Annual
Report
2019
Our Charter
We are BHP,
a leading global resources company.
Our Purpose
Our Values
To bring people and resources
together to build a better world.
Our Strategy
Our strategy is to have the best
capabilities, best commodities
and best assets, to create
long-term value and high returns.
Sustainability
Putting health and safety first, being environmentally responsible
and supporting our communities.
Integrity
Doing what is right and doing what we say we will do.
Respect
Embracing openness, trust, teamwork, diversity and relationships
that are mutually beneficial.
Performance
Achieving superior business results by stretching our capabilities.
Simplicity
Focusing our efforts on the things that matter most.
Accountability
Defining and accepting responsibility and delivering on our commitments.
We are successful when:
Our people start each day with a sense of purpose and end the day with
a sense of accomplishment.
Our teams are inclusive and diverse.
Our communities, customers and suppliers value their relationships with us.
Our asset portfolio is world-class and sustainably developed.
Our operational discipline and financial strength enables our future growth.
Our shareholders receive a superior return on their investment.
Andrew Mackenzie
Chief Executive Officer
May 2019
The Annual Report 2019 is
available online at bhp.com.
BHP Group Limited. ABN 49 004 028 077. Registered in Australia.
Registered office: 171 Collins Street, Melbourne, Victoria 3000, Australia.
BHP Group Plc. Registration number 3196209. Registered in England and
Wales. Registered office: Nova South, 160 Victoria Street London SW1E 5LB
United Kingdom. Each of BHP Group Limited and BHP Group Plc is a
member of the Group, which has its headquarters in Australia. BHP is
a Dual Listed Company structure comprising BHP Group Limited and
BHP Group Plc. The two entities continue to exist as separate companies
but operate as a combined group known as BHP.
The headquarters of BHP Group Limited and the global headquarters of
the combined Group are located in Melbourne, Australia. The headquarters
of BHP Group Plc are located in London, United Kingdom. Both companies
have identical Boards of Directors and are run by a unified management
team. Throughout this publication, the Boards are referred to collectively
as the Board. Shareholders in each company have equivalent economic
and voting rights in the Group as a whole.
In this Annual Report, the terms ‘BHP’, the ‘Company’, the ‘Group’, ‘our
business’, ‘organisation’, ‘we’, ‘us’, ‘our’ and ‘ourselves’ refer to BHP Group
Limited, BHP Group Plc and, except where the context otherwise requires,
their respective subsidiaries as defined in note 13 ‘Related undertaking
of the Group’ in section 5.2 of this Report. Those terms do not include
non-operated assets.
This Annual Report covers BHP’s assets (including those under exploration,
projects in development or execution phases, sites and closed operations)
that have been wholly owned and/or operated by BHP and that have been
owned as a joint venture(1) operated by BHP (referred to in this Report as
‘assets’, ‘operated assets’ or ‘operations’) during the period from 1 July 2018
to 30 June 2019. Our functions are also included.
BHP also holds interests in assets that are owned as a joint venture but
not operated by BHP (referred to in this Annual Report as ‘non-operated
joint ventures’ or ‘non-operated assets’). Notwithstanding that that this
Annual Report may include production, financial and other information
from non-operated assets, non-operated assets are not included in the
BHP Group and, as a result, statements regarding our operations, assets
and values apply only to our operated assets unless stated otherwise.
(1) References in this Annual Report to a ‘joint venture’ are used for convenience
to collectively describe assets that are not wholly owned by BHP. Such
references are not intended to characterise the legal relationship between
the owners of the asset.
Contents
1 Strategic Report
1.1 Chairman’s Review
1.2 Chief Executive Off icer’s Report
1.3 BHP at a glance: FY2019 performance summary
BHP at a glance: What we do
Tailings dams
1.4 About BHP
1.5 Our performance
1.6 Our operating environment
1.7 Samarco
1.8
1.9 People
1.10 Sustainability
1.11 Our businesses
1.12 Summary of financial performance
1.13 Performance by commodity
1.14 Other information
2 Governance at BHP
2.1 Governance at BHP
2.2 Board of Directors and Executive Leadership Team
2.3 Shareholder engagement
2.4 Role and responsibilities of the Board
2.5 Board membership
2.6 Chairman
2.7 Renewal and re-election
2.8 Director skills, experience and attributes
2.9 Director induction, training and development
2.10 Independence
2.11 Board evaluation
2.12 Board meetings and attendance
2.13 Board committees
2.14 Risk management governance structure
2.15 Management
2.16 Our conduct
2.17 Market disclosure
2.18 Remuneration
2.19 Directors’ share ownership
2.20 Conformance with corporate governance standards
2.21 Additional UK disclosure
Remuneration Report
3
3.1 Annual statement by the Remuneration
Committee Chairman
3.2 Remuneration policy report
3.3 Annual report on remuneration
4
5
6
8
9
18
23
44
47
50
55
66
81
95
103
106
109
115
116
118
118
118
119
121
121
122
123
124
132
133
134
134
134
134
135
135
138
144
150
Indemnities and insurance
4 Directors’ Report
4.1 Review of operations, principal activities and state of aff airs 164
165
4.2 Share capital and buy-back programs
165
4.3 Results, financial instruments and going concern
165
4.4 Directors
166
4.5 Remuneration and share interests
166
4.6 Secretaries
166
4.7
167
4.8 Employee policies
167
4.9 Corporate governance
167
4.10 Dividends
167
4.11 Auditors
167
4.12 Non-audit services
168
4.13 Political donations
168
4.14 Exploration, research and development
168
4.15 ASIC Instrument 2016/191
168
4.16 Proceedings on behalf of BHP Group Limited
4.17 Performance in relation to environmental regulation
168
4.18 Share capital, restrictions on transfer of shares and other
additional information
5 Financial Statements
5.1 Consolidated Financial Statements
5.2 BHP Group Plc
5.3 Directors’ declaration
5.4 Statement of Directors’ responsibilities in respect
of the Annual Report and the Financial Statements
5.5 Lead Auditor’s Independence Declaration under
Section 307C of the Australian Corporations Act 2001
Independent Auditors’ reports
5.6
5.7 Supplementary oil and gas information – unaudited
6 Additional information
6.1
Information on mining operations
6.2 Production
6.3 Resources and Reserves
6.4 Major projects
6.5 Climate change data
6.6 Legal proceedings
6.7 Glossary
7 Shareholder information
7.1 History and development
7.2 Markets
7.3 Organisational structure
7.4 Material contracts
7.5 Constitution
7.6 Share ownership
7.7 Dividends
7.8 American Depositary Receipts fees and charges
7.9 Government regulations
7.10 Ancillary information for our shareholders
168
170
226
238
239
240
241
248
254
263
266
290
291
294
297
304
304
304
306
306
310
312
313
313
316
Forward looking statements
This Annual Report contains forward looking statements, including
statements regarding trends in commodity prices and currency exchange
rates; demand for commodities; production forecasts; plans, strategies and
objectives of management; closure or divestment of certain assets,
operations or facilities (including associated costs); anticipated production
or construction commencement dates; capital costs and scheduling;
operating costs; anticipated productive lives of projects, mines and facilities;
provisions and contingent liabilities; and tax and regulatory developments.
Forward looking statements may be identified by the use of terminology
including, but not limited to, ‘intend’, ‘aim’, ‘project’, ‘anticipate’, ‘estimate’,
‘plan’, ‘believe’, ‘expect’, ‘may’, ‘should’, ‘will’, ‘continue’ or similar words.
These statements discuss future expectations concerning the results of
assets or financial conditions, or provide other forward looking information.
These forward looking statements are not guarantees or predictions of future
performance and involve known and unknown risks, uncertainties and other
factors, many of which are beyond our control and which may cause actual
results to differ materially from those expressed in the statements contained
in this Annual Report. Readers are cautioned not to put undue reliance on
forward looking statements.
For example, our future revenues from our assets, projects or mines described
in this Annual Report will be based, in part, on the market price of the minerals,
metals or petroleum products produced, which may vary significantly from
current levels. These variations, if materially adverse, may affect the timing
or the feasibility of the development of a particular project, the expansion of
certain facilities or mines, or the continuation of existing assets.
Other factors that may affect the actual construction or production
commencement dates, costs or production output and anticipated lives
of assets, mines or facilities include: our ability to profitably produce and
transport the minerals, petroleum and/or metals extracted to applicable
markets; the impact of foreign currency exchange rates on the market prices
of the minerals, petroleum or metals we produce; activities of government
authorities in the countries where we are exploring or developing projects,
facilities or mines, including increases in taxes, changes in environmental
and other regulations and political uncertainty; labour unrest; and other
factors identified in the risk factors set out in section 1.6.4.
Except as required by applicable regulations or by law, BHP does not
undertake to publicly update or review any forward looking statements,
whether as a result of new information or future events.
Past performance cannot be relied on as a guide to future performance.
Agreements for sale of Onshore US
On 28 September 2018, BHP completed the sale of 100 per cent of the issued
share capital of BHP Billiton Petroleum (Arkansas) Inc. and 100 per cent of the
membership interests in BHP Billiton Petroleum (Fayetteville) LLC, which held
the Fayetteville assets, for a gross cash consideration of US$0.3 billion.
On 31 October 2018, BHP completed the sale of 100 per cent of the issued
share capital of Petrohawk Energy Corporation, the BHP subsidiary which held
the Eagle Ford (being Black Hawk and Hawkville), Haynesville and Permian
assets, for a gross cash consideration of US$10.3 billion (net of preliminary
customary completion adjustments of US$0.2 billion).
While the effective date at which the right to economic profits transferred to
the purchasers was 1 July 2018, the Group continued to control the Onshore
US assets until the completion dates of their respective transactions. In addition,
the Group provided transitional services to the buyer, which ceased in July 2019.
For IFRS accounting purposes, Onshore US is treated as Discontinued
operations in BHP’s Financial Statements. Unless otherwise stated, information
in section 5 has been presented on a Continuing operations basis to
exclude the contribution from Onshore US assets. Details of the contribution
of Onshore US assets to the Group’s results are disclosed in note 27
‘Discontinued operations’ in section 5. All other information in this Annual
Report (other than FY2019 safety performance data) relating to the Group
has been presented on a Continuing and Discontinued operations basis to
include the contribution from Onshore US assets prior to completion of
their sale, unless otherwise stated. FY2019 safety performance data in this
Annual Report has been presented on a Continuing and Discontinued basis
to include the contribution from Onshore US assets to 28 February 2019.
Unless otherwise stated, comparative financial information for FY2017, FY2016
and FY2015 has been restated to reflect the sale of the Onshore US assets, as
required by IFRS 5/AASB 5 ‘Non-current Assets Held for Sale and Discontinued
Operations’. Consolidated Balance Sheet information for these periods has not
been restated as accounting standards do not require it.
BHP Annual Report 2019 1
2 BHP Annual Report 2019
Section 1
Strategic Report
About this Strategic Report
This Strategic Report in section 1 provides insight into BHP’s
strategy, operating and business model, and objectives. It
describes the principal risks BHP faces and how these risks
might affect our future prospects. It also gives our perspective
on our recent operational and financial performance.
This disclosure is also intended to assist shareholders and other
stakeholders to understand and interpret the Consolidated
Financial Statements prepared in accordance with International
Financial Reporting Standards (IFRS) included in this Annual
Report. The basis of preparation of the Consolidated Financial
Statements is set out in section 5.1. We also use alternative
performance measures to explain our underlying performance;
however, these measures should not be considered as an
indication of, or as a substitute for, statutory measures as an
indicator of actual operating performance, position or as a
substitute for cash flow as a measure of liquidity. To obtain
full details of the financial and operational performance of BHP,
this Strategic Report should be read in conjunction with the
Consolidated Financial Statements and accompanying notes.
Underlying EBITDA is the key measure that management uses
internally to assess the performance of the Group’s segments
and make decisions on the allocation of resources. Unless
otherwise stated, data in section 1 is presented on a Continuing
operations and Discontinued operations basis.
This Strategic Report in section 1 meets the requirements of
the UK Companies Act 2006 and the Operating and Financial
Review required by the Australian Corporations Act 2001.
We have excluded certain information from this Strategic
Report, to the extent permitted by UK and Australian law, on
the basis that it relates to impending developments or matters
in the course of negotiation, and disclosure would be seriously
prejudicial to the interests of BHP. This is because such
disclosure could be misleading due to the fact it is premature
or preliminary in nature, relates to commercially sensitive
contracts, would undermine confidentiality between BHP
and its suppliers and clients, or would otherwise unreasonably
damage the business. The categories of information omitted
include forward looking estimates and projections prepared
for internal management purposes, information regarding
BHP’s assets and projects that is developing and susceptible
to change, and information relating to commercial contracts
and pricing modules.
References to sections beyond section 1 are references to other
sections in this Annual Report 2019. Shareholders may obtain
a hard copy of the Annual Report free of charge by contacting
our Share Registrars, whose details are set out in our Corporate
directory on the inside back cover of this Annual Report.
In this section
1.1 Chairman’s Review
1.2 Chief Executive Off icer’s Report
1.3 BHP at a glance: FY2019 performance summary
1.4 About BHP
1.4.1 Our strategy
1.4.2 Our Operating Model
1.4.3 Managing performance
1.4.4 Transformation overview
1.4.5 Operations Services
1.4.6 Locations
1.5 Our performance
1.5.1 Financial KPIs
1.5.2 Non-financial KPIs
1.5.3 Our contribution in FY2019
1.6 Our operating environment
1.6.1 Market factors and trends
1.6.2 Commodity performance overview
1.6.3 Exploration
1.6.4 Risk management
1.7
Samarco
1.8 Tailings dams
1.9 People
1.9.1 Our people
1.9.2 Employees and contractors
1.10 Sustainability
1.10.1 Our approach to sustainability
1.10.2 Safety
1.10.3 Health
1.10.4 Protecting the environment
1.10.5 Engaging with communities
1.10.6 Respecting human rights
1.10.7 Indigenous peoples
1.10.8 Climate change
1.11 Our businesses
1.11.1 Minerals Australia
1.11.2 Minerals Americas
1.11.3 Petroleum
1.11.4 Commercial
1.12 Summary of financial performance
1.12.1 Group overview
1.12.2 Financial results
1.12.3 Debt and sources of liquidity
1.12.4 Alternative performance measures
1.12.5
Definition and calculation of alternative
performance measures
1.12.6 Definition and calculation of principal factors
1.13 Performance by commodity
1.13.1 Petroleum
1.13.2 Copper
1.13.3 Iron Ore
1.13.4 Coal
1.13.5 Other assets
1.14 Other information
BHP Annual Report 2019 3
1.1 Chairman’s Review
Dear Shareholder,
I am pleased to provide our Annual Report for FY2019.
During the year, our relentless focus on strengthening our portfolio,
capital discipline, culture and productivity delivered a solid set
of financial results. Higher prices and record production from
a number of operations contributed to strong operating cash
flows and enabled BHP to announce a record final dividend of
78 US cents per share.
We completed the sale of our Onshore US oil and gas business
in October 2018. Net proceeds of US$10.4 billion were returned
to shareholders through a combination of an off-market buy-back
in December 2018, and a special dividend in January 2019.
These returns, when added to dividends announced in respect
of FY2019, delivered record annual cash returns to shareholders.
We continued to invest in our future through the disciplined
and transparent application of our Capital Allocation Framework.
BHP currently has six major projects under development in
petroleum, copper, iron ore and potash. All of them are on
schedule and budget.
While we made strong progress in FY2019, we achieve nothing
if it is not done safely. Tragically, in December last year, our
colleague Allan Houston died at BMA’s Saraji Mine in Queensland.
I offer my condolences to Allan’s family, friends and colleagues.
We have shared the findings of the fatality investigation across
the organisation and we will continue our work to improve safety
tools and behaviours.
The collapse earlier this year of the Brumadinho tailings dam,
owned by Brazilian company Vale, was a tragic event for the
industry. Unfortunately, we know too well the toll these events
take on communities. We have responded to a Church of England
Pensions Board request for information on our own tailings facilities
– a request sent to around 700 mining companies. We held investor
briefings in Sydney and London to talk openly about how we
manage our tailings storage facilities. We are working closely
with industry and other stakeholders to achieve more consistent
disclosure. We will also participate in setting new international
and independent tailings management standards to improve
transparency and accountability across the industry.
Throughout FY2019, I met with many of our shareholders and
stakeholders. These discussions have renewed our commitment to
deliver on the five key priorities for BHP – safety, portfolio, capital
discipline, culture and capability, and social value. I strongly believe
our focus on these key areas will create value for shareholders and
make a positive contribution to society.
To strengthen our operating performance, this year we established
a dedicated Transformation Office to focus on workforce capability
and technology deployment. Our transformation efforts will make
BHP safer and our operations more efficient and reliable. These
efforts will develop workforce capability so that our people are
equipped for the rapid pace of change that lies ahead. Coupled
with a lean and agile management culture, transformation has the
potential to unlock significant value in the short and medium term.
We also take a structured and rigorous approach to Board
succession. In FY2019, we welcomed two new Board members,
Ian Cockerill and Susan Kilsby, who joined us in April 2019. Ian
and Susan are both excellent additions to the Board and will help
ensure we have the right balance of attributes, skills, experience
and diversity necessary for the Board to govern BHP effectively.
Carolyn Hewson, a Board member for over nine years, will be
retiring from the Board, as planned, at this year’s Annual General
Meeting. On behalf of her colleagues on the Board, and the many
employees she has closely interacted with over this term, I thank
Carolyn for her counsel on the Board and as Chairman of the
Remuneration Committee. Carolyn has made an outstanding
contribution to BHP and we wish her the very best for the future.
The progress our people have made to our five focus areas has
positioned us well for the future. I am confident that BHP, led by
Andrew Mackenzie and the leadership team, has the right assets
and capability to deliver strong shareholder value and returns.
Thank you for your continued support of BHP.
Ken MacKenzie
Chairman
4 BHP Annual Report 2019
1.2 Chief Executive Officer’s Report
Dear Shareholder,
BHP’s commitment to simplification, capital discipline and culture
laid the groundwork for a solid performance in FY2019. From these
strong foundations, we are confident in the long-term outlook,
with significant opportunities ahead to further transform our
business and deliver value and returns for our shareholders.
While our performance is a key indicator of success, how we operate
is equally critical.
This year, we changed Our Charter to revise our company purpose.
Our purpose is: to bring people and resources together to build
a better world. We also added social value as one of our five
company priorities. These changes recognise that we work with
a range of stakeholders to make a positive contribution to the
world. We know we must build trust and forge mutually beneficial
partnerships for the long term, because the value we create
together is central to shareholder value.
As always at BHP, the health, safety and wellbeing of our people
remains our highest priority.
In December 2018, our colleague Allan Houston died at BMA’s
Saraji Mine in Queensland. He remains in our thoughts as do
his colleagues, family and friends. After a lengthy and thorough
investigation, we could not determine the direct cause of the
incident but the investigation identified several areas for
improvement, which we shared across the organisation.
There was a slight rise in total recordable injury frequency to
4.7 per million hours worked. However, we reduced the number
of events with the potential to cause a fatality by 7 per cent,
which is a critical indicator of our future safety performance
across our business. This result is positive, but there is more
we can and will do.
We have generated consistently strong operating cash flows over
the past few years and delivered a further US$17 billion in FY2019.
We used this cash to progress attractive growth projects, pay
down debt and deliver record cash returns to shareholders.
The final dividend declared for FY2019 was a record 78 US cents
per share – or US$3.9 billion in total. This is in addition to the
$US17 billion we already returned to shareholders during the year.
With the approval of the Ruby oil and gas development in August
2019, we now have six major projects under development. All of
these are on schedule and budget. We also had further exploration
success in copper and oil and are confident we have a rich set of
options to grow value in the future.
In July 2019, we announced a five-year US$400 million Climate
Investment Program to find the best technologies, investments
and solutions to reduce greenhouse gas emissions across our
value chain.
We are well positioned for future success. We have plans to
maximise the value of our assets through our transformation
programs and disciplined investment. We will invest in our culture
and capabilities so our workforce is more inclusive and diverse
and ready for the challenges of tomorrow. Their hard work has
secured a strong outcome for BHP this year and I thank them
for their energy and commitment.
Thank you also to our shareholders, suppliers, customers and
the communities in which we operate. We are a better company
because of your trust and support.
Our FY2019 financial performance from continuing operations
was strong. Higher prices and solid underlying performance
contributed to EBITDA of US$23 billion at a margin of 53 per cent.
Underlying attributable profit was US$9.5 billion.
Andrew Mackenzie
Chief Executive Officer
BHP Annual Report 2019 5
1
i
S
t
r
a
t
e
g
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
a
t
B
H
P
R
e
m
u
n
e
r
a
t
i
o
n
R
e
p
o
r
t
D
i
r
e
c
t
o
r
s
’
R
e
p
o
r
t
i
F
n
a
n
c
a
i
l
S
t
a
t
e
m
e
n
t
s
A
d
d
i
t
i
o
n
a
l
i
n
f
o
r
m
a
t
i
o
n
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
1.3 BHP at a glance: FY2019 performance summary
Safety is our top priority
We created value for the community
Disappointingly, our total recordable
injury frequency (TRIF) increased by
7%
from last year (1) (2)
We made a social investment of
US$93.5 million
to communities around the world (3)
4.4
in FY2018
4.7
in FY2019
Strong financial performance was achieved this year
Attributable profit (4) of
US$8.3 billion
Underlying EBITDA (5) (6) of
US$23.2 billion
US$10.0 billion
free cash flow (4) (6) in FY2019
US$ billion
US$ billion
US$ billion
10
7.5
5
2.5
0
-2.5
-5
-7.5
5
1
0
2
Y
F
6
1
0
2
Y
F
7
1
0
2
Y
F
8
1
0
2
Y
F
9
1
0
2
Y
F
For more information on alternative
performance measures, refer to section 1.12.4.
25
20
15
10
5
0
5
1
0
2
Y
F
6
1
0
2
Y
F
7
1
0
2
Y
F
8
1
0
2
Y
F
9
1
0
2
Y
F
14
12
10
8
6
4
2
0
5
1
0
2
Y
F
6
1
0
2
Y
F
7
1
0
2
Y
F
8
1
0
2
Y
F
9
1
0
2
Y
F
We created value for our shareholders We strengthened our balance sheet
Total dividends (7) of
235 US cents
And basic earnings per
ordinary share (4) of
160.3 US cents
We reduced our net debt (6) to
US$9.2 billion
in FY2019, a reduction of
US$16.9 billion in three years
(1) TRIF is calculated based on the number of recordable injuries per million hours worked.
Refer to section 1.5.2.
(2) FY2018 TRIF data includes Continuing operations and Discontinued operations (Onshore US assets).
FY2019 TRIF data includes Discontinued operations (Onshore US assets) to 28 February 2019
and Continuing operations.
(3) FY2019 social investment figure includes Discontinued operations (Onshore US assets)
to 31 October 2018 and Continuing operations.
(4) Includes data for Continuing operations and Discontinued operations for the financial years being reported.
(5) Includes data for Continuing operations for the financial years being reported.
(6) For more information on alternative performance measures, refer to section 1.12.4
(7) Includes a special dividend of 102 US cents which was paid from the proceeds from the disposal of Onshore US.
6 BHP Annual Report 2019
For more information about our financial
performance in FY2019, see section 5.
We continued to focus on productivity
Strong cost discipline over the past five years
has seen continued reduction in unit costs (1)
Western Australia
Iron Ore
unit costs (2)
Queensland
Coal
unit costs (2)
Conventional
petroleum
unit costs (2) (3)
Escondida
copper
unit costs (2) (4)
Since FY2014, we’ve reduced
unit costs by over
20%
across our major assets
In FY2019, we produced
FY2014
US$26.96
FY2014
US$84.06
FY2014
US$14.07
FY2014
US$1.16
FY2019
US$14.16
FY2019
US$69.44
FY2019
US$10.54
FY2019
US$1.14
Iron ore
238
million tonnes
Copper
1,689
kilotonnes
Petroleum
(3)
Coal
121
MMboe
70
million tonnes
0% year-on-year.
We produced
238 Mt in FY2018
4% year-on-year.
We produced
1,753 kt in FY2018
1% year-on-year.
We produced
120 MMboe in FY2018
3% year-on-year.
We produced
72 Mt in FY2018
Underlying EBITDA (5)
US$11.1 billion
Underlying EBITDA (5)
US$4.6 billion
Underlying EBITDA (5)
US$3.8 billion
Underlying EBITDA (5)
US$4.1 billion
Underlying
EBITDA (5) margin
65%
Underlying
EBITDA (5) margin
46%
Underlying
EBITDA (5) margin
64%
Underlying
EBITDA (5) margin
45%
Contribution to Group
Underlying EBITDA (5) (6)
48%
Contribution to Group
Underlying EBITDA (5) (6)
19%
Contribution to Group
Underlying EBITDA (5) (6)
16%
Contribution to Group
Underlying EBITDA (5) (6)
17%
(1) Based on average exchange rates for FY2019 of AUD/USD 0.72 and USD/CLP 673.
(2) Cash cost per pound, per tonne or per barrel (US$).
(3) Excludes data from Discontinued operations (Onshore US assets).
(4) Escondida copper unit costs have reduced from US$1.16/lb to US$1.14/lb despite a 32% copper concentrate grade decline since FY2014.
(5) For more information on alternative performance measures refer to section 1.12.4. For more details on commodity performance, refer to section 1.13.
(6) Percentage contribution to Group Underlying EBITDA, excluding Group and unallocated items.
BHP Annual Report 2019 7
1
i
S
t
r
a
t
e
g
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
a
t
B
H
P
R
e
m
u
n
e
r
a
t
i
o
n
R
e
p
o
r
t
D
i
r
e
c
t
o
r
s
’
R
e
p
o
r
t
i
F
n
a
n
c
a
i
l
S
t
a
t
e
m
e
n
t
s
A
d
d
i
t
i
o
n
a
l
i
n
f
o
r
m
a
t
i
o
n
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
1.3 BHP at a glance: What we do
BHP has been around for
134 years
We employ over
72,000
employees and contractors (1)
Who work in over
90
locations worldwide
In FY2019
We paid
US$9.1 billion
globally in taxes, royalties
and other payments
to governments (1)
BHP operations
Evaluation
1
and exploration
We invest in discovering
new resources, to meet
the needs of future
generations.
With a total economic
contribution of (1)
US$46.2 billion
We are investing
US$400 million
into a Climate Investment Program
to accelerate our efforts
to address climate change.
2
Development
We invest in studies, trials
and infrastructure with the
goal of creating the maximum
value from resources.
Extraction
3
and processing
We extract and process
commodities, safely
and sustainably.
Rehabilitation
4
and closure
We close our operations
through one or a combination
of rehabilitation, ongoing
management or – in
consultation with the
community – a transition
to an alternative use.
1
3
2
4
5
Commercial
We sell our products, procure suppliers,
organise freight and manage market
risks to maximise value.
5
(1) All figures include data for Continuing and Discontinued operations.
8 BHP Annual Report 2019
1.4 About BHP
1.4.1 Our strategy
At BHP, our strategy is to have the best capabilities, best commodities and best assets to create long-term
value and high returns.
Culture and capabilities
that enable the execution
of our business strategy
Best
culture and
capabilities
Best
commodities
Commodities
with high economic rent potential
that match our capabilities
Value and returns
Best assets
Assets
that are resilient through the cycle,
have embedded growth options
and match our capabilities
Driven by a commitment to transformation, capital discipline and social value
1
i
S
t
r
a
t
e
g
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
a
t
B
H
P
R
e
m
u
n
e
r
a
t
i
o
n
R
e
p
o
r
t
D
i
r
e
c
t
o
r
s
’
R
e
p
o
r
t
i
F
n
a
n
c
a
i
l
Our strategy maximises value and returns
We have a simple and diverse portfolio of tier one assets. They are
long life, low cost and expandable. To extract the most value and
the highest returns from our assets we apply our values and culture,
operate them safely and productively, and deploy technology.
This has worked for shareholders. Since 2016 we have:
• strengthened our balance sheet through a US$17 billion
reduction in net debt;
• reinvested US$27 billion in development options;
• importantly, returned more than US$29 billion to shareholders.
To maintain this track record, we must make the most of our portfolio
and develop options that secure success. Future success depends
not only on our commitment to capital discipline but also social
value, which is our contribution to our people, the environment
and communities. It informs the way in which we provide resources,
achieve commercial success and make our workplace safe. We have
a responsibility to produce strong commercial, sustainable and
social outcomes for our shareholders, communities and society.
This inspired us to refresh our purpose to acknowledge people as
the driving force behind our achievements and reflect our broader
contribution. For more detail on BHP’s purpose, refer to section 1.10.1.
Transformation
Our Transformation program will continue to simplify the way
we work, increase our workforce capability, establish innovative
partnerships and create more stable and predictable operations,
with the aim of unlocking more value. The Transformation
program includes:
• the BHP Operating System, which will change the way we work;
• World Class Functions, designed to simplify
and remove bureaucracy;
• Centres of Excellence that help us be at the forefront of change;
• Value Chain Automation, which will change the way we operate.
These will:
• improve operational stability;
• make a quantum shift in safety, performance and value;
• continue to increase productivity;
• establish flexibility to rapidly capture opportunities.
For more information on these
programs, see section 1.4.4.
Future options
We also have broad development options and exploration
licences in many of the world’s premier basins, which could
create significant shareholder value over the long term. These
options cover a range of risk, return and optionality metrics
and are diversified by commodity and geography.
S
t
a
t
e
m
e
n
t
s
A
d
d
i
t
i
o
n
a
l
i
n
f
o
r
m
a
t
i
o
n
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
BHP Annual Report 2019 9
10 BHP Annual Report 2019
1.4.2 Our Operating Model
We have a simple and diverse portfolio of tier one assets around the world, with low-cost options for future
growth and value creation.
Our assets are high quality and largely located in low-risk locations, with strong development potential.
Our Operating Model
Assets
Minerals Australia
Coal, copper, iron ore, nickel
Operated assets
Western Australia Iron Ore
Queensland Coal (BMA and BMC)
New South Wales Energy Coal
Olympic Dam
Nickel West
Minerals Americas
Coal, copper, iron ore, potash
Operated assets
Escondida
Pampa Norte
Jansen
Non-operated assets
Antamina
Cerrejón
Samarco
Petroleum
Petroleum
Operated assets
Shenzi
Angostura
Pyrenees
Macedon
Non-operated assets
Atlantis
Mad Dog
Bass Strait
North West Shelf
Commercial
Functions
Centres of Excellence
Leadership
In addition to having the right assets in the right commodities, we also create value in the way we operate our assets.
Our Operating Model allows us to leverage integrated systems and technology, replicate expertise and apply high standards
of governance and transparency.
Our Operating Model includes:
Assets:
Assets are a set of one or more geographically proximate operations (including open-cut mines, underground
mines and onshore and offshore oil and gas production and processing facilities). We produce a broad range
of commodities through these assets. Our operated assets include assets that are wholly owned and operated
by BHP and assets that are owned as a joint venture and operated by BHP. We also hold interests in assets that
are owned as a joint venture but are not operated by BHP.
Asset groups:
We group our assets into geographic regions to provide effective governance and replicate best practice,
technology and improvement initiatives in other parts of the business. Our oil and gas assets are grouped
together as one global Petroleum asset group, which allows us to share best practice and promote new
technologies across our portfolio.
Commercial:
Our Commercial function optimises value creation and minimises costs across our end-to-end supply chain.
It is organised around our core value chain activities – Sales and Marketing; Maritime and Supply Chain
Excellence; Procurement; and Warehousing Inventory and Logistics and Property – supported by short-
and long-term market insights, strategy and planning activities, and close partnership with our assets.
Centres of
Excellence:
We have established Centres of Excellence in the disciplines of maintenance and engineering, resource
engineering, projects and geoscience to develop organisational capability and best practice.
Functions:
Functions operate along global reporting lines to support all areas of the organisation. Functions have specific
accountabilities and expertise in areas such as finance, legal, governance, technology, human resources,
corporate affairs, health, safety and community.
Leadership:
Our Executive Leadership Team (ELT) is responsible for the day-to-day management of the Group and leading
the delivery of our strategic objectives.
We disclose financial and other performance primarily by commodity. This gives an insight into the nature and financial outcomes
of our business activities and allows us to compare our performance against industry peers.
BHP Annual Report 2019 11
1
i
S
t
r
a
t
e
g
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
a
t
B
H
P
R
e
m
u
n
e
r
a
t
i
o
n
R
e
p
o
r
t
D
i
r
e
c
t
o
r
s
’
R
e
p
o
r
t
i
F
n
a
n
c
a
i
l
S
t
a
t
e
m
e
n
t
s
A
d
d
i
t
i
o
n
a
l
i
n
f
o
r
m
a
t
i
o
n
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
1.4.3 Managing performance
Corporate planning
Our corporate planning process is designed to deliver on our
strategy, which is to have the best capabilities applied to a
portfolio of the best assets, in the best commodities, to create
long-term value and high returns.
Informed by our strategy, our annual corporate planning process
is critical to creating alignment across BHP. It guides the
development of plans, targets and budgets to help us decide
where to deploy our capital and resources.
Plans are assessed at the Group level to balance the goal of
maximising the value of our individual assets with the goal of
creating value and mitigating investment risks at the portfolio
level. We evaluate the range of investment opportunities and
aim to optimise the portfolio based on our assessment of risk,
returns and future optionality. We then develop a long-term
capital plan and guidance for the Group.
Assessment and monitoring
We review our portfolio against a constantly changing external
environment, to capture and manage emerging opportunities and
risks. Our strategy is cascaded through our planning processes.
Long-term scenario planning is used to identify the strategic
capabilities we need to be successful in our industry and to evaluate
the selection of our preferred commodities and portfolio of assets.
We seek to identify potential new business opportunities and to test
the robustness of our portfolio over a range of possible outcomes. We
use signals tracking to monitor key trends and events that inform our
strategic choices and to identify actions to manage emerging risks.
Capital discipline
We use our Capital Allocation Framework to assess the most
effective and efficient way to deploy capital. This helps us:
• maintain our plant and equipment to support safe and efficient
operations over the long term;
• keep our balance sheet strong to give us stability and flexibility
through the business cycle;
• reward our shareholders by paying out at least 50 per cent
of our Underlying attributable profit in dividends.
We then look at what would be the most valuable risk-adjusted use
for any excess capital that remains after these three priorities are
met and decide whether to:
• further reduce our debt;
• return more cash to shareholders through additional dividends
or share buy-backs;
• invest in growth, either through projects within our asset portfolio
or through exploration or acquisitions, provided the investment
will create more value, based on our assessment of
its return, risk and optionality, than a share buy-back.
Our Capital Allocation Framework
Case study:
Sale of Onshore US assets
and shareholder return program
In November 2018, we committed to return the
US$10.4 billion net proceeds from the sale of our Onshore
US assets to our shareholders. This included the A$7.3 billion
(US$5.2 billion) off-market buy-back of BHP Group Limited
shares that was completed in December 2018 (Off-Market
Buy-Back) and the payment of the US$5.2 billion special
dividend in January 2019 (Special Dividend).
The Board carefully considered how best to return the net
proceeds to our shareholders. In making this decision, we
applied our Capital Allocation Framework. With net debt
toward the lower end of our target range, we treated the net
proceeds as excess capital to be returned to shareholders.
The combination of the Off-Market Buy-Back and Special
Dividend took into account the large range of views
expressed by our shareholders, returned significant value
to all our shareholders and enabled the net proceeds to
be returned in a timely manner.
The Off-Market Buy-Back enabled the Group to repurchase
approximately 265.8 million BHP Group Limited shares at
a 14 per cent discount to the Market Price.(1) We believe
all shareholders benefited from the positive impact on
BHP’s return on equity, cash flow per share and earnings
per share from the reduced number of shares on issue.
The Special Dividend provided a significant cash distribution
to all shareholders, irrespective of whether they participated
in the Off-Market Buy-Back. In addition, the Off-Market
Buy-Back and the Special Dividend efficiently released
a significant amount of franking credits to BHP Group
Limited’s shareholders.
The successful completion of the shareholder return
program demonstrates our commitment to capital discipline
and to transparently apply our Capital Allocation Framework
for the benefit of all shareholders.
(1) Volume weighted average price of BHP Group Limited ordinary shares
on the Australian Securities Exchange over the five trading days up to
and including Friday 14 December 2018.
Operating productivity
Capital productivity
Net operating cash flow
Maintenance capital
Strong balance sheet
Minimum 50% payout ratio dividend
Excess cash
50
Balance sheet
Additional dividend amounts
Share buy-backs
Organic development
Acquisitions/(Divestments)
Maximise returns and value
12 BHP Annual Report 2019
1.4.4 Transformation overview
In FY2019, we progressed our transformation agenda to build our
culture, capability and technology. The program focuses on safety
improvement, simplification and value creation and comprises four
key components:
• The BHP Operating System is a new framework that guides
behaviour and practices, builds capability and promotes
continuous improvement;
• World Class Functions aims to make our functions more effective
and efficient, through a comprehensive approach to business
process reengineering;
• Centres of Excellence for maintenance and engineering, projects
and geoscience aim to develop organisational capability and best
practice in these disciplines;
• Value Chain Automation uses technology to automate
equipment, processes and decision-making and includes our
work relating to innovation at our first Innovation Centre in
Newman, Western Australia, where we plan to trial new ideas
to change how we operate.
Through these activities, we aim to build capability and a culture
that empowers our frontline to act on their ideas and harness
their ingenuity. Following are some highlights from FY2019.
BHP Operating System: Western Australia Iron Ore
Port operations
The BHP Operating System is a new way of working that will align
our teams to produce better safety and business performance.
It is a company philosophy that guides leadership behaviours
and practices to empower our teams, build capability and make
problem solving and improvement part of what we do every
day. Western Australia Iron Ore’s (WAIO) Port operations was
the first BHP Operating System pilot site to go live in July 2018.
The deployment of the BHP Operating System program has
focused on car dumper activities within production and
maintenance and shutdown teams at the Nelson Point port
operations, with an aim of promoting stable operations.
Throughout FY2019, the team at Nelson Point strengthened
frontline safety, improved performance and introduced cultural
improvements. Key achievements include:
• improving the car dumper ramp-down process 15.75 hours on
average ahead of schedule (compared to previously executed
ramp-down activity), through engaging the frontline and
introducing coordination measures to optimise activity time and
improve predictability;
• using standardised work principles for a car dumper’s ring rail
replacement to safely complete the task in a record of 174 hours
versus the previous execution of 225 hours. Key lessons will now
be applied to future ring rail replacements that are scheduled at
Nelson Point port;
• implementing a workplace organisation method known as ‘5S’
across the Port’s key areas that encourages teams to take
responsibility for workplace cleanliness, organisation and
arrangement, and improve standards on safety, productivity
and culture;
• introducing a system in which problems are easily identified
and people are given leadership support when required to solve
the issue.
The BHP Operating System was also deployed at WAIO’s Perth repair
centre, BHP Mitsubishi Alliance’s Caval Ridge and Peak Downs,
Olympic Dam, Escondida and by our Petroleum asset group.
BHP Annual Report 2019 13
1
i
S
t
r
a
t
e
g
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
a
t
B
H
P
R
e
m
u
n
e
r
a
t
i
o
n
R
e
p
o
r
t
D
i
r
e
c
t
o
r
s
’
R
e
p
o
r
t
i
F
n
a
n
c
a
i
l
S
t
a
t
e
m
e
n
t
s
A
d
d
i
t
i
o
n
a
l
i
n
f
o
r
m
a
t
i
o
n
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
In FY2019, BHP’s Innovation Centre implemented several
technology-based solutions, including:
• Live mine scheduling – a new capability that enables mine
schedulers to deliver faster and higher-quality schedules and
decisions for mine load and haul operations by analysing
disparate data sets consisting of real-time and contextualised
information. The successful application of live mine scheduling
at Eastern Ridge has led to scaling and deployment at Whaleback.
In FY2020, live mine scheduling will be scaled across all iron ore
operations, which is expected to result in better mining fleet
utilisation and visibility throughout the BHP iron ore supply chain.
• Real-time payload distribution display – a visual tool enabling our
digger operators to precisely and efficiently distribute and deposit
payload onto trucks. This technology is expected to improve
operators’ ability to accurately deposit the target payload onto
trucks, enabling lower equipment maintenance costs.
• Pedestrian avoidance technology – a video and audio detection
and alert system that provides forklift operators with 360-degree
detection of personnel near forklift machinery. This technology
is expected to reduce safety incidents that have previously
occurred due to poor visibility. Developed and tested at BHP
Innovation Centre’s Welshpool facility, pedestrian avoidance
technology was piloted at Eastern Ridge, Port and Nickel West
in July 2019.
1.4.5 Operations Services
Operations Services is an industry first and has been established
to create a stronger foundation from which to achieve high
performance. It has rapidly unlocked improvements in safety,
production and cost outcomes for Minerals Australia, while
simultaneously providing stability for Operations Services
employees and contributing to social value in the communities
where we operate. Operations Services is an important element
in transforming organisational capability and the way we work,
along with the BHP Operating System, the Maintenance and
Engineering Centre of Excellence, field leadership and technology.
The Australia-wide Operations Services workforce comprises
permanent employees in production, maintenance, shut downs
and some operational functions, with specific scopes of work
and accountabilities. Sites request Operations Services to deploy
teams to specific Operations Services for fixed terms to provide
production or maintenance services.
Operations Services is recruiting and training employees from a
range of backgrounds, including those who are new to the industry.
Through its innovative approach to recruitment and onboarding,
Operations Services has the highest proportion of female and
Indigenous employees of any BHP production asset. This has
contributed to the enhancement of organisational capability, with
consequent improvements in safety and productivity. Operations
Services offers job security, considerable skills training, flexible
work options and wide-ranging career prospects, ultimately
delivering more stability and higher performance than the
contractors they displace. Over 50 per cent of Operations Services
employees are from regional communities and the income
security that Operations Services provides is helping to support
greater local economic activity.
1.4.4 Transformation overview continued
World Class Functions: Making our functions more
effective and efficient
In response to BHP’s changing operating environment and drive
to increase efficiency, in recent years our global and regional
functions began undertaking large-scale change and
improvement efforts.
World Class Functions aims to simplify functional activity and
deliver sustainable first quartile performance benchmarked
against our peer group, by reducing functional costs and
increasing effectiveness both in terms of what our functional
teams do and how they do it.
Initiatives include renewing operating models for functions,
changing functional services, including how they are delivered,
as well as improving processes, tools and systems.
Maintaining our focus on culture and people will ensure
the outcomes delivered by World Class Functions are
embedded sustainably.
Centres of Excellence: Maintenance and Engineering
Centre of Excellence
We are developing Centres of Excellence for areas including
maintenance and engineering, resource engineering, projects
and geoscience.
The Maintenance and Engineering Centre of Excellence focuses
on defect elimination, excellence in maintenance planning and
scheduling, and embedding equipment strategies that improve
the way people work.
The Maintenance Centre of Excellence was established in FY2017
in Minerals Australia and was expanded into Minerals Americas
in FY2019. In August 2019, an engineering team was established
within the Maintenance Centre of Excellence and the centre
has since become the Maintenance and Engineering Centre
of Excellence.
The centre plans and schedules all maintenance work and
shutdowns across the business in a standardised way. It works in
partnership with our assets and Supply and Technology functions
to establish best practice equipment and supply chain strategies
that use advanced analytical and risk-based processes.
Asset performance management systems have been established
under the Maintenance and Engineering Centre of Excellence to
detect and predict potential failures early. Practices to eliminate
defects underpin our continuous improvement approach.
Maintenance costs across our fleets and fixed plant under the
Maintenance and Engineering Centre of Excellence are being
reduced over their lifecycle in Minerals Australia and Minerals
Americas, while equipment reliability and availability have improved.
In FY2019, the Maintenance and Engineering Centre of Excellence
saved over AUD$144 million in maintenance costs compared to
maintenance costs in FY2018, increased availability across critical
fleet by up to 5 per cent in some operations since its inception
(in FY2019 compared to FY2018), and improved our prediction
of a range of engine and brake system failures.
Value Chain Automation: Innovation Centre
Our first BHP Innovation Centre located at our Newman
operations in Western Australia is an important part of
our Value Chain Automation.
The Innovation Centre tests and de-risks new solutions and
innovations developed in extraction and mine processes to
allow technology to support continuous improvement across
all aspects of the BHP value chain.
This unique testing ground allows emerging technologies to
be proven in a controlled site-based environment, while new
ways of working and capability are developed to allow for
successful and rapid deployment and scaling of integrated
automation solutions.
14 BHP Annual Report 2019
1
i
S
t
r
a
t
e
g
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
a
t
B
H
P
R
e
m
u
n
e
r
a
t
i
o
n
R
e
p
o
r
t
D
i
r
e
c
t
o
r
s
’
R
e
p
o
r
t
i
F
n
a
n
c
a
i
l
S
t
a
t
e
m
e
n
t
s
A
d
d
i
t
i
o
n
a
l
i
n
f
o
r
m
a
t
i
o
n
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
BHP Annual Report 2019 15
1.4.6 Locations
BHP locations (includes non-operated operations)
27
25
29
26
28
30
13
17
2
6
22
5
4
20
3
21
13
17
1
19
23
12
33
32
18
14
15
11
9
8
7
24
10
31
16
16 BHP Annual Report 2019
Minerals Australia
Ref Country
Asset
Description
1
2
3
4
5
6
Australia
Australia
Australia
Australia
Australia
Australia
Olympic Dam
Underground copper mine, also producing uranium, gold and silver
Western Australia Iron Ore
Integrated iron ore mines, rail and port operations in the Pilbara region
of Western Australia
New South Wales Energy Coal
Open-cut energy coal mine and coal preparation plant in New South Wales
BHP Mitsubishi Alliance
Open-cut and underground metallurgical coal mines in the Queensland
Bowen Basin and Hay Point Coal Terminal
BHP Mitsui Coal
Nickel West
Two open-cut metallurgical coal mines in the Bowen Basin, Central Queensland
Integrated sulphide mining, concentrating, smelting and refining operation
in Western Australia
Ownership
100%
65 – 85%
100%
50%
80%
100%
Asset
Escondida
Pampa Norte
Antamina (1)
Samarco (1)
Cerrejón (1)
Jansen
Minerals Americas
Ref Country
7
8
9
Chile
Chile
Peru
10
Brazil
11
12
Colombia
Canada
Petroleum
Ref Country
13
Australia
Description
Ownership
Open-cut copper mine located in northern Chile
Consists of the Cerro Colorado and Spence open-cut mines, producing
copper cathode in northern Chile
Open-cut copper and zinc mine in northern Peru
Open-cut iron ore mines, concentrators, pipelines, pelletising facilities
and dedicated port
Open-cut energy coal mine with integrated rail and port operations
Our interest in potash is via development projects in the Canadian province
of Saskatchewan, where the Jansen Project is our most advanced
Asset
Description
Australia Production Unit
Offshore oil fields and gas processing facilities in Western Australia
and Victoria
14
15
16
17
18
US
Gulf of Mexico Production Unit
Offshore oil and gas fields in the Gulf of Mexico
Trinidad and Tobago
Trinidad and Tobago Production Unit Offshore oil and gas fields
Algeria
Australia
US
Algeria Joint Interest Unit (1)
Onshore oil and gas unit
Australia Joint Interest Unit (1)
Offshore oil and gas fields in Bass Strait and North West Shelf
Gulf of Mexico Joint Interest Unit (1)
Offshore oil and gas fields in the Gulf of Mexico
BHP principal office locations
Ref Country
19
20
21
22
23
24
25
26
27
Australia
Australia
Australia
Australia
Canada
Chile
China
India
Japan
28 Malaysia
29
Philippines
30 Singapore
31
32
33
UK
US
US
Location
Adelaide
Brisbane
Melbourne
Perth
Saskatoon
Santiago
Shanghai
New Delhi
Tokyo
Office
Minerals Australia office
Minerals Australia office
Global headquarters
Minerals Australia office
Minerals Americas office
Minerals Americas office
Corporate office
Corporate office
Corporate office
Kuala Lumpur
Global Asset Services Centre
Manila
Singapore
London
Houston
Washington DC
Global Asset Services Centre
Marketing and corporate office
Corporate office
Petroleum office
Corporate office
Copper
Iron Ore
Coal
Nickel
Potash
Petroleum
(1) Non-operated joint venture.
1
i
S
t
r
a
t
e
g
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
a
t
B
H
P
R
e
m
u
n
e
r
a
t
i
o
n
R
e
p
o
r
t
D
i
r
e
c
t
o
r
s
’
R
e
p
o
r
t
i
F
n
a
n
c
a
i
l
57.5%
100%
33.75%
50%
33.3%
100%
Ownership
39.99 – 90%
35 – 44%
45%
29.3%
12.5 – 50%
23.9 – 44%
S
t
a
t
e
m
e
n
t
s
A
d
d
i
t
i
o
n
a
l
i
n
f
o
r
m
a
t
i
o
n
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
BHP Annual Report 2019 17
1.5 Our performance
Key performance indicators
Our key performance indicators (KPIs) enable us to measure our
sustainable development and financial performance. These KPIs are
used to assess performance of our people throughout the Group.
Following BHP’s sale of the Onshore US assets, the contribution
of these assets to the Group’s results is presented in this Annual
Report as Discontinued operations.
For information on our approach to performance
and reward, refer to section 1.9.
For information on our overall approach to executive
remuneration, including remuneration policies and
remuneration outcomes, refer to section 3.
To enable more meaningful comparisons with prior year disclosures,
and in some cases to comply with applicable statutory requirements,
the data in section 1.5 has been presented to include Onshore US,
except for Underlying EBITDA. Footnotes to tables and infographics
indicate whether data presented in section 1.5 is inclusive or
exclusive of Onshore US.
For more information on the accounting treatment,
refer to section 5.
1.5.1 Financial KPIs
Underlying
attributable profit (1) (3)
US$ billion
10
9.1
8
6
4
2
0
5
1
0
2
Y
F
6
1
0
2
Y
F
7
1
0
2
Y
F
8
1
0
2
Y
F
9
1
0
2
Y
F
Underlying
EBITDA (2) (3)
US$ billion
Net operating
cash flows (1)
US$ billion
25
20
15
10
5
0
23.2
5
1
0
2
Y
F
6
1
0
2
Y
F
7
1
0
2
Y
F
8
1
0
2
Y
F
9
1
0
2
Y
F
20
16
12
8
4
0
17.9
5
1
0
2
Y
F
6
1
0
2
Y
F
7
1
0
2
Y
F
8
1
0
2
Y
F
9
1
0
2
Y
F
In FY2019, higher prices together with underlying improvements
in productivity generated strong cash flow, enabling us to reduce
net debt and increase our dividends.
Profit and earnings
Attributable profit of US$8.3 billion in FY2019 includes an exceptional
loss of US$0.8 billion (after tax), compared to an attributable profit
of US$3.7 billion, including an exceptional loss of US$5.2 billion (after
tax) in the prior period. The FY2019 exceptional loss is related to the
Samarco dam failure, partially offset by the reversal of provisions for
global taxation matters, which were resolved during the period.
Our Underlying attributable profit was US$9.1 billion
(FY2018: US$8.9 billion).
We reported Underlying EBITDA (continuing operations)
of US$23.2 billion (FY2018: US$23.2 billion), with higher prices,
favourable exchange rate movements and underlying
improvements in productivity (in total US$3.2 billion) offset by
the impacts of operational outages, grade and field decline,
higher strip ratios, inflation, the impact of weather and other
net movements (in total US$3.2 billion).
Cash flow and balance sheet
Our Net operating cash flows (continuing operations) of
US$17.4 billion in FY2019 (FY2018: US$17.6 billion) reflects EBITDA
results and higher Australian and Chilean income tax payments
in FY2019.
Our balance sheet remains strong with net debt at US$9.2 billion
at FY2019 year-end (FY2018: US$10.9 billion), a reduction of
US$17 billion over three years. The reduction of US$1.7 billion
in FY2019 reflects strong free cash generation, which includes
proceeds received from the sale of Onshore US, partially offset
by returns to shareholders of US$16.6 billion, dividends paid to
non-controlling interests of US$1.2 billion and an unfavourable
non-cash fair value adjustment of US$0.4 billion related to
interest rate and exchange rate movements.
Our gearing ratio (3) in FY2019 was 15.1 per cent
(FY2018: 15.3 per cent).
(1) Includes data for Continuing and Discontinued operations for the financial years being reported.
(2) Excludes data from Discontinued operations for the financial years being reported.
(3) For more information on alternative performance measures, refer to section 1.12.4.
18 BHP Annual Report 2019
Reconciling our financial results to our key performance indicators
Profit
Earnings
Cash
Measure:
Profit after taxation from
Continuing and
Discontinued operations
US$M
9,185
Profit after taxation from
Continuing and
Discontinued operations
US$M
9,185
Net operating cash flows
from Continuing operations
US$M
17,397
Made up of:
Profit after taxation
Profit after taxation
Adjusted for:
Exceptional items
before tax (1)
Tax effect of
exceptional items
1,060
(242)
Exceptional items
before taxation
Tax effect of
exceptional items
Exceptional items
attributable to
BHP shareholders
Profit after taxation
attributable to
non-controlling interests
Depreciation and
amortisation excluding
exceptional items
818 Impairments of property,
plant and equipment,
financial assets and
intangibles excluding
exceptional items
(879) Net finance costs excluding
exceptional items
Taxation expense excluding
exceptional items
Loss after taxation from
Discontinued operations
Cash generated by the Group’s
consolidated operations, after
dividends received, interest,
taxation and royalty-related taxation.
It excludes cash flows relating to
investing and financing activities
1,060 Net operating cash flows
from Discontinued
operations
474
(242)
5,829
264
956
5,771
335
To reach
our KPIs
Why do
we use it?
Underlying
attributable profit
9,124 Underlying
EBITDA
23,158 Net operating
cash flows
17,871
Underlying attributable profit allows the
comparability of underlying financial
performance by excluding the impacts of
exceptional items and is a performance
indicator against which short-term incentive
outcomes for our senior executives are
measured. It is also the basis on which our
dividend payout ratio policy is applied.
Underlying EBITDA is the key alternative
performance measure that management
uses internally to assess the performance
of BHP’s segments and make decisions
on the allocation of resources and, in
our view, is more relevant to capital
intensive industries with long-life assets.
Net operating cash flows provide insights
into how we are managing costs and
increasing productivity across BHP.
Capital management
Free cash flow (continuing operations), which is net operating
cash flows less net investing cash flows, was US$10.0 billion
(FY2018:US$12.5 billion) reflecting a 12 per cent increase in capital
and exploration expenditure to US$7.6 billion in FY2019 in line
with guidance. The increase in capital and exploration expenditure
included continued investment in high-return latent capacity
projects, and investment in South Flank, Mad Dog Phase 2 and
the Spence Growth Option in FY2019. Capital and exploration
expenditure guidance is unchanged at below US$8 billion per
annum for FY2020, subject to exchange rate movements.
Our dividend policy provides for a minimum 50 per cent payout
of Underlying attributable profit at every reporting period.
The minimum dividend payment for the second half of FY2019
was 53 US cents per share. Recognising the importance of cash
returns to shareholders, the Board determined to pay an
additional amount of 25 US cents per share, taking the final
dividend to a record 78 US cents per share. In total, US$17.1 billion
of returns to shareholders have been determined for FY2019
including dividends of US$11.9 billion (FY2019: US$2.35 per share;
FY2018: US$1.18 per share), which includes a special dividend
of US$5.2 billion (US$1.02 per share) and a share buy-back of
US$5.2 billion. These returns are covered by total free cash flows
generated of US$20.5 billion including US$10.4 billion of net
proceeds from the sale of Onshore US.
BHP Annual Report 2019 19
1
i
S
t
r
a
t
e
g
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
a
t
B
H
P
R
e
m
u
n
e
r
a
t
i
o
n
R
e
p
o
r
t
D
i
r
e
c
t
o
r
s
’
R
e
p
o
r
t
i
F
n
a
n
c
a
i
l
S
t
a
t
e
m
e
n
t
s
A
d
d
i
t
i
o
n
a
l
i
n
f
o
r
m
a
t
i
o
n
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
1.5.2 Non-financial KPIs
Capital management KPIs
Sustainability KPIs
Total shareholder return
Long-term credit rating
Total recordable injury frequency (1)
Per million hours worked
5.0
4.0
3.0
2.0
1.0
0
4.7
5
1
0
2
Y
F
6
1
0
2
Y
F
7
1
0
2
Y
F
8
1
0
2
Y
F
9
1
0
2
Y
F
Total recordable injury frequency (TRIF)
performance increased by 7 per cent to
4.7 per million hours worked, compared
to 4.4 in FY2018. This was due to an
increase in injuries in both Minerals
Australia and Minerals Americas.
There was one fatality at our operated
assets in FY2019.
% change from previous year
(3-month average)
2019 A, A2
2018
2017
2016
2015
A, A3
A, A3
A, A3
A+, A1
21.5
50
40
30
20
10
0
-10
-20
-30
-40
-50
5
1
0
2
Y
F
6
1
0
2
Y
F
7
1
0
2
Y
F
8
1
0
2
Y
F
9
1
0
2
Y
F
Total shareholder return (TSR) shows
the total return to the shareholder during
the financial year. It combines both
movements in share prices and dividends
paid (which are assumed
to be reinvested).
During FY2019, TSR increased as a
result of both the BHP share price
and dividends paid, resulting in a
21.5 percentage change from FY2018.
From 1 July 2014 to 30 June 2019, BHP
underperformed the sector peer group
by 9.3 per cent and underperformed
the Index TSR by 35.3 per cent.
Credit ratings are forward-looking
opinions on credit risk. Standard & Poor’s
and Moody’s credit ratings express the
opinion of each agency on the ability
and willingness of BHP to meet its
financial obligations in full and on time.
A credit rating is not a recommendation
to buy, sell or hold securities and may
be subject to suspension, reduction or
withdrawal at any time by an assigning
rating agency. Any rating should
be evaluated independently of any
other information.
Standard & Poor’s credit rating of BHP
remained at the A level throughout
FY2019. It affirmed this rating on 23 July
2019. Moody’s upgraded its credit rating
of BHP from A3 to A2 on 31 October 2018
with a stable outlook thereafter in FY2019.
For more information on our
approach to capital discipline,
refer to section 1.4.3.
For more information on our
liquidity and capital resources,
refer to section 1.12.3
(1) Total recordable injury frequency (TRIF) is an indicator in highlighting broad personal injury trends and is calculated based on the number of recordable injuries
per million hours worked. TRIF includes work-related events occurring outside our operated assets from FY2015. In FY2015, we expanded our definition of
work-related activities to include events that occur outside our operated assets where we have established the work to be performed and can set and verify
the health and safety standards, such as an employee driving in a BHP vehicle between two sites for work. TRIF does not include events at non-operated
joint ventures. FY2015 to FY2018 TRIF data includes Continuing operations and Discontinued operations for the financial years being reported. FY2019 data
includes Discontinued operations (Onshore US assets) to 28 February 2019 and Continuing operations.
20 BHP Annual Report 2019
Sustainability KPIs
High potential injury events (1) (2)
Scope 1 and 2 GHG emissions (3)
Millions of tonnes CO2-e
Social investment (9)
US$ million
100
80
60
40
20
0
50.0
6
1
0
2
Y
F
7
1
0
2
Y
F
8
1
0
2
Y
F
9
1
0
2
Y
F
8
1
0
2
Y
F
This year we continue to report on high
potential injuries, which are injury events
where there was the potential for a
fatality. We are currently able to report
data for the last four financial years.
High potential injury trends remain a
primary focus to assess progress against
our most important safety objective:
to eliminate fatalities. High potential
injuries declined by 7 per cent from
FY2018 due to reductions at Western
Australia Iron Ore, Olympic Dam
and Potash.
250
200
150
100
50
0
16.6
76.9
5
1
0
2
Y
F
6
1
0
2
Y
F
7
1
0
2
Y
F
8
1
0
2
Y
F
9
1
0
2
Y
F
Contributions to BHP Group
supported charities
Contributions and administrative costs
Our target is to invest not less than
1 per cent of our pre-tax profit to
contribute to improved quality of life
in communities where we operate and
support achievement of the United
Nations Sustainable Development Goals.
Our voluntary social investment in FY2019
totalled US$93.5 million, consisting of
US$55.7 million in direct community
development projects and donations,
US$8.9 million equity share to non-
operated joint venture programs, a
US$16.57 million donation to the BHP
Foundation and US$4 million to the
Matched Giving and community small
grants programs. Administrative costs
to facilitate social investment activities
at our assets totalled US$6.27 million and
US$2 million supported the operations
of the BHP Foundation.
40
30
20
10
0
1.7
1.7
0.0
0.5
00.0
5.8
8.8
5.9
8.9
4.9
9.3
5
1
0
2
Y
F
6
1
0
2
Y
F
7
1
0
2
Y
F
8
1
0
2
Y
F
9
1
0
2
Y
F
Scope 1 (4)
Scope 2 (5)
Onshore US
FY2017 baseline (6)
Our five-year greenhouse gas (GHG)
emissions reduction target, which took
effect from 1 July 2017, is to maintain our
total operational emissions in FY2022 at
or below FY2017 levels(7) while we continue
to grow our business. Our target builds
on our success in achieving our previous
five-year target.
Our combined Scope 1 and Scope 2
emissions (operational emissions) in
FY2019 totalled 14.7 million tonnes of
carbon dioxide equivalent (CO2-e),
3 per cent below our FY2017 target
baseline(8). This decrease is primarily due
to a change in the electricity emissions
factor for Minerals Americas that resulted
from the interconnection of Chile’s
northern grid system, which is mainly
fossil fuel-based, and southern grid
system, which has a higher proportion
of renewable energy.
We have also set the longer-term goal
of achieving net-zero operational GHG
emissions in the latter half of this century,
consistent with the Paris Agreement.
In order to set the trajectory towards
achieving that goal, in FY2020 we intend
to develop a medium-term target for
operational emissions. We also intend to set
public goals related to Scope 3 emissions.
For information on our approach to
health and safety, and our performance,
refer to section 1.10.2 and 1.10.3.
For more information on our Scope 1
and 2 GHG emissions, as well as
Scope 3 emissions in our value chain,
refer to section 1.10.8.
For information on our voluntary social
investment, refer to section 1.10.5.
(1) High potential injuries (HPI) are recordable injuries and first aid cases where there was the potential for a fatality. FY2016 to FY2018 HPI data includes Continuing
and Discontinued operations (Onshore US assets) for the financial years being reported. FY2019 HPI data includes Discontinued operations (Onshore US assets)
to 28 February 2019 and Continuing operations.
(2) FY2018 data has been adjusted due to the reclassification of an event after the reporting period.
(3) Scope 1 and 2 emissions have been calculated on an operational control basis in accordance with the GHG Protocol Corporate Accounting and Reporting Standard.
Comparisons of data over the period FY2015 to FY2016 should be made with consideration of the divestment of South32 during FY2015 (FY2015 data excludes
emissions from South32 operations between the date of the divestment and 30 June 2015). Data over the period FY2017 to FY2019 is displayed with Onshore US
emissions shown separately for comparability (12 months of emissions in FY2017 and FY2018, and four months of emissions in FY2019 prior to divestment of this asset).
(4) Scope 1 refers to direct GHG emissions from operated assets.
(5) Scope 2 refers to indirect GHG emissions from the generation of purchased electricity and steam that is consumed by operated assets (calculated using the
market-based method).
(6) FY2017 is the base year for our current five-year GHG emissions reduction target, which took effect from FY2018. The FY2017 baseline has been adjusted for
the divestment of our Onshore US assets to ensure ongoing comparability of performance. The baseline will continue to be adjusted for any material acquisitions
and divestments based on GHG emissions at the time of the transaction; carbon offsets will be used as required.
(7) FY2017 baseline will be adjusted for any material acquisitions and divestments based on GHG emissions at the time of the transaction. Carbon offsets will be used as required.
(8) Calculated on a Continuing operations basis. The FY2017 baseline has been adjusted for the divestment of our Onshore US assets to ensure ongoing comparability
of performance.
(9) Our voluntary social investment is calculated as 1 per cent of the average of the previous three years’ pre-tax profit. Expenditure includes BHP’s equity share for operated
and non-operated joint ventures, and comprises cash, administrative costs and costs to facilitate the operation of the BHP Foundation. FY2015 to FY2018 social
investment figures include Continuing operations and Discontinued operations for the financial years being reported. FY2019 social investment figure includes
Discontinued operations (Onshore US assets) to 31 October 2018 and Continuing operations.
BHP Annual Report 2019 21
1
i
S
t
r
a
t
e
g
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
a
t
B
H
P
R
e
m
u
n
e
r
a
t
i
o
n
R
e
p
o
r
t
D
i
r
e
c
t
o
r
s
’
R
e
p
o
r
t
i
F
n
a
n
c
a
i
l
S
t
a
t
e
m
e
n
t
s
A
d
d
i
t
i
o
n
a
l
i
n
f
o
r
m
a
t
i
o
n
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
1.5.3 Our contribution in FY2019
In FY2019, our total direct economic contribution was US$46.2 billion, including payments to suppliers,
wages and employee benefits, dividends and other payments to shareholders, taxes and royalties, as well
as voluntary social investment across the communities where we operate.
Of this, we paid US$9.1 billion globally in taxes, royalties and
other payments to governments. Our global adjusted effective
tax rate was 36 per cent. Including royalties, this increases to
44.7 per cent. This significant source of taxation revenue assists
governments to provide essential services to their citizens and
invest in their communities for the future.
During FY2019, we paid US$18 billion to shareholders, lenders
and investors.
As well as our direct economic contribution, we invested
US$7.6 billion into our business through the purchase of property,
plant and equipment and expenditure on exploration. This
investment typically has a multiplier effect by creating new jobs
within our operations and also for the suppliers on whom they
rely. For example, investments that were approved during FY2019
included: the investment of approximately A$200 million (BHP share)
in the development of the West Barracouta gas field in Bass Strait,
Victoria, Australia, US$696 million (BHP share) in funding to
develop the Atlantis Phase 3 project in the US Gulf of Mexico
and US$256 million in funding to drill an additional appraisal well
(3DEL) and perform further studies in the Trion field in Mexico.
Total economic contribution in FY2019
Suppliers
Payments made to our
suppliers for the purchase
of utilities, goods and services
US$15.0b
Employees
Employee expenses for salary,
wages and incentives
US$4.0b
Shareholders, lenders
and investors
Dividend payments
Share buy-backs
Interest payments
Total payments
to governments
Income taxes
Royalty-related income taxes
Royalties
Other payments to governments
Social investment (1) (2)
Contributions and
administrative costs
US$18.0b
US$9.1b
US$93.5m
Total economic
contribution
US$46.2b
Figures are rounded to the nearest decimal point. All figures include Continuing and Discontinued operations.
(1) Calculated on an accrual basis.
(2) Total social investment includes community contributions and associated administrative costs (including US$2.0 million to facilitate the operation of the BHP
Foundation) and BHP’s equity share in community contributions for operated and non-operated joint ventures. Our social investment target is not less than 1 per cent
of pre-tax profits invested in community programs, including cash and administrative costs, calculated on the average of the previous three years’ pre-tax profit.
22 BHP Annual Report 2019
1.6 Our operating environment
1.6.1 Market factors and trends
We produce raw materials that are essential to modern life.
Our success is tied to the sustainable growth of emerging and
developed economies and, at the same time, the commodities
we produce are integral to driving that growth.
As a result, our performance is influenced by a wide range of
factors that drive a complex relationship between supply and
demand. Our diverse portfolio of long-life, low-cost assets allows
us to adapt to the changing needs of our customers and bring
people and resources together to build a better world.
Key trends
Our long-term view for our markets remains positive. Population
growth and rising living standards are expected to continue to
generate demand for energy, metals and fertilisers for decades
to come. New demand centres will emerge where the twin levers
of industrialisation and urbanisation are still immature today.
Technology continues to advance, creating both opportunities
and threats. International responses to climate change will evolve.
Against that backdrop, we are confident we have the right assets
in the right commodities, with demand diversified by end-use
sector and geography. Our exploration and acquisition efforts are
critical to maintaining that advantage, as they create a pipeline of
products to meet future demand (see section 1.6.3). Exploration
is inherently risky (see section 1.6.4), as the geoscience used for
locating and accessing resources is complex and uncertain.
Exploration and acquisition are also subject to political,
infrastructure and other risks that can impact the accessibility
of resources.
Policy uncertainty
Policy uncertainty heightened during FY2019.
The escalation of US-China trade tensions
and other trade and technology transfer
inhibiting policies, along with an increasingly
unpredictable policy formation process in some
major economies, serve to reduce consumer
confidence and business certainty. By extension,
this affects investment and jobs.
Mixed sentiments
Business and investor confidence have
been hit by policy uncertainty, feeding
back into commodity markets.
New supply
New supply, particularly of copper
and petroleum, is expected to
be required as demand grows
and current resources are depleted.
Sustainable productivity rewarded
As industry-wide costs rise, disciplined producers
are likely to see margin benefits from accumulated
investment in sustainable productivity gains.
Growth in population, wealth
Demand for metals, energy and fertiliser is
expected to increase to meet the needs of
the world’s growing population and rising
living standards.
Short
term
Medium
term
Long
term
Modest economic growth
While they remain in place, protectionism and
political uncertainty lower the achievable ceiling
for global economic growth.
Prudently cautious
The operating environment is complex, with
uncertainty and volatility expected to be high.
Steeper cost curves
The marginal cost of producing some commodities
is likely to rise, particularly for oil and copper, as
existing resources deplete and new resources
come from lower-quality deposits that are more
costly to access.
Emerging Asia
China still offers rich opportunities due to its
large-scale, ongoing urbanisation and the Belt and
Road Initiative, despite its ongoing structural shift
away from manufacturing towards services. India has
significant potential for sustained high growth,
along with populous South East Asia.
Electrification of transport
Electrification of transport creates both risks
and opportunities for our portfolio. Demand for
non-ferrous metals has potential upside, but oil
demand could face headwinds.
Decarbonisation of power
The move towards a low-carbon economy has the
potential to drive significant change. Environmental
and risk concerns will drive increasing diversification
of national energy sources.
Biosphere stewardship
Unsustainable land and water use and biodiversity
loss are a danger to long-run living standards.
Leading stewardship in these areas is a key vehicle
for creating social value.
BHP Annual Report 2019 23
1
i
S
t
r
a
t
e
g
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
a
t
B
H
P
R
e
m
u
n
e
r
a
t
i
o
n
R
e
p
o
r
t
D
i
r
e
c
t
o
r
s
’
R
e
p
o
r
t
i
F
n
a
n
c
a
i
l
S
t
a
t
e
m
e
n
t
s
A
d
d
i
t
i
o
n
a
l
i
n
f
o
r
m
a
t
i
o
n
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
1.6.1 Market factors and trends continued
Key geographies
Our customers are geographically diverse. We have structured our business to meet changing demands as global market dynamics shift.
Developments in a particular country can affect the demand for our products in that country and in any countries that supply goods for
import to that country.
China
China is the largest consumer of our commodities, accounting for roughly half of our sales. As the largest manufacturer and exporter in
the world and the second-largest importer, China’s performance is also a significant factor in the health of the global economic system.
China’s GDP growth in the short term is expected to remain steady. Growth is expected to slow modestly in CY2019 and CY2020 to
the range of 6 per cent to around 6 and a quarter per cent. This reflects the likely negative impact of US trade protection on the export
sector as well as an appropriately calibrated countervailing domestic policy response.
In our view, China’s policymakers are likely to continue to seek a balance between pursuing reform and maintaining macroeconomic
and financial stability. We expect a continuation of current efforts to reduce debt and deal with housing inflation.
In the long term, we expect China’s economic growth to slow progressively as the working age population falls and the capital stock
matures, with productivity reforms offsetting these impacts to some degree.
China’s economic structure is expected to continue to move from industry to services, and growth drivers shift from investment and
exports towards consumption. This structural change would likely produce a less volatile underlying growth rhythm in the long run.
United States
As both a major producer and consumer of our products, the United States is important to our performance. With most of our
transactions denominated in US dollars, fluctuations in the dollar also influence our performance.
The US performed strongly in CY2018 with a significant boost from the passing of the Tax Cuts and Jobs Act reducing the corporate
tax rate from 35 per cent to 21 per cent. However, near-term prospects are less certain as the expansionary impact of tax cuts will
progressively fade and trade policies remain unpredictable.
With the rise of US-China trade tensions, protectionist policies could hurt consumer purchasing power and productivity growth.
Purchasing power is reduced through higher prices for imported goods and domestic goods with imported components. Reduced
competition and the unintended consequences of restrictive migration policies on the free flow of world-class talent could dent
productivity growth. We note that the true costs of protectionism, particularly diminished consumer purchasing power, have not
yet been fully felt by US households and businesses.
Japan
Japan’s demographics (ageing population and low birth rate) and its public debt burden are constraints on long-term growth.
Without population, immigration and microeconomic reform, we expect that growth would likely stagnate.
The Japanese economy has slowed and we expect growth to be modest next year. Beyond the boost provided by the Tokyo Olympics,
in the medium term, with monetary and fiscal policy proving ineffective at spurring domestic demand, any sustained lift in Japanese
growth would likely come from external sources.
Eurozone
In Europe, economic conditions have softened. A material slowdown in the bellwether auto sector has weighed on the economy,
and rising political and policy uncertainty, at both a national and regional level, have hurt business confidence.
Significant macroeconomic reform is required in Europe’s southern regions to prevent longer-run stagnation. In the more
internationally competitive northern regions, lower savings rates would boost growth at home and help to rebalance demand within
the common currency zone.
India
In India, we believe growth prospects are solid. India’s short-term outlook seems positive, driven by consumer demand. Economic
reform that boosts the supply of basic infrastructure is critical to India’s ability to take advantage of its demographic profile and
successfully urbanise.
Progress on key reforms, including GST, real estate regulation and insolvency resolution, has been encouraging. The strong
performance of the incumbent government of Prime Minister Narendra Modi provides a basis for the pursuit of further economic
reforms in his second term.
Signposts on India expanding its resource and energy footprint have been encouraging. It is now the world’s second-largest crude
steel producer, the second-largest incremental contributor to global oil demand growth, a top-five potash importer and an increasingly
significant consumer of copper.
Exchange rates
We are exposed to exchange rate transaction risk on foreign currency
sales and purchases. Operating costs and costs of locally sourced
equipment are influenced by fluctuations in local currencies, primarily
the Australian dollar and Chilean peso. The majority of our sales are
denominated in US dollars and we borrow and hold surplus cash
predominately in US dollars. Those transactions and balances provide
no foreign exchange exposure relative to the US dollar presentation
currency of the Group.
The US dollar broadly increased in value during FY2019 against our
main local currencies.
We are also exposed to exchange rate translation risk in relation to
our foreign currency denominated monetary assets and liabilities,
including certain debt and other long-term liabilities.
Interest rates
We are exposed to interest rate risk on our outstanding borrowings
and investments. Our policy on interest rate exposure is to pay on
a US dollar floating interest rate basis.
Our earnings are sensitive to changes in interest rates on the
floating component of BHP’s borrowings. Our main exposure is
to the three-month US LIBOR benchmark, which decreased by
two basis points from 2.34 per cent at 30 June 2018 to 2.32 per cent
at 30 June 2019.
24 BHP Annual Report 2019
1.6.2 Commodity performance overview
Commodity prices
The following table shows the prices for our most significant commodities for the years ended 30 June 2019, 2018 and 2017.
These prices represent selected quoted prices from the relevant sources as indicated and will differ from the realised prices
due to differences in quotation periods, quality of products, delivery terms and the range of quoted prices that are used for
contracting sales in different markets.
For information on realised
prices, refer to section 1.13.
Year ended 30 June
Natural gas Asian Spot LNG (1) (US$/MMBtu)
Crude oil (Brent) (2) (US$/bbl)
Ethane (3) (US$/bbl)
Propane (4) (US$/bbl)
Butane (5) (US$/bbl)
Copper (LME cash) (US$/lb)
Iron ore (6) (US$/dmt)
Metallurgical coal (7) (US$/t)
Energy coal (8) (US$/t)
Nickel (LME cash) (US$/lb)
2019
Closing
2018
Closing
2017
Closing
2019
Average
2018
Average
2017
Average
2019 vs 2018
Average (9)
4.8
66.1
7.1
18.9
20.6
2.7
118.0
193.5
68.8
5.7
10.3
77.9
14.7
39.3
45.9
3.0
64.5
199.0
117.3
6.8
5.5
47.4
10.3
25.1
30.8
2.7
63.0
148.5
82.5
4.2
8.1
69.0
13.4
31.5
37.4
2.8
80.1
204.7
99.4
5.6
8.5
63.6
11.0
36.2
41.0
3.1
69.0
203.0
100.2
5.6
6.4
49.6
9.5
24.9
33.3
2.4
69.5
190.4
80.5
4.6
-5%
9%
21%
-13%
-9%
-9%
16%
1%
-1%
-1%
(1) Platts Liquefied Natural Gas Delivery Ex-Ship (DES) Japan/Korea Marker – typically applies to Asian LNG spot sales.
(2) Platts Dated Brent – a benchmark price assessment of the spot market value of physical cargoes of North Sea light sweet crude oil.
(3) OPIS Mont Belvieu non-Tet Ethane – typically applies to ethane sales in the US Gulf Coast market.
(4) OPIS Mont Belvieu non-Tet Propane – typically applies to propane sales in the US Gulf Coast market.
(5) OPIS Mont Belvieu non-Tet Normal Butane – typically applies to butane sales in the US Gulf Coast market.
(6) Platts 62% Fe Cost and Freight (CFR) China – used for fines.
(7) Platts Low-Vol hard coking coal Index FOB Australia – representative of high-quality hard coking coals.
(8) GlobalCoal FOB Newcastle 6,000kcal/kg NCV – typically applies to coal sales in the Asia Pacific market.
(9) Due to rounding, immaterial differences in numbers may exist.
Impact of changes to commodity prices
The prices we obtain for our products are a key driver of value for BHP. Fluctuations in these commodity prices affect our results,
including cash flows and asset values. The estimated impact of changes in commodity prices in FY2019 on our key financial
measures is set out in the following table.
US$1/bbl on oil price
US¢1/lb on copper price
US$1/t on iron ore price
US$1/t on metallurgical coal price
US$1/t on energy coal price
US¢1/lb on nickel price
Impact on profit
after taxation
from Continuing
operations (US$M)
Impact on
Underlying
EBITDA
(US$M)
29
21
154
26
12
1
44
30
221
37
18
2
BHP Annual Report 2019 25
1
i
S
t
r
a
t
e
g
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
a
t
B
H
P
R
e
m
u
n
e
r
a
t
i
o
n
R
e
p
o
r
t
D
i
r
e
c
t
o
r
s
’
R
e
p
o
r
t
i
F
n
a
n
c
a
i
l
S
t
a
t
e
m
e
n
t
s
A
d
d
i
t
i
o
n
a
l
i
n
f
o
r
m
a
t
i
o
n
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
1.6.3 Exploration
Our exploration program is focused on conventional petroleum and copper in order to replenish
our resource base and enhance our portfolio. The purpose is to generate attractive, low-cost,
value-accretive options by leveraging our competitive strengths.
In Mexico, we became the first international operator to drill a well
in the Mexican deepwater with the Trion-2DEL appraisal well,
which was spud on 15 November 2018 and encountered oil in line
with expectations. This was followed by a downdip sidetrack that
encountered oil and water, as predicted, further appraising the
field and delineating the resource. Following the recent results in
the Trion block, an additional appraisal well (3DEL) was approved
and spud on 9 July 2019. Based on preliminary results, the well
encountered oil in the reservoir’s up-dip from all previous well
intersections. Evaluation and analysis is ongoing.
During FY2019, we acquired the world’s first deepwater exploration
ocean bottom node seismic survey in the western US Gulf of Mexico.
The acquisition survey and node recovery have been completed
and will be incorporated into our ongoing analysis, which we will
continue to progress over the next 18 months. This will provide
key information to inform the risk of prospects in the area.
For more information on conventional
petroleum exploration, refer to section 1.13.1.
Western Australia
South Australia
During FY2019, our conventional petroleum exploration program
accessed a new acreage position in the Orphan Basin in Canada,
opened a new gas province in northern offshore Trinidad and
Tobago, drilled the first well in deepwater Mexico operated by
an international oil company and completed the world’s first
deepwater exploration ocean bottom node seismic survey in the
western US Gulf of Mexico. BHP tested nine opportunities with the
drill bit. We appraised Trion, and discovered gas offshore in both
the north and south deepwater regions of Trinidad and Tobago.
Our copper exploration program is at an earlier stage where we
continue to seek, secure and test concessions in regions such
as Ecuador, Canada, southwestern United States, South Australia,
Chile and Peru.
Exploration in FY2019
Conventional petroleum
In FY2019, we matured and expanded our exploration portfolio. We
were successful in our bid to acquire a 100 per cent participating
interest in, and operatorship of, two exploration licence agreements
for blocks 8 and 12 in the Orphan Basin, offshore Eastern Canada.
The drilling and seismic work required by the exploration work
programs spans over a six-year term under the licence agreements.
In Trinidad and Tobago, BHP has northern and southern deepwater
licences. In our northern licences, Bongos-2 spud in July 2018 and
found gas, opening a new play. This was followed by three additional
exploration wells, Bele-1, Tuk-1 and Hi-Hat-1, in the first half of CY2019
that all successfully encountered gas. Technical work is underway
to assess further exploration targets and commercial options for
the northern gas play. In our southern licences, we drilled Victoria-1
and Concepcion-1 to further assess the commercial potential of the
Magellan field play. Victoria-1 encountered gas while Concepcion-1
did not encounter commercial hydrocarbons.
BHP exploration regions
Northern Canada
Eastern Canada
South West US
Gulf of Mexico (US)
Gulf of Mexico (Mexico)
Barbados
Trinidad and Tobago
Ecuador
Peru
Chile
Petroleum exploration regions
Copper exploration regions
26 BHP Annual Report 2019
1
i
S
t
r
a
t
e
g
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
a
t
B
H
P
R
e
m
u
n
e
r
a
t
i
o
n
R
e
p
o
r
t
D
i
r
e
c
t
o
r
s
’
R
e
p
o
r
t
i
F
n
a
n
c
a
i
l
S
t
a
t
e
m
e
n
t
s
A
d
d
i
t
i
o
n
a
l
i
n
f
o
r
m
a
t
i
o
n
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
Copper
Copper exploration is focused on identifying and gaining access
to new search spaces to test the best targets capable of delivering
tier one deposits while we maintain research and technology
activities aligned with our exploration strategy. The field copper
exploration activities are directed towards the discovery of large,
high-quality copper deposits in Chile, Peru, Ecuador, North
America and Australia. These activities encompass early stage
reconnaissance work through to target definition and testing in
every country where we have exploration concessions.
On 27 November 2018, we announced a copper, gold and uranium
discovery at one of our exploration projects on the Stuart Shelf,
65 kilometres to the southeast of BHP’s operations at Olympic Dam.
Our Copper Exploration team was responsible for the four drill
hole intercepts, the most significant having grades of 3.04 per cent
copper, 0.59 grams per tonne gold and 346 parts per million
uranium over a drill length of 426 metres. We progressed the second
phase of the drilling program in the June 2019 half and the results
are currently being analysed.
In parallel, we continued to review other jurisdictions and
opportunities to partner with third parties to counter the increasing
exploration maturity of our existing geographies. During FY2019,
we acquired an 11.2 per cent interest in Solgold Plc, the majority
owner and operator of the Cascabel porphyry copper-gold project,
and in July 2019 we entered into a binding earn-in and joint venture
agreement with Luminex, both in Ecuador. We acquired a 5 per cent
interest in Midland Exploration Inc., a Canadian junior company
with interests in copper projects in northern Québec in Canada.
In Mexico, Copper Exploration entered into a financial agreement
with Riverside Resources that will enable BHP to access new
search spaces. The financial agreement is focusing on early stage
exploration opportunities.
Exploration expenditure
Our resource assessment expenditure increased by 13 per cent
in FY2019 to US$126 million, while our greenfield expenditure
increased to US$62 million. Expenditure on resource assessment
and greenfield exploration over the last three financial years is
set out in the following table.
Year ended 30 June
Greenfield exploration
Resource assessment
Total minerals exploration
and assessment
2019
US$M
62
126
188
2018
US$M
53
112
165
2017
US$M
43
120
163
Conventional petroleum exploration and appraisal
Petroleum exploration expenditure for FY2019 was US$685 million,
of which US$388 million was expensed. Expenditure on petroleum
exploration over the last three financial years is set out below.
Year ended 30 June
Conventional petroleum
exploration and appraisal
2019
US$M
2018
US$M
2017
US$M
685
709
803
Our petroleum exploration program had positive results in FY2019.
We are pursuing high-quality plays in our four priority basins and
a US$0.7 billion exploration program is planned for FY2020 as we
progress testing of our future growth opportunities.
For more information on conventional petroleum
exploration, refer to section 1.13.1
Exploration expense
Exploration expense represents that portion of exploration
expenditure that is not capitalised in accordance with our
accounting policies, as set out in note 11 ‘Property, plant and
equipment’ in section 5.
Exploration expense for each segment over the last three financial
years is set out below.
Year ended 30 June
Exploration expense
Petroleum (1) (2)
Copper
Iron Ore
Coal
Group and unallocated items (2) (3)
Total Group
2019
US$M
2018
US$M
2017
US$M
409
62
41
15
10
537
592
53
44
21
7
717
573
44
70
9
16
712
(1) Includes US$21 million (FY2018: US$76 million; FY2017: US$102 million)
exploration expense previously capitalised, written off as impaired.
(2) Excludes Onshore US exploration expenditure of US$ nil (FY2018: US$ nil;
FY2017: US$2 million).
(3) Group and unallocated items includes functions, other unallocated operations,
including Potash, Nickel West and consolidation adjustments.
BHP Annual Report 2019 27
1.6.4 Risk management
The identification and management of risks is central to achieving our strategic objectives.
It protects us against potential negative impacts, enables us to take risk for strategic reward and improves our resilience against emerging
risks. BHP believes an essential element of effective risk management is to have a single, consolidated view of risks across the business to
understand the Group’s full risk exposure and to prioritise risk management and governance activity. As such, we apply a single framework
(known as the ‘Risk Framework’) for all risks.
Refinements were made to BHP’s Risk Framework during FY2019. There are four pillars in our Risk Framework: risk strategy, risk governance,
risk process and risk intelligence.
Risk strategy
Taking the right risks,
at the right time,
in the right way
Risk governance
The right people
focusing on the
right things
Risk intelligence
Gaining insights
from our risk
knowledge
Risk process
Using the right
tools for the job
28 BHP Annual Report 2019
Risk strategy
Group Risk Architecture
In order to understand and manage the risks that BHP is exposed to, we have developed a Group Risk Architecture, which is a tool to
identify, analyse, monitor and report risk. The Group Risk Architecture is currently made up of 10 Group Risk categories, which cover a
number of Group Risks. Risks in BHP’s profile are connected to a Group Risk. This gives the Board and management visibility over the
aggregate exposure to risks on an enterprise-wide basis and supports performance monitoring and reporting against BHP’s risk appetite.
For example, under the Group Risk of occupational safety, we have identified risks relating to the safety of our people in performing their
work, such as vehicle incidents, falls from height and dropped objects.
The Group Risk Architecture (as at 30 June 2019) is illustrated below. The left column shows the Group Risk category and the columns
to the right show the allocation of the Group Risks to each category. This Group Risk Architecture will change over time to reflect our
strategy, changing activities and consideration of the external context. Our principal risks are shown in a darker shade of blue in the
diagram below, and are described further in the Risk factors section below.
Group Risk Categories
Group Risks
1
Strategy
2
3
Exploration, Growth
and Development
Production and
Operations
4
Commercial
5
People and Culture
6
Health and Safety
7
8
Environment, Climate
Change and
Community
Technology, Innovation
and Systems
9
Financial Management
10
Legal Compliance
and Stakeholder
Management
Capital allocation
Competitive advantage
Returns sustainability
Geopolitics and macro economics
Market disruption
Assessment and estimation
Political stability and new country entry
Expansions, organic growth and major projects
Asset performance
Business continuity
Third party performance
Production volume and cost
Asset integrity
Rehabilitation and closure
Commodity price
Counterparty risk
Supply chain management
Procurement cost
Sales and supplier concentration
Contractual terms
Attract and retain talent
Critical skills and
technical capabilities
Employee and labour relations
Performance management
Aviation
Process safety
Diversity, inclusion
and equal opportunity
Physical security and
emergency preparedness
Mental and physical health
Occupational safety
Occupational health exposures
Biodiversity loss
Human rights
Social unrest
Community wellbeing
Land use impacts
Water interactions
Climate change, greenhouse gas
emissions and energy
IT/OT service management
Cybersecurity
Automation and technology innovation
Information security
Liquidity
Tax
Financial control and reporting
Balance sheet
Stakeholder relations
Ethics and compliance
Legal and regulatory
Competition
Risk treatment and insurance
Risk appetite
BHP’s Risk Appetite Statement has been approved by the Board
and is a foundational element of our Risk Framework. It is made
up of a qualitative statement for each Group Risk category that
describes the nature and extent of risk we are prepared to take in
pursuing our objectives. The Risk Appetite Statement defines the
parameters that management is obliged to operate within and we
use key risk indicators to indicate any changes to our risk exposure.
Key risk indicators
Key risk indicators (KRIs) assist in identifying whether BHP is operating
within or outside of our risk appetite, as defined in our Risk Appetite
Statement. They also support decision making by providing
management with information about risk exposure at a group level.
KRIs are defined for Group Risks to provide the data for proactive
monitoring of BHP’s risk performance. Where KRI limits are exceeded,
management will review potential causes to understand if BHP may
be taking too little or too much risk, and to identify whether further
action is required. For example, our current KRIs monitor data such
as market concentration based on the percentage of revenue linked
to a single jurisdiction, the number of critical cybersecurity incidents,
greenhouse gas emissions relative to the FY2017 baseline and
trends in the number of community complaints received.
BHP Annual Report 2019 29
1
i
S
t
r
a
t
e
g
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
a
t
B
H
P
R
e
m
u
n
e
r
a
t
i
o
n
R
e
p
o
r
t
D
i
r
e
c
t
o
r
s
’
R
e
p
o
r
t
i
F
n
a
n
c
a
i
l
S
t
a
t
e
m
e
n
t
s
A
d
d
i
t
i
o
n
a
l
i
n
f
o
r
m
a
t
i
o
n
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
1.6.4 Risk management continued
Risk governance
Risk management accountability and oversight is an integral part of BHP’s governance. The Board and senior management (including
the Executive Leadership Team) provide oversight and monitoring of risk management outcomes. They are ultimately responsible for
ensuring BHP maintains a robust Risk Framework and an effective internal control environment.
BHP uses the ‘three lines of defence’ model of risk governance and management to define the relationships and clarify the role
of different teams across the organisation in managing risk. This approach is illustrated in the diagram below and integrates risk
management, control definition, control improvement, governance and assurance frameworks into one governance model.
BHP Board
Executive Leadership Team
Operational management
(operations, assets
and regions)
Centres of Excellence
Health, Safety and Environment
Analysis and improvement
Risk
Ethics and compliance
Legal
Business partners
Internal audit
(IAA)
E
x
t
e
r
n
a
l
a
u
d
i
t
R
e
g
u
a
t
o
r
l
First line of defence
Second line of defence
Third line of defence
Management across the assets
and functions who identify
risk and implement controls
Management in the functions that
define Group-wide minimum standards
and provide subject matter expertise
to support, delivering insight and
oversight to manage risk
Our Internal Audit and Advisory team,
who provide independent assurance
over the control environment
(governance, risk management
and internal controls)
Adapted from Institute of Internal Audit Position Paper: The three lines of defence in effective risk management and control.
For example, for a loss of containment risk within the Group Risk
of process safety, our first line operations personnel would be
responsible for implementing pipe thickness checks to ensure
corrosion is within acceptable limits. Second line functions, such as
our engineering teams, would define and assure minimum standards
for pipe materials and acceptable levels of corrosion. Our Internal
Audit and Advisory team would then audit the effectiveness of the
standards and their application, as the third line.
BHP Board and committees
The Board reviews and considers BHP’s risk profile, covering
operational and strategic risks, using the Material Risk Report. The
report includes an overview of the risk profile, summary of material
changes to the profile, performance against KRIs and summaries
of our priority group risks. The contents of this report are further
described in the diagram below ‘Risk intelligence’.
The Risk and Audit Committee (RAC) assists the Board with the
oversight of risk management, including by receiving a range of
reports from management on all types of risk, although the Board
retains overall accountability for BHP’s risk profile. In addition, the
Board requires the CEO to implement a system of control for
identifying and managing risk. The Directors, through the RAC,
review the systems that have been established for this purpose,
review the effectiveness of those systems and monitor that
necessary actions have been taken to remedy any significant
failings or weaknesses identified from that review. The RAC
regularly reports to the Board to enable the Board to review our
Risk Framework. For more information, refer to section 2.13.
The Sustainability Committee has oversight of health, safety,
environment and community related (HSEC) risks. Identification
and management of HSEC risks and the investigation of any
HSEC incidents are undertaken by management and reported
to the Sustainability Committee. For more information, refer
to section 2.13.
The Risk Appetite Statement is the mechanism by which the Board
sets boundaries for taking risk. It enables management to make
risk-informed decisions within the risk appetite of the Board.
Performance against risk appetite is monitored and reported to
the RAC and the Board, as described below. This includes reporting
of performance that is outside upper or lower tolerance limits to
indicate whether management is taking sufficient or excessive risk.
In FY2019, we introduced an additional second-line led review of
the Group’s most significant risks, such as dam failure, to provide a
further level of rigour in the management of these risks. This process,
referred to as the Priority Group Risk Review process, reviews the
analysis and controls for risks that could impact the Group’s viability
or strategy, with findings and recommendations reported to the
Board’s Risk and Audit, and Sustainability Committees. Findings
and recommendations will be used to inform strategic decisions
on whether to accept, reduce or further eliminate risks to align with
the Group’s risk appetite, and to develop remediation plans, such
as to improve risk analysis or control definition.
Additional information on risk management and internal controls is
provided to the Board and the RAC by the Business Risk and Audit
Committees (covering each asset group), other Board committees,
management committees and our Internal Audit and Advisory
team. For more information, refer to section 2.13. Our approach
to risk reporting is outlined in the ‘Risk Intelligence’ section.
30 BHP Annual Report 2019
Risk process
Our Risk Framework requires identification and management
of risks to be embedded in business activities through the
following processes:
• Risk identification
New and emerging risks are identified and owned where
they occur within BHP.
• Risk assessments
Risks are assessed with the most appropriate technique
and results are translated for BHP to understand and
appetite to be considered.
• Risk treatment
Risks are prevented, reduced or mitigated with controls.
• Monitoring and review
Risks and controls are reviewed periodically and on
an adhoc basis to evaluate performance.
Our Risk Framework includes requirements and guidance
on the tools and process to manage all risk types (current,
strategy and emerging).
Current risk
Current risks may have their origin inside BHP or originate as a
result of BHP’s activities. These may be strategic or operational
in nature and include material and non-material risks.
The materiality of our current risks is determined by calculating
an estimate of the maximum foreseeable loss (MFL). The MFL is
the estimated impact sustained by BHP in the ‘worst case’ scenario
for that risk. The ‘worst case’ scenario considers all potential
impacts without regard to probability and assumes all risk controls,
including insurance and hedging contracts, are ineffective.
For example, when calculating the number of fatalities to assess
MFL in an underground explosion, we might assume the maximum
number of people who are allowed to enter the underground mine.
Our focus for current risks is to prevent their occurrence or
minimise their impact should they occur. Current material risks
are required to be evaluated once a year at a minimum to
determine whether the risk exposure is within our risk appetite.
Strategy risk
Strategy risks inform, are created, or are affected by business
strategy decisions or pursuit of strategic objectives. They represent
opportunities as well as threats. The Risk Appetite Statement
and KRIs are available to assist in determining whether a proposed
course of action is within BHP’s appetite. Once a decision has
been made, our risk process as described above applies. In
addition to calculating the MFL, another tool available to inform
decision-making is the Maximum Foreseeable Gain (MFG). The MFG
is the ‘best case’ scenario that should be articulated when seeking
to take risk for strategic returns. It represents the optimum return.
Our focus for strategy risks is to enable the pursuit of high-reward
strategies. Therefore, as well as having controls to protect BHP
from the downside risk, we will implement controls to increase the
likelihood of the opportunity being realised. For example, we might
establish additional governance, oversight or reporting to ensure
new initiatives remain on track.
Emerging risk
Emerging risks typically have their origin outside BHP. There is
often insufficient information for these risks to be fully understood
and they cannot be prevented by BHP. Effective management
of emerging risks is critical to strengthening our resilience to
foreseeable changes and our ability to capture competitive
advantages. We assess and manage emerging risks based on
the expected consequence, timing and speed of the risk event,
as well as the capacity for BHP to respond.
Emerging risks are identified and initially monitored by subject
matter experts. Ongoing management is handed over to risk owners
when the impact and our response is defined. For example, BHP has
a dedicated climate change team that monitors and manages the
emerging risks relating to climate change as they evolve. However,
operational aspects (such as managing the increased risk of
extreme weather events) are managed by our operations.
Our focus for emerging risks is on reducing the impact should an
event occur, and on advocacy efforts to reduce the likelihood of
the risk manifesting. Our approach is to apply contingency controls,
such as response plans, to emerging risks that are outside our
appetite. These controls increase the resilience of BHP to shocks
from the external environment. Emerging risks are evaluated
annually to determine whether the risk remains emerging and if
the exposure is within our risk appetite.
Our emerging risk process was formalised during FY2019 and
in FY2020, emerging risks will be included in our Group-wide
risk register.
1
i
S
t
r
a
t
e
g
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
a
t
B
H
P
R
e
m
u
n
e
r
a
t
i
o
n
R
e
p
o
r
t
D
i
r
e
c
t
o
r
s
’
R
e
p
o
r
t
i
F
n
a
n
c
a
i
l
S
t
a
t
e
m
e
n
t
s
A
d
d
i
t
i
o
n
a
l
i
n
f
o
r
m
a
t
i
o
n
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
BHP Annual Report 2019 31
1.6.4 Risk management continued
Risk intelligence
Board and senior management are provided with insights on trends and aggregate exposure for our most significant risks, as well as
performance against risk appetite, by the Risk team. The Board also receives reports from other teams to support their robust assessment
of principal risks; including internal audit reports, ethics and compliance reports and the Chief Executive Officer’s report.
A summary of the risk reports delivered by the Risk team, and how these provide additional intelligence to the Board are outlined below.
BHP Board
CEO/ELT
Risk and Audit Committee
Sustainability Committee
Material risk report
Material risk report
Material risk report
Financial Risk
Management Committee
Group robust risk assessment
and viability statement
Priority group risk reviews
Material risk report
(Finance focused)
Viability statement
Business Risk and
Audit Committee
Material risk report
(Region focused)
Other management
committees
As required
Priority group risk reviews
Material risk report includes:
• Update on the implementation of the
Group’s new risk framework
• Group risk profile overview
• Key Risk Indicators (KRIs)
• Change in the material risk profile
• HSEC coverage
• Chief Risk Officer opinion (or Head of Risk
Business Partners opinion for Business RAC)
• Priority group risk summaries
Robust risk assessment and viability statement
During the year, the Board carried out a robust assessment of
BHP’s principal risks, including those risks that would threaten
the business model, future performance, solvency or liquidity.
The Directors assessed the prospects of BHP over the next three
years, taking into account our current position and principal risks.
The Directors believe a three-year viability assessment period is
appropriate for the following reasons. BHP has a two-year budget,
a five-year plan and a longer-term life of asset outlook. We have
publicly stated our view that, while commodity prices remain
volatile, our short-term outlook is optimistic. Price and exchange
rate volatility results in variability in plans and budgets. A three-year
period strikes an appropriate balance between long and short-term
influences on performance.
The viability assessment took into account, among other things,
BHP’s commodity price protocols, including: low-case prices; the
latest funding and liquidity update; the long-dated maturity profile
of BHP’s debt and the maximum debt maturing in any one year; the
Group-level risk profile and the mitigating actions available should
particular risks materialise; the regular Board strategy discussions,
which address the range of outcomes under the capital allocation
framework; the flexibility in BHP’s capital and exploration
expenditure programs under the capital allocation framework;
and the reserve life of BHP’s minerals assets and the reserves-to-
production life of our oil and gas assets.
32 BHP Annual Report 2019
The Directors’ assessment also took account of additional stress-
testing of the balance sheet against two hypothetical significant
risk events: a well blow-out in the Gulf of Mexico and a low-price
environment. A further level of robustness is added given no debt
issuance is required in the three-year period, and BHP would still
have access to US$6.0 billion of credit through its revolving credit
facility. The Directors were also mindful of the assessment of our
portfolio against scenarios as part of BHP’s corporate planning
process to help identify key uncertainties facing the global natural
resources sector.
In making this viability statement, the Directors have considered
the capital allocation framework and have also made certain
assumptions regarding management of the portfolio, the alignment
of production, capital expenditure and operating expenditure with
five year plan forecasts and the alignment of prices with the
cyclical low price case used in the control stress case for monthly
balance sheet testing.
Taking account of these matters, and BHP’s current position and
principal risks, the Directors have a reasonable expectation that
BHP will be able to continue in operation and meet its liabilities
as they fall due.
Risk factors
Our Group Risk Architecture currently has 10 Group Risk categories that represent BHP’s areas of risk. These categories are further broken
down into Group Risks. This section highlights our most significant Group Risks. Each of the risk factors listed below could materially
and adversely affect our business, financial performance, financial condition, prospects or reputation, leading to a loss of long-term
shareholder and/or investor confidence.
Asset integrity
Risks associated with operational integrity and performance of our assets.
Why is this important to BHP?
Maintaining the operational integrity and performance of our assets is crucial to protect our people, the environment and
communities in which we operate from incidents. We have onshore and offshore assets in variety of geographic locations. All our
assets exist in and around broader communities and environments. A serious incident (such as dam failure or underground explosion)
or the failure to appropriately maintain or develop our assets, could have an impact on our people, surrounding communities and
environments, as well as our cash flow, operations or the longevity of our assets.
Threats
Management
We employ a number of measures designed to protect the
operational integrity and performance of our assets, and to
detect, eliminate, prevent and mitigate operational incidents
and outages. These measures include:
• BHP’s standards on health, safety, the environment, communities,
water and tailings dams, maintenance, crisis and emergency
management, and event and investigation management;
• planning, designing and constructing mines, dams and
equipment to avoid incidents;
• maintaining and improving infrastructure and equipment to
protect our people and assets (for example controls to prevent
the accumulation of flammable gas and coal dust);
• inspections and reviews (including a dam risk review to assess
the management of significant tailings storage facilities, both
active and inactive as described in section 1.8);
• routine reviews and revisions to management plans and
manuals (for example, to test and update for alignment
with operating specifications and industry dam codes);
• training and qualifications for staff and contractors;
• maintaining mine evacuation routes and supporting equipment
(such as breathing apparatus), crisis and emergency response
plans and business continuity plans.
Failure to maintain operational integrity and performance of our
assets may result in operational incidents or reduce asset value.
An operational incident, such as dam failure or underground
explosion, could result in:
• multiple injuries and fatalities;
• extensive community disruption (including impacts to personal
safety, livelihood and quality of life);
• short-term and long-term health risks to our people or
the community;
• environmental damage (for example, affecting air quality,
biodiversity or water resources);
• loss of licences, permits or necessary approvals to operate assets;
• loss of community infrastructure and services (such as power,
water or transport);
• failure or redundancy of mining, processing or support
infrastructure or equipment (such as a structural collapse
or failure of a conveyor, petroleum platform or rail line);
• disruption to essential supplies or delivery of our products (for
example, where channel blockage is caused by a vessel incident);
• significant repair costs;
• interruption in production or other critical activities and loss
of revenue from affected operations;
• litigation, including class actions, or fines and investigations
by authorities.
A failure to maintain operational integrity and performance of
our assets may impact asset value due to production shortfalls,
loss of development options or a delay in asset development.
For example, poor maintenance of facilities that manage fugitive
emissions could result in excess dust or noise and restrict the
ability to obtain approvals to increase output or throughput.
It may also negatively impact cash flows and profitability, result
in financial write downs (for example, due to a need to abandon
remaining reserves where it is uneconomic to reconstruct or
recover the asset following a major incident) or increased costs
or other commercial impacts. We take steps to maintain the
operational integrity and performance of our assets through
planning, design, construction, operation and closure. However,
our projects are complex and may be adversely impacted by
factors out of our control, such as natural disasters.
Our risk financing approach is to self-insure or not purchase
external insurance for certain risks, including property damage
and business interruption, sabotage and terrorism, marine cargo,
construction, primary public liability and employee benefits.
Business continuity plans may not provide protection for all costs
that arise from such events, and where external insurance is
purchased, third party claims may exceed the limit of liability
of policies. Any uninsured or underinsured losses could impact
our financial position or the financial results of our assets.
FY2019 insights
The Group’s exposure to asset integrity risks is expected to remain relatively stable. The Priority Group Risk Review process
(described above) aims to provide additional rigour around the management of top operational risks, such as dam failure
and underground fire and explosion.
BHP Annual Report 2019 33
1
i
S
t
r
a
t
e
g
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
a
t
B
H
P
R
e
m
u
n
e
r
a
t
i
o
n
R
e
p
o
r
t
D
i
r
e
c
t
o
r
s
’
R
e
p
o
r
t
i
F
n
a
n
c
a
i
l
S
t
a
t
e
m
e
n
t
s
A
d
d
i
t
i
o
n
a
l
i
n
f
o
r
m
a
t
i
o
n
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
1.6.4 Risk management continued
Occupational and process safety
Risks associated with the safety of BHP employees and contractors in performing their work.
Why is this important to BHP?
All our sites may be subject to operational accidents, including fires, explosions, road, vehicle, port, shipping, railroad, aircraft or
airport incidents, rock fall incidents, loss of power supply, environmental pollution, mechanical equipment failures, mine-related
accidents, personal conveyance equipment failures, loss of primary containment of hazardous materials, or loss of well control
(involving an uncontrolled flow of well fluids or formation fluids from the wellbore to the surface).
We have onshore and offshore extractive, processing and logistical operations in many geographic locations. Transporting our people
to the locations of our exploration activities and operations can involve helicopters, aircraft or high occupancy vehicles. We have port
facilities and four underground mines, including one underground coal mine. The nature of the activities performed at such facilities
and mines can involve safety hazards.
We operate in zones prone to natural disasters. This includes our Western Australia Iron Ore, Queensland Coal and Gulf of Mexico oil
and gas assets, which are located in areas subject to cyclones or hurricanes, and our Chilean copper and Peruvian base metals assets
and Global Asset Services office in Manila, which are located in known earthquake and tsunami zones.
Threats
Management
Occupational and process safety incidents may lead to serious
injuries, loss of life or livelihood or quality of life to BHP employees,
contractors and members of the community. In addition,
occupational and process safety incidents may result in:
• interruption in production or other activities critical to
We employ a number of measures designed to detect,
eliminate, prevent and mitigate operational and process
safety incidents, including:
• BHP’s standards on aviation, health, safety, the environment
and community, crisis and emergency management;
our business;
• disruption to essential supplies (such as explosives
or maintenance parts);
• failure of mining or processing equipment or support
infrastructure (for example, relating to power, water,
transport or technology);
• environmental damage;
• increased costs or other commercial impacts;
• litigation (including class actions), fines or investigations
by authorities;
• reputational damage.
Our risk financing (insurance) approach is to self-insure or not
purchase external insurance for certain risks. For more information,
refer to Asset integrity section.
• compliance with quality assurance standards (for example,
the Drilling and Completions Quality Assurance Standard
for Petroleum offshore drilling and completion activity);
• selection and design of mine plans, wells and equipment to
prevent incidents (including slope design and underground
support systems);
• inspection, maintenance and improvements of infrastructure to
protect our people and assets (for example, cyclone resilience);
• inspection, maintenance and improvement of key equipment
designed to prevent or mitigate an occupational or process
safety incident (for example, pressure vessels designed
to contain fluids or gas at pressure and emergency response
equipment);
• training and qualifications for staff and contractors (including
drill rig contractors and aircraft operators);
• influencing joint venture partners to align with BHP standards;
• monitoring adverse weather conditions, ground stability and
pressure/temperature of materials;
• continuity plans and crisis and emergency response plans;
• self-insurance for losses arising from property damage,
business interruption and construction.
FY2019 insights
Although the divestment of our Onshore US assets in FY2019 decreased the onshore risk exposure in Petroleum, the Group’s exposure
to operational and process safety risk is expected to remain relatively stable.
34 BHP Annual Report 2019
Capital allocation and returns sustainability
Risks associated with the allocation of capital through annual planning and other processes, and ongoing returns
from BHP’s assets and investments.
Why is this important to BHP?
Our strategy is to have the best capabilities, commodities and assets to create long-term value and high returns. Our decisions and
actions relating to the allocation of capital across asset or reserve discovery, acquisition, maintenance, development or divestment,
impacts our financial performance and financial condition, and therefore the sustainability of our returns. This is particularly the case
with commodities that we view as attractive (for example, copper, oil and nickel sulphides).
Threats
Management
Changes in our portfolio, missed opportunities to invest or
a failure to effectively allocate capital or achieve expected
returns from assets or investments may lead to:
• loss of value, for example due to incorrect reserve estimates,
incorrect or changing assumptions (including those related
to commodity prices) or early depletion of reserves;
• failure to achieve expected commercial objectives, including
cost savings, sales revenues or operational performance;
• unexpected costs or liabilities, including due to the imposition
of adverse regulatory conditions, from acquired assets or
entities (such as rehabilitation costs) or legal dispute costs;
• adverse market reaction;
• adverse impacts on BHP’s ability to deliver returns
to shareholders;
• financial write-downs (for example, as a result of changes
in market or industry, prices, inability to recover reserves
or additional costs);
• exchange rate related additional costs;
• inability to retain key staff important to the success of
our business.
We have a number of strategies, processes and frameworks in
place designed to grow and protect the strength of our portfolio
and to help deliver ongoing returns to shareholders, including:
• a long-term strategy that informs the decisions and actions
in capital allocation;
• an ongoing strategy process that assesses the competitive
advantage of our business and enables identification of risks and
opportunities for our portfolio using fit-for-purpose scenarios;
• monitoring indicators to interpret external events and trends;
• commodity strategies and commodity price protocols that
are reviewed and presented to the Executive Leadership Team
and Board;
• life of asset plans, which inform forecasts for proposed
investments and operations;
• management reviews and governance activities to support
operational and project forecasts and planning;
• our Capital Allocation Framework, which provides the structure
and governance for prioritising capital allocation across the
Group and adding growth options to our portfolio. Refer to
section 1.4.3 for more information;
• investment approval processes that apply to investment
decisions, including mergers and acquisitions activity, overseen
by an investment committee as described in sections 2.14
and 2.15;
• annual reviews of our portfolio valuations to identify any value
change and test internal value methodologies and assumptions
against external benchmarks.
FY2019 insights
The Group’s exposure to risks related to capital allocation and returns sustainability is expected to remain relatively stable.
The divestment of our Onshore US assets in FY2019 has further simplified our portfolio.
BHP Annual Report 2019 35
1
i
S
t
r
a
t
e
g
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
a
t
B
H
P
R
e
m
u
n
e
r
a
t
i
o
n
R
e
p
o
r
t
D
i
r
e
c
t
o
r
s
’
R
e
p
o
r
t
i
F
n
a
n
c
a
i
l
S
t
a
t
e
m
e
n
t
s
A
d
d
i
t
i
o
n
a
l
i
n
f
o
r
m
a
t
i
o
n
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
1.6.4 Risk management continued
Geopolitics and macroeconomics
Risks associated with geopolitical and macroeconomic changes that impact our ability to access resources
and markets needed to realise our strategy.
Why is this important to BHP?
BHP operates in multiple locations around the globe and may consider operating in new locations to access the resources we require.
Our customers and suppliers are also located in markets around the world. Geopolitical and macroeconomic developments have the
potential to restrict our ability to access resources in certain countries or effectively trade in markets. Any restrictions will impact our
ability to realise our strategy as competition for resources grows, existing reserves are depleted and supply sources become more
expensive to develop.
Threats
Management
The diversification of our portfolio of commodities, markets,
geographies and currencies is a key strategy intended to reduce
our exposure to geopolitical and macroeconomic shifts.
We regularly monitor geopolitical and macroeconomic trends to
understand potential impacts on our business and seek to identify
mitigating actions as soon as possible.
We also engage with governments and other key stakeholders
to understand and attempt to mitigate any potential impacts
from changes in trade or resource policies.
Changes in relations between countries, trade protectionism and
political uncertainty can impact our ability to access resources
and markets, such as:
• a continued slowing in China’s economic growth and demand
could result in lower demand or prices for our products and
materially, and adversely impact our results, including cash
flows. Sales into China generated US$24.3 billion (FY2018:
US$22.7 billion) or 54.8 per cent (FY2018: 52.5 per cent) of
our revenue in FY2019, on a Continuing operations basis.
Section 5 note 2 ‘Revenue’ details our calculation of revenue,
including the impact of new accounting standards. FY2019
sales into China by commodity included 57 per cent Iron Ore,
26 per cent Copper, 14 per cent Coal and 2 per cent Nickel
(reported in Group and Unallocated);
• a marked rise in geopolitical uncertainty and protectionism has
the potential to inhibit international trade, weigh on business
confidence and constrain investment. In particular, restrictive
trade policies in the United States and China have ramifications
for business, governments and citizens. They may adversely
affect BHP’s ability to trade, and impact demand for BHP’s
products in those and other economies;
• BHP’s ability to obtain and retain licences to explore or develop
resources or to access markets for sales or supply may be
inhibited if there are tensions between a host country where
we operate or sell our products in other countries that BHP is
seen to be allied with. Such tensions may result in rescission
of licences, nationalisation of assets, detention of BHP
employees for regulatory investigations or limitations on
markets or customer access;
• our access may be restricted through disruptions to shipping
lanes, ports or other facilities as a result of conflicts or
embargoes that are not directly related to BHP or our customers;
• our business may be negatively impacted by the exit of the
United Kingdom from the EU, potentially triggering a
deterioration of business activity in Britain and other countries.
There remains uncertainty surrounding financial and trade
implications of Brexit, which may be more severe than expected.
For a discussion of the current geopolitical and macroeconomic
forces relevant to BHP’s performance, refer to section 1.6.1.
FY2019 insights
The Group’s exposure to geopolitics and macroeconomics risks is anticipated to increase in the short term due to heightened political
and policy uncertainty.
36 BHP Annual Report 2019
Cybersecurity
Cyber-related risk events, including attacks on our enterprise or incidents relating to human error.
Why is this important to BHP?
Many of our business and operational processes are heavily dependent on technology. We have a significant and increasing reliance
on autonomous systems for haulage and drilling. In addition, we have substantial integration between our information technology
and our operating technology.
Threats
Management
Cyber events or attacks may lead to:
• operational or commercial disruption (such as the inability
to process or ship resources);
• corruption or loss of system data;
• a misappropriation or loss of funds;
• unintended disclosure of commercial or personal information;
• health and safety incidents, including fatalities (where cyber
events cause system error or malfunction, which result in
operational incidents);
• environmental damage (for example, cyber incidents could
cause train derailments for autonomous transport);
• inability to respond appropriately to unrelated incidents;
• regulatory fines and compensation to people impacted;
• reputational damage.
We employ a number of measures designed to protect,
detect and respond to cyber events, including:
• BHP’s standards on technology and cybersecurity,
communications and external engagement;
• cybersecurity strategy and resilience programs;
• enterprise security framework and cybersecurity standards;
• cybersecurity awareness plan and training;
• security assessments and monitoring;
• restricted physical access to critical centres and servers;
• incident response plans, process and root cause analysis.
FY2019 insights
Although there were no identified cyber breaches to the Group’s technology environment during FY2019, the Group’s exposure to
cyber-related risk events is expected to increase primarily due to our growing reliance on technology and the increasing sophistication
of external cyberattacks.
1
i
S
t
r
a
t
e
g
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
a
t
B
H
P
R
e
m
u
n
e
r
a
t
i
o
n
R
e
p
o
r
t
D
i
r
e
c
t
o
r
s
’
R
e
p
o
r
t
i
F
n
a
n
c
a
i
l
S
t
a
t
e
m
e
n
t
s
A
d
d
i
t
i
o
n
a
l
i
n
f
o
r
m
a
t
i
o
n
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
BHP Annual Report 2019 37
1.6.4 Risk management continued
Third party performance
Risks associated with the delivery of products and services by third parties engaged by BHP, including contractors
and non-operated joint ventures.
Why is this important to BHP?
BHP holds interests in assets and joint ventures that it does not directly operate, primarily within Minerals Americas (Samarco, Antamina,
Resolution, Cerrejón and Nimba) and Petroleum (Algeria, Australia and Gulf of Mexico). Joint venture partners or other companies
managing non-operated joint ventures take action contrary to our standards or fail to adopt standards equivalent to BHP’s standards.
In such situations, BHP may be unable to influence non-operated joint venture activities.
In addition, BHP’s workforce is made up of a combination of permanent employees and contractors across all our operations. As a result,
appropriate contractor selection and effective management of contractors from a safety, cost, quality, schedule and performance
perspective is important to the success of our business. We also contract with many commercial and financial counterparties, including
end customers, suppliers and financial institutions in the context of global financial markets that remain volatile.
Threats
Management
We have global practices and standards for operations and
production that apply to third parties, including:
• BHP’s standards on supply, safety and capital projects that
apply to contractors and include requirements relating to
contractor management;
• Our Code of Conduct, which sets out requirements related
to working with integrity, including dealings with third parties
as described in section 2.16;
• our Contractor Management Framework, which specifies
a holistic approach to support regional alignment and is
supported by global training;
• anti-corruption training, competition training, and Our Code
of Conduct training;
• independent inspections, assurance and verifications
(in some cases performed by regulatory bodies);
• governance frameworks for our joint ventures, which define
how shareholders work together with management to
govern the joint venture;
• BHP and external reviews of joint venture projects,
risk management and governance activities;
• internal and shareholder audits of joint ventures.
We maintain a ‘one book’ approach with commercial
counterparties, which means that we aim to quantify and
assess our credit exposures on a consistent basis. We also
have contingency plans in place if production or shipping
is interrupted.
Third party (including contractor) activities, including a failure
to adopt standards, controls and procedures that are equivalent
to BHP’s, could lead to increased risk of:
• operational incidents or health and safety accidents,
including fatalities;
• failure to meet remediation and compensation requirements
(such as delays to community resettlements related to the
Samarco dam failure, see section 1.7 for information on our
response, support and commitments);
• inadequate quality of construction (for example, if contractors
do not follow appropriate standards);
• reduced production (for example, from poor planning
that does not align to appropriate standards);
• disengagement of the remaining workforce;
• litigation or regulatory action (for example, if a third party
was in breach of a law or regulation);
• cost overruns, schedule delays or interruptions (such as
in major development projects).
A failure by suppliers, contractors or joint venture partners
to perform existing contracts or obligations may lead to the
following impacts:
• non-supply of key inputs, such as explosives, mining
equipment, petrol and other consumables important
to our business;
• loss of access to third party owned or supplied infrastructure;
• disruption to essential supplies or delivery of our products
(for example, where access or use of BHP owned and operated
rail is disrupted by third parties);
• reduction in production at our assets;
• litigation (for example, for contractual breach);
• loss of revenue.
Our existing counterparty credit controls may not prevent
a material loss to us due to our credit exposure to certain
customer segments or financial counterparties.
Our risk financing (insurance) approach is to self-insure or not
purchase external insurance for certain risks. For information,
refer to the Asset integrity section.
FY2019 insights
There are no changes identified in the risk environment for third party performance, internally or externally, that are expected to
significantly increase the Group’s exposure.
38 BHP Annual Report 2019
Community wellbeing and human rights
Risks that have the potential to impact communities and the environment and damage support for our business with communities,
government or the general public.
Why is this important to BHP?
Our approach to all phases of the life cycle of an operation from exploration to closure can impact the environment, communities or
other stakeholders, which can affect support for our existing or future operations. The nature of our activities may cause adverse
impacts to air quality, biodiversity, water resources and related ecosystem services or health risks. Our activities may also have an
impact on human rights, community livelihoods and wellbeing. Our assets are subject to law and regulations on a range of issues,
including safety, health, environmental, anti-corruption, human rights, ethics, and employment conditions. Environmental and
community impacts or non-compliance or alleged non-compliance with such laws and regulations could adversely impact the
environment or communities, and damage community or governmental support for our business. Finally, our activities may be
affected by shareholder activism or civil society activism.
Threats
Management
BHP may engage in activities (or fail to engage in activities) that
impact the environment, communities, human rights and social
wellbeing. This can affect BHP’s relationships with, or be viewed
negatively by, the community and other stakeholders. A loss
of stakeholder support could result in the following impacts to
our business:
• loss of licences or permits for the operation of assets, or delays
in approvals for new projects;
• opposition to new BHP projects or BHP’s entry to new jurisdictions
by communities, including through legal or social action;
• increased costs for mitigation, offsets or financial
compensatory actions or obligations;
• potential schedule delay, increased costs or reduced production;
• increased taxes and royalties;
• industrial relations disputes, negotiations, litigation or
regulatory action, resulting in a loss of productivity;
• loss of business opportunity.
In addition, changes to legal requirements or community
expectations, for example, related to the rehabilitation or closure
of assets, may increase required financial provisioning and costs.
We have Group-wide standards for communications, community
and external engagement; and environment and climate change.
These standards and underpinning practices strengthen our
environmental and social performance and include:
• conducting regular impact assessments for each asset to
understand the social, environmental and economic context;
• identifying and analysing stakeholder, social, environmental
and human rights impacts and business risks;
• engaging in regular, open and honest dialogue with stakeholders
to understand their expectations, concerns and interests;
• contributing to environmental and community resilience
through social investment;
• applying the mitigation hierarchy (avoid, minimise, rehabilitate,
compensate) to minimise environment and community
impacts, and achieve target environmental outcomes.
These activities also assist us to identify, mitigate or manage
key potential social, environmental and human rights risks,
as described in section 1.10.
FY2019 insights
The Group’s exposure to risks associated with the community and human rights is assessed as increasing due to increasing societal
and political requirements and expectations.
BHP Annual Report 2019 39
1
i
S
t
r
a
t
e
g
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
a
t
B
H
P
R
e
m
u
n
e
r
a
t
i
o
n
R
e
p
o
r
t
D
i
r
e
c
t
o
r
s
’
R
e
p
o
r
t
i
F
n
a
n
c
a
i
l
S
t
a
t
e
m
e
n
t
s
A
d
d
i
t
i
o
n
a
l
i
n
f
o
r
m
a
t
i
o
n
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
1.6.4 Risk management continued
Climate change and greenhouse gas emissions
Risks associated with changes in climate patterns, as well as risks arising from policy, regulatory, legal, technological
or market responses to climate change.
Why is this important to BHP?
We are exposed to a broad range of climate-related risks arising from both the physical and non-physical impacts of climate change.
Climate-related risks may affect our operations, the markets in which we sell our products, the communities in which we operate
and our upstream and downstream value chains.
Risks related to the physical impacts of climate change include acute risks resulting from increased severity of extreme weather
events and chronic risks resulting from longer-term changes in climate patterns.
Risks also arise from a wide variety of policy, regulatory, legal, technological and market responses to the challenges posed by climate
change and the transition to a lower carbon economy. Fossil fuel use is a significant source of greenhouse gas (GHG) emissions,
which contribute to climate change. The production and use of fossil fuels receive scrutiny from a range of stakeholders, including
governments, investors, NGOs and communities. At BHP, we produce fossil fuels (energy coal, oil and gas) used primarily in the
transport and electricity generation sectors, as well as fossil fuels and other commodities that are used as inputs to emissions-
intensive industrial processes (including metallurgical coal and iron ore used in steelmaking). We also use fossil fuels in our mining
and processing operations either directly or through the purchase of fossil fuel-based electricity. We can therefore be impacted by
policies and regulations to reduce GHG emissions from the resources, electricity generation, transport and industrial sectors.
Technological and market-related risks include the substitution of existing technologies with lower emissions options, such as
renewables, particularly in the electricity generation and transport sectors, which have the potential to reduce demand for fossil fuels.
Threats
Management
The impacts of climate change could affect the execution of
our strategy, the expansion of our portfolio, and the ability of
our operated and non-operated assets to operate efficiently.
The following threats relating to climate change may affect us:
• the physical impacts of climate change (for example, changes
in precipitation patterns, water shortages, rising sea levels,
increased storm intensities and higher temperatures) may
materially and adversely affect our assets, the productivity
of our assets and the costs associated with our assets, as
well as our supply chains, transport and distribution networks,
customers’ facilities and the markets in which we sell our products;
• the Group’s asset carrying values or financial performance
may be affected by any adverse impacts to reserve estimates
or market prices that may occur if, for example, reserves are
rendered incapable of extraction or demand for fossil fuel
commodities decreases due to policy, regulatory (including
carbon pricing mechanisms), legal, technological, market or
societal responses to climate change in our operating
jurisdictions or markets;
• climate change may increase competition for, and the regulation
of, limited resources, such as power and water, which are critical
to the operation of our business. This could affect the productivity
of our assets and the costs associated with our assets;
• we are impacted by current and emerging policy and regulation
aimed at reducing GHG emissions from the resources, electricity
generation, transport and industrial sectors, including the
introduction of carbon pricing mechanisms. Climate policy and
regulation may reduce demand for our products or increase the
costs associated with our assets. Examples of recent regulatory
changes include the launch of an emissions trading scheme in
China in 2017 and the introduction of a carbon tax in Chile in 2017;
• applications for licences, permits and authorisations required to
develop our assets and projects may face greater scrutiny and
be contested by third parties. This could delay, limit or prevent
future development of our assets or affect the productivity
of our assets and the costs associated with our assets;
• the Group’s reputation and financial performance may be
impacted by concerns regarding the contribution of fossil fuels
to climate change. Impacts could include a reduction in investor
confidence and constraints on our ability to access capital from
financial markets;
• the Group may be subject to or impacted by climate-related
litigation (including class actions) and the associated costs.
Assessments of the potential impact of future climate change
policy, regulatory, legal, technological, market and societal
outcomes are uncertain given the wide scope of influencing
factors and the many countries in which we do business. For
example, countries will need to introduce new or strengthen
existing policies and regulation in order to meet the goals of
the Paris Agreement.
We work with globally recognised agencies to obtain regional
analyses of climate science to improve our understanding of the
potential climate vulnerabilities of our operations and communities
where we operate, and to inform resilience planning at an asset
level. Our assets are required to build climate resilience into their
activities, for example, by designing facilities to withstand sea level
rise or changing climate patterns, or factoring forecast increases
in extreme weather events into operational plans. We also require
new investments to assess and manage risks associated with the
forecast physical impacts of climate change.
We evaluate the resilience of our portfolio to climate change and
the low carbon transition by using a broad range of scenarios that
consider divergent policy, regulatory, legal, technological, market
and societal outcomes, including low plausibility, extreme shock
events. We also continue to monitor climate-related developments
that could impact the resilience of our portfolio. Our investment
evaluation process has incorporated market and sector-based
carbon prices for more than a decade.
We seek to mitigate our exposure to risk arising from current and
emerging policy and regulation in our operating jurisdictions and
markets by reducing our operational emissions and developing
a product stewardship approach to emissions in our value chain.
We also respond to our exposure to policy and regulatory risk by
advocating for the development of an effective, long-term policy
framework that can deliver a measured transition to a lower
carbon economy.
Identifying cost-effective and robust carbon offsets is important
to meeting our emissions reduction commitments and managing
reputational risk. We therefore also support the development of
market mechanisms that reduce global GHG emissions through
projects that generate carbon credits.
The Group continues to monitor policy, market and technological
changes and community, investor and regulatory standards and
expectations, as they develop, to inform appropriate management
actions. For more information on our climate change risk
management strategy, refer to section 1.10.8.
FY2019 insights
During FY2019, there was an accumulation of new indicators of
the risks and costs associated with climate change, including the
Intergovernmental Panel on Climate Change’s Special Report on
Global Warming of 1.5°C, which stated that the effects of climate
change are already being observed, that warming of even 1.5°C
would have profound impacts and that 2°C of warming would
be more damaging than previously believed.
Community, investor and regulatory standards and expectations
in relation to climate change continued to increase during
FY2019. There has also been a recent escalation of climate-related
litigation involving companies, particularly in the United States.
40 BHP Annual Report 2019
Legal, regulatory, ethics and compliance
Risks associated with BHP’s legal, regulatory, ethics and compliance obligations.
Why is this important to BHP?
Our operated assets and non-operated joint ventures are based on material long-term investments that are dependent on long-term
legal, regulatory, political, judicial and fiscal stability. In addition, the nature of the industries in which we operate means many of our
activities are highly regulated, including through: (i) law and regulations relating to bribery and anti-corruption, trade and financial
sanctions, market manipulation, taxation, royalties, competition, data protection and privacy; and (ii) local regulations and standards,
such as controls on production, imports, exports, prices on greenhouse gas emissions, native title, and health, safety and environment.
Section 1.7 details our response and support in relation to the Samarco incident as well as the progress on our commitments.
Threats
Management
We have internal policies, standards, systems and processes
for governance and compliance, including:
• BHP’s standards on business conduct, market disclosure,
and information governance and controlled documents;
• Our Code of Conduct;
• contractor due diligence and automated risk screening;
• ring fencing protocols to separate potentially competitive
businesses within BHP;
• classification of compliance sensitive transactions;
• governance and compliance processes (including the review
of internal controls over financial reporting and specific internal
controls in relation to trade and financial sanctions, market
manipulation, competition, data protection and privacy
and corruption);
• anti-corruption training, competition training, Our Code of
Conduct training;
• oversight and engagement with higher risk areas by our Ethics
and Compliance function, Internal Audit and Advisory team
and the Disclosure Committee;
• global monitoring of compliance controls by our Ethics
and Compliance function;
• EthicsPoint anonymous reporting service, supported by an
ethics and investigations framework and central investigations
team (within the Ethics and Compliance function) to investigate
Our Code of Conduct concerns.
BHP’s activities or those of our associates could result in actual or
alleged corruption, bribery, collusion, anti-competitive behaviour,
market manipulation, tax avoidance or other breaches of legal,
regulatory, ethics or compliance obligations. These activities, or
changes in laws or regulations due to the developing nature of
government regulations and international standards, could lead to
the following threats to BHP’s business, reputation and operations:
• actions, investigations or inquiries by regulatory authorities
or courts over actual or alleged legal or regulatory breaches
(for example, over suspected facilitation payments or bribery
and corruption which are prevalent in some of the countries
where we do business or our assets are located);
• disgorgement of profits (for example, if bribery or corruption
is established);
• civil or criminal prosecution of employees or third parties;
• loss of operating licences, permits or approvals;
• operational impacts, such as unforeseen closures, site
rehabilitation expenses, delays or disruption;
• increased compliance costs (for example, to meet new
or more onerous operating or reporting standards);
• regulatory fines or settlements (for example, from a failure
to comply with reporting standards or recognise royalties);
• increased costs in relation to taxation or royalties if laws
or policies change;
• adverse impacts to the quality and condition of infrastructure
that BHP uses in the operation of its assets, such as rail or ports
(which can be affected by political and legislative change);
• adverse change to regulatory regimes for access to
government-owned or privately operated infrastructure
or resources (for example, rail, electricity or water), resulting
in additional costs or limitations on access by BHP;
• renegotiation or nullification of existing contracts, leases,
permits or other agreements;
• litigation or disputes (such as in connection with ownership
and use of land) and the associated cost of such litigation
or disputes;
• loss or uncertainty of land tenure, for example, in countries
where native title must be established and recognised,
such as in Australia;
• effects on the economics of new mining projects and
the expansion of existing assets and operations.
We conduct our business globally in numerous jurisdictions
with complex regulatory frameworks. Our governance and
compliance processes may not identify or prevent misstatements
or fraud or prevent potential breaches of law, accounting or
governance practice.
FY2019 insights
There are currently no changes identified in the risk environment for BHP’s legal and regulatory obligations that are expected to significantly
increase the Group’s exposure, with the exception of those noted above for climate change and community and human rights. The Group’s
exposure to risks associated with legal, regulatory, ethics and compliance issues may increase in the event of increased investment and
activity in higher risk jurisdictions.
BHP Annual Report 2019 41
1
i
S
t
r
a
t
e
g
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
a
t
B
H
P
R
e
m
u
n
e
r
a
t
i
o
n
R
e
p
o
r
t
D
i
r
e
c
t
o
r
s
’
R
e
p
o
r
t
i
F
n
a
n
c
a
i
l
S
t
a
t
e
m
e
n
t
s
A
d
d
i
t
i
o
n
a
l
i
n
f
o
r
m
a
t
i
o
n
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
1.6.4 Risk management continued
Commodity prices
Risks associated with the prices of commodities, including sustained price shifts relative to the price of extraction.
Why is this important to BHP?
The prices we obtain for our minerals, oil and gas are determined by, or linked to, prices in world markets, which have historically
been, and may continue to be, subject to significant volatility.
Threats
Management
Our usual policy is to sell our products at the prevailing market
prices. We manage our exposures primarily through the diversity
of commodities, markets, geographies and currencies provided by
our relatively broad portfolio of commodities. However, this does
not necessarily insulate BHP from the effects of price changes.
Note 21 ‘Financial risk management’ in section 5 outlines BHP’s
financial risk management strategy, including market, commodity
and currency risk.
Fluctuations in commodity prices can occur in response to a
range of factors. These include price shifts triggered by global
economic and geopolitical factors, industry demand, increased
supply due to the development of new productive resources
or increased production from existing resources, technological
change, product substitution and national tariffs. The effects
of the trade negotiations between the US and China and the
United Kingdom’s exit from the EU may also have an impact on
price volatility and therefore affect us.
We are particularly exposed to price movements in minerals, oil
and gas. For example, a US$1 per tonne decline in the average
iron ore price and US$1 per barrel decline in the average oil price
would have an estimated impact on FY2019 profit after taxation
of US$154 million and US$29 million, respectively. For more
information on commodity price impacts, refer to section 1.6.2.
Commodity price impacts can also be exacerbated by exchange
rate fluctuation, which may impact our financial results.
Long-term price volatility or sustained low prices may adversely
affect our future profitability. This could result in cost pressure,
as we do not generally have the ability to offset costs through
price increases. In addition, this impact may result in lower than
desired credit ratings for BHP, restricting our access to debt
funding or increasing our financing costs.
FY2019 insights
With the exception of geopolitical and macroeconomic developments (mentioned in the Geopolitics and macroeconomics section), which
are expected to increase commodity price volatility, there are no changes identified in the risk environment for commodity prices that are
likely to significantly increase or decrease the Group’s exposure to commodity prices. Volatility in the market will continue to translate into
profit variability.
42 BHP Annual Report 2019
Balance sheet and liquidity
Risks associated with BHP’s ability to maintain a robust and effective balance sheet, distribute dividends and remain financially liquid.
Why is this important to BHP?
Fluctuations in commodity prices and ongoing global economic volatility could materially and adversely affect our future cash flows
and ability to access capital from financial markets at acceptable pricing. If our liquidity and cash flows deteriorate significantly,
it may adversely affect our ability to fund our strategy.
Threats
Management
If our key financial ratios and credit ratings are not maintained,
our ability to fund current and future capital projects and
acquisitions, cost of financing, solvency, ability to pay a dividend
and/or share price may be impacted.
The Financial Risk Management Committee (FRMC) oversees the
financial risks faced by BHP and endorses or approves financial
risk management strategies, mandates and activities, including
those related to commodity, currency, credit and insurance
markets. The role of the FRMC is described in sections 2.14
and 2.15. Note 21 ‘Financial risk management’ in section 5 outlines
our financial risk management strategy.
We seek to maintain a strong balance sheet supported by
our portfolio risk management strategy. To achieve this, we:
• operate a diversified portfolio, which reduces overall cash
flow volatility;
• maintain access to key debt markets globally;
• monitor target gearing levels and credit rating metrics;
• assess cash flow at risk to monitor sensitivities to market prices
and their impact on key financial ratios;
• maintain target cash and liquidity buffers within ranges set by
the Board (which are designed to sustain BHP through periods
where there is limited access to debt markets);
• operate within credit limits set by frameworks approved by
the FRMC.
FY2019 insights
Protectionism and political uncertainty heightened during FY2019, which we expect will constrain global economic growth.
However, no material changes have been identified in the risk environment, internally or externally, that are expected to significantly
increase the Group’s risk exposure or significantly impact the Group’s ability to maintain a strong balance sheet, distribute dividends
and remain financially liquid.
1
i
S
t
r
a
t
e
g
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
a
t
B
H
P
R
e
m
u
n
e
r
a
t
i
o
n
R
e
p
o
r
t
D
i
r
e
c
t
o
r
s
’
R
e
p
o
r
t
i
F
n
a
n
c
a
i
l
S
t
a
t
e
m
e
n
t
s
A
d
d
i
t
i
o
n
a
l
i
n
f
o
r
m
a
t
i
o
n
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
BHP Annual Report 2019 43
1.7 Samarco
Monitoring of the Doce river water.
The Fundão dam failure
On 5 November 2015, the Fundão tailings dam operated by Samarco
Mineração S.A. (Samarco) failed. Samarco is a non-operated joint
venture owned by BHP Billiton Brasil Limitada (BHP Billiton Brasil)
and Vale S.A. (Vale), with each having a 50 per cent shareholding.
A significant volume of tailings (water and mud-like waste resulting
from the iron ore beneficiation process) was released. Tragically,
19 people died – five community members and 14 people who
were working on the dam when it failed. The communities of Bento
Rodrigues, Gesteira and Paracatu were flooded. A number of other
communities further downstream in the states of Minas Gerais
and Espírito Santo were also affected by the tailings, as was the
environment of the Rio Doce basin.
Our response and support for Fundação Renova
More than three years into the recovery process, we remain
committed to doing the right thing for the people and the
environment in the Rio Doce region in a challenging and complex
operating context.
The Framework Agreement entered into between Samarco, Vale
and BHP Billiton Brasil and the relevant Brazilian authorities in
March 2016 established Fundação Renova, a not-for-profit, private
foundation that has developed and is implementing 42 remediation
and compensatory programs to restore the environment and
re-establish affected communities. As well as remediating the
impacts of the dam failure, Fundação Renova is implementing
a range of compensatory actions aimed at leaving a lasting,
positive legacy for the people and environment of the Rio Doce.
BHP is focused on supporting Fundação Renova’s operations through
representation on the Board of Governors and Board Committees,
making available secondees who work within Fundação Renova to
provide their technical expertise on priority areas, and regular peer
engagement on issues such as safety, risk management, human
rights and compliance.
Fundação Renova
Fundação Renova’s staff of approximately 530 people is supported
by about 6,200 contractors. Its CY2019 budget is R$3.1 billion.
The activities of Fundação Renova are overseen by an
Interfederative Committee comprising representatives from the
Brazilian Federal and State Governments, local municipalities,
environmental agencies, impacted communities and the Public
Defense Office, who monitor, guide and assess the progress of
actions agreed in the Framework Agreement. The Interfederative
Committee is supported by the Technical Chambers, made up
of specialists from the various government departments, which
are established to assist the Interfederative Committee in the
performance of its purpose of guiding, monitoring and supervising
the execution of the socioeconomic and socio-environmental
programs managed by Fundação Renova. There are 11 Technical
Chambers in the following areas: communication, participation,
dialogue and social control; economy and innovation; social
organisation and emergency aid; Indigenous peoples and traditional
communities; reconstruction and infrastructure recovery; health,
education, culture, leisure and information; conservation and
biodiversity; tailings and environmental safety management; forestry
restoration and water production; and water safety and quality.
Fundação Renova is governed by a Board of Governors, currently
comprising representatives nominated by Vale, BHP Billiton
Brasil and the Interfederative Committee. In the near term,
representatives of impacted communities are also expected to
join the Board of Governors. The Board of Governors appoints
an Executive Board, including the CEO, which is responsible for
the operational management of Fundação Renova.
Fundação Renova’s governance structure also comprises a Fiscal
Council, Advisory Council, seven Board Committees, a Compliance
Manager and an Ombudsman. The Advisory Council includes
representation from impacted communities and community
development and education experts.
On 25 June 2018, Samarco, Vale and BHP Billiton Brasil signed a
Governance Agreement with the other parties to the Framework
Agreement, the Public Prosecutors Office and the Public Defense
Office. The Governance Agreement augments the participation
of impacted people in the decision-making process, through
representation on both the Fundação Renova Board of Governors
and the Interfederative Committee.
44 BHP Annual Report 2019
In addition, during FY2019, a network of 18 local commissions,
made up of affected people, was established along the Rio Doce
to represent the affected people in the governance process for
full reparation of the damages.
Participants in the local commissions will be offered training
by the technical advisers (non-profit organisations that aim
to defend the rights of affected people, providing access
to information and technical guidance) to enable them to
actively participate in the process by submitting proposals,
recommendations and comments on the work of the Interfederative
Committee, Technical Chambers and Fundação Renova.
Each commission should also be able to work with other local
commissions to discuss and improve the results in each territory.
Due to the diversity, scale and complexity of the programs,
Fundação Renova collaborates and engages broadly with affected
communities, scientific and academic institutions, regulators
and civil society.
Resettlement
One of Fundação Renova’s priority social programs is the livelihood
restoration program to relocate and rebuild the communities of
Bento Rodrigues, Paracatu and Gesteira. A key to the success of
this program is the participation of affected community members,
their technical advisers, State Prosecutors, municipal leaders,
regulators and other interested parties.
The process involves the identification and acquisition of land,
design and planning for the urban plan, including all infrastructure
services (roads, power, water, drainage, sewerage) and public
buildings (schools, health centres, squares, sports grounds and
religious buildings), and construction of new houses for the affected
people. The resettlement project provides local employment for
community members where possible and support to help affected
people restore their livelihoods.
In Bento Rodrigues, preparation for construction of the public
school has commenced and infrastructure works are progressing.
Unfortunately, work is behind schedule due to delays in project
engineering and in the permitting process. Fundação Renova has
signed an agreement to provide additional resources required by
the municipality to analyse the individual house projects for
permitting approval. Of the 257 houses, as of June 2019, 112 families
had concluded the conceptual design of their houses and around
76 house projects have permits submitted to start construction.
In June 2019, Renova signed Letters of Intent with two major Brazilian
construction companies to undertake construction of the houses
and infrastructure.
In Paracatu, by June 2019, all licences and authorisations to
commence construction were granted and works to prepare
the construction site were under way (117 houses).
In December 2018, land was purchased for the resettlement of
37 families of Gesteira following a protracted negotiation with
the landowner. The urban plan design is being designed with
the community.
In addition to these three community resettlements, 14 families
from the rural area chose to rebuild their houses on their previous
property, and of these, six houses have been rebuilt and delivered
to the families.
Eighty-three families have chosen not to live in one of the three
villages or in their previous houses. Fundação Renova is assisting
them. Twenty-two properties have been purchased for these families
(as of June 2019).
Financial assistance and compensation
Fundação Renova had paid R$1.7 billion in indemnification and
financial aid up to June 2019.
Fundação Renova has distributed about 13,160 financial assistance
cards to those whose livelihoods were impacted by the dam failure,
including registered and informal commercial fisherfolk who are
unable to fish due to the imposition of fishing bans in the Rio Doce
and along the coast of Espírito Santo. The payments are designed
to provide those affected with the capacity to support themselves
and their families pending the re-establishment of conditions that
enable them to resume their economic activities.
Fundação Renova is also undertaking Brazil’s largest mediated
compensation program to fairly compensate all individuals
impacted by the dam failure. It comprises two key components:
• The Water Damages component compensated people for
an interruption to public water supplies for seven to 10 days
following the dam failure. Over 268,000 people participated
in the program, and were paid a total of approximately
R$267 million. Between judicial and extrajudicial processes,
about 300,000 settlements have been reached in small claims
filed by impacted people in Minas Gerais and Espírito Santo
requesting the payment of moral damages related to the
shortage of public water supply.
• The General Damages component covers all other impacts,
including loss of life, injury, property, business impacts, loss of
income and moral damages. The program was designed based
on inputs from public agencies, technical entities and impacted
families and has been validated by the Interfederative Committee.
Compensation represents 36 per cent of Fundação Renova’s budget,
which is approximately R$1 billion for CY2019.
Of the 19 fatalities, 16 families have been fully indemnified and one
partially. The remaining two families are still in legal negotiations.
Other socioeconomic programs
While resettlement, compensation and restoring fishing livelihoods
are an important focus, Fundação Renova continues to implement
a wide range of other socioeconomic programs in areas such
as health and social protection, education, small business
development, economic diversification, Indigenous peoples
and traditional communities (i.e. sand-gold miners):
• There are two work fronts of Fundação Renova in the area of
health: (i) conducting epidemiological and toxicological studies
to investigate the health risk of tailings and heavy metals from
the Doce River and to monitor the impact of dust on people’s
lives and (ii) supporting the public management of municipalities
by strengthening existing municipal structures, both in clinical
care and social protection. In March 2019, more than 60
professionals, including doctors, nurses, social workers and
psychologists hired by Fundação Renova worked in Mariana
and Barra Longa (Minas Gerais).
• Fundação Renova seeks to promote the local economy to
stimulate the resumption of the economic activity of the impacted
region. To promote small business development and economic
diversification, Fundação Renova launched, amongst others, a
fund of R$40 million, to finance micro and medium companies
with loans ranging from R$10,000 to R$200,000.
• Fundação Renova prioritises the local workforce in repair actions
and in March 2019, reported that 57 per cent of people directly
engaged or engaged via suppliers were from affected
municipalities. Fundação Renova’s goal is for this percentage
to stabilise at or exceed 70 per cent.
• Actions to protect and restore the quality of life of Indigenous
peoples and traditional communities aim to repair and
compensate for the social, cultural, environmental and economic
impacts on four communities and a total of 1,600 families. Impact
studies are being developed to be the foundation of an integrated
development action plan to recover the livelihoods of each of
these communities.
BHP Annual Report 2019 45
1
i
S
t
r
a
t
e
g
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
a
t
B
H
P
R
e
m
u
n
e
r
a
t
i
o
n
R
e
p
o
r
t
D
i
r
e
c
t
o
r
s
’
R
e
p
o
r
t
i
F
n
a
n
c
a
i
l
S
t
a
t
e
m
e
n
t
s
A
d
d
i
t
i
o
n
a
l
i
n
f
o
r
m
a
t
i
o
n
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
1.7 Samarco continued
Legal proceedings
BHP Group Limited, BHP Group Plc and BHP Billiton Brasil are
involved in legal proceedings relating to the Samarco dam failure.
For more information on the significant legal proceedings in
which BHP is currently involved, refer to section 6.6.
Restart
While restart remains a focus and is expected to provide a positive
effect on livelihoods in impacted communities, restart will only
occur if it is safe, economically viable and has the support of
the community.
Progress on our commitments
Following the investigation into the causes of the dam failure,
Samarco and its shareholders identified a number of specific actions
to help prevent a similar event from occurring. The actions were in
addition to the overall improvements we identified to further improve
the management of our tailings dams (as discussed in section 1.8).
Monitoring: A centralised monitoring system and control room with
emergency warning and response protocols has been established
for the Samarco tailings dams. Specifically trained personnel staff
the control room 24 hours a day, seven days a week.
Dam decommissioning plan: Due to legislative changes in Brazil,
Samarco is currently progressing plans for the accelerated
decommissioning of its upstream tailings dams (the Germano
dam complex). Plans for the decommissioning are at an early
stage and work is in progress on finalising the conceptual design.
Emergency drills: Emergency drills are conducted once a year,
bringing together the communities, employees and civil defence to
validate the efficiency of the Emergency Response Plan, so that all
parties that may potentially be affected are aware and prepared to
respond in case of an emergency.
More information on our ongoing dam
and tailings management is available in
our Sustainability Report 2019 at bhp.com.
More information on health, safety and environmental
performance at our NOJVs is available in our Sustainability
Report 2019, available online at bhp.com.
Bento Rodrigues school construction works.
Environmental remediation
Fundação Renova had successfully concluded works to stabilise the
impacted land areas by June 2019. The riverbanks and floodplains
have been vegetated, river margins have been stabilised and, in
general, water and sediment qualities have returned to historic
conditions. Regarding long-term remediation, work is continuing
with landowners and regulators to define the land use objectives,
further interventions that may be required, and the indicators and
monitoring programs that will be used to demonstrate success of
the program.
One of the main concerns held by stakeholders regarding the
tailings related to the potential contamination of water, sediment,
soil and biota. Fundação Renova commissioned human health
and ecological risk assessment studies to answer these questions.
Although the tailings have low concentrations of trace metals, the
background concentrations of some elements are elevated in the
area due to previous human activity or natural conditions. It is
therefore important that studies are well designed and results clearly
show the source of any potential health risks. BHP has been working
with Fundação Renova to make sure robust data is collected, the
correct methodologies are applied and clear causes for any health
impacts are identified so that health authorities have accurate
information to support their decision-making.
Water quality, aquatic habitat and fish surveys are continuing in the
rivers and coastal zone to understand the impact of the tailings flow
and the rate of recovery of the ecological systems. Results from
these studies indicate that, while sediment in the river channels
along the spill flow path upstream of the Candonga reservoir
continues to limit the re-establishment of habitats and aquatic fauna
diversity and abundance, the natural sediment transport processes
will ultimately restore suitable habitat. Methods to enhance the rate
of habitat recovery in the upstream section of the river closest to
the dam failure are under implementation.
Research institutions have been progressing with studies along
the river and coast required by regulators and prosecutors, with
preliminary results scheduled for late 2019. In May 2019, Brazil’s
National Sanitary Surveillance Agency (ANVISA) attested to the
safety of the consumption of fish and crustaceans from the Doce
River Basin and the coastal region, within daily limits of 200 grams
per adult and 50 grams per child. Given the significant impacts of
the fishing bans on the livelihoods of commercial and subsistence
fisherfolk and the social cohesion within their communities, BHP
Billiton Brasil has continued providing technical support to Fundação
Renova to accelerate the collection of data to address the concerns
of regulators and the community. This includes analysis of the safety
of fish for human consumption and the status of fish populations to
support lifting of the fishing bans currently in place.
46 BHP Annual Report 2019
1.8 Tailings dams
Tailings dams are dynamic structures and maintaining their integrity requires consideration of a range
of factors, including appropriate engineering design, quality construction, ongoing operating discipline
and effective governance processes.
Nothing is more important than the safety of our people and
communities. Immediately following the tragic failure of the Fundão
dam at Samarco in 2015, the BHP Board and senior management
initiated a dam risk review to assess the management of significant(1)
tailings storage facilities,(2) both active and inactive. This review was
in addition to existing review processes already being undertaken
by our operated assets. The review, conducted by a combination
of external tailings experts and BHP personnel, assessed dam design,
construction, operations, emergency response and governance
to determine the current level of risk and the adequacy and
effectiveness of controls.
Improvement actions were also identified at the Group level to
address common findings and lessons learned across the Group
so that our approach to dam risk management could be further
improved. As part of this, a central technical team was set up
to enhance oversight and assurance. We also increased our
investment in research and development to reduce and eliminate
tailings storage risks, including research into static liquefaction
failure mechanisms and evaluating dewatering of tailings. We are
also actively assisting the International Council on Mining and
Metals (ICMM) Tailings Working Group to contribute to improvements
in tailings storage management across the broader mining industry.
The scope of the review included:
• significant tailings facilities across all operated assets
and non-operated joint ventures;
• any proposed significant tailings or water dams as part of major
capital projects;
• consideration of health, safety, environmental, community and
financial impacts associated with the failure of a tailings dam,
including the physical impacts of climate change.
Improvement actions were assigned to address facility-specific
findings. Our Internal Audit and Advisory team subsequently
followed up to assess quality and completeness. These actions
resulted in enhancements such as buttressing of dam walls and
installation of additional instrumentation to monitor dam integrity.
Following such findings, we have subsequently undertaken and will
continue to undertake dam safety reviews, which provide external
assurance statements on dam integrity.
Prior to the tragic collapse of the Brumadinho dam at Vale’s iron
ore operation in Brazil in January 2019, we already had a significant
focus on looking at how we could deliver a step change reduction
in tailings risk. Together with our peers across the resource sector,
Brumadinho further strengthened our resolve to collaborate to
reduce tailings risk by sharing and implementing best practice.
As well as implementing a comprehensive tailings governance plan,
we established an internal Tailings Taskforce team reporting to the
Executive Leadership Team and the Board’s Sustainability Committee.
The Taskforce is accountable for the continued improvement and
assurance of our operated tailings storage facilities, progressing
the development of technology to improve tailings management
storage, and engaging in the setting of new tailings management
standards. BHP continues to review our approach to tailings
management as information on the causes of the Brumadinho
dam failure come to light, and will continue to consider any
industry guidance, standards and regulation as they emerge.
(1) Significance was determined as part of the review process taking account of the dam classification under the Canadian Dam Association and/or the Australian
National Committee on Large Dams for both active and inactive facilities.
(2) A tailings storage facility could comprise multiple dams or cells that have: a contiguous, structurally similar interconnected wall, operated under the same tailings
disposal regime, are interdependent for stability, of similar height and risk profile.
BHP Annual Report 2019 47
1
i
S
t
r
a
t
e
g
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
a
t
B
H
P
R
e
m
u
n
e
r
a
t
i
o
n
R
e
p
o
r
t
D
i
r
e
c
t
o
r
s
’
R
e
p
o
r
t
i
F
n
a
n
c
a
i
l
S
t
a
t
e
m
e
n
t
s
A
d
d
i
t
i
o
n
a
l
i
n
f
o
r
m
a
t
i
o
n
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
1.8 Tailings dams continued
We welcome a common, international and independent body
to oversee integrity of construction and operation of all tailings
storage facilities across the industry. In addition, we support calls
for greater transparency in tailings management and plan to work
with community, regulatory and financial stakeholders to promote
the application of consistent disclosure that informs better tailings
dam stewardship.
