Annual
Report
2020
B
H
P
A
n
n
u
a
l
R
e
p
o
r
t
2
0
2
0
Bringing people and resources
together to build a better world
Our Charter
We are BHP,
a leading global resources company.
Our Purpose
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.
Our Values
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 eff orts 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.
Mike Henry
Chief Executive Off icer
February 2020
The Annual Report 2020 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 undertakings
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
‘operated assets’ or ‘operations’) during the period from 1 July 2019 to
30 June 2020. 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 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
Contents
1 Strategic Report
1.1 Chair’s Review
1.2 Chief Executive Officer’s Report
1.3 BHP at a glance: FY2020
1.4 Performance
1.5 Our operating environment
1.6 Capability and culture
1.7 Sustainability
1.8 Samarco
1.9 Portfolio: Our business
1.10 Summary of financial performance
1.11 Performance by commodity
1.12 Other information
2 Governance at BHP
2.1 Chair’s letter
2.2 Board of Directors and Executive Leadership Team
2.3 Role and responsibilities of the Board
2.4 Board meetings and attendance
2.5 Key Board activities during FY2020
2.6 Stakeholder engagement
2.7 Director skills, experience and attributes
2.8 Board evaluation
2.9 Nomination and Governance Committee Report
2.10 Risk and Audit Committee Report
2.11 Sustainability Committee Report
2.12 Remuneration Committee Report
2.13 Risk management governance structure
2.14 Management
2.15 Our conduct
2.16 Market disclosure
2.17 Conformance with corporate governance standards
2.18 Additional UK disclosure
3 Remuneration Report
3.1 Annual statement by the Remuneration Committee Chair
3.2 Remuneration policy report
3.3 Annual report on remuneration
4
5
6
8
22
44
51
75
78
95
100
108
110
112
118
119
120
122
124
127
128
130
135
136
137
137
138
138
138
139
142
144
150
4 Directors’ Report
4.1 Review of operations, principal activities and state of affairs 166
167
4.2 Share capital and buy-back programs
167
4.3 Results, financial instruments and going concern
167
4.4 Directors
168
4.5 Remuneration and share interests
168
4.6 Secretaries
168
4.7
Indemnities and insurance
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
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 Alternative Performance Measures
6.2
Information on mining operations
6.3 Production
6.4 Resources and Reserves
6.5 Major projects
6.6 Sustainability – performance data
6.7 Legal proceedings
6.8 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
169
169
169
169
169
170
170
170
170
170
170
172
230
242
243
244
245
254
260
269
277
280
304
305
330
333
342
342
342
343
343
347
349
350
350
352
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 and supply of materials and skilled employees; 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’, ‘see’, ‘anticipate’,
‘estimate’, ‘plan’, ‘objective’, ‘believe’, ‘expect’, ‘may’, ‘should’, ‘will’, ‘would’,
‘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 based on the information available as
at the date of this Annual Report and 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. BHP cautions against reliance on any
forward looking statements or guidance, particularly in light of the current
economic climate and the significant volatility, uncertainty and disruption
arising in connection with COVID-19.
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 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 sell our products and in the countries
where we are exploring or developing projects, facilities or mines, including
increases in taxes; changes in environmental and other regulations; the
duration and severity of the COVID-19 pandemic and its impact on our
business; political uncertainty; labour unrest; and other factors identified
in the risk factors set out in section 1.5.4.
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.
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 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.
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 28 ‘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 operations basis
to include the contribution from Onshore US assets to 28 February 2019.
Unless otherwise stated, comparative financial information for FY2017 and
FY2016 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 2020 1
2 BHP Annual Report 2020
BHP Annual Report 2020 3
In this section1.1 Chair's Review1.2 Chief Executive Officer’s Report1.3 BHP at a glance: FY20201.4 Performance 1.4.1 Our strategy 1.4.2 Social value 1.4.3 Stakeholder engagement 1.4.4 Our Operating Model 1.4.5 Managing performance 1.4.6 COVID-19: Our global response 1.4.7 Our performance: Financial KPIs 1.4.8 Our performance: Non-financial KPIs 1.4.9 Our contribution in FY20201.5 Our operating environment 1.5.1 Market factors and trends 1.5.2 Commodity performance overview 1.5.3 Exploration 1.5.4 Risk management1.6 Capability and culture 1.6.1 Our people 1.6.2 Employees and contractors 1.6.3 Technology1.7 Sustainability 1.7.1 Sustainability guided by our purpose 1.7.2 Our approach 1.7.3 Safety 1.7.4 Health 1.7.5 Ethics and business conduct 1.7.6 Environment 1.7.7 Value chain sustainability 1.7.8 Climate change 1.7.9 Community 1.7.10 Tailings storage facilities 1.7.11 Independent limited assurance report1.8 Samarco1.9 Portfolio: Our business 1.9.1 Locations 1.9.2 Minerals Australia 1.9.3 Minerals Americas 1.9.4 Petroleum 1.9.5 Commercial1.10 Summary of financial performance 1.10.1 Group overview 1.10.2 Financial results 1.10.3 Debt and sources of liquidity 1.10.4 Alternative Performance Measures1.11 Performance by commodity 1.11.1 Petroleum 1.11.2 Copper 1.11.3 Iron Ore 1.11.4 Coal 1.11.5 Other assets1.12 Other informationAbout this Strategic ReportThe FY2020 Strategic Report 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, financial and non-financial performance. BHP performed strongly in FY2020 with zero fatalities and record production performance in a number of operations.A summary of our performance covering financial, operational and social value is set out in section 1.3. We also set out why what we do is integral to modern life in sections 1.4 and 1.5.This year, we have further integrated our sustainability reporting into the Annual Report to help stakeholders understand the most material topics, for example climate change (section 1.7.8), tailings dams (section 1.7.10), Indigenous peoples (section 1.7.9) and Samarco (section 1.8). Non-operated joint ventures and their performance are covered in section 1.9.3 (Cerrejón and Antamina). More information is also available at bhp.com. This includes case studies, our new Climate Change Report 2020, and our Environmental, Social and Governance (ESG) databook, which provides sustainability performance data and is targeted at both investors and ESG data providers.Finally, the Strategic Report is intended to assist shareholders and other stakeholders to understand and interpret the Consolidated Financial Statements prepared in accordance with the International Financial Reporting Standards (IFRS) included in this Annual Report. 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 at the end of this Annual Report.Section 1Strategic Report 1.1 Chair’s Review
Dear Shareholder,
I am pleased to provide our Annual Report for FY2020.
The COVID-19 pandemic continues to have a profound impact in
our host nations and markets around the world. It has tested the
resilience of millions of lives and livelihoods, as well as healthcare
systems and economies in ways we could never have imagined.
Despite the unpredictable nature of the pandemic, BHP’s response
has remained strong. Our people stepped up and quickly adopted
measures to keep themselves, their families and the communities
where we operate, safe and well. Their steadfast commitment has
meant we have been able to keep our operations running safely
and continue to contribute to local economies, through the jobs
we create and the taxes and royalties we pay.
BHP’s relentless focus on our five priority areas – safety; portfolio;
capital discipline; culture and capability; and social value – has
enabled us to meet the global challenges of the crisis from a
position of strength and to deliver a strong set of financial results
in FY2020. The outstanding efforts of our teams, our high-quality
portfolio and disciplined approach to capital allocation enabled
the Board to declare US$1.20 per share in dividends for the year.
The health and safety of our people remains the highest priority.
We recorded no fatalities at our operations during the year and
have had fewer frequent safety events with the potential to cause
a fatality. However, there is no room for complacency and we must
continue to push for exceptional safety performance every day.
We continue to invest and plan for the future while at the same time
delivering strong cash returns to our shareholders. Similarly, our
commodity portfolio has remained resilient throughout FY2020.
We believe our products will play an essential role in a decarbonising
world and will help us grow value for many decades to come.
The Board appointed Mike Henry as BHP’s new Chief Executive
Officer (CEO) in January, replacing Andrew Mackenzie. Mike
has long been a strong advocate for the resources industry,
driving higher standards of safety and contributing to our local
communities and global stakeholders. He is committed to
unlocking and accelerating greater value in our assets and
operations. In doing so he will make BHP safer, leaner, high
performing and future fit. Andrew was instrumental in turning
BHP into a simpler and more productive company, and one
that is financially stronger and sharply focused on value for
shareholders and society. I would like to thank Andrew for his
outstanding contribution as CEO.
We also continued to take a rigorous and structured approach
to our Board renewal process. Gary Goldberg joined the Board in
February, and Dion Weisler joined the Board in June. As announced
in May, we also look forward to Xiaoqun Clever joining the Board
in October.
Lindsay Maxsted will retire from the Board on 4 September 2020,
and Shriti Vadera will be retiring from the Board following the
2020 Annual General Meetings. Shriti and Lindsay have been highly
regarded members of the Board since 2011, with Shriti serving as
the Senior Independent Director since 2015, and Lindsay serving
as Chair of the Risk and Audit Committee. We have benefited greatly
from Shriti’s and Lindsay’s extensive experience and I would like
to thank them for their invaluable contribution and commitment
to BHP.
FY2020 was a year where we worked hard to integrate social value
into every decision we make. BHP’s immediate response to the
pandemic, under decisive direction from Mike and his leadership
team, has been clear from day one. From creating hundreds of
operational jobs across our Minerals Australia business, to providing
funding that has directly benefited communities where we have
a presence around the world, and accelerating payments for our
small, local and Indigenous suppliers, BHP has continued to step
up and play our part.
Taking actions that make a difference also extends to BHP’s
commitment to address climate change and progress made
through our Climate Investment Program, as outlined in the
BHP Climate Change Report 2020. We have set a medium-term
target to reduce our Scope 1 and Scope 2 operational emissions
by at least 30 per cent by FY2030 (from FY2020 levels (1)). We
also have set clearly defined Scope 3 emissions goals for 2030
to support industry to develop technologies and pathways
capable of 30 per cent emissions intensity reduction in integrated
steelmaking, with widespread adoption expected post-2030,
and to support 40 per cent emissions intensity reduction of
BHP-chartered shipping of our products.
While the challenges of the pandemic are likely to remain for some
time to come, I am confident our disciplined and focused approach
will create value for shareholders and make a positive contribution
to society for many years to come.
Thank you for your continued support of BHP.
Ken MacKenzie
Chair
(1) FY2020 baseline will be adjusted for any material acquisitions and divestments based on greenhouse gas emissions at the time of the transaction. Carbon offsets
will be used as required.
4 BHP Annual Report 2020
1.2 Chief Executive Officer’s Report
Dear Shareholder,
Thank you for your continued support and investment in BHP through
what has been an extraordinary 12 months. We have a resilient
portfolio, great people and strong relationships. These contributed to
a strong set of results, safely achieved in the face of some significant
challenges in our markets and in our operating regions.
It is my privilege to have been selected by your Board to lead
BHP. I want to thank my predecessor, Andrew Mackenzie, for his
leadership in creating a simpler, more focused company, setting
up BHP for the future.
Performing in extraordinary times
The COVID-19 pandemic is having a devastating effect on lives,
society and the global economy. BHP supports communities,
customers and countries around the world with the jobs, business
and materials that will help the world navigate through the
pandemic, and then rebuild. We have prioritised keeping our people
and communities safe, supporting those who rely on BHP, and
keeping our operations running reliably.
We have taken action to protect our workforce against COVID-19
by investing in more transportation capacity, restricting travel to
our operations and protecting at-risk workers. We have shortened
payment terms for small, local and Indigenous suppliers to help
address the financial pressures they are otherwise facing as a result
of the pandemic. We have funded social and health programs in our
communities globally, have hired 1,500 more people temporarily,
and the BHP Foundation is funding vaccine and treatment research.
In the face of this crisis, people across BHP have rallied in line with
our purpose and values in a way that has seen them stay safe while
keeping the business running and performing strongly.
We had no fatalities during the year and our total recordable injury
frequency fell 11 per cent to 4.2 per million hours worked. A number
of our operations achieved production or throughput records and
unit costs were lower across all of our major assets. Our major
capital projects are tracking well.
Our continued focus on disciplined allocation of capital saw us
invest US$7.6 billion in our assets while maintaining net debt at the
lower end of our target range, ensuring a strong balance sheet in
these volatile times. We declared a final dividend to shareholders
of US$0.55 per share, taking our annual dividend distribution
to US$1.20 per share. This is the third year in a row we have
returned more than US$6 billion to shareholders, highlighting
the resilience of our portfolio and our people.
Growing value and returns
We create value through our purpose: ‘To bring people and resources
together to build a better world’. Just prior to starting in the CEO role,
I spent six weeks engaging with people in BHP’s operations and
offices around the world. I came away energised by what I heard
and confident in the potential for BHP to create even greater value
for shareholders and society – an even safer, more reliable, and lower
cost BHP, with social value core to everything we do. We will grow
value and returns for all those who have a stake in a successful BHP.
Value and returns will be underpinned by embedding social value,
being excellent at operations and at allocating capital, and by
ensuring we have a portfolio with options that allow us to invest
in meeting society’s needs in the short, medium and long term.
In this regard, we recently announced further steps in the continued
optimisation of our portfolio, including the intended divestment
of some of our coal assets whose value will be best realised outside
BHP, and our non-operated interest in the Bass Strait joint venture.
We will create and secure more options in future-facing commodities
through innovation, exploration, early stage entry and well-timed
acquisitions of attractive resources and assets. We have also
announced new roles on the Executive Leadership Team. These
changes will help ensure operational and technical excellence are
front and centre for the company and that we are successful in
creating and securing more options in future facing commodities,
which will benefit successive generations of shareholders.
Sustainability and resilience
BHP’s commitment to sustainability is important and enduring.
We have refreshed our approach to sustainability reporting.
Key information and performance data is included in this Report
and we have significantly expanded our sustainability content on
our website, including the provision of a databook to make core
information more accessible.
The BHP Climate Change Report 2020 details our approach to
climate change and the role we will play in addressing it. We have
committed to reducing our operational greenhouse gas emissions
(Scope 1 and Scope 2) by at least 30 per cent from FY2020 levels (1)
by FY2030. For Scope 3 emissions, we have set goals for 2030.
We will support industry to develop technologies and pathways
capable of 30 per cent emissions intensity reduction in integrated
steel-making, with widespread adoption expected post 2030.
We will also support 40 per cent emissions intensity reduction
of BHP-chartered shipping of our products.
Conclusion
We are proud of our operational and financial performance
in FY2020, which was achieved safely and in the face of some
extraordinary challenges.
We expect that the global economy will take some time to stabilise
and recover from the ongoing COVID-19 pandemic. Commodity
markets will likely remain volatile. The trailing consequences
of high unemployment and spiralling debt are likely to reinforce
global concern about inequality and systemic disadvantage.
Environmental sustainability will remain a global priority.
BHP’s values, strategy and actions position us well to navigate the
period ahead and to play a role in the recovery process. We remain
committed to addressing climate change, creating social value and
to an inclusive workforce. We have structured our business to thrive
through changing times, and we are set up well to deal with
near-term market uncertainty and to prosper as the world returns
to its trajectory of long-term growth.
BHP’s performance in the past year illustrates this resilience
and our potential to continue to grow value and returns for
shareholders and society.
To all our shareholders, thank you for your ongoing commitment
and support.
Mike Henry
Chief Executive Officer
(1) FY2020 baseline will be adjusted for any material acquisitions and divestments based on greenhouse gas emissions at the time of the transaction. Carbon offsets will
be used as required.
BHP Annual Report 2020 5
Governance at BHPRemuneration ReportDirectors’ ReportFinancial StatementsAdditional informationShareholder informationStrategic Report1 1.3 BHP at a glance: FY2020
Bringing people and
resources together to
build a better world
Our values
Sustainability
Integrity
Respect
Performance
Simplicity
Accountability
n
c
a f e t y a
n tri c f o
e
W e prioritise: S
Through: A n a s s e t- c
t y
d s
i
l
t
s
u
a i n a b i
s C a p i
u
a l
t a l
Exceptional perform
Capability C
l o c a t i o n
We work
in more than
90
locations
by FY2030
A strong set of results, safely achieved
Our people maintained an
unwavering focus on safety in a
challenging year across the globe. 0
Fatalities
Total recordable injury
frequency fell
11%
to 4.2 per
million hours
worked.
Safety remains our top priority and we continue to
search for ways to improve safety across our business.
High potential injuries (HPI) decreased by
16 per cent from FY2019 and the frequency rate
decreased by 23 per cent.
HPI trends remain a primary focus to assess progress
against our most important safety objective:
to eliminate fatalities.
We contributed to social value in the
communities in which we operate
We invested US$150m
in environmental and social programs, including
responding to the COVID-19 pandemic through
social investment funds.
During FY2020, 12 per cent of our external expenditure
was with local suppliers. An additional 84 per cent of
our supply expenditure was located within the regions
in which we operate.
We embedded social value priorities into our annual
business planning process.
We remained true to our
environmental commitments
We set a target to reduce
our operational greenhouse
gas emissions by at least 30%
(from FY2020 levels (1)) and our long-term goal is to
achieve net-zero operational emissions by 2050.
In line with our water stewardship commitments and our
five-year public target for water, we continued to reduce
our freshwater withdrawals, with FY2020 withdrawals
now 19 per cent below our FY2017 baseline, exceeding
our 15 per cent reduction target.
We eliminated extraction of groundwater for operational
supply purposes at Escondida 10 years ahead of
schedule, and announced a move to 100 per cent
renewable power for Escondida and Spence by the
mid-2020s.
We delivered a strong financial performance
Our Attributable
profit was
US$8.0b
and our Underlying EBITDA (2) was US$22.1 billion,
at an Underlying EBITDA margin (2) of 53 per cent.
We generated free cash flow (2) of US$8.1 billion.
Our balance sheet remains strong, with net debt (2) at
US$12.0 billion and at the bottom of our target range.
We created value for our shareholders
Total dividends of 120 US cents per share and basic
earnings per ordinary share of 157.3 US cents.
Our underlying return on capital employed (2) was 17%.
(1) FY2020 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) For more information on Alternative Performance Measures, refer to section 6.1.
(3) Percentage contribution to Group Underlying EBITDA, excluding Group and unallocated items (G&U includes Potash, Nickel West and
closed mines previously reported in Petroleum reportable segment). Energy coal and Nickel have not been presented.
6 BHP Annual Report 2020
an
c
e
ulture T
A
w
i
n
n
i
n
g
e
c
h
n
o
l
o
g
y
p
o
r
t
f
o
l
i
o
80,000
employees
and
contractors
In FY2020 we produced:
We have a diverse range of customers
Proportion of
and suppliers
Change on
Group Underlying
Quantity
FY2019
EBITDA (2) (3)
We have over 9,000 suppliers around the world.
Iron ore
Copper
248 Mt
1,724 kt
Petroleum
109 MMboe
Metallurgical
41 Mt
coal
4%
2%
10%
3%
64%
19%
10%
9%
We continued to lower costs and
improve reliability
Unit costs
reduced by
9%
across our major assets due
to foreign exchange rates,
better productivity and
improved operating stability.
Our unit production costs at our major operated
assets were: Escondida (US$1.01/lb);
WAIO (US$12.63/t); Petroleum (US$9.74/boe)
and Queensland Coal (US$67.59/t).
We continued to work towards greater reliability –
for example, the mean time between car dumper
failure at WAIO rose 28 per cent.
We are strong because of our diversity
The representation of women
in our business grew by
2%
over the year, and nearly 4,000 more women now work
for us compared to four years ago when we announced
our aspirational goal to achieve a gender-balanced
workforce by CY2025.
We continued to build an inclusive working environment.
China continues to be our biggest market and
collectively the Asia region accounts for more than
of our revenue.
80%
Top five markets
China
Japan
South Korea
Rest of Asia
Australia
26,576
3,904
2,666
2,583
2,232
FY2020 (US$M)
% of total revenue
62%
9%
6%
6%
5%
We made a significant economic
contribution to society
We made a total
economic contribution
in FY2020 of
US$37.2b
We paid
US$9.1b
globally in taxes, royalties
and other payments to
governments.
We paid US$3.9 billion in wages to our employees
and contractors, and US$15.5 billion to our suppliers.
Bringing people and
resources together to
build a better world
Our values
Sustainability
Integrity
Respect
Performance
Simplicity
Accountability
t y
i
l
a i n a b i
t
s
u
d s
s C a p i
l o c a t i o n
a l
t a l
n
c
u
a f e t y a
n tri c f o
e
We work
in more than
90
locations
W e prioritise: S
Through: A n a s s e t- c
A strong set of results, safely achieved
Our people maintained an
unwavering focus on safety in a
challenging year across the globe. 0
Fatalities
Total recordable injury
frequency fell
11%
to 4.2 per
million hours
worked.
Safety remains our top priority and we continue to
search for ways to improve safety across our business.
High potential injuries (HPI) decreased by
16 per cent from FY2019 and the frequency rate
decreased by 23 per cent.
HPI trends remain a primary focus to assess progress
against our most important safety objective:
to eliminate fatalities.
We contributed to social value in the
communities in which we operate
We invested US$150m
in environmental and social programs, including
responding to the COVID-19 pandemic through
social investment funds.
During FY2020, 12 per cent of our external expenditure
was with local suppliers. An additional 84 per cent of
our supply expenditure was located within the regions
in which we operate.
We embedded social value priorities into our annual
business planning process.
We remained true to our
environmental commitments
We set a target to reduce
our operational greenhouse
gas emissions by at least 30%
(from FY2020 levels (1)) and our long-term goal is to
achieve net-zero operational emissions by 2050.
by FY2030
In line with our water stewardship commitments and our
five-year public target for water, we continued to reduce
our freshwater withdrawals, with FY2020 withdrawals
now 19 per cent below our FY2017 baseline, exceeding
our 15 per cent reduction target.
We eliminated extraction of groundwater for operational
supply purposes at Escondida 10 years ahead of
schedule, and announced a move to 100 per cent
renewable power for Escondida and Spence by the
mid-2020s.
We delivered a strong financial performance
Our Attributable
profit was
US$8.0b
and our Underlying EBITDA (2) was US$22.1 billion,
at an Underlying EBITDA margin (2) of 53 per cent.
We generated free cash flow (2) of US$8.1 billion.
Our balance sheet remains strong, with net debt (2) at
US$12.0 billion and at the bottom of our target range.
We created value for our shareholders
Total dividends of 120 US cents per share and basic
earnings per ordinary share of 157.3 US cents.
Our underlying return on capital employed (2) was 17%.
(1) FY2020 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) For more information on Alternative Performance Measures, refer to section 6.1.
(3) Percentage contribution to Group Underlying EBITDA, excluding Group and unallocated items (G&U includes Potash, Nickel West and
closed mines previously reported in Petroleum reportable segment). Energy coal and Nickel have not been presented.
Exceptional perform
Capability C
an
c
e
A
ulture T
e
c
h
n
o
l
o
g
y
w
i
n
n
i
n
g
p
o
r
t
f
o
l
i
o
80,000
employees
and
contractors
In FY2020 we produced:
Iron ore
Copper
Quantity
248 Mt
1,724 kt
Petroleum
109 MMboe
Metallurgical
coal
41 Mt
Change on
FY2019
Proportion of
Group Underlying
EBITDA (2) (3)
4%
2%
10%
3%
64%
19%
10%
9%
We continued to lower costs and
improve reliability
Unit costs
reduced by
9%
across our major assets due
to foreign exchange rates,
better productivity and
improved operating stability.
Our unit production costs at our major operated
assets were: Escondida (US$1.01/lb);
WAIO (US$12.63/t); Petroleum (US$9.74/boe)
and Queensland Coal (US$67.59/t).
We continued to work towards greater reliability –
for example, the mean time between car dumper
failure at WAIO rose 28 per cent.
We are strong because of our diversity
The representation of women
in our business grew by
2%
over the year, and nearly 4,000 more women now work
for us compared to four years ago when we announced
our aspirational goal to achieve a gender-balanced
workforce by CY2025.
We continued to build an inclusive working environment.
We have a diverse range of customers
and suppliers
We have over 9,000 suppliers around the world.
China continues to be our biggest market and
collectively the Asia region accounts for more than
80%
of our revenue.
Top five markets
FY2020 (US$M)
% of total revenue
China
Japan
South Korea
Rest of Asia
Australia
26,576
3,904
2,666
2,583
2,232
62%
9%
6%
6%
5%
We made a significant economic
contribution to society
We made a total
economic contribution
in FY2020 of
US$37.2b
We paid
US$9.1b
globally in taxes, royalties
and other payments to
governments.
We paid US$3.9 billion in wages to our employees
and contractors, and US$15.5 billion to our suppliers.
BHP Annual Report 2020 7
Governance at BHPRemuneration ReportDirectors’ ReportFinancial StatementsAdditional informationShareholder informationStrategic Report1
1.4 Performance
1.4.1 Our strategy
BHP’s strategy is to have the best capabilities, best commodities and best assets, to create long-term value
and high returns. Our strategy is underpinned by our disciplined approach to capital allocation and risk
management and our overriding commitment to generating social value for our stakeholders.
Social value is at the core of our approach and purpose – to bring
people and resources together to build a better world. It underpins
our decisions and actions, from the positive contribution we make
to the environment and society, to supporting the needs of our
workforce, partners, customers, economies and communities.
The longevity of BHP’s assets means we must think and plan
in decades. The long-term health of our business is dependent
on the long-term health of our society and a sustainable
natural environment.
As we look to the future, BHP and our products will play an
essential role as the world’s population continues to grow,
improved living standards are pursued and momentum towards
decarbonisation increases.
Culture and capabilities
that enable the execution
of our business strategy
Best
culture and
capabilities
Best
commodities
Commodities
with high economic
rent potential
Value and returns
Best assets
Assets
that are resilient through the cycle
and have embedded growth options
To extract the most value and the highest returns from our assets
we apply Our Charter values and culture of care to operate safely
and productively, supported by technology.
We want BHP to be recognised as the resources industry’s best
operator. To do this we must:
• have a relentless focus on the elimination of fatalities and achieving
our climate change, water and social value commitments
• be leaner and higher performing – lower cost, more reliable
and productive
• create and secure options in future-facing commodities to
continue to grow value
Our strategy maximises value and returns
We have secured and will continue to grow options in copper
and nickel, where increasing demand and our capability give us
competitive opportunities. We are moving to concentrate our coal
portfolio on higher-quality coking coals, with greatest potential
upside for quality premiums as steelmakers seek to improve blast
furnace utilisation and reduce emissions intensity, and will pursue
options to divest our interests in BMC, New South Wales Energy
Coal (NSWEC) and Cerrejón.
In oil and gas, we will continue to invest in opportunities that are
resilient under a range of price scenarios, and which are aligned
to our strengths. We will seek to divest oil and gas assets that
are mature or which are likely to realise greater value under
different ownership.
This approach to actively managing our portfolio for value, risk and
returns over multiple time horizons will yield superior returns for
our investors and greater value for our partners and communities.
We have some of the world’s best assets. This is backed up by
the discipline and competition stimulated through our Capital
Allocation Framework, which has driven better transparent
decision-making and capital efficiency.
8 BHP Annual Report 2020
1.4.2 Social value
Social value is the positive contribution we make to the environment
and society through considering the needs of and maintaining
respectful and mutually beneficial relationships with our workforce,
partners, customers, economies and communities.
Consideration of social value helps us create new business
opportunities and make better-informed business decisions.
Social value is a BHP priority and is embedded in our whole-of-
business five-year planning process. When business planning
occurs each year, each operated asset must consider local and
global issues that are important to its stakeholders, assess its
performance on those issues and develop a plan for how to
proactively contribute social value in these areas, in partnership
with our global functions and local stakeholders.
In FY2020, we completed the first social value assessments across
our operated assets in Minerals Australia and Minerals Americas.
These assessments identify social value priorities for each asset
and are a key input into the asset’s five-year plan. The benefit
of this approach is that community and broader sustainability
initiatives are fully integrated into core business planning activities.
For information on many of these initiatives,
refer to section 1.7.
More information on social value and its importance
at BHP is available at bhp.com.
BHP Annual Report 2020 9
Governance at BHPRemuneration ReportDirectors’ ReportFinancial StatementsAdditional informationShareholder informationStrategic Report1 1.4.3 Stakeholder engagement
Section 172 statement
How the Board complied with its section 172 duty
The UK Companies Act 2006 (CA2006) sets out a number of general
duties, which directors owe to the company. New legislation has been
introduced to help shareholders better understand how directors have
discharged their duty to promote the success of the company, while
having regard to the matters set out in section 172(1)(a) to (f) of the
CA2006 (s172 factors). The Board welcomes the new Section 172
reporting requirements.
The Board considers the interests of a range of stakeholders in its
discussions, decision-making and implementation of BHP’s strategy
and purpose, which will have an impact on the long-term success
of the Group. The Board does not typically engage with every
stakeholder group every year; however, engagement does take
place at management level and management discusses this with
Directors during Board meetings.
In addition, the Board considers the likely consequences of decisions
in the long term, the impact of the Group’s operations on the community
and the environment and the importance of maintaining a reputation
for high standards of business conduct.
More detail about our approach to these matters, along with other
stakeholder considerations, is set out in the Strategic Report as detailed
in this table – in particular the Board and Board Sustainability
Committee’s approach to Sustainability, the environment, tailings
storage facilities and Samarco.
S172 factor
Workforce
Community and government
Investors
Suppliers and customers
Environment
High standards of conduct
Key examples
• Approach to workforce in relation to COVID-19
• Culture and capabilities
• Health and safety
• Workforce engagement
• Local economic growth
• Social investment
• Indigenous peoples
• Understanding the views of BHP shareholders
• Acceleration of supplier payment terms (case study)
• Working with suppliers
• Responsible sourcing
• Commercial
• Land and biodiversity
• Rehabilitation and closure
• Water
• Climate change
• Human rights
• Tailings storage facilities
• Samarco
Section
1.4.6
1.6.1
1.7.3 and 1.7.4
2.6.2
1.7.9
1.7.9
1.7.9
2.6.1
1.4.6
1.6.1
1.7.7
1.9.5
1.7.6
1.7.6
1.7.6
1.7.8
1.7.9
1.7.10
1.8
10 BHP Annual Report 2020
Workforce
The Board uses a range of formal and informal communication channels and reporting methods to understand the views of the workforce.
This includes engaging with and hearing the perspectives of employees and contractors from all levels of the business. This includes discussions
during site visits, informal events during Board meetings, pulse surveys, feedback through our 24-hour speak up helpline, EthicsPoint and regular
updates from the CEO and management. The perspectives of our workforce are factored into the Board’s decision-making on a range of topics,
from health and safety to risk management and workforce planning. For more examples, refer to section 2.6.2.
COVID-19 response
The Board and the Sustainability Committee received regular reporting on
the controls in place to manage the health and wellbeing of our site and
office-based workforce in the context of COVID-19, and the feedback from
the workforce and from unions. This included steps taken to ensure social
distancing, the approach to testing for COVID-19 and the decision to extend
BHP’s Employee Assistance Program to family members. The Board also
received reports on the results of a COVID-19 wellbeing survey and steps
taken to monitor and address the wellbeing of our workforce, including
those working from home. For more information, refer to section 1.4.6.
Health and safety
The Sustainability Committee considers health and safety performance
across our operations at every meeting and reports to the Board on its
discussions. During the year, the Committee discussed a range of topics
relevant to the health and safety of our people, including the mental
health program, and the controls in place for workers in the vicinity
of tailings dams. In addition, the Sustainability Committee endorsed
Health, Safety, Environment and Community (HSEC) KPIs for FY2020
and recommended the HSEC outcomes for the Group and the Executive
Leadership Team to the Remuneration Committee.
Operations Services
Operations Services provides maintenance and production services across
Minerals Australia, supporting our people to build their skills through
coaching and by performing in-field verification. The Board discussed
Operations Services and its positive impact on safety, productivity and
diversity outcomes as well as the training and benefits provided to the
Operations Services team. The discussion included direct feedback from
Operations Services team members at different sites on their experiences.
Aligning executive pension contribution rate to workforce
At their August 2019 meetings, taking into account data on employee
pension contribution levels across the BHP workforce reviewed by the
Remuneration Committee earlier in 2019, the Remuneration Committee
and Board discussed and endorsed a change to the pension contribution
rate for senior executives to bring it lower than the employee average
across the Group’s global locations.
Ethics and compliance, and assurance
The Risk and Audit Committee (RAC) received, at its request, increased
regularity of reporting from the Chief Compliance Officer on trends in
reporting to EthicsPoint and details on consistency in disciplinary
outcomes for breaches of Our Code of Conduct (Our Code) which sets
out standards of behaviour for our people. The RAC also discussed the
introduction of assurance over risk culture by the Internal Audit and
Advisory team.
CEO and ELT succession
A major piece of work for the Board during the year was CEO succession.
For BHP, succession of the CEO is an ongoing process, which continues
to work well in developing internal candidates for this critical role. This
year, Andrew Mackenzie retired as CEO and Mike Henry was appointed
CEO from 1 January 2020. The Board took account of Mike’s 30 years’
experience in the global mining and petroleum industry, spanning
operational, commercial, safety, technology and marketing roles. A
critical component of succession at ELT level and below is the existence
of a robust senior leadership program that operates across multiple
organisational levels to build, develop, renew, recruit and promote our
leaders. The Board is actively engaged and oversees the development
of the senior team. See section 2.5 for additional information.
Community and government
Inclusion and diversity update
In August 2019, the Board discussed progress against agreed FY2019
inclusion and diversity objectives and the proposed scorecard objectives
for FY2020, noting that business data shows a more inclusive and
diverse workforce has lower injury rates and absenteeism, along with
higher scheduled work. The ongoing success of flexible working was
also discussed. The Board also considered how capital projects such
as South Flank and the Spence Growth Option have integrated inclusion
and diversity into project planning, with positive results.
CEO-elect – workforce engagement
In the 45 days between being announced CEO-Elect and becoming
CEO, Mike Henry spent time engaging with employees from every asset
and almost all major offices. Employees said they were proud of the
positive contribution BHP makes to the world through social value,
safety and our inclusive and diverse culture. They also saw opportunity
to further simplify processes and better align teams to work even faster
and maximise value across the business.
We recognise that mutually beneficial relationships with communities and governments are crucial to our strategy. The Board takes a range of steps
to understand the perspective of communities and governments in order to factor these into decisions as relevant. The Board receives insight into
the views of community members and government stakeholders through site visits (e.g. the Group Chair met with the President of Chile and the
Australian Ambassador to Chile as part of a visit to Escondida in September 2019 and Directors met with the Premier of Saskatchewan and
Indigenous community members as part of a site visit to Jansen in September 2019); engagement with BHP’s Forum on Corporate Responsibility
(FCR); management reports to the Board; and feedback received through letters to Directors, EthicsPoint reports and the media.
COVID-19 response
During FY2020, BHP supported the communities where we have a
presence in response to challenges posed by the COVID-19 pandemic.
This included a broad range of targeted initiatives focused on prevention
and support for health services in the regional communities where we
have a presence. For example, a A$50 million Vital Resources Fund was
established in Australia, with funds used to support hospitals, clinics and
public health organisations serving the communities surrounding our
Australian operations. For information of our approach to COVID-19
in Chile and elsewhere in the Group, refer to section 1.4.6.
Social value
The Board discussed an update on the implementation of BHP’s approach
to social value to support our business priorities, engage effectively with
stakeholders and manage external risk. The discussion focused on two
priority areas – continuing to integrate our approach to social value into
the Group’s standard ways of working and measures to effectively
communicate our contribution. The Sustainability Committee discussed
an update on societal expectations of the resource industry, how the
trends impact our ability to contribute to social value creation and the
approach we are taking to respond effectively to these challenges.
Forum on Corporate Responsibility (FCR)
The Sustainability Committee met with members of the FCR, which comprises civil society leaders in various fields of sustainability, to discuss
a range of social and environmental issues. The FCR provided the Sustainability Committee with their insights from their September 2019 trip to
Chile, which focused on water stewardship and Minerals Americas’ approach to social value. The FCR noted BHP’s leadership in deciding to cease
extraction from the Monturaqui aquifer in favour of sourcing water required for Escondida operations from its desalination plant, as well as its
approach to renewable power contracts.
BHP Annual Report 2020 11
Governance at BHPRemuneration ReportDirectors’ ReportFinancial StatementsAdditional informationShareholder informationStrategic Report1 1.4.3 Stakeholder engagement continued
Investors
Shareholder perspectives are taken into account by the Board and its Committees in its decision-making and long-term strategic planning.
The Board uses formal and informal communication channels to understand the views of shareholders, in addition to Annual General Meetings
(AGMs). This includes meetings and discussions between the Group Chair, the Senior Independent Director and the Remuneration Committee
Chair and Institutional and Retail shareholders. A range of investors also presented directly to the Board. For more examples, refer to section 2.6.1.
Industry associations
At a number of meetings in 2019 and 2020, the Board had in-depth
discussion on the Group’s future approach to industry association
membership. The Group Chair and CEO discussed the topic of industry
associations with a range of investors, and discussed investors’ feedback
with the Board. The Board also received reports on management
meetings with a range of investors on industry associations. Investor
feedback has been a key input to the Group’s future approach to industry
associations, which has been reflected in supportive comments following
publication. See bhp.com for our position on industry associations.
Climate change
Significant engagement was undertaken with investors on climate
change issues during FY2020. This comprised engagements to review
potential implementation approaches for the commitments announced
in July 2019 as well as incorporation of climate change into the Group’s
social value investor presentations, and engagement with key investor
groups, including Climate Action 100+. See bhp.com for the BHP
Climate Change Report 2020.
Remuneration policy
Investors played an integral role in the development of the remuneration
policy approved at the October and November 2019 AGMs. During
meetings led by the Board Chair and the Remuneration Committee Chair
in April and May 2019, investors provided feedback on what they saw as
strengths and weaknesses of the existing policy, and potential means to
strengthen it. The Remuneration Committee factored this feedback into
a new policy proposal, which was the subject of an extensive further
round of consultation. Investor comments in this second round led to
refinements to the policy submitted for approval at the AGMs, including
the three changes made to the policy as set out on page 139 of the 2019
Annual Report.
Governance
The Group Chair and Senior Independent Director sought feedback
from investors on governance practices as part of the annual cycle of
meetings. This included the approach to the AGM and reporting practices.
The Governance team, within management, seeks input from investors,
including ESG investors, on BHP’s reporting on sustainability. This feedback
has been incorporated into this year’s Annual Reporting documents.
Suppliers and customers
The Board and its Committees take into account the perspective of customers and suppliers during their deliberations. In FY2020, this included
reports from the CEO and the Chief Commercial Officer on discussions with customers and suppliers and particularly consideration of both
regarding COVID-19.
COVID-19 response
Suppliers – We accelerated payments and reduced payment terms to
seven days (from 30 days) for small, local and Indigenous suppliers. In
Chile, we offered voluntary financial assistance to cover a significant part
of contractor companies’ costs to maintain the remuneration of workers
demobilised at our operations because of the pandemic.
Vendor rationalisation
The Board discussed strategies to consolidate mining materials
and consumables vendors for Minerals Australia, and the impact
on other participants in the supply chain. Potential impacts on local
and Indigenous suppliers were considered as well as ways to mitigate
this risk, including KPIs for assets on local and Indigenous spend.
Customers – The impact of COVID-19 disruptions on our customers’
operations and our engagements with them to mitigate these were
captured in the regular COVID-19 updates from the CEO to the Directors.
Supply chain human rights and seafarer welfare
The Sustainability Committee discussed BHP’s risk and controls relating
to the potential for adverse human rights impacts in our supply chain,
and had a specific deep dive into maritime seafarer welfare. Board and
Sustainability Committee reviews were also undertaken of our approach
to the supply chain through the discussion and approval of the Modern
Slavery Statement FY2020.
Chile social issues
The Board discussed the situation in Chile since October 2019, including
the social crisis, the health and economic crisis caused by COVID-19,
and the combined effects of the three, as well as the fact that the
country will enter an intense electoral period, starting with the
referendum for a new Constitution in October 2020, and ending with
the Presidential election in November 2021. The Board reviewed the
implementation of Social Value plans for the regions where we operate,
as those continue to be the most important instrument for BHP to build
trust and long-term relationships with our key stakeholders.
Climate change
Discussions related to how we will work with our customers and suppliers with respect to Scope 3 greenhouse gas emissions, including our FY2021
actions, CY2030 goals and long-term vision to support the economy-wide transitions necessary to meet the Paris Agreement goals by working
with customers and suppliers to achieve sectoral decarbonisation. The Sustainability Committee reviewed proposed measures to deploy our
US$400 million Climate Investment Program, which will include investment in emissions reduction projects across our operated assets and value
chain and is part of our commitment to take a product stewardship role in relation to our full value chain.
Environment
The Board and its Committees consider a range of environmental matters throughout the year including, detailed discussions relating to climate
change, tailings storage facilities, rehabilitation and closure.
Renewable power agreements in Chile
The Board approved four power purchase agreements (PPAs) that will
meet the energy requirements for operations at Escondida and Spence
from 100 per cent renewable sources by the mid-2020s. The contracts
will effectively displace 3 million tonnes of CO2 per year from FY2022
compared to the fossil fuel based contracts they are replacing.
Climate change
The Board and its Committees spent significant time considering climate
change in relation to BHP’s business and strategy. These discussions
considered a range of stakeholders, including investors, communities,
governments, employees, customers and suppliers. These stakeholder
views were taken into account in considering our updated climate
change strategy.
In particular, during FY2020 the Board and Sustainability Committee
focused on the detailed development of the commitments set out in
July 2019: publicly setting a medium-term target for operational
emissions, the Climate Investment Program, Scope 3 emissions goals,
the link between emissions performance and executive remuneration,
and the work to release our new BHP Climate Change Report 2020.
12 BHP Annual Report 2020
1.4.4 Our Operating Model
Our Operating Model
Assets
Minerals Australia
Iron ore, copper, nickel, coal
Operated assets
Western Australia Iron Ore
Olympic Dam
Nickel West
Queensland Coal (BMA and BMC)
New South Wales Energy Coal
Minerals Americas
Copper, potash, iron ore, coal
Operated assets
Escondida
Pampa Norte
Jansen
Non-operated assets
Samarco
Antamina
Cerrejón
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
Our Operating Model allows us to leverage integrated systems and technology, replicate expertise and apply high standards
of governance and transparency. It includes:
Assets
Assets are a set of one or more geographically proximate operations (including open-cut and underground
mines, and onshore and offshore oil and gas production and processing facilities). We produce commodities
through these assets. Our operated assets are wholly owned and operated by BHP or 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 most of our assets into geographic regions (Minerals Australia and Minerals Americas), while our oil
and gas assets are considered one global asset group (Petroleum).
Commercial
Our Commercial function optimises value creation and minimises supply chain costs. It is organised around
our core value chain activities – Sales and Marketing; Maritime and Supply Chain Excellence; Procurement;
Warehousing Inventory and Logistics and Property; and Market Analysis and Economics.
Centres of
Excellence
We have Centres of Excellence in the disciplines of maintenance and engineering, resource engineering,
projects and geoscience to develop organisational capability and best practice.
Functions
Functions support all areas of BHP and have accountabilities and expertise in finance, legal, governance,
technology, human resources, corporate affairs, health, safety, environment and community.
Leadership
Our Executive Leadership Team (ELT) is responsible for the day-to-day management of the Group and leads
the delivery of our strategic objectives.
BHP Annual Report 2020 13
Governance at BHPRemuneration ReportDirectors’ ReportFinancial StatementsAdditional informationShareholder informationStrategic Report1 1.4.5 Managing performance
Corporate planning
Our corporate planning process is designed to deliver on our
strategy. It guides the development of plans, targets and budgets
to help us decide where to deploy our capital and resources.
Capital discipline
We use our Capital Allocation Framework (CAF) to assess the most
effective and efficient way to deploy capital. This helps us:
• maintain our plant and equipment to support safe and efficient
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. Long-term scenario planning is used to identify the
strategic capabilities we need to be successful and to evaluate
our preferred commodities and assets. We seek to identify potential
new business opportunities and 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 identify actions to manage emerging risks.
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 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 promotes discipline in all capital decisions
Operating productivity
Capital productivity
Net operating cash flow
Maintenance capital (1)
Strong balance sheet
Minimum 50% payout ratio dividend
Excess cash flow
50
Debt reduction
Additional dividends
Buy-backs
Organic development
Acquisitions/divestments
Maximise value and returns
(1) Maintenance capital includes spend on asset integrity, risk reduction, compliance, sustaining capacity/cost, transformation initiatives and climate change.
14 BHP Annual Report 2020
1.4.6 COVID-19: Our global response
COVID-19 key statistics and initiatives to 30 June 2020
Total number of confirmed (1) cases in the BHP workforce (2)
(potentially infectious while at work) (3)
Figures for persons potentially infectious while at work are
included irrespective of where infection may have occurred
Minerals Australia (4)
Minerals Americas (5)
Petroleum (6)
Asia/Europe
Global total
4 (0)
455 (135)
27 (0)
0 (0)
486 (135)
Established the Vital Resources Fund in Australia, providing a
broad range of support for regional communities
Minerals Australia – community
A$50 million
Provided support to labour hire for our Australian operations
to help them continue to operate
Minerals Australia – workforce
1,500 new positions created
Accelerating payments and reducing payment terms to seven
days (from 30 days) for small local and Indigenous businesses
Minerals Australia – suppliers
US$80 million
Assistance program to increase testing capacity and medical
treatment facilities in vulnerable areas of Santiago, Antofagasta
and Tarapacá Northern regions
Minerals Americas – community
US$8 million
Donations to the communities where we operate in Chile
Minerals Americas – community
US$3 million
Supporting impacted contracting partners in Chile by
voluntarily paying a proportion of their fixed remuneration
and social security costs to 30 June 2020
Established a Community Relief Fund supporting local
and regional health and wellness programs and essential
community services in North America and Trinidad and Tobago
Minerals Americas – workforce
US$25 million
Petroleum – community
US$2 million
Supporting the Chinese Red Cross Foundation in its
response efforts
Global – customer community
RMB10 million
Strong field leadership globally through the pandemic
Global – workforce
Employee wellbeing survey response
Global – workforce
27,401 critical control observations across the
Group from 1 March 2020 to 30 June 2020,
showing 92% compliance
73% rated their wellbeing as good or very good
91% believed BHP was doing a good job
responding to COVID-19
COVID-19 transformed the world earlier this year, touching every corner of society and shaking the global
economy. BHP quickly recognised that our ability to continue to operate through the pandemic depended
on the steps we took to keep our people safe and healthy, and to support the communities where we have
a presence.
Our first priority throughout our COVID-19 response has been
the health and safety of our people and communities, and to help
support the health and safety of the workforce across our value
chain. This guided us as we worked to prevent an outbreak in our
operations and communities when a pandemic was declared
in March. With strong engagement with and support from our
workforce and union leaders within our workforce, we were able
to take swift and decisive action, helping reduce the impact within
and outside our operated assets.
When the pandemic hit, we had the financial strength and agility to
implement our emergency plans and the rapid changes necessary
to keep our people safe and healthy and our operations running.
BHP’s strong balance sheet, disciplined approach and CAF, which
is embedded throughout our business, positions us to weather
downturns and unexpected issues such as the COVID-19 outbreak.
The CAF informs the core financial decisions we make and meant
we had already made the investments in our operated assets to
continue to operate safely and reliably.
Employees and contractors
To facilitate social distancing and reduce infection risk, we reduced
numbers of people at our work locations through split-shifts at our
offices, requirements for business-critical workers only at our
operated assets and flexible working from home arrangements.
In addition, we supported our employees at greatest risk from
COVID-19 to work from home and, where this was not possible,
access special leave.
We implemented screening measures at entry to our operations
and airport departure locations for our fly-in fly-out workforce,
including app-based questionnaires and temperature screening,
reduced capacity on flights and buses, in support of physical
distancing and increased hygiene practices. When people
displayed relevant symptoms, we implemented response plans and
evacuated them for testing, isolation and, where required, medical
care. In Chile and for our Petroleum operations in the United States,
due to high levels of community transmission, the screening
included testing for COVID-19 prior to travel to our remote sites
and facilities. This enabled us to safely operate, support jobs and
contribute to regional economic activity.
(1) A person with a laboratory confirmation of COVID-19 infection, using polymerase chain reaction (PCR) test methodology, irrespective of clinical signs and symptoms.
(2) Employees and contractors engaged by BHP.
(3) Figures in brackets indicate the number of people within the confirmed cases in the BHP workforce who were potentially infectious while at work, defined as being
in one of BHP’s managed locations (including camps and offices) within 48 hours before onset of symptoms and/or while symptomatic. Figures for persons potentially
infectious while at work are included irrespective of where infection may have occurred.
(4) Includes BHP offices within Australia.
(5) Includes BHP offices within South America or Canada.
(6) Includes BHP offices within the United States.
BHP Annual Report 2020 15
Governance at BHPRemuneration ReportDirectors’ ReportFinancial StatementsAdditional informationShareholder informationStrategic Report1 We limited access to Indigenous communities by our people and
made sure vulnerable members had access to medical services
and essential supplies. Expert advice early on told us that
Indigenous peoples may have additional susceptibility to COVID-19
infection. Therefore, we ceased face-to-face meetings with
Indigenous peoples very early in the pandemic, implemented strict
social protocols for all BHP employees and contractors in regional
communities, and in Australia, supported Indigenous peoples’
return to country and coordinated a national, multi-industry
response to protect and support remote communities.
The Vital Resources Fund contributed more than A$3.3 million
to peak Aboriginal and Torres Strait Islander health councils and
medical services across the country to support their communities
as they transition from lockdown to recovery.
The BHP Foundation committed A$3 million to the prevention and
treatment of COVID-19 with two world-leading research institutions
based in Australia. The Foundation provided A$2 million to support
the University of Queensland to develop a potential vaccine and
A$1 million to the Peter Doherty Institute for Infection and Immunity
for its Australasian COVID-19 Trial (ASCOT).
Suppliers
We worked with our suppliers to help ensure they followed
stringent health and safety standards among their own workforce.
We also worked with them to source critical hygiene products, such
as hand sanitiser, face masks and cleaning equipment to protect
our workforce and the communities where we have a presence.
For example, our suppliers delivered hygiene products to a school
in Moranbah, Queensland when they were running low, and our
local procurement team filled a shortfall in masks for staff at the
Andamooka branch of the Royal Flying Doctor Service in South
Australia. Minerals Americas continues to engage closely with the
communities associated with Escondida and Pampa Norte to
identify opportunities to support the ongoing crisis and recovery
phase, including supporting local suppliers.
Getting our people to and from sites safely around the world was
also a logistical challenge that our suppliers helped us overcome.
They provided people and equipment to conduct temperature
screenings at airports and bus depots to ensure no one with
a fever travelled to site. Our suppliers also expanded our bus
fleets, increased the number of charter flights and supported
new procedures in camps so we could maintain social distancing.
We also worked with our site-based suppliers to implement robust
shared resilience plans and include social distancing measures
in their on-site procedures to keep our people safe and our
operations running.
Specific examples of our response can be found throughout this
Report and at bhp.com/media-and-insights/covid-19/.
1.4.6 COVID-19: Our global response continued
Our Technology team supported our response to COVID-19, aiding
all Incident Management teams and Emergency Management
teams globally and rapidly enabling 16,000 people to work
remotely while ensuring the stability and security of enterprise
and operations systems.
The Technology team also developed a BHP contact tracing app
(C-19 Tracer) to provide digital personal protective equipment for
our global staff. It helps our Health, Safety and Environment teams
to trace those who had close contact with a COVID-19 positive
member of our workforce. The app uses GPS and Bluetooth-based
technologies and was deployed in May, with initial rollout to
Western Australia Iron Ore and Minerals Americas test groups.
Across BHP, we increased the availability of support services for our
people, including localised counselling services in addition to our
Employee Assistance Program, a range of online campaigns and
communication tools, and greater communication opportunities
to keep our people and teams connected. We sought to identify
and make safe and suitable arrangements for employees whose
wellbeing was not best served by continuing to work from home.
In Chile, which has had one of the highest rates of COVID-19
infection globally, a telemedicine service was established to
support and monitor infected workers’ health.
Where local COVID-19 transmission was sufficiently low,
work arrangement restrictions were lifted in some locations
following targeted assessments of local risks, resources, needs
and regulations, and the health and mental wellbeing of our
people, their families and communities.
Community
The local communities where we have a presence and local
businesses play a critical role in supporting our operated assets
and we depend on their ongoing wellbeing, success and
prosperity. BHP also operates in close proximity to several remote
and regional Indigenous communities globally.
We engaged with the communities where we operate to identify
where support was needed most, contributing to organisations
to meet supply and service shortages, accelerating payments
to our small, local and Indigenous suppliers and engaging
additional people from local regions. We worked with governments,
businesses and individuals to identify service and supply shortfalls
and determine the best way to fill those gaps.
These steps helped to keep our operated assets running safely and
supported communities and businesses that rely on our business.
We established social investment funds designed to help
support the most vulnerable from infection and mitigate the
broader impacts.
In Australia, this was through the A$50 million Vital Resources
Fund, which provided a broad range of support programs,
including additional GP support for remote Indigenous
communities in Western Australia, the establishment of two fever
clinics in Queensland, IT equipment for the Kokatha Aboriginal
Corporation in South Australia and business mentoring in New
South Wales.
In Chile, we contributed US$8 million to a program to increase
the testing capacity and medical treatment facilities in vulnerable
areas, including new sampling units in La Pintana and Puente Alto
including an in-car unit and mobile electric bus, water distribution in
Antofagasta and Pozo Almonte and sanitation campaigns for public
places in Antofagasta, Coloso, Sierra Gorda and Mamiña. We also
established an additional US$3 million fund for communities.
The US$2 million Community Relief Fund in North America,
Trinidad and Tobago and Mexico supported local and regional
health and wellness programs, such as through the donation of PPE
for medical professionals, as well as essential community services,
and we created a partnership with Project Dignity in Singapore to
supply meals to frontline healthcare workers.
16 BHP Annual Report 2020
1.4.7 Our performance: Financial KPIs
Key performance indicators
Our key performance indicators (KPIs) enable us to measure our
sustainable development and financial performance. These KPIs are
used to assess performance of our people throughout the Group.
For information on our approach to performance and reward,
refer to section 3.
For information on our overall approach to executive remuneration,
including remuneration policies and remuneration outcomes, refer
to section 3.
Following BHP’s sale of the Onshore US assets, the contribution
of these assets to the Group’s results is presented in this Annual
Report as Discontinued operations. To enable more meaningful
comparisons with prior year disclosures and in some cases to
comply with applicable statutory requirements, the data in section
1.4.7 has been presented to include Onshore US, except for
Underlying EBITDA. Footnotes to tables and infographics indicate
whether data presented in section 1.4.7 is inclusive or exclusive
of Onshore US.
For more information on the accounting treatment,
refer to section 5.
Underlying
attributable profit (1) (3)
US$ billion
10
9.1
8
6
4
2
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
0
2
0
2
Y
F
Underlying
EBITDA (2) (3)
US$ billion
Net operating
cash flows (1)
US$ billion
25
20
15
10
5
0
22.1
6
1
0
2
Y
F
7
1
0
2
Y
F
8
1
0
2
Y
F
9
1
0
2
Y
F
0
2
0
2
Y
F
20
16
12
8
4
0
15.7
6
1
0
2
Y
F
7
1
0
2
Y
F
8
1
0
2
Y
F
9
1
0
2
Y
F
0
2
0
2
Y
F
Underlying Return
on Capital Employed (1) (3)
%
20
16
12
8
4
0
16.9
6
1
0
2
Y
F
7
1
0
2
Y
F
8
1
0
2
Y
F
9
1
0
2
Y
F
0
2
0
2
Y
F
In FY2020, record production at WAIO, Caval Ridge and Poitrel;
record coal mined at Broadmeadow together with record throughput
at Escondida and improved operational stability generated solid cash
flow despite field and grade declines at Petroleum and Copper,
enabling us to maintain net debt (3) at the low end of our target range
and increase our ordinary dividend payments.
Profit and earnings
Attributable profit of US$8.0 billion in FY2020 includes an
exceptional loss of US$1.1 billion (after tax), compared to an
attributable profit of US$8.3 billion, including an exceptional
loss of US$0.8 billion (after tax) in the prior period. The FY2020
exceptional loss is related to the impairment of Cerro Colorado,
a provision for cancellation of power contracts as part of a shift
towards 100 per cent renewable energy at Escondida and Spence,
COVID-19 related costs and the current year impact of the Samarco
dam failure.
Cash flow and balance sheet
Our Net operating cash flows (Continuing operations) of
US$15.7 billion in FY2020 (FY2019: US$17.4 billion) reflects lower
Underlying EBITDA results although with tax payments in line with
FY2019 due to higher instalment rates.
Our balance sheet remains strong with net debt at US$12.0 billion
at FY2020 year end (FY2019: US$9.4 billion), which is at the low
end of our target net debt range.
The increase of US$2.6 billion in net debt in FY2020 is primarily
related to the impact of the application of IFRS 16 Leases,
returns to shareholders of US$6.9 billion and dividends paid
to non-controlling interests of US$1.0 billion, being offset by
free cash flow (3) generation of US$8.1 billion.
Our gearing ratio (3) at FY2020 year end was 18.7 per cent
(FY2019: 15.4 per cent).
Our Underlying attributable profit was US$9.1 billion in FY2020
(FY2019: US$9.1 billion).
Our Underlying Return on Capital Employed was 16.9 per cent
for FY2020 (FY2019: 15.9 per cent).
We reported Underlying EBITDA (Continuing operations) of
US$22.1 billion in FY2020 (FY2019: US$23.2 billion), with lower
prices (excluding iron ore), lower volumes (including copper grade
and petroleum field declines), inflation, an increase in the closure
and rehabilitation provision for closed mines, increased deferred
stripping depletion in line with mine plan at Escondida and other
net movements (in total US$6.1 billion), compared to the prior
period. This decrease was, partially offset by record volumes
at a number of our assets, improved operating stability, favourable
impacts from exchange rate movements, the application of
IFRS 16 Leases and other net movements (in total US$5.0 billion).
(1) Includes data for Continuing and Discontinued operations for the financial years being reported.
(2) Excludes data from Discontinued operations for the financial years being reported.
(3) For more information on Alternative Performance Measures, refer to section 6.1.
BHP Annual Report 2020 17
Governance at BHPRemuneration ReportDirectors’ ReportFinancial StatementsAdditional informationShareholder informationStrategic Report1 1.4.7 Our performance: Financial KPIs continued
Reconciling our financial results to our key performance indicators
Profit
Earnings
Cash
Returns
Measure: Profit after taxation
from Continuing
operations
US$M
8,736
Profit after
taxation from
Continuing
operations
US$M
8,736
Net operating
cash flows from
Continuing
operations
US$M
15,706
Profit after taxation
from Continuing
operations
US$M
8,736
Made
up of:
Profit after taxation
Profit after taxation
Profit after taxation
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
Adjusted
for:
Exceptional items
before taxation
Tax effect of
exceptional items
Exceptional items
after tax attributable
to non-controlling
interests
Exceptional items
attributable to
BHP shareholders
1,546
(241)
Exceptional items
before taxation
Tax effect of
exceptional items
(201)
Depreciation
and amortisation
excluding
exceptional items
1,104 Impairments of
property, plant
and equipment,
financial assets
and intangibles
excluding
exceptional items
1,546
(241)
6,112
85
Profit after taxation
attributable to
non-controlling
interests
(780) Net finance
costs excluding
exceptional items
818
Taxation expense
excluding
exceptional items
5,015
Exceptional items
before taxation
Tax effect of
exceptional items
Net finance costs
excluding exceptional
items
1,546
(241)
818
Income tax expense
on net finance costs
(267)
Profit after taxation
excluding net finance
costs and exceptional
items
10,592
Net Assets at the
beginning of period
51,824
Net Debt at the
beginning of period
9,446
Capital employed
at the beginning
of period
Net Assets at the
end of period
Net Debt at the end
of period
Capital employed
at the end of period
Average capital
employed
61,270
52,246
12,044
64,290
62,780
To reach
our KPIs
Underlying
attributable profit
9,060 Underlying
EBITDA
22,071 Net operating
cash flows
15,706 Underlying Return
on Capital Employed
16.9%
Why do
we use it?
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.
Underlying Return on Capital
Employed is an indicator of the
Group’s capital efficiency and is
provided on an underlying basis to
allow comparability of underlying
financial performance by excluding
the impacts of exceptional items.
Capital management
Free cash flow (Continuing operations), which is net operating cash
flows less net investing cash flows, was US$8.1 billion in FY2020
(FY2019: US$10.0 billion) reflecting a US$0.5 billion increase in total
capital and exploration expenditure to US$7.6 billion in FY2020 in
line with guidance. The increase in capital expenditure included
continued investment in high-return latent capacity projects, and
investment in South Flank, Spence Growth Option and Mad Dog
Phase 2 in FY2020. Capital and exploration expenditure guidance
is targeted at approximately US$7 billion for FY2021, 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 was 38 US cents
per share. Recognising the importance of cash returns to
shareholders, the Board determined to pay an additional amount
of 17 US cents per share, taking the final dividend to 55 US cents
per share. In total, US$1.20 per share of dividends to shareholders
have been determined for FY2020 (FY2019: US$2.35 per share
made up of US$1.33 per share ordinary dividends and US$1.02 per
share special dividend relating to the disbursement of Onshore
US proceeds). These returns are covered by total free cash flows
generated of US$8.1 billion in FY2020.
Our Underlying Return on Capital Employed was 16.9 per cent for
FY2020 (FY2019: 15.9 per cent) reflecting lower capital employed
as a result of the Onshore US disposal in FY2018.
18 BHP Annual Report 2020
1.4.8 Our performance: Non-financial KPIs
Capital management KPIs
Sustainability KPIs
Total shareholder return
Long-term credit rating
% change from previous year
(3-month average)
50
40
30
20
10
0
-10
-20
-30
-40
-50
-15.7%
6
1
0
2
Y
F
7
1
0
2
Y
F
8
1
0
2
Y
F
9
1
0
2
Y
F
0
2
0
2
Y
F
Total shareholder return (TSR) shows
the total return to shareholders
during the financial year. It combines
movements in share prices and
dividends paid (which are assumed
to be reinvested).
During FY2020, TSR decreased as
a result of the BHP share price and
dividends paid, resulting in a 15.7
percentage change from FY2019.
From 1 July 2015 to 30 June 2020,
BHP’s TSR performance was
29 per cent. This is above the sector
Peer Group TSR by 19.4 per cent,
and below the MSCI Index TSR
by 9.5 per cent.
2020 A, A2
2019
2018
2017
2016
A, A2
A, A3
A, A3
A, A3
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 and Moody’s credit
ratings of BHP remained at the A and A2
level respectively throughout FY2020.
Standard & Poor’s affirmed its rating
on 14 July 2020 and Moody’s affirmed
its rating on 1 May 2020.
For more information on our
liquidity and capital resources,
refer to section 1.10.3.
Our public sustainability five-year targets
and longer-term goals set in FY2017 are
designed to help us to operate safely,
reduce our environmental impact,
protect the health of our people and
contribute to improved quality of life
in the communities where we have a
presence. These targets and various
sustainability performance metrics
(SPMs) disclosed in this Report
encourage our continual improvement
in our sustainability areas and enable us
to manage and evaluate our performance
against our commitments.
The targets were created in consultation
with our operated assets and key internal
and external stakeholders, to prioritise
and measure our progress in our
sustainability areas. The targets were
approved by the Sustainability
Committee, which oversees how we
manage sustainability risks and evaluates
overall sustainability performance.
The targets are integrated into our
business plans and they and other
selected SPMs form part of Company
scorecards. Each year the Sustainability
Committee offers guidance to the
Remuneration Committee in the
evaluation of performance against
these targets and selected SPMs.
For a description of why we believe
our SPMs are useful and the
calculation methodology by metric,
refer to section 6.6.
For information on our approach
to performance and reward, refer
to section 3.
For information on our overall
approach to executive remuneration,
including remuneration policies
and remuneration outcomes,
refer to section 3.
BHP Annual Report 2020 19
Governance at BHPRemuneration ReportDirectors’ ReportFinancial StatementsAdditional informationShareholder informationStrategic Report1 1.4.8 Our performance: Non-financial KPIs continued
Our FY2020 sustainability performance
Target
Zero work-related fatalities
l
e
p
o
e
P
Year-on-year improvement of total recordable
injury frequency (3) (TRIF) per million hours worked
50 per cent reduction in the number of workers
potentially exposed (6) to our most material
exposures of diesel particulate matter, respirable
silica and coal mine dust compared to our
FY2017 (7) baseline by FY2022
FY2020 Result
Workplace fatalities
0
Total recordable injury
frequency decreased by
11%
compared to FY2019
Occupational exposures
60%
reduction compared to FY2017 baseline
Zero significant community events (9)
FY2020 0
Year-on-year
FY2017 (1)
FY2018
FY2019 (2)
FY2020
1
2
1
0
FY2018 (4)
FY2019 (5)
FY2020
4.4
4.7
4.2
Adjusted FY2017
baseline
FY2019 (8)
FY2020
4,266
2,192
1,744
FY2017
FY2018
FY2019
FY2020
0
0
0
0
i
y
t
e
c
o
S
Not less than 1 per cent of pre-tax profits (10)
invested in community programs that contribute
to the quality of life in communities where we
operate and support the achievement of the
UN Sustainable Development Goals
Social investment spend
US$149.6 million(11)
FY2017 (12) US$80.1 million
FY2018
US$77.1 million
FY2019 (13) US$93.5 million
FY2020
US$149.6 million
By FY2022, implement our Indigenous Peoples
Strategy across all our operated assets through
the development of Regional Indigenous
Peoples Plans
Regional Indigenous
Peoples Plans
being implemented across Australia (Reconciliation
Action Plan (RAP)), North and South America
e By FY2022, maintain operational (Scope 1 and
g
n
a
h
C
e
t
a
m
Scope 2) greenhouse gas emissions at or below
FY2017 levels (14) (15) while we continue to grow
our business
i
l
C
Greenhouse gas emissions
8%
above FY2017 baseline. While our annual emissions
are currently higher than FY2017 levels, our
asset-level emissions forecast suggest we are
on track to meet our FY2022 target
FY2018 (16) 17 million tonnes
carbon dioxide equivalent
(Mt CO2-e)
FY2019 (17)
FY2020
15.8 Mt CO2-e
15.8 Mt CO2-e
Zero significant environmental events (9)
FY2020 0
FY2017
FY2018
FY2019
FY2020
0
0
0
0
Reduce FY2022 withdrawal of fresh water
by 15 per cent from FY2017 levels (19)
freshwater withdrawal reduction
from FY2017 baseline
19%
t
n
e
m
n
o
r
i
v
n
E
Adjusted FY2017
baseline (18)
FY2019 freshwater
withdrawal
FY2020 freshwater
withdrawal
156,120 ML
155,570 ML
126,997 ML
By FY2022, improve marine and terrestrial
biodiversity outcomes by developing a framework
to evaluate and verify the benefits of our actions,
in collaboration with others
Progressed framework
development
in collaboration with others. Progress and pilot
work presented in two external forums
Year-on-year progress on
development of framework
to evaluate and verify the
benefits of our actions
(1) FY2018 and FY2019 data includes Continuing and Discontinued operations (Onshore US assets).
(2) FY2019 data includes Discontinued operations (Onshore US assets) to 28 February 2019 and Continuing operations.
(3) The sum of (fatalities + lost-time cases + restricted work cases + medical treatment cases) multiplied by 1 million/actual hours worked by our employees and
contractors. Stated in units of per million hours worked. We adopt the US Government’s Occupational Safety and Health Administration Guidelines for the recording
and reporting of occupational injuries and illnesses.
(4) FY2018 TRIF data includes Continuing and Discontinued operations (Onshore US assets).
(5) FY2019 TRIF data includes Discontinued operations (Onshore US assets) to 28 February 2019 and Continuing operations.
(6) For exposures exceeding our FY2017 baseline occupational exposure limits discounting the use of personal protective equipment, where required. The baseline
exposure profile (as at 30 June 2017) 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.
(7) New FY2017 baseline due to the removal of 98 exposures attributed to the Onshore US assets.
(8) Data excludes Discontinued operations (Onshore US assets).
(9) A significant event resulting from BHP operated activities is one with an actual severity rating of four and above, based on our internal severity rating scale
(tiered from one to five by increasing severity) as defined in our mandatory minimum requirements for risk management.
(10) Our voluntary social investment is calculated as 1 per cent of the average of the previous three years’ pre-tax profit.
(11) Expenditure includes BHP’s equity share for operated and non-operated joint ventures, and comprises cash, administrative costs, including costs to facilitate
the operation of the BHP Foundation.
(12) FY2017 and FY2018 social investment figures includes Discontinued operations (Onshore US assets).
(13) FY2019 social investment figure includes Discontinued operations (Onshore US assets) to 31 October 2018 and Continuing operations.
(14) Comparison 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.
(15) With the use of carbon offsets, as required.
(16) FY2018 GHG data includes Continuing operations and Discontinued operations (Onshore US assets) and has been restated.
(17) FY2019 GHG data includes Discontinued operations (Onshore US assets) to 31 October 2018 and Continuing operations and has been restated.
(18) 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 and exclusion of hypersaline, wastewater, entrainment, supplies from desalination and Discontinued
operations (Onshore US assets) in FY2019 and FY2020.
(19) Where ‘withdrawal’ is defined as water withdrawn and intended for use (in accordance with ‘A Practical Guide to Consistent Water Reporting’, ICMM (2017)).
‘Fresh water’ is defined as waters other than seawater, wastewater from third parties and hypersaline groundwater. 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.
20 BHP Annual Report 2020
1.4.9 Our contribution in FY2020
In FY2020, our total direct economic contribution was
US$37.2 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 33.2 per cent (1). Including
royalties, this increases to 42.2 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 FY2020, we paid US$8.6 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, the construction of the US$3.6 billion South Flank
project resulted in A$4.2 billion in contracts being awarded (including
A$3.2 billion on Western Australian-based work). South Flank reached
a construction workforce of around 3,000 people as the project
moved into its second year of construction in FY2020 and is
expected to create thousands of jobs over the life of the project.
In addition, we reduced our payment terms from 30 days to seven
days for over 1,500 small, local and Indigenous businesses as part
of a program to support communities and regional economies
during the COVID-19 pandemic. The accelerated payment program
delivered over US$80 million more quickly into the hands of our
small business partners. BHP also hired approximately 1,500
contractors on six-month contracts to support its Australian
operations during this difficult time.
Total economic contribution in FY2020
Suppliers (2)
Payments made to our
suppliers for the purchase
of utilities, goods and services
Employees (2)
Employee expenses for salary,
wages and incentives
Shareholders, lenders
and investors
Dividend and
interest payments
Total payments
to governments
US$15.5b
US$3.9b
US$8.6b
Income taxes, royalty-related income
taxes, royalties and other payments
to governments
US$9.1b
Social investment (2) (3)
Contributions and
administrative costs
US$150m
Figures are rounded to the nearest decimal point or the nearest million.
Total economic
contribution
US$37.2b
(1) For more information on Alternative Performance Measures, refer to section 6.1.
(2) Calculated on an accrual basis.
(3) Total social investment includes community contributions and associated administrative costs (including US$1 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.
BHP Annual Report 2020 21
Governance at BHPRemuneration ReportDirectors’ ReportFinancial StatementsAdditional informationShareholder informationStrategic Report1 1.5 Our operating environment
1.5.1 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. 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
The global economy has been dramatically impacted by the
COVID-19 pandemic. Our operating environment is complex
with demand volatility and price uncertainty expected. While the
outlook remains uncertain, within the scenarios that we consider,
our base case has the world economy rebounding in CY2021. There
will, however, be considerable variation at the national level. Even
with this rebound, our base case is for the world economy to be
6 per cent smaller than it would have otherwise been in CY2021.
Society
in flux
Demand
volatlity
Uneven
recovery
Policy
uncertainty
Growth in
population,
wealth
Electrification
of transport
Short
term
Medium
term
Long
term
Price
uncertainty
Opportunity
and risk
Sustainable
productivity
Climate
action
Decarbonisation
of power
Biosphere
stewardship
There remains a significant degree of uncertainty in terms of how
the COVID-19 pandemic will progress and its longer-term effects.
For the time being, we expect this uncertainty will constrain risk
appetite of households and businesses. Even before the pandemic,
action on climate change was expected to grow; new policies
to ‘build back better’ could accelerate this trend in some regions.
Our long-term view of our markets remains positive. Population
growth and rising living standards are expected to drive demand
for energy, metals and fertilisers for decades to come. New
demand centres for our commodities will emerge where the twin
levers of industrialisation and urbanisation are still immature today.
Technology continues to advance with electrification of transport
creating risks (both threats and opportunities) for our portfolio.
Demand for non-ferrous metals has potential upside, but oil
demand could face headwinds. The decarbonisation of power
is another major long-term trend. The move towards a low
carbon economy has the potential to drive significant change.
Environmental concerns will drive increasing diversification of
national energy sources. Biosphere stewardship will be a key
vehicle for creating social value as unsustainable land and water
use and biodiversity loss are a danger to long-run living standards.
Against a backdrop of near-term uncertainty, with long-term
strategic themes intact and accelerating, the value of optionality
is clear. 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 1.5.3). Exploration is inherently
risky (see section 1.5.4) 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.
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 directly. It also indirectly affects us through
countries that supply goods for import to that country.
Many major economies are expected to contract in CY2020,
including the United States, Europe, Japan and India. In contrast,
China has moved from intensive viral suppression to solid
indications of economic recovery. As of August, much of the
developing world was unfortunately still in the escalation phase
of their initial COVID-19 outbreaks.
There remains a significant degree of uncertainty in terms of how
the COVID-19 pandemic will progress, and its longer term effects.
We believe that China and the OECD are likely to return to their
pre COVID-19 trend growth rates from around 2023. Developing
economies outside East Asia may take longer. In our range analysis,
we also factor in the negative impact on China from the downturn
in the rest of the world.
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 FY2020 against
our main local currencies, although volatility has been pronounced.
We are also exposed to exchange rate translation risk in relation
to our foreign currency denominated financial 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 from
2.32 per cent at 30 June 2019 to 0.30 per cent at 30 June 2020.
LIBOR and other benchmark interest rates are expected to be
replaced by alternative risk-free rates by the end of CY2021 as
part of inter-bank offer rate (IBOR) reform. We have established
a project to assess the implications of IBOR reform across the
Group, and to manage and execute the transition from current
to alternative benchmark rates where applicable.
22 BHP Annual Report 2020
1.5.2 Commodity performance overview
Commodity prices
The following table shows the prices for our most significant commodities for the years ended 30 June 2020, 2019 and 2018. 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 1.11.
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)
2020
Closing
2019
Closing
2018
Closing
2020
Average
2019
Average
2018
Average
2020 vs 2019
Average (9)
2.2
41.8
8.0
19.0
19.1
2.7
101.1
116.0
51.2
5.8
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
4.1
51.5
7.2
18.0
22.8
2.6
93.2
143.9
64.5
6.4
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
-50%
-25%
-46%
-43%
-39%
-8%
16%
-30%
-35%
13%
(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 per cent 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 FY2020 on our key financial measures
is set out below.
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)
24
24
163
24
10
1
37
35
233
35
14
1
BHP Annual Report 2020 23
Governance at BHPRemuneration ReportDirectors’ ReportFinancial StatementsAdditional informationShareholder informationStrategic Report1
1.5.3 Exploration
Our exploration program is focused on copper, nickel and conventional petroleum 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. The Petroleum
and Metals teams are partnered together on a Joint Global
Endowment study to explore future growth opportunities and
global, yet-to-find volume through the use of data analytics and
artificial intelligence. The study introduces new technology and
innovation to create a competitive advantage and position BHP
for future access.
During FY2020, our Metals Exploration team continued to explore
the Oak Dam copper discovery of late 2018, while the remainder
of our exploration program was at an earlier stage where we
continued to seek, secure and test concessions in regions such
as Ecuador, Canada, south-western United States, South Australia,
Chile and Peru. Greenfield nickel exploration activities were
initiated in Western Australia and we started to look beyond
Australia for new nickel opportunities.
Our conventional petroleum exploration program progressed
exploration drilling activities in Trinidad and Tobago deepwater,
adding one additional gas discovery in the north and continuing
to progress the exploration potential for oil in the south. Our
exploration portfolio continued to grow and mature through
the addition of Gulf of Mexico leases, appraisal of Trion, issuance
of offshore licences in Barbados and continued assessment
of the Orphan Basin in Eastern Canada.
Exploration in FY2020
Metals (copper, nickel)
The Metals Exploration teams are focused on identifying and
gaining access to new search spaces to test the best targets
capable of delivering large, high-quality, Tier 1 deposits while
maintaining research and technology activities aligned with our
exploration strategy. The field exploration activities are directed
towards Chile, Peru, Ecuador, North America and Australia. These
activities encompass early stage reconnaissance work through
target definition and testing. With the addition of nickel to the
exploration portfolio, our field activities now include Western
Australia, where BHP holds a significant land position, and drill
programs are scheduled to start as soon as we are able to mobilise.
A global assessment of new opportunities is under review.
At Oak Dam in South Australia, the third phase of the drilling
program was completed in the June 2020 quarter, bringing
the total metres drilled to approximately 21,500. The results are
currently being analysed. This follows encouraging results from the
previous drilling phases, which confirmed high-grade mineralised
intercepts of copper, with associated gold, uranium and silver.
We continued to review other jurisdictions and opportunities to
partner with third parties to counter the increasing exploration
maturity of our existing geographies. During FY2020, BHP acquired
an additional 3.5 per cent and now holds 13.6 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 an
earn-in and joint venture agreement with Luminex; both in Ecuador.
We are maintaining our 5 per cent interest in Midland Exploration
Inc., a Canadian junior company with interests in copper projects
in northern Québec in Canada. In Mexico, our Metals Exploration
team continued the financial agreement with Riverside Resources,
which enables BHP to access new search spaces and early stage
exploration opportunities. In Australia, we agreed to acquire the
Honeymoon Well development project and a 50 per cent interest
in the Albion Downs North and Jericho exploration joint ventures
from MPI Nickel Pty Ltd, a wholly owned subsidiary of Norilsk Nickel
Australian Holdings BV.
Conventional petroleum
In FY2020, Petroleum continued to add to and mature the
exploration potential of our portfolio.
In Mexico, we drilled the Trion 3-DEL appraisal well in the
September 2019 quarter. We are encouraged by the preliminary
results, with the well encountering oil in the reservoirs up dip from
all previous well intersections. Evaluation and analysis of the Trion
project is ongoing and no further appraisal wells are anticipated.
In Trinidad and Tobago, we drilled two additional exploration
wells, which completed the exploration program on our northern
licences. The Boom-1 well was spud in August 2019 and
encountered hydrocarbons; evaluation and analysis is ongoing.
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
Western Australia
South Australia
Victoria
Copper exploration regions
Petroleum exploration regions
Nickel exploration regions
24 BHP Annual Report 2020
Conventional petroleum exploration and appraisal
Petroleum exploration expenditure for FY2020 was US$564 million,
of which US$394 million was expensed. Expenditure on petroleum
exploration over the last three financial years is set out below.
Year ended 30 June
Conventional
petroleum exploration
2020
US$M
2019
US$M
2018
US$M
564
685
709
Our petroleum exploration program had positive results in FY2020.
We are pursuing high-quality plays in our four priority basins and
a US$450 million exploration program is planned for FY2021 as we
progress testing of our future growth opportunities and evaluate
potential new basins for future entries.
For more information on conventional petroleum exploration,
refer to section 1.11.1.
Exploration expense
Exploration expense represents that portion of exploration
expenditure that is not capitalised in accordance with our
accounting policies, as set out in note 11 ‘Property, plant and
equipment’ in section 5.
Exploration expense for each segment over the last three financial
years is set out below.
Year ended 30 June
Exploration expense
Petroleum (5)
Copper
Iron Ore
Coal
Group and unallocated items (6)
Total Group
2020
US$M
2019
US$M
2018
US$M
394
54
47
9
13
517
409
62
41
15
10
537
592
53
44
21
7
717
The Carnival-1 well was spud in September 2019 and was a dry
hole. Evaluation and development planning studies in relation to
these northern licences are ongoing. Exploration potential in the
southern blocks continues to progress with potential for a deep oil
exploration test in FY2021.
In the US Gulf of Mexico, we expanded our acreage positions
through lease sale participation. In FY2020, the regulator awarded
BHP two blocks (1) in Green Canyon, central Gulf of Mexico and 19
blocks (2) in the western Gulf of Mexico. In July 2020, the regulator
awarded BHP two blocks (3) in Green Canyon, central Gulf of Mexico
and three blocks (4) in the western Gulf of Mexico. Additionally in
the western US Gulf of Mexico, the final processed data from the
Ocean Bottom Node seismic acquisition was received in April 2020
and technical work is ongoing to inform the exploration program.
We continue to advance evaluation of options to optimise value
at Wildling through progressive development of the discovery.
Different options for the development concept are under review,
including a tieback to the Shenzi facility.
In Barbados, the regulator has approved offshore exploration
licences for the Carlisle Bay and Bimshire blocks, allowing BHP
to commence the first three-year licence phase.
In Canada, we continue to progress our assessment of the Orphan
Basin in Eastern Canada where we are in year two of our six-year
exploration licences. Potential exploration wells are anticipated in
FY2022 pending approval of the environmental impact assessment
and other regulatory approvals.
In Australia, BHP participated in a multi-client 3D seismic acquisition
in the Gippsland Basin. The data will be delivered during FY2021
through FY2022 and will inform us of the prospectivity in this area.
For more information on conventional petroleum exploration,
refer to section 1.11.1.
Exploration expenditure
Our resource assessment exploration expenditure increased by
5 per cent in FY2020 to US$132 million, while our greenfield
expenditure decreased by 29 per cent to US$44 million.
Expenditure on resources assessment and greenfield exploration
over the last three financial years is set out below.
Year ended 30 June
Greenfield exploration
Resources assessment
Total metals exploration
and assessment
2020
US$M
44
132
176
2019
US$M
62
126
188
2018
US$M
53
112
165
(1) Leases were awarded in blocks: GC124 and GC168.
(2) Leases were awarded in blocks: GB721, GB630, GB574, GB575, GB619, GB676, GB677, EB655, EB656, EB701, GB762, GB805, GB806, GB851, GB852, GB895, GB672,
GB716 and GB760.
(3) Leases were awarded in blocks: GC80 and GC123.
(4) Leases were awarded in blocks: AC36, AC80 and AC81.
(5) Includes US$ nil (FY2019: US$21 million; FY2018: US$76 million) exploration expense previously capitalised, written off as impaired.
(6) Group and unallocated items includes functions, other unallocated operations including Potash, Nickel West and legacy assets (previously disclosed as closed mines
in the Petroleum reportable segment), and consolidation adjustments.
BHP Annual Report 2020 25
Governance at BHPRemuneration ReportDirectors’ ReportFinancial StatementsAdditional informationShareholder informationStrategic Report1 1.5.4 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 effective risk
management requires 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.
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
Risk strategy
Group Risk Architecture
The Group Risk Architecture is a tool to identify, analyse, monitor and report risk, which provides a platform to understand and manage
the risks to which BHP is exposed. It currently comprises 12 Group Risk Categories, which cover a number of Group Risks. Risks in BHP’s
risk 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) and, under the Group Risk of mental and physical health, we have
identified risks to our people associated with the impacts of the COVID-19 pandemic on our assets and offices.
The Group Risk Architecture (as at 30 June 2020) is outlined in the following diagram. 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 changes over time
to reflect our strategy, changing activities, organisational accountabilities and consideration of the external context. For example, Group
Risks may be added, removed, renamed, merged or moved between Group Risk Categories if there is a more appropriate place for them
in our continuously evolving Group Risk Architecture.
In FY2020, we added two new Group Risk Categories – Planning and technical, and Allocation of capital and group planning – which
include new Group Risks, as well as Group Risks moved from other categories. The new Group Risks were created to provide additional
visibility and oversight of some of the Group’s most significant risks and better recognise the importance of managing certain strategic
risks, including those relating to business planning, cash prioritisation and cash flow forecasts. In addition, changes were made to existing
Group Risks to further clarify and streamline the Group Risk Architecture. To date, the COVID-19 pandemic has not required any changes
to be made to the Group Risk Architecture, which is sufficiently broad to accommodate risks associated with the pandemic.
26 BHP Annual Report 2020
Group Risk
Categories
Strategy
Strategy
formation
Commodities
exposure
Assets
and growth
options
Growth and
development
Political
stability and
new country
entry
Expansions,
organic growth
and major
projects
Group Risks
Production and
operations
Operational
productivity
Mine to port
infrastructure
Third party
performance
Asset
integrity
Transformational
change
Commercial
Planning and
technical
Procurement
and inbound
supply chain
management
Exploration
Maritime
Commodity
price
Sales
security and
concentration
Counterparty
risk
Resource
development
Reserve
reporting
Rehabilitation
and closure
Tailings
storage
facilities
Geotechnical
stability
People and
culture
Attract, retain
and engage
capability
Diversity,
inclusion
and equal
opportunity
Industrial
and employee
relations
Labour
relations
Health and
safety
Aviation
Process safety/
hazardous
materials
containment ▲
Non-process
fire and
explosion
Environment,
climate change
and community
Biodiversity
loss and land
use impacts
Human
rights
Climate
change
Occupational
safety
Contractor
management
Occupational
health
exposures
Physical
security and
company
crisis
Community
Mental and
physical
health
Water
interactions
▲
▲
Technology,
innovation and
systems
IT/OT service
management
Cybersecurity
Automation
and technology
innovation
Data
protection
Financial
management
Liquidity
Tax
Financial
control and
reporting
Balance
sheet
Allocation
of capital and
group planning
Capital
allocation
Corporate
planning
Licence
to invest
Legal
compliance and
stakeholder
management
Geopolitics
and
stakeholder
relations
Ethics and
compliance
Legal and
regulatory
Principal risks
The allocation of our principal risks to the Group Risk
Architecture is shown in a darker shade of blue. Our principal
risks are described further in the Risk factors section. These
include risks that could result in events or circumstances that
might threaten our business model, future performance,
solvency or liquidity and reputation.
In identifying our principal risks, we have considered the
potential impact and probability of the related events or
circumstances, and the timescale over which they may occur.
Changes to our principal risks in FY2020:
New
▲ Renamed
Changes are described further in the Risk factors section.
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. When a new Group Risk Category is
introduced, the Board is asked to approve an updated Risk Appetite
Statement that includes a new qualitative statement for that new
Category. The Risk Appetite Statement provides guidance to
management on the amount and type of risk that is acceptable,
and key risk indicators are set by management to help monitor
performance against our risk appetite.
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 financial and
non-financial 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 upper or lower 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. 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.
Strategic business decisions
Strategic business decisions and the pursuit of our strategic
objectives can inform, create or affect risks to which BHP is
exposed. These risks may 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
risk appetite.
Our focus when managing risks associated with strategic business
decisions 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.
BHP Annual Report 2020 27
Governance at BHPRemuneration ReportDirectors’ ReportFinancial StatementsAdditional informationShareholder informationStrategic Report1 1.5.4 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
Community
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
Management across the assets
and functions who identify
risk and implement controls
Second line of defence
Management in the functions that
define Group-wide minimum standards
and provide subject matter expertise
to support, delivering insight and
oversight to manage risk
Third line of defence
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.
of performance that is outside upper or lower limits to indicate
whether management is taking sufficient or excessive risk, enabling
the Board to hold management to account where necessary.
In FY2019, we introduced an additional second line led review of
the Group’s most significant risks (such as tailings storage facility
failure) to provide greater oversight and assurance of, and identify
any opportunities to improve, 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 RAC and Sustainability Committee. Findings and
recommendations are considered by management and the Board
and may inform strategic decisions on whether to accept, reduce
or eliminate risks to align with the Group’s risk appetite, and may be
used to develop remediation plans, such as to improve risk analysis
or control definition.
Additional information on risk management and internal
controls is shared between the Board, the RAC and, for HSEC
matters, the Sustainability Committee and also provided by the
Business Risk and Audit Committees (covering each business
region), management committees, our Internal Audit and Advisory
team and our External Auditor. For more information, refer to
section 2. Our approach to risk reporting is outlined in the Risk
intelligence section.
For example, for a loss of containment risk within the Group Risk
of process safety/hazardous materials containment, 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 audits the effectiveness of the standards and their application
as the third line of defence.
BHP Board and Committees
The Board reviews and considers BHP’s risk profile, covering
operational, strategic and emerging risks, based on the material risk
report. The report includes an overview of the risk profile, summary
of material changes to the profile, performance against KRIs,
summaries of our priority Group Risks and, with the introduction
of our enterprise-level watch list in FY2020 (as described in the
Emerging risk section), updates on emerging risk themes.
The contents of this report are further described in the diagram
in the Risk intelligence section.
The broad range of skills, experience and knowledge of the Board
assists in providing a diverse view on risk management. The Risk
and Audit Committee (RAC) and Sustainability Committee assist
the Board with the oversight of risk management. For more
information, refer to sections 2.7, 2.10 and 2.11.
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 that has been
determined by the Board. Performance against risk appetite is
monitored and reported to the RAC and the Board, as well as the
Sustainability Committee for HSEC matters. This includes reporting
28 BHP Annual Report 2020
Risk process
Our Risk Framework requires identification and management
of risks to be embedded in business activities through the
following process:
Risk identification
New and emerging risks are identified and each is assigned an
owner, or accountable individual, in the part of our business
where the risk is located.
Risk assessments
Risks are assessed using an appropriate and internationally-
recognised technique to determine their potential impacts and
likelihood, prioritise them and inform risk treatment options.
Risk treatment
Controls are implemented to prevent, reduce or mitigate
downside risks and increase the likelihood of opportunities
being realised.
Monitoring and review
Risks and controls are reviewed periodically and on an ad hoc
basis (including where there are high potential events or
changes in the external environment, such as the COVID-19
pandemic) to evaluate performance.
Our Risk Framework includes requirements and guidance on the
tools and process to manage all risk types (current 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 a current risk is determined by estimating the
maximum foreseeable loss (MFL) if that risk was to materialise.
The MFL is not an estimate of the probable impact to BHP if the risk
was to materialise. Instead, the MFL is the estimated impact to BHP
in a worst case scenario without regard to probability and assuming
that all risk controls, including insurance and hedging contracts,
are ineffective. For example, when calculating the number of
fatalities to assess MFL in the event of an offshore well blow out,
we assume the personnel capacity of the drilling rig even though
there may be fewer people on it at the time of an incident
and despite controls such as emergency response plans
and equipment in place that are designed to reduce the
number of fatalities.
Our focus for current risks is to prevent their occurrence or
minimise their impact should they occur, but we also consider
how to maximise possible benefits that might be associated with
strategic risks (as described in the Risk strategy section). Current
material risks are required to be evaluated once a year at a
minimum to determine whether our exposure to the risk is within
our risk appetite.
Emerging risk
Emerging risks are newly developing or changing risks that are
highly uncertain and difficult to quantify. They are generally driven
by external influences and often cannot be prevented, although
they can be prepared for. They also tend to be interconnected
and often require solutions that draw upon expertise from across
our organisation.
In FY2020, we introduced an enterprise-level watch list of emerging
themes that provides an evolving view of the changing external
environment and how it might have an impact on our business.
These themes represent areas of risk where a shift in direction could
have a significant impact on our operating environment, with the
potential to affect our strategy or business continuity.
We maintain the watch list and use it to support the identification
and management of emerging risks through our normal business
activities and planning processes under our Risk Framework,
as well as to inform and test our corporate strategy.
Once identified, our focus for emerging risks is on structured
monitoring of the external environment, advocacy efforts to
reduce the likelihood of the downside risks manifesting and,
where appropriate, considering emerging risks (including
opportunities) as part of our planning and strategy setting and
review process. We also apply contingency controls, such as
response plans, to reduce the impact should emerging risks
that are outside our appetite occur. These controls increase
the resilience of BHP to shocks from the external environment.
Emerging risks are required to be evaluated once a year at a
minimum to determine whether the risks remain emerging
and if our exposure is within our risk appetite.
BHP Annual Report 2020 29
Governance at BHPRemuneration ReportDirectors’ ReportFinancial StatementsAdditional informationShareholder informationStrategic Report1 1.5.4 Risk management continued
Risk intelligence
The 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 its robust assessment of
BHP’s emerging and 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 is 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
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 Risk Framework
• Risk profile overview
• Material changes in the risk profile
• Key risk indicators
• Chief Risk Officer opinion (or Head
of Risk Business Partners opinion for
Business Risk and Audit Committee)
• Priority Group Risk summaries
• Update on emerging risk themes
Robust risk assessment and viability statement
The Board has carried out a robust assessment of BHP’s emerging
and principal risks, including those that could result in events or
circumstances that might threaten BHP’s business model, future
performance, solvency or liquidity and reputation.
The Board has assessed the prospects of BHP over the next three
years, taking into account our current position and principal risks.
The Board believes 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. As
highlighted in the Risk factors section, there is currently increased
uncertainty in the external environment, including due to
heightened political and policy uncertainty, growing civil unrest
in some countries in which we operate and market volatility and
geopolitical tensions resulting from the COVID-19 pandemic.
This may increase the risk of commodity price and exchange rate
volatility and also affect the longer-term supply, demand and price
of our commodities. These factors result 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 flexibility in BHP’s capital and exploration expenditure
programs under the CAF
• the reserve life of BHP’s minerals assets and the
reserves-to-production life of our oil and gas assets
• the Group-level risk profile and the mitigating actions available
should particular risks materialise
• any actual and further anticipated impacts of the COVID-19
pandemic on BHP’s two-year budget and five-year plan
The Board’s assessment also took into account additional stress
testing of the balance sheet against a number of scenarios that
model three hypothetical events occurring individually and
together in various combinations over the three-year viability
period. These hypothetical events were:
1. an offshore well blow out involving a drilling rig that we operate
2. simultaneous, short-term production outages at some of our
most significant assets
3. a low commodity price environment in FY2021 and FY2022,
followed by a gradual recovery by FY2025
30 BHP Annual Report 2020
A number of our principal risks may have impacts that are
embedded in these scenarios. For example, operational risks
associated with occupational and process safety, asset integrity,
tailings storage facilities and third party performance may have
comparable impacts to an offshore well blow out. Similarly, risks
associated with community, human rights and climate change
(such as civil unrest or a natural disaster, including the physical
impacts of climate change or a pandemic) may result in production
outages at one or more of our assets, while risks associated with
commodity prices, geopolitics and stakeholder relations may
have impacts that result in a sustained low commodity price
environment (for example, an economic slowdown may be caused
by geopolitical events or responses of governments and other
stakeholders to a pandemic). For further information on our
principal risks, see the Risk factors section.
Stress testing demonstrated that the Group’s balance sheet was
put under the greatest stress by the least likely scenario that all
three hypothetical events occur together. In such circumstances,
the Board considered that the Group would have a number of
mitigating actions available to it, including deferral of discretionary
capital expenditure, issuance of debt and divestment of certain
assets. A further level of robustness is added given BHP would
also have access to US$5.5 billion of credit through its revolving
credit facility.
The Board was also mindful of key risk indicator performance,
regular balance sheet stress testing against low commodity prices,
and the assessment of our portfolio against scenarios as part of
BHP’s strategy and corporate planning processes to help identify
key uncertainties facing the global natural resources sector
(including in relation to climate change, the COVID-19 pandemic
and commodity price volatility).
In making this viability statement, the Board has 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 monthly balance
sheet stress testing.
Taking account of these matters (including the assumptions) and
our current position and principal risks, the Board has a reasonable
expectation that BHP will be able to continue in operation and meet
its liabilities as they fall due over the next three years.
Risk factors
This section highlights our principal risks, as illustrated in the
Group Risk Architecture diagram in the Risk strategy section. Our
principal risks have changed since FY2019, largely due to changes in
our external environment and the continued evolution of our Group
Risk Architecture. These changes can be summarised as follows.
Risks associated with tailings storage facilities, geotechnical
stability, non-process fire and explosion, and sales security and
concentration have been identified as principal risks to provide
additional visibility of some of the Group’s most significant risks
and to better recognise the importance of managing certain
strategic risks. Tailings storage facilities risks are discussed in this
section with asset integrity. Geotechnical failures and underground
fires or explosions may pose significant threats to the health and
safety of our people and are therefore discussed with occupational
and process safety. Strategic risks associated with gaining and
maintaining access to the global markets that we rely upon
to trade our commodities are discussed with geopolitics and
stakeholder relations.
The scope of two of our principal risks was expanded in FY2020
and they have been removed from the Group Risk Architecture
diagram. Returns sustainability risks are now captured by assets
and growth options, which better supports and reinforces revisions
made to our purpose and strategy in FY2020. Risks associated with
geopolitics and macroeconomics now fall within geopolitics and
stakeholder relations in order to focus on broader macroeconomic
and geopolitical trends that may affect BHP and our stakeholders.
The names of some of our principal risks have also changed in
order to better represent associated risks, although their scope
remains the same.
Our principal risks are further described in the risk factors listed
on the following pages. Each of these 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. While these represent our
most significant risks, BHP is also exposed to other risks that are
important to us (for example, health, safety, environmental,
community, financial, reputational, legal or other risks) that
are not described in the risk factors.
We have considered the implications of the COVID-19 pandemic
on our business, including through event tree analysis to assess
its potential medium- to longer-term cascading impacts on the
Group’s risk profile and our enterprise-level watch list of emerging
themes. We will continue to assess the implications of the
pandemic and have referenced impacts to our principal risks
in the following risk factors, where relevant. To the extent that
our business is adversely impacted by the COVID-19 pandemic,
any such impacts may also have the effect of heightening some
of the risks listed on the following pages.
BHP Annual Report 2020 31
Governance at BHPRemuneration ReportDirectors’ ReportFinancial StatementsAdditional informationShareholder informationStrategic Report1 1.5.4 Risk management continued
Asset integrity and tailings storage facilities
Risks associated with operational integrity, tailings storage facilities 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. We have onshore and offshore assets in a variety of geographic locations, all of which exist in and around broader communities and
environments. A tailings dam failure, other serious incidents (for example, structural failure of onshore or offshore production infrastructure or a
vessel incident through our supply chain, including groundings, collisions and hydrocarbon release) 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 reputation, cash flow, operations
or the longevity of our assets.
While we seek to design and implement the right strategy and processes to maintain the operational integrity and performance of our assets, we may
not always be effective in doing so. The impacts of any serious incidents that occur may also be amplified if we fail to respond in an appropriate manner.
Threats
Failure to maintain the operational integrity and performance of our
assets may reduce their value and could lead to or exacerbate
operational incidents, such as structural failure of production
infrastructure, dam failure or a vessel incident. Such failures and/or
operational incidents could result in:
• multiple injuries and fatalities
• extensive community disruption, including impacts to personal safety,
livelihood and quality of life
• short- and long-term health and safety risks to our people or the
community (for example, exposure to diesel particulate matter, silica
or coal mine dust from our mining operations may result in acute
and/or chronic illness, such as coal mine dust lung disease)
• environmental damage (for example, as a result of a dam failure
releasing tailings, a hydrocarbon release or a vessel incident through
our supply chain that affects air quality, biodiversity, water resources
or environmentally sensitive areas)
• loss of licences, permits or necessary approvals to operate assets
• other adverse impacts on the communities in which we operate,
including loss of community infrastructure and services, such as
power, water or transport, and damage to cultural heritage sites
• 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 an owned, chartered or third
party vessel incident, including at Port Hedland in Australia where our
operations rely on a channel used by vessels unrelated to BHP)
• significant repair, recovery or reparation costs
• interruption in production or other critical activities and loss of revenue
from operations that are directly or indirectly affected by an incident
(for example, a loss of power supply or wider shutdown of operations
pending safety reviews)
• litigation (including class actions), fines or investigations by authorities,
and reputational damage
• loss of workforce confidence
• impacts on our ability to access capital (for example, an operational
incident may affect our ability to retain the confidence of shareholders
and other stakeholders, including financial institutions)
A failure to maintain the operational integrity and performance of our
assets may adversely impact asset value, including due to production
shortfalls, loss of development options or a delay in asset development
(for example, structural failure of critical ship loading infrastructure, such
as at our iron ore operations in Port Hedland, could result in a production
shortfall). Such failures 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 or
national crises. The COVID-19 pandemic has resulted in controls being
implemented by BHP and third parties that may affect the performance
of our assets. For example, workplace entry and travel restrictions may
result in the delay of key personnel or external consultants accessing our
sites to undertake inspections or other activities, potentially resulting in
unidentified asset integrity issues or production shortfalls.
Our risk financing approach is, where appropriate, to self-insure for
certain risks, including property damage and business interruption,
sabotage and terrorism, marine cargo reinsurance, construction,
public liability and applicable employee benefits, or to not purchase
external insurance for certain risks. Business continuity plans may
not provide protection for all costs that arise from such events.
Where external insurance is purchased, third party claims may exceed
the limit of liability of policies or our insurers may become insolvent or
otherwise unable to make payments under our policies. Any uninsured
or underinsured losses could impact our financial position or the
financial results of our assets.
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 storage facilities, maintenance, security, crisis and
emergency management, and event and investigation management
• planning, designing, constructing, maintaining and monitoring mines,
dams and equipment to avoid incidents
• maintaining and improving production infrastructure and equipment
to protect our people and assets (for example, controls to maintain the
structural integrity of dams)
• inspections and reviews (for example, independent dam safety
reviews to assess the management of significant tailings storage
facilities, both active and inactive as described in section 1.7.10)
• routine reviews of and revisions to management plans and manuals
(for example, to test and update for alignment with operating
specifications and industry dam codes)
FY2020 insights
• defining key accountable roles, and providing training and
qualifications for staff and contractors
• maintaining local availability of critical skilled personnel within BHP,
where possible, to increase operational resilience by ensuring the
continuity of critical inspections and other activities (for example, this
has mitigated the impacts of workplace entry and travel restrictions
imposed on our assets in response to the COVID-19 pandemic)
• maintaining evacuation routes, supporting equipment, emergency
preparedness and response plans, and business continuity plans
• collaborating with industry peers and relevant organisations on
minimum standards (such as a minimum maritime standard for bulk
ore carriers) and improvement of third party risk management
practices to reduce exposure to external events, as well as identifying
opportunities to improve our own risk management practices
For more information on our approach to risks associated with tailings
storage facilities, see section 1.7.10.
The Group’s exposure to asset integrity and tailings storage facilities risks is expected to remain relatively stable. While the COVID-19 pandemic has
not had significant impacts during FY2020 on asset integrity and tailings storage facilities risks, management of risk at each of our operated onshore
and offshore assets will continue to be reviewed to ensure we maintain an effective control environment for the duration of the COVID-19 pandemic
and safely transition to post-COVID-19 operating conditions when it is appropriate to do so.
32 BHP Annual Report 2020
Occupational and process safety (including geotechnical failures and underground fires or explosions)
Risks associated with the safety of BHP employees and contractors in performing their work and the containment of hazardous materials.
Why is this important to BHP?
Our sites, offices and other places where our people are located in connection with the performance of their work may be subject to occupational
safety and process safety/hazardous materials containment incidents. These may include fires and explosions (above and underground), road,
vehicle, mobile equipment, port, shipping, railroad, aircraft or airport incidents (including where these services are contracted to third parties),
falls from height, lifting or crane incidents, food or water safety incidents, loss of power supply, environmental pollution, geotechnical hazards,
mechanical equipment failures, mine-related accidents, personal conveyance equipment failures or loss of primary containment of hazardous
materials. Our oil and gas operations may also experience a loss of well control involving an uncontrolled flow of well fluids or formation fluids from
the wellbore to the surface, including at our offshore operated and non-operated assets. Our people may come into contact with electricity, work in
confined spaces, be exposed to conditions where air quality is unsafe, or work with or in close proximity to hazardous materials, such as flammable,
explosive, toxic, corrosive or molten materials or other materials at high pressure or temperature, which may lead to or exacerbate operational
accidents. Exposure to some substances, such as diesel particulate matter, may also pose short- and long-term health and safety risks to our people.
In addition, the mental and physical health of our people may be affected by events that take place in connection with the performance of their work,
including threats to their physical security, workplace sexual harassment and assault or other events or circumstances, such as controls implemented
in response to a pandemic.
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 often involves helicopters, aeroplanes or other high occupancy vehicles. We have port facilities
and four underground mines, including underground coal and nickel mines, and the nature of the activities performed at these facilities and mines
can involve safety hazards, such as geotechnical failures, underground fires and/or underground explosions.
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 tectonically seismic (earthquake- and tsunami-prone) zones.
Threats
Occupational safety and process safety/hazardous materials
containment incidents (such as a geotechnical failure, an underground
fire or explosion in one of our mines or a well blow out during operated
or non-operated drilling activities) may lead to serious injuries, loss of life
or livelihood or quality of life to BHP employees, contractors or members
of the community. In addition, these incidents may result in:
• interruption to production or other activities critical to our business
• disruptions to our supply chain
• failure of processing equipment or support infrastructure (for example,
relating to power, water, transport or technology)
• environmental damage (for example, due to the uncontrolled release
of hydrocarbons following an offshore well blow out)
• increased costs or other commercial impacts
• litigation (including class actions), fines or investigations by authorities
and reputational damage
• loss of workforce confidence
• short- and long-term health and safety risks to members of the
community, and adverse impacts on local communities’ economic
position or human rights
Our response to occupational safety and process safety/hazardous
materials containment incidents, such as our emergency response or
engagement with affected stakeholders, may not be adequate and could
result in impacts being amplified.
The COVID-19 pandemic has created challenges for health and safety
systems across our operations, such as the implementation of social
distancing measures at our sites. A failure to adequately respond to
these challenges could affect our ability to operate in specific
jurisdictions and may result in health and safety impacts, legal action
or reputational impacts. In addition, the pandemic may amplify impacts
associated with the occupational safety and process safety/hazardous
materials containment risks described above. For example, the ability
of emergency services to respond to operational incidents at our sites
(including those described above) may be affected by diversion of
resources by local or national governments or additional safeguards that
have been implemented to protect emergency responders.
Our risk financing approach is to self-insure or not purchase external
insurance for certain risks. For more information, refer to the Asset
integrity and tailings storage facilities risk factor.
Management
We employ a number of measures designed to detect, eliminate, prevent
and mitigate occupational safety and process safety/hazardous materials
containment incidents, including:
• BHP’s standards on aviation, health, safety, the environment and
community, crisis and emergency management
• 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 (in compliance with our global
geotechnical standards), wells and equipment to prevent incidents
(including slope design and underground support systems)
• inspection, maintenance and improvements of infrastructure and
critical equipment to protect our people and assets (for example,
cyclone resilience, pressure vessels designed to contain fluids or gas
at pressure and emergency response equipment)
• implementing controls at our operated assets to comply with
applicable local laws and regulations on safety (for example, relating
to the safe storage, handling and use of explosives, fuels and other
flammable substances)
FY2020 insights
• training and qualifications for staff and contractors (including drill rig
contractors and aircraft operators)
• specifying minimum technical specifications for aircraft
• influencing joint venture partners to align with internationally
recognised standards
• monitoring adverse weather conditions, ground stability (based on
early alert systems) 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
• applying our experience in safety frameworks to the issue of sexual
harassment and assault in order to prevent and respond appropriately
to such events, and create an inclusive workplace
• implementation of a global COVID-19 control framework across BHP,
which includes health and hygiene controls for our workforce,
partners and the communities in which we operate
The Group’s occupational safety performance continued to improve in FY2020 compared to FY2019, with higher hazard identification and lower high
potential injuries, and the identification of process safety/hazardous material containment incidents across our business also improved over this
period. Exposure to these risks is expected to remain relatively stable in FY2021. Our response to the COVID-19 pandemic is intended to support the
safety of our workforce and maintain the confidence of key stakeholders (such as local and national governments and the communities in which we
operate), and to enable the continuation of BHP’s operations in a safe and sustainable manner. Notwithstanding our efforts and the efforts of local
and national governments where we operate, it is possible that the COVID-19 pandemic may continue to impact the communities where our assets
are located, which may jeopardise the health, safety and wellbeing of our workforce.
BHP Annual Report 2020 33
Governance at BHPRemuneration ReportDirectors’ ReportFinancial StatementsAdditional informationShareholder informationStrategic Report1 1.5.4 Risk management continued
Geopolitics and stakeholder relations (including access to markets)
Risks associated with geopolitical changes and government actions that affect the macroeconomic outlook, commodity demand and supply and/
or impact our ability to access resources, markets and the operational or other inputs needed to realise our strategy; as well as relationships with
key stakeholders whose support is needed to realise our strategy and purpose.
Why is this important to BHP?
Geopolitical developments and changes in our relationships with key stakeholders (such as investors, governments, employees, customers and
suppliers) have the potential to cause a wide range of impacts in locations where we operate or may wish to operate, or where our customers and
suppliers are located. In addition, we may be affected by changes to bilateral relationships, the frameworks and global norms that govern international
trade, and other geopolitical developments (such as multilateral agreements on climate change and freedom of navigation). This includes acute
shocks (such as civil unrest or sanctions) and chronic stresses (such as political or business disputes and other forms of conflict, including military
conflict) that may pose longer-term threats to our business.
Disruptions or unanticipated changes of the nature described above may affect our ability to sell our commodities for optimum value or access inputs
required for the effective pursuit of our strategy, including access to markets, resources, technology, talent and capital. For example, our mining
operations in Australia rely on equipment, consumables (such as tyres) and specialised fabricated parts for ongoing operations, expansion and
development. We need to maintain access to international markets to source these items. Changes in the external environment (such as increased
protectionism, changes in stakeholder expectations regarding our role in society, or requirements to reduce emissions) may also impact our ability to
realise our strategy as competition for resources grows, existing reserves are depleted and supply sources become increasingly expensive to develop.
Threats
Unilateral action by, or changes in relations between, countries in which
we operate, may consider operating or where our customers or suppliers
operate, and such countries’ approach to multilateralism, trade
protectionism and political uncertainty, can impact our ability to access
resources, markets, technology, talent and capital, shape the external
environment, and adversely affect our financial performance. For instance:
co-ordination (such as climate change, trade agreements, tax
regulation, freedom of navigation and technology regulation),
as well as raise questions on the efficacy of and trust in international
institutions, including those that underpin international trade.
These types of changes may cause restrictions or impose costs
on our business, and may inhibit our future opportunities
• the challenging global political and economic conditions arising from
the impact of the COVID-19 pandemic, including the relative damage
to national economies and the speed at which they recover from the
effects of the pandemic, may exacerbate existing tensions between
countries and introduce a high degree of uncertainty in domestic and
international policy settings. These conditions, as well as protectionism,
interventionist industrial policy and restrictive trade policies (such as
tariffs, sanctions or other measures that amount to import restrictions
on our products), may adversely affect our ability to trade and impact
demand for our products, as well as impact our access to resources,
markets, technology, talent and capital
• our ability to obtain and retain licences to explore or develop resources
or access markets for sales or supply may be inhibited if there are
tensions between a country where we operate or sell our products
and other countries with which we are connected. Such tensions may
result in trade remedies (such as punitive tariffs or quotas on inputs
or outputs), rescission of licences, nationalisation of assets or
limitations on markets or customer access that could affect our
financial performance and reputation
• our operations may be disrupted or our access to customers and
suppliers and their facilities may be restricted through disruptions to
shipping lanes, ports, land logistics or other facilities as a result of civil
unrest, conflicts, embargoes or other measures
• geopolitical events, such as a shift in the relationship between the
United States and China or Australia and China, may affect the supply,
demand and price of our commodities and therefore our financial
performance. Shifts in great power relations may also introduce greater
uncertainty with respect to issues requiring global
• evolving government responses to the COVID-19 pandemic may
create challenges for us. For example, government responses to the
pandemic have varied significantly across the globe and have resulted
in and may continue to result in restrictions on our operations,
including mandatory lockdowns or self-imposed temporary
suspensions at our mines to allow effective systems to be
implemented to meet government requirements, such as the
temporary suspension of operations at Cerrejón in the June 2020
quarter. There may also be impacts on associated activities and the
broader supply chain (such as measures affecting suppliers, essential
services and transport of goods and our commodities) that could
affect production or our financial performance
A failure to meet the expectations of or maintain strong relationships with
key stakeholders (including investors, governments, employees, suppliers
and customers) whose support is needed to realise our strategy and
purpose could negatively affect our business. Such failures could damage
our reputation, our social value proposition and/or negatively affect our
ability to operate our assets and sell our products, which may adversely
impact financial performance. For example, not meeting growing societal
expectations of corporations to deliver value to all stakeholders can
damage our reputation and impact our ability to operate in jurisdictions
where we have a presence or to enter new jurisdictions. Growing societal
and government expectations, including in relation to climate change,
and their effect on our business may also be influenced by the impacts
of the COVID-19 pandemic (for example, if corporations such as BHP
are expected to play a larger role in the recovery of local and national
economies than we anticipate or if governments adjust climate change
policy to take into account economic recovery).
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 actively monitor geopolitical and macroeconomic developments and
trends, including through our enterprise-level watch list of emerging
themes that provides an evolving view of the changing external
environment (see Emerging risk section for further information). We also
regularly assess our ability to access markets, resources, technology,
talent and capital, as well as monitor the ongoing political and economic
landscape required to maintain trade and access for the effective pursuit
of our strategy. This enables an understanding of potential impacts
on our business and the identification of mitigating actions.
In addition, we monitor the sociopolitical environment in which we
operate and the stakeholders that influence that environment in order to
prioritise and manage the threats and opportunities that could have the
greatest impacts on our business and our social value proposition. We
also engage regularly and seek to maintain strong relationships with
governments and other key stakeholders to understand, respond to and
manage any potential impacts from changes to policy that could affect
us, such as trade or resource policies, or evolving expectations of BHP.
FY2020 insights
Our FY2019 Annual Report anticipated that the Group’s exposure to risks associated with geopolitics and macroeconomics would increase in the
short-term due to heightened political and policy uncertainty. This trend has accelerated due to changes in relationships and increased strategic
competition at an international level (for example, between the United States and China, and Australia and China), a decline in multilateralism,
growing civil unrest in some countries in which we operate (as further described in the Community and human rights risk factor), and market
volatility and geopolitical tensions resulting from the COVID-19 pandemic. Our influence over most of these aspects of our external environment is
limited and the Group’s exposure to the risks described above may continue to increase in the short-term.
On stakeholder relations, we anticipate risks associated with changing expectations of stakeholders related to the role of corporations in society are
likely to increase in the short-term, as governments and societies continue to deal with the COVID-19 pandemic and begin to realise the adjustments
required for the recovery of national economies.
34 BHP Annual Report 2020
Capital allocation, and assets and growth options
Risks associated with the allocation of capital through annual planning and other processes, to make investment decisions and to discover,
maintain and grow assets suited to our capabilities and strategy.
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. While we seek to design and
implement the right strategy at the right time, we may not always be effective in doing so.
Our decisions and actions relating to the allocation of capital across asset or reserve discovery, acquisition, maintenance, growth, development
or divestment impact 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
Changes in our portfolio, failure to secure or discover new reserves or
resources, missed opportunities to invest or a failure to effectively
allocate capital or achieve expected returns from existing assets or
growth investments have impacted our performance in the past and
may in the future lead to:
• loss of value, for example, due to incorrect or changing assumptions
(including those related to commodity prices) used to assess growth
or investment opportunities
• failure to achieve expected commercial objectives from assets or
investments, including cost savings, sales revenues or operational
performance, resulting in value loss (such as that experienced with
US shale)
• poor performance of current assets due to over-investment in
growth capital at the expense of non-discretionary sustaining capital
(for example, delaying asset maintenance tasks to free up capital for
growth projects resulting in production losses)
• unexpected costs or liabilities of an investment due to poor regulatory
conditions in a new region, or inherited liabilities of acquired assets
or entities (such as legacy asset rehabilitation or legal dispute costs)
• adverse market reactions (for example, to businesses associated with
production or use of energy coal) resulting in a potential impact to our
reputation, social value or our ability to retain the confidence of
external stakeholders and shareholders to execute our strategy
• poor performance impacting our ability to deliver forecasted returns
to shareholders
Management
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:
• our exploration program, with a focus on replenishing our resource
base and enhancing our portfolio
• a long-term strategy that informs the decisions and actions in capital
allocation and which is embedded through a tested CAF
• an ongoing strategy process that assesses the competitive advantage
of our business and enables identification of threats and opportunities
for our portfolio using forecasting and 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
• corporate planning processes, including life of asset plans, capital
prioritisation and asset appraisals, which inform forecasts for
proposed investments and operations
FY2020 insights
• not investing in opportunities due to increased debt levels resulting in
a lack of available growth capital
• missed investment opportunities due to a failure to understand
potential new developments or identify major trends (for example,
faster electrical vehicle penetration or hydrogen cost competitiveness
could impact whether we are well positioned for these changes in
copper, nickel, metallurgical coal or petroleum)
• financial write-downs (for example, as a result of changes in market,
industry or prices, inability to recover reserves, deteriorating demand/
supply fundamentals, value migrating away from where we are
positioned in value chains, per our strategy as described in section
1.4.1, or additional costs)
• loss of overall value at an asset due to the pursuit of the incorrect
strategy (for example, investing in growth projects in a commodity that
may have deteriorating demand fundamentals, such as energy coal)
• lack of diversified production base, increasing exposure to large
single-event risks (for example, too much reliance on Australian-based
assets or particular commodities) that may result in loss of value or
reduced cash flows
• inability to retain or attract key staff who are critical to the successful
design and implementation of our strategy, including in relation to the
allocation of capital and growth in our business
As evidenced by price volatility during CY2020, there are and may
continue to be potential short to medium-term impacts on certain
commodity prices due to the COVID-19 pandemic that could impact
values and result in growth project delays.
• management reviews and governance activities to support operational
and project forecasts and planning
• our CAF, which provides the structure and governance for prioritising
capital allocation across the Group and adding growth options
to our portfolio (for more information, refer to section 1.4.5)
• 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
• embedding the social value framework designed to drive better
outcomes that benefit all stakeholders through strategy, planning and
investment processes (including emissions, water, other
environmental factors and community initiatives)
While the COVID-19 pandemic has affected commodity prices and had significant impacts on businesses and national economies around the world
(as discussed in the Geopolitics and stakeholder relations risk factor), it may also present opportunities for growth options through acquisitions in
attractive commodities that align with our strategy. The discipline and competition for capital stimulated through our CAF is designed to drive better
decision-making and capital efficiency. This helps to strike a balance between returns to shareholders and reinvesting in the business and is intended
to enable us to be in a position to consider acquisition opportunities that may arise.
BHP Annual Report 2020 35
Governance at BHPRemuneration ReportDirectors’ ReportFinancial StatementsAdditional informationShareholder informationStrategic Report1 1.5.4 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
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 COVID-19 pandemic
have impacted and may continue to have an impact on commodity price
volatility due to rapid demand deterioration from affected customers/
countries, supply disruption from key producing regions or logistical
constraints impacting supply chains, which may therefore affect our
financial performance.
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
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 us from the effects of price changes.
FY2020 insights
US$1 per barrel decline in the average oil price would have an estimated
impact on FY2020 profit after taxation of US$163 million and
US$24 million, respectively. For more information on commodity price
impacts, refer to section 1.5.2. Commodity prices can also be affected
by exchange rate fluctuation, which impacts 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.
Note 22 ‘Financial risk management’ in section 5 outlines our
financial risk management strategy, including market, commodity
and currency risk.
Impacts from the COVID-19 pandemic and other geopolitical and macroeconomic developments (mentioned in the Geopolitics and stakeholder
relations risk factor) are expected to increase commodity price volatility. Volatility in the market will continue to translate into profit variability.
36 BHP Annual Report 2020
Community and human rights
Risks that have the potential to impact human rights and/or communities and affect support for our business with stakeholders, including
communities, governments or the general public.
Why is this important to BHP?
We recognise that our everyday interactions, activities, behaviours and decisions are intricately linked to the long-term viability of our business and
to the social and economic wellbeing of the communities where we have a presence.
Impacts could be in relation to our environmental, community, legal and regulatory performance (such as human rights, community wellbeing, water
and biodiversity, climate change, Indigenous peoples and local, regional and national economies), and also the effect of shareholder or civil society
activism on our business. Changes in society and the evolving expectations of communities and our other stakeholders have the potential to change
and increase these impacts.
Although our community and environmental performance is intended to go beyond managing threats to actively contributing to the resilience,
rehabilitation and conservation of the natural environment and communities with which we work, we may not always be successful in doing
so if our social value proposition is inadequate or we are unable to implement it.
Threats
BHP may engage in activities that have or are perceived to have adverse
impacts on communities, society, cultural heritage, human rights and
the environment. These activities, such as exploration, production,
construction or expansion of our operations, vary depending on the
social, economic and environmental context of each of our operations
and may take place on or adjacent to Indigenous peoples’ territories
or areas of importance for biodiversity or cultural conservation.
These activities, or a failure to effectively engage with communities
and relevant stakeholders, can affect our relationships with or be
viewed negatively by the community and other stakeholders and may
result in adverse impacts on human rights (for example, disruption of
community access to water, including through contamination of potable
water supplies). In addition, they could result in the following impacts
to our business:
• loss of rights to explore, operate or expand our current asset base,
delays in approvals, increased costs or reduced production for new
or existing projects
• withdrawal of consent or support from Indigenous peoples
• opposition to our projects or our entry into new jurisdictions,
including through legal or social action
• increased costs for mitigation, offsets or financial compensatory
actions or obligations
• loss of customer base or restriction of the countries to which we can
supply products
Management
In FY2020, social value was integrated into asset plans, which is intended
to enhance our contribution to the natural environment, communities
and our many stakeholders at an asset and Group-wide level.
BHP’s standards for communications, community and external
engagement, and supply chain management provide mandatory
minimum requirements and practices that are designed to strengthen
our social and human rights performance. In addition, our Human
Rights Policy Statement, Climate Change Position Statement, Water
Stewardship Position Statement and Indigenous Peoples Policy
Statement set out our commitments to human rights, climate change,
water security and access to safe water for all, and the traditional rights
of Indigenous peoples (including our approach to engaging with
Indigenous peoples).
• loss or limited access to commercial partners or employee talent
• increased taxes, royalties and other governmental or
administrative charges
• reduced access to equity and capital markets
• civil unrest, industrial relations disputes or action, negotiations, litigation
or regulatory action, resulting in higher costs and a loss of productivity
• reputational damage
The COVID-19 pandemic has affected community health, safety and
quality of life, and had economic impacts on livelihoods and supply
chains, particularly to regional communities and Indigenous peoples.
All of these impacts and our response to them may amplify existing
risks and have the potential to affect our business. This may include
production interruptions, delays or refusals of regulatory approvals
and reputational damage (for example, an outbreak of COVID-19 in
a community that is or is perceived to be caused by BHP may result
in criticism from our stakeholders, including investors).
Heightened societal expectations can also result in changes to legal
requirements, as well as litigation, inquiries, regulatory action or
government responses against BHP. For example, the transportation
of our commodities by third parties or procurement of materials needed
for our mining operations, such as personal protective equipment, tyres
or conveyor belts, may be connected to a breach of legislation intended
to prevent modern slavery or a breach of human rights within our supply
chain by a direct or indirect supplier.
These requirements and our practices also include:
• conducting regular impact assessments for each operated asset
to understand the social, environmental, human rights and
economic context
• identifying and analysing stakeholder, community and human rights
impacts, including modern slavery 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
• completing due diligence on all current and new suppliers through
our Ethical Supply Chain processes
These activities also assist us to identify, mitigate or manage key
potential social, environmental and human rights risks, as described
in section 1.7.
FY2020 insights
The Group’s exposure to risks associated with the community and human rights is expected to increase as societal, community and political pressures
continue to grow, as evidenced by recent civil unrest in Chile, the United States and other countries where we have a presence. The COVID-19
pandemic has amplified risks and impacts associated with pre-existing factors that affect communities and society across some of our locations
(such as inadequate community services and community health and safety). This highlights the need for a rapid and coordinated response by BHP
in partnership with relevant stakeholders and, along with adjustments required for the recovery of local and national economies, may present an
opportunity for BHP as strong social performance could generate competitive advantage in Australia and other countries in which we operate.
For information on our community response to the COVID-19 pandemic, refer to section 1.4.6.
BHP Annual Report 2020 37
Governance at BHPRemuneration ReportDirectors’ ReportFinancial StatementsAdditional informationShareholder informationStrategic Report1 1.5.4 Risk management continued
Climate change
Risks associated with changes in climate patterns, as well as risks arising from policy, regulatory, legal, technological, market or other societal
responses to the challenges posed by climate change.
Why is this important to BHP?
We are exposed to a broad range of climate-related risks arising from 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 potential 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 related to the non-physical impacts of climate change, or transition risks, arise from a variety of policy, regulatory, legal, technological, market
and other societal responses to the challenges posed by climate change and the transition to a low carbon economy. The production and use of
fossil fuels receive scrutiny from a range of stakeholders, including governments, investors, NGOs and communities. This is because the combustion
of fossil fuels is a significant source of greenhouse gas (GHG) emissions. 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 therefore have already been and may be further impacted by policies and
regulations that reduce GHG emissions, including 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
Risks associated with climate change and the transition to a low carbon
economy 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.
We are exposed to risks related to the physical impacts of climate
change (for example, potential changes in precipitation patterns, water
shortages, rising sea levels, increased storm intensities, higher
temperatures and natural disasters). These risks may affect us directly,
such as by causing damage to our assets, or indirectly, such as through
value chain disruptions (or a combination of both). Risks related to the
physical impacts of climate change may materially and adversely affect
our business, including through:
• adverse impacts to the health and safety of our people
• adverse impacts to our assets, such as failures of mining or processing
equipment, loss of containment, mining infrastructure failures
(for example, power, water, rail and port) and support infrastructure
failures (for example, technology services and office buildings).
