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Annual
Report
2021
The future
is clear
Contents
Strategic Report
1.1
1.2
1.3
1.4
1.5
1.6
1.6.1
1.6.2
1.6.3
1.7
1.8
1.8.1
1.8.2
1.8.3
1.8.4
1.9
1.10
Our highlights
Chair’s review
Chief Executive
Officer’s review
Our business today
Positioning for the future
Delivering value
Our business model
How we deliver value
How our choice of
commodities and assets
helps deliver value
Chief Financial
Officer’s review
Financial review
Group overview
Key performance indicators
Financial results
Debt and sources of liquidity
How we manage risk
Our business
1.10.1
Locations
05
Chief Executive
Officer’s review
02
04
05
06
07
08
08
10
11
13
14
14
14
15
17
19
20
20
70—128
Governance
129—217
Financial Statements
218—308
Additional Information
1.10.2 Minerals Australia
1.10.3 Minerals Americas
1.10.4
Petroleum
1.10.5 Commercial
1.11
1.12
1.13
Exploration
People and culture
Sustainability
1.13.1
Our sustainability approach
1.13.2 Our material
sustainability issues
22
24
26
27
28
30
32
32
33
1.13.12 Environment
1.13.13 Water
1.13.14 Land and biodiversity
1.13.15 Tailings storage facilities
1.13.16 Independent limited
assurance report
Section 172 statement
Samarco
Risk factors
Performance by commodity
1.14
1.15
1.16
1.17
1.13.3 Our sustainability performance:
34
1.17.1
Petroleum
Non-financial KPIs
1.13.4
Safety
1.13.5 Health
1.13.6
1.13.7
Ethics and business conduct
Climate change and
portfolio resilience
1.13.8 Community
1.13.9 Human rights
1.13.10 Indigenous peoples
1.13.11
Social investment
1.17.2
1.17.3
1.17.4
Copper
Iron Ore
Coal
1.17.5 Other assets
1.17.6
1.18
1.18.1
Impact of changes
to commodity prices
Other information
Company details and
terms of reference
1.18.2
Forward-looking statements
35
36
37
38
44
44
45
46
47
48
49
50
52
53
55
56
64
64
65
66
67
68
68
68
68
69
06
Our business today
08
Delivering value
2.1
2.2
2.3
Corporate Governance Statement
Remuneration Report
Directors’ Report
3.1
Consolidated Financial Statements
3.1.6 Notes to the financial statements
4.1
4.2
4.3
4.4
4.5
4.6
4.7
4.8
4.9
Financial information summary
Alternative Performance Measures
Information on mining operations
Financial information by commodity
Production
Resources and Reserves
Major projects
Sustainability – performance data
Legal proceedings
4.10
Shareholder information
71
98
124
130
137
219
219
229
239
242
245
268
269
291
293
The Annual Report 2021 is available online at bhp.com
Company details and terms of reference
refer to section 1.18.1
Forward-looking statements
refer to section 1.18.2
BHP Group Limited. ABN 49 004 028 077.
BHP Group Plc. Registration number 3196209.
Electric car and charging station – Getty Images
BHP
Annual Report 2021
We are BHP,
a leading
global
resources
company.
1
Strategic
Report
Our Purpose
Our purpose is to bring people and resources
together to build a better world.
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 efforts on the things that matter most.
Accountability
Defining and accepting responsibility and delivering
on our commitments.
We are successful when:
– Our people start each day with a sense of purpose
and end the day with a sense of accomplishment.
– Our teams are inclusive and diverse.
– Our communities, customers and suppliers value
their relationships with us and are better off for
our presence.
– 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.
– Our commodities support continued economic
growth and decarbonisation.
BHP
Annual Report 2021
01
GovernanceFinancial StatementsAdditional Information234 1.1 Our highlights
Operational
No fatalities for a second
consecutive year; total recordable
injury frequency decreased 11%
to 3.7 per million hours worked
Four major projects delivered
on time and on budget, including
the Spence Growth Project in
Copper and South Flank in Iron Ore
Record volumes at Western Australia
Iron Ore (WAIO), Goonyella and
Olympic Dam, and Escondida
maintained average concentrator
throughput at record levels
02
BHP
Annual Report 2021
Investment in Jansen Stage 1 potash
project; agreement to pursue a
merger of our Petroleum business
with Woodside; intention to unify
our corporate structure under BHP’s
existing Australian parent company
Social value
29.8% female workplace
representation at the end of FY2021,
a 3.3 percentage point increase from
the start of the year
Operational greenhouse gas (GHG)
emissions on track to be reduced
by at least 30% by FY2030
(from FY2020 levels)
Indigenous peoples workforce
representation at the end of FY2021
was 7.2% in Australia, 7.5% in Chile
and 13.7% in Canada
US$175 million invested
in environmental and
social programs, including
a US$50 million donation
to the BHP Foundation
3.3% points
Principles on Cultural Heritage in
Australia jointly developed with First
Nations Heritage Protection Alliance
27% freshwater withdrawal
reduction from FY2017 baseline,
with 11% reduction achieved
in FY2021
11%
Getty images
Commitment to create 2,500 new
Australian apprenticeships and training
positions over the next five years
through the BHP FutureFit Academy,
and a further 1,000 skills development
opportunities in Australian regional
areas. Around 80% of the Academy’s
graduates in FY2021 were female
Financial
Partnerships to support our
Scope 3 GHG emissions goals
for FY2030 progressed with three
major steelmakers who together
represent around 10% of global
steel production
US$25.9 bn 80%
Profit from operations
301USc (120USc in FY2020)
Shareholder dividends per share
US$4.12 bn 66%
Net debt
32.5% (16.9% in FY2020)
Underlying return on capital employed
BHP
Annual Report 2021
03
Strategic Report1GovernanceFinancial StatementsAdditional Information234 1.2 Chair’s review
Dear Shareholders,
I am pleased to provide our Annual Report
for FY2021.
In a year that has seen COVID-19 continue to
challenge the lives and livelihoods of so many,
I am proud of the resilience and commitment
our people have demonstrated to deliver an
outstanding set of results in FY2021.
The strong operational performance driven
by our teams across the world, combined
with a diversified portfolio and disciplined
approach to capital allocation, has seen
the Board determine a dividend of US$3.01
per share for FY2021. This means we have
returned US$15 billion to shareholders this
year, and more than US$38 billion over the
past three years. In a year of significant financial
disruption across the globe, these results
demonstrate the health of your company.
BHP is in a strong position and it is
against this backdrop that we are making
transformative changes.
We have announced our intention to unify BHP’s
corporate structure to a single listing on the
Australian Securities Exchange. Creating one
BHP today positions the company to deliver on
our strategy in the future. We will be more agile,
efficient and flexible, while still enabling BHP
shareholders around the world to support the
company as they have done for decades.
We have also announced a number of strategic
steps towards the future of your company,
as we continue to grow our portfolio in future
facing commodities. We have announced
a US$5.7 billion investment in Jansen Stage 1,
a top tier potash asset in Canada. BHP has
also announced our intention to merge our
Petroleum assets with Woodside. The resulting
global top 10 independent oil and gas company
will have the resilience and optionality to
succeed in the energy transition.
The essential resources we produce at BHP
are not only fundamental to the way we live
now, they are fundamental to the way we
will live in the future.
Based on the climate change scenario analysis
we undertook last year, we believe that the more
action the world takes to limit climate change,
the better it will be for BHP.
Commodities like copper, nickel and iron ore
will be essential for building the infrastructure
and technology that will aid the world’s
decarbonisation ambitions, and potash will
help feed the world’s growing population.
Investing in future facing commodities creates
great opportunities for BHP – it means our
strategic goals align with our climate goals –
but it also creates a challenge. The world needs
to increase production of commodities that
support the transition and do so ever more
sustainably. BHP has made progress against
our greenhouse gas emissions reductions
targets and goals, but we intend to continue
to challenge ourselves to reduce our own
emissions, and work in partnership with our
customers and suppliers to reduce emissions
along the value chain.
Our response to climate change and the
decarbonisation challenge is just one aspect
of our broader commitment to deliver social
value. Social value is the positive contribution
we make to the environment and society.
It goes hand in hand with financial value in
our decision-making, and we believe this
approach is in the long-term best interests of
shareholders. We have been able to provide
significant support to the communities in which
we operate. This includes US$11.1 billion in taxes,
royalties and other payments to governments
in FY2021 – and US$84.0 billion over the past
10 years.
In FY2021, we continued to broaden our
relationships with our Indigenous partners on
whose land our operated assets lie. Our Cultural
Heritage team has worked to ensure our
operational decision-making is informed by
reliable and contemporary heritage information,
and any decision regarding cultural heritage
is made by the most senior site leadership.
We have also set out Regional Indigenous
Peoples Plans that outline our commitment to
agreement-making, Indigenous procurement,
employment and social investment.
The delivery of the South Flank project was an
important milestone for the Group in FY2021,
and we would like to acknowledge the support
of the Banjima people in helping us to deliver
the project.
Our Board renewal process continued this year
as we welcomed Xiaoqun Clever and Christine
O’Reilly as independent Non-executive
Directors in October 2020. We are pleased that
Michelle Hinchliffe will join the BHP Board on
1 March 2022. Michelle has significant expertise
in financial risk management and strong global
experience, and we look forward to welcoming
Michelle early next year.
We have also announced that Anita Frew
and Susan Kilsby will retire from the BHP
Board at the end of the 2021 Annual General
Meetings. Both Anita and Susan have recently
accepted Chair roles at significant international
companies, and we wish them well. I thank Anita
and Susan for the invaluable contribution they
have made to BHP. Gary Goldberg has replaced
Susan as BHP’s Senior Independent Director,
and Christine O’Reilly has been appointed
Chair of the Remuneration Committee.
Finally, we achieve nothing unless we do it
safely. While we are pleased that it has now
been over two years since the last fatality at our
operated assets, we know that a commitment
to health and safety requires more than this.
We are committed to stamping out sexual
assault and harassment at all our sites. This is
a critical issue for BHP and for our industry.
We have been working on this for some time,
but we know we must do more to make our
workplaces safe and inclusive for everyone.
I am confident the decisions we are making to
build our company for the future, together with
continued strong operational performance and
commitment to those who rely on us, will see
us continue to grow BHP and create value for
our shareholders and our broader stakeholders
for decades to come.
Thank you for your continued support of BHP.
Ken MacKenzie
Chair
“ The strong operational performance
driven by our teams across the
world, combined with a diversified
portfolio and disciplined approach to
capital allocation, has seen the Board
determine a dividend of US$3.01 per
share for FY2021.”
04
BHP
Annual Report 2021
1.3 Chief Executive Officer’s review
Dear Shareholders,
I am pleased to report that BHP performed
strongly in FY2021, with no one fatally injured
across BHP’s global operations, and record
production and throughput in a number of
businesses. We completed four major capital
projects on time and on budget, a notable feat
given the pandemic context, and our approach
to capital allocation remained disciplined,
generating strong returns for shareholders.
I want to thank our employees and all those who
supported us in delivering these outcomes.
Our operational and financial results provide
the strong foundation upon which we have
announced our investment in the Jansen
Stage 1 potash project, the intended merger
of BHP’s Petroleum business with Woodside
Petroleum Ltd. (Woodside), and the intention
to unify the BHP corporate structure under a
single primary listing in Australia. These strategic
steps are intended to underpin BHP’s ability
to continue to grow shareholder value in the
coming decades.
The future is clear. We believe that the world is
going to need increasing supply of the essential
commodities BHP produces in order to sustain
global economic growth and in order to
decarbonise the global economy. It is important
for the world that this growing demand is met
sustainably, and BHP is ideally positioned to
do so given our portfolio of existing assets, our
strong track record on sustainability and social
value creation, our operating and financial
discipline, and most importantly our people.
The intended unification of BHP’s corporate
structure will position us even more strongly to
be able to continue growing shareholder value.
We will be a simpler, more efficient and more
agile company. This is expected to enable us to
be more competitive and to more quickly create
and capitalise on opportunities to continue
to grow value.
With a focus on Scope 3 emissions, we entered
into partnerships with major steel producers
in China and Japan, targeting technologies
to reduce emissions from steel making.
The combined output of these steel companies
equates to around 10 per cent of reported
global steel production. We also entered into a
series of innovative initiatives that seek to help
reduce emissions in bulk shipping.
Finally, we continue to invest in people.
In FY2021, we trained more than 500
apprentices and trainees through our FutureFit
Academy in Australia, and have committed to
creating 2,500 new Australian apprenticeship
and trainee positions over the next five years.
We have continued our progress towards
gender balance and female participation
in our workforce increased to 29.8 per cent
during the year, complementing our already
gender-balanced Executive Leadership Team.
Our Indigenous participation rate has also
increased to 7.2 per cent in Australia and 7.5 per
cent in Chile. We are leading the way in building
the workforce of the future.
I hope that you can see that this has been a
very good year for BHP. We have taken action to
shape BHP’s future, while delivering very strong
operational and financial results.
The combination of a clear strategic outlook,
increasing operational excellence and greater
exposure to future facing commodities is
expected to enable us to deliver positive returns
and grow more value for all of our stakeholders
in the years ahead.
Thank you for your ongoing support.
Mike Henry
Chief Executive Officer
The intended merger of BHP’s Petroleum
business with Woodside will create a global
top 10 independent exploration and production
company, with increased scale and resilience.
We expect shareholders to benefit from
significant synergies arising from the intended
merger, and they will have greater choice in how
to shape the relative commodity exposures in
their own portfolios.
The decision to proceed with the Jansen
Stage 1 potash project in Canada is a significant
milestone for BHP. Potash is a future facing
commodity that enables more efficient and
sustainable farming, which will be increasingly
important in feeding a growing global
population and in meeting the world’s need
to decarbonise. Jansen Stage 1 also opens up
a new front for future growth for BHP. We will
be ideally positioned to meet potential future
growth in global demand for potash with Jansen
Stages 2 through 4, which we anticipate will
offer high returns and faster paybacks.
These decisions and intended steps are
anticipated to result in around half of BHP’s
revenues being derived from the future facing
commodities of copper, potash and nickel by
the end of this decade. We also expect the
other half, comprising iron ore and higher-
quality coking coal, to see upside as the
world decarbonises.
BHP continues to take action on climate
change. In the past year we announced a new
suite of climate change related targets and
goals, together with an assessment of the
performance of BHP’s portfolio under different
climate scenarios. The latter indicated that BHP’s
overall portfolio is resilient and, in fact, many of
our commodities would perform best under
our Paris-aligned scenario that sees more rapid
decarbonisation and an increase in average
global temperature of no more than 1.5°C.
We progressed towards our operational
emissions reduction targets and goal by
entering into renewable power supply
agreements for our Kwinana nickel refinery
and Queensland Coal operations – adding
to the Escondida and Spence copper mine
agreements announced in FY2020.
“ I am pleased to report that BHP
performed strongly in FY2021, with no
one fatally injured across BHP’s global
operations, and record production and
throughput in a number of businesses.
We completed four major capital
projects on time and on budget.”
BHP
Annual Report 2021
05
Strategic Report1GovernanceFinancial StatementsAdditional Information234 1.4 Our business today
Our purpose is
to bring people and
resources together
to build a better world.
Our strategy is to deliver long-term value and
returns through the cycle. We aim to do this
through owning a portfolio of world class assets
with exposure to highly attractive commodities
that benefit from the mega-trends playing
out in the world around us, by operating them
exceptionally well, by maintaining a disciplined
approach to capital allocation and through
being industry leaders in sustainability and the
creation of social value.
We are a global business with over 9,000
suppliers around the world, many of which are
small to medium-sized businesses that are local
to our assets.
We have approximately 80,000 employees and
contractors who work in more than 17 countries
around the world.
The essential resources we produce are critical for
continued economic growth and decarbonisation
and we are committed to supplying them more
safely, responsibly and efficiently.
In FY2021, we produced:
– the commodities to create the steel that goes
into the infrastructure needed for growing
cities around the world, including to support
the energy transition
– the copper and nickel required for
electrification, such as copper-intensive
electric vehicles and nickel-intensive batteries
that can reduce the need for fossil fuels and
support decarbonisation
– the energy that heats homes, enables
transport and powers many of the household
products we use every day
Future facing commodities
Copper
Nickel
Emerging usage
Electrification mega trends
Wind turbines, electric vehicles, solar
panels, battery charging, electric vehicle
batteries, grid storage solutions
FY2021 production
1,635.7 kt
FY2021 production
89.0 kt
Traditional usage
Wiring, power cables, cars, smartphones,
televisions, laptops, air conditioners
Traditional usage
Stainless steel, refrigerators, cookware,
homeware, medical equipment
Steelmaking commodities
Iron ore
Metallurgical coal*
FY2021 production
253.5 Mt
FY2021 production
40.6 Mt
Traditional usage
Cities, hospitals, schools, houses, bridges, trains, cars, smartphones
* Metallurgical coal is also known as steelmaking coal.
Oil & Gas
Petroleum
FY2021 production
102.8 MMboe
Traditional usage
Driving, air travel, heating, generating electricity, cleaning products,
medical and hygiene products, roads
Emerging usage
Supporting development and
clean energy transition
Wind turbines, carbon capture infrastructure
and climate adaption to adjust to current or
expected climate change and its effects
Emerging usage
Supporting mobility and modern life
Low-emissions shipping, technology-
related materials, pairing with renewables,
and the transportation impacts of the
e-commerce revolution
06
BHP
Annual Report 2021
Electric car and charging station, Pipes and Ship – Getty Images
1.5 Positioning for the future
Growing value
and positioning
for the future
In August 2021, we announced
proposed changes to our portfolio
and corporate structure to position
BHP for the future. These portfolio
and capability changes are
intended to enable us to even
more strongly grow long-term
value by sustainably producing the
commodities the world needs for
continued economic growth and
decarbonisation. We seek to grow
value while continuing to provide
climate leadership and considering
social value and financial value in
the decisions we make.
Petroleum business merger
proposal – creating a global top
10 independent energy company
BHP and Woodside have entered into a merger
commitment deed to combine their respective
oil and gas portfolios by an all-stock merger.
The proposed merger would create a global top
10 independent energy company by production,
with a global top 10 position in the liquefied
natural gas (LNG) industry, and would be the
largest energy company listed on the Australian
Securities Exchange (ASX).
With the combination of two high-quality asset
portfolios, the combined business would have
a high-margin oil portfolio, long-life LNG assets
and the financial resilience to help supply
the energy needed for global growth and
development over the energy transition.
The proposed merger is subject to confirmatory
due diligence, negotiation and execution of full
form transaction documents, and satisfaction
of conditions precedent, including shareholder,
regulatory and other approvals.
The proposed merger is expected to be
completed in the first half of CY2022.
On completion, it is expected that Woodside
would be owned approximately 52 per cent
and 48 per cent by existing Woodside and
BHP shareholders respectively. The Woodside
shares would be immediately distributed to
BHP shareholders. Woodside intends to remain
listed on the ASX with listings on additional
exchanges being considered.
Ruby project in
Trinidad and Tobago
Jansen Stage 1 potash project –
entry into a top-tier potash basin
BHP’s Board approved a US$5.7 billion
investment in Jansen Stage 1 in Canada,
which is aligned with our strategy of growing
our exposure to future facing commodities
in world class assets. The project is
expected to produce 4.35 million tonnes
of potash per year with initial production
targeted for 2027, ramping up to full
production over two years.
Jansen is located in the world’s best potash
basin and is in an attractive investment
jurisdiction. It opens up a new front for
growth for BHP and is an expandable
resource that can support a century or
more of operations. Potash provides us
with greater diversification by commodity,
country, and customer.
Potash is a potassium-rich salt mainly used
in fertiliser and potassium is an essential
nutrient for plant growth.
Potash demand is underpinned by a growing
global population and the requirement
for more productive farming with a lower
environmental footprint.
Jansen Stage 1 is expected to be low cost
and one of the world’s most sustainable
potash mines, designed for a low-carbon
footprint and low water intensity.
Jansen Stage 1 is expected to create 3,500
jobs during peak construction and 600 jobs
in ongoing operations, and opportunities for
local and Indigenous businesses. Our goal
is for the Jansen workforce to be gender
balanced and for First Nations employees to
make up 20 per cent of the team. In the first
of their kind in the potash industry, we have
signed Opportunity Agreements with six
First Nations communities around the site.
A unified corporate structure –
flexibility for the future
BHP currently operates as a Dual Listed
Company with two parent entities, both
holding primary listings: BHP Group Limited
(BHP Ltd) in Australia and BHP Group Plc
(BHP Plc) in the United Kingdom.
We are proposing to adopt a single company
structure under BHP Ltd, with a primary listing on
the ASX. The company would hold a standard
listing on the London Stock Exchange, a
secondary listing on the Johannesburg Stock
Exchange and an American Depositary Receipt
program listed on the New York Stock Exchange.
We believe a simplified corporate structure
would be more efficient and agile, better
positioning the company for continued
performance and growth. One-off unification
costs are expected to range between US$400
to US$500 million.
If a unified model is implemented, eligible BHP Plc
shareholders would receive one share in BHP Ltd
for each BHP Plc share they hold. The holdings
of BHP Ltd shareholders would not change.
BHP’s dividend policy and ability to distribute fully
franked dividends also would not change.
Subject to final Board approval, BHP
shareholders are expected to vote on unification
at shareholder meetings planned for the first
half of CY2022.
Adding to our early stage options
in future facing commodities
Consistent with our strategy to secure
further growth opportunities in future
facing commodities, in July 2021 we made
a public all-cash offer to acquire Noront
Resources to gain access to a highly
prospective nickel basin in an attractive
region in Canada, following which Noront’s
Board recommended shareholders accept
BHP’s offer. During the year, we also signed
an agreement for a nickel exploration
alliance with Midland Exploration in Canada
and exercised an option to sign a farm-in
agreement with Encounter Resources for the
Elliott copper project in Australia.
Update on our non-core coal
divestment process
In August 2020, we announced plans to
divest our interests in BHP Mitsui Coal (BMC),
New South Wales Energy Coal and Cerrejón
to focus our coal portfolio on higher-quality
metallurgical coals used in steelmaking.
In June 2021, we announced the signing of
a Sale and Purchase Agreement to divest
our 33.3 per cent interest in Cerrejón for
US$294 million cash consideration. Subject to
the satisfaction of customary competition and
regulatory requirements, this is expected to
complete in the second half of FY2022.
The process for BMC and New South Wales
Energy Coal is progressing, in line with the
two-year timeframe set last year. We remain
open to all options and continue consultation
with relevant stakeholders.
BHP
Annual Report 2021
07
Strategic Report1GovernanceFinancial StatementsAdditional Information234 1.6 Delivering value
1.6.1 Our business model
We are committed to creating long-term value
for our shareholders and consider social value
and financial value in the decisions we make.
What we do
Exploration
and acquisition
With copper and nickel our primary targets.
For more information
refer to section 1.11
Development
and mining
Our aim is to be the industry’s best operator
through a focus on safety, operational
excellence and social value.
For more information
refer to section 1.6.2
What we need
High performing culture
and leading capability
Our aim is for our around 80,000 employees and contractors to work in
safer, more flexible and productive ways. Our investment in technology,
autonomy, recruitment and training means our teams are more skilled,
diverse and capable of unlocking future performance.
For more information
refer to section 1.12
World class assets
We have a diverse portfolio of Tier 1 assets that are largely located
in low-risk locations.
For more information
refer to section 1.10
Exceptional knowledge
We combine our detailed understanding of our assets with
technology and unique market insights.
For more information
refer to sections 1.6.2 and 1.10.5
Disciplined use of capital
Our Capital Allocation Framework helps us to effectively and
efficiently deploy capital to maintain our assets, balance sheet
and reward shareholders.
For more information
refer to section 1.6.2
08
BHP
Annual Report 2021
Effective risk management
Our Risk Framework helps us protect and create value.
For more information
refer to section 1.9
Strong, mutually
beneficial relationships
We work with customers, suppliers, business partners and community
stakeholders to help create value beyond the life of our assets. We need
appropriate policy settings with countries and governments that enable
us to develop resources.
For more information
refer to sections 1.10.5 and 1.13
Responsible natural
resource management
We seek to efficiently and responsibly manage water and power to
actively manage the drawdown on natural resources and to be long-term
custodians of 8 million hectares of land and sea.
For more information
refer to section 1.13
Process
and logistics
We process and refine ore, strive to safely
manage waste, and aim to efficiently and
sustainably transport our products to
customer markets.
For more information
refer to sections 1.10, 1.13.7 and 1.13.15
Sales
and marketing
We seek to maximise value through our
commercial expertise, customer insights
and proactive risk management.
Closure and
rehabilitation
Are considered throughout the asset lifecycle,
to help minimise our impact and optimise
post-closure value for all.
For more information
refer to section 1.10.5
For more information
refer to section 1.13.14
Value outcomes
For our people
We paid US$4.4 billion in FY2021 in salary, wages and incentives,
and sought to provide the opportunities and environment to empower
and inspire our people to be the best they can be at BHP.
For more information
refer to section 1.12
For our business
We continued to make our workplaces safer and more productive.
For more information
refer to sections 1.6 and 1.13
For our shareholders
Following a strong operational and financial performance, the Board
announced a record final dividend of 200 US cents per share, bringing
BHP’s returns to shareholders to more than US$15 billion for the full year.
For more information
refer to section 1.2
For our suppliers and customers
We spent US$16.5 billion with our suppliers in FY2021, with US$2.1 billion,
or 12.7 per cent, spent with local suppliers, and sought new solutions with
some of our steelmaking customers to reduce Scope 3 emissions.
For more information
refer to the BHP Economic Contribution
Report and section 1.13.7
For community stakeholders
We worked closely with Indigenous stakeholders to ensure their
rights are respected and that intergenerational social and economic
outcomes are realised as a result of our presence on their traditional
lands. We invested US$175 million in community initiatives in FY2021,
contributing to the resilience of the communities and environments
where we have a presence.
For more information
refer to sections 1.13.8 and 1.13.10
For the economies where we operate
Our total economic contribution was US$40.9 billion in FY2021,
including US$11.1 billion globally in taxes, royalties and other payments.
For more information
refer to the BHP Economic Contribution Report
From reducing our
environmental footprint
We continued to transition to renewable power in Australia and Chile
and remain on track to meet our FY2030 operational emissions target.
For more information
refer to section 1.13.7
From the use of our products
Many of our products are essential for a decarbonising world.
We estimate the world will need considerably more copper, nickel and
steel than it consumes today to achieve the Paris Agreement goals.
For more information
refer to section 1.6.3
BHP
Annual Report 2021
09
Strategic Report1GovernanceFinancial StatementsAdditional Information234 1.6 Delivering value continued
1.6.2 How we deliver value
Our people
Our strategic capabilities
Pursuing operational excellence
Our global workforce is the foundation of
our business. Supporting our people is vital
for high performance and for furthering our
competitive advantage. For more information
on our culture, including our aspirational
target of a gender-balanced workforce and
progress in FY2021, refer to section 1.12.
To deliver on our strategy we need
outstanding strategic capabilities in areas
where we can generate maximum value.
The strategic capabilities we are focused
on include:
– discovering and appraising resources
– acquiring the right assets and asset options
– defining the optimal ways to develop
our resources
– optimising our use of capital
– continuous improvement and innovation
– establishing and maintaining mutually
beneficial stakeholder relationships
Exploration
Our exploration program is focused on
copper and nickel to grow our future
facing resource portfolio and replenish our
resource base. It is designed to enable us to
generate attractive, low-cost, value-accretive
options for our business and to position BHP
for the best future access to our preferred
resources. We use new technology and
innovation in our exploration activities.
For more information
refer to section 1.11
Social value
We are committed to creating long-term value
for our shareholders and consider social value
and financial value in the decisions we make.
Social value is our positive contribution to
society – to our people, partners, economy,
environment and local communities.
We know that when we consider social
impacts in our decision-making and
when we build respectful and mutually
beneficial relationships, we create value for
all of our stakeholders and in particular for
our shareholders.
We consider our social value work to be
successful when the societies where we
operate are better off through our presence;
the communities we are part of are resilient
and thriving, even in the face of change; our
shareholders receive a superior return on their
investment; and we are a partner of choice
for governments, investors, employees,
communities, suppliers and customers.
10
BHP
Annual Report 2021
Our commitment to continuous
improvement supports our pursuit of
operational excellence. Our current and
developing strengths include:
– the principles, practices and tools of
the BHP Operating System (BOS), BHP’s
way of working that makes continuous
improvement part of what we do in our
business every day
– the capabilities and standards housed
in our technical functions, which
includes Technology and our Centres of
Excellence, which are designed to help
deliver improved safety, productivity and
sustainability outcomes
– our internal venture capital unit, BHP
Ventures, which looks to invest in
emerging companies with game-
changing technologies and management
teams to help drive innovation and
provide us with a valuable portfolio of
growth options
Examples in FY2021 included multi-team
and cross-functional approaches to achieve:
– an increase of over 1,000 productive
hours a year for the automated truck fleet
at our Jimblebar iron ore operation in
Western Australia
– improvements in the refining process at
Olympic Dam in South Australia resulting
in a copper recovery rate from scrap
copper that was 25 per cent above
the budgeted target for FY2021 and
a record for scrap copper recovery at
Olympic Dam
Capital discipline
We use the Capital Allocation Framework
(CAF) to assess the most effective and
efficient way to deploy capital. This helps
us to maintain safe and reliable operations,
meet our social value and greenhouse gas
emissions reduction commitments, keep
our balance sheet strong, and deliver strong
growth and returns to our shareholders.
We then look at what would be the
most valuable risk-adjusted use for any
excess capital.
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.
Technology
Technology helps us to improve frontline
safety, increase productivity, reduce cost,
build capability and accelerate value creation.
We are leveraging technologies such as cloud
computing, cloud storage and smart analytics
to enhance decision-making and advance
mining technologies to automate equipment.
– the use of machine learning and
optimisation techniques at our Western
Australia Iron Ore (WAIO) rail network to
refine WAIO’s rail track grinding plan, which
has simultaneously resulted in significantly
increased grinding compliance and a
reduction in hours lost
Highlights in FY2021 included:
– the development of an in-house machine
learning tool, Trident, at Escondida that
uses real-time data analytics to optimise
vessel scheduling and improve the revenue
per tonne from copper concentrate sales.
The tool is being implemented across
our other copper concentrate assets,
including Spence
– at our WAIO shipping facilities at
Port Hedland, data scientists and
mathematicians worked alongside the
operations team on the ground to develop
algorithms that lifted our port outflow
capacity by more than 1.4 Mtpa, by helping
to optimise transport routes to reduce
dump times and vessel line-up
1.6.3 How our choice of commodities and assets helps deliver value
Our purpose is to bring together
people and resources to build a
better world.
Building a better world requires the
decarbonisation of the global economy and
the protection and improvement of the quality
of life of people everywhere. The world needs
sustainable industries and products, cleaner
infrastructure and more of the types of jobs
people aspire to. This transformation cannot
happen without resources and companies like
BHP that seek to produce them more safely,
responsibly and efficiently.
Under our Paris-aligned 1.5°C scenario,(1) we
expect demand for many of our commodities
to be driven by continued growth in population
and the global economy, decarbonisation
and electrification. In our 1.5°C scenario, we
anticipate demand for primary copper almost
doubling and demand for primary nickel almost
quadrupling over the next 30 years, compared
to the past 30 years. We also expect demand
for steel to almost double in the same period.
We believe a wholesale shift away from blast
furnace steelmaking, which depends on
metallurgical coal, is still decades in the future.
However, we are moving to concentrate our
coal portfolio on higher-grade coals used for
steelmaking (metallurgical coal) that have the
greatest potential upside for quality premiums
as steelmakers seek to improve blast furnace
utilisation and reduce emissions intensity.
Potash is expected to become vital for more
efficient agricultural practices as governments
and industry seek more efficient and
environmentally sustainable agriculture, as well
as to ease pressure on increasingly scarce land
for farming.
As the shift to cleaner energy sources occurs,
we expect the world will still need oil and gas
to power mobility and everyday life on the
pathway to decarbonisation. We see oil and gas
remaining attractive in terms of their investment
fundamentals for at least the next decade.
There is no easy path to achieving net zero
emissions, but we believe the world has a
responsibility to meet this challenge. The task
of reducing emissions is more difficult in some
sectors and countries, and that activities that
reduce or remove carbon, such as natural
climate solutions or carbon capture, use and
storage, will be required to offset those carbon-
emitting activities that are harder to abate, such
as industrial processes like steel and cement
manufacturing, as the world aims for net
zero emissions.
We are taking action to play our part in
operating more responsibly to provide essential
resources. We have been taking action on
climate for decades and continue to work
towards our target of reducing operational
emissions by at least 30 per cent by FY2030
(from FY2020 levels(2)) and our goal of achieving
net zero operational emissions by 2050.(3) We
are working to support the acceleration of
decarbonisation in our value chain, including in
the hard to abate steelmaking sector. And we
will continue to progress work to assess the
potential physical impacts of climate change
and what will be required to build resilience.
For more information regarding our goals to
reduce our emissions, refer to section 1.13.7.
Through our focus on operational and financial
excellence, ever more sustainable production
and use of our commodities, and the creation of
broader social value, we believe BHP will play an
important role in achieving a cleaner and more
prosperous world, while creating greater value
for our stakeholders through doing so.
(1) Refer to our Climate Change Report 2020 for the assumptions and outputs and limitations of our 1.5°C scenario, used in our most recent portfolio analysis.
(2) The 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.
(3) These positions are expressed using terms that are defined in the Glossary, including the terms ‘net zero’, ‘target’ and ‘goal’.
BHP
Annual Report 2021
11
Strategic Report1GovernanceFinancial StatementsAdditional Information234 1.6 Delivering value continued
Our portfolio
We are actively managing our portfolio for value creation to maximise the opportunity to yield financial returns for shareholders and to create greater
value for our partners, communities and all other stakeholders. Following our Board’s approval to invest in Jansen Stage 1, the proposed merger of
Petroleum and the proposed exit of our non-core coal assets, BHP will be focused on producing higher-quality iron ore and metallurgical coal for
steelmaking, copper for electrification and renewable energy, nickel for batteries and potash to make food production and land use more efficient.
We will also continue to create and secure further options in future facing commodities.
Iron ore
Metallurgical coal
Copper
Nickel
Potash
Petroleum
Lowest-cost iron ore majors globally,(1) with improved product quality
– Record annual production at WAIO in FY2021.
– South Flank sustaining project in Western Australia achieved first ore in May 2021
and is expected to enhance our product mix in FY2022.
– WAIO is among the world’s lowest carbon emissions intensity iron ore producers.
World class resource with a focus on higher-quality product
– Seeking value growth by enhancing productivity and focusing on higher-grade
coal with greatest potential for quality premiums.
– Implementing technology applications to improve safety and productivity.
– Renewable power purchasing agreement in September 2020 to supply
up to half of the electricity needs of our Queensland Coal operations from
low-emissions sources.
Growth at some of the largest(2) and most sustainable copper mines globally
– Securing more copper resources through exploration and early-stage
entry options.
– Pursuing technical innovation to unlock value.
– Escondida and Spence on track for 100 per cent renewable electricity supply by
the mid-2020s with four renewable power contracts to commence from FY2022.
Options to grow from the second-largest nickel sulphide resource globally
– One of the lowest carbon emissions nickel miners in the world.
– Transitioning to new mines and focusing on higher-margin products and
technical innovation.
– Seeking more resources through exploration, acquisition and early-stage options.
Developing a potash business with embedded optionality
– Approved a US$5.7bn investment in the Jansen Stage 1 potash project in the
world’s best potash basin in Canada.
– Expected to be one of the world’s most sustainable potash mines, with a low
carbon footprint and low water intensity.
– Goal for a gender-balanced workforce and for First Nations employees to make
up around 20 per cent of the team.
Creation of a global top 10 independent energy company
– Proposed merger of our Petroleum business with Woodside expected to unlock
synergies, value and choice for BHP shareholders.
– On completion, existing BHP shareholders would own approximately 48 per cent
of the combined business.
– Combined business expected to benefit from a high-margin oil portfolio, long-life
LNG assets and the financial resilience to help supply the energy needed for global
growth over the energy transition.
(1) Based on published unit costs by major iron ore producers. There may be differences in the manner that third parties calculate or report unit costs data compared to BHP, which means that
third party data may not be comparable to our data.
(2) Based on published production figures.
12
BHP
Annual Report 2021
1.7 Chief Financial Officer’s review
Dear Shareholder,
I am pleased to report on BHP’s financial results
for FY2021.
I feel privileged to be back at BHP after more
than 15 years to continue the work and build on
the significant contribution of my predecessor,
Peter Beaven.
BHP delivered excellent financial results in
FY2021, supported by strong operational
performance, disciplined capital investment
and our Marketing team’s ability to negotiate
competitive commercial terms for our products.
US$40.9bn
Our total economic
contribution for FY2021
US$11.1bn
Tax, royalty and other payments
to governments in FY2021
301 US cents
Shareholder dividends
per share
Our operational performance, when combined
with higher iron ore and copper prices,
drove underlying EBITDA up 69 per cent to
US$37.4 billion – at a margin of 64 per cent.
Underlying attributable profit increased by
88 per cent to US$17.1 billion.
The shareholder dividend for the first half was
101 US cents per share. Combined with 200
US cents per share in the second half, the
total return for the year was a record 301 US
cents per share. This represents an 89 per cent
payout ratio.
Our total direct economic contribution for
FY2021 was US$40.9 billion. This includes
payments to suppliers, wages and benefits
for our approximately 80,000 employees and
contractors, dividends, taxes and royalties, and
voluntary investment in social projects across
the communities where we operate.
In FY2021, our tax, royalty and other payments
to governments totalled US$11.1 billion. Of this,
84.7 per cent or US$9.4 billion was paid in
Australia. Our global adjusted effective tax rate
in FY2021 was 34.1 per cent, which is broadly
in line with our average adjusted effective tax
rate over the past decade of 33.4 per cent.
Once royalties are included, our FY2021 rate
increases to 40.7 per cent.
We have continued to apply the Capital
Allocation Framework to direct cash where
it can generate the best returns. Over the
year, underlying Return on Capital Employed
strengthened to 32.5 per cent.
The Western Australia Iron Ore underlying
Return on Capital Employed of 89 per cent
is an outstanding result, helped by higher
iron ore prices but also record production.
Our copper assets are showing the benefits of
capital investment and higher prices. Our focus
remains on improving returns in other parts of
the business.
Based on the consistent performance of the
past five years, and despite the cyclical nature
of our industry, our earnings and returns are
reflective of our high-quality stable business.
These FY2021 results demonstrate the resilience
of our diversified portfolio.
Thank you for your continued support of BHP.
I look forward to speaking with more of our
shareholders in the months ahead.
David Lamont
Chief Financial Officer
“ Our operational performance, when
combined with higher iron ore and copper
prices, drove underlying EBITDA up
69 per cent to US$37.4 billion – at a margin
of 64 per cent. Underlying attributable
profit increased by 88 per cent to
US$17.1 billion.”
BHP
Annual Report 2021
13
Strategic Report1GovernanceFinancial StatementsAdditional Information234 1.8 Financial review
1.8.1 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 3
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 4.2, which is incorporated
into the Strategic Report by reference,
includes our APMs and section 4.2.1 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.
1.8.2 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 2
For information on our overall
approach to executive remuneration,
including remuneration policies and
remuneration outcomes
refer to section 2
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 1.8.2, except for Underlying
EBITDA, has been presented to include
Onshore US assets.
14
BHP
Annual Report 2021
Summary of financial measures
Year ended 30 June
US$M
Consolidated Income Statement (section 3.1.1)
Revenue
Profit after taxation from Continuing and Discontinued operations
attributable to BHP shareholders (Attributable profit)
Dividends per ordinary share – paid during the period (US cents)
Dividends per ordinary share – determined in respect of the period (US cents)
Basic earnings per ordinary share (US cents)
Consolidated Balance Sheet (section 3.1.3)(1)
Total assets
Net assets
Consolidated Cash Flow Statement (section 3.1.4)
Net operating cash flows
Capital and exploration expenditure
Other financial information (section 4.2)
Net debt
Underlying attributable profit
Underlying EBITDA
Underlying basic earnings per share (US cents)
Underlying Return on Capital Employed (per cent)
2021
2020
60,817
42,931
11,304
156.0
301.0
223.5
7,956
143.0
120.0
157.3
108,927
55,605
105,733
52,175
27,234
7,120
4,121
17,077
37,379
337.7
32.5
15,706
7,640
12,044
9,060
22,071
179.2
16.9
(1) All comparative periods have been restated to reflect changes to the Group’s accounting policy following a decision by
the IFRS Interpretations Committee on IAS 12 ‘Income Taxes’, resulting in the retrospective recognition of US$950 million
of goodwill at Olympic Dam (included in the Copper segment) and an offsetting US$1,021 million increase in deferred
tax liabilities. Refer to note 39 ‘New and amended accounting standards and interpretations and changes to accounting
policies’ in section 3 for further information.
For more selected consolidated financial information derived from
the historical audited Consolidated Financial Statements of the group
refer to section 4.1
Footnotes to tables and infographics indicate whether data presented in section 1.8.2 is inclusive or
exclusive of Onshore US. Details of the contribution of the Onshore US assets to the Group’s results
are disclosed in note 29 ‘Discontinued operations’ in section 3.
Underlying attributable profit(1)(3)
US$ billion
Underlying EBITDA(2)(3)
US$ billion
20
15
10
5
0
1
.
7
1
9
8
.
1
.
9
1
.
9
.
7
6
FY2017
FY2018
FY2019 FY2020 FY2021
40
30
20
10
0
4
.
7
3
.
2
3
2
.
2
3
2
1
.
2
2
.
4
9
1
FY2017
FY2018
FY2019 FY2020 FY2021
Net operating cash flows(1)
US$ billion
Underlying Return on Capital
Employed(1)(3)
Per cent
30
25
20
15
10
5
0
2
.
7
2
.
5
8
1
.
9
7
1
.
8
6
1
.
7
5
1
FY2017
FY2018
FY2019 FY2020 FY2021
35
30
25
20
15
10
5
0
.
5
2
3
.
0
6
1
.
9
6
1
.
2
4
1
8
9
.
FY2017
FY2018
FY2019 FY2020 FY2021
Includes data for Continuing and Discontinued operations for the financial years being reported.
(1)
(2) Excludes data from Discontinued operations for the financial years being reported.
(3) For more information on APMs, refer to section 4.2.
Reconciling our financial results to our key performance indicators
Profit
Earnings
Cash
Returns
Measure: Profit after taxation
from Continuing
operations
US$M
13,451
Profit after taxation
from Continuing
operations
US$M
13,451
Net operating
cash flows from
Continuing
operations
US$M
27,234
Profit after taxation
from Continuing
operations
US$M
13,451
Made
up of:
Profit after taxation
Profit after taxation
Profit after taxation
Cash generated by the Group’s
consolidated operations, after
dividends received, interest,
proceeds and settlements of
cash management related
instruments, 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
Profit after taxation
attributable to non-
controlling interests
4,470
1,327
(24)
Exceptional items
before taxation
Tax effect of
exceptional items
Depreciation
and amortisation
excluding
exceptional items
5,773
(2,147)
Impairments of
property, plant
and equipment,
financial assets and
intangibles excluding
exceptional items
Net finance
costs excluding
exceptional items
Taxation expense
excluding
exceptional items
4,470
1,327
6,824
264
1,220
9,823
Exceptional items
after taxation
Net finance
costs excluding
exceptional items
Income tax benefit
on net finance costs
Profit after taxation
excluding net
finance costs and
exceptional items
Net Assets at the
beginning of period
52,175
Net Debt at the
beginning of period
12,044
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
55,605
4,121
To reach
our KPIs
Underlying
attributable profit
17,077 Underlying EBITDA
37,379 Net operating
cash flows
27,234 Underlying Return
on Capital Employed
5,797
1,220
(337)
20,131
64,219
59,726
61,973
32.5%
Why do
we use it?
Underlying attributable profit
allows the comparability of
underlying financial performance
by excluding the impacts of
exceptional items and is also
the basis on which our dividend
payout ratio policy is applied.
Underlying EBITDA is used to help
assess current operational profitability
excluding the impacts of sunk
costs (i.e. depreciation from initial
investment). It is a measure that
management uses internally to assess
the performance of the Group’s
segments and make decisions on the
allocation of resources.
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. It is provided on an
underlying basis to allow comparability
of underlying financial performance
by excluding the impacts of
exceptional items.
1.8.3 Financial results
The following table provides more information on the revenue and expenses of the Group in FY2021:
Year ended 30 June
Continuing operations
Revenue(1)
Other income
Expenses excluding net finance costs
Loss from equity accounted investments, related impairments and expenses
Profit from operations
Net finance costs
Total taxation expense
Profit after taxation from Continuing operations
Discontinued operations
Loss after taxation from Discontinued operations
Profit after taxation from Continuing and Discontinued operations
Attributable to non-controlling interests
Attributable to BHP shareholders
(1)
Includes the sale of third-party products.
2021
US$M
2020
US$M
2019
US$M
60,817
510
(34,500)
(921)
25,906
(1,305)
(11,150)
13,451
−
13,451
2,147
11,304
42,931
777
(28,775)
(512)
14,421
(911)
(4,774)
8,736
−
8,736
780
7,956
44,288
393
(28,022)
(546)
16,113
(1,064)
(5,529)
9,520
(335)
9,185
879
8,306
BHP
Annual Report 2021
15
Strategic Report1GovernanceFinancial StatementsAdditional Information234
1.8 Financial review continued
Profit after taxation attributable to BHP
shareholders increased from a profit of
US$8.0 billion in FY2020 to a profit of
US$11.3 billion in FY2021. Attributable profit of
US$11.3 billion in FY2021 includes an exceptional
loss of US$5.8 billion (after tax), compared to an
attributable profit of US$8.0 billion, including an
exceptional loss of US$1.1 billion (after tax) in the
prior period. The FY2021 exceptional loss mainly
relates to impairment charges recognised in
relation to the Group’s energy coal and Potash
assets as well as the Samarco dam failure.
For more information on Exceptional items
refer to note 3 ‘Exceptional items’ in section 3
Revenue of US$60.8 billion increased by
US$17.9 billion, or 42 per cent, from FY2020.
This increase was primarily attributable to higher
average realised prices for iron ore, copper,
nickel, oil, natural gas and thermal coal, partially
offset by lower average realised prices for
metallurgical coal and LNG. Record volumes
achieved at WAIO, along with the highest
annual production at Olympic Dam since our
acquisition in 2005, were more than offset by
the impacts of expected grade declines at
Escondida and Spence, natural field decline
in Petroleum and adverse weather events.
For information on our average realised
prices and production of our commodities
refer to section 1.17
Total expenses excluding net finance costs
of US$34.5 billion increased by US$5.7 billion,
or 20 per cent, from FY2020. This includes
a US$2.0 billion increase of net impairment
charges recognised against the Group’s Potash
assets of US$1.3 billion and at NSWEC of
US$1.1 billion recognised in FY2021 compared
to US$0.4 billion at Cerro Colorado in FY2020.
The increase also included higher price linked
costs of US$0.9 billion reflecting higher royalties
due to higher realised prices for iron ore and
US$0.5 billion of higher third party concentrate
purchase costs. Depreciation and amortisation
expense increased by US$0.7 billion reflecting a
decrease in estimated remaining reserves at Bass
Strait due to underperformance of the reservoir
in the Turrum field and lower overall condensate
and natural gas liquids (NGL) recovery from the
Bass Strait gas fields and higher depreciation
at WAIO due to a change in Yandi’s life of mine.
This was combined with higher foreign exchange
losses of US$1.6 billion reflecting the impact of
the stronger Australian dollar and Chilean peso
against the US dollar on our cost base.
Loss from equity accounted investments, related
impairments and expenses of US$(0.9) billion
in FY2021, increased by US$0.4 billion from
FY2020. The increase was primarily due to
unfavourable foreign exchange impacts in
relation to the Samarco dam failure provision
of US$0.5 billion combined with a US$0.5 billion
impairment charge at Cerrejón, partially offset
by higher current year profits from Antamina
of US$0.4 billion primarily due to higher prices.
Further information on the total impact of the
Samarco dam failure provision and impairment
charges connected with equity accounted
investments, can be found at note 3 ‘Exceptional
items’ in section 3 and note 13 ‘Impairment of
non-current assets’ in section 3 respectively.
Net finance costs of US$1.3 billion increased
by US$0.4 billion, or 43 per cent, from FY2020.
This was primarily attributable to premiums of
US$395 million paid as part of the value accretive
multi-currency hybrid debt repurchase programs
completed during the year.
For more information on net finance costs
refer to section 1.8.4 and note 22 ‘Net finance
costs’ in section 3
Total taxation expense of US$11.2 billion
increased by US$6.4 billion from FY2020.
The increase was primarily due to significantly
higher profits and higher withholding tax
on dividends, mostly driven by higher
commodity prices.
For more information on income tax expense
refer to note 6 ‘Income tax expense’ in section 3
Principal factors that affect Underlying EBITDA
The following table and commentary describes the impact of the principal factors(1) that affected Underlying EBITDA for FY2021 compared with FY2020:
Underlying EBITDA for year
ended 30 June 2020
Net price impact:
US$M
22,071
Change in sales prices
16,965 Higher average realised prices for iron ore, copper, nickel, oil, natural gas and thermal coal, partially offset by lower
Price-linked costs
(870)
16,095
average realised prices for metallurgical coal and LNG.
Increased royalties reflect higher realised prices for iron ore and higher third party concentrate purchase costs reflect
higher nickel prices, partially offset by lower royalties for petroleum and metallurgical coal.
Change in volumes
(312) Record volumes at WAIO with strong performance across the supply chain, were offset by natural field decline at Petroleum.
The expected lower grades at Escondida and Spence more than offset Escondida concentrator throughput maintained
at record levels, the new stream of concentrate production from the Spence Growth Option that came online in
December 2020 and highest annual copper production achieved at Olympic Dam since our acquisition in 2005.
Lower volumes due to adverse weather impacts in the Gulf of Mexico (Petroleum) and NSWEC, combined with dragline
maintenance and higher strip ratios at BMC. This was partially offset by the acquisition of the additional 28 per cent
working interest at Shenzi and increased volumes at Nickel West following resource transition and major quadrennial
maintenance shutdowns in the prior period.
(34) Higher inventory drawdowns at Olympic Dam due to stronger mill and smelter performance and at Nickel West as
volumes increased following planned maintenance shutdowns in the prior period and additional costs associated
with the ramp-up of South Flank. This was largely offset by strong cost performance supported by cost reduction
initiatives across our assets, lower technology costs and a gain from the optimised outcome from renegotiation
of cancelled power contracts at Escondida and Spence.
109 Lower exploration expenses due to lower seismic activity in Petroleum.
75
Impact of the stronger Australian dollar and Chilean peso against the US dollar.
Impact of inflation on the Group’s cost base.
(1,588)
(286)
223 Predominantly lower diesel prices at our minerals assets.
282
(122) Volume loss across our operations due to COVID-19 restrictions, predominantly at our copper operations in Chile.
Lower deferred stripping depletion at Escondida in line with planned development phase of the mines.
(1,491)
17
242
Reflects the divestment of Neptune and a decrease in costs related to the closure and rehabilitation provision for
closed mines of US$311 million compared with the prior year.
682 Other includes higher average realised sales prices received by Antamina.
37,379
Change in controllable cash costs:
Operating cash costs
Exploration and
business development
Change in other costs:
Exchange rates
Inflation
Fuel and energy
Non-Cash
One-off items
Asset sales
Ceased and sold operations
Other items
Underlying EBITDA for year
ended 30 June 2021
(1) For information on the method of calculation of the principal factors that affect Underlying EBITDA, refer to section 4.2.2.
16
BHP
Annual Report 2021
Cash flow
The following table provides a summary of the Consolidated Cash Flow Statement contained in section 3.1.4:
2021
US$M
27,234
−
27,234
(7,845)
−
−
(7,845)
(17,922)
−
(17,922)
1,467
1,467
−
2020
US$M
15,706
−
15,706
(7,616)
−
−
(7,616)
(9,752)
−
(9,752)
(1,662)
(1,662)
−
2019
US$M
17,397
474
17,871
(7,377)
(443)
10,427
2,607
(20,515)
(13)
(20,528)
(10,477)
(10,495)
18
This was primarily due to the significant
operating cash flow generated from strong
financial and operational performance, and
the favourable commodity price environment
experienced during the year. Gearing, which is
the ratio of Net debt to Net debt plus Net assets,
was 6.9 per cent at 30 June 2021, compared
with 18.8 per cent at 30 June 2020.
During FY2021, two multi-currency hybrid
debt repurchase programs were completed
(US$1.7 billion on 17 September 2020 and
US$1.1 billion on 23 November 2020) and were
funded from surplus cash. The Group also
redeemed US$1.0 billion of 6.250 per cent
hybrid notes on 19 October 2020, US$0.3 billion
of 6.750 per cent hybrid notes on 30 December
2020 (the balance following the repurchase
programs), and €1.25 billion of 4.750 per
cent hybrid notes on 22 April 2021 using
surplus cash.
At the subsidiary level, Escondida borrowed
US$550 million to refinance maturing long-term
debt during FY2021.
Year ended 30 June
Net operating cash flows from Continuing operations
Net operating cash flows from Discontinued operations
Net operating cash flows
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 financing cash flows from Continuing operations
Net financing cash flows from Discontinued operations
Net financing cash flows
Net increase/(decrease) in cash and cash equivalents
Net increase/(decrease) in cash and cash equivalents from Continuing operations
Net increase/(decrease) in cash and cash equivalents from Discontinued operations
Net operating cash inflows of US$27.2 billion
increased by US$11.5 billion. This reflects
stronger iron ore and copper commodity prices
and strong operational performance across the
Group’s portfolio partially offset by the impacts
of a stronger Australian dollar and Chilean peso
against the US dollar, lower grades at Escondida
and Spence, natural field decline at Petroleum
and adverse weather events.
Net investing cash outflows of US$7.8 billion
increased by US$0.2 billion. This reflects the
investment in an additional 28 per cent working
interest in Shenzi from Hess Corporation of
US$0.5 billion, increasing our share from
44 per cent to 72 per cent; partially offset
by lower purchases of property plant and
equipment of US$0.3 billion as the Group
commissioned SGO and South Flank in FY2021.
For more information and a
breakdown of capital and exploration
expenditure on a commodity basis
refer to section 1.17
Net financing cash outflows of US$17.9 billion
increased by US$8.2 billion. This reflects the
higher repayment of interest bearing liabilities of
US$6.0 billion mainly due to bond repayments
on maturity of US$3.5 billion and early repurchase
of hybrid bonds of US$3.4 billion. This was
combined with higher dividends paid in FY2021
of US$1.0 billion reflecting the record half year
dividend and higher dividends paid to non-
controlling interests of US$1.1 billion driven by
higher profits achieved at Escondida.
For more information
refer to section 1.8.4 and
note 20 ‘Net debt’ in section 3
Underlying Return on Capital Employed
(ROCE) of 32.5 per cent increased by
15.6 percentage points (FY2020: 16.9 per
cent) reflecting the significant increase in
profit after taxation excluding net finance
costs and exceptional items of US$9.5 billion.
The Underlying ROCE in FY2021 includes
US$12.1 billion of Assets under Construction
(average of ending balances for FY2021 of
US$10.4 billion and FY2020 of US$13.8 billion)
including major projects in Potash and Mad
Dog Phase Two, that 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 3
1.8.4 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 FY2021, Interest bearing liabilities
were US$21.0 billion (FY2020: US$27.0 billion)
and Cash and cash equivalents were
US$15.2 billion (FY2020: US$13.4 billion).
This resulted in Net debt(1) of US$4.1 billion,
which represented a decrease of US$7.9 billion
compared with the net debt position at
30 June 2020.
(1) We use APMs to reflect our underlying financial performance. Refer to section 4.2 for a discussion on the APMs we use.
For the definition and method of calculation of APMs, refer to section 4.2.1. For the composition of net debt, refer to note 20
‘Net debt’ in section 3.
BHP
Annual Report 2021
17
Strategic Report1GovernanceFinancial StatementsAdditional Information234 1.8 Financial review continued
Funding sources
No new Group-level debt was issued in FY2021 and debt that matured during the year was not refinanced. These actions enhanced BHP’s capital
structure and extended BHP’s average debt maturity.
Our Group-level borrowing facilities are not subject to financial covenants. Certain specific financing facilities in relation to specific assets are the
subject of financial covenants that vary from facility to facility, as is considered normal for such facilities. In addition to the Group’s uncommitted
debt issuance programs, we hold the following committed standby facility:
Revolving credit facility(1)
Total financing facility
Facility
available
2021
US$M
5,500
5,500
Drawn
2021
US$M
–
–
Undrawn
2021
US$M
5,500
5,500
Facility
available
2020
US$M
5,500
5,500
Drawn
2020
US$M
–
–
Undrawn
2020
US$M
5,500
5,500
(1) During the year we completed a one-year extension of the facility which is now due to mature on 10 October 2025. 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$5.5 billion. As at 30 June 2021,
US$ nil commercial paper was drawn (FY2020: US$ nil), therefore US$5.5 billion of committed facility was available to use (FY2020: US$5.5 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 23 ‘Financial risk management’ in section 3
In our opinion, working capital is sufficient for our present requirements. Our Moody’s credit rating has remained at A2/P-1 outlook stable (long-term/
short-term) throughout FY2021. Moody’s affirmed its credit rating on 31 May 2021. Our Standard & Poor’s rating changed from A/A-1 outlook stable (long-
term/short-term) to A/A-1 CreditWatch negative (long-term/short-term) on 23 August 2021. 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.
The following table expands on the net debt, to provide more information on the cash and non-cash movements in FY2021:
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
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 2019
Lease additions
Others
Non-cash movements
Net debt at the end of the financial year
(12,044)
19,389
(10,253)
2021
US$M
27,234
(7,845)
7,433
(7,424)
(7,901)
(2,127)
(234)
58
(1)
−
(1,079)
(191)
2020
US$M
15,706
(7,616)
1,533
(1,984)
(6,876)
(1,043)
(143)
88
(26)
(1,778)
(363)
(96)
(9,446)
8,090
(8,513)
(1,213)
(4,121)
(2,175)
(12,044)
(1) Other financing activities mainly comprises purchases of shares by Employee Share Option Plan trusts of US$234 million (FY2020: US$143 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 23 ‘Financial risk
management’ in section 3.
Dividends
Our dividend policy provides for a minimum 50 per cent payout of Underlying attributable profit at every reporting period. The minimum dividend
payment for the second half of FY2021 was US cents 109 per share. Recognising the importance of cash returns to shareholders, the Board
determined to pay an additional amount of US cents 91 per share, taking the final dividend to US cents 200 per share (US$10.1 billion). Total dividends
of US$15.2 billion (US$3.01 per share) have been determined for FY2021, including an additional amount of US$6.7 billion above the minimum payout
policy. These returns are covered by total free cash flow of US$19.4 billion in FY2021.
18
BHP
Annual Report 2021
1.9 How we manage risk
Risk management helps us to protect and create
value, and is central to achieving our purpose
and strategic objectives.
Our Risk Framework has
four pillars: risk strategy,
risk governance, risk process
and risk intelligence.
Risk strategy
Risk classification
We classify all risks to which BHP is exposed
using our Group Risk Architecture. This is a
tool designed to identify, analyse, monitor
and report risk, which provides a platform to
understand and manage risks. Similar risks are
considered together in groups and categories.
This gives the Board and management visibility
over the aggregate exposure to risks on a
Group-wide basis and supports performance
monitoring and reporting against BHP’s
risk appetite.
Risk appetite
BHP’s Risk Appetite Statement is approved
by the Board and is a foundational element of
our Risk Framework. It provides guidance to
management on the amount and type of risk
we seek to take in pursuing our objectives.
Key risk indicators
Key risk indicators (KRIs) are set by management
to help monitor performance against our risk
appetite. They also support decision-making by
providing management with information about
financial and non-financial risk exposure at a
Group level. Each KRI has a target, or optimal
level of risk we seek to take, as well as upper
and lower limits. Where either limit is 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.
Risk culture
Our risk management approach is underpinned
by a risk culture that supports decision-making
in accordance with BHP’s values, objectives and
risk appetite.
We use a common foundation across BHP
to build the tools and capabilities required
to enable us to understand, monitor and
manage our risk culture. These include tailored
cultural assessments, Group-wide risk culture
dashboards and the inclusion of behavioural
auditing in our internal audit plan.
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.
Our Risk Appetite Statement and KRIs 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 designed to protect BHP
from threats, we seek to implement controls
to enhance and/or increase the likelihood of
opportunities being realised. For example,
we might establish additional governance,
oversight or reporting to help ensure new
initiatives remain on track.
Risk governance
Three lines model
BHP uses the ‘three lines model’ of risk
governance and management to define the
role of different teams across the organisation
in managing risk. This approach sets clear
accountabilities for risk management and
provides appropriate ‘checks and balances’
to support us in protecting and growing value.
The first line is provided by our frontline
staff, operational management and people
in functional roles – anyone who makes
decisions, deploys resources or contributes
to an outcome is responsible for identifying
and managing the associated risks. The Risk
team and other second-line functions are
responsible for providing expertise, support,
monitoring and challenge on risk-related
matters, including by defining Group-wide
minimum standards. The third line, our Internal
Audit and Advisory team, is responsible for
providing independent and objective assurance
over the control environment (governance,
risk management and internal controls) to
the Board and Executive Leadership Team.
Additional assurance may also be provided by
external providers, such as our External Auditor.
BHP Board and Committees
The Board reviews and monitors the
effectiveness of the Group’s systems of financial
and non-financial risk management and internal
control. 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 by reviewing
and considering BHP’s risk profile (covering
operational, strategic and emerging risks)
on a biannual basis.
For more information
refer to sections 2.1.7, 2.1.10 and 2.1.11
Performance against risk appetite is monitored
and reported to the RAC, as well as the
Sustainability Committee for HSEC matters,
enabling the Board to challenge and hold
management to account where necessary.
Second-line risk-based reviews are undertaken
to provide greater oversight and enhance our
understanding and management of the Group’s
most significant risks, with outcomes reported
to management, the RAC and Sustainability
Committee. These outcomes may be used to
develop remediation plans, adjust BHP’s Risk
Appetite Statement or KRIs, enhance our Risk
Framework or inform strategic decisions.
Additional information on risk management
and internal controls is shared between the
Board, the RAC and, for HSEC matters, the
Sustainability Committee, and is 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 2.1
Risk process
Our Risk Framework requires identification
and management of risks (both threats and
opportunities) to be embedded in business
activities through the following process:
– Risk identification – threats and opportunities
are identified and each is assigned an owner,
or accountable individual.
– Risk assessments – risks are assessed using
appropriate and internationally recognised
techniques to determine their potential
impacts and likelihood, prioritise them and
inform risk treatment options.
– Risk treatment – controls are implemented
to prevent, reduce or mitigate threats, and
enable or enhance opportunities.
– 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) to evaluate performance.
Our Risk Framework includes requirements and
guidance on the tools and process to manage
current and emerging risks.
Current risks
Current risks are risks that could impact BHP
today or in the near future, and comprise
current operational risks (risks that have their
origin inside BHP or occur as a result of our
activities) and current strategic risks (risks that
may enhance or impede the achievement of
our strategic objectives).
Current risks include material and non-material
risks (as defined by our Risk Framework).
The materiality of a current risk is determined
by estimating the maximum foreseeable loss
(MFL) if that risk was to materialise. The MFL is
the estimated impact to BHP in a worst-case
scenario without regard to probability and
assuming all risk controls, including insurance
and hedging contracts, are ineffective.
Our principal risks
are described in section 1.16
BHP
Annual Report 2021
19
Strategic Report1GovernanceFinancial StatementsAdditional Information234 1.9 How we manage risk continued
1.10 Our business
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 risks
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.
BHP maintains a ‘watch list’ of emerging themes
that provides an evolving view of the changing
external environment and how it might
impact our business. We use the watch list to
support the identification and management
of emerging risks, 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 threats manifesting and
identifying options to increase our resilience
to these threats.
Risk intelligence
The Risk team provides the Board and senior
management with insights on trends and
aggregate exposure for our most significant
risks, as well as performance against risk
appetite. Risk reports may also provide an
update on the Risk Framework, overview of (and
material changes in) the risk profile and updates
on emerging risk themes and risk culture.
They are supported by an opinion from the
Chief Risk Officer (or other relevant individual).
We maintain a risk insights dashboard designed
to provide current, data-driven and actionable
risk intelligence to our people at all levels of
the business to support decision-making.
This tool empowers the business to manage
risks more effectively, with increased accuracy
and transparency.
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.
For information on our principal
risks, and robust risk assessment
and viability statement
refer to section 1.16
20
BHP
Annual Report 2021
1.10.1 Locations
BHP locations (includes non-operated joint ventures)
23
12
37
36
13
35
34
15
16
11
26
30
9
8
7
24
10
Minerals Australia
Minerals Americas
1
2
3
4
5
6
Olympic Dam
Australia
Western Australia Iron Ore
Australia
New South Wales Energy Coal
Australia
BHP Mitsubishi
Alliance
Australia
BHP Mitsui Coal
Australia
Nickel West
Australia
For more information
refer to section 1.10.2
7
8
9
Escondida
Chile
Pampa Norte
Chile
Antamina (1)
Peru
10
Samarco (1)
Brazil
11
12
Cerrejón (1)
Colombia
Jansen
Canada
13
Resolution Copper (1)
US
For more information
refer to section 1.10.3
(1) Non-operated joint venture.
28
25
31
27
29
32
14
22
2
6
5
4
18
20
3
1
19
21
33
17
Petroleum
BHP principal office locations
19
Minerals Australia office
Adelaide, Australia
20
Minerals Australia office
Brisbane, Australia
21
Global headquarters
Melbourne, Australia
22
Minerals Australia office
Perth, Australia
23
Minerals Americas office
Saskatoon, Canada
Australia Production Unit
Australia
Gulf of Mexico Production Unit
Gulf of Mexico Joint Interest Unit (1)
US
14
15
16
17
18
Trinidad and Tobago Production Unit
Trinidad and Tobago
24
Minerals Americas office
Santiago, Chile
Algeria Joint Interest Unit (1)
Algeria
Australia Joint Interest Unit (1)
Australia
For more information
refer to section 1.10.4
25
Corporate office
Shanghai, China
26
Metals exploration office
Quito, Ecuador
27
Corporate office
New Delhi, India
28
Corporate office
Tokyo, Japan
29
Global Business Services
Kuala Lumpur, Malaysia
30 Metals exploration office
Lima, Peru
31
Global Business Services
Manila, Philippines
32
Marketing and corporate office
Singapore, Singapore
33
Corporate office
London, UK
34
Petroleum office
Houston, US
35
Metals exploration office
Tucson, US
36
Corporate office
Washington DC, US
37
Corporate office
Toronto, Canada
BHP
Annual Report 2021
21
Strategic Report1GovernanceFinancial StatementsAdditional Information234 1.10 Our business continued
1.10.2
Minerals
Australia
Minerals Australia includes
operated assets in Western
Australia, Queensland, New
South Wales and South
Australia, focused on iron ore,
metallurgical coal, copper,
nickel and energy coal.
The commodities produced
by our Minerals Australia
assets are transported by rail
to port and exported to our
global customers.
Olympic Dam
22
BHP
Annual Report 2021
1
2
Coober Pedy
Olympic Dam
Port Augusta
Finucane Island
South Hedland
Karratha
Great
Northern
Highway
Western
Australia
Existing
operations
Port
Port Hedland
Nelson Point
Goldsworthy
Rail Line
Yarrie
Marble Bar
Port Hedland –
Newman Rail Line
Chichester
Deviation
Port Lincoln
Victor Harbor
Kangaroo
Island
Adelaide
Karijini
National
Park
Yandi
Mining Area C
Orebody 24/25
South Australia
Olympic Dam
Port
Highway
Copper
South Flank
Mt Whaleback
Orebody 29/30/35
Newman
Orebody 18
Jimblebar
Iron ore
1 Olympic Dam
Overview
Located in South Australia, Olympic Dam (BHP
ownership: 100 per cent) is one of the world’s most
significant deposits of copper, gold, silver and
uranium. It comprises underground and surface
operations, and is a fully integrated processing
facility from ore to metal.
2 Western Australia Iron Ore
Overview
Western Australia Iron Ore (WAIO) is an
integrated system of four processing hubs
and six open-cut mines in the Pilbara region
of northern Western Australia, connected
by more than 1,000 kilometres of rail
infrastructure and port facilities.
Ore mined underground is hauled by an automated
train system to crushing, storage and ore hoisting
facilities or trucked directly to the surface.
Olympic Dam has a fully integrated metallurgical
complex with a grinding and concentrating circuit,
a hydrometallurgical plant incorporating solvent
extraction circuits for copper and uranium, a
copper smelter, a copper refinery, including an
electro-refinery and an electrowinning-refinery,
and a recovery circuit for precious metals.
Key developments in FY2021
Copper production increased by 20 per
cent to 205 kilotonnes (kt) (172 kt in FY2020),
reflecting improved smelter performance
and strong underground mine performance.
This was the highest annual copper production
since Olympic Dam was acquired in 2005.
Record gold production of 146 thousand
troy ounces (koz) was also achieved.
The short-term focus remains on completing
the multi-year asset integrity program designed
to improve the reliability of operations, which is
on track heading into a planned major smelter
maintenance campaign in FY2022. A new
refinery crane commenced operation in FY2021
to improve stability and reliability at the electro-
refinery. At Oak Dam, next stage resource
definition drilling commenced in May 2021 to
inform resource characterisation and potential
development pathways.
WAIO’s Pilbara reserve base is relatively
concentrated, allowing development through
integrated mining hubs connected to the mines
and satellite orebodies by conveyors or spur
lines. This approach seeks to maximise the
value of installed infrastructure by using the
same processing plant and rail infrastructure
for several orebodies.
Ore is crushed, beneficiated (where necessary)
and blended at the processing hubs – Mt Newman
operations, Yandi, Mining Area C and Jimblebar
– to create lump and fines products that are
transported along the Port Hedland–Mt 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 (which
includes the new South Flank mining hub)
and Jimblebar. BHP’s interest in each is 85
per cent, with Mitsui and ITOCHU owning the
remaining 15 per cent. The joint ventures are
unincorporated, except Jimblebar.
BHP, Mitsui, ITOCHU and POSCO are also
participants in the POSMAC JV. BHP’s interest
in POSMAC is 65 per cent. The ore from the
POSMAC JV is sold to the main joint ventures.
All ore is transported on the Mt Newman JV and
Mt Goldsworthy JV rail lines. The Nelson Point
port facility is owned by the Mt Newman JV and
the Finucane Island facility is owned by the Mt
Goldsworthy JV. WAIO’s current licensed export
capacity is 290 million tonnes per annum (Mtpa).
4
5
North Queensland
Export Terminal
Bowen
Collinsville
Goonyella
Riverside
Broadmeadow
South
Walker
Creek
Dalrymple
Bay
Mackay
BMA Hay Point
Coal Terminal
Queensland,
Australia
BMA Mine
BMC Mine
BMA Terminal
Terminal
Rail
3
Gunnedah
Tamworth
Quirindi
Jimblebar
Key developments in FY2021
WAIO production increased by 1 per cent to a
record 252 million tonnes (Mt) (248 Mt in FY2020),
or 284 Mt on a 100 per cent basis (281 Mt in
FY2020), reflecting record production at Jimblebar
and Mining Area C, which included first ore from
South Flank in May 2021. This was achieved despite
significant wet weather impacts, temporary
rail labour shortages due to COVID-19 related
border restrictions and the planned tie-in activity
to integrate South Flank with the Mining Area C
processing hub. Strong operational performance
across the supply chain reflected continued
improvements in car dumper performance
and reliability, and improved train cycle times.
Yandi commenced its end-of-life ramp-down
as South Flank ramped up. Yandi is expected to
provide supply chain flexibility with a lower level
of production to continue for a few years.
South Flank is scheduled to ramp up to full
production capacity of 80 Mtpa (100 per cent
basis) over three years. South Flank’s high-quality
ore is expected to increase WAIO’s average iron
ore grade from 61 to 62 per cent, and the overall
proportion of lump from 25 to between 30 and
33 per cent, once fully ramped up. South Flank
iron ore will be transported (eight to 16 kilometres)
by overland conveyors to the Mining Area C
processing hub.
Metallurgical coal
4 5 Queensland Coal
Overview
Queensland Coal comprises the BHP Mitsubishi
Alliance (BMA) (BHP ownership: 50 per cent) and
BHP Mitsui Coal (BMC) (BHP ownership: 80 per
cent) assets in the Bowen Basin, Queensland.
It has access to infrastructure in the Bowen Basin,
including a modern, multi-user rail network and
its own coal-loading terminal at Hay Point, near
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 North
Queensland Export Terminal (formerly known
as Abbot Point Coal Terminal).
Moranbah
Caval
Ridge
Daunia
Poitrel
Peak Downs
Saraji
Dysart
Emerald
Rockhampton
RG
Tanna
Blackwater
Blackwater
Gladstone
BMA operates seven metallurgical coal mines
– Goonyella Riverside, Broadmeadow, Daunia,
Peak Downs, Saraji, Blackwater and Caval
Ridge. With the exception of the Broadmeadow
underground longwall operation, BMA’s mines
are open cut. BMA also owns and operates
the Hay Point Coal Terminal near Mackay.
BMC owns and operates two open-cut
metallurgical coal mines – South Walker
Creek and Poitrel.
Key developments in FY2021
Queensland Coal’s metallurgical coal production
was 41 Mt (41 Mt in FY2020), reflecting a strong
operational performance including record
production at Goonyella and record tonnes
from Broadmeadow, but offset by operational
delays due to significant wet weather impacts
and planned wash plant maintenance at Saraji
and Caval Ridge. At South Walker Creek, despite
record stripping, production decreased as a result
of higher strip ratios due to ongoing impacts from
geotechnical constraints and lower yields.
The divestment process for our interests in BMC
that was announced in August 2020 is progressing,
in line with the two-year timeframe we set last
year. We remain open to all options and continue
consultation with relevant stakeholders.
Muswellbrook
Mt Arthur
Singleton
Cessnock
Maitland
Newcastle
NSW,
Australia
NSWEC
Port
Rail
Energy coal
3 New South Wales Energy Coal
Overview
New South Wales Energy Coal (NSWEC) (BHP
ownership: 100 per cent) comprises the Mt Arthur
Coal open-cut energy coal mine in the Hunter
Valley. It has access to infrastructure in the Hunter
Region, including a multi-user rail network and coal
loading terminal access at the Port of Newcastle
through Newcastle Coal Infrastructure Group
(28 per cent owned by BHP) and Port Waratah
Coal Services.
Key developments in FY2021
NSWEC production decreased by 11 per cent
to 14 Mt (16 Mt in FY2020) reflecting operational
delays due to significant weather impacts and
higher strip ratios, as well as lower volumes due to
an increased proportion of washed coal. This was
due to our strategy to focus on higher-quality
products in response to increased price premiums
for these products, and reduced port capacity
following damage to a shiploader at the Newcastle
port in November 2020. The shiploader returned
to operation in July 2021.
The divestment process for NSWEC that was
announced in August 2020 is progressing, in
line with the two-year timeframe we set last year.
We remain open to all options and continue
consultation with relevant stakeholders.
Nickel
6 Nickel West
Overview
Nickel West (BHP ownership: 100 per cent) is a
fully integrated nickel business located in Western
Australia, with three streams of concentrate.
It comprises open-cut and underground mines,
concentrators, a smelter and refinery.
Disseminated sulphide ore is mined at the Mt
Keith open-pit operation and crushed and
processed onsite to produce nickel concentrate.
Nickel sulphide ore is mined at the Cliffs and
Leinster underground mines and Rocky’s
Reward open-pit mine and processed through
a concentrator and dryer at Leinster.
BHP
Annual Report 2021
23
Strategic Report1GovernanceFinancial StatementsAdditional Information234 1.10.3
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.
Our operated copper assets in the Americas,
Escondida and Pampa Norte, are open-cut
mines that produce copper concentrate and
copper cathodes. The non-operated assets in
the Minerals Americas portfolio are open-cut
mines that produce copper (Antamina), iron
ore (Samarco) and energy coal (Cerrejón).
The commodities produced by our Minerals
Americas assets are transported to port
by pipeline, rail or road and exported to
customers around the world.
In FY2021, our Chilean assets operated with
a substantial reduction in their operational
workforces due to preventative measures
implemented to mitigate the impact
of COVID-19. We expect the operating
environment across our Chilean assets to
remain challenging, with reductions in our
on-site workforce expected to continue
in FY2022.
1.10 Our business continued
6
Newman
Western
Australia
Nickel West
Port
Highway
Cliffs
Mt Keith
Leinster
Geraldton
Kalgoorlie Smelter
Kambalda
Concentrator
Ravensthorpe
Fremantle
Perth
Kwinana Refinery
Albany
A concentrator plant in Kambalda processes ore
and concentrate purchased from third parties.
The three streams feed the Kalgoorlie nickel
smelter, which uses a flash furnace to produce
nickel matte. The Kwinana nickel refinery then
turns this into nickel powder and briquettes.
Key developments in FY2021
Nickel West production increased by 11 per
cent to 89 kt (80 kt in FY2020) reflecting strong
performances from the Mt Keith Satellite
mine (Yakabindie) and Venus underground
mine (part of the Leinster underground mine
complex) which reached full production.
Construction of a nickel sulphate plant at the
Kwinana nickel refinery is in the final stages of
commissioning, with first production expected
in the September 2021 quarter. The plant is
expected to produce at least 100 kilotonnes per
annum (ktpa) of nickel sulphate for the lithium-ion
battery industry.
A power purchase agreement with Southern
Cross Energy for Nickel West’s Goldfields-based
operations was extended to 2038, adding flexibility
for renewable power generation. Nickel West
also entered into a renewable power purchasing
agreement to supply up to 50 per cent of the
power for its Kwinana refinery operations from
Merredin Solar Farm. These two agreements
are expected to improve BHP’s position as one
of the lowest-carbon nickel miners in the world.
Nickel West is constructing a 38-megawatt solar
farm and battery energy storage system for its
Mt Keith and Leinster operations.
Nickel West completed the acquisition of the
Honeymoon Well development project and the
remaining 50 per cent interest in the Albion Downs
North and Jericho exploration joint ventures,
located about 50 kilometres from Mt Keith.
24
BHP
Annual Report 2021
Escondida
8
7
PERU
Chile
BOLIVIA
Mine
Cerro
Colorado
Iquique
BOLIVIA
Pica
Pacific
Ocean
CHILE
Tocopilla
Calama
Spence
Mejillones
Antofagasta
ARGENTINA
Minera Escondida
Copper
7 Escondida
Overview
Escondida (BHP ownership: 57.5 per cent) is 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 in FY2021
Escondida copper production decreased by 10 per
cent to 1,068 kt (1,185 kt in FY2020), as continued
strong concentrator throughput of 371 kilotonnes
per day (ktpd), at record levels was more than
offset by the impact of lower concentrator feed
grade and lower cathode production, due to
reduced operational workforce associated with
COVID-19 restrictions.
8 Pampa Norte
Overview
Pampa Norte (BHP ownership: 100 per cent)
consists of two assets in the Atacama Desert in
northern Chile – Spence and Cerro Colorado.
Spence produces copper cathodes and,
since December 2020, copper concentrate.
Cerro Colorado produces copper cathodes.
Its current environmental licence expires at
the end of CY2023.
Key developments in FY2021
Pampa Norte copper production decreased by
10 per cent to 218 kt (243 kt in FY2020) largely due
to a decline in stacking feed grade at Spence of
11 per cent, planned maintenance at Spence and
the impact of a reduced operational workforce
because of COVID-19 restrictions.
The Spence Growth Option (SGO) produced first
copper concentrate in December 2020 and is in
the process of ramping-up to full capacity.
12
9
0
50km
11
Puerto Bolivar
Saskatchewan,
Canada
BHP project
BHP mineral
leases
Prince Albert
Wolverine
Burr
Saskatoon
Jansen
Young
Boulder
Yorkton
Moose Jaw
Regina
Melville
Assiniboia
Weyburn
Potash
12 Jansen Potash Project
Overview
The Jansen Potash Project (BHP ownership:
100 per cent) is located about 140 kilometres
east of Saskatoon, Canada.
Jansen’s large resource provides the opportunity
to develop it in stages, with Jansen Stage 1
(Jansen S1) expected to produce approximately
4.35 Mt of potash per annum on completion,
and sequenced brownfield expansions of up
to 12 Mtpa (approximately 4 Mtpa per stage).
BHP holds mineral leases covering around 9,600
square kilometres in the Saskatchewan potash basin.
Key developments in FY2021
The focus was on installing watertight steel and
concrete final liners in the production and service
shafts, and continuing the installation of essential
surface infrastructure and utilities, with current scope
of work 93 per cent complete at the end of FY2021.
On 17 August 2021, BHP approved US$5.7 billion
(C$7.5 billion) in capital expenditure for the Jansen
S1 potash project in the province of Saskatchewan,
Canada. Jansen S1 includes the design,
engineering and construction of an underground
potash mine and surface infrastructure including
a processing facility, a product storage building,
and a continuous automated rail loading system.
Jansen S1 product will be shipped to export
markets through Westshore, in Delta, British
Columbia and the project includes funding
for the required port infrastructure.
First ore is targeted in the CY2027 calendar year,
with construction expected to take approximately
six years, followed by a ramp up period of two years.
Copper
9 Antamina
Overview
Antamina (BHP ownership: 33.75 per cent) is a large,
low-cost copper and zinc mine in north central Peru
with by-products including molybdenum and silver.
Antamina owns integrated pipeline and port facilities
and is operated independently by Compañía Minera
Antamina S.A.
Huari
Huaraz
Antamina
mine
Huarmey
Punta
Lobitos
Huari
Province,
Ancash,
Peru
Antamina mine
Port
Pipeline
Lima
Key developments in FY2021
Antamina copper production increased by
16 per cent to 144 kt (125 kt in FY2020) and zinc
increased by 64 per cent to 145 kt due to higher
concentrator throughput and higher zinc grades.
During FY2021, Antamina continued with a strong
focus on developing improvement opportunities
to maintain productivity and progressing on its
modified environmental impact assessment for
its life extension project from CY2028 to CY2036,
which includes extension of current approved
tailings capacity, additional waste dumps and
new pit design.
13 Resolution Copper
Overview
Resolution Copper (BHP ownership: 45 per
cent), located in the US state of Arizona, is
operated by Rio Tinto (55 per cent ownership
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.
Key developments in FY2021
In FY2021, Resolution progressed its prefeasibility
study and safely completed the shaft No. 9 work
(November 2020). The shaft No. 9 project
involved deepening the historic shaft from its
original 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.
The Resolution Copper project is subject to a
federal permitting process in the US (the National
Environmental Policy Act (NEPA)). The Forest
Service published the Final Environmental Impact
Statement (FEIS) on 15 January 2021. On 1 March
2021, the US Department of Agriculture (USDA)
directed the Forest Service to rescind the FEIS.
BHP supports meaningful consultation with local
communities and Native American Tribes as
Resolution continues to study the project.
For more information
refer to section 1.13.10
Caribbean Sea
Uribia
Riohacha
COLOMBIA
Maicao
Gulf of
Venezuela
Cerrejón
Maracaibo
VENEZUELA
La Guajira
province,
Colombia
Cerrejón
Port
Rail
Energy coal
11 Cerrejón
Overview
Cerrejón (BHP ownership: 33.33 per cent) 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 owns integrated
rail and port facilities.
Key developments in FY2021
Cerrejón production declined by 30 per cent to
approximately 5 Mt (7 Mt in FY2020). This was
mainly due to a 91-day strike and subsequent
delays to the restart of production as well as
the impact of a reduced operational workforce
associated with COVID-19 restrictions.
Cerrejón maintained its focus on higher-quality
products and maintained lower operational costs
through the implementation of a transformation
program, which allowed it to remain cash flow
positive despite the volume decline.
In June 2021, BHP entered into a sale and
purchase agreement with Glencore to divest
our 33.3 per cent interest in Cerrejón for
US$294 million cash consideration. The transaction
has an effective economic date of 31 December
2020. The purchase price is subject to adjustments
at transaction completion, which may include an
adjustment for any dividends paid by Cerrejón to
BHP during the period from signing to completion.
Subject to the satisfaction of competition and
regulatory requirements, we expect completion
to occur in the first half of CY2022.
BHP
Annual Report 2021
25
Strategic Report1GovernanceFinancial StatementsAdditional Information234 1.10 Our business continued
10
15
1.10.4
Petroleum
Our Petroleum unit comprises
conventional oil and gas
assets located in the US Gulf of
Mexico, Australia, Trinidad and
Tobago, Algeria and Mexico,
and appraisal and exploration
options in Trinidad and Tobago,
central and western US Gulf
of Mexico, eastern Canada
and Barbados.
The crude oil and condensate, gas and natural
gas liquids (NGLs) produced by our Petroleum
assets are sold on the international spot
market or domestic market.
On 17 August 2021, BHP and Woodside
entered into a merger commitment deed to
combine their respective oil and gas portfolios
by an all-stock merger. The merger is subject
to confirmatory due diligence, negotiation and
execution of full form transaction documents,
and satisfaction of conditions precedent
including shareholder, regulatory and
other approvals.
Minas Gerais,
Espírito Santo,
Brazil
Samarco
1st pipeline
2nd pipeline
3rd pipeline
Pipeline 2
operational;
pipelines 1 and 3
non-operational
Belo
Horizonte
(Main
offices)
Nova Era –
Antônio Dias
(Guilman-Amorim
hydroelectric plant)
Mariana –
Ouro Preto
(Germano
operational
unit)
Mining Lease
Vitória
(Sales office)
Muniz Freire
(Muniz Freire
hydroelectric
plant)
Anchieta
(Operational
unit and
ocean terminal
at Ponta Ubu)
Iron ore
10 Samarco
Overview
Samarco (BHP ownership: 50 per cent) comprises
a mine and three concentrators located in the
Brazilian state of Minas Gerais, four pellet plants
and a port located in Anchieta in the state of
Espírito Santo. Three 400-kilometre pipelines
connect the mine site to the pelletising facilities.
Samarco is operated independently by Samarco
Mineração S.A. Samarco’s main product is iron
ore pellets. Pellets are independently marketed by
Samarco and sold to customers around the world.
Key developments in FY2021
Having met the licensing requirements, Samarco
restarted iron ore pellet production at one
concentrator in December 2020 and produced
1.9 Mt of iron ore pellets in FY2021.
For further information on the
Fundão dam failure
refer to section 1.15
26
BHP
Annual Report 2021
Shenzi
New Orleans
LOUISIANA
Gulf of Mexico
Shenzi
Atlantis
Mad Dog
United States
BHP acreage
United States
15 Gulf of Mexico
Overview
Our producing fields include our operated asset
Shenzi (BHP ownership: 72 per cent) and our non-
operated assets, Atlantis (BHP ownership: 44 per
cent) and Mad Dog (BHP ownership: 23.9 per cent).
They 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 fields are
located, to connecting pipelines that transport
product onshore.
Key developments for FY2021
– The Atlantis Phase 3 project, a new subsea
production system that ties back to the Atlantis
facility, achieved first production in July 2020.
Atlantis Phase 3 is expected to have the capacity
to produce up to 38,000 gross barrels of oil
equivalent per day.
– On 6 November 2020, BHP finalised a
membership interest purchase and sale
agreement with Hess Corporation to acquire an
additional 28 per cent working interest in Shenzi
for US$480 million, which brings our working
interest to 72 per cent.
– The Mad Dog Phase 2 project achieved a major
milestone in April 2021 as the semi-submersible
floating production platform, Argos, arrived in
the US from South Korea. First production from
Mad Dog Phase 2 is expected in the middle of
the CY2022.
– On 20 May 2021, BHP finalised a purchase and
sale agreement with EnVen Energy Ventures,
LLC to divest our interest in and operation
of Neptune.
– On 5 August 2021, the Board approved the
funding to develop the Shenzi North Project,
a two-well subsea tie-in to the Shenzi platform.
First production is targeted in CY2024.
14
Thebe
0
200km
0
10
20
30km
18
North West Shelf
VICTORIA
Scarborough
Dampier
Maffra
Sale
Longford
Snapper
Tuna
Bream
Turrum
Halibut
Kipper
Flounder
Pyrenees
Onslow
Macedon
Barracouta
Blackback
Kingfish
Western
Australia
BHP acreage
Oil fields
Gas fields
Australia
Bass Strait
WESTERN AUSTRALIA
BHP acreage
Oil fields
Gas fields
14 18
Overview
We operate Macedon (BHP ownership: 71.43
per cent) which is 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 produces gas from four
subsea wells, with gas piped onshore to the
processing plant.
We operate Pyrenees (BHP ownership: 39.99–
71.43 per cent), which is a floating production,
storage and off-take facility, located about 23
kilometres off Northwest Cape, Western Australia.
The facility produces oil from six offshore fields.
We have a 32.5–50 per cent non-operated interest
in Bass Strait, which is a collection of offshore
installations and onshore processing facilities
producing oil and gas. It is located between 25
and 80 kilometres off the southeastern coast of
Australia and onshore Victoria. Gas is piped from
offshore fields to the onshore Longford processing
facility for processing with liquefied petroleum
gas transported to market by pipeline, road
tanker or ship and ethane by pipeline.
We have a 12.5–16.67 per cent non-operated
interest in the North West Shelf project, which
comprises offshore oil and gas fields, with
onshore gas processing infrastructure to
produce oil, LNG, condensate, LPG and domestic
gas. The offshore facilities are located about
125 kilometres northwest of Dampier in Western
Australia. Gas is piped from offshore platforms
to the onshore Karratha Gas Plant for processing,
with LNG and all liquefied products exported to
market by ship, and domestic gas transported
by pipeline.
Key developments in FY2021
In December 2020, BHP and the North West Shelf
joint venture partners executed fully termed gas
processing agreements for processing third-party
gas from the Pluto and Waitsia projects through
the North West Shelf facilities, extending the life
of the asset.
The Bass Strait West Barracouta gas project
achieved first production in April 2021.
Rest of world
16 17
Overview
BHP operates Ruby (BHP ownership:
68.46 per cent) and Greater Angostura (BHP
ownership: 45 per cent interest in a production
sharing contract) fields, which form part of our
Trinidad and Tobago operations – an integrated
oil and gas development consisting of two fields
located between 40 and 45 kilometres offshore
east of Trinidad.
BHP has a non-operated interest in an onshore
integrated development, the Rhourde Ouled
Djemma (ROD) Integrated Development (BHP
ownership: 28.85 per cent effective interest),
that produces oil and is located 900 kilometres
southeast of Algiers. It comprises six satellite
oil fields that pump oil back to a dedicated
processing train.
Key developments in FY2021
Ruby achieved first oil production in May 2021
ahead of schedule and on budget. Drilling and
completion of the remaining wells at Ruby is
ongoing with subsequent wells expected to be
placed into production in CY2021 and project
completion expected in the first half of CY2022.
1.10.5 Commercial
BHP’s Commercial function seeks to maximise
commercial value across our end-to-end supply
chain and provides improved service levels
to our assets and customers through subject-
matter expertise, simplified processes and the
centralisation of standardised activities.
The function is organised around the following
core activities in our value chain, supported
by business partnering, credit and market risk
management, and strategy and planning activities.
Sales and Marketing
Connects BHP’s resources to market through
commercial expertise, sales and operations
planning, customer insights and proactive risk
management. It presents a single face to markets
across multiple assets, with a view to realising
maximum value for our products and supporting
sustainability initiatives in our downstream
supply chain.
Maritime and Supply
Chain Excellence
Manages BHP’s enterprise-wide maritime
transportation strategy and the chartering
of ocean freight to meet BHP’s inbound and
outbound transportation needs. It focuses on
supply chain excellence and sourcing sustainable,
cost-efficient marine freight. We seek to
mitigate supply chain risk by vetting the safety
performance of the ships loading BHP cargo.
Procurement
Purchases the goods and services used by
our projects, assets and functions globally.
Procurement works to help optimise equipment
performance, reduce operating costs, improve
working capital and create social value.
It manages supply chain risk, fosters supplier
innovation and develops sustainable relationships
with global suppliers and local businesses in the
communities where we operate.
Warehousing, Inventory,
Logistics and Property
Designs and operates our inbound supply
chain networks for the delivery and warehousing
of spare parts, operating supplies and
consumables, and designs and operates
our office workspaces globally.
Market Analysis and Economics
Develops BHP’s proprietary view on the outlook
for commodity demand and prices, as well as our
input costs, the world economy, climate change
and financial markets. The team works with our
Procurement, Maritime, and Sales and Marketing
sub-functions to help optimise end-to-end
commercial value, and with the Portfolio Strategy
and Development and External Affairs functions
to identify and respond to long-run strategic
changes in our operating environment.