Dam risk management
BHP’s approach to dam risk management at our operated dams
is integrated into our standard approach to risk management,
assurance and continuous improvement with particular focus
on four key areas:
1. Maintenance of dam integrity;
2. Governance of dam facilities;
3. Monitoring, surveillance and review;
4. Emergency preparedness and response.
Supporting this approach to dam risk management at our operated
assets are Group-wide processes of technical support and oversight.
Maintenance of dam integrity
Central to our approach is the recognition that maintaining dam
integrity is a process of continuous assessment that needs to be
maintained for the life (including into closure and post-closure) of
a tailings facility. As a result, we have identified five key dimensions
to maintaining dam integrity:
1.
Design – the basis of dam design is guided by design criteria
specified through the Australian National Committee on Large
Dams (ANCOLD), the Canadian Dam Association (CDA) and
local regulation, taking account of dam classification;
2.
3.
4.
5.
Construction – quality assurance and quality control across
all construction phases (from initial construction to dam
lifts/expansions during operation to closure and post closure);
Operations and maintenance – operating and maintaining
the dam in accordance with its design requirements;
Change management – identifying, assessing and mitigating
the impacts of any changes on dam design and integrity;
Monitoring, surveillance and review – ensuring the dam
is functioning as intended.
Governance of dam facilities
We believe that effective governance encompasses a range
of aspects from the management of change in our business to
appropriately employing and enabling qualified personnel with
clear accountabilities.
We have mandated three key roles across our operated assets,
accountable to the Asset General Manager of the relevant asset:
• Dam Owner – the single point of accountability for maintaining
effective governance and integrity of the tailings storage facility
throughout its life cycle;
• Responsible Dam Engineer – a suitably qualified BHP individual
accountable for maintaining overall engineering stewardship
of the facility, including planning, operation, surveillance
and maintenance;
• Engineer of Record – an independent, suitably qualified
professional engineer retained by the Dam Owner for the
purpose of maintaining dam design, certifying dam integrity
and supporting the Dam Owner and the Responsible Dam
Engineer on any other matters of a technical nature.
Monitoring, surveillance and review
Given tailings dams are dynamic structures we believe effective
monitoring, surveillance and review is central to ongoing dam
integrity and governance. We believe these processes span
six dimensions, with the level of utilisation of each dimension
being dependent on the specific needs of the relevant facility.
These six dimensions include:
1. Monitoring systems – operating in real time or periodically;
2. Routine surveillance – undertaken by operators;
3.
4.
5.
6.
Dam inspections – more detailed inspections undertaken
periodically by the Responsible Dam Engineer;
Dam safety inspections – annual inspections undertaken
by the external Engineer of Record reviewing aspects
across both dam integrity and governance;
Dam safety reviews – conducted by an external third party
as set out below;
Tailings review or Stewardship Boards(1) – a panel of qualified
independent individuals established, whose capability is
commensurate with dam significance, under specific terms
of reference to review aspects such as the current status of
the dam; any proposed design changes; and outcomes of
any inspections or dam safety reviews. The review board is
approved by and accountable to the asset General Manager.
The type and frequency of monitoring, surveillance and review
is informed by the consequence classification, complexity and
operational status of the dam. Dams that are likely to have a
greater level of consequence, as a result of failure, that have
greater technical complexity and that are actively operating
will have monitoring, surveillance and reviews with greater
rigour and frequency.
Dam safety reviews
Dam safety reviews are central to our approach to dam integrity
and continuous improvement. We engage an external engineer
to undertake dam safety reviews consistent with the guidance
provided by the CDA in their 2016 Technical Bulletin on Dam Safety
Reviews. As per this guidance, review frequency is informed by the
dam classification under the CDA.
Dam safety reviews are detailed processes that include a thorough
review of dam integrity, dam governance and include a review of
the dam break assessment and dam consequence classification.
Reviews are led by an external qualified professional engineer
(selected for their appropriate level of education, training and
experience), with support and input from other technical specialists
from fields that may include, for example, hydrology, geochemistry,
seismicity, geotechnical and mechanical. At the conclusion of the
review, the qualified professional engineer provides a signed
assurance statement, which includes a comment as to the integrity
of the facility.
Emergency preparedness and response
We believe the final key element in our approach to dam risk
management is emergency preparedness and response. Our
approach to emergency response planning for our tailings facilities
is designed to be commensurate with risk, with the following steps
taken as appropriate given the risk:
• identifying and monitoring stability and operating conditions,
with thresholds that prompt preventive or remedial action;
• assessing and mapping the potential impacts from a hypothetical,
significant failure, including infrastructure, communities and
environment, both on and offsite, regardless of probability;
• establishing procedures to assist operations personnel
responding to emergency conditions at the dam;
• testing and training in emergency preparedness ranges from
desktop exercises to full-scale simulations. Desktop and field
drills are scheduled at a frequency commensurate with the level
of risk of the facility.
(1) BHP assesses the dam classification, risk and operational circumstances in determining whether to empanel a tailings review or Stewardship Board. Not all facilities will
have tailings reviews or Stewardship Boards. Tailings reviews or Stewardship Boards are either in place or in the process of being established for our operated assets
with very high and extreme classified tailings facilities.
48 BHP Annual Report 2019
BHP’s operated and non-operated tailings portfolio
The following classifications align to the CDA classification
system. It is important to note that the classification is based
on the modelled, hypothetical most significant failure mode and
consequences possible without controls, and not on the current
physical stability of the dam. It is also important to note that it is
possible for dam classifications to change over time, for example,
following changes to the operating context of a dam. As such,
this data represents the status of the portfolio as at May 2019.
The dam classification informs the design, surveillance and review
components of risk management and, therefore, dams that will
likely have a greater level of consequence as a result of failure
will have more rigorous requirements than dams that will have
a lesser level of consequence.
In total, we have 67 tailings facilities(1) at our operated assets,
29 of which are of upstream design. Of the 67 operated facilities,
we have five classified as extreme and a further 16 classified as very
high. Thirteen of our operated facilities are active. The substantial
inactive portfolio (54) at our operated assets is due largely to the
number of historic tailings facilities associated with our North
American legacy assets portfolio.
There are nine tailings facilities at our non-operated joint ventures.
All non-operated facilities are located in the Americas. There
are two active tailings facilities: Antamina in Peru, which is of
downstream/centreline construction and Cantor TSF at Cerrejón
in Colombia, which is of downstream construction. In addition, there
are seven inactive facilities. These include: two upstream facilities
at Samarco (Germano) in Brazil that are being decommissioned
following the February 2019 rulings by the Brazilian Government
on upstream dams in Brazil; three upstream inactive facilities and
one inactive modified centreline facility at Resolution Copper in the
United States; and one downstream inactive facility at Bullmoose
in Canada. The highest classification facilities, rated as extreme, are
the downstream facility at Antamina and the upstream Germano
facilities at Samarco.
More information on tailings dams is available online
at bhp.com.
Classification of operated
tailings facilities (2) (3) (4)
Types of operated
tailings facilities
Operational status of
operated tailings facilities
Low 20
Significant 13
High 11
Very high 16
Extreme 5
N/A 2
Upstream 29
Centreline 8
Downstream 16
Other (5) 14
Inactive (6) 54
Active 13
(1) The number of tailings storage facilities is based on the definition agreed to by the International Council on Mining and Metals (ICMM) Tailings Advisory Group.
(2) The following classifications align to the CDA classification system. It is important to note that the classification is based on the modelled, hypothetical most significant
failure mode and consequences possible without controls, and not on the current physical stability of the dam.
(3) For the purposes of this chart, ANCOLD and other classifications have been converted to their CDA equivalent. Hamburgo and Island Copper tailings facilities are
not considered dams and are, therefore, not subject to classification: Hamburgo TSF at Escondida is an inactive facility where tailings were deposited into a natural
depression; and Island Copper TSF in Canada, acquired in the 1980s, is also an inactive facility. Tailings at Island Copper were deposited in the ocean under an
approved licence and environmental impact assessment. This historic practice ceased in the 1990s. We have since committed to not dispose of mine waste rock
or tailings in river or marine environments.
(4) These classifications align to the CDA classification system and reflect the modelled, hypothetical most significant failure mode and consequences possible without
controls, and not the current physical stability of the dam.
(5) Other includes dams of a design that combines upstream, downstream and centreline, and the two non-dam tailing facilities of Hamburgo TSF in Chile and Island
Copper TSF in Canada.
(6) Inactive includes facilities not in operational use, under reclamation, reclaimed, closed and/or in post-closure care and maintenance.
BHP Annual Report 2019 49
1
i
S
t
r
a
t
e
g
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
a
t
B
H
P
R
e
m
u
n
e
r
a
t
i
o
n
R
e
p
o
r
t
D
i
r
e
c
t
o
r
s
’
R
e
p
o
r
t
i
F
n
a
n
c
a
i
l
S
t
a
t
e
m
e
n
t
s
A
d
d
i
t
i
o
n
a
l
i
n
f
o
r
m
a
t
i
o
n
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
1.9 People
1.9.1 Our people
We employ over 72,000 employees and contractors globally. We are committed to investing
in our people so they have the right skills and are supported by a healthy workplace culture
that is inclusive and collaborative.
We are committed to empowering our people to find safer,
more creative and more efficient ways of working. We continue
to develop a culture based on trust and collaboration and give
our people more say, new capabilities and tools, and new avenues
for technology and innovation to support BHP’s transformation.
We provide competitive remuneration to reward employees for
their expertise and commitment to our business strategy and
long-term success. Our remuneration approach is designed to
inspire our employees to embrace BHP’s core objectives and
values. Performance against key performance indicators linked
to safety, productivity and culture drives our employees’ variable
reward outcomes.
Building an enabled culture to support BHP’s transformation
Our annual Engagement and Perception Survey (EPS) is an important
tool to gauge our culture. The overall results in FY2019 remained
stable and showed we sustained the positive improvements achieved
in FY2018, despite the changes that occurred across the business.
The FY2019 results indicated we have more to do to continue
to simplify our processes and make it easier for our team to
perform their work. Our focus for FY2020 will be to support our
transformation initiatives (refer to section 1.4.4) and realise the
benefits to our culture and people. We will continue to enable our
people and address the obstacles that prevent them from doing
their job well by simplifying processes and increasing technology
capability. We expect that further capability development of our
employees in our new ways of working and continued development
of our leaders will set up our people and the organisation for success.
Developing our capabilities
We believe that the changing nature of work presents significant
opportunity for BHP. Our approach is to invest in new skills,
so our people are ready for the jobs of the future.
Over the past five years, we have invested in developing leadership
capability, as these qualities are critical to guiding our people and
navigating changes to the work environment.
Our employees told us they feel proud to work at BHP and
described the work environment as collaborative and inclusive.
They have the confidence to make decisions required to do their
job well and believe they have opportunities for professional
and personal development.
Our Operational Leadership Program aims to develop the technical
and operational leadership excellence of our operational general
managers and to identify successors to senior leadership roles that
drive operational value. The program launched in FY2018 and was
completed by 38 operational leaders in FY2019.
We have seen improvements in our EPS results related to equal
opportunities at work for all employees, perceptions on how
the leadership group communicates a vision of the future that
is exciting, how leaders are managing change, and perceived
opportunities for growth and development. These are important
indicators of people’s experiences at work.
The Step Up to Leadership and Leading Value programs continue
to drive our foundational leadership focus and in FY2019, 856
leaders completed the programs. Our Maintenance Academy
Program, introduced in FY2018, saw 39 maintenance managers
work to broaden their technical knowledge, leadership capability
and collaboration in FY2019.
50 BHP Annual Report 2019
We also focused in FY2019 on developing the leadership skills of
our Indigenous employees through our Indigenous Development
Program. The program is designed to identify Indigenous
employees with leadership potential and to respond to issues
identified as barriers to career progression. By May 2019, 147
employees in Australia had completed the program. Of the 97
employees that completed the program in the first half of 2019,
40 per cent have moved into new roles and 19 per cent have been
promoted to leadership roles.
We are proud of our EPS results related to the performance of our
leaders. In particular, the results identified our leaders as strong in
communicating the vision of BHP and leading their teams through
significant change.
In FY2020, we expect to increase our focus on systems, processes,
tools and behaviours to improve operational capability. The BHP
Operating System sets out the foundation for long-term and in-depth
learning and development, by developing practices and capabilities
that empower our people to pursue operating excellence.
Operations Services, which provides maintenance and production
services across Minerals Australia supports people to build their
skills through coaching and by performing in-field verifications.
This helps deliver consistent equipment operation and maintenance
that balances safety, maximum productivity and equipment
reliability. Participants report a high sense of achievement as they
leverage best practice from across BHP to help perfect their daily
activities and accelerate productivity.
Inclusion and diversity
We believe our people should have the opportunity to fulfil
their potential and thrive in an inclusive and diverse workplace.
In our experience, inclusion and diversity promotes safety,
productivity and wellbeing within BHP and underpins our ability
to attract new employees.
We employ, develop and promote people based on merit and our
systems, processes and practices are designed to empower fair
treatment. We do not tolerate any form of unlawful discrimination,
bullying or harassment.
Our employees are trained to recognise and mitigate potential
bias towards any employee. To help address gender pay disparities
we have taken steps to reduce potential bias in recruitment and
conduct an annual gender pay review, the results of which are
reported to the BHP Remuneration Committee.
Respect is one of our six core Our Charter values and we believe
it is fundamental to building stronger teams, and being a truly
inclusive and diverse workplace. For some people in our business,
this is not their experience of working at BHP. We are determined to
address this, so during FY2019 we began a Group-wide campaign
about respectful behaviour. The aim is to create greater awareness
and build understanding of what disrespectful behaviour is and
how it affects our people. We shared real-life examples of how
some people experience disrespectful behaviour at BHP, to
highlight the current environment and generate conversations.
The campaign asks everyone to reflect on their own behaviours
and what they see around them and ask ‘Is that ok?’ We equipped
leaders and employees with materials to help them have
conversations about disrespectful behaviours, and take steps to
address it. We also launched a new eLearning module on inclusion
and continue to develop additional resources for our people as we
continue this critical initiative. Further development of a culture of
care within our business is a fundamental element of our FY2020
business plan.
Gender balance (1)
We have an aspirational goal to achieve gender balance globally
by CY2025. In FY2019 we increased the representation of women
working at BHP by 2.1 percent, resulting in 1,156 more female
employees than the same time in FY2018. Our overall
representation of women is 24.5 per cent.(1)
In FY2019, the percentage of people newly hired to work for BHP
was 62.3 per cent male and 37.7 per cent female. This female
representation outcome is a marked increase when compared
to FY2015 (10.4 per cent), the baseline for our aspirational goal.
Our growth projects have reported strong female representation.
For example, South Flank operational workforce in Western
Australia has achieved 41 per cent female representation as at the
end of FY2019. We have improved the voluntary turnover rate of
women by 0.7 per cent, when compared to FY2018; the turnover
of women (11.4 per cent) remains higher than the rate for men
(10.4 per cent).
Our strategy to achieve a more diverse and inclusive workplace
continues to focus on the following four areas:
• embedding flexibility in the way we work;
• encouraging and working with our supply chain partners
to support our commitment to inclusion and diversity;
• uncovering and taking steps to mitigate potential bias in our
behaviours, systems, policies and processes;
• ensuring our brand is attractive to a diverse range of people.
Indigenous employment
In communities in which we operate, we aim to provide
employment opportunities that contribute to sustainable social
and economic benefits for Indigenous peoples. In Minerals
Australia, Indigenous employment within our overall workforce
increased from 4.4 per cent to 5 per cent (1,090 to 1,168) as we
aim to achieve 5.75 per cent by the end of FY2020. Twenty per
cent of all apprentices were Aboriginal and Torres Strait Islander
people. In North America, we have focused on working with our
contracting partners to support the employment of First Nations
and Métis peoples, who now comprise 9 per cent of our workforce
at the Jansen Potash Project. Chile has implemented a number of
initiatives that will result in formal performance reporting in FY2020.
LGBT+ inclusion
We want to provide a safe, inclusive and supportive workplace for
everyone at BHP. Jasper is BHP’s employee inclusion group for our
lesbian, gay, bisexual, transgender and others (LGBT+) community
and its allies. Inspired by the mineral rock jasper, which is known
for its unique multi-coloured patterns, the group was formally
endorsed by BHP’s Global Inclusion and Diversity Council in 2017
and is sponsored by BHP Executive team member, Laura Tyler.
Jasper’s aim is to drive a safe, inclusive and supportive work
environment for everyone by providing advice on ways to reduce
bias and ensure LGBT+ people are respected and valued irrespective
of their sexual orientation, gender identity or intersex variability.
Since its formation in 2017, Jasper has grown to over 900
members. We rolled out LGBT+ inclusion awareness and education
sessions across all Minerals Australia operations in FY2019, with
plans to extend to our other operations and offices in FY2020.
We also continue to celebrate days of significance, including
IDAHOBIT (International Day Against Homophobia, Biphobia,
Interphobia and Transphobia) and Wear It Purple Day (awareness
day for young LGBT+ people).
(1) Based on a ‘point in time’ snapshot of employees as at 30 June 2019, as used in internal management reporting for the purposes of monitoring progress against our
goals. This does not include contractors. This methodology differs from the data reported in section 1.9.2, which is calculated based on the average of the number
of employees at the last day of each calendar month for a 10-month period from July through to April and in accordance with our reporting requirement under the
UK Companies Act 2006.
BHP Annual Report 2019 51
1
i
S
t
r
a
t
e
g
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
a
t
B
H
P
R
e
m
u
n
e
r
a
t
i
o
n
R
e
p
o
r
t
D
i
r
e
c
t
o
r
s
’
R
e
p
o
r
t
i
F
n
a
n
c
a
i
l
S
t
a
t
e
m
e
n
t
s
A
d
d
i
t
i
o
n
a
l
i
n
f
o
r
m
a
t
i
o
n
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
1.9.1 Our People continued
Flexible working
Flexible work supports the diversity and wellness of our workforce.
Some 41 per cent of our people worked flexibly in FY2019 and
we continue to educate our workforce about flexible working
at BHP. We also continue to challenge the mindset that flexible
working is only available for office-based employees, with a
number of operations implementing flexible rosters and job
share arrangements that assist employees both commuting long
distances and living locally. For example, the Crib Relief Program
at BHP Mitsubishi Alliance (BMA) changed the existing approach
to truck crib relief by reducing the shift length for relief drivers
to better align with school hours. This helped unlock a new and
more diverse talent pool that also increased the workforce’s local
community representation. It also helped improve workforce
culture and morale as employees shared skills and knowledge
with those new to the industry.
Working with suppliers
We continue to work with our suppliers on ensuring their products
and services are suitable for a diverse workforce, as well as
encouraging diversity in their own work teams. For example,
we are working with Caterpillar to investigate improving the
ergonomic design of their vehicles. At Olympic Dam in Australia,
following a request by an employee of Muslim faith living at
camp, we collaborated with our catering supplier to ensure the
availability of halal food. This helped ensure that appropriate food
was available for all living at camp, as well as helping create a sense
of one team among the workforce. In FY2019, where practicable,
we also introduced inclusion and diversity incentives into our
supply contracts.
Employee relations
The culture of care and trustful relationships is a fundamental
principle of our employee relations strategy. The three key focus
areas for employee relations at BHP has continued to be:
• ensure BHP complies with legal obligations and regional
labour regulations;
• negotiate, where there are requirements to collectively bargain;
• close out agreements with our workforce in South America and
Australia, with no lost time due to industrial action.
On 17 August 2018, Minera Escondida Limitada (Escondida)
successfully completed negotiations with Union N°1 and signed
a new collective agreement, effective for 36 months from
1 August 2018.
Our people policies
We have a comprehensive set of frameworks that support
our culture and drive our focus on safety and productivity.
Our Charter is central to everything we do. It describes our
purpose, our values, how we measure our success, who we
are, what we do and what we stand for.
Our Code of Conduct demonstrates how to practically apply
the commitments and values set out in Our Charter and reflects
many of the standards and procedures we apply throughout
BHP. We have a business conduct advisory service, as well as
internal dispute and grievance handling processes, to report
and address any potential breaches of Our Code of Conduct.
The Our Requirements standards outline the minimum mandatory
standards we expect of those who work for, or on behalf of,
BHP. Some of those standards relate to people activities, such
as recruitment and talent retention.
Our all-employee share purchase plan, Shareplus, is available
to all permanent full-time and part-time employees and those
on fixed-term contracts, except where local regulations limit
operation of the scheme. In these instances, alternative
arrangements are in place.
Through all of these documents, we make it clear that unlawful
discrimination on any basis is not acceptable. In instances where
employees require support for a disability, we work with them
to identify any roles that meet their skill, experience and capability
and offer retraining where required.
The information in this section illustrates how these policies
have been implemented and the steps that we take to measure
their effectiveness.
52 BHP Annual Report 2019
Case study:
Inclusion and diversity in Minerals Americas
Diversity in new projects
A goal of the Spence Growth Option (SGO) Project was
to develop a diverse workforce for the concentrator plant.
The aim was to achieve a gender-balanced workforce and
increase local employability by focusing on hiring people
from local communities, of people without experience
and workers with disabilities.
A series of information and recruitment activities occurred
in regional towns of Iquique, Calama, Antofagasta, Copiapo
and La Serena and the communities of Sierra Gorda and
Baquedano, reaching nearly 1,200 people. Differentiated
training also occurred for people with and without experience
in mining, engineering and procurement, as well as with
construction companies engaged by the SGO. This helped
improve knowledge ranging in areas from equipment
assembly to commissioning.
All recruitment goals were exceeded, including creating a
workforce with a number of employees with disabilities;
61 per cent females; 22 per cent of employees hired from local
communities; and 60 per cent from the Antofagasta region.
Gender balanced programs at Escondida
Escondida faced the challenge of embedding inclusion
and diversity within an operation that traditionally had a
high percentage of males and low employee turnover.
Similar to the SGO project, Escondida adopted a balanced
hiring strategy, which consistently achieved gender balance
month-on-month through FY2019. The recruitment strategy
for apprentices and graduates also achieved greater than
50 per cent female representation, resulting in some 50
women joining Escondida via this program since 2016.
There was a 4.1 per cent increase in total female representation
and a 5.9 per cent increase in female representation in regional
leadership executive roles in FY2019. Escondida’s total female
representation at the end of FY2019 was 15.5 per cent, up
from 7.4 per cent in FY2016. Female turnover decreased from
6.6 per cent in FY2016 down to 2.1 per cent at the end of FY2019.
Adopting the BHP Operating System enabled operational
roles to be redefined and standardised.
Victoria Moreno is an example of the positive effect of this
dedicated focus on diversity. After many years working in
various camp service roles, Victoria was inspired to pursue
an operator role and in FY2019 commenced working as
a truck operator in the North Pit at Escondida.
The Mine Apprenticeship Program also selected 45 female
maintainers from a class of 81, enhancing local employment,
increasing the gender diversity of our workforce and creating
new opportunities for women that historically have had fewer
opportunities than males to develop careers in the mobile
maintenance field.
Reflecting on her participation in the program, participant
Raquel Gavia commented:
‘I am a woman from an Indigenous community, specifically
from the Toconao community. This has been a very good
opportunity in my life, one I did not imagine I could have, which
I have tried to take advantage of, as I do not have experience
and they gave me the possibility to develop. I will always be
grateful. Women also have the right to work, and this opportunity
allows us to achieve this dream.’
BHP Annual Report 2019 53
1
i
S
t
r
a
t
e
g
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
a
t
B
H
P
R
e
m
u
n
e
r
a
t
i
o
n
R
e
p
o
r
t
D
i
r
e
c
t
o
r
s
’
R
e
p
o
r
t
i
F
n
a
n
c
a
i
l
S
t
a
t
e
m
e
n
t
s
A
d
d
i
t
i
o
n
a
l
i
n
f
o
r
m
a
t
i
o
n
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
1.9.2 Employees and contractors
The data in this section (consistent with previous years) are averages. We take the number of employees and contractors
(where applicable) at the last day of each calendar month for a 10-month period to calculate an average for the year. This does
not necessarily reflect the number of employees and contractors as at the end of FY2019. All the data in this section includes
Continuing and Discontinued operations for the financial years being reported.
The diagram below shows the average number of employees and contractors over the last three financial years, and a breakdown
of our average number of employees by geographic region over the last three financial years.
Average number of employees and contractors
for the year ended 30 June 2019 (1)
Average number of employees by geographic region
for the year ended 30 June 2019 (1)
2019
Total 72,414
Employees 28,926
Contractors 43,488
60%
40%
2018
Total 62,476
Employees 27,161
Contractors 35,315
57%
43%
2017
Total 60,644
Employees 26,146
Contractors 34,498
57%
43%
North America 1,999
7%
South America 6,979
24%
North America 2,490
9%
South America 6,729
25%
North America 2,786
11%
South America 6,361
24%
Europe 59
< 1%
Asia 1,743
6%
Australia 18,146
63%
Europe 70
< 1%
Australia 16,504
61%
Europe 74
< 1%
Australia 15,906
61%
Asia 1,368
5%
Asia 1,019
4%
The table below shows the gender composition of our employees, senior leaders and the Board over the last three financial years.
Female employees(1)
Male employees(1)
Female senior managers(2) (3)
Male senior managers(2) (3)
Female Board members(2)
Male Board members(2)
2019
6,874
22,052
70
227
4
7
2018
5,907
21,254
70
235
3
7
2017
4,868
21,278
65
211
3
7
(1) Based on the average of the number of employees at the last day of each calendar month for a 10-month period to April, which is then used to calculate a weighted
average for the year to 30 June based on BHP ownership. Data includes Continuing and Discontinued operations (Onshore US assets) for the financial years being
reported. These numbers differ from the ‘point in time’ snapshot as used in internal management reporting for the purposes of monitoring progress against our goals,
which are reported in section 1.9.1.
(2) Based on actual numbers as at 30 June 2019, not rolling averages. FY2017 and FY2018 data includes Continuing operations and Discontinued operations
(Onshore US assets) for the financial years being reported. FY2019 data does not include Discontinued operations (Onshore US assets).
(3) For the purposes of the UK Companies Act 2006, we are required to show information for ‘senior managers’, which are defined to include both senior leaders and
any persons who are directors of any subsidiary company, even if they are not senior leaders. In FY2019, there were 282 senior leaders at BHP. There were 15 Directors
of subsidiary companies who are not senior leaders, comprising 11 men and 4 women. Therefore, for UK law purposes, the total number of senior managers was
227 men and 70 women (24 per cent women) in FY2019.
54 BHP Annual Report 2019
1.10 Sustainability
Sustainability is one of the core values set out in Our Charter. That means putting health and safety
first, being environmentally responsible and supporting our communities. The wellbeing of our people,
the community and the environment is considered in everything we do.
1.10.1 Our approach to sustainability
For more than 130 years, BHP has sought to operate a safe,
sustainable and productive business that makes a fair contribution
to society. As custodians of natural resources, we have a
responsibility to shape the future in a way that creates prosperity
for shareholders, our communities and society.
In 2011, BHP expressed its purpose as the creation of long-term
shareholder value. That statement of purpose was laid out in
Our Charter. Since then, we have evolved as the external business
landscape has changed. While value creation is central to what we
do, this purpose did not fully reflect the story behind why we exist.
We believed our purpose must encompass all of our stakeholders
and more accurately capture our long-term approach.
Following a year of feedback and testing with more than 1,000
employees, BHP’s Board approved our new purpose as: to bring
people and resources together to build a better world.
Our new purpose reflects a spirit, approach and ambition that
already exists at BHP and will guide us in everything we do.
Creating long-term shareholder value remains a strategic imperative.
Without that focus, BHP would not exist, because our shareholders
entrust us with their funds and expect competitive returns.
To fulfil our purpose, we have evolved our thinking about our
partnerships with the communities where we operate and our
contribution to society and the environment more broadly.
For many years, BHP has maintained relationships and achieved
social, environmental and economic outcomes that were necessary
to operate, otherwise referred to as social licence. However,
we believe this is no longer enough to maintain BHP’s long-term
success. Our focus has shifted to identifying opportunities that
contribute to social value, while continuing to meet our legal,
regulatory and ethical requirements.
The long-term success of our business depends on the long-term
health of society and a sustainable natural environment; our
approach must be about the long-term value we can create
together with our stakeholders. If we do not do this well, our ability
to earn and maintain the trust of our stakeholders, attract the right
employees and secure access to capital, resources and markets
will be hampered. Importantly, social value is not new to BHP –
there are already many examples of BHP’s contribution to social
value: from global water stewardship and Indigenous advocacy
to our Local Buying Program.
BHP’s Board oversees our sustainability approach, with the Board’s
Sustainability Committee overseeing health, safety, environment
and community (HSEC) matters and assisting the Board with
governance and monitoring. The Sustainability Committee also
oversees the adequacy of the systems to identify and manage
HSEC-related risks, legal and regulatory compliance and overall
HSEC and other human rights performance. The Board’s Risk and
Audit Committee assists with oversight of the Group’s risk
management systems.
Transparency and accountability
BHP’s business model is premised on trust and public acceptance
because our mines have long lifespans and cannot be moved
across jurisdictions in response to a breakdown in trust, changing
societal expectations or regulatory requirements. That is why
we must contribute to long-term social value. Our tax and
royalty payments help governments fund healthcare, education,
infrastructure and other essential services. Conversely, corruption
and poor governance of natural resources divert funding from
those basic provisions and diminish our contribution.
Economic transparency is not our only focus. We also have a strong
record of supporting robust reporting on climate change issues.
We were one of the first companies to report in accordance with
the recommendations of the Financial Stability Board’s Task Force
on Climate-related Financial Disclosures in our Annual Report.
BHP Annual Report 2019 55
1
i
S
t
r
a
t
e
g
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
a
t
B
H
P
R
e
m
u
n
e
r
a
t
i
o
n
R
e
p
o
r
t
D
i
r
e
c
t
o
r
s
’
R
e
p
o
r
t
i
F
n
a
n
c
a
i
l
S
t
a
t
e
m
e
n
t
s
A
d
d
i
t
i
o
n
a
l
i
n
f
o
r
m
a
t
i
o
n
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
1.10.1 Our approach to sustainability continued
1.10.2 Safety
We set clear targets to challenge ourselves to improve our
sustainability performance, transparency and accountability.
To realise these targets, we embed sustainability performance
measures throughout the Group. They include Group-wide key
performance indicators to balanced scorecards for individual
employees. Achieving these goals is fundamental to the success
of our business and our commitments to the objectives of the Paris
Agreement and the United Nations Sustainable Development Goals.
Our conduct
While what we achieve is important – so is how we achieve it.
We know consistent ethical behaviour cultivates loyalty and
trust with each other and our stakeholders.
How we work is guided by the core values in Our Charter. They
are: Sustainability, Integrity, Respect, Performance, Simplicity
and Accountability. We are relentless in our pursuit of these
values and they guide our decision-making.
Our Code of Conduct sets the standard for our commitment to
working with integrity and respect. Our Code of Conduct guides
us in our daily work and demonstrates how to practically apply
the commitments and values set out in Our Charter. Acting in
accordance with Our Code of Conduct is a condition of employment
for everyone who works for and on behalf of BHP, and is accessible
to all our people and external stakeholders on our website.
We deliver annual mandatory training for employees and
contractors to help them clearly understand Our Code of
Conduct and the standards of behaviour that are acceptable
at BHP. We do not tolerate any form of unlawful discrimination,
bullying or harassment.
Anti-corruption
Our commitment to anti-corruption compliance is embodied in
Our Charter and Our Code of Conduct. We also have a specific
anti-corruption procedure that sets out mandatory requirements
to identify and manage the risk of anti-corruption laws being
breached. We prohibit authorising, offering, giving or promising
anything of value directly or indirectly to a government official
to influence official action, or to anyone to encourage them to
perform their work disloyally or otherwise improperly. We also
require our people to take care that third parties acting on our
behalf do not violate anti-corruption laws. A breach of these
requirements can result in disciplinary action, including dismissal,
or termination of contractual relationships.
Our Ethics and Compliance function has a mandate to design
and govern BHP’s compliance frameworks for key compliance
risks, including anti-bribery and corruption. The function is
independent of our assets and asset groups. The Chief Compliance
Officer reports twice a year to the Risk and Audit Committee and
separately to the Committee Chairman, also twice a year.
Our anti-corruption compliance program is designed to meet the
requirements of the US Foreign Corrupt Practices Act, the UK
Bribery Act, the Australian Criminal Code and applicable laws of
all places where we do business. These laws are consistent with
the standards of the OECD Convention on Combating Bribery
of Foreign Public Officials in International Business Transactions.
We regularly review our anti-corruption compliance program
to make any changes required by regulatory developments.
In addition to anti-corruption training as part of annual training on
Our Code of Conduct, additional risk-based anti-corruption training
was completed by 9,374 employees in FY2019 as well as numerous
employees of business partners and community partners.
Our highest priority is the safety of our operations, including
our employees and contractors and the communities in which
we operate.
Tragically, one of our colleagues died at work on 31 December
2018. Allan Houston suffered fatal injuries while he was operating
a dozer at BHP Mitsubishi Alliance’s Saraji Mine. After a thorough
investigation, we could not determine the direct cause of the
incident. However, we identified several areas for improvement
and are actively sharing the learnings from the investigation
throughout our operations, with contract partners and the
broader resources industry.
On 5 November 2018, Western Australia Iron Ore (WAIO)
experienced a train rollaway event. There were no injuries as
our team at Train Control intentionally derailed the train at a time
when it was considered the safest to do so. Post the incident and
before rail operations recommenced, we implemented additional
procedures to help prevent a similar event from re-occurring.
In FY2019, we established new requirements for engaging
and managing contractors. The contractor safety requirements
were rolled out across BHP and assurance programs have
been established to monitor and verify the implementation
of the requirements.
To strengthen our safety leadership and culture, we are educating
our people about chronic unease, that is, being mindful of the
possibility of what could go wrong, and creating a culture where
it is safe to speak up and report hazards and incidents. One of the
objectives of our global Field Leadership Program is to strengthen
the reporting culture. We monitor reporting culture across all our
operations and we coach and support our leaders to improve
the quality of our field leadership activities with our employees
and contractors.
We also introduced a new event management system for recording
health, safety, environmental and community events. The system
is designed to capture, analyse and track events in real time and
will be implemented in FY2020.
Our safety performance
Total recordable injury frequency (per million hours worked)
Year ended 30 June
Total recordable injury frequency (1)
2019
4.7
2018
4.4
2017
4.2
(1) FY2017 to FY2018 data includes Continuing operations and Discontinued
operations (Onshore US assets). FY2019 data includes Discontinued operations
(Onshore US assets) to 28 February 2019 and Continuing operations.
Total recordable injury frequency (TRIF) performance increased
by 7 per cent to 4.7 per million hours worked, compared to
4.4 per million hours worked in FY2018. This was due to an increase
in injuries in both Minerals Australia and Minerals Americas.
High potential injury events
Year ended 30 June
High potential injury events (2)
2019
50
2018
54
2017
61
(2) Data adjusted since it was previously reported, due to reporting errors. Includes
recordable injuries and first aid cases where there was the potential for a
fatality. FY2017 to FY2018 data includes Continuing operations and Discontinued
operations (Onshore US assets). FY2019 data includes Discontinued operations
(Onshore US assets) to 28 February 2019 and Continuing operations.
High potential injuries declined by 7 per cent from FY2018 due
to reductions at WAIO, Olympic Dam and Potash. High potential
injury trends remain a primary focus to assess progress against
our most important safety objective: to eliminate fatalities.
56 BHP Annual Report 2019
1.10.3 Health
Our goal is to protect the health and wellbeing of our workforce
from potential occupational injury, now and into the future. We set
minimum mandatory controls to identify and manage health risks
for our employees and contractors. Our workplace health risks
include occupational exposures to noise, silica, diesel particulate
matter (DPM), coal mine dust, musculoskeletal stressors and mental
health impacts. The effectiveness of our health controls is regularly
reviewed and subjected to periodic audit to verify the controls are
implemented and operating as designed.
Our periodic medical surveillance programs help us support early
identification of potential occupational exposure illness and
enable us to assist our people through illness management and
recovery. In FY2019, we established key performance indicators
that require a 90 per cent adherence to schedule for health
surveillance activities, achieving 79 to 100 per cent across the
Group. We also reviewed our medical testing programs through
internal and external benchmarking with industry peers and
standards. Improvement opportunities identified from the
review are expected to be evaluated and the implementation
of endorsed recommendations are expected to commence
in FY2020, along with plans to further increase adherence
to planned surveillance activities.
Occupational illness
The incidence of employee occupational illness in FY2019 was
4.38 per million hours worked, an increase of 5 per cent compared
with FY2018. The reported incidence of contractor occupational
illness was 1.62 per million hours worked, a decrease of 16 per cent
compared with FY2018. The overall decrease in contractor illnesses
was predominantly driven by the 23 per cent increase in hours
worked in FY2019. We do not have full oversight of the incidence
of contractor noise-induced hearing loss (NIHL) cases in many
parts of BHP due to regulatory regimes and limited access to data.
We continue to work with our contractors and regulatory agencies
to resolve these issues.
The majority of our reported occupational illnesses are
musculoskeletal illness. The improved identification and more
effective control of causes of musculoskeletal stressors will be
supported by the progressive implementation of the Standardised
Work program. Standardised Work is a key foundational tool of
the BHP Operating System that seeks to empower individuals
to design work in a way that supports efficiency and ergonomics,
where health and other risks are identified, and enables additional
controls to be identified and incorporated.
Our continued focus on implementing our requirements for fit
testing for hearing protection devices has supported a 6.7 per cent
reduction in the NIHL illness rate.
We have seen an increase in the number of other illnesses reported,
which include short-term, low-impact conditions such as blisters,
skin conditions (dermatitis/eczema), bites and stings, due to a small
increase in cases across most Minerals Australia operations. The
dermatitis/eczema cases arose from different work locations across
Olympic Dam and could be attributed to the continued education
campaign on the prevention and management of skin conditions,
which encourages early reporting of signs and symptoms.
To a lesser extent, the increase was also driven by increases in
mental stress conditions and heat stress cases at Olympic Dam in
South Australia. These conditions are currently captured as ‘other
illnesses’ but, with our strong focus on mental health, we plan to
establish a stand-alone category for ‘mental stress conditions’ in
FY2020. Across the Group, mental stress conditions continue to
be reported in low numbers and the number of cases were not
significantly different to FY2018. Through the BHP Mental Health
Framework, we continue to seek to foster a work environment
where our people feel comfortable to raise their experience of
mental stress and to access appropriate support when needed.
Occupational exposures
We set internally specified occupational exposure limits (OELs)
to manage exposures to DPM, silica, coal mine dust and other
potentially harmful agents. For our most material exposures,
our process to set those OELs involves periodic monitoring and
evaluation of scientific literature, benchmarking against peers as
well as engagement with regulators, OEL-setting agencies and
expert independent advice. Our approach to monitor and review our
internal OELs is designed to ensure they continue to be aligned with,
or are more conservative than applicable regulated health limits.
For our most material exposures to DPM, silica and coal mine dust,
we have committed to a five-year target to achieve a 50 per cent
reduction in the number of workers potentially exposed(1) as
compared to our baseline exposure profile (as at 30 June 2017(2))
by 30 June 2022.
In Petroleum, the divestment of our Onshore US assets during
FY2019 changed the exposure profile for the region as workplace
exposures to silica and DPM are no longer present. Our baseline
exposure profile for the Group for the five-year target was therefore
adjusted to remove the baseline exposures attributed to the
Onshore US assets.
In FY2019, planned exposure reduction projects were implemented
across the Group, involving a collaborative effort from operational
and maintenance teams, supported by the Health, Safety and
Environment, and Supply and Technology teams. Many assets
exceeded planned exposure reductions resulting in an overall
reduction of 49 per cent(3) compared to the revised FY2017
baseline. Planned growth projects across the Group may result
in an increase in some potential exposures over the short term;
however, commitments to achieve planned exposure reductions
over the five-year target period remain unchanged.
Coal mine dust lung diseases
As at 30 June 2019, 10 cases of coal mine dust lung diseases
(CMDLD(4)) among our current employees were reported to
the Queensland Department of Natural Resources, Mines and
Energy. We continue to provide counselling, medical support
and redeployment options (where relevant) for all 10 colleagues
(seven of the 10 have been able to continue working).
During FY2019, one former BHP employee had a worker’s
compensation claim accepted for CMDLD resulting in a total,
as at 30 June 2019, of six former workers diagnosed with CMDLD
since January 2016 (noting that no Australian coal mine worker
had been diagnosed with CMDLD in the preceding two decades).
In addition to these confirmed cases, as at 30 June 2019, there were
six intimated worker’s compensation claims for CMDLD from current
and former employees that had not yet been determined. Our
Charter values guide our response and the support we offer, and we
are actively reviewing how we can improve timeframes and
processes for determination of claims.
To further protect the health of our people we remain committed to:
• a reduction in our coal mine dust OEL from 2 mg/m3 to 1.5 mg/m3
to be achieved as soon as reasonably practicable and no
later than 1 July 2020 (as compared with the regulatory OEL of
2.5 mg/m3), noting that all operations have developed exposure
reduction plans;
• a reduction in potential exposure to silica in coal mine workers
that exceeds a level 50 per cent lower than the current regulatory
level by no later than 1 July 2021.
(1) For exposures exceeding our FY2017 occupational exposure limits discounting the use of personal protective equipment, where required.
(2) The baseline exposure profile is derived through a combination of quantitative exposure measurements and qualitative assessments undertaken
by specialist occupational hygienists consistent with best practice as defined by the American Industrial Hygiene Association.
(3) FY2019 data excludes Discontinued operations (Onshore US assets).
(4) CMDLD is the name given to the lung diseases related to exposure to coal mine dust and includes CWP, silicosis, mixed dust pneumoconiosis and chronic
obstructive pulmonary disease.
BHP Annual Report 2019 57
1
i
S
t
r
a
t
e
g
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
a
t
B
H
P
R
e
m
u
n
e
r
a
t
i
o
n
R
e
p
o
r
t
D
i
r
e
c
t
o
r
s
’
R
e
p
o
r
t
i
F
n
a
n
c
a
i
l
S
t
a
t
e
m
e
n
t
s
A
d
d
i
t
i
o
n
a
l
i
n
f
o
r
m
a
t
i
o
n
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
1.10.3 Health continued
Mental health
BHP has prioritised the mental health of our people since 2015. We
have subsequently made good progress with the implementation
of our Group-wide Mental Health Framework.
In FY2019, we continued to embed programs and resources that
support a healthy, thriving workforce. This included the peer-led
Resilience Program, in which more than 3,392 people had
participated, as at the end of FY2019. We launched the inaugural
BHP Mental Health Week to raise awareness of BHP’s available
mental health resources and tools, and encourage conversations
about mental health. We conducted a global mental health risk
assessment with internal and external stakeholders to help identify
critical parts of our Mental Health Framework that promote a
supportive work environment.
FY2019 was the third year the wellbeing category was included
in our annual Engagement and Perception Survey. There was no
change overall at the Group level, but we continue to evaluate the
differences observed at the asset and function levels from previous
years’ results to inform local plans.
1.10.4 Protecting the environment
There is growing pressure on and competition for environmental
resources, such as land, biodiversity, water and air. Climate change
amplifies the sensitivities of our natural systems. Our operations
and growth strategy depend on obtaining and maintaining the
right to access these environmental resources. Our environmental
performance and management of environmental impacts on the
communities in which we operate are critical to creating social value.
We have comprehensive governance, risk management, policies
and processes that set the basis for how we manage risk and
realise opportunities to achieve our environmental objectives.
Our approach to environmental management is set out in the
Our Requirements for Environment and Climate Change and Our
Requirements for Risk Management standards. These standards
have been designed taking account of the ISO management
system requirements, such as ISO14001 for Environmental
Management. In FY2019, we began updating the Our Requirements
for Environment and Climate Change standard to reflect recent
changes in BHP’s Risk Framework and other Our Requirements
standards, new Technical Standards for water and our evolving
climate change and water stewardship programs.
Responsibly managing land and supporting biodiversity
Our assets have plans and processes in place that reflect local
biodiversity risks and regulatory requirements. We have a five-year
target to improve marine and terrestrial biodiversity outcomes
by developing a framework to evaluate and verify the benefits
of our actions, in collaboration with others. This will allow us
to better monitor, avoid, reduce and offset biodiversity impacts
of our activities in a coordinated way.
We started work on the framework in FY2018 and completed
initial phase pilot testing using data from three operating sites
and a social investment project during FY2019. We are progressing
this work with Conservation International and Proteus, a voluntary
partnership between the UN Environment World Conservation
Monitoring Centre and 12 extractive industry companies. We intend
to use the framework to track achievement of our longer-term
biodiversity goal: ‘in line with United Nations Sustainable Development
Goals 14 and 15, BHP will, by FY2030, have made a measurable
contribution to the conservation, restoration and sustainable use
of marine and terrestrial ecosystems in all regions where we operate’.
Rehabilitation and closure
We are committed to implementing a planned approach to closure
and rehabilitation through the life cycle of our operations. We do
this by following our closure management process, detailed in the
Our Requirements for Closure standard, taking into consideration
our values, obligations, commitment to safety, cost risks/benefits
and expectations of external stakeholders, and developing a
closure management plan that delivers enduring environmental
and social benefits.
The focus is to aim to achieve an optimal closure outcome in
consultation with local communities and other stakeholders. In
addition to environmental rehabilitation, closure outcomes may
include further local economic opportunities, recreational and/or
other community uses.
In November 2018, 1,176 hectares of rehabilitated subsidence with
a post-mining land use of mixed cropping and grazing at Gregory
Crinum Mine (now sold to Sojitz) was certified as complete. At the
Norwich Park Mine in Queensland, a further 294 hectares of spoil
dump was certified as complete for grazing in February 2019,
bringing the total rehabilitated land area certified as complete
to 1,470 hectares. In total, in FY2019, rehabilitation and closure
strategies for assets in Australia delivered just under 20,000
hectares rehabilitated land.
Contributing to a resilient environment
BHP recognises that we have a broader role to play in contributing
to environmental resilience. We achieve this through our Social
Investment Framework, and work with strategic partners and
communities to invest in voluntary projects that contribute
to the management of areas of national or international
conservation significance.
Since 2011, we have committed more than US$75 million to
biodiversity conservation through our alliance with Conservation
International and other partners. We look for projects that can
provide multiple benefits, improve water quality or quantity,
nature-based solutions to climate change, local livelihoods or
cultural benefits, as well as improve biodiversity conservation.
Towards water stewardship
Water stewardship is about safeguarding our natural water
resources for future generations. This requires collaboration
at every level of society, be it communities, government, business
and civil society, and we are committed to working with such
stakeholders to ensure that fresh and marine water resources
are conserved, become resilient and continue to support healthy
communities and ecosystems, maintain cultural and spiritual
values and sustain economic growth.
Water is integral to what we do and is vital to the sustainability of
our business. We cannot operate without it. We interact with water
in a number of ways including extracting water for activities such
as ore processing, cooling, dust suppression and processing mine
tailings; managing it to access ore through dewatering, and at our
closed operations; providing drinking water and sanitation facilities,
and discharging it back to the receiving environment. In addition,
we interact with marine water resources through our offshore
Petroleum business as part of the oil recovery process and port
facilities and utilise marine water for desalination.
We recognise our responsibility to effectively manage our
interactions and minimise impacts on water resources. Our
work starts within our operations, where we must strive to build
a foundation from which we can credibly collaborate with others
toward solutions to shared water challenges. Responsible water
interactions will ultimately make our business more resilient in the
long term, and positively contribute to an enduring environment
and social value.
58 BHP Annual Report 2019
Our Water Stewardship Strategy was adopted in FY2017 to improve
our management of water, increase transparency and contribute to
the resolution of shared water challenges. In FY2019, we developed
our Water Stewardship Position Statement, BHP’s expression of
commitment to and advocacy focus for water stewardship.
Implementation of the Position Statement will commence in FY2020.
social baseline analysis, social impact and opportunity assessments,
human rights impact assessments, stakeholder mapping and
community perception surveys. This information informs our
approach to community engagement, community development
and social investment activities that aim to be culturally sensitive
and socially inclusive.
Our five-year Group-wide target and longer-term goal focused
on water were revised in 2017. The Group-wide target is to reduce
FY2022 freshwater withdrawal(1) by 15 per cent from FY2017 levels.
It is focused on the use of freshwater as it is generally the most
important water resource for the communities in which we operate
and the environment.
Our longer-term goal is to collaborate to enable integrated water
resource management in all catchments where we operate by
FY2030. It is aligned to the UN Sustainable Development Goal 6
that seeks to ‘ensure availability and sustainable management
of water and sanitation for all’.
Freshwater withdrawal increased 9 per cent in FY2019 compared
to FY2018. However, overall we remain on track to attain the
15 per cent reduction target by FY2022, with FY2019 withdrawals
1 per cent below the FY2017 adjusted baseline.(2)
Transition to the ICMM Water Reporting Guidelines has continued
in FY2019. Improvements in the quality of data, particularly at WAIO
and our Queensland Coal assets, resulted in data changes that
required restatements to FY2017 data which form part of the
FY2017 baseline. Reductions in freshwater continued because
of increased throughput of the desalination plant at Escondida
and the subsequent reduced reliance on the region’s aquifers.
The most material increase in water withdrawal was at WAIO, due
to increases in water used for production and dust suppression.
Much of our initial collective action work is directed at supporting
local integrated water resource management (IWRM) initiatives.
During FY2019, we commenced the development of guidance on
how to approach collective action in support of IWRM. Effective
disclosure is fundamental to the success of IWRM initiatives and
we have continued to collaborate with the CEO Water Mandate
to support harmonisation of water accounting standards. We see
this as a critical step to enhancing transparency and collaboration
across all sectors for improved water governance. In line with our
Water Stewardship Position Statement, we anticipate releasing
the initial set of context-based, business-level targets by FY2022.
For details on our approach to water stewardship and water
performance in FY2019, see our Sustainability Report 2019.
1.10.5 Engaging with communities
We believe we are successful when we work in partnership with
communities to achieve long-term social, environmental and
economic outcomes. To support this, we must consider social value
in our decision-making and work with communities where we have
a presence. Social value is the sum of our contribution to society
underpinned by respectful and mutually beneficial partnerships,
and working collectively to prioritise social, environmental and
economic outcomes.
In FY2019, we completed an in-depth review of how we understand
and support social value. The review focused on how we can
improve our capacity to connect to communities, understand
their ambitions and work to empower these communities.
Engaging with communities
Our Code of Conduct and the Our Requirements for
Communications, Community and External Engagement
standard govern our actions in making a positive contribution
to communities where we have a presence and minimising
adverse impacts where these cannot be avoided.
Our community practitioners apply a range of systems, processes
and tools across our operations to help us understand, plan,
implement and evaluate our engagement activities. This includes
Supporting local economic growth
BHP proudly supports the growth of local businesses in the regions
where we operate, through sourcing and promoting locally available
products and services. Our assets develop local procurement
plans that identify opportunities for local suppliers, including small
businesses to deliver capacity building and employment creation
initiatives. These initiatives are designed to be sustainable post
BHP’s presence.
During FY2019, 14 per cent of our external expenditure was
with local suppliers. An additional 82 per cent of our supply
expenditure was located within the regions in which we operate.
Our expenditure with local suppliers in FY2019 was mostly
in Trinidad and Tobago (57 per cent), the United States
(31 per cent), Chile (14 per cent) and Australia (12 per cent).
Social investment
Through our long-standing commitment to investing not less
than 1 per cent of our pre-tax profit in social and environmental
projects and donations, we generate social value through greater
engagement with a broad set of stakeholders. Our contribution
to sustainability challenges at the local, regional, national and
global levels is a key element in managing current and future risk.
It also provides an opportunity to build long-term reciprocal
relationships with stakeholders.
We seek to develop strategic social investment partnerships by
advocating collective action, bringing together key stakeholders
to support the self-determination of communities, with a shared
approach to solving local challenges and building local opportunities.
We generate social value through our contribution to grass roots
initiatives, such as community donations, employee volunteering,
our Local Buying Program and BHP’s Matched Giving Program.
Our voluntary social investment in FY2019 totalled US$93.5 million,(3)
consisting of US$55.7 million in direct community development
projects and donations, US$8.9 million equity share to non-operated
joint venture programs, a US$16.57 million donation to the BHP
Foundation and US$4 million to the Matched Giving and community
small grants programs. Administrative costs to facilitate direct
social investment activities at our assets totalled US$6.27 million
and US$2 million supported the operations of the BHP Foundation.
In FY2019, we commenced the management of our social investment
contracts for community projects and donations through our
Global Contract Management System. The new system enables an
integrated end-to-end partnership management approach that is
auditable, transparent and enhances our ability to communicate
and report on our social investment activities.
1.10.6 Respecting human rights
We believe respecting human rights and contributing to the
positive realisation of rights is not only critical to the sustainable
operation of our business, it is the right thing to do. We are
committed to respecting internationally recognised human rights
as set out in the Universal Declaration on Human Rights and the
Voluntary Principles on Security and Human Rights and operating
in a manner consistent with the UN Guiding Principles on Business
and Human Rights and the 10 UN Global Compact Principles.
Human rights related to workplace health, safety and labour
conditions, activities of security providers, land access and use,
and water and sanitation are the most relevant to BHP’s business.
Of equal importance are the rights of Indigenous peoples and
other communities impacted by BHP’s operations.
(1) Where ‘withdrawal’ is defined as water withdrawn and intended for use (in accordance with ‘A Practical Guide to Consistent Water Reporting’, ICMM (2017)).
‘Freshwater’ is defined as waters other than sea water, waste water from third parties and hypersaline ground water. Freshwater withdrawal also excludes entrained
water that would not be available for other uses. These exclusions have been made to align with the target’s intent to reduce the use of freshwater sources subject
to competition from other users or the environment.
(2) The FY2017 baseline data has been adjusted to account for: the materiality of the strike affecting water withdrawals at Escondida in FY2017 and improvements to water
balance methodologies at WAIO and Queensland Coal in FY2019. Discontinued operations (Onshore US assets) have been excluded from the FY2017 baseline data.
(3) Our voluntary social investment is calculated as 1 per cent of the average of the previous three years’ pre-tax profit.
BHP Annual Report 2019 59
1
i
S
t
r
a
t
e
g
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
a
t
B
H
P
R
e
m
u
n
e
r
a
t
i
o
n
R
e
p
o
r
t
D
i
r
e
c
t
o
r
s
’
R
e
p
o
r
t
i
F
n
a
n
c
a
i
l
S
t
a
t
e
m
e
n
t
s
A
d
d
i
t
i
o
n
a
l
i
n
f
o
r
m
a
t
i
o
n
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
1.10.6 Respecting human rights continued
1.10.7 Indigenous peoples
For BHP, Indigenous peoples are critical partners and stakeholders
in many of our operations. We respect the rights of Indigenous
peoples and the special connection they often have with the
land, water and natural environment, and we understand that
this connection can be spiritual, reaching beyond tangible
objects or locations.
BHP’s Indigenous Peoples Policy Statement articulates our
approach to engagement and support for Indigenous peoples and
our commitment to the International Council of Mining and Metals
Indigenous Peoples Position Statement. Our Indigenous Peoples
Strategy guides the implementation of our Policy Statement.
In FY2019, each of our regions had an active Indigenous Peoples
Plan that operationalised the Indigenous Peoples Strategy across
our regions. Each plan is aligned with the Indigenous Peoples
Strategy and prioritises the local and regional context and
operational footprint and relevant Indigenous stakeholders.
In April 2019, BHP publicly released our FY2019–FY2023 South
American Indigenous Peoples Plan in San Pedro de Atacama,
Chile, which focuses on opportunities for advocacy and
strengthening opportunities for Indigenous employment.
The Plan is the first of its kind by a mining company in Chile.
BHP also contributes to and engages in programs and public policy
to advance the interests of Indigenous peoples. After significant
reflection and consultation with critical stakeholders, in January
2019, our CEO Andrew Mackenzie announced BHP’s support for
the Uluru Statement from the Heart. As part of this support, we
committed to a number of activities in support of the areas of
Voice, Treaty and Truth; key themes from the Uluru Statement
from the Heart.
Our Code of Conduct sets the standards of behaviour and human
rights commitments for our people, as well as our contractors,
suppliers and others who perform work for BHP. The commitments
in Our Code of Conduct are implemented through mandatory
minimum human rights performance requirements in the Our
Requirements standards and through our policy statements.
Human rights are also integrated into BHP’s Risk Framework through
these standards. Using that Framework, human rights risks were
assessed in functional, exploration and project risk assessments in
FY2019. This included inputs into a risk assessment for exploration
activities in Ecuador and a human rights and Indigenous peoples’
assessment for activities in Mexico.
We consolidated our existing human rights commitments and
management approaches in FY2019 into a Group-wide policy
statement. This action reflects Principle 16 of the UN Guiding
Principles on Business and Human Rights. Our Human Rights Policy
Statement (available on bhp.com) sets out the expectations of our
people, business partners and other relevant parties to respect
human rights.
A new globally consistent approach to human rights impact
assessments in FY2019 was also developed to enable a more
comprehensive understanding of our human rights exposures
across our assets and functions. The new methodology will be
mandated under the Our Requirements standards.
We are taking a multi-year, systemic approach to integrating human
rights due diligence for our supply chain process. At the centre
of our approach is engagement with our direct suppliers to assess
and encourage continuous improvement in their own capacity
to manage human rights risks (including modern slavery) in their
subcontractors and broader supply chain.
Modern slavery
Our 2019 Modern Slavery Act Statement provides a detailed
overview of our approach to managing human rights risks, in
particular those relating to modern slavery and trafficking in
our supply chain. It is prepared under the UK Modern Slavery
Act (2015) and available online at bhp.com.
Australian legislation for modern slavery was passed in December
2018 and our first statement under this legislation is expected
to be published for FY2020 by 31 December 2020.
60 BHP Annual Report 2019
1.10.8 Climate change
Our climate change strategy focuses on reducing our operational greenhouse gas (GHG) emissions,
investing in low emissions technologies, promoting product stewardship, managing climate-related risk
and opportunity, and working with others to enhance the global policy and market response.
Climate change is a global challenge that requires collaboration.
Resources companies such as BHP, our customers and governments
must play their part to meet this challenge.
Responding to climate change remains a priority governance and
strategic issue for us. Our Board is actively engaged in the
governance of climate change issues, including our strategic
approach, supported by the Sustainability Committee. Management
has primary responsibility for the design and implementation of
our climate change strategy and our performance against our
targets (outlined below) is reflected in senior executive and
leadership remuneration. From 2021, the link between our targets
and management remuneration will be strengthened to reinforce
the strategic importance of action to reduce emissions.
Operational emissions
As a major energy consumer, managing energy use, ensuring
energy security and reducing GHG emissions at our operations are
key components of our climate change strategy. We set targets in
order to hold ourselves accountable for these goals, and regularly
review them as our strategy and circumstances change.
Our five-year GHG emissions reduction target, which took effect
from 1 July 2017, is to maintain our total operational emissions
in FY2022 at or below FY2017 levels(1) while we continue to grow
our business. Our target builds on our success in achieving our
previous five-year target.
We have also set the longer-term goal of achieving net-zero
operational GHG emissions in the latter half of this century,
consistent with the Paris Agreement. In order to set the trajectory
towards achieving that goal, in FY2020 we intend to develop
a medium-term target for operational emissions.
Operational emissions performance
Our combined Scope 1 and Scope 2 emissions (operational
emissions) in FY2019 totalled 14.7 million tonnes of carbon dioxide
equivalent (CO2-e), 3 per cent below our FY2017 target baseline. (2)
This decrease is primarily due to a change in the electricity emissions
factor for Minerals Americas that resulted from the interconnection
of Chile’s northern grid system, which is mainly fossil fuel-based,
and southern grid system, which has a higher proportion of
renewable energy.
We have disclosed operational emissions performance at the asset
level for the first time in this year’s Report (see section 6.5 Climate
change data).
Operational greenhouse gas emissions (million tonnes CO2-e) (a) (b)
Year ended 30 June
Scope 1 GHG emissions (c)
Scope 2 GHG emissions (d)
Total operational GHG emissions
2019
9.7
5.0
14.7
2018
10.6
5.9
16.5
2017
10.5
5.8
16.3
(a) Scope 1 and 2 emissions have been calculated on an operational control basis in
accordance with the GHG Protocol Corporate Accounting and Reporting Standard.
(b) FY2017 and FY2018 data includes Continuing operations and Discontinued
operations (Onshore US assets). FY2019 data includes Continuing operations
and Discontinued operations (Onshore US assets) to 31 October 2018.
(c) Scope 1 refers to direct GHG emissions from operated assets.
(d) Scope 2 refers to indirect GHG emissions from the generation of purchased
electricity and steam that is consumed by operated assets (calculated using
the market-based method).
Our FY2019 GHG emissions intensity was 2.2 tonnes of CO2-e per
tonne of copper equivalent production (FY2018: 2.3 tonnes of
CO2-e). Our FY2019 energy intensity was 22 gigajoules per tonne
of copper equivalent production (FY2018: 21 gigajoules). (3)
(1) FY2017 baseline will be adjusted for any material acquisitions and divestments based on GHG emissions at the time of the transaction. Carbon offsets will be used
as required.
(2) Calculated on a Continuing operations basis. The FY2017 baseline has been adjusted for the divestment of our Onshore US assets to ensure ongoing comparability
of performance.
(3) Copper equivalent production has been calculated based on FY2019 average realised product prices for FY2019 production, and FY2018 average realised product
prices for FY2018 production.
BHP Annual Report 2019 61
1
i
S
t
r
a
t
e
g
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
a
t
B
H
P
R
e
m
u
n
e
r
a
t
i
o
n
R
e
p
o
r
t
D
i
r
e
c
t
o
r
s
’
R
e
p
o
r
t
i
F
n
a
n
c
a
i
l
S
t
a
t
e
m
e
n
t
s
A
d
d
i
t
i
o
n
a
l
i
n
f
o
r
m
a
t
i
o
n
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
1.10.8 Climate change continued
Investing in low emissions technologies
Defining a pathway to net-zero GHG emissions for our long-life
assets requires planning for the long term and a deep
understanding of the development pathway for low emissions
technologies (LETs).
Our LET strategy is threefold. First, we work to adapt mature
technologies such as light electric vehicles, in order to integrate
them safely and effectively into our operations. Second, in the
medium term, we create road maps for development and adoption
of LETs that support our goal of net-zero emissions, which may
include trials and demonstrations of technology in our production
environments. Finally, we look for early stage LETs that hold high
potential for future results. For these emerging technologies,
we seek opportunities for collaboration, research and other
ways to accelerate their development and adoption.
Our LET strategy has been developed to address BHP’s key sources
of operational GHG emissions. Emissions from electricity use
make up 43 per cent of our operational emissions.(1) This includes
the power we generate ourselves as well as the power we buy
from grids around the world. Our strategy seeks to accelerate the
transition to lower carbon sources of electricity while balancing
cost, reliability and emissions reductions.
Emissions from fuel and distillate make up 42 per cent of our
operational emissions, much of which is from diesel used in
moving material (for example, haul trucks). Our strategy is to
accelerate and de-risk technologies and innovations that can
transition operations over time to alternate fuels and greater
electrification of mining equipment and mining methods.
Fugitive methane emissions from our petroleum and coal assets
make up 15 per cent of our operational emissions. Our strategy
is to pursue innovation in mitigation technologies for these
emissions, which are among the most technically and economically
challenging to reduce.
Scope 3 emissions
While reducing our operational emissions is vital, emissions from
our value chain (Scope 3 emissions) are significantly higher than
those from our own operations. We work with our customers,
suppliers and other value chain participants to seek to influence
emissions reductions across the life cycle of our products.
As we work to develop an integrated product stewardship strategy in
FY2020 we intend to look to identify additional opportunities to work
with others in our value chain to influence emissions reductions.
We also intend to set public goals related to Scope 3 emissions.
Supporting the development of climate
change solutions
In July 2019, our CEO Andrew Mackenzie announced that BHP’s
Board had approved a new Climate Investment Program that
will invest in technologies to reduce emissions, and research
and development of potential future solutions.
The Program will build on BHP’s existing program of investing
in low emissions technologies and carbon capture and storage.
It includes a total investment amount of up to US$400 million
over five years from FY2020. Investments will target operational
emissions reduction and potential reductions of Scope 3
emissions, including from the processing and use of our products.
The Program will target mature and disruptive technologies,
designed to achieve both near-term emissions outcomes and
longer-term, higher-risk goals. We expect technology investment
to be critical in meeting our short- and medium-term targets
for operational emissions reduction, our long-term goal of
operational net-zero emissions, and our goals for addressing
Scope 3 emissions. The Program will also drive investment
in nature-based solutions.
Scope 3 emissions performance
The most significant contributions to Scope 3 emissions in our
value chain come from the downstream processing and use of our
products, in particular emissions emanating from the steelmaking
process (the processing and use of our iron ore and metallurgical
coal). In FY2019 emissions associated with the processing of our
non-fossil fuel commodities (iron ore to steel; copper concentrate
and cathode to copper wire) were 305 million tonnes of CO2-e.
Emissions associated with the use of our fossil fuel commodities
(metallurgical and energy coal, oil and gas) were 233 million
tonnes of CO2-e.
Scope 3 greenhouse gas emissions (million tonnes CO2-e) (1) (2)
Year ended 30 June
2019
2018
2017
Upstream
Purchased goods and services
(including capital goods)
Fuel and energy related activities
Upstream transportation
and distribution(3)
Business travel
Employee commuting
Downstream
Downstream transportation
and distribution(4)
Processing of sold products(5)
– Iron ore to steel
– Copper to copper wire
Use of sold products
– Metallurgical coal
– Energy coal
– Natural gas
– Crude oil and condensates(6)
– Natural gas liquids
Investments
(i.e. our non-operated assets)(7)
17.3
1.3
3.6
0.1
<0.1
4.0
304.7
299.6
5.1
232.7
111.4
67.0
28.3
23.3
2.8
8.2
1.4
3.6
0.1
<0.1
5.0
322.6
317.4
5.2
253.8
112.3
71.0
36.4
29.6
4.5
7.7
1.4
3.2
0.1
<0.1
2.8
313.7
309.5
4.2
254.1
105.5
72.1
38.3
33.1
5.1
3.1
1.7
1.9
(1) Scope 3 refers to all other indirect GHG emissions (not included in Scope 2)
from activities across our value chain, including upstream emissions related
to the extraction and production of purchased materials and fuels; downstream
emissions related to the processing and use of our products; upstream and
downstream transportation and distribution; and emissions from our
non-operated joint ventures. Scope 3 emissions have been calculated using
methodologies consistent with the GHG Protocol Corporate Value Chain
(Scope 3) Accounting and Reporting Standard.
(2) FY2017 and FY2018 data includes Continuing operations and Discontinued
operations (Onshore US assets). FY2019 data includes Discontinued operations
(Onshore US) to 31 October 2019 and Continuing operations.
(3) Includes product transport where freight costs are covered by BHP, for example
under Cost and Freight (CFR) or similar terms, as well as purchased transport
services for process inputs to our operations.
(4) Product transport where freight costs are not covered by BHP, for example
under Free on Board (FOB) or similar terms.
(5) All iron ore production is assumed to be processed into steel and all copper
production is assumed to be processed into copper wire for end use.
Processing of nickel, zinc, gold, silver, ethane and uranium oxide is not currently
included, as production volumes are much lower than iron ore and copper,
and a large range of possible end uses apply. Processing/refining of petroleum
products is also excluded as these emissions are considered immaterial
compared to the end-use product combustion reported in the ‘Use of sold
products’ category.
(6) All crude oil and condensates are conservatively assumed to be refined
and combusted as diesel.
(7) Covers the Scope 1 and 2 emissions (on an equity basis) from our assets that
are owned as a joint venture but not operated by BHP.
Scope 3 emissions reporting necessarily requires a degree of
overlap in reporting boundaries due to our involvement at multiple
points in the life cycle of the commodities we produce and
consume. A significant example of this is that Scope 3 emissions
reported under the ‘Processing of sold products’ category in the
table above include the processing of our iron ore to steel. This
third party activity also consumes metallurgical coal as an input,
a portion of which is produced by us. For reporting purposes, we
account for Scope 3 emissions from combustion of metallurgical
coal with all other fossil fuels under the ‘Use of sold products’
category, such that a portion of metallurgical coal emissions
is accounted for under two categories.
(1) Includes Scope 1 emissions from our natural gas-fired power generation as well as Scope 2 emissions from purchased electricity.
62 BHP Annual Report 2019
Supporting the development of eff ective climate
and energy policy
Industry has a key role to play in supporting policy development.
We engage with governments and other stakeholders to contribute
to the development of an effective, long-term policy framework
that can deliver a measured transition to a lower carbon economy.
We believe an effective policy framework should include a
complementary set of measures, including a price on carbon,
support for low emissions technology and measures to build
resilience. We are a signatory to the World Bank’s Putting a Price on
Carbon statement and a partner in the Carbon Pricing Leadership
Coalition, a global initiative that brings together leaders from
industry, government, academia and civil society with the goal of
putting in place effective carbon pricing policies. Our CEO Andrew
Mackenzie has also been appointed to the World Bank’s High-Level
Commission on Carbon Pricing and Competitiveness.
We also advocate for a framework of policy settings that will
accelerate the deployment of CCS. We are a member of the Global
CCS Institute and the UK Government’s Council on Carbon Capture
Usage and Storage.
Industry association membership
We believe industry associations have the capacity to play a key
role in advancing the development of standards, best practices
and constructive policy that are of benefit to members, the
economy and society. We also recognise there is stakeholder
interest in the nature and role of industry associations and the
extent to which the positions of industry associations on key
issues are aligned with those of member companies.
We were one of the first major companies to review our alignment
with the advocacy positions on climate and energy policy taken
by industry associations to which we belong, and to share the
findings and outcomes of this review publicly. Our initial review
was published in December 2017.
We continue to monitor the climate and energy policy positions
of our industry association memberships and to keep our
memberships of industry associations that hold an active position
on climate and energy policy under review. A further review
of our industry associations was commenced during FY2019.
More information on our approach to industry associations,
including our updated register of material differences on
climate and energy policy, is available online at bhp.com.
This is an expected outcome of emissions reporting between the
different scopes defined under standard GHG accounting practices
and is not considered to detract from the overall value of our
Scope 3 emissions disclosure. This double counting means that the
emissions reported under each category should not be added up,
as to do so would give an inflated total figure. For this reason, we
do not report a total Scope 3 emissions figure. Further details of
the calculation methodologies, assumptions and key references
used in the preparation of our Scope 3 emissions data can be
found in the associated Scope 3 calculation methodology
document available online at bhp.com/climate.
Accelerating the development of carbon capture and storage
We are working in partnership with others across our value chain
to accelerate the development of technologies with the potential
to reduce emissions from the processing and use of our products.
Carbon capture and storage (CCS) is a key low emissions
technology with the potential to play a pivotal role in reducing
emissions from industrial processes, such as steel production,
as well as emissions from the power sector and from oil and
gas production.
While we recognise progress is required in developing policy
frameworks to support the wider deployment of this technology,
our CCS investments and partnerships focus on mechanisms
to reduce costs and accelerate development timeframes. Our
investments include activities aimed at knowledge sharing from
commercial-scale projects, development of sectoral deployment
road maps and funding for research and development at leading
universities and research institutes.
For further information, refer to our Sustainability
Report 2019, available online at bhp.com.
Contributing to the global response
Climate change is a global challenge that requires collaboration.
We prioritise working with others to enhance the global policy
and market response.
Promoting market mechanisms to reduce global emissions
In addition to measures to reduce our emissions, we support
the development of market mechanisms that reduce global
GHG emissions through projects that generate carbon credits.
Our climate change strategy includes a focus on reducing emissions
from deforestation through support for REDD+, the UN program that
aims to reduce emissions from deforestation and forest degradation.
For example, in partnership with the International Finance
Corporation (IFC) and Conservation International (CI) we developed
a first-of-its-kind US$152 million Forests Bond, issued by the IFC in
2016. We provide a price-support mechanism for the bond, which
supports the Kasigau Corridor REDD project in Kenya. During
FY2019, we purchased additional carbon credits from the Kasigau
Corridor project.
In partnership with CI and Baker McKenzie, we developed the
Finance for Forests (F4F) initiative in FY2018, which aims to share
our experiences to help encourage replication of these investments
and provide a suite of innovative financial mechanisms to channel
private sector investment in REDD+.
BHP Annual Report 2019 63
1
i
S
t
r
a
t
e
g
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
a
t
B
H
P
R
e
m
u
n
e
r
a
t
i
o
n
R
e
p
o
r
t
D
i
r
e
c
t
o
r
s
’
R
e
p
o
r
t
i
F
n
a
n
c
a
i
l
S
t
a
t
e
m
e
n
t
s
A
d
d
i
t
i
o
n
a
l
i
n
f
o
r
m
a
t
i
o
n
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
1.10.8 Climate change continued
Managing risk and opportunity
We recognise the physical and non-physical impacts of climate
change may affect our assets, productivity, the markets in which
we sell our products and the communities in which we operate.
Risks related to the physical impacts of climate change include
acute risks resulting from increased severity of extreme weather
events and chronic risks resulting from longer-term changes in
climate patterns. Non-physical risks arise from a variety of policy,
regulatory, legal, technological and market responses to the
challenges posed by climate change and the transition to a lower
carbon economy.
A broader discussion of our climate-related risk factors and risk
management approach is provided as part of our Task Force on
Climate-related Financial Disclosures (TCFD)-aligned disclosures
throughout this Report, as described below.
Adapting to the physical impacts of climate change
We take a risk-based approach to adapting to the physical impacts
of climate change. We work with globally recognised agencies to
obtain regional analyses of climate science to inform resilience
planning at an asset level and improve our understanding of the
potential climate vulnerabilities of our operations and communities
where we operate.
Our operations are required to build climate resilience into
their activities through compliance with the Our Requirements
for Environment and Climate Change standard. We also require
new investments to assess and manage risks associated with
the forecast physical impacts of climate change. As well as this
ongoing business resilience planning, we continue to look at
ways we can contribute to community and ecosystem resilience.
Evaluating the resilience of our portfolio
We consider the impacts of climate change in our strategy process.
We recognise the world could respond in a number of different
ways to address climate change. We use a broad range of scenarios
to consider how divergent policy, technology, market and societal
outcomes could impact our portfolio, including low plausibility,
extreme shock events. We also continually monitor a range of
data sources to identify climate change-related developments
that would serve as a call to action for us to reassess the resilience
of our portfolio.
Our investment evaluation process includes an assessment of
non-quantifiable risks, such as those that could impact the people
and environment that underpin our contribution to social value.
The process has also incorporated market and sector-based carbon
prices for more than a decade.
Our Climate Change: Portfolio Analysis (2015) and Climate Change:
Portfolio Analysis – Views after Paris (2016) reports, which are
available online at bhp.com/climate, describe in more detail how
we have used scenario analysis to evaluate the resilience of our
portfolio to both an orderly and a more rapid transition to a 2°C
world. We will update our portfolio analysis in FY2020, evaluating
the potential impacts of a broader range of scenarios including
a transition to well below 2°C.
We are committed to keeping our stakeholders informed of the
potential impact of climate change on our business and continue
to review and consider developing best practices and evolving
stakeholder expectations.
Engagement and disclosure
Our climate change strategy is supported by active engagement
with our stakeholders, including investors, policymakers and
non-governmental organisations, and with peer companies
where appropriate.
We periodically hold one-on-one and group meetings with
investors and their advisers to explain our approach to climate
change. In FY2019, our climate-related investor engagement
included meetings held in Australia, the United Kingdom, the
Netherlands and the United States.
We also seek input and insight from external experts, such as the
BHP Forum on Corporate Responsibility (FCR). The FCR, which is
composed of civil society leaders and BHP executives, has played
a critical role in the development of our position on climate change.
During FY2019, the FCR met twice, with one of the meetings
including discussion of the review of our climate change strategy.
Informed by this engagement, we regularly review our approach
to climate change in response to emerging scientific knowledge,
changes in global climate policy and regulation, developments in
low emissions technologies and evolving stakeholder expectations.
64 BHP Annual Report 2019
Climate-related financial disclosures
BHP was one of the first companies to align our disclosures with
the recommendations of the Financial Stability Board’s Task Force
on Climate-related Financial Disclosures (TCFD). We believe the
TCFD recommendations represent an important step towards
establishing a widely accepted framework for climate-related
financial risk disclosure and we have been a firm supporter of this
work. Our Vice President of Sustainability and Climate Change,
Dr Fiona Wild, is a member of the Task Force.
We are committed to continuing to work with the TCFD and our
peers in the resources sector to support the wider adoption
of the TCFD recommendations and the development of more
effective disclosure practices within the sector.
As responding to climate change is an integral part of our strategy
and operations, our TCFD-aligned disclosures can be found
throughout this Report. The table below shows how our disclosures
in this Report align to the TCFD recommendations and where the
relevant information can be found.
Location of TCFD-aligned disclosures
TCFD recommendation
BHP disclosure
Reference
Governance – Disclose the organisation’s governance around climate-related risks and opportunities
a) Describe the Board’s oversight of climate-related risks and opportunities.
b) Describe management’s role in assessing and managing climate-related
risks and opportunities.
Risk management
Board skills and experience – climate change
Sustainability committee – role and focus
Risk management
Climate change – managing risk and opportunity
Sustainability committee – role and focus
FY2019 STIP performance outcomes
Note 11 Property, plant and equipment
– Impairment of non-current assets
1.6.4
2.8
2.13.4
1.6.4
1.10.8
2.13.4
3.3.2
5.1.6
Strategy – Disclose the actual and potential impacts of climate-related risks and opportunities on the organisation’s businesses, strategy, and financial
planning where such information is material
a) Describe the climate-related risks and opportunities the organisation has
identified over the short, medium, and long term.
b) Describe the impact of climate-related risks and opportunities on the
organisation’s businesses, strategy, and financial planning.
c) Describe the resilience of the organisation’s strategy, taking into
consideration different climate-related scenarios, including a 2°C
or lower scenario.
Risk management – Risk factors (climate change,
greenhouse gas emissions and energy)
Climate change – managing risk and opportunity
Risk management – Risk factors (climate change,
greenhouse gas emissions and energy)
Climate change – managing risk and opportunity
Climate change – evaluating the resilience of our portfolio
Risk management – Disclose how the organisation identifies, assesses, and manages climate-related risks
a) Describe the organisation’s processes for identifying and assessing
Risk management
climate-related risks.
b) Describe the organisation’s processes for managing climate-related risks.
c) Describe how processes for identifying, assessing, and managing climate-
related risks are integrated into the organisation’s overall
risk management.
Risk management – Risk factors (climate change,
greenhouse gas emissions and energy)
Risk management
Non-financial KPIs – sustainability KPIs
Risk management – Risk factors (climate change,
greenhouse gas emissions and energy)
Metrics and targets – Disclose the metrics and targets used to assess and manage relevant climate-related risks and opportunities
where such information is material
a) Disclose the metrics used by the organisation to assess climate-related risks
and opportunities in line with its strategy and risk management process.
b) Disclose Scope 1, Scope 2, and, if appropriate, Scope 3 greenhouse gas
(GHG) emissions, and the related risks.
c) Describe the targets used by the organisation to manage climate-related risks
and opportunities and performance against targets.
Non-financial KPIs – sustainability KPIs
Climate change – Operational emissions
Climate change – Scope 3 emissions
Non-financial KPIs – sustainability KPIs
Climate change – operational emissions performance
Climate change – Scope 3 emissions performance
Climate change data
Non-financial KPIs – sustainability KPIs
Climate change – operational emissions performance
FY2019 STIP performance outcomes
1.6.4
1.10.8
1.6.4
1.10.8
1.10.8
1.6.4
1.6.4
1.6.4
1.5.2
1.6.4
1.5.2
1.10.8
1.10.8
1.5.2
1.10.8
1.10.8
6.5
1.5.2
1.10.8
3.3.2
BHP Annual Report 2019 65
1
i
S
t
r
a
t
e
g
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
a
t
B
H
P
R
e
m
u
n
e
r
a
t
i
o
n
R
e
p
o
r
t
D
i
r
e
c
t
o
r
s
’
R
e
p
o
r
t
i
F
n
a
n
c
a
i
l
S
t
a
t
e
m
e
n
t
s
A
d
d
i
t
i
o
n
a
l
i
n
f
o
r
m
a
t
i
o
n
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
1.11 Our businesses
The maps in this section should be read in conjunction with the information on mining operations table in section 6.1.
1.11.1 Minerals Australia
The Minerals Australia asset group includes operated assets in Western Australia, Queensland,
New South Wales and South Australia.
Coober Pedy
Olympic Dam
Port Augusta
Port Lincoln
Adelaide
Victor Harbor
Kangaroo
Island
South Australia
Olympic Dam
Port
Hwy
Copper asset
Olympic Dam
Overview
Located 560 kilometres north of Adelaide, Olympic Dam is one
of the world’s most significant deposits of copper, gold, silver
and uranium.
Olympic Dam is made up of underground and surface operations
and operates a fully integrated processing facility from ore to
metal. Ore mined underground is hauled by an automated train
system to crushing, storage and ore hoisting facilities, or trucked
directly to the surface via declines.
The processing plant consists of two grinding circuits in which
high-quality copper concentrate is extracted from sulphide ore
through a flotation extraction process. Olympic Dam has a fully
integrated metallurgical complex with a grinding and concentrating
circuit, a hydrometallurgical plant incorporating solvent extraction
circuits for copper and uranium, a copper smelter, a copper refinery
and a recovery circuit for precious metals.
Key developments during FY2019
Olympic Dam began operating its third access ramp or decline,
opening up the southern mine area. The new decline, known
as the Kalta decline, supports productivity and potential growth
at the mine as it improves traffic flow for Olympic Dam’s
underground trucking fleet.
BHP’s research and development trials into heap leaching
technology were successfully completed. Heap leaching works
by drip-feeding acid through a large stockpile (or heap) of ore
to leach out metals. The program, which began in 2012, was
conducted with the support of the South Australian Government,
and confirmed the viability of the technology.
Looking ahead
In November 2018, BHP announced a discovery 65 kilometres
southeast of Olympic Dam. A potential new iron oxide, copper
and gold mineralised system was uncovered as part of our
ongoing copper exploration program. The results are still in
an early phase and more geological information is required.
Olympic Dam has a range of future growth options to consider
as part of its sustained, long-term growth strategy, including the
Brownfield Expansion project.
The Brownfield Expansion project has the potential to result in
production growing at Olympic Dam to approximately 240-300
kilotonnes per annum (ktpa).
66 BHP Annual Report 2019
Western
Australia
Port Hedland
Finucane Island
South Hedland
Karratha
Nelson Point
Goldsworthy
Rail Line
Yarrie
Great
Northern
Highway
Marble Bar
Port Hedland – Newman Rail Line
Chichester
Deviation
Karijini
National
Park
Yandi
Mining Area C
South Flank
Orebody
24/25
Orebody 18
Mt Whaleback
Orebody 29/30/35
Newman
Jimblebar/
Wheelarra
Existing operations
Port Hedland – Newman Rail Line
Port
Goldsworthy Rail Line
Iron ore asset
Western Australia Iron Ore
Overview
Western Australia Iron Ore (WAIO) is an integrated system of four
processing hubs and five mines connected by more than 1,000
kilometres of rail infrastructure and port facilities in the Pilbara
region of northern Western Australia.
WAIO’s Pilbara reserve base is relatively concentrated, allowing
development to be planned around integrated mining hubs that
are connected to the mines and satellite orebodies by conveyors
or spur lines. This approach enables the value of installed
infrastructure to be maximised by using the same processing
plant and rail infrastructure for a number of orebodies.
The ore is crushed, beneficiated (where necessary) and blended
at each processing hub – Newman operations, Yandi, Mining Area C
and Jimblebar – to create high-grade lump and fines products.
Iron ore products are then transported along the Port Hedland–
Newman rail line to the Finucane Island and Nelson Point port
facilities at Port Hedland.
There are four main WAIO joint ventures (JVs): Mt Newman, Yandi,
Mt Goldsworthy and Jimblebar. BHP’s interest in each of the joint
ventures is 85 per cent, with Mitsui and ITOCHU owning the
remaining 15 per cent. The joint ventures are unincorporated,
except Jimblebar.
BHP, Mitsui and ITOCHU are also participants in the POSMAC JV,
a joint venture with a subsidiary of POSCO that involves the
sublease of parts of one of WAIO’s existing mineral leases.
The ore from the POSMAC JV is sold to the Mt Goldsworthy JV.
All ore is transported by rail on the Mt Newman JV and
Mt Goldsworthy JV rail lines to the port facilities. WAIO’s port
facilities at Nelson Point are owned by the Mt Newman JV
and Finucane Island is owned by the Mt Goldsworthy JV.
Key developments during FY2019
Construction of the US$3.6 billion (100 per cent basis) South Flank
project started in July 2018 and by the end of FY2019 was more
than 30 per cent complete.
South Flank remains on track to deliver first ore in CY2021 and is
expected to produce 80 million tonnes per annum (Mtpa), replacing
volumes from Yandi as Yandi reaches its end of economic life in the
early-to-mid 2020s.
For more information about South Flank,
refer to section 6.4.
WAIO production was broadly unchanged in FY2019 compared
to FY2018. This was a positive result given the production impacts,
including a train derailment in November 2018 and Tropical Cyclone
Veronica in March 2019.
Jimblebar had record production of 58.5 million tonnes (Mt)
in FY2019, compared to 55.8 Mt in FY2018.
A range of cost and improvement initiatives contributed to
productivity, including changes to maintenance planning,
materials handling and truck fleet utilisation.
Looking ahead
South Flank is expected to reach its peak construction workforce of
around 3,000 people as the project moves into the second full year
of construction.
Within WAIO, our focus will remain on supply chain stability, quality
improvement and operating discipline.
In addition to equipment productivity, prioritisation of resource
recovery optimisation and stable supply of high-quality product
to market will continue. There will also be a focus on embedding
our transformation programs into the WAIO business. For example,
the BHP Operating System is currently being deployed at Port, in
the Perth Repair Centre and at Jimblebar and will soon be deployed
at Mining Area C, Nickel West’s Mt Keith operations and our
Integrated Remote Operations Centre during FY2020.
BHP Annual Report 2019 67
1
i
S
t
r
a
t
e
g
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
a
t
B
H
P
R
e
m
u
n
e
r
a
t
i
o
n
R
e
p
o
r
t
D
i
r
e
c
t
o
r
s
’
R
e
p
o
r
t
i
F
n
a
n
c
a
i
l
S
t
a
t
e
m
e
n
t
s
A
d
d
i
t
i
o
n
a
l
i
n
f
o
r
m
a
t
i
o
n
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
1.11.1 Minerals Australia continued
Abbot Point
Bowen
Collinsville
Queensland,
Australia
Dalrymple Bay
BMA Hay Point
Coal Terminal
Mackay
Broadmeadow
Goonyella
Riverside
Moranbah
Caval
Ridge
Saraji
South Walker
Creek
Daunia
Poitrel
Peak Downs
Dysart
Norwich Park
Emerald
Blackwater
Blackwater
Barney Point
Rockhampton
RG Tanna
Gladstone
BMA Mine
BMC Mine
BMA Port
Port
Rail
Coal assets
Our coal assets in Australia consist of open-cut and underground
mines. At our open-cut mines, overburden is removed after blasting,
using either draglines or truck and shovel. Coal is then extracted
using excavators or loaders and loaded onto trucks to be taken
to stockpiles or directly to a beneficiation facility.
At our underground mine, coal is extracted by either longwall
or continuous miner. The coal is then transported to stockpiles
on the surface by conveyor. Coal from stockpiles is crushed and,
for a number of the operations, washed and processed through
a coal preparation plant. Domestic coal is transported to nearby
customers via conveyor or rail, while export coal is transported
to ports on trains. Single and multi-user rail and port infrastructure
is used as part of the coal supply chain.
Queensland Coal
Overview
Queensland Coal comprises the BHP Mitsubishi Alliance (BMA)
and BHP Mitsui Coal (BMC) assets in the Bowen Basin in Central
Queensland, Australia.
The Bowen Basin’s high-quality metallurgical coals are ideally suited
to efficient blast furnace operations. The region’s proximity to Asian
customers means it is well positioned to competitively supply the
seaborne market.
Queensland Coal has access to key infrastructure in the Bowen Basin,
including a modern, multi-user rail network and its own coal loading
terminal at Hay Point, located near the city of Mackay. Queensland
Coal also has contracted capacity at three other multi-user port
facilities – the Port of Gladstone (RG Tanna Coal Terminal), Dalrymple
Bay Coal Terminal and Abbot Point Coal Terminal.
BHP Mitsubishi Alliance (BMA)
BMA is Australia’s largest coal producer and supplier of
seaborne metallurgical coal. It is owned 50:50 by BHP
and Mitsubishi Development.
BMA operates seven Bowen Basin mines (Goonyella Riverside,
Broadmeadow, Daunia, Peak Downs, Saraji, Blackwater and
Caval Ridge) and owns and operates the Hay Point Coal Terminal
near Mackay. BMA also owns Norwich Park Mine, which is in
care and maintenance. With the exception of the Broadmeadow
underground longwall operation, BMA’s mines are open-cut, using
draglines and truck and shovel fleets for overburden removal.
BHP Mitsui Coal (BMC)
BMC owns and operates two open-cut metallurgical coal mines
in the Bowen Basin – South Walker Creek Mine and Poitrel Mine.
BMC is owned by BHP (80 per cent) and Mitsui and Co (20 per cent).
South Walker Creek Mine is located on the eastern flank of the
Bowen Basin, 35 kilometres west of the town of Nebo and 132
kilometres west of the Hay Point Port facilities. Poitrel Mine is
situated southeast of the town of Moranbah and began open-cut
operations in October 2006.
Key developments during FY2019
BMA completed the sale of the Gregory Crinum Mine to Sojitz
Corporation on 27 March 2019. In addition to the sale of the mine to
Sojitz, BMA has provided Sojitz funding for rehabilitation of existing
areas of disturbance at the site.
For BMA, the construction of the Caval Ridge Southern Circuit
(CRSC) project in the Bowen Basin was completed with the first
conveying of coal in October 2018. The CRSC project includes an
11-kilometre overland conveyor system that transports coal from
Peak Downs Mine to the coal handling preparation plant at the
nearby Caval Ridge Mine, enabling utilisation of the latent capacity
of the Caval Ridge coal handling preparation plant.
The introduction of productivity initiatives targeting system
hours, the haul cycle, payload, our trucking strategy and enabling
activities were initiated in FY2019 to improve pre-strip productivity
across the Queensland Coal business. By further improving
our productivity in truck and shovel operations, we expect
to accelerate the rate at which coal is uncovered and ensure
a continuous feed for our wash plants.
The Integrated Remote Operations Centre has been focused on
ultra-class truck utilisation improvements through the use of
analytics and technology to optimise on-circuit trucks. This has
minimised process delays through effective refuelling, meal breaks
and shift change practices and embedded improvements in the
24-hour mine planning process.
68 BHP Annual Report 2019
Gunnedah
NSW, Australia
Tamworth
Quirindi
Mt Arthur
Muswellbrook
Singleton
Cessnock
Maitland
Newcastle
NSWEC
Port
Rail
Coal assets
Looking ahead
For BMA, continued delivery of initiatives and improved operating
discipline through the site-level integrated operational plans
are expected to support delivery of productivity improvement.
In the medium term, trucking performance is expected to improve
to benchmark rates, as well as the realisation of transformation
initiative benefits, through leveraging latent coal handling
preparation plant and logistics capacity.
BMA’s safety performance requires significant improvement.
With three fatalities over the last four years, BMA is focusing its
efforts to drive a change in safety through the consistent application
of improved safety standards, increasing the standardisation of
work, improving the quality of task-based risk assessments and
decreasing fatal risk exposure through investment in hard controls.
BMC will work to continue to improve the quality of field leadership,
hazard reporting and risk management at both South Walker
Creek and Poitrel Mines, and the Red Mountain coal handling
preparation plant. We will also focus on improving truck and
shovel productivity to ensure optimal utilisation of our coal
handling preparation plants. BMC will reopen Ramp 10 at Poitrel
to increase available mining areas, target delivery of the Mulgrave
Resource Area 2C project at South Walker Creek to release lower
strip ratio resources in the medium term, and continue to prioritise
low capital de-bottlenecking opportunities.
New South Wales Energy Coal
Overview
New South Wales Energy Coal (NSWEC) consists of the Mt Arthur
Coal open-cut energy coal mine in the Hunter Valley region of
New South Wales, Australia. The site produces coal for domestic
and international customers in the energy sector.
Key developments during FY2019
In October 2018, BHP awarded Thiess a mining services contract to
complete end-to-end mining services in the Ayredale and Roxburgh
pits (referred to as Mt Arthur South) over five years. Thiess was
identified as the preferred contractor, with expertise in existing
operations at the southern area of the main pit and terrace mining
techniques demonstrated at nearby operations. Under the new
contract, Thiess is appointed statutory mine operator of Mt Arthur
South, with scope including vegetation clearing, mine planning,
drill and blast, overburden and coal mining.
BHP will remain mine and lease holder of Mt Arthur South and
Mt Arthur North, and mine operator of Mt Arthur North.
Looking ahead
NSWEC is transitioning to a strategy of optimising product quality.
Volume is expected to decrease and unit costs to increase in
the short term. We expect that benefits of the multiple elevated
roadways project and continued improvements to truck and shovel
productivity will lead to lower unit costs in the medium term.
BHP Annual Report 2019 69
1
i
S
t
r
a
t
e
g
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
a
t
B
H
P
R
e
m
u
n
e
r
a
t
i
o
n
R
e
p
o
r
t
D
i
r
e
c
t
o
r
s
’
R
e
p
o
r
t
i
F
n
a
n
c
a
i
l
S
t
a
t
e
m
e
n
t
s
A
d
d
i
t
i
o
n
a
l
i
n
f
o
r
m
a
t
i
o
n
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
1.11.1 Minerals Australia continued
Western
Australia
Newman
Cliffs
Mt Keith
Leinster
Geraldton
Kalgoorlie Smelter
Kambalda
Concentrator
Ravensthorpe
Fremantle
Perth
Kwinana Refinery
Albany
Nickel West
Port
Hwy
Nickel West
Overview
Nickel West is a fully integrated mine-to-market nickel business.
All nickel operations (mines, concentrators, a smelter and refinery)
are located in Western Australia. The integrated business adds
value throughout our nickel supply chain, with the majority of
Nickel West’s current production sold as powder and briquettes.
Low-grade disseminated sulphide ore is mined from the large
open-pit operation at Mt Keith. The ore is crushed and processed
on-site to produce nickel concentrate. High-grade nickel sulphide
ore is mined at the Cliffs and Leinster underground mines and
Rocky’s Reward open-pit mine. The ore is processed through a
concentrator and dryer at Leinster. Nickel West’s concentrator plant
in Kambalda processes concentrate purchased from third parties
through its dryer, with its mill currently on care and maintenance.
The three streams of nickel concentrate come together at the
Nickel West Kalgoorlie smelter. The smelter uses a flash furnace
to smelt concentrate to produce nickel matte. Nickel West Kwinana
then refines granulated nickel matte from the Kalgoorlie smelter
into premium-grade nickel powder and briquettes containing
99.8 per cent nickel. Nickel matte and metal are exported to
overseas markets via the Port of Fremantle.
Key developments in FY2019
Nickel West made significant progress in FY2019 on its transition to
become a leading supplier to the battery materials market, selling
more than 70 per cent of its production to this sector in FY2019.
In addition, it was announced that Nickel West will be retained
in the BHP portfolio.
Construction of a nickel sulphate plant at the Kwinana Nickel
Refinery is underway. Stage 1 is expected to produce up to 100 ktpa
of nickel sulphate.
In FY2019, Nickel West signed an agreement with the traditional
owners of the land surrounding used by Nickel West’s operations in
the northern Goldfields. In addition to formalising BHP’s relationship
with the Tjiwarl people, the agreement provides support for the
Mt Keith Satellite mine development, which will supply additional
ore to the Mt Keith concentrator. Work has begun on the Mt Keith
Satellite mine development with excavation of the northern pit
(Six Mile Well) and construction of the haul road.
70 BHP Annual Report 2019
Work has commenced at our underground Venus Mine near
Leinster and work on the new main ventilation shaft and pastefill
plant are progressing well. Nickel West will operate the underground
infrastructure for the Venus mine.
Development on the undercut for Leinster B11 (block cave) is
proceeding in line with expectations, with key underground
infrastructure recommissioned and in use.
Looking ahead
Nickel West offers a number of development options and potential
enhancements to its resource position through exploration and
processing innovation. Our short-term focus is the upstream
segment of the nickel value chain through increased exploration
activities in Western Australia and continuing nickel mine
development in the northern Goldfields.
First production from the nickel sulphate plant at the Kwinana
Nickel Refinery is expected in the first half of CY2020.
First ore from the Mt Keith Satellite project is expected by the end
of CY2019. Additional capacity from the project will be matched
to meet the Mt Keith mill requirements.
We expect first production ore from the Leinster B11 undercut
in the second half of CY2020, pending external approvals.
Case study:
South Flank update
BHP continues to be committed to creating shared value
for local economies in the places in which we operate. Our
investment in South Flank is also an investment in Western
Australian-based businesses. By the end of June 2019, we
had awarded more than A$3.3 billion of work on South Flank
– 78 per cent of which is Australian-based work, including
37 per cent that is Pilbara based and 39 per cent that is based
in the rest of Western Australia.
Two of these local operators, Monadelphous and Clough,
deliver significant structural, mechanical, process, electrical
and instrumentation works for South Flank. When operational,
South Flank will be the largest producing iron ore mine BHP
has ever developed, integrating the latest advances in
autonomous-ready fleets and digital connectivity.
Monadelphous, an Australian engineering group
headquartered in Perth, has been contracted to expand an
existing stockyard within the rail loop, resulting in the creation
of 600 jobs. We have worked with Monadelphous for more
than 20 years on construction and maintenance projects.
Similarly, Clough, a Western Australian engineering and
construction business celebrating 100 years of local operation
in CY2019, has been contracted to construct the South Flank
ore handling plant and coarse ore stockpile. BHP expects
more than 600 ongoing operational roles over the life of
the 25-year mine.
1
i
S
t
r
a
t
e
g
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
a
t
B
H
P
R
e
m
u
n
e
r
a
t
i
o
n
R
e
p
o
r
t
D
i
r
e
c
t
o
r
s
’
R
e
p
o
r
t
i
F
n
a
n
c
a
i
l
S
t
a
t
e
m
e
n
t
s
A
d
d
i
t
i
o
n
a
l
i
n
f
o
r
m
a
t
i
o
n
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
BHP Annual Report 2019 71
1.11.2 Minerals Americas
The Minerals Americas asset group includes projects, operated assets and non-operated joint ventures in
Canada, Chile, Peru, the United States, Colombia and Brazil.
Operated assets
PERU
Chile
BOLIVIA
Cerro
Colorado
Iquique
Pica
CHILE
Calama
Spence
ARGENTINA
Minera Escondida
Pacific Ocean
Tocopilla
Mejillones
Antofagasta
Mine
Copper
Our operated copper assets in the Americas, Escondida and Pampa
Norte, are open-cut mines. At these mines, overburden is removed
after blasting, using truck and shovel. Ore is then extracted and
further processed into high-quality copper concentrate or cathodes.
Copper concentrate is obtained through a grinding and flotation
process, while copper cathodes are produced through a leaching,
solvent extraction and electrowinning process. Copper concentrate
is transported to ports via pipeline, while cathodes are transported
by either rail or road. From the port, copper is exported to our
customers around the world.
Escondida (Chile)
Overview
We own 57.5 per cent of the Escondida mine, a leading producer
of copper concentrate and cathodes located in the Atacama Desert
in northern Chile. Escondida’s two pits feed three concentrator
plants, as well as two leaching operations (oxide and sulphide).
Key developments during FY2019
Escondida copper production in FY2019 decreased by 6 per cent
to 1,135 kilotonnes (kt), as a consequence of an expected 12 per cent
decline in copper grades, partially offset by a record level of ore
milled reflecting a full year of operation with three concentrators.
The Escondida Water Supply Expansion (EWSE) project progressed
according to schedule during FY2019 and is expected to deliver its
first water in the first half of FY2020. The EWSE project comprises
the expansion of the Escondida Water Supply conveyance system
by 1,300 litres per second and the desalination water production
by 800 litres per second. This project is key to enabling Escondida
achieve its production plans while also reducing its reliance on
groundwater sources. The proportion of desalinated water in use
at Escondida at the end of FY2019 was 40 per cent.
On 17 August 2018, Escondida successfully completed negotiations
with Union N°1 and signed a new collective agreement, effective
for 36 months from 1 August 2018. On 17 April 2019, Escondida
reached an agreement with an intercompany union that includes
105 workers that were formerly part of Union N°1.
72 BHP Annual Report 2019
Looking ahead
Production of between 1,160 and 1,230 kt is expected for FY2020,
reflecting a further uplift in ore milled and higher recoveries at
the cathode process.
Escondida plans to continue to unlock latent capacity through the
maximisation of concentrator throughput, increased use of the
cathode circuit and improvements in mine fleet performance.
This will be enabled by focusing on continuous improvement
and leveraged by the implementation of the BHP Operating System
and the Maintenance Centre of Excellence. We will also implement
technology projects to enhance our decision making and automate
key activities. We expect these initiatives will allow Escondida to
operate with a medium-term unit cost of less than US$1.15 per
pound despite the continuation of grade decline and the increasing
water costs as we progress toward our goal to cease freshwater
usage altogether by CY2030.
PERU
Chile
BOLIVIA
Cerro
Colorado
Iquique
Pica
CHILE
Calama
Spence
ARGENTINA
Minera Escondida
Pacific Ocean
Tocopilla
Mejillones
Antofagasta
Mine
Copper
Pampa Norte (Chile)
Overview
Pampa Norte consists of two wholly owned assets in the Atacama
Desert in northern Chile – Spence and Cerro Colorado. Spence
and Cerro Colorado produce high-quality copper cathodes through
leaching, solvent extraction and electrowinning processes.
Key developments during FY2019
Pampa Norte copper production for FY2019 decreased by 7 per cent
to 247 kt, mostly due to a fire event in the electrowinning plant at
Spence in September 2018, which had a production impact of 18 kt.
This was partially offset by a 19 per cent increase in production at
Cerro Colorado due to higher throughput and recoveries.
The Spence Growth Option (SGO) to construct a 95 kilotonnes per
day (ktpd) ore concentrator and the outsourcing of a 1,000 litre per
second desalination plant progressed according to schedule and
at the end of FY2019 had an overall progress of 60 per cent. The
project is expected to incrementally increase copper production
capacity by approximately 185 ktpa, with first production expected
in the first half of FY2021. For more information about SGO, refer
to section 6.4.
In July 2018, Compañía Minera Cerro Colorado and its Supervisors
and Staff Union signed a new collective agreement for 36 months,
effective from 1 July 2018. In September 2018, Cerro Colorado and
the Operators and Maintainers Union N°1 signed a new collective
agreement for 36 months, effective from 1 September 2018.
On December 2018, BHP terminated the sale agreement of Cerro
Colorado to the private equity manager, EMR Capital, as the
financing conditions were not met by the buyer. BHP will continue
to operate Cerro Colorado.
1
i
S
t
r
a
t
e
g
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
a
t
B
H
P
R
e
m
u
n
e
r
a
t
i
o
n
R
e
p
o
r
t
D
i
r
e
c
t
o
r
s
’
R
e
p
o
r
t
i
F
n
a
n
c
a
i
l
Looking ahead
Production at Pampa Norte is expected to be between 230 and
250 kt in FY2020, despite the expected 11 per cent decline in
copper grades across both operations. Plans are on track to
redesign the approach to operations at Spence to optimally
balance the requirements of the concentrate and cathodes
processes, as well as changes in the loading and hauling fleet
following completion of the SGO. Spence will introduce a new
Ultra-Class truck fleet over the medium term, with the first units
expected to arrive during FY2020. This change, along with
technology enabled solutions, is expected to lead to reduced
health and safety risks and operating costs.
Production at Cerro Colorado is expected to remain relatively stable
during FY2020. The commissioning of a recovery optimisation
project is expected to be completed during the first half of FY2020.
S
t
a
t
e
m
e
n
t
s
A
d
d
i
t
i
o
n
a
l
i
n
f
o
r
m
a
t
i
o
n
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
BHP Annual Report 2019 73
1.11.2 Minerals Americas continued
Prince Albert
Saskatchewan,
Canada
Wolverine
Burr
Saskatoon
Jansen
Young
Stalwart
Boulder
Yorkton
Holdfast
Regina
Regina
Melville
Moose Jaw
Assiniboia
Weyburn
BHP Potential Projects
Extent of Mine Integrity
BHP Land Permits
Prairie Evaporite 1,100m
Potash
Potash is a potassium-rich salt mainly used in fertiliser to improve
the quality and yield of agricultural production. As an essential
nutrient for plant growth, potash is a vital link in the global food
supply chain. The demands on that supply chain are intensifying;
there will be more people to feed in future, as well as rising calorific
intake comprising more varied diets. The strains this will place on
finite land supply mean sustainable increases in crop yields will be
crucial and potash fertilisers will be critical in replenishing our soils.
Jansen Potash Project (Canada)
Overview
BHP holds exploration permits and mining leases covering
approximately 9,600 square kilometres in the province of
Saskatchewan, Canada. The Jansen Potash Project is located
approximately 140 kilometres east of Saskatoon. We currently
own 100 per cent of the Project.
Jansen’s large resource endowment provides the opportunity to
develop it in stages, with anticipated initial capacity of between
4.3 and 4.5 Mtpa for Jansen Stage 1, with sequenced brownfield
expansions of up to 12 Mtpa (4 Mtpa per stage).
Key developments during FY2019
Having safely excavated the two 7.3-metre diameter service and
production shafts to their full depths in August 2018, focus turned
to preparing the temporary liners for the final watertight composite
concrete and steel liners, and removing the two shaft boring
roadheader (SBR) machines that excavated the shafts. The SBRs
were removed from the shafts in April 2019.
The service shaft and production shaft are 1,005 metres and 975
metres deep, respectively. Jansen is intended to mine the Lower
Patience Lake potash formation, which lies between 935 metres
and 940 metres.
Looking ahead
Future work will include installing watertight composite concrete
and steel final liners from a depth of approximately 800 metres
upwards in both shafts. We expect the shafts to be completed in
the first half of CY2021 and we continue to assess how to reduce
risk and unlock value as we conclude this work. At the end of
FY2019, the current scope of work was 84 per cent complete.
We will continue the selection of a port option on the North
American west coast from which Jansen’s potash would be
exported. As with all decisions relating to the deployment of
capital, the next steps of the Project will be assessed in line
with our Capital Allocation Framework.
74 BHP Annual Report 2019
Non-operated minerals joint ventures
BHP holds interests in companies and joint ventures that we do
not operate. Our non-operated minerals joint ventures (NOJVs)
include Antamina (33.75 per cent ownership), Resolution
(45 per cent ownership), Cerrejón (33.33 per cent ownership)
and Samarco (50 per cent ownership).
We engage with our NOJV partners and operator companies
through our NOJV team, which seeks to sustainably maximise
returns through managing risk. While NOJVs have their own
operating and management standards, we seek to enhance
governance processes and influence operator companies to
adopt international standards (within the limits of the relevant
joint venture agreements).
Since the creation of the NOJV team, our focus has been to
reinforce strong practices in governance, risk management
and value optimisation. Our achievements to date include:
• Governance: We continue to work in our NOJV boards and
committees to improve governance practices and standards,
benchmarking against best practice. In collaboration with our
shareholder partners, we identify and implement annual
governance improvement plans for each operator company.
• Risk management: Our FY2019 strategy continued to focus on
understanding the NOJV operator’s risk management processes
and influencing them to align with international standards
(including ISO 31000). This included analysing and challenging
their risk profiles and prioritising management of those risks.
More information on health, safety and environment
performance at our NOJVs is available in our
Sustainability Report 2019, available online at bhp.com.
Non-operated minerals joint ventures
Santa District
Chimbote
Casma District
La Gramita
Chingas
District
Huari
Huaraz
Antamina
Mine
Puerto Huarmey
Las Zorras
Huari
Province,
Ancash,
Peru
Barranca
District
La Guajira
province,
Colombia
Puerto Bolivar
Caribbean Sea
Riohacha
Uribia
Maicao
COLOMBIA
Cerrejón
Gulf of Venezuela
Maracaibo
VENEZUELA
Antamina Mine
Port
Hwy
Cerrejón
Port
Rail
Copper
Antamina (Peru)
Overview
We own 33.75 per cent of Antamina, a large, low-cost copper and
zinc mine in north central Peru. Antamina is a joint venture between
BHP (33.75 per cent), Glencore (33.75 per cent), Teck Resources
(22.5 per cent) and Mitsubishi Corporation (10 per cent), and is
operated independently by Compañía Minera Antamina S.A.
Antamina by-products include molybdenum and silver.
Key developments during FY2019
Copper production for FY2019 increased by 6 per cent to 147 kt,
with zinc decreasing by 18 per cent to 98 kt, reflecting higher copper
head grades and lower zinc head grades, in line with the mine plan.
Throughout FY2019, Antamina progressed studies to debottleneck
the operation with a strong focus on evaluating new technologies to
secure a more sustainable operation in the long term and to maintain
cost competitiveness. The three-year Antamina Union Agreement
was signed in June 2019, expiring on 31 July 2021.
Looking ahead
Antamina remains focused on improving productivity and reducing
unit cash costs. Copper production of approximately 135 kt and
zinc production of approximately 110 kt is expected in FY2020.
Resolution Copper (United States)
Overview
We hold a 45 per cent interest in the Resolution Copper project in
the US state of Arizona, which is operated by Rio Tinto (55 per cent
interest). Resolution Copper is one of the largest undeveloped
copper projects in the world and has the potential to become the
largest copper producer in North America. The Resolution Copper
deposit lies more than 1,600 metres beneath the surface. Resolution
Copper is working with regulators and the community to plan the
development of the resource and obtain the necessary permits.
Key developments during FY2019
Restoration of the historic No. 9 shaft, originally constructed
in 1971, was successfully completed safely and on budget in
December 2018. The second phase of the project is to deepen the
shaft from its current depth at 1,460 metres below the surface to a
final depth of 2,086 metres and link it with the existing No. 10 shaft
via development activities underground.
During FY2019, the Resolution project continued to move forward
to identify the best development pathway for the project. The
multi-year National Environmental Policy Act (NEPA) permitting
process and community engagement are progressing positively.
Our share of project expenditure for FY2019 was US$85 million.
Looking ahead
We remain focused on optimising the Resolution Copper project
and working with the operator, Rio Tinto, to develop the project
in a manner that creates sustainable benefits for all stakeholders.
The next key milestones for the project will take place in the
June 2020 quarter with the completion of a final version of the
environmental impact study and in the December 2020 quarter
with the completion of the selection phase. A single preferred
investment alternative is yet to be selected.
Coal
Cerrejón (Colombia)
Overview
We have a one-third interest in Cerrejón, which owns, operates
and markets (through an independent company) one of the
world’s largest open-cut energy coal mines, located in the
La Guajira province of Colombia. Cerrejón also owns and operates
integrated rail and port facilities through which the majority
of its production is exported to European, North American and
South American customers.
Cerrejón’s coal assets consist of an open-cut mine with several
pits. Overburden is removed after blasting, using truck and shovel.
Coal is then extracted using excavators or loaders and loaded onto
trucks to be taken to stockpiles.
Coal from stockpiles is crushed, of which a certain portion is
washed and processed through the coal preparation plant.
Export coal is transported to the port via a 150-kilometre railway.
Key developments during FY2019
FY2019 concluded with stable safety and operational performance
at Cerrejón. Production declined 13 per cent to 9,230 kt in FY2019,
due to severe weather impacts and a lower volume plan compared
with FY2018.
Looking ahead
Cerrejón is focused on stability of throughput with current
installed capacity and securing the necessary permits to access
ore reserves.
BHP Annual Report 2019 75
1
i
S
t
r
a
t
e
g
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
a
t
B
H
P
R
e
m
u
n
e
r
a
t
i
o
n
R
e
p
o
r
t
D
i
r
e
c
t
o
r
s
’
R
e
p
o
r
t
i
F
n
a
n
c
a
i
l
S
t
a
t
e
m
e
n
t
s
A
d
d
i
t
i
o
n
a
l
i
n
f
o
r
m
a
t
i
o
n
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
1.11.2 Minerals Americas continued
Minas Gerais,
Espírito Santo
Brazil
Gov. Valadares
Belo Horizonte
(Main Offices)
Nova Era – Antônio Dias
(Guilman-Amorim Hydroelectric Plant)
Mining Lease
Mariana – Ouro Preto
(Germano
Operational Unit)
Muniz Freire
(Muniz Freire
Hydroelectric Plant)
Vitória
(Sales Office)
Anchieta
(Operational
unit and Ocean
Terminal at
Ponta Ubu)
Juiz de Fora
Samarco
2nd pipeline
1st pipeline
3rd pipeline
Iron ore
Samarco (Brazil)
BHP Billiton Brasil Limitada and Vale S.A. each have a 50 per cent
shareholding in Samarco Mineração S.A. (Samarco), the owner
of the Samarco iron ore mine in Brazil.
Overview
As a result of the tragic failure of the Fundão dam at Samarco
in November 2015, operations at Samarco remain suspended.
Samarco comprises a mine and three concentrators located in
the state of Minas Gerais and four pellet plants and a port located
in Anchieta in the state of Espírito Santo. Three 400-kilometre
pipelines connect the mine site to the pelletising facilities.
Samarco’s main product is iron ore pellets. Prior to the suspension
of operations, the extraction and beneficiation of iron ore were
conducted at the Germano facilities in the municipalities of
Mariana and Ouro Preto. Front end loaders were used to extract the
ore and convey it from the mines. Ore beneficiation then occurred
in concentrators, where crushing, milling, desliming and flotation
processes produced iron ore concentrate. The concentrate would
leave the concentrators as slurry and be pumped through the slurry
pipelines from the Germano facilities to the pelletising plants in
Ubu, Anchieta, where the concentrate was processed into pellets.
The iron ore pellets were then heat treated. The pellet output
was stored in a stockpile yard before being shipped out of the
Samarco-owned Port of Ubu in Anchieta.
All geotechnical structures within the Germano facilities, including
tailings dams, are monitored 24 hours a day, by more than 650
pieces of monitoring and safety equipment, including cameras,
weather forecast stations, drones and accelerometers.
In addition, sirens are installed along the river up to 100 kilometres
downstream of Samarco. Geotechnical engineers and technicians
monitor data from the instrumentation in an Integrated Monitoring
Control Room, undertake daily field inspections and perform
monthly third party audits.
Key developments during FY2019
The new Santarém dam was commissioned and is operating as
planned and drainage preparation commenced at the bottom
area of the Fundão Valley, which is part of the Degraded Area
Recovery Plan. The Alegria Sul pit tailings disposal system
implementation commenced and services completion is
expected in September 2019.
76 BHP Annual Report 2019
Following Vale’s Brumadinho dam tragedy on 25 January 2019,
Brazil’s National Mining Agency announced a requirement for all
upstream construction tailings dams to be decommissioned by
various dates, depending on their size. The relevant deadline for
the Germano Main Pit is September 2025 and for the Germano
Main Dam is September 2027. Samarco has hired STANTEC, an
international consulting company, to develop a detailed design
of the decommissioning plan for the Germano facilities, to be
submitted by December 2019.
In May 2019, Brazil’s National Sanitary Surveillance Agency
(ANVISA) attested to the safe consumption in certain quantities of
fish and crustaceans from the Doce River basin and coastal region,
within daily limits of 200 grams per adult and 50 grams per child.
Given the significant impacts of the fishing bans on the livelihoods
of commercial and subsistence fisherfolk and the social cohesion
within their communities, BHP Billiton Brasil has continued
providing technical support to Fundação Renova to accelerate the
collection of data to address the concerns of regulators and the
community. This includes analysis of the safety of fish for human
consumption and the status of fish populations to support lifting
of the fishing bans that currently remain in place.
Looking ahead
The development of the decommissioning plan for the Germano
facilities is the highest priority for Samarco. The plan will include
the design of downstream reinforcement, a surface drainage
management system and instrumentation and monitoring systems.
Restart of Samarco’s operations also remains a focus, provided it
is safe, economically viable and has the support of the community.
Activities required for the granting of licences by state and federal
authorities are complete or near completion. These include
completion of the Alegria Sul pit tailings disposal system and the
construction of a new filtration plant.
1.11.3 Petroleum
Conventional petroleum
BHP has owned oil and gas assets since the 1960s. We have high-margin conventional assets located in the
US Gulf of Mexico, Australia, Trinidad and Tobago, and Algeria, as well as appraisal and exploration options
in Mexico, Deepwater Trinidad and Tobago, Western Gulf of Mexico, Eastern Canada and Barbados. Our
conventional petroleum business includes exploration, appraisal, development and production activities.
We produce crude oil and condensate, gas and natural gas liquids (NGLs) that are sold on the international spot
market or delivered domestically under contracts with varying terms, depending on the location of the asset.
LOUISIANA
New Orleans
Shenzi
Neptune
Atlantis
Mad Dog
Gulf of Mexico
United States
BHP acreage
Petroleum
United States
Gulf of Mexico
Overview
We operate two fields in the US waters of the Gulf of Mexico –
Shenzi (44 per cent interest) and Neptune (35 per cent interest).
We hold non-operating interests in two other fields – Atlantis
(44 per cent interest) and Mad Dog (23.9 per cent interest).
All our producing fields are located between 155 and 210 kilometres
offshore from the US state of Louisiana. We also own 25 per cent
and 22 per cent, respectively, of the companies that own and
operate the Caesar oil pipeline and the Cleopatra gas pipeline.
These pipelines transport oil and gas from the Green Canyon
area, where our US Gulf of Mexico fields are located, to connecting
pipelines that transport product onshore.
Key developments during FY2019
Mad Dog Phase 2, located in the Green Canyon area in the
deepwater Gulf of Mexico, is an extension of the existing
Mad Dog field. The Mad Dog Phase 2 project is in response to
the successful Mad Dog South appraisal well, which confirmed
significant hydrocarbons in the southern portion of this field.
The project includes a new floating production facility with the
capacity to produce up to 140,000 gross barrels of crude oil
per day from up to 14 production wells. Production is expected
to begin in CY2022.
On 13 February 2019, the BHP Board approved the development
of the Atlantis Phase 3 project in the US Gulf of Mexico. The project
includes a subsea tie back of eight new production wells and
is expected to increase production by an estimated 38,000
gross barrels of oil equivalent per day at its peak.
For more information on Mad Dog Phase 2
and Atlantis Phase 3, refer to section 6.4.
BHP Annual Report 2019 77
1
i
S
t
r
a
t
e
g
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
a
t
B
H
P
R
e
m
u
n
e
r
a
t
i
o
n
R
e
p
o
r
t
D
i
r
e
c
t
o
r
s
’
R
e
p
o
r
t
i
F
n
a
n
c
a
i
l
S
t
a
t
e
m
e
n
t
s
A
d
d
i
t
i
o
n
a
l
i
n
f
o
r
m
a
t
i
o
n
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
1.11.3 Petroleum continued
Thebe
Scarborough
North West Shelf
VICTORIA
Dampier
Australia
Macedon
Pyrenees
Onslow
Maffra
Sale
Longford
Snapper
Tuna
Bream
Turrum
Halibut
Kipper
Flounder
Barracoutta
Blackback
Kingfish
0
200km
0
10
20
30km
Bass Strait
WESTERN AUSTRALIA
Pyrenees
BHP operates six oil fields in Pyrenees, which are located offshore
around 23 kilometres northwest of Northwest Cape, Western
Australia. We had an effective 63 per cent interest in the fields
as at 30 June 2019 based on inception-to-date production from
two permits in which we have interests of 71.43 per cent and
40 per cent, respectively. The development uses a FPSO facility.
Macedon
We are the operator of Macedon (71.43 per cent interest), an
offshore gas field located around 75 kilometres west of Onslow,
Western Australia and an onshore gas processing facility, located
around 17 kilometres southwest of Onslow.
The operation consists of four subsea wells, with gas piped onshore
to the processing plant. After processing, the gas is delivered into
a pipeline and sold to the Western Australian domestic market.
Minerva
BHP operates the Minerva Joint Venture (90 per cent interest),
a gas field located 11 kilometres south-southwest of Port Campbell
in western Victoria. The operation consists of two subsea wells,
with gas piped onshore to a processing plant. After processing,
the gas is delivered into a pipeline and sold domestically.
On 1 May 2018, BHP entered into an agreement for the sale of
its interests in the onshore gas plant with subsidiaries of Cooper
Energy and Mitsui E&P Australia Pty Ltd. The agreement, which
is conditional on completion of regulatory approvals and
assignments, provides for the transfer of the plant and associated
land after the cessation of current operations processing gas
from the Minerva gas field. Following Minerva’s end-of-field life,
the wells will be plugged and abandoned.
BHP acreage
Oil fields
Gas fields
Petroleum
Australia
Overview
Bass Strait
We have produced oil and gas from Bass Strait (50 per cent
interest) for over 50 years. Our operations are located between
25 and 80 kilometres off the southeastern coast of Australia.
The Gippsland Basin Joint Venture, operated by Esso Australia
(a subsidiary of ExxonMobil), participated in the original discovery
and development of hydrocarbons in the basin. The Kipper gas
field under the Kipper Unit Joint Venture (32.5 per cent interest),
also operated by Esso Australia, has brought online additional
gas and liquids production that are processed via existing
Gippsland Basin Joint Venture facilities.
The majority of our Bass Strait crude oil and condensate production
is sold to local refineries in Australia. Gas is piped onshore to the
Gippsland Joint Venture’s Longford processing facility, from where
we sell our share of production to domestic retailers and end users.
Liquefied petroleum gas (LPG) is dispatched via pipeline, road
tanker or sea tanker. Ethane is dispatched via pipeline to a
petrochemical plant in western Melbourne.
North West Shelf
We are a joint venture participant in the North West Shelf project
(12.5–16.67 per cent interest), located approximately 125 kilometres
northwest of Dampier in Western Australia. The North West Shelf
project supplies gas to the Western Australian domestic market
and liquefied natural gas (LNG) to buyers primarily in Japan,
South Korea and China.
North West Shelf gas is piped from offshore fields to the onshore
Karratha Gas Plant for processing. LPG, condensate and LNG are
transported to market by ship, while domestic gas is transported
by the Dampier-to-Bunbury and Pilbara Energy pipelines to buyers.
We are also a joint venture partner in four nearby oil fields produced
through the Okha floating, production, storage and off-take (FPSO)
facility (16.67 per cent interest) – Cossack, Wanaea, Lambert and
Hermes. All North West Shelf gas and oil joint ventures are operated
by Woodside Energy Limited (Woodside).
78 BHP Annual Report 2019
1
i
S
t
r
a
t
e
g
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
a
t
B
H
P
R
e
m
u
n
e
r
a
t
i
o
n
R
e
p
o
r
t
D
i
r
e
c
t
o
r
s
’
R
e
p
o
r
t
i
F
n
a
n
c
a
i
l
S
t
a
t
e
m
e
n
t
s
A
d
d
i
t
i
o
n
a
l
i
n
f
o
r
m
a
t
i
o
n
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
Petroleum
Key developments during FY2019
North West Shelf – Greater Western Flank-B
The Greater Western Flank-B project was sanctioned by the
Board in December 2015 and represents the second phase of
development of the core Greater Western Flank fields, behind
the Greater Western Flank-A development. It is located to the
southwest of the existing Goodwyn A platform. The development
comprises six fields and eight subsea wells. First production was
achieved during the December 2018 quarter ahead of schedule
and under budget.
Scarborough
BHP holds a 25 per cent non-operated interest in Scarborough
(WA-1-R) and a 50 per cent non-operated interest in Jupiter,
North Scarborough and Thebe titles (WA-61-R, WA-62-R and
WA-63-R), located offshore northwest Australia. Opportunities
to develop the Scarborough gas field are being actively studied,
including the potential to utilise available capacity at nearby
onshore LNG processing facilities.
Woodside became the operator of the WA-1-R lease in March 2018
following its acquisition of Esso’s working interest in the title. BHP
has an option to acquire a further 10 per cent interest in WA-1-R
from Woodside on equivalent terms to its Esso transaction.
This option may be exercised at any time prior to the earlier of
31 December 2019 and the date the Scarborough Joint Venture
approves entry into the front-end engineering and design phase
of the development of the Scarborough gas field. BHP continues
to evaluate the option as we progress our assessment of the
Scarborough development opportunity.
Bass Strait West Barracouta
The Bass Strait West Barracouta project was approved during the
December 2018 quarter. The A$200 million investment (which is
BHP’s share) is expected to produce first gas in CY2021, and help
offset Bass Strait production decline and deliver competitive
returns. The project includes a two well brownfield subsea tieback
to existing Gippsland Basin Joint Venture facilities and is expected
to supply the Australian domestic market.
Other conventional petroleum assets
Overview
Trinidad and Tobago
BHP operates the Greater Angostura field (45 per cent interest
in the production sharing contract), an integrated oil and gas
development located offshore 40 kilometres east of Trinidad.
The crude oil is sold on a spot basis to international markets,
while the gas is sold domestically under term contracts.
Algeria
Our Algerian asset comprises an effective 29.3 per cent interest
in the ROD Integrated Development, which consists of the ROD,
SF SFNE and four satellite oil fields that pump oil back to a
dedicated processing train. The oil is sold on a spot basis to
international markets. ROD Integrated Development is jointly
operated by Sonatrach and ENI.
United Kingdom
On 30 November 2018, BHP completed the sale of our interests
in the Bruce and Keith oil and gas fields in the United Kingdom
to Serica Energy UK Ltd, with an effective date of 1 January 2018.
For more information, refer to section 1.13.1.
Key developments during FY2019
Ruby is an offshore shallow water oil and gas development in
Trinidad and Tobago that would consist of five production wells
tied back into existing operated processing facilities. BHP is the
operator (68 per cent interest) and the project has an expected
investment of US$283 million (which is BHP’s share). The project
was approved by the BHP Board on 8 August 2019 with first
production targeted in CY2021. The relevant operating agreement
requires at least two parties and 65 per cent of the working interest
to approve the investment.
Unconventional petroleum
Onshore US
The Onshore US sales process was completed on 31 October 2018,
with the net proceeds of US$10.4 billion. The Fayetteville Onshore
US gas assets were sold to a company owned by Merit Energy
Company. BHP’s interests in the Eagle Ford, Haynesville and
Permian Onshore US oil and gas assets were sold to BP America
Production Company, a subsidiary of BP Plc.
For more information, refer to note 27
‘Discontinued operations’ in section 5.
BHP Annual Report 2019 79
1.11.4 Commercial
The purpose of the Commercial function is to optimise value creation and minimise costs
across our end-to-end supply chain.
The function is organised around our core value chain activities –
Sales and Marketing; Maritime and Supply Chain Excellence;
Procurement; and Warehousing Inventory and Logistics and Property
– supported by short and long-term market insights, strategy and
planning activities, and close partnership with our assets.
Our Operating Model enables us to provide improved service levels
and deliver optimised commercial outcomes by embedding deep
functional expertise and market insights. By embracing our
strategic end-to-end supply chain mandate and influencing
suppliers and customers to partner with BHP, the Commercial
function also creates social value through supply chain integrity
and sustainability focus.
Sales and Marketing
Sales and Marketing creates value by connecting BHP’s resources
to market through commercial expertise, optimised sales and
operations planning, deep customer insights and proactive risk
management. They present a single face to markets across multiple
assets, thereby allowing our assets to focus on their operations.
Maritime and Supply Chain Excellence
Maritime and Supply Chain Excellence is accountable for BHP’s
enterprise-wide transportation strategy and chartering ocean
freight (to meet BHP’s inbound and outbound transportation
needs). They work to ensure consistent safety standards across
BHP’s maritime supply chain and lead the industry toward a safer
and more sustainable global ecosystem. The team maintains a
strong focus on supply chain excellence and on sourcing marine
freight coverage at the lowest available cost.
Procurement
Our global Procurement sub-functions purchase all the goods
and services that are used by projects, our assets and functions.
Procurement works with our business to optimise equipment
performance, reduce operating cost and improve working capital.
They manage supply chain risk and develop sustainable relationships
with global suppliers and local businesses in our communities.
Warehousing Inventory and Logistics and Property
Warehousing Inventory and Logistics and Property is accountable for
the design and operation of our inbound supply chain networks for
the delivery of spare parts, operating supplies and consumables to
enable our assets to achieve superior performance. They design
and operate our office workspaces globally to provide a collaborative
and productive work environment for our employees and contractors.
Market Analysis and Economics
Our Market Analysis and Economics team is responsible for
developing the Company’s independent view on the outlook for
commodity demand and commodity prices. The team works
closely with our Procurement, Maritime, and Sales and Marketing
sub-functions to help optimise end-to-end commercial value.
The team also works closely with the Finance and External Affairs
functions to help identify and respond to long-run strategic
changes in our operating environment.
Commercial: Strategically located close to our key markets and Assets
Saskatoon
London
Houston
Trinidad and Tobago
Santiago
80 BHP Annual Report 2019
New Delhi
Tokyo
Shanghai
Manila
Kuala Lumpur
Singapore
Perth
Brisbane
Adelaide
Melbourne
1.12 Summary of financial performance
1.12.1 Group overview
We prepare our Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRS), as issued by
the International Accounting Standards Board. We publish our Consolidated Financial Statements in US dollars. All Consolidated Income
Statement, Consolidated Balance Sheet and Consolidated Cash Flow Statement information below has been derived from audited
financial statements. For more information, refer to section 5.
Unless otherwise stated, comparative financial information for FY2017, FY2016 and FY2015 has been restated to reflect the sale of the
Onshore US assets, as required by IFRS 5/AASB 5 ‘Non-current Assets Held for Sale and Discontinued Operations’. Consolidated Balance
Sheet information for these periods has not been restated as accounting standards do not require it.
Information in this section has been presented on a Continuing operations basis to exclude the contribution from Onshore US assets
and assets that were demerged with South32 in FY2015, unless otherwise noted. Details of the contribution of the Onshore US assets
to the Group’s results are disclosed in note 27 ‘Discontinued operations’ in section 5.
Year ended 30 June
US$M
2019
2018
2017
2016
2015
Consolidated Income Statement (section 5.1.1)
Revenue (1)
Profit from operations
Profit/(loss) after taxation from Continuing operations
Loss after taxation from Discontinued operations
Profit/(loss) after taxation from Continuing and Discontinued operations
attributable to BHP shareholders (Attributable profit/(loss)) (2)
Dividends per ordinary share – paid during the period (US cents)
Dividends per ordinary share – determined in respect of the period (US cents)
Basic earnings/(loss) per ordinary share (US cents) (2) (3)
Diluted earnings/(loss) per ordinary share (US cents) (2) (3)
Basic earnings/(loss) from Continuing operations per ordinary share (US cents) (3)
Diluted earnings/(loss) from Continuing operations per ordinary share (US cents) (3)
Number of ordinary shares (million)
– At period end
– Weighted average
– Diluted
Consolidated Balance Sheet (section 5.1.3) (4)
Total assets
Net assets
Share capital (including share premium)
Total equity attributable to BHP shareholders
Consolidated Cash Flow Statement (section 5.1.4)
Net operating cash flows (5)
Capital and exploration expenditure (6)
Other financial information
Net debt (7)
Underlying attributable profit (7)
Underlying EBITDA (7)
Underlying EBIT (7)
Underlying basic earnings per share (US cents) (7)
44,288
16,113
9,520
(335)
43,129
15,996
7,744
(2,921)
35,740
12,554
6,694
(472)
8,306
220.0
235.0
160.3
159.9
166.9
166.5
5,058
5,180
5,193
100,861
51,824
2,686
47,240
17,871
7,566
9,215
9,124
23,158
17,065
176.1
3,705
98.0
118.0
69.6
69.4
125.0
124.6
5,324
5,323
5,337
111,993
60,670
2,761
55,592
18,461
6,753
10,934
8,933
23,183
16,562
167.8
5,890
54.0
83.0
110.7
110.4
119.8
119.5
5,324
5,323
5,336
117,006
62,726
2,761
57,258
16,804
5,220
16,321
6,732
19,350
13,190
126.5
28,567
2,804
(312)
(5,895)
(6,385)
78.0
30.0
(120.0)
(120.0)
(10.2)
(10.2)
5,324
5,322
5,322
118,953
60,071
2,761
54,290
10,625
7,711
26,102
1,215
11,720
5,324
22.8
40,413
12,887
7,306
(4,428)
1,910
124.0
124.0
35.9
35.8
119.6
119.3
5,324
5,318
5,333
124,580
70,545
2,761
64,768
19,296
13,412
24,417
7,109
19,816
13,296
133.7
(1) FY2018 and FY2017 have been restated to reflect the impact of the accounting standard, IFRS 15 Revenue from Contracts with Customers, which became effective
from 1 July 2018 with restatements applied to comparative periods in section 5. FY2016 and FY2015 have not been restated. For more information on revenue,
refer to note 2 ‘Revenue’ in section 5.
(2) Includes Loss after taxation from Discontinued operations attributable to BHP shareholders.
(3) For more information on earnings per share, refer to note 7 ‘Earnings per share’ in section 5.
(4) The Consolidated Balance Sheet for FY2018 includes the assets and liabilities held for sale in relation to Onshore US as IFRS 5/AASB 5 ‘Non-current Assets Held for
Sale and Discontinued Operations’ does not require the Consolidated Balance Sheet to be restated for comparative periods.
(5) Net operating cash flows are after dividends received, net interest paid and net taxation paid and includes Net operating cash flows from Discontinued operations.
(6) Capital and exploration expenditure is presented on a cash basis and represents purchases of property, plant and equipment plus exploration expenditure from the
Consolidated Cash Flow Statement in section 5 and includes purchases of property, plant and equipment plus exploration expenditure from Discontinued operations.
For more information, refer to note 27 ‘Discontinued operations’ in section 5. Purchase of property, plant and equipment includes capitalised deferred stripping of
US$1,022 million for FY2019 (FY2018: US$880 million) and excludes capitalised interest. Exploration expenditure is capitalised in accordance with our accounting
policies, as set out in note 11 ‘Property, plant and equipment’ in section 5.
(7) We use alternative performance measures to reflect the underlying performance of the Group. Underlying attributable profit and Underlying basic earnings per share
includes Continuing and Discontinued operations. Refer to section 1.12.4 for a reconciliation of alternative performance measures to their respective IFRS measure.
Refer to section 1.12.5 for the definition and method of calculation of alternative performance measures. Refer to note 19 ‘Net debt’ in section 5 for the composition
of Net debt.
BHP Annual Report 2019 81
1
i
S
t
r
a
t
e
g
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
a
t
B
H
P
R
e
m
u
n
e
r
a
t
i
o
n
R
e
p
o
r
t
D
i
r
e
c
t
o
r
s
’
R
e
p
o
r
t
i
F
n
a
n
c
a
i
l
S
t
a
t
e
m
e
n
t
s
A
d
d
i
t
i
o
n
a
l
i
n
f
o
r
m
a
t
i
o
n
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
1.12.2 Financial results
The following table expands on the Consolidated Income Statement in section 5.1.1, to provide more information on the revenue and expenses
of the Group in FY2019.
2019
US$M
44,288
393
(4,032)
(496)
(4,591)
(2,378)
(4,745)
(1,069)
147
(2,538)
(516)
(5,829)
(264)
(405)
(1,306)
(28,022)
(546)
16,113
(1,064)
(5,529)
9,520
(335)
9,185
879
8,306
2018
US$M
Restated
2017
US$M
Restated
43,129
247
(3,990)
142
(4,389)
(2,294)
(4,786)
(1,374)
93
(2,168)
(641)
(6,288)
(333)
(421)
(1,078)
(27,527)
147
15,996
(1,245)
(7,007)
7,744
(2,921)
4,823
1,118
3,705
35,740
662
(3,694)
743
(3,830)
(1,786)
(4,037)
(1,060)
(103)
(1,986)
(610)
(6,184)
(193)
(391)
(989)
(24,120)
272
12,554
(1,417)
(4,443)
6,694
(472)
6,222
332
5,890
(Loss)/profit from equity accounted investments, related
impairments and expenses of US$(546) million has decreased
by US$693 million from FY2018. The decrease is primarily due
to the Samarco dam failure provision updated assumptions relating
to the fishing ban, financial assistance, compensation programs
and resettlement of communities and Samarco Germano dam
accelerated decommissioning provision following legislative
changes in Brazil. This is coupled with lower coal production
volumes at Cerrejón due to adverse weather and lower average
realised prices for copper at Antamina in FY2019.
Net finance costs of US$1.1 billion decreased by US$0.2 million,
or 15 per cent, from FY2018 mainly due to higher interest earned
on increased term deposit holdings and a lower average debt
balance following the repayment on maturity of Group debt.
For more information on net finance costs, refer to section 1.12.3
and note 19 ‘Net debt’ in section 5.
Total taxation expense of US$5.5 billion decreased by US$1.5 billion
from FY2018, primarily due to the impacts of the US tax reform in
FY2018. For more information on income tax expense, refer to note
6 ‘Income tax expense’ in section 5.
Year ended 30 June
Continuing operations
Revenue (1)
Other income
Employee benefits expense
Changes in inventories of finished goods and work in progress
Raw materials and consumables used
Freight and transportation
External services
Third party commodity purchases
Net foreign exchange gains/(losses)
Government royalties paid and payable
Exploration and evaluation expenditure incurred and expensed in the current period
Depreciation and amortisation expense
Impairment of assets
Operating lease rentals
All other operating expenses
Expenses excluding net finance costs
(Loss)/profit from equity accounted investments, related impairments and expenses
Profit from operations
Net finance costs
Total taxation expense
Profit after taxation from Continuing operations
Discontinued operations
Loss after taxation from Discontinued operations
Profit after taxation from Continuing and Discontinued operations
Attributable to non-controlling interests
Attributable to BHP shareholders
(1) Includes the sale of third party products.
Profit after taxation attributable to BHP shareholders increased
from a profit of US$3.7 billion in FY2018 to a profit of US$8.3 billion
in FY2019.
Revenue of US$44.3 billion increased by US$1.2 billion, or
3 per cent, from FY2018. This increase was primarily attributable
to higher average realised prices for iron ore, petroleum and
metallurgical coal, and higher sales volumes at WAIO as a result
of record production at Jimblebar and the expiry of the Wheelarra
Joint Venture. This was partially offset by lower average realised
prices for copper and thermal coal, the impact from Tropical
Cyclone Veronica and a train derailment at WAIO, lower volumes
from Escondida (lower grade partially offset by record concentrator
throughput) and Pampa Norte (fire at electrowinning plant at
Spence and heavy rainfall), coupled with lower volumes from
Petroleum due to planned Pyrenees dry-dock maintenance and
natural field decline. For information on our average realised prices
and production of our commodities, refer to section 1.13.
Total expenses of US$28.0 billion increased by US$0.5 billion or
2 per cent, from FY2018. The increase in changes in inventories
of finished goods and work in progress of US$638 million was
primarily driven by higher recoveries at the leach pad and inventory
drawdowns as more ore was redirected to the concentrators in line
with the Los Colorados Extension commissioning at Escondida, and
inventory drawdown at Coal due to Tropical Cyclone Trevor and
general wet weather affecting all operations at Queensland Coal.
Raw materials and consumables used increased by US$202 million
driven by higher diesel prices across the Group. Third party
commodity purchases have decreased by US$305 million driven
primarily by a decrease in copper price. Government royalties paid
and payable have increased by US$370 million reflecting higher
iron ore prices. Depreciation and amortisation expense decreased
by US$459 million reflecting lower depreciation and amortisation
at Petroleum (lower production at Shenzi and increase in estimated
remaining reserves at Atlantis) and lower depreciation at Escondida
(increase in asset life of the Escondida Water Supply project).
82 BHP Annual Report 2019
Principal factors that affect Revenue, Profit from operations and Underlying EBITDA
The following table describes the impact of the principal factors that affected Revenue, Profit from operations and Underlying EBITDA for
FY2019 and relates them back to our Consolidated Income Statement. For information on the method of calculation of the principal factors
that affect Revenue, Profit from operations and Underlying EBITDA, refer to section 1.12.6.
Revenue
US$M
43,129
1,591
−
1,591
304
(17)
287
−
−
−
(107)
−
−
−
(350)
(457)
−
23
(285)
−
−
44,288
Year ended 30 June 2018
Revenue
Other income
Expenses excluding net finance costs
(Loss)/profit from equity accounted investments,
related impairments and expenses
Total other income, expenses excluding net finance costs and Profit
from equity accounted investments, related impairments and expenses
Profit from operations
Depreciation, amortisation and impairments (1)
Exceptional items
Underlying EBITDA
Change in sales prices
Price-linked costs
Net price impact
Productivity volumes
Growth volumes
Changes in volumes
Operating cash costs
Exploration and business development
Change in controllable cash costs (2)
Exchange rates
Inflation on costs
Fuel and energy
Non-cash
One-off items
Change in other costs
Asset sales
Ceased and sold operations
Other
Depreciation, amortisation and impairments (1)
Exceptional items
Year ended 30 June 2019
Revenue
Other income
Expenses excluding net finance costs
(Loss)/profit from equity accounted investments,
related impairments and expenses
Total other income, expenses excluding net finance costs and Profit
from equity accounted investments, related impairments and expenses
Profit from operations
Depreciation, amortisation and impairments
Exceptional items
Underlying EBITDA
Total expenses,
Other income and
(Loss)/profit from
equity accounted
investments
US$M
Profit from
operations
US$M
Depreciation,
amortisation and
impairments and
Exceptional Items
US$M
Underlying
EBITDA
US$M
247
(27,527)
147
(27,133)
(36)
(353)
(389)
(161)
(58)
(219)
(1,176)
142
(1,034)
1,104
(400)
(180)
81
(46)
559
29
(264)
134
528
(386)
393
(28,022)
(546)
(28,175)
15,996
1,555
(353)
1,202
143
(75)
68
(1,176)
142
(1,034)
997
(400)
(180)
81
(396)
102
29
(241)
(151)
528
(386)
16,113
6,621
566
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
(528)
386
23,183
1,555
(353)
1,202
143
(75)
68
(1,176)
142
(1,034)
997
(400)
(180)
81
(396)
102
29
(241)
(151)
−
−
6,093
952
23,158
(1) Depreciation and impairments that we classify as exceptional items are excluded from depreciation, amortisation and impairments. Depreciation, amortisation and
impairments includes non-exceptional impairments of US$264 million (FY2018: US$333 million).
(2) Collectively, we refer to the change in operating cash costs and change in exploration and business development as change in controllable cash costs. Operating cash
costs by definition do not include non-cash costs. The change in operating cash costs also excludes the impact of exchange rates and inflation, changes in fuel and
energy costs, changes in exploration and business development costs and one-off items. These items are excluded so as to provide a consistent measurement of
changes in costs across all segments, based on the factors that are within the control and responsibility of the segment. Change in controllable cash costs and change
in operating cash costs are not measures that are recognised by IFRS. They may differ from similarly titled measures reported by other companies.
BHP Annual Report 2019 83
1
i
S
t
r
a
t
e
g
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
a
t
B
H
P
R
e
m
u
n
e
r
a
t
i
o
n
R
e
p
o
r
t
D
i
r
e
c
t
o
r
s
’
R
e
p
o
r
t
i
F
n
a
n
c
a
i
l
S
t
a
t
e
m
e
n
t
s
A
d
d
i
t
i
o
n
a
l
i
n
f
o
r
m
a
t
i
o
n
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
1.12.2 Financial results continued
The total decrease in Underlying EBITDA relating to productivity initiatives in FY2019 was US$1.0 billion compared to a decrease
of US$96 million in FY2018. The following table reconciles relevant factors with changes in the Group’s productivity:
Year ended 30 June (1)
Change in controllable cash costs
Change in volumes attributed to productivity
Change in productivity in Underlying EBITDA
Change in capitalised exploration
Change attributable to productivity initiatives
(1) Productivity initiatives exclude Onshore US.
2019
US$M
(1,034)
143
(891)
(124)
(1,015)
2018
US$M
(1,243)
1,024
(219)
123
(96)
Higher average realised prices increased Underlying EBITDA by US$1.6 billion in FY2019 reflecting higher iron ore, petroleum and
metallurgical coal prices, partially offset by lower copper and thermal coal prices. This was partially offset by an increase to price-linked
costs of US$353 million mainly reflecting higher royalty charges.
Productivity volumes in Underlying EBITDA improved by US$143 million primarily as a result of record throughput at Escondida following
the Los Colorados Extension commissioning and increased sales volumes at WAIO (record production at Jimblebar and improved material
handling and equipment reliability), partially offset by lower head grade at Escondida, the WAIO train derailment and fire at the Spence
electrowinning plant. This was partially offset by US$75 million lower growth volumes at Petroleum due to planned Pyrenees dry-dock
maintenance, higher gas to liquids production mix and natural field decline partially offset by higher uptime in the US Gulf of Mexico
and Australia and increased tax barrels in Trinidad and Tobago.
Higher costs reflect unfavourable fixed cost dilution related to unplanned production outages at Olympic Dam, WAIO, Spence and
Nickel West during the first half of FY2019, higher strip ratios and contractor stripping costs at our Australian coal operations, inventory
drawdowns related to the Los Colorados Extension commissioning, increased maintenance activities, partially offset by the benefit from
higher overall volumes at Olympic Dam as a result of the smelter maintenance campaign in the prior year. This was partially offset by lower
Petroleum exploration expense (the Ocean Bottom Node survey acquisition costs in the Gulf of Mexico were less than the prior year
impact of expensing the Scimitar well) and lower study costs (following development approval of the Escondida Water Supply Extension
project in March 2018).
Overall, underlying improvements in productivity of US$1.0 billion were offset by the impact of unplanned production outages at Olympic
Dam, WAIO, Spence and Nickel West of US$0.8 billion during the December 2018 half year; higher than expected unit costs at Queensland
Coal (lower volumes, wet weather and increased contractor stripping costs), New South Wales Energy Coal (higher strip ratio and
contractor stripping costs) and Nickel West (mine plan changes) of US$0.4 billion; and grade decline in copper of US$0.8 billion.
A stronger US dollar against the Australian dollar and Chilean peso increased Underlying EBITDA by US$997 million during the period.
84 BHP Annual Report 2019
Cash flow
The following table provides a summary of the Consolidated Cash Flow Statement contained in section 5.1.4 to show the key sources
and uses of cash during the periods presented:
Year ended 30 June
Cash generated from operations
Dividends received
Net interest paid
Proceeds/(settlements) of cash management related instruments
Net taxation paid
Net operating cash flows from Continuing operations
Net operating cash flows from Discontinued operations
Net operating cash flows
Purchases of property, plant and equipment
Exploration expenditure
Subtotal: Capital and exploration expenditure
Exploration expenditure expensed and included in operating cash flows
Net investment and funding of equity accounted investments
Other investing activities
Net investing cash flows from Continuing operations
Net investing cash flows from Discontinued operations
Proceeds from divestment of Onshore US, net of its cash
Net investing cash flows
Net repayment of interest bearing liabilities
Share buy-back – BHP Group Limited
Dividends paid
Dividends paid to non-controlling interests
Other financing activities
Net financing cash flows from Continuing operations
Net financing cash flows from Discontinued operations
Net financing cash flows
Net (decrease)/increase in cash and cash equivalents
Net (decrease)/increase in cash and cash equivalents from Continuing operations
Net increase/(decrease) in cash and cash equivalents from Discontinued operations
2019
US$M
23,428
516
(903)
296
(5,940)
17,397
474
17,871
(6,250)
(873)
(7,123)
516
(630)
(140)
(7,377)
(443)
10,427
2,607
(2,514)
(5,220)
(11,395)
(1,198)
(188)
(20,515)
(13)
(20,528)
(10,477)
(10,495)
18
2018
US$M
22,949
709
(887)
(292)
(4,918)
17,561
900
18,461
(4,979)
(874)
(5,853)
641
204
(52)
(5,060)
(861)
−
(5,921)
(3,878)
−
(5,220)
(1,582)
(171)
(10,851)
(40)
(10,891)
1,649
1,650
(1)
2017
US$M
18,612
636
(984)
(140)
(2,248)
15,876
928
16,804
(3,697)
(966)
(4,663)
610
(234)
563
(3,724)
(437)
−
(4,161)
(5,501)
−
(2,921)
(575)
(108)
(9,105)
(28)
(9,133)
3,510
3,047
463
Net operating cash inflows of US$17.9 billion decreased by
US$0.6 billion. This decrease reflects increased costs (including
outages and weather impact) and higher Australian and Chilean
income tax payments in FY2019 offset by strong commodity
prices and record production from several of our operations.
Net investing cash inflows of US$2.6 billion increased by
US$8.5 billion. The increase reflects the proceeds from the
divestment of Onshore US, net of its cash partially offset by
continued investment in high-return latent capacity projects,
and increased investment in South Flank, Mad Dog Phase 2
and the Spence Growth Option. Higher net investment and
funding of equity accounted investments relate to the FY2018
cash receipt from Newcastle Coal Infrastructure Group not
repeating in FY2019 and investment in SolGold and Resolution.
For more information and a breakdown
of capital and exploration expenditure
on a commodity basis, refer to section 1.13.
Net financing cash outflows of US$20.5 billion increased by
US$9.6 billion. This reflects the off-market buy-back of BHP Group
Limited shares of US$5.2 billion in December 2018, the special
dividend of US$5.2 billion paid in January 2019 from the Onshore
US asset sale (net proceeds) and higher dividends to BHP
shareholders of US$1.0 billion partially offset by lower repayments
of interest bearing liabilities of US$1.6 billion and lower dividends
to non-controlling interests of US$0.4 billion.
For more information, refer to section 1.12.3
and note 19 ‘Net debt’ in section 5.
BHP Annual Report 2019 85
1
i
S
t
r
a
t
e
g
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
a
t
B
H
P
R
e
m
u
n
e
r
a
t
i
o
n
R
e
p
o
r
t
D
i
r
e
c
t
o
r
s
’
R
e
p
o
r
t
i
F
n
a
n
c
a
i
l
S
t
a
t
e
m
e
n
t
s
A
d
d
i
t
i
o
n
a
l
i
n
f
o
r
m
a
t
i
o
n
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
1.12.3 Debt and sources of liquidity
Our policies on debt and liquidity management have
the following objectives:
This both extended BHP’s average debt maturity profile
and enhanced BHP’s capital structure.
• a strong balance sheet through the cycle;
• diversification of funding sources;
• maintain borrowings and excess cash predominantly in US dollars.
Interest bearing liabilities, net debt and gearing
At the end of FY2019, Interest bearing liabilities were US$24.8 billion
(FY2018: US$26.8 billion) and Cash and cash equivalents were
US$15.6 billion (FY2018: US$15.9 billion). This resulted in net debt(1)
of US$9.2 billion, which represented a decrease of US$1.7 billion
compared with the net debt position at 30 June 2018. Gearing,
which is the ratio of net debt to net debt plus net assets, was
15.1 per cent at 30 June 2019, compared with 15.3 per cent at
30 June 2018.
During FY2019, the Group continued to reduce its debt. This
included the decision not to refinance US$2.4 billion of Group-level
debt (being €1.3 billion of European medium-term notes and
US$0.8 billion of senior notes which matured in November 2018
and April 2019 respectively).
At the subsidiary level, Escondida has refinanced US$0.3 billion
of maturing long-term debt.
Funding sources
No new Group-level debt was issued in FY2019 and debt that
matured during the year was not refinanced.
Our Group-level borrowing facilities are not subject to financial
covenants. Certain specific financing facilities in relation to specific
assets are the subject of financial covenants that vary from facility
to facility, but this would be considered normal for such facilities.
In addition to the Group’s uncommitted debt issuance programs,
we hold the following committed standby facilities:
Revolving credit facility (2)
Total financing facilities
Facility available
2019
US$M
6,000
6,000
Drawn
2019
US$M
–
–
Undrawn
2019
US$M
Facility available
2018
US$M
6,000
6,000
6,000
6,000
Drawn
2018
US$M
–
–
Undrawn
2018
US$M
6,000
6,000
(1) We use alternative performance measures to reflect the underlying performance of BHP, refer to section 1.12.4. For the definition and method of calculation
of alternative performance measures, refer to section 1.12.5. For the composition of net debt, refer to note 19 ‘Net debt’ in section 5.
(2) BHP’s committed US$6.0 billion revolving credit facility operates as a back-stop to the Group’s uncommitted commercial paper program. The combined amount drawn
under the facility or as commercial paper will not exceed US$6.0 billion. As at 30 June 2019, US$ nil commercial paper was drawn (FY2018: US$ nil), therefore
US$6.0 billion of committed facility was available to use (FY2018: US$6.0 billion). The revolving credit facility expires on 7 May 2021. A commitment fee is payable on
the undrawn balance and an interest rate comprising an interbank rate plus a margin applies to any drawn balance. The agreed margins are typical for a credit facility
extended to a company with BHP’s credit rating.
For more information on the maturity profile of our debt obligations
and details of our standby and support agreements, refer to note 21
‘Financial risk management’ in section 5.
In BHP’s opinion, working capital is sufficient for its present requirements. BHP’s credit ratings are currently A2/P-1 outlook stable
(Moody’s – long-term/short-term) and A/A-1 outlook stable (Standard & Poor’s – long-term/short-term). A credit rating is not
a recommendation to buy, sell or hold securities and may be subject to suspension, reduction or withdrawal at any time by
an assigning rating agency. Any rating should be evaluated independently of any other information.
The following table expands on the net debt, to provide more information on the cash and non-cash movements in FY2019.