Such adverse impacts may affect our business, including through
reduced productivity, increased costs and project schedule delays
• disruptions to our supply chains, transport and distribution networks,
customers’ facilities and the markets in which we sell our products
In addition, assessments of the potential impact of future climate
change policy, regulatory, legal, technological, market, societal and
environmental outcomes are uncertain given the wide scope of
influencing factors and the 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. Accordingly, the following risks relating to the transition
to a low carbon economy have (in some instances) already affected
us and may in the future continue to affect us:
• 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 (such as petroleum
and energy coal) decreases due to policy, regulatory (including carbon
pricing mechanisms), legal, technological, market or other 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 and
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, as well as changes
to international reporting standards on climate change and pressure
from society for more rapid and aggressive action from governments
and companies, may reduce demand for our products, increase our
costs and affect our business and stakeholders, including by reducing
investor confidence
• increased scrutiny of applications for licences, permits or
authorisations required to develop our assets and projects, including
third parties contesting such applications. This could delay, limit or
prevent future development of our assets or affect the productivity
of and 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 (for example, some financial institutions and other institutional
investors have declared an intention to exit certain commodities that
are seen to be associated with climate change, such as energy coal).
Impacts could affect our share price, reduce investor confidence,
constrain our ability to access capital from financial markets, or result
in an inability or increase in cost to insure our assets
The following threats, which are common to risks related to both the
physical impacts of climate change and the transition to a low carbon
economy, may also materially and adversely affect our business:
• increased costs for mitigation, offsets or financial compensatory
actions or obligations, including taxes and royalties
• restricted access to capital or an inability to attract new or retain
existing employees
• adverse impacts to the environment, communities, human rights
and social wellbeing, which could affect our relationships with
and be viewed negatively by the community and other stakeholders
and damage our reputation
• opposition to new projects or our entry to new jurisdictions by
communities, including through legal or social action, or other loss
of business opportunities
• the Group may be subject to or impacted by climate-related litigation
(including class actions), associated costs and reputational damage
38 BHP Annual Report 2020
Management
We have a Climate Change Position Statement that sets out our
views on climate change and our commitments to act in response to
climate change. The Our Requirements for Environment and Climate
Change standard establishes minimum requirements for managing
climate change threats and opportunities and supports the execution
of our climate change strategies and plans through our corporate
planning processes.
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. We take a risk-based
approach to adaptation, including consideration of the potential
vulnerabilities of our operated assets, investments, portfolio,
communities, ecosystems and our suppliers and customers across
the value chain.
Our operated assets are required to develop plans to build climate
resilience into their activities and we require proposed new investments
to assess and manage risks associated with potential physical impacts
of climate change.
Climate-related scenarios, themes and signposts are used to evaluate
the resilience of our portfolio and inform BHP’s strategy. Climate-related
risks are assessed alongside the other threats and opportunities that
BHP faces when making capital expenditure decisions or allocating
capital through our CAF. Our Risk Framework helps identify these risks
for input to the prioritisation of capital and to investment approval
processes. Our investment evaluation process has incorporated market
and sector-based carbon prices for more than a decade.
In CY2020, we published the BHP Climate Change Report 2020
that describes our latest portfolio analysis, including a 1.5°C Paris
Agreement-aligned scenario. We continue to monitor climate-related
FY2020 insights
developments that could impact the resilience of our portfolio
and remain alert to policy, regulatory, legal, technological, market,
societal and environmental developments that may indicate changes
to our signposts and the development of new uncertainties in our
portfolio analysis.
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. In CY2020, we set a medium-term
target to reduce our operational GHG emissions (Scope 1 and Scope 2
from our operated assets) by at least 30 per cent from FY2020 levels (1)
by FY2030. We also take a product stewardship approach to emissions
in our value chain. In CY2020, for example, we set public goals to address
Scope 3 emissions.
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.
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 low
carbon economy.
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 the BHP Climate Change Report 2020 available at
bhp.com/climate.
During FY2020, community, investor and regulatory standards and expectations in relation to climate change continued to increase. Public response
to severe natural disasters, including bushfires in Australia this year, heightened scrutiny of potential links between climate change and physical impacts
and spurred calls for more rapid and aggressive action from governments and companies. In addition, the COVID-19 pandemic and the subsequent
reduction in economic activity decreased emissions, which may lead to opportunities to restart economies with a greater focus on sustainability.
(1) FY2020 baseline will be adjusted for any material acquisitions and divestments based on greenhouse gas emissions at the time of the transaction. Carbon offsets will
be used as required.
BHP Annual Report 2020 39
Governance at BHPRemuneration ReportDirectors’ ReportFinancial StatementsAdditional informationShareholder informationStrategic Report1 1.5.4 Risk management continued
Cybersecurity
Cyber-related risk events, including attacks on our enterprise or incidents relating to human error, online and web-based operations
and infrastructure.
Why is this important to BHP?
Many of our business and operational processes are supported by and dependent on technology. As automation and the speed of technological
innovation continues to increase, our dependence on technology is likely to grow. We are moving towards an increased reliance on autonomous
systems for haulage and drilling. Throughout our operations, we have substantial integration between our information technology and operating
technology systems. All such systems may be subjected to cyber events or attacks and these can have significant impacts, including on our business
and stakeholders.
Threats
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
or attacks cause system error or malfunction, which result in
operational incidents)
Management
• environmental damage (for example, a cybersecurity breach of
operational systems controlling pumps and valves resulting in material
being released into the environment)
• a hampered ability to respond appropriately to unrelated incidents
• regulatory fines and compensation to people impacted
• loss of licences, permits or necessary approvals to operate assets
• reputational damage
We employ a number of measures designed to protect against, detect
and respond to cyber events or attacks, 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, servers and
network equipment
• incident response and crisis management plans
FY2020 insights
There were no identified cybersecurity breaches to the Group’s technology environment during FY2020 despite an increase in attempted
cyberattacks during the COVID-19 pandemic. The Group’s exposure to cybersecurity-related risk events increased in FY2020 and is expected to
increase further, primarily due to our growing reliance on technology and the increasing sophistication and frequency of external cyberattacks.
40 BHP Annual Report 2020
Third party performance
Risks associated with non-operated joint ventures and the delivery of products and services by third parties engaged by BHP, including contractors.
Why is this important to BHP?
The Group, through its affiliated entities, holds interests in companies and joint ventures that we do not operate, primarily within Minerals Americas
(Samarco, Antamina, Resolution and Cerrejón) and Petroleum (Algeria, Australia and Gulf of Mexico). Joint venture partners or other companies
managing non-operated joint ventures may take action contrary to our standards or fail to adopt or apply standards equivalent to our standards
in relation to health, safety, environment, communities and other aspects of operations. In these situations, we may be unable to influence
non-operated joint venture activities and any incidents could result in potential financial, legal and reputational exposure.
In addition, approximately 60 per cent of our workforce (around 40,000 people) are contractors, with approximately 80 per cent of those
contractors undertaking activities classified as high risk. As a result, appropriate contractor selection and effective management of contractors
from a safety, business ethics, 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, joint venture partners and financial institutions, which may
experience financial difficulties (for example, in the context of global financial markets that remain volatile).
Threats
Third party (including contractor) activities, including a failure to adopt
and apply standards, controls and procedures that are equivalent to
ours, could lead to material risks, including the risk of:
• safety events that may result in injuries or fatalities, including among
community members
• production downtime and damage to or loss of equipment or facilities
• delay in project delivery
• poor quality on service delivery
• failure to meet remediation and compensation requirements (such as
delays to community resettlements related to the Samarco dam
failure; see section 1.8 for information on our response, support
and commitments)
• litigation (including class actions) or regulatory action, inquiries
and reputational damage
• shareholder activism (for example, to divest our interest in a
non-operated joint venture or stop using a certain supplier)
• industrial action, civil unrest or other adverse impacts on human rights
(for example, our joint venture partners may not engage in appropriate
consultation with communities or non-operated joint venture
operations may cause disruptions to community access to water,
including through contamination of potable water supplies)
A failure by suppliers, contractors or joint venture partners to perform
existing contracts or obligations may lead to adverse impacts, including:
• non-supply of key inputs, such as explosives, mining equipment,
petrol and other consumables important to our business
Management
• loss of access to third party owned or supplied infrastructure
• disruption to essential supplies or delivery of our products (for
example, where access to 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) and reputational damage
• loss of revenue
The potential effects of the COVID-19 pandemic on third parties may
increase the likelihood of or amplify the risks or impacts set out above.
For example, the operators of our non-operated joint ventures may not
implement effective standards, controls or procedures in response to
the pandemic, which may result in production downtime. In addition,
there is an increased likelihood of disruptions to our supply chains,
which may result in a shortage of critical equipment and supplies in
some geographical locations. The mobility of our direct and indirect
workforce (including contractors) has been limited by restrictions
implemented due to the pandemic which, for example, may impact the
delivery of construction projects.
Our existing counterparty credit controls may not prevent a material loss
to us due to our credit exposure to certain customer segments, or
commercial or financial counterparties.
Our risk financing approach is to self-insure or not purchase external
insurance for certain risks. For more information, refer to the Asset
integrity and tailings storage facilities risk factor.
We manage our interests in non-operated joint ventures through:
• our Contractor Management Framework, which specifies a holistic
• dedicated non-operated joint venture teams
• development of formal influencing plans and key focus areas specific
to each non-operated joint venture
• governance frameworks that define how joint venture partners work
together with operators
• where appropriate, governance improvement plans specific to
non-operated joint ventures
• BHP and external reviews of non-operated joint venture projects,
risk management and governance activities
• internal audits and participation in joint venture partner audits of
non-operated joint ventures
In addition, we have global practices and standards for operations and
production that apply to contractors, including:
• BHP’s standards on supply, safety, health, aviation and capital projects
• Our Code of Conduct, which sets out requirements related to working
with integrity, including dealings with third parties as described in
section 2.16
FY2020 insights
approach to support regional alignment and is supported by
global training
• training on anti-corruption, competition and Our Code of Conduct
• independent inspections, assurance and verifications (in some cases
performed by regulatory bodies)
We are in the process of improving our Contractor Management
Framework by developing a globally integrated approach, enabled
through the introduction of a new BHP standard for contractor
management, delivery of a suite of technology solutions to support the
end-to-end contractor management process, building organisational
capacity and capability, and changing behaviours to be more inclusive
and integrated with our contractor workforce.
We maintain a ‘one book’ approach with commercial counterparties,
which means 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.
While the COVID-19 pandemic may affect some third party performance risks (as described above), it has also presented opportunities to BHP. These
include focusing on local supply chain resilience by supporting small, local and Indigenous businesses (for example, in March and April 2020 we
made immediate payments of outstanding invoices and reduced payment terms from 30 to seven days for our small, local and Indigenous suppliers
in Australia and for those that support our Petroleum business), as well as employing additional contractors to support our Australian operations.
BHP Annual Report 2020 41
Governance at BHPRemuneration ReportDirectors’ ReportFinancial StatementsAdditional informationShareholder informationStrategic Report1 1.5.4 Risk management continued
Legal, regulatory, ethics and compliance
Risks associated with legal, regulatory, ethics and compliance obligations.
Why is this important to BHP?
Our operated assets and non-operated joint ventures involve 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 laws and regulations imposed at the local, state and regional levels as well as the federal, national and international levels in the
jurisdictions in which we operate. This includes laws and regulations relating to bribery and anti-corruption, trade and financial sanctions, market
manipulation, taxation, royalties, collusion, anti-competitive behaviour, anti-money laundering, data protection and privacy, controls on production,
trade, imports and exports, prices on greenhouse gas emissions, native title and other land rights, sexual harassment and assault, and health, safety
and the environment. Our Code of Conduct and our other internal policies, standards, systems and processes reflect these requirements.
Section 1.8 details our response and support in relation to the Samarco dam failure as well as progress on our commitments.
Threats
Certain action or inaction, whether intentional or unintentional, by BHP
or its Directors, executives, employees or third party partners (including
non-operated joint ventures) could result in actual or alleged breaches
of laws or regulations relating to the matters set out in this risk factor
above or other legal, regulatory, ethical or compliance obligations.
Actions of this nature, or changes in laws or regulations due to the
developing nature of government regulations and international
standards, could lead to (among others) the following threats to our
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 proceedings against or criminal prosecution of Directors,
executives, employees or third party partners
• 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 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, onerous terms
or limitations on access by BHP, which may adversely impact our
financial performance or disrupt operations
• renegotiation or nullification of existing contracts, leases, permits
or other agreements, nationalisation of assets or other measures being
taken against our business or people
Management
We have internal policies, standards, systems and processes for
governance and compliance, including:
• Our Code of Conduct
• BHP’s standards on business conduct, market disclosure, and
information governance and controlled documents
• training on Our Code of Conduct and in relation to anti-corruption,
market conduct and competition matters
• contractor due diligence and automated risk screening
• global monitoring of compliance controls and higher risk transactions
by our Ethics and Compliance function
• ring fencing protocols to separate potentially competitive businesses
within BHP
• classification of compliance sensitive transactions
• litigation (including class actions), prosecutions or disputes (such as
in connection with ownership and use of land) and the associated cost
and disruption arising from such litigation, prosecutions or disputes
• public inquiries such as Parliamentary inquiries or Royal Commissions,
which may adversely impact our reputation and ability to pursue
projects or conduct operations and which may lead to changes
to laws with cost or other impacts to financial performance
• loss, uncertainty or changing conditions associated with land tenure,
including in countries where compliance with laws is a condition of
the underlying land tenure or for the renewal of that tenure. For
example, withdrawal of consent or support from Indigenous peoples
(as discussed in the Community and human rights risk factor)
The COVID-19 pandemic has led to increased government action around
the world. Varying responses to the pandemic at all levels of government
have amplified pre-existing differences in policy and standards between
and within countries and may continue to do so. Increased government
action has resulted in and may continue to result in heightened legal
obligations in relation to, for example, the provision of a safe and healthy
workplace, management of personal health-related data, and public
health and emergency management. In addition, community, investor
and regulator expectations as to corporate governance requirements for
the Board to satisfy its fiduciary duties in response to the pandemic have
changed and may continue to change. Any actual or perceived failures
to comply with these heightened legal obligations or changes to
policies, standards or other requirements or expectations, whether
intentional or unintentional, could result in litigation or enforcement
action, fines or penalties and reputational damage (such as criticism
from our stakeholders, including investors).
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.
• 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)
• oversight and engagement with higher risk areas by our Ethics and
Compliance function, Internal Audit and Advisory team and the
Disclosure Committee
• 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. Material breaches of Our Code of Conduct are reported to
the Board on a regular basis and individuals are encouraged to report
anything they believe may be misconduct or an improper state of
affairs or circumstance without fear of retaliation (EthicsPoint is
discussed in further detail in section 2.15)
FY2020 insights
The Group’s exposure to risks associated with legal, regulatory, ethics and compliance issues may increase given changes in the external
environment. These risks could be exacerbated by the COVID-19 pandemic, as well as by the continuing response of governments and society
to ethical and cultural failings within large corporates, including the financial services industry. Exposure to these risks may also increase in the
event of additional investment and activity in higher risk jurisdictions. The impacts of the pandemic on such jurisdictions may amplify those risks
(for example, adverse effects on local economic wellbeing may increase corruption risks).
42 BHP Annual Report 2020
Balance sheet and liquidity
Risks associated with our ability to maintain a robust and effective balance sheet, raise debt, return value to shareholders and remain
financially liquid.
Why is this important to BHP?
Fluctuations in commodity prices, operational or supply chain disruptions 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
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 and our ability to return value to shareholders may
be impacted.
A number of risks across the Group Risk Architecture, including our
principal risks, could adversely impact the Balance Sheet and liquidity
to varying degrees should they occur and depending on their severity.
Examples of risks that may affect our short to medium-term cash flow
generation, profitability or the value of our assets (including reserves)
– and therefore the Balance Sheet and/or liquidity – include:
• a significant reduction in production at our assets caused by material
third party performance issues and operational disruptions due to the
COVID-19 pandemic
Management
• long-term commodity price volatility and sustained low prices. For
example, a prolonged low oil price may result in write downs to our
petroleum reserves, and a sustained decrease in the price of iron ore
may have significant impacts on liquidity (in FY2020, 48 per cent of
our revenue was derived from iron ore), as discussed further in the
Commodity prices risk factor
• inability to sell our commodities (for example, caused by physical
blockages of shipping lanes, closure of ports or land logistics, or other
restrictions to trade, including as a result of tensions between a
country where we operate or sell our products and other countries
with which BHP is connected, as discussed in the Geopolitics and
stakeholder relations risk factor)
The Financial Risk Management Committee (FRMC) oversees
the financial risks across our business 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 22
‘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:
• monitor target gearing levels and credit rating metrics under a range
of different stress test scenarios incorporating operational and
macroeconomic factors
• 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
• operate a diversified portfolio, which reduces overall cash flow volatility
• maintain access to key debt markets globally and a US$5.5 billion
revolving credit facility (undrawn as at 30 June 2020)
FY2020 insights
The global economy has been impacted by the COVID-19 pandemic. Increased geopolitical uncertainty, including the impact on national economies
and the speed at which they recover from the effects of the pandemic, has further weighed on the macroeconomic outlook. There is a risk of
heightened fluctuations in commodity prices, operational or supply chain disruptions and ongoing global economic volatility, which could affect
short to medium-term cash flow generation and profitability.
BHP Annual Report 2020 43
Governance at BHPRemuneration ReportDirectors’ ReportFinancial StatementsAdditional informationShareholder informationStrategic Report1 1.6 Capability and culture
1.6.1 Our people
Our global workforce is the foundation of our business and we believe that supporting the wellbeing of our
people and promoting an inclusive and diverse culture are vital for maintaining a competitive advantage.
We engage more than 80,000 employees and contractors globally
and empower them to work in safer, more creative and rewarding
ways. We trust and collaborate to drive performance and give our
people more say, new capabilities and tools, and new avenues for
technology and innovation.
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.
Developing our capabilities and an enabled culture
The delivery of our strategy is predicated on culture and capability.
We apply the BHP Operating System (BOS) practices to build
leader capability. We invest in people and capability to deliver
high performance and our aspiration for a gender-balanced
workforce. We drive continuous improvement through respect
for people’s differences, self-accountability, a hunger to learn
and a commercial mindset.
The BOS sets the foundation for long-term and in-depth learning
and development, by developing practices and capabilities that
empower our people to pursue operating excellence. In FY2020,
the focus of our capability building work was on teaching and
embedding the BOS practices across our operated assets, from
general managers to frontline employees and contractors. The BOS
senior leader development sessions equipped senior leaders to
lead and role model the BOS’s principles and practices. We will
further develop leadership capability in FY2021 through the BOS
learning and development programs for coaches and work with our
leaders to support the effective embedment of the BOS to improve
operational capability and cultural outcomes.
To continue to grow value we must ensure our operations perform
well and that means safely, productively, cost-effectively and
reliably. We invest in our people to drive this performance.
In FY2020, we invested in a new workforce surveying and analytics
platform that provides our leaders with deeper and more frequent
insights into our culture and our people’s safety, engagement and
enablement. We first deployed this technology in response to the
COVID-19 pandemic, to closely manage wellbeing and monitor the
effectiveness of communication. With more than 55,000 responses
over a three-month period from employees and contractors
to a weekly pulse survey, we could respond to the needs of our
workforce by deploying targeted support initiatives, such as
leader guides, training packages, coaching and access to mental
health services.
Our COVID-19 wellbeing survey results identified our leaders
as strong communicators and leaders of their teams through
significant change. Eighty-nine per cent of respondents indicated
they received support from their leader when they needed it and
92 per cent were clear about what they should be working on.
With a focus on developing capability in core leadership routines,
2,602 leaders have participated in the Step Up to Leadership
training since FY2015, which has been pivotal in the development
of BHP’s culture over the past five years. These programs will be
updated in FY2021 to further support our people and the
development of our culture.
We also focused on developing the leadership skills of our Indigenous
employees in FY2020, through our Indigenous development
program, which identifies Indigenous employees with leadership
potential and addresses barriers to career progression. For more
information, refer to the Indigenous employment section.
44 BHP Annual Report 2020
Operations Services was created by BHP to provide permanent
employment within BHP for roles undertaking maintenance and
production execution services across Minerals Australia assets.
Operations Services supports people to build their skills through
a structured coaching and in-field verification process, designed
to enable operators and maintainers to achieve mastery within
their roles. This helps deliver consistent equipment operation
and maintenance that balances safety, maximum productivity
and equipment reliability.
We recognise government, industry and education stakeholders
play important roles in helping us fulfil our skills requirements.
The Queensland Future Skills Partnership with TAFE Queensland
and Central Queensland University has been established to fast
track development of new autonomy skills. Our Minerals Americas
team is partnering with the Industrial and Mining Training Centre
in Chile, initially established 24 years ago by Escondida, to deliver
new technology skills and a pipeline of operators/maintainers who
are new to mining, with a focus on increasing female participation
in mining. We are working with the Minerals Council of Australia
as a key stakeholder through which the Department of Education,
Skills and Employment will engage with the mining sector to
develop a new skills organisation. Some of our operated assets are
also partnering locally with external companies to deliver programs
that prepare people who are new to mining with the skills they
need to work in the mining industry.
Inclusion and diversity
Inclusion and diversity promotes safety, productivity and wellbeing
of our workforce and underpins our ability to attract new employees.
We employ, develop and promote based on people’s strengths and
we do not tolerate any form of discrimination, bullying, harassment,
exclusion or victimisation (1). Our systems, processes and practices
are designed to support fair treatment for all.
Our employees are trained to recognise and mitigate potential
bias towards any employee and encouraged to speak up if they
encounter behaviours that are inconsistent with our values and
expectations. To prevent 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 Charter values and we believe it is
fundamental to building stronger teams and being an inclusive
and diverse workplace. For some people, this has not been their
experience of working at BHP. We are determined to address this.
In FY2020, we continued our Respectful Behaviour campaign,
which builds awareness of what constitutes disrespectful
behaviours in the workplace to generate conversation.
We equipped leaders and employees with materials to help them
have conversations about disrespectful behaviours and integrated
those materials and concepts throughout our cultural tools and
programs (including BHP leadership programs, Leading Inclusion,
sexual harassment training, and Our Code of Conduct training).
We also started to assemble an internal working group in FY2020,
to develop a holistic plan to address the controls and cultural
enablers of sexual harassment and assault in the workplace.
Our strategy to achieve a more diverse and inclusive workplace
continues with focus on 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
Gender balance (2)
We aim to achieve gender balance globally by CY2025. In FY2020,
we increased the representation of women working at BHP by
2.0 per cent, resulting in 1,767 more female employees than at the
end of FY2019. Our overall representation of women is 26.5 per cent.
We signed the CEO Statement of Support for the United Nations (UN)
Women’s Empowerment Principles in FY2020 to strengthen our
global commitment towards gender equality. The partnership with
UN Women and the UN Global Compact encourages business leaders
to use seven principles as a guide for actions that advance and
empower women in the workplace, marketplace and community.
The percentage of people newly hired to work for BHP in FY2020
was 60.7 per cent male and 39.3 per cent female. This female
representation outcome is a marked increase compared to FY2015
(10.4 per cent female), the baseline for our aspirational goal.
Several of our operations and major capital projects have reported
strong female representation with investment in entry-level
programs. Operations Services, South Flank, Escondida, Olympic
Dam and other operations increased their female representation
with apprenticeship intakes to develop women and create new
talent pools of females and diverse talent in entry-level roles as
operators, maintainers and others according to specific operational
needs where this diversity does not exist today. Escondida improved
female representation in FY2020 by 3.1 percentage points and hired
67 female apprentices in mine operations. Operations Services
increased female representation by 8.0 percentage points to
33.1 per cent in FY2020, including 82.9 per cent female apprentices
and trainees, 266 females and 55 males.
We also improved our representation of women in leadership
by 1.7 percentage points compared to FY2019, with 22.4 per cent
female leaders.
To accelerate female representation, in FY2020 we:
• improved employment branding that targets diverse audiences
about why they should join BHP
• progressed market mapping to proactively target people or groups
of people not actively looking to work for BHP or our industry
• broadened our channels across social, digital and
traditional media
• enhanced our workforce development and retention through
coaching and support materials for leaders
• took further steps to uncover and remove barriers for women
with the launch of the Women@BHP group on BHP’s social
networking service and set clear expectations of leaders about
how to respond to Our Code of Conduct breaches relating
to sexual harassment
Indigenous employment
We aim to provide employment opportunities in the communities
in which we operate that contribute to sustainable social and
economic benefits for Indigenous peoples. In Minerals Australia,
Indigenous employment within our employee and contractor (3)
workforce increased from 5 per cent to 6.5 per cent (1,726
employees and 475 contractors), exceeding our target of
5.75 per cent by the end of FY2020. There has been a 140 per
cent (50 to 120) increase in Indigenous employees in supervisor,
superintendent and manager roles since FY2017 through external
hiring and internal leadership development and career progression.
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 22 per cent of our workforce at the
Jansen Potash Project, and our overall workforce including
employees comprising 15 per cent Indigenous people. In Chile,
representation of Indigenous workers at our operations rose to
6.6 per cent in FY2020 (from 5.9 per cent in FY2019).
(1) We promote a workplace that is free from discrimination based on personal attributes unrelated to job performance, such as race, age, ethnicity, nationality, gender
identity, sexual orientation, intersex status, physical or mental disability, mental health condition, relationship status, religion, political opinion, industry/union
affiliations, pregnancy, breastfeeding or family responsibilities. This is subject to BHP’s requirement to comply with local laws in the jurisdictions in which we operate.
(2) Based on a ‘point in time’ snapshot of employees as at 30 June 2020, 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 1.6.2, 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 2019 through to April 2020 and in accordance with our reporting requirement
under the UK Companies Act 2006 which is then used to calculate a weighted average for the year to 30 June based on BHP ownership.
(3) Based on a ‘point in time’ snapshot of employees and labour hire contractors as at 30 June 2020.
BHP Annual Report 2020 45
Governance at BHPRemuneration ReportDirectors’ ReportFinancial StatementsAdditional informationShareholder informationStrategic Report1 1.6.1 Our people continued
Case study:
Developing Indigenous leaders in Minerals Australia
A successful Indigenous Development Program (IDP), run since
FY2015, has helped Minerals Australia progress its goal of
developing Indigenous employees for leadership roles.
The program has created career pathways for Aboriginal
and Torres Strait Islander employees to move into new roles,
including leadership roles, across BHP.
It has proven to be a success; 49 per cent of employees who
have completed the program have moved into new roles, and
20 per cent have been promoted into leadership roles.
Research underpinning the program showed that Indigenous
employees would benefit from mentoring, more exposure
to senior leaders and better access to training.
The program targeted Indigenous employees in entry-level
roles. In addition to addressing the opportunities raised through
the research, the program helped participants develop or
enhance skills in communication, emotional intelligence,
project management and business acumen.
Program alumni said they had grown in confidence following
the program, with leaders also reporting positive changes in the
participants. This has resulted in a strong pipeline of potential
participants to take part in future program intakes.
Reflecting on her participation in the program, Dee Clarke,
Planner Work Management, said: ‘The IDP has been one of the
most personally rewarding courses I have ever done. It helped
Indigenous leaders by role type in Minerals Australia
me with confidence, resilience and motivation. The program
taught us that whatever opportunities came our way, to no
longer say ‘no’ or think that we are not good enough. We were
exposed to managers, other supervisors and senior leadership
and this enabled us to network and further develop skills so that
we could create our own opportunities after the course.’
Working towards leadership parity
Following the IDP’s success, in FY2019 BHP created the
Indigenous Leadership Program (ILP) to help achieve the
leadership parity aspiration of 3 per cent Indigenous
representation at manager-level and above Australia by 2028.
The ILP supports Indigenous leaders to develop their careers and
move into higher levels of leadership. The program aims to build
capability, provide tools to manage the complexities that come
with leadership, learn different leadership models and further
develop skills in understanding and using emotional intelligence.
FY2020 course alumni Aaron Keevers, Contract Maintenance
Supervisor, said: ‘The BHP ILP was a very rewarding course for
me and the tools and learnings I took away have been invaluable
and will help me to go to the next step in my development and
career. From our very first day, we were told to be ‘comfortable
with the uncomfortable’ – four words that helped change my
mind-set.’
Role Type
Manager
Superintendent
Supervisor
Total
FY2017
FY2018
FY2019
FY2020
Increase
FY2017 to FY2020
1
3
46
50
2
6
57
65
2
15
68
85
4
17
99
120
300%
467%
115%
140%
LGBT+ inclusion
Flexible working
Jasper is BHP’s employee inclusion group for our lesbian, gay,
bisexual, transgender and others (LGBT+) community and its allies.
Its 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 status.
In FY2020, Jasper continued to focus on awareness and education,
internal networking and building a network of allies.
In Australia, over the past two years Jasper and non-profit
organisation, Pride in Diversity, have visited our coal and iron ore
mines in Western Australia, Queensland and New South Wales
and Olympic Dam in South Australia to roll out LGBT+ inclusion
awareness and education sessions.
In Asia, Jasper hosted the Jasper Enrichment Sessions, which
covered topics such as sexuality, coming out, HIV/AIDS and
COVID-19. We continue to co-chair the InterEnergy Forum in
Singapore and are an active member of the Philippine Financial
and Inter-Industry Pride forum in Manila.
In the United States, Jasper held monthly lunches where LGBT+
educational highlights were shared in a safe environment for
discussion and support. We continued to receive positive feedback
on the LGBT+ reverse mentoring pilot program in Houston.
Our employees participated in pride events in Adelaide, Brisbane,
Houston, Manila, Perth and Saskatoon in FY2020. We began to roll
out ‘all-gender’ bathrooms, starting in our corporate offices in
Melbourne and Adelaide. We continued to participate in the
Australian Workplace Equality Index, the national benchmark on
LGBTQ+ workplace inclusion and surveyed employees to assess the
impact of our LGBT+ inclusion initiatives on organisational culture.
Flexible work supports the diversity and wellness of our workforce.
We further implemented our flexible work principles during the
COVID-19 crisis by encouraging and supporting flexible work
in different ways, such as new rosters, shifts for people in office
buildings and working from home offices (for people from our
functions and also our operations if they were at risk). COVID-19
has rapidly challenged the mindset on work flexibility.
Working with suppliers
We continue to work with our supply partners to ensure their products
and services are suitable for our workforce, as well as encouraging
diversity in their own work teams. For example, we worked with our
major materials supplier, Blackwoods, to redesign personal protective
equipment (PPE) and other workwear to offer more size choices.
In formerly male dominated industries, such as resources, the design
of PPE and other industrial workwear has historically centred on
male requirements. This created a culture of ‘making do’, resulting
in women in these industries wearing uniforms that did not fit,
were uncomfortable and impacted their sense of belonging in the
workplace. More than 70 changes and improvements have been made
to the Blackwoods clothing range, from the size of socks and female
boots, to the size and weight of helmets, garments, and head lamps.
Employee relations
The four key focus areas for employee relations at BHP has
continued to be:
• ensuring BHP complies with legal obligations and regional
labour regulations
• negotiating, where there are requirements to collectively bargain
• closing out agreements with our workforce in South America
and Australia, with no lost time due to industrial action, to the
extent possible
• endeavouring to create solid relations with our workforce, based
on a culture of trust and cooperation
46 BHP Annual Report 2020
Our people policies
We have a comprehensive set of frameworks that support our
culture and drive our focus on safety and productivity.
identify roles that meet their skills, experience and capability,
and offer retraining where required.
Our Charter is the foundation of 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 mandatory minimum
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
discrimination on any basis is not acceptable. In instances where
employees require support for a disability, we work with them to
The information in this section illustrates how these policies
have been implemented and the steps we take to measure
their effectiveness.
Case study:
Inclusion and diversity in our supply chain
Partnering with our suppliers to support our commitment to
inclusion and diversity is one of the four commitments that
underpins our aspirational goal to reach gender balance by
CY2025. Over the past three years, this commitment has
presented a huge opportunity to challenge ourselves, as well
as more than 10,000 of our supply partners across 60 countries.
With an annual spend of more than US$15.5 billion in FY2020,
we continue to work in partnership with our supply partners
to promote the values and standards of behaviour we’ve
committed to in Our Charter and Our Code of Conduct,
and to follow the Our Requirements for Supply standards.
We establish and foster supplier relationships based on
mutual commercial value built on foundations of long-lasting
partnerships. Through these partnerships, we make decisions
that positively influence those around us, such as:
• providing support and incentives to encourage our
contracting partners to increase the diversity of potential
applicants for roles across BHP locations, who make
up approximately 60 per cent of our workforce
• encouraging our supply partners to support greater diversity
through ergonomic design and product development.
For example, working with manufacturers to make excavators
and trucks more accessible and safer to use by a wide range
of people, as well as easier to maintain
• working closely with supply partners to make sure the clothes
we wear at our operations, the food we eat and the camps
we live in are more inclusive
• introducing an online tool to our Australian supply partners
to allow BHP to collect and track local and Indigenous
procurement and diversity metrics. The data feeds into internal
and external reporting and tracks against contract incentives
and tender evaluation criteria. The metrics help recognise and
reward supply partners who have embedded BHP’s values and
are making a positive inclusion and diversity impact
More information on inclusion and diversity in our supply chain
is available at bhp.com.
BHP Annual Report 2020 47
Governance at BHPRemuneration ReportDirectors’ ReportFinancial StatementsAdditional informationShareholder informationStrategic Report1 1.6.1 Our people continued
Case study:
BHP Operating System
The BHP Operating System (BOS) and the Maintenance and
Engineering Centre of Excellence (MECoE) are two key priorities
driving exceptional performance and operational excellence
through the business.
The BOS is a way of working that puts 100 per cent safety for
our people, 100 per cent value for our customers achieved with
zero per cent waste at the centre of everything we do. It is a
business-wide philosophy that guides leadership behaviours
and practices, empowers our teams, builds capability and makes
problem solving and improvement part of what we do every day.
Three principles underpin the BOS: serve our customers, pursue
operating perfection and empower our people.
The MECoE was established in 2016 to achieve industry leading
performance and outright excellence in maintenance at BHP
by delivering safe, sustainable improvement in our equipment
availability, reliability and cost. To achieve this the MECoE
focuses on five core elements: establishing the BHP maintenance
way, achieving excellence in planning and scheduling,
establishing total equipment strategies, instilling maintenance
as a profession and making life easier for our people.
The advanced analytical techniques of the MECoE identify
what we need to work on to improve performance. By
integrating them with the BOS, we accelerate our cycle of
continuous improvement. Put simply, the MECoE provides
us with the ‘what’, the BOS provides us with the ‘how’, and
a feedback loop is created.
During FY2020, the BOS and MECoE have invested in a series
of value analytics projects to unlock capacity and improve
performance at BHP. Two prominent examples of their combined
benefit to the business have been at the car dumper at our Port
Hedland operations in Western Australia Iron Ore (WAIO), and the
uplift at the concentrator at our Escondida mine.
Improving car dumper dump time at WAIO
Adopting the BOS and leveraging the MECoE support has
enabled a sharper focus on sustainable performance and
enabled the teams across the WAIO supply chain to deliver
record production in FY2020. The collective effort and expertise
across the WAIO Port operational and functional teams has
unlocked capability and reduced the car dumper dump time
by more than 7 per cent, delivering an improvement value
of 2.1 million tonnes per annum (Mtpa).
To achieve this result, BOS principles and practices were
established as part of daily interactions with all of our frontline
teams, which enabled effective problem solving, innovative
thinking and safe delivery of key metrics. This combined
with support from the MECoE through the design of total
equipment strategies, planning and scheduling services,
root cause analysis and data analytics capabilities continues
to improve performance.
Escondida concentrator improvement
The combined work of our operations, the BOS and MECoE
has supported the delivery of historic throughput for Escondida
concentrators, averaging 371 kilotonnes per day throughout
for the first time equating to 135 Mtpa.
By bringing together domain knowledge, machine learning and
dynamic simulation modelling, variable drivers were able to be
prioritised in order of value so that defect elimination, strategy
optimisation and standardised work practices were applied
in areas that would impact performance, resulting in some
significant outcomes.
The combination of activity from the BOS and MECoE at WAIO
and Escondida demonstrate the significant value that can be
unlocked when they are united, which we are looking to
replicate in other parts of our business.
48 BHP Annual Report 2020
1.6.2 Employees and contractors
The data in this section 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 at the end of each financial year.
Average number of employees and contractors
for the year ended 30 June 2020 (1)
Average number of employees by geographic region
for the year ended 30 June 2020 (1)
2020
Total 80,121
Employees 31,589
Contractors 48,532
61%
39%
North America 1,296
4%
Europe 57
< 1%
Asia 1,939
6%
South America 7,330
23%
Australia 20,967
66%
2019
Total 72,414
Employees 28,926
Contractors 43,488
60%
40%
North America 1,999
7%
Europe 59
< 1%
Asia 1,743
6%
South America 6,979
24%
Australia 18,146
63%
2018
Total 62,476
Employees 27,161
Contractors 35,315
57%
43%
North America 2,490
9%
Europe 70
< 1%
Asia 1,368
5%
South America 6,729
25%
Australia 16,504
61%
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)
2020
8,072
23,517
67
185
3
9
2019
6,874
22,052
70
227
4
7
2018
5,907
21,254
70
235
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 from July 2019 to April 2020 and in accordance with
our reporting requirement under the UK Companies Act 2006, 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 used in internal management reporting for the purposes of monitoring progress against our goals, which are reported in section 1.6.1.
(2) Based on actual numbers as at 30 June 2020, not rolling averages. FY2018 data includes Continuing operations and Discontinued operations (Onshore US assets)
for the financial years being reported. FY2020 and FY2019 data do 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 FY2020, there were 252 senior leaders at BHP. There were 16 Directors
of subsidiary companies who are not senior leaders, comprising 12 men and four women. Therefore, for UK law purposes, the total number of senior managers was
197 men and 71 women (26 per cent women) in FY2020.
BHP Annual Report 2020 49
Governance at BHPRemuneration ReportDirectors’ ReportFinancial StatementsAdditional informationShareholder informationStrategic Report1 1.6.3 Technology
Technology is a key lever for BHP to improve frontline safety,
increase productivity, reduce cost, build capability and accelerate
value creation. This is being achieved by leveraging technologies
such as cloud computing and storage, and smart analytics to
enhance decision-making and advance mining technologies
to automate equipment.
In FY2020, we refocused our Technology function to an asset-
centric model, while streamlining our processes and our portfolio
of work to significantly increase the speed of delivering digital
solutions to our operations and functions. Plans have been
delivered that aim to realise a 30 per cent saving (against the
FY2020 budget baseline) by end of FY2021. This refocus also
established our first digital centre, elevated our use of data and
fast-tracked our infrastructure debottlenecking with concurrent
evolution towards cloud.
Digital centres partner our technology teams with our operations
to help rapidly solve asset-specific challenges. These hubs leverage
external partnerships, data, analytics and cloud-based infrastructure
to develop targeted solutions. They represent a shift from the
traditional model of having digital projects delivered by multiple
parts of our business. Our first two digital centres were launched
in Coal (Brisbane) and Enterprise (global), and we plan to launch
digital centres in Chile, North America and Western Australia
by the end of CY2020.
An example of the value unlocked through our digital centre
in Brisbane is a decision automation solution for our operations
at Caval Ridge using machine learning. This solution informs
operators of the optimal set points in the wash plant and is
enabling coal processing plants to reduce product ash variability
and improve overall product yield. This solution is being scaled
to other Coal sites.
Digital solutions are also improving safety and reducing the risk
for frontline staff. Our Innovation Centre developed a pedestrian
avoidance technology that leverages ultra-wide front-of-view
cameras and deep learning models to reduce the likelihood of
forklift associated injuries. This avoidance technology can be fitted
to any mobile heavy equipment. Another safety solution was the
Dash maintainer tool, an in-house hardware and software platform
that enables maintenance technicians to undertake machine
diagnostics out of harm’s way, eliminating more than 50 per cent
of live work exposure hours on excavator maintenance.
To ensure our sites are ready to leverage robotics, autonomous
equipment and advanced analytics solutions, we are accelerating
the modernisation of our sites’ infrastructure foundations. These
progressive upgrades commenced in FY2020 with Jimblebar and
Newman in Western Australia and Goonyella Riverside and Daunia
in Queensland, and include modular data centres, in-ground fibre,
and networks and hosting infrastructure.
Our ability to develop capability and attract technical talent is
critical to ensuring BHP’s workforce is future ready. Key talent
pipeline programs include our neurodiversity program (nurturing
career pathways that cater for a variety of neurological conditions,
including Autism Spectrum Disorder) and our sponsorship of
SheCodes Plus (female-focused pathways into coding and software
development). We have partnered with TAFE and Central
Queensland University to design and deliver qualifications in
automation, and supported the Resources Technology Showcase
in Western Australia.
50 BHP Annual Report 2020
Case study:
Automation
Use of advanced mine automation technologies is part of
BHP’s strategy to improve safety, build capability and drive
greater productivity.
In 2017, we completed the rollout of our first fully autonomous
haul truck fleet at WAIO’s Jimblebar Mine. The implementation
of autonomous haulage resulted in reducing the risk exposure
of our people to driving-related hazards, improved
productivity and provided an opportunity for our workforce
to gain new skills. The site is now one of the safest operations
in our portfolio, with significant events involving trucks at
Jimblebar having dropped by more than 90 per cent since
the introduction of autonomous haulage. Jimblebar is our
benchmark site for haulage costs with a 20 per cent reduction
since implementation (compared to other WAIO sites), and
is an example of leveraging technology and data to drive
performance and safety.
Following this success, in November 2019 BHP Mitsubishi
Alliance (BMA) announced Goonyella Riverside Mine
would be the first site to implement autonomous haulage in
Queensland. The transition to an autonomous fleet of up to
86 trucks over the next two years is underway and will involve
more than 40,000 hours of training delivered to the Goonyella
team to develop the competencies required for autonomous
operations. BMA’s Daunia Mine (also in Central Queensland)
will transition 34 trucks over 14 months with 30,000 hours
of training. In February, Newman East (Eastern Ridge) was
announced as the next iron ore site to deploy this technology.
While the introduction of this technology removes the need
for an operator in the haul truck, new roles are being created
in the operations as a result. Roles such as field officers,
service technicians and mine controllers are an essential part
of an autonomous operation and we are working with our
people to provide opportunities to transition into these new
roles. Our people and the communities in which we operate
are central to this change.
For more information on developing our people,
refer to section 1.6.1.
1.7 Sustainability
1.7.1 Sustainability guided by our purpose
Our commitment to sustainability starts with our purpose – to bring people and resources together to build
a better world. Our purpose reflects why we exist and underpins everything we do.
Our products support global economic development and many
aspects of modern life, helping maintain and raise living standards
for people around the world. They have been doing this for more
than 100 years and will continue to do so into the future. We realise
the production and use of our products has other impacts and
we are committed to understanding these impacts and minimising
and mitigating where they may have adverse effects.
Delivering our purpose requires us to make decisions based not
only on financial value, but social value, value that cannot be
measured in simple monetary terms. Without it, the economic
contributions we deliver will not be sustainable. Our commitment
to social value will enable our ability to attract and retain the best
talent, attract the best commercial partners and achieve the widest
access to resources, markets and capital.
The importance of social value to delivering sustainable financial
returns is especially relevant in the production of resources.
Our business is characterised by large-scale investments in
long-term assets and supply chains that often operate for decades.
We choose to do more than meet the terms of our contracts,
permits and licences. The currency of social value is not
compliance, but trust. We are committed to making a positive
contribution to the environment and society and seek to build
deep and authentic relationships with our local, regional and global
stakeholders. Our aim is to ensure that our business benefits our
stakeholders – financially, environmentally and socially.
planning process – through which we deliver on our strategy –
and the assessment of our businesses and people through the
scorecard used to reward employees, from the front line to the CEO.
Our management of sustainability lies at the core of our efforts
to generate social value. That includes:
• putting the health and safety of our people first
• being environmentally responsible
• respecting human rights
• supporting the communities in which we operate
When our efforts to create social value are successful, they
are a source of sustained competitive advantage. Ultimately,
our management of sustainability enables our commercial
performance and underpins it.
That is why this year for the first time we have integrated reporting
on our sustainability commitments and our performance against
them into this Annual Report. This reflects our belief that sustainability
performance is an integral driver of long-term shareholder and social
value and is something our stakeholders value.
We recognise the delivery of sustainable outcomes is never
complete and the challenges aren’t static; it will always require
our focus. Our approach, however, will be informed by our
purpose, our commitment to social value creation, and the
knowledge that the commodities we produce enable global
growth and improve the lives of people around the world.
Social value is a BHP priority and is considered at every level of our
decision-making. It is embedded into our whole-of-business five-year
We welcome your feedback.
Our material sustainability issues
How we report
We use international frameworks to
track our performance, such as the
Global Reporting Initiative (GRI)
Standards and the International
Council on Mining and Metals (ICMM)
Mining Principles.
We conduct an annual materiality
assessment to identify key sustainability
issues for BHP. The issues identified in
FY2020 are in the table below. More
information about our materiality
assessment is available at bhp.com.
We focus on the most material issues, which we disclose in this Annual Report.
More information on sustainability and the full suite of our FY2020 sustainability content,
including topic-specific detail and case studies, is available at bhp.com/sustainability.
For mapping against frameworks and standards, including the GRI Standards, ICMM Mining
Principles, Task Force on Climate-related Financial Disclosures (TCFD), United Nations Global
Compact (UNGC) Ten Principles and the United Nations Sustainable Development Goals
(UNSDGs), refer to our mapping navigator at bhp.com/sustainability.
For key sustainability performance data, refer to section 6.6 and our online databook.
We have obtained external limited assurance over our disclosures in sections 1.6.1 Our people,
1.6.2 Employees and contractors, 1.7 Sustainability and 6.6 Sustainability – performance data.
Refer to EY’s assurance report in section 1.7.11 for the full assurance statement.
Our sustainability approach
Society
• Board competency, succession and accountability
• Product stewardship and value chain sustainability
• Governance and management of our non-operated
Section 2
Section 1.7.7
Section 1.9.3
joint ventures
Health and safety
• Elimination of fatalities
• Safety, health and wellbeing of our people and
Section 1.7.3
Section 1.7.4
the community
Ethics and business conduct
• Anti-corruption and bribery
• Transparency and disclosure
Environment
• Biodiversity and land management
• Environmental impacts of our operations
• Managing air emissions
• Water management and access
Climate change
• Community relationships
• Respecting human rights
• Indigenous peoples
• Economic support for communities and
social investment
Tailings dams
• Dams and tailings management
• Response to Samarco
People
Section 1.7.5
• Inclusion and diversity
• Training and development of our people
• Technology
Section 1.7.6
Economic contribution
• Tax and royalty payments
• Portfolio resilience
• Physical impacts of climate change
• Minimising greenhouse gas emissions (GHG) from
our operations and from the use of our products
• Global response to climate change
Section 1.7.8 and
Climate Change
Report 2020
Section 1.7.9
Section 1.7.10
Section 1.8
Section 1.6.1
Section 1.6.1
Section 1.6.3
Economic
Contribution
Report 2020
BHP Annual Report 2020 51
Governance at BHPRemuneration ReportDirectors’ ReportFinancial StatementsAdditional informationShareholder informationStrategic Report1 1.7.2 Our approach
We must consider the wellbeing of our people, the communities in which we operate and the environment
in everything we do. Our approach to sustainability and social value reflects this. We look to integrate social
value into our decision-making and actions by considering the needs of our many stakeholders and finding
new and innovative solutions that create mutual benefit.
Our approach to sustainability is defined by Our Charter and
realised through Our Requirements standards. These standards
describe our mandatory minimum performance requirements and
provide the foundation to develop and implement management
systems at our operated assets.
We set clear targets to improve our sustainability performance.
We embed sustainability performance measures throughout the
Group through our public five-year sustainability targets. Achieving
these targets and working towards our goals aligns with our
commitments to the objectives of the Paris Agreement and the
UNSDGs. For more information about our FY2020 performance
against our targets, refer to section 1.4.8.
Keeping ourselves accountable
We voluntarily commit to several sustainability frameworks,
standards and initiatives and transparently disclose data according
to their requirements. The sustainability disclosures within this
Strategic Report align with the ICMM Sustainable Development
Framework and are prepared in accordance with the GRI Standards
comprehensive-level reporting. As BHP is a UNGC signatory,
this serves as our UNGC Communication on Progress on
implementation of the UNGC Ten Principles and support for
its broader development objectives.
Results
Targets
Metrics/indicators
Systems
Our Requirements standards
Through reporting, we are accountable to our stakeholders for results.
Identifying metrics and indicators to track performance and setting clear targets
challenge us, drive improvement and allow stakeholders to assess our
performance in the areas that matter most.
Our Requirements standards are the foundation for developing and
implementing effective management solutions.
Our Code of Conduct
Our Code of Conduct supports Our Charter and reflects many of the standards
and procedures applied throughout BHP.
Our Charter
Our Charter articulates our purpose, our values, how we measure success and
forms the basis for decision-making.
52 BHP Annual Report 2020
Contributing to sustainable development
The UNSDGs (SDGs) are goals to improve the wellbeing of present and future generations. The 17 UNSDGs promote sustainable
development to tackle the world’s most pressing challenges. We recognise that we have the ability to contribute to broader societal goals
with our stakeholders, enabling the creation of mutual benefit. We recognise that our business activities can create negative impacts and
to contribute meaningfully to the SDGs we must consider how we do business. The interconnectedness of the SDGs means that a positive
contribution to one does not compensate for negative impacts in others, so we work to understand the linkages, manage and mitigate our
impacts, and determine how we can make a positive contribution to the SDGs most relevant to our business and social value priorities.
We contribute towards the achievement of the SDGs through:
Our work on inclusion and diversity (refer to
section 1.6.1 for information on our approach
and how we are tracking against our goal of
achieving gender balance in our workforce
by the end of CY2025) (SDGs 5 and 8)
Our focus on water stewardship
(refer to section 1.7.6 for information
on our approach to water
management) (SDG 6)
Our work on marine and terrestrial
biodiversity (refer to section 1.7.6 for
information on our approach to
biodiversity) (SDGs 14 and 15)
The taxes and royalties we pay to host
governments, the direct and indirect
employment opportunities we create
and our supply chain (refer to section
1.4.9 and our Economic Contribution
Report 2020) (SDG 8)
Our voluntary social investment
(refer to section 1.7.9 for information
on our social investment strategy
and framework) (SDGs 3, 4 and 11)
Our commitment to the Paris
Agreement goals and action to reduce
our operational emissions help to
address emissions in our value chain,
build resilience and enhance the
global response to climate change
(refer to section 1.7.7 for information
on our approach to value chain
sustainability and 1.7.8 for our
approach to climate change) (SDG 13)
This approach allows us to work in partnership with others to achieve mutually beneficial outcomes (SDG 17).
Our stakeholders
BHP is committed to building strong relationships with
our stakeholders to achieve long-term sustainable social,
environmental and economic outcomes. We actively participate
in government consultations and voluntary initiatives, and
engage with industry associations to support positive change
and sustainable practices. Locally, our operated assets develop
mutually beneficial relationships with communities and plan,
implement and document stakeholder engagement activities.
A detailed description of our stakeholders, their interests and
how we engage with them is available at bhp.com/sustainability.
For information on how the Board engages with key stakeholder
groups, refer to section 1.4.3.
Sustainability governance
BHP’s Board oversees our approach to sustainability. The Board’s
Sustainability Committee has oversight of health, safety,
environmental and community (HSEC) matters and assists
the Board with governance and monitoring. Members of the
Sustainability Committee are Non-executive Directors determined
by the Board to have appropriate skills in HSEC matters.
The members of the Sustainability Committee in FY2020
were Malcolm Broomhead, Ian Cockerill, Gary Goldberg (from
1 February 2020) and John Mogford. The Committee met five
times during FY2020, three times face to face and twice virtually.
The Sustainability Committee also oversees the adequacy of the
systems to identify and manage HSEC-related risks, 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. In FY2020, three of the five Sustainability
Committee meetings included a joint session with the RAC.
For more information, refer to section 2.10.
The Sustainability Committee recommends to the Board the
approval of disclosures regarding sustainability matters in
conjunction with the Annual Report. The Committee also guides the
Remuneration Committee in setting HSEC-related scorecard targets
and evaluating performance against those targets. The Sustainability
Committee also meets with the Forum on Corporate Responsibility,
as described in the Section 172 Statement in section 1.4.3.
For more information about the Sustainability
Committee and its work, refer to section 2.11.
BHP Annual Report 2020 53
Governance at BHPRemuneration ReportDirectors’ ReportFinancial StatementsAdditional informationShareholder informationStrategic Report1 1.7.2 Our approach continued
Regulatory requirements
We are committed to complying with the laws and regulations of
the jurisdictions in which we operate and aim to exceed legal and
regulatory requirements where they are less stringent than our own
internal standards.
We set clear sustainability accountabilities. Everyone involved in
our operated assets and our functions is guided in the execution of
these accountabilities by Our Charter and supported by Our Code
of Conduct and the Our Requirements standards.
Although these standards are for internal use, we have made the
HSEC-related elements of several of the Our Requirements
standards and related documents publicly available at bhp.com.
We updated and released the Our Requirements for Environment
and Climate Change standard in FY2020.
We comply with the Non-financial Reporting Directive requirements
from sections 414CA and 414CB of the UK Companies Act 2006.
The table below sets out where relevant information is located
in this Annual Report.
Reporting requirement
Reference in this Annual Report
Policies and standards available online
Environmental matters
1.7.6 Environment
Employees
1.6.1 Our people
1.6.2 Employees and contractors
1.7.3 Safety
1.7.4 Health
Social matters and human rights
1.7.9 Community
Anti-corruption and anti-bribery matters
1.7.5 Ethics and business conduct
Our Requirements for Environment and Climate Change standard
Water Stewardship Position Statement
Climate Change Position Statement
Our Code of Conduct
Our Requirements for Safety standard
Our Requirements for Health standard
Our Code of Conduct
Our Requirements for Community, Environment and Climate
Change, Security and Emergency Management standards,
and Our Requirements for Supply standard (Minimum
requirements for suppliers)
Human Rights Policy Statement
Indigenous Peoples Policy Statement
Indigenous Peoples Strategy
Our Code of Conduct
Our Requirements for Supply standard
(minimum requirements for suppliers)
Principal risks relating to the matters
mentioned above
1.5.4 Risk management
Our mandatory minimum performance requirements
for risk management
Non-financial key performance indicators 1.4.8 Our performance: Non-financial KPIs
6.6 Sustainability – performance data
54 BHP Annual Report 2020
1.7.3 Safety
Our highest priority is the safety of our workforce and the communities in which we operate.
Contractor safety
In FY2020, we implemented additional safety requirements for
engaging, contracting and transacting with our contractors.
These contractor safety requirements have been rolled out across
BHP’s operated assets. In addition, the integrated Contractor
Management Program was established to:
• take a human-centric, inclusive approach to establish
partnerships with external service providers, driving safer work
through integrated processes and technologies
• develop long-term mutually beneficial relationships with our
external partners
• support an inclusive, respectful and caring workforce culture,
with improved safety, health and wellbeing outcomes
Event management
During FY2019, we introduced our improved and more intuitive
event management system. The system records health, safety,
environmental and community events, and is designed to capture,
analyse and track those events in real time. The system allows us
to capture incident investigations and share information across
the organisation so that we can learn from those incidents.
The system drives data quality, through consistent inputs and
outputs, producing meaningful and effective reports. In FY2020,
we enhanced our event management system to allow events to
be recorded in more detail, to enable deeper analysis and
continuous improvement.
For more information on safety visit bhp.com/sustainability.
In FY2020, there were no fatalities at our operated assets,
and we have continued the disciplined implementation of our
safety standards. We have continued to improve and refine our
Field Leadership Program, incident investigations, and controls
to manage fatal risks.
We continue to strengthen our safety leadership and culture
by educating our people about chronic unease, which 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 coach and support
our leaders to improve the quality of our field leadership activities
with our employees and contractors.
To support the BHP target of zero work-related fatalities, we have
been working towards global risk standardisation of critical controls
and performance standards for three safety risks: person(s) falling
from heights; lifting and cranage; and confined space incidents.
Our safety performance
Total recordable injury frequency (per million hours worked)
Year ended 30 June
Total recordable injury frequency (1)
2020
4.2
2019
4.7
2018
4.4
(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.
Our total recordable injury frequency (TRIF) performance
decreased by 11 per cent from FY2019.
High potential injury events (1)
Year ended 30 June
High potential injury events (2)
2020
42
2019
50
2018
54
(1) High potential injury basis of calculation revised in FY2020 from event count
to injury count as part of a safety reporting methodology improvement.
(2) 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 decreased by 16 per cent from FY2019 and
the frequency rate decreased by 23 per cent. We see the highest
number of events that have fatality potential in vehicle, mobile
equipment, dropped and falling object events. High potential injury
trends remain a primary focus to assess progress against our most
important safety objective: to eliminate fatalities.
BHP Annual Report 2020 55
Governance at BHPRemuneration ReportDirectors’ ReportFinancial StatementsAdditional informationShareholder informationStrategic Report1 1.7.4 Health
We recognise that activities at our operated assets can impact the health of our people. We set clear
requirements with mandatory minimum controls (the Our Requirements for Health standard) to manage
and protect the health and wellbeing of our employees and contractors.
Occupational illness
In FY2020, the reported incidence of occupational illness (1) for
employees was 4.3 per million hours worked, a decrease of
1.6 per cent compared with FY2019. The hours worked increased
by 9 per cent reducing the overall occupational illness rate.
Excluded from this reporting are cases of COVID-19 among our
employees that may have arisen from workplace transmission.
This is due to the inherent difficulty in concluding, with reasonable
certainty, that a person was infected as a consequence of work-
related activities or exposure in a setting of high levels of community
transmission and evolving understanding of the epidemiological
criteria for infection. For internal risk management purposes,
we have sought to identify where risks of workplace transmission
may have been a factor. Review of this information, along with a suite
of leading indicators, has supported the continual evaluation of the
effectiveness of our COVID-19 controls and informed improvement
opportunities. We are progressing work on classification and
verification of potential work-relatedness for COVID-19 cases in
further support of enhancing our risk management processes and
enabling external reporting. For key statistics and more information
on our COVID-19 response, refer to section 1.4.6.
Reported cases of employee Occupational illness
Per million hours worked
5
4
3
2
1
0
0.73
0.72
0.51
2.71
0.66
2.55
2.48
1.75
0.87
2.84
1.75
1.48
1.11
1.19
0.60
0
2
0
2
Y
F
9
1
0
2
Y
F
8
1
0
2
Y
F
7
1
0
2
Y
F
6
1
0
2
Y
F
● Noise induced hearing loss
● Musculoskeletal disease
● Other
The data for FY2016 to FY2018 includes Continuing and
Discontinued operations (Onshore US assets). FY2019 data includes
Discontinued operations (Onshore US assets) to 31 October 2018
and Continuing operations.
The reported incidence of contractor occupational illness was
1.43 per million hours worked, a decrease of 11 per cent compared
with 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. Also
excluded from this reporting are cases of COVID-19 among contractors
engaged by BHP, due to the inherent difficulty in concluding, with
reasonable certainty, that a person was infected as a consequence
of work-related activities or exposure, as described above.
The majority of our reported occupational illnesses are
musculoskeletal illness, which are conditions impacting the
musculoskeletal system and connective tissues attributable
to repetitive work-related stress or strain or exposure over time.
Musculoskeletal illness does not include disorders caused by
slips, trips, falls or similar incidents. We are trialling the APHIRM
(A Participative Hazard Identification and Risk Management) toolkit
developed by La Trobe University at a number of our
MineralsAustralia operated assets. Planned additional trials in
FY2020 were delayed due to COVID-19. APHIRM applies a concept
referred to as ‘systems thinking’ where work is considered as a
whole, to provide effective identification, assessment and
management of risks. Through our Standardised Work Program, we
seek to empower individuals to design their work in a way that
focuses on potentially damaging energies (for example electrical,
gravitational, high pressure) to identify health and other risks and
implement controls.
The main changes in the incidence of occupational illness in FY2020
compared to FY2019 were a decrease in the rate of employee cases
of NIHL reported by our operated assets in South America, which
were offset by an increase in the rate of musculoskeletal illness in
Minerals Australia. As noted above the hours worked increased by
9 per cent, reducing the overall illness rate.
In March 2020, health surveillance activities, such as audiometric
testing, had to be suspended in some operated assets in Australia
and South America due to the requirements of managing
COVID-19. This influenced the reduced number of
NIHL cases reported by the operated assets in South America.
Occupational exposures
For more than a decade BHP has set occupational exposure limits
(OELs) for our most material exposures based upon the latest
scientific evidence, which for a number of agents resulted in
stricter limits than the regulatory requirements, and for others,
such as diesel exhaust, a significantly lower limit than regulations
require. Where exposures potentially exceed regulatory limits or
the stricter limits of BHP, respiratory protective equipment is worn.
In addition, for our most material exposures to diesel particulate
matter (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 (2) as compared to our baseline
exposure profile (as at 30 June 2017 (3) (4)) by FY2022. In FY2016,
we committed to applying an OEL of 0.03 mg/m3 for DPM and in
FY2017, we committed to applying OELs of 1.5 mg/m3 for respirable
coal mine dust by 1 July 2020 and 0.05 mg/m3 for silica by 1 July
2021. Exposure data in this Report is based on these limits and in
all cases discounts the effect of personal protective equipment.
In FY2020, there was a reduction in potential exposure to silica
in excess our OEL of 8 per cent compared to FY2019 reported
by our Minerals Americas operated assets. An initial qualitative
assessment of some work groups indicated potential exposure in
excess of our OEL; however, an extensive quantitative assessment
determined exposure to be less than estimated and less than our
OEL. At our Minerals Australia coal operated assets, implemented
exposure reduction projects have reduced potential exposure
to silica in FY2020 by 30 per cent compared to FY2019. Overall,
in FY2020 we achieved a reduction of 13 per cent compared
to FY2019 in the number of workers potentially exposed to silica
in excess of our OEL.
In FY2020, exposure to respirable coal mine dust remained below our
OEL in all operated assets. Work to control exposure to diesel exhaust
particulate at Olympic Dam and Nickel West resulted in potential
exposure being reduced by 55 per cent compared to FY2019 and
by 88 per cent compared to the adjusted FY2017 baseline.
Overall, our material exposures have reduced by 60 per cent
compared to the adjusted FY2017 baseline, which exceeds our
FY2022 target.
Coal mine dust lung disease
As at 30 June 2020, two cases of coal mine dust lung disease
(CMDLD) (1) were recorded among our current employees at our
coal operated assets. In addition, one current employee who had
previously been recorded as a case of CMDLD had a workers’
compensation claim accepted. There were five former BHP
employees who had a workers’ compensation claim accepted
for CMDLD in FY2020.
(1) An illness that occurs as a consequence of work-related activities or exposure.
(2) For exposures exceeding our FY2017 occupational exposure limits discounting the use of personal protective equipment, where required.
(3) 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.
(4) The baseline has been adjusted to exclude Discontinued operations (Onshore US assets).
56 BHP Annual Report 2020
Mental health
We prioritised focus on the mental health of our people in 2015
and are making good progress with the implementation of our
Group-wide Mental Health Framework.
In the second half of FY2020, activity focused on support for our
workforce during the COVID-19 pandemic. Our Resilience Program
was reinforced with a program refresher and, in response to the
COVID-19 pandemic, we progressed virtual delivery by developing
podcasts and videos to supplement the peer-led program.
COVID-19 specific examples were developed for discussion during
delivery of the program. We have provided additional support
through employee assistance programs for our workforce and
their families and have increased access to counselling to assist
in addressing the impacts of the pandemic. As part of our Risk
Framework, we have set a key risk indicator (KRI) for mental health
using annual Engagement and Perception Survey (EPS) outcomes.
Our annual EPS was not held during FY2020; instead we have been
running a weekly COVID-19 wellbeing survey with more than
55,000 responses being received. We also conduct annual mental
health maturity curve assessments in our operated assets, which
include pillars such as culture, capacity, prevention and recovery
to assess year-on-year progress against those pillars and provide
focus for future action.
For more information on health visit bhp.com/sustainability.
1.7.5 Ethics and business conduct
Our conduct
Every day, BHP works to deliver the resources that are the building
blocks of an ever-changing world. While what we achieve is
important, so is how we achieve it.
We know consistent ethical behaviour cultivates a culture of
inclusion, care and trust, which ultimately results in improved
performance by BHP. It also strengthens our relationships with
the communities where we work and helps protect the social value
we deliver.
How we work is guided by the core values in Our Charter.
They are: Sustainability, Integrity, Respect, Performance, Simplicity
and Accountability. Our Code of Conduct (Our Code) brings our
core values to life, reminds us why they are important and helps
us understand what it means to work with those values as our
guiding principle.
Acting in accordance with Our Code is a requirement for BHP
employees. Our Code is accessible to all our people and external
stakeholders at bhp.com. We deliver annual training to help our
workforce understand Our Code and the standards of behaviour
that are acceptable at BHP.
Transparency and accountability
BHP’s existence is premised on trust and public acceptance
because our mines and petroleum assets 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 long-term social value is so important to us. Our tax
and royalty payments help governments fund healthcare,
education, infrastructure and other essential services. Conversely,
any instances of corruption and poor governance of natural
resources can divert funding from provision of those essential
services and diminish the contribution of the resources sector.
We continue to support and contribute to global transparency
and anti-corruption initiatives, including through our work in
partnership with Transparency International, our representation
on the Board of the Extractive Industries Transparency Initiative,
our financial support for and Steering Committee membership
of the Bribery Prevention Network (in Australia) and through our
funding to support the work of the BHP Foundation, including
its Natural Resources Governance Global Signature Program.
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.
Anti-corruption
Our commitment to anti-corruption is embodied in Our Charter
and Our Code. We have a specific anti-corruption procedure that
sets out mandatory requirements to identify and manage the
risk of anti-corruption laws being breached. Our anti-corruption
processes require review or approval by our Ethics and Compliance
function of activities that potentially involve higher risks of exposure
to corruption. 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
prohibit facilitation payments, which are payments to government
officials for routine government actions. We 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 regions, and reports to the Chief External Affairs
Officer. The Chief Compliance Officer previously provided a report
twice a year to the RAC on ethics and compliance issues. Since
March 2020, the Chief Compliance Officer reports quarterly to
the RAC and meets separately with the Committee Chair.
The Ethics and Compliance function also participates in all risk
assessments in respect of operated assets or functions considered
to carry material anti-corruption compliance risks. To date,
33 risk assessments have been completed with input from Ethics
and Compliance.
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
and otherwise to reflect best practice aligned with regulatory
requirements. Among other activities in FY2020, we conducted
a review of the design and risk weighting of key anti-corruption
compliance processes, with a particular focus on third party risk
management and related controls embedded in our contracting
processes. Regular calibration of our compliance processes
enables us to ensure optimal resource allocation to areas
presenting the highest corruption risks to our business.
In addition to anti-corruption training as part of annual training
on Our Code, additional risk-based anti-corruption training was
completed by 3,244 employees and contractors in FY2020,
as well as employees of business partners and community partners.
In recognition of the impacts on our workforce of COVID-19
disruptions, the end of the time period for relevant employees
to complete the additional risk-based anti-corruption training
was extended from 30 June 2020 to 31 August 2020.
More information on ethics and business conduct is available
at bhp.com/sustainability.
(1) CMDLD is the name given to the lung diseases related to exposure to coal mine dust and includes coal workers’ pneumoconiosis, silicosis, mixed dust pneumoconiosis
and chronic obstructive pulmonary disease.
BHP Annual Report 2020 57
Governance at BHPRemuneration ReportDirectors’ ReportFinancial StatementsAdditional informationShareholder informationStrategic Report1 1.7.6 Environment
To support continual improvement in environmental performance,
each of our operated assets is required to have an Environmental
Management System (EMS) that aligns with ISO14001 standards
and set target environmental outcomes for land, biodiversity, air
and water resources that are consistent with the assessed risks
and potential impacts. Target environmental outcomes are required
to be approved by the relevant Asset President or equivalent and
included in the life of asset plan. Verification of the EMS is either via
ISO14001 certification, for those sites that currently hold ISO14001
certification, or internal assurance processes.
We released an updated version of the Our Requirements for
Environment and Climate Change standard in FY2020, to reflect
recent changes in BHP’s Risk Framework and other Our
Requirements standards, our Water Stewardship Position
Statement, current public environment targets for climate change,
water and biodiversity, and new technical standards for water.
Our operated assets are required to have an implementation plan
in place for new requirements contained in the updated version
of the standard.
More information on our environment approach, the Our
Requirements for Environment and Climate Change standard and
environmental management and governance processes is available
at bhp.com/sustainability.
Minimising environmental impacts
There is growing pressure on and competition for environmental
resources, such as land, biodiversity, water and air; and climate
change amplifies aspects of 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 seek to avoid, minimise
and mitigate adverse environmental impacts at every stage
in the life cycle of our operated assets in line with our defined
risk appetite. However, we recognise our activities have an
environmental footprint, and therefore, we also commit to making
voluntary contributions to support environmental resilience across
the regions in which we operate.
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 standard
and our mandatory minimum performance requirements for risk
management. These standards have been designed taking account
of the ISO management system requirements, such as ISO14001
for Environmental Management.
The Our Requirements for Environment and Climate Change
standard outlines our Group-wide mandatory minimum
requirements to deliver on our commitments and manage risk.
It requires us to take an integrated, risk-based approach to the
management of any actual or reasonably foreseeable operational
impacts (which includes direct, indirect and cumulative impacts)
on land, biodiversity, water and air. We establish and implement
monitoring and review practices designed to ensure continued
management of environment-related risk within our risk appetite
through business planning and project evaluation cycles.
In addition to the environment specific components, the standard
also includes specific climate change-related requirements
for our operated assets.
58 BHP Annual Report 2020
Land and biodiversity
The nature of our activities means we have a significant
responsibility for land and biodiversity management. BHP owns or
manages more than 8 million hectares of land and sea; however,
less than 2 per cent of it is disturbed (physical or chemical
alteration that substantially disrupts the pre-existing habitats and
land cover) for our operational activities.
At each of our operated assets, we look to manage threats and
realise opportunities to achieve our environmental objectives by
applying the mitigation hierarchy (avoid, mitigate, rehabilitate and,
where appropriate, apply compensatory measures) to any potential
or adverse residual impacts on marine or terrestrial ecosystems.
BHP respects legally designated protected areas and commits to
avoiding areas or activities where we consider the environmental
risk is outside BHP’s risk appetite. These include:
• We do not explore or extract resources within the boundaries
of World Heritage-listed properties.
• We do not explore or extract resources adjacent to World
Heritage-listed properties, unless the proposed activity is
compatible with the outstanding universal values for which the
World Heritage property is listed.
• We do not explore or extract resources within or adjacent to
the boundaries of the International Union for Conservation of
Nature (IUCN) Protected Areas Categories I to IV, unless a plan
is implemented that meets regulatory requirements, takes into
account stakeholder expectations and contributes to the values
for which the protected area is listed.
• We do not operate where there is a risk of direct impacts to
ecosystems that could result in the extinction of an IUCN Red List
Threatened Species in the wild.
• We do not dispose of mined waste rock or tailings into a river
or marine environment.
Our operated assets are required to have plans and processes
in place that reflect local biodiversity risks and regulatory
requirements. In FY2020, we undertook work to develop internal
guidance on biodiversity-related elements of the Our Requirements
for Environment and Climate Change standard, to support more
consistent interpretation and application at an asset level. We have
a five-year target to improve marine and terrestrial biodiversity
outcomes by developing a framework by FY2022 to evaluate and
verify the benefits of our actions, in collaboration with others. This
is intended to allow us to better monitor, avoid, reduce and offset
the biodiversity impacts of our activities in a coordinated way.
We started work on development of the framework in FY2018
and are progressing this work with Conservation International
and with Proteus, a voluntary partnership between the UN
Environment World Conservation Monitoring Centre and
12 extractive industry companies. During FY2020, we continued
to pilot initial stages of the methodology agreed with partners for
framework development at a number of BHP operated assets and
projects. We shared findings of our pilots as part of the Proteus-led
framework development process and at industry forums. The next
stage of framework development will be to take the individual site
data and build this into a scorecard to track biodiversity status
and trends at an asset and regional level. We intend to use the
framework to track achievement of our long-term biodiversity goal:
in line with UNSDGs 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.
More information on our approach to biodiversity
and land management and current performance is
available at bhp.com/sustainability.
Air emissions
The most significant air emissions across our portfolio of operated
assets relate to emissions of greenhouse gases (GHG) and dust.
For information relating to GHG emissions, refer to section 1.7.8
and bhp.com/climate.
We recognise the importance of managing and controlling the dust
that mining operations can generate to minimise potential impacts
on air quality, health and the environment. The updated version of
the Our Requirements for Environment and Climate Change
standard includes the requirement for operated assets that have
identified the potential for a significant air-related impact on
community wellbeing, to develop an air quality plan. The plan must
consider in its development a stakeholder engagement strategy,
dispersion modelling, targets, objectives and reporting.
In FY2020, we progressed a number of actions to improve dust
management at our operated assets. At Western Australia Iron Ore
(WAIO), we announced plans to invest up to a further A$300 million
over five years to improve air quality and reduce dust emissions
across our Pilbara operations. Operational dust control projects are
proposed across the entire Pilbara activities chain, including
actions such as moisture management systems, ore conditioning
and monitoring infrastructure, and improvements to existing
controls at mines and port facilities.
At our Mt Arthur Coal mine in the Hunter Valley, Australia, we
recently implemented a comprehensive dust control system, which
utilises an extensive network of real-time dust and meteorological
monitors linked to our business information platform and informs
the Integrated Remote Operations Centre (IROC) that controls all
of the mining activities. The innovative approach and demonstrable
effect on air quality was recognised by award of the 2019 Industry
Excellence Award from the Clean Air Society of Australia and
New Zealand.
In Chile, the Spence mine has developed an air quality strategy
focusing on air quality monitoring, dust management controls,
protecting our workforce and engaging stakeholders.
For more information on current initiatives to improve our
dust management performance, see our ‘How strategic dust
management is improving our air emissions’ case study at bhp.com.
BHP Annual Report 2020 59
Governance at BHPRemuneration ReportDirectors’ ReportFinancial StatementsAdditional informationShareholder informationStrategic Report1 1.7.6 Environment continued
Rehabilitation and closure
In recognition of the potentially significant financial, environmental,
climate-related and social risks associated with future closure
of our operations, we are committed to integrating closure and
rehabilitation into our planning, decision-making and activities
through the entire life cycle of our assets.
BHP’s closure objective is to deliver optimised closure outcomes
for our operated assets in consultation with local communities
and other stakeholders. Optimised closure outcomes are those
that minimise adverse impacts and maximise post-closure value.
We implement our objective by following the closure management
process, which is designed to produce an optimised closure
management plan that is integrated into our operational plans.
In addition to compliance with legal requirements, our closure
management process takes into consideration our values,
commitment to safety, and technical and economic achievability.
We develop site-specific closure management plans for our
operated assets that are designed to deliver enduring
environmental and social benefits.
The closure outcome for a site may include one or a combination
of alternative land use (including for enduring environmental and
social benefits), ongoing management, relinquishment or
responsible divestment. As part of the closure management
process, BHP operated assets are required to prepare and maintain
a closure management plan that balances business and external
stakeholder interests and meets the following closure objectives:
• comply with our obligations, legal requirements and BHP
mandatory minimum performance requirements for closure
• achieve safe and stable outcomes
• effectively manage risks (both threats and opportunities)
• meet approved target environmental outcomes by following the
Our Requirements for Environment and Climate Change standard
• progressively reduce obligations, including progressive closure
of the area disturbed by our operational footprint
• manage and optimise closure costs
Information about BHP’s financial provision related to rehabilitation
and closure liabilities is available in note 14 ‘Closure and
rehabilitation provisions’ in section 5.
We apply BHP’s Risk Framework to our closure management
process to appropriately identify and manage closure risks (both
threats and opportunities) in our closure management plans. Our
closure management plans are also required to include long-term
monitoring to verify that any controls implemented are effective
and performance standards are achieved and maintained after
operations cease.
We regularly review our process to progressively close and
rehabilitate areas that are no longer required for operational
purposes and update our closure management plans and practices
as required with knowledge obtained from on-site experience
across our business and leading practice from the global industry.
We report annually on the status of land disturbance
and rehabilitation.
More information on our approach to closure
is available at bhp.com/sustainability.
Contributing to a resilient environment
BHP recognises we have a broader role to play in contributing
to environmental resilience. We achieve this through our social
investment strategy 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.
We have committed more than US$78 million to biodiversity
conservation since 2011, through our alliance with Conservation
International and other partners. We look for projects that can
provide multiple benefits, such as contributing to water quality
or quantity, nature-based solutions to climate change and local
livelihoods or cultural benefits, in addition to contributing to
biodiversity conservation.
More information on initiatives we have contributed
to is available at bhp.com/sustainability.
60 BHP Annual Report 2020
Water
Access to safe, clean water is a basic human right, central to
livelihoods and essential to maintaining healthy ecosystems.
Water is also integral to what we do and BHP cannot operate
without it. We adopted a Water Stewardship Strategy 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 which
is available at bhp.com/environment/water.
Our vision is for a water secure world by CY2030, consistent with
the UNSDGs and our previously communicated CY2030 public
goal for water. Communities, governments, business and civil
society must work together to build a world where terrestrial and
marine water resources are conserved and resilient, and continue
to support healthy communities and ecosystems, maintain cultural
and spiritual values and sustain economic growth.
We interact with water in a number of ways, including: extracting it
for ore processing, cooling, dust suppression and processing mine
tailings; managing it to access ore through dewatering, as part of
the oil recovery process and at our closed operations; providing
drinking water and sanitation facilities; ecosystem irrigation;
discharging it back to the receiving environment; interacting with
marine water resources through our port facilities and offshore
Petroleum facilities; and utilising marine water for desalination.
We recognise our responsibility to effectively manage our
interactions and minimise impacts on water resources. Effective
water stewardship must begin within our operations. From there,
we can more credibly collaborate with others toward solutions
to shared water challenges. Water challenges that we face may
include water scarcity or high variability in water supply due to
climatic conditions or collective use or impacts within a catchment.
These challenges need to be managed appropriately to minimise
impacts to the environment, communities and BHP’s ongoing
viability. We identify and assess opportunities to reduce stress
on high-risk water resources and implement actions where
appropriate. For example:
• Queensland Coal is located in a region with highly variable
rainfall. In any given year, we may need to manage an excess of
water or an insufficient water supply for operational needs, which
may influence our projected production or costs. In FY2020, a
number of intense rainfall events in the location of Queensland
Coal resulted in capture of water volumes above that needed for
operations. This excess water is managed to minimise impacts
to the environment and community while maintaining operational
continuity, with a number of options available including: storage
for future use; transfer to other sites that require water; or
discharge in line with legal requirements.
• Escondida mine extracted groundwater from the Andean aquifers
in Chile, where freshwater resources are scarce. In December
2019, we ceased extraction of groundwater for operational
purposes (other than small quantities of groundwater extracted
for pit dewatering to allow safe mining) 10 years earlier than
originally scheduled.
• WAIO operations commonly mine ore that is below the natural
water table and must extract water (an activity known as
‘dewatering’) to mine safely. The extracted water is used
to meet the mine’s water use requirements, but at most sites
the dewatering volumes exceed use requirements. This surplus
water is generally fresh to brackish in quality and is a recognised
environmental, social and economic resource. In recent years,
WAIO has developed large water infrastructure schemes to return
most of this surplus water to groundwater systems. In line with
increasing surplus water, WAIO has updated its long-term water
strategy to optimise operational considerations as well as social
value and environmental outcomes.
During FY2020, our internal focus was on strengthening our
processes for water risk management, accountabilities and data.
We progressed the implementation of our Group-wide standards
for water management, water data and drinking water, with
operated assets assessing compliance with these standards
and, where necessary, developing an action plan to achieve full
compliance. We progressed actions to further identify and assess
water interactions and operational water-related risks, including
catchment-level risks. These activities have resulted in an improved
understanding of our water-related risks.
We made progress on our public target for water. In FY2017,
we announced a five-year water target of reducing FY2022
freshwater withdrawal (1) by 15 per cent from FY2017 levels (2) across
our operated assets. Reducing the amount of fresh water we use is
important, as this is generally the water resource that communities
in which we operate and the environment most rely on.
We developed this target based on each operated asset’s
circumstances, the potential to reduce freshwater use and the
asset’s level of contribution to BHP’s water target. In FY2020,
freshwater withdrawal decreased 18 per cent (126,997 megalitres/
annum) compared to FY2019 (155,570 megalitres/annum).
The FY2020 result also represents a 19 per cent reduction on
the adjusted FY2017 baseline, exceeding our 15 per cent reduction
target. Progress on the target is primarily due to ongoing reduction
over a number of years, and from December 2019 the cessation
of groundwater withdrawal for operational supply purposes from
the Andean aquifers at Escondida. Other reductions in FY2020
include decreased surface water withdrawal at Queensland Coal,
increased sourcing of desalinated water and increased recovery
of low-quality water from water storage facilities at our operated
assets. We remain on track to sustain reductions to meet the
15 per cent reduction target in FY2022.
Our global freshwater withdrawals (1) from FY2017 to FY2020
are shown in the following figure.
Performance against freshwater
withdrawal reduction target
Megalitres
200,000
150,000
100,000
50,000
0
7
1
0
2
Y
F
8
1
0
2
Y
F
9
1
0
2
Y
F
0
2
0
2
Y
F
1
2
0
2
Y
F
2
2
0
2
Y
F
● Freshwater withdrawal
– FY2022 15% reduction target
All water performance data presented in this Report are from
operated assets during FY2020. For a year-on-year comparison
of data related to operated assets and further analysis of our
water data and performance, refer to section 6.6.5.
(1) Where ‘withdrawal’ is defined as water withdrawn and intended for use (in accordance with ‘A Practical Guide to Consistent Water Reporting’, ICMM (2017)). ‘Fresh
water’ is defined as waters other than seawater, wastewater from third parties and hypersaline groundwater. 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 of potential value to
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 and exclusion of hypersaline, wastewater, entrainment, supplies from desalination and Discontinued operations
(Onshore US assets) in FY2019 and FY2020.
BHP Annual Report 2020 61
Governance at BHPRemuneration ReportDirectors’ ReportFinancial StatementsAdditional informationShareholder informationStrategic Report1 1.7.6 Environment continued
We have publicly reported our water metrics and progress on water
specific targets for more than 15 years, since the establishment of
the Minerals Council of Australia’s Water Accounting Framework
(WAF) Input-Output Model. In FY2019 we transitioned our water
reporting to align with the ICMM ‘A Practical Guide to Consistent
Water Reporting’ (ICMM Guidelines), a mining sector framework
to allow for comparable water data reporting across the mining
and minerals sector. Although the ICMM Guidelines generally align
with the WAF and the GRI, alignment to the ICMM Guidelines has
resulted in some changes to the way we now report water data.
A key change is the terminology we use: we now describe our
water inputs as water withdrawals; and water outputs as water
consumption and water discharges.
We report on the following water metrics, as further described
in section 6.6 and in detail in the ICMM Guidelines and WAF:
• water withdrawals (water intended for use by an operated asset)
by source, quality and asset
• water discharges (water returned to the environment)
by destination, operated asset and quality
• water consumption (water used by the operated asset)
by the type of consumption (e.g. evaporation, entrainment)
• water recycled/reused (water that is used more than once
at the operated asset) by quantity and efficiency
• water diversions (water actively managed by the operated asset
but not used for any operational purposes) by quantity
The reported metrics are either measured directly, estimated
or simulated. The WAF accuracy statement process is used to
determine level of accuracy for each metric. During FY2020,
we continued to focus on improving the robustness of water data
in line with the ICMM Guidelines. We endeavour to directly measure
water withdrawals, water consumption, water discharges, water
diversion and water recycled/reused. This allows us to regularly
track and monitor data quality and performance. Using the WAF
accuracy statement approach as outlined in the ICMM guidance
(see section 3.3 of the WAF), we evaluated that 80 per cent of
withdrawal volumes and almost 70 per cent of reported discharge
volumes are measured for a majority of sources for the majority of
the year, therefore this data is considered to be at a high accuracy
level. We simulate or estimate elements, such as evaporation and
entrainment volumes, at all our operated assets as these are
challenging to measure and vary over time due to seasonal climatic
changes and product variability, which results from the changing
characteristics of ore bodies (for example, moisture content and
whether the ores are located below or above the water table).
Estimation is used in some instances, such as for runoff at
Queensland Coal, for quality categorisation. This focus on
improvements in data quality and understanding, particularly
at WAIO and Queensland Coal, has resulted in restatement
of the FY2017 data that formed part of the FY2017 baseline.
We seek to minimise our withdrawal of high-quality fresh water,
which is water with low levels of salinity, metals, pesticides and
bacteria and is relatively neutral (ph. 6-8.5) and use lower quality
or saline water instead. Seawater continues to be our largest
source of water withdrawal, representing over half of total
withdrawals, predominantly for desalination at Escondida.
Groundwater is our most significant freshwater source, at
approximately one-third of total water withdrawals, predominantly
at WAIO. Surface water withdrawals, largely influenced by rainfall,
are the primary freshwater source at Queensland Coal. Currently,
more than 85 per cent of our water withdrawals consist of water
classified as low-quality. The definitions for water quality types are
provided in section 6.8.2 and a detailed description is available
in section 2.4 of the WAF.
As we further strengthen our data quality, and our understanding
of the influencing factors on water-related risk within the water
catchment in which we operate, we will continue to refine our
approach to goal and target setting. In our Water Stewardship
Position Statement, we committed to realising our CY2030 vision
by setting public, context-based, operated asset-level targets that
will follow on from our current five-year Group-wide freshwater
withdrawal target. During FY2020, we commenced planning for
a water resource situational analysis (WRSA) process (defined in
section 6.8.2), which aims to establish a collective view on the
shared water challenges within the regions or catchments in which
we operate. The WRSA process will commence in FY2021 and will
inform our post-FY2022 water targets, which will vary across our
operated assets depending on the nature of our interactions with
water and the shared water challenges within each region.
Beyond our operational activities, we have committed to engaging
across communities, government, business and civil society
with the aim of catalysing actions to improve water governance,
increase recognition of water’s diverse values and advance
sustainable solutions. We continue to collaborate with the CEO
Water Mandate to support harmonisation of water accounting
standards. We see this as a critical step to strengthening
transparency and collaboration across all sectors for
improved water governance, in line with our Water Stewardship
Position Statement.
For more information on our approach to water stewardship,
progress against our water strategy and water performance
in FY2020, refer to section 6.6.5 and bhp.com/sustainability.
More information on environment is available
at bhp.com/sustainability.
62 BHP Annual Report 2020
1.7.7 Value chain sustainability
Promoting sustainability in our value chain
As a leading global resources company, we strive to work with our customers, suppliers and other value chain participants to promote
sustainable practices across the full life cycle of our products.
BHP’s value chain sustainability strategy takes a systems approach, designed to assess and work with others to improve the sustainability
impacts of our upstream supply chains, inbound and outbound logistics, and our products as they move through the value chain from
extraction, processing and use. We can broadly categorise value chain sustainability activities across our value chain as follows:
Responsible
sourcing:
Actions to integrate sustainability considerations into our inbound and outbound supply chains
(including shipping)
Process
stewardship:
Actions to help ensure the sustainability performance of our operated assets meets the
responsible sourcing expectations of the market
Product
stewardship: we do not have operational control
Actions to influence the sustainability performance of our downstream value chain where
Our value chain sustainability strategy seeks to identify and improve performance across a wide range of relevant issues, including
people, environment and communities. In determining where to focus, we consider financial impact as well as environmental and social
materiality. Priority areas (see below) have been identified and are aligned with BHP’s social value priorities.
People
Environment
Community
• Occupational health and safety
• Inclusion and diversity
• Ethical supply chain
• Greenhouse gas and air emissions
• Water stewardship
• Waste management
• Indigenous peoples
• Local community development
COVID-19
COVID-19 has brought with it a number of human rights challenges
throughout the value chain. During the pandemic, the welfare of
workforces and communities, in particular vulnerable populations,
has been the primary challenge while ensuring business continuity.
Seafarers are already particularly vulnerable workers globally, and
the COVID-19 pandemic has exacerbated the challenges faced by
these workers. During the pandemic, this workforce has faced the
closure of borders and reduction in flight availability, resulting in
some crew members being unable to join their vessel or to return
home for extended periods. In the early stages of the pandemic,
BHP and relevant regulatory authorities worked closely to enable
humanitarian assistance to be provided to seafarers.
We responded, for example, by supporting the seafarers centre in
Port Hedland, Australia, to reopen in conjunction with regulatory
authorities and clarified and encouraged shore leave requirements
(as put in place by the Australian state governments) to be upheld.
In addition, we worked with appropriate authorities to support a
process for the timely provision of medical attention to seafarers,
including those with suspected COVID-19. We recognise that
seafarer welfare continues to be impacted by the pandemic
and we are working to identify how BHP can further contribute
to support these vulnerable people.
Responsible sourcing
We encourage the suppliers we work with to put sustainability
at the heart of their operations. We are focused on how we can
support suppliers and service providers to adopt sustainable
business standards in health, safety, human rights, anti-corruption
and environmental protection that are in line with our own.
Contractors working at our operated assets are required to comply
with our our health, safety and environment (HSE) standards. We
also look for opportunities to minimise safety, health, human rights,
environmental and climate impacts throughout our value chain.
We take a risk-based approach to identify potential suppliers
for more in-depth assessment of their compliance against
our requirements. The approach is based on a combination
of questionnaires, due diligence and third party data.
In FY2019, the foundations of our Ethical Supply Chain and
Transparency program were developed and tested through the
completion of a pilot program. The full program was launched
in May 2020 and now forms the primary preventative control
to manage the risk of a human rights breach within BHP’s supply
chain. The program applies to all suppliers of non-traded goods
and services to BHP. This program is critical to the sustainable
operation of our business, but also to our responsibility to work
with our suppliers and contractors to manage risks that human
rights abuses present through our value chain. We are committed
to working with our suppliers to enhance their understanding
of our Ethical Supply Chain and Transparency processes, which
includes taking steps to encourage them to improve management
of human rights risks (including modern slavery) among
subcontractors and across their own supply chain.
At BHP, we take a collaborative approach with our suppliers
to maintain our commitment to sustainable operations. As an
example, we participate in the ICMM’s Innovation for Cleaner Safer
Vehicles program, which aims to introduce GHG emission-free
surface mining vehicles by 2040.
BHP Annual Report 2020 63
Governance at BHPRemuneration ReportDirectors’ ReportFinancial StatementsAdditional informationShareholder informationStrategic Report1 A focus on maritime sector emissions
We are prioritising support for emissions solutions in the maritime
sector. Ocean freight is vital to our success as a reliable global
supplier and is coming into focus as an area in which, in
partnership with the shipping industry, progress can be made to
reduce emissions. We are one of the largest dry bulk charterers in
the world, procuring freight for approximately 250 million tonnes
of iron ore, coal and copper and completing approximately
1,500 voyages each year.
The International Maritime Organisation (IMO) has set goals
to reduce the carbon intensity of international shipping by
40 per cent by CY2030 and by 70 per cent by CY2050, as well
as reducing the total annual GHG emissions from international
shipping by at least 50 per cent by CY2050. We believe we can
make an important contribution to bringing about change in the
bulk carrier segment.
Our Maritime and Supply Chain Excellence team is taking
a proactive role and seeking to drive change in the industry
to increase the focus on safety, environmental sustainability,
innovation and efficiency. BHP has continued to collaborate
with RightShip, (1) the world’s leading maritime risk management
organisation to use their GHG ratings system that encourages
charterers to use ships designed for greater energy efficiency.
In response, we have seen ship owners improve engine
performance and reduce drag. In July 2019, we released the
world’s first bulk carrier tender for LNG-fuelled transport for up
to 10 per cent of BHP’s iron ore. Introducing LNG-fuelled ships
into BHP’s maritime supply chain is expected to significantly reduce
CO2 and NOx (nitrogen oxide) emissions and eliminate SOx (sulphur
oxide) emissions along the busiest bulk transport routes globally.
More information on value chain sustainability is available
at bhp.com/sustainability.
1.7.7 Value chain sustainability continued
Process stewardship
We support industry association programs and other initiatives
that bring together participants in a product’s life cycle to improve
sustainability performance. For example, we are members of the
ICMM, apply the ICMM Mining Principles and participate in the
ICMM Materials Stewardship Facility. In FY2020, we developed
and implemented a plan to conform to the updated ICMM Mining
Principles, which now include clearly articulated performance
expectations and requirements for asset-level validation. We are
members of Responsible Steel, participated in the London Metal
Exchange’s consultation on responsible sourcing standards and
participated in the development of the Copper Mark, a new
assurance program for responsible copper production established
by the International Copper Association. Our participation in these
initiatives is aimed at ensuring the standards and thresholds are
meaningful and drive a fundamental change in the industry.
Product stewardship
BHP encourages the responsible design, use, reuse, recycling and
disposal of our products throughout our value chain, in line with
the ICMM Mining Principles.
Our Sales and Marketing team works with our operated assets
to maintain compliance with all product regulatory requirements
in relevant markets. This includes assessing the hazards of the
products of mining according to UN Globally Harmonised System
of Hazard Classification and Labelling or equivalent relevant
regulatory systems, and communicating through safety data
sheets and labelling as appropriate.
Where possible, BHP also works directly with those involved
in the processing and use of our products to improve environmental
performance throughout the value chain, and to promote the
sustainable use of our products. For example, we work with
individual customers to design and test raw material blends that
optimise environmental performance. We also collaborate on
research with customers, industry bodies and academia to identify
sustainable product and process improvements. We seek to
improve traceability and transparency of products through piloting
blockchain initiatives with industry consortia.
In July 2019, BHP committed to set public goals related to
Scope 3 GHG emissions. During FY2020, we investigated BHP’s
opportunities to influence GHG emissions reductions through
an analysis of our value chain and consultation with suppliers,
customers, investors and other stakeholders. As a result, we have
set Scope 3 GHG emissions goals for CY2030.
For more information on our approach to value chain
sustainability visit bhp.com/sustainability.
(1) RightShip is equally owned by BHP, Rio Tinto and Cargill. More information is available at rightship.com.
64 BHP Annual Report 2020
1.7.8 Climate change
This year, we produced the BHP Climate Change
Report 2020, aligned with the Task Force on
Climate-related Financial Disclosures (TCFD)
recommendations. The Report provides a more
detailed discussion of our approach to identifying
and managing climate-related risks (both threats
and opportunities) and our progress on our public
commitments in response to climate change.
More information is available at bhp.com/climate.
Warming of the climate is unequivocal, the human influence is clear and physical impacts are unavoidable.
We believe the world must pursue the Paris Agreement goals,
with increased levels of national and global ambition, to limit the
impacts of climate change. Access to affordable and clean energy
and the availability of natural resources for manufacturing are
essential to meet sustainable development goals. At BHP, we
advocate for actions in line with the Paris Agreement goals while
recognising the challenge of achieving these goals is of global scale
and historic complexity.
Portfolio analysis
The BHP Climate Change Report 2020 describes our latest portfolio
analysis, including four scenarios: Central Energy View and Lower
Carbon View which we use as inputs to our planning cases; a
non-linear, higher temperature Climate Crisis scenario, and a 1.5°C
Paris-aligned scenario.
There are inherent limitations with scenario analysis and it is
difficult to predict which, if any, of the scenarios might eventuate.
Scenarios do not constitute definitive outcomes for us. Scenario
analysis relies on assumptions that may or may not be, or prove
to be, correct and may or may not eventuate, and scenarios may
be impacted by additional factors to the assumptions disclosed.
To stay within a carbon budget that keeps global warming to no
more than 1.5°C, the 1.5°C scenario requires steep global annual
emissions reductions, sustained for decades. This pathway to
2050 represents a major departure from today’s global trajectory.
Our updated portfolio analysis demonstrates that our business can
continue to thrive over the next 30 years, as the global community
takes action to decarbonise, even under a Paris-aligned 1.5°C
trajectory. This modelling indicated that cumulative demand for
copper, nickel and potash over the next 30 years in the 1.5°C
scenario could not only exceed the last 30 years, but also our
Operational GHG emissions and energy consumption
BHP’s commitments to reduce operational GHG emissions
mid-planning case (Central Energy View). The modelling also
showed strong cumulative demand for iron ore, metallurgical coal
and natural gas and more modest demand for oil in the transition
to a low carbon future over the next 30 years.
Opportunities to invest in commodities such as potash, nickel and
copper, and our rigorous approach to capital allocation, provide
a strong foundation for our business as the world takes the action
to decarbonise, even for a 1.5°C world.
Transitioning the global economy over the next 30 years on a
trajectory consistent with the Paris Agreement goals would limit
potential global climate-related impacts, including physical climate
change risks at our assets, and potentially generate opportunities
to add significant value to our portfolio. The need to adapt would
also grow as the global average temperature rises, suggesting that
transitioning to a 1.5°C world could limit the costs associated with
adaptation in many regions, compared to higher temperature
trajectories. The 1.5°C scenario is an attractive scenario for BHP,
our shareholders and the global community.
However, today’s signposts do not indicate that the appropriate
measures are in place to drive decarbonisation at the pace nor scale
required for the 1.5°C scenario. If we see the necessary changes in
our signposts, we will adjust our planning cases accordingly. Given
the long lead times for new investments, we will continue to stress
test our decision making with updated strategic themes and
scenarios to better understand emerging opportunities. We will also
continue to advocate for actions in line with the Paris Agreement
goals and seek partnerships to leverage our own investments in low
emissions and negative emissions technologies and natural climate
solutions, because we believe it is the right thing to do for our
shareholders and our global community.
Short-term
target:
By FY2022, maintain emissions at or below FY2017 levels, (1) while we continue to grow
our business
Medium-term Reduce emissions by at least 30 per cent from FY2020 levels (1) by FY2030
target:
Long-term
goal:
Net zero emissions by 2050 (2)
Reducing our operational emissions is a key performance indicator for our business. Our performance against our targets is reflected
in senior executive and leadership remuneration.
We have set public GHG emissions reduction targets since the 1990s and regularly review them as our strategy and circumstances
change. Our current short-term target for FY2022 is to maintain our total operational emissions at or below FY2017 levels (1) while we
continue to grow our business. We have also set the long-term goal of achieving net-zero operational emissions by 2050 and our new
medium-term target is to reduce operational GHG emissions by at least 30 per cent from FY2020 levels (1) by FY2030. Building on our
short-term target for FY2022, the FY2030 target sets the trajectory towards achieving our long-term goal.
BHP has disclosed Scope 1 and Scope 2 emissions totals based on an operational control approach to boundaries for many years.
In FY2020, BHP has for the first time also disclosed total emissions under a financial control approach and an equity share approach,
providing more detail on emissions associated with our investments. Refer to section 6.6.4 for our equity share and financial control
emissions. BHP’s operational emissions targets continue to be measured against our GHG emissions based on an operational control,
market-based methodology.
(1) FY2017 and FY2020 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. FY2017 baseline is on a Continuing operations basis and has been adjusted for divestments.
(2) Carbon offsets will be used as required.
BHP Annual Report 2020 65
Governance at BHPRemuneration ReportDirectors’ ReportFinancial StatementsAdditional informationShareholder informationStrategic Report1 1.7.8 Climate change continued
Operational energy consumption by source (TWh) (1) (2)
Year ended 30 June
Consumption of fuel
– Coal and coke
– Natural gas
– Distillate/gasoline
– Other
Consumption of electricity
Consumption of electricity from grid
Total operational energy consumption
Operational energy consumption from
renewable sources (TWh)
2020
2019
2018
2017
31.6
0.2
5.8
25.0
0.6
10.1
8.9
42
31.6
0.2
6.6
24.1
0.7
9.6
8.5
41
31.9
0.2
8.6
22.6
0.6
9.6
8.5
42
31.1
0.2
9.2
21.0
0.6
7.8
6.6
39
0.01
0.01
0.01
0.01
Operational GHG emissions by source
(million tonnes CO2-e) (1) (2) (3) (4)
Year ended 30 June
2020
2019
2018
2017
Scope 1 GHG emissions (5)
Scope 2 GHG emissions (6)
Total operational GHG emissions
Total operational GHG emissions
(adjusted for Discontinued operations) (7)
Operational GHG emissions intensity
(tonnes CO2-e per tonne of copper
equivalent production) (8)
Percentage of Scope 1 GHG
emissions covered under an
emissions-limiting regulation (9)
Percentage of Scope 1
GHG emissions from methane
Scope 2 GHG emissions
(location based) (6)
9.5
6.3
9.7
6.1
15.8
15.8
15.8
15.3
2.0
2.4
10.6
6.4
17.0
15.3
2.4
10.5
5.8
16.3
14.6
2.2
79% 74%
81%
79%
19% 19%
21%
20%
5.1
5.1
6.1
6.0
Operational energy usage increased by 3 per cent from FY2019,
on a Continuing operations basis. The increase is a result of
increased production at WAIO, as well as increased energy usage
at BHP Mitsubishi Alliance (BMA) and BHP Mitsui Coal (BMC) and
Olympic Dam.
In FY2020, operational emissions (Scope 1 and Scope 2) increased
by 8 per cent from the adjusted FY2017 baseline and 3 per cent
from FY2019, on a Continuing operations basis. The increase is a
result of increased production and energy usage at WAIO, as well
as increased energy usage at BHP Mitsubishi Alliance (BMA),
BHP Mitsui Coal (BMC) and Nickel West. While our annual emissions
are currently higher than FY2017 levels, our asset-level emissions
forecasts show we are on track to meet our FY2022 target,
due primarily to implementation of renewable energy contracts
in Chile in FY2022.
to make BHP’s reporting more consistent, as the market-based
approach is the primary method of reporting when the relevant
information is available.
More information on the calculation methodologies, assumptions
and key references used in the preparation of our Scope 1 and
Scope 2 emissions data can be found in the BHP Scope 1, 2 and 3
Emissions Calculation Methodology, available at bhp.com/climate.
More information on our strategy to further reduce GHG emissions,
including our investments in low emissions technology and natural
climate solutions, is available in the BHP Climate Change Report
2020 at bhp.com/climate.
Scope 3 emissions
We recognise the importance of taking action to support efforts to
reduce emissions across our full value chain, as the emissions from
our customers’ use of our products are significantly higher than
those from our operated assets.
During FY2020, we investigated BHP’s opportunities to enable
emissions reductions through an analysis of our value chain and
consultation with suppliers, customers, investors and other
stakeholders. As a result, we have set Scope 3 GHG emissions
goals for CY2030, supported by an annual action plan and aligned
to a long-term vision of decarbonisation of the steel and maritime
sectors, in line with the Paris Agreement goals.
For more information, refer to the BHP Climate Change Report 2020
at bhp.com/climate.
Scope 3 emissions performance
The most significant contributions to Scope 3 emissions come
from the downstream processing and use of our products, in
particular from the use of our iron ore and metallurgical coal in
steelmaking. Our analysis indicates that in FY2020, emissions
associated with the processing of our non-fossil fuel commodities
(iron ore to steel; copper concentrate and cathode to copper wire)
were 210.8–327.8 million tonnes of CO2-e. Emissions associated with
the use of our fossil fuel commodities (metallurgical and energy coal,
oil and gas) were 130.5-205.0 Mt CO2-e. Refer to footnote (1) on the
following page for an explanation of why a degree of overlap in
reporting boundaries occurs, due to our involvement at multiple
points in the life cycle of the commodities we produce and
consume. A significant example of a boundary overlap is between
iron ore and metallurgical coal that results in a portion of
metallurgical coal emissions being double counted across these two
categories in the higher end estimate number. This means that the
emissions reported under each Scope 3 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.
FY2018 and FY2019 GHG emissions have been restated due to a
move from location-based (grid) emission factors to market-based
emission factors (contract specific) at the Escondida and Pampa
Norte (which includes Spence and Cerro Colorado) copper
operations in Chile. The current electricity supply contracts are
with coal and natural gas powered suppliers, and therefore the
emissions intensity of the contracted supply is significantly higher
than the grid average. The change in emission factors was made
This year, we have also included a lower end estimate of the
Scope 3 emissions from the combustion of metallurgical coal that
avoids the double counting of the emissions arising from iron and
steel production. We have included the lower-end number in the
estimate of our Scope 3 emissions, in part to reflect the different
ways of calculating Scope 3 emissions, particularly when there is
an overlap. The inclusion of two numbers also reflects the different
uses for reported Scope 3 emissions. The first, larger number is
(1) Unless otherwise noted, FY2017 and FY2018 data includes Continuing operations and Discontinued operations (Onshore US assets). Unless otherwise noted, FY2019
data includes Continuing operations and Discontinued operations (Onshore US assets) to 31 October 2018. Data in italics indicates that data has been adjusted since
it was previously reported. FY2019 originally reported data that was restated is 5.0 million tonnes CO2-e for Scope 2 GHG emissions, 14.7 million tonnes CO2-e for total
operational GHG emissions, and 2.2 tonnes CO2-e per tonne of copper equivalent production for operational GHG emissions intensity.
(2) Calculated based on an operational control approach in line with World Resources Institute/World Business Council for Sustainable Development guidance.
Consumption of fuel and consumption of electricity refers to annual quantity of energy consumed from the combustion of fuel; and the operation of any facility; and
energy consumed resulting from the purchase of electricity, heat, steam or cooling by the company for its own use. Over 99.9 per cent of BHP’s energy consumption
and emissions occurs outside the UK offshore area (as defined in the relevant UK reporting regulations). UK energy consumption of 222,368 kWh and emissions of 52
tonnes CO2-e is associated with electricity consumption from our office in London. One TWh equals 1,000,000,000 kWh.
(3) BHP currently uses Global Warming Potentials (GWP) from the Intergovernmental Panel on Climate Change (IPCC) Assessment Report 4 (AR4) based on 100-year timeframe.
(4) Scope 1 and Scope 2 emissions have been calculated based on an operational control approach (unless otherwise stated) in line with the Greenhouse Gas Protocol
Corporate Accounting and Reporting Standard. BHP Scope 1, 2 and 3 Emissions Calculation Methodology, available at bhp.com/climate.
(5) Scope 1 refers to direct GHG emissions from operated assets.
(6) Scope 2 refers to indirect GHG emissions from the generation of purchased or acquired electricity, steam, heat or cooling that is consumed by operated assets. Our
Scope 2 emissions have been calculated using the market-based method using supplier specific emission factors, in line with the Greenhouse Gas Protocol Scope 2
Guidance unless otherwise specified. A residual mix is currently unavailable to account for voluntary purchases and this may result in double counting between
electricity consumers.
(7) Excludes Onshore US assets, which were divested in FY2019.
(8) Copper equivalent production has been calculated based on FY2020 average realised product prices for FY2020 production, 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) and are taken on 100 per cent basis.
(9) Scope 1 emissions from BHP’s facilities covered by the Safeguard Mechanism administered by the Clean Energy Regulator in Australia and the distillate and gasoline
emissions from turbine boilers at the cathode plant at Escondida covered by the Green Tax legislation in Chile.
66 BHP Annual Report 2020
suitable as a proxy for an assessment of carbon risk to the portfolio.
The lower number, calculated to avoid double counting, provides
a more useful input into an assessment of the total Scope 3
emissions associated with our value chains.
Scope 3 GHG emissions by category (million tonnes CO2-e) (1)
More information on the calculation methodologies, assumptions
and key references used in the preparation of Scope 3 emissions
data can be found in the BHP Scope 1, 2 and 3 Emissions Calculation
Methodology, available at bhp.com/climate.
Year ended 30 June
Upstream
Purchased goods and services (including capital goods)
Fuel and energy related activities
Upstream transportation and distribution (2)
Business travel
Employee commuting
Downstream
Downstream transportation and distribution (3)
Investments (i.e. our non-operated assets) (4)
Processing of sold products (5)
Iron ore processing (6)
Copper processing
Total processing of sold products
Use of sold products
Metallurgical coal (6)
Energy coal (7)
Natural gas (7)
Crude oil and condensates (7)
Natural gas liquids (7)
Total use of sold products
Climate Investment Program
BHP will invest at least US$400 million over the five-year life of the
Climate Investment Program (CIP), announced in July 2019. The CIP
will invest in emissions reduction projects across our operated assets
and value chain. It is a demonstration of our commitment to taking
a product stewardship role in relation to our full value chain.
Initial investments will focus on reducing emissions at our Minerals
(Australia and Americas) operated assets and addressing Scope 3
emissions in the steelmaking sector, particularly emerging
technologies that have the potential to be scaled for widespread
application. During FY2020, potential CIP projects have requested
approximately US$350 million over five years. Establishing a robust
pipeline is critical to drive prioritisation of the best projects across
our operated assets and value chain, and to ensure that our emissions
targets can be met alongside safety, production and cost targets.
2020
2019
2018
2017
16.9
1.3
3.8
0.1
0.2
4.0
3.9
17.3
1.3
3.6
0.1
<0.1
4.0
3.1
8.2
1.4
3.6
0.1
<0.1
5.0
1.7
7.7
1.4
3.2
0.1
<0.1
2.8
1.9
205.6-322.6
5.2
197.2-299.6
5.1
201.2-317.4
5.2
194.1-309.5
4.2
210.8-327.8
202.3-304.7
206.4-322.6
198.3-313.7
33.7-108.2
56.4
20.6
17.9
1.9
34.7-111.4
67.0
28.3
23.3
2.8
35.0-112.3
71.0
36.4
29.6
4.5
32.5-105.5
72.1
38.3
33.1
5.1
130.5-205.0
156.0-232.7
176.5-253.8
181.1-254.1
Natural climate solutions
Investing in natural ecosystems is a cost-effective and immediately
available solution to mitigate climate change. BHP works to support
the development of market mechanisms that channel private
sector finance into projects that increase carbon storage or avoid
GHG emissions through conservation, restoration and improved
management of landscapes and wetlands, such as REDD+ (8). Our
REDD+ strategy was broadened in FY2020 to include investments
in reforestation, afforestation and ‘blue’ carbon – the carbon stored
in coastal and marine ecosystems (e.g. mangroves, tidal marshes
and seagrasses). We focus on project support, governance and
market stimulation for carbon credits generated by these projects.
In CY2020, BHP established our Carbon Offset strategy that
describes how we propose that a quantity of carbon offsets be
procured and from the mid-2020s onwards retired voluntarily
at regular intervals. While we will prioritise emissions reductions
within our operated assets to meet our medium-term target, by
including offsets as an element of our climate change strategy,
BHP will also continue to support a range of projects that offer
sustainability co-benefits, including support for local communities
and biodiversity conservation.
For more information, refer to the BHP Climate Change Report 2020
at bhp.com/climate.
(1) Scope 3 emissions have been calculated using methodologies consistent with the Greenhouse Gas 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. More information on the calculation methodologies, assumptions and key references used in the preparation of our Scope 3 emissions
data can be found in the associated BHP Scope 1, 2 and 3 Emissions Calculation Methodology, available at bhp.com/climate.
(2) 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.
(3) Product transport where freight costs are not covered by BHP, for example under Free on Board (FOB) or similar terms.
(4) For BHP, this category covers the Scope 1 and Scope 2 emissions (on an equity basis) from our assets that are owned as a joint venture but not operated by BHP.
(5) 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.
(6) 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 the higher-end estimate, 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. The
low-end estimate apportions the emission factor for steel between iron ore and metallurgical coal inputs. The low-end estimate for iron ore only accounts for BHP’s
Scope 3 emissions from iron ore and does not account for BHP’s or third party coal used in the steelmaking process. Scope 3 emissions from BHP’s coal are captured
in the ‘Use of sold products’ category under metallurgical coal.
(7) All crude oil and condensates are conservatively assumed to be refined and combusted as diesel. Energy coal, Natural gas and Natural gas liquids are assumed
to be combusted.
(8) REDD+ is the United Nations (UN) program for reducing emissions from deforestation and forest degradation.
BHP Annual Report 2020 67
Governance at BHPRemuneration ReportDirectors’ ReportFinancial StatementsAdditional informationShareholder informationStrategic Report1 1.7.8 Climate change continued
Contributing to the global response
Climate change is a global challenge that requires collaboration,
and 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 low carbon economy. We prioritise working with others to
enhance the global policy and market response and support the
development of market mechanisms that reduce global GHG
emissions through projects that generate carbon credits.
We believe that polices to spur rapid action should be
implemented in an equitable manner to address competitiveness
concerns and achieve lowest cost abatement.
We believe an effective policy framework should include a
complementary set of measures, including a globally consistent
price on carbon, support for low emissions and negative
emissions technologies and measures to build resilience.
We are a signatory to the UNFCCC ‘Paris Pledge’ (which brings
together cities, regions, companies and investors in support
of the Paris Agreement) and 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.
We also advocate for a framework of policy settings that will
accelerate the deployment of carbon capture, utilisation and
storage and/or carbon capture and storage (CCUS). Modelling
of 2°C and 1.5°C scenarios consistently highlight the critical role
of low emissions and negative emissions technologies. This is
why BHP is committed to catalysing action to accelerate CCUS
commercialisation at scale and acceptable cost and is a member
of the Global CCS Institute and the UK Government’s Council
on Carbon Capture Usage and Storage.
Industry association review
BHP is a member of industry associations around the world.
We believe associations can perform a number of functions that
can lead to better outcomes on policy, practice and standards.
Over the past five years, there has been increasing stakeholder
interest in the role played by industry associations in public policy
debates, particularly in the context of climate change policy.
We published our first industry association review in 2017, which
sought to identify ‘material differences’ between BHP and our
member associations on climate change policy. We repeated this
exercise in 2018 and 2019. For the latter, we have broadened our
methodology to capture additional organisations and to provide an
assessment of the extent of overall alignment between BHP and our
association memberships on climate change policy. Outcomes from
our 2019 review are set out in our 2019 Industry Association Review
Report available at bhp.com.
Following that 2019 review, we commenced a process to
understand how we could further enhance our overall approach
to industry associations to ensure we maximise the value of our
memberships. We have also taken further steps to address investor
expectations around climate change advocacy by industry
associations by engaging with a broad range of stakeholders from
around the world, including investors, civil society groups,
community groups and industry associations. As a result of that
feedback, we decided to make the following key changes to our
approach to industry associations:
• We developed and published our Global Climate Policy
Standards, (1) which are intended to provide greater clarity on
how our climate change policy positions should be reflected in
our own advocacy and that of associations to which we belong.
• We announced our intention to work with the various associations
that represent the minerals sector in Australia to develop and
agree a protocol on policy advocacy, the purpose of which would
be to define the policy areas on which the associations advocate,
having regard to their jurisdictional responsibilities.
• We announced our intention to work with key associations
in Australia to develop and publish an annual advocacy plan,
the purpose of which is to provide stakeholders with greater
transparency on the policy priorities and activities of
the associations.
• We made a number of enhancements to our own disclosure
of our industry association memberships, to provide more
information on our material association memberships, disclose
in ‘real time’ if a relevant association substantially departs from
our climate policy standards, and update our industry
association review process.
Managing risk and opportunity
Risks related to the potential 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. In order to strengthen our approach to
adapting to actual or potential physical impacts of climate change,
BHP undertook a series of assessments and engagements in
FY2020. These included a questionnaire for our operated assets,
industry benchmarking assessment, internal policy review and
extensive engagements across BHP. We take a risk-based approach
to adaptation, including consideration of the potential
vulnerabilities of our operated assets, investments, portfolio,
communities, ecosystems and our suppliers and customers across
the value chain.
Transition risks arise from policy, regulatory, legal, technological,
market and other societal responses to the challenges posed by
climate change and the transition to a low carbon economy.
A broader discussion of our climate-related risk factors and risk
management approach is provided in the risk factors set out in
section 1.5.4, as well as in the BHP Climate Change Report 2020
at bhp.com/climate.
Engagement and disclosure
BHP was one of the first companies to align our climate-related
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.
More information on climate change is available at
bhp.com/climate as well as in the BHP Climate Change
Report 2020.
(1) https://www.bhp.com/our-approach/operating-with-integrity/industry-associations-bhps-approach/
68 BHP Annual Report 2020
1.7.9 Community
Engaging with communities
At the centre of our approach to engaging and building social
value is our commitment to respecting stakeholders. We believe
we are successful when we have established meaningful long-term
relationships that understand local cultures and their priorities, and
when we have supported resilient and diversified local economies
with benefits that continue beyond the life of our assets.
Our engagement approach seeks to develop and maintain open,
honest relationships built on trust. Only with these attributes can
we understand the real and perceived impacts of our activities and
how we can partner with communities to contribute to long-term
social value.
Our Code of Conduct and the Our Requirements for Community
standard govern our actions and aspiration to make a positive
contribution to communities where we have a presence and
minimise adverse impacts where these cannot be avoided.
Community and human rights are Group Risks under our Risk
Framework. In FY2020, we undertook work to update and align the
Community risk profile with the Risk Framework. The Community
risk profile now captures risk events linked to business activities,
for example the impact of business transformation, community
dependency on BHP and a human rights breach within our
operated assets or value chain; and external factors, including
changing societal expectations, community unrest and protests,
and the impacts on communities of an economic downturn.
We have a suite of systems, processes and tools to help us
understand, plan, implement and evaluate our engagement
activities and to ensure all these activities are conducted in a
culturally sensitive and socially inclusive manner. These include
social baseline analysis, social impact and opportunity
assessments, human rights impact assessments, stakeholder
mapping and community perception surveys.
In FY2020, all our operated assets had stakeholder engagement
management plans in place. These engagement plans and our
engagement activities are based on an understanding and analysis
of the local context. As an example of our engagement activities,
in FY2020, our BMA team in Queensland met quarterly through
community consultative committees and special reference groups
to discuss community preparedness related to innovation and
technology. In Chile, through multi-stakeholder dialogue tables
we engaged with Indigenous communities on environmental and
technical information, and the implementation of Indigenous
peoples plans.
Aligned with our internal standards, social impact and opportunity
assessments were conducted in the United States, Chile and
Trinidad and Tobago in FY2020. Primary findings across our Chilean
operated assets included the impacts on Indigenous peoples,
community health and marine water quality with opportunities to
promote local sustainable development, diversify economic activity
and improve the quality and access to education. Across North
America and Trinidad and Tobago impacts identified were those
on fisheries and wildlife and coastal environments affecting
livelihoods, with opportunities to support capacity development,
and education and employment outcomes.
We are committed to enabling communities to express their views,
experiences, concerns and complaints related to us and our
activities. Throughout FY2020, community members’ primary
concerns as reported by our operated assets through their
engagement with communities were related to jobs and youth
unemployment, local community development and the
environment. More information on community concerns across
the regions can be found at bhp.com/sustainability.
In FY2020, we received 114 community complaints globally across
our operated assets with the majority of complaints relating to
odour and noise. This is an 18 per cent decrease in complaints
received compared to FY2019. We did not record any significant
community incidents in FY2020, therefore meeting our five-year
public target of no significant community events between FY2017
and FY2022 (1). In FY2020, there were no protest events or project
delays as a result of community concerns, community or
stakeholder resistance or protest, or armed conflict in relation
to BHP’s operations. Our planned review of asset-level complaints
and grievance mechanisms at our operated assets, for global
consistency and to ensure they meet the standards required under
the UN Guiding Principles on Business and Human Rights was
delayed as a result of COVID-19. Our community teams focused
on the response to the pandemic during this period and the review
is now planned to be completed in FY2021.
In FY2020, we had no reported artisanal or small-scale mining
on or adjacent to our operations. As part of our commitment to
respecting human rights, BHP recognises water access, sanitation
and hygiene as human rights and acknowledges the traditional,
spiritual and cultural connections to water, as outlined in our Water
Stewardship Position Statement. Engaging with communities on
water risks is an integral component of our water stewardship work.
We continued to strengthen our engagement with stakeholders
on water-related risks (both threats and opportunities) in FY2020
at the community and catchment levels.
More information is available at bhp.com/environment/water.
Social investment
Social investment is one of the tools in our overall approach to
contributing to the creation of social value. Social investment
is our voluntary contribution towards projects or donations with
the primary purpose of contributing to the resilience of the
communities where we have a presence and the environment,
aligned with our broader business priorities. We have a long-standing
commitment to invest not less than 1 per cent of pre-tax profits (2)
in voluntary social and environmental initiatives. Using research and
through a collaborative approach, we work with our diverse range
of stakeholders to understand and identify social needs and existing
resources through which we can design our social investment to
create meaningful outcomes for communities. We partner with
appropriate organisations to deliver our social investment initiatives,
including our employee Matched Giving Program.
Aligned with the UNSDGs, our Social Investment Framework
underpins our voluntary social investment approach and provides
a consistent framework for our local, regional, national and global
investments. The framework and Social Investment Strategy are
reviewed regularly, most recently in FY2020, to ensure we evolve
our focus with that of communities, understand their ambitions
and create enduring positive outcomes.
Our voluntary social investment in FY2020 totalled US$149.63 million,
consisting of US$113.83 million in direct community development
and environment projects and donations, US$12.03 million equity
share to non-operated joint venture social investment programs, a
US$12 million donation to the BHP Foundation (3) and US$1.85 million
under the Matched Giving Program. Administrative costs to
facilitate direct social investment activities totalled US$8.58 million
and US$1.33 million supported the operations of the BHP Foundation.
(1) A significant event resulting from BHP operated activities is one with an actual severity rating of four and above, based on our internal severity rating scale (tiered from
one to five by increasing severity) as defined in our mandatory minimum performance requirements for risk.
(2) Our voluntary social investment is calculated as 1 per cent of the average of the previous three years’ pre-tax profit.
(3) The BHP Foundation is a charitable organisation established and funded by BHP, which works in partnership with internationally recognised institutions, think tanks and
non-government organisations to address some of the most critical sustainable development challenges facing society that are directly relevant to the resources sector.
BHP Annual Report 2020 69
Governance at BHPRemuneration ReportDirectors’ ReportFinancial StatementsAdditional informationShareholder informationStrategic Report1 1.7.9 Community continued
Our FY2020 social investment increased by 60 percent compared
with FY2019 as a result of a higher 1 per cent commitment (calculated
on a three year rolling average) and our investments to support the
COVID-19 response and recovery efforts across our locations.
In line with our Social Investment Framework, we support projects
that enhance human capability and inclusion through increasing
the number of people with improved health and wellbeing, access
to quality education and vocational training, and enhanced
livelihood opportunities. Through our social investment
contribution, more than 427,000 students participated in
community projects and 1,747 people received job-related training
through our community partners. More than 840 scholarships
were awarded, including 465 to young Indigenous peoples and
436 to young women.
We aim to contribute to enduring environmental and social benefits
in addition to the dedicated work of our HSE team through
biodiversity conservation, water stewardship and climate change
mitigation and adaptation. Through our social investments
12,300 hectares of land was managed for conservation.
We aim to contribute to good governance with a focus on reducing
corruption, enhancing transparency and strengthening institutions.
Through our investments, almost 770 non-government and
community-based organisations and more than 790 small
businesses participated in capacity building activities, and 143 of
these were Indigenous organisations. In addition, 21 organisations
we partner with received dedicated anti-corruption training.
Crisis response and disaster relief
FY2020 saw challenges to the health and livelihoods of
communities across the world. We work closely with communities
to understand where our efforts to support response and resilience
initiatives are best placed during an emergency event. For
information about our social investment initiatives in response to
the social unrest in Chile, the Australian bushfires, the COVID-19
pandemic and the Black Lives Matter movement, refer to section
1.4.6 and bhp.com/sustainability.
Local economic growth
We support the growth of local businesses in the regions where
we operate and are committed to sourcing and promoting locally
available products and services. Our operated 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 in the region.
During FY2020, 12 per cent of our total external expenditure was
with local suppliers. An additional 84 per cent of our supply
expenditure was located within the regions in which we operate.
Our expenditure with local suppliers in FY2020 was mostly in Chile
(15 per cent), Australia (11 per cent), the United States (9 per cent)
and Trinidad and Tobago (2 per cent). These percentages are
of our total external expenditure within that context.
In addition to procuring locally, where possible, we employ local
people (refer to section 1.6.1) and support broader regional and
national economies by paying taxes and royalties.
Human rights
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 UNGC Ten Principles.
Our Code of Conduct sets the standards of behaviour and
commitments for our people, as well as our contractors, suppliers
and others who perform work for BHP (when under relevant
contractual obligations). Our Human Rights Policy Statement sets
out our expectations of our people, business partners and other
relevant parties to respect human rights. The commitments in
Our Code of Conduct and Human Rights Policy Statement are
implemented through mandatory minimum performance
requirements in the Our Requirements standards.
70 BHP Annual Report 2020
We recognise we have the potential to directly impact, contribute
to or be linked to human rights impacts on people. This is through
our active operations, closed and legacy assets, value chain
activities and relationships with business partners. We continued to
work collaboratively with stakeholders in FY2020 to understand the
rights most at risk by our activities and to build awareness across
our functions and operated assets about respecting rights.
Human rights is a Group Risk within the Environment, climate
change and community Group Risk category under our Risk
Framework. In FY2020, we revised human rights risk assessments
for our Global Asset Services office in Manila and completed
a human rights risk assessment at a major Australian project.