Global Business Services
Global Business Services (GBS) unites common
shared services across the Group into a single
operation with capabilities focused on transaction
efficiency, process intelligence and automation.
GBS manages end-to-end functional processes
designed to deliver continuous process
improvement and a better customer experience.
BHP
Annual Report 2021
27
Strategic Report1GovernanceFinancial StatementsAdditional Information234 1.11 Exploration
Our exploration program is
focused on copper and nickel
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. For the first time, the
Petroleum and Metals teams partnered together
on a Joint Global Endowment study to explore
future growth opportunities and global, yet-to-find
volume and metal accumulations through the
use of data analytics and augmented intelligence.
The study is expected to create a competitive
advantage and position BHP for future access to
new search spaces.
Following exploration results in previous drilling
phases, which confirmed mineralised intercepts
of copper with associated gold, uranium and
silver, in May 2021 the Oak Dam copper discovery
in South Australia commenced the next stage of
definition drilling to inform future design of the
BHP exploration regions
deposit. Elsewhere during the year, we continued
to seek, secure and test concessions in regions
such as Ecuador, 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 through a partnership
in Canada.
Eastern Canada
South West US
North West Mexico
Gulf of Mexico
(US)
Gulf of Mexico
(Mexico)
Barbados
Trinidad and Tobago
Colombia
Ecuador
Peru
Chile
Copper exploration regions
Petroleum exploration regions
Nickel exploration regions
Exploration in FY2021
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 and
maintaining research and technology activities
aligned with our exploration strategy. Despite the
slowdown and restrictions on movement due to
the COVID-19 pandemic, the field teams were
active in Chile, Peru, Ecuador, the United States
and Australia. These activities involved early stage
reconnaissance work through target definition
and drill testing. With the addition of nickel to
the exploration portfolio, the sphere of work
expanded into Western Australia, where BHP
holds a significant land position and drill programs
are scheduled pending appropriate clearances.
Metals Exploration also extended its partnership
with Midland Exploration, a Canadian company with
interests in copper and nickel projects in northern
Québec in Canada, to generate nickel targets in
Québec, including the completion of a regional
airborne electromagnetic survey. We initiated a
global assessment of new nickel opportunities
to further strengthen the pipeline.
28
BHP
Annual Report 2021
Western Australia
Northern Territory
South Australia
Victoria
Technology collaboration and research partnerships
are key to our metals exploration strategy. In particular,
we are focused on developing and deploying
technologies that will allow us to get to the ‘Next
400’ (that is below the first 400 metres of the
Earth’s surface). Similarly, we are conducting
research in collaboration with university groups to
determine controls on high-grade mineralisation
and undertaking programs in Chile and the United
States to further our own exploration effort under
cover. These two elements are intended to allow us
to continue to be successful in discovery within the
areas where we operate that are often incorrectly
considered mature.
Our business partnerships continue to deliver
encouraging results as we continued to add to our
early stage options in future facing commodities.
During FY2021, we advanced our earn-in with
Luminex in Ecuador, undertaking drilling at our Tarqui
project. Elsewhere in Ecuador, we maintained a
13.6 per cent ownership in SolGold plc, the majority
owner and operator of the Alpala porphyry copper-
gold project. We also own a 5 per cent interest
in Midland Exploration Inc., a mineral exploration
company in Canada. In Mexico, the team continued
the financial agreement with Riverside Resources,
which exposes BHP to new search spaces and
exploration opportunities. In Australia, we committed
to a partnership with Encounter Resources to
explore for sediment-hosted copper deposits
in the Northern Territory of Australia.
In addition, on 27 July 2021, we entered into
a definitive Support Agreement with Noront
Resources (Noront) to extend the Company an all-
cash takeover offer, following which Noront’s Board
of Directors recommended shareholders accept
BHP’s offer. Noront owns the Eagles Nest nickel-
copper deposit in the James Bay Lowlands, Ontario,
in an area highly prospective for nickel known as
the Ring of Fire.
Petroleum
In FY2021, Petroleum continued to add to and
mature the exploration potential of our portfolio.
In the US Gulf of Mexico, we expanded our acreage
positions through lease sale participation. In July
2020, the regulator awarded BHP two blocks(1)
in Green Canyon, central Gulf of Mexico and
three blocks(2) in the western Gulf of Mexico.
We additionally progressed our partnering strategy
in the Gulf of Mexico through lease exchange
agreements with Chevron, expanding our portfolio
in the central Gulf of Mexico.
(1) Leases were awarded in blocks: GC80 and GC123.
(2) Leases were awarded in blocks: AC36, AC80 and AC81.
Metals Exploration team
at work in Ecuador
In Mexico, we commenced an Ocean Bottom
Node seismic acquisition over the Trion field
in November 2020, as part of our ongoing
evaluation and analysis. The survey was completed
in the March 2021 quarter. The results will be
incorporated into the current evaluation of the
Trion opportunity. In addition, we received formal
approval for a 124-day extension for the evaluation
and exploration periods through 1 July 2021 and
1 July 2022 respectively, because of the suspension
of activities in 2020 due to COVID-19 restrictions.
In Trinidad and Tobago, we drilled the Broadside-1
exploration well on Block 3, which fully satisfied
the remaining drilling obligations on the Southern
exploration licenses. The Broadside-1 well reached
the main reservoir on 22 October 2020 and did
not encounter hydrocarbons. The well was a
dry hole and was plugged and abandoned on
8 November 2020. The Southern licenses expired
in June 2021, and BHP elected to participate in
a Market Development Phase (MDP) for Block
5 to retain the acreage around the LeClerc and
Victoria discoveries. The proposed MDP is pending
regulatory approval. The Transocean drilling rig
arrived on location and commenced drilling of
two Calypso gas appraisal wells for our northern
licenses in July 2021.
In Australia, BHP participated in a multi-client 3D
seismic acquisition in the Gippsland Basin that
was completed in September 2020. Analysis will
continue through FY2022 and will inform us of
the prospectivity in this area.
Exploration and appraisal wells drilled, or in the process of drilling, during the year included:
Well
Location
Broadside-1
Trinidad and
Tobago Block 3
Target
Oil
BHP
equity
Spud
date
Water
depth
Total well
depth
Status
65% (BHP
operator)
20 August
2020
2,019m 7,064m
Dry hole;
plugged and
abandoned
Exploration expenditure
Our resource assessment exploration expenditure increased by 5 per cent in FY2021 to US$138 million,
while our greenfield expenditure increased by 23 per cent to US$54 million. Expenditure on resources
assessment and greenfield exploration over the last three financial years is set out below.
Year ended 30 June
Greenfield exploration
Resources assessment
Total metals exploration and assessment
2021
US$M
54
138
192
2020
US$M
44
132
176
2019
US$M
62
126
188
Petroleum exploration and appraisal
Petroleum exploration expenditure for FY2021 was US$322 million, of which US$296 million was
expensed. Expenditure on petroleum exploration over the last three financial years is set out below.
Year ended 30 June
Petroleum exploration
2021
US$M
322
2020
US$M
564
2019
US$M
685
Our petroleum exploration program prioritised drilling commitments for development wells and strategic
partnering in FY2021. A US$540 million exploration program is planned for FY2022 as we progress testing
of our future growth opportunities and evaluate potential new basins for future entries.
Exploration expense
Exploration expense represents that portion of exploration expenditure that is not capitalised in accordance
with our accounting policies, as set out in note 11 ‘Property, plant and equipment’ in section 3.
Exploration expense for each segment over the last three financial years is set out below.
Year ended 30 June
Exploration expense
Petroleum(1)
Copper
Iron Ore
Coal
Group and unallocated items(2)
Total Group
2021
US$M
2020
US$M
2019
US$M
382
53
55
7
19
516
394
54
47
9
13
517
409
62
41
15
10
537
(1)
Includes US$86 million (FY2020: US$ nil; FY2019: US$21 million) exploration expense previously capitalised, written off
as impaired.
(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.
BHP
Annual Report 2021
29
Strategic Report1GovernanceFinancial StatementsAdditional Information234 1.12 People and culture
We aim to recruit and retain
the best people ensuring we
deliver our strategy and run our
operations safely and productively.
Around 80,000 employees and contractors work
for us globally; they are the foundation of our
business. We create and promote an inclusive
and diverse environment where the safety and
wellbeing of our people is the highest priority.
To enable our people to perform at their best, we
continue to invest in technology and innovative
ways to manage risk, streamline processes and
improve productivity. We also offer competitive
remuneration that rewards expertise and invest in
the development of our people to build capability
and improve performance.
Developing our capabilities
and an enabled culture
To drive continuous improvement, we
respect people’s differences and encourage
self-accountability, a hunger to learn and a
commercial mindset.
One of the ways we achieve this is by applying
the BHP Operating System (BOS) practices to help
build leader capability. BOS is a way of leading and
working that focuses on the safety of our people,
value for our customers and a mindset of zero
waste. In FY2021, we continued to train our leaders
through BOS learning academies to improve
operational capability and culture.
We also deploy a simplified Engagement and
Perception Survey (EPS) three times a year.
After each EPS, leaders are accountable for
identifying actions to address improvement areas,
as shaped by employee feedback, in the following
90 days. With a strong response rate (81 per cent)
and overall engagement scores of 84 per cent,
two to three percentage points under top decile
of global organisation benchmarks provided by
Qualtrics, we believe our overall workforce feels
supported and engaged.
In 2018, we created a new business unit,
Operations Services, to provide maintenance
and production services across our Minerals
Australia assets. Operations Services employs
its people on a permanent basis and supports
skill building through a structured coaching and
in-field training program designed to enable
the workforce to deliver consistent equipment
operation and maintenance that balances safety,
maximum productivity and equipment reliability.
As at 30 June 2021, Operations Services employed
more than 3,700 employees and is expected to
continue to grow.
As part of a new national training program to
help bolster Australia’s skills base and create new
career pathways into the mining sector, the BHP
FutureFit Academy (FFA) provides a pathway
to join Operations Services through either an
accredited maintenance traineeship or a trade
apprenticeship. Once trained and qualified,
employees move to a job at one of our Australian
operations. In FY2021, the FFA trained more than
500 apprentices and trainees as the first cohort
graduated (163 graduates in FY2021).
For more information on
BHP’s FutureFit Academy
see our case study at bhp.com/people
30
BHP
Annual Report 2021
Inclusion and diversity
An inclusive and diverse workforce promotes
safety, productivity and wellbeing, and underpins
our ability to attract new employees. We employ,
develop and promote based on people’s strengths
and do not tolerate any form of discrimination,
bullying, harassment, exclusion or victimisation.
Our systems, processes and practices are
designed to support fair treatment for all of our
people. In July 2020, we published our Inclusion
and Diversity Statement confirming our vision,
commitment and contributions to inclusion
and diversity.
Our employees are encouraged to celebrate
diversity and to speak up if they encounter
behaviours inconsistent with our values and
expectations. To help mitigate 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 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.
For information on our approach to addressing
sexual harassment and sexual assault
refer to section 1.13.4
Our ambition to achieve a more diverse and
inclusive workplace is focused 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 and workplaces are
attractive to a diverse range of people
Gender balance(1)
In 2016 we publicly announced our aspiration
to achieve gender balance within our employee
workforce globally by the end of FY2025.
At the end of FY2021 we had 5,257 more female
employees than reported in 2016. In FY2021, we
increased the representation of women working
at BHP by 2.7 per cent. Overall, women represent
29.8 per cent of our employee workforce including
employees on extended absence such as parental
leave. The Executive Leadership Team is confident
of achieving 40 per cent female representation
by the end of FY2025, meeting the definition
of gender balance used by entities such as the
International Labor Organization and HESTA,
which consider balance to be a minimum of
40 per cent women and 40 per cent men.
The percentage of employees newly hired to
work for BHP in FY2021 was 52.1 per cent male
and 47.9 per cent female. This is a marked increase
on our FY2015 baseline for our aspirational goal,
which was 10.4 per cent female.
We also improved our representation of women
in leadership by 2.8 percentage points compared
to FY2020, with 25.2 per cent female leaders as
at the end of FY2021.
To further accelerate female representation
in FY2021, we worked to:
– improve employment messaging to target
diverse audiences about why they should
work for BHP
– progress market mapping to proactively target
people or groups of people not actively looking
to work for BHP or our industry
– broaden our employment and brand
reach across social, digital and traditional
media channels
– enhance our workforce development and
retention through coaching and support
materials for leaders
– develop a Ways of Working Framework to guide
employees and leaders to ‘Work where you get
great outcomes’
– implement mentoring and support networks
for women
The table below shows the gender composition of our employees, senior leaders and the Board over the
last three financial years.
Female employees(2)
Male employees(2)
Female senior managers(3)(4)
Male senior managers(3)(4)
Female Executive Leadership Team (ELT) members(3)
Male Executive Leadership Team (ELT) members(3)
Female Board members(3)
Male Board members(3)
2021
11,868
27,953
90
189
5
5
4
8
2020
8,072
23,517
67
185
4
6
3
9
2019
6,874
22,052
70
227
4
7
4
7
(1) Based on a ‘point in time’ snapshot of employees as at 30 June 2021, as used in internal management reporting for the
purposes of monitoring progress against our goals. This does not include contractors. For the first time this includes
employees on extended absence (660 at 30 June 2021), who were previously not included in the active headcount.
(2) FY2021 employee numbers based on actual numbers at BHP operated location as at 30 June 2021, not 10-month averages.
FY2020 and FY2019 are 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 to calculate a weighted average for the year to 30 June and adjusted
based on BHP ownership. Data includes Continuing and Discontinued operations (Onshore US assets) for the financial
years being reported.
(3) Based on actual numbers as at 30 June 2021, not 10-month averages.
(4) 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 FY2021, there were 297 senior leaders at BHP. There are 18 Directors of subsidiary companies who are not
senior leaders, comprising 14 men and 4 women. Therefore, for UK law purposes, the total number of senior managers was
203 men and 94 women (31.6 per cent women) in FY2021.
Indigenous employment
Indigenous peoples are critical partners and
stakeholders for many of BHP’s operations around
the world. BHP recognises, as part of our Global
Indigenous Peoples Strategy, that we can contribute
to the economic empowerment of Indigenous
peoples through providing opportunities for
employment, training, procurement and supporting
Indigenous enterprises. Pre-employment training,
employment, career development and retention
of Indigenous employees are key to this.
We have set targets to achieve Indigenous
employment of 8 per cent in our Australian
workforce by the end of FY2025, 10 per cent in
our workforce in Chile by the end of FY2026 and
20 per cent in our Potash workforce in Canada by
the end of FY2027.
Indigenous employment within our employee
and contractor workforce(5) as at 30 June 2021
was 7.2 per cent in Australia, 7.5 per cent at
our operations in Chile and 13.7 per cent at
our Jansen Potash Project in Canada.
LGBT+ inclusion
Our LGBT+ ally employee inclusion group, Jasper,
was established in 2017 as a natural extension of
our inclusion and diversity aspirations and to reflect
Our Charter value of respect. The membership
base of LGBT+ employees and allies has grown
substantially with eight regional chapters globally.
In February 2021, we launched our Gender
Affirmation Policy and leader toolkit outlining how
we will support employees affirming their gender.
Flexible working
Our focus on flexible working over the past few
years assisted our office-based workers to adapt
to remote working requirements caused by the
COVID-19 pandemic.
We expect to maintain a hybrid working model for
employees based in corporate offices, allowing
office and home-based working arrangements,
while requiring 30 to 50 per cent of their work to be
based in the office (excluding times when COVID-
19-related workplace restrictions are in place)
depending on the nature of their work.
We also understand many site-based employees
are in roles that by their very nature cannot be
performed remotely. We will continue to seek to
provide flexible working through part-time and
job-share arrangements, flexible rosters and
career breaks.
Employee relations
Our four key focus areas for employee relations are:
– ensuring we comply 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
– creating solid relations with our workforce based
on a culture of trust and cooperation
During FY2021, Minerals Americas participated
in seven collective bargaining processes,
which were important to enable our business
objectives in relation to financial performance,
organisational capabilities, culture change and
behaviour management.
Escondida signed three collective bargaining
agreements: with the supervisors’ union for
36 months (1 October 2020 to 30 September
2023), the Intermel (Operators and Maintainers)
union for 24 months (1 April 2021 to 31 March
2023) and Escondida and Union No. 1 (Operators
and Maintainers) for 36 months (2 August
2021 to 1 August 2024). Spence signed two
36-month collective bargaining agreements:
with the supervisors’ union (1 December 2020
to 30 November 2023) and the Operator and
Maintainers union (1 June 2021 to 31 May 2024).
Cerro Colorado executed a collective agreement
for 36 months with the supervisors’ union (1 June
2021 to 31 May 2024).
The Specialists and Supervisors Union for BHP
Chile Inc. invoked article 342 of the Chilean Labor
Code, under which employees had their current
entitlements under existing collective agreement
preserved for the next 18 months (June 2021 to
December 2022). In the collective bargaining
between BHP Chile Inc. and the Specialists
and Supervisors Union, there were 13 days of
legal strike action (27 May 2021 to 8 June 2021).
Contingency plans were put in place to hand over
management of the control rooms back to the
operations and planned maintenance activities
were undertaken ahead of time, resulting in no
operational downtime due to this strike.
Our people policies
Our Charter is the foundation of the work we do
at BHP. 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.
Through these documents, we make it clear that
discrimination on any basis is not acceptable and
we give full and fair consideration to applications
for employment received from all candidates,
having regard to their particular aptitudes
and abilities.
In instances where employees require support
for a disability, we work with them to identify roles
that meet their skills, experience and capability,
and offer retraining where required.
Our Human Rights Policy Statement outlines our
commitment to respecting human rights, which
includes rights related to workplace health, safety
and labour. We commit to operating in a manner
consistent with the terms of the International
Labour Organization Declaration on Fundamental
Principles and Rights at Work.
The Our Requirements standards outline the
mandatory minimum standards we expect of
those who work for or on behalf of BHP.
Negotiations to renew the collective agreements
with Cerro Colorado Operators and Maintainers
union is expected to be completed in the first
quarter of FY2022.
Impacts and challenges from COVID-19
related to our people
The impact of COVID-19 and the resulting
measures taken by governments within Australia to
control its spread, resulted in changes to working
patterns for our employees and contractors.
In Australia and Chile, there was an increase
in unplanned absenteeism due to COVID-19
restrictions. As a result of the COVID-19 restrictions,
we implemented a range of employee measures
across our business to reduce the number of
workers required onsite, such as remote working
arrangements, increased health and safety
requirements, vaccination campaigns and
hybrid working.
With state border closures restricting the
mobilisation of employees and contractors to our
operating sites in Australia, changes to rosters and
hours of work were made to ensure operational
requirements for essential work were met.
There has also been a further extension of flexible
work options for employees and contractors in
Australia in response to government-imposed
lockdowns preventing them from attending their
normal place of work. These flexible work options
included staggered start times, working from
home and reduced working hours. Our contractor
workforce was reduced after the Spence Growth
Option (SGO) transitioned to the operation.
For information on the impact
of COVID-19 to our workforce
refer to section 1.13.5
(5) Based on a ‘point in time’ snapshot of employees
and labour hire contractors as at 30 June 2021.
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.
More information on people
is available at bhp.com/people
BHP
Annual Report 2021
31
Strategic Report1GovernanceFinancial StatementsAdditional Information234 1.13 Sustainability
Our commitment to sustainability starts with our
purpose – to bring people and resources together
to build a better world.
1.13.1 Our sustainability
approach
Our products support global development and
many aspects of modern life, and we expect
many will play an essential role as the world
decarbonises. We also understand there will
be times when we must make difficult choices
involving trade-offs, some of which may lead
to differences of opinion and concern among
some stakeholders. While we seek to gain and
maintain the support of all our stakeholders,
we also respect the right of every stakeholder
to disagree with a decision or choice we
may make.
There may be adverse impacts in the
production and use of our products, and
while our aim is to avoid them, the nature of
our activities and products means this will not
always be possible. We seek to minimise and
mitigate these impacts where we can and look
for ways to contribute to the long-term health
of society and the natural environment.
We view our management of sustainability
as core to our efforts to generate social
value including:
– putting the health and safety of our people first
– being environmentally responsible
– respecting human rights
– supporting the communities where
we operate
We recognise sustainability is integral to the
work we do at BHP. We believe it leads to higher
performance by making us more productive
and safe.
Our approach to sustainability is defined by
Our Charter and governed through the 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.
Across the Group, we embed sustainability
performance measures through our public
five-year sustainability targets. Achieving these
targets and working towards our goals aligns
with our commitments to the Paris Agreement
goals and the United Nations Sustainable
Development Goals (UNSDGs). It also drives
improvement in our sustainability performance.
Our current five-year public sustainability
targets conclude at the end of FY2022, and we
are developing new targets. We have already set
a climate change target to reduce operational
greenhouse gas (GHG) emissions (Scope 1 and
Scope 2 from our operated assets) by at least
30 per cent from FY2020 levels(1) by FY2030.
Our long-term goal is to achieve net zero(2)
operational emissions by 2050.(3)
We commit to several sustainability
frameworks, standards and initiatives and
disclose data according to their requirements.
Our sustainability reporting, including on our
website is prepared in accordance with the
Global Reporting Initiative (GRI) Standards
comprehensive-level reporting,(4) the
International Council on Mining and Metals
(ICMM) Sustainable Development Framework,
the Task Force on Climate-related Financial
Disclosures (TCFD) recommendations and
the Sustainability Accounting Standards
Board (SASB) Metals and Mining standard.
It also serves as our United Nations Global
Compact (UNGC) Communication on
Progress on implementation of the UNGC
Ten Principles and support for its broader
development objectives.
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.
For more information about the
Sustainability Committee and
its work refer to section 2.1.11
There is a growing number of sustainability
standards we commit to voluntarily or as
part of our memberships. In FY2021, we
completed a number of self-assessments
across different operated assets for the ICMM
Mining Principles and associated performance
expectations. In October 2020, BHP signed
a letter of commitment to the CopperMark(5)
assurance process for our copper producing
assets (Olympic Dam, Escondida and Spence)
and completed self-assessments as part of
this commitment.
(1) The 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.
(2) Net zero includes the use of carbon offsets as required.
(3) These positions are expressed using terms that are defined in the Glossary, including the terms ‘net zero’, ‘target’ and ‘goal’.
(4) Our GRI Content Index is available at bhp.com/FY21ESGStandardsDatabook
(5) https://www.bhp.com/media-and-insights/news-releases/2020/11/bhp-commits-to-copper-mark/.
32
BHP
Annual Report 2021
1.13.2 Our material sustainability issues
Sustainability materiality assessment
Each year we identify the sustainability issues most material to our business and stakeholders. We use this assessment to help inform our sustainability
strategies and to ensure the sustainability disclosures in our Annual Report include the issues of most interest to our business and stakeholders in line
with the GRI Standards Reporting Principles.
The materiality assessment considers internal and external stakeholder perspectives and the economic, social, environmental and cultural impacts
of our activities. We identified over 30 material sustainability issues as part of our materiality assessment in FY2021.
Of those, the issues shown below and disclosed in this Annual Report were identified as the most material issues to BHP and our stakeholders.
The below table also covers our requirements under the UK Companies Act 2006.(1)
More information about our materiality assessment is available at
bhp.com/materialityassessment
Material sustainability issues
Employees
People and culture
Refer to section 1.12
Workforce safety
Refer to section 1.13.4
Workforce health
Refer to section 1.13.5
Environmental
matters
Climate change
Refer to section 1.13.7
Portfolio resilience to
climate change
Refer to section 1.13.7
Water
Refer to section 1.13.13
Environment
Refer to section 1.13.12
Land and biodiversity
Refer to section 1.13.14
Social matters and
human rights
Indigenous peoples
Refer to section 1.13.10
Human rights
Refer to section 1.13.9
Local community
engagement
Refer to section 1.13.8
Community livelihoods
and social investment
Refer to section 1.13.11
Anti-corruption and
anti-bribery matters
Other
Ethics and
business conduct
Refer to section 1.13.6
Our conduct
Refer to section 2.1.15
Critical incident
risk management
Refer to sections 1.9 and 1.15
Tailings, tailings storage
facilities (TSF)
Refer to section 1.13.15
Compliance with laws
and regulation
Refer to sections 2.3.17 and 4.8.2
Sustainability governance
Refer to section 2.1.11
Policies and standards available online(2)
Our Code of Conduct
Our Requirements for
Safety standard
Our Requirements for
Health standard
Our Requirements for
Environment and Climate
Change standard
Water Stewardship
Position Statement
Climate Change
Position Statement
Our Requirements
for Community
Human Rights
Policy Statement
Indigenous Peoples
Policy Statement
Indigenous
Peoples Strategy
Principal risks that have key links to the matters mentioned above(3)
Our Code of Conduct
Our Requirements
for Supply (Minimum
requirements for suppliers)
standard
Our Charter
Sustainability Committee
Terms of Reference
Tailings Storage Facility
Policy Statement
Operational events
Refer to section 1.16
Inadequate
business resilience
Refer to section 1.16
Significant social or
environmental impacts
Refer to section 1.16
Low-carbon transition
Refer to section 1.16
Inadequate business
resilience Refer to section 1.16
Significant social or
environmental impacts
Refer to section 1.16
Ethical misconduct
Refer to section 1.16
Operational events
Refer to section 1.16
Ethical misconduct
Refer to section 1.16
Non-financial key performance indicators
Refer to section 1.13.3, for details of our key performance indicators. In addition, details of our sustainability performance metrics can be found in the sections referred to below.
People performance data
Refer to section 4.8.1
Health and safety
performance data
Refer to section 4.8.2
Environment performance
Refer to data section 4.8.4
Climate change
performance data
Refer to section 4.8.5
Water performance data
Refer to section 4.8.6
Society performance data
Refer to section 4.8.3
Ethics and
business conduct
Refer to section 1.13.6
Our sustainability
performance:
Non-financial KPIs
Refer to section 1.13.3
(1) We comply with the Non-financial Reporting Directive requirements and therefore report sustainability matters from sections 414CA and 414CB of the UK Companies Act 2006.
This table sets out where relevant information is located in this Annual Report.
(2) 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.
(3) For further information on BHP’s principal risks, refer to section 1.16.
BHP
Annual Report 2021
33
Strategic Report1GovernanceFinancial StatementsAdditional Information234 1.13 Sustainability continued
1.13.3 Our sustainability performance: Non-financial KPIs
Our five-year sustainability targets and FY2021 performance
Target
Zero work-related fatalities
FY2021 result
Workplace fatalities
0
l
e
p
o
e
P
i
y
t
e
c
o
S
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
Zero significant community events(10)
Total recordable injury frequency decreased by
11%
compared to FY2020
Occupational exposures
70%
reduction compared to FY2017 baseline
FY2021
0
Not less than 1 per cent of pre-tax profits(11) invested
in community programs that contribute to the quality
of life in the communities where we operate and
support the achievement of the UN Sustainable
Development Goals
Social investment spend
US$174.8m(12)
By FY2022, implement our Indigenous Peoples
Strategy across all our operated assets through the
development of Regional Indigenous Peoples Plans
Regional Indigenous People Plans being
implemented across Australia (Reconciliation
Action Plan (RAP)) and North and South America
e
t
a
m
i
l
C
By FY2022, maintain operational (Scope 1 and Scope 2)
greenhouse gas emissions at or below FY2017 levels(15)(16)
while we continue to grow our business
e
g
n
a
h
c
Zero significant environmental events(10)
Reduce FY2022 withdrawal of fresh water(17)
by 15 per cent from FY2017 levels
t
n
e
m
n
o
r
i
v
n
E
Greenhouse gas emissions
16.2 MtCO2-e
While our annual emissions are currently higher
than the FY2017 adjusted baseline, our GHG
emissions forecasts suggest we are on track
to meet our FY2022 target
FY2021
0
27%
freshwater withdrawal reduction
from FY2017 baseline(18)
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,
including pilots and approaches to data
validation in collaboration with others.
On track to deliver by end of FY2022
1
2
1
0
0
4.2
4.4
4.7
4.2
3.7
4,266
3,032
2,192
1,744
1,280
0
0
0
0
0
Year-on-year
FY2017(1)
FY2018
FY2019(2)
FY2020
FY2021
FY2017(4)
FY2018(4)
FY2019(5)
FY2020
FY2021
Adjusted FY2017 baseline
FY2018
FY2019(8)
FY2020
FY2021(9)
FY2017
FY2018
FY2019
FY2020
FY2021
FY2017(13)
FY2018
FY2019(14)
FY2020
FY2021
FY2017(15)
FY2018(16)
FY2019(16)
FY2020(16)
FY2021
FY2017
FY2018
FY2019
FY2020
FY2021
US$80.2 million
US$77.1 million
US$93.5 million
US$149.6 million
US$174.8 million
14.6 million
tonnes carbon dioxide
equivalent (MtCO2-e)
17 MtCO2-e
15.9 MtCO2-e
15.9 MtCO2-e
16.2 MtCO2-e
0
0
0
0
0
Adjusted FY2017 baseline(18) 156,120 ML
140,515ML
FY2018
155,570ML
FY2019
126,997ML
FY2020
113,444ML
FY2021
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
(11) Our voluntary social investment is calculated as 1 per cent of the average of the previous
assets to 28 February 2019).
three years’ pre-tax profit.
(2) FY2019 data includes Discontinued operations (Onshore US assets) to 28 February 2019
(12) Expenditure includes BHP’s equity share for operated and non-operated joint ventures,
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) FY2017 and 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) As of FY2021, the Occupational Exposure Limit for Coal was reduced to 1.5 mg/m3
compared to 2.0 mg/m3 in previous years.
(10) A significant event resulting from BHP operated activities is one with an actual severity
rating of four or 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 management.
and comprises cash, administrative costs, including costs to facilitate the operation of
the BHP Foundation.
(13) FY2017 and FY2018 social investment figures includes Discontinued operations (Onshore
US assets).
(14) FY2019 social investment figure includes Discontinued operations (Onshore US assets)
to 31 October 2018 and Continuing operations.
(15) FY2017 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.
(16) FY2018 GHG data includes Continuing operations and Discontinued operations (Onshore
US assets). FY2019 GHG data includes Discontinued operations (Onshore US assets) to
31 October 2018 and Continuing operations and has been restated. FY2020 data has
been restated.
(17) 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.
(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, BMA and BMC and exclusion of hypersaline, wastewater,
entrainment, supplies from desalination and Discontinued operations (Onshore US assets)
in FY2019 and FY2020.
34
BHP
Annual Report 2021
1.13.4 Safety
Our highest priority is the safety of our workforce
and the communities where we operate.
Our safety performance
In FY2021, we continued to focus on strong
safety performance:
– no fatalities at our operated assets
– a decrease of 17 per cent in high-potential
injury frequency rate from FY2020.
The highest number of events with potential
for one or more fatalities were related to
vehicle and mobile equipment accidents.
High-potential injury trends will remain a
primary focus to assess progress against
our most important safety objective,
eliminating fatalities
– a decrease in total recordable injury
frequency (TRIF) of 11 per cent from FY2020.
The highest number of injuries is related
to slips, trips and falls for both employees
and contractors
– an increase in field leadership activities, which
occurred at a sustainable frequency rate of
9,400 activities per million hours worked
with over 1,573,000 activities completed in
the period and over 44,000 employees and
contractors participating in the program at
least once. Scheduled activities compared
to non-scheduled activities increased by
72 per cent from FY2020 and coaching
increased by 5 per cent
– we took a number of significant steps to
improve our controls to address sexual
assault and sexual harassment, however
we have further to go to fully stop this
behaviour from occurring across BHP
– no safety fines were received at our
operated assets in FY2021
Our results were achieved through a sustained
focus on improving our management of risk
through new and existing programs including:
– Fatality Elimination Program
– Integrated Contractor Management Program
– Field Leadership Program
Fatality Elimination Program
In FY2021, we introduced our Fatality Elimination
Program to enable a step change towards our
goal of no fatalities across our business.
This replaced existing local frameworks and
provides a standardised way of working with
contractors to drive best practice. To embed
the standard, a number of initiatives and tools
have been developed:
Fatality elimination is not a new priority for us.
We have been seeking to improve our safety
performance over a number of years and
more recently, have considerably reduced
high potential injuries. However, there is more
to do and we are taking additional steps
to systematise a common set of controls.
In FY2021, the Fatality Elimination Program:
– engaged subject-matter experts and mining,
equipment, technology and services (METS)
organisations to provide control solutions
to our top 10 safety risks
– identified over 60 recommended controls
for our top 10 safety risks, including new
controls and material improvements to
existing controls
– conducted assessments at our operated
assets and relevant functions against the
recommended controls to determine the
actions that need to be taken
– Our Scope of Work Library is an online
resource containing best practice
examples for different types of contractor
engagements. This assists our contractor
partners to better understand the work
required at our sites, enabling them to
assign contractors with the right skills
and competencies to perform the work.
– To assist in defining the minimum
requirements for key roles, governance
and process routines, we introduced an
operational tiering model. The model
factors in work scope, operational safety
risks and contract arrangements to inform
the robustness of process requirements,
including key performance indicators.
– We developed a specific contractor
perception survey to ensure we receive
contractor feedback on our culture and
their experience working at BHP.
– established a global project team to
– We developed systems to support the
prioritise and deliver a global five-year
fatality elimination roadmap
– commenced planning to update the Our
Requirements for Safety standard and
coordinate a selection of control and human
performance improvement initiatives in FY2022
Integrated Contractor
Management Program
Our Integrated Contractor Management Program
is designed to make it safer and easier for our
contractors to work with us. Introduced in
FY2020, the program is focused on building
long-term mutually beneficial relationships with
our contractors, integrating and simplifying
processes and systems, and creating an inclusive,
respectful and caring workforce culture.
contractor management process to improve
supervision and training of contractors across
our operated assets. A pilot was conducted
at one of our Australian operated assets
to ensure the system was fit-for-purpose
before broader implementation.
Field Leadership Program
Leaders spending time in the field is vital
to maintaining safe operations. Our global
Field Leadership Program involves leaders
engaging with workers in the field to drive
a common approach to improving health,
safety and environment (HSE) performance.
These engagements are used to verify critical
safety controls are in place, being applied and
are effective in reducing the risk of fatalities.
In 2021, we launched our new global contractor
performance standard, establishing global
requirements for how we work with contractors
(including subcontractors and consultants).
The program encourages the workforce to
provide feedback to their leaders about safety
and to look out for the safety of themselves
and their colleagues.
Performance data – workforce health and safety for FY2021(1)
High-potential injury events(2)
Year ended 30 June
High potential injury events
2021
33
2020
42
2019
50
High-potential injury frequency(3)
Total recordable injury frequency
Year ended 30 June
Total recordable injury frequency(4)
Employees
Contractors
0.02
0.05
2021
3.7
2020
4.2
2019
4.7
Total recordable injury frequency(3)
Employees
Contractors
0.67
0.80
(1) FY2019 data includes Discontinued operations (Onshore US assets) to 28 February 2019 and Continuing operations.
Due to the lag nature of incident reporting and subsequent verification, final results may vary post reporting. Prior year
data has not been adjusted.
(2) High-potential injury includes injuries with fatality potential. The basis of calculation revised in FY2020 from event count
to injury count as part of a safety reporting methodology improvement.
(3) Employee and contractor frequency per 200,000 hours worked.
(4) Combined employee and contractor frequency per 1 million hours worked.
In FY2021 we:
– increased supervisor time in the field through
the BHP Operating System (BOS) and
reduced the large spans of control that some
supervisors had over their teams
– continued to improve the quality of field
leadership activities by increasing coaching
and delivery of field leadership engagements
at our operated assets
– focused on ensuring our leaders were
proactively scheduling field leadership
activities and executing them to plan to
ensure adequate verification of all fatality
risks across our operated assets
– developed a global, standardised field
leadership procedure designed to increase
the effectiveness of field leadership activities
by reducing variances in practices across
the business
BHP
Annual Report 2021
35
Strategic Report1GovernanceFinancial StatementsAdditional Information234 1.13 Sustainability continued
– conducted field leadership on COVID-19
controls, which increased our understanding
of control application and effectiveness by
engaging our workforce for direct feedback
1.13.5 Health
We are committed to protecting the health and
wellbeing of our employees and contractors.
These are conditions impacting the
musculoskeletal system and connective tissues
caused by repetitive work-related stress or strain or
exposure over time. Musculoskeletal illness does
not include disorders caused by slips, trips, falls or
similar incidents.
The main change in the incidence of
occupational illness in FY2021 as compared to
FY2020 was an increase in the rate of employee
cases of NIHL reported by our operated assets
in South America. This was due to an increase in
testing for noise induced hearing loss this year
because of a suspension of testing activities
due to COVID-19 impacts last year.
Our occupational illness data excludes
cases of COVID-19 among our employees
and contractors. In settings of high levels of
community transmission and with an evolving
understanding of the epidemiological criteria
for infection and emerging COVID-19 variants
with evidence of increased transmission, it is
difficult to conclude, with reasonable certainty,
that a person was infected because of work-
related activities or exposure. For information
on our response to COVID-19, refer to the
‘COVID-19’ section on the next page.
We set clear mandatory minimum standards
to identify and assess health risks, manage their
impact and monitor the health of our people.
Occupational illness
The reported incidence of occupational illness(1)
for employees in FY2021 was 308 which was
4.36 per million hours worked, representing a
minor increase compared to FY2020 which was
4.30 per million hours worked.
For our contractor workforce, the reported
incidence of occupational illness was 180 which
was 1.87 per million hours worked, an increase
of 31 per cent compared with FY2020. Due to
regulatory regimes and limited access to data,
we do not have full oversight of the incidence
of contractor noise-induced hearing loss
(NIHL) cases.
Musculoskeletal illness accounts for the majority
of our reported occupational illnesses.
Occupational illness
Per million employee hours worked(1)(2)(3)
5.0
4.0
3.0
2.0
1.0
0
3
7
0
.
1
7
2
.
8
4
.
1
1
5
0
.
8
4
2
.
9
1
.
1
2
7
0
.
5
5
2
.
1
1
.
1
7
8
0
.
4
8
2
.
9
5
0
.
5
7
.
0
9
6
2
.
2
9
0
.
FY2017
FY2018
FY2019
FY2020
FY2021
Noise-induced hearing loss Musculoskeletal illness Other Illnesses
Occupational illness
Per million contractor hours worked(1)(2)(3)(4)
2.25
2.00
1.75
1.50
1.25
1.00
0.75
0.50
0.25
0
8
6
0
.
4
2
.
1
6
5
0
.
6
0
.
1
1
5
0
.
2
9
0
.
7
5
0
.
0
3
.
1
4
4
0
.
7
9
0
.
2
0
0
.
FY2017
FY2018
FY2019
FY2020
FY2021
Noise-induced hearing loss Musculoskeletal illness Other Illnesses
(1) The data for FY2017 and FY2018 includes Continuing and Discontinued operations (Onshore US assets). FY2019 data
includes Discontinued operations (Onshore US assets) to 31 October 2018 and Continuing operations.
(2) Occupational illnesses excludes COVID-19 related data.
(3) Due to the lag nature of incident reporting and subsequent verification, final results may vary post reporting. Prior year
data has not been adjusted .
(4) Due to regulatory regimes and limited access to data, we do not have full oversight of the incidence of contractor noise-
induced hearing loss (NIHL) cases.
– introduced sexual harassment field
leadership activities, which provided
information on progress and areas for
improvement in this space
Sexual assault and
sexual harassment
Our position on sexual assault and sexual
harassment is clear. This conduct is completely
unacceptable, contrary to our values and
unlawful. Over a number of years, we have
taken action to prevent sexual harassment
including through education, encouraging
reporting and security measures. While we
have made important progress, this continues
to be an issue at BHP and, as long as it does,
we must and will do more and we continue to
focus and invest in preventing this behaviour.
In 2018, we formally defined sexual assault
and sexual harassment as a health and safety
risk. As part of the risk assessment processes,
we engaged experts in health and safety,
harassment and inclusion and diversity.
We introduced a range of controls including
security measures such as on-site security
guards, additional CCTV, increased security
patrols in public areas and improved lighting,
with a further AU$300 million for planned
improvements to occur in FY2022. We have
also introduced trauma informed emergency
response, victim-centric investigations and a
dedicated support service that provides end-to-
end assistance and advice to anyone impacted
by sexual assault and sexual harassment.
We are committed to the full implementation
of all requisite controls in FY2022, and have
tied completion of actions to executive and
employee remuneration. We also recognise that
we can improve the coordination of our work
to address this issue and have set up a project
management office for this purpose.
Sexual assault and sexual harassment
are risks for BHP and the industry, and we
are working with others in the industry
to address these risks, as we have done
with other health and safety matters.
We participated in the Minerals Council
of Australia Taskforce that developed and
released an industry statement and Code of
Conduct aimed at eradicating sexual assault
and sexual harassment from our industry.
We also made a submission to the Inquiry
in Western Australia into sexual harassment
against women in the FIFO mining industry
to contribute to the industry addressing
this issue which can be found at BHP
Submission – WA Inquiry in relation to Sexual
Harassment in FIFO mining industry.pdf
(parliament.wa.gov.au).
For more information on reported cases
refer to section 1.13.6
More information on safety is
available at bhp.com/safety
(1) An illness that occurs as a consequence
of work-related activities or exposure.
36
BHP
Annual Report 2021
Occupational exposures
Occupational exposure limits (OELs) for our
most material exposures are set according to the
latest scientific evidence, which for a number of
agents, such as diesel particulate matter (DPM),
resulted in lower limits than the then regulatory
requirements. Where exposures potentially
exceed regulatory limits or our stricter limits,
respiratory protective equipment is required.
For our most material exposures to DPM, silica
and coal mine dust, we have a five-year target
to achieve, by FY2022, a 50 per cent reduction
in the number of workers potentially exposed(1)
as compared to our 30 June 2017 baseline
exposure profile.(2)(3) 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 Annual Report is based
on these limits and in all cases discounts the
effect of personal protective equipment.
In FY2021, material exposures overall reduced
by 70 per cent compared to the adjusted
FY2017 baseline which is better than our FY2020
target. This includes a reduction of 29 per cent
compared to FY2020 in the number of workers
potentially exposed to silica in excess of our OEL
and this reduction was largely due to reduction
in exposures by our Minerals Americas operated
assets where there was a 35 per cent reduction
compared to the previous year.
In addition, work to control exposure to DPM
at Nickel West and Olympic Dam resulted in
a 12 per cent reduction compared to FY2020
in the number of workers potentially exposed
to DPM. No potential exposures in excess of
our OEL for respirable coal mine dust were
reported in FY2020; however, in FY2021 we
have identified a workgroup as being potentially
exposed in excess of our OEL at one of our coal
operated assets. We are committed to reducing
this potential exposure to below the OEL in the
next reporting period.
Coal mine dust lung disease
In FY2021, there were four coal mine dust
lung disease (CMDLD)(4) claims accepted,
which consisted of two current workers
and two former workers at our BMA asset.
Mental health
The mental health of our people continues to
be a focus. In FY2021, good progress was made
with implementing our Group-wide Mental
Health Framework to raise awareness of mental
wellbeing, reduce stigma and increase the
capacity of our leaders to recognise and support
individuals experiencing mental illness.
We also became a founding member of
the Global Business Collaboration for Better
Workplace Mental Health, which seeks
to advance progress across the globe by
committing senior leaders to a pledge to
create mentally healthy workplaces.
To support the proactive management of
mental wellbeing and give our workforce the
tools and skills they need to build resilience and
positive mental health, we provide and promote
the Employee Assistance Program, our mental
health toolkit, Thrive, education and awareness
campaigns (including stigma reduction) and
the BHP Resilience Program.
In May 2021, we held our inaugural Mental
Health month, with the aim of increasing mental
wellbeing in the communities where we operate
and encouraging everyone to support and look
out for one another. We also continue to support
global mental health campaigns, including World
Mental Health Day, R U OK? Day and Movember.
We plan to progress our efforts in FY2022 by
addressing psychosocial hazards in the workplace
using a risk management approach to further
support better workplace mental health.
COVID-19
Throughout FY2021, we continued to navigate
the challenges of the global COVID-19
pandemic and prioritise the health and safety
of our people and workplaces. This included
the removal of vulnerable workers from the
workplace and an increase in testing regimes
for site-based workforce during periods of high
community transmissions.
Across BHP’s global workforce,(5) we estimated
there were as many as 5,000 confirmed(6)
COVID-19 cases including three deaths, with
with around 1,100 of those confirmed cases
potentially infectious while at work(7) (figures for
persons potentially infectious while at work are
included irrespective of where infection may
have occurred). We recognise the significant
impact COVID-19 has had on the daily lives of
our people and the communities where we
operate and we offer our deep sympathies to
the families of our colleagues who tragically
were amongst the many people who have lost
their lives to COVID-19. Almost all confirmed
cases were from people in our Minerals
Americas workforce.
We conduct COVID-19 tests as part of our
workplace entry screening, which includes
mainly polymerase chain reaction (PCR) testing
and a small percentage of antigen testing.
In FY2021, we conducted 27,261 tests in our
Petroleum operated assets and 440,000 tests
in our Minerals Americas operated assets and
identified 248 and 2,277 confirmed cases
respectively. This included symptomatic and
asymptomatic cases that may not have been
identified otherwise.
Our support extended to areas impacted by high
community transmissions and reduced local
medical capabilities. This included establishing
telehealth services, in-home PCR testing,
emergency ambulance support, mental wellness
support and provision of medical support (e.g.
procurement of oxygen concentrators in India) to
support ill workers and their family members.
More information on health including a case
study on how we supported our people and
the communities where we operate through
COVID-19 is available at
bhp.com/health
1.13.6 Ethics and
business conduct
Our conduct
Our Code of Conduct (Our Code)(8) brings our
values to life so we can make the right choices
every day. It applies to everyone who works
for us or on our behalf. To ensure everyone
understands how Our Code applies and the
standards of behaviour we expect, annual
training is mandatory for all employees and
contractors. There are also consequences for
breaching Our Code and we encourage people
to speak up where a decision or action is not
in line with Our Code or Our Charter.
Our Code is available in five languages
and accessible at bhp.com
EthicsPoint is our confidential reporting tool
that is accessible to all, including external
stakeholders and the public, to report conduct
that may be unethical, illegal or inconsistent
with Our Code.
In 2021, 4,162 reports were received into
EthicsPoint (of these 3,541 were classified as
business conduct concerns(9)), representing
an increase of 52 per cent from FY2020.
This increase coincides with enhanced training
on Our Code and efforts to increase awareness
of the requirement for line leaders to log all
concerns relating to Our Code in EthicsPoint.
Of the reports received, 42 per cent were made
anonymously,(10) compared with 53 per cent in
FY2020, a reduction from FY2020, which may
indicate that reporters have greater confidence
in the EthicsPoint process. Of the total reports
received, 38 per cent contained one or more
substantiated allegations.(11)
(1) For exposures exceeding our FY2017 occupational exposure limits discounting the use of personal protective equipment, where required.
(2) The baseline exposure profile is derived through a combination of quantitative exposure measurements and qualitative assessments undertaken by specialist occupational hygienists
consistent with best practice as defined by the American Industrial Hygiene Association.
(3) The baseline has been adjusted to exclude Discontinued operations (Onshore US assets).
(4) 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.
(5) Employees and contractors engaged by BHP.
(6) A person with a laboratory confirmation of COVID-19 infection, using polymerase chain reaction (PCR) test methodology, irrespective of clinical signs and symptoms.
(7) Potentially infectious while at work is 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.
(8) https://www.bhp.com/our-approach/our-company/our-code-of-conduct/.
(9) Some EthicsPoint reports are enquiries, or are not related to business conduct concerns, or are a duplicate of an existing report.
(10) This excludes reports not containing a business conduct concern, and excludes reports logged by leaders on behalf of others.
(11) The calculation is based on reports received and completed in FY21, containing one or more substantiated allegations.
BHP
Annual Report 2021
37
Strategic Report1GovernanceFinancial StatementsAdditional Information234 1.13 Sustainability continued
Business conduct cases
by issue type FY2021
Harassment and bullying, including
sexual harassment and sexual assault
Fraud
Discrimination
Other(1)
Health, safety or environment breach
Ask a question
Retaliation for speaking up
61%
10%
8%
7%
6%
6%
2%
(1)
Inclusions are anti-competitive behaviour; attempts to
identify an anonymous reporter, community relations
or human rights breach; cybersecurity or data privacy
breach; deficiencies in a business conduct investigation;
improper political or governmental conduct;
inappropriate or unauthorised external communication;
information on other support service providers; physical
violence; and trade control breach.
Transparency and accountability
We understand the connection between:
– the disclosures we make about the taxes
and royalties we pay to governments, which
enable the public to see what we have paid
– transparency of the contracts we have
with governments which allows comparison
of our actual payments against what is
required to be paid
We support initiatives by governments of
the countries where we operate to publicly
disclose the content of our licences or
contracts for the development and production
of oil, gas or minerals that form the basis of
our payments to government, as outlined
in the Extractive Industries Transparency
Initiative (EITI) Standard.
Other key initiatives include our work in
partnership with Transparency International,
our representation on the Board of the EITI,
our support for ultimate beneficial ownership
transparency, our financial support for and
Steering Committee membership of the Bribery
Prevention Network (in Australia) and our
funding of the BHP Foundation, including its
Natural Resource Governance Global Program.
We believe these transparency initiatives will
reduce corruption risk and improve our ability
to operate and compete for resources.
Anti-corruption
We are determined to play a significant role
in the global fight against corruption in the
resources industry. Our Charter and Our Code
provide the framework for our anti-corruption
compliance program. All activities that potentially
involve higher risks of exposure to corruption
require review or approval by our Ethics and
Compliance function.
This function has a mandate to design and
govern our compliance frameworks for key
38
BHP
Annual Report 2021
compliance risks, including anti-bribery and
corruption. The function is independent of our
assets and regions, and reports to the Chief
Legal Governance and External Affairs Officer.
The Chief Compliance Officer reports quarterly
to the Risk and Audit Committee on ethics and
compliance issues and meets at least annually
with the Committee Chair.
Our Ethics and Compliance function also
participates in all risk assessments in respect
of operated assets or functions that are
considered to carry material anti-corruption
risks. In FY2021, the Ethics and Compliance
team provided input into 41 risk assessments.
As part of our commitment to anti-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. Our people must take care
that third parties acting on our behalf do not
violate anti-corruption laws. Disciplinary action,
including dismissal or termination of contractual
relationships, may follow from a breach
of these requirements.
We regularly review our anti-corruption
compliance program to ensure it meets the
requirements of the US Foreign Corrupt
Practices Act, the UK Bribery Act, the Australian
Criminal Code and the applicable laws and
regulatory developments 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.
Recognising the challenges posed to normal
ways of working by COVID-19, in FY2021 we
increased the frequency of our compliance
monitoring to support the timely identification
of activities that could potentially present
an enhanced compliance risk. By regularly
calibrating our compliance processes, we work
to ensure optimal resource allocation to areas
presenting the highest corruption risks to our
business. Our efforts are complementary to
the BHP Foundation’s global partnership with
Transparency International, which is supporting
governments to identify and address corruption
risks in mining licencing processes.
Anti-corruption training is provided to all
employees and contractors as part of mandatory
annual training on Our Code. In FY2021, additional
risk-based anti-corruption training was also
undertaken by 3,879 employees and contractors,
as well as employees of certain of our business
partners and community partners.
More information on ethics and
business conduct is available at
bhp.com/ethics
1.13.7 Climate change
and portfolio resilience
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. Providing access to
affordable and clean energy and other products
is essential to meet sustainable development
goals. At BHP, we advocate for effective actions
in line with the Paris Agreement goals while
recognising the challenge of achieving these
goals is of global scale and historic complexity.
In September 2021, BHP published its Climate
Transition Action Plan 2021, which sets out
our strategic approach to our goal to reduce
operational GHG emissions (Scope 1 and Scope
2 from our operated assets) to net zero(2) by
2050, and our enhanced Scope 3 position for
GHG emissions in our value chain. The Plan,
together with more information on our climate
commitments, actions and performance,
including our Climate Change Report 2020,
is available at bhp.com/climate.
More information on our climate
commitments, actions and performance,
including our Climate Change Report
2020, is available at bhp.com/climate
Governance and management
Climate change is a material governance
and strategic issue for us. Our Board is actively
engaged in the governance of climate change
issues, including our strategic approach and
performance against our commitments,
supported by the Sustainability Committee
and the Risk and Audit Committee (for more
information, refer to section 2.1).
Below the level of the Board, key management
decisions are made by the CEO and
management, in accordance with their
delegated authority. Management has
primary responsibility for the design and
implementation of our climate change strategy
and execution of that strategy is overseen
by the Climate Change Steering Committee.
BHP has a dedicated Climate Change Team
that is responsible for advising the Executive
Leadership Team. The team collaborates with
BHP’s functions and asset teams, external
partners and industry to develop practical
climate change solutions, designed to preserve
and unlock long-term value for BHP. It regularly
prepares information and advice for the
Executive Leadership Team, Sustainability
Committee, Risk and Audit Committee and
the Board on climate-related strategy, risks and
performance against climate-related metrics.
It also monitors key indicators and signposts
against our appetite for climate change-related
risks (both threats and opportunities).
Addressing climate risks
BHP applies a single, Group-wide approach
to the management of risk, known as the
Risk Framework. When new and emerging
risks are identified, each is assigned an
owner in the part of the business where the
risk occurs. Risks are assessed to determine
their potential impacts and likelihood, enable
prioritisation and determine risk treatment
options. We then implement controls designed
to prevent, reduce or mitigate downside risks
and increase the likelihood of opportunities
being realised. Risks and controls are reviewed
periodically and on an ad-hoc basis to evaluate
performance of the controls against the risks.
(2) Net zero includes the use of carbon offsets as required.
Climate-related risks can be grouped in two
categories: transition risk and physical risk.
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. For more information on BHP’s
exposure to and management of transition
risks, refer to section 1.16.
Physical risks refer to acute risks that are event-
driven, including increased severity of extreme
weather events, and chronic risks resulting
from longer-term changes in climate patterns.
For more information on BHP’s exposure to
and management of physical risks, refer to
‘Adaptation to physical risks’ below in this
section and to section 1.16.
Adaptation to physical risks
BHP’s vision for adapting to the physical risks
of climate change is to take a proactive and
collaborative approach to building the climate
resilience of our operated assets, investments,
portfolio, supply chain, communities and
ecosystems, to achieve mutually beneficial
outcomes for our stakeholders.
In FY2021, following external benchmarking and
internal engagement, we finalised our updated
Adaptation Strategy as set out below.
The focus in FY2021 was on enhancing
governance structures, developing a more
consistent and comprehensive approach to
the use of climate data, and improving how we
integrate physical climate risk within the existing
risk management process in order to identify
and resource priority actions.
In FY2022, we intend to build these priority
actions into planning and capital allocation
processes, and continue to analyse identified
risks in more detail. This will provide the basis from
which we can develop our ability to report on
specific material physical risks and their potential
financial impacts (including material expenditure
on climate change adaptation) in later years.
Portfolio analysis and
capital alignment
The world must undergo multiple transitions
arising from commitments to reduce GHG
emissions. These transitions are complex, multi-
faceted and could reasonably be expected to
manifest in unique ways across different regions,
reflecting heterogeneous local conditions.
However, we believe that together they comprise
a global transition to a lower-carbon economy
that can mitigate the impacts of climate change.
We see steps towards these transitions in the
emergence of electric mobility and the rapid
cost declines of renewable power generation.
Global accords such as the Paris Agreement and
subsequent government commitments suggest
these transitions are likely to accelerate.
The Paris Agreement has set an ambition to
pursue efforts to limit global temperature
increases to 1.5°C above pre-industrial levels,
which will require aggressive action to reduce
GHG emissions. Abatement commensurate
with limiting temperature increases to 1.5°C
would reduce the potential physical impact of
climate change on our assets, our employees,
our communities and our markets, and
potentially generate significant value for
our portfolio.
In the BHP Climate Change Report 2020,(1)
we described the impact on our business of
four divergent scenarios(2) across a range of
temperature outcomes, including our Paris-
aligned 1.5°C scenario.(3) Our most recent
portfolio analysis indicated that under our 1.5°C
scenario, the world would need around twice as
much steel and copper, and four times as much
nickel in the next 30 years as it did in the last 30.
Potash demand, required for higher agricultural
yields due to land use competition, also grows
under that scenario.
Today’s signposts do not yet indicate that the
appropriate measures are in place to drive
decarbonisation at the pace or scale required
to achieve the Paris Agreement goals. However,
as governments, institutions, companies and
society increasingly focus on addressing
climate change, the potential for a non-linear
transition and the subsequent impact on
opportunities and risk increases.
We intend to systematically integrate one
or more Paris-aligned scenarios (including
1.5°C scenarios) into our strategy and capital
prioritisation processes beginning in FY2022.
This will enhance our current approach, in
which our 1.5°C scenario is used to inform
and test strategic portfolio decisions.
More information on the BHP Climate
Transition Plan 2021, is available at
bhp.com/climate
Building blocks of our Climate Change Adaptation Strategy (FY2021 – 2025)
Intelligence
and capability
Risk
Strategy and
planning
Investment /
execution
Collective
action
Disclosure
Physical risks,
including
opportunities;
Adaptation
planning;
Internal
and collective
adaptation
actions
Governance
(1) https://www.bhp.com/climate
(2) Scenarios highlight critical elements of assumed future states and draw attention to the key factors that may drive future developments. They are hypothetical constructs, not forecasts,
predictions or sensitivity analyses. As they are a tool to enhance critical strategic thinking, a key feature of scenarios is they should challenge conventional wisdom about the future. In a world
of uncertainty, scenarios are intended to explore alternatives that may significantly alter the basis for ‘business as usual’ assumptions. 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.
(3) This scenario aligns with the Paris Agreement goals and requires steep global annual GHG emissions reductions, sustained for decades, to stay within a 1.5°C carbon budget. Refer to the BHP
Climate Change Report 2020 available at bhp.com for information about the assumptions, outputs and limitations of our 1.5°C Paris-aligned scenario. 1.5°C is above pre-industrial levels.
BHP
Annual Report 2021
39
Strategic Report1GovernanceFinancial StatementsAdditional Information234Enhance approach to collation and use of climate / climate-related data and information; Build knowledge and capabilityEnhance ownership and accountability for climate adaptationEnsure effective monitoring, reporting and compliance with requirementsIdentify and assess physical risks; Define adaptation measures for the short, medium and longer termEnhance adaptation plans; Integrate adaptation into operational and investment decisions through strategy, planning and evaluation frameworks Invest in technology, Nature-based Solutions (NbS) and operational changes to build resilience, realise opportunities and deliver multiple benefits for our business, surrounding communities and ecosystemsContribute to increasing the climate resilience of communities and ecosystems, and across our industry, supply chain and markets 1.13 Sustainability continued
Operational greenhouse gas
emissions and energy consumption
Our long-term goal is to achieve net zero(1)
operational GHG emissions by 2050. We have
also set a medium-term target to reduce
operational GHG emissions by at least
30 per cent from FY2020 levels(2) by FY2030.(3)
This reflects our commitment to decarbonising
BHP’s operations and a recognition that we
have a part to play in accelerating the global
pathway to decarbonisation.
We are also working to achieve our short-
term target for FY2022 to maintain our total
operational GHG emissions at or below FY2017
levels(4) while continuing to grow our business.
Our operational GHG emissions are measured
against our target performance based on an
operational control, market-based methodology.
We also disclose operational GHG emissions
by equity share and financial control in
section 4.8.5.
In FY2021, total operational energy consumption
increased 3 per cent from FY2020 due to
increased drilling activity in our Trinidad and
Tobago operations, the use of diesel generators
to provide power to our Angostura facility
during the Ruby project tie-in and increased
diesel usage at our Queensland Coal operated
assets. Building on our Light Electric Vehicle (LEV)
trials at Olympic Dam and Queensland Coal, we
have commenced LEV trials at Nickel West using
onboard battery power. This trial is anticipated to
reduce noise, heat and diesel particulate matter,
as well as consumption of fossil fuel. We have
increased the renewable component of our
energy consumption in FY2021 due to the start
of the renewable power purchasing agreement
(PPA) at Queensland Coal.
In FY2021, operational GHG emissions were
11 per cent higher than the adjusted FY2017
baseline of 14.6 MtCO2-e on a Continuing
operations basis, reflecting increased
production at our Minerals Australia operated
assets since FY2017. However, as a result of
actions taken in FY2020 and FY2021, particularly
securing the supply of renewable energy at
some operations, our forecasted operational
GHG emissions are currently tracking in line
with our FY2022 and FY2030 targets (see
Progress on decarbonisation, below).
Progress on decarbonisation
In FY2021:
– We signed a renewable PPA to supply up
to 50 per cent of our electricity needs at
the Nickel West Kwinana Refinery from the
Merredin Solar Farm.
– We secured firm renewable electricity via
a PPA to meet half of the electricity needs
across Queensland Coal mines from low-
emissions sources.
(1) Net zero includes the use of carbon offsets as required.
(2) 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.
(3) These positions are expressed using terms that are
defined in the Glossary, including the terms ‘net zero’,
‘target’ and ‘goal’.
(4) FY2017 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.
40
BHP
Annual Report 2021
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(3)
2021
32.6
0.2
6.3
25.5
0.6
10.3
9.1
42.9
0.1
Operational GHG emissions by source (MtCO2-e)(1)(2)(4)(5)(11)
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)(9)
Percentage of Scope 1 GHG emissions covered under
an emissions-limiting regulation(10)
Percentage of Scope 1 GHG emissions from methane
Scope 2 GHG emissions (location based)(7)
Carbon offsets retired(12)
Total operational GHG emissions (including carbon offsets)(12)
2021
10.0
6.2
16.2
16.2
2.2
81%
21%
5.0
0.3
15.9
2020
31.6
0.2
5.8
25.0
0.7
10.1
8.9
41.7
0.0
2020
9.6
6.3
15.9
15.9
2.0
80%
19%
5.1
2019
31.7
0.2
6.6
24.2
0.7
9.6
8.5
41.3
0.0
2019
9.7
6.2
15.9
15.5
2.4
75%
19%
5.1
(1) 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. FY2020 originally reported
data that has been restated is 9.5 MtCO2-e for Scope 1 GHG emissions and 15.8 MtCO2-e for total operational GHG emissions, due
to minor amendments to fugitive emissions from the coal operated assets as part of the annual reconciliation process for Australian
regulatory reporting purposes. FY2019 data that has been restated is 6.1 MtCO2-e for Scope 2 GHG emissions, 15.8 MtCO2-e for total
operational GHG emissions, and 15.3 MtCO2-e for total operational GHG emissions (adjusted for Discontinued operations) due to
minor amendments to market-based emission factors for Minerals Americas operated assets. Additionally, non-material adjustments
in prior year asset-level data and changes to presentation of the data has, in certain instances, resulted in minor impacts to the
rounding of data since it was previously reported.
(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 operational GHG emissions occurs
outside the UK and offshore area (as defined in the relevant UK reporting regulations). UK energy consumption of 99,762 kWh and
GHG emissions of 21 tCO2-e is associated with electricity consumption from our office in London. One TWh equals 1,000,000,000
kWh. Data has been rounded to the nearest 1 PJ or 0.1 TWh to be consistent with asset/regional energy information in this Annual
Report. In some instances, the sum of totals for sources, commodities and assets may differ due to rounding.
In FY2021 we have revised and tightened the definition of renewable energy consumption for our operations to better align with
our market-based GHG emissions reporting. This resulted in the restatement of operational consumption from renewable energy
sources figures. Previously reported numbers for FY2020 and FY2019 for this data were 0.01 TWh for both years.
(3)
(4) BHP currently uses Global Warming Potentials (GWP) from the Intergovernmental Panel on Climate Change (IPCC) Assessment
Report 5 (AR5) based on a 100-year timeframe for Minerals Australia and Petroleum. Minerals Americas currently use IPCC
Assessment Report 4 (AR4) GWP and will be transitioning to AR5 GWP in FY2022.
(5) Scope 1 and Scope 2 GHG 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. For more information, see BHP Scope 1, 2
and 3 GHG Emissions Calculation Methodology, available at bhp.com/climate. Data has been rounded to the nearest 10 ktCO2-e
or 0.1 MtCO2-e to be consistent with asset/regional GHG emissions information in this Annual Report. In some instances, the sum
of totals for sources, commodities and assets may differ due to rounding.
(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 GHG 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 emission factor is currently unavailable to account for grid electricity emissions remaining after removal of quantities directly
contracted between parties; this may result in double counting of low emissions or renewable electricity contributions across grid-
supplied consumers.
(8) Excludes Onshore US assets, which were divested in FY2019. Non-material acquisitions and divestments have not been included
in discontinued operations and are included in the Total.
(9) For this purpose, copper equivalent production has been calculated based on FY2021 average realised product prices for
FY2021 production, FY2020 average realised product prices for FY2020 production and FY2019 average realised product
prices for FY2019 production. Production figures used are consistent with energy and GHG emissions reporting boundaries (i.e.
BHP operational control) and are taken on 100 per cent basis.
(10) Scope 1 GHG emissions from BHP's facilities covered by the Safeguard Mechanism administered by the Clean Energy Regulator
in Australia and the distillate and gasoline GHG emissions from turbine boilers at the cathode plant at Escondida covered by the
Green Tax legislation in Chile.
(11) More information on the calculation methodologies, assumptions and key references used in the preparation of our Scope 1 and
Scope 2 GHG emissions data can be found in the BHP Scope 1, 2 and 3 GHG 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 and the BHP Climate Transition
Action Plan 2021 at bhp.com/climate.
(12) In FY2021, we have calculated an additional operational GHG emissions total for the reporting year including contributions from
the retirement of a quantity of carbon offsets. This figure has been calculated by subtracting the number of carbon offsets retired
(each equivalent to a single tonne of CO2-e reduced or ‘removed’ from the atmosphere) from the total GHG emissions reported
under our operational control boundary for the year. This is not intended to establish a recurrent approach. Further detail on our
approach to carbon offset use, and the specifics of the carbon offsets retired in FY2021, is provided at bhp.com/offsets-2021.
– We continued to implement PPAs for
Those goals are to:
We have therefore set these Scope 3 targets:(8)
renewable electricity commencing from
FY2022 at our Chilean copper operated
assets, Escondida and Spence, which are
on track to reach net zero Scope 2 GHG
emissions by the mid-2020s.
These agreements are intended to help meet
our FY2022 and FY2030 operational GHG
emissions targets. We regularly monitor our
forecasted GHG emissions to check we are
on track.
In FY2021, we partnered with Rio Tinto and Vale
to launch the ‘Charge on Innovation Challenge’,
a mining truck electrification initiative, facilitated
by Austmine. The initiative aims to develop
innovative charging infrastructure in parallel
with the development of battery-electric trucks.
In August 2021, BHP became a founding
member of Komatsu’s GHG Alliance, which
aims to develop commercially viable zero-
GHG emissions haul trucks. BHP will provide
engineering and technical resources to
Komatsu, enabling BHP’s real-time access
to technology in development and giving
Komatsu the opportunity to draw on BHP’s
mining expertise to accelerate its path to
market. Also in August 2021, BHP and TransAlta
announced plans to build two solar farms and
a battery storage system to help power the
Mt Keith and Leinster operations at Nickel West.
In FY2022, we intend to look for further
opportunities to collaborate with original
equipment manufacturers, source renewable
electricity for our Australian operated assets
and progress studies for diesel displacement
at our operated assets.
Value chain emissions
We recognise the importance of supporting
efforts to reduce emissions in our value chain.
In 2020, BHP set Scope 3 emissions goals
for 2030 for processing of our steelmaking
products and maritime transportation of
our products, supported by an action plan
and aligned to a long-term vision to support
the economy-wide transition necessary to
meet the Paris Agreement goals by working
with customers and suppliers to achieve
sectoral decarbonisation.
– Support industry to develop technologies and
pathways capable of 30 per cent emissions
intensity reduction in integrated steelmaking,
with widespread adoption expected post 2030;
– Support 40 per cent emissions intensity
reduction of BHP-chartered shipping of
our products.
In our Climate Transition Action Plan 2021,
we are building on these medium-term
goals. Our position reflects the challenges
and opportunities in line with our strategy for
increasing long-term portfolio exposure towards
future facing commodities. Our recent proposed
portfolio changes(1) are aligned with our strategic
approach to manage risk and maximise value.
While these decisions were not made for the
purpose of setting a future Scope 3 position,
upon completion, the changes would lower
our total Scope 3 emissions inventory.
As we shape our portfolio for the future, we are
announcing our enhanced Scope 3 position.(2)
While we cannot ensure the outcome alone,
for our reshaped portfolio,(3) we are pursuing
the long-term goal of net zero(4) Scope 3 GHG
emissions by 2050 to support the transition
that the world must make. To progress towards
this goal:
– we are targeting net zero for the operational
GHG emissions of our direct suppliers(5) and
the emissions from maritime transport of our
products; and
– recognising the particular challenge of a net
zero pathway for customers’ processing of
our products,(6) which is dependent on the
development and downstream deployment
of solutions and supportive policy, we cannot
set a target, but will continue to partner with
customers and others to accelerate the
transition to carbon neutral(7) steelmaking
and other downstream processes. We will
also support the value chain by pursuing
carbon neutral production of our future
facing commodities, such as copper, nickel
and potash, to provide the essential building
blocks of a net zero transition.
– We will target net zero(9) by 2050 for the
operational GHG emissions of our direct
suppliers,(10) subject to the widespread
availability of carbon neutral(11) goods and
services to meet our requirements.
– We will target net zero(12) by 2050 for
GHG emissions from all shipping(13) of our
products,(14) subject to the widespread
availability of carbon-neutral(15) solutions
including low/zero-emission technology on
board suitable ships and low/zero-emission
marine fuels.
Action on our value chain
GHG emissions goals in FY2021
Steelmaking
In FY2021, BHP signed memoranda of
understanding for partnerships with three of
our customers, China Baowu, JFE and HBIS, to
invest up to a total of US$65 million in research
and development of steel decarbonisation
pathways. We also established a research
program with the University of Newcastle in
Australia to study raw material properties in low-
carbon iron and steelmaking. Additionally, BHP
Ventures is strategically investing in a range of
emerging companies, including some focused
on low- or no-carbon steelmaking.
In FY2022, we intend to progress research and
development and develop plans for operational
testing and trials under the three steelmaking
partnerships. We also plan to explore new
steelmaking partnerships to jointly study low-
carbon steelmaking technologies.
Maritime
In FY2021, BHP committed to becoming one
of the founding members of the Global Centre
for Maritime Decarbonisation. The Centre is
to be set up in Singapore and act as a focal
point for the global maritime industry’s efforts
in decarbonisation and innovation. In April
2021, we participated in the first marine
biofuel trial involving an ocean-going vessel
bunkering in Singapore in collaboration with
Oldendorff Carriers and GoodFuels, and
supported by the Maritime and Port Authority
of Singapore. BHP also issued and awarded
(1) On 17 August 2021, BHP announced it had entered into a merger commitment deed with Woodside to combine their respective oil and gas portfolios by an all-stock merger. Completion of the
merger is subject to confirmatory due diligence, negotiation and execution of full form transaction documents, and satisfaction of conditions precedent including shareholder, regulatory and
other approvals, and expected to occur in the second quarter of the 2022 calendar year, with an effective date of 1 July 2021. For more information, refer to the Joint Announcement ‘Woodside
and BHP to create a global energy company’ by Woodside and BHP dated 17 August 2021, available at bhp.com/investor-centre. On 28 June 2021, BHP announced its agreement with Glencore
to divest its 33.3 per cent interest in Cerrejón, a non-operated energy coal joint venture in Colombia, with an effective economic date of 31 December 2020. Completion is subject to the
satisfaction of customary competition and regulatory requirements and expected to occur in the first half of the 2022 calendar year.
(2) This position is expressed using terms that are defined in the Glossary, including the terms ‘net zero’, ‘target’ and ‘goal’.
(3) Subject to completion of both of the divestment of our oil and gas business and the sale of our interest in Cerrejón.
(4) Net zero includes the use of carbon offsets as required.
(5) ‘Operational GHG emissions of our direct suppliers’ means the Scope 1 and Scope 2 emissions of our direct suppliers included in BHP’s Scope 3 emissions reporting categories of purchased
goods and services (including capital goods), fuel and energy related activities, business travel, and employee commuting.
(6) In line with our reporting methodology for Scope 3 emissions, we define ‘processing of our products’ as emissions resulting from our customers’ processing of our products comprising iron
ore and metallurgical coal (steelmaking materials) and copper (assumed to be processed into copper wire for end use).
(7) Carbon neutral includes all those GHG emissions as defined for BHP reporting purposes.
(8) These targets are referable to a FY2020 baseline year, which will be adjusted for any material acquisitions and divestments based on emissions at the time of the transaction, and to reflect
progressive refinement of the Scope 3 emissions reporting methodology. The targets’ boundaries may in some cases differ from required reporting boundaries. Carbon offsets will be used
as required.
(9) Net zero includes the use of carbon offsets as required.
(10) ‘Operational GHG emissions of our direct suppliers’ means the Scope 1 and Scope 2 emissions of our direct suppliers included in BHP’s Scope 3 reporting categories of purchased goods
and services (including capital goods), fuel and energy related activities, business travel, and employee commuting.
(11) Carbon neutral includes all those greenhouse gas emissions as defined for BHP reporting purposes.
(12) Net zero includes the use of carbon offsets as required.
(13) BHP-chartered and third party-chartered shipping.
(14) Target excludes maritime transportation of products purchased by BHP.
(15) Carbon neutral includes all those greenhouse gas emissions as defined for BHP reporting purposes.
BHP
Annual Report 2021
41
Strategic Report1GovernanceFinancial StatementsAdditional Information234 1.13 Sustainability continued
the world’s first LNG-fuelled Newcastlemax
bulk carrier vessel tender in FY2021, with the
aim of significantly reducing GHG emissions
per voyage. In FY2022, we intend to begin to
integrate the use of LNG-fuelled bulk carriers
into our maritime operations and assess the
suitability of a range of routes for LNG or bio-
fuelled bulk carriers. We are also developing a
sustainability analytics platform to analyse the
operational energy efficiency and emissions of
BHP-chartered vessels. This will enable more
energy-efficient vessel selection, as well as
more targeted emissions reduction insights
and actions that can be pursued with our
shipping partners.
Scope 3 GHG emissions
performance
The most significant contributions to BHP’s
total reported Scope 3 emissions inventory
come from the downstream processing of
our products, in particular from the GHG
emissions generated by steelmaking through
the processing of iron ore and metallurgical
coal. Our analysis indicates that in FY2021,
GHG emissions associated with the processing
of our commodities (primarily iron ore and
metallurgical coal to steel; together with copper
concentrate and cathode to copper wire) were
306 MtCO2-e. GHG emissions associated with
the use of our energy products (energy coal,
oil and gas)(1) were 76 MtCO2-e.
While we have worked to eliminate major
‘double-counting’ in our Scope 3 inventory of
GHG emissions from iron ore and metallurgical
coal used in steelmaking, a degree of overlap
in reporting boundaries still occurs due to our
involvement at multiple points in the life cycle
of the commodities we produce and consume.
Refer to footnotes (1) and (7) to the table to the
side for more information.
We continue to consider ways to understand
different metrics for measuring Scopes 1, 2 and
3 GHG emissions intensity and tracking their
impact on long-term decarbonisation. To this
end, in FY2021 we continued to engage with
Climate Action 100+ (CA100+) and the Transition
Pathway Initiative on their methodology for the
diversified mining sector. We also progressed
pilot traceability studies in copper and nickel
that measure the value-chain GHG emissions
of our products.
Investing in decarbonisation
In FY2020, we announced a commitment of at
least US$400 million to invest in GHG emissions
reduction across our operated assets and
value chain over the five-year life of our Climate
Investment Program. In FY2021, we spent
US$29 million under this program, targeting
operational, maritime, steelmaking and BHP
Ventures investments, and committed to spend
significantly more, including up to US$65 million
over coming years towards partnerships with
our customers in the steel sector.
(1)
In line with our reporting methodology for Scope 3 GHG
emissions, we define our energy products as oil, gas and
energy coal. We account for metallurgical coal within
the processing of our products (within steelmaking
GHG emissions).
42
BHP
Annual Report 2021
Scope 3 GHG emissions by category (MtCO2-e)(1)
Year ended 30 June
Upstream
Purchased goods and services
(including capital goods)(2)
Fuel and energy related activities(3)
Upstream transportation and distribution(4)
Business travel(2)
Employee commuting(2)
Downstream
Downstream transportation and distribution(5)
Investments (i.e. our non-operated assets)(6)
Processing of sold products(7)
GHG emissions from steelmaking(8)
– Iron ore processing to crude steel
– Metallurgical coal processing to crude steel
Copper processing
Total processing of sold products
Use of sold products
Energy coal(9)
Natural gas(9)
Crude oil and condensates(9)
Natural gas liquids(9)
Total use of sold products
Total Scope 3 GHG emissions(10)
2021
2020
2019
8.9
1.1
3.8
0.1
0.4
3.8
2.5
300.5
260.7
39.8
5.0
305.5
38.3
19.5
16.8
1.8
76.4
402.5
8.8
1.2
3.8
0.1
0.2
4.0
2.6
292.9
252.8
40.1
5.2
298.1
56.4
20.6
17.9
1.9
96.8
415.7
8.7
1.2
3.6
0.2
0.2
4.0
3.1
283.7
242.4
41.3
5.1
288.8
67.0
28.3
23.3
2.8
121.4
431.1
(2)
(1) Scope 3 GHG emissions have been calculated using methodologies consistent with the Greenhouse Gas Protocol
Corporate Value Chain (Scope 3) Accounting and Reporting Standard (Scope 3 Standard). Scope 3 GHG 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. More information on the calculation methodologies, assumptions
and key references used in the preparation of our Scope 3 GHG emissions data can be found in the BHP Scope 1, 2 and 3
GHG Emissions Calculation Methodology, available at bhp.com/climate.
In FY2021, we have made improvements in how we calculate Scope 3 GHG emissions associated with the purchased
goods and services category by assigning more accurate emission factors to some procurement categories and improving
the accuracy of spend data. Previously reported GHG emissions for the ‘Purchased goods and services (including capital
goods)’ category are 16.9 MtCO2-e in FY2020 and 17.3 MtCO2-e in FY2019. Previously reported GHG emissions for FY2019
are 0.1 MtCO2-e in the ‘Business travel’ category and <0.1 MtCO2-e for the ‘Employee commuting’ category. Emissions in
FY2020 did not materially change as a result of the improved methodology.
In FY2021, we have made improvements in how we calculate Scope 3 GHG emissions associated with the Fuel and Energy
related activities by removing the Scope 3 GHG emissions associated with natural gas consumption at our Petroleum
operations as the majority of those GHG emissions would be captured in our Scope 1 GHG emissions. Previously reported
GHG emissions for the ‘Fuel and Energy related activities’ category are 1.3 MtCO2-e in FY2020 and also in FY2019.
Includes product transport where freight costs are covered by BHP, for example under Cost and Freight (CFR) or similar
terms, as well as purchased transport services for process inputs to our operations.
(4)
(3)
(5) Product transport where freight costs are not covered by BHP, for example under Free on Board (FOB) or similar terms.
(6) For BHP, this category covers the Scope 1 and Scope 2 GHG emissions (on an equity basis) from our assets that are owned
as a joint venture but not operated by BHP. In FY2021, GHG emissions estimates from non-operated assets were developed
from data provided directly by operators. GHG emissions from our non-operated Kelar Power Station asset are reported as
Scope 2 GHG emissions at the Minerals Americas operated assets supplied by the facility and therefore excluded from our
Scope 3 GHG emissions totals. The previous FY2020 value of 3.9 MtCO2-e has been restated to remove GHG emissions
from the Kelar Power Station and include updated Scope 3 GHG emissions estimates for non-operated assets for which
data was previously unavailable from operators. FY2021 Scope 1 and Scope 2 emissions (on an equity basis) from Cerrejón
are only accounted for H1FY2021 due to the effective economic date of 31 December 2020 for sale of BHP’s interest
in Cerrejón.
(7) All iron ore production and metallurgical coal is assumed to be processed into steel and all copper metal production is
(8)
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 or downstream emissions are estimated to be immaterial. 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.
In FY2021, we have addressed some key limitations associated with estimating Scope 3 GHG emissions. We have worked
to eliminate double counting in our reported inventory in relation to GHG emissions from processing of iron ore and
metallurgical coal in steelmaking, by allocating GHG emissions between the two and reporting a single total Scope 3 GHG
emissions figure for GHG emissions from steelmaking. Allocation of steelmaking GHG emissions to BHP’s metallurgical
coal is based on the global average input mass ration of metallurgical vs iron ore to the blast furnace-basic oxygen furnace
(BF-BOF) steelmaking route. This approach to improving accuracy is consistent with the Scope 3 Standard. We have
also improved the accuracy of the GHG emission factor used to estimate Scope 3 GHG emissions by reflecting the
blast furnace integrated steelmaking route into which the majority of BHP’s steelmaking raw materials portfolio is sold.
The improved estimation also considers BHP iron ore product quality and its impact on the amount of ore required to
produce steel. As our product evolves in its quality and flow through to other pathways (such as direct reduced iron electric
arc furnace (DRI-EAF)), we will adjust the balance of intensity factors to reflect these changes. Previously reported numbers
for iron ore processing are 205.6-322.6 MtCO2-e for FY2020 and 197.2-299.6 MtCO2-e for FY2019. Previously reported
numbers for metallurgical coal are 33.7-108.2 MtCO2-e for FY2020 and 34.7-111.4 MtCO2-e for FY2019.
(9) 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. FY2021 Scope 3 GHG emissions associated with energy coal
products from Cerrejón are only accounted for H1FY2021 due to the effective economic date of 31 December 2020 for
sale of BHP’s interest in Cerrejón.
(10) We reported a total figure for the Scope 3 GHG emissions inventory this year as major double counting of GHG
emissions from the processing of iron ore and metallurgical coal in steelmaking was removed, however a degree
of overlap in reporting boundaries still occurs due to our involvement at multiple points in the life cycle of the
commodities we produce and consume.
We estimate potential spend of between
US$100 and US$200 million per year over
the next five years in support of operational
decarbonisation at our operated assets.
This estimate has been included in existing
capital guidance. Going forward, as our
climate response is further integrated into
business-as-usual planning, our spending
on climate initiatives is expected to become
increasingly indistinguishable from normal
business spending.
We assess and rank each decarbonisation
project across our operated assets through
our Capital Allocation Framework, where our
decarbonisation commitments rank alongside
maintenance capital in the hierarchy of our
capital allocation. Through our studies and
investment governance process, we seek to
optimise the risk and reward proposition for
these projects to allocate capital and optimise
decarbonisation at a portfolio level. We have
developed an internal marginal abatement cost
curve designed to support the allocation of
capital towards the most economically efficient
and effective decarbonisation projects.
We include regional carbon price forecasts in
our assessment of all projects in the Capital
Allocation Framework. In recognition that
explicit carbon pricing regimes in many
instances do not fully reflect the implicit
regulatory risk and value of carbon across
our value chain, we are developing additional
qualitative and quantitative metrics to better
capture the future cost and value of GHG
emissions abatement to inform corporate
strategy and core business decisions.
Green revenue
Green revenue is intended as a measure of
the extent to which products and services
contribute to the transition to a green
economy.(1) While these contributions will be
measured on a range of important indicators
(including water conservation, biodiversity
or reforestation), much of the discussion
about green revenue is focused around the
contribution to the transition to renewable
energy that is vital for climate change mitigation.
There is no settled methodology for classifying
green revenue in the resources sector.
In response to increased investor interest in
the concept, in FY2021 BHP reviewed potential
approaches to classification and measurement
of green revenue, starting with consideration
of how our products contribute to addressing
the challenge of climate change.
We expect many of our commodities to be
important to the energy transition. For example,
the International Energy Agency’s ‘The Role of
Critical Minerals in Clean Energy Transitions’
report(2) highlights the critical role of copper and
nickel, and BHP’s 1.5°C scenario(3) indicates that
the case for copper, nickel and potash could be
even more compelling as the world takes action
to decarbonise. Iron ore also fares slightly better
under our 1.5°C scenario versus other scenarios,
as steel requirements of the energy transition
are expected to be considerable. The most
commonly used measure for green revenue is
based on end use of products. However, this
measure is not straightforward, for two reasons:
– Identifying the end use of some commodities
is challenging. Copper and iron ore, in
particular, undergo multiple stages of
processing and have a diverse range
of end uses.
– The way in which commodities are
produced is not captured by end use
measures. However, production methods for
the resource sector can in themselves be an
important contributor to achieving a green
economy. For example, our Chilean copper
operated asset at Escondida is on track to
have 100 per cent renewable electricity
supply by the mid-2020s and source
desalinated water for operational purposes,
minimising water extraction from sensitive
Andean aquifers.
End use may therefore not be the sole
appropriate measure of products’ contribution
to the energy transition, and other measures
(such as how they are produced) may also
be useful, and even more appropriate in
some circumstances.
In FY2021, we have applied an approach to
green revenue based on end use, using nickel
and uranium by way of illustration. At this
stage, these are the most straightforward
of our commodities for which to determine
contribution to the energy transition from their
end use. In FY2022, we intend to continue to
consult with investors, industry and standard
setters to explore ways of establishing
clear methodologies for classification and
measurement of green revenue. We also
plan to work with our customers, suppliers
and others in our value chain to improve the
traceability of our products and the GHG
emissions produced by their use.
Battery manufacture contributes to climate
change mitigation.(4) Therefore, for illustrative
purposes,(5) we have measured the revenue
from our sales to battery materials suppliers as
green revenue. Seventy-two per cent of
BHP’s battery-suitable nickel metal(6) was
sold to global battery material suppliers in
FY2021.(7) For FY2021, BHP’s green revenue
from battery-suitable nickel metal amounted
to US$760 million.(8)
Australian uranium is sold for nuclear power
generation only, a low emissions source of
electricity, and therefore, also for illustrative
purposes, we have measured all revenue from
uranium as green revenue. For FY2021, BHP’s
green revenue from uranium amounted to
US$249 million.
Carbon offsets
BHP’s approach to carbon offsetting is to
prioritise emission reduction projects at
our operated assets, with investments in
external carbon offset projects considered
complementary to this ‘structural abatement’.
We work with others to promote the
development of carbon market mechanisms,
particularly for natural climate solutions.
Although we prioritise our internal emission
reduction projects, we acknowledge a role
for high-quality offsets in a temporary or
transitional capacity while abatement options
are being studied, as well as for ‘hard to
abate’ emissions with limited or no current
technological solutions.
In FY2021, we retired 0.3 million carbon offsets
in the form of verified carbon units equivalent
to the net increase in our FY2021 operational
GHG emissions from FY2020. The offsets
were sourced from high-quality projects,
such as the Cordillera Azul National Park
REDD+Project and the Kasigau Corridor REDD
Project,(9) representing additional, permanent
and otherwise unclaimed emission reductions
from activities designed to avoid contributing
to social or environmental harms.
For more information on how BHP manages
offsets refer to bhp.com/offsets-2021
Natural climate solutions
Investing in natural ecosystems is a cost-
effective and immediately available solution to
mitigate climate change that often provides
sustainability co-benefits, such as biodiversity
conservation, improved water quality or support
for local communities. We work 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 terrestrial
landscapes, wetlands and coastal and marine
(1) A green economy is defined by the UN Environment Programme as low carbon, resource efficient and socially inclusive. In a green economy, growth in employment and income are driven
by public and private investment into such economic activities, infrastructure and assets that allow reduced carbon emissions and pollution, enhanced energy and resource efficiency, and
prevention of the loss of biodiversity and ecosystem services.
(2) The Role of Critical Minerals in Clean Energy Transitions – World Energy Outlook Special Report, May 2021.
(3) This scenario aligns with the Paris Agreement goals and requires steep global annual GHG emissions reductions, sustained for decades, to stay within a 1.5°C carbon budget. Refer to the
BHP Climate Change Report 2020 available at bhp.com for information about the assumptions, outputs and limitations of our 1.5°C Paris-aligned scenario. 1.5°C is above pre-industrial levels.
(4) For example, the EU taxonomy recognises battery manufacture as a significant contributor to climate change mitigation. The EU Taxonomy is a classification system, establishing a list
of environmentally sustainable economic activities. Note the EU taxonomy does not presently cover the mining sector. https://ec.europa.eu/finance/docs/level-2-measures/taxonomy-
regulation-delegated-act-2021-2800-annex-1_en.pdf
(5) Recognising that a settled methodology for classifying green revenue in the resources sector has yet to be determined.
(6) Battery suitable nickel metal is defined as nickel briquettes and nickel powder. It does not include off-spec nickel metal.
(7) Based on percentage, battery-suitable nickel metal sales to battery material suppliers. Where a customer’s planned end-use is not known with certainty to be for battery supply, assumptions
of usage have been made using historical nickel metal usage for those customers.
(8) Calculated based on gross revenue from battery-suitable nickel metal multiplied by percentage of BHP’s sales of nickel metal to battery material suppliers.
(9) REDD and REDD+ are UN programs for reducing GHG emissions from deforestation and forest degradation.
BHP
Annual Report 2021
43
Strategic Report1GovernanceFinancial StatementsAdditional Information234 1.13 Sustainability continued
ecosystems (e.g. mangroves, tidal marshes,
seagrasses and seaweed, generally referred
to as ‘blue’ carbon ecosystems). We focus on
project support, governance, knowledge and
innovation, and market stimulation for carbon
credits generated by these projects.
For more information
see bhp.com/climate
strategy and operations, our TCFD-aligned
disclosures and information in support of our
NZCB assessment can be found throughout
this Annual Report, in our BHP Climate Change
Report 2020 and at bhp.com. A navigator
showing where to find relevant information
in relation to the TCFD recommendations is
available at bhp.com.
– The primary concerns of community
members, as reported to our operated
assets, largely related to community
support (including economic contribution,
capacity building, resilience and social
inclusion), environmental sustainability
and a desire for more communications
or engagement from BHP.
Just transition
There are communities around the world that rely
on mining certain commodities, which therefore
risk being disproportionately impacted by the
transition to a low-carbon economy. Solutions will
require a multi-stakeholder approach including
the local community, investors and financiers,
government at all levels and, of course, resource
companies such as BHP.
In FY2022, we plan to develop our approach
to ‘Just Transition’ taking into consideration
the evolving Climate Action 100+ Net-Zero
Company Benchmark (NZCB).
Engagement and disclosure
Achieving the Paris Agreement goals will
require supportive policy across jurisdictions
globally. The policy-making process is complex
and change is unlikely to be smooth or linear.
We believe BHP can best support policy
development by ensuring we meet our own
climate commitments, continuing to make the
case for the economic opportunities arising from
the energy transition, and focusing on those policy
areas where we are likely to have the greatest
ability to influence change. We engage on policy
matters directly with government and through our
membership of industry associations and issue-
specific coalitions and initiatives.
Our Global Climate Policy Standards clarify how
our policy positions on climate change should
be reflected in our own advocacy and that
of associations to which we belong, globally.
Over the past five years, BHP has introduced a
range of measures to strengthen the Company’s
governance of its member associations and
their climate change advocacy.
Further information on our approach to
industry associations can be found at
bhp.com/our-approach/operating-with-
integrity/industry-associations-bhps-approach/
BHP was one of the first companies to align
its climate-related disclosures with the
recommendations of the Financial Stability
Board’s Task Force on Climate-related Financial
Disclosures (TCFD). In FY2021, we published
our Climate Change Report 2020, and also
participated in the CA100+ NZCB, which
assesses the world's largest corporate GHG
emitters on their progress in the transition
to the net zero future.
In September 2021, we published the BHP
Climate Transition Action Plan 2021, which sets
out the steps BHP intends to take with the goal
of reducing GHG emissions to net zero within
our own operations by 2050 and pursuing net
zero across our value chain. As responding
to climate change is an integral part of our
1.13.8 Community
Making a positive contribution to
the communities where we operate
To make a positive contribution to the social and
economic wellbeing of the communities where
we operate requires long-term partnerships
based on respect, honesty, transparency and
trust. Our actions and approach to community
engagement, social investment, cultural heritage,
working with Indigenous peoples and human
rights practices are governed by Our Code.
We understand our activities have potential
social, cultural, environmental and human rights
impacts. We assess those impacts and consider
external factors such as changing socio-
political and economic content and societal
expectations and community concerns.
To gain a deeper understanding of the
context in which we operate, our operated
assets are required to conduct periodic social
research activities. We seek to implement and
conduct these planned activities in a culturally
sensitive and socially inclusive manner which
can include social baseline analysis, social
impact and opportunity assessments, human
rights impact assessments, stakeholder
mapping and community perception surveys.
Through these activities, we seek to better
understand social and reputational impacts,
threats and opportunities and make more
informed decisions.
We provide a range of opportunities for
communities to express their views, experiences,
concerns and complaints. The Our Requirements
for Community standard requires all operated
assets to have culturally appropriate complaint
and grievance mechanisms in place which
are accessible to all stakeholders, including
Indigenous peoples.
