved for an estimated capital investment of us$1.9 billion bhp billiton share 86 per cent the expansion project will lift capacity of the worsley refinery from 3.5 million tonnes per annum mtpa of alumina to 4.6 mtpa 100 per cent capacity through expanded mining operations additional refinery capacity and upgraded port facilities annual production and sales records for alumina were achieved for the second consecutive year all alumina operations achieved record annual output worsley operated consistently above the expanded nameplate capacity 1,375 kt we achieved our third consecutive year of record copper production as spence and escondida sulphide leach continued to ramp up and pinto valley operations commenced record underlying ebit of us$7,989 million was achieved as new and increased production was delivered during a period of high prices record copper production growth opportunities within the csg are reflected through a robust project pipeline for example the cannington life extension project and olympic dam expansion exciting results from exploration of the escondida mining lease are being obtained in areas close to existing infrastructure and processing facilities including the new pampa escondida discovery 12 bhp billiton plc concise annual report 2008

[close]

p. 15

operating performance at our ekati diamond mine in canada was strong while the acquisition of anglo potash limited enhances our diversification in the current financial year we commissioned three major projects ravensthorpe the yabulu expansion and cliffs graham kerr jimmy wilson diamonds and stainless steel specialty products materials underlying ebit decreased 4.1 revenue underlying ebit capital expenditure net operating assets underlying ebit decreased 65.3 us million 969 189 123 1,694 revenue underlying ebit capital expenditure net operating assets us million 5,088 1,275 1,191 7,275 higher operating costs had an adverse impact on underlying ebit and were largely due to a strengthening australian dollar and higher charges for fuel energy and labour reflecting industry-wide cost pressures gem quality rough diamonds ekati diamond mine canada cerro matoso colombia more than 7,000 km2 of potash exploration permits operating performance at our ekati diamond mine in canada was strong the koala underground project was completed ahead of schedule and under budget and is now ramping up strongly the acquisition of anglo potash limited was completed on 10 july 2008 this has given us full ownership of more than 7,000 square kilometres of highly prospective exploration permits in the immediate vicinity of existing major saskatchewan potash mines potash will further enhance our diversification we increased our exploration and development activities in diamonds angola potash canada and titanium minerals mozambique 3 major projects commissioned in the current financial year we commissioned three major projects ravensthorpe the yabulu expansion and cliffs underlying ebit was down 65.3 per cent mainly due to lower average london metal exchange prices and volume across all operations sales volumes decreased for the year reflecting lower production volumes due to an industrial stoppage at cerro matoso wet weather interruptions at yabulu scheduled maintenance across all operations and a furnace rebuild at the kalgoorlie nickel smelter offset by strong production from the kwinana nickel refinery bhp billiton plc concise annual report 2008 13

[close]