The application of our risk identification, assessment and
management processes in FY2020 considered potential scenarios,
including security, supply chain, and labour conditions, which may
lead to a breach of human rights. Also in FY2020, we continued our
pilot of a globally consistent methodology for human rights impact
assessments (HRIA) across several locations, including legacy sites,
and work commenced on HRIAs for WAIO and in Minerals
Americas. Although HRIAs may identify potential impacts to
be considered in human rights assessments, they are separate
processes from those risk assessments and include engagement
with external stakeholders.
As a result of the need to cease face-to-face engagement with
communities during the COVID-19 pandemic, the HRIA conducted
for WAIO did not include a site visit or focus group engagement
activities. Recognising that the standard HRIA process requires
inclusion of these engagement practices with external
stakeholders, we have conducted interviews through web-
conferencing and included additional questions in the WAIO
community perception survey to inform the HRIA with the
perspectives of community members, suppliers and other key
stakeholders. Our operated assets are required to complete HRIAs
at least every three years (and review them whenever there are
changes that may affect the impact) and we plan to complete them
across our operated assets during FY2021.
In FY2020, no resettlements or physical or economic displacement
of families and communities occurred as a result of the activities of
our operated assets.
Our risk of an actual or perceived failure to prevent or mitigate an
adverse human rights impact linked to BHP’s supply chain (directly
or indirectly), including maritime activities, was reviewed in
FY2020. For more information, refer to our Modern Slavery
Statement FY2020 available at bhp.com.
Relevant internal practitioners worked closely with our Commercial
function to include human rights in the program of work to design
and implement our value chain sustainability strategy (refer to
section 1.7.7). This looked at opportunities to leverage relationships
with customers, suppliers and business partners to enhance
recognition of human rights across their activities alongside other
sustainability issues, including climate change and environment.
In FY2020, we released our human rights training video, available
for people across our workforce and business partners. Human
rights training is currently mandated for our Corporate Affairs team
including Community and Indigenous Affairs, Government
Relations and Communications teams and the Procurement and
Maritime and Supply Chain Excellence teams in our Commercial
function. The training is made available within BHP’s internal
training system and publicly available at bhp.com.
Modern slavery
In FY2020, BHP participated in multi-industry forums to work
towards reporting under the new Australian modern slavery
legislation. Our Modern Slavery Statement FY2020, prepared under
the UK Modern Slavery Act (2015) and the Australian Modern
Slavery Act (2018), is available at bhp.com. The Statement outlines
BHP’s detailed approach to understanding and identifying and
managing modern slavery and human trafficking risks in our supply
chain and own operations.
Indigenous peoples
We recognise and respect the rights of Indigenous peoples and
acknowledge the connection they have to the natural environment,
which can be tangible and intangible. We recognise our activities
impact on Indigenous peoples and we are committed to working
together to ensure BHP is an enabling partner with Indigenous
peoples with a genuine understanding of their views and interests.
BHP’s Indigenous Peoples Policy Statement articulates our
approach to engagement and support for Indigenous peoples and
our commitment to the ICMM Position Statement on Indigenous
Peoples and Mining. Our Indigenous Peoples Strategy guides the
implementation of our Policy Statement.
We commenced a review of our Indigenous Peoples Policy
Statement and Strategy in early FY2020. This review involved
consultation with Indigenous leaders and analysis of leading
practice to understand changes in policy and practice since our
approach was articulated in 2014. We plan to publish updated
guidance in FY2021. In FY2020, we met our public target to have
active Regional Indigenous Peoples Plans in place across relevant
regions. Each plan includes our approach to governance,
economic empowerment and social and cultural support with
Indigenous stakeholders globally and has been developed to
respect Indigenous rights, align with respective regulatory
requirements and reflect local Indigenous stakeholder needs.
Aligned with the economic empowerment pillar of our Regional
Indigenous Peoples Plan for South America, in FY2020 we
conducted employability studies across Indigenous communities
and completed an Indigenous employee identification survey of
our workforce. In FY2020 in Minerals Australia we saw a 28 per cent
growth in BHP’s direct spend with Indigenous businesses across
our operated assets, increasing to AU$98 million of which
AU$42.4 million was with BHP Considered Traditional Owner
businesses. We also increased by 44 per cent the number of
Indigenous businesses we directly procured from in Minerals
Australia and the number of BHP Considered Traditional Owner
businesses (1) by 37 per cent.
We strive for a sustainable approach to our operations and to work
in partnership with Indigenous communities to ensure they benefit
from our presence over the long term, and that each stage of
development is informed by their views. Our relationships are
based on regular and extensive discussions on a range of issues
including our extractive activities and broader support for
Indigenous peoples, including employment and local procurement
opportunities. We seek to avoid or minimise impacts to cultural
heritage, through planning and ongoing consultation with
Indigenous communities. Our processes provide opportunities for
Indigenous stakeholders to identify those sites, places, structures
and objects that are culturally or traditionally significant and to be
consulted and engaged in relation to decisions regarding the
protection and management of those sites.
In October 2019, BHP submitted an application for a government
approval related to Aboriginal heritage sites at our South Flank
project under construction in the Pilbara region of Western
Australia. The approval was granted in May 2020 following extensive
consultation with the Traditional Owners, the Banjima people.
Nonetheless, consistent with our approach to cultural heritage, BHP
confirmed in June 2020 that it would not disturb the sites covered
by the approval without further consultation with the Traditional
Owners. BHP supports the Western Australian Government’s current
process to reform and update its cultural heritage legislation. BHP
has made submissions to the Government in support of this reform.
In Chile, our Indigenous affairs and environment teams work
closely with Indigenous stakeholders to identify sites of cultural
significance, as outlined in the Minerals Americas Indigenous
Peoples Plan. As part of the approvals for the Cerro Colorado
environmental assessment, we have cultural heritage monitoring
commitments that we execute in partnership with the relevant
Indigenous communities and these continued to be monitored
during FY2020.
More information on community is available at
bhp.com/sustainability.
Case study:
Sustainability at Escondida and Spence
Continued sustainability improvements at our Escondida and
Spence copper operations in Chile in FY2020 have placed
them on track to be 100 per cent powered by renewable
energy sources by the mid-2020s and have eliminated the
extraction of groundwater for operational supply purposes
at Escondida 10 years ahead of schedule.
Minerals Americas secured four renewable power agreements
for the operations during the year, to replace two coal-based
power purchase agreements, which accounted for 8 per cent
of Chile’s power demand.
The renewable power contracts will displace 3 million tonnes
of CO2 per year from 2022 and reduce 70 per cent of Minerals
Americas’ greenhouse gas emissions, equivalent to the annual
emissions of around 700,000 combustion engine cars.
The contracts will also reduce power costs despite the
US$780 million provision in BHP’s December 2019 half-year
financial results related to the early termination of the existing
coal-based power purchase agreements. In August 2020,
as part of the project optimisation, Escondida and Spence
negotiated more competitive terms for the early termination.
Taking this into account, the new contracts offer a 22 per cent
power unit cost reduction from FY2022 onwards.
With the growing use of desalination, Escondida ceased
groundwater extraction for operational supply purposes from
the high Andean aquifers during the year, a move that had
been originally scheduled for FY2030. By investing in
desalination capability to shift from groundwater to seawater
usage, we are taking pressure off the Atacama Desert water
resources surrounding the mines. This is important because,
with the expected gradual decline of grades at Escondida and
Spence over the coming years, the mines will need more water
and power to maintain production.
These initiatives demonstrate how BHP can deliver both
social value and financial value – by securing more
sustainable power sources, eliminating groundwater usage
and reducing operating costs.
More information on how Escondida is breaking the
water-energy nexus, see our case study at bhp.com.
(1) Refers to any business, formal collaboration or joint venture that is at least 50 per cent owned by an Aboriginal Traditional Owner(s) from one of the lands or waters
upon which BHP holds interests in connection with its mining businesses specific to this contract’s asset, unless otherwise defined in a native title agreement or other
formal agreement.
BHP Annual Report 2020 71
Governance at BHPRemuneration ReportDirectors’ ReportFinancial StatementsAdditional informationShareholder informationStrategic Report1 1.7.10 Tailings storage facilities
Ensuring the integrity of our tailings storage facilities (TSFs) is a primary focus across our operations.
Our aspiration is to eliminate the risk of catastrophic TSF failure at our operations and we are working
with others and sharing our progress in an effort to make this a reality.
In 2015, following the tragic failure of the Fundão dam at
Samarco, BHP immediately initiated a Dam Risk Review to assess
the management of significant TSFs both active and inactive.
Following the Brumadinho event, BHP established a Tailings
Taskforce that reports to the Executive Leadership Team and
the Board’s Sustainability Committee. The Tailings Taskforce is
accountable for accelerating our short-, medium- and long-term
strategies and working to ensure best practice is embedded.
In FY2021, upon completion of its current mandate, the Tailings
Taskforce will conclude and transfer ownership to the Centres
of Excellence which will continue to support and sustain the
program of work for BHP.
Governance
Over the past year, work progressed on our continuous
improvement and assurance of our operated TSFs. We commenced
an update to our standard that governs how we approach TSF
failure risks, including business planning, risk assessments and
management of change. This standard, along with our standards
on risk management, requires us to take a risk-based approach
and sets out key considerations, such as working with our
communities and external stakeholders and building our
emergency management plans.
In FY2020, critical work progressed on the governance and
controls of our TSF risk. We completed a Priority Group Risk Review
of TSF failure risks across some of our highest-rated consequence
sites, based on the Canadian Dam Association (CDA) classification
system, with findings and recommendations reported to the Risk
and Audit Committee and Sustainability Committee (further
information on the Priority Group Risk Review process is provided
in section 1.5.4). The Tailings Taskforce has continued with reviews
of TSF failure risks across our assets with findings incorporated into
risk remediation plans. These processes partner leading industry
experts with our technical leads to review and enhance BHP’s
global tailings governance framework. This process was in addition
to other governance activities, including Dam Safety Reviews,
Independent Tailings Review Boards and project specific
Independent Peer Reviews. Our Risk Appetite Statement was
updated to include a qualitative statement for the new Planning
and Technical Group Risk category, which covers TSF failure risks.
Key risk indicators (KRIs) were set by management to help monitor
performance against our risk appetite, including KRIs that monitor
data relating to dam integrity and design, overtopping/flood
management and emergency response planning.
We are currently expanding our capability of a satellite monitoring
program to better manage geotechnical risk through the use of
remote monitoring technologies, including interferometric
synthetic aperture radar (InSAR) (ground deformation monitoring
technology). InSAR technology can detect critical changes/
movements related to potential dam failure risks early and monitor
these changes over time. This control is intended to enable
identification, analysis, monitoring and management of ground
displacements or other indicators associated with tailings and
water storage facilities.
We are also progressing a simplified and formalised global
database for all BHP TSF information. This database will integrate
and centralise our data collection to enhance data preservation,
security and reliability. This key governance control is intended to
produce data efficiency gains and improved oversight of our global
TSFs. For example, we expect to be able to respond more quickly
and easily to stakeholder requests by maintaining a dynamic and
efficient TSF database.
More information on our management of TSFs and global
governance strategy is available at bhp.com.
Strategy
Our short-term strategy is focused on improving KRI performance
in line with defined targets. Asset-based studies at our operated
assets are being conducted on how to seek to reduce and mitigate
potential downstream impacts particularly focused on population
at risk (PAR). This is resulting in a diverse range of options to
mitigate the PAR risk at our TSF sites. For example we have created
physical barriers (such as the diversion wall at our Whaleback site)
and the ongoing relocation of a legacy tailings facility from historic
underground copper mining at our Miami Avenue site within our
legacy asset portfolio. The diverse nature of our sites requires
unique solutions and this work continues as a priority for FY2021.
Our medium- and long-term strategies focus on progressing the
development of technologies to improve tailings management
storage and working to ultimately eliminate the risk of catastrophic
TSF failure. These asset-specific strategies have started with
concepts for dewatering, stabilisation, reprocessing and reuse
of tailings. We will work to identify key initiatives around the
reprocessing and reuse of tailings by assessing technology options
on cost, feasibility and the ability to support the elimination of
tailings production.
72 BHP Annual Report 2020
Transparency
We support more detailed transparency and integrated disclosure
around TSF management and will work with our industry partners
to help make sure the disclosure is consistently applied and informs
better TSF stewardship. We support and have contributed to the
development of the new Global Industry Standard on Tailings
Management, which has been developed as an international standard
for safer tailings management, co-convened with the ICMM, the UN
Environment Programme and the Principles for Responsible Investing.
We are assisting the ICMM Tailings Working Group to contribute to
improvements in tailings storage management across the mining
industry. We are participants in other tailings working groups,
including those associated with the Canadian Dam Association,
Australasian Institute of Mining and Metallurgy, Minerals Council
of Australia, Society for Mining, Metallurgy and Exploration, and
Fundación Chile. We have also participated in the Investor Mining
and Tailings Safety Initiative, an investor-led engagement convening
institutional investors active in extractive industries, including major
asset owners and asset managers.
BHP’s operated and non-operated tailings portfolio
The classifications described herein align to the Canadian Dam
Association’s classification system. It is important to note the TSF
classification is a risk management tool. It reflects the modelled,
hypothetical most significant possible failure and consequences
without controls. It does not reflect the current physical stability
of the dam and 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 of June 2020. 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 70 TSFs (1) at our operated assets, 29 of which
are of upstream design. Of the 70 operated facilities, we have
four classified as extreme and a further 16 classified as very high.
Thirteen of our operated facilities are active. The substantial
inactive portfolio (57) 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 TSFs at our non-operated joint ventures, which are
all 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.
Classification of operated
tailings facilities (1) (2) (3)
Types of operated
tailings facilities (1)
Operational status of
operated tailings facilities (1)
Low 19
Significant 10
High 17
Very high 16
Extreme 4
N/A 4
Upstream 29
Centreline 8
Downstream 17
Other (4) 16
Inactive (5) 57
Active 13
(1) The number of Tailings storage facilities (TSFs) is based on the definition agreed to by the ICMM Tailings Advisory Group. We have an increase of 3 TSFs from our
Church of England submission in 2019 due to the updated BHP definition of TSF following the submission.
(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. SP1 TSF and SP2/3 TSF in Australia are currently undergoing detailed studies to understand their CDA classification.
(4) Other includes dams of a design that combines upstream, downstream and centerline, and the two non-dam tailings facilities of Hamburgo TSF in Chile and Island
Copper TSF in Canada.
(5) Inactive includes facilities not in operational use, under reclamation, reclaimed, closed and/or in post-closure care and maintenance.
BHP Annual Report 2020 73
Governance at BHPRemuneration ReportDirectors’ ReportFinancial StatementsAdditional informationShareholder informationStrategic Report1 1.7.11 Independent limited assurance report
Independent Assurance Report to the Management and Directors of BHP Group Limited
and BHP Group Plc (BHP)
Our Conclusions
– Limited Assurance
Based on the procedures we have performed and the evidence we have obtained, nothing has come to our attention that suggests that BHP’s
Sustainability data and disclosures and Asset Level Water Stewardship disclosures reported in the Sustainability KPI table in section 1.4.8, sections 1.6, 1.7,
and 6.6 of BHP’s Annual Report for the year ended 30 June 2020 (the Report) have not been prepared in accordance with the Criteria defined below.
– Reasonable Assurance
In our opinion, the Scope 1 and 2 greenhouse gas emissions, as reported in section 1.7.8 and 6.6.4 of BHP’s FY20 Annual Report are prepared, in all
material respects, in accordance with the Criteria defined below.
What we assured
Ernst & Young (EY) was engaged by BHP to provide limited assurance over
the following information in accordance with the noted criteria:
What we assured (Subject Matter)
What we assured it
against (Criteria)
BHP’s FY20 Sustainability data and
disclosures reported in the
Sustainability KPI table in section
1.4.8, sections 1.6, 1.7, and 6.6
of BHP’s FY20 Annual Report
BHP’s Sustainability policies and
standards and their alignment to
the ICMM Sustainable Development
Principles (2015) and mandatory
position statements
BHP’s identification and reporting
of its material risks and
opportunities within the Report and
online at bhp.com/sustainability
BHP’s implementation of systems
and approaches to manage its
material risks and opportunities
Water stewardship reporting,
at an asset level, in BHP’s FY20
Annual Report and the water
risk assessment online at
bhp.com/water
• International Council on Mining
and Metals (ICMM) Sustainable
Development Framework
Subject Matters 1 to 4
• Management’s own publicly
disclosed criteria
• Global Reporting Initiative
(GRI) Standards
• Sustainability Accounting
Standards Board (SASB) Mining
and Metals Standard
ICMM Subject Matter 1
ICMM Subject Matter 2
ICMM Subject Matter 3
ICMM guidance and
minimum disclosure Standards:
A Practical Guide to Consistent
Water Reporting
In addition, we were engaged by BHP to provide reasonable assurance
over the following information in accordance with the noted criteria:
What we assured (Subject Matter)
Scope 1 and 2 Greenhouse
Gas emissions as reported in
section 1.7.8 and 6.6.4 of BHP’s
Annual Report
What we assured it
against (Criteria)
• World Resource Institute/
World Business Council for
Sustainable Development
(WRI/WBCSD) Greenhouse
Gas Protocol
• BHP’s Basis of Preparation
Key responsibilities
EY’s responsibility and independence
Our responsibility was to express limited and reasonable assurance
conclusions on the noted subject matter as defined in the ‘what we
assured’ column in the tables above (Subject Matter).
We were also responsible for maintaining our independence and confirm
that we have met the requirements of the APES 110 Code of Ethics for
Professional Accountants including independence and have the required
competencies and experience to conduct this assurance engagement.
BHP’s responsibility
BHP’s management was responsible for selecting the Criteria and
preparing and fairly presenting information presented and referenced in
the Report in accordance with that Criteria. This responsibility includes
establishing and maintaining internal controls, adequate records and
making estimates that are reasonable in the circumstances.
Our approach to conducting the Review
We conducted our procedures in accordance with the International
Federation of Accountants’ International Standard for Assurance
Engagements Other Than Audits or Reviews of Historical Financial
Information (ISAE 3000), the Standard for Assurance on Greenhouse Gas
Statements (ISAE 3410) and the terms of reference for this engagement as
agreed with BHP on 17 December 2019 and amended on 19 March 2020.
We adapted our approach to undertaking our review procedures in
response to the COVID-19 travel restrictions and social distancing
requirements. We did not visit any BHP sites in person and instead
undertook site-based procedures by phone and videoconference.
The performance of the year end corporate review procedures at head
office was also required to be conducted remotely and was supported
through the use of collaboration platforms for discussions and delivery
of requested evidence.
The procedures we performed were based on our professional judgement
and included, but were not limited to, the following:
• Interviewing select corporate and site personnel to understand the
reporting process at group, business, asset and site level, including
management’s processes to identify BHP’s material issues
• Reviewing BHP policies and management standards to determine
alignment with the ICMM’s 10 Sustainable Development principles and
position statements
• Checking the Report to understand how BHP’s identified material risks
and opportunities are reflected within the qualitative disclosures
• Evaluating whether the information disclosed in the Report and related
disclosures is consistent with our understanding of sustainability
management and performance at BHP
• Evaluating the suitability and application of the Criteria and that the
Criteria have been applied appropriately to the Subject Matter
• Conducting virtual site procedures at eight BHP locations to evidence
site level data collection and reporting to Group as well as to identify
completeness of reported water and emission sources
• Undertaking analytical procedures of the quantitative disclosures in the
Report and related online disclosures
• Reviewing data, information or explanation about the sustainability
performance data and statements included in the Report and related
online disclosures
• Reviewing other information within BHP’s Annual Report for consistency
and alignment with our assurance subject matter
• On a judgemental sample basis, reperforming calculations to check
accuracy of claims in the Report
• On a sample basis, based on our professional judgement, agreeing
claims to source information to check accuracy and completeness
of claims, which included invoices, incident reports, meter calibration
records, and meter data
• For our reasonable assurance scope, selecting key item and
representative sampling, based on statistical audit sampling tables and
agreeing claims to source information to check accuracy and
completeness of claims, which included invoices, metre calibration
records and metre data.
We believe that the evidence obtained is sufficient and appropriate to
provide a basis for our reasonable and limited assurance conclusions.
Other Matters
We have not performed assurance procedures in respect of any
information relating to prior reporting periods, including those presented
in the Report, other than disclosures relating to BHP’s 2019 Sustainability
Report. Our report does not extend to any disclosures or assertions made
by BHP relating to case studies and future performance plans and/or
strategies disclosed in the Report.
While we considered the effectiveness of management’s internal controls
when determining the nature and extent of our procedures, our assurance
engagement was not designed to provide assurance on internal controls.
Our procedures did not include testing controls or performing procedures
relating to checking aggregation or calculation of data within IT systems.
Limited and Reasonable Assurance
Procedures performed in a limited assurance engagement vary in nature
and timing from, and are less in extent than for, a reasonable assurance
engagement. Consequently, the level of assurance obtained in a limited
assurance engagement is substantially lower than the assurance that
would have been obtained had a reasonable assurance engagement
been performed.
While our procedures performed for our reasonable assurance engagement
are of a higher level of assurance, due to the use of sampling techniques,
it is not a guarantee that it will always detect material misstatements.
Use of our Assurance Statement
We disclaim any assumption of responsibility for any reliance on this
assurance report to any persons other than management and the Directors
of BHP, or for any purpose other than that for which it was prepared.
Our Review included web-based information that was available via web
links as of the date of this statement. We provide no assurance over
changes to the content of this web-based information after the date
of this assurance statement.
Ernst & Young
Melbourne, Australia
3 September 2020
Mathew Nelson
Partner
74 BHP Annual Report 2020
1.8 Samarco
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 (NOJV) owned by BHP Billiton Brasil Ltda (BHP Brasil) and Vale
S.A. (Vale), with each having a 50 per cent shareholding.
A significant volume of tailings (39.2 million cubic metres (m3) of
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 de Baixo
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 four years into the recovery process, we remain
committed to the remediation of and compensation for the
impacts to 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 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 Brasil provides support to Fundação Renova’s operations
through representation on the Board of Trustees and Board
Committees, providing technical expertise and regular peer
engagement on issues such as safety, risk management, human
rights and compliance.
While restart of Samarco’s operations remains a focus and is
expected to provide a positive effect on livelihoods in impacted
communities, restart will only occur, among other considerations,
if it is safe, and has the support of the community. Samarco has
a valid operation licence and there are no further legal restrictions
to operate.
In relation to the COVID-19 pandemic, some actions were taken
to reduce labour in the field for filtration plant construction and
operational readiness activities without a significant impact on
the restart schedule. Samarco worked to re-establish a normal
roster regime while respecting all the measures and controls
implemented as a result of COVID-19, such as social distancing,
use of masks, access control, temperature scanning and packed
meals distribution, with the aim for restarting operations in FY2021.
Fundação Renova
Fundação Renova’s staff of approximately 660 people is supported
by about 7,100 contractors. Its CY2020 budget is R$4.7 billion.
It has an extensive governance structure, which includes
representatives from the Brazilian Federal and State Governments,
local municipalities and environmental agencies. On 25 June 2018,
Samarco, Vale and BHP Brasil signed a Governance Agreement to
include other parties to the supervision bodies and governance of
Fundação Renova, i.e. the Public Prosecutors’ Office and the Public
Defence Office. The Governance Agreement established local
commissions to enable the active participation of the affected
people in the decision-making process, by submitting proposals and
recommendations for works to be performed by Fundação Renova.
By June 2020, a network of 21 local commissions had been
established along the Rio Doce.
BHP Annual Report 2020 75
Governance at BHPRemuneration ReportDirectors’ ReportFinancial StatementsAdditional informationShareholder informationStrategic Report1 1.8 Samarco continued
Resettlement
One of Fundação Renova’s priority social programs is the relocation
and rebuilding of the communities of Bento Rodrigues, Paracatu
de Baixo 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 of collective resettlement involves designing new
towns on land that has been chosen by the community, to be
as close as possible to the previous layout. It requires attending
to the wishes and needs of the families and communities, while
also meeting permitting requirements.
In Bento Rodrigues, the public school, other public buildings and
infrastructure are under construction and, as of June 2020, 35 of the
222 homes were under construction. Progress has been slower than
anticipated primarily due to delays in the permitting process. The full
return to regular numbers of field staff and construction capacity
is uncertain and dependent on the evolving nature of the pandemic,
safety protocols implemented to prevent exposure to COVID-19 on
site and any restrictions imposed by authorities in the region.
By June 2020, construction of infrastructure and public buildings
in Paracatu de Baixo was under way and eight of the 96 planned
houses were under construction.
In December 2018, land was purchased for the resettlement of
37 families of Gesteira following a protracted negotiation with the
landowner. The urban plan is being designed with the community.
Families of Gesteira also have the option of a ‘letter of credit’ so
they can choose to buy a property elsewhere.
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, eight houses have been rebuilt and
delivered to the families.
A total of 126 families have chosen not to join the collective
resettlement of their previous community. Fundação Renova is
assisting them and 46 properties have been purchased for these
families (as of June 2020).
Other socio-economic programs
Fundação Renova continues to implement a wide range of
socio-economic 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):
• Fundação Renova is working on two fronts in the area of health:
(i) conducting a human health risk assessment to quantify
potential risk associated with the environmental impact of the
Fundão dam failure prior to conducting the epidemiological and
toxicological studies, as recommended by the Health Technical
Chamber and Sub-Secretariat of Health Surveillance and Security
and (ii) supporting the public management of municipalities by
strengthening existing municipal structures in clinical care and
social protection.
• Fundação Renova seeks to foster the local economy on
the following fronts:
• encouraging local employment opportunities in its own
workforce and through its contractors
• promoting the economic diversification of municipalities,
especially those that rely on mining
• encouraging mechanisms to stimulate economic development
• restoring productive capacity to micro and small companies
• 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.
• Fundação Renova has listening, dialogue and social participation
as guiding practices for its actions with the affected
communities. More than 110,000 people have attended
collective meetings.
• Additional compensatory actions are underway to construct new
water and sewage treatment facilities and improve existing ones
that were impacted by Fundão failure. Rio Doce was an industrial
river before November 2015, with inadequate and inefficient
water and sewage treatment. Raw sewage was, and continues
to be, discharged directly into the river.
Financial assistance and compensation
Environmental remediation
Fundação Renova had paid R$2.5 billion in indemnification
and financial aid up to June 2020.
Fundação Renova has distributed about 14,750 financial assistance
cards to those whose livelihoods were impacted by the dam failure,
including registered and informal commercial fisherfolk who had
their activities affected due to the imposition of fishing restrictions
in the Rio Doce in Minas Gerais and ban along the coast of Espírito
Santo. The monthly payments are designed to provide support to
affected people and their families pending the re-establishment of
conditions that enable them to resume their economic activities.
Fundação Renova is also undertaking a substantial mediated
compensation program to fairly compensate all individuals
impacted by the dam failure. It comprises two key components:
• More than 270,000 people participated in the water damages
program to compensate for temporary water interruption and
were paid a total of approximately R$280 million.
• The general damages component covers all other impacts,
including loss of life, injury, property, business impacts, loss
of income and moral damages. More than 10,000 families have
been paid a total of approximately R$910 million.
Compensation represents approximately 32 per cent of Fundação
Renova’s R$4.7 billion CY2020 budget.
Of the 19 fatalities, 16 families have been fully indemnified and one
partially. The remaining two families are still in legal negotiations.
Fundação Renova successfully concluded works to stabilise the
impacted land areas by June 2019. The riverbanks and floodplains
were vegetated, river margins stabilised and, in general, water and
sediment qualities returned to historic conditions. Long-term
remediation work is continuing with landowners and regulators
to re-establish agricultural production and riparian margins with
native vegetation.
The tailings have low concentrations of trace metals; however, the
background concentrations of some elements are elevated in the
area due to natural conditions or previous human activity. BHP has
continued working with Fundação Renova to make sure robust data
is collected, the assessment methodologies are consistent with
Brazilian and international standards, and clear causes for any
potential health impacts are identified so that health authorities
have accurate information to support their decision-making.
Results from water and sediment quality, aquatic habitat and fish
surveys demonstrate that the river ecology downstream of the
Candonga reservoir and along the coast has recovered from any
tailings-related impacts. Upstream of the Candonga reservoir,
sediment volumes in the river channel have slowed the recovery
of habitats and aquatic fauna diversity and abundance compared
to downstream of the reservoir. However Fundação Renova’s work
is intended to support natural system dynamics of the river to
enhance the recovery of habitats and aquatic ecology.
In December 2019, Fundação Renova successfully and safely
removed the Linhares barrier in the Pequeno River, allowing the
free flow of water between the river and the Juparanã lake.
76 BHP Annual Report 2020
Relevant legal proceedings: Key decisions on the fishing bans
in Espírito Santo, Minas Gerais and other priority areas
In 2016, the Federal Court of Linhares imposed a ban on fishing
activities in the coastal area of the state of Espírito Santo. The
request to revoke the injunction was denied on 10 July 2020.
In April 2020, Fundação Renova challenged the precautionary
conservation restriction preventing fishing for native fish species
in the Rio Doce in Minas Gerais state. To date, the restriction
remains in place.
Since January 2020, the 12th Federal Court of Belo Horizonte
has opened discussion over 12 enforcement proceedings linked
to the R$20 billion and R$155 billion public civil claims. These
enforcement proceedings seek to expedite the remediation
process related to the Fundão dam failure. The claims for these
proceedings are mostly related to programs provided for in the
Agreements and actions executed by Fundação Renova. Issues
covered by these 12 new proceedings include environmental
recovery, human health, food safety regarding fish and agricultural
products irrigated with Rio Doce water and ecological risk
assessment, resettlement of affected communities, infrastructure
and development, registration and indemnities, resumption of
economic activities, water supply for human consumption and
hiring of technical advisers to impacted people among other
key delivery areas.
Key decisions expected for resettlement
On 8 January 2020, the Mariana Court extended the deadline for
final delivery of the collective resettlements of Bento Rodrigues
and Paracatu de Baixo works, enforceable by potential fines for
non-compliance, until 27 February 2021. BHP Brasil, Vale and
Samarco appealed this decision given the factors impacting delays
that are outside of the control of Fundação Renova. A final ruling
is pending.
BHP Group Limited, BHP Group Plc and BHP 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.
Progress on our commitments
Following the investigation into the causes of the dam failure,
Samarco and its shareholders implemented specific actions
to help prevent a similar event from occurring, including a plan
to decommission the Germano dam.
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 a basic design level. Funding for CY2020 and CY2021 was
approved by the BHP Board in April 2020, including for initial
buttressing services, spillway construction and regrading activities.
Preliminary works started in April and a small impact on schedule
has been experienced due to COVID-19.
For information on our ongoing management of tailings dams,
refer to section 1.7.10. More information on the health, safety and
environmental performance at our NOJVs is available at bhp.com.
BHP Annual Report 2020 77
Governance at BHPRemuneration ReportDirectors’ ReportFinancial StatementsAdditional informationShareholder informationStrategic Report1 1.9 Portfolio: Our business
The maps in this section should be read in conjunction with the information on mining operations table in section 6.2.
1.9.1 Locations
BHP locations (includes non-operated operations)
27
24
30
26
28
31
17
13
2
6
21
5
4
19
3
20
17
1
18
22
12
34
33
14
35
25
29
15
11
9
8
7
23
10
32
16
78 BHP Annual Report 2020
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
Two open-cut metallurgical coal mines in the Bowen Basin, Central Queensland
Nickel West
Integrated sulphide mining, concentrating, smelting and refining operation
in Western Australia
Minerals Americas
Ref Country
7
8
9
Chile
Chile
Peru
10
Brazil
11
12
Colombia
Canada
Petroleum
Ref Country
13
14
Australia
US
Asset
Escondida
Pampa Norte
Antamina (1)
Samarco (1)
Cerrejón (1)
Jansen
Description
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
Ownership
Australia Production Unit
Offshore oil fields and gas processing facilities in Western Australia
39.99–71.43%
Gulf of Mexico Production Unit
Gulf of Mexico Joint Interest Unit (1)
Offshore oil and gas fields in the Gulf of Mexico
15
Trinidad and Tobago
Trinidad and Tobago Production
Unit
Offshore oil and gas fields
16
17
Algeria
Australia
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
BHP principal office locations
Ref Country
18
19
Australia
Australia
20
Australia
21
22
23
24
25
26
27
Australia
Canada
Chile
China
Ecuador
India
Japan
28 Malaysia
29
Peru
30 Philippines
Location
Adelaide
Brisbane
Melbourne
Perth
Saskatoon
Santiago
Shanghai
Quito
New Delhi
Tokyo
Office
Minerals Australia office
Minerals Australia office
Global headquarters
Minerals Australia office
Minerals Americas office
Minerals Americas office
Corporate office
Metals exploration office
Corporate office
Corporate office
Kuala Lumpur
Global Asset Services Centre
Lima
Manila
Metals exploration office
Global Asset Services Centre
31
32
33
34
35
Singapore
Singapore
Marketing and corporate office
UK
US
US
US
London
Houston
Tucson
Corporate office
Petroleum office
Metals exploration office
Washington DC
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
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
Ownership
100%
65 – 100%
100%
50%
80%
100%
Ownership
57.5%
100%
33.75%
50%
33.3%
100%
23.9– 44%
45%
29.2%
12.5 – 50%
BHP Annual Report 2020 79
1.9.2 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
s1001_v1
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 consists 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 metallurgical complex consists of grinding, flotation and leach
circuits, a hydrometallurgical plant incorporating solvent extraction
circuits for copper and uranium, copper smelter, copper refinery
and a recovery circuit for precious metals.
Key developments during FY2020
Olympic Dam achieved solid underground mine performance in
FY2020 with strong development metres, as well as record annual
gold production. Underground development into the Southern
Mine Area progressed to plan over the year, and provided access
to higher copper grade ore. Preparatory work was undertaken
in the September 2019 quarter related to the replacement of the
refinery crane with the physical replacement and commissioning
expected to be completed in the March 2021 quarter.
Looking ahead
Preparations are well advanced for the next Smelter Campaign
Maintenance to be executed early in FY2022. Olympic Dam has
a range of future growth options under consideration as part
of its sustained, long-term growth strategy, from incremental
debottlenecking through to large scale investments. A third
phase of exploration drilling on the Oak Dam project has been
completed with additional geotechnical and geo-metallurgical
data collected to assist in the understanding of the deposit.
Further drilling will be conducted in FY2021, which will inform
our next steps with the project.
80 BHP Annual Report 2020
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
Existing operations
Port Hedland – Newman Rail Line
Port
Goldsworthy Rail Line
s1002_v1
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 enables the value of installed infrastructure
to be maximised by using the same processing plant and rail
infrastructure for a number of orebodies.
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 FY2020
Construction of the South Flank project started in July 2018
and by the end of FY2020 was overall 76 per cent complete.
WAIO achieved record production in FY2020 of 248 million
tonnes (Mt) (compared to 238 Mt in FY2019), with higher volumes
reflecting record production at Jimblebar and Yandi. Weather
impacts from Tropical Cyclone Blake and Tropical Cyclone Damien
were offset by strong performance across the supply chain, with
significant improvements in productivity and reliability following a
series of targeted maintenance programs over the past four years.
We continue to be a low-cost iron ore producer with cost
reductions and volume creep enabled through the BHP Operating
System, debottlenecking initiatives across the supply chain, and
technology and improvements in our maintenance strategies.
WAIO continues to focus on operating safely, implementing a series
of preventative measures designed to minimise the spread of
COVID-19. To meet border controls introduced by the Western
Australian Government, more than 900 employees and contractors
in business critical roles have temporarily relocated to Western
Australia, including the majority of people in specialist roles who
are based interstate, such as train drivers and train load out
operators. These employees remain in Western Australia.
In October 2019, BHP submitted an application for a government
approval related to Aboriginal heritage sites at our South Flank
project under construction in the Pilbara region of Western
Australia. The approval was granted in May 2020 following
extensive consultation with the Traditional Owners, the Banjima
people. Nonetheless, consistent with our approach to cultural
heritage, BHP confirmed in June 2020 that it would not disturb
the sites covered by the approval without further consultation
with the Traditional Owners. BHP supports the Western Australian
Government’s current process to reform and update its cultural
heritage legislation. BHP has made submissions to the Government
in support of this reform.
Looking ahead
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 mine life.
For more information about South Flank,
refer to section 6.5.
WAIO continues to focus on productivity and debottlenecking,
while transitioning critical supply chain projects to deliver strong
returns and operational stability. Underpinning this success will
be the embedment of our transformation programs, labour
productivity and operational efficiencies across our business.
BHP Annual Report 2020 81
Governance at BHPRemuneration ReportDirectors’ ReportFinancial StatementsAdditional informationShareholder informationStrategic Report1 1.9.2 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
Emerald
Blackwater
Blackwater
Barney Point
Rockhampton
RG Tanna
Gladstone
BMA Mine
BMC Mine
BMA Port
Port
Rail
Metallurgical coal assets
Our metallurgical coal assets in Australia consist of open-cut and
underground mines. At our open-cut mines, overburden is removed
after blasting, using draglines or truck and shovel. The metallurgical
coal (also called steelmaking coal) is then extracted using
excavators or loaders and loaded onto trucks to be taken
to stockpiles or to a beneficiation facility.
At our underground mine, steelmaking coal is extracted by longwall
or continuous miner. It is then transported to stockpiles on the
surface by conveyor.
Steelmaking coal from stockpiles is crushed and, for a number of
the operations, washed and processed through a preparation plant.
It is then transported to ports on trains. Single and multi-user rail
and port infrastructure is used as part of the steelmaking 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 steelmaking 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.
BMA
BMA is Australia’s largest 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. 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.
82 BHP Annual Report 2020
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).
Key developments during FY2020
Queensland Coal achieved record underground coal mined at
Broadmeadow of 2.43 Mt (compared to 2.12 Mt in FY2019) and
record annual production at Caval Ridge of 4.35 Mt (compared
to 3.97 Mt in FY2019) and Poitrel of 4.13 Mt (compared to 4.07 Mt
in FY2019).
Productivity initiatives introduced in FY2019 to accelerate the rate
at which coal is uncovered and ensure a continuous feed to the
wash plants remained on track, with FY2020 focused on
improvements in payload and cycle times. Through the Integrated
Remote Operations Centre, we continued to build on the ultra class
truck utilisation improvements, optimising truck allocation and
minimising process delays with in-shift, real-time operational
performance management and increased integration through
the outbound supply chain.
With a continued focus on safety in FY2020, Queensland Coal
achieved its lowest ever total recordable injury frequency rate
and BMA achieved a step change across lead and lag indicators
attributed to the implementation of key work programs enabling
alignment of health and safety procedures across all operations
and through investment in the implementation of more than
120 additional hard controls.
Gunnedah
NSW, Australia
Tamworth
Quirindi
Mt Arthur
Muswellbrook
Singleton
Cessnock
Maitland
Newcastle
NSWEC
Port
Rail
s1004_v1
Coal assets
Looking ahead
Queensland Coal will continue to focus on safety with BMA
further embedding the programs and standards implemented in
FY2020, and further investment in hard controls. BMC will work
to continue improving safety outcomes through field leadership,
hazard reporting and risk management at the South Walker
Creek and Poitrel Mines, and the Red Mountain coal handling
preparation plant.
For BMA, strong asset-level alignment of operating discipline and
integrated operational plans ensure we focus on maximising value
through the supply chain. This will be achieved by focusing on
bottleneck processes to smooth coal flows leveraging latent coal
handling preparation plant and logistics capacity. Medium-term
plans remain focused on lifting trucking performance to benchmark
rates thereby leveraging the benefits of our transformation program
and achieving results in the areas implemented.
Autonomous trucks are being implemented at two Queensland
Coal sites. Daunia with 34 autonomous trucks and Goonyella
Riverside with 86 autonomous trucks. Deployment at both sites
is expected to be completed early in CY2022.
BMC will also plan to focus on improving truck and shovel
productivity to ensure optimal utilisation of the coal handling
preparation plants, and continue to prioritise low-capital
debottlenecking opportunities. BMC will plan to mitigate
short-term COVID-19-related price impacts by reducing high
cost production and capital expenditure, but retain the ability
to respond should higher prices emerge.
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. Historically, the site has produced
coal for domestic and international customers in the energy sector,
but has shifted to international customers only from the second
half of FY2020.
Key developments during FY2020
During FY2020, NSWEC transitioned to a strategy of optimising
product quality. This has resulted in a reduction in volumes and
an increase in unit costs in the short term, but overall increased
realised value. Production volumes were also impacted
by unfavourable weather impacts from December 2019
to February 2020, partially offset by strong performance
in the June 2020 quarter driven by record truck utilisation.
Truck productivity improvements were delivered in the second half
of FY2020, enabling a step-change improvement across our mining
fleets. Annualised truck hours improved by 20 per cent, cycle times
reduced by 10 per cent and payload increased by 3 per cent,
supported by maintenance strategies and practices that enabled
equipment availability in excess of 90 per cent.
In FY2020, BHP completed an optimisation of the NSWEC outbound
supply chain commercial arrangements through a partial
divestment of shares and stapled capacity at the Newcastle Coal
Infrastructure Group terminal. The total export capacity of the asset
remains unchanged and the transaction has facilitated a more
competitive cost position.
Looking ahead
NSWEC continues to plan for the most productive path through
steeply dipping resources (the monocline) and securing the
required regulatory approval to continue operations post FY2026.
Work is underway to review mine planning and operating
alternatives to structurally reduce costs in the near term and ensure
a viable mining operation which is resilient during low price cycles.
BHP Annual Report 2020 83
Governance at BHPRemuneration ReportDirectors’ ReportFinancial StatementsAdditional informationShareholder informationStrategic Report1
1.9.2 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
s1005_v1
Nickel West
Overview
Looking ahead
We continue to focus on finalising Nickel West’s resource transition.
Leinster B11 block cave is expected to commence the undercut
phase during the first half of FY2021, providing increasing
quantities of ore to the Leinster concentrator as the project
progresses to full caving.
Nickel West also offers development options and potential
enhancements to its resource position through exploration and
processing innovation. These opportunities are being explored
in parallel with incremental debottlenecking opportunities at the
concentrators and the Kalgoorlie nickel smelter.
Nickel West is expected to complete construction of the nickel
sulphate plant located at the Kwinana nickel refinery in the first
half of FY2021, with first product due in the second half of FY2021.
This stage (Stage 1) is expected to produce approximately 100 ktpa
of nickel sulphate.
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 refined metal in the form
of 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, Leinster underground mines and
Rocky’s Reward open-pit mine. The ore is processed through
a concentrator and dryer at Leinster. Nickel West’s facility at
Kambalda processes material purchased from third parties.
The three streams of nickel concentrate come together at the
Kalgoorlie nickel smelter. The smelter uses a flash furnace to smelt
concentrate to produce nickel matte. The Kwinana nickel refinery
then refines granulated nickel matte from the Kalgoorlie smelter
into premium-grade nickel powder and briquettes containing
high-grade refined nickel. Nickel matte and metal are exported
to overseas markets via the Port of Fremantle.
Key developments in FY2020
The Nickel West resource transition involving the construction
of three new mines continued to progress during FY2020, with two
of these mines now in full production.
The Mt Keith satellite mine (Yakabindie) entered production in
December 2019 and is now the primary source of feed to the
Mt Keith concentrator.
The Venus underground mine transitioned to full production in
September 2019, with ore hoisted to the Leinster concentrator.
Leinster B11 (the first block cave to be developed by BHP, located
beneath the Leinster underground mine) proceeded in line
with expectations, with development ore hoisted to the
Leinster concentrator.
Nickel West signed an agreement to acquire the Honeymoon
Well development project on 19 June 2020 and the remaining
50 per cent interest in the Albion Downs North and Jericho
exploration joint ventures, located approximately 50 kilometres
from Mt Keith. Completion of the agreement is subject to a number
of conditions, including government and third party approvals.
84 BHP Annual Report 2020
1.9.3 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
Pacific Ocean
Tocopilla
Mejillones
Antofagasta
Pica
CHILE
Calama
Spence
ARGENTINA
Minera Escondida
Mine
s1006_v1
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 the port via pipeline, while cathodes
are transported by either rail or road. From the ports, copper
is exported to our customers around the world.
For the majority of the June 2020 quarter, our Chilean assets
operated with a reduction in their operational workforces of
approximately 35 per cent to incorporate measures in response
to COVID-19. We have implemented a comprehensive plan for
COVID-19, including various hygiene and health controls and
a proactive testing regime for people before entering sites and
boarding transportation.
We will continue to maintain operational measures that protect
the health and wellbeing of our workforce while COVID-19 remains
a major health risk, in line with Our Charter values. As a result, we
anticipate continuing to operate our Chilean assets with a reduced
workforce until these controls can be relaxed.
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 FY2020
Escondida copper production in FY2020 increased by 4 per cent
to 1,185 kilotonnes (kt), supported by record average concentrator
throughput of 371 kilotonnes per day (ktpd), which offset expected
grade decline, stoppages associated with the social unrest and
COVID-19 impacts.
The Escondida Water Supply Expansion (EWSE) project was
completed on time and budget in December 2019. Following the
completion of the EWSE project, Escondida has eliminated water
drawdown from aquifers for operational supply 10 years ahead
of its FY2030 target.
The Centre of Integrated Operations (CIO) was inaugurated in
July 2019 in BHP’s Santiago office and has since provided remote
control services to the mine and process areas of Escondida and
Spence. The CIO enables an operation that is safer and more
productive by reducing people on-site and allowing them to work
in a collaborative space.
Looking ahead
Production of between 940 and 1,030 kt is expected for FY2021,
with a decline in copper grade of concentrator feed of approximately
4 per cent. Lower volumes reflect the need to continue to balance
mine development and production requirements, with processing
capacity at concentrators and leaching plants, as a result of a
reduced operational workforce due to COVID-19. It is expected that
production levels are likely to be impacted in FY2022 as a result of
reduced operational workforce and material movement in FY2021.
Guidance of an annual average of 1,200 kt of copper production over
the next five years remains unchanged.
The BHP Operating System deployment and automated truck trial
initiatives are expected to be completed in FY2021. In addition,
Escondida will be undertaking studies on different material handling
technologies to build an integrated suite of material handling projects
that aims to combine innovative and disruptive technology and
equipment solutions to increase mine productivity and improve
costs competitiveness.
We expect these initiatives will allow Escondida to operate with
a medium-term unit cost of less than US$1.10 per pound despite
the continuation of grade decline and the increasing water costs.
BHP Annual Report 2020 85
Governance at BHPRemuneration ReportDirectors’ ReportFinancial StatementsAdditional informationShareholder informationStrategic Report1 1.9.3 Minerals Americas continued
PERU
Chile
BOLIVIA
Cerro
Colorado
Iquique
Pacific Ocean
Tocopilla
Mejillones
Antofagasta
Pica
CHILE
Calama
Spence
ARGENTINA
Minera Escondida
Mine
s1006_v1
Copper
Pampa Norte (Chile)
Overview
Looking ahead
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.
Production for FY2021 is expected to be between 240 and 270 kt,
reflecting the reduced operational workforce due to COVID-19, the
start-up of the SGO project and expected grade decline of
approximately 7 per cent.
Key developments during FY2020
Pampa Norte copper production for FY2020 decreased by
2 per cent to 243 kt, mainly due to a 14 per cent decline in stacked
ore grade.
The Spence Growth Option (SGO) to construct a 95 ktpd ore
concentrator and the outsourcing of a 1,000 litre per second
desalination plant is 93 per cent complete. As a result of measures
put in place to reduce the spread of COVID-19, first production
is now expected between December 2020 and March 2021. The
commissioning of the desalination plant and capitalisation of the
associated US$600 million lease (approximate) will now occur
in the first half of FY2021.
For more information about SGO,
refer to section 6.5.
SGO will produce first copper between December 2020 and
March 2021 and plans are on track to redesign the approach
to operations at Spence to optimally balance the requirements
of the concentrate and cathodes processes. The first batch
of the ultra-class truck fleet arrived at Spence in FY2020 and
the remaining units are expected to arrive in the next two years.
The BHP Operating System deployment at Spence started in
January 2020 and is expected to continue during FY2021. Similar to
Escondida, Spence will be undertaking studies on various material
handling technologies, such as automated trucks, trolley assistance
and in-pit crushers and conveyors to increase mine productivity
and improve cost competitiveness.
On 1 July 2020, Cerro Colorado announced it had started a
four-month process to adjust its mine plan to reduce throughput
and costs to achieve improved cash returns and ensure viable
mining operations for the remaining period of its current
environmental licence, which expires at the end of CY2023.
86 BHP Annual Report 2020
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
s1010_v1
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 FY2020
Focus in FY2020 was on safely installing new work platforms, called
Galloways, into the two 7.3-metre diameter service and production
shafts to enable the installation of the final watertight composite
concrete and steel liners from a depth of approximately 900
metres. At the end of FY2020, the current scope of work was
86 per cent complete.
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 continuing to install the watertight
composite concrete and steel final liners. In June 2020, final shaft
lining work for the Jansen Potash Project, which was reduced to
focus on one shaft as part of our COVID-19 response plan to reduce
our on-site interprovincial workforce, was resumed in both shafts.
BHP continues to assess the impacts of COVID-19 and the
temporary reduction in construction activity. Timing for completion
of the shafts continues to be under review.
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.
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 Copper
(45 per cent ownership), Cerrejón (33.33 per cent ownership)
and Samarco (50 per cent ownership).
For more information on Samarco and Fundação Renova,
refer to section 1.8.
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.
During the COVID-19 pandemic, BHP supported some of the
work by the operator at certain of our NOJVs to address risks
associated with the pandemic, including temporary shutdowns
and restart. Subject matter experts from NOJV partners (including
BHP) provided input to relevant NOJV operators in relation to
HSE, communications and community engagement issues during
the pandemic.
Throughout FY2020, we continued positively influencing the
NOJVs to align with international standards (including ISO 31000).
This included analysing and challenging completeness of their risk
profile and prioritising management of those risks.
The NOJV team also continued to support the NOJVs to improve
their operating performance and cost competitiveness in a
challenging environment, delivering significant capital optimisation
across the Antamina, Cerrejón and Resolution joint ventures and
strengthening the capital returns from each of the operations.
More information on the health, safety and environment
performance at our NOJVs is available at bhp.com
BHP Annual Report 2020 87
Governance at BHPRemuneration ReportDirectors’ ReportFinancial StatementsAdditional informationShareholder informationStrategic Report1 1.9.3 Minerals Americas continued
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
Antamina Mine
Port
Hwy
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 FY2020
Antamina continues to focus its efforts on safety and health
improvements. Copper production for FY2020 decreased by
15 per cent to 125 kt and zinc decreased by 10 per cent to 88 kt
reflecting lower copper head grades and the impact of operating
with a reduced workforce following a six-week shutdown during
the June 2020 quarter in response to COVID-19.
During FY2020, Antamina continued with a strong focus on
developing a robust technology roadmap to secure a more
sustainable operation in the long term and to maintain cost
competitiveness. Antamina has progressed studies to debottleneck
the operation through mine mechanisation projects and the first
phase is expected to be completed in the next three years.
Antamina announced its intent to submit its Modified Environmental
Impact Assessment (MEIA) for its life extension project from CY2028
to CY2036, which includes extension of current approved tailings
capacity, additional waste dumps and new pit design.
Antamina’s operations were suspended between 13 April and
26 May 2020 due to COVID-19 implications. Strict controls were
applied during the demobilisation to safeguard the health of workers
and local communities. At the end of FY2020, its operations were
at a ramp-up stage, while complying with government COVID-19
requirements and applying sector international standards for health
and safety.
During the COVID-19 emergency, Antamina intensified its
contribution to local communities, helping the Regional Government
to strengthen its capabilities to cope with the pandemic, providing
medical equipment, launching initiatives for local farmers and
entrepreneurs to support the local economy (through the program
Reactiva Ancash), and distributing food aid.
Looking ahead
Copper production of between 120 and 140 kt, and zinc production
of between 140 and 160 kt is expected for FY2021.
Antamina will remain focused on improving productivity and
reducing unit cash costs by identifying new technologies and
88 BHP Annual Report 2020
innovative solutions in line with the technology roadmap. In addition,
Antamina will continue to embed a culture of diversity and inclusion
in its strategy and monitor the MEIA process, seeking final approval
in a reasonable timeframe and community engagement. Once the
MEIA process is finalised, it is anticipated Antamina will update its
reserve and resource statement to reflect an approved life extension
to CY2036.
Resolution Copper (United States)
Overview
BHP holds 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 FY2020
The shaft No. 9 sinking project involves deepening the historic
shaft from its current depth at 1,460 metres below the surface
to a final depth of 2,086 metres and linking it with the existing
No. 10 shaft via development activities underground. This project
is on track with respect to schedule and budget. In December 2019,
it passed the one-mile (1,600 metre) mark with zero safety events;
a major milestone for shaft sinking works in the United States.
The multi-year National Environmental Policy Act permitting
process and community engagement are progressing positively.
The US Forest Service released the Draft Environmental Impact
Statement on 9 August 2019 and the comment period closed
on 7 November 2019.
Resolution continued to move forward to identify the best
development pathway for the project as the PFS-A study progressed.
BHP’s share of project expenditure for FY2020 was US$103 million.
Looking ahead
We remain focused on supporting Resolution Copper on optimising
the project and working with the operator, Rio Tinto, to develop
the project in a manner that creates sustainable benefits for
all stakeholders.
La Guajira
province,
Colombia
Puerto Bolivar
Caribbean Sea
Riohacha
Uribia
Maicao
COLOMBIA
Cerrejón
Gulf of Venezuela
Maracaibo
VENEZUELA
Cerrejón
Port
Rail
s1009_v1
Coal
Cerrejón (Colombia)
Overview
We have a 33.33 per cent 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 is an equal partnership joint
venture with Anglo American and Glencore. Cerrejón has lease
agreements for several mining areas and owns integrated rail and
port facilities. Coal product is marketed through an independent
company and is exported mainly to European, North American and
South American customers; a minor proportion is exported to Asia.
Cerrejón makes an important contribution to the Colombian
economy and to the region of La Guajira, employing local people,
contributing through taxes and royalties and investing in social and
environmental initiatives. Cerrejón is also working with local
Indigenous groups to address concerns raised by them in relation
to the impacts of Cerrejón’s operations on their communities.
Key developments during FY2020
FY2020 concluded with stable safety and operational performance
at Cerrejón. Production declined by 23 per cent to 7 Mt in FY2020,
due to a temporary shutdown and workforce reduction during the
COVID-19 pandemic and focus on higher-quality products due to
market adjustment. Cerrejón reduced its operational costs by
15 per cent, which allowed it to remain cash flow neutral in spite
of the decline in coal price.
Cerrejón supported the local community of La Guajira during the
COVID-19 emergency by providing drinking water, food parcels and
medical equipment, including the donation of a laboratory to carry
out COVID-19 molecular testing in the community. Cerrejón
continues to engage with communities and ensure its stakeholders
are informed about the protocols and controls they have in place
to keep the workforce and communities safe.
Looking ahead
Cerrejón is focused on stability of throughput with current
installed capacity, targeting higher calorific value coal and market
diversification. Production is expected to be approximately 7 Mt
in FY2021.
BHP Annual Report 2020 89
Governance at BHPRemuneration ReportDirectors’ ReportFinancial StatementsAdditional informationShareholder informationStrategic Report1 1.9.3 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
s1008_v1
Iron ore
Samarco (Brazil)
BHP Billiton Brasil Ltda (BHP Brasil) and Vale S.A. (Vale) 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.
All geotechnical structures within the Germano facilities, including
tailings dams, are monitored 24 hours a day by Samarco, using
more than 800 pieces of monitoring and safety equipment,
including cameras, weather forecast stations, drones and
accelerometers. In addition, sirens are installed along the river up
to 80 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 FY2020
Samarco operations restart consists of three main pillars: Alegria
Sul pit tailings disposal system, LOC (corrective operational
licence) issuance and filtration plant construction together with
operations readiness activities. Alegria Sul pit tailings disposal
system implementation was completed in September 2019.
The LOC was issued on 25 October 2019. US$44 million for BHP
Billiton Brasil Ltda’s share was approved to fund the restart of
production at Samarco from a single concentrator in the second
half of CY2020 or early CY2021 (BHP mid-view is January 2021).
The funds will be used for the first phase of installation of tailings
filtration infrastructure and operational readiness activities. Work
related to the construction of the filtration plant and operations
readiness activities have been slowed as a result of a reduced
workforce as part of our COVID-19 response without a significant
impact on the restart schedule.
BHP Brasil and Vale approved the filtration plant and operational
readiness activities investment in November 2019 and dam
decommissioning program investment for CY2020–2021 was
approved in April 2020.
Following Vale’s Brumadinho dam tragedy on 25 January 2019,
Brazil’s National Mining Agency (ANM) announced a requirement
for all upstream construction tailings dams to be decommissioned
by various dates, depending on their size. As required under the
regulatory requirements, a dam decommissioning conceptual
design was filed with the ANM in August 2019 and a basic design
was filed with the ANM in December 2019. Field works started in
April 2020 for the program, which includes the decommissioning
of the Germano pit dam and Germano main dam (including the
main dam and the Sela, Tulipa and Selinha saddle dykes) to
guarantee the long-term stability of the structures, as well
as final regrading of the impoundment area and, finally,
environmental rehabilitation.
Construction of a new retaining dam, following the failure of the
Fundão dam, is now complete and was the last structure to be
built in the Fundão valley to ensure the remaining tailings would
not be remobilised. Further work relating to the starting dyke for
the future tailings and waste piles is now incorporated into the
Germano decommissioning program. This work will be completed
by Samarco following transfer of the program from Fundação
Renova in September 2019.
Looking ahead
The Samarco business plan considers an operations restart with
one concentrator and tailings filtering, which changes the tailings
disposal from the use of tailings dams to disposal of the coarse
portion of the tailings in dry stack piles and the disposal of slimes
in a previously mined out pit. Samarco is focused on completing
the filtration plant construction for dry stacking and completing
operational readiness activities. All filters are now installed and the
electrical and mechanical installation services are progressing.
As part of the dam decommissioning process, the Germano pit
dam gallery plugging and the Germano main dam preliminary
services have started. Samarco is looking ahead to complete
Germano main dam toe ground replacement, initial regrading
and initial excavation of the spillway in FY2021.
90 BHP Annual Report 2020
1.9.4 Petroleum
Conventional petroleum
BHP has owned oil and gas assets since the 1960s.
We have a world-class portfolio of 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 location of the asset.
Our conventional petroleum business responded effectively to COVID-19, despite global market impacts in the second half of FY2020 as
petroleum demand reduced due to collapsing transport activity. As always, the safety of our people came first and additional measures
were put in place across each of our assets and projects to protect the health and safety of our workforce. All assets remained in operation
as a result of these measures and through partnering with our communities, suppliers and contractors. Despite supply chain delays,
all projects currently in execution remain on track to meet first production guidance.
LOUISIANA
New Orleans
Shenzi
Neptune
Atlantis
Mad Dog
Gulf of Mexico
United States
BHP acreage
Petroleum
United States
Gulf of Mexico
Overview
Our US Gulf of Mexico assets are large, long-life and expandable.
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 FY2020
The Mad Dog Phase 2 project, located in the Green Canyon area of
the deepwater US Gulf of Mexico, successfully progressed through
FY2020 and remains on track for first production in CY2022. Mad
Dog Phase 2 is an extension of the existing Mad Dog field and is
one of the largest discovered and undeveloped resources in the
Gulf of Mexico. The project builds on the successful Mad Dog
South appraisal well, which confirmed significant hydrocarbons
in the southern portion of this field, and will include 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.
The Atlantis Phase 3 project, also located in the Green Canyon area,
remained on schedule and on budget, achieving first production
in July 2020. This project includes a subsea tie back of eight new
production wells accessing infill resource opportunities identified
through seismic imaging. Atlantis Phase 3 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 6.5.
BHP Annual Report 2020 91
Governance at BHPRemuneration ReportDirectors’ ReportFinancial StatementsAdditional informationShareholder informationStrategic Report1 1.9.4 Petroleum continued
Thebe
Scarborough
North West Shelf
VICTORIA
Dampier
Australia
Macedon
Pyrenees
Onslow
Maffra
Sale
Longford
Snapper
Tuna
Bream
Turrum
Halibut
Kipper
Flounder
Barracouta
Blackback
Kingfish
0
200km
0
10
20
30km
Bass Strait
WESTERN AUSTRALIA
Pyrenees
BHP operates the Pyrenees FPSO facility, located approximately
23 kilometres off Northwest Cape, Western Australia. The facility
produces from six offshore fields. We had an effective 62.36 per cent
interest in the fields as at 30 June 2020 based on inception-to-date
production from two permits in which we have interests of
71.43 per cent and 40 per cent, respectively.
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 3 September 2019, the Minerva gas field reached end-of-field
life and production ceased at the Minerva gas plant. 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 provided for the transfer
of the plant and associated land after the cessation of current
operations processing gas from the Minerva gas field. The sale
was completed on 5 December 2019.
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 more than 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 –
Cossack, Wanaea, Lambert and Hermes – produced through the
Okha floating production, storage and off-take (FPSO) facility
(16.67 per cent interest). All North West Shelf gas and oil joint
ventures are operated by Woodside Energy Limited (Woodside).
92 BHP Annual Report 2020
Petroleum
Key developments during FY2020
Scarborough
In the March 2020 quarter, BHP and Woodside (operator) agreed
to align participating interests across the WA-1-R and WA-2-R titles
resulting in BHP holding a 26.5 per cent interest in each title. BHP
also holds a 50 per cent non-operated interest in Jupiter and Thebe
titles (WA-61-R and WA-63-R) in the greater Scarborough area
located offshore northwest Australia. Scarborough offers material
growth potential in Western Australia and opportunities to develop
the Scarborough gas field are progressing.
BHP and Woodside also signed a non-binding Heads of Agreement
to progress the Scarborough gas development during the
December 2019 quarter. Among other terms, this includes
agreement on a competitive tariff for gas processing through the
Pluto LNG facility. In March 2020, Woodside announced deferral
of the Scarborough gas development to the second half of CY2021.
A final investment decision by BHP is expected to align with this
revised timing.
Bass Strait West Barracouta
Two new West Barracouta wells were completed under budget in the
June 2020 quarter. Construction on production infrastructure linking
the West Barracouta development to the existing Barracouta field is
currently underway. First gas is expected in CY2021.
North West Shelf Greater Western Flank
A final investment decision was reached for Greater Western Flank
Phase 3 (GWF-3) and Lambert Deep in January 2020. This four well
tie back will take advantage of existing infrastructure and first gas
is expected in CY2023.
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 29.2 per cent interest in
the Rhourde Ouled Djemma (ROD) Integrated Development, which
consists of the ROD, Sif Fatima – Sif Fatima North East (SF SFNE)
and four satellite oil fields that pump oil back to a dedicated
processing train. The oil is sold to international markets. ROD
Integrated Development is jointly operated by Sonatrach and ENI.
Key developments during FY2020
Building on our existing position in the region, Ruby is an offshore
shallow water oil and gas development in Trinidad and Tobago that
will consist of five production wells tied back into existing operated
processing facilities. The BHP Board approved its development
on 8 August 2019 with an expected investment of US$283 million
(BHP share). First production is targeted in CY2021. The project
is estimated to have the capacity to produce up to 16,000 gross
barrels of oil per day and 80 million gross standard cubic feet
of natural gas per day.
For more information on Ruby, refer to section 6.5.
BHP Annual Report 2020 93
Governance at BHPRemuneration ReportDirectors’ ReportFinancial StatementsAdditional informationShareholder informationStrategic Report1 1.9.5 Commercial
BHP’s Commercial function maximises commercial and social value and minimises costs across the
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
to our assets and customers, by harnessing deep subject matter
expertise, simpler processes and centralisation of standardised
activities. By embracing our strategic end-to-end supply chain
mandate and partnership with our suppliers and customers, the
Commercial function also creates social value through supply chain
integrity, community and sustainability focus.
Sales and Marketing
Sales and Marketing connects 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, with
a view to realising maximum value for our products.
Maritime and Supply Chain Excellence
Maritime and Supply Chain Excellence manages 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 focuses on supply chain excellence
and sourcing marine freight coverage at the lowest available cost.
Procurement
Our global Procurement sub-functions purchase the goods and
services used by our projects, assets and functions. Procurement
works with our business to optimise equipment performance, reduce
operating costs and improve working capital. They manage supply
chain risk and develop sustainable relationships with global suppliers
and local businesses in the communities in which we operate.
Warehousing Inventory and Logistics and Property
Warehousing Inventory and Logistics and Property design and
operate our inbound supply chain networks for the delivery of
spare parts, operating supplies and consumables. They design
and operate our office workspaces globally.
Market Analysis and Economics
Our Market Analysis and Economics team develops BHP’s
independent view on the outlook for commodity demand
and commodity prices. The team works with our Procurement,
Maritime, and Sales and Marketing sub-functions to help optimise
end-to-end commercial value, and with the Finance and External
Affairs functions to identify and respond to long-run strategic
changes in our operating environment.
94 BHP Annual Report 2020
1.10 Summary of financial performance
1.10.1 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.
Information in this section has been presented on a Continuing operations basis to exclude the contribution from Onshore US assets,
unless otherwise noted. Details of the contribution of the Onshore US assets to the Group’s results are disclosed in note 28 ‘Discontinued
operations’ in section 5.
Year ended 30 June
US$M
2020
2019
2018
2017
2016
44,288
16,113
9,520
(335)
43,129
15,996
7,744
(2,921)
35,740
12,554
6,694
(472)
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) (8)
Underlying attributable profit (7)
Underlying EBITDA (7)
Underlying EBIT (7)
Underlying basic earnings per share (US cents) (7)
Underlying Return on Capital Employed (per cent) (7)
42,931
14,421
8,736
−
7,956
143.0
120.0
157.3
157.0
157.3
157.0
5,058
5,057
5,069
8,306
220.0
235.0
160.3
159.9
166.9
166.5
5,058
5,180
5,193
104,783
52,246
2,686
47,936
100,861
51,824
2,686
47,240
15,706
7,640
12,044
9,060
22,071
15,874
179.2
16.9
17,871
7,566
9,446
9,124
23,158
17,065
176.1
15.9
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
25,590
1,215
11,720
5,324
22.8
2.4
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
11,605
8,933
23,183
16,562
167.8
14.2
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
17,201
6,732
19,350
13,190
126.5
9.8
(1) FY2018 and FY2017 have been restated to reflect the impact of the accounting standard, IFRS 15 Revenue from Contracts with Customers, which came into effect from
1 July 2018 with restatements applied to comparative periods in section 5. FY2016 has 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 28 ‘Discontinued operations’ in section 5. Purchase of property, plant and equipment includes capitalised deferred stripping of
US$698 million for FY2020 (FY2019: US$1,022 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, Underlying basic earnings per share and
Underlying Return on Capital Employed includes Continuing and Discontinued operations. Refer to section 6.1 for a reconciliation of Alternative Performance Measures
to their respective IFRS measure. Refer to section 6.1.1 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.
(8) With effect from 1 July 2019, the net debt definition includes the fair value of derivative financial instruments used to hedge cash and borrowings. Prior period
comparatives have been restated to reflect the change in net debt calculation. As a result of the adoption of IFRS 16 ‘Leases’ from 1 July 2019, the current period
‘Total Interest bearing liabilities’ includes all leases under the new definition. The Group elected to apply the modified retrospective transition approach, with no
restatement of comparative periods. Refer to note 38 ‘New and amended accounting standards and interpretations’ in section 5. Vessel lease contracts that are priced
with reference to a freight index, which did not meet the definition of a lease under IAS 17, now meet the definition of a lease under IFRS 16. These contracts are
measured at each reporting date based on the prevailing freight index. The freight index has historically been volatile which creates significant short-term fluctuation
in these liabilities. Continued volatility throughout FY2020 has meant that as of 1 January 2020, the Group excludes these liabilities from its net debt calculation.
BHP Annual Report 2020 95
Governance at BHPRemuneration ReportDirectors’ ReportFinancial StatementsAdditional informationShareholder informationStrategic Report1 2018
US$M
43,129
247
(3,990)
142
(4,389)
(2,294)
(4,786)
(1,374)
93
(208)
(2,168)
(641)
(6,288)
(333)
(421)
(870)
(27,527)
147
15,996
(1,245)
(7,007)
7,744
(2,921)
4,823
1,118
3,705
1.10.2 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 FY2020.
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)
Fair value of derivatives
Government royalties paid and payable
Exploration and evaluation expenditure incurred and expensed in the current period
Depreciation and amortisation expense
Impairment of assets
Lease costs
All other operating expenses
2020
US$M
42,931
777
(4,055)
326
(5,509)
(1,981)
(4,404)
(1,139)
603
(422)
(2,362)
(517)
(6,112)
(494)
(675)
(2,034)
2019
US$M
44,288
393
(4,032)
(496)
(4,591)
(2,378)
(4,745)
(1,069)
147
(8)
(2,538)
(516)
(5,829)
(264)
(405)
(1,298)
Expenses excluding net finance costs
(28,775)
(28,022)
(Loss)/profit from equity accounted investments, related impairments and expenses
(512)
14,421
(911)
(4,774)
8,736
−
8,736
780
7,956
(546)
16,113
(1,064)
(5,529)
9,520
(335)
9,185
879
8,306
driven by Cerro Colorado operations reflecting current mine plan.
Other operating expenses increased by US$736 million driven
by an increase in depletion of production stripping mainly at
Escondida due to increased fine copper movement combined
with closure provision adjustment for closed mines. Favourable
movements in foreign exchange (FX) affected the majority
of cost categories.
(Loss)/profit from equity accounted investments, related
impairments and expenses of US$(512) million in FY2020
decreased by US$34 million from FY2019. The decrease reflects
lower profits from Antamina and Cerrejón which was primarily due
to lower prices and COVID-19-related outages offset by favourable
FX movements on the Samarco dam failure provision.
Net finance costs of US$911 million decreased by US$153 million,
or 14 per cent, from FY2019 mainly due to lower effective interest
rates and lower average debt balance following the repayment on
maturity of Group debt.
For more information on net finance costs, refer
to section 1.10.3 and note 21 ‘Net finance costs’
in section 5.
Total taxation expense of US$4,774 million reduced by
US$755 million from FY2019. The decrease was primarily due to
lower profits combined with FY2019 impacted by provisions for tax
disputes and a higher net reduction in US tax credits related to
Chilean taxes.
For more information on income tax expense,
refer to note 6 ‘Income tax expense’ in section 5.
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 decreased
from a profit of US$8.3 billion in FY2019 to a profit of US$8.0 billion
in FY2020.
Revenue of US$42.9 billion decreased by US$1.4 billion, or
3 per cent, from FY2019. This decrease was primarily attributable
to lower average realised prices for coal, petroleum and copper,
and lower volumes due to natural field decline at Petroleum and
lower grade at Escondida and Spence, combined with planned
maintenance across a number of our assets. This was partially
offset by higher average realised prices for iron ore, record
production at WAIO, record average concentrator throughput at
Escondida and improved operational stability.
For information on our average realised prices and
production of our commodities, refer to section 1.11.
Total expenses of US$28.8 billion increased by US$0.8 billion,
or 3 per cent, from FY2019. The decrease in changes in inventories
of finished goods and work in progress of US$822 million was
primarily driven by FY2019 inventory drawdowns at Escondida
in line with the Los Colorados Extension commissioning compared
to planned rebuilds for operational stability following drawdowns
in the prior year. Raw materials and consumables used increased
by US$918 million driven by the cancellation of power contracts
at Escondida and Spence as part of the shift towards 100 per cent
renewable energy supply contracts. Freight and transportation
decreased by US$397 million driven by the adoption of IFRS 16
where freight costs related to continuous voyage charters were
brought onto the balance sheet as right-of-use assets and
depreciated. Depreciation and amortisation expense increased
by US$283 million driven by the adoption of IFRS 16 right-of-use
assets partially offset by lower depreciation and amortisation at
Petroleum in line with lower production volumes due to natural
field decline. Impairment of assets increased by US$230 million
96 BHP Annual Report 2020
Principal factors that affect Revenue, Profit from operations and Underlying EBITDA
The following table describes the impact of the principal factors that affected Revenue, Profit from operations and Underlying EBITDA
for FY2020 and relates them back to our Consolidated Income Statement. For information on the method of calculation of the principal
factors that affect Revenue, Profit from operations and Underlying EBITDA, refer to section 6.1.2.
With effect from 1 July 2019, the Change in volumes variance calculation has been changed to reference prior year price less variable unit
cost instead of prior year Underlying EBITDA margin. This change to the Change in volumes variance calculation is offset in the Operating
cash costs variance calculation. Management believes this amendment is useful because the entire impact of a Change in volumes will be
reflected in one category instead of separately reporting the related fixed cost dilution impacts in the Operating cash costs category. Prior
periods have not been restated for this change.
Year ended 30 June 2019
Revenue
Other income
Expenses excluding net finance costs
(Loss)/profit from equity accounted investments, related impairments
and expenses
Total other income, expenses excluding net finance costs and
(Loss)/profit from equity accounted investments, related impairments
and expenses
Profit from operations
Depreciation, amortisation and impairments (1)
Exceptional items
Underlying EBITDA
Change in sales prices
Price-linked costs
Net price impact
Changes in volumes
Operating cash costs
Exploration and business development
Change in controllable cash costs (2)
Exchange rates
Inflation on costs
Fuel and energy
Non-cash
One-off items
Change in other costs
Asset sales
Ceased and sold operations
Other
Depreciation, amortisation and impairments
Exceptional items
Revenue
US$M
44,288
(1,038)
–
(1,038)
(378)
−
−
−
(66)
−
−
−
189
123
−
(90)
26
−
−
Year ended 30 June 2020
Revenue
Other income
Expenses excluding net finance costs
(Loss)/profit from equity accounted investments, related impairments
and expenses
42,931
Total other income, expenses excluding net finance costs and
(Loss)/profit from equity accounted investments, related impairments
and expenses
Profit from operations
Depreciation, amortisation and impairments (1)
Exceptional item included in 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
393
(28,022)
(546)
(28,175)
(54)
(12)
(66)
(34)
223
(115)
108
1,020
(298)
77
(460)
95
434
1
(328)
155
(104)
(501)
777
(28,775)
(512)
(28,510)
16,113
(1,092)
(12)
(1,104)
(412)
223
(115)
108
954
(298)
77
(460)
284
557
1
(418)
181
(104)
(501)
14,421
6,093
952
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
104
501
23,158
(1,092)
(12)
(1,104)
(412)
223
(115)
108
954
(298)
77
(460)
284
557
1
(418)
181
−
−
6,606
(409)
1,453
22,071
(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$85 million (FY2019: US$264 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.
Lower average realised prices decreased Underlying EBITDA by
US$1.1 billion in FY2020 reflecting lower average realised prices for
metallurgical and energy coal, petroleum and copper, partially
offset by higher average realised prices for iron ore and nickel.
Change in volumes decreased Underlying EBITDA by
US$412 million primarily as a result of record production at WAIO,
Caval Ridge and Poitrel, record average concentrator throughput
at Escondida and improved operational stability following the prior
BHP Annual Report 2020 97
Governance at BHPRemuneration ReportDirectors’ ReportFinancial StatementsAdditional informationShareholder informationStrategic Report1
1.10.2 Financial results continued
period impacts of unplanned outages. These favourable
movements were more than offset by the impacts from planned
maintenance across a number of our assets (Queensland Coal,
WAIO), unfavourable weather (Queensland Coal, WAIO, NSWEC),
a change in product strategy at NSWEC to focus on higher-quality
products, lower grade at Escondida and Spence and Petroleum
natural field decline across the portfolio.
Lower costs reflect strong cost performance driven by consumption
efficiencies at Escondida, favourable inventory movements across
our assets in line with mine plans and planned rebuilds for operational
stability following drawdowns in the prior year, supported by further
reductions in overheads, partially offset by increased planned
maintenance activities at a number of assets during the year. This
was offset by higher business development costs in Mexico following
the successful exploration program at Trion.
A stronger US dollar against the Australian dollar and Chilean peso
increased Underlying EBITDA by US$954 million during the period.
Non-cash reflects higher deferred stripping depletion and lower
overburden movement in line with mine plan at Escondida,
decreasing Underlying EBITDA by US$460 million.
Higher ceased and sold operations reflects higher closure and
rehabilitation provision adjustments for closed mines of
US$362 million, sale of our interests in the Bruce and Keith oil
and gas fields in the prior period, and cessation of operations
at Minerva in FY2020.
Other includes the favourable impacts from the first year of
application of IFRS 16 Leases offset by lower profits from our equity
accounted investments (Antamina and Cerrejón) due to lower
prices and COVID-19 related outages.
Cash flow
The following table provides a summary of the Consolidated Cash Flow Statement contained in section 5.1.4 to show the key sources and
uses of cash during the periods presented:
Year ended 30 June
Cash generated from operations
Dividends received
Net interest paid
Proceeds/(settlements) of cash management related instruments
Net taxation paid
Net operating cash flows from Continuing operations
Net operating cash flows from Discontinued operations
Net operating cash flows
Purchases of property, plant and equipment
Exploration expenditure
Subtotal: Capital and exploration expenditure
Exploration expenditure expensed and included in operating cash flows
Net investment and funding of equity accounted investments
Other investing activities
Net investing cash flows from Continuing operations
Net investing cash flows from Discontinued operations
Proceeds from divestment of Onshore US, net of its cash
Net investing cash flows
Net repayment of interest bearing liabilities
Share buy-back – BHP Group Limited
Dividends paid
Dividends paid to non-controlling interests
Other financing activities
Net financing cash flows from Continuing operations
Net financing cash flows from Discontinued operations
Net financing cash flows
Net (decrease)/increase in cash and cash equivalents
Net (decrease)/increase in cash and cash equivalents from Continuing operations
Net increase/(decrease) in cash and cash equivalents from Discontinued operations
2020
US$M
22,268
137
(840)
85
(5,944)
15,706
−
15,706
(6,900)
(740)
(7,640)
517
(618)
125
(7,616)
−
−
(7,616)
(1,690)
−
(6,876)
(1,043)
(143)
(9,752)
−
(9,752)
(1,662)
(1,662)
−
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)
Net operating cash inflows of US$15.7 billion decreased by
US$2.2 billion. This reflects weaker commodity prices in coal
and petroleum and field and grade declines, partially offset by
stronger iron ore prices and strong underlying performance across
the portfolio.
Net investing cash outflows of US$7.6 billion increased by
US$10.2 billion. This reflects the proceeds from the divestment of
Onshore US, net of its cash in FY2019, partially offset by continued
investment in high-return latent capacity projects and investment
in South Flank, Spence Growth Option and Mad Dog 2 in FY2020.
For more information and a breakdown of
capital and exploration expenditure on a
commodity basis, refer to section 1.11.
Net financing cash outflows of US$9.8 billion decreased by
US$10.8 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), lower repayments of interest bearing
liabilities of US$0.8 billion and lower dividends to non-controlling
interests of US$0.2 billion, partially offset by higher dividends
to BHP shareholders in FY2020 of US$0.7 billion.
For more information, refer to section 1.10.3
and note 19 ‘Net debt’ in section 5.
Underlying Return on Capital Employed (ROCE) of 16.9 per cent
increased by 1.0 per cent (FY2019: 15.9 per cent) reflecting the
impact of the sale of Onshore US in FY2018. The Return on Capital
Employed in FY2020 includes US$12.5 billion of Assets under
Construction (average of ending balances for FY2020 of
US$13.8 billion and FY2019 of US$11.1 billion) including major
projects in Potash, Spence Growth Option, South Flank and
Mad Dog which are not yet producing their planned contribution
to earnings.
For more information on Assets under
Construction refer to note 11 ‘Property,
plant and equipment’ in section 5.
98 BHP Annual Report 2020
1.10.3 Debt and sources of liquidity
Our policies on debt and liquidity management have the
following objectives:
• 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 FY2020, Interest bearing liabilities were US$27.0 billion
(FY2019: US$24.8 billion) and Cash and cash equivalents were
US$13.4 billion (FY2019: US$15.6 billion). This resulted in net debt (1)
of US$12.0 billion, which represented an increase of US$2.6 billion
compared with the net debt position at 30 June 2019 primarily due
to the application of IFRS 16. Gearing, which is the ratio of net debt
to net debt plus net assets, was 18.7 per cent at 30 June 2020,
compared with 15.4 per cent at 30 June 2019.
During FY2020, the Group decided not to refinance US$0.9 billion
of Group-level debt (consisting of an A$1.0 billion bond and the
remaining amount of the €600 million bond that matured). This
extended BHP’s average debt maturity profile and enhanced BHP’s
capital structure.
At the subsidiary level, Escondida refinanced US$0.5 billion
of maturing long-term debt.
Funding sources
No new Group-level debt was issued in FY2020 and debt that matured during the year was not refinanced.
Our Group-level borrowing facilities are not subject to financial covenants. Certain specific financing facilities in relation to specific assets
are the subject of financial covenants that vary from facility to facility, but this would be considered normal for such facilities. In addition to
the Group’s uncommitted debt issuance programs, we hold the following committed standby facilities:
Revolving credit facility (2)
Total financing facilities
Facility available
2020
US$M
5,500
5,500
Drawn
2020
US$M
–
–
Undrawn
2020
US$M
Facility available
2019
US$M
5,500
5,500
6,000
6,000
Drawn
2019
US$M
–
–
Undrawn
2019
US$M
6,000
6,000
(1) We use Alternative Performance Measures to reflect the underlying financial performance of BHP, refer to section 6.1. For the definition and method of calculation
of Alternative Performance Measures, refer to section 6.1.1. For the composition of net debt, refer to note 19 ‘Net debt’ in section 5.
(2) BHP’s revolving credit facility was refinanced on 10 October 2019 and is due to mature on 10 October 2024. The committed US$5.5 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$5.5 billion. As at 30 June 2020, US$ nil commercial paper was drawn (FY2019: US$ nil), therefore US$5.5 billion of committed facility was available to use
(FY2019: US$6.0 billion). A commitment fee is payable on the undrawn balance and an interest rate comprising an interbank rate plus a margin applies to any drawn
balance. The agreed margins are typical for a credit facility extended to a company with BHP’s credit rating.
For more information on the maturity profile of our debt
obligations and details of our standby and support agreements,
refer to note 22 ‘Financial risk management’ in section 5.
In BHP’s opinion, working capital is sufficient for its present requirements. BHP’s credit ratings are currently A2/P-1 outlook stable
(Moody’s – long-term/short-term) and A/A-1 outlook stable (Standard & Poor’s – long-term/short-term). A credit rating is not a
recommendation to buy, sell or hold securities and may be subject to suspension, reduction or withdrawal at any time by an assigning
rating agency. Any rating should be evaluated independently of any other information.
The following table expands on the net debt, to provide more information on the cash and non-cash movements in FY2020.
Year ended 30 June
Net debt at the beginning of the financial year
Net operating cash flows
Net investing cash flows
Free cash flow
Carrying value of interest bearing liability repayments
Net settlements of interest bearing liabilities and debt related instruments
Share buy-back – BHP Group Limited
Dividends paid
Dividends paid to non-controlling interests
Other financing activities (1)
Other cash movements
Fair value adjustment on debt (including debt related instruments) (2)
Foreign exchange impacts on cash (including cash management related instruments)
IFRS 16 leases taken on at 1 July
Lease additions
Others
2020
US$M
15,706
(7,616)
1,533
(1,984)
–
(6,876)
(1,043)
(143)
88
(26)
(1,778)
(363)
(96)
(9,446)
2019
US$M
17,871
2,607
(11,605)
8,090
20,478
2,351
(2,781)
(5,220)
(11,395)
(1,198)
(201)
(8,513)
(18,444)
44
94
−
–
(13)
Non-cash movements
Net debt at the end of the financial year (3)
(2,175)
(12,044)
125
(9,446)
(1) Other financing activities mainly comprises purchases of shares by Employee Share Option Plan trusts of US$143 million (FY2019: US$188 million).
(2) 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 22 ‘Financial risk management’ in section 5.
(3) Includes US$1,633 million of additional leases due to the implementation of IFRS 16.
1.10.4 Alternative Performance Measures
We use various Alternative Performance Measures (APMs) to reflect our underlying performance.
These APMs 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 6.1, which is incorporated into the Strategic Report by reference, includes our APMs and Section 6.1.1 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 or 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.
BHP Annual Report 2020 99
Governance at BHPRemuneration ReportDirectors’ ReportFinancial StatementsAdditional informationShareholder informationStrategic Report1 1.11 Performance by commodity
Management believes the following financial information presented
by commodity provides a meaningful indication of the underlying
financial performance of the assets, including equity accounted
investments, of each reportable segment. Information relating to
assets that are accounted for as equity accounted investments is
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.
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 6.1. For the definition and
method of calculation of Alternative Performance Measures,
refer to section 6.1.1.
For more information as to the statutory
determination of our reportable segments,
refer to note 1 ‘Segment reporting’ in section 5.
Unit costs (1) 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.
1.11.1 Petroleum
Detailed below is financial information for our Petroleum assets excluding Onshore US for FY2019 and an analysis of Petroleum’s financial
performance for FY2020 compared with FY2019.
Revenue (4)
Underlying
EBITDA
Revenue (4)
Underlying
EBITDA
Total Petroleum statutory result
4,070
2,207
1,457
Year ended 30 June 2020
US$M
Australia Production Unit (1)
Bass Strait
North West Shelf
Atlantis
Shenzi
Mad Dog
Trinidad/Tobago
Algeria
Exploration
Other (2)
Total Petroleum from Group production
Third party products
Total Petroleum
Adjustment for equity accounted investments (3)
Year ended 30 June 2019
Restated
US$M
Australia Production Unit (1)
Bass Strait
North West Shelf
Atlantis
Shenzi
Mad Dog
Trinidad/Tobago
Algeria
Exploration
Other (2)
Total Petroleum from Group production
Third party products
Total Petroleum
Adjustment for equity accounted investments (3)
361
1,102
1,076
561
277
216
191
159
−
104
4,047
39
4,086
(16)
507
1,237
1,657
979
540
319
287
258
−
153
5,937
10
5,947
2,212
1,460
(2)
−
2,210
1,460
(3)
(3)
D&A
197
449
260
175
139
64
46
12
41
77
D&A
192
427
298
261
151
59
56
26
58
55
253
761
731
431
174
164
92
111
(394)
(111)
332
915
1,220
824
437
268
181
201
(388)
73
Underlying
EBIT
Net operating
assets (5)
Capital
expenditure
Exploration
gross (6)
Exploration
to profit (7)
56
312
471
256
35
100
46
99
(435)
(188)
752
(2)
750
−
750
289
1,796
1,261
1,061
550
1,551
323
60
1,227
129
8,247
−
8,247
−
8,247
6
87
130
197
45
375
46
16
(1)
8
909
−
909
−
909
564
–
564
−
564
394
–
394
−
394
Underlying
EBIT
Net operating
assets (5)
Capital
expenditure
Exploration
gross (6)
Exploration
to profit (7)
140
488
922
563
286
209
125
175
(446)
18
513
2,217
1,371
1,060
658
1,232
302
49
1,039
(109)
8,332
−
8,332
−
8,332
13
32
106
31
30
362
23
7
−
41
645
−
645
−
645
685
–
685
−
685
409
–
409
−
409
4,063
1,583
2,480
−
−
−
4,063
1,583
2,480
(17)
(2)
(2)
−
Total Petroleum statutory result
5,930
4,061
1,581
2,480
(1) Australia Production Unit includes Macedon, Pyrenees and Minerva.
(2) 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.
(3) Total Petroleum statutory result revenue excludes US$16 million (2019: US$17 million) revenue related to the Caesar oil pipeline and the Cleopatra gas pipeline.
Total Petroleum statutory result Underlying EBITDA includes US$3 million (2019: US$2 million) D&A related to the Caesar oil pipeline and the Cleopatra gas pipeline.
(4) Total Petroleum statutory result revenue includes: crude oil US$2,033 million (2019: US$3,171 million), natural gas US$980 million (2019: US$1,259 million), LNG
US$774 million (2019: US$1,179 million), NGL US$198 million (2019: US$263 million) and other US$85 million (2019: US$58 million) which includes third party products.
(5) Refer to section 6.1 for a reconciliation of Net operating assets to Net assets and section 6.1.1 for the definition and method of calculation of Net operating assets.
(6) Includes US$170 million of capitalised exploration (2019: US$297 million).
(7) Includes US$ nil of exploration expenditure previously capitalised, written off as impaired (included in depreciation and amortisation) (2019: US$21 million).
(1) For more information on Alternative Performance Measures, refer to section 6.1.
100 BHP Annual Report 2020
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$49.53 per
barrel (FY2019: US$66.59 per barrel). Crude oil prices dropped
significantly in the second half of FY2020 due to a brief OPEC
and its non-member allies’ (‘OPEC+’) price war in March 2020
and COVID-19, with Brent falling below US$20/bbl in April 2020 at
the height of the global lockdowns and peak demand destruction.
The prices have partially recovered since then mainly due to swift
output cuts from OPEC+ and a partial recovery in mobility. Very
large storage builds flipped to draws in late May 2020, which
allowed benchmark prices to move up to approximately US$40/
bbl. Demand is expected to recover to pre-COVID-19 levels no
earlier than the end of CY2021. In our longer-term outlook, we
believe oil will be attractive, even under a plausible low case,
for a considerable time to come.
Liquefied natural gas
Our average realised sales price for LNG was US$7.26 per Mcf
(FY2019: US$9.43 per Mcf). The Japan-Korea Marker (JKM) price
for LNG performed poorly in FY2020, reflecting a deepening
oversupply situation. JKM hit an all-time low in April 2020 as a
slowdown in Asian demand growth due to warm weather and
COVID-19 and large increments of new supply coming online
weighed on the market. Longer term, the commodity offers a
combination of systematic base decline and an attractive demand
trajectory. However, gas resource is abundant and liquefaction
infrastructure comes with large upfront costs and extended pay
backs. North American exports are expected to provide the
marginal supply across multiple longer-term scenarios for the
LNG industry, with new supply likely to be required to balance the
market in the middle of this decade, or slightly later. Within global
gas, LNG is expected to gain share. Against this backdrop, LNG
assets advantaged by their proximity to existing infrastructure
or customers, or both, will be attractive.
Production
Total Petroleum production for FY2020 decreased by 10 per cent
to 109 MMboe.
Crude oil, condensate and natural gas liquids production
decreased by 11 per cent to 49 MMboe due to the impacts of
Tropical Storm Barry in the Gulf of Mexico, Tropical Cyclone
Damien at our North West Shelf operations, maintenance at Atlantis
and natural field decline across the portfolio. Weaker market
conditions, including impacts from COVID-19, also contributed to
lower volumes in the June 2020 quarter. This decline was partially
offset by higher uptime at Pyrenees following the 70 day dry dock
maintenance program during the prior year.
Natural gas production decreased by 9 per cent to 360 bcf,
reflecting a decrease in both production and tax barrels (in
accordance with the terms of our Production Sharing Contract)
due to weaker market conditions in Trinidad and Tobago, impacts
of maintenance and Tropical Cyclone Damien at North West Shelf
and natural field decline across the portfolio.
For more information on individual asset production
in FY2020, FY2019 and FY2018, refer to section 6.3.
Financial results
Petroleum revenue for FY2020 decreased by US$1.9 billion to
US$4.1 billion. Gulf of Mexico, which includes Atlantis, Shenzi
and Mad Dog, decreased by US$784 million to US$1.1 billion.
In Australia, Bass Strait and North West Shelf collectively decreased
by US$716 million to US$2.2 billion. The Trinidad Production Unit
decreased by US$96 million to US$0.2 billion while the Australian
Production Unit, which includes Macedon, Pyrenees and Minerva,
decreased by US$146 million to US$0.4 billion.
Underlying EBITDA for Petroleum decreased by US$1.9 billion
to US$2.2 billion. Price impacts, net of price-linked costs,
decreased Underlying EBITDA by US$1.1 billion. Controllable
cash costs increased by US$30 million reflecting higher business
development costs in Mexico following the successful exploration
program at Trion, partially offset by lower maintenance activity
at our Australian assets. Ceased and sold operations decreased
by US$76 million reflecting the sale of our interests in the Bruce
and Keith oil and gas fields in the prior period, and cessation
of operations at Minerva in FY2020. Lower volumes decreased
Underlying EBITDA by US$588 million mainly due to natural field
decline across the portfolio, a decrease in tax barrels at Trinidad
and Tobago, weaker market conditions, the impacts from Tropical
Cyclone Barry and Tropical Cyclone Damien and planned
maintenance at Atlantis. Other items such as exchange rate
and inflation also negatively impacted Underlying EBITDA by
US$27 million.
Petroleum unit costs decreased by 8 per cent to US$9.74 per
barrel of oil equivalent due to a reduction in price-linked costs,
cost efficiencies and lower maintenance activities at our Australian
operations due to COVID-19, partially offset by lower volumes.
The calculation of conventional petroleum unit costs is set out
in the table below.
Petroleum unit costs
US$M
Revenue
Underlying EBITDA
Gross costs
Less: exploration expense (1)
Less: freight
Less: development and evaluation
Less: other (2)
Net costs
Production (MMboe, equity share)
Cost per Boe (US$) (3)
FY2020
4,070
2,207
1,863
394
110
166
131
1,062
109
9.74
FY2019
5,930
4,061
1,869
388
152
46
8
1,275
121
10.54
(1) Exploration expense represents conventional petroleum’s share of total
exploration expense.
(2) Other includes non-cash profit on sales of assets, inventory movements, foreign
exchange, provision for onerous lease contracts and the impact from the
revaluation of embedded derivatives in the Trinidad and Tobago gas contract.
(3) FY2020 based on an average exchange rate of AUD/USD 0.67.
Delivery commitments
We have delivery commitments of natural gas and LNG of
approximately 1 billion cubic feet through FY2034 (83 per cent
Australia and Asia, 17 per cent others), and crude and condensate
commitments of 7 million barrels through FY2021 (57 per cent
United States, 35 per cent Australia and Asia, 8 per cent others).
We have sufficient proved reserves and production capacity to fulfil
these delivery commitments.
We have obligation commitments of US$43 million for contracted
capacity on transportation pipelines and gathering systems
through FY2025, 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 2020 was as follows:
Exploratory wells Development wells
Total
Gross
Net (1) Gross
Net (1)
Gross
Net (1)
Australia
United States
Other (2)
Total
−
−
−
−
−
−
−
−
2
26
1
29
1
8
0
9
2
26
1
29
1
8
0
9
(1) Represents our share of the gross well count.
(2) Other is comprised of Algeria.
BHP Annual Report 2020 101
Governance at BHPRemuneration ReportDirectors’ ReportFinancial StatementsAdditional informationShareholder informationStrategic Report1 1.11.1 Petroleum continued
Conventional petroleum
BHP’s net share of capital development expenditure in FY2020,
which is presented on a cash basis within this section, was
US$909 million (FY2019: US$645 million). While the majority
of the expenditure in FY2020 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, Algeria and Trinidad and Tobago assets.
Australia
BHP’s net share of capital development expenditure in FY2020
was US$223 million. The expenditure was primarily related to:
• Scarborough gas field development
• North West Shelf: Karratha Gas Plant refurbishment projects
and external corrosion compliance
• Bass Strait: West Barracouta subsea tie back development
and Snapper A21a development project
Gulf of Mexico
BHP’s net share of capital development expenditure in FY2020
was US$617 million. The expenditure was primarily related to:
• Atlantis: execution of approved development on Atlantis Phase 3
Project and Brownfield subsea tie back to existing Atlantis facility
in Gulf of Mexico
• Mad Dog: execution phase of Phase 2 development
Trinidad and Tobago
BHP’s net share of capital development expenditure in FY2020
was US$46 million. The expenditure was primarily related to:
• Ruby: execution of approved development of Block 3a resources
in the Ruby and Delaware reservoirs
Conventional petroleum exploration and appraisal
The majority of the expenditure incurred in FY2020 was in our
focus areas, including Gulf of Mexico (US and Mexico) and Trinidad
and Tobago. We also incurred expenditure in Canada.
Access
In the US Gulf of Mexico, we expanded our acreage positions
through lease sale participation. In FY2020, the regulator awarded
two blocks (1) in Green Canyon, central Gulf of Mexico and 19 blocks (2)
in the western Gulf of Mexico. In July 2020, the regulator awarded
two blocks (3) in Green Canyon, central Gulf of Mexico and three
blocks (4) in the western Gulf of Mexico.
In Barbados, the offshore exploration licences for the Carlisle Bay
and Bimshire blocks were declared effective as of 27 January 2020.
The first exploration phase is a three-year program with commitment
of seismic data.
Exploration program expenditure details
Our gross expenditure on exploration was US$564 million
in FY2020, of which US$394 million was expensed.
Exploration and appraisal wells drilled, or in the process of drilling, during the year included:
Well
Trion-3DEL
Boom-1
Carnival-1
Location
Mexico
Block
AE-0093
Target
BHP equity
Spud date
Water depth Total well depth Status
Oil
60%
(BHP operator)
9 July 2019
2,596 m
4,615 m
Hydrocarbons encountered; plugged
and abandoned
Trinidad & Tobago
Block 14
Gas
70%
(BHP operator)
28 August
2019
2,207 m
5,035 m
Hydrocarbons encountered; plugged
and abandoned
Trinidad and Tobago
Block 14
Gas
70%
(BHP operator)
30 September
2019
2,119 m
4,347 m
Dry hole; plugged and abandoned
In Trinidad and Tobago, we drilled two exploration wells in our
northern licences and completed Phase 4 of our deepwater drilling
campaign in the first half of FY2020. The campaign included two
wells; Boom-1 encountered hydrocarbons and Carnival-1 was a dry
hole. Technical work is ongoing to evaluate an appraisal program,
development planning and commercial options for the discoveries
in the Northern Gas play.
In Mexico, we drilled the Trion 3DEL appraisal well in the first half
of FY2020 where we encountered oil in the reservoirs up dip from
all previous well intersections. The results provided greater
confidence around the scale, and quality, of the resource and we
now have sufficient information to underpin development planning.
In Eastern Canada, technical evaluation is ongoing on our two
licences in the Orphan Basin to support exploration well planning.
For information on conventional petroleum
exploration, refer to section 1.5.3.
Unit costs are expected to be between US$11 and US$12 per barrel
(based on an average exchange rate of AUD/USD 0.70) in FY2021
reflecting the impact of lower volumes and forecasted lower
price-linked costs. 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.
Petroleum capital and exploration expenditure of approximately
US$1.6 billion is now planned in FY2021 as a result of a delay of
the Scarborough gas development and several small and medium
sized projects, and an approximately US$250 million reduction
in our exploration and appraisal program.
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.
Outlook
In our conventional business, volumes are expected to be
between 95 and 102 MMboe in FY2021 as a result of expected
lower gas demand in Eastern Australia and Trinidad and Tobago,
the previously announced delay of several small and medium
sized projects with short lifecycles and natural field decline across
the portfolio.
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$0.2 billion). Results from the
Onshore US assets are disclosed as Discontinued operations.
For further information, refer to note 28
‘Discontinued operations’ in section 5.
(1) Leases were awarded in blocks: GC124 and GC168.
(2) Leases were awarded in blocks: GB721, GB630, GB574, GB575, GB619, GB676, GB677, EB655, EB656, EB701, GB762, GB805, GB806, GB851, GB852, GB895, GB672,
GB716 and GB760.
(3) Leases were awarded in blocks: GC80 and GC123.
(4) Leases were awarded in blocks: AC36, AC80 and AC81.
102 BHP Annual Report 2020
1.11.2 Copper
Detailed below is financial information for our Copper assets for FY2020 and FY2019 and an analysis of Copper’s financial performance
for FY2020 compared with FY2019.
Year ended 30 June 2020
US$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
6,719
1,395
832
1,463
−
10,409
1,089
11,498
Adjustment for equity accounted investments (5)
(832)
Total Copper statutory result
10,666
3,535
599
468
212
(202)
4,612
41
4,653
(306)
4,347
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
Adjustment for equity accounted investments (5)
Total Copper statutory result
6,876
1,502
1,144
1,351
−
10,873
1,109
11,982
(1,144)
10,838
3,384
701
723
273
(315)
4,766
116
4,882
(332)
4,550
D&A
1,143
316
114
291
58
1,922
−
1,922
(165)
1,757
D&A
1,245
381
108
331
8
2,073
−
2,073
(110)
1,963
Underlying
EBIT
Net
operating
assets (6)
Capital
expenditure
Exploration
gross
Exploration
to profit
2,392
283
354
(79)
(260)
12,013
3,187
1,453
7,651
103
2,690
24,407
41
−
2,731
24,407
(141)
−
2,590
24,407
919
955
205
538
22
2,639
−
2,639
(205)
2,434
62
(8)
54
57
(3)
54
Underlying
EBIT
Net
operating
assets (6)
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
(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$832 million (2019: US$1,144 million) revenue related to Antamina. Total Copper statutory result Underlying
EBITDA includes US$165 million (2019: US$110 million) D&A and US$141 million (2019: US$222 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$205 million (2019: US$229 million) related to
Antamina and US$ nil (2019: US$1 million) related to SolGold. Exploration gross excludes US$8 million (2019: US$4 million) related to SolGold of which US$3 million
(2019: US$3 million) was expensed.
(6) Refer to section 6.1 for a reconciliation of Net operating assets to Net assets and section 6.1.1 for the definition and method of calculation of Net operating assets.
Key drivers of Copper’s financial results
Price overview
Our average realised sales price for FY2020 was US$2.50 per pound
(FY2019: US$2.62 per pound). Copper prices fell sharply in the early
stages of the COVID-19 pandemic but have since rebounded, first
on improving sentiment towards pro-growth assets, and more
recently on news of COVID-19 related supply-side challenges. In the
medium term, we believe that the effect of the pandemic will be to
delay the timing of the anticipated structural deficit for copper by
one or two years from prior expectations. Longer term, traditional
end-use demand is expected to be solid, while broad exposure to
the electrification mega-trend offers attractive upside. Our view is
that the price setting marginal tonne a decade from now will come
from either a lower-grade brownfield expansion in a lower-risk
jurisdiction, or a higher-grade greenfield project in a higher-risk
jurisdiction. Prices are expected to rise on the back of grade
decline, resource depletion, increased input costs, water constraints
and a scarcity of high-quality future development opportunities
after a poor decade for industry-wide exploration.
Production
Total Copper production for FY2020 increased by 2 per cent to
1,724 kt.
Escondida copper production increased by 4 per cent to 1,185 kt,
with record June 2020 quarter concentrator throughput of 382 ktpd
lifting annual concentrator throughput to a record 371 ktpd.
This offsets the impact of a 3 per cent decline in copper grade,
stoppages associated with the social unrest in Chile (7 kt impact)
and a reduced workforce due to COVID-19 preventative measures.
Pampa Norte copper production decreased by 2 per cent to 243 kt,
with strong operating performance offset by grade decline of
approximately 14 per cent.
Olympic Dam copper production increased by 7 per cent to 172 kt
supported by solid underground mine performance with strong
development metres achieved, record grade and the prior period
acid plant outage. This was partially offset by the impact of planned
preparatory work undertaken in the September 2019 quarter related
to the replacement of the refinery crane and unplanned downtime
at the smelter during the March 2020 quarter.
Antamina copper production decreased by 15 per cent to 125 kt and
zinc production decreased by 10 per cent to 88 kt, reflecting lower
copper head grades and the impacts of operating with a reduced
workforce and a six-week shutdown during the June 2020 quarter
in response to COVID-19.
For more information on individual asset production
in FY2020, FY2019 and FY2018, refer to section 6.3.
BHP Annual Report 2020 103
Governance at BHPRemuneration ReportDirectors’ ReportFinancial StatementsAdditional informationShareholder informationStrategic Report1 Outlook
Total Copper production of between 1,480 and 1,645 kt is expected
in FY2021. Escondida production of between 940 and 1,030 kt is
expected in FY2021, as a result of COVID-19 impacts and a decline
in copper concentrator feed grade of approximately 4 per cent.
Production at Pampa Norte is expected to be between 240 and
270 kt in FY2021, reflecting the reduced operational workforce
due to COVID-19, the start-up of the Spence Growth Option project
and expected grade decline of approximately 7 per cent.
At Olympic Dam, production is expected to be between 180
and 205 kt in FY2021.
Escondida unit costs are expected to be between US$1.00
and US$1.25 per pound (based on an average exchange rate
of USD/CLP 769) in FY2021 reflecting lower volumes partially
offset by lower stripping costs. In the medium term, unit costs have
been revised to less than US$1.10 per pound reflecting updated
guidance exchange rates (based on an average exchange rate of
USD/CLP 769), with expected higher power and water costs offset
by further operational efficiency improvements and optimised
maintenance strategies.
1.11.2 Copper continued
Financial results
Copper revenue decreased by US$0.2 billion to US$10.7 billion
in FY2020. Escondida revenue decreased by US$0.2 billion
to US$6.7 billion.
Underlying EBITDA for Copper decreased by US$0.2 billion to
US$4.3 billion. Price impacts, net of price-linked costs, decreased
Underlying EBITDA by US$0.3 billion. Higher volumes increased
Underlying EBITDA by US$112 million mainly driven by record
concentrator throughput at Escondida, offset by expected lower
concentrator head grade and lower by-product volumes. Higher
copper volumes at Olympic Dam were supported by solid
underground mine performance, record grade and the prior period
acid plant outage. Increased volumes at Spence reflecting greater
operating stability partially offset by expected grade decline.
Controllable cash costs decreased by US$221 million, due to strong
cost performance driven by consumption efficiencies at Escondida,
and end-of-negotiation bonus payments at Escondida and Cerro
Colorado in the prior year. A favourable inventory movement at
Escondida due to higher ore movement in line with planned
development phase of the mines was partially offset by a higher
inventory drawdown at Spence and a lower build of inventory at
Olympic Dam due to the prior period outages, and the Olympic
Dam acid plant outage self-insurance recoveries in the prior period.
Non-cash costs increased by US$451 million due to increased
deferred stripping depletion at Escondida in line with planned
development phase of the mines. Other items such as exchange
rate and net of inflation, positively impacted Underlying EBITDA
by US$210 million.
Unit costs at Escondida decreased by 11 per cent to US$1.01 per
pound, reflecting record concentrator throughput, strong cost
management and favourable inventory and exchange rate
movements. This decrease was achieved despite the impact
of a 3 per cent decline in copper grade, lower by-product credits,
higher desalinated water costs and higher deferred stripping costs.
Escondida unit costs
US$M
Revenue
Underlying EBITDA
Gross costs
Less: by-product credits
Less: freight
Net costs
Sales (kt)
Sales (Mlb)
Cost per pound (US$) (1) (2)
FY2020
FY2019
6,719
3,535
3,184
407
178
2,599
1,164
2,567
1.01
6,876
3,384
3,492
490
149
2,853
1,131
2,493
1.14
(1) FY2020 based on average exchange rates of USD/CLP 771.
(2) FY2020 excludes COVID-19 related costs of US$0.01 per pound that are
reported as exceptional items.
104 BHP Annual Report 2020
1.11.3 Iron Ore
Detailed below is financial information for our Iron Ore assets for FY2020 and FY2019 and an analysis of Iron Ore’s financial performance
for FY2020 compared with FY2019.
Underlying
EBIT
Net
operating
assets (4)
Capital
expenditure
Exploration
gross (5)
Exploration
to profit
Year ended 30 June 2020
US$M
Western Australia Iron Ore
Samarco (1)
Other (2)
Total Iron Ore from Group production
Third party products (3)
Total Iron Ore
Revenue
Underlying
EBITDA
20,663
−
119
20,782
15
14,508
−
53
14,561
(7)
D&A
1,606
−
24
1,630
−
12,902
−
29
20,177
(2,045)
268
12,931
18,400
(7)
−
20,797
14,554
1,630
12,924
18,400
Adjustment for equity accounted investments
−
−
−
−
−
Total Iron Ore statutory result
20,797
14,554
1,630
12,924
18,400
2,326
−
2
2,328
−
2,328
−
2,328
87
−
87
47
−
47
Year ended 30 June 2019
US$M
Western Australia Iron Ore
Samarco (1)
Other (2)
Total Iron Ore from Group production
Third party products (3)
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
−
Total Iron Ore statutory result
17,255
11,129
D&A
1,707
−
25
1,732
−
1,732
−
1,732
Underlying
EBIT
Net
operating
assets (4)
Capital
expenditure
Exploration
gross (5)
Exploration
to profit
9,346
−
37
9,383
14
19,208
(1,908)
186
17,486
−
9,397
17,486
−
−
9,397
17,486
1,600
−
11
1,611
−
1,611
−
1,611
93
−
93
41
−
41
(1) 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.
(2) Predominantly comprises divisional activities, towage services, business development and ceased operations.
(3) Includes inter-segment and external sales of contracted gas purchases.
(4) Refer to section 6.1 for a reconciliation of Net operating assets to Net assets and section 6.1.1 for the definition and method of calculation of Net operating assets.
(5) Includes US$40 million of capitalised exploration (2019: US$52 million).
Key drivers of Iron Ore’s financial results
Price overview
Iron Ore’s average realised sales price for FY2020 was US$77.36
per wet metric tonne (wmt) (FY2019: US$66.68 per wmt). The Platts
62% Fe Iron Ore Fines price index has been elevated since the
Brumadinho tailings dam tragedy in Brazil first disrupted the market
in late January 2019. In the last half year, the combination of strong
Chinese pig iron production and constrained exports from Brazil
have more than offset record shipments from Australia and
weakness in ex-China regions. Prices can be expected to ease as
Brazilian supply recovers. In the long term, prices are expected to
be determined by high cost production, on a value-in-use adjusted
basis, from Australia or Brazil. Quality differentiation will remain a
factor in determining iron ore prices. China’s demand for iron ore
is expected to be lower than today in the second half of the 2020s
as crude steel production plateaus and the scrap-to-steel ratio
rises. At the same time, the likelihood of new supply of iron ore
from West Africa has increased. This implies that it will be even
more important to create competitive advantage and to grow
value through driving exceptional operational performance.
Production
Total Iron Ore production from WAIO for FY2020 increased by
4 per cent to 248 Mt (281 Mt on a 100 per cent basis).
WAIO achieved record production, with higher volumes reflecting
record production at Jimblebar and Yandi. Weather impacts from
Tropical Cyclone Blake and Tropical Cyclone Damien were offset
by strong performance across the supply chain, with significant
improvements in productivity and reliability following a series
of targeted maintenance programs over the past four years.
For more information on individual asset production
in FY2020, FY2019 and FY2018, refer to section 6.3.
Financial results
Total Iron Ore revenue increased by US$3.5 billion to
US$20.8 billion in FY2020.
Underlying EBITDA for Iron Ore increased by US$3.4 billion
to US$14.6 billion including favourable price impacts, net of
price-linked costs, of US$2.4 billion. Higher volumes increased
Underlying EBITDA by US$523 million driven by record production
at Jimblebar and Yandi, and significant improvements in
productivity and reliability across the supply chain following
a series of targeted maintenance programs over the past four
years. This was partially offset by the impacts from Tropical
Cyclone Blake and Tropical Cyclone Damien.
Other items such as exchange rate, inflation and one-off items
(including prior year impact of Tropical Cyclone Veronica) positively
impacted Underlying EBITDA by US$516 million.
WAIO unit costs decreased by 11 per cent to US$12.63 per tonne
reflecting record volumes following strong performance and
continued productivity improvements across the supply chain
and favourable exchange movements. The calculation of WAIO
unit costs is set out in the table below.
WAIO unit costs
US$M
Revenue
Underlying EBITDA
Gross costs
Less: freight
Less: royalties
Net costs
Sales (kt, equity share)
Cost per tonne (US$) (1) (2)
FY2020
20,663
14,508
6,155
1,459
1,531
3,165
250,598
12.63
FY2019
17,066
11,053
6,013
1,308
1,322
3,383
238,836
14.16
(1) FY2020 based on an average exchange rate of AUD/USD 0.67.
(2) FY2020 excludes COVID-19 related costs of US$0.30 per tonne (including
US$0.04 per tonne of demurrage) that are reported as exceptional items.
Outlook
WAIO production of between 244 and 253 Mt, or between 276
and 286 Mt on a 100 per cent basis, is expected in FY2021.
WAIO unit costs are expected to be between US$13 and US$14 per
tonne (based on an exchange rate of AUD/USD 0.70). In the medium
term, we expect to lower our unit costs to less than US$13 per tonne
(based on an exchange rate of AUD/USD 0.70).
BHP Annual Report 2020 105
Governance at BHPRemuneration ReportDirectors’ ReportFinancial StatementsAdditional informationShareholder informationStrategic Report1 1.11.4 Coal
Detailed below is financial information for our Coal assets for FY2020 and FY2019 and an analysis of Coal’s financial performance for
FY2020 compared with FY2019.
Year ended 30 June 2020
US$M
Queensland Coal
New South Wales Energy Coal (1)
Colombia (1)
Other (2)
Total Coal from Group production
Third party products
Total Coal
Revenue
Underlying
EBITDA
5,357
972
364
−
6,693
−
6,693
1,935
(19)
69
(155)
1,830
−
1,830
(198)
1,632
Adjustment for equity accounted investments (3) (4)
(451)
Total Coal statutory result
6,242
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
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
Underlying
EBIT
Net
operating
assets (5)
Capital
expenditure
Exploration
gross
Exploration
to profit
1,251
(171)
(43)
(166)
871
−
871
(60)
811
8,168
841
776
(276)
9,509
−
9,509
−
9,509
523
73
24
8
628
−
628
(25)
603
22
−
22
9
−
9
Underlying
EBIT
Net
operating
assets (5)
Capital
expenditure
Exploration
gross
Exploration
to profit
3,190
265
173
(112)
3,516
(1)
3,515
(115)
3,400
8,232
920
853
(331)
9,674
−
9,674
−
9,674
549
102
104
5
760
−
760
(105)
655
23
−
23
15
−
15
D&A
684
152
112
11
959
−
959
(138)
821
D&A
532
166
101
2
801
−
801
(134)
667
(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$364 million (2019: US$698 million) revenue related to Cerrejón. Total Coal statutory result Underlying EBITDA includes
US$112 million (2019: US$101 million) D&A and US$25 million (2019: US$70 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$24 million (2019: US$104 million) related to Cerrejón.
(4) Total Coal statutory result revenue excludes US$87 million (2019: US$106 million) revenue related to Newcastle Coal Infrastructure Group. Total Coal statutory result
excludes US$61 million (2019: US$78 million) Underlying EBITDA, US$26 million (2019: US$33 million) D&A and US$35 million (2019: US$45 million) Underlying EBIT
related to Newcastle Coal Infrastructure Group until future profits exceed accumulated losses. Total Coal Capital expenditure excludes US$1 million (2019: US$1 million)
related to Newcastle Coal Infrastructure Group.
(5) Refer to section 6.1 for a reconciliation of Net operating assets to Net assets and section 6.1.1 for the definition and method of calculation of Net operating assets.
Production
Metallurgical coal production for FY2020 decreased by 3 per cent
to 41 Mt (73 Mt on a 100 per cent basis) as a result of significant
wet weather events and geotechnical constraints at South Walker
Creek. At Queensland Coal strong underlying operational
performance, including record underground coal mined at
Broadmeadow and record annual production at Caval Ridge and
Poitrel, was offset by planned major wash plant shutdowns in the
first half of the year and significantly higher rainfall during January
and February 2020 compared with historical averages.
Energy coal production decreased by 16 per cent to 23 Mt. NSWEC
production decreased by 12 per cent to 16 Mt as a result of the
change in product strategy to focus on higher quality products
and unfavourable weather impacts from December 2019 to
February 2020. This was partially offset by a strong performance
in the June 2020 quarter driven by record truck utilisation. Cerrejón
production decreased by 23 per cent to 7 Mt due to a temporary
shutdown during the June 2020 quarter in response to COVID-19,
as well as a focus on higher quality products. The temporary
shutdown lasted for approximately 6 weeks and allowed for
completion of COVID-19 control measures to meet the Colombian
Government’s regulations.
For more information on individual asset production
in FY2020, FY2019 and FY2018, refer to section 6.3.
Key drivers of Coal’s financial results
Price overview
Metallurgical coal
Our average realised sales price for FY2020 was US$143.65 per
tonne for hard coking coal (FY2019: US$199.61 per tonne) and
US$92.59 per tonne for weak coking coal (FY2019: US$130.18 per
tonne). Metallurgical coal prices were under downward pressure for
most of FY2020. Broad-based demand weakness in all major import
regions but China was a weight on the price. This was amplified
during the second half of FY2020 with each of the major importers
going into lockdown. In China, uncertainty regarding the approach
to the volume of coal imports was an additional headwind for the
physical trade at times. In the short term, metallurgical coal still
has to navigate a difficult period as major importing regions
manage their re-openings. COVID-19 permitting, a sustained
improvement is possible in the second half of FY2021. Over time,
premium-quality coking coals are expected to be particularly
advantaged given the drive by steelmakers to improve blast
furnace productivity, partly to reduce emissions intensity.
We believe that a wholesale shift away from blast furnace
steelmaking, which requires metallurgical coal, is still decades
in the future given the high cost of conversion and operation
associated with alternative steelmaking technologies.
Energy coal
Our average realised sales price for FY2020 was US$57.10 per tonne
(FY2019: US$77.90 per tonne). The Newcastle 6,000 kcal/kg price
reached its high for the financial year in July 2019. It then declined
gradually over the course of the first half of FY2020, the rate of
decline accelerated in second half of FY2020 due to lockdowns
in major consumption markets. Tighter import controls at Chinese
ports also contributed to lower prices. Longer term, we expect total
primary energy derived from coal (power and non-power) to expand
at a compound rate slower than that of global population growth.
106 BHP Annual Report 2020
Financial results
Coal revenue decreased by US$2.9 billion to US$6.2 billion
in FY2020.
Underlying EBITDA for Coal decreased by US$2.4 billion to
US$1.6 billion including lower price impacts, net of price-linked
costs, of US$2.1 billion. Controllable cash costs decreased
Underlying EBITDA by US$124 million driven by increased
maintenance costs at Queensland Coal due to major planned
wash plant shutdowns and higher contractor costs due to the
mobilisation of additional equipment to address increased strip
ratio at South Walker Creek and increased contractor stripping
at NSWEC. This was partially offset by favourable inventory
movements as a result of good dragline performance. Lower
volumes decreased Underlying EBITDA by US$374 million as
a result of the change in NSWEC product strategy to focus on
higher-quality products and unfavourable weather impacts from
December 2019 to February 2020. There were lower volumes at
Queensland Coal, as record annual production at Caval Ridge
and Poitrel was offset by planned major wash plant shutdowns
in the first half of the year and significantly higher rainfall across
our operations in January and February 2020.
Queensland Coal unit costs decreased by 3 per cent to
US$68 per tonne, due to a build in inventory, as a result of solid
dragline performance across the majority of operations, and
favourable impacts from exchange rate movements and the
application of IFRS 16 Leases. This was partially offset by lower
volumes due to significant wet weather during the March 2020
quarter and planned maintenance. NSWEC unit costs increased
by 13 per cent to US$57 per tonne, reflecting lower volumes from
the change in product strategy to focus on higher-quality products
and unfavourable weather impacts, and higher stripping costs.
The calculation of Queensland Coal’s and NSWEC’s unit costs
is set out in the table below.
US$M
Revenue
Underlying EBITDA
Gross costs
Less: freight
Less: royalties
Net costs
Sales (kt, equity share)
Cost per tonne (US$) (1) (2)
Queensland Coal unit costs
NSWEC unit costs
FY2020
FY2019
FY2020
FY2019
5,357
1,935
3,422
147
498
2,777
41,086
67.59
7,679
3,722
3,957
156
805
2,996
43,145
69.44
886
(79)
965
−
68
897
15,868
56.53
1,421
353
1,068
−
114
954
19,070
50.03
(1) FY2020 based on an average exchange rate of AUD/USD 0.67.
(2) FY2020 excludes COVID-19 related costs of US$0.37 per tonne and US$0.06 per tonne that are reported as exceptional items relating to Queensland Coal
and NSWEC respectively.
Outlook
Metallurgical coal production is expected to be between 40 and
44 Mt, or 71 and 77 Mt on a 100 per cent basis, in FY2021, a similar
level to the prior year as it reflects an expected deterioration in
market outlook due to the impact of COVID-19. With Blackwater
returning to full capacity towards the end of the September 2020
quarter after flooding in the March 2020 quarter, volumes will be
weighted to the second half of the year. Energy coal production
is expected to be between 22 and 24 Mt in FY2021.
Queensland Coal unit costs are expected to be between
US$69 and US$75 per tonne (based on an average exchange rate
of AUD/USD 0.70) in FY2021, as a result of higher strip ratios and
contractor stripping costs partially offset by higher volumes and
improved productivity. In the medium term, we expect to lower
our unit costs to between US$58 and US$66 per tonne (based on
an exchange rate of AUD/USD 0.70). This reflects reduced volumes
due to a focus on higher quality coals and a market responsive
approach to bringing new tonnes into the markets.
NSWEC unit costs are expected to be between US$55 and US$59
per tonne (based on an average exchange rate of AUD/USD 0.70)
in FY2021. Work is underway at NSWEC to review mine planning
and operating alternatives to structurally reduce costs in the near
term and ensure a viable mining operation which is resilient during
low price cycles.
BHP Annual Report 2020 107
Governance at BHPRemuneration ReportDirectors’ ReportFinancial StatementsAdditional informationShareholder informationStrategic Report1 1.11.5 Other assets
Nickel West
Key drivers of Nickel West’s financial results
Price overview
Our average realised sales price for FY2020 was US$13,860 per
tonne (FY2019: US$12,462 per tonne). The average nickel price in
FY2020 was 13 per cent higher than FY2019, mainly due to higher
prices in the first half of FY2020 (+25 per cent year-on-year). Prices
started moving up in July 2019 as rumours of Indonesia’s ore export
ban being brought forward circulated and, following confirmation
of the ban, moved to their highest monthly average since FY2015
in September 2019. Prices dropped at the beginning of the second
half of FY2020 due to the impact of the COVID-19 pandemic, but
recovered from April onwards, supported by macro and market
sentiment factors. In the near term, we expect Indonesian supply
of nickel pig iron (NPI) to continue to grow, offsetting lost
production in China. Longer term, we believe that nickel will
be a substantial beneficiary of the global electrification mega-trend
and that nickel sulphides will be particularly attractive given the
relatively lower cost of production of battery-suitable class-1 nickel
than for laterites, which will set the long-run nickel price. This view
is supported by our assessment of the likely rate of growth in
electric vehicles and of the likely battery chemistry that will
underpin this.
Production
Nickel West production in FY2020 decreased by 8 per cent to
80 kt due to the major quadrennial maintenance shutdowns at the
Kwinana refinery and the Kalgoorlie smelter, as well as planned
routine maintenance at the concentrators.
For more information on individual asset production
in FY2020, FY2019 and FY2018, refer to section 6.3.
Financial results
Lower production partially offset by higher realised sales prices
resulted in revenue decreasing by US$4 million to US$1.2 billion
in FY2020.
Underlying EBITDA for Nickel West decreased by US$139 million
to a loss of US$37 million in FY2020 reflecting lower volumes
as a result of the major quadrennial maintenance shutdowns
at the refinery and the smelter, as well as costs associated with
the transition and ramp-up of new mines. This decrease was
partially offset by higher prices and favourable inventory and
exchange rate movements.
Potash
Potash recorded an Underlying EBITDA loss of US$127 million
in FY2020, and a loss of US$127 million in FY2019.
1.12 Other information
Application of critical accounting policies, judgements
and estimates
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.
All judgements, estimates and assumptions are based on most
current facts and circumstances and are reassessed on an ongoing
basis, 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. This may materially affect financial results and the
financial position to be reported in future periods.
The Group’s critical accounting policies where significant
judgements, estimates and assumptions applied 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
• leases
• impairment of investments accounted for using the
equity method
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 1.5.4.
A description of how we manage our market risks, including
quantitative and qualitative information about our market risk
sensitive instruments outstanding at 30 June 2020, is contained
in note 22 ‘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 2020
is provided in note 11 ‘Property, plant and equipment’, note 20
‘Leases’ and note 33 ‘Contingent liabilities’ in section 5.1.
Subsidiary information
Information about our significant subsidiaries is included in note 29
‘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 32 ‘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
Chair
Dated: 3 September 2020
108 BHP Annual Report 2020
BHP Annual Report 2020 109
In this section2.1 Chair’s letter2.2 Board of Directors and Executive Leadership Team 2.2.1 Board of Directors 2.2.2 Executive Leadership Team2.3 Role and responsibilities of the Board2.4 Board meetings and attendance2.5 Key Board activities during FY20202.6 Stakeholder engagement 2.6.1 Shareholder engagement 2.6.2 Workforce engagement2.7 Director skills, experience and attributes2.8 Board evaluation2.9 Nomination and Governance Committee Report2.10 Risk and Audit Committee Report2.11 Sustainability Committee Report2.12 Remuneration Committee Report2.13 Risk management governance structure2.14 Management2.15 Our conduct2.16 Market disclosure2.17 Conformance with corporate governance standards2.18 Additional UK disclosureSection 2Governance at BHP ‘In this unprecedented year, through our
people’s steadfast commitment to keeping
our operations running safely, we have
continued to contribute to local economies
through the jobs we create and the taxes
and royalties we pay.’
Ken MacKenzie
Chair
Culture and capability
There is significant opportunity ahead to create more shareholder
value from BHP’s assets. Our approach to developing our culture
and capability is underpinned by building capability in our leaders
consistent with the practices set out in the BHP Operating System.
We invest in our people and capability to support exceptional
performance. We aim to build on our engaged, empowered
and inclusive culture that drives continuous improvement with
strengthened self-accountability, performance edge, a hunger
to learn and improve, and a commercial mindset.