To further strengthen these mechanisms, we
have established globally consistent principles
aligned with the UN Guiding Principles on
Business and Human Rights to be applied
across each of our operated assets.
In FY2021:
– Community perception research was
conducted at 11 of our operated assets
providing an aggregated view of local
community perceptions and a valuable
input into asset planning.
– All of our operated assets had a stakeholder
engagement plan in place and conducted
regular stakeholder engagement activities,
including one-on-one meetings, dialogue
tables (multi-issue, multi-stakeholder),
consultation groups (issue based), written
communications and open days.
– Complaints and grievance mechanisms
were in place across all our operated assets.
– 103 community complaints (four classified
as grievances(1)) were received globally
across our operated assets. While this
was a 10 per cent decrease in community
complaints compared to FY2020, we
are revising our approach to reporting to
ensure we capture and record all concerns,
complaints and grievances received through
our community engagement channels.
– No significant community incidents were
recorded, meeting our five-year public target
of no significant community events between
FY2017 and FY2022.(2)
– No artisanal or small-scale mining on or
adjacent to our operations was reported.
As part of our commitment to respecting
human rights, we recognise water access,
sanitation and hygiene as fundamental
human rights and acknowledge traditional,
spiritual and cultural connections to water.
Engaging with communities on water
challenges is a component of our water
stewardship work outlined in our Water
Stewardship Position Statement. In FY2021,
we sought to strengthen our engagement
with stakeholders on water-related threats and
opportunities at the community and catchment
levels through the commencement of Water
Resource Situation Analysis projects, to identify
the shared water challenges and collective
action opportunities across the catchment.
More information on community
is available at bhp.com/community
1.13.9 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 way that is consistent
with the UN Guiding Principles on Business and
Human Rights and the UNGC Ten Principles.
Our commitments are implemented through
Our Charter values, Our Code of Conduct, the
Human Rights Policy Statement (HRPS) and
the Our Requirements standards. We seek to
meet those commitments through policies and
processes, due diligence activities, training and
by monitoring activities that may have human
rights impacts.
BHP’s HRPS sets out our expectations of our
people, business partners and other relevant
parties to respect human rights. In FY2021,
our annual review of the HRPS identified two
areas in which stakeholders are seeking greater
transparency and a more explicit commitment:
(1) An event or community complaint relating to an adverse impact/event that has escalated to the point where a third-party intervention or adjudication is required to resolve it.
(2) A significant event resulting from BHP operated activities is one with an actual severity rating of four or 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 management.
44
BHP
Annual Report 2021
– labour rights, specifically to operate
consistently with the terms of the
International Labor Organization (ILO)
Declaration on Fundamental Principles
and Rights at Work, including the four
core labour standards
– human rights requirements of the Global
Industry Standard on Tailings Management
The HRPS was updated to reflect these
commitments and has been endorsed by
relevant members of our Executive Leadership
Team. It is available at bhp.com.
In FY2021:
– A total of 610 employees completed human
rights training,(1) including teams across
Corporate Affairs and Commercial functions.
The training is publicly available at bhp.com
– Our human rights impact assessment (HRIA)
pilot project was finalised resulting in a
globally consistent methodology for HRIAs
to be applied across our operated assets.
– HRIAs were conducted by an external
consultant across Minerals Australia and
Minerals Americas, with self-assessments
conducted at each of these operated
assets. A HRIA was also conducted for the
Jansen Potash Project in Canada. The Our
Requirements standards require operated
assets to complete a HRIA at least every
three years and review whenever there are
changes that may affect the impact profile.
– No resettlements or physical or economic
displacement of families or communities
occurred as a result of the activities of our
operated assets.
In Australia, the most salient human rights
related risks reported in the HRIA include sexual
assault and sexual harassment, mental health,
and fair and equitable treatment (for example,
discrimination, inclusion and diversity and equal
pay for equal work).
These findings align with responses to existing
risks currently managed across our business
through measures including the introduction
of a sexual assault and sexual harassment
support line, our ongoing focus on mental
health and our commitment to inclusion
and diversity. Human rights related risks to
communities, including those related to the
environment, Indigenous peoples and access
to remedy, were also identified. The most
salient human rights related risks reported in
the HRIA for Chile were access to remedy for
employees and contractors, fair and equitable
treatment, occupational health and safety,
access to remedy for communities where we
operate, water and the impacts of COVID-19.
Additional human rights risks relating to
security, cumulative impacts on communities
and working conditions were identified across
our operated assets in Chile.
The outcomes of the HRIA pilot are expected
to strengthen our approach to managing
and monitoring human rights related risks.
In FY2022, our operated assets and functions
intend to use a risk-based approach to
determine when a HRIA needs to be reviewed
or conducted. Results of the HRIAs are also
expected to be better integrated into our
existing risk assessment processes to enhance
our understanding of the full spectrum of
identified risks, and where required, develop
additional controls. Social value assessments
are intended to include HRIA results to
ensure our operated assets have a deep
understanding of their operating context
and external environment as inputs into
their business planning.
During FY2021, we reviewed the risk of an
actual or perceived failure to prevent or mitigate
an adverse human rights impact linked to our
supply chain (directly or indirectly), including
maritime activities. We continued to focus on
embedding and building the maturity of our
supply chain due diligence program taking
a risk-based approach to assessing potential
human rights breaches by our suppliers,
including extended due diligence for high
or very high risk suppliers based on our initial
risk rating processes.
In FY2021, we started to align our supply chain
due diligence with the OECD Due Diligence
Guidance on Conflict-Affected and High
Risk Areas. This work is to be completed
by the end of FY2022 with an update on
alignment activities planned for inclusion
in our FY2022 Modern Slavery Statement.
Modern slavery
Our Modern Slavery Statement FY2021,
prepared under the UK Modern Slavery Act
(2015) and the Australian Modern Slavery Act
(2018), is available at bhp.com.
More information on our approach to human
rights is available at bhp.com/humanrights
1.13.10 Indigenous
peoples
We respect the rights of Indigenous peoples
and acknowledge their right to maintain
their culture, identity, traditions and customs.
We also recognise the significant contribution
Indigenous peoples make to national and
international economic prosperity brought
about by mining.
Many of our operated assets around the world
are located on or near the traditional lands of
Indigenous peoples. We believe this establishes
a fundamental relationship with Indigenous
peoples who are critical partners and, in
many jurisdictions, rights-holders under law.
As global events of the past 18 months have
reinforced, the continued success of BHP and
the industry more broadly is dependent on
having strong and trusting relationships with
Indigenous peoples.
In FY2021, we established a new global
Indigenous Engagement team to lead
Indigenous engagement, agreement-making
and advocacy to enhance our focus on
our engagement with Indigenous peoples.
We also continued our focus on cultural
heritage management practices. Our Cultural
Heritage team has enhanced our systems and
processes to ensure operational decision-
making is informed by the most up to date
heritage information.
This program of work commenced with
enhancements to Western Australia Iron Ore’s
cultural heritage databases and information
systems, enabling us to better integrate
cultural heritage considerations into our mine
planning processes. As a result, we can better
understand and engage with Traditional Owners
on cultural heritage sites that may be impacted
by our activities earlier in the planning process.
A staged rollout across Minerals Australia will
continue in FY2022, with relevant lessons to be
applied beyond Australia.
We further strengthened our engagement with
Traditional Owners and other representative
Indigenous bodies during the year. This includes
the introduction of a set of Principles on
Cultural Heritage in Australia agreed with the
First Nations Heritage Protection Alliance.
The Principles are jointly developed to guide
and inform BHP’s approach to Indigenous
cultural heritage in Australia. The Principles
represent an important, further contribution to
BHP’s commitments in relation to Indigenous
peoples, agreement-making and cultural
heritage and will apply in addition to the
existing requirements in relation to Indigenous
engagement and cultural heritage set out in
BHP’s agreements with Traditional Owners.
Beyond cultural heritage engagement, we
implement Regional Indigenous Peoples Plans,
which set expectations for our relationships
with Indigenous peoples across our operated
assets. We believe we are well positioned to
bring economic participation opportunities
to Indigenous communities where we operate
and through these plans, we articulate our
approach to agreement-making, Indigenous
procurement, employment and social
investment, which are core components
of our Indigenous Peoples Strategy.
Our efforts are complementary to the BHP
Foundation’s global programs supporting
Indigenous peoples. These include the
landmark ‘10 Deserts’ project in Australia that
has enabled and supported Indigenous land
management activities across 35 per cent of
the Australian landmass, and similar projects
supporting Indigenous peoples’ participation
in the management and protection of
traditional lands in the Boreal Forest of
Canada and the Peruvian Amazon.
Minerals Australia
There has been broad support and wide-
ranging community efforts to further strengthen
the laws, policies and practices regulating how
Aboriginal and Torres Strait Islander cultural
heritage values are managed in Australia.
(1) The number of employees trained has been annualised using data from a 10-month period, July to April, to determine a total for the year.
BHP
Annual Report 2021
45
Strategic Report1GovernanceFinancial StatementsAdditional Information234 1.13 Sustainability continued
We participated in the Joint Standing
Committee on Northern Australia’s inquiry into
matters relevant to the Juukan Gorge events
in the Pilbara region of Western Australia.
The Committee’s Terms of Reference include
considering the effectiveness and adequacy of
state and federal laws in relation to Aboriginal
and Torres Strait Islander cultural heritage
in each jurisdiction. In December 2020, the
Committee released its Interim Report with
recommendations calling for stronger cultural
heritage protection legislation and noting
the Western Australian Government is in the
process of progressing heritage law reform.
Consultation with Aboriginal people, industry
representatives, heritage professionals
and the broader community on Western
Australia’s Aboriginal Cultural Heritage Bill
2020 (WA) concluded in FY2021. The passage
of new legislation remains subject to
parliamentary processes.
A Heritage Advisory Council comprising Banjima
Elders and senior BHP representatives has been
established to provide input into mine planning
at South Flank. The Council has convened
on several occasions and is a vital forum for
ongoing high-level dialogue on important cultural
heritage and related matters. This Council and
corresponding forums seek to enable a critical
exchange for appropriate understanding and
management of cultural heritage so concerns
can be raised and addressed.
In January 2021, as part of routine monitoring at
Mining Area C in the Pilbara region of Western
Australia, we identified a rock fall at a registered
Banjima heritage site. Since that time, we
have been working closely with the Banjima
community, via an independent investigation
conducted by a team of external experts, to
understand how the rock fall occurred. The key
findings of the investigation will be released
publicly. We continue to be committed to
working in partnership with the Banjima
community to responsibly manage heritage
and further strengthen our processes as we
learn from this event.
Upholding our commitment to Australian
Indigenous peoples requires Group-wide
awareness and commitment. In FY2021:
– We developed an Australian Indigenous
Cultural Respect Framework, including
developing a package of additional
Aboriginal and Torres Strait Islander training
and awareness sessions targeted at our
leaders and employees, which is intended to
be delivered in partnership with Traditional
Owner groups where possible. Elements of
the framework were delivered in FY2021,
with further rollouts scheduled for FY2022.
– We provided a submission to the Australian
Government’s Indigenous Voice co-design
consultation process outlining support
for Aboriginal and Torres Strait Islander
people to have a greater voice on the laws,
policies and services that impact them, their
communities and their lives. This submission
is consistent with our broader support for the
Uluru Statement from the Heart. The Uluru
Statement calls for meaningful structural
reforms designed to enable a new relationship
between First Nations and the Australian nation
based on justice and self-determination.
– BMC and the Barada Barna people
negotiated an Indigenous Land Use
Agreement to provide BMC with consents
for past, current and future acts associated
with the South Walker Creek mine and
deliver a comprehensive benefits package
for immediate and intergenerational benefits
to the Barada Barna people. In conjunction,
a Cultural Heritage Management Plan was
agreed, providing for the protection and
appropriate management of Aboriginal
cultural heritage at the mine. Further work
is underway with the Widi people in relation
to shared country at South Walker Creek.
In FY2021, Minerals Australia saw a 17 per
cent increase, to A$114.6 million, in our direct
spend with Indigenous businesses across our
operated assets as compared to FY2020 levels.
Of this A$48.4 million was with BHP Considered
Traditional Owner Businesses.(1) Compared to
FY2020 levels, we also increased the number
of Indigenous businesses we directly procure
from by 35 per cent.
Minerals Americas
In line with our Indigenous Peoples Plan for
South America, we seek to work closely with
the communities where we operate to make
a positive contribution, including through key
agreement-making with local communities.
We reviewed our cultural heritage risks in
FY2021 and are continuing work to improve
our processes for the management of cultural
heritage across all our activities and supporting
the work being undertaken by our non-operated
joint ventures where we have the opportunity
to do so. We established a permanent Minerals
Americas Indigenous Engagement team to
enhance our work and have sought to use
our Indigenous peoples global working group
to better ensure alignment and sharing of
leading practices.
In Chile, our operated asset Escondida, the
Attorney General’s Office, the Peine Atacamanian
Indigenous community and the Council of
Atacamanian Peoples recently entered into
an agreement to improve the environmental
sustainability of the Salar de Punta Negra
following the settlement of a legal claim.
For more information, refer to section 1.13.13.
During FY2021, we refreshed most of our
Opportunity Agreements with our Jansen
Potash Project Indigenous partners in
Canada. In December 2020, we signed
our first Opportunity Agreement with the
George Gordon First Nation. The refresh of
two remaining Opportunity Agreements is
expected to be completed in FY2022.
Non-operated joint ventures –
Resolution
Resolution Copper Mining is jointly owned by
Rio Tinto (55 per cent) and BHP (45 per cent)
and managed by Rio Tinto. In January 2021,
the Final Environmental Impact Statement
(FEIS) was published, part of an independent
governmental, social and environmental
assessment and licensing process led by the
United States Forest Service (USFS) under the
National Environmental Policy Act. In March
2021, the US Department of Agriculture
directed the USFS to rescind the FEIS.
We recognise the Resolution Copper project
area includes sites of cultural significance for
Native American Tribes and their members.
Resolution Copper Mining has indicated it
intends to continue to engage in the regulatory
processes determined by the United States
Government and has publicly stated its
commitment to ongoing engagement with
Native American Tribes. Resolution Copper is
working to seek consent before any decision
is made on the development of the project,
consistent with the ICMM Position Statement
on Indigenous Peoples and Mining.(2) We are
monitoring and supporting Resolution Copper
Mining’s engagement with Native American
Tribes through ongoing good-faith dialogue.
Our funding decisions in relation to Resolution
Copper will be contingent upon the project
satisfying commercial considerations and
alignment with our values, policies and practices
concerning the rights of Indigenous peoples.
More information on Indigenous peoples
is available at bhp.com/indigenous
1.13.11 Social investment
Social investment is a tool in our overall
approach to create social value and contribute
to the resilience of communities and the
environment, in line with our broader business
priorities. Our long-standing commitment is to
invest not less than 1 per cent of pre-tax profits(3)
in voluntary social and environmental initiatives.
In FY2021, our voluntary social investment
totalled US$174.84 million, an increase
of 17 per cent compared with FY2020.
This investment consisted of US$100.41 million
in direct community development and
environmental projects and donations,
US$7.96 million equity share to non-operated
joint venture social investment programs and a
US$50 million donation to the BHP Foundation
and US$2.08 million under the Matched Giving
Program. Administrative costs(4) to facilitate
direct social investment activities totalled
US$12.53 million and US$1.86 million supported
the operations of the BHP Foundation.
(1) Suppliers that have any ownership by a Traditional Owner(s) from one of the language groups in which BHP operates or as defined in an Indigenous Land Use Agreement or other formal
agreement, providing a minimum overall Indigenous ownership of 50 per cent exists.
(2) http://www.icmm.com/en-gb/about-us/member-requirements/position-statements/indigenous-peoples
(3) Our voluntary social investment is calculated as 1 per cent of the average of the previous three years’ pre-tax profit.
(4) The direct costs associated with implementing social investment activities, including labour, travel, research and development, communications and costs to facilitate the operation
of the BHP Foundation.
46
BHP
Annual Report 2021
The BHP Foundation is a charitable organisation
established and funded by BHP that addresses
some of the world’s most critical sustainable
development challenges relevant to the
resources sector. The Foundation partners with
the NGO’s and international institutions to drive
systemic change.
For example, its partnership with the NGO
Open Contracting Partnership has led to
reforms in public procurement in Colombia
resulting in improved school meals for
700,000 children; and in Chile where open
contracting reforms contributed to a reduction
in the cost of medicines, improved citizen
access to affordable healthcare and resulted
in government savings of an estimated
US$9 million.
More information is available at
bhp.com/foundation
In March 2020, we established the Vital
Resources Fund (VRF) with a commitment
of A$50 million to support response and
recovery efforts associated with the impact of
the COVID-19 pandemic. Since that time, the
funds have been invested to address immediate
community need, support remote Indigenous
communities and complement government
investment as well as supporting the pandemic
recovery phase to meet emerging needs and
impacts across the key areas of employment
and training, technology and wellbeing.
Over 850,000 people have so far directly
benefited from the donations and more than
one-third of funding was invested specifically
to support Indigenous communities.
More information on the VRF, including a
case study and other initiatives to support
communities where we operate that are
experiencing the impact of COVID-19,
is available at bhp.com
Supporting local economic growth
To support the growth of local communities
we aim to source and promote locally available
products and services as an important part of
our external expenditure. Our operated assets
develop local procurement plans designed
to identify opportunities for local suppliers,
including small businesses, to deliver capacity
building and employment.
In FY2021, 13 per cent of our external
expenditure of US$16.9 billion was with local
suppliers with an additional 83 per cent of our
expenditure made within the regions where
we operate, while 4 per cent was from suppliers
external to the home country of operation.
Of the US$16.9 billion paid to more than 9,000
suppliers across the globe, US$2.1 billion was
paid to local suppliers in the communities
where we operate.
Our expenditure with local suppliers in FY2021
was primarily in Chile (17 per cent), Australia
(12 per cent), the United States (8 per cent)
and Trinidad and Tobago (1 per cent).
These percentages are of our total
external expenditure.
More information on social investment
is available at bhp.com/socialinvestment
1.13.12 Environment
We are committed to minimising our adverse
environmental impacts. Our operations and
growth strategy depend on obtaining and
maintaining the right to access environmental
resources. However, with growing pressure on, and
competition for these resources, and with climate
change amplifying certain sensitivities of our
natural systems, our environmental performance
and management of our environmental impacts
on the communities where we operate are critical
to creating social value.
At every stage in the life cycle of our operated
assets, we seek to avoid, minimise and mitigate
our adverse environmental impacts in line with
our defined risk appetite. We recognise our
activities have an environmental footprint and
commit to making voluntary contributions to
support environmental resilience across the
regions where we operate. Our Group-wide
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, including
ISO14001 for Environmental Management,
and set the basis for how we manage risk,
including realising opportunities, to achieve
our environmental objectives.
The Our Requirements for Environment and
Climate Change standard requires us to take an
integrated, risk-based approach to managing
any actual or reasonably foreseeable operational
impacts (direct, indirect and cumulative) on
land, biodiversity, water and air. This includes
establishing and implementing environmental
risk monitoring and review practices throughout
our business planning and project evaluation
cycles. In addition to the broader environment-
specific components, the standard includes
climate change related requirements for our
operated assets.
To support continuous improvement, 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 included
in the life of asset plan and approved by the
relevant Asset President or equivalent.
Social Investment Framework
Theme
Aim
FY2021
Future of
work
We aim to enhance human capability and social
inclusion through education and vocational
training and skills development.
– Through our support, approximately 19,000 people completed
education or training courses in digital, technology, leadership and/
or problem-solving initiatives. Over 9,750 of these participants were
Indigenous people and 6,187 were female.
– 313 education institutions aligned course content to business needs
in order to better prepare participants for future work readiness.
– 1,559 participants found paid employment following completion
of their training.
Future of
environment
We aim to contribute to environmental resilience
through biodiversity conservation, ecosystem
restoration, water stewardship and climate
change mitigation and adaptation.
– We made 29 investments in environmental restoration and
conservation initiatives.
– Contributed to improved management of approximately
13 million hectares.
Future of
communities
We aim to contribute to the understanding,
development and sustainable use of resources
to support communities to be more adaptive
and resilient.
– 75 scientific or thought leadership papers or specific knowledge
sharing events were supported.
– 836 organisations enhanced internal capability to support efficient
and sustainable communities.
– 505 organisations planned or delivered initiatives that increase/
improve infrastructure, use of technology and/or use of resources
that enhance community resilience, including 68 initiatives specific
to Indigenous peoples.
BHP
Annual Report 2021
47
Strategic Report1GovernanceFinancial StatementsAdditional Information234 1.13 Sustainability continued
We verify our EMS by ISO14001 certification
(for sites currently holding ISO14001
certification) or through our internal
assurance processes.
More information on our environmental
approach, the Our Requirements for
Environment and Climate Change standard,
and our environmental management and
governance processes is available at
bhp.com/sustainability
Contributing to a resilient
environment
Biodiversity is essential to maintain healthy
ecosystems and the clean air, water and
productive landscapes and seascapes we
all need to survive and thrive. We are seeing
an increasing societal focus on the urgent
need to reverse current trends in biodiversity
loss, and as a global resources company,
we acknowledge we have a role to play in
contributing to environmental resilience.
We do this through our social investment
strategy and our work with strategic partners
and communities.
Our work with strategic partners, including
Conservation International, and local
communities is focused on contributing to
enduring environmental and social benefits
through biodiversity conservation and
ecosystem restoration, water stewardship
and climate change mitigation and adaptation.
Our preference is to invest in projects that
contribute to cultural, economic and community
benefits in addition to environmental resilience.
Since FY2011, we have invested more
than US$85 million in environmental
resilience initiatives.
More information on the environment and
our environmental projects is available at
bhp.com/environment
Our focus on environmental resilience
is complementary to the work of the
BHP Foundation.
More information is available at
bhp.com/foundation
1.13.13 Water
Access to safe, clean water is a basic human
right and essential to maintaining healthy
ecosystems. Water is also integral to what we
do and we cannot operate without it. In FY2017,
we adopted a Water Stewardship Strategy to
improve our management of water, increase
transparency and contribute to the resolution
of shared water challenges. Our Water
Stewardship Position Statement was developed
in FY2019 and outlines our 2030 vision.
More information is available at
bhp.com/water
We recognise our responsibility to effectively
manage our interactions with and minimise
our adverse impacts on water resources.
Effective water stewardship begins within
our operations. We use water in a number of
ways, including but not limited to: extracting
it for ore processing and to access ore; dust
suppression; processing mine tailings; providing
drinking water and sanitation facilities; and using
marine water for desalination. By improving
water management and stewardship within
our operations, we can more credibly
collaborate with others to find solutions for
water challenges and opportunities, including
water scarcity or high variability in water supply.
We work to identify and assess opportunities
to reduce stress on water resources as a result
of our operations and implement actions
where appropriate.
Key opportunities identified during FY2020
and FY2021 included working with stakeholders
to identify shared water challenges through
Water Resource Situation Analysis (WRSAs)
and ongoing engagements and adoption of
new water technologies. The outcomes of the
WRSAs will be publicly available to support
continued collaboration between stakeholders
who share the same water resources we use
in our operations.
During FY2021, we focused on better
understanding our catchment-level risks,
developing long-term water strategies at our
operated assets and setting performance
standards for operational water-related
risk. We also commenced a pilot program
Performance against freshwater withdrawal reduction target
Megalitres
200,000
150,000
100,000
50,000
0
FY2017
FY2018
FY2019
FY2020
FY2021
Freshwater withdrawal FY2022 15% reduction target
48
BHP
Annual Report 2021
focused on catchment-level WRSAs to inform
development of new public context-based
water targets for our operated assets.
We have made progress on our current 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.
In FY2021, freshwater withdrawal decreased
by 11 per cent (113,444 megalitres compared
to 126,997 megalitres in FY2020). Our FY2021
result also represents a 27 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 of groundwater withdrawal
over the last five years, and from the cessation
of groundwater withdrawal for operational
consumption purposes from the Salar Punta
Negra and Monturaqui aquifers at Escondida in
December 2019. We remain on track to sustain
reductions and meet the 15 per cent reduction
target by the end of FY2022.
Our global freshwater withdrawals from FY2017
to FY2021 are shown in the chart below.
All water performance data presented in this
Annual Report is from operated assets during
FY2021. For a year-on-year comparison of data
related to operated assets and further analysis
of our water data and performance, refer to
section 4.8.6. We report on the water metrics,
risks and management, as described in section
4.8, in the ICMM ‘A Practical Guide to Consistent
Water Reporting’ (ICMM guidance), and the
Minerals Council of Australia’s Water Accounting
Framework (WAF). Generally, these align with
the reporting requirements documented in the
GRI Standards and the CEO Water Mandate.
Currently, water withdrawal data reported is
considered to be at a high accuracy level based
on WAF determination. This is predominately
driven by a high degree of accurately measured
withdrawal quantity data at our Escondida
desalination facility which represents just over
half of our water withdrawal volumes. For more
information about water accounting, including
accuracy levels with respect to our discharge
volumes and water data quality, refer to section
4.8.6 and bhp.com/water.
In FY2021, we began to report on water
volumes for those operated assets classed by
the WWF Water Risk Filter(3) as being located
in high or extremely high water stress areas.
The disclosure of water data in high-stress areas
is required by numerous reporting frameworks,
including the ICMM Water Reporting: Good
practice guide (2nd Edition).
(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, BMA and BMC and exclusion
of hypersaline, wastewater, entrainment, supplies from
desalination and Discontinued operations (Onshore US
assets) in FY2019 and FY2020.
(3) https://waterriskfilter.panda.org/
BHP has a commitment to contribute to
improved mining sector water reporting
through strengthened ICMM guidance, aligned
with GRI requirements. In FY2021 we collated
information on change in water storage as
described in the revised ICMM Water Reporting
Guidance and used it to support further
assessment of the validity of assumptions
underpinning asset water models and water
balances. Water modelling contains a degree
of uncertainty due to inclusion of estimates
and assumptions. The collation of information
to inform reporting of change in water storage
has identified areas for improvement in the
estimated and simulated data within the water
models as currently used at our Coal assets.
We intend to undertake work during FY2022 to
assess underlying assumptions in an effort to
improve the water modelling at those assets,
as well as further maturing the measurement
of changes in water storage across the Group.
For this reason, we have not included change in
water storage data in our reporting for FY2021.
We seek to minimise our withdrawal of high-
quality fresh water. Seawater continues to
be our largest source of water withdrawal,
representing more than half of total withdrawals,
predominantly for desalination at Escondida
and use of seawater in our Petroleum operated
assets. Groundwater is our most significant
freshwater source, at close to one-quarter of
total water withdrawals. In FY2021, approximately
80 per cent of our water withdrawals consisted
of water classified as low quality. The definitions
for water quality types are provided in section
4.11.4 and a detailed description is available in
section 2.4 of the WAF.
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 as part of our
commitment to strengthen transparency and
collaboration across all sectors for improved
water governance.
In the context of an environmental damage
lawsuit in relation to the Salar de Punta Negra
(SPN), Escondida, the Attorney General
Office, the Indigenous Community of Peine
and the Council of Atacamanian Peoples
reached an environmental agreement that
considers the implementation of a long-
term environmental management plan, as
well as a series of compensation and repair
measures. A participatory governance
arrangement, comprising representatives of all
the involved parties, will work together for the
implementation of the plan. Escondida stopped
extracting water in SPN in 2017 and then
completely ceased the use of groundwater
from the SPN and Monturaqui Andean
aquifers in 2019.
Following a court ruling regarding Cerro
Colorado’s main environmental licence in
January 2021, the Chilean Environmental
Authority is re-evaluating the licence
conditions permitting Cerro Colorado to
extract water from the Lagunillas aquifer, and
is carrying out a consultation process with an
Indigenous community to assess potential
environmental impacts.
In August 2021 an individual commenced a
legal action through the First Environmental
Court of Antofagasta (Court) that alleges
Cerro Colorado’s water extraction from the
Lagunillas aquifer has caused damage to
the Lagunillas aquifer, the Huantija lagoon,
and nearby wetlands. The Court granted
an injunction requiring Cerro Colorado to
suspend water extraction from the Lagunillas
aquifer commencing on 1 October 2021 for a
period of ninety days which may be extended.
Cerro Colorado is evaluating its legal and
operational options.
For more information on our approach to water
stewardship, progress against our water strategy,
water performance in FY2021 and case studies
on activities we are taking to progress towards
meeting our water stewardship vision, refer to
section 4.8.6 and bhp.com/water.
1.13.14 Land and
biodiversity
The nature of our activities means we have a
significant responsibility for land and biodiversity
management. We own or manage more than
8 million hectares of land and sea; however,
only 2 per cent 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. We apply
the mitigation hierarchy (avoid, mitigate,
rehabilitate and, where appropriate, apply
compensatory measures) to any potential
or residual adverse impacts on marine or
terrestrial ecosystems.
We respect legally designated protected areas
and commit to avoiding areas or activities where
we consider the environmental risk is outside our
risk appetite. As part of our commitments:
– 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 that reflect local biodiversity
risks and regulatory requirements. In FY2021,
we prepared internal guidance on biodiversity-
related elements of the Our Requirements for
Environment and Climate Change standard to
support more consistent interpretation and
application of those standards at our operated
assets. We have a five-year target to improve
marine and terrestrial biodiversity outcomes
by developing a framework by the end of
FY2022. This will enable us to better monitor
the impacts of our activities on biodiversity
and to avoid, reduce and offset adverse
impacts in a coordinated way.
Development of the framework started in
FY2018 and we are progressing this work
with Conservation International and Proteus,
a voluntary partnership between the UN
Environment Programme World Conservation
Monitoring Centre (UNEP WCMC) and 12
extractive industry companies.
During FY2021, we assessed all our operated
assets using an early stage methodology
developed by UNEP WCMC and developed
a prototype scorecard based on this
methodology to test and refine how we track
biodiversity status and trends at our operated
assets. The framework will be used to track
achievement of our long-term biodiversity goal:
that by FY2030, we will have made a measurable
contribution to the conservation, restoration
and sustainable use of marine and terrestrial
ecosystems in all regions where we operate
in line with UNSDGs 14 and 15.
More information on our approach to
biodiversity and land management and current
performance, including operated assets
owned, leased, managed in or adjacent to
protected areas and areas of high biodiversity
value outside protected areas is available in
Section 4.8.4 Environment – performance data
and at bhp.com/biodiversity.
Closure
We recognise the potentially significant social,
environmental and financial risks associated
with future closure of our operations. We seek
to integrate closure into our planning, decision-
making and operations through the entire life
cycle of our operated assets.
As a global leader in the development of
natural resources, we have a responsibility
to demonstrate a planned and purposeful
approach to closure through the life cycle of
our operated assets. This process requires the
consideration of threats and opportunities for
the communities and environment in which
we operate, as well as our workforce and
shareholder value. It drives towards optimised
closure outcomes for our sites by balancing
our values, obligations, safety, costs and the
expectations of external stakeholders to enable
an outcome that involves one or a combination
of alternative land uses, ongoing management,
relinquishment or responsible divestment.
BHP
Annual Report 2021
49
Strategic Report1GovernanceFinancial StatementsAdditional Information234 1.13 Sustainability continued
Each of our operations (whether projects,
producing, in care and maintenance or a
closed site) must have a closure management
plan, documenting the implementation of the
closure management process. This process
includes collating relevant knowledge and data,
undertaking risk and opportunity assessments,
framing and comparing alternative closure
options, and selecting the optimised closure
outcomes. Closure management plans are
required to be supported by stakeholder
engagement across the life cycle of the site,
and should balance business and stakeholder
needs while meeting the following objectives:
– comply with legal requirements and
obligations, and our mandatory minimum
performance requirements for closure
– achieve safe and stable outcomes and
meet approved environment outcomes
– manage pre and post-closure risks
(including opportunities)
– progressively reduce obligations, including
progressive closure of the area disturbed
by our operational footprint
– manage and optimise closure costs
Closure management plans are also required
to include long-term monitoring to verify any
controls implemented to manage closure risks
and and seek to realise opportunities throughout
the life of our operations, including closure and
post-closure, are effective, and that performance
standards are achieved and maintained after
operations cease.
Progressive closure of areas no longer required
for operational purposes is included in our
closure management plans and integrated into
operational plans. Our closure management
plans are regularly reviewed to reflect updated
asset planning and include current knowledge
obtained from onsite experience, locally, across
our business and globally across the industry.
Information about our financial provision related
to closure and rehabilitation liabilities is available
in note 15 'Closure and rehabilitation provisions'
in section 3.
We report annually on the status of land
disturbance and rehabilitation.
More information is available
in section 4.8.4
More information on our approach
to closure is available at bhp.com/
sustainability/environment/closure
1.13.15 Tailings
storage facilities
Ensuring the integrity of our tailings storage
facilities (TSFs) is a primary focus across our
business. Our aspiration is to achieve zero harm
from tailings and we will continue to work with
others and share our progress in an effort to
make this a reality.
In 2015, after the tragic failure of the Fundão
dam at Samarco BHP immediately initiated a
Dam Risk Review to assess the management
of major TSFs. The catastrophic failure of the
Brumadinho dam at Vale’s operation in Brazil
50
BHP
Annual Report 2021
in January 2019 further strengthened our
resolve to reduce tailings failure risk.
For information about the Samarco
tragedy and our progress with the
response, refer to section 1.15
In CY2019 we created a Tailings Taskforce (TTF)
team reporting to the Executive Leadership
Team and the Board’s Sustainability Committee.
The TTF, accountable for accelerating our
short-, medium- and long-term strategies and
embedding leading practice, was integrated
into the Resource Centre of Excellence at the
end of FY2021 to create a permanent Tailings
Excellence team.
Governance
In FY2021, we further strengthened the
governance and assurance of our operated
TSFs. We updated our mandatory minimum
performance requirements for the effective
management of TSF failure risks, aligning our
internal requirements to the Global Industry
Standard on Tailings Management (GISTM).
This is intended to ensure our technical TSF
and cross-functional guidance is consistent
with the GISTM and the requirements are
embedded across the business.
Our focus is on gap assessments against the
GISTM, completing corporate, asset and TSF-
level evaluations to inform our implementation
planning towards conformance within the
timelines outlined by the ICMM. A BHP
Tailings Storage Facility Policy Statement has
been published on our website, outlining
our Board of Directors’ commitment to the
safe management of TSFs, emergency
preparedness and response, recovery in the
event of a failure and transparency. We also
defined our Accountable Executive (AE)
positions, who are direct reports of the BHP
Chief Executive Officer and answerable to
the BHP Board’s Sustainability Committee
in conformance with GISTM requirements.
The AE roles include an AE accountable for
the companywide TSF governance framework,
and AEs accountable for the safety of TSFs,
tasked with avoiding or minimising the
potential environmental and social impacts
of a TSF failure, tailings management training
and emergency preparedness and response.
Their responsibilities will include having regular
communication with TSF operational and
technical employees.
In FY2021, we continued to progress critical
work on TSF failure risk management.
We completed the independent reviews of TSF
failure risks across our operations with findings
incorporated into risk remediation plans.
These reviews partner leading industry experts
with our technical leads to review and enhance
our global tailings governance framework.
The process is in addition to other governance
activities, including Dam Safety Reviews,
Independent Tailings Review Boards and project
specific Independent Peer Reviews. Key risk
indicators (KRIs) set by management help to
monitor the performance in dam integrity and
design, overtopping/flood management and
emergency response planning. These KRIs
have been updated to align to the GISTM.
We engaged in a partnership with Rio Tinto and
the University of Western Australia to support
the Future Tails Initiative, focused on training,
education, research and best-practice guides
in the tailings management space. This is a
major step towards supporting safe stewardship
of TSFs for the industry and we intend to
continue this collaboration to build capacity
and knowledge within the industry.
Strategy
Our short-term strategy continues to focus
on improving KRI performance in line with
defined targets. We are completing studies at
all our operated assets focused on reducing
and mitigating potential downstream impacts
particularly to populations at risk (PAR).
Most assets have completed these studies
resulting in a diverse range of options to reduce
the PAR exposure at our TSF sites or mitigate
TSF failure risk. In some cases, we have elected
to proactively eliminate the risk of catastrophic
failure. For example, we have relocated a TSF
at a Legacy Asset (an operated asset, or part
thereof, located in the Americas that is in the
closure phase) site in Miami, Arizona, to a nearby
depression on the interior of the mine site which
is expected to eliminate the risk of failure to
people in the potential impact zone.
Our medium- and long-term strategies focus
on the development of technologies to improve
tailings management storage, which we believe
are important to achieving our aspiration
of zero harm from tailings. Asset-specific
strategies have been developed for all of our
operated and legacy assets and seek long-
term alternative tailings solutions. In addition,
while our non-operated joint ventures (NOJVs)
are independently controlled and have their
own operating and management standards,
we encourage NOJVs to consider long-term
alternative tailings solutions as an option in
asset planning.
Transparency
We fully support the GISTM and are working
towards implementation at our sites. We have
prioritised and actioned a phased disclosure
approach to support our journey towards
conformance, starting with an update
to our previously published Church of
England Disclosure. We have contributed to
improvements in tailings storage management
across the mining industry, including through
the ICMM Tailings Working Group. We are
participants in other tailings working groups
globally, including those associated with the
Canadian Dam Association, Australian National
Committee on Large Dams, Australasian
Institute of Mining and Metallurgy, Minerals
Council of Australia, Society for Mining,
Metallurgy and Exploration, and Fundación
Chile. We have continued to participate 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.
Operated and non-operated
tailings portfolio
The classifications described in this Annual
Report align to the Canadian Dam Association
(CDA) classification system. It is important to
note the TSF classification is one element of TSF
risk management, but does not represent risk
itself. It reflects the modelled, hypothetical most
significant possible failure and consequences
without controls. It does not reflect the current
physical stability of the TSF and it is possible
for TSF classifications to change over time, for
example, following changes to the operating
context of a dam. As such, this data represents
the status of the portfolio as at 30 June 2021.
The TSF classification informs the design,
surveillance and review components of risk
management. Therefore, TSFs with a higher-
level classification will have more rigorous
requirements than TSFs that have a lower
level of classification.
In total, there are 72 TSFs(1) at our operated assets,
29 of which are of upstream design. Of the
72 operated facilities, three are classified as
extreme and a further 17 classified as very high.
Fourteen of our operated facilities are active.
A substantial portion of our inactive portfolio
(58) at our assets is due largely to the number of
historic tailings facilities associated with our North
American legacy assets portfolio. Further detail
of the risk reduction work underway for high
consequence classification facilities is provided
above in the Strategy and Governance sections
and online at our case studies.
There are 12 TSFs at our non-operated joint
ventures, which are all located in the Americas.
The four active tailings facilities are located
in Antamina in Peru, which is of downstream
construction, Patilla Norte Pit, an in-pit TSF at
Cerrejón in Colombia, and two TSFs at Samarco
in Brazil, Alegria Sul TSF, which is co-mingled dry
stack, and Alegria Sul Pit, an in-pit TSF.
In addition, there are eight inactive facilities.
These comprise of two upstream facilities
at Samarco (Germano) in Brazil 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; one
downstream inactive facility at Bullmoose in
Canada and one inactive downstream facility,
Cantor TSF, at Cerrejón in Colombia.
More information on our management
of TSFs and global governance strategy
is available at bhp.com/tailings
Classification of operated tailings
storage facilities(1)(2)(3)(4)(5)(6)(7)
Types of operated tailings
storage facilities(1)(2)(8)
Operational status of operated
tailings storage facilities(1)(2)(9)
Extreme
Very high
High
Significant
Low
N/A
Centreline
Downstream
Upstream
Other
3
17
16
11
15
10
Active
Inactive
7
19
29
17
14
58
(1) The number of tailings storage facilities (TSFs) is based on the definition agreed to by the ICMM Tailings Advisory Group at the original time of submission and expanded to align with the
TSF definition established in the Global Industry Standard for Tailings Management (GISTM). An increase of five TSFs is reported since our Church of England submission in 2019 due to
the updated BHP definition of TSF to align with the GISTM. We keep this definition under review.
(2) The Island Copper tailing facility originally disclosed in our Church of England submission in 2019 for the purposes of transparency has been removed as it is not a dam nor considered
a TSF under the GISTM definition of a TSF. Tailings at Island Copper were deposited in the ocean under an approved license and environmental impact assessment. This historic practice
ceased in the 1990s. We have since committed not to dispose of mine waste rock or tailings in river or marine environments. We continue to conduct environmental effects monitoring.
(3) The following classifications aligned 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.
(4) For the purposes of this chart, ANCOLD and other classifications have been converted to their CDA equivalent.
(5) Hamburgo TSF at Escondida is an inactive facility where tailings were deposited into a natural depression. Hamburgo TSF is not considered a dam and is, therefore, not subject to CDA
classification, the assessment to determine the GISTM classification will be completed in CY2021.
(6) SP1/2 and SP3 TSF at NSWEC are inactive facilities which have been assessed to have no credible failure modes and are therefore shown as not having a CDA classification.
(7) Seven TSFs are currently under assessment to determine their consequence classification.
(8) “Other“ includes dams with a raising method that combines upstream, downstream and centreline or are of in-pit design.
(9) “Inactive“ includes facilities not in operational use, under reclamation, reclaimed, closed and/or in post-closure care and maintenance.
BHP
Annual Report 2021
51
Strategic Report1GovernanceFinancial StatementsAdditional Information234 1.13 Sustainability continued
1.13.16 Independent Assurance Report to the Management
and Directors of BHP Group Limited and BHP Group Plc (BHP)
What we assured
Ernst & Young (EY) was engaged by BHP to provide limited assurance over certain sustainability data and disclosures in
BHP’s Annual Report for the year ended 30 June 2021 (‘FY21 Annual Report’) and online, in accordance with the noted
criteria, as defined in the following table:
What we assured (Limited Assurance Subject Matter)
What we assured it against (Criteria)
BHP’s qualitative disclosures in sections 1.12 and 1.13 of the
FY21 Annual Report
BHP’s Sustainability policies and standards as disclosed
in the ICMM tab in BHP’s ESG Standards and Databook
www.bhp.com/FY21ESGStandardsDatabook.
BHP’s identification and reporting of its material sustainability
risks and opportunities described within the FY21 Annual
Report and online at bhp.com/materialityassessment
BHP’s implementation of systems and approaches to
manage its material sustainability risks and opportunities
BHP’s reported performance of its material sustainability risks
and opportunities in sections 1.12, 1.13, and 4.8 of the FY21
Annual Report
BHP’s prioritisation process for the selection of
assets for PE validation reported online at bhp.com/
sustainabilitystandards
Water stewardship reporting, at an asset level, in the FY21
Annual Report and supporting disclosures included online at
bhp.com/water
– Management’s own publicly disclosed criteria
–
International Council on Mining and Metals (ICMM)
Mining Principles and relevant Performance
Expectations (PE) (2020) and mandatory Position
Statements (Subject Matter 1)
–
ICMM Subject Matter 2
– Global Reporting Initiative (GRI) Principles for defining
report content
–
ICMM Subject Matter 3
–
ICMM Subject Matter 4
– Management’s own publicly disclosed criteria including
GRI Topic Specific Standards and Sustainability
Accounting Standards Board (SASB) Mining and
Metals Standard
–
ICMM Subject Matter 5
–
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 (Reasonable Assurance Subject Matter)
What we assured it against (Criteria)
Scope 1 and 2 Greenhouse Gas emissions as reported in
section 1.13.7 and 4.8.5 of the FY21 Annual Report
– World Resource Institute/World Business Council for
Sustainable Development
(WRI/WBCSD) Greenhouse Gas Protocol
– BHP’s Basis of Preparation
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 sections 1.12, 1.13 and 4.8 of the FY21 Annual Report have not been prepared, in all material respects, in
accordance with the Criteria defined above.
– Reasonable Assurance
In our opinion, the Scope 1 and 2 greenhouse gas emissions, as reported in section 1.13.7 and 4.8.5 of the FY21
Annual Report are prepared, in all material respects, in accordance with the Criteria defined above.
Emphasis of Matter
We draw attention to section 4.8.6 in the FY21 Annual
Report and online at bhp.com/water, in which BHP
discloses performance metrics as it relates to water
withdrawals, consumption and discharges. The collation
of water storage data during FY21 has identified
uncertainty in the water models currently used at BHP’s
Coal Assets (BMA, BMC and NSW Energy Coal). As a
result, the disclosed water performance data for the Coal
Assets is subject to estimation uncertainty but is based
on the best information available at the time of reporting.
Our conclusion is not modified in respect of this matter.
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
Standards) 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 FY21 Annual 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.
52
BHP
Annual Report 2021
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 27 January 2021.
We adapted our approach to undertaking our review
procedures in response to the COVID-19 travel restrictions
and social distancing requirements. We visited one
BHP site in person with the remaining ‘site visits’
undertaken virtually by phone and video-conference.
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
–
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 FY21 Annual Report to understand how
BHP’s identified material risks and opportunities are
reflected within the qualitative disclosures
– Evaluating whether the information disclosed in
the FY21 Annual 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 a mix of virtual and in-person 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 FY21 Annual Report and related
online disclosures
– Reviewing data, information or explanation about
the sustainability performance data and statements
included in the FY21 Annual Report and related
online disclosures
– Reviewing other information within the FY21 Annual
Report for consistency and alignment with our
assurance subject matter
– On a judgemental sample basis, re-performing
calculations to check accuracy of claims in the
FY21 Annual Report
– Checking the water balance for each asset and
judgementally selecting a sample of water streams
for further testing
– 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 of Greenhouse Gas
emissions, selecting key items and representative
sampling, based on statistical audit sampling tables and
agreeing to source information to check accuracy and
completeness of performance data, 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 FY21 Annual Report,
other than sustainability data and disclosures relating
to BHP’s Annual Report for the year ended 30 June
2020. 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 FY21
Annual 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.
Ernst & Young
Melbourne, Australia
2 September 2021
Mathew Nelson
Partner
1.14 Section 172 statement
We are committed to continuing to deliver strong
value to shareholders and to growing value for other
stakeholders who depend on and support BHP.
Engagement and Perception Survey
(EPS) and Culture Dashboard
These results provide insight to the Board on our
culture and areas of focus, including where we
are lagging in certain measures. The EPS survey
was redesigned in FY2021 to include more
targeted questions and a new survey platform
to provide leaders with greater insight into the
key metrics related to Safety, Engagement and
Enablement, which were identified as critical
foundations for our performance culture.
For more information
refer to section 1.12
EthicsPoint
Our 24-hour speak-up helpline enables
employees and other stakeholders to raise
matters of concern. This helps to ensure Board
oversight of culture and management response
to any alleged serious conduct contrary to
Our Charter and Our Code of Conduct.
For more information on EthicsPoint
refer to section 2.1.15
Impact of our engagement
on decision-making, strategy
and purpose
Inclusion and diversity
The Board considers and discusses progress
against agreed inclusion and diversity
objectives and endorses inclusion and
diversity scorecard KPIs.
For more information
refer to section 2.1.9
Culture and capability
The Board considers the capabilities and culture
required for the effective execution of our
strategy. These considerations are reflected in
organisational structure decisions (including
the design of our Executive Leadership Team,
for example, the two new roles of Chief
Technical Officer and the Chief Development
Officer); as well as training, development and
succession planning.
Mental and physical health and wellbeing
Feedback from the workforce is taken into
consideration as part of health and wellbeing
initiatives, such as the measures implemented
in response to the COVID-19 pandemic for
people on-site and those working from home.
Consistent with our focus on mental health
within our business and recognising the
particular challenges faced by the resources
industry, BHP was a founding member of
the Global Business Initiative for Workplace
Mental Health.
For more information
refer to section 1.13.5
We believe this focus will be a
long-term source of competitive
advantage. Our Directors
communicate with stakeholder
groups to understand their
interests and priorities through
various channels, including via
direct engagement and delegated
committees and forums.
The UK Companies Act 2006 (CA 2006) sets
out a number of general duties that directors
owe to the company, including the duty
to promote the success of the company,
while having regard to the factors, including
stakeholder factors, set out in section 172(1)(a) to
(f) of the CA 2006. Our Section 172 Statement
sets out at a high-level how the Board considers
the interests of a range of stakeholders
in its discussions, decision-making and
implementation of BHP’s strategy and purpose.
In addition, the Board considers the likely
consequences of decisions in the long term
and the importance of maintaining a reputation
for high standards of business conduct.
For more information on the
Board’s decision-making process
refer to section 2.1.3
Workforce
The Board uses a range of formal and
informal communication channels and
reporting methods to understand the views
of the workforce. Key focus areas include
health, safety and wellbeing matters,
opportunities for career development and
progression, as well as the Group’s culture
and purpose.
For more information
refer to sections 1.12 and 2.1.6
How we engage and communicate
Direct engagement
Directors hear from employees up to several
levels below the CEO, at Board and Board
Committee meetings, and at virtual and
physical site visits. Issues raised by employees
in these sessions have included the impact
of COVID-19 in relation to mental health and
fatigue management (due to quarantine
requirements), views on the effectiveness of
health and safety initiatives, and engagement
activities with local communities.
Webcasts
Webcasts are used by the CEO to deliver key
messages to the workforce on topics such as
financial results, strategy, health and safety
performance, confirming our zero tolerance
for sexual assault and sexual harassment and
our COVID-19 response; as well as for live
Q&A and town hall sessions with members
of management.
Community and government
We recognise mutually beneficial
relationships with communities and
governments are crucial to our strategy
and building social value. Key focus
areas include the Group’s economic and
social contribution, Indigenous relations
and our approach to sustainability and
environmental matters.
For more information
refer to section 1.13
How we engage and communicate
Forum on Corporate Responsibility (FCR)
The Sustainability Committee and other
members of the Board meet with members of
the FCR, which comprises civil society leaders
in various fields of sustainability, to discuss FCR
members’ views on societal trends and how
these may influence BHP’s emerging risks.
EthicsPoint
Our 24-hour speak-up helpline can also be
used by external stakeholders to raise matters
of concern.
Cultural heritage practices
The Board and Sustainability Committee
receive updates on BHP’s cultural heritage
management, including in relation to actions to
enhance our systems, processes and capability.
The Chair and CEO also engaged directly with
the First Nations Heritage Protection Alliance.
We are focused on continuing to develop
our relationships with Traditional Owners,
for example, in September 2020, we further
strengthened our 20-year partnership with the
Banjima people in Western Australia through
the establishment of the South Flank Heritage
Advisory Council. This is intended to ensure
ongoing high-level dialogue between us on
important cultural heritage and other matters.
Impact of our engagement
on decision-making, strategy
and purpose
Relationships with Traditional
Owners in Australia
In FY2021, we established a new global
Indigenous Engagement team to lead
Indigenous engagement, agreement-making
and advocacy to enhance our focus on our
engagement with Indigenous peoples.
For more information on the improvements
to our systems and processes to reflect
engagement with Traditional Owners
refer to section 1.13.10
First Nations Heritage Protection Alliance
BHP and the First Nations Heritage Protection
Alliance jointly designed a set of shared
principles, which reaffirm BHP’s commitment
to Free, Prior and Informed Consent in
agreement- making.
For more information
refer to section 1.13.10
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Annual Report 2021
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Strategic Report1GovernanceFinancial StatementsAdditional Information234
sessions when assessing our portfolio positions,
including opportunities to create more options
in future facing commodities.
implemented by BHP for several months
in CY2020 as a temporary COVID-19
support measure.
1.14 Section 172 statement continued
Social value
We are embedding the consideration of
social value creation across BHP, including in
relevant Group targets, policies and investment
decision-making processes, as well as in
planning cycles for our operated assets.
Social investment commitment
This is aligned with our broader business priorities
and supports projects and provides donations
with the primary purpose of contributing to the
resilience of the communities and environment
where we have a presence.
Portfolio considerations
Creating and securing more options in future
facing commodities remains a priority in order
to strengthen our portfolio and protect and
grow value over the long term. In FY2021, this
included our intention to exit from our energy
coal assets and non-core metallurgical coal
assets, and the agreement to sell our stake
in Colombian energy coal mine Cerrejón.
For more information
refer to section 1.13.11
For more information
refer to section 1.5
Climate policy and other ESG issues
The Board takes into account community and
expert external views, including the FCR, in
considering climate policy and other ESG issues.
Investors
Part of the Board’s commitment to high-
quality governance is expressed through
the approach BHP takes to engaging and
communicating with our investors. Key
focus areas include the Group’s overall
strategy, capital allocation, social value and
our financial and operational performance.
For more information
refer to section 2.1.6
How we engage and communicate
Investor meetings
We engage regularly with investors on key areas
of market interest, including heritage protection,
industry associations and climate matters and
feedback from these meetings is shared with
the Board.
Question and answer sessions
These sessions provide shareholders the
opportunity to ask BHP leaders about the topics
most important to them with answers webcast
via BHP’s website.
Review of investor perspectives
The Board receives regular feedback on
investor perceptions and opinions, including
through independent survey results and
associated analysis.
Annual General Meetings (AGMs)
All Board members attended the 2020 BHP
Group Limited AGM virtually to engage directly
with shareholders. A virtual forum for BHP
Group Plc shareholders was also held as an
opportunity to hear from the Chair and CEO,
and to ask questions via a live text facility.
Industry associations
We engaged with investors to discuss their
views on industry associations in advance
of and subsequent to the 2020 AGMs.
For more information
refer to section 2.1.6
Impact of our engagement
on decision-making, strategy
and purpose
Consideration of ESG issues
Given investor interest in ESG issues, including
related financial threats and opportunities
the Board considers these during its strategy
Industry associations
Investor feedback has been a key input to
BHP’s reforms announced in August 2020 and
the active role BHP plays in shaping the policy
advocacy of industry associations in which
it participates.
Suppliers and customers
We seek to build authentic, collaborative
relationships with our local, regional and
global suppliers and customers to create
shared value. We see respecting human
rights as critical for our ability to contribute
meaningful and ongoing social value to our
stakeholders. We expect businesses we work
with to respect human rights throughout
the value chain. Key focus areas include the
Group’s supply chain management and our
approach to procurement and sales.
For more information
refer to section 1.13.9
How we engage and communicate
Supply chain human rights
The Sustainability Committee considers BHP’s
approach to policy developments in and
management of human rights. The Board and
Sustainability Committee review our approach
to managing human rights risks in the supply
chain through the discussion and approval of
our annual Modern Slavery Statement.
For more information
refer to section 1.13.9
Climate change
We are engaging with our customers and
progressively with our suppliers, on opportunities
to reduce Scope 3 GHG emissions.
For more information
refer to section 1.13.7
Impact of our engagement
on decision-making, strategy
and purpose
Emissions reduction partnerships
We established emissions reduction
partnerships with three major steelmakers
in China and Japan whose combined output
equates to around 10 per cent of global
steel production.
Payment terms
From 1 July 2021, BHP implemented seven-
day payment terms for all small, local and
Indigenous businesses across our global
operations. The move followed positive
feedback on quicker payment terms
Environment
The Board and its Committees consider
a range of environmental matters
throughout the year, including detailed
discussions relating to climate change,
biodiversity, water, tailings storage
facilities, rehabilitation and closure.
For more information
refer to section 1.13.12
How we engage and communicate
Climate change
Our purpose and our strategy provide a clear
direction for our climate change strategy.
The Board and its relevant Committees consider
climate change, including the external landscape
in relation to climate risks and expectations,
progress against BHP’s climate change
commitments and our climate risk exposure.
For more information
refer to section 1.13.7
Health, safety, environment
and community (HSEC) targets
The Sustainability Committee receives updates
on how we are performing against our public
HSEC targets and longer-term goals, including
in relation to water and biodiversity.
For more information
refer to sections 1.13.4 and 2.1.11
Environmental performance
The Sustainability Committee considers reports
from the HSE Officer covering environmental
performance at every meeting and reports
to the Board on its discussions.
Impact of our engagement
on decision-making, strategy
and purpose
Climate change commitments
The Board approved commitments, including
setting a medium-term target for operational
(Scope 1 and Scope 2) emissions, Scope 3
emissions goals and the link between emissions
performance and executive remuneration.
The Board considered stakeholder feedback and
views as part of its decision-making process.
Capital allocation
In addressing our Scope 1 and Scope 2
emissions, as with all capital investments, we
assess and rank each decarbonisation project
through the rigour of our Capital Allocation
Framework. Achieving our Scope 1 and Scope
2 emissions reduction targets and goal ranks
alongside maintenance capital in the hierarchy
of our decisions.
Renewable power contracts
In keeping with our target to reduce operational
emissions by at least 30 per cent from FY2020
levels(1) by FY2030 and our long-term goal to
achieve net zero operational emissions by 2050,
we established renewable power contracts for
our coal operations in Queensland and nickel
operations in Western Australia.
(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.
54
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Annual Report 2021
In addition, approximately R$1.6 billion
(approximately US$300 million(1)) was paid to
more than 17,000 people under the court-
mandated simplified indemnity system (known
as the ‘Novel’ system), which is designed to
provide compensation for informal workers
who have had difficulty proving the damages
they suffered, such as cart drivers, sand miners,
artisanal miners and street vendors.
Updates on the progress of the compensation
program are available at fundacaorenova.org/
en/repair-data/indemnities-and-productive-
resumption.
Other socio-economic programs
Fundação Renova continues to implement a
wide range of socio-economic programs in
addition to the resettlement and compensation
programs. These programs cover health and
infrastructure projects in the Rio Doce basin,
promotion of economic development in the
impacted communities and sewage treatment
facilities to improve the water quality in the
Rio Doce.
Environmental remediation
Since December 2019, the riverbanks
and floodplains have been vegetated, river
margins stabilised and in general, water
quality and sediment qualities have returned
to historic levels. Long-term remediation work
is continuing to re-establish agriculture and
native vegetation.
A ban on fishing activities along the coast of
Espírito Santo and a precautionary conservation
restriction preventing fishing for native fish
species in the Rio Doce in Minas Gerais remain
in place. Fundação Renova continues to
support the recovery of habitats and aquatic
ecology and engage with the authorities with
the goal of lifting the restrictions.
Legal proceedings
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 involving BHP
refer to section 4.9
1.15 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) 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.
The communities of Bento Rodrigues, Gesteira
and Paracatu de Baixo were flooded and other
communities and the environment downstream
in the Rio Doce basin were also affected.
In December 2020, Samarco restarted its
operations at a reduced production level
For information on Samarco’s restart
and its operations
refer to section 1.10.3
Our response and support
for Fundação Renova
BHP Brasil has been and remains fully
committed to supporting the extensive ongoing
remediation and compensation efforts of the
Fundação Renova in Brazil.
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 is implementing 42
remediation and compensatory programs.
BHP Brasil provides support to Fundação
Renova, including through representation
on the foundation’s governance structures.
BHP Brasil has provided US$1.6 billion(1) to
fund Framework Agreement programs when
Samarco has been unable to do so.
Fundação Renova
Resettlement
One of Fundação Renova’s priorities is
the resettlement of the communities of
Bento Rodrigues, Paracatu de Baixo and
Gesteira. This involves ongoing engagement
and consultation with a large number of
stakeholders, including the affected community
members, their technical advisers, state
prosecutors, municipal leaders, regulators
and other interested parties.
The resettlement process for Bento Rodrigues
and Paracatu de Baixo involves designing new
towns on land that has been chosen by the
communities, to be as close as possible to the
previous layout, attending to the wishes and
needs of the families and communities, while
also meeting permitting requirements.
In Bento Rodrigues and Paracatu de Baixo, the
implementation of precautionary measures in
response to COVID-19, including a suspension
of works between March and June 2020,
as well as increases to the technical scope
for resettlement of the communities and
permitting delays have impacted the timeline
for completion.
Resettlement works resumed from mid-June
2020 and are continuing with a reduced
workforce. Currently, there is no schedule
to return to full workforce capacity given
COVID-19 restrictions. At Bento Rodrigues, the
construction of the public school, healthcare
facilities and public infrastructure has been
completed and the construction of housing
is continuing to progress. At Paracatu,
infrastructure works and the construction
of some public buildings (such as the public
school) were completed and the first houses
are underway.
In addition to the community resettlements,
some families from the rural area chose to
rebuild their houses on their previous property.
Some other families have chosen not to join
the resettlement of their previous community
and Fundação Renova is assisting them to
purchase properties.
At Gesteira, Fundação Renova offered the
families a payment solution in which they would
be able to purchase property through a ‘letter
of credit’. Most families of Gesteira have chosen
this option and the agreements are being
ratified by the 12th Federal Court.
Updates on the progress of Fundação
Renova’s resettlement program are available
at fundacaorenova.org/en/repair-data/
resettlement-and-infrastructure.
Compensation and financial assistance
Fundação Renova continues to provide fair
compensation to people impacted by the
dam failure.
Compensation and financial assistance of
approximately R$4.7 billion (approximately
US$1.1 billion(1)) has been paid to support
approximately 336,000 people affected
by the dam failure up until 30 June 2021.
More than 10,500 general damages claims
have been resolved and more than 270,000
people have been paid a total of approximately
R$280 million (approximately US$65 million(1))
for temporary water interruption. The general
damages component includes loss of life, injury,
property damage, business impacts, loss of
income and moral damages. Fundação Renova
continues to provide financial assistance cards
and other income support to those whose
livelihoods continue to be impacted by the dam
failure, including fisherfolk whose activities are
affected by fishing restrictions.
(1) USD amount is calculated based on actual transactional (historical) exchange rates related to Renova funding.
BHP
Annual Report 2021
55
Strategic Report1GovernanceFinancial StatementsAdditional Information234 1.16 Risk factors
Our principal risks are described
below and may occur as a result of
our activities globally, including in
connection with our operated and
non-operated assets, third parties
engaged by BHP or through our
value chain.
Our principal risks, individually or collectively,
could threaten our viability, strategy, business
model, future performance, solvency or
liquidity and reputation. They could also
materially and adversely affect the health
and safety of our people or members of the
public, the environment, the communities in
which we or our third-party partners operate,
or the interests of our stakeholders leading
to litigation (including class actions) or a loss
of stakeholder and/or investor confidence.
References to ‘financial performance’ includes
our financial condition and liquidity, including
due to decreased profitability or increased
operating costs, capital spend, remediation
costs or contingent liabilities. While the risks
described in this section represent our principal
risks, BHP is also exposed to other risks that are
not described in this section.
Each of our principal risks may present
opportunities as well as threats. We take
risk for strategic reward in the pursuit of our
strategy and purpose, including to grow
our asset portfolio and develop the right
capabilities for the future of our business.
Potential threats and opportunities associated
with each of our principal risks are described
below, along with the key controls to manage
them. These controls are not exhaustive and
many Group-wide controls (such as Our Code
of Conduct, Risk Framework, mandatory
minimum performance requirements for risk
management, health, safety and other matters,
dedicated non-operated joint venture teams
and our Contractor Management Framework)
help to support effective and efficient
management of all risks in line with our risk
appetite. While we implement preventative
and/or mitigating controls designed to reduce
the likelihood of a threat from occurring and
minimise the impacts if it does, these may
not be effective.
Key changes to our principal risks in FY2021
are the introduction of risks associated with
inadequate business resilience and adopting
technologies. The way in which we articulate
our other principal risks has also changed since
our FY2020 Annual Report. For example, risks
associated with operational events have been
consolidated into a single risk factor rather
than being discussed across two risk factors.
We have also disaggregated and combined
elements of principal risks. For example, risks
associated with third-party performance are
embedded throughout our principal risks and
climate change risks have been separated to
provide a greater focus on transition risks, while
risks associated with the potential physical
impacts of climate change are addressed
alongside other business resilience risks
(as well as across other relevant principal risks).
56
BHP
Annual Report 2021
We have also simplified the presentation
of our principal risks. These changes are
designed to provide greater accessibility
and value to stakeholders in understanding
our principal risks.
With the exception of risks associated
with operational events, exposure to all
of our principal risks increased in FY2021.
These increases were largely driven by
uncertainties in the external environment,
such as the continuing global impacts of the
COVID-19 pandemic, heightened geopolitical
tensions and societal and stakeholder
expectations of business (including in relation to
social, environmental and climate-related risks),
and increasing frequency and sophistication
of cyberattacks against companies in the
resources industry and governments. While our
influence over most of these aspects of our
external environment is limited, we continue
to monitor signals and review our control
environment to improve management of
associated risks.
Operational events
Risks associated with operational events
in connection with our activities globally,
resulting in significant adverse impacts on
our people, communities, the environment
or our business.
Why is this important to BHP?
We engage in activities that have the potential
to cause harm to our people and assets,
and/or communities and the environment,
including serious injuries, illness and fatalities,
loss of infrastructure, amenities and livelihood
and damage to sites of cultural significance.
An operational event at our operated or non-
operated assets or through our value chain
could also cause damage or disruptions to our
assets and operations, impact our financial
performance, result in litigation or class actions
and cause long-term damage to our licence to
operate and reputation. The potential physical
impacts of climate change could increase the
likelihood and/or severity of risks associated
with operational events. Impacts of operational
events may also be amplified if we fail to
respond in a way that is consistent with our
corporate values and stakeholder expectations.
Examples of potential threats
– An offshore well blow out, including at one of
our assets in the US Gulf of Mexico, Australia,
Trinidad and Tobago or Algeria, or at one
of our appraisal and exploration options in
Mexico, Trinidad and Tobago, Western and
Central Gulf of Mexico or Australia.
– Failure of a water or tailings storage facility,
such as the tragic failure of the Fundão dam
at Samarco in 2015 or a failure at one of our
facilities in Australia, Chile, Colombia, Peru,
the United States, Canada or Brazil.
– Unplanned fire events or explosions
(on the surface and underground).
– Geotechnical stability events (such as an
unexpected and large fall of ground at our
underground or open pit mines, or potential
interaction between our mining activities and
community infrastructure or natural systems),
including at our underground mines in
Australia, the United States and Canada.
– Air, land (road and rail) and marine
transportation events (such as aircraft
crashes or vessel collisions, groundings
or hydrocarbon release) that occur while
transporting people, supplies or products to
exploration, operation or customer locations,
which include remote and environmentally
sensitive areas in Australia, South America,
Asia and the United States.
– Critical infrastructure or hazardous
materials containment failures, other
occupational or process safety events,
or workplace exposures.
– Operational events experienced by third
parties, which may result in unavailability
of shared critical infrastructure (such as
railway lines or ports) or transportation
routes (such as the Port Hedland channel
in Western Australia).
Examples of potential opportunities
– Our focus on safety and the welfare
of our people, communities and the
environment may increase workforce and
other stakeholder confidence, enhancing
our ability to attract and retain talent and
access (or lower the cost of) capital.
– Collaborating with industry peers and
relevant organisations on minimum standards
(such as the Global Industry Standard on
Tailings Management and Large Open Pit
Project guidelines on open-pit mining design
and management) supports improvements
to wider industry management of operational
risks and may also identify opportunities to
improve our own practices.
Key management actions
– Planning, designing, constructing,
operating, maintaining and monitoring
surface and underground mines, water and
tailings storage facilities, wells and other
infrastructure and equipment in a manner
designed to maintain structural integrity,
prevent incidents and protect our people,
assets, communities, the environment
and other stakeholders.
– Specifying minimum requirements and
technical specifications, such as for
transportation (including high-occupancy
vehicles, aircraft and their operators), and
compliance with operating specifications,
industry codes and other relevant standards,
including BHP’s mandatory minimum
performance requirements.
– Defining key accountable roles, such as a
dam owner (an internal BHP individual who
is accountable for maintaining effective
governance and integrity of each tailings
storage facility), and providing training
and qualifications for our people.
– Inspections, reviews, audits and other
assurance activities, such as independent
dam safety reviews and geotechnical
review boards.
– Maintaining evacuation routes, supporting
equipment, continuity plans and crisis and
emergency response plans.
– Incorporating future climate projections into
operational event risks through ongoing
assessment of potential physical climate
change risks.
FY2021 insights
While our overall exposure to risks associated
with operational events remained relatively
stable in FY2021, our risk profile has adapted to
changes in our operating context. For example,
a greater focus on exploration has increased
our use of helicopters to conduct geophysical
surveys and transport personnel. We have also
had to adapt the way we transport people to
and from work due to the COVID-19 pandemic
(for example, more buses have been scheduled
due to social distancing requirements).
Safety section 1.13.4
Tailings storage facilities section 1.13.15
Samarco section 1.15
bhp.com/sustainability
Accessing key markets
Risks associated with market concentration
and our ability to sell and deliver products
into existing and future key markets,
impacting our economic efficiency.
Why is this important to BHP?
We rely on the sale and delivery of the
commodities we produce to customers around
the world. Changes to laws, international trade
arrangements, contractual terms or other
requirements and/or geopolitical developments
could result in physical, logistical or other
disruptions to our operations in, or the sale or
delivery of our commodities to, key markets.
These disruptions could affect sales volumes
or prices obtained for our products, adversely
impacting our financial performance, results
of operations and growth prospects.
Examples of potential threats
– Government actions, including economic
sanctions, tariffs or other trade restrictions,
imposed by or on countries where we
operate or into which we sell or deliver our
products may prevent BHP from trading
or make it more difficult for BHP to trade
in key markets. For example, China has
imposed import restrictions and tariffs on
some Australian exports, including energy
and metallurgical coal. The imposition of
further tariffs or other restrictions on any of
our other products could adversely affect
our financial performance.
– Physical disruptions to the delivery of our
products to customers in key markets
including due to the disruption of shipping
routes, closure or blockage of ports or land
logistics (road or rail) or military conflict.
In some cases, physical disruptions
may be driven or intensified by weather,
climate variability or climate change.
– Legal or regulatory changes (such as
royalties or taxes, port or import restrictions
or customs requirements, shipping/
maritime regulatory changes, restrictions
on movements or imposition of quarantines,
or changing environmental restrictions or
regulations, including measures with respect
to carbon-intensive imports) and commercial
changes (such as changes to the standards
and requirements of customers) may
adversely impact our ability to sell or deliver,
or realise full market value for, our products.
– Failure to maintain strong relationships
with customers, or changes to customer
demands for our products (such as vertical
integration), may reduce our market share or
adversely impact our financial performance.
– Increasing geopolitical tensions may
adversely affect our strategic and business
planning decisions and/or increase the
time it takes us to manage our access to
key markets, particularly if we fail to detect
or anticipate deviations in the geopolitical
environment in a timely manner.
Examples of potential opportunities
– Monitoring macroeconomic, geopolitical
and policy developments and trends may
reveal new markets or identify opportunities
to strengthen secondary markets for
existing products.
– Leveraging the opportunity to create value
by developing strategic partnerships and
strong, mutually beneficial relationships
with our customers.
– Building a deep understanding of the
geopolitical risks faced by BHP and their
potential impacts on our business could
enhance our strategy, business planning
and response, providing a potential
competitive advantage.
– Identifying the potential for weather, climate
variability or climate change to disrupt
delivery of products and implementing
management measures may increase the
resilience of our operations and supply chain.
– Signal monitoring and building relationships
with and understanding the perspectives
of influential stakeholders may improve our
ability to understand, respond to and manage
any impacts from policy changes (such as
trade policies).
Key management actions
– Monitoring and assessing our ability to
access key markets, and maintaining sales
plans, product placement and business
resilience strategies and relationships with
relevant stakeholders (such as the Chinese,
United States and Australian Governments,
and our customers in China and elsewhere).
– Maintaining response plans for various
scenarios (including physical disruptions
of logistics) to mitigate disruptions to our
ability to access key markets.
– Monitoring geopolitical and macroeconomic
developments and trends, including through
signal monitoring and our enterprise-level
watch list of emerging themes, to provide an
early indication of events that could impact
our ability to access key markets.
– Identifying weather and/or climate-related
vulnerabilities and implementing controls
to mitigate disruptions to our ability to
physically access key markets.
– Diversification of our asset and commodity
portfolio, such as our ongoing investment
in potash through the Jansen Potash
Project, to reduce exposure to market
concentration risks.
FY2021 insights
Exposure to risks associated with our access to
key markets increased in FY2021 as a result of
tensions between Australia, the United States
and China, and import restrictions and tariffs
imposed by China on some Australian exports
(including energy and metallurgical coal).
Although our influence over these aspects of
our external environment is limited, adjustments
to our portfolio may reduce exposure to market
concentration risk in the longer term.
Shareholder information – Markets
section 4.10.2
Optimising portfolio returns
and managing commodity
price movements
Risks associated with our ability to position
our asset portfolio to generate returns
and value for shareholders (including
securing growth options in future facing
commodities) and to manage adverse
impacts of short- and long-term movements
in commodity prices.
Why is this important to BHP?
We take decisions and actions in pursuit of our
strategy to optimise our asset portfolio and
to secure and create growth options in future
facing commodities (such as copper, nickel
and potash). A strategy that does not support
BHP’s objectives and/or ill-timed execution
of our strategy (including as a result of not
having sector-leading capabilities) or other
circumstances, may lead to a loss of value
that impacts our ability to deliver returns to
shareholders and fund our investment and
expansion opportunities. It may also result in our
asset portfolio being less resilient to fluctuations
in commodity prices, which are determined
by or linked to prices in world markets. In the
short term, this may reduce our cash flow, ability
to access capital and our dividends. A failure
to optimise our asset portfolio for structural
movements in commodity prices over the long
term may result in asset impairments and could
adversely affect the results of our operations,
our financial performance, and returns
to investors.
Examples of potential threats
– Failure to optimise our portfolio through
effective and efficient acquisitions,
exploration, large project delivery, mergers,
divestments or expansion of existing assets.
– Failure to identify potential changes in
commodity attractiveness and missed entry
or commodity exit opportunities, resulting
in decreased return on capital spend for,
or overpayment to acquire or invest in,
new assets or projects, stranded assets
or reduced divestment proceeds.
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Annual Report 2021
57
Strategic Report1GovernanceFinancial StatementsAdditional Information234 1.16 Risk factors continued
– Failure to achieve expected commercial
objectives from assets or investments, such
as cost savings, sales revenues or operational
performance (including as a result of
inaccurate commodity price assumptions or
resources and reserves estimates), may result
in returns that are lower than anticipated and
loss of value (such as that experienced with
US shale).
– Renegotiation or nullification of permits,
increased royalties, or expropriation or
nationalisation of our assets, or other
legal, regulatory, political, judicial or
fiscal or monetary policy instability may
adversely impact our ability to achieve
expected commercial objectives from
assets or investments, access reserves,
develop, maintain or operate our assets,
or otherwise optimise our portfolio.
– Inability to predict long-term trends in the
supply, demand and price of commodities
and optimise our asset portfolio accordingly
may restrict our ability to generate long-term
returns from the portfolio.
– Commodity prices have historically been
and may continue to be subject to significant
volatility, including due to global economic
and geopolitical factors, industrial activity,
commodity supply and demand (including
inventory levels), technological change,
product substitution, tariffs and exchange
rate fluctuations. Our usual policy and
practice is to sell our products at prevailing
market prices and as such fluctuations in
commodity prices may affect our financial
performance. For example, a US$1 per tonne
decline in the average iron ore price and
US$1 per barrel decline in the average oil
price would have an estimated impact on
FY2021 profit after taxation of US$163 million
and US$24 million, respectively. Long-term
price volatility or sustained low prices may
adversely impact our financial performance
as we do not generally have the ability to
offset costs through price increases.
Examples of potential opportunities
– Acquisition of new resources in future
facing commodities may strengthen our
portfolio and protect and grow value over
the long term.
– Ability to predict long-term commodity
demand, supply and price trends may lead
to BHP being able to identify and acquire
new future facing commodities and assets
ahead of our competitors or exit from
declining commodities in a timely manner,
strengthening our portfolio and leading
to long-term portfolio returns.
– BHP may be perceived as a welcome
and valued or preferred partner for
the development of new resource
opportunities, enabling us to secure new
assets or exploration opportunities to create
long-term optionality in the portfolio.
Key management actions
– Strategies, processes and frameworks
to grow and protect our portfolio and
to assist in delivering ongoing returns
to shareholders include:
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BHP
Annual Report 2021
– our exploration and business development
programs, which focus on replenishing our
resource base and enhancing our portfolio
(including creating and securing more
options in future facing commodities)
– our long-term strategic outlook and
ongoing strategic processes to assess our
competitive advantage and enable the
identification of threats to or opportunities
for our portfolio through forecasting and
scenario modelling
– monitoring signals to interpret external
events and trends, and designing
commodity strategies and price protocols
that are reviewed by management and
the Board
– our Capital Allocation Framework,
corporate planning processes,
investment approval processes and
annual reviews (including resilience
testing) of portfolio valuations
– our balance sheet and liquidity framework,
which is designed to maintain a robust
balance sheet with sufficient liquidity and
access to diverse sources of funding
– Pursuing a considered approach to new
country entry, including development
of capability to operate in higher-risk
jurisdictions, in order to support portfolio
opportunities in new jurisdictions.
– Further developing BHP’s social value
proposition to position BHP as a preferred
partner for the development of resource
opportunities in line with the expectations
of local communities, host governments
and other global stakeholders.
– Managing commodity price exposure
through the diversity of commodities,
markets, geographies and currencies
provided by our portfolio, as well as our
financial risk management practices in
relation to our commercial activities.
FY2021 insights
Our exposure to risks associated with
optimising our portfolio and managing
commodity price movements increased in
FY2021 as a result of volatility and uncertainty
across global economies, including due
to the continuing effects of the COVID-19
pandemic. We announced the sale of
Cerrejón in June 2021 as part of our intention
to consolidate our portfolio of coal assets to
higher-quality metallurgical coal, and remain
open to all options for BMC and NSWEC.
Heightened societal expectations regarding
the use of coal will continue to be a portfolio
consideration. On 17 August 2021, we also
announced our intention to merge our
Petroleum assets with Woodside(1), which is
designed to unlock synergies and increase
value and choice for BHP’s shareholders.
Positioning for future section 1.5
Performance by commodity section 1.17
Note 23 ‘Financial risk management’
in section 3
Significant social or
environmental impacts
Risks associated with significant impacts
of our operations on and contributions to
communities and environments throughout
the life cycle of our assets and across our
value chain.
Why is this important to BHP?
The long-term viability of our business is closely
connected to the wellbeing of the communities
and environments where we have a presence.
At any stage of the asset life cycle, our activities
and operations may have or be seen to have
significant adverse impacts on communities
and environments. In these circumstances,
we may fail to meet the evolving expectations
of our stakeholders (including investors,
governments, employees, suppliers, customers
and community members) whose support is
needed to realise our strategy and purpose.
This could lead to loss of stakeholder support
or regulatory approvals, increased taxes and
regulation, enforcement action, litigation or
class actions, or otherwise impact our licence
to operate and adversely affect our reputation,
ability to attract and retain talent, operational
continuity and financial performance.
Examples of potential threats
– Engaging in or being associated with
activities (including through our non-
operated joint ventures and value
chain) that have or are perceived to
have individual or cumulative adverse
impacts on the environment, biodiversity
and land management, water access
and management, human rights or
cultural heritage.
– Failing to meet stakeholder expectations
in connection with our legal and regulatory
obligations, relationships with Indigenous
peoples, community wellbeing and the
way we invest in communities.
– Political, regulatory and judicial
developments (such as constitutional
reform in Chile that could result in
adjustments to water and other resource
rights, or the Dasgupta Review in the United
Kingdom that could result in government
actions that impact the management of
biodiversity and ecosystems) or changing
stakeholder expectations could result in
more stringent operating requirements
on our business. For example, changes
to regulations or stakeholder expectations
may delay the timing or increase costs
associated with closure and rehabilitation
of assets, or expose BHP to unanticipated
environmental or other legacy liabilities.
– Failing to identify and manage potential
physical climate change risks to communities,
biodiversity and ecosystems. For example,
changes to species habitat or distribution as a
result of sustained higher temperatures could
result in land access restrictions or litigation,
or limit our access to new opportunities.
(1) On 17 August 2021, BHP announced it had entered into a merger commitment deed with Woodside to combine
their respective oil and gas portfolios by an all-stock merger. Completion of the merger is subject to confirmatory
due diligence, negotiation and execution of full form transaction documents, and satisfaction of conditions
precedent including shareholder, regulatory and other approvals, and expected to occur in the second
quarter of CY2022.
Examples of potential opportunities
– Our support for responsible stewardship
of natural resources may enhance the
resilience of environments and communities
to potential threats (including the potential
physical impacts of climate change).
– Strong social performance, including
sustainable mining and a focus on the
wellbeing of communities, could generate
competitive advantage in the jurisdictions
where we operate.
– Our global social value strategy may improve
stakeholder relations, build community
trust and increase investor confidence
and demand for our commodities.
– Greater clarity, transparency and standards
associated with regulatory regimes that
support and protect communities and the
environment may increase requirements
across our sector, generating competitive
advantage for companies that have already
invested in social performance.
Key management actions
– Our Requirements for Community and Our
Requirements for Environment and Climate
Change standards provide requirements and
practices that are designed to strengthen
our social, human rights and environmental
performance. Our Human Rights Policy
Statement, Water Stewardship Position
Statement, Climate Change Position
Statement and Indigenous Peoples Policy
Statement set out our commitments and
approach to these matters.
– Engaging in regular, open and honest
dialogue with stakeholders to better
understand their expectations, concerns and
interests, and undertaking research to better
understand stakeholder perceptions.
– Building social value into our decision-making
process, along with financial considerations.
– Building stakeholder trust and contributing
to environmental and community resilience,
including through collaborating on shared
challenges (such as climate change and
water stewardship), enhanced external
reporting of our operated assets’ potential
impacts on biodiversity and maximising
the value of social investments through
our social investment strategy.
– Conducting regular research and impact
assessments for operated assets to better
understand the social, environmental, human
rights and economic context. This supports
us to identify and analyse stakeholder,
community and human rights impacts,
including modern slavery risks and emerging
issues. We also complete due diligence
screening on suppliers through our Ethical
Supply Chain and Transparency program.
– Integrating closure into our planning,
decision-making and other activities
through the life cycle of our operated assets,
as set out in our mandatory minimum
performance requirements for closure.
FY2021 insights
Our exposure to risks with potentially significant
social or environmental impacts increased
in FY2021 due to environmental, political and
regulatory developments, and increasing
societal expectations, including of regulators
and other stakeholders on Indigenous
peoples’ rights and potential impacts of
our operations throughout the asset life
cycle. We believe the nexus between water,
climate change, biodiversity and society is
becoming increasingly clear as a driver of
social expectations.
– Failure to address investor concerns on the
potential impact of climate change on and
from BHP’s portfolio and operations may
result in reduced investor confidence and/or
investor actions seeking to influence BHP’s
climate strategy.
– Social concerns around climate change may
result in investors divesting our securities,
pressure on BHP to divest or close remaining
fossil fuel assets and on financial institutions
not to provide financing for our fossil fuel
assets, or otherwise adversely impact our
ability to optimise our portfolio.
People and culture section 1.12
Community section 1.13.8
Indigenous peoples section 1.13.10
Social investment section 1.13.11
Environment section 1.13.12
Water section 1.13.13
Land and biodiversity section 1.13.14
bhp.com/sustainability
Low-carbon transition
Risks associated with the transition
to a low-carbon economy.
Why is this important to BHP?
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. As a world-leading resources
company, BHP is exposed to a range of
transition risks that could affect the execution
of our strategy or our operational efficiency,
asset values and growth options, resulting
in a material adverse impact on our financial
performance, share price or reputation,
including litigation. The complex and pervasive
nature of climate change means transition risks
are interconnected with and may amplify our
other principal risks. Additionally, the inherent
uncertainty of potential societal responses
to climate change may create a systemic
risk to the global economy.
Examples of potential threats
– Introduction or improvement of low-carbon
technologies or changes in customer
preference for products that support the
transition to a low-carbon economy may
decrease demand for some of our products
(which may be abrupt or unanticipated),
increase our costs or decrease the availability
of key inputs to production. For example:
– ‘Green steel’ technologies may
reduce demand for our metallurgical
coal or iron ore, or electric vehicle
penetration may reduce demand
for our petroleum products.
– Implementing low-carbon processes or
new investments to respond to market
demand for products that support a
low-carbon economy (such as potential
capital spend at our Jansen Potash
Project to deliver fertiliser products or
at our Nickel West asset to supply the
battery market) may increase operating
or development costs.
– Perceived or actual misalignment of the
resources industry’s or BHP’s climate
actions (goals, targets and performance)
with societal and investor expectations, or
a failure to deliver our climate actions, may
result in damage to our reputation, climate-
related litigation (including class actions)
or give rise to other adverse regulatory,
legal or market responses.
– Changes in laws, regulations, policies,
obligations, government actions, and
our ability to anticipate and respond to
such changes (which may be abrupt or
unanticipated), including emission targets,
restrictive licencing, carbon taxes, border
adjustments or the addition or removal
of subsidies, may give rise to adverse
regulatory, legal or market responses.
Examples of potential opportunities
– Our copper, nickel, iron ore and metallurgical
coal provide essential building blocks for
renewable power generation and electric
vehicles, and can play an important part in
the transition to a low-carbon economy.
– Our potash fertiliser options can promote
more efficient and more profitable agriculture
and alleviate the increased competition for
arable land.
– Increased collaboration with customers
and original equipment manufacturers,
such as BHP’s partnerships with each of
China Baowu, JFE and HBIS for research
and development of steel decarbonisation
pathways, can provide opportunities for
development of new products and markets.
Key management actions
– Establishing public views and commitments
on, and mandatory minimum performance
requirements for managing, climate change
threats and opportunities, which are set out
in our Climate Change Position Statement,
our Climate Change Report 2020, our
Climate Transition Action Plan 2021 and
the Our Requirements for Environment
and Climate Change standard.
– Using climate-related scenarios, themes
and signposts (such as monitoring policy,
regulatory, legal, technological, market and
other societal developments) to evaluate
the resilience of our portfolio and inform
our strategy.
– Considering transition risks (including carbon
prices) when making capital expenditure
decisions or allocating capital through our
Capital Allocation Framework, supporting
the prioritisation of capital and investment
approval processes.
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Strategic Report1GovernanceFinancial StatementsAdditional Information234 1.16 Risk factors continued
– Seeking to mitigate our exposure to risks
arising from policy and regulation in our
operating jurisdictions and markets by
reducing our operational emissions and
taking a product stewardship approach
to emissions in our value chain.
– Advocating for the introduction of an
effective, long-term policy framework
that can deliver a measured transition
to a low-carbon economy.
FY2021 insights
Our exposure to transition risks increased in
FY2021 due primarily to political developments
– with the Biden administration renewing the
United States’ focus on climate and net zero
goals set by China, Japan and the European
Union – and greater investor and other
stakeholder interest in understanding how
climate change might impact our strategy
and portfolio.
Stakeholder expectations of BHP regarding
disclosure of climate change-related information
have grown accordingly (for example, Climate
Action 100+ requested information from BHP to
conduct its first net zero company benchmark in
FY2021). Actions by investors and proxy advisers
seeking to hold companies accountable
for their climate strategies also accelerated
during FY2021.
We anticipate these and potentially other
factors will continue to affect transition risks in
FY2022, following publication in August 2021
of the first part of the Intergovernmental Panel
on Climate Change’s Sixth Assessment Report,
Climate Change 2021: The Physical Science
Basis. However, our recent proposed portfolio
changes would, subject to their completion,
reduce our exposure to certain transition risks.
Positioning for future section 1.5
Climate change and portfolio resilience
section 1.13.7
BHP Climate Change Report 2020
BHP Climate Transition Action Plan 2021
bhp.com/climate
Adopting technologies and
maintaining digital security
Risks associated with adopting and
implementing new technologies, and
maintaining the effectiveness of our existing
digital landscape (including cyber defences)
across our value chain.
Why is this important to BHP?
Our business and operational processes across
our value chain are dependent on the effective
application of technology, which we use as
a lever to deliver on our current and future
operational, financial and social objectives.
This exposes BHP to risks originating from
adopting or implementing new technologies,
or failing to take appropriate action to position
BHP for the digital future, which may impact
the capabilities we require, the effectiveness
and efficiency of our operations and our
ability to compete effectively. We may also fail
to maintain the effectiveness of our existing
and future digital landscape, including cyber
defences, exposing us to technology availability,
reliability and cybersecurity risks.
Sensitivity of our portfolio
to demand for fossil fuels
We acknowledge there is a range of possible
energy transition scenarios, including those
aligned with the Paris Agreement goals, that
may indicate different outcomes for our
individual commodities. Our most recent
portfolio analysis published in our Climate
Change Report 2020 demonstrates the Group
can continue to thrive over the next 30 years,
as the global community takes action to
decarbonise, even under our Paris-aligned
1.5°C trajectory.(1)
There are inherent limitations with scenario
analysis and it is difficult to predict which,
if any, of the scenarios might eventuate and
none of the scenarios considered constitutes
a definitive outcome for the Group.
The long-term commodity price outlooks
under our 1.5°C Paris-aligned scenario are
either largely consistent with or favourable
to, the price outlooks in our current planning
cases, with the exception of energy coal,
oil and natural gas.
The long-term commodity price outlooks
under our 1.5°C Paris-aligned scenario,
excluding energy coal, oil and natural
gas, reflect:
– copper and nickel benefiting from the
dramatic pace of electrification over
and above our current planning cases
– iron ore growth underpinned by the benefit
to steel demand from the construction of
renewables, particularly wind power.
– potash growth reflecting the potential
for greater penetration of biofuels
– metallurgical coal supported by the
limited alternatives in steelmaking
over the scenario timeframe
Given these positive long-term price outlooks,
a material adverse change is not expected
under our 1.5°C Paris-aligned scenario to the
carrying values of our assets and liabilities
related to these commodities, including
property, plant and equipment and closure
and rehabilitation provisions.
For energy coal, oil and natural gas, long-
term commodity price outlooks under our
1.5°C Paris-aligned scenario are unfavourable
compared to the price outlooks in our current
planning cases. Price outlooks for these
commodities published in the International
Energy Agency’s (IEA) Net Zero by 2050:
A Roadmap for the Global Energy Sector
Special Report (May 2021) (IEA NZE) are also
unfavourable to the price outlooks in our
current planning cases.
Despite recent progress, all 1.5°C pathways
to 2050 represent a major departure from
today’s global trajectory and we do not believe
the technological, regulatory, or economic
foundations for a rapid transition to net zero
emissions are currently in place. Therefore, a
1.5°C Paris-aligned scenario is currently not an
input into our planning cases. This is consistent
with the IAE’s acknowledgement that the
window for its Net Zero by 2050 roadmap
is narrow, albeit still achievable.
While the price outlooks under the IEA NZE
and our 1.5°C Paris-aligned scenario are
unfavourable compared to the price outlooks
in our current planning cases, recent portfolio
announcements and impairments recognised
in FY2021 limit the exposure of the carrying
value of our assets to long-term commodity
prices for energy coal, oil and natural gas, as
– On 17 August 2021, we announced the
proposed merger of our Petroleum assets
with Woodside. The merger is subject to
confirmatory due diligence, negotiation
and execution of full form transaction
documents, and satisfaction of conditions
precedent including shareholder, regulatory
and other approvals. The preliminary terms
of the merger did not provide an indicator
of impairment for our Petroleum assets at
30 June 2021. The merger is expected to be
completed during the first half of CY2022,
following which, the Group’s revenue would
no longer be directly exposed to long-term
oil and gas prices, including those under
1.5°C scenarios.
– In June 2021, we entered into a Sale and
Purchase Agreement to divest our 33.3 per
cent interest in the Cerrejón energy coal
joint venture in Colombia, subject to the
satisfaction of customary competition and
regulatory requirements. The divestment
is expected to complete in the second
half of FY2022;
– Following the write downs taken by the
Group in FY2021, the carrying value of
our NSWEC assets is no longer material.
Further, the profitability and cash flow of
NSWEC assets are immaterial to the Group
in FY2021.
In relation to New South Wales Energy
Coal (NSWEC), closure and rehabilitation
provisions may be susceptible to the long-term
impacts of our 1.5°C Paris-aligned scenario.
In isolation, and without considering the
impact of changes management would make
to operating and investment plans, bringing
forward the majority of rehabilitation activities
by one year could increase the closure
and rehabilitation provision at NSWEC by
approximately US$10 million.
(1) This scenario aligns with the Paris Agreement goals and requires steep global annual emissions reductions, sustained for decades, to stay within a 1.5°C carbon budget.
Refer to the BHP Climate Change Report 2020 available at bhp.com/climate for information about the assumptions, outputs and limitations of our 1.5°C Paris-aligned scenario.
1.5°C is above pre-industrial levels.
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These could lead to operational events,
commercial disruption (such as an inability to
process or ship our products), corruption or
loss of system data, a misappropriation or loss
of funds, unintended disclosure of commercial
or personal information, enforcement action or
litigation. An inability to adequately implement
new technology, or any sustained disruption
to our existing technology, may also adversely
affect our licence to operate, reputation, results
of operations and financial performance.
As we continue to leverage technology to
improve productivity and safety, we expect
the importance of safe, secure and reliable
technology to our business will continue
to grow.