Year ended 30 June
Net debt at the beginning of the financial year
Net operating cash flows
Net investing cash flows
Free cash flow
Carrying value of interest bearing liability repayments
Net settlements of interest bearing liabilities and debt related instruments
Share buy-back – BHP Group Limited
Dividends paid
Dividends paid to non-controlling interests
Other financing activities(1)
Other cash movements
Interest rate movements (2)
Foreign exchange impacts on debt (3)
Foreign exchange impacts on cash (3)
Others
Non-cash movements
Net debt at the end of the financial year
2019
US$M
17,871
2,607
2,351
(2,514)
(5,220)
(11,395)
(1,198)
(201)
(729)
311
(170)
6
(10,934)
20,478
(18,177)
(582)
(9,215)
2018
US$M
18,461
(5,921)
3,573
(3,878)
−
(5,220)
(1,582)
(211)
353
(245)
56
1
(16,321)
12,540
(7,318)
165
(10,934)
(1) Other financing activities mainly comprises purchases of shares by Employee Share Option Plan trusts of US$188 million (FY2018: US$171 million).
(2) Interest rate movements reflect the movement in the mark to market (fair value) adjustment of corporate bond interest rates.
(3) Foreign exchange impacts reflect the revaluation of local currency debt and cash to US dollars, the Group’s functional currency.
The Group hedges against the volatility in both exchange and interest rates on debt, and also exchange on cash, with associated movements in derivatives reported
in Other financial assets/liabilities as effective hedged derivatives (cross currency and interest rate swaps), in accordance with accounting standards.
For more information, refer to note 21 ‘Financial risk management’ in section 5.
86 BHP Annual Report 2019
1.12.4 Alternative performance measures
We use various alternative performance measures (APMs) to reflect
our underlying performance.
These indicators are not defined or specified under the requirements
of IFRS, but are derived from the Group’s Consolidated Financial
Statements prepared in accordance with IFRS. The APMs are
consistent with how management reviews financial performance
of the Group with the Board and the investment community.
Section 1.12.5 outlines why we believe the APMs are useful and the
calculation methodology. We believe these APMs provide useful
information, but they should not be considered as an indication of,
or as a substitute for, statutory measures as an indicator of actual
operating performance, such as profit, net operating cash flow or
any other measure of financial performance or position presented
in accordance with IFRS, or as a measure of a company’s
profitability, liquidity or financial position.
The following tables provide reconciliations between the APMs
and their nearest respective IFRS measure.
The measures and below reconciliations included in this section
for the year ended 30 June 2019 and comparative periods are
unaudited and have been derived from the Group’s Consolidated
Financial Statements.
Exceptional items
To improve the comparability of underlying financial performance
between reporting periods, some of our APMs adjust the relevant
IFRS measures for exceptional items. For more information on
exceptional items, refer to note 3 ‘Exceptional items’ in section 5.
Exceptional items are those gains or losses where their nature,
including the expected frequency of the events giving rise to them,
and amount is considered material to the Group’s Consolidated
Financial Statements. The exceptional items included within the
Group’s profit from Continuing and Discontinued operations for
the fiscal year are detailed below.
Year ended 30 June
Continuing operations
Revenue
Other income
Expenses excluding net finance costs, depreciation, amortisation and impairments
Depreciation and amortisation
Net impairments
(Loss)/profit from equity accounted investments, related impairments and expenses
Profit/(loss) from operations
Financial expenses
Financial income
Net finance costs
Profit/(loss) before taxation
Income tax benefit/(expense)
Royalty-related taxation (net of income tax benefit)
Total taxation benefit/(expense)
Profit/(loss) after taxation from Continuing operations
Discontinued operations
Profit/(loss) after taxation from Discontinued operations
Profit/(loss) after taxation from Continuing and Discontinued operations
Total exceptional items attributable to non-controlling interests
Total exceptional items attributable to BHP shareholders
Exceptional items attributable to BHP shareholders per share (US cents)
Weighted basic average number of shares (Million)
2019
US$M
2018
US$M
2017
US$M
−
50
(57)
−
−
(945)
(952)
(108)
−
(108)
(1,060)
242
−
242
(818)
−
(818)
−
(818)
(15.8)
5,180
−
−
(57)
−
−
(509)
(566)
(84)
−
(84)
(650)
(2,320)
−
(2,320)
(2,970)
(2,258)
(5,228)
−
(5,228)
(98.2)
5,323
−
169
(416)
(212)
(5)
(172)
(636)
(127)
−
(127)
(763)
(243)
−
(243)
(1,006)
−
(1,006)
(164)
(842)
(15.8)
5,323
BHP Annual Report 2019 87
1
i
S
t
r
a
t
e
g
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
a
t
B
H
P
R
e
m
u
n
e
r
a
t
i
o
n
R
e
p
o
r
t
D
i
r
e
c
t
o
r
s
’
R
e
p
o
r
t
i
F
n
a
n
c
a
i
l
S
t
a
t
e
m
e
n
t
s
A
d
d
i
t
i
o
n
a
l
i
n
f
o
r
m
a
t
i
o
n
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
1.12.4 Alternative performance measures continued
APMs derived from Consolidated Income Statement
Underlying attributable profit
Year ended 30 June
Profit after taxation from Continuing and Discontinued operations attributable to BHP shareholders
Total exceptional items attributable to BHP shareholders (1)
Underlying attributable profit
(1) For more information, refer to note 3 ‘Exceptional items’ in section 5.
Underlying attributable profit – Continuing operations
Year ended 30 June
Profit after taxation from Continuing and Discontinued operations attributable to BHP shareholders
Loss attributable to members of BHP for Discontinued operations
Total exceptional items attributable to BHP shareholders (1)
Total exceptional items attributable to BHP shareholders for Discontinued operations (1)
Underlying attributable profit – Continuing operations
(1) For more information, refer to note 3 ‘Exceptional items’ in section 5.
Underlying basic earnings per share
Year ended 30 June
Basic earnings per ordinary share
Exceptional items attributable to BHP shareholders per share (1)
Underlying basic earnings per ordinary share
(1) For more information, refer to note 3 ‘Exceptional items’ in section 5.
Underlying EBITDA
Year ended 30 June
Profit from operations
Exceptional items included in profit from operations (1)
Underlying EBIT
Depreciation and amortisation expense
Net impairments
Exceptional item included in Depreciation, amortisation and impairments (1)
Underlying EBITDA
(1) For more information, refer to note 3 ‘Exceptional items’ in section 5.
2019
US$M
8,306
818
9,124
2019
US$M
8,306
342
818
−
9,466
2018
US$M
3,705
5,228
8,933
2018
US$M
3,705
2,947
5,228
(2,258)
9,622
2017
US$M
5,890
842
6,732
2017
US$M
5,890
485
842
−
7,217
2019
US cents
2018
US cents
2017
US cents
160.3
15.8
176.1
2019
US$M
16,113
952
17,065
5,829
264
−
23,158
69.6
98.2
167.8
2018
US$M
15,996
566
16,562
6,288
333
−
23,183
110.7
15.8
126.5
2017
US$M
12,554
636
13,190
6,184
193
(217)
19,350
88 BHP Annual Report 2019
Underlying EBITDA – Segment
Year ended 30 June 2019
US$M
Profit from operations
Exceptional items included in profit from operations (1)
Depreciation and amortisation expense
Net impairments
Exceptional item included in Depreciation, amortisation and impairments (1)
Underlying EBITDA
Petroleum Copper
Iron Ore
Coal
2,220
−
1,560
21
−
2,587
−
1,835
128
−
8,426
971
1,653
79
−
3,400
−
632
35
−
3,801
4,550
11,129
4,067
Year ended 30 June 2018
US$M
Profit from operations
Exceptional items included in profit from operations (1)
Depreciation and amortisation expense
Net impairments
Exceptional item included in Depreciation, amortisation and impairments (1)
Underlying EBITDA
Petroleum Copper
Iron Ore
Coal
1,546
−
1,719
76
−
3,341
4,389
−
1,920
213
−
6,656
539
1,721
14
−
3,682
−
686
29
−
6,522
8,930
4,397
Year ended 30 June 2017
US$M
Profit from operations
Exceptional items included in profit from operations (1)
Depreciation and amortisation expense
Net impairments
Exceptional item included in Depreciation, amortisation and impairments (1)
Underlying EBITDA
Petroleum Copper
Iron Ore
Coal
1,367
−
1,648
102
−
1,460
546
1,737
14
(212)
6,994
203
1,828
52
−
3,214
(164)
719
20
(5)
3,117
3,545
9,077
3,784
Group and
unallocated
items/
elimination (2)
(520)
(19)
149
1
−
(389)
Group and
unallocated
items/
elimination (2)
(277)
27
242
1
−
(7)
Total Group
16,113
952
5,829
264
−
23,158
Total Group
15,996
566
6,288
333
−
23,183
Group and
unallocated
items/
elimination (2)
(481)
51
252
5
−
(173)
Total Group
12,554
636
6,184
193
(217)
19,350
(1) For more information, refer to note 3 ‘Exceptional items’ in section 5.
(2) Group and unallocated items includes functions and other unallocated operations, including Potash and Nickel West and consolidation adjustments.
1
i
S
t
r
a
t
e
g
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
a
t
B
H
P
R
e
m
u
n
e
r
a
t
i
o
n
R
e
p
o
r
t
D
i
r
e
c
t
o
r
s
’
R
e
p
o
r
t
Year ended 30 June 2019
US$M
Potash
Nickel West
Corporate and eliminations
Total
Year ended 30 June 2018
US$M
Potash
Nickel West
Corporate and eliminations
Total
Year ended 30 June 2017
US$M
Potash
Nickel West
Corporate and eliminations
Total
Exceptional
items
included in
profit from
operations (1)
−
−
(19)
(19)
Profit from
operations
(131)
91
(480)
(520)
Depreciation and
amortisation
Net
impairments
Exceptional item
included in
Depreciation,
amortisation and
impairments (1)
4
11
134
149
−
−
1
1
−
−
−
−
Exceptional
items included
in profit from
operations (1)
Profit from
operations
(139)
215
(353)
(277)
−
−
27
27
Exceptional
items included
in profit from
operations (1)
Profit from
operations
(118)
(43)
(320)
(481)
−
−
51
51
Depreciation and
amortisation
Net
impairments
Exceptional item
included in
Depreciation,
amortisation and
impairments (1)
4
76
162
242
−
−
1
1
−
−
−
−
Depreciation and
amortisation
Net
impairments
Exceptional item
included in
Depreciation,
amortisation and
impairments (1)
5
87
160
252
5
−
−
5
−
−
−
−
Underlying
EBITDA
(127)
102
(364)
(389)
Underlying
EBITDA
(135)
291
(163)
(7)
Underlying
EBITDA
(108)
44
(109)
(173)
(1) For more information, refer to note 3 ‘Exceptional items’ in section 5.
BHP Annual Report 2019 89
i
F
n
a
n
c
a
i
l
S
t
a
t
e
m
e
n
t
s
A
d
d
i
t
i
o
n
a
l
i
n
f
o
r
m
a
t
i
o
n
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
1.12.4 Alternative performance measures continued
Underlying EBITDA margin
Year ended 30 June 2019
US$M
Revenue – Group production
Revenue – Third party products
Revenue
Underlying EBITDA – Group production(1)
Underlying EBITDA – Third party products(1)
Underlying EBITDA
Segment contribution to the Group’s Underlying EBITDA(2)
Underlying EBITDA margin(3)
Year ended 30 June 2018
US$M
Revenue – Group production
Revenue – Third party products
Revenue
Underlying EBITDA – Group production(1)
Underlying EBITDA – Third party products(1)
Underlying EBITDA
Segment contribution to the Group’s Underlying EBITDA(2)
Underlying EBITDA margin(3)
Year ended 30 June 2017
US$M
Revenue – Group production
Revenue – Third party products
Revenue
Underlying EBITDA – Group production(1)
Underlying EBITDA – Third party products(1)
Underlying EBITDA
Segment contribution to the Group’s Underlying EBITDA(2)
Underlying EBITDA margin(3)
Petroleum Copper
Iron Ore
Coal
5,920
10
9,729
1,109
17,223
32
9,102
19
5,930 10,838
17,255
9,121
3,801
−
4,434
116
11,115
14
4,068
(1)
3,801
4,550
11,129
4,067
16%
64%
19%
46%
48%
65%
17%
45%
Petroleum Copper
Iron Ore
Coal
5,396
12
11,432
1,349
14,756
54
8,887
2
5,408
12,781
14,810
8,889
3,340
1
6,462
60
8,929
1
4,398
(1)
3,341
6,522
8,930
4,397
14%
62%
28%
57%
39%
61%
19%
49%
Petroleum Copper
Iron Ore
Coal
4,713
9
6,930
1,012
14,543
81
4,722
7,942
14,624
3,114
3
3,117
16%
66%
3,522
23
3,545
18%
51%
9,054
23
9,077
47%
62%
7,578
−
7,578
3,784
−
3,784
19%
50%
Group and
unallocated
items/
elimination(4) Total Group
1,116
28
1,144
(389)
−
(389)
43,090
1,198
44,288
23,029
129
23,158
100%
53%
Group and
unallocated
items/
elimination (4)
Total Group
1,222
19
1,241
(8)
1
(7)
41,693
1,436
43,129
23,121
62
23,183
100%
55%
Group and
unallocated
items/
elimination (4)
Total Group
867
7
874
(173)
−
(173)
34,631
1,109
35,740
19,301
49
19,350
100%
56%
(1) We differentiate sales of our production from sales of third party products to better measure the operational profitability of our operations as a percentage of revenue.
These tables show the breakdown between our production and third party products, which is necessary for the calculation of the Underlying EBITDA margin and
margin on third party products.
We engage in third party trading for the following reasons:
• Production variability and occasional shortfalls from our assets means that we sometimes source third party materials to ensure a steady supply of product
to our customers.
• To optimise our supply chain outcomes, we may buy physical product from third parties.
• To support the development of liquid markets, we will sometimes source third party physical product and manage risk through both the physical
and financial markets.
(2) Percentage contribution to Group Underlying EBITDA, excluding Group and unallocated items.
(3) Underlying EBITDA margin excludes third party products.
(4) Group and unallocated items includes functions and other unallocated operations, including Potash and Nickel West and consolidation adjustments. Revenue not
attributable to reportable segments comprises the sale of freight and fuel to third parties. Exploration and technology activities are recognised within relevant segments.
Effective tax rate
Year ended 30 June
Statutory effective tax rate
Adjusted for:
Exchange rate movements
Exceptional items(1)
Adjusted effective tax rate
2019
2018
2017
Profit
before
taxation
US$M
Income tax
expense
US$M
Profit
before
taxation
US$M
Income tax
expense
US$M
%
Profit
before
taxation
US$M
Income tax
expense
US$M
%
%
15,049
(5,529)
36.7
14,751
(7,007)
47.5
11,137
(4,443)
39.9
−
1,060
(25)
(242)
−
650
(152)
2,320
−
763
88
243
16,109
(5,796)
36.0
15,401
(4,839)
31.4
11,900
(4,112)
34.6
(1) For more information, refer to note 3 ‘Exceptional items’ in section 5.
90 BHP Annual Report 2019
APMs derived from Consolidated Cash Flow Statement
Capital and exploration expenditure
Year ended 30 June
Capital expenditure (purchases of property, plant and equipment)
Add: Exploration expenditure
Capital and exploration expenditure (cash basis) – Continuing operations
Capital and exploration expenditure – Discontinued operations
Capital and exploration expenditure (cash basis) – Total operations
Free cash flow
Year ended 30 June
Net operating cash flows
Net investing cash flows
Free cash flow
Free cash flow – Continuing operations
Year ended 30 June
Net operating cash flows from Continuing operations
Net investing cash flows from Continuing operations
Free cash flow – Continuing operations
APMs derived from Consolidated Balance Sheet
Net debt and gearing ratio
Year ended 30 June
Interest bearing liabilities – Current
Interest bearing liabilities – Non current
Total interest bearing liabilities
Less: Cash and cash equivalents
Net debt
Net assets
Gearing
Net debt waterfall
Year ended 30 June
Net debt at the beginning of the period
Net operating cash flows
Net investing cash flows
Net financing cash flows
Net (decrease)/increase in cash and cash equivalents from Continuing and Discontinued operations
Carrying value of interest bearing liability repayments
Interest rate movements
Foreign exchange impacts on debt
Foreign exchange impacts on cash
Others
Non-cash movements
Net debt at the end of the period
2019
US$M
6,250
873
7,123
443
7,566
2019
US$M
17,871
2,607
20,478
2019
US$M
17,397
(7,377)
10,020
2018
US$M
4,979
874
5,853
900
6,753
2018
US$M
18,461
(5,921)
12,540
2018
US$M
17,561
(5,060)
12,501
2019
US$M
1,661
23,167
24,828
15,613
9,215
51,824
15.1%
2019
US$M
(10,934)
17,871
2,607
(20,528)
(50)
2,351
(729)
311
(170)
6
(582)
2017
US$M
3,697
966
4,663
555
5,218
2017
US$M
16,804
(4,161)
12,643
2017
US$M
15,876
(3,724)
12,152
2018
US$M
2,736
24,069
26,805
15,871
10,934
60,670
15.3%
2018
US$M
(16,321)
18,461
(5,921)
(10,891)
1,649
3,573
353
(245)
56
1
165
(9,215)
(10,934)
BHP Annual Report 2019 91
1
i
S
t
r
a
t
e
g
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
a
t
B
H
P
R
e
m
u
n
e
r
a
t
i
o
n
R
e
p
o
r
t
D
i
r
e
c
t
o
r
s
’
R
e
p
o
r
t
i
F
n
a
n
c
a
i
l
S
t
a
t
e
m
e
n
t
s
A
d
d
i
t
i
o
n
a
l
i
n
f
o
r
m
a
t
i
o
n
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
1.12.4 Alternative performance measures continued
Net operating assets
The following table reconciles Net operating assets for the Group to Net assets on the Consolidated Balance Sheet:
Year ended 30 June
Net assets
Less: Non-operating assets
Cash and cash equivalents
Trade and other receivables (1)
Other financial assets (2)
Current tax assets
Deferred tax assets
Assets held for sale (3)
Add: Non-operating liabilities
Trade and other payables (4)
Interest bearing liabilities
Other financial liabilities (5)
Current tax payable
Non-current tax payable
Deferred tax liabilities
Liabilities held for sale (3)
Net operating assets
Petroleum
Copper
Iron Ore
Coal
Group and unallocated items (6)
Total
2019
US$M
51,824
(15,613)
(222)
(1,188)
(124)
(3,764)
−
328
24,828
1,020
1,546
187
3,234
−
62,056
7,228
24,088
17,486
9,674
3,580
62,056
2018
US$M
60,670
(15,871)
(36)
(974)
(106)
(4,041)
(11,939)
363
26,805
1,218
1,773
137
3,472
1,222
62,693
8,052
23,679
18,320
9,853
2,789
62,693
(1) Represents loans to associates of US$33 million (FY2018: US$13 million), external finance receivable and accrued interest receivable of US$51 million
(FY2018: US$23 million) included within other receivables.
(2) Represents cross currency and interest rate swaps, forward exchange contracts of US$35 million (FY2018: US$140 million) and investment in shares and other
investments (refer to note 21 ‘Financial risk management’ in section 5) included in other financial assets.
(3) Represents Onshore US assets and liabilities treated as held for sale.
(4) Represents accrued interest payable included within other payables.
(5) Represents cross currency and interest rate swaps (refer to note 21 ‘Financial risk management’ in section 5) included in other financial liabilities.
(6) Group and unallocated items include functions and other unallocated operations including Potash and Nickel West and consolidation adjustments.
92 BHP Annual Report 2019
1.12.5 Definition and calculation of alternative performance measures
Alternative performance measure (APM)
Reasons why we believe the APMs are useful
Calculation methodology
Underlying attributable profit
Allows the comparability of underlying financial
performance by excluding the impacts of exceptional
items and is a performance indicator against
which short-term incentive outcomes for our senior
executives are measured. It is also the basis on
which our dividend payout ratio policy is applied.
Profit after taxation attributable to BHP shareholders
excluding any exceptional items attributable to
BHP shareholders.
Underlying basic earnings per share On a per share basis, allows the comparability
Underlying EBITDA
Underlying EBITDA margin
Underlying EBIT
Capital and exploration expenditure
Free cash flow
Net debt
Gearing ratio
Net operating assets
Adjusted effective tax rate
Unit cost
of underlying financial performance by excluding
the impacts of exceptional items.
Used to help assess current operational profitability
excluding the impacts of sunk costs (i.e. depreciation
from initial investment). Each is a measure that
management uses internally to assess the
performance of the Group’s segments and make
decisions on the allocation of resources.
Used to help assess current operational profitability
excluding net finance costs and taxation expense
(each of which are managed at the Group level),
as well as Discontinued operations and any
exceptional items.
Used as part of our Capital Allocation Framework
to assess efficient deployment of capital.
Represents the total outflows of our operational
investing expenditure.
It is a key measure used as part of our Capital
Allocation Framework. Reflects our operational cash
performance inclusive of investment expenditure,
which helps to highlight how much cash was
generated in the period to be available for the
servicing of debt and distribution to shareholders.
Net debt shows the position of gross debt offset by
cash immediately available to pay debt if required.
Net debt, along with the gearing ratio, is used to
monitor the Group’s capital management by relating
Net debt relative to equity from shareholders.
Enables a clearer view of the physical assets deployed
to generate earnings by highlighting the net operating
assets of the business separate from the financing and
tax balances. This measure helps provide an indicator
of the underlying performance of our assets and
enhances comparability between them.
Provides an underlying tax rate to allow
comparability of underlying financial performance
by excluding the impacts of exceptional items.
Used to assess the controllable financial
performance of the Group’s assets for each unit of
production. Unit costs are adjusted for site specific
non-controllable factors to enhance comparability
between the Group’s assets.
Underlying attributable profit divided by the
weighted basic average number of shares.
Earnings before net finance costs, depreciation,
amortisation and impairments, taxation expense,
Discontinued operations and exceptional items.
Underlying EBITDA includes BHP’s share of profit/
(loss) from investments accounted for using the
equity method including net finance costs,
depreciation, amortisation and impairments and
taxation expense/(benefit).
Underlying EBITDA excluding third party product
EBITDA, divided by revenue excluding third party
product revenue.
Earnings before net finance costs, taxation
expense, Discontinued operations and any
exceptional items. Underlying EBIT includes
BHP’s share of profit/(loss) from investments
accounted for using the equity method including
net finance costs and taxation expense/(benefit).
Purchases of property, plant and equipment
and exploration expenditure.
Net operating cash flows less Net investing
cash flows.
Interest bearing liabilities less Cash and cash
equivalents for the Group at the reporting date.
Ratio of Net debt to Net debt plus Net assets.
Operating assets net of operating liabilities, including
the carrying value of equity accounted investments
and predominantly excludes cash balances, loans
to associates, interest bearing liabilities, derivatives
hedging our debt and tax balances.
Total taxation expense/(benefit) excluding
exceptional items and exchange rate movements
included in taxation expense/(benefit) divided by
Profit before taxation and exceptional items.
Ratio of Net costs of the assets to the equity share of
sales tonnage. Net costs is defined as revenue less
Underlying EBITDA and excludes freight and other
costs, depending on the nature of each asset. Freight
is excluded as the Group believes it provides a similar
basis of comparison to our peer group.
Conventional petroleum unit costs exclude:
• exploration, development and evaluation expense
as these costs do not represent our cost
performance in relation to current production
and the Group believes it provides a similar basis
of comparison to our peer group;
• other costs that do not represent underlying
cost performance of the business.
Escondida unit costs exclude:
• by-product credits being the favourable impact
of by-products (such as gold or silver) to determine
the directly attributable costs of copper production.
WAIO, Queensland Coal and NSWEC unit cash
costs exclude royalties as these are costs that
are not deemed to be under the Group’s control,
and the Group believes exclusion provides a similar
basis of comparison to our peer group.
See section 1.13 for unit cost information.
BHP Annual Report 2019 93
1
i
S
t
r
a
t
e
g
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
a
t
B
H
P
R
e
m
u
n
e
r
a
t
i
o
n
R
e
p
o
r
t
D
i
r
e
c
t
o
r
s
’
R
e
p
o
r
t
i
F
n
a
n
c
a
i
l
S
t
a
t
e
m
e
n
t
s
A
d
d
i
t
i
o
n
a
l
i
n
f
o
r
m
a
t
i
o
n
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
1.12.6 Definition and calculation of principal factors
The method of calculation of the principal factors that affect Revenue, Profit from operations and Underlying EBITDA is as follows:
Principal factor
Method of calculation
Change in sales prices
Price-linked costs
Productivity volumes
Growth volumes
Controllable cash costs
Operating cash costs
Change in average realised price for each operation from the prior period to the current period,
multiplied by current period sales volumes.
Change in price-linked costs (mainly royalties) for each operation from the prior period to the current
period, multiplied by current period sales volumes.
Change in sales volumes for each operation not included in the Growth category from the prior period
to the current period, multiplied by the prior year Underlying EBITDA margin.
Comprises: (1) Underlying EBITDA for operations that are new or acquired in the current period minus
Underlying EBITDA for operations that are new or acquired in the prior period; (2) change in sales volumes
for operations identified as a growth project from the prior period to the current period multiplied by the
prior year Underlying EBITDA margin; and (3) change in sales volumes for our petroleum assets from the
prior period to the current period multiplied by the prior year Underlying EBITDA margin.
Total of operating cash costs and exploration and business development costs.
Change in total costs, other than price-linked costs, exchange rates, inflation on costs, fuel and energy
costs, non-cash costs and one-off items as defined below for each operation from the prior period to
the current period.
Exploration and business development Exploration and business development expense in the current period minus exploration and business
development expense in the prior period.
Exchange rates
Inflation on costs
Fuel and energy
Non-cash
One-off items
Asset sales
Change in exchange rate multiplied by current period local currency revenue and expenses.
Change in inflation rate applied to expenses, other than depreciation and amortisation, price-linked costs,
exploration and business development expenses, expenses in ceased and sold operations and expenses
in new and acquired operations.
Fuel and energy expense in the current period minus fuel and energy expense in the prior period.
Change in net impact of capitalisation and depletion of deferred stripping from the prior period to
the current period.
Change in costs exceeding a pre-determined threshold associated with an unexpected event that
had not occurred in the last two years and is not reasonably likely to occur within the next two years.
Profit/(loss) on the sale of assets or operations in the current period minus profit/(loss) on sale of assets
or operations in the prior period.
Ceased and sold operations
Underlying EBITDA for operations that ceased or were sold in the current period minus Underlying EBITDA
for operations that ceased or were sold in the prior period.
Share of operating profit from equity
accounted investments
Share of operating profit from equity accounted investments for the current period minus share
of operating profit from equity accounted investments in the prior period.
Other
Variances not explained by the above factors.
Productivity
Comprises changes in controllable cash costs, changes in volumes attributed to productivity and changes in capitalised exploration
(being capitalised exploration in the current period less capitalised exploration in the prior period as reported in the cash flow statement).
94 BHP Annual Report 2019
1.13 Performance by commodity
Management believes the following financial information presented
by commodity provides a meaningful indication of the underlying
performance of the assets, including equity accounted
investments, of each reportable segment. Information relating
to assets that are accounted for as equity accounted investments
are shown to reflect BHP’s share, unless otherwise noted,
to provide insight into the drivers of these assets.
For the purposes of this financial information, segments are
reported on a statutory basis in accordance with IFRS 8 ‘Operating
Segments’. The tables for each commodity include an ‘adjustment
for equity accounted investments’ to reconcile the equity
accounted results to the statutory segment results.
1.13.1 Petroleum
For a reconciliation of alternative performance measures to
their respective IFRS measure and an explanation as to the use
of Underlying EBITDA and Underlying EBIT in assessing our
performance, refer to section 1.12.4. For the definition and method
of calculation of alternative performance measures, refer to section
1.12.5. For more information as to the statutory determination of our
reportable segments, refer to note 1 ‘Segment reporting’ in section 5.
Unit costs is one of the financial measures used to monitor the
performance of our individual assets and is included in the analysis
of each reportable segment.
Detailed below is financial information for our Petroleum assets excluding Onshore US for FY2019 and FY2018 and an analysis
of Petroleum’s financial performance for FY2019 compared with FY2018.
Underlying
EBIT
Net operating
assets (8)
Capital
expenditure
Exploration
gross (2)
Exploration
to profit (3)
Year ended 30 June 2019
US$M
Australia Production Unit (4)
Bass Strait
North West Shelf
Atlantis
Shenzi
Mad Dog
Trinidad/Tobago
Algeria
Exploration
Other (5)
Revenue (1)
Underlying
EBITDA
507
1,237
1,657
979
540
319
287
258
−
153
332
915
1,220
824
437
268
181
201
(388)
73
D&A
192
427
298
261
151
59
56
26
58
55
Total Petroleum from Group production
Closed mines (6)
Third party products
5,937
4,063
1,583
−
10
(260)
−
−
−
Total Petroleum
Adjustment for equity accounted investments (7)
5,947
3,803
1,583
(17)
(2)
(2)
Total Petroleum statutory result
5,930
3,801
1,581
2,220
Year ended 30 June 2018
US$M
Australia Production Unit (4)
Bass Strait
North West Shelf
Atlantis
Shenzi
Mad Dog
Trinidad/Tobago
Algeria
Exploration
Other (5)
Total Petroleum from Group production
Closed mines (6)
Third party products
Total Petroleum
Adjustment for equity accounted investments (7)
Total Petroleum statutory result
568
1,285
1,400
833
576
229
161
234
−
126
5,412
−
12
5,424
(16)
5,408
D&A
247
494
230
332
193
50
38
28
127
59
422
948
1,058
666
470
160
(53)
186
(516)
54
3,395
1,798
1,597
(52)
1
−
−
3,344
1,798
(3)
(3)
3,341
1,795
(52)
1
1,546
−
1,546
140
488
922
563
286
209
125
175
(446)
18
2,480
(260)
−
2,220
−
175
454
828
334
277
110
(91)
158
(643)
(5)
513
2,217
1,371
1,060
658
1,232
302
49
1,039
(109)
8,332
(1,104)
−
7,228
−
7,228
13
32
106
31
30
362
23
7
−
41
645
−
−
645
−
645
685
409
685
−
685
409
−
409
740
2,504
1,574
1,307
743
947
256
37
953
(142)
8,919
(867)
−
8,052
−
8,052
−
29
167
159
32
189
16
6
−
58
656
−
−
656
−
656
709
592
709
−
709
592
−
592
Revenue (1)
Underlying
EBITDA
Underlying
EBIT
Net operating
assets (8)
Capital
expenditure
Exploration
gross (2)
Exploration
to profit (3)
(1) Total Petroleum statutory result Revenue includes: crude oil US$3,171 million (2018: US$2,933 million), natural gas US$1,259 million (2018: US$1,124 million), LNG
US$1,179 million (2018: US$920 million), NGL US$263 million (2018: US$294 million) and other US$58 million (2018: US$137 million) which includes third party products.
(2) Includes US$297 million of capitalised exploration (2018: US$193 million).
(3) Includes US$21 million of exploration expenditure previously capitalised, written off as impaired (included in depreciation and amortisation) (2018: US$76 million).
(4) Australia Production Unit includes Macedon, Pyrenees and Minerva.
(5) Predominantly divisional activities, business development, UK (divested in November 2018), Neptune and Genesis. Also includes the Caesar oil pipeline and the
Cleopatra gas pipeline, which are equity accounted investments. The financial information for the Caesar oil pipeline and the Cleopatra gas pipeline presented above,
with the exception of net operating assets, reflects BHP’s share.
(6) Comprises closed mining and smelting operations in Canada and the United States.
(7) Total Petroleum statutory result Revenue excludes US$17 million (2018: US$16 million) revenue related to the Caesar oil pipeline and the Cleopatra gas pipeline.
Total Petroleum statutory result Underlying EBITDA includes US$2 million (2018: US$3 million) D&A related to the Caesar oil pipeline and the Cleopatra gas pipeline.
(8) Refer to section 1.12.4 for a reconciliation of Net operating assets to Net assets and section 1.12.5 for the definition and method of calculation of Net operating assets.
BHP Annual Report 2019 95
1
i
S
t
r
a
t
e
g
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
a
t
B
H
P
R
e
m
u
n
e
r
a
t
i
o
n
R
e
p
o
r
t
D
i
r
e
c
t
o
r
s
’
R
e
p
o
r
t
i
F
n
a
n
c
a
i
l
S
t
a
t
e
m
e
n
t
s
A
d
d
i
t
i
o
n
a
l
i
n
f
o
r
m
a
t
i
o
n
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
Conventional petroleum unit costs increased by 5 per cent to
US$10.54 per barrel of oil equivalent due to additional planned
maintenance partially offset by higher volumes. The calculation
of conventional petroleum unit costs is set out in the table below.
Conventional petroleum unit costs (1)
US$M
Revenue
Underlying EBITDA
Gross costs
Less: exploration expense (2)
Less: freight
Less: development and evaluation
Less: other (3)
Net costs
Production (MMboe, equity share)
Cost per Boe (US$) (4)
FY2019
5,930
4,061
1,869
388
152
46
8
1,275
121
10.54
FY2018
5,408
3,393
2,015
516
152
34
106
1,207
120
10.06
(1) Conventional petroleum assets exclude divisional activities reported in Other
and closed mining and smelting operations in Canada and the United States.
(2) Exploration expense represents conventional petroleum’s share of total
exploration expense.
(3) Other includes non-cash profit on sales of assets, inventory movements,
exchange and the impact from the revaluation of embedded derivatives
in the Trinidad and Tobago gas contract.
(4) FY2019 based on an average exchange rate of AUD/USD 0.72.
Delivery commitments
We have delivery commitments of natural gas and LNG in
conventional petroleum of approximately 2.1 billion cubic feet
through FY2034 (65 per cent Australia and Asia, 35 per cent
Trinidad). We have crude and condensate delivery commitments
of around 10.8 million barrels through FY2020 (51 per cent United
States, 46 per cent Australia and Asia, 3 per cent others). We have
sufficient proved reserves and production capacity to fulfil these
delivery commitments.
We have obligations of US$53 million for contracted capacity on
transportation pipelines and gathering systems through FY2024,
on which we are the shipper. The agreements have annual
escalation clauses.
Other information
Drilling
The number of wells in the process of drilling and/or completion
as of 30 June 2019 was as follows:
Exploratory wells Development wells
Total
Gross
Net (1) Gross
Net (1)
Gross
Net (1)
Australia
United States
Other (2)
Total
−
−
−
−
−
−
−
−
−
5
1
6
−
1
1
2
−
5
1
6
−
1
1
2
(1) Represents our share of the gross well count.
(2) Other is comprised of Algeria.
1.13.1 Petroleum continued
Key drivers of conventional petroleum’s financial results
Price overview
Trends in each of the major markets are outlined below.
Crude oil
Our average realised sales price for crude oil was US$66.59 per
barrel (FY2018: US$60.57 per barrel). While crude oil prices
were higher on average compared to the previous financial year,
geopolitics and shifts in OPEC policy contributed to increased
price volatility. Brent hit a four-year high in the first half of FY2019,
ahead of US sanctions on Iran taking effect, but then fell sharply
in December on mounting oversupply concerns. Deeper supply
cuts by OPEC and its non-member allies (‘OPEC plus’), coupled
with increased US sanctions and unplanned outages supported
a recovery in the second half of FY2019. However, this was
moderated by rising US supply and concerns over demand growth
in response to ongoing trade tensions. A roughly balanced market
is expected in CY2019. Our long-term outlook remains positive,
underpinned by rising demand from the developing world and
natural field decline.
Liquefied natural gas
Our average realised sales price for LNG was US$9.43 per Mcf
(FY2018: US$8.07 per Mcf). The Japan-Korea Marker (JKM) price
for LNG reached a three-year high in September 2018 on strong
demand growth in Asia, led by China. However, prices declined
sharply in the second half as Asian demand slowed, while new
supply volume increased. European imports increased substantially
year-on-year, playing a key role to help balance the market. We
expect the market to remain well supplied through to CY2020. Our
long-term outlook for LNG remains positive, underpinned by rising
energy demand from emerging economies and the need for low
emission and flexible fuels to supplement intermittent renewables.
Depleting indigenous gas supplies are also expected to increase
the dependence of some major consumers on the export market.
Production
Total petroleum production for FY2019 increased by 1 per cent
to 121 MMboe as a result of higher uptime and stronger field
performance at Atlantis, Mad Dog and North West Shelf offset by
natural field decline and a 70-day planned dry dock maintenance
program at Pyrenees.
For more information on individual asset production in FY2019,
FY2018 and FY2017, refer to section 6.2.
Financial results
Petroleum revenue for FY2019 increased by US$522 million to
US$5.9 billion. Gulf of Mexico, which includes Atlantis, Shenzi
and Mad Dog, increased by US$200 million to US$1.8 billion. In
Australia, Bass Strait and North West Shelf collectively increased
by US$209 million to US$2.9 billion. The Trinidad Production Unit
increased by US$126 million to US$0.3 billion while the Australian
Production Unit, which includes Macedon, Pyrenees and Minerva,
decreased by US$61 million to US$0.5 billion.
Underlying EBITDA for Petroleum increased by US$460 million to
US$3.8 billion. Price impacts, net of price-linked costs, increased
Underlying EBITDA by US$599 million. Controllable cash costs
decreased by US$27 million reflecting lower exploration expenses
due to the ocean bottom node seismic survey acquisition costs in
the Gulf of Mexico less than the prior year impact of expensing the
Scimitar well, partially offset by additional maintenance activity at
our Australian assets. Ceased and sold operations decreased by
US$167 million reflecting the revaluation of the closed mines
provision partially offset by the sale of our interests in the Bruce
and Keith oil and gas fields. Lower volumes decreased Underlying
EBITDA by US$75 million mainly due to planned Pyrenees dry-dock
maintenance, higher gas to liquids production mix, natural field
decline across the portfolio and an increase in overlift positions
in Australia. Other items such as exchange rate, inflation and
revaluation of embedded derivatives in the Trinidad and Tobago
gas contract also positively impacted Underlying EBITDA by
US$76 million.
96 BHP Annual Report 2019
Conventional petroleum exploration and appraisal
The majority of the expenditure incurred in FY2019 was in our focus
areas, including Gulf of Mexico (US and Mexico) and Trinidad and
Tobago. We also incurred expenditure in Canada.
Access
BHP was successful in its bids to acquire a 100 per cent interest in,
and operatorship of, two exploration licences for blocks 8 and 12 in
the Orphan Basin, offshore Eastern Canada. BHP’s aggregate bid
amount of US$625 million reflects the costs of the drilling and
seismic work likely to be performed during the exploration phase,
although there is no minimum work program under the licence
agreements. The maximum forfeiture amount under the licence
agreements if no work is performed is approximately US$119 million
for block 8 and US$38 million for block 12.
Exploration program expenditure details
Our gross expenditure on exploration was US$685 million
in FY2019, of which US$388 million was expensed.
Conventional petroleum
BHP’s net share of capital development expenditure in FY2019,
which is presented on a cash basis within this section, was
US$645 million (FY2018: US$656 million). While the majority
of the expenditure in FY2019 was incurred by operating partners
at our Australian and Gulf of Mexico non-operated assets, we also
incurred capital expenditure at our operated Australian, Gulf of
Mexico, and Trinidad and Tobago assets.
Australia
BHP’s net share of capital development expenditure in FY2019,
which is presented on a cash basis within this section, was
US$151 million. The expenditure was primarily related to:
• North West Shelf: Karratha Gas Plant refurbishment projects,
external corrosion compliance and Greater Western Flank-B
subsea tie back well development;
• West Barracouta subsea tie back development, Snapper A21a
development project and rationalisation of crude processing
facility onshore.
Gulf of Mexico
BHP’s net share of capital development expenditure in FY2019,
which is presented on a cash basis within this section, was
US$423 million. The expenditure was primarily related to:
• Atlantis: execution of approved development on Atlantis
Phase 3 Project;
• Mad Dog: execution phase of Phase 2 development, including
ongoing drilling activity, with additional development activity
on one well at Spar A.
Exploration and appraisal wells drilled, or in the process of drilling, during the year included:
Well
Location
Target
BHP equity
Spud date
Water depth Total well depth Status
Victoria-1
Bongos-1
Bongos-2
Samurai-2
Samurai-2
ST01
(sidetrack)
Trinidad and Tobago
Block TTDAA 5
Gas
Trinidad and Tobago
Block 14
Gas
Trinidad and Tobago
Block 14
Gas
US Gulf of Mexico
GC432
US Gulf of Mexico
GC 476
Oil
Oil
65%
(BHP Operator)
70%
(BHP Operator)
70%
(BHP Operator)
50%
(Murphy Operator)
50%
(Murphy Operator)
Concepcion-1 Trinidad and Tobago
Block 5
Gas
Trion-2DEL
Mexico Block
AE-0093
Trion-2DEL
ST01
Mexico Block
AE-0093
Oil
Oil
65%
(BHP Operator)
60%
(BHP Operator)
60%
(BHP Operator)
Bele-1
Tuk-1
Hi-Hat-1
Trinidad and Tobago
Block 23(a)
Gas
70%
(BHP operator)
Trinidad and Tobago
Block 23(a)
Gas
Trinidad and Tobago
Block 14
Gas
70%
(BHP Operator)
70%
(BHP Operator)
12 Jun 2018 1,828 m
3,282 m
20 Jul 2018 1,909 m
2,469 m
22 Jul 2018
1,910 m
5,151 m
16 Apr 2018 1,088 m
9,777 m
Hydrocarbons encountered; plugged
and abandoned
Plugged and abandoned due to
mechanical failure
Hydrocarbons encountered; plugged
and abandoned
Hydrocarbons encountered; plugged
and abandoned
25 Aug 2018 1,088 m
10,088 m
Plugged and abandoned (sidetrack)
30 Sep 2018 1,721 m
3,506 m
15 Nov 2018 2,379 m
4,659 m
4 Jan 2019
2,379 m
5,002 m
2 Mar 2019
2,102 m
3,982 m
24 Apr 2019 1,954 m
4,511 m
20 May 2019 1,782 m
3,804 m
No commercial hydrocarbons
encountered; plugged and abandoned
Hydrocarbons encountered; plugged
and abandoned
Hydrocarbons encountered; plugged
and abandoned
Hydrocarbons encountered; plugged
and abandoned
Hydrocarbons encountered; plugged
and abandoned
Hydrocarbons encountered; plugged
and abandoned
Achernar-1
Western Australia
WA-28-P
Gas
15.8%
(Woodside Operator)
2 May 2019 122 m
3,285 m
Dry hole; plugged and abandoned
In Trinidad and Tobago, we continued phase 2 of our deepwater
drilling program. Victoria-1 and Concepcion-1 were drilled in our
southern licences to further assess the commercial potential of
the Magellan play. Victoria-1 encountered gas, while Concepcion-1
did not encounter commercial hydrocarbons. Analysis is ongoing.
Phase 2 drilling also included Bongos-2, which spud on 22 July 2018
and discovered gas in the Pliocene and Late Miocene.
Following the Bongos-2 discovery, a Phase 3 drilling program in
Trinidad and Tobago in the second half of the year included three
wells (Bele-1, Tuk-1 and Hi-Hat-1) to establish additional volumes
around the Bongos discovery. All three wells encountered gas and
analysis of the results is ongoing.
In Mexico, we drilled our first operated well at Trion, following
acquisition of the discovery in 2017. Trion 2DEL encountered oil in
line with expectations and was followed by a down-dip sidetrack
to delineate the field and provide information about the oil water
contact. Another appraisal well, Trion 3DEL, spud on 9 July 2019
and based on preliminary results, the well encountered oil in the
reservoir’s up-dip from all previous well intersections. Evaluation
and analysis is ongoing.
In Australia, as part of the North West Shelf Joint Venture, we
participated in the Achernar-1 exploration to fulfil a well commitment
on the WA-28-P exploration permit. The well was a dry hole and was
plugged and abandoned.
Following the Wildling-2 well in FY2018 in the US Gulf of Mexico,
technical work is continuing as we advance evaluation of the
development options to optimise value of the resource discovered
in this area.
For more information on conventional
petroleum exploration, refer to section 1.6.3.
BHP Annual Report 2019 97
1
i
S
t
r
a
t
e
g
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
a
t
B
H
P
R
e
m
u
n
e
r
a
t
i
o
n
R
e
p
o
r
t
D
i
r
e
c
t
o
r
s
’
R
e
p
o
r
t
i
F
n
a
n
c
a
i
l
S
t
a
t
e
m
e
n
t
s
A
d
d
i
t
i
o
n
a
l
i
n
f
o
r
m
a
t
i
o
n
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
1.13.1 Petroleum continued
Outlook
In our conventional business, volumes are expected to be between
110 and 116 MMboe in FY2020 as a result of planned maintenance
at Atlantis and natural field decline across the portfolio.
Conventional unit costs are expected to be between US$10.50
and US$11.50 per barrel (based on an average exchange rate of
AUD/USD 0.70) in FY2020 reflecting the impact of lower volumes,
partially offset by lower maintenance activities at our Australian
assets. In the medium term, we expect an increase in unit costs
to less than US$13 per barrel (based on an average exchange rate
of AUD/USD 0.70) as a result of natural field decline.
Conventional petroleum capital expenditure of approximately
US$1.2 billion is planned in FY2020. Conventional petroleum capital
expenditure for FY2020 includes US$1.1 billion of development
and US$0.1 billion of maintenance.
A US$0.7 billion exploration and appraisal program is planned
for FY2020.
Onshore US: Discontinued operations
On 28 September 2018, BHP completed the sale of 100 per cent
of the issued share capital of BHP Billiton Petroleum (Arkansas) Inc.
and 100 per cent of the membership interests in BHP Billiton
Petroleum (Fayetteville) LLC, which held the Fayetteville assets,
for a gross cash consideration of US$0.3 billion.
On 31 October 2018, BHP completed the sale of 100 per cent of
the issued share capital of Petrohawk Energy Corporation, the
BHP subsidiary that held the Eagle Ford (being Black Hawk and
Hawkville), Haynesville and Permian assets, for a gross cash
consideration of US$10.3 billion (net of preliminary customary
completion adjustments of US$0.2 billion).
While the effective date at which the right to economic profits
transferred to the purchasers was 1 July 2018, the Group continued
to control the Onshore US assets until the completion dates of their
respective transactions. As such, the Group continued to recognise
its share of revenue, expenses, net finance costs and associated
income tax expense related to the operation until the completion
date. In addition, the Group provided transitional services to the
buyer, which ceased in July 2019. Results from the Onshore US
assets are disclosed as Discontinued operations.
For further information, refer to note 27
‘Discontinued operations’ in section 5.
1.13.2 Copper
Detailed below is financial information for our Copper assets for FY2019 and FY2018 and an analysis of Copper’s financial performance for
FY2019 compared with FY2018.
Year ended 30 June 2019
US$M
Revenue
Underlying
EBITDA
Escondida (1)
Pampa Norte (2)
Antamina (3)
Olympic Dam
Other (3) (4)
Total Copper from Group production
Third party products
Total Copper
6,876
1,502
1,144
1,351
−
10,873
1,109
11,982
Adjustment for equity accounted investments (5)
(1,144)
3,384
701
723
273
(315)
4,766
116
4,882
(332)
Total Copper statutory result
10,838
4,550
Year ended 30 June 2018
US$M
Revenue(6)
Underlying
EBITDA
Escondida (1)
Pampa Norte (2)
Antamina (3)
Olympic Dam
Other (3) (4)
Total Copper from Group production
Third party products
Total Copper
Adjustment for equity accounted investments (5)
Total Copper statutory result
8,346
1,831
1,305
1,255
−
12,737
1,349
14,086
(1,305)
12,781
4,921
924
955
267
(193)
6,874
60
6,934
(412)
6,522
D&A
1,245
381
108
331
8
2,073
−
2,073
(110)
1,963
D&A
1,601
298
111
228
8
−
2,246
(113)
2,133
Underlying
EBIT
Net
operating
assets (7)
Capital
expenditure
Exploration
gross
Exploration
to profit
2,139
320
615
(58)
(323)
12,726
2,937
1,345
7,133
(53)
2,693
24,088
116
−
2,809
24,088
(222)
−
2,587
24,088
1,036
1,194
229
485
21
2,965
−
2,965
(230)
2,735
66
(4)
62
65
(3)
62
Underlying
EBIT
Net
operating
assets (7)
Capital
expenditure
Exploration
gross
Exploration
to profit
2,246
4,628
23,679
3,320
626
844
39
(201)
13,666
1,967
1,313
6,937
(204)
60
−
4,688
23,679
(299)
−
997
757
183
669
5
2,611
−
2,611
(183)
4,389
23,679
2,428
53
−
53
53
−
53
(1) Escondida is consolidated under IFRS 10 and reported on a 100 per cent basis.
(2) Includes Spence and Cerro Colorado.
(3) Antamina, SolGold and Resolution are equity accounted investments and their financial information presented above with the exception of net operating assets
reflects BHP Group’s share.
(4) Predominantly comprises divisional activities, greenfield exploration and business development. Includes Resolution and SolGold (acquired in October 2018).
(5) Total Copper statutory result Revenue excludes US$1,144 million (2018: US$1,305 million) revenue related to Antamina. Total Copper statutory result Underlying
EBITDA includes US$110 million (2018: US$113 million) D&A and US$222 million (2018: US$299 million) net finance costs and taxation expense related to Antamina,
Resolution and SolGold that are also included in Underlying EBIT. Total Copper Capital expenditure excludes US$229 million (2018: US$183 million) related to Antamina
and US$1 million (2018: US$ nil) related to SolGold. Exploration gross excludes US$4 million (2018: US$ nil) related to SolGold of which US$3 million (2018: US$ nil)
was expensed.
(6) Comparative financial information has been restated for the new accounting standard, IFRS15 Revenue from Contracts with Customers, which became effective
from 1 July 2018.
(7) Refer to section 1.12.4 for a reconciliation of Net operating assets to Net assets and section 1.12.5 for the definition and method of calculation of Net operating assets.
98 BHP Annual Report 2019
Key drivers of Copper’s financial results
Price overview
Our average realised sales price for FY2019 was US$2.62 per pound
(FY2018: US$3.00) per pound. Copper prices decreased in FY2019
as rising global trade uncertainty affected investor sentiment.
Labour negotiations in Chile and Peru during CY2018 went relatively
smoothly with limited volume disruptions. Despite the lower price,
refined copper stocks at exchanges decreased year-on-year. In the
near term, incremental mine production from committed projects
and rising scrap availability should continue to meet demand needs.
In the longer term, we expect demand to grow steadily, led by
a solid performance in traditional end-use sectors. Exposure to
the electrification megatrend provides some upside. A deficit
is expected to emerge early to middle of next decade as grade
declines, a rise in costs and a scarcity of high-quality future
development opportunities are likely to constrain the industry’s
ability to cheaply meet this demand growth.
Production
Total Copper production for FY2019 decreased by 4 per cent
to 1.7 Mt.
Escondida copper production decreased by 6 per cent to 1,135 kt,
as an expected 12 per cent decline in copper grade was partially
offset by record average concentrator throughput of 344 ktpd.
Pampa Norte copper production decreased by 7 per cent to 247 kt,
due to adverse weather impacts and a production outage at Spence
following a fire at the electrowinning plant in September 2018. This
was partially offset by record ore milled at Spence and Cerro
Colorado after implementing maintenance improvement initiatives
as part of our broader transformation program. Olympic Dam
copper production increased by 17 per cent to 160 kt as a result of
the major smelter maintenance campaign in the prior period, which
was partially offset by an unplanned acid plant outage in August
2018 and two minor production outages relating to the smelter and
to the refinery crane during the year. Antamina copper production
increased by 6 per cent to 147 kt and zinc production decreased by
18 per cent to 98 kt, reflecting higher copper head grades and lower
zinc head grades, in line with the mine plan.
For more information on individual asset production
in FY2019, FY2018 and FY2017, refer to section 6.2.
Financial results
Copper revenue decreased by US$1.9 billion to US$10.8 billion
in FY2019. Escondida revenue decreased by US$1.5 billion to
US$6.9 billion.
Underlying EBITDA for Copper decreased by US$2.0 billion to
US$4.6 billion. Price impacts, net of price-linked costs, decreased
Underlying EBITDA by US$1.3 billion. Lower volumes decreased
Underlying EBITDA by US$315 million mainly driven by lower grades
at Escondida and lower production at Pampa Norte after a fire at
the electrowinning plant at Spence and heavy rainfall, partially
offset by a record concentrator throughput at Escondida following
the Los Colorados Extension commissioning and record ore milled
at Pampa Norte.
Controllable cash costs increased by US$321 million, mainly due
to Olympic Dam unfavourable fixed cost dilution related to the
acid plant outage, Escondida inventory drawdowns related to the
Los Colorados Extension commissioning, change in estimated
recoverable copper contained in the Escondida sulphide leach
pad which benefited costs in the prior year and end-of-negotiation
bonus payments. This was partially offset by the Olympic Dam
acid plant outage self-insurance recoveries, inventory movements
at Pampa Norte and the benefit from higher overall volumes at
Olympic Dam as a result of the smelter maintenance campaign
in the prior year.
Unit costs at Escondida increased by 7 per cent to US$1.14 per
pound, driven by an expected 12 per cent decline in copper grade
and labour settlement costs. The calculation of Escondida unit
costs is set out in the table below.
US$M
Revenue
Underlying EBITDA
Gross costs
Less: by-product credits
Less: freight
Net costs
Sales (kt, equity share)
Sales (Mlb, equity share)
Cost per pound (US$) (1)
Escondida unit costs
FY2019
FY2018
6,876
3,384
3,492
490
149
2,853
1,131
2,493
1.14
8,346
4,921
3,425
447
123
2,855
1,209
2,664
1.07
(1) FY2019 based on average exchange rates of AUD/USD 0.72 and USD/CLP 673.
Outlook
Total Copper production of between 1,705 and 1,820 kt is expected
in FY2020. Escondida production of between 1,160 and 1,230 kt is
expected in FY2020, underpinned by a further uplift in concentrator
throughput to compensate grade decline. Production at Pampa
Norte is expected to be between 230 and 250 kt in FY2020, as
the Spence Growth Option continues to progress on schedule
and budget, with initial production targeted in FY2021. At Olympic
Dam, production is expected to be between 180 and 205 kt in
FY2020 reflecting improved operational performance, partially
offset by planned maintenance related to the replacement of
the refinery crane.
Escondida unit costs are expected to increase to between US$1.20
and US$1.35 per pound (based on an average exchange rate of
USD/CLP 683) in FY2020 reflecting lower by-product credits and
higher deferred stripping costs. The impact of a decline in copper
grade of approximately 5 per cent is expected to be offset by
increased concentrator throughput. In the medium term, unit costs
are expected to remain less than US$1.15 per pound (based on an
average exchange rate of USD/CLP 683) with expected higher
power and water costs offset by transformation programs focused
on efficiency improvements and optimised maintenance strategies.
BHP Annual Report 2019 99
1
i
S
t
r
a
t
e
g
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
a
t
B
H
P
R
e
m
u
n
e
r
a
t
i
o
n
R
e
p
o
r
t
D
i
r
e
c
t
o
r
s
’
R
e
p
o
r
t
i
F
n
a
n
c
a
i
l
S
t
a
t
e
m
e
n
t
s
A
d
d
i
t
i
o
n
a
l
i
n
f
o
r
m
a
t
i
o
n
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
1.13.3 Iron Ore
Detailed below is financial information for our Iron Ore assets for FY2019 and FY2018 and an analysis of Iron Ore’s financial performance
for FY2019 compared with FY2018.
Year ended 30 June 2019
US$M
Western Australia Iron Ore
Samarco (2)
Other (3)
Total Iron Ore from Group production
Third party products (4)
Total Iron Ore
Adjustment for equity accounted investments
Revenue
Underlying
EBITDA
17,066
−
157
17,223
32
17,255
−
11,053
−
62
11,115
14
11,129
−
D&A
1,707
−
25
1,732
−
1,732
−
Underlying
EBIT
Net
operating
assets
Capital
expenditure
Exploration
gross (1)
Exploration
to profit
9,346
−
37
9,383
14
19,208
(1,908)
186
17,486
−
9,397
17,486
−
−
1,600
−
11
1,611
−
1,611
−
1,611
93
−
93
41
−
41
Total Iron Ore statutory result
17,255
11,129
1,732
9,397
17,486
Year ended 30 June 2018
US$M
Western Australia Iron Ore
Samarco (2)
Other (3)
Total Iron Ore from Group production
Third party products (4)
Total Iron Ore
Revenue
Underlying
EBITDA
14,596
−
160
14,756
54
8,869
−
60
8,929
1
14,810
8,930
Adjustment for equity accounted investments
−
−
Total Iron Ore statutory result
14,810
8,930
D&A
1,721
−
14
1,735
−
1,735
−
1,735
Underlying
EBIT
Net
operating
assets (5)
Capital
expenditure
Exploration
gross (1)
Exploration
to profit
7,148
−
46
7,194
1
19,406
(1,278)
192
18,320
−
7,195
18,320
−
−
7,195
18,320
1,047
−
27
1,074
−
1,074
−
1,074
84
−
84
44
−
44
(1) Includes US$52 million of capitalised exploration (2018: US$40 million).
(2) Samarco is an equity accounted investment and its financial information presented above, with the exception of net operating assets, reflects BHP Billiton Brasil Ltda’s
share. All financial impacts following the Samarco dam failure have been reported as exceptional items in both reporting periods.
(3) Predominantly comprises divisional activities, towage services, business development and ceased operations.
(4) Includes inter-segment and external sales of contracted gas purchases.
(5) Refer to section 1.12.4 for a reconciliation of Net operating assets to Net assets and section 1.12.5 for the definition and method of calculation of Net operating assets.
Key drivers of Iron Ore’s financial results
Price overview
Iron Ore’s average realised sales price for FY2019 was US$66.68 per
wet metric tonne (wmt) (FY2018: US$56.71 per wmt). The Platts 62%
Fe Iron Ore Fines index has been elevated since the tailings dam
collapse in Brazil disrupted the market in late January 2019. In
addition to the decline in Brazilian exports, prices responded to
stronger than expected Chinese pig iron production and cyclone
disruptions to Australian supply. In the longer term, supply is
expected to return to a more normal trajectory and the marginal
tonne being provided by a higher cost, lower value-in-use exporter
from Australia or Brazil.
Production
Total Iron Ore production from WAIO for FY2019 was broadly
unchanged at 238 Mt, or 270 Mt on a 100 per cent basis. This
reflected record production at Jimblebar and inventory impacts
from the Mt Whaleback fire in the prior period offset by the impacts
of planned maintenance in September 2018, a train derailment
in November 2018 and Tropical Cyclone Veronica in March 2019.
For more information on individual asset production
in FY2019, FY2018 and FY2017, refer to section 6.2.
Financial results
Total Iron Ore revenue increased by US$2.4 billion to US$17.3 billion
in FY2019.
Underlying EBITDA for Iron Ore increased by US$2.2 billion to
US$11.1 billion. Price impact, net of price-linked costs, increased
Underlying EBITDA by US$2.1 billion. Higher volumes increased
Underlying EBITDA by US$382 million driven by record production
at Jimblebar, expiry of the Wheelarra joint venture and improved
supply chain reliability and performance. This was partially offset
by a train derailment and the impact from Tropical Cyclone Veronica.
Lower controllable cash costs from favourable inventory movements
partially offset by increased maintenance activities increased
Underlying EBITDA by US$103 million.
WAIO unit costs decreased by 1 per cent to US$14.16 per tonne
reflecting higher volumes, continued productivity improvements
and favourable exchange movements, partially offset by the
impacts of a train derailment and Tropical Cyclone Veronica.
The calculation of WAIO unit costs is set out in the table below.
WAIO unit costs (US$M)
Revenue
Underlying EBITDA
Gross costs
Less: freight
Less: royalties
Net costs
Sales (kt, equity share)
Cost per tonne (US$)(1)
FY2019
17,066
11,053
6,013
1,308
1,322
3,383
238,836
14.16
FY2018
14,596
8,869
5,727
1,276
1,075
3,376
236,771
14.26
(1) FY2019 based on an average exchange rate of AUD/USD 0.72.
Outlook
WAIO production of between 242 and 253 Mt, or between 273 and
286 Mt on a 100 per cent basis is expected in FY2020. This reflects
a significant maintenance program at Port Hedland designed to
improve productivity and provide a stable base for our tightly
coupled supply chain as we sustainably increase production
towards 290 Mtpa (100 per cent basis). As part of this, a major car
dumper maintenance campaign is planned for the September 2019
quarter, with a corresponding impact expected on production.
WAIO unit costs are expected to decrease to between US$13 and
US$14 per tonne (based on an average exchange rate of AUD/USD
0.70) in FY2020. In the medium term, we expect to lower our unit
costs to less than US$13 per tonne (based on an average exchange
rate of AUD/USD 0.70).
100 BHP Annual Report 2019
1.13.4 Coal
Detailed below is financial information for our Coal assets for FY2019 and FY2018 and an analysis of Coal’s financial performance
for FY2019 compared with FY2018.
Year ended 30 June 2019
US$M
Queensland Coal
New South Wales Energy Coal (1)
Colombia (1)
Other (2)
Total Coal from Group production
Third party products
Total Coal
Adjustment for equity accounted investments (3) (4)
Total Coal statutory result
Year ended 30 June 2018
US$M
Queensland Coal
New South Wales Energy Coal (1)
Colombia (1)
Other (2)
Total Coal from Group production
Third party products
Total Coal
Adjustment for equity accounted investments (3) (4)
Total Coal statutory result
Revenue
Underlying
EBITDA
7,679
1,527
698
2
9,906
19
9,925
(804)
9,121
3,722
431
274
(110)
4,317
(1)
4,316
(249)
4,067
Revenue
Underlying
EBITDA
7,388
1,605
818
−
9,811
2
9,813
(924)
8,889
3,647
652
395
(10)
4,684
(1)
4,683
(286)
4,397
Underlying
EBIT
Net
operating
assets (5)
Capital
expenditure
Exploration
gross
Exploration
to profit
3,190
265
173
(112)
3,516
(1)
3,515
(115)
8,232
920
853
(331)
9,674
−
9,674
−
3,400
9,674
549
102
104
5
760
−
760
(105)
655
23
−
23
15
−
15
Underlying
EBIT
Net
operating
assets (5)
Capital
expenditure
Exploration
gross
Exploration
to profit
3,051
503
300
(13)
3,841
(1)
3,840
(158)
3,682
8,355
994
883
(379)
9,853
−
9,853
−
9,853
391
18
54
−
463
−
463
(54)
409
21
−
21
21
−
21
D&A
532
166
101
2
801
−
801
(134)
667
D&A
596
149
95
3
843
−
843
(128)
715
(1) Newcastle Coal Infrastructure Group and Cerrejón are equity accounted investments and their financial information presented above with the exception of net
operating assets reflects BHP Group’s share.
(2) Predominantly comprises divisional activities and ceased operations.
(3) Total Coal statutory result Revenue excludes US$698 million (2018: US$818 million) revenue related to Cerrejón. Total Coal statutory result Underlying EBITDA includes
US$101 million (2018: US$95 million) D&A and US$70 million (2018: US$108 million) net finance costs and taxation expense related to Cerrejón, that are also included
in Underlying EBIT. Total Coal statutory result Capital expenditure excludes US$104 million (2018: US$54 million) related to Cerrejón.
(4) Total Coal statutory result Revenue excludes US$106 million (2018: US$106 million) revenue related to Newcastle Coal Infrastructure Group. Total Coal statutory result
excludes US$78 million (2018: US$83 million) Underlying EBITDA, US$33 million (2018: US$33 million) D&A and US$45 million (2018: US$50 million) Underlying EBIT
related to Newcastle Coal Infrastructure Group until future profits exceed accumulated losses. Total Coal Capital expenditure excludes US$1 million (2018: US$ nil)
related to Newcastle Coal Infrastructure Group.
(5) Refer to section 1.12.4 for a reconciliation of Net operating assets to Net assets and section 1.12.5 for the definition and method of calculation of Net operating assets.
Key drivers of Coal’s financial results
Price overview
Metallurgical coal
Our average realised sales price for FY2019 was US$199.61 per
tonne for hard coking coal (FY2018: US$194.59 per tonne) and
US$130.18 per tonne for weak coking coal (FY2018: US$131.70 per
tonne). Metallurgical coal prices reached a high in the middle of
FY2019 amid supply constraints in Queensland on account of wet
weather conditions. Prices eased from this peak due to weaker
demand from India and uncertainties around Chinese imports. In
the short term, supply should continue to improve with additional
volumes expected from various regions. Within this broader view,
the application of China’s coal supply reform, and the design and
enforcement of safety, environmental and water stewardship
requirements will be critical signposts to monitor. Over the longer
term, emerging markets such as India are expected to support
seaborne demand growth. High-quality metallurgical coals will
continue to offer steelmakers value-in-use benefits.
Energy coal
Our average realised sales price for FY2019 was US$77.90 per
tonne (FY2018: US$86.94 per tonne). The Newcastle 6,000 kcal/kg
price reached its peak in July 2018 and gradually declined over the
course of FY2019. Weaker demand in North Asia, driven by
increased nuclear and renewable power generation, and slower
restocking post the winter season, weighed on price. Tighter
import controls and softer demand from China also contributed
to lower prices, particularly for the lower-heat 5,500 kcal/kg coals.
In the long term, global energy coal demand is expected to grow
only modestly, with Indian and South East Asian demand offsetting
weakness in OECD countries amidst slowing demand from China.
Production
Metallurgical coal production for FY2019 was broadly flat at 42 Mt,
or 75 Mt on a 100 per cent basis. At Queensland Coal, record annual
production was achieved at BMC due to improved wash plant
performance and increased yields at South Walker Creek and higher
wash plant throughput at Poitrel. Despite record stripping, BMA’s
production decreased slightly due to unfavourable weather impacts
and lower wash plant yields during the year. Energy coal production
decreased 6 per cent to 27 Mt, as record stripping performance
was offset by higher strip ratios and lower wash plant yields at
New South Wales Energy Coal, and due to adverse weather and
its impacts on mine sequencing at Cerrejón.
For more information on individual asset production
in FY2019, FY2018 and FY2017, refer to section 6.2.
Financial results
Coal revenue increased by US$0.2 billion to US$9.1 billion in FY2019.
Underlying EBITDA for Coal decreased by US$330 million to
US$4.1 billion. Prices, net of price-linked costs, decreased
Underlying EBITDA by US$115 million. Controllable cash costs
decreased Underlying EBITDA by US$415 million driven by
increased contractor stripping activity and rates coupled with
higher planned maintenance activity at Queensland Coal, and
unfavourable inventory movements and increased contractor
mining and stripping activity at New South Wales Energy Coal.
Higher volumes increased Underlying EBITDA by US$103 million
supported by record production at South Walker Creek and Poitrel
and prior year impacts from lower volumes at Broadmeadow
(roof conditions) and Blackwater (geotechnical issues).
BHP Annual Report 2019 101
1
i
S
t
r
a
t
e
g
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
a
t
B
H
P
R
e
m
u
n
e
r
a
t
i
o
n
R
e
p
o
r
t
D
i
r
e
c
t
o
r
s
’
R
e
p
o
r
t
i
F
n
a
n
c
a
i
l
S
t
a
t
e
m
e
n
t
s
A
d
d
i
t
i
o
n
a
l
i
n
f
o
r
m
a
t
i
o
n
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
1.13.4 Coal continued
Queensland Coal unit costs increased by 2 per cent to US$69 per
tonne, mainly due to wet weather impacts and higher strip ratios,
diesel prices and contractor stripping costs, partially offset by
favourable exchange rate movements. New South Wales Energy
Coal unit costs increased by 10 per cent to US$50 per tonne, as
a result of higher strip ratios and contractor stripping costs, and
unfavourable inventory movements. This was partially offset by the
impact of favourable exchange rate movements. The calculation
of Queensland Coal’s and New South Wales Energy Coal’s unit
costs is set out in the table below.
US$M
Revenue
Underlying EBITDA
Gross costs
Less: freight
Less: royalties
Net costs
Sales (kt, equity share)
Cost per tonne (US$) (1)
(1) FY2019 based on an average exchange rate of AUD/USD 0.72.
Outlook
Metallurgical coal production is expected to be between 41 and
45 Mt, or 73 and 79 Mt on a 100 per cent basis, in FY2020. With
major wash plant shutdowns at Goonyella, Peak Downs and
Caval Ridge planned in the September 2019 quarter, volumes
are expected to be larger in the last three quarters of FY2020.
Energy coal production is expected to be between approximately
24 to 26 Mt in FY2020.
Queensland Coal unit costs are expected to be between US$67
and US$74 per tonne (based on an average exchange rate
of AUD/USD 0.70) in FY2020 as a result of increased wash plant
maintenance and local inflationary pressures. In the medium term,
we expect to lower our unit costs to between US$54 and US$61
per tonne (based on an average exchange rate of AUD/USD 0.70)
reflecting higher volumes, lower strip ratios, optimised
maintenance strategies and efficiency improvements from
our transformation programs.
Queensland Coal unit costs
NSWEC unit costs
FY2019
FY2018
FY2019
7,679
3,722
3,957
156
805
2,996
43,145
69.44
7,388
3,647
3,741
150
740
2,851
41,899
68.04
1,421
353
1,068
−
114
954
19,070
50.03
FY2018
1,501
569
932
−
111
821
18,022
45.56
New South Wales Energy Coal unit costs are expected to be
between US$55 and US$61 per tonne (based on an average
exchange rate of AUD/USD 0.70) in FY2020 reflecting increased
stripping costs and lower volumes as we continue to progress
through the monocline, increase development stripping and focus
on higher-quality products. In the medium term, unit costs are
expected to be between US$46 and US$50 per tonne (based on
an average exchange rate of AUD/USD 0.70), reflecting ongoing
progression through the monocline and our focus on higher-
quality products.
102 BHP Annual Report 2019
1.13.5 Other assets
Nickel West
Key drivers of Nickel West’s financial results
Price overview
Our average realised sales price for FY2019 was US$12,462 per
tonne (FY2018: US$12,591 per tonne). The average nickel price in
FY2019 was similar to the previous financial year. Decreasing prices
in the first half of the year could be attributed to trade uncertainty
and a slow-down in industrial activities, while improvements in the
second half were linked to stronger stainless steel output in China.
Exchange stocks of refined nickel metal continued to decline
throughout FY2019. In the near term, we expect Indonesian supply
of stainless steel and nickel intermediates to continue to grow.
However, the industry wide impact of Indonesia’s nickel ore export
policies is a source of uncertainty. In the long term, the battery
sector is expected to provide strong growth in demand for
high-purity nickel supply.
Production
Nickel West production in FY2019 decreased by 6 per cent to 87 kt
following a fire at the Kalgoorlie smelter in September 2018.
For more information on individual asset production
in FY2019, FY2018 and FY2017, refer to section 6.2.
Financial results
Lower production and lower realised sales prices resulted in
revenue decreasing by US$104 million to US$1.2 billion in FY2019.
Underlying EBITDA for Nickel West decreased by US$189 million
to US$102 million due to the transition to new ore bodies, which
resulted in a drawdown of inventories and unfavourable fixed cost
dilution from reduced volumes at Leinster and Mt Keith, and the
impact from a fire at the Kalgoorlie smelter in the December 2018
half year.
Potash
Potash recorded an Underlying EBITDA loss of US$127 million
in FY2019, compared to a loss of US$135 million in FY2018.
1.14 Other information
Application of critical accounting policies
The preparation of the Financial Statements requires management
to make judgements and estimates and form assumptions that
affect the amounts of assets, liabilities, contingent liabilities,
revenues and expenses reported in the Financial Statements.
On an ongoing basis, management evaluates its judgements
and estimates in relation to assets, liabilities, contingent liabilities,
revenue and expenses. Management bases its judgements and
estimates on historical experience and on other factors it believes
to be reasonable under the circumstances, the results of which
form the basis of the reported amounts that are not readily
apparent from other sources. Actual results may differ from these
estimates under different assumptions and conditions.
The Group has identified a number of critical accounting policies
under which significant judgements, estimates and assumptions
are made. Actual results may differ for these estimates under
different assumptions and conditions. This may materially affect
financial results and the financial position to be reported in future.
These critical accounting policies are as follows:
• significant events – Samarco dam failure;
• taxation;
• inventories;
• exploration and evaluation;
• development expenditure;
• overburden removal costs;
• depreciation of property, plant and equipment;
• impairments of non-current assets – recoverable amount;
• closure and rehabilitation provisions.
In accordance with IFRS, we are required to include information
regarding the nature of the judgements and estimates and
potential impacts on our financial results or financial position in the
Financial Statements. This information can be found in section 5.1.
Quantitative and qualitative disclosures about market risk
We identified our principal market risks in section 1.6.4. A
description of how we manage our market risks, including both
quantitative and qualitative information about our market risk
sensitive instruments outstanding at 30 June 2019, is contained
in note 21 ‘Financial risk management’ in section 5.1.
Off-balance sheet arrangements and contractual
commitments
Information in relation to our material off-balance sheet
arrangements, principally contingent liabilities, commitments
for capital expenditure and commitments under leases
at 30 June 2019 is provided in note 32 ‘Commitments’
and note 33 ‘Contingent liabilities’ in section 5.1.
Subsidiary information
Information about our significant subsidiaries is included in note
28 ‘Subsidiaries’ in section 5.1 and in note 13 ‘Related undertakings
of the Group’ in section 5.2.
Related party transactions
Related party transactions are outlined in note 31 ‘Related party
transactions’ in section 5.1.
Significant changes since the end of the year
Significant changes since the end of the year are outlined
in note 34 ‘Subsequent events’ in section 5.1.
The Strategic Report is made in accordance with a resolution
of the Board.
Ken MacKenzie
Chairman
Dated: 5 September 2019
BHP Annual Report 2019 103
1
i
S
t
r
a
t
e
g
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
a
t
B
H
P
R
e
m
u
n
e
r
a
t
i
o
n
R
e
p
o
r
t
D
i
r
e
c
t
o
r
s
’
R
e
p
o
r
t
i
F
n
a
n
c
a
i
l
S
t
a
t
e
m
e
n
t
s
A
d
d
i
t
i
o
n
a
l
i
n
f
o
r
m
a
t
i
o
n
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
104 BHP Annual Report 2019
Section 2
Governance
at BHP
In this section
2.1 Governance at BHP
2.2 Board of Directors and Executive Leadership Team
2.3 Shareholder engagement
2.4 Role and responsibilities of the Board
2.5 Board membership
2.6 Chairman
2.7 Renewal and re-election
2.8 Director skills, experience and attributes
2.9 Director induction, training and development
2.10 Independence
2.11 Board evaluation
2.12 Board meetings and attendance
2.13 Board committees
2.14 Risk management governance structure
2.15 Management
2.16 Our conduct
2.17 Market disclosure
2.18 Remuneration
2.19 Directors’ share ownership
2.20 Conformance with corporate governance standards
2.21 Additional UK disclosure
BHP Annual Report 2019 105
2.1 Governance at BHP
2.1.1 Chairman’s letter
‘Alongside a lean and agile management
culture, transformation has the potential
to unlock value worth billions of dollars
in the short and medium term.’
Ken MacKenzie
Chairman
Dear Shareholder,
At the 2018 Annual General Meeting, I once again discussed our
priorities, safety, our portfolio, capital discipline, capability and
culture, and social value. We made good progress with these
priorities during FY2019, and I want to touch on a few aspects
here that are relevant to governance.
Safety
Safety remains our first priority. We never forget the impact a
fatality has on the families, friends and colleagues. The tragic death
of our colleague Allan Houston at BMA’s Saraji Mine in Queensland
was a stark reminder of this. The results of an investigation into
the fatality were considered by both the Sustainability Committee
and the Board, and for the first time in many years, the cause was
unable to be determined. However, our investigation identified a
number of improvement areas and work is underway to implement
these. Leaders have also shared findings broadly through interactive
safety briefings with employees and contractors at all sites and
major offices.
With regards to Samarco, the Board has continued to focus on
responding to the tragedy. Please see section 1.7 for information
on our ongoing response to the Samarco dam failure.
Portfolio
At BHP, our strategy is to have the best capabilities, commodities
and assets to create long-term shareholder value and high returns.
During the year we continued to reshape the portfolio with the
completion of the sale of our Onshore US assets for net proceeds
of US$10.4 billion.
In addition, we have continued to explore for petroleum and
copper assets. In Petroleum the Board approved US$696 million
in funding to develop the Atlantis Phase 3 project in the US Gulf
of Mexico, and US$256 million in funding to drill an additional
appraisal well and perform further studies in the Trion field in
Mexico, along with the successful bid for exploration blocks
in the offshore Orphan Basin in Eastern Canada. In copper
we confirmed the potential new iron oxide, copper and gold
mineralised system located 65 kilometres south east of Olympic
Dam. Our US$2.46 billion Spence Growth Option project in Chile,
which is expected to extend the mining operations by more than
50 years, is on schedule and on budget.
Capital discipline
Our Capital Allocation Framework remains key to how we assess
decisions about the deployment of capital. During FY2019, we
have kept capital expenditure below US$8 billion per annum
and reduced our net debt to US$9.2 billion, reflecting strong
cash generation. As a result of the sale of our Onshore US assets,
BHP also completed the return of US$10.4 billion to shareholders
through the combination of an off-market buyback and a special
dividend. These returns, when added to dividends determined
in FY2019, delivered record annual cash returns to shareholders.
Culture and capability
There is significant opportunity ahead to create more shareholder
value from BHP’s assets. This will be made possible through
BHP’s Transformation work. That is why, in late 2018, a dedicated
Transformation Office was established to focus on simplification,
workforce capability and to accelerate adoption of the technology
required to deliver greater efficiencies.
The Transformation programs will make BHP safer and operations
more efficient and predictable. They will also help develop
workforce capability so that our people are equipped for the
rapid pace of change that lies ahead.
Alongside a lean and agile management culture, transformation
has the potential to unlock value worth billions of dollars in the
short and medium term.
Board composition
The Board has 11 members, including the CEO. I am a proponent
of a relatively small Board. However, for a company like BHP,
which has four key Board committees, a Board size of 10 to 12
is appropriate. In addition, diversity remains a focus and BHP has
an aspiration to achieve gender balance on our Board by FY2025.
As referenced in last year’s Corporate Governance Statement, we
have a refreshed board skills matrix which we have used through
FY2019 in our Board succession planning. This year, Wayne Murdy
retired from the Board after the 2018 Annual General Meetings
(AGMs). On behalf of shareholders, I thank Wayne for his dedicated
service and leadership.
106 BHP Annual Report 2019
i
S
t
r
a
t
e
g
c
R
e
p
o
r
t
2
G
o
v
e
r
n
a
n
c
e
a
t
B
H
P
R
e
m
u
n
e
r
a
t
i
o
n
R
e
p
o
r
t
D
i
r
e
c
t
o
r
s
’
R
e
p
o
r
t
i
F
n
a
n
c
a
i
l
S
t
a
t
e
m
e
n
t
s
A
d
d
i
t
i
o
n
a
l
i
n
f
o
r
m
a
t
i
o
n
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
We also strive to build social value through trust and transparency.
That is why we disclose that in FY2019, our total direct economic
contribution was US$46.2 billion. This includes payments to
suppliers, wages and employee benefits, dividends to shareholders,
and taxes and royalties to government.
We consider social value throughout the value chain, from our
local operational footprint, to our impact on society. We continue
to focus on local businesses through initiatives such as the Local
Buying Program to support suppliers in our communities. We
also take a global perspective. This year we announced measures
to address global warming, including a five-year US$400 million
Climate Investment Program (CIP).
Conclusion
During the past year, I have continued to meet with many of
our institutional shareholders along with members of our retail
shareholder base. Direct engagement with investors remains
invaluable to the Board and the management of BHP.
I have also continued to visit many of our operations around the
world. These visits reinforce the quality of BHP’s assets and people,
which gives me confidence that BHP can create long-term value
for our shareholders.
Ken MacKenzie
Chairman
We also stated that our search for a new Non-executive Director
with mining experience was well under way and on 1 April 2019
we appointed Ian Cockerill to the Board. Ian has extensive mining
experience, including in chief executive, operational, strategic
and technical roles. He was formerly the Chief Executive Officer
of Anglo Coal and Gold Fields Limited, and a senior executive
with AngloGold Ashanti and Anglo American Group. Ian has
considerable public company board experience, including
as Chairman of Polymetal International plc, and as a former
Non-executive Director of Orica Limited, Ivanhoe Mines Ltd
and Endeavour Mining Corporation, and the former Chairman
of Blackrock World Mining Trust plc.
Susan Kilsby also joined the Board on 1 April 2019. She has
extensive experience in finance and strategy, having held several
roles in global investment banking. From 1996 to 2014, she held
senior executive roles at Credit Suisse, including as a Senior
Adviser, and Chairman of EMEA Mergers and Acquisitions. Susan
brings to the BHP Board her Non-executive experience across
multiple industries. Until recently, she was the Chairman of Shire
plc and Senior Independent Director of BBA Aviation plc. She is
currently a Non-executive Director of Unilever N.V and Unilever
plc, Diageo plc and Fortune Brands Home & Security Inc.
I also want to acknowledge Carolyn Hewson, a Board member for
over nine years, who will be retiring from the Board, as planned, at
this year’s Annual General Meeting. On behalf of her colleagues on
the Board and the many employees she has closely interacted with
over her term, I want to thank Carolyn for her counsel on the Board
and as Chairman of the Remuneration Committee. Carolyn has
made an outstanding contribution to BHP and we wish her all the
very best for the future.
Social value
Throughout its history, BHP has recognised its corporate
responsibility. Over the last decade, the business landscape
has shifted and the expectations of shareholders and stakeholders
have changed.
As a Company, we recognise we must work with others to address
issues and opportunities, both inside and outside the mine gate,
and we must work with a range of stakeholders to make a positive
contribution. That is consistent with our longer-term interests and
the long-term interests of our shareholders. Without the overt support
of communities and other stakeholders, BHP cannot succeed.
BHP Annual Report 2019 107
2.1.2 Governance structure
Our philosophy of governance goes beyond compliance.
We believe high-quality governance supports long-term value
creation: simply put, good governance is good business.
Our approach is to adopt what we consider to be the best of
the prevailing governance standards in Australia, the United
Kingdom and the United States.
In the same spirit, we do not see governance as just a matter for
the Board. Good governance is also the responsibility of executive
management and is embedded throughout BHP. In this, the Board
and management are guided by Our Charter values, including our
value of Sustainability, in how we operate our business, interact
with our stakeholders and plan for the future.
Update on governance reforms in Australia
and the United Kingdom
In July 2018, the Financial Reporting Council released the 2018
UK Corporate Governance Code and the Guidance on Board
Effectiveness. The UK Code emphasises the importance of
demonstrating, through reporting, how the governance of
a company contributes to its long-term sustainable success
and achieves wider objectives. We agree that good governance
contributes to sustainable success, and we recognise the
renewed emphasis on a business building trust by forging
strong relationships with key stakeholders. We also understand
the importance of a corporate culture that is aligned with
BHP’s purpose and strategy, and which promotes integrity
and includes diversity.
As anticipated in last year’s Annual Report, BHP is well placed
to comply with the UK Code. We have begun implementing
new policies and procedures in line with the new Code, and
will report against it in full in next year’s Annual Report.
One of the main UK Code changes relates to how the Board
engages with the workforce and takes into account their views.
During the year under review, the Board for example:
• visited operational sites in a number of countries and engaged
with a broad cross-section of the working population, both in
the field and in small-group discussions and meetings to hear
first-hand the views our people;
• during a Board meeting in Brisbane, met with employees in a
range of settings and at multiple levels to hear their perspectives,
and learn more about their day-to-day work experience including
working in one of our Integrated Remote Operations Centres
and a virtual reality underground mine walkthrough;
• attended the annual HSEC awards, which celebrate excellence
in HSEC implementation, and met with employees and award
finalists to hear their improvement ideas and projects;
BHP governance structure
• heard from a range of employees at each Board meeting on
topics such as the health and safety of our people, workforce
relations, our purpose as a company, human rights, conduct
concerns and diversity;
• participated in a half-day immersive in Melbourne led by
employees on different transformation projects and their impact
on the experience of our workforce, communities and suppliers;
• discussed the results of the annual employee Engagement
and Perception Survey which covers employees’ engagement
levels, the state of the culture and level of inclusiveness
and development.
The Board continues to consider additional mechanisms for
workforce engagement.
In addition, the Terms of Reference of the Remuneration Committee
have been updated so that the Committee will periodically review
workforce remuneration and related policies and the alignment of
incentives and reward with the Group’s culture and will also engage
with the workforce to explain how executive remuneration aligns
with the wider company pay policy. The Board is finalising its
approach to ensure it meets the spirit of the revised UK Code
and more details on employee engagement and the other Code
provisions will be provided in the 2020 Annual Report.
The Fourth Edition of the ASX Corporate Governance Council’s
Principles and Recommendations was released in February 2019
and takes effect from 1 July 2020. We are currently reviewing our
practices to determine any changes needed to align fully with the
revised Principles and Recommendations and will adopt early to
the extent possible.
BHP governance structure
The following diagram describes the governance framework at
BHP. It shows the interaction between our shareholders and the
Board, as well as the relationship between the Board and the CEO.
It also illustrates the flow of delegation from shareholders.
Robust processes are in place to ensure the delegation flows
through the Board and its committees to the CEO, the Executive
Leadership Team (ELT) and into the organisation. At the same time,
accountability flows upwards from the Group to shareholders.
This process helps ensure alignment with shareholders.
Our Charter is central to the governance framework of BHP.
It embodies our corporate purpose, strategy and values and
defines when we are successful. We foster a culture that values
and rewards high ethical standards, personal and corporate
integrity and respect for others.
s
s
r
o
r
e
nit
t
t
a
o
C m
d m
E
S
y
a
e
e
bilit
mitt
Sustain
m
Oversees a
o
material H
C
n
A c c o u ntability
e
x
f
t
i
O
v
e
e
n
r
r
a
s
n
n
e
a
c
e
l
s
i
a
a
a
l
u
n
r
R
i
C
s
o
k
m
&
m
A
i
t
u
Shareholders
d
e
d
i
t
p
o
o
m
t
d
e
i
t
e
r
r
o
a
n
t
i
n
n
i
t
d
o
g
,
r
i
s
k
r
s
Board
R
e
m
O
v
re
m
C
o
m
uneration
mittee
ersees and monitors
uneration policy
n &
t i o
e
N o m i n a
c
n
a
n
e
G o v e r
e
t
C o m m i t
d m o
O v e r s e e s a n
n
r e n e w a l a
n p l a
s i o
s u c c e s
n it o rs
g
n i n
n
d
Chief Executive O ff i c e r
Executive Leadersh i p T e a m
D
e
l
e
g
a
ti
o
n
108 BHP Annual Report 2019
2.2 Board of Directors and Executive Leadership Team
2.2.1 Board of Directors
Andrew Mackenzie
BSc (Geology), PhD (Chemistry), 62
Terry Bowen
BAcct, FCPA, MAICD, 52
Ken MacKenzie
BEng, FIEA, FAICD, 55
Chairman and Independent
Non-executive Director
Director of BHP Group Limited and
BHP Group Plc since September 2016.
Chairman of BHP Group Limited and
BHP Group Plc from 1 September 2017.
Skills and experience:
Mr MacKenzie has extensive global and
executive experience and a deeply strategic
approach, with a focus on capital discipline
and the creation of long-term value. He
has insight and understanding in relation
to organisational culture, the external
environment, the diverse interests of our
stakeholders and emerging issues related
to the creation of social value.
Mr MacKenzie was the Managing Director
and Chief Executive Officer of Amcor Limited,
a global packaging company with operations
in over 40 countries, from 2005 until 2015.
During his 23-year career with Amcor,
Mr MacKenzie gained extensive experience
across all of Amcor’s major business segments
in developed and emerging markets in the
Americas, Australia, Asia and Europe.
Other directorships and offices
(current and recent):
• Advisory Board member of American
Securities Capital Partners LLC
(since January 2016)
• Former Advisory Board member of
Adamantem Capital (from September
2016 to May 2019)
Non-independent
Director of BHP Group Limited and
BHP Group Plc since May 2013.
Mr Mackenzie was appointed Chief Executive
Officer on 10 May 2013.
Skills and experience:
Mr Mackenzie has over 30 years’ experience,
including in oil and gas, minerals, strategy
and capital discipline over long-term cycles,
technology, global markets, public policy
and commodity value chains. He also has
non-executive director experience.
Mr Mackenzie joined BHP in November 2008
as Chief Executive Non-Ferrous, with
responsibility for over half of BHP’s 100,000
strong workforce across four continents.
He was appointed Chief Executive Officer
in May 2013. Prior to BHP, Mr Mackenzie held
various executive roles at Rio Tinto, including
as Chief Executive of Diamonds and Minerals,
and at BP, where he held a number of senior
roles, including as Group Vice President for
Technology and Engineering, and Group
Vice President for Chemicals. Mr Mackenzie
was previously a non-executive director of
Centrica plc.
Other directorships and offices
(current and recent):
• Fellow of the Royal Society of London
(since May 2014)
• Director (since May 2013) and Deputy Chair
(since November 2017) of the International
Council on Mining and Metals
• Former Senior Adviser to McKinsey &
• Former Director of the Grattan Institute
Company (from January 2016 to June 2017)
(from May 2013 to November 2017)
• Former Managing Director and Chief
Executive Officer of Amcor Limited (from
July 2005 to April 2015)
Board Committee membership:
• Chairman of the Nomination
and Governance Committee
• Former Non-executive Director of Centrica
plc (from September 2005 to May 2013)
Independent Non-executive Director
Director of BHP Group Limited and
BHP Group Plc since October 2017.
Skills and experience:
Mr Bowen has significant executive experience
across a range of diversified industries. He
has deep financial expertise, and extensive
experience in capital allocation discipline,
commodity value chains and strategy.
He served as an Executive Director and Finance
Director of Wesfarmers Limited from 2009
to 2017, which included chairing a number of
Wesfarmers’ operating divisions. Wesfarmers
is a conglomerate with interests predominantly
in Australian and New Zealand retail, chemicals,
fertilisers, coal mining and industrial and safety
products. Prior to this, Mr Bowen held various
senior executive roles within Wesfarmers,
including as Finance Director of Coles, Managing
Director of Industrial and Safety and Finance
Director of Wesfarmers Landmark. He also
served as the inaugural Chief Financial Officer
of Jetstar Airways Limited from 2003 to 2005
and before this, held senior finance roles over
an 11-year career with Tubemakers of Australia
Limited. Mr Bowen is a former Director of
Gresham Partners and past President of the
National Executive of the Group of 100 Inc.
He is also currently the Head of the Operations
Group at BGH Capital.
The Board is satisfied that Mr Bowen meets the
criteria for financial experience as outlined in the
UK Corporate Governance Code, competence
in accounting and auditing as required by the
UK Financial Conduct Authority’s Corporate
Governance Rules and the audit committee
financial expert requirements under the US
Securities and Exchange Commission (SEC) Rules.
Other directorships and offices
(current and recent):
• Head of the Operations Group at BGH Capital
(since 2018)
• Director of West Coast Eagles Football Club
(since 2017)
• Director of Navitas (since 2019)
• Former Executive Director and Finance Director
of Wesfarmers Limited (from 2009 to 2017)
• Former Chairman of West Australian Opera
Company Incorporated (from 2014 to 2017)
• Former Director of Gresham Partners Holdings
Limited and Gresham Partners Group Limited
(from 2009 to 2017)
• Former Director of the Harry Perkins
Institute of Medical Research Incorporated
(from 2010 to 2013)
• Former Chief Financial Officer of Jetstar
Airways Limited (from 2003 to 2005)
Board Committee membership:
• Member of the Risk and Audit Committee
BHP Annual Report 2019 109
i
S
t
r
a
t
e
g
c
R
e
p
o
r
t
2
G
o
v
e
r
n
a
n
c
e
a
t
B
H
P
R
e
m
u
n
e
r
a
t
i
o
n
R
e
p
o
r
t
D
i
r
e
c
t
o
r
s
’
R
e
p
o
r
t
i
F
n
a
n
c
a
i
l
S
t
a
t
e
m
e
n
t
s
A
d
d
i
t
i
o
n
a
l
i
n
f
o
r
m
a
t
i
o
n
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
2.2.1 Board of Directors continued
Malcolm Broomhead
MBA, BE, FAICD, 67
Independent Non-executive Director
Director of BHP Group Limited and
BHP Group Plc since March 2010.
Skills and experience:
Mr Broomhead has extensive experience
as a non-executive director of global
organisations, and as a chief executive of
large global industrial and mining companies.
Mr Broomhead has a broad strategic
perspective and understanding of the
long-term cyclical nature of the resources
industry and commodity value chains, with
proven health, safety and environment, and
capital allocation performance.
Mr Broomhead was Managing Director and
Chief Executive Officer of Orica Limited from
2001 until September 2005. Prior to joining
Orica, he held a number of senior positions
at North Limited, including Managing Director
and Chief Executive Officer and, prior to
that, held senior management positions with
Halcrow (UK), MIM Holdings, Peko Wallsend
and Industrial Equity.
Other directorships and offices
(current and recent):
• Chairman of Orica Limited (since January
Ian Cockerill
MSc (Mineral Production Management),
BSc (Hons.) (Geology), AMP – Oxford
Templeton College, 65
Independent Non-executive Director
Director of BHP Group Limited and
BHP Group Plc since April 2019.
Skills and experience:
Mr Cockerill has extensive global mining
operational, project and executive experience
having initially trained as a geologist. He was
formerly the Chief Executive Officer of Anglo
American Coal and Chief Executive Officer
and President of Gold Fields Limited, and a
senior executive with AngloGold Ashanti and
Anglo American Group. Mr Cockerill is the
Chairman of Polymetal International plc.
Mr Cockerill is the former Chairman of
BlackRock World Mining Trust, the former Lead
Independent Director of Ivanhoe Mines Ltd
and former Director of Orica Limited and
Endeavour Mining Corporation.
Other directorships and offices
(current and recent):
• Chairman of Polymetal International plc
(since April 2019)
• Former Director of Orica Limited
(from 2010 to 2019)
Anita Frew
BA (Hons), MRes, Hon. D.Sc, 62
Independent Non-executive Director
Director of BHP Group Limited and
BHP Group Plc since September 2015.
Skills and experience:
Ms Frew has an extensive breadth of non-
executive experience in diverse industries,
including chemicals, engineering, industrial
and finance. In particular, Ms Frew has
valuable insight and experience in the
creation of shareholder value, organisational
change, mergers and acquisitions, financial
and non-financial risk, and health, safety
and environment.
Ms Frew is the Chairman of Croda International
Plc (a British speciality chemicals company)
and Deputy Chairman and Senior Independent
Director of Lloyds Banking Group Plc. Prior
to this, she was the Chairman of Victrex Plc,
Senior Independent Director of Aberdeen
Asset Management Plc and IMI Plc and a
Non-executive Director of Northumbrian Water.
Other directorships and offices
(current and recent):
• Director (since March 2015) and Chairman
(since September 2015) of Croda
International Plc
2016) and a Director (since December 2015)
• Former Director (from 2013 to 2019) and
• Director (since 2010), Deputy Chairman
• Former Chairman of Asciano Limited
(from October 2009 to August 2016)
• Former Director of Coates Group Holdings
Pty Ltd (from January 2008 to July 2013)
• Director of the Walter and Eliza Hall Institute
of Medical Research (since July 2014)
• Former Chairman of the Australia China
One Belt One Road Advisory Board
(from August 2016 to February 2019)
Board Committee membership:
• Chairman of the Sustainability Committee
• Member of the Nomination
and Governance Committee
Chairman (from 2016 to 2019) of BlackRock
World Mining Trust plc
• Former Director (from 2011 to June 2019)
and Lead Independent Director (from 2012
to June 2019) of Ivanhoe Mines Ltd
• Former Director of Endeavour Mining
Corporation (from 2013 to 2019)
• Former Executive Director and executive
Chairman (from 2010 to 2013) and Non-
executive Chairman (from 2013 to 2017)
of Petmin Limited
• Former Chairman of Hummingbird
Resources plc (from 2009 to 2014)
Board Committee membership:
• Member of the Risk and Audit Committee
• Member of the Sustainability Committee
(since December 2014) and Senior
Independent Director (since May 2017)
of Lloyds Banking Group Plc
• Former Senior Independent Director
of Aberdeen Asset Management Plc
(from October 2004 to September 2014)
• Former Senior Independent Director of
IMI Plc (from March 2006 to May 2015)
• Former Chairman of Victrex Plc
(from 2008 to October 2014)
Board Committee membership:
• Member of the Remuneration Committee
• Member of the Risk and Audit Committee
110 BHP Annual Report 2019
i
S
t
r
a
t
e
g
c
R
e
p
o
r
t
2
G
o
v
e
r
n
a
n
c
e
a
t
B
H
P
R
e
m
u
n
e
r
a
t
i
o
n
R
e
p
o
r
t
D
i
r
e
c
t
o
r
s
’
R
e
p
o
r
t
i
F
n
a
n
c
a
i
l
S
t
a
t
e
m
e
n
t
s
A
d
d
i
t
i
o
n
a
l
i
n
f
o
r
m
a
t
i
o
n
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
Carolyn Hewson
AO, BEc (Hons), MA, FAICD, 64
Susan Kilsby
MBA, BA, 60
Lindsay Maxsted
DipBus (Gordon), FCA, FAICD, 65
Independent Non-executive Director
Independent Non-executive Director
Independent Non-executive Director
Director of BHP Group Limited and
BHP Group Plc since March 2010.
Director of BHP Group Limited and
BHP Group Plc since April 2019.
Director of BHP Group Limited and
BHP Group Plc since March 2011.
Skills and experience:
Ms Hewson has extensive non-executive
experience in a number of sectors, as well as
executive experience in financial markets, risk
management and investment management.
Through her non-executive roles, Ms Hewson
brings a breadth of experience and insight on
strategy and portfolio optimisation through
cycles, financial and non-financial risk, social
value, organisational culture and the changing
external environment.
Ms Hewson is a former investment banker with
over 35 years’ experience in the finance sector.
She was previously an Executive Director of
Schroders Australia Limited and has extensive
financial markets, risk management and
investment management expertise. Ms Hewson
is a former Director of Stockland Group, BT
Investment Management Limited, Westpac
Banking Corporation, AMP Limited, CSR
Limited, AGL Energy Limited, the Australian Gas
Light Company, South Australian Water and the
Economic Development Board of South Australia.
Other directorships and offices
(current and recent):
• Member of Federal Government
Growth Centres Advisory Committee
(since January 2015)
• Director of Infrastructure SA (since
January 2019)
• Former Director of Stockland Group
(from March 2009 to September 2018)
• Former Trustee Westpac Foundation
(from May 2015 to 2019)
• Former Member of Australian Federal
Government Financial Systems Inquiry
(from January 2014 to December 2014)
• Former Member of the Advisory Board
of Nanosonics Limited (from June 2007
to August 2015)
• Former Director of BT Investment
Management Limited (from December 2007
to December 2013)
• Former Director of Australian Charities
Fund Operations Limited (from June 2000
to February 2014)
• Former Director and Patron of the
Neurosurgical Research Foundation
(from April 1993 to December 2013)
• Former Trustee and Chairman of Westpac
Buckland Fund (from January 2011 to
December 2013) and Chairman of Westpac
Matching Gifts Limited (from August 2011
to December 2013), together known as
the Westpac Foundation
• Former Director of Westpac Banking
Corporation (from February 2003 to June 2012)
Board Committee membership:
• Chairman of the Remuneration Committee
• Member of the Nomination and
Governance Committee
Skills and experience:
Ms Kilsby has extensive experience in mergers
and acquisitions, and finance and strategy,
having held several roles in global investment
banking. From 1996 to 2014, she held senior
executive roles at Credit Suisse, including
as a Senior Adviser, and Chairman of EMEA
Mergers and Acquisitions. Ms Kilsby also
has non-executive experience across multiple
industries. Until recently, she was the
Chairman of Shire plc and the Senior
Independent Director at BBA Aviation plc.
Ms Kilsby is currently a Non-executive Director
of Unilever N.V and Unilever plc, Diageo plc
and Fortune Brands Home & Security Inc.
Other directorships and offices
(current and recent):
• Director of Diageo plc (since 2018)
• Director of Fortune Brands Home & Security
Inc. (since 2015)
• Director of Unilever N.V and Unilever plc
(since August 2019)
• Member of the UK Takeover Panel
• Former Director (from 2011 to 2019) and
Chairman (from 2014 to 2019) of Shire plc
• Former Director (from 2012 to 2019) and
Senior Independent Director (from 2016
to 2019) of BBA Aviation Plc
• Former Director of Goldman Sachs
International (from 2016 to 2018)
• Former Director of Keurig Green Mountain
(from 2013 to 2016)
• Former Director of Coca-Cola HBC
(from 2013 to 2015)
Skills and experience:
Mr Maxsted has extensive experience in
non-executive roles, including as chairman
of two global companies. Mr Maxsted is also
a corporate recovery specialist who has
managed a number of Australia’s largest
corporate insolvency and restructuring
engagements and, until 2011, continued
to undertake consultancy work in the
restructuring advisory field. He was the
Chief Executive Officer of KPMG Australia
between 2001 and 2007.
Mr Maxsted has a breadth of understanding
and insight in relation to the creation of
long-term value through cycles, financial and
non-financial risk, capital allocation discipline
and the external environment.
The Board is satisfied that Mr Maxsted meets
the criteria for recent and relevant financial
experience as outlined in the UK Corporate
Governance Code, competence in accounting
and auditing as required by the UK Financial
Conduct Authority’s Corporate Governance
Rules. In addition, he is the Board’s nominated
‘audit committee financial expert’ for the
purposes of the SEC Rules.
Other directorships and offices
(current and recent):
• Chairman of Westpac Banking Corporation
(since December 2011) and a Director
(since March 2008)
• Chairman of Transurban Group
(since August 2010) and a Director
(since March 2008)
• Former Director of L’Occitane International
• Director and Honorary Treasurer
(from 2010 to 2012)
Board Committee membership:
• Member of the Remuneration Committee
of Baker Heart and Diabetes Institute
(since June 2005)
Board Committee membership:
• Chairman of the Risk and Audit Committee
BHP Annual Report 2019 111
2.2.1 Board of Directors continued
Caroline Cox
BA (Hons), MA, LLB, BCL, 49
Group General Counsel & Company
Secretary and Chairman of the
Disclosure Committee
Ms Cox was appointed Group Company
Secretary of BHP effective March 2019.
Ms Cox joined BHP in 2015 as Vice President
Legal and was appointed Group General
Counsel in March 2016, a role she continues
to hold. Prior to BHP, Ms Cox was a Partner
at Herbert Smith Freehills, a firm she was
with for 11 years, specialising in cross-border
regulatory investigations, inquiries and
disputes. Earlier in her career, Ms Cox was
a solicitor at the Canadian law firm, Osler
Hoskin & Harcourt and clerked for Judges
at the Alberta Court of Appeal and Court
of Queen’s Bench.
John Mogford
BEng, 66
Shriti Vadera
MA, 57
Independent Non-executive Director
Senior Independent Director, BHP Group Plc
Director of BHP Group Limited and
BHP Group Plc since October 2017.
Director of BHP Group Limited and
BHP Group Plc since January 2011.
Skills and experience:
Mr Mogford has significant global executive
experience, including in oil and gas, capital
allocation discipline, commodity value
chains and health, safety and environment.
Mr Mogford has also held roles as a non-
executive director on a number of boards.
Mr Mogford spent the majority of his career in
various leadership, technical and operational
roles at BP Plc. He was the Managing Director
and an Operating Partner of First Reserve,
a large global energy focused private equity
firm, from 2009 until 2015, during which he
served on the boards of First Reserve’s
investee companies, including as Chairman
of Amromco Energy LLC and White Rose
Energy Ventures LLP. Mr Mogford retired from
the boards of Weir Group Plc, and one of First
Reserve’s portfolio companies, DOF Subsea AS,
in 2018, and is a Non-executive Director
of ERM Worldwide Group Limited.
Other directorships and offices
(current and recent):
• Non-executive Director of ERM Worldwide
Group Limited (since 2015)
• Former Non-executive Director of Network
Rail Limited (from 2016 to 2017)
• Former Managing Director (from 2012 to
2015) and Operating Partner (from 2009
to 2012) of First Reserve Corporation
• Former Non-executive Director of Midstates
Petroleum Company Inc. (from 2011 to 2016)
• Former Non-executive Director of CHC
Group Limited (from 2014 to 2015) and
CHC Helicopters SA (from 2012 to 2015)
• Former Non-executive Director of DOF
Subsea AS (from 2009 to 2018)
• Former Non-executive Director of Weir
Group Plc (from 2008 to 2018)
Board Committee membership:
• Member of the Sustainability Committee
Skills and experience:
Ms Vadera brings wide-ranging and global
experience in economics, public policy
and strategy, as well as deep understanding
and insight in relation to global and emerging
markets and the macro-political and
economic environment.
Ms Vadera has held executive roles and has
broad non-executive experience. She is
Chairman of Santander UK Group Holdings Plc
and Santander UK Plc, and was a Director of
AstraZeneca Plc from 2011 to 2018. She was
an investment banker with S G Warburg/UBS
from 1984 to 1999, on the Council of Economic
Advisers, HM Treasury from 1999 to 2007,
Minister in the UK Department of International
Development in 2007, Minister in the Cabinet
Office and Business Department from 2008
to 2009 with responsibility for dealing with the
financial crisis and G20 Adviser from 2009 to
2010. Ms Vadera advised governments, banks
and investors on the Eurozone crisis, banking
sector, debt restructuring and markets from
2010 to 2014.
Other directorships and offices
(current and recent):
• Chairman of Santander UK Group Holdings
Plc and Santander UK Plc (since March 2015)
• Former Director of AstraZeneca Plc
(from January 2011 to December 2018)
• Former Trustee of Oxfam (from 2000
to 2005)
Board Committee membership:
• Member of the Nomination and
Governance Committee
• Member of the Remuneration Committee
112 BHP Annual Report 2019
2.2.2 Executive Leadership Team
Andrew Mackenzie
BSc (Geology), PhD (Chemistry), 62
Chief Executive Officer
(See section 2.2.1 for biography)
Peter Beaven
BAcc, CA, 52
Chief Financial Officer
Geoff Healy
BEc, LLB, 53
Chief External Affairs Officer
Mr Beaven was appointed Chief Financial
Officer in October 2014. Previously he was
the President of Copper and prior to that
appointment in May 2013, President of
Base Metals, President of BHP’s Manganese
Business, and Vice President and Chief
Development Officer for Carbon Steel
Materials. He has wide experience across
a range of regions and businesses in BHP,
UBS Warburg, Kleinwort Benson and
PricewaterhouseCoopers.
Mr Healy joined BHP as Chief Legal Counsel
in June 2013 and was appointed Chief External
Affairs Officer in February 2016. Prior to
joining BHP, Mr Healy was a partner at Herbert
Smith Freehills for 16 years and a member
of its Global Partnership Council, working
widely across its network of Australian
and international offices.
i
S
t
r
a
t
e
g
c
R
e
p
o
r
t
2
G
o
v
e
r
n
a
n
c
e
a
t
B
H
P
R
e
m
u
n
e
r
a
t
i
o
n
R
e
p
o
r
t
D
i
r
e
c
t
o
r
s
’
R
e
p
o
r
t
i
F
n
a
n
c
a
i
l
Mike Henry
BSc (Chemistry), 53
President Operations, Minerals Australia
Diane Jurgens
BSEE, MSEE, MBA, 57
Chief Technology Officer
Mr Henry joined BHP in 2003. He served as
President, Coal from January 2015 to February
2016 when he was appointed President
Operations, Minerals Australia. Prior to January
2015, he was President, HSE, Marketing &
Technology. His earlier career with BHP
included a number of commercial roles
covering Minerals and Petroleum, including
the role of Chief Marketing Officer.
Ms Jurgens joined BHP in 2015 and was
appointed Chief Technology Officer in February
2016. Prior to joining BHP, Ms Jurgens was based
in China for nearly 10 years, serving as Board
Member and Managing Director of Shanghai
OnStar Telematics Company, in addition to prior
roles as Chief Information Officer and Strategy
Board member for General Motors’ International
and China Operations. Ms Jurgens’ early career
was with the Boeing Company where she
worked for 12 years in engineering, information
technology and business development
leadership roles.
Daniel Malchuk
BEng, MBA, 53
President Operations, Minerals Americas
Mr Malchuk was appointed President
Operations, Minerals Americas in February 2016
based in Santiago, Chile. Previously he was
President of the Copper Business. Mr Malchuk
has held a number of roles in BHP, including
President Aluminium, Manganese and Nickel,
President of Minerals Exploration, and Vice
President Strategy and Development Base
Metals. He has worked in four countries with
BHP, since joining the Company in April 2002.
S
t
a
t
e
m
e
n
t
s
A
d
d
i
t
i
o
n
a
l
i
n
f
o
r
m
a
t
i
o
n
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
BHP Annual Report 2019 113
2.2.2 Executive Leadership Team continued
Vandita Pant
BCom (Hons), MBA, Business Administration, 49
Chief Commercial Officer
Ms Pant joined BHP in 2016 and was appointed
Chief Commercial Officer in July 2019, with
global accountabilities for Marketing,
Procurement, Maritime and Logistics and for
developing the Company’s views on global
commodities markets. Prior to this role she
was Group Treasurer and Head of Europe.
Before joining BHP, she held roles with ABN
Amro and Royal Bank of Scotland and has
lived and worked in Singapore, India, Japan
and the UK.
Jonathan Price
MEng (Hons), Metallurgy & Materials Science,
MBA, Business Administration, 43
Chief Transformation Officer
Mr Price joined BHP in 2006 and was appointed
Chief Transformation Officer in March 2019.
Prior to this, he was Transformation Director,
and held senior roles in Nickel, Marketing,
Iron Ore, and Finance, where he has worked
with governments, joint venture partners,
customers, industry peers, investors and
advisors. Before joining BHP, he held roles
at ABN AMRO investment bank in London,
servicing metals and mining clients through
a period of industry consolidation.
Geraldine Slattery
BSc, Physics, MSc, International Management
(Oil & Gas), 50
President Operations, Petroleum
Ms Slattery joined BHP in 1994 and was
appointed President Operations, Petroleum
in March 2019. Ms Slattery has 25 years’ of
experience with BHP, most recently as Asset
President Conventional, and prior to that
in several senior operational and business
leadership roles across the Petroleum
business in the United Kingdom, Australia
and the United States.
Laura Tyler
BSc (Geology (Hons)), MSc (Mining Engineering), 52
Chief Geoscientist
Athalie Williams
BA (Hons), FAHRI, 49
Chief People Officer
Ms Tyler joined BHP in 2004 and was appointed
Chief Geoscientist in 2019 in addition to her
role as Asset President of Olympic Dam.
Previously, Ms Tyler was Chief of Staff to the
CEO, Asset President of the Cannington Mine,
and held technical and operational roles at the
EKATI Diamond Mine in Canada and corporate
HSEC in London. Prior to joining BHP, Ms Tyler
worked for Western Mining Corporation,
Newcrest Mining and Mount Isa Mines in
various technical and operational roles.
Ms Williams joined BHP in 2007 and was
appointed to the role of President, Human
Resources in January 2015. Ms Williams’
title changed to Chief People Officer effective
1 July 2015. She has previously held senior
Human Resources positions, including Vice
President Human Resources Marketing, Vice
President Human Resources for the Uranium
business and Group HR Manager, Executive
Resourcing & Development. Prior to BHP,
Ms Williams was an organisation strategy
adviser with Accenture (formerly Andersen
Consulting) and National Australia Bank.
Ms Williams is a member of Chief Executive
Women and a Director of the BHP Foundation.
114 BHP Annual Report 2019
2.3 Shareholder engagement
Part of the Board’s commitment to high-quality governance is
expressed through the approach BHP takes to engaging and
communicating with its shareholders. We encourage shareholders
to make their views known to us.
Our shareholders are based around the globe. As well as the two
AGMs, which are an important part of the governance and investor
engagement process, the Board uses a range of formal and
informal communication channels to understand the views of
shareholders. This ensures the Board represents shareholders in
governing BHP. We regularly engage with institutional shareholders
and investor representative organisations in Australia, South Africa,
Europe and the United States. The purpose of these meetings is
to discuss governance and strategy of BHP. The meetings are an
important opportunity to build relationships and to engage directly
with governance managers, fund managers and governance
advisers. The Chairman and the CEO also meet regularly with
retail shareholder representatives and their members, such as
the Australian Shareholders’ Association, the UK Shareholders’
Association and ShareSoc.
We take a coordinated approach to engagement on corporate
governance and during FY2019, we responded to a wide range
of shareholders, their representatives and non-governmental
organisations. Issues covered included tailings dams, Samarco,
non-operated joint ventures, industry associations, tax and
transparency, corporate purpose, remuneration, human rights,
climate change, social value and workforce relations. Engagement
with other stakeholder groups, including non-governmental
organisations, is outlined in section 1.10.
Investor engagement in FY2019
Topic
Strategy, governance
and remuneration
Led by
Chairman
Remuneration
Chairman of the
Remuneration
Committee
Strategy, finance
and operating
performance
CEO, CFO, senior
management and
Investor Relations
Purpose
FY2019 activity
Discuss Board priorities and seek
shareholder feedback.
Remuneration policy consultation
Meetings held in July 2018 in Australia and
in May 2019 in the US. The Chairman also
participated in the Remuneration meetings
in Australia and the UK referenced below.
Retail shareholder event, held in conjunction with
the Australian Shareholders’ Association in July
2018, in line with our intention to make this annual.
Event in June 2019 with UK Shareholders’
Association and Sharesoc.
Meetings held in Australia in April 2019 and the
UK in May 2019.
Update shareholders on results or other key
announcements. We also engage with other
capital providers; for example, through
meetings with bondholders.
Live webcasts of important announcements.
Face-to-face investor meetings held in Australia,
Canada, Hong Kong, Singapore, South Africa,
Spain, UK and the US.
Health, Safety,
Environment and
Community (HSEC)
Head of Health, Safety
and Environment
Update investors on key HSEC issues.
Governance strategy
and briefings
Group Governance
Provides a conduit to enable the Board and
its committees to remain abreast of evolving
investor expectations and to continuously
enhance the governance processes of BHP.
Debt investor meetings held in London
in September.
Debt investor teleconferences held in August
2018 and February 2019 were attended by
investors in Australia, France, Singapore,
Switzerland, the UK and the US.
Meetings held in Australia in September and
in the UK and Europe in October to re-align
with the release of the Sustainability Report
and in June 2019 following the appointment
of a new Group Head of HSE.
Meetings held in Australia and the UK throughout
the year and the US in March. Multiple briefings
on Samarco and an update in June in Australia
and the UK covering BHP’s approach to tailings
dams. Conversations relating to remuneration
were also held with the Vice President Reward
in August 2018 in advance of the broader
consultation about the remuneration policy.
Climate change
Vice President,
Sustainability and
Climate Change
Update investors on our strategy
on climate change.
Ad hoc meetings held in Australia,
Europe and the US throughout the year.
Shareholder communications
Shareholders can communicate with BHP and our registrar
electronically. Shareholders can contact us at any time through
our Investor Relations team, with contact details available online
at bhp.com. Shareholder and analyst feedback is shared with the
Board through the Chairman, the Senior Independent Director,
the Chairman of the Remuneration Committee, other Directors,
the CEO, the CFO and the Group Company Secretary. In addition,
Investor Relations and Group Governance provide regular reports
to the Board on shareholder and governance manager feedback
and analysis. This approach provides a robust mechanism to
ensure that Directors are aware of issues raised and have a good
understanding of current shareholder views.
Annual General Meetings
The AGMs provide a forum to facilitate the sharing of shareholder
views and are important events in the BHP calendar. These meetings
provide an update for shareholders on our performance and offer
an opportunity for shareholders to ask questions and vote.
Key members of management, including the CEO and CFO, are
present and available to answer questions. The External Auditor
attends the AGMs and is also available to answer questions.
Proceedings at shareholder meetings are webcast live from our
website. Copies of the speeches delivered by the Chairman and
CEO to the AGMs are released to the relevant stock exchanges and
posted on our website. A summary of proceedings and the outcome
of voting on the items of business are released to the relevant stock
exchanges and posted on our website as soon as they are available
following completion of the BHP Group Limited AGM.
Information relating to our AGMs is available online
at bhp.com/meetings.
BHP Annual Report 2019 115
i
S
t
r
a
t
e
g
c
R
e
p
o
r
t
2
G
o
v
e
r
n
a
n
c
e
a
t
B
H
P
R
e
m
u
n
e
r
a
t
i
o
n
R
e
p
o
r
t
D
i
r
e
c
t
o
r
s
’
R
e
p
o
r
t
i
F
n
a
n
c
a
i
l
S
t
a
t
e
m
e
n
t
s
A
d
d
i
t
i
o
n
a
l
i
n
f
o
r
m
a
t
i
o
n
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
Understanding shareholder views
Sell side analysts
Research providers
Retail investors
Institutional investors
Portfolio managers
Environmental, Social
& Governance managers
Proxy advisers
ESG advisers
ESG ratings
agencies
Investor Relations
(meetings and correspondence)
CEO/CFO/Senior Management
Group Governance
(meetings and correspondence)
Chairman/Senior Independent Director/
Remuneration Committee Chairman
Board
(Annual General Meetings)
2.4 Role and responsibilities of the Board
The Board’s role is to represent the shareholders. It is accountable
to shareholders for creating and delivering value through the
effective governance of BHP. This role requires a high-performing
Board, with all Directors contributing to the Board’s collective
decision-making processes.
The Board Governance Document is a statement of the practices
and processes the Board has adopted to discharge its
responsibilities. It includes the processes the Board has
implemented to undertake its own tasks and activities; the matters
it has reserved for its own consideration and decision-making;
the authority it has delegated to the CEO, including the limits
on the way in which the CEO can execute that authority; and
guidance on the relationship between the Board and the CEO.
The Board Governance Document specifies the role of the
Chairman, the membership of the Board and the role and conduct
Matters reserved for Board decision
Topic
Matter
of Non-executive Directors. It also provides that the Group
Company Secretary is accountable to the Board and advises the
Chairman and, through the Chairman, the Board and individual
Directors on all matters of governance process.
The CEO is required to report regularly to the Board in a spirit of
openness and trust on the progress being made by BHP. Open
dialogue between individual members of the Board and the CEO
and other members of the management team is encouraged to
enable Directors to gain a better understanding of the Group.
For more information,
refer to sections 2.5 to 2.8.
The Board Governance Document is available
online at bhp.com/governance.
Succession
Appointment of the CEO and determination of the terms of the appointment.
Succession planning for direct reports to the CEO.
Approval of the appointment of executives reporting to the CEO and membership of the ELT, and material changes
to the organisational structure involving direct reports to the CEO.
Strategic
matters
Strategy, annual budgets, balance sheet management and funding strategy.
Determination of commitments, capital and non-capital items, acquisitions and divestments above specified thresholds.
Setting dividend policy and determining dividends.
Market risk management strategy and limits.
Monitoring
Performance assessment of the CEO and the Group and the remuneration of the CEO.
Management of Board composition processes and performance.
Review and monitoring systems of risk management and internal control.
Establishment and assessment of measurable diversity objectives.
Reporting
and regulation
Determination and adoption of documents (including the publication of reports and statements to shareholders)
that are required by the Group’s constitutional documents, statute or by other external regulation.
Determination and approval of matters that are required by the Group’s constitutional documents,
statute or by other external regulation to be determined or approved by the Board.
116 BHP Annual Report 2019
Key Board activities during FY2019
The Board considered a range of matters during FY2019, as outlined below.
Strategic matters
Capital allocation
(Capital Allocation Framework, capital prioritisation
and development outcomes)
Funding
(annual budgets, balance sheet management,
liquidity management)
Portfolio
(Group scenarios, commodity and asset review,
growth options, approving commitments, capital
and non-capital items and acquisitions and divestments
above a specified threshold, and geopolitical and
macro-environmental impacts)
Monitoring and assurance matters
Includes matters and/or documents required
by the Group’s constitutional documents,
statute or by other external regulation
Chairman’s matters
Board composition, succession planning,
performance and culture
Dividend policy and dividend recommendations
Capital prioritisation and portfolio development options
Capital execution watchlist
Sale of Onshore US distribution options and considerations
Two-year budget, including transformation
Funding updates
Euro medium-term note renewal
Distribution of sale of Onshore US proceeds
Portfolio review – options and alternatives
Transformation overview and initiatives
Risk appetite statement
Group scenarios – signposts update
Commodity price protocols
Transaction updates
Climate change
Samarco strategy update and funding
Energy Coal review
Nickel West review
Nickel commodity attractiveness
Petroleum exploration
Atlantis project overview and execution
Appraisal well funding – Trion Mexico
Jansen
Autonomous haulage
Saraji fatality ICAM
Tailings dams
BHP purpose
Investor relations reports
CEO reports
HSEC reports
Risk and Audit Committee report-outs
Sustainability Committee report-outs including Site Visit report-outs
Nomination and Governance Committee report-outs
Remuneration Committee report-outs
Approval of the CEO’s remuneration
Reviewing and approving the Annual Report suite
Site visits and Board meetings held outside of Melbourne and London
Committee succession
Board composition and succession
Board evaluation
Inclusion and diversity update and FY2019 targets
Reviewing the ELT succession and talent pipeline
Corporate Governance updates
Board culture framework
BHP Annual Report 2019 117
i
S
t
r
a
t
e
g
c
R
e
p
o
r
t
2
G
o
v
e
r
n
a
n
c
e
a
t
B
H
P
R
e
m
u
n
e
r
a
t
i
o
n
R
e
p
o
r
t
D
i
r
e
c
t
o
r
s
’
R
e
p
o
r
t
i
F
n
a
n
c
a
i
l
S
t
a
t
e
m
e
n
t
s
A
d
d
i
t
i
o
n
a
l
i
n
f
o
r
m
a
t
i
o
n
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
2.5 Board membership
The Board currently has 11 members. The Non-executive Directors
are considered by the Board to be independent of management
and free from any business relationship or other circumstance that
could materially interfere with the exercise of objective, unfettered
or independent judgement. For more information on the process
for assessing independence, refer to section 2.10.
The Nomination and Governance Committee retains the services
of external recruitment specialists to assist in the identification
of potential candidates for the Board.
The Board believes there is an appropriate balance between
Executive and Non-executive Directors to promote shareholder
interests and govern BHP effectively. While the Board includes
a smaller number of Executive Directors than is common for
UK-listed companies, its composition is appropriate for the Dual
Listed Company structure and is in line with Australian-listed
company practice. In addition, the Board has extensive access
to members of senior management who frequently attend Board
meetings, where they make presentations and engage in
discussions with Directors, answer questions and provide input
and perspective on their areas of responsibility. The CFO attends
all Board meetings. The Board, led by the Chairman, also holds
discussions in the absence of management at each Board meeting.
The Directors of BHP, along with their biographical details,
are listed in section 2.2.1.
Inclusion and diversity
Our Charter and the Our Requirements for Human Resources
standard guide management on all aspects of human resource
management, including inclusion and diversity. Underpinning
the Our Requirements standards and supporting the achievement
of diversity across BHP are principles and measurable objectives
that define our approach to diversity and our focus on creating
an inclusive work environment.
The Board considers that many facets of diversity are required for
the Board, as set out in section 2.8, in order to meet the corporate
purpose. Diversity is a core consideration in ensuring the Board
and its committees have the right blend of perspectives so that
the Board oversees BHP effectively for shareholders.
Part of the Board’s role is to consider and approve measurable
objectives for workforce diversity each financial year and to assess
annually both the objectives and our progress in achieving those
objectives. This progress will continue to be disclosed in the
Annual Report, along with the proportion of women in our
workforce, in senior management positions and on the Board,
with our aspirational goal being to achieve gender balance across
the business and the Board by CY2025. For more information on
inclusion and diversity at BHP, including our progress against our
measurable objectives and our employee profile more generally,
refer to section 1.9.
2.6 Chairman
Mr MacKenzie was considered by the Board to be independent
on his appointment as Chairman and was an independent
Non-executive Director from his appointment to the Board
effective 22 September 2016. The Board considered that none
of Mr MacKenzie’s other commitments (set out in section 2.2.1)
interfered with the discharge of his responsibilities to BHP during
the year under review. The Board is satisfied that as Chairman,
Mr MacKenzie made sufficient time available to serve BHP effectively.
2.7 Renewal and re-election
Renewal
BHP adopts a structured and rigorous approach to Board succession
planning. We consider Board size, tenure and the skills, experience
and attributes required to effectively govern and manage risk
within BHP. This process is continuous and planning is based on
a nine-year tenure, allowing the Board to ensure we have the right
balance on the Board between experience and fresh perspectives,
noting the value of non-executive and executive experience. It also
ensures the Board continues to be fit-for-purpose and evolves to
take account of the rapidly changing external environment and
BHP’s circumstances. Further information is set out in section 2.13.3
Nomination and Governance Committee Report.
When considering new appointments to the Board, the Nomination
and Governance Committee oversees the preparation of a role
description, which includes the criteria and attributes set out in
the Board Governance Document and section 2.8, which is provided
to an external search firm retained to conduct a global search.
Once a candidate is identified, the Board, with the assistance
of external consultants, conducts appropriate background and
reference checks. The candidate is also interviewed by each
Board member ahead of the Board deciding whether to appoint
the candidate to the Board.
The Board has adopted a letter of appointment that contains
the terms on which Non-executive Directors will be appointed,
including the basis upon which they will be indemnified by
the Group. The letter of appointment clearly defines the role of
Directors, including the expectations in terms of independence,
participation, time commitment and continuous improvement.
A copy of the terms of appointment for Non-executive Directors
is available online at bhp.com/governance.
Director re-election
The Board adopted a policy in 2011, consistent with the UK
Corporate Governance Code, under which all Directors must seek
re-election by shareholders annually if they wish to remain on
the Board. The Board believes annual re-election promotes and
supports accountability to shareholders. The combined voting
outcome of the BHP Group Plc and BHP Group Limited 2018
AGMs was that each Director received more than 96.9 per cent
in support of their re-election.
Board support for re-election is not automatic. Directors who
are seeking re-election are subject to a performance appraisal
overseen by the Nomination and Governance Committee.
Annual re-election effectively means all Directors are subject
to a performance appraisal annually. The Board, on the
recommendation of the Nomination and Governance Committee,
makes a determination as to whether it will endorse a retiring
Director for re-election. The Board will not endorse a Director for
re-election if his or her performance is not considered satisfactory.
The Notice of Meeting provides information that is material to
a shareholder’s decision whether or not to re-elect a Director,
including whether or not re-election is supported by the Board.
118 BHP Annual Report 2019
2.8 Director skills, experience
and attributes
Skills, experience and attributes required
The Board and its Nomination and Governance Committee work
to ensure that the Board continues to have the right balance
necessary to discharge its responsibilities in accordance with
the highest standards of governance. The requirements for
Board composition are articulated in an overarching statement,
with the desired skills and experience included in the skills and
experience matrix.
The overarching statement, skills, experience and attributes
take into account, and respond to, the external environment
and BHP’s core business characteristics, including:
• BHP’s strategy and the long-term cyclical nature of the business;
• that BHP is a global natural resources company operating
in global markets;
• the continued need to focus on financial and non-financial risk
(including HSEC risks);
• the increasing challenge related to social value and the many
stakeholders that are impacted by BHP, including civil society,
communities, investors, government, regulators, customers
and employees;
• the increasing importance of technology and innovation
to the sustainability of BHP;
• ongoing and continued focus on capital allocation, and
improving shareholder and capital returns.
Overarching statement of Board requirements
The BHP Board will be diverse in terms of gender, background,
nationality, skills, expertise and geographic location. The Board
will comprise Directors who have proven past performance and
the level of business, executive and non-executive experience
required to:
• provide the breadth and depth of understanding necessary
to effectively create long-term shareholder value;
• protect and promote the interests of BHP and its social licence
to operate;
• ensure the talent, capability and culture of the Group to support
the long-term delivery of BHP’s strategy.
Attributes
The Board considers that each of the Non-executive Directors
has the following attributes: sufficient time to undertake the
responsibilities of the role; honesty and integrity; and a
preparedness to question, challenge and critique. The Executive
Director brings additional perspectives to the Board through a
deeper understanding of BHP’s business and day-to-day operations.
Skills matrix
During FY2018, the Nomination and Governance Committee and
the Board conducted a review of the Board skills matrix, which
took into account the skills and experience the Board requires
for the next period of BHP’s development, having regard to
BHP’s circumstances and the changing external environment.
Fewer Directors meet each of the skills and experience contained in
the updated matrix than was the case previously. This is intentional,
but all Directors satisfy both the overarching statement and the key
attributes. Further information about the skills and attributes of each
Director is set out in their biographies.
Board skills and experience: Climate change
The strategic issues facing the Board change over time. It is
important the Board is able to identify these issues and access
the best possible advice.
Climate change is a multi-faceted issue that affects investment
decisions, our portfolio, oversight of the sustainability of our
operations and engagement with government, investors, suppliers
and customers. The Board includes an appropriate mix of skills
and experience to understand the implications of climate change
on our operations, market and society.
Climate change is treated as a Board-level governance issue and
is discussed regularly, including during Board strategy discussions,
portfolio review and investment decisions, and in the context of
scenario triggers and signposts. The Sustainability Committee
spends a significant amount of time considering systemic climate
change matters relating to the resilience of, and opportunities for,
BHP’s portfolio.
As a Board-level governance issue requiring experience of managing
in the context of uncertainty and an understanding of the risk
environment of the Group, the Non-executive Directors bring
relevant experience to our climate change discussions.
Board members bring significant sectoral experience, which equips
them to consider potential implications of climate change on the
Group and its operational capacity. Board members also possess
extensive experience in energy, governance and sustainability.
There is also wide-ranging experience in finance, economics and
public policy, which helps BHP understand the nature of the debate
and the international policy response as it develops. In addition,
there is a deep understanding of systemic risk and the potential
impacts on our portfolio.
Collectively, this means the Board has the experience and skills to
assist the Group in the optimal allocation of financial, capital and
human resources for the creation of long-term shareholder value.
It also means the Board understands the importance of meeting
the expectations of stakeholders, including in respect of the
natural environment.
To enhance that experience, the Board has taken a number of
measures to ensure that its decisions are appropriately informed
by climate change science and expert advisers.
The Board seeks the input of management (including Dr Fiona Wild,
our Vice President Sustainability and Climate Change), our Forum on
Corporate Responsibility (which advises the Board on sustainability
issues and includes Don Henry, former CEO of the Australian
Conservation Foundation and Changhua Wu, former Greater China
Director, the Climate Group) and other independent advisers.
During the year the Board received an update relating to the
Group’s climate change strategy and approved a range of actions
to support ongoing delivery, including strengthening the link
between emissions performance and executive remuneration,
establishing a new medium-term, science-based target for scope
one and two emissions in line with the Paris Agreement, and the
framework for a Climate Investment Program, which includes an
amount of US$400 million as set out by the CEO in July 2019.
BHP Annual Report 2019 119
i
S
t
r
a
t
e
g
c
R
e
p
o
r
t
2
G
o
v
e
r
n
a
n
c
e
a
t
B
H
P
R
e
m
u
n
e
r
a
t
i
o
n
R
e
p
o
r
t
D
i
r
e
c
t
o
r
s
’
R
e
p
o
r
t
i
F
n
a
n
c
a
i
l
S
t
a
t
e
m
e
n
t
s
A
d
d
i
t
i
o
n
a
l
i
n
f
o
r
m
a
t
i
o
n
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
Skills and experience
Total Directors
Mining
Senior Executive who has deep operating or technical mining experience with a large company operating in multiple countries;
successfully optimised and led a suite of large, global, complex operating assets that have delivered consistent and sustaining
levels of high performance (related to cost, returns and throughput); successfully led exploration projects with proven results
and performance; delivered large capital projects that have been successful in terms of performance and returns; and a proven
record in terms of health, safety and environmental performance and results.
Oil and gas
Senior executive who has deep technical and operational oil and gas experience with a large company operating in multiple
countries; successfully led production operations that have delivered consistent and sustaining levels of high performance
(related to cost, returns and throughput); successfully led exploration projects with proven results and performance; delivered
large capital projects that have been successful in terms of performance and returns; and a proven record in terms of health,
safety and environmental performance and results.
Global experience
Global experience working in multiple geographies over an extended period of time, including a deep understanding
of and experience with global markets, and the macro-political and economic environment.
Strategy
Experience in enterprise-wide strategy development and implementation in industries with long cycles, and developing
and leading business transformation strategies.
Risk
Experience and deep understanding of systemic risk and monitoring risk management frameworks and controls, and the ability
to identify key emerging and existing risks to the organisation.
Commodity value chain expertise
End-to-end value or commodity chain experience – understanding of consumers, marketing demand drivers (including specific
geographic markets) and other aspects of commodity chain development.
Board
11
3
2
7
9
11
6
Financial expertise
Extensive relevant experience in financial regulation and the capability to evaluate financial statements and understand key financial
drivers of the business, bringing a deep understanding of corporate finance, internal financial controls and experience probing the
adequacy of financial and risk controls.
11/2 (1)
Relevant public policy expertise
Extensive experience specifically and explicitly focused on public policy or regulatory matters, including ESG
(in particular climate change) and community issues, social responsibility and transformation, and economic issues.
Health, safety, environment and community
Extensive experience with complex workplace health, safety, environmental and community risks and frameworks.
Technology
Recent experience and expertise with the development, selection and implementation of leading and business transforming
technology and innovation, and responding to digital disruption.
Capital allocation and cost efficiency
Extensive direct experience gained through a senior executive role in capital allocation discipline, cost efficiency and cash flow,
with proven long-term performance.
3
7
2
7
(1) Eleven Directors meet the criteria of financial expertise outlined above. Two of these Directors also meet the criteria for recent and relevant financial experience as
outlined in the UK Corporate Governance Code, competence in accounting and auditing as required by the UK Financial Conduct Authority’s Corporate Governance
Rules in DTR7 and the audit committee financial expert requirements under the US Securities and Exchange Commission rules.
Board tenure and diversity (as at 30 June 2019)
Location
Australia
Europe
US
9%
36%
55%
Gender
36%
Female
Female
Male
64%
36%
Tenure
0–3 years
46%
6–9 years
27%
3–6 years
9%
9+ years
18%
120 BHP Annual Report 2019
i
S
t
r
a
t
e
g
c
R
e
p
o
r
t
2
G
o
v
e
r
n
a
n
c
e
a
t
B
H
P
R
e
m
u
n
e
r
a
t
i
o
n
R
e
p
o
r
t
D
i
r
e
c
t
o
r
s
’
R
e
p
o
r
t
i
F
n
a
n
c
a
i
l
2.9 Director induction, training and development
The development of industry and Group knowledge is a continuous
and ongoing process. The Board’s development activity reflects
the diversification of the portfolio through the provision of regular
updates to Directors on BHP’s assets, commodities, geographies
and markets, and on the changing external environment, to enable
the Board to remain up-to-date.
Upon appointment, each new Non-executive Director undertakes
an induction program specifically tailored to his or her needs.
A copy of an indicative induction program is available online
at bhp.com/governance.
Following the induction program, Non-executive Directors
participate in continuous improvement activities (Training and
Development Program), which are overseen by the Nomination
and Governance Committee. The Training and Development
Program covers a range of matters of a business nature, including
environmental, social and governance matters. Programs are
designed to maximise the effectiveness of the Directors throughout
their tenure and reflect their individual performance evaluations.
Training and development in FY2019
Area
Purpose
FY2019 activity
Briefings and
development
sessions
Provide each Director with a deeper
understanding of the activities, environment,
key issues and direction of the assets along
with HSEC and public policy considerations.
Site visits
Briefings on the assets, operations and
other relevant issues and meetings
with key personnel.
Transformation initiatives
BHP and China 2035
Climate change
Market overviews
HSEC Awards
Virtual reality underground mine walkthrough
Integrated Remote Operations Centre tour
Western Australia Iron Ore, Iron Ore, Australia
Escondida, Copper, Chile
Spence, Copper, Chile
BMA (Hay Point, Broadmeadow, Goonyella, Peak Downs),
Metallurgical Coal, Australia
Integrated Remote Operated Centre, Metallurgical Coal, Australia
These sessions and site visits also allow an opportunity to discuss
in detail the changing risk environment and the potential for
impacts on the achievement of our corporate purpose and
strategy. For information on the management of principal risks,
refer to section 1.6.4.
This approach also ensures a coordinated process in relation to
succession planning, Board renewal, training and development
and committee composition, which are all relevant to the
Nomination and Governance Committee’s role in identifying
appropriate Non-executive Director candidates.
The Chairman throughout the year discusses development areas
with each Director. Board committees in turn review and agree
their training needs. The benefit of this approach is that induction
and learning opportunities can be tailored to Directors’ committee
memberships, as well as the Board’s specific areas of focus.
Each Board committee provides a standing invitation for any
Non-executive Director to attend committee meetings (rather
than just limiting attendance to committee members). Committee
agendas and papers are provided to all Directors to ensure
Directors are aware of matters to be considered by the committees
and any Director can elect to attend meetings where appropriate.
2.10 Independence
The Board is committed to ensuring a majority of Directors is
independent. The Board considers that all of the current Non-
executive Directors, including the Chairman, are independent.
Process to determine independence
The Board has adopted a policy which it uses to determine the
independence of its Directors. This determination is carried out
upon appointment, annually and at any other time where the
changed circumstances of a Director warrant reconsideration.
A copy of the policy on Independence of Directors is available
online at bhp.com/governance.
Under the policy, an ‘independent’ Director is one who is:
‘independent of management and any business or other relationship
that could materially interfere with the exercise of objective,
unfettered or independent judgement by the Director or the
Director’s ability to act in the best interests of the BHP Group’.
Where a Director is considered by the Board to be independent
but is affected by circumstances that appear relevant to the
Board’s assessment of independence, the Board has undertaken
to explain the reasons why it reached its conclusion. In applying
the independence test, the Board considers relationships with
management, major shareholders, subsidiary and associated
companies and other parties with whom BHP transacts business
against pre-determined materiality thresholds, all of which are
set out in the policy.
Tenure
As at the end of the year under review, Malcolm Broomhead and
Carolyn Hewson, who were appointed in March 2010, had served
on the Board for more than nine years. The Board does not believe
S
t
a
t
e
m
e
n
t
s
A
d
d
i
t
i
o
n
a
l
i
n
f
o
r
m
a
t
i
o
n
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
that their tenure materially interferes with their ability to act in the
best interests of the Group. The Board believes they have retained
independence of character and judgement and have not formed
associations with management (or others) that might compromise
their ability to exercise independent judgement or act in the best
interests of the Group.
Relationships and associations
Lindsay Maxsted was the CEO of KPMG in Australia from 2001
until 2007. The Board believes this prior relationship with KPMG
does not materially interfere with Mr Maxsted’s exercise of
objective, unfettered or independent judgement, or his ability
to act in the best interests of BHP. The Board has determined,
consistent with its policy on the independence of Directors, that
Mr Maxsted is independent. The Board notes in particular that:
• at the time of his appointment to the Board, more than three
years had elapsed since Mr Maxsted’s retirement from KPMG.
The Director independence rules and guidelines that apply
to the Group – which are a combination of Australian, UK and
US rules and guidelines – all use three years as the benchmark
‘cooling off’ period for former audit firm partners;
• Mr Maxsted has no financial (e.g. pension, retainer or advisory
fee) or consulting arrangements with KPMG;
• Mr Maxsted was not part of the KPMG audit practice after 1980,
and while at KPMG was not in any way involved in, or able to
influence, any audit activity associated with BHP.
The Board believes Mr Maxsted’s financial acumen and extensive
experience in the corporate restructuring field to be important
in the discharge of the Board’s responsibilities. His membership
of the Board and Chairmanship of the Risk and Audit Committee
are considered by the Board to be appropriate and desirable.
BHP Annual Report 2019 121
Some of the Directors hold, or have previously held, positions in
companies with which BHP has commercial relationships. Those
positions and companies are set out in the Director profiles in
section 2.2.1. The Board has assessed all of the relationships between
the Group and companies in which Directors hold or held positions,
and has concluded that in all cases the relationships do not interfere
with the Directors’ exercise of objective, unfettered or independent
judgement or their ability to act in the best interests of BHP.
A specific instance is Malcolm Broomhead and Ian Cockerill who
were both Directors of Orica Limited (a company with which BHP
has commercial dealings) during the year under review. Orica
provides commercial explosives, blasting systems and mineral
processing chemicals and services to the mining and resources
industry, among others. Mr Cockerill was appointed to the Orica
Board in 2010 (prior to his appointment to the BHP Board) and
Mr Broomhead was appointed to the Orica Board in 2016 (after
his appointment to the BHP Board). At the time of Mr Broomhead’s
appointment to the Board of Orica, and at the time of Ian Cockerill’s
appointment to the Board of BHP, the BHP Board assessed the
relationship between BHP and Orica and determined (and remains
satisfied) that Mr Broomhead and Mr Cockerill are able to apply
objective, unfettered and independent judgement and to act in
the best interests of BHP. Ian Cockerill retired from the Board
of Orica during August 2019.
Transactions during FY2019 that amounted to related party
transactions with Directors or Director-related entities under
International Financial Reporting Standards (IFRS) are outlined
in note 31 ‘Related party transactions’ in section 5.
Executive Director
The Executive Director, Andrew Mackenzie, is not considered
independent because of his executive responsibilities.
Mr Mackenzie does not hold directorships in any other company
included in the ASX 100 or FTSE 100.
2.11 Board evaluation
The Board is committed to transparency in assessing the
performance of Directors. The Board conducts regular evaluations
of its performance, the performance of its committees, the
Conflicts of interest
The UK Companies Act 2006 requires that BHP Directors avoid
a situation where they have or can have an unauthorised direct
or indirect interest that conflicts, or possibly may conflict, with
the Group’s interests, unless approved by non-interested Directors.
In accordance with the UK Companies Act 2006, BHP Group Plc’s
Articles of Association allow the Directors to authorise conflicts
and potential conflicts where appropriate. A procedure operates
to ensure the disclosure of conflicts and for the consideration
and, if appropriate, the authorisation of those conflicts by non-
conflicted Directors. The Nomination and Governance Committee
supports the Board in this process by reviewing requests from
Directors for authorisation of situations of actual or potential
conflict and making recommendations to the Board, and by
regularly reviewing any situations of actual or potential conflict
that have previously been authorised by the Board, and making
recommendations regarding whether the authorisation remains
appropriate. In addition, in accordance with Australian law, if a
situation arises for consideration in which a Director has a material
personal interest, the affected Director takes no part in decision-
making unless authorised by non-interested Directors. Provisions
for Directors’ interests are set out in the Constitution of BHP
Group Limited.
In FY2019, there was one occasion where a commercial dealing
between BHP and Orica was considered by the Board. At its
June 2019 meeting, the Board considered a prospective explosives
contract between BHP and Orica. On that occasion, relevant
papers were withheld and both Mr Broomhead and Mr Cockerill
stepped out of the meeting room. They therefore played no
role in the decision-making, in accordance with relevant legal
requirements and the BHP Articles of Association and Constitution.
Chairman, individual Directors and the governance processes that
support the Board’s work. The Board evaluation process comprises
both assessment and review, as summarised in the diagram below.
Evaluation process
Assessment
Review
Year one:
1
Committee and
individual Director
assessment.*
Year two:
Whole Board
assessment.*
2
Each year, review of:
• Directors for re-election.
• Board and committees for compliance with the
Board Governance Document and committee
terms of reference.
* May be internally or externally facilitated assessment. Our approach is to conduct an externally facilitated assessment of the Board or Directors
and committees at least every three years.
The evaluation considers the balance of skills, experience,
independence and knowledge of the Group and the Board,
its overall diversity, including gender diversity, and how the
Board works together as a unit.
Directors provide anonymous feedback on their peers’ performance
and individual contributions to the Board, which is passed on to
the relevant Director via the Chairman. In respect of the Chairman’s
performance, feedback is provided directly to the Senior
Independent Director. External independent advisers are engaged
to assist with these processes, as necessary. The involvement of
an independent third party has assisted in the evaluation processes
being rigorous and fair, and ensuring continuous improvement
in the operation of the Board and committees, as well as the
contributions of individual Directors.
Director assessment
The assessment of individual Directors focuses on the contribution
of the Director to the work of the Board and the expectations
of Directors as specified in the Group’s governance framework.
The performance of individual Directors is assessed against
a range of criteria, including the ability of the Director to:
• focus on creating long-term shareholder value;
• contribute to the development of strategy;
• understand the major risks affecting BHP;
• provide clear direction to management;
• contribute to Board effectiveness;
• contribute to discussions relating to organisational culture
and behaviour;
• commit the time required to fulfil the role and perform their
responsibilities effectively;
• listen to and respect the ideas of fellow Directors and members
of management.
122 BHP Annual Report 2019
Board effectiveness
The effectiveness of the Board as a whole and of its committees
is assessed against the accountabilities set out in the Board
Governance Document and each committee’s terms of reference.
Matters considered in evaluations include the:
• effectiveness of discussion and debate at Board
and committee meetings;
• effectiveness of the Board’s and committees’ processes
and relationship with management;
• quality and timeliness of meeting agendas, Board
and committee papers and secretariat support;
• composition of the Board and each committee, focusing on
the blend of skills, experience, independence and knowledge
of the Group and its diversity, including geographic location,
nationality and gender.
The process is managed by the Chairman, with feedback
on the Chairman’s performance being provided to him by
the Senior Independent Director.
For information on the performance review process for
executives, refer to section 2.15.
Assessments conducted in respect of FY2019
During FY2019, the Board commenced an external evaluation
using Consilium, which has no other connection with the Group.
This covered Board, Committee and Chairman effectiveness,
along with an individual assessment of the Directors. The Board
evaluation focused on Board performance, the value of individual
contributions, training and development, Board and committee
succession and composition, support provided by Group
Governance, considerations for further improvement and external
engagement. The evaluation included seeking feedback from the
CEO, ELT, Group Company Secretary and senior management.
These assessments were completed in early FY2020 and have
been discussed with the Board.
In addition, a Board committee assessment was undertaken,
which required each committee member to consider the
relevant committee’s compliance with its respective terms
of reference. The Board considered its compliance with the
Board Governance Document.
The outcomes of the assessment for each committee are set
out in the following relevant sections.
Director review
An assessment of Directors’ performance was conducted in
respect of FY2019. The assessments were undertaken with the
assistance of an external service provider (Consilium), which does
not have any other connection with the Group. The Consilium-led
assessment of the individual Directors focused on consistently
taking the perspective of creating shareholder value, contributing
to Board cohesion and effective relationships with fellow Directors,
and committing the time required to fulfil their role and effectively
perform their responsibilities. Directors were specifically asked
to comment on areas where their fellow directors contribute the
greatest value and on potential areas for development.
Consilium sought feedback and provided it to the Chairman
and the Senior Independent Director, and this was then discussed
with the Directors. Feedback on the performance of the Chairman
was discussed in a closed session without the Chairman or CEO
present. The outcomes of the review supported the Board’s
decision to endorse all Directors standing for re-election.
Board evaluation in action
A number of improvements were agreed and implemented
following the FY2019 Board and committee evaluation. The key
areas of agreed focus were to further enhance agenda planning;
include an annual strategy day between the Board and the ELT,
in addition to the strategy sessions held at each Board meeting;
and provide further opportunities to increase the detailed
understanding of the operations and transformation, including
through updates to the Board induction program and continuation
of asset reviews at Board meetings.
i
S
t
r
a
t
e
g
c
R
e
p
o
r
t
2
G
o
v
e
r
n
a
n
c
e
a
t
B
H
P
R
e
m
u
n
e
r
a
t
i
o
n
R
e
p
o
r
t
D
i
r
e
c
t
o
r
s
’
R
e
p
o
r
t
2.12 Board meetings and attendance
The Board meets as often as is appropriate to fulfil its role. Directors
are required to allocate sufficient time to BHP to perform their
responsibilities effectively, including adequate time to prepare for
Board meetings. During the reporting year, the Board met 10 times,
with eight of those meetings held in Australia and two in the United
Kingdom. Regularly scheduled Board meetings generally run over
three days (including committee meetings and Director training
and development sessions).
Board and Board Committee attendance in FY2019
Members of the ELT and other members of senior management
attended meetings of the Board by invitation, with the CFO
attending each meeting.
Attendance at Board and standing Board committee meetings
during FY2019 is set out in the following table.
Board
Risk and Audit
Nomination and
Governance
Remuneration
Sustainability
Tenure as
at 30 June 2019
Terry Bowen
Malcolm Broomhead
Ian Cockerill
Anita Frew
Carolyn Hewson
Susan Kilsby
Andrew Mackenzie
Ken MacKenzie
Lindsay Maxsted
John Mogford
Wayne Murdy
Shriti Vadera
A
10
10
2
10
10
2
10
10
10
10
5
10
B
10
10
2
9 (1)
10
2
10
10
10
10
5
10
A
11
–
2
11
–
–
–
–
11
–
5
–
B
10 (2)
–
2
11
–
–
–
–
11
–
5
–
A
–
6
–
–
6
–
–
6
–
–
–
6
B
–
6
–
–
6
–
–
6
–
–
–
6
A
–
–
–
5
5
2
–
–
–
–
2
5
B
–
–
–
5
5
2
–
–
–
–
2
5
A
–
5
2
–
–
–
–
3
–
5
–
–
B
–
5
2
–
–
–
–
3
–
5
–
–
1 year 9 months
9 years 3 months
3 months
3 years 10 months
9 years 3 months
3 months
6 years 3 months
2 years 10 months
8 years 3 months
1 year 9 months
Retired on
2 November 2018
8 years 5 months
Column A: Scheduled indicates the number of scheduled and ad-hoc meetings held during the period the Director was a member of the Board and/or committee.
Column B: Attended indicates the number of scheduled and ad-hoc meetings attended by the Director during the period the Director was a member of the Board
and/or committee. The following Directors were not able to attend certain meetings:
(1) Ms Frew did not attend the meeting on 19 March due to an administrative oversight by BHP.
(2) Mr Bowen was unable to attend the RAC meeting on 12 February due to a prior engagement.
BHP Annual Report 2019 123
i
F
n
a
n
c
a
i
l
S
t
a
t
e
m
e
n
t
s
A
d
d
i
t
i
o
n
a
l
i
n
f
o
r
m
a
t
i
o
n
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
2.13 Board committees
The Board has established committees to assist it in exercising
its authority, including monitoring the performance of BHP to
gain assurance that progress is being made towards the corporate
purpose within the limits imposed by the Board.
Each of the permanent committees has terms of reference under
which authority is delegated by the Board.
Group Governance provides secretariat services for each of the
committees. Committee meeting agendas, papers and minutes
2.13.1 Risk and Audit Committee Report
Role and focus
The role of the Risk and Audit Committee (RAC) is to assist the
Board in monitoring the decisions and actions of the CEO and the
Group and to gain assurance that progress is being made towards
achieving the corporate purpose within the limits imposed by the
Board, as set out in the Board Governance Document.
The RAC discharges its responsibilities by overseeing:
• the integrity of BHP’s Financial Statements and Annual Report;
• the appointment, performance and remuneration of the
External Auditor and integrity of the external audit process;
• the effectiveness of the systems of risk management and
internal control;
• the plans, performance, objectivity and leadership of the Internal
Audit function and the integrity of the internal audit process;
• capital management (capital structure and funding, and capital
management planning and initiatives) and other matters.
Risk and Audit Committee members during the year
are made available to all members of the Board. Subject to
appropriate controls and the overriding scrutiny of the Board,
Committee Chairmen are free to use whatever resources they
consider necessary to discharge their responsibilities.
Reports from each of the committees follow.
The terms of reference for each committee are available
online at bhp.com/governance.
For more information about our approach to risk
management, refer to section 1.6.4.
The RAC met 11 times during FY2019. Information on meeting
attendance by Committee members is included in the following
table and information on Committee members’ qualifications,
which includes competence relevant to the mining sector, is set
out in section 2.2.1.
In addition to the regular business of the year, the Committee
discussed matters including those set out in the following
diagram. The viability statement and the Board’s confirmation
that it has carried out a robust risk assessment are in section
1.6.4. Statements relating to tendering of the external audit
contract, significant matters relating to the Financial Statements
and the process for evaluating the External Auditor are set out
in the following diagram.
Name
Lindsay Maxsted (Chairman) (1)
Terry Bowen (2)
Ian Cockerill
Anita Frew
Wayne Murdy
Independent
Status
Attendance
Yes
Yes
Yes
Yes
Yes
Member for whole period
Member for whole period
Member from 1 April 2019
Member for whole period
Member until 2 November 2018
11/11
10/11
2/2
11/11
5/5
(1) Mr Maxsted is the Committee’s financial expert nominated by the Board.
(2) Mr Bowen was unable to attend the meeting on 12 February 2019 due to a prior engagement.
Committee activities in FY2019
Integrity of Financial Statements and funding matters
• Accounting matters for consideration, materiality limits,
half-year and full-year results
• SOX compliance, reserves and resources
• Capital Allocation Framework
• Funding update and net debt target
• Euro medium-term note program update
• FY2019 portfolio valuation review
• Cost of capital and country risk premium review
• Business RAC meetings
• Deed of cross guarantee
External auditor and integrity of the audit process
• External audit report
• External audit letters of engagement, external audit fees
and non-audit services
• Management and external auditor closed sessions
• Audit plan, review of performance and quality of service
• EY independence and non-audit services
• EY audit transition and preliminary audit plan
Effectiveness of systems of internal control and risk management
• Material risk report
• Group risk profile
• Group risk framework including the risk appetite statement
and priority group risk review
• Regular reports on progress against the internal audit plan
• Matters of note arising from internal audits
• Internal audit reports
124 BHP Annual Report 2019
• Internal assessments of performance of Internal Audit and Assurance
• Fraud and misappropriation report
• Committee and Group Assurance Officer and Chief Risk Officer
closed sessions
• Ethics and compliance report
• Insurance update and Directors’ and Officers’ insurance update
• Material disputes update
Other governance matters
• Inter-company loans and group guarantees update
• Tax/royalty disputes update
• New accounting standards update
• Management of data protection and privacy risks update
• World Class Functions
• Technology risks
• Financial governance procedures
Business Risk and Audit Committees
Business Risk and Audit Committees, covering each asset group,
assist management in providing the information necessary
to allow the RAC to discharge its responsibilities. They are
management committees and perform an important monitoring
function in the overall governance of BHP. The meetings take
place annually as part of our financial governance framework.