Social value through COVID-19
We recognise that we must work with others to address issues
and opportunities, inside and outside the mine gate, and we
must work with a range of stakeholders to create mutual benefit.
That is consistent with our longer-term interests and those of
our shareholders. Without the overt support of the communities
where we operate and other stakeholders, BHP cannot succeed.
That is why social value is a company priority and is embedded
in our five-year planning process. Our immediate response
to the COVID-19 pandemic clearly demonstrates the positive
contribution we have made this year, where it was needed most.
In this unprecedented year, through our people’s steadfast
commitment to keeping our operations running safely, we have
continued to contribute to local economies through the jobs we
create and the taxes and royalties we pay. This includes employing
hundreds of additional people from the local regions where we
operate, establishing social investment funds to help protect
the most vulnerable from infection, and reducing payment terms
for small, local and Indigenous businesses to support our host
communities around the world.
We also contribute to social value through trust and transparency.
In FY2020, our total direct economic contribution was
US$37.2 billion. This includes payments to supply partners,
wages and employee benefits, dividends to shareholders,
and taxes and royalties to governments.
2.1 Chair’s letter
Dear Shareholder,
We have made good progress on our key priorities of safety,
portfolio, capital discipline, culture and capability and social
value during FY2020.
Safety
Our highest priority is the safety of our employees and contractors
in our operations and the communities in which we operate.
There were no fatalities at our operations in FY2020 and our injury
frequency rates are trending in the right direction. Our focus must
remain on exceptional safety performance and eliminating near
misses with fatality potential.
Nearly five years have passed since the tragic dam failure at
Samarco. We remain committed to the full and fair remediation and
compensation of impacts to the people and the environment in the
Rio Doce region, in a challenging and complex operating context.
Please see section 1.8 for information on our ongoing response.
Portfolio
At BHP, our strategy is to have the best capabilities, commodities
and assets to create long-term shareholder value and high returns.
We continue to invest and plan for the future while at the same time
delivering strong cash returns to our shareholders. Our commodity
portfolio has remained resilient throughout FY2020.
We believe our products will play an essential role in a decarbonising
world, and will help us grow value for many decades to come.
We are confident that we have the right portfolio to meet the
world’s needs today and for the energy transition to a low carbon
future. We are pleased to release the BHP Climate Change Report
this year, which contains a detailed review of our updated portfolio
analysis, comparing two BHP planning cases; a non-linear, higher
temperature Climate Crisis scenario, and a new 1.5°C scenario,
as well as a set of challenging targets and goals for emissions
reduction across our business and value chain.
Capital discipline
BHP’s strong balance sheet, disciplined approach and Capital
Allocation Framework allows us to weather downturns and
unexpected issues, such as the COVID-19 pandemic, from
a position of financial strength.
At the end of FY2020, BHP had six major projects under
development in copper, iron ore, potash and petroleum,
with a combined budget of US$11.4 billion over the life
of the projects.
During FY2020, we have kept capital expenditure below
US$8 billion per annum with net debt at US$12 billion.
The Board announced total dividends of US$1.20 per share
in respect of FY2020, equivalent to a 67 per cent payout ratio.
This is the third consecutive year cash returns to shareholders
have exceeded US$6 billion.
110 BHP Annual Report 2020
Executive Leadership team renewal
The Board appointed Mike Henry as BHP’s new Chief Executive
Officer (CEO) in January, replacing Andrew Mackenzie. Mike
is a strong advocate for the resources industry, driving higher
standards of safety and contributing to our local communities
and global stakeholders. He is committed to unlocking and
accelerating greater value in our assets and operations. In doing
so he will make BHP safer, leaner, high performing and future fit.
Andrew was instrumental in turning BHP into a simpler and more
productive company, and one that is financially stronger and
sharply focused on value for shareholders and society. I would
like to thank Andrew for his outstanding contribution as CEO.
Conclusion
Transparency and listening to our stakeholders help us make better
decisions. 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 continue to visit as many of our operations as I can. These visits
reinforce the quality of BHP’s assets and people, which gives me
confidence we can create long-term value for our shareholders.
Ken MacKenzie
Chair
Board composition
The Board has 12 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 aspirational goal to achieve gender balance by CY2025.
We have previously stated that we were searching for an additional
Non-executive Director with mining experience. Gary Goldberg,
who has more than 35 years of global mining industry experience,
including in executive, operational and strategic roles, joined the
Board on 1 February 2020.
When we updated our Board Skills and Experience Matrix in
2018, we identified a need to further deepen the understanding
of technology on our Board, and we focused on attracting
that experience. As a result, in May 2020 we announced the
appointment of Dion Weisler and Xiaoqun Clever.
Dion Weisler was appointed with effect from 1 June 2020. Dion has
extensive global executive experience, including in chief executive
officer and operational roles. He served as the President and Chief
Executive Officer of HP Inc. from 2015 to 2019. He has public
company board experience, having recently joined the board of
Intel Corporation and as a Director of Thermo Fisher Scientific, Inc.
since 2017 and HP Inc. from 2015 until 2019.
Xiaoqun Clever will join the Board on 1 October 2020. Xiaoqun
has over 20 years of global experience in technology with a focus
on software engineering, data and analytics, cybersecurity and
digitalisation. She held various roles with SAP SE, Ringier AG
and ProSiebenSat.1 Media SE. She currently serves on the board
of Capgemini SE, Infineon Technologies AG and Amadeus IT
Group SA.
I would also like to acknowledge Lindsay Maxsted and Shriti Vadera
– members of the Board for more than nine years. Lindsay will retire
on 4 September this year and Shriti will retire, as planned, at this
year’s Annual General Meeting. On behalf of the Board, I thank
Lindsay for his counsel and for his exceptional contribution to the
Board and as Chair of the Risk and Audit Committee. I also thank
Shriti for her support to me as Senior Independent Director and her
commitment to our shareholders through her regular engagement.
Shriti has made an outstanding contribution to BHP.
BHP Annual Report 2020 111
Strategic ReportRemuneration ReportDirectors’ ReportFinancial StatementsAdditional informationShareholder informationGovernance at BHP2 2.2 Board of Directors and Executive Leadership Team
2.2.1 Board of Directors
Ken MacKenzie
BEng, FIEA, FAICD, 56
Chair and Independent
Non-executive Director
Director of BHP Group Limited and
BHP Group Plc since September 2016.
Chair 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 shareholder
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.
Ken 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, Ken 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 Managing Director and Chief
Executive Officer of Amcor Limited
(from July 2005 to April 2015)
• Former Advisory Board member of
Adamantem Capital (from September 2016
to May 2019)
• Former Senior Adviser to McKinsey &
Company (from January 2016 to June 2017)
Board Committee membership:
• Chair of the Nomination and
Governance Committee
112 BHP Annual Report 2020
Mike Henry
BSc (Chemistry), 54
Terry Bowen
BAcct, FCPA, MAICD, 53
Non-independent Director
Independent Non-executive Director
Director of BHP Group Limited and BHP Group
Plc since January 2020. He was appointed
Chief Executive Officer on 1 January 2020.
Skills and experience:
Mr Henry has over 30 years’ experience
in the global mining and petroleum industry,
spanning operational, commercial, safety,
technology and marketing roles.
Mike joined BHP in 2003, initially in business
development and then in marketing and
trading of a range of mineral and petroleum
commodities based in The Hague, where
he was also accountable for BHP’s ocean
freight operations. He went on to hold various
positions in the Company, including President
Operations Minerals Australia, President Coal,
President HSE, Marketing and Technology, and
Chief Marketing Officer. Mike was appointed
Chief Executive Officer on 1 January 2020
and has been a member of the Executive
Leadership Team since 2011.
Prior to joining BHP, Mike worked in the
resources industry in Canada, Japan
and Australia.
Other directorships and offices
(current and recent):
• Council member and Treasurer of the
International Council on Mining and
Metals (ICMM) (since 2020)
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.
Terry is currently Chair of the Operations Group
at BGH Capital, and a Non-executive Director
of Transurban Group.
Prior to this, Terry served as Managing Partner
and Head of Operations at BGH Capital. He also
previously served as an Executive Director and
Finance Director of Wesfarmers Limited from
2009 to 2017, which included chairing a number
of Wesfarmers’ operating divisions. Prior to this,
Terry 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. Terry is a former Director of Gresham
Partners and past President of the National
Executive of the Group of 100 Inc.
The Board is satisfied that Terry meets the
criteria for financial experience as outlined
in the 2018 UK Corporate Governance Code
(UK Code), competence in accounting and
auditing as required by the Financial Conduct
Authority (FCA) Disclosure and Transparency
Rules and the audit committee financial expert
requirements under the US Securities and
Exchange Commission Rules. In addition,
he is the Board’s nominated ‘audit committee
financial expert’ for the purposes of the US
Securities and Exchange Commission Rules.
Other directorships and offices
(current and recent):
• Non-executive Director of Transurban Group
(since February 2020)
• Director of Navitas Pty Limited (since July 2019)
• Chair (since 2020) and Former Head of the
Operations Group at BGH Capital (from
January 2018 to January 2020)
• Director of West Coast Eagles Football Club
(since May 2017)
• Former Executive Director and Finance
Director of Wesfarmers Limited (from April
2009 to November 2017)
• Former Chair of West Australian Opera
Company Incorporated (from July 2014
to December 2017)
• Former Director of Gresham Partners Holdings
Limited and Gresham Partners Group Limited
(from April 2009 to August 2017)
Board Committee membership:
• Chair of the Risk and Audit Committee
Malcolm Broomhead
AO, MBA, BE, FAICD, 68
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.
Malcolm 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.
Malcolm was Managing Director and Chief
Executive Officer of Orica Limited (a global
mining services and chemicals company) 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):
• Chair of Orica Limited (since January 2016)
and a Director (since December 2015)
• Director of the Walter and Eliza Hall Institute
of Medical Research (since July 2014)
• Former Chair of Asciano Limited (from
October 2009 to August 2016)
• Former Director of Coates Group Holdings
Pty Ltd (from January 2008 to July 2013)
• Former Chair of the Australia China
One Belt One Road Advisory Board
(from August 2016 to February 2019)
Board Committee membership:
• Member of the Sustainability Committee
• Member of the Nomination and
Governance Committee
Ian Cockerill
MSc (Mining and Mineral Engineering), BSc
(Hons.) (Geology), AMP – Oxford Templeton
College, 66
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. Ian is the Chair of
Polymetal International plc and Non-executive
Director of I-Pulse Inc.
Ian is the former Chair of BlackRock World
Mining Trust plc and the former Lead
Independent Director of Ivanhoe Mines Ltd
and former Director of Orica Limited and
Endeavour Mining Corporation. He is a
Director of the Leadership for Conservation
in Africa (a not-for-profit organisation) and is
the Chair of Conservation 360, a Botswanan
conservation NGO dealing with anti-poaching
initiatives. He is a former Director of Business
Leadership South Africa, the South African
Business Trust and the World Gold Council.
Other directorships and offices
(current and recent):
• Chair of Polymetal International plc
(since April 2019)
• Non-executive Director of I-Pulse Inc
(since September 2010)
• Former Director of Orica Limited
(from 2010 to August 2019)
• Former Director (from 2013 to 2019)
and Chair (from 2016 to May 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
Chair (from 2010 to 2013) and Non-executive
Chair (from 2013 to 2017) of Petmin Limited
• Former Chair of Hummingbird Resources plc
(from 2009 to 2014)
Board Committee membership:
• Member of the Risk and Audit Committee
• Member of the Sustainability Committee
Anita Frew
BA (Hons), MRes, Hon. D.Sc, 63
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, Anita has valuable
insight and experience in the creation of
value, organisational change, mergers and
acquisitions, financial and non-financial risk,
and health, safety and environment.
Anita is the Chair of Croda International Plc
(a British speciality chemicals company)
and until recently, was also the Deputy Chair
and Senior Independent Director of Lloyds
Banking Group Plc. Prior to this, she was
the Chair 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 Chair (since
September 2015) of Croda International Plc
• Former Director (from 2010 to May 2020),
Deputy Chair (from December 2014 to
May 2020) and Senior Independent Director
(from May 2017 to December 2019) 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 Chair of Victrex Plc (from 2008
to October 2014)
Board Committee membership:
• Member of the Remuneration Committee
• Member of the Risk and Audit Committee
BHP Annual Report 2020 113
Strategic ReportRemuneration ReportDirectors’ ReportFinancial StatementsAdditional informationShareholder informationGovernance at BHP2 2.2.1 Board of Directors continued
Gary Goldberg
BS, MBA, 61
Susan Kilsby
MBA, BA, 61
Lindsay Maxsted
DipBus (Gordon), FCA, FAICD, 66
Independent Non-executive Director
Independent Non-executive Director
Independent Non-executive Director
Director of BHP Group Limited and
BHP Group Plc since February 2020.
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 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 Advisor, and Chair of EMEA Mergers
and Acquisitions. Susan also has non-executive
experience across multiple industries. Susan
was previously the Chair of Shire plc and the
Senior Independent Director at BBA Aviation
plc. She is currently the Senior Independent
Director of Diageo plc, and a Non-executive
Director of Fortune Brands Home & Security
Inc and Unilever N.V and Unilever plc.
Other directorships and offices
(current and recent):
• Director (since 2018) and Senior
Independent Director (since October 2019)
of Diageo plc
• 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
Chair (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 2015)
• Former Director of Coca-Cola HBC
(from 2013 to 2015)
Board Committee membership:
• Chair of the Remuneration Committee
• Member of the Nomination and
Governance Committee
Skills and experience:
Mr Maxsted has over 10 years’ experience in
non-executive roles, including as chair of two
global companies. Lindsay 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.
Lindsay has a breadth of understanding
and insight in relation to the creation of
shareholder value through cycles, financial
and non-financial risk, capital discipline
and the external environment.
The Board is satisfied that Lindsay meets
the criteria for recent and relevant financial
experience as outlined in the UK Code,
and competence in accounting and auditing
as required by the UK FCA’s Disclosure and
Transparency Rules.
Other directorships and offices
(current and recent):
• Chair of Transurban Group (since August
2010) and a Director (since March 2008)
• Director and Honorary Treasurer of
Baker Heart and Diabetes Institute
(since June 2005)
• Former Chair (from December 2011
to March 2020) and Director
(from March 2008 to March 2020)
of Westpac Banking Corporation
Board Committee membership:
• Member of the Risk and Audit Committee
Skills and experience:
Mr Goldberg has over 35 years of global
executive experience, including deep
experience in mining, strategy, risk, commodity
value chain, capital allocation discipline
and public policy. Gary served as the Chief
Executive Officer of one of the largest gold
producers, Newmont Corporation, from
2013 until October 2019, with responsibility
for Newmont’s 37,000 employees and
contractors, and operations in United States,
Australia, Argentina, Canada, Dominican
Republic, Mexico, Peru, Ghana and Suriname.
Prior to joining Newmont, Gary was President
and Chief Executive Officer of Rio Tinto
Minerals, and served in executive leadership
roles in Rio Tinto’s coal, gold, copper and
industrial minerals businesses.
Gary is the former Vice Chair of the World
Gold Council and the former Treasurer of the
International Council on Mining and Metals,
and previously served as Chair of the National
Mining Association in the United States from
2008 to 2010. Gary also has non-executive
director experience, having previously served
on the board of Port Waratah Coal Services
Limited and Rio Tinto Zimbabwe.
Other directorships and offices
(current and recent):
• Former Advisor, Newmont (from October
2019 to March 2020)
• Former President and Chief Executive
Officer of Newmont Corporation
(from 2013 to October 2019)
• Former Director (from 2013 to October 2019)
and Treasurer (from 2017 to October 2019)
of the International Council on Mining
and Metals
• Former Vice Chair of World Gold Council
(from 2017 to 2019)
• Former Co-Chair of World Economic
Forum Mining and Metals Governors
(from 2016 to 2017)
Board Committee membership:
• Member of the Remuneration Committee
• Member of the Sustainability Committee
114 BHP Annual Report 2020
John Mogford
BEng, 67
Shriti Vadera
MA, 58
Dion Weisler
BASc (Computing), Honorary Doctor of Laws, 53
Independent Non-executive Director
Director of BHP Group Limited and
BHP Group Plc since October 2017.
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. John has
also held roles as a non-executive director
on a number of boards.
John 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 Chair
of Amromco Energy LLC and White Rose
Energy Ventures LLP. John retired from the
boards of Weir Group Plc and one of First
Reserve’s portfolio companies, DOF Subsea
AS, in 2018, and is currently 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:
• Chair of the Sustainability Committee
Senior Independent Director,
BHP Group Plc
Director of BHP Group Limited and
BHP Group Plc since January 2011.
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.
Shriti has held executive roles and has broad
and extensive non-executive experience. She is
currently Chair of Santander UK Group Holdings
Plc and Santander UK Plc, a Non-executive
Director of Prudential Plc, and is expected
to become the next Chair of Prudential
from 1 January 2021. Shriti was formerly
a Non-executive 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.
Shriti 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):
• Non-executive Director of Prudential Plc
(since May 2020)
• Chair of Santander UK Group Holdings Plc
and Santander UK Plc (since March 2015)
• Former Non-executive Director of
AstraZeneca Plc (from January 2011
to December 2018)
Board Committee membership:
• Member of the Nomination and
Governance Committee
• Member of the Remuneration Committee
Independent Non-executive Director
Director of BHP Group Limited and
BHP Group Plc since June 2020.
Skills and experience:
Mr Weisler has extensive global executive
experience, including in chief executive officer
and operational roles. In particular, Dion has
valuable transformation and commercial
experience in the global information technology
sector, a focus on capital discipline, as well
as perspectives on current and emerging
ESG issues.
Dion served as the President and Chief
Executive Officer of HP Inc. from 2015 to 2019
and after stepping down from his President
and CEO role, remained at HP Inc. as a Director
and Senior Executive Adviser until May 2020.
Prior to joining HP in 2012, Dion held a number
of senior executive roles at Lenovo Group
Limited, including as Vice President and
Chief Operating Officer of the Product and
Mobile Internet Digital Home Groups, and
as Vice President and General Manager,
South East Asia. Dion also has experience at
Telstra Corporation as the General Manager
Conferencing and Collaboration, and from
1987 to 2001 held various positions at Acer
Inc., including as Managing Director, Acer UK.
Dion is currently a Non-executive Director of
Intel Corporation and Thermo Fisher Scientific.
Other directorships and offices
(current and recent):
• Director of Intel Corporation
(since June 2020)
• Director of Thermo Fisher Scientific Inc.
(since 2017)
• Former President and Chief Executive
Officer (from 2015 to October 2019),
Director (from 2015 to May 2020),
and Senior Executive Adviser (from
November 2019 to May 2020) at HP Inc.
Board Committee membership:
• Member of the Remuneration Committee
Caroline Cox
BA (Hons), MA, LLB, BCL, 50
Group General Counsel & Company Secretary and Chair 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.
BHP Annual Report 2020 115
Strategic ReportRemuneration ReportDirectors’ ReportFinancial StatementsAdditional informationShareholder informationGovernance at BHP2 2.2.2 Executive Leadership Team
Athalie Williams
BA (Hons), FAHRI, 50
Chief People Officer
Daniel Malchuk
BEng, MBA, 54
Edgar Basto
BSc, Metallurgy, 53
President Operations, Minerals Americas
President, Minerals Australia
Ms Williams joined BHP in 2007 and was
appointed to the role of President, Human
Resources in January 2015. Athalie’s 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, Athalie was an organisation
strategy adviser with Accenture (formerly
Andersen Consulting) and National Australia
Bank. She is a member of Chief Executive
Women and a Director of the BHP Foundation.
Mr Malchuk was appointed President
Operations, Minerals Americas in February
2016 and is based in Santiago, Chile.
Previously he was President of the Copper
Business. Danny 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.
Mr Basto was appointed President Minerals
Australia on 1 July 2020 and is responsible
for BHP’s iron ore and nickel operations in
Western Australia, metallurgical and energy
coal in Queensland and New South Wales,
and copper in South Australia. Edgar was
Asset President of Western Australia Iron Ore
(WAIO) from March 2016 and Acting President
Operations Minerals Australia from November
2019. Edgar has held senior leadership roles
across a range of commodities including iron
ore, copper, coal and nickel, and has deep
technical capability in both mining and
smelting operations. Originally from Colombia,
Edgar has a Bachelor of Applied Science
(Metallurgical Engineering) from the
Universidad Industrial de Santander.
He joined BHP in 1989.
Geoff Healy
BEc, LLB, 54
Chief External Affairs Officer
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, Geoff 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.
Geraldine Slattery
BSc, Physics, MSc, International Management
(Oil & Gas), 51
Laura Tyler
BSc (Geology (Hons)), MSc
(Mining Engineering), 53
President Operations, Petroleum
Chief Geoscientist
Ms Slattery joined BHP in 1994 and was
appointed President Operations, Petroleum
in March 2019. Geraldine 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.
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, Laura 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, Laura
worked for Western Mining Corporation,
Newcrest Mining and Mount Isa Mines
in various technical and operational roles.
116 BHP Annual Report 2020
Mike Henry
BSc (Chemistry), 54
Chief Executive Officer
(See section 2.2.1 for biography)
Peter Beaven
BAcc, CA, 53
Vandita Pant
BCom (Hons), MBA, Business Administration, 50
Chief Financial Officer
Chief Commercial 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.
As noted in section 2.5, Peter will continue
as CFO until 30 November 2020 to provide
ongoing leadership through to Mr Lamont’s
commencement, and will support Mr Lamont
with handover into early 2021, after which he
will leave BHP.
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 BHP’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 United Kingdom.
BHP Annual Report 2020 117
Strategic ReportRemuneration ReportDirectors’ ReportFinancial StatementsAdditional informationShareholder informationGovernance at BHP2 2.3 Role and responsibilities of the Board
BHP governance structure
Shareholders
The Board uses formal and informal communication channels to understand the views of shareholders to ensure they are represented in governing BHP.
For more information on shareholder engagement, refer to section 2.6.1.
Board
BHP’s purpose is to bring people and resources together to build a better world (our purpose). Our strategy is to have the best capabilities, best
commodities and best assets, to create long-term value and high returns (our strategy). Transformation, capital discipline and social value enable the
successful execution of our strategy.
Independence – The Non-executive Directors are considered by the Board to be independent of management. They are 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 2.9.
Composition – The Board currently has 12 members. The Board believes there is an appropriate balance between Executive and Non-executive Directors
to promote shareholder interests and govern BHP effectively. The Board has fewer Executive Directors than is common for UK-listed companies,
but 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. Management makes presentations and engages
in discussions with Directors, answers questions and provides input and perspective on their areas of responsibility. The Chief Financial Officer (CFO)
attends all Board meetings. The Board, led by the Chair, also holds discussions in the absence of management at each Board meeting. The Directors
of BHP, along with their profiles, are listed in section 2.2.1.
Role and responsibilities of the Board
Matters reserved for the Board include
The role of the Board, as set out in the Board Governance Document,
is to represent shareholders and promote and protect the interests
of BHP in the short and long term. The Board considers the interests
of the Group’s shareholders as a whole and the interests of other
relevant stakeholders.
The Board Governance Document is a statement of the practices and
processes the Board has adopted to fulfil 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 Chief Executive Officer
(CEO), including the limits on the way the CEO can execute that authority;
and guidance on the relationship between the Board and the CEO.
The Group Company Secretary is accountable to the Board and advises
the Chair and, through the Chair, the Board and individual Directors on all
matters of governance process.
Succession
• CEO appointment and determination of the terms of the appointment
• Approval of the appointment of Executive Leadership Team (ELT)
members, 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 limits
Monitoring
• Performance assessment of the CEO and the Group
• Approving the Group’s values, Our Code of Conduct, purpose and
risk appetite
The Board Governance Document is available
at bhp.com/governance.
• Management of Board composition processes and performance
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
Chair
CEO
The Chair is responsible for leading the Board and ensuring it operates
to the highest governance standards.
The CEO is accountable to the Board for the authority that is delegated
to the CEO and for the performance of the Group. The CEO works in a
constructive partnership with the Board and is required to report regularly
to the Board on progress.
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 our 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.
These are available at bhp.com/governance.
Nomination and
Governance Committee
Oversees and monitors renewal
and succession planning
and advises and makes
recommendations on the
Group’s governance practices
(See section 2.9)
Risk and Audit Committee
Sustainability Committee
Remuneration Committee
Oversees and monitors financial
reporting, other periodic
reporting and external and
internal audit and risk
Oversees and monitors material
health, safety, environmental
and community matters and
social value
Oversees and monitors
remuneration policy
(See section 2.10)
(See section 2.11)
(See section 2.12)
118 BHP Annual Report 2020
2.4 Board meetings and attendance
The Board meets as often as required. Directors must allocate
sufficient time to BHP to perform their responsibilities effectively,
including adequate time to prepare for Board meetings. During
FY2020, the Board met 13 times. Twelve meetings were held in
Australia and one in the United Kingdom. The normal schedule,
which includes Board meetings in the UK and in another global
office location, was disrupted due to the travel impacts of
COVID-19 resulting in virtual board meetings, and additional
meetings were held regarding COVID-19. In total, four of the
meetings were ad hoc – scheduled during the year.
Board and Board Committee attendance in FY2020
Members of the ELT and other members of senior management
attended meetings of the Board by invitation, with the CFO
attending each meeting.
Scheduled
Board
Ad hoc
Board
Risk and Audit
Committee
Nomination
and Governance
Committee
Remuneration
Committee
Sustainability
Committee
Tenure as at
30 June 2020 (1)
Terry Bowen
Malcolm Broomhead
Ian Cockerill
Anita Frew
Gary Goldberg
Mike Henry
Carolyn Hewson
Susan Kilsby
Andrew Mackenzie
Ken MacKenzie
Lindsay Maxsted
John Mogford
Shriti Vadera
Dion Weisler
9/9
9/9
9/9
9/9
3/3
3/3
4/4
9/9
6/6
9/9
9/9
9/9
9/9
1/1
4/4
4/4
4/4
4/4
3/3
3/3
1/1
2/4 (3)
1/1
4/4
4/4
4/4
4/4
11/11
10/11 (2)
11/11
11/11
4/4
2/2
1/1
4/4
4/4
5/5
5/5
2 years 9 months
10 years 3 months
1 year 3 months
4 years 10 months
3/3
5 months
6 months
Retired on 7 November 2019
1 year 3 months
Retired on 31 December 2019
3 years 10 months
9 years 3 months
5/5
2 years 9 months
9 years 5 months
1 month
6/6
3/3
3/3
6/6
6/6
1/1
Table indicates the number of scheduled and ad hoc meetings attended and held during the period the Director was a member of the Board and/or committee.
(1) See section 2.9 for further discussion about tenure.
(2) Ian Cockerill was unable to attend the Risk and Audit Committee meeting on 15 August 2019 due to pre-existing Board commitments in a transitional year. Ian provided
detailed comments to the Chair of the Committee ahead of the meeting.
(3) Susan Kilsby was unable to attend ad hoc Board calls which were scheduled at short notice, on 30 October 2019 and 17 March 2020, due to pre-existing Board
commitments and COVID-related travel disruptions. Ms Kilsby provided detailed comments to the Chair in advance of both meetings.
BHP Annual Report 2020 119
Strategic ReportRemuneration ReportDirectors’ ReportFinancial StatementsAdditional informationShareholder informationGovernance at BHP2 2.5 Key Board activities during FY2020
Adoption of governance reforms in Australia and the United Kingdom
In July 2018, the Financial Reporting Council released the UK Code and the Guidance on Board Effectiveness, and we comply in full.
We also comply with the third edition of the ASX Corporate Governance Principles and Recommendations (ASX Third Edition) published
by the ASX Limited’s Corporate Governance Council. In addition, we comply with the majority of the recommendations contained
in the fourth edition of the ASX Corporate Governance Principles and Recommendations (ASX Fourth Edition) which was released
in February 2019.
During FY2020, BHP implemented new policies and procedures in line with the UK Code and the ASX Fourth Edition, with an emphasis
in seven main areas. These are: enhanced role for the Board in relation to codes of conduct and whistleblowing: risk assessment and
management; diversity; requirement to disclose certain policies; consideration of stakeholder interests; engagement with the workforce
and oversight of workforce policies and practices; and an enhanced role for the Board in relation to culture.
Board Governance
Document and committee
Terms of Reference updates
The Board Governance Document was updated to reflect our revised approach to risk management and reporting,
and to reference the Board’s role in assessment and monitoring. In addition, areas relating to how information flows
to the Board were clarified, and changes were made to reflect BHP’s revised purpose and strategy. Committee Terms
of Reference were also updated as set out below.
Enhanced role for the
Board in relation to
codes of conduct
and whistleblowing
Risk assessment
and management
Diversity of the board
and senior management,
and enhanced role for
nomination committee
Requirement to disclose
certain policies
From a UK perspective, the main changes are to ensure the Code of Conduct and whistleblowing are a Board-level
responsibility, rather than a Committee responsibility, and to ensure the scope of reporting is ‘any matters of concern’.
The RAC Terms of Reference confirm that the RAC provides a report-out to the Board, which includes significant Code
of Conduct matters reported to the RAC at its meetings. In addition, an independent investigations team has been
maintained within Ethics and Compliance, and its investigations and investigation trends are regularly reported to the
RAC. (See sections 2.10 (effectiveness of systems of internal control and risk management) and 2.15.)
The revised UK Code and ASX Fourth Edition were taken into account in the design of the Group Risk Framework and
approach to risk management and reporting. In addition, the Board Governance Document and RAC Terms of Reference
were amended to reflect our updated approach to risk management and reporting, including the importance of the
Board having oversight of both financial and non-financial risks, the RAC assisting the Board in monitoring that the Group
is operating with due regard to the risk appetite set by the Board, and that the Group Risk Framework deals adequately
with contemporary and emerging risks. (See section 2.10.)
The Board Governance Document was aligned with new UK Code provisions by ensuring that appointments and
succession plans for both Board and senior management are both led by the Nomination and Governance Committee.
At the end of CY2020 we will have 33 per cent women on the Board. (See sections 1.6.1 and 2.9.)
BHP already disclosed its Communications Policy and Our Code of Conduct. The ‘Speaking up’ and ‘Anti-corruption’
sections of our Our Code of Conduct cover BHP’s whistle-blower and anti-bribery and corruption policies. Our Market
Disclosure policy has been updated for periodic market disclosures, including verification procedures. (See section 2.16.)
Consideration of
stakeholder interests
BHP’s strategic framework, focus on social value, our purpose statement, section 172 statement, and risk appetite
statement all reflect the consideration of external stakeholders in decision-making. (See sections 1.4.3 and 2.6.)
Engagement with the
workforce and oversight
of workforce policies
and practices
Enhanced role for the
Board in relation to culture
The Board and its Committees receive information related to the workforce through a range of channels, including
direct engagement at Board meetings and site visits, the Engagement and Perception Survey (EPS) findings, gender
pay gap reports, and updates from the Chief Executive Officer and the Chief People Officer.
In addition, as part of implementing the UK Code, the Chief People Officer presented to the Board a review of
workforce policies and practices to ensure these are consistent with the Group’s values and support its long-term
sustainable success. (See sections 1.4.3, 1.6 and 2.6.2.)
The Board, supported by the Committees, considers a range of qualitative and quantitative information in relation
to culture and monitors and assesses culture on an ongoing basis for alignment with our strategy, purpose and values.
Board and committee papers include workforce planning in the context of COVID-19, Engagement and Perception
Survey results, inclusion & diversity update, RAC report-outs on Code of Conduct investigations, the culture and
capability required to execute the strategy, and culture as a part of asset reviews. The Board Governance Document
was updated to expressly reference the Board’s role in relation to assessing and monitoring culture. (See sections 1.6,
2.6.2, 2.7 and 2.15.)
CEO and ELT succession
A major piece of work for the Board during FY2020 was CEO
succession. For BHP, succession of the CEO is an ongoing process,
which continues to work well in developing internal candidates for
this critical role. This year, Andrew Mackenzie retired as CEO and
Mike Henry was appointed CEO from 1 January 2020. The Board
took account of Mike’s 30 years’ experience in the global mining
and petroleum industry, spanning operational, commercial, safety,
technology and marketing roles. As set out in section 1.4.3, in the
45 days between being announced CEO-Elect and becoming CEO,
Mike Henry spent time engaging with employees from every asset
and almost all major offices. In addition, Mike was able to get out
and meet with other key stakeholders before COVID-19 struck,
and COVID-19 has subsequently reinforced the advantages of
an internal appointment. A critical component of succession at
ELT level and below is the existence of a robust senior leadership
program that operates across multiple organisational levels
to build, develop, renew, recruit and promote our leaders.
The Board is actively engaged and oversees the development
of the senior team. Following his appointment, Mike Henry has
begun to announce the new senior management team and
continued focus on assets and their performance.
In June 2020, we announced the appointment of Mr Lamont as
Chief Financial Officer, effective 1 December 2020. David has been
the CFO of the ASX-listed global biotech company CSL Limited
since January 2016. Prior to joining CSL, he was the CFO and an
Executive Director at MMG from 2010. Peter Beaven will continue
as CFO until 30 November 2020 to provide ongoing leadership
through to Mr Lamont’s commencement, and will support Mr Lamont
with handover into early 2021, after which he will leave BHP.
In August 2020, CEO Mike Henry announced new roles and
appointments on the ELT. Ragnar Udd will become President
Minerals Americas, effective 1 November 2020, replacing Daniel
Malchuk. Mr Malchuk will continue in the role until that time, and
leave BHP at the end of CY2020. Laura Tyler commenced in the
new role of Chief Technical Officer on 1 September 2020. This
role is an expansion of her current position on the ELT as Chief
Geoscientist. She will relinquish her concurrent role as Asset
President Olympic Dam. Caroline Cox will become Chief External
Affairs Officer, effective 1 November 2020, replacing Geoff Healy.
Mr Healy will continue in the role until that time, and leave BHP at
the end of CY2020. Johan van Jaarsveld commenced in the new
role of Chief Development Officer on 1 September 2020.
120 BHP Annual Report 2020
Key matters considered by the Board during FY2020 are outlined below.
Chair’s matters
Board composition, succession
planning, performance and culture
CEO succession
CEO transition update
Approval of the appointment of the new CFO
Committee succession
Board composition and succession
Board evaluation
Inclusion and diversity update and FY2020 targets
Corporate governance updates
Board culture framework
Strategic matters
Capital allocation
(CAF, capital prioritisation and
development outcomes)
Dividend policy and dividend recommendations
Capital prioritisation and portfolio development options
Capital execution watch list
Funding
(annual budgets, balance sheet
management, liquidity management)
COVID-19 financial impacts, balance sheet and forecasts
Two-year budget
Funding updates
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)
Social value and other
significant items
Monitoring and
assurance matters
Includes matters and/or documents
required by the Group’s constitutional
documents, statute or by other
external regulation
COVID-19 update – including safety measures, wellbeing steps, workforce planning
and community support
Portfolio review – options and alternatives
Risk Appetite Statement
Climate change scenarios and stakeholder analysis
Climate change – medium-term target, Scope 3 emissions, investment fund
Circular economy
Samarco strategy, funding and communications
Germano dam decommissioning
Energy Coal review
Petroleum plan
Jansen Potash project
Trinidad and Tobago gas
Resolution Copper project
Mexico Trion project update
Rail technology
Economic and geopolitical risk
Escondida and Spence power purchase agreements
Social value update
Industry associations review
Shareholder requisitioned resolutions
World Class Functions
Vendor rationalisation
Culture and capability
EPS survey and COVID-19 wellbeing survey
Tailings dams updates
Investor relations reports
CEO reports, including CEO transition
HSEC reports
RAC 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 Reporting suite
Site visits
BHP Annual Report 2020 121
Strategic ReportRemuneration ReportDirectors’ ReportFinancial StatementsAdditional informationShareholder informationGovernance at BHP2 2.6.1 Shareholder engagement
Part of the Board’s commitment to high-quality governance
is expressed through the approach BHP takes to engaging and
communicating with our shareholders. The Board uses formal
and informal communication channels to understand and take
into account the views of shareholders.
We encourage shareholders to make their views known to us.
Shareholders can contact us at any time through our Investor
Relations team, with contact details available at bhp.com.
In addition, shareholders can communicate with us and our
registrar electronically.
2.6 Stakeholder engagement
There are multiple ways the views of stakeholders, beyond
shareholders (section 2.6.1) and the workforce (section 2.6.2),
are brought to the Board and its Committees. For example,
Health, Safety, Environment and Community (HSEC) updates,
site visits involving engagement with community members
and government, and engagement with the Forum on
Corporate Responsibility. In addition, the RAC receives
reports on engagement with regulators. It also receives
reports on material litigation and disputes with third parties
and complaints raised through the speak-up hotline, EthicsPoint,
which allows our workforce to raise concerns in confidence.
The strategic framework, focus on social value, our new
purpose and Risk Appetite Statement reflect the significance
of external stakeholders in decision-making.
The Annual Report includes additional information on our
stakeholders, including non-governmental organisations.
For more information, refer to sections 1.4.3, 1.6 and 1.7.
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)
Chair/Senior Independent Director/
Remuneration Committee Chair
Board
(Annual General Meetings)
122 BHP Annual Report 2020
Investor engagement in FY2020
Topic
Strategy,
governance and
remuneration
Led by
Group Chair
Remuneration
Chair of the
Remuneration
Committee, Vice
President Reward
and Vice President,
Group Governance
Purpose
FY2020 activity
Discuss Board
priorities and seek
shareholder feedback
Meetings with institutional investors in Australia, the UK and the US.
In addition, the Chair participated in the remuneration consultation
meetings in Australia and the UK in July 2019.
Meetings with retail shareholders in Australia held in conjunction
with the Australian Shareholders’ Association and in the UK with the
UK Shareholders’ Association and Sharesoc.
Remuneration
policy consultation
Meetings held in Australia and the UK in July 2019.
Climate change
and environmental,
social and
governance (ESG)
Board
Direct feedback
Direct engagement between a panel of institutional investors and the
Board at the virtual Board meeting in June 2020.
Strategy, finance
and operating
performance
CEO, CFO, senior
management and
Investor Relations
Update shareholders
on results or other
key announcements.
We also engage
with other capital
providers, for example,
through meetings
with bondholders
Live webcasts of key announcements.
Face-to-face investor meetings held in Australia, Canada, Hong Kong
SAR (China), Japan, Malaysia, Singapore, South Africa, the UK and the
US. Virtual meetings were held with investors in Australia, Hong Kong
SAR (China), Denmark, France, Germany, Switzerland, the United Arab
Emirates, the UK and the US.
Debt investor meetings held in London in October 2019 with investors
from the Netherlands, Singapore, the UK and the US, along with ad
hoc meetings.
Debt investor teleconferences held in August 2019 and February 2020
with investors in the Netherlands, the UK and the US.
Management led engagement with retail investors in Australia in
September 2019, and the Investor Relations team conducted retail
broker briefings.
Engaged with investors
on shareholder
resolutions, the 2019
Industry Association
Review and a new
approach to industry
association membership
Multiple calls and face-to-face meetings were held between September
2019 and March 2020 with investors globally. This included face-to-face
engagement between the CEO and certain investors in December 2019.
In January 2020, briefings were held in Sydney, Melbourne, London,
Edinburgh and Amsterdam. In March 2020, BHP commenced a global
engagement and dialogue process with stakeholders to explore how the
Group could improve its approach to industry associations, including
to address issues raised by investors in our engagement on the 2019
shareholder resolutions.
Update investors
on key HSEC issues
Meetings held in Australia in September 2019, the UK and Europe in
October 2019, and the US in December 2019 about BHP’s approach
to social value.
Industry
associations
CEO, External
Affairs, Group
Governance
Social value
and HSEC
Head of External
Affairs and Head
of Health, Safety
and Environment
Corporate
Governance
and ESG matters
ESG, Group
Governance and
Investor Relations
Climate change
Vice President,
Sustainability and
Climate Change
Provides a conduit to
enable the Board and
its Committees to be
up to date with investor
expectations and to
continuously improve
the governance
processes of BHP
Update investors on our
climate change strategy
Annual General
Meetings
Board and Senior
Management, and
external auditor
Respond to
investor queries
Multiple forms of engagement with investors throughout the year
on a wide range of topics. For example, responded to enquiries on
topics including diversity and inclusion, cultural heritage, tailings dams,
Samarco, non-operated joint ventures, industry associations, climate
risk, biodiversity, water stewardship, COVID-19, workforce mental health
and thermal coal.
Ad hoc meetings held in Australia, Europe and the US, including
engagement with Climate Action 100+ regarding our climate change
response (e.g. offsets, Scope 3 goals, medium-term target, portfolio
analysis and industry associations).
Information on our AGMs is available at bhp.com/meetings.
BHP Annual Report 2020 123
Strategic ReportRemuneration ReportDirectors’ ReportFinancial StatementsAdditional informationShareholder informationGovernance at BHP2 2.6.2 Workforce engagement
The Board has arrangements in place for workforce engagement,
and has built on these arrangements further following the
implementation of the UK Code. Alongside section 1.4.3, the table
below describes the ways the Board engaged with our workforce in
FY2020, and how workforce considerations impacted key decisions.
The Board considers these arrangements to be effective as they
enable the Board to hear first-hand from a cross-section of the
workforce, and to engage with them interactively (e.g. during site
visits and some Board briefing sessions), with the opportunity to
consider the feedback received in subsequent Board discussions.
Engagement practice
Description
Site visits
Deep dives
Board meetings
Employee survey
results
Wellbeing survey
results
Directors visited operational sites in several countries and informally engaged with a cross-section of our workforce in the
field, in small group discussions and meetings to hear first-hand the views of our people.
In February 2020, Directors participated in an interactive presentation from Western Australia Iron Ore (WAIO) employees.
The employees shared their perspectives on issues including peer comparison, strategic risks, people and investment options.
Directors hear from employees, up to several levels below the CEO, at each Board meeting. Topics include the health
and safety of our people, culture, ethics and compliance, workforce relations, response to COVID-19, our purpose,
human rights, conduct concerns and diversity.
Members of our workforce are able to raise matters of concern either through one of the means described below,
or through our 24-hour speak-up helpline, EthicsPoint (see section 2.15). This helps to ensure Board oversight of culture
and management response to serious conduct contrary to Our Charter and Our Code of Conduct.
Directors discussed the results of the FY2019 Employee Engagement and Perception Survey, which provided insights
on developing our culture and the areas of focus for FY2020. The results showed that our commitment to leadership
development and a focus on trust and care remain critically important to a vibrant culture that underpins performance
and transformation.
Directors were provided with details of employee feedback from a regular COVID-19 wellbeing survey. By reviewing the
data and open comments, our leaders are working to address key concerns for our people including challenges related
to managing their health (working from home, lack of exercise, poor sleep and diet), workload (lack of clear barriers
and work hours in work-from-home situations), family (home schooling) and social isolation (particularly in mining camps
and for young people).
2.7 Director skills, experience and attributes
Skills, experience and attributes required
The Board and its Nomination and Governance Committee work
to ensure the Board continues to have the right balance necessary
to fulfil its responsibilities. The requirements for Board composition
are described in an overarching statement, with the desired skills
and experience included in the skills and experience matrix below.
All Directors are expected to comply with the Group’s Code
of Conduct, act with integrity, lead by example and promote
the desired culture.
Overarching statement of Board requirements
The BHP Board will be diverse in terms of gender, nationality,
geography, age, personal strengths and social and ethnic
backgrounds. 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
The overarching statement, skills, experience and attributes
consider and respond to both 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 risks
(including HSEC risks and the risks identified) (see section 1.5.4)
• 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
to operate
• ensure the talent, capability and culture of BHP to support
the long-term delivery of our strategy
Attributes
The Board believes each Non-executive Director has these 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.
124 BHP Annual Report 2020
Skills matrix
The Board skills matrix identifies the skills and experience the Board needs for the next period of BHP’s development, considering BHP’s
circumstances and the changing external environment as referred to above.
Fewer Directors meet each of the skills and experience contained in the current matrix than in the matrix used prior to FY2019. This is
intentional to create a more diverse and well-rounded Board, but all Directors satisfy the overarching statement and hold the attributes
discussed above. The Board collectively meets all the skills and experience set out in the skills matrix, and the matrix below reflects the
Board composition as at 30 June 2020. For more information on the skills and attributes of the Directors, refer to section 2.2.1.
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.
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.
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.
Board
12
4
2
9
11
12
8
12 (1)
4
8
4
10
(1) Twelve 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 Code, competence in accounting and auditing as required by the UK FCA’s Disclosure and Transparency Rules in DTR7 and the audit committee
financial expert requirements under the US Securities and Exchange Commission Rules.
BHP Annual Report 2020 125
Strategic ReportRemuneration ReportDirectors’ ReportFinancial StatementsAdditional informationShareholder informationGovernance at BHP2 2.7 Director skills, experience and attributes continued
Board skills and experience: Climate change
Climate change is 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.
During FY2020, the Board:
• undertook a deep dive relating to climate change and strategy.
This included discussion about climate change scenarios and
discussions on relative commodity attractiveness, including
under a Climate Crisis scenario and a 1.5°C scenario. In addition,
stakeholder attitudes, including those of investors, were
considered in relation to climate change and the direction
and momentum of the evolution of those expectations
Board members bring experience from a range of sectors including
resources, energy, finance, technology and public policy. This equips
them to consider potential implications of climate change on BHP
and its operational capacity, as well as 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.
The Board has taken measures to ensure its decisions are 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) and other
independent advisers. In addition, our Forum on Corporate
Responsibility (which includes Don Henry, former CEO of the
Australian Conservation Foundation and Changhua Wu, former
Greater China Director, the Climate Group) advises operational
management teams and engages with the Sustainability
Committee and the Board as appropriate.
Board tenure and diversity (as at 1 October 2020)
• held discussions on a range of other climate-related topics
including the role of industry associations in climate policy
advocacy, investor and government views on climate change
issues (including in the context of shareholder requisitioned
resolutions), reviews of supply and demand analysis and
portfolio planning
Following extensive discussion by the ELT and the Sustainability
Committee during FY2020, in August 2020, the Board approved
our medium-term target, Scope 3 emission goals and the
strengthening of links between executive remuneration and
climate change performance measures.
For more information, refer to section 1.7.8 and the Climate
Change Report 2020.
Tenure
0–3 years
66%
6–9 years
0%
3–6 years
17%
9+ years
17%
Region of Nationality
Australia
Europe
North America
25%
42%
Diversity
33%
Female
Female
Male
67%
33%
33%
126 BHP Annual Report 2020
2.8 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 Group
Chair, Directors and the governance processes that support the
Board’s work.
The evaluation considers the balance of skills, experience,
independence and knowledge of the Group and the Board,
its diversity, including gender diversity, and how the Board
works together as a unit.
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.
External Board review
As set out in last year’s Annual Report, the Board conducted
an external evaluation using Consilium Board Review (Consilium),
which considered Board, committee and Chair effectiveness,
and assessed the Directors’ contribution. Consilium does not
have any other connection with the Group or individual Directors.
This evaluation was completed in FY2020 with improvements
agreed and implemented, including the reintroduction of an
annual strategy day (in addition to the existing strategy sessions
held at each Board meeting); and additional deep dives on
BHP’s operations. Actions undertaken during FY2020 included
an annual strategy day between the Board and the ELT, which
was heavily focused on the portfolio, climate change and the
impacts of COVID-19. In addition, the Board had a deep dive
on WAIO in February 2020 and site visits (including by new
Directors) as described in the Training and Development table
in section 2.9.
It was considered that Board composition could be improved
by appointing Directors with experience in technology, Asian
markets and mining. These factors were taken into account
in the appointments of Gary Goldberg, Dion Weisler and
Xiaoqun Clever. For more information, refer to section 2.1.
Director review
In FY2020, an assessment was conducted of Directors’ performance
with the assistance of an external service provider (Lintstock).
Lintstock does not have any other connection with the Group
or individual Directors. It has been used previously by the Group.
The assessment of Directors focused on the contribution of each
Director to the work of the Board and its Committees, and the
expectations of Directors as specified in BHP’s governance
framework. The performance of Directors was assessed against
criteria including those described in the first three points in
section 2.7.
In addition, the assessment focused on whether each Director
contributes to Board cohesion and effective relationships with
fellow Directors, commits the time required to fulfil their role and
effectively performs their responsibilities. Directors were asked
to comment on areas where their fellow Directors contribute the
greatest value and on potential areas for development.
Lintstock sought feedback from and provided feedback to the
Chair and the Senior Independent Director, which was then
discussed with the Directors.
As a result of these outcomes, the review supported the Board’s
decision to endorse those Directors standing for re-election.
Committee assessments
Following an assessment of its work, each committee concluded
it had met its terms of reference in FY2020.
BHP Annual Report 2020 127
Strategic ReportRemuneration ReportDirectors’ ReportFinancial StatementsAdditional informationShareholder informationGovernance at BHP2 2.9 Nomination and Governance Committee Report
Role and focus
The Nomination and Governance Committee assists the Board
in ensuring it comprises individuals who are best able to fulfil the
responsibilities of a Director and who have 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 considering 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 Chair
• the succession planning process for the CEO and periodic
• 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
The Nomination and Governance Committee met four times
during FY2020. In addition to regular business, the Committee
considered CEO succession, the appointment as Non-executive
Directors of Gary Goldberg and Dion Weisler, and Xiaoqun
Clever with effect from 1 October, and the retirement of Lindsay
Maxsted on 4 September 2020, and Shriti Vadera after the
2020 AGMs. The Committee also oversaw other targeted
searches for Non-executive Director candidates in FY2020,
which are continuing.
evaluation of the process
• Board and Director performance evaluation, including
evaluation of Directors seeking re-election prior to their
endorsement by the Board as described in section 2.8
• the provision of appropriate training and development
opportunities for Directors
• the independence of Non-executive Directors
External recruitment specialists
The Committee retained the services of external recruitment
specialists. Russell Reynolds and MWM Consulting assisted
with Non-executive Director candidate searches during FY2020.
These recruitment specialists do not have any connection
with the Group or any Director.
Nomination and Governance Committee members during the year
Name
Ken MacKenzie (Chair)
Malcolm Broomhead
Carolyn Hewson
Susan Kilsby
Shriti Vadera
Independent
Status
Attendance
Chair of the Board
Member for whole period
Yes
Yes
Yes
Yes
Member for whole period
Member until 7 November 2019
Member from 1 April 2020
Member for whole period
4/4
4/4
2/2
1/1
4/4
Our aspiration is to achieve gender balance on our Board,
among our senior executives and across our workforce by
CY2025. We therefore welcome the ongoing Hampton-Alexander
initiative for all FTSE 100 Boards to have at least 33 per cent
female representation by the end of CY2020, and the objective
of having at least 30 per cent of Directors of each gender in
accordance with the ASX Fourth Edition. Our aspiration includes
a fixed target of maintaining the level of Board diversity above
33 per cent, and we will be aligned with this requirement
from 1 October 2020. We therefore satisfy the guidance in
both the ASX Fourth Edition and also the UK Code. In addition,
as at 30 June 2020, gender diversity among senior management
(defined as the ELT plus Company Secretary and their direct
reports) was 31 per cent.
We also welcome the final Parker Report into ethnic diversity
of UK boards and continue to seek additional ethnic diversity
on our Board, and throughout BHP. On our Board we meet
the target of having ‘at least one Director of colour by 2021’
as recommended by the Parker Review.
Part of the Board’s role continues to be to consider and approve
BHP’s measurable objectives for workforce diversity each
financial year and to oversee our progress in achieving those
objectives. For more information, including our progress against
our FY2020 measurable objectives and our employee profile
more generally, refer to sections 1.6.1 and 1.6.2.
Renewal and re-election
The Board adopted a policy in 2011, consistent with the UK
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.
When considering new appointments, the Board’s Nomination
and Governance Committee takes the following approach:
Committee activities in FY2020
Succession planning processes
• CEO succession
• Implementation of the skills and experience matrix
• Identification of suitable Non-executive Director candidates
• Board and committee succession
• Partnering with new search firms regarding candidate searches
• Technology and mining Non-executive Director search
Evaluation and training
• Board evaluation and Director development
• 2020 training and development program
• Director induction
• Committee assessment
Corporate governance practices
• Independence of Non-executive Directors
• Authorisation of situations of actual or potential conflict
• Advisory Committees
• Corporate Governance Statement
• Governance update – Section 172 mapping
• Implementing provisions from the UK Code and the
ASX Fourth Edition
• Updated Director Deed of Indemnity Insurance and Access
• Updated Terms of Appointment for Directors
• Crisis management
• Update of the Committee Terms of Reference
Policy on inclusion and diversity
The Board and management believe diversity is required
to meet our purpose, which is outlined in section 1.6.1.
Diversity is key to ensuring the Board and its Committees
have the right blend of perspectives so that the Board oversees
BHP effectively for shareholders. In CY2019, we updated the
Nomination and Governance Committee Terms of Reference
to explicitly refer to age, social and ethnic backgrounds and
personal strengths. This is in addition to diversity of gender,
nationality and geography.
128 BHP Annual Report 2020
Board succession
Step 1:
Rigorous approach
Step 2:
Continuous approach
BHP adopts a structured and rigorous approach to Board succession planning and oversees the development
of a diverse pipeline. The Nomination and Governance Committee considers Board diversity, size, tenure and
the skills, experience and attributes needed to effectively govern and manage risk within BHP.
This process is continuous and for Non-executive Directors planning is based on a nine-year tenure as a guide,
allowing the Board to ensure the right balance on the Board between experience and fresh perspectives. It also
ensures the Board continues to be fit-for-purpose and evolves to take account of the changing external
environment and BHP’s circumstances. It also prepares pipelines for Nomination and Governance Committee
membership, considering relevant skills and requirements.
Step 3:
Role description
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 described in the Board Governance
Document and section 2.7.
Step 4:
Selection and appointment
of search firm
Step 5:
Board interviews
Step 6:
Committee
recommendation
Step 7:
Background checks
Step 8:
Letter of appointment
The role description is provided to an external search firm retained to conduct a global search based on the
Board’s criteria.
The shortlisted candidates are considered by the Nomination and Governance Committee and interviewed
by the Chair initially. Meetings for selected candidates are held with each Board member ahead of the Board
deciding whether to appoint the candidate.
The Nomination and Governance Committee recommends the Board appoint the preferred candidate.
The Board, with the assistance of external consultants, conducts appropriate background and reference checks.
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 defines
the role of Directors, including the expectations in terms of independence, participation, time commitment and
continuous improvement. Written agreements are in place for all Non-executive Directors.
A copy of the terms of appointment for Non-executive
Directors is available at bhp.com/governance.
Senior management succession
A robust senior management succession process is also
conducted to ensure pipeline stability for critical roles. A talent
deep dive is conducted by the Board at least once a year to
evaluate these pipelines. Senior management succession is
viewed from a five-year perspective that considers the readiness
of successors across time horizons, contexts and future capability
demands. Select Board members are involved in the interview
process for executive-level appointments one level below
the CEO, and occasionally for roles two levels below the CEO.
BHP has a written agreement with each ELT member setting
out the terms of their appointment. Further information about
CEO and ELT succession is set out in sections 2.1 and 2.5.
Training and development in FY2020
Director induction, training and development
Upon appointment, each new Non-executive Director
undertakes an induction program tailored to their needs.
A copy of an indicative induction program is available
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 matters of a business nature, including
environmental, social and governance matters and provides
updates on BHP’s assets, commodities, geographies and
markets. Programs are designed and periodically reviewed
to maximise effectiveness, and the results of Director
performance evaluations are incorporated into these programs.
Area
Purpose
FY2020 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.
During FY2020, several site visits were cancelled
due to COVID-19 restrictions.
These sessions and site visits also allow an opportunity to discuss
in detail the risk environment and the potential for impacts on
the achievement of our purpose and strategy. For information
on the management of principal risks, refer to section 1.5.4.
Throughout the year, the Chair discusses development areas
with each Director. Board Committees review and agree
their needs for more briefings. 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. This approach also ensures a coordinated
process on succession planning, Board renewal, training and
• Strategy day with the ELT
• Climate change sessions
• Briefing on ESG issues from senior investor representative
• WAIO deep dive
• BMA, Metallurgical Coal, Australia (Group Chair only)
• Jansen, Potash, Canada
• Nickel West, Nickel, Australia
• NSWEC, Thermal Coal, Australia
• Olympic Dam, Copper, Australia
• Santiago office and Escondida, Copper, Chile (Group Chair only)
development and committee composition. These processes are
all relevant to the Nomination and Governance Committee’s role
in identifying appropriate Non-executive Director candidates.
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 they are aware of matters to be considered.
BHP Annual Report 2020 129
Strategic ReportRemuneration ReportDirectors’ ReportFinancial StatementsAdditional informationShareholder informationGovernance at BHP2 2.9 Nomination and Governance Committee Report continued
Independence
The Board is committed to ensuring a majority of Directors
are independent. The Board considers that all of the current
Non-executive Directors, including the Chair, are independent.
hold or held positions, and has concluded that 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.
Process to determine independence
The Board has adopted a policy that it uses to determine the
independence of its Directors. This determination is carried out
upon appointment, annually and at any other time where the
change in circumstances of a Director warrant reconsideration.
A copy of the policy on Independence of Directors
is available at bhp.com/governance.
Tenure
At the end of FY2020, Malcolm Broomhead, who was appointed
in March 2010, Shriti Vadera, appointed in January 2011 and
Lindsay Maxsted, appointed in March 2011, had each served on
the Board for more than nine years. The Board does not believe
their tenure interferes with their ability to act in the best interests
of BHP. 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. The Board was comfortable extending
Mr Broomhead’s tenure for another year from the FY2020 AGMs
in order to provide continued access to his corporate memory
and his extensive experience in the mining sector. Mr Maxsted
will retire on 4 September 2020, having completed the handover
of the Risk and Audit Committee Chair position to Terry Bowen,
and seen through the Group’s FY2020 financial reporting
schedule. As previously disclosed, Ms Vadera is not standing for
re-election at the 2020 AGMs.
Relationships and associations
Lindsay Maxsted was the CEO of KPMG in Australia from 2001
until 2007. The Board believes this prior relationship with KPMG
(BHP’s former external auditor) did 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 while
KPMG was the Group’s auditor. The Board has determined,
consistent with its policy on the independence of Directors,
that Mr Maxsted is independent.
Some of the Directors hold or have previously held positions
in companies that BHP has commercial relationships with.
Those positions and companies are listed in the Director
profiles in section 2.2.1. The Board has assessed the relationships
between the Group and the companies in which our Directors
For example, Malcolm Broomhead and Ian Cockerill were
Directors of Orica Limited (a company BHP has commercial
dealings with) during FY2020. 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 Mr 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
were, during FY2020, and Mr Broomhead remains, able to apply
objective, unfettered and independent judgement and
to act in the best interests of BHP. Mr Cockerill retired from
the Board of Orica in August 2019.
Transactions during FY2020 that amounted to related party
transactions with Directors or Director-related entities under
International Financial Reporting Standards (IFRS) are outlined
in note 32 ‘Related party transactions’ in section 5.
Conflicts of interest
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. It also regularly reviews any situations of actual
or potential conflict that have previously been authorised
by the Board and makes recommendations on whether the
authorisation remains appropriate. In addition, in accordance
with Australian law, if a situation arises for consideration
where 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.
The terms of reference for the Nomination and Governance
Committee are available at bhp.com/governance.
For more information on our approach to risk management,
refer to section 1.5.4.
The RAC met 11 times during FY2020. For information on
Committee members’ qualifications, which include competence
relevant to the mining sector, refer to section 2.2.1.
The terms of reference for the RAC were updated in FY2020
to align with revisions made to the UK Code, the ASX Fourth
Edition, and the revised Remuneration Committee Terms of
Reference that were approved by the Board in August 2019.
2.10 Risk and Audit Committee Report
Role and focus
The RAC assists the Board in monitoring the decisions and
actions of the CEO and the Group and gaining assurance that
progress is being made towards achieving our purpose within
the limits imposed by the Board, as described in the Board
Governance Document.
The RAC oversees:
• 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,
including financial and non-financial risk, 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
130 BHP Annual Report 2020
Risk and Audit Committee members during the year
Name
Independent
Status
Attendance
Lindsay Maxsted (Chair until 1 May 2020)
Terry Bowen (Chair from 1 May 2020) (1)
Ian Cockerill (2)
Anita Frew
Yes
Yes
Yes
Yes
Member for whole period
Member for whole period
Member for whole period
Member for whole period
11/11
11/11
10/11
11/11
(1) Mr Bowen is the Committee’s financial expert nominated by the Board.
(2) Mr Cockerill was unable to attend the RAC meeting scheduled for 15 August 2019 due to the need to fly to London at that time in order to attend another board
meeting in London the following day. As this was his transitional year, there were some inevitable clashes with pre-existing meetings, and this was one that could
not be resolved. Since then, all meetings have been rescheduled where necessary to avoid clashes. Mr Cockerill provided detailed comments to the Chair of the
Committee ahead of the meeting.
Committee activities in FY2020
Integrity of Financial Statements and funding matters
Other governance matters
• Accounting matters for consideration, materiality limits, half-year
and full-year results
• Commentary and explanatory notes to the Financial Statements
• Closure and rehabilitation provision
• Sarbanes-Oxley Act compliance
• Financial governance procedures
• Reserves and resources
• FY2020 portfolio valuation review
• Weighted average cost of capital review
• Funding updates
• Business RAC meetings
• Inter-company loans and group guarantees update
• 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
• Ernst & Young (EY) independence and non-audit services
• EY audit transition
Effectiveness of systems of internal control and risk management
• Material risk reports
• Approach to emerging risks
• Group risk profile
• Viability statement
• Robust risk assessment
• Practical application of the new Risk Framework
• Updates to and review of the Risk Appetite Statement and
confirmation that the Group is operating with due regard
to that appetite
• Monitoring performance against risk appetite through key risk
indicators
• Approval of the internal audit plan, plan principles and regular
reports on progress against the internal audit plan
• Cultural assessments in internal audits
• Matters of note arising from internal audits
• Internal audit reports
• Internal assessments of performance of Internal Audit and Advisory
• Fraud report
• Committee and Group Assurance Officer and Chief Risk Officer
closed sessions
• Ethics and compliance reports, grievance and investigation processes
• Insurance update and Directors’ and Officers’ insurance update
• Tax updates
• Material disputes updates
• Data protection and privacy risk update
• Updates on control framework and risks regarding COVID-19
• Samarco dam failure provision
• Tailings storage facility failure material risk
• Escondida, Cerro Colorado, BMA guarantees
• Revolving credit facility
• Sexual harassment material risk
• Update of the Committee Terms of Reference
• Update of the Internal Audit and Advisory Terms of Reference
• Update of the Provision of Audit and Other Services Policy
by the External Auditor
Fair, balanced and understandable
The RAC confirmed its view to the Board that BHP’s Annual Report
2020 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.
In making this assessment, the RAC considers the substantial
governance framework that is in place for the Annual Report.
This includes management representation letters, certifications,
RAC oversight of the Financial Statements and other financial
governance procedures focused on the financial section
of the Annual Report, together with verification procedures
for the narrative reporting section of the Annual Report.
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.
CEO and CFO assurance
For the FY2020 full year and half year, the CEO and CFO have
certified that BHP’s financial records have been properly
maintained and the FY2020 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.
The CEO and CFO have also 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.
BHP Annual Report 2020 131
Strategic ReportRemuneration ReportDirectors’ ReportFinancial StatementsAdditional informationShareholder informationGovernance at BHP2 2.10 Risk and Audit Committee Report continued
Significant issues
In addition to the Group’s key judgements and estimates disclosed throughout the FY2020 Financial Statements, the Committee
considered these 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.
Specific consideration was given to the most recent short,
medium and long-term price forecasts (including the
significant petroleum price volatility observed to date
in CY2020), expected production volumes and updated
development plans, operating and capital costs, the
impacts of climate change and COVID-19, discount rates
and other market indicators of fair value.
The Committee concurred with management’s conclusion
on significant impairments recognised, including the
impairment of Cerro Colorado, and that no impairment
reversals were appropriate.
Conclusions from these reviews are reflected in
note 11 ‘Property, plant and equipment’ in section 5.
Samarco
dam failure
Closure and
rehabilitation
provisions
Impact of new
accounting
standards
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 Brasil and Vale S.A.
BHP 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 compensation.
BHP Brasil’s loss from Equity Accounted Investments
includes impairments arising from working capital funding
provided to Samarco and revisions to the Samarco dam
failure and Germano decommissioning provisions during
the year ended 30 June 2020.
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, including a reduction
to the discount rates applied.
The Group adopted IFRS 16/AASB 16 ‘Leases’ with effect
from 1 July 2019. The Committee reviewed management’s
analysis of the accounting outcomes and disclosure
requirements for the Group, including the treatment
of leases within the Group’s net debt definitions.
In addition, the Committee:
• considered and approved the early adoption,
for FY2020, of amendments to accounting standards
relating to interest rate benchmark reforms
Impact of
COVID-19
The Committee considered the impacts of the global
COVID-19 pandemic on the Group’s FY2020 financial
reporting, including:
• the recognition and disclosure of costs incurred by
the Group that are directly attributable to COVID-19
Potential direct financial impacts to BHP Brasil
The Committee considered:
• changes to the estimated cost of remediation
and compensatory 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 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 Brasil
(including the decommissioning of the Germano tailings
dam complex) and contingent liabilities disclosed in the
Group’s Financial Statements are appropriate.
For more information, refer to note 4 ‘Significant
events – Samarco dam failure’ in section 5.
Specific consideration was given to the results
of the most recently completed survey data and
characterisation activity, changes to current cost
estimates and the 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 more information, refer to note 14 ‘Closure and
rehabilitation provisions’ in section 5.
• noted that the Group is in the process of evaluating
the implications of the IFRS Interpretations Committee
agenda decision ‘Income Taxes – Multiple tax
consequences of recovering an asset’ and approved
that any changes to the Group’s accounting policy
for income tax will be implemented from 1 July 2020
on a retrospective basis
For more information, refer to note 38 ‘New and
amended accounting standards and interpretations’
in section 5.
• the impact on key judgements and estimates,
particularly those relating to impairment
indicator assessments
The Committee concluded that the management’s
judgements and the disclosure of the COVID-19 directly
attributable costs were appropriate.
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.
The lead audit engagement partners for EY in Australia and
the United Kingdom (together, ‘EY’) were appointed for
commencement from 1 July 2019.
Audit tender and transition
BHP confirms during FY2020 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.
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.
In August 2017, consistent with the Committee’s recommendation,
the Board announced it had selected EY to be the Group’s
auditor from the financial year beginning 1 July 2019, subject to
shareholder approval, which was received at the AGMs in 2019.
During 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.
KPMG was the auditor during FY2019 and FY2018, and EY was
the auditor during FY2020.
132 BHP Annual Report 2020
Evaluation of External Auditor and external audit process
The RAC evaluates the objectivity and independence of the
External Auditor and the quality and effectiveness of the external
audit arrangements. As part of this evaluation, the RAC considers
specified criteria, including delivering value to shareholders
and BHP, and also assesses the adequacy of the external audit
process with emphasis on quality, effectiveness and performance.
It does so through a range of means, including:
• 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 EY teams assess each
other against a range of criteria. The criteria against which
the BHP team evaluates EY’s performance include ethics and
integrity, insight, service quality, communication, 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
• reviewing audit quality inspection reports on EY published
by the UK Financial Reporting Council in considering the
effectiveness of the audit
In addition, the RAC 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.
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 with some services prohibited from being
undertaken, 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. This policy was reviewed
and updated in FY2020, including to reflect only those services
permitted to be provided by the External Auditor in the revised
Ethical Standard published by the UK Financial Reporting Council.
Our policy on Provision of Audit and Other Services by the
External Auditor is available 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 their role. 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
policy that have been ‘pre-approved’ by the RAC.
The categories of ‘pre-approved’ services are:
• Audit 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.
• Audit-related and other assurance services – work that is
outside the scope of the statutory audit but is consistent with
the role of the external statutory auditor, is of an assurance
or compliance nature, is work the External Auditor must
or is best placed to undertake and is permissible under the
relevant applicable standard.
Activities outside the scope of the categories above are
not ‘pre-approved’ and must be approved by the RAC prior
to engagement, regardless of the dollar value involved.
In addition, 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 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) 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 these
services will always be subject to our overriding governance
practices as articulated in the policy.
In addition, the RAC did not approve any services during the
year ended 30 June 2020 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 FY2020 for audit
and other services were US$16.7 million, of which 75 per cent
comprised audit fees (including the US Sarbanes-Oxley Act of 2002
as amended (SOX)), 11 per cent for audit-related fees, 2 per cent
was for tax fees and 12 per cent for all other fees. 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.
Business Risk and Audit Committees
Business Risk and Audit Committees (Business RACs), covering
each asset group, assist management in providing the information
to enable the RAC to fulfil its responsibilities. They are management
committees and perform an important monitoring function
in the governance of BHP. Meetings take place annually as part
of our financial governance framework.
As management committees, the appropriate member of the ELT
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.
Risk function
The Risk function’s role is to create and maintain the Group’s
Risk Framework, and to support, verify, oversee and provide
insight on the effective application of the Risk Framework for
all risks, including strategic, operational and emerging risks.
The RAC assists the Board with the oversight of risk
management, although the Board retains 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, 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 at least
annually to confirm that the Risk Framework continues to be
sound and that BHP is operating with regard to the risk appetite
set by the Board. A review was undertaken during FY2020,
resulting in refinements to BHP’s Risk Framework. For more
information, refer to section 1.5.4.
BHP Annual Report 2020 133
Strategic ReportRemuneration ReportDirectors’ ReportFinancial StatementsAdditional informationShareholder informationGovernance at BHP2 2.10 Risk and Audit Committee Report continued
Internal Audit
The Internal Audit function is carried out by Internal Audit
and Advisory (IAA). IAA provides assurance on 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 effectiveness of the internal audit activities.
The RAC approves the appointment and dismissal of the
Group Assurance Officer and assesses their performance,
independence and objectivity. The position was held
throughout the period by Rama Devarajan who 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, outlined 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 regularly review
these systems for 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. Any material breaches of Our Code,
including breaches of our anti-bribery and corruption
requirements, as well as any material incidents reported
under our ‘speaking up with confidence’ requirements are
reported quarterly to the RAC by the Chief Compliance Officer.
These reports are then communicated to the Board through
the report-out process. In undertaking this role, the RAC reviews:
• procedures for identifying, assessing and managing material
risks and controlling their impact on the Group, and other
stakeholders where relevant, and the operational effectiveness
of these procedures
• processes and systems for managing budgeting, forecasting
and financial reporting
• the Group’s strategy and standards for insurance
• the Group’s standards and procedures for reporting reserves
and resources
• the Group’s standards and procedures for 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
Section 1.5.4 includes a description of the Group’s principal risks
that could result in events or circumstances that might threaten
BHP’s business model, future performance, solvency or liquidity
and reputation and also provides an explanation of how those
risks are managed.
During FY2020, management presented an assessment of the
material 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 assessed 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 2020. There were no
material weaknesses in BHP’s internal controls over financial
reporting identified by management as at 30 June 2020.
BHP has engaged our independent registered public accounting
firm, EY, 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 FY2020 that have materially affected,
or are reasonably likely to materially affect, our internal control
over financial reporting. This includes COVID-19, which only
had a minor impact on internal controls over financial reporting
in relation to both the number and nature of controls that
were impacted.
During FY2020, 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 2020. 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 it files or submits under the
Exchange Act, is recorded, processed, summarised and
reported on a timely basis and this 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 2020, 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. Even effective disclosure controls
and procedures can only provide reasonable assurance
of achieving their control objectives.
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.
The terms of reference for the RAC are available
at bhp.com/governance.
134 BHP Annual Report 2020
2.11 Sustainability Committee Report
Role and focus
The Sustainability Committee assists the Board in overseeing
the Group’s health, safety, environmental and community
(HSEC) performance and governance responsibilities, and the
adequacy of the Group’s HSEC framework.
The Group’s HSEC framework consists of:
• the CEO limits outlined 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 HSEC. HSEC considerations are also taken into
account in employee and executive remuneration. For more
information, refer to Sustainability in section 1.7 and section 3.
The Committee oversees the preparation and presentation of
sustainability disclosures by management. This year, BHP has
included material sustainability content in this Annual Report.
Sustainability Committee members during the year
The Sustainability Committee reviewed and recommended
to the Board the approval of these disclosures in section 1.6
and 1.7 and the sustainability performance data in section 6.6,
along with the Modern Slavery Statement FY2020. These
disclosures identify 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.
Our sustainability reporting, including additional case studies
and a databook of key ESG and sustainability data is available
at bhp.com.
For information on our material exposure to economic,
environmental and social sustainability risks and how we
manage or intend to manage those risks, refer to section 1.5.4.
Activities of the Sustainability Committee
The Sustainability Committee met five times during FY2020
and continued to assist the Board in its oversight of HSEC issues
and performance. The Committee considered the Group’s
approach to climate change throughout the year. More
information on our approach to climate change, is set out in
section 1.7.8. For more information on our approach to tailings
storage facilities, refer to section 1.7.10. The Committee also
continues to monitor our water stewardship work and for
more information on our water stewardship performance,
see section 6.6.
Members of the Sustainability Committee also visited several
sites during FY2020. During these site visits, Committee
members received briefings on 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.
During FY2020, several site visits were cancelled due
to COVID-19 restrictions.
Name
Independent
Status
Attendance
John Mogford (Chair from 7 November 2019)
Malcolm Broomhead (Chair until 6 November 2019)
Ian Cockerill
Gary Goldberg
Committee activities in FY2020
Yes
Yes
Yes
Yes
Member for whole period
Member for whole period
Member for whole period
Member from 1 February 2020
5/5
5/5
5/5
3/3
Assurance and adequacy of HSEC framework
and HSEC management system
Performance
• Key HSEC risks, including tailings storage facility failure,
climate change-related risks, and fatalities
• Audit planning and reporting on HSEC risks and processes
• Contractor management
• Event management solution demonstration
• Review of the HSE function and Group HSE Officer
Compliance and reporting
• Compliance with HSEC legal and regulatory requirements
• Updates on key legal and regulatory changes
• Consideration of threshold for reporting HSEC matters
to the Committee
• Sustainability reporting, including consideration of processes
for preparation and assurance provided by EY
• Social value and ESG metrics
• Performance of BHP on HSEC matters
• Considering proposed HSEC key performance indicators (KPIs)
for Key Management Personnel scorecard and considering
performance against these KPIs
• Monitoring against the FY2018–FY2022 HSEC performance targets
• Update on Samarco remediation and the Fundação Renova
• BHP tailings dam review and actions
• Saraji mine fatality investigation
• Performance and key issues on sustainable development and
community relations, including community issues update
• Social value update, including investor feedback
• Scope 3 emissions goals
• Medium-term operational (Scope 1 and 2) greenhouse gas
emissions target
• Link between climate change performance and
executive remuneration
Other governance matters
• Induction, training and development of Committee members
• Site visits and site visit reports
• Modern Slavery Statement FY2020
BHP Annual Report 2020 135
Strategic ReportRemuneration ReportDirectors’ ReportFinancial StatementsAdditional informationShareholder informationGovernance at BHP2 2.11 Sustainability Committee Report continued
Sustainable development governance
Our approach to HSEC and sustainable development
governance is characterised by:
• the Sustainability Committee assisting the Board to oversee
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
• clear links between executive remuneration and
HSEC performance
2.12 Remuneration Committee Report
Role and focus
The Remuneration Committee assists the Board in overseeing:
• the remuneration policy and its specific application to the
CEO and other ELT members and its general application
to all employees
• the adoption of annual and long-term incentive plans
• the determination of levels of reward for the CEO and
approval of reward for other members of the ELT
• the annual evaluation of the performance of the CEO,
by giving guidance to the Chair
• 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
The Sustainability Committee and the RAC 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.
Remuneration Committee members during the year
For information on the key areas of focus for the Committee,
management and the HSE function and Community
sub-function, refer to section 1.7.
Social investment
We continued to monitor our progress on our social investment
and met our target for investments in community programs.
For more information, refer to section 1.7.9.
The terms of reference for the Sustainability Committee
are available at bhp.com/governance.
The Remuneration Committee met six times during FY2020
and also considered some matters out of session. Susan Kilsby
was appointed Chair of the Remuneration Committee with
effect from 7 November 2019. She served on the Committee
from her appointment to the Board in April 2019, which provided
an appropriate transition to become Chair. She also has relevant
skills and experience, including her current appointment as
the Chair of the remuneration committee of Diageo plc and
as a member of the compensation committee of Fortune Brands
Home & Security Inc. She therefore satisfies the requirement
for the incoming Chair to have served on a remuneration
committee for at least 12 months.
Some of the items the Committee discussed are described
below. For more information on the Committee’s work,
refer to the Remuneration Report in section 3.
The terms of reference of the Remuneration Committee were
updated following the release of the new versions of the UK
Code and the ASX Fourth Edition. In addition, areas in need of
clarification were identified during the recent ASIC Corporate
Governance Taskforce’s review (e.g. how information flows
to the Board).
Name
Independent
Status
Attendance
Susan Kilsby (Chair from 7 November 2019)
Anita Frew
Gary Goldberg
Carolyn Hewson (Chair and member until 7 November 2019)
Dion Weisler
Shriti Vadera
Yes
Yes
Yes
Yes
Yes
Yes
Member for whole period
Member for whole period
Member from 1 February 2020
Member until 7 November 2019
Member from 1 June 2020
Member for whole period
6/6
6/6
3/3
3/3
1/1
6/6
136 BHP Annual Report 2020
Committee activities in FY2020
Remuneration of the ELT and the Board
Other
• Remuneration policy review
• Remuneration of CEO and other ELT members and Group
Company Secretary
• Induction, training and development program
• Board committee procedures, including closed sessions
• Update of the Committee Terms of Reference
• Remuneration arrangements for new ELT members
• Retirement arrangements for former CEO
• Consideration of COVID-19 impacts
• KPIs, performance levels, award outcomes
• FY2021 HSEC scorecard – climate enhanced
• Long-Term Incentive Plan sector peer group review
• Chair fees
Other remuneration matters
• Workforce remuneration and engagement
• Shareplus enrolment update
• Remuneration by gender
• Shareholder engagement
• Corporate Governance Code provisions
Remuneration
Details of our remuneration policies and practices, and the
remuneration paid to the Directors (Executive and Non-executive)
and other members of the Key Management Personnel, are set
out in the Remuneration Report in section 3.
The terms of reference for the Remuneration Committee
are available at bhp.com/governance.
2.13 Risk management
governance structure
Identifying and managing risk are central to achieving our purpose.
For information on our approach to risk and risk governance, including
the role of the BHP Board and its Committees, refer to section 1.5.4.
2.14 Management
Below the level of the Board, key management decisions are
made by the CEO, the ELT, management committees and members
of management who have delegated authority.
Management committees consider BHP’s risks and controls.
Strategic risks (both threats and opportunities) arising from
changes in our business environment are regularly reviewed
by the ELT and discussed by the Board.
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 considers
the performance of executives against criteria designed to capture
‘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.
A performance evaluation as outlined was conducted for all members
of the ELT during FY2020. For the CEO, the performance evaluation
was led by the Chair 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
• Purpose is to assist the CEO in monitoring
and overseeing the management of the
financial risks faced by BHP, including:
• commodity price risk
• counterparty credit risk
• currency risk
• financing risk
• interest rate risk
• insurance
Group Investment Review Committee
Disclosure Committee
• Purpose is to assist the CEO 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 optimised,
on a risk adjusted basis
• Purpose is to assist the 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 2020 137
Strategic ReportRemuneration ReportDirectors’ ReportFinancial StatementsAdditional informationShareholder informationGovernance at BHP2 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 at bhp.com.
To receive email alerts of news releases, subscribe at bhp.com.
2.17 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 Securities
Exchange Commission (SEC) in the United States, is summarised
in this Corporate Governance Statement, the Remuneration Report,
the Directors’ Report and the Financial Statements.
The UK Code (available at: frc.org.uk) and the ASX Principles and
Recommendations (available at www.asx.com/au) 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. The Board considers that
during FY2020 it applied the Principles and complied with the
provisions set out in the 2018 edition of the UK Code, and complied
with the ASX Third Edition, with no exceptions.
Our Appendix 4G, which summarises our compliance with
the ASX Third Edition is available 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.
Under NYSE rules, foreign private issuers such as BHP are required
to disclose any significant ways 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 NYSE-Listed Company Manual followed
by US companies, a 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 reported to shareholders.
2.15 Our conduct
Our Charter and 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 legally compliant working
environment and includes our policies on speaking up,
anti-bribery and corruption.
Our Charter and Our Code are accessible to all our people
and external stakeholders 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 their concerns through
a number of channels, including through line leaders. Anyone,
including external stakeholders and the public, can lodge a concern,
in the form of a report, either online in EthicsPoint, or via the 24-hour,
multilingual call service. Reporters of misconduct can choose
to raise their concern anonymously.
Reports received are assigned by the Ethics Team to an investigator,
line leader or team for investigation or resolution as appropriate,
in accordance with internal policy and process documents.
Both the reporting and investigations processes are transparent
and summary information is accessible to all BHP employees
via BHP’s intranet.
Reports raised via EthicsPoint provide valuable insight into culture
and organisational learning. All significant Code of Conduct
matters, and key trends from investigations, are reported to the
RAC. These are then reported to the Board as part of its report-out
as set out in section 2.5. The most serious breaches of Our Code
are also reported to the Integrity Working Group, which is
accountable for oversight of the operational effectiveness of the
Investigations Framework, including oversight of investigations
completed by the Central Investigations team. The Integrity
Working Group is chaired by the Chief Compliance Officer and
comprises of a number of Senior Leaders across BHP.
2.16 Market disclosure
We have disclosure controls in place for periodic disclosures,
including the Operational Review, our results announcements,
debt investor documents (such as the prospectus for the Euro
or Australian Medium Term Notes) and Annual Report documents,
which must comply with relevant regulatory requirements.
Additional details about these verification processes can be found
in the Periodic Disclosure – Disclosure Controls document at
bhp.com. To safeguard the effective dissemination of information,
we have developed mandatory minimum performance
requirements for market disclosure, which outline how we identify
and distribute information to shareholders and market participants
and sets out the role of the Disclosure Committee in managing
compliance with market disclosure obligations. Further, where
an announcement is determined to be material by the Disclosure
Committee, the Board receives a copy promptly after it has been
made. Where BHP gives a new and substantive investor or analyst
presentation, it releases a copy of the presentation materials on the
ASX Market Announcements Platform ahead of the presentation.
As a result of COVID-19, we introduced extra monitoring and
disclosure controls. These included: increasing the regularity
and breadth of information gathered from management
(including Finance, Supply, Marketing, Legal, and Operational
teams); more regular updates to the Disclosure Committee;
and more regular discussions with UBS (our corporate broker
in the UK), as well as our Investor Relations team. This enabled
BHP to assess the materiality of developments and stay across
market expectations, dynamics and emerging best practice.
A copy of the market disclosure and communications
document is available at bhp.com/governance.
138 BHP Annual Report 2020
Compliance with the UK Corporate Governance Code 2018
This section describes how BHP has applied the Principles of the UK Code
Board leadership and company purpose
Composition, succession and evaluation
– Long-term sustainable success – we believe we put
the long-term sustainable success of BHP at the centre
of what we do (section 1.4.2 and 1.4.3).
– Purpose, values, strategy and culture – we renewed
our purpose in FY2019 to better capture the aspirations
of all our stakeholders (sections 1.4.1, 1.4.2, 1.4.3,
1.6 and 1.7).
– Performance measurement and control framework
(sections 1.4 and 6.6).
– Responsibilities to shareholders and stakeholders
(sections 1.4.2, 1.4.3, 1.6.1 and 2.6).
– Workforce policies and practices (sections 1.4.2, 1.4.3,
1.6.1, 1.6.2 and 2.6).
– Appointments – we have a rigorous process in place
for Board appointments, and to consider succession
having regard to diversity of gender, social and ethnic
backgrounds and personal strengths (section 2.9).
– Skills matrix – we have an appropriate mix of skills,
experience and knowledge on the Board and in 2018
revised our skills matrix (section 2.7). Section 2.9
provides information on tenure and Board renewal.
– Director review – the contribution of each Director
to the work of the Board and its Committees, the
expectations of Directors as specified in BHP’s
governance framework and the performance of
Directors. The review confirmed that each Director
continues to contribute effectively (section 2.8).
Division of responsibilities
– Chair of the Board – the Chair leads the Board and
is responsible for its effectiveness and the effective
contribution from all Non-executive Directors
(section 2.3).
– Board composition – the Board operates effectively
with the appropriate balance of executives and
Non-executives and believes the roles of the Chair
and the CEO should be separated (section 2.3).
– Non-executive Directors have sufficient time to meet
their responsibilities – when we appoint new Directors
we ensure they have sufficient time to undertake
their responsibilities and are able to offer challenge,
strategic guidance and specialist advice (section 2.2.1).
– Time and resources – the Board ensures it has
the necessary time, resources, policies and processes
in place as part of its evaluation process (section 2.8).
Audit Risk and Internal Control
– Internal and external audit independence –
we understand the importance of ensuring these lines
of defence remain independent (section 2.10).
– Fair balanced and understandable – the Board presents
a fair balanced and understandable assessment of BHP’s
position and prospects (section 2.10).
– Management and oversight of risk – our risk and
control environment is monitored and overseen by the
Risk and Audit Committee. The Board, Risk and Audit
Committee, and Sustainability Committee considered
emerging and principal risk during the year (sections
1.5.4, 2.5, 2.10 and 2.11).
Remuneration
– Policies and practices – remuneration is designed to
support our strategy and long-term sustainable success
(section 3).
– Formal and transparent procedure – we have formal and
transparent procedures in place, and routinely engage
with investors for their feedback (section 2.6.1).
– Use of discretion – we have used discretion to adjust the
formulaic remuneration outcomes (section 3).
2.18 Additional UK disclosure
The information specified in the UK FCA Disclosure 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 3 September 2020 and signed on its behalf by:
Ken MacKenzie
Chair
3 September 2020
BHP Annual Report 2020 139
Strategic ReportRemuneration ReportDirectors’ ReportFinancial StatementsAdditional informationShareholder informationGovernance at BHP2 140 BHP Annual Report 2020
140 BHP Annual Report 2020
BHP Annual Report 2020 141
Section 3Remuneration ReportIn this section3.1 Annual statement by the Remuneration Committee Chair3.2 Remuneration policy report Remuneration policy for the Executive Director Remuneration policy for Non-executive Directors3.3 Annual report on remuneration Remuneration for the Executive Directors (the CEOs) Remuneration for other Executive KMP (excluding the CEOs) Remuneration for Non-executive Directors Remuneration governance Other statutory disclosuresThis 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 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 FY2020 comprised the following roles: all Non-executive Directors, the CEO, the Chief Financial Officer, the President Minerals Australia, the President Minerals Americas, and the President Petroleum.The following individuals have held their positions and were KMP for the whole of FY2020, unless stated otherwise:• Mike Henry, CEO and Executive Director (from 1 January 2020) and President Minerals Australia (to 31 December 2019)• Andrew Mackenzie, CEO and Executive Director (to 31 December 2019)• Peter Beaven, Chief Financial Officer• Daniel Malchuk, President Minerals Americas• Geraldine Slattery, President Petroleum• Non-executive Directors - see section 3.3.14 for details of the Non-executive Directors, including dates of appointment or cessation (where relevant)AbbreviationItemAGMAnnual General MeetingCDPCash and Deferred PlanCEOChief Executive OfficerDEPDividend Equivalent PaymentDLCDual Listed CompanyELTExecutive Leadership TeamGHGGreenhouse GasGSTIPGroup Short-Term Incentive PlanHPIFHigh Potential Injury FrequencyHSECHealth, Safety, Environment and CommunityIFRSInternational Financial Reporting StandardsKMPKey Management PersonnelKPIKey Performance IndicatorLTIPLong-Term Incentive PlanMAPManagement Award PlanMSRMinimum Shareholding RequirementOIFOccupational Illness FrequencyROCEReturn on Capital EmployedSTIPShort-Term Incentive PlanTRIFTotal Recordable Injury FrequencyTSRTotal Shareholder Return 3.1 Annual statement by the Remuneration Committee Chair
The Committee believes the remuneration
outcomes for FY2020 reflect an appropriate
alignment between pay and performance
during the year and are also fair in terms
of the global context in which decisions
have been made.
Susan Kilsby
Chair, Remuneration Committee
Dear Shareholders,
I am pleased to introduce BHP’s Remuneration Report for the
financial year to 30 June 2020, which is my first since assuming
the Remuneration Committee Chair role, and I am looking forward
to engaging with shareholders as the Committee undertakes its work.
During FY2020, the Committee has continued its focus on achieving
remuneration outcomes that fairly reflect the performance of BHP,
and which are aligned to the interests of shareholders and other
key stakeholders.
FY2020 has been an unprecedented year, with the COVID-19
pandemic having widespread impacts on lives, society and the
global economy. In the face of this, BHP employees have rallied in
line with the Group’s purpose and values, working very effectively
to keep the business running and performing strongly, and keeping
each other safe.
I would like to thank my predecessor as Remuneration Committee
Chair, Carolyn Hewson, for her leadership and for establishing a
Committee with a strong foundation of policies, principles and
practices upon which our decisions are able to be made. This is
especially so in the unpredictable times in which we find ourselves.
We have also made other changes to the Committee this year. New
Directors Gary Goldberg and Dion Weisler have joined Anita Frew
and Shriti Vadera on the Committee and I would like to thank all
members for their contributions.
Remuneration policy
The Committee sought and received approval from shareholders
at last year’s AGMs for a revised remuneration policy, with almost
94 per cent of votes in favour, and we believe the policy will serve
stakeholders well. The key changes approved for the CEO were:
• A change in the balance of incentive arrangements comprising:
– a significantly reduced LTIP grant size of 200 per cent of base
salary (on a face value basis), down from 400 per cent
– a CDP with a longer term focus than the former STIP. The CDP
outcome is delivered one-third as a cash award, with two-thirds
delivered in equity, as two-year and five-year deferred share
awards each of equivalent value to the cash award. This aligns
participants’ incentive remuneration with performance over
the short, medium and long-term
These two changes in combination did not materially alter the
target value or vesting profile of incentive remuneration, but
resulted in a 12 per cent reduction in the maximum possible
remuneration for a year.
• A significant reduction in the pension contribution rate to
10 per cent of base salary, down from 25 per cent (noting that
the estimated workforce average is approximately 11.5 per cent
of base salary). As a result of this change, fixed remuneration for
the CEO role has been reduced by 12 per cent and overall target
remuneration reduced by 4 per cent.
• The introduction of a two-year post-retirement
shareholding requirement.
While these changes took effect from 1 July 2019, existing short-
and long-term equity awards made under prior policies remain
on foot and will vest, subject to existing service and performance
conditions, over coming years.
We were also pleased to again receive strong support for our
overall Remuneration Report from shareholders at the 2019
AGMs, with approximately 96 per cent voting ‘for’ the report.
This continues our strong shareholder support over the past five
years, where on average almost 97 per cent have voted in favour.
The Committee strives to implement the remuneration policy
in a considered way:
• We test the CEO’s remuneration against CEO roles in other global
companies of similar complexity, size, reach and industry. The
remuneration also reflects the CEO’s responsibilities, location,
skills, performance, qualifications and experience. This detailed
benchmarking ensures BHP’s executive remuneration packages
are competitive enough to attract and retain talented executives,
without being excessive. External benchmarking shows the CEO’s
target remuneration package is below the average for similar
global companies and importantly, can only be realised as actual
remuneration if performance targets are met.
• The CEO’s remuneration is deliberately tied to the performance
of the business, with the majority of remuneration delivered in
BHP shares, not cash. The CEO also has a minimum shareholding
requirement of five times pre-tax base salary, which continues for
two years post-retirement. This aligns the CEO to the experience
of BHP’s shareholders.
• The exercise of reasonable downward discretion 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, and this remains unchanged.
The Committee is focussed on having and applying a remuneration
policy and approach that supports the Group’s strategy and enables
us to attract, retain and motivate the executives critical to delivering
the best outcomes for all of BHP’s stakeholders. In addition, the
Committee is cognisant of the need to navigate the priorities
of differing jurisdictions.
COVID-19
In early 2020, BHP began to experience the impacts of the
COVID-19 pandemic. All BHP employees have come together as
one team to deal with the issues faced and despite the challenges,
BHP’s results have been strong. The CEO and other ELT members
have provided strong and effective leadership through this period,
and the Committee is proud of the way BHP’s employees have
found new ways of working, collaborated to solve problems,
supported each other and their communities, and aligned
around a common goal.
Despite the challenges the COVID-19 pandemic has presented,
in FY2020 BHP has not needed to furlough any employees
without pay, has not sought any government assistance, and
did not raise additional equity. In addition, BHP’s strong, safe
operational performance through this year, together with solid
profitability, enabled the Board to announce a robust final dividend
payable to shareholders in September 2020. This follows a
record interim dividend paid to shareholders in March 2020,
and continues the delivery of strong and consistent returns
to shareholders. The COVID-19 pandemic increased costs and
reduced volumes during FY2020, which negatively impacted
executive remuneration outcomes.
142 BHP Annual Report 2020
During the COVID-19 pandemic, BHP has been especially conscious
of contributing to the communities in which we operate, by doing
all it can to keep employees, their families and their communities
safe and healthy. BHP took action to slow the spread of COVID-19
into the workforce by investing in more transportation capacity,
restricting travel to the operations and protecting at-risk workers.
BHP has also created hundreds of operational jobs across our
Minerals Australia business, funded local health and social
programs in the communities where BHP operates, and for the
Company’s small, local and Indigenous suppliers, BHP reduced the
time taken to pay their invoices to help address the financial stress
they might otherwise face as a result of the pandemic.
Decisions and activities of the Committee
A key element of the Committee’s work during the year was the
remuneration implications of CEO succession. Mike Henry was
appointed CEO and Executive Director effective 1 January 2020.
Mike’s fixed pay on appointment was set at US$1.870 million per
annum, which included a base salary of US$1.700 million per
annum plus a pension contribution of 10 per cent of base salary.
This level of fixed pay was a reduction of 12 per cent from
Andrew Mackenzie’s fixed pay of US$2.125 million per annum.
Mike participates in the CDP and LTIP in accordance with the
approved remuneration policy.
Andrew Mackenzie stepped down as CEO and a Director of the
Group on 31 December 2019, and he retired from BHP on
31 March 2020. The terms of Andrew’s departure announced
on 23 December 2019 reflected the Group’s remuneration
policy and the rules of our incentive arrangements and leaving
entitlements as approved by shareholders. Further information
in respect of this is provided in sections 3.3.13 and 3.3.24.
Other key decisions and activities of the Committee during
FY2020 included:
• Completing the 2019 review of the remuneration policy and
seeking and gaining the approval of shareholders at the 2019 AGMs
• Considering remuneration for other members of the ELT and the
Group Company Secretary
• Aligning the determination of CDP equity award sizes
to a 12-month pricing approach, also used for LTIP awards,
to minimise potential volatility over time
• Setting and reviewing outcomes against performance measures
and conditions of relevant incentive plans
• Redesigning, with the support of the Sustainability Committee,
the HSEC component of the CDP scorecard to give greater
weight and transparency to climate change
• Reviewing the fee for the BHP Chair
• Reviewing and adopting changes and improvements flowing
from regulatory requirements and guidance, which in turn helps
us improve our processes and approaches
• Engaging with shareholders and other key stakeholders
• Undertaking regular reviews of workforce engagement,
workforce remuneration and related policies, remuneration
by gender and the annual Shareplus enrolment update
CEOs’ remuneration
The scorecard against which the CEO’s annual performance is
assessed comprises stretching performance measures, including
HSEC, financial and individual performance elements. For FY2020,
the Remuneration Committee has assessed Mike Henry’s and
Andrew Mackenzie’s performance and determined CDP outcomes
of 96 per cent for each of them, against the target of 100 per cent
(and the maximum of 150 per cent), with the outcomes prorated
to reflect their periods as CEO.
FY2021 CEO remuneration
These outcomes took into account BHP’s strong HSEC performance
during the year, with no fatalities recorded, and improvements in all
key health and safety indicators, while environment and community
outcomes were broadly in line with expectations. Financial and
operating performance was strong, yet fell slightly short of the
stretching targets set at the commencement of the year.
While the COVID-19 pandemic impacted BHP, society and the global
economy, the Group maintained continuity of operations while
keeping employees healthy and safe. Despite this, there were
significant costs and other impacts of COVID-19 to BHP’s financial
results for FY2020. The direct costs have been recorded as an
exceptional item in the financial statements. Nevertheless, the
Committee concluded that, while these COVID-19 related costs
were outside the control of management, they, together with the
volume impacts of COVID-19, should flow through to the financial
measures for CDP scorecard purposes, thereby reducing the
remuneration outcome for executives from what they would have
otherwise been. The Committee considered this was appropriate
in light of the global impacts of the COVID-19 pandemic.
The Committee also considered each of the CEOs’ performance
against their individual objectives. For Mike, this included assuming
the CEO role, redefining and restructuring the ELT, enhancing the
performance improvement focus, strategy review, portfolio value
and options analysis, accelerating gender balance aspirations, and
the work of the Tailings Dams Taskforce. For Andrew, this included
enhancing the value of the portfolio, maximising performance
options, and maintaining a robust ELT succession slate. The
Committee considered both Mike’s and Andrew’s performance
against their individual objectives to be in line with target.
While the CEOs’ scorecard outcomes were determined at
96 per cent of target and the scorecard outcomes for other
Executive KMP were on average marginally ahead of target,
the short-term incentive pool applicable to the majority of
BHP employees below the ELT level was above target. This was
considered appropriate and due recognition, given the excellent
performance across BHP’s whole workforce in the face of the
COVID-19 pandemic, where, despite this, strong safety performance
and operational continuity was achieved during FY2020.
The vesting outcome for the 2015 LTIP against the relative TSR
performance conditions was 48 per cent, and this is the first
vesting under the program since 2014. BHP outperformed the
sector peer group significantly, but did not meet the performance
threshold for vesting against the MSCI World index. This
48 per cent level of vesting is aligned with the long-term average
vesting under the LTIP since its inception 16 years ago. Consistent
with prior practice, the Board and Committee has conducted a
holistic review of business performance over the prior five years
since grant to ensure this level of vesting was appropriate.
Further details in respect of overall remuneration outcomes for the
year for the CEOs, together with information on how the outcomes
are aligned to performance during FY2020, are provided in section
3.3. As at the date of this report, Mike’s shareholding meets the
minimum shareholding requirement of five times pre-tax base salary.
For FY2021, the Committee determined that Mike’s base salary
remains unchanged at US$1.700 million per annum, as it was at the
time of his appointment. In addition, the other components of his
total target remuneration (pension contributions, benefits, CDP and
LTIP) also remain unchanged. A summary of Mike’s arrangements
for FY2021 is set out below.
Fixed remuneration
CDP
LTIP
• Base salary US$1.700 million per annum.
• No change to base salary.
• Pension contribution 10 per cent
of base salary.
• Target cash award of 80 per cent of base
salary (maximum 120 per cent ).
• Plus two awards of deferred shares each
of equivalent value to the cash award,
vesting in two and five years, respectively.
• The annual LTIP grant is based on a face
value of 200 per cent of base salary.
• Our LTIP awards have rigorous relative
TSR performance hurdles measured
over five years.
• Three performance categories:
– HSEC – 25 per cent
– Financial – 50 per cent
– Individual performance – 25 per cent
BHP Annual Report 2020 143
Strategic ReportGovernance at BHPDirectors’ ReportFinancial StatementsAdditional informationShareholder informationRemuneration Report3
We have also addressed last year’s commitment to clarify and
strengthen the link between executive remuneration and climate
change for FY2021. The weighting on climate change is now
10 per cent of the 25 per cent HSEC weighting in the CDP
scorecard, which compares to circa 4 per cent allocated to
climate change in the prior STIP, and we have enhanced the
disclosure of climate change-related performance targets.
Further details are set out in section 3.3.9.
Mike is BHP’s only Executive Director, however, the Committee
has also reviewed the base salaries and total target remuneration
packages for other Executive KMP and determined that there would
be no increases to base salaries as a consequence of that review,
and that other aspects of their remuneration arrangements would
remain unchanged.
Remuneration outcomes for the Chair
and Non-executive Directors
Fees for the Chair and Non-executive Directors are reviewed
annually and are benchmarked against peer companies. No
changes to the Chair’s fee will be made for FY2021. This follows
a review in 2017, where a decision was made to reduce the Chair’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
Chair and Non-executive Directors, their fees had remained
unchanged since 2011.
Summary
With the COVID-19 pandemic this year, FY2020 has presented
many challenges, not only for BHP, but also for many other
companies, governments, employees, families and communities
across the world. On behalf of the Remuneration Committee,
I would like to recognise the hard work, dedication and sacrifices
of all of our employees. They have aligned around a common cause,
and through their steadfast commitment, they have remained safe
and healthy, continued to support their communities, and enabled
BHP to generate strong results for all stakeholders.
The Committee believes the remuneration outcomes for FY2020
reflect an appropriate alignment between pay and performance
during the year and are also fair in terms of the global context
in which decisions have been made. We are confident that
shareholders will recognise this as a continuation of our long-held
approach. We look forward to ongoing dialogue with, and the
support of, BHP’s shareholders, and I very much look forward to
meeting shareholders face-to-face when once again we are able
to do so. As always, we welcome your feedback and comments
on any aspect of this Report.
Susan Kilsby
Chair, Remuneration Committee
3 September 2020
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). Under Australian legislation, shareholders also have the opportunity to vote on our remuneration policy in conjunction with the
broader Remuneration Report, each year at the AGMs as it applies to all KMP under a non-binding advisory vote. Our remuneration policy,
which was approved by shareholders at the 2019 AGMs, has not changed and is repeated below.
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.
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.
Pension contributions (2)
Provides a market-competitive level
of post-employment benefits
provided to attract and retain a
high-quality and experienced CEO.
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 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.
Maximum (1)
8% increase per annum
(annualised) or inflation
if higher in Australia.
A pension contribution
rate of 10% of base
salary applies.
144 BHP Annual Report 2020
Remuneration component
and link to strategy
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.
CDP
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.
Maximum (1)
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.
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.
Operation and performance framework
• 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.
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 Group’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 in section 3.2.2.
BHP Annual Report 2020 145
Strategic ReportGovernance at BHPDirectors’ ReportFinancial StatementsAdditional informationShareholder informationRemuneration Report3 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.
Maximum (1)
Maximum award
Face value of 200%
of base salary.(6)
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 in section 3.2.2.
(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 that 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) Pension contributions maximum column wording has been updated to reflect the leadership transition of Executive Director and CEO on 1 January 2020 and the
current application of policy with respect to pension contribution rate for Mike Henry. The FY2019 remuneration report policy table wording reflected the application
of Andrew Mackenzie’s contribution rate: ’For the existing CEO, the current pension contribution rate of 25 per cent of base salary will reduce as follows: 25 per cent
of base salary to 30 June 2020; 20 per cent of base salary from 1 July 2020; 15 per cent of base salary from 1 July 2021; 10 per cent of base salary from 1 July 2022
onwards. For a new appointment, the pension contribution rate will be 10 per cent of base salary immediately.’
(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 made in late CY2019 was based on 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
• 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 2020
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
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 January 2020 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.
Remuneration mix for the CEO
Minimum
100%
2,040
Target
Maximum
27%
17%
18%
36%
19%
7,514
18%
36%
29%
11,560
0
1,000
2,000
3000
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 (10 per cent of base
salary) and other benefits (notional 10 per cent of base salary).
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$13.260 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.
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 2020 147
Strategic ReportGovernance at BHPDirectors’ ReportFinancial StatementsAdditional informationShareholder informationRemuneration Report3 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 12 months’ notice for voluntary resignation (1).
The table below sets out the basis on which payments on loss of office may be made.
Voluntary resignation
Termination for cause
Leaving reason (2) (3)
Death, serious injury, illness,
disability or total and
permanent disablement
Cessation of employment
as agreed with the Board (4)
• No payment will be made.
• Paid for a period of up to six
months, after which time
employment may cease.
• Paid as a lump sum for the
notice period or progressively
over the notice period.
• No contributions will
be provided.
• Paid for a period of up to six
months, after which time
employment may cease.
• Paid as a lump sum for the
notice period or progressively
over the notice period.
Base salary
Pension
contributions
Benefits
• Paid as a lump sum
for the notice period
or progressively over
the notice period.
• Paid as a lump sum
for the notice period
or progressively over
the notice period.
• 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 the 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.
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.
• 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 the 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 to pay and/or
award an amount in respect
of the CEO’s performance
for that year.
• The Committee has discretion
to pay and/or award an amount
in respect of the CEO’s
performance for that year.
• Unvested two-year CDP/STIP
• 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.
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) Notice period for voluntary resignation updated to reflect the terms of the new Executive Director and CEO employment contract effective on 1 January 2020.
(2) 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).
(3) 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 prorated (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
(4) 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 2020
Remuneration policy for Non-executive Directors
Our Non-executive Directors are paid in line with the UK Corporate Governance Code (2018 edition) 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
• The Chair is paid a single fee for all responsibilities.
• Non-executive Directors are paid a base fee and relevant committee membership fees.
• Committee Chairs 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 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).
Maximum (1)
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 that 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 at bhp.com. 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 at bhp.com).
BHP Annual Report 2020 149
Strategic ReportGovernance at BHPDirectors’ ReportFinancial StatementsAdditional informationShareholder informationRemuneration Report3 3.3 Annual report on remuneration
This section of the Report shows the impact of the remuneration policy in FY2020 and how remuneration outcomes are linked
to actual performance.
Remuneration for the Executive Directors (the CEOs)
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
received, rather than a figure calculated in accordance with IFRS (which is detailed in note 24 ‘Employee share ownership plan’ section 5).
As Mike Henry assumed the role of CEO and became an Executive Director on 1 January 2020, the FY2020 actual remuneration shown
relates to the period 1 January to 30 June 2020. The FY2020 actual remuneration for Andrew Mackenzie relates to the period 1 July to
31 December 2019, on which date he ceased to be CEO and an Executive Director. The components of remuneration are detailed in the
remuneration policy table in section 3.2.1.
US$(‘000)
Mike Henry
FY2020
Andrew Mackenzie
FY2020
FY2019
Base salary
Benefits (1)
Pension (2)
850
850
1,700
6
55
100
85
213
425
Total
fixed
941
1,118
2,225
CDP/STIP (3)
LTIP (4)
Total
variable
Single total
figure
1,959
1,306 (5)
1,306
3,169
0
0
5,128
1,306
1,306
6,069
2,424
3,531
(1) Includes private family health insurance, spouse/partner business-related travel, car parking and personal tax return preparation in required countries.
(2) Pension contributions for Andrew Mackenzie in FY2019 and FY2020 (until the date he ceased as CEO and Executive Director) were made in accordance with
the remuneration policy approved by shareholders in 2019 (i.e. based on 25 per cent of base salary). Mike Henry’s FY2020 pension contributions were also
made in accordance with the remuneration policy approved by shareholders in 2019 (i.e. based on 10 per cent of base salary which applied for a new Executive
Director appointment). Pension contributions for both were made into the international retirement plan.
(3) FY2020 CDP award is provided one-third in cash and two-thirds in deferred equity (on the terms of the CDP) as shown in the table below. FY2019 STIP award was
provided half in cash and half in deferred equity (on the terms of the STIP) as shown in the table below. No discretion was applied to the STIP awards when determining
vesting of awards in FY2019 or FY2020.
(4) Mike Henry’s LTIP award value is based on the full award he received in 2015 when he was President Coal (prior to becoming and with no proration applied for time as
CEO and Executive Director). The value is based on 48 per cent of the award vesting, including a DEP amount of US$0.548 million paid in shares. The value delivered
through share price appreciation between the date of grant and the vesting date was US$1.410 million. The value of Andrew Mackenzie’s vested LTIP award (which
vested after Andrew retired from BHP) is detailed in section 3.3.24. No discretion was applied to the LTIP awards when determining vesting of awards for FY2020.
(5) Andrew Mackenzie’s prorated CDP award for FY2020 was provided as cash covering the one-third cash component and the two-year deferred equity component.
Nothing has been or will be granted or paid in respect of the remaining one-third, i.e. the five-year deferred equity award.
For Mike Henry, the single total figure of remuneration is calculated on the basis of his appointment on 1 January 2020. There have been
no changes to his base salary, benefit entitlements or pension contributions since that date. For Andrew Mackenzie, the single total
figure of remuneration is calculated on the basis of his period as CEO and Executive Director up until 31 December 2019. There were no
changes to his base salary, benefit entitlements or pension contributions prior to the date of his cessation as CEO and Executive Director.
Details of remuneration received in the period 1 January to 31 March 2020 are set out in section 3.3.24. Changes from prior year
outcomes of CDP/STIP and LTIP are set out below.
Mike Henry
FY2020
Andrew Mackenzie
FY2020
FY2019
CDP/STIP
LTIP
CDP awarded for FY2020 performance. One-third was
provided in cash in September 2020, one-third deferred
in an equity award that is due to vest in FY2023, and
one-third deferred in an equity award that is due to vest
in FY2026.
Prorated CDP awarded for FY2020 performance.
Two-thirds of the award was paid in cash in September
2020 covering the cash and two-year deferred equity
portion. Nothing has been or will be granted or paid in
respect of the remaining one-third of the award i.e. the
five-year deferred equity portion.
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.
Based on performance during the five-year period to
30 June 2020, 48 per cent of Mike’s 192,360 awards
from the 2015 LTIP (granted to him when he was
President Coal before he was appointed CEO and
Executive Director) have vested, and the remaining
awards have lapsed. The value of the vested awards is
inclusive of a DEP which is paid in shares.
Details of Andrew’s vested 2015 LTIP award
(which vested after Andrew retired from BHP)
are set out in section 3.3.24.
Based on performance during the five-year period to
30 June 2019, all of Andrew’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.
150 BHP Annual Report 2020
3.3.2 FY2020 CDP performance outcomes
The Board and Remuneration Committee assessed both CEOs’ CDP outcomes (for the period they were, respectively, in the CEO role)
in light of the Group’s performance in FY2020, taking into account each CEO’s performance against the KPIs in their CDP scorecards.
Despite strong operational and financial performance in FY2020, when assessing performance against the targets set at the
commencement the year the Board and Committee determined that the CDP outcome for Mike Henry for FY2020 is 96 per cent against
the target of 100 per cent (which represents an outcome of 64 per cent against maximum) and that the CDP outcome for Andrew
Mackenzie for FY2020 is also 96 per cent against the target of 100 per cent (which also represents an outcome of 64 per cent against
maximum). The Board and Committee believe these outcomes are appropriately aligned with the shareholder experience and the interests
of the Group’s other stakeholders.
The CEOs’ CDP scorecard outcomes for FY2020 are summarised in the following tables, including a narrative description of each performance
measure and the CEOs’ level of achievement, as determined by the Remuneration Committee and approved by the Board. The level of
performance for each measure is determined based on a range of thresholds (the minimum necessary to qualify for any reward outcome),
target (where the performance requirements are met), and maximum (where the performance requirements are significantly exceeded).
Performance measure
HSEC
Financial
Individual Measures
Total
Weighting for
FY2020
25%
50%
25%
100%
Threshold
Target
Maximum
Mike Henry
Andrew Mackenzie
Percentage outcome
32%
39%
25%
96%
32%
39%
25%
96%
Scorecard outcomes applicable to both Mike and Andrew for their time as CEO.
Scorecard outcome applicable to Mike for his time as CEO.
Scorecard outcomes applicable to Andrew for his time as CEO.
HSEC
The HSEC targets for the CEOs are aligned to the Group’s suite of HSEC five-year public targets as set out in section 1.7. 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
Nil fatalities at operated assets.
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 Group is to continue
to build our focus on fatality prevention and safety through leadership,
verification and effective risk management. Historically, this fatality measure
has had a zero outcome in years where a fatality occurred.
There were no fatalities during FY2020 at operated assets, and accordingly
the maximum outcome against this measure has been awarded.
Measure
outcome
Maximum.
Environmental
and
community
incidents
Nil significant environmental and
community incidents at operated assets.
There were no significant environmental and community incidents during
FY2020 at operated assets. This element carries a lesser weighting than for
fatalities, as there have historically not been as many significant incidents.
Target.
HPIF, TRIF
and OIF
Improved performance compared
with FY2019 results.
Risk
management
Health,
environmental
and
community
and social
value
initiatives
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.
All operated assets to achieve 100% of
planned targets in respect of occupational
exposure reduction, mental health, water,
GHGs, social value plans, quality of life,
community perceptions and community
complaints.
HPIF is a critical lead indicator which provides insight into our performance
on preventing future fatalities. It decreased year-on-year by 23% during
FY2020. TRIF performance in FY2020 of 4.2 is also lower by 11% than the 4.7
recorded in FY2019. In addition, OIF performance in FY2020 of 2.46 is lower
by 7% than the 2.64 recorded last year.
Between
target and
maximum,
closer to
maximum.
All operated assets substantially increased levels of coaching of Field
Leadership, thereby improving the quality of leader engagement, which
exceeded target. The reduction in the rates of identified critical control
failures was ahead of target. The implementation of critical control
observation schedules covering all critical controls and improved discipline
in closing actions created when critical controls have failed were in line
with targets set.
Above target.
Targeted asset level improvements were exceeded for mental health activities
and social value and community plans and activities (which have all been
especially important during the COVID-19 pandemic), and targets were
met in respect of GHG reduction. However, we fell short on occupational
exposure reduction targets and, despite meeting our water withdrawal
reduction target, didn’t complete certain asset level actions regarding our
water stewardship.
Target overall
(i.e. a blend of
above, on and
below target).
The outcome against the HSEC KPI for FY2020 was 32 per cent against the target of 25 per cent. As a Group-level outcome, this applied
to both Mike and Andrew for their time as CEO.
Financial
ROCE is underlying profit after taxation (excluding after-taxation finance costs and exceptional items) divided by average capital employed.
ROCE is the key financial KPI against which CDP outcomes for our senior executives are measured and is, in our view, a relevant measure
to assess the financial performance of the Group for this purpose. While ROCE excludes exceptional items, the Remuneration Committee
reviews each exceptional item to assess if it should be included in the result for the purposes of deriving the ROCE CDP outcome.
When we are assessing management’s performance, we make adjustments to the ROCE 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. Of these, changes in commodity prices have historically been the most material
due to volatility in prices and the impact on Group revenue and ROCE.
BHP Annual Report 2020 151
Strategic ReportGovernance at BHPDirectors’ ReportFinancial StatementsAdditional informationShareholder informationRemuneration Report3
Financial
measure
ROCE
Measure
outcome
Below target.
Scorecard targets
Performance against scorecard targets
For FY2020, the target for ROCE was 19.9%,
with a threshold of 16.3% and a maximum
of 21.1%.
The target ROCE 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 ROCE target
will result in a target CDP outcome. The
threshold and maximum are a fair range of
ROCE outcomes that represent a lower limit
of underperformance below which no CDP
award should be made, and an upper limit
of outperformance that would represent the
maximum CDP award.
Because a material element of stretch
performance is built into the budget
(and hence the ROCE target derived from
the budget), together with physical and
regulatory asset constraints, the
performance range around target is subject
to a greater level of downside risk than there
is upside opportunity. Accordingly, the range
between threshold and target is greater than
that between target and maximum. For
maximum, 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. The Committee retains, and has
a track record of applying, downward
discretion to ensure that the CDP outcome
is appropriately aligned with the overall
performance of the Group for the year, and
is fair to management and shareholders.
ROCE of 16.9 % was reported by BHP for FY2020. Adjusted for the factors
outlined below, ROCE is 18.2%, which is below target. The following
adjustments were made to ensure the outcomes appropriately reflect
the performance of management for the year:
• The impacts of movements in commodities prices and exchange rates
increased ROCE by 1.2%.
• Adjustments for other material items ordinarily made to ensure the
outcomes reflect the performance of management for the year
increased ROCE by 0.3%, mainly due to the exclusion of the impacts
of unusually severe weather events during FY2020.
• Having reviewed the FY2020 exceptional items (as described in note 3
‘Exceptional items’ in section 5), the Committee determined they should
not be considered for the purposes of determining the ROCE CDP
outcome, with the exception of the exceptional item in relation to the
costs of the COVID-19 pandemic on BHP’s FY2020 results. The Committee
concluded that, while this was outside the control of management,
the direct costs and volume impacts of COVID-19 should flow through
to the ROCE outcomes for CDP scorecard purposes. The Committee
considered this was appropriate in light of the global impacts of the
COVID-19 pandemic. This adjustment reduced ROCE by 0.2%. Beyond
this, the Committee concluded that no further action was required
in respect of exceptional items.
The key drivers of the ROCE performance being below target at 18.2% were:
• In Minerals Australia, despite record volumes at Western Australia Iron
Ore, Caval Ridge and Poitrel and record coal mined at Broadmeadow,
production was lower than expected at Western Australia Iron Ore, Coal
and Olympic Dam due mainly to reliability issues and shutdown timing,
together with higher maintenance and contractor costs.
• In Minerals Americas, lower production than expected at Escondida
(despite mill throughput being at record levels) and Pampa Norte due
to unplanned maintenance, equipment failures and lower recoveries,
partly offset by better than expected cost performance.
• In Petroleum, lower market demand for petroleum products resulted
in lower than expected production volumes at Trinidad and Bass Strait,
particularly in the last quarter of FY2020, together with extended
maintenance in Australia impacting volumes, partly offset by better
than expected cost performance.
The outcome against the ROCE KPI for FY2020 was 39 per cent against the target of 50 per cent. As a Group-level outcome, this outcome
applied to Mike and Andrew for their time as CEO.
Individual performance measures for the CEOs
Individual measures for the CEOs are determined at the commencement of the financial year (or at the time of appointment for a new
CEO). 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 CEOs’ individual measures for FY2020 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 tables below.
Mike Henry
Individual
measures
Safety and
sustainability
Individual scorecard targets
Performance against scorecard targets
• Future plan for reduction in near misses.
• Risk management embedded.
• Climate change next steps.
• Near misses reduced significantly in FY2020 from FY2019; analysis
completed and future action plans completed to achieve further
significant reductions.
• Material risks recorded appropriately, and agreed risk appetites being
embedded in the business.
• Next stage of climate change plans delivered.
Measure
outcome
Target.
Performance
• Team restructuring.
• BHP Operating System implementation.
• Gender representation advanced.
Portfolio
• Portfolio value improvement.
• Strategy review improvement.
• Samarco strategy implemented.
• New ELT members appointed, Technology and Transformation
Target.
restructured, World Class Functions benefits accelerated, Operations
Committee established.
• BHP Operating System deployment proceeding according to plan, with
volume and safety benefits delivered, as well as supporting compliance
with COVID-19 protocols.
• Positive improvements in gender representation in the second half, after
a slow start to FY2020. By 30 June 2020 gender diversity had increased
2.0 percentage points to 26.5%, up from 24.5% at 30 June 2019, for a
cumulative increase of 8.9 percentage points from 17.6% at 30 June 2016.
• Significant progress achieved on portfolio enhancement activities
in spite of the challenges faced during the year with COVID-19, social
unrest in Chile and unprecedented market volatility in oil and gas,
including progressing agreed capital and operational options
and projects at Petroleum, Escondida, Western Australia Iron Ore,
Queensland Coal and Olympic Dam.
• Developed an improved review process for our portfolio and strategy
around existing portfolio and growth options, and successfully conducted
a large portion of the process, including significant Board engagement.
The process is ongoing and will complete during 2020.
• While the agreed Samarco strategy has been executed consistent
with the principles to achieve fair and reasonable compensation and
remediation, there have been some delays due to COVID-19 and further
work and focus is required in FY2021. Insurance recoveries have been
progressed, class actions are being actively managed and the first
phase of dam decommissioning has been approved.
Target overall
(i.e. a blend of
above, on and
below target).
Tailings dams
• Tailings Dam Taskforce work.
• Long-term strategy development.
• Delivered the work of the Tailings Dam Taskforce in accordance with
agreed plans, schedules and targets, together with accelerating dam
remediation activities across the Group.
• Developed a long-term tailings management strategy to deliver step
change risk reduction within 10 years.
Target.
152 BHP Annual Report 2020
Andrew Mackenzie
Individual
measures
Performance
• Deliver value through Transformation.
• Risk management embedded.
Tailings dams
• Tailings Dam Taskforce work.
• Long-term strategy development.
Individual scorecard targets
Performance against scorecard targets
Measure
outcome
• BHP Operating System implementation, value chain automation and
Target.
World Class Functions activities on-track.
• Material risks being recorded appropriately, and agreed risk appetites
being embedded in the business.
• Progressed the work of the Tailings Dam Taskforce in accordance with
Target.
agreed plans, schedules and targets.
• Progressed a long-term tailings management strategy to deliver step
change risk reduction within 10 years.
Portfolio
• Maximise the value of the current
• Identified projects and options in Petroleum, Escondida, Western Australia
Target.
portfolio.
• Progress delivery of value and returns
from future options.
• Exploration success.
Iron Ore, Queensland Coal and Olympic Dam progressed according
to plans.
• Future option projects continue to progress well, including identified
options in Petroleum, Copper and Potash.
• Achieved positive exploration outcomes, with extensions to the lives
and reserves of conventional oil and gas fields.
Culture and
capability
• Gender representation advanced.
• Maintain a robust succession slate.
• Notwithstanding positive improvements in gender representation
in the second half, there was a slow start to FY2020 in the first half.
By 31 December 2019 gender diversity had increased to 24.8%,
up from 24.5% at 30 June 2019.
Target overall
(i.e. a blend
of above and
below target).
Social value
• Manage risks to protect operating licence.
• Samarco strategy implemented.
• Create opportunities to enhance
social value.
• A robust slate of potential successors to the CEO role and other ELT roles
has been achieved through a deliberate focus on a strong long-term talent
pool of candidates, evidenced by internal appointments to several key
roles during the year.
• Continued to manage risks by meeting commitments to our workforce,
partners, communities and governments through health and safety, the
public commitment to and implementation of the climate change strategy
including an action plan around our public commitments, and managing
water permits, Native Title agreements and social investments.
• Progress made in implementing the agreed Samarco strategy, however
there were some delays and further work and focus required.
• Continued to work closely with our communities and collaborate with
various local, regional and global stakeholders, new employment models
are building better outcomes for employees, and have a leading position
on social value through placing a high value on the long-term needs of
society and the environment.
Target overall
(i.e. a blend of
above, on and
below target).
Overall, it was considered that the performance of both Mike and Andrew against their individual measures KPI was as expected for their
respective periods as CEO. Accordingly, they were each awarded an outcome of 25 per cent, which is equal to target.
3.3.3 LTIP performance outcomes
The graph below shows BHP’s performance relative
to comparator groups.
LTIP vesting based on performance to June 2020
The five-year performance period for the 2015 LTIP ended on
30 June 2020. Mike Henry’s 2015 LTIP award comprised 192,360
awards (granted as President Coal prior to his appointment as CEO)
and Andrew Mackenzie’s 2015 LTIP award comprised 322,765
awards (reduced from 339,753 awards originally granted, prorated
for time served at the time of departure). Vesting is subject
to achievement of the relative TSR performance conditions
and any discretion applied by the Remuneration Committee
(see section 3.3.5).
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 2015 to 30 June 2020. 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 29.0 per cent over the five-year
period from 1 July 2015 to 30 June 2020. This is above the weighted
median Peer Group TSR of positive 9.6 per cent and below the Index
TSR of positive 38.5 per cent over the same period. This level of
performance results in 48 per cent vesting for the 2015 LTIP award,
and accordingly 48 per cent of Mike Henry’s awards and Andrew
Mackenzie’s retained awards have vested, and 52 per cent have
lapsed. No compensation or DEP was paid in relation to the lapsed
awards. The value of Mike’s vested 2015 LTIP award has been
reported in section 3.3.1 and the value of Andrew’s vested 2015
LTIP award has been reported in section 3.3.24.
BHP vs. Peer Group and Index TSR over the 2015 LTIP cycle
TSR since 1 July 2015 (%)
BHP
Peer Group
Index
(MSCI)
60
40
20
0
-20
-40
-60
2015
2016
2017
2018
2019
2020
Years ended 30 June
BHP Annual Report 2020 153
Strategic ReportGovernance at BHPDirectors’ ReportFinancial StatementsAdditional informationShareholder informationRemuneration Report3 3.3.4 LTIP allocated during FY2020
Following shareholder approval at the 2019 AGMs, LTIP awards (in the form of performance rights) were granted to Mike Henry (in his role
as President Minerals Australia) and Andrew Mackenzie (in his role as CEO) on 20 November 2019. The first LTIP grant to be made to Mike
as the new CEO under the terms of the remuneration policy approved by shareholders in 2019 will be awarded in late CY2020 and will
be made on the reduced 200 per cent of base salary (face value).
The face value and fair value of the awards granted on 20 November 2019 are shown in the table below. The face value of Mike’s award is
350 per cent of his base salary of US$1.100 million at the time of grant. The face value of Andrew’s award is 400 per cent of his base salary
of US$1.700 million.
The fair value of the awards is ordinarily calculated by multiplying the face value of the award by the fair value factor of 41 per cent (for the
current plan design, as determined by the independent adviser to the Committee). The number of LTIP awards for both Mike and Andrew
as detailed below was determined based on the US$ face value of the LTIP awards and calculated using the average share price and
US$/A$ exchange rate over the 12 months up to and including 30 June 2019.