Examples of potential threats
– Failure to achieve efficiencies through our
investment in technologies, or to keep
pace with advancements in technology,
resulting in an inability to access systems
or digital infrastructure required to support
our operations or customers’ and other
stakeholders’ evolving expectations.
For example, delays, costs and failures to
achieve efficiencies arising from difficulties
in integrating new technologies with existing
technologies, or from failures of new
technology to perform as expected.
– Failing to identify, access and secure
necessary infrastructure and key inputs
(including electricity, internet bandwidth,
data, software, licences or other rights in
intellectual property, hardware and talent)
to support new technology innovations
and advanced technologies may adversely
affect our ability to operate or adopt
those technologies. This includes artificial
intelligence and machine learning, process
automation, robotics, data analytics, cloud
computing, smart devices and remote
working. For example, adopting new
technology to reduce emissions through
the use of alternative energy sources
may require new infrastructure (such as
at our mines and ports), and effective
implementation of new digital technologies
will be heavily dependent on access to
relevant data.
– Failure or outage of our existing or
future information and operating
technology systems.
– Cyber events or attacks (including
ransomware, state-sponsored and other
cyberattacks) on our existing or future
information and operating technology
systems, including on third-party partners
and suppliers (such as our cloud service
providers). For example, a cyberattack
on our autonomous systems for haulage
and drilling may reduce operational
productivity and/or adversely impact safety.
Examples of potential opportunities
– Application of digital solutions across our
operations and value chain may unlock
greater productivity and safety performance.
For example, using predictive analytics
to enable operations to identify asset
condition and efficiencies may improve
safety, production and equipment availability,
and reduce maintenance and other costs.
– Technology solutions to reduce emissions
may support BHP and our suppliers and
customers in achieving climate action
targets. For example, BHP is collaborating
with other miners and suppliers to develop
new technology to electrify haul trucks.
– Developing and applying artificial intelligence
in mine planning, remote operation and
advanced robotic technologies may identify
or provide access to previously unknown or
inaccessible deposits and development of
end-to-end autonomous mining systems.
– Using digital simulations and predictive trend
modelling may enable us to optimise the
deployment of new technologies, such as
automation and electrification, support early
identification of process variances and faults,
and support the marketing of our products
to customers.
Key management actions
– Our assets, functions and projects are
responsible for managing localised or
project-specific exposure to technology
risks. Enterprise-level risks that are specific to
technology, such as those that pose a greater
threat to our wider business and strategic
opportunities, are generally managed by our
global Technology team and other relevant
stakeholders to support delivery of our
technology strategy.
– We collaborate with industry and research
partners to develop technological solutions.
– Our Technology Risk Committee oversees
the management and improvement of
technology risks and controls, and supports
the embedment of a sustainable risk culture
in our Technology team.
– We employ a number of measures designed
to protect against, detect and respond
to cyber events or attacks, including
BHP’s mandatory minimum performance
requirements for technology and
cybersecurity, cybersecurity performance
requirements for suppliers, cybersecurity
strategy and resilience programs, an
enterprise security framework and
cybersecurity standards, cybersecurity
awareness plans and training, security
assessments and monitoring, restricted
physical access to hardware and crisis
management plans.
FY2021 insights
Risks associated with technology and the pace
of technological innovation continue to evolve
rapidly. The Group’s exposure to technology
risks increased in FY2021 due primarily to an
increase in the frequency and sophistication
of cyberattacks against companies in the
resources industry and governments.
BHP continues to leverage technology to deliver
value while taking actions to manage associated
risks and strengthening cyber capabilities.
During FY2021, we implemented programs
to enable rapid technology development,
improve operational performance and to
create new analytic capabilities.
How we deliver value – Technology
section 1.6.2
Ethical misconduct
Risks associated with actual or alleged
deviation from societal or business
expectations of ethical behaviour (including
breaches of laws or regulations) and wider or
cumulative organisational cultural failings,
resulting in significant reputational impacts.
Why is this important to BHP?
The conduct of BHP or our people or third-party
partners could result in an actual or alleged
deviation from expectations of ethical behaviour
or breaches of laws and regulations. This may
include fraud, corruption, anti-competitive
behaviour, money laundering, breaching trade
or financial sanctions, market manipulation,
privacy breaches, ethical misconduct and
wider organisational cultural failings. A failure
to act ethically or legally may result in
negative publicity (including on social media),
investigations, public inquiries, regulatory
enforcement action (including fines), litigation or
other civil or criminal proceedings, or increased
regulation. It could also threaten the validity of
our tenements or permits, or adversely impact
our reputation, results of operations, financial
performance or share price. Impacts may be
amplified if our senior leaders fail to uphold
BHP’s values or address actual or alleged
misconduct in a way that is consistent with
societal and stakeholder expectations, and
our workplace culture may also be eroded,
adversely affecting our ability to attract and
retain talent. Ethical misconduct risks and
impacts are heightened by the complex and
continuously evolving legal and regulatory
frameworks that apply to the jurisdictions
where we operate and potentially conflicting
obligations under different national laws.
Examples of potential threats
– Failing to prevent breaches of international
standards, laws, regulations or other
legal, regulatory, ethical, environmental,
governance or compliance obligations,
such as external misstatements, inaccurate
financial or operational reporting or a breach
of our continuous disclosure obligations.
– Corruption (particularly in high-risk or less
economically developed jurisdictions),
market conduct or anti-competitive
behaviour, including in relation to our
joint venture operations.
– Failing to comply with trade or financial
sanctions (which are subject to rapid
change and may potentially result in
conflicting obligations), health, safety
and environmental laws and regulations,
native title and other land right or tax
or royalty obligations.
– Failing to protect our people from harm
(including to mental and physical health)
due to the misconduct of others that takes
place in connection with their work, such
as discrimination or sexual harassment
and assault.
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Strategic Report1GovernanceFinancial StatementsAdditional Information234 1.16 Risk factors continued
Examples of potential opportunities
– Our capability to manage ethical misconduct
risks may expand portfolio growth options
by providing greater assurance that we
can operate legally and ethically in high-
risk jurisdictions.
– Managing ethical risks in line with societal and
stakeholder expectations may distinguish
BHP from competitors and enhance our
ability to raise capital, attract and retain
talent, obtain permits, partner with external
organisations or suppliers, or market our
products to customers.
Key management actions
– Setting the ‘tone from the top’ through
Our Charter, which is central to our business
and describes our purpose, values and how
we measure success.
– Implementing internal policies, standards,
systems and processes for governance
and compliance to support an appropriate
culture at BHP, including:
– Our Code of Conduct and BHP’s
mandatory minimum performance
requirements for business conduct,
market disclosure and other matters
– training on Our Code of Conduct and
in relation to anti-corruption, market
conduct and competition
– ring fencing protocols to separate
potentially competitive businesses
within BHP
– governance and compliance processes,
including classification of sensitive
transactions, as well as accounting,
procurement and other internal
controls, and tailored monitoring
of control effectiveness
– oversight and engagement with high-
risk areas by our Ethics and Compliance
function, Internal Audit and Advisory
team and the Disclosure Committee
– review and endorsement by our Ethics and
Compliance function of the highest-risk
transactions, such as gifts and hospitality,
engagement of third parties, community
donations and sponsorships above
defined thresholds
– automated counterparty and transaction
screening against lists of entities subject
to trade sanctions
– our EthicsPoint anonymous reporting
service, supported by an ethics and
investigations framework and central
investigations team
– Continuing to enforce Our Code of Conduct
via appropriate investigations and responses
including disciplinary action, in addition to
deployment of appropriate safety controls
to prevent harm.
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Annual Report 2021
FY2021 insights
Our exposure to ethical misconduct risks
increased in FY2021, including due to continued
exploration of potential growth options in
high-risk or less economically developed
jurisdictions and escalating trade sanctions
or equivalent measures (in particular, among
China and Australia and the United States).
Societal expectations have also increased
– stakeholder dissatisfaction in response to
other companies’ executive misconduct and
failures to uphold corporate or societal values
demonstrate the importance of implementing
and maintaining effective preventative controls
and responding to inappropriate conduct in
a timely manner.
Our Charter and Our Code of Conduct
Our conduct – EthicsPoint section 2.1.15
Corporate Governance Statement section 2.1
Safety – Sexual assault and sexual
harassment section 1.13.4
Ethics and business conduct section 1.13.6
Inadequate business resilience
Risks associated with unanticipated or
unforeseeable adverse events and a failure
of planning and preparedness to respond to,
manage and recover from adverse events
(including potential physical impacts of
climate change).
Why is this important to BHP?
In addition to the threats described in our other
risk factors, our business could experience
unanticipated, unforeseeable or other adverse
events (internal or external) that could harm our
people, disrupt our operations or value chain,
or damage our assets or corporate offices,
including our non-operated assets over which
BHP has less control. A failure to identify or
understand exposure, adequately prepare for
these events (including maintaining business
continuity plans) or build wider organisational
resilience may inhibit our (or our third-party
partners’) ability to respond and recover in an
effective and efficient manner. This could cause
material adverse impacts on our business, such
as reduced ability to access resources, markets
and the operational or other inputs required
by our business, reduced production or sales
of commodities, or increased regulation,
which could adversely impact our financial
performance, share price or reputation, and
could lead to litigation or class actions.
Examples of potential threats
– Geopolitical, global economic, regional or
local developments or adverse events, such
as social unrest, strikes, work stoppages,
labour disruptions, social activism, terrorism,
bomb threats, economic slowdown, acts of
war or other significant disruptions in areas
where we operate or have interests (for
example, in FY2020, stoppages associated
with social unrest in Chile impacted copper
production at Escondida).
– Natural events, including earthquakes,
tsunamis, hurricanes, cyclones, fires,
solar flares and pandemics (for example,
earthquakes may affect the Andes region
in South America where we undertake
exploration activities and have operated
and non-operated assets).
– Potential physical impacts of climate change,
such as acute risks that are event-driven
(including increased severity of extreme
weather events) and chronic risks resulting
from longer-term changes in climate
patterns. Hazards and impacts may include
changes in precipitation patterns, water
shortages, rising sea levels, increased storm
intensity, prolonged extreme temperatures
and increased drought, fire and tidal flooding.
– Failure by suppliers, contractors or joint
venture partners to perform existing
contracts or obligations (including due to
insolvency), such as construction of large
projects or supply of key inputs to our
business (for example, consumables for
our mining equipment).
– Failure of our risk management or other
processes (including controls) to prepare for
or manage any of the risks discussed in this
‘Risk factors’ section may inhibit our (or our
third party partners’) ability to manage any
resulting adverse events and may disrupt our
operations or adversely impact our financial
performance or reputation.
Examples of potential opportunities
– Risk identification and management
supports proactive, focused and prioritised
deployment of resources to reduce exposure
to adverse events. It may be used to
inform priorities and strategies across BHP,
supporting a proportionate and cost-effective
response, which could provide a competitive
advantage at a regional or global level.
– Building wider organisational resilience
may help us to mitigate the impacts of
unforeseeable adverse events. For example,
processes may be redesigned to enhance
resilience to adverse events, such
as pandemics.
– Adapting to climate change across our
operations and value chain could position
BHP as a supplier of choice and provide
competitive advantage (for example, by
fulfilling our commitment to security of
supply). Support for climate vulnerable
communities and ecosystems may also
improve our social value proposition.
Key management actions
– Implementing Group-wide controls to
enhance business resilience, including
BHP’s mandatory minimum performance
requirements for security, crisis and
emergency management and business
continuity plans.
– Monitoring our current state of readiness
(preparedness, redundancy and resilience),
including through scenario analysis, to
respond to and recover from adverse
events to support organisational capability
in our operations, functions and senior
management to effectively and efficiently
respond to events should they materialise.
– Monitoring the external environment,
including political and economic factors
through signal monitoring, our geopolitical
monitoring and public policy frameworks and
our enterprise-level watch list of emerging
themes, to support early identification of
policy changes or adverse events for which
we may need to increase preparedness.
– Identifying security threats that could
directly or indirectly impact our operations
and people in countries of interest to BHP.
For example, a review of BHP’s global security
program was undertaken in FY2021 to better
understand our security position and identify
potential improvements.
– Implementing our Climate Change
Adaptation Strategy, including requiring
operated assets and functions to identify
and progressively assess potential physical
climate change risks (including to our value
chain) and build climate change adaptation
into their plans, activities and investments.
FY2021 insights
Our exposure to risks associated with
inadequate business resilience grew in FY2021
due to the increasing frequency and scale of
crisis events, such as extreme temperatures and
weather events being experienced globally and
the continuing global impacts of the COVID-19
pandemic. While the impacts on BHP have
been relatively minor to date, sustained or
increased geopolitical tensions, the pandemic
and nationalist sentiment may exacerbate
the drivers of conflict, instability and unrest,
including existing inequality within and between
nations. This could increase the likelihood of
more significant events that can have a greater
impact on our business, such as social unrest
and conflict (including war and terrorism).
bhp.com/climate
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 considerable uncertainty in
the external environment (which has been
amplified by the COVID-19 pandemic), including
due to political and policy uncertainty, evolving
stakeholder expectations (for example, in
relation to the environment, climate change
and human rights), civil unrest or reform in
some countries in which we operate, continued
market volatility and geopolitical tensions that
could affect our ability to access key markets.
This could lead to changes to our regulatory
environment and stakeholder expectations of
our business, increase the risk of commodity
price 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
– 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 Capital
Allocation Framework
– the reserve life of BHP’s minerals assets and
the reserves-to-production life of BHP’s oil
and gas assets
– the Group-level material risk profile
(including climate-related risks) 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
reverse stress testing of the Group’s balance
sheet to determine the additional levels of
debt it could support on forecast commodity
prices, as well as the cyclical low price case
used in monthly balance sheet stress testing.
Results were compared against assessed
financial impacts for all material risks recorded
on the Group’s risk profile, enabling the Board
to consider the resilience of the balance sheet
in the context of identified threats.
In addition, the balance sheet was stress
tested against three hypothetical scenarios.
Each scenario modelled two or three
hypothetical events, based on our principal
risks, occurring simultaneously towards the start
of FY2022. Scenarios were designed without
regard to the effectiveness of preventative
controls and reflect market, operational, and
a combination of market and operational risks.
The simultaneous occurrence of all four events
was not considered plausible. Further details
are set out in the table below.
A number of our other principal risks may have
impacts that are embedded in these scenarios.
For example, a cyber event or attack may lead to an
operational event, while responses of governments
and other stakeholders to a pandemic may result
in an economic slowdown and low commodity
price environment. For further information on our
principal risks, see the ‘Risk factors’ section.
While scenario modelling was undertaken for
the duration of BHP’s five-year plan, confidence
is higher in the first three years. Stress testing
demonstrated the Group’s balance sheet was put
under the greatest stress by Scenario C, which
reflects both market and operational risks, with
net debt expected to increase to approximately
US$48 billion over FY2022 to FY2024 (assuming
dividends would be suspended in accordance
with our Capital Allocation Framework). In such
circumstances, the Board considered that the
Group would have a number of further mitigating
actions available to it which would be expected to
allow the Group to limit net debt to approximately
US$30 billion over that period, including
deferral of discretionary capital expenditure and
divestment of certain assets. BHP would also
have access to US$5.5 billion of credit through its
revolving credit facility. These mitigating actions
would be expected to be sufficient to support
minimum investment-grade credit ratings over
FY2022 to FY2024.
For the purposes of stress testing, the Board made
certain key 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.
In making this viability statement, the Board was
also mindful of other relevant factors, including
key risk indicator performance, monthly balance
sheet stress testing against the cyclical low price
case, the assessment of the Group’s portfolio
against scenarios as part of BHP’s strategy and
corporate planning processes, a Board-level
risk identification session to help identify key
uncertainties facing the Group, and the proposed
changes to the Group’s portfolio which are
currently expected to complete in FY2022.(1)
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.
Scenario
A
B
C
Principal risk
Hypothetical event
Operational events
Accessing key markets
Offshore well blow out involving a drilling
rig that we operate in the US Gulf of Mexico
Catastrophic failure of a tailings storage
facility at an operated asset in Australia
Temporary physical or logistical disruption
of access to key markets preventing the
sale or delivery of commodities to Asia
Optimising portfolio
returns and managing
commodity price
movements
Low commodity price environment for
two years, commencing at the start of the
second half of FY2022, followed by a gradual
recovery by the end of the first half of FY2026
(1) Refer to section 1.5 Positioning for the future, Petroleum business merger proposal and Update on our non-core
coal divestment process.
BHP
Annual Report 2021
63
Strategic Report1GovernanceFinancial StatementsAdditional Information234 1.17 Performance by commodity
Management believes the following
information presented by commodity provides
a meaningful indication of the underlying
financial and operating 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 in assessing our performance, refer
to section 4.2. For the definition and method
of calculation of alternative performance
measures, refer to section 4.2.1. For more
information as to the statutory determination
of our reportable segments, refer to note 1
‘Segment reporting’ in section 3.
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.
1.17.1 Petroleum
Detailed below is financial and operating
information for Petroleum comparing FY2021
to FY2020
For more detailed financial information
on our Petroleum assets
refer to section 4.4.1
Year ended 30 June
US$M
Revenue
Underlying EBITDA
Net operating assets
Capital expenditure
Total petroleum
production (Mmboe)
Average realised prices
2021
3,946
2,300
7,964
994
2020
4,070
2,207
8,247
909
103
109
Oil (crude and condensate)
(US$/bbl)
Natural gas (US$/Mscf)
LNG (US$/Mscf)
52.56
4.34
5.63
49.53
4.04
7.26
Key drivers of Petroleum’s
financial results
Price overview
Trends in each of the major markets are outlined
as follows:
Crude oil
Our average realised sales price for crude oil
for FY2021 was US$52.56 per barrel (FY2020:
US$49.53 per barrel). Brent crude oil prices steadily
increased through FY2021, rising from around
US$40/bbl at the beginning of FY2021 to around
US$75/bbl at the close. A recovery in business
activity and mobility as economies reduced
COVID-19 controls has supported oil demand.
Supply side curtailments from OPEC+ and capital
restraint from US operators have supported oil
inventories to rebalance globally. Demand is
expected to continue its recovery to pre-COVID-19
levels in FY2022. The rate at which currently
curtailed supply is expected to come back on-
stream is uncertain. Longer term, we believe oil will
remain attractive, even under a plausible low price,
for a considerable time to come.
Liquefied natural gas
Our average realised sales price for LNG for
FY2021 was US$5.63 per Mcf (FY2020: US$7.26
per Mcf). The Japan-Korea Marker (JKM) price
for LNG performed strongly in FY2021, hitting an
all-time high in January 2021 supported by cold
weather, recovery in China, high European gas
prices, unplanned outages and less incremental
supply coming online. Longer term, we expect the
commodity to offer a combination of systematic
base decline and an attractive demand trajectory,
with new supply likely to be required to balance
the market in the middle of this decade, or
slightly later. However, gas resource is currently
abundant and liquefaction infrastructure comes
with large upfront costs and extended pay backs.
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, in addition to being at the
lower end of the emissions intensity curve, are
expected to remain attractive.
Production
Total Petroleum production for FY2021
decreased by 6 per cent to 103 MMboe.
Crude oil, condensate and natural gas liquids
production decreased by 6 per cent to
46 MMboe due to natural field decline across
the portfolio, a highly active hurricane season in
the Gulf of Mexico in the first half of the year and
downtime at Atlantis, with tie-in activity in the
first half of the year and unplanned downtime
in the March 2021 quarter. These impacts were
partially offset by the earlier than scheduled
achievement of first production from the
Atlantis Phase 3 project in July 2020 and the
additional working interest acquired in Shenzi,
completed on 6 November 2020.
Natural gas production decreased by 5 per cent
to 341 bcf, reflecting planned shutdowns at
Angostura related to the Ruby tie-in, lower gas
demand at Bass Strait and natural field decline
across the portfolio. The decline was partially
offset by improved reliability at Bass Strait and
higher domestic gas sales at Macedon.
For more information on individual asset
production in FY2021, FY2020 and FY2019
refer to section 4.5
Other information
Financial results
Petroleum revenue for FY2021 decreased by
US$0.1 billion to US$3.9 billion reflecting lower
production offset by higher average realised
prices. Underlying EBITDA for Petroleum
increased by US$0.1 billion to US$2.3 billion.
Price impacts, net of price-linked costs,
increased Underlying EBITDA by US$0.3 billion
but were partially offset by the impacts of lower
production of US$0.2 billion. Controllable cash
costs decreased by US$43 million reflecting lower
maintenance activity at our Australian assets due
to COVID-19 restrictions and lower exploration
seismic activity. This was partially offset by higher
workover activity at Atlantis, restructuring costs
related to improving future competitiveness and
increased business development activity in Mexico
due to Trion progressing into pre-feasibility.
Petroleum unit costs increased by 11 per cent
to US$10.83 per barrel of oil equivalent due to
lower volumes and unfavourable exchange rate
movements, partially offset by a reduction in
price-linked costs. The calculation of petroleum
unit costs is set out in the table below:
Petroleum unit costs
(US$M)
Revenue
Underlying EBITDA
Gross costs
Less: exploration expense
Less: freight
Less: development
and evaluation
Less: other(1)
Net costs
Production (MMboe,
equity share)
Cost per Boe (US$)(2)(3)
FY2021
FY2020
3,946
2,300
1,646
296
107
196
(68)
1,115
103
10.83
4,070
2,207
1,863
394
110
166
131
1,062
109
9.74
(1) Other includes non-cash profit on sales of assets,
inventory movements, foreign exchange, provision for
onerous lease contracts and the impact from revaluation
of embedded derivatives in the Trinidad and Tobago
gas contract.
(2) FY2021 based on an exchange rate of AUD/USD 0.75.
(3) FY2021 excludes COVID-19 related costs of US$0.27
per barrel of oil equivalent that are reported as
exceptional items.
Delivery commitments
We have delivery commitments of natural gas
and LNG of approximately 1.1 billion Mcf through
2031 and Crude commitments of 9 million
barrels through 2024. We have sufficient proved
reserves and production capacity to fulfil these
delivery commitments.
We have obligation commitments of
US$41 million for contracted capacity on
transportation pipelines and gathering systems
through FY2025, on which we are the shipper.
The agreements have annual escalation clauses.
Drilling
The number of wells in the process of drilling and/or completion as of 30 June 2021 was as follows:
Australia
United States
Other(2)
Total
Exploratory wells
Development wells
Total
Gross
Net(1)
Gross
Net(1)
Gross
Net(1)
−
−
−
−
−
−
−
−
−
27
5
32
−
9
3
12
−
27
5
32
−
9
3
12
(1) For more information on Alternative Performance
Measures, refer to section 4.2.
(1) Represents our share of the gross well count.
(2) Other is comprised of Trinidad and Tobago.
64
BHP
Annual Report 2021
Petroleum
BHP’s net share of capital development
expenditure in FY2021, which is presented
on a cash basis within this section, was
US$994 million (FY2020: US$909 million).
While the majority of the expenditure in FY2021
was incurred by operating partners at our
Australian and Gulf of Mexico non-operated
assets, we also incurred capital expenditure
at our operated Australian, Gulf of Mexico,
and Trinidad and Tobago assets.
Australia
BHP’s net share of capital development
expenditure in FY2021 was US$197 million.
The expenditure was primarily related to:
– Scarborough gas field development
– North West Shelf: Greater Western
Flank 3 and Lambert Deep subsea tie
back development, Karratha Gas Plant
refurbishment projects and facility
integrity projects
– Bass Strait: West Barracouta subsea
tie back development
Gulf of Mexico
BHP’s net share of capital development
expenditure in FY2021 was US$599 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
– Shenzi: Drilling of Shenzi North and
ongoing infill drilling
Trinidad and Tobago
BHP’s net share of capital development
expenditure in FY2021 was US$152 million.
The expenditure was primarily related to:
– Ruby: execution of approved development
of Block 3a resources in the Ruby and
Delaware reservoirs
Outlook
Production is expected to be between 99 and
106 MMboe in FY2022, reflecting a full year
of the additional 28 per cent working interest
acquired in Shenzi, increased production at
Shenzi from infill wells and increased volumes
from Ruby following first production in May
2021, offset by natural field decline across
the portfolio.
Unit costs in FY2022 are expected to be
between US$11 and US$12 per barrel (based on
an exchange rate of AUD/USD 0.78) reflecting
the expected impact of an increase in exchange
rate and expected higher price-linked costs.
In the medium term, we expect an increase in
unit costs to be maintained at less than US$13
per barrel (based on an exchange rate of AUD/
USD 0.78) primarily as a result of expected
natural field decline.
Petroleum capital and exploration expenditure
of approximately US$2.3 billion is planned
in FY2022.
On 17 August 2021, the Group announced the
proposed merger of our Petroleum assets with
Woodside. On completion of the proposed
transaction, BHP’s oil and gas business would
merge with Woodside, and Woodside would
issue new shares to be distributed to BHP
shareholders, at which time it is expected
that Woodside would be owned 52 per cent
and 48 per cent by existing Woodside and
BHP shareholders, respectively. The merger,
which has a proposed effective date of 1 July
2021, is subject to confirmatory due diligence,
negotiation and execution of full form
transaction documents, and satisfaction of
conditions precedent including shareholder,
regulatory and other approvals. The Group
continues to assess the full financial reporting
impacts of the proposed merger. However, the
preliminary terms of the merger did not provide
an indicator of impairment for our Petroleum
assets at 30 June 2021. The merger is expected
to be completed during the first half of CY2022,
at which time, we would derecognise the
carrying value of our Petroleum assets, which
at 30 June 2021 included, but was not limited
to, property plant and equipment and closure
and rehabilitation provisions of approximately
US$11.9 billion and US$3.9 billion, respectively.
The outlook for our expected production, unit
costs and capital and exploration expenditure
in FY2022 does not take into account the
proposed merger with Woodside.
1.17.2 Copper
Detailed below is financial and operating
information for our Copper assets comparing
FY2021 to FY2020
For more detailed financial information
on our Copper assets
refer to section 4.4.2
Year ended 30 June
US$M
Revenue
Underlying EBITDA
Net operating assets
Capital expenditure
Total copper production (kt)
Average realised prices
2021
2020
15,726 10,666
4,347
8,489
26,928
25,357
2,180
1,636
2,434
1,724
Copper (US$/lb)
3.81
2.50
Key drivers of Copper’s
financial results
Price overview
Our average realised sales price for FY2021
was US$3.81 per pound (FY2020: US$2.50
per pound). Copper rode a wave of investor
optimism for much of FY2021, hitting an
all-time high in May. We believe mine supply
and scrap collection will both need to rise to
meet demand growth in the medium term.
Longer term, traditional end-use demand is
expected to be solid, while broad exposure to
the electrification mega-trend offers attractive
upside. Prices are expected to rise compared
to historical averages in the long term due to
grade decline, resource depletion, increased
input costs, water constraints, rising ESG
standards, and a scarcity of high-quality future
development opportunities after a poor decade
for industry-wide exploration. Regulatory risk
is an emerging theme across the industry.
Production
Total Copper production for FY2021 decreased
by 5 per cent to 1,636 kt.
Escondida copper production decreased by
10 per cent to 1,068 kt as continued strong
concentrator throughput of 371 ktpd, at
record levels, was more than offset by the
impact of expected lower concentrator feed
grade and lower cathode production as a
result of a reduced operational workforce
due to COVID-19 restrictions.
Pampa Norte copper production decreased
by 10 per cent to 218 kt largely due to a decline
in stacking feed grade at Spence of 11 per
cent, planned maintenance at Spence and the
impact of a reduced operational workforce as a
result of COVID-19 restrictions partially offset by
the new stream of concentrate production from
the Spence Growth Option that came online
in December 2020.
Olympic Dam copper production increased
by 20 per cent to 205 kt, the highest annual
production achieved since our acquisition
in 2005, reflecting improved smelter stability
and strong underground mine performance.
Olympic Dam also achieved record gold
production of 146 koz.
Antamina copper production increased 16 per
cent to 144 kt and zinc production increased
64 per cent to a record 145 Kt, reflecting both
higher copper and zinc head grades.
For more information on individual
asset production in FY2021, FY2020
and FY2019
refer to section 4.5
Financial results
Copper revenue increased by US$5.1 billion
to US$15.7 billion in FY2021 due to higher
average realised Copper prices offset by
lower production.
Underlying EBITDA for Copper increased by
US$4.1 billion to US$8.5 billion. Price impacts,
net of price-linked costs, increased Underlying
EBITDA by US$4.3 billion. Lower volumes
decreased Underlying EBITDA by US$258 million.
Controllable cash costs increased by
US$106 million, due to higher inventory
drawdowns at Olympic Dam, from stronger
mill and smelter performance compared to
the prior period, and at Escondida to offset
lower material mined during the period due
to a reduced operational workforce. This was
partially offset by strong cost performance
at Escondida, a US$99 million gain from the
optimised outcome from renegotiation of
cancelled power contracts at Escondida and
Spence, and favourable leach pad inventory
movements at Escondida and Spence.
Non-cash costs decreased by US$273 million
due to lower deferred stripping depletion at
Escondida, reflecting the planned development
phase of the mines. Inflation and foreign
exchange rate negatively impacted Underlying
EBITDA by US$514 million which was offset by
increased equity accounted investment profits
attributable to Antamina of US$411 million.
BHP
Annual Report 2021
65
Strategic Report1GovernanceFinancial StatementsAdditional Information234 1.17 Performance by commodity continued
Unit costs at Escondida decreased by 1 per cent
to US$1.00 per pound, reflecting continued
strong concentrator throughput, at record
levels, as well as lower deferred stripping
costs and higher by-product credits. This also
reflects a one-off gain from the optimisation
of a settlement outcome for the cancellation
of power contracts as part of a shift towards
100 per cent renewable energy at Escondida.
The strong unit cost result was achieved despite
the impact of unfavourable exchange rate
movements, a 4 per cent decline in copper
concentrate feed grade and lower cathode
volumes as a result of a reduced operational
workforce due to COVID-19 restrictions.
The calculation of Escondida unit costs is
set out in the table below:
Escondida unit costs
(US$M)
Revenue
Underlying EBITDA
Gross costs
Less: by-product credits
Less: freight
Net costs
Sales (kt)
Sales (Mlb)
Cost per pound (US$)(1)(2)(3)
FY2021
FY2020
9,470
6,483
2,987
478
162
2,347
1,066
2,350
1.00
6,719
3,535
3,184
407
178
2,599
1,164
2,567
1.01
(1) FY2021 based on average exchange rates of USD/CLP 746.
(2) FY2021 excludes COVID-19-related costs of US$0.03
per pound that are reported as exceptional items.
(3) FY2021 includes a (one off) gain from the optimised
outcome from renegotiation of cancelled power
contracts of US$0.04 per pound.
Outlook
We expect the operating environment across
our Chilean assets to remain challenging, with
reductions in our on-site workforce expected
to continue in FY2022.
Total Copper production of between
1,590 and 1,760 kt is expected in FY2022.
Escondida production of between 1,000 and
1,080 kt is expected in FY2022, reflecting
a continuing need to catch up on mine
development due to reduced material movement
in FY2021, as well as uncertainty around
COVID-19 impacts. Decline in the copper grade
of concentrator feed in FY2022 is expected
to be approximately 2 per cent. Production at
Pampa Norte is expected to increase by more
than 50 per cent to be between 330 and 370 kt
in FY2022, reflecting the continued ramp-up
of the Spence Growth Option (SGO), partially
offset by an expected decline in stacking feed
grade at Pampa Norte of approximately 9 per
cent. The ramp-up to full production capacity
at SGO is still expected to take approximately
12 months from first production in December
2020, following which Spence is currently
planned to average 300 ktpa of production
(including cathodes) over the first four years
of operation. At Olympic Dam, production
is expected to be between 140 and 170 kt in
FY2022 as a result of the planned major smelter
maintenance campaign and subsequent ramp-
up planned between August 2021 and February
2022. Antamina Copper production is expected
between 120 and 140 kt in FY2022.
Escondida unit costs in FY2022 are expected to
be between US$1.20 and US$1.40 per pound
(based on an average exchange rate of USD/
66
BHP
Annual Report 2021
CLP 727) reflecting expected lower by-product
credits, expected higher costs associated with
an approximately 20 per cent increase in material
mined required to catch up on mine development
due to reduced material movement in FY2021 and
study costs to increase optionality at Escondida
longer term. This also reflects the inclusion of
COVID-19 costs (treated as an exceptional item in
FY2021) and a further decline in concentrator feed
grade of approximately 2 per cent. In the medium
term, unit cost guidance remains unchanged
at less than US$1.10 per pound (based on an
exchange rate of USD/CLP 727).
1.17.3 Iron Ore
Detailed below is financial and operating
information for our Iron Ore assets comparing
FY2021 to FY2020.
For more detailed financial information
on our Iron Ore assets
refer to section 4.4.3
Year ended 30 June
US$M
Revenue
Underlying EBITDA
Net operating assets
Capital expenditure
2021
2020
34,475
20,797
14,554
26,278
18,663 18,400
2,328
2,188
Total iron ore production (Mt)
254
248
Average realised prices
Iron ore (US$/wmt, FOB)
130.56
77.36
Key drivers of Iron Ore’s
financial results
Price overview
Iron Ore’s average realised sales price for FY2021
was US$130.56 per wet metric tonne (wmt)
(FY2020: US$77.36 per wmt). Iron ore prices
were elevated throughout FY2021, hitting record
highs in the second half. Forces contributing
to price gains included strong Chinese pig iron
production, a rapid recovery in global markets
excluding China and a shortage of branded fines
products as some iron ore mining companies
have been producing towards their lower
end of guidance. Medium term, we believe
China’s demand for iron ore is expected to be
lower than it is today as crude steel production
plateaus and the scrap-to-steel ratio rises. In the
long term, we believe prices are expected to
be determined by high cost production, on
a value-in-use adjusted basis, from Australia
or Brazil. Quality differentiation is expected to
remain a factor in determining iron ore prices as
steelmakers prefer high-quality raw materials for
higher productivity and lower-emissions intensity.
Production
Total Iron Ore production increased by 2 per
cent to 254 Mt.
WAIO production increased by 1 per cent
to a record 252 Mt (284 Mt on a 100% basis)
reflecting record production at Jimblebar and
Mining Area C, which included first ore from
South Flank in May 2021. This was combined
with strong operational performance across
the supply chain reflecting continued
improvements in car dumper performance
and reliability, and improved train cycle times.
This was achieved despite significant weather
impacts, temporary rail labour shortages due
to COVID-19 related border restrictions and
the planned Mining Area C and South Flank
major tie-in activity to integrate South Flank
with the Mining Area C processing hub.
Samarco production was 1.9 Mt following the
recommencement of iron ore pellet production
at one concentrator in December 2020.
For more information on individual
asset production in FY2021, FY2020
and FY2019
refer to section 4.5
Financial results
Total Iron Ore revenue increased by
US$13.7 billion to US$34.5 billion in FY2021
reflecting higher average realised prices and
production. Underlying EBITDA for Iron Ore
increased by US$11.7 billion to US$26.3 billion
including favourable price impacts, net of price-
linked costs, of US$12.1 billion. Higher volumes
increased Underlying EBITDA by US$148 million.
This was partially offset by unfavourable
foreign exchange impacts of US$416 million.
Other items such as inflation and one-off items
negatively impacted Underlying EBITDA by
US$63 million.
WAIO unit costs increased by 17 per cent to
US$14.82 per tonne due to the impact of a
12 per cent stronger Australian dollar, higher
third-party royalties related to higher iron ore
prices, incremental costs relating to the ramp-
up of South Flank and higher labour costs
relating to increased planned maintenance
partially offset by record production and
continued production improvements across
the supply chain. The calculation of WAIO
unit costs is set out in the table below:
WAIO unit costs
(US$M)
Revenue
Underlying EBITDA
Gross costs
Less: freight
Less: royalties
Net costs
Sales (kt, equity share)
Cost per tonne (US$)(1)(2)
FY2021
FY2020
34,337
20,663
26,270
14,508
8,067
1,755
2,577
6,155
1,459
1,531
3,735
3,165
252,052 250,598
12.63
14.82
(1) FY2021 based on an average exchange rate of
AUD/USD 0.75.
(2) FY2021 excludes COVID-19 related costs of US$0.51 per
tonne (including US$0.25 per tonne relating to operations
and US$0.26 per tonne of demurrage) that are reported as
exceptional items. An additional US$0.12 per tonne relating
to capital projects is also reported as an exceptional item.
Outlook
WAIO production of between 246 and 255 Mt,
or between 278 and 288 Mt on a 100 per cent
basis, is expected in FY2022 as WAIO looks to
focus on incremental volume growth through
productivity improvements. We continue with
our program to further improve port reliability
and this includes a major maintenance
campaign on car dumper one planned for the
September 2021 quarter. The Yandi resource has
commenced its end-of-life ramp-down as South
Flank ramps up, and this is expected to continue
to provide supply chain flexibility with a lower
level of production to continue for a few years.
Samarco production of between 3 and 4 Mt
(BHP share) is expected in FY2022.
WAIO unit costs in FY2022 are expected to be
between US$17.50 and US$18.50 per tonne
reflecting updated guidance exchange rates
(based on an exchange rate of AUD/USD 0.78),
expected costs associated with the ramp up
of South Flank and ramp-down of Yandi, and
elevated third-party royalties. This also reflects
the inclusion of COVID-19 costs (treated as an
exceptional item in FY2021). In the medium term,
unit costs have been revised to less than US$16
per tonne predominately reflecting a number
of uncontrollable factors including updated
guidance exchange rates (based on an exchange
rate of AUD/USD 0.78), expected higher third-
party royalties and forecast higher diesel prices.
1.17.4 Coal
Detailed below is financial and operating
information for our Coal assets comparing
FY2021 to FY2020.
For more detailed financial information
on our Coal assets
refer to section 4.4.4
Year ended 30 June
US$M
Revenue
Underlying EBITDA
Net operating assets
Capital expenditure
Total metallurgical coal
production (Mt)
Total energy coal
production (Mt)
Average realised prices
2021
5,154
288
7,512
579
41
19
2020
6,242
1,632
9,509
603
41
23
Metallurgical coal (US$/t)
106.64
130.97
Hard coking coal
(HCC) (US$/t)
Weak coking coal (WCC)
(US$/t)
Thermal coal (US$/t)
112.72
143.65
89.62
58.42
92.59
57.10
Key drivers of Coal’s
financial results
Price overview
Metallurgical coal
Our average realised sales price for FY2021 was
US$112.72 per tonne for hard coking coal (HCC)
(FY2020: US$143.65 per tonne) and US$89.62
per tonne for weak coking coal (WCC) (FY2020:
US$92.59 per tonne). Metallurgical coal prices
faced by Australian producers in the free-on-
board (FOB) market were weak for most of
FY2021. A spike in uncertainty regarding China’s
import policy on Australia origin coals distorted
the usual trade flows and had a key influence
on the market. Demand outside China has
been promising supported by strong recovery
in the steel sector. Prices rebounded sharply
towards the end of FY2021, on multi-regional
supply disruptions and trade flow rebalancing.
Going forward, while trade flow from Australia into
China is inhibited, the metallurgical coal industry
could face an uncertain and challenging period
ahead. 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 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 FY2021 was
US$58.42 per tonne (FY2020: US$57.10 per tonne).
The Newcastle 6,000 kcal/kg price reached its
high for the financial year in June 2021 amid strong
demand and disrupted supply. Newcastle 5,500
kcal/kg coal found demand in India and North Asia
given import restrictions into China. Longer term,
our base case is that total primary energy derived
from coal (power and non-power) is expected to
modestly grow at a compound rate slower than
that of global population growth. Under deep
decarbonisation scenarios, demand is expected
to decline in absolute terms.
Production
Metallurgical coal production decreased by
1 per cent to 41 Mt (73 Mt on a 100 per cent
basis). At Queensland Coal strong operational
performance, including record production at
Goonyella facilitated by record tonnes from
Broadmeadow mine, was offset by significant
weather impacts across most operations
earlier in the year, as well as planned wash plant
maintenance at Saraji and Caval Ridge in the first
half of the year. At South Walker Creek, despite
record stripping, production decreased as a result
of higher strip ratios due to ongoing impacts from
geotechnical constraints and lower yields.
Energy coal production decreased by 17 per
cent to 19 Mt. NSWEC production decreased by
11 per cent to 14 Mt despite increased stripping.
This decrease reflects significant weather impacts
and higher strip ratios, as well as lower volumes
due to an increased proportion of washed coal
in response to widening price quality differentials
consistent with our strategy to focus on higher
quality products, and reduced port capacity
following damage to a shiploader at the Newcastle
port in November 2020. Cerrejón production
decreased by 30 per cent to 5 Mt mainly as a result
of a 91-day strike in the first half of the year and
subsequent delays to the restart of production,
as well as the impact of a reduced operational
workforce due to COVID-19 restrictions.
For more information on individual asset
production in FY2021, FY2020 and FY2019
refer to section 4.5
Financial results
Coal revenue decreased by US$1.1 billion to
US$5.2 billion in FY2021 due to lower average
realised prices and production.
Underlying EBITDA for Coal decreased
by US$1.3 billion to US$288 million including
lower price impacts, net of price-linked
costs, of US$0.7 billion. Lower volumes
decreased Underlying EBITDA by
US$168 million. Controllable cash costs
increased by US$102 million driven by increased
maintenance costs at Queensland Coal
(earth moving equipment maintenance and
shiploader maintenance at Hay Point port)
as well as increased stripping volumes, which
was partially offset by cost reduction initiatives
at both Queensland Coal and NSWEC.
Other items including lower fuel and energy
prices favourably impacted Underlying EBITDA
by US$93 million, but were more than offset by
US$512 million of foreign exchange losses.
Queensland Coal unit costs increased by 21 per
cent to US$82 per tonne, due to the impact of
a 12 per cent stronger Australian dollar, higher
planned maintenance in the first half of the year,
shiploader maintenance at Hay Point, and lower
yields and increased stripping volumes at Poitrel
and South Walker Creek. This was partially offset
by lower fuel and energy costs, driven by lower
diesel prices, and cost reduction initiatives.
NSWEC unit costs increased by 14 per cent
to US$64 per tonne, due to the impact of a
stronger Australian dollar and lower volumes as a
result of significant weather impacts, higher strip
ratios, an increased proportion of washed coal in
response to widening price quality differentials
and reduced port capacity following damage to
a shiploader at the Newcastle port in November
2020. This was partially offset by lower fuel and
energy costs, driven by lower diesel prices,
as well as cost reduction initiatives.
The calculation of Queensland Coal’s and
NSWEC’s unit costs is set out in the table below:
Outlook
Metallurgical coal production is expected to
be between 39 and 44 Mt, or 70 and 78 Mt on
a 100 per cent basis, in FY2022, as we expect
restrictions on coal imports into China to remain
for a number of years. Production is expected to
be weighted to the second half of the year due
to planned wash plant maintenance in the first
half of the year.
US$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
FY2021
FY2020
FY2021
FY2020
4,315
593
3,722
69
330
3,323
40,619
81.81
5,357
1,935
3,422
147
498
2,777
41,086
67.59
839
(169)
1,008
−
66
942
14,626
64.41
886
(79)
965
−
68
897
15,868
56.53
(1) FY2021 based on an average exchange rate of AUD/USD 0.75.
(2) FY2021 excludes COVID-19 related costs of US$0.91 per tonne and US$0.40 per tonne that are reported as exceptional
items relating to Queensland Coal and NSWEC respectively.
BHP
Annual Report 2021
67
Strategic Report1GovernanceFinancial StatementsAdditional Information234 1.17 Performance by commodity continued
Production
Nickel West production in FY2021 increased
by 11 per cent to 89 kt reflecting strong
performance from the new mines and improved
operational stability following major quadrennial
maintenance shutdowns in the prior year.
For more information on individual
asset production in FY2021, FY2020
and FY2019
refer to section 4.5
Financial results
Higher production combined with higher average
realised sales prices resulted in revenue increasing
by US$356 million to US$1.5 billion in FY2021.
Underlying EBITDA for Nickel West increased
by US$296 million to US$259 million in FY2021
reflecting higher prices and volumes, and
lower maintenance costs following the major
quadrennial shutdowns in the prior year, as
well as lower contractor costs following the
transition and ramp-up of new mines. This was
partially offset by unfavourable exchange rate
movements and the adverse impacts of the
stronger nickel price on third-party concentrate
purchase costs.
Potash
Potash recorded an Underlying EBITDA loss
of US$167 million in FY2021, and a loss of
US$127 million in FY2020.
1.17.6 Impact of changes
to commodity prices
The prices we obtain for our products are a key
driver of value for BHP. Fluctuations in these
commodity prices affect our results, including
cash flows and asset values. The estimated
impact of changes in commodity prices in
FY2021 on our key financial measures is set
out below.
Impact on
profit after
taxation
from
Continuing
operations
(US$M)
Impact on
Underlying
EBITDA
(US$M)
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
24
23
163
24
9
1
35
33
233
35
13
1
Energy coal production is expected to be
between 13 and 15 Mt in FY2022, reflecting
the announced divestment of our interest
in Cerrejón in June 2021 and that Cerrejón
volumes will now be separately reported from
1 July 2021 until transaction completion.
Queensland Coal unit costs are expected to
be between US$80 and US$90 per tonne
(based on an average exchange rate of AUD/
USD 0.78) in FY2022 as a result of expected
higher diesel prices, with mine plan optimisation
and efficiency uplifts expected to largely offset
increased stripping requirements. We remain
focused on cost reduction and productivity
initiatives, however given the ongoing
uncertainty regarding restrictions on coal
imports into China we are unable to provide
medium-term volume and unit cost guidance.
NSWEC unit costs are expected to be between
US$62 and US$70 per tonne (based on an
average exchange rate of AUD/USD 0.78) in
FY2022 reflecting a continued focus on higher
quality products, mine plan optimisation,
productivity improvements and cost
reduction initiatives.
1.17.5 Other assets
Detailed below is an analysis of Other
assets’ financial and operating performance
comparing FY2021 to FY2020.
For more detailed financial information
on our Other assets
refer to section 4.4.5
Nickel West
Key drivers of Nickel West’s
financial results
Price overview
Our average realised sales price for FY2021 was
US$16,250 per tonne (FY2020: US$13,860 per
tonne). In FY2021, the nickel price benefitted
from positive investor sentiment amidst a
strong, geographically diverse rebound in
end-use demand. An announcement by a
major nickel producer during the period that it
intends to convert some nickel pig iron to nickel
matte in Indonesia, thereby making it suitable
for use in the battery supply chain, led to a
brief correction in March. Prices subsequently
rebounded supported by strong demand, multi-
region supply disruptions and falling London
Metal Exchange stocks.
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.
This is due to their relatively lower cost of
production of battery-suitable class-1 nickel
than for laterites, and the favourable position
of integrated sulphide operations on the
emission intensity curve.
68
BHP
Annual Report 2021
1.18 Other information
1.18.1 Company details
and terms of reference
BHP Group Limited is 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. 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
3.2 of this Annual 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 Annual Report as
‘operated assets’ or ‘operations’) during the
period from 1 July 2020 to 30 June 2021.
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.
On 17 August 2021, we announced our proposal
to adopt a single company structure under
BHP Group Ltd, with a primary listing on the
Australian Securities Exchange (ASX).
The company would also hold a standard
listing on the London Stock Exchange (LSE),
a secondary listing on the Johannesburg
Stock Exchange (JSE) and an ADR program
listed on the New York Stock Exchange
(NYSE). If implemented, eligible BHP Group
Plc shareholders would receive one share in
BHP Group Ltd for each BHP Group Plc share
they hold.
The holdings of BHP Group Ltd shareholders
would not change. BHP’s dividend policy and
ability to distribute fully franked dividends
also would not change. Subject to final Board
approval, BHP shareholders are expected to
vote on unification at shareholder meetings
planned for the first half of CY2022.
1.18.2 Forward-looking
statements
This Annual Report contains forward-looking
statements, including: statements regarding
trends in commodity prices and currency
exchange rates; demand for commodities;
reserves and production forecasts; plans,
strategies and objectives of management;
climate scenarios; approval of certain projects
and consummation of certain transactions;
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’, ‘commit’, ‘may’, ‘should’, ‘need’, ‘must’,
‘will’, ‘would’, ‘continue’, ‘forecast’, ‘guidance’,
‘trend’ or similar words. These statements
discuss future expectations concerning the
results of assets or financial conditions, or
provide other forward-looking information.
Examples of forward-looking statements
contained in this Annual Report include,
without limitation, statements describing:
(i) our strategy, our values and how we
define our success;
(ii) the emerging uses of and our expectations
regarding future demand for certain
commodities, in particular copper, nickel, iron
ore, metallurgical coal, steel, oil and gas and
potash, and our intentions, commitments or
expectations with respect to our supply of
certain commodities;
(iii) our expectations of a competitive advantage
in certain commodities, in particular in copper,
nickel and potash;
(iv) the perceived synergies and other benefits
of the proposed transaction between BHP
and Woodside;
(v) our future exploration and partnerships
plans and the structure of our portfolio;
(vi) our outlook for long-term economic growth
and other macroeconomic and industry trends;
(vii) our projected and expected production
levels and development projects across our
portfolio of assets;
(viii) our reserves and resources;
(ix) our plans for our major projects and related
budget allocations;
(x) our expectations and objectives with respect
to decarbonisation, climate change resilience
and timelines to achieve such objectives,
including our Climate Transition Action Plan,
Climate Change Adaptation Strategy and
goals, targets and strategies to seek to reduce
or support the reduction of greenhouse gas
emissions, and related perceived opportunities
for BHP;
(xi) the assumptions, beliefs and conclusions
in our climate change-related statements and
strategies, including in our Climate Change
Report 2020, for example, in respect of
future temperatures, energy consumption
and greenhouse gas emissions, and climate-
related impacts;
(xii) our commitment to generating social value;
(xiii) our commitments under sustainability
frameworks, standards and initiatives;
(xiv) our intention to improve tailings
storage management;
(xv) our intention to achieve certain inclusion
and diversity targets; and
(xvi) our intention to achieve certain targets and
outcomes with respect to Indigenous peoples.
Forward-looking statements are based on
management’s current expectations and
reflect judgments, assumptions, estimates
and other information available as at the date
of this Annual Report and/or the date of BHP’s
planning or scenario analysis processes.
These statements do not represent guarantees
or predictions of future financial or operational
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, including 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, revenues, costs or production output
and anticipated lives of assets, mines or
facilities include:
(i) our ability to profitably produce and transport
the minerals, petroleum and/or metals extracted
to applicable markets;
(ii) the impact of foreign currency exchange
rates on the market prices of the minerals,
petroleum or metals we produce;
(iii) 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;
(iv) changes in environmental and
other regulations;
(v) the duration and severity of the COVID-19
pandemic and its impact on our business;
(vi) political or geopolitical uncertainty;
(vii) labour unrest; and
(viii) other factors identified in the risk factors
set out in section 1.16.
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.
Emissions and energy
consumption data
Due to the inherent uncertainty and limitations
in measuring greenhouse gas (GHG) emissions
and operational energy consumption under
the calculation methodologies used in the
preparation of such data, all GHG emissions
and operational energy consumption data or
references to GHG emissions and operational
energy consumption volumes (including
ratios or percentages) in this Annual Report
are estimates. There may also be differences
in the manner that third parties calculate or
report GHG emissions or operational energy
consumption data compared to BHP, which
means that third party data may not be
comparable to our data. For information on
how we calculate our GHG emissions and
operational energy consumption data, see
our Methodology tab in our ESG Standards
and Databook.
The Strategic Report is made in accordance
with a resolution of the Board.
Ken MacKenzie
Chair
2 September 2021
(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.
BHP
Annual Report 2021
69
Strategic Report1GovernanceFinancial StatementsAdditional Information234 Section 2
Governance
In this section:
In this section:
2.1
2.1.1
2.1.2
2.1.3
2.1.4
2.1.5
2.1.6
2.1.7
2.1.8
2.1.9
2.1.10
2.1.11
2.1.12
2.1.13
Corporate Governance Statement
Chair’s letter
Board of Directors and Executive Leadership Team
Board of Directors
Executive Leadership Team
BHP governance structure
Board and Committee meetings and attendance
Key Board activities during FY2021
Stakeholder engagement
Shareholder engagement
Workforce engagement
Director skills, experience and attributes
Board evaluation
Nomination and Governance Committee Report
Risk and Audit Committee Report
Sustainability Committee Report
Remuneration Committee Report
Risk management governance structure
2.1.14 Management
2.1.15 Our conduct
2.1.16 Market disclosure
2.1.17
Conformance with corporate
governance standards
Additional UK disclosure
2.1.18
Governance
71
71
72
72
74
75
76
77
79
79
81
82
83
84
87
93
94
94
94
95
96
96
97
2.2
2.2.1
2.2.2
2.2.3
2.3
2.3.1
2.3.2
2.3.3
2.3.4
2.3.5
2.3.6
2.3.7
2.3.8
2.3.9
Remuneration Report
Annual statement by the Remuneration
Committee Chair
Remuneration policy report
Remuneration policy for the Executive Director
Remuneration policy for Non-executive Directors
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 disclosures
Directors’ Report
Review of operations, principal activities and
state of affairs
Share capital and buy-back programs
Results, financial instruments and going concern
Directors
Remuneration and share interests
Secretaries
Indemnities and insurance
Employee policies
Corporate governance
2.3.10 Dividends
2.3.11
2.3.15
2.3.13
2.3.14
Auditors
2.3.12 Non-audit services
Political donations
Exploration, research and development
ASIC Instrument 2016/191
Proceedings on behalf of BHP Group Limited
Performance in relation to
environmental regulation
Share capital, restrictions on transfer of shares
and other additional information
2.3.16
2.3.18
2.3.17
98
99
103
103
107
108
108
115
117
118
119
124
124
124
125
125
125
126
126
126
127
127
127
127
127
127
127
127
128
128
70
BHP
Annual Report 2021
2.1 Corporate Governance Statement
2.1.1 Chair’s letter
Dear Shareholder,
This year BHP achieved some outstanding
results, underpinned by strong operational
performance and disciplined capital allocation.
For the second consecutive year, there were no
fatalities at our operated assets. We also created
more value for shareholders and continued to
contribute to the communities and partners
who support our work.
Strategy and portfolio
Our purpose is to bring people and resources
together to build a better world. Our objective
is to deliver sustainable long-term value and
returns. We do this by owning a portfolio of
world class assets in attractive commodities,
operating them exceptionally well, maintaining
a disciplined approach to capital allocation
and being leaders in sustainability and creating
social value.
We are proactively positioning the company
for the future with a portfolio and capabilities
that will enable us to grow long-term value – the
commodities we supply are essential to the world
now and in the future. We recently announced an
investment of US$5.7 billion in the Jansen Stage
1 potash project in Canada, which opens up a
new growth front for BHP. We also announced
our intention to merge BHP’s Petroleum business
with Woodside to create a top 10 independent
oil and gas company with the capability to
support the world’s energy needs through
the energy transition.
As well as positioning our portfolio for future
growth, we have also announced our intention
to move from a Dual Listed Company with two
parent entities, to a single company structure
under BHP Ltd with a primary listing on the
Australian Securities Exchange. We believe
unification will make BHP more efficient and
agile, and better position the company for
continued performance and growth.
Culture and capability
Successful delivery of our strategy relies on
workforce capability and a strong culture.
We believe that supporting our people’s
wellbeing, creating and promoting an inclusive
and diverse environment for our people to
work, and keeping them safe in the workplace
is critically important. It is core to our values.
In FY2021, this has taken on an even greater
emphasis as our workforce and their families
and communities have adapted to new ways
of working as a result of the pandemic.
This year we have created a simpler
Engagement and Perception Survey that
runs in 100-day culture improvement cycles.
The Board regularly reviews the results of
these surveys and any actions that are taken
as a result. We also continue to invest in our
leaders and in new talent, through programs
like our BHP Operating System learning
academies, Operations Services and the
FutureFit Academies which have seen us
recruit hundreds of new apprentices and
trainees into our operations in Australia.
Board composition
In FY2021, we continued to renew our Board
through our structured Board succession
process. The Board regularly assesses its
current skills and expected requirements for
the future and uses that analysis to establish
clear succession plans. In October 2020,
Christine O’Reilly and Xiaoqun Clever were
appointed to the Board as independent
Non-executive Directors.
Xiaoqun Clever has more than 20 years’
experience in technology with a focus on
software engineering, data and analytics,
cyber security and digitalisation. She held
various roles with SAP SE, Ringier AG and
ProSiebenSat.1 Media SE. She currently serves
on the boards of Capgemini SE, Infineon
Technologies AG and Amadeus IT Group SA.
Christine O’Reilly has more than 30 years’
experience in finance, public policy and
transformational strategy. She held various roles
with GasNet Australia Group and Colonial First
State Global Asset Management. She currently
serves on the boards of Stockland Limited,
Medibank Private Limited, Baker Heart and
Diabetes Institute, and will join the board of
Australia and New Zealand Banking Group
Limited from November 2021.
We have also announced the appointment
of Michelle Hinchliffe as an independent
Non-executive Director from 1 March 2022.
Ms Hinchliffe has over 30 years’ experience in
KPMG’s financial services division and has spent
time as a partner and member of the Board
of KPMG’s Australian and UK practices. She is
currently the UK Chair of Audit for KPMG and
will retire from KPMG prior to her appointment.
Susan Kilsby and Anita Frew will retire as BHP
Directors at the end of the 2021 Annual General
Meetings (AGMs). Susan was appointed as Chair
of Fortune Brands in January 2021 and Anita
has joined the board of Rolls-Royce Holdings
Plc and will become Chair from 1 October 2021.
Both directors have stepped down due to the
time commitments associated with these new
chair roles. I would like to acknowledge and
thank both Susan and Anita for their counsel
and contribution to BHP and the Board.
We are continuing our renewal process
and will look to add a further independent
director in 2022.
Shareholder engagement
We are committed to communicating with our
shareholders and hearing your views on the
company’s performance. We do this through
our AGMs, shareholder forums and investor
meetings where we engage with investors
on key areas of market interest.
Shareholders also have the opportunity to
ask questions directly of the Chief Executive
Officer, Mike Henry, through shareholder
question and answer sessions webcast
through BHP’s website.
The Board also engages with investors and
considers their perspectives, including through
independent survey results, and regularly seeks
feedback from other external stakeholders,
such as the Forum on Corporate Responsibility,
to ensure it is considering all perspectives and
effecting positive change.
Conclusion
I am proud that BHP’s people and operations
have been resilient, and continued to create
value for our shareholders, communities,
customers, suppliers and partners.
I look forward to our upcoming AGMs and to
engaging with as many shareholders as I can,
institutional and retail, throughout the year
to hear your views and feedback.
On behalf of the Board, thank you for your
continued support.
Ken MacKenzie
Chair
“ This year BHP achieved some outstanding
results, underpinned by strong operational
performance and disciplined capital allocation.
For the second consecutive year, there were
no fatalities at our operated assets. We also
created more value for shareholders and
continued to contribute to the communities
and partners who support our work.”
BHP
Annual Report 2021
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Financial StatementsAdditional Information34Strategic Report12Governance 2.1 Corporate Governance Statement continued
2.1.2 Board of Directors and Executive Leadership Team
Board of Directors
NG
RA
NG
Ken MacKenzie
BEng, FIEA, FAICD 57
Independent Non-executive Director since
September 2016.
Chair since 1 September 2017.
Mr MacKenzie has extensive global and executive
experience and a deeply strategic approach, with
a focus on operational excellence, capital discipline
and the creation of long-term shareholder value.
Ken has insight and understanding in relation to
organisational culture, the external environment,
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. Ken currently sits on the Advisory
Board of American Securities Capital Partners LLC
(since January 2016) and is a part-time advisor at
Barrenjoey (since April 2021).
Mike Henry
BSc (Chemistry) 55
Non-independent Director since January 2020.
Chief Executive Officer since 1 January 2020.
Terry Bowen
BAcct, FCPA, MAICD 54
Independent Non-executive Director since
October 2017.
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 BHP,
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.
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 was formerly Managing Partner and Head
of Operations at BGH Capital and an Executive
Director and Finance Director of Wesfarmers
Limited. 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 also a former
Director of Gresham Partners and past President
of the National Executive of the Group of 100 Inc.
Terry is currently Chair of the Operations Group
at BGH Capital, and a Director of Transurban
Group (since February 2020), Navitas Pty Limited
and West Coast Eagles Football Club.
NG S
RA
RA
S
Malcolm Broomhead
AO, MBA, BE, FAICD 69
Independent Non-executive Director since
March 2010.
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 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.
Malcolm is currently Chair of Orica Limited (since
January 2016, having served on the board since
December 2015). He is also a Director of the Walter
and Eliza Hall Institute of Medical Research (since
July 2014).
Xiaoqun Clever
Ian Cockerill
Diploma in Computer Science and International
Marketing, MBA 51
Independent Non-executive Director since
October 2020.
Ms Clever has over 20 years’ experience in
technology with a focus on software engineering,
data and analytics, cybersecurity and digitalisation.
Xiaoqun was formerly Chief Technology Officer
of Ringier AG and ProSiebenSat.1 Media SE.
Xiaoqun previously held various roles with
SAP SE from 1997 to 2013, including Chief
Operating Officer of Technology and Innovation.
Xiaoqun was formerly a member of the Supervisory
Board of Allianz Elementar Versicherungs and
Lebensversicherungs AG (from January 2015
to August 2020).
She is currently a Non-executive Director of
Capgemini SE (since May 2019) and Amadeus IT
Group SA (since June 2020) and on the Supervisory
Board of Infineon Technologies AG (since February
2020). She is also a member of the Administrative
Board of Cornelsen Group (since October 2019)
and the Advisory Board of Nuremberg Institute for
Market Decisions e.V. (since June 2019). Xiaoqun is
also the Co-Founder and Chief Executive Officer
of LuxNova Suisse GmbH (since April 2018).
MSc (Mining and Mineral Engineering),
BSc (Hons.) (Geology), AMP –
Oxford Templeton College 67
Independent Non-executive Director since
April 2019.
Mr Cockerill has extensive global mining
operational, project and executive experience
having initially trained as a geologist.
Ian previously served as Chair of BlackRock World
Mining Trust plc (from 2016 to May 2019, having
served on the board since September 2013),
Lead Independent Director of Ivanhoe Mines Ltd
(from 2012 to June 2019, having served on the
board since August 2011), and a Non-executive
Director of Orica Limited (from July 2010 to August
2019) and Endeavour Mining Corporation (from
September 2013 to March 2019). Ian 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.
He is currently the Chair of Polymetal International
plc (since April 2019) and a Non-executive Director
of I-Pulse Inc (since September 2010). Ian is a
Director of the Leadership for Conservation in
Africa and is the Chair of Conservation 360, a
Botswanan conservation NGO dealing with anti-
poaching initiatives.
Key to Committee membership
Committee Chair
RA
Risk and Audit
Committee member
NG
Nomination and Governance
R
S
Remuneration
Sustainability
72
BHP
Annual Report 2021
RA
R
R
NG S
R
Anita Frew
BA (Hons), MRes, Hon. D.Sc 64
Independent Non-executive Director since
September 2015.
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 was previously the Deputy Chair (from
December 2014 to May 2020), Senior Independent
Director (from May 2017 to December 2019)
and Non-executive Director (from 2010 to May
2020) of Lloyds Banking Group plc. She also
previously held the roles of Chair of Victrex Plc and
Senior Independent Director of Aberdeen Asset
Management Plc and IMI Plc.
Anita is currently the Chair of Croda International Plc
(since September 2015, having joined the Board in
March 2015). She is a Non-executive Director (since
1 July 2021) and Chair designate (commencing from
1 October 2021) of Rolls-Royce Holdings Plc.
Gary Goldberg
BS (Mining Engineering), MBA 62
Independent Non-executive Director since
February 2020.
Senior Independent Director of BHP Group Plc
since December 2020.
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. 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 previously served as Vice Chair of the World
Gold Council, Treasurer of the International Council
on Mining and Metals, and Chair of the National
Mining Association in the United States. Gary also
has non-executive director experience, having
previously served on the board of Port Waratah
Coal Services Limited and Rio Tinto Zimbabwe.
Susan Kilsby
MBA, BA 62
Independent Non-executive Director since
April 2019.
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, Susan held senior executive
roles at Credit Suisse, including as a Senior Advisor,
and Chair of EMEA Mergers and Acquisitions.
Susan also has non-executive director experience
across multiple industries. She was previously
the Chair of Shire plc (from 2014 to January 2019,
having served on the board since September
2011) and the Senior Independent Director at BBA
Aviation plc (from 2016 to 2019, having served on
the Board from April 2012).
Susan is currently the Senior Independent Director
of Diageo plc (since October 2019 having served on
the board since April 2018), Chair of Fortune Brands
Home & Security Inc (since January 2021 having
served on the board since July 2015) and a Non-
executive Director of Unilever plc (since August
2019) and NHS England (since January 2021).
S
NG
R
RA
NG
R
John Mogford
BEng 68
Independent Non-executive Director since
October 2017.
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.
John is currently a Non-executive Director of
ERM Worldwide Group Limited (since 2015).
Stefanie Wilkinson
BA, LLB (Hons), LLM 43
Group Company Secretary since March 2021.
Christine O’Reilly
BBus 60
Independent Non-executive Director since
October 2020.
Ms O’Reilly has extensive experience in both
executive and non-executive roles with deep
financial and public policy expertise, as well as
valuable experience in large-scale capital projects
and transformational strategy. She has over
30 years’ executive experience in the financial
and infrastructure sectors, including as the Chief
Executive Officer of the GasNet Australia Group and
as Co-Head of Unlisted Infrastructure Investments
at Colonial First State Global Asset Management.
Christine served as a Non-executive Director of
Transurban Group (from April 2012 to October
2020), CSL Limited (from February 2011 to October
2020) and Energy Australia Holdings Limited (from
September 2012 to August 2018).
Christine is currently a Non-executive Director of
Stockland Limited (since August 2018), Medibank
Private Limited (since March 2014) and Baker Heart
and Diabetes Institute (since June 2013), and will join
the board of Australia and New Zealand Banking
Group Limited from November 2021.
Dion Weisler
BASc (Computing), Honorary Doctor of Laws 54
Independent Non-executive Director since
June 2020.
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 continued
as a Director and Senior Executive Adviser until
May 2020. Dion previously held a number of senior
executive roles at Lenovo Group Limited. Prior to
this, Dion was General Manager Conferencing
and Collaboration at Telstra Corporation, and
held various positions at Acer Inc., including as
Managing Director, Acer UK.
Dion is currently a Non-executive Director of Intel
Corporation (since June 2020) and Thermo Fisher
Scientific Inc. (since March 2017).
Ms Wilkinson was appointed Group Company Secretary effective March 2021. Prior to joining BHP, Stefanie
was a Partner at Herbert Smith Freehills, a firm she was with for 15 years, specialising in corporate law and
governance for listed companies. Earlier in her career, Stefanie was a solicitor at Allen & Overy in the Middle
East. Stefanie is a fellow of the Governance Institute of Australia.
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Annual Report 2021
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Financial StatementsAdditional Information34Strategic Report12Governance 2.1 Corporate Governance Statement continued
Executive Leadership Team
Athalie Williams
Chief People Officer
BA (Hons), FAHRI 51
Caroline Cox
Chief Legal, Governance and External Affairs Officer
David Lamont
Chief Financial Officer
BA (Hons), MA, LLB, BCL 51
BComm, CA 56
Ms Williams joined BHP in 2007 and was appointed
Chief People Officer in January 2015. Athalie is
responsible for delivering innovative people and
culture strategies, programs and policies for the
Group globally, and ensuring BHP has the right
people and capabilities to deliver its strategy.
Prior to joining BHP, Athalie was the General
Manager Cultural Transformation at NAB and
an organisation strategy adviser with Accenture
(formerly Andersen Consulting).
Ms Cox was appointed Chief Legal, Governance
and External Affairs Officer in November 2020.
Caroline joined BHP in 2014 as Vice President Legal
and was appointed Group General Counsel in 2016
and Group General Counsel & Company Secretary
from March 2019. Prior to joining BHP, Caroline
was a Partner at Herbert Smith Freehills, a firm she
was with for 11 years, specialising in cross-border
transactions, disputes and regulatory investigations.
Mr Lamont was appointed Chief Financial Officer
in December 2020. Prior to joining BHP David was
the Chief Financial Officer of ASX-listed global
biotech company CSL Limited. He has also held the
positions of CFO and Executive Director at Minerals
and Metals Group and has previously served as
CFO at OZ Minerals Limited, PaperlinX Limited
and Incitec Limited. David held senior roles at BHP
between 2001 and 2006, including as CFO of its
Carbon Steel Materials and Energy Coal businesses.
Edgar Basto
President Minerals Australia
BSc, Metallurgy 54
Mr Basto joined BHP in 1989 and was appointed
President Minerals Australia in July 2020. Edgar 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 has held key leadership
roles across a range of commodities, including
as Asset President of Western Australia Iron Ore
(WAIO) from March 2016 and Asset President
Escondida (Chile) from 2009.
Geraldine Slattery
President Petroleum
Johan van Jaarsveld
Chief Development Officer
BSc, Physics, MSc, International Management
(Oil & Gas) 52
B.Eng (Chem), MCom, Applied Finance,
PhD (Eng), Extractive Metallurgy 49
Ms Slattery joined BHP in 1994 and was appointed
President Operations, Petroleum in March 2019.
Geraldine has more than 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.
Mr van Jaarsveld joined BHP in 2016 and was
appointed Chief Development Officer in
September 2020. Johan is responsible for strategy,
acquisitions and divestments, securing early-stage
growth options in future facing commodities,
ventures and innovation. Prior to joining BHP, Johan
held executive positions in resources and finance,
including at Barrick Gold Corporation, Goldman
Sachs and The Blackstone Group.
Laura Tyler
Chief Technical Officer
BSc (Geology (Hons)), MSc (Mining
Engineering) 54
Ms Tyler joined BHP in 2004 and was appointed
Chief Technical Officer in September 2020.
Laura has 17 years of experience with BHP, most
recently as Chief Geoscientist and Asset President
of Olympic Dam. Prior to joining BHP, Laura worked
for Western Mining Corporation, Newcrest Mining
and Mount Isa Mines in various technical and
operational roles.
Ragnar Udd
President Minerals Americas
Vandita Pant
Chief Commercial Officer
BAppSc (Mining Engineering), MEng, MBA 49
BCom (Hons), MBA, Business Administration 51
Mr Udd joined BHP in 1997 and was appointed
President Minerals Americas in November 2020.
Ragnar has held a number of senior leadership
positions across BHP in operations, logistics,
projects and technology, including most recently
as Acting Chief Technology Officer and Asset
President of BHP Mitsubishi Alliance (BMA).
Ms Pant joined BHP in 2016 and was appointed
Chief Commercial Officer in July 2019. Her global
accountabilities include Marketing, Procurement,
Maritime, Logistics, Global Business Services, and
developing BHP’s views on global commodities
markets. Prior to this role she was Group Treasurer
and Head of Europe. Prior to joining BHP, Vandita
held a wide range of executive roles with ABN
Amro and Royal Bank of Scotland and has lived
and worked in India, Singapore, Japan and the
United Kingdom.
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2.1.3 BHP governance structure
Shareholders
Board
Nomination and
Governance Committee
Risk and Audit
Committee
Sustainability
Committee
Remuneration
Committee
CEO
Executive Leadership Team
The Board currently has 12 members. The Directors of BHP, along with their profiles, are listed in section 2.1.2.
The Board believes there is an appropriate combination of 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 considered appropriate for the
Dual Listed Company structure and is in line with Australian-listed company practice.
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 Executive
Officer (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. The Chief Financial Officer (CFO) also attends
all Board meetings. The Board, led by the Chair, also holds discussions in the absence of management at each Board meeting.
The Chair is responsible for leading the Board and ensuring it operates to the highest governance standards. In particular, the Chair facilitates
constructive Board relations and the effective contribution of all Non-executive Directors.
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.
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 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 matters reserved for the Board include:
– 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
– strategy, annual budgets, balance sheet management and funding strategy
– determination of commitments, capital and non-capital items, acquisitions and divestments above specified limits
– performance assessment of the CEO and the Group
– approving the Group’s values, Our Code of Conduct, purpose and risk appetite
– management of Board composition, processes and performance
– 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
The Board Governance Document is available at
bhp.com/governance.
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. These Committees include the Risk and Audit Committee, the
Nomination and Governance Committee, the Remuneration Committee and the Sustainability Committee. Each of these permanent Committees has
terms of reference under which authority is delegated by the Board. These are available at bhp.com/governance. Reports from these Committees are
set out at sections 2.1.9 to 2.1.12.
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Annual Report 2021
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Financial StatementsAdditional Information34Strategic Report12Governance 2.1 Corporate Governance Statement continued
2.1.4 Board and Committee meetings and attendance
The Board meets as often as required. During FY2021, the Board met 12 times. The normal schedule, which includes Board meetings in the United
Kingdom and in another global office location, was disrupted due to the impacts of the COVID-19 pandemic. During FY2021, all Board meetings
were held virtually. An additional ad hoc meeting was held in FY2021.
Members of the ELT and other members of senior management attend meetings of the Board by invitation, with the CFO attending each meeting.
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.
Board and Board Committee attendance in FY2021
Terry Bowen
Malcolm Broomhead
Xiaoqun Clever(2)
Ian Cockerill
Anita Frew
Gary Goldberg
Mike Henry
Susan Kilsby
Ken MacKenzie
Lindsay Maxsted(6)
John Mogford
Christine O’Reilly(8)
Shriti Vadera(9)
Dion Weisler
Risk and Audit
Committee
Nomination and
Governance
Committee
Remuneration
Committee
Sustainability
Committee
11/11
7/7
11/11
11/11
4/4
7/7
4/4(1)
6/6
2/2(3)
4/4(5)
6/6
4/4(7)
2/2
2/2
5/5
5/5
5/5
5/5
6/6
6/6
6/6(5)
3/3(5)
2/3(10)
6/6
Board
12/12
12/12
8/8
12/12
12/12
12/12
12/12
11/12(4)
12/12
4/4
12/12
8/8
4.5/4.5(9)
12/12
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) Terry Bowen became a member of the Nomination and Governance Committee on 2 December 2020.
(2) Xiaoqun Clever became a member of the Board and the Risk and Audit Committee on 1 October 2020.
(3) Gary Goldberg became a member of the Nomination and Governance Committee on 1 March 2021.
(4) Susan Kilsby was unable to attend the Board meeting on 5 May 2021 as the meeting time was rescheduled and Susan had a pre-existing Board commitment. Susan provided detailed comments
to the Chair in advance of the meeting.
(5) Susan Kilsby ceased being a member of the Nomination and Governance Committee on 1 March 2021, and was replaced as Chair of the Remuneration Committee by Christine O’Reilly effective
1 March 2021.
(6) Lindsay Maxsted retired as a member of the Board and the Risk and Audit Committee on 4 September 2020.
(7) John Mogford became a member of the Nomination and Governance Committee on 2 December 2020.
(8) Christine O’Reilly became a member of the Board, the Risk and Audit Committee and the Remuneration Committee on 12 October 2020, and a member of the Nomination and Governance
Committee on 1 March 2021.
(9) Shriti Vadera retired as a member of the Board, the Nomination and Governance Committee and the Remuneration Committee on 15 October 2020. The October Board meeting was held over
two days on 13 and 16 October, and Shriti attended the first session prior to her retirement.
(10) Shriti Vadera was unable to attend the Remuneration Committee meeting on 23 September 2020 due to pre-existing Board commitments. Shriti provided detailed comments to the Chair of
the Committee ahead of the meeting.
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2.1.5 Key Board activities during FY2021
Key matters considered by the Board during FY2021 are outlined below.
Chair’s matters
Board composition, succession
planning, performance and culture
– CEO and ELT succession
– Committee succession
– Board composition and succession
– Board evaluation
– Director training and development
– Corporate governance updates
– Employee indemnification policy
Strategic matters
Capital allocation
(Capital Allocation Framework, capital
prioritisation and development outcomes)
– Dividend policy and dividend recommendations
– Capital prioritisation and portfolio development options
– Capital execution watch list
– Capital allocation for pathways to net zero and other social value projects
Funding
(annual budgets, balance sheet
management, liquidity management)
– Finance and business performance reports
– Two-year budget
– Funding updates
Portfolio and strategy
(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)
– Growth projects and transactions
– Commodity strategies
– Dual Listed Company structure
– Strategic roadmap
– Risk Appetite Statement
– Climate change – approval of commitments and updates on progress against commitments
– Climate change – external landscape and risk exposure
– Equity alternatives
– New world trends post COVID-19 pandemic
– COVID-19 updates, including safety measures, wellbeing steps, workforce planning and
community support
– Samarco strategy, funding and communications
– Strategic options for Petroleum
– Acquisition of additional interest in Shenzi
– Jansen Potash Project
– Trion project and Mexico country risk update
– Commodity price protocols
– China strategy
– Chile country update
– Economic and geopolitical landscape
– Nickel West power purchase agreement
– Innovation and technology update
– Minerals exploration briefing
People, culture, social value and other
significant items
– Culture and capability, including capability deep dives
– Culture dashboard and Engagement and Perception Survey (EPS) results,
Monitoring and assurance matters
Includes matters and/or documents
required by the Group’s constitutional
documents, statute or by other
external regulation
including actions that will be taken based on the findings
– Inclusion and diversity update
– Sexual assault and sexual harassment
– Payroll review
– Cultural heritage review, including in relation to Project Resolution
– Shareholder requisitioned resolutions
– Investor relations reports, including investor perception survey results
– CEO reports, including updates on safety and sustainability, financial and operational
performance, external affairs, markets, people and projects
– Risk review session
– Non-financial risk management
– Tailings Storage Facility Policy
– Approval of the CEO’s remuneration
– Review and approval of half-year and full-year financial results
– Review and approval of the Annual Reporting suite and Climate Change Report
– Physical and virtual site visits, and site visit reports
– Director evaluations
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Policies and procedures
During FY2021, we transitioned to full compliance with the fourth edition of the ASX Corporate Governance Principles and Recommendations (ASX
Fourth Edition) published by the ASX Corporate Governance Council.
We implemented new arrangements in line with the ASX Fourth Edition and reviewed them to ensure they remained in line with the 2018 edition of the
UK Corporate Governance Code (UK Code).
In line with the ASX Fourth Edition, BHP also disclosed its Periodic Disclosure – Disclosure Controls policy, which sets out our process to verify the
integrity of the periodic corporate reports we release to the market, including those that are not audited or reviewed by the external auditor.
For more information
refer to section 2.1.16
ELT succession
A critical component of succession at the Executive Leadership Team (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 leadership team.
On 1 December 2020, David Lamont’s appointment as Chief Financial Officer (CFO) took effect. Peter Beaven continued as CFO until 30 November
2020 to provide ongoing leadership through to David’s commencement, and supported David with handover into early CY2021.
In August 2020, the Board approved new roles and appointments on the ELT. Ragnar Udd became President Minerals Americas, effective 1 November
2020, replacing Daniel Malchuk. Daniel continued in the role until that time and left 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 previous position on the ELT as Chief Geoscientist. She relinquished her
role as Asset President Olympic Dam. Caroline Cox became Chief Legal, Governance and External Affairs Officer, effective 1 November 2020, replacing
Geoff Healy. Geoff continued in the role until that time and left BHP at the end of CY2020. Johan van Jaarsveld commenced in the new role of Chief
Development Officer on 1 September 2020.
Culture
The delivery of our strategy is predicated on our culture and capability. The Board, supported by the Committees, considers a range of qualitative and
quantitative information in relation to culture at BHP 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, EPS results, inclusion and diversity update, Risk and
Audit Committee report-outs on Our Code of Conduct investigations, the culture and capability required to execute our strategy, and culture as a part
of asset reviews. Recognising our culture cannot be measured using a single number or index, a culture dashboard was developed in FY2021 to provide
the Board with an additional tool to monitor our culture. The dashboard includes simple measures to provide key signposts on the health of our culture.
This data combined with the EPS results provides the Board with insight on safety, engagement and enablement. The culture dashboard will be further
developed over the next year to provide insight into the execution of our strategy.
Directors also gain insights into culture through direct engagement with a cross-section of the workforce where they can gain direct feedback
on a range of issues, including COVID-19 impacts, diversity, health, safety, environment and community (HSEC) topics and social value.
For more information
refer to sections 1.14, 2.1.6 and 1.12
Climate change
Climate change is a material governance and strategic issue and is routinely on the Board agenda, including as part of strategy discussions, portfolio
reviews and investment decisions, risk management oversight and monitoring, and performance against our commitments. The Sustainability
Committee assists the Board in overseeing the Group’s climate change performance and governance responsibilities. The Risk and Audit Committee
and Sustainability Committee assist the Board with the oversight of climate-related risk management, although the Board retains overall accountability
for BHP’s risk profile. Below the level of the Board, key management decisions are made by the CEO and management, in accordance with their
delegated authority.
Following discussion by the ELT and Sustainability Committee, in August 2020 the Board approved our medium-term target, Scope 3 emissions
goals and the strengthening of links between executive remuneration and climate change performance measures.
For information regarding our approach to climate change and sustainability
refer to sections 1.13.7 and 1.13.1
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2.1.6
Stakeholder engagement
There are multiple ways the views of stakeholders, beyond shareholders, are brought to the Board and its Committees. For example, HSEC updates,
site visits (physical and virtual where necessary) involving engagement with community members and government, and engagement with the
Forum on Corporate Responsibility. In addition, the Risk and Audit Committee 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 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, how we have elicited the
views of stakeholders and the outcomes of our engagements with stakeholders, in particular in relation to the Board’s decision-making.
For more information
refer to sections 1.12, 1.13 and 1.14
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. As part of our investor relations program to facilitate effective two-way communication with investors, the Board uses formal and informal
communication channels to understand and take into account the views of shareholders. BHP provides information about itself and its governance
to investors via its website at bhp.com.
Investor engagement in FY2021
Chair investor meetings
The Chair regularly meets with investors to discuss Board priorities and seek shareholder feedback.
FY2021 activity
Virtual meetings were held in July 2020 between the Chair and investors in Australia, the US, the UK and mainland Europe, with additional meetings held in June
2021. The Chair also held a UK Virtual Shareholder Forum with the CEO in September 2020 to allow shareholders to ask questions in advance of the AGMs. This was
arranged after consultation with the UK Shareholders’ Association and ShareSoc.
.
Live webcasts and Q&A sessions
Provides a forum to update shareholders on results or other key announcements.
FY2021 activity
Annual and half-year results, as well as key announcements are webcast and the materials are made available on our website. The CEO held a shareholder question
and answer session in August 2020 via webcast in relation to BHP’s FY2020 performance.
Presentations and briefings
Presentation materials are set out on the BHP website.
FY2021 activity
Presentations delivered relating to our climate change strategy in September 2020, cultural heritage in October 2020, decarbonising steel in November 2020
and tailings storage facilities in June 2021.
Direct engagement
Provides a conduit to enable the Board and its Committees to be up to date with investor expectations and continuously improve the governance
processes of BHP. We also engage with other capital providers, for example, through meetings with bondholders.
FY2021 activity
The CEO, CFO, senior management and Investor Relations team held virtual
meetings with investors worldwide, including: Australia, Canada, Germany,
Hong Kong SAR (China), Japan, Malaysia, Singapore, South Africa, Sweden,
United Arab Emirates, the UK and the US. Topics covered include corporate
governance and ESG matters, strategy, finance and operating performance.
We engaged with investors on cultural heritage issues, including the
withdrawn shareholder resolution and our updated approach. This included
a number of presentations and investor one-on-one meetings through the
first half of FY2021 to set out the detail of our approach to cultural heritage
both in the Pilbara and worldwide.
We engaged regularly with the Climate Action 100+ lead investors and the
broader investor group of the CA100+ on a range of decarbonisation and
emissions related topics. We also engaged with the Transparency Pathway
Initiative and FTSE Russell about their methodologies relating to the transition
and approach to mined commodities.
The CEO had a series of meetings with the CEOs and chief investment officers
of major investors globally to discuss a range of topics including decarbonisation
and the criticality of minerals and metals to the transition.
In addition, we engaged with a range of ESG data providers about their
methodologies and responded to enquiries on topics including cultural
heritage, industry associations, thermal coal, decarbonisation, Scope 3
emissions, diversity and inclusion, tailings dams, Samarco, non-operated
joint ventures, biodiversity, water stewardship and COVID-19.
The Risk and Audit Committee considered and oversaw management work
in relation to a letter from the Institutional Investors Group on Climate Change
(IIGCC) setting out ‘investor expectations for Paris-aligned accounts’.
The Remuneration Committee also engages with investors on remuneration-
related matters. The Chair of the Remuneration Committee wrote an open
letter to shareholders and proxy advisers in September 2020, summarising
key aspects of BHP’s FY2020 remuneration outcomes and welcoming
investor feedback. This letter was published on BHP’s website.
Annual General Meetings
Our AGMs provide an opportunity for all investors to question and engage with the Board.
Information on our AGMs is
available at bhp.com/meetings
FY2021 activity
Due to COVID-19 restrictions, the BHP Group Limited AGM for FY2020 was held as a virtual meeting and the BHP Group Plc AGM for FY2020 was held as
a closed meeting. A virtual forum for BHP Group Plc shareholders was held in September 2020 to provide an opportunity to hear from the Chair and CEO
and to ask questions via a live text facility. BHP Group Plc shareholders were also invited to attend the BHP Group Limited AGM virtually.
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2.1 Corporate Governance Statement continued
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.
We facilitate and encourage shareholder participation at our AGMs. These meetings provide an update for shareholders on our performance and offer
an opportunity for shareholders to ask questions and vote. Before an AGM, shareholders are provided with all material information in BHP’s possession
relevant to their decision on whether or not to elect or re-elect a Director.
Proceedings at shareholder meetings are webcast live from our website. Copies of the speeches delivered by the Chair and CEO at 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. The External Auditor will also be available to
answer questions at the AGMs.
At our AGMs in 2020, resolution 25 (a shareholder-requisitioned resolution to suspend memberships of industry associations that are involved
in COVID-19-related advocacy that is inconsistent with the goals of the Paris Agreement) received the support of 22 per cent of votes cast.
The key messages received from engagement with shareholders include:
– an emphasis that BHP constructively influence its trade associations to further enhance the global energy transition
– ensuring the COVID-19 pandemic was not used (or seen to be used) as a rationale by associations to impede progress on alignment with the Paris
Agreement goals and that the economic recovery measures being considered present a unique opportunity to accelerate clean energy innovation
– enhancing transparency on the alignment between the policy positions held by BHP and those of industry associations of which BHP is a member
is important but not sufficient. If an industry association is advocating for policy changes inconsistent with the goals of the Paris Agreement,
companies must take tangible action to drive consistency
We are confident our existing processes, combined with the reforms outlined below, provide strengthened oversight over industry association
advocacy and will help ensure our commitment to responsible and constructive advocacy is shared by the associations of which we are a member.
Prior to the 2020 AGMs, BHP announced a series of industry association reforms, including a new set of Global Climate Policy Standards (applicable
to BHP in its direct advocacy and also to the associations of which we are a member) and disclosure enhancements, such as publishing a list of
material association memberships (including membership fees) on our website. Since the AGMs, BHP has continued to work to implement the
reforms announced in August 2020. This has included:
– working with the minerals sector associations of which BHP is a member in Australia (i.e. the Minerals Council of Australia (MCA) and the various state-
based minerals sector associations) to develop and agree an advocacy protocol. This protocol delineates the policy areas on which the associations
will advocate, having regard to their jurisdictional responsibilities
– working with the key associations of which BHP is a member in Australia (i.e. the MCA, the various state-based minerals sector associations, the
Australian Petroleum Production and Exploration Association (APPEA) and the Business Council of Australia (BCA)) to develop plans outlining their
expected advocacy priorities and activities for the coming year. These plans are now available on the websites of the respective associations or
will soon be available pending board approval by the relevant associations
– implementing BHP’s new model of disclosing material departures from our Global Climate Policy Standards in ‘real time’ on the BHP website
BHP has also played an active role in shaping the policy advocacy of its industry associations. This has included working with other members to:
– change the American Petroleum Institute’s position on methane regulation and carbon pricing
– update the APPEA’s climate change policy principles (which now call for Australia to achieve net zero emissions by 2050)
– enable the BCA to provide in-principle support for the Climate Change (National Framework for Adaptation and Mitigation)
Bill 2020 that was introduced before the Australian Parliament in November 2020
We will be conducting our next industry association review in CY2022. Consistent with BHP’s culture of continuous improvement, we will work
to strengthen the review process. More information on our approach to industry associations is available at bhp.com.
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Workforce engagement
Our global workforce is the foundation of our business and we believe supporting the wellbeing of our people and promoting an inclusive and diverse
culture are vital for maintaining a competitive advantage. The Board considers effective workforce engagement a key element of its governance and
oversight role.
The Board has arrangements in place for managing workforce engagement. The Board and its Committees receive information related to the workforce
through a range of channels, including direct engagement at Board and Committee meetings and site visits, the Employee Perception Survey (EPS)
findings, culture dashboard insights, gender pay gap reports and updates from the Chief Executive Officer and the Chief People Officer.
Alongside section 1.14, the table below further describes the ways the Board engaged with our workforce in FY2021 and how workforce considerations
impacted key decisions.
Having reviewed these workforce engagement arrangements in FY2021, 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 Board and Committee
meetings), with the opportunity to consider the feedback received in subsequent Board discussions.
Workforce engagement practices
Site visits
For more information
refer to section 2.1.9
Directors participated in site visits (many of these were virtual in FY2021 due to COVID-19 travel restrictions) to engage directly with a cross-
section of the workforce.
These engagements deliberately included a cross-section of staff in various regions and provide insight into matters that are front of mind
for Directors and the workforce.
Board and Committee meetings
Directors hear from employees, up to several levels below the CEO, at each Board and Committee meeting. Topics raised by employees include
the health and safety of our people, culture, ethics and compliance, workforce relations, sexual assault and sexual harassment, response to
COVID-19, our purpose, social value, conduct concerns and diversity.
EthicsPoint
For more information on
refer to sections 1.13.6 and 2.1.15
Members of our workforce are able to raise matters of concern through our 24-hour speak-up helpline, EthicsPoint.
This helps to ensure Board oversight of culture and management response to serious conduct contrary to Our Charter and Our Code of Conduct.
Employee survey results and culture dashboard
Metrics from the EPS and culture dashboard provide Directors with insight into our culture and areas of focus, including where we are lagging
in certain measures.
The EPS was redesigned in FY2021 to include more targeted questions and a new survey platform to provide leaders with greater insight into the
key metrics related to safety, engagement and enablement, which were identified as critical foundations for our performance culture. The culture
dashboard was also developed in FY2021 to provide key signposts on the health of our culture.
Management engagement through webcasts, Q&A sessions and emails
Management regularly engages with the workforce through a range of formal and informal channels, including webcasts, live Q&A sessions
and emails from the CEO and other ELT members. Live Q&A sessions were particularly helpful in providing an opportunity for employees to
ask questions of our leaders and receive responses in real time.
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2.1.7 Director skills, experience and attributes
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 to operate
– ensure the talent, capability and culture of BHP to support the long-term delivery of our strategy
Attributes and commitment to role
All Directors are expected to comply with Our Code of Conduct, act with integrity, lead by example and promote the desired culture.
The Board believes each Non-executive Director has demonstrated the attributes of sufficient time to undertake the responsibilities of the role; honesty
and integrity; and a preparedness to question, challenge and critique throughout the year through their participation in Board meetings, as well as the
other activities that they have undertaken in their roles.
In accordance with provision 15 of the UK Code, during FY2021 the Board considered Ken MacKenzie’s appointment as a part-time adviser at Barrenjoey
and approved it on the basis that it did not consider it adversely impacted his role or commitment to BHP. In particular, the Board noted it was not
an executive role and Mr MacKenzie committed to the Board that BHP would remain Mr MacKenzie’s number one priority. It was also agreed that
Barrenjoey will not advise BHP and that Mr MacKenzie himself will not advise on transactions or advise BHP competitors or our significant customers
or suppliers.
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.
The Board collectively possesses all the skills and experience set out in the skills matrix, and each Director satisfies the Board requirements and
attributes discussed above. For more information on the individual skills and attributes of the Directors, refer to section 2.1.2.
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
10
11
12
8
12(1)
5
10
5
11
(1) Twelve Directors meet the criteria of financial expertise outlined above. The Risk and Audit Committee Report contains details of how its members meet the relevant legal and regulatory requirements
in relation to financial experience.
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Board skills and experience: Climate change
Board members bring experience from a range of sectors, including resources, energy, finance, technology and public policy. The Board also seeks
the input of management and other independent advisers. 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 designed 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.
For more information
refer to section 1.13.7
Board tenure and diversity (as at 30 June 2021)
Tenure
Region of nationality
Gender diversity
0 > 3 years 58%
3 > 6 years 33%
6 > 9 years 0%
9+ years
8%
Australia
42%
Europe/UK 33%
North
America
25%
Female
33%
Female
Male
33%
67%
2.1.8 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.