As management committees, the responsible member of the
Executive Leadership Team participates, but the committee is
chaired by a member of the RAC. Each committee also includes
the Group Financial Controller, the Chief Risk Officer and the
Group Assurance Officer.
Significant operational and risk matters raised at Business
RAC meetings are reported to the RAC by management.
Activities undertaken by RAC during FY2019
Fair, balanced and understandable
Directors are required to confirm that they consider the Annual
Report, taken as a whole, to be fair, balanced and understandable
and provides the information necessary for shareholders to
assess BHP’s position, performance, business model and strategy.
BHP has a substantial governance framework in place for the
Annual Report. This includes management representation letters,
certifications, RAC oversight of the Financial Statements and a
range of other financial governance procedures focused on the
financial section of the Annual Report, together with verification
procedures for the narrative reporting section of the Report.
The RAC advises the Board on whether the Annual Report meets
the fair, balanced and understandable requirement. The process
to support the giving of this confirmation involved the following:
• ensuring all individuals involved in the preparation of any part
of the Annual Report are briefed on the fair, balanced and
understandable requirement through training sessions for
each content manager that detail the key attributes of ‘fair,
balanced and understandable’;
• employees who have been closely involved in the preparation
of the Financial Statements review the entire narrative for the
fair, balanced and understandable requirement, and sign off
an appropriate sub-certification;
• key members of the team preparing the Annual Report
confirm they have taken the fair, balanced and understandable
requirement into account and they have raised, with the
Annual Report project team, any concerns they have in
relation to meeting this requirement;
• the Annual Report suite sub-certification incorporates
a fair, balanced and understandable declaration;
• in relation to the requirement for the auditor to review parts
of the narrative report for consistency with the audited
Financial Statements, asking the External Auditor to raise
any issues of inconsistency at an early stage.
As a result of the process outlined above, the RAC, and then
the Directors, were able to confirm their view that BHP’s
Annual Report 2019 taken as a whole is fair, balanced and
understandable. For the Board’s statement on the Annual
Report, refer to the Directors’ Report in section 4.
Integrity of Financial Statements
The RAC assists the Board in assuring the integrity of the Financial
Statements. The RAC evaluates and makes recommendations
to the Board about the appropriateness of accounting policies
and practices, areas of judgement, compliance with accounting
standards, stock exchange and legal requirements and the results
of the external audit. It reviews the half-yearly and annual
Financial Statements and makes recommendations on specific
actions or decisions (including formal adoption of the Financial
Statements and reports) the Board should consider in order
to maintain the integrity of the Financial Statements.
For the FY2019 full-year and the half-year, the CEO and CFO
have certified that BHP’s financial records have been properly
maintained and that the FY2019 Financial Statements present
a true and fair view, in all material respects, of our financial
condition and operating results and are in accordance with
accounting standards and applicable regulatory requirements.
Significant issues
In addition to the Group’s key judgements and estimates
disclosed throughout the FY2019 Financial Statements, the
Committee also considered the following significant issues
relating to financial reporting:
Carrying value of long-term assets
The assessment of carrying values of long-term assets uses
a number of significant judgements and estimates.
The Committee examined management’s review of impairment
triggers and potential impairment charges or reversals for the
Group’s cash generating units.
The results of impairment assessments for the Jansen potash
assets in Canada were reviewed and the Committee concluded
that no impairment was required.
Specific consideration was given to the most recent short,
medium and long-term price forecasts, sanction date, expected
production volumes and ramp up development plans, operating
and capital costs, discount rates and other market indicators
of fair value.
Conclusions from these reviews are reflected in note 11
‘Property, plant and equipment’ in section 5.
Samarco dam failure
On 5 November 2015, the Samarco Mineração S.A (Samarco)
iron ore operation in Minas Gerais, Brazil experienced a tailings
dam failure that resulted in a release of mine tailings, flooding
the community of Bento Rodrigues and impacting other
communities downstream. Samarco is jointly owned by BHP
Billiton Brasil Limitada (BHP Billiton Brasil) and Vale S.A. (Vale).
BHP Billiton Brasil’s 50 per cent interest in Samarco is accounted
for as an equity accounted joint venture investment.
Samarco’s provisions and contingent liabilities
The Committee reviewed updates to matters relating to the
Samarco dam failure, including developments on existing and
new legal proceedings, and changes to the estimated costs
of remediation and provisions relating to the decommissioning
of Samarco’s Germano tailings dam complex.
BHP Billiton Brasil has recognised a share of additional losses
recorded by Samarco during the year ended 30 June 2019.
Potential direct financial impacts to BHP Billiton Brasil
The Committee considered:
• the impact of Brazilian Government legislation requiring the
accelerated decommissioning of upstream raised tailings dams,
specifically for Samarco’s Germano tailings dam complex;
• the accounting implications of funding provided to the
Renova Foundation and Samarco to support activities
under the Framework Agreement, carry out remediation
and stabilisation work and support Samarco’s operations;
• changes to the estimated cost of remediation and
compensation Programs under the Framework Agreement;
• developments in existing and new legal proceedings,
on the provision related to the Samarco dam failure and
related disclosures;
• the provisions recognised and contingent liabilities disclosed
by BHP Billiton Brasil or other BHP entities.
Based on currently available information, the Committee
concluded that the accounting for the equity investment
in Samarco, the provision recognised by BHP Billiton Brasil
(including the decommissioning of the Germano tailings
dam complex) and contingent liabilities disclosed in the
Group’s Financial Statements are appropriate.
For further information refer to note 4 ‘Significant events –
Samarco dam failure’ in section 5.
Onshore US divestment
The Committee considered and concurred with the accounting
implications of the completion of the Group’s Onshore US asset
divestment, including the allocation of revenue and costs to
discontinuing operations and tax accounting of the divestment.
The Committee also reviewed the disclosure of the Financial
Statement impacts resulting from the divestment including the
discontinued operations disclosure.
Conclusions from these reviews are reflected in note 27
‘Discontinued operations’ in section 5.
Impact of new accounting standards
The Committee considered and approved accounting policy
changes resulting from the application of new standards and
interpretations commencing 1 July 2019, including IFRS 16/AASB
16 ‘Leases’.
BHP Annual Report 2019 125
i
S
t
r
a
t
e
g
c
R
e
p
o
r
t
2
G
o
v
e
r
n
a
n
c
e
a
t
B
H
P
R
e
m
u
n
e
r
a
t
i
o
n
R
e
p
o
r
t
D
i
r
e
c
t
o
r
s
’
R
e
p
o
r
t
i
F
n
a
n
c
a
i
l
S
t
a
t
e
m
e
n
t
s
A
d
d
i
t
i
o
n
a
l
i
n
f
o
r
m
a
t
i
o
n
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
2.13.1 Risk and Audit Committee Report continued
The Committee reviewed management’s analysis of the adoption
implications for the Group, including the selection of transition
options, and concurred with its recommendations.
Consistent with the UK and EU requirements in regard to audit
firm tender and rotation, the Committee conducted an audit
tender process during FY2017 to appoint a new external auditor.
For further information, refer to note 38 ‘New and amended
accounting standards and interpretations’ in section 5.
Tax and royalty liabilities
The Group is subject to a range of tax and royalty matters across
many jurisdictions. The Committee considered updates on
changes to the wider tax landscape, estimates and judgements
supporting the measurement and disclosure of tax and royalty
provisions and contingent liabilities including the following:
• tax risks (including transfer pricing risks) arising from the
Group’s cross-border operations and transactions, including
settlement of the transfer pricing dispute with the Australian
Taxation Office relating to the Group’s marketing operations
in Singapore;
• settlement of a dispute with the Western Australian
Government in relation to a long-standing deduction made
by the Group and its Joint Venture Partners in the calculation
of royalties;
• other matters where uncertainty exists in the application
of the law.
The Committee concluded that provisions recognised and
contingent liabilities disclosed for these matters were
appropriate considering the range of possible outcomes,
currently available information and legal advice obtained.
For further information refer to notes 6 ‘Income tax expense’
and 33 ‘Contingent liabilities’ in section 5.
Closure and rehabilitation provisions
Determining the closure and rehabilitation provision is a
complex area requiring significant judgement and estimates,
particularly given the timing and quantum of future costs, the
unique nature of each site and the long timescales involved.
The Committee considered the various changes in estimates
for closure and rehabilitation provisions recognised during the
year. Consideration was given to the results of the most recently
completed surveying data, current cost estimates and
appropriate inclusion of contingency in cost estimates to allow
for both known and residual risks. The Committee concluded
that the assumptions and inputs for closure and rehabilitation
cost estimates were reasonable and the related provisions
recorded were appropriate.
For further information, refer to note 14 ‘Closure and rehabilitation
provisions’ in section 5.
External Auditor
The RAC manages the relationship with the External Auditor
on behalf of the Board. It considers the reappointment of
the External Auditor each year, as well as remuneration and
other terms of engagement and makes a recommendation
to the Board. There are no contractual obligations that restrict
the RAC’s capacity to recommend a particular firm for
appointment as auditor.
The lead audit engagement partners for KPMG in Australia and
the United Kingdom (together, (‘KPMG’)), were rotated every
five years. The most recent Australian audit engagement
partner was appointed at the start of FY2015, while the UK
audit engagement partner took formal responsibility at the
start of FY2018 following a transition period. Audit engagement
partners have been appointed in Australia and the United
Kingdom to represent EY for commencement from 1 July 2019.
Change in Registrant’s Certifying Accountant/Audit
tender and transition
BHP confirms that during FY2019 it was in compliance with the
provisions of The Statutory Audit Services for Large Companies
Market Investigation (Mandatory Use of Competitive Tender
Processes and Audit Committee Responsibilities) Order 2014.
In August 2017, consistent with the Committee’s recommendation,
the Board announced that it had selected EY to be appointed as
the Group’s auditor from the financial year beginning 1 July 2019,
subject to shareholder approval. The Board intends to seek
shareholder approval at the AGMs in 2019 of the appointment
of EY as external auditor. KPMG, BHP’s current external auditor,
did not participate in the tender due to UK and EU requirements
which require a new external auditor to be in place by 1 July 2023.
KPMG’s appointment as external auditor will come to an end on
completion of its procedures on BHP’s Consolidated Financial
Statements for the financial year ending 30 June 2019 and the
filing of the related Form-20F.
During the financial years ended 30 June 2018 and 2019, (1) KPMG
has not issued any reports on the financial statements of BHP
that contained an adverse opinion or a disclaimer of opinion,
nor were the auditors’ reports of BHP qualified or modified as to
uncertainty, audit scope, or accounting principles, and (2) there
has not been any disagreement over any matter of accounting
principles or practices, financial statement disclosure, or auditing
scope or procedures, which disagreements if not resolved to
KPMG’s satisfaction would have caused it to make reference
to the subject matter of the disagreement in connection with
its auditor’s reports for such years, or any “reportable event”
as described in Item 16F(a)(1)(v) of Form 20-F.
BHP has provided KPMG with a copy of the foregoing
disclosure and has requested that they furnish BHP with
a letter addressed to the SEC stating whether or not they
agree with the above statements.
During FY2018 and FY2019, BHP did not consult with EY
regarding: (i) the application of accounting principles to any
specified transaction, either completed or proposed, or the type
of audit opinion that might be rendered on the Consolidated
Financial Statements of the Group; or (ii) any matter that
was either the subject of a disagreement as defined in Item
16F(a)(1)(iv) of Form 20-F or reportable event as defined
in Item 16F(a)(1)(v) of Form 20-F.
In FY2019, the RAC received updates from EY on the audit
transition and preparation for commencement of its audit,
including EY’s process in meeting all relevant independence
criteria, audit plan for commencement from 1 July 2019 and
reports on any non-audit services.
Evaluation of External Auditor and external audit process
The RAC evaluates the performance of the External Auditor
during its term of appointment against specified criteria,
including delivering value to shareholders and BHP, and also
assesses the effectiveness of the external audit process.
It does so through a range of means:
• the Committee considers the External Audit Plan, in particular
to gain assurance that it is tailored to reflect changes
in circumstances from the prior year;
• throughout the year, the Committee meets with the audit
partners, particularly the lead Australian and UK audit
engagement partners, without management present;
• following the completion of the audit, the Committee
considers the quality of the External Auditor’s performance
drawing on survey results. The survey is based on a two-way
feedback model where the BHP and KPMG teams assess each
other against a range of criteria. The criteria against which
the BHP team evaluates KPMG’s performance include ethics
and integrity, insight, service quality, communication and
reporting, and responsiveness;
• reviewing the terms of engagement of the External Auditor;
• discussing with the audit engagement partners the skills
and experience of the broader audit team;
126 BHP Annual Report 2019
• reviewing audit quality inspection reports on KPMG published
by the UK Financial Reporting Council in considering the
effectiveness of the audit;
• overseeing (and approving where relevant) non-audit services
as described below.
The RAC also reviews the integrity, independence and objectivity
of the External Auditor and assesses whether there is any element
of the relationship that impairs, or appears to impair, the External
Auditor’s judgement or independence. This review includes:
• confirming the External Auditor is, in its judgement,
independent of BHP;
• obtaining from the External Auditor an account of all
relationships between the External Auditor and BHP;
• monitoring the number of former employees of the External
Auditor currently employed in senior positions within BHP;
• considering the various relationships between BHP and
the External Auditor;
• determining whether the compensation of individuals
employed by the External Auditor who conduct the audit
is tied to the provision of non-audit services;
• reviewing the economic importance of BHP to the
External Auditor.
The External Auditor also certifies its independence to the RAC.
Non-audit services
Although the External Auditor does provide some non-audit
services, the objectivity and independence of the External Auditor
are safeguarded through restrictions on the provision of these
services. For example, certain types of non-audit services may
be undertaken by the External Auditor only with the prior
approval of the RAC (as described in this section), while other
services may not be undertaken at all, including services where
the External Auditor:
• may be required to audit its own work;
• participates in activities that would normally be
undertaken by management;
• is remunerated through a ‘success fee’ structure;
• acts in an advocacy role for BHP.
The RAC has adopted a policy entitled ‘Provision of Audit and
Other Services by the External Auditor’ covering the RAC’s
pre-approval policies and procedures to maintain the
independence of the External Auditor.
Our policy on Provision of Audit and Other Services by the
External Auditor is available online at bhp.com/governance.
In addition to audit services, the External Auditor is permitted
to provide other (non-audit) services that are not, and are not
perceived to be, in conflict with the role of the External Auditor.
In accordance with the requirements of the Exchange Act and
guidance contained in Public Company Accounting Oversight
Board (PCAOB) Release 2004-001, certain specific activities
are listed in our detailed policy that have been ‘pre-approved’
by the RAC.
The categories of ‘pre-approved’ services are as follows:
• Audit and audit-related services – work that constitutes the
agreed scope of the statutory audit and includes the statutory
audits of BHP and its entities (including interim reviews).
This category also includes work that is reasonably related
to the performance of an audit or review and is a logical
extension of the audit or review scope. The RAC monitors
the audit services engagements and if necessary, approves
any changes in terms and conditions resulting from changes
in audit scope, Group structure or other relevant events.
• Other assurance services – work that is outside the required
scope of the statutory audit but is consistent with the role
of the external statutory auditor, is of an assurance or
compliance nature and is work the External Auditor must
or is best placed to undertake.
• Other services – work of an advisory nature that does not
compromise the independence of the External Auditor.
Activities not listed specifically are therefore not ‘pre-approved’
and must be approved by the RAC prior to engagement,
regardless of the dollar value involved. Additionally, any
engagement for other services with a value over US$100,000,
even if listed as a ‘pre-approved’ service, requires the approval
of the RAC. All engagements for other services whether
‘pre-approved’ or not and regardless of the dollar value involved
are reported quarterly to the RAC.
While not specifically prohibited by BHP’s policy, any proposed
non-audit engagement of the External Auditor relating to internal
control (such as a review of internal controls or assistance with
implementing the regulatory requirements, including those of
the Exchange Act) requires specific prior approval from the RAC.
With the exception of the external audit of BHP’s Financial
Statements, any engagement identified that contains an internal
control-related element is not considered to be pre-approved. In
addition, while the categories of ‘pre-approved’ services include
a list of certain pre-approved services, the use of the External
Auditor to perform such services will always be subject to our
overriding governance practices as articulated in the policy.
An exception can be made to the policy where it is in BHP’s
interests and appropriate arrangements are put in place to
ensure the integrity and independence of the External Auditor.
Any such exception requires the specific prior approval of the
RAC and must be reported to the Board. No exceptions were
approved during the year ended 30 June 2019.
In addition, the RAC approved no services during the year ended
30 June 2019 pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of
SEC Regulation S-X (provision of services other than audit).
Fees paid to BHP’s External Auditor during FY2019 for audit
and other services were US$14.5 million, of which 64 per cent
comprised audit fees, 32 per cent related to legislative
requirements (including US Sarbanes-Oxley Act of 2002
as amended (SOX)) and 4 per cent was for other services.
Details of the fees paid are set out in note 35 ‘Auditor’s
remuneration’ in section 5.
Based on the review by the RAC, the Board is satisfied that the
External Auditor is independent and that the incoming auditor
is also independent.
Risk function
The role of the Risk function is to own the Group’s end to end
Risk Framework, to create, maintain, govern, support and report
on the effective implementation of the risk management
framework for all risks (including material and non-material,
strategic, operational, reporting, compliance and emerging risks).
The RAC assists the Board with the oversight of risk management,
although the Board retains overall accountability for BHP’s risk
profile. In addition, the Board specifically requires the CEO to
implement a system of control for identifying and managing risk.
The Directors, through the RAC, review the systems that have
been established for this purpose, regularly review the
effectiveness of those systems and monitor that necessary
actions have been taken to remedy any significant failings or
weaknesses identified from that review. The RAC regularly
reports to the Board to enable the Board to review our Risk
Framework. Refinements were made to BHP’s Risk Framework
during FY2019. For more information, refer to section 1.6.4.
Additional information about the effectiveness of risk
management is set out as follows.
Internal Audit
The Internal Audit function is carried out by Internal Audit and
Advisory (IAA). The role of IAA is to provide assurance as to
whether risk management, internal control and governance
processes are adequate and functioning. The Internal Audit
function is independent of the External Auditor. The RAC
evaluates and, if thought fit, approves the terms of reference
of IAA, the staffing levels and its scope of work to ensure it
is appropriate in light of the key risks we face. It also reviews
and approves the annual internal audit plan and monitors and
reviews the overall effectiveness of the internal audit activities.
BHP Annual Report 2019 127
i
S
t
r
a
t
e
g
c
R
e
p
o
r
t
2
G
o
v
e
r
n
a
n
c
e
a
t
B
H
P
R
e
m
u
n
e
r
a
t
i
o
n
R
e
p
o
r
t
D
i
r
e
c
t
o
r
s
’
R
e
p
o
r
t
i
F
n
a
n
c
a
i
l
S
t
a
t
e
m
e
n
t
s
A
d
d
i
t
i
o
n
a
l
i
n
f
o
r
m
a
t
i
o
n
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
2.13.1 Risk and Audit Committee Report continued
The RAC also approves the appointment and dismissal of the
Group Assurance Officer and assesses his or her performance,
independence and objectivity. The position was held until
September 2018 by Kirsty Wallace, when Rama Devarajan
was appointed to the role. Both Ms Wallace and Mr Devarajan
reported directly to the RAC. During the period, functional
oversight of IAA was provided by the Chief External Affairs Officer.
Effectiveness of systems of internal control
and risk management (RAC and Board)
In delegating authority to the CEO, the Board has established CEO
limits set out in the Board Governance Document. Limits on the
CEO’s authority require the CEO to ensure there is a system
of control in place for identifying and managing risk in BHP.
Through the RAC, the Directors review the systems
that have been established for this purpose and regularly
review their effectiveness. These reviews include assessing
whether processes continue to meet evolving external
governance requirements.
The RAC oversees and reviews the internal controls and risk
management systems. In undertaking this role, the RAC
reviews the following:
• procedures for identifying material risks and controlling
their impact on the Group, and the operational effectiveness
of these procedures;
• processes and systems for managing budgeting, forecasting
and financial reporting;
• the Group’s strategy and standards in respect of insurance;
• the Group’s standards and procedures in respect of reporting
of reserves and resources;
• the Group’s standards and procedures in respect of the
closure and rehabilitation provision;
• standards and practices for detecting, reporting and preventing
fraud, serious breaches of business conduct and whistle-
blowing procedures supporting reporting to the Committee;
• procedures for ensuring compliance with relevant regulatory
and legal requirements;
• arrangements for the protection of the Group’s information
and data systems and other non-physical assets;
• operational effectiveness of the Business RAC structures;
• overseeing the adequacy of the internal controls and allocation
of responsibilities for monitoring internal financial controls.
For more information on our approach to risk management, refer
to section 1.6.4. Section 1.6.4 includes a description of
the most significant Group risks which could materially and
adversely affect our business, financial performance, financial
condition, prospects or reputation, leading to a loss of long-term
shareholder and/or investor confidence. Section 1.6.4 also
provides an explanation of how those risks are managed.
During FY2019, management presented an assessment of the
material business risks facing BHP and the level of effectiveness
of risk management over the material business risks. The
reviews were overseen by the RAC, with findings and
recommendations reported to the Board. In addition to
considering key risks facing BHP, the Board received an
assessment of the effectiveness of internal controls over key
risks identified through the work of the Board committees.
The Board is satisfied with the effectiveness of risk management
and internal control systems.
Management’s assessment of internal control over
financial reporting
Management is responsible for establishing and maintaining
adequate internal control over financial reporting (as defined
in Rule 13a-15(f) and Rule 15d-15(f) under the Exchange Act).
Because of its inherent limitations, internal control over financial
reporting may not prevent or detect misstatements and, even
when determined to be effective, can only provide reasonable
assurance with respect to financial statement preparation and
presentation. Also, projections of any evaluation of effectiveness
to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or the degree
of compliance with the policies or procedures may deteriorate.
Under the supervision and with the participation of our
management, including our CEO and CFO, the effectiveness
of BHP’s internal control over financial reporting has been
evaluated based on the framework and criteria established in
Internal Controls – Integrated Framework (2013), issued by the
Committee of the Sponsoring Organizations of the Treadway
Commission (COSO). Based on this evaluation, management
has concluded that internal control over financial reporting
was effective as at 30 June 2019. There were no material
weaknesses in BHP’s internal controls over financial reporting
identified by management as at 30 June 2019.
BHP has engaged our independent registered public accounting
firms, KPMG and KPMG LLP, to issue an audit report on our
internal control over financial reporting for inclusion in the
Financial Statements section of the Annual Report and the
Annual Report on Form 20-F as filed with the SEC.
There have been no changes in our internal control over
financial reporting during FY2019 that have materially affected,
or are reasonably likely to materially affect, our internal control
over financial reporting.
The CEO and CFO have certified to the Board that the Financial
Statements for the full-year and half-year are founded on a
sound system of risk management and internal control and
the system is operating efficiently and effectively.
During FY2019, the RAC reviewed our compliance with
the obligations imposed by SOX, including evaluating
and documenting internal controls as required by section
404 of SOX.
Management’s assessment of disclosure controls
and procedures
Management, with the participation of our CEO and CFO,
performed an evaluation of the effectiveness of the design
and operation of our disclosure controls and procedures
as at 30 June 2019. Disclosure controls and procedures are
designed to provide reasonable assurance that the material
financial and non-financial information required to be disclosed
by BHP, including in the reports that it files or submits under
the Exchange Act, is recorded, processed, summarised and
reported on a timely basis and that such information is
accumulated and communicated to BHP’s management,
including our CEO and CFO, as appropriate, to allow timely
decisions regarding required disclosure. Based on the
evaluation, management, including the CEO and CFO, has
concluded that as at 30 June 2019, our disclosure controls and
procedures are effective in providing that reasonable assurance.
There are inherent limitations to the effectiveness of any system
of disclosure controls and procedures, including the possibility
of human error and the circumvention or overriding of the
controls and procedures. Accordingly, even effective disclosure
controls and procedures can only provide reasonable assurance
of achieving their control objectives.
Further, in the design and evaluation of our disclosure controls
and procedures, management was required to apply its
judgement in evaluating the cost-benefit relationship of possible
controls and procedures.
Committee assessment
Following the committee assessment, the RAC was satisfied that it
had continued to meet its terms of reference in FY2019.
The terms of reference for the RAC are available
online at bhp.com/governance.
128 BHP Annual Report 2019
2.13.2 Remuneration Committee Report
Role and focus
The role of the Remuneration Committee is to assist the Board
in overseeing:
• the remuneration policy and its specific application to the
CEO and other Key Management Personnel (those who
have authority and responsibility for planning, directing and
controlling the activities of the Group directly or indirectly),
and its general application to all employees;
• the adoption of annual and longer-term incentive plans;
• the determination of levels of reward for the CEO and
approval of reward for other Key Management Personnel;
• the annual evaluation of the performance of the CEO,
by giving guidance to the Chairman;
• leaving entitlements;
• the preparation of the Remuneration Report for inclusion
in the Annual Report;
• compliance with applicable legal and regulatory requirements
associated with remuneration matters;
• the review, at least annually, of remuneration by gender.
Remuneration Committee members during the year
The Sustainability Committee and the Risk and Audit Committee
assist the Remuneration Committee in determining appropriate
HSEC and financial metrics, respectively, to be included in
senior executive scorecards and in assessing performance
against those measures.
The Remuneration Committee met five times during FY2019
and also considered some matters out of session. Information
on meeting attendance by Committee members is included
in the following table.
Certain items the Committee discussed are set out below.
For full details of the Committee’s work on behalf of the Board,
refer to the Remuneration Report in section 3.
Name
Carolyn Hewson (Chairman)
Anita Frew
Susan Kilsby
Wayne Murdy
Shriti Vadera
Committee activities in FY2019
Independent
Status
Attendance
Yes
Yes
Yes
Yes
Yes
Member for whole period
Member for whole period
Member from 1 April 2019
Member until 2 November 2018
Member for whole period
5/5
5/5
2/2
2/2
5/5
Remuneration of the KMP and the Board
Other remuneration matters
• Remuneration policy review
• Remuneration of CEO and other Key Management Personnel
• KPIs, performance levels, award outcomes
• Long-Term Incentive Plan sector peer group review
• Chairman fees
Other
• Induction, training and development program
• Board committee procedures, including closed sessions
• Shareplus enrolment update
• Remuneration by gender
• Director travel expenses policy
• Shareholder engagement
• Share plan rule update
• UK BEIS Committee report
• Corporate Governance code provisions
• Proxy adviser consultation
Committee assessment
Following the committee assessment, the Remuneration Committee was satisfied that it had continued to meet its terms
of reference in FY2019. Subsequent to year end, updates were made to the terms of reference, to reflect the latest version
of the UK Corporate Governance Code.
The terms of reference for the Remuneration Committee
are available online at bhp.com/governance.
BHP Annual Report 2019 129
i
S
t
r
a
t
e
g
c
R
e
p
o
r
t
2
G
o
v
e
r
n
a
n
c
e
a
t
B
H
P
R
e
m
u
n
e
r
a
t
i
o
n
R
e
p
o
r
t
D
i
r
e
c
t
o
r
s
’
R
e
p
o
r
t
i
F
n
a
n
c
a
i
l
S
t
a
t
e
m
e
n
t
s
A
d
d
i
t
i
o
n
a
l
i
n
f
o
r
m
a
t
i
o
n
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
2.13.3 Nomination and Governance Committee Report
Role and focus
The role of the Nomination and Governance Committee is to
assist the Board in ensuring that the Board comprises individuals
who are best able to discharge the responsibilities of a Director,
having regard to the highest standards of governance, the
strategic direction of BHP and the diversity aspirations of the
Board. It does so by focusing on:
• the succession planning process for the Board and its
committees, including the identification of suitable candidates
for appointment to the Board taking into account the skills,
experience, independence and knowledge required on the
Board, as well as the attributes required of potential Directors;
• the succession planning process for the Chairman;
• the succession planning process for the CEO and periodic
evaluation of the process;
• Board and Director performance evaluation, including
evaluation of Directors seeking re-election prior to their
endorsement by the Board as set out in sections 2.7 and 2.11;
• the provision of appropriate training and development
opportunities for Directors;
• the independence of Non-executive Directors;
• the time required from Non-executive Directors;
• the assessment and, if appropriate, authorisation of situations
of actual and potential conflict notified by Directors;
• BHP’s corporate governance practices.
For details on the Board succession planning process,
refer to section 2.8.
The Nomination and Governance Committee met six times
during FY2019. Information on meeting attendance by Committee
members is included in the following table. In addition to the
regular business of the year, the Committee considered the
appointments of Ian Cockerill and Susan Kilsby as Non-executive
Directors and the retirement of Wayne Murdy. The Committee
also oversaw several other targeted searches for Non-executive
Director candidates in FY2019 which are continuing.
Board changes
Ian Cockerill and Susan Kilsby joined the Board on 1 April 2019.
As set out in the 2018 Annual Report, Wayne Murdy retired with
effect from 2 November 2018. Our search for a new Non-
executive Director with mining experience commenced
in FY2017 and the appointment of Ian Cockerill satisfies that
requirement as he has extensive mining experience, including
in chief executive, operational, strategic and technical roles.
Susan Kilsby has extensive experience in finance and strategy,
having held several roles in global investment banking. Both
new Directors also bring extensive Non-executive Director
experience. Ian Cockerill was appointed to the Risk and Audit
Committee and the Sustainability Committee, and Susan Kilsby
was appointed to the Remuneration Committee.
Carolyn Hewson will retire from the Board after 2019 BHP Group
Limited Annual General Meeting.
Board policy on inclusion and diversity
Our Charter and the Our Requirements for Human Resources
standard guide management on all aspects of human resource
management, including inclusion and diversity. Underpinning
the Our Requirements standards and supporting the
achievement of diversity across BHP are principles and
measurable objectives that define our approach to diversity
and our focus on creating an inclusive work environment.
The Board and management believe that many facets of diversity
are required in order to meet the corporate purpose as set out
in section 2.8. Diversity is a core consideration in ensuring the
Board and its committees have the right blend of perspectives
so that the Board oversees BHP effectively for shareholders.
The Board believes that critical mass is important for diversity
and diversity of all types remains a priority as the Board
continues to be refreshed and renewed, as set out in section 2.8.
We also have an aspirational goal to achieve gender balance
across our workforce – and on our Board – by FY2025. We
believe this will help create a more diverse, inclusive, empowered
and connected workforce, underpinned by Our Charter values.
Part of the Board’s role is to consider and approve BHP’s
measurable objectives for workforce diversity each financial
year and to oversee our progress in achieving those objectives.
BHP’s progress will continue to be disclosed in the Annual
Report, along with the proportion of women in our workforce,
in senior management positions and on the Board. For more
information on inclusion and diversity at BHP, including our
progress against our FY2019 measurable objectives and our
employee profile more generally, refer to sections 1.9.1 and 1.9.2.
External recruitment specialists
The Committee retained the services of external recruitment
specialists. Heidrick and Struggles, Russell Reynolds and
MWM Consulting assisted with Non-executive Director
candidate searches throughout the year.
Nomination and Governance Committee members during the year
Name
Independent
Status
Attendance
Ken MacKenzie (Chairman)
Chairman of the Board
Malcolm Broomhead
Carolyn Hewson
Shriti Vadera
Yes
Yes
Yes
Committee activities in FY2019
Member for whole period
Member for whole period
Member for whole period
Member for whole period
6/6
6/6
6/6
6/6
Succession planning processes
Corporate governance practices
• Implementation of the new skills and experience matrix
• Identification of suitable Non-executive Director candidates
• Board and committee succession
• Partnering with new search firms regarding candidate searches
• Independence of Non-executive Directors
• Authorisation of situations of actual or potential conflict
• Corporate Governance Statement
• Update on UK governance reforms
• Implementing new UK Corporate Governance Code provisions
Evaluation and training
Other governance matters
• Board evaluation approach for FY2019
• Board and Director performance evaluation
• Provision of appropriate training and development opportunities
• Induction
• Committee assessment
• Board and management advisory committees framework
Committee assessment
Following the committee assessment, the Nomination and Governance Committee
was satisfied that it had continued to meet its terms of reference in FY2019.
The terms of reference for the Nomination
and Governance Committee are available
online at bhp.com/governance.
130 BHP Annual Report 2019
2.13.4 Sustainability Committee Report
Role and focus
The role of the Sustainability Committee is to assist the Board
in its oversight of the Group’s health, safety, environment
and community (HSEC) performance and the adequacy of
the Group’s HSEC framework, and in relation to various other
governance responsibilities related to HSE and Community.
The Group’s HSEC framework consists of:
• the CEO limits set out in the Board Governance Document.
The Board Governance Document establishes the remit of the
Board and delegates authority to the CEO, including in respect
of the HSEC Management System, subject to CEO limits;
• the Sustainability Committee, which is responsible for
assisting the Board in overseeing the adequacy of the
Group’s HSEC Framework and HSEC Management System
(among other things);
• the HSEC Management System, established by management
in accordance with the CEO’s delegated authority. The HSEC
Management System provides the processes, resources,
structures and performance standards for the identification,
management and reporting of HSEC risks and the
investigation of any HSEC incidents;
• a robust and independent internal audit process overseen
by the RAC, in accordance with its terms of reference;
• independent advice on HSEC matters, which may be
requested by the Board and its committees where deemed
necessary in order to meet their respective obligations.
Our approach to sustainability is reflected in Our Charter, which
defines our values, purpose and how we measure success, and in
our sustainability performance targets, which define our public
commitments to safety, health, environment and community.
HSEC considerations are also taken into account in employee
and executive remuneration. More information is available in our
Sustainability Report 2019 and the Remuneration Report 2019.
The Committee provides oversight of the preparation and
presentation of the Sustainability Report by management,
and reviewed and recommended to the Board the approval
Sustainability Committee members during the year
of the Sustainability Report for publication. The Sustainability
Report identifies our targets for HSEC matters and our
performance against those targets. Our targets rely on fact-
based measurement and quality data, and reflect a desire
to move BHP to a position of industry leadership.
A copy of the Sustainability Report is available
online at bhp.com.
Activities of the Sustainability Committee
The Sustainability Committee met five times during FY2019 and
continued to assist the Board in its oversight of HSEC issues
and performance. A summary of the main areas discussed and
information on meeting attendance by Committee members is
included in the following table. However, one of the major topics
discussed by the Committee, particularly following the dam failure
at Vale’s Brumadinho iron ore mine, was tailings storage facilities.
These discussions included dam risk review actions, the industry
review led by the ICMM and the Church of England Pensions
Board led initiative. Further information about our approach
to tailings storage facilities is set out in section 1.8. Water
stewardship was also important as the Group worked to finalise
the Water Stewardship report in August 2018. The Committee
continues to monitor the work of the water stewardship project.
Members of the Sustainability Committee also visited a number
of operated and non-operated sites during FY2019 as part
of a formal program of committee visits. These included West
Australian Iron Ore, Iron Ore, Australia; Escondida and Spence,
Copper, Chile; and Broadmeadow and Goonyella, BMA,
Metallurgical Coal, Australia. During these site visits, Committee
members received briefings on relevant HSEC matters and
the management of material HSEC risks, and met with key
personnel. These visits offer access to a diverse cross-section
of the workforce from frontline through to the leadership team,
including, where possible, risk and control owners. This provides
Directors with a sense of the risk management processes and
culture at each site.
Name
Independent
Status
Attendance
Malcolm Broomhead (Chairman)
Ian Cockerill
Ken MacKenzie
John Mogford
Yes
Yes
Yes
Yes
Committee activities in FY2019
Member for whole period
Member from 1 April 2019
Member until 1 April 2019
Member for whole period
5/5
2/2
3/3
5/5
Assurance and adequacy of HSEC framework and HSEC
management system
Compliance and reporting
• Key HSEC risks, including tailings dams and a deep dive on the risk
of blasting incidents
• Audit planning and reporting in relation to HSEC risks and processes
• Contractor management
• Compliance with HSEC legal and regulatory requirements
• Updates on key legal and regulatory changes
• Sustainability Report, including consideration of processes
for preparation and assurance provided by KPMG
Performance
Other governance matters
• Induction, training and development of Committee members
• HSEC emerging trends
• Site visits and site visit reports to Board
• Investor approach to environmental, social and governance issues
• Modern Slavery Act Statement
• Performance of BHP in relation to HSEC matters
• Considering proposed HSEC KPIs for KMP scorecard
and considering performance against such KPIs
• Monitoring against the FY2018–FY2022 HSEC performance targets
• Updates on Samarco remediation and Renova Foundation
• Tailings management industry review
• BHP dam review and actions
• Field leadership
• Saraji fatality ICAM
• Performance and key issues on sustainable development and
community relations, including community issues update
• Water stewardship and position statement
• Climate change updates
• Social licence and social value
BHP Annual Report 2019 131
i
S
t
r
a
t
e
g
c
R
e
p
o
r
t
2
G
o
v
e
r
n
a
n
c
e
a
t
B
H
P
R
e
m
u
n
e
r
a
t
i
o
n
R
e
p
o
r
t
D
i
r
e
c
t
o
r
s
’
R
e
p
o
r
t
i
F
n
a
n
c
a
i
l
S
t
a
t
e
m
e
n
t
s
A
d
d
i
t
i
o
n
a
l
i
n
f
o
r
m
a
t
i
o
n
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
2.13.4 Sustainability Committee Report continued
Sustainable development governance
Our approach to HSEC and sustainable development
governance is characterised by:
• the Sustainability Committee assisting the Board in its
oversight of material HSEC matters and risks across BHP,
including seeking continuous improvement and policy
advocacy as applicable;
• management having primary responsibility for the design and
implementation of an effective HSEC Management System;
• management having accountability for HSEC performance;
• the HSE function and Community sub-function providing
advice and guidance directly to the Sustainability Committee
and the Board;
• the Board, Sustainability Committee and management
seeking input and insight from external experts, such
as the BHP Forum on Corporate Responsibility; and
• clear links between executive remuneration
and HSEC performance.
The key areas of focus for the Committee, management and
the HSE function and Community sub-function are outlined
in the Sustainability Report 2019.
Climate change
Climate change is treated as a Board-level governance issue,
with the Sustainability Committee playing a key supporting role.
The Committee work during FY2019 included reviewing the
proposed approach to reduction in greenhouse gas emissions
and the product stewardship project which aims to improve
identification, assessment and management of climate change
risks and opportunities in the value chain. For more information
on our climate change position and how we consider the
impacts on our portfolio, refer to section 1.10.8.
Social investment
We also continued to monitor our progress in relation to our
social investment and met our target for investments in
community programs. This was the equivalent of not less
than 1 per cent of our pre-tax profit, calculated on the average
of the previous three years’ pre-tax profit. Our social investment
performance in FY2019 saw BHP deliver projects with a
continued focus on good governance, human capability and
social inclusion and environment. Our voluntary social
investment in FY2019 totalled US$93.5 million, consisting of
US$55.7 million in direct community development projects and
donations, US$8.9 million equity share to non-operated joint
venture programs, a US$16.57 million donation to the BHP
Foundation and US$4 million to the Matched Giving and
community small grants programs. Administrative costs
to facilitate social investment activities at our assets totalled
US$6.27 million and US$2 million supported the operations
of the BHP Foundation.
HSEC matters and remuneration
In order to link HSEC matters to remuneration, 25 per cent
of the short-term incentive opportunity for Key Management
Personnel was based on HSEC performance during FY2019.
The Sustainability Committee assists the Remuneration
Committee in determining appropriate HSEC metrics to be
included in the KMP scorecard and also assists in relation
to assessment of performance against those measures.
The Board believes this method of assessment is transparent,
rigorous and balanced, and provides an appropriate, objective
and comprehensive assessment of performance. For more
information on the metrics and their assessment, refer
to the Remuneration Report in section 3.
Committee assessment
Following the committee assessment, the Sustainability Committee was satisfied that it had continued to meet its terms of reference
in FY2019.
The terms of reference for the Sustainability Committee
are available online at bhp.com/governance.
2.14 Risk management governance structure
We believe the identification and management of risk are central to achieving the corporate purpose. Our approach to risk and risk
governance, including the role of the BHP Board and its committees is set out in section 1.6.4.
132 BHP Annual Report 2019
2.15 Management
Below the level of the Board, key management decisions are made
by the CEO, the ELT, other management committees and individual
members of management to whom authority has been delegated.
Management committees perform roles in relation to risk and
control. Strategic risks and opportunities arising from changes
in our business environment are regularly reviewed by the ELT
and discussed by the Board. The Financial Risk Management
Committee (FRMC) reviews the effectiveness of internal controls
relating to commodity price risk, counterparty credit risk, currency
risk, financing risk, interest rate risk and insurance. Minutes of
the FRMC meetings are provided to the Board through the RAC.
The Investment Review Committee (IRC) provides oversight for
investment processes across BHP and coordinates the investment
toll-gating process for major investments. Reports are made
to the Board on findings by the IRC in relation to major capital
projects. The Disclosure Committee oversees BHP’s compliance
with securities dealing and continuous and periodic disclosure
requirements, including reviewing information that may require
disclosure through stock exchanges and overseeing processes
to ensure information disclosed is timely, accurate and complete.
The following diagram describes the responsibilities of the CEO
and four key management committees.
CEO and management committee responsibilities
Performance evaluation for executives
The performance of executives and other senior employees is
reviewed on an annual basis. For the members of the ELT, this
review includes their contribution, engagement and interaction
at Board level. The annual performance review process that we
employ considers the performance of executives against criteria
designed to capture both ‘what’ is achieved and ‘how’ it is
achieved. All performance assessments of executives include
how effective they have been in undertaking their role; what they
have achieved against their specified key performance indicators;
how they match up to the behaviours prescribed in our leadership
model; and how those behaviours align with Our Charter values.
The assessment is therefore holistic and balances absolute
achievement with the way performance has been delivered.
Progression within BHP is driven equally by personal leadership
behaviours and capability to produce excellent results.
A performance evaluation as outlined was conducted for all
members of the ELT during FY2019. For the CEO, the performance
evaluation was led by the Chairman of the Board on behalf of
all the Non-executive Directors, and was discussed with the
Remuneration Committee.
Chief Executive Officer
• Holds delegated authority from the Board to achieve the corporate purpose.
• Authority extends to all matters except those reserved for the Board’s decision.
• CEO has delegated authority to management committees and individual members of
management – but CEO remains accountable to Board for all authority delegated to him.
Executive Leadership Team
• Established by the CEO, the ELT has responsibility for day-to-day management of BHP.
• Purpose is to provide leadership to BHP, determining its priorities and the way it is to operate,
thereby assisting the CEO in pursuing the corporate purpose.
• Is a forum to debate high-level matters important to BHP and to ensure consistent
development of BHP’s strategy.
Financial Risk
Management Committee
Group Investment
Review Committee
Disclosure
Committee
• Purpose is to assist the CEO
to monitor and oversee the
management of the financial
risks faced by BHP, including:
• commodity price risk;
• counterparty credit risk;
• currency risk;
• financing risk;
• interest rate risk;
• insurance.
• Purpose is to assist the CEO
• Purpose is to assist the
in assessing investment
decisions using a transparent
and rigorous governance
process, such that:
• investments are aligned with
BHP’s purpose, strategy and
Charter values as well as the
Group’s capital priorities
and plans;
• key risks and opportunities
are identified and managed;
• shareholder value is
maximised, on a risk
adjusted basis.
CEO in overseeing BHP’s
compliance with securities
dealing and continuous
and periodic disclosure
requirements, including:
• reviewing information
that may require disclosure
to stock exchanges;
• overseeing disclosure
processes to ensure
information disclosed
is timely, accurate
and complete.
BHP Annual Report 2019 133
i
S
t
r
a
t
e
g
c
R
e
p
o
r
t
2
G
o
v
e
r
n
a
n
c
e
a
t
B
H
P
R
e
m
u
n
e
r
a
t
i
o
n
R
e
p
o
r
t
D
i
r
e
c
t
o
r
s
’
R
e
p
o
r
t
i
F
n
a
n
c
a
i
l
S
t
a
t
e
m
e
n
t
s
A
d
d
i
t
i
o
n
a
l
i
n
f
o
r
m
a
t
i
o
n
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
2.16 Our conduct
Our Charter and Our Code of Conduct
Our Charter is central to our business. It articulates the values
we uphold, our strategy and how we measure success.
Our Code of Conduct (Our Code) is based on Our Charter values.
Our Code sets out standards of behaviour for our people when
using BHP resources, in their dealings with governments and
communities, third parties and each other. Our Code describes
the behaviours expected to support a safe, respectful and a legally
compliant working environment.
Working with integrity is a condition of employment with BHP and
in some cases a contractual obligation of many of our contractors
and suppliers. All our people are required to undertake annual
training on Our Code to promote awareness and understanding
of the behaviours expected of them. Demonstration of the values
described in Our Charter and Our Code is part of the annual
employee performance review process.
Our Code is accessible to all our people and external
stakeholders online at bhp.com.
BHP’s EthicsPoint
We have mechanisms in place for anyone to raise a report if they
feel Our Code has been breached. Employees and contractors
can raise reports through line leaders or Human Resources.
Processes for the community to report potential breaches of
Our Code are available at the asset level and these are then
reported to a central grievances system.
Reports can also be raised by anyone, whether they are employees,
contractors, vendors/suppliers, customers, shareholders or
community members, through EthicsPoint, a 24-hour, multilingual
service for confidential reporting of potential misconduct.
This service is accessible online or via telephone and reports
can be raised anonymously.
We acknowledge, investigate as appropriate and document
all matters reported. Where matters are investigated and
substantiated, we take appropriate remedial actions, advise
the reporter (where possible) and document the outcome.
BHP does not tolerate any form of retaliation against anyone
for speaking up about potential misconduct or participating
in an investigation.
Enhancements
With culture at the centre of key strategic priorities, we have several
initiatives to improve our policies, procedures and practices, building
on changes already made. They include the implementation of:
• an updated Our Requirements for Business Conduct standard, to
strengthen our investigations framework, including providing clear
guidance how each EthicsPoint concern is assessed and triaged;
• an independent, dedicated Central Investigation team within our
Ethics and Compliance function that investigates the most
serious allegations of misconduct, including, allegations of sexual
harassment, fraud, conflicts of interest, compliance related
matters and any other Our Code of Conduct allegations raised in
relation to senior managers. The Central Investigations Team also
provides guidance to drive a standardised, quality investigation
process throughout BHP;
• an Integrity Working Group, Chaired by our Chief Compliance
Officer and comprised of senior leaders across the Health, Safety
and Environment; Risk; Internal Audit; Legal; and Ethics and
Compliance functions, with accountability for oversight of the
operational effectiveness of the Investigations Framework,
including oversight of investigations completed by the Central
Investigations team.
Complaints raised through EthicsPoint provide valuable insight into
cultural issues and areas for organisational improvement.
Complaints are reported biannually to the Board’s Risk and Audit
Committee by the Chief Compliance Officer. In FY2019, we
improved the EthicsPoint process, ethics reporting capability and
the quality of investigations and investigations outcomes. These
changes will make the reporting more holistic and permit detailed
reporting of ethical culture issues to management and the Board.
134 BHP Annual Report 2019
Political donations
We maintain a position of impartiality with respect to party politics
and do not make political contributions or expenditure/donations
for political purposes to any political party, politician, elected
official or candidate for public office. We do, however, contribute
to the public debate of policy issues that may affect BHP in the
countries in which we operate. As explained in the Directors’
Report, the Australian Electoral Commission (AEC) disclosure
requirements are broad and amounts that are not political
donations can be reportable for AEC purposes. For example, where
a political party or organisation owns shares in BHP, the AEC filing
requires the political party or organisation to disclose the dividend
payments received for their shareholding.
2.17 Market disclosure
We are committed to maintaining the highest standards of
disclosure, ensuring that all investors and potential investors
have the same access to high-quality, relevant information in
an accessible and timely manner to assist them in making informed
decisions. The Disclosure Committee manages our compliance with
market disclosure obligations and is responsible for implementing
reporting processes and controls and setting guidelines for the
release of information. As part of our commitment to continuous
improvement, we continue to ensure alignment with best practice
as it develops in the jurisdictions in which BHP is listed.
Disclosure officers have been appointed in BHP’s Asset groups,
Marketing, Procurement, Maritime and Logistics, and functions.
These officers are responsible for identifying and providing the
Disclosure Committee with referral information about the activities
of the asset or functional areas using disclosure guidelines
developed by the Committee. The Committee then makes the
decision whether a particular piece of information is material and
therefore needs to be disclosed to the market.
To safeguard the effective dissemination of information, we have
developed the Our Requirements for market disclosure standard,
which outlines how we identify and distribute information to
shareholders and market participants.
A copy of the market disclosure and communications
document is available online at bhp.com/governance.
Copies of announcements to the stock exchanges on which BHP
is listed, investor briefings, Financial Statements, the Annual Report
and other relevant information can be found online at bhp.com.
Any person wishing to receive advice by email of news releases
can subscribe at bhp.com.
2.18 Remuneration
Details of our remuneration policies and practices, and the
remuneration paid to the Directors (Executive and Non-executive)
and other members of the KMP, are set out in the Remuneration
Report in section 3.
2.19 Directors’ share ownership
Non-executive Directors have agreed to apply at least 25 per cent of
their remuneration (base fees plus committee fees) to the purchase
of BHP shares until they achieve a shareholding equivalent in value
to one year’s remuneration (base fees plus committee fees).
Thereafter, they must maintain at least that level of shareholding
throughout their tenure. All dealings by Directors are subject to the
Our Requirements for Securities Dealing standard and are reported
to the Board and to the stock exchanges.
Information on our policy governing the use of hedging
arrangements over shares in BHP by Directors and other
members of the KMP is set out in section 3.3.21.
Details of the shares held by Directors
are set out in section 3.3.20.
2.20 Conformance with corporate
governance standards
Our compliance with the governance standards in our home
jurisdictions of Australia and the United Kingdom, and with
the governance requirements that apply to us as a result of our
New York Stock Exchange (NYSE) listing and our registration with
the SEC in the United States, is summarised in this Corporate
Governance Statement, the Remuneration Report, the Directors’
Report and the Financial Statements.
The Listing Rules and the Disclosure and Transparency Rules of
the UK Financial Conduct Authority require companies listed in
the United Kingdom to report how they have applied the Main
Principles and the extent to which they have complied with
the provisions of the UK Corporate Governance Code (UK Code),
and explain the reasons for any non-compliance. The UK Code
is available online at frc.org.uk/Our-Work/Corporate-Governance-
Reporting/Corporate-governance.aspx.
The Listing Rules of the ASX require ASX-listed companies to
report on the extent to which they meet the ASX Principles and
Recommendations and explain the reasons for any non-compliance.
The ASX Principles and Recommendations are available online at
asx.com.au/regulation/corporate-governance-council.htm.
Both the UK Code and the ASX Principles and Recommendations
require the Board to consider the application of the relevant
corporate governance principles, while recognising that departures
from those principles are appropriate in some circumstances.
We have applied the Main Principles and complied with the
provisions set out in the 2016 edition of the UK Code and with the
ASX Principles and Recommendations during the financial period,
with no exceptions.
Appendix 4G, summarising our compliance with the ASX Principles
and Recommendations is available online at bhp.com/governance.
BHP Group Limited and BHP Group Plc are registrants with the
SEC in the United States. Each company is classified as a foreign
private issuer and each has American Depositary Shares listed
on the NYSE.
We have reviewed the governance requirements applicable to
foreign private issuers under SOX, including the rules promulgated
by the SEC and the rules of the NYSE, and are satisfied that we
comply with those requirements.
Section 303A of the NYSE-Listed Company Manual contains a
broad regime of corporate governance requirements for NYSE-
listed companies. Under the NYSE rules, foreign private issuers,
such as BHP, are permitted to follow home country practice in lieu
of the requirements of Section 303A, except for the rule relating
to compliance with Rule 10A-3 of the Exchange Act (audit
committee independence) and certain notification provisions
contained in Section 303A of the Listed Company Manual. Section
303A.11 of the Listed Company Manual, however, requires us to
disclose any significant ways in which our corporate governance
practices differ from those followed by US companies under the
NYSE corporate governance standards. After a comparison of our
corporate governance practices with the requirements of Section
303A of the Listed Company Manual followed by US companies,
the following significant difference was identified:
• Rule 10A-3 of the Exchange Act requires NYSE-listed companies
to ensure their audit committees are directly responsible for
the appointment, compensation, retention and oversight of the
work of the External Auditor unless the company’s governing
law or documents or other home country legal requirements
require or permit shareholders to ultimately vote on or approve
these matters. While the RAC is directly responsible for
remuneration and oversight of the External Auditor, the ultimate
responsibility for appointment and retention of the External
Auditor rests with our shareholders, in accordance with UK law
and our constitutional documents. The RAC does, however,
make recommendations to the Board on these matters, which
are in turn reported to shareholders.
While the Board is satisfied with its level of compliance with the
governance requirements in Australia, the United Kingdom and
the United States, it recognises that practices and procedures can
always be improved and there is merit in continuously reviewing
its own standards against those in a variety of jurisdictions. The
Board’s program of review will continue throughout the year ahead.
2.21 Additional UK disclosure
The information specified in the UK Financial Conduct Authority
Disclosure Guidance and Transparency Rules, DTR 7.2.6, is located
elsewhere in this Annual Report. The Directors’ Report in section 4
provides cross-references to where the information is located.
This Corporate Governance Statement was current and approved
by the Board on 5 September 2019, and signed on its behalf by:
Ken MacKenzie
Chairman
5 September 2019
BHP Annual Report 2019 135
i
S
t
r
a
t
e
g
c
R
e
p
o
r
t
2
G
o
v
e
r
n
a
n
c
e
a
t
B
H
P
R
e
m
u
n
e
r
a
t
i
o
n
R
e
p
o
r
t
D
i
r
e
c
t
o
r
s
’
R
e
p
o
r
t
i
F
n
a
n
c
a
i
l
S
t
a
t
e
m
e
n
t
s
A
d
d
i
t
i
o
n
a
l
i
n
f
o
r
m
a
t
i
o
n
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
136 BHP Annual Report 2019
In this section
3.1 Annual statement by the Remuneration
Committee Chairman
3.2 Remuneration policy report
Remuneration policy for the Executive Director
Remuneration policy for Non-executive Directors
3.3 Annual report on remuneration
Remuneration for the Executive Director (the CEO)
Remuneration for other Executive KMP
(excluding the CEO)
Remuneration for Non-executive Directors
Remuneration governance
Other statutory disclosures
Abbreviation
Item
AASB
AGM
CDP
CEO
DEP
DLC
ELT
GSTIP
HPIF
HSEC
IFRS
KMP
KPI
LTIP
MAP
MSR
ROC
STIP
TRIF
TSR
UAP
Australian Accounting Standards Board
Annual General Meeting
Cash and Deferred Plan
Chief Executive Officer
Dividend Equivalent Payment
Dual Listed Company
Executive Leadership Team
Group Short-Term Incentive Plan
High Potential Injury Frequency
Health, Safety, Environment and
Community
International Financial Reporting
Standards
Key Management Personnel
Key Performance Indicator
Long-Term Incentive Plan
Management Award Plan
Minimum Shareholding Requirement
Return on Capital
Short-Term Incentive Plan
Total Recordable Injury Frequency
Total Shareholder Return
Underlying Attributable Profit
Section 3
Remuneration
Report
This Remuneration Report describes the remuneration policies,
practices, outcomes and governance for the KMP of BHP.
BHP’s DLC structure means that we are subject to remuneration
disclosure requirements in both the United Kingdom and
Australia. This results in some complexity in our disclosures,
as there are some key differences in the requirements and the
information that must be disclosed. For example, UK requirements
give shareholders the right to a binding vote on the remuneration
policy every three years, and as a result, the remuneration policy
needs to be described in a separate section in the Remuneration
Report. Our remuneration policy is set out in section 3.2. In
Australia, BHP is required to make certain disclosures for KMP
as defined by the Australian Corporations Act 2001, Australian
Accounting Standards and IFRS.
The UK requirements focus on the remuneration of executive
and non-executive directors. At BHP, this is our Board, including
the CEO, who is our sole Executive Director. In contrast, the
Australian requirements focus on the remuneration of KMP,
defined as those who have authority and responsibility for
planning, directing and controlling the activities of the Group
directly or indirectly. KMP includes the Board, as well as certain
members of our senior executive team.
After due consideration, the Committee has determined the
KMP for FY2019 comprised: all Non-executive Directors, the
CEO, the Chief Financial Officer, the President Operations,
Minerals Australia, the President Operations, Minerals Americas,
and the President Operations, Petroleum.
The following individuals have held their positions and were
KMP for the whole of FY2019, unless stated otherwise:
• CEO and Executive Director, Andrew Mackenzie;
• Non-executive Directors - see section 3.3.13 for details of the
Non-executive Directors, including dates of appointment
or cessation (where relevant);
• Other Executive KMP, as set out in the table below.
Name
Title
Peter Beaven
Mike Henry
Daniel Malchuk
Steve Pastor
Geraldine Slattery
Chief Financial Officer
President Operations, Minerals Australia
President Operations, Minerals Americas
President Operations, Petroleum (to 17 March 2019)
President Operations, Petroleum (from 18 March 2019)
BHP Annual Report 2019 137
3.1 Annual statement by the Remuneration Committee Chairman
‘Our FY2019 remuneration outcomes
are aligned with performance, and
the proposed enhancements to our
remuneration policy will further
strengthen this linkage and ensure our
remuneration arrangements continue
to support the delivery of our strategy.’
Carolyn Hewson
Chairman, Remuneration Committee
Dear Shareholders,
I am pleased to introduce BHP’s Remuneration Report for FY2019.
During the past two years, the Remuneration Committee invested
time reviewing the Company’s remuneration policy, to ensure it
supports the attraction and motivation of talented executives and,
at the same time, aligns business performance and remuneration
outcomes. Based on the findings of this review, several
enhancements to the remuneration policy are being proposed.
Why change?
The purpose of BHP’s remuneration arrangements is to drive
the delivery of strategy, attract and motivate talented executives,
and ensure long-term alignment with our shareholders’ interests.
Shareholder support of BHP’s remuneration arrangements has
been strong over many years, and we believe they have served
stakeholders well. However, it is appropriate to regularly review
opportunities to enhance the Group’s remuneration arrangements
to deliver on their intended purpose. The LTIP is well understood,
transparent and aligned to the interests of shareholders, yet
the reviews conducted in recent years have identified the
following tendencies:
• The LTIP rewards volatility in performance rather than
sustained outperformance, which is an aspiration for BHP.
• There are material time lags between key long-dated
decisions and their LTIP outcomes, leading to a discrepancy
between participants who are the decision-makers, and
those who eventually experience the positive or negative
remuneration outcomes.
• The LTIP tends to deliver ‘all or nothing’ outcomes, often
for extended periods.
• When the LTIP next vests at 100 per cent (or similarly
high levels), there is likely to be significant scrutiny by
shareholders and other stakeholders, due to the overall
remuneration accruing from the awards granted.
The enhancements to the remuneration policy being proposed
mitigate these concerns, without relinquishing the well understood
and supported benefits of the LTIP.
Consultation with shareholders
During FY2019, the Committee engaged with shareholders on the
concerns above and discussed various possible improvements;
then with the benefit of valuable shareholder input from those
discussions, several proposed changes were tested with
shareholders in a second round of discussions. While a majority
of those consulted were comfortable with the rationale for, and
the specifics of, the proposed changes, constructive feedback
was also received in relation to certain aspects. Three modifications
were made to the proposal based on this shareholder feedback
(see ‘Before and after comparison’ on page 139).
138 BHP Annual Report 2019
What is proposed?
The following changes to the remuneration policy are proposed
for the CEO:
• A change in the balance of incentive arrangements comprising:
– A reduced LTIP grant size from 400 per cent to 200 per cent
of base salary (on a face value basis);
– A CDP that has a longer-term focus than the current STIP.
The CDP will include a cash award, plus two-year and five-year
deferred share awards each of equivalent value to the actual
cash award, which will align participants’ incentive remuneration
with performance over the short, medium and long term;
In aggregate, these two changes in combination do not
materially alter the target value or vesting profile of incentive
remuneration, but result in a 12 per cent reduction in the
maximum value of total annual remuneration.
• A reduction in the pension contribution rate from 25 per cent
of base salary down to 10 per cent of base salary (the estimated
workforce average is approximately 11.5 per cent of base salary),
and because of this change, overall target remuneration
is reduced by 4 per cent.
• The introduction of a two-year post-retirement shareholding
requirement for the CEO.
What is the impact?
The proposed changes mitigate the leverage of the overall
remuneration package and the likelihood of unpalatable quantum
outcomes is reduced significantly. The chart below shows the ‘all or
nothing’ LTIP vesting outcome pattern since 2009, projected to 2022.
LTIP vesting
%
100
80
60
40
20
0
35
100 100 100 100 65
58
70 100 100
2009
2010
2011
2012
2013
2014
2015
2016
Vesting year
2017
2018
2019
2020
2021
2022
Actual vesting %
Discretion used %
Projected vesting %
While no LTIP awards have vested since 2014, performance-to-date
to 30 June 2019 for the next three LTIP awards indicates projected
vesting of 70 per cent in FY2020, 100 per cent in FY2021 and
100 per cent in FY2022. Such vesting would continue the ‘all or
nothing’ pattern, potentially giving rise to significant scrutiny of overall
remuneration outcomes by shareholders and other stakeholders.
A comparison of actual total remuneration outcomes from
FY2009–FY2019 against notional outcomes over the same period
under the proposed changes, indicates the prior CEO’s total
remuneration would have been lower by US$19 million (25 per
cent lower) under the proposed remuneration policy. Conversely,
the current CEO’s total remuneration would have been marginally
higher by US$1 million (2 per cent higher). The Remuneration
Committee consider that these remuneration outcomes would
have been more appropriate, given the performance of the
Group and the experience of shareholders over the period.
Comparison of actual and notional outcomes
under the proposed changes
US$million
Prior CEO
Current CEO
18
16
14
12
10
8
6
4
2
0
FY2009
FY2010
FY2011
FY2012
FY2013
FY2014
FY2015
FY2016
FY2017
FY2018
FY2019
Prior CEO – Actual
Prior CEO – Notional
Current CEO – Actual
Current CEO – Notional
In addition, the de-weighting of the LTIP in the overall
remuneration package mitigates the other concerns referred
to above. The changes to pension arrangements and the
introduction of post-retirement shareholding requirements
conform to best practice governance.
Before and after comparison
The following table details the elements of the CEO’s remuneration
package that are changing and those that are not.
As noted above, three changes to the proposed remuneration
policy were made based on shareholder feedback during
the consultation meetings. These are referred to in the table;
however, for ease of reference, they are:
• Increasing the weighting on financial measures from 45 per cent
to 50 per cent in the CDP scorecard (with a commensurate
reduction from 30 per cent to 25 per cent for individual measures).
• Replacing the CDP absolute underlying attributable profit
financial measure with a return on capital measure.
• Applying a policy of pro-rata reduction to the CDP five-year
deferred shares for leavers entitled to retain awards, instead
of vesting in full (note that vesting is not accelerated; it will
occur on their scheduled vesting date).
Element
Before
After
Fixed pay
Base salary
Fixed amount per annum
Fixed amount per annum
Change
No change
Pension
contribution
25% of base salary
10% of base salary (reduced to 20%
from 1 July 2020, 15% from 1 July 2021,
and 10% from 1 July 2022 onwards,
but immediate for new hires)
Reduced to below workforce average
of approximately 11.5% of base salary
Benefits
Specified benefits up to a maximum
of 10% of base salary
Specified benefits up to a maximum
of 10% of base salary
No change
Variable pay
STIP / CDP
STIP – Cash award with a target of
80% of base salary (maximum 120%)
with an award of two-year deferred
shares equivalent in value to the
actual cash award
HSEC:
• 25% weighting
• Includes circa 4%
on climate change
CDP – Cash award with a target of
80% of base salary (maximum 120%)
with awards of two-year and five-year
deferred shares each equivalent
in value to the actual cash award
HSEC:
• 25% weighting
• From 1 July 2020 to include increased
weighting, specificity and
transparency on climate change
Financial:
• 45% weighting
• Absolute underlying attributable
Financial:
• 50% weighting
• Underlying return on capital metric
The CDP has an additional component
of five-year deferred shares of equivalent
value to the actual cash award
KPIs reweighted as shown and return
on capital metric introduced based
on feedback during consultations
with shareholders
Vesting of the five-year deferred shares
is underpinned by a five-year holistic
review of performance
Pro-rating for five-year deferred shares
for good leavers introduced subsequent
to consultations with shareholders
profit metric
Individual:
• 30% weighting
Individual:
• 25% weighting
Vesting underpin:
• A five-year holistic review
of performance
Good leavers:
• Two-year deferred shares vest in full
on their scheduled vesting dates
Good leavers:
• Two-year deferred shares vest in full
on their scheduled vesting dates
• Five-year deferred shares vest pro-rata
for time served, vesting on their
scheduled vesting date
LTIP
400% of base salary on a face value
basis (164% fair value)
Good leavers:
• LTIP awards reduced pro-rata based
for time served, vesting on their
scheduled vesting date and subject
to original performance conditions
200% of base salary on a face value
basis (82% fair value)
Good leavers:
• LTIP awards reduced pro-rata based
for time served, vesting on their
scheduled vesting date and subject to
original performance conditions
Grant size reduced by half
No other changes
At target
US$7.7 million
US$7.4 million
Reduced by 4%
At maximum
(fixed share
price)
US$13.1 million
US$11.5 million
Reduced by 12%
Remuneration
package
Shareholding requirements
500% of salary (based on owned
shares only)
500% of salary (based on owned shares
only) with a requirement to hold these
shares for a minimum of two years
post-retirement
Introduction of a two-year
post-retirement shareholding
requirement
BHP Annual Report 2019 139
i
S
t
r
a
t
e
g
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
a
t
B
H
P
3
R
e
m
u
n
e
r
a
t
i
o
n
R
e
p
o
r
t
D
i
r
e
c
t
o
r
s
’
R
e
p
o
r
t
i
F
n
a
n
c
a
i
l
S
t
a
t
e
m
e
n
t
s
A
d
d
i
t
i
o
n
a
l
i
n
f
o
r
m
a
t
i
o
n
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
Maintaining our long-term focus
One aspect of the proposal that attracted comment from a number
of shareholders was whether a sufficiently long-term perspective
would be retained despite a reduced weighting of five-year relative
TSR in the overall remuneration arrangements. The Board and
Remuneration Committee are committed to ensuring the CDP
scorecard is a genuine combination of short-term business
imperatives and progress towards long-term sustainable business
outcomes that are subject to rigorous and transparent performance
assessment. This will also be reflected in our disclosures in the
annual remuneration report.
The scorecard set out below is a combination of short, medium and
long-term elements that the Board and Remuneration Committee
view as priorities for FY2020.
Categories
Item
HSEC (25%)
Financial (50%)
Individual (25%)
• Fatalities and other HSEC incidents
• HPIF, TRIF and Occupational illnesses
• HSEC risk management (including climate change)
• HSEC initiatives linked to five-year Public Targets
(including climate change)
• Return on Capital (adjusted for commodity prices,
exchange movements and exceptional items that
are not within management control during the
performance year)
• Portfolio/strategy (i.e. aligned to long-term plans)
• Tailings dams
• Future options and exploration (i.e. aligned
to long-term plans)
• Culture and capability (including quantitative employee
survey and diversity targets)
• Social value (including management of risk, community
relationships and environmental performance linked to
our long-term success)
Performance is measured on an annual basis against the scorecard,
and CDP awards are made in the form of cash, two-year deferred
shares and five-year deferred shares. While there are certain
appropriate short-term components of the scorecard (e.g. financial
performance), a number of the HSEC and Individual measures are
long term elements which contribute to value creation in the longer
term or will take multiple years to realise their full potential.
The Board and Committee take the view that long-term objectives
(including items such as our public HSEC five-year targets, portfolio/
strategy implementation, critical tailings dam work, capital projects,
future options, exploration, culture, capability and social value)
need to be broken down into milestones if they are to be successfully
implemented and long-term value created. Many of these items
in the scorecard are multi-year in nature, and while the Committee
is measuring the milestones on an annual basis, they have been
crafted to contribute to long-term successful implementation.
The CDP scorecard will be reviewed at the commencement of
each performance year to ensure it captures the most important
elements for the coming year. For example, the link between
executive remuneration and climate change will be reviewed
over FY2020, with a view to strengthening that link for the
financial year that commences on 1 July 2020.
The first CDP awards will be made in late CY2020 in respect
of FY2020. Awards to be made in late CY2019 in respect of
FY2019 will be made under the existing STIP arrangements.
Vesting will also be subject to an underpin through
a holistic performance review
To ensure the vesting of five-year deferred shares under the CDP
is underpinned by ongoing performance post-grant, the vesting will
also be subject to an underpin. This will take the form of a holistic
review of performance at the end of the five-year vesting period,
including a five-year view on HSEC performance, profitability,
cash flow, balance sheet health, returns to shareholders, corporate
governance and conduct.
If this holistic review determined that the scheduled vesting outcome
would not be appropriate, the Committee has discretion to reduce
vesting. The exercise of discretion – to adjust variable pay outcomes
downwards – has been a feature of BHP’s approach over many years
where the status quo or a formulaic outcome does not align with
the overall shareholder experience. For example, under the LTIP, this
holistic review resulted in discretion being applied in 2013 when the
LTIP vesting was reduced from 100 per cent to 65 per cent.
140 BHP Annual Report 2019
LTIP
The only change to the LTIP is a reduction in the size of the grant.
The comparator groups, relative TSR condition, five-year
performance term, vesting scale, leaver conditions, availability
of discretion (downwards), malus and clawback are unchanged.
While the LTIP is de-weighted in the overall remuneration package,
it does focus executive effort on sustainable long-term value creation,
and is seen as a successful program by many shareholders where
remuneration outcomes and the shareholder experience are aligned.
In order to ensure there is a fair transitional outcome for participants,
the LTIP grant to be made in late CY2019 will be made on the
current 400 per cent of base salary (face value), with potential
vesting five years later in mid-CY2024. The first five-year deferred
shares that result from performance under the CDP will be granted
in late CY2020 and will first vest five years later in mid-CY2025.
The LTIP grant to be made in late CY2020 will be made on the
reduced 200 per cent of base salary (face value), with potential
vesting five years later also in mid-CY2025.
CEO remuneration outcomes
Since his appointment as CEO in 2013, Andrew Mackenzie has
not received a base salary increase and, after review in 2019,
the Committee has again determined his salary will remain
unchanged at US$1.700 million per annum. In addition, prior to
the changes being proposed this year, the other components
of his total target remuneration (pension contributions, benefits
and short-term and long-term incentive targets) have also
remain unchanged since 2013. Mr Mackenzie is BHP’s only
Executive Director.
From a performance perspective, while shareholders have
benefited during FY2019 from positive share price growth
and significant shareholder returns, the year was a challenging
one operationally for BHP, and the remuneration outcomes
for FY2019 for our senior executives reflect this.
The scorecard against which Mr Mackenzie’s performance
is assessed comprises both short-term business imperatives
and progress towards long-term sustainable business outcomes,
including HSEC, financial and individual performance elements,
which have stretching performance measures subject to
rigorous and transparent performance assessment. For FY2019,
the Remuneration Committee has assessed Mr Mackenzie’s
performance and determined an STIP outcome of 48 per cent
against the target of 100 per cent (which represents an outcome
of 32 per cent against the maximum STIP opportunity available
to him or 77 per cent of base salary).
This outcome took into account HSEC performance, which primarily
reflected the tragic fatality that occurred at the Saraji coal mine
in Queensland, Australia in December 2018. The Committee took
advice from the Sustainability Committee, giving the Group’s safety
performance the greatest weighting in the HSEC category.
Controllable financial performance was below the threshold
financial target set at the commencement of the year, mainly
due to operational issues leading to below target production
performance across the Group.
The Committee considered the CEO’s performance against
individual objectives to be ahead of target, including improved
returns of major capital projects in development, progressing
BHP’s rigorous Capital Allocation Framework, positive outcomes
from exploration, and the successful completion of the Onshore
US divestment, with the proceeds distributed in a value accretive
manner, contributing to the positive shareholder experience
during the year.
In relation to the LTIP awards granted in 2014, BHP’s TSR performance
was positive 6.0 per cent over the five-year period from 1 July 2014
to 30 June 2019. This is below the weighted median TSR of peer
companies of positive 15.3 per cent and below the TSR of the MSCI
World index of positive 41.3 per cent. This level of performance
results in zero vesting for the 2014 LTIP awards, and accordingly
the awards have lapsed.
Overall, Mr Mackenzie’s actual total remuneration for FY2019 was
US$3.531 million, compared with US$4.657 million for FY2018,
with the decrease due to a lower STIP outcome this year compared
with FY2018. The LTIP outcome was zero in both years.
In line with the approach for Mr Mackenzie, after review in 2019, the
base salaries for all other Executive KMP will also remain unchanged.
FY2019 CEO remuneration
FY2019 actual
63%
37%
3,531
Minimum
100%
2,225
Target
29%
35%
36%
7,733
Maximum
17%
31%
52%
13,105
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
10,000
11,000
12,000
13,000
14,000
Fixed remuneration
STI P
LTIP
Total remuneration (US$’000)
FY2020 CEO remuneration
Fixed remuneration
CDP
LTIP
• Base salary US$1.700 million per annum.
• No change to base salary.
• Pension contribution 25% of base salary,
reducing thereafter as follows:
to 20% from 1 July 2020, to 15%
from 1 July 2021, and to 10% from
1 July 2022 onwards.
• Target cash award of 80% of base salary
• The LTIP grant is to be based on a face
(maximum 120%).
value of 200%* of base salary.
• Plus two awards of deferred shares each
of equivalent value to the cash award,
vesting in two and five years, respectively.
• Our LTIP awards have rigorous relative
TSR performance hurdles measured
over five years.
• Three categories:
– HSEC – 25%
– Financial – 50%
– Individual – 25%.
* 400% of base salary for the late 2019 LTIP grant with
the late 2020 LTIP grant to be made under the new
remuneration policy.
To that end, I have been working closely with the BHP Chairman
and Committee members on an effective and seamless transition.
I am confident that my colleagues on the Board will appoint
a Chairman of BHP’s Remuneration Committee who, with the
undoubted continuing support from the BHP Chairman and
Committee members, will be very successful and effective.
Summary
The remuneration outcomes for FY2019 reflect an appropriate
alignment between pay and performance during the year, and we
are confident that shareholders will recognise this as a continuation
of our long-held approach.
In late 2019, our remuneration policy enhancements will be put
before shareholders at the UK and Australian AGMs for approval.
BHP’s Board and Remuneration Committee believe the proposed
changes improve our senior executive remuneration arrangements
and they will continue to promote long-term value creation.
We look forward to your support.
As always, we look forward to ongoing dialogue with our
shareholders, and welcome your feedback and comments
on any aspect of this Report.
Carolyn Hewson
Chairman, Remuneration Committee
5 September 2019
Chairman and Non-executive Director fees
Fee levels for the Chairman and Non-executive Directors are
reviewed annually, including benchmarking against peer
companies. No changes to the Chairman’s fee will be made
for FY2020. This follows a review in 2017, where a decision
was made to reduce the Chairman’s annual fee by approximately
8 per cent from US$0.960 million to US$0.880 million with
effect from 1 July 2017, which followed an earlier reduction,
effective 1 July 2015, of approximately 13 per cent from
US$1.100 million to US$0.960 million.
Base fee levels for Non-executive Directors will also remain
unchanged, after they were also reduced effective 1 July 2015
by approximately 6 per cent, from US$0.170 million to
US$0.160 million per annum. Prior to the above reductions
in fee levels for the Chairman and Non-executive Directors,
their fees had remained unchanged since 2011.
Transition of the Remuneration Committee Chairman role
As you would be aware, this will be my last statement to shareholders
as Chairman of the Remuneration Committee, as I will be retiring
from the Board and the Committee after the Australian AGM later
this year. A key focus during my tenure as Chairman of the
Committee has been to arrive at pay outcomes that are fair to all
stakeholders. That is, fair to executives reflecting the outcomes
they have achieved, fair to shareholders in terms of the outcomes
they have experienced, and fair to other stakeholders in terms
of what is regarded as reasonable compensation for the complex
and global roles our executives perform. Of course, sometimes
this has not been straightforward, and it has involved careful
consideration and balanced decisions on some occasions
to achieve the right outcome.
I was fortunate when I assumed the role to have the wisdom and
experience of my predecessors to lean on and to learn from,
particularly Sir John Buchanan whom I succeeded as Chairman
of the Committee. Sir John left a very strong legacy at BHP on
remuneration matters for my fellow Committee members and me
to build upon. I have taken that responsibility very seriously during
my tenure and I am also committed to seeing this work continue.
BHP Annual Report 2019 141
i
S
t
r
a
t
e
g
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
a
t
B
H
P
3
R
e
m
u
n
e
r
a
t
i
o
n
R
e
p
o
r
t
D
i
r
e
c
t
o
r
s
’
R
e
p
o
r
t
i
F
n
a
n
c
a
i
l
S
t
a
t
e
m
e
n
t
s
A
d
d
i
t
i
o
n
a
l
i
n
f
o
r
m
a
t
i
o
n
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
Common questions and answers on the remuneration policy changes
Why are changes being
made now?
Is this a shift from the
long-term to the short term?
What is the change to
target and maximum
remuneration outcomes?
What reduction in quantum
will apply for the switch
from five-year LTIP
to five-year CDP
deferred shares?
Having invested time reviewing the Group’s remuneration policy, to ensure it supports the attraction
and motivation of talented executives and, at the same time, aligns business performance and
remuneration outcomes, the Remuneration Committee concluded that the time was right to make
changes to mitigate concerns with our current arrangements, particularly regarding the LTIP.
In addition, other changes are proposed to conform with best practice governance, namely
reducing our pension contribution rate to 10 per cent of base salary, which is below the workforce
average, and introducing two-year post-retirement shareholding requirements for the CEO.
No, the current high level of focus on the long-term business performance is maintained. While the
current five-year TSR-based LTIP is de-weighted, the CDP scorecard is a genuine combination of
short-term business imperatives and progress towards long-term sustainable business outcomes
that are subject to rigorous and transparent performance assessment. Disclosures in the annual
remuneration report will reflect that.
In addition, awards under the CDP (being rights to receive ordinary BHP shares at the end of the
relevant deferral periods) will include five-year deferred shares, which provide ongoing share price
exposure over the long-term. At the time of vesting, the five-year deferred shares will be subject
to a holistic review of business performance over the prior five years since grant to ensure vesting
is appropriate.
Total target remuneration will reduce by 4 per cent from the current arrangements, and maximum
total remuneration (at a fixed share price) will reduce by 12 per cent.
The size of the discount in award numbers varies depending on the assumed CDP scorecard
outcome. For example, when comparing the current LTIP awards at face value to the future
CDP awards:
• At a target CDP outcome, the proposal incorporates a 60 per cent discount.
• At a maximum CDP outcome, the proposal incorporates a 40 per cent discount
(albeit, a maximum outcome under the scorecard has never been achieved previously).
In reviewing these discounts, the following has been considered:
• The quantum of the CDP grant is directly related to the scorecard performance condition
outcomes (i.e. it is not a grant of deferred shares without performance conditions).
• Achieving a maximum outcome under the CDP is highly unlikely, whereas LTIP maximum
outcomes have occurred in the past.
• The average short-term incentive outcome over the past 11 years has been 53 per cent of
maximum (or 79 per cent of target) and a maximum outcome has never been achieved, whereas
LTIP maximum outcomes against the performance conditions have been achieved in five of the
past 11 years.
• An underpin review will apply to the vesting of the five-year deferred shares, and BHP has a strong
track record of applying discretion which ensures appropriate remuneration outcomes.
Why weren’t other
measures introduced
for the LTIP?
Our current relative TSR approach in the LTIP is well understood, transparent and simple, and is
demonstrably aligned to the interests of shareholders, particularly through its five-year duration,
longer than most other LTIPs in the market.
Why is this year’s LTIP
grant being made at
400 per cent of base
salary (face value)?
Through this and prior reviews, the Committee has concluded that it is difficult to identify
substantive long-term KPIs as other measures for the LTIP that are an improvement on the current
approach. Such KPIs do not generally have the transparency and rigour preferred by both
shareholders and participants, or their nature can make it difficult to set new targets for each
successive five-year performance period, or are derived from accounting results that can be volatile
over the long-term due to movements in commodity prices and are challenging to measure against
peer companies on a relative basis.
This is to ensure the proposed changes align the equity award grant and vesting timings between
the current and proposed arrangements so as not to inadvertently create a benefit or a penalty
for the CEO because of the changes.
The LTIP grant to be made in late CY2019 will be made on the current 400 per cent of base salary
(face value), with potential vesting five years later in mid-CY2024. The first five-year deferred shares
that result from performance under the CDP will be granted in late CY2020 and will first vest five
years later in mid-CY2025. The LTIP grant to be made in late CY2020 will be made on the reduced
200 per cent of base salary (face value), with potential vesting five years later also in mid-CY2025.
Why will the five-year
deferred shares be
pro-rated under the CDP
for leavers entitled
to retain them?
The five-year LTIP has pro-rating applied for time served for leavers who are entitled to retain their
awards. As the CDP five-year deferred shares are also long-term in nature, the same approach has
been applied.
As with the five-year LTIP, any retained CDP five-year deferred shares will only vest on the originally
scheduled vesting date.
142 BHP Annual Report 2019
Will there be greater scope
for payment for failure?
The Board and Committee consider it is important to ensure that remuneration outcomes align
to business performance over the long term. This is achieved by the use of long-term equity awards,
which are only granted and vested after satisfying stretching performance targets, and which
provide long-term share price exposure.
To ensure the vesting of five-year equity awards is underpinned by ongoing performance, any
vesting, whether deferred shares under the CDP or performance shares under the LTIP, will be
subject to a holistic review of performance as referred to above.
This review of business performance is an important safeguard against inappropriate remuneration
outcomes. This process is also consistent with BHP’s past exercise of appropriate downward
discretion where the status quo or a formulaic outcome does not align with the overall shareholder
experience. Other examples in recent years include reducing the CEO’s remuneration package by
25 per cent in 2013, zero STI outcomes for the CEO (and Chief Executive Petroleum) in 2012 as a
result of shale impairments, the reduction in Chairman fees in 2015 and 2017 and in Non-executive
Director fees in 2015, and the zero STI outcome for the CEO in 2016 as a result of the dam failure
at Samarco, and the ongoing decline in commodity markets and the associated negative impact
on our performance.
Are the HSEC and Individual
measures all qualitative?
No, many of the targets in the HSEC and Individual measure categories have quantitative targets.
For example, in the HSEC measures, many of the targets are directly linked to the quantified
five-year HSEC targets that BHP has published externally in its Sustainability Report. Additionally,
under the Individual measures, many of the targets are expressed as quantified outcomes over
which rigorous assessment can be applied.
Are the arrangements
sufficiently linked and
aligned to business
performance?
Are the targets under the
CDP scorecard sufficiently
stretching and robust?
Will outcomes be easier
to achieve?
Why is the pension
contribution rate changing?
Will it change immediately?
The proposed variable pay arrangements have strong links to performance and the shareholder
experience as outlined below:
• Determining the size of CDP award outcomes – a balanced scorecard with a mix of short, medium
and long-term elements.
• Direct link to the share price – deferred shares under the CDP and performance shares under the
LTIP vesting over the medium and long-term.
• A rigorous LTIP with vesting of awards determined by long-term relative performance – five-year
performance shares with vesting driven by relative TSR.
The proposed variable pay arrangements include long-term, ‘at-risk’, equity-based features, to
ensure the ultimate remuneration and wealth outcomes are aligned with performance. Of annual
total target remuneration, almost 40 per cent is earned over a five-year timeframe, 75 per cent is
performance-based variable pay and ‘at risk’, and almost 60 per cent is delivered in the form of
equity awards with long-term share price exposure.
Once shares are owned, a significant MSR applies, being five times base salary for the CEO, and
a two-year post-retirement shareholding requirement for the CEO from 1 July 2020. Together these
ensure long-term, material share price exposure.
The Board and Committee will ensure the CDP scorecard includes rigorous and stretching
performance targets. Evidence of this is seen in the outcomes against the short-term incentive
scorecard historically which have averaged 53 per cent of maximum (or 79 per cent of target) over
the past 11 years for the CEO, and this rigorous and stretching approach will be unchanged.
When the current CEO assumed the role in 2013, the pension contribution rate was reduced
from the former CEO’s 40 per cent of base salary to the current rate of 25 per cent of base salary.
Our analysis indicates that the market-competitive pension contribution rates for a majority of
employees across the Group’s global locations range from 8–20 per cent of base salary, with
an average of approximately 11.5 per cent of base salary. Accordingly, in order to promote a more
equitable outcome, we have decided to reduce the pension contribution rate for senior executives
to 10 per cent of base salary, lower than the workforce average.
In order to be fair to incumbents, this will be introduced gradually over the next three years.
The rate of 25 per cent of base salary will apply until 30 June 2020, reducing to 20 per cent from
1 July 2020, reducing again to 15 per cent from 1 July 2021, and a rate of 10 per cent applying from
1 July 2022 onwards. For a new appointee, the pension contribution rate of 10 per cent of base
salary will apply immediately.
BHP Annual Report 2019 143
i
i
S
S
t
t
r
r
a
a
t
t
e
e
g
g
c
c
R
R
e
e
p
p
o
o
r
r
t
t
G
G
o
o
v
v
e
e
r
r
n
n
a
a
n
n
c
c
e
e
a
a
t
t
B
B
H
H
P
P
3
R
e
m
u
n
e
r
a
t
i
o
n
R
e
p
o
r
t
D
i
r
e
c
t
o
r
s
’
R
e
p
o
r
t
i
F
n
a
n
c
a
i
l
S
t
a
t
e
m
e
n
t
s
A
d
d
i
t
i
o
n
a
l
i
n
f
o
r
m
a
t
i
o
n
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
3.2 Remuneration policy report
BHP has an overarching remuneration policy that guides the Remuneration Committee’s decisions. Under UK legislation, shareholders
have the opportunity to vote on our remuneration policy every three years, with binding effect in regard to the Directors (including
the CEO). The Committee undertook a review of the policy during the past year and determined that while the current policy remains
appropriate in many respects and aligned to our business priorities, certain proposed enhancements to variable pay and pension
arrangements will support the delivery of our strategic priorities.
A summary of proposed changes to the remuneration policy for the Executive Director is outlined below. No changes are proposed to the
remuneration policy for our Non-executive Directors. This remuneration policy is subject to a binding vote by shareholders at the 2019
AGMs, and if approved, will apply with effect from the November 2019 BHP Group Limited AGM.
Remuneration policy for the Executive Director
This section only refers to the remuneration policy for our CEO, who is our sole Executive Director. If any other executive were
to be appointed an Executive Director, this remuneration policy would apply to that new role.
3.2.1 Components of remuneration
The following table shows the components of total remuneration, the link to strategy, the applicable operation and performance
frameworks, and the maximum opportunity for each component, including a summary of the proposed enhancements to our variable
pay plans and changes to pension arrangements.
In summary, the proposed remuneration policy enhancements are detailed below:
• A CDP which has a longer term focus than the STIP and which comprises a mix of short, medium and long-term award outcomes
to align incentive remuneration with performance:
– Cash award of 80 per cent of base salary at target; 120 per cent of base salary at maximum.
– An amount equivalent to the actual cash award in deferred shares restricted for two years.
– An amount equivalent to the actual cash award in deferred shares restricted for five years.
• Reduction of the maximum face value of the LTIP award by half, from 400 per cent of base salary to 200 per cent of base salary.
All other terms of the current LTIP remain unchanged.
• Reduction in pension contribution rates for the existing CEO to 10 per cent of base salary from 25 per cent of base salary over
the next three years.
Remuneration component
and link to strategy
Base salary
A competitive base salary is paid
in order to attract and retain a
high-quality and experienced
CEO, and to provide appropriate
remuneration for this important
role in the Group.
Operation and performance framework
• Base salary, denominated in US dollars, is broadly aligned with salaries for comparable
roles in global companies of similar global complexity, size, reach and industry,
and reflects the CEO’s responsibilities, location, skills, performance, qualifications
and experience.
• Base salary is reviewed annually with effect from 1 September. Reviews are informed,
but not led, by benchmarking to comparable roles (as above), changes in responsibility
and general economic conditions. Substantial weight is also given to the general base
salary increases for employees.
• Base salary is not subject to separate performance conditions.
Pension contributions
Provides a market-competitive
level of post-employment benefits
provided to attract and retain a
high-quality and experienced CEO.
• Pension contributions are benchmarked to comparable roles in global companies
and have been determined after considering the pension contributions provided
to the wider workforce.
• A choice of funding vehicles is offered, including a defined contribution plan, an
unfunded retirement savings plan, an international retirement plan or a self-managed
superannuation fund. Alternatively, a cash payment may be provided in lieu.
Benefits
Provides personal insurances,
relocation benefits and tax
assistance where BHP’s structure
gives rise to tax obligations across
multiple jurisdictions, and a
market-competitive level of
benefits to attract and retain a
high-quality and experienced CEO.
• Benefits may be provided, as determined by the Committee, and currently include
costs of private family health insurance, death and disability insurance, car parking,
and personal tax return preparation in the required countries where BHP has requested
the CEO relocate internationally, or where BHP’s DLC structure requires personal tax
returns in multiple jurisdictions.
• Costs associated with business-related travel for the CEO’s spouse/partner, including
for Board meetings, may be covered. Where these costs are deemed to be taxable
benefits for the CEO, BHP may reimburse the CEO for these tax costs.
• The CEO is eligible to participate in Shareplus, BHP’s all-employee share
purchase plan.
• A relocation allowance and assistance is provided only where a change of location
is made at BHP’s request. The Group’s mobility policies generally provide for ‘one-off’
payments with no material trailing entitlements.
144 BHP Annual Report 2019
Maximum (1)
8% increase per
annum (annualised),
or inflation if higher
in Australia.
For the existing CEO,
the current pension
contribution rate of
25% of base salary
will reduce as follows:
• 20% of base salary
from 1 July 2020.
• 15% of base salary
from 1 July 2021.
• 10% of base salary
from 1 July 2022
onwards.
For a new
appointment, the
pension contribution
rate will be 10%
of base salary
immediately.
Benefits as
determined by the
Committee but to a
limit not exceeding
10% of base salary
and (if applicable)
a one-off taxable
relocation allowance
up to US$700,000.
Remuneration component
and link to strategy
CDP (2)
The purpose of the CDP is to
encourage and focus the CEO’s
efforts on the delivery of the
Group’s strategic priorities for the
relevant financial year to deliver
short, medium and long-term
success, and to motivate the
CEO to strive to achieve stretch
performance objectives.
The performance measures for
each year are chosen on the basis
that they are expected to have
a significant short, medium and
long-term impact on the success
of the Group.
Delivery of two-thirds of CDP
awards in deferred shares
encourages a longer-term focus
aligned to that of shareholders.
Operation and performance framework
Setting performance measures and targets
• The Committee sets a balanced scorecard of short, medium and long-term elements
including HSEC, financial and individual performance measures, with targets and
relative weightings at the beginning of the financial year in order to appropriately
motivate the CEO to achieve outperformance that contributes to the long-term
sustainability of the Group and shareholder wealth creation.
• Specific financial measures will constitute the largest weighting and are derived from
the annual budget as approved by the Board for the relevant financial year.
• Appropriate HSEC measures that are consistent with the Company’s long-term five-year
public HSEC targets, and their weightings, are determined by the Remuneration
Committee with the assistance of the Sustainability Committee.
• Individual measures are an important element of effective performance management,
and are a combination of quantitative and qualitative targets. They are aligned with
medium and long-term strategy aspirations that are intended to drive long-term value
for shareholders and other stakeholders.
• For HSEC and for individual measures the target is ordinarily expressed in narrative
form and will be disclosed near the beginning of the performance period. However,
the target for each financial measure will be disclosed retrospectively. In the rare
instances where this may not be prudent on grounds of commercial sensitivity, we
will seek to explain why and give an indication of when the target may be disclosed.
• Should any other performance measures be added at the discretion of the Committee,
we will determine the timing of disclosure of the relevant target with due consideration
of commercial sensitivity.
Assessment of performance
• At the conclusion of the financial year, the CEO’s achievement against each measure
is assessed by the Remuneration Committee and the Board, with guidance provided
by other relevant Board Committees in respect of HSEC and other measures, and a
CDP award determined. If performance is below the Threshold level for any measure,
no CDP award will be provided in respect of that portion of the CDP award opportunity.
• The Board believes this method of assessment is transparent, rigorous and balanced,
and provides an appropriate, objective and comprehensive assessment of performance.
• In the event that the Remuneration Committee does not consider the outcome that
would otherwise apply to be a true reflection of the performance of the Group or
should it consider that individual performance or other circumstances makes this an
inappropriate outcome, it retains the discretion to not provide all or a part of any CDP
award. This is an important mitigation against the risk of unintended award outcomes.
Delivery of award
• CDP awards are provided under the CDP as cash and two awards of deferred shares,
each of equivalent value to the cash award, vesting in two and five years respectively.
• The awards of deferred shares comprise rights to receive ordinary BHP shares in the
future at the end of the deferral periods. Before the awards vest (or are exercised),
these rights are not ordinary shares and do not carry entitlements to ordinary dividends
or other shareholder rights; however, a DEP is provided on vested awards. The
Committee also has a discretion to settle CDP awards in cash.
Underpin, malus and clawback
• To ensure any vesting of five-year deferred shares under the CDP is underpinned by
satisfactory performance post-grant, the vesting will be subject to an underpin. This
will encompass a holistic review of performance at the end of the five-year vesting
period, including a five-year view on HSEC performance, profitability, cash flow,
balance sheet health, returns to shareholders, corporate governance and conduct.
• Both cash and deferred share CDP awards are subject to malus and clawback as
described on page 146.
Maximum (1)
Maximum award
A cash award of
120% of base salary
plus two awards of
deferred shares each
of equivalent value
to the cash award,
vesting in two
and five years
respectively.
Target performance
A cash award of
80% of base salary
plus two awards of
deferred shares each
of equivalent value
to the cash award,
vesting in two
and five years
respectively, for
target performance
on all measures.
Threshold
performance
A cash award of
40% of base salary
plus two awards of
deferred shares each
of equivalent value
to the cash award,
vesting in two
and five years
respectively,
for threshold
performance
on all measures.
Minimum award
Zero.
i
S
t
r
a
t
e
g
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
a
t
B
H
P
3
R
e
m
u
n
e
r
a
t
i
o
n
R
e
p
o
r
t
D
i
r
e
c
t
o
r
s
’
R
e
p
o
r
t
i
F
n
a
n
c
a
i
l
S
t
a
t
e
m
e
n
t
s
A
d
d
i
t
i
o
n
a
l
i
n
f
o
r
m
a
t
i
o
n
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
BHP Annual Report 2019 145
Maximum (1)
Maximum award
Face value of 200%
of base salary. (6)
Remuneration component
and link to strategy
LTIP
The purpose of the LTIP is to
focus the CEO’s efforts on the
achievement of sustainable
long-term value creation and
success of the Group (including
appropriate management
of business risks).
It also encourages retention
through long-term share exposure
for the CEO over the five-year
performance period (consistent
with the long-term nature
of resources), and aligns the
long-term interests of the
CEO and shareholders.
The LTIP aligns the CEO’s reward
with sustained shareholder wealth
creation in excess of that of
relevant comparator group(s),
through the relative TSR
performance condition.
Relative TSR has been chosen
as an appropriate measure as it
allows for an objective external
assessment over a sustained
period on a basis that is familiar
to shareholders.
Operation and performance framework
Relative TSR performance condition
• The LTIP award is conditional on achieving five-year relative TSR (3) performance
conditions as set out below.
• The relevant comparator group(s) and the weighting between relevant comparator
group(s) will be determined by the Committee in relation to each LTIP grant.
Level of performance required for vesting
• Vesting of the award is dependent on BHP’s TSR relative to the TSR of relevant
comparator group(s) over a five-year performance period.
• 25% of the award will vest where BHP’s TSR is equal to the median TSR of the relevant
comparator group(s), as measured over the performance period. Where TSR is below
the median, awards will not vest.
• Vesting occurs on a sliding scale between the median TSR of the relevant comparator
group(s) up to a nominated level of TSR outperformance (4) over the relevant
comparator group(s), as determined by the Committee, above which 100% of the
award will vest.
• Where the TSR performance condition is not met, there is no retesting and awards will
lapse. The Committee also retains discretion to lapse any portion or all of the award
where it considers the vesting outcome is not appropriate given Group
or individual performance. This is an important mitigation against the risk
of unintended outcomes.
Further performance measures
• The Committee may add further performance conditions, in which case the vesting
of a portion of any LTIP award may instead be linked to performance against the new
condition(s). However, the Committee expects that in the event of introducing an
additional performance condition(s), the weighting on relative TSR would remain
the majority weighting.
Delivery of award
• LTIP awards are provided under the LTIP approved by shareholders at the 2013 AGMs.
When considering the value of the award to be provided, the Committee primarily
considers the face value of the award, and also considers its fair value which includes
consideration of the performance conditions. (5)
• LTIP awards consist of rights to receive ordinary BHP shares in the future if the
performance and service conditions are met. Before vesting (or exercise), these rights
are not ordinary shares and do not carry entitlements to ordinary dividends or other
shareholder rights; however, a DEP is provided on vested awards. The Committee has
a discretion to settle LTIP awards in cash.
Underpin, malus and clawback
• If the specified performance conditions are satisfied in part or in full, to ensure any
vesting of LTIP awards is underpinned by satisfactory performance through the
performance period, the vesting will be subject to an underpin. This will encompass
a holistic review of performance at the end of the five-year performance period,
including a five-year view on HSEC performance, profitability, cash flow, balance
sheet health, returns to shareholders, corporate governance and conduct.
• LTIP awards are subject to malus and clawback as described below.
(1) UK regulations require the disclosure of the maximum that may be paid in respect of each remuneration component. Where that is expressed as a maximum annual
percentage increase which is annualised it should not be interpreted that it is BHP’s current intention to award an increase of that size in total in any one year, or in each
year, and instead it is a maximum required to be disclosed under the regulations.
(2) Subject to shareholder approval, the CDP will operate for FY2020. The terms of CDP awards are similar to those provided under the former STIP. STIP awards approved
by shareholders at the 2019 AGMs and provided to the CEO for performance in FY2019 will be in accordance with the remuneration policy approved by shareholders
in 2017, and are scheduled to vest in August 2021.
(3) BHP’s TSR is a weighted average of the TSRs of BHP Group Limited and BHP Group Plc.
(4) Maximum vesting is determined with reference to a position against each comparator group.
(5) Fair value is calculated by the Committee’s independent adviser and is different to fair value used for IFRS disclosures (which do not take into account forfeiture
conditions on the awards). It reflects outcomes weighted by probability, taking into account the difficulty of achieving the performance conditions and the correlation
between these and share price appreciation, together with other factors, including volatility and forfeiture risks. The current fair value is 41 per cent of the face value
of an award, which may change should the Committee vary elements (such as adding a performance measure or altering the level of relative TSR outperformance).
(6) In order to ensure there is a fair transitional outcome for participants, the LTIP grant to be made in late CY2019 will be made on the current 400 per cent face value
basis, in accordance with the remuneration policy approved by shareholders in 2017, with potential vesting five years later in mid CY2024. The first five-year deferred
shares that result from performance under the CDP for FY2020 will be granted in late CY2020 and will first vest five years later in mid-CY2025. The LTIP grant to be
made in late CY2020 will be made on the reduced 200 per cent face value basis, with potential vesting five years later also in mid-CY2025.
The Remuneration Committee’s discretion in respect of each remuneration component applies up to the maximum shown in the table
above. Any remuneration elements awarded or granted under the previous remuneration policy approved by shareholders in 2014 and
2017, but which have not yet vested or been awarded or paid, shall continue to be capable of vesting, awarded or payment made on their
existing terms.
3.2.2 Malus and clawback
The CDP, LTIP and STIP rule provisions allow the Committee to reduce or clawback awards in the following circumstances:
• the participant acting fraudulently or dishonestly or being in material breach of their obligations to the Group;
• where BHP becomes aware of a material misstatement or omission in the Financial Statements of a Group company or the Group; or
• any circumstances occur that the Committee determines in good faith to have resulted in an unfair benefit to the participant.
These malus and clawback provisions apply whether or not awards are made in the form of cash or equity, whether or not the equity has
vested, and whether or not employment is ongoing.
146 BHP Annual Report 2019
3.2.3 Potential remuneration outcomes
The Remuneration Committee recognises that market forces necessarily influence remuneration practices and it strongly believes the
fundamental driver of remuneration outcomes should be business performance. It also believes that overall remuneration should be both
fair to the individual, such that remuneration levels accurately reflect the CEO’s responsibilities and contributions, and align with the
expectations of our shareholders, while considering the positioning and relativities of pay and employment conditions across the wider
BHP workforce.
The amount of remuneration actually received each year depends on the achievement of superior business and individual performance
generating sustained shareholder value. Before deciding on the final incentive outcomes for the CEO, the Committee first considers the
achievement against the pre-determined performance conditions. The Committee then applies its overarching discretion on the basis
of what it considers to be a fair and commensurate remuneration level to decide if the outcome should be reduced. When the CEO
was appointed in May 2013, the Board advised him that the Committee would exercise its discretion on the basis of what it considered
to be a fair and commensurate remuneration level to decide if the outcome should be reduced.
In this way, the Committee believes it can set a remuneration level for the CEO that is sufficient to incentivise him and that is also fair
to him and commensurate with shareholder expectations and prevailing market conditions.
The diagram below provides the scenario for the potential total remuneration of the CEO at different levels of performance under
the new remuneration policy.
Remuneration mix for the CEO
Minimum
100%
1,970
Target
Maximum
27%
17%
18%
36%
19%
7,444
18%
36%
29%
11,490
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
10,000
11,000
12,000
Fixed remuneration
CDP (cash)
CDP (deferred shares)
LTIP
Total remuneration (US$’000)
Minimum: consists of fixed remuneration, which comprises base salary (US$1.700 million), pension contributions (currently 25 per cent
of base salary, but reducing as follows for the current CEO: 20 per cent of base salary from 1 July 2020, 15 per cent of base salary from
1 July 2021 and 10 per cent of base salary from 1 July 2022 onwards; 10 per cent of base salary would be applied immediately for a new
appointee) and other benefits (US$0.1 million).
Target: consists of fixed remuneration, target CDP (a cash award of 80 per cent of base salary plus two awards of deferred shares each
of equivalent value to the cash award, vesting in two and five years respectively) and target LTIP. The LTIP target value is based on the fair
value of the award, which is 41 per cent of the face value of 200 per cent of base salary. The potential impact of future share price
movements is not included in the value of deferred CDP awards or LTIP awards.
Maximum: consists of fixed remuneration, maximum CDP (a cash award of 120 per cent of base salary plus two awards of deferred shares
each of equivalent value to the cash award, vesting in two and five years respectively), and maximum LTIP (face value of 200 per cent
of base salary). The potential impact of future share price movements is not included in the value of deferred CDP awards or LTIP awards.
All other things being equal, if the share price at vesting of LTIP awards was 50 per cent higher than the share price at grant, then the total
maximum value would be US$13.190 million.
The maximum opportunity represented above is the most that could potentially be paid of each remuneration component, as required
by UK regulations. It does not reflect any intention by the Group to award that amount. The Remuneration Committee reviews relevant
benchmarking data and industry practices, and believes the maximum remuneration opportunity is appropriate.
3.2.4 Approach to recruitment and promotion remuneration
The remuneration policy as set out in section 3.2 of this Report will apply to the remuneration arrangements for a newly recruited or
promoted CEO, or for another Executive Director should one be appointed. A market-competitive level of base salary will be provided.
The pension contributions, benefits and variable pay will be in accordance with the remuneration policy table in section 3.2.1
of this Report.
For external appointments, the Remuneration Committee may determine that it is appropriate to provide additional cash and/or equity
components to replace any remuneration forfeited or not received from a former employer. It is anticipated that any foregone equity
awards would be replaced by equity. The value of the replacement remuneration would not be any greater than the fair value of the
awards foregone or not received (as determined by the Committee’s independent adviser). The Committee would determine appropriate
service conditions and performance conditions within BHP’s framework, taking into account the conditions attached to the foregone
awards. The Committee is mindful of limiting such payments and not providing any more compensation than is necessary. For any internal
CEO (or another Executive Director) appointment, any entitlements provided under former arrangements will be honoured according
to their existing terms.
BHP Annual Report 2019 147
i
S
t
r
a
t
e
g
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
a
t
B
H
P
3
R
e
m
u
n
e
r
a
t
i
o
n
R
e
p
o
r
t
D
i
r
e
c
t
o
r
s
’
R
e
p
o
r
t
i
F
n
a
n
c
a
i
l
S
t
a
t
e
m
e
n
t
s
A
d
d
i
t
i
o
n
a
l
i
n
f
o
r
m
a
t
i
o
n
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
3.2.5 Service contracts and policy on loss of office
The terms of employment for the CEO are formalised in his employment contract. Key terms of the current contract and relevant payments
on loss of office are shown below. If a new CEO or another Executive Director was appointed, similar contractual terms would apply, other
than where the Remuneration Committee determines that different terms should apply for reasons specific to the individual or circumstances.
The CEO’s current contract has no fixed term. It can be terminated by BHP on 12 months’ notice. BHP can terminate the contract immediately
by paying base salary plus pension contributions for the notice period. The CEO must give six months’ notice for voluntary resignation.
The table below sets out the basis on which payments on loss of office may be made.
Voluntary resignation
Termination for cause
Leaving reason (1) (2)
Death, serious injury, illness,
disability or total and
permanent disablement
Cessation of employment
as agreed with the Board (3)
Base salary
• Paid as a lump sum for the
• No payment will be made.
• Paid for a period of up to
• Paid as a lump sum for the
notice period or progressively
over the notice period.
six months, after which time
employment may cease.
notice period or progressively
over the notice period.
• Paid as a lump sum for the
• No contributions will
• Paid for a period of up to
• Paid as a lump sum for the
notice period or progressively
over the notice period.
be provided.
six months, after which time
employment may cease.
notice period or progressively
over the notice period.
Pension
contributions
Benefits
• May continue to be provided
during the notice period.
• Accumulated annual leave
entitlements and any
statutory payments will
be paid.
• May pay repatriation
expenses to the home
location where a relocation
was at the request of BHP.
• Any unvested Shareplus
Matched Shares held
will lapse.
• No benefits will be provided.
• Accumulated annual leave
entitlements and any
statutory payments will
be paid.
• May pay repatriation
expenses to the home
location where a relocation
was at the request of BHP.
• Any unvested Shareplus
Matched Shares held
will lapse.
CDP/STIP – cash
and deferred
shares
Where CEO leaves
either during or
after the end of
the financial year,
but before an
award is provided.
• No cash award will be paid.
• Unvested CDP/STIP
deferred shares will lapse.
• No cash award will be paid.
• Unvested CDP/STIP
deferred shares will lapse.
• Vested but unexercised
• Vested but unexercised
CDP/STIP deferred shares
will remain exercisable for
the remaining exercise
period unless the Committee
determines they will lapse.
• Vested but unexercised
CDP/STIP awards remain
subject to malus and
clawback.
CDP/STIP deferred shares
will remain exercisable
for the remaining exercise
period unless the
Committee determines
they will lapse.
• Vested but unexercised
CDP/STIP awards remain
subject to malus
and clawback.
LTIP –
unvested and
vested but
unexercised
awards
• Unvested awards will lapse.
• Vested but unexercised
• Unvested awards will lapse.
• Vested but unexercised
awards will remain
exercisable for the remaining
exercise period, or for
a reduced period, or
may lapse, as determined
by the Committee.
awards will remain
exercisable for the
remaining exercise period,
or for a reduced period,
or may lapse, as determined
by the Committee.
• Vested but unexercised
awards remain subject
to malus and clawback.
• Vested but unexercised
awards remain subject
to malus and clawback.
• May continue to be provided
• May continue to be
for a period of up to six
months, after which time
employment may cease.
• Accumulated annual leave
entitlements and any
statutory payments will
be paid.
• May pay repatriation
expenses to the home
location where a relocation
was at the request of BHP.
• Any unvested Shareplus
Matched Shares held will
vest in full.
provided for year in which
employment ceases.
• Accumulated annual leave
entitlements and any statutory
payments will be paid.
• May pay repatriation expenses
to the home location where
a relocation was at the request
of BHP.
• Any unvested Shareplus
Matched Shares held will
vest in full.
• The Committee has discretion
• The Committee has discretion
to pay and/or award an
amount in respect of the
CEO’s performance for
that year.
• Unvested CDP/STIP deferred
shares will vest in full and,
where applicable become
exercisable.
• Vested but unexercised
CDP/STIP deferred shares will
remain exercisable for the
remaining exercise period.
• Unvested and vested but
unexercised CDP/STIP awards
remain subject to malus
and clawback.
to pay and/or award an amount
in respect of the CEO’s
performance for that year.
• Unvested two-year CDP/STIP
deferred shares and a pro-rata
portion (based on the
proportion of the vesting
period served) of unvested
five-year CDP deferred shares
continue to be held on the
existing terms for the deferral
period before vesting (subject
to Committee discretion to
lapse some or all of the award).
• Vested but unexercised
CDP/STIP deferred shares
remain exercisable for the
remaining exercise period,
or a reduced period, or may
lapse, as determined by
the Committee.
• Unvested and vested but
unexercised CDP/STIP
awards remain subject
to malus and clawback.
• Unvested awards will
• A pro-rata portion of unvested
vest in full.
• Vested but unexercised
awards will remain
exercisable for remaining
exercise period.
• Unvested and vested
but unexercised awards
remain subject to malus
and clawback.
awards (based on the proportion
of the performance period
served) will continue to be
held subject to the LTIP rules
and terms of grant. The balance
will lapse.
• Vested but unexercised awards
will remain exercisable for
the remaining exercise period,
or for a reduced period,
or may lapse, as determined
by the Committee.
• Unvested and vested but
unexercised awards remain
subject to malus and clawback.
(1) If the Committee deems it necessary, BHP may enter into agreements with a CEO, which may include the settlement of liabilities in return for payment(s),
including reimbursement of legal fees subject to appropriate conditions; or to enter into new arrangements with the departing CEO (for example, entering
into consultancy arrangements).
(2) In the event of a change in control event (for example, takeover, compromise or arrangement, winding up of the Group) as defined in the CDP, STIP and LTIP rules:
• base salary, pension contributions and benefits will be paid until the date of the change of control event;
• in relation to the CDP and STIP: the Committee may determine that a cash payment be made in respect of performance during the current financial year and all
unvested two-year deferred shares would vest in full and, in relation to the CDP, all unvested five-year deferred shares would vest pro-rata (based on the proportion
of the vesting period served up to the date of the change of control event);
• the Committee may determine that unvested LTIP awards will either (i) be pro-rated (based on the proportion of the performance period served up to the date
of the change of control event) and vest to the extent the Committee determines appropriate (with reference to performance against the performance condition
up to the date of the change of control event and expectations regarding future performance) or (ii) be lapsed if the Committee determines the holders will
participate in an acceptable alternative employee equity plan as a term of the change of control event.
(3) Defined as occurring when a participant leaves BHP due to forced early retirement, retrenchment or redundancy, termination by mutual agreement or retirement
with the agreement of the Group, or such other circumstances that do not constitute resignation or termination for cause.
148 BHP Annual Report 2019
Remuneration policy for Non-executive Directors
Our Non-executive Directors are paid in line with the UK Corporate Governance Code (2016 edition; the 2018 edition will apply from
FY2020) and the Australian Securities Exchange Corporate Governance Council’s Principles and Recommendations (3rd Edition).
3.2.6 Components of remuneration
The following table shows the components of total remuneration, the link to strategy, the applicable operation and performance
frameworks, and the maximum opportunity for each component.
Remuneration component
and link to strategy
Fees
Competitive base fees are paid
in order to attract and retain
high-quality individuals, and to
provide appropriate remuneration
for the role undertaken.
Committee fees are provided
to recognise the additional
responsibilities, time and
commitment required.
Benefits
Competitive benefits are paid
in order to attract and retain
high-quality individuals and
adequately remunerate them
for the role undertaken, including
the considerable travel burden.
Operation and performance framework
Maximum (1)
• The Chairman is paid a single fee for all responsibilities.
• Non-executive Directors are paid a base fee and relevant committee
membership fees.
• Committee Chairmen and the Senior Independent Director are paid
an additional fee to reflect their extra responsibilities.
• All fee levels are reviewed annually and any changes are effective from 1 July.
• Fees are set at a competitive level based on benchmarks and advice
provided by external advisers. Fee levels reflect the size and complexity
of the Group, the multi-jurisdictional environment arising from the DLC
structure, the multiple stock exchange listings and the geographies in
which the Group operates. The economic environment and the financial
performance of the Group are taken into account. Consideration is also
given to salary reviews across the rest of the Group.
• Where the payment of pension contributions is required by law, these
contributions are deducted from the Director’s overall fee entitlements.
• Travel allowances are paid on a per-trip basis reflecting the considerable
travel burden imposed on members of the Board as a consequence of the
global nature of the organisation and apply when a Director needs to travel
internationally to attend a Board meeting or site visits at our multiple
geographic locations.
• As a consequence of the DLC structure, Non-executive Directors are
required to prepare personal tax returns in both Australia and the UK,
regardless of whether they reside in one or neither of those countries.
They are accordingly reimbursed for the costs of personal tax return
preparation in whichever of the UK and/or Australia is not their place
of residence (including payment of the tax cost associated with the
provision of the benefit).
8% increase per annum (annualised),
or inflation if higher in the location in
which duties are primarily performed,
on a per fee basis.
8% increase per annum (annualised),
or inflation if higher in the location in
which duties are primarily performed,
on a per-trip basis.
Up to a limit not exceeding 20% of fees.
Variable pay (CDP and LTIP)
• Non-executive Directors are not eligible to participate in any CDP
or LTIP award arrangements.
Payments on early termination
• There are no provisions in any of the Non-executive Directors’ appointment
arrangements for compensation payable on early termination of their directorship.
(1) UK regulations require the disclosure of the maximum that may be paid in respect of each remuneration component. Where that is expressed as a maximum annual
percentage increase which is annualised it should not be interpreted that it is BHP’s current intention to award an increase of that size in total in any one year, or in
each year, and instead it is a maximum required to be disclosed under the regulations.
Approach to recruitment remuneration
The ongoing remuneration arrangements for a newly recruited Non-executive Director will reflect the remuneration policy in place
for other Non-executive Directors, comprising fees and benefits as set out in the table above. No variable remuneration (CDP and LTIP
award arrangements) will be provided to newly recruited Non-executive Directors.
Letters of appointment and policy on loss of office
The standard letter of appointment for Non-executive Directors is available on our website. The Board has adopted a policy consistent
with the UK Corporate Governance Code, under which all Non-executive Directors must seek re-election by shareholders annually if they
wish to remain on the Board. As such, no Non-executive Directors seeking re-election have an unexpired term in their letter of appointment.
A Non-executive Director may resign on reasonable notice. No payments are made to Non-executive Directors on loss of office.
3.2.7 How remuneration policy is set
The Remuneration Committee sets the remuneration policy for the
CEO and other Executive KMP. The Committee is briefed on and
considers prevailing market conditions, the competitive environment
and the positioning and relativities of pay and employment
conditions across the wider BHP workforce. The Committee takes
into account the annual base salary increases for our employee
population when determining any change in the CEO’s base salary.
Salary increases in Australia, where the CEO is located, are
particularly relevant, as they reflect the local economic conditions.
The principles that underpin the remuneration policy for the CEO
are the same as those that apply to other employees, although
the CEO’s arrangements have a greater emphasis on, and a higher
proportion of, remuneration in the form of performance-related
variable pay. Similarly, the performance measures used to
determine variable pay outcomes for the CEO and all other
employees are linked to the delivery of our strategy and behaviours
that are aligned to the values in Our Charter.
Although BHP does not consult directly with employees on CEO
and other Executive KMP remuneration, the Group conducts
regular employee engagement surveys that give employees an
opportunity to provide feedback on a wide range of employee
matters. Further, many employees are ordinary shareholders
through our all-employee share purchase plan, Shareplus, and
therefore have the opportunity to vote on AGM resolutions. In
addition, in line with changes to the UK Corporate Governance
Code, the Remuneration Committee is considering additional
means of engaging with the workforce to explain how executive
remuneration aligns with wider Group pay policy.
As part of the Board’s commitment to good governance, the
Committee also considers shareholder views, together with those
of the wider community, when setting the remuneration policy for
the CEO and other Executive KMP. We are committed to engaging
and communicating with shareholders regularly and, as our
shareholders are spread across the globe, we are proactive with
our engagement on remuneration and governance matters with
institutional shareholders and investor representative organisations.
Feedback from shareholders and investors is shared with, and used
as input into decision-making by, the Board and Remuneration
Committee in respect of our remuneration policy and its
application. The Committee considers that this approach provides
a robust mechanism to ensure Directors are aware of matters
raised, have a good understanding of current shareholder views,
and can formulate policy and make decisions as appropriate. We
encourage shareholders to always make their views known to us
by directly contacting our Investor Relations team (contact details
available on our website at bhp.com).
BHP Annual Report 2019 149
i
S
t
r
a
t
e
g
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
a
t
B
H
P
3
R
e
m
u
n
e
r
a
t
i
o
n
R
e
p
o
r
t
D
i
r
e
c
t
o
r
s
’
R
e
p
o
r
t
i
F
n
a
n
c
a
i
l
S
t
a
t
e
m
e
n
t
s
A
d
d
i
t
i
o
n
a
l
i
n
f
o
r
m
a
t
i
o
n
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
3.3 Annual report on remuneration
This section of the Report shows the impact of the remuneration policy in FY2019 and how remuneration outcomes are linked
to actual performance.
Remuneration for the Executive Director (the CEO)
3.3.1 Single total figure of remuneration
This section shows a single total figure of remuneration as prescribed under UK requirements. It is a measure of actual remuneration,
rather than a figure calculated in accordance with IFRS (which is detailed in note 23 ‘Employee share ownership plan’ section 5).
The components of remuneration are detailed in the remuneration policy table in section 3.2.1.
US$(’000)
Andrew Mackenzie
FY2019
FY2018
Base salary
Benefits (1)
1,700
1,700
100
84
STIP (2)
1,306
2,448
LTIP
Pension
0
0
425
425
Total
3,531
4,657
(1) Includes private family health insurance, spouse business-related travel, car parking and personal tax return preparation in required countries.
(2) Provided half in cash and half in deferred equity (on the terms of the STIP) as shown in the table below.
For the CEO, the single total figure of remuneration is calculated on the same basis as at his appointment in 2013. There have been no changes
to his base salary, benefit entitlements or pension since that date. Changes from prior year outcomes of STIP and LTIP are set out below.
FY2019
FY2018
STIP
LTIP
STIP awarded for FY2019 performance. Half was provided in cash
in September 2019, and half deferred in an equity award that is due
to vest in FY2022.
STIP awarded for FY2018 performance. Half was provided in cash
in September 2018, and half deferred in an equity award that is due
to vest in FY2021.
Based on performance during the five-year period to 30 June 2019,
all of Andrew Mackenzie’s 224,859 awards from the 2014 LTIP did not
vest and have lapsed. The value of the awards is zero and no DEP has
been paid in respect of these awards.
Based on performance during the five-year period to 30 June 2018,
all of Andrew Mackenzie’s 213,701 awards from the 2013 LTIP did not
vest and have lapsed. The value of the awards is zero and no DEP has
been paid in respect of these awards.
3.3.2 FY2019 STIP performance outcomes
The Board and Remuneration Committee assessed the CEO’s STIP outcome in light of the Group’s performance in FY2019, taking into
account the CEO’s performance against the KPIs in his STIP scorecard. The Board and Committee determined that the STIP outcome
for the CEO for FY2019 is 48 per cent against the target of 100 per cent (which represents an outcome of 32 per cent against maximum),
and believe this outcome is appropriately aligned with the shareholder experience and the interests of the Group’s other stakeholders.
The CEO’s STIP scorecard outcomes for FY2019 are summarised in the following tables, including a narrative description of each
performance measure and the CEO’s level of achievement, as determined by the Remuneration Committee. The level of performance
for each measure is determined based on a range of threshold (the minimum necessary to qualify for any reward outcome), target
(where the performance requirements are met), and stretch (where the performance requirements are significantly exceeded).
Performance categories
Weighting for
FY2019
Threshold
Target
Stretch
Percentage
outcome
STI
US$(‘000)
HSEC
Financial
Individual
Total
25%
45%
30%
100%
15%
0%
33%
48%
408
–
898
1,306
HSEC
The HSEC targets for the CEO are aligned to the Group’s suite of HSEC five-year public targets as set out in BHP’s Sustainability Report.
As it has done for several years, the Remuneration Committee seeks guidance each year from the Sustainability Committee when
assessing HSEC performance against scorecard targets. The Remuneration Committee has taken a holistic view of Group performance
in critical areas, including any matters outside the scorecard targets which the Sustainability Committee considers relevant.
The performance commentary below is provided against the scorecard targets, which were set on the basis of operated assets only.
HSEC measures Scorecard targets
Performance against scorecard targets
Fatalities,
environmental
and community
incidents
Nil fatalities and nil actual significant
environmental and community incidents
at operated assets.
Tragically we lost our colleague Allan Houston in December 2018
at the Saraji mine at our coal operations in Queensland, Australia.
After undertaking an extensive investigation, consistent with our usual
processes, we were unable to determine the cause of the fatality. This
has not occurred for a fatality investigation for more than 15 years. Our
investigation did identify a small number of possible causes, and those
possible causes included both work and non-work related circumstances,
and both reasonably preventable and non-preventable elements.
The weighting of fatalities is 10 percentage points of the 25 percentage
points allocated to the HSEC category, and represents the greatest
weighting of all HSEC items. Our imperative as a Company is to continue
to build our focus on fatality prevention and safety through leadership,
verification and effective risk management.
No significant environment or community incidents occurred during FY2019.
Measure
outcome
Below
threshold
for fatalities.
Target for
environmental
and community
incidents.
HPIF, TRIF and
Occupational
illnesses
Improved performance compared
with FY2018 results.
Our HPIF is a critical lead indicator which provides us with insight into our
performance on preventing future fatalities, and declined significantly by 18%
during FY2019. While our TRIF performance in FY2019 (including Onshore US)
of 4.7 is higher than the 4.4 recorded in FY2018, this was due to an increase
in low impact injuries. We also experienced an 8% increase in occupational
illnesses during FY2019, again driven by an increase in low impact incidents.
Target.
150 BHP Annual Report 2019
HSEC measures Scorecard targets
Performance against scorecard targets
Risk
management
Health,
environmental
and community
initiatives
For all material risks, operated assets
to have all critical control execution and
critical control verification tasks evaluated
and recorded with controls in place as
part of Field Leadership activities.
Year-on-year improvement in trends for
potential events associated with identified
material risks.
All assets to achieve 100% of planned
targets in respect of occupational
exposure reduction, water and
greenhouse gas, social investment, quality
of life, community perceptions and
community complaints.
All operated assets completed reviews of critical control execution
and verification tasks for all material HSEC risks. The targets for Field
Leadership activities were exceeded, as were targets for critical
control execution and verification close out. Targets for critical
control improvements were met; however, significant event close
out and critical control improvement activities fell short of target.
Measure
outcome
Target.
Targeted asset level improvement actions and projects were delivered
in respect of water stewardship and greenhouse gas reduction; however,
stretch performance, which required a reduction in both greenhouse gas
intensity and total freshwater withdrawals, was not achieved. The assets met
all occupational exposure reduction and community targets.
Target.
The outcome against the HSEC KPI for FY2019 was 15 per cent against the target of 25 per cent.
Financial
UAP is the profit after taxation attributable to members of the Group, excluding exceptional items (see section 1.12.4 for a more detailed
explanation of UAP). UAP is the key financial KPI against which FY2019 STIP outcomes for our senior executives were measured and is,
in our view, a relevant measure to assess the financial performance of the Group for this purpose. At the commencement of the financial
year when the target is approved, attributable profit is usually equal to UAP as there are usually no exceptional items.
During the assessment of management’s performance, adjustments to the UAP result are made to allow for changes in commodity prices,
foreign exchange movements and other material items to ensure the assessment appropriately measures outcomes that are within the
control and influence of the Group and its executives. Of these, changes in commodity prices has historically been the most material due
to volatility in prices and the impact on Group revenue. The Remuneration Committee reviews each exceptional item to assess if it should
be included in the result for the purposes of deriving the UAP STIP outcome.
Financial
measure
UAP
Measure
outcome
Below
Threshold .
Scorecard targets
Performance against scorecard targets
In respect of FY2019, the Board determined
a Target for UAP of US$10.3 billion, with
a Threshold of US$9.6 billion and a Stretch
of US$10.6 billion.
The Target UAP is derived from the Group’s
approved annual budget. It is the Group’s
practice to build a material element of
stretch performance into the budget.
Achievement of this stretching UAP Target
will result in a target STIP outcome. The
Threshold and Stretch are a fair range of
UAP outcomes which represent a lower limit
of underperformance below which no STIP
award should be made, and an upper limit
of outperformance which would represent
the maximum STIP award.
For the reasons set out above, the
performance range around Target is subject
to a greater level of downside risk than there
is upside opportunity, and accordingly, the
range between Threshold and Target is
greater than that between Target and
Stretch. For Stretch, the Committee takes
care not to create leveraged incentives that
encourage executives to push for
short-term performance that goes beyond
our risk appetite and current operational
capacity. Using the mid-point of the
Threshold and Stretch range as Target
would provide a symmetrical distribution;
however, this would not provide sufficient
stretch for management to achieve a target
STIP outcome. The Committee retains, and
has a track record of applying, downward
discretion to ensure that the STIP outcome
is appropriately aligned with the overall
performance of the Group for the year, and
is fair to management and shareholders.
UAP of US$9.1 billion was reported by BHP for FY2019. Adjusted for the
factors outlined below, UAP is US$8.6 billion, which is below Threshold
as determined by the Board. The following adjustments were made
to ensure the outcomes appropriately reflect the performance
of management for the year:
• Adjustments in relation to the impacts of movements in prices of
commodities and exchange rates reduced UAP by US$1.6 billion.
• An adjustment to exclude the impact of Onshore US, which was not
included in the Target as the economic outcomes from 1 July 2018
accrued to the buyer, increased UAP by US$0.6 billion.
• Adjustments for other material items ordinarily made to ensure
the outcomes reflect the performance of management for the year
increased UAP by US$0.5 billion, mainly due to the exclusion of the
impacts of unusually severe cyclone weather events in Australia
and non-cash taxation provision adjustments which are unable to
be determined at the time of budget preparation.
Having reviewed the FY2019 exceptional items (as described in
note 3 ‘Exceptional items’ in section 5), the Committee determined
that they should not be considered for the purposes of determining
the UAP STI outcome. The Committee concluded that no further
action was appropriate.
The key drivers of the UAP performance being below Threshold at
US$8.6 billion were lower volumes at Western Australian Iron Ore
resulting from train derailment impacts, shutdown overruns, and
equipment reliability issues at mines and port; at Olympic Dam caused
by an acid plant outage; at Coal due to prime stripping shortfalls resulting
in low raw coal production; at Escondida due to conveyor belt failures,
lower mill performance, and unscheduled and extended maintenance;
and at Spence due to an electrowinning plant fire; partly offset by higher
Petroleum volumes from improved well performance across most fields.
Notwithstanding this below Threshold outcome for the UAP KPI driven
by operational matters, the financial shareholder experience during
FY2019 was positive, with increases in share prices, dividends and
share buy-backs.
The outcome against the UAP KPI for FY2019 was zero against the target of 45 per cent.
BHP Annual Report 2019 151
i
S
t
r
a
t
e
g
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
a
t
B
H
P
3
R
e
m
u
n
e
r
a
t
i
o
n
R
e
p
o
r
t
D
i
r
e
c
t
o
r
s
’
R
e
p
o
r
t
i
F
n
a
n
c
a
i
l
S
t
a
t
e
m
e
n
t
s
A
d
d
i
t
i
o
n
a
l
i
n
f
o
r
m
a
t
i
o
n
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
Individual performance measures for the CEO
Individual measures for the CEO are determined at the commencement of the financial year. The application of personal measures
remains an important element of effective performance management. These measures seek to provide a balance between the financial
and non-financial performance requirements that maintain our position as a leader in our industry. The CEO’s individual measures for
FY2019 included contribution to BHP’s overall performance and the management team, and also the delivery of projects and initiatives
within the scope of the CEO role as specified by the Board, as set out in the table below.
Individual
measures
Individual scorecard targets
Performance against scorecard targets
Strategy
• Improve the return profile of our major
• The expected returns of almost all major capital projects in development
capital projects in development.
• Make commercial progress from
exploration.
have been improved, within the application of the Capital Allocation
Framework and adhering to the risk appetite.
• We continued to progress and work within BHP’s rigorous Capital
• Complete the Onshore US divestment.
Allocation Framework.
Measure
outcome
Between
Target and
Stretch; closer
to Stretch.
• Positive outcomes from oil and gas exploration during the year, together
with options generated through copper exploration and acquisition.
• The Onshore US divestment was completed ahead of schedule and in an
efficient and transparent way, with due regard to the significant people
impacts. The proceeds were distributed in a value accretive manner,
contributing to the positive shareholder experience during the year.
• BHP’s value increased consistent with the plans outlined previously,
driven not only by commodity price appreciation, but also by
management actions on strategic initiatives.
• Due mainly to the operational issues noted above, the expectations on
productivity gains and improvements and the targeted return on capital
were not met.
Between
Threshold
and Target.
• Latent capacity projects on track to meet expected milestones
and benefits.
• BOS continues to be rolled out in line with the expected plan, aimed
at delivering a step change in safety, productivity and culture outcomes,
through standardising work to increase safety and efficiency at
operations across the Company.
• We achieved most efficiency and effectiveness targets through our
World Class Functions program; however, we need further design work
and leadership engagement in FY2020 to fully embed the changes and
realise the full benefits.
• We completed and commenced the implementation of the strategic
Technology five-year plan, which is integrated and embedded within
the assets’ plans.
• Continued strong leadership and representation on key issues such as
indigenous representation, climate change, tailings dams, government
policy development, taxation and inclusion.
• The global brand strategy execution continues to enhance BHP’s
reputation in important markets.
• Close communication, regular updates and proactive relationship
building continues to build strong engagement and relationships with
shareholders and other stakeholders.
• Solid progress on the goal to increase female representation in the
workforce globally – by 30 June 2019 gender diversity had increased
2.1 percentage points to 24.5%, up from 22.4% at 30 June 2018,
for a cumulative increase of 6.9 percentage points from 17.6%
at 30 June 2016.
• Our progress on flexible working arrangements across BHP
Above Target.
Marginally
below Target.
Productivity
• Deliver productivity initiatives.
• Return on capital.
• Progress key projects driving
latent capacity increases.
• Progress the BHP Operating
System (BOS).
• Transformation of global functions.
• Technology five-year plan.
Sustainability
• Enhanced reputation and brand
of BHP.
• Enhanced relationships with
key stakeholders.
People and
culture
• Achievement of inclusion and
diversity aspirations.
• Achievement of culture initiatives, as
measured through the Company-wide
annual Engagement and Perception
Survey (EPS).
• ELT member development and succession.
has continued.
• Our 2019 EPS showed flat or slightly negative results across a range of
categories, reflecting the extent of disruptive transformational change
occurring within the Company.
• The development of a strong long-term talent pool of candidates for
ELT, Asset President and key functional roles has been a strong and
deliberate focus, resulting in a robust slate of potential successors.
It was considered that the performance of the CEO against the individual measures KPI warranted an outcome for FY2019 of 33 per cent
against the target of 30 per cent.
152 BHP Annual Report 2019
3.3.3 LTIP performance outcomes
LTIP vesting based on performance to June 2019
The five-year performance period for the 2014 LTIP ended on
30 June 2019. The CEO’s 2014 LTIP award comprised 224,859
awards (inclusive of an uplift of 15,980 awards due to the
demerger of South32), subject to achievement of the relative
TSR performance conditions and any discretion applied
by the Remuneration Committee.
Testing the performance condition
For the award to vest in full, TSR must exceed the Peer Group TSR
(for 67 per cent of the award) and the Index TSR (for 33 per cent
of the award) by an average of 5.5 per cent per year for five years,
being 30.7 per cent in total compounded over the performance
period from 1 July 2014 to 30 June 2019. TSR includes returns
to BHP shareholders in the form of share price movements along
with dividends paid and reinvested in BHP (including cash and
in-specie dividends).
BHP’s TSR performance was positive 6.0 per cent over the five-year
period from 1 July 2014 to 30 June 2019. This is below the weighted
median Peer Group TSR of positive 15.3 per cent and below the Index
TSR of positive 41.3 per cent over the same period. This level of
performance results in zero vesting for the 2014 LTIP awards, and
accordingly all of the CEO’s awards have lapsed. No compensation
or DEP was paid in relation to the lapsed awards.
The graph below shows BHP’s performance relative to
comparator groups.
BHP vs. Peer Group and Index TSR over the 2014 LTIP cycle
TSR since 1 July 2014 (%)
BHP
Peer Group
Index
(MSCI)
60
40
20
0
-20
-40
-60
2014
2015
2016
2017
2018
2019
Years ended 30 June
3.3.4 LTIP allocated during FY2019
Following shareholder approval at the 2018 AGMs, an LTIP award
(in the form of performance rights) was granted to the CEO on
18 December 2018. The face value and fair value of the award
are shown in the table below.
The face value of the award is 400 per cent of the CEO’s base
salary of US$1.700 million. The fair value of the award is ordinarily
calculated by multiplying the face value of the award by the
fair value factor of 41 per cent (for the current plan design,
as determined by the independent adviser to the Committee).
Using the average share price and US$/A$ exchange rate over
the 12 months up to and including 30 June 2018, the number
of LTIP awards derived from a grant of 400 per cent of base salary
with a face value of US$6.800 million was 304,523 LTIP awards.
Number of
LTIP awards
Face value
US$(‘000)
Face value
% of salary
Fair value
US$(‘000)
Fair value
% of salary
% of
max (1)
304,523
6,800
400
2,788
164
100
(1) The allocation is 100 per cent of the maximum award that was able to be
provided under the remuneration policy approved by shareholders at the
2017 AGMs.
Terms of the LTIP award
In addition to those LTIP terms set in the remuneration policy for
the CEO approved by shareholders in 2017, the Remuneration
Committee has determined:
Performance
period
Performance
conditions
• 1 July 2018 to 30 June 2023
• An averaging period of six months will be used in the
TSR calculations.
• BHP’s TSR relative to the weighted median TSR of
sector peer companies selected by the Committee
(Peer Group TSR) and the MSCI World index (Index TSR)
will determine the vesting of 67% and 33% of the
award, respectively.
• Each company in the peer group is weighted by market
capitalisation. The maximum weighting for any one
company is 25% and the minimum is set at 0.4% to
reduce sensitivity to any single peer company.
• For the whole of either portion of the award to vest,
BHP’s TSR must be at or exceed the weighted 80th
percentile of the Peer Group TSR or the Index TSR (as
applicable). Threshold vesting (25% of each portion of
the award) occurs where BHP’s TSR equals the weighted
50th percentile of the Peer Group TSR or the Index TSR
(as applicable). Vesting occurs on a sliding scale
between the weighted 50th and 80th percentiles.
Sector Peer
Group
Companies (1) (2) (3)
• Resources (85%): Anglo American, Fortescue Metals,
Freeport-McMoRan, Glencore, Rio Tinto, Southern
Copper, Teck Resources, Vale.
• Oil and Gas (15%): Anadarko Petroleum, Apache,
BP, Canadian Natural Res., Chevron, ConocoPhillips,
Devon Energy, EOG Resources, ExxonMobil, Occidental
Petroleum, Royal Dutch Shell, Woodside Petroleum.
(1) From December 2015, Alcoa, Cameco and MMC Norilsk Nickel were removed
from the sector peer group following the demerger of South32 as they are less
relevant comparator companies.
(2) From December 2016, BG Group and Peabody Energy were removed from the
comparator group. BG Group was acquired by Royal Dutch Shell and Peabody
Energy has become a significantly less comparable peer.
(3) From November 2018, CONSOL Energy was removed from the comparator
group, as due to its internal restructuring it became a less comparable peer.
3.3.5 Overarching discretion
and vesting underpin
The rules of the CDP, LTIP and STIP and the terms and conditions of
the awards give the Committee an overarching discretion to reduce
the number of awards that will vest, notwithstanding the fact that
the performance condition for partial or full vesting, as tested
following the end of the performance period, or the relevant
service conditions, have been met.
This holistic, qualitative judgement, which is applied as an
underpin test before final vesting is confirmed, is an important
risk management aspect to ensure that vesting is not simply driven
by a formula or the passage of time that may give unexpected
or unintended remuneration outcomes.
The Committee considers its discretion carefully each year.
It considers performance holistically over the five-year period,
including a five-year view on HSEC performance, profitability,
cash flow, balance sheet health, returns to shareholders,
corporate governance and conduct.
Having undertaken this review, the Committee considered its
discretion in respect of equity awards due to vest in August 2019.
In respect of the STIP two-year deferred shares (granted in
November 2017 in respect of performance in FY2017), the
Committee chose not to exercise its discretion and allowed the
STIP awards to vest in full. As the formulaic outcome of the 2014
LTIP was a zero vesting, there is no discretion available to the
Remuneration Committee, as the overarching discretion may
only reduce the number of awards that may vest.
BHP Annual Report 2019 153
i
S
t
r
a
t
e
g
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
a
t
B
H
P
3
R
e
m
u
n
e
r
a
t
i
o
n
R
e
p
o
r
t
D
i
r
e
c
t
o
r
s
’
R
e
p
o
r
t
i
F
n
a
n
c
a
i
l
S
t
a
t
e
m
e
n
t
s
A
d
d
i
t
i
o
n
a
l
i
n
f
o
r
m
a
t
i
o
n
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
3.3.6 CEO remuneration and returns to shareholders
Ten-year CEO remuneration
The table below shows the total remuneration earned by Andrew Mackenzie and Marius Kloppers over the last 10-years along with the
proportion of maximum opportunity earned for each type of incentive.
FY2010
FY2011
FY2012
FY2013 (1)
FY2014
FY2015
FY2016
FY2017
FY2018
FY2019
Financial year
Andrew Mackenzie
Total single figure remuneration, US$(‘000)
STIP (% of maximum)
LTIP (% of maximum)
Marius Kloppers
Total single figure remuneration, US$(‘000)
14,789
15,755
16,092
15,991
STIP (% of maximum)
LTIP (% of maximum)
71
100
69
100
0
100
47
65
–
–
–
–
–
–
–
–
–
47
65
2,468
7,988
4,582
2,241
4,554
4,657
3,531
77
58
–
–
–
57
0
–
–
–
0
0
–
–
–
57
0
–
–
–
60
0
–
–
–
32
0
–
–
–
(1) As Mr Mackenzie assumed the role of CEO in May 2013, the FY2013 total remuneration shown relates only to the period 10 May to 30 June 2013. The FY2013 total
remuneration for Mr Kloppers relates only to the period 1 July 2012 to 10 May 2013.
10-year TSR
The graph below shows BHP’s TSR against the performance of relevant indices over the same 10-year period. The indices shown
in the graph were chosen as being broad market indices, which include companies of a comparable size and complexity to BHP.
Value of US$100 invested over the 10-year period to 30 June 2019 (with dividends reinvested)
Value of investment (US$)
$250
$200
$150
$100
$50
$0
BHP Group Limited
BHP Group Plc
FTSE 100
ASX 100
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
Years ended 30 June
3.3.7 Changes in the CEO’s remuneration in FY2019
The table below sets out the CEO’s base salary, benefits and STIP amounts earned in respect of FY2019, with the percentage change from
FY2018. The table also shows the average change in each element for current employees in Australia (being approximately 18,000
employees) during FY2019. This has been chosen by the Committee as the most appropriate comparison, as the CEO is located in Australia.
Andrew Mackenzie
Australian employees
Base salary
Benefits
US$(‘000)
% change
% change (average)
1,700
0.0
2.1
100
19.0
28.0
STIP
1,306
(46.7)
(14.0)
The ratio of the total remuneration of the CEO to the median total remuneration of all BHP employees for FY2019 was 31:1 (2018: 37:1).
154 BHP Annual Report 2019
3.3.8 Remuneration for the CEO in FY2020
The remuneration for the CEO in FY2020 will be in accordance with the remuneration policy to be approved by shareholders
at the AGMs in 2019. In the event shareholders do not approve the remuneration policy at the AGMs in 2019, the remuneration
for the CEO in FY2020 will be in accordance with the remuneration policy approved by shareholders at the AGMs in 2017.
Base salary review
Base salary is reviewed annually and increases are applicable from 1 September. The CEO will not receive a base salary increase
in September 2019 and it will remain unchanged at US$1.700 million per annum for FY2020.
FY2020 CDP performance measures
For FY2020, the Remuneration Committee has set the following CDP scorecard performance measures:
Performance categories
Weighting
Target measures
HSEC
25%
Financial
50%
Individual
25%
The following HSEC performance measures are designed to incentivise achievement of the Group’s public five-year
HSEC targets.
Fatalities, environmental and community incidents: Nil fatalities and nil actual significant environmental
and community incidents.
HPIF, TRIF and occupational illness: Improved performance compared with FY2019 results, with severity and
trends to also be considered as a moderating influence on the overall HSEC assessment.
Risk management: Operated assets to have controls for fatal risks verified as part of Field Leadership activities
with fatal risk control improvement plans developed and executed and increased levels of in-field coaching.
Achieve 90% compliance for critical control verification and execution tasks.
Health, environmental and community/social value initiatives: All operated assets to achieve 100% of planned
targets in respect of occupational exposure reduction, mental health, water and greenhouse gas, social value plans,
quality of life, community perceptions and community complaints.
ROC is underlying profit after taxation (excluding after-taxation finance costs and exceptional items) divided by average
capital employed. When we are assessing management’s performance, we make adjustments to the ROC result to allow
for changes in commodity prices, foreign exchange movements and other material items to ensure the assessment
appropriately measures outcomes that are within the control and influence of the Group and its executives.
For reasons of commercial sensitivity, the target for ROC will not be disclosed in advance; however, we plan
to disclose targets and outcomes retrospectively in our next Remuneration Report, following the end of each
performance year. In the rare instances where this may not be prudent on grounds of commercial sensitivity,
we will explain why and give an indication of when they will be disclosed.
The CEO’s individual measures for FY2020 comprise contribution to BHP’s overall performance and the management
team and the delivery of projects and initiatives within the scope of the CEO role as set out by the Board. These
include strategy, productivity initiatives, transformation programs, latent capacity enhancement projects, focus
on the returns of future major capital projects, tailings dam activities, exploration, continued enhancement of BHP’s
global brand, culture initiatives (including improvement in Group-wide leadership capabilities, employee engagement,
diversity and inclusion, conduct and risk management) and ELT member development and succession.
These performance measures are aligned with medium and long-term strategy aspirations that are intended to
drive long-term value for shareholders and other stakeholders.
The strong link between BHP’s HSEC performance and executive remuneration (with HSEC performance representing 25 per cent of the
total scorecard) is well regarded by shareholders. The Board and Committee recognise that climate change is a material governance and
strategic issue. Increasingly, shareholders expect action to address climate change to be linked to executive remuneration. We have
been setting operational greenhouse gas emissions targets and linking performance against them to executive remuneration through
our HSEC scorecard for many years. However, recognising the increasing importance of this issue, we plan to clarify and strengthen this
link. In FY2020, we will enhance our approach, including weighting and disclosure mechanisms for our performance, which will take
effect from FY2021.
FY2020 LTIP award
The maximum face value of the CEO’s LTIP award under the remuneration policy approved by shareholders at the 2017 AGMs is
US$6.800 million, being 400 per cent of the CEO’s base salary. The number of LTIP awards in FY2020 has been determined using the
share price and US$/A$ exchange rate over the 12 months up to and including 30 June 2019. Based on this, a FY2020 grant of 271,348
LTIP awards is proposed and approval for this LTIP grant will be sought from shareholders at the 2019 AGMs. If approved, the award will
be granted following the AGMs (i.e. in or around November/December 2019). The FY2020 LTIP award will use the same performance,
service conditions and peer groups as the FY2019 LTIP award.
Subject to the approval of the revised remuneration policy by shareholders at the 2019 AGMs, and in order to ensure there is a fair
transitional outcome for participants, the LTIP grant to be made in late CY2019 will be made on the current 400 per cent of base salary
(face value), with potential vesting five years later in mid-CY2024. The first five-year deferred shares that result from performance under
the CDP for FY2020 will be granted in late CY2020 with potential vesting five years later in mid-CY2025, and the LTIP grant to be made
in late CY2020 will then be made on the reduced 200 per cent of base salary (face value), with potential vesting five years later also
in mid-CY2025.
BHP Annual Report 2019 155
i
S
t
r
a
t
e
g
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
a
t
B
H
P
3
R
e
m
u
n
e
r
a
t
i
o
n
R
e
p
o
r
t
D
i
r
e
c
t
o
r
s
’
R
e
p
o
r
t
i
F
n
a
n
c
a
i
l
S
t
a
t
e
m
e
n
t
s
A
d
d
i
t
i
o
n
a
l
i
n
f
o
r
m
a
t
i
o
n
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
Remuneration for other Executive KMP (excluding the CEO)
The information in this section contains details of the remuneration policy that guided the Remuneration Committee’s decisions and resulted
in the remuneration outcomes for other Executive KMP (excluding the CEO).
The remuneration policy and structures for other Executive KMP are essentially the same as those already described for the CEO in previous
sections of the Remuneration Report, including the treatment of remuneration on loss of office as detailed in section 3.2.5.
3.3.9 Components of remuneration
The components of remuneration for other Executive KMP are the same as for the CEO, with any differences described below.
STIP
The STIP performance measures for other Executive KMP for FY2019 are similar to those of the CEO which are outlined at section 3.3.2;
however, the weighting of each performance measure will vary to reflect the focus required from each Executive KMP role.
Individual performance measures are determined at the start of the financial year. These include the other Executive KMP’s contribution
to the delivery of projects and initiatives within the scope of their role and the overall performance of the Group. Individual performance
of other Executive KMP was reviewed against these measures by the Committee and, on average, was considered above target.
The diagram below represents the FY2019 STIP outcomes against the original scorecard.
Performance categories
HSEC
Financial
Individual
Group
Region
UAP
Underlying EBITDA
Other Executive
KMP with
region
responsibility
Other Executive
KMP without
region
responsibility
12.5%
12.5%
22.5%
22.5%
30%
25%
0%
45%
0%
30%
Threshold
Target
Stretch
BHP Group
Minerals Australia
Minerals Americas
Petroleum
LTIP
LTIP awards granted to other Executive KMP for FY2020 will have a
maximum face value of 350 per cent of base salary, which is a fair
value of 143.5 per cent of base salary under the current plan design
(with a fair value of 41 per cent, taking into account the performance
condition: 350 per cent x 41 per cent = 143.5 per cent).
Subject to the approval of the new remuneration policy by
shareholders at the 2019 AGMs, consistent with the CEO, the
proposed reduction to the LTIP grant size of other Executive KMP
awards to 200 per cent of base salary (face value) will apply to LTIP
grants made from FY2021 onwards.
Equity awards provided for pre-KMP service
Other Executive KMP who were promoted from executive
roles within BHP may hold GSTIP and MAP awards that were
granted to them in respect of their service in non-KMP roles.
Shareplus
Other Executive KMP are eligible to participate in Shareplus.
For administrative simplicity, Executive KMP, including the CEO,
do not currently participate in Shareplus. No Executive KMP,
including the CEO, had any holdings under the Shareplus
program during FY2019.
3.3.10 Remuneration mix
A significant portion of other Executive KMP remuneration is at-risk, in order to provide strong alignment between remuneration outcomes
and the interests of BHP shareholders.
The diagram below sets out the relative mix of each remuneration component for the other Executive KMP for FY2019. Each component
is determined as a percentage of base salary (at the minimum, target and maximum levels of performance-based remuneration).
Remuneration mix for other Executive KMP
The percentage numbers in the bars represent the percentage of base salary
Minimum
Base salary
25%
10%
Target
Base salary
25%
10%
80%
80%
143%
Maximum
Base salary
25%
10%
120%
120%
350%
0
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Base salary (1)
STIP (cash) (4)
Retirement benefits (2)
STIP (deferred shares) (4)
Other benefits (3)
LTIP (5)
% share of total remuneration
(1) Base salary earned by each Executive KMP is set out in section 3.3.17.
(2) Retirement benefits are 25 per cent of base salary.
(3) Other benefits is based on a notional 10 per cent of base salary.
(4) As for the CEO, the minimum STIP award is zero, with an award of 80 per cent of base salary in cash and 80 per cent of salary in deferred equity for target
performance, and a maximum award of 120 per cent cash and 120 per cent deferred equity for exceptional performance against KPIs.
(5) Other Executive KMP have a maximum LTIP award with a face value of 350 per cent of base salary as shown in the diagram.
156 BHP Annual Report 2019
3.3.11 Employment contracts
The terms of employment for other Executive KMP are formalised in employment contracts, which have no fixed term. They typically
outline the components of remuneration paid to the individual, but do not prescribe how remuneration levels are to be modified from
year-to-year. An Executive KMP employment contract may be terminated by BHP on up to 12 months’ notice or can be terminated
immediately by BHP making a payment of up to 12 months’ base salary plus pension contributions for the relevant period. An Executive
KMP must give six months’ notice for voluntary resignation.
3.3.12 Arrangements for Executive KMP leaving the Group
The arrangements for Executive KMP leaving the Group are within the approval provided by shareholders at the 2017 AGMs in regard
to Australian termination benefits legislation, including the provision of performance-based remuneration in accordance with the rules
of the relevant incentive plans.
Steve Pastor stepped down from his role as President, Petroleum on 17 March 2019 and exited BHP on 31 March 2019. Mr Pastor received
base salary, pension contributions, pro-rated STIP, statutory leave entitlements, and applicable benefits up to the date of his exit from BHP.
Mr Pastor received a payment in lieu of notice upon exit and has been paid or will receive in the future the value of pension funds that
he has accumulated during his service with the Group. When determining the Executive KMP STIP awards for FY2019, the Remuneration
Committee resolved that Mr Pastor would receive a pro-rated FY2019 STIP award in the form of cash based on his performance. No deferral
period will apply in respect of this cash STIP award.
All unvested FY2017 and FY2018 STIP awards allocated to Mr Pastor remained on foot on termination. FY2017 STIP vested in August 2019,
and FY2018 STIP will not vest until August 2020. MAP awards allocated to Mr Pastor prior to Executive KMP service vested upon
termination, pro-rated to reflect the percentage of the service period to 31 March 2019. Mr Pastor’s unvested LTIP awards were pro-rated
to reflect the percentage of the performance period to 31 March 2019. The vesting of the retained pro-rated LTIP awards will be determined
by the Committee at the relevant time in future years, and will only vest if the performance conditions are met at the end of each five-year
performance period, subject to the Committee’s ability to reduce vesting through its discretion under the plan rules.
Remuneration for Non-executive Directors
The remuneration outcomes described below have been provided in accordance with the remuneration policy approved by shareholders
at the 2017 AGMs. The maximum aggregate fees payable to Non-executive Directors (including the Chairman) were approved by
shareholders at the 2008 AGMs at US$3.800 million per annum. This sum includes base fees, Committee fees and pension contributions.
Travel allowances and non-monetary benefits are not included in this limit.
3.3.13 Single total figure of remuneration
This section shows a single total figure of remuneration as prescribed under UK requirements. It is a measure of actual remuneration. Fees
include the annual base fee, plus additional fees as applicable for the Senior Independent Director, Committee Chairmen and Committee
memberships. Non-executive Directors do not have any at-risk remuneration or receive any equity awards as part of their remuneration.
This table also meets the requirements of the Australian Corporations Act 2001 and relevant accounting standards.
i
S
t
r
a
t
e
g
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
a
t
B
H
P
3
R
e
m
u
n
e
r
a
t
i
o
n
R
e
p
o
r
t
D
i
r
e
c
t
o
r
s
’
R
e
p
o
r
t
US$(‘000)
Terry Bowen (3)
Malcolm Broomhead
Ian Cockerill (4)
Anita Frew
Carolyn Hewson
Susan Kilsby (4)
Ken MacKenzie
Lindsay Maxsted
John Mogford (3)
Wayne Murdy (5)
Shriti Vadera
Financial year
Fees
Benefits (1)
Pensions (2)
Total
FY2019
FY2018
FY2019
FY2018
FY2019
FY2019
FY2018
FY2019
FY2018
FY2019
FY2019
FY2018
FY2019
FY2018
FY2019
FY2018
FY2019
FY2018
FY2019
FY2018
183
135
212
200
55
220
202
212
195
47
865
749
209
209
187
138
75
220
253
235
30
37
40
33
30
48
62
32
32
22
32
61
32
47
61
60
35
80
48
63
10
7
11
11
–
–
–
11
10
–
15
16
11
11
–
–
–
–
–
–
223
179
263
244
85
268
264
255
237
69
912
826
252
267
248
198
110
300
301
298
(1) The majority of the amounts disclosed for benefits are travel allowances for each Non-executive Director: amounts of between US$22,000 and US$60,000. In addition,
amounts of between US$ nil and US$3,000 are included in respect of tax return preparation; and amounts of between US$ nil and US$2,000 are included in respect
of reimbursement of the tax cost associated with the provision of taxable benefits.