Mike Henry
Andrew Mackenzie
Number of
LTIP awards
Face value
US$(‘000)
Face value
% of salary
Fair value
US$(‘000)
Fair value
% of salary
153,631
271,348 (2)
3,850
6,800
350
400
1,579
2,788
144
164
% of max (1)
100
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 2019 AGMs.
(2) Subsequently reduced to 40,702 awards on a pro rata basis for time served.
Terms of the LTIP award
In addition to those LTIP terms set in the remuneration policy for the CEO approved by shareholders in 2019, the Remuneration Committee
has determined:
Performance period
• 1 July 2019 to 30 June 2024
Performance conditions
• 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)
• Resources (85%): Anglo American, Fortescue Metals, Freeport-McMoRan, Glencore, Rio Tinto, Southern Copper,
Teck Resources, Vale.
• Oil and gas (15%): Anadarko Petroleum (3), Apache, BP, Canadian Natural Res., Chevron, ConocoPhillips, Devon Energy,
EOG Resources, ExxonMobil, Occidental Petroleum, Royal Dutch Shell, Woodside Petroleum.
(1) 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
had become a significantly less comparable peer.
(2) From November 2018, CONSOL Energy was removed from the comparator group, as due to its internal restructuring it had become a less comparable peer.
(3) Anadarko Petroleum was acquired by Occidental Petroleum in August 2019.
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 tool to ensure 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 ’look back’ 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 2020.
In respect of the STIP two-year deferred shares (granted in November 2018 in respect of performance in FY2018), the Committee chose
not to exercise its discretion and allowed the STIP awards to vest in full. In respect of the LTIP five-year performance shares (granted
in December 2015), the formulaic outcome of the 2015 LTIP was a 48 per cent vesting. Having undertaken the ‘look back’ review, the
Committee concluded the vesting outcome was appropriate given Group and individual performance, and chose not to exercise its
discretion and allowed 48 per cent of the LTIP awards to vest. There is no upwards discretion available to the Remuneration Committee
in respect of the LTIP, as the overarching discretion may only reduce the number of awards that may vest.
154 BHP Annual Report 2020
3.3.6 CEO remuneration and returns to shareholders
10-year CEO remuneration
The table below shows the single total figure of remuneration for Mike Henry, Andrew Mackenzie and Marius Kloppers over the last
10 years along with the proportion of maximum opportunity earned for each type of incentive.
Executive Director
Mike Henry
Andrew Mackenzie
Financial year
FY2020 (1)
FY2020 (1)
FY2019
FY2018
FY2017
FY2016
FY2015
FY2014
FY2013 (2)
FY2013 (2)
FY2012
FY2011
Marius Kloppers
Single total figure of
remuneration, US$(‘000)
STIP/CDP
(% of maximum)
LTIP
(% of maximum)
6,069
2,424
3,531
4,657
4,554
2,241
4,582
7,988
9,740
5,624
16,092
15,755
64
64
32
60
57
0
57
77
47
47
0
69
48
48
0
0
0
0
0
58
65
65
100
100
(1) As Mike Henry assumed the role of CEO and Executive Director in January 2020, the FY2020 single total figure of remuneration shown includes remuneration relevant
to that role for the period 1 January to 30 June 2020. The FY2020 single total figure of remuneration for Andrew Mackenzie includes remuneration relevant to his role
as CEO and Executive Director for the period 1 July to 31 December 2019. The value of Mike’s vested 2015 LTIP award is included in full, while Andrew’s vested 2015 LTIP
award is reported in full in section 3.3.24.
(2) As Andrew Mackenzie assumed the role of CEO and Executive Director in May 2013, the FY2013 single total figure of remuneration shown includes remuneration
relevant to that role for the period 10 May to 30 June 2013. The FY2013 single total figure of remuneration for Marius Kloppers includes remuneration relevant to his
role as CEO and Executive Director for the period 1 July 2012 to 10 May 2013. The value of Andrew’s vested 2008 LTIP award of US$8.480 million (inclusive of vested
sign-on awards provided when Andrew joined BHP) is included in full, while Marius’ vested 2008 LTIP award (with a value of US$12.051 million and which vested after
Marius stepped down from his role as CEO and Executive Director) was reported in section 4.4.28 of the 2014 Annual Report.
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$100 invested over the 10-year period to 30 June 2020 (with dividends reinvested)
Value of investment (US$)
$200
$175
$150
$125
$100
$75
$50
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Years ended 30 June
BHP Group Plc
BHP Group Limited
FTSE 100
ASX 100
BHP Annual Report 2020 155
Strategic ReportGovernance at BHPDirectors’ ReportFinancial StatementsAdditional informationShareholder informationRemuneration Report3 3.3.7 Changes in Directors’ remuneration from FY2019 to FY2020
The table below sets out the percentage change in remuneration from FY2019 to FY2020 for the CEOs (for the time they were CEO) and
Non-executive Directors, compared to the average change in each remuneration element for employees in Australia (being approximately
21,000 employees) over the same period. This has been chosen by the Committee as the most appropriate comparison, as Australia has
the largest employee base, and the Committee considers remuneration levels in Australia when setting salaries and fees for Executive and
Non-executive Directors and the CEO is located in Australia. The CEOs and Non-executive Directors’ remuneration described in the table
align to what is disclosed in 3.3.1 and 3.3.14 respectively.
Changes from
FY2019 to FY2020
CEO (1)
Mike Henry
Andrew Mackenzie
Non-executive Directors
Terry Bowen
Malcolm Broomhead
Ian Cockerill (2)
Anita Frew
Gary Goldberg (2)
Carolyn Hewson (3)
Susan Kilsby (2)
Ken MacKenzie
Lindsay Maxsted
John Mogford
Shriti Vadera
Dion Weisler (2)
Australian employees
Base salary/fees
% change
Benefits
% change
CDP/STI
% change
0
0
2
(5)
0
0
0
0
0
0
(2)
6
0
0
2
0
0
33
(53)
0
(2)
0
0
0
25
(44)
13
0
0
(7)
0
0
–
–
–
–
–
–
–
–
–
–
–
–
43
(1) The per cent changes in remuneration from FY2019 to FY2020 for Mike Henry are zero as he was appointed as CEO on 1 January 2020. There were no changes in
remuneration for Andrew Mackenzie in either FY2019 or FY2020 so his per cent changes are zero.
(2) The per cent changes in remuneration from FY2019 to FY2020 are zero as there were no changes made to the remuneration of Non-executive Directors who joined
the Board either during FY2019 and FY2020 (Ian Cockerill and Susan Kilsby both joined on 1 April 2019, and Gary Goldberg and Dion Weisler joined on 1 February 2020
and 1 June 2020 respectively).
(3) The per cent changes in remuneration from FY2019 to FY2020 for Carolyn Hewson are zero as there were no changes made to Carolyn’s remuneration up to the date
of her retirement from the Board on 7 November 2019.
3.3.8 CEO pay ratios
As BHP is a global company and our UK employees represent less than 1 per cent of all of our employees worldwide, these disclosures are
voluntary, and we have chosen to amend the comparison to all employees, an approach that is still compliant with UK requirements.
The table below shows the CEO pay ratios, calculated using the reported single total figure of remuneration, and compared to employees
at the 25th, Median and 75th percentile using Option A methodology as set out under UK requirements.
Year
FY2020
FY2019
25th percentile
Median
75th percentile
116:1
46:1
81:1
31:1
67:1
25:1
Option A uses the full-time equivalent base salary and benefits paid during the year as it is the most accurate reflection of employee pay
as a direct comparison to the single total figure of remuneration for the CEO. The FY2020 CEO remuneration used in the calculation
is a combination of reported single total figure of remuneration data for Andrew Mackenzie and Mike Henry, recognising the transition
in CEO leadership during FY2020. The remuneration calculation for all employees is based on actual earnings for the 12 months to
31 March 2020, including annual incentive payments for employees calculated using the Group performance outcome, and vested equity
received if applicable. Pension contributions are calculated as the total cost of contributions made by the Group over the 12-month period.
Employees on international assignments have been excluded from the analysis as their remuneration structures are generally not
consistent with the single total figure of remuneration for the CEO.
The FY2020 ratio of 81:1 at the median compared to the FY2019 ratio of 31:1 reflects the proportion of the CEO’s pay being more heavily
weighted to variable pay, including share-based long-term incentives, than for other employees. Specifically, the change from FY2019
to FY2020 is driven by a higher FY2020 CDP outcome of 96 per cent against a target of 100 per cent compared to the STIP outcome of
48 per cent in FY2019, together with the 48 per cent LTIP vesting for FY2020, whereas there was zero LTIP vesting in FY2019.
The Group believes the median pay ratio reflects the diversity of our global business footprint and employee population. BHP’s
remuneration policies and practices are based on a high degree of alignment and consistency, with total remuneration at all levels
providing a competitive package that enables the attraction and retention of talent while also providing at-risk remuneration based
on performance.
3.3.9 Remuneration for the CEO in FY2021
The remuneration for the CEO in FY2021 will be in accordance with the remuneration policy approved by shareholders at the AGMs in 2019.
Base salary review
Base salary is reviewed annually and increases are applicable from 1 September. The CEO commenced in role on 1 January 2020 and did
not receive a base salary increase in September 2020 and it will remain unchanged at US$1.700 million per annum for FY2021.
156 BHP Annual Report 2020
FY2021 CDP performance measures
For FY2021, 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.
Significant events (10%): No significant (actual level 4) health, safety (including fatalities), environment or community
events during the year.
Climate change (10%): Steps in place to achieve reported GHG emissions in FY2022 at the FY2017 level.
Decarbonisation plans developed in line with pathways to net zero and incorporated into the capital allocation plan
process. Two partnerships formalised with strategic customers in the steel sector.
Management of priority tailings storage facilities (5%): All priority tailings storage facilities are assessed based on key risk
indicator data, and are either within appetite or continued operation outside appetite is approved with remediation
progressing to plan.
ROCE 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 ROCE
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 ROCE 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 FY2021 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
projects and initiatives in respect of performance (material improvement in the system that supports exceptional
performance), social value (long-term growth in value and returns for all stakeholders), people (right people, right skills,
coming together in the right way to support exceptional performance) and portfolio (progress on our strategic
objectives to create a winning portfolio and set BHP up for the next 20 years).
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 GHG 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 have clarified and strengthened this link for FY2021 by enhancing our
approach, including a weighting of 10 per cent of the 25 per cent HSEC weighting under the CDP, which compares to circa 4 per cent
allocated to climate change in the prior STIP, together with enhanced disclosure of our performance targets as set out above (against
which we will report at the end of the year).
FY2021 LTIP award
The maximum face value of the CEO’s LTIP award under the remuneration policy approved by shareholders at the 2019 AGMs is
US$3.400 million, being 200 per cent of the CEO’s base salary. The number of LTIP awards in FY2021 has been determined using the
share price and US$/A$ exchange rate over the 12 months up to and including 30 June 2020. Based on this, a FY2021 grant of 140,239
LTIP awards is proposed and approval for this LTIP grant will be sought from shareholders at the 2020 AGMs. If approved, the award will
be granted following the AGMs (i.e. in or around October/November 2020 subject to securities dealing considerations). The FY2021 LTIP
award will use the same performance, service conditions and peer groups as the FY2020 LTIP award (with the exception of the sector
peer group where Anadarko Petroleum was acquired by Occidental Petroleum in August 2019).
Remuneration for other Executive KMP (excluding the CEOs)
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 CEOs).
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.
3.3.10 Components of remuneration
The components of remuneration for other Executive KMP are the same as for the CEO, with any differences described below.
CDP
The CDP performance measures for other Executive KMP for FY2020 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 FY2020 CDP outcomes against the original scorecard.
Performance categories
HSEC
Financial
Individual
Group
Region
Group
Region
Other Executive
KMP with region
responsibility
Other Executive
KMP without region
responsibility
Threshold
Target
Maximum
12.5%
12.5%
25.0%
25.0%
25.0%
25.0%
0%
50.0%
0%
25.0%
BHP
Minerals Australia
Minerals Americas
Petroleum
BHP Annual Report 2020 157
Strategic ReportGovernance at BHPDirectors’ ReportFinancial StatementsAdditional informationShareholder informationRemuneration Report3
LTIP
LTIP awards granted to other Executive KMP for FY2021
will be calculated in accordance with the remuneration policy
approved by shareholders in 2019. Awards for other Executive
KMP will have a maximum face value of 175 per cent of base
salary, which is a fair value of 72 per cent of base salary under
the current plan design (with a fair value of 41 per cent,
taking into account the performance condition:
175 per cent x 41 per cent = 72 per cent).
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 FY2020.
3.3.11 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 FY2020. 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
Minimum
74%
19%
7%
Target
22%
6%
2%
18%
36%
16%
Maximum
15%
4%
1%
18%
36%
26%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Base salary (1)
CDP (cash) (4)
Retirement benefits (2)
CDP (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 3.3.18.
(2) Retirement benefits are 25 per cent of base salary. From FY2021 contribution rates will reduce in accordance with the remuneration policy approved by shareholders at
the 2019 AGMs (progressive reduction to 10 per cent of base salary as follows: 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. For a new Executive KMP appointment, the pension contribution rate will be 10 per cent of base salary immediately).
(3) Other benefits is based on a notional 10 per cent of base salary.
(4) As for the CEO, the minimum CDP award is zero, with 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, for target performance on all measures, and a maximum cash award of 120 per cent base salary plus two awards
of deferred shares each of equivalent value to the cash award, vesting in two and five years respectively.
(5) Other Executive KMP have a maximum LTIP award with a face value of 175 per cent of base salary.
Andrew would receive a prorated FY2020 CDP award for his time as
CEO, covering both the cash and two-year deferred equity portion,
based on his performance, and paid in the form of cash. No deferral
period will apply in respect of this cash CDP award.
No payment or award was or will be made in respect of the CDP
five-year deferred share component for FY2020.
All unvested FY2018 and FY2019 STIP awards allocated to Andrew
remained on foot on termination. FY2018 STIP vested in August
2020, and FY2019 STIP will vest in August 2021. Andrew’s unvested
LTIP awards were prorated to reflect the percentage of service
during the relevant performance period to 31 March 2020. The
outcomes in respect of Andrew’s 2015 LTIP award are set out in
section 3.3.24. The vesting of the remaining retained prorated 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 overarching
discretion under the plan rules.
3.3.12 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. Other Executive KMP’s employment contracts 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. Other Executive
KMP must give up to 12 months’ notice for voluntary resignation.
3.3.13 Arrangements for 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.
Andrew Mackenzie stepped down from his role as CEO and
Executive Director on 31 December 2019, and retired from BHP on
31 March 2020. Andrew received base salary, pension contributions,
statutory leave entitlements and applicable benefits up to the date
of his retirement from BHP. Andrew will receive in the future the
value of pension funds that he has accumulated during his service
with the Group and certain employment-related taxation return
preparation services. When determining the Executive KMP CDP
awards for FY2020, the Remuneration Committee resolved that
158 BHP Annual Report 2020
Remuneration for Non-executive Directors
The remuneration outcomes described below have been provided in accordance with the remuneration policy approved by shareholders
at the 2019 AGMs. The maximum aggregate fees payable to Non-executive Directors (including the Chair) were approved by
shareholders at the 2008 AGMs at US$3.800 million per annum. This sum includes base fees, Committee fees and pension contributions.
Travel allowances and non-monetary benefits are not included in this limit.
3.3.14 Single total figure of remuneration
This section shows a single total figure of remuneration as prescribed under UK requirements. It is a measure of actual remuneration.
Fees include the annual base fee, plus additional fees as applicable for the Senior Independent Director, Committee Chair and
Committee memberships. Non-executive Directors do not have any performance-based at-risk remuneration or receive any equity awards
as part of their remuneration, therefore the totals shown below are total remuneration and total fixed fees. This table also meets the
requirements of the Australian Corporations Act 2001 and relevant accounting standards.
US$(‘000)
Terry Bowen
Malcolm Broomhead
Ian Cockerill (3)
Anita Frew
Gary Goldberg (4)
Carolyn Hewson (5)
Susan Kilsby (3)
Ken MacKenzie
Lindsay Maxsted
John Mogford
Wayne Murdy (6)
Shriti Vadera
Dion Weisler (4)
Financial year
Fees
Benefits (1)
Pensions (2)
Total
FY2020
FY2019
FY2020
FY2019
FY2020
FY2019
FY2020
FY2019
FY2020
FY2020
FY2019
FY2020
FY2019
FY2020
FY2019
FY2020
FY2019
FY2020
FY2019
FY2019
FY2020
FY2019
FY2020
187
183
201
212
220
55
220
220
90
75
212
205
47
866
865
205
209
199
187
75
253
253
15
40
30
19
40
90
30
47
48
15
18
32
83
22
40
32
18
32
69
61
35
48
48
–
10
10
11
11
–
–
–
–
–
4
11
–
–
14
15
11
11
–
–
–
–
–
1
237
223
231
263
310
85
267
268
105
97
255
288
69
920
912
234
252
268
248
110
301
301
16
(1) The majority of the amounts disclosed for benefits are travel allowances for each Non-executive Director: amounts of between US$ nil and US$90,000. In addition,
amounts of between US$ nil and US$3,500 are included in respect of tax return preparation; and amounts of between US$ nil and US$1,500 are included in respect
of the 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 FY2020 in accordance with Australian superannuation legislation.
No other pension contributions are paid.
(3) 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.
(4) The FY2020 remuneration for Gary Goldberg and Dion Weisler relates to part of the year only, as they joined the Board on 1 February 2020 and 1 June 2020 respectively.
(5) The FY2020 remuneration for Carolyn Hewson relates to part of the year only, as she retired from the Board on 7 November 2019.
(6) The FY2019 remuneration for Wayne Murdy relates to part of the year only, as he retired from the Board on 2 November 2018.
3.3.15 Non-executive Directors’ remuneration in FY2021
In FY2021, the remuneration for the Non-executive Directors will
be paid in accordance with the remuneration policy 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 Chair are reviewed annually. The review includes
benchmarking against peer companies, with the assistance
of external advisers.
From 1 July 2017, the Chair’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 FY2021. 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$0.160 million per annum.
The below table sets out the annualised fee levels for FY2021.
Levels of fees and travel allowances
for Non-executive Directors (in US$)
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
Chair’s fee
From 1 July
2020
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.
BHP Annual Report 2020 159
Strategic ReportGovernance at BHPDirectors’ ReportFinancial StatementsAdditional informationShareholder informationRemuneration Report3 Remuneration governance
3.3.16 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 however, members of management are not present
when decisions are considered or taken concerning their own
remuneration. 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 at bhp.com. The current
members of the Remuneration Committee are: Susan Kilsby
(Remuneration Committee Chair), Anita Frew, Gary Goldberg,
Shriti Vadera, and Dion Weisler. The role and focus of the
Committee and details of meeting attendances can be found
in section 2.12. Other Directors and employees who regularly
attended meetings were: Ken MacKenzie (Chair), Carolyn Hewson
(Remuneration Committee Chair to 7 November 2019),
Andrew Mackenzie (CEO to 31 December 2019), Mike Henry
(CEO from 1 January 2020), Athalie Williams (Chief People Officer),
Andrew Fitzgerald (Vice President Reward), Caroline Cox (Group
Company Secretary), and Geof Stapledon (Vice President
3.3.17 Statement of voting at the 2019 AGMs
Governance). These individuals were not present when decisions
regarding their own remuneration were considered or taken.
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 PricewaterhouseCoopers teams 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 FY2020.
Total fees paid to the PricewaterhouseCoopers team advising the
Committee on remuneration-related matters for FY2020 were
£177,100. 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 FY2020 were approximately US$28 million.
BHP’s remuneration resolutions have attracted a high level of support by shareholders. Voting in regard to those resolutions put to
shareholders at the 2019 AGMs is shown below.
AGM resolution
Requirement
% vote ‘for’ % vote ‘against’
Votes withheld (1)
Remuneration Report (remuneration policy)
Remuneration Report (excluding remuneration policy)
Remuneration Report (whole report)
Approval of grant to Executive Director
UK
UK
Australia
Australia
93.5
97.3
96.7
97.5
6.5
2.7
3.3
2.5
23,166,578
21,012,150
11,217,511
10,460,699
(1) The sum of votes marked ‘Vote withheld’ at BHP Group Plc’s 2019 AGM and votes marked ‘Abstain’ at BHP Group Limited’s 2019 AGM.
160 BHP Annual Report 2020
Other statutory disclosures
This section provides details of any additional statutory disclosures required by Australian or UK regulations that have not been included
in the previous sections of the Remuneration Report.
3.3.18 Executive KMP remuneration table
The table below has been prepared in accordance with relevant accounting standards and remuneration data for Executive KMP and are
for the periods of FY2019 and FY2020 that they were KMP. More information on the policy and operation of each element of remuneration
is provided in previous sections of this Report.
Share-based payments
The figures included in the shaded columns of the statutory table below for share-based payments were not actually provided to the
KMP during FY2019 or FY2020. These amounts are calculated in accordance with accounting standards and are the amortised IFRS fair
values of equity and equity-related instruments that have been granted to the executives. For information on awards that were allocated
and vested during FY2019 and FY2020, refer to section 3.3.19.
US$(‘000)
Executive Director
Mike Henry
Andrew Mackenzie (7)
Other Executive KMP
Peter Beaven
Mike Henry
Daniel Malchuk
Geraldine Slattery
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/CDP
awards (2) (6)
Value of
LTIP
awards (6)
Total
FY2020
FY2020
FY2019
FY2020
FY2019
FY2020
FY2019
FY2020
FY2019
FY2020
FY2019
850
850
1,700
1,000
1,000
550
1,100
1,000
1,000
750
219
653
653
653
848
480
422
440
816
424
618
167
86
124
100
41
5
43
10
38
30
–
–
–
–
–
–
–
–
–
–
14
–
–
85
213
425
250
250
138
275
250
250
188
55
509
1,202
990
810
637
398
623
797
585
378
43
1,143
3,326
2,038
5,080
4,037
7,905
2,090
5,039
2,078
1,156
2,286
4,450
2,707
4,734
2,090
4,991
2,078
4,381
903
213
2,837
697
(1) Base salaries shown in this table reflect the amounts paid over the 12-month period from 1 July 2019 to 30 June 2020 for each Executive KMP. There were no changes
to Executive KMP base salaries during the year except for Mike Henry who was appointed as CEO on 1 January 2020 on an annual base salary of US$1.700 million.
(2) Annual cash incentive for FY2019 is the cash portion of STIP awards earned in respect of performance during that financial year for each executive. STIP was provided
half in cash and half in deferred equity (which are included in the share-based payments columns of the table). Annual cash incentive for FY2020 is the cash portion of
CDP awards earned in respect of performance during that financial year for each executive. CDP is provided one-third in cash and two-thirds in deferred equity (which
are included in the Share-based payments columns of the table). The cash portion of CDP/ 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 360 per cent of base salary (120 per cent in cash and
240 per cent in deferred equity). For FY2020, Executive KMP earned the following CDP awards as a percentage of the maximum (the remaining portion has been
forfeited): Mike Henry 64 per cent (for the time served as CEO and as President Minerals Australia), Andrew Mackenzie 64 per cent (for the time served as CEO), Peter
Beaven 71 per cent, Daniel Malchuk 68 per cent, and Geraldine Slattery 69 per cent. Andrew’s FY2020 CDP was paid in cash and prorated to reflect the period served
until he ceased to be KMP on 31 December 2019, as noted in 3.3.1 with 50 per cent of the total CDP award included in the Annual cash incentive column, and
50 per cent in the Value of STIP/CDP awards column.
(3) Non-monetary benefits are non-pensionable and include items such as net leave accruals, 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.
(5) In FY2020, retirement benefits were 25 per cent of base salary for each Executive KMP except for Mike Henry who was appointed CEO on 1 January 2020 with a reduced
pension contribution rate of 10 per cent of base salary as per the remuneration policy approved at the 2019 AGMs.
(6) The IFRS fair value of CDP, STIP and LTIP awards is estimated at grant date. In FY2020, the value of Mike Henry’s LTIP and STIP awards previously granted have been
prorated based on time served as CEO and President Minerals Australia, whereas the CDP has been split based on what was earned as CEO and President Minerals
Australia. Refer to note 24 ‘Employee share ownership plans’ in section 5 for further details on IFRS.
(7) The remuneration reported for Andrew Mackenzie reflects service as Executive KMP up to 31 December 2019.
3.3.19 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. Our mandatory minimum
performance requirements for securities dealing 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 or MAP awards.
Equity awards provided for Executive KMP service
Awards under the STIP, CDP and LTIP
Executive KMP received 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. The LTIP rules are available at bhp.com.
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 FY2020,
Geraldine Slattery held GSTIP awards and still holds MAP awards
that were allocated to her prior to her Executive KMP service.
BHP Annual Report 2020 161
Strategic ReportGovernance at BHPDirectors’ ReportFinancial StatementsAdditional informationShareholder informationRemuneration Report3 Award type
Mike Henry
STIP
STIP
STIP
LTIP
LTIP
LTIP
LTIP
LTIP
LTIP
Andrew Mackenzie (5)
STIP
STIP
STIP
LTIP
LTIP
LTIP
LTIP
LTIP
LTIP
Peter Beaven
STIP
STIP
STIP
LTIP
LTIP
LTIP
LTIP
LTIP
LTIP
Daniel Malchuk
STIP
STIP
STIP
LTIP
LTIP
LTIP
LTIP
LTIP
LTIP
Geraldine Slattery
STIP
LTIP
MAP
MAP
MAP
MAP
MAP
GSTIP
Date of grant
At
1 July
2019
Granted
Vested
Lapsed
At
30 June
2020
Award
vesting
date (1)
Market price on date of:
Grant (2)
Vesting (3)
Gain on
awards
(‘000) (4)
DEP on
awards
(‘000)
20-Nov-19
18-Dec-18
24-Nov-17
20-Nov-19
18-Dec-18
24-Nov-17
9-Dec-16
4-Dec-15
19-Dec-14
20-Nov-19
18-Dec-18
24-Nov-17
20-Nov-19
18-Dec-18
24-Nov-17
9-Dec-16
4-Dec-15
19-Dec-14
20-Nov-19
18-Dec-18
24-Nov-17
20-Nov-19
18-Dec-18
24-Nov-17
9-Dec-16
4-Dec-15
19-Dec-14
20-Nov-19
18-Dec-18
24-Nov-17
20-Nov-19
18-Dec-18
24-Nov-17
9-Dec-16
4-Dec-15
19-Dec-14
20-Nov-19
20-Nov-19
21-Feb-19
21-Feb-19
24-Sep-18
25-Sep-17
31-Oct-16
25-Sep-17
–
30,692
36,376
–
172,413
218,020
192,360
192,360
127,310
–
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
–
33,686
28,070
–
156,739
198,200
174,873
174,873
115,736
–
–
28,527
28,527
28,527
34,349
21,775
14,951
17,420
–
–
153,631
–
–
–
–
–
25,845
–
–
271,348
–
–
–
–
–
19,003
–
–
139,664
–
–
–
–
–
16,786
–
–
139,664
–
–
–
–
–
6,628
104,748
–
–
–
–
–
–
–
–
36,376
–
–
–
–
–
–
–
–
56,217
–
–
–
–
–
–
–
–
36,145
–
–
–
–
–
–
–
–
28,070
–
–
–
–
–
–
–
–
–
–
–
–
21,775
14,951
–
–
–
–
–
–
–
–
127,310
–
–
–
–
–
–
–
–
224,859
–
–
–
–
–
–
–
–
115,736
–
–
–
–
–
–
–
–
115,736
–
–
–
–
–
–
–
–
17,420
30,692
–
153,631
172,413
218,020
192,360
192,360
–
25,845
52,061
–
271,348
304,523
385,075
339,753
339,753
–
19,003
30,964
–
139,664
156,739
198,200
174,873
174,873
–
16,786
33,686
–
139,664
156,739
198,200
174,873
174,873
–
6,628
104,748
28,527
28,527
28,527
34,349
–
–
Aug 21
Aug 20
21 Aug 19
Aug 24
Aug 23
Aug 22
Aug 21
Aug 20
21 Aug 19
Aug 21
Aug 20
21 Aug 19
Aug 24
Aug 23
Aug 22
Aug 21
Aug 20
21 Aug 19
Aug 21
Aug 20
21 Aug 19
Aug 24
Aug 23
Aug 22
Aug 21
Aug 20
21 Aug 19
Aug 21
Aug 20
21 Aug 19
Aug 24
Aug 23
Aug 22
Aug 21
Aug 20
21 Aug 19
Aug 21
Aug 24
Aug 23
Aug 22
Aug 21
Aug 20
21 Aug 19
21 Aug 19
A$37.24
A$33.50
A$27.97
A$37.24
A$33.50
A$27.97
A$25.98
A$17.93
A$28.98
A$37.24
A$33.50
A$27.97
A$37.24
A$33.50
A$27.97
A$25.98
A$17.93
A$28.98
A$37.24
A$33.50
A$27.97
A$37.24
A$33.50
A$27.97
A$25.98
A$17.93
A$28.98
A$37.24
A$33.50
A$27.97
A$37.24
A$33.50
A$27.97
A$25.98
A$17.93
A$28.98
A$37.24
A$37.24
A$34.83
A$34.83
A$33.83
A$25.98
A$23.07
A$25.98
–
–
A$35.25
–
–
–
–
–
–
–
–
A$35.25
–
–
–
–
–
–
–
–
A$35.25
–
–
–
–
–
–
–
–
A$35.25
–
–
–
–
–
–
–
–
–
–
–
–
A$35.25
A$35.25
–
–
A$1,282
–
–
–
–
–
–
–
–
A$1,982
–
–
–
–
–
–
–
–
A$1,274
–
–
–
–
–
–
–
–
A$989
–
–
–
–
–
–
–
–
–
–
–
–
A$768
A$527
–
–
A$166
–
–
–
–
–
–
–
–
A$256
–
–
–
–
–
–
–
–
A$165
–
–
–
–
–
–
–
–
A$128
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(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 vesting
is the second (STIP, CDP two-year awards and GSTIP), third (MAP), fourth (MAP) or fifth (MAP, CDP five-year awards 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 FY2020 is at the grant date of 20 November 2019, and are as follows: STIP – A$37.24 and LTIP – A$20.07.
(3) The market price shown is the closing price of BHP shares on the relevant date of vest.
(4) The gain on awards is calculated using the market price on date of vesting or exercise (as applicable) less any exercise price payable. The amounts that vested
and were lapsed for the awards during FY2020 are as follows: STIP – 100 per cent vested; LTIP – 100 per cent lapsed; GSTIP – 100 per cent vested; MAP –
100 per cent vested.
(5) Awards shown as held by Andrew Mackenzie at 30 June 2020 are his balances at the date he ceased being CEO and Executive Director (31 December 2019).
The subsequent treatment of his awards is set out in sections 3.3.13 and 3.3.24.
162 BHP Annual Report 2020
3.3.20 Estimated value range of equity awards
The current face value (and estimate of the maximum possible total value) of equity awards allocated during FY2020 and yet to vest are
the awards as set out in the previous table multiplied by the current share price of BHP Group Limited or BHP Group Plc as applicable.
The minimum possible total value of the awards is nil.
The actual value that may be received by participants in the future cannot be determined as it is dependent on and therefore fluctuates
with the share prices of BHP Group Limited and BHP Group Plc at the date that any particular award vests or is exercised. The table below
provides five-year share price history for BHP Group Limited and BHP Group Plc, history of dividends paid and the Group’s earnings.
Five-year share price, dividend and earnings history
BHP Group Limited
Share price at beginning of year
Share price at end of year
Dividends paid
BHP Group Plc
Share price at beginning of year
Share price at end of year
Dividends paid
BHP
Attributable profit /(loss) (US$M, as reported)
FY2020
A$41.68
A$35.82
A$2.13
£20.33
£16.54
£1.13
7,956
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)
(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.
The highest share prices during FY2020 were A$42.08 for BHP Group Limited shares and £20.49 for BHP Group Plc shares. The lowest share
prices during FY2020 were A$25.20 and £9.40, respectively.
3.3.21 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.
No shares are held nominally by any KMP or their related parties. There have been no changes in the interests of any Directors in the period
to 3 September 2020 (being not less than one month prior to the date of the notice of the 2020 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 2020
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
2019 Purchased
Received as
remuneration (1)
Sold
Held at
30 June
2020
Held at
1 July
2019 Purchased
Received as
remuneration (1)
Sold
Executive Director
Mike Henry
Andrew Mackenzie (2)
Other Executive KMP
Peter Beaven
Daniel Malchuk
Geraldine Slattery (3)
Non-executive Directors
Terry Bowen
Malcolm Broomhead
Ian Cockerill
Anita Frew
Gary Goldberg (3) (4)
Carolyn Hewson (2)
Susan Kilsby
Ken MacKenzie
Lindsay Maxsted
John Mogford
Shriti Vadera
Dion Weisler (4)
98,062
93,051
240,262
174,355
49,701
11,000
19,000
–
–
–
–
–
–
–
5,259
3,500
–
–
–
10,000
19,000
5,638
–
52,351
18,000
–
–
1,544
–
–
–
–
–
–
41,080
19,073
120,069
196,262
63,486
31,309
125,228
266,205
40,819
19,794
261,287
31,700
11,447
194,608
36,726
14,907
71,520
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
11,000
19,000
8,759
3,500
–
15,000
10,000
24,638
–
52,351
18,000
–
–
–
–
–
–
–
12,000
25,000
1,544
–
–
–
–
–
–
–
–
–
–
–
–
6,900
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Held at
30 June
2020
196,262
266,205
–
–
–
–
–
3,500
15,000
–
–
6,900
–
–
12,000
25,000
–
(1) Includes DEP in the form of shares on equity awards vesting as disclosed in section 3.3.18.
(2) The closing balances for Andrew Mackenzie and Carolyn Hewson reflect their shareholdings on the date that each ceased being KMP, being 31 December 2019
and 7 November 2019, respectively.
(3) The following BHP Group Limited shares were held in the form of American Depositary Shares: Geraldine Slattery (868 BHP Group Limited) and Gary Goldberg
(5,000 BHP Group Limited).
(4) The opening balances for Gary Goldberg and Dion Weisler reflect their shareholdings on the date that each became KMP being 1 February 2020 and 1 June 2020
respectively.
BHP Annual Report 2020 163
Strategic ReportGovernance at BHPDirectors’ ReportFinancial StatementsAdditional informationShareholder informationRemuneration Report3 3.3.22 Prohibition on hedging of BHP Group
shares and equity instruments
3.3.24 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.
3.3.23 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 FY2020:
• the MSR for the CEO was five times annual pre-tax base salary
and Mike Henry’s shareholding was 4.1 times his annual pre-tax
base salary at the end of FY2020. As at the date of this Report,
Mike met the MSR;
• the MSR for other Executive KMP was three times annual pre-tax
base salary. At the end of FY2020, Peter Beaven and Daniel
Malchuk met the MSR, while Geraldine Slattery did not as she
was appointed as Executive KMP on 18 March 2019.
No Executive KMP sold shares during FY2020, other than to satisfy
taxation obligations.
Effective 1 July 2020, a two-year post-retirement shareholding
requirement for the CEO applies 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 of
remuneration (base fees plus Committee fees). Thereafter, they
must maintain at least that level of shareholding throughout their
tenure. At the end of FY2020, each Non-executive Director met the
MSR with the exception of Susan Kilsby and Dion Weisler as they
only recently joined the Board on 1 April 2019 and 1 June 2020
respectively. As at the date of this Report and since their
commencement, Susan and Dion each hold shares that satisfy
their requirement to build shareholdings to the MSR equivalent
of 25 per cent of their annual remuneration.
UK regulations require the inclusion in the Remuneration Report
of certain payments to past Directors and payments made for
loss of office.
The following payments were made to Andrew Mackenzie that relate
to the period when he was no longer an Executive Director and CEO
and which have not been reported in sections 3.3.1 and 3.3.18:
• 48 per cent of the 322,765 retained LTIP awards granted in 2015,
reduced from 339,753 awards originally granted and prorated for
time served at the time of departure, vested on 19 August 2020.
The value of these awards for Andrew was US$5.317 million,
including a related DEP of US$0.919 million which was paid
in shares.
• Fixed remuneration comprising base salary, pension contributions
and applicable benefits valued at US$0.533 million was provided
to Andrew for the period 1 January to 31 March 2020.
• Upon his retirement from BHP, Andrew received his outstanding
accrued statutory leave entitlements valued at US$0.500 million.
The Remuneration Committee has adopted a de minimis threshold
of US$7,500 for disclosure of payments to past Directors under
UK requirements.
There were no payments made for loss of office in FY2020.
3.3.25 Relative importance of spend on pay
The table below sets out the total spend for Continuing operations
on employee remuneration during FY2020 (and the prior year)
compared with other significant expenditure items, and includes
items as prescribed in the UK requirements. BHP has included tax
payments and purchases of property, plant and equipment being
the most significant other outgoings in monetary terms.
US$ million
FY2020
FY2019
Aggregate employee benefits expense
Dividends paid to BHP shareholders
Share buy-backs
Income tax paid and royalty-related taxation
paid (net of refunds)
4,120
6,876
–
5,944
4,117
11,395
5,220
5,940
Purchases of property, plant and equipment
6,900
6,250
3.3.26 Transactions with KMP
During the financial year, there were no transactions between the
Group and its subsidiaries and KMP (including their related parties)
(2019: US$ nil; 2018: US$ nil). There were no amounts payable by,
or loans with, KMP (including their related parties) at 30 June 2020
(2019: US$ nil).
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 (2019: US$ nil).
This Remuneration Report was approved by the Board on
3 September 2020 and signed on its behalf by:
Susan Kilsby
Chair, Remuneration Committee
3 September 2020
164 BHP Annual Report 2020
BHP Annual Report 2020 165
In this section4.1 Review of operations, principal activities and state of affairs4.2 Share capital and buy-back programs4.3 Results, financial instruments and going concern4.4 Directors4.5 Remuneration and share interests4.6 Secretaries4.7 Indemnities and insurance4.8 Employee policies4.9 Corporate governance4.10 Dividends4.11 Auditors4.12 Non-audit services4.13 Political donations4.14 Exploration, research and development4.15 ASIC Instrument 2016/1914.16 Proceedings on behalf of BHP Group Limited4.17 Performance in relation to environmental regulation4.18 Share capital, restrictions on transfer of shares and other additional informationSection 4Directors’ Report 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
Chair’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
Section in this
Annual Report
Section 5, note 21
Paragraphs (2), (4), (5), (6), (7), (8), (9), (10), (11), (12), (13) and (14)
of Listing Rule 9.8.4 R are not applicable.
The Directors confirm, on the advice of the Risk and Audit
Committee, (RAC), 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 FY2020, the results
of those operations during FY2020 and the expected results of
those operations in future financial years are set out in section 1,
in particular in 1.1 to 1.8, 1.11 and 1.12 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 FY2020 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 FY2020 other than as disclosed in section 1.
There were no significant changes in BHP’s state of affairs that
occurred during FY2020 and no significant post balance date
events other than as disclosed in section 1 and note 34 in section 5.
No other matter or circumstance has arisen since the end of
FY2020 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.
166 BHP Annual Report 2020
4.2 Share capital and buy-back programs
At the Annual General Meetings held in 2018 and 2019,
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.
During FY2020, we did not make any on-market or off-market
purchases of BHP Group Limited or BHP Group Plc shares under
any share buy-back program. As at the date of this Directors’
Report, there were no current on-market buy-backs. Shareholders
will be asked at the 2020 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 FY2020.
A
B
C
D
Total number of
shares purchased
and transferred to
employees to satisfy
employee awards
Total number
of shares purchased
as part of publicly
announced plans
or programs
Average price
paid per share (1)
–
4,094,559
–
–
–
–
–
–
1,714,630
132,286
219,011
–
6,160,486
US$
–
25.07
–
–
–
–
–
–
19.42
19.45
22.65
–
23.29
–
–
–
–
–
–
–
–
–
–
–
–
–
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)
Period
1 Jul 2019 to 31 Jul 2019
1 Aug 2019 to 31 Aug 2019
1 Sep 2019 to 30 Sep 2019
1 Oct 2019 to 31 Oct 2019
1 Nov 2019 to 30 Nov 2019
1 Dec 2019 to 31 Dec 2019
1 Jan 2020 to 31 Jan 2020
1 Feb 2020 to 29 Feb 2020
1 Mar 2020 to 31 Mar 2020
1 Apr 2020 to 30 Apr 2020
1 May 2020 to 31 May 2020
1 Jun 2020 to 30 Jun 2020
Total
(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 2018 and 2019, 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.
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$8.0 billion in FY2020, compared with a profit
of US$8.3 billion in FY2019.
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 1.5 and 2.13, and note 22
‘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 FY2020 or up until the
date of this Directors’ Report were Ken MacKenzie, Mike Henry,
Andrew Mackenzie, Terry Bowen, Malcolm Broomhead, Ian Cockerill,
Anita Frew, Gary Goldberg, Carolyn Hewson, Susan Kilsby, Lindsay
Maxsted, John Mogford, Shriti Vadera and Dion Weisler. 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 2017 and
the period for which each directorship has been held.
Carolyn Hewson served as a Non-executive Director of BHP Group
Limited and BHP Group Plc from March 2010 until her retirement
on 7 November 2019. Lindsay Maxsted served as a Non-executive
Director of BHP Group Limited and BHP Group Plc from March 2011
until he retires on 4 September 2020.
Andrew Mackenzie served as Chief Executive Officer of BHP Group
Limited and BHP Group Plc until his retirement on 31 December 2019.
Mike Henry was appointed as Chief Executive Officer of BHP Group
Limited and BHP Group Plc with effect from 1 January 2020. In
accordance with the BHP Group Limited Constitution and BHP
Group Plc Articles of Association, he will seek election at the 2020
Annual General Meetings.
Gary Goldberg, Dion Weisler and Xiaoqun Clever were appointed
as Non-executive Directors of BHP Group Limited and BHP Group
Plc with effect from 1 February 2020, 1 June 2020 and 1 October 2020
respectively. In accordance with the BHP Group Limited
Constitution and BHP Group Plc Articles of Association,
they will seek election at the 2020 Annual General Meetings.
Shriti Vadera 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 Plc Annual General Meeting in October 2020.
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 2.4.
BHP Annual Report 2020 167
Strategic ReportGovernance at BHPRemuneration ReportFinancial StatementsAdditional informationShareholder informationDirectors’ Report4 4.5 Remuneration and share interests
4.5.3 Key Management Personnel
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 3.3.21 sets out the relevant interests in shares in BHP Group
Limited and BHP Group Plc of the Directors who held office during
FY2020, at the beginning and end of FY2020. 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 2020 are set
out in the tables showing interests in incentive plans contained in
section 3.3.19. Except for Mike Henry, 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 3.3.21. Where applicable, the information includes shares
held in the name of a spouse, superannuation fund, nominee and/
or other controlled entities.
Non-executive Directors have agreed to apply at least 25 per
cent of their remuneration (base fees plus committee fees) to
the purchase of shares in BHP Group Limited and BHP Group Plc
until they achieve a shareholding equivalent in value to one year’s
remuneration (base fees plus committee fees). Thereafter,
Non-executive Directors must maintain at least that level of
shareholding throughout their tenure. All dealings by Directors
are subject to mandatory minimum performance requirements for
securities dealing 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 3.3.22.
As at the date of this Directors’ Report, Mike Henry held:
• (either directly, indirectly or beneficially) 196,262 shares in
BHP Group Plc and 198,979 shares in BHP Group Limited
• rights and options over nil shares in BHP Group Plc and
753,844 shares in BHP Group Limited
We have not made available to any Director any interest
in a registered scheme.
Section 3.3.21 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 FY2020 by those senior executives who
were Executive KMP (other than the Executive Director) during
FY2020. 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 2020 are set out in the
tables contained in section 3.3.19.
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
Edgar Basto
Peter Beaven
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
134,863
–
332,107
–
276,986
–
97,325
–
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 acted during FY2020,
as Company Secretaries of BHP Group Limited and BHP Group Plc:
Rachel Agnew, BComm (Economics), LLB (Hons), GAICD, until 1
September 2020 and Geof Stapledon, BEc, LLB (Hons), DPhil, FCIS.
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.
168 BHP Annual Report 2020
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, Ernst & Young
(EY), 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
EY LLP for, and protect EY LLP against, any loss, damage, expense,
or liability incurred by EY LLP in respect of third party claims
arising from a breach by BHP of any obligation under the
engagement terms.
The BHP Group agreed to indemnify KPMG LLP and KPMG (KPMG)
against all legal costs and expenses incurred in connection with
KPMG’s successful defence of any legal actions or proceedings
that may arise as a result of KPMG’s consent to include its audit
report on the BHP Group’s consolidated financial statements as
of 30 June 2019 and for each of the years in the two-year period
ended 30 June 2019 in BHP’s Form 20-F for the year ended 30 June
2020 and KPMG’s consent for such audit reports to be incorporated
by reference in certain other BHP registration statements.
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$20,560,322 net during FY2020.
During FY2020, BHP paid defence costs for certain employees and
former employees of BHP Brasil (Affected Individuals) in relation to
the charges filed by the Federal Prosecutors’ Office against BHP
Brasil and the Affected Individuals.
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 FY2020.
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 1.4.3, 1.6.1, and 2.6.2.
4.9 Corporate governance
The FCA’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 FCA’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 55 US cents per share will be paid on 22
September 2020, resulting in total dividends determined in respect
of FY2020 of 120 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
1.4.5, 1.4.7 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.
No current officer of BHP has held the role of director or partner
of the Group’s current external auditor. During FY2020, Lindsay
Maxsted was the only officer of BHP who, prior to his appointment
as an officer of BHP, held the role of director or partner of the
Group’s former external auditor, at a time when the Group’s former
external auditor conducted an audit of BHP. His prior relationship
with KPMG (BHP’s former external auditor) is outlined in section 2.9.
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.
After a comprehensive tender process, at a meeting held on 16
August 2017, the Board selected EY as its independent registered
public accounting firm from the financial year beginning 1 July
2019, and our shareholders approved EY’s appointment at the
Annual General Meetings in 2019.
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
RAC, 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 a statement of the reasons for this view and for more
information about our policy in relation to the provision of
non-audit services by the auditor, refer to section 2.10.
BHP Annual Report 2020 169
Strategic ReportGovernance at BHPRemuneration ReportFinancial StatementsAdditional informationShareholder informationDirectors’ Report4 4.13 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.
No political contributions/donations for political purposes were
made by BHP to any political party, politician, elected official or
candidate for public office during FY2020.(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 1.5.3, 1.9 to 1.11 and 6.4.
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.
4.18 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 1.9.1 (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 24 ‘Employee share ownership
plans’ in section 5
As at the date of this Directors’ Report, there were 14,978,955
unvested equity awards outstanding in relation to BHP Group
Limited ordinary shares held by 15,795 holders and 364,889
unvested equity awards outstanding in relation to BHP Group Plc
ordinary shares held by 998 holders. The expiry dates of these
unvested equity awards range between April 2021 and August 2024
and there is no exercise price. No options over unissued shares
or unissued interests in BHP have been granted since the end of
FY2020 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 FY2020. Further details are set out in note 24 ‘Employee
share ownership plans’ in section 5. Details of movements in share
capital during and since the end of FY2020 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
Chair
Dated: 3 September 2020
Mike Henry
Chief Executive Officer
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 1.7.
Fines and prosecutions
For the purposes of section 299 (1)(f) of the Australian Corporations
Act 2001, in FY2020 BHP levied six fines in relation to Australian
environmental laws and regulations at our operated assets, the
total amount payable being US$216,229. Two fines were received at
Blackwater: noise exceedance (US$9,123) and mine affected water
(US$8,937). One fine was received at Goonyella: unauthorised
release (US$135,733) and one fine at Saraji: tailings pipeline
breach (US$8,830). One fine was received at NSWEC: dust event
(US$10,198) and one fine at Nickel West: mining disturbance
footprint non adherence (US$43,408).
Greenhouse gas emissions
Regulations made under 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, and the Group’s
energy consumption. In accordance with those UK requirements,
information on BHP’s total FY2020 greenhouse gas emissions and
intensity and energy consumption has been included in sections
1.4.8, 1.7.8 and 6.6.
For more information on environmental performance, including
environmental regulation, refer to section 1.7.
(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.
170 BHP Annual Report 2020
About these Financial Statements
Reporting entity
BHP Group Limited, an incorporated Australian-listed
company, and BHP Group Plc, an incorporated UK-listed
company, form a Dual Listed Company (DLC). 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 32
‘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 3 September 2020. 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 Leases
21 Net finance costs
22 Financial risk management
Employee matters
23 Key management personnel
24 Employee share ownership plans
25 Employee benefits, restructuring and post-retirement
employee benefits provisions
26 Pension and other post-retirement obligations
27 Employees
Group and related party information
28 Discontinued operations
29 Subsidiaries
Investments accounted for using the equity method
30
31
Interests in joint operations
32 Related party transactions
Unrecognised items and uncertain events
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 2020 171
Section 5Financial Statements
5.1 Consolidated Financial Statements
5.1.1 Consolidated Income Statement for the year ended 30 June 2020
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
30
21
6
28
7
7
7
7
2020
US$M
42,931
777
(28,775)
(512)
14,421
(1,262)
351
(911)
13,510
(4,708)
(66)
(4,774)
8,736
−
8,736
780
7,956
157.3
157.0
157.3
157.0
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
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
5.1.2 Consolidated Statement of Comprehensive Income for the year ended 30 June 2020
Profit after taxation from Continuing and Discontinued operations
Other comprehensive income
Items that may be reclassified subsequently to the income statement:
Net valuation gains 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
2020
US$M
8,736
−
(315)
297
1
−
5
(12)
(81)
(2)
26
(57)
(69)
8,667
769
7,898
2019
US$M
9,185
−
(327)
299
1
(6)
8
(25)
(20)
1
19
−
(25)
9,160
878
8,282
2018
US$M
4,823
11
82
(215)
2
−
36
(84)
1
−
(14)
(13)
(97)
4,726
1,118
3,608
172 BHP Annual Report 2020
5.1.3 Consolidated Balance Sheet as at 30 June 2020
Notes
2020
US$M
2019
US$M
ASSETS
Current assets
Cash and cash equivalents
Trade and other receivables
Other financial assets
Inventories
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
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
22
10
8
22
10
11
12
30
13
9
19
22
4, 14, 18, 25
9
19
22
13
4, 14, 18, 25
16
16
13,426
3,364
84
4,101
366
130
21,471
267
2,522
1,221
72,362
624
2,585
3,688
43
83,312
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
104,783
100,861
5,767
5,012
225
913
2,810
97
6,717
1,661
127
1,546
2,175
113
14,824
12,339
1
22,036
1,414
109
2,758
11,185
210
37,713
52,537
52,246
1,111
1,057
(5)
2,306
43,467
47,936
4,310
52,246
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
The Financial Statements were approved by the Board of Directors on 3 September 2020 and signed on its behalf by:
Ken MacKenzie
Chair
Mike Henry
Chief Executive Officer
BHP Annual Report 2020 173
Strategic ReportGovernance at BHPRemuneration ReportDirectors’ ReportAdditional informationShareholder informationFinancial Statements5 5.1.4 Consolidated Cash Flow Statement for the year ended 30 June 2020
Notes
2020
US$M
2019
US$M
13,510
15,049
2018
US$M
14,751
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
6,112
494
911
512
720
291
(715)
(755)
1,188
22,268
137
385
(1,225)
85
48
(5,992)
15,706
−
15,706
(6,900)
(740)
517
(618)
265
(140)
(7,616)
−
−
(7,616)
514
(157)
(2,047)
(143)
−
(6,876)
(1,043)
(9,752)
−
(9,752)
(1,662)
−
−
15,593
(505)
13,426
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
(285)
(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
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
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
28
28
28
28
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.
174 BHP Annual Report 2020
5.1.5 Consolidated Statement of Changes in Equity for the year ended 30 June 2020
Attributable to BHP shareholders
Share capital
Treasury shares
US$M
Balance as at 1 July 2019
Total comprehensive income
Transactions with owners:
Purchase of shares by ESOP Trusts
Employee share awards exercised
net of employee contributions
net of tax
Vested employee share awards
that have lapsed, been cancelled
or forfeited
Accrued employee entitlement
for unexercised awards net of tax
Dividends
BHP
Group
Limited
1,111
−
BHP
Group
Plc
1,057
−
−
−
−
−
−
−
−
−
−
−
Balance as at 30 June 2020
1,111
1,057
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
net of tax
Vested employee share awards
that have lapsed, been cancelled
or 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
1,186
−
1,186
1,057
−
1,057
−
−
−
−
−
−
(75)
−
−
−
−
−
−
−
−
−
−
−
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
net of tax
Vested employee share awards
that have lapsed, been cancelled
or 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
The accompanying notes form part of these Financial Statements.
BHP
Group
Limited
BHP
Group
Plc
Reserves
Retained
earnings
Total equity
attributable
to BHP
shareholders
Non-
controlling
interests
2,285
(12)
42,819
7,910
47,240
7,898
4,584
769
−
−
(143)
(32)
−
(139)
166
−
−
−
(5)
(5)
−
(5)
−
−
−
(4)
4
−
−
−
−
−
−
−
−
(182)
(6)
155
−
−
−
−
−
−
(2)
−
(159)
6
−
−
−
−
−
−
−
(1)
−
(12)
Total
equity
51,824
8,667
(143)
−
−
60,670
(7)
60,663
9,160
(188)
−
−
−
−
−
−
−
−
−
−
−
−
175
(7,234)
−
(1,043)
175
(8,277)
2,306
43,467
47,936
4,310
52,246
51,064
(7)
51,057
8,306
55,592
(7)
55,585
8,282
5,078
−
5,078
878
−
(188)
(132)
(38)
(10)
175
−
10
−
(7,234)
2,290
−
2,290
(24)
−
(18)
138
−
−
−
(1)
(100)
(61)
18
−
(11,302)
138
(11,302)
−
(1,205)
138
(12,507)
(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
−
−
(171)
156
13
(139)
(30)
−
−
−
−
−
(5)
−
−
−
−
−
−
(2)
123
−
−
(5)
2
−
−
(5,221)
−
−
−
−
−
(171)
−
−
123
(14)
(1,499)
5
(14)
(6,720)
−
−
−
123
−
(5,221)
(5)
Balance as at 30 June 2019
1,111
1,057
(32)
2,290
51,064
55,592
5,078
60,670
BHP Annual Report 2020 175
Strategic ReportGovernance at BHPRemuneration ReportDirectors’ ReportAdditional informationShareholder informationFinancial Statements5 Basis of preparation
The Group’s Financial Statements as at and for the year ended
30 June 2020:
• are a consolidated general purpose financial report;
• have been prepared in accordance with the requirements of the:
– Australian Corporations Act 2001;
– UK Companies Act 2006;
• have 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);
• are prepared on a going concern basis;
• measure 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;
• include 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;
• include 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’;
• apply 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;
• present reclassified comparative information where required
for consistency with the current year’s presentation;
• adopt all new and amended standards and interpretations under
IFRS issued by the relevant bodies (listed above), that are mandatory
for application in periods beginning on 1 July 2019;
• early adopt amendments to IFRS 9/AASB 9 ‘Financial Instruments’
(IFRS 9) and IFRS 7/AASB 7 ‘Financial Instruments: Disclosures’
(IFRS 7) in relation to Interest Rate Benchmark Reform;
• apply accounting policies consistently in all prior years presented
with the exception of the new standards and amendments adopted
from 1 July 2019 and 1 July 2018. Refer to note 38 ‘New and
amended accounting standards and interpretations’ for the impact
on the Financial Statements;
• have not early adopted any other 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 29
‘Subsidiaries’, note 30 ‘Investments accounted for using the equity
method’ and note 31 ‘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 incurred
jointly. 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.
176 BHP Annual Report 2020
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
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).
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:
Note
4
6
10
11
11
11
11
Significant events – Samarco dam failure
Taxation
Inventories
Exploration and evaluation
Development expenditure
Overburden removal costs
Depreciation of property, plant and equipment
11 and 12
Impairments of non-current assets –
recoverable amount
14
20
30
Closure and rehabilitation provisions
Leases
Impairments of investments accounted
for using the equity method
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.
Reserve estimates
Reserves are estimates of the amount of product that can be
demonstrated to be able to be economically and legally extracted
from the Group’s properties. 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. 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 6.4.
Section 6.4 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;
• closure and rehabilitation 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.
Impact of COVID-19 pandemic
The Group continues to actively monitor the impact of the COVID-19
pandemic, including the impact on economic activity and financial
reporting. During FY2020, the Group experienced lower volumes
at certain operated assets, temporary shutdowns at non-operated
equity accounted investments (Antamina and Cerrejón) and incurred
incremental directly attributable costs including those associated
with the increased provision of health and hygiene services and
the impacts of maintaining social distancing requirements. These
incremental costs have been classified as an exceptional item,
as outlined in note 3 ‘Exceptional items’.
As the pandemic continues to progress and evolve, it is difficult
to predict the full extent and duration of resulting operational and
economic impacts for the Group, which are expected to impact a
number of reporting periods. This uncertainty impacts judgements
made by the Group, including those relating to assessing
collectability of receivables and determining the recoverable values
of the Group’s non-current assets as outlined in notes 8 ‘Trade and
other receivables’ and 11 ‘Property, plant and equipment’, respectively.
The ongoing uncertainty has also been considered in the Group’s
assessment of the appropriateness of adopting the going concern
basis of preparation of the Consolidated Financial Statements. The
Group’s financial forecasts, including downside commodity price and
production scenarios that include the potential impact of COVID-19,
demonstrate that the Group believes that it has sufficient financial
resources to meet its obligations as they fall due throughout the
going concern period. As such, the Consolidated Financial
Statements continue to be prepared on the going concern basis.
BHP Annual Report 2020 177
Strategic ReportGovernance at BHPRemuneration ReportDirectors’ ReportAdditional informationShareholder informationFinancial Statements5 5.1.6 Notes to the Financial Statements
Performance
1 Segment reporting
Reportable segments
The Group operated four reportable segments during FY2020, 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 for the years ended 30 June 2019 and 30 June 2018 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, other unallocated operations including Potash, Nickel West and legacy assets (previously
disclosed as closed mines in the Petroleum reportable segment), and consolidation adjustments. Comparative information for the years ended
30 June 2019 and 30 June 2018 have been restated to reflect the inclusion of legacy assets in Group and unallocated items. 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 2020
US$M
Revenue
Inter-segment revenue
Total revenue
Underlying EBITDA
Depreciation and amortisation
Impairment losses (1)
Underlying EBIT
Exceptional items (2)
Net finance costs
Profit before taxation
Petroleum
4,008
62
4,070
2,207
(1,445)
(12)
750
(6)
Copper
10,666
−
10,666
4,347
(1,740)
(17)
2,590
(1,228)
Iron Ore
20,797
−
20,797
14,554
(1,608)
(22)
12,924
(614)
Group and
unallocated
items/
eliminations
1,219
(63)
1,156
(669)
(512)
(20)
(1,201)
413
Coal
6,241
1
6,242
1,632
(807)
(14)
811
(18)
Group total
42,931
−
42,931
22,071
(6,112)
(85)
15,874
(1,453)
(911)
13,510
Capital expenditure (cash basis)
909
2,434
2,328
603
626
6,900
(Loss)/profit from equity accounted investments,
related impairments and expenses
Investments accounted for using the equity method
Total assets
Total liabilities
(4)
245
13,071
4,824
67
1,558
27,942
3,535
(508)
−
23,841
5,441
(68)
776
12,110
2,601
1
6
27,819
36,136
(512)
2,585
104,783
52,537
178 BHP Annual Report 2020
1 Segment reporting continued
Year ended 30 June 2019
US$M
Restated
Revenue
Inter-segment revenue
Total revenue
Underlying EBITDA
Depreciation and amortisation
Impairment losses (1)
Underlying EBIT
Exceptional items (2)
Net finance costs
Profit before taxation
Capital expenditure (cash basis)
(Loss)/profit from equity accounted investments,
related impairments and expenses
Investments accounted for using the equity method
Total assets
Total liabilities
Year ended 30 June 2018
US$M
Restated
Revenue
Inter-segment revenue
Total revenue
Underlying EBITDA
Depreciation and amortisation
Impairment losses (1)
Underlying EBIT
Exceptional items (2)
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
5,853
77
5,930
4,061
(1,560)
(21)
2,480
−
645
(2)
239
12,434
4,102
Copper
10,838
−
10,838
4,550
(1,835)
(128)
2,587
−
2,735
303
1,472
27,428
3,340
Iron Ore
17,251
4
17,255
11,129
(1,653)
(79)
9,397
(971)
1,611
(945)
−
22,592
5,106
Petroleum
Copper
Iron Ore
5,333
75
5,408
3,393
(1,719)
(76)
1,598
−
656
(4)
249
12,896
3,977
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
Group and
unallocated
items/
eliminations
1,225
(81)
1,144
(649)
(149)
(1)
(799)
19
Group total
44,288
−
44,288
23,158
(5,829)
(264)
17,065
(952)
(1,064)
15,049
604
6,250
(5)
5
26,283
34,039
(546)
2,569
100,861
49,037
Group and
unallocated
items/
eliminations (3)
Group total
1,329
(88)
1,241
(59)
(242)
(1)
(302)
(27)
43,129
−
43,129
23,183
(6,288)
(333)
16,562
(566)
(1,245)
14,751
412
4,979
1
6
37,808
37,909
147
2,473
111,993
51,323
Coal
9,121
−
9,121
4,067
(632)
(35)
3,400
−
655
103
853
12,124
2,450
Coal
8,889
−
8,889
4,397
(686)
(29)
3,682
−
409
192
883
12,257
2,404
(1) Impairment losses exclude exceptional items of US$409 million (FY2019: US$ nil; FY2018: US$ nil).
(2) Exceptional items reported in Group and unallocated include Samarco dam failure costs of US$(32) million (FY2019: US$(31) million; FY2018: US$(27) million)
and Samarco related other income of US$489 million (FY2019: US$50 million; FY2018: US$ nil). Refer to note 3 ‘Exceptional items’ for further information.
(3) Total assets and total liabilities include balances for the year ended 30 June 2018 relating to Onshore US assets.
BHP Annual Report 2020 179
Strategic ReportGovernance at BHPRemuneration ReportDirectors’ ReportAdditional informationShareholder informationFinancial Statements5 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
South America
Rest of world
Unallocated assets (1)
Revenue by location of customer
2020
US$M
2,232
1,156
26,576
3,904
1,475
2,666
2,583
1,827
315
197
42,931
2019
US$M
2,568
1,875
24,274
4,193
2,479
2,550
2,940
2,442
662
305
44,288
2018
US$M
2,304
1,886
22,660
4,628
2,439
2,588
2,620
2,715
1,054
235
43,129
Non-current assets by location of assets
2020
US$M
47,286
9,682
18,179
1,955
6,210
83,312
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
(1) 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.
180 BHP Annual Report 2020
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
2020
US$M
361
1,102
1,076
561
277
216
191
159
39
88
4,070
6,719
1,395
1,463
1,089
10,666
20,663
15
119
20,797
5,357
885
−
−
6,242
1,219
(63)
2019
US$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)
42,931
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
(1) Total Petroleum revenue includes: crude oil US$2,033 million (2019: US$3,171 million; 2018: US$2,933 million), natural gas US$980 million (2019: US$1,259 million;
2018: US$1,124 million), LNG US$774 million (2019: US$1,179 million; 2018: US$920 million), NGL US$198 million (2019: US$263 million; 2018: US$294 million) and other
US$85 million (2019: US$58 million; 2018: US$137 million).
(2) Total Copper revenue includes: copper US$10,044 million (2019: US$10,215 million; 2018: US$12,059 million) and other US$622 million (2019: US$623 million;
2018: US$722 million). Other consists of silver, zinc, molybdenum, uranium and gold.
(3) Total Coal revenue includes: metallurgical coal US$5,311 million (2019: US$7,568 million; 2018: US$7,331 million) and energy coal US$931 million (2019: US$1,553 million;
2018: US$1,558 million).
(4) Group and unallocated items revenue includes: Nickel West US$1,189 million (2019: US$1,193 million; 2018: US$1,297 million) and other revenue US$30 million
(2019: US$32 million; 2018: US$32 million).
Revenue consists of revenue from contracts with customers of US$43,087 million (2019: US$44,361 million; 2018: US$42,748 million)
and other revenue of US$(156) million (2019: US$(73) million; 2018: US$381 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 2020 181
Strategic ReportGovernance at BHPRemuneration ReportDirectors’ ReportAdditional informationShareholder informationFinancial Statements5 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 impact
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 28 ‘Discontinued operations’.
Year ended 30 June 2020
Exceptional items by category
Samarco dam failure
Cancellation of power contracts
COVID-19 related costs
Cerro Colorado impairment
Total
Attributable to non-controlling interests
Attributable to BHP shareholders
Gross
US$M
(176)
(778)
(183)
(409)
(1,546)
(291)
(1,255)
Tax
US$M
−
271
53
(83)
241
90
151
Samarco Mineração S.A. (Samarco) dam failure
The FY2020 exceptional loss of US$176 million related to the Samarco dam failure in November 2015 and comprises the following:
Year ended 30 June 2020
Other income
Expenses excluding net finance costs:
Costs incurred directly by BHP Brasil and other BHP entities in relation to the Samarco dam failure
Loss from equity accounted investments, related impairments and expenses:
Samarco impairment expense
Samarco Germano dam decommissioning
Samarco dam failure provision
Net finance costs
Total (1)
Net
US$M
(176)
(507)
(130)
(492)
(1,305)
(201)
(1,104)
US$M
489
(64)
(95)
46
(459)
(93)
(176)
(1) Refer to note 4 ‘Significant events – Samarco dam failure’ for further information.
Cancellation of power contracts
Reflects an onerous contract provision in relation to the cancellation of power contracts at the Group’s Escondida and Spence operations,
as part of the shift towards 100 per cent renewable energy supply contracts.
COVID-19 related costs
COVID-19 can be considered a single protracted globally pervasive event with financial impacts expected over a number of reporting periods.
The exceptional item reflects the directly attributable COVID-19 pandemic related additional costs for the Group for FY2020, including costs
associated with the increased provision of health and hygiene services and the impacts of maintaining social distancing requirements.
Cerro Colorado impairment
The Group recognised an impairment charge of US$492 million (after tax) in relation to Cerro Colorado. This reflects the decision taken
by the Group to reduce Cerro Colorado’s throughput for the remaining period of its current environmental licence, which expires at the
end of CY2023.
The exceptional items relating to the year ended 30 June 2019 and the year ended 30 June 2018 are detailed below.
30 June 2019
Year ended 30 June 2019
Exceptional items by category
Samarco dam failure
Global taxation matters
Total
Attributable to non-controlling interests
Attributable to BHP shareholders
Gross
US$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$1,060 million related to the Samarco dam failure in November 2015 and comprises the following:
Year ended 30 June 2019
Other income
Expenses excluding net finance costs:
Costs incurred directly by BHP Brasil and other BHP entities in relation to the Samarco dam failure
Loss from equity accounted investments, related impairments and expenses:
Samarco impairment expense
Samarco Germano dam decommissioning
Samarco dam failure provision
Net finance costs
Total (1)
(1) Refer to note 4 ‘Significant events – Samarco dam failure’ for further information.
Net
US$M
(1,060)
242
(818)
−
(818)
US$M
50
(57)
(96)
(263)
(586)
(108)
(1,060)
182 BHP Annual Report 2020
3 Exceptional items continued
Global taxation matters
Global taxation matters includes amounts released from provisions for tax matters and other claims resolved during the period.
30 June 2018
Year ended 30 June 2018
Exceptional items by category
Samarco dam failure
US tax reform
Total
Attributable to non-controlling interests
Attributable to BHP shareholders
Gross
US$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$650 million related to the Samarco dam failure in November 2015 and comprises the following:
Year ended 30 June 2018
Expenses excluding net finance costs:
Costs incurred directly by BHP Brasil and other BHP entities in relation to the Samarco dam failure
Loss from equity accounted investments, related impairments and expenses:
Samarco impairment expense
Samarco dam failure provision
Net finance costs
Total (1)
Net
US$M
(650)
(2,320)
(2,970)
−
(2,970)
US$M
(57)
(80)
(429)
(84)
(650)
(1) Refer to note 4 ‘Significant events – Samarco dam failure’ for further information.
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$2,320 million, primarily relating
to the reduced US corporate income tax rate, which resulted in re-measurement of the Group’s deferred tax position and impairment
of foreign tax credits due to reduced forecast utilisation, together with tax charges on the deemed repatriation of accumulated earnings
of non-US subsidiaries.
Year ended 30 June 2018
Re-measurement of deferred taxes as a result of reduced US corporate income tax rate
Impairment of foreign tax credits
Net impact of tax charges on deemed repatriation of accumulated earnings of non-US subsidiaries
Recognition of Alternative Minimum Tax Credits
Other impacts
Total (1)
(1) Refer to note 6 ‘Income tax expense’ for further information.
US$M
(1,390)
(834)
(194)
95
3
(2,320)
BHP Annual Report 2020 183
Strategic ReportGovernance at BHPRemuneration ReportDirectors’ ReportAdditional informationShareholder informationFinancial Statements5 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 1.8 ‘Samarco’.
Samarco is jointly owned by BHP Billiton Brasil Ltda (BHP Brasil) and Vale S.A. (Vale). BHP Brasil’s 50 per cent interest is accounted for as
an equity accounted joint venture investment. BHP 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 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 Brasil has
an obligation to fund the losses. 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 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 2020 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 Brasil and other BHP entities in relation
to the Samarco dam failure (2)
Loss from equity accounted investments, related impairments and expenses:
Samarco impairment expense (3)
Samarco Germano dam decommissioning (4)
Samarco dam failure provision (5)
Loss from operations
Net finance costs (6)
Loss before taxation
Income tax benefit
Loss after taxation
Balance sheet movement
Trade and other payables
Provisions
Net liabilities
Cash flow statement
Loss before taxation
Adjustments for:
Samarco impairment expense (3)
Samarco Germano dam decommissioning (4)
Samarco dam failure provision (5)
Net finance costs (6)
Changes in assets and liabilities:
Trade and other payables
Net operating cash flows
Net investment and funding of equity accounted investments (7)
Net investing cash flows
Net decrease in cash and cash equivalents
95
(46)
459
93
5
2020
US$M
(176)
430
(464)
(464)
(34)
2020
US$M
489
(64)
(95)
46
(459)
(83)
(93)
(176)
−
(176)
(5)
(137)
(142)
96
263
586
108
(4)
2019
US$M
50
(57)
(96)
(263)
(586)
(952)
(108)
(1,060)
−
(1,060)
4
(629)
(625)
2019
US$M
(1,060)
(11)
(424)
(424)
(435)
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)
(1) Proceeds from insurance settlements.
(2) Includes legal and advisor costs incurred.
(3) Following a change to IAS 28 ‘Investments in Associates and Joint Ventures’ the loss from working capital funding provided during the period will be disclosed as an
impairment included within the Samarco impairment expense line item and not as operating loss. Comparative periods have been restated to reflect the change.
(4) US$37 million change in estimate and US$(83) million exchange translation.
(5) US$916 million change in estimate and US$(457) million exchange translation.
(6) Amortisation of discounting of provision.
(7) Includes US$(95) million funding provided during the period, US$(365) million utilisation of the Samarco dam failure provision, and US$(4) million utilisation of the
Samarco Germano decommissioning provision.
184 BHP Annual Report 2020
4 Significant events – Samarco dam failure continued
Equity accounted investment in Samarco
BHP Brasil’s investment in Samarco remains at US$ nil. BHP Brasil provided US$95 million funding under a working capital facility during the
period and recognised impairment losses of US$95 million. No dividends have been received by BHP Brasil from Samarco during the period
and Samarco currently does not have profits available for distribution.
Provisions related to the Samarco dam failure
(369)
916
37
93
(540)
2020
US$M
1,914
137
2,051
896
1,155
2,051
(328)
579
263
108
7
2019
US$M
1,285
629
1,914
440
1,474
1,914
Under a Governance Agreement ratified on 8 August 2018, BHP Brasil,
Samarco and Vale were to establish a process to renegotiate the
Programs over two years to progress settlement of the R$155 billion
(approximately US$28 billion) Federal Public Prosecution Office claim
(described below). The renegotiation process remains outstanding as
certain pre-requisites established in the Governance Agreement are
yet to be implemented. However, the renegotiation may be extended
for a further two years by mutual consent of the parties.
BHP Brasil, Samarco and Vale maintain security comprising R$1.3 billion
(approximately US$240 million) in insurance bonds and a charge of
R$800 million (approximately US$145 million) over Samarco’s assets.
A further R$100 million (approximately US$20 million) in liquid assets
previously maintained as security has been released for COVID-19
related response efforts in Brazil. The security is maintained for a
period of 30 months from ratification of the Governance Agreement,
after which BHP 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$400 million).
Samarco Germano dam decommissioning
Samarco is currently progressing plans for the accelerated
decommissioning of its upstream tailings dams (the Germano dam
complex). Given the significant uncertainties surrounding the nature
and extent of Samarco’s future operations and related cash flows,
BHP Brasil recognises a provision of US$227 million (30 June 2019:
US$263 million) for a 50 per cent share of the remaining expected
Germano decommissioning cost. The decommissioning is at an
early stage and as a result, further engineering work and required
validation by Brazilian authorities could lead to changes to estimates
in future reporting periods.
At the beginning of the financial year
Movement in provisions
Comprising:
Utilised
Adjustments charged to the income statement:
Change in estimate – Samarco dam failure provision
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 2020, BHP 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 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. In addition, the 12th Federal
Court is supervising the work of the Fundação Renova and in July
2020 made decisions relating to financial compensation for impacted
persons in two municipalities, which have been considered in the
Samarco dam failure provision change in estimate. Further decisions
are anticipated in FY2021.
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 Brasil
and Vale has funding obligations under the Framework Agreement
in proportion to its 50 per cent shareholding in Samarco.
Samarco is currently progressing plans to resume operations,
however significant uncertainties surrounding the nature and
extent of future operations remain. In light of these uncertainties
and based on currently available information, BHP Brasil’s provision
for its obligations under the Framework Agreement Programs is
US$1.8 billion before tax and after discounting at 30 June 2020
(30 June 2019: US$1.7 billion).
BHP Annual Report 2020 185
Strategic ReportGovernance at BHPRemuneration ReportDirectors’ ReportAdditional informationShareholder informationFinancial Statements5 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 Office claim
BHP 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$28 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$1.4 billion) injunction request. Despite suspension of the claim
being for a period of two years from the date of ratification of the
Governance Agreement on 8 August 2018, the claim has not been
resumed and the parties may negotiate a further extension.
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 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 Ltd, BHP Group Plc, BHP Brasil, Vale and officers
of Samarco, including four of Vale and BHP Brasil’s nominees
to the Samarco Board. On 5 April 2017, the plaintiff discontinued
its claims against the individual defendants.
The complaint, along with a second amended complaint, has
previously been dismissed by the Court. The plaintiff filed a motion
for reconsideration, or leave to file a third amended complaint,
which was denied by the Court on 30 October 2019. The plaintiff
has appealed this decision and the appeal remains pending before
the Court.
The amount of damages sought by the putative class is unspecified.
Australian class action complaints
BHP Group Ltd is named as a defendant in a shareholder class action
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.
The amount of damages sought 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. The amount
of damages sought in these claims is unspecified.
The court heard a preliminary application filed by BHP to strike out or
stay this action on jurisdictional and other procedural grounds in July
2020. The court has not yet issued its judgement on this application.
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 has determined that a provision can only
be recognised for obligations under the Framework
Agreement and Samarco Germano dam decommissioning
as at 30 June 2020. 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 75 per cent of remaining costs for
Programs under the Framework Agreement will be
incurred by December 2021.
While the provisions have been measured based on
latest information available, 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 duration 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.
The provisions may also be affected by factors including
but not limited to:
• resolution of existing and potential legal claims;
• 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, community
participation required under the Governance Agreement
and rulings made by the 12th Federal Court;
• 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 the nature and
extent of Samarco’s future operations;
• costs to complete the Germano dam decommissioning;
• updates to discount and foreign exchange rates.
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.
186 BHP Annual Report 2020
4 Significant events – Samarco dam failure continued
Criminal charges
The Federal Prosecutors’ Office has filed criminal charges against
BHP Brasil, Samarco and Vale and certain employees and former
employees of BHP Brasil (Affected Individuals) in the Federal Court
of Ponte Nova, Minas Gerais. On 3 March 2017, BHP Brasil filed its
preliminary defences. The Federal Court terminated the charges
against eight of the Affected Individuals. The Federal Prosecutors’
Office has appealed seven of those decisions. BHP 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$1.4 billion),
State Prosecutors in Espírito Santo (claiming damages of approximately
R$2 billion, US$365 million), and public defenders in Minas Gerais
(claiming damages of approximately R$10 billion, US$1.8 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 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 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 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 2020, BHP recognised income of
US$489 million relating to proceeds from insurance settlements.
As at 30 June 2020, 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 Brasil
does not have an existing obligation to fund Samarco.
In November 2019, BHP approved US$44 million for BHP Brasil’s share
of funding for work related to the restart of Samarco’s operations.
In December 2019, a further short-term facility of up to US$212 million
was made available to carry out remediation and stabilisation work
and support Samarco’s care and maintenance and operational restart.
In the six months to 30 June 2020, US$68 million of the total amount
approved has been provided to Samarco. Further funds will be released
to Samarco only as required and subject to the achievement of key
milestones with amounts undrawn expiring at 31 December 2020.
Any additional requests for funding or future investment provided
would be subject to a future decision by BHP, 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 2020, Samarco has recognised provisions of
US$0.2 billion (30 June 2019: 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. Insurers’ loss adjusters or claims
representatives continue to investigate and assist with the
claims process for matters not yet settled. As at 30 June 2020,
an insurance receivable has not been recognised by Samarco
in respect of ongoing matters.
Samarco commitments
At 30 June 2020, Samarco has commitments of US$0.4 billion
(30 June 2019: US$0.5 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 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$4.5 billion (approximately US$0.8 billion).
BHP Annual Report 2020 187
Strategic ReportGovernance at BHPRemuneration ReportDirectors’ ReportAdditional informationShareholder informationFinancial Statements5 5 Expenses and other income
Employee benefits expense:
Wages, salaries and redundancies
Employee share awards
Social security costs
Pension and other post-retirement obligations
Less employee benefits expense classified as exploration and evaluation expenditure
Changes in inventories of finished goods and work in progress
Raw materials and consumables used
Freight and transportation
External services
Third party commodity purchases
Net foreign exchange gains
Fair value change on derivatives (1)
Government royalties paid and payable
Exploration and evaluation expenditure incurred and expensed in the current period
Depreciation and amortisation expense
Net impairments:
Property, plant and equipment
Goodwill and other intangible assets
Available for sale financial assets
Lease costs (2)
All other operating expenses
Total expenses
Insurance recoveries (3)
Other income (4)
Total other income
2020
US$M
3,706
129
2
283
(65)
(326)
5,509
1,981
4,404
1,139
(603)
422
2,362
517
6,112
494
−
−
675
2,034
28,775
(489)
(288)
(777)
2019
US$M
3,683
138
4
292
(85)
496
4,591
2,378
4,745
1,069
(147)
8
2,538
516
5,829
250
14
−
405
1,298
2018
US$M
3,653
123
4
292
(82)
(142)
4,389
2,294
4,786
1,374
(93)
208
2,168
641
6,288
318
14
1
421
870
28,022
27,527
(57)
(336)
(393)
−
(247)
(247)
(1) Fair value change on derivatives is principally related to commodity price contracts, foreign exchange contracts and embedded derivatives used in the ordinary
course of business as well as derivatives used as part of the funding of dividends.
(2) Lease costs for FY2020 represent short-term, low-value and variable lease costs that continue to be charged against profit from operations under IFRS 16. Refer to note
20 ‘Leases’ for details. Lease costs for FY2019 and FY2018 represent the operating lease rentals under IAS 17.
(3) Insurance recoveries is principally related to claims received from Samarco dam failure. Refer to note 4 ‘Significant events – Samarco dam failure’ for further information.
(4) 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 can be reliably
measured. Dividends are recognised upon declaration.
188 BHP Annual Report 2020
6 Income tax expense
Total taxation expense comprises:
Current tax expense
Deferred tax (benefit)/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)
Amounts under/(over) provided in prior years
Foreign exchange adjustments
Tax rate changes
Recognition of previously unrecognised tax assets
Investment and development allowance
Impact of tax rates applicable outside of Australia (3)
Other
Income tax expense
Royalty-related taxation (net of income tax benefit)
Total taxation expense
2020
US$M
5,109
(335)
4,774
2020
US$M
2019
US$M
5,408
121
5,529
2019
US$M
13,510
4,053
15,049
4,515
−
−
−
−
−
−
707
225
154
64
20
(8)
(30)
(99)
(167)
(211)
4,708
66
4,774
–
–
–
–
–
–
742
283
164
(21)
(25)
6
(10)
(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)
(51)
(152)
(79)
(170)
(180)
(484)
172
6,879
128
7,007
(1) Comprising US$797 million repatriation tax net of US$603 million of previously unrecognised tax credits.
(2) The (loss)/profit from equity accounted investments, related impairments and expenses is net of income tax. This item removes the prima facie tax effect on such
(loss)/profit, related impairments and expenses.
(3) All profits earned in Singapore by BHP’s Sales and Marketing organisation from the sale of our Australian commodities acquired from entities controlled by BHP Group
Limited are subject to Australian ‘top up tax’ under the Controlled Foreign Company tax rules in FY2020. This reflects the change in ownership of the main Sales and
Marketing entity, in accordance with the settlement agreement entered into with the Australian Taxation Office in FY2019 to resolve a long-standing transfer pricing dispute.
Income tax recognised in other comprehensive income is as follows:
Income tax effect of:
Items that may be reclassified subsequently to the income statement:
Net valuation gains on investments taken to equity
Cash flow hedges:
Gains/(losses) taken to equity
(Gains)/losses transferred to the income statement
Income tax credit relating to items that may be reclassified subsequently to the income statement
Items that will not be reclassified to the income statement:
Remeasurement gains/(losses) on pension and medical schemes
Others
Income tax credit/(charge) relating to items that will not be reclassified to the income statement
Total income tax credit relating to components of other comprehensive income (1)
2020
US$M
2019
US$M
2018
US$M
−
94
(89)
5
25
1
26
31
−
98
(90)
8
7
12
19
27
(3)
(25)
64
36
(22)
8
(14)
22
(1) Included within total income tax relating to components of other comprehensive income is US$31 million relating to deferred taxes and US$ nil relating to current
taxes (2019: US$15 million and US$12 million; 2018: US$17 million and US$5 million).
BHP Annual Report 2020 189
Strategic ReportGovernance at BHPRemuneration ReportDirectors’ ReportAdditional informationShareholder informationFinancial Statements5 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 as at
30 June 2020. Matters with a possible economic outflow and/or presently incapable of being measured reliably are contingent liabilities and
disclosed in note 33 ‘Contingent liabilities’. Individually significant matters, including those resolved during the financial year, are outlined
below to the extent that disclosure does not prejudice the Group.
Controlled Foreign
Companies dispute
On 11 March 2020, the Australian High Court ruled that BHP Group Limited and BHP Group Plc are ‘associates’
under the Controlled Foreign Companies rules, and therefore profits earned globally by BHP’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 at the corporate tax rate of 30 per cent. As a result of this ruling, BHP paid approximately
US$115 million in additional taxes for the prior years, being FY2006 to FY2019, with US$32 million paid in prior
periods and US$83 million paid in FY2020.
Samarco tax assessments
Details of uncertain tax and royalty matters relating to Samarco are disclosed in note 4 ‘Significant events –
Samarco dam failure’.
190 BHP Annual Report 2020
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 tax assets and tax liabilities, including deferred tax,
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
2020
2019
2018
7,956
7,956
5,057
5,069
157.3
157.3
157.0
157.0
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
Refer to note 28 ‘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.
During December 2018, 266 million BHP Group Limited shares were bought back and then cancelled during the period following an off-market
buy-back program of US$5.2 billion related to the disbursement of proceeds from the disposal of Onshore US.
For the purposes of calculating diluted earnings per share, the effect of 12 million dilutive shares has been taken into account for the year
ended 30 June 2020 (2019: 13 million shares; 2018: 14 million shares). The Group’s only potential dilutive ordinary shares are share awards
granted under the employee share ownership plans for which terms and conditions are described in note 24 ‘Employee share ownership
plans’. Diluted earnings per share calculation excludes instruments which are considered antidilutive.
At 30 June 2020, there are no instruments which are considered antidilutive (2019: nil; 2018: nil).
BHP Annual Report 2020 191
Strategic ReportGovernance at BHPRemuneration ReportDirectors’ ReportAdditional informationShareholder informationFinancial Statements5 Working capital
8 Trade and other receivables
Trade receivables
Loans to equity accounted investments
Other receivables
Total
Comprising:
Current
Non-current
2020
US$M
1,974
40
1,617
3,631
3,364
267
2019
US$M
2,403
33
1,339
3,775
3,462
313
Recognition and measurement
Trade receivables are recognised initially at their transactions price or, for those receivables containing a significant financing component, at
fair value. Trade receivables are subsequently measured 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.
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 the receivable is considered in assessing receivables for impairment.
The 10 largest customers represented 32 per cent (2019: 34 per cent) 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 2020, trade receivables of US$23 million (2019: US$14 million) were past due but not impaired. The majority of these receivables
were less than 30 days overdue.
The assessment of recoverability of trade receivables at 30 June 2020 has considered the impacts of COVID-19 and no material recoverability
issues have been identified. Enhanced credit monitoring of commercial counterparties commenced from late January 2020 as COVID-19
impacted key markets in Asia, Europe and the United States and increased commodity price volatility.
At 30 June 2020, trade receivables are stated net of provisions for expected credit losses of US$2 million (2019: US$3 million).
192 BHP Annual Report 2020
9 Trade and other payables
Trade payables
Other payables
Total
Comprising:
Current
Non-current
10 Inventories
Raw materials and consumables
Work in progress
Finished goods
Total (1)
Comprising:
Current
Non-current
2020
US$M
4,396
1,372
5,768
5,767
1
2019
US$M
5,162
1,560
6,722
6,717
5
2020
US$M
1,797
2,814
711
5,322
4,101
1,221
2019
US$M
1,406
2,515
687
4,608
3,840
768
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 or within the operating
cycle of the business.
(1) Inventory write-downs of US$37 million were recognised during the year (2019: US$16 million; 2018: US$18 million). Inventory write-downs of US$13 million made
in previous periods were reversed during the year (2019: US$21 million; 2018: US$2 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.
BHP Annual Report 2020 193
Strategic ReportGovernance at BHPRemuneration ReportDirectors’ ReportAdditional informationShareholder informationFinancial Statements5 Resource assets
11 Property, plant and equipment
Net book value – 30 June 2020
At the beginning of the financial year
Impact of adopting IFRS 16 (1)
Additions (2)
Remeasurements of index-linked freight contracts (3)
Depreciation for the year
Impairments, net of reversals
Disposals
Transfers and other movements
At the end of the financial year (4)
– Cost
– Accumulated depreciation and impairments
Net book value – 30 June 2019
At the beginning of the financial year
Additions (2)
Depreciation for the year
Impairments, net of reversals
Disposals
Transferred to assets held for sale
Exchange variations taken to reserve
Transfers and other movements
At the end of the financial year (4)
– 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
7,885
754
115
−
(630)
(17)
(12)
292
8,387
13,932
(5,545)
8,152
5
(585)
(9)
(2)
−
−
324
7,885
12,825
(4,940)
38,174
1,400
1,719
733
(5,104)
(189)
(22)
2,718
39,429
97,230
(57,801)
40,885
515
(4,885)
(234)
(40)
−
(1)
1,934
38,174
92,090
(53,916)
9,211
−
684
−
(294)
(288)
−
(661)
8,652
13,736
(5,084)
8,974
1,023
(277)
−
(5)
−
−
(504)
9,211
13,681
(4,470)
11,149
−
6,100
−
−
−
−
(3,475)
13,774
13,774
−
7,554
5,799
−
−
−
(331)
−
(1,873)
11,149
11,149
−
1,622
−
218
−
−
−
(65)
345
2,120
2,899
(779)
1,617
418
−
(7)
−
−
−
(406)
1,622
2,404
(782)
Total
US$M
68,041
2,154
8,836
733
(6,028)
(494)
(99)
(781)
72,362
141,571
(69,209)
67,182
7,760
(5,747)
(250)
(47)
(331)
(1)
(525)
68,041
132,149
(64,108)
(1) Refer to note 38 ‘New and amended accounting standards and interpretations’.
(2) Includes change in estimates and net foreign exchange gains/(losses) related to the closure and rehabilitation provisions for operating sites. Refer to note 14
‘Closure and rehabilitation provisions’.
(3) Relates to remeasurements of index-linked freight contracts including continuous voyage charters (CVCs). Refer to note 20 ‘Leases’.
(4) Includes the carrying value of the Group’s right-of-use assets relating to land and buildings and plant and equipment of US$3,047 million (2019: US$492 million
relating to finance leases). Refer to note 20 ‘Leases’ for the movement of the right-of-use assets during FY2020.
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.
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.
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.
194 BHP Annual Report 2020
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 2020 195
Strategic ReportGovernance at BHPRemuneration ReportDirectors’ ReportAdditional informationShareholder informationFinancial Statements5 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
Commitments
The Group’s commitments for capital expenditure were US$2,585 million as at 30 June 2020 (2019: US$3,308 million). The Group’s
commitments related to leases are included in note 20 ‘Leases’.
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.
196 BHP Annual Report 2020
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, or the
possible additional impacts from emerging risks such as those
related to climate change and the transition to a lower carbon
economy and pandemics similar to COVID-19.
Climate change
Impacts related to climate change and the transition to a lower
carbon economy may include:
• demand for the Group’s commodities decreasing, due to
policy, regulatory (including carbon pricing mechanisms),
legal, technological, market or societal responses to climate
change, resulting in a proportion of a CGU’s reserves becoming
incapable of extraction in an economically viable fashion;
• 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.
The Group continues to develop its assessment of the potential
impacts of climate change and the transition to a lower carbon
economy. Where sufficiently developed, the potential financial
impacts on the Group of climate change and the transition to a
lower carbon economy have been considered in the assessment
of indicators of impairment, including:
• the Group’s current assumptions relating to demand for
commodities and carbon pricing and their impact on the
Group’s long term price forecasts;
• the Group’s operational emissions reduction strategy. For
example, transitioning to renewable power supply contracts
at the Group’s Escondida and Spence operations.
COVID-19
The macro economic disruptions relating to COVID-19 and
mitigating actions enforced by health authorities create
uncertainty in the Group’s operating and economic assumptions,
including commodity prices, demand and supply volumes,
operating costs, and discount rates.
However, given the long-lived nature of the majority of the
Group’s assets, COVID-19 did not, in isolation, result in the
identification of indicators of impairment for the Group’s
asset values at 30 June 2020.
Due to ongoing uncertainty as to the extent and duration
of COVID-19 restrictions and the overall impact on economic
activity, actual experience may materially differ from internal
forecasts and may result in the reassessment of indicators of
impairment for the Group’s assets in future reporting periods.
Petroleum
Given the significant petroleum price volatility in CY2020 and the
potential impact of climate change on long term petroleum prices,
the Group considered a range of long term price assumptions,
including oil prices at US$55 a barrel (Brent), when determining
that no indicators of impairment existed at 30 June 2020.
Estimates: In determining the recoverable amount of assets,
in the absence of quoted market prices, estimates are made
regarding the present value of future post-tax cash flows. These
estimates are made from the perspective of a market participant
and include prices, future production volumes, operating costs,
tax attributes and discount rates. All estimates require significant
management judgements and assumptions and are subject
to risk and uncertainty that may be beyond the control of the
Group; hence, there is a possibility that changes in circumstances
will materially alter projections, which may impact the
recoverable amount of assets at each reporting date.
12 Intangible assets
Net book value
At the beginning of the financial year
Additions
Amortisation for the year
Impairments for the year
Transfers and other movements
At the end of the financial year (1)
– Cost
– Accumulated amortisation and impairments
2020
Other
intangibles
US$M
Goodwill
US$M
Total
US$M
Goodwill
US$M
247
−
−
−
−
247
247
−
428
98
(118)
−
(31)
377
675
98
(118)
−
(31)
624
1,580
(1,203)
1,827
(1,203)
247
−
−
−
−
247
247
−
2019
Other
intangibles
US$M
531
31
(142)
(14)
22
428
1,697
(1,269)
Total
US$M
778
31
(142)
(14)
22
675
1,944
(1,269)
(1) The Group’s aggregate net carrying value of goodwill is US$247 million (2019: US$247 million), representing less than one per cent of net equity at 30 June 2020
(2019: less than one 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.
BHP Annual Report 2020 197
Strategic ReportGovernance at BHPRemuneration ReportDirectors’ ReportAdditional informationShareholder informationFinancial Statements5 12 Intangible assets continued
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 credit/(charge) recorded in the income statement (1)
Income tax credit recorded directly in equity
Other movements
At the end of the financial year
2020
US$M
530
335
34
31
930
2019
US$M
569
(81)
15
27
530
2018
US$M
2,023
(1,445)
17
(26)
569
(1) Includes Discontinued operations income tax credit to the income statement of US$ nil (2019: US$40 million; 2018: US$510 million).
For recognition and measurement refer to note 6 ‘Income tax expense’.
The composition of the Group’s net deferred tax assets and liabilities recognised in the balance sheet and the deferred tax expense (credited)/
charged to the income statement is as follows:
Type of temporary difference
Depreciation (1)
Exploration expenditure
Employee benefits
Closure and rehabilitation
Resource rent tax
Other provisions
Deferred income
Deferred charges
Investments, including foreign tax credits
Foreign exchange gains and losses
Tax losses
Lease liability (1)
Other
Total
Deferred tax assets
Deferred tax liabilities
(Credited)/charged to the income statement
2020
US$M
(2,749)
398
353
2,100
359
173
(4)
(383)
348
(134)
2,759
548
(80)
3,688
2019
US$M
(1,717)
449
310
1,671
431
144
24
(416)
412
(97)
2,611
−
(58)
3,764
2020
US$M
1,807
−
(26)
(109)
921
(239)
−
187
458
(61)
−
(245)
65
2,758
2019
US$M
1,444
−
(6)
(203)
1,112
(1)
(5)
286
600
(6)
−
−
13
3,234
2020
US$M
1,394
51
(38)
(334)
(119)
(268)
33
(132)
(77)
(18)
(148)
(793)
114
(335)
2019
US$M
2018
US$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
(1) Includes deferred tax associated with the recognition of right-of-use assets and lease liabilities on adoption of IFRS 16. Refer to note 20 ‘Leases’.
The amount of deferred tax assets dependent on future taxable profits not arising from the reversal of existing deferred tax liabilities,
and which relate to tax jurisdictions where the taxable entity has suffered a loss in the current or preceding year, was US$2,865 million
at 30 June 2020 (2019: US$2,229 million). It is considered probable that these benefits will be utilised based on anticipated future taxable
income or gains in relevant jurisdictions. The amounts recognised in the Financial Statements reflect the Group’s best judgements and
estimates as described in note 6 ‘Income tax expense’.
198 BHP Annual Report 2020
13 Deferred tax balances continued
The composition of the Group’s unrecognised deferred tax assets and liabilities is as follows:
Unrecognised deferred tax assets
Tax losses and tax credits (1)
Investments in subsidiaries (2)
Deductible temporary differences relating to PRRT (3)
Mineral rights (4)
Other deductible temporary differences (5)
Total unrecognised deferred tax assets
Unrecognised deferred tax liabilities
Investments in subsidiaries (2)
Future taxable temporary differences relating to unrecognised deferred tax asset for PRRT (3)
Total unrecognised deferred tax liabilities
2020
US$M
4,088
1,575
2,079
2,244
673
10,659
2,375
624
2,999
2019
US$M
3,720
1,656
2,197
2,230
412
10,215
2,253
659
2,912
(1) At 30 June 2020, the Group had income and capital tax losses with a tax benefit of US$2,405 million (2019: US$2,265 million) and tax credits of US$1,683 million
(2019: US$1,455 million), which are not recognised as deferred tax assets, because it is not probable that future taxable profits or capital gains will be available
against which the Group can utilise the benefits.
The gross amount of tax losses carried forward that have not been recognised is as follows:
Year of expiry
Income tax losses
Not later than one year
Later than one year and not later than two years
Later than two years and not later than five years
Later than five years and not later than 10 years
Later than 10 years and not later than 20 years
Unlimited
Capital tax losses
Not later than one year
Later than two years and not later than five years
Unlimited
Gross amount of tax losses not recognised
Tax effect of total losses not recognised
2020
US$M
474
240
2,525
679
2,379
2,262
8,559
−
−
4,150
12,709
2,405
Of the US$1,683 million of tax credits, US$1,637 million expires not later than 10 years and US$46 million expires later than 10 years and not later than 20 years.
(2) The Group had deferred tax assets and deferred tax liabilities 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 unrecognised deferred tax assets relating to Australian Petroleum Resource Rent Tax (PRRT). Recognition of a deferred tax asset for PRRT depends
on benefits expected to be obtained from the deduction against PRRT liabilities. As PRRT payments are deductible for income tax purposes, to the extent these PRRT
deferred tax assets are recognised this would give rise to a corresponding deferred tax liability for income tax (presented as the future taxable temporary differences
relating to the unrecognised PRRT deferred tax assets).
(4) The Group had deductible temporary differences relating to mineral rights for which deferred tax assets 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 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.
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
Other movements
At the end of the financial year
Comprising:
Current
Non-current
Operating sites
Closed sites
2020
US$M
6,977
1,255
(188)
731
(19)
(43)
356
(258)
(1)
−
−
8,810
373
8,437
6,636
2,174
2019
US$M
6,330
494
(194)
318
(7)
(33)
353
(201)
(2)
(80)
(1)
6,977
361
6,616
5,535
1,442
BHP Annual Report 2020 199
Strategic ReportGovernance at BHPRemuneration ReportDirectors’ ReportAdditional informationShareholder informationFinancial Statements5
14 Closure and rehabilitation provisions continued
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 currency
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 for operating sites 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$669 million in the year ended
30 June 2020 (2019: charge of US$251 million; 2018: credit of US$(21) million).
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 (including activities to mitigate the
potential physical impact of climate change);
• 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, the estimated timing
of which is informed by the Group’s current assumptions relating
to demand for commodities and carbon pricing, and their impact
on the Group’s long-term price forecasts. Remaining production
lives range from 4-91 years with an average for all sites, weighted
by current closure provision, of approximately 28 years. The
discount rates applied to the Group’s closure and rehabilitation
provisions were revised during the year to reflect decreases in
market interest rates. The effect of changes to discount rates was
an increase of approximatively US$675 million in the closure and
rehabilitation provision of which US$90 million in respect of
closed sites was recognised in the income statement.
A further 0.5 per cent decrease in the real discount rates applied
at 30 June 2020 would result in an increase to the closure and
rehabilitation provision of US$772 million, an increase in property,
plant and equipment of US$606 million in relation to operating
sites and an income statement charge of US$166 million in
respect of closed sites. In addition, the change would result in an
increase of approximately US$35 million to depreciation expense
and a US$16 million reduction in net finance costs for the year
ending 30 June 2021.
Given the long-lived nature of the majority of the Group’s assets,
closure activities are not expected to occur for a significant
period of time. While the closure and rehabilitation provisions
reflect management’s best estimates based on current knowledge
and information, further studies and detailed analysis of the
closure activities for individual assets will be performed as the
assets near the end of their operational life and/or detailed
closure plans are required to be submitted to relevant regulatory
authorities. Such studies and analysis can impact the estimated
costs of closure activities. Estimates can also be impacted by the
emergence of new restoration techniques, changes in regulatory
requirements for rehabilitation, risks relating to climate change
and the transition to a lower carbon economy, and experience at
other operations. These uncertainties may result in future actual
expenditure differing from the amounts currently provided for
in the balance sheet.
200 BHP Annual Report 2020
Capital structure
15 Share capital
BHP Group Limited
BHP Group Plc
2020
shares
2019
shares
2018
shares
2020
shares
2019
shares
2018
shares
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)
2,945,851,394 3,211,691,105
(6,854,057)
5,902,588
951,469
(265,839,711)
(5,975,189)
6,893,113
(917,924)
−
3,211,691,105
(7,469,236)
7,339,522
129,714
−
2,112,071,796
(185,297)
222,245
(36,948)
−
2,112,071,796
(274,069)
275,984
(1,915)
−
2,112,071,796
(679,223)
711,705
(32,482)
−
Closing number of shares (2)
2,945,851,394 2,945,851,394
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
2,945,621,003 2,944,703,079 3,211,494,259 2,112,069,025 2,112,032,077
39,719
1,148,315
196,846
230,391
2,771
2,112,030,162
41,634
1
−
−
1
1
−
−
1
1
−
−
1
−
1
50,000
−
−
1
50,000
−
−
1
50,000
−
(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 employee share awards during the period 1 July 2020
to 3 September 2020.
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 ordinary shares fully paid
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$10.
Treasury shares are shares of BHP Group
Limited and BHP Group Plc and are held by the
ESOP Trusts for the purpose of issuing shares to
employees under the Group’s Employee Share
Plans. Treasury shares are recognised at cost
and deducted from equity, net of any income
tax effects. When the treasury shares are
subsequently sold or reissued, any consideration
received, net of any directly attributable costs
and income tax effects, is recognised as an
increase in equity. Any difference between
the carrying amount and the consideration,
if reissued, is recognised in retained earnings.
BHP Annual Report 2020 201
Strategic ReportGovernance at BHPRemuneration ReportDirectors’ ReportAdditional informationShareholder informationFinancial Statements5 16 Other equity
Share premium account
Foreign currency
translation reserve
Employee share
awards reserve
2020
US$M
518
39
246
2019
US$M
518
37
213
2018
US$M
518
42
196
Cash flow hedge reserve
50
114
58
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 hedge 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
(23)
(74)
Equity investments
reserve
16
17
−
16
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.
Capital redemption
reserve
Non-controlling interest
contribution reserve
177
177
177
1,283
1,283
1,283
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
2,306
2,285
2,290
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$M
Group share (per cent)
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Net assets
Net assets attributable to NCI
Revenue
Profit after taxation
Other comprehensive income
Total comprehensive income
Profit after taxation attributable to NCI
Other comprehensive income attributable to NCI
Net operating cash flow
Net investing cash flow
Net financing cash flow
Dividends paid to NCI (1)
2020
Other individually
immaterial
subsidiaries (incl.
intra-group
eliminations)
Minera
Escondida
Limitada
Minera
Escondida
Limitada
Total
2019
Other individually
immaterial
subsidiaries (incl.
intra-group
eliminations)
Total
57.5
2,432
12,121
(1,614)
(4,613)
8,326
3,539
6,719
1,088
(27)
1,061
462
(11)
2,637
(919)
(1,920)
757
57.5
2,456
12,538
(1,826)
(4,122)
9,046
3,845
6,876
1,360
(1)
1,359
578
−
3,283
(1,034)
(2,517)
986
771
4,310
318
−
780
(11)
286
1,043
739
4,584
301
(1)
879
(1)
219
1,205
(1) Includes dividends paid to non-controlling interests related to Onshore US of US$ nil (2019: US$7 million). Refer to note 28 ‘Discontinued operations’.
While the Group controls Minera Escondida Limitada, the non-controlling interests hold certain protective rights that restrict the Group’s ability
to sell assets held by Minera Escondida Limitada, or use the assets in other subsidiaries and operations owned by the Group. Minera Escondida
Limitada is also restricted from paying dividends without the approval of the non-controlling interests.
202 BHP Annual Report 2020
17 Dividends
Dividends paid during the period (1)
Prior year final dividend
Interim dividend
Special dividend
Year ended 30 June 2020
Year ended 30 June 2019
Year ended 30 June 2018
Per share
US cents
78
65
−
143
Total
US$M
3,946
3,288
−
7,234
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
(1) 5.5 per cent dividend on 50,000 preference shares of £1 each determined and paid annually (2019: 5.5 per cent; 2018: 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. An additional derivative settlement
of US$322 million was made as part of the funding of the interim dividend and is disclosed in Proceeds/(settlements) of cash management
related instruments in the Cash Flow Statement.
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. Subsequent to year-end, on 18 August 2020, BHP Group Limited and BHP Group Plc determined a final
dividend of 55 US cents per share (US$2,782 million), which will be paid on 22 September 2020 (30 June 2019: final dividend of 78 US cents
per share – US$3,946 million; 30 June 2018: final dividend of 63 US cents per share – US$3,356 million).
BHP Group Limited dividends for all periods presented are, or will be, fully franked based on a tax rate of 30 per cent.
Franking credits as at 30 June
Franking credits arising from the payment of current tax
Total franking credits available (1)
2020
US$M
10,980
471
11,451
2019
US$M
8,681
1,194
9,875
2018
US$M
10,400
1,330
11,730
(1) The payment of the final 2020 dividend determined after 30 June 2020 will reduce the franking account balance by US$694 million.
18 Provisions for dividends and other liabilities
The disclosure below excludes closure and rehabilitation provisions (refer to note 14 ‘Closure and rehabilitation provisions’), employee benefits,
restructuring and post-retirement employee benefits provisions (refer to note 25 ‘Employee benefits, restructuring and post-retirement
employee benefits provisions’) and provisions related to the Samarco dam failure (refer to note 4 ‘Significant events – Samarco dam failure’).
Movement in provision for dividends and other liabilities
At the beginning of the financial year
Dividends determined
Charge/(credit) for the year:
Underlying
Discounting
Exchange variations
Released during the year
Utilisation
Dividends paid
Transfers and other movements
At the end of the financial year
Comprising:
Current
Non-current
2020
US$M
501
7,234
1,027
3
(356)
(94)
(99)
(6,876)
(100)
1,240
258
982
2019
US$M
944
11,302
372
10
101
(391)
(338)
(11,395)
(104)
501
220
281
BHP Annual Report 2020 203
Strategic ReportGovernance at BHPRemuneration ReportDirectors’ ReportAdditional informationShareholder informationFinancial Statements5 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.
With effect from 1 July 2019, the net debt definition includes the fair value of derivative financial instruments used to hedge cash and
borrowings. Management believes this amendment is useful because it reflects the Group’s risk management strategy of reducing
the volatility of net debt caused by fluctuations in foreign exchange and interest rates.
Net debt-related derivative financial instruments are a subset of the other financial assets and liabilities presented in the Consolidated Balance
Sheet. Prior period comparatives have been restated to reflect the change in net debt calculation.
As a result of the adoption of IFRS 16/AASB 16 ‘Leases’ (IFRS 16) from 1 July 2019, the current period ‘Total Interest bearing liabilities’ includes
a US$2,793 million increase in gross debt during the year. The Group elected to apply the modified retrospective transition approach to IFRS
16, with no restatement of comparative periods. Refer to note 20 ‘Leases’ for information on lease liabilities.
Vessel lease contracts that are priced with reference to a freight index, which did not meet the definition of a lease under IAS 17/AASB 117
‘Leases’ (IAS 17), now meet the definition of a lease under IFRS 16. These contracts are required to be remeasured at each reporting date
to the prevailing freight index. While these liabilities are included in the Group interest bearing liabilities, they are excluded from the net debt
calculation as they do not align with how the Group assesses net debt for decision making in relation to the Capital Allocation Framework. In
addition, the freight index has historically been volatile which creates significant short-term fluctuation in these liabilities. As of 1 January 2020,
the Group excludes these liabilities from its net debt calculation.
US$M
Interest bearing liabilities
Bank loans
Notes and debentures
Lease liabilities (1)
Bank overdraft and short-term borrowings
Other
Total interest bearing liabilities
Less: Lease liability associated with index-linked freight contracts
Less: Cash and cash equivalents
Cash
Short-term deposits
Less: Total cash and cash equivalents
Less: Derivatives included in net debt
Net debt management related instruments (2)
Net cash management related instruments (3)
Less: Total derivatives included in net debt
Net debt
Net assets
Gearing
2020
2019
Restated
Current
Non-current
Current
Non-current
737
3,354
853
−
68
5,012
379
3,493
9,933
13,426
(162)
(15)
(177)
1,755
17,691
2,590
−
−
22,036
781
−
−
−
595
−
595
12,044
52,246
18.7%
508
1,002
65
20
66
1,661
−
2,210
13,403
15,613
(48)
(27)
(75)
1,990
20,527
650
−
−
23,167
−
−
−
−
(156)
−
(156)
9,446
51,824
15.4%
(1) Reflects the impact of IFRS 16. Refer to note 20 ‘Leases’.
(2) Represents the net cross currency and interest rate swaps designated as effective hedging instruments included within current and non-current other financial assets
and liabilities.
(3) Represents the net forward exchange contracts included within current and non-current other financial assets and liabilities.
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 borrowings
Total cash and cash equivalents, net of overdrafts
2020
US$M
13,426
−
13,426
2019
US$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$96 million (2019: US$108 million) restricted by legal or contractual arrangements.
204 BHP Annual Report 2020
19 Net debt continued
Interest bearing liabilities and cash and cash equivalents include balances denominated in the following currencies:
USD
EUR
GBP
AUD
CAD
Other
Total
Interest bearing liabilities
Cash and cash equivalents
2020
US$M
14,625
7,323
3,272
1,055
597
176
27,048
2019
US$M
12,485
7,680
3,118
951
594
−
24,828
2020
US$M
9,555
4
519
1,011
2,131
206
13,426
2019
US$M
9,214
6
48
3,023
3,092
230
15,613
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 22 ‘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 FY2020. On 1 May 2020, Moody’s affirmed
its credit rating of the Group at A2 with a stable outlook.
There were no defaults on the Group’s liabilities during the period.
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 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$5.5 billion. As at 30 June 2020, US$ nil commercial paper was
drawn (2019: US$ nil). The revolving credit facility was refinanced on 10 October 2019 and has a five-year maturity ending 10 October 2024.
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:
2020
US$M
Due for payment:
In one year or less or on demand
In more than one year but not more than two years
In more than two years but not more than five years
In more than five years
Total
Carrying amount
2019
US$M
Bank loans,
debentures
and other
loans
Expected
future
interest
payments
Derivatives
related to
debentures
Other
derivatives
Obligations
under lease
liabilities (1)
Trade and
other
payables (2)
4,138
1,665
5,727
10,101
21,631
23,605
813
702
1,713
4,368
7,596
−
260
81
819
974
2,134
1,579
60
−
−
−
60
60
927
630
1,335
1,043
3,935
3,443
5,622
1
−
−
5,623
5,623
Bank loans,
debentures
and other
loans
Expected
future
interest
payments
Derivatives
related to
debentures
Other
derivatives
Obligations
under lease
liabilities (1)
Trade and
other
payables (2)
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
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
(1) Lease obligations as at 30 June 2020 and 30 June 2019 relate to lease liabilities under IFRS 16 and finance lease liabilities under IAS 17, respectively.
(2) Excludes input taxes of US$145 million (2019: US$162 million) included in other payables. Refer to note 9 ‘Trade and other payables’.
Total
11,820
3,079
9,594
16,486
40,979
34,310
Total
9,380
5,224
8,242
18,161
41,007
32,411
BHP Annual Report 2020 205
Strategic ReportGovernance at BHPRemuneration ReportDirectors’ ReportAdditional informationShareholder informationFinancial Statements5 20 Leases
The Group applied IFRS 16/AASB 16 ‘Leases’ (IFRS 16) from 1 July 2019. The Group elected to apply the modified retrospective transition
approach, with no restatement of comparative periods. The comparative information relating to leases presented throughout the Financial
Statements is in accordance with IAS 17/AASB 117 ‘Leases’ (IAS 17). Refer to note 38 ‘New and amended accounting standards and
interpretations’ for information on the transition effects of IFRS 16 and policy choices made on implementation. Movements in the Group’s
lease liabilities during the year are as follows:
At the beginning of the financial year (1)
IFRS 16 transition
Additions
Remeasurements of index-linked freight contracts
Lease payments
Foreign exchange movement
Amortisation of discounting
Transfers and other movements
At the end of the financial year
Comprising:
Current liabilities
Non-current liabilities
(1) Relates to existing finance leases at 1 July 2019.
2020
US$M
715
2,301
436
733
(761)
(43)
90
(28)
3,443
853
2,590
A significant proportion by value of the Group’s lease contracts relate to plant facilities, office buildings and vessels. Lease terms for plant
facilities and office buildings typically run for over 10 years and vessels for four to 10 years. Other leases include port facilities, various
equipment and vehicles. The lease contracts contain a wide range of different terms and conditions including extension and termination
options and variable lease payments.
The Group’s lease obligations are included in the Group’s Interest bearing liabilities and, with the exception of vessel lease contracts that are
priced with reference to a freight index, form part of the Group’s net debt.
The maturity profile of lease liabilities based on the undiscounted contractual amounts is as follows:
Lease liability (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
2020
US$M
927
630
1,335
1,043
3,935
3,443
2019
US$M
110
110
307
501
1,028
715
(1) Lease liability as at 30 June 2019 represents finance lease liabilities under IAS 17.
At 30 June 2020, commitments for leases not yet commenced based on undiscounted contractual amounts were US$1,458 million; and
commitments relating to short-term leases were US$103 million.
The Group’s aggregate amounts of minimum lease payments under non-cancellable operating leases at 30 June 2019 under IAS 17 were
as follows (reported under note 32 ‘Commitments’ in FY2019):
Commitments under operating leases
Due not later than one year
Due later than one year and not later than five years
Due later than five years
Total
Movements in the Group’s right-of-use assets during the year are as follows:
2020
Net book value
At the beginning of the financial year (1)
Assets recognised on adoption of IFRS 16
Additions
Remeasurements of index-linked freight contracts
Depreciation expensed during the period
Depreciation classified as exploration
Impairments, net of reversals
Transfers and other movements
At the end of the financial year
– Cost
– Accumulated depreciation and impairments
(1) Relates to assets previously held under finance leases under IAS 17.
206 BHP Annual Report 2020
2019
US$M
440
876
589
1,905
Total
US$M
492
2,154
436
733
(656)
(34)
(24)
(54)
3,047
4,153
(1,106)
Land and
buildings
US$M
Plant and
equipment
US$M
−
754
104
−
(113)
−
(2)
(54)
689
804
(115)
492
1,400
332
733
(543)
(34)
(22)
−
2,358
3,349
(991)
20 Leases continued
Right-of-use assets are included within the underlying asset classes in Property, plant and equipment. Refer to note 11 ‘Property, plant and equipment’.
Amounts recorded in the income statement and the cash flow statement for the year were:
Income statement
Depreciation of right-of-use assets
Short-term, low-value and variable lease costs (1)
Interest on lease liabilities
Cash flow statement
Principal lease payments
Lease interest payments
2020
US$M
Included within
656
675
90
Profit from operations
Profit from operations
Financial expenses
671
90
Cash flows from financing activities
Cash flows from operating activities
(1) Relates to US$438 million of variable lease costs, US$211 million of short-term lease costs and US$26 million of low-value lease costs.
Recognition and measurement (following adoption of IFRS 16)
All leases with the exception of short-term (under 12 months) and
low-value leases are recognised on the balance sheet, as a right-of-use
asset and a corresponding interest bearing liability. Lease liabilities
are initially measured at the present value of the future lease
payments from the lease commencement date and are subsequently
adjusted to reflect the interest on lease liabilities, lease payments
and any remeasurements due to, for example, lease modifications
or a change to future lease payments linked to an index or rate. Lease
payments are discounted using the interest rate implicit in the lease,
where this is readily determinable. Where the implicit interest rate is
not readily determinable, the interest payments are discounted at
the Group’s incremental borrowing rate, adjusted to reflect factors
specific to the lease, including where relevant the currency, tenor
and location of the lease.
Low-value and short-term leases continue to be expensed to the
income statement. Variable lease payments not dependent on an
index or rate are excluded from lease liabilities, and expensed to the
income statement.
Right-of-use assets are measured at cost, less any accumulated
depreciation and impairment losses, and adjusted for any
remeasurement of lease liabilities. The cost will initially correspond
to the lease liability, adjusted for initial direct costs, lease payments
made prior to lease commencement, capitalised provisions for
closure and rehabilitation and any lease incentives.
The lease asset and liability associated with all index-linked freight
contracts, including continuous voyage charters (CVCs), are
measured at each reporting date based on the prevailing freight
index (generally the Baltic C5 index).
Lease costs are 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,
replacing certain operating lease expenses previously reported
under IAS 17.
Where the Group is the operator of an unincorporated joint operation
and all investors are parties to a lease, the Group recognises its
proportionate share of the lease liability and associated right-of-use
asset. In the event the Group is the sole signatory to a lease, and
therefore has the sole legal obligation to make lease payments, the
lease liability is 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
recognises 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 to the joint operation. If the Group is not party
to the lease contract but sub-leases the associated right-of-use asset,
it recognises its proportionate share of the right-of-use asset and
a lease liability which is payable to the operator.
Key judgements and estimates
Judgements: Certain contractual arrangements not in the
form of a lease require the Group to apply significant judgement
in evaluating whether the Group controls the right to direct
the use of assets and therefore whether the contract contains
a lease. Management considers all facts and circumstances in
determining whether the Group or the supplier has the rights
to direct how, and for what purpose, the underlying assets
are used in certain mining contacts and other arrangements,
including outsourcing arrangements, shipping arrangements
and power purchase agreements. Judgement is used to assess
which decision-making rights mostly affect the benefits of use
of the assets for each arrangement.
In addition to containing a lease, the Group’s contractual
arrangements may include non-lease components. For example,
certain mining services arrangements involve the provision of
additional services, including maintenance, drilling activities and
the supply of personnel. The Group has elected to separate these
non-lease components from the lease components in measuring
lease liabilities. Judgement is required to identify the lease and
non-lease components.
Estimates: Where the Group cannot readily determine the
interest rate implicit in the lease, estimation is involved in the
determination of the weighted average incremental borrowing
rate to measure lease liabilities. The incremental borrowing rate
reflects the rates of interest a lessee would have to pay to borrow
over a similar term, with similar security, the funds necessary to
obtain an asset of similar value to the right-of-use asset in a similar
economic environment. Under the Group’s portfolio approach
to debt management, the Group does not specifically borrow
for asset purchases. Therefore, the incremental borrowing rate
is estimated with reference to the Group’s corporate borrowing
portfolio, adjusted to reflect the terms and conditions of the
lease (including the impact of currency, credit rating of subsidiary
entering into the lease and the term of the lease), at the inception
of the lease arrangement or the time of lease modification.
The Group estimates stand-alone prices, where such prices
are not readily observable, in order to allocate the contractual
payments between lease and non-lease components.
BHP Annual Report 2020 207
Strategic ReportGovernance at BHPRemuneration ReportDirectors’ ReportAdditional informationShareholder informationFinancial Statements5 21 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 4.14% (2019: 4.96%; 2018: 4.24%) (1)
Interest on lease liabilities
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
2020
US$M
2019
US$M
2018
US$M
1,099
(308)
90
452
721
(788)
(18)
14
1,262
(351)
911
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) 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$92 million
(2019: US$74 million; 2018: US$42 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.
22 Financial risk management
22.1 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.
208 BHP Annual Report 2020
22 Financial risk management continued
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 2020,
87 per cent of the Group’s borrowings were exposed to floating
interest rates inclusive of the effect of swaps (2019: 87 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.
The Group has early adopted amendments to IFRS 9 ‘Financial
Instruments’ and IFRS 7 ‘Financial Instruments: Disclosures’ in relation
to Interest Rate Benchmark Reform. There is no impact on the Group’s
hedge accounting as a result of adopting the amendments and for
further information refer to note 38 ‘New and amended accounting
standards and interpretations’.
Based on the net debt position as at 30 June 2020, 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$47 million (2019: decrease of US$39 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.
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. Fluctuations
in foreign exchange rates are therefore not expected to have
a significant 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, 80 per cent (2019: 82 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 2020,
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
(2019: decrease of US$12 million).
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. Substantially all of the Group’s
commodity production is sold on market-based index pricing terms,
with derivatives used from time to time to achieve a specific outcome.
Financial instruments with commodity price risk comprise forward
commodity and other derivative contracts with a net assets fair value
of US$159 million (2019: US$199 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$180 million (2019: US$202 million). These are included within
other derivatives and fair value measurement related to these
resulted in an expense of US$22 million (2019: expense of
US$14 million).
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 10 per cent with all other factors held constant (including the
pricing on underlying physical exposures), would increase or
decrease profit after taxation by US$8 million (2019: US$55 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 using a method categorised
as Level 2 based on forecast selling prices in the quotation period.
The Group’s exposure at 30 June 2020 to the impact of movements
in commodity prices upon provisionally invoiced sales and purchases
volumes was predominately around copper.
The Group had 301 thousand tonnes of copper exposure as at
30 June 2020 (2019: 277 thousand tonnes) that was provisionally
priced. The final price of these sales and purchases volumes will
be determined during the first half of FY2021. 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$134 million (2019: US$114 million).
The relationship between commodity prices and foreign currencies
is complex and movements in foreign exchange rates can impact
commodity prices.
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.
BHP Annual Report 2020 209
Strategic ReportGovernance at BHPRemuneration ReportDirectors’ ReportAdditional informationShareholder informationFinancial Statements5 22 Financial risk management continued
22.2 Recognition and measurement
All financial assets and liabilities, other than derivatives and trade
receivables, are initially recognised at the fair value of consideration
paid or received, net of transaction costs as appropriate. Financial
assets are initially recognised on their trade date.
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.
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:
IFRS 13 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.
210 BHP Annual Report 2020
22 Financial risk management continued
22.3 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 (1)
Current cross currency and interest rate swaps (2)
Current other derivative contracts (3)
Current other investments (4)
Non-current cross currency and interest rate swaps (2)
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
Loans to equity accounted investments
Total financial assets
Non-financial assets
Total assets
Current cross currency and interest rate swaps (2)
Current other derivative contracts (3)
Non-current cross currency and interest rate swaps (2)
Non-current other derivative contracts (3)
Total other financial liabilities
Trade and other payables (7)
Provisionally priced trade payables
Bank overdrafts and short-term borrowings (8)
Bank loans (8)
Notes and debentures (8)
Leases liabilities
Other (8)
Total financial liabilities
Non-financial liabilities
Total liabilities
IFRS 9 Classification
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
2
2, 3
1, 2
2
2, 3
3
3
1, 2, 3
Amortised cost
Amortised cost
Fair value through profit or loss
Amortised cost
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
Amortised cost
Fair value through profit or loss
Amortised cost
Amortised cost
Amortised cost
Amortised cost
Amortised cost
2020
US$M
3
45
36
2,009
159
32
−
322
2,606
13,426
1,633
1,480
40
19,185
85,598
104,783
165
60
1,414
−
1,639
5,354
269
−
2,492
21,045
3,443
68
34,310
18,227
52,537
2019
US$M
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
(1) 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.
(2) Cross currency and interest rate swaps are measured at forward rate and swap models and present value calculations.
(3) Includes other derivative contracts of US$179 million (2019: US$200 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$180 million (2019: US$202 million).
(4) Includes investments held by BHP Billiton Foundation which are restricted and not available for general use by the Group of US$296 million (2019: US$309 million)
of which other investment (US Treasury Notes) of US$87 million categorised as Level 1 (2019: US$128 million).
(5) Includes other investments of US$47 million (2019: US$47 million) categorised as Level 3.
(6) Excludes input taxes of US$478 million (2019: US$367 million) included in other receivables.
(7) Excludes input taxes of US$145 million (2019: US$162 million) included in other payables.
(8) All interest bearing liabilities, excluding leases, are unsecured.
The carrying amounts in the table above generally approximate to fair
value. In the case of US$3,019 million (2019: US$3,019 million) of fixed
rate debt not swapped to floating rate, the fair value at 30 June 2020
was US$4,114 million (2019: US$3,757 million). The fair value is
determined using a method that can be categorised as Level 2 and
uses inputs based on benchmark interest rates, alternative market
mechanisms or recent comparable transactions.
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.
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.
BHP Annual Report 2020 211
Strategic ReportGovernance at BHPRemuneration ReportDirectors’ ReportAdditional informationShareholder informationFinancial Statements5 22 Financial risk management continued
22.4 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
The Group has early adopted amendments to IFRS 9 ‘Financial
Instruments’ and IFRS 7 ‘Financial Instruments: Disclosures’ in relation
to Interest Rate Benchmark Reform. There is no impact on the Group’s
hedge accounting as a result of adopting the amendments. Refer to
note 38 ‘New and amended accounting standards and interpretations’
for further information.
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.
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.
2020
US$M
USD
GBP
EUR
CAD
Total
2019
US$M
USD
GBP
EUR
CAD
AUD
Total
Fair value of derivatives
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 (1)
Accrued
cash flows
Total
Hedged
value of
notes and
debentures (2)
A
9,926
3,245
7,294
580
B
−
764
500
199
C
(742)
(730)
(576)
(32)
21,045
1,463
(2,080)
D
−
(16)
(55)
−
(71)
E
−
13
21
(2)
32
F
29
(18)
65
(4)
72
G
74
47
32
(2)
151
B to G
A + B + C
(639)
60
(13)
159
(433)
9,184
3,279
7,218
747
20,428
Fair value of derivatives
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 (1)
Accrued
cash flows
Total
Hedged
value of
notes and
debentures (2)
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)
E
−
70
33
3
−
106
F
20
(2)
54
(4)
−
68
G
111
62
82
1
(5)
251
B to G
A + B + C
(122)
234
(119)
148
63
204
9,180
3,279
7,492
747
773
21,471
(1) Predominantly related to ineffectiveness.