An evaluation was conducted during the year in accordance with this process. More information is provided below.
Director review
In FY2021, 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.
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 set out in BHP’s governance framework. In addition, the assessment focused on how 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. With the introduction of
virtual Board and Committee meetings (as a consequence of COVID-19 health and safety protocols), the assessment also focused on the effectiveness
of the Board’s virtual interactions.
Lintstock provided feedback received to the Chair, which was then discussed with Directors. Feedback relating to the Chair was discussed with the
Chair by the Senior Independent Director. 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 that it had met its terms of reference in FY2021.
External Board review
The Board conducted an external evaluation in FY2019 using Consilium Board Review, which considered Board, Committee and Chair effectiveness,
and assessed the Directors’ contributions. The review was concluded in FY2020 and the Nomination and Governance Committee considered the
status of implementation of the review findings in FY2021.
In accordance with the UK Code, the Board intends to conduct an external Board review in FY2022.
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2.1.9
Nomination and Governance Committee Report
Ken MacKenzie
Chair, Nomination and Governance Committee
Role and focus
The Nomination and Governance Committee oversees and monitors renewal and succession planning, Board and Director performance evaluation,
Director training and development, and advises and makes recommendations on the Group’s governance practices.
More information on the role and responsibilities of the Nomination and Governance Committee can be found in its terms of reference, which are
available at bhp.com/governance.
Committee activities in FY2021 included:
Succession planning processes
– Implementation of the skills and
experience matrix
– Identification of suitable Non-executive
Director candidates
– Board and Committee succession
– Partnering with search firms regarding
candidate searches
Evaluation and training
– Board evaluation and Director development
Corporate governance practices
– Independence of Non-executive Directors
– 2021 training and development program
– Authorisation of situations of actual or
– Director induction
potential conflict
– Crisis management
Policy on inclusion and diversity
The Board and management believe diversity is required to meet our purpose and strategy, which is outlined in section 1.4. 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 FY2021, we adopted
an Inclusion and Diversity Position Statement, which sets out our diversity policy in relation to the Board, senior management and our workforce, and
our priorities to accelerate the development of a more inclusive work environment and enhanced overall workplace diversity. The Inclusion and Diversity
Position Statement is available at bhp.com/careers/diversity-and-inclusion/our-approach/ and is summarised in section 1.12.
As described in our Inclusion and Diversity Position Statement, our aspiration is to achieve gender balance on our Board, among our senior executives
and across our workforce by CY2025. Our aspiration includes a fixed target of maintaining the level of Board diversity above 33 per cent, which
we achieved last year and we continue to maintain. We therefore satisfy the guidance of having at least 30 per cent of Directors of each gender in
accordance with the ASX Fourth Edition and the target set by the Hampton-Alexander Review in the United Kingdom for all FTSE 100 Boards to have
at least 33 per cent female representation by the end of CY2020.
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. Our Board meets the target of having ‘at least one Director of colour by 2021’ as recommended by the Parker Review.
In accordance with the UK Code, our gender diversity among senior management (defined as the ELT plus the Company Secretary and their direct
reports) was 36 per cent.
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 FY2021 measurable objectives and our employee profile more generally
refer to section 1.12
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Board appointments and succession planning
When considering new appointments, the Board’s Nomination and Governance Committee takes the following approach:
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. Succession plans consider both unforeseen departures as well as the orderly replacement
of current members of the Board. When considering succession planning and a diverse pipeline of talent, 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 2.1.7.
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, including the diversity of the pipeline.
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. Appropriate checks are undertaken before appointing a member of the ELT. BHP has a written agreement
with each ELT member setting out the terms of their appointment. For more information about CEO and ELT succession, refer to section 2.1.5.
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 FY2021. These recruitment specialists do not have any connection with the Group or any Director.
Director induction, training and development
Upon appointment, each new Non-executive Director undertakes an induction program tailored to their needs.
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.
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Training and development in FY2021
Area
Purpose
Briefings and
development
sessions
Site visits
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.
Briefings on the assets, operations and other
relevant issues and meetings with key personnel.
During FY2021, a number of site visits were held
virtually due to COVID-19 travel restrictions, but where
possible, some Directors also participated in physical
site visits.
FY2021 activity
– Strategy day with the ELT
– Strategy presentation from external presenter
– Climate change sessions
– Innovation and Technology
– Olympic Dam
– Legacy assets
– Jansen Potash Project
– Petroleum Offshore
– Nickel West
– Western Australia Iron Ore
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 development and
Committee composition. These processes are all relevant to the Nomination and Governance Committee’s role in identifying appropriate Non-
executive Director candidates.
Independence
The Board is committed to ensuring a majority of Directors are independent.
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. The Board confirms that it considers all of the
current Non-executive Directors, including the Chair, to be independent of management and free from any business relationship or other circumstance
that could materially interfere with the exercise of objective, unfettered or independent judgement.
A copy of the policy on Independence of Directors is available at
bhp.com/governance
Tenure
At the end of FY2021, Malcolm Broomhead, who was appointed in March 2010, had served on the Board for more than nine years. In light of the
retirement of both Susan Kilsby and Anita Frew at the end of the 2021 AGMs, the Board has requested that Mr Broomhead seek re-election at the 2021
AGMs for a further year. Mr Broomhead would step down from the Sustainability Committee and Nomination and Governance Committee following the
AGMs but remain on the Board. The Board supports Mr Broomhead’s re-election given his extensive knowledge of BHP and the mining and resources
sector and the proposed corporate transaction that the Group is undertaking at this time. The Board does not believe his tenure interferes with his
ability to act in the best interests of BHP. The Board believes he continues to demonstrate strong independence of character and judgement, and has
not formed associations with management (or others) that might compromise his ability to exercise independent judgement or act in the best interests
of the Group. The Board has been undergoing a process of renewal and, recognising the importance of continuity on the Board and Mr Broomhead’s
expertise, considers his continued service to be in the best interests of shareholders.
Relationships and associations
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 2.1.2 and in past Annual Reports. The Board has assessed the relationships between the Group and the
companies in which our Directors 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.
For example, Mr Broomhead was a Director of Orica Limited (a company BHP has commercial dealings with) during FY2021, and Mr Cockerill was also
a Director of Orica until August 2019. 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 (and Mr Broomhead remains during FY2021) able to apply objective,
unfettered and independent judgement and to act in the best interests of BHP.
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.
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2.1.10
Risk and Audit Committee Report
Terry Bowen
Chair, Risk and Audit Committee
Role and focus
The Risk and Audit Committee (RAC) oversees and monitors financial reporting, other periodic reporting, external and internal audit, capital
management, and risk (including effectiveness of the systems of risk management and internal control).
More information on the role and responsibilities of the Risk and Audit Committee can be found in its terms of reference, which are available
at bhp.com/governance.
UK committee membership requirements
The Board is satisfied that Terry Bowen meets the criteria for recent and relevant financial experience as outlined in the UK Code, the competence in
accounting and auditing as required by the Financial Conduct Authority (FCA) Disclosure Guidance 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.
The Board is satisfied that the members of the Committee as a whole have competence relevant to the mining sector for the purposes of the FCA
Disclosure Guidance and Transparency Rules. The Board is also satisfied that the Committee meets the independence criteria under Rule 10A-3 of the
Exchange Act. For information on Committee members’ qualifications, which include competence relevant to the mining sector, refer to section 2.1.2.
Committee activities in FY2021 included:
Integrity of Financial
Statements and
funding matters
– Accounting matters
for consideration,
materiality limits,
half-year and full-
year results
– Sarbanes-Oxley
Act of 2002 (SOX)
compliance
– Financial governance
procedures
– Funding, loans and
guarantees updates
External auditor
and integrity of the
audit process
– External audit report
– Management and
external auditor
closed sessions
– Audit plan, review
of performance and
quality of service
– External auditor
independence and
non-audit services
Other governance
matters
– Samarco dam failure
provision, closure and
rehabilitation provision
– Disputes and
litigation updates
– Closure, rehabilitation
and reserves and
resources updates
Risks of climate
change and its
potential impacts on
measurement in the
financial statements
– Climate change
financial
statement disclosures
– Climate change
considerations in
key judgements
and estimates
– Consistency between
narrative reporting
on climate risks with
the accounting
assumptions
Effectiveness
of systems of
internal control and
risk management
– Material risk reports
and consideration
of approach to
emerging risks
– Group risk profile
and monitoring
performance against
risk appetite through
key risk indicators
– Internal audit reports,
annual internal audit
plan and review of
performance of the
Internal Audit and
Advisory team
– Ethics and
Investigations
reports including on
sexual harassment,
compliance reports,
and grievance
and investigation
processes
Fair, balanced and understandable
The RAC confirmed its view to the Board that BHP’s 2021 Annual Report 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 2.3.
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.
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Annual Report 2021
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CEO and CFO assurance
For the FY2021 full year and half year, the CEO and CFO have certified that in their opinion, BHP’s financial records have been properly maintained and
the FY2021 Financial Statements present a true and fair view 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 this opinion was formed on the basis of a sound system of risk management and internal control
and the system is operating efficiently and effectively. The RAC considered these certifications when recommending the Financial Statements to the
Board for approval.
Significant issues
In addition to the Group’s key judgements and estimates disclosed throughout the FY2021 Financial Statements, the Committee also considered the
following significant issues relating to financial reporting:
Divestment of interests in certain of the Group’s assets
The Committee examined management’s review of impairment triggers and potential impairment charges for certain of the Group’s assets that were
subject to divestment processes throughout the year. While the processes were underway, prior to receipt of bids, considerations were consistent with
the approach to the Group’s other long-term assets as presented below.
The Committee concurred with management’s conclusion on significant impairments recognised in relation to New South Wales Energy Coal and
Cerrejón, including associated deferred tax assets.
The Committee also reviewed other potential Financial Statements impacts, including classification and disclosure as assets held for sale and
Discontinued operations.
Conclusions from these reviews are reflected in notes 3 ‘Exceptional items’, 13 ‘Impairment of non-current assets’ and 31 ‘Investments accounted
for using the equity method’ in section 3.
Carrying value of other 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 market conditions for the Group’s commodities, including the impacts of climate change, along with key
assumptions underpinning asset valuations. Assumptions include the most recent short, medium and long-term price forecasts, expected production
volumes and updated development plans, operating and capital costs, discount rates and other market indicators of fair value.
The Committee concurred with management’s conclusion on the significant impairment recognised in relation to the Group’s Potash assets, including
associated deferred tax assets, and that no impairment reversals were appropriate.
The results of the Olympic Dam impairment assessment were reviewed and the Committee concurred with management that no impairment
was required.
Conclusions from these reviews are reflected in note 13 ‘Impairment of non-current assets’ in section 3.
Climate change in financial reporting
While the Group’s understanding of evolving climate risks continues to develop, the potential financial implications, along with appropriate disclosure,
are an area of focus for the Committee.
The Committee was informed of and acknowledged global trends, including increased disclosure within financial statements and more broadly.
Specifically, the Committee considered a request from the Institutional Investors Group on Climate Change (IIGCC) for Paris-aligned financial
statements and disclosure of material climate risks and the potential impacts to financial statements.
The Committee considered financial statement disclosures and how the Group’s greenhouse gas emissions reduction commitments and climate
change scenarios, including those aligned with the Paris Agreement goals, are reflected in the Group’s key judgements and estimates used in the
preparation of the Group’s FY2021 finance statements. This included consideration of portfolio impacts, demand for the Group’s commodities and
associated price outlooks, costs of decarbonisation and Scope 3 emissions considerations. Specific focus was also given to the potential impact
on impairment assessments and the expected timing and cost of closure activities.
The Committee reviewed the approach proposed by management to provide additional disclosure in relation to the potential financial statement
impacts of climate change, including under a Paris-aligned 1.5°C scenario.
The Committee, recognising the evolving nature of climate change risks and responses, concluded that climate change has been appropriately
considered by management in key judgements and estimates and concurred with the disclosures proposed by management.
For more information
refer to the Basis of Preparation in section 3 and the Climate change risk factor in section 1.16
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Samarco dam failure
On 5 November 2015, the Samarco Mineração S.A (Samarco) iron ore operation in Minas Gerais, Brazil experienced a tailings dam failure that resulted in
a release of mine tailings, flooding the community of Bento Rodrigues and impacting other communities downstream. Samarco is jointly owned by BHP
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,
judicial reorganisation 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 2021.
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, including judicial reorganisation, 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 3
Closure and rehabilitation provisions
Determining the closure and rehabilitation provision is a complex area requiring significant judgement and estimates, particularly given the timing and
quantum of future costs, the unique nature of each site and the long timescales involved.
The Committee considered the various changes in estimates for closure and rehabilitation provisions recognised during the year, including a reduction
to the discount rates applied.
Specific consideration was given to ongoing and recently completed study, survey and characterisation activity, changes to current cost estimates and
the expected timing of closure activities. 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 15 ‘Closure and rehabilitation provisions’ in section 3
Impact of amended accounting standards and changes to accounting policies
The Group implemented the IFRS Interpretations Committee agenda decision ‘Income Taxes – Multiple tax consequences of recovering an asset’ on
a retrospective basis. The Committee reviewed management’s analysis of the accounting outcomes, including the recognition of goodwill relating to
Olympic Dam.
In addition, the Committee considered and approved the early adoption, for FY2021, of further amendments to certain accounting standards relating
to interest rate benchmark reforms.
For more information
refer to note 39 ‘New and amended accounting standards and interpretations and changes to accounting policies’ in section 3
Impact of COVID-19
The Committee considered the impacts of the global COVID-19 pandemic on the Group’s FY2021 financial reporting, including the recognition and
disclosure of costs incurred by the Group that are directly attributable to COVID-19.
The Committee concluded that the disclosure of costs directly attributable to COVID-19 was appropriate.
For more information
refer to note 3 ‘Exceptional items’ in section 3
BHP
Annual Report 2021
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United Kingdom (UK) Financial Reporting Council (FRC) reviews
Audit Quality Review of the audit of the Company’s 2019 Financial Statements
During 2020, the Audit Quality Review Team (AQRT) from the UK FRC undertook a review of KPMG LLP’s (KPMG) audit of BHP Group Plc’s financial
statements for the year ended 30 June 2019. KPMG were the auditors of BHP Group prior to Ernst & Young (EY). There were no key findings arising
from the AQRT’s review. The review findings, which were not considered to be significant, were discussed with KPMG. The company made EY aware of
the actions that KPMG had proposed to implement had they still been the auditors of the company and if similar circumstances were to prevail.
Review of BHP Group’s Annual Report and Accounts
The UK FRC carried out a review of the Group’s published Annual Report and Accounts for the year ended 30 June 2020. This review considered
compliance with reporting requirements and, given the inherent limitations of the review, provided no assurance that the Annual Report and Accounts
were correct in all material respects. There were no exchanges of substantive correspondence as a result of this review and the FRC confirmed, based
on the review performed, it had no questions or queries that it wished to raise.
External Auditor
The RAC manages the relationship with the External Auditor on behalf of the Board. It considers the independence and reappointment of the External
Auditor each year, as well as remuneration and other terms of engagement and makes a recommendation to the Board.
Audit tender and transition
BHP confirms that during FY2021, 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 to replace KPMG, resulting in the appointment of EY in 2019.
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.
Pre-approved services
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, which reflects the requirements for External Auditors contained in the Ethical
Standards published by the UK Financial Reporting Council.
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.
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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 2021 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 FY2021 for audit and other services were US$15.5 million, of which 77 per cent comprised audit fees
(including in relation to SOX matters), 11 per cent for audit-related fees and 12 per cent for all other fees. No fees were paid in relation to tax services.
Details of the fees paid are set out in note 36 ‘Auditor’s remuneration’ in section 3.
Our policy on Provision of Audit and Other Services by the External Auditor is available at
bhp.com/governance
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 FY2021, resulting in refinements to BHP’s Risk Framework. For more information, refer to section 1.9.
Internal Audit
The Internal Audit function is carried out by the Internal Audit and Advisory team (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.
During FY2021, the Group Assurance Officer reported directly to the RAC, and functional oversight of IAA was provided by the Chief Legal,
Governance and 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 (including procedures, processes and systems for, among other
things, budgeting and forecasting, provisions, financial controls, financial reporting and reporting of reserves and resources, compliance, preventing
fraud and serious breaches of business conduct and whistle-blowing procedures, protecting information and data systems, and operational
effectiveness of the Business RAC structures). Any material breaches of Our Code of Conduct, 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
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During FY2021, 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.
Having carried out a review during FY2021, 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. 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 was 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. Based on this evaluation, management concluded that internal control
over financial reporting was effective as at 30 June 2021. There were no material weaknesses in BHP’s internal controls over financial reporting
identified by management as at 30 June 2021.
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 Securities Exchange
Commission (SEC).
There were no changes in our internal control over financial reporting during FY2021 that materially affected or were reasonably likely to materially
affect our internal control over financial reporting. This included COVID-19, which only had a minor impact on internal controls over financial reporting
in relation to the number and nature of controls that were impacted.
During FY2021, 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 2021. 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. 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)
concluded that, as at 30 June 2021, 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.
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2.1.11
Sustainability Committee Report
John Mogford
Chair, Sustainability Committee
Role and focus
The Sustainability Committee oversees and monitors material HSEC matters, including the adequacy of the Group’s HSEC Framework and HSEC
Management Systems, and the Group’s HSEC reporting and performance. This includes consideration of existing HSEC issues, such as climate,
safety and Indigenous and human rights, as well as emerging areas of HSEC risk for the Group.
More information on the role and responsibilities of the Sustainability Committee can be found in its terms of reference, which are available at
bhp.com/governance.
HSEC Framework
The Group’s HSEC Framework consists of:
– the Sustainability Committee, which is responsible for assisting the Board in overseeing the adequacy of the Group’s HSEC Framework and HSEC
Management Systems (among other things)
– the Board Governance Document, which establishes the remit of the Board and delegates authority to the CEO, including in respect of the HSEC
Management Systems
– the HSEC Management Systems, established by management in accordance with the CEO’s delegated authority. The HSEC Management Systems
provide 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 1.13 and section 2.2.
Committee activities in FY2021 included:
Assurance and adequacy of
HSEC Framework and HSEC
Management Systems
– Key HSEC risks, including
tailings storage facility failure,
climate change-related
risks, fatalities, aviation and
underground fire or explosion
– Asset deep dives providing
updates on key HSEC matters
and HSEC performance
– Audit planning and reporting
on HSEC risks and processes
– Review of the HSE function
and Group HSE Officer
Compliance and reporting
– Compliance with HSEC legal
and regulatory requirements
and updates on key legal and
regulatory changes
– Sustainability reporting,
including consideration of
processes for preparation and
assurance provided by EY
– Modern Slavery Statement
– Social value metrics
Performance
– Performance of BHP on HSEC
matters, including cultural
heritage, community relations,
emissions targets, closure and
rehabilitation, biodiversity, and
human rights
– Monitoring against the
FY2018–FY2022 HSEC
performance targets
and goals
– Performance outcomes
under the HSEC performance
targets and setting targets
for FY2021
Other governance matters
– Training and development of
Committee members
– Updates to the Committee’s
terms of reference
Members of the Sustainability Committee also participated in several site visits during FY2021. Where not limited by COVID-19 travel restrictions, these
were in-person site visits, but otherwise were attended virtually. 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.
For information on the key areas of focus for the Committee, management and the HSE and Community functions
refer to section 1.13
Sustainability disclosures
The Sustainability Committee oversees the preparation and presentation of sustainability disclosures by management. This year, BHP has again
included material sustainability content in this Annual Report. The Sustainability Committee reviewed and recommended to the Board the approval of
these disclosures in section 1.12 and 1.13, along with the FY2021 Modern Slavery Statement. 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 environmental and social risks and how we manage or intend to manage those risks
refer to sections 1.9 and 1.16
BHP
Annual Report 2021
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Financial StatementsAdditional Information34Strategic Report12Governance 2.1 Corporate Governance Statement continued
2.1.12
Remuneration Committee Report
Christine O’Reilly
Chair, Remuneration Committee
Role and focus
The Remuneration Committee oversees and monitors remuneration policy and practices (including the adoption of incentive plans and levels of reward
for the CEO and other ELT members), compliance with applicable requirements associated with remuneration matters and the review, at least annually,
of remuneration by gender.
More information on the role and responsibilities of the Remuneration Committee can be found in its terms of reference, which are available at
bhp.com/governance.
UK committee membership requirements
Christine O’Reilly was appointed Chair of the Remuneration Committee with effect from 1 March 2021. She served on the Committee from her
appointment to the Board in October 2020, which provided an appropriate transition to become Chair. She has relevant skills and experience,
including her former appointment as a member of the Human Resources and Remuneration Committee of CSL Limited. She therefore satisfies
the position in the UK Code that the incoming Chair should have served on a remuneration committee for at least 12 months.
Committee activities in FY2021 included:
Remuneration of the ELT and the Board
– Remuneration of the CEO, other
ELT members and the Group
Company Secretary
– Remuneration arrangements for new
ELT members
– The impact of the COVID-19 pandemic
on remuneration
– Performance measures, performance
levels and incentive award outcomes
– Long-Term Incentive Plan sector peer
group review
– Chair fees
Other remuneration matters
– Workforce remuneration, policies, practices
and engagement
– Remuneration by gender
– Annual remuneration report
– Shareholder engagement
– Corporate Governance Code
provisions compliance
– Shareplus enrolment update
Other
– Induction, training and
development program
– Board Committee procedures,
including closed sessions
– Update of the Committee terms
of reference
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.
For more information on the Committee’s work
refer to the Remuneration Report in section 2.2
2.1.13 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 1.9
2.1.14 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 (threats and opportunities) arising from changes in our business
environment are regularly reviewed by the ELT and discussed by the Board.
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 was conducted for all members of the ELT during FY2021. 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.
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CEO and management committee responsibilities
– Holds delegated authority from the Board
to achieve the corporate purpose
– Authority extends to all matters except
those reserved for the Board’s decision
Chief Executive Officer
– CEO has delegated authority to management
committees and individual members of
management – but CEO remains accountable
to the Board for all authority delegated to him
Executive Leadership Team
– Established by the CEO, the ELT
– Purpose is to provide leadership to BHP,
– Is a forum to debate high-level matters
has responsibility for the day-to-day
management of BHP
determining its priorities and the way it is
to operate, thereby assisting the CEO in
pursuing the corporate purpose
important to BHP and ensure consistent
developments of BHP’s strategy
Financial Risk Management
Committee
Group Investment Review
Committee
Disclosure
Committee
Purpose is to assist the CEO to monitor
and oversee the management of the
financial risks faced by BHP, including:
– commodity price risk
– counterparty credit risk
– currency risk
– financing risk
– interest rate risk
– insurance
Purpose is to assist the CEO in assessing
investment decisions using a transparent and
rigorous governance process, such that:
– investments are aligned with BHP’s purpose,
strategy and Our 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 to 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
2.1.15 Our conduct
Our Code of Conduct and Our Charter
Our Code of Conduct (Our Code) is based on Our Charter values. Our Code sets out standards of behaviour for our people and includes our policies
on speaking up, anti-bribery and corruption.
Our Code and Our Charter 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 query about Our Code, or make a report if they feel Our Code has been breached.
EthicsPoint is our system for reporting misconduct and can be used by employees, contractors and external stakeholders, including members
of the public to raise concerns about misconduct that has either happened to them or they have witnessed. Reports can be raised in EthicsPoint
directly, via an employee or contractor’s line leader 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. The reporting and investigations processes are transparent and summary information is accessible to
all BHP employees via BHP’s intranet.
All reports received in EthicsPoint are reviewed and categorised by the Ethics Team. Once categorised, reports are assigned in accordance with internal
policy and processes to an investigator, line leader or appropriate team for resolution. The processes for reporting and investigation are transparent and
BHP employees and contractors can access this information via BHP’s intranet. External stakeholders can access this via the BHP website.
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 2.1.5. 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.
BHP
Annual Report 2021
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Financial StatementsAdditional Information34Strategic Report12Governance 2.1 Corporate Governance Statement continued
2.1.16 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.
More information about these verification processes can be found in the Periodic Disclosure – Disclosure Controls document available at
bhp.com/governance
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. In addition, 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.
In response to COVID-19, we have introduced extra monitoring and disclosure controls. These have included: increasing the regularity and breadth
of information gathered from management (including the 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 enables
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
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.
2.1.17 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 asx.com.au) require the Board to consider the
application of the relevant corporate governance principles, while recognising departures from those principles are appropriate in some circumstances.
The Board considers that during FY2021 it applied the Principles and complied with the provisions set out in the 2018 edition of the UK Code and
complied with the ASX Fourth Edition, with no exceptions.
Our Appendix 4G, which summarises our compliance with the ASX Fourth 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. However, the RAC does make recommendations to the Board
on these matters, which are reported to shareholders.
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Compliance with the UK Code
This table describes how BHP has applied the Principles of the UK Code
Board leadership
and our purpose
Long-term sustainable success – we believe we put the long-term sustainable success of BHP
at the centre of what we do.
Purpose, values, strategy and culture – we renewed our purpose in FY2019 to better capture the
aspirations of all our stakeholders.
Performance measurement and control framework.
Responsibilities to shareholders and stakeholders.
Workforce policies and practices.
Composition,
succession
and evaluation
Appointments and succession planning – 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.
Skills matrix – we have an appropriate mix of skills, experience and knowledge on the Board and
in 2018 revised our skills matrix (section 2.1.7). Section 2.1.9 provides information on tenure and
Board renewal.
Director review – reviews are undertaken on 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.
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.
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.
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.
More information
in section
1.6 and 1.14
1.6, 1.14, 1.13,
2.1.5 and 2.1.7
1.13.3 and 4.8
1.14, 1.12 and 2.1.6
1.6.2, 1.14, 1.12 and 2.1.6
2.1.9
2.1.7 and 2.1.9
2.1.8
2.1.3
2.1.3
2.1.2 and 2.1.7
Time and resources – the Board ensures it has the necessary time, resources, policies and processes
in place as part of its evaluation process.
2.1.3 and 2.1.8
Audit Risk and
Internal Control
Internal and external audit independence – we understand the importance of ensuring these lines
of defence remain independent.
Fair balanced and understandable – the Board presents a fair balanced and understandable
assessment of BHP’s position and prospects.
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.
Remuneration
Policies and practices – remuneration is designed to support our strategy and long-term
sustainable success.
Formal and transparent procedure – we have formal and transparent procedures in place,
and routinely engage with investors for their feedback.
Use of discretion – we have used discretion to adjust the formulaic remuneration outcomes.
2.1.10
2.1.10
1.9, 2.1.5,
2.1.10 and 2.1.11
2.2
2.2 and
‘Shareholder
engagement’ in
2.1.6
2.2
2.1.18 Additional UK disclosure
The information specified in the UK FCA Disclosure Guidance and Transparency Rules, DTR 7.2.6, is located elsewhere in this Annual Report.
The Directors’ Report in section 2.3 provides cross-references to where the information is located.
This Corporate Governance Statement was current and approved by the Board on 2 September 2021 and signed on its behalf by:
Ken MacKenzie
Chair
2 September 2021
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Financial StatementsAdditional Information34Strategic Report12Governance 2.2 Remuneration Report
In this section:
2.2.1
Annual statement by the Remuneration Committee Chair
2.2.2
Remuneration policy report
Remuneration policy for the Executive Director
Remuneration policy for Non-executive Directors
2.2.3
Annual report on remuneration
Remuneration for the Executive Directors (the CEOs)
Remuneration for other Executive KMP (excluding the CEO)
Remuneration for Non-executive Directors
Remuneration governance
Other statutory disclosures
99
103
103
107
108
108
115
117
118
119
This Remuneration Report describes the remuneration policies, practices, outcomes and governance for the KMP of BHP.
BHP’s DLC structure means that we are subject to remuneration disclosure requirements in 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 2.2.2. 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 FY2021 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 FY2021, unless stated otherwise:
– Mike Henry, CEO and Executive Director
– Edgar Basto, President Minerals Australia
– Peter Beaven, Chief Financial Officer (to 30 November 2020)
– David Lamont, Chief Financial Officer (from 1 December 2020)
– Daniel Malchuk, President Minerals Americas (to 31 October 2020)
– Geraldine Slattery, President Petroleum
– Ragnar Udd, President Minerals Americas (from 1 November 2020)
– Non-executive Directors – see ‘Remuneration for Non-executive Directors’ in section 2.2.3 for details of the Non-executive Directors, including
dates of appointment or cessation (where relevant)
Abbreviation
Item
Abbreviation
Item
AGM
CDP
CEO
DEP
DLC
ELT
GHG
HSEC
IFRS
Annual General Meeting
Cash and Deferred Plan
Chief Executive Officer
Dividend Equivalent Payment
Dual Listed Company
Executive Leadership Team
Greenhouse Gas
Health, Safety, Environment and Community
International Financial Reporting Standards
KMP
KPI
LTIP
MAP
MSR
ROCE
STIP
TSR
Key Management Personnel
Key Performance Indicator
Long-Term Incentive Plan
Management Award Plan
Minimum Shareholding Requirement
Return on Capital Employed
Short-Term Incentive Plan
Total Shareholder Return
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2.2.1
Annual statement by the Remuneration Committee Chair
Christine O’Reilly
Chair, Remuneration Committee
Dear Shareholders,
I am pleased to introduce BHP’s Remuneration Report for the financial year to 30 June 2021, my first as Chair of BHP’s Remuneration Committee.
During FY2021, the Committee continued its focus on achieving remuneration outcomes that fairly reflect the performance of BHP and the contribution
of our employees, and which are aligned to the interests of shareholders and other key stakeholders.
During FY2021, COVID-19 has remained a significant source of uncertainty across the world. While the emergence and deployment of successful
vaccines is reason for optimism, the pandemic continues to have widespread impacts on lives, society and the global economy. In the face of this,
BHP employees have operated in line with our purpose and values, working effectively to keep the business performing strongly, and keeping each
other safe.
Our approach
Our Charter sets out our values, placing health and safety first, upon which the Remuneration Committee places great weight in the determination of
performance-based remuneration outcomes for BHP executives. Our Charter also sets out our purpose, our strategy and how we measure success.
The Committee is guided by Our Charter and aims to support our executives in taking a long-term approach to decision-making in order to build a
sustainable and value-adding business.
The Committee is focused 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 in different geographies critical to delivering the best outcomes for all BHP stakeholders. In addition, as BHP is a
global organisation, the Committee is cognisant of the need to navigate the priorities and expectations of multiple jurisdictions.
Our policy and approach to remuneration remains unchanged; however, we continue to strive for simplification in our programs. We were pleased
to again receive strong support for our remuneration policy at the 2020 AGMs, with over 95 per cent voting ‘for’ the Remuneration Report, and, on
average, over 96 per cent support over the past five years. The Committee and the Board continue to incorporate shareholder feedback into our
deliberations on pay to ensure it supports BHP’s strategy.
Remuneration policy
FY2021 represents the second year of application of the revised remuneration policy, which was approved by shareholders at the 2019 AGMs with
almost 94 per cent of votes in favour. We believe the policy is serving stakeholders well. The key changes approved in 2019 for the CEO, which took
effect from 1 July 2019, 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 rebalancing to a CDP award 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
– this rebalancing from LTIP to CDP reduced the leverage in the overall pay arrangements resulting in a 12 per cent reduction in the maximum
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 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 was reduced by 12 per cent and overall
target remuneration reduced by 4 per cent
– the introduction of a two-year post-retirement shareholding requirement for the CEO
A consequence of the transition to the revised remuneration policy is that the FY2021 single total figure of remuneration for the CEO under UK
requirements requires disclosure of the total amount of the CDP award earned during FY2021 (i.e. irrespective that some elements of the CDP award
are deferred and five-year deferred shares were not a feature of the former STIP), together with the full amount of the pre-existing LTIP award vesting
at the end of FY2021, which was granted in 2016 when the CEO was President Operations, Minerals Australia (i.e. when the LTIP award size was double
the current grant size). This legacy consequence of remuneration policy transition will continue each year through to FY2024.
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. Importantly, a significant portion of the CEO’s target remuneration package can only be realised as actual remuneration
if performance targets are met.
In addition, the CEO’s remuneration is deliberately tied to the performance of the business, with the majority of the remuneration package intended
to be delivered in BHP equity, 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.
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Business performance
Given the strong link at BHP between executive remuneration and performance, I am pleased to be able to report BHP has performed strongly across
a wide range of areas in FY2021.
Our people have continued their focus on safety. Our global safety improvement programs are progressing well and our safety leading indicators have
continued a strong positive trend underpinning the current safety performance. We have now had over two and a half years without a fatality at our
operated assets and we continue to focus on fostering a culture of respect and ensuring our workplace is safe at all times.
We have delivered strong underlying operational performance during the year, with record volumes achieved at Western Australia Iron Ore, Goonyella
and Olympic Dam, and Escondida maintained average concentrator throughput at record levels. We successfully achieved first production at four
major development projects: South Flank, Spence Growth Option, Atlantis Phase 3 and Ruby, all of which were delivered on or ahead of schedule and
on budget. We have also progressed significant strategic initiatives during FY2021, including preparing for the investment in Jansen Stage 1, pursuing
a merger of our Petroleum business with Woodside, and unifying our corporate structure.
We have made strong progress on actions required to meet our commitments to reduce operational GHG emissions. We have established significant
renewable power supply agreements for our Kwinana nickel refinery, Queensland Coal operations, and Escondida and Spence copper mines. We have
established emissions reduction partnerships with three major steelmakers in China and Japan whose combined output equates to around 10 per cent
of global steel production. In shipping, we have also taken a number of actions to help reduce emissions in our value chain: awarded the world’s first
liquified natural gas fuelled bulk carriers contract and took part in a successful marine biofuel trial.
With respect to COVID-19, we remain vigilant and will continue with social distancing and hygiene practices, and other additional protocols as
appropriate to protect our workforce and communities. Our Australian operations have effectively managed the rapidly changing environment relating
to interstate travel and border access. In Chile, the operating environment is expected to continue to be challenging. The Remuneration Committee
is proud of the way BHP’s employees have continued to collaborate to solve problems and support each other and their communities.
Despite the challenges the COVID-19 pandemic has presented, in FY2021 BHP has again not needed to furlough any employees without pay, did
not seek any government assistance, and did not raise additional equity. In addition, BHP’s strong, safe operational performance through this year,
together with strong profitability, enabled the Board to announce record dividends for FY2021. This continues the delivery of strong and consistent
returns to shareholders.
Activities of the Committee
I would like to thank all members of the Remuneration Committee for their contributions during the past year. In particular, I would like to express my
appreciation to my predecessor as Chair, Susan Kilsby, who has provided strong leadership and guidance during her term, as BHP navigated one of
the most tumultuous periods in our history.
A key element of the Committee’s work during the year was the remuneration implications of changes to the BHP ELT, with a number of appointments
and departures taking place. David Lamont, Edgar Basto and Ragnar Udd join Mike Henry and Geraldine Slattery as Executive KMP for the purposes
of this Remuneration Report, and Peter Beaven and Daniel Malchuk departed BHP having been Executive KMP during FY2021. Information on
remuneration arrangements for David, Edgar and Ragnar and the departure arrangements for Peter and Daniel is set out in ‘Arrangements for
KMP leaving and joining the Group’ and ‘Executive KMP remuneration table’ in section 2.2.3.
Other key decisions and activities of the Committee during FY2021 included:
– considering remuneration for members of the ELT and the Group Company Secretary
– setting targets for and reviewing outcomes against performance measures and conditions of relevant incentive plans, including the Committee
considering its discretion over FY2021 plan outcomes
– reviewing the fee for the BHP Chair, which remains unchanged
– commencing early preparations for the re-approval of the remuneration policy at the 2022 AGMs
– 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
FY2021 CDP
The scorecard against which Mike Henry’s annual performance as BHP’s CEO is assessed comprises stretching performance measures, including
HSEC, financial and individual performance elements. For FY2021, the Remuneration Committee has assessed the CEO’s performance and
determined a CDP outcome of 115 per cent, against the target of 100 per cent (and the maximum of 150 per cent).
These outcomes took into account BHP’s strong HSEC performance during the year, with no fatalities recorded, and good progress against our Fatality
Elimination Program. We also saw positive progress against our climate change targets, which were expanded and strengthened for FY2021 from prior
years, and our progress in the management of priority tailings storage facilities was pleasing.
As previously mentioned, Our Charter sets out our values, placing health and safety first, upon which the Remuneration Committee places great weight
in determining performance-based remuneration outcomes for BHP executives. Good progress has been made at BHP through significant efforts since
2018 to address sexual assault and sexual harassment in the workplace, and completion of work to implement controls has been incorporated into the
FY2022 CDP HSEC scorecard. The Committee considers that the efforts to address the risk of sexual assault and sexual harassment could have been
further accelerated through stronger coordination of work streams and integrated planning. Accordingly, the Committee has exercised its discretion to
make a downwards adjustment to the HSEC outcome of the CDP scorecard by 10 per cent from an initial 33 per cent to a final outcome of 30 per cent
out of a target of 25 per cent. This downwards adjustment was applied to the CEO and all other ELT members.
Financial and operating performance was strong, even after fully eliminating the very positive impacts of commodity prices during the year,
particularly for iron ore. Accordingly, performance was better than the stretching targets set at the commencement of the year.
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While the COVID-19 pandemic continued to impact BHP, society and the global economy, the Group maintained continuity of operations while
keeping employees healthy and safe. Despite this, as occurred in FY2020, there were costs and other impacts of COVID-19 to BHP’s financial results for
FY2021. The direct costs have been recorded as an exceptional item in the Financial Statements, as they were in FY2020. Nevertheless, the Committee
concluded that, to the extent the COVID-19 related costs were higher than those included in the approved budget, they 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 CDP outcome for the financial
measure was 60 per cent out of a target of 50 per cent.
The Committee also considered Mike’s performance against his individual objectives. These included 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). The Committee considered Mike’s performance against his individual
objectives to be in line with the target of 25 per cent.
While the CEO’s CDP scorecard outcome was determined at 115 per cent of target, the CDP scorecard outcomes for other Executive KMP were also
on average ahead of target. Likewise, the short-term incentive pool applicable to the majority of BHP employees below the ELT level was above target.
These outcomes were considered appropriate and due recognition, given the excellent performance across BHP’s whole workforce in the face of the
continuing COVID-19 pandemic, where strong safety performance and operational continuity were achieved during FY2021.
2016 LTIP award
The vesting outcome for the 2016 LTIP award against the relative TSR performance conditions was 100 per cent. BHP outperformed both the sector
peer group and the MSCI World Index significantly. This 100 per cent level of vesting is aligned with the projected vesting outcome communicated
to shareholders in the 2019 Remuneration Report at the time of the changes to our remuneration policy, which were approved by shareholders at
the 2019 AGMs, and is set out in the chart below.
LTIP vesting
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0
%
0
0
1
%
0
0
1
%
0
0
1
%
0
0
1
%
5
3
–
%
5
6
%
8
5
%
0
0
1
%
0
0
1
%
0
7
%
8
4
2009
Vesting year
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
Actual vesting Discretion used Projected vesting
%
0
%
0
%
0
%
0
%
0
As shareholders will recall, one of the key elements of our revised remuneration policy was to reduce the weighting of future LTIP grants as part of the
overall CEO remuneration package; however, pre-existing grants would stay on foot and their vesting would be determined with existing service and
performance conditions.
The Committee is conscious that the granting of the 2016 LTIP awards and the early part of the five-year performance period coincided with a period
of lower share prices, driven in part by the Samarco dam failure having occurred on 5 November 2015.
At the time of the grant of the 2016 LTIP award, the Committee sought to ensure the Samarco dam failure did not result in an inappropriate LTIP award
size due to the lower share price, and reduced the number of awards by 26 per cent from that which would have resulted from the standard grant
size calculation. The Committee has reviewed this approach and concluded it was appropriate. In reaching this conclusion, the Committee noted
the positive feedback received from shareholders and other investor groups in 2016 on the approach adopted.
Having considered the LTIP grant size, the Committee undertook a further exercise to satisfy itself that the TSR performance, which formulaically would
result in 100 per cent vesting, had not been inappropriately enhanced by the starting position of the performance period being lower as a consequence
of a fall in share price following the Samarco dam failure. This analysis included estimating and removing the impact of the dam failure from the start
of the performance period (i.e. removing the impact this would have otherwise had on the TSR outcome due to the lower starting position), reducing
the TSR outcome for estimated payments in relation to the Samarco dam failure that may take place beyond the end of the performance period and
examining the construct of the comparator group against which TSR performance is measured.
While this analysis uses inputs and assumptions that are theoretical, the Committee concluded the analysis was sufficiently robust to provide
confidence that the underlying TSR performance was sufficient to support the formulaic vesting of the 2016 LTIP award at 100 per cent.
The Committee notes the value of the vested 2016 LTIP award is higher than the value of the award at the time it was granted. With the share price
having risen appreciably during the five-year period and strong dividends, 36 per cent of the value realised is the value at grant time and 64 per cent
of the value realised is due to share price appreciation and dividends. This value increment due to share price appreciation and dividends is consistent
with the experience of shareholders over the period.
Consistent with prior practice, the Board and Committee has also conducted a holistic review of business performance over the five years since grant
to ensure this level of vesting was appropriate. More information on the 2016 LTIP vesting outcome, including the five-year holistic business review
covering HSEC performance, profitability, cash flow, balance sheet health, returns to shareholders, corporate governance and conduct, is included
in ‘LTIP performance outcomes’ and ‘Overarching discretion and vesting underpin’ in section 2.2.3.
BHP
Annual Report 2021
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Financial StatementsAdditional Information34Strategic Report12Governance 2.2 Remuneration Report continued
More information on the overall remuneration outcomes for the CEO for the year, and how the outcomes are aligned to performance during FY2021,
is provided in ‘Single total figure of remuneration’ in section 2.2.3. Having considered the overall remuneration outcomes for the CEO carefully, as
set out above and in section 2.2.3, the Committee concluded it was a fair reflection of performance and the experience of shareholders, and the
application of any downwards discretion was not warranted. As at the date of this Report, the CEO’s BHP shareholding is in excess of his minimum
shareholding requirement of five times pre-tax base salary.
FY2022 remuneration
For FY2022, the Committee determined that the CEO’s base salary remains unchanged at US$1.700 million per annum, as it was at the time of his
appointment at the beginning of 2020. In addition, the other components of his total target remuneration (pension contributions, benefits, CDP
and LTIP) also remain unchanged. A summary of the CEO’s arrangements for FY2022 is set out below.
Fixed remuneration
CDP
– Base salary US$1.700 million
– Target cash award of 80 per cent of base salary (maximum 120 per cent)
per annum
– Plus two awards of deferred shares each of equivalent value to the cash award,
– No change to base salary
vesting in two and five years respectively
– Pension contribution
10 per cent of base salary
– Three performance categories:
– HSEC – 25 per cent
– Financial – 50 per cent
– Individual – 25 per cent
LTIP
– The normal 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
The Committee has also reviewed the base salaries and total target remuneration packages for other Executive KMP and determined there would
be no changes to base salaries in September 2021, and other aspects of their remuneration arrangements would also 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 FY2022. 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
It is with much pleasure that I note the strong performance by BHP across a wide range of areas during FY2021. We deliberately align our executive
remuneration outcomes to performance – in particular, in our incentive plans where executives’ variable remuneration will reflect circumstances where
shareholders have been rewarded very well, as delivered this year and measured in share price and dividend performance. As such, the remuneration
outcomes for our executives in FY2021 reflect BHP’s strong performance, even after favourable commodity price movements for the year are backed out
in full under the CDP. Given our need to attract, retain and motivate the executives critical to delivering the best outcomes for all BHP stakeholders, this is an
especially pleasing result this year for all concerned, after recent years where the variable pay outcomes have been at the lower end for our executive team.
With the COVID-19 pandemic continuing to impact this year, not only for BHP, but also for many other companies, governments, employees, families
and communities across the world, I note the ongoing challenges. On behalf of the Remuneration Committee, I would like to recognise the hard work,
dedication and sacrifices of our employees. 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 FY2021 are aligned with BHP’s performance and the experience of shareholders, and are
also fair in terms of the wider context of global circumstances. We are confident 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 we are able to do so. As always, we welcome your feedback and comments on any aspect of this Report.
Christine O’Reilly
Chair, Remuneration Committee
2 September 2021
102
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Annual Report 2021
2.2.2 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.
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.
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.
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.
Maximum(1)
8% increase per
annum (annualised)
or inflation if higher
in Australia.
– 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.
A pension
contribution rate
of 10% of base
salary applies.
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.
– 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.
BHP
Annual Report 2021
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Financial StatementsAdditional Information34Strategic Report12Governance
Maximum(1)
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.
Maximum award
Face value of 200%
of base salary(6)
2.2 Remuneration Report continued
Remuneration component
and link to strategy
Operation and performance framework
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
in ‘Malus and clawback’ in this section 2.2.2.
Relative TSR performance condition
– The LTIP award is conditional on achieving five-year relative TSR(3) performance conditions as set
out below.
– The relevant comparator group(s) and the weighting between relevant comparator group(s) will
be determined by the Committee in relation to each LTIP grant.
Level of performance required for vesting
– Vesting of the award is dependent on BHP’s TSR relative to the TSR of relevant comparator group(s)
over a five-year performance period.
– 25% of the award will vest where BHP’s TSR is equal to the median TSR of the relevant comparator
group(s), as measured over the performance period. Where TSR is below the median, awards will
not vest.
– Vesting occurs on a sliding scale between the median TSR of the relevant comparator group(s) up
to a nominated level of TSR outperformance(4) over the relevant comparator group(s), as determined
by the Committee, above which 100% of the award will vest.
– Where the TSR performance condition is not met, there is no retesting and awards will lapse.
The Committee also retains discretion to lapse any portion or all of the award where it considers
the vesting outcome is not appropriate given Group or individual performance. This is an important
mitigation against the risk of unintended outcomes.
Further performance measures
– The Committee may add further performance conditions, in which case the vesting of a portion
of any LTIP award may instead be linked to performance against the new condition(s). However, the
Committee expects that in the event of introducing an additional performance condition(s), the
weighting on relative TSR would remain the majority weighting.
Delivery of award
– LTIP awards are provided under the LTIP approved by shareholders at the 2013 AGMs.
When considering the value of the award to be provided, the Committee primarily considers the face
value of the award, and also considers its fair value which includes consideration of the performance
conditions.(5)
– LTIP awards consist of rights to receive ordinary BHP shares in the future if the performance and
service conditions are met. Before vesting (or exercise), these rights are not ordinary shares and do
not carry entitlements to ordinary dividends or other shareholder rights; however, a DEP is provided
on vested awards. The Committee has a discretion to settle LTIP awards in cash.
Underpin, malus and clawback
– If the specified performance conditions are satisfied in part or in full, to ensure any vesting of LTIP
awards is underpinned by satisfactory performance through the performance period, the vesting
will be subject to an underpin. This will encompass a holistic review of performance at the end of
the five-year performance period, including a five-year view on HSEC performance, profitability,
cash flow, balance sheet health, returns to shareholders, corporate governance and conduct.
– LTIP awards are subject to malus and clawback as described in ‘Malus and clawback’ in this section 2.2.2.
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.
(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 was 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 were granted in late
CY2020 and will first vest five years later in mid-CY2025. The LTIP grant in late CY2020 was made on the reduced 200 per cent face value basis, with potential vesting five years later 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 policies 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.
104
BHP
Annual Report 2021
Malus and clawback
The CDP, STIP and LTIP 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.
Potential remuneration outcomes
The Remuneration Committee recognises market forces necessarily influence remuneration practices and it strongly believes the fundamental driver of
remuneration outcomes should be business performance. It also believes 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 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 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%
Target
27%
Maximum
17%
18%
18%
36%
19%
36%
29%
2,040
7,514
11,560
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
10,000
11,000
12,000
Total remuneration US$’000
Fixed remuneration CDP (cash) CDP (deferred shares) LTIP
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.
Approach to recruitment and promotion remuneration
The remuneration policy as set out in ‘Components of remuneration’ in this section 2.2.2 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 ‘Components of remuneration’
in this section 2.2.2.
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 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.
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.
BHP
Annual Report 2021
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Financial StatementsAdditional Information34Strategic Report12Governance 2.2 Remuneration Report continued
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.
Leaving reason(2)(3)
Base salary
Pension
contributions
Benefits
Voluntary resignation
Termination for cause
– 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 payment will be made.
– No contributions will
be provided.
– 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.
Death, serious injury,
illness, disability or total and
permanent disablement
– Paid for a period of up to six
months, after which time
employment may cease.
– Paid for a period of up to six
months, after which time
employment may cease.
Cessation of employment as agreed with
the Board(4)
– 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
– May continue to be provided for year
in which employment ceases.
– Accumulated annual leave entitlements
and any statutory payments will be paid.
– May pay repatriation expenses to the
home location where a relocation was
at the request of BHP.
– Any unvested Shareplus matched
shares held will vest in full.
provided 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.
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.
LTIP – unvested
and vested but
unexercised
awards
– No cash award will be paid.
– No cash award will be paid.
– The Committee has
– Unvested CDP/STIP
– Unvested CDP/STIP
deferred shares will lapse.
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
– Vested but unexercised
CDP/STIP awards
remain subject to malus
and clawback.
CDP/STIP awards
remain subject to malus
and clawback.
discretion to pay and/
or award an amount in
respect of the CEO’s
performance for that year.
– Unvested CDP/STIP
deferred shares will vest in
full and, where applicable
become exercisable.
– Vested but unexercised
CDP/STIP deferred shares
will remain exercisable
for the remaining
exercise period.
– Unvested and vested but
unexercised CDP/STIP
awards remain subject to
malus and clawback.
– 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 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 lapse.
– Unvested awards will lapse.
– Unvested awards will vest
– A pro rata portion of unvested
– Vested but unexercised
– Vested but unexercised
in full.
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
– Vested but unexercised
awards remain subject to
malus and clawback.
awards remain subject to
malus and clawback.
– 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 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.
106
BHP
Annual Report 2021
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).
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.
Variable pay
(CDP and LTIP)
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.
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.
8% increase per annum (annualised),
or inflation if higher in the location in
which duties are primarily performed,
on a per-trip basis.
– 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).
– Non-executive Directors are not eligible to participate in any CDP or LTIP
award arrangements.
Up to a limit not exceeding 20%
of fees.
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 on our website. The Board has adopted a policy consistent with the UK
Corporate Governance Code, under which all Non-executive Directors must seek re-election by shareholders annually if they wish to remain on the
Board. As such, no Non-executive Directors seeking re-election have an unexpired term in their letter of appointment. A Non-executive Director may
resign on reasonable notice. No payments are made to Non-executive Directors on loss of office.
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 2021
107
Financial StatementsAdditional Information34Strategic Report12Governance 2.2 Remuneration Report continued
2.2.3 Annual report on remuneration
This section of the Report shows the impact of the remuneration policy in FY2021 and how remuneration outcomes are linked to actual performance.
Remuneration for the Executive Directors (the CEOs)
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’ in section 3.1). The components of
remuneration are detailed in the remuneration policy table in section 2.2.2.
US$(’000)
Mike Henry
Andrew Mackenzie
FY2021
FY2020(5)
FY2020(5)
Base
salary
1,700
850
850
Benefits(1)
Pension(2)
20
6
55
170
85
213
Total
fixed
1,890
941
1,118
CDP(3)
LTIP(4)
Total
variable
Single total
figure
4,692
1,959
1,306
7,939
3,169
–
12,631
5,128
1,306
14,521
6,069
2,424
(1) Includes private family health insurance, spouse business-related travel, car parking and personal tax return preparation in required countries.
(2) Mike Henry’s FY2021 and FY2020 pension contributions were 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 Andrew Mackenzie in FY2020 (until the date he ceased as CEO and Executive Director) were also made in accordance
with the remuneration policy approved by shareholders in 2019 (i.e. based on 25 per cent of base salary). Pension contributions for both were made into an international retirement plan.
(3) FY2021 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. No discretion was applied to STIP awards when determining
vesting of awards in FY2021 or FY2020.
(4) Mike Henry’s LTIP award value for FY2021 is based on the full award he received in 2016 when he was President Operations, Minerals Australia (prior to becoming, and with no proration applied for
time as, CEO and Executive Director). The value is based on 100 per cent of the award vesting, including a DEP amount of US$1.291 million paid in shares. The value delivered through share price
appreciation between the date of grant and the vesting date as prescribed under UK requirements was US$3.800 million. Mike Henry’s LTIP award value for FY2020 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$0.774 million.
(5) 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.
A consequence of the transition to the revised remuneration policy approved by shareholders at the 2019 AGMs which took effect from 1 July 2019,
is that the FY2021 single total figure of remuneration for Mike Henry requires disclosure of the full amount of the CDP award earned during FY2021
(i.e. irrespective that some elements of the CDP award are deferred and five-year deferred shares were not a feature of the former STIP) together
with the full amount of the pre-existing LTIP award vesting at the end of FY2021 which was granted in 2016 (i.e. when the LTIP award size was double
the current grant size). Had the current approved remuneration policy been in place when Mike’s 2016 LTIP grant was made, the reported LTIP value
for FY2021 would have been US$3.970 million (instead of US$7.939 million in the table above) and the reported single total figure of remuneration
for FY2021 would have been US$10.552 million (instead of US$14.521 million in the table above).
Changes from prior year outcomes of CDP/STIP and LTIP are set out below.
CDP
LTIP
Mike
Henry
FY2021
CDP awarded for FY2021 performance. One-third was
provided in cash in September 2021, one-third deferred
in an equity award that is due to vest in FY2024, and
one-third deferred in an equity award that is due to
vest in FY2027.
FY2020
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.
Andrew
Mackenzie
FY2020
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.
Based on performance during the five-year period to 30 June
2021, 100% of Mike’s 192,360 awards from the 2016 LTIP
(granted to him when he was President Operations, Minerals
Australia before he was appointed CEO and Executive Director)
have vested. The value of the vested awards is inclusive of a
DEP, which is paid in shares.
Based on performance during the five-year period to 30 June
2020, 48% 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) vested, and the remaining awards
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 of the
2020 Annual Report.
FY2021 CDP performance outcomes
The Board and Remuneration Committee assessed the CEO’s CDP outcome in light of the Group’s performance in FY2021, taking into account the
CEO’s performance against the KPIs in his CDP scorecard. Having recorded strong safety, operational and financial performance in FY2021 (after
fully eliminating the very positive impacts of commodity prices during the year, particularly for iron ore), when assessing performance against the
targets set at the commencement of the year the Board and Committee determined the CDP outcome for the CEO for FY2021 at 115 per cent against
the target of 100 per cent (which represents an outcome of 77 per cent against maximum). The Board and Committee believe this outcome is
appropriately aligned with the shareholder experience and the interests of the Group’s other stakeholders.
The CEO’s CDP scorecard outcomes for FY2021 are summarised in the following tables, including a narrative description of each performance
measure and the CEO’s level of achievement, as determined by the Remuneration Committee and approved by the Board. The level of performance
for each measure is determined based on a range of threshold (the minimum necessary to qualify for any reward outcome), target (where the
performance requirements are met), and maximum (where the performance requirements are significantly exceeded).
108
BHP
Annual Report 2021
Summary of outcomes for the CEO
Performance measure
HSEC
Financial
Individual
Total
Weighting
for FY2021
25%
50%
25%
100%
Threshold
Target
Maximum
Mike Henry
Percentage outcome
30%
60%
25%
115%
HSEC
The HSEC targets for the CEO are aligned to the Group’s suite of HSEC five-year public targets as set out in section 1.13. 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 that the Sustainability Committee considers relevant.
The performance commentary below is provided against the HSEC scorecard targets, which were updated in FY2021 as a consequence of our
commitment to clarify and strengthen the links between climate change and executive remuneration. This resulted in a weighting for climate change
of 10 per cent under the CDP, which compares to around 4 per cent allocated to climate change in the prior STIP. The targets were set on the basis
of operated assets only.
HSEC measures
Scorecard targets
Performance against scorecard targets
Measure outcome
Significant events
No significant (actual level 4)
health, safety (including fatalities),
environment or community events
during the year.
Climate change
Steps in place to achieve reported
GHG emissions in FY2022 at
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.
– There were no fatalities or other significant HSEC events during
Close to maximum.
FY2021 at operated assets.
– In addition, for a maximum outcome to be awarded, strong progress
was required on the development and implementation of BHP’s
Fatality Elimination Program in all regions, and this was largely
achieved for FY2021.
– For FY2021, we improved on our operational GHG emissions target
Slightly above target.
of 17.0Mt, with an actual result of 16.2Mt.
– All operated assets completed the development of decarbonisation
plans which were incorporated in the capital allocation process.
The new renewable power purchase agreements at Escondida
and Spence, both in Chile, remain on track for first power supply in
the first half of FY2022. In addition, in FY2021 we also entered into
renewable power purchase agreements for Queensland Coal and
Kwinana nickel refinery in Australia.
– During the year, memorandums of understanding were signed with
China Baowu (China), JFE Steel Corporation (Japan) and HBIS Limited
(China) to partner on emissions intensity reduction in integrated
steelmaking. We have significantly progressed developing a Phase
1 research and development agreement with China Baowu (which
we anticipate will be signed in FY2022) and significant work is also
being undertaken in collaboration with our partners to convert the
remaining two memorandums of understanding into executed
definitive contracts.
Management of
priority Tailings
Storage Facilities
(TSFs)
All priority TSFs 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.
– All priority TSFs are now either within appetite based on key risk
Slightly above target.
indicator data or continued operation outside appetite is approved
with remediation progressing to plan.
– We have continued improving our key risk indicator performance
with 84% of all key risk indicators for priority TSFs rated either on
target or less risk being taken than target, against a target of 80%.
The initial outcome against the HSEC KPI for FY2021 was 33 per cent out of the target of 25 per cent.
However, having assessed performance against the FY2021 HSEC KPI, the Sustainability Committee also considered sexual assault and sexual
harassment and noted:
– Good progress has been made in relation to preventing, managing and responding to risks of sexual assault and sexual harassment through
significant efforts since 2018, including enhancing controls to prevent incidents, improved reporting processes and in the creation and
commencement of a dedicated support service to assist impacted persons.
– Management acknowledges there were areas where coordination of work streams and integrated planning in relation to work regarding sexual
assault and sexual harassment could have been improved, and this may have allowed certain actions to have been taken sooner, including the
introduction of increased alcohol restrictions in camps.
– Aligned targets for implementation of controls have been incorporated into the FY2022 CDP HSEC scorecard with support from a dedicated
project management office.
In recognition of the opportunity to have enhanced coordination of work streams and integrated planning in relation to sexual assault and
sexual harassment, and with the Remuneration Committee being mindful that this is a critical health and safety matter, the Committee, upon
the recommendation of the Sustainability Committee, determined a 10 per cent reduction in the overall FY2021 CDP HSEC KPI outcome from
33 per cent to a final outcome of 30 per cent out of the target of 25 per cent.
BHP
Annual Report 2021
109
Financial StatementsAdditional Information34Strategic Report12Governance 2.2 Remuneration Report continued
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.
Measure outcome
Between target
and maximum.
Financial measure
Scorecard targets
Performance against scorecard targets
ROCE
For FY2021, the target for ROCE
was 13.5%, with a threshold of
11.6% and a maximum of 15.0%.
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 32.5% was reported by BHP for FY2021. Adjusted for
the factors outlined below, ROCE is 14.3%, which is above target.
The following adjustments were made to ensure the outcomes
appropriately reflect the performance of management for the year:
– The full elimination of the impacts of very positive movements
in commodities prices (particularly iron ore) and exchange rates
decreased ROCE by 17.4 percentage points.
– Having reviewed the FY2021 exceptional items (as described in
note 3 ‘Exceptional items’ in section 3), the Committee determined
they should not be considered for the purposes of determining the
FY2021 ROCE CDP outcome, with the exception of the exceptional
item in relation to the costs of the COVID-19 pandemic on BHP’s
FY2021 results. The Committee concluded the above-budget
portion of additional direct costs of COVID-19 should flow through to
the ROCE outcomes for CDP scorecard purposes. The Committee
considered this was appropriate in light of the continuing global
impacts of the COVID-19 pandemic. This adjustment reduced ROCE
by 0.3 percentage points. Beyond this, the Committee concluded
no further action was required in respect of exceptional items.
– Adjustments for other material items ordinarily made to ensure the
outcomes reflect the performance of management for the year
decreased ROCE by 0.5 percentage points. This was mainly due
to the elimination of the positive effect on ROCE outcomes of the
reduction in the closing balance sheet due to exceptional items.
The key drivers of the FY2021 ROCE outcome of 14.3% being above the
target for FY2021 of 13.5% set at the commencement of the year were:
– In Minerals Australia, operational performance was strong, with
Western Australia Iron Ore achieving record production, Olympic
Dam achieving its highest annual copper production level since
our acquisition in 2005 on the back of improved smelter stability
and strong underground mine performance, and Queensland Coal
achieving record production at Goonyella. However, this was more
than offset by higher than budgeted depreciation across most
assets and the inclusion of the above-budget portion of additional
direct costs of COVID-19, resulting in a slight overall below-target
ROCE outcome for Minerals Australia.
– In Minerals Americas, driven mainly by Escondida maintaining
average concentrator throughput at record levels by managing
COVID-19 impacts and optimisation of materials fed to the
concentrators. This was partially offset by the slower than planned
Spence Growth Option concentrator ramp-up due to tailings
work, permits and water availability, and the inclusion of the
above-budget portion of additional direct costs of COVID-19.
– In Petroleum, driven mainly by higher than expected gas demand
and improved performance in Australia, combined with lower
maintenance activity at Australian operations, partially offset by
the inclusion of the above-budget portion of additional direct
costs of COVID-19.
The outcome against the ROCE KPI for FY2021 was 60 per cent out of the target of 50 per cent.
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Individual measures for the CEO
Individual measures for the CEO are determined at the commencement of the financial year. The application of personal measures remains an
important element of effective performance management. These measures seek to provide a balance between the financial and non-financial
performance requirements that maintain our position as a leader in our industry. The CEO’s individual measures for FY2021 included contribution to
BHP’s overall performance and the management team, and also the delivery of projects and initiatives within the scope of the CEO role as specified
by the Board, as set out in the table below.
Individual measures
Individual scorecard targets
Performance against scorecard targets
Performance
– BHP Operating System deployment
on track.
– Enterprise-wide improvement initiatives
established and progressed to plan.
– The deployment of the BHP Operating System is
tracking better than target on the schedule and
costs of implementation, and the improvement value
identified and delivered to date is in excess of target.
– The accelerated delivery of cost savings targeted by the
end of FY2021 has been achieved, and in-flight initiatives
are progressing to plan.
Measure outcome
Between target
and maximum.
Social value
– Social value plans established for
each asset.
– All assets have established social value plans, and also
delivered the FY2021 actions set out in those plans.
Target.
– Reframing the social value narrative
– ‘Reframing the Narrative’, marketing segmentation
plan agreed and underway.
– Restructure of the leadership of
Samarco/Fundação Renova oversight.
– Progress on Samarco claims.
People
– Increase in female participation
by three percentage points.
– Operations Services (OS) increased
to 5,000 employees.
– New Engagement and Perception
Survey (EPS) system embedment.
– ELT members’ development and
succession plans.
Portfolio
– Portfolio strategy delivery.
– Exploration and
development performance.
– Business development
process improvement.
strategy, audience testing and creative concepts were
presented to the Board throughout FY2021, approved
as necessary, and implemented, with strong results
received so far.
– Samarco/Fundação Renova leadership was successfully
restructured to have Samarco/Fundação Renova overseen
by a dedicated person reporting directly to the regional
President Minerals Americas, and a dedicated external
affairs team was also established.
– Good progress on Fundação Renova compensation
programs, and we have continued to amplify our
communications and stakeholder engagement
in Brazil, with positive feedback received.
– By 30 June 2021 gender diversity had increased
2.7 percentage points to 29.2%, up from 26.5%
at 30 June 2020, for a cumulative increase of
11.6 percentage points from 17.6% at 30 June 2016.
– By 30 June 2021 there were 3,864 OS employees.
– The new EPS was successfully implemented during
FY2021 with high levels of participation and a strong
improvement focus.
– The ELT transitions were completed in FY2021
(i.e. promotions, recruitment and departures),
and updated individual development plans
were established for all ELT members.
– Strong progress on delivery of key strategy elements as
have been publicly announced, including preparing for
the investment in Jansen Stage 1, pursuing a merger of our
Petroleum business with Woodside, unifying our corporate
structure and the Cerrejón divestment. The process for BHP
Mitsui Coal and New South Wales Energy Coal is progressing,
in line with the two-year timeframe set last year.
– The metals exploration strategy was refreshed, as
presented to the Board in June 2021, and is now in execution.
Greenfield exploration activity has increased, with wider
geographic coverage and greater focus on using technology
to increase identification of ore under cover.
– Business Development and Exploration teams are working
effectively together, with the co-location of senior personnel,
which will improve the interactions of the teams, as well
as access to new opportunities. In addition, the Business
Development team has significantly increased capability
during FY2021.
Between threshold
and target.
Target.
Overall, it was considered the performance of the CEO against the individual measures KPI for FY2021 warranted an outcome at the target of 25 per cent.
LTIP performance outcomes
LTIP vesting based on performance to June 2021
The five-year performance period for the 2016 LTIP award ended on 30 June 2021. The CEO’s 2016 LTIP award comprised 192,360 awards (granted
as President Operations, Minerals Australia prior to his appointment as CEO). Vesting is subject to achievement of the relative TSR performance
conditions and any discretion applied by the Remuneration Committee (see ‘Overarching discretion and vesting underpin’ in this section 2.2.3).
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 2016 to 30 June 2021.
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 266.5 per cent over the five-year period from 1 July 2016 to 30 June 2021. This is above the weighted median Peer Group
TSR of positive 213.9 per cent and above the Index TSR of positive 99.8 per cent over the same period. This level of performance results in 100 per cent
vesting for the 2016 LTIP award. The value of the CEO’s vested 2016 LTIP award has been reported in ‘Single total figure of remuneration’ in this section 2.2.3.
BHP
Annual Report 2021
111
Financial StatementsAdditional Information34Strategic Report12Governance 2.2 Remuneration Report continued
The graph below shows BHP’s performance relative to comparator groups.
BHP vs. Peer Group and Index TSR over the 2016 LTIP cycle
TSR since 1 July 2016 (%)
300%
250%
200%
150%
100%
50%
0%
2016
Years ended 30 June
2017
2018
2019
2020
2021
BHP Peer Group Index (MSCI)
The Committee is conscious the granting of the 2016 LTIP awards and the early part of the five-year performance period coincided with a period
of share price reductions, driven in part by the Samarco dam failure having occurred on 5 November 2015.
The number of LTIP awards to be granted in December 2016 was to be determined using the share price and US$/A$ exchange rate over the 12 months
up to and including 30 June 2016. Using a 12-month average share price of A$20.3326 and a 12-month average US$/A$ exchange rate of 0.728415 (each
up to and including 30 June 2016), the number of LTIP awards derived for Mike Henry was 259,982. However, to ensure Mike (and other Executive KMP)
did not receive a larger number of awards as a result of the lower BHP share price since the Samarco dam failure in Brazil on 5 November 2015, as the
Committee was conscious of shareholder expectations in this respect, the Committee instead granted 192,360 LTIP awards to Mike in December 2016,
a reduction of 26 per cent. This was the same number that was granted to Mike in the prior year in December 2015, which in itself had been reduced
from the formulaically derived amount to ensure the Samarco dam failure did not inflate the 2015 LTIP award grant size. The Committee has reviewed
this approach and concluded it was appropriate.
Having considered the LTIP grant size, the Committee undertook a further exercise to satisfy itself that the TSR performance, which formulaically would
result in 100 per cent vesting, had not been inappropriately enhanced by the starting position of the performance period being lower as a consequence
of a fall in share price following the Samarco dam failure. This analysis included estimating and removing the impact of the dam failure from the start
of the performance period (i.e. removing the impact this would have otherwise had on the TSR outcome due to the lower starting position), reducing
the TSR outcome for estimated payments in relation to the Samarco dam failure that may take place beyond the end of the performance period and
examining the construct of the comparator group against which TSR performance is measured.
While this analysis uses inputs and assumptions that are theoretical, the Committee concluded the analysis was sufficiently robust to provide
confidence that the underlying TSR performance was sufficient to support the formulaic vesting of the 2016 LTIP award at 100 per cent.
The value of the vested 2016 LTIP award is higher than the value of the award at the time it was granted. With the share price having risen appreciably
during the five-year period and strong dividends, 36 per cent of the value realised is the value at grant time and 64 per cent of the value realised is due
to share price appreciation and dividends. This value increment due to share price appreciation and dividends is consistent with the experience of
shareholders over the period.
The following chart shows the cumulative outcomes of the decisions above, with the original notional grant size as if it had vested in full, the grant
size reduction due to the Samarco dam failure, and the final vested value of US$7.939 million, split between the original grant value and share price
appreciation and dividends.
CEO 2016 LTIP award outcome
US$m
12
10
8
6
4
2
0
7
.
0
1
%
6
2
–
9
.
7
1
.
5
Notional
value
Grant reduction
(26% of notional value)
Vested
value
Share price
appreciation and dividends
(64% of vested value)
Grant value
(36% of vested value)
8
2
.
LTIP allocated during FY2021
Following shareholder approval at the 2020 AGMs, LTIP awards (in the form of performance rights) were granted to Mike Henry on 20 October 2020.
The face value and fair value of the awards granted on 20 October 2020 are shown in the table below. The face value of Mike’s award was 200 per cent
of his base salary of US$1.700 million at the time of grant.
The fair value of the awards is ordinarily calculated by multiplying the face value of the award by the fair value factor of 41 per cent (for the current plan
design, as determined by the independent adviser to the Committee). The number of LTIP awards for Mike as detailed below was determined based on
the US$ 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 2020.
112
BHP
Annual Report 2021
Mike Henry
Number of
LTIP awards
Face value
US$(‘000)
Face value
% of salary
Fair value
US$(‘000)
Fair value
% of salary
% of max(1)
140,239
3,400
200
1,394
82
100
(1) The allocation is 100 per cent of the maximum award that was permitted under the remuneration policy approved by shareholders at the 2019 AGMs.
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 2020 to 30 June 2025
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 (i.e. the median) of the Peer Group TSR or the Index TSR
(as applicable). Vesting occurs on a sliding scale between the weighted 50th and 80th percentiles.
– Resources (85%): Anglo American, Fortescue Metals, Freeport-McMoRan, Glencore, Rio Tinto, Southern Copper,
Teck Resources, Vale.
– Oil and gas (15%): Apache, BP, Canadian Natural Res., Chevron, ConocoPhillips, Devon Energy, EOG Resources,
ExxonMobil, Occidental Petroleum, Royal Dutch Shell, Woodside Petroleum.
Sector peer
group companies(1)(2)(3)
(1) Sector peer group companies are selected by the Committee on the basis of the commodities they produce and their market capitalisations, such that the sector peer group as a whole, to the extent
practical, reflects the weighting of the value of commodities produced by BHP. The targeted outcome is that, to the extent practical, the vesting outcome is driven by BHP’s performance excluding
movements in commodity prices over the five-year performance period.
(2) From December 2016, BG Group and Peabody Energy were removed from the comparator group. BG Group was acquired by Royal Dutch Shell and Peabody Energy had become a significantly less
comparable peer.
(3) From November 2018, CONSOL Energy was removed from the comparator group, as due to its internal restructuring it had become a less comparable peer.
Overarching discretion and vesting underpin
The rules of the CDP, STIP and LTIP 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 ahead of the scheduled vesting of equity awards in August. 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. For the five years from FY2017 to FY2021, the Committee noted BHP’s continued improvement in
HSEC outcomes, strong operational performance with improving production and cost performance, and significant returns to shareholders, together
with no governance or conduct issues of note.
Accordingly, in respect of the STIP two-year deferred shares (granted in November 2019 in respect of performance in FY2019), the Committee chose
not to exercise its discretion and allowed the STIP awards to vest in full. In addition, in respect of the LTIP five-year performance shares (granted in
December 2016), the formulaic outcome of the 2016 LTIP was a 100 per cent vesting. Having undertaken the ‘look back’ review described above
and the assessment of the estimated impact on TSR performance of the Samarco dam failure, the Committee concluded the vesting outcome was
appropriate given Group and individual performance, and chose not to exercise its discretion and allowed 100 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.
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
Financial year
Single total figure of
remuneration, US$(‘000)
CDP/STIP (% of maximum)
LTIP (% of maximum)
Mike Henry
Andrew Mackenzie
Marius Kloppers
FY2021
FY2020(1)
FY2020(1)
FY2019
FY2018
FY2017
FY2016
FY2015
FY2014
FY2013(2)
FY2013(2)
FY2012
14,521
6,069
2,424
3,531
4,657
4,554
2,241
4,582
7,988
9,740
5,624
16,092
77
64
64
32
60
57
0
57
77
47
47
0
100
48
48
0
0
0
0
0
58
65
65
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 2020 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
2019 to 31 December 2019. The value of Mike’s vested 2015 LTIP award is included in full, while Andrew’s vested 2015 LTIP award (with a value of US$5.317 million and which vested after Andrew
stepped down from his role as CEO and Executive Director) was reported in section 3.3.24 of the 2020 Annual Report.
(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 2013 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.
BHP
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Financial StatementsAdditional Information34Strategic Report12Governance 2.2 Remuneration Report continued
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$100 invested over the 10-year period to 30 June 2021 (with dividends reinvested)
Value of investment (US$)
$175
$150
$125
$100
$75
$50
$25
2011
Years ended 30 June
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
ASX 100 FTSE 100 BHP Group Limited BHP Group Plc
Changes in Directors’ remuneration from FY2019 to FY2021
The table below sets out the percentage change in remuneration from FY2019 to FY2021 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 24,000 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 ‘Single total figure of remuneration’
(Executive Directors and Non-executive Directors) in this section 2.2.3.
CEOs(1)
Non-executive
Directors
Australian employees
Mike Henry
Andrew Mackenzie
Terry Bowen
Malcolm Broomhead
Xiaoqun Clever(2)
Ian Cockerill(2)
Anita Frew
Gary Goldberg(2)
Carolyn Hewson(3)
Susan Kilsby(2)
Ken MacKenzie
Lindsay Maxsted(3)
John Mogford
Christine O’Reilly(2)
Shriti Vadera(3)
Dion Weisler(2)
FY2019 to FY2020
FY2020 to FY2021
Base salary/
fees % change
Benefits
% change
CDP/STI
% change
Base salary/
fees % change
Benefits
% change(4)
CDP/STI
% change
0
0
2
(5)
0
0
0
0
0
0
0
(2)
6
0
0
0
2
0
10
33
(53)
0
0
(2)
0
0
0
25
(44)
13
0
0
0
(7)
0
100
–
–
–
–
–
–
–
–
–
–
–
–
–
–
43
0
–
17
(3)
0
0
0
14
–
7
0
0
8
0
0
0
3
67
–
(90)
(84)
0
(100)
(96)
(87)
–
(99)
(90)
0
(97)
0
0
0
(36)
20
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
3
(1) The per cent changes for Mike Henry from FY2019 to FY2020 are zero due to his appointment as CEO on 1 January 2020. The per cent changes for Mike Henry from FY2020 to FY2021 are based
on annualised FY2020 figures. The per cent changes for Andrew Mackenzie from FY2019 to FY2020 are based on annualised FY2020 figures.
(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 during FY2019
(Ian Cockerill and Susan Kilsby both joined on 1 April 2019). The per cent changes in remuneration from FY2020 to FY2021 are zero as there were no changes made to the remuneration of
Non-executive Directors who joined the Board in FY2021 (Xiaoqun Clever and Christine O’Reilly joined on 1 October 2020 and 12 October 2020 respectively). The per cent changes for Gary
Goldberg and Dion Weisler from FY2020 to FY2021 are based on annualised FY2020 figures as they joined the Board 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 her remuneration up to the date of her retirement from the Board on
7 November 2019. The per cent changes for Lindsay Maxsted and Shriti Vadera from FY2020 to FY2021 are zero as there were no changes made to their remuneration up to the date of their retirement
from the Board on 4 September 2020 and 15 October 2020 respectively.
(4) The majority of the amounts disclosed for benefits for Non-executive Directors are usually travel allowances (amounts of between US$ nil and US$90,000 for FY2020), however, the COVID-19
pandemic restricted Non-executive Director travel during FY2021.
CEO pay ratio disclosure
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 percentile, Median and 75th percentile using Option A methodology as set out under UK requirements.
Year
FY2021
FY2020
25th percentile
189:1
116:1
Median
129:1
81:1
75th percentile
106:1
67:1
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 FY2021 CEO remuneration used in the calculation is the reported single total
figure of remuneration data for Mike Henry. The remuneration calculation for all employees is based on actual earnings for the 12 months to 31 March
114
BHP
Annual Report 2021
2021, 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 CEO remuneration used in the calculation is a combination of reported single total figure of remuneration
data for Mike Henry and Andrew Mackenzie, recognising the transition in CEO leadership during FY2020.
The FY2021 ratio of 129:1 at the median compared to the FY2020 ratio of 81:1 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 FY2020 to FY2021 is driven by
a higher FY2021 CDP outcome of 115 per cent against a target of 100 per cent compared to the CDP outcome of 96 per cent in FY2020, together
with the 100 per cent LTIP vesting for FY2021 at a BHP Group Limited share price of A$47.70 per share, whereas there was 48 per cent LTIP vesting
for FY2020 at a BHP Group Limited share price of A$39.06 per share.
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.
Remuneration for the CEO in FY2022
The remuneration for the CEO in FY2022 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 the role on 1 January 2020 and did not receive
a base salary increase in September 2021 and it will remain unchanged at US$1.700 million per annum for FY2022. The CEO’s base salary will be kept
under review in future years to ensure it remains competitive, especially in light of recent movement in exchange rates against the US dollar.
FY2022 CDP performance measures
For FY2022, the Remuneration Committee has set the following CDP scorecard performance measures:
Performance
categories
Weighting
Target measures
HSEC
25%
The following HSEC performance measures are designed to incentivise achievement of the Group’s public five-year HSEC targets.
Financial
50%
Individual
25%
Significant events (10%): No significant (actual level 4) health, safety (including fatalities), environment or community events during
the year, implementation of sexual assault and sexual harassment controls, and design of cultural heritage controls.
Climate change (10%): Reported GHG emissions in FY2022 are below the FY2017 level. A majority of planned decarbonisation projects
are presented for tollgates and all asset adaptation plans are updated. Work undertaken as planned under partnerships with strategic
customers in the steel sector established in FY2021, one more partnership formalised, and a review of Scope 3 goals and estimation
methodologies completed.
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 FY2022 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 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), performance (material improvement in the system that supports exceptional performance) and
portfolio (material 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.
FY2022 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$3.400 million, being
200 per cent of the CEO’s base salary. The number of LTIP awards in FY2022 has been determined using the share price and US$/A$ exchange rate
over the 12 months up to and including 30 June 2021. Based on this, a FY2022 grant of 107,183 LTIP awards is proposed and approval for this LTIP grant
will be sought from shareholders at the 2021 AGMs. If approved, the award will be granted following the AGMs (i.e. in or around November/December
2021 subject to securities dealing considerations). The FY2022 LTIP award will use the same performance and service conditions and comparator
groups as the FY2021 LTIP award.
Remuneration for other Executive KMP (excluding the CEO)
The information in this section contains details of the remuneration policy that guided the Remuneration Committee’s decisions and resulted in the
remuneration outcomes for other Executive KMP (excluding the CEO). The remuneration policy and structures for other Executive KMP are essentially
the same as those already described for the CEO in previous sections of the Remuneration Report, including the treatment of remuneration on loss
of office as detailed in ‘Service contracts and policy on loss of office’ in section 2.2.2.
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 FY2021 are similar to those of the CEO, which are outlined in ‘FY2021 CDP performance
outcomes’ in this section 2.2.3; 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 slightly above target.
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Financial StatementsAdditional Information34Strategic Report12Governance 2.2 Remuneration Report continued
The diagram below represents the FY2021 CDP weightings and 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 America
Petroleum
LTIP
LTIP awards granted to other Executive KMP for FY2022 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).
Other Executive KMP who were promoted from executive roles within BHP may hold 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 FY2021.
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 FY2021. Each component is determined
as a percentage of base salary (at the minimum, target and maximum levels of performance-based remuneration).
Remuneration mix for the other Executive KMP
The percentage numbers in the bars represent the percentage of base salary
Minimum
84%
Target
23%
2%
2% 19%
38%
Maximum
15%
2% 2%
18%
0
10%
20%
30%
% share of total remuneration
36%
40%
8%
8%
16%
27%
50%
60%
70%
80%
90%
100%
Base salary(1)
Retirement benefits(2)
Other benefits(3)
CDP (cash)(4)
CDP (deferred shares)(4)
LTIP(5)
(1) Base salary earned by each Executive KMP is set out in ‘Executive KMP remuneration table’ in this section 2.2.3.
(2) Retirement benefits are 10 per cent of base salary for other Executive KMP, with the exception of Geraldine Slattery. From FY2021, contribution rates for Geraldine reduced to 20 per cent of base salary
in accordance with the remuneration policy approved by shareholders at the 2019 AGMs (progressive reduction to 10 per cent of base salary as follows: 15 per cent of base salary from 1 July 2021; and
10 per cent of base salary from 1 July 2022 onwards). For any new Executive KMP appointments, the pension contribution rate will be 10 per cent of base salary immediately.
(3) Other benefits are 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.
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.
Arrangements for KMP leaving and joining the Group
KMP leaving the Group
The arrangements for Executive KMP leaving the Group are within the approval provided by shareholders at the 2020 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.
Peter Beaven stepped down from his role as Chief Financial Officer on 30 November 2020 and exited BHP on 28 February 2021. Daniel Malchuk stepped
down from his role as President Minerals Americas on 31 October 2020 and exited BHP on 31 December 2020. Peter and Daniel received base salary,
pension contributions, prorated CDP, statutory leave entitlements and applicable benefits up to the dates of their exit from BHP.
Peter and Daniel received a part payment in lieu of notice upon exit and have been paid or will receive in the future the value of pension funds that they have
accumulated during their service with the Group. When determining the Executive KMP CDP awards for FY2021, the Remuneration Committee resolved that
Peter and Daniel would each receive a prorated FY2021 CDP award in the form of cash based on their performance (covering the cash and two-year deferred
share components, but not the five-year deferred share component). No deferral period will apply in respect of these CDP awards.
All unvested FY2019 STIP and FY2020 CDP two-year deferred share awards allocated to Peter and Daniel remained on foot on termination. FY2019 STIP
deferred share awards vested in August 2021 and FY2020 CDP two-year deferred share awards will not vest until August 2022. Peter’s and Daniel’s unvested
LTIP awards and CDP five-year deferred shares were prorated to reflect the percentage of the performance period to 28 February 2021 for Peter and
31 December 2020 for Daniel. The vesting of the retained prorated LTIP awards will be determined by the Committee at the relevant time in future years
and will only vest to the extent the performance conditions are met at the end of each five-year performance period. The vesting of LTIP awards and
CDP five-year deferred share awards are subject to the Committee’s ability to reduce vesting through its discretion under the plan rules.
116
BHP
Annual Report 2021
KMP joining the Group
David Lamont joined BHP as Chief Financial Officer on 1 December 2020. David left his former employer, CSL Limited, a major Australian company listed
on the Australian Stock Exchange, on 30 October 2020. As a consequence of his resignation certain CSL incentive awards, which were expected to
have been paid or vested in 2021 and beyond, were foregone.
Replacement BHP awards have been provided in accordance with BHP’s remuneration policy (approved by shareholders in 2019 with almost 94 per cent
support) under which a new senior executive appointed from outside BHP can be provided cash and/or BHP equity awards to replace any remuneration
forfeited or not received from the former employer. In accordance with that policy, remuneration that David forfeited or did not receive as a
consequence of leaving CSL to join BHP has been partly replaced as set out in the table below.
The value of the BHP awards is less than the fair value of the awards foregone (as confirmed by the Committee’s independent adviser), and the duration
of the BHP awards is longer, on average, than those they replace. The Committee has determined appropriate service and performance conditions
within BHP’s framework, considering the vesting status of the conditions attached to the foregone awards. As always, the Committee has been mindful
of limiting such payments and not providing any more compensation than is necessary and, under BHP’s incentive plans, retains the right to adjust
vesting outcomes where an inappropriate benefit would be received.
The BHP awards provided are set out in the table below.
Award
Cash
Performance
shares
Amount/number Payable/vesting
Release
Conditions
Replaces
US$300,000
September 2021(1) September 2022(1) Nil
Replaces a cash bonus payment
foregone that would have been
payable in September 2021
77,000
August 2022(2)
August 2023(2)
Service and performance conditions, being
subject to a holistic assessment of underlying
financial performance of BHP and personal
performance of David during the vesting period
Partly replaces equity awards
foregone that would have been
paid and vested to David in 2021
and beyond
(1) Should David voluntarily resign or retire during the holding lock period, or be terminated for cause, the cash payment would become repayable on a pro-rata basis.
(2) Upon performance shares vesting in August 2022, a holding lock will apply to the vested shares until August 2023, at which time they will be released to David. Should David voluntarily resign or retire
during the holding lock period, or be terminated for cause, the shares subject to the holding lock will be forfeited.
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$3.800 million per annum. This sum includes base fees, Committee fees and pension contributions. Travel allowances and non-monetary benefits
are not included in this limit.
Single total figure of remuneration
This section shows a single total figure of remuneration as prescribed under UK requirements. It is a measure of actual remuneration. Fees include the annual
base fee, plus additional fees as applicable for the Senior Independent Director, Committee Chair and Committee memberships. Non-executive Directors
do not have any performance-based at-risk remuneration or receive any equity awards as part of their remuneration, therefore the totals shown below are
total remuneration and total fixed fees. This table also meets the requirements of the Australian Corporations Act 2001 and relevant accounting standards.
US$(‘000)
Terry Bowen
Malcolm Broomhead
Ian Cockerill
Xiaoqun Clever(3)
Anita Frew
Gary Goldberg(3)
Carolyn Hewson(4)
Susan Kilsby
Ken MacKenzie
Lindsay Maxsted(4)
John Mogford
Christine O’Reilly(3)
Shriti Vadera(4)
Dion Weisler(3)
Financial year
FY2021
FY2020
FY2021
FY2020
FY2021
FY2020
FY2021
FY2021
FY2020
FY2021
FY2020
FY2020
FY2021
FY2020
FY2021
FY2020
FY2021
FY2020
FY2021
FY2020
FY2021
FY2021
FY2020
FY2021
FY2020
Fees
219
187
195
201
220
220
144
220
220
246
90
75
220
205
864
866
33
205
215
199
162
74
253
178
15
Benefits(1)
Pensions(2)
4
40
3
19
–
90
–
2
47
2
15
18
1
83
4
40
3
18
2
69
–
1
48
1
–
12
10
10
11
–
–
–
–
–
–
–
4
–
–
16
14
2
11
–
–
9
–
–
9
1
Total
235
237
208
231
220
310
144
222
267
248
105
97
221
288
884
920
38
234
217
268
171
75
301
188
16
(1) The majority of the amounts disclosed for benefits for Non-executive Directors are usually travel allowances (amounts of between US$ nil and US$90,000 for FY2020) however, the COVID-19 pandemic
restricted Non-executive Director travel during FY2021. For FY2021, amounts of between US$ nil and US$3,500 are included in respect of tax return preparation; and amounts of between US$ nil and US$2,500
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 FY2021 in accordance with Australian superannuation legislation. No other pension contributions were paid.
(3) 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. The FY2021 remuneration for Xiaoqun
Clever and Christine O’Reilly relates to part of the year only, as they joined the Board on 1 October 2020 and 12 October 2020 respectively.
(4) The FY2020 remuneration for Carolyn Hewson relates to part of the year only, as she retired from the Board on 7 November 2019. The FY2021 remuneration for Lindsay Maxsted and Shriti Vadera relates to part
of the year only, as they retired from the Board on 4 September 2020 and 15 October 2020 respectively.
BHP
Annual Report 2021
117
Financial StatementsAdditional Information34Strategic Report12Governance 2.2 Remuneration Report continued
Non-executive Directors’ remuneration in FY2022
In FY2022, 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 FY2022. 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$0.160 million per annum. The below table sets out the annualised fee levels for FY2022.
Levels of fees and travel allowances for Non-executive Directors (in US$)
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 2021
160,000
48,000
60,000
45,000
45,000
No additional fee
32,500
27,500
27,500
18,000
7,000
15,000
880,000
(1) In relation to travel for Board business, the time thresholds relate to the flight time to travel to the meeting location (i.e. one way flight time). Only one travel allowance is paid per round trip.
Remuneration governance
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 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 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 April 2021), which are available
at bhp.com. The current members of the Remuneration Committee are: Christine O’Reilly (Remuneration Committee Chair), Anita Frew, Gary Goldberg,
Susan Kilsby, and Dion Weisler. The role and focus of the Committee and details of meeting attendances can be found in section 2.1. Other Directors and
employees who regularly attended meetings were: Ken MacKenzie (Chair), Mike Henry (CEO), Athalie Williams (Chief People Officer), Andrew Fitzgerald
(Vice President Reward), Caroline Cox (Group Company Secretary to 31 October 2020), Stefanie Wilkinson (Group Company Secretary from 1 March 2021),
Geof Stapledon (Vice President Governance to 31 March 2021), and Prakash Kakkad (Head of Group Governance from 1 June 2021). These individuals were
not present when decisions regarding their own remuneration were considered or taken.
When determining executive director remuneration practices, the Remuneration Committee considers any decisions in the context of the principles
of the 2018 UK Corporate Governance Code, including:
Principle
Clarity
Simplicity
Risk
How the Remuneration Committee has applied the principle
BHP engages proactively with shareholders on remuneration matters. Feedback from shareholders is used by the Remuneration Committee
in its decision-making in respect of the remuneration policy and its application. The Group also conducts regular employee engagement
surveys which give employees an opportunity to provide feedback on a wide range of employee matters. Many employees are also ordinary
shareholders through Shareplus and therefore have the opportunity to share their views as shareholders.
The purpose, structure and strategic alignment of each element of remuneration is clearly set out in section 2.2.2.
A significant portion of variable remuneration is at-risk in order to provide strong alignment between remuneration outcomes and the
interests of BHP shareholders. The delivery of two-thirds of CDP awards in deferred shares and the LTIP five-year performance period help
to align the long-term interests of the CEO and shareholders.
Predictability
The remuneration opportunities under different performance scenarios (minimum, target and maximum) are set out in section 2.2.2.
Proportionality
Alignment
with culture
The CEO is incentivised to achieve stretching performance through the targets set under the CDP and LTIP. In addition, the Remuneration
Committee has discretion to adjust formulaic outcomes downwards to ensure that poor performance is not rewarded.
The FY2021 CDP performance measures for the CEO include a number of measures linked to culture including the delivery of social value
plans for assets, improving gender diversity and embedding a new Engagement and Perception Survey system. We continue to focus on
fostering a culture of respect and ensuring the workplace is safe at all times.
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
118
BHP
Annual Report 2021
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 FY2021.
Total fees paid to the PricewaterhouseCoopers team advising the Committee on remuneration-related matters for FY2021 were £177,300. 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 FY2021 were approximately US$31 million.
Statement of voting at the 2020 AGMs
BHP’s remuneration resolutions have attracted a high level of support by shareholders. Voting in regard to those resolutions put to shareholders at the
2020 AGMs is shown below.
AGM resolution
Remuneration Report (excluding remuneration policy(2))
Remuneration Report (whole Report)
Approval of grants to Executive Director
Approval of leaving entitlements
Requirement
% vote ‘for’ % vote ‘against’
UK
Australia
Australia
Australia
95.8
95.7
98.5
99.3
4.2
4.3
1.5
0.7
Votes
withheld(1)
4,630,094
4,961,722
4,624,916
5,029,752
(1) The sum of votes marked ‘Vote withheld’ at BHP Group Plc’s 2020 AGM and votes marked ‘Abstain’ at BHP Group Limited’s 2020 AGM.
(2) The UK requirement for approval of the remuneration policy was met at the 2019 AGMs, where the following outcomes were recorded: a 93.5 per cent vote ‘for’, a 6.5 per cent vote ‘against’ with
23,166,578 votes withheld. This resolution was not required in 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.
Executive KMP remuneration table
The table below has been prepared in accordance with relevant accounting standards and remuneration data for Executive KMP are for the periods of
FY2020 and FY2021 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
FY2021 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 FY2021
and FY2020, refer to ‘Equity awards’ in this section 2.2.3.