(2) BHP Group Limited made minimum superannuation contributions of up to 9.5 per cent of fees for FY2019 in accordance with Australian superannuation legislation.
(3) The FY2018 remuneration for Terry Bowen and John Mogford relates to part of the year only, as they both joined the Board on 1 October 2017.
(4) The FY2019 remuneration for Ian Cockerill and Susan Kilsby relates to part of the year only, as they both joined the Board on 1 April 2019.
(5) The FY2019 remuneration for Wayne Murdy relates to part of the year only as he retired from the Board on 2 November 2018.
BHP Annual Report 2019 157
i
F
n
a
n
c
a
i
l
S
t
a
t
e
m
e
n
t
s
A
d
d
i
t
i
o
n
a
l
i
n
f
o
r
m
a
t
i
o
n
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
3.3.14 Non-executive Directors’
remuneration in FY2020
In FY2020, the remuneration for the Non-executive Directors will
be paid in accordance with the remuneration policy to be approved
by shareholders at the 2019 AGMs (which is unchanged from the
remuneration policy for Non-executive Directors approved by
shareholders at the 2017 AGMs). Fee levels for the Non-executive
Directors and the Chairman are reviewed annually. The review
includes benchmarking, with the assistance of external advisers,
against peer companies.
From 1 July 2017, the Chairman’s annual fee was reduced
by approximately 8 per cent from US$0.960 million to
US$0.880 million, and will remain at that level for FY2020. This
fee reduction was in addition to the reduction of approximately
13 per cent from US$1.100 million to US$0.960 million effective
1 July 2015. Base fee levels for Non-executive Directors will remain
at the reduced levels that took effect from 1 July 2015, at which
time they were reduced by approximately 6 per cent from
US$0.170 million to US$0.160 million per annum.
The below table sets out the annualised fee levels for FY2020.
Levels of fees and travel allowances for
Non-executive Directors (in US$)
Base annual fee
Plus additional fees for:
Senior Independent Director
of BHP Group Plc
Committee Chair:
Risk and Audit
Remuneration
Sustainability
Nomination and Governance
Committee membership:
Risk and Audit
Remuneration
Sustainability
Nomination and Governance
Travel allowance: (1)
Greater than 3 but less than 10 hours
10 hours or more
Chairman’s fee
From 1 July
2019
160,000
48,000
60,000
45,000
45,000
No additional fee
32,500
27,500
27,500
18,000
7,000
15,000
880,000
(1) In relation to travel for Board business, the time thresholds relate to the flight
time to travel to the meeting location (i.e. one way flight time). Only one travel
allowance is paid per round trip.
Remuneration governance
3.3.15 Board oversight and the Remuneration Committee
Board
The Board is responsible for ensuring the Group’s remuneration
arrangements are equitable and aligned with the long-term
interests of BHP and its shareholders. In performing this function,
it is critical that the Board is independent of management when
making decisions affecting remuneration of the CEO, other
Executive KMP and the Group’s employees.
The Board has therefore established a Remuneration Committee
to assist it in making such decisions. The Committee is comprised
solely of Non-executive Directors, all of whom are independent.
To ensure that it is fully informed, the Committee regularly invites
members of management to attend meetings to provide reports
and updates. The Committee can draw on services from a range
of external sources, including remuneration advisers.
Remuneration Committee
The activities of the Remuneration Committee are governed
by Terms of Reference (updated version approved by the Board
in August 2019), which are available on our website. The current
members of the Remuneration Committee are Carolyn Hewson
(Chairman), Anita Frew, Susan Kilsby and Shriti Vadera. The role and
focus of the Committee and details of meeting attendances can be
found in section 2.13.2. Other Directors and employees who
regularly attended meetings were: Ken MacKenzie (Chairman);
Wayne Murdy (Remuneration Committee member to 2 November
2018); Andrew Mackenzie (CEO); Athalie Williams (Chief People
Officer); Andrew Fitzgerald (Vice President Reward); Margaret
Taylor (Group Company Secretary to 28 February 2019); Caroline
Cox (Group Company Secretary from 1 March 2019) and Geof
Stapledon (Vice President Governance). These individuals were not
present when matters associated with their own remuneration were
considered.
3.3.16 Statement of voting at the 2018 AGMs
Engagement of independent remuneration advisers
The Committee seeks and considers advice from independent
remuneration advisers where appropriate. Remuneration consultants
are engaged by, and report directly to, the Committee. Potential
conflicts of interest are taken into account when remuneration
consultants are selected and their terms of engagement regulate
their level of access to, and require their independence from,
BHP’s management.
PricewaterhouseCoopers was appointed by the Committee
in March 2016 to act as an independent remuneration adviser.
The PricewaterhouseCoopers team that advises the Remuneration
Committee does not provide any other services to the Group.
Other parts of PricewaterhouseCoopers provide services to the
Group in the areas of forensic and general technology, internal
audit and international assignment solutions. Processes and
arrangements are in place to protect independence (for example,
ring-fencing of teams) and to manage any conflicts of interest
that may arise.
PricewaterhouseCoopers is currently the only remuneration adviser
appointed by the Committee. In that capacity, they may provide
remuneration recommendations in relation to KMP; however they
did not do so in FY2019.
Total fees paid to the PricewaterhouseCoopers team advising the
Committee on remuneration-related matters for FY2019 were
£160,000. These fees are based on an agreed fee for regular items
with additional work charged at agreed rates. Total fees paid to
PricewaterhouseCoopers for other services rendered to the
Group for FY2019 were approximately US$26 million.
BHP’s remuneration resolutions have attracted a high level of support by shareholders. Voting in regard to those resolutions put to
shareholders at the 2018 AGMs is shown below.
AGM resolution
Remuneration Report (excluding remuneration policy (2))
Remuneration Report (whole report)
Approval of grants to Executive Director
Requirement
% vote ‘for’ % vote ‘against’
UK
Australia
Australia
96.6
95.2
97.0
3.4
4.8
3.0
Votes
withheld (1)
53,711,796
44,236,128
7,029,924
(1) The sum of votes marked ‘Vote Withheld’ at BHP Group Plc’s 2018 AGM and votes marked ‘Abstain’ at BHP Group Limited’s 2018 AGM.
(2) The UK requirement for approval of the remuneration policy was met at the 2017 AGMs, where the following outcomes were recorded: a 97.1 per cent vote
‘for’, a 2.9 per cent vote ‘against’ with 9,658,674 votes withheld. This resolution was not required in 2018.
158 BHP Annual Report 2019
Other statutory disclosures
This section provides details of any additional statutory disclosures required by Australian or UK regulations that have not been included
in the previous sections of the Remuneration Report.
3.3.17 Executive KMP remuneration table
The table below has been prepared in accordance with relevant accounting standards and remuneration data for Executive KMP are for
the periods of FY2018 and FY2019 that they were KMP. More information on the policy and operation of each element of remuneration
is provided in prior sections of this Report.
Share-based payments
The figures included in the shaded columns of the statutory table below for share-based payments were not actually provided to the KMP during
FY2018 or FY2019. These amounts are calculated in accordance with accounting standards and are the amortised IFRS fair values of equity and
equity-related instruments that have been granted to the executives. For information on awards that were allocated and vested during FY2018
and FY2019, refer to section 3.3.18.
Short-term benefits
Post-
employment
benefits
Share-based payments
Financial
year
Base
salary (1)
Annual
cash
incentive (2)
Non-
monetary
benefits (3)
Other
benefits (4)
Retirement
benefits (5)
Value of STIP
awards (2) (6)
Value of LTIP
awards (6)
Total
FY2019
FY2018
FY2019
FY2018
FY2019
FY2018
FY2019
FY2018
FY2019
FY2018
FY2019
1,700
1,700
1,000
1,000
1,100
1,100
1,000
1,000
712
1,000
219
653
1,224
480
728
440
722
424
792
524
720
167
100
84
5
8
10
13
30
13
–
–
–
–
–
–
–
–
–
14
19
49
21
–
425
425
250
250
275
275
250
250
178
250
55
990
779
637
549
623
546
585
507
1,166
493
43
4,037
7,905
3,894
8,106
2,078
4,450
1,792
4,327
2,286
4,734
1,971
4,627
2,078
4,381
1,751
4,332
1,087
3,716
1,076
3,560
213
697
US$(‘000)
Executive Director
Andrew Mackenzie
Other Executive KMP
Peter Beaven
Mike Henry
Daniel Malchuk
Steve Pastor (7)
Geraldine Slattery (7)
(1) Base salaries shown in this table reflect the amounts paid over the 12-month period from 1 July 2018 to 30 June 2019 for each Executive KMP. There were no changes to
Executive KMP base salaries during the year except for Geraldine Slattery who was appointed Executive KMP during the year on an annual base salary of US$0.750 million.
(2) Annual cash incentive is the cash portion of STIP awards earned in respect of performance during each financial year for each executive. STIP is provided half in
cash and half in deferred equity (which are included in the share-based payments columns of the table). The cash portion of STIP awards is paid to Executive KMP
in September of the year following the relevant financial year. The minimum possible value awarded to each individual is nil and the maximum is 240 per cent of
base salary (120 per cent in cash and 120 per cent in deferred equity). For FY2019, Executive KMP earned the following STIP awards as a percentage of the maximum
(the remaining portion has been forfeited): Andrew Mackenzie 32 per cent, Peter Beaven 40 per cent, Mike Henry 33 per cent, Daniel Malchuk 35 per cent, Steve Pastor
61 per cent, and Geraldine Slattery 65 per cent. Steve Pastor’s FY2019 STIP was paid in cash, pro-rated to reflect the period served until he ceased to be KMP
on 17 March 2019, as noted in 3.3.12.
(3) Non-monetary benefits are non-pensionable and include such items as health and other insurances, fees for tax return preparation (if required in multiple jurisdictions),
car parking and travel costs.
(4) Other benefits are non-pensionable and for FY2019 include an international relocation benefit for Daniel Malchuk and an encashment of annual leave entitlements
under the US Annual Leave policy and the cost of tax services for Steve Pastor.
(5) Retirement benefits are 25 per cent of base salary for each Executive KMP.
(6) The IFRS fair value of both STIP and LTIP awards is estimated at grant date. Refer to note 23 ‘Employee share ownership plans’ in section 5 for further details.
(7) The remuneration reported for Steve Pastor and Geraldine Slattery reflects service as Executive KMP during the year.
3.3.18 Equity awards
The interests held by Executive KMP under the Group’s employee
equity plans are set out below. Each equity award is a right to
acquire one ordinary share in BHP Group Limited or in BHP Group
Plc upon satisfaction of the vesting conditions. BHP Group Limited
share awards are shown in Australian dollars. BHP Group Plc awards
are shown in Pounds Sterling. The Our Requirements for Securities
Dealing standard governs and restricts dealing arrangements
and the provision of shares on vesting or exercise of awards.
No interests under the Group’s employee equity plans are held
by related parties of Executive KMP.
Dividend Equivalent Payments
DEP applies to awards provided to Executive KMP under the
CDP, STIP and LTIP as detailed in section 3.2.1. No DEP is payable
on GSTIP awards or MAP awards.
Equity awards provided for Executive KMP service
Awards under the STIP, CDP and LTIP
Executive KMP receive or will receive awards under the STIP, CDP
and LTIP. The terms and conditions of STIP, CDP and LTIP awards,
including the performance conditions, are described in sections
3.2.1 and 3.2.5 of this Annual Report. The LTIP rules are available
on our website.
Equity awards provided prior to Executive KMP service
Awards under the GSTIP and MAP
BHP senior management who are not KMP received awards under the
GSTIP and receive awards under the MAP. While no GSTIP or MAP
awards were granted to Executive KMP during FY2019, Steve Pastor
and Geraldine Slattery held GSTIP awards and still hold MAP awards
that were allocated to them prior to their Executive KMP service.
BHP Annual Report 2019 159
i
S
t
r
a
t
e
g
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
a
t
B
H
P
3
R
e
m
u
n
e
r
a
t
i
o
n
R
e
p
o
r
t
D
i
r
e
c
t
o
r
s
’
R
e
p
o
r
t
i
F
n
a
n
c
a
i
l
S
t
a
t
e
m
e
n
t
s
A
d
d
i
t
i
o
n
a
l
i
n
f
o
r
m
a
t
i
o
n
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
Award type
Date of grant
Andrew Mackenzie
STIP
STIP
LTIP
LTIP
LTIP
LTIP
LTIP
LTIP
Peter Beaven
STIP
STIP
STIP
LTIP
LTIP
LTIP
LTIP
LTIP
LTIP
Mike Henry
STIP
STIP
STIP
LTIP
LTIP
LTIP
LTIP
LTIP
LTIP
Daniel Malchuk
STIP
STIP
STIP
LTIP
LTIP
LTIP
LTIP
LTIP
LTIP
Steve Pastor (5)
STIP
STIP
STIP
LTIP
LTIP
LTIP
MAP
MAP
MAP
GSTIP
Geraldine Slattery (6)
MAP
MAP
MAP
MAP
MAP
GSTIP
18 Dec 2018
24 Nov 2017
18 Dec 2018
24 Nov 2017
9 Dec 2016
4 Dec 2015
19 Dec 2014
18 Dec 2013
18 Dec 2018
24 Nov 2017
9 Dec 2016
18 Dec 2018
24 Nov 2017
9 Dec 2016
4 Dec 2015
19 Dec 2014
18 Dec 2013
18 Dec 2018
24 Nov 2017
9 Dec 2016
18 Dec 2018
24 Nov 2017
9 Dec 2016
4 Dec 2015
19 Dec 2014
18 Dec 2013
18 Dec 2018
24 Nov 2017
9 Dec 2016
18 Dec 2018
24 Nov 2017
9 Dec 2016
4 Dec 2015
19 Dec 2014
18 Dec 2013
18 Dec 2018
24 Nov 2017
9 Dec 2016
18 Dec 2018
24 Nov 2017
9 Dec 2016
24 Feb 2016
24 Feb 2016
30 Oct 2015
9 Dec 2016
21 Feb 2019
21 Feb 2019
24 Sep 2018
25 Sep 2017
31 Oct 2016
25 Sep 2017
At
1 July
2018
–
56,217
–
385,075
339,753
339,753
224,859
213,701
–
36,145
10,958
–
198,200
174,873
174,873
115,736
109,993
–
36,376
10,663
–
218,020
192,360
192,360
127,310
120,993
–
28,070
9,694
–
198,200
174,873
174,873
115,736
93,495
–
30,659
2,697
–
198,200
139,898
21,775
21,775
21,775
5,435
–
–
–
34,349
21,775
14,951
Granted
Vested
Lapsed
At
30 June
2019
Award
vesting
date (1)
Market price on date of:
Grant (2)
Vesting (3)
Gain on
awards
(‘000) (4)
DEP on
awards
(‘000)
52,061
–
304,523
–
–
–
–
–
30,964
–
–
156,739
–
–
–
–
–
30,692
–
–
172,413
–
–
–
–
–
33,686
–
–
156,739
–
–
–
–
–
30,624
–
–
156,739
–
–
–
–
–
–
28,527
28,527
28,527
–
–
–
–
–
–
–
–
–
–
–
–
–
10,958
–
–
–
–
–
–
–
–
10,663
–
–
–
–
–
–
–
–
9,694
–
–
–
–
–
–
–
–
2,697
–
–
–
–
–
21,775
5,435
–
–
–
–
–
–
–
–
–
–
–
–
–
213,701
–
–
–
–
–
–
–
–
109,993
–
–
–
–
–
–
–
–
120,993
–
–
–
–
–
–
–
–
93,495
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
52,061
56,217
304,523
385,075
339,753
339,753
224,859
–
30,964
36,145
–
156,739
198,200
174,873
174,873
115,736
–
30,692
36,376
–
172,413
218,020
192,360
192,360
127,310
–
33,686
28,070
–
156,739
198,200
174,873
174,873
115,736
–
30,624
30,659
–
156,739
198,200
139,898
21,775
21,775
–
–
28,527
28,527
28,527
34,349
21,775
14,951
Aug 20
Aug 19
Aug 23
Aug 22
Aug 21
Aug 20
Aug 19
22 Aug 18
Aug 20
Aug 19
22 Aug 18
Aug 23
Aug 22
Aug 21
Aug 20
Aug 19
22 Aug 18
Aug 20
Aug 19
22 Aug 18
Aug 23
Aug 22
Aug 21
Aug 20
Aug 19
22 Aug 18
Aug 20
Aug 19
22 Aug 18
Aug 23
Aug 22
Aug 21
Aug 20
Aug 19
22 Aug 18
Aug 20
Aug 19
22 Aug 18
Aug 23
Aug 22
Aug 21
Aug 20
Aug 19
22 Aug 18
22 Aug 18
Aug 23
Aug 22
Aug 21
Aug 20
Aug 19
Aug 19
A$33.50
A$27.97
A$33.50
A$27.97
A$25.98
A$17.93
A$28.98
A$35.79
A$33.50
A$27.97
A$25.98
A$33.50
A$27.97
A$25.98
A$17.93
A$28.98
A$35.79
A$33.50
A$27.97
A$25.98
A$33.50
A$27.97
A$25.98
A$17.93
A$28.98
A$35.79
A$33.50
A$27.97
A$25.98
A$33.50
A$27.97
A$25.98
A$17.93
A$28.98
A$35.79
A$33.50
A$27.97
A$25.98
A$33.50
A$27.97
A$25.98
A$16.18
A$16.18
A$23.02
A$25.98
A$34.83
A$34.83
A$33.83
A$25.98
A$23.07
A$25.98
–
–
–
–
–
–
–
–
–
–
A$32.08
–
–
–
–
–
–
–
–
A$32.08
–
–
–
–
–
–
–
–
A$32.08
–
–
–
–
–
–
–
–
A$32.08
–
–
–
–
–
A$32.08
A$32.08
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
A$352
–
–
–
–
–
–
–
–
A$342
–
–
–
–
–
–
–
–
A$311
–
–
–
–
–
–
–
–
A$87
–
–
–
–
–
A$699
A$174
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
A$22
–
–
–
–
–
–
–
–
A$21
–
–
–
–
–
–
–
–
A$19
–
–
–
–
–
–
–
–
A$5
–
–
–
–
–
–
–
–
–
–
–
–
–
(1) Where the vesting date is not yet known, the estimated vesting month is shown. Where awards lapse, the lapse date is shown. If the vesting conditions are met, awards
will vest on, or as soon as practicable after, the first non-prohibited period date occurring after 30 June of the preceding year of vest. The year of vest is the second
(STIP and GSTIP), third (MAP), fourth (MAP) or fifth (MAP and LTIP) financial year after grant. All awards are conditional awards and have no exercise period, exercise
price or expiry date; instead ordinary fully paid shares are automatically delivered upon the vesting conditions being met. Where vesting conditions are not met,
the conditional awards will immediately lapse.
(2) The market price shown is the closing price of BHP shares on the relevant date of grant. No price is payable by the individual to receive a grant of awards.
The IFRS fair value of the STIP and LTIP awards granted in FY2019 is at the grant date of 18 December 2018, and are as follows: STIP – A$33.50 and LTIP – A$24.13.
(3 The market price shown is the closing price of BHP shares on the relevant date of vest.
(4) The gain on awards is calculated using the market price on date of vesting or exercise (as applicable) less any exercise price payable. The amounts that vested and
were lapsed for the awards during FY2019 are as follows: STIP – 100 per cent vested; LTIP – 100 per cent lapsed; GSTIP – 100 per cent vested; MAP – 100 per cent vested.
(5) Awards shown as held by Steve Pastor at 30 June 2019 are his balances at the date he ceased being KMP (17 March 2019). The subsequent treatment of his awards
is set out in section 3.3.12.
(6) The opening balances of awards for Geraldine Slattery reflects her holdings on the date she commenced being KMP (18 March 2019).
160 BHP Annual Report 2019
3.3.19 Estimated value range of equity awards
The current face value (and estimate of the maximum possible total value) of equity awards allocated during FY2019 and yet to vest are
the awards as set out in the previous table multiplied by the current share price of BHP Group Limited or BHP Group Plc as applicable.
The minimum possible total value of the awards is nil.
The actual value that may be received by participants in the future cannot be determined as it is dependent on and therefore fluctuates
with the share prices of BHP Group Limited and BHP Group Plc at the date that any particular award vests or is exercised. The table below
provides five-year share price history for BHP Group Limited and BHP Group Plc, history of dividends paid and the Group’s earnings.
Five-year share price, dividend and earnings history
BHP Group Limited
Share price at beginning of year
Share price at end of year
Dividends paid
BHP Group Plc
Share price at beginning of year
Share price at end of year
Dividends paid
BHP
Attributable profit /(loss) (US$M, as reported)
FY2019
A$33.60
A$41.16
A$3.08 (1)
£16.53
£20.15
£1.70 (1)
8,306
FY2018
A$23.23
A$33.91
A$1.24
£12.15
£17.06
£0.72
3,705
FY2017
A$19.09
A$23.28
A$0.72
£9.40
£11.76
£0.44
5,890
FY2016
A$26.58
A$18.65
A$1.09
£12.58
£9.43
£0.51
(6,385)
FY2015
A$36.00
A$27.05
A$3.72 (2)
£19.45
£12.49
£1.95 (2)
1,910
(1) The FY2019 dividends paid includes A$1.41 or £0.80 in respect of the special dividend associated with the divestment of Onshore US.
(2) The FY2015 dividends paid includes A$2.25 or £1.15 in respect of the in-specie dividend associated with the demerger of South32.
The highest share prices during FY2019 were A$41.95 for BHP Group Limited shares and £20.15 for BHP Group Plc shares. The lowest share
prices during FY2019 were A$30.43 and £14.91, respectively.
3.3.20 Ordinary share holdings and transactions
The number of ordinary shares in BHP Group Limited or in BHP Group Plc held directly, indirectly or beneficially, by each individual
(including shares held in the name of all close members of the Director’s or Executive KMP’s family and entities over which either the
Director or Executive KMP or the family member has, directly or indirectly, control, joint control or significant influence) are shown below.
There have been no changes in the interests of any Directors in the period to 5 September 2019 (being not less than one month prior
to the date of the notice of the 2019 AGMs), except as noted below. These are ordinary shares held without performance conditions
or restrictions and are included in MSR calculations for each individual.
The interests of Directors and Executive KMP in the ordinary shares of each of BHP Group Limited and BHP Group Plc as at 30 June 2019
did not exceed on an individual basis or in the aggregate 1 per cent of BHP Group Limited’s or BHP Group Plc’s issued ordinary shares.
BHP Group Limited Shares
BHP Group Plc Shares
Held at
1 July
2018 Purchased
Received as
remuneration (1)
Sold
Held at
30 June
2019
Held at
1 July
2018 Purchased
Received as
remuneration (1)
Sold
Held at
30 June
2019
i
S
t
r
a
t
e
g
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
a
t
B
H
P
3
R
e
m
u
n
e
r
a
t
i
o
n
R
e
p
o
r
t
D
i
r
e
c
t
o
r
s
’
R
e
p
o
r
t
Executive Director
Andrew Mackenzie
Other Executive KMP
Peter Beaven
Mike Henry
Daniel Malchuk
Steve Pastor (2) (3)
Geraldine Slattery (2) (4)
Non-executive Directors
Terry Bowen
Malcolm Broomhead
Ian Cockerill (4) (5)
Anita Frew
Carolyn Hewson
Susan Kilsby (4) (5)
Ken MacKenzie (6)
Lindsay Maxsted
John Mogford
Wayne Murdy (2) (3)
Shriti Vadera
93,051
296,690
91,993
164,054
52,953
49,701
11,000
19,000
5,259
–
19,000
–
52,351
18,000
–
8,000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
93,051
266,205
11,644
68,072
240,262
–
11,331
5,262
98,062
196,262
10,301
–
174,355
30,076
12,234
70,795
–
–
49,701
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
11,000
19,000
5,259
–
15,000
19,000
–
52,351
18,000
–
–
–
–
–
12,000
8,000
24,000
–
25,000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
3,500
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
– 266,205
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
196,262
–
–
–
–
–
3,500
15,000
–
–
–
–
12,000
24,000
25,000
(1) Includes DEP in the form of shares on equity awards vesting as disclosed in section 3.3.18.
(2) The following BHP Group Limited shares and BHP Group Plc shares were held in the form of American Depositary Shares: Wayne Murdy (4,000 BHP Group Limited;
12,000 BHP Group Plc), Steve Pastor (1,574 BHP Group Limited), and Geraldine Slattery (868 BHP Group Limited).
(3) The closing balances for Steve Pastor and Wayne Murdy reflect their shareholdings on the date that each ceased being KMP, being 17 March 2019 and
2 November 2018, respectively.
(4) The opening balances for Geraldine Slattery, Ian Cockerill and Susan Kilsby reflect their shareholdings on the date that each became KMP being 18 March 2019,
1 April 2019 and 1 April 2019 respectively.
(5) Ian Cockerill acquired 3,500 shares in BHP Group Limited on 29 August 2019 and Susan Kilsby acquired 2,900 shares in BHP Group Plc on 23 August 2019.
(6) The opening balance for Ken MacKenzie has been updated to include 4,495 BHP Group Limited shares that were purchased on 25 August 2017, which were
inadvertently not included in the 2018 report.
BHP Annual Report 2019 161
i
F
n
a
n
c
a
i
l
S
t
a
t
e
m
e
n
t
s
A
d
d
i
t
i
o
n
a
l
i
n
f
o
r
m
a
t
i
o
n
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
3.3.21 Prohibition on hedging of BHP
shares and equity instruments
3.3.23 Payments to past Directors
and for loss of office
The CEO and other Executive KMP may not use unvested BHP
equity awards as collateral, or protect the value of any unvested
BHP equity awards or the value of shares and securities held
as part of meeting the MSR.
Any securities that have vested and are no longer subject to
restrictions may be subject to hedging arrangements or used
as collateral, provided that prior consent is obtained.
3.3.22 Share ownership guidelines
and the MSR
The share ownership guidelines and the MSR help to ensure the
interests of Directors, executives and shareholders remain aligned.
The CEO and other Executive KMP are expected to grow their
holdings to the MSR from the scheduled vesting of their employee
awards over time. The MSR is tested at the time that shares are to
be sold. Shares may be sold to satisfy tax obligations arising from
the granting, holding, vesting, exercise or sale of the employee
awards or the underlying shares whether the MSR is satisfied
at that time or not.
For FY2019:
• the MSR for the CEO was five times annual pre-tax base salary
and while he has met this requirement in the past, subsequent
movements in foreign exchange rates and share prices have
resulted in Andrew Mackenzie’s shareholding being 4.8 times
his annual pre-tax base salary at the end of FY2019. As at the
date of this Report, Mr Mackenzie met the MSR;
• the MSR for other Executive KMP was three times annual pre-tax
base salary. At the end of FY2019, Peter Beaven, Mike Henry
and Daniel Malchuk met the MSR, while Geraldine Slattery did
not as she was only recently appointed as Executive KMP on
18 March 2019. While Mr Beaven sold shares during FY2019,
he met the MSR both before and after the sale. Other than
Mr Beaven, no other Executive KMP sold shares during FY2019,
other than to satisfy taxation obligations.
Effective 1 July 2020, a two-year post-retirement shareholding
requirement for the CEO will apply from the date of retirement,
which will be the lower of the CEO’s MSR or the CEO’s actual
shareholding at the date of retirement.
Subject to securities dealing constraints, Non-executive Directors
have agreed to apply at least 25 per cent of their remuneration
(base fees plus Committee fees) to the purchase of BHP shares until
they achieve an MSR equivalent in value to one year’s remuneration
(base fees plus Committee fees). Thereafter, they must maintain
at least that level of shareholding throughout their tenure. At the
end of FY2019, each Non-executive Director met the MSR with the
exception of Ian Cockerill and Susan Kilsby as they only recently
joined the Board on 1 April 2019. As at the date of this Report,
Mr Cockerill met the MSR and Ms Kilsby met the agreed application
of fees to purchase of BHP shares in respect of her tenure since
1 April 2019.
UK regulations require the inclusion in the Remuneration Report
of certain payments to past Directors and payments made for
loss of office. There is nothing to disclose for these payments for
FY2019. The Remuneration Committee has adopted a de minimis
threshold of US$7,500 for disclosure of payments to past Directors
under UK requirements.
3.3.24 Relative importance of spend on pay
The table below sets out the total spend for continuing operations
on employee remuneration during FY2019 (and the prior year)
compared with other significant expenditure items, and includes
items as prescribed in the UK requirements. BHP has included tax
payments and purchases of property, plant and equipment being
the most significant other outgoings in monetary terms.
US$ million
FY2019
FY2018
Aggregate employee benefits expense
Dividends paid to BHP shareholders
Share buy-backs
Income tax paid and royalty-related taxation
paid (net of refunds)
4,117
11,395
5,220
5,940
4,072
5,220
–
4,918
Purchases of property, plant and equipment
6,250
4,979
3.3.25 Transactions with KMP
During the financial year, there were no transactions between the
Group and its subsidiaries and KMP (including their related parties)
(2018: US$ nil; 2017: US$ nil). There were no amounts payable at
30 June 2019 (2018: US$ nil). There were US$ nil loans (2018: US$ nil)
with KMP (including their related parties).
A number of KMP hold or have held positions in other companies
(i.e. personally related entities), where it is considered they control
or significantly influence the financial or operating policies of those
entities. There have been no transactions with those entities and
no amounts were owed by the Group to personally related entities
or any other related parties (2018: US$ nil).
This Remuneration Report was approved by the Board on
5 September 2019 and signed on its behalf by:
Carolyn Hewson
Chairman, Remuneration Committee
5 September 2019
162 BHP Annual Report 2019
Section 4
Directors’ Report
In this section
4.1 Review of operations, principal activities and state
of aff airs
Indemnities and insurance
4.2 Share capital and buy-back programs
4.3 Results, financial instruments and going concern
4.4 Directors
4.5 Remuneration and share interests
4.6 Secretaries
4.7
4.8 Employee policies
4.9 Corporate governance
4.10 Dividends
4.11 Auditors
4.12 Non-audit services
4.13 Political donations
4.14 Exploration, research and development
4.15 ASIC Instrument 2016/191
4.16 Proceedings on behalf of BHP Group Limited
4.17 Performance in relation to environmental regulation
4.18 Share capital, restrictions on transfer of shares and
other additional information
BHP Annual Report 2019 163
The information presented by the Directors in this Directors’ Report
relates to BHP Group Limited, BHP Group Plc and their respective
subsidiaries. Section 1 ‘Strategic Report’ (which includes the
Chairman’s Review in section 1.1 and the Chief Executive Officer’s
Report in section 1.2, and incorporates the operating and financial
review), section 2 ‘Governance at BHP’, section 3 ‘Remuneration
Report’, section 5.5 ‘Lead Auditor’s Independence Declaration’
and section 7 ‘Shareholder information’ are each incorporated by
reference into, and form part of, this Directors’ Report. In addition,
for the purposes of UK law, the Strategic Report in section 1 and
the Remuneration Report in section 3 form separate reports and
have been separately approved by the Board for that purpose.
For the purpose of the Financial Conduct Authority’s (FCA) Listing
Rule 9.8.4C R, the applicable information required to be disclosed
in accordance with FCA Listing Rule 9.8.4 R is set out in the
sections below.
Applicable information required by FCA
Listing Rule 9.8.4 R
(1) Interest capitalised by the Group
(6) Waiver of future emoluments
(12) Shareholder waivers of dividends
(13) Shareholder waivers of future dividends
Section in this
Annual Report
Section 5, note 20
Section 3.3.1
Section 5, note 23
Section 5, note 23
Paragraphs (2), (4), (5), (7), (8), (9), (10), (11) and (14) of Listing
Rule 9.8.4 R are not applicable.
The Directors confirm, on the advice of the Risk and Audit
Committee, that they consider the Annual Report (including
the Financial Statements), taken as a whole, is fair, balanced
and understandable, and provides the information necessary
for shareholders to assess BHP’s position, performance,
business model and strategy.
4.1 Review of operations, principal
activities and state of affairs
A review of the operations of BHP during FY2019, the results
of those operations during FY2019 and the expected results of
those operations in future financial years are set out in section 1,
in particular in 1.1 to 1.10, 1.12 and 1.13 and in other material in this
Annual Report. Information on the development of BHP and likely
developments in future years also appears in those sections.
We have excluded certain information from the Strategic Report
in section 1 (which forms part of this Directors’ Report), to the
extent permitted by UK and Australian law, on the basis that such
information relates to impending developments or matters in the
course of negotiation and disclosure would be seriously prejudicial
to the interests of BHP. This is because such disclosure could be
misleading due to the fact it is premature or preliminary in nature,
relates to commercially sensitive contracts, would undermine
confidentiality between BHP and our suppliers and clients,
or would otherwise unreasonably damage BHP. The categories
of information omitted include forward looking estimates
and projections prepared for internal management purposes,
information regarding BHP’s assets and projects, which is
developing and susceptible to change, and information relating
to commercial contracts and pricing modules.
Our principal activities during FY2019 are disclosed in section 1.
We are among the world’s top producers of major commodities,
including iron ore, metallurgical coal and copper. We also have
substantial interests in oil, gas and energy coal. No significant
changes in the nature of BHP’s principal activities occurred
during FY2019 other than as disclosed in section 1.
There were no significant changes in BHP’s state of affairs that
occurred during FY2019 and no significant post balance date
events other than as disclosed in section 1.
No other matter or circumstance has arisen since the end of
FY2019 that has significantly affected or is expected to significantly
affect the operations, the results of operations or state of affairs
of BHP in future years.
164 BHP Annual Report 2019
4.2 Share capital and buy-back programs
At the Annual General Meetings held in 2017 and 2018,
shareholders authorised BHP Group Plc to make on-market
purchases of up to 211,207,180 of its ordinary shares, representing
10 per cent of BHP Group Plc’s issued share capital at that time.
On 17 December 2018, we announced the completion of a
US$5.2 billion off-market tender buy-back of BHP Group Limited
shares. Approximately 265.8 million shares (8.3 per cent of BHP
Group Limited’s issued share capital and 5 per cent of the total
issued share capital of BHP Group Limited and BHP Group Plc) were
bought back at a price of A$27.64 per share. As at the date of this
Directors’ Report, there were no current on-market buy-backs.
Shareholders will be asked at the 2019 Annual General Meetings
to renew this authority. As at the date of this Directors’ Report,
there is no intention to exercise this authority.
Some of our executives receive rights over BHP shares as part of
their remuneration arrangements. Entitlements may be satisfied by
the transfer of existing shares, which are acquired on-market by the
Employee Share Ownership Plan (ESOP) Trusts or, in respect of
some entitlements, by the issue of shares.
The number of shares referred to in column A below were
purchased to satisfy awards made under the various BHP Group
Limited and BHP Group Plc employee share schemes during FY2019.
A
B
C
D
Period
1 Jul 2018 to 31 Jul 2018
1 Aug 2018 to 31 Aug 2018
1 Sep 2018 to 30 Sep 2018
1 Oct 2018 to 31 Oct 2018
1 Nov 2018 to 30 Nov 2018
1 Dec 2018 to 31 Dec 2018
1 Jan 2019 to 31 Jan 2019
1 Feb 2019 to 28 Feb 2019
1 Mar 2019 to 31 Mar 2019
1 Apr 2019 to 30 Apr 2019
1 May 2019 to 31 May 2019
1 Jun 2019 to 30 Jun 2019
Total
Total number of
shares purchased
Average price
paid per share (1)
Total number
of shares purchased
as part of publicly
announced plans
or programs
86,722
2,706,718
20
424,230
–
–
–
3,852,173
24,306
–
–
–
US$
22.99
25.86
34.69
23.73
–
19.84
–
27.35
26.82
–
–
–
–
–
–
–
–
265,839,711
–
–
–
–
–
–
7,094,169
20.02
265,839,711
Maximum number of shares that may yet
be purchased under the plans or programs
BHP Group Limited (2)
BHP Group Plc
–
–
–
–
–
–
–
–
–
–
–
–
–
211,207,180 (3)
211,207,180 (3)
211,207,180 (3)
211,207,180 (3)
211,207,180 (3)
211,207,180 (3)
211,207,180 (3)
211,207,180 (3)
211,207,180 (3)
211,207,180 (3)
211,207,180 (3)
211,207,180 (3)
211,207,180 (3)
(1) The shares were purchased in the currency of the stock exchange on which the purchase took place and the sale price has been converted into US dollars at the
exchange rate on the day of purchase.
(2) BHP Group Limited is able to buy-back and cancel BHP Group Limited shares within the ‘10/12 limit’ without shareholder approval in accordance with section 257B
of the Australian Corporations Act 2001. Any future on-market share buy-back program would be conducted in accordance with the Australian Corporations Act 2001
and with the ASX Listing Rules.
(3) At the Annual General Meetings held during 2017 and 2018, shareholders authorised BHP Group Plc to make on-market purchases of up to 211,207,180 of its ordinary
shares, representing 10 per cent of BHP Group Plc’s issued capital at the time.
i
S
t
r
a
t
e
g
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
a
t
B
H
P
R
e
m
u
n
e
r
a
t
i
o
n
R
e
p
o
r
t
4
D
i
r
e
c
t
o
r
s
’
R
e
p
o
r
t
i
F
n
a
n
c
a
i
l
4.3 Results, financial instruments
and going concern
Information about the Group’s financial position and financial
results is included in the Financial Statements in this Annual Report.
The Consolidated Income Statement shows profit attributable to
BHP members of US$8.3 billion in FY2019, compared with a profit
of US$3.7 billion in FY2018.
BHP’s business activities, together with the factors likely to affect
its future development, performance and position, are discussed
in section 1. In addition, sections 1.3 to 1.6 and 2.14, and note 21
‘Financial risk management’ in section 5 outline BHP’s capital
management objectives, its approach to financial risk management
and exposure to financial risks, liquidity and borrowing facilities.
The Directors, having made appropriate enquiries, have a
reasonable expectation that BHP has adequate resources to
continue in operational existence for the foreseeable future.
Therefore, they continue to adopt the going concern basis
of accounting in preparing the annual Financial Statements.
4.4 Directors
The Directors who served at any time during FY2019 or up until
the date of this Directors’ Report were Ken MacKenzie, Andrew
Mackenzie, Terry Bowen, Malcolm Broomhead, Ian Cockerill,
Anita Frew, Carolyn Hewson, Susan Kilsby, Lindsay Maxsted,
John Mogford, Wayne Murdy and Shriti Vadera. Further details
of the current Directors of BHP Group Limited and BHP Group Plc
are set out in section 2.2. These details include the period for which
each Director held office up to the date of this Directors’ Report,
their qualifications, experience and particular responsibilities,
the directorships held in other listed companies since 1 July 2016
and the period for which each directorship has been held.
Wayne Murdy served as a Non-executive Director of BHP Group
Limited and BHP Group Plc from June 2009 until his retirement
on 2 November 2018.
Ian Cockerill was appointed as a Non-executive Director of BHP
Group Limited and BHP Group Plc with effect from 1 April 2019.
In accordance with the BHP Group Limited Constitution and
BHP Group Plc Articles of Association, he will seek election
at the 2019 Annual General Meetings.
Susan Kilsby was appointed as a Non-executive Director of BHP
Group Limited and BHP Group Plc with effect from 1 April 2019.
In accordance with the BHP Group Limited Constitution and
BHP Group Plc Articles of Association, she will seek election
at the 2019 Annual General Meetings.
Carolyn Hewson has announced that she will retire as a Non-
executive Director of BHP Group Limited and BHP Group Plc
at the conclusion of the BHP Group Limited Annual General
Meeting in November 2019.
The number of meetings of the Board and its Committees held
during the year and each Director’s attendance at those meetings
are set out in section 2.12.
S
t
a
t
e
m
e
n
t
s
A
d
d
i
t
i
o
n
a
l
i
n
f
o
r
m
a
t
i
o
n
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
BHP Annual Report 2019 165
4.6 Secretaries
Caroline Cox is the Group General Counsel and Company Secretary.
Details of her qualifications and experience are set out in section
2.2. The following people also act, or have acted during FY2019, as
Company Secretaries of BHP Group Limited, BHP Group Plc or both
(as indicated): Margaret Taylor, BA, LLB, GAICD FCIS (BHP Group
Limited and BHP Group Plc), Rachel Agnew, BComm (Economics),
LLB (Hons), GAICD (BHP Group Limited and BHP Group Plc), Kathryn
Griffiths, BA, LLB (Hons), GDipACG, FCIS, FGIA, GAICD (BHP Group
Limited), Megan Pepper, BA (Hons), LLB (Hons), GDipACG, FCIS,
FGIA, GAICD (BHP Group Limited) and Geof Stapledon, BEc, LLB
(Hons), DPhil, FCIS (BHP Group Limited and BHP Group Plc). Each
individual has experience in a company secretariat role or other
relevant fields arising from time spent in roles within BHP, other
large listed companies or other relevant entities.
4.7 Indemnities and insurance
Rule 146 of the BHP Group Limited Constitution and Article 146
of the BHP Group Plc Articles of Association require each Company
to indemnify, to the extent permitted by law, each Officer of BHP
Group Limited and BHP Group Plc, respectively, against liability
incurred in, or arising out of, the conduct of the business of BHP
or the discharge of the duties of the Officer. The Directors named
in section 2.2, the Company Secretaries and other Officers
of BHP Group Limited and BHP Group Plc have the benefit
of this requirement, as do individuals who formerly held one
of those positions.
In accordance with this requirement, BHP Group Limited and
BHP Group Plc have entered into Deeds of Indemnity, Access
and Insurance (Deeds of Indemnity) with each of their respective
Directors. The Deeds of Indemnity are qualifying third party
indemnity provisions for the purposes of the UK Companies Act
2006 and each of these qualifying third party indemnities was
in force as at the date of this Directors’ Report.
We have a policy that BHP will, as a general rule, support and
hold harmless an employee, including an employee appointed
as a Director of a subsidiary who, while acting in good faith,
incurs personal liability to others as a result of working for BHP.
In addition, as part of the arrangements to effect the demerger
of South32, we agreed to indemnify certain former Officers of BHP
who transitioned to South32 from certain claims and liabilities
incurred in their capacity as Directors or Officers of South32.
From time to time, we engage our External Auditor, KPMG, to
conduct non-statutory audit work and provide other services
in accordance with our policy on the provision of other services
by the External Auditor. The terms of engagement in the United
Kingdom include that we must compensate and reimburse KPMG
LLP for, and protect KPMG LLP against, any loss, damage, expense,
or liability incurred by KPMG LLP in respect of third party claims
arising from a breach by BHP of any obligation under the
engagement terms.
We have insured against amounts that we may be liable to pay to
Directors, Company Secretaries or certain employees (including
former Officers) pursuant to Rule 146 of the Constitution of BHP
Group Limited and Article 146 of the Articles of Association of BHP
Group Plc or that we otherwise agree to pay by way of indemnity.
The insurance policy also insures Directors, Company Secretaries
and some employees (including former Officers) against certain
liabilities (including legal costs) they may incur in carrying out
their duties. For this Directors’ and Officers’ insurance, we paid
premiums of US$5,449,910 net during FY2019.
4.5 Remuneration and share interests
4.5.1 Remuneration
The policy for determining the nature and amount of emoluments
of the Executive Key Management Personnel (KMP) (including
the Executive Director) and the Non-executive Directors, and
information about the relationship between that policy and
BHP’s performance are set out in sections 3.2 and 3.3.
The remuneration tables contained in section 3.3 set out the
remuneration of members of the Executive KMP (including
the Executive Director) and the Non-executive Directors.
4.5.2 Directors
Section 3.3.20 sets out the relevant interests in shares in BHP
Group Limited and BHP Group Plc of the Directors who held office
during FY2019, at the beginning and end of FY2019. No rights or
options over shares in BHP Group Limited and BHP Group Plc are
held by any of the Non-executive Directors. Interests held by the
Executive Director under employee equity plans as at 30 June 2019
are set out in the tables showing interests in incentive plans
contained in section 3.3.18. Except for Andrew Mackenzie, Susan
Kilsby and Ian Cockerill, as at the date of this Directors’ Report, the
information pertaining to shares in BHP Group Limited and BHP
Group Plc held directly, indirectly or beneficially by Directors is the
same as set out in the table in section 3.3.20. Where applicable, the
information includes shares held in the name of a spouse,
superannuation fund, nominee and/or other controlled entities.
As at the date of this Directors’ Report, Andrew Mackenzie held:
• (either directly, indirectly or beneficially) 266,205 shares
in BHP Group Plc and 125,228 shares in BHP Group Limited;
• rights and options over nil shares in BHP Group Plc and
1,421,165 shares in BHP Group Limited.
As at the date of this Directors’ Report, Susan Kilsby holds
2,900 shares in BHP Group Limited and Ian Cockerill indirectly
holds 8,759 shares in BHP Group Limited and 3,500 shares
in BHP Group Plc.
We have not made available to any Director any interest
in a registered scheme.
4.5.3 Key Management Personnel
Section 3.3.20 sets out the relevant interests in shares in BHP
Group Limited and BHP Group Plc held directly, indirectly or
beneficially at the beginning and end of FY2019 by those senior
executives who were Executive KMP (other than the Executive
Director) during FY2019. Where applicable, the information
includes shares held in the name of a spouse, superannuation
fund, nominee and/or other controlled entities. Interests held by
members of the Executive KMP under employee equity plans as at
30 June 2019 are set out in the tables contained in section 3.3.18.
The table below sets out the relevant interests in shares in BHP
Group Limited and BHP Group Plc held directly, indirectly or
beneficially, as at the date of this Directors’ Report by those senior
executives who were Executive KMP (other than the Executive
Director) on that date. Where applicable, the information also
includes shares held in the name of a spouse, superannuation
fund, nominee and/or other controlled entities.
Executive KMP member
BHP Group entity
As at date of
Directors’ Report
Peter Beaven
Mike Henry
Daniel Malchuk
Geraldine Slattery
BHP Group Limited
BHP Group Plc
BHP Group Limited
BHP Group Plc
BHP Group Limited
BHP Group Plc
BHP Group Limited
BHP Group Plc
261,287
–
120,069
196,262
194,608
–
71,520
–
166 BHP Annual Report 2019
During FY2019, BHP paid defence costs for:
• certain employees and former employees of BHP Billiton Brasil
(Affected Individuals) in relation to the charges filed by the
Federal Prosecutors’ Office against BHP Billiton Brasil and the
Affected Individuals;
• certain employees and former employees of BHP in relation
to the putative class action complaint that was filed in the US
District Court for the Southern District of New York on behalf
of purchasers of American Depositary Receipts of BHP Group
Limited and BHP Group Plc between 25 September 2014 and
30 November 2015;
• certain employees and former employees of BHP in relation
to a putative class action complaint filed in the US District Court
for the Southern District of New York on behalf of all purchasers
of Samarco’s 10-year bond notes due 2022–2024 between
31 October 2012 and 30 November 2015.
Other than as set out above, no indemnity in favour of a current
or former officer of BHP Group Limited or BHP Group Plc, or in
favour of the External Auditor, was called on during FY2019.
4.8 Employee policies
Our people are fundamental to our success. We are committed
to shaping a culture where our employees are provided with
opportunities to develop, are valued and encouraged to
contribute towards making work safer, simpler and more
productive. We strongly believe that having employees who
are engaged and connected to BHP reinforces our shared
purpose aligned to Our Charter and will result in a more
productive workplace.
For more information on employee engagement and employee
policies, including communications and regarding disabilities,
refer to section 1.9.
4.9 Corporate governance
The Financial Conduct Authority’s Disclosure and Transparency
Rules (DTR 7.2) require that certain information be included in
a corporate governance statement. BHP has an existing practice
of issuing a corporate governance statement as part of our Annual
Report that is incorporated into the Directors’ Report by reference.
The information required by the Disclosure and Transparency Rules
and the Financial Conduct Authority’s Listing Rules (LR 9.8.6) is
located in section 2, with the exception of the information referred
to in LR 9.8.6 (1), (3) and (4) and DTR 7.2.6, which is located in
sections 4.2, 4.3, 4.5.2 and 4.18.
4.10 Dividends
A final dividend of 78 US cents per share will be paid on 25
September 2019, resulting in total dividends determined in respect
of FY2019 of 235 US cents per share. Details of the dividends paid
are set out in notes 15 ‘Share capital’ and 17 ‘Dividends’ in section 5,
and details of the Group’s dividend policy are set out in sections
1.4.3, 1.5.1 and 7.7.
4.11 Auditors
A copy of the declaration given by our External Auditor to
the Directors in relation to the auditors’ compliance with the
independence requirements of the Australian Corporations Act
2001 and the Professional Code of Conduct for External Auditors
is set out in section 5.5.
During FY2019, Lindsay Maxsted was the only officer of BHP who
previously held the role of director or partner of the Group’s External
Auditor at a time when the Group’s External Auditor conducted an
audit of BHP. His prior relationship with KPMG is outlined in section
2.10. Lindsay Maxsted was not part of the KPMG audit practice after
1980 and, while at KPMG, was not in any way involved in, or able
to influence, any audit activity associated with BHP.
Each person who held the office of Director at the date the Board
approved this Directors’ Report made the following statements:
• so far as the Director is aware, there is no relevant audit
information of which BHP’s External Auditor is unaware;
• the Director has taken all steps that he or she ought to have taken
as a Director to make him or herself aware of any relevant audit
information and to establish that BHP’s External Auditor is aware
of that information.
This confirmation is given pursuant to section 418 of the UK
Companies Act 2006 and should be interpreted in accordance
with, and subject to, those provisions.
Consistent with the UK and EU requirements in regard to audit firm
tender and rotation, BHP conducted an audit tender during FY2017.
KPMG, BHP’s current External Auditor, did not participate in the
tender due to UK and EU requirements, which require a new External
Auditor to be in place by 1 July 2023. After a comprehensive tender
process, at a meeting held on 16 August 2017, the Board selected
Ernst & Young as its independent registered public accounting firm
from the financial year beginning 1 July 2019, subject to approval
of shareholders at the Annual General Meetings in 2019.
The law in each of Australia and the United Kingdom requires
shareholders to approve the appointment of a new auditor. A
resolution to appoint Ernst & Young as the auditor of BHP Group
Limited and Ernst & Young LLP as the auditor of BHP Group Plc
will be proposed at the 2019 Annual General Meetings.
4.12 Non-audit services
Details of the non-audit services undertaken by BHP’s External
Auditor, including the amounts paid for non-audit services, are set
out in note 35 ‘Auditor’s remuneration’ in section 5. All non-audit
services were approved in accordance with the process set out
in the Policy on Provision of Audit and Other Services by the
External Auditor. No non-audit services were carried out that were
specifically excluded by the Policy on Provision of Audit and Other
Services by the External Auditor. Based on advice provided by the
Risk and Audit Committee, the Directors have formed the view that
the provision of non-audit services is compatible with the general
standard of independence for auditors, and that the nature of
non-audit services means that auditor independence was not
compromised. For more information about our policy in relation
to the provision of non-audit services by the auditor, refer
to section 2.13.1.
BHP Annual Report 2019 167
i
S
t
r
a
t
e
g
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
a
t
B
H
P
R
e
m
u
n
e
r
a
t
i
o
n
R
e
p
o
r
t
4
D
i
r
e
c
t
o
r
s
’
R
e
p
o
r
t
i
F
n
a
n
c
a
i
l
S
t
a
t
e
m
e
n
t
s
A
d
d
i
t
i
o
n
a
l
i
n
f
o
r
m
a
t
i
o
n
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
4.18 Share capital, restrictions
on transfer of shares and other
additional information
Information relating to BHP Group Plc’s share capital structure,
restrictions on the holding or transfer of its securities or on the
exercise of voting rights attaching to such securities, certain
agreements triggered on a change of control and the existence
of branches of BHP outside of the United Kingdom, is set out
in the following sections:
• Section 1.4.6 (Our locations)
• Section 4.2 (Share capital and buy-back programs)
• Section 7.3 (Organisational structure)
• Section 7.4 (Material contracts)
• Section 7.5 (Constitution)
• Section 7.6 (Share ownership)
• Section 7.9 (Government regulations)
• Note 15 ‘Share capital’ and note 23 ‘Employee share ownership
plans’ in section 5.
As at the date of this Directors’ Report, there were 17,234,372
unvested equity awards outstanding in relation to BHP Group
Limited ordinary shares and 417,515 unvested equity awards
outstanding in relation to BHP Group Plc ordinary shares. The
expiry dates of these unvested equity awards range between
August 2020 and August 2023 and there is no exercise price.
No options over unissued shares or unissued interests in BHP
have been granted since the end of FY2019 and no shares or
interests were issued as a result of the exercise of an option over
unissued shares or interests since the end of FY2019. Further
details are set out in note 23 ‘Employee share ownership plans’
in section 5. Details of movements in share capital during and since
the end of FY2019 are set out in note 15 ‘Share capital’ in section 5.
The Directors’ Report is approved in accordance with a resolution
of the Board.
Ken MacKenzie
Chairman
Dated: 5 September 2019
Andrew Mackenzie
Chief Executive Officer
4.13 Political donations
No political contributions/donations for political purposes were
made by BHP to any political party, politician, elected official
or candidate for public office during FY2019. (1)
4.14 Exploration, research
and development
Companies within the Group carry out exploration and research
and development necessary to support their activities. Details
are provided in sections 1.6.3, 1.11 to 1.12 and 6.3.
4.15 ASIC Instrument 2016/191
BHP Group Limited is an entity to which Australian Securities and
Investments Commission (ASIC) Corporations (Rounding in
Financial/Directors’ Reports) Instrument 2016/191 dated 24 March
2016 applies. Amounts in this Directors’ Report and the Financial
Statements, except estimates of future expenditure or where
otherwise indicated, have been rounded to the nearest million
dollars in accordance with ASIC Instrument 2016/191.
4.16 Proceedings on behalf
of BHP Group Limited
No proceedings have been brought on behalf of BHP Group
Limited, nor has any application been made, under section 237
of the Australian Corporations Act 2001.
4.17 Performance in relation
to environmental regulation
BHP seeks to be compliant with all applicable environmental laws
and regulations relevant to its operations. We monitor compliance
on a regular basis, including through external and internal means,
to minimise the risk of non-compliance. For more information on
BHP’s performance in relation to health, safety and the
environment, refer to section 1.10.
Fines and prosecutions
For the purposes of section 299 (1)(f) of the Australian Corporations
Act 2001, in FY2019 BHP received five fines in relation to Australian
environmental laws and regulations at our operated assets, the
total amount payable being US$45,529. One fine was received
at Peak Downs: mine affected water (US$9,143). Two fines were
received at Blackwater: contaminated water and maintenance of
other measures (US$17,922). One fine was received at Caval Ridge:
mine affected water (US$9,157) and one fine at Saraji: contaminated
water (US$9,307).
Greenhouse gas emissions
The UK Companies Act 2006 requires BHP, to the extent practicable,
to obtain relevant information on the Group’s annual quantity of
greenhouse gas emissions, which is reported in tonnes of carbon
dioxide equivalent. In accordance with those UK requirements,
information on BHP’s total FY2019 greenhouse gas emissions and
intensity has been included in sections 1.5.2 and 1.10.8.
For more information on environmental performance, including
environmental regulation, refer to section 1.10 and the Sustainability
Report 2019, which is available online at bhp.com.
(1) Note that Australian Electoral Commission (AEC) disclosure requirements are
broad, such that amounts that are not political donations can be reportable
for AEC purposes. For example, where a political party or organisation owns
shares in BHP, the AEC filing requires the political party or organisation to
disclose the dividend payments received in respect of their shareholding.
168 BHP Annual Report 2019
Section 5
Financial
Statements
About these Financial Statements
Reporting entity
In 2001, BHP Billiton Limited (previously known as BHP Limited),
an Australian-listed company, and BHP Billiton Plc (previously
known as Billiton Plc), a UK listed company, entered into a Dual
Listed Company (DLC) merger. In November 2018, BHP Billiton
Limited and BHP Billiton Plc changed their names to BHP Group
Limited and BHP Group Plc, respectively. These entities and
their subsidiaries operate together as a single for-profit
economic entity (referred to as ‘BHP’ or ‘the Group’) with a
common Board of Directors, unified management structure
and joint objectives. In effect, the DLC structure provides the
same voting rights and dividend entitlements from BHP Group
Limited and BHP Group Plc irrespective of whether investors
hold shares in BHP Group Limited or BHP Group Plc.
Group and related party information is presented in note 31
'Related party transactions' in section 5.1. This details
transactions between the Group’s subsidiaries, associates,
joint arrangements and other related parties. The nature of the
operations and principal activities of the Group are described
in the segment information (refer to note 1 'Segment reporting'
in section 5.1).
Presentation of the Consolidated Financial Statements
BHP Group Limited and BHP Group Plc Directors have
included information in this report they deem to be material
and relevant to the understanding of the Consolidated
Financial Statements (the Financial Statements). Disclosure
may be considered material and relevant if the dollar amount
is significant due to its size or nature, or the information
is important to understand the:
• Group’s current year results;
• impact of significant changes in the Group’s business; or
• aspects of the Group’s operations that are important
to future performance.
These Financial Statements were approved by the Board
of Directors on 5 September 2019. The Directors have the
authority to amend the Financial Statements after issuance.
In this section
Financial Statements
5.1 Consolidated Financial Statements
5.1.1 Consolidated Income Statement
5.1.2 Consolidated Statement of Comprehensive Income
5.1.3 Consolidated Balance Sheet
5.1.4 Consolidated Cash Flow Statement
5.1.5 Consolidated Statement of Changes in Equity
5.1.6 Notes to the Financial Statements
5.2 BHP Group Plc
5.3 Directors’ declaration
5.4 Statement of Directors’ responsibilities in respect
of the Annual Report and the Financial Statements
5.5 Lead Auditor’s Independence Declaration under
Section 307C of the Australian Corporations Act 2001
Independent Auditors’ reports
5.6
5.7 Supplementary oil and gas information – unaudited
Notes to the Financial Statements
Performance
1
2
3
4
5
6
7
Segment reporting
Revenue
Exceptional items
Significant events – Samarco dam failure
Expenses and other income
Income tax expense
Earnings per share
Working capital
8
9
10
Trade and other receivables
Trade and other payables
Inventories
Resource assets
Property, plant and equipment
11
12
Intangible assets
13 Deferred tax balances
14 Closure and rehabilitation provisions
Capital Structure
15 Share capital
16 Other equity
17 Dividends
18 Provisions for dividends and other liabilities
Financial Management
19 Net debt
20 Net finance costs
21
Financial risk management
Employee matters
22 Key management personnel
23 Employee share ownership plans
24 Employee benefits, restructuring and
post-retirement employee benefits provisions
25 Pension and other post-retirement obligations
26 Employees
Group and related party information
27 Discontinued operations
28 Subsidiaries
Investments accounted for using the equity method
29
30
Interests in joint operations
31 Related party transactions
Unrecognised items and uncertain events
32 Commitments
33 Contingent liabilities
34 Subsequent events
Other items
35 Auditor’s remuneration
36 BHP Group Limited
37 Deed of Cross Guarantee
38 New and amended accounting standards
and interpretations
BHP Annual Report 2019 169
5.1 Consolidated Financial Statements
5.1.1 Consolidated Income Statement for the year ended 30 June 2019
Continuing operations
Revenue
Other income
Expenses excluding net finance costs
(Loss)/profit from equity accounted investments, related impairments and expenses
Profit from operations
Financial expenses
Financial income
Net finance costs
Profit before taxation
Income tax expense
Royalty-related taxation (net of income tax benefit)
Total taxation expense
Profit after taxation from Continuing operations
Discontinued operations
Loss after taxation from Discontinued operations
Profit after taxation from Continuing and Discontinued operations
Attributable to non-controlling interests
Attributable to BHP shareholders
Basic earnings per ordinary share (cents)
Diluted earnings per ordinary share (cents)
Basic earnings from Continuing operations per ordinary share (cents)
Diluted earnings from Continuing operations per ordinary share (cents)
The accompanying notes form part of these Financial Statements.
Notes
2
5
5
29
20
6
27
7
7
7
7
2019
US$M
44,288
393
(28,022)
(546)
16,113
(1,510)
446
(1,064)
15,049
(5,335)
(194)
(5,529)
9,520
(335)
9,185
879
8,306
160.3
159.9
166.9
166.5
2018
US$M
Restated
43,129
247
(27,527)
147
15,996
(1,567)
322
(1,245)
14,751
(6,879)
(128)
(7,007)
7,744
(2,921)
4,823
1,118
3,705
69.6
69.4
125.0
124.6
2017
US$M
Restated
35,740
662
(24,120)
272
12,554
(1,560)
143
(1,417)
11,137
(4,276)
(167)
(4,443)
6,694
(472)
6,222
332
5,890
110.7
110.4
119.8
119.5
5.1.2 Consolidated Statement of Comprehensive Income for the year ended 30 June 2019
Profit after taxation from Continuing and Discontinued operations
Other comprehensive income
Items that may be reclassified subsequently to the income statement:
Net valuation gains/(losses) on investments taken to equity
Hedges:
(Losses)/gains taken to equity
Losses/(gains) transferred to the income statement
Exchange fluctuations on translation of foreign operations taken to equity
Exchange fluctuations on translation of foreign operations transferred to income statement
Tax recognised within other comprehensive income
Total items that may be reclassified subsequently to the income statement
Items that will not be reclassified to the income statement:
Re-measurement (losses)/gains on pension and medical schemes
Equity investments held at fair value
Tax recognised within other comprehensive income
Total items that will not be reclassified to the income statement
Total other comprehensive loss
Total comprehensive income
Attributable to non-controlling interests
Attributable to BHP shareholders
The accompanying notes form part of these Financial Statements.
Notes
6
6
2019
US$M
9,185
−
(327)
299
1
(6)
8
(25)
(20)
1
19
−
(25)
9,160
878
8,282
2018
US$M
4,823
11
82
(215)
2
−
36
(84)
1
−
(14)
(13)
(97)
4,726
1,118
3,608
2017
US$M
6,222
(1)
351
(432)
(1)
−
24
(59)
36
−
(26)
10
(49)
6,173
332
5,841
170 BHP Annual Report 2019
5.1.3 Consolidated Balance Sheet as at 30 June 2019
Notes
2019
US$M
2018
US$M
ASSETS
Current assets
Cash and cash equivalents
Trade and other receivables
Other financial assets
Inventories
Assets held for sale
Current tax assets
Other
Total current assets
Non-current assets
Trade and other receivables
Other financial assets
Inventories
Property, plant and equipment
Intangible assets
Investments accounted for using the equity method
Deferred tax assets
Other
Total non-current assets
Total assets
LIABILITIES
Current liabilities
Trade and other payables
Interest bearing liabilities
Liabilities held for sale
Other financial liabilities
Current tax payable
Provisions
Deferred income
Total current liabilities
Non-current liabilities
Trade and other payables
Interest bearing liabilities
Other financial liabilities
Non-current tax payable
Deferred tax liabilities
Provisions
Deferred income
Total non-current liabilities
Total liabilities
Net assets
EQUITY
Share capital – BHP Group Limited
Share capital – BHP Group Plc
Treasury shares
Reserves
Retained earnings
Total equity attributable to BHP shareholders
Non-controlling interests
Total equity
The accompanying notes form part of these Financial Statements.
19
8
21
10
8
21
10
11
12
29
13
9
19
21
4, 14, 18, 24
9
19
21
13
4, 14, 18, 24
16
16
15,613
3,462
87
3,840
−
124
247
23,373
313
1,303
768
68,041
675
2,569
3,764
55
77,488
100,861
6,717
1,661
−
127
1,546
2,175
113
15,871
3,096
200
3,764
11,939
106
154
35,130
180
999
1,141
67,182
778
2,473
4,041
69
76,863
111,993
5,977
2,736
1,222
138
1,773
2,025
118
12,339
13,989
5
23,167
896
187
3,234
8,928
281
36,698
49,037
51,824
1,111
1,057
(32)
2,285
42,819
47,240
4,584
51,824
3
24,069
1,093
137
3,472
8,223
337
37,334
51,323
60,670
1,186
1,057
(5)
2,290
51,064
55,592
5,078
60,670
The Financial Statements were approved by the Board of Directors on 5 September 2019 and signed on its behalf by:
Ken MacKenzie
Chairman
Andrew Mackenzie
Chief Executive Officer
BHP Annual Report 2019 171
i
S
t
r
a
t
e
g
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
a
t
B
H
P
R
e
m
u
n
e
r
a
t
i
o
n
R
e
p
o
r
t
D
i
r
e
c
t
o
r
s
’
R
e
p
o
r
t
5
i
F
n
a
n
c
a
i
l
S
t
a
t
e
m
e
n
t
s
A
d
d
i
t
i
o
n
a
l
i
n
f
o
r
m
a
t
i
o
n
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
5.1.4 Consolidated Cash Flow Statement for the year ended 30 June 2019
Notes
2019
US$M
2018
US$M
15,049
14,751
2017
US$M
11,137
6,184
193
1,417
(272)
194
267
(687)
512
(333)
18,612
636
164
(1,148)
(140)
337
(2,585)
15,876
928
16,804
(3,697)
(966)
610
(234)
529
187
(153)
(3,724)
(437)
−
(4,161)
1,577
36
(7,114)
(108)
−
(2,921)
(575)
(9,105)
(28)
(9,133)
3,047
463
−
10,276
322
14,108
5,829
264
1,064
546
308
(211)
298
406
(125)
23,428
516
443
(1,346)
296
59
(5,999)
17,397
474
17,871
(6,250)
(873)
516
(630)
145
4
(289)
(7,377)
(443)
10,427
2,607
250
(160)
(2,604)
(188)
(5,220)
(11,395)
(1,198)
(20,515)
(13)
(20,528)
(10,495)
18
10,427
15,813
(170)
15,593
6,288
333
1,245
(147)
597
(662)
(182)
719
7
22,949
709
290
(1,177)
(292)
17
(4,935)
17,561
900
18,461
(4,979)
(874)
641
204
89
−
(141)
(5,060)
(861)
−
(5,921)
528
(218)
(4,188)
(171)
−
(5,220)
(1,582)
(10,851)
(40)
(10,891)
1,650
(1)
−
14,108
56
15,813
Operating activities
Profit before taxation
Adjustments for:
Depreciation and amortisation expense
Impairments of property, plant and equipment, financial assets and intangibles
Net finance costs
Loss/(profit) from equity accounted investments, related impairments and expenses
Other
Changes in assets and liabilities:
Trade and other receivables
Inventories
Trade and other payables
Provisions and other assets and liabilities
Cash generated from operations
Dividends received
Interest received
Interest paid
Proceeds/(settlements) of cash management related instruments
Net income tax and royalty-related taxation refunded
Net income tax and royalty-related taxation paid
Net operating cash flows from Continuing operations
Net operating cash flows from Discontinued operations
Net operating cash flows
Investing activities
Purchases of property, plant and equipment
Exploration expenditure
Exploration expenditure expensed and included in operating cash flows
Net investment and funding of equity accounted investments
Proceeds from sale of assets
Proceeds from divestment of subsidiaries, operations and joint operations, net of their cash
Other investing
Net investing cash flows from Continuing operations
Net investing cash flows from Discontinued operations
Proceeds from divestment of Onshore US, net of its cash
Net investing cash flows
Financing activities
Proceeds from interest bearing liabilities
(Settlements)/proceeds of debt related instruments
Repayment of interest bearing liabilities
Purchase of shares by Employee Share Ownership Plan (ESOP) Trusts
Share buy-back – BHP Group Limited
Dividends paid
Dividends paid to non-controlling interests
Net financing cash flows from Continuing operations
Net financing cash flows from Discontinued operations
Net financing cash flows
27
27
27
27
Net (decrease)/increase in cash and cash equivalents from Continuing operations
Net increase/(decrease) in cash and cash equivalents from Discontinued operations
Proceeds from divestment of Onshore US, net of its cash
Cash and cash equivalents, net of overdrafts, at the beginning of the financial year
Foreign currency exchange rate changes on cash and cash equivalents
Cash and cash equivalents, net of overdrafts, at the end of the financial year
19
The accompanying notes form part of these Financial Statements.
172 BHP Annual Report 2019
5.1.5 Consolidated Statement of Changes in Equity for the year ended 30 June 2019
Attributable to BHP shareholders
Share capital
Treasury shares
BHP
Group
Limited
BHP
Group
Plc
(5)
−
(5)
−
−
−
–
−
Reserves
2,290
−
2,290
Retained
earnings
51,064
(7)
51,057
(24)
8,306
(182)
(6)
−
−
(61)
18
(100)
(18)
Total equity
attributable
to BHP
shareholders
Non-
controlling
interests
55,592
(7)
55,585
8,282
(188)
−
−
5,078
−
5,078
878
−
−
−
Total
equity
60,670
(7)
60,663
9,160
(188)
−
−
US$M
Balance as at 1 July 2018
Impact of adopting IFRS 9
Balance as at 1 July 2018
Total comprehensive income
Transactions with owners:
Purchase of shares by ESOP Trusts
Employee share awards exercised
net of employee contributions
Employee share awards forfeited
Accrued employee entitlement for
unexercised awards
Dividends
BHP Group Limited shares bought
back and cancelled
Divestment of subsidiaries,
operations and joint operations
Transfer to non-controlling interests
BHP
Group
Limited
1,186
−
1,186
BHP
Group
Plc
1,057
−
1,057
−
−
−
−
−
−
(75)
−
−
−
−
−
−
−
−
−
−
−
155
–
−
−
−
−
−
Balance as at 30 June 2019
1,111
1,057
(32)
Balance as at 1 July 2017
Total comprehensive income
Transactions with owners:
Purchase of shares by ESOP Trusts
Employee share awards exercised
net of employee contributions
Employee share awards forfeited
Accrued employee entitlement
for unexercised awards
Distribution to non-controlling
interests
Dividends
Transfer to non-controlling interests
1,186
−
1,057
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
Balance as at 30 June 2018
1,186
1,057
Balance as at 1 July 2016
Total comprehensive income
Transactions with owners:
Purchase of shares by ESOP Trusts
Employee share awards exercised
net of employee contributions
Employee share awards forfeited
Accrued employee entitlement
for unexercised awards
Distribution to non-controlling
interests
Dividends
Divestment of subsidiaries,
operations and joint operations
1,186
−
1,057
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
Balance as at 30 June 2017
1,186
1,057
The accompanying notes form part of these Financial Statements.
(2)
−
(159)
156
−
−
−
−
−
(5)
(7)
−
(105)
110
−
−
−
−
−
(2)
i
S
t
r
a
t
e
g
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
a
t
B
H
P
R
e
m
u
n
e
r
a
t
i
o
n
R
e
p
o
r
t
D
i
r
e
c
t
o
r
s
’
R
e
p
o
r
t
5
i
F
n
a
n
c
a
i
l
S
t
a
t
e
m
e
n
t
s
A
d
d
i
t
i
o
n
a
l
i
n
f
o
r
m
a
t
i
o
n
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
6
−
−
−
−
−
−
−
(1)
−
(12)
13
−
−
−
−
−
−
(26)
−
(3)
28
−
−
−
−
−
138
−
−
(11,302)
138
(11,302)
−
(1,205)
138
(12,507)
−
−
(1)
(5,199)
(5,274)
−
(5,274)
−
−
−
(1)
(168)
1
(168)
−
2,285
42,819
47,240
4,584
51,824
2,400
(87)
52,618
3,695
57,258
3,608
5,468
1,118
62,726
4,726
−
(139)
(2)
123
−
−
(5)
−
(30)
2
−
−
(5,221)
−
(171)
−
−
123
−
−
−
−
(171)
−
−
123
−
(5,221)
(5)
(14)
(1,499)
5
(14)
(6,720)
−
2,290
51,064
55,592
5,078
60,670
2,538
(59)
49,542
5,900
54,290
5,841
5,781
332
60,071
6,173
−
(167)
(18)
106
−
−
−
−
29
18
−
−
(2,871)
−
(108)
−
−
106
−
(2,871)
−
−
−
−
−
(16)
(601)
(28)
(108)
−
−
106
(16)
(3,472)
(28)
(1)
2,400
52,618
57,258
5,468
62,726
BHP Annual Report 2019 173
Basis of preparation
The Group’s Financial Statements as at and for the year ended
30 June 2019:
• is a consolidated general purpose financial report;
• has been prepared in accordance with the requirements of the:
– Australian Corporations Act 2001;
– UK Companies Act 2006;
• has been prepared in accordance with accounting standards and
interpretations collectively referred to as ‘IFRS’ in this report, which
encompass the:
– International Financial Reporting Standards and interpretations
as issued by the International Accounting Standards Board;
– Australian Accounting Standards, being Australian equivalents
to International Financial Reporting Standards and interpretations
as issued by the Australian Accounting Standards Board (AASB);
– International Financial Reporting Standards and interpretations
adopted by the European Union (EU);
• is prepared on a going concern basis;
• measures items on the basis of historical cost principles, except
for the following items:
– derivative financial instruments and certain other financial
assets and liabilities, which are carried at fair value;
– non-current assets or disposal groups that are classified as
held-for-sale or held-for-distribution, which are measured at
the lower of carrying amount and fair value less costs to sell;
• includes significant accounting policies in the notes to the
Financial Statements that summarise the recognition and
measurement basis used and are relevant to an understanding
of the Financial Statements;
• includes selected financial information of the BHP Group Limited
parent entity in note 36 ‘BHP Group Limited’. Financial Statements
of the BHP Group Plc parent entity are presented in section 5.2
‘BHP Group Plc’;
• applies a presentation currency of US dollars, consistent with the
predominant functional currency of the Group’s operations. Amounts
are rounded to the nearest million dollars, unless otherwise stated,
in accordance with ASIC (Rounding in Financial/Directors’ Reports)
Instrument 2016/191;
• presents reclassified comparative information where required for
consistency with the current year’s presentation;
• adopts all new and amended standards and interpretations under
IFRS issued by the relevant bodies (listed above), that are mandatory
for application beginning on or after 1 July 2018. The accounting
policies have been consistently applied in all prior years presented
with the exception of the new standards adopted from 1 July 2018.
Refer to note 38 ‘New and amended accounting standards and
interpretations’ for the impact on the Financial Statements;
• has not early adopted any standards and interpretations that have
been issued or amended but are not yet effective.
The accounting policies are consistently applied by all entities
included in the Financial Statements.
Principles of consolidation
In preparing the Financial Statements the effects of all intragroup
balances and transactions have been eliminated.
A list of significant entities in the Group, including subsidiaries, joint
arrangements and associates at year-end is contained in note 28
‘Subsidiaries’, note 29 ‘Investments accounted for using the equity
method’ and note 30 ‘Interests in joint operations’.
Subsidiaries: The Financial Statements of the Group include the
consolidation of BHP Group Limited, BHP Group Plc and their
respective subsidiaries, being the entities controlled by the parent
entities during the year. Control exists where the Group:
• is exposed to, or has rights to, variable returns from its involvement
with the entity;
• has the ability to affect those returns through its power to direct
the activities of the entity.
The ability to approve the operating and capital budget of a subsidiary
and the ability to appoint key management personnel are decisions
that demonstrate that the Group has the existing rights to direct the
relevant activities of a subsidiary. Where the Group’s interest is less
than 100 per cent, the interest attributable to outside shareholders
is reflected in non-controlling interests. The financial statements of
subsidiaries are prepared for the same reporting period as the Group.
The acquisition method of accounting is used to account for the
Group’s business combinations.
Joint arrangements: The Group undertakes a number of business
activities through joint arrangements, which exist when two or more
parties have joint control. Joint arrangements are classified as either
joint operations or joint ventures, based on the contractual rights
and obligations between the parties to the arrangement:
• Joint operations: A joint operation is an arrangement in which the
Group shares joint control, primarily via contractual arrangements
with other parties. In a joint operation, the Group has rights to the
assets and obligations for the liabilities relating to the arrangement.
This includes situations where the parties benefit from the joint
activity through a share of the output, rather than by receiving
a share of the results of trading. In relation to the Group’s interest
in a joint operation, the Group recognises: its assets and liabilities,
including its share of any assets and liabilities held or incurred
jointly; revenue from the sale of its share of the output and its share
of any revenue generated from the sale of the output by the joint
operation; and its expenses including its share of expenses. All
such amounts are measured in accordance with the terms of the
arrangement, which is usually in proportion to the Group’s interest
in the joint operation.
• Joint ventures: A joint venture is a joint arrangement in which
the parties that share joint control have rights to the net assets
of the arrangement. A separate vehicle, not the parties, will have
the rights to the assets and obligations to the liabilities relating
to the arrangement. More than an insignificant share of output
from a joint venture is sold to third parties, which indicates the
joint venture is not dependent on the parties to the arrangement
for funding, nor do the parties have an obligation for the liabilities
of the arrangement. Joint ventures are accounted for using the
equity accounting method.
Associates: The Group accounts for investments in associates using
the equity accounting method. An entity is considered an associate
where the Group is deemed to have significant influence but not
control or joint control. Significant influence is presumed to exist
where the Group:
• has over 20 per cent but less than 50 per cent of the voting rights
of an entity, unless it can be clearly demonstrated that this is not
the case; or
• holds less than 20 per cent of the voting rights of an entity;
however, has the power to participate in the financial and operating
policy decisions affecting the entity.
The Group uses the term ‘equity accounted investments’ to refer
to joint ventures and associates collectively.
174 BHP Annual Report 2019
Foreign currencies
Transactions related to the Group’s worldwide operations are
conducted in a number of foreign currencies. The majority of the
subsidiaries, joint arrangements and associates within each of the
operations have assessed US dollars as the functional currency,
however, some subsidiaries, joint arrangements and associates
have functional currencies other than US dollars.
Transactions and monetary items denominated in foreign currencies
are translated into US dollars as follows:
Foreign currency item
Applicable exchange rate
Transactions
Date of underlying transaction
Monetary assets and liabilities
Period-end rate
Critical accounting policies, judgements
and estimates
The Group has identified a number of critical accounting
policies under which significant judgements, estimates
and assumptions are made. All judgements, estimates
and assumptions are based on most current facts and
circumstances and are reassessed on an ongoing basis.
Actual results may differ for these estimates under different
assumptions and conditions. This may materially affect
financial results and the carrying amount of assets and
liabilities to be reported in the next and future periods.
Significant judgements and key estimates and assumptions
made in applying these critical accounting policies are
embedded within the following notes:
Foreign exchange gains and losses resulting from translation are
recognised in the income statement, except for qualifying cash
flow hedges (which are deferred to equity) and foreign exchange
gains or losses on foreign currency provisions for site closure and
rehabilitation costs (which are capitalised in property, plant and
equipment for operating sites).
Note
4
6
10
Significant events – Samarco dam failure
Taxation
Inventories
On consolidation, the assets, liabilities, income and expenses of
non-US dollar denominated functional currency entities are translated
into US dollars using the following applicable exchange rates:
Foreign currency amount
Applicable exchange rate
Income and expenses
Date of underlying transaction
Assets and liabilities
Equity
Reserves
Period-end rate
Historical rate
Historical rate
Foreign exchange differences resulting from translation are initially
recognised in the foreign currency translation reserve and
subsequently transferred to the income statement on disposal
of a foreign operation.
11 and 12
Exploration and evaluation
11
11
11
Development expenditure
Overburden removal costs
Depreciation of property, plant
and equipment
11 and 12
Impairments of non-current assets –
recoverable amount
14
Closure and rehabilitation provisions
Reserve estimates
Reserves are estimates of the amount of product that
can be economically and legally extracted from the
Group’s properties. In order to estimate reserves, estimates
are required for a range of geological, technical and
economic factors, including quantities, grades, production
techniques, recovery rates, production costs, transport
costs, commodity demand, commodity prices and
exchange rates.
Estimating the quantity and/or grade of reserves requires
the size, shape and depth of ore bodies or fields to be
determined by analysing geological data such as drilling
samples. This process may require complex and difficult
geological judgements to interpret the data.
Additional information on the Group’s mineral and oil
and gas reserves and resources can be viewed within
section 6.3.
Section 6.3 is unaudited and does not form part of these
Financial Statements.
Reserve impact on financial reporting
Estimates of reserves may change from period-to-period
as the economic assumptions used to estimate reserves
change and additional geological data is generated during
the course of operations. Changes in reserves may affect
the Group’s financial results and financial position in a
number of ways, including:
• asset carrying values may be affected due to changes
in estimated future production levels;
• depreciation, depletion and amortisation charged in the
income statement may change where such charges are
determined on the units of production basis, or where
the useful economic lives of assets change;
• overburden removal costs recorded on the balance
sheet or charged to the income statement may change
due to changes in stripping ratios or the units of
production basis of depreciation;
• decommissioning, site restoration and environmental
provisions may change where changes in estimated
reserves affect expectations about the timing or cost
of these activities;
• the carrying amount of deferred tax assets may change
due to changes in estimates of the likely recovery of the
tax benefits.
BHP Annual Report 2019 175
i
S
t
r
a
t
e
g
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
a
t
B
H
P
R
e
m
u
n
e
r
a
t
i
o
n
R
e
p
o
r
t
D
i
r
e
c
t
o
r
s
’
R
e
p
o
r
t
5
i
F
n
a
n
c
a
i
l
S
t
a
t
e
m
e
n
t
s
A
d
d
i
t
i
o
n
a
l
i
n
f
o
r
m
a
t
i
o
n
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
5.1.6 Notes to the Financial Statements
Performance
1 Segment reporting
Reportable segments
The Group operated four reportable segments during FY2019, which are aligned with the commodities that are extracted and marketed
and reflect the structure used by the Group’s management to assess the performance of the Group.
Reportable segment
Principal activities
Petroleum
Exploration, development and production of oil and gas
Copper
Iron Ore
Coal
Mining of copper, silver, zinc, molybdenum, uranium and gold
Mining of iron ore
Mining of metallurgical coal and energy coal
Unless otherwise noted, the segment reporting information excludes Discontinued operations, being the Petroleum Onshore US operations
comprising the Eagle Ford, Haynesville, Permian and Fayetteville oil and gas assets.
Group and unallocated items includes functions and other unallocated operations, including Potash, Nickel West and consolidation adjustments.
Revenue not attributable to reportable segments comprises the sale of freight and fuel to third parties, as well as revenues from unallocated
operations. Exploration and technology activities are recognised within relevant segments.
Year ended 30 June 2019
US$M
Revenue
Inter-segment revenue
Total revenue
Underlying EBITDA
Depreciation and amortisation (1)
Impairment losses (2)
Underlying EBIT
Exceptional items (3)
Net finance costs
Profit before taxation
Petroleum
5,853
77
5,930
3,801
(1,560)
(21)
2,220
−
Copper
10,838
−
10,838
4,550
(1,835)
(128)
2,587
−
Iron Ore
17,251
4
17,255
11,129
(1,653)
(79)
9,397
(971)
Capital expenditure (cash basis)
645
2,735
1,611
(Loss)/profit from equity accounted investments,
related impairments and expenses
Investments accounted for using the equity method
Total assets
Total liabilities
(2)
239
12,465
5,237
303
1,472
27,428
3,340
(945)
−
22,592
5,106
Group and
unallocated
items/
eliminations
1,225
(81)
1,144
(389)
(149)
(1)
(539)
19
Group total
44,288
−
44,288
23,158
(5,829)
(264)
17,065
(952)
(1,064)
15,049
604
6,250
(5)
5
26,252
32,904
(546)
2,569
100,861
49,037
Coal
9,121
−
9,121
4,067
(632)
(35)
3,400
−
655
103
853
12,124
2,450
176 BHP Annual Report 2019
1 Segment reporting continued
Year ended 30 June 2018
US$M
Revenue
Inter-segment revenue
Total revenue
Underlying EBITDA
Depreciation and amortisation (1)
Impairment losses (2)
Underlying EBIT
Exceptional items (3)
Net finance costs
Profit before taxation
Capital expenditure (cash basis)
(Loss)/profit from equity accounted investments,
related impairments and expenses
Investments accounted for using the equity method
Total assets
Total liabilities
Year ended 30 June 2017
US$M
Revenue
Inter-segment revenue
Total revenue
Underlying EBITDA
Depreciation and amortisation (1)
Impairment losses (2)
Underlying EBIT
Exceptional items (3)
Net finance costs
Profit before taxation
Capital expenditure (cash basis)
(Loss)/profit from equity accounted investments,
related impairments and expenses
Investments accounted for using the equity method
Total assets
Total liabilities
Petroleum
Copper
Iron Ore
5,333
75
5,408
3,341
(1,719)
(76)
1,546
−
656
(4)
249
12,938
4,886
12,781
−
12,781
6,522
(1,920)
(213)
4,389
−
14,797
13
14,810
8,930
(1,721)
(14)
7,195
(539)
2,428
1,074
467
1,335
26,824
3,145
(509)
−
22,208
3,888
Petroleum
Copper
Iron Ore
4,639
83
4,722
3,117
(1,648)
(102)
1,367
−
917
(3)
264
13,726
4,715
7,942
−
7,942
3,545
(1,525)
(14)
2,006
(546)
1,484
295
1,306
26,743
2,643
14,606
18
14,624
9,077
(1,828)
(52)
7,197
(203)
805
(172)
−
22,781
3,606
Group and
unallocated
items/
eliminations(4)
Group total
1,329
(88)
1,241
(7)
(242)
(1)
(250)
(27)
43,129
−
43,129
23,183
(6,288)
(333)
16,562
(566)
(1,245)
14,751
412
4,979
1
6
37,766
37,000
147
2,473
111,993
51,323
Group and
unallocated
items/
eliminations(4)
Group total
975
(101)
874
(173)
(252)
(5)
(430)
(51)
35,740
−
35,740
19,350
(5,972)
(188)
13,190
(636)
(1,417)
11,137
245
3,697
−
5
41,760
41,456
272
2,448
117,006
54,280
Coal
8,889
−
8,889
4,397
(686)
(29)
3,682
−
409
192
883
12,257
2,404
Coal
7,578
−
7,578
3,784
(719)
(15)
3,050
164
246
152
873
11,996
1,860
(1) Depreciation and amortisation excludes exceptional items of US$ nil (FY2018: US$ nil; FY2017: US$212 million).
(2) Impairment losses excludes exceptional items of US$ nil (FY2018: US$ nil; FY2017: US$5 million).
(3) Exceptional items reported in Group and unallocated include Samarco dam failure costs of US$(31) million (FY2018: US$(27) million; FY2017: US$(51) million) and
Samarco related other income of US$50 million (FY2018: US$ nil; FY2017: US$ nil). Refer to note 3 ‘Exceptional items’ for further information.
(4) Total assets and total liabilities include balances for the years ended 30 June 2018 and 2017 relating to Onshore US assets.
BHP Annual Report 2019 177
i
S
t
r
a
t
e
g
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
a
t
B
H
P
R
e
m
u
n
e
r
a
t
i
o
n
R
e
p
o
r
t
D
i
r
e
c
t
o
r
s
’
R
e
p
o
r
t
5
i
F
n
a
n
c
a
i
l
S
t
a
t
e
m
e
n
t
s
A
d
d
i
t
i
o
n
a
l
i
n
f
o
r
m
a
t
i
o
n
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
1 Segment reporting continued
Geographical information
Australia
Europe
China
Japan
India
South Korea
Rest of Asia
North America
South America
Rest of world
Australia
North America (1)
South America
Rest of world
Unallocated assets (2)
Revenue by location of customer
2019
US$M
2,568
1,875
24,274
4,193
2,479
2,550
2,940
2,442
662
305
44,288
2018
US$M
2,304
1,886
22,660
4,628
2,439
2,588
2,620
2,715
1,054
235
43,129
2017
US$M
2,037
1,641
18,644
3,036
1,891
2,271
3,152
2,233
649
186
35,740
Non-current assets by location of assets
2019
US$M
45,013
8,633
18,404
371
5,067
77,488
2018
US$M
45,157
8,246
18,267
154
5,039
76,863
2017
US$M
46,949
22,860
18,899
173
7,069
95,950
(1) Balance for the year ended 30 June 2017 includes non-current assets relating to Onshore US assets.
(2) Unallocated assets comprise deferred tax assets and other financial assets.
Underlying EBITDA
Underlying EBITDA is earnings before net finance costs, depreciation,
amortisation and impairments, taxation expense, Discontinued
operations and any exceptional items. Underlying EBITDA includes
BHP’s share of profit/(loss) from investments accounted for using the
equity method including net finance costs, depreciation, amortisation
and impairments and taxation expense.
Exceptional items are excluded from Underlying EBITDA in order to
enhance the comparability of such measures from period-to-period
and provide investors with further clarity in order to assess the
underlying performance of the Group’s operations. Management
monitors exceptional items separately. Refer to note 3 ‘Exceptional
items’ for additional detail.
Segment assets and liabilities
Total segment assets and liabilities of reportable segments represents
operating assets and operating liabilities, including the carrying
amount of equity accounted investments and predominantly excludes
cash balances, loans to associates, interest bearing liabilities and
deferred tax balances. The carrying value of investments accounted
for using the equity method represents the balance of the Group’s
investment in equity accounted investments, with no adjustment for
any cash balances, interest bearing liabilities or deferred tax balances
of the equity accounted investment.
178 BHP Annual Report 2019
2 Revenue
Revenue by segment and asset
Australia Production Unit
Bass Strait
North West Shelf
Atlantis
Shenzi
Mad Dog
Trinidad/Tobago
Algeria
Third party products
Other
Total Petroleum (1)
Escondida
Pampa Norte
Olympic Dam
Third party products
Total Copper (2)
Western Australia Iron Ore
Third party products
Other
Total Iron Ore
Queensland Coal
New South Wales Energy Coal
Third party products
Other
Total Coal (3)
Group and unallocated items (4)
Inter-segment adjustment
Total revenue
2019
US$M
507
1,237
1,657
979
540
319
287
258
10
136
5,930
6,876
1,502
1,351
1,109
10,838
17,066
32
157
17,255
7,679
1,421
19
2
9,121
1,225
(81)
44,288
2018
US$M
568
1,285
1,400
833
576
229
161
234
12
110
5,408
8,346
1,831
1,255
1,349
12,781
14,596
54
160
14,810
7,388
1,499
2
−
8,889
1,329
(88)
43,129
2017
US$M
601
1,096
1,190
677
509
202
110
212
9
116
4,722
4,242
1,401
1,287
1,012
7,942
14,395
81
148
14,624
6,316
1,251
−
11
7,578
975
(101)
35,740
(1) Total Petroleum revenue includes: crude oil US$3,171 million (2018: US$2,933 million; 2017: US$2,528 million), natural gas US$1,259 million (2018: US$1,124 million;
2017: US$1,029 million), LNG US$1,179 million (2018: US$920 million; 2017: US$858 million), NGL US$263 million (2018: US$294 million; 2017: US$265 million) and
other US$58 million (2018: US$137 million; 2017: US$42 million).
(2) Total Copper revenue includes: copper US$10,215 million (2018: US$12,059 million; 2017: US$7,323 million) and other US$623 million (2018: US$722 million; 2017:
US$619 million). Other consists of silver, zinc, molybdenum, uranium and gold.
(3) Total Coal revenue includes: metallurgical coal US$7,568 million (2018: US$7,331 million; 2017: US$6,266 million) and thermal coal US$1,553 million (2018:
US$1,558 million; 2017: US$1,312 million).
(4) Group and unallocated items revenue includes: Nickel West US$1,193 million (2018: US$1,297 million; 2017: US$950 million) and other revenue US$32 million
(2018: US$32 million; 2017: US$25 million).
Revenue consists of revenue from contracts with customers of US$44,361 million (2018: US$42,748 million; 2017: US$35,036 million)
and other revenue of US$(73) million (2018: US$381 million; 2017: US$704 million).
Recognition and measurement
The Group generates revenue from the production and sale of
commodities. Revenue is recognised when or as control of the
promised goods or services passes to the customer. In most
instances, control passes when the goods are delivered to a
destination specified by the customer, typically on board the
customer’s appointed vessel. Revenue from the provision of services
is recognised over time, but does not represent a significant
proportion of total revenue and is aggregated with the respective
asset and product revenue for disclosure purposes. The amount of
revenue recognised reflects the consideration to which the Group
expects to be entitled in exchange for the goods or services.
Where the Group’s sales are provisionally priced, the final price
depends on future index prices. The amount of revenue initially
recognised is based on the relevant forward market price. Adjustments
between the provisional and final price are accounted for under
IFRS 9/AASB 9 ‘Financial Instruments’ (IFRS 9) and separately
recorded as other revenue. The period between provisional pricing
and final invoicing is typically between 60 and 120 days.
Revenue from concentrate is net of treatment costs and
refining charges.
Revenue from the sale of significant by-products is included
within revenue. Where a by-product is not significant, revenue
is credited against costs.
The Group applies the practical expedient to not adjust the expected
consideration for the effects of the time value of money if the period
between the delivery and when the customer pays for the promised
good or service is one year or less.
For commodity sales contracts, each individual metric unit is a
separate performance obligation. Where the Group has contracts
with unfulfilled performance obligations at period end, it is required
to disclose the transaction price allocated to these performance
obligations. The Group applies the practical expedient to not disclose
this information for contracts with an expected duration of one year
or less. The Group has a number of long-term contracts which are
primarily priced on variable terms, based on quoted index prices near
the time of delivery, and at times include fixed pricing components.
Fixed pricing components, such as premiums and other charges, do
not represent a significant proportion of the total price. Any estimate
of the future transaction price would exclude estimated amounts of
variable consideration. The amount of future consideration from fixed
pricing components has not been disclosed, as the Group does not
consider this relevant or useful information.
BHP Annual Report 2019 179
i
S
t
r
a
t
e
g
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
a
t
B
H
P
R
e
m
u
n
e
r
a
t
i
o
n
R
e
p
o
r
t
D
i
r
e
c
t
o
r
s
’
R
e
p
o
r
t
5
i
F
n
a
n
c
a
i
l
S
t
a
t
e
m
e
n
t
s
A
d
d
i
t
i
o
n
a
l
i
n
f
o
r
m
a
t
i
o
n
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
3 Exceptional items
Exceptional items are those gains or losses where their nature, including the expected frequency of the events giving rise to them, and amount
is considered material to the Financial Statements. Such items included within the Group’s profit from Continuing operations for the year are
detailed below. Exceptional items attributable to Discontinued operations are detailed in note 27 ‘Discontinued operations’:
Year ended 30 June 2019
Exceptional items by category
Samarco dam failure
Global taxation matters
Total
Attributable to non-controlling interests
Attributable to BHP shareholders
Gross
US$M
(1,060)
−
(1,060)
−
(1,060)
Tax
US$M
−
242
242
−
242
Samarco Mineração S.A. (Samarco) dam failure
The FY2019 exceptional loss of US$1,060 million related to the Samarco dam failure in November 2015 and comprises the following:
Year ended 30 June 2019
Other income
Expenses excluding net finance costs:
Costs incurred directly by BHP Billiton Brasil Ltda and other BHP entities in relation to the Samarco dam failure
Loss from equity accounted investments, related impairments and expenses:
Share of loss relating to the Samarco dam failure
Samarco Germano dam decommissioning
Samarco dam failure provision
Net finance costs
Total (1)
(1) Refer to note 4 ‘Significant events – Samarco dam failure’ for further information.
Global taxation matters
Global taxation matters includes amounts released from provisions for tax matters and other claims resolved during the period.
Year ended 30 June 2018
Exceptional items by category
Samarco dam failure
US tax reform
Total
Attributable to non-controlling interests
Attributable to BHP shareholders
Gross
US$M
(650)
−
(650)
−
(650)
Tax
US$M
−
(2,320)
(2,320)
−
(2,320)
Samarco Mineração S.A. (Samarco) dam failure
The FY2018 exceptional loss of US$650 million related to the Samarco dam failure in November 2015 and comprises the following:
Year ended 30 June 2018
Expenses excluding net finance costs:
Costs incurred directly by BHP Billiton Brasil Ltda and other BHP entities in relation to the Samarco dam failure
Loss from equity accounted investments, related impairments and expenses:
Share of loss relating to the Samarco dam failure
Samarco dam failure provision
Net finance costs
Total (1)
(1) Refer to note 4 ‘Significant events – Samarco dam failure’ for further information.
Net
US$M
(1,060)
242
(818)
−
(818)
US$M
50
(57)
(96)
(263)
(586)
(108)
(1,060)
Net
US$M
(650)
(2,320)
(2,970)
−
(2,970)
US$M
(57)
(80)
(429)
(84)
(650)
180 BHP Annual Report 2019
3 Exceptional items continued
US tax reform
On 22 December 2017, the US President signed the Tax Cuts and Jobs Act (the TCJA) into law. The TCJA (effective 1 January 2018) includes
a broad range of tax reforms affecting the Group, including, but not limited to, a reduction in the US corporate tax rate from 35 per cent
to 21 per cent and changes to international tax provisions.
Following enactment of the TCJA, the Group has recognised an exceptional income tax charge of US$2,320 million, primarily relating to the
reduced US corporate income tax rate, which resulted in re-measurement of the Group’s deferred tax position and impairment of foreign tax
credits due to reduced forecast utilisation, together with tax charges on the deemed repatriation of accumulated earnings of non-US subsidiaries.
Year ended 30 June 2018
Re-measurement of deferred taxes as a result of reduced US corporate income tax rate
Impairment of foreign tax credits
Net impact of tax charges on deemed repatriation of accumulated earnings of non-US subsidiaries
Recognition of Alternative Minimum Tax Credits
Other impacts
Total (1)
(1) Refer to note 6 ‘Income tax expense’ for further information.
Year ended 30 June 2017
Exceptional items by category
Samarco dam failure
Escondida industrial action
Cancellation of the Caroona exploration licence
Withholding tax on Chilean dividends
Total
Attributable to non-controlling interests – Escondida industrial action
Attributable to BHP shareholders
Gross
US$M
Tax
US$M
(381)
(546)
164
−
(763)
(232)
(531)
−
179
(49)
(373)
(243)
68
(311)
Samarco Mineração S.A. (Samarco) dam failure
The FY2017 exceptional loss of US$381 million related to the Samarco dam failure in November 2015 and comprises the following:
Year ended 30 June 2017
Expenses excluding net finance costs:
Costs incurred directly by BHP Billiton Brasil Ltda and other BHP entities in relation to the Samarco dam failure
Loss from equity accounted investments, related impairments and expenses:
Share of loss relating to the Samarco dam failure
Samarco dam failure provision
Net finance costs
Total (1)
(1) Refer to note 4 ‘Significant events – Samarco dam failure’ for further information.
US$M
(1,390)
(834)
(194)
95
3
(2,320)
Net
US$M
(381)
(367)
115
(373)
(1,006)
(164)
(842)
US$M
(82)
(134)
(38)
(127)
(381)
Escondida industrial action
Our Escondida asset in Chile began negotiations with Union N°1 on a new collective agreement in December 2016, as the existing agreement
was expiring on 31 January 2017. Negotiations, including government-led mediation, failed and the union commenced strike action on
9 February 2017 resulting in a total shutdown of operations, including work on the expansion of key projects. On 24 March 2017, following
a 44-day strike and a revised offer being presented to union members, Union N°1 exercised its rights under Article 369 of the Chilean Labour
Code to extend the existing collective agreement for 18 months.
Industrial action through this period resulted in a reduction to FY2017 copper production of 214 kt and gave rise to idle capacity charges
of US$546 million, including depreciation of US$212 million.
Cancellation of the Caroona exploration licence
Following the Group’s agreement with the New South Wales Government in August 2016 to cancel the exploration licence of the Caroona
Coal project, a net gain of US$115 million (after tax expense) has been recognised.
Withholding tax on Chilean dividends
BHP Billiton Chile Inversiones Limitada paid a one-off US$2.3 billion dividend to its parent in April 2017 while a concessional tax rate was
available, resulting in withholding tax of US$373 million.
BHP Annual Report 2019 181
i
S
t
r
a
t
e
g
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
a
t
B
H
P
R
e
m
u
n
e
r
a
t
i
o
n
R
e
p
o
r
t
D
i
r
e
c
t
o
r
s
’
R
e
p
o
r
t
5
i
F
n
a
n
c
a
i
l
S
t
a
t
e
m
e
n
t
s
A
d
d
i
t
i
o
n
a
l
i
n
f
o
r
m
a
t
i
o
n
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
4 Significant events – Samarco dam failure
On 5 November 2015, the Samarco Mineração S.A. (Samarco) iron ore operation in Minas Gerais, Brazil, experienced a tailings dam failure
that resulted in a release of mine tailings, flooding the communities of Bento Rodrigues, Gesteira and Paracatu and impacting other
communities downstream (the Samarco dam failure). Refer to section 1.7 ‘Samarco’.
Samarco is jointly owned by BHP Billiton Brasil Ltda (BHP Billiton Brasil) and Vale S.A. (Vale). BHP Billiton Brasil’s 50 per cent interest is
accounted for as an equity accounted joint venture investment. BHP Billiton Brasil does not separately recognise its share of the underlying
assets and liabilities of Samarco, but instead records the investment as one line on the balance sheet. Each period, BHP Billiton Brasil
recognises its 50 per cent share of Samarco’s profit or loss and adjusts the carrying value of the investment in Samarco accordingly. Such
adjustment continues until the investment carrying value is reduced to US$ nil, with any additional share of Samarco losses only recognised
to the extent that BHP Billiton Brasil has an obligation to fund the losses, or when future investment funding is provided. After applying equity
accounting, any remaining carrying value of the investment is tested for impairment.
Any charges relating to the Samarco dam failure incurred directly by BHP Billiton Brasil or other BHP entities are recognised 100 per cent
in the Group’s results.
The financial impacts of the Samarco dam failure on the Group’s income statement, balance sheet and cash flow statement for the year
ended 30 June 2019 are shown in the table below and have been treated as an exceptional item.
Financial impacts of Samarco dam failure
Income statement
Other income (1)
Expenses excluding net finance costs:
Costs incurred directly by BHP Billiton Brasil and other BHP entities in relation
to the Samarco dam failure (2)
Loss from equity accounted investments, related impairments and expenses:
Share of loss relating to the Samarco dam failure (3)
Samarco Germano dam decommissioning
Samarco dam failure provision (4)
Loss from operations
Net finance costs (5)
Loss before taxation
Income tax benefit
Loss after taxation
Balance sheet movement
Trade and other payables
Provisions
Net (liabilities)/assets
Cash flow statement
Loss before taxation
Adjustments for:
Share of loss relating to the Samarco dam failure (3)
Samarco Germano dam decommissioning
Samarco dam failure provision (4)
Net finance costs (5)
Changes in assets and liabilities:
Trade and other payables
Net operating cash flows
Net investment and funding of equity accounted investments (6)
Net investing cash flows
Net decrease in cash and cash equivalents
96
263
586
108
(4)
2019
US$M
(1,060)
(11)
(424)
(424)
(435)
2019
US$M
50
(57)
(96)
(263)
(586)
(952)
(108)
(1,060)
−
(1,060)
4
(629)
(625)
80
−
429
84
(4)
2018
US$M
−
(57)
(80)
−
(429)
(566)
(84)
(650)
–
(650)
4
(228)
(224)
2018
US$M
(650)
(61)
(365)
(365)
(426)
134
–
38
127
3
2017
US$M
−
(82)
(134)
−
(38)
(254)
(127)
(381)
–
(381)
(3)
143
140
2017
US$M
(381)
(79)
(442)
(442)
(521)
(1) Proceeds from insurance settlements.
(2) Includes legal and advisor costs incurred.
(3) Loss from working capital funding provided during the period.
(4) US$(579) million change in estimate and US$(7) million exchange translation.
(5) Amortisation of discounting of provision.
(6) Includes US$(96) million funding provided during the period and US$(328) million utilisation of the Samarco dam failure provision, of which US$(313) million
allowed for the continuation of reparatory and compensatory programs in relation to the Framework Agreement and a further US$(15) million for dam stabilisation
and expert costs.
182 BHP Annual Report 2019
4 Significant events – Samarco dam failure continued
Equity accounted investment in Samarco
BHP Billiton Brasil’s investment in Samarco remains at US$ nil. BHP Billiton Brasil provided US$96 million funding under a working capital
facility during the period and recognised additional share of losses of US$96 million. No dividends have been received by BHP Billiton Brasil
from Samarco during the period. Samarco currently does not have profits available for distribution and is legally prevented from paying
previously declared and unpaid dividends.
Provisions related to the Samarco dam failure
At the beginning of the financial year
Movement in provisions
Comprising:
Utilised
Adjustments charged to the income statement:
Change in estimate
Samarco Germano dam decommissioning
Amortisation of discounting impacting net finance costs
Exchange translation
At the end of the financial year
Comprising:
Current
Non-current
At the end of the financial year
Samarco dam failure provisions and contingencies
As at 30 June 2019, BHP Billiton Brasil has identified provisions and
contingent liabilities arising as a consequence of the Samarco dam
failure as follows:
Provisions
Provision for Samarco dam failure
On 2 March 2016, BHP Billiton Brasil, Samarco and Vale, entered into
a Framework Agreement with the Federal Government of Brazil, the
states of Espírito Santo and Minas Gerais and certain other public
authorities to establish a foundation (Fundação Renova) that will
develop and execute environmental and socio-economic programs
(Programs) to remediate and provide compensation for damage
caused by the Samarco dam failure. Key Programs include those
for financial assistance and compensation of impacted persons,
including fisherfolk impacted by the dam failure, and those for
remediation of impacted areas and resettlement of impacted
communities. A committee (Interfederative Committee) comprising
representatives from the Brazilian Federal and State Governments,
local municipalities, environmental agencies, impacted communities
and Public Defence Office oversees the activities of the Fundação
Renova in order to monitor, guide and assess the progress of actions
agreed in the Framework Agreement.
The term of the Framework Agreement is 15 years, renewable for
periods of one year successively until all obligations under the
Framework Agreement have been performed. Under the Framework
Agreement, Samarco is responsible for funding Fundação Renova’s
annual calendar year budget for the duration of the Framework
Agreement. The funding amounts for each calendar year will be
dependent on the remediation and compensation projects to be
undertaken in a particular year. Annual contributions may be
reviewed under the Framework Agreement. To the extent that
Samarco does not meet its funding obligations, each of BHP
Billiton Brasil and Vale has funding obligations under the Framework
Agreement in proportion to its 50 per cent shareholding in Samarco.
Mining and processing operations remain suspended and Samarco
is currently progressing plans to resume operations, however
significant uncertainties surrounding the nature and timing of
ongoing future operations remain. In light of these uncertainties
and based on currently available information, BHP Billiton Brasil’s
provision for its obligations under the Framework Agreement
Programs is US$1.7 billion before tax and after discounting
at 30 June 2019 (30 June 2018: US$1.3 billion).
i
S
t
r
a
t
e
g
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
a
t
B
H
P
R
e
m
u
n
e
r
a
t
i
o
n
R
e
p
o
r
t
D
i
r
e
c
t
o
r
s
’
R
e
p
o
r
t
(328)
579
263
108
7
2019
US$M
1,285
629
1,914
440
1,474
1,914
(285)
560
–
84
(131)
2018
US$M
1,057
228
1,285
313
972
1,285
Under a Governance Agreement ratified on 8 August 2018,
BHP Billiton Brasil, Samarco and Vale will establish a process to
renegotiate the Programs over two years to progress settlement
of the R$155 billion (approximately US$40 billion) Federal Public
Prosecution Office claim (described below).
BHP Billiton Brasil, Samarco and Vale maintain security comprising
R$1.3 billion (approximately US$340 million) in insurance bonds,
R$100 million (approximately US$25 million) in liquid assets and
a charge of R$800 million (approximately US$210 million) over
Samarco’s assets. The security is maintained for a period of
30 months from ratification of the Governance Agreement, after
which BHP Billiton Brasil, Vale and Samarco will be required to
provide security of an amount equal to the Fundação Renova’s annual
budget up to a limit of R$2.2 billion (approximately US$575 million).
Samarco Germano dam decommissioning
Due to legislative changes in Brazil in the current year, Samarco
is currently progressing plans for the accelerated decommissioning
of its upstream tailings dams (the Germano dam complex).
5
i
F
n
a
n
c
a
i
l
S
t
a
t
e
m
e
n
t
s
A
d
d
i
t
i
o
n
a
l
i
n
f
o
r
m
a
t
i
o
n
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
Given the significant uncertainties surrounding the nature and timing
of Samarco’s future operations, BHP Billiton Brasil has recognised a
provision of US$263 million for a 50 per cent share of the expected
Germano decommissioning cost. Plans for the decommissioning
are at an early stage and as a result, further engineering work and
required validation by Brazilian authorities could lead to material
changes to estimates in future reporting periods.
If Samarco successfully restarts and generates sufficient cash flows
during the period in which the Germano decommissioning activity
occurs, BHP Billiton Brasil may not be required to provide funding for
the decommissioning, resulting in a reversal of the provision in future
reporting periods.
BHP Annual Report 2019 183
4 Significant events – Samarco dam failure continued
Contingent liabilities
The following matters are disclosed as contingent liabilities and given
the status of proceedings it is not possible to provide a range of
possible outcomes or a reliable estimate of potential future exposures
for BHP, unless otherwise stated. Ultimately, all the legal matters
disclosed as contingent liabilities could have a material adverse
impact on BHP’s business, competitive position, cash flows,
prospects, liquidity and shareholder returns.
Federal Public Prosecution Off ice claim
BHP Billiton Brasil is among the defendants named in a claim
brought by the Federal Public Prosecution Office on 3 May 2016,
seeking R$155 billion (approximately US$40 billion) for reparation,
compensation and moral damages in relation to the Samarco
dam failure.
The 12th Federal Court previously suspended the Federal Public
Prosecution Office claim, including a R$7.7 billion (approximately
US$2 billion) injunction request. Suspension of the claim continues
for a period of two years from the date of ratification of the
Governance Agreement on 8 August 2018.
United States class action complaint – Samarco bond holders
On 14 November 2016, a putative class action complaint (Bondholder
Complaint) was filed in the U.S. District Court for the Southern District
of New York on behalf of purchasers of Samarco’s ten-year bond notes
(Plaintiff) due 2022-2024 between 31 October 2012 and 30 November
2015. The Bondholder Complaint was initially filed against Samarco
and the former chief executive officer of Samarco.
The Bondholder Complaint was subsequently amended to include
BHP Group Limited, BHP Group Plc, BHP Billiton Brasil Ltda, Vale S.A.
and officers of Samarco, including four of Vale S.A. and BHP Billiton
Brasil Ltda’s nominees to the Samarco Board. On 5 April 2017, the
Plaintiff discontinued its claims against the individual defendants.
On 7 March 2018, the District Court granted a joint motion from
the remaining corporate defendants to dismiss the Bondholder
Complaint. A second amended Bondholder Complaint was also
dismissed by the Court on 18 July 2019. The Plaintiff has filed a
motion, which remains pending before the Court, for reconsideration
of that decision or leave to file a third amended complaint.
The amount of damages sought by the putative class is unspecified.
Australian class action complaints
Three separate shareholder class actions were filed in the Federal
Court of Australia on behalf of persons who acquired shares in BHP
Group Ltd on the Australian Securities Exchange or shares in BHP
Group Plc on the London Stock Exchange and Johannesburg Stock
Exchange in periods prior to the Samarco dam failure.
Following an appeal to the Full Court of the Federal Court, two of the
actions have been consolidated into one action and the third action
is expected to be dismissed. The amount of damages sought in the
consolidated action is unspecified.
United Kingdom group action complaint
BHP Group Plc and BHP Group Ltd are named as defendants in
group action claims for damages that have been filed in the courts
of England. These claims have been filed on behalf of certain
individuals, governments, businesses and communities in Brazil
allegedly impacted by the Samarco dam failure.
On 7 August 2019, the BHP parties filed a preliminary application
to strike out or stay this action on jurisdictional and other
procedural grounds.
The amount of damages sought in these claims is unspecified.
Key judgements and estimates
Judgements
The outcomes of litigation are inherently difficult to
predict and significant judgement has been applied
in assessing the likely outcome of legal claims and
determining which legal claims require recognition of a
provision or disclosure of a contingent liability. The facts
and circumstances relating to these cases are regularly
evaluated in determining whether a provision for any
specific claim is required.
Management have determined that a provision can only
be recognised for obligations under the Framework
Agreement and Samarco Germano dam decommissioning
as at 30 June 2019. It is not yet possible to provide a range
of possible outcomes or a reliable estimate of potential
future exposures to BHP in connection to the contingent
liabilities noted below, given their status.
Estimates
The provisions for Samarco dam failure and Samarco
Germano dam decommissioning currently reflect the
estimated remaining costs to complete Programs under
the Framework Agreement and estimated costs to
complete the Germano dam decommissioning and
require the use of significant judgements, estimates and
assumptions. Based on current estimates, it is expected
that approximately 45 per cent of remaining costs for
Programs under the Framework Agreement will be
incurred by December 2020.
While the provisions have been measured based on
information available as at 30 June 2019, likely changes
in facts and circumstances in future reporting periods may
lead to revisions to these estimates. However, it is currently
not possible to determine what facts and circumstances
may change, therefore the possible revisions in future
reporting periods cannot be reliably measured.
The key estimates that may have a material impact
upon the provisions in the next and future reporting
periods include:
• timing of repealing the fishing ban along the Rio Doce,
which is subject to certain regulatory approvals
and could impact upon the length of financial
assistance and compensation payments;
• number of people eligible for financial assistance
and compensation, as duration of registration periods
and changes to geographical boundaries or eligibility
criteria could impact estimated future costs;
• costs to complete resettlement of the Bento Rodrigues,
Gesteira and Paracatu communities;
• costs to complete the Germano dam decommissioning.
The provision may also be affected by factors including
but not limited to:
• potential changes in scope of work and funding
amounts required under the Framework Agreement
including the impact of the decisions of the
Interfederative Committee along with further technical
analysis and community participation required under
the Governance Agreement;
• the outcome of ongoing negotiations with State
and Federal Prosecutors, including review of
Fundação Renova’s Programs as provided in the
Governance Agreement;
• actual costs incurred;
• resolution of uncertainty in respect of operational restart;
• updates to discount and foreign exchange rates;
• resolution of existing and potential legal claims.
Given these factors, future actual expenditures may differ
from the amounts currently provided and changes to key
assumptions and estimates could result in a material impact
to the provision in the next and future reporting periods.
184 BHP Annual Report 2019
4 Significant events – Samarco dam failure continued
Criminal charges
The Federal Prosecutors’ Office has filed criminal charges against
BHP Billiton Brasil, Samarco and Vale and certain employees and
former employees of BHP Billiton Brasil (Affected Individuals) in the
Federal Court of Ponte Nova, Minas Gerais. On 3 March 2017, BHP
Billiton Brasil filed its preliminary defences. The Federal Court granted
Habeas Corpus petitions in favour of three of the Affected Individuals
terminating the charges against those individuals. The Federal
Prosecutors’ Office appealed two of those decisions. BHP Billiton
Brasil rejects outright the charges against the company and the
Affected Individuals and will defend the charges and fully support
each of the Affected Individuals in their defence of the charges.
Other claims
The civil public actions filed by State Prosecutors in Minas Gerais
(claiming damages of approximately R$7.5 billion, US$2 billion), State
Prosecutors in Espírito Santo (claiming damages of approximately
R$2 billion, US$520 million), and public defenders in Minas Gerais
(claiming damages of approximately R$10 billion, US$2.6 billion),
have been consolidated before the 12th Federal Court and suspended.
The Governance Agreement provides for a process to review whether
these civil public claims should be terminated or suspended.
BHP Billiton Brasil is among the companies named as defendants
in a number of legal proceedings initiated by individuals, non-
governmental organisations, corporations and governmental
entities in Brazilian Federal and State courts following the Samarco
dam failure. The other defendants include Vale, Samarco and
Fundação Renova. The lawsuits include claims for compensation,
environmental rehabilitation and violations of Brazilian environmental
and other laws, among other matters. The lawsuits seek various
remedies including rehabilitation costs, compensation to injured
individuals and families of the deceased, recovery of personal and
property losses, moral damages and injunctive relief. In addition,
government inquiries and investigations relating to the Samarco
dam failure have been commenced by numerous agencies of the
Brazilian government and are ongoing.
Additional lawsuits and government investigations relating to the
Samarco dam failure could be brought against BHP Billiton Brasil
and possibly other BHP entities in Brazil or other jurisdictions.
BHP insurance
BHP has various third party liability insurances for claims related
to the Samarco dam failure made directly against BHP Billiton Brasil
or other BHP entities, their directors and officers, including class
actions. External insurers have been notified of the Samarco dam
failure, the third party claims and the class actions referred to above.
In the year ended 30 June 2019, BHP recognised income of
US$50 million relating to proceeds from insurance settlements.
As at 30 June 2019, an insurance receivable has not been recognised
for any potential recoveries in respect of ongoing matters.
Commitments
Under the terms of the Samarco joint venture agreement, BHP
Billiton Brasil does not have an existing obligation to fund Samarco.
For the year ended 30 June 2019, BHP Billiton Brasil has provided
US$96 million funding to support Samarco’s operations and a further
US$15 million for dam stabilisation and prosecutor experts costs, with
undrawn amounts of US$17 million expiring as at 30 June 2019. In
June 2019, BHP Billiton Brasil made available a new short-term facility
of up to US$79 million to carry out remediation and stabilisation work
and support Samarco’s operations. Funds will be released to Samarco
only as required and subject to the achievement of key milestones
with amounts undrawn expiring at 31 December 2019.
Any additional requests for funding or future investment provided
would be subject to a future decision accounted for at that time.
The following section includes disclosure required by IFRS of
Samarco Mineração S.A.’s provisions, contingencies and other
matters arising from the dam failure for matters in addition
to the above-mentioned claims to which Samarco is a party.
Samarco
Dam failure related provisions and contingencies
In addition to its obligations under the Framework Agreement
as at 30 June 2019, Samarco has recognised provisions of
US$0.2 billion (30 June 2018: US$0.2 billion), based on currently
available information. The magnitude, scope and timing of these
additional costs are subject to a high degree of uncertainty and
Samarco has indicated that it anticipates that it will incur future
costs beyond those provided. These uncertainties are likely to
continue for a significant period and changes to key assumptions
could result in a material change to the amount of the provision
in future reporting periods. Any such unrecognised obligations
are therefore contingent liabilities and, at present, it is not
practicable to estimate their magnitude or possible timing
of payment. Accordingly, it is also not possible to provide
a range of possible outcomes or a reliable estimate of total
potential future exposures at this time.
Samarco is also named as a defendant in a number of other legal
proceedings initiated by individuals, non-governmental
organisations, corporations and governmental entities in Brazilian
Federal and State courts following the Samarco dam failure.
The lawsuits include claims for compensation, environmental
rehabilitation and violations of Brazilian environmental and other
laws, among other matters. The lawsuits seek various remedies
including rehabilitation costs, compensation to injured individuals
and families of the deceased, recovery of personal and property
losses, moral damages and injunctive relief. In addition,
government inquiries and investigations relating to the Samarco
dam failure have been commenced by numerous agencies of
the Brazilian government and are ongoing. Given the status of
proceedings it is not possible to provide a range of possible
outcomes or a reliable estimate of total potential future exposures
to Samarco.
Additional lawsuits and government investigations relating
to the Samarco dam failure could be brought against Samarco.
Samarco insurance
Samarco has standalone insurance policies in place with
Brazilian and global insurers. In the year ended 30 June 2019,
Samarco recognised income relating to proceeds from certain
of its insurance policies. Insurers’ loss adjusters or claims
representatives continue to investigate and assist with the
claims process for matters not yet settled. As at 30 June 2019,
an insurance receivable has not been recognised by Samarco
in respect of ongoing matters.
Samarco commitments
At 30 June 2019, Samarco has commitments of US$0.5 billion
(30 June 2018: US$1.1 billion). Following the dam failure
Samarco invoked force majeure clauses in a number of long-term
contracts with suppliers and service providers to suspend
contractual obligations.
Samarco non-dam failure related contingent liabilities
The following non-dam failure related contingent liabilities pre-date
and are unrelated to the Samarco dam failure. Samarco is currently
contesting both of these matters in the Brazilian courts. Given the
status of these tax matters, the timing of resolution and potential
economic outflow for Samarco is uncertain.
Brazilian Social Contribution Levy
Samarco has received tax assessments for the alleged non-
payment of Brazilian Social Contribution Levy for the calendar
years 2007-2014 totalling approximately R$5.5 billion
(approximately US$1.4 billion).
Brazilian corporate income tax rate
Samarco has received tax assessments for alleged incorrect
calculation of Corporate Income Tax (IRPJ) in respect of the
2000-2003 and 2007-2014 income years totalling approximately
R$4.3 billion (approximately US$1.1 billion).
BHP Annual Report 2019 185
i
S
t
r
a
t
e
g
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
a
t
B
H
P
R
e
m
u
n
e
r
a
t
i
o
n
R
e
p
o
r
t
D
i
r
e
c
t
o
r
s
’
R
e
p
o
r
t
5
i
F
n
a
n
c
a
i
l
S
t
a
t
e
m
e
n
t
s
A
d
d
i
t
i
o
n
a
l
i
n
f
o
r
m
a
t
i
o
n
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
5 Expenses and other income
Employee benefits expense:
Wages, salaries and redundancies
Employee share awards
Social security costs
Pension and other post-retirement obligations
Less employee benefits expense classified as exploration and evaluation expenditure
Changes in inventories of finished goods and work in progress
Raw materials and consumables used
Freight and transportation
External services
Third party commodity purchases
Net foreign exchange (gains)/losses
Government royalties paid and payable
Exploration and evaluation expenditure incurred and expensed in the current period
Depreciation and amortisation expense
Net impairments:
Property, plant and equipment
Goodwill and other intangible assets
Available for sale financial assets
Operating lease rentals
All other operating expenses
Total expenses
(Gains)/losses on disposal of property, plant and equipment
Other income
Total other income
2019
US$M
3,683
138
4
292
(85)
496
4,591
2,378
4,745
1,069
(147)
2,538
516
5,829
250
14
−
405
1,306
2018
US$M
3,653
123
4
292
(82)
(142)
4,389
2,294
4,786
1,374
(93)
2,168
641
6,288
318
14
1
421
1,078
2017
US$M
3,392
105
3
273
(79)
(743)
3,830
1,786
4,037
1,060
103
1,986
610
6,184
160
33
−
391
989
28,022
27,527
24,120
(22)
(371)
(393)
10
(257)
(247)
(286)
(376)
(662)
Other income is generally income earned from transactions outside the course of the Group’s ordinary activities and may include certain
management fees from non-controlling interests and joint arrangements, dividend income, royalties, commission income and gains or losses
on divestment of subsidiaries or operations.
Recognition and measurement
Income is recognised when it is probable that the economic benefits associated with a transaction will flow to the Group and they can be
reliably measured. Dividends are recognised upon declaration.
186 BHP Annual Report 2019
6 Income tax expense
Total taxation expense comprises:
Current tax expense
Deferred tax expense
Factors affecting income tax expense for the year
Income tax expense differs to the standard rate of corporation tax as follows:
Profit before taxation
Tax on profit at Australian prima facie tax rate of 30 per cent
Impact of US tax reform
Tax rate changes
Non-tax effected operating losses and capital gains
Tax on remitted and unremitted foreign earnings (1)
Recognition of previously unrecognised tax assets
Other
Subtotal
Other items not related to US tax reform
Non-tax effected operating losses and capital gains
Tax on remitted and unremitted foreign earnings
Tax effect of (loss)/profit from equity accounted investments, related impairments and expenses (2)
Tax rate changes
Recognition of previously unrecognised tax assets
Amounts over provided in prior years
Foreign exchange adjustments
Investment and development allowance
Impact of tax rates applicable outside of Australia
Other
Income tax expense
Royalty-related taxation (net of income tax benefit)
Total taxation expense
2019
US$M
5,408
121
5,529
2019
US$M
15,049
4,515
−
−
−
−
−
−
742
283
164
6
(10)
(21)
(25)
(94)
(312)
87
5,335
194
5,529
2018
US$M
5,052
1,955
7,007
2018
US$M
14,751
4,425
1,390
834
194
(95)
(3)
2,320
721
401
(44)
(79)
(170)
(51)
(152)
(180)
(484)
172
6,879
128
7,007
2017
US$M
4,412
31
4,443
2017
US$M
11,137
3,341
−
−
−
−
−
−
242
478
(82)
25
(21)
175
88
(53)
(136)
219
4,276
167
4,443
i
S
t
r
a
t
e
g
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
a
t
B
H
P
R
e
m
u
n
e
r
a
t
i
o
n
R
e
p
o
r
t
D
i
r
e
c
t
o
r
s
’
R
e
p
o
r
t
(1) Comprising US$797 million repatriation tax and US$603 million of previously unrecognised tax credits.
(2) The (loss)/profit from equity accounted investments, related impairments and expenses is net of income tax. This item removes the prima facie tax effect on such
(loss)/profit, related impairments and expenses.
Income tax recognised in other comprehensive income is as follows:
2019
US$M
2018
US$M
2017
US$M
5
Income tax effect of:
Items that may be reclassified subsequently to the income statement:
Available for sale investments:
Net valuation losses taken to equity
Hedges:
Gains/(losses) taken to equity
(Gains)/losses transferred to the income statement
Income tax credit relating to items that may be reclassified subsequently to the income statement
Items that will not be reclassified to the income statement:
Remeasurement gains/(losses) on pension and medical schemes
Employee share awards transferred to retained earnings on exercise
Income tax credit/(charge) relating to items that will not be reclassified to the income statement
Total income tax credit/(charge) relating to components of other comprehensive income (1)
−
98
(90)
8
7
12
19
27
(3)
(25)
64
36
(22)
8
(14)
22
−
(105)
129
24
(12)
(14)
(26)
(2)
(1) Included within total income tax relating to components of other comprehensive income is US$15 million relating to deferred taxes and US$12 million relating to current
taxes (2018: US$17 million and US$5 million; 2017: US$12 million and US$(14) million).
BHP Annual Report 2019 187
i
F
n
a
n
c
a
i
l
S
t
a
t
e
m
e
n
t
s
A
d
d
i
t
i
o
n
a
l
i
n
f
o
r
m
a
t
i
o
n
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
6 Income tax expense continued
Recognition and measurement
Taxation on the profit/(loss) for the year comprises current and deferred tax. Taxation is recognised in the income statement except to the
extent that it relates to items recognised directly in equity, in which case the tax effect is also recognised in equity.
Current tax
Deferred tax
Royalty-related taxation
Royalties and resource rent taxes are treated as taxation
arrangements (impacting income tax expense/(benefit))
when they are imposed under government authority
and the amount payable is calculated by reference
to revenue derived (net of any allowable deductions)
after adjustment for temporary differences. Obligations
arising from royalty arrangements that do not satisfy
these criteria are recognised as current provisions
and included in expenses.
Current tax is the expected tax
on the taxable income for the
year, using tax rates and laws
enacted or substantively
enacted at the reporting
date, and any adjustments
to tax payable in respect
of previous years.
Deferred tax is provided in full, on temporary differences
arising between the tax bases of assets and liabilities
and their carrying amounts in the Financial Statements.
Deferred tax assets are recognised to the extent
that it is probable that future taxable profits will be
available against which the temporary differences
can be utilised.
Deferred tax is not recognised for temporary
differences relating to:
• initial recognition of goodwill;
• initial recognition of assets or liabilities in a
transaction that is not a business combination and
that affects neither accounting nor taxable profit;
• investment in subsidiaries, associates and jointly
controlled entities where the Group is able to control
the timing of the reversal of the temporary difference
and it is probable that they will not reverse in the
foreseeable future.
Deferred tax is measured at the tax rates that are
expected to be applied when the asset is realised or
the liability is settled, based on the laws that have been
enacted or substantively enacted at the reporting date.
Current and deferred tax assets and liabilities are offset
when the Group has a legally enforceable right to offset
and when the tax balances are related to taxes levied
by the same tax authority and the Group intends to
settle on a net basis, or realise the asset and settle the
liability simultaneously.
Uncertain tax and royalty matters
The Group operates across many tax jurisdictions. Application of tax law can be complex and requires judgement to assess risk and estimate
outcomes, particularly in relation to the Group’s cross-border operations and transactions. The evaluation of tax risks considers both amended
assessments received and potential sources of challenge from tax authorities. The status of proceedings for these matters will impact the
ability to determine the potential exposure and in some cases, it may not be possible to determine a range of possible outcomes or a reliable
estimate of the potential exposure.
The Group has unresolved tax and royalty matters for which the timing of resolution and potential economic outflow are uncertain. Tax and
royalty matters with uncertain outcomes arise in the normal course of business and occur due to changes in tax law, changes in interpretation
of tax law, periodic challenges and disagreements with tax authorities and legal proceedings.
Tax and royalty obligations assessed as having probable future economic outflows capable of reliable measurement are provided for at
30 June 2019. Matters with a possible economic outflow and/or presently incapable of being measured reliably are contingent liabilities
and disclosed in note 33 ‘Contingent liabilities’. Irrespective of whether the potential economic outflow of the matter has been assessed
as probable or possible, individually significant matters are included below, to the extent that disclosure does not prejudice the Group.
Transfer pricing – Sales of
commodities to BHP Billiton
Marketing AG in Singapore
Controlled Foreign
Companies dispute
On 19 November 2018, BHP settled a long-standing transfer pricing dispute relating to its Sales and Marketing
operations in Singapore with the Australian Taxation Office (ATO). The settlement fully resolved all prior years and
provides certainty in relation to the future Australian taxation treatment of BHP’s Sales and Marketing operations.
The settlement did not involve any admission of tax avoidance by BHP. As part of the settlement, BHP paid a total
of approximately A$529 million (US$388 million) in additional taxes for the prior years, being 2003 to 2018 (BHP
paid A$328 million (US$243 million) of this amount when the amended assessments were received in prior years,
with the balance of A$201 million (US$145 million) paid in the December 2018 quarter). From the 2020 financial year,
all profits made in Singapore in relation to the Australian assets owned by BHP Group Limited will be fully subject to
Australian tax under the Controlled Foreign Company tax rules, due to a change in ownership of the main Sales and
Marketing entity.
The Group is currently in dispute with the ATO regarding whether profits earned globally by the Group’s Sales and
Marketing organisation from the sale of commodities acquired from Australian subsidiaries of BHP Group Plc are
subject to ‘top-up tax’ in Australia under the Controlled Foreign Companies rules. In June 2011 and December 2014,
the Group received amended assessments relating to the 2006-2010 income years. Between May 2016 and August
2019, the Group received amended assessments relating to the 2012-2018 income years. The Group has formally
objected or intends to formally object to all the amended assessments received. The earlier years (2006-2010) are
the subject of litigation and the case will be heard by the High Court of Australia. It is estimated that the total primary
tax subject to dispute for the 2006-2018 income years is US$87 million (A$125 million), of which US$30 million
(A$43 million) relates to the 2006-2010 income years, which are being litigated. The ATO has not determined that
the Group is liable for any penalties.
Samarco tax assessments
Details of uncertain tax and royalty matters relating to Samarco are disclosed in note 4 ‘Significant events – Samarco
dam failure’.
188 BHP Annual Report 2019
6 Income tax expense continued
Key judgements and estimates
Income tax classification
Judgements: The Group’s accounting policy for taxation,
including royalty-related taxation, requires management’s
judgement as to the types of arrangements considered
to be a tax on income in contrast to an operating cost.
Deferred tax
Judgements: Judgement is required to determine the amount
of deferred tax assets that are recognised based on the likely
timing and the level of future taxable profits. Judgement is applied
in recognising deferred tax liabilities arising from temporary
differences in investments. These deferred tax liabilities caused
principally by retained earnings held in foreign tax jurisdictions
are recognised unless repatriation of retained earnings can be
controlled and is not expected to occur in the foreseeable future.
Estimates: The Group assesses the recoverability of recognised
and unrecognised deferred taxes, including losses in Australia,
the United States and Canada on a consistent basis, using
estimates and assumptions relating to projected earnings
and cash flows as applied in the Group impairment process
for associated operations.
Uncertain tax matters
Judgements: Management applies judgements about the
application of income tax legislation and its interaction with
income tax accounting principles. These judgements are
subject to risk and uncertainty, hence there is a possibility that
changes in circumstances will alter expectations, which may
impact the amount of deferred tax assets and deferred tax
liabilities recognised on the balance sheet and the amount of
other tax losses and temporary differences not yet recognised.
Where the final tax outcomes are different from the amounts
that were initially recorded, these differences impact the
current and deferred tax provisions in the period in which
the determination is made.
Measurement of uncertain tax and royalty matters considers
a range of possible outcomes, including assessments received
from tax authorities. Where management is of the view that
potential liabilities have a low probability of crystallising, or it
is not possible to quantify them reliably, they are disclosed as
contingent liabilities (refer to note 33 ‘Contingent liabilities’).
7 Earnings per share
Earnings attributable to BHP shareholders (US$M)
– Continuing operations
– Total
Weighted average number of shares (Million)
– Basic
– Diluted
Basic earnings per ordinary share (US cents)
– Continuing operations
– Total
Diluted earnings per ordinary share (US cents)
– Continuing operations
– Total
2019
2018
2017
8,648
8,306
5,180
5,193
166.9
160.3
166.5
159.9
6,652
3,705
5,323
5,337
125.0
69.6
124.6
69.4
6,375
5,890
5,323
5,336
119.8
110.7
119.5
110.4
Refer to note 27 ‘Discontinued operations’ for basic earnings per share and diluted earnings per share for Discontinued operations.
Earnings on American Depositary Shares represent twice the earnings for BHP Group Limited or BHP Group Plc ordinary shares.
Recognition and measurement
Diluted earnings attributable to BHP shareholders are equal to the earnings attributable to BHP shareholders.
The calculation of the number of ordinary shares used in the computation of basic earnings per share is the aggregate of the weighted average
number of ordinary shares of BHP Group Limited and BHP Group Plc outstanding during the period after deduction of the number of shares
held by the Billiton Employee Share Ownership Trust and the BHP Billiton Limited Employee Equity Trust.
For the purposes of calculating diluted earnings per share, the effect of 13 million dilutive shares has been taken into account for the year
ended 30 June 2019 (2018: 14 million shares; 2017: 13 million shares). The Group’s only potential dilutive ordinary shares are share awards
granted under the employee share ownership plans for which terms and conditions are described in note 23 ‘Employee share ownership
plans’. Diluted earnings per share calculation excludes instruments which are considered antidilutive.
At 30 June 2019, there are no instruments which are considered antidilutive (2018: nil; 2017: nil).
BHP Annual Report 2019 189
i
S
t
r
a
t
e
g
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
a
t
B
H
P
R
e
m
u
n
e
r
a
t
i
o
n
R
e
p
o
r
t
D
i
r
e
c
t
o
r
s
’
R
e
p
o
r
t
5
i
F
n
a
n
c
a
i
l
S
t
a
t
e
m
e
n
t
s
A
d
d
i
t
i
o
n
a
l
i
n
f
o
r
m
a
t
i
o
n
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
Working capital
8 Trade and other receivables
Trade receivables
Loans to equity accounted investments
Other receivables
Total
Comprising:
Current
Non-current
2019
US$M
2,403
33
1,339
3,775
3,462
313
2018
US$M
1,857
13
1,406
3,276
3,096
180
Recognition and measurement
Trade receivables are recognised initially at fair value and subsequently at amortised cost using the effective interest method, less an
allowance for impairment, except for provisionally priced receivables which are subsequently measured at fair value through the income
statement under IFRS 9.
The collectability of trade receivables is assessed continuously. At the reporting date, specific allowances are made for any expected credit
losses based on a review of all outstanding amounts at reporting period-end. Individual receivables are written off when management deems
them unrecoverable. The net carrying amount of trade and other receivables approximates their fair values. For further information on the
changes under IFRS 9 refer to note 38 ‘New and amended accounting standards and interpretations’.
Credit risk
Trade receivables generally have terms of less than 30 days. The Group has no material concentration of credit risk with any single
counterparty and is not dominantly exposed to any individual industry.
Credit risk can arise from the non-performance by counterparties of their contractual financial obligations towards the Group. To manage
credit risk, the Group maintains Group-wide procedures covering the application for credit approvals, granting and renewal of counterparty
limits, proactive monitoring of exposures against these limits and requirements triggering secured payment terms. As part of these processes,
the credit exposures with all counterparties are regularly monitored and assessed on a timely basis. The credit quality of the Group’s customers
is reviewed and the solvency of each debtor and their ability to pay on the receivable is considered in assessing receivables for impairment.
The 10 largest customers represented 34% (2018: 33%) of total credit risk exposures managed by the Group.
Receivables are deemed to be past due or impaired in accordance with the Group’s terms and conditions. These terms and conditions are
determined on a case-by-case basis with reference to the customer’s credit quality, payment performance and prevailing market conditions.
As at 30 June 2019, trade receivables of US$14 million (2018: US$32 million) were past due but not impaired. The majority of these receivables
were less than 30 days overdue.
At 30 June 2019, trade receivables are stated net of provisions for expected credit losses of US$3 million (2018: US$1 million). As at the
reporting date, there are no indications that the debtors will not meet their payment obligations.
190 BHP Annual Report 2019
9 Trade and other payables
Trade creditors
Other creditors
Total
Comprising:
Current
Non-current
10 Inventories
Raw materials and consumables
Work in progress
Finished goods
Total (1)
Comprising:
Current
Non-current
2019
US$M
5,162
1,560
6,722
6,717
5
2018
US$M
4,574
1,406
5,980
5,977
3
2019
US$M
1,406
2,515
687
4,608
3,840
768
2018
US$M
1,266
2,965
674
4,905
3,764
1,141
Definitions
Spares, consumables and other supplies yet to be utilised in the production
process or in the rendering of services.
Commodities currently in the production process that require further
processing by the Group to a saleable form.
Commodities held-for-sale and not requiring further processing by the Group.
Inventories classified as non-current are not expected to be utilised or sold
within 12 months after the reporting date.
(1) Inventory write-downs of US$16 million were recognised during the year (2018: US$18 million; 2017: US$112 million). Inventory write-downs of US$21 million made
in previous periods were reversed during the year (2018: US$2 million; 2017: US$19 million).
Recognition and measurement
Regardless of the type of inventory and its stage in the production process, inventories are valued at the lower of cost and net realisable value.
Cost is determined primarily on the basis of average costs. For processed inventories, cost is derived on an absorption costing basis. Cost
comprises costs of purchasing raw materials and costs of production, including attributable mining and manufacturing overheads taking
into consideration normal operating capacity.
Minerals inventory quantities are assessed primarily through surveys and assays, while petroleum inventory quantities are derived through
flow rate or tank volume measurement and the composition is derived via sample analysis.
Key estimates
Accounting for inventory involves the use of estimates, particularly related to the measurement and valuation of inventory on hand
within the production process. Critical estimates, including expected metal recoveries and work in progress volumes, are calculated
by engineers using available industry, engineering and scientific data. Estimates used are periodically reassessed by the Group
taking into account technical analysis and historical performance. Changes in estimates are adjusted for on a prospective basis.
i
S
t
r
a
t
e
g
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
a
t
B
H
P
R
e
m
u
n
e
r
a
t
i
o
n
R
e
p
o
r
t
D
i
r
e
c
t
o
r
s
’
R
e
p
o
r
t
5
i
F
n
a
n
c
a
i
l
S
t
a
t
e
m
e
n
t
s
A
d
d
i
t
i
o
n
a
l
i
n
f
o
r
m
a
t
i
o
n
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
BHP Annual Report 2019 191
Resource assets
11 Property, plant and equipment
Net book value – 30 June 2019
At the beginning of the financial year
Additions (1) (2)
Depreciation for the year
Impairments, net of reversals (3)
Disposals
Transferred to assets held for sale
Exchange variations taken to reserve
Transfers and other movements
At the end of the financial year
– Cost
– Accumulated depreciation and impairments
Net book value – 30 June 2018
At the beginning of the financial year
Additions (1) (2)
Depreciation for the year
Impairments, net of reversals (3)
Disposals
Transferred to assets held for sale
Exchange variations taken to reserve
Transfers and other movements
At the end of the financial year
– Cost
– Accumulated depreciation and impairments
Land and
buildings
US$M
Plant and
equipment
US$M
Other mineral
assets
US$M
Assets under
construction
US$M
Exploration
and evaluation
US$M
8,152
5
(585)
(9)
(2)
−
−
324
7,885
12,825
(4,940)
8,547
(20)
(548)
(9)
(7)
(21)
−
210
8,152
12,525
(4,373)
40,885
515
(4,885)
(234)
(40)
−
(1)
1,934
38,174
92,090
(53,916)
49,427
110
(6,467)
(507)
(26)
(4,426)
1
2,773
40,885
91,037
(50,152)
8,974
1,023
(277)
−
(5)
−
−
(504)
9,211
13,681
(4,470)
15,557
873
(730)
(260)
(36)
(5,563)
−
(867)
8,974
13,212
(4,238)
7,554
5,799
−
−
−
(331)
−
(1,873)
11,149
11,149
−
5,536
5,423
−
−
(1)
(662)
−
(2,742)
7,554
7,554
−
1,617
418
−
(7)
−
−
−
(406)
1,622
2,404
(782)
1,430
258
−
(62)
(9)
−
−
−
1,617
2,400
(783)
Total
US$M
67,182
7,760
(5,747)
(250)
(47)
(331)
(1)
(525)
68,041
132,149
(64,108)
80,497
6,644
(7,745)
(838)
(79)
(10,672)
1
(626)
67,182
126,728
(59,546)
(1) Includes net foreign exchange gains/(losses) related to the closure and rehabilitation provisions. Refer to note 14 ‘Closure and rehabilitation provisions’.
(2) Property, plant and equipment of US$ nil (2018: US$3 million; 2017: US$593 million) was acquired under finance lease. This is a non-cash investing transaction
that has been excluded from the Consolidated Cash Flow Statement.
(3) Includes impairment charges related to Onshore US assets of US$ nil (2018: US$520 million). Refer to note 27 ‘Discontinued operations’.
In respect of petroleum activities:
• the exploration and evaluation activity is within an area of interest
for which it is expected that the expenditure will be recouped
by future exploitation or sale; or
• exploration and evaluation activity has not reached a stage that
permits a reasonable assessment of the existence of commercially
recoverable reserves.
A regular review of each area of interest is undertaken to determine
the appropriateness of continuing to carry forward costs in relation
to that area. Capitalised costs are only carried forward to the extent
that they are expected to be recovered through the successful
exploitation of the area of interest or alternatively by its sale.
To the extent that capitalised expenditure is no longer expected
to be recovered, it is charged to the income statement.
Key judgements and estimates
Judgements: Exploration and evaluation expenditure
results in certain items of expenditure being capitalised
for an area of interest where a judgement is made that
it is likely to be recoverable by future exploitation or sale,
or where the activities are judged not to have reached
a stage that permits a reasonable assessment of the
existence of reserves.
Estimates: Management makes certain estimates and
assumptions as to future events and circumstances,
in particular when making quantitative assessment
of whether an economically viable extraction operation
can be established. These estimates and assumptions
may change as new information becomes available.
If, after having capitalised the expenditure under the
policy, new information suggests that recovery of the
expenditure is unlikely, the relevant capitalised amount
is charged to the income statement.
Recognition and measurement
Property, plant and equipment
Property, plant and equipment is recorded at cost less accumulated
depreciation and impairment charges. Cost is the fair value of
consideration given to acquire the asset at the time of its acquisition
or construction and includes the direct costs of bringing the asset
to the location and the condition necessary for operation and the
estimated future costs of closure and rehabilitation of the facility.
Equipment leases
Assets held under lease, which result in the Group receiving
substantially all of the risk and rewards of ownership are capitalised
as property, plant and equipment at the lower of the fair value of the
leased assets or the estimated present value of the minimum lease
payments. Leased assets are depreciated on the same basis as
owned assets or, where shorter, the lease term. The corresponding
finance lease obligation is included within interest bearing liabilities.
The interest component is charged to the income statement over the
lease term to reflect a constant rate of interest over the remaining
balance of the obligation.
Operating leases are not capitalised and rental payments are
included in the income statement on a straight-line basis over
the lease term. Ongoing contracted commitments under finance
and operating leases are disclosed within note 32 ‘Commitments’.
From 1 July 2019, IFRS 16/AASB 16 ‘Leases’ became effective
for the Group. Refer to note 38 ‘New and amended accounting
standards and interpretations’.
Exploration and evaluation
Exploration costs are incurred to discover mineral and petroleum
resources. Evaluation costs are incurred to assess the technical
feasibility and commercial viability of resources found.
Exploration and evaluation expenditure is charged to the income
statement as incurred, except in the following circumstances
in which case the expenditure may be capitalised:
In respect of minerals activities:
• the exploration and evaluation activity is within an area of interest
that was previously acquired as an asset acquisition or in a business
combination and measured at fair value on acquisition; or
• the existence of a commercially viable mineral deposit has
been established.
192 BHP Annual Report 2019
11 Property, plant and equipment continued
Development expenditure
When proven mineral reserves are determined and development
is sanctioned, capitalised exploration and evaluation expenditure
is reclassified as assets under construction within property, plant
and equipment. All subsequent development expenditure is
capitalised and classified as assets under construction, provided
commercial viability conditions continue to be satisfied.
The Group may use funds sourced from external parties to finance
the acquisition and development of assets and operations. Finance
costs are expensed as incurred, except where they relate to the
financing of construction or development of qualifying assets.
Borrowing costs directly attributable to acquiring or constructing
a qualifying asset are capitalised during the development phase.
Development expenditure is net of proceeds from the saleable
material extracted during the development phase. On completion
of development, all assets included in assets under construction
are reclassified as either plant and equipment or other mineral
assets and depreciation commences.
Key judgements and estimates
Judgements: Development activities commence after
project sanctioning by the appropriate level of
management. Judgement is applied by management
in determining when a project is economically viable.
Estimates: In determining whether a project is economically
viable, management is required to make certain estimates
and assumptions as to future events and circumstances,
including reserve estimates, existence of an accessible
market and forecast prices and cash flows. Estimates and
assumptions may change as new information becomes
available. If, after having commenced the development
activity, new information suggests that a development
asset is impaired, the appropriate amount is charged
to the income statement.
Other mineral assets
Other mineral assets comprise:
• capitalised exploration, evaluation and development expenditure
for assets in production;
• mineral rights and petroleum interests acquired;
• capitalised development and production stripping costs.
Overburden removal costs
The process of removing overburden and other waste materials
to access mineral deposits is referred to as stripping. Stripping
is necessary to obtain access to mineral deposits and occurs
throughout the life of an open-pit mine. Development and
production stripping costs are classified as other mineral assets
in property, plant and equipment.
Stripping costs are accounted for separately for individual
components of an ore body. The determination of components
is dependent on the mine plan and other factors, including the
size, shape and geotechnical aspects of an ore body. The Group
accounts for stripping activities as follows:
Development stripping costs
These are initial overburden removal costs incurred to obtain access
to mineral deposits that will be commercially produced. These costs
are capitalised when it is probable that future economic benefits
(access to mineral ores) will flow to the Group and costs can be
measured reliably.
Once the production phase begins, capitalised development
stripping costs are depreciated using the units of production
method based on the proven and probable reserves of the
relevant identified component of the ore body to which the
initial stripping activity benefits.
Production stripping costs
These are post initial overburden removal costs incurred during
the normal course of production activity, which commences
after the first saleable minerals have been extracted from the
component. Production stripping costs can give rise to two
benefits, the accounting for which is outlined below:
Production stripping activity
Benefits of stripping activity
Extraction of ore (inventory) in current period.
Improved access to future ore extraction.
Period benefited
Current period
Future period(s)
Recognition and
measurement criteria
When the benefits of stripping activities are realised
in the form of inventory produced; the associated
costs are recorded in accordance with the Group’s
inventory accounting policy.
When the benefits of stripping activities are improved
access to future ore; production costs are capitalised
when all the following criteria are met:
• the production stripping activity improves access
to a specific component of the ore body and it
is probable that economic benefits arising from
the improved access to future ore production
will be realised;
• the component of the ore body for which access
has been improved can be identified;
• costs associated with that component can be
measured reliably.
Allocation of costs
Production stripping costs are allocated between the inventory produced and the production stripping asset using
a life-of-component waste-to-ore (or mineral contained) strip ratio. When the current strip ratio is greater than the
estimated life-of-component ratio a portion of the stripping costs is capitalised to the production stripping asset.
Asset recognised from
stripping activity
Inventory
Depreciation basis
Not applicable
Other mineral assets within property, plant and equipment.
On a component-by-component basis using the
units of production method based on proven
and probable reserves.
Key judgements and estimates
Judgements: Judgement is applied by management in determining the components of an ore body.
Estimates: Estimates are used in the determination of stripping ratios and mineral reserves by component. Changes to estimates
related to life-of-component waste-to-ore (or mineral contained) strip ratios and the expected ore production from identified
components are accounted for prospectively and may affect depreciation rates and asset carrying values.
BHP Annual Report 2019 193
i
S
t
r
a
t
e
g
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
a
t
B
H
P
R
e
m
u
n
e
r
a
t
i
o
n
R
e
p
o
r
t
D
i
r
e
c
t
o
r
s
’
R
e
p
o
r
t
5
i
F
n
a
n
c
a
i
l
S
t
a
t
e
m
e
n
t
s
A
d
d
i
t
i
o
n
a
l
i
n
f
o
r
m
a
t
i
o
n
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
11 Property, plant and equipment continued
Depreciation
Depreciation of assets, other than land, assets under construction and capitalised exploration and evaluation that are not depreciated,
is calculated using either the straight-line (SL) method or units of production (UoP) method, net of residual values, over the estimated
useful lives of specific assets. The depreciation method and rates applied to specific assets reflect the pattern in which the asset’s benefits
are expected to be used by the Group. The Group’s reported reserves are used to determine UoP depreciation unless doing so results in
depreciation charges that do not reflect the asset’s useful life. Where this occurs, alternative approaches to determining reserves are applied,
such as using management’s expectations of future oil and gas prices rather than yearly average prices, to provide a phasing of periodic
depreciation charges that better reflects the asset’s expected useful life.
Where assets are dedicated to a mine or petroleum lease, the below useful lives are subject to the lesser of the asset category’s useful life
and the life of the mine or petroleum lease, unless those assets are readily transferable to another productive mine or lease.
Key estimates
The determination of useful lives, residual values and depreciation methods involves estimates and assumptions and is reviewed
annually. Any changes to useful lives or any other estimates or assumptions may affect prospective depreciation rates and asset
carrying values. The table below summarises the principal depreciation methods and rates applied to major asset categories
by the Group.
Category
Buildings
Plant and equipment
Mineral rights and
petroleum interests
Capitalised exploration, evaluation
and development expenditure
Typical depreciation methodology
SL
SL
UoP
UoP
Depreciation rate
25–50 years
3–30 years
Based on the rate of
depletion of reserves
Based on the rate of depletion
of reserves
Impairment of non-current assets
Recognition and measurement
Impairment tests for all assets are performed when there is an
indication of impairment, although goodwill is tested at least
annually. If the carrying amount of the asset exceeds its recoverable
amount, the asset is impaired and an impairment loss is charged
to the income statement so as to reduce the carrying amount
in the balance sheet to its recoverable amount.
Previously impaired assets (excluding goodwill) are reviewed for
possible reversal of previous impairment at each reporting date.
Impairment reversal cannot exceed the carrying amount that would
have been determined (net of depreciation) had no impairment loss
been recognised for the asset or cash generating units (CGUs).
There were no reversals of impairment in the current or prior year.
How recoverable amount is calculated
The recoverable amount is the higher of an asset’s fair value less
cost of disposal (FVLCD) and its value in use (VIU). For the purposes
of assessing impairment, assets are grouped at the lowest levels
for which there are separately identifiable cash flows.
Valuation methods
Fair value less cost of disposal
FVLCD is an estimate of the amount that a market participant would
pay for an asset or CGU, less the cost of disposal. FVLCD for mineral
and petroleum assets is generally determined using independent
market assumptions to calculate the present value of the estimated
future post-tax cash flows expected to arise from the continued use
of the asset, including the anticipated cash flow effects of any capital
expenditure to enhance production or reduce cost, and its eventual
disposal where a market participant may take a consistent view. Cash
flows are discounted using an appropriate post-tax market discount
rate to arrive at a net present value of the asset, which is compared
against the asset’s carrying value. FVLCD may also take into
consideration other market-based indicators of fair value.
Value in use
VIU is determined as the present value of the estimated future
cash flows expected to arise from the continued use of the asset
in its present form and its eventual disposal. VIU is determined by
applying assumptions specific to the Group’s continued use and
cannot take into account future development. These assumptions
are different to those used in calculating FVLCD and consequently
the VIU calculation is likely to give a different result (usually lower)
to a FVLCD calculation.
194 BHP Annual Report 2019
11 Property, plant and equipment continued
Key judgements and estimates
Judgements: Assessment of indicators of impairment or
impairment reversal and the determination of CGUs for
impairment purposes require significant management judgement.
Indicators of impairment may include changes in the Group’s
operating and economic assumptions, including those arising
from changes in reserves or mine planning, updates to the
Group’s commodity supply, demand and price forecasts (which
include carbon price forecasts), or the possible additional
impacts from emerging risks such as those related to climate
change and the transition to a lower carbon economy.
Additional impacts related to climate change and the transition
to a lower carbon economy may include:
• a proportion of a CGU’s reserves becoming incapable
of extraction in an economically viable fashion;
• demand for the Group’s commodities decreasing, due to
policy, regulatory (including carbon pricing mechanisms),
legal, technological, market or societal responses
to climate change;
• physical impacts related to acute risks resulting from
increased severity of extreme weather events, and those
related to chronic risks resulting from longer-term changes
in climate patterns.
Estimates: In determining the recoverable amount of assets,
in the absence of quoted market prices, estimates are made
regarding the present value of future post-tax cash flows. These
estimates require significant management judgements and
assumptions and are subject to risk and uncertainty that may
be beyond the control of the Group; hence, there is a possibility
that changes in circumstances will materially alter projections,
which may impact the recoverable amount of assets at each
reporting date. The estimates are made from the perspective
of a market participant and include prices, future production
volumes, operating costs, tax attributes and discount rates.