(2) Includes US$3,019 million (2019: US$3,019 million) of fixed rate debt not swapped to floating rate that is not in a hedging relationship.
The weighted average interest rate payable is USD LIBOR + 2.95 per cent (2019: USD LIBOR + 2.3 per cent). Refer to note 21 ‘Net finance costs’
for details of net finance costs for the year.
212 BHP Annual Report 2020
22 Financial risk management continued
Movements in reserves relating to hedge accounting
The following table shows a reconciliation of the components of equity and an analysis of the movements in reserves for all hedges.
For a description of these reserves, refer to note 16 ‘Other equity’.
2020
US$M
At the beginning of the financial year
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
2019
US$M
At the beginning of the financial year
Impact of adoption of IFRS 9
Add: Change in fair value of hedging instrument
recognised in OCI
Less: Reclassified from reserves to interest expense
– recognised through OCI
At the end of the financial year
Cash flow hedging reserve
Cost of hedging reserve
Gross
163
(315)
223
71
Tax
(49)
94
(66)
(21)
Net
114
(221)
157
50
Gross
(106)
−
74
(32)
Tax
32
−
(23)
9
Cash flow hedging reserve
Cost of hedging reserve
Gross
85
176
(327)
229
163
Tax
(27)
(52)
98
(68)
(49)
Net
58
124
(229)
161
114
Gross
−
(176)
−
70
(106)
Tax
−
52
−
(20)
32
Net
(74)
−
51
(23)
Net
−
(124)
−
50
(74)
Changes in interest bearing liabilities and related derivatives resulting from financing activities
The movement in the year in the Group’s interest bearing liabilities and related derivatives are as follows:
Interest bearing liabilities
Bank loans
Notes and
debentures
Lease
liabilities
Bank
overdraft and
short-term
borrowings
Other
2020
US$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
Leases recognised on IFRS 16 transition
Lease additions
Remeasurement of index-linked freight contracts
Other interest bearing liabilities/derivative related changes
2,498
514
−
(522)
21,529
−
−
(859)
(8)
(859)
−
−
−
−
−
2
720
(354)
−
−
−
9
715
−
−
(671)
(671)
−
(43)
2,301
436
733
(28)
At the end of the financial year
2,492
21,045
3,443
20
−
−
−
−
−
−
−
−
−
(20)
−
2019
US$M
At the beginning of the financial year
Proceeds from interest bearing liabilities
Settlements of debt related instruments
Repayment of interest bearing liabilities
Change from Net financing cash flows
Other movements:
Interest rate impacts
Foreign exchange impacts
Other interest bearing liabilities/derivative related changes
At the end of the financial year
Interest bearing liabilities
Bank loans
Notes and
debentures
Lease
liabilities
Bank
overdraft and
short-term
borrowings
2,555
250
−
(308)
23,298
−
−
(2,198)
(58)
(2,198)
−
−
1
729
(311)
11
2,498
21,529
802
−
−
(75)
(75)
−
(11)
(1)
715
58
−
−
−
−
−
−
(38)
20
Derivatives
(assets)/
liabilities
Cross
currency
and interest
rate swaps
204
−
(157)
−
(157)
(788)
316
−
−
−
(8)
(433)
Derivatives
(assets)/
liabilities
Cross
currency
and interest
rate swaps
805
−
(160)
−
(160)
(809)
319
49
204
66
−
−
5
5
−
(4)
−
−
−
1
68
Other
92
−
−
(23)
(23)
−
−
(3)
66
Total
40
(221)
208
27
Total
58
−
(229)
211
40
Total
514
(157)
(2,047)
(1,690)
Total
250
(160)
(2,604)
(2,514)
BHP Annual Report 2020 213
Strategic ReportGovernance at BHPRemuneration ReportDirectors’ ReportAdditional informationShareholder informationFinancial Statements5 Employee matters
23 Key management personnel
Key management personnel compensation comprises:
Short-term employee benefits
Post-employment benefits
Share-based payments
Total
2020
US$
12,564,637
1,172,727
13,514,588
2019
US$
11,557,506
1,490,716
15,821,972
2018
US$
13,190,838
1,506,108
13,356,657
27,251,952
28,870,194
28,053,603
Key Management Personnel (KMP) includes the roles which have the authority and responsibility for planning, directing and controlling the
activities of BHP. These are Non-executive Directors, the CEO, the Chief Financial Officer, the President Minerals Australia, the President
Minerals Americas, and the President Petroleum.
Transactions and outstanding loans/amounts with key management personnel
There were no purchases by key management personnel from the Group during FY2020 (2019: US$ nil; 2018: US$ nil).
There were no amounts payable by key management personnel at 30 June 2020 (2019: US$ nil; 2018: US$ nil).
There were no loans receivable from or payable to key management personnel at 30 June 2020 (2019: US$ nil; 2018: 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 2020 (2019: US$ nil; 2018: US$ nil).
For more information on remuneration and transactions with key management personnel, refer to section 3.
214 BHP Annual Report 2020
24 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), Cash and Deferred Plan (CDP), Short-Term Incentive Plan (STIP),
Management Award Plan (MAP), Group Short-Term Incentive Plan (GSTIP) 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
CDP/STIP and GSTIP
Short-term incentive
LTIP and MAP
Long-term incentive
Shareplus
All-employee share
purchase plan
Overview
Vesting
conditions
The CDP was implemented in FY2020
as a replacement of the STIP, both of which
are generally plans for Executive KMP and
the Executive Leadership Team who are
not Executive KMP. GSTIP is a plan for BHP
senior management who are not KMP.
Under the CDP, two thirds 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 (and the remaining one
third is delivered in cash). Two awards of
deferred shares are granted, each of the
equivalent value to the cash award, vesting
in two and five years respectively.
Under STIP and GSTIP, 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 two-year vesting period.
CDP: Service conditions and performance
conditions for the awards of five-year
deferred shares only. Vesting of the
five-year award is subject to a satisfactory
performance underpin which encompasses
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.
STIP and GSTIP: Service conditions only.
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.
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.
LTIP: Service and performance conditions.
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
CDP – 2 and 5 years
STIP and GSTIP – 2 years
LTIP – 5 years
MAP – 1 to 5 years
Dividend
Equivalent
Payment
Exercise
period
CDP – Yes
STIP – Yes
GSTIP – No
None
LTIP – Yes
MAP – No
None
(1) BHP’s TSR is the weighted average of the TSRs of BHP Group Limited and BHP Group Plc.
3 years
No
None
BHP Annual Report 2020 215
Strategic ReportGovernance at BHPRemuneration ReportDirectors’ ReportAdditional informationShareholder informationFinancial Statements5 24 Employee share ownership plans continued
Employee share awards
2020
BHP Group Limited
STIP awards
GSTIP awards
LTIP awards
Transitional Executive KMP awards (1)
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)
Weighted
average
share price at
exercise date
513,991
1,142,484
5,730,889
23,420
11,490,345
3,857,145
157,865
−
809,055
−
3,898,575
2,483,483
294,713
1,130,443
−
19,439
3,465,901
1,985,787
3
−
1,602,438
3,981
763,029
297,459
377,140
12,041
4,937,506
−
11,159,990
4,057,382
29,426
273,031
224,070
−
80,033
142,168
29,426
76,267
116,005
−
58,394
20,771
−
218,403
229,462
−
−
−
−
25,549
−
−
−
−
0.5
0.2
1.7
−
1.2
1.3
−
1.1
1.3
A$35.33
A$35.51
−
A$35.25
A$35.62
A$32.16
£17.14
£17.14
£12.96
(1) Awards were granted to new Executive KMP 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. Awards were last granted in FY2016. All awards had vested or lapsed at 30 June 2020.
Employee share awards pre-tax expense is US$128.999 million (2019: US$138.275 million; 2018: US$123.313 million).
Fair value and assumptions in the calculation of fair value for awards issued
2020
BHP Group Limited
STIP awards
LTIP awards
MAP awards (1)
Shareplus
BHP Group Plc
MAP awards
Shareplus
Weighted
average fair
value of awards
granted during
the year US$
Risk-free
interest rate
Estimated
life of awards
Share price at grant date
Estimated
volatility of
share price
Dividend
yield
25.36
13.67
21.46
19.03
17.94
12.17
n/a
0.78%
n/a
1.49%
n/a
0.66%
3 years
5 years
1-5 years
3 years
3 years
3 years
A$37.24
A$37.24
A$36.53/A$37.24
A$39.07
£17.33
£19.02
n/a
22.0%
n/a
n/a
n/a
n/a
n/a
n/a
5.30%
5.08%
6.00%
5.60%
(1) Includes MAP awards granted on 25 September 2019 and 20 November 2019.
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 equity 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.
216 BHP Annual Report 2020
25 Employee benefits, restructuring and post-retirement employee benefits provisions
Employee benefits (1)
Restructuring (2)
Post-retirement employee benefits (3)
Total provisions
Comprising:
Current
Non-current
2020
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
Transfers and other movements
At the end of the financial year
2020
US$M
1,313
34
547
1,894
1,283
611
Employee
benefits
US$M
Restructuring
US$M
Post-retirement
employee
benefits (3)
US$M
1,140
1,224
−
−
(31)
(127)
−
(893)
−
1,313
78
26
−
−
(1)
(12)
−
(58)
1
34
493
65
36
(21)
(34)
(1)
81
(70)
(2)
547
2019
US$M
1,140
78
493
1,711
1,154
557
Total
US$M
1,711
1,315
36
(21)
(66)
(140)
81
(1,021)
(1)
1,894
(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 26 ‘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 2020 217
Strategic ReportGovernance at BHPRemuneration ReportDirectors’ ReportAdditional informationShareholder informationFinancial Statements5 26 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$260 million during the financial year (2019: US$274 million; 2018: US$277 million) to
defined contribution plans and multi-employer defined contribution plans. These contributions are expensed as incurred.
Defined benefit
pension schemes
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).
Defined benefit
post-retirement
medical schemes
Defined benefit
post-employment
obligations
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
2020
US$M
613
354
(634)
333
−
−
−
333
2019
US$M
632
306
(648)
290
−
−
−
290
2020
US$M
2019
US$M
−
214
−
214
−
−
−
214
−
203
−
203
−
−
−
203
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.
218 BHP Annual Report 2020
27 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
2020
Number
2019
Number
2018
Number
20,967
7,330
1,296
1,939
57
31,589
−
31,589
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
(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
28 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 customary completion adjustments of US$0.2 billion).
While the effective date at which the right to economic profits transferred to the purchasers was 1 July 2018, the Group continued to control
the Onshore US assets until the completion dates of their respective transactions. As such the Group continued to recognise its share of
revenue, expenses, net finance costs and associated income tax expense related to the operation until the completion date. In addition,
the Group provided transitional services to the buyer, which ceased in July 2019.
The completion adjustments included a reduction in sale proceeds, based on the operating cash generated and retained by the Group in the
period prior to completion, in order to transfer the economic profits from 1 July 2018 to completion date to the buyers. Therefore, the pre-tax
profit from operating the assets is largely offset by a pre-tax loss on disposal. Accordingly, the net loss from Discontinued operations
predominantly relates to incremental costs arising as a consequence of the divestment, including restructuring costs and provisions
for surplus office accommodation, and tax expenses largely triggered by the completion of the transactions.
There was no contribution of Discontinued operations for the year ended 30 June 2020. The contribution of Discontinued operations included
within the Group’s profit and cash flows for the year ended 30 June 2019 and the year ended 30 June 2018 are detailed below:
Income statement – Discontinued operations
Profit/(loss) after taxation from operating activities
Net loss on disposal
Loss after taxation
Attributable to non-controlling interests
Attributable to BHP shareholders
Basic loss per ordinary share (cents)
Diluted loss per ordinary share (cents)
2019
US$M
175
(510)
(335)
7
(342)
(6.6)
(6.6)
2018
US$M
(2,921)
−
(2,921)
26
(2,947)
(55.4)
(55.4)
The total comprehensive income attributable to BHP shareholders from Discontinued operations was a loss of US$342 million in FY2019
and a loss of US$2,943 million in FY2018.
The conversion of options and share rights would decrease the loss per share for the years ended 30 June 2019 and 2018 and therefore
its impact has been excluded from the diluted earnings per share calculation.
BHP Annual Report 2020 219
Strategic ReportGovernance at BHPRemuneration ReportDirectors’ ReportAdditional informationShareholder informationFinancial Statements5 28 Discontinued operations continued
Cash flows from Discontinued operations
Net operating cash flows
Net investing cash flows (1)
Net financing cash flows (2)
Net increase/(decrease) in cash and cash equivalents from Discontinued operations
Net proceeds received from the sale of Onshore US
Less Cash and cash equivalents
Proceeds from divestment of Onshore US, net of its cash
Total cash impact
2019
US$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 in FY2019 (2018: US$900 million) less proceeds from sale of assets of US$ nil in FY2019
(2018: US$39 million).
(2) Includes net repayment of interest bearing liabilities of US$6 million in FY2019 (2018: US$4 million), distribution to non-controlling interests of US$ nil in FY2019
(2018: US$14 million) and dividends paid to non-controlling interests of US$7 million in FY2019 (2018: US$22 million).
Net loss on disposal of Discontinued operations
Details of the net loss on disposal for the year ended 30 June 2019 is presented in the table below:
Net assets
Less non-controlling interest share of net assets disposed
BHP Share of net assets disposed
Gross consideration
Less transaction costs
Income tax expense
Net loss on disposal
2019
US$M
11,111
(168)
10,943
10,555
(54)
(68)
(510)
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 impact
is considered material to the Financial Statements.
There were no exceptional items related to Discontinued operations for the years ended 30 June 2020 and 30 June 2019.
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.
220 BHP Annual Report 2020
29 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 Billiton Nickel West Pty Ltd
BHP Group Operations 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
Canada
The Netherlands
Australia
Australia
Australia
Australia
Australia
Potash development
Finance
Finance
Finance
Nickel mining, smelting, refining and administrative services
Administrative services
Finance
Group’s interest
2020
%
2019
%
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.
BHP Annual Report 2020 221
Strategic ReportGovernance at BHPRemuneration ReportDirectors’ ReportAdditional informationShareholder informationFinancial Statements5
30 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
2020
%
2019
%
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
Joint venture
Iron ore mining
31 December
33.75
50.00
33.75
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 Ltda (BHP Brasil) and Vale S.A. (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 2020
US$M
At the beginning of the financial year
(Loss)/profit from equity accounted investments, related impairments and expenses (1)
Investment in equity accounted investments
Dividends received from equity accounted investments
Other
At the end of the financial year
Investment in
associates
Investment in
joint ventures
Total equity
accounted
investments
2,569
(4)
147
(126)
(1)
2,585
−
(508)
95
−
413
−
2,569
(512)
242
(126)
412
2,585
(1) US$(508) million represents US$(95) million impairment relating to US$(95) million funding provided during the period, US$(459) million movement in the Samarco
dam failure provision including US$(916) million change in estimate and US$457 million exchange translation and US$46 million movement in provisions related to the
Samarco Germano dam decommissioning provision including US$(37) million change in estimate and US$83 million exchange translation. Refer to note 4 ‘Significant
events – Samarco dam failure’ for further information.
Key judgements and estimates
Estimates: An indicator of impairment was identified for the
Group’s net investment in Cerrejón at 30 June 2020 as a result of
reductions in the Group’s forecast prices for Colombian thermal
coal and the reduced production volumes in Cerrejón’s latest
mine plan. Accordingly the Group assessed the recoverable
amount of Cerrejón in line with the impairment of non-current
assets principles (including key judgements and estimates)
detailed in note 11 ‘Property, Plant and Equipment’. The
recoverable amount was assessed using the 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 Cerrejón carrying amount of
US$776 million is supported by the recoverable amount
determination and as such, no impairment has been recognised.
The recoverable amount assessment is most susceptible to
assumptions regarding the long term forecasts of Colombian
thermal coal prices and discount rates:
• Colombian thermal coal prices: At 30 June 2020 the price
assumptions used in determining the recoverable amount
considered the Group’s latest internal price forecasts, taking
into account expected demand and supply for Colombian
thermal coal, and price forecasts available from external
sources (including consensus pricing). The short to long term
range of prices used in the valuations were consistent with
those published by market commentators of approximately
US$45 to US$65 per tonne;
• 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 9.5 per cent was applied to post-tax cash flows.
Changes in circumstances may affect the assumptions used
to determine recoverable amount at future reporting dates.
222 BHP Annual Report 2020
30 Investments accounted for using the equity method continued
The following table summarises the financial information relating to each of the Group’s significant equity accounted investments. BHP Brasil’s
50 per cent portion of Samarco’s commitments, for which BHP Brasil has no funding obligation, is US$200 million (2019: US$250 million).
2020
US$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
Investment in Samarco
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
Impairment of the carrying value of the investment in Samarco
Additional share of Samarco losses
Unrecognised losses
(Loss)/profit from equity accounted investments, related
impairments and expenses
Comprehensive income – 100%
Share of comprehensive income/(loss) – Group share in equity
accounted investments
Dividends received from equity accounted investments
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
Investment in Samarco
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
Impairment of the carrying value of the investment in Samarco
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
974
4,743
(239)
(1,173)
4,305
1,453
−
–
−
−
−
1,453
2,464
629
212
–
−
−
212
629
212
105
712
2,462
(170)
(854)
2,150
717
59
–
−
−
−
776
1,091
(182)
(68)
–
−
−
(68)
(182)
(68)
9
49 (3)
3,601
(7,961) (4)
(5,447)
(9,758)
(4,879)
256 (5)
405 (6)
(930) (7)
3,341 (8)
1,807 (9)
356
−
−
2,585
26
(3,617) (10)
(1,918) (11)
(95) (7)
93
1,412 (9)
(508)
(3,617)
(508)
−
(148)
(148)
12
−
−
−
(512)
(512)
126
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)
310 (6)
(835) (7)
2,835 (8)
395 (9)
371
−
−
2,569
24
(2,166) (10)
(1,075) (11)
(96) (7)
108
118 (9)
(945)
(2,166)
(945)
−
(98)
(98)
15
−
−
−
(546)
(546)
510
BHP Annual Report 2020 223
Strategic ReportGovernance at BHPRemuneration ReportDirectors’ ReportAdditional informationShareholder informationFinancial Statements5 30 Investments accounted for using the equity method continued
2018
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
Impairment of the carrying value of the investment in Samarco
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
3,866
1,613
544
−
−
−
544
1,613
544
496
2,453
576
192
−
−
−
192
576
192
181
30
(1,558) (10)
(823) (11)
(80) (7)
117
277 (9)
(509)
(1,558)
(509)
−
(80)
(80)
16
−
−
−
147
147
693
(1) The unrecognised share of loss for the period was US$12 million (2019: unrecognised share of profit for the period was US$15 million), which increased the cumulative
losses to US$193 million (2019: decrease to US$181 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
Brasil’s share of Samarco’s losses.
(3) Includes cash and cash equivalents of US$15 million (2019: US$246 million).
(4) Includes current financial liabilities (excluding trade and other payables and provisions) of US$6,023 million (2019: US$5,510 million).
(5) Relates mainly to dividends declared by Samarco that remain unpaid at balance date and which, in accordance with the Group’s accounting policy, are recognised
when received not receivable.
(6) Working capital funding provided to Samarco is capitalised as part of the Group’s investments in joint ventures. Following a change to IAS 28 the Group no longer
recognises an additional share of Samarco’s losses related to working capital funding provided during the period. This is now disclosed as an impairment included
within the Samarco impairment expense line item. Comparative periods, including the impact on unrecognised losses have been restated to reflect the change.
(7) In the year ended 30 June 2016 BHP Brasil adjusted its investment in Samarco to US$ nil (resulting from US$(655) million share of loss from Samarco and
US$(525) million impairment). Additional cumulative impairment losses relating to working capital funding of US$(405) million have also been recognised.
(8) BHP Brasil has recognised accumulated additional share of Samarco losses of US$(3,341) million resulting from US$(2,929) million provisions relating to the Samarco
dam failure, including US$(412) million recognised as net finance costs.
(9) Share of Samarco’s losses for which BHP Brasil does not have an obligation to fund.
(10) Includes depreciation and amortisation of US$84 million (2019: US$85 million; 2018: US$73 million), interest income of US$16 million (2019: US$22 million; 2018:
US$31 million), interest expense of US$588 million (2019: US$342 million; 2018: US$385 million) and income tax benefit/(expense) of US$(256) million (2019:
US$52 million; 2018: US$(154) million).
(11) Includes accounting policy adjustments mainly related to the removal of foreign exchange gains on excluded dividends payable.
31 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
Atlantis
Bass Strait
Greater Angostura
Macedon (1)
Mad Dog
North West Shelf
Pyrenees (1)
ROD Integrated Development (2)
Shenzi
Mt Goldsworthy (3)
Mt Newman (3)
Yandi (3)
Central Queensland Coal Associates
US
Australia
Trinidad and Tobago
Australia
US
Australia
Australia
Algeria
US
Australia
Australia
Australia
Australia
Hydrocarbons production
Hydrocarbons production
Hydrocarbons production
Hydrocarbons production
Hydrocarbons production
Hydrocarbons production
Hydrocarbons production
Hydrocarbons production
Hydrocarbons production
Iron ore mining
Iron ore mining
Iron ore mining
Coal mining
Group’s interest
2020
%
2019
%
44
50
45
71.43
23.9
12.5–16.67
40–71.43
29.50
44
85
85
85
50
44
50
45
71.43
23.9
12.5–16.67
40–71.43
29.50
44
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
2020
US$M
2,059
37,193
39,252
2019
US$M
1,946
35,682
37,628
(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.
224 BHP Annual Report 2020
32 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 23 ‘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.
Such loans made to joint operations are payable on demand and loans made to associates 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 2020 (2019: US$ nil), other than those with post-employment
benefit plans for the benefit of Group employees. These are shown in note 26 ‘Pension and other post-retirement obligations’.
Transactions with related parties
Further disclosures related to 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
2020
US$M
−
−
1.306
−
−
4.851
2019
US$M
−
−
1.532
−
−
12.539
2020
US$M
2019
US$M
−
−
−
−
−
−
−
−
−
−
−
−
2020
US$M
−
967.276
2.370
−
126.187
12.273
2019
US$M
−
1,141.230
0.826
0.011
509.577
14.547
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
2020
US$M
−
33.812
−
13.625
2019
US$M
−
40.513
−
15.474
2020
US$M
2019
US$M
−
−
−
−
−
−
−
−
2020
US$M
69.490
5.097
0.473
40.759
2019
US$M
169.773
10.097
3.828
33.486
BHP Annual Report 2020 225
Strategic ReportGovernance at BHPRemuneration ReportDirectors’ ReportAdditional informationShareholder informationFinancial Statements5 Unrecognised items and uncertain events
33 Contingent liabilities
Associates and joint ventures (1)
Subsidiaries and joint operations (1)
Total
2020
US$M
1,314
1,534
2,848
2019
US$M
1,822
1,621
3,443
(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
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.
Samarco
contingent
liabilities
Demerger
of South32
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 2020.
34 Subsequent events
On 18 August 2020, the Group announced that, as part of its ongoing review of its portfolio, it will pursue options to divest its interests in BMC,
NSWEC and Cerrejón. Execution of these options, including demerger of an independent, listed company and trade sale opportunities, may
take time and, as such, the Group is not able to estimate the financial effect of any future transaction and these assets have not been classified
as held for sale as at 30 June 2020.
On the same day, the Group also announced that it will continue to optimise its petroleum portfolio through the exit of later life assets,
including an intended exit from Bass Strait, and farm-downs of the longer dated options. Execution of these options may take time and, as
such, the Group is not able to estimate the financial effect of any future transaction and these assets have not been classified as held for sale
as at 30 June 2020.
Other than the matters outlined above, 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.
226 BHP Annual Report 2020
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 the accounts of subsidiaries, joint ventures and associates
Audit-related assurance services required by legislation to be provided by the auditor
Other assurance and agreed-upon procedures under legislation or contractual arrangements
Total assurance services
Fees payable to the Group’s auditors for non-assurance services
Other services
Total other services
Total fees
2020
US$M
11.196
1.262
1.815
2.003
16.276
0.400
0.400
16.676
2019
US$M
6.764
5.127
1.358
1.266
14.515
0.013
0.013
14.528
2018
US$M
6.585
5.369
1.363
10.533
23.850
−
−
23.850
In FY2020, all amounts were paid to EY or EY affiliated firms. Fees are determined, and predominantly billed, in US dollars.
In each of FY2019 and FY2018, all amounts were paid to KPMG or KPMG affiliated firms, being the Group’s auditors for these financial years.
Fees were determined in local currencies and 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 the Group’s Annual Report comprises fees for auditing the statutory financial report of the Group and includes audit work in relation
to compliance with section 404 of the US Sarbanes-Oxley Act.
Audit-related assurance services required by legislation to be provided by the auditors mainly comprises review of half-year reports.
Other assurance services comprise assurance in respect of the Group’s sustainability reporting, economic contribution reporting, and comfort
letters, and in FY2018, non-recurring fees in connection with the sale of the Onshore US oil and gas assets.
Fees payable to the Group’s auditors for other services
Other services comprise tax compliance services of US$0.269 million (2019: US$0.013 million; 2018: US$ nil) and tax advisory services
of US$0.131 million (2019: US$ nil; 2018: US$ nil).
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
2020
US$M
8,881
8,895
8,531
53,772
1,526
1,826
823
(5)
224
50,904
51,946
2019
US$M
5,820
5,830
3,804
49,111
1,724
1,854
823
(30)
203
46,261
47,257
Parent company guarantees
BHP Group Limited has guaranteed certain financing arrangements available to subsidiaries of US$13,404 million at 30 June 2020
(2019: US$11,368 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 2020 amounted to US$8 million (2019: US$10 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 2020 amounted to US$5,466 million (2019: US$8,716 million).
In addition, BHP Group Limited and BHP Group Plc have severally guaranteed a Group Revolving Credit Facility of US$5,500 million
(2019: US$6,000 million), which remains undrawn.
BHP Annual Report 2020 227
Strategic ReportGovernance at BHPRemuneration ReportDirectors’ ReportAdditional informationShareholder informationFinancial Statements5 37 Deed of Cross Guarantee
BHP Group Limited together with certain wholly owned subsidiaries as identified in note 13 ‘Related undertakings of the Group’ in section 5.2
have entered into a Deed of Cross Guarantee (Deed) dated 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 2020 and 30 June 2019 are as follows:
Consolidated Statement of Comprehensive Income and Retained Earnings
Revenue
Other income
Expenses excluding net finance costs
Net finance costs
Total taxation 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
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
228 BHP Annual Report 2020
2020
US$M
24,514
2,239
(15,415)
(399)
(2,723)
8,216
12
8,228
44,723
−
8,216
(27)
−
(4,214)
48,698
2020
US$M
7
1,351
9,116
1,887
76
12,437
65
−
496
33,735
261
37,646
688
39
72,930
85,367
3,319
17,312
275
570
1,042
7
22,525
10
8,925
693
−
751
2,416
12
12,807
35,332
50,035
1,111
(5)
231
48,698
50,035
2019
US$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
2019
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
38 New and amended accounting standards and interpretations
The Group adopted IFRS 16/AASB 16 ‘Leases’ (IFRS 16) in the Group’s
Financial Statements from 1 July 2019. The adoption of other new or
amended accounting standards or interpretations applicable from
1 July 2019, including IFRIC 23 ‘Uncertainty over Income Tax Treatment’,
did not have a significant impact on the Group’s Financial Statements.
The Group has also early adopted amendments to IFRS 9/AASB 9
‘Financial Instruments’ (IFRS 9) and IFRS 7/AASB 7 ‘Financial
Instruments: Disclosures’ (IFRS 7) in relation to Interest Rate
Benchmark Reform.
All new and amendments to standards and interpretations have been
endorsed by the EU.
IFRS 16 Leases
IFRS 16 replaces IAS 17/AASB 117 ‘Leases’ (IAS 17) including associated
interpretative guidance and covers the recognition, measurement,
presentation and disclosures of leases in the Financial Statements
of both lessees and lessors.
Transition impact
IFRS 16 became effective for the Group from 1 July 2019 and the
Group 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 was the IAS 17 carrying amounts as at 30 June 2019.
As allowed by IFRS 16, 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;
• to only recognise, within the lease liability, the lease component
of contracts that include non-lease components and other services;
• to adjust the carrying amount of right-of-use assets on transition
for related onerous lease provisions that were recognised on the
Group balance sheet as at 30 June 2019.
Adoption of IFRS 16 resulted in an increase in interest bearing
liabilities of US$2.3 billion, right-of-use assets of US$2.2 billion and
net adjustments to other assets and liabilities of US$0.1 billion at
1 July 2019. The weighted average incremental borrowing rate applied
to the Group’s additional lease liabilities at 1 July 2019 was 2.1 per cent
taking into account the currency, tenor and location of each lease.
The following table provides a reconciliation of the operating lease
commitments disclosed in note 32 ‘Commitments’ in the 2019 Annual
Report to the total lease liability recognised at 1 July 2019:
Operating lease commitments as at 30 June 2019
Add: Leases which did not meet the definition
of a lease under IAS 17 (1)
Add: Cost of reasonably certain extension options
(undiscounted)
Less: Components excluded from lease liability
(undiscounted)
Less: Effect of discounting
Total additional lease liabilities recognised at 1 July 2019
US$M
1,905
686
91
(190)
(191)
2,301
(1) These relate to freight contracts known as continuous voyage charters (CVCs).
Generally CVCs were not considered leases under IAS 17 given the supplier has
the right, whether exercised or not, to substitute the named vessel. However,
these rights are not considered substantial substitution rights under IFRS 16.
Additionally, the Group has the right to direct the use of the vessel throughout
the period of use due to the ability to designate the destination port for each
voyage and make changes to relevant decisions within the scope of contractual
constraints. Consequently, the CVCs meet the definition of a lease under IFRS 16.
The Group’s activities as a lessor are not material and hence there
is no significant impact on the Financial Statements on adoption
of IFRS 16.
Amendments to IFRS 9 ‘Financial Instruments’ and IFRS 7
‘Financial Instruments: Disclosures’ – Interest Rate
Benchmark Reform
The London Interbank Offered Rate (LIBOR) and other benchmark
interest rates are expected to be replaced by alternative risk-free
rates by the end of CY2021 as part of inter-bank offer rate (IBOR)
reform. The amendments to IFRS 9 and IFRS 7 provide temporary
relief from applying specific hedge accounting requirements to
hedging arrangements directly impacted by these reforms. The
Group has early adopted the amendments resulting in no impact
on the Group’s hedge accounting.
As outlined in note 22 ‘Financial risk management’, the Group has
foreign currency and US dollar denominated loans and debentures
at fixed interest rates. The Group uses interest rate swaps and cross
currency swaps to convert most of its fixed interest exposure to
a floating USD LIBOR. The interest rate derivatives are designated
into fair value hedges.
The reliefs provided by the amendments allow the Group
to assume that:
• USD LIBOR remains a separately identifiable component for the
duration of the hedge;
• for the purpose of assessing the effectiveness of the hedge
relationship the USD LIBOR rates referenced by fixed-to-floating
rate swaps in the fair value hedge relationships do not change
as a result of IBOR reform.
The amendments were applied retrospectively, including to hedging
arrangements designated as hedges during the period, and will
continue to apply until the uncertainty arising from the reforms with
respect to the timing and the amount of the underlying cash flows
that the Group is exposed to ends. A project has been established
to assess the implications of IBOR reform across the Group, and
to manage and execute the transition from current benchmark
rates to alternative benchmark rates. The Group will continue
to assess amendments to certain accounting standards covering
the accounting for the transition to alternative rates which were
released in August 2020 and will be applicable to the Group
in future reporting periods.
Issued but not yet effective
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. The classification of
future acquisitions may be impacted by the change in the definition
of a business under the amendments to IFRS 3/AASB 3 ‘Business
Combinations’ effective for the Group from 1 July 2020.
On 29 April 2020, the IFRS Interpretations Committee issued an
agenda decision on the application of IAS 12 ‘Income Tax’ when the
recovery of the carrying amount of an asset gives rise to multiple tax
consequences, concluding that an entity must account for distinct
tax consequences separately. The Group is in the process of
evaluating the implications of the agenda decision. Changes to the
Group’s accounting policy for income tax will be implemented from
1 July 2020 on a retrospective basis.
BHP Annual Report 2020 229
Strategic ReportGovernance at BHPRemuneration ReportDirectors’ ReportAdditional informationShareholder informationFinancial Statements5 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 2020 and 2019. The BHP Group Plc Financial Statements have 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.
Parent company Financial Statements of BHP Group Plc
BHP Group Plc Balance Sheet as at 30 June 2020
ASSETS
Current assets
Trade and other receivables – Amounts owed by Group undertakings
Non-current assets
Investments in subsidiaries
Deferred tax assets
Total assets
LIABILITIES
Current liabilities
Trade and other payables – 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
2020
US$M
6,283
6,283
3,131
−
3,131
9,414
(32)
−
(32)
(8)
(8)
(40)
2019
US$M
8,258
8,258
3,131
−
3,131
11,389
(38)
(2)
(40)
(9)
(9)
(49)
9,374
11,340
1,057
518
177
7,622
9,374
1,057
518
177
9,588
11,340
The accompanying notes form part of these Parent company Financial Statements.
Profit after tax and total comprehensive income for the year amounted to US$1,054 million (2019: US$1,372 million). BHP Group Plc is exempt
from presenting an unconsolidated parent company profit and loss account and statement of comprehensive income in accordance with
section 408 of the UK Companies Act 2006.
The Parent company Financial Statements of BHP Group Plc, registration number 3196209, were approved by the Board of Directors
on 3 September 2020 and signed on its behalf by:
Ken MacKenzie
Chair
Mike Henry
Chief Executive Officer
230 BHP Annual Report 2020
BHP Group Plc Statement of Changes in Equity for the year ended 30 June 2020
US$M
Balance as at 1 July 2019
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 net of tax
Accrued employee entitlement for unexercised awards
net of tax
Dividends
Balance as at 30 June 2020
Balance as at 1 July 2018
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 net of tax
Accrued employee entitlement for unexercised awards
net of tax
Dividends
−
−
−
−
−
−
−
−
1,057
1,057
−
−
−
−
−
−
−
−
Balance as at 30 June 2019
1,057
Treasury
shares (1)
Share
premium
account
Capital
redemption
reserve
−
−
−
−
−
(4)
4
−
−
−
−
−
−
−
−
(6)
6
−
−
−
518
177
−
−
−
−
−
−
−
−
518
518
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
177
177
−
−
−
−
−
−
−
−
518
177
Profit
and loss
account
9,588
1,054
−
−
Total
equity
11,340
1,054
−
−
1,054
1,054
−
(4)
4
(3,020)
7,622
12,868
1,372
−
−
(4)
−
4
(3,020)
9,374
14,620
1,372
−
−
1,372
1,372
−
(6)
2
(4,648)
9,588
(6)
−
2
(4,648)
11,340
(1) Shares held by the Billiton Employee Share Ownership Trust as at 30 June 2020 were 2,771 shares with a market value below US$1 million (2019: 39,719 shares
with a market value of US$1 million).
The accompanying notes form part of these Parent company Financial Statements.
BHP Annual Report 2020 231
Strategic ReportGovernance at BHPRemuneration ReportDirectors’ ReportAdditional informationShareholder informationFinancial Statements5 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;
• 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.
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 24 ‘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 Billiton Employee Share Ownership 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.
Disclosures related to the share-based payment plans are in note 24
‘Employee share ownership plans’ in section 5.1, including a
description of the schemes.
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 26 ‘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 amount
of expected credit losses (ECL) and the amount initially recognised
less cumulative amortisation.
232 BHP Annual Report 2020
2 Trade and other receivables – Amounts owed by Group undertakings
Amounts owed by Group undertakings
Total trade and other receivables
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
2020
US$M
6,283
6,283
6,283
−
2020
US$M
3,131
2019
US$M
8,258
8,258
8,258
−
2019
US$M
3,131
BHP Group Plc had the following principal subsidiary undertakings as at 30 June 2020:
Company
BHP Billiton Group Limited
BHP Billiton Finance Plc
BHP (AUS) DDS Pty Ltd
Principal activity
Holding company
Finance company
General finance
Country of incorporation
UK
UK
Australia
Percentage
shareholding
Carrying value
of investment
US$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$1,000 million (2019: US$1,246 million) from BHP Billiton Group Limited and dividends
of US$ nil (2019: US$ nil) 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
As at 30 June 2020, BHP Group Plc had unused income tax losses of US$658 million (2019: US$605 million), with an associated income tax
benefit of US$125 million (2019: US$103 million), and other deductible temporary differences of US$14 million (2019: US$17 million) with an
associated income tax benefit of US$3 million (2019: US$3 million). A deferred tax asset has not been recognised in relation to these losses
and deductible temporary differences, as it is not probable that future tax profits will be available against which they can be utilised.
BHP Annual Report 2020 233
Strategic ReportGovernance at BHPRemuneration ReportDirectors’ ReportAdditional informationShareholder informationFinancial Statements5 5 Trade and other payables – Amounts owed to Group undertakings
Group relief payable
Amounts owed to Group undertakings
Total trade and other payables
Comprising:
Current
Non-current
The amounts due to Group undertakings are unsecured and repayable on demand.
6 Provisions
Employee benefits
Pension liabilities
Total provisions
Comprising:
Current
Non-current
2020
At the beginning of the financial year
Actuarial loss on pension scheme
Charge for the year
Utilisation
At the end of the financial year
2020
US$M
2019
US$M
17
15
32
32
−
34
4
38
38
−
2020
US$M
2019
US$M
−
8
8
−
8
Employee
benefits
US$M
Pension
liabilities
US$M
2
−
−
(2)
−
9
−
−
(1)
8
2
9
11
2
9
Total
US$M
11
−
−
(3)
8
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 2020. 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
2020
US$M
2019
US$M
14
(6)
8
8
15
(6)
9
9
234 BHP Annual Report 2020
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
2020
Shares
2019
Shares
2,112,071,796
(185,297)
222,245
(36,948)
2,112,071,796
(274,069)
275,984
(1,915)
2,112,071,796
2,112,071,796
2,112,069,025
2,771
2,112,032,077
39,719
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
2020
Number
1
2019
Number
1
The number above represents a Director of BHP Group Plc. 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’.
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 2020, the guaranteed liabilities amounted to US$15,230 million (2019: US$13,222 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) Ltd. 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 2020, the guaranteed liabilities amounted to US$5,466 million (2019: US$8,716 million). Further, BHP
Group Plc and BHP Group Limited have severally guaranteed a Group Revolving Credit Facility of US$5,500 million (2019: US$6,000 million),
which remains undrawn.
At 30 June 2020, the liability recognised for financial guarantees was US$ nil (2019: 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.
BHP Group Plc had no capital or lease commitments as at 30 June 2020 (2019: US$ nil).
BHP Annual Report 2020 235
Strategic ReportGovernance at BHPRemuneration ReportDirectors’ ReportAdditional informationShareholder informationFinancial Statements5 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 2020.
Unless otherwise stated, the share capital disclosed comprises ordinary or common shares which are held by subsidiaries of the Group.
Refer to notes 29 ‘Subsidiaries’, 30 ‘Investments accounted for using the equity method’ and 31 ‘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 (t) (u)
BHP Billiton IO Pilbara Mining Pty Ltd
BHP Billiton Iron Ore Pty Limited (r) (t) (u)
BHP Billiton Minerals Pty Ltd (f) (r) (t) (u)
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 (r)
BHP Billiton Petroleum Investments (Great Britain) Pty Ltd
BHP Direct Reduced Iron Pty Limited (t)
BHP IO Mining Pty Ltd
BHP IO Workshop Pty Ltd
BHP Iron Ore Holdings Pty Ltd (r)
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 (t) (u)
Pilbara Gas Pty Limited (t)
United Iron Pty Ltd
Australia
Level 14, 480 Queen Street, Brisbane, QLD, 4000, Australia
BHP Coal Pty Ltd (t) (u)
BHP Energy Coal Australia Pty Ltd
BHP MetCoal Holdings Pty Ltd (r) (t) (u)
BHP Minerals Asia Pacific Pty Ltd
BHP Queensland Coal Investments Pty Ltd
Broadmeadow Mine Services Pty Ltd (t)
Central Queensland Services Pty Ltd (t)
Coal Mines Australia Pty Ltd
Dampier Coal (Queensland) Proprietary Limited (t) (u)
Hay Point Services Pty Limited (t)
Hunter Valley Energy Coal Pty Ltd
Mt Arthur Coal Pty Limited
Mt Arthur Underground Pty Ltd
OS ACPM Pty Ltd (t) (u)
OS MCAP Pty Ltd (t) (u)
UMAL Consolidated Pty Ltd (t) (u)
Level 15, 171 Collins Street, Melbourne, VIC, 3000, Australia
Agnew Pastoral Company Pty Ltd
Albion Downs Pty Limited
BHP (AUS) DDS Pty Ltd (s)
BHP Aluminium Australia Pty Ltd
BHP Billiton Finance (USA) Limited (r)
BHP Billiton Finance Limited (r)
BHP Billiton Nickel West Pty Ltd (t) (u)
BHP Billiton Olympic Dam Corporation Pty Ltd (t) (u)
BHP Billiton SSM Development Pty Ltd
BHP Capital No. 20 Pty Limited (r)
BHP Group Operations Pty Ltd (t) (u)
BHP Innovation Pty Ltd (r) (t)
BHP Lonsdale Investments Pty Ltd (r) (t)
BHP Manganese Australia Pty Ltd
BHP Marine & General Insurances Pty Ltd (r)
BHP Minerals Holdings Proprietary Limited (r) (t) (u)
BHP Nickel Operations Pty Ltd
BHP Pty Ltd
BHP Shared Business Services Pty Ltd (r)
BHP SSM Indonesia Holdings Pty Ltd (r)
BHP SSM International Pty Ltd
BHP Titanium Minerals Pty Ltd (o) (r)
BHP Western Mining Resources International Pty Ltd
BHP Yakabindie Nickel Pty Ltd
BHPB Freight Pty Ltd (r) (t)
Billiton Australia Finance Pty Ltd
The Broken Hill Proprietary Company Pty Ltd (r) (t) (u)
Weebo Pastoral Company Pty Ltd
WMC Finance (USA) Limited
236 BHP Annual Report 2020
13 Related undertakings of the Group continued
Bermuda
Chile
Victoria Place, 31 Victoria Street, Hamilton, HM 10, Bermuda
Cerro El Plomo 6000, Piso 15, Las Condes, Santiago, Chile
BHP Petroleum (Tankers) Limited
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
BHP Billiton Chile Inversiones Limitada (i)
BHP Explorations Chile SpA
Compañía Minera Cerro Colorado Limitada (i)
Minera Spence SA
Tamakaya Energía SpA
China
Xin Mao Mansion, South Taizhong Road, Free Trade Zone Waigaoqiao,
Shanghai, 200131, China
BHP Billiton International Trading (Shanghai) Co. Ltd
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.
Guernsey
Canada
1741 Lower Water Street, Suite 600, Halifax NS B3J 0J2, Canada
BHP Petroleum (New Ventures) Corporation
Heritage Hall, Le Marchant Street, St Peter Port, Guernsey, GY1 4HY,
Channel Islands
Stein Insurance Company Limited
1959 Upper Water Street, Suite 900, Halifax NS B3J 3N2, Canada
BHP Billiton Petroleum (Philippines) Corporation
2900 – 550 Burrard Street, Vancouver BC V6C 0A3, Canada
BHP Billiton Canada Inc.
BHP World Exploration Inc.
333 Bay Street, Suite 2400, Bay Adelaide Centre, Box 20,
Toronto ON M5H2T6, Canada
Rio Algom Exploration Inc.
Rio Algom Investments (Chile) Inc.
Rio Algom Limited (g) (h)
WMC Resources Marketing Limited
4500 Bankers Hall East, 855-2nd Street S.W., Calgary, Alberta,
T2P 4K7, Canada
India
12th Floor, One Horizon Centre, Golf Course Road, DLF Phase V,
Sector 43, Gurgaon, HR, 122002, India
BHP Marketing Services India Pvt Ltd
BHP Minerals India Private Limited
Indonesia
Midplaza 1 Building, Level 17, Jl.Jend.Sudirman Kav.10-11, JKT, 10220,
Indonesia
PT BHP Billiton Indonesia
PT Billiton Indonesia
Ireland
19-20 Seagrave House (1st Floor), Earlsfort Terrace, DUB 2, Ireland
Billiton Investments Ireland Limited
BHP Billiton (Trinidad-2C) Ltd
Japan
Cayman Islands
238 North Church Street, George Town, Grand Cayman, KY1-1102,
Cayman Islands
Global BHP Copper Ltd
RAL Cayman Inc.
Riocerro Inc.
Riochile Inc.
1-8-3 Marunouchi, Chiyoda-ku, Tokyo, Japan
BHP Japan Limited
Jersey
31 Esplanade, St Helier, JE1 1FT, Jersey
BHP Billiton Services Jersey Limited
Malaysia
Level 19-1 Menara Milenium, Jalan Damanlela, Pusat Bandar Damansara,
50490, Wilayah Persekutuan, Malaysia
BHP Shared Services Malaysia Sdn. Bhd.
BHP Annual Report 2020 237
Strategic ReportGovernance at BHPRemuneration ReportDirectors’ ReportAdditional informationShareholder informationFinancial Statements5 13 Related undertakings of the Group continued
Mexico
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)
Perdido Mexico Pipeline Holdings, S.A. de C.V.
Perdido Mexico Pipeline, S. de R.L. de C.V. (k)
Netherlands
Naritaweg 165, 1043 BW, AMS, Netherlands
BHP Billiton Company B.V.
BHP Billiton International Metals B.V.
Billiton Development B.V.
Billiton Marketing Holding B.V.
Nova South, 160 Victoria Street, London, England, SW1E 5LB,
United Kingdom
BHP Billiton Finance B.V.
Billiton Guinea B.V.
Billiton Investment 3 B.V.
Billiton Investment 8 B.V.
Billiton Suriname Holdings B.V.
Panama
Plaza PwC, Piso 7, Calle 58 E y Ave. Ricardo Arango, Obarrio,
Panama City, Panama
Marcona International S.A. (g) (h)
Saint Lucia
Pointe Seraphine, Castries, St Lucia
BHP (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
138 Market Street, #07-02 CapitaGreen, Singapore, 048946, Singapore
Westminer Insurance Pte Ltd (l)
South Africa
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
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 (Trinidad-3A) Ltd
United Kingdom
36 East Stockwell Street, Colchester, Essex, CO1 1ST, England,
United Kingdom
Billiton Executive Pension Scheme Trustee Limited
One America Square, 17 Crosswall, London, EC3N 2LB,
United Kingdom
The World Marine & General Insurance Plc (r)
Nova South, 160 Victoria Street, London, England, SW1E 5LB,
United Kingdom
BHP Aluminium Limited
BHP Billiton (UK) DDS Limited (r)
BHP Billiton (UK) Limited
BHP Billiton Finance Plc (s)
BHP Billiton Group Limited (s)
BHP Billiton Holdings Limited
BHP Billiton International Services Limited
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 (f)
BHP Petroleum (Trinidad Block 14) Limited (f)
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)
238 BHP Annual Report 2020
13 Related undertakings of the Group continued
United States of America
1209 Orange Street, Wilmington, DE, 19801, United States of America
BHP Billiton Petroleum Holdings LLC
BHP Petroleum (Foreign Exploration Holdings) LLC
BHP Petroleum (Mexico Holdings) LLC
BHP Resolution Holdings LLC
Rio Algom Mining LLC
1999 Bryan Street, Suite 900, Dallas TX 75201-3136,
United States of America
BHP Foundation
Suite 301, 1136 Union Mall, Honolulu, HI, 96813,
United States of America
BHP Hawaii Inc.
Subsidiaries where effective interest is less than 100 per cent (b)
Country of incorporation
Australia
Registered office address
125 St Georges Terrace, Perth, WA 6000, Australia
Company Name
BHP Iron Ore (Jimblebar) Pty Ltd (85%) (g) (h) (q)
Level 14, 480 Queen Street, Brisbane, QLD 4000, Australia
BHP Billiton Mitsui Coal Pty Ltd (80%) (j)
Red Mountain Infrastructure Pty Ltd (80%)
Brazil
Rua Paraíba, 1122, 5° andar, Belo Horizonte, MG, 30130-918, Brazil
Consórcio Santos Luz de Imóveis Ltda (90%)
Suite 500, 6100 Neil Road, Reno, NV, 89511, United States of America
Chile
Carson Hill Gold Mining Corporation
Cerro El Plomo 6000, Piso 15, Las Condes, Santiago, Chile
Suite B, 1675 South State Street, Dover, DE, 19901,
United States of America
141 Union Company
BHP Billiton Boliviana de Petróleo Inc.
BHP Billiton Marketing Inc.
BHP Billiton New Mexico Coal Inc.
BHP Billiton Petroleum (Americas) Inc.
BHP Billiton Petroleum (Deepwater) Inc.
BHP Billiton Petroleum (GOM) Inc.
BHP Billiton Petroleum Holdings (USA) Inc. (g) (h)
BHP Capital Inc.
BHP Chile Inc.
BHP Copper Inc.
BHP Escondida Inc.
BHP Finance (International) Inc.
BHP Foreign Holdings Inc.
BHP Holdings (International) Inc.
BHP Holdings (Resources) Inc.
BHP Holdings (USA) Inc. (m) (r)
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 Petroleum (Arkansas Holdings) LLC
BHP Petroleum (North America) LLC
BHP Resources Inc.
Broken Hill Proprietary (USA) Inc.
Hamilton Brothers Petroleum Corporation
Hamilton Oil Company Inc.
WMC (Argentina) Inc.
WMC Corporate Services Inc.
202 South Minnesota Street, Carson City, NV, 89703,
United States of America
BHP Queensland Coal Limited (r)
Kelti S.A. (57.5%)
Minera Escondida Ltda (57.5%) (i)
Ecuador
Av. Simon Bolivar SN, Intersección Via A Nayon, Quito, Pichincha, Ecuador
Cerro-Yatsur S.A. (51%)
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%) (p)
Australia
125 St Georges Terrace, Perth, WA 6000, Australia
Bass Strait (50%) (p)
Macedon (71.43%) (p)
Minerva (90%) (p)
Mt Goldsworthy (85%) (p)
Mt Newman (85%) (p)
North West Shelf (12.5–16.67%) (p)
Posmac (65%) (p)
Pyrenees (40–71.43%) (p)
Yandi (85%) (p)
ESSO House, 12 Riverside Quay, Southbank, VIC 3006, Australia
Southern Natural Gas Development Pty Limited (50%)
BHP Annual Report 2020 239
Strategic ReportGovernance at BHPRemuneration ReportDirectors’ ReportAdditional informationShareholder informationFinancial Statements5 13 Related undertakings of the Group continued
Australia continued
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%) (p)
Gregory (50%) (p)
South Blackwater Coal Pty Limited (50%)
Level 16, Alluvion Building, 58 Mounts Bay Road, Perth, WA 6000,
Australia
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%)
Joint ventures and associates (d)
Country of incorporation
Anguilla
Registered office address
Harlaw Chambers, The Valley, Anguilla
Company Name
Carbones del Cerrejón Limited (33.33%)
Australia
30 Raven St, Kooragang, NSW 2304, Australia
NCIG Holdings Pty Ltd (27.98%)
Level 20, 500 Collins Street, Melbourne, VIC 3000, Australia
Rightship Pty Limited (33.33%)
Canada
Suite 1500, 1874 Scarth Street, Regina, SK, S4P 4E9, Canada
BHP SaskPower Carbon Capture and Storage (CCS) Knowledge
Centre Inc. (50%) (k)
Brazil
Rua Paraĩba, 1122, 9o andar, Belo Horizonte, MG, Brazil
Samarco Mineração S.A. (50%)
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%)
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%)
Mexico
Netherlands
Av. Ejercito Nacional #769, Torre B, Piso 3, Colonia Granada, Delegación
Miguel Hidalgo, Ciudad de Mexico, 11520, Mexico
Trion (60%) (p)
Singapore
10 Marina Boulevard, #07-01 Marina Bay Financial Centre Tower 2,
018983, Singapore
BM Alliance Marketing Pte Ltd (50%)
Trinidad and Tobago
Herikerbergweg 238, AMS, 1101 CM, The Netherlands
Global HubCo B.V. (33.33%) (n)
Peru
Av El Derby N° 055 Torre 1 Of 801, Santiago del Surco, Lima, Peru
Compañía Minera Antamina S.A. (33.75%)
United Kingdom
201 Bishopsgate, London, EC2M 3AB, United Kingdom
48-50 Sackville Street, Port of Spain, Trinidad, Trinidad and Tobago
SolGold Plc (13.64%)
Greater Angostura (45%) (p)
United States of America
United States of America
1209 Orange Street, Wilmington, DE, 19801, United States of America
1209 Orange Street, Wilmington, DE, 19801, United States of America
Gulf of Mexico (23.9–44%) (p)
Caesar Oil Pipeline Company LLC (25%) (k)
Cleopatra Gas Gathering Company LLC (22%) (k)
2711 Centerville Road, Suite 400, Wilmington DE 19808, United States
of America
Resolution Copper Mining LLC (45%)
9807 Katy Freeway, Suite 1200, Houston, TX, 77024, United States
of America
Marine Well Containment Company LLC (10%) (k)
240 BHP Annual Report 2020
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%)
(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 in preference B shares.
(o) Ownership in ordinary and special share classes L and M.
(p) Joint operation held by a subsidiary of the Group.
(q) 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.
(r) Directly held by BHP Group Ltd.
(s) Directly held by BHP Group Plc.
(t) These companies are parties to the Limited Deed of Cross Guarantee (Deed) and members of the Closed Group as at 30 June 2020. These companies originally
entered into the Deed on 6 June 2016 or have subsequently joined the deed by way of an Assumption Deed.
(u) These companies are parties to the Deed and are relieved from the Corporations Act 2001 requirements for preparation, audit and lodgement of financial reports and
Directors’ reports.
BHP Annual Report 2020 241
Strategic ReportGovernance at BHPRemuneration ReportDirectors’ ReportAdditional informationShareholder informationFinancial Statements5 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:
complying with the applicable Accounting Standards;
(i)
(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 2020 and of
their performance for the year ended 30 June 2020;
(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 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 2020.
(f)
Signed in accordance with a resolution of the Board of Directors.
Ken MacKenzie
Chair
Mike Henry
Chief Executive Officer
Dated this 3rd day of September 2020
242 BHP Annual Report 2020
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.
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.
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.
BHP Annual Report 2020 243
Strategic ReportGovernance at BHPRemuneration ReportDirectors’ ReportAdditional informationShareholder informationFinancial Statements5 5.5 Lead Auditor’s Independence Declaration under
Section 307C of the Australian Corporations Act 2001
Auditor’s Independence Declaration to the Directors of BHP Group Limited
As lead auditor for the audit of the financial report of BHP Group Limited
for the financial year ended 30 June 2020, I declare to the best
of my knowledge and belief, there have been:
a)
b)
no contraventions of the auditor independence requirements
of the Corporations Act 2001 in relation to the audit; and
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 financial year.
Ernst & Young
Tim Wallace
Partner
3 September 2020
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
244 BHP Annual Report 2020
5.6 Independent Auditors’ reports
Independent Auditors’ Reports of Ernst & Young (‘EY Australia’)
to the members of BHP Group Limited and Ernst & Young LLP
(‘EY UK’) to the members of BHP Group Plc
For the purpose of these reports, and unless otherwise stated to
denote either EY Australia or EY UK specifically, the terms ‘we’ and
‘our’ denote both (i) EY Australia in relation to Australian responsibilities
and reporting obligations to the members of BHP Group Limited, and
(ii) EY UK in relation to United Kingdom responsibilities and reporting
obligations to the members of BHP Group Plc.
BHP (‘the Group’) consists of BHP Group Limited, BHP Group Plc and
the entities they controlled during the year ended 30 June 2020.
1. Our opinions arising from our audits
1.1 What we have audited
We have audited the Consolidated Financial Statements of the Group
which comprise:
The Group
Consolidated balance sheet as at 30 June 2020
Consolidated income statement for the year then ended
Consolidated statement of comprehensive income for the year
then ended
Consolidated statement of changes in equity for the year then ended
Consolidated cash flow statement for the year then ended
Notes 1 to 38 to the Consolidated Financial Statements, including
a summary of significant accounting policies
The Directors’ Declaration is considered to be part of the Consolidated
Financial Statements for the purposes of EY Australia’s audit opinion.
EY UK has audited the Parent Company Financial Statements of BHP
Group Plc (“Parent Company”) which comprise:
Parent Company
Balance sheet as at 30 June 2020
Statement of changes in equity for the year then ended
Notes 1 to 13 to the Parent Company Financial Statements including
a summary of significant accounting policies
The financial reporting framework that has been applied in the
preparation of the Consolidated Financial Statements is the
Australian Corporations Act 2001, the UK Companies Act 2006,
Article 4 of the IAS Regulation, International Financial Reporting
Standards (IFRSs) as issued by the IASB, Australian Accounting
Standards and IFRSs as adopted by the European Union. The
financial reporting framework that has been applied in the
preparation of the Parent Company Financial Statements is
applicable laws and United Kingdom Accounting Standards,
including FRS 101 “Reduced Disclosure Framework”
(United Kingdom Generally Accepted Accounting Practice).
1.2 Our opinions
1.2.1 EY Australia
In the opinion of EY Australia, the accompanying Consolidated
Financial Statements of the Group are in accordance with the
Australian Corporations Act 2001, including:
• giving a true and fair view of the consolidated financial position
of the Group as at 30 June 2020 and of its consolidated financial
performance for the year ended on that date; and
• complying with Australian Accounting Standards and the Australian
Corporations Regulations 2001.
1.2.2 EY UK
In the opinion of EY UK:
• BHP Group Plc’s Consolidated Financial Statements and Parent
Company Financial Statements give a true and fair view of the state
of the Group’s and of the Parent Company’s affairs as at 30 June
2020 and of the Group’s profit for the year then ended;
• the Consolidated Financial Statements have been properly
prepared in accordance with both IFRSs as adopted by the
European Union and IFRSs as issued by the IASB;
• the Parent Company Financial Statements have been properly
prepared in accordance with United Kingdom Generally Accepted
Accounting Practice; and
• the Consolidated Financial Statements and the Parent Company
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.
2. Basis for our opinions
We, both EY Australia and EY UK, conducted our audits in
accordance with Australian Auditing Standards and International
Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our
responsibilities under those standards are further described in
Section 11 of this report, titled Auditors’ responsibilities for the audit
of the financial statements.
We are independent of the Group in accordance with the auditor
independence requirements of the Australian Corporations Act 2001
and the ethical requirements of the Accounting Professional and
Ethical Standards Board’s APES 110 Code of Ethics for Professional
Accountants (including Independence Standards) (the Code) that are
relevant to our audit of the financial report in Australia. We have also
fulfilled our other ethical responsibilities in accordance with the Code.
We are also independent of the Group and the Parent Company in
accordance with the ethical requirements that are relevant to our
audit of the financial statements in the UK, including the FRC’s Ethical
Standard as applied to listed public interest entities. We have fulfilled
our other ethical responsibilities in accordance with these requirements.
We believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our opinions.
BHP Annual Report 2020 245
Strategic ReportGovernance at BHPRemuneration ReportDirectors’ ReportAdditional informationShareholder informationFinancial Statements5 3. Our assessment of key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements
of the current year and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we identified.
These matters included 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.
These matters were addressed in the context of our audit on the financial statements as a whole, and in forming our opinions thereon, and we
do not provide separate opinions on these matters. For each matter below, our description of how our audit addressed the matter is provided
in that context.
We have fulfilled the responsibilities described in Section 11 titled Auditors’ Responsibilities for the Audit of the financial statements of our
report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed to respond to our
assessment of the risks of material misstatement of the financial report. The results of our audit procedures, including the procedures
performed to address the matters below, provide the basis for our audit opinion on the accompanying financial report.
Samarco dam failure provisions recognised and contingent liabilities disclosed
Losses in the period attributable to the dam failure (pre-tax and finance costs): US$0.1 billion (2019: US$1.0 billion)
Provisions: US$2.1 billion (2019: US$1.9 billion)
Contingent liability disclosure in Note 33
Why significant
How our audit addressed the key audit matter
Refer to Note 3 ‘Exceptional items’, Note 4 ‘Significant
events – Samarco dam failure’ and Note 33
‘Contingent liabilities’
There are a number of significant judgements and
disclosures made by the Group in relation to the
Samarco dam failure and the Germano dam
decommissioning, including:
• Determining the extent of the Group and BHP Billiton
Brasil Ltda’s legal obligation to continue to fund the
costs associated with the Samarco dam failure, and the
quantification of the continued obligation required by
the Governance Agreement, Framework Agreement and
Preliminary Agreement;
• Determining the costs of the decommissioning of the
Germano dam complex;
• Determining the status, accounting treatment and
quantification (if applicable) of the legal claims against
BHP Group Limited, BHP Group Plc, BHP Billiton Brasil
Ltda and Samarco;
• Disclosures relating to the contingent liabilities relating
to the various legal claims and other circumstances that
represent exposures to Samarco and the Group.
We identified the Samarco dam failure provisions
recognised, and contingent liabilities disclosures as a
key audit matter as auditing these estimates is complex.
There is a high degree of estimation uncertainty, together
with a wide range of reasonable outcomes. Significant
judgement is required in relation to assessing the
completeness and measurement of the estimated cash
outflow related to the provisions and contingent liabilities,
including the probability of the outflow. This is due to:
• The significant size of the potential claims, combined
with the multi-jurisdictional legal and regulatory locations;
• High degree of judgement and estimation around
certain key assumptions in the provision, including:
– Cost estimates of remediation and compensation
requirements for the Samarco dam failure;
– The number and compensation category of impacted
peoples entitled to compensation;
– Nature and extent of remediation activities; and
– Timing of cash flows.
The primary audit procedures we performed, amongst others, included
the following:
• We assessed the design of and tested the operating effectiveness of the
internal controls over the Samarco dam failure accounting and disclosure
process. This included testing controls over:
– The determination of the provision for the remediation of the Samarco
dam failure, including significant assumptions such as the cost estimate
to remediate, the nature and extent of remediation activities, and the
timing of the cash flows; and
– The Group’s review of the legal claims and determination of associated
legal provision and related contingent liability disclosures.
• We assessed the key assumptions used to determine the provision
recorded by the Group in relation to potential funding obligations by:
– Understanding the impact of any legal decisions on the number and
compensation category of impacted peoples;
– Inquiring with the BHP subject matter experts for the various remediation
programs regarding the cost estimate to remediate the environment,
residents’ wellbeing and infrastructure damaged by the dam failure;
– Evaluating the qualifications, competence and objectivity of the Group’s
subject matter experts involved in the determination of the cash flow
estimates by considering their qualifications, scope of work and
remuneration structure;
– Comparing the nature and extent of remediation activities described
in the Framework Agreement to the activities included in the cash
flow forecasts;
– Selecting a sample of cost estimates included in the provision
and considering the underlying supporting documentation, such
as court decisions;
– Assessing the period in which a provision change was recorded by
understanding when the event that caused the change occurred;
– Assessing the Germano dam decommissioning provision, with the
assistance of our subject matter specialists, as part of our audit
procedures reported in the Closure and Rehabilitation Provisions
key audit matter below; and
– Evaluating the historical accuracy of prior year’s forecasted cash flows
by comparing to the current year’s actual cash flows.
• We read the claims and assessed their status and considered whether they
now represented liabilities through:
– Inquiries with BHP’s external and internal legal advisors, senior
management, Group finance, and members of the Executive Leadership
Team, with respect to the ongoing proceedings;
– Inspection of correspondence with external legal advisors; and
– Independent confirmation letters received from external legal advisors.
• We assessed the disclosures regarding the environmental and legal
contingent liabilities as included in Note 33, and the relevant disclosures
regarding the significant events relating to Samarco dam failure as
included in Note 4 against the disclosure requirements of the relevant
accounting standards.
Our procedures were performed by the Group engagement team.
Key observations communicated to the Risk and Audit Committee
• We reported that the Samarco dam failure provisions are reasonable and that the increase in the cost estimates were a result of new
information obtained during the period.
• We reported that the contingent liabilities disclosures related to the Samarco dam failure are appropriate.
246 BHP Annual Report 2020
Assessment of the carrying value of long-lived assets
• Property, plant and equipment: US$72.4 billion (2019: US$68.0 billion)
• Intangible assets: US$0.6 billion (2019: US$0.7 billion)
• Investments accounted for using the equity method: US$2.6 billion (2019: US$2.6 billion)
• Impairment of property, plant and equipment: US$0.5 billion (2019: US$0.3 billion)
Why significant
How our audit addressed the key audit matter
Refer to Note 11 ‘Property, plant and equipment’, Note 12
‘Intangible assets’ and Note 30 ‘Investments accounted for
using the equity method’.
Accounting standards require an assessment of indicators
of impairment and impairment reversal annually or more
frequently if indicators of impairment exist, for each cash
generating unit (CGU).
The Group’s assessment of impairment indicators included
an evaluation of the impact of the COVID-19 pandemic and
the related macro-economic disruptions. The Group
concluded that COVID-19, in isolation, did not result in the
identification of an indicator of impairment.
At 30 June 2020, the Group determined that indicators
of impairment existed for the Cerro Colorado and Cerrejón
CGUs, requiring an impairment test to determine the
recoverable amount of these CGU’s.
The Group assessed the recoverable amount of the Cerro
Colorado and Cerrejón CGU’s, using the Value in Use (VIU)
methodology for Cerro Colorado and a Fair Value Less
Cost to Dispose methodology (FVLCD) for Cerrejón; as
disclosed in Note 11 to the financial statements.
An impairment charge of US$492 million (including
related tax impacts) was recorded for the Cerro Colorado
CGU primarily in relation to the updated life of mine plan.
No impairment charge was required following the
assessment of the recoverable amount for Cerrejón.
The assessment of the recoverable amount of these CGUs
was considered to be a key audit matter as it involves
significant judgement. Auditing the recoverable amount
of CGU’s is complex and subjective due to the use of
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.
The key estimates in management’s determination of
the recoverable amount, which drives whether or not
an impairment charge or reversal is recognised, were
as follows:
• Commodity prices: BHP’s commodity price assumptions
have a significant impact on CGU impairment assessments,
and these are inherently uncertain. There is a risk that
management’s commodity price assumptions are not
reasonable and may not appropriately reflect changes
in supply and demand, including due to climate change
and energy transition, leading to a material misstatement.
• Reserves: auditing the estimation of reserves is complex
as there is significant estimation uncertainty in assessing
the quantities of reserves, and the amount that will be
recovered based on future production estimates.
• Discount rates: given the long life of BHP’s assets,
recoverable amounts are sensitive to the discount rate
applied. Determining the appropriate discount rate to
apply to a CGU is judgemental.
The Group’s assessment of the potential financial impacts
of climate change and transition to a lower carbon
economy are disclosed in Note 11 to the financial statements.
The primary audit procedures we performed, amongst others, included
the following:
• We evaluated the design of and tested the operating effectiveness of the
internal controls over the Group’s processes of assessment for indicators
of impairment, and the assessment of the recoverable amount of the CGU’s
for which an indicator of impairment was identified.
• We performed an independent analysis for indicators of impairment, which
included considering the performance of the assets and also external
market conditions. Our procedures involved assessing the key inputs such
as forecast commodity prices, discount rates and reserve estimation.
• We considered the impact of COVID-19 and the related macro-economic
disruptions through evaluation of operating performance of the CGU’s,
and benchmarked forecast commodity prices to comparable market data.
• We considered the significant petroleum price volatility to date in CY2020
and the potential impact of climate change on the long-term petroleum
prices. We considered a range of long-term price assumptions, including
oil prices at US$55 a barrel (Brent) to identify potential impairment in the
Petroleum CGU’s. To address the price assumptions, we compared future
short and long-term commodity prices to consensus analysts’ forecasts
and those adopted by other companies.
• We involved our valuation specialists to assist in evaluating, amongst
other things, the discount rates applied and forecast commodity prices.
Our procedures to address the recoverable amounts of the Cerrejón
and Cerro Colorado CGU’s included:
• Evaluation of whether the methodology applied complied with the
requirements of the relevant accounting standards;
• Assessment of the future commodity prices adopted with reference to
broker and analyst data and publicly available peer companies information;
• Assessment of the discount rate adopted, with reference to external
market data including government bond rates and other relevant
companies data;
• Determining whether the cash flow projections agreed to approved plans,
capital allocations, budgets and forecasts and assessment of the
reasonableness of the forecast cashflows against the past performance
of the CGUs;
• Performance of sensitivity analysis to evaluate the impact of reasonably
possible changes in key assumptions such as commodity price, discount
rates, production, operating costs and capital expenditure;
• Evaluation of the historical accuracy of prior year’s forecasted cashflows
by comparing to current year’s actual cash flows; and
• Testing the mathematical accuracy of the impairment models.
The Group uses internal and external experts to provide geological,
metallurgical, mine planning, future commodity price and technological
information to support key assumptions in the impairment models. With
assistance from our mining and oil and gas reserves experts, we have
examined the information provided by the Group’s experts, including
assessment of the reserve estimation methodology against the relevant
industry and regulatory guidance. We also assessed the qualifications,
competence and the objectivity of the internal and external experts.
With the assistance of our climate change and valuation specialists we
have also evaluated how the Group’s response to climate change had been
reflected in assessment of asset carrying values, such as commodity price
forecasts and carbon prices.
Our procedures were performed by the Group engagement team.
Key observations communicated to the Risk and Audit Committee
• We reported that the impairment charge recorded for Cerro Colorado was appropriately recorded in the financial year ending
30 June 2020.
• We concluded that the recoverable amount of Cerrejón was appropriately supported, and consequently no impairment was required.
• We reported that we had considered the impact of the decline in global oil prices and that our benchmarking of forecast prices against
comparable market data provided third party evidence to support the reasonableness of the Group’s assessment of long-term price
assumptions. This included our consideration of oil prices at US$55 a barrel. We reported that we considered management’s conclusion
that there is no impairment charge to be appropriate.
• We are satisfied with how management has reflected the impact of climate change in their assessment of the carrying value
of long-lived assets.
BHP Annual Report 2020 247
Strategic ReportGovernance at BHPRemuneration ReportDirectors’ ReportAdditional informationShareholder informationFinancial Statements5 Closure and Rehabilitation Provisions
• Closure and Rehabilitation Provisions: US$8.8 billion (2019: US$7.0 billion)
• Expenses excluding net finance costs: US$0.7 billion (2019: US$0.3 billion)
Why significant
How our audit addressed the key audit matter
Refer to Note 14 ‘Closure and rehabilitation provisions’
The Group has rehabilitation obligations to restore and
rehabilitate land, offshore and environmental disturbances
created by its operations and related sites.
These obligations arise from regulatory and legislative
requirements across multiple jurisdictions in addition
to policies and processes set by the Group.
The evaluation of Closure and Rehabilitation provisions
was a key audit matter due to the highly complex and
judgemental nature of the estimates representing key
inputs to the provision, such as:
• Life of the operation or site;
• Estimated cost of future closure and rehabilitation
activities;
• Timing of the activities;
• Discount rates; and
• Regulatory and legislative requirements.
As a result of these inputs closure and rehabilitation
provisions have a high degree of estimation uncertainty
with a wide potential range of reasonable outcomes.
The primary audit procedures we performed, amongst others, included
the following:
• We evaluated the design of and tested the operating effectiveness of internal
controls related to the Group’s Closure and Rehabilitation provision estimates.
• Our procedures involved evaluation of the Group’s legal and regulatory
obligations for Closure and Rehabilitation, life of operation, future
rehabilitation costs, discount rates and timing of future cashflows.
• We tested the mathematical accuracy of the Closure and Rehabilitation
provision calculations.
• With the assistance of our subject matter specialists we evaluated a sample
of closure and rehabilitation provisions for operating and closed sites within
the Group. Our audit procedures included:
– Evaluation of the Closure and Rehabilitation plan with regard to applicable
regulatory and legislative requirements;
– Evaluation of the methodology used by mine closure engineers against
industry practice and our understanding of the business; and
– Assessment of the reasonableness of the timing of cash flows and cost
estimates against the Closure and Rehabilitation plan and industry practice.
• The Group has used internal and external experts to support the estimation
of the mine rehabilitation provisions. With the assistance of our subject
matter specialists, we assessed the qualifications, competence and
objectivity of the internal and external experts and that the information
provided by the Group’s internal and external experts has been appropriately
reflected in the calculation of the Closure and Rehabilitation provisions.
• We assessed the discount rates adopted to calculate the Closure and
Rehabilitation provisions, including benchmarking to comparable market
data (risk-free rates).
• With the assistance of our climate change and subject matter specialists,
we evaluated how the Group’s response to climate change had been
reflected in Closure and Rehabilitation provision estimates.
The Group engagement team and our component teams in Australia, Chile
and USA performed audit procedures which covered 91% of the Closure and
Rehabilitation provision.
Key observations communicated to the Risk and Audit Committee
• We reported that we have evaluated the rationale for the material changes in the Closure and Rehabilitation Provisions and that we were
satisfied this reflected new information for the year ended 30 June 2020.
• We reported that we considered the decrease in the closure and rehabilitation discount rates as at 30 June 2020 to be appropriate.
• We are satisfied with how management have reflected the impact of climate change in their estimates and with the climate change
disclosure in the financial statements.
The previous auditor included key audit matters in respect of the Samarco dam failure, the impairment of non-current assets, closure and
rehabilitation provisions and taxation for the year ended 30 June 2019. As would be expected in the case of any audit, key audit matters will
inevitably differ from year to year as significant events, transactions and judgements differ. Taxation is no longer a key audit matter due to the
settlement with relevant taxation authorities in 2019 of significant uncertain tax positions.
248 BHP Annual Report 2020
4. Our Scope of the Audit of BHP
What we mean
We are required to establish an overall audit strategy that sets the scope, timing and direction of our audit, and that
guides the development of our audit plan. Audit scope comprises the operated and non-operated assets, activities
and processes to be audited that, in aggregate, provide sufficient coverage of the financial statements for us to
express an audit opinion.
Criteria for
determining our
audit scope
Our assessment of audit risk and our evaluation of materiality determined our audit scope for each location within BHP
which, when taken together, enabled us to form an opinion on the financial statements under Australian Auditing
Standards and ISAs (UK). Our audit effort was focused towards higher risk areas, such as management judgements
and estimates, and on assets and group functions that we considered significant based upon size, complexity or risk.
Full and specific
scopes
Specified and
Group procedures
Changes from
the prior year
Analysis of our
audit coverage
The factors that we considered when assessing the scope of the BHP audit, and the level of work to be performed
at each asset or group function that were in scope for Group reporting purposes, included the following:
• the financial significance to BHP’s earnings, total assets or total liabilities, including consideration of the financial
significance of specific account balances or transactions;
• the significance of specific risks relating to an asset or group function: history of unusual or complex transactions,
identification of significant audit issues or the potential for, or a history of, material misstatements; and
• the effectiveness of the control environment and monitoring activities, including entity-level controls.
Of the 36 assets and group functions (‘locations’), we selected 10 locations based on their size or risk characteristics
and performed full scope audits of the complete financial information at four locations. Three of the full scope
locations are the most significant assets within the Iron Ore, Copper and Coal segments. The additional full scope
location is the Group Treasury Function. For the other six locations we performed specific scope audit procedures
on individual account balances within the location based on their size and risk profiles.
Specified
In addition to the 10 full and specific scope locations above, we selected 10 locations to perform procedures specified
by the group audit team in response to specific risk factors and in order to ensure that, at the overall Group level,
we reduced and appropriately covered the residual risk of error.
Centralised group functions
For full and specific scope locations, as well as specified procedures locations, we have performed procedures over
certain accounts by testing group functions which have centralised processes for revenue and accounts receivables,
purchase to pay, treasury, property, plant and equipment, employee benefits, right of use assets and lease liabilities
and the elimination of intercompany balances.
Group wide procedures
We performed centralised procedures across the entire Group, including IT general and IT application controls over
the 1SAP IT system and audit of manual and consolidation journal entries.
For the remaining 16 locations we performed supplementary audit procedures in relation to BHP’s centralised group
accounting and reporting processes including, but not limited to, procedures over equity accounted investments, and
the completeness of litigation and other claims. We also performed disaggregated analytical reviews on each financial
statement line item.
The prior year audit scope of the previous auditor was based on 10 reporting components, which included each asset,
segment and group function, as aggregated by region. Our audit scope is based on assets and group functions, rather
than aggregating by region.
The locations within the scope of our work accounted for the following percentages of the Group’s measures:
Profit before tax %
Total assets %
Revenue %
14
1
4
11
4
2
11
1
4
2
19
70
19
64
74
● Full scope ● Specific Scope ● Specified Procedures ● Review Scope ● Limited Procedures
BHP Annual Report 2020 249
Strategic ReportGovernance at BHPRemuneration ReportDirectors’ ReportAdditional informationShareholder informationFinancial Statements5 Integrated global
primary team and
their involvement with
EY component teams
EY Australia and EY UK operate as one integrated group audit team which was responsible for the direction and
supervision of the group audit engagement in compliance with professional standards and applicable legal and
regulatory requirements. This integrated group audit team established the overall group audit strategy, communicated
with component teams, performed work on the consolidation process, and evaluated the conclusions drawn from
the audit evidence as the basis for forming the opinions on the financial statements. Audit instructions outlined the
significant audit areas, performance materiality thresholds, which ranged from US$158 million to US$394 million,
and specific reporting requirements.
For the purpose of the Group audit, the integrated group audit team was responsible for directing, supervising,
evaluating and reviewing the work of EY global network firms operating under their instruction (local EY teams)
to assess whether:
• the work was performed and documented to a sufficiently high standard;
• the local EY audit team demonstrated that they had challenged management sufficiently and had executed their
audit procedures with a sufficient level of scepticism; and
• there was sufficient appropriate audit evidence to support the conclusions reached.
Each in-scope location has a local EY audit team led by a partner. Our in-scope locations cover four geographical
locations, being Australia, Chile, United States and Singapore. These local audit teams were supported by an audit
team in Malaysia and the Philippines performing procedures over centralised group functions.
The Group audit team interacted regularly with the local EY teams during each stage of the audit, were responsible
for the scope and direction of the audit process and reviewed key working papers. This, together with the additional
procedures performed at the group level, gave us sufficient appropriate audit evidence for our opinion on BHP’s
Consolidated Financial Statements.
A global team audit planning event was held in Australia in March 2019 (discussed further below). During the audit
period, the group audit team visited the local EY teams in Chile, United States, Australia, Singapore, London,
Philippines and Malaysia, where their scope, planned audit approach and areas of risk were discussed and we met
with local BHP management.
Changes due to COVID-19
The group audit team adapted their approach to interact with and monitor local EY teams in response to the COVID-19
pandemic. Due to COVID-19 travel restrictions imposed by governments, we did not complete our planned second
visits to the locations visited during the planning phase of the audit, as well as planned travel to Brazil and Canada.
In lieu of these additional visits, we maintained continuous dialogue with our local EY teams. This included: additional
meetings with our component teams and local BHP management via video conference and performing remote review
of the key workpapers associated with the component teams’ audit procedures.
We attended all meetings with our component teams and local management to conclude the audit procedures at
each location by phone or videoconference, to ensure that we were fully aware of their progress and results of their
audit procedures.
The performance of the year end audit was also required to be conducted remotely due to COVID-19 restrictions and
social distancing requirements at both component and Group locations. This was supported through remote access
to the Group’s financial systems and the use of EY software collaboration platforms for the secure and timely delivery
of requested audit evidence.
In preparation for our first-year audit of the year ended 30 June 2020 financial statements, we performed a number
of transition activities to build on our knowledge of BHP’s specific risks, policies and processes to enable us to identify
the risks of material misstatements to the financial statements and to determine the scope of our audit. The principal
procedures performed included:
• Establishing independence from BHP in December 2018 by exiting non-audit services that would impair our
independence and ensuring that all staff and partners who work on the audit globally are independent of BHP;
• Establishing an appropriately resourced and skilled global audit team, including specialists, in all relevant locations;
• Engaging with management at a group and local level in order to obtain a detailed understanding of BHP, including
its processes and internal controls, and accounting policies;
• Developing and delivering a bespoke global audit planning event in March 2019 for the global audit team members
from our significant locations where an overview of the Group and the group scope and audit strategy was
discussed. Any updates to our initial audit strategy were communicated to the global audit team members
throughout the audit;
• Shadowing KPMG, the previous auditor, during the half year ended 31 December 2018 review and year ended
30 June 2019 audit at group and key locations during closing meetings with management to gain insights
on key issues impacting BHP, as well as attending BHP Risk and Audit Committee meetings as observers.
• Understanding accounting policies and historic accounting judgements by reviewing accounting policy manuals
and technical documentation on specific accounting topics;
• Reviewing key elements of KPMG’s 2018 and 2019 audit files at both the group level and key locations in scope
for the group audit; and
• Conducting group audit team visits to locations in Australia, Chile, United States, Singapore, Philippines,
United Kingdom and Malaysia.
We presented our audit plan to the BHP Risk and Audit Committee in June 2019 and provided the Committee
with written updates to our plan in October 2019 and June 2020.
First year audit
considerations
250 BHP Annual Report 2020
5. Our application of materiality
We apply the concept of materiality in planning and performing the audit, in evaluating the effect of identified misstatements on the audit
and in forming our audit opinions.
Materiality
What we mean
Basis of Materiality
and determination
The magnitude of an omission or misstatement that, individually or in the aggregate, could reasonably be expected
to influence the economic decisions of the users of the financial statements. Materiality provides a basis for
determining the nature and extent of our audit procedures.
We determined materiality for the Group to be US$700 million, which is approximately 5% of Group profit before
tax and exceptional items from continuing operations. We believe that profit before tax and exceptional items from
continuing operations provides the most relevant measure to the users to assess the financial performance of the
Group. In 2019, the previous auditor used a materiality threshold of US$650 million, which was approximately 5%
of the three-year average of Group profit before tax and exceptional items from continuing operations. Exceptional
items are defined in Note 3 to the financial statements.
We determined materiality for the Parent Company to be US$95 million, which is 1% of total assets. Total assets is an
appropriate basis to determine materiality for an investment holding company, and 1% is a typical percentage of total
assets to use to determine materiality. In 2019, the previous auditor used a materiality of US$113 million, which was
1% of total assets.
During the course of our audit, we reassessed initial materiality and considered it to still be appropriate based
on the final profit before tax and exceptional items from continuing operations.
Performance Materiality
What we mean
Determination
of Performance
Materiality
Allocation of
Performance
Materiality
to in-scope
locations
The application of materiality at the individual account or balance level. It is set at an amount to reduce to
an appropriately low level the probability that the aggregate of uncorrected and undetected misstatements
exceeds materiality.
On the basis of our risk assessments, together with our assessment of the Group’s overall control environment, our
judgement was that performance materiality was 75% of our planning materiality, namely US$525 million. In assessing
the appropriate level, we consider the nature, the number and impact of the audit differences identified by the
previous auditor.
The level of materiality that we applied in undertaking our audit work at each location was determined by applying
a percentage of our total performance materiality. This percentage is based on the significance of the location relative
to BHP as a whole and our assessment of the risk of material misstatement at that location. The locations selected,
together with the ranges of materiality applied, were:
Location
WAIO
Escondida
BMA
Group Functions
Marketing (Freight)
Marketing (Revenue)
Samarco
Olympic Dam
Australian JIU
Gulf of Mexico
Commodity/
Function
Iron Ore
Copper
Coal
Treasury
Marketing
Marketing
Iron Ore
Copper
Petroleum
Petroleum
Country
Australia
Chile
Australia
Australia
Singapore
Singapore
Brazil
Australia
Australia
United States
Scope
Full
Full
Full
Full
Specific
Specific
Specific
Specific
Specific
Specific
Performance
materiality (US$M)
394
200
158
394
394
236
263
158
158
158
Reporting Threshold
What we mean
An amount below which identified misstatements are considered as being clearly trivial.
Level set
We agreed with the Risk and Audit Committee that we would report to them all uncorrected audit differences in
excess of US$35 million, which is set at 5% of planning materiality, as well as differences below that threshold that,
in our view, warranted reporting on qualitative grounds. In 2019, the previous auditor reported differences in excess
of US$30 million.
We evaluate any uncorrected misstatements against both the quantitative measures of materiality discussed above
and in light of other relevant qualitative considerations in forming our opinion.
BHP Annual Report 2020 251
Strategic ReportGovernance at BHPRemuneration ReportDirectors’ ReportAdditional informationShareholder informationFinancial Statements5 6. Other information
The other information comprises the information included in the
Annual Report set out in Sections 1, 2, 3, 4, 6 and 7 being the Strategic
Report, Governance at BHP, Remuneration Report, the Directors’
Report, Additional Information and Shareholder Information, other
than the financial statements and our auditors’ report thereon.
The directors are responsible for the other information.
Our opinions on the financial statements do not cover the
other information and, except to the extent otherwise explicitly
stated in this report, we do not express any form of assurance
conclusion thereon.
In connection with our audits of the financial statements, our
responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent
with the financial statements or our knowledge obtained in the audit
or otherwise appears to be materially misstated. If we identify such
material inconsistencies or apparent material misstatements, we
are required to determine whether there is a material misstatement
in the financial statements or a material misstatement of the other
information. If, based on the work we have performed, we conclude
that there is a material misstatement of the other information,
we are required to report that fact.
We have nothing to report in this regard.
7. Opinions on the Remuneration Report
7.1 EY Australia’s opinion on the Remuneration Report
EY Australia have audited the Remuneration Report included in
Section 3 of the Annual Report for the year ended 30 June 2020.
The directors of the Company are responsible for the preparation
and presentation of the Remuneration Report in accordance with
section 300A of the Australian Corporations Act 2001. EY Australia’s
responsibility is to express an opinion on the Remuneration Report,
based on our audit conducted in accordance with Australian
Auditing Standards.
In EY Australia’s opinion, the Remuneration Report of BHP Group
Limited for the year ended 30 June 2020, complies with section
300A of the Australian Corporations Act 2001.
7.2 EY UK’s opinion on the part of the Remuneration Report
to be audited
In EY UK’s opinion, the part of the Remuneration Report prescribed
by the UK Companies Act 2006 to be audited, set out in section 3
of the Annual Report, has been properly prepared in accordance
with the UK Companies Act 2006. This covers the following:
• the single total figure for remuneration of each director,
as set out in sections 3.3.1 and 3.3.14
• details of the taxable benefits, as set out in sections
3.3.1 and 3.3.14
• Cash and Deferred Plan and Long-Term Incentive Plan
performance targets and outcomes for 2020, as set out
in sections 3.3.2 and 3.3.3 respectively
• the directors’ statement set out in section 4.3 in the Annual Report
about whether they considered it appropriate to adopt the going
concern basis of accounting in preparing them, and their
identification of any material uncertainties to the entity’s ability
to continue to do so over a period of at least twelve months from
the date of approval of the financial statements;
• whether the directors’ statement in relation to going concern
required under the Listing Rules in accordance with Listing Rule
9.8.6R(3) is materially inconsistent with our knowledge obtained
in the audit; or
• the directors’ explanation set out in section 1.5.4 in the Annual
Report as to how they have assessed the prospects of the entity,
over what period they have done so and why they consider that
period to be appropriate, and their statement as to whether they
have a reasonable expectation that the entity will be able to
continue in operation and meet its liabilities as they fall due over
the period of their assessment, including any related disclosures
drawing attention to any necessary qualifications or assumptions.
8.2 Corporate governance disclosures
In the context of EY UK’s responsibilities with regards to the other
information described in section 6, EY UK have nothing to report
in regard to our responsibility to specifically address the following
items in the other information and to report as uncorrected material
misstatements of the other information where we conclude that
those items meet the following conditions:
• Fair, balanced and understandable set out in section 2.10 –
the statement given by the directors that they consider the Annual
Report and financial statements taken as a whole is fair, balanced
and understandable and provides the information necessary for
members to assess the Group’s performance, business model and
strategy, is materially inconsistent with our knowledge obtained
in the audit; or
• Risk and Audit Committee reporting set out in section 2.10 –
the section describing the work of the audit committee does
not appropriately address matters communicated by us to the
Risk and Audit Committee; or
• Directors’ statement of compliance with the UK Corporate
Governance Code set out in section 2.17 – the parts of the
directors’ statement required under the Listing Rules relating
to the company’s compliance with the UK Corporate Governance
Code containing provisions specified for review by the auditor
in accordance with Listing Rule 9.8.10R(2) do not properly disclose
a departure from a relevant provision of the UK Corporate
Governance Code.
8.3 EY UK’s opinion on other matters prescribed by the UK
Companies Act 2006
In our opinion, based on the work undertaken in the course
of the audit:
• the information given in the strategic report and the directors’
report for the financial year for which the financial statements
are prepared is consistent with the financial statements; and
• details of the total pension entitlements, as set out in sections
• the strategic report and the directors’ report have been prepared
3.3.1 and 3.3.14
• details of scheme interests awarded during the financial year,
as set out in section 3.3.4
• details of payments to past directors and for loss of office
as set out in section 3.3.24
• statement of directors’ shareholding and share interests,
as set out in section 3.3.21 and the table included in
section 3.3.19.
8. EY UK’s reporting on specific sections of the other
information
In this section 8 ‘we’ and ‘our’ refer to EY UK only.
8.1 Conclusion related to principal risks, going concern and
viability statement
EY UK have nothing to report in respect of the following information
in the Annual Report, in relation to which the ISAs (UK) require us
to report to you whether we have anything material to add or draw
attention to:
• the disclosures in the Annual Report set out in section 1.5.4 that
describe the principal risks and explain how they are being
managed or mitigated;
• the directors’ confirmation set out in section 1.5.4 in the Annual
Report that they have carried out a robust assessment of the
principal risks facing the entity, including those that would threaten
its business model, future performance, solvency or liquidity;
in accordance with applicable legal requirements.
9. Other matters which EY UK is required to report
by exception
In this section 9 ‘we’ and ‘our’ refer to EY UK only.
In the light of the knowledge and understanding of the Group and the
Parent Company and its environment obtained in the course of the
audit, EY UK have not identified material misstatements in the
strategic report or the directors’ report.
EY UK have nothing to report in respect of the following matters in
relation to which the UK Companies Act 2006 requires us to report
to you if, in our opinion:
• adequate accounting records have not been kept by the Parent
Company, or returns adequate for our audit have not been received
from branches not visited by us; or
• the Parent Company financial statements and the part of the
Remuneration Report to be audited are not in agreement with
the accounting records and returns; or
• certain disclosures of directors’ remuneration specified by law
are not made; or
• we have not received all the information and explanations
we require for our audit.
252 BHP Annual Report 2020
• We assessed the susceptibility of the Group’s financial statements
to material misstatement, including how fraud might occur by
considering the risk of fraud through management override and,
in response, incorporated data analytics across manual journal
entries into our audit approach.
• Based on this understanding we designed our audit procedures
to identify non-compliance with such laws and regulations.
Our procedures involved journal entry testing, with a focus
on journals meeting our defined risk criteria based on our
understanding of the business; enquiries of the legal counsel,
external legal advisers, group management, internal audit and
all full and specific scope management; and review of Board and
Risk and Audit Committee reporting.
• We ensured our global audit team has deep industry experience
through working for many years on relevant audits, including
experience of mining and oil and gas. Our audit planning included
considering external market factors, for example geopolitical risk,
the potential impact of climate change, commodity price risk and
major trends in the industry.
12.2 Other matters
• We were appointed by the company on 7 November 2019 to audit
the financial statements for the year ending 30 June 2020 and
subsequent financial periods. The period of total uninterrupted
engagement including previous renewals and reappointments
is one year as this is the first audit year.
• The non-audit services prohibited by the FRC’s Ethical Standard
were not provided to the Group or the Parent Company and
we remain independent of the Group and the Parent Company
in conducting the audit.
• Our audit opinion is consistent with our report to the Risk and
Audit Committee explaining the results of our audit.
13. Use of EY’s reports
EY Australia’s report is made solely to BHP Group Limited members,
as a body, in accordance with the Australian Corporations Act 2001.
EY UK’s report is made solely to the BHP Group plc’s members, as a
body, in accordance with Chapter 3 of Part 16 of the UK Companies
Act 2006. Our audit work has been undertaken so that we might state
to the companies’ members those matters we are required to state
to them in an auditor’s report and for no other purpose. Accordingly,
each of EY Australia and EY UK 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 this report, or for the
opinions we have formed.
Tim Wallace
Partner
Gary Donald
Senior Statutory Auditor
for and on behalf of
Ernst & Young
Melbourne
3 September 2020
In respect of BHP Group Limited
Ernst & Young LLP
London
3 September 2020
In respect of BHP Group Plc
Ernst & Young, an Australian partnership and Ernst & Young LLP, a limited liability
partnership registered in England and Wales, are member firms of Ernst & Young
Global Limited.
Ernst & Young Australia liability limited by a scheme approved under Professional
Standards Legislation.
10. Responsibilities of directors
As explained more fully in the directors’ responsibilities statement set
out in section 5.4, the directors of the Group are responsible for the
preparation of the financial statements and for being satisfied that
they give a true and fair view in accordance with the relevant financial
reporting frameworks, and for such internal control as the directors
determine is necessary to enable the preparation of financial
statements that give a true and fair view and are free from material
misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible
for assessing the Group and Parent Company’s ability to continue
as a going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting, unless the
directors either intend to liquidate the Group or the Parent Company
or to cease operations, or have no realistic alternative but to do so.
11. Auditors’ responsibilities for the audits of the
financial statements
Our objectives are to obtain reasonable assurance about whether the
financial statements as a whole are free from material misstatement,
whether due to fraud or error, and to issue an auditors’ report that
includes our opinion. Reasonable assurance is a high level of
assurance, but is not a guarantee that an audit conducted in
accordance with Australian Auditing Standards and ISAs (UK) will
always detect a material misstatement when it exists. Misstatements
can arise from fraud or error and are considered material if, individually
or in the aggregate, they could reasonably be expected to influence
the economic decisions of users taken on the basis
of these financial statements.
A further description of EY Australia’s responsibilities for the audit
of the Consolidated Financial Statements together with the Directors’
Declaration is located at the Auditing and Assurance Standards Board
website at https://www.auasb.gov.au/admin/file/content102/c3/
ar1_2020.pdf. This description forms part of EY Australia auditor’s report.
A further description of EY UK’s responsibilities for the audit
of the Consolidated Financial Statements and Parent Financial
Statements is provided on the UK FRC’s website at https://www.frc.
org.uk/auditors/audit-assurance/auditor-s-responsibilities-for-the-
audit-of-the-fi/description-of-the-auditor’s-responsibilities-for. This
description forms part of EY UK auditor’s report.
12. Other matters EY UK are required to address
In this section 12 ‘we’ and ‘our’ refer to EY UK only.
12.1 Explanation as to what extent the audit was considered
capable of detecting irregularities, including fraud
The objectives of our audit, in respect to fraud, are; to identify and
assess the risks of material misstatement of the financial statements
due to fraud; to obtain sufficient appropriate audit evidence
regarding the assessed risks of material misstatement due to fraud,
through designing and implementing appropriate responses; and to
respond appropriately to fraud or suspected fraud identified during
the audit. However, the primary responsibility for the prevention and
detection of fraud rests with both those charged with governance
of the entity and management.
Our approach was as follows:
• We obtained an understanding of the legal and regulatory
frameworks that are applicable to the Group and determined that
the most significant are those that relate to the reporting framework
(including IFRSs as issued by the IASB, Australian Accounting
Standards and IFRSs as adopted by the European Union, the
Australian Corporations Act 2001, UK Companies Act 2006, the
UK Corporate Governance Code, the US Securities Exchange Act
of 1934 and the Listing Rules of the UK Listing Authority) and the
relevant tax compliance regulations in the jurisdictions in which
BHP operates. In addition, we concluded that there are certain
significant laws and regulations that may have an effect on the
determination of the amounts and disclosures in the financial
statements, mainly relating to health and safety, employee matters,
bribery and corruption practices, environmental and certain
aspects of company legislation recognising the regulated nature
of the Group’s mining activities and its legal form.
• We understood how BHP is complying with those frameworks
by making enquiries of management, internal audit, those
responsible for legal and compliance procedures and the Company
Secretary. We corroborated our enquiries through our review
of Board minutes, papers provided to the Group’s Risk and Audit
Committee and the Sustainability Committee and correspondence
received from regulatory bodies and noted that there was
no contradictory evidence.
BHP Annual Report 2020 253
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 1.11.1 ‘Petroleum’ and section 6.4.1 ‘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 28 ‘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 6.3.2
‘Production – Petroleum’ and section 6.4.1 ‘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
2020
Unproved properties
Proved properties
Total costs
Less: Accumulated depreciation, depletion, amortisation and valuation provisions
Net capitalised costs
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
Australia
US$M
United
States (1)
US$M
Other (2)
US$M
Total
US$M
10
17,079
17,089
(11,423)
5,666
10
16,514
16,524
(10,867)
5,657
10
16,258
16,268
(9,984)
6,284
808
12,538
13,346
(8,726)
4,620
875
11,751
12,626
(8,339)
4,287
4,528
43,885
48,413
(33,437)
14,976
576
1,743
2,319
(1,370)
949
458
1,625
2,083
(1,302)
781
202
2,424
2,626
(2,065)
561
1,394
31,360
32,754
(21,519)
11,235
1,343
29,890
31,233
(20,508)
10,725
4,740
62,567
67,307
(45,486)
21,821
(1) Net capitalised costs includes Onshore US assets of US$ nil (2019: US$ nil; 2018: US$10,672 million).
(2) Other is primarily comprised of Algeria, Mexico, Trinidad and Tobago and the United Kingdom (divested 30 November 2018).
Costs incurred relating to oil and gas property acquisition, exploration and development activities
The following table shows costs incurred relating to oil and gas property acquisition, exploration and development activities (whether charged
to expense or capitalised). Amounts shown include interest capitalised.
2020
Acquisitions of proved property
Acquisitions of unproved property
Exploration (1)
Development
Total costs (2)
2019
Acquisitions of proved property
Acquisitions of unproved property
Exploration (1)
Development
Total costs (2)
2018
Acquisitions of proved property
Acquisitions of unproved property
Exploration (1)
Development
Total costs (2)
Australia
US$M
United
States (3)
US$M
Other (4)
US$M
−
−
38
232
270
−
−
44
132
176
−
−
25
195
220
−
38
278
676
992
−
5
190
792
987
−
9
418
1,548
1,975
−
6
370
100
476
−
−
492
54
546
−
−
291
34
325
Total
US$M
−
44
686
1,008
1,738
−
5
726
978
1,709
−
9
734
1,777
2,520
(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$1,178 million (2019: US$1,275 million; 2018: US$1,970 million) capitalised during the year.
(3) Total costs include Onshore US assets of US$ nil (2019: US$331 million; 2018: US$1,081 million).
(4) Other is primarily comprised of Algeria, Canada, Mexico and Trinidad and Tobago.
254 BHP Annual Report 2020
5.7 Supplementary oil and gas information – unaudited continued
Results of operations from oil and gas producing activities
The following information is similar to the disclosures in note 1 ‘Segment reporting’ in section 5.1, but differs in several respects as to the
level of detail and geographic information. Amounts shown in the following table exclude financial income, financial expenses, and general
corporate overheads. Further, the amounts shown below include Onshore US however the disclosures in note 1 ‘Segment reporting’
in Section 5.1 do not.
Income taxes were determined by applying the applicable statutory rates to pre-tax income with adjustments for permanent differences
and tax credits.
2020
Oil and gas revenue (1)
Production costs
Exploration expenses
Depreciation, depletion, amortisation and valuation provision (2)
Production taxes (3)
Accretion expense (4)
Income taxes
Royalty-related taxes (5)
Results of oil and gas producing activities (6)
2019
Oil and gas revenue (1)
Production costs
Exploration expenses
Depreciation, depletion, amortisation and valuation provision (2)
Production taxes (3)
Accretion expense (4)
Income taxes
Royalty-related taxes (5)
Results of oil and gas producing activities (6)
2018
Oil and gas revenue (1)
Production costs
Exploration expenses
Depreciation, depletion, amortisation and valuation provision (2)
Production taxes (3)
Accretion expense (4)
Income taxes
Royalty-related taxes (5)
Results of oil and gas producing activities (6)
Australia
US$M
United
States (7)
US$M
Other (8)
US$M
2,535
(575)
(37)
(906)
(177)
840
(78)
(275)
(85)
402
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
1,101
(161)
(271)
(476)
(1)
192
(24)
(35)
−
133
2,675
(568)
(162)
(621)
−
1,324
(34)
(193)
−
1,097
3,747
(1,312)
(270)
(2,842)
−
(677)
(46)
(723)
−
(1,446)
350
(80)
(252)
(75)
(13)
(70)
(10)
(157)
−
(237)
610
(118)
(229)
(103)
(25)
135
(13)
(267)
−
(145)
421
(121)
(254)
(81)
(1)
(36)
(14)
(124)
−
(174)
Total
US$M
3,986
(816)
(560)
(1,457)
(191)
962
(112)
(467)
(85)
298
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)
(1) Includes sales to affiliated companies of US$62 million (2019: US$75 million; 2018: US$75 million).
(2) Includes valuation provision of US$12 million (2019: US$21 million; 2018: US$596 million).
(3) Includes royalties and excise duty.
(4) Represents the unwinding of the discount on the closure and rehabilitation provision.
(5) Includes petroleum resource rent tax and petroleum revenue tax where applicable.
(6) Amounts shown exclude financial income, financial expenses and general corporate overheads and, accordingly, do not represent all of the operations attributable
to the Petroleum segment presented in note 1 ‘Segment reporting’ in section 5.1.
(7) Results of oil and gas producing activities includes Onshore US assets of US$ nil (2019: US$431 million; 2018: US$(465) million).
(8) Other is primarily comprised of Algeria, Canada, Mexico, Trinidad and Tobago and the United Kingdom (divested 30 November 2018).
BHP Annual Report 2020 255
Strategic ReportGovernance at BHPRemuneration ReportDirectors’ ReportAdditional informationShareholder informationFinancial Statements5 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 6.4.1 ‘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
2020
Future cash inflows
Future production costs
Future development costs
Future income taxes (3)
Future net cash flows
Discount at 10 per cent per annum
Standardised measure
2019
Future cash inflows
Future production costs
Future development costs
Future income taxes (3)
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 (3)
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
11,526
(4,027)
(4,124)
(187)
3,188
(642)
2,546
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
12,997
(4,943)
(3,242)
(880)
3,932
(1,586)
2,346
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
1,660
(494)
(433)
(473)
260
(94)
166
1,807
(459)
(226)
(711)
411
(94)
317
2,124
(501)
(189)
(901)
533
(129)
404
26,183
(9,464)
(7,799)
(1,540)
7,380
(2,322)
5,058
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
(1) Standardised measure includes Onshore US assets of US$ nil (2019: US$ nil; 2018: US$1,932 million).
(2) Other is primarily comprised of Algeria and Trinidad and Tobago.
(3) Future income taxes include credits to be received as a result of Petroleum operations and the utilisation of future tax losses by the Group.
256 BHP Annual Report 2020
5.7 Supplementary oil and gas information – unaudited continued
Changes in the Standardised measure are presented in the following table.
Changes in the Standardised measure
Standardised measure at the beginning of the year
Revisions:
Prices, net of production costs
Changes in future development costs
Revisions of reserves quantity estimates (1)
Accretion of discount
Changes in production timing and other
Sales of oil and gas, net of production costs
Acquisitions of reserves-in-place
Sales of reserves-in-place (2)
Previously estimated development costs incurred
Extensions, discoveries, and improved recoveries, net of future costs
Changes in future income taxes
Standardised measure at the end of the year (3)
2020
US$M
2019
US$M
9,152
10,240
(5,633)
330
(229)
1,313
(310)
4,623
(2,980)
−
−
1,005
145
2,265
5,058
3,821
(228)
1,268
1,178
(618)
15,661
(5,029)
−
(1,489)
545
(33)
(503)
9,152
2018
US$M
8,242
5,540
(358)
(166)
1,016
946
15,220
(5,091)
−
(26)
1,068
502
(1,433)
10,240
(1) Changes in reserves quantities are shown in the Petroleum reserves tables in section 6.4.1.
(2) Onshore US assets disposal in 2019.
(3) Standardised measure at the end of the year includes Onshore US assets of US$ nil (2019: US$ nil; 2018: US$1,932 million).
Accounting for suspended exploratory well costs
Refer to note 11 ‘Property, plant and equipment’ in section 5.1 for a discussion of the accounting policy applied to the cost of exploratory wells.
Suspended wells are also reviewed in this context.
The following table provides the changes to capitalised exploratory well costs that were pending the determination of proved reserves for the
three years ended 30 June 2020, 30 June 2019 and 30 June 2018.
Movement in capitalised exploratory well costs
At the beginning of the year
Additions to capitalised exploratory well costs pending the determination of proved reserves
Capitalised exploratory well costs charged to expense
Capitalised exploratory well costs reclassified to wells, equipment, and facilities based on the
determination of proved reserves
Sale of suspended wells
At the end of the year
2020
US$M
1,040
120
−
(6)
(65)
1,089
2019
US$M
794
297
(9)
(42)
−
1,040
2018
US$M
668
186
(62)
2
−
794
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.
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
2020
US$M
120
969
1,089
2020
14
2019
US$M
210
830
1,040
2019
13
2018
US$M
124
670
794
2018
17
BHP Annual Report 2020 257
Strategic ReportGovernance at BHPRemuneration ReportDirectors’ ReportAdditional informationShareholder informationFinancial Statements5 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 2020
Australia
United States (1)
Other (2)
Total
Year ended 30 June 2019
Australia
United States (1)
Other (2)
Total
Year ended 30 June 2018
Australia
United States (1)
Other (2)
Total
Net exploratory wells
Net development wells
Productive
Dry
Total
Productive
Dry
Total
Total
−
−
1
1
−
1
4
5
−
1
−
1
−
−
1
1
−
−
2
2
−
1
−
1
−
−
2
2
−
1
6
7
−
2
−
2
−
−
1
1
1
33
−
34
1
84
−
85
−
1
−
1
−
−
−
−
−
1
−
1
−
1
1
2
1
33
−
34
1
85
−
86
−
1
3
4
1
34
6
41
1
87
−
88
(1) Includes Onshore US assets net productive development wells of nil (2019: 33; 2018: 84) and net dry development wells of nil (2019: nil; 2018: 1). Onshore US assets
had nil net exploratory wells in 2020, 2019 and 2018.
(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 2020. 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 2020 was as follows:
Australia
United States
Other (1)
Total
Crude oil wells
Natural gas wells
Total
Gross
353
61
59
473
Net
176
24
22
222
Gross
162
−
8
170
Net
54
−
4
58
Gross
515
61
67
643
Net
230
24
26
280
(1) Other is primarily comprised of Algeria and Trinidad and Tobago.
Of the productive crude oil and natural gas wells, 133 (net: 62) operated wells had multiple completions.
Developed and undeveloped acreage (including both leases and concessions) held at 30 June 2020 was as follows:
Thousands of acres
Australia
United States
Other (1)(2)
Total
Developed acreage
Undeveloped acreage
Gross
2,152
98
146
2,396
Net
823
36
57
916
Gross
766
844
3,926
5,536
Net
279
800
3,445
4,524
(1) Developed acreage in Other primarily consists of Algeria and Trinidad and Tobago.
(2) Undeveloped acreage in Other primarily consists of Barbados, Canada, Mexico and Trinidad and Tobago.
Approximately 833 thousand gross acres (411 thousand net acres), 1,089 thousand gross acres (655 thousand net acres) and 264 thousand
gross acres (256 thousand net acres) of undeveloped acreage will expire in the years ending 30 June 2021, 2022 and 2023 respectively,
if the Group does not establish production or take any other action to extend the terms of the licences and concessions.
258 BHP Annual Report 2020
BHP Annual Report 2020 259
In this section6.1 Alternative Performance Measures6.2 Information on mining operations6.3 Production6.4 Resources and Reserves6.5 Major projects6.6 Sustainability – performance data6.7 Legal proceedings6.8 GlossarySection 6Additional information 6.1 Alternative Performance Measures
We use various Alternative Performance Measures (APMs) to reflect
our underlying financial performance.
These APMs 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 review the financial performance
of the Group with the Board and the investment community.
Sections 6.1.1 and 6.1.2 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 or 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 2020 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 5.1.
Exceptional items are those gains or losses where their nature,
including the expected frequency of the events giving rise to them,
and impact 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 financial years are detailed below.
2019
US$M
2018
US$M
2020
US$M
−
489
(1,025)
−
(409)
(508)
(1,453)
(93)
−
(93)
−
50
(57)
−
−
(945)
(952)
(108)
−
(108)
(1,546)
(1,060)
241
−
241
(1,305)
−
(1,305)
(201)
(1,104)
(21.9)
5,057
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
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)
260 BHP Annual Report 2020
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 5.1.
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 5.1.
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 5.1.
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 5.1.
2020
US$M
7,956
1,104
9,060
2020
US$M
7,956
−
1,104
−
9,060
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
2020
US cents
2019
US cents
2018
US cents
157.3
21.9
179.2
2020
US$M
14,421
1,453
15,874
6,112
494
(409)
22,071
160.3
15.8
176.1
2019
US$M
16,113
952
17,065
5,829
264
−
23,158
69.6
98.2
167.8
2018
US$M
15,996
566
16,562
6,288
333
−
23,183
BHP Annual Report 2020 261
Strategic ReportGovernance at BHPRemuneration ReportDirectors’ ReportFinancial StatementsShareholder informationAdditional information6 6.1 Alternative Performance Measures continued
Underlying EBITDA – Segment
Year ended 30 June 2020
US$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
Year ended 30 June 2019
US$M
Restated
Profit from operations
Exceptional items included in profit from operations (1)
Depreciation and amortisation expense
Net impairments
Exceptional item included in Depreciation, amortisation and impairments (1)
Underlying EBITDA
Year ended 30 June 2018
US$M
Restated
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
744
6
1,445
12
−
1,362
1,228
1,740
426
(409)
12,310
614
1,608
22
−
793
18
807
14
−
2,207
4,347
14,554
1,632
Petroleum Copper
Iron Ore
Coal
2,480
−
1,560
21
−
2,587
−
1,835
128
−
8,426
971
1,653
79
−
3,400
−
632
35
−
4,061
4,550
11,129
4,067
Petroleum Copper
Iron Ore
Coal
1,598
−
1,719
76
−
4,389
−
1,920
213
−
6,656
539
1,721
14
−
3,682
−
686
29
−
3,393
6,522
8,930
4,397
Group and
unallocated
items/
eliminations (2)
(788)
(413)
512
20
−
(669)
Group and
unallocated
items/
eliminations (2)
(780)
(19)
149
1
−
(649)
Group and
unallocated
items/
eliminations (2)
(329)
27
242
1
−
(59)
Total Group
14,421
1,453
6,112
494
(409)
22,071
Total Group
16,113
952
5,829
264
−
23,158
Total Group
15,996
566
6,288
333
−
23,183
(1) For more information, refer to note 3 ‘Exceptional items’ in section 5.1.
(2) Group and unallocated items includes functions, other unallocated operations, including Potash, Nickel West and legacy assets (previously disclosed as closed mines
in the Petroleum reportable segment), and consolidation adjustments. Comparative information for the year ended 30 June 2019 and 30 June 2018 have been restated
to reflect the inclusion of legacy assets in Group and unallocated items.
Year ended 30 June 2020
US$M
Potash
Nickel West
Corporate, legacy assets and eliminations
Total
Year ended 30 June 2019
US$M
Restated
Potash
Nickel West
Corporate, legacy assets and eliminations
Total
Year ended 30 June 2018
US$M
Restated
Potash
Nickel West
Corporate, legacy assets and eliminations
Total
Exceptional
items
included in
profit from
operations (1)
−
5
(418)
(413)
Profit from
operations
(130)
(113)
(545)
(788)
Depreciation and
amortisation
Net
impairments
Exceptional item
included in
Depreciation,
amortisation and
impairments (1)
3
68
441
512
−
3
17
20
−
−
−
−
Exceptional
items included
in profit from
operations (1)
Profit from
operations
(131)
91
(740)
(780)
−
−
(19)
(19)
Exceptional
items included
in profit from
operations (1)
Profit from
operations
(139)
215
(405)
(329)
−
−
27
27
Depreciation and
amortisation
Net
impairments
Exceptional item
included in
Depreciation,
amortisation and
impairments (1)
4
11
134
149
−
−
1
1
−
−
−
−
Depreciation and
amortisation
Net
impairments
Exceptional item
included in
Depreciation,
amortisation and
impairments (1)
4
76
162
242
−
−
1
1
−
−
−
−
Underlying
EBITDA
(127)
(37)
(505)
(669)
Underlying
EBITDA
(127)
102
(624)
(649)
Underlying
EBITDA
(135)
291
(215)
(59)
(1) For more information, refer to note 3 ‘Exceptional items’ in section 5.1.
262 BHP Annual Report 2020
Underlying EBITDA margin
Year ended 30 June 2020
US$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 2019
US$M
Restated
Revenue – Group production
Revenue – Third party products
Revenue
Underlying EBITDA – Group production (1)
Underlying EBITDA – Third party products (1)
Underlying EBITDA
Segment contribution to the Group’s Underlying EBITDA (2)
Underlying EBITDA margin (3)
Year ended 30 June 2018
US$M
Restated
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
4,031
39
9,577
1,089
20,782
15
6,242
−
4,070 10,666
20,797
6,242
2,209
(2)
4,306
41
14,561
(7)
1,632
−
2,207
4,347
14,554
1,632
10%
55%
19%
45%
64%
70%
7%
26%
Petroleum Copper
Iron Ore
Coal
5,920
10
9,729
1,109
17,223
32
5,930 10,838
17,255
9,102
19
9,121
4,061
−
4,434
116
11,115
14
4,068
(1)
4,061
4,550
11,129
4,067
17%
69%
19%
46%
47%
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
3,392
1
6,462
60
8,929
1
4,398
(1)
3,393
6,522
8,930
4,397
15%
63%
28%
57%
38%
61%
19%
49%
Group and
unallocated
items/
elimination (4) Total Group
1,128
28
1,156
(669)
−
(669)
41,760
1,171
42,931
22,039
32
22,071
100%
53%
Group and
unallocated
items/
elimination (4)
Total Group
1,116
28
1,144
(649)
−
(649)
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
(60)
1
(59)
41,693
1,436
43,129
23,121
62
23,183
100%
55%
(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, other unallocated operations, including Potash, Nickel West and legacy assets (previously disclosed as closed mines
in the Petroleum reportable segment), and consolidation adjustments. Comparative information for the year ended 30 June 2019 and 30 June 2018 have been restated
to reflect the inclusion of legacy assets in Group and unallocated items. 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.
BHP Annual Report 2020 263
Strategic ReportGovernance at BHPRemuneration ReportDirectors’ ReportFinancial StatementsShareholder informationAdditional information6 2020
2019
2018
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
%
13,510
(4,774)
35.3
15,049
(5,529)
36.7
14,751
(7,007)
%
47.5
−
1,060
16,109
(25)
(242)
−
650
(152)
2,320
(5,796)
36.0
15,401
(4,839)
31.4
2020
US$M
6,900
740
7,640
−
7,640
2020
US$M
15,706
(7,616)
8,090
2020
US$M
15,706
(7,616)
8,090
2019
US$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
6.1 Alternative Performance Measures continued
Effective tax rate
Year ended 30 June
Statutory effective tax rate
Adjusted for:
Exchange rate movements
Exceptional items (1)
−
1,546
20
(241)
Adjusted effective tax rate
15,056
(4,995)
33.2
(1) For more information, refer to note 3 ‘Exceptional items’ in section 5.1.
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
264 BHP Annual Report 2020
APMs derived from Consolidated Balance Sheet
With effect from 1 July 2019, the net debt definition includes the fair value of derivative financial instruments used to hedge cash
and borrowings.
Management believes this amendment is useful because it reflects the Group’s risk management strategy of reducing the volatility
of net debt caused by fluctuations in foreign exchange and interest rates.
Net debt related derivative financial instruments are a subset of the other financial assets and liabilities represented on the Consolidated
Balance Sheet. Prior period comparatives have been restated to reflect the change in net debt calculation.
As a result of the adoption of IFRS 16 ‘Leases’ from 1 July 2019, the current period ‘Total Interest bearing liabilities’ includes all leases
under the new definition. The Group elected to apply the modified retrospective transition approach, with no restatement of comparative
periods. Refer to note 38 ‘New and amended accounting standards and interpretations’ in section 5.1.
Vessel lease contracts that are priced with reference to a freight index, which did not meet the definition of a lease under IAS 17, now meet
the definition of a lease under IFRS 16. These contracts are required to be remeasured at each reporting date to the prevailing freight
index. While these liabilities are included in the Group interest bearing liabilities, they are excluded from the net debt calculation as they
do not align with how the Group assesses net debt for decision making in relation to the Capital Allocation Framework. In addition, the
freight index has historically been volatile which creates significant short-term fluctuation in these liabilities. As of 1 January 2020, the
Group excludes these liabilities from its net debt calculation.
Net debt and gearing ratio
Year ended 30 June
Interest bearing liabilities – Current
Interest bearing liabilities – Non current
Total interest bearing liabilities
Comprising:
Borrowing
Lease liabilities (1)
Less: Lease liability associated with index-linked freight contracts
Less: Cash and cash equivalents
Less: Net debt management related instruments (2)
Less: Net cash management related instruments (3)
Less: Total derivatives included in net debt
Net debt
Net assets
Gearing
2020
US$M
5,012
22,036
27,048
23,605
3,443
1,160
13,426
433
(15)
418
12,044
52,246
18.7%
(1) Reflects the impact of IFRS 16. Refer to note 20 ‘Leases’ in section 5.1.
(2) Represents the net cross currency and interest rate swaps included within current and non-current other financial assets and liabilities.
(3) Represents the net forward exchange contracts included within current and non-current other financial assets and liabilities.
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 in cash and cash equivalents from Continuing and Discontinued operations
Carrying value of interest bearing liability repayments
Carrying value of debt related instruments repayments
Carrying value of cash management related instruments proceeds
Fair value adjustment on debt (including debt related instruments)
Foreign exchange impacts on cash (including cash management related instruments)
IFRS 16 leases taken on at 1 July
Lease additions
Other
Non-cash movements
Net debt at the end of the period (1)
(1) Includes US$1,633 million of additional leases due to the implementation of IFRS 16.
2019
US$M
Restated
1,661
23,167
24,828
24,113
715
−
15,613
(204)
(27)
(231)
9,446
51,824
15.4%
2020
US$M
(9,446)
15,706
(7,616)
(9,752)
(1,662)
1,533
157
(451)
88
(26)
(1,778)
(363)
(96)
(2,175)
2018
US$M
Restated
2,736
24,069
26,805
26,003
802
−
15,871
(805)
134
(671)
11,605
60,670
16.1%
2019
US$M
Restated
(11,605)
17,871
2,607
(20,528)
(50)
2,351
160
(427)
44
94
−
−
(13)
125
(12,044)
(9,446)
BHP Annual Report 2020 265
Strategic ReportGovernance at BHPRemuneration ReportDirectors’ ReportFinancial StatementsShareholder informationAdditional information6 6.1 Alternative Performance Measures continued
Net operating assets
The following table reconciles Net operating assets for the Group to Net assets on the Consolidated Balance Sheet:
Year ended 30 June
Net assets
Less: Non-operating assets
Cash and cash equivalents
Trade and other receivables (1)
Other financial assets (2)
Current tax assets
Deferred tax assets
Add: Non-operating liabilities
Trade and other payables (3)
Interest bearing liabilities
Other financial liabilities (4)
Current tax payable
Non-current tax payable
Deferred tax liabilities
Net operating assets
Net operating assets
Petroleum
Copper
Iron Ore
Coal
Group and unallocated items (5)
Total
2020
US$M
52,246
(13,426)
(194)
(2,425)
(366)
(3,688)
310
27,048
1,618
913
109
2,758
64,903
8,247
24,407
18,400
9,509
4,340
64,903
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
8,332
24,088
17,486
9,674
2,476
62,056
(1) Represents loans to associates of US$40 million (FY2019: US$33 million), external finance receivable and accrued interest receivable of US$144 million (FY2019:
US$51 million) included within other receivables.
(2) Represents cross currency and interest rate swaps, forward exchange contracts of US$24 million (FY2019: US$35 million) and investment in shares and other
investments (refer to note 22 ‘Financial risk management’ in section 5.1) included in other financial assets.
(3) Represents accrued interest payable included within other payables.
(4) Represents cross currency and interest rate swaps (refer to note 22 ‘Financial risk management’ in section 5.1) and forward exchange contracts included in other
financial liabilities.
(5) Group and unallocated items include functions, other unallocated operations including Potash, Nickel West and legacy assets (previously disclosed as closed mines
in the Petroleum reportable segment), and consolidation adjustments. Comparative information for the year ended 30 June 2019 has been restated to reflect the
inclusion of legacy assets in Group and unallocated items.
Other APM
Underlying Return on Capital Employed (ROCE)
Year ended 30 June
Profit after taxation from Continuing and Discontinued operations
Exceptional items (1)
Subtotal
Adjusted for:
Net finance costs
Exceptional items included within net finance costs (1)
Income tax expense on net finance costs
2020
US$M
8,736
1,305
10,041
911
(93)
(267)
2019
US$M
Restated
9,185
818
10,003
1,072
(108)
(319)
2018
US$M
Restated
4,823
5,228
10,051
1,267
(84)
(405)
Profit after taxation excluding net finance costs and exceptional items
10,592
10,648
10,829
Net assets at the beginning of the period
Net debt at the beginning of the period (2)
Capital employed at the beginning of the period
Net assets at the end of the period
Net debt at the end of the period (2)
Capital employed at the end of the period
Average capital employed
51,824
9,446
61,270
52,246
12,044
64,290
62,780
60,670
11,605
72,275
51,824
9,446
61,270
66,773
62,726
17,201
79,927
60,670
11,605
72,275
76,101
Underlying Return on Capital Employed
16.9%
15.9%
14.2%
(1) For more information, refer to note 3 ‘Exceptional items’ in section 5.1.
(2) The Underlying ROCE calculation uses the restated net debt calculation for the comparative periods.
266 BHP Annual Report 2020
6.1.1 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 of
Underlying EBITDA
Underlying EBITDA margin
Underlying EBIT
Profit from operations
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.
Capital and exploration expenditure
Free cash flow
Net debt
Gearing ratio
Net operating assets
Underlying Return on Capital
Employed (ROCE)
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 less
index-linked freight contracts offset by cash
immediately available to pay debt if required and any
associated derivative financial instruments. Liability
associated with index-linked freight contracts are
excluded from the net debt calculation due to the
short term volatility of the index they relate to not
aligning with how the Group uses net debt for
decision making in relation to the Capital Allocation
Framework. 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 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.
Indicator of the Group’s capital efficiency and is
provided on an underlying basis to allow comparability
of underlying financial performance by excluding the
impacts of exceptional items.
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).
Earnings before net finance costs, taxation expense
and Discontinued operations. Profit from operations
includes Revenue, Other income, Expenses
excluding net finance costs and 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 liability associated with
index-linked freight contracts less cash and cash
equivalents less net cross currency and interest rate
swaps less net cash management related
instruments 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 net debt and tax balances.
Profit after taxation excluding exceptional items and
net finance costs (after taxation) divided by average
capital employed.
Profit after taxation excluding exceptional items and
net finance costs (after taxation) is profit after taxation
from Continuing and Discontinued operations
excluding exceptional items, net finance costs and the
estimated taxation impact of net finance costs. These
are annualised for a half-year end reporting period.
The estimated tax impact is calculated using a prima
facie taxation rate on net finance costs (excluding
any foreign exchange impact).
Average capital employed is calculated as the
average of net assets less net debt for the last two
reporting periods.
BHP Annual Report 2020 267
Strategic ReportGovernance at BHPRemuneration ReportDirectors’ ReportFinancial StatementsShareholder informationAdditional information6 6.1.1 Definition and calculation of Alternative Performance Measures continued
Alternative Performance Measure (APM)
Reasons why we believe the APMs are useful
Calculation methodology
Adjusted effective tax rate
Unit cost
Provides an underlying tax basis 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.
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.
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 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.
6.1.2 Definition and calculation of principal factors
The method of calculation of the principal factors that affect the period on period movements of Revenue, Profit from operations and
Underlying EBITDA are as follows:
Principal factor
Method of calculation
Change in sales prices
Price-linked costs
Change in 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 multiplied by the prior year average realised price less variable
unit cost.
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 profit/(loss) from equity
accounted investments
Share of profit/(loss) from equity accounted investments for the current period minus share of profit/(loss)
from equity accounted investments in the prior period.
Other
Variances not explained by the above factors.
268 BHP Annual Report 2020
6.2 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 6.3.1) and reserves table (refer to section 6.4.2).
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
Mining lease
granted by
South Australian
Government
expires in 2036
Right of
extension
for 50 years
(subject to
remaining
mine life)
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
Acquired in
2005 as part of
Western Mining
Corporation
(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 6.3.1) and reserves table (refer to section 6.4.2).