Short-term
benefits
Non-
monetary
Annual cash
incentive(2)
benefits(3)
Post-
employment
benefits
Share-based
payments
Other
benefits(4)
Retirement
Value of
CDP/STIP
benefits(5)
awards(2)(6)
Value
of LTIP
awards(6)
Financial
year
Base
salary(1)
FY2021
FY2020
FY2020
FY2021
FY2021
FY2020
FY2021
FY2021
FY2020
FY2021
FY2020
FY2021
1,700
1,400
850
950
417
1,000
554
333
1,000
800
750
567
1,564
1,075
653
866
400
848
510
307
816
800
618
521
120
129
124
60
39
41
42
23
38
25
–
49
–
–
–
–
–
–
–
–
–
–
–
420
170
223
213
95
83
250
55
67
250
160
188
57
1,487
907
1,202
432
876
810
167
765
797
777
378
190
2,315
2,299
2,038
839
787
2,090
935
620
2,090
930
903
483
Total
7,356
6,033
5,080
3,242
2,602
5,039
2,263
2,115
4,991
3,492
2,837
2,287
US$(‘000)
Executive Director
Mike Henry
Andrew Mackenzie(7)
Other Executive KMP
Edgar Basto
Peter Beaven(7)
David Lamont
Daniel Malchuk(7)
Geraldine Slattery
Ragnar Udd
(1) Base salaries shown in this table reflect the amounts paid over the 12-month period from 1 July 2020 to 30 June 2021 for each Executive KMP. There were no changes to Executive KMP base salaries during
the year except for Edgar Basto who was appointed as President Minerals Australia on 1 July 2020 on an annual base salary of US$0.950 million, Ragnar Udd who was appointed as President Minerals
Americas on 1 November 2020 on an annual base salary of US$0.850 million, David Lamont who was appointed as Chief Financial Officer on 1 December 2020 on an annual base salary of US$0.950 million,
and Geraldine Slattery whose salary changed to US$0.850 million on 1 January 2021. Geraldine’s base salary was set by the Remuneration Committee in March 2019 upon her appointment as President
Petroleum at US$0.750 million per annum, which was 25 per cent below that of Geraldine’s predecessor. In December 2020, the Committee assessed Geraldine’s performance as President Petroleum
and it was confirmed that Geraldine was performing and developing strongly in role. The Committee also considered market factors, job relativities and contribution in the role in reaching its decision that
Geraldine’s base salary would be increased to US$0.850 million per annum on 1 January 2021. The base salaries for Executive KMP will be kept under review in future years to ensure they remain competitive,
especially in light of recent movement in exchange rates against the US dollar.
(2) Annual cash incentive in this table is the cash portion of CDP awards earned in respect of performance during each 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 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 FY2021, Executive KMP
earned the following CDP awards as a percentage of the maximum (the remaining portion has been forfeited): Mike Henry 77 per cent, Edgar Basto 76 per cent, Peter Beaven 80 per cent (for the time served
as Chief Financial Officer), David Lamont 77 per cent (for the time served as Chief Financial Officer), Daniel Malchuk 77 per cent (for the time served as President Minerals Americas), Geraldine Slattery 83 per
cent and Ragnar Udd 77 per cent (for the time served as President Minerals Americas). Andrew’s FY2020 CDP and Peter’s and Daniel’s FY2021 CDP was paid in cash and prorated to reflect the period served
until they ceased to be KMP on 31 December 2019, 30 November 2020 and 31 October 2020 respectively, as noted for Andrew in ‘Single total figure of remuneration’ in this section 2.2.3, with 50 per cent of
the total CDP award included in the Annual cash incentive column, and 50 per cent in the Value of CDP/STIP 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 include a one-off relocation allowance (with no trailing entitlements) provided to Ragnar Udd in FY2021 relating to his international relocation from Australia to Chile.
(5) In FY2021, retirement benefits were 20 per cent of base salary for each Executive KMP except for Mike Henry, who was appointed CEO on 1 January 2020, Edgar Basto, who was appointed as President
Minerals Australia on 1 July 2020, David Lamont, who was appointed as Chief Financial Officer on 1 December 2020, and Ragnar Udd, who was appointed as President Minerals Americas on 1 November
2020, each with a 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. Refer to note 25 ‘Employee share ownership plans’ in section 3 for more information on IFRS.
(7) The remuneration reported for Andrew Mackenzie, Peter Beaven and Daniel Malchuk reflects service as Executive KMP up to 31 December 2019, 30 November 2020 and 31 October 2020 respectively.
BHP
Annual Report 2021
119
Financial StatementsAdditional Information34Strategic Report12Governance 2.2 Remuneration Report continued
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 ‘Components of remuneration’ in section 2.2.2. No DEP
is payable on MAP awards previously provided to Executive KMP.
Equity awards provided for Executive KMP service
Awards under the CDP, STIP, and LTIP
Executive KMP received or will receive awards under the CDP, STIP and LTIP. The terms and conditions of CDP, STIP and LTIP awards, including the
performance conditions, are described in ‘Components of remuneration’ in section 2.2.2. The LTIP rules are available at bhp.com.
Equity awards provided prior to Executive KMP service
Awards under the MAP
BHP senior management who are not KMP receive awards under the MAP. While no MAP awards were granted to Executive KMP after becoming KMP,
Edgar Basto, Geraldine Slattery and Ragnar Udd still hold MAP awards that were allocated to them prior to commencing their Executive KMP service.
Date
of grant
At 1 July
2020
Granted
Vested
Lapsed
At 30 June
2021
Award
vesting
Market price on date of:
date(1)
Grant(2)
Vesting(3)
Gain on
awards
(‘000)(4)
DEP on
awards
(‘000)
Award type
Mike Henry
CDP
CDP
STIP
STIP
LTIP
LTIP
LTIP
LTIP
LTIP
LTIP
Edgar Basto(5)
LTIP
MAP
MAP
MAP
MAP
MAP
Peter Beaven(6)
CDP
CDP
STIP
STIP
LTIP
LTIP
LTIP
LTIP
LTIP
LTIP
David Lamont(5)
Performance shares
LTIP
Daniel Malchuk(6)
CDP
CDP
STIP
STIP
LTIP
LTIP
LTIP
LTIP
LTIP
LTIP
20-Oct-20
20-Oct-20
20-Nov-19
18-Dec-18
20-Oct-20
20-Nov-19
18-Dec-18
24-Nov-17
9-Dec-16
4-Dec-15
20-Oct-20
19-May-20
19-May-20
25-Sep-19
24-Sep-18
25-Sep-17
20-Oct-20
20-Oct-20
20-Nov-19
18-Dec-18
20-Oct-20
20-Nov-19
18-Dec-18
1-Dec-20
1-Dec-20
20-Oct-20
20-Oct-20
20-Nov-19
18-Dec-18
20-Oct-20
20-Nov-19
18-Dec-18
24-Nov-17
198,200
9-Dec-16
4-Dec-15
174,873
174,873
139,664
156,739
24-Nov-17
198,200
9-Dec-16
4-Dec-15
174,873
174,873
–
–
44,348
44,348
17,420
30,692
–
–
–
140,239
153,631
172,413
218,020
192,360
192,360
–
–
–
–
–
–
68,572
28,245
28,245
28,245
27,651
33,828
–
–
–
–
–
–
–
34,977
34,977
19,003
30,964
–
–
–
72,182
139,664
156,739
–
–
–
–
16,786
33,686
77,000
68,572
33,657
33,657
–
–
–
72,182
–
–
–
–
–
–
–
–
–
–
–
–
–
30,692
–
–
–
–
–
–
–
–
–
–
–
–
–
–
44,348
44,348
17,420
Aug 25
A$35.90
Aug 22
Aug 21
A$35.90
A$37.24
–
–
–
–
–
–
–
–
–
–
19 Aug 20
A$33.50
A$39.06
A$1,199
A$152
140,239
153,631
172,413
218,020
192,360
Aug 25
Aug 24
Aug 23
Aug 22
Aug 21
A$35.90
A$37.24
A$33.50
A$27.97
A$25.98
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
92,333
100,027
–
19 Aug 20
A$17.93
A$39.06
A$3,607
A$748
–
–
–
–
–
33,828
–
–
–
30,964
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
68,572
28,245
28,245
28,245
27,651
Aug 25
Aug 24
Aug 23
Aug 22
Aug 21
A$35.90
A$35.05
A$35.05
A$36.53
A$33.83
–
–
–
–
–
–
–
–
–
–
–
19 Aug 20
A$25.98
A$39.06
A$1,321
34,977
34,977
19,003
Aug 25
A$35.90
Aug 22
Aug 21
A$35.90
A$37.24
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
19 Aug 20
A$33.50
A$39.06
A$1,209
A$154
72,182
Aug 25
A$35.90
139,664
156,739
198,200
174,873
Aug 24
Aug 23
Aug 22
Aug 21
A$37.24
A$33.50
A$27.97
A$25.98
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
83,940
90,933
–
19 Aug 20
A$17.93
A$39.06
A$3,279
A$680
–
–
–
–
–
33,686
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
77,000
68,572
Aug 22
A$38.56
Aug 25
A$38.56
33,657
33,657
16,786
Aug 25
A$35.90
Aug 22
Aug 21
A$35.90
A$37.24
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
19 Aug 20
A$33.50
A$39.06
A$1,316
A$167
72,182
139,664
156,739
198,200
174,873
Aug 25
Aug 24
Aug 23
Aug 22
Aug 21
A$35.90
A$37.24
A$33.50
A$27.97
A$25.98
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
83,940
90,933
–
19 Aug 20
A$17.93
A$39.06
A$3,279
$680
120
BHP
Annual Report 2021
Award type
Geraldine Slattery
CDP
CDP
STIP
LTIP
LTIP
MAP
MAP
MAP
MAP
Ragnar Udd(5)
LTIP
MAP
MAP
MAP
MAP
Date
of grant
At 1 July
2020
Granted
Vested
Lapsed
At 30 June
2021
Award
vesting
Market price on date of:
date(1)
Grant(2)
Vesting(3)
Gain on
awards
(‘000)(4)
DEP on
awards
(‘000)
20-Oct-20
20-Oct-20
20-Nov-19
20-Oct-20
–
–
6,628
25,490
25,490
–
–
54,136
20-Nov-19
104,748
21-Feb-19
21-Feb-19
24-Sep-18
25-Sep-17
2-Nov-20
21-Aug-20
21-Aug-20
25-Sep-19
24-Sep-18
28,527
28,527
28,527
34,349
–
–
–
–
–
–
61,354
21,231
21,231
21,231
25,565
–
–
–
–
–
–
–
–
–
–
–
–
34,349
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
25,490
25,490
6,628
54,136
104,748
28,527
28,527
28,527
Aug 25
A$35.90
Aug 22
Aug 21
A$35.90
A$37.24
Aug 25
A$35.90
Aug 24
Aug 23
Aug 22
Aug 21
A$37.24
A$34.83
A$34.83
A$33.83
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
19 Aug 20
A$25.98
A$39.06
A$1,342
61,354
Aug 25
A$33.81
21,231
21,231
21,231
25,565
Aug 24
Aug 23
Aug 22
Aug 21
A$38.36
A$38.36
A$36.53
A$33.83
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(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 and CDP two-year awards), 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 CDP and LTIP awards
granted in FY2021 at the grant date of 20 October 2020 are as follows: CDP – A$35.90 and LTIP – A$20.98. The IFRS fair value of the LTIP awards granted in FY2021 at the grant date of 2 November
2020 and 1 December 2020 are A$18.61 and A$20.85 respectively. The IFRS fair value of David Lamont’s performance shares at the grant date of 1 December 2020 is A$38.56.
(3) The market price shown is the closing price of BHP shares on the relevant date of vest.
(4) The gain on awards is calculated using the market price on date of vesting or exercise (as applicable) less any exercise price payable. The amounts that vested and were lapsed for the awards during
FY2021 are as follows: STIP – 100 per cent vested; LTIP – 48 per cent vested and 52 per cent lapsed; MAP – 100 per cent vested.
(5) The opening balances of awards for Edgar Basto, David Lamont and Ragnar Udd reflect their holdings on the date that each became KMP, being 1 July 2020, 1 December 2020 and 1 November
2020 respectively.
(6) Awards shown as held by Peter Beaven and Daniel Malchuk at 30 June 2021 are their balances at the date they ceased being KMP (30 November 2020 and 31 October 2020, respectively).
The subsequent treatment of their awards is set out in ‘Arrangements for KMP leaving and joining the Group’ in this section 2.2.3.
Estimated value range of equity awards
The current face value (and estimate of the maximum possible total value) of equity awards allocated during FY2021 and yet to vest are the awards as
set out in the previous table multiplied by the current share price of BHP Group Limited or BHP Group Plc as applicable. The minimum possible total
value of the awards is nil.
The actual value that may be received by participants in the future cannot be determined as it is dependent on and therefore fluctuates with the share
prices of BHP Group Limited and BHP Group Plc at the date that any particular award vests or is exercised. The table below provides five-year share
price history for BHP Group Limited and BHP Group Plc, history of dividends paid and the Group’s earnings.
Five-year share price, dividend and earnings history
BHP Group Limited
Share price at beginning of year
Share price at end of year
Dividends paid
BHP Group Plc
Share price at beginning of year
Share price at end of year
Dividends paid
BHP
Attributable profit (US$ million, as reported)
FY2021
A$35.82
A$48.57
A$2.07
£16.28
£21.30
£1.15
11,304
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
(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 FY2021 were A$51.65 for BHP Group Limited shares and £23.76 for BHP Group Plc shares. The lowest share prices
during FY2021 were A$33.78 and £14.90 respectively.
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 1 September 2021 (being not less than one month prior to
the date of the notice of the 2021 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 2021 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
Annual Report 2021
121
Financial StatementsAdditional Information34Strategic Report12Governance 2.2 Remuneration Report continued
BHP Group Limited shares
BHP Group Plc shares
Held at
1 July
2020 Purchased
Received as
remuneration(1)
Sold
Held at
30 June
2021
Held at
1 July
2020 Purchased
Received as
remuneration(1)
Sold
Executive Director
Mike Henry
Other Executive KMP
Edgar Basto(2)
Peter Beaven(3)
David Lamont(2)
Daniel Malchuk(3)
Geraldine Slattery(4)
Ragnar Udd(2)
Non-executive Directors
Terry Bowen
Malcolm Broomhead
Xiaoqun Clever(5)
Ian Cockerill
Anita Frew
Gary Goldberg(4)
Susan Kilsby
Ken MacKenzie
Lindsay Maxsted(6)
John Mogford
Christine O’Reilly(5)
Shriti Vadera(6)
Dion Weisler
120,069
117,279
261,287
6,345
194,608
71,520
105,418
11,000
19,000
5,000
8,759
–
10,000
–
52,351
18,000
–
7,000
–
1,544
–
42
–
–
–
–
–
–
–
2,000
–
–
–
–
–
–
–
–
–
–
146,072
67,162
198,979
196,262
16,260
134,889
65,424
332,107
–
6,345
56,934
276,986
97,325
105,418
11,000
19,000
7,000
8,759
–
–
–
–
–
–
–
–
–
3,500
33,828
136,244
–
139,312
34,349
–
–
–
–
–
–
–
–
–
–
–
–
–
–
8,544
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
15,000
10,000
–
–
6,900
52,351
18,000
–
–
–
12,000
1,938
7,000
–
–
25,000
1,544
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Held at
30 June
2021
196,262
–
–
–
–
–
–
–
–
–
3,500
15,000
–
6,900
–
–
13,938
–
25,000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(1) Includes DEP in the form of shares on equity awards vesting as disclosed in ‘Equity awards’ in this section 2.2.3.
(2) The opening balances for Edgar Basto, David Lamont and Ragnar Udd reflect their shareholdings on the date that each became KMP being 1 July 2020, 1 December 2020 and 1 November 2020 respectively.
(3) Shares shown as held by Peter Beaven and Daniel Malchuk at 30 June 2021 are their balances at the date they ceased being KMP being 30 November 2020 and 31 October 2020 respectively.
(4) 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).
(5) The opening balances for Xiaoqun Clever and Christine O’Reilly reflect their shareholdings on the date that each became Non-executive Directors being 1 October 2020 and 12 October 2020 respectively.
(6) Shares shown as held by Lindsay Maxsted and Shriti Vadera at 30 June 2021 are their balances at the date of their retirement from the Board on 4 September 2020 and 15 October 2020 respectively.
Prohibition on hedging of BHP Group shares and equity instruments
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.
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 FY2021:
– The MSR for the CEO was five times annual pre-tax base salary. At the end of FY2021, the CEO met the MSR.
– The MSR for other Executive KMP was three times annual pre-tax base salary. At the end of FY2021, the other Executive KMP met the MSR, except
for David Lamont, as he was appointed as Executive KMP on 1 December 2020.
– No other Executive KMP sold or purchased shares during FY2021, other than sales to satisfy taxation obligations and a net immaterial purchase
for Edgar Basto.
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 FY2021, each Non-executive Director met
the MSR with the exception of Susan Kilsby, Dion Weisler and Christine O’Reilly as they only recently joined the Board on 1 April 2019, 1 June 2020 and
12 October 2020, respectively. As at the date of this Report, Susan, Dion and Christine each met the MSR.
122
BHP
Annual Report 2021
Payments to past Directors and for loss of office
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 for FY2021 that relate to the period when he was no longer an Executive Director and CEO
and which have not been reported elsewhere in this section 2.2.3:
– 100 per cent of the 254,815 retained LTIP awards granted in 2016, reduced from 339,753 awards originally granted and prorated for time served at the
time of departure, vested on 18 August 2021. The value of these awards for Andrew was US$10.517 million, including a related DEP of US$1.710 million
which was paid in shares.
– During FY2021, Andrew was provided tax return preparation services of US$0.073 million in respect of his tax obligations in multiple jurisdictions for
BHP employment income in accordance with contractual and termination arrangements.
The Remuneration Committee has adopted a de minimis threshold of US$7,500 for disclosure of payments to past Directors under UK requirements.
There were no payments made for loss of office in FY2021.
Relative importance of spend on pay
The table below sets out the total spend for Continuing operations on employee remuneration during FY2021 (and the prior year) compared with other
significant expenditure items, and includes items as prescribed in the UK requirements. BHP has included tax payments and purchases of property,
plant and equipment being the most significant other outgoings in monetary terms.
US$ million
Aggregate employee benefits expense
Dividends paid to BHP shareholders(1)
Income tax paid and royalty-related taxation paid (net of refunds)
Purchases of property, plant and equipment
(1) There were no share buybacks in FY2021 or FY2020.
FY2021
4,842
7,901
7,610
6,606
FY2020
4,120
6,876
5,944
6,900
Transactions with KMP
During the financial year, there were no transactions between the Group and its subsidiaries and KMP (including their related parties) (2020: US$ nil;
2019: US$ nil). There were no amounts payable by or loans with KMP (including their related parties) at 30 June 2021 (2020: 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 (2020: US$ nil; 2019: US$ nil).
This Remuneration Report was approved by the Board on 2 September 2021 and signed on its behalf by:
Christine O’Reilly
Chair, Remuneration Committee
2 September 2021
BHP
Annual Report 2021
123
Financial StatementsAdditional Information34Strategic Report12Governance 2.3 Directors’ 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 1.2 and the Chief Executive Officer’s review in section 1.3, and incorporates
the operating and financial review), section 2.1 ‘Corporate Governance Statement’, section 2.2 ‘Remuneration Report’, section 3.5 ‘Lead Auditor’s
Independence Declaration’ and section 4 ‘Additional 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 2.2 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 3, note 22 ‘Net finance costs’
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.
2.3.1 Review of operations, principal activities and state of affairs
A review of the operations of BHP during FY2021, the results of those operations during FY2021 and the expected results of those operations in future
financial years are set out in section 1, in particular in 1.2 to 1.15, 1.17 and 1.18 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 FY2021 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 FY2021 other than as disclosed in section 1. There were no significant changes in BHP’s state of affairs that occurred during
FY2021 and no significant post balance date events other than as disclosed in section 1 and note 35 ‘Subsequent events’ in section 3. No other matter
or circumstance has arisen since the end of FY2021 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.
2.3.2 Share capital and buy-back programs
At the Annual General Meetings held in 2019 and 2020, 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 FY2021, 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 2021 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 FY2021.
A
B
C
D
Period
1 Jul 2020 to 31 Jul 2020
1 Aug 2020 to 31 Aug 2020
1 Sep 2020 to 30 Sep 2020
1 Oct 2020 to 31 Oct 2020
1 Nov 2020 to 30 Nov 2020
1 Dec 2020 to 31 Dec 2020
1 Jan 2021 to 31 Jan 2021
1 Feb 2021 to 28 Feb 2021
1 Mar 2021 to 31 Mar 2021
1 Apr 2021 to 30 Apr 2021
1 May 2021 to 31 May 2021
1 Jun 2021 to 30 Jun 2021
Total
Total number
of shares purchased
and transferred to
employees to satisfy
employee awards
–
6,158,718
–
–
–
–
–
–
882,454
–
–
731,235
7,772,407
Average price paid
per share(1)
Total number of shares
purchased as part of
publicly announced
plans or programs
US$
–
28.32
–
–
–
–
–
–
36.57
–
–
38.00
30.16
–
–
–
–
–
–
–
–
–
–
–
–
–
Maximum number of shares that may yet be
purchased under the plans or programs
BHP Group Limited(2)
BHP Group Plc
–
–
–
–
–
–
–
–
–
–
–
–
–
211,207,180(3)
211,207,180(3)
211,207,180(3)
211,207,180(3)
211,207,180(3)
211,207,180(3)
211,207,180(3)
211,207,180(3)
211,207,180(3)
211,207,180(3)
211,207,180(3)
211,207,180(3)
211,207,180(3)
(1) The shares were purchased in the currency of the stock exchange on which the purchase took place and the sale price has been converted into US dollars at the exchange rate on the day of purchase.
(2) BHP Group Limited is able to buy-back and cancel BHP Group Limited shares within the ‘10/12 limit’ without shareholder approval in accordance with section 257B of the Australian Corporations Act
2001. Any future on-market share buy-back program would be conducted in accordance with the Australian Corporations Act 2001 and with the ASX Listing Rules.
(3) At the Annual General Meetings held during 2019 and 2020, 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.
124
BHP
Annual Report 2021
2.3.3 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$11.3 billion in FY2021, compared with a profit of US$8.0 billion in FY2020.
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 1.9 and 2.1.13, and note 23 ‘Financial risk management’ in section 3 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.
2.3.4 Directors
The Directors who served at any time during FY2021 or up until the date of this Directors’ Report were Ken MacKenzie, Mike Henry, Terry Bowen,
Malcolm Broomhead, Xiaoqun Clever, Ian Cockerill, Anita Frew, Gary Goldberg, Susan Kilsby, Lindsay Maxsted, John Mogford, Christine O’Reilly, Shriti
Vadera and Dion Weisler. For information on the current Directors of BHP Group Limited and BHP Group Plc, refer to section 2.1.2. 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 2018 and the period for which each directorship has been held.
Shriti Vadera served as a Non-executive Director of BHP Group Limited and BHP Group Plc from January 2011 until her retirement on 15 October
2020. Lindsay Maxsted served as a Non-executive Director of BHP Group Limited and BHP Group Plc from March 2011 until his retirement on
4 September 2020.
Xiaoqun Clever and Christine O’Reilly were appointed as Non-executive Directors of BHP Group Limited and BHP Group Plc with effect from 1 October
2020 and 12 October 2020 respectively and were elected at the 2020 Annual General Meetings.
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 2.1.4.
2.3.5 Remuneration and share interests
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 2.2.2 and 2.2.3.
The remuneration tables contained in section 2.2.3 set out the remuneration of members of the Executive KMP (including the Executive Director)
and the Non-executive Directors.
Directors
‘Ordinary share holdings and transactions’ in section 2.2.3 sets out the relevant interests in shares in BHP Group Limited and BHP Group Plc of the
Directors who held office during FY2021, at the beginning and end of FY2021. 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 2021 are set out in
the tables showing interests in incentive plans contained in ‘Equity awards’ in section 2.2.3. 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 ‘Ordinary share holdings and transactions’ in section 2.2.3. 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 ‘Prohibition on hedging
of BHP Group shares and equity instruments’ in section 2.2.3.
As at the date of this Directors’ Report, Mike Henry held:
– (either directly, indirectly or beneficially) 196,262 shares in BHP Group Plc and 325,330 shares in BHP Group Limited
– rights and options over nil shares in BHP Group Plc and 772,999 shares in BHP Group Limited
We have not made available to any Directors any interest in a registered scheme.
Key Management Personnel
‘Ordinary share holdings and transactions’ in section 2.2.3 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 FY2021 by those senior executives who were Executive KMP (other than the Executive Director)
during FY2021. 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 2021 are set out in the tables contained in ‘Equity
awards’ in section 2.2.3.
BHP
Annual Report 2021
125
Financial StatementsAdditional Information34Strategic Report12Governance 2.3 Directors’ Report continued
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
Edgar Basto
David Lamont
Geraldine Slattery
Ragnar Udd
BHP Group entity
BHP Group Limited;
BHP Group Plc
BHP Group Limited
BHP Group Plc
BHP Group Limited
BHP Group Plc
BHP Group Limited
BHP Group Plc
As at date of Directors’ Report
130,038
–
6,345
–
123,640
–
118,557
–
2.3.6 Secretaries
Stefanie Wilkinson is the Group Company Secretary. For details of her qualifications and experience, refer to section 2.1.2. The following people also
acted during FY2021 as Company Secretaries of BHP Group Limited and BHP Group Plc: Caroline Cox BA (Hons), MA, LLB, BCL until 1 March 2021,
Rachel Agnew, BComm (Economics), LLB (Hons), GAICD, until 1 September 2020 and Geof Stapledon, BEc, LLB (Hons), DPhil, FCIS.
Geof Stapledon resigned as Company Secretary of BHP Group Limited and BHP Group Plc with effect from 7 July 2021. Prakash Kakkad, LLB, LPC
was appointed as a Company Secretary of BHP Group Limited and BHP Group Plc and John-Paul Santamaria, BEng (Civil) (Hons), LLB was appointed
as a Company Secretary of BHP Group Limited, in each case with effect from 7 July 2021.
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.
2.3.7 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 2.1.2, the Company Secretaries and other Officers
of BHP Group Limited and BHP Group Plc have the benefit of this requirement, as do individuals who formerly held one of those positions.
In accordance with this requirement, BHP Group Limited and BHP Group Plc have entered into Deeds of Indemnity, Access and Insurance (Deeds of
Indemnity) with each of their respective Directors. The Deeds of Indemnity are qualifying third party indemnity provisions for the purposes of the UK
Companies Act 2006 and each of these qualifying third party indemnities was in force as at the date of this Directors’ Report.
We have a policy that BHP will, as a general rule, support and hold harmless an employee, including an employee appointed as a Director of a subsidiary
who, while acting in good faith, incurs personal liability to others as a result of working for BHP.
In addition, as part of the arrangements to effect the demerger of South32, we agreed to indemnify certain former Officers of BHP who transitioned
to South32 from certain claims and liabilities incurred in their capacity as Directors or Officers of South32.
From time to time, we engage our External Auditor, 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. In Australia, the terms of engagement for certain services include
that we must compensate and reimburse EY for, and protect EY against, any loss, damage, expense, or liability incurred by EY in respect of third party
claims arising from a breach by BHP of any obligation under the engagement terms.
We have insured against amounts that we may be liable to pay to Directors, Company Secretaries or certain employees (including former Officers)
pursuant to Rule 146 of the Constitution of BHP Group Limited and Article 146 of the Articles of Association of BHP Group Plc or that we otherwise agree
to pay by way of indemnity. The insurance policy also insures Directors, Company Secretaries and some employees (including former Officers) against
certain liabilities (including legal costs) they may incur in carrying out their duties. For this Directors’ and Officers’ insurance, we paid premiums of
US$24,114,600 excluding taxes during FY2021.
During FY2021, BHP paid legal defence costs for certain current and former employees of BHP or BHP Brasil in relation to the criminal charges filed
by the Federal Prosecutors’ Office in Brazil. In addition, BHP paid legal defence costs for Roger Gilbertson, a former BHP Bolivia country manager,
in connection with the Bolivian authorities’ decision to criminally prosecute two former presidents of Bolivia and a number of former international
oil company executives in relation to exploration and production contracts entered into between 1994 and 1997.
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 FY2021.
2.3.8 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 1.14, 1.12 and in ‘Workforce engagement’ in section 2.1.6
126
BHP
Annual Report 2021
2.3.9 Corporate governance
The FCA’s Disclosure Guidance 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 Guidance 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 2.3.2, 2.3.3, ‘Directors’ in section
2.3.5 and 2.3.18.
2.3.10 Dividends
A final dividend of 200 US cents per share will be paid on 21 September 2021, resulting in total dividends determined in respect of FY2021 of 301
US cents per share. For information on the dividends paid, refer to notes 16 ‘Share capital’ and 18 ‘Dividends’ in section 3.
For information on the Group’s dividend policy
refer to section 4.10.7
2.3.11 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 3.5.
No current officer of BHP has held the role of director or partner of the Group’s current external auditor. During FY2021, Lindsay Maxsted was the only
officer of BHP who, prior to his appointment as an officer of BHP, previously 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. KPMG resigned as BHP’s external auditor on 7 November 2019 following
the conclusion of the 2019 AGMs, in order to comply with UK and EU requirements on auditor tenure. 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. Lindsay Maxsted
retired as a Non-executive Director of BHP Group Limited and BHP Group Plc on 4 September 2020.
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 then applicable 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.
2.3.12 Non-audit services
Information on the non-audit services undertaken by BHP’s External Auditor, including the amounts paid for non-audit services, refer to note 36
‘Auditor’s remuneration’ in section 3. 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 2.1.10.
2.3.13 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 FY2021.(1)
2.3.14 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 1.10 to 1.17 and 4.6.
2.3.15 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.
2.3.16 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.
(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.
BHP
Annual Report 2021
127
Financial StatementsAdditional Information34Strategic Report12Governance 2.3.17 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 1.13.
Fines and prosecutions
For the purposes of section 299 (1)(f) of the Australian Corporations Act 2001, in FY2021 BHP was levied four fines in relation to environmental laws and
regulations at our operated assets, the total amount payable being US$35,526. Three fines were received in Australia: the first fine was received at the
Caval Ridge Mine for mine affected water release (US$10,187), the second fine was received at the Poitrel Mine for unverified environmental monitoring
data (US$10,329) and the third fine was received at Ripstone Dam for water monitoring telemetry system failure (US$10,417). One fine was received in
South America, at the Spence Mine for incorrect waste storage (US$4,593).
Greenhouse gas emissions and energy consumption
Regulations made under the UK Companies Act 2006 require 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 FY2021 greenhouse gas emissions and intensity and energy consumption has been included
in sections 1.13.7 and 4.8.
For more information on environmental performance, including environmental regulation,
refer to section 1.13
2.3.18 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 1.10.1 (Locations)
– section 2.3.2 (Share capital and buy-back programs)
– section 4.10.3 (Organisational structure)
– section 4.10.4 (Material contracts)
– section 4.10.5 (Constitution)
– section 4.10.6 (Share ownership)
– section 4.10.9 (Government regulations)
– note 16 ‘Share capital’ and note 25 ‘Employee share ownership plans’ in section 3
As at the date of this Directors’ Report, there were 13,607,440 unvested equity awards outstanding in relation to BHP Group Limited ordinary shares held
by 18,942 holders and 324,504 unvested equity awards outstanding in relation to BHP Group Plc ordinary shares held by 1,015 holders. The expiry dates
of these unvested equity awards range between February 2022 and August 2025 and there is no exercise price. 4,155 options over unissued shares or
unissued interests in BHP have been granted during or since the end of FY2021 and 4,096,660 shares or interests were issued as a result of the exercise
of an option over unissued shares or interests during or since the end of FY2021. For more information, refer to note 25 ‘Employee share ownership
plans’ in section 3. For information on movements in share capital during and since the end of FY2021, refer to note 16 ‘Share capital’ in section 3.
The Directors’ Report is approved in accordance with a resolution of the Board.
Ken MacKenzie
Chair
Dated: 2 September 2021
Mike Henry
Chief Executive Officer
128
BHP
Annual Report 2021
Section 3
Financial Statements
In this section:
3
Financial
Statements
Consolidated Financial Statements
130
Employee matters
3.1
3.1.1
3.1.2
3.1.3
3.1.4
3.1.5
3.1.6
3.2
3.3
3.4
3.5
3.6
3.7
Consolidated Income Statement
Consolidated Statement of Comprehensive Income
Consolidated Balance Sheet
Consolidated Cash Flow Statement
Consolidated Statement of Changes in Equity
Notes to the Financial Statements
BHP Group Plc
Directors’ declaration
Statement of Directors’ responsibilities in respect
of the Annual Report and the Financial Statements
Lead Auditor’s Independence Declaration
under Section 307C of the Australian
Corporations Act 2001
Independent Auditors’ reports
Supplementary oil and gas information – unaudited
Notes to the Financial Statements
Performance
1
2
3
4
5
6
Segment reporting
Revenue
Exceptional items
Significant events – Samarco dam failure
Expenses and other income
Income tax expense
Earnings per share
7
Working capital
8
9
Trade and other receivables
Trade and other payables
Inventories
10
Resource assets
11
12
13
14
Property, plant and equipment
Intangible assets
Impairment of non-current assets
Deferred tax balances
Closure and rehabilitation provisions
15
Capital Structure
16
17
18
Share capital
Other equity
Dividends
Provisions for dividends and other liabilities
19
Financial Management
20
21
22
23
Net debt
Leases
Net finance costs
Financial risk management
130
130
131
132
133
137
189
200
201
202
203
213
137
139
140
141
146
147
149
150
150
151
151
154
154
158
159
161
162
163
163
164
165
167
168
24
25
26
27
Key management personnel
Employee share ownership plans
Employee benefits, restructuring and
post-retirement employee benefits provisions
Pension and other post-retirement obligations
Employees
28
Group and related party information
29
30
31
32
Discontinued operations
Subsidiaries
Investments accounted for using the equity method
Interests in joint operations
Related party transactions
33
Unrecognised items and uncertain events
34
Contingent liabilities
Subsequent events
35
Other items
36
37
38
39
Auditor’s remuneration
BHP Group Limited
Deed of Cross Guarantee
New and amended accounting standards and
interpretations and changes to accounting policies
174
174
177
178
179
179
180
180
183
183
184
185
185
186
186
188
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 33 ‘Related party
transactions’ in section 3.1. 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 3.1).
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 2 September 2021. The Directors have the authority to amend the
Financial Statements after issuance.
BHP
Annual Report 2021
129
Strategic ReportAdditional Information14Governance2 3.1 Consolidated Financial Statements
3.1.1 Consolidated Income Statement
for the year ended 30 June 2021
Continuing operations
Revenue
Other income
Expenses excluding net finance costs
Loss 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
2021
US$M
2020
US$M
2019
US$M
2
5
5
31
22
6
29
7
7
7
7
60,817
510
(34,500)
(921)
25,906
(1,378)
73
(1,305)
24,601
(10,921)
(229)
(11,150)
13,451
−
13,451
2,147
11,304
223.5
223.0
223.5
223.0
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
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
3.1.2 Consolidated Statement of Comprehensive Income
for the year ended 30 June 2021
Profit after taxation from Continuing and Discontinued operations
Other comprehensive income
Items that may be reclassified subsequently to the income statement:
Hedges:
Gains/(losses) taken to equity
(Gains)/losses 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 gains/(losses) 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 income/(loss)
Total comprehensive income
Attributable to non-controlling interests
Attributable to BHP shareholders
The accompanying notes form part of these Financial Statements.
Notes
2021
US$M
13,451
2020
US$M
8,736
2019
US$M
9,185
6
6
863
(837)
5
−
(8)
23
58
(2)
(20)
36
59
13,510
2,158
11,352
(315)
297
1
−
5
(12)
(81)
(2)
26
(57)
(69)
8,667
769
7,898
(327)
299
1
(6)
8
(25)
(20)
1
19
−
(25)
9,160
878
8,282
130
BHP
Annual Report 2021
3.1.3 Consolidated Balance Sheet
as at 30 June 2021
ASSETS
Current assets
Cash and cash equivalents
Trade and other receivables
Other financial assets
Inventories
Assets held for sale
Current tax assets
Other
Total current assets
Non-current assets
Trade and other receivables
Other financial assets
Inventories
Property, plant and equipment
Intangible assets
Investments accounted for using the equity method
Deferred tax assets
Other
Total non-current assets
Total assets
LIABILITIES
Current liabilities
Trade and other payables
Interest bearing liabilities
Liabilities directly associated with the assets held for sale
Other financial liabilities
Current tax payable
Provisions
Deferred income
Total current liabilities
Non-current liabilities
Trade and other payables
Interest bearing liabilities
Other financial liabilities
Non-current tax payable
Deferred tax liabilities
Provisions
Deferred income
Total non-current liabilities
Total liabilities
Net assets
EQUITY
Share capital – BHP Group Limited
Share capital – BHP Group Plc
Treasury shares
Reserves
Retained earnings
Total equity attributable to BHP shareholders
Non-controlling interests
Total equity
The accompanying notes form part of these Financial Statements.
Notes
2021
US$M
2020
US$M
Restated
20
8
23
10
31
8
23
10
11
12
31
14
9
20
31
23
4,15,19,26
9
20
23
14
4,15,19,26
17
17
15,246
6,059
230
4,426
324
279
129
26,693
337
1,610
1,358
73,813
1,437
1,742
1,912
25
82,234
108,927
7,027
2,628
17
130
2,800
3,696
105
16,403
−
18,355
1,146
120
3,314
13,799
185
36,919
53,322
55,605
1,111
1,057
(33)
2,350
46,779
51,264
4,341
55,605
13,426
3,364
84
4,101
–
366
130
21,471
267
2,522
1,221
72,362
1,574
2,585
3,688
43
84,262
105,733
5,767
5,012
–
225
913
2,810
97
14,824
1
22,036
1,414
109
3,779
11,185
210
38,734
53,558
52,175
1,111
1,057
(5)
2,306
43,396
47,865
4,310
52,175
The Financial Statements were approved by the Board of Directors on 2 September 2021 and signed on its behalf by:
Ken MacKenzie
Chair
Mike Henry
Chief Executive Officer
BHP
Annual Report 2021
131
GovernanceAdditional Information241Strategic Report3Financial Statements
Notes
2021
US$M
2020
US$M
2019
US$M
24,601
13,510
15,049
6,824
2,635
1,305
921
348
(2,723)
(447)
1,201
501
35,166
753
97
(771)
(401)
407
(8,017)
27,234
−
27,234
(6,606)
(514)
430
(480)
(578)
197
(294)
29
(7,845)
(7,616)
29
29
−
−
−
−
(7,845)
(7,616)
568
167
(8,395)
(234)
−
(7,901)
(2,127)
(17,922)
−
(17,922)
1,467
−
−
13,426
353
15,246
514
(157)
(2,047)
(143)
−
(6,876)
(1,043)
(9,752)
−
(9,752)
(1,662)
−
−
15,593
(505)
13,426
29
20
6,112
494
911
512
720
291
(715)
(755)
1,188
5,829
264
1,064
546
308
(211)
298
406
(125)
22,268
23,428
137
385
(1,225)
85
48
(5,992)
15,706
−
15,706
(6,900)
(740)
517
−
(618)
265
(140)
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
3.1.4 Consolidated Cash Flow Statement
for the year ended 30 June 2021
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 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
(Settlements)/proceeds 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
Investment in subsidiaries, operations and joint operations, net of cash
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
Proceeds/(settlements) 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
Net increase/(decrease) 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
The accompanying notes form part of these Financial Statements.
132
BHP
Annual Report 2021
3.1.5 Consolidated Statement of Changes in Equity
for the year ended 30 June 2021
Attributable to BHP shareholders
Share capital
Treasury shares
−
−
(5)
4
−
−
−
6
−
−
−
−
−
−
−
US$M
Balance as at 1 July 2020 (restated)
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
−
−
−
−
−
−
−
−
−
−
−
−
BHP
Group
Limited
(5)
−
(229)
202
−
−
−
BHP
Group
Plc Reserves
Retained
earnings
Total equity
attributable
to BHP
shareholders
Non-
controlling
interests
2,306
43,396
22
11,330
47,865
11,352
4,310
2,158
Total
equity
52,175
13,510
(234)
−
−
175
−
−
−
−
(2,127)
(10,021)
4,341
55,605
−
−
(234)
(149)
(57)
(4)
175
−
4
−
(7,894)
−
−
175
(7,894)
51,264
Balance as at 30 June 2021
1,111
1,057
(32)
(1)
2,350
46,779
Balance as at 1 July 2019 (restated)
1,111
1,057
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
−
−
−
−
−
−
−
−
−
−
−
−
Balance as at 30 June 2020 (restated)
1,111
1,057
Balance as at 1 July 2018
Impact of change in accounting policies (Note 39)
Restated 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 net of tax
Dividends
BHP Group Limited shares bought back
and cancelled
Divestment of subsidiaries, operations
and joint operations
Transfer to non-controlling interests
Balance as at 30 June 2019 (restated)
1,186
−
1,186
1,057
−
1,057
−
−
−
−
−
−
(75)
−
−
−
−
−
−
−
−
−
−
−
(32)
−
(139)
166
−
−
−
(5)
(5)
−
(5)
−
(182)
155
−
−
−
−
−
−
−
−
(4)
4
−
−
−
−
−
−
−
−
2,285
(12)
42,748
7,910
47,169
7,898
4,584
769
51,753
8,667
−
−
(143)
(132)
(38)
(10)
175
−
10
−
(7,234)
2,306
43,396
−
−
175
(7,234)
47,865
−
−
−
−
(1,043)
4,310
(143)
−
−
175
(8,277)
52,175
2,290
51,057
55,585
5,078
60,663
−
(71)
2,290
50,986
(24)
8,306
(71)
55,514
8,282
−
(71)
5,078
60,592
878
9,160
(6)
−
−
(61)
18
−
(188)
−
−
138
−
−
−
−
(188)
−
−
138
(11,302)
(11,302)
(1,205)
(12,507)
(5,199)
(5,274)
−
(5,274)
−
−
−
(1)
(168)
1
(168)
−
(100)
(18)
138
−
−
−
(1)
1,111
1,057
(32)
2,285
42,748
47,169
4,584
51,753
The accompanying notes form part of these Financial Statements.
Basis of preparation
The Group’s Financial Statements as at and for the year ended
30 June 2021:
– 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 Accounting Standards in conformity with the
requirements of the UK Companies Act 2006 and International
Financial Reporting Standards adopted pursuant to Regulation (EC)
No. 1606/2002 as it applies in the European Union (EU)
– International Accounting Standards adopted for use within the UK
– are prepared on a going concern basis as the Directors:
– have made an assessment of the Group’s ability to continue as a
going concern over the period to 30 September 2022 (the ‘going
concern period’)
– consider it appropriate to adopt the going concern basis of
accounting in preparing the Group’s Financial Statements
BHP
Annual Report 2021
133
GovernanceAdditional Information241Strategic Report3Financial Statements – 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 37 ‘BHP Group Limited’. Financial Statements of the BHP
Group Plc parent entity are presented in section 3.2 ‘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 2020. Those new and
amended standards and interpretations did not require restatement
of prior period financial information
– early adopt amendments to IFRS 9/AASB 9 ‘Financial Instruments’
(IFRS 9), IAS 39/AASB 139 ‘Financial Instruments: Recognition
and Measurement’ (IAS 39); IFRS 7/AASB 7 ‘Financial Instruments:
Disclosures’ (IFRS 7); IFRS 4/AASB 4 ‘Insurance Contracts’ (IFRS 4)
and IFRS 16/AASB 16 ‘Leases’ (IFRS 16) in relation to Interest Rate
Benchmark Reform
– apply accounting policies consistently in all prior years presented
including retrospective application of the Group’s accounting policy
change relating to Income Taxes. Refer to note 39 ‘New and amended
accounting standards and interpretations and changes to accounting
policies’ 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 30
‘Subsidiaries’, note 31 ‘Investments accounted for using the equity
method’ and note 32 ‘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
134
BHP
Annual Report 2021
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 for 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.
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).
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
Assets and liabilities
Equity
Reserves
Date of underlying transaction
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.
Significant accounting policies, judgements and estimates
The Group has identified a number of accounting policies under
which significant judgements, estimates and assumptions are made.
All judgements, estimates and assumptions are based on the most
current facts and circumstances and are reassessed on an ongoing
basis. Actual results in future reporting periods may differ for these
estimates under different assumptions and conditions.
Significant judgements and key estimates and assumptions made
in applying these accounting policies are embedded within the
following notes:
Note
4
6
10
11
11
11
11
13
15
21
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
Closure and rehabilitation provisions
Leases
The Samarco dam failure, impairment assessments and closure
and rehabilitation provisions have been identified as areas involving
significant judgement and where changes to key estimates and
assumptions may materially affect financial results and the carrying
amount of assets and liabilities to be reported in the next reporting
period. Additional information including sensitivity analysis, where
appropriate, has been provided in the relevant notes to enhance an
understanding of the impact of key estimates and assumptions on
the Group’s financial position and performance.
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
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 the period the Group continued to experience lower
volumes at certain of our operated assets and to incur incremental
directly attributable costs including those associated with the increased
provision of health and hygiene services, the impacts of maintaining social
distancing requirements and demurrage and other standby charges
related to delays caused by COVID-19. These incremental costs have been
classified as an exceptional item, as outlined in note 3 ‘Exceptional items’.
As the pandemic continues to evolve, with the extent and timing of impacts
varying across the Group’s key operating locations, it remains difficult to
predict the full extent and duration of resulting operational and economic
impacts for the Group. 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 13 ‘Impairment of
non-current assets’, respectively. Given the uncertainty associated with the
pandemic, management assesses the appropriate financial treatment and
disclosure of COVID-19 impacts each reporting period.
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. In assessing
the appropriateness of the going concern assumption over the going
concern period, management have stress tested BHP’s most recent
financial projections to incorporate a range of potential future outcomes by
considering BHP’s principal risks. The Group’s financial forecasts, including
downside commodity price and production scenarios, 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.
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 4.6.
Section 4.6 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
Climate change
The Group continues to develop its assessment of the potential
impacts of climate change and the transition to a low carbon economy.
The Group’s current climate change strategy focuses on reducing
operational greenhouse gas (GHG) emissions, investing in low emissions
technologies, supporting emissions reductions in our value chain and
promoting product stewardship, managing climate-related risk and
opportunity, and working with others to enhance the global policy and
market response. Future changes to the Group’s climate change strategy
or global decarbonisation signposts may impact the Group’s significant
judgements and key estimates and result in material changes to financial
results and the carrying values of certain assets and liabilities in future
reporting periods.
The Group’s current climate change strategy is reflected in the Group’s
significant judgements and key estimates, and therefore the Financial
Statements, as follows:
Transition risks
The Group’s targets and goals
As part of its response to the Paris Agreement goals, the Group has set
a target to reduce its operational GHG emissions (Scope 1 and Scope 2
from our operated assets) by at least 30 per cent from FY2020 levels by
FY2030 and a goal to achieve net zero operational GHG emissions by
2050. For the FY2030 target, the FY2020 baseline will be adjusted for
any material acquisitions and divestments based on GHG emissions at
the time of the transaction, and carbon offsets will be used as required.
Emissions reduction projects aimed at contributing to the achievement
of the Group’s operational GHG emissions target and goal have been
incorporated into the forecast cash flows of the Group’s assets.
BHP
Annual Report 2021
135
GovernanceAdditional Information241Strategic Report3Financial Statements The Group’s offset strategy is currently being managed at a
consolidated Group level and therefore is not currently incorporated
into the forecast cash flows of individual assets. Any change to the
Group’s climate change strategy could impact these forecasts and
the Group’s significant judgements and key estimates.
Although all potential financial reporting consequences under the Group’s
1.5°C Paris-aligned scenario are currently impracticable to fully assess, the
long-term commodity price outlooks under this scenario are either largely
consistent with or favourable to the price outlooks in the Group’s current
planning cases, with the exception of energy coal, oil and natural gas.
There are inherent limitations with scenario analysis and it is difficult to
predict which, if any, of the scenarios might eventuate and none of the
scenarios considered constitutes a definitive outcome for the Group.
The long-term commodity price outlooks under the Group’s 1.5°C Paris-
aligned scenario, excluding energy coal, oil and natural gas, reflect:
– Copper and nickel benefiting from the dramatic pace of electrification
over and above the Group’s current planning cases
– Iron ore growth underpinned by the benefit to steel demand from
the construction of renewables, particularly wind power
– Potash growth reflecting the potential for greater penetration
of biofuels
– Metallurgical coal supported by the limited alternatives in steelmaking
over the scenario timeframe
Given the positive long-term price outlooks for these commodities, the
Group currently considers that a material adverse change is not expected
to the valuation, and remaining useful life, of assets and discounting
of closure and rehabilitation provisions for assets relating to these
commodities under its 1.5°C Paris-aligned scenario.
For energy coal, oil and natural gas, long-term commodity price outlooks
under the Group’s 1.5°C Paris-aligned scenario are unfavourable to the
price outlooks in the Group’s current planning cases. However, recent
portfolio announcements and impairments recognised in FY2021 limit
the exposure of the carrying value of the Group’s assets to long-term
commodity prices for energy coal, oil and natural gas, as:
– the Group has announced a merger proposal to combine the Group’s
petroleum business with Woodside
– the Group has announced the signing of a Sale and Purchase
Agreement to divest the Group’s 33.3 per cent interest in Cerrejón
– following impairments recognised in FY2021, the carrying value
of the Group’s NSWEC assets is no longer material
Further, as management would alter its operating and investment plans
in such a pricing environment for these assets to mitigate cash flow and
valuation impacts, it is currently impracticable to fully assess the potential
impacts on the significant judgements and key estimates used in the
preparation of the Group’s Financial Statements. However, given the
factors outlined above, NSWEC closure provisions are considered the
liabilities most susceptible to the long-term impacts of the Group’s 1.5°C
Paris-aligned scenario as reserves and resources may become incapable
of extraction in an economically viable fashion prior to the current best
estimate of remaining useful life. In such a scenario, closure activity may
be performed earlier than the Group’s current best estimate, impacting
the closure provision.
Physical risks
The Group is progressing work to assess the potential impact of physical
risks of climate change in line with the Group’s Risk Management
Framework. Given the ongoing nature of the Group’s physical risk
assessment process, inclusion of adaptation risk in the Group’s operating
plans, and associated asset valuations, is currently limited. As the Group
progresses its adaptation strategy, the identification of additional risks or
the detailed development of the Group’s response may result in material
changes to financial results and the carrying values of assets and liabilities
in future reporting periods.
The Group continues to invest, including in partnership with others,
in emissions reduction projects and technology innovation and
development in its value chain to support reductions to its total
reported Scope 3 GHG emissions inventory. However, while we seek
to influence, Scope 3 emissions occur outside of our direct control.
Reduction pathways are dependent on the development and upstream
or downstream deployment of solutions and/or supportive policy.
It is therefore currently not possible to reliably estimate or measure
the full potential financial statement impacts of the Group’s pursuit
of its Scope 3 goals and targets.
Expenditure under the Climate Investment Program (CIP) which, as
announced by the Group in July 2019, aims to invest at least US$400 million
over the CIP’s five-year life in emissions reduction projects across the
Group’s operated assets and value chain, is recognised in the relevant
year of expenditure.
Global transition signposts and commodity impacts
In addition to the Group’s targets and goals, significant judgements and
key estimates are also impacted by the Group’s current assessment of
the range of economic and climate related conditions that could exist in
transitioning to a low carbon economy, considering the current trajectory
of society and the global economy as a whole. Despite recent progress,
all 1.5°C pathways to 2050 represent a major departure from today’s
global trajectory and the Group does not believe the technological,
regulatory, or economic foundations for a rapid transition to net zero
emissions are currently in place. Acknowledging these signposts, the
Group’s current best estimate of the potential impacts of climate change
and the transition to a low carbon economy are reflected in the following
two scenarios, which consider existing policies, trends and commitments
and the Group’s view of the most likely range of futures for the global
economy and associated sub-systems:
– Central Energy View: reflects, and is periodically updated to respond
to, existing policy trends and commitments and currently tracks to
approximately 3°C temperature increase above pre-industrial levels
by 2100
– Lower Carbon View: currently tracks to approximately 2.5°C
temperature increase by 2100, and accelerates decarbonisation
trends and policies, particularly in easier-to-abate sectors such
as power generation and light duty vehicles
These two scenarios are reviewed periodically to reflect new information.
These scenarios are currently being used as inputs to the Group’s
planning cases, informing updates to the Group’s supply, demand and
price forecasts, capital allocation and portfolio decisions. As such, these
scenarios impact certain significant judgements and key estimates,
including the determination of the valuation of assets and potential
impairment charges (notes 11 ‘Property, plant and equipment’ and 13
‘Impairment of non-current assets’), the estimation of the remaining
useful economic life of assets for depreciation purposes (note 11 ‘Property,
plant and equipment’), the timing of closure and rehabilitation activities
(note 15 ‘Closure and rehabilitation provisions’) and the recoverability
of certain deferred tax assets (note 14 ‘Deferred tax balances’).
The Group continues to monitor global decarbonisation signposts and
update its planning cases accordingly. Where such signposts indicate
the appropriate measures are in place for achievement of a 1.5ºC Paris-
aligned scenario, this will be reflected in the Group’s planning cases.
Sensitivity to demand for fossil fuels
The Group acknowledges that there are a range of possible energy
transition scenarios, including those that are aligned with the Paris
Agreement goals, that may indicate different outcomes for individual
commodities. While not currently an input to the Group’s planning
cases, the resilience of the Group’s portfolio to a 1.5°C Paris-aligned
scenario (the Group’s 1.5°C Paris-aligned scenario) has been considered,
including the impact of Paris-aligned commodity price outlooks under
that scenario on the Group’s latest asset plans.
136
BHP
Annual Report 2021
3.1.6 Notes to the Financial Statements
Performance
1 Segment reporting
Reportable segments
The Group operated four reportable segments during FY2021, 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
Copper
Iron Ore
Coal
Exploration, development and production of oil and gas
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 year ended 30 June 2019 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, and consolidation
adjustments. Revenue not attributable to reportable segments comprises the sale of freight and fuel to third parties, as well as revenues from
unallocated operations. Exploration and technology activities are recognised within relevant segments.
Total assets and total liabilities for FY2020 and FY2019 have been restated to reflect changes to the Group’s accounting policy following a decision
by the IFRS Interpretations Committee on IAS 12/AASB 112 ‘Income Taxes’ (IAS 12), resulting in the retrospective recognition of US$950 million of
Goodwill at Olympic Dam (included in the Copper Segment) and an offsetting US$1,021 million increase in Deferred tax liabilities (included in Group and
unallocated). Refer to note 39 ‘New and amended accounting standards and interpretations and changes to accounting policies’ for further information.
Year ended 30 June 2021
US$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
3,895
51
3,946
2,300
(1,739)
(128)
433
(47)
Copper
15,726
−
Iron Ore
34,475
−
15,726
34,475
8,489
(1,608)
(72)
6,809
(144)
26,278
(1,971)
(13)
24,294
(1,319)
Coal
5,154
−
5,154
288
(845)
(20)
(577)
(1,567)
Group and
unallocated items/
eliminations
Group total
1,567
(51)
1,516
24
(661)
(31)
(668)
(1,308)
60,817
−
60,817
37,379
(6,824)
(264)
30,291
(4,385)
(1,305)
24,601
Capital expenditure (cash basis)
994
2,180
2,188
579
665
6,606
(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 2020
US$M
Restated
Revenue
Inter-segment revenue
Total revenue
Underlying EBITDA
Depreciation and amortisation
Impairment losses(1)
Underlying EBIT
Exceptional items(2)
Net finance costs
Profit before taxation
(6)
253
13,775
5,811
692
1,482
31,517
4,589
(1,126)
−
26,171
7,508
(480)
−
11,030
3,518
(1)
7
26,434
31,896
(921)
1,742
108,927
53,322
Petroleum
4,008
62
4,070
2,207
(1,445)
(12)
750
(6)
Copper
10,666
−
10,666
4,347
(1,740)
(17)
2,590
(1,228)
Iron Ore
20,797
−
20,797
14,554
(1,608)
(22)
12,924
(614)
Coal
6,241
1
6,242
1,632
(807)
(14)
811
(18)
Group and
unallocated items/
eliminations
Group total
1,219
(63)
1,156
(669)
(512)
(20)
(1,201)
413
42,931
−
42,931
22,071
(6,112)
(85)
15,874
(1,453)
(911)
13,510
Capital expenditure (cash basis)
909
2,434
2,328
603
626
6,900
(Loss)/profit from equity accounted investments,
related impairments and expenses
Investments accounted for using the equity method
Total assets(3)
Total liabilities(3)
(4)
245
13,071
4,824
67
1,558
28,892
3,535
(508)
−
23,841
5,441
(68)
776
12,110
2,601
1
6
27,819
37,157
(512)
2,585
105,733
53,558
BHP
Annual Report 2021
137
GovernanceAdditional Information241Strategic Report3Financial Statements 1 Segment reporting continued
Year ended 30 June 2019
US$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
Petroleum
5,853
77
5,930
4,061
(1,560)
(21)
2,480
−
Copper
10,838
−
10,838
4,550
(1,835)
(128)
2,587
−
Iron Ore
17,251
4
17,255
11,129
(1,653)
(79)
9,397
(971)
Capital expenditure (cash basis)
(Loss)/profit from equity accounted investments,
related impairments and expenses
Investments accounted for using the equity method
Total assets(3)
Total liabilities(3)
645
2,735
1,611
(2)
239
12,434
4,102
303
1,472
28,378
3,340
(945)
−
22,592
5,106
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
35,060
(546)
2,569
101,811
50,058
Coal
9,121
−
9,121
4,067
(632)
(35)
3,400
−
655
103
853
12,124
2,450
(1) Impairment losses exclude exceptional items of US$2,371 million (2020: US$409 million; 2019: US$ nil).
(2) Exceptional items reported in Group and unallocated include Samarco dam failure costs of US$(14) million (2020: US$(32) million; 2019: US$(31) million) and Samarco related
other income of US$34 million (2020: US$489 million; 2019: US$50 million). Refer to note 3 ‘Exceptional items’ for further information.
(3) Total assets and total liabilities of FY2020 and FY2019 have been restated to reflect changes to the Group’s accounting policy. Refer to note 39 ‘New and amended accounting
standards and interpretations and changes to accounting policies’ for further information.
Geographical information
Australia
Europe
China
Japan
India
South Korea
Rest of Asia
North America
South America
Rest of world
Australia
North America
South America
Rest of world
Unallocated assets(2)
Revenue by location of customer
2021
US$M
2020
US$M
2019
US$M
2,951
1,050
39,727
4,808
2,189
3,436
3,603
2,432
426
195
60,817
2,232
1,156
26,576
3,904
1,475
2,666
2,583
1,827
315
197
42,931
2,568
1,875
24,274
4,193
2,479
2,550
2,940
2,442
662
305
44,288
Non-current assets by location of assets(1)
2021
US$M
48,612
9,701
18,548
1,851
3,522
82,234
2020
US$M
Restated
48,236
9,682
18,179
1,955
6,210
84,262
2019
US$M
Restated
45,963
8,633
18,404
371
5,067
78,438
(1) FY2020 and FY2019 have been restated to reflect changes to the Group’s accounting policy following a decision by the IFRS Interpretations Committee on IAS 12 ‘Income
Taxes’, resulting in the retrospective recognition of US$950 million of Goodwill at Olympic Dam. Refer to note 39 ‘New and amended accounting standards and interpretations
and changes to accounting policies’ for further information.
(2) Unallocated assets comprise deferred tax assets and other financial assets.
Underlying EBITDA
Underlying EBITDA is earnings before net finance costs, depreciation, amortisation and impairments, taxation expense, Discontinued operations and
any exceptional items. Underlying EBITDA includes BHP’s share of profit/(loss) from investments accounted for using the equity method including net
finance costs, depreciation, amortisation and impairments and taxation expense/(benefit).
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 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.
138
BHP
Annual Report 2021
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
2021
US$M
327
1,066
893
560
417
231
204
164
11
73
3,946
9,470
1,801
2,211
2,244
15,726
34,337
18
120
34,475
4,315
839
−
−
5,154
1,567
(51)
60,817
2020
US$M
361
1,102
1,076
561
277
216
191
159
39
88
4,070
6,719
1,395
1,463
1,089
10,666
20,663
15
119
20,797
5,357
885
−
−
6,242
1,219
(63)
42,931
2019
US$M
507
1,237
1,657
979
540
319
287
258
10
136
5,930
6,876
1,502
1,351
1,109
10,838
17,066
32
157
17,255
7,679
1,421
19
2
9,121
1,225
(81)
44,288
(1) Total Petroleum revenue includes: crude oil US$2,013 million (2020: US$2,033 million; 2019: US$3,171 million), natural gas US$977 million (2020: US$980 million; 2019:
US$1,259 million), LNG US$682 million (2020: US$774 million; 2019: US$1,179 million), NGL US$212 million (2020: US$198 million; 2019: US$263 million) and other US$62 million
(2020: US$85 million; 2019: US$58 million).
(2) Total Copper revenue includes: copper US$14,812 million (2020: US$10,044 million; 2019: US$10,215 million) and other US$914 million (2020: US$622 million; 2019:
US$623 million). Other consists of silver, zinc, molybdenum, uranium and gold.
(3) Total Coal revenue includes: metallurgical coal US$4,260 million (2020: US$5,311 million; 2019: US$7,568 million) and energy coal US$894 million (2020: US$931 million; 2019:
US$1,553 million).
(4) Group and unallocated items revenue includes: Nickel West US$1,545 million (2020: US$1,189 million; 2019: US$1,193 million) and other revenue US$22 million (2020:
US$30 million; 2019: US$32 million).
Revenue consists of revenue from contracts with customers of US$59,302 million (2020: US$43,087 million; 2019: US$44,361 million) and other
revenue of US$1,515 million (2020: US$(156) million; 2019: US$(73) 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 2021
139
GovernanceAdditional Information241Strategic Report3Financial Statements 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.
Year ended 30 June 2021
Exceptional items by category
Samarco dam failure
COVID-19 related costs
Impairment of Energy coal assets
Impairment of Potash assets
Total
Attributable to non-controlling interests
Attributable to BHP shareholders
Gross
US$M
(1,087)
(546)
(1,523)
(1,314)
(4,470)
(34)
(4,436)
Tax
US$M
(71)
146
(651)
(751)
(1,327)
10
(1,337)
Samarco Mineração S.A. (Samarco) dam failure
The FY2021 exceptional loss of US$1,158 million (after tax) related to the Samarco dam failure in November 2015 comprises the following:
Year ended 30 June 2021
Other income
Expenses excluding net finance costs:
Costs incurred directly by BHP Brasil and other BHP entities in relation to the Samarco dam failure
Loss from equity accounted investments, related impairments and expenses:
Samarco impairment expense
Samarco Germano dam decommissioning
Samarco dam failure provision
Fair value change on forward exchange derivatives
Net finance costs
Income tax expense
Total(1)
Net
US$M
(1,158)
(400)
(2,174)
(2,065)
(5,797)
(24)
(5,773)
US$M
34
(46)
(111)
(15)
(1,000)
136
(85)
(71)
(1,158)
(1) Refer to note 4 ‘Significant events – Samarco dam failure’ for further information.
COVID-19 related costs
COVID-19 is considered a single protracted globally pervasive event with financial impacts being experienced over a number of reporting periods.
The exceptional item reflects the directly attributable COVID-19 pandemic related additional costs for the Group for the year ended 30 June 2021,
including costs associated with the increased provision of health and hygiene services, the impacts of maintaining social distancing requirements
and demurrage and other standby charges related to delays caused by COVID-19.
Impairment of Energy coal assets
The Group recognised an impairment charge of US$1,704 million (after tax) in relation to New South Wales Energy Coal (NSWEC) reflecting the status
of the divestment process and current market conditions for thermal coal, the strengthening Australian dollar and changes to the mine plan. In addition,
the Group recognised an impairment charge of US$470 million (after tax) for Cerrejón, reflecting the expected net sales proceeds. Refer to note 13
‘Impairment of non-current assets’ for further information on the pre-tax impairment.
Impairment of Potash assets
The Group recognised an impairment charge of US$2,065 million (after tax) in relation to Potash. The impairment charge reflects an analysis of recent
market perspectives and the value that we would now expect a market participant to attribute to our investments to date. Refer to note 13 ‘Impairment
of non-current assets’ for further information on the pre-tax impairment.
The exceptional items relating to the year ended 30 June 2020 and the year ended 30 June 2019 are detailed below.
30 June 2020
Year ended 30 June 2020
Exceptional items by category
Samarco dam failure
Cancellation of power contracts
COVID-19 related costs
Cerro Colorado impairment
Total
Attributable to non-controlling interests
Attributable to BHP shareholders
140
BHP
Annual Report 2021
Gross
US$M
(176)
(778)
(183)
(409)
(1,546)
(291)
(1,255)
Tax
US$M
−
271
53
(83)
241
90
151
Net
US$M
(176)
(507)
(130)
(492)
(1,305)
(201)
(1,104)
3 Exceptional items continued
Samarco Mineração S.A. (Samarco) dam failure
The FY2020 exceptional loss of US$176 million related to the Samarco dam failure in November 2015 comprises the following:
Year ended 30 June 2020
Other income
Expenses excluding net finance costs:
Costs incurred directly by BHP Brasil and other BHP entities in relation to the Samarco dam failure
Loss from equity accounted investments, related impairments and expenses:
Samarco impairment expense
Samarco Germano dam decommissioning
Samarco dam failure provision
Net finance costs
Total(1)
US$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$492 million (after tax) in relation to Cerro Colorado. This reflects the decision taken by the Group
to reduce Cerro Colorado’s throughput for the remaining period of its current environmental licence, which expires at the end of CY2023.
30 June 2019
Year ended 30 June 2019
Exceptional items by category
Samarco dam failure
Global taxation matters
Total
Attributable to non-controlling interests
Attributable to BHP shareholders
Gross
US$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$1,060 million related to the Samarco dam failure in November 2015 comprises the following:
Year ended 30 June 2019
Other income
Expenses excluding net finance costs:
Costs incurred directly by BHP Brasil and other BHP entities in relation to the Samarco dam failure
Loss from equity accounted investments, related impairments and expenses:
Samarco impairment expense
Samarco Germano dam decommissioning
Samarco dam failure provision
Net finance costs
Total(1)
Net
US$M
(1,060)
242
(818)
−
(818)
US$M
50
(57)
(96)
(263)
(586)
(108)
(1,060)
(1) Refer to note 4 ‘Significant events – Samarco dam failure’ for further information.
Global taxation matters
Global taxation matters includes amounts released from provisions for tax matters and other claims resolved during the period.
4 Significant events – Samarco dam failure
On 5 November 2015, the Samarco Mineração S.A. (Samarco) iron ore operation in Minas Gerais, Brazil, experienced a tailings dam failure that resulted
in a release of mine tailings, flooding the communities of Bento Rodrigues, Gesteira and Paracatu and impacting other communities downstream
(the Samarco dam failure). Refer to section 1.15 ‘Samarco’.
Samarco is jointly owned by BHP Billiton Brasil Ltda (BHP Brasil) and Vale S.A. (Vale). BHP Brasil’s 50 per cent interest is accounted for as an equity
accounted joint venture investment. BHP Brasil does not separately recognise its share of the underlying assets and liabilities of Samarco, but instead
records the investment as one line on the balance sheet. Each period, BHP Brasil recognises its 50 per cent share of Samarco’s profit or loss and adjusts
the carrying value of the investment in Samarco accordingly. Such adjustment continues until the investment carrying value is reduced to US$ 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.
BHP
Annual Report 2021
141
GovernanceAdditional Information241Strategic Report3Financial Statements 4 Significant events – Samarco dam failure continued
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
2021 are shown in the tables 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)
Fair value change on forward exchange derivatives(6)
Loss from operations
Net finance costs(7)
Loss before taxation
Income tax expense(8)
Loss after taxation
Balance sheet movement
Trade and other payables
Derivatives
Tax liabilities
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)
Fair value change on forward exchange derivatives(6)
Net finance costs(7)
Changes in assets and liabilities:
Trade and other payables
Net operating cash flows
Net investment and funding of equity accounted investments(9)
Net investing cash flows
Net decrease in cash and cash equivalents
111
15
1,000
(136)
85
5
2021
US$M
(1,087)
(7)
(470)
(470)
(477)
95
(46)
459
−
93
5
2021
US$M
2020
US$M
2019
US$M
34
(46)
(111)
(15)
(1,000)
136
(1,002)
(85)
(1,087)
(71)
(1,158)
(5)
136
(71)
(741)
(681)
2020
US$M
(176)
430
(464)
(464)
(34)
489
(64)
(95)
46
(459)
−
(83)
(93)
(176)
−
(176)
(5)
−
–
(137)
(142)
96
263
586
−
108
(4)
50
(57)
(96)
(263)
(586)
−
(952)
(108)
(1,060)
−
(1,060)
4
−
–
(629)
(625)
2019
US$M
(1,060)
(11)
(424)
(424)
(435)
(1) Proceeds from insurance settlements.
(2) Includes legal and advisor costs incurred.
(3) Impairment expense from working capital funding provided during the period.
(4) US$(6) million (2020: US$37 million; 2019: US$263 million) change in estimate and US$21 million (2020: US$(83) million; 2019: US$ nil) exchange translation.
(5) US$842 million (2020: US$916 million; 2019: US$579 million) change in estimate and US$158 million (2020: US$(457) million; 2019: US$7 million) exchange translation.
(6) During the period the Group entered into forward exchange contracts to limit the Brazilian reais exposure on the dam failure provisions. While not applying hedge accounting, the
fair value changes in the forward exchange instruments are recorded within Loss from equity accounted investments, related impairments and expenses in the Income Statement.
(7) Amortisation of discounting of provision.
(8) Includes tax on forward exchange derivatives and other taxes incurred during the period.
(9) Includes US$(111) million (2020: US$(95) million; 2019: US$(96) million) funding provided during the period, US$(351) million (2020: US$(365) million; 2019: US$(328) million)
utilisation of the Samarco dam failure provision, and US$(8) million (2020: US$(4) million; 2019: US$ nil) utilisation of the Samarco Germano decommissioning provision.
Equity accounted investment in Samarco
BHP Brasil’s investment in Samarco remains at US$ nil. BHP Brasil provided US$111 million funding under a working capital facility during the period and
recognised impairment losses of US$111 million. No dividends have been received by BHP Brasil from Samarco during the period and Samarco currently
does not have profits available for distribution.
142
BHP
Annual Report 2021
4 Significant events – Samarco dam failure continued
Provisions related to the Samarco dam failure
At the beginning of the financial year
Movement in provisions
Comprising:
Utilised
Adjustments charged to the income statement:
Change in estimate – Samarco dam failure provision
Change in estimate – Samarco Germano dam decommissioning
Amortisation of discounting impacting net finance costs
Exchange translation
At the end of the financial year
Comprising:
Current
Non-current
At the end of the financial year
Comprising:
Samarco dam failure provision
Samarco Germano dam decommissioning provision
(359)
842
(6)
85
179
2021
US$M
2,051
741
2,792
1,206
1,586
2,792
2,560
232
(369)
916
37
93
(540)
2020
US$M
1,914
137
2,051
896
1,155
2,051
1,824
227
Samarco dam failure provisions and contingencies
As at 30 June 2021, 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 is developing and executing 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 the Court’s decisions have been considered in the Samarco dam failure provision change in
estimate. Any future decisions will be analysed for impacts on the provision at the time of any decision.
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 has primary responsibility 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 have secondary funding obligations under the Framework Agreement
in proportion to its 50 per cent shareholding in Samarco.
Samarco began to gradually recommence operations in December 2020, however, there remains significant uncertainty regarding Samarco’s long-
term cash flow generation. 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$2.6 billion before tax and after discounting at 30 June 2021 (30 June 2020: US$1.8 billion).
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$30 billion) Federal Public Prosecution Office claim (described below).
Pre-requisites established in the Governance Agreement, for re-negotiation of the Framework Agreement were not implemented during the two year
period and on 30 September 2020, Brazilian Federal and State prosecutors and public defenders filed a request for the immediate resumption of the
R$155 billion (approximately US$30 billion) claim, which has been suspended from the date of ratification of the Governance Agreement. The claim
remains suspended after the parties to the claim agreed to continue the suspension on 19 March 2021. BHP Brasil, Samarco, Vale and Federal and State
prosecutors have been engaging in negotiations to seek a definitive and substantive settlement of the obligations under the Framework Agreement
and the R$155 billion (approximately US$30 billion) Federal Public Prosecution Office claim. It is not possible to provide a range of outcomes or a reliable
estimate of potential settlement outcomes and there is a risk that a negotiated outcome may be materially higher than amounts currently reflected
in the Samarco dam failure provision. Until any 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.
BHP Brasil, Samarco and Vale are required to maintain security of an amount equal to the Fundação Renova’s annual budget up to a limit of R$2.2 billion
(approximately US$440 million). The security currently comprises R$1.3 billion (approximately US$260 million) in insurance bonds and a charge of
R$800 million (approximately US$160 million) over Samarco’s assets. A further R$100 million (approximately US$20 million) in liquid assets previously
maintained as security was released for COVID-19 related response efforts in Brazil.
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 Samarco’s long-term cash flow generation, BHP Brasil’s provision for a 50 per cent share of the expected Germano
decommissioning costs is US$232 million (30 June 2020: US$227 million). 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.
BHP
Annual Report 2021
143
GovernanceAdditional Information241Strategic Report3Financial Statements
4 Significant events – Samarco dam failure continued
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 2021. 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 85 per cent of remaining costs for Programs under
the Framework Agreement will be incurred by December 2023.
While the provisions have been measured based on latest information
available, likely changes in facts and circumstances in future reporting
periods may lead to material revisions to these estimates. However, it is
currently not possible to determine what facts and circumstances may
change, therefore revisions in future reporting periods due to the key
estimates and factors outlined below cannot be reliably measured.
The key estimates that may have a material impact upon the
provisions in the next and future reporting periods include:
– number of people eligible for financial assistance and
compensation and the corresponding amount of
expected compensation
– costs to complete key infrastructure programs, including
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 in Brazil and
other jurisdictions, including the impact of ongoing settlement
negotiations and outcome of the United Kingdom group
action complaint
– 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 long-term cash generation
– costs to complete the Germano dam decommissioning
– updates to discount and foreign exchange rates
– the outcomes of Samarco’s judicial reorganisation (defined below)
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.
144
BHP
Annual Report 2021
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$30 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$1.5 billion) injunction request. On 30 September 2020, Brazilian
Federal and State prosecutors and public defenders filed a request for the
immediate resumption of the R$155 billion (approximately US$30 billion)
claim, which has been suspended since the date of ratification of the
Governance Agreement. The claim remains suspended after the parties
to the claim agreed to continue the suspension on 19 March 2021.
BHP Brasil, Samarco, Vale and Federal and State prosecutors have been
engaging in negotiations to seek a definitive and substantive settlement
of the obligations under the Framework Agreement and the R$155 billion
(approximately US$30 billion) Federal Public Prosecution Office claim.
It is not possible to provide a range of outcomes or a reliable estimate
of potential settlement outcomes and there is a risk that a negotiated
outcome may be materially higher than amounts currently reflected
in the Samarco dam failure provision.
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, had
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 appealed this
decision, which was affirmed by the court of appeals in March 2021.
Australian class action complaint
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 were named as defendants in group
action claims for damages filed in the courts of England. These claims
were 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 complaint and a subsequent application for permission to
appeal have been dismissed by the court, however an application by
the claimants to reopen the proceedings was granted in July 2021,
allowing the claimants to appeal previous dismissals of the claim.
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.
4 Significant events – Samarco dam failure continued
The Federal Court terminated the charges against eight of the Affected
Individuals. The Federal Prosecutors’ Office has appealed seven of those
decisions with hearings of the appeals still pending. 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
Civil public actions filed by State Prosecutors in Minas Gerais (claiming
damages of approximately R$7.5 billion, US$1.5 billion), State Prosecutors
in Espírito Santo (claiming damages of approximately R$2 billion,
US$400 million), and public defenders in Minas Gerais (claiming damages
of approximately R$10 billion, US$2 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 general liability and directors and officers
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 along with the third party claims and class actions
referred to above. In the period since the dam failure to 30 June 2021, the
Group has recognised US$573 million other income from general liability
insurance proceeds relating to the dam failure. Recoveries related to
general liability insurance are now considered complete.
As at 30 June 2021, 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.
BHP has agreed to fund a total of up to US$765 million for the Fundação
Renova programs and Samarco’s working capital during calendar year 2021.
This comprises up to US$725 million relating to Fundação Renova programs
until 31 December 2021, which will be offset against the Group’s provision
for the Samarco dam failure, and a short-term working capital facility of
up to US$40 million to be made available to Samarco until 31 December
2021. Amounts related to Fundação Renova and Samarco working capital
incurred in the six months to 30 June 2021 have been reflected in the
utilisation of the provision and impairment expense respectively disclosed
above. Any additional requests for funding or future investment provided
would be subject to a future decision by BHP, accounted for at that time.
Samarco judicial reorganisation
Samarco filed for judicial reorganisation (JR) in April 2021, with the
Commercial Courts of Belo Horizonte, State of Minas Gerais, Brazil (JR
Court), after multiple enforcement actions taken by certain creditors of
Samarco. Samarco’s JR filing followed unsuccessful attempts to negotiate
a debt restructure with certain financial creditors and multiple legal
actions filed by those creditors which threatened Samarco’s operations.
The JR is an insolvency proceeding with a means for Samarco to seek to
restructure its financial debts and establish a sustainable financial position
that allows Samarco to continue to rebuild its operations and strengthen
its ability to meet its Fundação Renova funding obligations. Samarco’s
operations are expected to continue during the JR and restructure process.
The JR is not expected to affect Samarco’s obligation or commitment to
make full redress for the 2015 Fundão dam failure, and is not expected
to impact Fundação Renova’s ability to undertake that remediation and
compensation. It is not possible to determine the outcomes of the JR
or estimate any impact that the reorganisation may have for BHP Brasil,
including its share of the Samarco dam failure provisions.
The following section includes disclosure required by IFRS of
Samarco’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 2021, Samarco has recognised provisions of US$0.2 billion
(30 June 2020: 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 2021, an insurance receivable has not
been recognised by Samarco in respect of ongoing matters.
Samarco commitments
At 30 June 2021, Samarco has commitments of US$0.7 billion (30 June
2020: US$0.4 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$5.9 billion (approximately US$1.2 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$4.6 billion (approximately US$0.9 billion).
BHP
Annual Report 2021
145
GovernanceAdditional Information241Strategic Report3Financial Statements 5 Expenses and other income
Employee benefits expense:
Wages, salaries and redundancies
Employee share awards
Social security costs
Pension and other post-retirement obligations
Less employee benefits expense classified as exploration and evaluation expenditure
Changes in inventories of finished goods and work in progress
Raw materials and consumables used
Freight and transportation
External services
Third-party commodity purchases
Net foreign exchange losses/(gains)
Fair value change on derivatives(1)
Government royalties paid and payable
Exploration and evaluation expenditure incurred and expensed in the current period
Depreciation and amortisation expense
Net impairments:
Property, plant and equipment
Goodwill and other intangible assets
All other operating expenses
Total expenses
Insurance recoveries(2)
Other income(3)
Total other income
2021
US$M
2020
US$M
2019
US$M
4,399
3,706
3,683
124
3
316
(119)
(334)
4,940
2,037
5,260
2,230
310
145
3,217
430
6,824
2,583
52
2,083
34,500
(46)
(464)
(510)
129
2
283
(65)
(326)
5,509
1,981
4,404
1,139
(603)
422
2,362
517
6,112
494
−
2,709
28,775
(489)
(288)
(777)
138
4
292
(85)
496
4,591
2,378
4,745
1,069
(147)
8
2,538
516
5,829
250
14
1,703
28,022
(57)
(336)
(393)
(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) Insurance recoveries is principally related to claims received from Samarco dam failure. Refer to note 4 ‘Significant events – Samarco dam failure’ for further information.
(3) 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.
146
BHP
Annual Report 2021
6 Income tax expense
Total taxation expense comprises:
Current tax expense
Deferred tax expense/(benefit)
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
Non-tax effected operating losses and capital gains(1)
Tax on remitted and unremitted foreign earnings
Tax effect of loss from equity accounted investments, related impairments and expenses(2)
Investment and development allowance
Tax rate changes
Amounts (over)/under provided in prior years
Recognition of previously unrecognised tax assets
Foreign exchange adjustments
Impact of tax rates applicable outside of Australia
Other
Income tax expense
Royalty-related taxation (net of income tax benefit)
Total taxation expense
2021
US$M
9,825
1,325
11,150
2020
US$M
5,109
(335)
4,774
2019
US$M
5,408
121
5,529
2021
US$M
2020
US$M
2019
US$M
24,601
7,380
3,112
485
317
−
(1)
(11)
(28)
(95)
(603)
365
10,921
229
11,150
13,510
4,053
15,049
4,515
707
225
154
(99)
(8)
64
(30)
20
(167)
(211)
4,708
66
4,774
742
283
164
(94)
6
(21)
(10)
(25)
(312)
87
5,335
194
5,529
(1) Includes the tax impacts related to the exceptional impairments of NSWEC and Potash in the year ended 30 June 2021 and Cerro Colorado in the year ended 30 June 2020,
as presented in note 3 ‘Exceptional items’. There were no exceptional impairments in the year ended 30 June 2019.
(2) The loss from equity accounted investments, related impairments and expenses is net of income tax, with the exception of the Samarco forward exchange derivatives
described in note 4 ‘Significant events – Samarco dam failure’. This item removes the prima facie tax effect on such loss, related impairments and expenses, excluding
the impact of the Samarco forward exchange derivatives which are taxable.
Income tax recognised in other comprehensive income is as follows:
Income tax effect of:
Items that may be reclassified subsequently to the income statement:
Hedges:
Gains/(losses) taken to equity
(Gains)/losses transferred to the income statement
Others
Income tax (charge)/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 (charge)/credit relating to items that will not be reclassified to the income statement
Total income tax (charge)/credit relating to components of other comprehensive income(1)
2021
US$M
2020
US$M
2019
US$M
(259)
252
(1)
(8)
(21)
1
(20)
(28)
94
(89)
−
5
25
1
26
31
98
(90)
−
8
7
12
19
27
(1) Included within total income tax relating to components of other comprehensive income is US$(28) million relating to deferred taxes and US$ nil relating to current taxes
(2020: US$31 million and US$ nil; 2019: US$15 million and US$12 million).
BHP
Annual Report 2021
147
GovernanceAdditional Information241Strategic Report3Financial Statements 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 or other comprehensive income, in which case the tax effect is also recognised in equity or other
comprehensive income.
Current tax
Deferred tax
Royalty-related taxation
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:
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 liabilities and
included in expenses.
– 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
2021. Matters with a possible economic outflow and/or presently incapable of being measured reliably are contingent liabilities and disclosed in note 34
‘Contingent liabilities’. Details of uncertain tax and royalty matters relating to Samarco are disclosed in note 4 ‘Significant events – Samarco dam failure’.
148
BHP
Annual Report 2021
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. Estimates and assumptions
relating to projected earnings and cash flows as applied in the Group
impairment process are used for operating assets.
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 34 ‘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
Headline earnings per ordinary share (US cents)
– Basic
– Diluted
Refer to note 29 ‘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.
Headline earnings is a Johannesburg Stock Exchange defined performance measure and is reconciled from earnings attributable to ordinary
shareholders as follows:
Earnings attributable to BHP shareholders
Adjusted for:
(Gain)/loss on sales of property, plant and equipment, Investments and Operations(1)
Impairments of property, plant and equipment, financial assets and intangibles
Samarco impairment expense
Cerrejón impairment expense
Other(2)
Recycling of re-measurements from equity to the income statement
Tax effect of above adjustments
Subtotal of adjustments
Headline earnings
Diluted headline earnings
2021
US$M
11,304
(50)
2,633
111
466
−
−
(60)
3,100
14,404
14,404
2020
US$M
7,956
4
494
95
−
48
−
54
695
8,651
8,651
(1) Included in other income.
(2) Mainly represent BHP share of impairment embedded in the statutory income statement of the Group’s equity accounted investments.
2021
2020
2019
11,304
11,304
5,057
5,068
223.5
223.5
223.0
223.0
284.8
284.2
7,956
7,956
5,057
5,069
157.3
157.3
157.0
157.0
171.1
170.7
8,648
8,306
5,180
5,193
166.9
160.3
166.5
159.9
164.9
164.5
2019
US$M
8,306
(52)
264
96
−
−
(6)
(64)
238
8,544
8,544
BHP
Annual Report 2021
149
GovernanceAdditional Information241Strategic Report3Financial Statements 7 Earnings per share continued
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$5.2 billion related to the disbursement of proceeds from the disposal of Onshore US.
For the purposes of calculating diluted earnings per share, the effect of 11 million dilutive shares has been taken into account for the year ended 30 June
2021 (2020: 12 million shares; 2019: 13 million shares). The Group’s only potential dilutive ordinary shares are share awards granted under the employee
share ownership plans for which terms and conditions are described in note 25 ‘Employee share ownership plans’. Diluted earnings per share calculation
excludes instruments which are considered antidilutive.
At 30 June 2021, there are no instruments which are considered antidilutive (2020: nil; 2019: nil).
Working capital
8 Trade and other receivables
Trade receivables
Loans to equity accounted investments
Other receivables
Total
Comprising:
Current
Non-current
2021
US$M
4,450
−
1,946
6,396
6,059
337
2020
US$M
1,974
40
1,617
3,631
3,364
267
Recognition and measurement
Trade receivables are recognised initially at their transaction 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 31 per cent (2020: 32 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 2021, trade receivables of US$68 million (2020: US$23 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 2021 has considered the impacts of COVID-19 and no material recoverability issues
have been identified. As COVID-19 continues to impact key markets in Asia, Europe and the United States, the Group continues to perform enhanced
credit monitoring of commercial counterparties.
At 30 June 2021, trade receivables are stated net of provisions for expected credit losses of US$3 million (2020: US$2 million).
The Group may accelerate trade receivables through Letters of Credit programs to collect receipts from debtors earlier than contractual sales terms
but elected not to do so as at 30 June 2021.
9 Trade and other payables
Trade payables
Other payables
Total
Comprising:
Current
Non-current
150
BHP
Annual Report 2021
2021
US$M
5,079
1,948
7,027
7,027
−
2020
US$M
4,396
1,372
5,768
5,767
1
10 Inventories
Raw materials and consumables
Work in progress
Finished goods
Total(1)
Comprising:
Current
Non-current
2021
US$M
1,904
3,046
834
5,784
4,426
1,358
2020
US$M
1,797
2,814
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.
711
Commodities ready-for-sale and not requiring further processing by the Group.
5,322
4,101
1,221
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$58 million were recognised during the year (2020: US$37 million; 2019: US$16 million). Inventory write-downs of US$27 million made in previous
periods were reversed during the year (2020: US$13 million; 2019: US$21 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. Key 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.
Resource assets
11 Property, plant and equipment
Net book value – 30 June 2021
At the beginning of the financial year
Additions(1)
Acquisition of subsidiaries & operations(2)
Remeasurements of index-linked freight contracts(3)
Depreciation for the year
Impairments for the year(4)
Disposals
Divestment and demerger of subsidiaries and operations(5)
Transfers and other movements
At the end of the financial year(6)
– Cost
– Accumulated depreciation and impairments
Net book value – 30 June 2020
At the beginning of the financial year
Impact of adopting IFRS 16
Additions(1)
Remeasurements of index-linked freight contracts(3)
Depreciation for the year
Impairments for the year(4)
Disposals
Transfers and other movements
At the end of the financial year(6)
– Cost
– Accumulated depreciation and impairments
Land and
buildings
US$M
Plant and
equipment
US$M
Other mineral
assets
US$M
Assets under
construction
US$M
Exploration
and evaluation
US$M
8,387
25
−
−
(694)
(208)
(18)
−
580
8,072
14,545
(6,473)
7,885
754
115
−
(630)
(17)
(12)
292
8,387
13,932
(5,545)
39,429
3,841
151
(59)
(5,748)
(877)
(9)
(14)
7,968
44,682
108,049
(63,367)
38,174
1,400
1,719
733
(5,104)
(189)
(22)
2,718
39,429
97,230
(57,801)
8,652
797
491
−
(310)
(687)
−
−
(2)
8,941
15,059
(6,118)
9,211
−
684
−
(294)
(288)
−
(661)
8,652
13,736
(5,084)
13,774
5,961
−
−
−
(745)
−
(2)
(8,556)
10,432
11,177
(745)
11,149
−
6,100
−
−
−
−
(3,475)
13,774
13,774
−
Total
US$M
72,362
10,717
642
(59)
(6,752)
(2,583)
(27)
(16)
(471)
73,813
151,361
2,120
93
−
−
−
(66)
−
−
(461)
1,686
2,531
(845)
(77,548)
1,622
−
218
−
−
−
(65)
345
2,120
2,899
(779)
68,041
2,154
8,836
733
(6,028)
(494)
(99)
(781)
72,362
141,571
(69,209)
(1) Includes change in estimates and net foreign exchange gains/(losses) related to the closure and rehabilitation provisions for operating sites. Refer to note 15 ‘Closure and
rehabilitation provisions’.
(2) Relates to the acquisition of an additional 28 per cent working interest in Shenzi.
(3) Relates to remeasurements of index-linked freight contracts including continuous voyage charters (CVCs). Refer to note 21 ‘Leases’.
(4) Refer to note 13 ‘Impairment of non-current assets’ for information on impairments.
(5) Relates to the sale of the Neptune asset in Gulf of Mexico.
(6) Includes the carrying value of the Group’s right-of-use assets relating to land and buildings and plant and equipment of US$3,350 million (2020: US$3,047 million). Refer to note
21 ‘Leases’ for the movement of the right-of-use assets.
BHP
Annual Report 2021
151
GovernanceAdditional Information241Strategic Report3Financial Statements 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 which the initial stripping activity benefits.
11 Property, plant and equipment continued
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.
Right-of-use assets are measured at cost, less any accumulated
depreciation and impairment losses, and adjusted for any remeasurement
of lease liabilities. Refer to note 21 ‘Leases’ for details.
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.
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.
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.
152
BHP
Annual Report 2021
11 Property, plant and equipment continued
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:
Benefits of stripping activity
Extraction of ore (inventory) in current period.
Improved access to future ore extraction.
Period benefited
Current period
Future period(s)
Production stripping activity
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.
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 proved reserves for petroleum assets and proved and probable reserves for minerals assets 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 useful lives below 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
Typical depreciation methodology
Depreciation rate
Buildings
SL
Plant and
equipment
SL
25-50 years
3-30 years
Mineral rights and
petroleum interests
Capitalised exploration, evaluation and
development expenditure
UoP
Based on the rate of
depletion of reserves
UoP
Based on the rate of
depletion of reserves
Commitments
The Group’s commitments for capital expenditure were US$2,469 million as at 30 June 2021 (2020: US$2,585 million). The Group’s commitments
related to leases are included in note 21 ‘Leases’.
BHP
Annual Report 2021
153
GovernanceAdditional Information241Strategic Report3Financial Statements 12 Intangible assets
Net book value
At the beginning of the financial year
Impact of change in accounting policies(1)
At the beginning of the financial year (restated)
Additions
Amortisation for the year
Impairments for the year(2)
Transfers and other movements
At the end of the financial year
– Cost
– Accumulated amortisation and impairments
2021
Other
intangibles
US$M
Goodwill
US$M
Total
US$M
Goodwill
US$M
1,197
−
1,197
−
−
−
−
1,197
1,197
−
377
−
377
23
(93)
(52)
(15)
240
1,506
(1,266)
1,574
−
1,574
23
(93)
(52)
(15)
1,437
2,703
(1,266)
247
950
1,197
−
−
−
−
1,197
1,197
−
2020
Other
intangibles
US$M
428
−
428
98
(118)
−
(31)
377
1,580
(1,203)
Total
US$M
675
950
1,625
98
(118)
−
(31)
1,574
2,777
(1,203)
(1) Intangible assets has been restated to reflect changes to the Group’s accounting policy following a decision by the IFRS Interpretations Committee on IAS 12 ‘Income Taxes’,
resulting in the retrospective recognition of US$950 million of Goodwill at Olympic Dam. Refer to note 39 ‘New and amended accounting standards and interpretations and
changes to accounting policies’ for further information.
(2) Refer to note 13 ‘Impairment of non-current assets’ for information on impairments.
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.