An indicator of impairment has been identified for the Jansen
potash CGU at 30 June 2019 as the Group continues to assess
project feasibility and the timing of project approval in
accordance with the Group’s Capital Allocation Framework.
Accordingly, the Group has assessed the recoverable amount
of the Jansen CGU using FVLCD methodology including a market
participant’s perspective of the net present value of future
post-tax cash flows and other market-based indicators of fair
value. The Jansen CGU carrying amount of US$3.0 billion
as at 30 June 2019 is supported by the recoverable amount
determination and as such, no impairment has been recognised.
The recoverable amount estimate is most sensitive to
assumptions regarding the long-term forecasts of potash
prices and discount rates:
• Potash price: prices are based on the latest internal
forecasts taking into account expected demand and supply
for potash globally (which includes, amongst a range of
factors, carbon price forecasts), benchmarked with external
sources of information;
• Discount rate: the discount rate is derived using the weighted
average cost of capital methodology adjusted for any risks that
are not reflected in the underlying cash flows, including where
appropriate a country risk premium. A real post-tax discount
rate of 7.5 per cent was applied to post-tax cash flows.
Changes in circumstances may affect the assumptions used
to determine recoverable amount and could result in an
impairment of non-current assets at future reporting dates.
i
S
t
r
a
t
e
g
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
a
t
B
H
P
R
e
m
u
n
e
r
a
t
i
o
n
R
e
p
o
r
t
D
i
r
e
c
t
o
r
s
’
R
e
p
o
r
t
5
i
F
n
a
n
c
a
i
l
S
t
a
t
e
m
e
n
t
s
A
d
d
i
t
i
o
n
a
l
i
n
f
o
r
m
a
t
i
o
n
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
BHP Annual Report 2019 195
12 Intangible assets
Net book value
At the beginning of the financial year
Additions
Amortisation for the year
Impairments for the year (1)
Disposals
Transferred to assets held for sale
Transfers and other movements
At the end of the financial year (2)
– Cost
– Accumulated amortisation and impairments
2019
Other
intangibles
US$M
Goodwill
US$M
Total
US$M
Goodwill
US$M
247
−
−
−
−
−
−
247
247
−
531
31
(142)
(14)
−
−
22
428
778
31
(142)
(14)
−
−
22
675
1,697
(1,269)
1,944
(1,269)
3,269
−
−
(2,339)
(16)
(667)
−
247
247
−
2018
Other
intangibles
US$M
699
50
(197)
(14)
(7)
−
−
531
1,665
(1,134)
Total
US$M
3,968
50
(197)
(2,353)
(23)
(667)
−
778
1,912
(1,134)
(1) Includes impairment charges related to Onshore US assets of US$ nil (2018: US$2,339 million). Refer to note 27 ‘Discontinued operations’.
(2) The Group’s aggregate net carrying value of goodwill for Continuing operations is US$247 million (2018: US$247 million), representing less than 1 per cent of net equity
at 30 June 2019 (2018: less than 1 per cent). The goodwill is allocated across a number of CGUs.
Recognition and measurement
Goodwill
Where the fair value of the consideration paid for a business acquisition exceeds the fair value of the identifiable assets, liabilities and contingent
liabilities acquired, the difference is treated as goodwill. Where consideration is less than the fair value of acquired net assets, the difference
is recognised immediately in the income statement. Goodwill is not amortised and is measured at cost less any impairment losses.
Other intangibles
The Group capitalises amounts paid for the acquisition of identifiable intangible assets, such as software, licences and initial payments for the
acquisition of mineral lease assets, where it is considered that they will contribute to future periods through revenue generation or reductions
in cost. These assets, classified as finite life intangible assets, are carried in the balance sheet at the fair value of consideration paid less
accumulated amortisation and impairment charges. Intangible assets with finite useful lives are amortised on a straight-line basis over their
useful lives. The estimated useful lives are generally no greater than eight years.
Initial payments for the acquisition of intangible mineral lease assets are capitalised and amortised over the term of the permit. A regular review
is undertaken of each area of interest to determine the appropriateness of continuing to carry forward costs in relation to that area. Capitalised
costs are only carried forward to the extent that they are expected to be recovered through the successful exploitation of the area of interest or
alternatively by its sale. To the extent that capitalised expenditure is no longer expected to be recovered, it is charged to the income statement.
Key judgements and estimates
Judgements: Assessment of impairment indicators requires management judgement. If a judgement is made that recovery
of previously capitalised intangible mineral lease assets is unlikely, the relevant amount will be charged to the income statement.
Estimates: Determining the recoverable amount requires management to make certain estimates and assumptions as to future
events and circumstances, in particular whether an economically viable extraction operation can be established.
Where indicators of impairment exist for intangible assets, in the absence of quoted market prices, estimates are made regarding
the present value of future post-tax cash flows. These estimates require management judgement and assumptions and are subject
to risk and uncertainty that may be beyond the control of the Group; hence, there is a possibility that changes in circumstances
will materially alter projections, which may impact the recoverable amount of assets at each reporting date. The estimates are
made from the perspective of a market participant and include prices, future production volumes, operating costs, tax attributes
and discount rates.
13 Deferred tax balances
The movement for the year in the Group’s net deferred tax position is as follows:
Net deferred tax asset
At the beginning of the financial year
Income tax (charge)/credit recorded in the income statement (1)
Income tax credit/(charge) recorded directly in equity
Other movements
At the end of the financial year
2019
US$M
569
(81)
15
27
530
2018
US$M
2,023
(1,445)
17
(26)
569
2017
US$M
1,823
188
12
−
2,023
(1) Includes Discontinued operations income tax credit to the income statement of US$40 million (2018: US$510 million, 2017: US$219 million).
For recognition and measurement refer to note 6 ‘Income tax expense’.
196 BHP Annual Report 2019
13 Deferred tax balances continued
The composition of the Group’s net deferred tax assets and liabilities recognised in the balance sheet and the deferred tax expense
charged/(credited) to the income statement is as follows:
Type of temporary difference
Depreciation
Exploration expenditure
Employee benefits
Closure and rehabilitation
Resource rent tax
Other provisions
Deferred income
Deferred charges
Investments, including foreign tax credits
Foreign exchange gains and losses
Tax losses
Other
Total
Deferred tax assets
Deferred tax liabilities
Charged/(credited) to the income statement
2019
US$M
(1,717)
449
310
1,671
431
144
24
(416)
412
(97)
2,611
(58)
3,764
2018
US$M
(2,756)
492
321
1,627
468
141
21
(374)
546
(120)
3,758
(83)
4,041
2019
US$M
1,444
−
(6)
(203)
1,112
(1)
(5)
286
600
(6)
−
13
3,234
2018
US$M
1,356
−
(2)
(194)
1,328
(2)
−
272
691
16
−
7
3,472
2019
US$M
2018
US$M
2017
US$M
(951)
43
14
(53)
(179)
(2)
(9)
56
70
(45)
1,147
(10)
81
(752)
51
31
218
(194)
(11)
(13)
(119)
615
(20)
1,595
44
1,445
391
(22)
(37)
(151)
(189)
14
3
(77)
(17)
(77)
(381)
355
(188)
The Group recognises the benefit of tax losses amounting to US$2,611 million (2018: US$3,758 million) only to the extent of anticipated future
taxable income or gains in relevant jurisdictions. The amounts recognised in the Financial Statements in respect of each matter are derived
from the Group’s best judgements and estimates as described in note 6 ‘Income tax expense’.
The composition of the Group’s unrecognised deferred tax assets and liabilities is as follows:
Unrecognised deferred tax assets
Tax losses and tax credits (1)
Investments in subsidiaries (2)
Deductible temporary differences relating to PRRT (3)
Mineral rights (4)
Other deductible temporary differences (5)
Total unrecognised deferred tax assets
Unrecognised deferred tax liabilities
Investments in subsidiaries (2)
Taxable temporary differences relating to unrecognised deferred tax asset for PRRT (3)
Total unrecognised deferred tax liabilities
2019
US$M
3,720
1,656
2,197
2,230
412
10,215
2,253
659
2,912
2018
US$M
3,028
1,659
2,282
2,263
437
9,669
2,216
685
2,901
i
S
t
r
a
t
e
g
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
a
t
B
H
P
R
e
m
u
n
e
r
a
t
i
o
n
R
e
p
o
r
t
D
i
r
e
c
t
o
r
s
’
R
e
p
o
r
t
(1) At 30 June 2019, the Group had income and capital tax losses with a tax benefit of US$2,265 million (2018: US$1,946 million) and tax credits of US$1,455 million
(2018: US$1,082 million), which are not recognised as deferred tax assets, because it is not probable that future taxable profits or capital gains will be available against
which the Group can utilise the benefits.
5
The gross amount of tax losses carried forward that have not been recognised is as follows:
Year of expiry
Income tax losses
Not later than one year
Later than one year and not later than two years
Later than two years and not later than five years
Later than five years and not later than 10 years
Later than 10 years and not later than 20 years
Unlimited
Capital tax losses
Not later than one year
Later than two years and not later than five years
Unlimited
Gross amount of tax losses not recognised
Tax effect of total losses not recognised
Total
US$M
359
443
2,723
530
2,312
2,001
8,368
−
−
4,114
12,482
2,265
Of the US$1,455 million of tax credits, US$1,449 million expires not later than 10 years and US$6 million expires later than 10 years and not later than 20 years.
(2) The Group had deferred tax assets of US$1,656 million at 30 June 2019 (2018: US$1,659 million) and deferred tax liabilities of US$2,253 million (2018: US$2,216 million)
associated with undistributed earnings of subsidiaries that have not been recognised because the Group is able to control the timing of the reversal of the temporary
differences and it is not probable that these differences will reverse in the foreseeable future.
(3) The Group had US$2,197 million of unrecognised deferred tax assets relating to Australian Petroleum Resource Rent Tax (PRRT) at 30 June 2019 (2018: US$2,282 million
relating to Australian PRRT), with a corresponding unrecognised deferred tax liability for income tax purposes of US$659 million (2018: US$685 million). Recognition
of a deferred tax asset for PRRT depends on benefits expected to be obtained from the deduction against PRRT liabilities.
(4) The Group had deductible temporary differences relating to mineral rights for which deferred tax assets of US$2,230 million at 30 June 2019 (2018: US$2,263 million)
had not been recognised because it is not probable that future capital gains will be available, against which the Group can utilise the benefits. The deductible
temporary differences do not expire under current tax legislation.
(5) The Group had other deductible temporary differences for which deferred tax assets of US$412 million at 30 June 2019 (2018: US$437 million) had not been
recognised because it is not probable that future taxable profits will be available against which the Group can utilise the benefits. The deductible temporary
differences do not expire under current tax legislation.
BHP Annual Report 2019 197
i
F
n
a
n
c
a
i
l
S
t
a
t
e
m
e
n
t
s
A
d
d
i
t
i
o
n
a
l
i
n
f
o
r
m
a
t
i
o
n
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
14 Closure and rehabilitation provisions
At the beginning of the financial year
Capitalised amounts for operating sites:
Change in estimate
Exchange translation
Adjustments charged/(credited) to the income statement:
Increases to existing and new provisions
Exchange translation
Released during the year
Other adjustments to the provision:
Amortisation of discounting impacting net finance costs
Expenditure on closure and rehabilitation activities
Exchange variations impacting foreign currency translation reserve
Divestment and demerger of subsidiaries and operations
Transferred to liabilities held for sale
Other movements
At the end of the financial year
Comprising:
Current
Non-current
Operating sites
Closed sites
2019
US$M
6,330
494
(194)
318
(7)
(33)
353
(201)
(2)
(80)
−
(1)
2018
US$M
6,738
35
(122)
132
(11)
(165)
352
(178)
−
−
(450)
(1)
6,977
6,330
361
6,616
5,535
1,442
274
6,056
5,120
1,210
The Group is required to rehabilitate sites and associated facilities at the end of, or in some cases, during the course of production, to a
condition acceptable to the relevant authorities, as specified in licence requirements and the Group’s environmental performance requirements
as set out within Our Charter.
The key components of closure and rehabilitation activities are:
• the removal of all unwanted infrastructure associated with an operation;
• the return of disturbed areas to a safe, stable, productive and self-sustaining condition, consistent with the agreed end land use.
Recognition and measurement
Provisions for closure and rehabilitation are recognised by the Group when:
• it has a present legal or constructive obligation as a result of past events;
• it is more likely than not that an outflow of resources will be required to settle the obligation;
• the amount can be reliably estimated.
Initial recognition
Subsequent remeasurement
Closure and rehabilitation provisions are initially
recognised when an environmental disturbance
first occurs. The individual site provisions are an
estimate of the expected value of future cash
flows required to rehabilitate the relevant site
using current restoration standards and
techniques and taking into account risks and
uncertainties. Individual site provisions are
discounted to their present value using country
specific discount rates aligned to the estimated
timing of cash outflows.
When provisions for closure and rehabilitation
are initially recognised, the corresponding
cost is capitalised as an asset, representing part
of the cost of acquiring the future economic
benefits of the operation.
The closure and rehabilitation asset, recognised within property, plant and equipment, is depreciated
over the life of the operations. The value of the provision is progressively increased over time as the
effect of discounting unwinds, resulting in an expense recognised in net finance costs.
The closure and rehabilitation provision is reviewed at each reporting date to assess if the estimate
continues to reflect the best estimate of the obligation. If necessary, the provision is remeasured
to account for factors, including:
• revisions to estimated reserves, resources and lives of operations;
• developments in technology;
• regulatory requirements and environmental management strategies;
• changes in the estimated extent and costs of anticipated activities, including the effects
of inflation and movements in foreign exchange rates;
• movements in interest rates affecting the discount rate applied.
Changes to the closure and rehabilitation estimate are added to, or deducted from, the related
asset and amortised on a prospective basis accordingly over the remaining life of the operation,
generally applying the units of production method.
Costs arising from unforeseen circumstances, such as the contamination caused by unplanned
discharges, are recognised as an expense and liability when the event gives rise to an obligation
that is probable and capable of reliable estimation.
Closed sites
Where future economic benefits are no longer expected to be derived through operation, changes to the associated closure and remediation
costs are charged/(credited) to the income statement in the period identified. This amounted to a charge of US$251 million in the year ended
30 June 2019 (2018: credit of US$(21) million; 2017: charge of US$33 million).
198 BHP Annual Report 2019
14 Closure and rehabilitation provisions continued
Key estimates
The recognition and measurement of closure and rehabilitation provisions requires the use of significant estimates and assumptions,
including, but not limited to:
• the extent (due to legal or constructive obligations) of potential activities required for the removal of infrastructure and
rehabilitation activities;
• costs associated with future rehabilitation activities;
• applicable real discount rates;
• the timing of cash flows and ultimate closure of operations.
Rehabilitation activities are generally undertaken at the end of the production life at the individual sites. Remaining production lives
range from 1-98 years with an average for all sites, weighted by current closure provision, of approximately 32 years. A 0.5 per cent
decrease in the real discount rates applied at 30 June 2019 would result in an increase to the closure and rehabilitation provision
of US$618 million, an increase in property, plant and equipment of US$524 million in relation to operating sites and an income
statement charge of US$94 million in respect of closed sites. In addition, the change would result in an increase of approximately
US$42 million to depreciation expense and an immaterial reduction in net finance costs for the year ending 30 June 2020.
Estimates can also be impacted by the emergence of new restoration techniques, changes in regulatory requirements for
rehabilitation, and experience at other operations. These uncertainties may result in future actual expenditure differing from
the amounts currently provided for in the balance sheet.
Capital structure
15 Share capital
Share capital issued
Opening number of shares
Purchase of shares by ESOP Trusts
Employee share awards exercised following vesting
Movement in treasury shares under Employee Share Plans
Shares bought back and cancelled (1)
BHP Group Limited
BHP Group Plc
2019
shares
2018
shares
2017
shares
2019
shares
2018
shares
2017
shares
3,211,691,105 3,211,691,105 3,211,691,105
(6,481,292)
6,945,570
(464,278)
−
(6,854,057)
5,902,588
951,469
(265,839,711)
(7,469,236)
7,339,522
129,714
−
2,112,071,796
(274,069)
275,984
(1,915)
−
2,112,071,796
(679,223)
711,705
(32,482)
−
2,112,071,796
(225,646)
940,070
(714,424)
−
Closing number of shares (2)
2,945,851,394 3,211,691,105 3,211,691,105
2,112,071,796
2,112,071,796
2,112,071,796
Comprising:
Shares held by the public
Treasury shares
Other share classes
Special Voting share of no par value
Special Voting share of US$0.50 par value
5.5% Preference shares of £1 each
DLC Dividend share
2,944,703,079 3,211,494,259 3,211,623,973
67,132
1,148,315
196,846
2,112,032,077
39,719
2,112,030,162
41,634
2,111,997,680
74,116
1
−
−
1
1
−
−
1
1
−
−
1
−
1
50,000
−
−
1
50,000
−
−
1
50,000
−
i
S
t
r
a
t
e
g
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
a
t
B
H
P
R
e
m
u
n
e
r
a
t
i
o
n
R
e
p
o
r
t
D
i
r
e
c
t
o
r
s
’
R
e
p
o
r
t
5
i
F
n
a
n
c
a
i
l
(1) During December 2018, BHP completed an off-market buy-back program of US$5.2 billion of BHP Group Limited shares related to the disbursement of proceeds
from the disposal of Onshore US.
(2) No fully paid ordinary shares in BHP Group Limited or BHP Group Plc were issued on the exercise of Group Incentive Scheme awards during the period 1 July 2019
to 5 September 2019.
Recognition and measurement
Share capital of BHP Group Limited and BHP Group Plc is composed of the following classes of shares:
Ordinary shares fully paid
Special Voting shares
Preference shares
BHP Group Limited and BHP Group Plc
ordinary shares fully paid of US$0.50 par value
represent 99.99 per cent of the total number
of shares. Any profit remaining after payment
of preferred distributions is available for
distribution to the holders of BHP Group
Limited and BHP Group Plc ordinary shares
in equal amounts per share.
Each of BHP Group Limited and BHP Group
Plc issued one Special Voting share to facilitate
joint voting by shareholders of BHP Group
Limited and BHP Group Plc on Joint Electorate
Actions. There has been no movement
in these shares.
Preference shares have the right to repayment
of the amount paid up on the nominal value
and any unpaid dividends in priority to the
holders of any other class of shares in BHP
Group Plc on a return of capital or winding up.
The holders of preference shares have limited
voting rights if payment of the preference
dividends are six months or more in arrears
or a resolution is passed changing the rights
of the preference shareholders. There has been
no movement in these shares, all of which are
held by JP Morgan Limited.
DLC Dividend share
Treasury shares
The DLC Dividend share supports the Dual
Listed Company (DLC) equalisation principles
in place since the merger in 2001, including
the requirement that ordinary shareholders
of BHP Group Plc and BHP Group Limited
are paid equal cash dividends per share. This
share enables efficient and flexible capital
management across the DLC and was issued
on 23 February 2016 at par value of US$10.
Treasury shares are shares of BHP Group Limited
and BHP Group Plc and are held by the ESOP
Trusts for the purpose of issuing shares to
employees under the Group’s Employee Share
Plans. Treasury shares are recognised at cost
and deducted from equity, net of any income
tax effects. When the treasury shares are
subsequently sold or reissued, any consideration
received, net of any directly attributable costs
and income tax effects, is recognised as an
increase in equity. Any difference between the
carrying amount and the consideration, if
reissued, is recognised in retained earnings.
S
t
a
t
e
m
e
n
t
s
A
d
d
i
t
i
o
n
a
l
i
n
f
o
r
m
a
t
i
o
n
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
BHP Annual Report 2019 199
16 Other equity
Share premium
account
Foreign currency
translation reserve
Employee share
awards reserve
2019
US$M
518
37
213
2018
US$M
518
42
196
2017
US$M
518
40
214
Cash flow hedge
reserve
114
58
153
Recognition and measurement
The share premium account represents the premium paid on the issue of
BHP Group Plc shares recognised in accordance with the UK Companies
Act 2006.
The foreign currency translation reserve represents exchange differences
arising from the translation of non-US dollar functional currency operations
within the Group into US dollars.
The employee share awards reserve represents the accrued employee
entitlements to share awards that have been charged to the income
statement and have not yet been exercised.
Once exercised, the difference between the accumulated fair value
of the awards and their historical on-market purchase price is recognised
in retained earnings.
The cash flow hedging reserve represents hedging gains and losses
recognised on the effective portion of cash flow hedges. The cumulative
deferred gain or loss on the hedge is recognised in the income statement
when the hedged transaction impacts the income statement, or is
recognised as an adjustment to the cost of non-financial hedged items.
The hedging reserve records the portion of the gain or loss on a hedging
instrument in a cash flow hedge that is determined to be an effective
hedge relationship.
Cost of hedging
reserve
Equity investments
reserve
Capital redemption
reserve
Non-controlling interest
contribution reserve
(74)
17
−
16
−
10
The cost of hedging reserve represents the recognition of certain costs
of hedging for example, basis adjustments, which have been excluded
from the hedging relationship and deferred in other comprehensive
income until the hedged transaction impacts the income statement.
The financial assets reserve represents the revaluation of investments
in shares recognised through other comprehensive income. Where
a revalued financial asset is sold, the relevant portion of the reserve
is transferred to retained earnings.
177
177
177
1,283
1,283
1,288
The capital redemption reserve represents the par value of BHP Group Plc
shares that were purchased and subsequently cancelled. The cancellation
of the shares creates a non-distributable capital redemption reserve.
The non-controlling interest contribution reserve represents the excess
of consideration received over the book value of net assets attributable
to equity instruments when acquired by non-controlling interests.
Total reserves
2,285
2,290
2,400
Summarised financial information relating to each of the Group’s subsidiaries with non-controlling interests (NCI) that are material to the Group
before any intra-group eliminations is shown below:
US$M
Group share (per cent)
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Net assets
Net assets attributable to NCI
Revenue
Profit after taxation
Other comprehensive income
Total comprehensive income
Profit after taxation attributable to NCI
Other comprehensive income attributable to NCI
Net operating cash flow
Net investing cash flow
Net financing cash flow
Dividends paid to NCI (1)
Minera
Escondida
Limitada
57.5
2,456
12,538
(1,826)
(4,122)
9,046
3,845
6,876
1,360
(1)
1,359
578
−
3,283
(1,034)
(2,517)
986
2019
Other individually
immaterial
subsidiaries (incl.
intra-group
eliminations)
Minera
Escondida
Limitada
Total
2018
Other individually
immaterial
subsidiaries (incl.
intra-group
eliminations)
Total
57.5
2,751
13,389
(1,781)
(4,352)
10,007
4,253
8,775
2,221
(2)
2,219
944
(1)
5,041
(997)
(3,392)
1,469
739
4,584
301
(1)
879
(1)
219
1,205
825
5,078
174
1
1,118
−
135
1,604
(1) Includes dividends paid to non-controlling interests related to Onshore US of US$7 million (2018: US$22 million). Refer to note 27 ‘Discontinued operations’.
While the Group controls Minera Escondida Limitada, the non-controlling interests hold certain protective rights that restrict the Group’s ability
to sell assets held by Minera Escondida Limitada, or use the assets in other subsidiaries and operations owned by the Group. Minera Escondida
Limitada is also restricted from paying dividends without the approval of the non-controlling interests.
200 BHP Annual Report 2019
17 Dividends
Dividends paid during the period (1)
Prior year final dividend
Interim dividend
Special dividend
Year ended 30 June 2019
Year ended 30 June 2018
Year ended 30 June 2017
Per share
US cents
63
55
102
220
Total
US$M
3,356
2,788
5,158
11,302
Per share
US cents
43
55
−
98
Total
US$M
2,291
2,930
−
5,221
Per share
US cents
14
40
−
54
Total
US$M
746
2,125
−
2,871
(1) 5.5 per cent dividend on 50,000 preference shares of £1 each determined and paid annually (2018: 5.5 per cent; 2017: 5.5 per cent).
Dividends paid during the period differs from the amount of dividends paid in the Cash Flow Statement as a result of foreign exchange gains
and losses relating to the timing of equity distributions between the record date and the payment date.
The Dual Listed Company merger terms require that ordinary shareholders of BHP Group Limited and BHP Group Plc are paid equal cash
dividends on a per share basis. Each American Depositary Share (ADS) represents two ordinary shares of BHP Group Limited or BHP Group Plc.
Dividends determined on each ADS represent twice the dividend determined on BHP Group Limited or BHP Group Plc ordinary shares.
Dividends are determined after period-end and announced with the results for the period. Interim dividends are determined in February and
paid in March. Final dividends are determined in August and paid in September. Dividends determined are not recorded as a liability at the
end of the period to which they relate. On 17 December 2018, BHP Group Limited and BHP Group Plc determined a special dividend of US$1.02
per share (US$5.2 billion), which was paid on 30 January 2019 and related to the disbursement of proceeds from the disposal of Onshore US.
Subsequent to year-end, on 20 August 2019, BHP Group Limited and BHP Group Plc determined a final dividend of 78 US cents per share
(US$3,944 million), which will be paid on 25 September 2019 (30 June 2018: final dividend of 63 US cents per share – US$3,354 million;
30 June 2017: final dividend of 43 US cents per share – US$2,289 million).
BHP Group Limited dividends for all periods presented are, or will be, fully franked based on a tax rate of 30 per cent.
Franking credits as at 30 June
Franking credits arising from the payment of current tax
Total franking credits available (1)
2019
US$M
8,681
1,194
9,875
2018
US$M
10,400
1,330
11,730
2017
US$M
10,155
1,239
11,394
(1) The payment of the final 2019 dividend determined after 30 June 2019 will reduce the franking account balance by US$984 million.
18 Provisions for dividends and other liabilities
The disclosure below excludes closure and rehabilitation provisions (refer to note 14 ‘Closure and rehabilitation provisions’), employee benefits,
restructuring and post-retirement employee benefits provisions (refer to note 24 ‘Employee benefits, restructuring and post-retirement
employee benefits provisions’) and provisions related to the Samarco dam failure (refer to note 4 ‘Significant events – Samarco dam failure’).
Movement in provision for dividends and other liabilities
At the beginning of the financial year
Dividends determined
Charge/(credit) for the year:
Underlying
Discounting
Exchange variations
Released during the year
Utilisation
Dividends paid
Transferred to liabilities held for sale
Transfers and other movements
At the end of the financial year
Comprising:
Current
Non-current
2019
US$M
944
11,302
372
10
101
(391)
(338)
(11,395)
−
(104)
501
220
281
2018
US$M
984
5,221
337
4
3
(78)
(150)
(5,325)
(39)
(13)
944
290
654
BHP Annual Report 2019 201
i
S
t
r
a
t
e
g
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
a
t
B
H
P
R
e
m
u
n
e
r
a
t
i
o
n
R
e
p
o
r
t
D
i
r
e
c
t
o
r
s
’
R
e
p
o
r
t
5
i
F
n
a
n
c
a
i
l
S
t
a
t
e
m
e
n
t
s
A
d
d
i
t
i
o
n
a
l
i
n
f
o
r
m
a
t
i
o
n
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
Financial management
19 Net debt
The Group seeks to maintain a strong balance sheet and deploys its capital with reference to the Capital Allocation Framework.
The Group monitors capital using the net debt balance and the gearing ratio, being the ratio of net debt to net debt plus net assets.
US$M
Interest bearing liabilities
Bank loans
Notes and debentures
Finance leases
Bank overdraft and short-term borrowings
Other
Total interest bearing liabilities
Less cash and cash equivalents
Cash
Short-term deposits
Total cash and cash equivalents
Net debt
Net assets
Gearing
2019
2018
Current
Non-current
Current
Non-current
508
1,002
65
20
66
1,661
2,210
13,403
15,613
1,990
20,527
650
−
−
23,167
−
−
−
9,215
51,824
15.1%
308
2,228
77
58
65
2,736
1,065
14,806
15,871
2,247
21,070
725
−
27
24,069
−
−
−
10,934
60,670
15.3%
2017
US$M
14,153
(45)
14,108
Cash and short-term deposits are disclosed in the cash flow statement net of bank overdrafts and interest bearing liabilities at call.
Total cash and cash equivalents
Bank overdrafts and short-term borrowing
Total cash and cash equivalents, net of overdrafts
2019
US$M
15,613
(20)
15,593
2018
US$M
15,871
(58)
15,813
Recognition and measurement
Cash and short-term deposits in the balance sheet comprise cash at bank and on hand and highly liquid cash deposits with short-term
maturities that are readily convertible to known amounts of cash with insignificant risk of change in value. The Group considers that the
carrying value of cash and cash equivalents approximate fair value due to their short term to maturity.
Cash and cash equivalents includes US$108 million (2018: US$98 million) restricted by legal or contractual arrangements.
Interest bearing liabilities and cash and cash equivalents include balances denominated in the following currencies:
USD
EUR
GBP
AUD
CAD
Other
Total
Interest bearing liabilities
Cash and cash equivalents
2019
US$M
12,485
7,680
3,118
951
594
−
24,828
2018
US$M
12,981
9,070
3,104
1,077
573
−
26,805
2019
US$M
9,214
6
48
3,023
3,092
230
15,613
2018
US$M
7,024
5,845
1,560
9
1,301
132
15,871
The Group enters into derivative transactions to convert the majority of its exposures above into US dollars. Further information on the Group’s
risk management activities relating to these balances is provided in note 21 ‘Financial risk management’.
Liquidity risk
The Group’s liquidity risk arises from the possibility that it may not be able to settle or meet its obligations as they fall due and is managed
as part of the portfolio risk management strategy. Operational, capital and regulatory requirements are considered in the management of
liquidity risk, in conjunction with short-term and long-term forecast information.
Recognising the cyclical volatility of operating cash flows, the Group has defined minimum target cash and liquidity buffers to be maintained
to mitigate liquidity risk and support operations through the cycle.
The Group’s strong credit profile, diversified funding sources, its minimum cash buffer and its committed credit facilities ensure that sufficient
liquid funds are maintained to meet its daily cash requirements.
Standard & Poor’s credit rating of the Group remained at the A level with stable outlook throughout FY2019. Moody’s upgraded its credit
rating of the Group from A3 to A2 on 31 October 2018 with a stable outlook thereafter in FY2019.
There were no defaults on the Group’s liabilities during the period.
202 BHP Annual Report 2019
19 Net debt continued
Counterparty risk
The Group is exposed to credit risk from its financing activities, including short-term cash investments such as deposits with banks and
derivative contracts. This risk is managed by Group Treasury in line with the counterparty risk framework, which aims to minimise the exposure
to a counterparty and mitigate the risk of financial loss through counterparty failure.
Exposure to counterparties is monitored at a Group level across all products and includes exposure with derivatives and cash investments.
Investments and derivatives are only transacted with approved counterparties who have been assigned specific limits based on a quantitative
credit risk model. These limits are updated at least bi-annually. Additionally, derivatives are subject to tenor limits and investments are subject
to concentration limits by rating.
Derivative fair values are inclusive of valuation adjustments that take into account consideration of both the counterparty and the Group’s risk
of default.
Standby arrangements and unused credit facilities
The Group’s committed revolving credit facility operates as a back-stop to the Group’s uncommitted commercial paper program. The combined
amount drawn under the facility or as commercial paper will not exceed US$6.0 billion. As at 30 June 2019, US$ nil commercial paper was
drawn (2018: US$ nil). The revolving credit facility has a five-year maturity ending 7 May 2021. A commitment fee is payable on the undrawn
balance and an interest rate comprising an interbank rate plus a margin applies to any drawn balance. The agreed margins are typical for
a credit facility extended to a company with the Group’s credit rating.
Maturity profile of financial liabilities
The maturity profile of the Group’s financial liabilities based on the undiscounted contractual amounts, taking into account the derivatives
related to debt, is as follows:
2019
US$M
Due for payment:
In one year or less or on demand
In more than one year but not more than two years
In more than two years but not more than five years
In more than five years
Total
Carrying amount
2018
US$M
Bank loans,
debentures
and other
loans
Expected
future
interest
payments
Derivatives
related to
debentures
Other
derivatives
Obligations
under
finance
leases
Trade and
other
payables (1)
1,587
4,107
5,513
11,662
22,869
24,113
864
775
1,864
4,896
8,399
−
200
226
558
1,102
2,086
958
64
1
−
−
65
65
110
110
307
501
1,028
715
6,555
5
−
−
6,560
6,560
Bank loans,
debentures
and other
loans
Expected
future
interest
payments
Derivatives
related to
debentures
Other
derivatives
Obligations
under
finance
leases
Trade and
other
payables (1)
Due for payment:
In one year or less or on demand
In more than one year but not more than two years
In more than two years but not more than five years
In more than five years
Total
Carrying amount
2,647
1,545
8,019
13,287
25,498
26,003
682
957
2,203
5,519
9,361
−
302
188
823
1,191
2,504
1,213
17
1
−
−
18
18
127
113
335
590
1,165
802
5,788
3
−
−
5,791
5,791
(1) Excludes input taxes of US$162 million (2018: US$189 million) included in other payables. Refer to note 9 ‘Trade and other payables’.
Total
9,380
5,224
8,242
18,161
41,007
32,411
Total
9,563
2,807
11,380
20,587
44,337
33,827
20 Net finance costs
Financial expenses
Interest expense using the effective interest rate method:
Interest on bank loans, overdrafts and all other borrowings
Interest capitalised at 4.96% (2018: 4.24%; 2017: 3.25%) (1)
Interest on finance leases
Discounting on provisions and other liabilities
Other gains and losses:
Fair value change on hedged loans
Fair value change on hedging derivatives
Exchange variations on net debt
Other
Total financial expenses
Financial income
Interest income
Net finance costs
2019
US$M
2018
US$M
2017
US$M
1,296
(248)
47
470
729
(809)
6
19
1,510
(446)
1,064
1,168
(139)
59
414
(265)
329
(19)
20
1,567
(322)
1,245
1,130
(113)
33
450
(1,185)
1,244
(23)
24
1,560
(143)
1,417
(1) Interest has been capitalised at the rate of interest applicable to the specific borrowings financing the assets under construction or, where financed through general
borrowings, at a capitalisation rate representing the average interest rate on such borrowings. Tax relief for capitalised interest is approximately US$74 million
(2018: US$42 million; 2017: US$34 million).
Recognition and measurement
Interest income is accrued using the effective interest rate method. Finance costs are expensed as incurred, except where they relate to the
financing of construction or development of qualifying assets.
BHP Annual Report 2019 203
i
S
t
r
a
t
e
g
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
a
t
B
H
P
R
e
m
u
n
e
r
a
t
i
o
n
R
e
p
o
r
t
D
i
r
e
c
t
o
r
s
’
R
e
p
o
r
t
5
i
F
n
a
n
c
a
i
l
S
t
a
t
e
m
e
n
t
s
A
d
d
i
t
i
o
n
a
l
i
n
f
o
r
m
a
t
i
o
n
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
21 Financial risk management
21.1 Financial risks
Financial and capital risk management strategy
The financial risks arising from the Group’s operations comprise market, liquidity and credit risk. These risks arise in the normal course of
business and the Group manages its exposure to them in accordance with the Group’s portfolio risk management strategy. The objective
of the strategy is to support the delivery of the Group’s financial targets, while protecting its future financial security and flexibility by taking
advantage of the natural diversification provided by the scale, diversity and flexibility of the Group’s operations and activities.
A Cash Flow at Risk (CFaR) framework is used to measure the aggregate and diversified impact of financial risks upon the Group’s financial
targets. The principal measurement of risk is CFaR measured on a portfolio basis, which is defined as the worst expected loss relative
to projected business plan cash flows over a one-year horizon under normal market conditions at a confidence level of 90 per cent.
Market risk management
The Group’s activities expose it to market risks associated with movements in interest rates, foreign currencies and commodity prices.
Under the strategy outlined above, the Group seeks to achieve financing costs, currency impacts, input costs and commodity prices
on a floating or index basis. This strategy gives rise to a risk of variability in earnings, which is measured under the CFaR framework.
In executing the strategy, financial instruments are potentially employed in three distinct but related activities. The following table summarises
these activities and the key risk management processes:
Activity
Key risk management processes
1 Risk mitigation
On an exception basis, hedging for the purposes of mitigating risk related to specific and
significant expenditure on investments or capital projects will be executed if necessary
to support the Group’s strategic objectives.
2 Economic hedging of commodity sales, operating costs, short-term cash deposits and
debt instruments
Where Group commodity production is sold to customers on pricing terms that deviate
from the relevant index target and where a relevant derivatives market exists, financial
instruments may be executed as an economic hedge to align the revenue price exposure
with the index target and US dollars.
Where debt is issued in a currency other than the US dollar and/or at a fixed interest rate,
fair value and cash flow hedges may be executed to align the debt exposure with the
Group’s functional currency of US dollars and/or to swap to a floating interest rate.
Where short-term cash deposits are held in a currency other than US dollars, derivative
financial instruments may be executed to align the foreign exchange exposure to the
Group’s functional currency of US dollars.
3 Strategic financial transactions
Opportunistic transactions may be executed with financial instruments to capture value
from perceived market over/under valuations.
Execution of transactions within approved mandates.
Measuring and reporting the exposure in customer
commodity contracts and issued debt instruments.
Executing hedging derivatives to align the total group
exposure to the index target.
Execution of transactions within approved mandates.
Execution of transactions within approved mandates.
Primary responsibility for the identification and control of financial
risks, including authorising and monitoring the use of financial
instruments for the above activities and stipulating policy thereon,
rests with the Financial Risk Management Committee under authority
delegated by the Chief Executive Officer.
Interest rate risk
The Group is exposed to interest rate risk on its outstanding
borrowings and short-term cash deposits from the possibility that
changes in interest rates will affect future cash flows or the fair
value of fixed interest rate financial instruments. Interest rate risk
is managed as part of the portfolio risk management strategy.
The majority of the Group’s debt is issued at fixed interest rates.
The Group has entered into interest rate swaps and cross currency
interest rate swaps to convert most of its fixed interest rate exposure
to floating US dollar interest rate exposure. As at 30 June 2019,
87 per cent of the Group’s borrowings were exposed to floating
interest rates inclusive of the effect of swaps (2018: 89 per cent).
The fair value of interest rate swaps and cross currency interest
rate swaps in hedge relationships used to hedge both interest rate
and foreign currency risks are shown in the valuation hierarchy
of this note.
Based on the net debt position as at 30 June 2019, taking into
account interest rate swaps and cross currency interest rate swaps,
it is estimated that a one percentage point increase in the US LIBOR
interest rate will decrease the Group’s equity and profit after taxation
by US$39 million (2018: decrease of US$54 million). This assumes the
change in interest rates is effective from the beginning of the
financial year and the fixed/floating mix and balances are constant
over the year. However, interest rates and the net debt profile of the
Group may not remain constant over the coming financial year and
therefore such sensitivity analysis should be used with care.
Currency risk
The US dollar is the predominant functional currency within the
Group and as a result, currency exposures arise from transactions
and balances in currencies other than the US dollar. The Group’s
potential currency exposures comprise:
• translational exposure in respect of non-functional currency
monetary items;
• transactional exposure in respect of non-functional currency
expenditure and revenues.
The Group’s foreign currency risk is managed as part of the portfolio
risk management strategy.
Translational exposure in respect of non-functional currency
monetary items
Monetary items, including financial assets and liabilities,
denominated in currencies other than the functional currency
of an operation are periodically restated to US dollar equivalents
and the associated gain or loss is taken to the income statement.
The exception is foreign exchange gains or losses on foreign
currency denominated provisions for closure and rehabilitation
at operating sites, which are capitalised in property, plant
and equipment.
The Group has entered into cross currency interest rate swaps and
foreign exchange forwards to convert its significant foreign currency
exposures in respect of monetary items into US dollars. Changes in
foreign exchange rates will therefore have an insignificant impact on
equity and profit after tax.
The principal non-functional currencies to which the Group is
exposed are the Australian dollar, the Euro, the Pound sterling and
the Chilean peso; however, 82 per cent (2018: 88 per cent) of the
Group’s net financial liabilities are denominated in US dollars. Based
on the Group’s net financial assets and liabilities as at 30 June 2019,
a weakening of the US dollar against these currencies (one cent
strengthening in Australian dollar, one cent strengthening in Euro,
one penny strengthening in Pound sterling and 10 pesos strengthening
in Chilean peso), with all other variables held constant, would
decrease the Group’s equity and profit after taxation by US$12 million
(2018: decrease of US$10 million).
204 BHP Annual Report 2019
21 Financial risk management continued
Transactional exposure in respect of non-functional currency
expenditure and revenues
Certain operating and capital expenditure is incurred in currencies
other than an operation’s functional currency. To a lesser extent,
certain sales revenue is earned in currencies other than the functional
currency of operations and certain exchange control restrictions
may require that funds be maintained in currencies other than the
functional currency of the operation. These currency risks are
managed as part of the portfolio risk management strategy. The
Group may enter into forward exchange contracts when required
under this strategy.
Commodity price risk
The risk associated with commodity prices is managed as part of
the portfolio risk management strategy. Contracts for the sale and
physical delivery of commodities are executed whenever possible
on a pricing basis intended to achieve a relevant index target. While
substantially all of the Group’s commodity production is sold on
market-based index pricing terms, derivatives may from time
to time be used to align realised prices with the relevant index.
Financial instruments with commodity price risk comprise forward
commodity and other derivative contracts with a net assets fair value
of US$199 million (2018: US$210 million). Significant commodity
price risk instruments within other derivative balances include
derivatives embedded in physical commodity purchase and sales
contracts of gas in Trinidad and Tobago with a net assets fair value
of US$202 million (2018: US$216 million). These are included within
other derivatives.
The potential effect on these derivatives’ fair values of using
reasonably possible alternative assumptions in these models,
based on a change in the most significant input, such as commodity
prices, by a 10 per cent change with all other factors held constant,
would increase or decrease profit after taxation by US$55 million
(2018: US$9 million).
Provisionally priced commodity sales and purchases contracts
Provisionally priced sales or purchases volumes are those for which
price finalisation, referenced to the relevant index, is outstanding at
the reporting date. Provisional pricing mechanisms within these sales
and purchases arrangements have the character of a commodity
derivative. Trade receivables or payables under these contracts are
carried at fair value through profit and loss. The Group’s exposure
at 30 June 2019 to the impact of movements in commodity prices
upon provisionally invoiced sales and purchases volumes was
predominately around copper.
The Group had 277 thousand tonnes of copper exposure as at
30 June 2019 (2018: 356 thousand tonnes) that was provisionally
priced. The final price of these sales and purchases volumes will
be determined during the first half of FY2020. A 10 per cent change
in the price of copper realised on the provisionally priced sales, with
all other factors held constant, would increase or decrease profit after
taxation by US$114 million (2018: US$178 million).
The relationship between commodity prices and foreign currencies
is complex and movements in foreign exchange rates can impact
commodity prices. The sensitivities should therefore be used with care.
Liquidity risk
Refer to note 19 ‘Net debt’ for details on the Group’s liquidity risk.
Credit risk
Credit risk is the risk that a counterparty will not meet its obligations
under a financial instrument or customer contract, leading to a
financial loss. The Group is exposed to credit risk from its operating
activities (primarily from customer receivables) and from its financing
activities, including deposits with banks and financial institutions,
other short-term investments, interest rate and currency derivative
contracts and other financial instruments.
Refer to note 8 ‘Trade and other receivables’ and note 19 ‘Net debt’
for details on the Group credit risk.
21.2 Recognition and measurement (following adoption of IFRS 9)
All financial assets and liabilities, other than derivatives, are initially
recognised at the fair value of consideration paid or received, net
of transaction costs as appropriate.
Financial assets are subsequently carried at fair value or amortised
cost based on:
• the Group’s purpose, or business model, for holding the
financial asset;
• whether the financial asset’s contractual terms give rise to cash
flows that are solely payments of principal and interest.
The resulting financial statement classifications of financial assets can be summarised as follows:
Contractual cash flows
Business model
Category
Solely principal and interest
Solely principal and interest
Hold in order to collect contractual cash flows
Amortised cost
Hold in order to collect contractual cash flows
and sell
Fair value through other comprehensive income
Solely principal and interest
Hold in order to sell
Fair value through profit or loss
Other
Any of those mentioned above
Fair value through profit or loss
Solely principal and interest refers to the Group receiving returns only
for the time value of money and the credit risk of the counterparty
for financial assets held. The main exceptions for the Group are
provisionally priced receivables and derivatives.
The Group has the intention of collecting payment directly from its
customers in most cases, however the Group also participates in
receivables financing programs in respect of selected customers.
Receivables in these portfolios are therefore held at fair value through
profit or loss prior to sale to the financial institution.
With the exception of derivative contracts and provisionally priced
trade payables, the Group’s financial liabilities are classified as
subsequently measured at amortised cost.
The Group may in addition elect to designate certain financial assets
or liabilities at fair value through profit or loss or to apply hedge
accounting where they are not mandatorily held at fair value through
profit or loss.
Derivatives are initially recognised at fair value on the date the contract
is entered into and are subsequently remeasured at their fair value.
Fair value measurement
The carrying amount of financial assets and liabilities measured at
fair value is principally calculated based on inputs other than quoted
prices that are observable for these financial assets or liabilities,
either directly (i.e. as unquoted prices) or indirectly (i.e. derived
from prices). Where no price information is available from a quoted
market source, alternative market mechanisms or recent comparable
transactions, fair value is estimated based on the Group’s views on
relevant future prices, net of valuation allowances to accommodate
liquidity, modelling and other risks implicit in such estimates.
The inputs used in fair value calculations are determined by the
relevant segment or function. The functions support the assets
and operate under a defined set of accountabilities authorised
by the Executive Leadership Team. Movements in the fair value
of financial assets and liabilities may be recognised through the
income statement or in other comprehensive income.
BHP Annual Report 2019 205
i
S
t
r
a
t
e
g
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
a
t
B
H
P
R
e
m
u
n
e
r
a
t
i
o
n
R
e
p
o
r
t
D
i
r
e
c
t
o
r
s
’
R
e
p
o
r
t
5
i
F
n
a
n
c
a
i
l
S
t
a
t
e
m
e
n
t
s
A
d
d
i
t
i
o
n
a
l
i
n
f
o
r
m
a
t
i
o
n
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
21 Financial risk management continued
For financial assets and liabilities carried at fair value, the Group uses the following to categorise the method used based on the lowest level
input that is significant to the fair value measurement as a whole:
Fair value hierarchy
Level 1
Level 2
Level 3
Valuation method
Based on quoted prices (unadjusted)
in active markets for identical
financial assets and liabilities.
Based on inputs other than quoted prices
included within Level 1 that are observable
for the financial asset or liability, either
directly (i.e. as unquoted prices) or
indirectly (i.e. derived from prices).
Based on inputs not observable
in the market using appropriate
valuation models, including
discounted cash flow modelling.
21.3 Financial assets and liabilities
The financial assets and liabilities are presented by class in the table below at their carrying amounts.
IFRS 13
Fair value hierarchy
Level
IFRS 9 Classification (1)
2019
US$M
2018
US$M
Fair value hierarchy (2)
Current cross currency and interest rate swaps
Current other derivative contracts (3)
Current other investments (4)
Non-current cross currency and interest rate swaps
Non-current other derivative contracts (3)
Non-current investment in shares
Non-current investment in shares
Non-current other investments (4) (5)
Total other financial assets
Cash and cash equivalents
Trade and other receivables (6)
Provisionally priced trade receivables (6)
Loans to equity accounted investments
Total financial assets
Non-financial assets
Total assets
Current cross currency and interest rate swaps
Current other derivative contracts (3)
Non-current cross currency and interest rate swaps
Non-current other derivative contracts (3)
Total other financial liabilities
Trade and other payables (7)
Provisionally priced trade payables (7)
Bank overdrafts and short-term borrowings (8)
Bank loans(8)
Notes and debentures (8)
Finance leases
Other (8)
Total financial liabilities
Non-financial liabilities
Total liabilities
2
2,3
1,2
2
2,3
3
3
1,2,3
2
2
2,3
2
2,3
2
Fair value through profit or loss
Fair value through profit or loss
Fair value through profit or loss
Fair value through profit or loss
Fair value through profit or loss
Fair value through other
comprehensive income
Fair value through profit or loss
Fair value through profit or loss
Amortised cost
Amortised cost
Fair value through profit or loss
Amortised cost
Fair value through profit or loss
Fair value through profit or loss
Fair value through profit or loss
Fair value through profit or loss
Amortised cost
Fair value through profit or loss
Amortised cost
Amortised cost
Amortised cost
Amortised cost
Amortised cost
15
57
15
739
180
34
6
344
1,390
15,613
1,929
1,446
33
20,411
80,450
100,861
63
64
895
1
1,023
6,283
277
20
2,498
21,529
715
66
32,411
16,626
49,037
12
170
18
396
195
33
–
375
1,199
15,871
1,799
1,126
13
20,008
91,985
111,993
121
17
1,092
1
1,231
5,414
377
58
2,555
23,298
802
92
33,827
17,496
51,323
(1) For classifications under IAS 39 refer to note 38 ‘New and amended accounting standards and interpretations’.
(2) All of the Group’s financial assets and financial liabilities recognised at fair value were valued using market observable inputs categorised as Level 2 with the exception
of the specified items in the following footnotes.
(3) Includes other derivative contracts of US$200 million (2018: US$213 million) categorised as Level 3. Significant items are derivatives embedded in physical commodity
purchase and sales contracts of gas in Trinidad and Tobago with net assets fair value of US$202 million (2018: US$216 million).
(4) Includes investments held by BHP Billiton Foundation which are restricted and not available for general use by the Group of US$309 million (2018: US$343 million)
of which other investment (US Treasury Notes) of US$128 million categorised as Level 1 (2018: US$108 million).
(5) Includes other investments of US$47 million (2018: US$47 million) categorised as Level 3.
(6) Excludes input taxes of US$367 million (2018: US$338 million) included in other receivables. Refer to note 8 ‘Trade and other receivables’.
(7) Excludes input taxes of US$162 million (2018: US$189 million) included in other payables. Refer to note 9 ’Trade and other payables‘.
(8) All interest bearing liabilities, excluding finance leases, are unsecured.
The carrying amounts in the table above generally approximate to fair value. In the case of US$3,019 million (2018: US$3,019 million) of fixed
rate debt not swapped to floating rate, the fair value at 30 June 2019 was US$3,757 million (2018: US$3,434 million).
For financial instruments that are carried at fair value on a recurring basis, the Group determines whether transfers have occurred between
levels in the hierarchy by reassessing categorisation at the end of each reporting period. There were no transfers between categories during
the period.
For financial instruments not valued at fair value on a recurring basis, the Group uses a method that can be categorised as Level 2.
206 BHP Annual Report 2019
21 Financial risk management continued
Offsetting financial assets and liabilities
The Group enters into money market deposits and derivative
transactions under International Swaps and Derivatives Association
master netting agreements that do not meet the criteria for
offsetting, but allow for the related amounts to be set-off in certain
circumstances. The amounts set out as cross currency and interest
rate swaps in the table above represent the derivative financial assets
and liabilities of the Group that may be subject to the above
arrangements and are presented on a gross basis.
21.4 Derivatives and hedge accounting
The Group uses derivatives to hedge its exposure to certain market
risks and may elect to apply hedge accounting.
Hedge accounting
Derivatives are included within financial assets or liabilities at fair
value through profit or loss unless they are designated as effective
hedging instruments. Financial instruments in this category are
classified as current if they are expected to be settled within
12 months otherwise they are classified as non-current.
The Group uses derivatives to hedge its exposure to certain market
risks and may elect to apply hedge accounting. Where hedge
accounting is applied, at the start of the transaction, the Group
documents the type of hedge, the relationship between the hedging
instrument and hedged items and its risk management objective and
strategy for undertaking various hedge transactions. The documentation
also demonstrates that the hedge is expected to be effective.
The Group applies the following types of hedge accounting to its
derivatives hedging the interest rate and currency risks in its notes
and debentures:
• Fair value hedges – the fair value gain or loss on interest rate and
cross currency swaps relating to interest rate risk, together with
the change in the fair value of the hedged fixed rate borrowings
attributable to interest rate risk are recognised immediately in the
income statement.
If the hedge no longer meets the criteria for hedge accounting, the
fair value adjustment on the note or debenture is amortised to the
income statement over the period to maturity using a recalculated
effective interest rate.
• Cash flow hedges – changes in the fair value of cross currency
interest rate swaps which hedge foreign currency cash flows on the
notes and debentures are recognised directly in other comprehensive
income and accumulated in the cash flow hedging reserve. To the
extent a hedge is ineffective, changes in fair value are recognised
immediately in the income statement.
When a hedging instrument expires, or is sold, terminated or
exercised, or when a hedge no longer meets the criteria for hedge
accounting, any cumulative gain or loss existing in equity at that
time remains in equity and is amortised to the income statement
over the period to the hedged item’s maturity.
When hedged, the Group hedges the full notional value of notes
or debentures. However, certain components of the fair value of
derivatives are not permitted under IFRS 9 to be included in the
hedge accounting above. Certain costs of hedging are permitted
to be recognised in other comprehensive income. Any change in the
fair value of a derivative that does not qualify for hedge accounting,
or is ineffective in hedging the designated risk due to contractual
differences between the hedged item and hedging instrument,
is recognised immediately in the income statement.
The table below shows the carrying amounts of the Group’s notes
and debentures by currency and the derivatives which hedge them:
• The carrying amount of the notes and debentures includes foreign
exchange remeasurement to period end rates and fair value
adjustments when included in a fair value hedge.
• The breakdown of the hedging derivatives includes remeasurement
of foreign currency notional values at period end rates, fair value
movements due to interest rate risk, foreign currency cash flows
designated into cash flow hedges, costs of hedging recognised
in other comprehensive income, ineffectiveness recognised in the
income statement and accruals or prepayments.
• The hedged value of notes and debentures includes their carrying
amounts adjusted for the offsetting derivative fair value movements
due to foreign currency and interest rate risk remeasurement.
i
S
t
r
a
t
e
g
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
a
t
B
H
P
R
e
m
u
n
e
r
a
t
i
o
n
R
e
p
o
r
t
D
i
r
e
c
t
o
r
s
’
R
e
p
o
r
t
2019
US$M
USD
GBP
EUR
CAD
AUD
Total
2018
US$M
Carrying
amount of
notes and
debentures
Foreign
exchange
notional at
spot rates
Interest rate
risk
Recognised
in cash flow
hedging
reserve
Recognised
in cost of
hedging
reserve
Recognised
in the
income
statement
Accrued
cash flows
Total
Hedged
value of
notes and
debentures
5
Fair value of derivatives
A
9,433
3,118
7,680
594
704
B
−
678
378
175
73
C
(253)
(517)
(566)
(22)
(4)
21,529
1,304
(1,362)
D
−
(57)
(100)
(5)
(1)
(163)
23,298
1,145
(633)
(85)
E
−
70
33
3
−
106
−
F
20
(2)
54
(4)
–
68
71
G
111
62
82
1
(5)
251
307
B to G
A + B + C
(122)
234
(119)
148
63
204
9,180
3,279
7,492
747
773
21,471
805
23,810
The weighted average interest rate payable is USD LIBOR + 2.3%. Refer to note 20 ‘Net finance costs’ for details of net finance costs for the year.
Movements in reserves relating to hedge accounting
The following table shows a reconciliation of the components of equity and an analysis of the movements in reserves for all hedges. For a
description of these reserves, refer to note 16 ‘Other equity’.
2019
US$M
At the beginning of the financial year
Impact of adoption of IFRS 9
Add: Change in fair value of hedging instrument
recognised in OCI
Less: Reclassified from reserves to interest expense
– recognised through OCI
At the end of the financial year
Cash flow hedging reserve
Cost of hedging reserve
Gross
85
176
(327)
229
163
Tax
(27)
(52)
98
(68)
(49)
Net
58
124
(229)
161
114
Gross
−
(176)
−
70
(106)
Tax
−
52
−
(20)
32
Net
−
(124)
−
50
(74)
Total
58
−
(229)
211
40
BHP Annual Report 2019 207
i
F
n
a
n
c
a
i
l
S
t
a
t
e
m
e
n
t
s
A
d
d
i
t
i
o
n
a
l
i
n
f
o
r
m
a
t
i
o
n
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
21 Financial risk management continued
Changes in interest bearing liabilities and related derivatives resulting from financing activities
The movement in the year in the Group’s interest bearing liabilities and related derivatives are as follows:
2019
US$M
At the beginning of the financial year
Proceeds from interest bearing liabilities
Settlements of debt related instruments
Repayment of interest bearing liabilities
Change from Net financing cash flows
Other movements:
Interest rate impacts
Foreign exchange impacts
Other interest bearing liabilities/derivative related changes
At the end of the financial year
2018
US$M
At the beginning of the financial year
Proceeds from interest bearing liabilities
Settlements of debt related instruments
Repayment of interest bearing liabilities
Change from Net financing cash flows
Other movements:
Interest rate impacts
Foreign exchange impacts
Other interest bearing liabilities/derivative related changes
Liabilities transferred to held for sale
Interest bearing liabilities
Bank loans
Notes and
debentures
Finance
leases
Bank
overdraft and
short-term
borrowings
2,555
250
−
(308)
23,298
−
−
(2,198)
(58)
(2,198)
−
−
1
729
(311)
11
2,498
21,529
802
−
−
(75)
(75)
−
(11)
(1)
715
58
−
−
−
−
−
−
(38)
20
Interest bearing liabilities
Bank loans
Notes and
debentures
Finance
leases
Bank
overdraft and
short-term
borrowings
2,281
500
−
(221)
279
−
−
(5)
−
27,041
−
−
(3,736)
(3,736)
(353)
245
101
−
897
−
−
(81)
(81)
−
(9)
−
(5)
45
−
−
−
−
−
−
13
−
58
Derivatives
(assets)/
liabilities
Cross
currency
and interest
rate swaps
805
−
(160)
−
(160)
(809)
319
49
204
Derivatives
(assets)/
liabilities
Cross
currency
and interest
rate swaps
740
−
(218)
−
(218)
329
(254)
208
−
805
Other
92
−
−
(23)
(23)
−
−
(3)
66
Other
210
28
−
(150)
(122)
−
−
4
−
92
Total
250
(160)
(2,604)
(2,514)
Total
528
(218)
(4,188)
(3,878)
At the end of the financial year
2,555
23,298
802
Employee matters
22 Key management personnel
Key management personnel compensation comprises:
Short-term employee benefits
Post-employment benefits
Share-based payments
Total
2019
US$
11,557,506
1,490,716
15,821,972
2018
US$
13,190,838
1,506,108
13,356,657
2017
US$
16,439,948
1,895,828
13,747,355
28,870,194
28,053,603
32,083,131
Following the dissolution of the Operations Management Committee (OMC) in FY2018, the Remuneration Committee re-examined the
classification of Key Management Personnel (KMP) for FY2018 and determined that the roles which have the authority and responsibility
for planning, directing and controlling the activities of BHP are Non-executive Directors, the CEO, the Chief Financial Officer, the President
Operations, Minerals Australia, the President Operations, Minerals Americas, and the President Operations, Petroleum. The Remuneration
Committee also determined that, effective 1 July 2017 the Chief External Affairs Officer and Chief People Officer roles are no longer
considered KMP.
Transactions and outstanding loans/amounts with key management personnel
There were no purchases by key management personnel from the Group during the financial year (2018: US$ nil; 2017: US$ nil).
There were no amounts payable by key management personnel at 30 June 2019 (2018: US$ nil; 2017: US$ nil).
There were no loans receivable from or payable to key management personnel at 30 June 2019 (2018: US$ nil; 2017: US$ nil).
Transactions with personally related entities
A number of Directors of the Group hold or have held positions in other companies (personally related entities) where it is considered
they control or significantly influence the financial or operating policies of those entities. There were no reportable transactions with those
entities and no amounts were owed by the Group to personally related entities at 30 June 2019 (2018: US$ nil; 2017: US$ nil).
For more information on remuneration and transactions with key management personnel, refer to section 3.
208 BHP Annual Report 2019
23 Employee share ownership plans
Awards, in the form of the right to receive ordinary shares in either BHP Group Limited or BHP Group Plc, have been granted under the
following employee share ownership plans: Long-Term Incentive Plan (LTIP), Short-Term Incentive Plan (STIP), Management Award Plan (MAP),
Group Short-Term Incentive Plan (GSTIP), Transitional Executive KMP awards and the all-employee share plan, Shareplus.
Some awards are eligible to receive a cash payment, or the equivalent value in shares, equal to the dividend amount that would have been
earned on the underlying shares awarded to those participants (the Dividend Equivalent Payment, or DEP). The DEP is provided to the
participants once the underlying shares are allocated or transferred to them. Awards under the plans do not confer any rights to participate
in a share issue; however, there is discretion under each of the plans to adjust the awards in response to a variation in the share capital
of BHP Group Limited or BHP Group Plc.
The table below provides a description of each of the plans.
Plan
Type
Overview
Vesting
conditions
STIP and GSTIP
LTIP and MAP
Transitional Executive KMP awards
Shareplus
All-employee share
purchase plan
Employees may
contribute up
to US$5,000 to
acquire shares
in any plan year.
On the third
anniversary of the
start of a plan year,
the Group will
match the number
of acquired shares.
Service
conditions only.
Short-term incentive
Long-term incentive
Long-term incentive
The STIP is generally a plan
for the Executive KMP and
the GSTIP is a plan for BHP
senior management who
are not KMP.
Under both plans, half of
the value of a participant’s
short-term incentive amount
is awarded as rights to
receive BHP Group Limited
or BHP Group Plc shares at
the end of the vesting period.
Service conditions only.
Awards may be granted to new
Executive KMP recruited from
within the Group to bridge the
gap created by the different
timeframes of the vesting of
MAP awards, granted in their
non-KMP roles, and LTIP
awards, granted to Executive
KMP. No awards were granted
to Executive KMP in FY2019.
Service conditions and
performance conditions.
The Remuneration Committee
has absolute discretion to
determine if the performance
condition has been met and
whether any, all or part of the
award will vest (or otherwise
lapse), having regard to (but
not limited to) the BHP’s TSR (1)
over the three-or four-year
performance period
(respectively), the participant’s
contribution to Group
outcomes and the participant’s
personal performance (with
guidance on this assessment
from the CEO).
The LTIP is a plan for Executive KMP
and awards are granted annually.
The MAP is a plan for BHP senior
management who are not KMP.
The number of share rights awarded
is determined by a participant’s role
and grade.
LTIP: Service and performance conditions.
For awards granted from December 2013
onwards, BHP’s Total Shareholder Return
(TSR) (1) performance relative to the Peer
Group TSR over a five-year performance
period determines the vesting of
67 per cent of the awards, while
performance relative to the Index
TSR (being the index value where the
comparator group is a market index)
determines the vesting of 33 per cent
of the awards. For the awards to vest in
full, BHP’s TSR must exceed the Peer
Group TSR and Index TSR (if applicable)
by a specified percentage per year,
determined for each grant by the
Remuneration Committee. From the
establishment of the LTIP in 2004 until
the awards granted in December 2016,
this percentage was set at 5.5 per cent
per year.
For awards granted from December 2017
onwards, 25 per cent of the award will vest
where BHP’s TSR is equal to the median
TSR of the relevant comparator group(s),
as measured over the performance
period. Where TSR is below the median,
awards will not vest. Vesting occurs on a
sliding scale when BHP’s TSR measured
over the performance period is between
the median TSR of the relevant
comparator group(s) up to a nominated
level of TSR outperformance over
the relevant comparator group(s), as
determined by the Committee, above
which 100 per cent of the award will vest.
MAP: Service conditions only.
Vesting
period
Dividend
Equivalent
Payment
Exercise
period
2 years
STIP – Yes
GSTIP – No
None
LTIP – 5 years
MAP – 1 to 5 years
LTIP – Yes
MAP – No
LTIP – None
MAP – None
(1) BHP’s TSR is the weighted average of the TSRs of BHP Group Limited and BHP Group Plc.
3 or 4 years
3 years
No
None
No
None
BHP Annual Report 2019 209
i
S
t
r
a
t
e
g
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
a
t
B
H
P
R
e
m
u
n
e
r
a
t
i
o
n
R
e
p
o
r
t
D
i
r
e
c
t
o
r
s
’
R
e
p
o
r
t
5
i
F
n
a
n
c
a
i
l
S
t
a
t
e
m
e
n
t
s
A
d
d
i
t
i
o
n
a
l
i
n
f
o
r
m
a
t
i
o
n
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
23 Employee share ownership plans continued
Employee share awards
2019
BHP Group Limited
STIP awards
GSTIP awards
LTIP awards
Transitional Executive KMP awards
MAP awards
Shareplus
BHP Group Plc
GSTIP awards
MAP awards
Shareplus
Number of
awards at the
beginning of the
financial year
Number of
awards issued
during the year
Number of
awards
vested and
exercised
Number of
awards
lapsed
Number of
awards at the
end of the
financial year
Number of
awards vested
and exercisable
at the end of the
financial year
Weighted
average
remaining
contractual
life (years)
308,028
2,008,455
5,980,975
46,840
10,379,263
4,775,079
271,355
−
947,153
−
4,604,638
2,025,302
65,392
780,315
−
16,160
2,416,107
2,590,297
−
85,656
1,197,239
7,260
1,077,449
352,939
513,991
1,142,484
5,730,889
23,420
11,490,345
3,857,145
63,868
315,451
282,159
−
132,676
111,866
22,911
107,756
145,666
11,531
67,340
24,289
29,426
273,031
224,070
−
15,932
−
−
94,921
−
−
−
−
0.7
0.2
2.1
0.2
1.3
1.2
0.2
1.3
1.2
Employee share awards expense is US$138.275 million (2018: US$123.313 million; 2017: US$106.214 million) and includes Onshore US.
Fair value and assumptions in the calculation of fair value for awards issued
2019
BHP Group Limited
STIP awards
LTIP awards
MAP awards (1)
Shareplus
BHP Group Plc
MAP awards
Shareplus
Weighted
average fair
value of awards
granted during
the year US$
Risk-free
interest rate
Estimated
life of awards
Share price at grant date
Estimated
volatility of
share price
Dividend
yield
24.10
17.36
21.29
20.68
18.68
14.71
n/a
2.04%
n/a
2.13%
n/a
0.86%
3 years
5 years
A$33.50
A$33.50
1-5 years A$33.83/A$33.41/A$33.50
A$28.29
3 years
1-5 years
3 years
£16.71
£14.04
n/a
30.0%
n/a
n/a
n/a
n/a
n/a
n/a
5.30%
4.71%
5.80%
5.40%
(1) Includes MAP awards granted on 24 September 2018, 12 November 2018 and 18 December 2018.
Recognition and measurement
The fair value at grant date of equity-settled share awards is charged
to the income statement over the period for which the benefits
of employee services are expected to be derived. The fair values
of awards granted were estimated using a Monte Carlo simulation
methodology and Black-Scholes option pricing technique and
consider the following factors:
• exercise price;
• expected life of the award;
• current market price of the underlying shares;
• expected volatility using an analysis of historic volatility over
different rolling periods. For the LTIP, it is calculated for all sector
comparators and the published MSCI World index;
• expected dividends;
• risk-free interest rate, which is an applicable government bond rate;
• market-based performance hurdles;
• non-vesting conditions.
Where awards are forfeited because non-market-based vesting
conditions are not satisfied, the expense previously recognised
is proportionately reversed.
The tax effect of awards granted is recognised in income tax
expense, except to the extent that the total tax deductions are
expected to exceed the cumulative remuneration expense. In this
situation, the excess of the associated current or deferred tax is
recognised in other comprehensive income and forms part of the
employee share awards reserve. The fair value of awards as presented
in the tables above represents the fair value at grant date.
In respect of employee share awards, the Group utilises the Billiton
Employee Share Ownership Trust and the BHP Billiton Limited
Employee Equity Trust. The trustees of these trusts are independent
companies, resident in Jersey. The trusts use funds provided by
the Group to acquire ordinary shares to enable awards to be made
or satisfied. The ordinary shares may be acquired by purchase
in the market or by subscription at not less than nominal value.
The BHP Billiton Limited Employee Equity Trust has waived its
rights to current and future dividends on shares held to meet
future awards under the plans.
210 BHP Annual Report 2019
24 Employee benefits, restructuring and post-retirement employee benefits provisions
Employee benefits (1)
Restructuring (2)
Post-retirement employee benefits
Total provisions
Comprising:
Current
Non-current
2019
At the beginning of the financial year
Charge/(credit) for the year:
Underlying
Discounting
Net interest expense
Exchange variations
Released during the year
Remeasurement gains taken to retained earnings
Utilisation
At the end of the financial year
2019
US$M
1,140
78
493
1,711
1,154
557
Employee
benefits
US$M
Restructuring
US$M
Post-retirement
employee
benefits (3)
US$M
1,232
1,011
−
−
(49)
(146)
−
(908)
1,140
8
160
−
−
1
(11)
−
(80)
78
449
55
42
(21)
(6)
−
20
(46)
493
2018
US$M
1,232
8
449
1,689
1,148
541
Total
US$M
1,689
1,226
42
(21)
(54)
(157)
20
(1,034)
1,711
(1) The expenditure associated with total employee benefits will occur in a pattern consistent with when employees choose to exercise their entitlement to benefits.
(2) Total restructuring provisions include provisions for terminations and office closures.
(3) Refer to note 25 ‘Pension and other post-retirement obligations’.
Recognition and measurement
Provisions are recognised by the Group when:
• there is a present legal or constructive obligation as a result of past events;
• it is more likely than not that a permanent outflow of resources will be required to settle the obligation;
• the amount can be reliably estimated and measured at the present value of management’s best estimate of the cash outflow required
to settle the obligation at reporting date.
Provision
Description
Employee benefits
Liabilities for annual leave and any accumulating sick leave accrued up until the reporting date that are expected to be settled
within 12 months are measured at the amounts expected to be paid when the liabilities are settled.
Liabilities for long service leave are measured as the present value of estimated future payments for the services provided
by employees up to the reporting date and disclosed within employee benefits.
Liabilities that are not expected to be settled within 12 months are discounted at the reporting date using market yields
of high-quality corporate bonds or government bonds for countries where there is no deep market for corporate bonds.
The rates used reflect the terms to maturity and currency that match, as closely as possible, the estimated future
cash outflows.
In relation to industry-based long service leave funds, the Group’s liability, including obligations for funding shortfalls,
is determined after deducting the fair value of dedicated assets of such funds.
Liabilities for unpaid wages and salaries are recognised in other creditors.
Restructuring
Restructuring provisions are recognised when:
• the Group has a detailed formal plan identifying the business or part of the business concerned, the location and
approximate number of employees affected, a detailed estimate of the associated costs, and an appropriate timeline;
• the restructuring has either commenced or been publicly announced and can no longer be withdrawn.
Payments falling due greater than 12 months after the reporting date are discounted to present value.
BHP Annual Report 2019 211
i
S
t
r
a
t
e
g
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
a
t
B
H
P
R
e
m
u
n
e
r
a
t
i
o
n
R
e
p
o
r
t
D
i
r
e
c
t
o
r
s
’
R
e
p
o
r
t
5
i
F
n
a
n
c
a
i
l
S
t
a
t
e
m
e
n
t
s
A
d
d
i
t
i
o
n
a
l
i
n
f
o
r
m
a
t
i
o
n
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
25 Pension and other post-retirement obligations
The Group operates or participates in a number of pension (including superannuation) schemes throughout the world. The funding of
the schemes complies with local regulations. The assets of the schemes are generally held separately from those of the Group and are
administered by trustees or management boards.
Schemes/Obligations
Description
Defined contribution
pension schemes and
multi-employer
pension schemes
For defined contribution schemes or schemes operated on an industry-wide basis where it is not possible to identify assets
attributable to the participation by the Group’s employees, the pension charge is calculated on the basis of contributions
payable. The Group contributed US$274 million during the financial year (2018: US$277 million; 2017: US$247 million) to
defined contribution plans and multi-employer defined contribution plans. These contributions are expensed as incurred.
Defined benefit
pension schemes
Defined benefit
post-retirement
medical schemes
Defined benefit
post-employment
obligations
For defined benefit pension schemes, the cost of providing pensions is charged to the income statement so as to
recognise current and past service costs, net interest cost on the net defined benefit obligations/plan assets and the effect
of any curtailments or settlements. Remeasurement gains and losses are recognised directly in equity. An asset or liability
is consequently recognised in the balance sheet based on the present value of defined benefit obligations less the fair
value of plan assets, except that any such asset cannot exceed the present value of expected refunds from and reductions
in future contributions to the plan. Defined benefit obligations are estimated by discounting expected future payments
using market yields at the reporting date on high-quality corporate bonds in countries that have developed corporate bond
markets. However, where developed corporate bond markets do not exist, the discount rates are selected by reference
to national government bonds. In both instances, the bonds are selected with terms to maturity and currency that match,
as closely as possible, the estimated future cash flows.
The Group has closed all defined benefit pension schemes to new entrants. Defined benefit pension schemes remain
operating in Australia, the United States, Canada and Europe for existing members. Full actuarial valuations are prepared
and updated annually to 30 June by local actuaries for all schemes. The Group operates final salary schemes (that provide
final salary benefits only), non-salary related schemes (that provide flat dollar benefits) and mixed benefit schemes (that
consist of a final salary defined benefit portion and a defined contribution portion).
The Group operates a number of post-retirement medical schemes in the United States, Canada and Europe and certain
Group companies provide post-retirement medical benefits to qualifying retirees. In some cases, the benefits are provided
through medical care schemes to which the Group, the employees, the retirees and covered family members contribute.
Full actuarial valuations are prepared by local actuaries for all schemes. These schemes are recognised on the same basis
as described for defined benefit pension schemes. All of the post-retirement medical schemes in the Group are unfunded.
The Group has a legal obligation to provide post-employment benefits to employees in Chile. The benefit is a function of
an employee’s final salary and years of service. These obligations are recognised on the same basis as described for defined
benefit pension schemes.
Full actuarial valuations are prepared by local actuaries. These post-employment obligations are unfunded.
Risk
The Group’s defined benefit schemes/obligations expose the Group to a number of risks, including asset value volatility, interest rate variations,
inflation, longevity and medical expense inflation risk.
Recognising this, the Group has adopted an approach of moving away from providing defined benefit pensions. The majority of Group-sponsored
defined benefit pension schemes have been closed to new entrants for many years. Existing benefit schemes and the terms of employee
participation in these schemes are reviewed on a regular basis.
Fund assets
The Group follows a coordinated strategy for the funding and investment of its defined benefit pension schemes (subject to meeting all
local requirements). The Group’s aim is for the value of defined benefit pension scheme assets to be maintained at close to the value of the
corresponding benefit obligations, allowing for some short-term volatility.
Scheme assets are invested in a diversified range of asset classes, predominantly comprising bonds and equities.
The Group’s aim is to progressively shift defined benefit pension scheme assets towards investments that match the anticipated profile of
the benefit obligations, as funding levels improve and benefit obligations mature. Over time, this is expected to result in a further reduction
in the total exposure of pension scheme assets to equity markets. For pension schemes that pay lifetime benefits, the Group may consider
and support the purchase of annuities to back these benefit obligations if it is commercially sensible to do so.
Net liability recognised in the Consolidated Balance Sheet
The net liability recognised in the Consolidated Balance Sheet is as follows:
Present value of funded defined benefit obligation
Present value of unfunded defined benefit obligation
Fair value of defined benefit scheme assets
Scheme deficit
Unrecognised surplus
Unrecognised past service credits
Adjustment for employer contributions tax
Net liability recognised in the Consolidated Balance Sheet
Defined benefit pension schemes/
post-employment obligations
Post-retirement medical schemes
2019
US$M
632
306
(648)
290
−
−
−
290
2018
US$M
616
274
(633)
257
−
−
−
257
2019
US$M
2018
US$M
−
203
−
203
−
−
−
203
−
192
−
192
−
−
−
192
The Group has no legal obligation to settle these liabilities with any immediate contributions or additional one-off contributions. The Group
intends to continue to contribute to each defined benefit pension and post-retirement medical scheme in accordance with the latest
recommendations of each scheme actuary.
212 BHP Annual Report 2019
26 Employees
Average number of employees (1)
Australia
South America
North America
Asia
Europe
Total average number of employees from Continuing operations
Total average number of employees from Discontinued operations
Total average number of employees
2019
Number
2018
Number
2017
Number
18,146
6,979
1,999
1,743
59
28,926
−
28,926
16,504
6,729
1,839
1,368
70
26,510
651
27,161
15,906
6,361
2,072
1,019
74
25,432
714
26,146
(1) Average employee numbers include the Executive Director and 100 per cent of employees of subsidiary companies. Employees of equity accounted investments and
joint operations are not included. Part-time employees are included on a full-time equivalent basis. Employees of businesses disposed of during the year are included
for the period of ownership. Contractors are not included.
Group and related party information
27 Discontinued operations
On 28 September 2018, BHP completed the sale of 100 per cent of the issued share capital of BHP Billiton Petroleum (Arkansas) Inc. and
100 per cent of the membership interests in BHP Billiton Petroleum (Fayetteville) LLC, which held the Fayetteville assets, for a gross cash
consideration of US$0.3 billion.
On 31 October 2018, BHP completed the sale of 100 per cent of the issued share capital of Petrohawk Energy Corporation, the BHP subsidiary
which held the Eagle Ford (being Black Hawk and Hawkville), Haynesville and Permian assets, for a gross cash consideration of US$10.3 billion
(net of preliminary customary completion adjustments of US$0.2 billion).
While the effective date at which the right to economic profits transferred to the purchasers was 1 July 2018, the Group continued to control
the Onshore US assets until the completion dates of their respective transactions. As such the Group continued to recognise its share of
revenue, expenses, net finance costs and associated income tax expense related to the operation until the completion date. In addition,
the Group provided transitional services to the buyer, which ceased in July 2019.
The completion adjustments included a reduction in sale proceeds, based on the operating cash generated and retained by the Group in the
period prior to completion, in order to transfer the economic profits from 1 July 2018 to completion date to the buyers. Therefore, the pre-tax
profit from operating the assets is largely offset by a pre-tax loss on disposal. Accordingly, the net loss from discontinued operations
predominantly relates to incremental costs arising as a consequence of the divestment, including restructuring costs and provisions for
surplus office accommodation, and tax expenses largely triggered by the completion of the transactions.
i
S
t
r
a
t
e
g
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
a
t
B
H
P
R
e
m
u
n
e
r
a
t
i
o
n
R
e
p
o
r
t
D
i
r
e
c
t
o
r
s
’
R
e
p
o
r
t
5
i
F
n
a
n
c
a
i
l
S
t
a
t
e
m
e
n
t
s
A
d
d
i
t
i
o
n
a
l
i
n
f
o
r
m
a
t
i
o
n
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
BHP Annual Report 2019 213
27 Discontinued operations continued
The contribution of Discontinued operations included within the Group’s profit and cash flows are detailed below:
Income statement – Discontinued operations
Revenue
Other income
Expenses excluding net finance costs
Profit/(loss) from operations
Financial expenses
Net finance costs
Profit/(loss) before taxation
Income tax (expense)/benefit
Profit/(loss) after taxation from operating activities
Net loss on disposal
Loss after taxation
Attributable to non-controlling interests
Attributable to BHP shareholders
Basic loss per ordinary share (cents)
Diluted loss per ordinary share (cents)
2019
US$M
851
94
(729)
216
(8)
(8)
208
(33)
175
(510)
(335)
7
(342)
(6.6)
(6.6)
2018
US$M
2,171
34
(5,790)
(3,585)
(22)
(22)
(3,607)
686
(2,921)
−
(2,921)
26
(2,947)
(55.4)
(55.4)
2017
US$M
2,150
74
(3,025)
(801)
(14)
(14)
(815)
343
(472)
−
(472)
13
(485)
(9.1)
(9.1)
The total comprehensive income attributable to BHP shareholders from Discontinued operations was a loss of US$342 million (2018: loss of
US$2,943 million; 2017: loss of US$489 million).
The conversion of options and share rights would decrease the loss per share for the years ended 30 June 2019, 2018 and 2017 and therefore
its impact has been excluded from the diluted earnings per share calculation.
Cash flows from Discontinued operations
Net operating cash flows
Net investing cash flows (1)
Net financing cash flows (2)
Net increase/(decrease) in cash and cash equivalents from Discontinued operations
Net proceeds received from the sale of Onshore US
Less Cash and cash equivalents
Proceeds from divestment of Onshore US, net of its cash
Total cash impact
2019
US$M
474
(443)
(13)
18
10,531
(104)
10,427
10,445
2018
US$M
900
(861)
(40)
(1)
−
−
−
(1)
(1) Includes purchases of property, plant and equipment of US$443 million (2018: US$900 million; 2017: US$555 million) less proceeds from sale of assets
of US$ nil (2018: US$39 million; 2017: US$118 million).
(2) Includes net repayment of interest bearing liabilities of US$6 million (2018: US$4 million; 2017: US$6 million), distribution to non-controlling interests
of US$ nil (2018: US$14 million; 2017: US$16 million) and dividends paid to non-controlling interests of US$7 million (2018: US$22 million; 2017: US$6 million).
Net loss on disposal of Discontinued operations
Details of the net loss on disposal is presented below:
Assets
Cash and cash equivalents
Trade and other receivables
Other financial assets
Inventories
Property, plant and equipment
Intangible assets
Total assets
Liabilities
Trade and other payables
Provisions
Total liabilities
Net assets
Less non-controlling interest share of net assets disposed
BHP Share of net assets disposed
Gross consideration
Less transaction costs
Income tax expense
Net loss on disposal
214 BHP Annual Report 2019
2017
US$M
928
(437)
(28)
463
−
−
−
463
2019
US$M
104
562
31
34
10,998
667
12,396
794
491
1,285
11,111
(168)
10,943
10,555
(54)
(68)
(510)
27 Discontinued operations continued
Exceptional items – Discontinued operations
Exceptional items are those gains or losses where their nature, including the expected frequency of the events giving rise to them, and amount
is considered material to the Financial Statements.
There were no exceptional items related to Discontinued operations for the year ended 30 June 2019 and 30 June 2017.
Items related to Discontinued operations included within profit for the year ended 30 June 2018 are detailed below.
Year ended 30 June 2018
Exceptional items by category
US tax reform
Impairment of Onshore US assets
Total
Attributable to non-controlling interests
Attributable to BHP shareholders
Gross
US$M
−
(2,859)
(2,859)
−
(2,859)
Tax
US$M
492
109
601
−
601
Net
US$M
492
(2,750)
(2,258)
−
(2,258)
US tax reform
On 22 December 2017, the US President signed the Tax Cuts and Jobs Act (TCJA) into law. The TCJA (effective 1 January 2018) includes a broad
range of tax reforms affecting the Group, including, but not limited to, a reduction in the US corporate tax rate from 35 per cent to 21 per cent
and changes to international tax provisions. As a result of the TCJA, the Group has recognised an exceptional income tax benefit of
US$492 million relating to the re-measurement of the Onshore US deferred tax positions arising from temporary differences.
Impairment of Onshore US assets
For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows.
At 30 June 2018, the Onshore US assets, including goodwill, have been allocated to two CGUs reflecting the separately identifiable cash
flows expected from the divestment of the assets.
The Group recognised impairment charges as follows:
Cash generating unit
Petrohawk
Fayetteville
Total impairment of non-current assets
Property,
plant and
equipment
US$M
–
(520)
(520)
Goodwill
US$M
(2,253)
(86)
(2,339)
Total
US$M
(2,253)
(606)
(2,859)
The charges reflect a robust and competitive exit process with fair value based on the agreed sales consideration (Level 2 of the fair value
hierarchy) less expected costs of disposal.
In previous reporting periods the Group performed impairment testing of the five individual Onshore US assets as each asset had separately
identifiable cash flows. In addition, the goodwill attributable to the Onshore US group of CGUs (2017: US$3,022 million) was tested for
impairment after the assessment of the individual CGUs. The recoverable amount determinations for the Onshore US CGUs were based
on FVLCD using discounted cash flow techniques. The FVLCD calculations were based primarily on Level 3 inputs and significant assumptions
included management’s assessment of a market participant’s perspective of crude oil and natural gas prices, production volumes and
discount rates.
i
S
t
r
a
t
e
g
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
a
t
B
H
P
R
e
m
u
n
e
r
a
t
i
o
n
R
e
p
o
r
t
D
i
r
e
c
t
o
r
s
’
R
e
p
o
r
t
5
i
F
n
a
n
c
a
i
l
S
t
a
t
e
m
e
n
t
s
A
d
d
i
t
i
o
n
a
l
i
n
f
o
r
m
a
t
i
o
n
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
BHP Annual Report 2019 215
28 Subsidiaries
Significant subsidiaries of the Group are those with the most significant contribution to the Group’s net profit or net assets. The Group’s
interest in the subsidiaries results are listed in the table below. For a complete list of the Group’s subsidiaries, refer to note 13 ‘Related
undertakings of the Group’ in section 5.2.
Significant subsidiaries
Coal
BHP Billiton Mitsui Coal Pty Ltd
Hunter Valley Energy Coal Pty Ltd
Copper
BHP Billiton Olympic Dam Corporation Pty Ltd
Compañia Minera Cerro Colorado Limitada
Minera Escondida Limitada (1)
Minera Spence S.A.
Iron Ore
BHP Billiton Iron Ore Pty Ltd
BHP Billiton Minerals Pty Ltd
BHP Iron Ore (Jimblebar) Pty Ltd (2)
BHP (Towage Service) Pty Ltd
Marketing
BHP Billiton Freight Singapore Pte Limited
BHP Billiton Marketing AG
BHP Billiton Marketing Asia Pte Ltd
Group and Unallocated
BHP Billiton Canada Inc.
BHP Billiton Finance BV
BHP Billiton Finance Limited
BHP Billiton Finance (USA) Ltd
BHP Group Operations Pty Ltd
BHP Billiton Nickel West Pty Ltd
WMC Finance (USA) Limited
Country of
incorporation
Principal activity
Australia
Australia
Australia
Chile
Chile
Chile
Australia
Australia
Australia
Australia
Coal mining
Coal mining
Copper and uranium mining
Copper mining
Copper mining
Copper mining
Service company
Iron ore and coal mining
Iron ore mining
Towing services
Singapore
Switzerland
Singapore
Freight services
Marketing and trading
Marketing support and other services
Potash development
Canada
The Netherlands Finance
Finance
Australia
Finance
Australia
Administrative services
Australia
Nickel mining, smelting, refining
Australia
and administrative services
Finance
Australia
Group’s interest
2019
%
2018
%
80
100
100
100
57.5
100
100
100
85
100
100
100
100
100
100
100
100
100
100
100
80
100
100
100
57.5
100
100
100
85
100
100
100
100
100
100
100
100
100
100
100
(1) As the Group has the ability to direct the relevant activities at Minera Escondida Limitada, it has control over the entity. The assessment of the most relevant activity
in this contractual arrangement is subject to judgement. The Group establishes the mine plan and the operating budget and has the ability to appoint the key
management personnel, demonstrating that the Group has the existing rights to direct the relevant activities of Minera Escondida Limitada.
(2) The Group has an effective interest of 92.5 per cent in BHP Iron Ore (Jimblebar) Pty Ltd; however, by virtue of the shareholder agreement with ITOCHU Iron Ore
Australia Pty Ltd and Mitsui & Co. Iron Ore Exploration & Mining Pty Ltd, the Group’s interest in the Jimblebar mining operation is 85 per cent, which is consistent with
the other respective contractual arrangements at Western Australia Iron Ore.
216 BHP Annual Report 2019
29 Investments accounted for using the equity method
Significant interests in equity accounted investments of the Group are those with the most significant contribution to the Group’s net profit
or net assets. The Group’s ownership interest in equity accounted investments results are listed in the table below. For a complete list of the
Group’s associates and joint ventures, refer to note 13 ‘Related undertakings of the Group’ in section 5.2.
Significant associates and joint
ventures
Country of incorporation/
principal place of business
Associate or
joint venture
Principal activity
Reporting date
Ownership interest
2019
%
2018
%
Cerrejón
Compañía Minera Antamina
S.A. (Antamina)
Samarco Mineração S.A.
(Samarco)
Anguilla/Colombia/Ireland Associate
Coal mining in Colombia
31 December
33.33
33.33
Peru
Brazil
Associate
Copper and zinc mining
31 December
33.75
33.75
Joint venture
Iron ore mining
31 December
50.00
50.00
Voting in relation to relevant activities in Antamina and Cerrejón, determined to be the approval of the operating and capital budgets, does
not require unanimous consent of all participants to the arrangement, therefore joint control does not exist. Instead, because the Group
has the power to participate in the financial and operating policies of the investee, these investments are accounted for as associates.
Samarco is jointly owned by BHP Billiton Brasil and Vale. As the Samarco entity has the rights to the assets and obligations to the liabilities
relating to the joint arrangement and not its owners, this investment is accounted for as a joint venture.
The Group is restricted in its ability to make dividend payments from its investments in associates and joint ventures as any such payments
require the approval of all investors in the associates and joint ventures. The ownership interest at the Group’s and the associates’ or joint
ventures’ reporting dates are the same. When the annual financial reporting date is different to the Group’s, financial information is obtained
as at 30 June in order to report on an annual basis consistent with the Group’s reporting date.
The movement for the year in the Group’s investments accounted for using the equity method is as follows:
Year ended 30 June 2019
US$M
At the beginning of the financial year
(Loss)/profit from equity accounted investments, related impairments and expenses (1)
Investment in equity accounted investments
Dividends received from equity accounted investments
Other
At the end of the financial year
Investment in
associates
Investment in
joint ventures
Total equity
accounted
investments
2,473
399
207
(510)
−
2,569
−
(945)
96
−
849
−
2,473
(546)
303
(510)
849
2,569
(1) US$(945) million represents US$(96) million share of loss from US$(96) million funding provided during the period and US$(849) million movement in provisions
related to the Samarco dam failure including US$(579) million change in estimate, US$(7) million exchange translation and US$(263) million Samarco Germano
dam decommissioning provision. Refer to note 4 ‘Significant events – Samarco dam failure’ for further information.
The following table summarises the financial information relating to each of the Group’s significant equity accounted investments.
BHP Billiton Brasil’s 50 per cent portion of Samarco’s commitments, for which BHP Billiton Brasil has no funding obligation, is US$250 million
(2018: US$550 million).
2019
US$M
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Net assets/(liabilities) – 100%
Net assets/(liabilities) – Group share
Adjustments to net assets related to accounting policy adjustments
Impairment of the carrying value of the investment in Samarco
Additional share of Samarco losses
Unrecognised losses
Carrying amount of investments accounted for using
the equity method
Revenue – 100%
Profit/(loss) from Continuing operations – 100%
Share of operating profit/(loss) of equity accounted investments
Additional share of Samarco losses
Unrecognised losses
(Loss)/profit from equity accounted investments,
related impairments and expenses
Comprehensive income/(loss) – 100%
Share of comprehensive income/(loss) – Group share in equity
accounted investments
Dividends received from equity accounted investments
Associates
Joint ventures
Antamina
Cerrejón
Individually
immaterial (1)
Samarco (2)
Individually
immaterial
Total
1,065
4,495
(498)
(1,076)
3,986
1,345
−
−
−
−
1,345
3,203
1,168
394
−
−
394
1,168
394
361
845
2,664
(344)
(801)
2,364
788
65
−
−
−
853
2,094
309
103
−
−
103
309
103
134
290 (3)
6,103
(6,704) (4)
(5,830)
(6,141)
(3,071)
366 (5)
(525) (6)
3,145 (7)
85 (8)
371
−
−
2,569
24
(2,166) (9)
(1,075)
108
22 (8)
(945)
(2,166)
(945)
−
(98)
(98)
15
−
−
−
(546)
(546)
510
BHP Annual Report 2019 217
i
S
t
r
a
t
e
g
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
a
t
B
H
P
R
e
m
u
n
e
r
a
t
i
o
n
R
e
p
o
r
t
D
i
r
e
c
t
o
r
s
’
R
e
p
o
r
t
5
i
F
n
a
n
c
a
i
l
S
t
a
t
e
m
e
n
t
s
A
d
d
i
t
i
o
n
a
l
i
n
f
o
r
m
a
t
i
o
n
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
29 Investments accounted for using the equity method continued
2018
US$M
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Net assets/(liabilities) – 100%
Net assets/(liabilities) – Group share
Adjustments to net assets related to accounting policy adjustments
Impairment of the carrying value of the investment in Samarco
Additional share of Samarco losses
Unrecognised losses
Carrying amount of investments accounted for using the
equity method
Revenue – 100%
Profit/(loss) from Continuing operations – 100%
Share of operating profit/(loss) of equity accounted investments
Additional share of Samarco losses
Unrecognised losses
Profit/(loss) from equity accounted investments, related
impairments and expenses
Comprehensive income/(loss) – 100%
Share of comprehensive income/(loss) – Group share in equity
accounted investments
Dividends received from equity accounted investments
Associates
Joint ventures
Antamina
Cerrejón
Individually
immaterial (1)
Samarco (2)
Individually
immaterial
Total
1,099
4,385
(532)
(1,064)
3,888
1,312
1
−
−
−
1,313
3,866
1,613
544
−
−
544
1,613
544
496
1,187
2,485
(585)
(663)
2,424
808
75
−
−
−
883
2,453
576
192
−
−
192
576
192
181
79 (3)
6,023
(5,811) (4)
(4,265)
(3,974)
(1,987)
357 (5)
(525) (6)
2,092 (7)
63 (8)
277
−
−
2,473
30
(1,558) (9)
(823)
251
63 (8)
(509)
(1,558)
(509)
−
(80)
(80)
16
−
−
−
147
147
693
2017
US$M
Associates
Joint ventures
Antamina
Cerrejón
Individually
immaterial
Samarco (2)
Individually
immaterial
Total
Revenue – 100%
Profit/(loss) from Continuing operations – 100%
Share of operating profit/(loss) of equity accounted investments
Additional share of Samarco losses
Profit/(loss) from equity accounted investments, related
impairments and expenses
Comprehensive income/(loss) – 100%
Share of comprehensive income/(loss) – Group share in equity
accounted investments
Dividends received from equity accounted investments
2,905
1,010
341
−
341
1,010
341
425
2,247
388
129
−
129
388
129
163
28
(1,520) (9)
(760)
588
(172)
(1,520)
(172)
−
(26)
(26)
32
−
−
−
272
272
620
(1) The unrecognised share of profit for the period was US$15 million (2018: unrecognised share of loss for the period was US$56 million), which decreased the
cumulative losses to US$181 million (2018: increase to US$196 million).
(2) Refer to note 4 ‘Significant events – Samarco dam failure’ for further information regarding the financial impact of the Samarco dam failure in November 2015
on BHP Billiton Brasil’s share of Samarco’s losses.
(3) Includes cash and cash equivalents of US$246 million (2018: US$23 million).
(4) Includes current financial liabilities (excluding trade and other payables and provisions) of US$5,510 million (2018: US$5,066 million).
(5) Relates mainly to dividends declared by Samarco that remain unpaid at balance date and which, in accordance with the Group’s accounting policy, are recognised
when received not receivable.
(6) In the year ended 30 June 2016 BHP Billiton Brasil adjusted its investment in Samarco to US$ nil (resulting from US$(655) million share of loss from Samarco and
US$(525) million impairment).
(7) BHP Billiton Brasil has recognised accumulated additional share of Samarco losses of US$(3,145) million resulting from US$(310) million share of loss from funding
provided to Samarco and US$(2,835) million from provisions relating to the Samarco dam failure, including US$(319) million recognised as net finance costs.
(8) Share of Samarco’s losses for which BHP Billiton Brasil does not have an obligation to fund.
(9) Includes depreciation and amortisation of US$85 million (2018: US$73 million; 2017: US$88 million), interest income of US$22 million (2018: US$31 million; 2017:
US$57 million), interest expense of US$342 million (2018: US$385 million; 2017: US$473 million) and income tax benefit/(expense) of US$52 million (2018:
US$(154) million; 2017: US$(851) million).
218 BHP Annual Report 2019
30 Interests in joint operations
Significant joint operations of the Group are those with the most significant contributions to the Group’s net profit or net assets. The Group’s
interest in the joint operations results are listed in the table below. For a complete list of the Group’s investments in joint operations, refer to
note 13 ‘Related undertakings of the Group’ in section 5.2.
Significant joint operations
Country of operation
Principal activity
Bass Strait
Greater Angostura
Gulf of Mexico
Macedon (1)
North West Shelf
Pyrenees (1)
ROD Integrated Development (2)
Mt Goldsworthy (3)
Mt Newman (3)
Yandi (3)
Central Queensland Coal Associates
Australia
Trinidad and Tobago
US
Australia
Australia
Australia
Algeria
Australia
Australia
Australia
Australia
Hydrocarbons production
Hydrocarbons production
Hydrocarbons exploration and production
Hydrocarbons exploration and production
Hydrocarbons production
Hydrocarbons exploration and production
Hydrocarbons exploration and production
Iron ore mining
Iron ore mining
Iron ore mining
Coal mining
Group’s interest
2019
%
50
45
23.9–44
71.43
12.5–16.67
40–71.43
29.50
85
85
85
50
2018
%
50
45
23.9–44
71.43
12.5–16.67
40–71.43
29.50
85
85
85
50
(1) While the Group may hold a greater than 50 per cent interest in these joint operations, all the participants in these joint operations approve the operating and capital
budgets and therefore the Group has joint control over the relevant activities of these arrangements.
(2) Group interest reflects the working interest and may vary year-on-year based on the Group’s effective interest in producing wells.
(3) These contractual arrangements are controlled by the Group and do not meet the definition of joint operations. However, as they are formed by contractual
arrangement and are not entities, the Group recognises its share of assets, liabilities, revenue and expenses arising from these arrangements.
Assets held in joint operations subject to significant restrictions are as follows:
Current assets
Non-current assets
Total assets (1)
Group’s share
2019
US$M
1,946
35,682
37,628
2018
US$M
2,445
36,144
38,589
(1) While the Group is unrestricted in its ability to sell a share of its interest in these joint operations, it does not have the right to sell individual assets that are used in these
joint operations without the unanimous consent of the other participants. The assets in these joint operations are also restricted to the extent that they are only available
to be used by the joint operation itself and not by other operations of the Group.
31 Related party transactions
The Group’s related parties are predominantly subsidiaries, joint operations, joint ventures and associates and key management personnel of
the Group. Disclosures relating to key management personnel are set out in note 22 ‘Key management personnel’. Transactions between each
parent company and its subsidiaries are eliminated on consolidation and are not disclosed in this note.
• All transactions to/from related parties are made at arm’s length, i.e. at normal market prices and rates and on normal commercial terms.
• Outstanding balances at year-end are unsecured and settlement occurs in cash. Loan amounts owing from related parties represent secured
loans made to joint operations, associates and joint ventures under co-funding arrangements. Such loans are made on an arm’s length basis
with interest charged at market rates and are due to be repaid by 16 August 2022.
• No guarantees are provided or received for any related party receivables or payables.
• No provision for expected credit losses has been recognised in relation to any outstanding balances and no expense has been recognised
in respect of expected credit losses due from related parties.
• There were no other related party transactions in the year ended 30 June 2019 (2018: US$ nil), other than those with post-employment
benefit plans for the benefit of Group employees. These are shown in note 25 ‘Pension and other post-retirement obligations’.
Transactions with related parties
Further disclosures related to other related party transactions are as follows:
Sales of goods/services
Purchases of goods/services
Interest income
Interest expense
Dividends received
Net loans made to/(repayments from) related parties
Joint operations
Joint ventures
Associates
2019
US$M
−
−
1.532
−
−
12.539
2018
US$M
−
−
1.764
−
−
60.566
2019
US$M
2018
US$M
−
−
−
−
−
−
−
−
−
−
−
−
2019
US$M
−
1,141.230
0.826
0.011
509.577
14.547
2018
US$M
−
1,358.016
19.337
−
693.105
(599.979)
Outstanding balances with related parties
Disclosures in respect of amounts owing to/from joint operations represent the amount that does not eliminate on consolidation.
Trade amounts owing to related parties
Loan amounts owing to related parties
Trade amounts owing from related parties
Loan amounts owing from related parties
Joint operations
Joint ventures
Associates
2019
US$M
−
40.513
−
15.474
2018
US$M
−
55.667
−
18.089
2019
US$M
2018
US$M
−
−
−
−
−
−
−
−
2019
US$M
169.773
10.097
3.828
33.486
2018
US$M
210.716
4.097
3.932
12.939
BHP Annual Report 2019 219
i
S
t
r
a
t
e
g
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
a
t
B
H
P
R
e
m
u
n
e
r
a
t
i
o
n
R
e
p
o
r
t
D
i
r
e
c
t
o
r
s
’
R
e
p
o
r
t
5
i
F
n
a
n
c
a
i
l
S
t
a
t
e
m
e
n
t
s
A
d
d
i
t
i
o
n
a
l
i
n
f
o
r
m
a
t
i
o
n
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
Unrecognised items and uncertain events
32 Commitments
The Group’s commitments for capital expenditure were US$3,308 million as at 30 June 2019 (2018: US$2,110 million). The Group’s other
commitments are as follows:
Due not later than one year
Due later than one year and not later than five years
Due later than five years
Total
Future financing liability
Finance lease liability
Commitments under
finance leases
Commitments under
operating leases
2019
US$M
110
417
501
1,028
(313)
715
2018
US$M
127
448
590
1,165
(363)
802
2019
US$M
440
876
589
1,905
2018
US$M
388
785
839
2,012
Finance leases include leases of power generation and transmission assets. Certain lease payments may be subject to inflation escalation
clauses on which contingent rentals are determined. The leases contain extension and renewal options.
Operating leases include leases of property, plant and equipment. Rental payments are generally fixed, but with inflation escalation clauses
on which contingent rentals are determined. Certain leases contain extension and renewal options. From 1 July 2019, IFRS 16/AASB 16 ‘Leases’
became effective for the Group. Refer to note 38 ‘New and amended accounting standards and interpretations’.
33 Contingent liabilities
Associates and joint ventures (1)
Subsidiaries and joint operations (1)
Total
2019
US$M
1,822
1,621
3,443
2018
US$M
1,588
1,915
3,503
(1) There are a number of matters, for which it is not possible at this time to provide a range of possible outcomes or a reliable estimate of potential future exposures, and
for which no amounts have been included in the table above.
A contingent liability is a possible obligation arising from past events and whose existence will be confirmed only by occurrence or non-
occurrence of one or more uncertain future events not wholly within the control of the Group. A contingent liability may also be a present
obligation arising from past events but is not recognised on the basis that an outflow of economic resources to settle the obligation is not
viewed as probable, or the amount of the obligation cannot be reliably measured.
When the Group has a present obligation, an outflow of economic resources is assessed as probable and the Group can reliably measure
the obligation, a provision is recognised.
The Group has entered into various counter-indemnities of bank and performance guarantees related to its own future performance,
which are in the normal course of business. The likelihood of these guarantees being called upon is considered remote.
The Group presently has tax matters, litigation and other claims, for which the timing of resolution and potential economic outflow are
uncertain. Obligations assessed as having probable future economic outflows capable of reliable measurement are provided at reporting
date and matters assessed as having possible future economic outflows capable of reliable measurement are included in the total amount
of contingent liabilities above. Individually significant matters, including narrative on potential future exposures incapable of reliable
measurement, are disclosed below, to the extent that disclosure does not prejudice the Group.
Uncertain tax and
royalty matters
Samarco
contingent
liabilities
Demerger
of South32
The Group is subject to a range of taxes and royalties across many jurisdictions, the application of which is uncertain in some
regards. Changes in tax law, changes in interpretation of tax law, periodic challenges and disagreements with tax authorities,
and legal proceedings result in uncertainty of the outcome of the application of taxes and royalties to the Group’s business.
Areas of uncertainty at reporting date include the application of taxes and royalties to the Group’s cross-border operations
and transactions.
Details of uncertain tax and royalty matters have been disclosed in note 6 ‘Income tax expense’. To the extent uncertain tax
and royalty matters give rise to a contingent liability, an estimate of the potential liability is included within the table above,
where it is capable of reliable measurement.
The table above includes contingent liabilities related to the Group’s equity accounting investment in Samarco to the extent
they are capable of reliable measurement. Details of contingent liabilities related to Samarco are disclosed in note 4 ‘Significant
events – Samarco dam failure’.
As part of the demerger of South32 Limited (South32) in May 2015, certain indemnities were agreed under the Separation Deed.
Subject to certain exceptions, BHP Group Limited indemnifies South32 against claims and liabilities relating to the Group Businesses
and former Group Businesses prior to the demerger and South32 indemnifies the Group against all claims and liabilities relating
to the South32 Businesses and former South32 Businesses. No material claims have been made pursuant to the Separation Deed
as at 30 June 2019.
34 Subsequent events
Other than the matters outlined in the Financial Statements, no matters or circumstances have arisen since the end of the financial year that
have significantly affected, or may significantly affect, the operations, results of operations or state of affairs of the Group in subsequent
accounting periods.
220 BHP Annual Report 2019
Other items
35 Auditor’s remuneration
Fees payable to the Group’s auditors for assurance services
Audit of the Group’s Annual Report
Audit of subsidiaries, joint ventures and associates
Audit-related assurance services
Other assurance services
Total assurance services
Fees payable to the Group’s auditors for other services
Other services relating to corporate finance
All other services
Total other services
Total fees
2019
US$M
4.033
5.275
4.089
0.594
13.991
0.055
0.482
0.537
14.528
2018
US$M
3.909
13.902
4.039
1.343
23.193
0.104
0.553
0.657
23.850
2017
US$M
3.381
7.040
3.597
1.849
15.867
0.042
0.589
0.631
16.498
All amounts were paid to KPMG or KPMG affiliated firms. Fees are determined in local currencies and are predominantly billed in US dollars
based on the exchange rate at the beginning of the relevant financial year.
Fees payable to the Group’s auditors for assurance services
For all periods disclosed, no fees are payable in respect of the audit of pension funds.
Audit of subsidiaries, joint ventures and associates comprise audit of the Group’s subsidiaries, joint ventures and associates including
additional non-recurring audit fees in FY2018 in connection with the sale of the Onshore US oil and gas assets.
Audit-related assurance services comprise review of half-year reports and audit work in relation to compliance with section 404 of the US
Sarbanes-Oxley Act.
Other assurance services comprise assurance in respect of the Group’s sustainability reporting.
Fees payable to the Group’s auditors for other services
Other services relating to corporate finance comprise services in connection with debt raising transactions.
All other services comprise non-statutory assurance based procedures, advice on accounting matters, as well as tax compliance services
of US$0.013 million (2018: US$ nil; 2017: US$0.027 million).
i
S
t
r
a
t
e
g
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
a
t
B
H
P
R
e
m
u
n
e
r
a
t
i
o
n
R
e
p
o
r
t
D
i
r
e
c
t
o
r
s
’
R
e
p
o
r
t
5
i
F
n
a
n
c
a
i
l
S
t
a
t
e
m
e
n
t
s
A
d
d
i
t
i
o
n
a
l
i
n
f
o
r
m
a
t
i
o
n
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
BHP Annual Report 2019 221
36 BHP Group Limited
BHP Group Limited does not present unconsolidated parent company financial statements. Selected financial information of the BHP Group
Limited parent company is as follows:
Income statement information for the financial year
Profit after taxation for the year
Total comprehensive income
Balance sheet information as at the end of the financial year
Current assets
Total assets
Current liabilities
Total liabilities
Share capital
Treasury shares
Reserves
Retained earnings
Total equity
2019
US$M
5,820
5,830
3,804
49,111
1,724
1,854
823
(30)
203
46,261
47,257
2018
US$M
7,818
7,830
16,935
56,448
2,313
2,805
898
(5)
182
52,568
53,643
Parent company guarantees
BHP Group Limited has guaranteed certain financing arrangements available to subsidiaries of US$11,368 million at 30 June 2019
(2018: US$13,108 million).
Under the terms of a Deed Poll Guarantee, BHP Group Limited has guaranteed certain current and future liabilities of BHP Group Plc.
The guaranteed liabilities at 30 June 2019 amounted to US$10 million (2018: US$11 million).
BHP Group Limited and BHP Group Plc have severally, fully and unconditionally guaranteed the payment of the principal and premium,
if any, and interest, including certain additional amounts that may be payable in respect of the notes issued by 100 per cent owned finance
subsidiary, BHP Billiton Finance (USA) Ltd. BHP Group Limited and BHP Group Plc have guaranteed the payment of such amounts when they
become due and payable, whether on an interest payment date, at the stated maturity of the notes, by declaration or acceleration, call for
redemption or otherwise. The guaranteed liabilities at 30 June 2019 amounted to US$8,716 million (2018: US$9,486 million). In addition, BHP
Group Limited and BHP Group Plc have severally guaranteed a Group Revolving Credit Facility of US$6,000 million (2018: US$6,000 million),
which remains undrawn.
37 Deed of Cross Guarantee
BHP Group Limited together with wholly owned subsidiaries identified in note 13 ‘Related undertakings of the Group’ in section 5.2 entered
into a Deed of Cross Guarantee (Deed) on 6 June 2016. The effect of the Deed is that BHP Group Limited has guaranteed to pay any
outstanding liabilities upon the winding up of any wholly owned subsidiary that is party to the Deed. Wholly owned subsidiaries that
are party to the Deed have also given a similar guarantee in the event that BHP Group Limited or another party to the Deed is wound up.
The wholly owned Australian subsidiaries identified in note 13 ‘Related undertakings of the Group’ in section 5.2 are relieved from the
requirements to prepare and lodge audited financial reports.
A Consolidated Statement of Comprehensive Income and Retained Earnings and Consolidated Balance Sheet, comprising BHP Group
Limited and the wholly owned subsidiaries that are party to the Deed for the year ended 30 June 2019 and 30 June 2018 are as follows:
Consolidated Statement of Comprehensive Income and Retained Earnings
Revenue
Other income
Expenses excluding net finance costs
Net finance costs
Income tax expense
Profit after taxation
Total other comprehensive income
Total comprehensive income
Retained earnings at the beginning of the financial year
Net effect on retained earnings of entities added to/removed from the Deed
Profit after taxation for the year
Transfers to and from reserves
Shares bought back and cancelled
Dividends
Retained earnings at the end of the financial year
2019
US$M
22,660
2,881
(14,610)
(414)
(2,317)
8,200
10
8,210
48,442
(34)
8,200
(31)
(5,199)
(6,655)
44,723
2018
US$M
20,434
3,188
(12,693)
(470)
(2,218)
8,241
12
8,253
45,979
48
8,241
(15)
–
(5,811)
48,442
222 BHP Annual Report 2019
37 Deed of Cross Guarantee continued
Consolidated Balance Sheet
ASSETS
Current assets
Cash and cash equivalents
Trade and other receivables
Loans to related parties
Inventories
Other
Total current assets
Non-current assets
Trade and other receivables
Loans to related parties
Inventories
Property, plant and equipment
Intangible assets
Investments in Group companies
Deferred tax assets
Other
Total non-current assets
Total assets
LIABILITIES
Current liabilities
Trade and other payables
Loans from related parties
Interest bearing liabilities
Current tax payable
Provisions
Deferred income
Total current liabilities
Non-current liabilities
Trade and other payables
Loans from related parties
Interest bearing liabilities
Non-current tax payable
Deferred tax liabilities
Provisions
Deferred income
Total non-current liabilities
Total liabilities
Net assets
EQUITY
Share capital – BHP Group Limited
Treasury shares
Reserves
Retained earnings
Total equity
2019
US$M
2018
US$M
13
4,875
4,255
1,677
92
10,912
40
−
326
31,508
362
33,123
442
59
65,860
76,772
4,790
13,682
104
694
889
6
20,165
8
7,689
143
75
542
2,136
14
10,607
30,772
46,000
1,111
(31)
197
44,723
46,000
2
3,977
16,730
1,649
90
22,448
73
151
323
31,009
444
27,354
329
68
59,751
82,199
3,425
15,719
115
1,053
952
6
21,270
3
7,870
191
–
573
2,475
18
11,130
32,400
49,799
1,186
(5)
176
48,442
49,799
BHP Annual Report 2019 223
i
S
t
r
a
t
e
g
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
a
t
B
H
P
R
e
m
u
n
e
r
a
t
i
o
n
R
e
p
o
r
t
D
i
r
e
c
t
o
r
s
’
R
e
p
o
r
t
5
i
F
n
a
n
c
a
i
l
S
t
a
t
e
m
e
n
t
s
A
d
d
i
t
i
o
n
a
l
i
n
f
o
r
m
a
t
i
o
n
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
38 New and amended accounting standards and interpretations
The Group adopted IFRS 9/AASB 9 ‘Financial Instruments’ (IFRS 9)
and IFRS 15/AASB 15 ‘Revenue from Contracts with Customers’
(IFRS 15) in these Financial Statements from 1 July 2018. The adoption
of other changes to IFRS applicable from 1 July 2018, including
IFRIC 22 ‘Foreign Currency Transactions and Advance Consideration’,
did not have a significant impact on these Financial Statements.
• Financial assets carried at amortised cost are tested for impairment
based on expected losses, whereas the previous policy required
that impairments were recognised only when there was objective
evidence that a credit loss was present. Upon adoption of IFRS 9,
an expected credit loss provision of US$7 million against cash
and cash equivalents and trade receivables was recognised in
retained earnings.
IFRS 9 Financial Instruments
This standard replaces IAS 39/AASB 139 ‘Financial Instruments:
Recognition and measurement’ (IAS 39). It revises the classification
and measurement of financial assets and financial liabilities,
introduces a forward looking ‘expected credit loss’ impairment model
and modifies the approach to hedge accounting. Upon adoption of
the new standard on 1 July 2018, the Group adjusted the opening
balance sheet, with no restatement of comparatives required.
Adoption impacts include:
• At 1 July 2018, the Group reassessed the classification and
measurement of financial assets and liabilities based on the
business model by which they are managed and their cash flow
characteristics.
Financial assets previously classified as loans and receivables of
US$17.7 billion were recategorised as amortised cost. The Group’s
available for sale (AFS) shares of US$33 million were designated
as fair value through other comprehensive income (FVOCI), while
investments in shares after 1 July 2018 will be designated at fair
value through profit or loss (FVTPL) or FVOCI on an investment
by investment basis.
Other AFS investments of US$47 million were classified as held at
FVTPL because they are not investments in shares and their cash
flows do not consist solely of payments of principal and interest.
The adoption of IFRS 9 has not resulted in any changes to the
classification of financial assets held at FVTPL or to the
classification or measurement of financial liabilities.
• From 1 July 2018, the Group has applied the amended rules on
hedge accounting which enable closer alignment between the
Group’s risk management strategy and the accounting outcomes.
IFRS 9 broadens the scope of arrangements that may qualify
for hedge accounting and allows for simplification of hedge
designations. Other changes under the standard mean that
hedge effectiveness is only considered on a prospective basis
with no set quantitative thresholds and voluntary de-designation
of hedges is prohibited.
Certain of the Group’s existing derivatives hedging foreign currency
notes and debentures, were in qualifying fair value and cash flow
hedge relationships and have been treated as continuing hedges.
The opportunity to apply simplified hedge designations under IFRS 9
will continue to be assessed for future hedge relationships. Risks
present in the derivative only, such as counterparty credit risk, are not
part of the hedge designation and will continue to be recognised
through the income statement.
Foreign currency basis has been separately measured as a cost
of hedging and movements continue to be recognised in reserves,
with US$176 million being reclassified from the cash flow hedging
reserve into the cost of hedging reserve on transition. The hedging
reserves at transition will continue to be transferred to the income
statement over the life of the underlying notes and debentures.
The impact of adopting IFRS 9 on Total equity as at 1 July 2018 is as follows:
Total equity as at 30 June 2018
Impairment provision resulting from application of the Expected Credit Loss model
Total equity as at 1 July 2018
US$M
60,670
(7)
60,663
The table below summarises the change in classification and measurement of financial assets and liabilities upon adoption of IFRS 9
on 1 July 2018.
Measurement category under
IAS 39
Measurement category under
IFRS 9
Financial assets
Derivative contracts
Investment in shares
Other investments
Cash and cash equivalents
Trade and other receivables
Provisionally priced trade receivables
Loans to equity accounted investments
Financial liabilities
Other financial liabilities
Trade and other payables
Provisionally priced trade payables
Bank overdrafts and short-term borrowings
Bank loans
Notes and debentures
Finance leases
Other
FVTPL
AFS
AFS or FVTPL
Loans and receivables
Loans and receivables
FVTPL
Loans and receivables
FVTPL
Amortised cost
FVTPL
Amortised cost
Amortised cost
Amortised cost
Amortised cost
Amortised cost
FVTPL
FVOCI or FVTPL
FVTPL
Amortised cost
Amortised cost
FVTPL
Amortised cost
FVTPL
Amortised cost
FVTPL
Amortised cost
Amortised cost
Amortised cost
Amortised cost
Amortised cost
224 BHP Annual Report 2019
38 New and amended accounting standards and interpretations continued
IFRS 15 Revenue from Contracts with Customers
This standard modifies the determination of when to recognise
revenue and how much revenue to recognise. Revenue is recognised
when control of the promised goods or services passes to the
customer. The amount of revenue recognised should reflect the
consideration to which the entity expects to be entitled in exchange
for those goods or services.
The Group has applied the full retrospective transition approach,
resulting in the restatement of comparative information. Comparative
information in the consolidated income statement has been restated
to reflect changes in the presentation of treatment costs and refining
charges (TCRC) included in concentrate sales contracts.
Concentrate sales contracts require the Group to physically deliver
concentrate with the contractual sales amount reflecting the final
refined metal content delivered, reduced by TCRC. Revenue was
previously recognised at the gross value of the final refined metal
content delivered with contractually agreed TCRC recorded as an
expense. Under IFRS 15, TCRC will instead be recognised as a
reduction to revenue, reflecting the consideration that the Group
expects to receive from the customer. This will have no net income
statement impact as applying this change would have reduced
revenue and expenses by US$522 million for the year ended
30 June 2019, US$509 million for the year ended 30 June 2018 and
US$395 million for the year ended 30 June 2017, with no impact on
profit after tax. This change has no impact on the basic and diluted
earnings per ordinary share.
Revenue includes both revenue from contracts with customers,
which is recognised under IFRS 15 and provisional pricing adjustments,
which are recognised under IFRS 9. Following adoption of IFRS 15
provisional pricing adjustments will be separately disclosed in the
notes to these Financial Statements as other revenue. The impact
of all other measurement differences identified between IAS 18 and
IFRS 15 was immaterial at 1 July 2018.
Issued but not yet effective
The following new accounting standards and interpretations
will become effective for future reporting periods and may
have a significant impact on the income statement or net assets
of the Group.
IFRS 16 Leases
This standard provides a new model for lessee accounting under
which all leases, with the exception of short term (under 12 months)
and low-value leases, will be accounted for by the recognition on the
balance sheet of a right of use asset and a corresponding lease
liability. Lease costs will be recognised in the income statement over
the lease term in the form of depreciation on the right of use asset
and finance charges representing the unwind of the discount on the
lease liability.
The standard became effective for the Group from 1 July 2019 and the
Group has elected to apply the modified retrospective transition
approach, with no restatement of comparative financial information.
For existing finance leases, the right of use asset and lease liability
on transition will be the IAS 17/AASB 117 ‘Leases’ (IAS 17) carrying
amounts as at 30 June 2019.
As allowed by the standard, the Group has elected:
• except for existing finance leases, to measure the right of use asset
on transition at an amount equal to the lease liability (as adjusted
for prepaid or accrued lease payments);
• not to recognise low-value or short term leases on the balance sheet.
Costs for these lease arrangements will continue to be expensed;
• to only recognise, within the lease liability, the lease component
of contracts that include non-lease components and other services;
• to reflect the impairment of right of use assets on transition by
adjusting their carrying amounts for onerous lease provisions
recognised on the Group balance sheet as at 30 June 2019.
Where the Group is the operator of an unincorporated joint operation
and all investors are parties to a lease, the Group will recognise its
proportionate share of the lease liability and associated right of use
asset. Where the Group is the sole signatory to a lease, and therefore
has the sole legal obligation to make lease payments, the lease
liability will be recognised in full. Where the associated right of use
asset is sub-leased (under a finance sub-lease) to a joint operation,
for instance where it is dedicated to a single operation and the joint
operation has the right to direct the use of the asset, the Group will
recognise its proportionate share of the right of use asset and a net
investment in the lease, representing amounts to be recovered from
the other parties. If the Group is not party to the lease contract but
sub-leases the associated right of use asset it will recognise its
proportionate share of the right of use asset and a lease liability
which is payable to the operator.
The application of IFRS 16 requires certain significant judgements,
estimates and assumptions including whether the Group controls the
right to direct the use of assets in certain contractual arrangements,
the likelihood of extension and termination options being exercised,
the separation and estimation of non-lease components of payments,
the identification and valuation of in-substance fixed payments and
the determination of the incremental borrowing rate relevant in
calculating lease liabilities.
The impact on transition is expected to result in an increase in lease
liabilities of approximately US$2.3 billion, right of use assets of
US$2.2 billion, and net adjustments to other assets and liabilities
of US$0.1 billion. The Group is required to recognise these leases
applying the incremental borrowing rate that takes into account the
currency, tenor and location of each lease. The weighted average
incremental borrowing rate applied to the Group’s additional lease
liabilities at 1 July 2019 is 2.1 per cent. The Group will recognise
leases entered into after 1 July 2019 using the interest rate implicit
in the lease, where this is readily determinable.
The following table provides a reconciliation of the operating lease
commitments disclosed in note 32 ‘Commitments’ to the expected
total lease liability to be recognised at 1 July 2019:
Operating lease commitments as at 30 June 2019
Add: Leases which did not meet the definition
of a lease under IAS 17
Add: Cost of reasonably certain extension options
(undiscounted)
Less: Components excluded from lease liability
(undiscounted)
Less: Effect of discounting
Total additional lease liabilities recognised
on transition
US$B
1.9
0.7
0.1
(0.2)
(0.2)
2.3
i
S
t
r
a
t
e
g
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
a
t
B
H
P
R
e
m
u
n
e
r
a
t
i
o
n
R
e
p
o
r
t
D
i
r
e
c
t
o
r
s
’
R
e
p
o
r
t
5
i
F
n
a
n
c
a
i
l
Leases recognised under IFRS 16, which did not meet the definition
of a lease under IAS 17, relate to freight contracts known as continuous
voyage charters (CVCs). The lease asset and liability associated with
all index-linked freight contracts, including CVCs, will be remeasured
at each reporting date based on the prevailing freight index (Baltic C5
index). Freight indices, which reflect demand and supply for vessels,
have shown historic volatility. The accounting for these contracts
continues to evolve and the Group is monitoring industry practice.
The Group’s finance lease obligations at 30 June 2019 are currently
included in the Group’s net debt (note 19 ‘Net debt’). From 1 July 2019,
net debt will include the Group’s total lease liabilities.
The Group has developed lease accounting systems, processes and
controls which will be used to account for the Group’s lease contracts
following transition. Practical application of the standard continues
to develop in a number of areas and the Group will continue to
monitor developments and assess any implications for the expected
lease liability on transition and post transition accounting.
Other interpretations issued but not yet effective
The adoption of other changes to IFRS applicable from 1 July 2019,
including IFRIC 23 ‘Uncertainty over Income Tax Treatments’ is not
expected to have a significant impact on these Financial Statements.
A number of other accounting standards and interpretations, along
with revisions to the Conceptual Framework for Financial Reporting,
have been issued and will be applicable in future periods. While these
remain subject to ongoing assessment, no significant impacts have
been identified to date. These standards have not been applied in the
preparation of these Financial Statements.
S
t
a
t
e
m
e
n
t
s
A
d
d
i
t
i
o
n
a
l
i
n
f
o
r
m
a
t
i
o
n
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
BHP Annual Report 2019 225
5.2 BHP Group Plc
BHP Group Plc is required to present its unconsolidated parent company balance sheet and certain notes to the balance sheet on a stand-
alone basis as at 30 June 2019 and 2018. The BHP Group Plc Balance Sheet has been prepared in accordance with Financial Reporting
Standard 101 ‘Reduced Disclosure Framework’ (FRS 101). Refer to note 1 ‘Principal accounting policies’ for information on the principal
accounting policies.
BHP Group Plc is exempt from presenting an unconsolidated parent company profit and loss account and statement of comprehensive
income in accordance with section 408 of the UK Companies Act 2006.
Parent company Financial Statements of BHP Group Plc
BHP Group Plc Balance Sheet as at 30 June 2019
ASSETS
Current assets
Debtors – Amounts owed by Group undertakings
Non-current assets
Investments in subsidiaries
Deferred tax assets
Total assets
LIABILITIES
Current liabilities
Creditors – Amounts owed to Group undertakings
Provisions
Non-current liabilities
Pension liabilities
Total liabilities
Net assets
Capital and reserves
Called up share capital
Share premium account
Capital redemption reserve
Profit and loss account
Total equity
Notes
2
3
4
5
6
6, 7
2019
US$M
8,258
8,258
3,131
−
3,131
2018
US$M
11,503
11,503
3,131
−
3,131
11,389
14,634
(38)
(2)
(40)
(9)
(9)
(49)
(4)
(1)
(5)
(9)
(9)
(14)
11,340
14,620
1,057
518
177
9,588
11,340
1,057
518
177
12,868
14,620
The accompanying notes form part of these Parent company Financial Statements.
The Parent company Financial Statements of BHP Group Plc, registration number 3196209, were approved by the Board of Directors
on 5 September 2019 and signed on its behalf by:
Ken MacKenzie
Chairman
Andrew Mackenzie
Chief Executive Officer
226 BHP Annual Report 2019
BHP Group Plc Statement of Changes in Equity for the year ended 30 June 2019
US$M
Balance as at 1 July 2018
Share capital
1,057
Profit for the year after taxation
Other comprehensive income for the year:
Tax on employee entitlements taken to retained earnings
Actuarial loss on pension scheme
Total comprehensive income for the year
Transactions with owners:
Purchase of shares by ESOP trusts
Employee share awards exercised net of employee
contributions and forfeitures
Accrued employee entitlement for unexercised awards
Dividends
Balance as at 30 June 2019
Balance as at 1 July 2017
Profit for the year after taxation
Other comprehensive income for the year:
Tax on employee entitlements taken to retained earnings
Actuarial loss on pension scheme
Total comprehensive income for the year
Transactions with owners:
Purchase of shares by ESOP trusts
Employee share awards exercised net of employee
contributions and forfeitures
Accrued employee entitlement for unexercised awards
Dividends
−
−
−
−
−
−
−
−
1,057
1,057
−
−
−
−
−
−
−
−
Balance as at 30 June 2018
1,057
Treasury
shares (1)
Share
premium
account
Capital
redemption
reserve
Profit and loss
account
Total equity
−
−
−
−
−
(6)
6
−
−
−
(1)
−
−
−
−
(12)
13
−
−
−
518
177
−
−
−
−
−
−
−
−
518
518
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
177
177
−
−
−
−
−
−
−
−
518
177
12,868
1,372
−
−
14,620
1,372
−
−
1,372
1,372
−
(6)
(6)
2
(4,648)
9,588
6,436
8,512
−
−
−
2
(4,648)
11,340
8,187
8,512
−
−
8,512
8,512
−
(12)
(13)
3
(2,070)
12,868
−
3
(2,070)
14,620
(1) Shares held by the Billiton Employee Share Ownership Trust as at 30 June 2019 were 39,719 shares with a market value of US$1 million (2018: 41,634 shares with
a market value of US$1 million).
The accompanying notes form part of these Parent company Financial Statements.
i
S
t
r
a
t
e
g
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
a
t
B
H
P
R
e
m
u
n
e
r
a
t
i
o
n
R
e
p
o
r
t
D
i
r
e
c
t
o
r
s
’
R
e
p
o
r
t
5
i
F
n
a
n
c
a
i
l
S
t
a
t
e
m
e
n
t
s
A
d
d
i
t
i
o
n
a
l
i
n
f
o
r
m
a
t
i
o
n
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
BHP Annual Report 2019 227
Foreign currencies
The accounting policy is consistent with the Group’s policy on
‘Foreign currencies’ as set out in section 5.1.
Investments in subsidiaries (Group undertakings)
Investments in subsidiaries are stated at cost less provisions for
impairments. Investments in subsidiaries are reviewed for impairment
where events or changes in circumstances indicate that the carrying
amount of the investment may not be recoverable.
If any such indication exists, BHP Group Plc makes an assessment
of the recoverable amount. If the asset is determined to be impaired,
an impairment loss will be recorded and the asset written down
based on the amount by which the asset carrying amount exceeds
the higher of fair value less cost of disposal and value in use. An
impairment loss is recognised immediately in the income statement.
Taxation
The accounting policy is consistent with the Group’s policy set out
in note 6 ‘Income tax expense’ in section 5.1.
Key judgements and estimates
Judgements: Judgement is required to determine the
amount of deferred tax assets that are recognised based
on the likely timing and the level of future taxable profits.
Estimates: The Group assesses the recoverability of
recognised and unrecognised deferred taxes on a
consistent basis, using estimates and assumptions
relating to projected cash flows as applied in the
Group impairment reviews for associated operations.
Share-based payments
The accounting policy is consistent with the Group’s policy set out
in note 23 ‘Employee share ownership plans’ in section 5.1 and is
applied with respect to all rights and options granted over BHP
Group Plc shares, including those granted to employees of other
Group companies. However, the cost of rights and options granted
is recovered from subsidiaries of the Group where the participants
are employed.
BHP Group Plc is the Trust’s sponsoring company and so the Parent
company Financial Statements of BHP Group Plc represent the
combined financial statements of BHP Group Plc and the Trust.
Revenue recognition
Interest income is recognised on an accruals basis using the effective
interest method. Dividend income is recognised when the right to
receive payment is established, typically on declaration by subsidiaries.
Treasury shares
The consideration paid for the repurchase of BHP Group Plc shares
that are held as treasury shares is recognised as a reduction in
shareholders’ funds and represents a reduction in distributable
reserves.
Pension costs and other post-retirement benefits
The accounting policy is consistent with the Group’s policy set out in
note 25 ‘Pension and other post-retirement obligations’ in section 5.1.
Financial guarantees
Financial guarantees issued by BHP Group Plc are contracts
that require a payment to be made to reimburse the holder
for a loss it incurs because the specified debtor fails to comply
with the terms of the debt instrument. Financial guarantees are
recognised initially as a liability at fair value less transaction costs
as appropriate. Subsequently, the liability is measured at the higher
of the best estimate of the expenditure required to settle the present
obligation at the reporting date and the amount recognised less
cumulative amortisation.
1 Principal accounting policies
BHP Group Plc company information
BHP Group Plc is a public company limited by shares, registered
in England and Wales and with a registered office located at Nova
South, 160 Victoria Street, London SW1E 5LB, United Kingdom.
BHP Group Plc has a premium listing on the UK Listing Authority’s
Official List and its ordinary shares are admitted to trading on the
London Stock Exchange in the United Kingdom and have a secondary
listing on the Johannesburg Stock Exchange in South Africa.
Basis of preparation
BHP Group Plc meets the definition of a qualifying entity under
Financial Reporting Standard 100 ‘Application of Financial Reporting
Requirements’ (FRS 100) as issued by the Financial Reporting Council.
The BHP Group Plc Parent company Financial Statements are:
• unconsolidated Financial Statements of the stand-alone company.
BHP Group Plc is exempt from preparing consolidated accounts
by virtue of section 400 of the UK Companies Act 2006;
• prepared in accordance with the provisions of the UK Companies
Act 2006;
• presented in accordance with Financial Reporting Standard
101 ‘Reduced Disclosure Framework’ (FRS 101);
• prepared on a going concern basis;
• using historical cost principles as modified by the revaluation
of certain financial assets and liabilities in accordance with
the UK Companies Act 2006;
• presented in US dollars, which is the functional currency of
BHP Group Plc. Amounts are rounded to the nearest million
dollars, unless otherwise stated.
The principal accounting policies applied in the preparation of these
Parent company Financial Statements are set out below. These have
been applied consistently to all periods presented. The following
disclosure exemptions have been applied under FRS 101:
• paragraphs 45(b) and 46-52 of IFRS 2 ‘Share-based Payment’ (details
of number and weighted average exercise price of share options,
and how the fair value of goods or services received was determined);
• the requirements of IFRS 7 ‘Financial Instruments: Disclosures’;
• paragraphs 91–99 of IFRS 13 ‘Fair Value Measurement’ (disclosure
of valuation techniques and inputs used for fair value measurement
of assets and liabilities);
• paragraph 38 of IAS 1 ‘Presentation of Financial Statements’
(comparative financial information in respect of paragraph 79(a)(iv)
of IAS 1);
• disclosure of the following requirements of IAS 1 ‘Presentation
of Financial Statements’:
– 10(d) – A statement of cash flows for the period;
– 16 – A statement that the Financial Statements are in compliance
with all IFRSs;
– 38A – Requirement for a minimum of two primary statements
including cash flow statements;
– 38 B-D – Comparative information;
– 111 – Cash flow statement information;
– 134-136 – Capital management disclosures;
• IAS 7 ‘Statement of Cash Flows’;
• paragraphs 30 and 31 of IAS 8 ‘Accounting Policies and Changes
in Accounting Estimates and Errors’ (disclosure of information
when an entity has not applied a new IFRS that has been issued
and is not yet effective);
• paragraphs 17 and 18A of IAS 24 ‘Related Party Disclosures’
(key management compensation);
• the requirements of IAS 24 ‘Related Party Disclosures’ (disclosure
of related party transactions entered into between two or more
members of a group).
Judgements in applying accounting policies and key sources
of estimation uncertainties
The preparation of financial statements in conformity with FRS 101
requires the use of critical accounting estimates, and requires the
application of judgement in applying BHP Group Plc’s accounting
policies. Significant judgements and estimates applied in the
preparation of these Parent company Financial Statements have
been identified and disclosed throughout.
228 BHP Annual Report 2019
2 Debtors – Amounts owed by Group undertakings
Amounts owed by Group undertakings
Total debtors
Comprising:
Current
Non-current
The amounts due from Group undertakings primarily relate to unsecured receivable balances that are at call.
3 Investments in subsidiaries
Investments in subsidiaries (Group undertakings):
At the beginning and the end of the financial year
BHP Group Plc had the following principal subsidiary undertakings as at 30 June 2019:
Company
Principal activity
Country of incorporation
BHP Billiton Group Limited
BHP Billiton Finance Plc
BHP (AUS) DDS Pty Ltd
Holding company
Finance company
General finance
UK
UK
Australia
2019
US$M
8,258
8,258
8,258
−
2018
US$M
11,503
11,503
11,503
−
2019
US$M
2018
US$M
3,131
3,131
Percentage
shareholding
Carrying value
of investment
US$M
100%
99%
100%
3,131
0.1
–
BHP Billiton Group Limited, BHP Billiton Finance Plc and BHP (AUS) DDS Pty Ltd are included in the consolidation of the Group.
During the year, BHP Group Plc received dividends of US$1,246 million (2018: US$5,947 million) from BHP Billiton Group Limited and dividends
of US$ nil (2018: US$2,660 million) were received from BHP (AUS) DDS Pty Ltd.
In accordance with section 409 of the UK Companies Act 2006, a full list of related undertakings is disclosed in note 13 ‘Related undertakings
of the Group’ in this section.
4 Deferred tax assets
The movement for the year in BHP Group Plc’s deferred tax position is as follows:
Deferred tax assets
At the beginning of the financial year
Income tax charge recorded in the income statement
Income tax credit recorded directly to other comprehensive income
At the end of the financial year
2019
US$M
2018
US$M
−
−
−
−
111
(111)
−
−
The composition of BHP Group Plc’s deferred tax asset recognised in the balance sheet and the deferred tax expense charged to the income
statement is as follows:
Type of temporary difference
Tax losses
Employee benefits
Total
Deferred tax assets
Charged to the income statement
2019
US$M
2018
US$M
2019
US$M
−
−
−
−
−
−
−
−
−
2018
US$M
105
6
111
As at 30 June 2019, BHP Group Plc had unused income tax losses of US$605 million (2018: US$618 million), with income tax benefit of
US$103 million (2018: US$105 million), and other deductible temporary differences of US$17 million (2018: US$33 million) with income
tax benefit of US$3 million (2018: US$6 million). A deferred tax asset has not been recognised on these losses and deductible temporary
differences, as it is not probable that future tax benefits will be available against which they can be utilised.
BHP Annual Report 2019 229
i
S
t
r
a
t
e
g
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
a
t
B
H
P
R
e
m
u
n
e
r
a
t
i
o
n
R
e
p
o
r
t
D
i
r
e
c
t
o
r
s
’
R
e
p
o
r
t
5
i
F
n
a
n
c
a
i
l
S
t
a
t
e
m
e
n
t
s
A
d
d
i
t
i
o
n
a
l
i
n
f
o
r
m
a
t
i
o
n
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
5 Creditors – Amounts owed to Group undertakings
Group relief payable
Amounts owed to Group undertakings
Total creditors
Comprising:
Current
Non-current
The amounts due to Group undertakings are unsecured, interest free and repayable on demand.
6 Provisions
Employee benefits
Pension liabilities
Total provisions
Comprising:
Current
Non-current
At the beginning of the financial year
Actuarial loss on pension scheme
Charge for the year
Transfers and other movements
At the end of the financial year
2019
US$M
2018
US$M
34
4
38
38
−
−
4
4
4
−
2019
US$M
2018
US$M
2
9
11
2
9
Employee
benefits
US$M
Pension
liabilities
US$M
1
−
−
1
2
9
−
−
−
9
1
9
10
1
9
Total
US$M
10
−
−
1
11
7 Pension liabilities
The Group operates the UK Executive fund in the United Kingdom. A full actuarial valuation is prepared by the independent actuary to the
fund as at 30 June 2019. The Group operates final salary schemes that provide final salary benefits only, non-salary related schemes that
provide flat dollar benefits and mixed benefit schemes that consist of a final salary defined benefit portion and a defined contribution portion.
The defined benefit pension scheme exposes BHP Group Plc to a number of risks, including asset value volatility, interest rate, inflation, longevity
and medical expense inflation risk.
The Group follows a coordinated strategy for the funding and investment of its defined benefit pension schemes (subject to meeting all local
requirements). Scheme assets are predominantly invested in bonds and equities.
Amounts recognised in the BHP Group Plc balance sheet are as follows:
Present value of funded defined benefit obligation
Fair value of defined benefit scheme assets
Scheme deficit
Net liability recognised in the Balance Sheet
2019
US$M
2018
US$M
15
(6)
9
9
15
(6)
9
9
230 BHP Annual Report 2019
8 Share capital
Share capital issued (issued and fully paid)
Opening number of shares
Purchase of shares by ESOP Trusts
Employee share awards exercised following vesting
Movement in treasury shares under Employee Share Plans
Closing number of shares (1)
Comprising:
Shares held by the public
Treasury shares
Other share classes
Special Voting Share of US$0.50 par value
5.5% Preference shares of £1 each
BHP Group Plc
2019
Shares
2018
Shares
2,112,071,796
(274,069)
275,984
(1,915)
2,112,071,796
(679,223)
711,705
(32,482)
2,112,071,796
2,112,071,796
2,112,032,077
39,719
2,112,030,162
41,634
1
50,000
1
50,000
(1) The total number of BHP Group Plc shares for all classes is 2,112,071,796 of which 99.99 per cent are ordinary shares with a par value of US$0.50.
Refer to note 15 ‘Share capital’ in section 5.1 for descriptions of the nature of share capital held.
9 Employee numbers
Average number of employees during the year including Executive Directors
2019
Number
1
2018
Number
1
10 Financial guarantees
Under the terms of a Deed Poll Guarantee, BHP Group Plc has guaranteed certain current and future liabilities of BHP Group Limited.
At 30 June 2019, the guaranteed liabilities amounted to US$13,222 million (2018: US$15,908 million).
BHP Group Plc and BHP Group Limited have severally, fully and unconditionally guaranteed the payment of the principal and premium,
if any, and interest, including certain additional amounts that may be payable in respect of the notes issued by 100 per cent owned finance
subsidiary BHP Billiton Finance (USA) Limited. BHP Group Plc and BHP Group Limited have guaranteed the payment of such amounts when
they become due and payable, whether on an interest payment date, at the stated maturity of the notes, by declaration or acceleration,
call for redemption or otherwise. At 30 June 2019, the guaranteed liabilities amounted to US$8,716 million (2018: US$9,486 million).
Further, BHP Group Plc and BHP Group Limited have severally guaranteed a Group Revolving Credit Facility of US$6,000 million
(2018: US$6,000 million), which remains undrawn.
At 30 June 2019, the liability recognised for financial guarantees was US$ nil (2018: US$ nil).
11 Financing facilities
BHP Group Plc is a party to a revolving credit facility. Refer to note 19 ‘Net debt’ in section 5.1.
12 Other matters
Note 35 ‘Auditor’s remuneration’ in section 5.1 provides details of the remuneration of BHP Group Plc’s auditor on a Group basis.
The Directors are remunerated by BHP Group Plc for their services to the Group as a whole. No remuneration was paid to them specifically
in respect of their services to BHP Group Plc. Details of the Directors’ remuneration are disclosed in section 3.3 ‘Annual report on remuneration’.
BHP Group Plc had no capital or operating/finance lease commitments as at 30 June 2019 (2018: US$ nil).
BHP Annual Report 2019 231
i
S
t
r
a
t
e
g
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
a
t
B
H
P
R
e
m
u
n
e
r
a
t
i
o
n
R
e
p
o
r
t
D
i
r
e
c
t
o
r
s
’
R
e
p
o
r
t
5
i
F
n
a
n
c
a
i
l
S
t
a
t
e
m
e
n
t
s
A
d
d
i
t
i
o
n
a
l
i
n
f
o
r
m
a
t
i
o
n
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
13 Related undertakings of the Group
In accordance with Section 409 of the UK Companies Act 2006 the following tables disclose a full list of related undertakings, the country
of incorporation, the registered office address and the effective percentage of equity owned as at 30 June 2019.
Unless otherwise stated, the share capital disclosed comprises ordinary or common shares which are held by subsidiaries of the Group.
Refer to note 28 ‘Subsidiaries’, 29 ‘Investments accounted for using the equity method’ and 30 ‘Interests in joint operations’ in section 5.1
for undertakings that have a significant contribution to the Group‘s net profit or net assets.
Wholly owned subsidiaries (a)
Country of incorporation
Argentina
Registered office address
Sarmiento 580, piso 4º – 5º, Buenos Aires, C1041AAL, Argentina
Company Name
BHP Petroleum (Argentina) S.A.
Australia
125 St Georges Terrace, Perth, WA 6000, Australia
BHP (Towage Services) Pty Ltd (v) (y)
BHP Billiton IO Pilbara Mining Pty Ltd
BHP Billiton Iron Ore Pty Limited (s) (v) (x)
BHP Billiton Minerals Pty Ltd (f) (s) (v) (x)
BHP Billiton Petroleum (Australia) Pty Ltd
BHP Billiton Petroleum (Bass Strait) Pty Ltd
BHP Billiton Petroleum (International Exploration) Pty Ltd
BHP Billiton Petroleum (North West Shelf) Pty Ltd
BHP Billiton Petroleum (Victoria) Pty Ltd
BHP Billiton Petroleum International Pty Ltd (s)
BHP Billiton Petroleum Investments (Great Britain) Pty Ltd
BHP Direct Reduced Iron Pty Limited (v) (x)
BHP IO Mining Pty Ltd
BHP IO Workshop Pty Ltd
BHP Iron Ore Holdings Pty Ltd (s)
BHP Petroleum (Cambodia) Pty Ltd
BHP Petroleum Pty Ltd
BHP Towage Services (Boodarie) Pty Ltd
BHP Towage Services (Iron Brolga) Pty Ltd
BHP Towage Services (Iron Corella) Pty Ltd
BHP Towage Services (Iron Ibis) Pty Ltd
BHP Towage Services (Iron Kestrel) Pty Ltd
BHP Towage Services (Iron Osprey) Pty Ltd
BHP Towage Services (Iron Whistler) Pty Ltd
BHP Towage Services (Mallina) Pty Ltd
BHP Towage Services (Mount Florance) Pty Ltd
BHP Towage Services (RT Atlantis) Pty Ltd
BHP Towage Services (RT Darwin) Pty Ltd
BHP Towage Services (RT Discovery) Pty Ltd
BHP Towage Services (RT Eduard) Pty Ltd
BHP Towage Services (RT Endeavour) Pty Ltd
BHP Towage Services (RT Enterprise) Pty Ltd
BHP Towage Services (RT Force) Pty Ltd
BHP Towage Services (RT Inspiration) Pty Ltd
BHP Towage Services (RT Rotation) Pty Ltd
BHP Towage Services (RT Sensation) Pty Ltd
BHP Towage Services (RT Tough) Pty Ltd
BHP WAIO Pty Ltd (v) (y)
Pilbara Gas Pty Limited (v) (x)
United Iron Pty Ltd
Australia
Level 14, 480 Queen Street, Brisbane, QLD, 4000, Australia
BHP Coal Pty Ltd (u) (v)
BHP Energy Coal Australia Pty Ltd
BHP MetCoal Holdings Pty Ltd (s) (u) (v)
BHP Minerals Asia Pacific Pty Ltd
BHP Queensland Coal Investments Pty Ltd (w)
Broadmeadow Mine Services Pty Ltd (u) (v)
Central Queensland Services Pty Ltd (u) (v)
Coal Mines Australia Pty Ltd
Dampier Coal (Queensland) Proprietary Limited (v) (x)
Hay Point Services Pty Limited (u) (v)
Hunter Valley Energy Coal Pty Ltd
Mt Arthur Coal Pty Limited
Mt Arthur Underground Pty Ltd
OS ACPM Pty Ltd (v) (y)
OS MCAP Pty Ltd (v) (z)
Red Mountain Infrastructure Pty Ltd
UMAL Consolidated Pty Ltd (v) (x)
Level 15, 171 Collins Street, Melbourne, VIC, 3000, Australia
Agnew Pastoral Company Pty Ltd
Albion Downs Pty Limited
BHP (AUS) DDS Pty Ltd (t)
BHP Aluminium Australia Pty Ltd
BHP Billiton Finance (USA) Limited (s)
BHP Billiton Finance Limited (s)
BHP Billiton Nickel West Pty Ltd (u) (v)
BHP Billiton Olympic Dam Corporation Pty Ltd (u) (v)
BHP Billiton SSM Development Pty Ltd
BHP Capital No. 20 Pty Limited (s)
BHP Group Operations Pty Ltd (u) (v)
BHP Innovation Pty Ltd (s) (u) (v)
BHP Lonsdale Investments Pty Ltd (s) (u) (v)
BHP Manganese Australia Pty Ltd
BHP Marine & General Insurances Pty Ltd (s)
BHP Minerals Holdings Proprietary Limited (s) (v) (x)
BHP Nickel Operations Pty Ltd
BHP Pty Ltd
BHP Shared Business Services Pty Ltd (s)
BHP SSM Indonesia Holdings Pty Ltd (s)
BHP SSM International Pty Ltd
BHP Titanium Minerals Pty Ltd (p) (s)
BHP Western Mining Resources International Pty Ltd
BHP Yakabindie Nickel Pty Ltd
BHPB Freight Pty Ltd (s) (u) (v)
Billiton Australia Finance Pty Ltd
The Broken Hill Proprietary Company Pty Ltd (s) (u) (v)
Weebo Pastoral Company Pty Ltd
WMC Finance (USA) Limited
232 BHP Annual Report 2019
13 Related undertakings of the Group continued
Bermuda
China
Victoria Place, 31 Victoria Street, Hamilton, HM 10, Bermuda
BHP Petroleum (Tankers) Limited
Xin Mao Mansion, South Taizhong Road, Free Trade Zone Waigaoqiao,
Shanghai, 200131, China
BHP Billiton International Trading (Shanghai) Co. Ltd
Brazil
Avenida Rio Branco, No. 110, room 901, Centro, Rio de Janeiro,
20040-001, Brazil
BHP Billiton Brasil Exploração e Produção de Petróleo Limitada
BHP Billiton Brasil Investimentos de Petróleo Ltda
Rua Paraíba, 1122, 5° andar, Belo Horizonte, MG, 30130-918, Brazil
Araguaia Participaçóes Ltda
BHP Billiton Brasil Ltda
BHP Internacional Participaçóes Ltda
Jenipapo Recursos Naturais Ltda
WMC Mineraçóo Ltda
British Virgin Islands
Trident Chambers, Wickhams Cay, Road Town, Tortola,
British Virgin Islands
BHP Billiton UK Holdings Limited
BHP Billiton UK Investments Limited
Suite 1209, Level 12, One Corporate Avenue, 222 Hubin Road,
Shanghai, Huangpu, China
BHP Billiton Technology (Shanghai) Co Ltd
Ecuador
Av. Patria 640 intersección Av. Amazonas, Edificio Patria Piso 10,
Pichincha, Quito, Ecuador
Cerro-Quebrado S.A.
Av. Simon Bolivar SN, Intersección Via A Nayon, Quito,
Pichincha, Ecuador
Cerro-Yatsur S.A.
Guernsey
Heritage Hall, Le Marchant Street, St Peter Port, Guernsey, GY1 4HY,
Channel Islands
Stein Insurance Company Limited
Canada
India
1959 Upper Water Street, Suite 900, Halifax NS B3J 3N2, Canada
BHP Billiton Petroleum (New Ventures) Corporation
BHP Billiton Petroleum (Philippines) Corporation
12th Floor, One Horizon Centre, Golf Course Road, DLF Phase V,
Sector 43, Gurgaon, HR, 122002, India
BHP Billiton Marketing Services India Pvt Ltd
BHP Minerals India Private Limited
2900 – 550 Burrard Street, Vancouver BC V6C 0A3, Canada
BHP Billiton Canada Inc.
BHP Billiton World Exploration Inc.
Indonesia
Midplaza 1 Building, Level 17, Jl.Jend.Sudirman Kav.10-11, JKT, 10220,
Indonesia
333 Bay Street, Suite 2400, Bay Adelaide Centre, Box 20, Toronto ON
M5H2T6, Canada
PT BHP Billiton Indonesia
PT Billiton Indonesia
Rio Algom Exploration Inc.
Rio Algom Investments (Chile) Inc.
Rio Algom Limited
WMC Resources Marketing Limited
MidPlaza 2 Building, Level 3, Jl.Jend.Sudirman Kav.10-11, JKT, 10220,
Indonesia
PT BHP Billiton Services Indonesia
4500 Bankers Hall East, 855-2nd Street S.W., Calgary, Alberta, T2P 4K7,
Canada
Ireland
19-20 Seagrave House (1st Floor), Earlsfort Terrace, DUB 2, Ireland
BHP Billiton (Trinidad-2C) Ltd
Billiton Investments Ireland Limited
Cayman Islands
Japan
2nd Floor Building 3, Governors Square 23 Lime Three Bay Avenue,
Grand Cayman, KY1-1205, BWI, Cayman Islands
1-8-3 Marunouchi, Chiyoda-ku, Tokyo, Japan
BHP Billiton Japan Limited
Global BHP Copper Ltd
RAL Cayman Inc.
238 North Church Street, George Town, Grand Cayman, KY1-1102,
Cayman Islands
Jersey
31 Esplanade, St Helier, JE1 1FT, Jersey
BHP Billiton Services Jersey Limited
Riocerro Inc.
Riochile Inc.
Chile
Malaysia
Level 19-1 Menara Milenium, Jalan Damanlela, Pusat Bandar Damansara,
50490, Wilayah Persekutuan, Malaysia
Cerro El Plomo 6000, Piso 15, Las Condes, Santiago, Chile
BHP Billiton Shared Services Malaysia Sdn. Bhd.
BHP Billiton Chile Inversiones Limitada (i)
BHP Explorations Chile SpA
Compañía Minera Cerro Colorado Limitada (i)
Kelti S.A.
Minera Spence SA
Tamakaya Energía SpA
BHP Annual Report 2019 233
i
S
t
r
a
t
e
g
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
a
t
B
H
P
R
e
m
u
n
e
r
a
t
i
o
n
R
e
p
o
r
t
D
i
r
e
c
t
o
r
s
’
R
e
p
o
r
t
5
i
F
n
a
n
c
a
i
l
S
t
a
t
e
m
e
n
t
s
A
d
d
i
t
i
o
n
a
l
i
n
f
o
r
m
a
t
i
o
n
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
13 Related undertakings of the Group continued
Mexico
South Africa
Av. Ejercito Nacional #769, Torre B, Piso 3, Colonia Granada, Delegación
Miguel Hidalgo, Ciudad de Mexico, 11520, Mexico
BHP Billiton Petróleo Holdings de México S. de R.L. de C.V. (k)
BHP Billiton Petróleo Operaciones de México S. de R.L. de C.V. (k)
BHP Billiton Petróleo Servicios Administrativos S. de R.L. de C.V. (k)
BHP Billiton Petróleo Servicios de México S. de R.L. de C.V. (k)
Operaciones Conjuntas S. de R.L. de C.V. (k)
7 West Street, Houghton, 2198, South Africa
Phoenix Mining Finance Company Proprietary Limited
Unit G05 Century Gate Office Park, Corner Bosmansdam Road
and Century Way, Century City, Cape Town, Western Cape, 7441,
South Africa
Consolidated Nominees Proprietary Limited
Netherlands
Naritaweg 165, 1043 BW, AMS, Netherlands
BHP Billiton Company B.V.
BHP Billiton International Metals B.V.
Billiton Development B.V.
Billiton Investment 3 B.V.
Billiton Investment 8 B.V.
Billiton Marketing Holding B.V.
Switzerland
Joechlerweg 2, CH-6341, Baar, Switzerland
BHP Billiton Marketing AG
Trinidad and Tobago
Invaders Bay Tower, Invaders Bay, off Audrey Jeffers Highway,
Port of Spain, Trinidad, Trinidad and Tobago
BHP Billiton (Trinidad-3A) Ltd
Nova South, 160 Victoria Street, London, England, SW1E 5LB,
United Kingdom
United Kingdom
BHP Billiton Finance B.V.