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 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
75 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 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 2020 269
Strategic ReportGovernance at BHPRemuneration ReportDirectors’ ReportFinancial StatementsShareholder informationAdditional information6 Ownership
Operator
Title, leases
or options
History
Mine type &
mineralisation style
Power source
Facilities,
use & condition
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
71 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 are
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 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
Open-cut
Bedded ore types
classified as per
host Archaean or
Proterozoic iron
formation, which
is Marra Mamba
Production
commenced in
October 2003
POSMAC JV
sells all ore to
Mt Goldsworthy
JV at Mining
Area C (FY2020
ore production
<1 Mt)
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
POSMAC sells all
ore to Mt Goldsworthy
JV, which is then
processed at Mining
Area C
BHP
BHP 85%
ITOCHU Iron Ore
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
BHP 65%
ITOCHU Minerals
and Energy of
Australia 8%
Mitsui Iron Ore
Corporation 7%
POSCO-Ore 20%
Private road
POSMAC JV
sells ore to
Mt Goldsworthy
JV at Mining
Area C
Ore is
transported
via Mt
Goldsworthy
JV-owned rail
and Mt
Newman
JV-owned
railed to Port
Hedland
270 BHP Annual Report 2020
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 6.3.1) and reserves table (refer to section 6.4.2).
Mine &
location
Means
of access
Queensland Coal
Ownership
Operator
Title, leases
or options
History
Mine type &
mineralisation style
Power source
Facilities,
use & condition
Central Queensland Coal Associates joint venture
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
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
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
nd energy
purchased
via a Retail
Agreement
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
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
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
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
Mining leases,
including
undeveloped
tenements, expire
between 2021 and
2043, renewable
for further periods
as Queensland
Government
legislation allows
Mining is permitted
to continue under
the legislation
during the renewal
application period
BHP 80%
Mitsui and Co
20%
BMC
BHP 100%
BHP
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
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
Domestic sales
ceased during
FY2020 and
the conveyor
has been
decommissioned
Export coal
transported
by third
party rail to
Newcastle port
Mining leases,
including
undeveloped
tenements, expire
between 2034 and
2041 (renewal
pending),
renewable for
further periods as
Queensland
Government
legislation allows.
Mining is permitted
to continue under
the legislation
during the renewal
application period
Current
Development
Consent expires in
2026, new state
and federal
approvals will be
sought within the
next few years to
allow mining to
continue beyond
30 June 2026
This work has
commenced
MAC holds 10
mining leases,
2 sub leases
and 3 exploration
licences
MAC’s primary
exploration licence
(EL5965) is in the
process of being
renewed.
In December
2019, the NSW
Department
of Planning
Infrastructure and
Environment
issued HVEC
with a ‘Notice of
Intent To Renew In
Full’ with the final
approval currently
being processed
BHP Annual Report 2020 271
Strategic ReportGovernance at BHPRemuneration ReportDirectors’ ReportFinancial StatementsShareholder informationAdditional information6 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 6.3.1) and reserves table (refer to section 6.4.2).
Mine &
location
Means of
access
Ownership
Operator
Title, leases
or options
History
Mine type &
mineralisation style
Power source
Facilities,
use & condition
Nickel West
Mt Keith mine and concentrator
485 km north
of Kalgoorlie,
Western
Australia
Private road
Nickel
concentrate
transported
by road to
Leinster 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
Cliffs mine
481 km north
of Kalgoorlie,
Western
Australia
Private road
Nickel ore
transported by
road to Leinster
or Mt Keith for
further
processing
BHP 100%
BHP
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
Mining leases
granted by
Western
Australian
Government
Key leases expire
between 2029
and 2036
Renewals at
government
discretion
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 with
backup from
diesel engine
generation
Contracts
expire in
December
2023
Natural gas
sourced and
transported
under separate
long-term
contracts
On-site third
party gas-fired
turbines with
back up from
diesel engine
generation
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
2025 and 2040
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
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
Mineral leases
granted by
Western
Australian
Government
Key leases expire
in 2028
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
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
82.5 ktpa nickel matte Power is sourced from the
local grid, which is supplied
under a retail contract
London Metal
Exchange (LME)
grade nickel
briquettes,
nickel powder
Also intermediate
products, including
copper sulphide,
cobalt-nickel-sulphide,
ammonium-sulphate
272 BHP Annual Report 2020
3 concentrator
plants extract
copper concentrate
from sulphide
ore by flotation
extraction process
2 solvent extraction
and electrowinning
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 (total water
capacity of 3,800
litres per second)
Processing and
crushing facilities,
separate dynamic
leach pads, solvent
extraction and
electrowinning plants
Nominal capacity of
tank house: 200 ktpa
copper cathode
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 6.3.1) and reserves table (refer to section 6.4.2).
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
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)
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
2 open-cut pits:
Escondida and
Escondida Norte
Escondida
and Escondida
Norte mineral
deposits are
adjacent but
distinct supergene
enriched porphyry
copper deposits
Original
construction
completed
in 1990
Start of
operations
of the third
concentrator
plant in 2015
Inauguration
of Escondida
Water Supply
desalination
plant (2018)
and its
extension
(2019)
Escondida-owned
transmission
lines connect to
Chile’s northern
power grid
Electricity
sourced from
external vendors
and Tamakaya
SpA (100% owned
by BHP), which
generates power
from the Kelar
gas-fired
power plant
New renewable
power
agreements
signed in 2019
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)
First copper
produced in
2006
Spence Growth
Option (SGO)
project (i.e.
new 95ktpd
concentrator
plant) was
approved in
2017
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
Spence-owned
transmission
lines connect to
Chile’s northern
power grid
Electricity
purchased from
external vendors.
New renewable
power
agreements
signed in 2019
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
Electricity
purchased from
external vendors
2 primary, secondary
and tertiary crushers,
dynamic leach 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
BHP Annual Report 2020 273
Strategic ReportGovernance at BHPRemuneration ReportDirectors’ ReportFinancial StatementsShareholder informationAdditional information6 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 6.3.1) and reserves table (refer to section 6.4.2).
Mine &
location
Samarco
Southeast
Brazil
Means of
access
Ownership
Operator
Title, leases
or options
History
Mine type &
mineralisation style
Power source
Facilities,
use & condition
Open-cut
Itabirites
(metamorphic
quartz-hematite
rock) and friable
hematite ores
The beneficiation
plants, pipelines,
pellet plants and port
facilities are intact. A
re-start of operations
is planned during
FY2021.
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
Samarco
BHP Brasil 50%
of Samarco
Mineração S.A.
Vale S.A. 50%
Public road
Conveyor
belts used
to transport
iron ore to
beneficiation
plant
3 slurry
pipelines used
to transport
concentrate
to pellet plants
on coast
Iron ore pellets
exported via
port facilities
Samarco’s
mining facilities
administrative
embargoes and
judicial
injunctions have
been lifted, and
restart can occur
when the
filtration system
is complete and
all safety
requirements
are met.
In October 2019,
obtained the
Corrective
Operating
Licence required
to progress
towards
operational
restart
of one
concentrator
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
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 6.3.1) and reserves table (refer to section 6.4.2).
Mine &
location
Cerrejón
La Guajira
province,
Colombia
Means
of access
Ownership
Operator
Title, leases
or options
History
Mine type &
mineralisation style
Power source
Facilities,
use & condition
Public road
Coal exported
by company-
owned rail to
Puerto Bolivar
(150 km)
BHP 33.33%
Anglo American
33.33%
Glencore 33.33%
Cerrejón Mining leases
expire
progressively
from 2028 to
early 2034
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
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 6.3.2) and reserves table (refer to section 6.4.1).
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
(1,300 m)
Shenzi (Green Canyon 653)
Oil and gas
Offshore
deepwater
Gulf of Mexico
(1,310 m)
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
(2,155 m)
Oil and gas
BHP 44%
BP 56%
Mad Dog (Green Canyon 782)
Offshore
deepwater
Gulf of Mexico
(1,310 m)
Oil and gas
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
274 BHP Annual Report 2020
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
North West Shelf
Offshore
and onshore
Western
Australia
Domestic gas,
LPG, condensate,
LNG
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%
North West Shelf Project
is an unincorporated JV
BHP:
16.67% of original LNG JV
12.5% of China LNG JV
15.78% of Extended
Interest Joint Venture
Other participants:
subsidiaries of Woodside,
Chevron, BP, Shell,
Mitsubishi/Mitsui and
China National Offshore
Oil Corporation
Esso Australia
20 production licences and
2 retention leases issued
by Australian Government
Licences and leases expire
between 2020 and end
of life of field
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
Licences expire between
2022 and 5 years after
production ceases
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
11 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 offshore
fields is processed over the
North Rankin Complex,
Goodwyn Alpha and Angel
platforms, then transported
onshore to the Karratha Gas
Plant by 2 subsea trunklines
The Karratha Gas Plant
comprises 5 LNG
processing trains, two
domestic gas trains, LPG
fractionation and
condensate stabilisation
units and associated storage
and loading facilities
North West Shelf
Offshore
Western
Australia
Pyrenees
Offshore
Western
Australia
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
Licences expire between
2033 and 2039
Production:
60 Mbbl/d
Storage: 1 MMbbl
12 subsea well completions
(4 producers), 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 unit
Macedon
Offshore
and onshore
Western
Australia
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
4 well completions
Single flow line transports
gas to onshore gas
processing facility
Gas plant located
approximately 17 km
southwest of Onslow
BHP Annual Report 2020 275
Strategic ReportGovernance at BHPRemuneration ReportDirectors’ ReportFinancial StatementsShareholder informationAdditional information6 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 3 September 2019, the
Minerva gas field reached
end-of-field life and
production ceased at the
Minerva gas plant
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 sale
was completed on 5
December 2019
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
Operation
& location
Minerva
Offshore
and onshore
Victoria
Product
Ownership
Operator
Title, leases
or options
Nominal
production capacity
Facilities,
use & condition
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
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 2031
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 29.2%
interest in ROD unitised
integrated development
Joint
Sonatrach/
ENI entity
Production sharing contract
with Sonatrach (title holder)
Approximately
80 Mbbl/d oil
276 BHP Annual Report 2020
6.3 Production
6.3.1 Production – Minerals
The table below details our mineral and derivative product production for all operations (except Petroleum) for the three years ended
30 June 2020, 2019 and 2018. 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 1.5.2.
BHP interest
%
BHP share of production (1)
Year ended 30 June
2020
2019
2018
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
925.9
124.5
882.1
147.2
1,050.4
1,029.3
259.4
242.7
171.6
673.7
1,724.1
1.7
1.7
88.5
88.5
177.4
146.0
323.4
6,413
4,116
984
11,513
3,678
3,678
1,666
1,666
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
BHP interest
%
BHP Group share of production (1)
Year ended 30 June
2020
2019
2018
85
85
85
85
85
50
65,641
51,499
69,262
61,754
3
66,622
47,440
65,197
58,546
159
248,159
237,964
–
–
67,071
51,517
64,048
30,627
25,158
238,421
–
248,159
237,964
238,421
BHP Annual Report 2020 277
Strategic ReportGovernance at BHPRemuneration ReportDirectors’ ReportFinancial StatementsShareholder informationAdditional information6
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
Energy coal
Production (‘000 tonnes)
New South Wales Energy Coal, Australia
Cerrejón, Colombia (4)
Total energy coal
Other assets
Nickel
Saleable production (‘000 tonnes)
Nickel West, Australia (11) (12)
Total nickel
BHP interest
%
BHP Group share of production (1)
Year ended 30 June
2020
2019
2018
50
50
50
50
50
50
80
80
100
33.3
5,545
8,765
5,783
4,963
2,170
4,349
31,575
5,415
4,128
9,543
41,118
16,052
7,115
23,167
6,603
8,563
5,933
4,892
2,178
3,967
32,136
6,194
4,071
10,265
42,401
18,257
9,230
27,487
6,688
7,961
6,350
5,053
2,556
4,285
32,893
6,029
3,718
9,747
42,640
18,541
10,617
29,158
BHP interest
%
BHP Group share of production (1)
Year ended 30 June
2020
2019
2018
100
80.1
80.1
87.4
87.4
93.0
93.0
(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 1.10. Samarco operations are currently suspended following the Samarco dam failure as explained in section 1.8.
(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) Production restated to include other nickel by-products.
(12) Nickel contained in refined nickel metal, including briquette and power, matte and by-product streams.
278 BHP Annual Report 2020
6.3.2 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 2020, 2019 and 2018. 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 share of production
Year ended 30 June
2020
2019
2018
Production volumes
Crude oil and condensate (‘000 of barrels)
Australia
United States – Conventional
United States – Onshore US (1)
Other (2)
Total crude oil and condensate
Natural gas (billion cubic feet)
Australia
United States – Conventional
United States – Onshore US (1)
Other (2)
Total natural gas
Natural gas liquids (3) (‘000 of barrels)
Australia
United States – Conventional
United States – Onshore US (1)
Other (2)
Total NGL (3)
Total production of petroleum products (million barrels of oil equivalent) (4)
Australia
United States – Conventional
United States – Onshore US (1)
Other (2)
Total production of petroleum products
Average sales price
Crude oil and condensate (US$ per barrel)
Australia
United States – Conventional
United States – Onshore US (1)
Other (2)
Total crude oil and condensate
Natural gas (US$ per thousand cubic feet)
Australia
United States – Conventional
United States – Onshore US (1)
Other (2)
Total natural gas
Natural gas liquids (US$ per barrel)
Australia
United States – Conventional
United States – Onshore US (1)
Other (2)
Total NGL
Total average production cost (US$ per barrel of oil equivalent) (5)
Australia
United States – Conventional
United States – Onshore US (1)
Other (2)
Total average production cost
14,044
23,345
–
3,823
41,212
292.6
8.1
–
58.9
359.6
6,462
1,189
–
–
7,651
69.3
25.9
–
13.6
108.8
52.38
46.69
–
56.05
49.53
5.60
2.20
–
2.60
5.02
27.51
13.44
–
–
25.36
7.12
4.57
–
4.94
6.24
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
(1) Production for Onshore US assets shown through the closing date of the divestment in FY2019. Production for Eagle Ford, Permian and Haynesville assets
are shown through 31 October 2018 and production for Fayetteville is shown through 28 September 2018.
(2) Other comprises Algeria, Trinidad and Tobago, and the United Kingdom (divested 30 November 2018).
(3) LPG and ethane are reported as natural gas liquids (NGL).
(4) Total barrels of oil equivalent (boe) conversion is based on the following: 6,000 standard cubic feet (scf) of natural gas equals one boe.
(5) 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.
BHP Annual Report 2020 279
Strategic ReportGovernance at BHPRemuneration ReportDirectors’ ReportFinancial StatementsShareholder informationAdditional information6 6.4 Resources and Reserves
Resources are the estimated quantities of material that can
potentially be commercially recovered from BHP’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.
6.4.1 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 FY2018. Footnotes have been
included with the accompanying tables to identify the contribution
of the Discontinued operations (Onshore US) for this period. The
sale of Petroleum’s interests in Onshore US reserves was completed
in FY2019. Remaining reserves at the end of FY2019 and FY2020
reflect the Continuing operations only.
Our proved reserves are estimated and reported on a net interest
basis according to the US Securities and Exchange Commission
(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 operations (Onshore US) reported for
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 12 million barrels of oil equivalent (MMboe)
in FY2020, 16 MMboe in FY2019 and 23 MMboe in FY2018. These
amounts represent approximately 2 per cent of our total reported
proved reserves in FY2020, FY2019 and FY2018. 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.
280 BHP Annual Report 2020
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 6.4.1 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 the testing of the effectiveness
of key controls that have been implemented as required by the US
Sarbanes-Oxley Act of 2002.
For more information on our risk management governance,
refer to section 2.10.
FY2020 proved reserves
Production for FY2020 totalled 109 MMboe in sales with an
additional 5 MMboe in non-sales production, which was used
primarily for fuel consumed in operations. Total production was
approximately 13 MMboe lower than conventional production in
FY2019. The decrease was due to a number of factors, including
natural declines in mature fields, weather events that necessitated
precautionary shut ins and lower demand as a consequence of the
COVID-19 pandemic, (refer to section 6.3.2 for more information).
Discoveries, extensions and revisions to reserves added a total
of 21 MMboe, which replaced 19 per cent of production.
As of 30 June 2020, proved reserves totalled 748 MMboe.
Reserves have been calculated using the economic interest method
and represent net interest volumes after deduction of applicable
royalty. Reserves of 69 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 2020,
approximately 9 per cent of the proved reserves were attributable
to such arrangements.
Extensions and discoveries
Board approval of the North West Shelf Greater Western Flank
Phase 3 project in Australia added 12 MMboe for development of
the Goodwyn South and Lambert Deep fields. Board approval of
the Ruby development project in Trinidad and Tobago during the
September 2019 quarter also added 19 MMboe to proved reserves.
The Ruby project is comprised of the Ruby oil field and the
Delaware gas field.
Revisions
In Australia, reserves decreased by 35 MMboe overall due to
downward revisions. This reduction was primarily in the Bass Strait
due to poor reservoir performance in the Turrum field and lower
overall condensate and natural gas liquids (NGL) recovery from the
Bass Strait gas fields totalling 40 MMboe. Included in this reduction
was a decrease of 4 MMboe due to lower product prices. Improved
reservoir performance in the Pyrenees operated field added 5 MMboe
partially offsetting the Bass Strait reduction. In the North West Shelf
fields, reserves increased 4 MMboe for better performance and
other revisions, however, this increase was offset by product price
related reductions of 4 MMboe. In the US Gulf of Mexico, strong
reservoir performance and technical studies in the Atlantis, Shenzi
and Mad Dog fields added a total of 25 MMboe to proved reserves.
In the Angostura field in Trinidad and Tobago and the ROD
integrated development in Algeria, increases of 1 MMboe were
offset by product price related reductions of approximately 1 MMboe.
During FY2020, net revisions reduced reserves by a total
of 10 MMboe overall.
Improved recovery revisions
There were no improved recovery revisions during the year.
Purchases and sales
There were no purchases or sales during the year.
FY2019 proved 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 6.3.2 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.
Extensions and discoveries
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 the 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 the
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.
Purchases and 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.
BHP Annual Report 2020 281
Strategic ReportGovernance at BHPRemuneration ReportDirectors’ ReportFinancial StatementsShareholder informationAdditional information6 FY2018 proved reserves
Production for FY2018 totalled 192 MMboe in sales, which was
a decrease of 16 MMboe from FY2017 (refer to section 6.3.2 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 1,400 MMboe
and reflected a net increase of 62 MMboe and production of
198 MMboe from the 1,535 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.
Extensions and discoveries
Extensions and discoveries 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.
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.
Purchases and 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.
These results are summarised in the following tables, which
detail estimated oil, condensate, NGL and natural gas reserves
at 30 June 2020, 30 June 2019, 30 June 2018, and 30 June 2017,
with a reconciliation of the changes in each year.
282 BHP Annual Report 2020
Millions of barrels
Australia
United States
Other (b)
Total
Proved developed and undeveloped oil and condensate reserves (a)
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
Improved recovery
Revisions of previous estimates
Extensions and discoveries
Purchase/sales of reserves
Production
Total changes
Reserves at 30 June 2020
Developed
Proved developed oil and condensate reserves
as of 30 June 2017
as of 30 June 2018
as of 30 June 2019
Developed reserves as of 30 June 2020
Undeveloped
Proved undeveloped oil and condensate reserves
as of 30 June 2017
as of 30 June 2018
as of 30 June 2019
Undeveloped reserves as of 30 June 2020
88.6
–
(1.6)
–
–
(16.5)
(18.2)
70.5
–
7.8
0.0
–
(14.4)
(6.5)
63.9
–
0.9
1.8
–
(14.0)
(11.3)
52.6
76.2
60.5
59.0
46.7
12.4
10.0
5.0
6.0
340.7 (c)
26.0
455.3 (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
–
21.3
–
–
(23.3)
(2.0)
272.3
162.3
181.2
128.9
131.0
178.4
180.7
145.4
141.3
–
0.6
–
–
(4.6)
(4.0)
21.9
–
1.0
–
–
(4.9)
(3.9)
18.0
–
(0.7)
5.0
–
(3.8)
0.4
18.4
21.9
19.2
16.3
11.9
4.0
2.8
1.7
6.5
–
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
–
21.5
6.7
–
(41.2)
(13.0)
343.4
260.5
260.8
204.2
189.6
194.8
193.4
152.1
153.8
(a) Small differences are due to rounding to first decimal place.
(b) ‘Other’ comprises Algeria,Trinidad and Tobago and the United Kingdom (sold in FY2019).
(c) For FY2017 and FY2018 amounts include 73.0 and 86.1 million barrels respectively attributable to discontinued operations of Onshore US.
BHP Annual Report 2020 283
Strategic ReportGovernance at BHPRemuneration ReportDirectors’ ReportFinancial StatementsShareholder informationAdditional information6 Millions of barrels
Australia
United States
Other (c)
Total
Proved developed and undeveloped NGL reserves (a)
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
Improved recovery
Revisions of previous estimates
Extensions and discoveries
Purchase/sales of reserves
Production (b)
Total changes
Reserves at 30 June 2020
Developed
Proved developed NGL reserves
as of 30 June 2017
as of 30 June 2018
as of 30 June 2019
Developed reserves as of 30 June 2020
Undeveloped
Proved undeveloped NGL reserves
as of 30 June 2017
as of 30 June 2018
as of 30 June 2019
Undeveloped reserves as of 30 June 2020
65.2
–
(1.7)
–
–
(7.0)
(8.7)
56.5
–
4.9
0.2
–
(6.3)
(1.2)
55.2
–
(17.8)
0.3
–
(6.5)
(23.9)
31.3
56.6
49.8
46.5
23.8
8.6
6.6
8.7
7.6
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
–
1.2
–
–
(1.2)
–
9.0
31.4
37.0
4.3
5.0
27.5
35.0
4.8
4.0
–
–
0.1
–
–
(0.1)
–
–
–
0.0
–
–
(0.0)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
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
–
(16.6)
0.3
–
(7.6)
(23.9)
40.4
88.0
86.8
50.8
28.8
36.1
41.6
13.5
11.6
(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 (sold in FY2019).
(d) For FY2017 and FY2018 amounts include 2.1 and 2.5 million barrels respectively, consumed as fuel in the United States.
(e) For FY2017 and FY2018 amounts include 51.0 and 62.2 million barrels respectively attributable to discontinued operations of Onshore US.
284 BHP Annual Report 2020
Billions of cubic feet
Australia (c)
United States
Other (d)
Total
Proved developed and undeveloped natural gas reserves (a)
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
Improved recovery
Revisions of previous estimates
Extensions and discoveries
Purchase/sales of reserves
Production (b)
Total changes
Reserves at 30 June 2020
Developed
Proved developed natural gas reserves
as of 30 June 2017
as of 30 June 2018
as of 30 June 2019
Developed reserves as of 30 June 2020
Undeveloped
Proved undeveloped natural gas reserves
as of 30 June 2017
as of 30 June 2018
as of 30 June 2019
Undeveloped reserves as of 30 June 2020
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)
275.5 (g)
2,519.7 (h)
–
(111.7)
62.4
–
(317.3)
(366.6)
1,765.3 (e)
2,346.3
1,975.9
1,856.4
1,453.1
523.4
436.6
275.5
312.2
–
14.2
–
–
(10.7)
3.5
–
5.6
84.0
–
(60.7)
28.9
–
(92.0)
146.5
–
(388.7)
(334.2)
115.8 (f)
304.4 (g)
2,185.5 (h)
1,556.4
1,479.4
65.5
73.4
989.9
680.7
46.8
42.4
315.9
328.6
275.5
220.4
–
–
–
84.0
4,218.5
3,783.8
2,197.3
1,746.9
1,513.3
1,117.3
322.3
438.6
(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 (sold in FY2019).
(e) For FY2017, FY2018, FY2019 and FY2020 amounts include 295, 295, 268 and 246 billion cubic feet respectively, which are anticipated to be consumed as fuel
in operations in Australia.
(f) For FY2017, FY2018, FY2019 and FY2020 amounts include 155, 160, 64 and 65 billion cubic feet respectively, which are anticipated to be consumed as fuel
in operations in the United States.
(g) For FY2017, FY2018, FY2019 and FY2020 amounts include 17, 16, 14 and 17 billion cubic feet respectively, which are anticipated to be consumed as fuel in operations
in Other areas.
(h) For FY2017, FY2018, FY2019 and 2020 amounts include 467, 472, 346 and 327 billion cubic feet respectively, which are anticipated to be consumed as fuel in operations.
(i) For FY2017 and FY2018 amounts include 2444 and 2049 billion cubic feet respectively attributable to discontinued operations of Onshore US.
BHP Annual Report 2020 285
Strategic ReportGovernance at BHPRemuneration ReportDirectors’ ReportFinancial StatementsShareholder informationAdditional information6 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 2017
632.1 (e)
824.0 (f) (i)
78.6 (g)
1,534.6 (h) (i)
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
Improved recovery
Revisions of previous estimates
Extensions and discoveries
Purchase/sales of reserves
Production (c)
Total changes
Reserves at 30 June 2020
Developed
Proved developed oil, condensate, natural gas and NGL reserves
as of 30 June 2017
as of 30 June 2018
as of 30 June 2019
Developed reserves as of 30 June 2020
Undeveloped
Proved undeveloped oil, condensate, natural gas and NGL reserves
as of 30 June 2017
as of 30 June 2018
as of 30 June 2019
Undeveloped reserves as of 30 June 2020
–
(20.9)
–
–
(82.2)
(103.1)
529.0 (e)
–
21.6
0.6
–
(76.8)
(54.5)
–
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)
63.9 (g)
840.6 (h)
–
(35.4)
12.5
–
(73.4)
(96.3)
–
24.8
–
–
(26.3)
(1.5)
–
0.2
19.0
–
(13.9)
5.2
–
(10.4)
31.5
–
(113.6)
(92.6)
378.2 (e)
300.7 (f)
69.1 (g)
748.0 (h)
523.8
439.6
414.9
312.6
108.2
89.4
59.6
65.6
453.1
464.7
144.1
148.3
370.8
329.2
158.1
152.4
74.6
73.9
62.2
48.6
4.0
2.8
1.7
20.5
1,051.6
978.2
621.2
509.5
483.1
421.3
219.4
238.5
(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 (sold in FY2019).
(e) For FY2017, FY2018, FY2019 and FY2020 amounts include 49, 49, 45 and 41 million barrels equivalent respectively, which are anticipated to be consumed as fuel
in operations in Australia.
(f) For FY2017, FY2018, FY2019 and FY2020 amounts include 28, 29, 11 and 11 million barrels equivalent respectively, which are anticipated to be consumed as fuel
in operations in the United States.
(g) For FY2017, FY2018, FY2019 and FY2020 amounts include 3, 3, 2 and 3 million barrels equivalent respectively, which are anticipated to be consumed as fuel
in operations in Other areas.
(h) For FY2017, FY2018, FY2019 and FY2020 amounts include 80, 81, 58 and 55 million barrels equivalent respectively, which are anticipated to be consumed as fuel
in operations.
(i) For FY2017 and FY2018 amounts include 531 and 490 million barrels equivalent respectively attributable to discontinued operations of Onshore US.
286 BHP Annual Report 2020
FY2020 proved undeveloped reserves
At 30 June 2020, Petroleum had 238 MMboe of proved undeveloped
reserves, which corresponds to 32 per cent of the reported proved
reserves of 748 MMboe. This represents an increase of 19 MMboe
from the 219 MMboe at 30 June 2019.
The most significant drivers of this increase were the additions
of 19 MMboe for the Ruby development project in Offshore Trinidad
and Tobago and 12 MMboe for the Greater Western Flank Phase 3
development project in Australia as extensions and discoveries.
Reclassifications from proved undeveloped to proved developed
occurred in Australia in the Macedon field (7 MMboe), the Cobia
field in Bass Strait (2 MMboe) and in the Offshore US Gulf of Mexico
in the Mad Dog Spar A field (3 MMboe). In the Shenzi field, the need
to perform a producer redrill resulted in the reclassification
of 4 MMboe proved developed into proved undeveloped.
In Australia, in the Bass Strait, 18 MMboe was moved into proved
undeveloped for the Turrum field as a result of the reservoir
performance reassessment while in the Kipper field, a reduction
of the gas delivery pressure requirements enabled more gas to be
delivered prior to the installation of compression. This resulted in
the movement of 16 MMboe from proved undeveloped to proved
developed reserves. Bass Strait proved undeveloped fuel was also
increased by 3 MMboe as a result of a fuel utilisation study.
Performance revisions in the Mad Dog Spar A and the Shenzi fields
in the US Gulf of Mexico reduced proved undeveloped by 6 MMboe.
Lower commodity prices resulted in a 4 MMboe reduction to proved
undeveloped reserves.
Over the past three years, the conversion of proved undeveloped
reserves to developed status has totalled 98 MMboe, averaging
33 MMboe per year. At 30 June 2020, a total of 30 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 FY2020, Petroleum spent US$1.0 billion
on development activities worldwide. Of this amount:
• US$0.8 billion was spent progressing the conversion of proved
undeveloped reserves for conventional projects where developed
status was achieved in FY2020 or, will be achieved when
development is completed in the future
• US$0.2 billion represented other development expenditures,
including compliance and infrastructure improvements
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.
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 1,400 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.
The changes in proved undeveloped reserves in FY2020, FY2019
and FY2018 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) (a)
PUD Opening Balance
Revisions of Previous Estimates
Reclassifications to developed
Performance, Technical Studies and Other
Development Plan Changes
Price
Extensions/Discoveries
Acquisitions/Sales
Total Change
PUD Closing Balance
(a) Small differences are due to rounding.
Year Ended 30 June
2020
219
(12)
(8)
(1)
(0)
(4)
31
–
19
238
2019
421
(18)
(42)
16
8
–
1
(185)
(202)
219
2018
483
(111)
(48)
9
(67)
(4)
50
–
(62)
421
BHP Annual Report 2020 287
Strategic ReportGovernance at BHPRemuneration ReportDirectors’ ReportFinancial StatementsShareholder informationAdditional information6
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 resource and reserve
estimates are conducted on a frequency that is informed by
asset materiality and annual risk reviews.
The Technical Centre of Excellence manages assurance and
functional leadership for and reporting of Mineral Resources
and Ore Reserves supported by the above controls.
Mineral Resources and Ore Reserves are presented in the
accompanying tables.
6.4.2 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 an 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 2020. 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.
288 BHP Annual Report 2020
Competent Persons
Copper
Mineral Resources
Escondida, Pampa Escondida, Pinta Verde and Chimborazo:
R Maureira (MAusIMM) employed by Minera Escondida Limitada
Cerro Colorado: H Matias (MAusIMM)
Spence: R Ferrer (MAusIMM)
Pinto Valley Miami unit: M Williams (MAusIMM)
Olympic Dam: K Ehrig (FAusIMM), D Clarke (MAusIMM)
Antamina: L Canchis (FAusIMM) employed by Minera Antamina S.A.
Ore Reserves
Escondida: F Barrera (MAusIMM) employed by Minera
Escondida Limitada
Cerro Colorado and Spence: H Martinez (MAusIMM)
Olympic Dam: M Hamilton (MAusIMM)
Antamina: F Angeles (PEGBC) employed by Minera Antamina S.A.
Iron Ore
Mineral Resources
WAIO: F Muller (MAusIMM)
Samarco: L Bonfioli (MAusIMM) employed by
Samarco Mineração S.A.
Ore Reserves
WAIO: P K Chhajer (MAusIMM), A Greaves (MAusIMM),
A McLean (MAusIMM), C Burke (MAusIMM)
Coal
Coal Resources
Goonyella Riverside, Broadmeadow, Red Hill and Bee Creek:
R Macpherson (MAIG)
Peak Downs, Nebo West and Wards Well: C Williams (MAusIMM)
Caval Ridge, Blackwater and Togara South: M Godfrey (MAIG)
Saraji and Saraji East: R Saha (MAusIMM)
Norwich Park: C Robertson (MAusIMM)
Daunia and Poitrel: S Cutler (MAusIMM)
South Walker Creek: H Strauss (MGSSA)
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: N Mohtaj (MAusIMM)
Blackwater: A Hardy (MAusIMM)
Daunia and Poitrel: G Bustos (MAusIMM)
South Walker Creek: A Walker (MAusIMM)
Mt Arthur Coal: A O’Rourke (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:
R Finch (MAusIMM)
Ore Reserves
Leinster, Cliffs and Venus: C Barclay (MAusIMM)
Mt Keith and Yakabindie: C Barclay (MAusIMM),
D Brosztl (MAusIMM)
BHP Annual Report 2020 289
Strategic ReportGovernance at BHPRemuneration ReportDirectors’ ReportFinancial StatementsShareholder informationAdditional information6 90
2,220
6,000
0.04
7,440
0.05
10,200
1,500
5.0
25
6.2
21
29
−
24
0.3
−
841
15
37
84
−
Mt
105
Mt
589
235
301
171
3,330
0.59
0.44
0.53
0.58
0.65
0.42
0.37
0.14
0.43
−
−
0.42
0.43
0.54
0.45
0.60
−
0.60
1.65
%Cu
0.81
1.00
1.31
1.28
0.41
0.10
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
0.20
0.40
%Zn
0.13
1.55
0.22
1.54
0.23
0.63
8
15
11
17
290
90
210
80
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
1
3
19,000
1,500
160
186
195
157
217
38
59
124
23
188
60
223
−
Mt
10,070
1,041
Mt
1,230
563
301
171
0.63
0.52
0.55
0.63
0.61
0.43
0.37
0.63
0.18
0.59
0.66
0.44
0.45
0.57
0.47
0.54
−
0.62
1.68
%Cu
0.82
0.94
1.31
1.28
0.44
0.11
0.42
−
−
−
−
−
−
−
−
−
−
−
−
−
−
0.21
0.47
%Zn
0.13
1.73
0.22
1.54
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
100
130
0.27
0.63
8
16
11
17
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
1
3
280
90
210
80
As at 30 June 2019
Total Resources
BHP
Interest
%
57.5
100
100
57.5
57.5
57.5
100
100
185
179
19,200
204
164
207
1,410
39
63
140
22
2,210
7,440
188
60
223
214
Mt
9,880
1,012
Mt
601
296
174
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
0.63
1.70
%Cu
0.80
0.93
1.28
1.26
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
1
3
0.44
0.11
0.42
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
130
0.05
0.21
0.48
%Zn
0.13
1.71
0.22
1.35
0.28
0.64
8
16
13
17
280
90
200
70
%Cu kg/tU3O8
g/tAu
g/tAg
%Cu kg/tU3O8
g/tAu
g/tAg
%Cu kg/tU3O8
g/tAu
g/tAg
g/tAg ppmMo
g/tAg ppmMo
g/tAg ppmMo
33.75
1,200
Measured Resources
Indicated Resources
Inferred Resources
Total Resources
Mt
%TCu
%SCu
ppmMo
g/tAu
Mt
%TCu
%SCu
ppmMo
g/tAu
Mt
%TCu
%SCu ppmMo
g/tAu
Mt
%TCu
%SCu ppmMo
g/tAu
Mt
%TCu
%SCu ppmMo
g/tAu
−
−
−
−
−
−
−
−
−
−
−
−
42
63
3,510
116
92
110
−
1.7
34
9.6
0.5
761
0.07
1,150
−
−
−
−
64
23
139
−
Mt
3,440
524
Mt
418
226
−
−
0.58
0.47
0.50
0.64
0.61
0.42
−
0.66
0.20
0.45
0.53
0.45
0.55
0.53
0.50
0.50
−
−
−
−
0.45
0.12
−
−
0.42
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
60
130
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
0.10
−
−
−
−
%Cu kg/tU3O8
0.20
0.61
1.64
%Cu
0.83
0.93
−
−
0.47
%Zn
0.13
1.87
−
−
g/tAu
g/tAg
0.26
0.59
1
3
g/tAg
ppmMo
8
16
−
−
260
90
−
−
113
98
5,280
73
44
78
−
36
0.9
114
22
620
294
109
−
−
−
0.65
0.58
0.61
0.61
0.60
0.45
−
0.63
0.23
0.60
0.67
0.46
0.53
0.60
−
−
−
−
−
−
0.43
0.11
−
−
0.42
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
100
180
−
−
−
−
−
Mt
3,300
%Cu kg/tU3O8
0.21
0.66
412
Mt
223
102
−
−
1.74
%Cu
0.83
0.85
−
−
0.49
%Zn
0.11
1.84
−
−
g/tAu
g/tAg
0.33
0.68
1
4
g/tAg
ppmMo
6
16
−
−
280
80
−
−
Mineral Resources
≥ 0.20%SCu
≥ 0.30%TCu
≥0.25%TCu or ≥0.30%TCu depending
on processing
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 optimised
mine plan with consideration of technical and
economical parameters in order to maximise
Net Present Value.
≥ 0.25%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
−
−
−
Copper
Mineral Resources
As at 30 June 2020
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
Pinto Valley Miami unit (5)
Sulphide
Oxide
Sulphide
Sulphide
In situ Leach
Copper Uranium Gold Operations
Olympic Dam
OC Sulphide
UG Sulphide
Copper Zinc Operations
Antamina (6)
(1)
Cut-off criteria:
Deposit
Escondida
Sulphide Cu only
Sulphide Cu-Zn
UG Sulphide Cu only
UG Sulphide Cu-Zn
Ore Type
Oxide
Mixed
Sulphide
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
Pampa Escondida
Sulphide
Pinta Verde
Chimborazo
Oxide & Sulphide
Sulphide
≥ 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
290 BHP Annual Report 2020
Measured Resources
Indicated Resources
Inferred Resources
Total Resources
Mt
%TCu
%SCu
ppmMo
g/tAu
Mt
%TCu
%SCu
ppmMo
g/tAu
Mt
%TCu
%SCu ppmMo
g/tAu
Mt
%TCu
%SCu ppmMo
g/tAu
Copper
Mineral Resources
As at 30 June 2020
Commodity
Deposit (1)
Copper Operations
Escondida (2)
Cerro Colorado (3)
Ore Type
Oxide
Mixed
Sulphide
Oxide
Supergene Sulphide
Transitional Sulphide
Hypogene Sulphide
Low-grade Oxide
Supergene Sulphide
Transitional Sulphide
Hypogene Sulphide
Spence (4)
Oxide
Copper Projects
Pampa Escondida
Pinta Verde
Chimborazo
Sulphide
Oxide
Sulphide
Sulphide
Pinto Valley Miami unit (5)
In situ Leach
Copper Uranium Gold Operations
Copper Zinc Operations
Antamina (6)
OC Sulphide
UG Sulphide
Sulphide Cu only
Sulphide Cu-Zn
UG Sulphide Cu only
UG Sulphide Cu-Zn
5,280
3,510
113
98
73
44
78
−
36
0.9
114
22
620
294
109
−
−
−
412
Mt
223
102
−
−
0.65
0.58
0.61
0.61
0.60
0.45
−
0.63
0.23
0.60
0.67
0.46
0.53
0.60
−
−
−
0.66
1.74
%Cu
0.83
0.85
−
−
0.43
0.11
0.42
−
−
−
−
−
−
−
−
−
−
−
−
−
−
0.21
0.49
%Zn
0.11
1.84
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
100
180
0.33
0.68
6
16
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
1
4
−
−
280
80
42
63
116
92
110
−
1.7
34
9.6
0.5
761
64
23
139
−
Mt
524
Mt
418
226
−
−
0.58
0.47
0.50
0.64
0.61
0.42
−
0.66
0.20
0.45
0.53
0.45
0.55
0.53
0.50
0.50
−
0.61
1.64
%Cu
0.83
0.93
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
0.45
0.12
0.42
0.20
0.47
%Zn
0.13
1.87
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
60
130
0.26
0.59
8
16
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
1
3
−
−
260
90
g/tAg
ppmMo
g/tAg
ppmMo
0.07
1,150
0.10
5.0
25
10,200
6.2
21
29
1,500
−
24
0.3
−
841
6,000
15
37
84
−
Mt
3,330
105
Mt
589
235
301
171
Olympic Dam
3,300
3,440
Mt
%Cu kg/tU3O8
g/tAu
g/tAg
%Cu kg/tU3O8
g/tAu
g/tAg
0.59
0.44
0.53
0.58
0.65
0.42
0.37
−
0.14
0.43
−
0.42
0.43
0.54
0.45
0.60
−
−
−
−
0.41
0.10
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
90
−
−
−
−
−
%Cu kg/tU3O8
0.20
0.60
1.65
%Cu
0.81
1.00
1.31
1.28
0.40
%Zn
0.13
1.55
0.22
1.54
g/tAu
g/tAg
0.23
0.63
1
3
g/tAg ppmMo
8
15
11
17
290
90
210
80
−
−
−
−
−
−
−
−
−
−
−
−
160
186
19,000
195
157
217
1,500
38
59
124
23
2,220
0.04
7,440
−
−
−
−
188
60
223
−
Mt
10,070
1,041
Mt
1,230
563
301
171
0.63
0.52
0.55
0.63
0.61
0.43
0.37
0.63
0.18
0.59
0.66
0.44
0.45
0.57
0.47
0.54
−
−
−
−
0.44
0.11
−
−
0.42
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
100
130
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
0.05
−
−
−
−
%Cu kg/tU3O8
0.21
0.62
1.68
%Cu
0.82
0.94
1.31
1.28
0.47
%Zn
0.13
1.73
0.22
1.54
g/tAu
g/tAg
0.27
0.63
1
3
g/tAg ppmMo
8
16
11
17
280
90
210
80
BHP
Interest
%
As at 30 June 2019
Total Resources
Mt
%TCu
%SCu ppmMo
g/tAu
57.5
100
100
57.5
57.5
57.5
100
100
185
179
19,200
204
164
207
1,410
39
63
140
22
2,210
7,440
188
60
223
214
Mt
9,880
1,012
Mt
33.75
1,200
601
296
174
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
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
Mineral Resources
Variable between 0.10%Cu and 0.30%Cu
Ore Reserves
−
Variable between 0.80%Cu and 1.30%Cu
Variable between 1.10%Cu and 1.40%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$0/hr limit is equivalent
0.17%Cu, 3.2g/tAg, 89ppmMo 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, 0.59%Zn, 6.1g/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 US$53.8/t break-even cut-off was applied,
equivalent to 0.84%Cu, 8.9g/tAg and 220ppmMo.
NSR estimates are based on Cu price of US$3.30/lb,
Ag price of US$19.95/oz and Mo price of US$10.00/lb
and predicted metallurgical recoveries of 89% for
Cu, 77% for Ag and 35% for Mo.
NSR value incorporating all material revenue and
includes metallurgical recovery. Only sub-level
stoping mining method at US$53.8/t break-even
cut-off was applied, equivalent to 0.70%Cu, 1.00%Zn
and 13.8g/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$19.95/oz and predicted metallurgical
recoveries of 78% for Cu, 80% for Zn and 44% for Ag.
≥ 0.65%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 0.17%Cu, 2.2g/tAg, 139ppmMo 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, 0.72%Zn, 8.7g/tAg with 6,500t/hr
mill throughput.
–
–
Antamina – All metals used in net value calculations are assumed to be recovered into concentrate and sold.
(2) Escondida – The decrease in Oxide ore type was mainly due to depletion and an update in the resource estimate supported by additional drilling. Change in Mineral
Resources Sulphide ore type cut-off criteria aligned to updated Sulphide Leach Ore Reserves cut-off criteria.
(3) Cerro Colorado – The decrease in the Supergene Sulphide ore type was mainly due to depletion.
(4) Spence – The decrease in Low-grade Oxide and Supergene Sulphide ore types was mainly due to depletion. The increase in Transitional Sulphide ore type was due
mainly to an update in the resource estimate supported by additional drilling.
(5) Pinto Valley Miami unit – Project review has been performed and does not currently meet the reasonable prospects for eventual economic extraction.
(6) Antamina – The decrease in Sulphide Cu-Zn ore type was mainly due to depletion partially offset by an update in the resource estimate supported by
additional drilling.
BHP Annual Report 2020 291
Strategic ReportGovernance at BHPRemuneration ReportDirectors’ ReportFinancial StatementsShareholder informationAdditional information6 Copper
Ore Reserves
As at 30 June 2020
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
Total Reserves
Mt
%TCu
%SCu
ppmMo
Mt
%TCu
%SCu
ppmMo
Mt
%TCu
%SCu
ppmMo
Mt
%TCu
%SCu
ppmMo
77
3,420
1,330
29
14
12
31
9.9
100
22
615
−
Mt
210
−
Mt
137
69
0.64
0.70
0.42
0.58
0.57
0.51
0.61
0.68
0.62
0.67
0.46
−
−
−
−
0.42
0.17
0.10
0.42
0.29
0.10
0.05
0.02
−
%Cu kg/tU3O8
0.58
1.92
−
%Cu
0.92
0.89
−
%Zn
0.12
2.09
−
−
−
−
−
−
−
−
−
100
180
−
g/tAu
0.74
−
g/tAg
4
−
g/tAg
ppmMo
6
13
350
80
129
1,790
326
6.0
4.0
1.6
0.11
0.59
6.6
0.51
694
−
Mt
238
25
Mt
108
94
0.55
0.57
0.41
0.58
0.63
0.51
0.95
0.56
0.43
0.53
0.46
−
−
−
−
0.42
0.15
0.09
0.63
0.31
0.08
0.04
0.02
−
−
−
−
−
−
−
−
−
−
60
130
−
%Cu kg/tU3O8
0.56
1.85
0.86
%Cu
0.97
0.82
0.29
%Zn
0.15
2.18
g/tAu
g/tAg
0.65
0.34
4
2
g/tAg
ppmMo
8
13
330
80
Reserve
Life
(years)
BHP
Interest
%
58
57.5
3.4
100
36
100
As at 30 June 2019
Total Reserves
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
0.57
0.33
%Zn
0.16
1.97
−
−
−
−
−
−
−
−
−
−
100
160
g/tAu
0.71
0.40
7
15
228
5,420
1,670
41
24
17
21
14
131
20
1,310
0.74
Mt
537
24
Mt
266
202
Reserve
Life
(years)
58
4.3
46
54
8.8
g/tAg
4
2
370
70
kg/tU3O8
kg/tU3O8
g/tAg
4
2
340
80
43
100
7.7
33.75
g/tAg
ppmMo
g/tAg
ppmMo
206
5,210
1,660
35
18
14
31
10
107
23
1,310
−
Mt
448
25
Mt
245
163
0.58
0.66
0.42
0.58
0.58
0.51
0.61
0.67
0.61
0.66
0.46
−
%Cu
1.88
0.86
%Cu
0.94
0.85
−
−
−
0.42
0.17
0.10
0.42
0.30
0.10
0.05
0.02
−
0.57
0.29
%Zn
0.13
2.14
−
−
−
−
−
−
−
−
−
−
95
150
g/tAu
0.69
0.34
7
13
(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 80m
Olympic Dam
Antamina
20m to 35m
25m to 45m
(8) Ore delivered to process plant.
(9) Metallurgical recoveries for the operations were:
Deposit
Escondida
Metallurgical Recovery
Oxide: 59%
Sulphide: 83%
Sulphide Leach: 42%
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:
Cu 86%, Mo 56%
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 80%, Ag 63%, Mo 0%
(10) Escondida – The decrease in Oxide ore type was mainly due to depletion. Incorporated within the Reserve Life calculation were Oxide and Sulphide Leach ore types,
which contribute 10 years and 24 years respectively.
(11) Cerro Colorado – The decrease in Ore Reserves was mainly due to depletion with Reserve Life constrained by mining permit expiry in 2023. Transitional Sulphide ore
type recovery based on metallurgical testwork.
(12) Spence – The increase in Oxide and Transitional Sulphide ore types was due to an update in the resource estimate supported by additional drilling. The decrease in
Oxide Low Solubility, Supergene Sulphide and ROM ore types was mainly due to depletion. Reduction in Reserve Life from 46 years to 36 years was mainly due to
increased overall processing rate assumptions. Transitional Sulphide and Hypogene Sulphide ore type recoveries are based on metallurgical testwork.
(13) Olympic Dam – The decrease in UG Sulphide ore type and reduction in Reserve Life was due to updated commodity prices, mine stope design changes and
modifying factors partially offset by an update in the resource estimate supported by additional drilling.
(14) Antamina – The decrease in the Ore Reserves and reduction in Reserve Life was mainly due to depletion partially offset by an update in the resource estimate and
changes to reserves classification.
292 BHP Annual Report 2020
Copper
Ore Reserves
As at 30 June 2020
Commodity
Deposit (1) (7) (8) (9)
Copper Operations
Escondida (10)
Cerro Colorado (11)
Oxide
Spence (12)
Oxide
Copper Zinc Operations
Antamina (14)
Ore Type
Oxide
Sulphide
Sulphide Leach
Supergene Sulphide
Transitional Sulphide
Oxide Low Solubility
Supergene Sulphide
Transitional Sulphide
Hypogene Sulphide
ROM
UG Sulphide
Low-grade
Sulphide Cu only
Sulphide Cu-Zn
Proved Reserves
Probable Reserves
Total Reserves
Mt
%TCu
%SCu
ppmMo
Mt
%TCu
%SCu
ppmMo
Mt
%TCu
%SCu
ppmMo
77
3,420
1,330
29
14
12
31
9.9
100
22
615
−
Mt
210
−
Mt
137
69
0.64
0.70
0.42
0.58
0.57
0.51
0.61
0.68
0.62
0.67
0.46
−
−
%Cu
0.92
0.89
0.42
0.17
0.10
0.42
0.29
0.10
0.05
0.02
−
−
−
−
−
%Zn
0.12
2.09
−
−
−
−
−
−
−
−
−
−
−
6
13
100
180
g/tAg
4
−
350
80
129
1,790
326
6.0
4.0
1.6
0.11
0.59
6.6
0.51
694
−
Mt
238
25
Mt
108
94
0.55
0.57
0.41
0.58
0.63
0.51
0.95
0.56
0.43
0.53
0.46
−
1.85
0.86
%Cu
0.97
0.82
−
−
−
0.42
0.15
0.09
0.63
0.31
0.08
0.04
0.02
−
0.56
0.29
%Zn
0.15
2.18
−
−
−
−
−
−
−
−
−
−
60
130
0.65
0.34
8
13
g/tAg
ppmMo
g/tAg
ppmMo
4
2
330
80
206
5,210
1,660
35
18
14
31
10
107
23
1,310
−
Mt
448
25
Mt
245
163
0.58
0.66
0.42
0.58
0.58
0.51
0.61
0.67
0.61
0.66
0.46
−
%Cu
1.88
0.86
%Cu
0.94
0.85
−
−
−
0.42
0.17
0.10
0.42
0.30
0.10
0.05
0.02
−
kg/tU3O8
0.57
0.29
%Zn
0.13
2.14
−
−
−
−
−
−
−
−
−
95
150
−
g/tAu
0.69
0.34
g/tAg
4
2
g/tAg
ppmMo
7
13
340
80
Reserve
Life
(years)
BHP
Interest
%
58
57.5
3.4
100
36
100
43
100
7.7
33.75
As at 30 June 2019
Total Reserves
Mt
%TCu
%SCu
ppmMo
Reserve
Life
(years)
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
58
4.3
46
54
8.8
Copper Uranium Gold Operations
Olympic Dam (13)
%Cu kg/tU3O8
1.92
0.58
g/tAu
0.74
%Cu kg/tU3O8
g/tAu
g/tAg
BHP Annual Report 2020 293
Strategic ReportGovernance at BHPRemuneration ReportDirectors’ ReportFinancial StatementsShareholder informationAdditional information6 Iron Ore
Mineral Resources
As at 30 June 2020
Commodity
Deposit (1) (2)
Iron Ore Operations
Australia
WAIO (3) (4)
Brazil
Samarco
Ore Reserves
As at 30 June 2020
Commodity
Deposit
Iron Ore Operations
Australia
WAIO (1) (3) (4) (5) (6) (7) (8) (9) (10)
Ore Type
Mt
%Fe
%P %SiO2 %Al2O3
%LOI
Mt
%Fe
%P %SiO2 %Al2O3
%LOI
Mt
%Fe
%P %SiO2 %Al2O3
%LOI
Mt
%Fe
%P %SiO2 %Al2O3
%LOI
%
Mt
%Fe
%P %SiO2 %Al2O3
%LOI
Measured Resources
Indicated Resources
Inferred Resources
Total Resources
BHP
Interest
As at 30 June 2019
Total Resources
BKM
CID
MM
NIM
ROM
1,870
540
1,230
10
Mt
3,340
61.5
55.7
62.1
59.0
%Fe
39.0
0.13
0.05
0.07
0.08
%Pc
0.05
4.1
6.4
2.8
10.1
2.4
2.2
1.6
1.2
4.8
11.1
6.2
3.9
5,140
360
2,060
120
Mt
2,150
60.1
56.3
60.3
61.6
%Fe
37.2
0.14
0.06
0.06
0.06
%Pc
0.05
4.9
6.4
4.2
8.0
2.5
2.3
2.1
1.1
5.9
10.3
6.9
1.7
13,070
920
4,800
70
Mt
950
58.9
54.9
59.7
60.4
%Fe
37.2
0.14
0.06
0.07
0.05
%Pc
0.06
5.6
6.7
4.5
10.0
2.7
2.9
2.3
1.2
6.7 20,080
11.0
1,810
7.1
1.7
8,090
200
Mt
6,440
59.5
55.4
60.2
61.1
%Fe
38.1
0.14
0.06
0.07
0.06
%Pc
0.05
5.3
6.6
4.2
8.8
2.6
2.6
2.1
1.2
6.3
10.9
6.9
1.8
88
19,650
1,850
8,140
200
Mt
50
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
Ore Type
Mt
%Fe
%P %SiO2 %Al2O3
%LOI
Mt
%Fe
%P %SiO2 %Al2O3
%LOI
Mt
%Fe
%P
%SiO2
%Al2O3
%LOI
Mt
%Fe
%P
%SiO2
%Al2O3
%LOI
Proved Reserves
Probable Reserves
Total Reserves
BKM
BKM Bene
CID
MM
910
10
120
560
63.1
59.8
57.0
62.4
0.12
0.13
0.05
0.06
2.9
6.9
5.7
2.7
2.1
3.5
1.6
1.5
4.3
2.1
10.7
6.0
1,570
10
30
1,240
62.2
59.6
57.9
61.4
0.13
0.13
0.05
0.06
3.5
7.4
5.1
3.4
2.2
3.1
1.5
1.8
4.8
2.0
10.3
6.5
2,480
30
150
1,800
62.5
59.7
57.2
61.7
0.13
0.13
0.05
0.06
3.3
7.1
5.5
3.1
2.2
3.3
1.5
1.7
4.6
2.0
10.6
6.3
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
Reserve
Life
(years)
BHP
Interest
%
15
88
As at 30 June 2019
Total Reserves
Reserve
Life
(years)
17
(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 – 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%.
(5) Approximate drill hole spacings used to classify the reserves were:
Deposit
WAIO
Proved Reserves
50m x 50m
Probable Reserves
150m x 50m
(6) WAIO – Recovery was 100%, except for BKM Bene where Whaleback beneficiation plant recovery was 87% (tonnage basis).
(7) WAIO – Iron ore is marketed for WAIO as Lump (direct blast furnace feed) and Fines (sinter plant feed).
(8) WAIO – Cut-off grades used to estimate Ore Reserves range from 50–62%Fe for all material types. Ore delivered to process facility.
(9) 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.
(10) WAIO – The decrease in BKM and BKM Bene ore types was mainly due to depletion. The decrease in CID ore type was due to depletion and changes to the mine plan.
The reduction in Reserve Life was mainly due to depletion.
294 BHP Annual Report 2020
Iron Ore
Mineral Resources
As at 30 June 2020
Commodity
Deposit (1) (2)
Australia
WAIO (3) (4)
Iron Ore Operations
Brazil
Samarco
Ore Reserves
As at 30 June 2020
Commodity
Deposit
Iron Ore Operations
Australia
Ore Type
Mt
%Fe
%P %SiO2 %Al2O3
%LOI
Mt
%Fe
%P %SiO2 %Al2O3
%LOI
Mt
%Fe
%P %SiO2 %Al2O3
%LOI
Mt
%Fe
%P %SiO2 %Al2O3
%LOI
Measured Resources
Indicated Resources
Inferred Resources
Total Resources
BHP
Interest
%
As at 30 June 2019
Total Resources
Mt
%Fe
%P %SiO2 %Al2O3
%LOI
BKM
CID
MM
NIM
ROM
1,870
540
1,230
10
Mt
3,340
61.5
55.7
62.1
59.0
%Fe
39.0
0.13
0.05
0.07
0.08
%Pc
0.05
4.1
6.4
2.8
10.1
2.4
2.2
1.6
1.2
4.8
11.1
6.2
3.9
5,140
360
2,060
120
Mt
2,150
60.1
56.3
60.3
61.6
%Fe
37.2
0.14
0.06
0.06
0.06
%Pc
0.05
4.9
6.4
4.2
8.0
2.5
2.3
2.1
1.1
5.9
10.3
6.9
1.7
13,070
920
4,800
70
Mt
950
58.9
54.9
59.7
60.4
%Fe
37.2
0.14
0.06
0.07
0.05
%Pc
0.06
5.6
6.7
4.5
10.0
2.7
2.9
2.3
1.2
6.7 20,080
11.0
1,810
7.1
1.7
8,090
200
Mt
6,440
59.5
55.4
60.2
61.1
%Fe
38.1
0.14
0.06
0.07
0.06
%Pc
0.05
5.3
6.6
4.2
8.8
2.6
2.6
2.1
1.2
6.3
10.9
6.9
1.8
88
19,650
1,850
8,140
200
Mt
50
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
Ore Type
Mt
%Fe
%P %SiO2 %Al2O3
%LOI
Mt
%Fe
%P %SiO2 %Al2O3
%LOI
Mt
%Fe
%P
%SiO2
%Al2O3
%LOI
Proved Reserves
Probable Reserves
Total Reserves
WAIO (1) (3) (4) (5) (6) (7) (8) (9) (10)
BKM
BKM Bene
CID
MM
910
10
120
560
63.1
59.8
57.0
62.4
0.12
0.13
0.05
0.06
2.9
6.9
5.7
2.7
2.1
3.5
1.6
1.5
4.3
2.1
10.7
6.0
1,570
10
30
1,240
62.2
59.6
57.9
61.4
0.13
0.13
0.05
0.06
3.5
7.4
5.1
3.4
2.2
3.1
1.5
1.8
4.8
2.0
10.3
6.5
2,480
30
150
1,800
62.5
59.7
57.2
61.7
0.13
0.13
0.05
0.06
3.3
7.1
5.5
3.1
2.2
3.3
1.5
1.7
4.6
2.0
10.6
6.3
Reserve
Life
(years)
BHP
Interest
%
15
88
As at 30 June 2019
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
Reserve
Life
(years)
17
BHP Annual Report 2020 295
Strategic ReportGovernance at BHPRemuneration ReportDirectors’ ReportFinancial StatementsShareholder informationAdditional information6 Metallurgical Coal
Coal Resources
As at 30 June 2020
Commodity
Deposit (1) (2)
Mining Method
Coal Type
Mt
%Ash
%VM
%S
Mt
%Ash
%VM
%S
Mt
%Ash
%VM
%S
Mt
%Ash
%VM
%S
Mt
%Ash
%VM
%S
Measured Resources
Indicated Resources
Inferred Resources
Total Resources
As at 30 June 2019
Total Resources
BHP
Interest
%
40
15
424
147
40
116
22
779
222
5.1
5.5
71
108
59
−
563
504
16
71
13
149
12.6
13.4
11.4
11.9
11.7
10.3
9.9
6.6
7.2
13.0
7.0
10.4
9.5
8.0
−
10.0
10.0
8.5
10.0
9.6
9.2
25.1
24.5
20.2
18.8
18.6
17.7
17.1
29.8
29.1
19.3
21.1
15.7
15.2
24.1
−
20.4
15.3
13.9
7.2
15.0
20.0
0.54
0.59
0.75
0.49
0.83
0.76
0.65
0.43
0.36
0.30
0.40
0.40
0.35
0.36
−
0.52
0.68
0.59
0.67
0.42
0.52
838
1,010
1,990
695
947
465
42
1,657
222
59
85
398
298
157
25
1,686
1,638
51
71
23
1,306
9.1
9.8
10.5
12.1
10.8
9.8
9.7
6.0
7.2
10.0
7.0
10.0
10.0
8.0
12.4
9.9
10.2
8.4
10.0
9.3
8.9
22.8
21.9
19.4
20.7
17.6
17.6
17.2
29.7
29.1
20.5
20.9
14.0
13.7
24.0
19.8
19.8
15.7
13.7
7.2
15.2
20.8
0.53
0.53
0.63
0.54
0.66
0.70
0.69
0.43
0.36
0.30
0.40
0.32
0.31
0.36
0.49
0.52
0.66
0.59
0.67
0.41
0.52
50
50
50
50
50
50
50
80
80
50
50
80
80
80
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
6.6
15.2
20.6
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
0.64
0.41
0.53
Metallurgical Coal Operations
Queensland Coal
CQCA JV
Goonyella Riverside
Broadmeadow
Peak Downs
Caval Ridge (3)
Saraji (4)
Norwich Park
Blackwater
Daunia (5)
BHP Mitsui Coal
South Walker Creek
Poitrel
Metallurgical Coal Projects
Queensland Coal
CQCA JV
Red Hill
Saraji East
BHP Mitsui Coal
Nebo West (6)
Bee Creek
Wards Well (7)
OC
UG
OC
OC
OC
OC
UG
OC
UG
OC
OC
OC
UG
OC
OC
UG
OC
UG
OC
OC
UG
Met
Met
Met
Met
Met
Met
Met
Met/Th
Met/Th
PCI
Met
Met/PCI
Met/PCI
Met
Met
Met
Met
Met
Anth
Met/Th
Met
766
572
1,058
332
803
221
−
350
−
40
58
207
36
49
−
−
8.8
9.4
10.2
12.3
10.6
9.6
−
5.2
−
9.0
7.0
10.2
10.0
7.9
−
−
22.6
21.2
19.4
22.0
17.6
17.6
−
29.6
−
20.8
20.9
13.3
13.8
23.9
0.53
0.52
0.60
0.56
0.64
0.66
−
0.42
−
0.36
0.40
0.31
0.31
0.35
−
−
−
−
458
10.2
16.0
0.63
−
–
–
–
−
–
–
–
−
–
–
–
−
–
–
–
32
423
508
216
104
128
20
528
−
14
21
119
154
49
25
1,123
676
35
−
9.4
1,158
11.2
10.2
10.4
11.9
12.0
9.9
9.4
5.5
−
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
19.1
20.1
17.9
17.5
17.4
29.7
−
19.9
21.1
14.3
12.7
24.1
19.8
19.5
15.8
13.6
−
15.4
20.9
0.56
0.55
0.63
0.56
0.78
0.71
0.73
0.44
−
0.30
0.40
0.30
0.28
0.35
0.49
0.52
0.67
0.59
−
0.40
0.52
(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
Goonyella Riverside, Norwich Park, Saraji
Mining Method
OC
Coal Resources
≥ 0.5m seam thickness, core yield ≥50% and <35% raw ash ≥ 0.5m seam thickness
Coal Reserves
Peak Downs
Caval Ridge
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
UG
OC
UG
OC
OC
UG
OC
OC
UG
≥ 0.5m seam thickness and <35% raw ash
≥ 0.5m seam thickness
≥ 0.3m seam thickness, core yield ≥30% and <35% raw ash ≥ 0.4m seam thickness
≥ 0.3m seam thickness, core yield ≥50% and <40% raw ash ≥ 0.3m seam thickness
≥ 0.3m seam thickness, core yield ≥50% and <35% raw ash ≥ 0.3m seam thickness
≥ 2.0m seam thickness, core yield ≥50% and <35% raw ash −
≥ 2.0m seam thickness, core yield ≥50% and <40% raw ash −
≥ 2.0m seam thickness, core yield ≥50% and <35% raw ash ≥ 2.5m seam thickness
≥ 0.5m seam thickness, core yield ≥ 50%, <35% raw ash and
100m lease boundary buffer
≥ 0.3m seam thickness
≥ 2.0m seam thickness, core yield ≥ 50% and <35% raw ash −
≥ 0.3m seam thickness, core yield ≥ 50% and <35% raw ash ≥ 0.3m seam thickness
≥ 0.5m seam thickness, core yield ≥ 50% and <35% raw ash −
≥ 2.0m seam thickness, core yield ≥ 50% and <35% raw ash −
≥ 0.5m seam thickness, core yield ≥ 50% and <150m
below surface
≥ 0.5m seam thickness, <100m below surface, core yield
≥ 50% and <35% raw ash
≥ 2.0m seam thickness and core yield ≥ 50%
−
−
−
(3) Caval Ridge – The decrease in Coal Resources was mainly due to depletion and removal of coal seams partially off-set by an update in the resource estimate
supported by additional drilling.
(4) Saraji – The decrease in Coal Resources was mainly due to an update in the geological interpretation supported by additional data.
(5) Daunia – The decrease in Met Coal Resources was mainly due to depletion.
(6) Nebo West – The increase in Coal Resources was mainly due to an update in the geological interpretation and increased depth criteria.
(7) Wards Well – The decrease in Coal Resources was due to inclusion of yield in the cut-off criteria.
296 BHP Annual Report 2020
Metallurgical Coal
Coal Resources
As at 30 June 2020
Commodity
Deposit (1) (2)
Metallurgical Coal Operations
Queensland Coal
CQCA JV
Goonyella Riverside
Broadmeadow
Peak Downs
Caval Ridge (3)
Saraji (4)
Norwich Park
Blackwater
Daunia (5)
BHP Mitsui Coal
South Walker Creek
Poitrel
CQCA JV
Red Hill
Saraji East
BHP Mitsui Coal
Nebo West (6)
Bee Creek
Wards Well (7)
Metallurgical Coal Projects
Queensland Coal
OC
UG
OC
OC
OC
OC
UG
OC
UG
OC
OC
OC
UG
OC
OC
UG
OC
UG
OC
OC
UG
Mining Method
Coal Type
Mt
%Ash
%VM
%S
Mt
%Ash
%VM
%S
Mt
%Ash
%VM
%S
Mt
%Ash
%VM
%S
Measured Resources
Indicated Resources
Inferred Resources
Total Resources
BHP
Interest
%
As at 30 June 2019
Total Resources
Mt
%Ash
%VM
%S
Met
Met
Met
Met
Met
Met
Met
Met/Th
Met/Th
PCI
Met
Met/PCI
Met/PCI
Met
Met
Met
Met
Met
Anth
Met/Th
Met
766
572
1,058
332
803
221
350
−
−
40
58
207
36
49
−
−
−
–
–
–
8.8
9.4
10.2
12.3
10.6
9.6
5.2
−
−
9.0
7.0
10.2
10.0
7.9
−
−
−
–
–
–
29.6
0.42
22.6
21.2
19.4
22.0
17.6
17.6
−
−
20.8
20.9
13.3
13.8
23.9
−
−
−
–
–
–
0.53
0.52
0.60
0.56
0.64
0.66
0.36
0.40
0.31
0.31
0.35
−
−
−
−
−
–
–
–
458
10.2
16.0
0.63
32
423
508
216
104
128
20
528
−
14
21
119
154
49
25
1,123
676
35
−
9.4
1,158
11.2
10.2
10.4
11.9
12.0
9.9
9.4
5.5
−
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
19.1
20.1
17.9
17.5
17.4
29.7
−
19.9
21.1
14.3
12.7
24.1
19.8
19.5
15.8
13.6
−
15.4
20.9
0.56
0.55
0.63
0.56
0.78
0.71
0.73
0.44
−
0.30
0.40
0.30
0.28
0.35
0.49
0.52
0.67
0.59
−
0.40
0.52
40
15
424
147
40
116
22
779
222
5.1
5.5
71
108
59
−
563
504
16
71
13
149
12.6
13.4
11.4
11.9
11.7
10.3
9.9
6.6
7.2
13.0
7.0
10.4
9.5
8.0
−
10.0
10.0
8.5
10.0
9.6
9.2
25.1
24.5
20.2
18.8
18.6
17.7
17.1
29.8
29.1
19.3
21.1
15.7
15.2
24.1
−
20.4
15.3
13.9
7.2
15.0
20.0
0.54
0.59
0.75
0.49
0.83
0.76
0.65
0.43
0.36
0.30
0.40
0.40
0.35
0.36
−
0.52
0.68
0.59
0.67
0.42
0.52
838
1,010
1,990
695
947
465
42
1,657
222
59
85
398
298
157
25
1,686
1,638
51
71
23
1,306
9.1
9.8
10.5
12.1
10.8
9.8
9.7
6.0
7.2
10.0
7.0
10.0
10.0
8.0
12.4
9.9
10.2
8.4
10.0
9.3
8.9
22.8
21.9
19.4
20.7
17.6
17.6
17.2
29.7
29.1
20.5
20.9
14.0
13.7
24.0
19.8
19.8
15.7
13.7
7.2
15.2
20.8
0.53
0.53
0.63
0.54
0.66
0.70
0.69
0.43
0.36
0.30
0.40
0.32
0.31
0.36
0.49
0.52
0.66
0.59
0.67
0.41
0.52
50
50
50
50
50
50
50
80
80
50
50
80
80
80
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
6.6
15.2
20.6
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
0.64
0.41
0.53
BHP Annual Report 2020 297
Strategic ReportGovernance at BHPRemuneration ReportDirectors’ ReportFinancial StatementsShareholder informationAdditional information6 Metallurgical Coal
Coal Reserves
As at 30 June 2020
Commodity
Deposit (2) (8) (9) (10) (11)
Mining
Method
Coal
Type
Proved
Reserves
Probable
Reserves
Total
Reserves
Proved Marketable Reserves
Probable Marketable Reserves
Total Marketable Reserves
Total Marketable Reserves
Mt
Mt
Mt
Mt
%Ash
%VM
%S
Mt
%Ash
%VM
%S
Mt
%Ash
%VM
%S
Mt
%Ash
%VM
%S
Reserve
Life
(years)
BHP
Interest
%
As at 30 June 2019
Metallurgical Coal Operations
Queensland Coal
CQCA JV
Goonyella Riverside (12)
Broadmeadow (12)
Peak Downs (13)
OC
OC
UG
Caval Ridge
Saraji (13) (14)
Norwich Park (15)
Blackwater (13) (16)
Daunia (17)
BHP Mitsui Coal
South Walker Creek (18)
Poitrel (19)
OC
OC
OC
OC
OC
OC
OC
OC
Met
Met
Met/Th
Met
Met/Th
Met
Met
Met/Th
Met/PCI
Met/PCI
Met
513
59
669
232
487
−
159
181
68
93
31
19
106
91
101
54
−
70
229
25
36
24
532
165
760
333
541
−
229
410
93
129
55
405
46
393
134
315
−
116
157
59
74
25
9.1
8.1
10.6
11.0
10.5
−
10.3
8.8
8.1
9.2
7.9
25.2
23.9
22.1
22.2
17.9
−
16.8
26.5
20.4
13.6
23.0
0.53
0.54
0.59
0.57
0.63
−
0.70
0.43
0.34
0.29
0.31
14
67
51
61
24
−
49
195
21
29
19
10.9
10.0
10.6
11.0
10.6
−
10.2
9.1
8.3
9.2
8.4
28.4
23.3
24.2
22.3
19.2
−
16.6
26.2
20.0
13.2
23.3
0.56
0.55
0.84
0.57
0.88
−
0.70
0.42
0.35
0.29
0.31
419
112
444
196
339
−
165
352
80
102
44
9.1
9.2
10.6
11.0
10.5
−
10.3
9.0
8.2
9.2
8.1
25.3
23.5
22.3
22.2
18.0
−
16.7
26.3
20.3
13.5
23.1
0.53
0.55
0.62
0.57
0.65
−
0.70
0.42
0.34
0.29
0.31
35
27
27
33
65
27
17
16
9.6
50
50
50
50
50
50
50
80
80
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
Reserve
Life
(years)
38
26
28
31
65
24
18
17
10
(8) 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
Goonyella Riverside, Broadmeadow
Peak Downs
Proved Reserves
900m to 1,300m plus 3D seismic coverage for UG
250m to 1,500m
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
(9) Product recoveries for the operations were:
Deposit
Goonyella Riverside, Broadmeadow
Product Recovery
74%
Peak Downs
Caval Ridge
Saraji
Norwich Park
Blackwater
Daunia
South Walker Creek
Poitrel
58%
59%
63%
71%
86%
85%
78%
79%
Probable Reserves
1,750m to 2,400m
500m to 2,500m
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
(10) 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; 10.5% 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.
(11) Coal delivered to handling plant.
(12) Goonyella Riverside and Broadmeadow deposits use the same infrastructure and Reserve Life applies to both. The decrease in Reserve Life was mainly due to
depletion, change in mine plan at Broadmeadow and an increase in nominated production rate from 19Mtpa to 20Mtpa.
(13) Percentage of secondary thermal products for Reserves with coal type Met/Th are: Peak Downs 1%; Saraji 1%; Blackwater 14%. Contributions will vary year on year
based on market demand.
(14) Saraji – The increase in Coal Reserves was mainly due to changes in the mine design and revised yield. Change in Coal Type from Met to Met/Th.
(15) Norwich Park – Remains on care and maintenance.
(16) Blackwater – The decrease in Coal Reserves was mainly due to an update in the modifying factors.
(17) Daunia – The decrease in Coal Reserves was due to depletion.
(18) South Walker Creek – The decrease in Coal Reserves was due to depletion.
(19) Poitrel – The decrease in Coal Reserves was due to depletion.
298 BHP Annual Report 2020
Metallurgical Coal
Coal Reserves
As at 30 June 2020
Commodity
Deposit (2) (8) (9) (10) (11)
Mining
Method
Coal
Type
Metallurgical Coal Operations
Queensland Coal
CQCA JV
Goonyella Riverside (12)
Broadmeadow (12)
Peak Downs (13)
Caval Ridge
Saraji (13) (14)
Norwich Park (15)
Blackwater (13) (16)
Daunia (17)
BHP Mitsui Coal
South Walker Creek (18)
Poitrel (19)
OC
UG
OC
OC
OC
OC
OC
OC
OC
OC
OC
Met
Met
Met/Th
Met
Met/Th
Met
Met
Met/Th
Met/PCI
Met/PCI
Met
Proved
Reserves
Probable
Reserves
Total
Reserves
Proved Marketable Reserves
Probable Marketable Reserves
Total Marketable Reserves
Mt
Mt
Mt
Mt
%Ash
%VM
%S
Mt
%Ash
%VM
%S
Mt
%Ash
%VM
%S
Reserve
Life
(years)
BHP
Interest
%
Total Marketable Reserves
Mt
%Ash
%VM
%S
Reserve
Life
(years)
As at 30 June 2019
513
59
669
232
487
−
159
181
68
93
31
19
106
91
101
54
−
70
229
25
36
24
532
165
760
333
541
−
229
410
93
129
55
405
46
393
134
315
−
116
157
59
74
25
9.1
8.1
10.6
11.0
10.5
−
10.3
8.8
8.1
9.2
7.9
25.2
23.9
22.1
22.2
17.9
−
16.8
26.5
20.4
13.6
23.0
0.53
0.54
0.59
0.57
0.63
−
0.70
0.43
0.34
0.29
0.31
14
67
51
61
24
−
49
195
21
29
19
10.9
10.0
10.6
11.0
10.6
−
10.2
9.1
8.3
9.2
8.4
28.4
23.3
24.2
22.3
19.2
−
16.6
26.2
20.0
13.2
23.3
0.56
0.55
0.84
0.57
0.88
−
0.70
0.42
0.35
0.29
0.31
419
112
444
196
339
−
165
352
80
102
44
9.1
9.2
10.6
11.0
10.5
−
10.3
9.0
8.2
9.2
8.1
25.3
23.5
22.3
22.2
18.0
−
16.7
26.3
20.3
13.5
23.1
0.53
0.55
0.62
0.57
0.65
−
0.70
0.42
0.34
0.29
0.31
35
27
27
33
65
27
17
16
9.6
50
50
50
50
50
50
50
80
80
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
BHP Annual Report 2020 299
Strategic ReportGovernance at BHPRemuneration ReportDirectors’ ReportFinancial StatementsShareholder informationAdditional information6 Energy Coal
Coal Resources
As at 30 June 2020
Commodity
Deposit (1) (2)
Mining
Method
Coal
Type
Energy Coal Operations
Australia
Mt Arthur Coal
Colombia
Cerrejón (3)
Energy Coal Project
Australia
Togara South
OC
OC
UG
Coal Reserves
As at 30 June 2020
Th
Th
Th
Measured Resources
Indicated Resources
Inferred Resources
Total Resources
Mt
%Ash
%VM
%S KCal/kg CV
Mt
%Ash
%VM
%S KCal/kg CV
Mt
%Ash
%VM
%S KCal/kg CV
Mt
%Ash
%VM
%S KCal/kg CV
Mt
%Ash
%VM
%S KCal/kg CV
As at 30 June 2019
Total Resources
BHP
Interest
%
814
21.5
31.2
0.65
6,170
1,333
19.4
29.9
0.61
6,150
1,255
20.6
29.3
0.62
6,050
3,402
20.3
30.0
0.62
6,120
100
3,423
20.4
30.0
0.62
6,120
2,989
3.9
34.9
0.52
6,560
1,173
3.9
34.8
0.51
6,570
620
4.7
34.0
0.55
6,370
4,782
4.0
34.8
0.52
6,539
33.33
4,600
3.9
34.8
0.52
6,540
719
12.1
29.6
0.31
6,700
177
13.5
28.9
0.31
6,500
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
Commodity
Deposit (1) (4) (5) (6)
Mining
Method
Coal
Type
Mt
Mt
Mt
Mt %Ash %VM
%S KCal/kg CV
Mt %Ash %VM
%S KCal/kg CV
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
Total Marketable Reserves
Total Marketable Reserves
Energy Coal Operations
Australia
Mt Arthur Coal (7) (8)
Colombia
Cerrejón (9) (10)
(1) Cut-off criteria:
Deposit
Mt Arthur Coal
Cerrejón
Togara South
OC
OC
Th
Th
269
192
299
568
211
15.9
28.6 0.52
5,990
225
14.7
28.2 0.46
6,100
436
15.3
28.4
0.49
6,050
100
453
15.3
28.4
0.49
6,050
137
329
186
12.3
32.3
0.61
6,070
133
11.0 33.0 0.60
5,980
319
11.8
32.6
0.61
6,032
33.33
333
11.2
32.4
0.61
6,101
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
−
Reserve
Life
(years)
BHP
Interest
%
20
14
As at 30 June 2019
Reserve
Life
(years)
21
15
(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) Cerrejón – The Coal Resources are restricted to areas which have been identified for inclusion by BHP based on a risk assessment.
(4) Approximate drill hole spacings used to classify the reserves were:
Deposit
Mt Arthur Coal
Cerrejón
Proved Reserves
200m to 800m (geophysical logged, ≥95% core recovery)
Probable Reserves
400m to 1,550m (geophysical logged, ≥95% core recovery)
>6 drill holes per 100ha
2 to 6 drill holes per 100ha
(5) Overall product recoveries for the operations were:
Deposit
Mt Arthur Coal
Cerrejón
Product Recovery
77%
97%
(6) Total Coal Reserves were at the moisture content when mined (9% Mt Arthur Coal; 13.2% Cerrejón). Total Marketable Reserves were at a product specific
moisture content (9.6% Mt Arthur Coal; 14.5% Cerrejón) and at an as received quality basis for Mt Arthur Coal and at a total moisture quality basis for Cerrejón.
(7) Mt Arthur Coal – Coal is delivered to handling plant.
(8) Mt Arthur Coal – Mining studies are in progress that may result in changes in the mine design and the Coal Reserves.
(9) Cerrejón – Marketable Coal Reserves decreased due to depletion partially offset by improved resource classification supported by additional drilling.
Coal is beneficiated by exception.
(10) Cerrejón – In response to ongoing local community legal challenges, some permits remain suspended. BHP continues to monitor the situation for potential
impact on mining.
300 BHP Annual Report 2020
Energy Coal
Coal Resources
As at 30 June 2020
Energy Coal Operations
Australia
Mt Arthur Coal
Colombia
Cerrejón (3)
Energy Coal Project
Australia
Togara South
OC
OC
UG
Coal Reserves
As at 30 June 2020
Th
Th
Th
Commodity
Deposit (1) (4) (5) (6)
Mining
Method
Coal
Type
Energy Coal Operations
Australia
Mt Arthur Coal (7) (8)
Colombia
Cerrejón (9) (10)
OC
OC
Th
Th
269
192
Commodity
Deposit (1) (2)
Mining
Method
Coal
Type
Mt
%Ash
%VM
%S KCal/kg CV
Mt
%Ash
%VM
%S KCal/kg CV
Mt
%Ash
%VM
%S KCal/kg CV
Mt
%Ash
%VM
%S KCal/kg CV
Measured Resources
Indicated Resources
Inferred Resources
Total Resources
BHP
Interest
%
As at 30 June 2019
Total Resources
Mt
%Ash
%VM
%S KCal/kg CV
814
21.5
31.2
0.65
6,170
1,333
19.4
29.9
0.61
6,150
1,255
20.6
29.3
0.62
6,050
3,402
20.3
30.0
0.62
6,120
100
3,423
20.4
30.0
0.62
6,120
2,989
3.9
34.9
0.52
6,560
1,173
3.9
34.8
0.51
6,570
620
4.7
34.0
0.55
6,370
4,782
4.0
34.8
0.52
6,539
33.33
4,600
3.9
34.8
0.52
6,540
719
12.1
29.6
0.31
6,700
177
13.5
28.9
0.31
6,500
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
Proved
Reserves
Probable
Reserves
Total
Reserves
Proved Marketable Reserves
Probable Marketable Reserves
Total Marketable Reserves
Mt
Mt
Mt
Mt %Ash %VM
%S KCal/kg CV
Mt %Ash %VM
%S KCal/kg CV
Mt
%Ash
%VM
%S KCal/kg CV
299
568
211
15.9
28.6 0.52
5,990
225
14.7
28.2 0.46
6,100
436
15.3
28.4
0.49
6,050
137
329
186
12.3
32.3
0.61
6,070
133
11.0 33.0 0.60
5,980
319
11.8
32.6
0.61
6,032
Reserve
Life
(years)
BHP
Interest
%
As at 30 June 2019
Total Marketable Reserves
Mt
%Ash
%VM
%S KCal/kg CV
20
14
100
453
15.3
28.4
0.49
6,050
33.33
333
11.2
32.4
0.61
6,101
Reserve
Life
(years)
21
15
BHP Annual Report 2020 301
Strategic ReportGovernance at BHPRemuneration ReportDirectors’ ReportFinancial StatementsShareholder informationAdditional information6 Other Assets
Mineral Resources
As at 30 June 2020
Measured Resources
Indicated Resources
Inferred Resources
Total Resources
As at 30 June 2019
Total Resources
Commodity
Deposit
Ore
Type
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
%
Potash Project
Jansen (1) (2) (3) (4) (5)
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
6,510 25.6
7.7 0.08
(1) The Mineral Resources are stated for the Lower Patience Lake (LPL) potash unit. A 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 x 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%.
Mineral Resources
As at 30 June 2020
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
Yakabindie
Venus (4)
Nickel West Project
SP
Disseminated Sulphide
Massive Sulphide
Disseminated Sulphide
Disseminated Sulphide
Massive Sulphide
0.058
3.0
2.4
16
−
−
−
133
7.1
−
0.94
148
1.2
1.1
0.69
2.0
−
−
−
0.54
0.58
−
3.6
0.59
1.7
6.2
8.0
77
12
−
1.0
0.53
2.0
−
0.89
0.75
−
67
−
6.6
1.1
108
5.8
0.75
−
0.52
−
0.87
3.7
0.63
1.7
6.4
0.70
88
4.3
5.3
−
1.9
24
−
1.7
0.53
169
1.1
0.28
1.2
0.52
1.9
1.8
−
1.7
0.52
−
1.0
3.7
0.62
1.4
6.1
12
167
32
5.3
0.89
1.9
224
7.1
8.3
2.6
425
8.1
1.1
1.1
0.53
2.0
1.8
0.75
1.7
0.53
0.58
0.90
3.7
0.61
1.7
6.3
As at 30 June 2019
BHP
Interest
%
Total Resources
Mt
%Ni
100
100
100
100
100
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
Jericho
Disseminated Sulphide
−
−
−
−
31
0.59
31
0.59
50
31
0.59
Ore Reserves
As at 30 June 2020
Commodity
Deposit (1) (5) (6) (7) (8)
Nickel West Operations
Leinster (9) (10)
Mt Keith (11)
Cliffs (12)
Yakabindie (13)
Venus (14)
Proved
Reserves
Probable
Reserves
Total Reserves
Ore Type
Mt
%Ni
Mt
%Ni
Mt
%Ni
As at 30 June 2019
Reserve
Life
(years)
BHP
Interest
%
Total Reserves
Mt
%Ni
Reserve
Life
(years)
OC
SP
UG
OC
SP
UG
OC
UG
3.5
0.74
−
−
65
6.2
0.10
119
−
−
−
0.57
0.58
1.9
0.56
−
1.8
0.89
5.1
19
0.90
1.0
44
9.3
0.66
0.75
1.6
0.55
0.45
2.0
0.61
1.5
5.3
0.89
5.1
84
7.1
1.1
163
9.3
0.72
0.75
1.6
0.57
0.58
2.0
0.57
1.5
8.0
100
15
100
4.0
15
13
100
100
100
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
12
0.9
15
7.0
302 BHP Annual Report 2020
(1) Cut-off criteria:
Deposit
Leinster
Ore Type
Mineral Resources
Ore Reserves
Proved Reserves
Probable Reserves
(5) Approximate drill hole spacings used to classify the reserves were:
OC
Disseminated
Sulphide
UG
Oxide
≥ 0.40%Ni
≥ 0.40%Ni
≥ 1.0%Ni
≥ 1.2%Ni
SP, SP oxidised
≥ 0.70%Ni
Mt Keith
Disseminated
Sulphide
Variable between
0.35%Ni and 0.40%Ni
SP
Variable between
0.35%Ni and 0.40%Ni
and ≥ 0.18%
recoverable Ni
OC
−
≥ 0.40%Ni
−
≥ 0.90%Ni
−
−
−
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
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
≥ 1.2%Ni
−
≥ 0.35%Ni
−
−
≥ 0.9%Ni
−
Deposit
Leinster
Mt Keith
Cliffs
25m x 25m
40m x 40m
25m x 25m
(and development)
Yakabindie
40m x 60m
Venus
25m x 25m
25m x 50m
80m x 80m
25m x 25m
80m x 60m
50m x 50m
(6) Ore delivered to the process plant.
(7) Metallurgical recoveries for the operations were:
OC
Deposit
Leinster
Mt Keith
Cliffs
Yakabindie
Venus
Metallurgical Recovery
80%
63%
83%
63%
88%
(8) Predicted metallurgical recoveries for the projects were:
Deposit
Leinster
UG
Metallurgical Recovery
88%
(9) Leinster – Ore Reserves includes operations and projects.
(10) Leinster – The increase in the OC ore type was due to improved resource
classification which enabled increase conversion to Ore Reserves.
The decrease in the Reserve Life was due to an increase in the nominated
production rate from 0.6Mtpa to 1.4Mtpa. Incorporated within the Reserve Life
calculation were OC and UG ore types, which contribute 3 years and 8 years
respectively.
(11) Mt Keith – The decrease in Ore Reserves was mainly due to depletion.
The increase in Reserve Life was due to a decrease in nominated production
rate from 8Mtpa to 6Mtpa.
(12) Cliffs – The increase in Ore Reserves and Reserve Life was mainly due to an
update in the mine design.
(13) Yakabindie – The increase in Ore Reserves was mainly due to an update in the
mine design.
(2) Leinster – The increase in OC ore type was due to an update in the resource
(14) Venus – The increase in Ore Reserves and Reserve Life was mainly due to
estimate supported by additional drilling. The decrease in SP ore type was due
to depletion.
(3) Mt Keith – The decrease in SP ore type was due to depletion.
(4) Venus – The increase in Disseminated Sulphide ore type and decrease in
Massive Sulphide ore type was due to an update in the resource estimate
supported by additional drilling.
changes in mining method from Longhole Open Stope to Sub-Level Cave.
BHP Annual Report 2020 303
Strategic ReportGovernance at BHPRemuneration ReportDirectors’ ReportFinancial StatementsShareholder informationAdditional information6
6.5 Major projects
At the end of FY2020, BHP had six major projects under development in petroleum, copper, iron ore and potash, with a combined budget
of US$11.4 billion over the life of the projects.
Capital and exploration expenditure of US$7.6 billion in FY2020 was within guidance. Capital and exploration expenditure of approximately
US$7 billion is now expected for FY2021 and is approximately US$1 billion lower than previous guidance predominantly due to the deferral
of a number of our petroleum projects in order to maximise value. This guidance includes a US$0.7 billion exploration program in FY2021,
with approximately US$450 million for petroleum exploration and appraisal expenditure.
Projects in execution at the end of FY2020
Commodity
Project and ownership
Capacity (1)
Target
Budget
Date of initial production
Capital expenditure (US$M) (1)
Projects under development
Petroleum
Atlantis Phase 3
(US Gulf of Mexico)
44% (non-operator)
Petroleum
Ruby
(Trinidad and Tobago)
68.46% (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.
On schedule and on budget. First
production achieved in July 2020.
Overall project is 79% complete
Five production wells tied back into
existing operated processing facilities,
with capacity to produce up to 16,000
gross barrels of oil per day and
80 million gross standard cubic feet of
natural gas per day. On schedule and on
budget. Overall project is 28% 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 77% complete
Sustaining iron ore mine to replace
production from the 80 Mtpa Yandi
Mine. Overall project is 76% 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 93% complete. Project approved
on 17 August 2017
CY2020
696
CY2021
283
CY2022
2,154
CY2021
FY2021
3,061
2,460
8,654
Other projects in progress at the end of FY2020
Commodity
Project and ownership
Scope
Projects under development
Potash
Jansen Potash Project
(Canada) 100%
Investment to finish the excavation and lining of the production
and service shafts, and 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.
304 BHP Annual Report 2020
6.6 Sustainability – performance data
Definition and calculation of sustainability performance metrics
We use various sustainability performance metrics (SPMs) to reflect our sustainability performance.
Management uses these SPMs to evaluate BHP’s performance against both positive and negative impacts of operational activities
and our progress against our sustainability commitments and targets.
These SPMs are commonly used measures by many of our stakeholders and most are industry standard. To ensure our sustainability
performance is relevant and considers breadth and depth of reporting, we align our SPMs with credible international standards,
such as the Global Reporting Initiative (GRI) sustainability reporting standards. The standards relevant to each SPM for the year
ended 30 June 2020 are listed in the tables below.
The SPMs are externally audited and a copy of the EY assurance statement is available in section 1.7.11.
This section outlines why we believe the SPMs are useful to the Board, management, investors and other stakeholders, and the methodology
behind the metrics. A detailed definition and explanation is provided in the below methodology tables for each of our most material SPMs.
Health and Safety – related metrics
Our highest priority is the safety of our people and the communities in which we operate. This is why we focus on identifying safety
risks and implementing controls designed to minimise the likelihood and potential impact of those risks. The health and safety SPMs
allow the Board, management, investors and other stakeholders to measure and track health and safety performance at our operated
assets, including trends related to personal injuries, occupational illness and exposures. We focus on strengthening in-field verification
of material and fatal risks; enhancing our internal investigation process and widely sharing and applying lessons and enabling additional
quality field time to engage our workforce.
Reference and SPM
Methodology
Section 1.4.8 Sustainability
KPIs, section 1.7.3 Safety
and section 6.6.1 People
– performance data
– TRIF
Section 1.7.3 Safety and
section 6.6.1 People –
performance data
– High potential
injury events
Section 1.7.4 Health and
section 6.6.1 People –
performance data
– Occupational illness
incidence
Section 1.4.8
Sustainability KPIs
and section 1.7.4 Health
– Occupational exposures
TRIF (total recordable injury frequency) is an indicator highlighting broad personal injury trends and refers to the
number of recordable injuries per hours worked during the financial year. TRIF equals the sum of (fatalities + lost-time
cases + restricted work cases + medical treatment cases) x 1,000,000 (or 200,000) ÷ actual hours worked. In
accordance with SASB Metals and Mining Standard we also report TRIF per 200,000 hours worked in section 6.6.1
People – performance data FY2020. BHP adopts the US Government Occupational Safety and Health Administration
(OSHA) guidelines for the recording and reporting of occupational injury and illnesses. TRIF statistics exclude
non-operated assets.
Year-on-year improvement of TRIF is one of our five-year sustainability targets and is one of the indicators used to assess
our safety performance.
FY2016 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.
This methodology has been prepared in accordance with GRI standard 403-9 and OSHA guidelines.
High potential injury (HPI) events refers to the number of recordable injuries and first aid cases where there was the
potential for a fatality during the financial year. High potential injury event trends remain a primary focus to assess
progress against our most important safety objective: to eliminate fatalities and provides insight into our performance
on preventing future fatalities.
The basis of calculation for high potential injuries was revised in FY2020 from event count to injury count as part
of a safety reporting methodology improvement.
FY2016 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.
This methodology has been prepared in accordance with GRI standard 403-9.
An occupational illness is an illness that occurs as a consequence of work-related activities or exposure and includes
acute or chronic illnesses or diseases, which may be caused by inhalation, absorption, ingestion or direct contact.
Illness is determined by reference to the US OSHA Recordkeeping Handbook.
Occupational illness incidence is a lag indicator highlighting broad occupational illness trends and refers to the number
of employees that suffer from an occupational illness per million hours worked during the financial year.
Incidence of occupational illness is used to identify situations where exposure controls were effective (no illness
occurrence) and where exposure controls were potentially ineffective (illness occurs). It also informs priorities for
exposure reduction projects.
The data for FY2016 to FY2018 includes Continuing operations and Discontinued operations. FY2019 data includes
Discontinued operations (Onshore US assets) to 31 October 2018 and Continuing operations.
This methodology has been prepared in accordance with GRI standard 403-10 and the OSHA Recordkeeping
Handbook.
Occupational exposures refers to the number of employees who have potential exposure to an agent in the workplace
that exceeds either regulatory or the sometimes stricter BHP internal occupational exposure limits (OELs). These
employees are required to wear personal protective equipment (PPE). Reported occupational exposure data discounts
the effect of the PPE worn.
BHP has adopted a five-year sustainability target to reduce by at least 50 per cent (compared to the adjusted FY2017
exposure data) the number of employees exposed to diesel exhaust particulate matter, coal mine dust and silica.
An OEL is the level of exposure to an agent to which it is believed nearly all people may be repeatedly exposed
throughout a working life without adverse effect.
The 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. The 95 per cent upper confidence limit of the mean exposure is compared to our OELs.
Where employees are exposed in excess of an OEL
• exposure controls in accordance with the hierarchy of control must be implemented
• PPE is provided and must be worn
• health surveillance must be undertaken
Quantitative occupational exposure measurements are undertaken to provide assurance that implemented controls
remain effective.
BHP Annual Report 2020 305
Strategic ReportGovernance at BHPRemuneration ReportDirectors’ ReportFinancial StatementsShareholder informationAdditional information6 People related metrics
Our global workforce is the foundation of our business and we believe that supporting the wellbeing of our people and promoting an
inclusive and diverse culture are vital for maintaining a competitive advantage. The SPMs for gender, employment type and turnover are
key indicators, which allow the Board, management, investors and other stakeholders to measure and track our near and long-term progress.
Reference and SPM
Methodology
Section 1.6.1 Our people,
section 1.6.2 Employees and
contractors, and section 6.6.1
People – performance data
– Workforce by gender,
region, category and
employment type
Section 1.6.1 Our people
and section 6.6.1 People –
performance data
– Employee new hires
and turnover
Proportional data for average number of employees is based on the average of the number of employees at the last day of each
calendar month for a 10-month period from July to April, which is then used as the average for the FY2020.
The number and average number (and percentages) of employees by region shows the weighted average number of employees
based on BHP ownership.
Contractor data is collected from internal surveys and the organisation systems and averages for a 10-month period from
July 2019 to April 2020, which is then used as the average for the FY2020.
The gender numbers in section 1.6.1 are a ‘point in time’ snapshot at 30 June 2020 used in internal management reporting
for the purposes of monitoring progress against our aspiration goal of a gender balanced workforce by FY2025.
There is no significant seasonal variation in employment numbers.
These methodologies have been prepared in accordance with GRI standard 102-8 and GRI standard 405-1.
Data for employee new hires, including by gender, age group and region, is based on the number of employee new hires for
a 10-month period from July 2019 through to April 2020 divided by the average number of employees at the last day of each
calendar month for the same period, which is then used to calculate a weighted average for FY2020 based on our operated
assets. Employee new hires refers to all employment types.
Data for employee turnover, including by gender, age group and region, is based on the number of employee new terminations
for a 10-month period from July 2019 through to April 2020 divided by the average number of employees at the last day of each
calendar month for the same period, which is then used to calculate a weighted average for FY2020 based on our operated
assets. Employee new terminations refers to all employment types.
These methodologies have been prepared in accordance with GRI standard 401-1.
Community-related metrics
We seek to create and contribute to social value in the communities where we operate through the positive social and economic benefits
generated by our core business, our constructive engagement and advocacy on important issues and our contribution as community
partners. Our community SPMs allow the Board, management, investors and other stakeholders to track our performance in contributing to
social value in the communities in which we operate and monitor our relationships and engagement with this important stakeholder group.
Reference and SPM
Methodology
Section 1.4.8 Sustainability
KPIs and section 1.7.9
Community
– Social investment spend
Section 1.4.8 Sustainability
KPIs and section 1.7.9
Community
– Significant
community events
Section 1.7.9 Community
and section 6.6.2 Society
– performance data
– Community complaints
Our voluntary social investment is calculated as 1 per cent of the average of the previous three years’ pre-tax profit.
Social investment is our voluntary contribution towards projects or donations with the primary purpose of contributing
to the resilience of the communities where we operate and the environment, aligned with our broader business
priorities. By building common ground through collective impact and partnerships, our social investments will
purposefully create social value to strengthen the communities of which we are a part, to improve the resilience
of the natural environment, and address the strategic priorities of the business. Donations from BHP to the BHP
Foundation are included in the calculation of our 1 per cent target as are the costs of administering our social
investment programs. The Sustainability Committee reviews our social investment spend on a quarterly basis.
Our social investment spend is one of the metrics used to monitor our performance against our commitment to making
a contribution to social value and meeting our five-year sustainability target.
A significant event resulting from BHP operated activities, is one with an actual severity rating of four and above,
based on our internal severity rating scale (tiered from one to five by increasing severity) as defined in our mandatory
minimum requirements for risk management. A significant community event is an event that could have a serious
impact on community, including impacts to livelihoods, infrastructure, health, safety, security or cultural heritage.
A significant event could also include a substantiated human rights violation.
This metric assists the Board and management in monitoring BHP’s social performance and is one indicator of the health
of our relationship with the communities where we operate.
This methodology has been prepared in accordance with GRI standard 413-2 and GRI standard MM6.
Community complaints refer to a verbal or written notification made directly to a BHP representative by a member
of a community relating to an alleged adverse impact on that community arising from BHP’s activities and/or employee
or contractor behaviour at our operated assets. Trends in community complaints are analysed by management every
six months, and this data is used as one of the inputs for management to determine whether we are operating within
our risk appetite.
This metric assists the Board and management to monitor BHP’s social performance and is one indicator of the health
of our relationship with the communities where we operate.
This methodology has been prepared in accordance with GRI standard MM7.
306 BHP Annual Report 2020
Environment – related metrics
We acknowledge the nature of our operations can have significant environmental impacts. Our environmental SPMs allow the Board and
management to manage and monitor the inherent risks relating to, and any adverse impacts our operations may have on, air quality, water
resources, biodiversity and habitats. They also allow the Board, management, investors and other stakeholders to measure and track our
performance towards our environmental commitments. These measures are used to inform strategic focus areas, support planning and
investments in infrastructure and identify improvement opportunities that potentially reduce environmental impacts. BHP respects legally
designated protected areas and commits to avoiding areas or activities where we consider the environmental risk is outside BHP’s risk
appetite. Additionally, our operations and growth strategy depend on obtaining and maintaining access to environmental resources, such
as land and water. Significant environmental events and incidents of non-compliance, such as tailings storage facilities failures can lead
to costly environmental liabilities, which hinder our growth and expansion strategies.
Reference and SPM
Methodology
Section 1.7.6 Environment
and section 6.6.3
Environment –
performance data
– Land owned, leased or
managed, Land disturbed,
Land rehabilitated and Land
set aside for conservation.
Land may refer to sea, lake or river beds if appropriate and includes land for infrastructure to support extractive operations.
Land disturbed includes the total land area at the time of reporting that is physically impacted by the activities of the
business that substantially disrupts the pre-existing habitats and land cover.
Land managed for conservation is the total area at the time of reporting managed for the purposes of biodiversity
conservation only. It includes land that the business has formally assigned and manages as a compensatory action
as well as other land that the business has protected from disturbance activities and manages for conservation.
Land data is calculated as the total land area owned, leased or managed by BHP as at 30 June of the reporting year,
expressed as hectares. Data does not include land managed for rehabilitation or conservation as part of voluntary
social investment.
This methodology has been prepared in accordance with GRI standard MM1 and these metrics assist the Board
and management in understanding the magnitude of land that is under direct control of the company and its
operational footprint.
Section 1.4.8 Sustainability
KPIs, section 1.7.6
Environment and
section 6.6.5 Water –
performance data
– Water withdrawals,
Water discharges,
Water diversions,
Water consumption
and Water sensitivity
Water withdrawals
The volume of water, in megalitres (ML), received and intended for use by the operated asset from the water
environment and/or a third party supplier. We disclose water withdrawal in ML by operated asset and source (sea,
ground and surface waters as defined in section 6.8.2). Volumes by quality type (as defined in section 6.8.2) are also
disclosed. Withdrawal volumes disclosed per annum include rainfall and runoff volumes captured and used during the
reporting year. Rainfall and runoff volumes that have been captured and stored are excluded and will be reported in the
future year of use. Withdrawal volumes also include water entrained (see section 6.8.2) in ore.
Water withdrawal metrics assist the Board and management in understanding the significance of our water resource
use, collectively for the Group and by individual operated asset, and to assess trends over time. It also helps inform
investment in infrastructure to reduce water withdrawals and improve efficiency of water use.
Water discharges
The volume of water, in ML, removed from the operated asset and returned to the environment and/or distributed
to a third party. This may include discharge to sea, surface waters, groundwater seepage or aquifer reinjection. We
disclose water discharges in ML by operated asset and destination. Volumes by quality type (as defined in section 6.8.2)
are also disclosed.
Water discharge metrics assist the Board and management in understanding the amount of water that operated assets
must handle and release in line with water quality requirements. It also helps inform investment in infrastructure to
improve water quality, reduce water withdrawals and improve efficiency of water use.
Water diversions
The volume of water, in ML, that is actively managed by an operated asset but not used for any operational purposes.
Diversions are reported as both withdrawals and discharges and may include:
• flood waters that are discharged to an external surface water body
• dewatering volumes produced by aquifer interception that are reinjected to groundwater or discharged to surface water
• ground or surface water that is removed by or supplied to a third party, such as a community
• water removed as part of accessing crude oil that is returned to the sea without use
• water used for ecosystem irrigation
Withdrawal and discharge diverted water may occur in different annual reporting periods, so in any given annual period
there may be a differential between withdrawals and discharges for diverted water.
Water diversion metrics assist the Board and management in understanding the volumes of water handled by the operated
asset. This information assists in forecasting water management costs and identifying opportunities to reduce them.
Water consumption
The volume of water, in ML, used by the operated asset and not returned to the environment or a third party. We
disclose consumption by total consumption and use (evaporation, entrainment and other as defined in section 6.8.2).
Water consumption metrics assist the Board and management in the planning of water supplies and infrastructure for
future production, expansions or new projects. The metrics are also used to identify the areas where we have
opportunity to reduce water use.
Water recycled/reused
The volume of water, in ML, that is reused or recycled at an operated asset. Reused water is water that has previously
being used at the operated asset that is used again without further treatment. Recycled water is water that is reused
but is treated before it is used again. Efficiency of this recycling and reuse is calculated in percentage by calculating
the proportion of recycled or reused water volumes to total water volumes withdrawn (excluding seawater) by BHP
in accordance with section 3.6.1 of the Minerals Council of Australia’s Water Accounting Framework (WAF).
Water recycled/reused metrics assist the Board and management in assessing opportunities to reduce water
withdrawals. These metrics assist with comparisons of water recycling/reuse performance and trends between our
operated assets and with peers, which can be used to inform and prioritise reuse and recycling improvements and
technological investments.
Water sensitivity
We define water sensitivity as the degree (high, moderate or low) to which a region is sensitive to a range of water-
influencing factors.
Water sensitivity metrics assist the Board and management in understanding the relativity and contributing factors
to water-related risk management at individual operated assets, and in understanding if this changes over time.
These methodologies have been prepared in accordance with GRI standard 303-3, GRI standard 303-4 and GRI
standard 303-5 and these metrics assist the Board and management in understanding the volumes of water that the
company interacts with the and water volume and use efficiency trends over time.
BHP Annual Report 2020 307
Strategic ReportGovernance at BHPRemuneration ReportDirectors’ ReportFinancial StatementsShareholder informationAdditional information6 Reference and SPM
Methodology
Section 6.6.3 Environment
– performance data
– Mineral waste
(including tailings)
Mineral waste refers to the large quantities of material arising as a result of extractive activities. Non-product materials
(overburden) have to be removed to give access to product-bearing material (ores), which are processed, physically or
chemically, to release them from their matrix and convert them into output products and waste products (tailings, slags,
sludges, slimes or other process residues). For minerals waste, the figures represent the total deposited in the reporting
year, expressed as kilotonnes (kt).
Mineral waste (hazardous)
Includes the following if classified as hazardous by local legislation:
• mineral waste from raw or intermediate materials that have been processed as part of the production sequence,
such as beneficiation, refining and smelting
• tailings, slimes, sludge, residues, slag, fly ash, gypsum, coal rejects
Includes non-hazardous waste co-disposed/mingled with hazardous material. Excludes any hazardous mineral waste
that is rehandled to prevent double counting.
Tailings waste (non-hazardous)
Includes tailings, slimes and residue resulting from the processing of ore which is not classified as hazardous
by local legislation.
This methodology has been prepared in accordance with GRI standard MM3 and these metrics assist the Board
and management in understanding the volumes and types of waste generated and trends over time.
Section 1.4.8 Sustainability
KPIs and section 1.7.6
Environment
– Significant
environmental events
A significant event resulting from BHP operated activities is one with an actual severity rating of four and above,
based on our internal severity rating scale (tiered from one to five by increasing severity) as defined in our mandatory
minimum requirements for risk management. The severity rating considers the nature, extent and duration of the
impact and any corrective actions required to restore ecosystem function.
This metric assists the Board and management in monitoring BHP’s environment performance and is one indicator
of the impacts on the environments where we operate.
308 BHP Annual Report 2020
Climate Change related metrics
We recognise the impacts of climate change may impact BHP in a range of areas (refer to section 1.5.4 for more information). Climate-
related risks include the potential physical impacts of acute and chronic risks, and transition impacts arising from the transition to a lower
carbon economy. Our climate change SPMs help us monitor our climate change commitments (refer to section 1.7) to mitigate the risks
and potential impacts associated with climate change to BHP, as well as fulfil our regulatory reporting obligations. The SPMs allow the
Board, management, investors and other stakeholders to measure BHP’s performance against these commitments.
Reference and SPM
Methodology
Section 1.7.8 Climate
change and section 6.6.4
Climate Change –
performance data
– Operational energy
consumption
Section 1.4.8 Sustainability
KPIs, section 1.7.8 Climate
change and section 6.6.4
Climate change –
performance data
– Operational GHG
emissions, Scope 1 GHG
emissions – Scope 2 GHG
emissions
Definition
Energy means all forms of energy products where ‘energy products’ means combustible fuels, heat, renewable energy,
electricity or any other form of energy from operations that are owned or controlled by BHP. The primary sources of
energy consumption come from fuel consumed by haul trucks at our operated assets, as well as purchased electricity
used at our operated assets.
Energy consumption has been calculated on an operational control basis in accordance with mandatory minimum
performance requirements for HSEC reporting, which are in line with the World Resources Institute/World Business
Council for Sustainable Development guidance and are measured in terawatt-hours or petajoules (measurement unit
specified in the relevant table).
Calculation methodology
The energy figures are calculated using the activity data collected at our operated assets. Activity data is multiplied
by an energy content factor (where necessary) to derive the energy consumption associated with a process or an
operation. Examples of activity data include, kilowatt-hours of electricity used or quantity of fuel used. Energy content
factors are sourced from the regulations and guidance specified in Scope 1 and Scope 2 GHG emissions calculation
methodology below. All other energy figures in section 1.7.8 are derived from the approach specified above with further
information detailed in the footnotes.
This methodology has been prepared in accordance with GRI standard 302-1.
Definition
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 1 refers to direct GHG emissions from our operated assets.
Scope 2 greenhouse gas emissions are indirect emissions from the generation of purchased or acquired electricity,
steam, heat or cooling that is consumed by operations that are owned or controlled by BHP. Our Scope 2 emissions
have been calculated using the market-based method using supplier-specific emission factors unless otherwise specified.
Scope 1 and 2 emissions have been calculated on an operational control basis in accordance with mandatory minimum
performance requirements for HSEC reporting, which are in line with the Greenhouse Gas Protocol definitions and are
measured in tonnes of carbon dioxide equivalent, and in line with the Greenhouse Gas Protocol Corporate Accounting
and Reporting Standard and the Greenhouse Gas Protocol Scope 2 Guidance.
Calculation methodology
The emissions figures are calculated using the activity data collected at our operated assets. Activity data is multiplied
by an energy content factor (where necessary) and emission factors to derive the energy consumption and GHG
emissions associated with a process or an operation. Examples of activity data include kilowatt-hours of electricity
used or quantity of fuel used.
Energy and Scope 1 emissions for facilities already reporting to mandatory local regulatory programs are required to
use the same emission factors and methodologies for reporting under BHP’s operational control boundary. This ensures
a single emissions and energy inventory is maintained for consistency and efficiency. Local regulatory programs were
applicable to the majority of BHP’s Scope 1 emissions inventory in FY2020 (operational control boundary), as listed in
the table below. A local regulatory program in this context refers to any scheme requiring emissions to be calculated
using mandated references (e.g. the Green Tax legislation in Chile, which requires emissions to be calculated using the
Intergovernmental Panel on Climate Change (IPCC) factors) or mandated emission factors (e.g. the Australian National
Greenhouse and Energy Reporting (NGER) Scheme or US EPA GHG reporting program, which publish factors specific to the
programs). In the absence of local mandatory regulations, the Australian NGER (Measurement) Determination has been set
as the default source for emission factors and methodologies for consistency with the majority of the emissions inventory.
Asset
BMA, BMC, NSW Energy Coal, Olympic
Dam, Nickel West, WA Iron ore,
Petroleum – Australia
Location
Australia
Escondida, Pampa Norte
Chile
Petroleum – Gulf of Mexico
Potash Canada
Petroleum – Trinidad
USA
Canada
Trinidad
Local regulations
National Greenhouse and Energy
Reporting Scheme
Green Tax legislation
(referencing IPCC factors)
US EPA GHG reporting program
Canadian Greenhouse Gas Reporting
Program (referencing IPCC factors)
None
Scope 2 emissions totals are reported using the market-based method (default calculation approach unless otherwise
stated) and the location-based method, as recommended by the GHG Protocol Scope 2 Guidance. Definitions of
location and market-based reporting used in BHP’s accounting are consistent with the Greenhouse Gas Protocol
terminology as follows:
• Market-based reporting: Scope 2 GHG emissions based on the generators (and therefore the generation fuel mix from
which the reporter contractually purchases electricity and/or is directly provided electricity via a direct line transfer).
• Location-based reporting: Scope 2 GHG emissions based on average energy generation emission factors for defined
geographic locations, including local, subnational, or national boundaries (i.e. grid factors). In the case of a direct line
transfer, the location-based emissions are equivalent to the market-based emissions.
For facilities where market-based reporting is required, electricity emission factors are sourced directly from the
supplier in the first instance. An emission factor in the public domain, which is specific to the generation plant
supplying the facility, is considered equivalent to a supplier-specific factor in this context.
Where supplier-specific factors are not available, a default emission factor for off-grid electricity is used instead,
as published in local regulations or industry frameworks (or the default off-grid electricity emission factor from
the Australian NGER (Measurement) Determination) in the case where no local default is available.
The location-based method is applied using electricity emission factors for the relevant grid network, as sourced from
local regulations, industry frameworks or publications from the local grid administrator.
These methodologies have been prepared in accordance with GRI standard 305-1 and GRI standard 305-2.
All other emission figures in section 1.7.8 are derived from the approach specified above with further information
detailed in the footnotes. More information on the calculation methodologies for other reported categories, boundaries
assumptions and key references used in the preparation of our Scope 1 and Scope 2 emissions data can be found in the
BHP Scope 1, 2 and 3 Emissions Calculation Methodology, available at bhp.com/climate.
BHP Annual Report 2020 309
Strategic ReportGovernance at BHPRemuneration ReportDirectors’ ReportFinancial StatementsShareholder informationAdditional information6 Reference and SPM
Methodology
Scope 3 emissions have been calculated on a carbon dioxide equivalent basis using methodologies consistent with the
Greenhouse Gas Protocol Corporate Value Chain (Scope 3) Accounting and Reporting Standard (Scope 3 Standard).
Scope 3 emissions refers to 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 operated assets; emissions resulting from the
transportation and distribution of our products; and operational emissions (on an equity basis) from our non-operated
joint ventures. 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 Category 10: ‘Processing of sold products’ 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 Category 11: ‘Use of sold products’, 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
the 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.
The below methodology describes the emissions from Category 10: Processing of sold products and Category 11: Use
of sold products. These categories are the most material Scope 3 emission categories and together account for almost
95 per cent of Scope 3 emissions.
Category 10: Processing of sold products
Emissions from the processing of intermediate products sold in the reporting year by downstream companies
(e.g. manufacturers) subsequent to sale by the reporting company.
Calculation methodology
The average-data method as described in the Greenhouse Gas Protocol Technical Guidance for Calculating Scope 3
Emissions (Scope 3 Guidance) is used to calculate these emissions, with industry-average emission factors applied to
production volumes (on an equity basis) for each commodity to calculate an overall emissions estimate for this category.
Assumptions
• To estimate emissions from the processing of iron ore, all iron ore production is assumed to be processed to steel.
To estimate the higher-end estimate, the crude steel emission factor is applied to the volume of crude steel produced
from BHP’s iron ore.
• To estimate the lower-end emissions number from the processing of iron ore, it is assumed that the crude steel
emission factor already takes into account emissions from both iron ore and metallurgical coal. Therefore, the crude
steel emission factor is apportioned based on the ratio of iron ore and metallurgical coal input to produce 1,000
kilograms of crude steel (based on World Steel Association’s integrated blast furnace and basic oxygen furnace
route). The crude steel emission factor is split to estimate the emissions from iron ore and metallurgical coal
(calculated in Category 11: Use of sold products). The split factor is applied to the volume of crude steel produced
from BHP’s iron ore. The estimated crude steel produced with BHP’s iron ore is significantly higher than with BHP’s
metallurgical coal (due to higher iron ore production). Therefore, this approach does not capture third party
metallurgical coal emissions in the steelmaking process.
• To estimate emissions from the processing of copper, we apply an emission factor for the processing of copper
to copper wire (rather than alternative products such as tubes or sheets), as this is the most emissions-intensive
process and therefore the most ‘conservative’ assumption.
Category 11: Use of sold products
Emissions from the end use of goods and services sold by the reporting company in the reporting year.
Calculation methodology
The method recommended in the Scope 3 Guidance for ‘direct use-phase’ emissions calculations for ‘Fuels and
feedstocks’ is used to calculate these emissions, with industry-average emission factors applied to production volumes
(on an equity basis) for each commodity to calculate an overall emissions estimate for this category.
For the lower-end estimate emissions from metallurgical coal, the average-data method as described in the Scope 3
Guidance is used to calculate these emissions, with industry-average emission factors applied to production volumes
(on an equity basis) for metallurgical coal to calculate an overall emissions estimate for this category.
Assumptions
• All metallurgical coal (higher end estimate), energy coal, natural gas and petroleum products are assumed
to be combusted.
• In practice, metallurgical coal is primarily used in steelmaking and a portion of the carbon content remains
embedded in the final steel product and is not released to the atmosphere; the quantities involved vary according
to the feedstocks, processing technologies and output specifications of the process route used.
• To estimate the lower-end emissions number from the use of metallurgical coal, it is assumed that crude steel
emission factor already takes into account emissions from both iron ore and metallurgical coal. Therefore, the crude
steel emission factor is apportioned based on the ratio of iron ore and metallurgical coal input to produce 1,000
kilograms of crude steel (based on World Steel Association’s integrated blast furnace and basic oxygen furnace
route). The crude steel emission factor is split to estimate the emissions from metallurgical coal and iron ore
(calculated in Category 10: Processing of sold products). The split factor is applied to the volume of crude steel
produced from BHP’s metallurgical coal. It should be noted that in reality, BHP’s metallurgical coal may not end
up with the same customer as our iron ore.
• All energy coal is assumed to be bituminous, which has a mid-range energy content among the three sub-categories
of black coal (the others being sub-bituminous coal and anthracite) listed in the NGER Measurement Determination
published by the Australian Government (Australian NGER Determination), from which these emission factors are sourced.
• All crude oil and condensates are assumed to be refined and combusted as diesel (rather than alternative products
such as gasoline) as the most emissions-intensive, therefore the most conservative assumption. The energy content
of the crude oil and condensate volumes is used to estimate the corresponding quantity of diesel that would be
produced, assuming that no fuel is ‘lost’ during the refining process.
• Emissions from LPG and ethane volumes are included in emissions reported for ‘natural gas liquids’ (NGL) production
and are assumed to be combusted with the same NGL emission factors. This assumption has minimal impact on
estimated emissions due to the small volumes involved.
This methodology has been prepared in accordance with GRI standard 305-3.
More information on the calculation methodologies for other reported categories, boundaries assumptions and key
references used in the preparation of our Scope 3 emissions data can be found in the associated BHP Scope 1, 2 and 3
Emissions Calculation Methodology, available at bhp.com/climate.
Section 1.7.8 Climate
change and section
6.6.4 Climate change
– performance data –
Scope 3 GHG emissions
310 BHP Annual Report 2020
6.6.1 People – performance data FY2020
Performance data – Workforce health and safety for FY2020
Regional summary for FY2020
Per 1,000,000 hours worked
Asia
Australia
Europe
North America
South America
Total
Injury rates for FY2020
SASB basis – per 200,000 hours worked
Total recordable injury frequency
High potential injury events frequency
Number of recordable work-related injuries
Number of hours worked
Regional safety fines levied in FY2020
Regional safety fines levied
Australia
Europe
North America
South America
Fatalities
0
0
0
0
0
0
TRIF
0.0
5.6
0.0
0.6
2.0
4.2
Employee
occupational
illness
incidence (1)
Contractor
occupational
illness
incidence (1)
Employee high
potential injury
frequency (2)
Contractor high
potential injury
frequency (2)
0.0
5.1
0.0
0.0
2.5
4.3
0.0
2.3
0.0
0.4
0.5
1.4
0.0
0.2
0.0
0.0
0.3
0.2
0.0
0.3
0.0
0.0
0.2
0.3
Per 200,000 hours worked
Per 200,000 hours worked
Employees
Contractors
0.88
0.04
286
65,188,193
0.81
0.05
451
110,806,784
2020 Number of fines
US$34,860
US$0
US$0
US$0
1
0
0
0
(1) Occupational illnesses excludes COVID-19 related illnesses.
(2) High potential injury basis of calculation revised in FY2020 from event count to injury count as part of a safety reporting methodology improvement.
Performance data – Workforce (1) (2)
Workforce data and diversity by region for FY2020
Region
Asia
Australia
Europe
North America
South America
Total
Average Number
and % of employees
Employees by Gender %
Average Number and %
of contractors
Average (EE)
absenteeism
rate (3)
Male
Female
1,939
20,967
57
1,296
7,330
31,589
6.1
66.4
0.2
4.1
23.2
100.0
39.2
76.5
48.0
66.0
79.6
74.4
60.8
23.5
52.0
34.0
20.4
25.6
2,033
23,948
11
1,165
21,375
48,532
4.2
49.4
<0.1
2.4
44.0
100.00
33.4
76.0
8.0
45.1
63.9
70.1
Employees by category and diversity for FY2020
Gender %
Age Group %
Ratio Male to Female
Category
Male
Female
Senior leaders
Managers
Supervisory and professional
Operators and general support
Total
72.7
71.9
69.2
79.5
74.4
27.3
28.1
30.8
20.5
25.6
Under 30
years
30 – 39
40 – 49
0.0
0.3
11.1
16.3
13.5
12.5
28.5
41.1
30.4
34.5
52.1
45.3
30.4
28.3
29.9
Average
Basic Salary
US$
Average Total
Rem US$
1.10
1.06
1.13
1.30
1.11
1.14
1.08
1.18
1.30
1.14
50+
35.4
25.9
17.4
25.0
22.1
Employment Category
Full time
Part time
Fixed term full time
Fixed perm part time
Casual
Total
Total %
Male %
Female %
94.1
3.1
2.8
0.1
0.0
100.0
76.1
57.5
58.4
36.9
68.3
74.4
23.9
42.5
41.6
63.1
31.7
25.6
BHP Annual Report 2020 311
Strategic ReportGovernance at BHPRemuneration ReportDirectors’ ReportFinancial StatementsShareholder informationAdditional information6 Turnover and new hires for FY2020
Total
Gender
Age group
Male
Female
Under 30
30 – 39
40-49 Over 50
Asia
Australia
Europe
North
America
South
America
Employee new hires
Employee turnover
7,998
22.75%
3,988
11.34%
4,926
3,072
18.67% 35.00%
2,499
2,789
52.49% 23.01%
2,603
9.87%
1,385
15.78%
733
1,265
15.40% 10.43%
1,829
17.39%
1,122
10.67%
881
11.36%
868
11.19%
496
25.58%
250
12.89%
6,553
26.71%
2,890
11.78%
5
8.85%
7
12.28%
132
10.18%
296
22.87%
812
11.08%
545
7.43%
Remuneration for FY2020 (4)
Region
Asia
Australia
Europe
North America
South America
Total
Employee training for FY2020 (5)
Category
Senior leaders
Managers
Supervisory and professional
Operators and general support
Total
Employee parental leave for FY2020 (6)
By Gender
Female
Male
Total
Ratio male to female
Ratio highest to lowest
Average basic
salary US$
Average total
remuneration
US$
Salary increase
Total
remuneration
1.69
1.10
1.37
1.21
0.87
1.11
1.78
1.13
1.53
1.24
0.95
1.14
0 : 1
0 : 1
1 : 1
0 : 1
0 : 1
99 : 1
54 : 1
5 : 1
11 : 1
112 : 1
Ratio standard entry
level wage to local
minimum wage
Male
Female
3:1
2:1
6:1
3:1
4 : 1
2 : 1
3 : 1
4 : 1
4 : 1
Average No. Hours
Total
Male
Female
17
17
30
47
39
17
17
32
46
39
17
18
24
51
36
Number of employees
Parental leave
Return to work
Due to return
Return rate %
731
570
1,301
334
405
739
361
411
772
93
99
96
%
95.64
82.88
94.64
95.72
47.13
76.85
Employee regular performance discussion records for FY2020 (7)
Region
Asia
Australia
Europe
North America
South America
Total
(1) Proportional data in Our people section are based on the average of the number of employees at the last day of each calendar month for a 10-month period which
calculates the average for the year with the exception of the average number (and %) of employees in the data tables by region which shows the weighted average
number of employees based on BHP ownership. There is no significant seasonal variation in employment numbers.
(2) Contractor data is collected from internal surveys and the organisation systems and averages for a 10-month period.
(3) Absenteeism comprises sick leave, hospitalisation leave, and injury on duty, short-term disability, unauthorised absence, industrial action, union absence, unpaid
absence and workers’ compensation.
(4) Remunerations.
Contractors are excluded from the Report.
The highest paid individual in each significant region has been excluded from the median determination.
Salary increases do not include promotional increases.
Individuals classified as entry level are those in an Operators and General Support role, and have been with the organisation for less than one year.
Minimum wage is determined for all locations except for Singapore and Switzerland, as they do not have a minimum wage mandated by the government.
(5) The number of training hours has been annualised using data from a 10-month period, July to April, to determine a total for the year. Percentages are calculated using
the average of the number of employees at the last day of each calendar month for the same 10-month period.
(6) Return to work rates of employees that took parental leave of 96 per cent. The calculation includes primary parental leave only and does not include secondary
parental leave. Secondary parental leave is a two-week parental leave benefit for the non-primary caregiver. All BHP employees are eligible for parental leave.
(7) Data reflects the number of employees as at 30 June 2020 that have at least one performance review record in our core HR system for performance review records.
Performance review records for some employees in Chile are not recorded in the core HR system and not captured in this data.
312 BHP Annual Report 2020
6.6.2 Society – performance data FY2020
Community complaints for FY2020 (1)
Blasting
Conduct/behaviour
Dust
Lighting
Noise
Odour
Other
Road/rail
Total
7
11
9
18
22
37
6
4
114
(1) Based on data reported to BHP’s operated assets.