13 Impairment of non-current assets
Segment
Coal
Coal
G&U
Various
Segment
Copper
Various
2021
Property,
plant and
equipment
US$M
Goodwill
and other
intangibles
US$M
Equity-
accounted
investment
US$M
1,025
−
1,314
244
2,583
−
2,583
Property,
plant and
equipment
US$M
409
85
494
−
494
32
−
−
20
52
−
52
−
466
−
−
466
−
466
2020
Goodwill
and other
intangibles
US$M
Equity-
accounted
investment
US$M
−
−
−
−
−
−
−
−
−
−
Total
US$M
1,057
466
1,314
264
3,101
−
3,101
Total
US$M
409
85
494
−
494
Cash generating unit
New South Wales Energy Coal
Cerrejón
Potash
Other
Total impairment of non-current assets
Reversal of impairment
Net impairment of non-current assets
Cash generating unit
Cerro Colorado
Other
Total impairment of non-current assets
Reversal of impairment
Net impairment of non-current assets
154
BHP
Annual Report 2021
13 Impairment of non-current assets continued
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 or CGU’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 or closure. 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.
Impairment of non-current assets (excluding goodwill)
The Group recognised the following impairments to non-current assets during the year:
Year ended 30 June 2021
NSWEC
Cerrejón
Potash
What has been recognised?
What were the drivers
of impairment?
How were the
valuations calculated?
At 30 June 2021, the Group
determined the overall recoverable
amount of the CGU to be negative
US$300 million, resulting in an
aggregate impairment to property,
plant and equipment and intangibles
of US$1,057 million for FY2021.
The impairment charges reflect the
status of the divestment process
and the forecast market conditions
for Australian thermal coal, the
strengthening Australian dollar
and changes to the mine plan.
At 30 June 2021, the Group
determined the recoverable
amount to be US$284 million,
being the agreed sale proceeds
of US$294 million adjusted for
transaction costs, resulting in
an aggregate impairment of
US$466 million for FY2021.
On 28 June 2021, the Group
announced that it had signed
a Sale and Purchase Agreement
with Glencore to divest its
interest in Cerrejón.
The 30 June 2021 valuation
represents VIU, applying discounted
cash flow (DCF) techniques(1).
The 30 June 2021 valuation
represents a FVLCD based on
the expected net sale proceeds
of US$284 million(1).
At 30 June 2021, the Group
determined the recoverable
amount to be US$3.3 billion,
resulting in an impairment charge
of US$1.3 billion against property,
plant and equipment.
The impairment charge against
the Group’s Potash assets reflects
an analysis of recent market
perspectives and the value that
the Group would now expect a
market participant to attribute to
the Group’s investments to date.
The 30 June 2021 valuation
was determined using FVLCD
methodology, applying DCF
techniques(1).
What were the significant
assumptions and estimates
used in the valuations?
The valuation for NSWEC is most sensitive to changes in energy coal prices, estimated future production
volumes and discount rates. The valuation applied a post-tax real discount rate of 6.5 per cent. The post-
impairment carrying value of NSWEC’s property, plant and equipment is not material, therefore any
changes to key estimates will not give rise to a further material impairment.
The valuation for Potash is most sensitive to changes in the long-term potash price outlook and the risking
applied to the future development phases of the potash resource. The valuation applied a post-tax real
discount rate of 6.5 per cent. In August 2021, the Group sanctioned the ongoing development of Potash
following a comprehensive review of the future prospects and development opportunities. In light of this
investment approval and the risking applied in the current valuation, management does not consider there
to be a significant risk of a further material impairment in the next financial reporting period.
Key judgements and estimates that have been applied in the valuations using DCF techniques are disclosed
further below.
(1) Valuations are based primarily on Level 3 inputs as defined in note 23 ‘Financial risk management’.
BHP
Annual Report 2021
155
GovernanceAdditional Information241Strategic Report3Financial Statements 13 Impairment of non-current assets continued
Impairment test for goodwill
The carrying amount of goodwill has been allocated to the CGUs, or groups of CGUs, as follows:
Cash generating unit
Olympic Dam(1)
Other
Total goodwill
2021
US$M
1,010
187
1,197
2020
US$M
Restated
1,010
187
1,197
(1) Goodwill has been restated to reflect changes to the Group’s accounting policy following a decision by the IFRS Interpretations Committee on IAS 12 ‘Income Taxes’, resulting
in the retrospective recognition of US$950 million of Goodwill at Olympic Dam. Refer to note 39 ‘New and amended accounting standards and interpretations and changes
to accounting policies’ for further information.
For the purpose of impairment testing, goodwill has been allocated to CGUs or groups of CGUs, that are expected to benefit from the synergies of
previous business combinations, which represent the level at which management will monitor and manage goodwill. Olympic Dam goodwill is the
most significant goodwill balance.
Olympic Dam goodwill
Impairment test conclusion
How did the goodwill arise?
Segment
How were the valuations
calculated?
Significant assumptions
and sensitivities
The Group’s decision during HY2021 to change the expansion strategy for Olympic Dam was identified as an
indicator of impairment as at 31 December 2020. The Group performed an impairment test of the Olympic
Dam CGU, including goodwill, as at 31 December 2020 and an impairment charge was not required. A goodwill
impairment test was not required at 30 June 2021 as there were no indicators of impairment.
Goodwill arose on the acquisition of WMC Resources Ltd in June 2005.
Olympic Dam is part of the Copper reportable segment.
FVLCD methodology using DCF techniques has been applied in determining the recoverable amount of Olympic
Dam. The calculation is based primarily on Level 3 inputs as defined in note 23 'Financial risk management'.
The current valuation of Olympic Dam exceeds its carrying amount by approximately US$1.8 billion and is most
sensitive to changes in copper and gold commodity prices, production volumes, operating costs and discount
rates. The valuation applied a post-tax real discount rate of 6 per cent.
Management consider that there are no reasonably possible changes in copper and gold price forecasts,
operating cost estimates or the discount rate that would, in isolation, result in the estimated recoverable amount
being equal to the carrying amount.
A production volume decrease of 4.8 per cent across all commodities (copper, gold, silver and uranium) would,
in isolation, result in the estimated recoverable amount being equal to the carrying amount. Typically, changes
in any one of the aforementioned assumptions (including operating performance) would be accompanied by
a change in another assumption which may have an offsetting impact. Action is usually taken to respond to
adverse changes in assumptions to mitigate the impact of any such change.
Key judgements and estimates that have been applied in the FVLCD valuation are disclosed further below.
Other goodwill
Goodwill held by other CGUs is US$187 million (2020: US$187 million). This represents less than one per cent of net assets at 30 June 2021 (2020: less
than one per cent). There was no impairment of other goodwill in the year to 30 June 2021 (2020: US$ nil).
156
BHP
Annual Report 2021
13 Impairment of non-current assets 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 low 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 low carbon economy.
As outlined in the Basis of Preparation, where sufficiently developed,
the potential financial impacts on the Group of climate change and
the transition to a low 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, including their impact on the Group’s long-term
price forecasts
– the Group’s operational emissions reduction strategy
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 2021.
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.
Estimates: The Group performs a recoverable amount determination
for an asset or CGU when there is an indication of impairment or
impairment reversal.
When the recoverable amount is measured by reference to FVLCD,
in the absence of quoted market prices or binding sale agreement,
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, capital expenditure, closure and rehabilitation costs, tax attributes,
risking factors applied to cash flows and discount rates. The cash flow
forecasts may include net cash flows expected from the extraction,
processing and sale of material that does not currently qualify for
inclusion in ore reserves. Reserves and resources are included in the
assessment of FVLCD to the extent that it is considered probable that
a market participant would attribute value to them.
When recoverable amount is measured using VIU, estimates are made
regarding the present value of future cash flows based on internal
budgets and forecasts and life of asset plans. Key estimates are similar
to those identified for FVLCD, although some assumptions and values
may differ as they reflect the perspective of management rather than
a market participant.
All estimates require 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/CGUs at each reporting date.
The most significant estimates impacting the Group’s recoverable
amount determinations:
Commodity prices
Commodity prices were based on latest internal forecasts which
assume short-term market prices will revert to the Group’s assessment
of long-term price. These price forecasts reflect management’s long-
term views of global supply and demand, built upon past experience
of the commodity markets and are benchmarked with external sources
of information such as analyst forecasts. Prices are adjusted based
upon premiums or discounts applied to global price markers based
on the location, nature and quality produced, or to take into account
contracted prices.
Future production volumes
Estimated production volumes were based on detailed data and took
into account development plans established by management as part
of the Group’s long-term planning process. When estimating FVLCD,
assumptions reflect all reserves and resources that a market participant
would consider when valuing the respective CGU, which in some
cases are broader in scope than the reserves that would be used in a
VIU test. In determining FVLCD, risk factors may be applied to reserves
and resources which do not meet the criteria to be treated as proved.
Operating costs and capital expenditure
Operating costs and capital expenditure were based on internal
budgets and forecasts and life of asset plans. Cost assumptions reflect
management experience and expectations. In the case of FVLCD, cash
flow projections include the anticipated cash flow effects of any capital
expenditure to enhance production or reduce cost where a market
participant may take a consistent view. VIU does not take into account
future development.
Discount rates
The Group uses real post-tax discount rates applied to real post-tax cash
flows. The discount rates are derived using the weighted average cost
of capital methodology. Adjustments to the rates are made for any risks
that are not reflected in the underlying cash flows, including country risk.
BHP
Annual Report 2021
157
GovernanceAdditional Information241Strategic Report3Financial Statements 14 Deferred tax balances
The movement for the year in the Group’s net deferred tax position is as follows:
Net deferred tax (liability)/asset
At the beginning of the financial year
Impact of change in accounting policies(1)
Income tax (charge)/credit recorded in the income statement(2)
Income tax credit recorded directly in equity
Other movements
At the end of the financial year
2021
US$M
(91)
−
(1,325)
42
(28)
(1,402)
2020
US$M
Restated
2019
US$M
Restated
(491)
−
335
34
31
(91)
569
(1,021)
(81)
15
27
(491)
(1) Deferred tax has been restated to reflect changes to the Group’s accounting policy following a decision by the IFRS Interpretations Committee on IAS 12 ‘Income Taxes’,
resulting in the retrospective recognition of US$1,021 million of Deferred tax. Refer to note 39 ‘New and amended accounting standards and interpretations and changes
to accounting policies’ for further information.
(2) Includes Discontinued operations income tax credit to the income statement of US$ nil (2020: US$ nil; 2019: US$40 million).
For recognition and measurement refer to note 6 ‘Income tax expense’.
The composition of the Group’s net deferred tax assets and liabilities recognised in the balance sheet and the deferred tax expense charged/(credited)
to the income statement is as follows:
Deferred tax assets
Deferred tax liabilities
Charged/(credited) to the income statement
Type of temporary difference
Depreciation(1)(2)
Exploration expenditure
Employee benefits
Closure and rehabilitation
Resource rent tax
Other provisions
Deferred income
Deferred charges
Investments, including foreign tax credits
Foreign exchange gains and losses
Tax losses
Lease liability(1)
Other
Total
2021
US$M
(1,349)
51
94
638
122
108
11
(36)
147
(3)
1,999
68
62
1,912
2020
US$M
(2,749)
398
353
2,100
359
173
(4)
(383)
348
(134)
2,759
548
(80)
3,688
2021
US$M
4,716
−
(333)
(2,086)
368
(227)
(16)
602
671
133
(82)
(658)
226
3,314
2020
US$M
Restated
2,828
−
(26)
(109)
921
(239)
−
187
458
(61)
−
(245)
65
3,779
2021
US$M
488
347
(68)
(515)
(309)
77
(31)
68
414
63
678
67
46
1,325
2020
US$M
1,394
51
(38)
(334)
(119)
(268)
33
(132)
(77)
(18)
(148)
(793)
114
(335)
2019
US$M
(951)
43
14
(53)
(179)
(2)
(9)
56
70
(45)
1,147
−
(10)
81
(1) Includes deferred tax associated with the recognition of right-of-use assets and lease liabilities on adoption of IFRS 16. Refer to note 21 ‘Leases’.
(2) FY2020 has been restated to reflect the impact of the change to the Group’s accounting policy following a decision by the IFRS Interpretations Committee on IAS 12
‘Income Taxes’. Refer to note 39 ‘New and amended accounting standards and interpretations and changes to accounting policies’ for further information.
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$1,675 million at 30 June 2021
(2020: US$2,865 million). For operating assets, the group assesses the recoverability of these deferred tax assets using estimates and assumptions
relating to projected earnings and cash flows as applied in the Group impairment process for associated operations. Further information on the
key judgements and estimates relating to the recognition of deferred tax assets is provided in note 6 ‘Income tax expense’.
The composition of the Group’s unrecognised deferred tax assets and liabilities is as follows:
Unrecognised deferred tax assets
Tax losses and tax credits(1)
Investments in subsidiaries(2)
Deductible temporary differences relating to PRRT(3)
Mineral rights(4)
Other deductible temporary differences(5)
Total unrecognised deferred tax assets
Unrecognised deferred tax liabilities
Investments in subsidiaries(2)
Future taxable temporary differences relating to unrecognised deferred tax asset for PRRT(3)
Total unrecognised deferred tax liabilities
2021
US$M
5,944
1,712
2,402
3,359
1,630
15,047
2,203
720
2,923
2020
US$M
Restated
4,088
1,575
2,079
3,265
673
11,680
2,375
624
2,999
(1) At 30 June 2021, the Group had income and capital tax losses with a tax benefit of US$3,569 million (2020: US$2,405 million) and tax credits of US$2,375 million (2020:
US$1,683 million), which are not recognised as deferred tax assets, because it is not probable that future taxable profits or capital gains will be available against which the
Group can utilise the benefits.
158
BHP
Annual Report 2021
14 Deferred tax balances continued
The gross amount of tax losses carried forward that have not been recognised is as follows:
Year of expiry
Income tax losses
Not later than one year
Later than one year and not later than two years
Later than two years and not later than five years
Later than five years and not later than 10 years
Later than 10 years and not later than 20 years
Unlimited
Capital tax losses
Not later than one year
Later than two years and not later than five years
Unlimited
Gross amount of tax losses not recognised
Tax effect of total losses not recognised
2021
US$M
13
5
105
1,449
3,347
4,799
9,718
−
−
4,238
13,956
3,569
2020
US$M
474
240
2,525
679
2,379
2,262
8,559
−
−
4,150
12,709
2,405
Of the US$2,375 million of tax credits, US$1,805 million expires not later than 10 years and US$570 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. Where the Group has
undistributed earnings held by associates and joint interests, the deferred tax liability will be recognised as there is no ability to control the timing of the potential distributions.
(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.
15 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
Acquisition of subsidiaries and operations
Divestment and demerger of subsidiaries and operations
Expenditure on closure and rehabilitation activities
Exchange variations impacting foreign currency translation reserve
At the end of the financial year
Comprising:
Current
Non-current
Operating sites
Closed sites
2021
US$M
8,810
1,974
483
564
76
(157)
380
179
(81)
(321)
3
11,910
591
11,319
9,279
2,631
2020
US$M
6,977
1,255
(188)
731
(19)
(43)
356
−
−
(258)
(1)
8,810
373
8,437
6,636
2,174
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
BHP
Annual Report 2021
159
GovernanceAdditional Information241Strategic Report3Financial Statements
15 Closure and rehabilitation provisions continued
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 to the income statement in the period identified. This amounted to US$483 million in the year ended 30 June 2021 (2020: US$669 million;
2019: US$251 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
– costs associated with future rehabilitation activities
– applicable discount rates
– the timing of cash flows and ultimate closure of operations
The extent and cost of future rehabilitation activities may also be impacted
by the potential physical impacts of climate change. In estimating the
potential cost of closure activities, the Group considers factors such as
long-term weather outlooks, for example forecast changes in rainfall
patterns, and the impact of the Group’s energy transition strategy on
the costs of performing rehabilitation activities.
While progressive closure is performed across a number of operations,
significant 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 3-91 years
with an average for all sites, weighted by current closure provision, of
approximately 27 years. The discount rates applied to the Group’s closure
and rehabilitation provisions are determined by reference to the currency
of the closure cash flows, the period over which the cash flows will be
incurred and prevailing market interest rates (where available). The rates
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$1,085 million in the closure and rehabilitation provision of which
approximately US$210 million in respect of closed sites was recognised in
the income statement.
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 low
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.
Sensitivity
A further 0.5 per cent decrease in the discount rates applied at 30 June
2021 would result in an increase to the closure and rehabilitation provision
of approximately US$1,075 million, an increase in property, plant and
equipment of approximately US$820 million in relation to operating
sites and an income statement charge of approximately US$255 million
in respect of closed sites. In addition, the change would result in an
increase of approximately US$115 million to depreciation expense
and a US$25 million reduction in net finance costs for the year ending
30 June 2022.
Given the long-lived nature of the majority of the Group’s assets, closure
activities are generally not expected to occur for a significant period of
time. A one-year acceleration in forecast cash flows of the Group’s closure
and rehabilitation provisions, in isolation, would result in an increase to the
provision of approximately US$230 million, an increase in property, plant
and equipment of US$180 million in relation to operating sites and an
income statement charge of US$50 million in respect of closed sites.
160
BHP
Annual Report 2021
(185,297)
222,245
(36,948)
−
(274,069)
275,984
(1,915)
−
2,112,071,796
2,112,071,796
2,112,069,025
2,112,032,077
2,771
39,719
Capital structure
16 Share capital
BHP Group Limited
BHP Group Plc
2021
shares
2020
shares
2019
shares
2021
shares
2020
shares
2019
shares
Share capital issued
Opening number of shares
Purchase of shares by ESOP Trusts
2,945,851,394 2,945,851,394
(5,975,189)
(7,587,353)
3,211,691,105
2,112,071,796
2,112,071,796
2,112,071,796
(6,854,057)
(185,054)
Employee share awards exercised following vesting
Movement in treasury shares under Employee Share Plans
6,948,683
638,670
6,893,113
5,902,588
(917,924)
951,469
173,644
11,410
Shares bought back and cancelled(1)
Closing number of shares(2)
−
2,945,851,394 2,945,851,394
−
(265,839,711)
−
2,945,851,394 2,112,071,796
Comprising:
Shares held by the public
Treasury shares
Other share classes
Special Voting share of no par value
Special Voting share of US$0.50 par value
5.5% Preference shares of £1 each
DLC Dividend share
2,944,982,333 2,945,621,003 2,944,703,079 2,112,057,615
14,181
869,061
1,148,315
230,391
1
−
−
1
1
−
−
1
1
−
−
1
−
1
−
1
−
1
50,000
50,000
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) 4,400,000 fully paid ordinary shares in BHP Group Limited were issued in order to satisfy the exercise of employee share awards during the period 1 July 2021 to 2 September 2021.
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. On 16 September 2020
and on 17 March 2021, BHP Group Limited paid
dividends of US$1,915 million and US$1,610 million
respectively to BHP (AUS) DDS Pty Ltd under
the DLC dividend share arrangements. These
dividends are eliminated on consolidation.
Treasury shares are shares of BHP Group
Limited and BHP Group Plc and are held by the
ESOP Trusts for the purpose of issuing shares
to employees under the Group’s Employee
Share Plans. Treasury shares are recognised
at cost and deducted from equity, net of any
income tax effects. When the treasury shares are
subsequently sold or reissued, any consideration
received, net of any directly attributable costs and
income tax effects, is recognised as an increase
in equity. Any difference between the carrying
amount and the consideration, if reissued, is
recognised in retained earnings.
BHP
Annual Report 2021
161
GovernanceAdditional Information241Strategic Report3Financial Statements 17 Other equity
Share premium account
Foreign currency
translation reserve
Employee share
awards reserve
2021
US$M
518
43
2020
US$M
518
39
268
246
2019
US$M Recognition and measurement
518
37
213
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.
Cash flow hedge reserve
100
50
114 The cash flow hedge reserve represents hedging gains and losses recognised on the
Cost of hedging reserve
(54)
(23)
Equity investments reserve
Capital redemption reserve
15
177
16
177
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.
(74) 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.
17
177
The equity investments 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.
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.
Non-controlling interest
contribution reserve
1,283
1,283
1,283
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
2,350
2,306
2,285
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$M
Group share (per cent)
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Net assets
Net assets attributable to NCI
Revenue
Profit after taxation
Other comprehensive income
Total comprehensive income
Profit after taxation attributable to NCI
Other comprehensive income attributable to NCI
Net operating cash flow
Net investing cash flow
Net financing cash flow
Dividends paid to NCI
2021
Other individually
immaterial
subsidiaries
(incl. intra-group
eliminations)
Minera
Escondida
Limitada
2020
Other individually
immaterial
subsidiaries
(incl. intra-group
eliminations)
Total
Minera
Escondida
Limitada
Total
57.5
2,996
11,867
(1,912)
(4,733)
8,218
3,493
9,470
3,605
27
3,632
1,532
11
5,007
(655)
(4,001)
1,590
57.5
2,432
12,121
(1,614)
(4,613)
8,326
3,539
6,719
1,088
(27)
1,061
462
(11)
2,637
(919)
(1,920)
757
848
4,341
615
–
2,147
11
537
2,127
771
4,310
318
−
780
(11)
286
1,043
While the Group controls Minera Escondida Limitada, the non-controlling interests hold certain protective rights that restrict the Group’s ability to sell
assets held by Minera Escondida Limitada, or use the assets in other subsidiaries and operations owned by the Group. Minera Escondida Limitada is
also restricted from paying dividends without the approval of the non-controlling interests.
162
BHP
Annual Report 2021
18 Dividends
Dividends paid during the period(1)
Prior year final dividend
Interim dividend
Special dividend
Year ended 30 June 2021
Year ended 30 June 2020
Year ended 30 June 2019
Per share
US cents
Total
US$M
Per share
US cents
Total
US$M
Per share
US cents
55
101
−
156
2,779
5,115
−
7,894
78
65
−
143
3,946
3,288
−
7,234
63
55
102
220
Total
US$M
3,356
2,788
5,158
11,302
(1) 5.5 per cent dividend on 50,000 preference shares of £1 each determined and paid annually (2020: 5.5 per cent; 2019: 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. Additional derivative proceeds of US$8 million were
received as part of the funding of the interim dividend and is disclosed in (Settlements)/proceeds 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 17 August 2021, BHP Group Limited and BHP Group Plc determined a final dividend of 200 US cents per
share (US$10,114 million), which will be paid on 21 September 2021 (30 June 2020: final dividend of 55 US cents per share – US$2,782 million; 30 June
2019: final dividend of 78 US cents per share – US$3,944 million).
BHP Group Limited dividends for all periods presented are, or will be, fully franked based on a tax rate of 30 per cent.
Franking credits as at 30 June
Franking credits arising from the payment of current tax
Total franking credits available(1)
2021
US$M
14,302
1,799
16,101
2020
US$M
10,980
471
11,451
2019
US$M
8,681
1,194
9,875
(1) The payment of the final 2021 dividend determined after 30 June 2021 will reduce the franking account balance by US$2,525 million.
19 Provisions for dividends and other liabilities
The disclosure below excludes closure and rehabilitation provisions (refer to note 15 ‘Closure and rehabilitation provisions’), employee benefits,
restructuring and post-retirement employee benefits provisions (refer to note 26 ‘Employee benefits, restructuring and post-retirement employee
benefits provisions’) and provisions related to the Samarco dam failure (refer to note 4 ‘Significant events – Samarco dam failure’).
Movement in provision for dividends and other liabilities
At the beginning of the financial year
Dividends determined
Charge/(credit) for the year:
Underlying
Discounting
Exchange variations
Released during the year
Utilisation
Dividends paid
Transfers and other movements
At the end of the financial year
Comprising:
Current
Non-current
2021
US$M
1,240
7,894
260
2
20
(43)
(267)
(7,901)
(624)
581
293
288
2020
US$M
501
7,234
1,027
3
(356)
(94)
(99)
(6,876)
(100)
1,240
258
982
BHP
Annual Report 2021
163
GovernanceAdditional Information241Strategic Report3Financial Statements Financial management
20 Net debt
The Group seeks to maintain a strong balance sheet and deploys its capital with reference to the Capital Allocation Framework.
The Group monitors capital using the net debt balance and the gearing ratio, being the ratio of net debt to net debt plus net assets.
The net debt definition includes the fair value of derivative financial instruments used to hedge cash and borrowings which reflects the Group’s risk
management strategy of reducing the volatility of net debt caused by fluctuations in foreign exchange and interest rates.
Vessel lease contracts, under IFRS 16, are required to be remeasured at each reporting date to the prevailing freight index. While these liabilities are included
in the Group interest bearing liabilities, they are excluded from the net debt calculation as they do not align with how the Group assesses net debt for
decision making in relation to the Capital Allocation Framework. In addition, the freight index has historically been volatile which creates significant short-term
fluctuation in these liabilities.
US$M
Interest bearing liabilities
Bank loans
Notes and debentures
Lease liabilities
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(1)
Net cash management related instruments(2)
Less: Total derivatives included in net debt
Net debt
Net assets(3)
Gearing
2021
2020
Restated
Current
Non-current
Current
Non-current
437
1,244
889
−
58
2,628
346
4,408
10,838
15,246
20
34
54
1,823
13,525
3,007
−
−
18,355
679
−
−
−
537
−
537
4,121
55,605
6.9%
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
52,175
18.8%
(1) 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.
(2) Represents the net forward exchange contracts included within current and non-current other financial assets and liabilities.
(3) 30 June 2020 net assets have been restated to reflect changes to the Group’s accounting policy following a decision by the IFRS Interpretations Committee on IAS 12 ‘Income
Taxes’ resulting in a retrospective decrease of US$71 million. Refer to note 39 ‘New and amended accounting standards and interpretations and changes to accounting policies’.
Cash and short-term deposits are disclosed in the cash flow statement net of bank overdrafts and interest bearing liabilities at call.
Total cash and cash equivalents
Bank overdrafts and short-term borrowings
Total cash and cash equivalents, net of overdrafts
2021
US$M
15,246
−
15,246
2020
US$M
13,426
−
13,426
2019
US$M
15,613
(20)
15,593
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$159 million (2020: US$96 million) restricted by legal or contractual arrangements.
Interest bearing liabilities and cash and cash equivalents include balances denominated in the following currencies:
USD
EUR
GBP
AUD
CAD
Other
Total
Interest bearing liabilities
Cash and cash equivalents
2021
US$M
11,146
4,505
3,415
1,053
635
229
20,983
2020
US$M
14,625
7,323
3,272
1,055
597
176
27,048
2021
US$M
12,003
4
32
573
2,455
179
15,246
2020
US$M
9,555
4
519
1,011
2,131
206
13,426
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 23 ‘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.
164
BHP
Annual Report 2021
20 Net debt continued
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.
The Group’s Moody’s credit rating has remained at A2/P-1 outlook stable (long-term/short-term) throughout FY2021. Moody’s affirmed its credit rating on
31 May 2021. The Group’s Standard & Poor’s rating changed from A/A-1 outlook stable (long-term/short-term) to A/A-1 CreditWatch negative (long-term/
short-term) on 23 August 2021.
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$5.5 billion. As at 30 June 2021, US$ nil commercial paper was drawn (2020: US$ nil).
During the year, the Group completed a one-year extension to the facility which is now due to mature on 10 October 2025. 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:
2021
US$M
Due for payment:
In one year or less or on demand
In more than one year but not more than two years
In more than two years but not more than five years
In more than five years
Total
Carrying amount
2020
US$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
Bank loans,
debentures and
other loans
Expected
future interest
payments
Derivatives
related to
debentures
Other
derivatives
Obligations
under lease
liabilities
Trade
and other
payables(1)
1,722
2,278
4,062
7,801
15,863
17,087
729
661
1,492
4,136
7,018
−
61
267
256
585
1,169
586
149
80
240
317
786
690
980
680
1,397
1,842
4,899
3,896
6,851
−
−
−
6,851
6,851
Bank loans,
debentures and
other loans
Expected
future interest
payments
Derivatives
related to
debentures
Other
derivatives
Obligations
under lease
liabilities
Trade
and other
payables(1)
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
(1) Excludes input taxes of US$176 million (2020: US$145 million) included in other payables. Refer to note 9 ‘Trade and other payables’.
21 Leases
Movements in the Group’s lease liabilities during the year are as follows:
At the beginning of the financial year(1)
IFRS 16 transition
Additions
Remeasurements of index-linked freight contracts
Lease payments
Foreign exchange movement
Amortisation of discounting
Transfers and other movements
At the end of the financial year
Comprising:
Current liabilities
Non-current liabilities
2021
US$M
3,443
−
1,223
(59)
(879)
115
109
(56)
3,896
889
3,007
Total
10,492
3,966
7,447
14,681
36,586
29,110
Total
11,820
3,079
9,594
16,486
40,979
34,310
2020
US$M
715
2,301
436
733
(761)
(43)
90
(28)
3,443
853
2,590
(1) Lease liability at the beginning of FY2020 relates to existing finance leases under IAS 17/AASB 117 ‘Leases’ (IAS 17) at 1 July 2019.
BHP
Annual Report 2021
165
GovernanceAdditional Information241Strategic Report3Financial Statements 21 Leases continued
A significant proportion by value of the Group’s lease contracts relate to plant facilities, office buildings and vessels. Lease terms for plant facilities
and office buildings typically run for over 10 years and vessels for four to 10 years. Other leases include port facilities, various equipment and vehicles.
The lease contracts contain a wide range of different terms and conditions including extension and termination options and variable lease payments.
The Group’s lease obligations are included in the Group’s Interest bearing liabilities and, with the exception of vessel lease contracts that are priced
with reference to a freight index, form part of the Group’s net debt.
The maturity profile of lease liabilities based on the undiscounted contractual amounts is as follows:
Lease liability
Due for payment:
In one year or less or on demand
In more than one year but not more than two years
In more than two years but not more than five years
In more than five years(1)
Total
Carrying amount
2021
US$M
980
680
1,397
1,842
4,899
3,896
2020
US$M
927
630
1,335
1,043
3,935
3,443
(1) Include US$878 million (2020: US$302 million) due for payment in more than ten years.
At 30 June 2021, commitments for leases not yet commenced based on undiscounted contractual amounts were US$457 million (2020: US$1,458 million);
and commitments relating to short-term leases were US$171 million (2020: US$103 million).
Movements in the Group’s right-of-use assets during the year are as follows:
Net book value
At the beginning of the financial year(1)
Assets recognised on adoption of IFRS 16
Additions
Remeasurements of index-linked freight contracts
Depreciation expensed during the period
Depreciation classified as exploration
Impairments
Transfers and other movements
At the end of the financial year
– Cost
– Accumulated depreciation and impairments
2021
Land and
buildings
US$M
Plant and
equipment
US$M
689
–
25
–
(111)
–
(30)
65
638
897
(259)
2,358
−
1,227
(59)
(670)
(19)
(2)
(123)
2,712
4,393
(1,681)
Land and
buildings
US$M
2020
Plant and
equipment
US$M
−
754
104
−
(113)
−
(2)
(54)
689
804
(115)
492
1,400
332
733
(543)
(34)
(22)
−
2,358
3,349
(991)
Total
US$M
3,047
−
1,252
(59)
(781)
(19)
(32)
(58)
3,350
5,290
(1,940)
Total
US$M
492
2,154
436
733
(656)
(34)
(24)
(54)
3,047
4,153
(1,106)
(1) Right-of-use assets at the beginning of FY2020 relates to assets previously held under finance leases under IAS 17 at 1 July 2019.
Right-of-use assets are included within the underlying asset classes in Property, plant and equipment. Refer to note 11 ‘Property, plant and equipment’.
Amounts recorded in the income statement and the cash flow statement for the year were:
Income statement
Depreciation of right-of-use assets
Short-term, low-value and variable lease costs(1)
Interest on lease liabilities
Cash flow statement
Principal lease payments
Lease interest payments
2021
US$M
2020
US$M
Included within
781
895
109
770
109
656
675
90
671
90
Profit from operations
Profit from operations
Financial expenses
Cash flows from financing activities
Cash flows from operating activities
(1) Relates to US$546 million of variable lease costs (2020: US$438 million), US$316 million of short-term lease costs (2020: US$211 million) and US$33 million of low-value lease
costs (2020: US$26 million). Variable lease costs include contracts for hire of mining service equipment, drill rigs and transportation services. These contracts contain variable
lease payments based on usage and asset performance.
Recognition and measurement
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.
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.
166
BHP
Annual Report 2021
21 Leases continued
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. Lease costs for the year ended 30 June 2019 represent 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 contracts 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.
Where a contract includes the provision of non-lease services,
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.
22 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 2.83% (2020: 4.14%; 2019: 4.96%)(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
Loss on bond repurchase(2)
Exchange variations on net debt
Other
Total financial expenses
Financial income
Interest income
Net finance costs
2021
US$M
2020
US$M
2019
US$M
610
(248)
109
467
(779)
704
395
99
21
1,378
(73)
1,305
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)
Interest has been capitalised at the rate of interest applicable to the specific borrowings financing the assets under construction or, where financed through general borrowings,
at a capitalisation rate representing the average interest rate on such borrowings. Tax relief for capitalised interest is approximately US$74 million (2020: US$92 million;
2019: US$74 million).
(2) Relates to the additional cost on settlement of two multi-currency hybrid debt repurchase programs and the unwind of the associated hedges, included in a total cash payment
of US$3,402 million disclosed in repayment of interest bearing liabilities in the Consolidated Cash Flow Statement.
Recognition and measurement
Interest income is accrued using the effective interest rate method. Finance costs are expensed as incurred, except where they relate to the financing
of construction or development of qualifying assets.
BHP
Annual Report 2021
167
GovernanceAdditional Information241Strategic Report3Financial Statements 23 Financial risk management
23.1 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.
As part of the risk management strategy, the Group monitors target gearing levels and credit rating metrics under a range of different stress test
scenarios incorporating operational and macroeconomic factors (refer to 1.16 ‘Robust risk assessment and viability statement’).
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 Cash Flow at Risk (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
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, other monetary
items 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.
Key risk management processes
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.
Where short-term cash deposits and other monetary items are denominated 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.
Execution of transactions within
approved mandates.
Primary responsibility for the identification and control of financial risks, including authorising and monitoring the use of financial instruments for
the above activities and stipulating policy thereon, rests with the Financial Risk Management Committee under authority delegated by the Chief
Executive Officer.
Interest rate risk
The Group is exposed to interest rate risk on its outstanding borrowings and short-term cash deposits from the possibility that changes in interest
rates will affect future cash flows or the fair value of fixed interest rate financial instruments. Interest rate risk is managed as part of the portfolio risk
management strategy.
The majority of the Group’s debt is issued at fixed interest rates. The Group has entered into interest rate swaps and cross currency interest rate swaps
to convert most of its fixed interest rate exposure to floating US dollar interest rate exposure. As at 30 June 2021, 82 per cent of the Group’s borrowings
were exposed to floating interest rates inclusive of the effect of swaps (2020: 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.
Based on the net debt position as at 30 June 2021, 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 increase the Group’s equity and profit after taxation by US$7 million (2020: decrease
of US$47 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.
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 (ARR) by the
end of CY2021 as part of inter-bank offer rate (IBOR) reform. The Group has established a project to assess the implications of IBOR reform across the
Group, and to manage and execute the transition from current discontinuing IBORs rates to ARR, including updating policies, systems and processes.
A detailed due diligence review has identified a range of contracts that reference IBORs, including derivative instruments, money market deposits, lease
agreements, supply contracts and joint venture agreements. The Group is in the process of developing action plans for each of these arrangements
to ensure a smooth transition to ARR.
The Group has early adopted amendments to IFRS 9 ‘Financial Instruments’, IFRS 7 ‘Financial Instruments: Disclosures’ and IFRS 16 ‘Leases’ in relation to
IBOR reform (refer to note 39 ‘New and amended accounting standards and interpretations and changes to accounting policies’). In particular, the IBOR
reform impacts the Group’s interest rate swaps, which reference US LIBOR, and the associated hedge accounting. Refer to section 23.4 ‘Derivatives and
hedge accounting’ for further information.
168
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Annual Report 2021
23 Financial risk management continued
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 following table shows the foreign currency risk arising from financial assets and liabilities, which are denominated in currencies other than the
US dollar:
Net financial (liabilities)/assets – by currency of denomination
Australian dollars
Chilean peso
British pound sterling
Euro
Other
Total
2021
US$M
(4,421)
(649)
535
366
128
2020
US$M
(3,788)
(369)
587
619
(17)
(4,041)
(2,968)
The principal non-functional currencies to which the Group is exposed are the Australian dollar, the Chilean peso, the Pound sterling and the Euro.
Based on the Group’s net financial assets and liabilities as at 30 June 2021, a weakening of the US dollar against these currencies (one cent strengthening
in Australian dollar, 10 pesos strengthening in Chilean peso, one penny strengthening in Pound sterling and one cent strengthening in Euro), with all other
variables held constant, would decrease the Group’s equity and profit after taxation by US$21 million (2020: 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$138 million (2020: US$159 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$121 million (2020: US$180 million).
These are included within other derivatives and fair value measurement related to these resulted in an expense of US$59 million (2020: expense of
US$22 million).
The potential effect on these derivatives’ fair values of using reasonably possible alternative assumptions in the valuation 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$26 million (2020: US$8 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 2021 to the impact of movements in commodity prices upon provisionally invoiced sales and
purchases volumes was predominately around copper.
The Group had 254 thousand tonnes of copper exposure as at 30 June 2021 (2020: 301 thousand tonnes) that was provisionally priced. The final price
of these sales and purchases volumes will be determined during the first half of FY2022. 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$166 million (2020: US$134 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 20 ‘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 20 ‘Net debt’ for details on the Group credit risk.
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GovernanceAdditional Information241Strategic Report3Financial Statements 23 Financial risk management continued
23.2 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 Statements classifications of financial assets can be summarised as follows:
Contractual cash flows
Business model
Solely principal and interest
Hold in order to collect contractual cash flows
Category
Amortised cost
Solely principal and interest
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
Other
Any of those mentioned above
Fair value through profit or loss
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 which are measured at fair value through the
income statement under IFRS 9.
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 which are classified as ‘hold in order to sell’, are provisionally
priced receivables and 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.
170
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Annual Report 2021
23 Financial risk management continued
23.3 Financial assets and liabilities
The financial assets and liabilities are presented by class in the table below at their carrying amounts.
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 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)
Current other financial liabilities(7)
Non-current cross currency and interest rate swaps(2)
Non-current other financial liabilities(7)
Total other financial liabilities
Trade and other payables(8)
Provisionally priced trade payables
Bank loans(9)
Notes and debentures(9)
Lease liabilities
Other(9)
Total financial liabilities
Non-financial liabilities
Total liabilities
IFRS 13
Fair value hierarchy
Level(1)
2
2,3
1,2
2
2,3
3
1,2,3
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
Amortised cost
Amortised cost
2
Fair value through profit or loss
Amortised cost
2
2,3
Fair value through profit or loss
Fair value through profit or loss
Amortised cost
2
Fair value through profit or loss
Amortised cost
Amortised cost
2
Fair value through profit or loss
Amortised cost
Amortised cost
Amortised cost
2021
US$M
20
207
3
1,123
152
31
304
1,840
15,246
2,363
3,547
−
22,996
85,931
108,927
−
52
78
586
560
1,276
6,277
574
2,260
14,769
3,896
58
29,110
24,212
53,322
2020
US$M
Restated
3
45
36
2,009
159
32
322
2,606
13,426
1,633
1,480
40
19,185
86,548
105,733
165
60
−
1,414
−
1,639
5,354
269
2,492
21,045
3,443
68
34,310
19,248
53,558
(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 valued using market data including interest rate curves (which include the base LIBOR rate and swap rates) and foreign exchange
rates. A discounted cash flow approach is used to derive the fair value of cross currency and interest rate swaps at the reporting date.
(3) Includes other derivative contracts of US$121 million (2020: US$179 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$121 million (2020: US$180 million).
(4) Includes investments held by BHP Billiton Foundation which are restricted and not available for general use by the Group of US$260 million (2020: US$296 million) of which
other investment (US Treasury Notes) of US$72 million categorised as Level 1 (2020: US$87 million).
(5) Includes other investments of US$46 million (2020: US$47 million) categorised as Level 3.
(6) Excludes input taxes of US$486 million (2020: US$478 million) included in other receivables.
(7) Includes the discounted settlement liability in relation to the cancellation of power contracts at the Group’s Escondida operations.
(8) Excludes input taxes of US$176 million (2020: US$145 million) included in other payables.
(9) All interest bearing liabilities, excluding lease liabilities, are unsecured.
The carrying amounts in the table above generally approximate to fair value. In the case of US$3,018 million (2020: US$3,019 million) of fixed
rate debt not swapped to floating rate, the fair value at 30 June 2021 was US$4,052 million (2020: US$4,114 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.
23.4 Derivatives and hedge accounting
The Group uses derivatives to hedge its exposure to certain market risks and may elect to apply hedge accounting.
Hedge accounting
Derivatives are included within financial assets or liabilities at fair value through profit or loss unless they are designated as effective hedging
instruments. Financial instruments in this category are classified as current if they are expected to be settled within 12 months otherwise they
are classified as non-current.
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171
GovernanceAdditional Information241Strategic Report3Financial Statements 23 Financial risk management continued
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.
Carrying
amount of
notes and
debentures
Foreign
exchange
notional at
spot rates
A
6,270
3,387
4,486
626
14,769
B
−
435
73
142
650
Carrying
amount of
notes and
debentures
Foreign
exchange
notional at
spot rates
A
9,926
3,245
7,294
580
21,045
B
−
764
500
199
1,463
Fair value of derivatives
Recognised
in cash flow
hedging
reserve
Recognised
in cost of
hedging
reserve
Recognised in
the income
statement(1)
Accrued
cash flows
D
−
(81)
(33)
(28)
(142)
E
−
25
27
25
77
F
11
(34)
7
(2)
(18)
G
77
53
49
(2)
177
Fair value of derivatives
Recognised
in cash flow
hedging
reserve
Recognised
in cost of
hedging
reserve
Recognised in
the income
statement(1)
Accrued
cash flows
D
−
(16)
(55)
−
(71)
E
−
13
21
(2)
32
F
29
(18)
65
(4)
72
G
74
47
32
(2)
151
Interest
rate risk
C
(318)
(544)
(418)
(21)
(1,301)
Interest
rate risk
C
(742)
(730)
(576)
(32)
(2,080)
Hedged value
of notes and
debentures(2)
A + B + C
5,952
3,278
4,141
747
14,118
Hedged value
of notes and
debentures(2)
A + B + C
9,184
3,279
7,218
747
20,428
Total
B to G
(230)
(146)
(295)
114
(557)
Total
B to G
(639)
60
(13)
159
(433)
2021
US$M
USD
GBP
EUR
CAD
Total
2020
US$M
USD
GBP
EUR
CAD
Total
(1) Predominantly related to ineffectiveness.
(2) Includes US$3,018 million (2020: 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 + 2.18 per cent (2020: USD LIBOR + 2.95 per cent). Refer to note 22 ‘Net finance costs’ for
details of net finance costs for the year.
Interest Rate Benchmark Reform
IBOR reform impacts the Group’s interest rate swaps, which reference 3-month US LIBOR, and the associated hedge accounting. At 30 June 2021, the
notional value of hedging instruments that reference 3-month US LIBOR is US$16.8 billion. It is anticipated that the Secured Overnight Financing Rate
(SOFR) benchmark rate will be widely adopted by market participants and effectively replace US LIBOR in new contracts during FY2022. However, a
number of US LIBOR settings, including 3-month US LIBOR, will continue to be published until 30 June 2023. Accordingly, absent of any agreement with
counterparties to transition to an alternative risk-free rate before this date, the Group’s existing interest rate swaps with maturity dates beyond 30 June
2023 will only transition to ARR once US LIBOR publication ceases. As at 30 June 2021, the Group has not transitioned any of its existing interest rate
swaps to alternative risk-free rates.
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Annual Report 2021
23 Financial risk management continued
Hedging instrument
Interest rate swaps
Cross-currency interest rate swaps
Notional
value to mature
before LIBOR
expires FY2023
US$M
1,979
404
923
3,306
Notional
value
US$M
11,950
3,187
1,673
16,810
Notional
currency
USD
EUR
GBP
Total
In addition, the Group has other arrangements which reference 3-month US LIBOR benchmarks and extend beyond 2021. These include USD bank
loans of US$2.3 billion and an undrawn revolving credit facility (refer to note 20 ‘Net debt’).
The Group has early adopted amendments to IFRS 9 ‘Financial Instruments’ and IFRS 7 ‘Financial Instruments: Disclosures’ in relation to IBOR Reform
(refer to note 39 ‘New and amended accounting standards and interpretations and changes to accounting policies’). These amendments provide reliefs
from applying specific hedge accounting requirements to hedging arrangements directly impacted by these reforms. In particular, where changes
to the Group’s instruments arise solely as a result of IBOR reform and do not change the economic substance of the Group’s arrangements, the Group
is able to maintain its existing hedge relationships and accounting. The Group has applied these reliefs resulting in no impact on the Group’s hedge
accounting. Upon transition to alternative risk-free rates, the Group will seek to apply further reliefs in IFRS 9 and continue to apply hedge accounting
to its hedging arrangements.
Movements in reserves relating to hedge accounting
The following table shows a reconciliation of the components of equity and an analysis of the movements in reserves for all hedges. For a description
of these reserves, refer to note 17 ‘Other equity’.
2021
US$M
At the beginning of the financial year
Add: Change in fair value of hedging instrument
recognised in OCI
Less: Reclassified from reserves to financial
expenses – recognised through OCI
At the end of the financial year
Cash flow hedging reserve
Cost of hedging reserve
Gross
71
Tax
(21)
863
(259)
(792)
142
238
(42)
Net
50
604
(554)
100
Gross
(32)
−
(45)
(77)
Tax
9
−
14
23
Cash flow hedging reserve
Cost of hedging reserve
2020
US$M
At the beginning of the financial year
Add: Change in fair value of hedging instrument
recognised in OCI
Less: Reclassified from reserves to financial
expenses – recognised through OCI
At the end of the financial year
Gross
163
(315)
223
71
Tax
(49)
94
(66)
(21)
Net
114
(221)
157
50
Gross
(106)
−
74
(32)
Changes in interest bearing liabilities and related derivatives resulting from financing activities
The movement in the year in the Group’s interest bearing liabilities and related derivatives are as follows:
Interest bearing liabilities
2021
US$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:
Loss on bond repurchase
Interest rate impacts
Foreign exchange impacts
Lease additions
Remeasurement of index-linked freight contracts
Other interest bearing liabilities/derivative related changes
Bank
loans
Notes and
debentures
Lease
liabilities
2,492
21,045
3,443
504
−
(737)
(233)
−
−
(6,888)
(6,888)
−
−
(1)
−
−
2
579
(764)
798
−
−
(1)
−
−
(770)
(770)
−
−
115
1,223
(59)
(56)
At the end of the financial year
2,260
14,769
3,896
Bank
overdraft and
short-term
borrowings
−
−
−
−
−
−
−
−
−
−
−
−
Total
27
604
(585)
46
Total
40
(221)
208
27
Total
568
167
(8,395)
(7,660)
Net
(23)
−
(31)
(54)
Net
(74)
−
51
(23)
Derivatives
(assets)/
liabilities
Cross
currency
and interest
rate swaps
(433)
−
167
−
167
(184)
704
(796)
−
−
(15)
(557)
Tax
32
−
(23)
9
Other
68
64
−
−
64
−
−
(14)
−
−
(60)
58
BHP
Annual Report 2021
173
GovernanceAdditional Information241Strategic Report3Financial Statements 23 Financial risk management continued
2020
US$M
Interest bearing liabilities
Bank loans
Notes and
debentures
Lease
liabilities
Bank
overdraft and
short-term
borrowings
At the beginning of the financial year
2,498
21,529
Proceeds from interest bearing liabilities
Settlements of debt related instruments
Repayment of interest bearing liabilities
Change from Net financing cash flows
Other movements:
Interest rate impacts
Foreign exchange impacts
Leases recognised on IFRS 16 transition
Lease additions
Remeasurement of index-linked freight contracts
Other interest bearing liabilities/derivative related changes
514
−
(522)
(8)
−
−
−
−
−
2
−
−
(859)
(859)
720
(354)
−
−
−
9
715
−
−
(671)
(671)
−
(43)
2,301
436
733
(28)
At the end of the financial year
2,492
21,045
3,443
20
−
−
−
−
−
−
−
−
−
(20)
−
Total
514
(157)
(2,047)
(1,690)
Derivatives
(assets)/
liabilities
Cross
currency
and interest
rate swaps
204
−
(157)
−
(157)
(788)
316
−
−
−
(8)
Other
66
−
−
5
5
−
(4)
−
−
−
1
68
(433)
Employee matters
24 Key management personnel
Key management personnel compensation comprises:
Short-term employee benefits
Post-employment benefits
Share-based payments
Total
2021
US$
2020
US$
14,081,625
12,564,637
744,951
1,172,727
11,601,866
13,514,588
2019
US$
11,557,506
1,490,716
15,821,972
26,428,442
27,251,952
28,870,194
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 FY2021 (2020: US$ nil; 2019: US$ nil).
There were no amounts payable by key management personnel at 30 June 2021 (2020: US$ nil; 2019: US$ nil).
There were no loans receivable from or payable to key management personnel at 30 June 2021 (2020: US$ nil; 2019: 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 2021 (2020: US$ nil; 2019: US$ nil).
For more information on remuneration and transactions with key management personnel, refer to section 2.2.
25 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: Cash and Deferred Plan (CDP), Short-Term Incentive Plan (STIP), Long-Term Incentive Plan (LTIP), Management
Award Plan (MAP), Transitional and Commencement KMP awards and the all-employee share plan, Shareplus.
Some awards are eligible to receive a cash payment, or the equivalent value in shares, equal to the dividend amount that would have been earned
on the underlying shares awarded to those participants (the Dividend Equivalent Payment, or DEP). The DEP is provided to the participants once the
underlying shares are allocated or transferred to them. Awards under the plans do not confer any rights to participate in a share issue; however, there
is discretion under each of the plans to adjust the awards in response to a variation in the share capital of BHP Group Limited or BHP Group Plc.
174
BHP
Annual Report 2021
25 Employee share ownership plans continued
The table below provides a description of each of the plans.
Plan
CDP and STIP
LTIP and MAP
Type
Short-term incentive
Long-term incentive
Overview
Vesting
conditions
The CDP was implemented in FY2020
as a replacement for the STIP, both
of which are generally plans for
Executive KMP and members of
the Executive Leadership Team
who are not Executive 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, 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 only for
the two-year award. Vesting of
the five-year award is subject to
service conditions and also to
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: Service conditions only.
Vesting
period
Dividend
Equivalent
Payment
Exercise
period
CDP – 2 and 5 years
STIP – 2 years
CDP – Yes
STIP – Yes
None
The LTIP is a plan for Executive KMP and
members of the Executive Leadership Team
who are not Executive KMP, and awards are
granted annually.
The MAP is a plan for BHP senior
management who are not KMP. The number
of share rights awarded is determined by
a participant’s role and grade.
LTIP: Service and performance conditions.
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.
LTIP – 5 years
MAP – 1 to 5 years
LTIP – Yes
MAP – Varies
None
(1) BHP’s TSR is the weighted average of the TSRs of BHP Group Limited and BHP Group Plc.
Transitional and
Commencement KMP
awards
Long-term incentive
Awards may be granted
to new Executive KMP
recruited into or within
the Group to bridge
the time-based gap
between the vesting of
awards either granted
in their non-KMP roles
or to replace awards
foregone from a
previous company.
Shareplus
All-employee share
purchase plan
Employees may
contribute up to
US$5,000 to acquire
shares in any plan
year. On the third
anniversary of the
start of a plan year,
the Group will match
the number of
acquired shares.
Service and
performance conditions.
Service
conditions only.
The Remuneration
Committee has absolute
discretion to determine
if the performance
condition has been
met and whether any,
all or part of the award
will vest (or otherwise
lapse), having regard to
personal performance
and the underlying
financial performance
of the Group during the
performance period.
To the extent the
performance condition
is not achieved,
awards will lapse.
There is no retesting
of the performance
condition. Vested awards
may be subject to a
holding lock.
2 years
3 years
Yes
None
No
None
BHP
Annual Report 2021
175
GovernanceAdditional Information241Strategic Report3Financial Statements 25 Employee share ownership plans continued
Employee share awards
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
−
377,140
12,041
276,944
74,796
−
−
60,604
251,148
12,041
3
−
216,340
200,785
−
4,937,506
654,790
653,170
1,395,906
3,543,220
−
−
−
−
11,159,990
3,502,112
4,161,573
547,012
9,953,517
51,247
−
77,000
−
−
77,000
4,057,382
2,536,374
1,694,880
359,682
4,539,194
218,403
229,462
82,404
125,493
70,569
103,128
54,189
19,060
176,049
232,767
−
−
−
−
2.2
0.5
−
1.6
1.2
1.2
1.3
1.1
1.3
−
A$39.06
A$39.06
A$39.06
A$39.16
−
A$45.49
£17.89
£20.57
2021
BHP Group Limited
CDP awards
STIP awards
GSTIP awards(1)
LTIP awards
MAP awards
Transitional and
Commencement KMP awards
Shareplus
BHP Group Plc
MAP awards
Shareplus
(1) Short-term incentive awards that were granted to BHP senior management who were not KMP. Awards were last granted in FY2018. All awards had vested or lapsed at
30 June 2021.
Employee share awards pre-tax expense is US$123.525 million (2020: US$128.999 million; 2019: US$138.275 million).
Fair value and assumptions in the calculation of fair value for awards issued
2021
BHP Group Limited
CDP awards
STIP awards
LTIP awards(1)
MAP awards(2)
Transitional and Commencement KMP awards
Shareplus
BHP Group Plc
MAP awards
Shareplus
Weighted
average fair
value of awards
granted during
the year US$
25.28
25.28
14.68
22.88
28.35
24.96
18.66
15.32
Risk-free
interest rate
Estimated
life of awards
Share price at grant date
Estimated
volatility of
share price Dividend yield
n/a 2 and 5 years
2 years
A$35.90
A$35.90
n/a
n/a
5 years A$35.90/A$33.81/A$38.56
28.0%
1-5 years
2 years
3 years
3 years
3 years
A$38.36/A$36.91/A$35.90/
A$45.88
A$38.56
A$30.19
£17.13
£12.11
n/a
n/a
n/a
n/a
n/a
n/a
0.25%
n/a
n/a
0.21%
n/a
0.12%
n/a
n/a
n/a
4.90%
n/a
5.59%
5.70%
6.40%
(1) Includes LTIP awards granted on 20 October 2020, 2 November 2020 and 1 December 2020.
(2) Includes MAP awards granted on 21 August 2020, 24 September 2020, 20 October 2020 and 7 April 2021.
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.
176
BHP
Annual Report 2021
26 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
2021
US$M
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
2021
US$M
1,624
54
534
2,212
1,606
606
Employee
benefits Restructuring
Post-
retirement
employee
benefits(3)
1,313
1,402
−
−
104
(82)
−
(1,119)
6
1,624
34
45
−
−
1
−
−
(26)
−
54
547
62
31
(10)
30
(46)
(58)
(59)
37
534
2020
US$M
1,313
34
547
1,894
1,283
611
Total
1,894
1,509
31
(10)
135
(128)
(58)
(1,204)
43
2,212
(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 27 ‘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
Employee
benefits
Description
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.
Restructuring
Liabilities for unpaid wages and salaries are recognised in other creditors.
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 2021
177
GovernanceAdditional Information241Strategic Report3Financial Statements 27 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
Defined benefit
pension schemes
Defined benefit
post-retirement
medical schemes
Defined benefit
post-employment
obligations
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$334 million during the financial year (2020: US$260 million; 2019: US$274 million) to defined
contribution plans and multi-employer defined contribution plans. These contributions are expensed as incurred.
For defined benefit pension schemes, the cost of providing pensions is charged to the income statement so as to recognise
current and past service costs, net interest cost on the net defined benefit obligations/plan assets and the effect of any
curtailments or settlements. Remeasurement gains and losses are recognised directly in equity. An asset or liability is consequently
recognised in the balance sheet based on the present value of defined benefit obligations less the fair value of plan assets, except
that any such asset cannot exceed the present value of expected refunds from and reductions in future contributions to the plan.
Defined benefit obligations are estimated by discounting expected future payments using market yields at the reporting date on
high-quality corporate bonds in countries that have developed corporate bond markets. However, where developed corporate
bond markets do not exist, the discount rates are selected by reference to national government bonds. In both instances, the
bonds are selected with terms to maturity and currency that match, as closely as possible, the estimated future cash flows.
The Group has closed all defined benefit pension schemes to new entrants. Defined benefit pension schemes remain operating
in Australia, the United States, Canada and Europe for existing members. Full actuarial valuations are prepared and updated
annually to 30 June by local actuaries for all schemes. The Group operates final salary schemes (that provide final salary benefits
only), non-salary related schemes (that provide flat dollar benefits) and mixed benefit schemes (that consist of a final salary
defined benefit portion and a defined contribution portion).
The Group operates a number of post-retirement medical schemes in the United States, Canada and Europe and certain Group
companies provide post-retirement medical benefits to qualifying retirees. In some cases, the benefits are provided through
medical care schemes to which the Group, the employees, the retirees and covered family members contribute. Full actuarial
valuations are prepared by local actuaries for all schemes. These schemes are recognised on the same basis as described for
defined benefit pension schemes. All of the post-retirement medical schemes in the Group are unfunded.
The Group has a legal obligation to provide post-employment benefits to employees in Chile. The benefit is a function of an
employee’s final salary and years of service. These obligations are recognised on the same basis as described for defined
benefit pension schemes.
Full actuarial valuations are prepared by local actuaries. These post-employment obligations are unfunded.
Risk
The Group’s defined benefit schemes/obligations expose the Group to a number of risks, including asset value volatility, interest rate variations, inflation,
longevity and medical expense inflation risk.
Recognising this, the Group has adopted an approach of moving away from providing defined benefit pensions. The majority of Group-sponsored
defined benefit pension schemes have been closed to new entrants for many years. Existing benefit schemes and the terms of employee participation
in these schemes are reviewed on a regular basis.
Fund assets
The Group follows a coordinated strategy for the funding and investment of its defined benefit pension schemes (subject to meeting all local requirements).
The Group’s aim is for the value of defined benefit pension scheme assets to be maintained at close to the value of the corresponding benefit obligations,
allowing for some short-term volatility. Scheme assets are invested in a diversified range of asset classes, predominantly comprising bonds and equities.
The Group’s aim is to progressively shift defined benefit pension scheme assets towards investments that match the anticipated profile of the benefit
obligations, as funding levels improve and benefit obligations mature. Over time, this is expected to result in a further reduction in the total exposure
of pension scheme assets to equity markets. For pension schemes that pay lifetime benefits, the Group may consider and support the purchase of
annuities to back these benefit obligations if it is commercially sensible to do so.
Net liability recognised in the Consolidated Balance Sheet
The net liability recognised in the Consolidated Balance Sheet is as follows:
Present value of funded defined benefit obligation
Present value of unfunded defined benefit obligation
Fair value of defined benefit scheme assets
Scheme deficit
Unrecognised surplus
Unrecognised past service credits
Adjustment for employer contributions tax
Net liability recognised in the Consolidated Balance Sheet
Defined benefit
pension schemes/
post-employment obligations
2021
US$M
377
358
(398)
337
−
−
−
337
2020
US$M
613
354
(634)
333
−
−
−
333
Post-retirement
medical schemes
2021
US$M
2020
US$M
−
197
−
197
−
−
−
197
−
214
−
214
−
−
−
214
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.
178
BHP
Annual Report 2021
28 Employees
Average number of employees(1)
Australia
South America
North America
Asia
Europe
Total average number of employees
2021
Number
2020
Number
2019
Number
23,828
7,390
1,299
1,907
54
34,478
20,967
7,330
1,296
1,939
57
31,589
18,146
6,979
1,999
1,743
59
28,926
(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
29 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 2021 and 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 are detailed below:
Income statement – Discontinued operations
Profit 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)
The total comprehensive income attributable to BHP shareholders from Discontinued operations was a loss of US$342 million in FY2019.
The conversion of options and share rights would decrease the loss per share for the year ended 30 June 2019 and therefore its impact has been
excluded from the diluted earnings per share calculation.
Cash flows from Discontinued operations
2019
US$M
175
(510)
(335)
7
(342)
(6.6)
(6.6)
Net operating cash flows
Net investing cash flows(1)
Net financing cash flows(2)
Net increase 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
Includes purchases of property, plant and equipment of US$443 million.
(1)
(2) Includes net repayment of interest bearing liabilities of US$6 million and dividends paid to non-controlling interests of US$7 million.
2019
US$M
474
(443)
(13)
18
10,531
(104)
10,427
10,445
BHP
Annual Report 2021
179
GovernanceAdditional Information241Strategic Report3Financial Statements 29 Discontinued operations continued
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)
30 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 3.2.
Significant subsidiaries
Coal
BHP Mitsui Coal Pty Ltd
Hunter Valley Energy Coal Pty Ltd
Copper
BHP Olympic Dam Corporation Pty Ltd
Compañia Minera Cerro Colorado Limitada
Minera Escondida Ltda(1)
Minera Spence SA
Iron Ore
BHP Iron Ore (Jimblebar) Pty Ltd(2)
BHP Iron Ore Pty Ltd
BHP Minerals Pty Ltd
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 Finance B.V.
BHP Billiton Finance Limited
BHP Billiton Finance (USA) Limited
BHP Canada Inc.
BHP Group Operations Pty Ltd
BHP Nickel West Pty Ltd
WMC Finance (USA) Limited
Country of
incorporation
Principal activity
Australia
Australia
Coal mining
Coal mining
Australia
Copper and uranium mining
Chile
Chile
Chile
Australia
Australia
Australia
Australia
Singapore
Switzerland
Singapore
Copper mining
Copper mining
Copper mining
Iron ore mining
Service company
Iron ore and coal mining
Towing services
Freight services
Marketing and trading
Marketing support and other services
The Netherlands
Finance
Australia
Australia
Canada
Australia
Australia
Australia
Finance
Finance
Potash development
Administrative services
Nickel mining, smelting, refining and administrative services
Finance
Group’s interest
2021
%
2020
%
80
100
100
100
57.5
100
85
100
100
100
100
100
100
100
100
100
100
100
100
100
80
100
100
100
57.5
100
85
100
100
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 Ltda, 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 Ltda.
(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.
31 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 3.2.
Significant associates
and joint ventures
Country of incorporation/
principal place of business
Associate or
joint venture
Principal activity
Reporting date
Cerrejón
Anguilla/Colombia/Ireland
Associate
Coal mining in Colombia
31 December
Ownership interest
2021
%
33.33
2020
%
33.33
Compañía Minera Antamina S.A.
(Antamina)
Peru
Samarco Mineração S.A.
(Samarco)
Brazil
Associate
Copper and zinc mining
31 December
33.75
33.75
Joint venture
Iron ore mining
31 December
50.00
50.00
Voting in relation to relevant activities in Antamina and Cerrejón, determined to be the approval of the operating and capital budgets, does not
require unanimous consent of all participants to the arrangement, therefore joint control does not exist. Instead, because the Group has the power
to participate in the financial and operating policies of the investee, these investments are accounted for as associates.
180
BHP
Annual Report 2021
31 Investments accounted for using the equity method continued
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:
2021
US$M
At the beginning of the financial year
Profit/(loss) from equity accounted investments, related impairments and expenses(1)
Investment in equity accounted investments
Dividends received from equity accounted investments
Transfer to assets held for sale(2)
Other
At the end of the financial year
Investment in
associates
Investment in
joint ventures
Total equity
accounted
investments
2,585
69
108
(737)
(284)
1
1,742
−
(990)
111
−
−
879
−
2,585
(921)
219
(737)
(284)
880
1,742
(1) US$(990) million represents US$(111) million impairment relating to US$(111) million funding provided during the period, US$(1,000) million movement in the Samarco dam
failure provision including US$(842) million change in estimate and US$(158) million exchange translation, US$(15) million movement in provisions related to the Samarco
Germano dam decommissioning provision including US$6 million change in estimate and US$(21) million exchange translation and US$136 million fair value change on
forward exchange derivatives. Refer to note 4 ‘Significant events – Samarco dam failure’ for further information.
(2) On 28 June 2021, the Group announced the divestment of its 33.3 per cent interest in Cerrejón to Glencore, for US$294 million cash consideration. The transaction has an
effective economic date of 31 December 2020. The purchase price is subject to adjustments at transaction completion which may include an adjustment for the dividends
paid by Cerrejón to the Group during the period from signing to completion. An impairment charge of US$466 million (before tax) was recognised in the year ended 30 June
2021 reducing the carrying value of the Group’s investment in Cerrejón at 30 June 2021 to US$284 million, being the agreed sale proceeds of US$294 million adjusted for
expected transaction costs. Refer to note 13 ‘Impairment of non-current assets’ for details.
At 30 June 2021, the Group’s investment of US$284 million in Cerrejón along with a loan due from Cerrejón of US$40 million, has been classified as ‘Assets held for sale’.
Payables owed to Cerrejón of US$17 million have been classified as ‘Liabilities directly associated with the assets held for sale’. Subject to the satisfaction of customary
competition and regulatory requirements, the transaction is expected to be completed within 12 months from the balance sheet date.
The following table summarises the financial information relating to each of the Group’s significant equity accounted investments. Information of the
Group’s investment in Cerrejón has not been included for FY2021 following its classification as ‘Assets held for sale’. BHP Brasil’s 50 per cent portion
of Samarco’s commitments, for which BHP Brasil has no funding obligation, is US$350 million (2020: US$200 million).
2021
US$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 profit/(loss) of equity accounted investments
Impairment of the carrying value of the investment in Cerrejón
Impairment of the carrying value of the investment in Samarco
Additional share of Samarco losses
Fair value change on forward exchange derivatives
Unrecognised losses
Profit/(loss) 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
Associates
Joint ventures
Antamina
Cerrejón
Individually
immaterial(1)
Samarco(2)
Individually
immaterial
Total
1,499
4,885
(1,285)
(1,062)
4,037
1,362
−
−
−
−
−
1,362
4,822
1,847
623
−
−
−
−
−
623
1,847
623
714
−
−
−
−
−
−
−
−
−
−
−
−
844
(43)
(14)
(466)
−
−
−
−
(480)
(43)
(480)
13
509(3)
4,380
(9,222)(4)
(7,627)
(11,960)
(5,980)
280(5)
516(6)
(1,041)(7)
4,442(8)
1,783(9)
380
−
−
1,742
814
(2,202)(10)
(1,076)(11)
−
(111)(7)
85
136
(24)(9)
(990)
(2,202)
(990)
−
(74)
(74)
10
−
−
−
(921)
(921)
737
BHP
Annual Report 2021
181
GovernanceAdditional Information241Strategic Report3Financial Statements
31 Investments accounted for using the equity method continued
2020
US$M
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Net assets/(liabilities) – 100%
Net assets/(liabilities) – Group share
Adjustments to net assets related to accounting policy adjustments
Investment in Samarco
Impairment of the carrying value of the investment in Samarco
Additional share of Samarco losses
Unrecognised losses
Carrying amount of investments accounted for using the equity method
Revenue – 100%
Profit/(loss) from Continuing operations – 100%
Share of profit/(loss) of equity accounted investments
Impairment of the carrying value of the investment in Samarco
Additional share of Samarco losses
Unrecognised losses
Profit/(loss) from equity accounted investments, related impairments
and expenses
Comprehensive income/(loss) – 100%
Share of comprehensive income/(loss) – Group share in equity
accounted investments
Dividends received from equity accounted investments
2019
US$M
Revenue – 100%
Profit/(loss) from Continuing operations – 100%
Share of 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
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)
−
26
(3,617)(10)
(1,918)(11)
(95)(7)
93
1,412(9)
(508)
(3,617)
(508)
−
356
(148)
(148)
12
−
2,585
−
−
−
(512)
(512)
126
Associates
Joint ventures
Antamina
Cerrejón
Individually
immaterial
Samarco(2)
Individually
immaterial
Total
3,203
1,168
394
−
−
−
394
1,168
394
361
2,094
309
103
−
−
−
103
309
103
134
24
(2,166)(10)
(1,075)(11)
(96)(7)
108
118(9)
(945)
(2,166)
(945)
−
(98)
(98)
15
−
−
−
(546)
(546)
510
(1) The unrecognised share of loss for the period was US$40 million (2020: unrecognised share of loss for the period was US$12 million), which increased the cumulative losses
to US$233 million (2020: increase to US$193 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$134 million (2020: US$15 million).
(4) Includes current financial liabilities (excluding trade and other payables and provisions) of US$6,567 million (2020: US$6,023 million).
(5) Relates mainly to dividends declared by Samarco that remain unpaid at balance date and which, in accordance with the Group’s accounting policy, are recognised when
received not receivable.
(6) Working capital funding provided to Samarco during the period is capitalised as part of the Group’s investments in joint ventures and disclosed as an impairment included
within the Samarco impairment expense line item.
(7) In the year ended 30 June 2016 BHP Brasil adjusted its investment in Samarco to US$ 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$(516) million have also been recognised.
(8) BHP Brasil has recognised accumulated additional share of Samarco losses of US$(4,442) million resulting from US$(3,945) million provisions relating to the Samarco dam
failure, including US$(497) 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$154 million (2020: US$84 million; 2019: US$85 million), interest income of US$1 million (2020: US$16 million; 2019: US$22 million),
interest expense of US$492 million (2020: US$588 million; 2019: US$342 million) and income tax (expense)/benefit of US$(303) million (2020: US$(256) million; 2019:
US$52 million).
(11) Includes accounting policy adjustments mainly related to the removal of foreign exchange gains on excluded dividends payable.
182
BHP
Annual Report 2021
32 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 3.2.
Significant joint operations
Country of operation
Principal activity
Atlantis
Bass Strait
Macedon(1)
Mad Dog
North West Shelf
Pyrenees(1)
ROD Integrated Development(2)
Shenzi(3)
Trinidad/Tobago(1)(4)
Mt Goldsworthy(5)
Mt Newman(5)
Yandi(5)
Central Queensland Coal Associates
US
Australia
Australia
US
Australia
Australia
Algeria
US
Hydrocarbons production
Hydrocarbons production
Hydrocarbons production
Hydrocarbons production
Hydrocarbons production
Hydrocarbons production
Hydrocarbons production
Hydrocarbons production
Group’s interest
2021
%
44
50
71.43
23.9
2020
%
44
50
71.43
23.9
12.5–16.67
40–71.43
28.85
72
12.5–16.67
40–71.43
29.50
44
Trinidad and Tobago
Hydrocarbons production
45–68.46
45–68.46
Australia
Australia
Australia
Australia
Iron ore mining
Iron ore mining
Iron ore mining
Coal mining
85
85
85
50
85
85
85
50
(1) While the Group may hold a greater than 50 per cent interest in these joint operations, all the participants in these joint operations approve the operating and capital budgets
and therefore the Group has joint control over the relevant activities of these arrangements.
(2) Group interest reflects the working interest and may vary year-on-year based on the Group’s effective interest in producing wells.
(3) Increase in Group interest reflects the acquisition of an additional 28 per cent working interest in Shenzi. The transaction was completed on 6 November 2020 for a purchase
price of US$480 million after customary post-closing adjustments. Shenzi continues to be accounted for as a joint operation because BHP continues to have joint decision-
making rights with the other joint venture partner (Repsol). The assets and liabilities related to the acquired interests have been accounted for in line with the principles of
IFRS 3/AASB 3 ‘Business Combinations’ with no remeasurement of the Group’s previous interest. The acquisition resulted in increases to property plant and equipment
of US$642 million, inventory of US$17 million and closure and rehabilitation liabilities of US$179 million. Fair value of the identifiable assets and liabilities approximate the
consideration paid and therefore no goodwill or bargain purchase gain has been recognised for the acquisition.
(4) Trinidad/Tobago joint operations include Greater Angostura and Ruby.
(5) These contractual arrangements are controlled by the Group and do not meet the definition of joint operations. However, as they are formed by contractual arrangement
and are not entities, the Group recognises its share of assets, liabilities, revenue and expenses arising from these arrangements.
Assets held in joint operations subject to significant restrictions are as follows:
Current assets
Non-current assets
Total assets(1)
Group’s share
2021
US$M
2,260
38,725
40,985
2020
US$M
2,059
37,193
39,252
(1) While the Group is unrestricted in its ability to sell a share of its interest in these joint operations, it does not have the right to sell individual assets that are used in these joint
operations without the unanimous consent of the other participants. The assets in these joint operations are also restricted to the extent that they are only available to be
used by the joint operation itself and not by other operations of the Group.
33 Related party transactions
The Group’s related parties are predominantly subsidiaries, associates and joint ventures and key management personnel of the Group.
Disclosures relating to key management personnel are set out in note 24 ‘Key management personnel’. Transactions between each parent company
and its subsidiaries are eliminated on consolidation and are not disclosed in this note.
– All transactions to/ from related parties are made at arm’s length, i.e. at normal market prices and rates and on normal commercial terms.
– Outstanding balances at year-end are unsecured and settlement occurs in cash. Loan amounts owing from related parties represent secured loans
made to associates and joint ventures under co-funding arrangements. Such loans are made on an arm’s length basis.
– No guarantees are provided or received for any related party receivables or payables.
– No provision for expected credit losses has been recognised in relation to any outstanding balances and no expense has been recognised in respect
of expected credit losses due from related parties.
– There were no other related party transactions in the year ended 30 June 2021 (2020: US$ nil), other than those with post-employment benefit plans
for the benefit of Group employees. These are shown in note 27 ‘Pension and other post-retirement obligations’.
– Related party transactions with Samarco are described in note 4 ‘Significant events – Samarco dam failure’.
BHP
Annual Report 2021
183
GovernanceAdditional Information241Strategic Report3Financial Statements 33 Related party transactions continued
Further disclosures related to related party transactions are as follows:
Transactions with related parties
Sales of goods/services
Purchases of goods/services
Interest income
Interest expense
Dividends received
Net loans (repayments from)/made to related parties
Outstanding balances with related parties
Trade amounts owing to related parties
Loan amounts owing to related parties
Trade amounts owing from related parties
Loan amounts owing from related parties
Unrecognised items and uncertain events
34 Contingent liabilities
Associates and joint ventures(1)
Subsidiaries and joint operations(1)
Total
Joint ventures
Associates
2021
US$M
2020
US$M
−
−
−
−
−
−
−
−
−
−
−
−
2021
US$M
−
1,564.073
2.241
−
737.250
(12.108)
Joint ventures
Associates
2021
US$M
2020
US$M
−
−
−
−
−
−
−
−
2021
US$M
316.269
17.097
0.004
40.651
2020
US$M
−
967.276
2.370
−
126.187
12.273
2020
US$M
69.490
5.097
0.473
40.759
2021
US$M
1,532
1,615
3,147
2020
US$M
1,314
1,534
2,848
(1) There are a number of matters, for which it is not possible at this time to provide a range of possible outcomes or a reliable estimate of potential future exposures, and for which
no amounts have been included in the table above.
A contingent liability is a possible obligation arising from past events and whose existence will be confirmed only by occurrence or non-occurrence of
one or more uncertain future events not wholly within the control of the Group. A contingent liability may also be a present obligation arising from past
events but is not recognised on the basis that an outflow of economic resources to settle the obligation is not viewed as probable, or the amount of the
obligation cannot be reliably measured.
When the Group has a present obligation, an outflow of economic resources is assessed as probable and the Group can reliably measure the obligation,
a provision is recognised.
The Group has entered into various counter-indemnities of bank and performance guarantees related to its own future performance, which are in the
normal course of business. The likelihood of these guarantees being called upon is considered remote.
The Group presently has tax matters, litigation and other claims, for which the timing of resolution and potential economic outflow are uncertain.
Obligations assessed as having probable future economic outflows capable of reliable measurement are provided at reporting date and matters
assessed as having possible future economic outflows capable of reliable measurement are included in the total amount of contingent liabilities above.
Individually significant matters, including narrative on potential future exposures incapable of reliable measurement, are disclosed below, to the extent
that disclosure does not prejudice the Group.
Uncertain tax and
royalty matters
Samarco
contingent
liabilities
Demerger
of South32
The Group is subject to a range of taxes and royalties across many jurisdictions, the application of which is uncertain
in some regards. Changes in tax law, changes in interpretation of tax law, periodic challenges and disagreements with
tax authorities, and legal proceedings result in uncertainty of the outcome of the application of taxes and royalties to
the Group’s business. Areas of uncertainty at reporting date include the application of taxes and royalties to the Group’s
cross-border operations and transactions.
To the extent uncertain tax and royalty matters give rise to a contingent liability, an estimate of the potential liability
is included within the table above, where it is capable of reliable measurement.
The table above includes contingent liabilities related to the Group’s equity accounted 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 2021.
184
BHP
Annual Report 2021
35 Subsequent events
On 27 July 2021, the Group entered into a definitive Support Agreement with Noront Resources (Noront) to make an all-cash takeover offer for Noront.
On 17 August 2021, the Group announced a major growth investment of US$5.7 billion (C$7.5 billion) in the Jansen Stage 1 potash project, which is
aligned with its strategy of growing its exposure to future facing commodities in world class assets.
On 17 August 2021, the Group announced the proposed merger of our Petroleum assets with Woodside. On completion of the proposed transaction,
BHP’s oil and gas business would merge with Woodside, and Woodside would issue new shares to be distributed to BHP shareholders, at which time it
is expected that Woodside would be owned 52 per cent and 48 per cent by existing Woodside and BHP shareholders, respectively. The merger, which
has a proposed effective date of 1 July 2021, is subject to confirmatory due diligence, negotiation and execution of full form transaction documents, and
satisfaction of conditions precedent including shareholder, regulatory and other approvals. The Group continues to assess the full financial reporting
impacts of the proposed merger. However, the preliminary terms of the merger did not provide an indicator of impairment for our Petroleum assets at
30 June 2021. The merger is expected to be completed during the first half of CY2022, at which time, we would derecognise the carrying value of our
Petroleum assets, which at 30 June 2021 included, but was not limited to, property plant and equipment and closure and rehabilitation provisions of
approximately US$11.9 billion and US$3.9 billion, respectively.
On 17 August 2021, the Group announced its intention to realise simplification and enhanced strategic flexibility benefits through unifying its corporate
structure under its existing Australian parent company.
Other than the matters outlined above, no matters or circumstances have arisen since the end of the financial year that have significantly affected,
or may significantly affect, the operations, results of operations or state of affairs of the Group in subsequent accounting periods.
Other items
36 Auditor’s remuneration
Fees payable to the Group’s auditors for assurance services
Audit of the Group’s Annual Report
Audit of the accounts of subsidiaries, joint ventures and associates
Audit-related assurance services required by legislation to be provided by the auditor
Other assurance and agreed-upon procedures under legislation or contractual arrangements
Total assurance services
Fees payable to the Group’s auditors for non-assurance services
Other services
Total other services
Total fees
2021
US$M
2020
US$M
2019
US$M
10.642
1.234
1.770
1.867
15.513
−
−
15.513
11.196
1.262
1.815
2.003
16.276
0.400
0.400
16.676
6.764
5.127
1.358
1.266
14.515
0.013
0.013
14.528
In each of FY2021 and FY2020, all amounts were paid to EY or EY affiliated firms. Fees are determined, and predominantly billed, in US dollars.
In FY2019, all amounts were paid to KPMG or KPMG affiliated firms, being the Group’s auditors for the financial year. Fees were determined in local
currencies and predominantly billed in US dollars based on the exchange rate at the beginning of the 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.
Fees payable to the Group’s auditors for other services
No amounts were payable for other services in FY2021. In prior years, amounts for other services comprised tax compliance services (2020:
US$0.269 million; 2019: US$0.013 million) and tax advisory services of (2020: US$0.131 million; 2019: US$ nil).
BHP
Annual Report 2021
185
GovernanceAdditional Information241Strategic Report3Financial Statements 37 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
2021
US$M
3,106
3,108
7,126
49,957
2,819
3,097
823
(32)
236
45,833
46,860
2020
US$M
8,881
8,895
8,531
53,772
1,526
1,826
823
(5)
224
50,904
51,946
Parent company guarantees
BHP Group Limited has guaranteed certain financing arrangements available to subsidiaries of US$7,879 million at 30 June 2021 (2020: US$13,404 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 2021 amounted to US$10 million (2020: US$8 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 2021 amounted to US$5,466 million (2020: US$5,466 million). In addition, BHP Group Limited and BHP Group
Plc have severally guaranteed a Group Revolving Credit Facility of US$5,500 million (2020: US$5,500 million), which remains undrawn.
38 Deed of Cross Guarantee
BHP Group Limited together with certain wholly owned subsidiaries as identified in note 13 ‘Related undertakings of the Group’ in section 3.2 have
entered into a Deed of Cross Guarantee (Deed) dated 6 June 2016. The effect of the Deed is that BHP Group Limited has guaranteed to pay any
outstanding liabilities upon the winding up of any wholly owned subsidiary that is party to the Deed. Wholly owned subsidiaries that are party
to the Deed have also given a similar guarantee in the event that BHP Group Limited or another party to the Deed is wound up.
The wholly owned Australian subsidiaries identified in note 13 ‘Related undertakings of the Group’ in section 3.2 are relieved from the requirements
to prepare and lodge audited financial reports.
A Consolidated Statement of Comprehensive Income and Retained Earnings and Consolidated Balance Sheet, comprising BHP Group Limited
and the wholly owned subsidiaries that are party to the Deed for the years ended 30 June 2021 and 30 June 2020 are as follows:
Consolidated Statement of Comprehensive Income and Retained Earnings
Revenue
Other income
Expenses excluding net finance costs
Net finance costs
Total taxation expense
Profit after taxation
Total other comprehensive income
Total comprehensive income
Retained earnings at the beginning of the financial year
Impact of change in accounting policies (Note 39)
Retained earnings at the beginning of the financial year (restated)
Profit after taxation for the year
Transfers to and from reserves
Dividends
Retained earnings at the end of the financial year
186
BHP
Annual Report 2021
2021
US$M
37,568
4,751
(26,789)
(247)
(5,495)
9,788
1
9,789
48,666
−
48,666
9,788
(52)
(8,125)
50,277
2020
US$M
Restated
24,514
2,239
(15,415)
(399)
(2,723)
8,216
12
8,228
44,723
(32)
44,691
8,216
(27)
(4,214)
48,666
38 Deed of Cross Guarantee continued
Consolidated Balance Sheet
ASSETS
Current assets
Cash and cash equivalents
Trade and other receivables
Loans to related parties
Inventories
Other
Total current assets
Non-current assets
Trade and other receivables
Inventories
Property, plant and equipment
Intangible assets(1)
Investments in Group companies
Deferred tax assets
Other
Total non-current assets
Total assets
LIABILITIES
Current liabilities
Trade and other payables
Loans from related parties
Interest bearing liabilities
Current tax payable
Provisions
Deferred income
Total current liabilities
Non-current liabilities
Trade and other payables
Loans from related parties
Interest bearing liabilities
Deferred tax liabilities(1)
Provisions
Deferred income
Total non-current liabilities
Total liabilities
Net assets
EQUITY
Share capital – BHP Group Limited
Treasury shares
Reserves
Retained earnings(1)
Total equity
2021
US$M
2020
US$M
Restated
2
1,906
7,158
2,101
96
11,263
60
491
35,457
1,143
31,838
−
20
69,009
80,272
3,898
4,828
283
1,777
1,459
8
7
1,351
9,116
1,887
76
12,437
65
496
33,735
1,211
37,646
688
39
73,880
86,317
3,319
17,312
275
570
1,042
7
12,253
22,525
4
11,472
690
998
3,236
8
16,408
28,661
51,611
1,111
(32)
255
50,277
51,611
10
8,925
693
1,733
2,416
12
13,789
36,314
50,003
1,111
(5)
231
48,666
50,003
(1) 30 June 2020 balances have been restated to reflect changes to the Group’s accounting policy following a decision by the IFRS Interpretations Committee on IAS 12 ‘Income
Taxes’, resulting in the retrospective recognition of US$950 million of goodwill at Olympic Dam and an offsetting US$982 million increase in deferred tax liabilities for the companies
included in the Deed of Cross Guarantee. Refer to note 39 ‘New and amended accounting standards and interpretations and changes to accounting policies’ for further information.
BHP
Annual Report 2021
187
GovernanceAdditional Information241Strategic Report3Financial Statements 39 New and amended accounting standards and interpretations and changes to accounting policies
Amended accounting standards
The adoption of amendments and revisions to accounting pronouncements applicable from 1 July 2020, including the change in definition of a
business under the amendments to IFRS 3/AASB 3 ‘Business Combinations’ and revisions to the Conceptual Framework for Financial Reporting
did not have a significant impact on the Group’s Financial Statements.
The Group has early adopted ‘Interest Rate Benchmark (IBOR) Reform – Phase 2 (Amendments to IFRS 9/AASB 9 ‘Financial Instruments’, IAS 39/AASB 139
‘Financial Instruments: Recognition and Measurement’; IFRS 7/AASB 7 ‘Financial Instruments: Disclosures’; IFRS 4/AASB 4 ‘Insurance Contracts’ and
IFRS 16/AASB 16 ‘Leases’). These amendments address the financial reporting impacts from IBOR reform and supplement the IBOR Reform Phase 1
amendments to IFRS 7 and IFRS 9 which were early adopted by the Group in the financial year ended 30 June 2020. Refer to note 23 ‘Financial risk
management’ for information on IBOR reform.
Issued not yet effective
A number of other accounting standards and interpretations, 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.
Changes in accounting policies
On 29 April 2020, the IFRS Interpretations Committee issued a decision on the application of IAS 12 ‘Income Taxes’ 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. As a
result, the Group has changed its accounting policy for assets that have no deductible or depreciable amount for income tax purposes, but do have
a deductible amount for capital gains tax (CGT) when determining deferred tax. The Group’s policy had been to use only the amount deductible for
CGT purposes whereas the Group will now account for the distinct income tax and CGT consequences arising from the expected manner of recovery.
The assets impacted by the change predominately relate to mineral rights.
Retrospective application of the accounting policy change has resulted in the following adjustments:
Consolidated Balance Sheet
The consolidated balance sheet as at 1 July 2019 has been updated for the following:
Increase in Deferred tax liabilities
Increase in Goodwill (included within Intangible assets)
Decrease in Retained earnings
US$M
1,021
950
(71)
The goodwill recognised as a result of the change in accounting policy relates to Olympic Dam and has been tested for impairment in the period, with
no impairment charge being required. Refer to note 13 ‘Impairment of non-current assets’ for information on impairments. The comparative balance
sheet as at 30 June 2020 has been restated to reflect these amounts.
Consolidated Statement of Changes in Equity
The consolidated statement of changes in equity as at 1 July 2018 and 1 July 2019 has been updated to reflect the reduction in retained earnings
of US$71 million.
Consolidated Income Statement, Consolidated Statement of Comprehensive Income
The impact of the accounting policy change on the consolidated income statement and consolidated statement of comprehensive income is
de minimus and therefore the comparative information has not been restated.
Consolidated Cash Flow Statement
The change in accounting policy has no impact on the consolidated cash flow statement.
188
BHP
Annual Report 2021
3.2 BHP Group Plc
BHP Group Plc is required to present its unconsolidated parent company balance sheet and certain notes to the balance sheet on a stand-alone basis
as at 30 June 2021 and 2020. The BHP Group Plc Financial Statements have been prepared in accordance with Financial Reporting Standard 101
‘Reduced Disclosure Framework’ (FRS 101). Refer to note 1 ‘Principal accounting policies’ for information on the principal accounting policies.
Parent company Financial Statements of BHP Group Plc
BHP Group Plc Balance Sheet
as at 30 June 2021
ASSETS
Current assets
Trade and other receivables – Amounts owed by Group undertakings
Non-current assets
Investments in subsidiaries
Deferred tax assets
Total assets
LIABILITIES
Current liabilities
Trade and other payables – Amounts owed to Group undertakings
Non-current liabilities
Pension liabilities
Total liabilities
Net assets
Capital and reserves
Called up share capital
Treasury shares
Share premium account
Capital redemption reserve
Profit and loss account
Total equity
Notes
2021
US$M
2020
US$M
2
3
4
5
6,7
6,408
6,408
1,621
−
1,621
8,029
(12)
(12)
(10)
(10)
(22)
8,007
1,057
(1)
518
177
6,256
8,007
6,283
6,283
3,131
−
3,131
9,414
(32)
(32)
(8)
(8)
(40)
9,374
1,057
–
518
177
7,622
9,374
The accompanying notes form part of these Parent company Financial Statements.
Profit after tax for the year amounted to US$1,933 million (2020: US$1,054 million). BHP Group Plc is exempt from presenting an unconsolidated parent
company profit and loss account in accordance with section 408 of the UK Companies Act 2006.
The Parent company Financial Statements of BHP Group Plc, registration number 3196209, were approved by the Board of Directors on 2 September
2021 and signed on its behalf by:
Ken MacKenzie
Chair
Mike Henry
Chief Executive Officer
BHP
Annual Report 2021
189
GovernanceAdditional Information241Strategic Report3Financial Statements BHP Group Plc Statement of Changes in Equity
for the year ended 30 June 2021
US$M
Balance as at 1 July 2020
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 2021
Balance as at 1 July 2019
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
Share capital
1,057
−
−
−
−
−
−
−
−
1,057
1,057
−
−
−
−
−
−
−
−
1,057
Treasury
shares(1)
−
−
−
−
−
(5)
4
−
−
(1)
−
−
−
−
−
(4)
4
−
−
−
Share
premium
account
Capital
redemption
reserve
518
177
−
−
−
−
−
−
−
−
518
518
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
177
177
−
−
−
−
−
−
−
−
518
177
Profit
and loss
account
7,622
1,933
−
(1)
Total
equity
9,374
1,933
−
(1)
1,932
1,932
−
(4)
1
(3,295)
6,256
9,588
1,054
−
−
(5)
−
1
(3,295)
8,007
11,340
1,054
−
−
1,054
1,054
−
(4)
4
(4)
−
4
(3,020)
7,622
(3,020)
9,374
(1) Shares held by the Billiton Employee Share Ownership Trust as at 30 June 2021 were 14,181 shares with a market value of US$1 million (2020: 2,771 shares with a market value
below US$1 million).
The accompanying notes form part of these Parent company Financial Statements.
190
BHP
Annual Report 2021
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 as the Directors:
– have made an assessment of the Group’s ability to continue as a going concern over the period to 30 September 2022 (the ‘going concern period’)
– Consider it appropriate to adopt the going concern basis of accounting in preparing the BHP Group Plc Parent company’s Financial Statements
– 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
– early adopting the 2020 amendments to FRS 101 reflecting the changes in UK company law following the UK exit from the European Union which are
applicable for accounting periods beginning on or after 1 January 2021. The adoption of these amendments did not have a significant impact on the
Parent Company Financial Statements
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 3.1.
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.
Key judgements and estimates
Judgements: Assessment of indicators of impairment of investments
requires significant management judgement.
Estimates: Assumptions in relation to the underlying cash flow forecasts
used in determining the recoverable value of investments are consistent
with those used to assess the recoverable amount of individual cash
generating units in the Consolidated Financial Statements.
Refer to note 13 ‘Impairment of non-current assets’ in Section 3.1
for further details on the Group’s impairment assessments, including
key judgements and estimates.
BHP
Annual Report 2021
191
GovernanceAdditional Information241Strategic Report3Financial Statements
1 Principal accounting policies continued
Taxation
The accounting policy is consistent with the Group’s policy set out in note 6 ‘Income tax expense’ in section 3.1.
Share-based payments
The accounting policy is consistent with the Group’s policy set out in note 25 ‘Employee share ownership plans’ in section 3.1 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 therefore the Parent company’s 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 disclosed in note 25 ‘Employee share ownership plans’ in section 3.1, 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 27 ‘Pension and other post-retirement obligations’ in section 3.1.
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.
2 Trade and other receivables – Amounts owed by Group undertakings
Group relief receivable
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 of the financial year
Impairment losses
At the end of the financial year
2021
US$M
10
6,398
6,408
6,408
−
2021
US$M
3,131
(1,510)
1,621
2020
US$M
–
6,283
6,283
6,283
−
2020
US$M
3,131
−
3,131
BHP Group Plc had the following principal subsidiary undertakings as at 30 June 2021:
Company
Principal activity
Country of incorporation
Percentage shareholding
Carrying value of investment
US$M
BHP Billiton Group Limited
Holding company
BHP Billiton Finance Plc
Finance company
UK
UK
BHP (AUS) DDS Pty Ltd
General finance
Australia
100%
99%
100%
1,621
0.1
−
BHP Billiton Group Limited, BHP Billiton Finance Plc and BHP (AUS) DDS Pty Ltd are included in the consolidation of the Group.
At 30 June 2021, BHP Group Plc recognised an impairment charge of US$1,510 million (after tax) in relation to its investment in BHP Billiton Group
Limited, a holding company that has ownership interests in the Group’s energy coal assets including New South Wales Energy Coal (NSWEC), Cerrejón,
and copper assets including Spence, Cerro Colorado and Antamina. The impairment charge is based on an equity valuation of BHP Billiton Group
Limited and primarily reflects the deterioration in value of NSWEC and Cerrejón during the year. Refer to note 13 ‘Impairment of non-current assets’
in Section 3.1 for further details on the impairment assessment of these assets.