Billiton Guinea B.V.
Billiton Suriname Holdings B.V.
36 East Stockwell Street, Colchester, Essex, CO1 1ST, England,
United Kingdom
Billiton Executive Pension Scheme Trustee Limited
Panama
88 Leadenhall Street, London, England, EC3A 3BP, United Kingdom
33 Central Avenue, City of Panama, Republic of Panama
The World Marine & General Insurance Plc (s)
Marcona International S.A. (g) (h)
Papua New Guinea
Level 11, MRDC Haus, Cnr Musgrave Street and Champion Parade,
Port Moresby, National Capital District, Papua New Guinea
BHP Billiton PNG Services Limited (s)
Saint Lucia
Pointe Seraphine, Castries, St Lucia
BHP Billiton (Trinidad) Holdings Ltd
Singapore
10 Marina Boulevard, #07-01 Marina Bay Financial Centre Tower 2,
018983, Singapore
BHP Billiton Freight Singapore Pte Limited
BHP Billiton Marketing Asia Pte Ltd
BHP Billiton SSM Indonesia Pte Ltd
8 Marina View #09-05, Asia Square Tower 1, 018960, Singapore
Westminer Insurance Pte Ltd (l)
Nova South, 160 Victoria Street, London, England, SW1E 5LB,
United Kingdom
BHP Aluminium Limited
BHP Billiton (UK) DDS Limited (s)
BHP Billiton (UK) Limited
BHP Billiton Finance Plc (t)
BHP Billiton Group Limited (t)
BHP Billiton Holdings Limited
BHP Billiton International Services Limited
BHP Billiton Investment Holdings Limited (s)
BHP Billiton Marketing UK Limited (g)
BHP Billiton Petroleum (Bimshire) Limited
BHP Billiton Petroleum (South Africa 3B/4B) Limited (f)
BHP Billiton Petroleum (Trinidad Block 23B) Limited (f)
BHP Billiton Petroleum (Trinidad Block 7) Limited
BHP Billiton Petroleum Great Britain Limited
BHP Billiton Petroleum Limited
BHP Billiton Sustainable Communities
BHP BK Limited
BHP Finance Limited
BHP Group Holdings Limited
BHP Holdings Limited
BHP International Services Limited
BHP Marketing UK Limited
BHP Minerals Europe Limited
BHP Petroleum (Brazil) Limited
BHP Petroleum (Carlisle Bay) Limited
BHP Petroleum (Mexico) Limited
BHP Petroleum (Trinidad Block 14) Limited
BHP Petroleum (Trinidad Block 23A) Limited (f)
BHP Petroleum (Trinidad Block 28) Limited (f)
BHP Petroleum (Trinidad Block 29) Limited (f)
BHP Petroleum (Trinidad Block 3) Limited
BHP Petroleum (Trinidad Block 5) Limited (f)
BHP Petroleum (Trinidad Block 6) Limited (f)
234 BHP Annual Report 2019
13 Related undertakings of the Group continued
United States of America
Subsidiaries where effective interest is less than 100 per cent (b)
1209 Orange Street, Wilmington, DE, 19801, United States of America
Country of incorporation
Australia
BHP Billiton Boliviana de Petróleo Inc.
BHP Billiton Marketing Inc.
BHP Billiton Petroleum (Americas) Inc.
BHP Billiton Petroleum (Deepwater) Inc.
BHP Billiton Petroleum (GOM) Inc.
BHP Billiton Petroleum (North America) Inc.
BHP Billiton Petroleum Holdings (USA) Inc. (g) (h)
BHP Billiton Petroleum Holdings LLC
BHP Copper Inc.
BHP Escondida Inc.
BHP Petroleum (Arkansas Holdings) LLC
BHP Petroleum (Foreign Exploration Holdings) LLC
BHP Petroleum (Mexico Holdings) LLC
BHPB Resolution Holdings LLC
Broken Hill Proprietary (USA) Inc.
Hamilton Brothers Petroleum Corporation
Hamilton Oil Company Inc.
IPS USA Inc.
Rio Algom Mining LLC
1500 Post Oak Boulevard, Houston, TX, 77056-3030,
United States of America
BHP Billiton Foundation
Suite 301, 1136 Union Mall, Honolulu, HI, 96813,
United States of America
BHP Hawaii Inc.
Suite 500, 6100 Neil Road, Reno, NV, 89511, United States of America
Carson Hill Gold Mining Corporation
Suite B, 1675 South State Street, Dover, DE, 19901,
United States of America
141 Union Company
BHP Billiton New Mexico Coal Inc.
BHP Capital Inc.
BHP Chile Inc.
BHP Finance (International) Inc.
BHP Foreign Holdings Inc.
BHP Holdings (International) Inc.
BHP Holdings (Resources) Inc.
BHP Holdings (USA) Inc. (m) (s)
BHP Holdings International (Investments) Inc.
BHP International Finance Corp
BHP Mineral Resources Inc
BHP Minerals Exploration Inc.
BHP Minerals International Exploration Inc.
BHP Minerals International LLC
BHP Minerals Service Company
BHP Peru Holdings Inc.
BHP Resources Inc.
WMC (Argentina) Inc.
WMC Corporate Services Inc.
202 South Minnesota Street, Carson City, NV, 89703,
United States of America
BHP Queensland Coal Limited (s) (w)
Registered office address
125 St Georges Terrace, Perth, WA 6000, Australia
Company Name
BHP Iron Ore (Jimblebar) Pty Ltd (85%) (n) (r)
Level 14, 480 Queen Street, Brisbane, QLD 4000, Australia
BHP Billiton Mitsui Coal Pty Ltd (80%) (j)
Brazil
Rua Paraíba, 1122, 5° andar, Belo Horizonte, MG, 30130-918, Brazil
Consórcio Santos Luz de Imóveis Ltda (90%)
Chile
Cerro El Plomo 6000, Piso 15, Las Condes, Santiago, Chile
Minera Escondida Ltda (57.5%) (i)
Philippines
Arthaland Century Pacific Tower, 27th Floor – 5th Ave. cor. 30th Street
and 4th Ave. cor. 30th Street, Bonifacio Global City, Taguig, Philippines
BHP Shared Services Philippines Inc. (99.99%)
Pearlbank Centre, 20th Floor – 146 Valero Street, Salcedo Village,
Makati City, 1227, Philippines
BHP Billiton (Philippines) Inc. (99.99%)
QNI Philippines Inc. (99.99%)
Joint operations (c)
Country of incorporation
Algeria
Registered office address
125 St Georges Terrace, Perth, WA 6000, Australia
Company Name
ROD Integrated Development (29.50%) (q)
Australia
125 St Georges Terrace, Perth, WA 6000, Australia
Bass Strait (50%) (q)
Macedon (71.43%) (q)
Minerva (90%) (q)
Mt Goldsworthy (85%) (q)
Mt Newman (85%) (q)
North West Shelf (12.5–16.67%) (q)
Posmac (65%) (q)
Pyrenees (40–71.43%) (q)
Stybarrow (50%) (q)
Yandi (85%) (q)
ESSO House, 12 Riverside Quay, Southbank, VIC 3006, Australia
Southern Natural Gas Development Pty Limited (50%)
Level 14, 480 Queen Street, Brisbane, QLD 4000, Australia
BM Alliance Coal Marketing Pty Limited (50%)
BM Alliance Coal Operations Pty Limited (50%)
Central Queensland Coal Associates (50%) (q)
Gregory (50%) (q)
South Blackwater Coal Pty Limited (50%)
BHP Annual Report 2019 235
i
S
t
r
a
t
e
g
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
a
t
B
H
P
R
e
m
u
n
e
r
a
t
i
o
n
R
e
p
o
r
t
D
i
r
e
c
t
o
r
s
’
R
e
p
o
r
t
5
i
F
n
a
n
c
a
i
l
S
t
a
t
e
m
e
n
t
s
A
d
d
i
t
i
o
n
a
l
i
n
f
o
r
m
a
t
i
o
n
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
13 Related undertakings of the Group continued
Australia continued
Joint ventures and associates (d)
Level 16, Alluvion Building, 58 Mounts Bay Road, Perth, WA 6000,
Australia
Country of incorporation
Anguilla
North West Shelf Gas Pty Limited (16.67%)
North West Shelf Liaison Company Pty Ltd (16.67%) (h)
North West Shelf Lifting Coordinator Pty Ltd (16.67%) (g)
North West Shelf Shipping Service Company Pty Ltd (16.67%)
Registered office address
Harlaw Chambers, The Valley, Anguilla
Company Name
Carbones del Cerrejón Limited (33.33%)
Canada
Australia
Suite 1500, 1874 Scarth Street, Regina, SK, S4P 4E9, Canada
30 Raven St, Kooragang, NSW 2304, Australia
BHP Billiton SaskPower Carbon Capture and Storage (CCS) Knowledge
Centre Inc. (50%) (k)
NCIG Holdings Pty Ltd (35.47%)
Japan
1-8-3 Marunouchi, Chiyoda-ku, Tokyo, Japan
BMA Japan KK (50%)
Liberia
80 Broad Street, Monrovia, Liberia
Blue Ocean Bulk Shipping Limited (50%)
Mexico
Av. Ejercito Nacional #769, Torre B, Piso 3, Colonia Granada, Delegación
Miguel Hidalgo, Ciudad de Mexico, 11520, Mexico
Trion (60%) (q)
Singapore
Level 20, 500 Collins Street, Melbourne, VIC 3000, Australia
Rightship Pty Limited (33.33%)
Brazil
Rua Paraĩba, 1122, 9o andar, Belo Horizonte, MG, Brazil
Samarco Mineração S.A. (50%)
Colombia
Calle 100, No. 19-54, Bogota, Colombia
Cerrejón Zona Norte S.A. (33.33%)
Ireland
Furnbally Square, New Street, DUB 8, Ireland
CMC-Coal Marketing DAC (33.33%)
10 Marina Boulevard, #07-01 Marina Bay Financial Centre Tower 2,
018983, Singapore
Netherlands
BM Alliance Marketing Pte Ltd (50%)
South Africa
Herikerbergweg 238, AMS, 1101 CM, The Netherlands
Global HubCo B.V. (33.33%) (o)
Roger Dyason Road, Pretoria West, 0183, South Africa
Peru
Thakweneng Mineral Resources Pty Ltd (50%)
Trinidad and Tobago
Av El Derby N° 055 Torre 1 Of 801, Santiago del Surco, Lima, Peru
Compañía Minera Antamina S.A. (33.75%)
48-50 Sackville Street, Port of Spain, Trinidad, Trinidad and Tobago
United Kingdom
Greater Angostura (45%) (q)
United States of America
201 Bishopsgate, London, EC2M 3AB, United Kingdom
SolGold Plc (11.2%)
1209 Orange Street, Wilmington, DE, 19801, United States of America
United States of America
1209 Orange Street, Wilmington, DE, 19801, United States of America
Caesar Oil Pipeline Company LLC (25%) (k)
Cleopatra Gas Gathering Company LLC (22%) (k)
2711 Centerville Road, Suite 400, Wilmington DE 19808, United States
Resolution Copper Mining LLC (45%)
9807 Katy Freeway, Suite 1200, Houston, TX, 77024,
United States of America
Marine Well Containment Company LLC (10%) (k)
Gulf of Mexico (23.9–44%) (q)
236 BHP Annual Report 2019
13 Related undertakings of the Group continued
Minority Investments (e)
Country of incorporation
Australia
Registered office address
125 St Georges Terrace, Perth, WA 6000, Australia
Company Name
Pilbara Pastoral Company Pty Limited (25%)
727 Collins Street, Melbourne, VIC 3008, Australia
Commonwealth Steamship Insurance Company Pty Limited (29.72%)
Interstate Steamship Insurance Company Pty Ltd (24.91%)
Brazil
Rodovia do Sol, S/N, Ponta Ubu, Anchieta, ES, 29230-000, Brazil
Ponta Ubu Agropecuária Ltda. (49%)
Jersey
13 Castle Street, St Helier, Jersey Channel Islands, JE4 5UT, Jersey
Euronimba Limited (45.5%)
(a) Wholly owned 100 per cent subsidiary consolidated by the Group.
(b) Subsidiaries where the effective interest is less than 100 per cent but controlled by the Group.
(c) Interests in joint operations. The Consolidated Financial Statements include the Group’s share of the assets in joint operations, together with its share of the liabilities,
revenues and expenses arising jointly or otherwise from those operations and its revenue derived from the sale of its share of output from the joint operation.
(d) Investments accounted for using the equity method.
(e) Minority investments which represent a non-controlling interest held by the Group.
(f) Ownership held in ordinary and preference shares.
(g) Ownership held in class A shares.
(h) Ownership held in class B shares.
(i) Capital injection, no shares.
(j) Ownership held in redeemable preference, class A and class B shares.
(k) Ownership in Membership interest.
(l) Ownership in ordinary redeemable preference shares.
(m) Ownership held in class A common shares.
(n) Ownership held in preference A and class B shares.
(o) Ownership in preference B shares.
(p) Ownership in ordinary and special share classes L and M.
(q) Joint operation held by a subsidiary of the Group.
(r) The Group has an effective interest of 92.5 per cent in BHP Iron Ore (Jimblebar) Pty Ltd, however by virtue of the shareholder agreement with ITOCHU Iron Ore
i
S
t
r
a
t
e
g
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
a
t
B
H
P
R
e
m
u
n
e
r
a
t
i
o
n
R
e
p
o
r
t
D
i
r
e
c
t
o
r
s
’
R
e
p
o
r
t
Australia Pty Ltd and Mitsui & Co. Iron Ore Exploration & Mining Pty Ltd, the Group’s interest in the Jimblebar mining operation is 85 per cent which is consistent
with the other respective contractual arrangements at Western Australia Iron Ore.
(s) Directly held by BHP Group Limited.
(t) Directly held by BHP Group Plc.
(u) These companies are parties to the Limited Deed of Cross Guarantee, originally entered into on 6 June 2016, and members of the Closed Group, as at 30 June 2019.
(v) These companies are parties to the Limited Deed of Cross Guarantee and are relieved from the Corporations Act 2001 requirements for preparation, audit and
5
lodgement of financial reports and Directors’ reports.
(w) These companies were removed from the Limited Deed of Cross Guarantee based on the Revocation Deed executed on 20 December 2016.
(x) These companies were added into the Limited Deed of Cross Guarantee based on the Assumption Deed executed on 29 June 2017 and are members of the Closed
Group, as at 30 June 2017.
(y) These companies were added into the Limited Deed of Cross Guarantee based on the Assumption Deed executed on 26 June 2018 and are members of the Closed
Group, as at 30 June 2018.
(z) These companies were added into the Limited Deed of Cross Guarantee based on the Assumption Deed executed on 29 June 2019 and are members of the Closed
Group, as at 30 June 2019
BHP Annual Report 2019 237
i
F
n
a
n
c
a
i
l
S
t
a
t
e
m
e
n
t
s
A
d
d
i
t
i
o
n
a
l
i
n
f
o
r
m
a
t
i
o
n
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
5.3 Directors’ declaration
In accordance with a resolution of the Directors of BHP Group Limited
and BHP Group Plc, the Directors declare that:
(a) in the Directors’ opinion and to the best of their knowledge the
Financial Statements and notes, set out in sections 5.1 and 5.2,
are in accordance with the UK Companies Act 2006 and the
Australian Corporations Act 2001, including:
(i)
complying with the applicable Accounting Standards;
(ii) giving a true and fair view of the assets, liabilities, financial
position and profit or loss of each of BHP Group Limited,
BHP Group Plc, the Group and the undertakings included
in the consolidation taken as a whole as at 30 June 2019
and of their performance for the year ended 30 June 2019;
(b) the Financial Statements also comply with International Financial
Reporting Standards, as disclosed in section 5.1;
(c) to the best of the Directors’ knowledge, the management report
(comprising the Strategic Report and Directors’ Report) includes
a fair review of the development and performance of the business
and the financial position of the Group and the undertakings
included in the consolidation taken as a whole, together with
a description of the principal risks and uncertainties that the
Group faces;
(d) in the Directors’ opinion there are reasonable grounds to believe
that each of BHP Group Limited, BHP Group Plc and the Group
will be able to pay its debts as and when they become due
and payable;
(e) as at the date of this declaration, there are reasonable grounds
to believe that BHP Group Limited and each of the Closed Group
entities identified in note 13 in section 5.2 will be able to meet
any liabilities to which they are or may become, subject because
of the Deed of Cross Guarantee between BHP Group Limited
and those group entities pursuant to ASIC Corporations
(Wholly-owned Companies) Instrument 2016/785; and
the Directors have been given the declarations required by
Section 295A of the Australian Corporations Act 2001 from
the Chief Executive Officer and Chief Financial Officer for
the financial year ended 30 June 2019.
(f)
Signed in accordance with a resolution of the Board of Directors.
Ken MacKenzie
Chairman
Andrew Mackenzie
Chief Executive Officer
Dated this 5th day of September 2019
238 BHP Annual Report 2019
5.4 Statement of Directors’ responsibilities in respect of the Annual Report
and the Financial Statements
The Directors are responsible for preparing the Annual Report and the
Group and Parent company Financial Statements in accordance with
applicable law and regulations. References to the ‘Group and Parent
company Financial Statements’ are made in relation to the Group and
individual Parent company Financial Statements of BHP Group Plc.
The Directors are responsible for keeping proper accounting records
that disclose with reasonable accuracy at any time the financial
position of the parent company and enable them to ensure that
its Financial Statements comply with the UK Companies Act 2006.
They are responsible for such internal control as they determine is
necessary to enable the preparation of Financial Statements that are
free from material misstatement, whether due to fraud or error, and
have general responsibility for taking such steps as are reasonably
open to them to safeguard the assets of the Group and to prevent
and detect fraud and other irregularities.
Under applicable law and regulations, the Directors are also
responsible for preparing a Strategic Report, Directors’ Report,
Directors’ Remuneration Report and Corporate Governance
Statement that complies with that law and those regulations.
The Directors are responsible for the maintenance and integrity of the
corporate and financial information included on the Group’s website.
Legislation in the United Kingdom governing the preparation and
dissemination of Financial Statements may differ from legislation
in other jurisdictions.
UK company law requires the Directors to prepare Group and Parent
company Financial Statements for each financial year. The Directors
are required to prepare the Group Financial Statements in
accordance with IFRS as adopted by the EU and applicable law and
have elected to prepare the Parent company Financial Statements
in accordance with UK Accounting Standards and applicable law
(UK Generally Accepted Accounting Practice).
The Group Financial Statements must, in accordance with IFRS as
adopted by the EU and applicable law, present fairly the financial
position and performance of the Group; references in the UK
Companies Act 2006 to such Financial Statements giving a true
and fair view are references to their achieving a fair presentation.
The Parent company Financial Statements must, in accordance
with UK Generally Accepted Accounting Practice, give a true and
fair view of the state of affairs of the parent company at the end
of the financial year and of the profit or loss of the parent company
for the financial year.
In preparing each of the Group and Parent company Financial
Statements, the Directors are required to:
• select suitable accounting policies and then apply them consistently;
• make judgements and estimates that are reasonable and prudent;
• for the Group Financial Statements, state whether they have been
prepared in accordance with IFRS as adopted by the EU;
• for the Parent company Financial Statements, state whether
applicable UK Accounting Standards have been followed, subject
to any material departures disclosed and explained in the Parent
company Financial Statements;
• assess the Group and parent company’s ability to continue
as a going concern, disclosing, as applicable, related matters;
• use the going concern basis of accounting unless they either
intend to liquidate the Group or the parent company or to cease
operations, or have no realistic alternative but to do so.
i
S
t
r
a
t
e
g
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
a
t
B
H
P
R
e
m
u
n
e
r
a
t
i
o
n
R
e
p
o
r
t
D
i
r
e
c
t
o
r
s
’
R
e
p
o
r
t
5
i
F
n
a
n
c
a
i
l
S
t
a
t
e
m
e
n
t
s
A
d
d
i
t
i
o
n
a
l
i
n
f
o
r
m
a
t
i
o
n
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
BHP Annual Report 2019 239
5.5 Lead Auditor’s Independence Declaration under
Section 307C of the Australian Corporations Act 2001
To the Directors of BHP Group Limited:
I declare that, to the best of my knowledge and belief, in relation
to the audit of BHP Group Limited for the financial year ended
30 June 2019 there have been:
(i)
no contraventions of the auditor independence requirements
as set out in the Australian Corporations Act 2001 in relation
to the audit; and
(ii) no contraventions of any applicable code of professional conduct
in relation to the audit.
This declaration is in respect of BHP Group Limited and the entities it
controlled during the year.
KPMG
Anthony Young
Partner
Melbourne
5 September 2019
KPMG, an Australian partnership and KPMG LLP, a UK limited liability partnership
are member firms of the KPMG network of independent member firms affiliated
with KPMG International Cooperative (‘KPMG International’), a Swiss entity.
KPMG Australia’s liability limited by a scheme approved under Professional
Standards Legislation.
240 BHP Annual Report 2019
5.6 Independent Auditors’ reports
Independent auditors’ reports of KPMG LLP (‘KPMG UK’)
to the members of BHP Group Plc and of KPMG (‘KPMG
Australia’) to the members of BHP Group Limited
1. Opinions
For the purpose of these reports, the terms ‘we’ and ‘our’ denote
KPMG UK in relation to UK responsibilities and reporting obligations
to the members of BHP Group Plc, and KPMG Australia in relation to
Australian responsibilities and reporting obligations to the members
of BHP Group Limited. BHP (‘the Group’) consists of BHP Group Plc,
BHP Group Limited and the entities they controlled during the
financial year ended 30 June 2019.
We have audited the Consolidated Financial Statements which
comprise the:
• Consolidated Balance Sheet as at 30 June 2019;
• Consolidated Income Statement, Consolidated Statement of
Comprehensive Income, Consolidated Statement of Changes in
Equity and Consolidated Cash Flow Statement for the year then
ended; and
• Notes to the Financial Statements including a summary of
significant accounting policies.
In addition:
• KPMG UK has audited the BHP Group Plc company Financial
Statements for the year ended 30 June 2019, which comprise
the unconsolidated parent company Balance Sheet and related
notes; and
• KPMG Australia considers the Directors’ declaration to be part of
the Consolidated Financial Statements when forming its opinion
under the requirements of the Corporations Act 2001.
A. KPMG UK’s opinion on the Consolidated Financial Statements
and BHP Group Plc company Financial Statements (collectively the
‘Financial Statements’) is unmodified
In our opinion the:
• Financial Statements give a true and fair view of the state of the
Group’s and of BHP Group Plc’s affairs as at 30 June 2019 and
of the Group’s profit for the year then ended;
• Consolidated Financial Statements have been properly prepared
in accordance with International Financial Reporting Standards
(‘IFRSs’) as adopted by the European Union (‘EU’);
• BHP Group Plc company Financial Statements have been properly
prepared in accordance with UK accounting standards, including
FRS 101 Reduced Disclosure Framework; and
• Financial Statements have been prepared in accordance with the
requirements of the UK Companies Act 2006 and, as regards to the
Consolidated Financial Statements, Article 4 of the IAS Regulation.
B. KPMG UK’s additional opinion in relation to IFRSs as issued by the
International Accounting Standards Board (‘IASB’) is unmodified
As explained in section 5.1 ‘Basis of preparation’ to the Consolidated
Financial Statements, the Group, in addition to complying with its
legal obligation to apply IFRSs as adopted by the EU, has also applied
IFRSs as issued by the IASB. In our opinion the Consolidated Financial
Statements have been properly prepared in accordance with IFRSs as
issued by the IASB.
C. KPMG Australia’s opinion on the Consolidated Financial
Statements is unmodified
In our opinion the accompanying Consolidated Financial Statements,
are in accordance with the Australian Corporations Act 2001, including:
• Giving a true and fair view of the Group’s financial position as at
30 June 2019 and of its financial performance for the year ended
on that date; and
• Complying with Australian Accounting Standards and the
Corporations Regulations 2001.
2. Basis for opinions
We conducted our audits in accordance with Australian Auditing
Standards and International Standards on Auditing (UK) and
applicable law. Our responsibilities under these standards are further
described in the Auditors’ responsibilities for the audits of the
Financial Statements item of our report below. We believe that the
audit evidence we have obtained is sufficient and appropriate to
provide a basis for our opinions, and KPMG UK notes that its opinions
are consistent with its report to the Risk and Audit Committee.
We were first appointed as auditors by the Directors on 3 May 2002.
The period of total uninterrupted engagement is the 17 financial years
ended 30 June 2019. We have fulfilled our ethical responsibilities under,
and we remain independent of the Group in accordance with: the
Australian Corporations Act 2001; the relevant ethical requirements of
the Australian Accounting Professional and Ethical Standards Board’s
APES 110 Code of Ethics for Professional Accountants; and UK ethical
requirements, including the UK FRC Ethical Standard as applied
to listed public interest entities. No non-audit services prohibited
by the UK FRC Ethical Standard were provided.
i
S
t
r
a
t
e
g
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
a
t
B
H
P
R
e
m
u
n
e
r
a
t
i
o
n
R
e
p
o
r
t
D
i
r
e
c
t
o
r
s
’
R
e
p
o
r
t
5
i
F
n
a
n
c
a
i
l
S
t
a
t
e
m
e
n
t
s
A
d
d
i
t
i
o
n
a
l
i
n
f
o
r
m
a
t
i
o
n
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
BHP Annual Report 2019 241
3. Key audit matters: including our assessment of risks of material misstatement
Key audit matters are those matters that, in our professional judgement, were of most significance in the audits of the Financial Statements
for the current year and include the most significant assessed risks of material misstatement (whether or not due to fraud) identified by us,
including those which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing the efforts
of the engagement team. We summarise below the key audit matters, in decreasing order of audit significance, in arriving at our audit opinion
above, together with our key audit procedures to address those matters and, as required for EU public interest entities, our results from those
procedures. These matters were addressed, and our results are based on procedures undertaken in the context of, and solely for the purpose
of, our audits of the Financial Statements as a whole, and in forming our opinions thereon, and consequently are incidental to those opinions,
and we do not provide a separate opinion on these matters.
Key Audit Matter
How the matter was addressed in our audit
Samarco dam failure (Risk v 2018:
Losses attributable to the dam failure (pre-tax and finance costs): US$1.0 billion (2018: US$0.6 billion)
)
Provision: US$1.9 billion (2018: US$1.3 billion)
Contingent liability disclosure
There are a number of complex accounting judgements
and disclosures made by the Group resulting from the
Samarco dam failure, including:
• Determining the legal status of claims made against
Samarco, the Group and BHP Billiton Brasil Ltda and
the resulting accounting treatment;
• Determining the extent of BHP Billiton Brasil Ltda’s
legal obligation to provide funding to Samarco and
the quantification of that obligation in line with the
requirements of the Governance Agreement,
Framework Agreement and Preliminary Agreement; and
• Disclosure of contingent liabilities associated with the
various claims and other circumstances that represent
exposures to Samarco and the Group and that cannot
be reliably estimated.
We identified the evaluation of the accounting treatment
of the Samarco dam failure as a key audit matter due
to the high degree of estimation uncertainty and the
significant size of the potential claims, which required
especially challenging auditor judgement in:
• Assessing the status, the Group’s accounting treatment,
and disclosure of potential and existing legal claims; and
• Assessing the key assumptions the Group used
to determine the provision recorded by BHP Billiton
Brasil Ltda in relation to its potential funding
obligations, including:
– Cost estimates to remediate the Samarco dam failure;
– Nature and extent of remediation activities; and
– Timing of cash flows.
The effect of these matters is that, as part of our risk
assessment, we determined that provisions and
contingencies related to the Samarco dam failure have
a high degree of estimation uncertainty with a particularly
wide potential range of reasonable outcomes.
The primary procedures we performed to address this key audit matter
included the following:
• Testing certain internal controls over the Group’s accounting and disclosure
process relating to the Samarco dam failure. This included controls over the
Group’s review of legal claims and assessment of the accounting treatment
and controls over the determination of key assumptions such as the cost
estimates to remediate the Samarco dam failure, nature and extent of
remediation activities and timing of cash flows;
• Assessing the existence of legal and/or constructive obligations under
the Samarco shareholders’ agreement, Brazilian law, and the Group’s
public statements;
• Assessing the key assumptions the Group used to determine the provision
recorded by BHP Billiton Brasil Ltda in relation to its potential funding
obligations by:
– Comparing the nature, timing and extent of remediation activities
described in the Framework Agreement with those included within
the cash flow forecasts;
– Testing a sample of cost estimates included in the provision
to underlying documentation, such as the Group’s external
engineering reports;
– Evaluating the scope, competency and objectivity of the Group’s experts
involved in the determination of the cost estimates by considering the
work they were engaged to perform, their professional qualifications,
and remuneration structure; and
– Evaluating the historical accuracy of prior year’s forecasted cash flows
by comparing to current year’s actual cash flows; and
• Assessing the status of claims and disclosures relating to contingent
liabilities through inspection of the Group’s internal legal documentation,
inquiry of internal and external legal personnel, Group finance and
members of the executive leadership team, and inspection of
documentation provided by external legal counsel.
Results: We considered the level of provisioning and related disclosures
to be acceptable.
Refer to note 4 ‘Significant events – Samarco dam failure’ and section 2.13.1 Risk and Audit Committee Report (Significant issues –
Samarco dam failure).
242 BHP Annual Report 2019
3. Key audit matters: including our assessment of risks of material misstatement continued
Key Audit Matter
How the matter was addressed in our audit
Impairment of non-current assets (Risk v 2018:
Property, plant and equipment: US$68.0 billion (2018: US$67.2 billion)
)
Impairment of property, plant and equipment (pre-tax): US$0.3 billion (2018: US$0.3 billion)
Fixed assets – Investments in subsidiaries of BHP Group Plc: US$3.1 billion (2018: US$3.1 billion)
The Group is required to perform impairment tests for all
assets, including BHP Group Plc’s investment in subsidiaries,
where there is an indication of impairment. As part of
their assessment of indicators of impairment, the Group
determines an estimate of future cash flows for each cash
generating unit (‘CGU’), considering different internal and
external factors.
The primary procedures we performed to address this key audit matter
included the following:
• Testing certain internal controls over the Group’s impairment assessment
process including controls over the Group’s assessment of indicators of
impairment and controls over the determination of key inputs such as
future commodity prices, reserves and production volumes, discount rates,
and future capital and operating expenditures;
The Group determined that there was an indicator of
impairment for the Jansen CGU and therefore estimated its
recoverable amount and compared it to its carrying value,
and concluded that no impairment is required.
The determination of the future cash flows in the process
for identifying impairment indicators and the Jansen CGU
recoverable amount use forward looking estimates which
are inherently difficult to determine with precision. There
is also a level of judgement applied by the Group in
determining the key inputs into these forward looking
estimates, including:
• Future commodity prices;
• Reserves;
• Future production volumes;
• Discount rates; and
• Future capital and operating expenditures.
We identified the assessment of possible indicators of
impairment and the evaluation of the recoverable amount
of the Jansen CGU as a key audit matter. This was due to
the complex auditor judgement and level of specialised
skills needed to evaluate the key inputs noted above.
The effect of these matters is that, as part of our risk
assessment, we determined that the future cash
flows and other key inputs have a high degree of
estimation uncertainty with a wide potential range
of reasonable outcomes.
• Evaluating key inputs used in the Group’s assessment for indicators of
impairment and determination of the recoverable amount of the Jansen
CGU by:
– Evaluating future commodity prices by comparing to published
commodity price reports and research reports from external parties;
– Comparing future capital and operating expenditures and future reserves
to the latest approved mine plans and long term budgets. We assessed
the Group’s ability to budget accurately by comparing prior years’
estimated cashflows to actual results;
– Evaluating the scope, competency, and objectivity of the Group’s experts
who produced the reserve estimates used in the valuations by
considering the work that they were engaged to perform, their
professional qualifications, experience, use of industry accepted
methodology, remuneration structure, and reporting lines; and
– Involving our valuation specialists with specialised skill and knowledge,
who assisted in comparing key inputs such as discount rates to external
market data; and
– Performing sensitivity analysis on the key inputs including: future
commodity prices, future production volumes, future capital and
operating expenditures, and discount rates.
• Additional procedures were performed over the evaluation
of the recoverable amount of the Jansen CGU including:
– Challenging estimated future capital expenditures by:
• Comparing the capital expenditures to a report prepared
by the Group’s external expert with specialised skills; and
• Testing a sample of future capital expenditures to current
third-party quotations.
• Evaluating the scope, competency, and objectivity of the Group’s expert
who assisted in determining the capital expenditure estimate by
considering the work that they were engaged to perform, their professional
qualifications, experience, and remuneration structure.
Procedures performed over the investment in subsidiaries of BHP Group Plc
• Assessing the impact of changes in the estimated future cash flows on the
carrying value of investments in the BHP Group’s Plc parent company
balance sheet.
Results: We considered the carrying amount of property, plant and
equipment and investments to be acceptable.
Refer to note 11 ‘Property, plant and equipment’ (Recognition and measurement), section 5.2 ‘BHP Group Plc’ and section 2.13.1 Risk
and Audit Committee Report (Significant issues – Carrying value of long-term assets).
BHP Annual Report 2019 243
i
S
t
r
a
t
e
g
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
a
t
B
H
P
R
e
m
u
n
e
r
a
t
i
o
n
R
e
p
o
r
t
D
i
r
e
c
t
o
r
s
’
R
e
p
o
r
t
5
i
F
n
a
n
c
a
i
l
S
t
a
t
e
m
e
n
t
s
A
d
d
i
t
i
o
n
a
l
i
n
f
o
r
m
a
t
i
o
n
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
Key Audit Matter
How the matter was addressed in our audit
Closure and rehabilitation provisions (Risk v 2018:
Closure and rehabilitation provisions: US$7.0 billion (2018: US$6.3 billion)
)
The Group incurs obligations to close, restore and
rehabilitate its sites and associated facilities. The majority
of the Group’s assets are long-life, which increases the
estimation uncertainty relating to future cash flows.
The size of the closure and rehabilitation provisions
are significant relative to the Group’s financial position.
Closure and rehabilitation activities are governed
by a combination of legislative requirements and the
Group’s policies. Estimates over the life of mine and
reserves are made by the Group in determining its
rehabilitation provision.
We identified the evaluation of the closure and rehabilitation
provisions as a key audit matter due to the significant
size of the provision and the complex auditor judgement
and specialised skills required to evaluate:
• The life of mine including the reserves and
production profile;
• The interpretation of legislative requirements;
• The costs associated with future rehabilitation;
• Discount rates; and
• The timing of future rehabilitation costs.
The effect of these matters is that, as part of our risk
assessment, we determined that closure and rehabilitation
provisions have a high degree of estimation uncertainty
with a wide potential range of reasonable outcomes.
The primary procedures we performed to address this key audit matter
included the following:
• Testing certain internal controls over the Group’s process to estimate
closure and rehabilitation provisions including controls over the
determination of key inputs such as life of mine reserves and production
profile, discount rates, future rehabilitation costs, and timing of future
cash flows.
• Involving our environmental specialists with specialised skills and
knowledge, who assisted in assessing the estimates of life of mine
and reserves used by the Group. We evaluated a sample of closure
and rehabilitation provisions based on the known reserves and the
expected production profile of the reserves;
• Assessing the nature and extent of the work performed by the Group’s
mine closure engineers in identifying future rehabilitation activities against
our independent interpretation of the legislative requirements and the
Group’s policies and assessing the timing and likely cost of such activities.
We evaluated the methodology used by the mine closure engineers
against industry practice and our understanding of the business;
• Evaluating the scope, competency and objectivity of the mine closure
engineers based on the work that they were engaged to perform, their
professional qualifications, experience, remuneration structure, and
reporting lines; and
• Evaluating the discount rates applied to calculate the net present value
of the provision. The assumptions used by the Group to determine the
discount rates were compared against market available data including
risk free rates.
Results: We considered the level of closure and rehabilitation provisioning
to be acceptable.
Refer to note 14 ‘Closure and rehabilitation provisions’ (Recognition and measurement) and section 2.13.1 Risk and Audit Committee Report
(Significant issues – Closure and rehabilitation provisions).
Key Audit Matter
How the matter was addressed in our audit
Taxation (Risk v 2018: )
Income tax expense (including royalties): US$5.5 billion (2018: US$7.0 billion)
Current tax payable: US$1.5 billion (2018: US$1.8 billion)
Non-current deferred tax assets US$3.8 billion (2018: US$4.0 billion) and non-current deferred tax liabilities: $US3.2 billion
(2018: US$3.5 billion)
Contingent liability disclosure
Taxation risk is considered less significant in 2019 due to the settlement of some of the uncertain tax positions during the year.
The Group has operations in multiple countries, each
with its own taxation regime. The nature of the Group’s
activities triggers various taxation obligations including
corporation tax, royalties, other resource and production
based taxes, and employment related taxes.
We identified the assessment of the Group’s uncertain
tax matters as a key audit matter because complex
auditor judgement and specialised skills were required in
evaluating the Group’s interpretation of tax law in multiple
countries, and its estimate of the associated provisions,
tax charges and contingent liability disclosures across the
various tax obligations.
The effect of these matters is that, as part of our risk
assessment, we determined that the uncertain tax matters
have a high degree of estimation uncertainty with a wide
potential range of reasonable outcomes.
The primary procedures we performed to address this key audit matter
included the following:
• Testing certain internal controls over the Group’s uncertain tax position
process, including controls over the Group’s assessment of tax law
and the process to estimate the associated provisions and contingent
liability disclosures;
• Involving our tax specialists with specialised skills and knowledge,
who assisted in evaluating the Group’s tax obligations by:
– Inquiring with the Group’s Tax team and inspecting internally and
externally prepared documentation to evaluate current disputes
and uncertain tax positions; and
– Evaluating the Group’s conclusions regarding the status, possible outcomes
and associated exposures, and the related accounting treatment.
• Inspecting settlement documents with applicable taxation authorities.
We compared the total amount per the settlement to the cash paid
and the release of the provision; and
• Assessing the Group’s disclosures in respect of tax and the associated
contingent liabilities disclosures.
Results: We considered the level of tax provisioning and related disclosures
to be acceptable.
Refer to note 6 ‘Income tax expense’ (Recognition and measurement) and section 2.13.1 Risk and Audit Committee Report
(Significant issues – Tax and royalty liabilities).
Valuation, classification and presentation of Onshore US assets is not a KAM in 2019 given that the sale of the Onshore US business was
completed during the year.
244 BHP Annual Report 2019
• The work on 9 of the 10 components (2018: 9 of the 10
components) was performed by component auditors and the rest,
including the audit of the parent company, was performed by the
Group audit team.
• Audit instructions set out the significant audit areas (and include
the relevant risks detailed above), materiality thresholds which
ranged from US$124 million to US$244 million (2018: ranged
from US$120 million to US$220 million) and specific reporting
requirements. The Group audit team directed the work undertaken
by component auditors, through a combination of related
inter-office reporting, regular interaction on audit and accounting
matters, periodic site visits and review of specific audit work papers.
• The 10 reporting components cover 6 geographical locations being
Australia, Brazil, Canada, Chile, Singapore and the United States.
During the year the Group audit team performed visits to 5 of the
Group’s reporting components.
5. KPMG UK have nothing to report on going concern
The Directors have prepared the Financial Statements on the going
concern basis as they do not intend to liquidate the Group or BHP
Group Plc or to cease their operations, and as they have concluded
that the Group’s and BHP Group Plc’s financial position means that
this is realistic. They have also concluded that there are no material
uncertainties that could have cast significant doubt over their ability
to continue as a going concern for at least a year from the date of
approval of the Financial Statements (’the going concern period‘).
Our responsibility is to conclude on the appropriateness of the Directors’
conclusions and, had there been a material uncertainty related to going
concern, to make reference to that in this audit report. However, as we
cannot predict all future events or conditions and as subsequent events
may result in outcomes that are inconsistent with judgements that were
reasonable at the time they were made, the absence of reference to a
material uncertainty in this auditor’s report is not a guarantee that the
Group and BHP Group Plc will continue in operation.
In our evaluation of the Directors’ conclusions, we considered the
inherent risks to the Group’s and BHP Group Plc’s business model
including the impact of Brexit, and analysed how those risks might
affect the Group’s and BHP Group Plc’s financial resources or ability
to continue operations over the going concern period. We evaluated
those risks and concluded that they were not significant enough
to require us to perform additional procedures.
Based on this work, we are required to report to you if:
• we have anything material to add or draw attention to in relation
to the Directors’ statement in section 5.4 to the Financial
Statements on the use of the going concern basis of accounting
with no material uncertainties that may cast significant doubt over
the Group’s use of that basis for a period of at least twelve months
from the date of approval of the Financial Statements; or
• the related statement under the Listing Rules set out within
section 4.3 is materially inconsistent with our audit knowledge.
We have nothing to report in these respects, and we did not identify
going concern as a key audit matter.
4. Our application of materiality and an overview of the
scope of our audits
The materiality for the audit of the Consolidated Financial Statements
was set at US$650 million (2018: US$400 million). Materiality has
been determined with reference to a benchmark of the three year
average Group profit before taxation and exceptional items for
Continuing operations (i.e. normalised profit), of US$13,846 million,
which we consider to be one of the principal considerations for users
in assessing the financial performance of the Group.
Materiality for the Group Financial Statements
Average profit before
taxation and exceptional
items for continuing operations
US$13,846M (2018: US$10,537M)
Group Materiality
US$650M (2018: US$400M)
US$650M
Group Financial
Statements
materiality
(2018: US$400M)
US$244M
Range of materiality
at components
US$124M – US$244M
(2018: US$120M
to US$220M)
US$30M
Misstatements
reported to the
Risk and Audit
Committee
(2018: US$20M)
Average profit before taxation
and exceptional items for
continuing operations
Group materiality
The use of a normalised three year average profit measure is
consistent with the approach used last year, and this approach is
considered to be appropriate given the cyclical nature of the industry
and the volatility in commodity prices impacting current levels
of profitability. Materiality represents approximately five per cent of
the three year average Group profit before taxation and exceptional
items for Continuing operations (exceptional items is defined in note 3
to the Financial Statements), and one per cent of Group revenue
(2018: four per cent and one per cent respectively).
Materiality for BHP Group Plc parent company Financial Statements
as a whole was set at US$113 million (2018: US$146 million), determined
with reference to a benchmark of total assets, of which it represents
one per cent (2018: one per cent).
We agreed to report to the Risk and Audit Committee all corrected
and uncorrected misstatements we identified through our audit in
excess of US$30 million (2018: US$20 million). We report other audit
misstatements below that threshold that we believe warrant reporting
on qualitative grounds. For those items excluded from normalised
profit, component auditors performed procedures on items relating
to their components. The Group audit team performed procedures
on the remaining excluded items.
In order to achieve appropriate audit coverage of the risks described
above and of each individually significant component of the Group,
including each asset, segment and group function:
• Of the Group’s 10 (2018: 10) reporting components, we subjected 6
(2018: 6) to full scope audits for Group purposes and 4 (2018: 4)
to specified risk-focused audit procedures over closure and
rehabilitation (2 components (2018: 2)), property, plant and
equipment (3 components (2018: 3)), deferred tax assets
(1 component (2018: 1)), cash (1 component (2018: 1)), inventory
(1 component (2018: nil)), provisions and contingent liabilities
(1 component (2018: 1)). The latter were not individually financially
significant enough to require a full scope audit for Group
purposes, but did present specific individual risks that needed
to be addressed.
The components within the scope of our work accounted for the
following percentages of the Group’s measures1:
Group revenue %
Group profit before tax %
Group total assets %
8
8
1
1
99%
(2018: 99%)
91
91
5
5
3
2
97%
(2018: 98%)
93
92
15
9
1
1
99%
(2018: 99%)
90
84
(1) Presented as a percentage of the Group’s consolidated result at 30 June 2019.
Full scope audits 2019
Audits of account balances 2019
Full scope audits 2018
Audits of account balances 2018
Out of scope
BHP Annual Report 2019 245
i
S
t
r
a
t
e
g
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
a
t
B
H
P
R
e
m
u
n
e
r
a
t
i
o
n
R
e
p
o
r
t
D
i
r
e
c
t
o
r
s
’
R
e
p
o
r
t
5
i
F
n
a
n
c
a
i
l
S
t
a
t
e
m
e
n
t
s
A
d
d
i
t
i
o
n
a
l
i
n
f
o
r
m
a
t
i
o
n
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
10. Respective responsibilities continued
C. Irregularities – ability to detect
We identified areas of laws and regulations that could reasonably be
expected to have a material effect on the Financial Statements from
our sector experience, and through discussion with the Directors
and other management (as required by auditing standards), and from
inspection of the Group’s regulatory and legal correspondence and
discussed with Directors and other management the policies and
procedures regarding compliance with laws and regulations. We
communicated identified laws and regulations throughout our team
and remained alert to any indications of non-compliance throughout
the audit. This included communication from the Group audit team
to component audit teams of relevant laws and regulations identified
at Group level.
The potential effect on laws and regulations on the Financial
Statements varies considerably.
Firstly, the Group is subject to laws and regulations that directly affect
the Financial Statements including financial reporting (including
the Australian Corporations Act 2001 and UK Companies Act 2006),
distributable profits legislation and taxation legislation and we
assessed the extent of compliance with those laws and regulations
as part of our procedures on the related Financial Statement items.
Secondly, the Group is subject to many other laws and regulations
where the consequences of non-compliance could have a material
effect on amounts or disclosures in the Financial Statements, for
instance through the imposition of fines or litigation or the loss of the
Group’s license to operate. We identified the following areas as those
most likely to have such an effect: health and safety, anti-bribery,
environmental and certain aspects of company legislation recognising
the regulated nature of the Group’s mining activities and its legal
form. Auditing standards limit the required audit procedures to
identify non-compliance with these laws and regulations to enquiry
of the Directors and other management, and inspection of regulatory
and legal correspondence. Through these procedures we became
aware of actual or suspected non-compliance and considered the
effect as part of our procedures on the related Financial Statement
items. The identified actual or suspected non-compliance included
items that were not sufficiently significant to our audit to result in
our response being identified as a key audit matter. Further detail
in respect of the legal claims related to the Samarco dam failure are
set out in the key audit matter disclosures in section 3 of this report.
Owing to the inherent limitations of an audit, there is an unavoidable
risk that we may not have detected some material misstatements
in the Financial Statements, even though we have properly planned
and performed our audit in accordance with auditing standards.
For example, the further removed non-compliance with laws and
regulations (irregularities) is from the events and transactions
reflected in the Financial Statements, the less likely the inherently
limited procedures required by auditing standards would identify
it. In addition, as with any audit, there remained a higher risk of
non-detection of irregularities, as these may involve collusion,
forgery, intentional omissions, misrepresentations, or the override
of internal controls. We are not responsible for preventing non-
compliance and cannot be expected to detect non-compliance
with all laws and regulations.
11. The purpose of our audit work, to whom we owe
our responsibilities
KPMG UK’s report is made solely to BHP Group Plc’s members, as a
body, in accordance with Chapter 3 of Part 16 of the UK Companies
Act 2006. KPMG Australia’s report is made solely to BHP Group
Limited’s members, as a body, in accordance with the Australian
Corporations Act 2001. Our audit work has been undertaken so that
we might state to the members of each company those matters we
are required to state to them in an auditor’s report, and the further
matters we are required to state to them in accordance with the
terms agreed with each company, and for no other purpose.
Accordingly, each of KPMG UK and KPMG Australia makes the
following statement: to the fullest extent permitted by law, we
do not accept or assume responsibility to anyone other than the
company and the company’s members as a body, for our audit
work, for our report, or for the opinions we have formed.
Michiel Soeting (Senior Statutory Auditor)
For and on behalf of KPMG LLP, Statutory Auditor
Chartered Accountants
London
5 September 2019
KPMG
Anthony Young
Partner
Melbourne
5 September 2019
KPMG, an Australian partnership and KPMG LLP, a UK limited liability partnership
are member firms of the KPMG network of independent member firms affiliated
with KPMG International Cooperative (‘KPMG International’), a Swiss entity.
KPMG Australia’s liability limited by a scheme approved under Professional
Standards Legislation.
BHP Annual Report 2019 247
Strategic ReportGovernance at BHPRemuneration ReportDirectors’ ReportAdditional informationShareholder informationFinancial Statements5
5.7 Supplementary oil and gas information – unaudited
In accordance with the requirements of the Financial Accounting Standards Board (FASB) Accounting Standard Codification ‘Extractive
Activities-Oil and Gas’ (Topic 932) and SEC requirements set out in Subpart 1200 of Regulation S-K, the Group is presenting certain disclosures
about its oil and gas activities. These disclosures are presented below as supplementary oil and gas information, in addition to information
disclosed in section 1.13.1 ‘Petroleum’ and section 6.3.1 ‘Petroleum reserves’.
The information set out in this section is referred to as unaudited as it is not included in the scope of the audit opinion of the independent
auditor on the Financial Statements, refer to section 5.6 ‘Independent Auditors’ reports’.
On 28 September 2018, BHP completed the sale of 100 per cent of the issued share capital of BHP Billiton Petroleum (Arkansas) Inc. and
100 per cent of the membership interests in BHP Billiton Petroleum (Fayetteville) LLC, which held the Fayetteville assets. On 31 October 2018,
BHP completed the sale of 100 per cent of the issued share capital of Petrohawk Energy Corporation, the BHP subsidiary which held the Eagle
Ford (being Black Hawk and Hawkville), Haynesville and Permian assets. The financial and non-financial impact of the Onshore US assets is
included in the supplementary oil and gas information presented below. The financial and non-financial impact of these assets has been
footnoted beneath each applicable table. Refer to note 27 ‘Discontinued operations’ in Section 5.1 for further information.
Reserves and production
Proved oil and gas reserves and net crude oil and condensate, natural gas, LNG and NGL production information is included in section 6.2.2
‘Production – Petroleum’ and section 6.3.1 ‘Petroleum reserves’.
Capitalised costs relating to oil and gas production activities
The following table shows the aggregate capitalised costs relating to oil and gas exploration and production activities and related accumulated
depreciation, depletion, amortisation and valuation provisions.
Capitalised cost
2019
Unproved properties
Proved properties
Total costs
Less: Accumulated depreciation, depletion, amortisation and valuation provisions
Net capitalised costs
2018
Unproved properties
Proved properties
Total costs
Less: Accumulated depreciation, depletion, amortisation and valuation provisions
Net capitalised costs
2017
Unproved properties
Proved properties
Total costs
Less: Accumulated depreciation, depletion, amortisation and valuation provisions
Net capitalised costs
Australia
US$M
United
States (1)
US$M
Other (2)
US$M
Total
US$M
10
16,514
16,524
(10,867)
5,657
10
16,258
16,268
(9,984)
6,284
94
16,190
16,284
(9,085)
7,199
875
11,751
12,626
(8,339)
4,287
4,528
43,885
48,413
(33,437)
14,976
5,284
41,837
47,121
(30,969)
16,152
458
1,625
2,083
(1,302)
781
202
2,424
2,626
(2,065)
561
165
2,404
2,569
(1,984)
585
1,343
29,890
31,233
(20,508)
10,725
4,740
62,567
67,307
(45,486)
21,821
5,543
60,431
65,974
(42,038)
23,936
(1) Net capitalised costs includes Onshore US assets of US$ nil (2018: US$10,672 million; 2017: US$11,803 million).
(2) Other is primarily comprised of Algeria, Mexico, Trinidad and Tobago and the United Kingdom (divested 30 November 2018).
Costs incurred relating to oil and gas property acquisition, exploration and development activities
The following table shows costs incurred relating to oil and gas property acquisition, exploration and development activities (whether charged
to expense or capitalised). Amounts shown include interest capitalised.
2019
Acquisitions of proved property
Acquisitions of unproved property
Exploration (1)
Development
Total costs (2)
2018
Acquisitions of proved property
Acquisitions of unproved property
Exploration (1)
Development
Total costs (2)
2017
Acquisitions of proved property
Acquisitions of unproved property
Exploration (1)
Development
Total costs (2)
Australia
US$M
United
States (3)
US$M
Other (4)
US$M
−
−
44
132
176
−
−
25
195
220
−
−
32
360
392
−
5
190
792
987
−
9
418
1,548
1,975
−
12
471
1,034
1,517
−
−
492
54
546
−
−
291
34
325
−
62
235
18
315
Total
US$M
−
5
726
978
1,709
−
9
734
1,777
2,520
−
74
738
1,412
2,224
(1) Represents gross exploration expenditure, including capitalised exploration expenditure, geological and geophysical expenditure and development evaluation
costs charged to income as incurred.
(2) Total costs include US$1,275 million (2018: US$1,970 million; 2017: US$1,744 million) capitalised during the year.
(3) Total costs include Onshore US assets of US$331 million (2018: US$1,081 million; 2017: US$608 million).
(4) Other is primarily comprised of Algeria, Canada, Mexico and Trinidad and Tobago.
248 BHP Annual Report 2019
5.7 Supplementary oil and gas information – unaudited continued
Results of operations from oil and gas producing activities
The following information is similar to the disclosures in note 1 ‘Segment reporting’ in section 5.1, but differs in several respects as to the level
of detail and geographic information. Amounts shown in the following table exclude financial income, financial expenses, and general
corporate overheads. Further, the amounts shown below include Onshore US however the disclosures in note 1 ‘Segment reporting’
in Section 5.1 do not.
Income taxes were determined by applying the applicable statutory rates to pre-tax income with adjustments for permanent differences
and tax credits.
2019
Oil and gas revenue (1)
Production costs
Exploration expenses
Depreciation, depletion, amortisation and valuation provision (2)
Production taxes (3)
Accretion expense (4)
Income taxes
Royalty-related taxes (5)
Results of oil and gas producing activities (6)
2018
Oil and gas revenue (1)
Production costs
Exploration expenses
Depreciation, depletion, amortisation and valuation provision (2)
Production taxes (3)
Accretion expense (4)
Income taxes
Royalty-related taxes (5)
Results of oil and gas producing activities (6)
2017
Oil and gas revenue (1)
Production costs
Exploration expenses
Depreciation, depletion, amortisation and valuation provision (2)
Production taxes (3)
Accretion expense (4)
Income taxes
Royalty-related taxes (5)
Results of oil and gas producing activities (6)
Australia
US$M
United
States (7)
US$M
Other (8)
US$M
3,404
(752)
(44)
(917)
(198)
1,493
(80)
(530)
(164)
719
3,229
(701)
(25)
(1,045)
(171)
1,287
(81)
(418)
(103)
685
2,876
(533)
(32)
(814)
(158)
1,339
(56)
(361)
(104)
818
2,675
(568)
(162)
(621)
−
1,324
(34)
(193)
−
1,097
3,747
(1,312)
(270)
(2,842)
−
(677)
(46)
(723)
−
(1,446)
3,479
(1,515)
(242)
(2,592)
(4)
(874)
(32)
386
−
(520)
610
(118)
(229)
(103)
(25)
135
(13)
(267)
−
(145)
421
(121)
(254)
(81)
(1)
(36)
(14)
(124)
−
(174)
356
(200)
(206)
(91)
−
(141)
(14)
(142)
−
(297)
Total
US$M
6,689
(1,438)
(435)
(1,641)
(223)
2,952
(127)
(990)
(164)
1,671
7,397
(2,134)
(549)
(3,968)
(172)
574
(141)
(1,265)
(103)
(935)
6,711
(2,248)
(480)
(3,497)
(162)
324
(102)
(117)
(104)
1
(1) Includes sales to affiliated companies of US$75 million (2018: US$75 million; 2017: US$83 million).
(2) Includes valuation provision of US$21 million (2018: US$596 million; 2017: US$102 million).
(3) Includes royalties and excise duty.
(4) Represents the unwinding of the discount on the closure and rehabilitation provision.
(5) Includes petroleum resource rent tax and petroleum revenue tax where applicable.
(6) Amounts shown exclude financial income, financial expenses and general corporate overheads and, accordingly, do not represent all of the operations
attributable to the Petroleum segment presented in note 1 ‘Segment reporting’ in section 5.1.
(7) Results of oil and gas producing activities includes Onshore US assets of US$431 million (2018: US$(465) million; 2017: US$(564) million).
(8) Other is primarily comprised of Algeria, Canada, Mexico, Trinidad and Tobago and the United Kingdom (divested 30 November 2018).
BHP Annual Report 2019 249
i
S
t
r
a
t
e
g
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
a
t
B
H
P
R
e
m
u
n
e
r
a
t
i
o
n
R
e
p
o
r
t
D
i
r
e
c
t
o
r
s
’
R
e
p
o
r
t
5
i
F
n
a
n
c
a
i
l
S
t
a
t
e
m
e
n
t
s
A
d
d
i
t
i
o
n
a
l
i
n
f
o
r
m
a
t
i
o
n
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
5.7 Supplementary oil and gas information – unaudited continued
Standardised measure of discounted future net cash flows relating to proved oil and gas reserves (Standardised measure)
The following tables set out the standardised measure of discounted
future net cash flows, and changes therein, related to the Group’s
estimated proved reserves as presented in section 6.3.1 ‘Petroleum
reserves’, and should be read in conjunction with that disclosure.
Certain key assumptions prescribed under Topic 932 are arbitrary
in nature and may not prove to be accurate. The reserve estimates
on which the Standard measure is based are subject to revision
as further technical information becomes available or economic
conditions change.
The analysis is prepared in compliance with FASB Oil and Gas
Disclosure requirements, applying certain prescribed assumptions
under Topic 932 including the use of, unweighted average
first-day-of-the-month market prices for the previous 12-months,
year-end cost factors, currently enacted tax rates and an annual
discount factor of 10 per cent to year end quantities of net
proved reserves.
Standardised measure
2019
Future cash inflows
Future production costs
Future development costs
Future income taxes
Future net cash flows
Discount at 10 per cent per annum
Standardised measure
2018
Future cash inflows
Future production costs
Future development costs
Future income taxes
Future net cash flows
Discount at 10 per cent per annum
Standardised measure
2017
Future cash inflows
Future production costs
Future development costs
Future income taxes
Future net cash flows
Discount at 10 per cent per annum
Standardised measure
Discounted future net cash flows like those shown below are not
intended to represent estimates of fair value. An estimate of fair value
would also take into account, among other things, the expected
recovery of reserves in excess of proved reserves, anticipated future
changes in commodity prices, exchange rates, development and
production costs as well as alternative discount factors representing
the time value of money and adjustments for risk inherent in
producing oil and gas.
Australia
US$M
United
States (1)
US$M
Other (2)
US$M
Total
US$M
18,292
(4,710)
(3,860)
(2,551)
7,171
(1,926)
5,245
17,398
(5,345)
(3,842)
(1,919)
6,292
(1,713)
4,579
18,407
(6,663)
(3,714)
(1,508)
6,522
(2,104)
4,418
18,076
(4,917)
(4,516)
(1,657)
6,986
(3,396)
3,590
28,012
(11,182)
(6,554)
(1,236)
9,040
(3,783)
5,257
23,537
(11,176)
(6,451)
(18)
5,892
(2,426)
3,466
1,807
(459)
(226)
(711)
411
(94)
317
2,124
(501)
(189)
(901)
533
(129)
404
1,954
(534)
(208)
(746)
466
(108)
358
38,175
(10,086)
(8,602)
(4,919)
14,568
(5,416)
9,152
47,534
(17,028)
(10,585)
(4,056)
15,865
(5,625)
10,240
43,898
(18,373)
(10,373)
(2,272)
12,880
(4,638)
8,242
(1) Standardised measure includes Onshore US assets of US$ nil (2018: US$1,932 million; 2017: US$1,962 million).
(2) Other is primarily comprised of Algeria and Trinidad and Tobago.
250 BHP Annual Report 2019
5.7 Supplementary oil and gas information – unaudited continued
Changes in the Standardised measure are presented in the following table.
Changes in the Standardised measure
Standardised measure at the beginning of the year
Revisions:
Prices, net of production costs
Changes in future development costs
Revisions of reserves quantity estimates (1)
Accretion of discount
Changes in production timing and other
Sales of oil and gas, net of production costs
Acquisitions of reserves-in-place
Sales of reserves-in-place (2)
Previously estimated development costs incurred
Extensions, discoveries, and improved recoveries, net of future costs
Changes in future income taxes
Standardised measure at the end of the year (3)
2019
US$M
10,240
3,821
(228)
1,268
1,178
(618)
15,661
(5,029)
−
(1,489)
545
(33)
(503)
9,152
2018
US$M
8,242
5,540
(358)
(166)
1,016
946
15,220
(5,091)
−
(26)
1,068
502
(1,433)
10,240
2017
US$M
8,987
(96)
275
2,961
1,147
(1,611)
11,663
(4,301)
–
(15)
718
(401)
578
8,242
(1) Changes in reserves quantities are shown in the Petroleum reserves tables in section 6.3.1.
(2) Onshore US assets disposal.
(3) Standardised measure at the end of the year includes Onshore US assets of US$ nil (2018: US$1,932 million; 2017: US$1,962 million).
Accounting for suspended exploratory well costs
Refer to note 11 ‘Property, plant and equipment’ in section 5.1 for a discussion of the accounting policy applied to the cost of exploratory wells.
Suspended wells are also reviewed in this context.
The following table provides the changes to capitalised exploratory well costs that were pending the determination of proved reserves for the
three years ended 30 June 2019, 30 June 2018 and 30 June 2017.
Movement in capitalised exploratory well costs
At the beginning of the year
Additions to capitalised exploratory well costs pending the determination of proved reserves
Capitalised exploratory well costs charged to expense
Capitalised exploratory well costs reclassified to wells, equipment, and facilities based
on the determination of proved reserves
Other
At the end of the year
2019
US$M
794
297
(9)
(42)
−
1,040
2018
US$M
2017
US$M
668
186
(62)
2
−
794
770
258
(69)
(155)
(136)
668
i
S
t
r
a
t
e
g
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
a
t
B
H
P
R
e
m
u
n
e
r
a
t
i
o
n
R
e
p
o
r
t
D
i
r
e
c
t
o
r
s
’
R
e
p
o
r
t
The following table provides an ageing of capitalised exploratory well costs, based on the date the drilling was completed, and the number
of projects for which exploratory well costs has been capitalised for a period greater than one year since the completion of drilling.
5
Exploration activity typically involves drilling multiple wells, over a number of years, to fully evaluate and appraise a project. The term
‘project’ as used in this disclosure refers primarily to individual wells and associated exploratory activities.
Ageing of capitalised exploratory well costs
Exploratory well costs capitalised for a period of one year or less
Exploratory well costs capitalised for a period greater than one year
At the end of the year
Number of projects that have been capitalised for a period greater than one year
2019
US$M
210
830
1,040
2019
13
2018
US$M
124
670
794
2018
17
2017
US$M
120
548
668
2017
14
BHP Annual Report 2019 251
i
F
n
a
n
c
a
i
l
S
t
a
t
e
m
e
n
t
s
A
d
d
i
t
i
o
n
a
l
i
n
f
o
r
m
a
t
i
o
n
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
5.7 Supplementary oil and gas information – unaudited continued
Drilling and other exploratory and development activities
The number of crude oil and natural gas wells drilled and completed for each of the last three years was as follows:
Year ended 30 June 2019
Australia
United States (1)
Other (2)
Total
Year ended 30 June 2018
Australia
United States (1)
Other (2)
Total
Year ended 30 June 2017
Australia
United States (1)
Other (2)
Total
Net exploratory wells
Net development wells
Productive
Dry
Total
Productive
Dry
Total
Total
−
1
4
5
−
1
−
1
−
−
3
3
−
−
2
2
−
1
−
1
−
−
2
2
−
1
6
7
−
2
−
2
−
−
5
5
1
33
−
34
1
84
−
85
−
80
1
81
−
−
−
−
−
1
−
1
−
−
−
−
1
33
−
34
1
85
−
86
−
80
1
81
1
34
6
41
1
87
−
88
−
80
6
86
(1) Includes Onshore US assets net productive development wells of 33 (2018: 84; 2017: 79) and net dry development wells of nil (2018: 1; 2017: nil). Onshore US assets
had nil net exploratory wells in 2019, 2018 and 2017.
(2) Other is primarily comprised of Algeria, Mexico and Trinidad and Tobago.
The number of wells drilled refers to the number of wells completed at any time during the respective year, regardless of when drilling was
initiated. Completion refers to the installation of permanent equipment for production of oil or gas, or, in the case of a dry well, to reporting
to the appropriate authority that the well has been abandoned.
An exploratory well is a well drilled to find oil or gas in a new field or to find a new reservoir in a field previously found to be productive of oil
or gas in another reservoir. A development well is a well drilled within the limits of a known oil or gas reservoir to the depth of a stratigraphic
horizon known to be productive.
A productive well is an exploratory, development or extension well that is not a dry well. Productive wells include wells in which hydrocarbons
were encountered and the drilling or completion of which, in the case of exploratory wells, has been suspended pending further drilling
or evaluation. A dry well (hole) is an exploratory, development, or extension well that proves to be incapable of producing either oil or gas
in sufficient quantities to justify completion as an oil or gas well.
Oil and gas properties, wells, operations, and acreage
The following tables show the number of gross and net productive crude oil and natural gas wells and total gross and net developed and
undeveloped oil and natural gas acreage as at 30 June 2019. A gross well or acre is one in which a working interest is owned, while a net well
or acre exists when the sum of fractional working interests owned in gross wells or acres equals one. Productive wells are producing wells
and wells mechanically capable of production. Developed acreage is comprised of leased acres that are within an area by or assignable
to a productive well. Undeveloped acreage is comprised of leased acres on which wells have not been drilled or completed to a point that
would permit the production of economic quantities of oil and gas, regardless of whether such acres contain proved reserves.
The number of productive crude oil and natural gas wells in which the Group held an interest at 30 June 2019 was as follows:
Australia
United States
Other (1)
Total
Crude oil wells
Natural gas wells
Total
Gross
352
60
57
469
Net
176
25
21
222
Gross
153
−
8
161
Net
53
−
4
57
Gross
505
60
65
630
Net
229
25
25
279
(1) Other is primarily comprised of Algeria, Mexico and Trinidad and Tobago.
Of the productive crude oil and natural gas wells, 43 (net: 18) operated wells had multiple completions.
Developed and undeveloped acreage (including both leases and concessions) held at 30 June 2019 was as follows:
Thousands of acres
Australia
United States
Other (1) (2)
Total
Developed acreage
Undeveloped acreage
Gross
2,152
105
146
2,403
Net
823
39
57
919
Gross
963
828
3,526
5,317
Net
393
776
2,869
4,038
(1) Developed acreage in Other primarily consists of Algeria and Trinidad and Tobago.
(2) Undeveloped acreage in Other primarily consists of Canada, Mexico and Trinidad and Tobago.
Approximately 126 thousand gross acres (59 thousand net acres), 1,612 thousand gross acres (932 thousand net acres) and 1,257 thousand
gross acres (889 thousand net acres) of undeveloped acreage will expire in the years ending 30 June 2020, 2021 and 2022 respectively,
if the Group does not establish production or take any other action to extend the terms of the licences and concessions.
252 BHP Annual Report 2019
Section 6
Additional
information
In this section
Information on mining operations
6.1
6.2 Production
6.3 Resources and Reserves
6.4 Major projects
6.5 Climate change data
6.6 Legal proceedings
6.7 Glossary
BHP Annual Report 2019 253
6.1 Information on mining operations
Minerals Australia
Copper mining operations
The following table contains additional details of our mining operations. This table should be read in conjunction with the production table
(refer to section 6.2.1) and reserves table (refer to section 6.3.2).
Mine &
location
Means
of access
Ownership
Operator
Title, leases
or options
History
Mine type &
mineralisation style
Power source
Facilities,
use & condition
BHP 100%
BHP
Olympic Dam
560 km
northwest
of Adelaide,
South
Australia
Public road
Copper
cathode
trucked
to ports
Uranium oxide
transported by
road to ports
Underground
Large poly-metallic
deposit of iron
oxide-copper-
uranium-gold
mineralisation
Electricity
transmitted via
(i) BHP’s 275 kV
power line from
Port Augusta and
(ii) ElectraNet’s
system upstream
of Port Augusta
Energy
purchased
via Retail
Agreement
Underground
automated train and
trucking network
feeding crushing,
storage and ore
hoisting facilities
2 grinding circuits
Nominal milling
capacity: 10.3 Mtpa
Flash furnace
produces copper
anodes, then
refined to produce
copper cathodes
Electrowon copper
cathode and uranium
oxide concentrate
produced by leaching
and solvent extracting
flotation tailings
Mining lease
granted by
South Australian
Government
expires in 2036
Right of
extension
for 50 years
(subject to
remaining
mine life)
Acquired in
2005 as part
of WMC
acquisition
Copper
production
began in 1988
Nominal milling
capacity raised
to 9 Mtpa
in 1999
Optimisation
project
completed
in 2002
New copper
solvent
extraction plant
commissioned
in 2004
Major smelter
maintenance
campaign
completed
in 2018
Iron ore mining operations
The following table contains additional details of our iron ore mining operations. This table should be read in conjunction with the
production table (refer to section 6.2.1) and reserves table (refer to section 6.3.2).
Mine &
location
WAIO
Means
of access
Ownership
Operator
Title, leases
or options
History
Mine type &
mineralisation style
Power source
Facilities,
use & condition
Mt Newman joint venture
Pilbara region,
Western
Australia
Mt Whaleback
Orebodies 18,
24, 25, 29, 30,
31, 32 and 35
Private road
Ore transported
by Mt Newman
JV-owned
rail to
Port Hedland
(427 km)
BHP 85%
Mitsui-ITOCHU
Iron 10%
ITOCHU Minerals
and Energy of
Australia 5%
BHP
Yandi joint venture
Pilbara region,
Western
Australia
BHP
BHP 85%
ITOCHU Minerals
and Energy
of Australia 8%
Mitsui Iron Ore
Corporation 7%
Private road
Ore transported
by Mt Newman
JV-owned rail
to Port Hedland
(316 km)
Yandi JV’s
railway spur
links Yandi hub
to Mt Newman
JV main line
Mineral lease
granted and
held under
the Iron Ore
(Mount Newman)
Agreement Act
1964 expires in
2030 with right
to successive
renewals of
21 years each
Production
began at
Mt Whaleback
in 1969
Production
from Orebodies
18, 24, 25,
29, 30, 31,
32 and 35
complements
production
from Mt
Whaleback
Production
from Orebodies
31 and 32
started in 2015
and 2017
respectively
Open-cut
Bedded ore types
classified as per
host Archaean
or Proterozoic
iron formation,
which are
Brockman and
Marra Mamba
Power for all mine
operations both
in the Central and
Eastern Pilbara
is supplied by
BHP’s natural
gas fired Yarnima
power station
Power consumed
in port operations
is supplied via
a contract
with Alinta
Newman Hub:
primary crusher,
ore handling plant,
heavy media
beneficiation plant,
stockyard blending
facility, single cell
rotary car dumper,
train load out
(nominal capacity
73 Mtpa)
Orebody 25 Ore
processing plant
(nominal capacity
12 Mtpa)
Mining lease
granted pursuant
to the Iron Ore
(Marillana Creek)
Agreement Act
1991 expires
in 2033 with
1 renewal right
to a further
21 years to 2054
Production
began at the
Yandi mine
in 1992
Capacity
of Yandi hub
expanded
between
1994 and 2013
Open-cut
Channel Iron
Deposits are
Cainozoic fluvial
sediments
3 primary crushers,
3 ore handling plants,
stockyard blending
facility, and 2 train
load outs (nominal
capacity 80 Mtpa)
Power for all mine
operations both
in the Central and
Eastern Pilbara
is supplied by
BHP’s natural
gas fired Yarnima
power station
Power consumed
in port operations
is supplied
via a contract
with Alinta
254 BHP Annual Report 2019
Ownership
Operator
Title, leases
or options
History
Mine type &
mineralisation style
Power source
Facilities,
use & condition
BHP
BHP 85%
ITOCHU Minerals
and Energy
of Australia 8%
Mitsui & Co. Iron
Ore Exploration
& Mining 7%
*Jimblebar is an
‘incorporated’
venture, with the
above companies
holding A Class
Shares in Mining
Lease 266SA
Section 1 and
Section 3 held
by BHP Iron Ore
Jimblebar Pty Ltd
(BHPIOJ)
BHP holds 100%
of the B Class
Shares, which has
rights to all other
BHPIOJ assets
BHP
BHP 85%
Mitsui Iron Ore
Corporation 7%
ITOCHU Minerals
and Energy of
Australia 8%
Mine &
location
Means
of access
Jimblebar operation*
Pilbara region,
Western
Australia
Private road
Ore is
transported
via overland
conveyor
(12.4 km)
Mt Goldsworthy joint venture
Pilbara region,
Western
Australia
Yarrie
Nimingarra
Mining Area C
Private road
Yarrie and
Nimingarra
iron ore
transported by
Mt Goldsworthy
JV-owned rail
to Port Hedland
(218 km)
Mining Area C
iron ore
transported
by Mt Newman
JV-owned rail
to Port Hedland
(360 km)
Mt Goldsworthy
JV railway spur
links Mining
Area C to Yandi
railway spur
POSMAC joint venture
Pilbara
Region,
Western
Australia
BHP
Private road
POSMAC JV
sells ore to
Mt Goldsworthy
JV at Mining
Area C
BHP 65%
ITOCHU Minerals
and Energy of
Australia 8%,
Mitsui Iron Ore
Corporation 7%
POS-Ore 20%
i
S
t
r
a
t
e
g
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
a
t
B
H
P
R
e
m
u
n
e
r
a
t
i
o
n
R
e
p
o
r
t
D
i
r
e
c
t
o
r
s
’
R
e
p
o
r
t
i
F
n
a
n
c
a
i
l
S
t
a
t
e
m
e
n
t
s
6
A
d
d
i
t
i
o
n
a
l
i
n
f
o
r
m
a
t
i
o
n
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
Mining lease
granted pursuant
to the Iron Ore
(McCamey’s
Monster)
Agreement
Authorisation
Act 1972 expires
in 2030 with
rights to
successive
renewals of
21 years each
1 mineral lease
and 1 mining
lease both
granted pursuant
to the Iron Ore
(Goldsworthy
– Nimingarra)
Agreement Act
1972, expire
2035, with rights
to successive
renewals of
21 years
A number of
smaller mining
leases granted
under the Mining
Act 1978 expire in
2026 with rights
to successive
renewals of
21 years
3 mineral leases
granted under
the Iron Ore
(Mount
Goldsworthy)
Agreement Act
1964, which
expire 2028
with rights
to successive
renewals of
21 years each
Sublease over
part of Mt
Goldsworthy
Mining Area C
mineral lease
that expires
on the earlier
of termination
of the mineral
lease or the
end of the
POSMAC JV
Open-cut
Bedded ore types
classified as per
host Archaean or
Proterozoic banded
iron formation,
which are Brockman
and Marra Mamba
3 primary crushers,
ore handling plant,
train loadout,
stockyard blending
facility and
supporting mining
hub infrastructure
(nominal capacity
65 Mtpa)
Power for all
mine operations
both in the
Central and
Eastern Pilbara
is supplied by
BHP’s natural
gas fired Yarnima
power station
Power consumed
in port operations
is supplied
via a contract
with Alinta
2 primary crushers,
2 ore handling plants,
stockyard blending
facility and train load
out (nominal capacity
60 Mtpa)
Mining Area C,
Yarrie and
Nimingarra
all open-cut
Bedded ore types
classified as per
host Archaean
or Proterozoic iron
formation, which
are Brockman,
Marra Mamba
and Nimingarra
Power for Yarrie
and Shay Gap
is supplied by
their own small
diesel generating
stations
Power for all
remaining mine
operations both
in the Central and
Eastern Pilbara
is supplied by
BHP’s natural
gas fired Yarnima
power station
Power consumed
in port operations
is supplied
via a contract
with Alinta
Production
began in
March 1989
From 2004,
production was
transferred to
Wheelarra JV
as part of the
Wheelarra
sublease
agreement.
This sublease
agreement
expired in
March 2018
Ore was first
produced from
the newly
commissioned
Jimblebar hub
in late 2013
Jimblebar
sells ore to the
Newman JV
proximate to
the Jimblebar
hub
Operations
commenced at
Mt Goldsworthy
in 1966 and
at Shay Gap
in 1973
Original
Goldsworthy
mine closed
in 1982
Associated
Shay Gap mine
closed in 1993
Mining at
Nimingarra
mine ceased
in 2007, then
continued
from adjacent
Yarrie area
Production
commenced
at Mining Area
C mine in 2003
Yarrie mine
operations were
suspended in
February 2014
Production
commenced in
October 2003
POSMAC JV
sells all ore to
Mt Goldsworthy
JV at Mining
Area C
Open-cut
Bedded ore types
classified as per
host Archaean or
Proterozoic iron
formation, which
is Marra Mamba
POSMAC sells all
ore to Mt Goldsworthy
JV, which is then
processed at Mining
Area C
Power for all mine
operations both
in the Central and
Eastern Pilbara
is supplied by
BHP’s natural
gas fired Yarnima
power station
Power consumed
in port operations
is supplied
via a contract
with Alinta
BHP Annual Report 2019 255
Coal mining operations
The following table contains additional details of our mining operations. This table should be read in conjunction with the production table
(refer to section 6.2.1) and reserves table (refer to section 6.3.2).
Mine &
location
Means
of access
Queensland Coal
Ownership
Operator
Title, leases
or options
History
Mine type &
mineralisation style
Power source
Facilities,
use & condition
On-site beneficiation
processing facilities
Combined nominal
capacity: in excess
of 67 Mtpa
Queensland
electricity grid
connection
is under
long-term
contracts
and energy
purchased
via Retail
Agreements
All open-cut except
Broadmeadow:
longwall
underground
Bituminous coal
is mined from the
Permian Moranbah
and Rangal
Coal measures
Products range from
premium quality,
low volatile, high
vitrinite, hard coking
coal to medium
volatile hard coking
coal, to weak
coking coal, some
pulverised coal
injection (PCI) coal
and medium ash
thermal coal as a
secondary product
On-site beneficiation
processing facility
Facilities under care
and maintenance
Gregory: open-cut
Crinum: longwall
underground
Bituminous coal
is mined from
the Permian
German Creek
Coal measures
Product is a high
volatile, low ash
hard coking coal
Queensland
electricity grid
connection
is under
long-term
contracts
and energy
purchased
via Retail
Agreements
Open-cut
Bituminous coal
is mined from the
Permian Rangal
Coal measures
Produces a range
of coking coal and
pulverised coal
injection (PCI) coal
Queensland
electricity grid
connection
is under
long-term
contracts
and energy
purchased
via Retail
Agreements
South Walker Creek
coal beneficiated
on-site
Nominal capacity:
in excess of 6 Mtpa
Poitrel mine utilises
Red Mountain for
processing and rail
loading facilities
Nominal capacity:
in excess of 4 Mtpa
Goonyella mine
commenced in
1971, merged with
adjoining Riverside
mine in 1989
Operates as
Goonyella
Riverside
Production
commenced at:
Peak Downs
in 1972
Saraji in 1974
Norwich Park
in 1979
Blackwater
in 1967
Broadmeadow
(longwall
operations)
in 2005
Daunia in
2013 and
Caval Ridge
in 2014
Production at
Norwich Park
ceased in
May 2012
Production
commenced at:
Gregory in 1979
Crinum mine
(longwall)
commenced
in 1997
Production at
Gregory open-cut
mine ceased in
October 2012
Production
at Crinum
underground
mine ceased in
November 2015
Agreement
entered for sale
of our entire
50% interest
in Gregory
Joint Venture
On 27 March 2019,
BMA completed
the sale of
Gregory Crinum
Mine to Sojitz
Corporation
South
Walker Creek
commenced
in 1996
Poitrel
commenced
in 2006
BMC purchased
remaining
50% share of
Red Mountain
processing facility
in 2018 to secure
100% ownership
Mining leases,
including
undeveloped
tenements,
expire in 2031,
renewable for
further periods
as Queensland
Government
legislation allows
Mining is
permitted to
continue under
the legislation
during the
renewal
application
period
Mining leases,
including
undeveloped
tenements,
expire between
2019 and 2039,
renewable for
further periods
as Queensland
Government
legislation allows
Mining is
permitted to
continue under
the legislation
during the
renewal
application
period
Mining leases,
including
undeveloped
tenements expire
between 2020
and 2034, and
are renewable
for further
periods as
Queensland
Government
legislation allows
Mining is
permitted to
continue under
the legislation
during the
renewal
application
period
Central Queensland Coal Associates joint venture
BMA
BHP 50%
Mitsubishi
Development
50%
Bowen Basin,
Queensland,
Australia
Goonyella
Riverside,
Broadmeadow
Daunia
Caval Ridge
Peak Downs
Saraji
Blackwater
and Norwich
Park mines
Public road
Coal
transported
by rail to
Hay Point,
Gladstone,
Dalrymple Bay
and Abbot
Point ports
Distances
between the
mines and port
are between
160 km and
315 km
BMA
BHP 50%
Mitsubishi
Development
50%
Gregory joint venture
Bowen Basin,
Queensland,
Australia
Gregory and
Crinum mines
Public road
Coal
transported
by rail to Hay
Point and
Gladstone ports
Distances
between the
mines and port
are between
310 km and
370 km
BHP 80%
Mitsui and Co
20%
BMC
BHP Mitsui Coal
Bowen Basin,
Queensland,
Australia
South Walker
Creek and
Poitrel mines
Public road
Coal
transported
by rail to Hay
Point and
Dalrymple
Bay ports
Distances
between the
mines and port
are between
135 km and
165 km
256 BHP Annual Report 2019
Mine &
location
Means
of access
New South Wales Energy Coal
Mt Arthur Coal
Approximately
126 km
northwest
of Newcastle,
New South
Wales,
Australia
Public road
Domestic coal
transported
by conveyor
to Bayswater
and Liddell
Power Stations
Export coal
transported
by third
party rail to
Newcastle port
Ownership
Operator
Title, leases
or options
History
Mine type &
mineralisation style
Power source
Facilities,
use & condition
BHP 100%
BHP
Open-cut
Produces a medium
rank bituminous
thermal coal
Beneficiation
facilities: coal
handling, preparation,
washing plants
Nominal capacity:
in excess of 23 Mtpa
NSW electricity
grid connection
under a
deemed
long-term
contract
and energy
purchased
via a Retail
Agreement
Production
commenced
in 2002
Government
approval permits
extraction of up
to 36 Mtpa of
run of mine coal
from underground
and open-cut
operations,
with open-cut
extraction limited
to 32 Mtpa
Current
Development
Consent expires
in 2026, an
extension will
be sought
within the
next few years
MAC holds
10 mining
leases and
3 exploration
licences
MAC’s primary
exploration
licence
is currently
being renewed
Nickel mining operations
The following table contains additional details of our mining operations. This table should be read in conjunction with the production table
(refer to section 6.2.1) and reserves table (refer to section 6.3.2).
Ownership
Operator
Title, leases
or options
History
Mine type &
mineralisation style
Power source
Facilities,
use & condition
Mine &
location
Means
of access
Nickel West
Mt Keith mine and concentrator
485 km north
of Kalgoorlie,
Western
Australia
Private road
Nickel
concentrate
transported
by road to
Leinster nickel
operations for
drying and
on-shipping
BHP 100%
BHP
Leinster mine complex and concentrator
BHP 100%
BHP
375 km north
of Kalgoorlie,
Western
Australia
Public road
Nickel
concentrate
shipped by
road and rail
to Kalgoorlie
nickel smelter
BHP 100%
BHP
Cliffs mine
481 km north
of Kalgoorlie,
Western
Australia
Private road
Nickel ore
transported
by road to
Leinster nickel
operations
for further
processing
Commissioned
in 1995 by WMC
Acquired in 2005
as part of WMC
acquisition
Open-cut
Disseminated
textured magmatic
nickel-sulphide
mineralisation
associated with
a metamorphosed
ultramafic intrusion
Production
commenced
in 1979
Acquired in 2005
as part of WMC
acquisition
Perseverance
underground
mine ceased
operations
during 2013
Open-cut and
underground
Steeply dipping
disseminated and
massive textured
nickel-sulphide
mineralisation
associated with
metamorphosed
ultramafic lava
flows and intrusions
Concentration
plant with a
nominal capacity:
11 Mtpa of ore
Concentration
plant with a
nominal capacity:
3 Mtpa of ore
On-site third
party gas-fired
turbines
Contracts
expire in
December
2023
Natural gas
sourced and
transported
under separate
long-term
contracts
On-site third
party gas-fired
turbines
Contracts
expire in
December
2023
Natural gas
sourced and
transported
under separate
long-term
contracts
Supplied
from Mt Keith
Mine site
Production
commenced
in 2008
Acquired in 2005
as part of WMC
acquisition
Underground
Steeply dipping
massive textured
nickel-sulphide
mineralisation
associated with
metamorphosed
ultramafic lava flows
Mining leases
granted by
Western
Australian
Government
Key leases expire
between 2029
and 2036
Renewals at
government
discretion
Mining leases
granted by
Western
Australian
Government
Key leases
expire between
2025 and 2034
Renewals
of principal
mineral lease in
accordance with
Nickel (agnew)
Agreement
Mining leases
granted by
Western
Australian
Government
Key leases
expire between
2025 and 2028
Renewals at
government
discretion
BHP Annual Report 2019 257
i
S
t
r
a
t
e
g
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
a
t
B
H
P
R
e
m
u
n
e
r
a
t
i
o
n
R
e
p
o
r
t
D
i
r
e
c
t
o
r
s
’
R
e
p
o
r
t
i
F
n
a
n
c
a
i
l
S
t
a
t
e
m
e
n
t
s
6
A
d
d
i
t
i
o
n
a
l
i
n
f
o
r
m
a
t
i
o
n
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
Nickel smelters, refineries and processing plants
Smelter, refinery
or processing plant
Nickel West
Kambalda
Nickel concentrator
Kalgoorlie
Nickel smelter
Kwinana
Nickel refinery
Location
Ownership
Operator
Title, leases
or options
Product
Nominal
production capacity
Power source
BHP 100%
BHP
56 km south
of Kalgoorlie,
Western
Australia
Concentrate
containing
approximately
13% nickel
1.6 Mtpa ore
Ore sourced
through tolling
and concentrate
purchase
arrangements
with third parties
in Kambalda region
On-site third party gas-fired
turbines supplemented
by access to grid power
Contracts expire
in December 2023
Natural gas sourced and
transported under separate
long-term contracts
Mineral leases
granted by
Western
Australian
Government
Key leases
expire in 2028
No further term
possible. New
mining lease
will be sought
Kalgoorlie,
Western
Australia
BHP 100%
BHP
Freehold title
over the property
Matte containing
approximately
65% nickel
110 ktpa matte
On-site third party gas-fired
turbines supplemented
by access to grid power
Contracts expire
in December 2023
Natural gas sourced and
transported under separate
long-term contracts
30 km south
of Perth,
Western
Australia
BHP 100%
BHP
Freehold title
over the property
LME grade
nickel briquettes,
nickel powder
Also intermediate
products, including
copper sulphide,
cobalt-nickel-sulphide,
ammonium-sulphate
79 ktpa nickel matte
Power is sourced from the
local grid, which is supplied
under a retail contract
Minerals Americas
Copper mining operations
The following table contains additional details of our mining operations. This table should be read in conjunction with the production table
(refer to section 6.2.1) and reserves table (refer to section 6.3.2).
Means
of access
Ownership
Operator
Title, leases
or options
History
Mine type &
mineralisation style
Power source
Facilities,
use & condition
Mine &
location
Escondida
Atacama
Desert 170 km
southeast of
Antofagasta,
Chile
Private road
available for
public use
Copper
cathode
transported
by privately
owned rail
to ports at
Antofagasta
and Mejillones
Copper
concentrate
transported
by Escondida-
owned
pipelines
to its Coloso
port facilities
BHP
BHP 57.5%
Rio Tinto 30%
JECO
Corporation
consortium
comprising
Mitsubishi,
JX Nippon
Mining and
Metals 10%
JECO2 Ltd 2.5%
Mining
concession
from Chilean
Government
valid indefinitely
(subject to
payment of
annual fees)
Original
construction
completed
in 1990
Sulphide
leach copper
production
commenced
in 2006
2 open-cut pits:
Escondida and
Escondida Norte
Escondida and
Escondida Norte
mineral deposits
are adjacent but
distinct supergene
enriched porphyry
copper deposits
Escondida-owned
transmission
lines connect to
Chile’s northern
power grid
Electricity
sourced from
a combination
of contracts with
external vendors
expiring in 2029
and Tamakaya
SpA (100% owned
by BHP), which
generates power
from the recently
commissioned
Kelar gas-fired
power plant
Pampa Norte Spence
Atacama
Desert 162 km
northeast of
Antofagasta,
Chile
Public road
Copper
cathode
transported by
rail to ports at
Mejillones and
Antofagasta
BHP 100%
BHP
Mining
concession
from Chilean
Government
valid indefinitely
(subject to
payment of
annual fees)
Development
cost of
US$1.1 billion
approved
in 2004
First copper
produced
in 2006
Spence-owned
transmission
lines connect to
Chile’s northern
power grid
Electricity
purchased
under contract
Open-cut
Enriched and
oxidised porphyry
copper deposit
containing in situ
copper oxide
mineralisation
that overlies a
near-horizontal
sequence of
supergene sulphides,
transitional sulphides,
and finally primary
(hypogene) sulphide
mineralisation
258 BHP Annual Report 2019
3 concentrator
plants extract
copper concentrate
from sulphide
ore by flotation
extraction process
2 solvent extraction
plants produce
copper cathode
Nominal capacity:
153.7 Mtpa (nominal
milling capacity)
and 350 ktpa
copper cathode
(nominal capacity
of tank house)
2 x 168 km
concentrate pipelines
167 km water pipeline
Port facilities at
Coloso, Antofagasta
Desalinated water
plant (Nominal
capacity 2,500 litre
per second)
Processing and
crushing facilities,
separate dynamic
(on-off) leach
pads, solvent
extraction plant,
electrowinning plant
Nominal capacity of
tank house: 200 ktpa
copper cathode
Mine &
location
Means
of access
Ownership
Operator
Title, leases
or options
History
Mine type &
mineralisation style
Power source
Facilities,
use & condition
Pampa Norte Cerro Colorado
Atacama
Desert
120 km east
of Iquique,
Chile
Public road
Copper
cathode
trucked to port
at Iquique
BHP 100%
BHP
Mining
concession
from Chilean
Government
valid indefinitely
(subject to
payment of
annual fees)
Commercial
production
commenced
in 1994
Expansions in
1996 and 1998
Antamina
Andes
mountain
range
270 km north
of Lima, north
central Peru
Public road
Copper
and zinc
concentrates
transported
by pipeline
to port of
Huarmey
Molybdenum
and lead/
bismuth
concentrates
transported
by truck
BHP 33.75%
Glencore 33.75%
Teck 22.5%
Mitsubishi 10%
Compañía
Minera
Antamina
S.A.
Commercial
production
commenced
in 2001
Mining rights
from Peruvian
Government
held indefinitely,
subject to
payment of
annual fees
and supply
of information
on investment
and production
Open-cut
Enriched and
oxidised porphyry
copper deposit
containing in situ
copper oxide
mineralisation
that overlies a
near-horizontal
sequence of
supergene
sulphides,
transitional
sulphides, and
finally primary
(hypogene) sulphide
mineralisation
Open-cut
Zoned porphyry
and skarn deposit
with central copper
dominated ores
and an outer band
of copper-zinc
dominated ores
Long-term
contracts with
northern Chile
power grid
2 primary, secondary
and tertiary crushers,
dynamic leaching
pads, solvent
extraction plant,
electrowinning plant
Nominal capacity of
tank house: 130 ktpa
copper cathode
Long-term
contracts
with individual
power producers
Primary crusher,
concentrator, copper
and zinc flotation
circuits, bismuth/
moly cleaning circuit
Nominal milling
capacity 53 Mtpa
300 km concentrate
pipeline
Port facilities
at Huarmey
Iron ore mining operations
The following table contains additional details of our mining operations. This table should be read in conjunction with the production table
(refer to section 6.2.1) and reserves table (refer to section 6.3.2).
Mine &
location
Samarco
Southeast
Brazil
Means
of access
Ownership
Operator
Title, leases
or options
History
Mine type &
mineralisation style
Power source
Facilities,
use & condition
Samarco
BHP Billiton
Brasil Limitada
50% of Samarco
Mineração S.A.
Vale S.A. 50%
The mining
facilities are
currently under
administrative
embargoes
and judicial
injunction given
the Fundão
dam failure
Public road
Conveyor
belts were
used to
transport
iron ore to
beneficiation
plant
3 slurry
pipelines used
to transport
concentrate
to pellet plants
on coast
Iron pellets
were exported
via port
facilities
Production
began at
Germano mine
in 1977 and
at Alegria
complex
in 1992
Second pellet
plant built
in 1997
Third pellet
plant, second
concentrator
and second
pipeline built
in 2008
Fourth pellet
plant, third
concentrator
and third
pipeline built
in 2014
Open-cut
Itabirites
(metamorphic
quartz-hematite
rock) and friable
hematite ores
Samarco mining
activities are currently
suspended after the
failure of Fundão dam
The beneficiation
plants, pipelines,
pellet plants and port
facilities are intact
Samarco holds
interests in
2 hydroelectric
power plants,
which supply
part of its
electricity
Power supply
contract with
Cemig Geração
e Transmissão
expires in 2022
BHP Annual Report 2019 259
i
S
t
r
a
t
e
g
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
a
t
B
H
P
R
e
m
u
n
e
r
a
t
i
o
n
R
e
p
o
r
t
D
i
r
e
c
t
o
r
s
’
R
e
p
o
r
t
i
F
n
a
n
c
a
i
l
S
t
a
t
e
m
e
n
t
s
6
A
d
d
i
t
i
o
n
a
l
i
n
f
o
r
m
a
t
i
o
n
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
Coal mining operations
The following table contains additional details of our mining operations. This table should be read in conjunction with the production table
(refer to section 6.2.1) and reserves table (refer to section 6.3.2).
Means
of access
Ownership
Operator
Title, leases
or options
History
Mine type &
mineralisation style
Power source
Facilities,
use & condition
Mine &
location
Cerrejón
La Guajira
province,
Colombia
Public road
Coal exported
by company-
owned rail to
Puerto Bolivar
(150 km)
Cerrejón
BHP 33.33%
Anglo American
33.33%
Glencore 33.33%
Navajo
40 km
southwest
of Farmington,
New Mexico,
United States
Public road
Coal
transported
by rail to
Four Corners
Power Plant
BHP
BHP 0%
Navajo
Transitional
Energy Company
100%
Mining leases
expire
progressively
from 2028 to
early 2034
Production not
scheduled after
2033
Lease held
by Navajo
Transitional
Energy Company
Original
mine began
producing
in 1976
BHP interest
acquired
in 2000
Open-cut
Produces a
medium rank
bituminous thermal
coal (non-coking,
suitable for the
export market)
Local Colombian
power system
Beneficiation
facilities: crushing
plant with capacity
in excess of 40 Mtpa
and washing plant
Nominal capacity
in excess of 3 Mtpa
Four Corners
Power Plant
Open-cut
Produces a medium
rank bituminous
thermal coal
(non-coking suitable
for the domestic
market only)
Stackers and
reclaimers used
to size and blend
coal to meet
contract quantities
and specification
Nominal capacity
in excess of 4 Mtpa
Production
commenced
in 1963
Divested
in FY2014
BHP continued
to manage
and operate
the mine
until the Mine
Management
Agreement
with Navajo
Transitional
Energy
Company
(NTEC)
ended on 31
December 2016
Petroleum
Petroleum operations
The following table contains additional details of our petroleum operations. This table should be read in conjunction with the production
table (refer to section 6.2.2) and reserves table (refer to section 6.3.1).
Operation
& location
United States
Product
Ownership
Operator
Title, leases or options
Nominal
production capacity
Facilities,
use & condition
Offshore Gulf of Mexico
Neptune (Green Canyon 613)
Oil and gas
Offshore
deepwater
Gulf of Mexico
(1,300m)
Shenzi (Green Canyon 653)
Oil and gas
Offshore
deepwater
Gulf of Mexico
(1,310m)
Atlantis (Green Canyon 743)
BHP 35%
EnVen Energy 30%
W&T Offshore 20%
31 Offshore 15%
BHP 44%
Hess 28%
Repsol 28%
Offshore
deepwater
Gulf of Mexico
(2,155m)
Oil and gas
BHP 44%
BP 56%
Mad Dog (Green Canyon 782)
Oil and gas
Offshore
deepwater
Gulf of Mexico
(1,310m)
BHP 23.9%
BP 60.5%
Chevron 15.6%
BHP
BHP
BP
BP
Lease from US Government
as long as oil and gas
produced in paying quantities
50 Mbbl/d oil
50 MMcf/d gas
Stand-alone tension
leg platform (TLP)
Lease from US Government
as long as oil and gas
produced in paying quantities
100 Mbbl/d oil
50 MMcf/d gas
Stand-alone TLP
Genghis Khan field (part of
same geological structure)
tied back to Marco Polo TLP
Lease from US Government
as long as oil and gas
produced in paying quantities
200 Mbbl/d oil
180 MMcf/d gas
Moored semi-submersible
platform
Lease from US Government
as long as oil and gas
produced in paying quantities
100 Mbbl/d oil
60 MMcf/d gas
Moored integrated
truss spar, facilities for
simultaneous production
and drilling operations
260 BHP Annual Report 2019
Product
Ownership
Operator
Title, leases or options
Nominal
production capacity
Facilities,
use & condition
Operation
& location
Australia
Bass Strait
Offshore and
onshore Victoria
Oil and gas
Gippsland Basin joint
venture (GBJV):
BHP 50%
Esso Australia (Exxon
Mobil subsidiary) 50%
Kipper Unit joint
venture (KUJV):
BHP 32.5%
Esso Australia 32.5%
MEPAU A Pty Ltd 35%
Esso Australia
20 production licences and
2 retention leases issued
by Australian Government
Expire between 2019 and
end of life of field
1 production licence held
with MEPAU A Pty Ltd
65 Mbbl/d oil
1,040 TJ/d
5,150 tpd LPG
850 tpd Ethane
Woodside
Petroleum Ltd
14 production licences issued
by Australian Government
Expire between 2022 and 5
years after production ceases
Domestic gas,
LPG, condensate,
LNG
North West Shelf
Offshore
and onshore
Western
Australia
North Rankin
Goodwyn
Perseus
Angel and
Searipple fields
North West Shelf Project
is an unincorporated JV
BHP:
16.67% of Incremental
Pipeline Gas (IPG)
domestic gas JV
16.67% of original LNG JV
12.5% of China LNG JV
16.67% of LPG JV
Other participants:
subsidiaries of Woodside,
Chevron, BP, Shell,
Mitsubishi/Mitsui and
China National Offshore
Oil Corporation
North Rankin
Complex: 3,010
MMcf/d gas
53 Mbbl/d
condensate
Goodwyn A platform:
1,746 MMcf/d gas
100 Mbbl/d
condensate
Angel platform:
960 MMcf/d gas
51 Mbbl/d
condensate
Withnell Bay
gas plant:
630 MMcf/d gas
5-train LNG plant:
52,000 tpd LNG
4 offshore fields
producing through
offshore infrastructure,
including 12 steel jacket
platforms, 2 concrete
gravity platforms and
a subsea pipeline network
Onshore infrastructure:
• Longford facility
(gas conditioning/
processing and liquids
processing facilities)
• interconnecting pipelines
• long Island Point
(LPG processing and
liquids storage/offtake)
• heliport and onshore
supply base
Production from North
Rankin, Persephone
and Perseus processed
through the interconnected
North Rankin A and North
Rankin B platforms
Production from Goodwyn
processed through
Goodwyn A platform
Production from Perseus,
Tidepole, Keast, Dockrell,
Sculptor, Rankin, Lady Nora
and Pemberton fields tied
back via subsea wells to
the Goodwyn A platform
Production from Angel
field processed through
Angel platform
Onshore gas treatment
plant at Withnell Bay
processes gas for
domestic market
5-train LNG plant
i
S
t
r
a
t
e
g
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
a
t
B
H
P
R
e
m
u
n
e
r
a
t
i
o
n
R
e
p
o
r
t
D
i
r
e
c
t
o
r
s
’
R
e
p
o
r
t
North West Shelf
Offshore
Western
Australia
Wanaea
Cossack
Lambert and
Hermes fields
Pyrenees
Offshore
Western
Australia
Crosby
Moondyne
Wild Bull
Tanglehead
Stickle and
Ravensworth
fields
Macedon
Offshore
and onshore
Western
Australia
Minerva
Offshore
and onshore
Victoria
Oil
Oil
BHP 16.67%
Woodside 33.34%,
BP, Chevron, Japan
Australia LNG (MIMI)
16.67% each
Woodside
Petroleum Ltd
3 production licences issued
by Australian Government
Expire between 2033
and 2039
Production:
60 Mbbl/d
Storage: 1 MMbbl
FPSO unit
BHP
WA-42-L permit:
BHP 71.43%
Quadrant PVG P/L 28.57%
WA-43-L permit:
BHP 39.999%
Quadrant PVG P/L
31.501%
Inpex Alpha Ltd 28.5%
Production licence issued
by Australian Government
expires 5 years after
production ceases
Production:
96 Mbbl/d oil
Storage: 920 Mbbl
26 subsea well
completions
(21 producers,
4 water injectors,
1 gas injector), FPSO
Gas and
condensate
WA-42-L permit
BHP 71.43%
Quadrant PVG P/L 28.57%
BHP
Production licence issued
by Australian Government
expires 5 years after
production ceases
Production:
213 MMcf/d gas
20 bbl/d condensate
Gas and
condensate
BHP 90%
Cooper Energy (MF)
Pty Ltd 10%
BHP
Production licence issued
by Australian Government
expires 5 years after
production ceases
150 TJ/d gas
600 bbl/d
condensate
4 well completions
Single flow line transports
gas to onshore gas
processing facility
Gas plant located
approximately 17 km
southwest of Onslow
2 subsea well completions
(2 producing wells)
Single flow line transports
gas to onshore gas
processing facility
Gas plant located
approximately 4 km inland
from Port Campbell
On 1 May 2018, BHP entered
into an agreement for
the sale of its interests
in the onshore gas plant
with subsidiaries of
Cooper Energy and Mitsui
E&P Australia Pty Ltd.
Agreement is conditional
on regulatory approval
BHP Annual Report 2019 261
i
F
n
a
n
c
a
i
l
S
t
a
t
e
m
e
n
t
s
6
A
d
d
i
t
i
o
n
a
l
i
n
f
o
r
m
a
t
i
o
n
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
Operation
& location
Product
Ownership
Operator
Title, leases or options
Nominal
production capacity
Facilities,
use & condition
Other production operations
Trinidad and Tobago
Greater Angostura
Offshore
Trinidad and
Tobago
Oil and gas
BHP 45%
National Gas
Company 30%
Chaoyang 25%
BHP
Production sharing contract
with the Trinidad and Tobago
Government entitles us to
operate Greater Angostura
until 2026
100 Mbbl/d oil
340 MMcf/d gas
Algeria
ROD Integrated Development
Oil
Onshore
Berkine Basin
900 km
southeast of
Algiers, Algeria
BHP 45% interest in
401a/402a production
sharing contract
ENI 55%
BHP effective 29.3%
interest in ROD unitised
integrated development
Joint
Sonatrach/
ENI entity
Production sharing contract
with Sonatrach (title holder)
Approximately
80 Mbbl/d oil
Integrated oil and gas
development: central
processing platform
connected to 4
wellhead platforms and
a gas export platform
31 wells completed for
production and injection
including: 17 oil producers,
7 gas producers (3 subsea)
and 7 gas injectors
Development and
production of 6 oil fields
2 largest fields (ROD
and SF SFNE) extend into
neighbouring blocks
403a, 403d
Production through
dedicated processing
train on block 403
262 BHP Annual Report 2019
6.2 Production
6.2.1 Production – Minerals
The table below details our mineral and derivative product production for all operations (except Petroleum) for the three years ended
30 June 2019, 2018 and 2017. Unless otherwise stated, the production numbers represent our share of production and include BHP’s
share of production from which profit is derived from our equity accounted investments. Production information for equity accounted
investments is included to provide insight into the operational performance of these entities. For discussion of minerals pricing during
the past three years, refer to section 1.6.2.
BHP Group
interest
%
BHP share of production (1)
Year ended 30 June
2019
2018
2017
Copper (2)
Payable metal in concentrate (‘000 tonnes)
Escondida, Chile (3)
Antamina, Peru (4)
Total copper concentrate
Copper cathode (‘000 tonnes)
Escondida, Chile (3)
Pampa Norte, Chile (5)
Olympic Dam, Australia
Total copper cathode
Total copper concentrate and cathode
Lead
Payable metal in concentrate (‘000 tonnes)
Antamina, Peru (4)
Total lead
Zinc
Payable metal in concentrate (‘000 tonnes)
Antamina, Peru (4)
Total zinc
Gold
Payable metal in concentrate (‘000 ounces)
Escondida, Chile (3)
Olympic Dam, Australia (refined gold)
Total gold
Silver
Payable metal in concentrate (‘000 ounces)
Escondida, Chile (3)
Antamina, Peru (4)
Olympic Dam, Australia (refined silver)
Total silver
Uranium
Payable metal in concentrate (tonnes)
Olympic Dam, Australia
Total uranium
Molybdenum
Payable metal in concentrate (tonnes)
Antamina, Peru (4)
Total molybdenum
Iron ore
Western Australia Iron Ore
Production (‘000 tonnes) (6)
Newman, Australia
Area C Joint Venture, Australia
Yandi Joint Venture, Australia
Jimblebar, Australia (7)
Wheelarra, Australia (8)
Total Western Australia Iron Ore
Samarco, Brazil (4)
Total iron ore
57.5
33.75
57.5
100
100
33.75
33.75
57.5
100
57.5
33.75
100
100
33.75
882.1
147.2
1,029.3
253.2
246.5
160.3
660.0
1,689.3
2.4
2.4
98.1
98.1
286.0
107.0
393.0
8,830
4,758
923
14,511
3,565
3,565
1,141
1,141
925.8
139.5
1,065.3
287.5
263.8
136.7
688.0
1,753.3
3.4
3.4
119.8
119.8
229.1
91.6
320.7
8,796
5,437
792
15,025
3,364
3,364
1,662
1,662
539.6
133.8
673.4
232.0
254.3
166.3
652.6
1,326.0
5.5
5.5
87.5
87.5
110.9
104.1
215.0
4,326
5,783
768
10,877
3,661
3,661
1,144
1,144
BHP Group
interest
%
BHP Group share of production (1)
Year ended 30 June
2019
2018
2017
85
85
85
85
85
50
66,622
47,440
65,197
58,546
159
237,964
–
67,071
51,517
64,048
30,627
25,158
238,421
–
68,283
48,744
65,355
21,950
27,020
231,352
–
237,964
238,421
231,352
BHP Annual Report 2019 263
i
S
t
r
a
t
e
g
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
a
t
B
H
P
R
e
m
u
n
e
r
a
t
i
o
n
R
e
p
o
r
t
D
i
r
e
c
t
o
r
s
’
R
e
p
o
r
t
i
F
n
a
n
c
a
i
l
S
t
a
t
e
m
e
n
t
s
6
A
d
d
i
t
i
o
n
a
l
i
n
f
o
r
m
a
t
i
o
n
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
Coal
Metallurgical coal
Production (‘000 tonnes) (9)
Blackwater, Australia
Goonyella Riverside, Australia
Peak Downs, Australia
Saraji, Australia
Daunia, Australia
Caval Ridge, Australia
Total BHP Mitsubishi Alliance
South Walker Creek, Australia (10)
Poitrel, Australia (10)
Total BHP Mitsui Coal
Total Queensland Coal
IndoMet, Haju, Indonesia (11)
Total metallurgical coal
Energy coal
Production (‘000 tonnes)
Navajo, United States (12)
San Juan, United States
Total New Mexico Coal
New South Wales Energy Coal, Australia
Cerrejón, Colombia (4)
Total energy coal
Other assets
Nickel
Saleable production (‘000 tonnes)
Nickel West, Australia (13) (14)
Total nickel
BHP Group
interest
%
BHP Group share of production (1)
Year ended 30 June
2019
2018
2017
50
50
50
50
50
50
80
80
75
100
100
100
33.3
6,603
8,563
5,933
4,892
2,178
3,967
32,136
6,194
4,071
10,265
42,401
–
6,688
7,961
6,350
5,053
2,556
4,285
32,893
6,029
3,718
9,747
42,640
–
7,296
7,355
6,055
4,734
2,560
3,458
31,458
5,123
3,189
8,312
39,770
129
42,401
42,640
39,899
–
–
–
18,257
9,230
27,487
–
–
–
18,541
10,617
29,158
451
–
451
18,176
10,959
29,586
BHP Group
interest
%
BHP Group share of production (1)
Year ended 30 June
2019
2018
2017
100
87.4
87.4
93.0
93.0
85.8
85.8
(1) BHP share of production includes the Group’s share of production for which profit is derived from our equity accounted investments, unless otherwise stated.
(2) Metal production is reported on the basis of payable metal.
(3) Shown on 100 per cent basis following the application of IFRS 10. BHP interest in saleable production is 57.5 per cent.
(4) For statutory financial reporting purposes, this is an equity accounted investment. We have included production numbers from our equity accounted investments as
the level of production and operating performance from these operations impacts Underlying EBITDA of the Group. Our use of Underlying EBITDA is explained in
section 1.12. Samarco operations are currently suspended following the Samarco dam failure as explained in section 1.7.
(5) Includes Cerro Colorado and Spence.
(6) Iron ore production is reported on a wet tonnes basis.
(7) Shown on 100 per cent basis. BHP interest in saleable production is 85 per cent.
(8) All production from Wheelarra is now processed via the Jimblebar processing hub.
(9) Metallurgical coal production is reported on the basis of saleable product. Production figures include some thermal coal.
(10) Shown on 100 per cent basis. BHP interest in saleable production is 80 per cent.
(11) Shown on 100 per cent basis. BHP interest in saleable production is 75 per cent.
(12) BHP completed the sale of Navajo Mine on 30 December 2013. As BHP retained control of the mine until 29 July 2016, production has been reported through such date.
(13) Production restated to include other nickel by-products.
(14) Nickel contained in refined nickel metal, including briquette and power, matte and by-product streams.
264 BHP Annual Report 2019
6.2.2 Production – Petroleum
The table below details Petroleum‘s historical net crude oil and condensate, natural gas and natural gas liquids production, primarily by
geographic segment, for each of the three years ended 30 June 2019, 2018 and 2017. We have shown volumes of marketable production
after deduction of applicable royalties, fuel and flare. We have included in the table average production costs per unit of production and
average sales prices for oil and condensate and natural gas for each of those periods.
BHP Group share of production
Year ended 30 June
2019
2018
2017
Production volumes
Crude oil and condensate (‘000 of barrels)
Australia
United States – Conventional
United States – Onshore US (5)
Other (4)
Total crude oil and condensate
Natural gas (billion cubic feet)
Australia
United States – Conventional
United States – Onshore US (5)
Other (4)
Total natural gas
Natural gas liquids (1) (‘000 of barrels)
Australia
United States – Conventional
United States – Onshore US (5)
Other (4)
Total NGL (1)
Total production of petroleum products (million barrels of oil equivalent) (2)
Australia
United States – Conventional
United States – Onshore US (5)
Other (4)
Total production of petroleum products
Average sales price
Crude oil and condensate (US$ per barrel)
Australia
United States – Conventional
United States – Onshore US
Other (4)
Total crude oil and condensate
Natural gas (US$ per thousand cubic feet)
Australia
United States – Conventional
United States – Onshore US
Other (4)
Total natural gas
Natural gas liquids (US$ per barrel)
Australia
United States – Conventional
United States – Onshore US
Other (4)
Total NGL
Total average production cost (US$ per barrel of oil equivalent) (3)
Australia
United States – Conventional
United States – Onshore US
Other (4)
Total average production cost
14,365
28,047
6,411
4,885
53,708
310.1
10.4
96.3
76.2
493.0
6,265
1,581
3,505
42
11,392
72.3
31.4
26.0
17.6
147.3
69.50
64.65
68.02
68.86
66.73
7.00
3.22
2.90
2.87
5.50
36.54
25.73
27.74
28.66
32.17
8.98
5.29
4.93
6.41
7.18
16,545
27,476
19,464
4,616
68,101
325.0
9.5
258.5
42.5
635.5
6,955
1,725
9,560
88
18,328
77.7
30.8
72.1
11.8
192.4
63.69
58.55
59.03
61.73
60.12
5.97
3.12
2.79
3.19
4.44
35.99
27.52
22.15
25.85
27.95
8.06
7.43
6.43
9.31
7.43
18,658
29,933
22,944
4,850
76,385
345.7
10.3
275.0
36.8
667.8
7,423
1,725
11,427
119
20,694
83.7
33.4
80.2
11.1
208.4
50.59
45.45
47.91
47.96
47.61
5.06
4.39
2.82
2.72
4.00
27.76
21.29
15.14
21.10
20.37
5.78
6.62
7.87
13.55
7.14
(1) LPG and ethane are reported as natural gas liquids (NGL).
(2) Total barrels of oil equivalent (boe) conversion is based on the following: 6,000 standard cubic feet (scf) of natural gas equals one boe.
(3) Average production costs include direct and indirect costs relating to the production of hydrocarbons and the foreign exchange effect of translating local currency
denominated costs into US dollars, but excludes ad valorem and severance taxes, and the cost to transport our produced hydrocarbons to the point of sale.
(4) Other comprises Algeria, Canada, Mexico, Trinidad and Tobago, and the United Kingdom (divested 30 November 2018).
(5) Production for Onshore US assets shown through the closing date of the divestment. Production for Eagle Ford, Permian, and Haynesville assets are shown through
31 October 2018 and production for Fayetteville is shown through 28 September 2018.
BHP Annual Report 2019 265
i
S
t
r
a
t
e
g
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
a
t
B
H
P
R
e
m
u
n
e
r
a
t
i
o
n
R
e
p
o
r
t
D
i
r
e
c
t
o
r
s
’
R
e
p
o
r
t
i
F
n
a
n
c
a
i
l
S
t
a
t
e
m
e
n
t
s
6
A
d
d
i
t
i
o
n
a
l
i
n
f
o
r
m
a
t
i
o
n
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
6.3 Resources and Reserves
Resources are the estimated quantities of material that can
potentially be commercially recovered from the Group’s properties.
Reserves are a subset of resources that can be demonstrated
to be able to be economically and legally extracted. In order
to estimate reserves, assumptions are required about a range
of technical and economic factors, including quantities, qualities,
production techniques, recovery efficiency, production and
transport costs, commodity supply and demand, commodity
prices and exchange rates.
Estimating the quantity and/or quality of reserves requires the
size, shape and depth of ore bodies or oil and gas reservoirs to
be determined by analysing geological data, such as drilling samples
and geophysical survey interpretations. Economic assumptions used
to estimate reserves change from period-to-period as additional
technical and operational data is generated.
6.3.1 Petroleum reserves
Estimates of oil and gas reserves involve some degree of uncertainty,
are inherently imprecise, require the application of judgement and
are subject to future revision. Accordingly, financial and accounting
measures (such as the standardised measure of discounted
cash flows, depreciation, depletion and amortisation charges,
the assessment of impairments and the assessment of valuation
allowances against deferred tax assets) that are based on reserve
estimates are also subject to change.
How we estimate and report reserves
Petroleum’s reserves are estimated as of 30 June each year.
Reported reserves include both Conventional Petroleum reserves
and Onshore US reserves for FY2017 and FY2018. Footnotes have
been included to identify the contribution of the discontinued
Onshore US operations for these years. The sale of Petroleum’s
interests in Onshore US reserves was completed in FY2019.
Remaining reserves at the end of FY2019 reflect the continuing
conventional operations only.
Our proved reserves are estimated and reported according
to SEC regulations and have been determined in accordance
with SEC Rule 4-10(a) of Regulation S-X.
Proved oil and gas reserves
Proved oil and gas reserves are those quantities of crude oil,
natural gas and natural gas liquids (NGL) that, by analysis
of geoscience and engineering data, can be estimated with
reasonable certainty to be economically producible from
a given date forward from known reservoirs and under existing
economic conditions, operating methods, operating contracts
and government regulations. Unless evidence indicates that
renewal of existing operating contracts is reasonably certain,
estimates of economically producible reserves reflect only the
period before the contracts expire. The project to extract the
hydrocarbons must have commenced or the operator must
be reasonably certain that it will commence within a reasonable
time. As specified in SEC Rule 4-10(a) of Regulation S-X,
oil and gas prices are taken as the unweighted average of the
corresponding first day of the month prices for the 12 months
prior to the ending date of the period covered.
Proved reserves were estimated by reference to available well
and reservoir information, including but not limited to well logs,
well test data, core data, production and pressure data, geologic
data, seismic data and in some cases, to similar data from
analogous, producing reservoirs. A wide range of engineering
and geoscience methods, including performance analysis,
numerical simulation, well analogues and geologic studies
were used to estimate high confidence proved developed and
undeveloped reserves in accordance with SEC regulations.
Proved reserve estimates were attributed to future development
projects only where there is a significant commitment to project
funding and execution and for which applicable government
and regulatory approvals have been secured or are reasonably
certain to be secured. Furthermore, estimates of proved reserves
include only volumes for which access to market is assured with
reasonable certainty. All proved reserve estimates are subject
to revision (either upward or downward) based on new information,
such as from development drilling and production activities
or from changes in economic factors, including product prices,
contract terms or development plans.
Developed oil and gas reserves
Proved developed oil and gas reserves are reserves that can
be expected to be recovered through:
• existing wells with existing equipment and operating methods;
• installed extraction equipment and infrastructure operational
at the time of the reserve estimate if the extraction is by means
not involving a well.
Performance-derived reserve assessments for producing wells
were primarily based in the following manner:
• for our conventional operations, reserves were estimated using
rate and pressure decline methods, including material balance,
supplemented by reservoir simulation models where appropriate;
• for our discontinued Onshore US operations reported for
FY2017 and FY2018, rate-transient analysis and decline curve
analysis methods;
• for wells that lacked sufficient production history, reserves
were estimated using performance-based type curves
and offset location analogues with similar geologic and
reservoir characteristics.
Proved undeveloped reserves
Proved undeveloped oil and gas reserves are reserves that are
expected to be recovered from new wells on undrilled acreage
where commitment has been made to commence development
within five years from first reporting or from existing wells where
a relatively major expenditure is required for recompletion.
A combination of geologic and engineering data and where
appropriate, statistical analysis was used to support the assignment
of proved undeveloped reserves when assessing planned drilling
locations. Performance data along with log and core data was
used to delineate consistent, continuous reservoir characteristics
in core areas of the development. Proved undeveloped locations
were included in core areas between known data and adjacent
to productive wells using performance-based type curves and
offset location analogues with similar geologic and reservoir
characteristics. Locations where a high degree of certainty
could not be demonstrated using the above technologies and
techniques were not categorised as proved.
Methodology used to estimate reserves
Reserve estimates have been estimated with deterministic
methodology, with the exception of the North West Shelf gas
operation in Australia, where probabilistic methodology has
been used to estimate and aggregate reserves for the reservoirs
dedicated to the gas project only. The probabilistic based portion
of these reserves totals 16 million barrels of oil equivalent
(MMboe) in FY2019, 23 MMboe in FY2018 and 39 MMboe in 2017.
These amounts represent approximately 2 per cent of our total
reported proved reserves in FY2019, 2 per cent in FY2018 and
3 per cent in FY2017, respectively. Total boe conversion is based
on the following: 6,000 standard cubic feet (scf) of natural gas
equals 1 boe. Aggregation of proved reserves beyond the field/
project level has been performed by arithmetic summation.
Due to portfolio effects, aggregates of proved reserves may be
conservative. The custody transfer point(s) or point(s) of sale
applicable for each field or project are the reference point for
reserves. The reserves replacement ratio is the change in reserves
during the year excluding production, divided by the production
during the year and stated as a percentage.
266 BHP Annual Report 2019
Governance
The Petroleum Reserves Group (PRG) is a dedicated group that
provides oversight of the reserves’ assessment and reporting
processes. It is independent of the various operation teams directly
responsible for development and production activities. The PRG
is staffed by individuals averaging more than 30 years’ experience
in the oil and gas industry. The manager of the PRG, Abhijit Gadgil,
is a full-time employee of BHP and is responsible for overseeing
the preparation of the reserve estimates and compiling the
information for inclusion in this Annual Report. He has an advanced
degree in engineering and more than 35 years of diversified
industry experience in reservoir engineering, reserves assessment,
field development and technical management. He is a 35-year
member of the Society of Petroleum Engineers (SPE). He has also
served on the Society of Petroleum Engineers Oil and Gas Reserves
Committee. Mr Gadgil has the qualifications and experience
required to act as a qualified petroleum reserves evaluator under
the Australian Securities Exchange (ASX) Listing Rules. The estimates
of petroleum reserves are based on and fairly represent information
and supporting documentation prepared under the supervision
of Mr Gadgil. He has reviewed and agrees with the information
included in section 6.3.1 and has given his prior written consent
for its publication. No part of the individual compensation for
members of the PRG is dependent on reported reserves.
Reserve assessments for all Petroleum operations were
conducted by technical staff within the operating organisation.
These individuals meet the professional qualifications outlined
by the SPE, are trained in the fundamentals of SEC reserves
reporting and the reserves processes and are endorsed by the
PRG. Each reserve assessment is reviewed annually by the PRG
to ensure technical quality, adherence to internally published
Petroleum guidelines and compliance with SEC reporting
requirements. Once endorsed by the PRG, all reserves receive
final endorsement by senior management and the Risk and
Audit Committee prior to public reporting. Our Internal Audit
and Assurance function provides secondary assurance of
the oil and gas reserve reporting processes through audits
of the key controls that have been implemented, as required
by the U.S. Sarbanes-Oxley Act of 2002.
For more information on our risk management governance,
refer to section 2.13.1.
FY2019 reserves
Production for FY2019 totalled 147 MMboe in sales, which was
comprised of 121 MMboe for our conventional fields and 26 MMboe
that was produced from our US Onshore fields prior to the closure
of the divestment agreements. In comparison, our conventional
fields produced approximately 1 MMboe more than in FY2018.
This increase was due to a number of factors, including start-up
of the Greater Western Flank Phase B project in the North West
Shelf in Australia and higher uptime in several fields, which more
than offset natural production declines in more mature fields.
Refer to section 6.2.2 for more information. There was also an
additional 5 MMboe in non-sales production, primarily for fuel
consumed in our Petroleum operations. The combined sales and
non-sales production totalled 152 MMboe for FY2019. For our
conventional fields, additions and revisions to reserves added
57 MMboe, which replaced 45 per cent of the production in FY2019.
As of 30 June 2019, our proved reserves totalled 841 MMboe.
Reserves have been calculated using the economic interest method
and represent net interest volumes after deduction of applicable
royalty. Reserves of 64 MMboe are in two production and risk-sharing
arrangements where BHP has a revenue interest in production
without transfer of ownership of the products. At 30 June 2019,
approximately 8 per cent of the proved reserves were attributable
to such arrangements.
Discoveries and extensions
Extensions added a total of approximately 2 MMboe to proved
reserves, of which 1 MMboe was added for the Atlantis field in the
US Gulf of Mexico with the balance being added in the Snapper
field in Bass Strait in Australia.
Improved recovery revisions
There were no improved recovery revisions during the year.
Revisions
Revisions for FY2019 added a total of 56 MMboe. The largest
addition was in the Atlantis field where 28 MMboe was added for
performance and approval of Phase 3 infill drilling. Other revisions,
primarily in the Mad Dog field, brought the total revisions for our
US Gulf of Mexico assets to 29 MMboe. Additions through revisions
in Australia totalled 22 MMboe, with the North West Shelf project
adding 11 MMboe. The Goodwyn field was the largest component
of this change adding 10 MMboe for strong performance. In Bass
Strait, 11 MMboe was added with the largest changes occurring
in the Snapper and Turrum fields, which added 5 MMboe and
2 MMboe, respectively. In other geographic areas, 4 MMboe was
added for better performance in the Offshore Angostura project
in Trinidad and Tobago, while 1 MMboe was added for improved
performance in the ROD Integrated Development in Algeria.
Sales
The sale of Petroleum’s interests in the US Onshore Permian,
Eagle Ford, Haynesville and Fayetteville fields accounted for
reported sales of approximately 464 MMboe. There were
no purchases during FY2019.
FY2018 reserves
Production for FY2018 totalled 192 MMboe in sales, which is a
decrease of 16 MMboe from FY2017. Refer to section 6.2.2 for
more information. There was an additional 5 MMboe in non-sales
production, primarily for fuel consumed in our Petroleum operations.
The combined sales and non-sales production totalled 198 MMboe.
The natural decline of production in our Onshore US fields and
mature fields in other locations was the primary reason for the
lower amount produced.
As of 30 June 2018, our proved reserves totalled 1400 MMboe
and reflected a net increase of 62 MMboe and production
of 198 MMboe from the 1535 MMboe reported at FY2017.
This increase was primarily the result of continued strong
performance in our Offshore US fields in the Gulf of Mexico and
Offshore Trinidad and Tobago along with better performance
and improved liquid product prices for our North American
shale operations. These increases were partially offset by
reductions in the North West Shelf (Australia) and reduced gas
prices received for production from our Onshore US fields.
Net additions to reserves resulted in a reserves replacement
of 32 per cent overall, (Conventional: 25 per cent reserves
replacement, Onshore US: 43 per cent reserves replacement).
As of 30 June 2018, approximately 65 per cent of our proved
reserves were in conventional fields, while about 35 per cent
of our proved reserves were in unconventional fields.
Discoveries and extensions
Discoveries and extensions added 75 MMboe to proved reserves
during FY2018. This was comprised of 69 MMboe of extensions
related to planned drilling in new locations in our Onshore
US operations within the next five years and an additional
4 MMboe in the Mad Dog field and 2 MMboe in the Shenzi field,
both of which are in the US Gulf of Mexico.
Improved recovery revisions
There were no improved recovery revisions during the year.
BHP Annual Report 2019 267
i
S
t
r
a
t
e
g
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
a
t
B
H
P
R
e
m
u
n
e
r
a
t
i
o
n
R
e
p
o
r
t
D
i
r
e
c
t
o
r
s
’
R
e
p
o
r
t
i
F
n
a
n
c
a
i
l
S
t
a
t
e
m
e
n
t
s
6
A
d
d
i
t
i
o
n
a
l
i
n
f
o
r
m
a
t
i
o
n
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
Improved recovery revisions
There were no improved recovery revisions during the year.
Revisions
Overall, net revisions increased proved reserves by 274 MMboe
during FY2017. Of this, the impact of commodity prices using the
required SEC price-basis represented an increase of 271 MMboe.
Well performance, interest changes and other revisions resulted
in a net increase of 3 MMboe. Virtually all of the price-related
increase occurred in our Onshore US fields.
In our US operations, the overall increase in proved reserves
through revisions totalled 258 MMboe. This included price related
additions of 269 MMboe, 32 MMboe for additional drilling locations
planned in our Onshore US fields and a reduction of 51 MMboe
related to performance and other revisions in our Onshore US
operations. There were also additions of 8 MMboe for better
than expected performance and increased prices in the Shenzi,
Atlantis and Mad Dog fields in our Gulf of Mexico operations.
In our Australian operations, continued strong performance of the
North West Shelf and Minerva fields added a total of 7 MMboe
through revisions. This was partially offset by performance
and other related reductions of 3 MMboe in Bass Strait fields.
Overall, revisions for Australian fields totalled about 4 MMboe.
Operations outside of Australia and the United States also added
approximately 12 MMboe through revisions. In the Angostura
area fields in Trinidad and Tobago, 6 MMboe was added for better
than expected performance. The ROD Integrated Development
in Algeria also added 4 MMboe primarily for better than expected
performance. Our fields in the United Kingdom also added
1 MMboe offsetting production during the year.
Sales
The sale of acreage in our Eagle Ford and Permian fields accounted
for our reported sales of approximately 1 MMboe. There were no
purchases during FY2017.
These results are summarised in the following tables, which
detail estimated oil, condensate, NGL and natural gas reserves at
30 June 2019, 30 June 2018 and 30 June 2017, with a reconciliation
of the changes in each year.
Revisions
Overall, net revisions decreased proved reserves by 7 MMboe
during FY2018. In our Australian operations, reductions of 21 MMboe
occurred, primarily in the North West Shelf, due to revisions related
to updated technical assessments. In the United States, net revisions
increased reserves by approximately 4 MMboe. This was a result
of additions of 35 MMboe, primarily for strong performance
in the Atlantis field in the Offshore US Gulf of Mexico, and better
performance in our Onshore US Eagle Ford and Permian assets.
These additions were partially offset by reductions of 33 MMboe,
mainly in our Onshore US fields as a result of lower planned drilling
activity in light of our previously announced plan to exit our shale
operations and the effect of lower gas prices. In other areas
outside of Australia and the United States, revisions increased
reserves by 10 MMboe, primarily for strong performance in the
Angostura Phase 3 project in Offshore Trinidad and Tobago.
Of the overall decrease in proved reserves of 7 MMboe through
revisions, the impact of commodity prices using the required
SEC price-basis represented a decrease of 4 MMboe while well
performance, interest changes and other revisions resulted
in a net decrease of 3 MMboe. Virtually all of the price-related
decrease occurred in our Onshore US fields where increases
of 26 MMboe occurred in the Eagle Ford and Permian fields
as a result of higher liquids prices, but these additions were
more than offset by 31 MMboe in reductions in Haynesville
and Fayetteville due to lower gas prices.
Sales
The sale of Petroleum’s interests in the US Onshore Eagle Ford
field accounted for our reported sales of approximately 5 MMboe.
There were no purchases during FY2018.
FY2017 reserves
Production for FY2017 totalled 208 MMboe in sales, which was
a decrease of 32 MMboe from FY2016. Refer to section 6.2.2 for
more information. There was an additional 5 MMboe in non-sales
production, primarily for fuel consumed in our Petroleum operations.
The combined sales and non-sales production totalled 213 MMboe.
The natural decline of production, primarily in our Onshore US fields
and mature fields in other locations was the primary reason for the
lower amount produced.
As of 30 June 2017, our proved reserves totalled 1535 MMboe and
reflected a net increase of 445 MMboe and annual production of
213 MMboe from the 1303 MMboe reported at FY2016. This increase
was primarily the result of higher product prices experienced during
the reporting period, reductions in unconventional well operating
costs and an increase in planned drilling activity which enabled the
addition of new proved undeveloped reserves for our Onshore US
fields. As of 30 June 2017, approximately 65 per cent of our proved
reserves were in conventional fields, while about 35 per cent of our
proved reserves were in unconventional fields.
Discoveries and extensions
Discoveries and extensions added 172 MMboe to proved reserves
during FY2017. This was comprised of 105 MMboe of extensions
related to the decision to proceed and funding of the Phase 2
development of the Mad Dog field and 3 MMboe related to drilling
in the Atlantis field in the US Gulf of Mexico along with 65 MMboe
related to planned drilling in new locations in our Onshore US
operations within the next five years.
268 BHP Annual Report 2019
Millions of barrels
Australia
United States
Other (b)
Total
Proved developed and undeveloped oil and condensate reserves (a)
Reserves at 30 June 2016
Improved recovery
Revisions of previous estimates
Extensions and discoveries
Purchase/sales of reserves
Production
Total changes
Reserves at 30 June 2017
Improved recovery
Revisions of previous estimates
Extensions and discoveries
Purchase/sales of reserves
Production
Total changes
Reserves at 30 June 2018
Improved recovery
Revisions of previous estimates
Extensions and discoveries
Purchase/sales of reserves
Production
Total changes
Reserves at 30 June 2019
Developed
Proved developed oil and condensate reserves
as of 30 June 2016
as of 30 June 2017
as of 30 June 2018
Developed reserves as of 30 June 2019
Undeveloped
Proved undeveloped oil and condensate reserves
as of 30 June 2016
as of 30 June 2017
as of 30 June 2018
Undeveloped reserves as of 30 June 2019
113.2
–
(5.9)
–
–
(18.7)
(24.6)
88.6
–
(1.6)
–
–
(16.5)
(18.2)
70.5
–
7.8
0.0
–
(14.4)
(6.5)
63.9
82.2
76.2
60.5
59.0
31.0
12.4
10.0
5.0
253.7 (c)
–
17.0
123.3
(0.4)
(52.9)
87.0
340.7 (c)
–
41.2
27.6
(0.7)
(46.9)
21.1
361.8 (c)
–
25.9
0.8
(79.7)
(34.5)
(87.5)
274.4
187.3
162.3
181.2
128.9
66.4
178.4
180.7
145.4
26.5
–
4.4
–
–
(4.8)
(0.5)
26.0
–
0.6
–
–
(4.6)
(4.0)
21.9
–
1.0
–
–
(4.9)
(3.9)
18.0
20.0
21.9
19.2
16.3
6.5
4.0
2.8
1.7
393.4 (c)
–
15.4
123.3
(0.4)
(76.4)
61.9
455.3 (c)
–
40.1
27.6
(0.7)
(68.1)
(1.1)
454.2 (c)
–
34.7
0.9
(79.7)
(53.7)
(97.9)
356.3
289.5
260.5
260.8
204.2
103.9
194.8
193.4
152.1
(a) Small differences are due to rounding to first decimal place.
(b) ‘Other’ comprises Algeria,Trinidad and Tobago and the United Kingdom.
(c) For FY2016, FY2017, and FY2018 amounts include 62.9, 73.0 and 86.1 million barrels respectively attributable to discontinued operations of Onshore US.
i
S
t
r
a
t
e
g
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
a
t
B
H
P
R
e
m
u
n
e
r
a
t
i
o
n
R
e
p
o
r
t
D
i
r
e
c
t
o
r
s
’
R
e
p
o
r
t
i
F
n
a
n
c
a
i
l
S
t
a
t
e
m
e
n
t
s
6
A
d
d
i
t
i
o
n
a
l
i
n
f
o
r
m
a
t
i
o
n
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
BHP Annual Report 2019 269
Millions of barrels
Australia
United States
Other (c)
Total
Proved developed and undeveloped NGL reserves (a)
Reserves at 30 June 2016
Improved recovery
Revisions of previous estimates
Extensions and discoveries
Purchase/sales of reserves
Production (b)
Total changes
Reserves at 30 June 2017
Improved recovery
Revisions of previous estimates
Extensions and discoveries
Purchase/sales of reserves
Production (b)
Total changes
Reserves at 30 June 2018
Improved recovery
Revisions of previous estimates
Extensions and discoveries
Purchase/sales of reserves
Production (b)
Total changes
Reserves at 30 June 2019
Developed
Proved developed NGL reserves
as of 30 June 2016
as of 30 June 2017
as of 30 June 2018
Developed reserves as of 30 June 2019
Undeveloped
Proved undeveloped NGL reserves
as of 30 June 2016
as of 30 June 2017
as of 30 June 2018
Undeveloped reserves as of 30 June 2019
71.3
–
1.2
–
–
(7.4)
(6.2)
65.2
–
(1.7)
–
–
(7.0)
(8.7)
56.5
–
4.9
0.2
–
(6.3)
(1.2)
55.2
38.0
56.6
49.8
46.5
33.3
8.6
6.6
8.7
35.6 (d) (e)
–
23.4
13.1
(0.1)
(13.2)
23.2
58.9 (d) (e)
–
12.7
13.4
(1.7)
(11.3)
13.1
72.0 (d) (e)
–
0.8
0.1
(58.7)
(5.1)
(62.9)
9.1 (d)
30.7
31.4
37.0
4.3
4.9
27.5
35.0
4.8
–
–
0.1
–
–
(0.1)
–
–
–
0.1
–
–
(0.1)
–
–
–
0.0
–
–
(0.0)
–
–
–
–
–
–
–
–
–
–
107.0 (d) (e)
–
24.8
13.1
(0.1)
(20.7)
17.0
124.0 (d) (e)
–
11.0
13.4
(1.7)
(18.3)
4.4
128.4 (d) (e)
–
5.7
0.2
(58.7)
(11.4)
(64.1)
64.3 (d)
68.7
88.0
86.8
50.8
38.2
36.1
41.6
13.5
(a) Small differences are due to rounding to first decimal place.
(b) Production includes volumes consumed by operations.
(c) ‘Other’ comprises Algeria, Trinidad and Tobago and the United Kingdom.
(d) For FY2016, FY2017 and FY2018 amounts include 0.2, 2.1 and 2.5 million barrels respectively, which are anticipated to be consumed as fuel in the United States.
(e) For FY2016, FY2017 and FY2018 amounts include 28.3, 51.0 and 62.2 million barrels respectively attributable to discontinued operations of Onshore US.
270 BHP Annual Report 2019
Billions of cubic feet
Australia (c)
United States
Other (d)
Total
Proved developed and undeveloped natural gas reserves (a)
Reserves at 30 June 2016
Improved recovery
Revisions of previous estimates
Extensions and discoveries
Purchase/sales of reserves
Production (b)
Total changes
Reserves at 30 June 2017
Improved recovery
Revisions of previous estimates
Extensions and discoveries
Purchase/sales of reserves
Production (b)
Total changes
Reserves at 30 June 2018
Improved recovery
Revisions of previous estimates
Extensions and discoveries
Purchase/sales of reserves
Production (b)
Total changes
Reserves at 30 June 2019
Developed
Proved developed natural gas reserves
as of 30 June 2016
as of 30 June 2017
as of 30 June 2018
Developed reserves as of 30 June 2019
Undeveloped
Proved undeveloped natural gas reserves
as of 30 June 2016
as of 30 June 2017
as of 30 June 2018
Undeveloped reserves as of 30 June 2019
3,192.0 (e)
1,311.1 (f) (i)
310.8 (g)
4,813.8 (h) (i)
–
49.9
–
–
(372.1)
(322.3)
–
1,307.4
216.5
(0.7)
(287.9)
1,235.3
–
43.5
–
–
(38.3)
5.1
–
1,400.7
216.5
(0.7)
(698.4)
918.1
2,869.7 (e)
2,546.3 (f) (i)
315.9 (g)
5,731.9 (h) (i)
–
(105.3)
–
–
(351.9)
(457.2)
–
(302.0)
204.1
(17.8)
(270.7)
(386.3)
–
57.0
–
–
(44.3)
12.7
–
(350.2)
204.1
(17.8)
(666.9)
(830.7)
2,412.5 (e)
2,160.1 (f) (i)
328.6 (g)
4,901.2 (h) (i)
–
53.7
2.5
–
(336.8)
(280.6)
–
14.0
0.4
(1,952.8)
(109.4)
(2,047.8)
–
24.7
–
–
(77.8)
(53.1)
–
92.4
3.0
(1,952.8)
(524.1)
(2,381.5)
2,131.9 (e)
112.3 (f) (i)
275.5 (g)
2,519.7 (h) (i)
2,204.6
2,346.3
1,975.9
1,856.4
987.4
523.4
436.6
275.5
1,268.1
1,556.4
1,479.4
65.5
43.0
989.9
680.7
46.8
182.9
315.9
328.6
275.5
127.8
–
–
–
3,655.6
4,218.5
3,783.8
2,197.3
1,158.2
1,513.3
1,117.3
322.3
(a) Small differences are due to rounding to first decimal place.
(b) Production includes volumes consumed by operations.
(c) Production for Australia includes gas sold as LNG.
(d) ‘Other’ comprises Algeria, Trinidad and Tobago and the United Kingdom.
(e) For FY2016, FY2017, FY2018 and FY2019 amounts include 321, 295, 295 and 268 billion cubic feet respectively, which are anticipated to be consumed as fuel in operations
in Australia.
(f) For FY2016, FY2017, FY2018 and FY2019 amounts include 75, 155, 160 and 64 billion cubic feet respectively, which are anticipated to be consumed as fuel in operations
in the United States.
(g) For FY2016, FY2017, FY2018 and FY2019 amounts include 17, 17, 16 and 14 billion cubic feet respectively, which are anticipated to be consumed as fuel in operations
in Other areas.
(h) For FY2016, FY2017, FY2018 and 2019 amounts include 413, 467, 472 and 346 billion cubic feet respectively, which are anticipated to be consumed as fuel in operations.
(i) For FY2016, FY2017 and FY2018 amounts include 1238, 2444 and 2049 billion cubic feet respectively attributable to discontinued operations of Onshore US.
BHP Annual Report 2019 271
i
S
t
r
a
t
e
g
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
a
t
B
H
P
R
e
m
u
n
e
r
a
t
i
o
n
R
e
p
o
r
t
D
i
r
e
c
t
o
r
s
’
R
e
p
o
r
t
i
F
n
a
n
c
a
i
l
S
t
a
t
e
m
e
n
t
s
6
A
d
d
i
t
i
o
n
a
l
i
n
f
o
r
m
a
t
i
o
n
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
Millions of barrels of oil equivalent (a)
Australia
United States
Other (d)
Total
Proved developed and undeveloped oil, condensate, natural gas and NGL reserves (b)
Reserves at 30 June 2016
716.5 (e)
507.9 (f) (i)
78.2 (g)
1,302.7 (h) (i)
Improved recovery
Revisions of previous estimates
Extensions and discoveries
Purchase/sales of reserves
Production (c)
Total changes
Reserves at 30 June 2017
Improved recovery
Revisions of previous estimates
Extensions and discoveries
Purchase/sales of reserves
Production (c)
Total changes
Reserves at 30 June 2018
Improved recovery
Revisions of previous estimates
Extensions and discoveries
Purchase/sales of reserves
Production (c)
Total changes
Reserves at 30 June 2019
Developed
Proved developed oil, condensate, natural gas and NGL reserves
as of 30 June 2016
as of 30 June 2017
as of 30 June 2018
Developed reserves as of 30 June 2019
Undeveloped
Proved undeveloped oil, condensate, natural gas and NGL reserves
as of 30 June 2016
as of 30 June 2017
as of 30 June 2018
Undeveloped reserves as of 30 June 2019
–
3.6
–
–
(88.1)
(84.5)
632.1 (e)
–
(20.9)
–
–
(82.2)
(103.1)
529.0 (e)
–
21.6
0.6
–
(76.8)
(54.5)
–
258.3
172.4
(0.6)
(114.0)
316.1
–
11.7
–
–
(11.4)
0.4
–
273.6
172.4
(0.6)
(213.5)
232.0
824.0 (f) (i)
78.6 (g)
1,534.6 (h) (i)
–
3.5
75.0
(5.3)
(103.3)
(30.1)
–
10.2
–
–
(12.1)
(1.9)
–
(7.3)
75.0
(5.3)
(197.6)
(135.1)
793.8 (f) (i)
76.7 (g)
1,399.5 (h) (i)
–
29.1
0.9
(463.9)
(57.8)
(491.7)
–
5.1
–
–
(17.9)
(12.8)
–
55.8
1.6
(463.9)
(152.4)
(558.9)
474.5 (e)
302.2 (f) (i)
63.9 (g)
840.6 (h) (i)
487.6
523.8
439.6
414.9
228.9
108.2
89.4
59.6
429.4
453.1
464.7
144.1
78.5
370.8
329.2
158.1
50.5
74.6
73.9
62.2
27.8
4.0
2.8
1.7
967.5
1,051.6
978.2
621.2
335.2
483.1
421.3
219.4
(a) Barrel oil equivalent conversion based on 6,000 scf of natural gas equals 1 boe.
(b) Small differences are due to rounding to first decimal place.
(c) Production includes volumes consumed by operations.
(d) ‘Other’ comprises Algeria, Trinidad and Tobago and the United Kingdom.
(e) For FY2016, FY2017, FY2018 and FY2019 amounts include 53, 49, 49 and 45 million barrels equivalent respectively, which are anticipated to be consumed as fuel
in operations in Australia.
(f) For FY2016, FY2017, FY2018 and FY2019 amounts include 13, 28, 29 and 11 million barrels equivalent respectively, which are anticipated to be consumed as fuel
in operations in the United States.
(g) For FY2016, FY2017, FY2018 and FY2019 amounts include 3, 3, 3 and 2 million barrels equivalent respectively, which are anticipated to be consumed as fuel
in operations in Other areas.
(h) For FY2016, FY2017, FY2018 and FY2019 amounts include 69, 80, 81 and 58 million barrels equivalent respectively, which are anticipated to be consumed as fuel
in operations.
(i) For FY2016, FY2017 and FY2018 amounts include 298, 531 and 490 million barrels equivalent respectively attributable to discontinued operations of Onshore US.
272 BHP Annual Report 2019
FY2019 proved undeveloped reserves
At 30 June 2019, Petroleum had 219 MMboe of proved undeveloped
reserves, which corresponds to 26 per cent of the reported proved
reserves of 841 MMboe. This represents a reduction in proved
undeveloped reserves of 202 MMboe from the 421 MMboe at
30 June 2018. The largest element of this reduction was 185 MMboe,
which occurred with the divestment of unconventional Onshore
US assets. A reclassification from proved undeveloped to proved
developed status of approximately 40 MMboe that occurred in the
North West Shelf, Australia, with the completion of development
and the start of production from the Greater Western Flank Phase B
project, also contributed to the reduction. An additional 1 MMboe
was also reclassified from proved undeveloped to proved developed
status with the completion of an infill well in the ROD Integrated
Development in Algeria. Partially offsetting these reductions were
revisions for technical studies of 10 MMboe for the Kipper field in
the Bass Strait, Australia. Additions following the approval of the
Atlantis Phase 3 project in the Offshore US Gulf of Mexico added
8 MMboe for development plan changes, 7 MMboe for performance
and 1 MMboe as an extension. A performance reduction of 2 MMboe
in the Mad Dog field partially offset the Atlantis performance addition.
Over the past three years, the conversion of proved undeveloped
reserves to developed has totalled 267MMboe, averaging 89
MMboe per year. At 30 June 2019, a total of 69 MMboe proved
undeveloped reserves have been reported for five or more years.
These reserves are in our currently producing fields and will be
developed and brought on stream in a phased manner to best
optimise the use of production facilities and to meet sales
commitments. During FY2019, Petroleum spent US$1.0 billion
on development activities worldwide. Of this amount:
• US$0.5 billion was spent progressing the conversion of previously
reported proved undeveloped reserves for conventional projects
where developed status was achieved in FY2019 or, will be
achieved when development is completed in the future;
• US$0.3 billion related to development expenditures occurring
in divested Onshore US fields; and
• US$0.2 billion represented other development expenditures,
including compliance and infrastructure improvements.
FY2018 proved undeveloped reserves
At 30 June 2018, Petroleum had 421 MMboe of proved
undeveloped reserves, which represented 30 per cent of year-end
2018 proved reserves of 1400 MMboe. Approximately 237 MMboe
or 56 per cent of the proved undeveloped reserves resided in our
conventional offshore fields in Australia, the Gulf of Mexico and
Algeria, while 185 MMboe or 44 per cent resided in our Onshore
US fields. The proved undeveloped reserves at 30 June 2018 reflect
a net decrease of 62 MMboe from the 483 MMboe reported at
30 June 2017. This decrease was in large part the result of changes
to development plans and reduced pace of drilling which resulted
in a reduction of 67 MMboe, the majority of which occurred
in our Onshore US fields. This was partially offset by extensions
of 50 MMboe for new drilling locations in our Onshore US fields.
The conversion of 48 MMboe from proved undeveloped to proved
developed through drilling and development activities also
contributed to the decrease. The largest component of this
conversion occurred in our Onshore US fields where 26 MMboe
was moved to proved developed status. An additional 11 MMboe
was converted in the North West Shelf Persephone development
in Australia, while 10 MMboe was converted in the Atlantis field
in the Offshore US Gulf of Mexico. An additional 1 MMboe was
also converted as a result of drilling in the ROD Integrated
Development in Algeria. Improved liquids prices but reduced gas
prices led to a net reduction due to price in Onshore US proved
undeveloped reserves of 4 MMboe. Performance revisions overall
totalled 9 MMboe, with an increase of 11 MMboe in Onshore US
fields, primarily in Eagle Ford and Permian, and a net reduction
of 2 MMboe in Australia.
FY2017 proved undeveloped reserves
At 30 June 2017, Petroleum had 483 MMboe of proved undeveloped
reserves, which represented 31 per cent of year-end 2017 proved
reserves of 1535 MMboe. Approximately 263 MMboe or 54 per cent
of the proved undeveloped reserves resided in our conventional
offshore fields in Australia, the Gulf of Mexico and Trinidad and
Tobago, while 220 MMboe or 46 per cent resided in our Onshore
US fields. The proved undeveloped reserves at 30 June 2017
reflected a net increase of 148 MMboe from the 335 MMboe
reported at 30 June 2016. This increase was primarily the result
of adding 202 MMboe of new proved undeveloped reserves for
drilling planned over the next five years in our Onshore US fields.
In the Gulf of Mexico, 105 MMboe was also added for the Mad Dog
Phase 2 project approval and 3 MMboe was added in the Atlantis
field as a result of drilling and reservoir assessments. The portion
of these additions reported as extensions totalled 161 MMboe
with the balance being reported as revisions. The additions from
revisions were offset by development activities that converted
177 MMboe of proved undeveloped to proved developed reserves.
The largest of these conversions occurred in Australia where
111 MMboe were converted to proved developed in the Kipper,
Tuna and Turrum fields in Bass Strait with the start-up of the
Longford gas conditioning plant. The start-up and first gas from
the Tidepole field in the Greater Western Flank A project in the
North West Shelf also converted 10 MMboe to proved developed.
In Trinidad and Tobago, 23 MMboe was converted to proved
developed for the completion of Angostura Phase 3 development.
In the United States, drilling and completion activities resulted
in the conversion of 15 MMboe to proved developed in the Eagle
Ford field, 9 MMboe in the Atlantis and 8 MMboe in the Mad Dog
(Spar A) fields in the Gulf of Mexico. Price related additions
in our Onshore US fields added 163 MMboe due to improved
product prices.
The changes in proved undeveloped reserves in FY2019, FY2018
and FY2017 are summarised by change category in the table below.
Additional information detailing the effect of price, performance,
changes in capital development plans and technical studies are
also provided for Revisions.
Proved Undeveloped Reserves (PUD) Reconciliation (MMboe)
PUD Opening Balance
Revisions of Previous Estimates
Reclassifications to developed
Price
Performance
Development Plan Changes
Technical Studies and Other
Extensions/Discoveries
Acqusitions/Sales
Total Change
PUD Closing Balance
Year Ended 30 June
2019
421
(18)
(42)
–
5
8
10
1
(185)
(202)
219
2018
483
(111)
(48)
(4)
9
(67)
(1)
50
–
(62)
421
2017
335
(13)
(177)
163
–
1
–
161
–
148
483
BHP Annual Report 2019 273
i
S
t
r
a
t
e
g
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
a
t
B
H
P
R
e
m
u
n
e
r
a
t
i
o
n
R
e
p
o
r
t
D
i
r
e
c
t
o
r
s
’
R
e
p
o
r
t
i
F
n
a
n
c
a
i
l
S
t
a
t
e
m
e
n
t
s
6
A
d
d
i
t
i
o
n
a
l
i
n
f
o
r
m
a
t
i
o
n
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
These include:
• standard BHP procedures for public reporting aligned with
current regulatory requirements;
• independent audits of new and materially changed estimates;
• annual reconciliation performance metrics to validate reserves
estimates for operating mines;
• internal technical assessments of resources and reserves
estimates for each asset scheduled every two years.
The Geoscience and Resource Engineering Centres of Excellence
manage assurance and functional leadership for Mineral Resources
and Ore Reserves. The Geoscience Centre of Excellence coordinates
Mineral Resources and Ore Reserves reporting to support the
above controls.
Mineral Resources and Ore Reserves are presented in the
accompanying tables.
6.3.2 Mineral Resources and Ore Reserves
The statement of Mineral Resources and Ore Reserves presented
in this Annual Report has been produced in accordance with the
Australian Securities Exchange (ASX) Listing Rules Chapter 5 2014
and the Australasian Code for Reporting of Exploration Results,
Mineral Resources and Ore Reserves, December 2012 (JORC Code).
The JORC Code requires the use of reasonable investment
assumptions when reporting reserves. As a result, management
predicts sales prices, based on supply and demand forecast and
current and long-term historical average price trends.
The Ore Reserves tabulated are held within existing, permitted
mining tenements. BHP’s mineral leases are of sufficient duration
(or convey a legal right to renew for sufficient duration) to enable
all reserves on the leased properties to be mined in accordance
with current production schedules. Our Ore Reserves may include
areas where some additional approvals remain outstanding, but
where, based on the technical investigations we carry out as part
of our planning process and our knowledge and experience of the
approvals process, we expect that such approvals will be obtained
as part of the normal course of business and within the time frame
required by the current life of mine schedule.
The information in this Annual Report relating to Mineral Resources
and Ore Reserves is based on and fairly represents information
and supporting documentation compiled by Competent Persons
(as defined in the JORC Code). All Competent Persons have, at
the time of reporting, sufficient experience relevant to the style
of mineralisation and type of deposit under consideration and to
the activity they are undertaking to qualify as a Competent Person.
At the reporting date, each Competent Person listed in this Annual
Report is a full-time employee of BHP or a company in which BHP
has a controlling interest (unless otherwise noted) and is a Member
or Fellow of the AusIMM or AIG or a Recognised Professional
Organisation. Each Competent Person consents to the inclusion
in this Annual Report of the matters based on his or her information
in the form and context in which it appears.
All Mineral Resources and Ore Reserves presented are reported
in 100 per cent terms (unless otherwise stated) and represent
estimates at 30 June 2019. Tonnes are reported as dry metric
tonnes (unless otherwise stated). All tonnes and grade/quality
information have been rounded, hence small differences may
be present in the totals. The Measured and Indicated Mineral
Resources are inclusive of those Mineral Resources modified
to produce the Ore Reserves. The information contained in this
document differs in certain respects from that reported to the SEC.