Operations located
in or adjacent
to Indigenous
peoples’ territories
for FY2020
Operations
with a formal
agreement with
Indigenous peoples
for FY2020
24
7
2
2
13
1
2
0
Australia
Canada
Chile
USA
BHP Annual Report 2020 313
Strategic ReportGovernance at BHPRemuneration ReportDirectors’ ReportFinancial StatementsShareholder informationAdditional information6 6.6.3 Environment – performance data
Land (2)
Land owned, leased or managed
– Land disturbed
– Land rehabilitated (3)
– Land set aside for conservation (3) (4)
Water (5)
Withdrawals (6)
Water withdrawals by quality – Type 1
Water withdrawals by quality – Type 2
Water withdrawals by quality – Type 3
Water withdrawals by source – Surface water (7)
Water withdrawals by source – Groundwater
Water withdrawals by source – Seawater
Discharges
Water discharges by quality – Type 1
Water discharges by quality – Type 2
Water discharges by quality – Type 3
Water discharges by destination – Surface water
Water discharges by destination – Groundwater
Water discharges by destination – Seawater
Water discharges by destination – Third party
Consumption (8)
Consumption – evaporation
Consumption – entrainment
Consumption – other
Recycled/Reused
Diversions
Diversions – withdrawals
Diversions – discharges
Waste
Hazardous waste – Mineral total (including tailings) (9)
Non-hazardous waste – Mineral tailings (9) (10)
Accidental discharges of water and tailings (11) (12)
Air emissions for FY2020 (13)
hectares
hectares
hectares
hectares
ML
ML
ML
ML
ML
ML
ML
ML
ML
ML
ML
ML
ML
ML
ML
ML
ML
ML
ML
ML
ML
ML
ML
kt
kt
ML
2020
2019 (1)
2018 (1)
8,704,300
10,018,600
10,001,500
151,000
26,050
66,500
144,413
25,649
66,500
380,330
352,950
51,610
35,670
293,060
45,190
123,660
211,510
147,850
0
3,740
144,110
3,970
9,440
134,116
310
258,120
126,120
109,550
22,440
250,090
102,780
79,430
15,000
175,000
0
58,850
37,560
256,550
50,660
140,020
162,260
119,250
0
3,060
116,190
2,940
1,540
114,460
320
268,620
139,980
107,270
21,370
246,420
101,520
72,500
13,500
167,000
0
141,500
27,180
28,000
339,870
34,900
44,150
260,820
43,380
134,319
162,161
118,940
0
1,150
117,790
2,730
840
115,040
320
140,760
17,870
1,330
261,620
16,290
7,860
13,100
137,000
0
Petroleum
Legacy
sites
Queensland
Coal NSWEC
WAIO (14)
Olympic
Dam
Total oxides of sulphur
Total oxides of nitrogen
tonnes
tonnes
43
2,824
0
8
73
29,772
15
6,115
93
24,921
1,246
742
Nickel
West
14,677
3,354
Escondida
Pampa Norte
Potash
26
10,595
99
4,529
1
38
Regional environment fines levied (12) in FY2020
Regional environment fines levied
Australia
North America
South America
2020 Number of Fines
US$216,229
US$0
US$0
6
0
0
(1) FY2018 and FY2019 data includes Continuing and Discontinued operations (Onshore US assets) and FY2019 data includes Discontinued operations (Onshore US
assets) to 28 February 2019 and Continuing operations unless otherwise stated. Data in italics indicates that data has been adjusted since it was previously reported.
Water restatements are because of the change from the Minerals Council of Australia’s Water Accounting Framework to ICMM’s Water Reporting guidelines in 2019
and ongoing improvements in data quality. Land restatement is due to an improvement to BMA data collection.
(2) Land data is calculated as the total land area at the time of reporting.
(3) Data does not include land managed for rehabilitation or conservation as part of social investment.
(4) Material contributor (38,022 ha) includes the Emerald Springs Significant Environment Benefit credit area approved by the South Australian government.
(5) Data has been rounded to the nearest ten to be consistent with asset/regional Water information in this report. In some instances the sum of totals for quality, source
and destination may differ due to rounding. All water performance data excludes Discontinued operations (Onshore US).
(6) Third party water withdrawals have been reported by source.
(7) Data includes rainfall and run-off volumes captured and used during the reporting year; rainfall and run-off volumes that have been captured and stored are excluded
and will be reported in the future year of use.
(8) Data for water consumption metrics was collected for the first time in FY2019 across all operations. FY2018 data reflects partial volumes collected from Queensland
and NSW Energy Coal, WAIO and Pampa Norte operations only.
(9) For tailings related minerals waste these figures represent the total deposited in the reporting year.
(10) Year-on-year movement has been largely caused by an improvement in calculation methodology at our Coal assets from FY2019.
(11) Data reported for environmentally significant incidents.
(12) Does not include the dam failure at Samarco, our non-operated minerals joint venture.
(13) Data drawn from Australian NPI and US EPA Reporting and represent emissions over the 2020 calendar year for all Assets except Olympic Dam and US Petroleum,
which report emissions for the FY2020 financial year.
(14) WAIO includes ‘Other Iron Ore’ including ‘Projects’ and ‘Planning & Technical’ data.
314 BHP Annual Report 2020
Species distributions for IUCN, the International Union for Conservation of Nature, listed species were downloaded from the Integrated
Biodiversity Assessment Tool, provided by Proteus Partners, in June 2020. Analysis was undertaken utilising ArcGIS by identifying all
species that occur within the area of influence of BHP’s operated assets, or areas where disturbance activities have been undertaken
in the previous 12 months. Lists of national species were identified from relevant national databases where available. Where national
databases were not available, species lists were compiled from in-house impact assessment reports and/or management plans.
A screening assessment was undertaken to remove any species that occur in biomes or habitats not impacted by the operated asset,
or where the operation occurs outside of the known distribution for the species, or where surveys/monitoring has determined that
the species or its habitat does not occur. Where national classifications differ to that utilised by the IUCN, species have been attributed
to the category that most closely aligns to their national ranking. In Canada, species may occur under more than one category. In these
instances, the higher ranking has been reported. This information is correct as of 30 June 2020 and is subject to change as more
information is obtained about species ranges, habitats and impacts from operated assets.
Total number of IUCN Red List species and national conservation list species with habitats in areas affected by the operated assets
of BHP as at 30 June 2020.
Note the following:
• Species only included that are listed at an international or national level.
• Data obtained for this table from the Integrated Biodiversity Assessment Tool (IBAT) or national species databases (where available).
• Not all countries utilise IUCN rankings. In these cases, species have been attributed to the designation that most closely aligns to their
national ranking.
Operated
asset
Commodity
Endangered Endangered
Vulnerable
Critically
Near
Threatened
Least
Concern
Critically
Endangered Endangered Vulnerable
IUCN listed species
National listed species
Location
Australia
West Australia WAIO
West Australia Nickel West
West Australia
Beenup
(closed site)
Iron Ore
Nickel
Titanium
South Australia Olympic Dam Copper,
uranium,
gold, silver
Oil and Gas
West Australia,
Victoria
Queensland
Queensland
New South
Wales
Australian
Production Unit
BMC
BMA
NSWEC
Coal
Coal
Coal
Jansen
Legacy Assets
Potash
Various
Canada
Saskatchewan
British
Columbia, Nova
Scotia, Ontario,
Quebec
United States
Legacy Assets
Arizona,
California,
New Mexico,
Utah
Gulf of Mexico Gulf of Mexico
Production Unit
Various
Oil and Gas
Central America
Trinidad &
Tobago
Mexico
Chile
Trinidad
Production Unit
Trion
Oil and Gas
Oil and Gas
Antofagasta
Antofagasta
Escondida
Pampa Norte
Copper
Copper
3
0
1
1
12
0
8
4
0
4
5
5
11
5
2
2
7
2
4
4
31
2
25
3
1
13
21
13
17
13
9
10
6
6
4
5
122
6
137
17
6
40
32
16
46
16
9
9
12
15
14
11
463
394
283
396
160
2094
21
177
27
8
50
594
2,250
619
298
834
29
1,070
7
494
36
6
17
17
1613
468
141
168
4
0
4
3
8
3
5
6
0
0
0
0
1
0
2
2
7
0
12
7
15
7
20
8
8
1
8
11
46
15
36
24
2
215
7
105
8
8
1
13
9
5
10
13
4
0
18
15
BHP Annual Report 2020 315
Strategic ReportGovernance at BHPRemuneration ReportDirectors’ ReportFinancial StatementsShareholder informationAdditional information6 Designated Protected Areas (DPAs) were identified by reference to the World Database on Protected Areas, IUCN Red List of Threatened
Species, and the World Database of Key Biodiversity Areas, which we access via the Integrated Biodiversity Assessment Tool (IBAT)
through our by Proteus partnership. The result reported is as at 30 June of the year of reporting. Analysis was undertaken utilising ArcGIS
by identifying all tenure that overlaps with, or occurs within 500 metres, a designated protected area (DPA) or key biodiversity area (KBA).
Operated assets were defined as sites for which current, future or historic activities have been undertaken and where a revenue has been
received by BHP for these activities. Exploration activities are not to be included unless future operations have been announced, i.e.
permits have been received from mining operations. ‘Land managed areas’ are included in this assessment. DPAs and KBAs are only
included if they are listed at an international or national level.
Operated assets owned, leased, managed in, or adjacent to, protected areas and areas of high biodiversity value outside protected areas
Note the following:
• Sites only included that are listed at an international or national level.
• Extractive defined as mining, exploration, closure activities relating to mining, including transportation. Manufacturing/production
includes pastoral activities, refineries and other locations where products are made. Some operated assets may include both,
but for purposes of disclosure refers to the activity that has the highest operational footprint.
• In the Area = The entire operated asset occurs within the DPA/HBVA boundary or the entire DPA/HBVA site occurs within the boundary
of the operated asset. Adjacent to = The operated asset occurs within 500 metres of the boundary. Contains portions of = The operated
asset contains some but not all of the DPA/HBVA site or the DPA/HBVA site contains some but not all of the operated asset.
• Data obtained for this table from the Integrated Biodiversity Assessment Tool (IBAT).
Maritime
Great Barrier Reef
World Heritage Area
Contains portions of
World Database on
International
NA
Protected Areas
Terrestrial
Norwich Park
Adjacent to
Nature Refuge
Terrestrial
Norwich Park
Contains portions of
Nature Refuge
National
National
Terrestrial
Blackwater
Terrestrial
Kenmare
Terrestrial
Dipperu
Terrestrial
Lake Eyre
Adjacent to
Adjacent to
Adjacent to
Adjacent to
Conservation Park
National
National Park
(scientific)
National
National Park
National
Country/Region
Commodity
Operated asset
Operated asset
size (km2)
Type of Operated asset
Biodiversity Area
Classification
Habitat Type
Area Name
to DPA or HBVA
(i.e. protected status)
DPA Designation Type
IUCN Category
of recognition
Position of owned, leased
For DPA – Basis
or managed land relative
of recognition
For HBVA – Basis
Australia
Queensland
Queensland
Queensland
Queensland
Queensland
Queensland
Coal
Coal
Coal
Coal
Coal
Coal
BMA
BMA
BMA
BMA
BMA
BMC
1263 Extractive
1263 Extractive
DPA
DPA
880 Manufacturing/production
Designated
Protected Area
1263 Extractive
DPA
880 Manufacturing/production
DPA
349 Extractive
DPA
South Australia
Copper, uranium, gold, silver
Olympic Dam
21889 Manufacturing/production
HBVA
South Australia
Copper, uranium, gold, silver
Olympic Dam
21889 Manufacturing/production
HBVA
Terrestrial
Strezelecki Desert
Adjacent to
South Australia
Copper, uranium, gold, silver
Olympic Dam
21889 Manufacturing/production
HBVA
Terrestrial
Lake Torrens
Contains portions of
South Australia
Copper, uranium, gold, silver
Olympic Dam
21889 Manufacturing/production
HBVA
Terrestrial
Arcoona Lakes
Contains portions of
South Australia
Copper, uranium, gold, silver
Olympic Dam
21889 Manufacturing/production
DPA
Terrestrial
Witchelina Nature
Adjacent to
Heritage Agreement National
South Australia
Copper, uranium, gold, silver
Olympic Dam
21889 Manufacturing/production
DPA
Terrestrial
Lake Torrens National
Contains portions of
National Park
National
South Australia
Copper, uranium, gold, silver
Olympic Dam
21889 Manufacturing/production
DPA
Terrestrial
Strezelecki Regional
Adjacent to
Regional Reserve
National
South Australia
Copper, uranium, gold, silver
Olympic Dam
21889 Manufacturing/production
DPA
Terrestrial
Elliot Price
Adjacent to
Conservation Park
National
Lakes
Reserve
Park
Reserve
Conservation Park
South Australia
Copper, uranium, gold, silver
Olympic Dam
21889 Manufacturing/production
DPA
Terrestrial
Kati Thanda-Lake Eyre Adjacent to
National Park
National
South Australia
Copper, uranium, gold, silver
Olympic Dam
21889 Manufacturing/production
DPA
Terrestrial
Wabma Kadarbu
Mound Springs
Adjacent to
Conservation Park
National
South Australia
Copper, uranium, gold, silver
Olympic Dam
21889 Manufacturing/production
DPA
Freshwater
Coongie Lakes
Contains portions of
Ramsar Site, Wetland
International
Not Reported
IBA – migratory birds/
congregations
IBA – endemic,
migratory birds/
congregations, other
IBA – migratory birds/
congregations
IBA – migratory birds/
congregations
South Australia
Copper, uranium, gold, silver
Olympic Dam
21889 Manufacturing/production
DPA
South Australia
Copper, uranium, gold, silver
Olympic Dam
21889 Manufacturing/production
DPA
Terrestrial
Unnamed (No.
Adjacent to
Heritage Agreement National
Western Australia
Nickel
Western Australia
Nickel
Western Australia
Nickel
Western Australia
Nickel
Western Australia
Nickel
Western Australia
Nickel
Western Australia
Iron ore
316 BHP Annual Report 2020
NiW
NiW
NiW
NiW
NiW
NiW
WAIO
5414 Manufacturing/production
DPA
1384 Extractive
DPA
5414 Manufacturing/production
DPA
5414 Manufacturing/production
DPA
5414 Manufacturing/production
DPA
5414 Manufacturing/production
DPA
3667
Extractive
DPA
of International
Importance
Terrestrial
Unnamed (No.
HA1545)
In the Area
Heritage Agreement National
HA1022)
Terrestrial
Wanjarri
Terrestrial
Wanjarri
Terrestrial
Kambalda
Adjacent to
Adjacent to
Adjacent to
Nature Reserve
Nature Reserve
Nature Reserve
Terrestrial
Dordie Rocks
Adjacent to
Nature Reserve
Terrestrial
Leda
Adjacent to
Nature Reserve
Terrestrial
Unnamed WA51658
Adjacent to
5(1)(h) Reserve
Terrestrial
Karijini
Adjacent to
National Park
National
National
National
National
National
National
National
VI
VI
III
VI
Ia
Ia
VI
VI
Ia
VI
III
III
III
Ia
Ia
Ia
II
Ia
II
II
Designated Protected Areas (DPAs) were identified by reference to the World Database on Protected Areas, IUCN Red List of Threatened
Species, and the World Database of Key Biodiversity Areas, which we access via the Integrated Biodiversity Assessment Tool (IBAT)
through our by Proteus partnership. The result reported is as at 30 June of the year of reporting. Analysis was undertaken utilising ArcGIS
by identifying all tenure that overlaps with, or occurs within 500 metres, a designated protected area (DPA) or key biodiversity area (KBA).
Operated assets were defined as sites for which current, future or historic activities have been undertaken and where a revenue has been
received by BHP for these activities. Exploration activities are not to be included unless future operations have been announced, i.e.
permits have been received from mining operations. ‘Land managed areas’ are included in this assessment. DPAs and KBAs are only
included if they are listed at an international or national level.
Operated assets owned, leased, managed in, or adjacent to, protected areas and areas of high biodiversity value outside protected areas
Note the following:
• Sites only included that are listed at an international or national level.
• Extractive defined as mining, exploration, closure activities relating to mining, including transportation. Manufacturing/production
includes pastoral activities, refineries and other locations where products are made. Some operated assets may include both,
but for purposes of disclosure refers to the activity that has the highest operational footprint.
• In the Area = The entire operated asset occurs within the DPA/HBVA boundary or the entire DPA/HBVA site occurs within the boundary
of the operated asset. Adjacent to = The operated asset occurs within 500 metres of the boundary. Contains portions of = The operated
asset contains some but not all of the DPA/HBVA site or the DPA/HBVA site contains some but not all of the operated asset.
• Data obtained for this table from the Integrated Biodiversity Assessment Tool (IBAT).
Australia
Queensland
Queensland
Queensland
Queensland
Queensland
Queensland
Coal
Coal
Coal
Coal
Coal
Coal
1263 Extractive
1263 Extractive
1263 Extractive
880 Manufacturing/production
DPA
349 Extractive
Protected Area
DPA
DPA
DPA
DPA
South Australia
Copper, uranium, gold, silver
Olympic Dam
21889 Manufacturing/production
HBVA
South Australia
Copper, uranium, gold, silver
Olympic Dam
21889 Manufacturing/production
HBVA
Country/Region
Commodity
Operated asset
size (km2)
Type of Operated asset
Habitat Type
Area Name
Operated asset
Biodiversity Area
Classification
Position of owned, leased
or managed land relative
to DPA or HBVA
For DPA – Basis
of recognition
(i.e. protected status)
DPA Designation Type
IUCN Category
For HBVA – Basis
of recognition
Maritime
Great Barrier Reef
World Heritage Area
Contains portions of
World Database on
Protected Areas
International
NA
880 Manufacturing/production
Designated
Terrestrial
Norwich Park
Contains portions of
Nature Refuge
Terrestrial
Norwich Park
Adjacent to
Nature Refuge
National
National
Terrestrial
Blackwater
Terrestrial
Kenmare
Terrestrial
Dipperu
Terrestrial
Lake Eyre
Adjacent to
Adjacent to
Adjacent to
Adjacent to
Terrestrial
Strezelecki Desert
Lakes
Adjacent to
Conservation Park
National
National Park
(scientific)
National
National Park
National
South Australia
Copper, uranium, gold, silver
Olympic Dam
21889 Manufacturing/production
HBVA
Terrestrial
Lake Torrens
Contains portions of
South Australia
Copper, uranium, gold, silver
Olympic Dam
21889 Manufacturing/production
HBVA
Terrestrial
Arcoona Lakes
Contains portions of
South Australia
Copper, uranium, gold, silver
Olympic Dam
21889 Manufacturing/production
DPA
South Australia
Copper, uranium, gold, silver
Olympic Dam
21889 Manufacturing/production
DPA
South Australia
Copper, uranium, gold, silver
Olympic Dam
21889 Manufacturing/production
DPA
South Australia
Copper, uranium, gold, silver
Olympic Dam
21889 Manufacturing/production
DPA
Terrestrial
Terrestrial
Terrestrial
Terrestrial
Witchelina Nature
Reserve
Lake Torrens National
Park
Strezelecki Regional
Reserve
Elliot Price
Conservation Park
Adjacent to
Heritage Agreement National
Contains portions of
National Park
National
Adjacent to
Regional Reserve
National
Adjacent to
Conservation Park
National
South Australia
Copper, uranium, gold, silver
Olympic Dam
21889 Manufacturing/production
DPA
Terrestrial
Kati Thanda-Lake Eyre Adjacent to
National Park
National
South Australia
Copper, uranium, gold, silver
Olympic Dam
21889 Manufacturing/production
DPA
Terrestrial
Wabma Kadarbu
Mound Springs
Adjacent to
Conservation Park
National
IBA – migratory birds/
congregations
IBA – endemic,
migratory birds/
congregations, other
IBA – migratory birds/
congregations
IBA – migratory birds/
congregations
VI
VI
III
VI
Ia
Ia
VI
VI
Ia
VI
III
South Australia
Copper, uranium, gold, silver
Olympic Dam
21889 Manufacturing/production
DPA
Freshwater
Coongie Lakes
Contains portions of
Ramsar Site, Wetland
of International
Importance
International
Not Reported
BMA
BMA
BMA
BMA
BMA
BMC
NiW
NiW
NiW
NiW
NiW
NiW
WAIO
South Australia
Copper, uranium, gold, silver
Olympic Dam
21889 Manufacturing/production
DPA
South Australia
Copper, uranium, gold, silver
Olympic Dam
21889 Manufacturing/production
DPA
Western Australia
Nickel
Western Australia
Nickel
Western Australia
Nickel
Western Australia
Nickel
Western Australia
Nickel
Western Australia
Nickel
Western Australia
Iron ore
5414 Manufacturing/production
DPA
1384 Extractive
DPA
5414 Manufacturing/production
DPA
5414 Manufacturing/production
DPA
5414 Manufacturing/production
DPA
5414 Manufacturing/production
DPA
3667
Extractive
DPA
Terrestrial
Dordie Rocks
Adjacent to
Nature Reserve
Terrestrial
Leda
Adjacent to
Nature Reserve
Terrestrial
Unnamed WA51658
Adjacent to
5(1)(h) Reserve
Terrestrial
Karijini
Adjacent to
National Park
Terrestrial
Terrestrial
Unnamed (No.
HA1545)
Unnamed (No.
HA1022)
Terrestrial
Wanjarri
Terrestrial
Wanjarri
Terrestrial
Kambalda
In the Area
Heritage Agreement National
Adjacent to
Heritage Agreement National
Adjacent to
Adjacent to
Adjacent to
Nature Reserve
Nature Reserve
Nature Reserve
National
National
National
National
National
National
National
III
III
Ia
Ia
Ia
II
Ia
II
II
BHP Annual Report 2020 317
Strategic ReportGovernance at BHPRemuneration ReportDirectors’ ReportFinancial StatementsShareholder informationAdditional information6
Country/Region
Commodity
Operated asset
Operated asset
size (km2)
Type of Operated asset
Biodiversity Area
Classification
Habitat Type
Area Name
to DPA or HBVA
(i.e. protected status)
DPA Designation Type
IUCN Category
of recognition
Position of owned, leased
For DPA – Basis
or managed land relative
of recognition
Western Australia
Iron ore
Western Australia
Iron ore
Western Australia
Titanium
Western Australia
Oil and Gas
Western Australia
Oil and Gas
Western Australia
Oil and Gas
Victoria
Canada
Oil and Gas
WAIO
WAIO
Beenup
Pyrenees
Pyrenees
Stybarrow
Minerva
3667
Extractive
HBVA
Freshwater
Fortescue Marshes
Contains portions of
8295 Manufacturing/production
HBVA
Freshwater
Fortescue Marshes
Adjacent to
3 Extractive
DPA
558 Manufacturing/production
DPA
558 Manufacturing/production
DPA
240 Manufacturing/production
DPA
66 Manufacturing/production
DPA
Saskatchewan
Potash
Jansen
56 Extractive
Nova Scotia
Legacy Assets/Closed Sites/R&CM East Kemptville
11
Extractive
United States
Arizona
Chile
Legacy Assets/Closed Sites/R&CM San Manuel
115 Extractive
Antofagasta
Copper
Antofagasta
Antofagasta
Antofagasta
Copper
Copper
Copper
Spence
Spence
Escondida
Escondida
627
Extractive
627
Extractive
4019 Extractive
4019 Extractive
DPA
DPA
HBVA
HBVA
DPA
DPA
HBVA
Terrestrial
Scott National Park
Adjacent to
National Park
National
Maritime
Ningaloo
Adjacent to
Australian Marine Park National
Maritime
Ningaloo Coast
Adjacent to
World Heritage Site
International
(natural or mixed)
Maritime
Gascoyne
Adjacent to
Australian Marine Park National
Terrestrial
Port Campbell
Contains portions of
National Park
National
Terrestrial
Private Conservation
Adjacent to
Private Conservation
National
Lands
Lands
Terrestrial
Tobeatic Wilderness
Adjacent to
Wilderness Area
National
Terrestrial
Lower San Pedro River Contains portions of
Terrestrial
Reserva Nacional Los
Adjacent to
Flamencos-Soncor
Terrestrial
Los Flamencos
Adjacent to
National Reserve
National
Terrestrial
Llullaillaco
In the Area
National Park
National
Terrestrial
Bahía de Mejillones
Contains portions of
II
II
NA
VI
II
IV
Ib
IV
II
For HBVA – Basis
IBA – CR/EN, VU,
migratory birds/
congregations, others
IBA – CR/EN, VU,
migratory birds/
congregations, others
IBA – other
IBA – VU, migratory
birds/congregations
IBA – CR/EN,
migratory birds/
congregations
318 BHP Annual Report 2020
Country/Region
Commodity
Operated asset
size (km2)
Type of Operated asset
Habitat Type
Area Name
Operated asset
Biodiversity Area
Classification
Position of owned, leased
or managed land relative
to DPA or HBVA
For DPA – Basis
of recognition
(i.e. protected status)
DPA Designation Type
IUCN Category
Western Australia
Iron ore
3667
Extractive
HBVA
Freshwater
Fortescue Marshes
Contains portions of
Western Australia
Iron ore
8295 Manufacturing/production
HBVA
Freshwater
Fortescue Marshes
Adjacent to
3 Extractive
DPA
558 Manufacturing/production
DPA
558 Manufacturing/production
DPA
240 Manufacturing/production
DPA
66 Manufacturing/production
DPA
Terrestrial
Scott National Park
Adjacent to
National Park
National
Maritime
Ningaloo
Adjacent to
Australian Marine Park National
Maritime
Ningaloo Coast
Adjacent to
World Heritage Site
(natural or mixed)
International
Maritime
Gascoyne
Adjacent to
Australian Marine Park National
Terrestrial
Port Campbell
Contains portions of
National Park
National
Saskatchewan
Potash
Jansen
56 Extractive
Terrestrial
Private Conservation
Lands
Adjacent to
Private Conservation
Lands
National
Nova Scotia
Legacy Assets/Closed Sites/R&CM East Kemptville
11
Extractive
Terrestrial
Tobeatic Wilderness
Adjacent to
Wilderness Area
National
Legacy Assets/Closed Sites/R&CM San Manuel
115 Extractive
Terrestrial
Lower San Pedro River Contains portions of
627
Extractive
627
Extractive
4019 Extractive
4019 Extractive
Terrestrial
Reserva Nacional Los
Flamencos-Soncor
Adjacent to
Terrestrial
Los Flamencos
Adjacent to
National Reserve
National
Terrestrial
Llullaillaco
In the Area
National Park
National
Terrestrial
Bahía de Mejillones
Contains portions of
DPA
DPA
HBVA
HBVA
DPA
DPA
HBVA
II
II
NA
VI
II
IV
Ib
IV
II
Western Australia
Titanium
Western Australia
Oil and Gas
Western Australia
Oil and Gas
Western Australia
Oil and Gas
Oil and Gas
Victoria
Canada
United States
Arizona
Chile
Antofagasta
Copper
Antofagasta
Antofagasta
Antofagasta
Copper
Copper
Copper
WAIO
WAIO
Beenup
Pyrenees
Pyrenees
Stybarrow
Minerva
Spence
Spence
Escondida
Escondida
For HBVA – Basis
of recognition
IBA – CR/EN, VU,
migratory birds/
congregations, others
IBA – CR/EN, VU,
migratory birds/
congregations, others
IBA – other
IBA – VU, migratory
birds/congregations
IBA – CR/EN,
migratory birds/
congregations
BHP Annual Report 2020 319
Strategic ReportGovernance at BHPRemuneration ReportDirectors’ ReportFinancial StatementsShareholder informationAdditional information6
Year ended 30 June
2020
2019
2018
2017
114
100%
1
1%
21
18%
90
79%
2
2%
36
100%
32
88%
150
0.04
0.03%
19
31.6
0.2
5.8
25.0
0.6
10.1
8.9
42
0.01
114
100%
1
1%
24
21%
87
76%
3
2%
35
100%
31
88%
149
0.05
0.04%
22
31.6
0.2
6.6
24.1
0.7
9.6
8.5
41
0.01
115
100%
1
1%
31
27%
81
71%
2
2%
35
100%
31
89%
150
0.05
0.04%
21
31.9
0.2
8.6
22.6
0.6
9.6
8.5
42
0.01
112
100%
1
1%
33
30%
76
68%
2
2%
28
100%
24
85%
140
0.04
0.04%
19
31.1
0.2
9.2
21.0
0.6
7.8
6.6
39
0.01
Consumption
of fuel
(PJ)
Consumption
of electricity
(PJ)
Total operational
energy
consumption
(PJ)
11.1
20.5
33.3
40.7
7.9
114
0.1
26.2
1.2
5.3
3.4
36
11.2
46.7
34.5
46.0
11.3
150
Consumption
of fuel
(PJ)
Consumption
of electricity
(PJ)
Total operational
energy
consumption
(PJ)
15.0
20.7
31.0
39.3
7.7
114
0.2
24.6
1.2
5.3
3.2
35
15.2
45.3
32.2
44.6
10.9
149
6.6.4 Climate change – performance data (1)
Energy consumption (2)
Operational energy consumption by source
Operational energy consumption (PJ)
Consumption of fuel
– Coal and coke
– Natural gas
– Distillate/gasoline
– Other
Consumption of electricity
Consumption of electricity from grid
Percentage consumption of electricity from grid
Total operational energy consumption
Operational energy consumption from renewable sources (PJ)
Operational energy intensity (GJ per tonne of copper
equivalent production) (3)
Operational energy consumption (TWh)
Consumption of fuel
– Coal and coke
– Natural gas
– Distillate/gasoline
– Other
Consumption of electricity
Consumption of electricity from grid
Total operational energy consumption
Operational energy consumption from renewable sources (TWh)
Operational energy consumption by commodity
Year ended 30 June 2020
Petroleum
Copper
Iron ore
Coal
Nickel
Total
Year ended 30 June 2019
Petroleum
Copper
Iron ore
Coal
Nickel
Total
320 BHP Annual Report 2020
Greenhouse gas emissions
Operational GHG emissions by source (2) (4) (5)
Operational GHG emissions (Mt CO2-e)
Scope 1 GHG emissions (6)
Scope 2 GHG emissions (7)
Total operational GHG emissions
Total operational GHG emissions (adjusted for Discontinued operations) (8)
Operational GHG emissions intensity (tonnes CO2-e per tonne of copper
equivalent production) (3)
Percentage of Scope 1 GHG emissions covered under
an emissions-limiting regulation (9)
Percentage of Scope 1 GHG emissions from methane
Scope 2 GHG emissions (location based) (7)
Year ended 30 June
2020
2019
2018
9.5
6.3
15.8
15.8
2.0
79%
19%
5.1
9.7
6.1
15.8
15.3
2.4
74%
19%
5.1
10.6
6.4
17.0
15.3
2.4
81%
21%
6.1
2017
10.5
5.8
16.3
14.6
2.2
79%
20%
6.0
Operational Scope 1 GHG emissions from Petroleum operations by source (kt CO2-e) (10)
Scope 1 GHG emissions
Year ended 30 June 2020
Other
combustion
Process
emissions
Other vented
emissions
Fugitive
emissions from
operations
586.3
0.3
0.0
180.3
BHP Annual Report 2020 321
Strategic ReportGovernance at BHPRemuneration ReportDirectors’ ReportFinancial StatementsShareholder informationAdditional information6 Scope 1 GHG
emissions
(kt CO2-e)
Scope 2 GHG
emissions
(kt CO2-e)
Operational
GHG emissions
Total
(kt CO2-e)
Operational
GHG emissions
intensity
(kt CO2-e/unit of
production) (12)
200
350
200
750
860
360
230
1,450
2,210
2,210
4,040
530
4,570
490
490
9,490
0
9,490
–
–
20
20
3,260
530
450
4,240
260
260
1,120
80
1,200
550
550
6,280
0
6,280
200
350
220
770
4,120
890
680
5,690
2,470
2,470
5,160
610
5,770
1,040
1,040
15,800
0
15,800
0.03
0.03
0.02
0.03
3.48
3.67
3.96
3.56
0.01
0.01
0.07
0.04
0.07
12.86
12.86
Scope 1 GHG
emissions
(kt CO2-e)
Scope 2 GHG
emissions
(kt CO2-e)
Operational
GHG emissions
Total
(kt CO2-e)
Operational GHG
emissions
intensity
(kt CO2-e/unit of
production) (12)
200
310
250
760
930
340
200
1,470
2,050
2,050
3,980
520
4,500
460
460
9,730
470
9,260
–
–
20
20
3,060
530
470
4,060
260
260
1,090
90
1,180
530
530
6,080
0
6,080
200
310
270
780
3,990
870
670
5,530
2,310
2,310
5,070
610
5,680
990
990
15,810
470
15,340
0.02
0.03
0.03
0.02
3.51
3.53
4.18
3.59
0.01
0.01
0.07
0.03
0.06
11.21
11.21
Operational GHG emissions by commodity and asset (2) (4) (5)
Year ended 30 June 2020
Petroleum
United States – Conventional
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 (11)
Emissions from Discontinued operations
Total (excluding Discontinued operations) (8) (11)
Year ended 30 June 2019
Petroleum
United States – Conventional
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 (11)
Emissions from Discontinued operations
Total (excluding Discontinued operations) (8) (11)
322 BHP Annual Report 2020
Equity share GHG emissions by commodity and asset (4) (13)
Year ended 30 June 2020
Petroleum
United States – Conventional
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
Non-operated assets (15)
Total (11)
Emissions from Discontinued operations
Total (excluding Discontinued operations) (8) (11)
Financial control GHG emissions by commodity and asset (4) (14)
Year ended 30 June 2020
Petroleum
United States – Conventional
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
Non-operated assets (15)
Total (11)
Emissions from Discontinued operations
Total (excluding Discontinued operations) (8) (11)
Scope 1 GHG
emissions
(kt CO2-e)
Scope 2 GHG
emissions
(kt CO2-e)
Equity share
GHG emissions
Total
(kt CO2-e)
80
250
90
420
490
360
230
1,080
1,900
1,900
2,150
530
2,680
490
490
3,800
10,400
0
10,400
–
–
10
10
1,880
530
450
2,860
220
220
580
80
660
550
550
130
4,440
0
4,440
80
250
100
430
2,370
890
680
3,940
2,120
2,120
2,730
610
3,340
1,040
1,040
3,930
14,840
0
14,840
Scope 1 GHG
emissions
(kt CO2-e)
Scope 2 GHG
emissions
(kt CO2-e)
Financial control
GHG emissions
Total
(kt CO2-e)
80
250
90
420
860
360
230
1,450
1,920
1,920
2,240
530
2,770
490
490
3,430
10,510
0
10,510
0
0
10
10
3,260
530
450
4,240
220
220
590
80
670
550
550
10
5,730
0
5,730
80
250
100
430
4,120
890
680
5,690
2,140
2,140
2,830
610
3,440
1,040
1,040
3,440
16,240
0
16,240
BHP Annual Report 2020 323
Strategic ReportGovernance at BHPRemuneration ReportDirectors’ ReportFinancial StatementsShareholder informationAdditional information6 Scope 3 GHG emissions by category (16)
Scope 3 GHG emissions (Mt CO2-e)
Upstream
Purchased goods and services (including capital goods)
Fuel and energy related activities
Upstream transportation and distribution (17)
Business travel
Employee commuting
Downstream
Downstream transportation and distribution (18)
Investments (i.e. our non-operated assets) (19)
Processing of sold products (20)
Iron ore processing (21)
Copper processing
Total processing of sold products
Use of sold products
Metallurgical coal (21)
Energy coal (22)
Natural gas (22)
Crude oil and condensates (22)
Natural gas liquids (22)
Total use of sold products
Year ended 30 June
2020
2019
2018
2017
16.9
1.3
3.8
0.1
0.2
4.0
3.9
17.3
1.3
3.6
0.1
<0.1
4.0
3.1
8.2
1.4
3.6
0.1
<0.1
5.0
1.7
7.7
1.4
3.2
0.1
<0.1
2.8
1.9
205.6-322.6
5.2
197.2-299.6
5.1
201.2-317.4
5.2
194.1-309.5
4.2
210.8-327.8
202.3-304.7
206.4-322.6
198.3-313.7
33.7-108.2
56.4
20.6
17.9
1.9
34.7-111.4
67.0
28.3
23.3
2.8
35.0-112.3
71.0
36.4
29.6
4.5
32.5-105.5
72.1
38.3
33.1
5.1
130.5-205.0
156.0-232.7
176.5-253.8
181.1-254.1
(1) Unless otherwise noted, FY2017 and FY2018 data includes Continuing operations and Discontinued operations (Onshore US assets). Unless otherwise noted, FY2019
data includes Continuing operations and Discontinued operations (Onshore US assets) to 31 October 2018. Data in italics indicates that data has been adjusted since
it was previously reported. FY2019 originally reported data that was restated is 5.0 million tonnes CO2-e for Scope 2 GHG emissions, 14.7 million tonnes CO2-e for total
operational GHG emissions, and 2.2 tonnes CO2-e per tonne of copper equivalent production for operational GHG emissions intensity.
(2) Calculated based on an operational control approach in line with World Resources Institute/World Business Council for Sustainable Development guidance.
Consumption of fuel and consumption of electricity refers to annual quantity of energy consumed from the combustion of fuel; and the operation of any facility; and
energy consumed resulting from the purchase of electricity, heat, steam or cooling by the company for its own use. Over 99.9 per cent of BHP’s energy consumption
and emissions occurs outside the UK offshore area (as defined in the relevant UK reporting regulations). UK energy consumption of 222,368 kWh and emissions of 52
tonnes CO2-e is associated with electricity consumption from our office in London. One TWh equals 1,000,000,000 kWh.
(3) Copper equivalent production has been calculated based on FY2020 average realised product prices for FY2020 production, 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) and are taken on 100 per cent basis.
(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 Scope 2 emissions have been calculated based on an operational control approach (unless otherwise stated) in line with the Greenhouse Gas Protocol
Corporate Accounting and Reporting Standard. BHP Scope 1, 2 and 3 Emissions Calculation Methodology, available at bhp.com/climate.
(6) Scope 1 refers to direct GHG emissions from operated assets.
(7) Scope 2 refers to indirect GHG emissions from the generation of purchased or acquired electricity, steam, heat or cooling that is consumed by operated assets.
Our Scope 2 emission have been calculated using the market-based method using supplier specific emission factors, in line with the Greenhouse Gas Protocol Scope
2 Guidance unless otherwise specified. A residual mix is currently unavailable to account for voluntary purchases and this may result in double counting between
electricity consumers.
(8) Excludes Onshore US assets, which were divested in FY2019.
(9) Scope 1 emissions from BHP’s facilities covered by the Safeguard Mechanism administered by the Clean Energy Regulator in Australia and the distillate and gasoline
emissions from turbine boilers at the cathode plant at Escondida covered by the Green Tax legislation in Chile.
(10) Calculated emissions are based on 11-month data, annualised for June for FY2020 total. Emissions from flared hydrocarbons are included in fugitive emissions.
(11) Total includes functions, projects, exploration, closed sites and consolidation adjustments.
(12) Based on FY2020 and FY2019 production figures. Production figures used are consistent with emissions reporting boundary (i.e. BHP operational control and are taken
on a 100 per cent basis). Production data for Copper assets does not include gold, silver or uranium in the calculation. Saleable production data used for Nickel West.
(13) Equity share approach to calculate emissions reflects BHP’s equity share in the operations as defined under the Greenhouse Gas Protocol Corporate Accounting and
Reporting Standard. As BHP does not control or have access to the data from all operations in which it holds equity, certain assumptions had to be made to estimate
equity share of operations not under BHP’s operational control. Details on assumptions and operations included are provided in note (15).
(14) Financial control approach to report GHG emissions is based on the accounting treatment in the company’s consolidated financial statements, as follows:
100 per cent for operations accounted for as subsidiaries, regardless of equity interest owned; and for operations accounted for as a joint operation, the company’s
interest in the operation. It does not report GHG emissions from operations which are accounted for using the equity method in the company’s financial statements.
As BHP does not control or have access to the data from all operations in which it holds equity, certain assumptions had to be made to estimate equity share of
operations not under BHP’s operational control. Details are provided in note (15).
(15) Non-operated assets include Antamina, Cerrejón, Kelar and the petroleum assets in Australia, the United States and Algeria. Emissions data was sourced directly from
the operator in the first instance and, where not readily available for the current reporting year, FY2019 data was extrapolated to reflect FY2020 production levels.
Emissions intensity estimates were applied for any remaining assets based on analogous BHP operations.
(16) Scope 3 emissions have been calculated using methodologies consistent with the Greenhouse Gas 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 BHP Scope 1, 2 and 3 Emissions Calculation Methodology, available at bhp.com/climate.
(17) 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.
(18) Product transport where freight costs are not covered by BHP, for example under Free on Board (FOB) or similar terms.
(19) For BHP, this category covers the Scope 1 and Scope 2 emissions (on an equity basis) from our assets that are owned as a joint venture but not operated by BHP.
(20) 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.
(21) 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 the higher-end estimate, 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.
The low-end estimate apportions the emission factor for steel between iron ore and metallurgical coal inputs. The low-end estimate for iron ore only accounts for
BHP’s Scope 3 emissions from iron ore and does not account for BHP’s or third party coal used in the steelmaking process. Scope 3 emissions from BHP’s coal are
captured in the ‘Use of sold products’ category under metallurgical coal.
(22) All crude oil and condensates are conservatively assumed to be refined and combusted as diesel. Energy coal, Natural gas and Natural gas liquids are assumed
to be combusted.
324 BHP Annual Report 2020
6.6.5 Water information – performance data
This section provides detailed disclosure of our various water
metrics. All water performance data presented in this Report are
from operated assets during FY2020, and exclude Discontinued
operations. (Onshore US assets).
Definitions of water metrics, sources and types is provided in
sections 6.6 and 6.8.2.
BHP has continued to classify water quality into three categories
in line with the Minerals Council of Australia’s Water Accounting
Framework (WAF) as this provides more granularity. Type 1 and
Type 2 equate to high-quality water, while Type 3 equates
to low-quality water under the International Council on Mining
and Metals (ICMM) Guidelines.
Water withdrawals
Water withdrawals represent the volume of water, in megalitres
(ML) received and intended for use by the operated asset from
the water environment and/or a third party supplier. (1)
FY2020 Withdrawals by asset (by source)
Per million megalitres
2.0
1.5
1.0
5
0
i
a
d
d
n
o
c
s
E
a
i
l
a
r
t
s
u
A
n
r
e
t
s
e
W
e
r
O
n
o
r
I
l
m
u
e
o
r
t
e
P
)
C
M
B
/
A
M
B
(
l
a
o
C
d
n
a
l
s
n
e
e
u
Q
t
s
e
W
l
e
k
c
N
i
i
m
a
D
c
p
m
y
O
l
e
t
r
o
N
a
p
m
a
P
l
a
o
C
y
g
r
e
n
E
W
S
N
s
e
t
i
s
y
c
a
g
e
L
a
d
a
n
a
C
h
s
a
t
o
P
FY2017 – FY2020 withdrawals (by source)
● Seawater ● Surface water ● Groundwater
● Seawater
● Groundwater
● Surface water
Per million megalitres
4.0
3.2
2.4
1.6
8
0
7
1
0
2
8
1
0
2
9
1
0
2
0
2
0
2
FY2017 – FY2020 withdrawals (by quality)
Per million megalitres
● Type 3
● Type 2
● Type 1
4.0
3.2
2.4
1.6
8
0
7
1
0
2
8
1
0
2
9
1
0
2
0
2
0
2
Water withdrawals for FY2020 across our operations increased
by 8 per cent from FY2019 (from 352,950 ML to 380,330 ML), due
primarily to increased use at Escondida. Minor increases at other
assets (e.g. Olympic Dam) were offset by a decrease in withdrawal
at our Queensland Coal operated assets due to lower than average
rainfall in the region. Despite the increase in water withdrawal, our
withdrawal of high-quality (Type 1) water reduced from 58,850 ML
in FY2019 to 51,610 ML.
The majority of our water withdrawals now come from seawater.
Escondida stopped drawing groundwater from the Monturaqui
borefield in the second half of FY2020 and water for operational
purposes is now supplied entirely by desalinated seawater, other
than small quantities of groundwater extracted for pit dewatering
to allow safe mining. The proportion of withdrawals relating to
groundwater across BHP reduced from 40 per cent in FY2019
to 33 per cent in FY2020, and is expected to reduce further when
the effect of Escondida’s cessation of groundwater extraction from
the Andean aquifers is seen over a full year. WAIO and Queensland
Coal account for more than 50 per cent of terrestrial water
withdrawal across our business. All of the WAIO withdrawals are
from groundwater. Queensland Coal draws from a mix of surface
water (collected rainfall runoff represents approximately 75 per cent
of surface water withdrawal) and groundwater. Due to ongoing
improvement in our water data, it was identified that water
extracted during the petroleum production process to access
hydrocarbon products should be classified as groundwater
withdrawal under the ICMM and WAF guidance. Prior to FY2019,
this was reported as seawater withdrawal.
Freshwater (2) withdrawal decreased 18 per cent in FY2020
compared to FY2019 and 19 per cent compared to our FY2017
baseline. This was primarily due to the early cessation of
groundwater extraction at Escondida. The withdrawals, and
the material contributors to these, were within expectations for
FY2020 and in line with our ambition to minimise our withdrawal
of high-quality fresh water and replace these with seawater/
low-quality withdrawals where feasible. As the results are within
expectations, there is no implications for current commitments,
strategy and costs for the business with respect to water
withdrawals. For more information on freshwater withdrawal,
refer to section 1.7.6.
(1) Volumes of withdrawal by source have been updated for FY2019, FY2018 and FY2017 for the Nickel West, Kwinana operated asset. Previously the total volumes
of water supplied to the site by third party, Water Corporation, was proportionately to source in alignment with the public information (48 per cent from seawater,
42 per cent from groundwater and 10 per cent from surface water). In FY2020, Water Corporation supplied BHP site specific proportions of water sources for our
Kwinana operations for the FY2017 to FY2020 period.
(2) ‘Freshwater’ is defined as waters other than seawater, wastewater 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 of potential
value to other users or the environment.
BHP Annual Report 2020 325
Strategic ReportGovernance at BHPRemuneration ReportDirectors’ ReportFinancial StatementsShareholder informationAdditional information6
Water discharges
Water discharges includes water that has been removed from the
operated asset and returned to the environment or distributed
to a third party. This includes seepage from tailings dams to
groundwater, discharges from operations to surface waters
(which are also affected by periods of higher rainfall) and discharges
to seawater. Water we treat and then on-supply to third parties
is captured as a diversion consistent with ICMM Guidelines as it
is not intended for operational purposes. Water that is evaporated
or entrained (1) is also excluded from discharges and instead reported
under the water consumption category. (2)
FY2017 – FY2020 Total discharges (by destination)
Per million megalitres
● Seawater
● Groundwater
● Surface water
● Third party water
1.5
1.2
9
6
3
0
7
1
0
2
8
1
0
2
9
1
0
2
0
2
0
2
FY2017 – FY2020 Total discharges (by quality)
Per million megalitres
● Type 3
● Type 2
● Type 1
1.5
1.2
9
6
3
0
7
1
0
2
8
1
0
2
9
1
0
2
0
2
0
2
FY2020 Discharges by asset (by destination)
Per million megalitres
1.0
8
6
4
2
0
i
a
d
d
n
o
c
s
E
l
m
u
e
o
r
t
e
P
)
C
M
B
/
A
M
B
(
l
a
o
C
d
n
a
l
s
n
e
e
u
Q
a
i
l
a
r
t
s
u
A
n
r
e
t
s
e
W
e
r
O
n
o
r
I
a
d
a
n
a
C
h
s
a
t
o
P
t
s
e
W
l
e
k
c
N
i
i
m
a
D
c
p
m
y
O
l
e
t
r
o
N
a
p
m
a
P
l
a
o
C
y
g
r
e
n
E
W
S
N
s
e
t
i
s
y
c
a
g
e
L
Total water discharges for FY2020 were 147,850 ML an increase
from FY2019 as expected due to the increase throughout of
the desalination facility at our Escondida asset. The majority
of water discharges are to seawater at over 90 per cent, with
Escondida and Petroleum being the largest contributors. The
second largest discharge volume is to groundwater, the majority
of which is Type 3 seawater that is withdrawn as a by-product
during the recovery of hydrocarbons from below the seabed (and
therefore classed as groundwater in the ICMM and WAF guidance)
and which is returned by re-injection to below the seabed.
Discharges to surface water (usually riverine systems) are influenced
by climatic conditions such as rainfall and occurrence of extreme
weather events, therefore are subject to higher variability and less
predictable. These scenarios may occur at our Queensland Coal
operated assets. In FY2020, some localised high rainfall events
resulted in discharges to surface waters at those operated assets.
Our water management practices at the operated assets where
this may occur are designed to accommodate this variability
and therefore the occurrence of such events does not affect our
current management activities and strategy or result in elevated risks.
Approximately 40 per cent of our assets do not have any water
discharges due to water being either consumed in operational
activities or reused/recycled. This is similar to previous years,
but note that prior to FY2019, the definition of water discharges
included water that was evaporated or entrained. This is now
reported as consumption, in line with ICMM Guidelines. The
extent of this change is shown in the data tables in section 6.6.3.
Water recycled/reused
During FY2020, the total volume of water recycled/reused was
250,090 ML. This represents an efficiency of 66 per cent of
withdrawals excluding seawater. Increases in recycled/reused
volumes was observed at five of our operated assets in FY2020.
The ability of our operated assets to reuse and recycle water varies
depending on the recovery processes used and the water quality
requirements. The accuracy of the recycled/reused metric currently
varies depending on the complexity of the process and how closely
water movements are measured and understood. As our data
collection and analysis improves, we can more robustly assess
opportunities to improve efficiency of water use.
Water diversions
FY2019 was the first year that BHP disclosed diversions. Diverted
water is water that is actively managed by an operated asset but
not used for any operational purposes. For example, this includes
the water that is removed from below the water table at WAIO
to access the ore but is returned to the environment and not
consumed in operations. Another example is when we withdraw
water and treat it for use as drinking water by local communities,
as Olympic Dam does for the town of Roxby Downs in South Australia.
In FY2020, 102,780 ML of water was withdrawn without any
intention to be used at BHP operated assets, predominantly relating
to water that is treated by our legacy assets in North America, and
by dewatering as noted above for WAIO, and described further in
the WAIO water case study.
Note the withdrawal of diverted water may occur in a different
annual reporting period to its discharge, so in any given annual
period there may be a differential between withdrawal and
discharge volumes for diverted water.
● Seawater ● Surface water ● Groundwater ● Third party water
(1) Entrained water includes water incorporated into product and/or waste streams, such as tailings, that cannot be easily recovered.
(2) Evaporation and entrainment, previously reported as water outputs under the WAF, have been reported under consumption to align with the ICMM Guidelines.
326 BHP Annual Report 2020
Water consumption
Prior to FY2019, water consumption was included within the
reporting of water outputs. In the ICMM Guidelines, consumption
(the volume of water used by the operated asset and not returned
to the water environment or a third party) is a separate reporting
category. Available data for evaporation and entrainment from the
FY2017 and FY2018 reporting periods was moved to the consumption
category from FY2019 in order to allow representative year-on-year
comparisons. This data is shown in section 6.6.3.
In FY2020, evaporation and entrainment were the most significant
contributors to consumption, representing more than 91 per cent
of total consumption, slightly less than in FY2019 due to a reduction
in evaporation.
Evaporation consumption is inherently linked with climatic
conditions during the reporting period. Evaporation data is
estimated or simulated using average climatic conditions and
therefore consumption due to evaporation should remain relatively
stable but may vary due to climatic conditions outside of BHP’s
control. The Minerals Council of Australia has indicated there will
be some updates in the WAF guidance with respect to reporting
of evaporation. The new guidance states that evaporation should
be reported by source water quality type (instead of as Type 1).
This change is to better align the WAF with other global water
metrics. Classifying the quality of evaporated water by the source
water quality allows the consumptive use of lower-quality water
to be better represented in the water account. BHP has reported
evaporation in line with this intended update to the WAF.
Entrainment may show variability due to the type and location
of ore during any given reporting period. The category of ‘other’
for consumption includes water consumed, for example as a result
of potable water consumption at operated assets.
The increased focus on consumption will assist with increased
and improved data accuracy for entrainment and evaporation,
and assist with identifying opportunities to reduce, where possible,
losses such as those associated with evaporation.
The operated assets in FY2020 that consumed the most water
were Escondida, WAIO and Queensland Coal. Entrainment of water
in tailings is the largest contributor to consumption at Escondida,
whereas evaporation is the key driver of consumption at WAIO and
Queensland Coal. It should be noted that in any given reporting
period, consumption and discharges volumes might be higher than
withdrawals as evaporation can occur from water that has been
captured and stored during previous periods.
FY2020 Consumption by asset
Per million megalitres
1.0
8
6
4
2
0
i
a
d
d
n
o
c
s
E
a
i
l
a
r
t
s
u
A
n
r
e
t
s
e
W
e
r
O
n
o
r
I
)
C
M
B
/
A
M
B
(
l
a
o
C
d
n
a
l
s
n
e
e
u
Q
t
s
e
W
l
e
k
c
N
i
i
m
a
D
c
p
m
y
O
l
e
t
r
o
N
a
p
m
a
P
l
a
o
C
y
g
r
e
n
E
W
S
N
s
e
t
i
s
y
c
a
g
e
L
l
m
u
e
o
r
t
e
P
a
d
a
n
a
C
h
s
a
t
o
P
● Evaporation ● Entrainment ● Other
BHP Annual Report 2020 327
Strategic ReportGovernance at BHPRemuneration ReportDirectors’ ReportFinancial StatementsShareholder informationAdditional information6
Progress against our Water Stewardship Strategy
Water Stewardship Strategy pillar
What we did in FY2020
Risk
Embed processes and systems to
effectively manage water-related risk
and realise opportunities at a catchment
level in the short and longer term.
Technology
Leverage technology solutions that drive
a step-change reduction in water-related
risks, realise opportunities and deliver
multiple benefits.
Value
Effectively value water in investment
and operated asset decisions through
integration into strategy, planning
and evaluation frameworks.
Disclosure
Transparently disclose water-related risks,
management and performance at an
operated asset level.
Collective action
Collaborate with stakeholders to improve
regional water policy and catchment
governance and address shared water
challenges within our communities and
across our value chain.
BHP issued three Group-wide water standards for our operated assets in FY2019: water management,
drinking water and water data. Performance against all three standards will be assured as part of BHP’s
‘three lines of defence’ model of risk governance and management. For more information on this model,
refer to section 1.5.4.
The Technical Centre of Excellence will undertake ‘second line of defence’ assurance activities to ensure
our operated assets are meeting the minimum requirements set out in these three water standards.
Our Internal Audit and Advisory team, which provides independent assurance over the risk control
environment, will include assurance against the standards as part of the ‘third line of defence’ and
operated assets will monitor and review their water management activities as part of the ‘first line
of defence’.
In FY2020, each of our operated assets executed a gap assessment for each of the three water
standards. Action plans are in place to progress towards compliance with these new standards. For
example, a number of technology data management solutions were assessed in FY2020 to assist with
improvements in water data storage and analysis.
We undertook an assessment of water-related risks within the catchments and marine regions in which
we operate, taking account of environmental, community and third party interactions and assessed
water-related operational risk in alignment with the BHP Risk Framework.
The technologies available for water recovery from tailings and water treatment options were shortlisted
for further assessment and or development for each operated asset (as applicable), thereby creating a
pipeline of technology projects designed to contribute to the delivery of the FY2030 longer-term goal.
For more information, refer to the technology case study at bhp.com.
In FY2020, an approach was developed to help integrate social value considerations (including
environment and community aspects of water) into BHP’s planning and project evaluation processes.
The approach is expected to be trialed and further developed in FY2021.
We incorporated feedback from external parties on our FY2018 Water Report within our FY2019
Sustainability Report and FY2020 Annual Report (e.g. presentation of relativity of water-related risk).
We increased our water disclosure by providing withdrawal, discharge, and consumption and diversion
data at an operated asset level.
In FY2020, we commenced a case study with the ICMM to help inform improvements and increase
consistency of water disclosures in the mining sector.
In FY2020, we continued work with the CEO Water Mandate to develop a Common Water Accounting
Framework (see the CEO Water Mandate case study). We believe this is the first step required to advance
effective multi-stakeholder conversations on water.
We also continued to work in the Gulf of Mexico to improve water, biodiversity and climate change
outcomes (see the Bayou Terrebonne Biodiversity and Resiliency Project case study).
We partnered with industry and research peers to launch the Groundwater Modelling Decision Support
Initiative (GMDSI) in October 2019. The GMDSI is an industry-funded project designed to improve the
contribution of groundwater modelling in supporting environmental management and decision-making
(see the Groundwater Modelling Support Initiative (GMDSI) case study). The GMDSI reflects our
recognition of the value that deep knowledge brings to addressing water challenges.
We continued our dialogue with customers and suppliers in the China region to assess water-related
risks (both threats and opportunities) in our value chain.
We began a program of Water Resource Situational Analyses (WRSA) to inform post-FY2022 operated
asset context-based water targets. The targets will seek to minimise our impacts and address shared
water challenges in the regions in which we operate, in line with our commitments in our Water
Stewardship Position Statement. This work is also expected to contribute towards our longer-term goal
to support integrated water resource management in all the catchments where we operate by FY2030.
328 BHP Annual Report 2020
Nickel
West
NSW
Energy
Coal
Olympic
Dam
Pampa
Norte
Petroleum (3)
Legacy
assets
Low to
High
Moderate Moderate High
High
High
Low
380,330
199,160
1,150
17,590 9,360
13,460 10,770
43,500
Jansen
Potash
Project
Queensland
Coal
Moderate
Western
Australia
Iron Ore
Low
510
to high Moderate
37,440
47,380
1,150
2,520 3,860
0
5,320 2,780
11,280
0
0
50
0
14,910
29,120
0
510
15,650
130
9,760 2,720
2,180 10,780
43,440
0
6,890
18,130
45,190
0
1,150
350 7,420
310
7,090
50
460
28,360
0
16,080 1,950
13,160
3,690
7,930
50
9,090
47,380
Asset summary table FY2020
Metric (1) (2)
Total
Escondida
Water sensitivity
(BHP assessed)
Withdrawals (4) (ML)
Water withdrawals by
quality – Type 1
Water withdrawals by
quality – Type 2
Water withdrawals by
quality – Type 3
Water withdrawals by
source – Surface water (5)
Water withdrawals by
source – Groundwater
Water withdrawals by
source – Seawater
51,610
35,670
0
0
293,060
199,160
123,660
24,330
211,510
174,830
Discharges (ML)
147,850
99,740
Water discharges by
quality – Type 1
Water discharges by
quality – Type 2
Water discharges by
quality – Type 3
Water discharges by
destination – Surface water
Water discharges by
destination – Groundwater
Water discharges by
destination – Seawater
Water discharges by
destination – Third party
0
3,740
0
0
144,110
99,740
3,970
0
9,440
1,500
134,116
98,240
310
0
0
0
0
0
0
0
0
0
0
0
0
0
1,170
310
0
0
310
0
0
0
310
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
35,510
43,440
0
0
43,440
0
7,930
35,506
0
850
0
0
850
0
0
10
0
0
10
0
10
0
0
80
50
0
30
0
0
0
2,790
1,560
0
0
2,790
950
0
610
2,490
1,480
0
290
0
0
80
0
53,250
62,000
38,500
40,740
13,590
21,260
1,160
0
5,860
11,460
Consumption (ML)
258,120
95,680
Consumption – evaporation
126,120
28,380
Consumption – entrainment
109,550
66,770
Consumption – other
22,440
530
Recycled/reused (ML)
250,090
38,000
2,010
2,010
0
0
10
15,600 7,660
12,190
8,800
350 4,390
5,890
5,810
0 3,120
1,990
2,820
15,250
150
4,310
160
10,020
0 14,590 170,150
Diversions (ML)
Diversions – withdrawals
Diversions – discharges
102,780
79,430
380
380
41,080
42,740
0
0
0
0
0
960
780
780
1,240
1,090
0
230
17,200
42,100
8,630
24,620
(1) Data has been rounded to the nearest 10. In some instances, the sum of totals for quality, source and destination may differ due to rounding.
(2) Excludes Discontinued operations (Onshore US assets).
(3) Petroleum assets have been grouped due to their relatively lower volumes of water withdrawals, discharges and consumption compared to the mining assets.
(4) Third party water withdrawals have been reported by source.
(5) Includes rainfall and run-off volumes captured and used during the reporting year; rainfall and run-off volumes that have been captured and stored are excluded
and will be reported in the future year of use.
BHP Annual Report 2020 329
Strategic ReportGovernance at BHPRemuneration ReportDirectors’ ReportFinancial StatementsShareholder informationAdditional information6
6.7 Legal proceedings
The Group is 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 the Group is
currently involved or has finalised since our last Annual Report.
The timing of many of the legal proceedings and investigations
has been delayed or is uncertain as a result of court closures
or delays in response to the COVID-19 pandemic.
Legal proceedings relating to the failure of the Fundão
tailings dam at the Samarco iron ore operations in Minas
Gerais and Espírito Santo (Samarco dam failure)
The Group is engaged in numerous legal proceedings relating
to the Samarco dam failure. Given the stage of these proceedings,
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 similar or possibly the same damages.
There are numerous additional lawsuits against Samarco relating
to the Samarco dam failure to which the Group is 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 Ltda (BHP Brasil) and Vale, seeking the establishment
of a fund of up to R$20 billion (approximately US$3.7 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$365 million) into a Court-managed bank account for use
towards community and environmental rehabilitation. BHP Brasil,
Vale and Samarco immediately appealed against the injunction.
On 4 November 2016, the Federal Court reduced the R$2 billion
(approximately US$365 million) injunction to R$1.2 billion
(approximately US$220 million).
On 2 March 2016, BHP 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 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 Federal Public Prosecutors’ Claim for R$155 billion
(approximately US$28 billion) (also summarised below) for 24 months
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$220 million) injunction order.
330 BHP Annual Report 2020
On 13 April 2020, the 12th Federal Court granted a request made by
the states of Minas Gerais and Espírito Santo to allow R$100 million
(approximately US$20 million) Interim Security (defined below)
held on escrow with the Court to be used in implementation of
preventive measures and control and management of risks and
damages relating to the COVID-19 pandemic. The amount made
available is in the process of being allocated to the healthcare
systems in the state of Minas Gerais and the state of Espírito Santo.
Preliminary Agreement
On 18 January 2017, BHP 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$3.7 billion) public civil claim and the
R$155 billion (approximately US$28 billion) Federal Public
Prosecutors’ Office claim relating to the dam failure.
Under the Preliminary Agreement, BHP Brasil, Vale and Samarco
agreed interim security (Interim Security) comprising:
• R$1.3 billion (approximately US$240 million) in insurance bonds
• R$100 million (approximately US$20 million) in liquid assets
which was made available to the states of Minas Gerais and
Espírito Santo for the implementation of preventive measures
and control and management of risks and damages relating
to the COVID-19 pandemic
• a charge of R$800 million (approximately US$145 million)
over Samarco’s assets
On 24 January 2017, BHP 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 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 Brasil, Vale, Samarco, the other parties
to the Framework Agreement, the Public Prosecutors Office and
the Public Defense Office entered into a Governance Agreement,
which settled the R$20 billion (approximately US$3.7 billion) public
civil claim, enhances community participation in decisions related
to Programs under the Framework Agreement and established a
process to renegotiate the Programs over two years to progress
settlement of the R$155 billion (approximately US$28 billion)
Federal Public Prosecutors’ Office claim.
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 Brasil,
Samarco and Vale, consideration of findings from experts
appointed by Prosecutors and consideration of feedback from
impacted communities.
The renegotiation process remains outstanding as certain pre-
requisites established in the Governance Agreement are yet
to be implemented. The renegotiation term may be extended
for a further two years by mutual consent of the parties to the
Governance Agreement. During the renegotiation period and up
until revisions to the Programs are agreed, Fundação Renova will
continue to implement the Programs in accordance with the terms
of the Framework Agreement and the Governance Agreement.
The Interim Security provided under the Preliminary Agreement
is maintained for a period of 30 months under the Governance
Agreement, after which BHP 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$400 million).
R$155 billion public civil claim commenced by the Federal
Public Prosecutors’ Office (R$155 billion Federal Public
Prosecutors’ Office claim)
On 3 May 2016, the Federal Public Prosecutors’ Office filed a public
civil claim before the 12th Federal Court of Belo Horizonte against
BHP Brasil, Vale and Samarco – as well as 18 other public entities
(which has since been reduced to five defendants (2) by the 12th
Federal Court) – seeking R$155 billion (approximately US$28 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 Brasil, Vale and Samarco deposit
R$7.7 billion (approximately US$1.4 billion) in a special company
account and provide guarantees equivalent to R$155 billion
(approximately US$28 billion). The injunctions also seek to prohibit
BHP Brasil, Vale and Samarco from distributing dividends and
selling certain assets (among other things).
This public civil claim and the R$20 billion Public Civil Claim are
broad claims that encompass the majority of the public civil claims
filed against BHP Brasil, Samarco and Vale. For this reason, the
12th Federal Court has suspended other public civil claims while
negotiations continue in relation to the settlement of this public
civil claim.
Ratification of the Governance Agreement settled the $20 billion
Public Civil Claim and suspended this public civil claim, including
the R$7.7 billion (approximately US$1.4 billion) injunction request.
Despite suspension of this public civil claim being for a period of
two years from the date of ratification of the Governance Agreement
on 8 August 2018, the claim has not been resumed and the parties
may negotiate a further extension.
Enforcement Proceedings
On 7 January 2020, the 12th Federal Court of Belo Horizonte issued
a decision creating 10 enforcement proceedings (Enforcement
Proceedings) linked to the R$20 billion and R$155 billion Public Civil
Claims described above with two additional proceedings added
in subsequent months. The 12 Enforcement Proceedings seek
to expedite the remediation process related to the Samarco dam
failure, addressing issues considered to be priority in this context.
No substantive new claims were made under these proceedings.
Issues covered by these Enforcement Proceedings include
environmental recovery, human health risk and ecological
risk, resettlement of affected communities, infrastructure and
development, registration of certain impacted individuals under
the Programs and indemnities for people impacted by the dam
failure, resumption of economic activities, water supply for human
consumption and hiring of technical advisors to impacted people
among other key delivery areas.
In the context of these Enforcement Proceedings, BHP Brasil,
Samarco and Vale are seeking determinations, including the
repealing of fishing bans ordered by the courts or administration
entities, final compensation of impacted communities, the end of
registration of new indemnification requests for compensation and
indemnification of impacted people, and set-off of compensation
paid against future damages that may need to be paid.
Public civil claims commenced by the State Prosecutors’ Office
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 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
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$55 million) in Samarco’s bank
accounts. The Court granted the injunction freezing R$300 million
(approximately US$55 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$3,700) payment to each
displaced family;
• a R$100,000 (approximately US$18,000) 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, Fundação Renova 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 Brasil,
Vale and Samarco before the State Court in Ponte Nova claiming
compensation of R$7.5 billion (approximately US$1.4 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 (Ponte Nova 1). The claim also sought
a number of preliminary injunctions, including orders to:
• freeze R$1 billion (approximately US$185 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$5,500) per affected family and compensation to provide
dignified and adequate housing for the affected families.
On 5 February 2016, the Ponte Nova Court granted an injunction
to freeze R$475 million (approximately US$87 million) from bank
accounts of BHP 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 Ponte Nova Court, on 8 May 2018, ordered the
R$475 million (approximately US$87 million) in frozen funds
to be returned. Samarco and BHP 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 Brasil,
Vale, Samarco and Fundação Renova claiming approximately
R$2 billion (approximately US$366 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.
On 15 December 2015, Prosecutors filed a civil public action against
Samarco and Vale claiming implementation of water capture
infrastructure and payment of moral damages of R$5 billion
(approximately US$915 million). The injunction relief requested
remains suspended, awaiting for a decision by the Court.
On 13 August 2018, State Prosecutor’s Office in the state of Minas
Gerais filed a public civil action against BHP Brasil, Vale, Samarco
and Fundação Renova claiming several measures related to
healthcare in Mariana. On 25 April 2019, the parties settled the
case, and the execution of such settlement is ongoing.
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 Brasil, Vale and Samarco in the State
Court in Belo Horizonte, Minas Gerais, Brazil claiming R$10 billion
(approximately US$1.8 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’ Office
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 Brasil, Vale and Samarco seeking compensation
(2) Currently, solely BHP Brasil, Vale and Samarco, the Federal Government and the state of Minas Gerais are defendants.
BHP Annual Report 2020 331
Strategic ReportGovernance at BHPRemuneration ReportDirectors’ ReportFinancial StatementsShareholder informationAdditional information6 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$366 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 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$185 million)
of the defendants’ assets. On 4 February 2016, the Court ordered
Samarco to deposit approximately R$7 million (approximately
US$1.3 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$185 million). On 6 April 2016,
the Court of Appeals suspended the injunctions granted. BHP
Brasil, Vale and Samarco filed their defences in March 2016
and also requested the suspension of this public civil claim.
On 16 July 2019, the case was formally received by the 12th Federal
Court of Belo Horizonte. The 12th Federal Court has not made
a decision regarding the suspension of this public civil claim.
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$1.85 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$185 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
12th Federal Court suspended this public civil claim.
Other civil proceedings in Brazil
As noted above, BHP Brasil has been named as a defendant in
numerous other lawsuits. The lawsuits seek various remedies,
including rehabilitation costs, compensation to impacted 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.
BHP Brasil’s 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 1.8.
As at June 2020, Samarco had been named as a defendant in more
than 79,000 small claims for moral damages in which people argue
their public water service was interrupted for between five and
10 days. BHP Brasil is a co-defendant in more than 23,000 of these
cases. More than 270,000 people have received moral damages
related to the temporary suspension of public water supply
through settlements reached with Fundação Renova.
332 BHP Annual Report 2020
Criminal charges
On 20 October 2016, the Federal Prosecutors’ Office filed criminal
charges against BHP Brasil, Vale and Samarco and certain employees
and former employees of BHP Brasil (Affected Individuals) in the
Federal Court of Ponte Nova, Minas Gerais. On 3 March 2017, BHP
Brasil and the Affected Individuals filed their preliminary defences.
The Federal Court granted Habeas Corpus petitions in favour of
eight of the Affected Individuals terminating the charges against
those individuals. The Federal Prosecutors’ Office appealed seven
of the decisions. BHP Brasil rejects outright the charges against
BHP Brasil 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 – 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. The amount of damages sought by the putative
class is unspecified.
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 June 2019. On 9 July 2019, the plaintiff
filed a motion for reconsideration of that decision or for leave
to file a third amended complaint. On 30 October 2019, the Court
denied the plaintiff’s motion for reconsideration and for leave
to amend its complaint. The plaintiff has filed a notice of appeal
of both of those orders. This appeal remains pending before the
Court of Appeals.
Australian class action complaints
BHP Group Limited is named as a defendant in a shareholder
class action 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. The amount of damages sought
in the consolidated action is unspecified.
BHP filed an application for a temporary stay of the class action
pending resolution of certain Brazilian criminal proceedings.
On 17 March 2020, the Court declined to order the temporary stay.
Instead, the Court ordered that interlocutory steps in the class
action be considered on a case by case basis and allowed to
proceed only if any prejudice in connection with the Brazilian
criminal proceedings does not outweigh the other interests
of justice.
On 12 May 2020, BHP Group Ltd filed an application seeking
declaratory relief which, if successful, would narrow the group
of claimants in the class action. This application is scheduled
to be heard on 7-8 September 2020.
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 application was heard in July 2020. The Court has not
yet issued its judgment on this application.
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 6 ‘Income
tax expense’ in section 5.1.
6.8 Glossary
6.8.1 Mining, oil and gas-related terms
2D
Two dimensional.
3D
Three dimensional.
AIG
The Australian Institute of Geoscientists.
Anthracite
Coal of high rank with the highest carbon content.
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.
Bituminous
Coal of intermediate rank with relatively high carbon content.
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.
Fly ash
The finer particle fraction of coal ash.
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.
BHP Annual Report 2020 333
Strategic ReportGovernance at BHPRemuneration ReportDirectors’ ReportFinancial StatementsShareholder informationAdditional information6 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).
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.
PEGBC
Association of Professional Engineers and Geoscientists of the
Province of British Columbia.
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.
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. Copper in Hypogene
Sulphide is mainly provident from the copper bearing mineral
chalcopyrite and higher metal recoveries are achieved via grinding/
flotation concentration processes.
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 2 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).
334 BHP Annual Report 2020
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 meteoric or surface water. Copper in Supergene
Sulphide is mainly provident from the copper bearing minerals
chalcocite and covellite and is amenable to both grinding/flotation
concentration and leaching processes.
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.
Transitional Sulphide
Transitional is a term used to describe the zone of mineralisation
that is a gradation between Supergene Sulphide and Hypogene
Sulphide resulting from the incomplete development of the former
as it overprints the latter. This results in a more irregular distribution
of the three main copper bearing minerals and is amenable to both
grinding/flotation concentration and leaching processes.
UG (underground)
Below the surface 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.
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).
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.
Slag
A by-product of smelting after the desired metal has been
extracted from its ore.
Slimes
A mixture of liquid and the finer particle sized fraction of minerals,
typically related to tailings.
Sludge
A thick, soft, wet mud or similar viscous mixture of liquid and solid
components, especially the product of minerals processing or
refining activities.
Smelting
The process of extracting metal from its ore by heating and melting.
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.
BHP Annual Report 2020 335
Strategic ReportGovernance at BHPRemuneration ReportDirectors’ ReportFinancial StatementsShareholder informationAdditional information6 6.8.2 Other terms
AASB (Australian Accounting Standards Board)
Accounting standards as issued by the Australian Accounting
Standards Board.
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.
Activity data
A quantitative measure of a level of activity that results in greenhouse
gas emissions. Activity data is multiplied by an energy factor and/or
an emission factor to derive the energy consumption and greenhouse
gas emissions associated with a process or an operation. Examples
of activity data include kilowatt-hours of electricity used, quantity
of fuel used, output of a process, hours equipment is operated,
distance travelled and floor area of a building.
ADR (American Depositary Receipt)
An instrument evidencing American Depositary 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.
336 BHP Annual Report 2020
Board
The Board of Directors of BHP.
Canadian Greenhouse Gas Reporting Program
(previously listed as ECCC)
The Greenhouse Gas Reporting Program (GHGRP) collects
information on greenhouse gas (GHG) emissions annually from
facilities across Canada.
Carbon dioxide equivalent (CO2-e)
The universal unit of measurement to indicate the global warming
potential (GWP) of each greenhouse gas, expressed in terms
of the GWP of one unit of carbon dioxide. It is used to evaluate
releasing (or avoiding releasing) different greenhouse gases against
a common basis.
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.
Emission factor
A factor that converts activity data into greenhouse gas emissions
data (e.g. kg CO2-e emitted per GJ of fuel consumed, kg CO2-e
emitted per KWh of electricity used).
Equity share approach
A consolidation approach whereby a company accounts for
greenhouse gas emissions from operations according to its share
of equity in the operation. The equity share reflects economic
interest, which is the extent of rights a company has to the risks
and rewards flowing from an operation. Also see the definition for
‘Operational control approach’.
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.
Energy
Energy means all forms of energy products where ‘energy
products’ means combustible fuels, heat, renewable energy,
electricity, or any other form of energy from operations that are
owned or controlled by BHP. The primary sources of energy
consumption come from fuel consumed by haul trucks at our
operated assets, as well as purchased electricity used at our
operated assets.
Energy content factor
The energy content of a fuel is an inherent chemical property
that is a function of the number and types of chemical bonds
in the fuel.
Entrainment
Entrained water includes water incorporated into product and/or
waste streams, such as tailings, that cannot be easily recovered.
EPA (Environmental Protection Agency)
The EPA is a government regulator working to protect
the environment.
Evaporation
Volumes of water that are consumed via evaporation of water
from water storage facilities and for dust suppression activities.
Evaporation volumes are calculated using both climate and physical
information. Evaporation may be calculated by multiplying the
evaporation rate (measured through on-site instruments or sourced
from meteorological authorities) by the surface areas of the water
body, or it may be estimated from the change in stored water
volumes when the other inputs and outputs are directly measured.
Executive KMP (Key Management Personnel)
Executive KMP includes the Executive Director (our CEO), the
Chief Financial Officer, the President, Minerals Australia, the
President, Minerals Americas, and the President, Petroleum.
It does not include the Non-Executive Directors (our Board).
Financial control approach
A consolidation approach whereby a company reports greenhouse
gas emissions based on the accounting treatment in the company’s
consolidated financial statements, as follows:
• 100 per cent for operations accounted for as subsidiaries,
regardless of equity interest owned
• for operations accounted for as a joint operation, the company’s
interest in the operation
It does not report greenhouse gas emissions from operations that
are accounted for using the equity method in the company’s
financial statements.
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).
GRI (Global Reporting Initiative)
GRI works with businesses and governments to understand and
communicate their impact on critical sustainability issues.
Groundwater
Water beneath the earth’s surface, including beneath the seabed,
which fills pores or cracks between porous media such as soil,
rock, coal, and sand, often forming aquifers. For accounting
purposes, water that is entrained in the ore can be considered
as groundwater (e.g. dewatering, abstraction from bore field,
ore entrainment).
Group
BHP Group Limited, BHP Group Plc and their respective subsidiaries.
GWP (Global warming potential)
A factor describing the radiative forcing impact (degree of harm
to the atmosphere) of one unit of a given greenhouse gas
relative to one unit of CO2. BHP currently uses GWP from the
Intergovernmental Panel on Climate Change (IPCC) Assessment
Report 4 (AR4) based on 100-year timeframe.
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.
ICMM (International Council on Mining and Metals)
The International Council on Mining and Metals is an international
organisation dedicated to a safe, fair and sustainable mining and
metals industry.
IFRS (International Financial Reporting Standards)
Accounting standards as issued by the International Accounting
Standards Board.
IPCC (Intergovernmental Panel on Climate Change)
The Intergovernmental Panel on Climate Change (IPCC)
is the United Nations body for assessing the science related
to climate change.
IUCN (International Union for Conservation of Nature)
The International Union for Conservation of Nature is an
international organisation working in the field of nature
conservation and sustainable use of natural resources.
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 (Minerals Australia), the President (Minerals
Americas), and the President (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.
Location-based reporting
Scope 2 greenhouse gas emissions based on average energy
generation emission factors for defined geographic locations,
including local, subnational, or national boundaries (i.e. grid
factors). In the case of a direct line transfer, the location-based
emissions are equivalent to the market-based emissions.
Market-based reporting
Scope 2 greenhouse gas emissions based on the generators
(and therefore the generation fuel mix from which the reporter
contractually purchases electricity and/or is directly provided
electricity via a direct line transfer).
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.
BHP Annual Report 2020 337
Strategic ReportGovernance at BHPRemuneration ReportDirectors’ ReportFinancial StatementsShareholder informationAdditional information6 NGER (National Greenhouse and Energy Reporting Scheme)
The Australian National Greenhouse and Energy Reporting (NGER)
scheme is a single national framework for reporting and
disseminating company information about greenhouse gas
emissions, energy production, energy consumption and other
information specified under NGER legislation.
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.
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.
OELs (occupational exposure limits)
An occupational exposure limit is an upper limit on the acceptable
concentration of a hazardous substance in workplace air for a
particular material or class of materials. OELs may also be set for
exposure to physical agents such as noise, vibration or radiation.
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, Minerals Australia, the President, Minerals Americas,
and the President, 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 (divested in year ended 30 June 2019)
in four US shale areas (Eagle Ford, Permian, Haynesville and
Fayetteville), where we produced oil, condensate, gas and
natural gas liquids.
OPEC (Organization of the Petroleum Exporting Countries)
OPEC is a permanent intergovernmental organisation of 13
oil-exporting developing nations that coordinates and unifies
the petroleum policies of its Member Countries.
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.
Operational control approach
A consolidation approach whereby a company accounts for
100 per cent of the greenhouse gas emissions over which it has
operational control (a company is considered to have operational
control over an operation if it or one of its subsidiaries has the full
authority to introduce and implement its operating policies at the
operation). It does not account for greenhouse gas emissions from
operations in which it owns an interest but does not have operational
control. Also see the definition for ‘Equity share approach’.
Operations
Open-cut mines, underground mines, offshore oil and gas
production and processing facilities.
OSHA (Occupational Safety and Health Administration)
The Occupational Safety and Health Administration is an agency
of the United States Department of Labor that regulates workplace
health and safety.
Other (with respect to water consumption volumes)
This includes water volumes used for purposes such as potable
water consumption and amenity facilities at our operated assets.
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.
Paris Agreement goals
The central objective of the Paris Agreement is its long-term
temperature goal to hold global average temperature increase to
well below 2°C above preindustrial levels and pursue efforts to limit
the temperature increase to 1.5°C above pre-industrial levels.
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.
PPE (personal protective equipment)
PPE means anything used or worn to minimise risk to worker’s
health and safety, including air supplied respiratory equipment.
Quoted
In the context of American Depositary Shares (ADS) and
listed investments, the term ‘quoted’ means ‘traded’ on the
relevant exchange.
Residual mix
The mix of energy generation resources and associated attributes
such as greenhouse gas emissions in a defined geographic
boundary left after contractual instruments have been claimed/
retired/cancelled. The residual mix can provide an emission
factor for companies without contractual instruments to use
in a market-based method calculation. A residual mix is currently
unavailable to account for voluntary purchases and this may
result in double counting between electricity consumers.
SASB (Sustainability Accounting Standards Board)
The Sustainability Accounting Standards Board is a non-profit
organisation that develops standards focused on the financial
impacts of sustainability.
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 1 refers to direct greenhouse gas
emissions from operated assets.
338 BHP Annual Report 2020
Scope 2 greenhouse gas emissions
Scope 2 greenhouse gas emissions are indirect emissions from
the generation of purchased or acquired electricity, steam, heat
or cooling that is consumed by operations that are owned or
controlled by BHP. Our Scope 2 emissions have been calculated
using the market-based method using supplier specific emissions
factors unless otherwise specified.
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.
Seawater
Water from oceans, seas and estuaries.
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.
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.
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 1 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.
SPM (sustainability performance metric)
The sustainability performance metrics are the metrics used
to measure and evaluate our sustainability performance.
Strate
South Africa’s Central Securities Depositary for the electronic
settlement of financial instruments.
Surface water
All water naturally open to the atmosphere, except for water from
oceans, seas and estuaries (e.g. precipitation and runoff, including
snow and hail), rivers and creeks external water dams.
Third party water
Water supplied by an entity external to the operational facility. Third
party water contains water from the other three sources. When the
source is known, the physical source (surface water, groundwater
and seawater) should prevail. Our disclosures have allocated all
third party water withdrawals to the physical source.
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 6.1 for further information.
Underlying EBIT
Underlying EBITDA, including depreciation, amortisation
and impairments. Refer to section 6.1 for further information.
Underlying EBITDA
Earnings before net finance costs, depreciation, amortisation
and impairments, taxation expense, Discontinued operations and
exceptional items. Refer to section 6.1 for further information.
Unit costs
One of the financial measures BHP uses to monitor the performance
of individual assets. Unit costs are calculated as ratio of net costs of
the assets to the equity share of sales tonnage. Net costs is defined
as revenue less Underlying EBITDA excluding freight and other
costs, depending on the nature of each asset. Petroleum unit costs
exclude exploration and development and evaluation expense and
other costs that do not represent underlying cost performance
of the business; Western Australia Iron Ore, Queensland Coal
and New South Wales Energy Coal unit costs exclude royalties;
Escondida unit costs exclude by-product credits.
WAF (Water Accounting Framework)
The Water Accounting Framework is a common mining and metals
industry approach to water accounting in Australia.
Water quality – Type 1
Water of high quality that would require minimal (if any) treatment
to meet drinking water standards. This water is considered high
quality/high-grade in the International Council on Mining and
Metals (ICMM) ‘A Practical Guide to Consistent Water Reporting’.
Water quality – Type 2
Water of medium quality that would require moderate treatment to
meet drinking water standards (it may have a high salinity threshold
of no higher than 5,000 milligrams per litre total dissolved solids
and other individual constituents). This water is considered high
quality/high grade in the International Council on Mining and
Metals (ICMM) ‘A Practical Guide to Consistent Water Reporting’.
Water quality – Type 3
Water of low quality that would require significant treatment to
meet drinking water standards. It may have individual constituents
with high values of total dissolved solids, elevated levels of metals
or extreme levels of pH. This type of water also includes seawater.
This water is considered low quality/low-grade in the International
Council on Mining and Metals (ICMM) ‘A Practical Guide to
Consistent Water Reporting’.
WRSA (Water Resource Situational Analysis)
A situational analysis is an analysis of the water resources and
catchments that the operated asset interacts with, including
assessment of: (i) the sustainability of the volume and quality
of the water resources taking into account interactions of all other
parties and climate change forecasts; (ii) BHP’s direct, indirect and
cumulative impacts on the sustainability of the volume and quality
of the water resources and any related environmental, social or
cultural values, taking into account climate change forecasts in
accordance with the Water Management Standard; (iii) the state
of water infrastructure, water access, sanitation and hygiene of
local communities; (iv) the environmental health of the water
catchments that feed the water resources taking into account the
extent of vegetation, runoff, and any conservation of the area; (v)
external water governance arrangements and their effectiveness.
BHP Annual Report 2020 339
Strategic ReportGovernance at BHPRemuneration ReportDirectors’ ReportFinancial StatementsShareholder informationAdditional information6 6.8.3 Terms used in reserves and resources
6.8.4 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
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
Mt
million tonnes
Mtpa
million tonnes per annum
MW
megawatt
oz
ounce
ppm
parts per million
PJ
petajoules
scf
standard cubic feet
t
tonne
tCO2-e
tonne of carbon dioxide
equivalent
TJ
terajoule
TJ/d
terajoules per day
TW
terawatt
TWh
terawatt hour
tpa
tonnes per annum
tpd
tonnes per day
t/h
tonnes per hour
wmt
wet metric tonnes
%
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)
boe
barrels of oil equivalent –
6,000 scf of natural gas
equals 1 boe
CO2-e
carbon dioxide equivalent
dmt
dry metric tonne
GJ
gigajoule
GL
gigalitre
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
kW
kilowatt
kWh
kilowatt hour
lb
pound
m
metre
m3
cubic metre
Mbbl/d
thousand barrels per day
Mcf
thousand cubic feet
(measured at the pressure
bases set by the regulator)
340 BHP Annual Report 2020
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 2020 341
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 FCA’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 BHP Group Limited and 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.
• 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 ‘DLC
Dividend Share’ sub-section and section 7.5.
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.
342 BHP Annual Report 2020
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.
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 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 6.7.
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.
BHP Annual Report 2020 343
Strategic ReportGovernance at BHPRemuneration ReportDirectors’ ReportFinancial StatementsAdditional informationShareholder information7 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
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.
7.5.5 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.
344 BHP Annual Report 2020
Voting rights
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 even though the Constitution and Articles
of Association generally permit voting to be conducted by a show
of hands in the first instance.
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 7.3.2 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.
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 7.3.2 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 7.3.2. 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, there are 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.
These special provisions 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.
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.
BHP Annual Report 2020 345
Strategic ReportGovernance at BHPRemuneration ReportDirectors’ ReportFinancial StatementsAdditional informationShareholder information7 7.5.8 Redemption of preference shares
7.5.11 Annual General Meetings
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 of 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 above in section 7.5.2, BHP can
issue preference shares that are subject to a right of redemption on
terms the Board considers appropriate.
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. To vote at an AGM, a shareholder must be a registered holder
of BHP Group Limited shares (in the case of the AGM of BHP Group
Limited) or a registered holder of BHP Group Plc shares (in the
case of the AGM of BHP Group Plc) at a designated date before
the relevant AGM.
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 Chair 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.
More information on our AGMs is available at bhp.com/meetings.
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.
7.5.10 Borrowing powers
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.
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
7.5.12 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 subject to any applicable law. 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.
7.5.13 Limitations of rights to own securities
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.
7.5.14 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 https://data.fca.org.uk/#/nsm/nationalstoragemechanism.
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.
346 BHP Annual Report 2020
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 21 August 2020.
Major shareholders
The tables in section 3.3.21 and the information set out in section 4.5.3 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 2020.(1)
Date of last notice
% of total voting rights (2)
Title of class
Identity of person or group
Date received
Date of change Number owned
Ordinary shares BlackRock Group
21 November 2019 18 November 2019
176,981,268
Ordinary shares Vanguard Group
18 June 2020
19 March 2020
177,088,930
2020
6.00
6.01
2019
5.46
–
2018
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 2020 and
21 August 2020.
(2) The percentages quoted are based on the total voting rights conferred by ordinary shares in BHP Group Limited as at 21 August 2020 of 2,945,851,394.
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 2020.(1)
Date of last notice
% of total voting rights (2)
Title of class
Identity of person or group
Date received
Date of change Number owned
Ordinary shares Aberdeen Asset Managers Limited
8 October 2015
7 October 2015
103,108,283
2020
4.88
2019
4.88
2018
4.88
Ordinary shares BlackRock, Inc.
3 December 2009
1 December 2009
213,014,043 (3)
<10.00
<10.00
<10.00
Ordinary shares Elliott International, L.P.(4)
4 January 2020
1 January 2020
106,940,721
Ordinary shares Norges Bank
24 February 2020
21 February 2020
85,812,981
5.07
4.06
5.45
3.07
5.45
–
(1) There have been three changes in 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 2020 and 21
August 2020. On 16 July 2020, 20 July 2020 and 21 July 2020 Norges Bank advised changes took place on 15 July 2020, 17 July 2020 and 20 July 2020 respectively.
The number of ordinary shares it owned in the final disclosure was 105,881,783 or 5.01 per cent of total voting rights.
(2) The percentages quoted are based on the total voting rights conferred by ordinary shares in BHP Group Plc as at 21 August 2020 of 2,112,071,796.
(3) The TR1 dated 1 December 2009 showed, as at that date, an interest in 213,014,043 shares which amounted to 9.65 per cent of the BHP Group Plc issued share capital.
Changes in the share capital of BHP Group Plc since the TR1 was received on 3 December 2009, including certain share buy-backs conducted by BHP Group Plc,
indicated a formulaic holding above 10 per cent; however, given no revised TR1 has been received by BHP Group Plc, the BlackRock holding is considered to be below
10 per cent.
(4) Holding is made up of 4.66 per cent ordinary shares and 0.41 per cent by financial instruments.
Twenty largest shareholders as at 21 August 2020 (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 Limited
4. Citicorp Nominees Pty Ltd
5. National Nominees Limited
6. BNP Paribas Nominees Pty Ltd
7. BNP Paribas Noms Pty Ltd
8. Citicorp Nominees Pty Limited
9. HSBC Custody Nominees (Australia) Limited
10. Computershare Nominees CI Ltd
11. Australian Foundation Investment Company Limited
12. Netwealth Investments Limited
13. Argo Investments Limited
14. Solium Nominees (Australia) Pty Ltd
15. HSBC Custody Nominees (Australia) Limited-GSCO ECA
16. BNP Paribas Nominees Pty Ltd Hub24 Custodial Serv Ltd
17. Milton Corporation Limited
18. AMP Life Limited
19. HSBC Custody Nominees (Australia) Limited
20. Navigator Australia Ltd
Number of fully
paid shares
% of issued
capital
666,307,800
534,089,074
144,595,262
140,416,220
102,305,317
75,828,947
35,922,389
28,993,633
21,035,595
16,760,114
13,413,159
7,996,830
7,406,304
6,301,578
5,209,719
5,077,233
4,854,921
4,575,652
4,401,170
3,672,850
22.62
18.13
4.91
4.77
3.47
2.57
1.22
0.98
0.71
0.57
0.46
0.27
0.25
0.21
0.18
0.17
0.16
0.16
0.15
0.12
1,829,163,767
62.09
BHP Annual Report 2020 347
Strategic ReportGovernance at BHPRemuneration ReportDirectors’ ReportFinancial StatementsAdditional informationShareholder information7 BHP Group Plc
1. PLC Nominees (Proprietary) Limited (2)
2. State Street Nominees Limited
3. National City Nominees Limited
4. Vidacos Nominees Limited <13559>
5. Chase Nominees Limited
6. The Bank of New York (Nominees) Limited
7. State Street Nominees Limited
8. Nortrust Nominees Limited
9. Hanover Nominees Limited
10. Government Employees Pension Fund – Public Investment Corporation
11. Chase Nominees Limited
12. State Street Nominees Limited
13. State Street Nominees Limited
14. Hanover Nominees Limited
15. Vidacos Nominees Limited
16. Chase Nominees Limited
17. Industrial Development Corporation of South Africa
18. Lynchwood Nominees Limited <2006420>
19. HSBC Global Custody Nominee (UK) Limited <357206>
20. Nutraco Nominees Limited <781221>
Number of fully
paid shares
% of issued
capital
270,434,351
110,668,368
108,881,961
101,929,550
84,850,483
75,501,860
62,978,858
40,386,501
40,004,656
36,212,548
36,059,172
30,605,959
28,024,620
27,463,879
26,208,676
24,085,532
23,537,693
23,196,964
21,474,128
18,768,923
12.80
5.24
5.16
4.83
4.02
3.57
2.98
1.91
1.89
1.71
1.71
1.45
1.33
1.30
1.24
1.14
1.11
1.10
1.02
0.89
1,191,274,682
56.40
(1) Many of the 20 largest shareholders shown for BHP Group Limited and BHP Group Plc hold shares as a nominee or custodian. In accordance with the reporting
requirements, the tables reflect the legal ownership of shares and not the details of the underlying beneficial holders.
(2) The largest holder on the South African register of BHP Group Plc is the Strate nominee in which the majority of shares in South Africa (including some of the
shareholders included in this list) are held in dematerialised form.
US share ownership as at 21 August 2020
BHP Group Limited
BHP Group Plc
Number of
shareholders
%
Number of
shares
Number of
shareholders
%
%
Number of
shares
Classification of holder
Registered holders
of voting securities
ADR holders
1,562
1,638
0.29
0.30
3,700,401
144,492,012 (1)
0.13
4.90
75
190
0.52
1.33
91,145
108,881,960 (2)
(1) These shares translate to 72,246,006 ADRs.
(2) These shares translate to 54,440,980 ADRs.
Geographical distribution of shareholders and shareholdings as at 21 August 2020
BHP Group Limited
BHP Group Plc
Number of
shareholders
%
Number of
shares
Number of
shareholders
%
%
Number of
shares
96.84 2,888,854,021
20,822,830
6,827,940
3,700,401
237,922
25,408,280
1.70
0.47
0.29
0.02
0.68
98.07
0.71
0.23
0.13
0.01
0.85
1,503
30
9,647
75
2,001
1,031
10.52
0.21
67.52
0.52
14.01
7.22
1,990,143
49,669
1,817,353,859
91,145
287,509,791
5,077,189
100.00 2,945,851,394
100.00
14,287
100.00
2,112,071,796
100.00
%
0.01
5.16
%
0.09
0.01
86.04
0.01
13.61
0.24
Registered address
Australia
New Zealand
United Kingdom
United States
South Africa
Other
Total
528,947
9,307
2,577
1,562
110
3,682
546,185
348 BHP Annual Report 2020
Distribution of shareholdings by size as at 21 August 2020
BHP Group Limited
BHP Group Plc
Number of
shareholders
%
Number of
shares (1)
Number of
shareholders
%
%
Number of
shares (1)
%
0.07
0.09
0.24
0.12
0.25
0.34
0.71
1.78
2.39
3.32
90.69
Size of holding
1 – 500 (2)
501 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 25,000
25,001 – 50,000
50,001 – 100,000
100,001 – 250,000
250,001 – 500,000
500,001 – 1,000,000
1,000,001 and over
Total
250,357
102,679
152,026
24,306
12,664
2,760
921
333
75
23
41
546,185
45.84
18.79
27.83
4.45
2.32
0.51
0.17
0.06
0.01
0.01
0.01
53,064,327
78,715,867
340,532,413
171,276,806
190,135,982
93,617,943
63,165,072
47,160,113
25,798,872
15,328,906
1,867,055,093
1.80
2.67
11.56
5.81
6.45
3.18
2.14
1.60
0.88
0.52
63.39
7,590
2,462
2,445
365
327
200
207
236
139
98
218
53.13
17.23
17.11
2.55
2.29
1.40
1.45
1.65
0.97
0.69
1.53
1,543,091
1,811,389
4,972,678
2,608,717
5,345,222
7,155,662
15,010,886
37,581,108
50,478,374
70,039,310
1,915,525,359
100.00 2,945,851,394
100.00
14,287
100.00
2,112,071,796
100.00
(1) One ordinary share entitles the holder to one vote.
(2) The number of BHP Group Limited shareholders holding less than a marketable parcel (A$500) based on the market price of A$38.36 as at 21 August 2020 was 5,195.
BHP Group Limited
BHP Group Plc
Number of
shareholders
%
Number of
shares
Number of
shareholders
%
%
Number of
shares
Classification of holder
Corporate
Private
Total
155,120
391,065
546,185
28.40 2,127,074,432
818,776,962
71.60
72.21
27.79
100.00 2,945,851,394
100.00
5,198
9,089
14,287
36.38
63.62
2,103,711,453
8,360,343
100.00
2,112,071,796
%
99.60
0.40
100.00
Payments
BHP Group Limited shareholders may currently have their cash
dividends paid directly into their bank account in Australian dollars,
UK pounds sterling, New Zealand dollars or US dollars, provided
they have submitted direct credit details and if required, a valid
currency election nominating a financial institution to the BHP
Share Registrar in Australia no later than close of business on the
dividend reinvestment plan election date. BHP Group Limited
shareholders who do not provide their direct credit details will
receive dividend payments by way of a cheque in Australian dollars.
BHP Group Plc shareholders on the UK register who wish
to receive their dividends in US dollars must complete the
appropriate election form and return it to the BHP Share Registrar
in the United Kingdom no later than close of business on the
dividend reinvestment plan election date. BHP Group Plc
shareholders may have their cash dividends paid directly into a
bank or building society by completing a dividend mandate form,
which is available from the BHP Share Registrar in the United
Kingdom or South Africa.
Dividend reinvestment plan
BHP offers a dividend reinvestment plan to registered shareholders,
which provides the opportunity to use cash dividends to purchase
BHP shares in the market.
7.7 Dividends
Policy
The Group adopted a dividend policy in February 2016 that
provides for a minimum 50 per cent payout of Underlying
attributable profit at every reporting period. For information on
Underlying attributable profit for FY2020, refer to section 1.10.1.
The Board will assess, at every reporting period, the ability to pay
amounts additional to the minimum payment, in accordance with
the Capital Allocation Framework, as described in section 1.4.5.
In FY2020, we determined our dividends and other distributions in
US dollars as it is our main functional currency. BHP Group Limited
paid its dividends in Australian dollars, UK pounds sterling, New
Zealand dollars and US dollars. BHP Group Plc paid its dividends
in UK pounds sterling (or US dollars, if elected) to shareholders
registered on its principal register in the United Kingdom and in
South African rand to shareholders registered on its branch register
in South Africa.
Currency conversions were based on the foreign currency
exchange rates on the dividend reinvestment plan election date,
except for the conversion into South African rand, which takes
place one week before the record date. Aligning the currency
conversion date with the dividend reinvestment plan election date
(for all currencies except the conversion into South African rand)
enables a high level of certainty around the currency required to
pay the dividend. This helps to reduce the Group’s exposure to
movements in exchange rates since the number of shares on which
dividends are payable (and the elected currency) is final at close of
business on the dividend reinvestment plan election date.
Aligning the final date to receive currency elections (currency
election date) with the dividend reinvestment plan election date
further simplifies the process.
BHP Annual Report 2020 349
Strategic ReportGovernance at BHPRemuneration ReportDirectors’ ReportFinancial StatementsAdditional informationShareholder information7 7.8 American Depositary Receipts fees
and charges
We have American Depositary Receipts (ADR) programs for
BHP Group Limited and BHP Group Plc.
Depositary fees
Citibank serves as the depositary bank for both of our ADR
programs. ADR holders agree to the terms in the deposit
agreement filed with the SEC for depositing ADSs or surrendering
the ADSs for cancellation and for certain services as provided by
Citibank. Holders are required to pay all fees for general depositary
services provided by Citibank in each of our ADR programs, as set
forth in the tables below.
Standard depositary fees:
Depositary service
Fee payable by the ADR holders
Issuance of ADSs upon deposit
of shares
Up to US$5.00 per 100 ADSs
(or fraction thereof) issued
Delivery of Deposited Securities
against surrender of ADSs
Up to US$5.00 per 100 ADSs
(or fraction thereof) surrendered
Distribution of Cash Distributions
No fee
Corporate actions depositary fees:
Depositary service
Fee payable by the ADR holders
Cash Distributions (i.e. sale of rights,
other entitlements, return of capital)
Up to US$2.00 per 100 ADSs
(or fraction thereof) held
Distribution of ADSs pursuant
to exercise of rights to purchase
additional ADSs. Excludes stock
dividends and stock splits
Distribution of securities other
than ADSs or rights to purchase
additional ADSs (i.e. spin-off shares)
Distribution of ADSs pursuant
to an ADR ratio change in which
shares are not distributed
Up to US$5.00 per 100 ADSs
(or fraction thereof) held
Up to US$5.00 per 100 ADSs
(or fraction thereof) held
No fee
Fees payable by the Depositary to the Issuer
Citibank has provided BHP net reimbursement of US$1,157,500 in
FY2020 for ADR program-related expenses for both of BHP’s ADR
programs (FY2019 US$1,229,094). ADR program-related expenses
include legal and accounting fees, listing fees, expenses related
to investor relations in the United States, fees payable to service
providers for the distribution of material to ADR holders, expenses
of Citibank as administrator of the ADS Direct Plan and expenses
to remain in compliance with applicable laws.
Citibank has further agreed to waive other ADR program-related
expenses for FY2020, amounting to less than US$0.03 million,
which are associated with the administration of the ADR programs
(FY2019 less than US$0.03 million).
Our ADR programs trade on the NYSE under the stock tickers BHP
and BBL for the BHP Group Limited and BHP Group Plc programs,
respectively. As of 21 August 2020, there were 72,246,006 ADRs on
issue and outstanding in the BHP Group Limited ADR program and
54,440,980 ADRs on issue and outstanding in the BHP Group Plc
ADR program. Both of the ADR programs have a 2:1 ordinary shares
to ADR ratio.
7.9 Government regulations
Our assets are subject to a broad range of laws and regulations
imposed by governments and regulatory bodies. These regulations
touch all aspects of our assets, including how we extract, process
and explore for minerals, oil and natural gas and how we conduct
our business, including regulations governing matters such as
environmental protection, land rehabilitation, occupational health
and safety, human rights, the rights and interests of Indigenous
peoples, competition, foreign investment, export, marketing of
minerals, oil and natural gas and taxes.
The ability to extract minerals, oil and natural gas is fundamental to
BHP. In most jurisdictions, the rights to extract mineral or petroleum
deposits are owned by the government. We obtain the right to
access the land and extract the product by entering into licences
or leases with the government that owns the mineral, oil or natural
gas deposit. The terms of the lease or licence, including the time
period of the lease or licence, vary depending on the laws of the
relevant government or terms negotiated with the relevant
government. Generally, we own the product we extract and we
are required to pay royalties or similar taxes to the government.
Related to our ability to extract is our ability to process the
extracted minerals, oil or natural gas. Again, we rely on
governments to grant the rights necessary to transport and treat
the extracted material to prepare it for sale.
The rights to explore for minerals, oil and natural gas are granted
to us by the government that owns the natural resources we wish
to explore. Usually, the right to explore carries with it the obligation
to spend a defined amount of money on the exploration, or to
undertake particular exploration activities.
In certain jurisdictions where we have assets, such as Trinidad and
Tobago, a production sharing contract (PSC) governs the
relationship between the government and companies concerning
how much of the oil and gas extracted from the country each party
will receive. In PSCs, the government awards rights for the
execution of exploration, development and production activities
to the company. The company bears the financial risk of the
initiative and explores, develops and ultimately produces the field
as required. When successful, the company is permitted to use the
money from a certain set percentage of produced oil and gas to
recover its capital and operational expenditures, known as ‘cost oil’.
The remaining production is known as ‘profit oil’ and is split
between the government and the company at a rate determined
by the government and set out in the PSC.
Environmental protection, mine closure and land rehabilitation,
and occupational health and safety are principally regulated by
governments and to a lesser degree, if applicable, by leases. These
obligations often require us to make substantial expenditures to
minimise or remediate the environmental impact of our assets and
to ensure the safety of our employees and contractors and the
communities where we operate. Regulations setting emissions
standards for fuels used to power vehicles and equipment at our
assets and the modes of transport used in our supply chains can
also have a substantial impact, both directly and indirectly, on the
markets for these products, with flow-on impacts on our costs.
For more information on these types of obligations,
refer to section 1.7.
From time to time, certain trade sanctions are adopted by the
United Nations (UN) Security Council and/or various governments,
including in the United Kingdom, the United States, the European
Union (EU) and Australia against certain countries, entities or
individuals, that may restrict our ability to sell extracted minerals,
oil or natural gas to, and/or our ability to purchase goods or
services from, these countries, entities or individuals.
350 BHP Annual Report 2020
Disclosure of Iran-related activities pursuant to section 13(r)
of the US Securities Exchange Act of 1934
Section 13(r) of the US Securities Exchange Act of 1934, as
amended (the Exchange Act) requires an issuer to disclose in its
annual reports whether it or any of its affiliates knowingly engaged
in certain activities, transactions or dealings relating to Iran. If
applicable, disclosure is required even where the activities,
transactions or dealings are conducted outside the United States
by non-U.S. persons in compliance with applicable law, and
whether or not the activities are sanctionable under U.S. law.
Provided in this section is certain information concerning activities
of certain affiliates of BHP that took place in FY2020. BHP believes
that these activities are not sanctionable either as being outside the
scope of U.S. sanctions, or within the scope of a specific licence
issued by the U.S. Department of the Treasury‘s Office of Foreign
Assets Control (OFAC).
On 30 November 2018, BHP Billiton Petroleum Great Britain Ltd
(BHP GB), a wholly owned subsidiary of BHP, and its co-venturers
in the Bruce and Keith gas and oil fields offshore United Kingdom
(BP Exploration Operating Company (BP), Marubeni Oil & Gas (UK)
Limited (Marubeni) and Total E&P UK Limited (Total)) completed
the sale of their interests in the Bruce and Keith gas and oil fields
to Serica Energy (UK) Limited (Serica) (the Bruce and Keith
Transaction). BHP divested its entire licence interests in Bruce
and Keith but retained the obligation to fund decommissioning
in accordance with its previous licence interest.
The transfer of licence interests and retention of decommissioning
liabilities for the Bruce and Keith co-venturers in the respective gas
and oil fields is described below:
BP
Total
BHP GB
Marubeni
Serica
Bruce
Keith
Pre-sale
interest
%
Post-sale
licence interest
%
Post-sale
decom. interest
%
Pre-sale
interest
%
Post-sale
licence interest
%
Post-sale
decom. interest
%
37
43.25
16
3.65
0
1
1
0
0
98
37
43.25
16
0
3.75
34.83
25
31.83
8.33
0
0
0
0
0
100
34.83
25
31.83
0
8.33
While the sale closed on 30 November 2018, it was effective in
economic terms as of 1 January 2018. In addition to initial cash
consideration received from Serica at completion, BHP
subsequently received, and will continue to receive:
• a share of pre-tax net cash flow attributable to its historic interest
in the Bruce and Keith gas and oil fields of 60 per cent during
December 2018, 50 per cent in CY2019 and 40 per cent in each
of CY2020 and CY2021 under a Net Cash Flow Sharing Deed
• a share of projected decommissioning costs up to a
specified cap
The Bruce platform provides transportation and processing
services to the nearby Rhum gas field pursuant to a contract
between the Bruce owners and Rhum owners (the Bruce-Rhum
Agreement). At the same time as the Bruce and Keith Transaction,
Serica acquired from BP its 50 per cent interest and operatorship
of the Rhum gas field. The Rhum gas field is now owned by a 50:50
unincorporated joint venture arrangement between Serica and
Iranian Oil Company (UK) Limited (IOC). IOC is an indirect
subsidiary of the National Iranian Oil Company (NIOC), which
is a corporation owned by the Government of Iran.
OFAC issued licence No. IA-2018-352294-2 (the OFAC Licence)
authorising BP, Serica and all U.S. persons and U.S.-owned or
controlled foreign entities identified in the licence application
to provide goods, services and support for the operation,
maintenance and production of the Rhum gas field, and goods,
services and support to the Bruce platform for a period from
2 November 2018 through 31 October 2019. On 22 October 2019,
OFAC renewed this licence through to 28 February 2021. OFAC also
provided an assurance that non-U.S. persons would not be exposed
to U.S. secondary sanctions for engaging in these activities and
transactions involving Rhum or the Bruce platform, namely
providing goods, services and support to the Rhum field.
BHP continues to monitor developments concerning U.S. sanctions
with respect to Iran to maintain compliance with applicable
sanctions laws and requirements. Although BHP has no ongoing
direct dealings with any Iranian party, because BHP will receive
ongoing consideration from Serica related to the sale of its interest
in the Bruce-Rhum Agreement, BHP has included this disclosure.
BHP recognised the following transaction in FY2020 related to
the Bruce-Rhum Agreement. For the period 1 July 2019 to 30 June
2020, BHP received $US2.4 million from Serica under the Net Cash
Flow Sharing Deed.
Uranium production in Australia
To mine, process, transport and sell uranium from within Australia,
we are required to hold possession and export permissions, which
are also subject to regulation by the Australian Government or
bodies that report to the Australian Government.
To possess nuclear material, such as uranium, in Australia, a Permit
to Possess Nuclear Materials (Possession Permit) must be held
pursuant to the Australian Nuclear Non-Proliferation (Safeguards)
Act 1987 (Non-Proliferation Act). A Possession Permit is issued by
the Australian Minister for Foreign Affairs. Compliance with the
Non-Proliferation Act is monitored by the Australian Safeguards
and Non-Proliferation Office, an office established under the
Non-Proliferation Act, which administers Australia’s domestic nuclear
safeguards requirements and reports to the Australian Government.
To export uranium from Australia, a Permit to Export Natural
Uranium (Export Permit) must be held pursuant to the Australian
Customs (Prohibited Exports) Regulations 1958. The Export Permit is
issued by the Minister with responsibility for Resources and Energy.
A special permit to transport nuclear material is required under
the Non-Proliferation Act by a party that transports nuclear
material from one specified location to another specified location.
As we engage service providers to transport uranium, each of
those service providers is required to hold a permit to transport
nuclear material issued by the Australian Safeguards and
Non-Proliferation Office.
BHP Group Plc
There are no laws or regulations currently in force in the
United Kingdom that restrict the export or import of capital
or the payment of dividends to non-resident holders of BHP
Group Plc’s shares, although the Group does operate in some
other jurisdictions where the payment of dividends could be
affected by exchange control approvals.
From time to time, certain sanctions are adopted by the UN
Security Council and/or various governments, including in the
United Kingdom, the United States, the EU and Australia against
certain countries, entities or individuals that may restrict the
export or import of capital or the remittance of dividends to
certain non-resident holders of BHP Group Plc’s shares.
There are no restrictions under BHP Group Plc’s Articles of
Association or (subject to the effect of any sanctions) under
English law that limit the right of non-resident or foreign owners
to hold or vote BHP Group Plc’s shares.
There are certain restrictions on shareholding levels under
BHP Group Plc’s Articles of Association described below.
BHP Annual Report 2020 351
Strategic ReportGovernance at BHPRemuneration ReportDirectors’ ReportFinancial StatementsAdditional informationShareholder information7 BHP Group Limited
Under current Australian legislation, the payment of any dividends,
interest or other payments by BHP Group Limited to non-resident
holders of BHP Group Limited’s shares is not restricted by
exchange controls or other limitations, except that, in certain
circumstances, BHP Group Limited may be required to withhold
Australian taxes.
7.10 Ancillary information for
our shareholders
This Annual Report provides the detailed financial data and
information on BHP’s performance required to comply with
the reporting regimes in Australia, the United Kingdom and
the United States.
From time to time, certain sanctions are adopted by the UN
Security Council and/or various governments, including in the
United Kingdom, the United States, the EU and Australia. Those
sanctions prohibit or, in some cases, impose certain approval and
reporting requirements on transactions involving sanctioned
countries, entities and individuals and/or assets controlled or
owned by them. Certain transfers into or out of Australia of
amounts greater than A$10,000 in any currency may also be
subject to reporting requirements.
The Australian Foreign Acquisitions and Takeovers Act 1975
(the FATA) restricts certain acquisitions of interests in shares in
Australian companies, including BHP Group Limited. Generally,
under the FATA, the prior approval of the Australian Treasurer must
be obtained for proposals by a foreign person (either alone or
together with its associates) to acquire 20 per cent or more of the
voting power or issued shares in an Australian company. Any
acquisition by a foreign government investor of the voting power
or issued shares in an Australian company will require the prior
approval of the Australian Treasurer to be obtained.
The FATA also empowers the Treasurer to make certain orders
prohibiting acquisitions by foreign persons in Australian
companies, including BHP Group Limited (and requiring divestiture
if the acquisition has occurred) where the Treasurer considers the
acquisition to be contrary to the national interest. Such orders may
also be made in respect of acquisitions by foreign persons where
two or more foreign persons (and their associates) in aggregate
already control 40 per cent or more of the issued shares or voting
power in an Australian company, including BHP Group Limited.
The restrictions in the FATA on share acquisitions in BHP Group
Limited described above apply equally to share acquisitions in BHP
Group Plc because BHP Group Limited and BHP Group Plc are dual
listed entities.
Except for the restrictions under the FATA, there are no limitations,
either under Australian law or under the Constitution of BHP Group
Limited, on the right of non-residents to hold or vote BHP Group
Limited ordinary shares.
Shareholding limits under the Constitution and Articles
of Association
There are certain other statutory restrictions and restrictions under
BHP Group Limited’s Constitution and BHP Group Plc’s Articles of
Association that apply generally to acquisitions of shares in BHP
Group Limited and BHP Group Plc (i.e. the restrictions are not
targeted at foreign persons only). These include restrictions on a
person (and associates) breaching a voting power threshold of:
• above 20 per cent in relation to BHP Group Limited on a
‘stand-alone’ basis (i.e. calculated as if there were no
Special Voting Share and only counting BHP Group
Limited’s ordinary shares)
• 30 per cent of BHP Group Plc. This is the threshold for a
mandatory offer under Rule 9 of the UK takeover code and this
threshold applies to all voting rights of BHP Group Plc (therefore
including voting rights attached to the BHP Group Plc Special
Voting Share)
• 30 per cent in relation to BHP Group Plc on a ‘stand-alone’ basis
(i.e. calculated as if there were no Special Voting Share and only
counting BHP Group Plc’s ordinary shares)
Shareholders of BHP Group Limited and BHP Group Plc will receive
a copy of the Annual Report if they have requested a copy. ADR
holders may view all documents at bhp.com or opt to receive a
hard copy by accessing https://app.irdirect.net/company/0/hotline/
or calling Citibank Shareholder Services during normal business
hours using the details listed in the Corporate directory at the end
of this Annual Report.
Change of shareholder details and enquiries
Shareholders wishing to contact BHP on any matter relating to their
shares or ADR holdings are invited to telephone the appropriate
office of the BHP Share Registrar or Transfer Office listed in the
Corporate directory at the end of this Annual Report.
Any change in shareholding details should be notified by the
shareholder to the relevant Registrar in a timely manner.
Shareholders can also access their current shareholding details
and change many of those details at bhp.com. The website
requires shareholders to quote their Shareholder Reference
Number (SRN) or Holder Identification Number (HIN) in order
to access this information.
Alternative access to the Annual Report
We offer an alternative for all shareholders who wish to be advised
of the availability of the Annual Report through our website via an
email notification. By providing an email address through our
website, shareholders will be notified by email when the Annual
Report has been released. Shareholders will also receive
notification of other major BHP announcements by email.
Shareholders requiring further information or wishing to make
use of this service should visit bhp.com.
ADR holders wishing to receive a hard copy of the Annual Report
2020 can do so by accessing https://app.irdirect.net/company/0/
hotline/or calling Citibank Shareholder Services during normal
business hours. ADR holders may also contact the adviser that
administers their investments. Holders of BHP Group Plc shares
dematerialised into Strate should liaise directly with their Central
Securities Depository Participant (CSDP) or broker.
Key dates for shareholders
The following table sets out future dates in the next financial
and calendar year of interest to our shareholders. If there are
any changes to these dates, all relevant stock exchanges (see
section 7.2) will be notified.
Date
Event
22 September 2020 Final dividend payment date
15 October 2020
14 October 2020
BHP Group Plc Annual General Meeting in London
Time: 9.30 am (local time)
Details of the business of the meeting are
contained in the separate Notice of Meeting
BHP Group Limited Annual General Meeting
Virtual Meeting
Time: 5.00pm (local time)
Details of the business of the meeting are
contained in the separate Notice of Meeting
16 February 2021
Interim results announced
5 March 2021
Interim dividend record date
• above 20 per cent in relation to BHP Group Plc, calculated having
23 March 2021
Interim dividend payment date
regard to all the voting power on a joint electorate basis (i.e.
calculated on the aggregate of BHP Group Limited’s and BHP
Group Plc’s ordinary shares)
Under BHP Group Limited’s Constitution and BHP Group Plc’s
Articles of Association, sanctions for breach of any of these
thresholds, other than by means of certain ‘permitted acquisitions’,
include withholding of dividends, voting restrictions and compulsory
divestment of shares to the extent a shareholder and its associates
exceed the relevant threshold.
352 BHP Annual Report 2020
Share Registrars and Transfer Offices
South Africa
BHP Registered Offices
BHP Corporate Centres
Corporate directory
BHP Group Limited
Australia
171 Collins Street
Melbourne VIC 3000
Telephone Australia 1300 55 47 57
Telephone International +61 3 9609 3333
Facsimile +61 3 9609 3015
BHP Group Plc
United Kingdom
Nova South, 160 Victoria Street
London SW1E 5LB
Telephone +44 20 7802 4000
Facsimile +44 20 7802 4111
Group General Counsel & Company
Secretary
Caroline Cox
Australia
BHP Group Limited Registrar
Computershare Investor Services
Pty Limited
Yarra Falls, 452 Johnston Street
Abbotsford VIC 3067
Postal address – GPO Box 2975
Melbourne VIC 3001
Telephone 1300 656 780 (within Australia)
+61 3 9415 4020 (outside Australia)
Facsimile +61 3 9473 2460
Email enquiries: investorcentre.com/bhp
United Kingdom
BHP Group Plc Registrar
Computershare Investor Services PLC
The Pavilions, Bridgwater Road
Bristol BS13 8AE
Postal address (for general enquiries)
The Pavilions, Bridgwater Road
Bristol BS99 6ZZ
Telephone +44 344 472 7001
Facsimile +44 370 703 6101
Email enquiries:
investorcentre.co.uk/contactus
Cerro El Plomo 6000
Chile
Piso 18
Las Condes 7560623
Santiago
Telephone +56 2 2579 5000
Facsimile +56 2 2207 6517
United States
is Jennifer Lopez-Burkland at:
1500 Post Oak Boulevard,
Houston TX 77056-3004
Telephone +1 713 961 8500
Facsimile +1 713 961 8400
Our agent for service in the United States
BHP Group Plc Branch Register
and Transfer Secretary
Computershare Investor Services
(Pty) Limited
Rosebank Towers
15 Biermann Avenue
Rosebank 2196
South Africa
Saxonwold 2132
South Africa
Telephone +27 11 373 0033
Facsimile +27 11 688 5217
Email enquiries:
Level 2/159 Hurstmere Road
Takapuna Auckland 0622
Postal address – Private Bag 92119
Auckland 1142
Telephone +64 9 488 8777
Facsimile +64 9 488 8787
Commercial Office
Singapore
10 Marina Boulevard, #07-01
Marina Bay Financial Centre, Tower 2
Singapore 018983
Telephone +65 6421 6000
Facsimile +65 6421 6800
United States
Computershare Trust Company, N.A.
150 Royall Street
Canton MA 02021
Postal address – PO Box 43078
Providence RI 02940-3078
Telephone +1 888 404 6340
(toll-free within US)
Facsimile +1 312 601 4331
Citibank Shareholder Services
PO Box 43077
Providence RI 02940-3077
Telephone +1 781 575 4555 (outside of US)
+1 877 248 4237 (+1-877-CITIADR)
Postal address – Private Bag X9000
ADR Depositary, Transfer Agent and Registrar
web.queries@computershare.co.za
(toll-free within US)
Holders of shares dematerialised into Strate
Facsimile +1 201 324 3284
should contact their CSDP or stockbroker.
Email enquiries:
New Zealand
Computershare Investor Services Limited
Website: citi.com/dr
citibank@shareholders-online.com
How to access information on BHP
BHP produces a range of publications, which are available to
download at bhp.com. If you are a shareholder, you can also
elect to receive a paper copy of the Annual Report through
one of the Share Registrars listed above.
Subscribe to receive news alerts
sent directly to your email address
linkedin . com / company / bhp
youtube . com / bhp
twitter . com / bhp
Economic
Contribution
Report
2020
Climate
Change
Report
2020
Bringing people and resources
together to build a better world
Bringing people and resources
together to build a better world
Read our reports at
bhp.com
Economic
Contribution
Report 2020
Climate
Change
Report 2020
n
g
i
s
e
D
h
c
a
o
R
a
d
n
a
m
A
y
b
d
e
n
g
i
s
e
D
The papers used in this document are FSC® Recycled and FSC mixed sources
certified. Both stocks are derived from well managed forests and controlled
sources. They are manufactured at mills which carry ISO 14001 certification.
Cover image
Photographer: Steve Baccon
Corporate directory
BHP Registered Offices
BHP Group Limited
Australia
171 Collins Street
Melbourne VIC 3000
Telephone Australia 1300 55 47 57
Telephone International +61 3 9609 3333
Facsimile +61 3 9609 3015
BHP Corporate Centres
Chile
Cerro El Plomo 6000
Piso 18
Las Condes 7560623
Santiago
Telephone +56 2 2579 5000
Facsimile +56 2 2207 6517
Commercial Office
Singapore
10 Marina Boulevard, #07-01
Marina Bay Financial Centre, Tower 2
Singapore 018983
Telephone +65 6421 6000
Facsimile +65 6421 6800
BHP Group Plc
United Kingdom
Nova South, 160 Victoria Street
London SW1E 5LB
Telephone +44 20 7802 4000
Facsimile +44 20 7802 4111
Group General Counsel & Company
Secretary
Caroline Cox
Share Registrars and Transfer Offices
Australia
BHP Group Limited Registrar
Computershare Investor Services
Pty Limited
Yarra Falls, 452 Johnston Street
Abbotsford VIC 3067
Postal address – GPO Box 2975
Melbourne VIC 3001
Telephone 1300 656 780 (within Australia)
+61 3 9415 4020 (outside Australia)
Facsimile +61 3 9473 2460
Email enquiries: investorcentre.com/bhp
United Kingdom
BHP Group Plc Registrar
Computershare Investor Services PLC
The Pavilions, Bridgwater Road
Bristol BS13 8AE
Postal address (for general enquiries)
The Pavilions, Bridgwater Road
Bristol BS99 6ZZ
Telephone +44 344 472 7001
Facsimile +44 370 703 6101
Email enquiries:
investorcentre.co.uk/contactus
United States
Our agent for service in the United States
is Jennifer Lopez-Burkland at:
1500 Post Oak Boulevard,
Houston TX 77056-3004
Telephone +1 713 961 8500
Facsimile +1 713 961 8400
South Africa
BHP Group Plc Branch Register
and Transfer Secretary
Computershare Investor Services
(Pty) Limited
Rosebank Towers
15 Biermann Avenue
Rosebank 2196
South Africa
Postal address – Private Bag X9000
Saxonwold 2132
South Africa
Telephone +27 11 373 0033
Facsimile +27 11 688 5217
Email enquiries:
web.queries@computershare.co.za
Holders of shares dematerialised into Strate
should contact their CSDP or stockbroker.
New Zealand
Computershare Investor Services Limited
Level 2/159 Hurstmere Road
Takapuna Auckland 0622
Postal address – Private Bag 92119
Auckland 1142
Telephone +64 9 488 8777
Facsimile +64 9 488 8787
United States
Computershare Trust Company, N.A.
150 Royall Street
Canton MA 02021
Postal address – PO Box 43078
Providence RI 02940-3078
Telephone +1 888 404 6340
(toll-free within US)
Facsimile +1 312 601 4331
ADR Depositary, Transfer Agent and Registrar
Citibank Shareholder Services
PO Box 43077
Providence RI 02940-3077
Telephone +1 781 575 4555 (outside of US)
+1 877 248 4237 (+1-877-CITIADR)
(toll-free within US)
Facsimile +1 201 324 3284
Email enquiries:
citibank@shareholders-online.com
Website: citi.com/dr
How to access information on BHP
BHP produces a range of publications, which are available to
download at bhp.com. If you are a shareholder, you can also
elect to receive a paper copy of the Annual Report through
one of the Share Registrars listed above.
Subscribe to receive news alerts
sent directly to your email address
linkedin . com / company / bhp
youtube . com / bhp
twitter . com / bhp
Economic
Contribution
Report
2020
Climate
Change
Report
2020
Bringing people and resources
together to build a better world
Bringing people and resources
together to build a better world
Read our reports at
bhp.com
Economic
Contribution
Report 2020
Climate
Change
Report 2020
Cover image
Photographer: Steve Baccon
B
H
P
A
n
n
u
a
l
R
e
p
o
r
t
2
0
2
0
bhp.com