Reserve reporting requirements for SEC filings in the United States
are specified in Industry Guide 7, with economic assumptions
based on current economic conditions that may differ to the JORC
Code’s reasonable investment assumptions. Accordingly, a SEC
pricing assumptions test is performed with reserve estimates
derived under the JORC Code compared to those derived
assuming ‘current economic conditions’. Reserves disclosed
in the United States will differ if the SEC pricing assumption test
indicates reserves lower than those reported under the JORC
Code in Australia and the United Kingdom and/or Inferred Mineral
Resources are included in the mine plan. BHP applies assurance
arrangements and internal controls to verify the estimates and
estimation process for Mineral Resources and Ore Reserves.
274 BHP Annual Report 2019
Competent Persons
Copper
Mineral Resources
Escondida, Pampa Escondida, Pinta Verde and Chimborazo:
R Maureira (MAusIMM) employed by Minera Escondida Limitada
Cerro Colorado: G Merello (MAusIMM)
Spence: R Ferrer (MAusIMM)
Pinto Valley Miami unit: M Williams (MAusIMM)
Olympic Dam: K Ehrig (FAusIMM), D Clarke (MAusIMM)
Antamina: L Canchis (MAusIMM) employed by Minera Antamina S.A.
Ore Reserves
Escondida: F Barrera (MAusIMM) employed by Minera
Escondida Limitada
Cerro Colorado and Spence: C González (MAusIMM)
Olympic Dam: M Hamilton (MAusIMM)
Antamina: L Mamani (MAusIMM) employed by Minera Antamina S.A.
Iron Ore
Mineral Resources
WAIO: C Allison (MAusIMM), S Whittaker (MAusIMM), A Williamson
(MAIG), P Androszczuk (MAusIMM), W Patton (MAusIMM)
Samarco: L Bonfioli (MAusIMM) employed by
Samarco Mineração S.A.
Ore Reserves
WAIO: P Kumar Chhajer (MAusIMM), A Greaves (MAusIMM),
A McLean (MAusIMM), C Burke (MAusIMM)
Coal
Coal Resources
Goonyella Riverside, Broadmeadow, Blackwater, Gregory, Crinum,
Liskeard, Red Hill, Nebo West, Bee Creek, Wards Well and Togara
South: R Macpherson (MAIG)
Peak Downs and Caval Ridge: S Martinez (MAusIMM)
Saraji, Norwich Park, South Walker Creek and Saraji East:
R Saha (MAusIMM)
Daunia and Poitrel: S Cutler (MAusIMM)
Mt Arthur Coal: B Wesley (MAusIMM)
Cerrejón: G Hernandez (MGSSA) employed by Cerrejón Limited,
D Lawrence (MAusIMM) employed by DJL Geological
Consulting Limited
Coal Reserves
Goonyella Riverside: J Holdt (MAusIMM)
Broadmeadow: R Sharma (MAusIMM)
Peak Downs: P Gupta (MAusIMM)
Caval Ridge : H Mirabediny (MAusIMM)
Saraji: G Clarete (MAusIMM)
Norwich Park: S de la Cruz (MAusIMM)
Blackwater: A Hardy (MAusIMM)
Daunia: R Lumbanradja (MAusIMM)
Gregory: R Macpherson (MAIG)
South Walker Creek: N Wilson (MAusIMM)
Poitrel: G Bustos (MAusIMM)
Mt Arthur Coal: G Foster (MAusIMM)
Cerrejón: S Chaudari (MAusIMM) employed by Cerrejón Limited,
D Lawrence (MAusIMM) employed by DJL Geological
Consulting Limited
Potash
Mineral Resources
Jansen: B Németh (MAusIMM), O Turkekul (APEGS)
Nickel
Mineral Resources
Leinster, Mt Keith, Cliffs, Yakabindie, Venus and Jericho:
M Menicheli (MAusIMM)
Ore Reserves
Leinster: C Barclay (MAusIMM), S Gadi (MAusIMM)
Mt Keith and Yakabindie: S Gadi (MAusIMM), D Brosztl (MAusIMM)
Cliffs: A Hadzhiev (MAusIMM)
Venus: C Barclay (MAusIMM), P Cunningham (MAusIMM) employed
by AMC Consultants Pty Limited
BHP Annual Report 2019 275
i
S
t
r
a
t
e
g
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
a
t
B
H
P
R
e
m
u
n
e
r
a
t
i
o
n
R
e
p
o
r
t
D
i
r
e
c
t
o
r
s
’
R
e
p
o
r
t
i
F
n
a
n
c
a
i
l
S
t
a
t
e
m
e
n
t
s
6
A
d
d
i
t
i
o
n
a
l
i
n
f
o
r
m
a
t
i
o
n
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
Measured Resources
Indicated Resources
Mt
%TCu
%SCu
ppmMo
g/tAu
Mt
%TCu
%SCu
ppmMo
g/tAu
139
89
5,500
67
42
68
–
37
1.0
125
21
585
294
109
–
–
174
Mt
3,160
328
Mt
230
104
–
–
0.67
0.55
0.62
0.61
0.61
0.46
–
0.64
0.23
0.66
0.68
0.45
0.53
0.60
–
–
0.31
–
–
–
0.42
0.11
–
–
0.43
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
190
–
–
–
–
–
%Cu kg/tU3O8
0.21
0.67
1.74
%Cu
0.84
0.86
–
–
0.50
%Zn
0.13
1.77
–
–
g/tAu
g/tAg
0.34
0.66
1
4
g/tAg
ppmMo
7
17
–
–
300
90
–
–
–
–
–
–
–
–
–
–
–
–
–
–
41
64
3,490
131
100
111
–
1.5
34
12
0.6
762
0.07
1,150
–
–
–
–
64
23
139
40
Mt
3,110
525
Mt
439
260
–
–
0.52
0.48
0.50
0.63
0.61
0.42
–
0.60
0.20
0.46
0.56
0.45
0.55
0.53
0.50
0.50
0.32
–
–
–
0.44
0.11
–
–
0.38
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
130
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
0.10
–
–
–
–
%Cu kg/tU3O8
0.20
0.61
1.67
%Cu
0.84
0.92
–
–
0.48
%Zn
0.14
1.81
–
–
g/tAu
g/tAg
0.26
0.63
1
3
g/tAg
ppmMo
9
16
–
–
260
80
–
–
Ore Reserves
≥ 0.20%SCu
−
≥ 0.30%TCu and greater than variable cut-off
(V_COG) of concentrator. Sulphide ore is processed
in the concentrator plants as a result of the
optimised mine plan with consideration of technical
and economical parameters in order to maximise
Net Present Value.
≥ 0.30%TCu and lower than V_COG. Sulphide
Leach ore is processed by dump leaching
as an alternative to the concentrator process.
≥ 0.30%TCu
≥ 0.30%TCu
−
≥ 0.30%TCu
−
≥ 0.30%TCu
≥ 0.20%TCu
≥ 0.20%TCu
≥ 0.20%TCu
≥ 0.10%TCu
−
−
−
−
Copper
Mineral Resources
As at 30 June 2019
Commodity
Deposit (1)
Copper Operations
Escondida (2)
Cerro Colorado (3)
Ore Type
Oxide
Mixed
Sulphide
Oxide
Supergene Sulphide
Transitional Sulphide
Hypogene Sulphide
Spence (4)
Oxide
Low-grade Oxide
Supergene Sulphide
Transitional Sulphide
Hypogene Sulphide
Copper Projects
Pampa Escondida
Pinta Verde
Chimborazo
Sulphide
Oxide
Sulphide
Sulphide
Pinto Valley Miami unit
In situ Leach
Copper Uranium Gold Operations
Olympic Dam (5)
OC Sulphide
UG Sulphide
Sulphide Cu only
Sulphide Cu-Zn
UG Sulphide Cu only
UG Sulphide Cu-Zn
Copper Zinc Operations
Antamina (6)
(1) Cut-off criteria:
Deposit
Escondida
Ore Type
Oxide
Mixed
Sulphide
Mineral Resources
≥ 0.20%SCu
≥ 0.30%TCu
≥ 0.30%TCu
Sulphide Leach
−
Cerro Colorado
Oxide & Supergene Sulphide
≥ 0.30%TCu
Transitional Sulphide
Hypogene Sulphide
Spence
Oxide
Low-grade Oxide
Oxide Low Solubility
Supergene Sulphide
Transitional Sulphide
Hypogene Sulphide
ROM
Sulphide
Oxide & Sulphide
Sulphide
Pampa Escondida
Pinta Verde
Chimborazo
Pinto Valley Miami unit
In situ Leach
≥ 0.20%TCu
≥ 0.20%TCu
≥ 0.30%TCu
≥ 0.10%TCu
−
≥ 0.20%TCu
≥ 0.10%TCu
≥ 0.20%TCu
−
≥ 0.30%TCu
≥ 0.30%TCu
≥ 0.30%TCu
−
276 BHP Annual Report 2019
Inferred Resources
Total Resources
Mt
%TCu
%SCu ppmMo
g/tAu
Mt
%TCu
%SCu ppmMo
g/tAu
BHP
Interest
%
As at 30 June 2018
Total Resources
Mt
%TCu
%SCu ppmMo
g/tAu
–
–
–
–
–
–
–
–
–
–
–
–
185
179
19,200
204
164
207
1,410
39
63
140
22
2,210
0.04
7,440
–
–
–
–
188
60
223
214
Mt
9,880
1,012
Mt
1,200
601
296
174
0.50
0.43
0.53
0.59
0.66
0.42
0.36
–
0.15
0.76
–
0.41
0.43
0.54
0.45
0.60
–
–
–
–
0.42
0.10
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
80
–
–
–
–
–
5.0
26
10,200
6.0
22
28
1,410
–
28
3.0
–
863
6,000
15
37
84
–
Mt
3,610
159
Mt
528
237
296
174
%Cu kg/tU3O8
0.21
0.62
1.69
%Cu
0.76
0.97
1.28
1.26
0.45
%Zn
0.13
1.58
0.22
1.35
g/tAu
g/tAg
0.24
0.61
1
3
g/tAg ppmMo
8
15
13
17
280
90
200
70
Deposit
Olympic Dam
Ore Type
OC Sulphide
UG Sulphide
Low-grade
Antamina
Sulphide Cu only
Sulphide Cu-Zn
UG Sulphide Cu only
UG Sulphide Cu-Zn
0.63
0.51
0.55
0.62
0.62
0.43
0.36
0.64
0.18
0.65
0.68
0.44
0.45
0.57
0.47
0.54
0.31
–
–
–
0.44
0.11
–
–
0.42
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
130
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
0.05
–
–
–
–
%Cu kg/tU3O8
0.21
0.63
1.70
%Cu
0.80
0.93
1.28
1.26
0.48
%Zn
0.13
1.71
0.22
1.35
g/tAu
g/tAg
0.28
0.64
1
3
g/tAg ppmMo
8
16
13
17
280
90
200
70
57.5
100
100
57.5
57.5
57.5
100
163
164
19,200
212
165
209
1,600
38
59
151
23
2,220
7,440
188
60
223
214
Mt
100
9,730
997
Mt
33.75
1,270
632
513
–
0.63
0.50
0.54
0.63
0.61
0.43
0.35
0.67
0.19
0.69
0.68
0.44
0.45
0.57
0.47
0.54
0.31
–
–
–
0.44
0.11
–
–
0.42
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
120
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
0.05
–
–
–
–
%Cu kg/tU3O8
0.20
0.62
1.68
%Cu
0.86
0.93
0.96
–
0.49
%Zn
0.14
1.77
0.49
–
g/tAu
g/tAg
0.27
0.64
1
4
g/tAg ppmMo
8
16
11
–
290
86
140
–
Mineral Resources
Ore Reserves
Variable between 0.10%Cu and 0.30%Cu
−
Variable between 0.80%Cu and 1.50%Cu
Variable between 1.20%Cu and 1.40%Cu
≥ 0.60%Cu
Net value per concentrator hour incorporating
all material revenue and cost factors and includes
metallurgical recovery (see footnote 9 for averages).
Mineralisation at the US$6,000/hr limit is equivalent
to 0.16%Cu, 2g/tAg, 141ppmMo with 6,700t/hr
mill throughput.
Net value per concentrator hour incorporating
all material revenue and cost factors and includes
metallurgical recovery (see footnote 9 for averages).
Mineralisation at the US$6,000/hr limit is equivalent
to 0.08%Cu, 0.71%Zn, 12g/tAg with 6,500t/hr
mill throughput.
−
Net value per concentrator hour incorporating
all material revenue and cost factors and includes
metallurgical recovery (see footnote 9 for averages).
Mineralisation at the US$0/hr limit is equivalent
0.14%Cu, 2g/tAg, 77ppmMo with 6,700t/hr
mill throughput.
Net value per concentrator hour incorporating
all material revenue and cost factors and includes
metallurgical recovery (see footnote 9 for averages).
Mineralisation at the US$0/hr limit is equivalent
to 0.07%Cu, 0.61%Zn, 9g/tAg with 6,500t/hr mill
throughput.
Net smelter return (NSR) value incorporating
all material revenue and includes metallurgical
recovery. Only sub-level stoping mining method
at a US$53.81/t break-even cut-off was applied,
equivalent to 0.84%Cu, 10g/tAg and 204ppmMo.
NSR estimates are based on Cu price of US$3.30/lb,
Ag price of US$20.50/oz and Mo price of US$9.29/lb
and predicted metallurgical recoveries of 89% for
Cu, 76% for Ag and 28% for Mo.
NSR value incorporating all material revenue and
includes metallurgical recovery. Only sub-level
stoping mining method at a US$53.81/t break-even
cut-off was applied, equivalent to 0.64%Cu, 1.28%Zn
and 13g/tAg. NSR estimates are based on Cu price
of US$3.30/lb, Zn price of US$1.23/lb and Ag price
of US$20.50/oz and predicted metallurgical
recoveries of 75% for Cu, 82% for Zn and 40% for Ag.
Antamina – All metals used in net value calculations are assumed to be recovered into concentrate and sold.
(2) Escondida – The increase in the Oxide and Mixed ore types was mainly due to an updated resource estimate supported by additional drilling.
(3) Cerro Colorado – The decrease in the Hypogene Sulphide ore type was due to changes in cost assumptions partially offset by an updated resource estimate
supported by additional drilling.
(4) Spence – The increase in the Low-grade Oxide ore type was due to an update in the resource estimate supported by additional drilling. The decrease in the
Supergene Sulphide ore type was due to depletion.
(5) Olympic Dam – Changes in the UG Sulphide ore type resource classification was due to an updated geological model to the south, supported by additional drilling.
(6) Antamina – The decrease in Mineral Resources for Sulphide Cu only and Sulphide Cu-Zn ore types was mainly due to depletion. Changes in ore type definition
from UG Sulphide Cu only to UG Sulphide Cu only and UG Sulphide Cu-Zn, considering a sub-level stoping mining method, has resulted in a decrease in tonnage
and an increase in qualities.
BHP Annual Report 2019 277
i
S
t
r
a
t
e
g
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
a
t
B
H
P
R
e
m
u
n
e
r
a
t
i
o
n
R
e
p
o
r
t
D
i
r
e
c
t
o
r
s
’
R
e
p
o
r
t
i
F
n
a
n
c
a
i
l
S
t
a
t
e
m
e
n
t
s
6
A
d
d
i
t
i
o
n
a
l
i
n
f
o
r
m
a
t
i
o
n
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
Copper
Ore Reserves
As at 30 June 2019
Commodity
Deposit (1) (7) (8) (9)
Copper Operations
Escondida (10)
Ore Type
Oxide
Sulphide
Sulphide Leach
Cerro Colorado (11)
Oxide
Supergene Sulphide
Transitional Sulphide
Spence (12)
Oxide
Oxide Low Solubility
Supergene Sulphide
Transitional Sulphide
Hypogene Sulphide
ROM
Copper Uranium Gold Operations
Olympic Dam (13)
UG Sulphide
Copper Zinc Operations
Antamina (14)
Low-grade
Sulphide Cu only
Sulphide Cu-Zn
Proved Reserves
Probable Reserves
Mt
%TCu
%SCu
ppmMo
Mt
%TCu
%SCu
ppmMo
104
3,570
1,330
33
19
13
1.3
13
80
19
576
–
Mt
203
–
Mt
142
79
0.68
0.70
0.42
0.59
0.62
0.50
0.96
0.69
0.71
0.67
0.45
–
–
–
–
0.43
0.15
0.10
0.77
0.29
0.10
0.06
0.02
–
%Cu kg/tU3O8
0.60
1.92
–
%Cu
0.98
0.84
–
%Zn
0.15
1.91
–
–
–
–
–
–
–
–
–
100
190
–
g/tAu
0.74
–
g/tAg
5
–
g/tAg
ppmMo
7
17
380
70
124
1,850
335
7.6
5.2
3.8
20
0.75
51
0.53
733
0.74
Mt
334
24
Mt
124
123
0.54
0.56
0.41
0.54
0.53
0.49
0.61
0.52
0.53
0.55
0.45
0.65
–
–
–
0.39
0.13
0.10
0.39
0.23
0.18
0.04
0.02
0.06
–
–
–
–
–
–
–
–
–
60
130
–
%Cu kg/tU3O8
0.55
1.84
0.99
%Cu
0.96
0.80
0.33
%Zn
0.18
2.01
g/tAu
g/tAg
0.69
0.40
4
2
g/tAg
ppmMo
8
13
350
80
(7) Approximate drill hole spacings used to classify the reserves were:
Deposit
Escondida
Proved Reserves
Oxide: 30m x 30m
Sulphide: 50m x 50m
Probable Reserves
Oxide: 45m x 45m
Sulphide: 90m x 90m
Sulphide Leach: 60m x 60m
Sulphide Leach: 115m x 115m
Cerro Colorado
40m to 50m
100m
Spence
Oxide & Oxide Low Solubility: maximum 50m x 50m 100m x 100m for all Ore Types
Supergene Sulphide, Transitional Sulphide &
Hypogene Sulphide: maximum 70m x 70m
35m to 70m
40m to 60m
Olympic Dam
Antamina
20m to 35m
25m to 40m
(8) Ore delivered to process plant.
(9) Metallurgical recoveries for the operations were:
Deposit
Escondida
Metallurgical Recovery
Oxide: 62%
Sulphide: 85%
Sulphide Leach: 38%
Cerro Colorado
Oxide: 75%
Supergene Sulphide: 80%
Transitional Sulphide: 65%
Spence
Oxide & Oxide Low Solubility: 80%
Olympic Dam
Antamina
Supergene Sulphide: 82%
Transitional Sulphide & Hypogene Sulphide: 84%
ROM: 30%
Cu 94%, U3O8 68%, Au 70%, Ag 63%
Sulphide Cu only: Cu 93%, Zn 0%, Ag 80%, Mo 65%
Sulphide Cu-Zn: Cu 78%, Zn 81%, Ag 63%, Mo 0%
(10) Escondida – The decrease in the Oxide ore type was mainly due to depletion. Incorporated within the Reserve Life calculation were Oxide and Sulphide Leach, which
have a Reserve Life of 10 years and 16 years respectively.
(11) Cerro Colorado – The decrease in the Oxide and Supergene Sulphide ore types was mainly due to depletion and reduction in annual nominated production rate from
20.7Mtpa to 19.2Mtpa. Metallurgical recoveries are based on testwork.
(12) Spence – The decrease in the Oxide, Oxide Low Solubility and ROM ore types was mainly due to depletion. Transitional Sulphide and Hypogene ore type recoveries
are based on metallurgical testwork.
(13) Olympic Dam – The increase in the UG Sulphide ore type was due to improved resource classification supported by additional drilling. The decrease in the Low-grade
ore type was due to a revised methodology used to define Low-grade ore in the mine design.
(14) Antamina – The decrease in Ore Reserves was mainly due to depletion.
278 BHP Annual Report 2019
Total Reserves
Mt
%TCu
%SCu
ppmMo
228
5,420
1,670
41
24
17
21
14
131
20
1,310
0.74
Mt
537
24
Mt
266
202
0.60
0.65
0.42
0.58
0.61
0.49
0.63
0.68
0.64
0.67
0.45
0.65
%Cu
1.87
0.99
%Cu
0.97
0.82
–
–
–
0.42
0.15
0.10
0.42
0.28
0.13
0.06
0.02
0.06
kg/tU3O8
0.57
0.33
%Zn
0.16
1.97
–
–
–
–
–
–
–
–
–
100
160
–
g/tAu
0.71
0.40
g/tAg
4
2
g/tAg
ppmMo
7
15
370
70
Reserve
Life
(years)
BHP
Interest
%
58
57.5
4.3
100
46
100
54
100
8.8
33.75
As at 30 June 2018
Total Reserves
Mt
%TCu
%SCu
ppmMo
Reserve
Life
(years)
250
5,610
1,740
57
36
17
29
18
126
20
1,330
3.4
Mt
500
35
Mt
298
216
0.62
0.66
0.41
0.60
0.61
0.53
0.63
0.72
0.71
0.68
0.45
0.53
%Cu
1.98
1.15
%Cu
0.99
0.83
–
–
–
0.43
0.15
0.10
0.42
0.30
0.10
0.06
0.02
0.12
–
–
–
–
–
–
–
–
–
100
150
–
kg/tU3O8
0.58
0.37
%Zn
0.17
2.05
g/tAu
g/tAg
0.72
0.51
4
3
g/tAg
ppmMo
8
14
350
80
58
5.3
43
51
9.7
i
S
t
r
a
t
e
g
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
a
t
B
H
P
R
e
m
u
n
e
r
a
t
i
o
n
R
e
p
o
r
t
D
i
r
e
c
t
o
r
s
’
R
e
p
o
r
t
i
F
n
a
n
c
a
i
l
S
t
a
t
e
m
e
n
t
s
6
A
d
d
i
t
i
o
n
a
l
i
n
f
o
r
m
a
t
i
o
n
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
BHP Annual Report 2019 279
Iron Ore
Mineral Resources
As at 30 June 2019
Commodity
Deposit (1) (2)
Iron Ore Operations
Australia
WAIO (3) (4) (5)
Brazil
Samarco
Ore Reserves
As at 30 June 2019
Commodity
Deposit
Iron Ore Operations
Australia
WAIO (1) (3) (5) (6) (7) (8) (9) (10) (11)
Ore Type
Mt
%Fe
%P %SiO2 %Al2O3
%LOI
Mt
%Fe
%P %SiO2 %Al2O3
%LOI
Measured Resources
Indicated Resources
BKM
CID
MM
NIM
ROM
1,300
560
890
10
Mt
3,340
62.1
55.8
62.2
59.0
%Fe
39.0
0.13
0.05
0.07
0.08
%Pc
0.05
3.7
6.4
2.8
10.1
2.3
2.2
1.6
1.2
4.5
11.0
6.1
3.9
4,560
360
1,880
120
Mt
2,150
60.3
56.3
60.7
61.6
%Fe
37.2
0.14
0.06
0.06
0.06
%Pc
0.05
4.7
6.4
3.8
8.0
2.5
2.3
2.0
1.1
5.9
10.3
6.8
1.7
Ore Type
Mt
%Fe
%P %SiO2 %Al2O3
%LOI
Mt
%Fe
%P %SiO2 %Al2O3
%LOI
Proved Reserves
Probable Reserves
BKM
BKM Bene
CID
MM
1,010
20
240
430
62.9
59.6
56.6
62.4
0.12
0.13
0.05
0.06
3.0
7.2
6.3
2.7
2.1
3.4
1.6
1.5
4.3
2.1
10.6
5.9
1,700
20
60
1,340
62.0
59.5
57.0
61.6
0.13
0.14
0.04
0.06
3.6
7.4
6.4
3.2
2.3
3.2
1.4
1.7
4.8
2.0
10.3
6.5
(1) The Mineral Resources and Ore Reserves qualities listed refer to in situ mass percentage on a dry weight basis. Wet tonnes are reported for WAIO deposits and
Samarco, including moisture contents for WAIO: BKM – Brockman 3%, BKM Bene – Brockman Beneficiation 3%, CID – Channel Iron Deposits 8%, MM – Marra Mamba
4%, NIM – Nimingarra 3.5% and Samarco: ROM – 6.5%.
(2) A single cut-off grade was applied in WAIO per deposit ranging from 50–55%Fe. For Samarco the cut-off grade was 22%Fe.
(3) WAIO – Mineral Resources and Ore Reserves are reported on a Pilbara basis by ore type to align with our production of blended lump products which comprises BKM,
BKM Bene and MM ore types and blended fines products including CID. This also reflects our single logistics chain and associated management system.
(4) WAIO – The decrease in CID ore type due to depletion. The increase in MM ore type due to updated resource estimates supported by additional drilling.
(5) WAIO – BHP interest is reported as Pilbara Ore Reserves tonnes weighted average across all joint ventures which can vary from year to year. BHP ownership varies
between 85% and 100%.
(6) Approximate drill hole spacings used to classify the reserves were:
Deposit
WAIO
Proved Reserves
50m x 50m
Probable Reserves
150m x 50m
(7) WAIO – Recovery was 100%, except for BKM Bene where Whaleback beneficiation plant recovery was 91% (tonnage basis).
(8) WAIO – Iron ore is marketed for WAIO as Lump (direct blast furnace feed) and Fines (sinter plant feed).
(9) WAIO – Cut-off grades used to estimate Ore Reserves range from 50–62%Fe for all material types. Ore delivered to process facility.
(10) WAIO – Ore Reserves are all located on State Agreement mining leases that guarantee the right to mine. Across WAIO, State Government approvals (including
environmental and heritage clearances) are required before commencing mining operations in a particular area. Included in the Ore Reserves are select areas
where one or more approvals remain outstanding, but where, based on the technical investigations carried out as part of the mine planning process and company
knowledge and experience of the approvals process, it is expected that such approvals will be obtained as part of the normal course of business and within the time
frame required by the current mine schedule.
(11) WAIO – The decreases in BKM Bene ore type was due to the application of a higher cut-off grade and CID ore type was due to depletion. The increase in the MM
ore type was due to updated reserves estimates including satellite deposits additional to existing operations.
280 BHP Annual Report 2019
Inferred Resources
Total Resources
Mt
%Fe
%P %SiO2 %Al2O3
%LOI
Mt
%Fe
%P %SiO2 %Al2O3
%LOI
BHP
Interest
%
As at 30 June 2018
Total Resources
Mt
%Fe
%P %SiO2 %Al2O3
%LOI
13,780
920
5,370
70
Mt
950
59.1
54.9
59.7
60.4
%Fe
37.2
0.14
0.06
0.07
0.05
%Pc
0.06
5.4
6.7
4.6
10.0
2.6
2.9
2.3
1.2
6.6
11.0
7.1
1.7
19,650
1,850
8,140
200
Mt
6,440
59.6
55.4
60.2
61.1
%Fe
38.1
0.14
0.06
0.07
0.06
%Pc
0.05
5.2
6.6
4.2
8.8
2.6
2.6
2.1
1.2
6.3
10.9
6.9
1.8
89
19,370
1,980
7,730
200
Mt
50
6,440
59.6
55.5
60.2
61.1
%Fe
38.1
0.14
0.05
0.07
0.06
%Pc
0.05
5.1
6.6
4.2
8.8
2.6
2.5
2.1
1.2
6.3
10.9
6.9
1.8
Total Reserves
Mt
%Fe
%P
%SiO2
%Al2O3
%LOI
Reserve
Life
(years)
BHP
Interest
%
As at 30 June 2018
Total Reserves
Mt
%Fe
%P
%SiO2
%Al2O3
%LOI
2,710
40
300
1,760
62.3
59.5
56.7
61.8
0.13
0.13
0.04
0.06
3.4
7.3
6.4
3.1
2.2
3.3
1.5
1.7
4.6
2.1
10.6
6.3
17
89
2,600
50
400
1,680
62.4
57.8
56.7
61.7
0.12
0.11
0.04
0.06
3.4
10.1
6.1
3.2
2.2
3.3
1.6
1.7
4.5
2.1
10.7
6.3
Reserve
Life
(years)
16
i
S
t
r
a
t
e
g
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
a
t
B
H
P
R
e
m
u
n
e
r
a
t
i
o
n
R
e
p
o
r
t
D
i
r
e
c
t
o
r
s
’
R
e
p
o
r
t
i
F
n
a
n
c
a
i
l
S
t
a
t
e
m
e
n
t
s
6
A
d
d
i
t
i
o
n
a
l
i
n
f
o
r
m
a
t
i
o
n
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
BHP Annual Report 2019 281
Metallurgical Coal
Coal Resources
As at 30 June 2019
Commodity
Deposit (1) (2)
Mining Method
Coal Type
Mt
%Ash
%VM
%S
Mt
%Ash
%VM
%S
Measured Resources
Indicated Resources
Metallurgical Coal Operations
Queensland Coal
CQCA JV
Goonyella Riverside
Broadmeadow
Peak Downs
Caval Ridge
Saraji (3)
Norwich Park
Blackwater (4)
Daunia (5)
Gregory JV (6)
Gregory
Crinum
BHP Mitsui Coal
South Walker Creek
Poitrel
Metallurgical Coal Projects
Queensland Coal
CQCA JV
Red Hill
Saraji East (3)
Gregory JV
Liskeard (6)
BHP Mitsui Coal
Nebo West
Bee Creek
Wards Well
OC
UG
OC
OC
OC
OC
UG
OC
UG
OC
OC
OC
UG
OC
UG
OC
OC
UG
OC
UG
OC
OC
OC
UG
Met
Met
Met
Met
Met
Met
Met
Met/Th
Met/Th
PCI
Met
Met
Met
Met/PCI
Met/PCI
Met
Met
Met
Met
Met
Met
Anth
Met/Th
Met
784
580
519
423
844
221
–
375
–
40
65
–
–
215
36
55
–
–
8.8
9.4
9.6
12.9
10.6
9.6
–
6.2
–
9.0
7.0
–
–
10.2
10.0
7.9
–
–
22.6
21.2
19.8
22.1
17.6
17.6
–
28.2
–
20.8
20.9
–
–
13.3
13.8
23.9
0.53
0.52
0.64
0.60
0.64
0.66
–
0.41
–
0.36
0.40
–
–
0.31
0.27
0.35
–
–
–
–
458
10.2
16.0
0.63
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
32
423
863
207
137
128
20
506
–
14
21
–
–
119
154
49
25
1,123
676
35
–
–
9.4
1,224
11.2
10.2
10.0
12.9
11.5
9.9
9.4
6.5
–
10.0
7.0
–
–
9.4
10.4
8.0
12.4
9.8
10.3
8.3
–
–
8.9
8.9
24.3
22.9
19.7
21.9
18.0
17.5
17.4
27.9
–
19.9
21.1
–
–
14.3
12.7
24.1
19.8
19.5
15.8
13.6
–
–
15.4
20.7
0.56
0.55
0.64
0.57
0.75
0.71
0.73
0.42
–
0.30
0.40
–
–
0.30
0.28
0.35
0.49
0.52
0.67
0.59
–
–
0.40
0.53
(1) Tonnages are reported on an in situ moisture basis. Coal qualities are for a potential product on an air-dried basis.
(2) Cut-off criteria:
Deposit
Mining Method
Coal Resources
Goonyella Riverside, Norwich Park
Peak Downs
Caval Ridge, Saraji
Blackwater, Daunia
Norwich Park, Blackwater
Broadmeadow
South Walker Creek
Poitrel
Red Hill, Saraji East
Nebo West
Bee Creek
Wards Well
OC
OC
OC
OC
UG
UG
OC
UG
OC
OC
UG
OC
OC
UG
≥ 0.5m seam thickness
≥ 0.5m seam thickness and ≤35% raw ash
≥ 0.5m seam thickness
≥ 0.3m seam thickness
≥ 2.0m seam thickness
≥ 2.0m seam thickness
≥ 0.5m seam thickness, core yield ≥ 50% and 100m lease
boundary buffer
≥ 2.0m seam thickness
≥ 0.3m seam thickness
≥ 0.5m seam thickness
≥ 2.0m seam thickness
≥ 0.5m seam thickness and < 90m below surface
≥ 0.5m seam thickness
≥ 2.0m seam thickness
Coal Reserves
≥ 0.5m seam thickness
≥ 0.5m seam thickness
≥ 0.4m seam thickness
≥ 0.3m seam thickness
−
≥ 2.5m seam thickness
≥ 0.5m seam thickness
−
≥ 0.3m seam thickness
−
−
−
−
−
(3) Saraji – The increase in Coal Resources was mainly due to resources transferred from Saraji East project resulting from approval of an operating license.
(4) Blackwater – The decrease in OC Coal Resources was mainly due to changes in the resource estimate and a maiden declaration of UG Coal Resources.
(5) Daunia – Change in the coal type from Met to Met and PCI.
(6) Divestment of Gregory JV completed on 27 March 2019.
282 BHP Annual Report 2019
Inferred Resources
Total Resources
Mt
%Ash
%VM
%S
Mt
%Ash
%VM
%S
BHP
Interest
%
As at 30 June 2018
Total Resources
Mt
%Ash
%VM
%S
40
15
669
130
42
116
22
778
222
5.1
5.5
–
–
71
108
59
–
563
504
16
–
14
13
149
12.6
13.4
10.3
13.6
11.7
10.3
9.9
7.4
7.2
13.0
7.0
–
–
10.4
9.5
8.0
–
10.0
10.0
8.5
–
9.4
9.6
9.3
25.1
24.5
19.4
22.2
18.4
17.7
17.1
27.8
29.1
19.3
21.1
–
–
15.7
15.2
24.1
–
20.4
15.3
13.9
0.54
0.59
0.69
0.59
0.74
0.76
0.65
0.43
0.36
0.30
0.40
–
–
0.40
0.35
0.36
–
0.52
0.68
0.59
–
–
6.6
15.0
20.1
0.64
0.42
0.53
856
1,018
2,051
760
1,023
465
42
1,659
222
59
92
–
–
405
298
163
25
1,686
1,638
51
–
14
23
1,373
9.1
9.8
10.0
13.0
10.8
9.8
9.7
6.8
7.2
10.0
7.0
–
–
10.0
10.0
8.0
12.4
9.9
10.2
8.4
–
9.4
9.3
8.9
22.8
21.9
19.6
22.1
17.7
17.6
17.2
27.9
29.1
20.5
20.9
–
–
14.0
13.8
24.0
19.8
19.8
15.7
13.7
0.53
0.53
0.66
0.59
0.66
0.70
0.69
0.42
0.36
0.30
0.40
–
–
0.32
0.31
0.36
0.49
0.52
0.66
0.59
–
–
6.6
15.2
20.6
0.64
0.41
0.53
50
50
50
50
50
50
50
–
80
80
50
50
–
80
80
80
874
1,026
2,072
774
968
465
42
2,154
–
–
148
8.6
113
413
298
166
25
1,686
1,708
51
5.6
14
23
1,373
9.1
9.8
10.0
13.0
10.9
9.8
9.7
8.9
–
–
9.1
6.0
6.3
10.0
10.0
8.0
12.4
9.9
10.2
8.4
7.5
9.4
9.3
8.9
22.8
21.9
19.7
22.1
17.7
17.6
17.2
26.7
–
–
0.53
0.53
0.66
0.59
0.66
0.70
0.69
0.49
–
–
20.4
0.35
33.0
32.9
14.0
13.8
23.8
19.8
19.8
15.7
13.7
0.60
0.60
0.32
0.31
0.35
0.49
0.52
0.66
0.59
34.6
2.30
6.6
15.2
20.6
0.64
0.41
0.53
i
S
t
r
a
t
e
g
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
a
t
B
H
P
R
e
m
u
n
e
r
a
t
i
o
n
R
e
p
o
r
t
D
i
r
e
c
t
o
r
s
’
R
e
p
o
r
t
i
F
n
a
n
c
a
i
l
S
t
a
t
e
m
e
n
t
s
6
A
d
d
i
t
i
o
n
a
l
i
n
f
o
r
m
a
t
i
o
n
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
BHP Annual Report 2019 283
Metallurgical Coal
Coal Reserves
As at 30 June 2019
Commodity
Deposit (2) (7) (8) (9) (10)
Mining
Method
Coal
Type
Proved
Reserves
Probable
Reserves
Total
Reserves
Proved Marketable Reserves
Probable Marketable Reserves
Mt
Mt
Mt
Mt
%Ash
%VM
%S
Mt
%Ash
%VM
%S
Metallurgical Coal Operations
Queensland Coal
CQCA JV
Goonyella Riverside (11)
Broadmeadow (11) (12)
OC
UG
Peak Downs
Caval Ridge
Saraji (13)
Norwich Park (14)
Blackwater (15)
Daunia (16)
OC
OC
OC
OC
OC
OC
OC
Met
Met
Met/Th
Met
Met
Met
Met/Th
Met/PCI
Met
Gregory JV (6)
Gregory
BHP Mitsui Coal
South Walker Creek (17)
Poitrel (18)
OC
Met
OC
OC
Met/PCI
Met
530
67
379
252
442
159
183
74
–
–
101
37
19
114
339
95
60
70
236
25
–
–
36
24
549
181
718
347
502
229
419
99
–
–
137
61
418
48
235
151
264
116
173
64
–
–
80
29
9.1
8.1
10.6
11.0
10.1
10.3
8.1
8.1
–
–
25.2
23.7
22.3
22.4
17.7
16.8
26.6
20.4
–
–
0.53
0.54
0.60
0.57
0.64
0.70
0.43
0.34
–
–
9.2
7.9
13.6
23.0
0.29
0.31
14
72
208
52
29
49
223
21
–
–
29
19
10.9
9.9
10.6
11.0
11.2
10.2
8.7
8.3
–
–
28.4
23.5
22.7
22.0
18.8
16.6
26.8
20.0
–
–
0.56
0.55
0.65
0.58
0.79
0.70
0.43
0.35
–
–
9.2
8.4
13.2
23.3
0.29
0.31
(7) Only geophysically logged, fully analysed cored holes with greater than 95% recovery (or <± 10% expected error at 95% confidence for Goonyella Riverside
Broadmeadow) were used to classify Coal Reserves. Drill hole spacings vary between seams and geological domains and were determined in conjunction
with geostatistical analysis where applicable. The range of maximum drill hole spacings used to classify the Coal Reserves were:
Deposit
Proved Reserves
Goonyella Riverside, Broadmeadow
900m to 1,300m plus 3D seismic coverage for UG
Peak Downs, Caval Ridge
Saraji
Norwich Park
Blackwater
Daunia
South Walker Creek
Poitrel
500m to 1,050m
450m to 1,800m
500m to 1,400m
450m to 1,000m
450m to 850m
400m to 800m
300m to 550m
(8) Product recoveries for the operations were:
Deposit
Product Recovery
Goonyella Riverside, Broadmeadow
Peak Downs
Caval Ridge
Saraji
Norwich Park
Blackwater
Daunia
South Walker Creek
Poitrel
74%
61%
58%
58%
71%
92%
85%
75%
79%
Probable Reserves
1,750m to 2,400m
500m to 2,100m
800m to 2,600m
1,000m to 2,800m
900m to 1,850m
900m to 1,400m
650m to 1,500m
600m to 1,050m
(9) Total Coal Reserves were at the moisture content when mined (4% CQCA JV and BHP Mitsui Coal). Total Marketable Reserves were at a product specification moisture
content (9.5-10% Goonyella Riverside Broadmeadow, 9.5% Peak Downs, 10% Caval Ridge; 10% Saraji, 10-11% Norwich Park, 7.5-11.5% Blackwater, 10-10.5% Daunia,
9% South Walker Creek, 10-12% Poitrel) and at an air-dried quality basis for sale after the beneficiation of the Total Coal Reserves.
(10) Coal delivered to handling plant.
(11) Goonyella Riverside and Broadmeadow deposits use the same infrastructure and Reserve Life applies to both.
(12) Broadmeadow – The decrease in Coal Reserves was due to depletion and the exclusion of some mining areas impacted by geotechnical issues and the Isaac River.
(13) Saraji – The increase in Coal Reserves and Reserve Life was mainly due to additional resources transferred from Saraji East project due to approval of an operating license.
(14) Norwich Park – Remains on care and maintenance.
(15) Blackwater – The increase in Reserve Life is due to a reduction in the nominated annual production rate from 20Mtpa to 17.2Mtpa.
(16) Daunia – The decrease in Coal Reserves and Reserve Life was mainly due to depletion. Changes in Coal Reserves classification was due to an update in the resource
classification supported by drill hole spacing analysis and additional drilling. Change in Coal Type from Met to Met/PCI.
(17) South Walker Creek – The decrease in Coal Reserves and Reserve Life was mainly due to depletion.
(18) Poitrel – The decrease in Reserve Life was mainly due to depletion.
284 BHP Annual Report 2019
Total Marketable Reserves
Mt
%Ash
%VM
%S
Reserve
Life
(years)
BHP
Interest
%
Total Marketable Reserves
Mt
%Ash
%VM
%S
Reserve
Life
(years)
As at 30 June 2018
432
120
443
203
293
165
396
85
–
–
108
48
9.1
9.2
10.6
11.0
10.2
10.3
8.4
8.2
–
–
9.2
8.1
25.3
23.6
22.5
22.3
17.8
16.7
26.7
20.3
–
–
13.5
23.1
0.53
0.54
0.62
0.58
0.65
0.70
0.43
0.34
–
–
0.30
0.31
38
26
28
31
65
24
18
–
17
10
50
50
50
50
50
50
50
–
80
80
444
128
456
211
270
165
411
–
99
5.6
114
49
9.2
9.1
10.6
11.0
10.2
10.3
8.4
–
8.4
7.0
9.2
8.7
22.8
23.6
22.5
22.3
17.9
16.7
26.7
–
20.4
0.53
0.54
0.62
0.58
0.66
0.70
0.43
–
0.35
34.8
0.60
13.5
23.6
0.30
0.33
40
26
29
25
65
22
22
4.0
18
11
i
S
t
r
a
t
e
g
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
a
t
B
H
P
R
e
m
u
n
e
r
a
t
i
o
n
R
e
p
o
r
t
D
i
r
e
c
t
o
r
s
’
R
e
p
o
r
t
i
F
n
a
n
c
a
i
l
S
t
a
t
e
m
e
n
t
s
6
A
d
d
i
t
i
o
n
a
l
i
n
f
o
r
m
a
t
i
o
n
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
BHP Annual Report 2019 285
Energy Coal
Coal Resources
As at 30 June 2019
Commodity
Deposit (1) (2)
Mining
Method
Coal
Type
Measured Resources
Indicated Resources
Mt
%Ash
%VM
%S KCal/kg CV
Mt
%Ash
%VM
%S KCal/kg CV
Energy Coal Operations
Australia
Mt Arthur Coal (3)
Colombia
Cerrejón (4)
Energy Coal Project
Australia
Togara South
OC
OC
UG
Coal Reserves
As at 30 June 2019
Th
Th
Th
836
21.5
31.2
0.65
6,170
1,333
19.4
29.9
0.61
6,150
2,832
3.9
34.9
0.52
6,551
1,110
3.8
34.8
0.51
6,576
719
12.1
29.6
0.31
6,700
177
13.5
28.9
0.31
6,500
Commodity
Deposit (1) (5) (6) (7)
Mining
Method
Coal
Type
Mt
Mt
Mt
Mt %Ash %VM
%S KCal/kg CV
Mt %Ash %VM
%S KCal/kg CV
Proved
Reserves
Probable
Reserves
Total
Reserves
Proved Marketable Reserves
Probable Marketable Reserves
Energy Coal Operations
Australia
Mt Arthur Coal (8) (9)
Colombia
Cerrejón (10) (11)
(1) Cut-off criteria:
Deposit
Mt Arthur Coal
Cerrejón
Togara South
OC
OC
Th
Th
292
294
299
591
228
15.9
28.6 0.52
5,990
225
14.7
28.2 0.46
6,010
48
342
286
11.7
32.3
0.61
6,091
47
8.5
32.8 0.60
6,155
Coal Resources
≥ 0.3m seam thickness and ≤35% raw ash
Coal Reserves
≥ 0.3m seam thickness, ≤ 32% ash, ≥ 40% coal washery yield
≥ 0.35m seam thickness
≥ 1.5m seam thickness
≥ 0.35m seam thickness
−
(2) Qualities are reported on an air-dried in situ basis. Tonnages are reported as in situ for Mt Arthur Coal and Togara South, and on a total moisture basis for Cerrejón.
(3) Mt Arthur Coal – The increase in Coal Resources was mainly due to an updated resource estimate supported by additional drilling and a revised intrusion
interpretation based on geophysical surveys.
(4) Cerrejón – The Coal Resources are restricted to areas which have been identified for inclusion by BHP based on a risk assessment.
(5) Approximate drill hole spacings used to classify the reserves were:
Deposit
Proved Reserves
Probable Reserves
Mt Arthur Coal
200m to 800m (geophysically logged, >95% core recovery) 400m to 1,550m (geophysically logged, >95% core recovery)
Cerrejón
>6 drill holes per 100ha
2 to 6 drill holes per 100ha
(6) Overall product recoveries for the operations were:
Deposit
Mt Arthur Coal
Cerrejón
Product Recovery
77%
97%
(7) Total Coal Reserves were at the moisture content when mined (8% Mt Arthur Coal; 13.2% Cerrejón). Total Marketable Reserves were at a product specific moisture
content (9.3% Mt Arthur Coal; 14.2% Cerrejón) and at an air-dried quality basis for Mt Arthur Coal and at a total moisture quality basis for Cerrejón.
(8) Mt Arthur Coal – Coal delivered to handling plant.
(9) Mt Arthur Coal – The decrease in Marketable Coal Reserves and Reserve Life was due to additional data informing changes in the mine plan based on revised
geotechnical and geological understanding. Coal Reserves cut-off criteria reported for ROM; superseding export product cut-off criteria reported in 2018.
(10) Cerrejón – Marketable Coal Reserves decreased due to depletion, delayed approval of the Bruno Creek diversion permits and a reduction in the nominated annual
production rate from 29.5Mt to 25.7Mt partially offset by a change in cut-off criteria from ≥ 0.65m to ≥ 0.35m seam thickness. Approximately 10% of extracted
reserves was beneficiated. Lease expiry in 2033.
(11) Cerrejón – While there have been delays in some permits as at 30 June 2019 in response to ongoing local community legal challenges, some replacement reserves
have been identified within the mine plan utilitising existing fleet capacity. BHP continues to monitor the situation for potential impact on mining.
286 BHP Annual Report 2019
Inferred Resources
Total Resources
Mt
%Ash
%VM
%S KCal/kg CV
Mt
%Ash
%VM
%S KCal/kg CV
BHP
Interest
%
As at 30 June 2018
Total Resources
Mt
%Ash
%VM
%S KCal/kg CV
1,255
20.6
29.3
0.62
6,050
3,423
20.4
30.0
0.62
6,120
100
3,193
20.0
29.6
0.66
6,070
658
4.4
34.2
0.54
6,423
4,600
3.9
34.8
0.52
6,540
33.33
4,533
3.8
34.8
0.52
6,552
1,051
16.8
28.4
0.31
6,210
1,947
14.8
28.9
0.31
6,420
100
1,947
14.8
28.9
0.31
6,420
Total Marketable Reserves
Mt
%Ash
%VM
%S KCal/kg CV
Reserve
Life
(years)
BHP
Interest
%
As at 30 June 2018
Total Marketable Reserves
Mt
%Ash
%VM
%S KCal/kg CV
453
15.3
28.4
0.49
6,050
333
11.2
32.4
0.61
6,101
21
15
100
654
17.8
30.9
0.56
6,320
33.33
445
9.3
32.6
0.57
6,144
Reserve
Life
(years)
31
16
i
S
t
r
a
t
e
g
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
a
t
B
H
P
R
e
m
u
n
e
r
a
t
i
o
n
R
e
p
o
r
t
D
i
r
e
c
t
o
r
s
’
R
e
p
o
r
t
i
F
n
a
n
c
a
i
l
S
t
a
t
e
m
e
n
t
s
6
A
d
d
i
t
i
o
n
a
l
i
n
f
o
r
m
a
t
i
o
n
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
BHP Annual Report 2019 287
Other Assets
Mineral Resources
As at 30 June 2019
Measured Resources
Indicated Resources
Inferred Resources
Total Resources
As at 30 June 2018
Total Resources
Commodity
Deposit (1) (2) (3) (4) (5) (6)
Ore
Type
Potash Project
O
2
K
Mt %
.
l
o
s
n
I
%
O
g
M
%
O
2
K
Mt %
.
l
o
s
n
I
%
O
g
M
%
O
2
K
Mt %
.
l
o
s
n
I
%
O
g
M
%
O
2
K
Mt %
.
l
o
s
n
I
%
O
g
M
%
BHP
Interest
%
O
2
K
Mt %
.
l
o
s
n
I
%
O
g
M
%
Jansen
LPL
5,230 25.6
7.7 0.08
–
–
–
–
1,280 25.6
7.7 0.08
6,510 25.6
7.7 0.08
100 6,440 25.7
7.8 0.08
(1) The Mineral Resources are stated for the Lower Patience Lake (LPL) potash unit. A fixed seam thickness of 3.96m from the top of 406 clay seam was applied.
(2) 25.6%K2O grade is equivalent to 40.5%KCl content using the mineralogical conversion factor of 1.583.
(3) %MgO is used as a measure of carnallite (KCl.MgCl2.6H2O) content where per cent carnallite equivalent = %MgO × 6.8918.
(4) Measured Resources grade has been assigned to Inferred Resources.
(5) Tonnages are reported on an in situ moisture content basis, estimated to be 0.3%.
(6) The change in Mineral Resources was due to modelling methodology changes from a stratigraphic cut-off to a fixed seam thickness model.
Mineral Resources
As at 30 June 2019
Commodity
Deposit (1)
Measured
Resources
Indicated
Resources
Inferred
Resources
Total Resources
Ore Type
Mt
%Ni
Mt
%Ni
Mt
%Ni
Mt
%Ni
Nickel West Operations
Leinster (2)
OC
Disseminated Sulphide
UG
Oxide
SP
SP Oxidised
Mt Keith (3)
Disseminated Sulphide
Cliffs (4)
Yakabindie
Venus (5)
SP
Disseminated Sulphide
Massive Sulphide
Disseminated Sulphide
Disseminated Sulphide
Massive Sulphide
Nickel West Project
Jericho
Disseminated Sulphide
3.3
2.6
16
–
–
–
134
8.4
–
0.72
157
–
–
–
1.8
0.70
2.1
–
–
–
0.54
0.48
–
3.7
0.60
–
–
–
2.8
76
10
–
1.4
–
67
–
6.7
1.3
112
4.2
0.84
1.2
0.52
2.2
–
1.0
–
0.52
–
0.88
3.9
0.62
1.9
6.2
3.2
89
5.4
5.3
–
1.9
24
–
2.0
0.49
170
2.3
0.69
1.0
0.50
2.0
1.8
–
1.7
0.52
–
1.0
3.8
0.62
1.6
6.1
9.3
168
31
5.3
1.4
1.9
225
8.4
8.6
2.5
439
6.5
1.5
1.4
0.52
2.1
1.8
1.0
1.7
0.53
0.48
0.92
3.8
0.61
1.8
6.2
As at 30 June 2018
BHP
Interest
%
Total Resources
Mt
%Ni
100
100
100
100
100
9.3
168
29
–
2.7
1.9
231
11
6.9
2.6
440
5.9
1.5
1.4
0.52
2.1
–
0.92
1.7
0.54
0.48
0.98
3.5
0.61
1.8
5.8
–
–
31
0.59
31
0.59
50
31
0.59
Ore Reserves
As at 30 June 2019
Commodity
Deposit (1) (6) (7) (8) (9)
Nickel West Operations
Leinster (10) (11)
Mt Keith (12)
Cliffs (13)
Yakabindie (14)
Venus (15)
Proved
Reserves
Probable
Reserves
Total Reserves
Ore Type
Mt
%Ni
Mt
%Ni
Mt
%Ni
As at 30 June 2018
Reserve
Life
(years)
BHP
Interest
%
Total Reserves
Mt
%Ni
Reserve
Life
(years)
OC
SP
UG
OC
SP
UG
OC
UG
1.3
0.96
–
–
69
4.7
–
107
–
–
–
0.57
0.51
–
0.56
–
2.8
–
5.3
19
3.7
0.45
44
2.1
0.79
–
1.6
0.55
0.45
2.0
0.61
2.7
4.1
–
5.3
88
8.4
0.45
150
2.1
0.84
–
1.6
0.57
0.48
2.0
0.57
2.7
11
100
12
100
0.9
15
7
100
100
100
4.6
1.3
5.3
11
11
0.55
96
–
0.87
0.84
1.6
0.61
0.48
2.0
0.61
–
11
2.0
1.7
11
–
288 BHP Annual Report 2019
Ore Type
Mineral Resources
Ore Reserves
Proved Reserves
Probable Reserves
(6) Approximate drill hole spacings used to classify the reserves were:
(1) Cut-off criteria:
Deposit
Leinster
OC
Disseminated
Sulphide
≥ 0.40%Ni
≥ 0.40%Ni
UG
≥ 1.0%Ni
Oxide
≥ 1.2%Ni
SP, SP oxidised
≥ 0.70%Ni
Mt Keith
Disseminated
Sulphide
SP
Variable between
0.35%Ni and
0.40%Ni
Variable between
0.35%Ni and
0.40%Ni
OC
−
Cliffs
Disseminated
Sulphide
≥ 0.40%Ni
Massive Sulphide
Stratigraphic
Yakabindie
Venus
Jericho
UG
Disseminated
Sulphide
OC
Disseminated
Sulphide
−
≥ 0.40%Ni
−
≥ 0.40%Ni
Massive Sulphide
Stratigraphic
UG
Disseminated
Sulphide
−
≥ 0.40%Ni
≥ 0.40%Ni
−
≥ 0.90%Ni includes
dilution that occurs
during block cave
mining process
−
−
−
Variable between
0.35%Ni and
0.40%Ni and ≥
0.18% recoverable
Ni
Variable between
0.35%Ni and
0.40%Ni and ≥
0.18%
recoverable Ni
−
−
≥ 1.2%Ni
−
≥ 0.35%Ni
−
−
≥ 1.3%Ni
−
Deposit
Leinster
Mt Keith
Cliffs
25m × 25m
40m × 40m
25m × 25m
(and development)
Yakabindie
40m × 60m
Venus
25m x 25m
25m × 50m
80m × 80m
25m × 25m
80m × 60m
50m x 50m
(7) Ore delivered to the process plant.
(8) Metallurgical recoveries for the operations were:
OC
Deposit
Leinster
Mt Keith
Cliffs
Yakabindie
Venus
Metallurgical Recovery
83%
64%
83% recovery at 10%
concentrate grade
63% (based on
metallurgical test work)
89%
(9) Predicted metallurgical recoveries for the projects were:
Deposit
Leinster
UG
OC
Metallurgical Recovery
88%
51%
(10) Leinster – Ore Reserves includes operations and projects.
(11) Leinster – The decrease in Ore Reserves was due to depletion. Incorporated
within the Reserve Life calculation were OC and UG, which have a Reserve Life
of 3 years and 11 years respectively.
(12) Mt Keith – The increase in Ore Reserves and Reserve Life was mainly due to the
inclusion of additional mining areas based on updated economic assumptions.
(13) Cliffs – The decrease in Ore Reserves was mainly due to depletion and
redesign of the mine areas.
(14) Yakabindie – The increase in Ore Reserves and Reserve Life was mainly due
to the inclusion of additional mining areas.
(15) Venus – Maiden reporting of Ore Reserves.
(2) Leinster – Mineral Resources increased including a maiden declaration
of Oxide ore type and an updated estimate of UG ore type supported
by additional drilling. SP tonnage decreased due to depletion.
(3) Mt Keith – The decrease in SP Mineral Resources was due to depletion.
(4) Cliffs – The increase in Disseminated Sulphide Mineral Resources was due
to an upgrade in the resource estimate supported by additional drilling.
(5) Venus – The increase in Disseminated Sulphide Mineral Resources was mainly
due to an updated resource estimate supported by additional drilling.
i
S
t
r
a
t
e
g
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
a
t
B
H
P
R
e
m
u
n
e
r
a
t
i
o
n
R
e
p
o
r
t
D
i
r
e
c
t
o
r
s
’
R
e
p
o
r
t
i
F
n
a
n
c
a
i
l
S
t
a
t
e
m
e
n
t
s
6
A
d
d
i
t
i
o
n
a
l
i
n
f
o
r
m
a
t
i
o
n
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
BHP Annual Report 2019 289
6.4 Major projects
At the end of FY2019, BHP had five major projects under development in petroleum, copper, iron ore and potash, with a combined budget
of US$11.1 billion over the life of the projects.
Capital and exploration expenditure of US$7.6 billion in FY2019 was within guidance. Capital and exploration expenditure guidance for
FY2020 is unchanged at below US$8 billion. This guidance includes a US$0.9 billion exploration program in FY2020, with US$0.7 billion
for petroleum exploration and appraisal expenditure.
Projects in execution at the end of FY2019
Commodity
Project and ownership
Capacity (1)
Target
Budget
Date of initial production
Capital expenditure (US$M) (1)
Projects under development
Petroleum
Atlantis Phase 3
(US Gulf of Mexico)
44% (non-operator)
Petroleum
Mad Dog Phase 2
(US Gulf of Mexico)
23.9% (non-operator)
Iron Ore
Copper
South Flank (Australia)
85% (operator)
Spence Growth Option
(Chile)
New subsea production system that will
tie back to the existing Atlantis facility,
with capacity to produce up to 38,000
gross barrels of oil equivalent per day.
Overall project is 13% complete
New floating production facility with
the capacity to produce up to 140,000
gross barrels of crude oil per day.
On schedule and on budget, overall
project is 53% complete
Sustaining iron ore mine to replace
production from the 80 Mtpa Yandi
Mine. Overall project is 39% complete
New 95 ktpd concentrator is expected
to incrementally increase Spence’s
payable copper in concentrate
production by approximately 185 ktpa
in the first 10 years of operation
and extend the mining operations
by more than 50 years. Overall project
is 60% complete. Project approved
on 17 August 2017
CY2020
696
CY2022
2,154
CY2021
FY2021
3,061
2,460
8,371
Other projects in progress at the end of FY2019
Commodity
Project and ownership
Scope
Projects under development
Potash
Jansen Potash (Canada) 100%
Investment to finish the excavation and lining of the production
and service shafts, and to continue the installation of essential
surface infrastructure and utilities
Capital expenditure (US$M) (1)
Budget
2,700
2,700
(1) Unless noted otherwise, references to capacity are on a 100 per cent basis, references to capital expenditure from subsidiaries are reported on a 100 per cent basis
and references to capital expenditure from joint operations reflect BHP’s share.
290 BHP Annual Report 2019
6.5 Climate change data (1)
6.5.1 Energy consumption (2)
Operational energy consumption by source
Operational energy consumption (petajoules)
Consumption of fuel
– Coal & coke
– Natural gas
– Distillate/Gasoline
– Other
Consumption of electricity
Total operational energy consumption
Operational energy consumption from renewable sources (petajoules)
Operational energy intensity (gigajoules per tonne of copper equivalent production) (3)
Operational energy consumption by commodity
Year ended 30 June 2019
Petroleum
Copper
Iron Ore
Coal
Total
Year ended 30 June 2018
Petroleum
Copper
Iron Ore
Coal
Total
i
S
t
r
a
t
e
g
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
a
t
B
H
P
R
e
m
u
n
e
r
a
t
i
o
n
R
e
p
o
r
t
D
i
r
e
c
t
o
r
s
’
R
e
p
o
r
t
Year Ended 30 June
2018
2017
115
1
31
81
2
35
150
0.38
21
112
1
33
76
2
28
140
0.26
19
2019
114
1
24
87
3
35
149
0.31
22
Consumption
of fuel
(petajoules)
Consumption
of electricity
(petajoules)
Total operational
energy
consumption
(petajoules)
15.0
20.7
31.0
39.3
114.4
0.2
24.6
1.2
5.3
34.6
15.2
45.3
32.2
44.6
149.0
Consumption
of fuel
(petajoules)
Consumption
of electricity
(petajoules)
Total operational
energy
consumption
(petajoules)
24.1
19.6
29.3
34.7
115.5
0.3
24.6
1.2
5.2
34.5
24.4
44.2
30.5
39.9
150.0
i
F
n
a
n
c
a
i
l
S
t
a
t
e
m
e
n
t
s
6
A
d
d
i
t
i
o
n
a
l
i
n
f
o
r
m
a
t
i
o
n
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
BHP Annual Report 2019 291
6.5.2 Greenhouse gas emissions
Operational GHG emissions by source (4) (5)
Operational GHG emissions (million tonnes CO2-e)
Scope 1 GHG emissions (6)
Scope 2 GHG emissions (7)
Total operational GHG emissions
Operational GHG emissions intensity (tonnes CO2-e per tonne of copper equivalent production) (3)
Operational GHG emissions by commodity and asset (4) (5)
Year ended 30 June 2019
Petroleum
United States – Conventional
United States – US Onshore (8)
Australia
Other
Total petroleum
Copper
Escondida, Chile
Pampa Norte, Chile
Olympic Dam, Australia
Total copper
Iron Ore
Western Australia Iron Ore, Australia
Total iron ore
Coal
Metallurgical coal – Queensland Coal, Australia
Energy coal – New South Wales Energy Coal, Australia
Total coal
Nickel
Nickel West, Australia
Total nickel
Total (9)
Year ended 30 June 2018
Petroleum
United States – Conventional
United States – US Onshore
Australia
Other
Total petroleum
Copper
Escondida, Chile
Pampa Norte, Chile
Olympic Dam, Australia
Total copper
Iron Ore
Western Australia Iron Ore, Australia
Total iron ore
Coal
Metallurgical coal – Queensland Coal, Australia
Energy coal – New South Wales Energy Coal, Australia
Total coal
Nickel
Nickel West, Australia
Total nickel
Total (9)
292 BHP Annual Report 2019
Year Ended 30 June
2019
9.7
5.0
14.7
2.2
2018
10.6
5.9
16.5
2.3
2017
10.5
5.8
16.3
2.2
Scope 1 GHG
emissions
(kilotonnes
CO2-e)
Scope 2 GHG
emissions
(kilotonnes
CO2-e)
Operational
GHG emissions
Total
(kilotonnes
CO2-e)
200
467
320
250
1,237
930
340
200
1,470
2,050
2,050
3,980
520
4,500
460
460
9,730
0
3
0
10
13
2,140
330
470
2,940
260
260
1,090
90
1,180
530
530
4,970
200
470
320
260
1,250
3,070
670
670
4,410
2,310
2,310
5,070
610
5,680
990
990
14,700
Scope 1 GHG
emissions
(kilotonnes
CO2-e)
Scope 2 GHG
emissions
(kilotonnes
CO2-e)
Operational
GHG emissions
Total
(kilotonnes
CO2-e)
220
1,680
430
240
2,570
890
320
180
1,390
1,930
1,930
3,820
460
4,280
380
380
10,590
0
10
0
0
10
3,040
480
420
3,940
260
260
1,070
80
1,150
540
540
5,950
220
1,690
430
240
2,580
3,930
800
600
5,330
2,190
2,190
4,890
540
5,430
920
920
16,540
Scope 3 GHG emissions by category (10)
Scope 3 GHG emissions (million tonnes CO2-e)
Upstream
Purchased goods and services (including capital goods)
Fuel and energy-related activities
Upstream transportation and distribution (11)
Business travel
Employee commuting
Downstream
Downstream transportation and distribution (12)
Investments (i.e. our non-operated assets) (13)
Processing of sold products (14)
Iron ore processing (15)
Copper processing
Total processing of sold products
Use of sold products
Metallurgical coal (15)
Energy coal
Natural gas
Crude oil and condensates (16)
Natural gas liquids
Total use of sold products
Year Ended 30 June
2019
2018
2017
17.3
1.3
3.6
0.1
<0.1
4.0
3.1
299.6
5.1
304.7
111.4
67.0
28.3
23.3
2.8
232.7
8.2
1.4
3.6
0.1
<0.1
5.0
1.7
317.4
5.2
322.6
112.3
71.0
36.4
29.6
4.5
253.8
7.7
1.4
3.2
0.1
<0.1
2.8
1.9
309.5
4.2
313.7
105.5
72.1
38.3
33.1
5.1
254.1
(1) Unless otherwise noted, FY2017 and FY2018 data includes Continuing operations and Discontinued operations (Onshore US assets). FY2019 data includes Continuing
operations and Discontinued operations (Onshore US assets) to 31 October 2018.
(2) Calculated on an operational control basis in line with World Resources Institute/World Business Council for Sustainable Development guidance.
(3) Copper equivalent production has been calculated based on FY2019 average realised product prices for FY2019 production, FY2018 average realised product prices
for FY2018 production and FY2017 average realised product prices for FY2017 production. Production figures used are consistent with energy and emissions
reporting boundaries (i.e. BHP operational control).
(4) BHP currently uses Global Warming Potentials (GWP) from the Intergovernmental Panel on Climate Change (IPCC) Assessment Report 4 (AR4) based on 100-year timeframe.
(5) Scope 1 and 2 emissions have been calculated on an operational control basis in line with the GHG Protocol Corporate Accounting and Reporting Standard.
(6) Scope 1 refers to direct GHG emissions from operated assets.
(7) Scope 2 refers to indirect GHG emissions from the generation of purchased electricity and steam that is consumed by operated assets. Our Scope 2 emissions
have been calculated using the market-based method using supplier specific emissions factors, in line with the GHG Protocol Scope 2 Guidance. Our market-based
Scope 2 emissions were 5.0 Mt CO2-e which compares to 5.1 Mt CO2-e if calculated using the location-based method. A residual mix is currently unavailable
to account for voluntary purchases and this may result in double counting between electricity consumers.
Includes four months of emissions in FY2019 prior to divestment of this asset.
(8)
(9) Total includes functions, projects, exploration, closed sites and consolidation adjustments.
(10) Scope 3 emissions have been calculated using methodologies consistent with the GHG Protocol Corporate Value Chain (Scope 3) Accounting and Reporting
Standard. Scope 3 emissions reporting necessarily requires a degree of overlap in reporting boundaries due to our involvement at multiple points in the life cycle of
the commodities we produce and consume. A significant example of this is that Scope 3 emissions reported under the ‘Processing of sold products’ category include
the processing of our iron ore to steel. This third party activity also consumes metallurgical coal as an input, a portion of which is produced by us. For reporting
purposes, we account for Scope 3 emissions from combustion of metallurgical coal with all other fossil fuels under the ‘Use of sold products’ category, such that
a portion of metallurgical coal emissions is accounted for under two categories. This is an expected outcome of emissions reporting between the different scopes
defined under standard GHG accounting practices and is not considered to detract from the overall value of our Scope 3 emissions disclosure. This double counting
means that the emissions reported under each category should not be added up, as to do so would give an inflated total figure. For this reason we do not report a
total Scope 3 emissions figure. Further details of the calculation methodologies, assumptions and key references used in the preparation of our Scope 3 emissions
data can be found in the associated Scope 3 calculation methodology document available online at bhp.com/climate.
(11) Includes product transport where freight costs are covered by BHP, for example under Cost and Freight (CFR) or similar terms, as well as purchased transport
services for process inputs to our operations.
(12) Product transport where freight costs are not covered by BHP, for example under Free on Board (FOB) or similar terms.
(13) For BHP, this category covers the Scope 1 and 2 emissions (on an equity basis) from our assets that are owned as a joint venture but not operated by BHP.
(14) All iron ore production is assumed to be processed into steel and all copper metal production is assumed to be processed into copper wire for end use. Processing
of nickel, zinc, gold, silver, ethane and uranium oxide is not currently included, as production volumes are much lower than iron ore and copper and a large range of
possible end uses apply. Processing/refining of petroleum products is also excluded as these emissions are considered immaterial compared to the end-use product
combustion reported in the ‘Use of sold products’ category.
(15) Scope 3 emissions reported under the ‘Processing of sold products’ category include the processing of our iron ore to steel. This third party activity also consumes
metallurgical coal as an input, a portion of which is produced by us. For reporting purposes, we account for Scope 3 emissions from combustion of metallurgical
coal with all other fossil fuels under the ‘Use of sold products’ category, such that a portion of metallurgical coal emissions is accounted for under two categories.
(16) All crude oil and condensates are conservatively assumed to be refined and combusted as diesel.
BHP Annual Report 2019 293
i
S
t
r
a
t
e
g
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
a
t
B
H
P
R
e
m
u
n
e
r
a
t
i
o
n
R
e
p
o
r
t
D
i
r
e
c
t
o
r
s
’
R
e
p
o
r
t
i
F
n
a
n
c
a
i
l
S
t
a
t
e
m
e
n
t
s
6
A
d
d
i
t
i
o
n
a
l
i
n
f
o
r
m
a
t
i
o
n
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
6.6 Legal proceedings
We are involved from time-to-time in legal proceedings and
governmental investigations of a character normally incidental
to our business, including claims and pending actions against
us seeking damages, or clarification or prosecution of legal
rights and regulatory inquiries regarding business practices.
Insurance or other indemnification protection may offset the
financial impact on the Group of a successful claim.
This section summarises the significant legal proceedings and
investigations and associated matters in which we are currently
involved or have finalised since our last Annual Report.
Legal proceedings relating to the failure of the Fundão
tailings dam at the iron ore operations of Samarco in
Minas Gerais and Espírito Santo (Samarco dam failure)
We are engaged in numerous legal proceedings relating to the
Samarco dam failure. Given all of these proceedings are in early
stages, it is not possible at this time to provide a range of possible
outcomes or a reliable estimate of potential future exposures.
The most significant of these proceedings are summarised below.
As described below, many of these proceedings involve claims
for compensation for the similar or possibly the same damages.
There are numerous additional lawsuits against Samarco relating
to the Samarco dam failure to which we are not party.
R$20 billion public civil claim commenced by the Federal
Government of Brazil, states of Espírito Santo and Minas Gerais
and other authorities (R$20 billion Public Civil Claim)
On 30 November 2015, the Federal Government of Brazil, states
of Espírito Santo and Minas Gerais and other public authorities
collectively filed a public civil claim before the 12th Federal
Court of Belo Horizonte against Samarco and its shareholders,
BHP Billiton Brasil and Vale, seeking the establishment of a fund
of up to R$20 billion (approximately US$5.2 billion) in aggregate
for clean-up costs and damages.
The plaintiffs also requested certain interim injunctions in connection
with the public civil claim. On 18 December 2015, the Federal Court
granted the injunctions and, among other things, ordered Samarco
to deposit R$2 billion (approximately US$605 million) into a
court-managed bank account for use towards community and
environmental rehabilitation. BHP Billiton Brasil, Vale and Samarco
immediately appealed against the injunction. On 4 November 2016,
the Federal Court reduced the R$2 billion injunction to R$1.2 billion
(approximately US$365 million).
On 2 March 2016, BHP Billiton Brasil, together with Vale and
Samarco, entered into a Framework Agreement with the plaintiffs
to establish a foundation (Fundação Renova) to develop and
execute environmental and socioeconomic programs (Programs)
to remediate and provide compensation for damage caused by the
Samarco dam failure.
The term of the Framework Agreement is 15 years, renewable for
periods of one year successively until all obligations under the
Framework Agreement have been performed. Under the Framework
Agreement, Samarco is responsible for funding Fundação Renova’s
annual calendar year budget for the duration of the Framework
Agreement. The amount of funding for each calendar year will
be dependent on the remediation and compensation projects
to be undertaken in a particular year. To the extent that Samarco
does not meet its funding obligations under the Framework
Agreement, each of Vale and BHP Billiton Brasil has funding
obligations under the Framework Agreement in proportion
to its 50 per cent shareholding in Samarco.
On 25 June 2018, a Governance Agreement (summarised below),
was entered into providing for the settlement of this public civil
claim, suspension of the R$155 billion (approximately US$40 billion)
Federal Public Prosecution Office claim for 24 months, partial
ratification of the Framework Agreement and a formal declaration
that the Framework Agreement remains valid for the signing parties.
On 8 August 2018, the 12th Federal Court of Minas Gerais ratified
the Governance Agreement.
Ratification of the Governance Agreement on 8 August 2018
settled this public civil claim, including the R$1.2 billion
(approximately US$365 million) injunction order.
(1) Currently, solely BHP Billiton Brasil, Vale and Samarco, the Federal Government
and the State of Minas Gerais are defendants.
294 BHP Annual Report 2019
Preliminary Agreement
On 18 January 2017, BHP Billiton Brasil, together with Vale and
Samarco, entered into a Preliminary Agreement with the Federal
Prosecutors’ Office in Brazil, which outlines the process and timeline
for further negotiations towards a final settlement regarding the
R$20 billion (approximately US$5.2 billion) public civil claim and
the R$155 billion (approximately US$40 billion) Federal Public
Prosecution Office claim relating to the dam failure.
Under the Preliminary Agreement, BHP Billiton Brasil, Vale and
Samarco agreed interim security (Interim Security) comprising:
• R$1.3 billion (approximately US$335 million) in insurance bonds;
• R$100 million (approximately US$20 million) in liquid assets;
• A charge of R$800 million (approximately US$210 million)
over Samarco’s assets;
• R$200 million (approximately US$50 million) to be allocated
within the next four years through existing Framework Agreement
programs in the Municipalities of Barra Longa, Rio Doce, Santa
Cruz do Escalvado and Ponte Nova.
On 24 January 2017, BHP Billiton Brasil, Vale and Samarco provided
the Interim Security to the 12th Federal Court of Belo Horizonte,
which was to remain in place until the earlier of 30 June 2017 and
the date that a final settlement arrangement was agreed between
the Federal Prosecutors and BHP Billiton Brasil, Vale and Samarco.
Following a series of extensions, on 25 June 2018, the parties
reached an agreement in the form of the Governance Agreement
(summarised below).
Governance Agreement
On 25 June 2018, BHP Billiton Brasil, Vale, Samarco, the other parties
to the Framework Agreement, the Public Prosecutors Office and
the Public Defence Office entered into a Governance Agreement
which settles the R$20 billion (approximately US$5.2 billion) public
civil claim, enhances community participation in decisions related
to Programs under the Framework Agreement and establishes
a process to renegotiate the Programs over two years to progress
settlement of the R$155 billion (approximately US$40 billion)
Federal Public Prosecution Office claim (Governance Agreement).
Renegotiation of the Programs will be based on certain agreed
principles, such as full reparation consistent with Brazilian law,
the requirement for a technical basis for any proposed changes,
consideration of findings from experts appointed by BHP Billiton
Brasil, Samarco and Vale, consideration of findings from experts
appointed by Prosecutors and consideration of feedback
from impacted communities. During the renegotiation period
and up until revisions to the Programs are agreed, the Renova
Foundation will continue to implement the Programs in
accordance with the terms of the Framework Agreement
and the Governance Agreement.
The Governance Agreement was ratified by the 12th Federal Court
of Minas Gerais on 8 August 2018, settling the R$20 billion
(approximately US$5.2 billion) public civil claim and suspending
the R$155 billion (approximately US$40 billion) Federal Public
Prosecution Office claim for a period of two years from the date
of ratification.
Interim Security provided under the Preliminary Agreement
is maintained for a period of 30 months under the Governance
Agreement, after which BHP Billiton Brasil, Vale and Samarco
will be required to provide security of an amount equal to
Fundação Renova’s annual budget up to a limit of R$2.2 billion
(approximately US$570 million).
R$155 billion public civil claim commenced by the Federal
Public Prosecution Service (R$155 billion Federal Public
Prosecution Off ice claim)
On 3 May 2016, the Federal Public Prosecution Office filed a public
civil claim before the 12th Federal Court of Belo Horizonte against
BHP Billiton Brasil, Vale and Samarco – as well as 18 other public
entities (which has since been reduced to five defendants (1) by
the Court) – seeking R$155 billion (approximately US$40 billion)
for reparation, compensation and collective moral damages
in relation to the Samarco dam failure.
In addition, the claim includes a number of preliminary injunction
requests, seeking orders that BHP Billiton Brasil, Vale and Samarco
deposit R$7.7 billion (approximately US$2 billion) in a special
company account and provide guarantees equivalent to R$155 billion
(approximately US$40 billion). The injunctions also seek to prohibit
BHP Billiton Brasil, Vale and Samarco from distributing dividends
and selling certain assets (among other things).
The 12th Federal Court previously suspended this public civil claim,
including the R$7.7 billion (approximately US$2 billion) injunction
request. Suspension of the claim continues for a period of two
years from the date of ratification of the Governance Agreement
on 8 August 2018.
Public civil claims commenced by the State Prosecutors’ Off ice
in the state of Minas Gerais
On 10 December 2015, the State Prosecutors’ Office in the state
of Minas Gerais filed a public civil claim against BHP Billiton Brasil,
Vale and Samarco before the State Court in Mariana claiming
indemnification (amount not specified) for moral and material
damages to an unspecified group of individuals affected by the
Samarco dam failure, including the payment of costs for housing
and social and economic assistance.
The State Prosecutors’ Office also requested certain interim
injunctions in connection with this claim, including orders for
BHP Billiton Brasil, Vale and Samarco to provide housing, health
care, financial assistance and education facilities to the people
affected by the Samarco dam failure. The plaintiff also sought
an order to freeze R$300 million (approximately US$80 million)
in Samarco’s bank accounts. The Court granted the injunction
freezing R$300 million (approximately US$80 million) in Samarco’s
bank accounts for use towards the compensation and remediation
measures requested under this public civil claim. At a Court
hearing on 20 January 2016, the parties agreed that Samarco
should unilaterally provide:
• flexible housing solutions for 271 displaced families;
• monthly salaries to the displaced families for at least 12 months;
• a R$20,000 (approximately US$5,000) payment to each
displaced family;
• a R$100,000 (approximately US$25,000) payment to each
of the families of those deceased, as advance compensation.
There have been multiple hearings, injunctions and enforcement
petitions of previous settlements requested in this public civil
claim. Following Samarco’s request, the Court released part of the
frozen amount to pay for (i) the technical entity hired to assist the
impacted community and (ii) payments related to the Preliminary
Agreement. On 2 October 2018, the parties reached an agreement
that was ratified by the Court for the dismissal of the claim.
Under this settlement, Renova Foundation has reached more
than 83 individual agreements with impacted families in Mariana
for the payment of damages.
On 2 February 2016, the State Prosecutors’ Office in the state of
Minas Gerais filed another public civil claim against BHP Billiton
Brasil, Vale and Samarco before the State Court in Ponte Nova
claiming compensation of R$7.5 billion (approximately US$2.3 billion)
for moral and material damages suffered by 1,350 individuals
in Ponte Nova and collective moral damages allegedly suffered
by the community in Ponte Nova. The claim also sought a number
of preliminary injunctions, including orders to:
• freeze R$1 billion (approximately US$305 million) of cash in the
defendants’ bank accounts in order to secure the compensation
requested under the public civil claim;
• require the defendants to pay minimum wages and basic food
supplies to the families in Ponte Nova affected by the Samarco
dam failure;
• require the defendants to pay R$30,000 (approximately
US$8,000) per affected family and compensation to provide
dignified and adequate housing for the affected families.
On 5 February 2016, the Court granted an injunction to freeze
R$475 million (approximately US$145 million) from bank accounts
of BHP Billiton Brasil, Vale and Samarco and ordered them to pay
preliminary amounts to families in Ponte Nova affected by the
Samarco dam failure. This injunction was revoked on 9 November
2016 and the Court, on 8 May 2018, also ordered the frozen funds
to be returned to BHP Billiton Brasil (R$2 million). Samarco and
BHP Billiton Brasil filed their defences, respectively on 6 December
2016 and 9 March 2017. This case has been remitted to the 12th
Federal Court in Belo Horizonte and is currently suspended.
In November 2018, the State Prosecutor’s Office in the State of Minas
Gerais filed another public civil claim against BHP Billiton Brasil, Vale,
Samarco and Renova Foundation claiming approximately R$2 billion
(approximately US$500 million) for damages. The public civil claim
was terminated before the subpoenas on the basis that the claim
has already been addressed in the first public civil claim filed on
10 December 2015, which has been settled. The State Prosecutor’s
Office has appealed the decision.
Public civil claim commenced by the Public Defender Department
in Minas Gerais
On 25 April 2016, the Public Defender Department filed a public
civil claim against BHP Billiton Brasil, Vale and Samarco in the State
Court in Belo Horizonte, Minas Gerais, Brazil claiming R$10 billion
(approximately US$2.6 billion) for collective moral damages to
be deposited in the State Human Rights Defense Fund. The Public
Defender Department is also seeking a number of social and
environmental remediation measures in relation to the Samarco
dam failure, including orders requiring the reparation of the
environmental damage and the reconstruction of properties
and populations, including historical, religious, cultural, social,
environmental and immaterial heritages affected by the dam failure.
On 16 March 2016, the Court denied the remediation measures
requested as an injunction by the Public Defender Department.
The public civil claim was remitted to the 12th Federal Court
in Belo Horizonte and is currently suspended.
Public civil claim commenced by the State Prosecutors’ Off ice
in the state of Espírito Santo
On 15 January 2016, the State Prosecutors’ Office of Espírito Santo
filed a public civil claim before the State Court in Espírito Santo
against BHP Billiton Brasil, Vale and Samarco seeking compensation
for collective moral damages in relation to the suspension of the
water supply of the Municipality of Colatina as a result of the
Samarco dam failure. As part of the public civil claim, the State
Prosecutors’ Office sought a number of injunctions, including
an order to freeze R$2 billion (approximately US$520 million)
in the defendants’ bank accounts in order to secure the requested
compensation. On 11 February 2016, the Court denied all of
the injunction requests made by the State Prosecutors’ Office.
The State Prosecutors’ Office appealed the decision and on
2 August 2016 the State Court of Appeal decided to remit the
case to the 12th Federal Court in Belo Horizonte. This public
civil claim is suspended.
Public civil claim commenced by the state of Espírito Santo
On 8 January 2016, the state of Espírito Santo filed a public civil
claim against BHP Billiton Brasil, Vale and Samarco before the
State Court in Colatina (later remitted to the 12th Federal Court
in Belo Horizonte) seeking the remediation and restoration
of the water supply of the residents of Baixo Guandu, Linhares,
Colatina and Marilândia. In addition, the claim sought injunctions
ordering, among other things, the execution of several works and
improvements in public equipment in order to repair and upgrade
the sewerage system and water network in Colatina and Linhares,
and an order to freeze R$1 billion (approximately US$260 million)
of the defendants’ assets. On 4 February 2016, the Court ordered
Samarco to deposit approximately R$7 million (approximately
US$2 million) in a fund of the state of Espírito Santo to be created
and granted certain injunctions relating to remediation measures.
At the same time it denied the injunction request to freeze assets
of R$1 billion (approximately US$260 million). On 6 April 2016,
the Court of Appeals suspended the injunctions granted. BHP
Billiton Brasil, Vale and Samarco filed their defences in March 2016
and also requested the suspension of this public civil claim. On
18 December 2017, the case was remitted to the 12th Federal Court.
Public civil claim commenced by the Association for the Defense
of Collective Interests – ADIC
On 17 November 2015, ADIC, a non-governmental organisation
(NGO) in Brazil, filed a public civil claim solely against Samarco
before the 12th Federal Court in Belo Horizonte claiming at least
R$10 billion (approximately US$2.6 billion) for environmental and
social damages in relation to the Samarco dam failure, in addition to
collective moral damages and reparation measures. The NGO also
requested preliminary injunctions ordering the deposit of R$1 billion
(approximately US$260 million) and prohibiting Samarco from
distributing dividends to its shareholders. Samarco presented its
defence on 12 February 2016. The Court did not decide on the
injunction request and on 27 March 2017, the Court suspended this
public civil claim.
BHP Annual Report 2019 295
i
S
t
r
a
t
e
g
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
a
t
B
H
P
R
e
m
u
n
e
r
a
t
i
o
n
R
e
p
o
r
t
D
i
r
e
c
t
o
r
s
’
R
e
p
o
r
t
i
F
n
a
n
c
a
i
l
S
t
a
t
e
m
e
n
t
s
6
A
d
d
i
t
i
o
n
a
l
i
n
f
o
r
m
a
t
i
o
n
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
Other civil proceedings in Brazil
As noted above, BHP Billiton Brasil has been named as a defendant
in numerous other lawsuits that are at early stages of proceedings.
The lawsuits seek various remedies, including rehabilitation costs,
compensation to injured individuals and families of the deceased,
recovery of personal and property losses and injunctive relief.
In addition, government inquiries and investigations relating to
the Samarco dam failure have been commenced by numerous
agencies of the Brazilian Government and are ongoing, including
criminal investigations by the federal and state police, and by
federal prosecutors.
Our potential liabilities, if any, resulting from other pending and future
claims, lawsuits and enforcement actions relating to the Samarco
dam failure, together with the potential cost of implementing
remedies sought in the various proceedings, cannot be reliably
estimated at this time and therefore a provision has not been
recognised and nor has any contingent liability been quantified
for these matters. Ultimately, these could have a material adverse
impact on BHP’s business, competitive position, cash flows,
prospects, liquidity and shareholder returns. For more information
on the Samarco dam failure, refer to section 1.7.
As at June 2019, Samarco had been named as a defendant in more
than 74,000 small claims for moral damages in which people argue
their public water service was interrupted for between five and
10 days, and courts have awarded damages, generally ranging
from R$1,000 (approximately US$260) to R$10,000 (approximately
US$2,600) per impacted person. BHP Billiton Brasil is a co-defendant
in more than 15,500 of these cases. Over 260,000 people have
received moral damages related to the temporary suspension of
public water supply through settlements reached with Renova.
Criminal charges
On 20 October 2016, the Federal Prosecutors’ Office filed criminal
charges against BHP Billiton Brasil, Vale and Samarco and certain
employees and former employees of BHP Billiton Brasil (Affected
Individuals) in the Federal Court of Ponte Nova, Minas Gerais. On
3 March 2017, BHP Billiton Brasil and the Affected Individuals filed
their preliminary defences. The Federal Court granted Habeas
Corpus petitions in favour of three of the Affected Individuals
terminating the charges against those individuals. The Federal
Prosecutors’ Office appealed two of the decisions. BHP Billiton
Brasil rejects outright the charges against the Company and the
Affected Individuals and will defend the charges and fully support
each of the Affected Individuals in their defence of the charges.
United States class action complaint – shareholders
In February 2016, a putative class action complaint (Complaint)
was filed in the U.S. District Court for the Southern District of
New York on behalf of purchasers of American Depositary Receipts
of BHP Group Limited and BHP Group Plc between 25 September
2014 and 30 November 2015 against BHP Group Limited and
BHP Group Plc and certain of its current and former executive
officers and directors. The Complaint asserted claims under
US federal securities laws and indicated that the plaintiff would
seek certification to proceed as a class action.
On 6 August 2018, the parties reached an in-principle settlement
agreement of US$50 million to resolve all claims with no admission
of liability by the Defendants, subject to Court approval. On 10 April
2019, the District Court made orders granting final approval of
the settlement and the settlement became final on 10 May 2019.
The majority of the settlement payment was covered by BHP’s
external insurance arrangements.
United States class action complaint – bondholders
On 14 November 2016, a putative class action complaint (Bondholder
Complaint) was filed in the U.S. District Court for the Southern District
of New York on behalf of purchasers of Samarco’s 10-year bond
notes due 2022–2024 between 31 October 2012 and 30 November
2015. The Bondholder Complaint was initially filed against Samarco
and the former chief executive officer of Samarco. The Complaint
asserted claims under the U.S. federal securities laws and indicated
that the plaintiff will seek certification to proceed as a class action.
The Bondholder Complaint was subsequently amended to include
BHP Group Limited, BHP Group Plc, BHP Billiton Brasil Ltda, Vale S.A.
and officers of Samarco, including four of Vale S.A. and BHP Billiton
Brasil Ltda’s nominees to the Samarco Board. On 5 April 2017, the
Plaintiff discontinued its claims against the individual defendants.
296 BHP Annual Report 2019
On 7 March 2018, the District Court granted a joint motion from
the remaining corporate defendants to dismiss the Bondholder
Complaint. A second amended Bondholder Complaint was also
dismissed by the Court on 18 July 2019. The Plaintiff has filed a
motion, which remains pending before the Court, for reconsideration
of that decision or leave to file a third amended complaint.
The amount of damages sought by the putative class is unspecified.
Australian class action complaints
Three separate shareholder class actions were filed in the Federal
Court of Australia on behalf of persons who acquired shares in
BHP Group Ltd on the Australian Securities Exchange or shares
in BHP Group Plc on the London Stock Exchange and Johannesburg
Stock Exchange in periods prior to the Samarco dam failure.
Following an appeal to the Full Court of the Federal Court, two
of the actions have been consolidated into the one action and the
third action is expected to be dismissed.
The amount of damages sought in the consolidated action
is unspecified.
United Kingdom group action complaint
BHP Group Plc and BHP Group Ltd are named as defendants
in group action claims for damages that have been filed in the
courts of England. These claims have been filed on behalf of
certain individuals, governments, businesses and communities
in Brazil allegedly impacted by the Samarco dam failure.
On 7 August 2019, the BHP parties filed a preliminary application
seeking to strike out or stay this action on jurisdictional and other
procedural grounds.
The amount of damages sought in this class action is unspecified.
Tax and royalty matters
Transfer pricing dispute – Sales of commodities to BHP Billiton
Marketing AG in Singapore
On 19 November 2018, BHP reached an agreement with the
Australian Taxation Office (ATO) to settle the transfer pricing
dispute relating to its marketing operations in Singapore.
The settlement fully resolves the longstanding dispute between
BHP and the ATO for all prior years, being 2003 to 2018, with
no admission of tax avoidance by BHP, and provides certainty
in relation to the future taxation treatment.
The dispute related to the amount of Australian tax payable
as a result of the sale of BHP’s Australian commodities to BHP’s
Singapore marketing business. The ATO had issued amended
assessments for A$661 million primary tax (A$1,042 million
including interest and penalties) for the income years 2003
to 2013.
As part of the settlement, BHP paid a total of approximately
A$529 million in additional taxes for the income years 2003 to 2018.
BHP had already paid A$328 million of this amount to the ATO,
following receipt of amended tax assessments and in accordance
with the ATO’s normal practice.
A further element of the settlement is that BHP Group Limited
will increase its ownership of BHP Billiton Marketing AG from
58 per cent to 100 per cent. BHP Billiton Marketing AG is the main
company that BHP utilises to conduct its Singapore marketing
business. The change in ownership will result in all profits
made in Singapore in relation to the Australian assets owned
by BHP Group Limited being fully subject to Australian tax.
The change in ownership will provide certainty for BHP
and the ATO regarding the Australian taxation treatment
of BHP’s Singapore marketing business for future years.
BHP’s marketing operations will continue to be located in
Singapore and remain an important part of BHP’s value chain.
Unresolved tax and royalty matters
The Group presently has unresolved tax and royalty matters
for which the timing of resolution and potential economic
outflow is uncertain. For details of those matters, refer to
note 5 ‘Income and tax expense’ in section 5.
6.7 Glossary
6.7.1 Mining, oil and gas-related terms
2D
Two dimensional.
3D
Three dimensional.
AIG
The Australian Institute of Geoscientists.
APEGS
Association of Professional Engineers and Geoscientists
of Saskatchewan.
AusIMM
The Australasian Institute of Mining and Metallurgy.
Beneficiation
The process of physically separating ore from waste material
prior to subsequent processing of the improved ore.
Brownfield
The development or exploration located inside the area
of influence of existing mine operations which can share
infrastructure/management.
Butane
A component of natural gas. Where sold separately, is largely butane
gas that has been liquefied through pressurisation. One tonne
of butane is approximately equivalent to 14,000 cubic feet of gas.
Coal Reserves
Equivalent to Ore Reserves, but specifically concerning coal.
Coal Resources
Equivalent to Mineral Resources, but specifically concerning coal.
Coking coal
Used in the manufacture of coke, which is used in the steelmaking
process by virtue of its carbonisation properties. Coking coal may
also be referred to as metallurgical coal.
Competent Person
A minerals industry professional who is a Member or Fellow
of The Australasian Institute of Mining and Metallurgy, or of the
Australian Institute of Geoscientists, or of a ‘Recognised Professional
Organisation’ (RPO), as included in a list available on the JORC and
ASX websites. These organisations have enforceable disciplinary
processes, including the powers to suspend or expel a member.
A Competent Person must have a minimum of five years’ relevant
experience in the style of mineralisation or type of deposit under
consideration and in the activity that the person is undertaking
(JORC Code, 2012 Edition).
Condensate
A mixture of hydrocarbons that exist in gaseous form in natural
underground reservoirs, but which condense to form a liquid at
atmospheric conditions.
Conventional Petroleum Resources
Hydrocarbon accumulations that can be produced by a well
drilled into a geologic formation in which the reservoir and fluid
characteristics permit the hydrocarbons to readily flow to the
wellbore without the use of specialised extraction technologies.
Copper cathode
Electrolytically refined copper that has been deposited on the
cathode of an electrolytic bath of acidified copper sulphate
solution. The refined copper may also be produced through
leaching and electrowinning.
Crude oil
A mixture of hydrocarbons that exist in liquid form in natural
underground reservoirs, and remain liquid at atmospheric
pressure after being produced at the well head and passing
through surface separating facilities.
Cut-off grade
A nominated grade above which an Ore Reserve or Mineral Resource
is defined. For example, the lowest grade of mineralised material
that qualifies as economic for estimating an Ore Reserve.
Dated Brent
A benchmark price assessment as of a specified date of the spot
market value of physical cargoes of North Sea light sweet crude oil.
Electrowinning/electrowon
An electrochemical process in which metal is recovered by
dissolving a metal within an electrolyte and plating it onto
an electrode.
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.
Ethane
A component of natural gas. Where sold separately, is largely ethane
gas that has been liquefied through pressurisation. One tonne
of ethane is approximately equivalent to 28,000 cubic feet of gas.
FAusIMM
Fellow of the Australasian Institute of Mining and Metallurgy.
Field
An area consisting of a single reservoir or multiple reservoirs all
grouped on or related to the same individual geological structural
feature and/or stratigraphic condition. There may be two or more
reservoirs in a field that are separated vertically by intervening
impervious strata, or laterally by local geologic barriers, or by both.
Reservoirs that are associated by being in overlapping or adjacent
fields may be treated as a single or common operational field.
The geological terms ‘structural feature’ and ‘stratigraphic
condition’ are intended to identify localised geological features
as opposed to the broader terms of basins, trends, provinces,
plays, areas-of-interest, etc. (per SEC Regulation S-X, Rule 4-10).
Flotation
A method of selectively recovering minerals from finely ground ore
using a froth created in water by specific reagents. In the flotation
process, certain mineral particles are induced to float by becoming
attached to bubbles of froth and the unwanted mineral particles sink.
FPSO (Floating, production, storage and off -take)
A floating vessel used by the offshore oil and gas industry for
the processing of hydrocarbons and for storage of oil. An FPSO
vessel is designed to receive hydrocarbons produced from nearby
platforms or subsea templates, process them and store oil until
it can be offloaded onto a tanker.
Grade or Quality
Any physical or chemical measurement of the characteristics
of the material of interest in samples or product.
Greenfield
The development or exploration located outside the area
of influence of existing mine operations/infrastructure.
Heap leach(ing)
A process used for the recovery of metals such as copper, nickel,
uranium and gold from low-grade ores. The crushed material
is laid on a slightly sloping, impermeable pad and leached
by uniformly trickling (gravity fed) a chemical solution through
the beds to ponds. The metals are recovered from the solution.
Hypogene Sulphide
Hypogene mineralisation is formed by fluids at high temperature
and pressure derived from magmatic activity. Hypogene sulphide
consists predominantly of chalcopyrite.
BHP Annual Report 2019 297
i
S
t
r
a
t
e
g
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
a
t
B
H
P
R
e
m
u
n
e
r
a
t
i
o
n
R
e
p
o
r
t
D
i
r
e
c
t
o
r
s
’
R
e
p
o
r
t
i
F
n
a
n
c
a
i
l
S
t
a
t
e
m
e
n
t
s
6
A
d
d
i
t
i
o
n
a
l
i
n
f
o
r
m
a
t
i
o
n
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
Mineralisation
Any single mineral or combination of minerals occurring in a mass,
or deposit, of economic interest.
Modifying Factors
Considerations used to convert Mineral Resources to Ore Reserves.
These include, but are not restricted to, mining, processing,
metallurgical, infrastructure, economic, marketing, legal,
environmental, social and governmental factors.
NGL (natural gas liquids)
Consists of propane, butane and ethane – individually or as a mixture.
Nominated production rate
The approved average production rate for the remainder of the
life-of-asset plan or five-year plan production rate if significantly
different to life-of-asset production rate.
OC (open-cut)
Surface working in which the working area is kept open to the sky.
Ore Reserves
The economically mineable part of a Measured and/or Indicated
Mineral Resource. It includes diluting materials and allowances for
losses, which may occur when the material is mined or extracted
and is defined by studies at Pre-Feasibility or Feasibility level
as appropriate that include application of Modifying Factors.
Such studies demonstrate that, at the time of reporting, extraction
could reasonably be justified (JORC Code, 2012 Edition).
PCI
Pulverised coal injection.
P. Eng. PEGNL
Professional Engineer of the Association of Professional Engineers
and Geoscientists of Newfoundland and Labrador.
Probable Ore Reserves
The economically mineable part of an Indicated and, in some
circumstances, a Measured Mineral Resource. The confidence
in the Modifying Factors applying to a Probable Ore Reserve
is lower than that applying to a Proved Ore Reserve. Consideration
of the confidence level of the Modifying Factors is important in
conversion of Mineral Resources to Ore Reserves. A Probable Ore
Reserve has a lower level of confidence than a Proved Ore Reserve
but is of sufficient quality to serve as the basis for a decision
on the development of the deposit (JORC Code, 2012 Edition).
Propane
A component of natural gas. Where sold separately, is largely
propane gas that has been liquefied through pressurisation.
One tonne of propane is approximately equivalent to 19,000
cubic feet of gas.
Proved oil and gas reserves
Those quantities of oil, gas and natural gas liquids, which by
analysis of geoscience and engineering data can be estimated
with reasonable certainty to be economically producible –
from a given date forward, from known reservoirs, and under
existing economic conditions, operating methods, and government
regulations – prior to the time at which contracts providing the
right to operate expire, unless evidence indicates that renewal
is reasonably certain, regardless of whether deterministic
or probabilistic methods are used for the estimation (from SEC
Modernization of Oil and Gas Reporting, 2009, 17 CFR Parts 210,
211, 229 and 249).
Proved Ore Reserves
The economically mineable part of a Measured Mineral Resource.
A Proved Ore Reserve implies a high degree of confidence in the
Modifying Factors. A Proved Ore Reserve represents the highest
confidence category of reserve estimate and implies a high
degree of confidence in geological and grade continuity, and the
consideration of the Modifying Factors. The style of mineralisation
or other factors could mean that Proved Ore Reserves are not
achievable in some deposits (JORC Code, 2012 Edition).
Indicated Mineral Resources
That part of a Mineral Resource for which quantity, grade (or quality),
densities, shape and physical characteristics are estimated with
sufficient confidence to allow the application of Modifying Factors
in sufficient detail to support mine planning and evaluation of
the economic viability of the deposit (JORC Code, 2012 Edition).
Inferred Mineral Resources
That part of a Mineral Resource for which quantity and grade
(or quality) are estimated on the basis of limited geological
evidence and sampling. Geological evidence is sufficient to
imply but not verify geological and grade (or quality) continuity
(JORC Code, 2012 Edition).
Joint Ore Reserves Committee (JORC) Code
A set of minimum standards, recommendations and guidelines
for public reporting in Australasia of Exploration Results,
Mineral Resources and Ore Reserves. The guidelines are defined
by the Australasian Joint Ore Reserves Committee (JORC),
which is sponsored by the Australian mining industry and
its professional organisations.
Leaching
The process by which a soluble metal can be economically
recovered from minerals in ore by dissolution.
LNG (liquefied natural gas)
Consists largely of methane that has been liquefied through
chilling and pressurisation. One tonne of LNG is approximately
equivalent to 46,000 cubic feet of natural gas.
LOI (loss on ignition)
A measure of the percentage of volatile matter (liquid or gas)
contained within a mineral or rock. LOI is determined to calculate
loss in mass when subjected to high temperatures.
LPG (liquefied petroleum gas)
Consists of propane and butane and a small amount (less
than two per cent) of ethane that has been liquefied through
pressurisation. One tonne of LPG is approximately equivalent
to 12 barrels of oil.
MAIG
Member of the Australian Institute of Geoscientists.
Marketable Coal Reserves
Represents beneficiated or otherwise enhanced coal product
where modifications due to mining, dilution and processing have
been considered, must be publicly reported in conjunction with,
but not instead of, reports of Coal Reserves. The basis of the
predicted yield to achieve Marketable Coal Reserves must be
stated (JORC Code, 2012).
MAusIMM
Member of the Australasian Institute of Mining and Metallurgy.
Measured Mineral Resources
That part of a Mineral Resource for which quantity, grade
(or quality), densities, shape and physical characteristics are
estimated with confidence sufficient to allow the application
of Modifying Factors to support detailed mine planning
and final evaluation of the economic viability of the deposit
(JORC Code, 2012 Edition).
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.
MGSSA
Member of the Geological Society of South Africa.
Mineral Resources
A concentration or occurrence of solid material of economic
interest in or on the Earth’s crust in such form, grade (quality) and
quantity that there are reasonable prospects for eventual economic
extraction. The location, quantity, grade (or quality), continuity
and other geological characteristics of a Mineral Resource are
known, estimated or interpreted from specific geological evidence
and knowledge, including sampling (JORC Code, 2012 Edition).
298 BHP Annual Report 2019
Qualified petroleum reserves and resources evaluator
A qualified petroleum reserves and resources evaluator,
as defined in Chapter 19 of the ASX Listing Rules.
Reserve Life
Current stated Ore Reserves estimate divided by the current
approved nominated production rate as at the end of the
financial year.
ROM (run of mine)
Run of mine product mined in the course of regular mining
activities. Tonnes include allowances for diluting materials and
for losses that occur when the material is mined.
Solvent extraction
A method of separating one or more metals from a leach solution
by treating with a solvent that will extract the required metal,
leaving the others. The metal is recovered from the solvent
by further treatment.
SP (stockpile)
An accumulation of ore or mineral built up when demand
slackens or when the treatment plant or beneficiation equipment
is incomplete or temporarily unable to process the mine output;
any heap of material formed to create a buffer for loading
or other purposes or material dug and piled for future use.
Spud
Commence drilling of an oil or gas well.
Supergene Sulphide
Supergene is a term used to describe near-surface processes and
their products, formed at low temperature and pressure by the
activity of descending water. Supergene sulphide is mainly formed
of chalcocite and covellite and is amenable to heap leaching.
Tailings
Those portions of washed or milled ore that are too poor to be
treated further or remain after the required metals and minerals
have been extracted.
TLP (tension leg platform)
A vertically moored floating facility for production of oil and gas.
Total Mineral Resources
The sum of Inferred, Indicated and Measured Mineral Resources.
Total Ore Reserves
The sum of Proved and Probable Ore Reserves.
UG (underground)
Below the surface mining activities.
Unconventional Petroleum Resources
Hydrocarbon accumulations that are generally pervasive in nature
and may be continuous throughout a large area requiring specialised
extraction technologies to produce or recover. Examples include,
but are not limited to coalbed methane, basin-centred gas, shale
gas, gas hydrates, natural bitumen (tar sands), and oil shale deposits.
Examples of specialised technologies include: dewatering
of coalbed methane, massive fracturing programs for shale gas,
steam and/or solvents to mobilise bitumen for in situ recovery,
and, in some cases, mining activities.
Wet tonnes
Production is usually quoted in terms of wet metric tonnes (wmt).
To adjust from wmt to dry metric tonnes (dmt) a factor is applied
based on moisture content.
6.7.2 Other terms
AASB (Australian Accounting Standards Board)
Accounting standards as issued by the Australian Accounting
Standards Board.
ADR (American Depositary Receipt)
An instrument evidencing American Depository Shares or ADSs,
which trades on a stock exchange in the United States.
ADS (American Depositary Share)
A share issued under a deposit agreement that has been created
to permit US-resident investors to hold shares in non-US companies
and trade them on the stock exchanges in the United States.
ADSs are evidenced by American Depositary Receipts, or ADRs,
which are the instruments that trade on a stock exchange in the
United States.
ASIC (Australian Securities and Investments Commission)
The Australian Government agency that enforces laws relating
to companies, securities, financial services and credit in
order to protect consumers, investors and creditors.
Assets
Assets are a set of one or more geographically proximate operations
(including open-cut mines, underground mines, and onshore
and offshore oil and gas production and production facilities).
Assets include our operated and non-operated assets.
Asset groups
We group our assets into geographic regions in order to provide
effective governance and accelerate performance improvement.
Minerals assets are grouped under Minerals Australia or Minerals
Americas based on their geographic location. Oil, gas and
petroleum assets are grouped together as Petroleum.
ASX (Australian Securities Exchange)
ASX is a multi-asset class vertically integrated exchange group
that functions as a market operator, clearing house and payments
system facilitator. It oversees compliance with its operating rules,
promotes standards of corporate governance among Australia’s
listed companies and helps educate retail investors.
BHP
Both companies in the DLC structure, being BHP Group Limited
and BHP Group Plc and their respective subsidiaries.
BHP Group Limited
BHP Group Limited and its subsidiaries.
BHP Group Limited share
A fully paid ordinary share in the capital of BHP Group Limited.
BHP Group Limited shareholders
The holders of BHP Group Limited shares.
BHP Group Limited Special Voting Share
A single voting share issued to facilitate joint voting by
shareholders of BHP Group Limited on Joint Electorate Actions.
BHP Group Plc
BHP Group Plc and its subsidiaries.
BHP Group Plc share
A fully paid ordinary share in the capital of BHP Group Plc.
BHP Group Plc shareholders
The holders of BHP Group Plc shares.
BHP Group Plc Special Voting Share
A single voting share issued to facilitate joint voting by
shareholders of BHP Group Plc on Joint Electorate Actions.
BHP shareholders
In the context of BHP’s financial results, BHP shareholders refers
to the holders of shares in BHP Group Limited and BHP Group Plc.
Board
The Board of Directors of BHP.
BHP Annual Report 2019 299
i
S
t
r
a
t
e
g
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
a
t
B
H
P
R
e
m
u
n
e
r
a
t
i
o
n
R
e
p
o
r
t
D
i
r
e
c
t
o
r
s
’
R
e
p
o
r
t
i
F
n
a
n
c
a
i
l
S
t
a
t
e
m
e
n
t
s
6
A
d
d
i
t
i
o
n
a
l
i
n
f
o
r
m
a
t
i
o
n
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
CQCA
Central Queensland Coal Associates
Commercial
Our Commercial function optimises value creation and minimises
costs across our end-to-end supply chain. It is organised around
our core value chain activities – Sales and Marketing; Maritime and
Supply Chain Excellence; Procurement; and Warehousing Inventory
and Logistics and Property – supported by short and long-term
market insights, strategy and planning activities, and close
partnership with our assets.
Company
BHP Group Limited, BHP Group Plc and their respective subsidiaries.
Continuing operations
Assets/operations/entities that are owned and/or operated
by BHP, excluding major assets/operations/entities classified
as Discontinued Operations.
Discontinued operations
Major assets/operations/entities that have either been disposed of
or are classified as held for sale in accordance with IFRS 5/AASB 5
Non-current Assets Held for Sale and Discontinued Operations.
Dividend record date
The date, determined by a company’s board of directors, by when
an investor must be recorded as an owner of shares in order to
qualify for a forthcoming dividend.
DLC Dividend Share
A share to enable a dividend to be paid by BHP Group Plc to
BHP Group Limited or by BHP Group Limited to BHP Group Plc
(as applicable).
DLC (Dual Listed Company)
BHP’s Dual Listed Company structure has two parent companies
(BHP Group Limited and BHP Group Plc) operating as a single
economic entity as a result of the DLC merger.
DLC merger
The Dual Listed Company merger between BHP Group Limited
and BHP Group Plc on 29 June 2001.
ELT (Executive Leadership Team)
The Executive Leadership Team directly reports to the Chief
Executive Officer and is responsible for the day-to-day management
of BHP and leading the delivery of our strategic objectives.
Executive KMP (Key Management Personnel)
Executive KMP includes the Executive Director (our CEO), the
Chief Financial Officer, the President Operations, Minerals Australia,
the President Operations, Minerals Americas, and the President
Operations, Petroleum. It does not include the Non-Executive
Directors (our Board).
Functions
Functions operate along global reporting lines to provide
support to all areas of the organisation. Functions have specific
accountabilities and deep expertise in areas such as finance,
legal, governance, technology, human resources, corporate
affairs, health, safety and community.
Gearing ratio
The ratio of net debt to net debt plus net assets.
GHG (Greenhouse gas)
For BHP reporting purposes, these are the aggregate anthropogenic
carbon dioxide equivalent emissions of carbon dioxide (CO2),
methane (CH4), nitrous oxide (N2O), hydrofluorocarbons (HFCs),
perfluorocarbons (PFCs) and sulphur hexafluoride (SF6 ).
Group
BHP Group Limited, BHP Group Plc and their respective subsidiaries.
Henry Hub
A natural gas pipeline located in Erath, Louisiana that serves as
the official delivery location for futures contracts on the New York
Mercantile Exchange.
HPI (High potential injuries)
High potential injuries (HPI) are recordable injuries and first aid
cases where there was the potential for a fatality.
IFRS (International Financial Reporting Standards)
Accounting standards as issued by the International Accounting
Standards Board.
KMP (Key Management Personnel)
Persons having authority and responsibility for planning, directing
and controlling the activities of the Group, directly or indirectly.
For BHP, KMP includes the Executive Director (our CEO),
the Non-Executive Directors (our Board), as well as the Chief
Financial Officer, the President Operations (Minerals Australia),
the President Operations (Minerals Americas), and the President
Operations (Petroleum).
KPI (Key performance indicator)
Used to measure the performance of the Group, individual
businesses and executives in any one year.
LME (London Metal Exchange)
A major futures exchange for the trading of industrial metals.
Minerals Americas
A group of assets located in Brazil, Canada, Chile, Colombia, Peru
and the United States (see ‘Asset groups’) focusing on copper, zinc,
iron ore, energy coal and potash.
Minerals Australia
A group of assets located in Australia (see ‘Asset groups’). Minerals
Australia includes operations in Western Australia, Queensland,
New South Wales and South Australia, focusing on iron ore, copper,
metallurgical, and energy coal and nickel.
Non-operated asset/Non-operated joint venture (NOJV)
Non-operated assets/non-operated joint ventures include interests
in assets that are owned as a joint venture but not operated by BHP.
References in this Annual Report to a ‘joint venture’ are used for
convenience to collectively describe assets that are not wholly
owned by BHP. Such references are not intended to characterise
the legal relationship between the owners of the asset.
Occupational illness
An illness that occurs as a consequence of work-related activities
or exposure. It includes acute or chronic illnesses or diseases,
which may be caused by inhalation, absorption, ingestion
or direct contact.
OMC (Operations Management Committee)
Prior to FY2018, the Operations Management Committee had
responsibility for planning, directing and controlling the activities
of BHP under the authorities that have been delegated to it by
the Board. This included key strategic, investment and operational
decisions, and recommendations to the Board.
During FY2018 the OMC was dissolved and the Remuneration
Committee re-examined the classification of KMP for FY2018
to determine which persons have the authority and responsibility
for planning, directing and controlling the activities of BHP.
After due consideration, the Remuneration Committee determined
the KMP for FY2018 comprised of all Non-executive Directors
(the Board), the Executive Director (the CEO), the Chief Financial
Officer, the President Operations, Minerals Australia, the President
Operations, Minerals Americas, and the President Operations,
Petroleum. The Committee also determined that, effective
1 July 2017, the Chief External Affairs Officer and Chief People
Officer roles are no longer considered KMP.
Onshore US
BHP’s Petroleum asset in four US shale areas (Eagle Ford, Permian,
Haynesville and Fayetteville), where we produce oil, condensate,
gas and natural gas liquids.
Operated assets
Operated assets include assets that are wholly owned and operated
by BHP and assets that are owned as a joint venture and operated
by BHP. References in this Annual Report to a ‘joint venture’ are used
for convenience to collectively describe assets that are not wholly
owned by BHP. Such references are not intended to characterise
the legal relationship between the owners of the asset.
300 BHP Annual Report 2019
Operating Model
The Operating Model outlines how BHP is organised, works and
measures performance and includes mandatory performance
requirements and common systems, processes and planning.
The Operating Model has been simplified and BHP is organised
by assets, asset groups, Commercial, and functions.
Senior manager
An employee who has responsibility for planning, directing or
controlling the activities of the entity or a strategically significant
part of it. In the Strategic Report, senior manager includes senior
leaders and any persons who are directors of any subsidiary
company even if they are not senior leaders.
Operations
Open-cut mines, underground mines, onshore and offshore oil
and gas production and processing facilities.
Our Requirements
The standards that give effect to the mandatory requirements
arising from the BHP Operating Model as approved by the
Executive Leadership Team (ELT). They describe the mandatory
minimum performance requirements and accountabilities
for definitive business obligations, processes, functions and
activities across BHP.
Previously called Group Level Documents (GLDs), the Our
Requirements standards reflect a simpler organisation with
the purpose of being more user-friendly and easier to read.
Paris Agreement
The Paris Agreement is an agreement between countries party
to the United Nations Framework Convention on Climate Change
(UNFCC) to strengthen efforts to combat climate change and
adapt to its effects, with enhanced support to assist developing
countries to do so.
Petroleum (asset group)
A group of conventional and non-conventional oil and gas assets
(see ‘Asset groups’). Petroleum’s core production operations
are located in the US Gulf of Mexico, Australia and Trinidad
and Tobago. Petroleum produces crude oil and condensate,
gas and natural gas liquids.
Platts
Platts is a global provider of energy, petrochemicals, metals and
agriculture information and a premier source of benchmark price
assessments for those commodity markets.
Quoted
In the context of American Depositary Shares (ADS) and
listed investments, the term ‘quoted’ means ‘traded’ on the
relevant exchange.
Scope 1 Greenhouse gas emissions
Scope 1 greenhouse gas emissions are direct emissions from
operations that are owned or controlled by BHP, primarily emissions
from fuel consumed by haul trucks at our operated assets, as well
as fugitive methane emissions from coal and petroleum production
at our operated assets.
Scope 2 Greenhouse gas emissions
Scope 2 greenhouse gas emissions are indirect emissions from
the generation of purchased energy consumed by BHP, primarily
emissions from electricity we buy from the grid for use at our
operated assets.
Scope 3 Greenhouse gas emissions
Scope 3 greenhouse gas emissions are all other indirect emissions
(not included in Scope 2) that occur in BHP’s value chain, primarily
emissions resulting from our customers using the fossil fuel
commodities and processing the non-fossil fuel commodities we
sell, as well as upstream emissions associated with the extraction,
production and transportation of the goods, services, fuels and
energy we purchase for use at our operations; emissions resulting
from the transportation and distribution of our products; and
operational emissions (on an equity basis) from our non-operated
joint ventures.
SEC (United States Securities and Exchange Commission)
The US regulatory commission that aims to protect investors,
maintain fair, orderly and efficient markets and facilitate
capital formation.
Shareplus
All-employee share purchase plan.
Social investment
Voluntary contributions to support communities through cash
donations to community programs and associated administrative
costs. BHP’s targeted level of contribution is one per cent of
pre-tax profit calculated on the average of the previous three
years’ pre-tax profit as reported.
South32
During FY2015, BHP demerged a selection of our alumina,
aluminium, coal, manganese, nickel, silver, lead and zinc assets
into a new company – South32 Limited.
Strate
South Africa’s Central Securities Depositary for the electronic
settlement of financial instruments.
TRIF (Total recordable injury frequency)
The sum of (fatalities + lost-time cases + restricted work cases +
medical treatment cases) x 1,000,000 ÷ actual hours worked.
Stated in units of per million hours worked. BHP adopts the
US Government Occupational Safety and Health Administration
guidelines for the recording and reporting of occupational
injury and illnesses. TRIF statistics exclude non-operated assets.
TSR (Total shareholder return)
TSR measures the return delivered to shareholders over a certain
period through the movements in share price and dividends paid
(which are assumed to be reinvested). It is the measure used to
compare BHP’s performance to that of other relevant companies
under the Long-Term Incentive Plan.
UKLA (United Kingdom Listing Authority)
Term used when the UK Financial Conduct Authority (FCA) acts as
the competent authority under Part VI of the UK Financial Services
and Markets Act (FSMA).
Underlying attributable profit
Profit/(loss) after taxation attributable to BHP shareholders
excluding any exceptional items attributable to BHP shareholders
as described in note 3 ‘Exceptional items’ in section 5. Refer to
section 1.12 for further information.
Underlying EBIT
Underlying EBITDA, including depreciation, amortisation
and impairments. Refer to section 1.12 for further information.
Underlying EBITDA
Earnings before net finance costs, depreciation, amortisation
and impairments, taxation expense, Discontinued operations and
exceptional items. Refer to section 1.12 for further information.
Unit costs
One of the financial measures BHP uses to monitor the performance
of individual assets. Unit costs are calculated as revenue less
Underlying EBITDA excluding third party. Conventional petroleum
unit costs exclude inventory movements, freight, exploration
and development and evaluation expense; WAIO, Queensland
Coal and New South Wales Energy Coal unit costs exclude
freight and royalties; Escondida unit costs exclude freight and
by-product credits.
BHP Annual Report 2019 301
i
S
t
r
a
t
e
g
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
a
t
B
H
P
R
e
m
u
n
e
r
a
t
i
o
n
R
e
p
o
r
t
D
i
r
e
c
t
o
r
s
’
R
e
p
o
r
t
i
F
n
a
n
c
a
i
l
S
t
a
t
e
m
e
n
t
s
6
A
d
d
i
t
i
o
n
a
l
i
n
f
o
r
m
a
t
i
o
n
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
6.7.3 Terms used in reserves and resources
6.7.4 Units of measure
P
phosphorous
Pc
phosphorous in concentrate
PCI
pulverised coal injection
S
sulphur
SCu
soluble copper
SiO2
silica
TCu
total copper
Th
thermal coal
U3O8
uranium oxide
VM
volatile matter
Yield
the percentage of material of
interest that is extracted during
mining and/or processing
Zn
zinc
Ag
silver
AI2O3
alumina
Anth
anthracite
Ash
inorganic material remaining
after combustion
Au
gold
Cu
copper
CV
calorific value
Fe
iron
Insol.
insolubles
K2O
potassium oxide
KCl
potassium chloride
LOI
loss on ignition
Met
metallurgical coal
MgO
magnesium oxide
Mo
molybdenum
Ni
nickel
%
percentage or per cent
bbl
barrel (containing
42 US gallons)
bbl/d
barrels per day
Bcf
billion cubic feet (measured
at the pressure bases set
by the regulator)
bcm
bank cubic metres
boe
barrels of oil equivalent –
6,000 scf of natural gas
equals 1 boe
dmt
dry metric tonne
dmtu
dry metric tonne unit
g/t
grams per tonne
ha
hectare
kcal/kg
kilocalories per kilogram
kg/tonne or kg/t
kilograms per tonne
km
kilometre
kt
kilotonnes
ktpa
kilotonnes per annum
ktpd
kilotonnes per day
kV
kilovolt
lb
pound
m
metre
Mbbl/d
thousand barrels per day
Mcf
thousand cubic feet
(measured at the pressure
bases set by the regulator)
ML
megalitre
mm
millimetre
MMbbl/d
million barrels per day
MMboe
million barrels of oil equivalent
MMBtu
million British thermal units –
1 scf of natural gas equals
approximately 1,010 Btu
MMcf/d
million cubic feet per day
MMcm/d
million cubic metres per day
Mscf
thousand standard cubic feet
Mt
million tonnes
Mtpa
million tonnes per annum
MW
megawatt
oz
ounce
ppm
parts per million
psi
pounds per square inch
scf
standard cubic feet
t
tonne
TJ
terajoule
TJ/d
terajoules per day
tpa
tonnes per annum
tpd
tonnes per day
t/h
tonnes per hour
wmt
wet metric tonnes
302 BHP Annual Report 2019
Section 7
Shareholder
information
In this section
7.1 History and development
7.2 Markets
7.3 Organisational structure
7.4 Material contracts
7.5 Constitution
7.6 Share ownership
7.7 Dividends
7.8 American Depositary Receipts fees and charges
7.9 Government regulations
7.10 Ancillary information for our shareholders
BHP Annual Report 2019 303
• Certain DLC equalisation principles must be observed. These are
designed to ensure that for so long as the Equalisation Ratio
between a BHP Group Limited ordinary share and a BHP Group
Plc ordinary share is 1:1, the economic and voting interests
resulting from holding one BHP Group Limited ordinary share
and one BHP Group Plc ordinary share are, so far as practicable,
equivalent. For more information, refer to sub-section
‘Equalisation of economic and voting rights’ below.
Australian Foreign Investment Review Board conditions
The Treasurer of Australia approved the DLC merger subject
to certain conditions, the effect of which was to require that,
among other things, BHP Group Limited continues to:
• be an Australian company, which is headquartered in Australia;
• ultimately manage and control the companies that conducted
the businesses that were conducted by its subsidiaries at the
time of the DLC merger for as long as those businesses form
part of BHP.
The conditions also require the global headquarters of BHP
to be in Australia.
The conditions have effect indefinitely, subject to amendment of the
Australian Foreign Acquisitions and Takeovers Act 1975 (FATA) or any
revocation or amendment by the Treasurer of Australia. If BHP Group
Limited no longer wishes to comply with these conditions, it must
obtain the prior approval of the Treasurer. Failure to comply with the
conditions results in substantial penalties under the FATA.
Equalisation of economic and voting rights
The economic and voting interests attached to each BHP Group
Limited ordinary share relative to each BHP Group Plc ordinary
share are determined by a ratio known as the Equalisation Ratio.
The Equalisation Ratio is currently 1:1, meaning one BHP Group
Limited ordinary share currently has the same economic and
voting interests as one BHP Group Plc ordinary share.
The Equalisation Ratio governs the proportions in which dividends
and capital distributions are paid on the ordinary shares in each
company relative to the other. Given the current Equalisation Ratio
of 1:1, the amount of any cash dividend paid by BHP Group Limited
on each BHP Group Limited ordinary share must be matched by an
equivalent cash dividend by BHP Group Plc on each BHP Group Plc
ordinary share, and vice versa. If one company is prohibited by
applicable law or is otherwise unable to pay a matching dividend,
the DLC Structure Sharing Agreement requires that BHP Group
Limited and BHP Group Plc will, as far as practicable, enter into
such transactions with each other as their Boards agree to be
necessary or desirable to enable both companies to pay matching
dividends at the same time. These transactions may include BHP
Group Limited or BHP Group Plc making a payment to the other
company or paying a dividend on the DLC Dividend Share held
by the other company (or a subsidiary of it). The DLC Dividend
Share may be used to ensure that the need to trigger the matching
dividend mechanism does not arise. BHP Group Limited issued
a DLC Dividend Share on 23 February 2016. No DLC Dividend
Share has been issued by BHP Group Plc.
For more information on the DLC Dividend Share, refer to the
following ‘DLC Dividend Share’ section and section 7.5.
7.1 History and development
BHP Group Limited (formerly BHP Billiton Limited, then BHP Limited
and, before that, The Broken Hill Proprietary Company Limited)
was incorporated in 1885 and is registered in Australia with
ABN 49 004 028 077. BHP Group Plc (formerly BHP Billiton Plc,
and before that Billiton Plc) was incorporated in 1996 and is
registered in England and Wales with registration number
3196209. Successive predecessor entities to BHP Group Plc
have operated since 1860.
We have operated under a Dual Listed Company (DLC) structure
since 29 June 2001. Under the DLC structure, the two parent
companies, BHP Group Limited and BHP Group Plc, operate
as a single economic entity, run by a unified Board and senior
executive management team. For more information on the
DLC structure, refer to section 7.3.
7.2 Markets
As at the date of this Annual Report, BHP Group Limited has
a primary listing on the Australian Securities Exchange (ASX)
(ticker BHP) in Australia and BHP Group Plc has a premium listing
on the UK Financial Conduct Authority’s Official List and its ordinary
shares are admitted to trading on the London Stock Exchange (LSE)
(ticker BHP). BHP Group Plc also has a secondary listing on the
Johannesburg Stock Exchange (JSE) (ticker BHP) in South Africa.
In addition, BHP Group Limited and BHP Group Plc are listed on
the New York Stock Exchange (NYSE) in the United States. Trading
on the NYSE is via American Depositary Receipts (ADRs) evidencing
American Depositary Shares (ADSs), with each ADS representing
two ordinary shares of BHP Group Limited or BHP Group Plc.
Citibank N.A. (Citibank) is the Depositary for both ADS programs.
BHP Group Limited’s ADSs have been listed for trading on the
NYSE (ticker BHP) since 28 May 1987 and BHP Group Plc’s since
25 June 2003 (ticker BBL).
7.3 Organisational structure
7.3.1 General
BHP consists of the BHP Group Limited and the BHP Group Plc,
operating as a single unified economic entity, following the
completion of the DLC merger in June 2001 (the DLC merger).
For a full list of BHP Group Limited and BHP Group Plc subsidiaries,
refer to section 5.2 note 13.
7.3.2 DLC structure
BHP shareholders approved the DLC merger in 2001, which
was designed to place ordinary shareholders of both companies
in a position where they have economic and voting interests in
a single group.
The principles of the BHP DLC structure are reflected in the
DLC Structure Sharing Agreement and include the following:
• The two companies must operate as if they are a single
unified economic entity, through Boards of Directors that
comprise the same individuals and a unified senior executive
management team.
• The Directors of both companies will, in addition to their
duties to the company concerned, have regard to the interests
of the ordinary shareholders in the two companies as if the
two companies were a single unified economic entity and,
for that purpose, the Directors of each company take into
account in the exercise of their powers the interests of the
shareholders of the other.
304 BHP Annual Report 2019
7.3.2 DLC Structure continued
The Equalisation Ratio may be adjusted to maintain economic
equivalence between an ordinary share in each of the two companies
where, broadly speaking (and subject to certain exceptions):
• a distribution or action affecting the amount or nature of issued
share capital is proposed by one of BHP Group Limited and
BHP Group Plc and that distribution or action would result in the
ratio of economic returns on, or voting rights in relation to Joint
Electorate Actions (see below) of, a BHP Group Limited ordinary
share to a BHP Group Plc ordinary share not being the same,
or would benefit the holders of ordinary shares in one company
relative to the holders of ordinary shares in the other company;
• no ‘matching action’ is taken by the other company. A matching
action is a distribution or action affecting the amount or nature
of issued share capital in relation to the holders of ordinary
shares in the other company, which ensures that the economic
and voting rights of a BHP Group Limited ordinary share and
BHP Group Plc ordinary share are maintained in proportion
to the Equalisation Ratio.
For example, an adjustment would be required if there were to
be a capital issue or distribution by one company to its ordinary
shareholders that does not give equivalent value (before tax)
on a per share basis to the ordinary shareholders of the other
company and no matching action was undertaken. Since the
establishment of the DLC structure in 2001, no adjustment
to the Equalisation Ratio has ever been made.
DLC Dividend Share
Each of BHP Group Limited and BHP Group Plc is authorised
to issue a DLC Dividend Share to the other company or a wholly
owned subsidiary of it. In effect, only that other company or
a wholly owned subsidiary of it may be the holder of the share.
The share is redeemable.
The holder of the share is entitled to be paid such dividends
as the Board may decide to pay on that DLC Dividend Share
provided that:
• the amount of the dividend does not exceed the cap
mentioned below;
• the Board of the issuing company in good faith considers paying
the dividend to be in furtherance of any of the DLC principles,
including the principle of BHP Group Limited and BHP Group Plc
operating as a single unified economic entity.
The amounts that may be paid as dividends on a DLC Dividend
Share are capped. Broadly speaking, the cap is the total amount
of the preceding ordinary cash dividend (whether interim or final)
paid on BHP Group Limited ordinary shares or BHP Group Plc
ordinary shares, whichever is greater. The cap will not apply
to any dividend paid on a DLC Dividend Share if the proceeds
of that dividend are to be used to pay a special cash dividend
on ordinary shares.
A DLC Dividend Share otherwise has limited rights and does not
carry a right to vote. DLC Dividend Shares cannot be used to transfer
funds outside of BHP as the terms of issue contain structural
safeguards to ensure that a DLC Dividend Share may only be used
to pay dividends within the Group.
For more information on the rights attaching to and terms of DLC
Dividend Shares, refer to section 7.5, the Constitution of BHP
Group Limited and the Articles of Association of BHP Group Plc.
Joint Electorate Actions
Under the terms of the DLC agreements, BHP Group Limited and
BHP Group Plc have implemented special voting arrangements
so that the ordinary shareholders of both companies vote together
as a single decision-making body on matters that affect the ordinary
shareholders of each company in similar ways. These are referred
to as Joint Electorate Actions. For so long as the Equalisation Ratio
remains 1:1, each BHP Group Limited ordinary share will effectively
have the same voting rights as each BHP Group Plc ordinary share
on Joint Electorate Actions.
A Joint Electorate Action requires approval by ordinary resolution
(or special resolution if required by statute, regulation, applicable
listing rules or other applicable requirements) of BHP Group Limited
and BHP Group Plc. In the case of BHP Group Limited, both the
BHP Group Limited ordinary shareholders and the holder of the
BHP Group Limited Special Voting Share vote as a single class
and, in the case of BHP Group Plc, the BHP Group Plc ordinary
shareholders and the holder of the BHP Group Plc Special Voting
Share vote as a single class.
Class Rights Actions
Matters on which ordinary shareholders of BHP Group Limited may
have divergent interests from the ordinary shareholders of BHP
Group Plc are referred to as Class Rights Actions. The company
wishing to carry out the Class Rights Action requires the prior
approval of the ordinary shareholders in the other company voting
separately and, where appropriate, the approval of its own ordinary
shareholders voting separately. Depending on the type of Class
Rights Action undertaken, the approval required is either an
ordinary or special resolution of the relevant company.
The Joint Electorate Action and Class Rights Action voting
arrangements are secured through the constitutional documents
of the two companies, the DLC Structure Sharing Agreement,
the BHP Special Voting Shares Deed and rights attaching to a
specially created Special Voting Share issued by each company
and held in each case by a special voting company. The shares
in the special voting companies are held legally and beneficially
by Law Debenture Trust Corporation Plc.
Cross guarantees
BHP Group Limited and BHP Group Plc have each executed a Deed
Poll Guarantee in favour of the creditors of the other company.
Under the Deed Poll Guarantees, each company has guaranteed
certain contractual obligations of the other company. This means
that creditors entitled to the benefit of the BHP Group Limited
Deed Poll Guarantee and the BHP Group Plc Deed Poll Guarantee
will, to the extent possible, be placed in the same position as
if the relevant debts were owed by both BHP Group Limited and
BHP Group Plc on a combined basis.
Restrictions on takeovers of one company only
The BHP Group Limited Constitution and the BHP Group Plc Articles
of Association have been drafted to ensure that, except with the
consent of the Board, a person cannot gain control of one company
without having made an equivalent offer to the ordinary shareholders
of both companies on equivalent terms. Sanctions for breach of
these provisions would include withholding of dividends, voting
restrictions and the compulsory divestment of shares to the extent
a shareholder and its associates exceed the relevant threshold.
BHP Annual Report 2019 305
i
S
t
r
a
t
e
g
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
a
t
B
H
P
R
e
m
u
n
e
r
a
t
i
o
n
R
e
p
o
r
t
D
i
r
e
c
t
o
r
s
’
R
e
p
o
r
t
i
F
n
a
n
c
a
i
l
S
t
a
t
e
m
e
n
t
s
A
d
d
i
t
i
o
n
a
l
i
n
f
o
r
m
a
t
i
o
n
7
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
7.5.3 Restrictions on voting by Directors
A Director may not vote in respect of any contract or arrangement
or any other proposal in which they have a material personal
interest except in certain prescribed circumstances, including
(subject to applicable laws) where the material personal interest:
• arises because the Director is a shareholder of BHP and is held
in common with the other shareholders of BHP;
• arises in relation to the Director’s remuneration as a Director
of BHP;
• relates to a contract BHP is proposing to enter into that is subject
to approval by the shareholders and will not impose any obligation
on BHP if it is not approved by the shareholders;
• arises merely because the Director is a guarantor or has given
an indemnity or security for all or part of a loan, or proposed
loan, to BHP;
• arises merely because the Director has a right of subrogation
in relation to a guarantee or indemnity referred to above;
• relates to a contract that insures, or would insure, the Director
against liabilities the Director incurs as an officer of BHP, but only
if the contract does not make BHP or a related body corporate
the insurer;
• relates to any payment by BHP or a related body corporate
in respect of an indemnity permitted by law, or any contract
relating to such an indemnity; or
• is in a contract, or proposed contract with, or for the benefit
of, or on behalf of, a related body corporate and arises merely
because the Director is a director of a related body corporate.
If a Director has a material personal interest and is not entitled to
vote on a proposal, they will not be counted in the quorum for any
vote on a resolution concerning the material personal interest.
In addition, under the UK Companies Act 2006, a Director
has a duty to avoid conflicts of interest between their interests
and the interests of the company. The duty is not breached
if, among other things, the conflict of interest is authorised
by non-interested Directors. The Articles of Association
of BHP Group Plc enable the Board to authorise a matter that
might otherwise involve a Director breaching their duty to
avoid conflicts of interest. An interested Director may not vote
or be counted towards a quorum for a resolution authorising
a conflict of interest. Where the Board authorises a conflict
of interest, the Board may prohibit the relevant Director from
voting on any matter relating to the conflict. The Board has
adopted procedures to manage these voting restrictions.
7.5.4 Loans by Directors
Any Director may lend money to BHP at interest with or without
security or may, for a commission or profit, guarantee the repayment
of any money borrowed by BHP and underwrite or guarantee the
subscription of shares or securities of BHP or of any corporation
in which BHP may be interested without being disqualified as
a Director and without being liable to account to BHP for any
commission or profit.
7.4 Material contracts
DLC structure agreements
BHP Group Limited (then known as BHP Limited) and BHP Group
Plc (then known as Billiton Plc) merged by way of a DLC structure
on 29 June 2001. To effect the DLC structure, BHP Limited and
Billiton Plc (as they were then known) entered into the following
contractual agreements:
• BHP Billiton DLC Structure Sharing Agreement
• BHP Billiton Special Voting Shares Deed
• BHP Billiton Limited Deed Poll Guarantee
• BHP Billiton Plc Deed Poll Guarantee
For information on the effect of each of these agreements,
refer to section 7.3.
Framework Agreement
On 2 March 2016, BHP Billiton Brasil together with Vale and Samarco,
entered into a Framework Agreement with the Federal Government
of Brazil, states of Espírito Santo and Minas Gerais and certain
other authorities to establish a foundation (Fundação Renova)
that will develop and execute environmental and socio-economic
programs to remediate and provide compensation for damage
caused by the Samarco dam failure. For a description of the terms
of the Framework Agreement, refer to section 6.6.
7.5 Constitution
This section sets out a summary of the Constitution of BHP Group
Limited and the Articles of Association of BHP Group Plc. Where
the term ‘BHP’ is used in this section, it can mean either BHP Group
Limited or BHP Group Plc.
Provisions of the Constitution of BHP Group Limited and the
Articles of Association of BHP Group Plc can be amended only
where such amendment is approved by special resolution either:
• by approval as a Class Rights Action, where the amendment
results in a change to an ‘Entrenched Provision’; or
• otherwise, as a Joint Electorate Action.
In 2015, shareholders approved a number of amendments to our
constitutional documents to amend the terms of the Equalisation
Shares (which were renamed as DLC Dividend Shares) and
to facilitate the more streamlined conduct of simultaneous
general meetings.
For a description of Joint Electorate Actions and Class Rights
Actions, refer to section 7.3.2.
7.5.1 Directors
The Board may exercise all powers of BHP, other than those that
are reserved for BHP shareholders to exercise in a general meeting.
7.5.2 Power to issue securities
Under the Constitution and Articles of Association, the Board of
Directors has the power to issue any BHP shares or other securities
(including redeemable shares) with preferred, deferred or other
special rights, obligations or restrictions. The Board may issue
shares on any terms it considers appropriate, provided that:
• the issue does not affect any special rights of shareholders;
• if required, the issue is approved by shareholders;
• if the issue is of a class other than ordinary shares, the rights
attaching to the class are expressed at the date of issue.
306 BHP Annual Report 2019
7.5.5 Appointment and retirement
of Directors
Appointment of Directors
The Constitution and Articles of Association provide that a person
may be appointed as a Director of BHP by the existing Directors
of BHP or may be elected by the shareholders in a general meeting.
Any person appointed as a Director of BHP by the existing Directors
will hold office only until the next general meeting that includes an
election of Directors.
A person may be nominated by shareholders as a Director of BHP if:
• a shareholder provides a valid written notice of the nomination;
• the person nominated by the shareholder satisfies candidature
for the office and consents in writing to his or her nomination
as a Director,
in each case, at least 40 business days before the earlier of the date
of the general meeting of BHP Group Plc and the corresponding
general meeting of BHP Group Limited. The person nominated
as a Director may be elected to the Board by ordinary resolution
passed in a general meeting.
Under the Articles of Association, if a person is validly nominated
for election as a Director at a general meeting of BHP Group
Limited, the Directors of BHP Group Plc must nominate that person
as a Director at the corresponding general meeting of BHP Group
Plc. An equivalent requirement is included in the Constitution,
which requires any person validly nominated for election as a
Director of BHP Group Plc to be nominated as a Director of BHP
Group Limited.
Retirement of Directors
The Board has a policy consistent with the UK Corporate Governance
Code under which all Directors must, if they wish to remain on the
Board, seek re-election by shareholders annually. This policy took
effect from the 2011 Annual General Meetings (AGMs) and replaced
the previous system that required Directors to submit themselves
to shareholders for re-election at least every three years.
A Director may be removed by BHP in accordance with
applicable law and must vacate his or her office as a Director
in certain circumstances set out in the Constitution and Articles
of Association. There is no requirement for a Director to retire
on reaching a certain age.
7.5.6 Rights attaching to shares
Dividend rights
Under English law, dividends on shares may only be paid out of
profits available for distribution. Under Australian law, dividends
on shares may be paid only if the company’s assets exceed its
liabilities immediately before the dividend is determined and the
excess is sufficient for payment of the dividend, the payment of
the dividend is fair and reasonable to the company’s shareholders
as a whole and the payment of the dividend does not materially
prejudice the company’s ability to pay its creditors.
The Constitution and Articles of Association provide that payment
of any dividend may be made in any manner, by any means and
in any currency determined by the Board.
All unclaimed dividends may be invested or otherwise used
by the Board for the benefit of whichever of BHP Group Limited
or BHP Group Plc determined that dividend, until claimed or,
in the case of BHP Group Limited, otherwise disposed of according
to law. BHP Group Limited is governed by the Victorian unclaimed
monies legislation, which requires BHP Group Limited to pay to the
State Revenue Office any unclaimed dividend payments of A$20
or more that have remained unclaimed for over 12 months.
In the case of BHP Group Plc, any dividend unclaimed after a period
of 12 years from the date the dividend was determined or became
due for payment will be forfeited and returned to BHP Group Plc.
Voting rights
Voting at any general meeting of BHP shareholders can,
in the first instance, be conducted by a show of hands unless
a poll is demanded in accordance with the Constitution or
Articles of Association (as applicable) or is otherwise required
(as outlined below).
Generally, matters considered by shareholders at an AGM of
BHP Group Limited or BHP Group Plc constitute Joint Electorate
Actions or Class Rights Actions and must be decided on a poll
and in the manner described under the headings ‘Joint Electorate
Actions’ and ‘Class Rights Actions’ in section 7.3.2. This means that,
in practice, most items of business at AGMs are decided by way
of a poll.
In addition, at any general meeting a resolution, other than a
procedural resolution, put to the vote of the meeting on which the
holder of the relevant BHP Special Voting Share is entitled to vote
must be decided on a poll.
For the purposes of determining which shareholders are entitled
to attend or vote at a meeting of BHP Group Plc or BHP Group
Limited, and how many votes such shareholder may cast, the Notice
of Meeting will specify when a shareholder must be entered on
the Register of Shareholders in order to have the right to attend
or vote at the meeting. The specified time must be not more than
48 hours before the time of the meeting.
Shareholders who wish to appoint a proxy to attend, vote or speak
at a meeting of BHP Group Plc or BHP Group Limited (as appropriate)
on their behalf must deposit the relevant form appointing a proxy
so that it is received by that company not less than 48 hours before
the time of the meeting.
Rights to share in BHP Group Limited’s profits
The rights attached to the ordinary shares of BHP Group Limited,
as regards the participation in the profits available for distribution,
are as follows:
• The holders of any preference shares will be entitled, in priority
to any payment of dividend to the holders of any other class
of shares, to a preferred right to participate as regards dividends
up to but not beyond a specified amount in distribution.
• Subject to the special rights attaching to any preference shares,
but in priority to any payment of dividends on all other classes
of shares, the holder of the DLC Dividend Share (if any) will be
entitled to be paid such non-cumulative dividends as the Board
may, subject to the cap referred to in section 7.3 and the DLC
Dividend Share being held by BHP Group Plc or a wholly owned
member of its group, decide to pay on that DLC Dividend Share.
• Any surplus remaining after payment of the distributions above
will be payable to the holders of BHP Group Limited ordinary
shares and the BHP Group Limited Special Voting Share in equal
amounts per share.
BHP Annual Report 2019 307
i
S
t
r
a
t
e
g
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
a
t
B
H
P
R
e
m
u
n
e
r
a
t
i
o
n
R
e
p
o
r
t
D
i
r
e
c
t
o
r
s
’
R
e
p
o
r
t
i
F
n
a
n
c
a
i
l
S
t
a
t
e
m
e
n
t
s
A
d
d
i
t
i
o
n
a
l
i
n
f
o
r
m
a
t
i
o
n
7
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
On a return of assets on liquidation of BHP Group Plc, subject to
the payment of all amounts payable under the special provisions
referred to earlier, prior ranking amounts owed to the creditors
of BHP Group Plc and to all prior ranking statutory entitlements,
the assets of BHP Group Plc to be distributed on a winding-up are
to be distributed to the holders of shares in the following order
of priority:
• To the holders of the cumulative preference shares, the repayment
of a sum equal to the nominal capital paid up or credited
as paid up on the cumulative preference shares held by them
and any accrued Preferential Dividend, whether or not such
dividend has been earned or declared, calculated up to the date
of commencement of the winding-up.
• To the holders of the BHP Group Plc ordinary shares and to the
holders of the BHP Group Plc Special Voting Share and the DLC
Dividend Share, the payment out of surplus, if any, remaining after
the distribution above of an equal amount for each BHP Group Plc
ordinary share, the BHP Group Plc Special Voting Share and the
DLC Dividend Share subject to a maximum in the case of the
BHP Group Plc Special Voting Share and the DLC Dividend Share
of the nominal capital paid up on such shares.
7.5.8 Redemption of preference shares
If BHP Group Limited at any time proposes to create and issue
any preference shares, the terms of the preference shares may
give either or both BHP Group Limited and the holder the right
to redeem the preference shares.
The preference shares terms may also give the holder the right
to convert the preference shares into ordinary shares.
Under the Constitution, the preference shares must give the holders:
• the right (on redemption and on a winding-up) to payment in
cash in priority to any other class of shares of (i) the amount paid
or agreed to be considered as paid on each of the preference
shares; and (ii) the amount, if any, equal to the aggregate of any
dividends accrued but unpaid and of any arrears of dividends;
• the right, in priority to any payment of dividend on any other
class of shares, to the preferential dividend.
There is no equivalent provision in the Articles of Association
of BHP Group Plc, although as noted in section 7.5.2, BHP can
issue preference shares that are subject to a right of redemption
on terms the Board considers appropriate.
7.5.9 Capital calls
Subject to the terms on which any shares may have been issued,
the Board may make calls on the shareholders in respect of
all monies unpaid on their shares. BHP has a lien on every partly
paid share for all amounts payable in respect of that share.
Each shareholder is liable to pay the amount of each call in the
manner, at the time and at the place specified by the Board
(subject to receiving at least 14 days’ notice specifying the time
and place for payment). A call is considered to have been made
at the time when the resolution of the Board authorising the call
was passed.
Rights to share in BHP Group Plc’s profits
The rights attached to the ordinary shares of BHP Group Plc,
in relation to the participation in the profits available for distribution,
are as follows:
• The holders of the cumulative preference shares will be entitled,
in priority to any payment of dividend to the holders of any other
class of shares, to be paid a fixed cumulative preferential dividend
(Preferential Dividend) at a rate of 5.5 per cent per annum, to be
paid annually in arrears on 31 July in each year or, if any such date
will be a Saturday, Sunday or public holiday in England, on the
first business day following such date in each year. Payments
of Preferential Dividends will be made to holders on the register
at any date selected by the Directors up to 42 days prior to the
relevant fixed dividend date.
• Subject to the rights attaching to the cumulative preference shares,
but in priority to any payment of dividends on all other classes
of shares, the holder of the BHP Group Plc Special Voting Share
will be entitled to be paid a fixed dividend of US$0.01 per annum,
payable annually in arrears on 31 July.
• Subject to the rights attaching to the cumulative preference
shares and the BHP Group Plc Special Voting Share, but in priority
to any payment of dividends on all other classes of shares,
the holder of the DLC Dividend Share will be entitled to be
paid such non-cumulative dividends as the Board may, subject
to the cap referred to in section 7.3 of this Annual Report and
the DLC Dividend Share being held by BHP Group Limited
or a wholly owned member of its group, decide to pay on that
DLC Dividend Share.
• Any surplus remaining after payment of the distributions above
will be payable to the holders of the BHP Group Plc ordinary
shares in equal amounts per BHP Group Plc ordinary share.
DLC Dividend Share
As set out in section 7.3.2, each of BHP Group Limited and
BHP Group Plc is authorised to issue a DLC Dividend Share
to the other company or a wholly owned subsidiary of it.
The dividend rights attaching to a DLC Dividend Share are
described above and in section 7.3. The DLC Dividend Share issued
by BHP Group Limited (BHP Group Limited DLC Dividend Share)
and the DLC Dividend Share that may be issued by BHP Group Plc
(BHP Group Plc DLC Dividend Share) have no voting rights and,
as set out in section 7.5.7 below, very limited rights to a return
of capital on a winding-up. A DLC Dividend Share may be redeemed
at any time, and must be redeemed if a person other than:
• in the case of the BHP Group Limited DLC Dividend Share,
BHP Group Plc or a wholly owned member of its group;
• in the case of the BHP Group Plc DLC Dividend Share,
BHP Group Limited or a wholly owned member of its group,
becomes the beneficial owner of the DLC Dividend Share.
7.5.7 Rights on return of assets on liquidation
Under the DLC structure, special provisions designed to ensure that,
as far as practicable, the holders of ordinary shares in BHP Group
Limited and holders of ordinary shares in BHP Group Plc are treated
equitably having regard to the Equalisation Ratio, which would apply
in the event of an insolvency of either or both companies.
On a return of assets on liquidation of BHP Group Limited, the assets
of BHP Group Limited remaining available for distribution among
shareholders after the payment of all prior ranking amounts owed
to all creditors and holders of preference shares, and to all prior
ranking statutory entitlements, are to be applied subject to the
special provisions referred to above in paying to the holders of the
BHP Group Limited Special Voting Share and the DLC Dividend
Share of an amount of up to A$2.00 on each such share, on an equal
priority with any amount paid to the holders of BHP Group Limited
ordinary shares, and any surplus remaining is to be applied in making
payments solely to the holders of BHP Group Limited ordinary shares
in accordance with their entitlements.
308 BHP Annual Report 2019
7.5.10 Borrowing powers
7.5.12 Limitations of rights to own securities
Subject to relevant law, the Directors may exercise all powers of
BHP to borrow money, and to mortgage or charge its undertaking,
property, assets (both present and future) and all uncalled capital
or any part or parts thereof and to issue debentures and other
securities, whether outright or as collateral security for any debt,
liability or obligation of BHP or of any third party.
There are no limitations under the Constitution or the Articles
of Association restricting the right to own BHP shares other
than restrictions that reflect the takeovers codes under relevant
Australian and English law. In addition, the Australian Foreign
Acquisitions and Takeovers Act 1975 imposes a number of conditions
that restrict foreign ownership of Australian-based companies.
For information on share control limits imposed by the Constitution
and the Articles of Association, as well as relevant laws, refer to
sections 7.9 and 7.3.2.
7.5.13 Documents on display
Documents filed by BHP Group Limited on the Australian Securities
Exchange (ASX) are available at asx.com.au and documents filed
on the London Stock Exchange (LSE) by BHP Group Plc are available
at morningstar.co.uk/uk/NSM. Documents filed on the ASX, or on
the LSE are not incorporated by reference into this Annual Report.
The documents referred to in this Annual Report as being available
on our website, bhp.com, are not incorporated by reference and
do not form part of this Annual Report.
BHP Group Limited and BHP Group Plc both file Annual Reports and
other reports and information with the US Securities and Exchange
Commission (SEC). These filings are available on the SEC website
at sec.gov.
Rights attached to any class of shares issued by either BHP Group
Limited or BHP Group Plc can only be varied (whether as a Joint
Electorate Action or a Class Rights Action) where such variation
is approved by:
• the company that issued the relevant shares, as a special resolution;
• the holders of the issued shares of the affected class, either by
a special resolution passed at a separate meeting of the holders
of the issued shares of the class affected, or with the written
consent of members with at least 75 per cent of the votes
of that class.
7.5.11 Conditions governing general meetings
The Board may, and must on requisition in accordance with
applicable laws, call a general meeting of the shareholders
at the time and place or places and in the manner determined
by the Board. No shareholder may convene a general meeting
of BHP except where entitled under law to do so. Any Director
may convene a general meeting whenever the Director thinks fit.
General meetings can also be cancelled, postponed or adjourned,
where permitted by law or the Constitution or Articles of Association.
Notice of a general meeting must be given to each shareholder
entitled to vote at the meeting and such notice of meeting must
be given in the form and manner in which the Board thinks fit.
Five shareholders of the relevant company present in person
or by proxy constitute a quorum for a meeting. A shareholder
who is entitled to attend and cast a vote at a general meeting
of BHP may appoint a person as a proxy to attend and vote
for the shareholder in accordance with applicable law.
All provisions relating to general meetings apply with any
necessary modifications to any special meeting of any class
of shareholders that may be held.
i
S
t
r
a
t
e
g
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
a
t
B
H
P
R
e
m
u
n
e
r
a
t
i
o
n
R
e
p
o
r
t
D
i
r
e
c
t
o
r
s
’
R
e
p
o
r
t
i
F
n
a
n
c
a
i
l
S
t
a
t
e
m
e
n
t
s
A
d
d
i
t
i
o
n
a
l
i
n
f
o
r
m
a
t
i
o
n
7
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
BHP Annual Report 2019 309
7.6 Share ownership
Share capital
The details of the share capital for both BHP Group Limited and BHP Group Plc are presented in note 15 ‘Share capital’ in section 5
and remain current as at 23 August 2019.
Major shareholders
The tables in section 3.3.20 and the information set out in section 4.18 present information pertaining to the shares in BHP Group Limited
and BHP Group Plc held by Directors and members of the Key Management Personnel (KMP).
Neither BHP Group Limited nor BHP Group Plc is directly or indirectly controlled by another corporation or by any government. Other than
as described in section 7.3.2, no major shareholder possesses voting rights that differ from those attaching to all of BHP Group Limited
and BHP Group Plc’s voting securities.
Substantial shareholders in BHP Group Limited
The following table shows holdings of 5 per cent or more of voting rights in BHP Group Limited’s shares as notified to BHP Group Limited
under the Australian Corporations Act 2001, Section 671B as at 30 June 2019.(1)
Title of class
Identity of person or group
Date received
Date of change Number owned
2019
2018
2017
Ordinary shares BlackRock Group
19 December 2016 15 December 2016
160,784,672
5.46%
5.00%
5.00%
(1) No changes in the holdings of 5 per cent or more of the voting rights in BHP Group Limited’s shares have been notified to BHP Group Limited between 1 July 2019
and 23 August 2019.
(2) The percentages quoted are based on the total voting rights conferred by ordinary shares in BHP Group Limited as at 23 August 2019 of 2,945,851,394.
Date of last notice
Percentage of total voting rights (2)
Substantial shareholders in BHP Group Plc
The following table shows holdings of 3 per cent or more of voting rights conferred by BHP Group Plc’s ordinary shares as notified
to BHP Group Plc under the UK Disclosure and Transparency Rule 5 as at 30 June 2019.(1)
Date of last notice
Percentage of total voting rights (2)
Title of class
Identity of person or group
Date received
Date of change Number owned
2019
2018
2017
Ordinary shares Aberdeen Asset Managers Limited
8 October 2015
7 October 2015
103,108,283
4.88%
4.88%
4.88%
Ordinary shares BlackRock, Inc.
3 December 2009
1 December 2009
213,014,043
10.08%
10.08%
10.08%
Ordinary shares Elliott Capital Advisors, L.P. (3)
3 February 2018
1 February 2018
115,183,724
Ordinary shares Norges Bank
20 February 2019
19 February 2019
64,753,649
5.45%
3.07%
5.45%
5.04%
–
–
(1) No changes in the holdings of 3 per cent or more of the voting rights in BHP Group Plc’s shares notified to BHP Group Plc between 1 July 2019 and 23 August 2019.
(2) The percentages quoted are based on the total voting rights conferred by ordinary shares in BHP Group Plc as at 23 August 2019 of 2,112,071,796.
(3) Holding is made up of 4.65 per cent ordinary shares and 0.80 per cent by financial instruments.
Twenty largest shareholders as at 23 August 2019 (as named on the Register of Shareholders) (1)
BHP Group Limited
1. HSBC Custody Nominees (Australia) Limited
2. J P Morgan Nominees Australia Pty Limited
3. Citicorp Nominees Pty Ltd
4. Citicorp Nominees Pty Limited
Continue reading text version or see original annual report in PDF format above