The impairment charge reflects recoverable amount based on fair value less costs of disposal, applying discounted cash flow techniques
(predominantly at a post-tax real discount rate of 6.5 per cent) and using Level 3 inputs. The valuation is most sensitive to changes in commodity prices,
estimated future production volumes and discount rates.
During the year, BHP Group Plc received dividends of US$ nil (2020: US$1,000 million) from BHP Billiton Group Limited and dividends of
US$3,525 million (2020: US$ 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.
192
BHP
Annual Report 2021
4 Deferred tax assets
The UK Budget 2021 announcements included measures to support economic recovery as a result of the ongoing COVID-19 pandemic. These measures
included an increase in the UK’s main corporation tax rate from 19% to 25%, which is due to take effect from 1 April 2023. The increase in rate was
substantively enacted on 24 May 2021 and therefore has been reflected in the measurement of the unrecognised deferred tax asset below.
As at 30 June 2021, BHP Group Plc had unused income tax losses of US$744 million (2020: US$658 million), with an associated income tax benefit of
US$186 million (2020: US$125 million), and other deductible temporary differences of US$17 million (2020: US$14 million) with an associated income tax
benefit of US$4 million (2020: US$3 million). A deferred tax asset has not been recognised in relation to these losses and other deductible temporary
differences, as it is not probable that future tax profits will be available against which they can be utilised.
5 Trade and other payables – Amounts owed to Group undertakings
Group relief payable
Amounts owed to Group undertakings
Total trade and other payables
Comprising:
Current
Non-current
The amounts owed to Group undertakings are unsecured and repayable on demand.
6 Provisions
Pension liabilities
Total provisions
Comprising:
Current
Non-current
2021
At the beginning of the financial year
Actuarial loss on pension scheme
Charge for the year
Utilisation
At the end of the financial year
2021
US$M
2020
US$M
−
12
12
12
−
17
15
32
32
−
2021
US$M
2020
US$M
10
10
−
10
Pension
liabilities
US$M
8
1
1
−
10
8
8
−
8
Total
US$M
8
1
1
−
10
7 Pension liabilities
The Group operates the UK Executive fund in the United Kingdom. A full actuarial valuation is prepared by the independent actuary to the fund as at
30 June 2021. The Group operates final salary schemes that provide final salary benefits only, non-salary related schemes that provide flat dollar benefits
and mixed benefit schemes that consist of a final salary defined benefit portion and a defined contribution portion.
The defined benefit pension scheme exposes BHP Group Plc to a number of risks, including asset value volatility, interest rate, inflation, longevity and
medical expense inflation risk.
The Group follows a coordinated strategy for the funding and investment of its defined benefit pension schemes (subject to meeting all local requirements).
Scheme assets are predominantly invested in bonds and equities.
Amounts recognised in the BHP Group Plc balance sheet are as follows:
Present value of funded defined benefit obligation
Fair value of defined benefit scheme assets
Scheme deficit
Net liability recognised in the Balance Sheet
2021
US$M
2020
US$M
17
(7)
10
10
14
(6)
8
8
BHP
Annual Report 2021
193
GovernanceAdditional Information241Strategic Report3Financial Statements 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
2021
Shares
2020
Shares
2,112,071,796
2,112,071,796
(185,054)
173,644
11,410
(185,297)
222,245
(36,948)
2,112,071,796
2,112,071,796
2,112,057,615 2,112,069,025
2,771
14,181
1
1
50,000
50,000
(1) The total number of BHP Group Plc shares for all classes is 2,112,121,797 of which 99.99 per cent are ordinary shares with a par value of US$0.50.
Refer to note 16 ‘Share capital’ in section 3.1 for descriptions of the nature of share capital held.
9 Employee numbers
Average number of employees during the year including Executive Directors
2021
Number
1
2020
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 2.2.3 ‘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 2021,
the guaranteed liabilities amounted to US$10,976 million (2020: US$15,230 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
2021, the guaranteed liabilities amounted to US$5,466 million (2020: US$5,466 million). Further, BHP Group Plc and BHP Group Limited have severally
guaranteed a Group Revolving Credit Facility of US$5,500 million (2020: US$5,500 million), which remains undrawn.
At 30 June 2021, the liability recognised for financial guarantees was US$ nil (2020: US$ nil).
11 Financing facilities
BHP Group Plc is a party to a revolving credit facility. Refer to note 20 ‘Net debt’ in section 3.1.
12 Other matters
Note 36 ‘Auditor’s remuneration’ in section 3.1 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 2021 (2020: US$ nil).
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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 2021.
Unless otherwise stated, the share capital disclosed comprises ordinary or common shares, which are held by subsidiaries of the Group. Refer to notes
30 ‘Subsidiaries’, 31 ‘Investments accounted for using the equity method’ and 32 ‘Interests in joint operations’ in section 3.1 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 Direct Reduced Iron Pty Limited (t)
BHP IO Mining Pty Ltd
BHP IO Workshop Pty Ltd
BHP Iron Ore Holdings Pty Ltd (r)
BHP Iron Ore Pty Ltd (r) (t) (u)
BHP Minerals Pty Ltd (f) (r) (t) (u)
BHP Petroleum (Australia) Pty Ltd
BHP Petroleum (Bass Strait) Pty Ltd
BHP Petroleum (International Exploration) Pty Ltd
BHP Petroleum (North West Shelf) Pty Ltd
BHP Petroleum (Victoria) Pty Ltd
BHP Petroleum International Pty Ltd (r)
BHP Petroleum Investments (Great Britain) Pty Ltd
BHP Petroleum Pty Ltd
BHP Towage Services (Boodarie) Pty Ltd
BHP Towage Services (Iron Brolga) Pty Ltd
BHP Towage Services (Iron Corella) Pty Ltd
BHP Towage Services (Iron Ibis) Pty Ltd
BHP Towage Services (Iron Kestrel) Pty Ltd
BHP Towage Services (Iron Osprey) Pty Ltd
BHP Towage Services (Iron Whistler) Pty Ltd
BHP Towage Services (Mallina) Pty Ltd
BHP Towage Services (Mount Florance) Pty Ltd
BHP Towage Services (RT Atlantis) Pty Ltd
BHP Towage Services (RT Clerke) Pty Ltd
BHP Towage Services (RT Darwin) Pty Ltd
BHP Towage Services (RT Discovery) Pty Ltd
BHP Towage Services (RT Endeavour) Pty Ltd
BHP Towage Services (RT Enterprise) Pty Ltd
BHP Towage Services (RT Imperieuse) 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) (v)
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 SSM Development Pty Ltd
BHP Capital No. 20 Pty Limited (r)
BHP Freight Pty Ltd (r) (t)
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 Nickel West Pty Ltd (t) (u)
BHP Olympic Dam Corporation Pty Ltd (t) (u)
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
Billiton Australia Finance Pty Ltd
The Broken Hill Proprietary Company Pty Ltd (r) (t) (u)
WMC Finance (USA) Limited
Bermuda
Victoria Place, 31 Victoria Street, Hamilton, HM 10, Bermuda
BHP Petroleum (Tankers) Limited
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Annual Report 2021
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GovernanceAdditional Information241Strategic Report3Financial Statements 13 Related undertakings of the Group continued
Brazil
Avenida Rio Branco, No. 110, room 901, Centro, Rio de Janeiro,
20040-001, Brazil
Ecuador
Av. Patria 640 intersección Av. Amazonas, Edificio Patria Piso 10, Pichincha,
Quito, Ecuador
BHP Billiton Brasil Exploração e Produção de Petróleo Limitada
Cerro-Quebrado S.A.
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
Guernsey
Heritage Hall, Le Marchant Street, St Peter Port, Guernsey, GY1 4JY,
Channel Islands
Stein Insurance Company Limited
India
12th Floor, One Horizon Centre, Golf Course Road, DLF Phase V, Sector 43,
Gurgaon, HR, 122002, India
British Virgin Islands
Trident Chambers, Wickhams Cay, Road Town, Tortola, British Virgin Islands
BHP Marketing Services India Pvt Ltd
BHP Minerals India Private Limited
BHP Billiton UK Holdings Limited
BHP Billiton UK Investments Limited
Canada
1741 Lower Water Street, Suite 600, Halifax NS B3J 0J2, Canada
BHP Petroleum (New Ventures) Corporation
2900 – 550 Burrard Street, Vancouver BC V6C 0A3, Canada
BHP 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
BHP Billiton (Trinidad-2C) Ltd
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.
Chile
Cerro El Plomo 6000, Piso 15, Las Condes, Santiago, Chile
BHP Billiton Chile Inversiones Limitada (i)
BHP Explorations Chile SpA
Compañía Minera Cerro Colorado Limitada (i)
Minera Spence SA
Tamakaya Energía SpA
China
Suite 1209, Level 12, Link Square One, 222 Hubin Road, Shanghai,
HuangPu, 200021, China
BHP Billiton Technology (Shanghai) Co Ltd
Xin Mao Mansion, South Taizhong Road, Free Trade Zone Waigaoqiao,
Shanghai, 200131, China
BHP Billiton International Trading (Shanghai) Co. Ltd
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Indonesia
Midplaza 1 Building, Level 17, Jl.Jend.Sudirman Kav.10-11, JKT, 10220, Indonesia
PT BHP Billiton Indonesia
PT Billiton Indonesia
Ireland
12 Northbrook Road, Ranelagh, Dublin 6, Ireland
Billiton Investments Ireland Limited
Japan
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.
Mexico
Av. Ejercito Nacional #769, Torre B, Piso 3, Colonia Granada,
Alcadia 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.
13 Related undertakings of the Group continued
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, #18-01 Marina Bay Financial Centre Tower 2,
018983, Singapore
BHP Billiton Freight Singapore Pte Limited
BHP Billiton Marketing Asia Pte Ltd
BHP Billiton SSM Indonesia Pte Ltd
8 Marina View, #09-05 Asia Square Tower 1, 018960, Singapore
Westminer Insurance Pte Ltd (l)
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-6340, 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
United Kingdom
Nova South, 160 Victoria Street, London, England,
SW1E 5LB, United Kingdom
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 (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 (Bimshire) Limited
BHP Petroleum (Carlisle Bay) Limited
BHP Petroleum (Egypt) 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)
United States of America
1188 Bishop Street, Suite 2212, Honolulu, HI 96813, United States of America
BHP Hawaii Inc.
1999 Bryan Street, Suite 900, Dallas TX 75201-3136,
United States of America
BHP Foundation
202 South Minnesota Street, Carson City, NV, 89703, United States of America
BHP Queensland Coal Limited (r)
Carson Hill Gold Mining Corporation
BHP
Annual Report 2021
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GovernanceAdditional Information241Strategic Report3Financial Statements 13 Related undertakings of the Group continued
United States of America
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 Petroleum (Americas) Inc.
BHP Billiton Petroleum (Deepwater) Inc.
BHP Billiton Petroleum (GOM) Inc.
BHP Billiton Petroleum Holdings (USA) Inc. (g) (h)
BHP Billiton Petroleum Holdings LLC
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 New Mexico Coal Inc.
BHP Peru Holdings Inc.
BHP Petroleum (Arkansas Holdings) LLC
BHP Petroleum (Foreign Exploration Holdings) LLC
BHP Petroleum (Mexico Holdings) LLC
BHP Petroleum (North America) LLC
BHP Resolution Holdings LLC
BHP Resources Inc.
Broken Hill Proprietary (USA) Inc.
Hamilton Brothers Petroleum Corporation
Hamilton Oil Company Inc.
Rio Algom Mining LLC
WMC (Argentina) Inc.
WMC Corporate Services 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 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%)
Chile
Cerro El Plomo 6000, Piso 15, Las Condes, Santiago, Chile
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%)
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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)
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%)
Canada
Suite 1500, 1874 Scarth Street, Regina, SK, S4P 4E9, Canada
BHP SaskPower Carbon Capture and Storage (CCS)
Knowledge Centre Inc. (50%) (k)
Japan
1-8-3 Marunouchi, Chiyoda-ku, Tokyo, Japan
BMA Japan KK (50%)
Liberia
80 Broad Street, Monrovia, Liberia
Blue Ocean Bulk Shipping Limited (50%)
Mexico
Av. Ejercito Nacional #769, Torre B, Piso 3, Colonia Granada,
Delegación Miguel Hidalgo, Ciudad de Mexico, 11520, Mexico
Trion (60%) (p)
13 Related undertakings of the Group continued
Singapore
10 Marina Boulevard, #18-01 Marina Bay Financial Centre Tower 2,
018983, Singapore
Minority Investments (e)
Country of incorporation
Australia
BM Alliance Marketing Pte Ltd (50%)
Trinidad and Tobago
48-50 Sackville Street, Port of Spain, Trinidad, Trinidad and Tobago
Greater Angostura (45%) (p)
Registered office address
125 St Georges Terrace, Perth, WA 6000, Australia
Company Name
Pilbara Pastoral Company Pty Limited (25%)
United States of America
1209 Orange Street, Wilmington, DE, 19801,
United States of America
Gulf of Mexico (23.9–44%) (p)
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%)
Brazil
Rua Paraĩba, 1122, 9o andar, Belo Horizonte, MG, Brazil
Samarco Mineração S.A. (50%)
Colombia
Calle 100, No. 19-54, Bogota, Colombia
Cerrejón Zona Norte S.A. (33.33%)
Ireland
Furnbally Square, New Street, DUB 8, Ireland
CMC-Coal Marketing DAC (33.33%)
Netherlands
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
SolGold Plc (13.56%)
United States of America
1209 Orange Street, Wilmington, DE, 19801,
United States of America
Caesar Oil Pipeline Company LLC (25%) (k)
Cleopatra Gas Gathering Company LLC (22%) (k)
2711 Centerville Road, Suite 400, Wilmington DE 19808,
United States 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)
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 2021. 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.
(v) The company is eligible for relief from the Corporations Act 2001 requirements
for preparation, audit and lodgement of financial reports and Directors’ reports
as at 30 June 2021 and was not eligible for relief as at 30 June 2020.
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GovernanceAdditional Information241Strategic Report3Financial Statements 3.3 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 3.1 and 3.2, are
in accordance with the UK Companies Act 2006 and the Australian
Corporations Act 2001, including:
(i) complying with the applicable Accounting Standards
(ii) giving a true and fair view of the assets, liabilities, financial position
and profit or loss of each of BHP Group Limited, BHP Group Plc, the
Group and the undertakings included in the consolidation taken as
a whole as at 30 June 2021 and of their performance for the year
ended 30 June 2021
(b) the Financial Statements also comply with International Financial
Reporting Standards, as disclosed in section 3.1
(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 3.2 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
(f) 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 2021
Signed in accordance with a resolution of the Board of Directors.
Ken MacKenzie
Chair
Mike Henry
Chief Executive Officer
Dated this 2nd day of September 2021
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3.4 Statement of Directors’ responsibilities in respect of the Annual Report
and the Financial Statements
The Directors are responsible for keeping adequate accounting records
that are sufficient to show and explain the Parent Company’s and Group’s
transactions and disclose with reasonable accuracy at any time the
financial position of the Parent Company and the Group and enable them
to ensure that the 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 the Parent Company
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.
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
International Accounting Standards in conformity with the requirements
of the UK Companies Act 2006 and have elected to prepare the Parent
company Financial Statements in accordance with UK Accounting
Standards and applicable law (UK Generally Accepted Accounting
Practice), including Financial Reporting Standard 101 Reduced
Disclosure Framework (‘FRS 101’).
Under UK company law the Directors must not approve the Group
Financial Statements unless they are satisfied that they give a true and fair
view of the state of affairs of the Group and the Parent Company and of
the profit or loss of the Group and the Parent Company for that period.
Under the Financial Conduct Authority’s Disclosure Guidance and
Transparency Rules, Group Financial Statements are required to be
prepared in accordance with IFRSs adopted pursuant to Regulation (EC)
No 1606/2002 as it applies in the European Union.
In preparing each of the Group and Parent company Financial
Statements, the Directors are required to:
– select suitable accounting policies in accordance with IAS 8
‘Accounting Policies, Changes in Accounting Estimates and Errors’
and then apply them consistently
– make judgements and accounting estimates that are reasonable
and prudent
– present information, including accounting policies, in a manner that
provides relevant, reliable, comparable and understandable information
– provide additional disclosures when compliance with the specific
requirements in IFRSs (or in respect of the Parent Company Financial
Statements, FRS 101) is insufficient to enable users to understand the
impact of particular transactions, other events and conditions on the
Group’s financial position and financial performance
– for the Group Financial Statements, state whether International
Accounting Standards in conformity with the requirements of the
Companies Act 2006 and IFRSs adopted pursuant to Regulation(EC)
No 1606/2002 as it applies in the European Union have been followed,
subject to any material departures disclosed and explained in the
Financial Statements
– for the Parent Company Financial Statements, state whether applicable
UK Accounting Standards, including FRS 101, 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
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GovernanceAdditional Information241Strategic Report3Financial Statements 3.5 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 2021, I declare to the best of my
knowledge and belief, there have been:
a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and
b) 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
2 September 2021
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
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3.6 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 (or ‘the Group’) consists of BHP Group Limited, BHP Group Plc and the entities they controlled during the year ended 30 June 2021.
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 2021
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 39 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 2021
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, Australian Accounting Standards, International Accounting Standards in conformity with the requirements
of the UK Companies Act 2006, International Financial Reporting Standards (IFRSs) adopted pursuant to Regulation (EC) No. 1606/2002 as it applies
in the European Union and IFRSs as issued by the International Accounting Standards Board (IASB). 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 2021 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 2021 and of the Group’s profit for the year then ended;
– the Consolidated Financial Statements have been properly prepared in accordance with International Accounting Standards in conformity with
the requirements of the UK Companies Act 2006, IFRSs adopted pursuant to Regulation (EC) No. 1606/2002 as it applies in 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.
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 12 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 Financial Reporting Council’s (FRC) 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.
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GovernanceAdditional Information241Strategic Report3Financial Statements 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 12 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.
Assessment of the carrying value of non-current assets
Property, plant and equipment: US$73.8 billion (2020: US$72.4 billion)
Intangible assets: US$1.4 billion (2020: US$1.6 billion)
Investments accounted for using the equity method: US$1.7 billion (2020: US$2.6 billion)
Impairment of property, plant and equipment: US$2.6 billion (2020: US$0.5 billion)
Impairment of equity accounted associates US$0.5 billion (2020: US$nil)
BHP Group plc
Investments in subsidiaries US$1.6 billion (2020: US$3.1 billion)
Impairment of investments in subsidiaries: US$1.5 billion (2020: US$nil)
Why significant
Refer to Note 3 ‘Exceptional items’, Note 11 ‘Property,
plant and equipment’, Note 12 ‘Intangible assets’, Note 13
‘Impairment of non-current assets’, Note 31 ‘Investments
accounted for using the equity method’ and Note 3 of
section 3.2 ‘Investments in subsidiaries’.
Accounting standards require an assessment of indicators
of impairment annually or more frequently if indicators
of impairment exist, for each cash generating unit (CGU),
including BHP Group Plc’s investments in subsidiaries.
The Group’s assessment of impairment indicators included
an evaluation of the ongoing impact of the COVID-19
pandemic, macro-economic disruptions, commodity
price forecasts and asset operating performance.
During the year, the Group determined that indicators
of impairment existed for the Potash, New South Wales
Energy Coal (NSWEC), Olympic Dam and Cerrejón CGUs,
requiring an impairment test to determine the recoverable
amount of these CGU’s, as disclosed in Note 13 to the
financial statements.
The Group assessed the recoverable amount of the Potash,
Olympic Dam and Cerrejon CGU’s using a Fair Value Less
Cost to Dispose methodology (FVLCD). The recoverable
amount of NSWEC was assessed using the Value in
Use (VIU) methodology, as disclosed in Note 13 to the
financial statements.
An impairment charge of US$4,239 million (including
related tax impacts) was recorded for Potash
(US$2,065 million), NSWEC (US$1,704 million) and Cerrejón
(US$470 million).
No impairment charge was required following the
assessment of the recoverable amount for Olympic Dam.
The principal driver of the recoverable amount of
investment in subsidiaries is the estimated value
of underlying operating assets held by the Group’s
subsidiaries. BHP Group Plc’s investment in subsidiaries
was impaired by US$1,510 million primarily as a result
of the NSWEC and Cerrejón impairment charges.
How our audit addressed the key audit matter
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 external market
conditions. Our procedures involved assessing the key inputs such as commodity
price forecasts, discount rates and reserve estimation.
– We considered the impact of COVID-19, macro-economic disruptions through
evaluation of operating performance of the CGU’s.
– We assessed commodity price forecasts assumed by the Group against
comparable market data.
– We involved our valuation specialists to assist in evaluating, amongst other things,
the discount rates applied and commodity price forecasts.
Our procedures to address the recoverable amounts of the Potash, NSWEC, Cerrejón
and Olympic Dam CGU’s included:
– Evaluation of whether the methodology applied complied with the requirements
of the relevant accounting standards;
– Assessment of the commodity price forecasts adopted with reference to broker
and analyst data and publicly available peer company information;
– Assessment of the discount rate adopted, with reference to external market data
including government bond rates and other relevant companies data;
– Determination of 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;
– Evaluation of the historical accuracy of prior year’s forecasted cashflows by
comparing to current year’s actual cash flows;
– For those CGU’s assessed under a FVLCD methodology, in assessing how a
market participant would attribute value, we evaluated comparable transaction
data and related market participant information;
– Performance of sensitivity analysis to evaluate the impact of reasonably possible
changes in key assumptions such as commodity price forecasts, discount rates,
production, operating costs and capital expenditure; and
– Testing the mathematical accuracy of the impairment models.
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3. Our assessment of key audit matters continued
Assessment of the carrying value of non-current assets continued
How our audit addressed the key audit matter
The Group uses internal and external experts to provide geological, metallurgical, mine
planning, commodity price forecasts and technological information to support key
assumptions in the impairment models. With assistance from our mining and oil and
gas reserves experts, we 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 the
assessment of asset carrying values, by way of commodity price forecasts, climate
related commitments and carbon prices.
We assessed the adequacy of the disclosures included in Notes 11, 12, 13 and 31
to the financial statements.
Our procedures were performed by the Group engagement team as well as our
local audit team in Australia.
Procedures performed over the investment in subsidiaries of BHP Group Plc:
We assessed the impact of changes in the estimated future cash flows on the
recoverable amount of BHP Group Plc’s investments in subsidiaries.
Why significant
The assessment of the recoverable amount of these
CGUs and consequently, BHP Group Plc’s investments in
subsidiaries were 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 the Group’s determination of the
recoverable amount, which influence whether or not
an impairment charge or reversal is recognised, were
as follows:
– Commodity prices: the Group’s commodity price
forecasts have a significant impact on CGU impairment
assessments, and these are inherently uncertain.
There is a risk that these commodity price forecasts
are not reasonable and may not appropriately reflect
changes in supply and demand, including the impact
of 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 the Group’s assets,
recoverable amounts are sensitive to the discount rate
applied. Determining the appropriate discount rate to
apply to a CGU is judgemental.
– Estimating FVLCD: given that this approach uses
relevant information generated by transactions involving
comparable assets, determining the perspectives of
relevant market participants is judgemental.
The Group’s assessment of the potential financial impacts
of climate change and transition to a low carbon economy
are disclosed in Note 13 to the financial statements.
Key observations communicated to the Risk and Audit Committee
– We reported that the estimated recoverable amounts for Potash, NSWEC and Cerrejón were reasonable and that the impairment charge was
appropriately recorded in the financial year ended 30 June 2021.
– We concluded that the recoverable amount of Olympic Dam was appropriately supported, and consequently no impairment was required.
– We are satisfied that management has reflected their best estimate of the impacts of climate change in the impairment indicator assessment
and determination of the recoverable amounts for CGUs, including climate related commitments, such as planned transition to renewable
energy arrangements and the assessment of climate considerations on commodity price forecasts.
– We concluded that the impairment charge reflected in the BHP Group Plc financial statements is appropriate.
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GovernanceAdditional Information241Strategic Report3Financial Statements 3. Our assessment of key audit matters continued
Closure and rehabilitation provisions
Closure and rehabilitation provisions: US$11.9 billion (2020: US$8.8 billion)
Expenses excluding net finance costs: US$0.5 billion (2020: US$0.7 billion)
Why significant
Refer to Note 15 ‘Closure and rehabilitation provisions’
The Group has rehabilitation obligations to restore and
rehabilitate environmental disturbances created by its
operations and related sites.
These obligations arise from regulatory and legislative
requirements across multiple jurisdictions.
The key inputs used to determine the closure and
rehabilitation provisions are:
– Life of the operation or site;
How our audit addressed the key audit matter
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 that the future rehabilitation costs were consistent with the approved
closure plans prepared by the Group’s internal experts.
– We tested the mathematical accuracy of the closure and rehabilitation
– Estimated cost of future closure and
provision calculations.
rehabilitation activities;
– Timing of the activities;
– Discount rates; and
– With the assistance of our subject matter specialists we evaluated a sample of
closure and rehabilitation provisions for operating and closed asset sites within
the Group. Our audit procedures included:
– Regulatory and legislative requirements.
– Evaluation of the closure and rehabilitation plan with regard to applicable
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.
Closure and rehabilitation provisions were considered to
be a key audit matter as the estimation of these provisions
is complex, involves a high degree of judgement and often
requires specialist expertise to estimate the costs required
to satisfy closure and rehabilitation obligations.
regulatory and legislative requirements;
– Evaluation of the methodology used by the Group’s internal 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 other subject matter specialists,
we evaluated how the Group’s response to climate change had been reflected
in closure and rehabilitation provision estimates.
– We assessed the adequacy of the disclosures included in Note 15 to the
financial statements.
– 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 2021. We also reported that the provisions appropriately reflect management’s best
estimate of the costs required to perform the approved closure plans.
– We reported that we assessed the changes in discount rates used for closure and rehabilitation at 30 June 2021 and consider the reduction
in rates to be appropriate when benchmarked against relevant market data.
– We are satisfied with how management has reflected their best estimate of the impact of climate change in the closure cost estimates as
disclosed in the Key Estimates section of Note 15 to the financial statements.
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3. Our assessment of key audit matters continued
Samarco dam failure provisions recognised, including the Germano dam decommissioning, and contingent liabilities disclosed
Losses in the period attributable to the dam failure (pre-tax and finance costs): US$1.0 billion (2020: US$0.1 billion)
Provisions: US$2.8 billion (2020: US$2.1 billion)
Contingent liability disclosure in Note 34
Why significant
Refer to Note 3 ‘Exceptional items’, Note 4 ‘Significant events
– Samarco dam failure’ and Note 34 ‘Contingent liabilities’
How our audit addressed the key audit matter
The primary audit procedures we performed, amongst others, included
the following:
There were 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;
– Determining the status of any potential settlements; and
– Disclosures relating to the contingent liabilities from
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 was 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
– 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 compensation
for the impacted peoples; and
– The Group’s assessment of the legal claims and determination of the associated
provision and related contingent liability disclosures.
– We assessed the key assumptions used to determine the provision recorded
by the Group in relation to potential obligations by:
– Understanding the impact of any Brazilian court decisions on the number
and compensation category of impacted peoples;
– Understanding the impact of any Brazilian court decisions on the infrastructure
remediation program relating to the resettling of communities impacted by the
dam failure;
– Inquiring with the Group’s 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, and the independent external party that contribute to 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 above;
– Determining whether or not it is possible to provide a range of outcomes or
a reliable estimate of any potential settlement outcomes; and
– Evaluating the historical accuracy of prior year’s forecasted cash flows by
comparing to the current year’s actual cash flows.
impacted peoples entitled to compensation; and
– We read the claims and assessed their status and considered whether they now
– Nature and extent of remediation activities.
represented liabilities through:
– Inquiries with the Group’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 34, 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 was a result of new information
obtained during the period that could not have been anticipated in prior periods.
– We reported that the contingent liabilities disclosures related to the Samarco dam failure are appropriate.
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GovernanceAdditional Information241Strategic Report3Financial Statements 4. Our Scope of the Audit of BHP
What we mean
Criteria for
determining our
audit scope
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.
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.
The factors that we considered when assessing the scope of the 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 (2020: 36) assets and group functions (‘locations’), we selected 9 (2020: 10) locations based on their size or risk
characteristics and performed full scope audits of the complete financial information at 4 (2020: 4) locations. Of the full
scope locations, 3 (2020: 3) 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 5 (2020: 6) locations we performed specific scope audit
procedures on individual account balances within the location based on their size and risk profiles. The audit scope of
these components may not have included testing of all significant accounts of the component but will have contributed
to the coverage of significant accounts tested for the Group.
Specified
In addition to the 9 full and specific scope locations above, we selected 15 (2020: 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. As well as centralised revenue and accounts
receivable testing using data analytics techniques over the Group’s amounts.
For the remaining 12 (2020: 16) Other Procedures locations we performed supplementary audit procedures in relation to
BHP’s centralised group accounting and reporting processes including, but not limited to, the completeness of litigation
and other claims. We also performed disaggregated analytical reviews on each financial statement line item.
The locations within the scope of our work accounted for the following percentages of the Group’s measures:
Profit before tax
Total assets
Revenue
Full and
specific scopes
Specified and
Group procedures
Analysis of our
audit coverage
Full Scope
Specific Scope
Specified Procedures
Other Procedures
80
Full Scope
64
Full Scope
4
8
8
Specific Scope
Specified Procedures
Other Procedures
Specific Scope
Specified Procedures
19
14
3
78
8
14
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4. Our Scope of the Audit of BHP continued
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$169 million to US$540 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.
Impacts of COVID-19 on Group audit team involvement with EY component teams
Due to the global COVID-19 pandemic and the international travel restrictions, the Group audit team visits were restricted.
Consistent with our monitoring approach, since the global pandemic was announced in March 2020, we maintained continuous
dialogue with our local EY teams. This included: 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 BHP 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.
In certain locations, 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.
5. Our consideration of climate change related risks
The financial impacts on the Group of climate change and the transition to a low carbon economy (“climate change”) were considered in our audit
where they have the potential to directly or indirectly impact key judgements and estimates within the financial statements.
The Group continues to develop its assessment of the potential impacts of climate change which is currently premised upon two scenarios; the Central
Energy View and the Lower Carbon view, as explained in the Climate change section within the Basis of preparation of the financial statements.
Climate risks have the potential to materially impact the key judgements and estimates within the financial report. Our audit considered those
risks that could be material to the key judgement and estimates in the assessment of the carrying value of non-current assets and closure and
rehabilitation provisions.
The key judgements and estimates included in the financial statements incorporate actions and strategies, to the extent they have been approved
and can be reliably estimated in accordance with the Group’s accounting policies.
Accordingly, our key audit matters address how we have assessed the Group’s climate related assumptions to the extent they impact each key audit
matter. Our audit procedures were performed with the involvement of our climate change and valuation specialists.
6. 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$900 million, which is approximately 5% of the three-year average
Group profit before tax and exceptional items from continuing operations. In 2020, our first-year audit of the Group, we
used a materiality threshold of US$700 million, which was approximately 5% of the Group’s 30 June 2020 profit before
tax and exceptional items from continuing operations. We believe that a three-year average of Group 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 due to the volatility in commodity prices impacting current levels of profitability. Had we
based our assessment of materiality on the same basis as 2020, the 2021 materiality would have been in excess of
US$900 million. Exceptional items are defined in Note 3 to the Consolidated Financial Statements.
We determined materiality for the Parent Company to be US$80 million (2020: 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.
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.
BHP
Annual Report 2021
209
GovernanceAdditional Information241Strategic Report3Financial Statements 6. Our application of materiality continued
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% (2020: 75%) of our planning materiality, namely US$675 million
(2020: US$525 million). In assessing the appropriate level, we consider the nature, the number and impact of the audit
differences identified in the previous year’s audit.
The level of materiality that we applied in undertaking our audit work at each location was determined by applying a
percentage of our total performance materiality. This percentage is based on the significance of the location relative to
BHP as a whole and our assessment of the risk of material misstatement at that location. The locations selected, together
with the ranges of materiality applied, were:
Location
Commodity/Function
Country
WAIO
Escondida
BMA
Group Functions
Marketing (Freight)
Samarco
Olympic Dam
Australian JIU
Gulf of Mexico
Iron Ore
Copper
Coal
Treasury
Marketing
Iron Ore
Copper
Petroleum
Petroleum
Australia
Chile
Australia
Australia
Singapore
Brazil
Australia
Australia
United States
Scope
Full
Full
Full
Full
Specific
Specific
Specific
Specific
Specific
Performance materiality
(US$M)
540
257
169
506
506
338
169
169
169
Reporting Threshold
What we mean
Level set
An amount below which identified misstatements are considered as being clearly trivial.
We agreed with the Risk and Audit Committee that we would report to them all uncorrected audit differences in excess of
US$45 million (2020: 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.
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.
7. Other information
The other information comprises the information included in the Annual Report set out in sections 1, 2 and 4 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 contained within the Annual Report.
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.
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 course of 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 themselves. 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.
8. Opinions on the Remuneration Report
8.1 EY Australia’s opinion on the Remuneration Report
EY Australia has audited the Remuneration Report included in section 2.2 of the Annual Report for the year ended 30 June 2021. 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 2021, complies with section 300A of the
Australian Corporations Act 2001.
8.2 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 2.2.3 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 section 2.2.3 (separate disclosure for Chief Executive Officer and
Non-Executive Directors)
– details of the taxable benefits, as set out in the notes to the single total figure for remuneration of each director
– Cash and Deferred Plan (‘CDP’) and Long-Term Incentive Plan (‘LTIP’) performance targets and FY2021 CDP performance outcomes and LTIP
performance outcomes, respectively
– details of the total pension entitlements, as set out in the notes to the single total figure for remuneration of each director
– details of scheme interests awarded during the financial year, as set out in the tables within the LTIP allocated during FY2021
– details of payments to past directors and for loss of office
– statement of directors’ shareholding and share interests, as set out in the tables within the ordinary share holdings and transactions and awards
under the MAP.
210
BHP
Annual Report 2021
9. EY UK’s reporting on specific sections of the other
information
In section 9 ‘we’, ‘us’ and ‘our’ refer to EY UK only.
9.1 EY UK’s conclusions relating to going concern
In auditing the financial statements, we have concluded that the
directors’ use of the going concern basis of accounting in the
preparation of the Consolidated and Parent Company Financial
Statements is appropriate. Our evaluation of the directors’ assessment
of the Group and Parent Company’s ability to continue to adopt the
going concern basis of accounting included the following:
– we obtained an understanding of the process over management’s
going concern assessment. We then evaluated the design of the
controls around the budgeting process, being the basis of the going
concern assessment, and tested their operating effectiveness.
– we obtained management’s going concern model and reconciled
the output of such model to management’s going concern and
viability paper presented to the Board and Risk and Audit Committee.
We confirmed that the method used in management’s model is
appropriate and checked its clerical accuracy.
– we assessed the information used in the going concern assessment
for consistency with the information obtained through auditing other
areas of the business and challenged the assumptions, including
those relating to commodity prices, production, operating costs,
debt repayments and climate risk.
– given that management prepare forecasts for other business
purposes that go beyond the going concern period, we have
used such forecasts in our management challenge process and
considered whether events and conditions beyond the period
of management’s assessment may cast significant doubt over
the Group’s and Parent Company’s ability to continue as going
concern; and
– we tested management’s severe but plausible scenario to determine
if under such conditions BHP could potentially experience a
liquidity shortfall.
Based on the work we have performed, we have not identified any
material uncertainties relating to events or conditions that, individually
or collectively, may cast significant doubt on the Group’s and Parent
Company’s ability to continue as a going concern over the period to
30 September 2022.
In relation to the Group and Parent Company’s reporting on how they
have applied the UK Corporate Governance Code, we have nothing
material to add or draw attention to in relation to the directors’ statement
in the financial statements about whether the directors considered it
appropriate to adopt the going concern basis of accounting.
Our responsibilities and the responsibilities of the directors with
respect to going concern are described in the relevant sections of
this report. However, because not all future events or conditions can
be predicted, this statement is not a guarantee as to the Group’s and
Parent Company’s ability to continue as a going concern.
9.2 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
– the strategic report and the directors’ report have been prepared
in accordance with applicable legal requirements.
9.3 EY UK’s Corporate Governance Statement
The Listing Rules require us to review the directors’ statement in relation
to going concern, longer-term viability and that part of the Corporate
Governance Statement relating to the Group’s and Parent Company’s
compliance with the provisions of the UK Corporate Governance Code
specified for our review.
Based on the work undertaken as part of our audit, we have concluded
that each of the following elements of the Corporate Governance
Statement is materially consistent with the financial statements or
our knowledge obtained during the audit:
– Directors’ statement with regards to the appropriateness of adopting
the going concern basis of accounting and any material uncertainties
identified set out in section 2.3.3;
– Directors’ explanation as to its assessment of the company’s
prospects, the period this assessment covers and why the period
is appropriate set out in section 2.1.10;
– Directors’ statement on fair, balanced and understandable set out
in section 2.1.10;
– Board’s confirmation that it has carried out a robust assessment of
the emerging and principal risks set out in sections 1.10, 2.1.5, 2.1.10
and 2.1.11;
– The section of the Annual Report that describes the review of
effectiveness of risk management and internal control systems set
out in section 2.1.10; and
– The section describing the work of the Risk and Audit Committee
set out in section set out in section 2.1.10.
10. Other matters which EY UK is required to report
by exception
In section 10 ‘we’ and ‘our’ refer to EY UK only.
In 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 has not identified material misstatements in the strategic
report or the directors’ report.
EY UK has 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.
11. Responsibilities of directors
As explained more fully in the directors’ responsibilities statement set
out in section 3.4, 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.
BHP
Annual Report 2021
211
GovernanceAdditional Information241Strategic Report3Financial Statements 12. 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 located on the UK FRC’s website at
https://www.frc.org.uk/auditorsresponsibilities. This description forms
part of EY UK auditor’s report.
13. Other matters EY UK are required to address
In section 13 ‘we’ and ‘our’ refer to EY UK only.
13.1 Explanation as to what extent the audit was considered
capable of detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws
and regulations. We design procedures in line with our responsibilities,
outlined above, to detect irregularities, including fraud. The risk of not
detecting a material misstatement due to fraud is higher than the risk of
not detecting one resulting from error, as fraud may involve deliberate
concealment by, for example, forgery or intentional misrepresentations,
or through collusion.
The extent to which our procedures are capable of detecting
irregularities, including fraud is detailed below. However, the primary
responsibility for the prevention and detection of fraud rests with both
those charged with governance of the company 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, Australian Accounting Standards, the Australian
Corporations Act 2001, International Accounting Standards adopted
for use within the UK, 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 and oil and
gas 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.
– We assessed the susceptibility of the Group’s financial statements to
material misstatement, including how fraud might occur. Our forensic
specialists reviewed the BHP Ethics and Compliance fraud analytics,
which were undertaken to respond to the risk of potential fraudulent or
corrupt payments made to third parties. We also considered 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; review of Board and Risk and Audit Committee
reporting and review of the volume and nature of complaints received
by the EthicsPoint anonymous reporting service during the year.
– If any instances of non-compliance with laws and regulations
were identified, these were communicated to the relevant local EY
teams who performed sufficient and appropriate audit procedures,
supplemented by audit procedures performed at the Group level.
– 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.
13.2 Other matters
– Following the recommendation from the Risk and Audit Committee
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 two
years covering the years ended 30 June 2020 and 30 June 2021.
– 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.
14. 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
respective 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
2 September 2021
In respect of BHP Group Limited
Ernst & Young LLP
London
2 September 2021
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.
212
BHP
Annual Report 2021
3.7 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 1.17.1
‘Petroleum’ and section 4.6.1 ‘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 3.6 ‘Independent Auditors’ reports’.
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 4.5.2 ‘Production
– Petroleum’ and section 4.6.1 ‘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
2021
Unproved properties
Proved properties
Total costs
Less: Accumulated depreciation, depletion, amortisation and valuation provisions
Net capitalised costs
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
(1) Other is primarily comprised of Algeria, Mexico and Trinidad and Tobago.
Australia
US$M
United States
US$M
Other(1)
US$M
Total
US$M
−
17,882
17,882
(12,720)
5,162
10
17,079
17,089
(11,423)
5,666
10
16,514
16,524
(10,867)
5,657
754
13,210
13,964
(8,329)
5,635
808
12,538
13,346
(8,726)
4,620
875
11,751
12,626
(8,339)
4,287
580
1,972
2,552
(1,483)
1,069
576
1,743
2,319
(1,370)
949
458
1,625
2,083
(1,302)
781
1,334
33,064
34,398
(22,532)
11,866
1,394
31,360
32,754
(21,519)
11,235
1,343
29,890
31,233
(20,508)
10,725
Costs incurred relating to oil and gas property acquisition, exploration and development activities
The following table shows costs incurred relating to oil and gas property acquisition, exploration and development activities (whether charged to
expense or capitalised). Amounts shown include interest capitalised.
2021
Acquisitions of proved property
Acquisitions of unproved property
Exploration(1)
Development
Total costs(2)
2020
Acquisitions of proved property
Acquisitions of unproved property
Exploration(1)
Development
Total costs(2)
2019
Acquisitions of proved property
Acquisitions of unproved property
Exploration(1)
Development
Total costs(2)
Australia
US$M
United States(3)
US$M
Other(4)
US$M
Total
US$M
−
−
23
201
224
−
−
38
232
270
−
−
44
132
176
642
19
166
749
1,576
−
38
278
676
992
−
5
190
792
987
−
−
310
184
494
−
6
370
100
476
−
−
492
54
546
642
19
499
1,134
2,294
−
44
686
1,008
1,738
−
5
726
978
1,709
(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$1,160 million (2020: US$1,178 million; 2019: US$1,275 million) capitalised during the year.
(3) Total costs include Onshore US assets of US$ nil (2020: US$ nil; 2019: US$331 million).
(4) Other is primarily comprised of Algeria, Canada, Mexico and Trinidad and Tobago.
BHP
Annual Report 2021
213
GovernanceAdditional Information241Strategic Report3Financial Statements Results of operations from oil and gas producing activities
The following information is similar to the disclosures in note 1 ‘Segment reporting’ in section 3.1, but differs in several respects as to the level of detail
and geographic information. Amounts shown in the following table exclude financial income, financial expenses, and general corporate overheads.
Further, the amounts shown below include Onshore US however the disclosures in note 1 ‘Segment reporting’ in Section 3.1 do not.
Income taxes were determined by applying the applicable statutory rates to pre-tax income with adjustments for permanent differences and tax credits.
2021
Oil and gas revenue(1)
Production costs
Exploration expenses
Depreciation, depletion, amortisation and valuation provision(2)
Production taxes(3)
Accretion expense(4)
Income taxes
Royalty-related taxes(5)
Results of oil and gas producing activities(6)
2020
Oil and gas revenue(1)
Production costs
Exploration expenses
Depreciation, depletion, amortisation and valuation provision(2)
Production taxes(3)
Accretion expense(4)
Income taxes
Royalty-related taxes(5)
Results of oil and gas producing activities(6)
2019
Oil and gas revenue(1)
Production costs
Exploration expenses
Depreciation, depletion, amortisation and valuation provision(2)
Production taxes(3)
Accretion expense(4)
Income taxes
Royalty-related taxes(5)
Results of oil and gas producing activities(6)
Australia
US$M
United States(7)
US$M
Other(8)
US$M
2,272
(487)
(23)
(1,210)
(125)
427
(89)
(46)
11
303
2,535
(575)
(37)
(906)
(177)
840
(78)
(275)
(85)
402
3,404
(752)
(44)
(917)
(198)
1,493
(80)
(530)
(164)
719
1,244
(267)
(164)
(489)
−
324
(22)
(78)
−
224
1,101
(161)
(271)
(476)
(1)
192
(24)
(35)
−
133
2,675
(568)
(162)
(621)
−
1,324
(34)
(193)
−
1,097
368
(93)
(305)
(113)
(11)
(154)
(7)
(115)
–
(276)
350
(80)
(252)
(75)
(13)
(70)
(10)
(157)
−
(237)
610
(118)
(229)
(103)
(25)
135
(13)
(267)
−
(145)
Total
US$M
3,884
(847)
(492)
(1,812)
(136)
597
(118)
(239)
11
251
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
(1) Includes sales to affiliated companies of US$51 million (2020: US$62 million; 2019: US$75 million).
(2) Includes valuation provision of US$101 million (2020: US$12 million; 2019: US$21 million).
(3) Includes royalties and excise duty.
(4) Represents the unwinding of the discount on the closure and rehabilitation provision.
(5) Includes petroleum resource rent tax and petroleum revenue tax where applicable.
(6) Amounts shown exclude financial income, financial expenses and general corporate overheads and, accordingly, do not represent all of the operations attributable to the
Petroleum segment presented in note 1 ‘Segment reporting’ in section 3.1.
(7) Results of oil and gas producing activities includes Onshore US assets of US$ nil (2020: US$ nil; 2019: US$431 million).
(8) Other is primarily comprised of Algeria, Canada, Mexico, Trinidad and Tobago and the United Kingdom (divested 30 November 2018).
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 4.6.1 Petroleum reserves, and should be read in conjunction with that disclosure.
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.
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.
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.
214
BHP
Annual Report 2021
Standardised measure
2021
Future cash inflows
Future production costs
Future development costs
Future income taxes(2)
Future net cash flows
Discount at 10 per cent per annum
Standardised measure
2020
Future cash inflows
Future production costs
Future development costs
Future income taxes(2)
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(2)
Future net cash flows
Discount at 10 per cent per annum
Standardised measure
Australia
US$M
United States
US$M
Other(1)
US$M
Total
US$M
8,948
(3,783)
(4,118)
706
1,753
(160)
1,593
11,526
(4,027)
(4,124)
(187)
3,188
(642)
2,546
18,292
(4,710)
(3,860)
(2,551)
7,171
(1,926)
5,245
13,437
(5,122)
(2,996)
(944)
4,375
(1,468)
2,907
12,997
(4,943)
(3,242)
(880)
3,932
(1,586)
2,346
18,076
(4,917)
(4,516)
(1,657)
6,986
(3,396)
3,590
1,561
(418)
(261)
(438)
444
(93)
351
1,660
(494)
(433)
(473)
260
(94)
166
1,807
(459)
(226)
(711)
411
(94)
317
23,946
(9,323)
(7,375)
(676)
6,572
(1,721)
4,851
26,183
(9,464)
(7,799)
(1,540)
7,380
(2,322)
5,058
38,175
(10,086)
(8,602)
(4,919)
14,568
(5,416)
9,152
(1) Other is primarily comprised of Algeria and Trinidad and Tobago.
(2) Future income taxes include credits to be received as a result of oil and gas operations and the utilisation of future tax losses by the Group.
Changes in the Standardised measure are presented in the following table.
Changes in the Standardised measure
Standardised measure at the beginning of the year
Revisions:
Prices, net of production costs
Changes in future development costs
Revisions of reserves quantity estimates(1)
Accretion of discount
Changes in production timing and other
Sales of oil and gas, net of production costs
Acquisitions of reserves-in-place
Sales of reserves-in-place(2)
Previously estimated development costs incurred
Extensions, discoveries, and improved recoveries, net of future costs
Changes in future income taxes
Standardised measure at the end of the year
(1) Changes in reserves quantities are shown in the Petroleum reserves tables in section 4.6.1.
(2) Onshore US assets disposal in 2019.
2021
US$M
2020
US$M
2019
US$M
5,058
9,152
10,240
(175)
(238)
(107)
678
360
5,576
(2,901)
462
44
1,075
17
578
4,851
(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
BHP
Annual Report 2021
215
GovernanceAdditional Information241Strategic Report3Financial Statements Accounting for suspended exploratory well costs
Refer to note 11 ‘Property, plant and equipment’ in section 3.1 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 2021, 30 June 2020 and 30 June 2019.
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
2021
US$M
1,089
7
(66)
−
−
1,030
2020
US$M
1,040
120
−
(6)
(65)
1,089
2019
US$M
794
297
(9)
(42)
−
1,040
The following table provides an ageing of capitalised exploratory well costs, based on the date the drilling was completed, and the number of projects
for which exploratory well costs has been capitalised for a period greater than one year since the completion of drilling.
Exploration activity typically involves drilling multiple wells, over a number of years, to fully evaluate and appraise a project. The term ‘project’ as used in
this disclosure refers primarily to individual wells and associated exploratory activities.
Ageing of capitalised exploratory well costs
Exploratory well costs capitalised for a period of one year or less
Exploratory well costs capitalised for a period greater than one year
At the end of the year
Number of projects that have been capitalised for a period greater than one year
Drilling and other exploratory and development activities
The number of crude oil and natural gas wells drilled and completed for each of the last three years was as follows:
2021
US$M
7
1,023
1,030
2021
15
2020
US$M
120
969
1,089
2020
14
2019
US$M
210
830
1,040
2019
13
Year ended 30 June 2021
Australia
United States(1)
Other(2)
Total
Year ended 30 June 2020
Australia
United States(1)
Other(2)
Total
Year ended 30 June 2019
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
1
1
1
3
−
−
1
1
1
33
−
34
−
−
−
−
−
1
−
1
−
−
−
−
1
1
1
3
−
1
1
2
1
33
−
34
1
1
2
4
−
1
3
4
1
34
6
41
(1) Includes Onshore US assets net productive development wells of nil (2020: nil; 2019: 33). Includes Onshore US assets net exploratory wells of nil for 2021, 2020 and 2019.
(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.
216
BHP
Annual Report 2021
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 2021. 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 2021 was as follows:
Australia
United States
Other(1)
Total
Crude oil wells
Natural gas wells
Total
Gross
334
55
61
450
Net
166
27
23
216
Gross
176
−
8
184
Net
66
−
4
70
Gross
510
55
69
634
Net
232
27
27
286
(1) Other is primarily comprised of Algeria and Trinidad and Tobago.
Of the productive crude oil and natural gas wells, 131 (net: 60) operated wells had multiple completions.
Developed and undeveloped acreage (including both leases and concessions) held at 30 June 2021 was as follows:
Thousands of acres
Australia
United States
Other(1)(2)
Total
Developed acreage
Undeveloped acreage
Gross
2,423
92
160
2,675
Net
897
41
67
1,005
Gross
391
403
3,394
4,188
Net
148
339
3,104
3,591
(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 139 thousand gross acres (22 thousand net acres), 386 thousand gross acres (241 thousand net acres) and 121 thousand gross acres
(103 thousand net acres) of undeveloped acreage will expire in the years ending 30 June 2022, 2023 and 2024 respectively, if the Group does not
establish production or take any other action to extend the terms of the licences and concessions.
BHP
Annual Report 2021
217
GovernanceAdditional Information241Strategic Report3Financial Statements Section 4
Additional information
In this section:
4.1
Financial information summary
4.2
4.3
4.4
4.5
4.6
4.7
4.8
4.9
Alternative Performance Measures
Information on mining operations
Financial Information by commodity
Production
Resources and Reserves
Major projects
Sustainability – performance data
Legal proceedings
4.10
Shareholder information
4.10.1 History and development
4.10.2 Markets
4.10.3 Organisational structure
4.10.4 Material contracts
4.10.5 Constitution
4.10.6 Share ownership
4.10.7 Dividends
4.10.8 American Depositary Receipts fees and charges
4.10.9 Government regulations
4.10.10 Ancillary information for our shareholders
4.11
Glossary
219
219
229
239
242
245
268
269
291
293
293
293
293
295
295
298
300
300
301
303
304
218
BHP
Annual Report 2021
4.1 Financial information summary
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 3.
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 29 ‘Discontinued operations’ in section 3
Year ended 30 June
US$M
Consolidated Income Statement (section 3.1.1)
Revenue
Profit from operations
Profit after taxation from Continuing operations
Loss after taxation from Discontinued operations
Profit after taxation from Continuing and Discontinued operations attributable
to BHP shareholders (Attributable profit)(1)
Dividends per ordinary share – paid during the period (US cents)
Dividends per ordinary share – determined in respect of the period (US cents)
Basic earnings per ordinary share (US cents)(1)(2)
Diluted earnings per ordinary share (US cents)(1)(2)
Basic earnings from Continuing operations per ordinary share (US cents)(2)
Diluted earnings from Continuing operations per ordinary share (US cents)(2)
Number of ordinary shares (million)
– At period end
– Weighted average
– Diluted
Consolidated Balance Sheet (section 3.1.3)(3)
Total assets(4)
Net assets(4)
Share capital (including share premium)
Total equity attributable to BHP shareholders(4)
Consolidated Cash Flow Statement (section 3.1.4)
Net operating cash flows(5)
Capital and exploration expenditure(6)
Other financial information (section 4.2)
Net debt(7)
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)(4)(7)
2021
2020
2019
2018
2017
60,817
25,906
13,451
−
11,304
156.0
301.0
223.5
223.0
223.5
223.0
5,058
5,057
5,068
108,927
55,605
2,686
51,264
27,234
7,120
4,121
17,077
37,379
30,291
337.7
32.5
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
105,733
52,175
2,686
47,865
15,706
7,640
12,044
9,060
22,071
15,874
179.2
16.9
44,288
16,113
9,520
(335)
43,129
15,996
7,744
(2,921)
8,306
220.0
235.0
160.3
159.9
166.9
166.5
5,058
5,180
5,193
101,811
51,753
2,686
47,169
17,871
7,566
9,446
9,124
23,158
17,065
176.1
16.0
3,705
98.0
118.0
69.6
69.4
125.0
124.6
5,324
5,323
5,337
112,943
60,599
2,761
55,521
18,461
6,753
11,605
8,933
23,183
16,562
167.8
14.2
35,740
12,554
6,694
(472)
5,890
54.0
83.0
110.7
110.4
119.8
119.5
5,324
5,323
5,336
117,956
62,655
2,761
57,187
16,804
5,220
17,201
6,732
19,350
13,190
126.5
9.8
Includes Loss after taxation from Discontinued operations attributable to BHP shareholders.
(1)
(2) For more information on earnings per share, refer to note 7 ‘Earnings per share’ in section 3.
(3) The Consolidated Balance Sheet includes the associated assets and liabilities held for sale in relation to Cerrejón for FY2021 and Onshore US for FY2018 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.
(4) All comparative periods have been restated to reflect changes to the Group’s accounting policy following a decision by the IFRS Interpretations Committee on IAS 12 ‘Income Taxes’, resulting
in the retrospective recognition of US$950 million of goodwill at Olympic Dam (included in the Copper segment) and an offsetting US$1,021 million increase in deferred tax liabilities.
Refer to note 39 ‘New and amended accounting standards and interpretations and changes to accounting policies’ in section 3 for further information.
(5) Net operating cash flows are after dividends received, net interest paid, proceeds and settlements of cash management related instruments, 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 3 and includes purchases of property, plant and equipment plus exploration expenditure from Discontinued operations. For more information, refer to note
29 ‘Discontinued operations’ in section 3. Purchase of property, plant and equipment includes capitalised deferred stripping of US$810 million for FY2021 (FY2020: US$698 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 3.
(7) We use Alternative Performance Measures (APMs) 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 4.2 for a reconciliation of APMs to their respective IFRS measure. Refer to section 4.2.1 for
the definition and method of calculation of APMs. Refer to note 20 ‘Net debt’ in section 3 for the composition of Net debt.
4.2 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 4.2.1 and 4.2.2 outline 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 2021
219
23Financial StatementsGovernance1Strategic Report4Additional Information 4.2 Alternative Performance Measures continued
The following tables provide reconciliations between the APMs and their nearest respective IFRS measure.
The measures and reconciliations below included in this section for the year ended 30 June 2021 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 3.1
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.
Year ended 30 June
Continuing operations
Revenue
Other income
Expenses excluding net finance costs, depreciation, amortisation and impairments
Depreciation and amortisation
Net impairments
Loss 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 (expense)/benefit
Royalty-related taxation (net of income tax benefit)
Total taxation (expense)/benefit
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)
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 3.1.
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)
Underlying attributable profit – Continuing operations
(1) For more information, refer to note 3 ‘Exceptional items’ in section 3.1.
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 3.1.
220
BHP
Annual Report 2021
2021
US$M
−
34
(592)
−
(2,371)
(1,456)
(4,385)
(85)
−
(85)
2020
US$M
−
489
(1,025)
−
(409)
(508)
(1,453)
(93)
−
(93)
(4,470)
(1,546)
(1,327)
−
(1,327)
(5,797)
−
(5,797)
(24)
(5,773)
(114.2)
5,057
2021
US$M
11,304
5,773
17,077
2021
US$M
11,304
−
5,773
17,077
241
−
241
(1,305)
−
(1,305)
(201)
(1,104)
(21.9)
5,057
2020
US$M
7,956
1,104
9,060
2020
US$M
7,956
−
1,104
9,060
2019
US$M
−
50
(57)
−
−
(945)
(952)
(108)
−
(108)
(1,060)
242
−
242
(818)
−
(818)
−
(818)
(15.8)
5,180
2019
US$M
8,306
818
9,124
2019
US$M
8,306
342
818
9,466
2021
US cents
2020
US cents
2019
US cents
223.5
114.2
337.7
157.3
21.9
179.2
160.3
15.8
176.1
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 3.1.
Underlying EBITDA – Segment
Year ended 30 June 2021
US$M
Profit from operations
Exceptional items included in profit from operations(1)
Depreciation and amortisation expense
Net impairments
Exceptional item included in Depreciation, amortisation and impairments(1)
Underlying EBITDA
2,300
8,489
26,278
Petroleum
Copper
Iron Ore
Coal
6,665
22,975
(2,144)
386
47
1,739
128
−
144
1,608
72
−
1,319
1,971
13
−
2021
US$M
25,906
4,385
30,291
6,824
2,635
(2,371)
37,379
2020
US$M
14,421
1,453
15,874
6,112
494
(409)
22,071
2019
US$M
16,113
952
17,065
5,829
264
−
23,158
Group and
unallocated
items/
eliminations(2)
(1,976)
1,308
661
1,345
(1,314)
24
Group and
unallocated
items/
eliminations(2)
(788)
(413)
512
20
−
Total Group
25,906
4,385
6,824
2,635
(2,371)
37,379
Total Group
14,421
1,453
6,112
494
(409)
1,567
845
1,077
(1,057)
288
Coal
793
18
807
14
−
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
Profit from operations
Exceptional items included in profit from operations(1)
Depreciation and amortisation expense
Net impairments
Underlying EBITDA
Petroleum
Copper
Iron Ore
744
6
1,445
12
−
2,207
1,362
1,228
1,740
426
(409)
4,347
12,310
614
1,608
22
−
14,554
1,632
(669)
22,071
Petroleum
Copper
Iron Ore
2,480
2,587
−
1,560
21
4,061
−
1,835
128
4,550
8,426
971
1,653
79
11,129
Coal
3,400
−
632
35
4,067
Group and
unallocated
items/
eliminations(2)
(780)
(19)
149
1
(649)
Total Group
16,113
952
5,829
264
23,158
(1) For more information, refer to note 3 ‘Exceptional items’ in section 3.1.
(2) Group and unallocated items includes functions, other unallocated operations, including Potash, Nickel West, legacy assets, and consolidation adjustments.
Year ended 30 June 2021
US$M
Potash
Nickel West
Corporate, legacy assets and eliminations
Total
Exceptional
items included
in profit from
operations(1)
Profit from
operations
(1,489)
146
(633)
(1,976)
1,320
3
(15)
1,308
Depreciation and
amortisation
Net
impairments
2
79
580
661
1,314
31
−
1,345
Year ended 30 June 2020
US$M
Potash
Nickel West
Corporate, legacy assets and eliminations
Total
Exceptional
items included
in profit from
operations(1)
Profit from
operations
(130)
(113)
(545)
(788)
−
5
(418)
(413)
Depreciation and
amortisation
Net
impairments
3
68
441
512
−
3
17
20
Exceptional
item included
in Depreciation,
amortisation and
impairments(1)
(1,314)
−
−
(1,314)
Exceptional
item included
in Depreciation,
amortisation and
impairments(1)
−
−
−
−
Underlying
EBITDA
(167)
259
(68)
24
Underlying
EBITDA
(127)
(37)
(505)
(669)
BHP
Annual Report 2021
221
23Financial StatementsGovernance1Strategic Report4Additional Information 4.2 Alternative Performance Measures continued
Year ended 30 June 2019
US$M
Potash
Nickel West
Corporate, legacy assets and eliminations
Total
Exceptional
items included
in profit from
operations(1)
Profit from
operations
(131)
91
(740)
(780)
−
−
(19)
(19)
Depreciation and
amortisation
Net
impairments
4
11
134
149
−
−
1
1
Exceptional
item included
in Depreciation,
amortisation and
impairments(1)
−
−
−
−
Underlying
EBITDA
(127)
102
(624)
(649)
(1) For more information, refer to note 3 ‘Exceptional items’ in section 3.1.
Underlying EBITDA margin
Year ended 30 June 2021
US$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 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
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
3,935
11
3,946
2,299
1
2,300
6%
58%
Petroleum
4,031
39
4,070
2,209
(2)
2,207
10%
55%
Petroleum
5,920
10
5,930
4,061
−
4,061
17%
69%
Copper
13,482
2,244
15,726
8,425
64
8,489
23%
62%
Copper
9,577
1,089
10,666
4,306
41
4,347
19%
45%
Copper
9,729
1,109
10,838
4,434
116
4,550
19%
46%
Iron Ore
34,457
18
34,475
26,277
1
26,278
70%
76%
Iron Ore
20,782
15
20,797
14,561
(7)
14,554
64%
70%
Iron Ore
17,223
32
17,255
11,115
14
11,129
47%
65%
Group and
unallocated
items/
eliminations(4)
Total Group
1,493
23
1,516
24
−
24
Group and
unallocated
items/
eliminations(4)
1,128
28
1,156
(669)
−
(669)
Group and
unallocated
items/
eliminations(4)
1,116
28
1,144
(649)
−
(649)
58,521
2,296
60,817
37,313
66
37,379
100%
64%
Total Group
41,760
1,171
42,931
22,039
32
22,071
100%
53%
Total Group
43,090
1,198
44,288
23,029
129
23,158
100%
53%
Coal
5,154
−
5,154
288
−
288
1%
6%
Coal
6,242
−
6,242
1,632
−
1,632
7%
26%
Coal
9,102
19
9,121
4,068
(1)
4,067
17%
45%
(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 products 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, legacy assets, and consolidation adjustments. Revenue not attributable
to reportable segments comprises the sale of freight and fuel to third parties. Exploration and technology activities are recognised within relevant segments.
222
BHP
Annual Report 2021
Effective tax rate
Year ended 30 June
Statutory effective tax rate
Adjusted for:
Exchange rate movements
Exceptional items(1)
Adjusted effective tax rate
2021
2020
2019
Profit before
taxation
US$M
Income tax
expense
US$M
Profit before
taxation
US$M
Income tax
expense
US$M
%
24,601
(11,150)
45.3
13,510
(4,774)
Profit before
taxation
US$M
Income tax
expense
US$M
15,049
(5,529)
%
35.3
%
36.7
−
4,470
29,071
(95)
1,327
(9,918)
34.1
−
1,546
15,056
20
(241)
(4,995)
33.2
−
1,060
16,109
(25)
(242)
(5,796)
36.0
(1) For more information, refer to note 3 ‘Exceptional items’ in section 3.1.
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
APMs derived from Consolidated Balance Sheet
Net debt and gearing ratio
Year ended 30 June
Interest bearing liabilities – Current
Interest bearing liabilities – Non-current
Total interest bearing liabilities
Comprising:
Borrowing
Lease liabilities
Less: Lease liability associated with index-linked freight contracts
Less: Cash and cash equivalents
Less: Net debt management related instruments(1)
Less: Net cash management related instruments(2)
Less: Total derivatives included in net debt
Net debt
Net assets(3)
Gearing
2021
US$M
6,606
514
7,120
−
7,120
2021
US$M
27,234
(7,845)
19,389
2021
US$M
27,234
(7,845)
19,389
2021
US$M
2,628
18,355
20,983
17,087
3,896
1,025
15,246
557
34
591
4,121
55,605
6.9%
2020
US$M
6,900
740
7,640
−
7,640
2020
US$M
15,706
(7,616)
8,090
2020
US$M
15,706
(7,616)
8,090
2020
US$M
Restated
5,012
22,036
27,048
23,605
3,443
1,160
13,426
433
(15)
418
12,044
52,175
18.8%
2019
US$M
6,250
873
7,123
443
7,566
2019
US$M
17,871
2,607
20,478
2019
US$M
17,397
(7,377)
10,020
2019
US$M
Restated
1,661
23,167
24,828
24,113
715
−
15,613
(204)
(27)
(231)
9,446
51,753
15.4%
(1) Represents the net cross currency and interest rate swaps included within current and non-current other financial assets and liabilities.
(2) Represents the net forward exchange contracts related to cash management included within current and non-current other financial assets and liabilities.
(3) 30 June 2020 and 30 June 2019 net assets have been restated to reflect changes to the Group’s accounting policy following a decision by the IFRS Interpretations Committee on IAS 12
‘Income Taxes’ resulting in retrospective decrease of US$71 million. Refer to note 39 ‘New and amended accounting standards and interpretations and changes to accounting policies’
in section 3.1.
BHP
Annual Report 2021
223
23Financial StatementsGovernance1Strategic Report4Additional Information 4.2 Alternative Performance Measures continued
Net debt waterfall
Year ended 30 June
Net debt at the beginning of the period
Net operating cash flows
Net investing cash flows
Net financing cash flows
Net increase/(decrease) in cash and cash equivalents from Continuing and Discontinued operations
Carrying value of interest bearing liability repayments
Carrying value of debt related instruments (proceeds)/settlements
Carrying value of cash management related instruments settlements/(proceeds)
Fair value adjustment on debt (including debt related instruments)
Foreign exchange impacts on cash (including cash management related instruments)
IFRS 16 leases taken on at 1 July 2019
Lease additions
Other
Non-cash movements
Net debt at the end of the period
Net operating assets
The following table reconciles Net operating assets for the Group to Net assets on the Consolidated Balance Sheet:
Year ended 30 June
Net assets(1)
Less: Non-operating assets
Cash and cash equivalents
Trade and other receivables(2)
Other financial assets(3)
Current tax assets
Deferred tax assets
Assets held for sale
Add: Non-operating liabilities
Trade and other payables(4)
Interest bearing liabilities
Other financial liabilities(5)
Current tax payable
Non-current tax payable
Deferred tax liabilities(1)
Liabilities directly associated with the assets held for sale
Net operating assets
Net operating assets
Petroleum
Copper(1)
Iron Ore
Coal
Group and unallocated items(6)
Total
2021
US$M
(12,044)
27,234
(7,845)
(17,922)
1,467
7,433
(167)
403
58
(1)
−
(1,079)
(191)
(1,213)
(4,121)
2021
US$M
55,605
(15,246)
(280)
(1,516)
(279)
(1,912)
(324)
227
20,983
588
2,800
120
3,314
17
2020
US$M
(9,446)
15,706
(7,616)
(9,752)
(1,662)
1,533
157
(451)
88
(26)
(1,778)
(363)
(96)
(2,175)
(12,044)
2020
US$M
Restated
52,175
(13,426)
(194)
(2,425)
(366)
(3,688)
–
310
27,048
1,618
913
109
3,779
–
64,097
65,853
7,964
26,928
18,663
7,512
3,030
64,097
8,247
25,357
18,400
9,509
4,340
65,853
(1) 30 June 2020 balances have been restated to reflect changes to the Group’s accounting policy following a decision by the IFRS Interpretations Committee on IAS 12 ‘Income Taxes’,
resulting in the retrospective recognition of US$950 million of goodwill at Olympic Dam (included in the Copper segment) and an offsetting US$1,021 million increase in deferred tax
liabilities. Refer to note 39 ‘New and amended accounting standards and interpretations and changes to accounting policies’ in section 3.1 for further information.
(2) Represents loans to associates, external finance receivable and accrued interest receivable included within other receivables.
(3) Represents cross currency and interest rate swaps, forward exchange contracts related to cash management and investment in shares and other investments.
(4) Represents accrued interest payable included within other payables.
(5) Represents cross currency and interest rate swaps and forward exchange contracts related to cash management.
(6) Group and unallocated items include functions, other unallocated operations including Potash, Nickel West, legacy assets, and consolidation adjustments.
224
BHP
Annual Report 2021
Other APM
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 FY2021 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 4.2.2.
Year ended 30 June 2020
Revenue
Other income
Expenses excluding net finance costs
Loss from equity accounted investments, related impairments and expenses
Total other income, expenses excluding net finance costs and loss 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
Change in sales prices
Price-linked costs
Net price impact
Change 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
Year ended 30 June 2021
Revenue
Other income
Expenses excluding net finance costs
Loss from equity accounted investments, related impairments and expenses
Total other income, expenses excluding net finance costs and loss 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
Revenue
US$M
42,931
17,186
−
17,186
(371)
−
−
−
104
−
−
−
(142)
(38)
−
(22)
1,131
−
−
60,817
Total expenses,
Other income
and Loss
from equity
accounted
investments
US$M
Depreciation,
amortisation
and
impairments
and
Exceptional
Items
US$M
Profit from
operations
US$M
Underlying
EBITDA
US$M
777
(28,775)
(512)
(28,510)
(221)
(870)
(1,091)
59
(34)
109
75
(1,692)
(286)
223
282
20
14,421
16,965
(870)
16,095
(312)
(34)
109
75
(1,588)
(286)
223
282
(122)
(1,453)
(1,491)
17
264
(449)
(891)
(2,932)
510
(34,500)
(921)
(34,911)
17
242
682
(891)
(2,932)
25,906
6,606
(409)
1,453
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
891
2,932
22,071
16,965
(870)
16,095
(312)
(34)
109
75
(1,588)
(286)
223
282
(122)
(1,491)
17
242
682
−
−
9,459
(2,371)
4,385
37,379
(1) Depreciation and impairments that we classify as exceptional items are excluded from depreciation, amortisation and impairments. Depreciation, amortisation and impairments includes
non-exceptional impairments of US$264 million (FY2020: US$85 million).
(2) Collectively, we refer to the change in operating cash costs and change in exploration and business development as Change in controllable cash costs. Operating cash costs by definition
do not include non-cash costs. The change in operating cash costs also excludes the impact of exchange rates and inflation, changes in fuel and energy costs, changes in exploration and
business development costs and one-off items. These items are excluded so as to provide a consistent measurement of changes in costs across all segments, based on the factors that are
within the control and responsibility of the segment. Change in controllable cash costs and change in operating cash costs are not measures that are recognised by IFRS. They may differ
from similarly titled measures reported by other companies.
BHP
Annual Report 2021
225
23Financial StatementsGovernance1Strategic Report4Additional Information 4.2 Alternative Performance Measures continued
Underlying Return on Capital Employed (ROCE)
Year ended 30 June
Profit after taxation from Continuing and Discontinued operations
Exceptional items(1)
Subtotal
Adjusted for:
Net finance costs
Exceptional items included within net finance costs(1)
Income tax benefit on net finance costs
Profit after taxation excluding net finance costs and exceptional items
Net assets at the beginning of the period(2)
Net debt at the beginning of the period
Capital employed at the beginning of the period
Net assets at the end of the period(2)
Net debt at the end of the period
Capital employed at the end of the period
Average capital employed
2021
US$M
13,451
5,797
19,248
1,305
(85)
(337)
20,131
52,175
12,044
64,219
55,605
4,121
59,726
61,973
2020
US$M
Restated
8,736
1,305
10,041
911
(93)
(267)
2019
US$M
Restated
9,185
818
10,003
1,072
(108)
(319)
10,592
10,648
51,753
9,446
61,199
52,175
12,044
64,219
62,709
60,599
11,605
72,204
51,753
9,446
61,199
66,702
Underlying Return on Capital Employed
32.5%
16.9%
16.0%
(1) For more information, refer to note 3 ‘Exceptional items’ in section 3.1.
(2) The Underlying ROCE calculation uses restated net assets for the comparative periods.
4.2.1 Definition and calculation of Alternative Performance Measures
Alternative Performance Measures (APMs)
Reasons why we believe the APMs are useful
Calculation methodology
Underlying attributable profit
Underlying basic earnings per share
Underlying EBITDA
Underlying EBITDA margin
Underlying EBIT
Profit from operations
Allows the comparability of underlying financial
performance by excluding the impacts of
exceptional items and is also the basis on which
our dividend payout ratio policy is applied.
On a per share basis, allows the comparability
of underlying financial performance by
excluding the impacts of exceptional items.
Used to help assess current operational
profitability excluding the impacts of sunk
costs (i.e. depreciation from initial investment).
Each is a measure that management uses
internally to assess the performance of the
Group’s segments and make decisions on
the allocation of resources.
Used to help assess current operational
profitability excluding net finance costs and
taxation expense (each of which are managed
at the Group level) as well as discontinued
operations and any exceptional items.
Capital and exploration expenditure
Free cash flow
226
BHP
Annual Report 2021
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.
Profit after taxation attributable to BHP
shareholders excluding any exceptional items
attributable to BHP shareholders.
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.
Alternative Performance Measures (APMs)
Reasons why we believe the APMs are useful
Calculation methodology
Net debt
Gearing ratio
Net operating assets
Underlying return on capital employed (ROCE)
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, which are required to be remeasured
to the prevailing freight index at each reporting
date, 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
includes the fair value of derivative financial
instruments used to hedge cash and borrowings
to reflect the Group’s risk management strategy
of reducing the volatility of net debt caused
by fluctuations in foreign exchange and
interest rates.
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.
Adjusted effective tax rate
Provides an underlying tax basis to allow
comparability of underlying financial
performance by excluding the impacts
of exceptional items.
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, assets
held for sale, liabilities directly associated with
assets held for sale 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.
Total taxation expense/(benefit) excluding
exceptional items and exchange rate movements
included in taxation expense/(benefit) divided by
Profit before taxation and exceptional items.
BHP
Annual Report 2021
227
23Financial StatementsGovernance1Strategic Report4Additional Information 4.2 Alternative Performance Measures continued
Alternative Performance Measures (APMs)
Reasons why we believe the APMs are useful
Calculation methodology
Unit cost
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.
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.
4.2.2 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
Change in sales prices
Price-linked costs
Change in volumes
Controllable cash costs
Operating cash costs
Exploration and business development
Exchange rates
Inflation on costs
Fuel and energy
Non-cash
One-off items
Asset sales
Ceased and sold operations
Share of profit/(loss) from equity
accounted investments
Other
Method of calculation
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 expense in the current period minus exploration and
business development expense in the prior period.
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.
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 for the current period minus share of
profit/(loss) from equity accounted investments in the prior period.
Variances not explained by the above factors.
228
BHP
Annual Report 2021
4.3 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 4.5.1) and reserves table (refer to section 4.6.2).
Mine & location Means of access Ownership
Operator
Title, leases
or options
History
Mine type
& mineralisation
style
Power source
Facilities, use
& condition
Olympic Dam
560 km
northwest
of Adelaide,
South Australia
Public road
BHP 100%
BHP
Copper cathode
trucked to ports
Uranium oxide
transported by
road to ports
Gold bullion
transported by
road and plane
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
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
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
Gold cyanide
leach circuit
and gold room
producing
gold bullion
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 4.5.1) and reserves table (refer to section 4.6.2).
Mine & location Means of access Ownership
Operator
Title, leases
or options
History
Mine type
& mineralisation
style
Power source
Facilities, use
& condition
WAIO
Mt Newman joint venture
Pilbara region,
Private road
Western Australia
Mt Whaleback
Orebodies 24,
25, 29, 30, 31,
32 and 35
Ore transported
by Mt Newman
JV-owned rail
to Port Hedland
(427 km)
Yandi joint venture
Pilbara region,
Western Australia
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
BHP 85%
BHP
Mitsui-ITOCHU
Iron 10%
ITOCHU Minerals
and Energy of
Australia 5%
BHP 85%
BHP
ITOCHU Minerals
and Energy of
Australia 8%
Mitsui Iron Ore
Corporation 7%
Production
began at Mt
Whaleback in
1969
Production from
Orebodies 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
Mining at
Orebody 18
ceased in 2020
after depletion
Production
began at the
Yandi mine in
1992
Capacity of Yandi
hub expanded
between 1994
and 2013
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
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
Open-cut
Bedded ore
types classified
as per host
Archaean or
Proterozoic
iron formation,
which are
Brockman and
Marra Mamba;
also present is
iron-rich detrital
material
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)
Open-cut
Channel Iron
Deposits are
Cainozoic fluvial
sediments
Power for all
mine operations
in the Central
and Eastern
Pilbara is
supplied by
BHP’s natural
gas fired Yarnima
power station
4 primary
crushers, 3
ore handling
plants, stockyard
blending facility
and 2 train load
outs (nominal
capacity 80
Mtpa)
Power
consumed in
port operations
is supplied via
a contract with
Alinta
BHP
Annual Report 2021
229
23Financial StatementsGovernance1Strategic Report4Additional Information
4.3 Information on mining operations continued
Mine & location Means of access Ownership
Operator
Title, leases
or options
History
Mine type
& mineralisation
style
Power source
Facilities, use
& condition
Jimblebar operation*
Pilbara region,
Western Australia
Private road
Ore is
transported
via overland
conveyor (12.4
km) and by
Mt Newman
JV-owned rail
to Port Hedland
(428 km)
Mt Goldsworthy joint venture
Pilbara region,
Western Australia
Private road
Yarrie
Nimingarra
Mining Area C
(includes South
Flank)
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)
South Flank iron
ore transported
by overland
conveyors
(8-16 km) to the
Mining Area C
processing hub
Mt Goldsworthy
JV railway spur
links Mining Area
C and South
Flank to Yandi
railway spur
POSMAC joint venture
Pilbara region,
Western Australia
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 rail to
Port Hedland
BHP 85%
BHP
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 with
rights to certain
parts of Mining
Lease 266SA
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 85%
BHP
Mitsui Iron Ore
Corporation 7%
ITOCHU Minerals
and Energy of
Australia 8%
BHP 65%
BHP
ITOCHU Minerals
and Energy of
Australia 8%
Mitsui Iron Ore
Corporation 7%
POSCO-Ore 20%
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;
also present is
iron-rich detrital
material
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
3 primary
crushers, ore
handling plant,
train loadout,
stockyard
blending facility
and supporting
mining hub
infrastructure
(nominal capacity
71 Mtpa)
2 primary
crushers, 2 ore
handling plants,
stockyard
blending facility
and train load out
(nominal capacity
60 Mtpa)
Mining Area C,
South Flank,
Yarrie and
Nimingarra are
open-cut
Bedded ore
types classified
as per host
Archaean or
Proterozoic iron
formation, which
are Brockman,
Marra Mamba
and Nimingarra;
also present is
iron-rich detrital
material
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
First ore at
South Flank
commenced
in May 2021
Production
commenced
in October 2003
POSMAC JV
sells all ore to
Mt Goldsworthy
JV at Mining
Area C
Open-cut
Bedded ore
types classified
as per host
Archaean or
Proterozoic iron
formation, which
is Marra Mamba
POSMAC sells
all ore to Mt
Goldsworthy JV,
which is then
processed at
Mining Area C
Power for
all mine
operations 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
230
BHP
Annual Report 2021
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 4.5.1) and reserves table (refer to section 4.6.2).
Mine & location Means of access Ownership
Operator
Title, leases
or options
History
Mine type
& mineralisation
style
Power source
Facilities, use
& condition
Queensland Coal
Central Queensland Coal Associates joint venture
Bowen Basin,
Queensland,
Australia
Public road
BHP 50%
BMA
Mitsubishi
Development
50%
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
Goonyella
Riverside
Broadmeadow
Daunia
Caval Ridge
Peak Downs
Saraji
Blackwater and
Norwich Park
mines
Queensland
electricity grid
connection is
under medium-
term contracts
and energy
purchased
via Retail
Agreements
On-site
beneficiation
processing
facilities
Combined
nominal capacity:
in excess of
67 Mtpa
Mining leases,
including
undeveloped
tenements, have
expiry dates
ranging up to
2043, renewable
for further periods
as Queensland
Government
legislation allows
Mining is permitted
to continue under
the legislation
during the renewal
application period
All renewal
applications
were lodged and
pending a decision
from the Minister
Goonyella mine
commenced in
1971, merged with
adjoining Riverside
mine in 1989
All open-
cut except
Broadmeadow
(longwall
underground)
Operates as
Goonyella Riverside
Production
commenced at:
Peak Downs in 1972
Bituminous coal
is mined from
the Permian
Moranbah and
Rangal Coal
measures
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
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
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
BHP 80%
BMC
Mitsui and Co
20%
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
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 medium-
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
6 Mtpa
Mining leases,
including
undeveloped
tenements, have
expiry dates
ranging up to
2041, renewable
for further periods
as Queensland
Government
legislation allows
Mining is permitted
to continue under
the legislation
during the renewal
application period
All renewal
applications
were lodged and
pending a decision
from the Minister
BHP
Annual Report 2021
231
23Financial StatementsGovernance1Strategic Report4Additional Information
4.3 Information on mining operations continued
Mine & location Means of access Ownership
Operator
Title, leases
or options
History
Mine type
& mineralisation
style
Power source
Facilities, use
& condition
New South Wales Energy Coal
Mt Arthur Coal
Approximately
126 km northwest
of Newcastle,
New South
Wales, Australia
Export coal
transported by
third-party rail to
Newcastle port
Public road
Open-cut
Produces a
medium rank
bituminous
thermal coal
NSW electricity
grid connection
under a deemed
long-term
contract
and energy
purchased via a
Retail Agreement
Beneficiation
facilities: coal
handling,
preparation,
washing plants
Nominal capacity:
in excess of
23 Mtpa
BHP 100%
BHP
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
Domestic sales
ceased during
FY2020
Conveyor to
Bayswater and
Liddell Power
Stations has been
decommissioned
Current
Development
Consent expires
in 2026, Mt Arthur
Coal Mine (MAC)
commenced
the first formal
step to obtain
new State and
Commonwealth
approvals to
continue open-cut
mining at MAC
beyond 30 June
2026
MAC holds 10
mining leases,
2 sub leases and
3 exploration
licences
MAC’s primary
exploration licence
(EL5965) was
renewed in full in
December 2020 for
a further term until
July 2026
MAC’s primary
Mining Lease (ML
1487) will expire
in June 2022. A
renewal application
was submitted in
April 2021 seeking a
further 21 years
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 4.5.1) and reserves table (refer to section 4.6.2).
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
BHP 100%
Mt Keith Mine
Mt Keith Satellite
Mine (Yakabindie)
Nickel
concentrate
transported by
road to Leinster
for drying and
on- shipping
Leinster mine complex and concentrator
375 km north
Public road
BHP 100%
of Kalgoorlie,
Western Australia
Nickel
concentrate
shipped by
road and rail to
Kalgoorlie Nickel
Smelter
Venus sub-level
caving operation
B11 block caving
operation
Rocky’s Reward
open-pit mine
232
BHP
Annual Report 2021
BHP
BHP
Open-cut
Disseminated textured
magmatic nickel-
sulphide mineralisation
associated with a
metamorphosed
ultramafic intrusion
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
2038
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
2038
Natural gas
sourced and
transported
under separate
long-term
contracts
Mining leases
granted by
Western
Australian
Government
Key leases expire
between 2029
and 2036
First renewal of 21
years is as a right.
Further renewals
at government
discretion
Commissioned
in 1995 by WMC
Acquired in 2005
as part of WMC
acquisition
Mt Keith Satellite
mine contains
2 open-pit mines,
Six Mile Well in
full production
and Goliath
currently being
pre-stripped
Mining leases
granted by
Western
Australian
Government
Key leases expire
between 2025
and 2040
Renewals
of principal
mineral lease in
accordance with
State Agreement
ratified by the
Nickel (Agnew)
Agreement Act
1974
Production
commenced in
1979
Acquired in 2005
as part of WMC
acquisition
Leinster
underground
ceased
operations
in 2013 and
recommenced
operations in
2016 with Venus
sub-level cave
now in operation
and B11 block
cave developing
its undercut and
first draw points
Mine & location Means of access Ownership
Operator
Title, leases
or options
History
Mine type &
mineralisation style
Power source
Facilities, use &
condition
Cliffs mine
481 km north
of Kalgoorlie,
Western Australia
Private road
BHP 100%
BHP
Nickel ore
transported
by road to
Leinster or Mt
Keith for further
processing
Nickel smelters, refineries and processing plants
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 2028
First renewal of
21 years is as of
right. Further
renewals at
government
discretion
Smelter, refinery
or processing plant
Nickel West
Kambalda
Nickel concentrator
Kalgoorlie
Nickel smelter
Kwinana
Nickel refinery
Location
Ownership Operator
Title, leases
or options
Product
Power source
56 km south
of Kalgoorlie,
Western Australia
BHP 100% BHP
Concentrate
containing
approximately
13% nickel
Mineral leases
granted by
Western
Australian
Government
Key leases expire
in 2028
Kalgoorlie,
Western Australia
BHP 100% BHP
Freehold title
over the property
Matte containing
approximately
65% nickel
30 km south
of Perth, Western
Australia
BHP 100% BHP
Freehold title
over the property
London Metal
Exchange (LME) grade
nickel briquettes,
nickel powder
Also intermediate
products, including
copper sulphide,
cobalt-nickel-sulphide,
ammonium-sulphate
On-site third-
party gas-fired
turbines
supplemented
by access to
grid power
Contracts expire
in December
2038
Natural gas
sourced and
transported
under separate
long-term
contracts
On-site third-
party gas-fired
turbines
supplemented
by access to
grid power
Contracts expire
in December
2038
Natural gas
sourced and
transported
under separate
long-term
contracts
Power is
sourced from
the local
grid, which is
supplied under
a retail contract
Nominal
production
capacity
1.6 Mtpa ore
Ore sourced
through tolling
and concentrate
purchase
arrangements
with third parties
in Kambalda
region
110 ktpa matte
82.5 ktpa matte
(with approval
to increase up
to 90 kpta)
BHP
Annual Report 2021
233
23Financial StatementsGovernance1Strategic Report4Additional Information 4.3 Information on mining operations continued
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 4.5.1) and reserves table (refer to section 4.6.2).
Mine & location Means of access Ownership
Operator
Title, leases
or options
History
Mine type &
mineralisation
style
Power source
Facilities, use
& condition
Escondida
Atacama Desert
170 km southeast
of Antofagasta,
Chile
BHP 57.5%
BHP
Rio Tinto 30%
JECO
Corporation
consortium
comprising
Mitsubishi,
JX Nippon Mining
and Metals 10%
JECO 2 Ltd 2.5%
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
Mining
concession
from Chilean
Government
valid indefinitely
(subject to
payment of
annual fees)
Original
construction
completed in
1990
Start of
operations
of the third
concentrator
plant in 2015
Inauguration
of Escondida
Water Supply
desalination
plant (CY2018)
and its extension
(CY2019)
2 open-cut pits:
Escondida and
Escondida Norte
Escondida and
Escondida Norte
mineral deposits
are adjacent
but distinct
supergene
enriched
porphyry copper
deposits
Escondida-
owned
transmission
lines connect to
Chile’s northern
power grid
Electricity
sourced from
external vendors
and Tamakaya
SpA (100%
owned by BHP),
which generates
power from the
Kelar gas-fired
power plant
Renewable
power
agreements
signed in FY2020
with supply to
commence in
FY2022
Pampa Norte Spence
Atacama
Desert
162 km northeast
of Antofagasta,
Chile
Public road
BHP 100%
BHP
Copper cathode
transported by
rail to ports at
Mejillones and
Antofagasta
Copper
concentrate
transported by
rail or trucks to
port in Mejillones
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
95 ktpd copper
concentrator and
molybdenum
plants) produced
first copper in
December 2020
Spence-owned
transmission
lines connect to
Chile’s northern
power grid
Electricity
purchased from
external vendors
Renewable
power
agreements
signed in FY2020
with supply to
commence in
FY2022
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
Crushing facilities
feed concentrator
and leaching
processes
3 concentrator
plants produce
copper
concentrate
from sulphide
ore by flotation
extraction
process (by-
products: gold
and silver)
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)
Crushing facilities
feed concentrator
and leaching
processes
1 copper
concentrator
plant with 95
ktpd capacity
(by-products:
gold and silver),
molybdenum
plant and a 1,000
lps desalinated
water plant
under a Build,
Own, Operate,
Transfer (BOOT)
agreement
Dynamic leach
pads, solvent
extraction and
electrowinning
plant
Nominal capacity
of tank house:
200 ktpa copper
cathode
234
BHP
Annual Report 2021
Title, leases
or options
History
Mine type &
mineralisation
style
Power source
Facilities, use
& condition
Mine & location Means of access Ownership
Operator
Pampa Norte Cerro Colorado
Atacama
Desert
120 km east
of Iquique,
Chile
Public road
BHP 100%
BHP
Copper cathode
trucked to port at
Iquique
Commercial
production
commenced in
1994
Expansions in
1996 and 1998
Mining
concession
from Chilean
Government
valid indefinitely
(subject to
payment of
annual fees)
Current
environmental
licence expires
at the end of
CY2023
Antamina
Andes
mountain range
270 km northeast
of Lima, Peru
Public road
BHP 33.75%
Glencore 33.75%
Teck 22.5%
Mitsubishi 10%
Copper and zinc
concentrates
transported by
pipeline to Punta
Lobitos port
Molybdenum
and lead/
bismuth
concentrates
transported by
truck
Compañía Minera
Antamina S.A.
Mining rights
from Peruvian
Government
held indefinitely,
subject to
payment of
annual fees
and supply of
information on
investment and
production
Commercial
production
commenced
in 2001
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
Crushing facilities,
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
304 km
concentrate
pipeline
Port facilities
at Huarmey
Iron ore mining operations
The following table contains additional details of our mining operations. This table should be read in conjunction with the production table (refer to
section 4.5.1) and reserves table (refer to section 4.6.2).
Mine & location Means of access Ownership
Operator
Title, leases
or options
History
Samarco
BHP Brasil 50%
of Samarco
Mineração S.A.
Vale S.A. 50%
Samarco
Southeast
Brazil
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
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
Mining
concessions
granted by
Brazilian
Government
subject to
compliance with
the mine plan
Samarco
commenced
iron ore pellet
production
in December
2020, having
met licensing
requirements to
restart operations
at its Germano
complex in Minas
Gerais and its
Ubu complex in
Espírito Santo
Mine type &
mineralisation
style
Open-cut
Itabirites
(metamorphic
quartz-hematite
rock) and friable
hematite ores
Power source
Facilities, use
& condition
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’s
gradual restart
of operations
includes 1
concentrator and
a new system of
tailings disposal
combining a
confined pit and
filtration plant for
dry stacking of
sandy tailings
Beneficiation
plants, pipelines,
pellet plants and
port facilities
BHP
Annual Report 2021
235
23Financial StatementsGovernance1Strategic Report4Additional Information 4.3 Information on mining operations continued
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 4.5.1) and reserves table (refer to section 4.6.2).
Mine & location Means of access Ownership
Operator
Title, leases
or options
History
Cerrejón
La Guajira
province,
Colombia
Public road
BHP 33.33%
Cerrejón
Coal exported
by company-
owned rail to
its Port Bolivar
facilities
(150 km)
Anglo American
33.33%
Glencore
33.33%
Mining
leases expire
progressively
from 2028 to
early 2034
Original
mine began
producing in
1976
BHP interest
acquired in
2000
In June 2021,
BHP entered
into a sale
and purchase
agreement
with Glencore
to divest its
33.3% interest
in Cerrejón.
See section
1.10.3 for more
information
Mine type &
mineralisation
style
Open-cut
Produces a
medium rank
bituminous
thermal coal
Power source
Facilities, use
& condition
Local
Colombian
power system
Electricity
purchased
from external
vendors
Beneficiation
facilities: crushing
plants, rail loading
facilities with
capacity in excess
of 40 Mtpa
and a 3.2 Mtpa
washing plant
4.3.1 Information on oil and gas operations
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 4.5.2) and reserves table (refer to section 4.6.1).
Operation & location
Product
Ownership
Operator
Title, leases
or options
Nominal production
capacity
Facilities, use
& condition
United States
Offshore Gulf of Mexico
Neptune (Green Canyon 613)
Offshore
deepwater
Oil and gas
Gulf of Mexico
(1,300 m)
BHP 0%
EnVen Energy
EnVen Energy 65%
W&T Offshore 20%
31 Offshore 15%
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)
On 20 May 2021, BHP
finalised a purchase
and sale agreement
with EnVen Energy
Ventures, LLC to divest
our interest in and
operation of Neptune
Shenzi (Green Canyon 653)
Offshore
deepwater
Oil and gas
Gulf of Mexico
(1,310 m)
BHP 72%
Repsol 28%
BHP
Lease from US
Government as
long as oil and gas
produced in paying
quantities
100 Mbbl/d oil
Stand-alone TLP
50 MMcf/d gas
Genghis Khan
field (part of same
geological structure)
tied back to Marco
Polo TLP
On 6 November
2020, BHP finalised a
membership interest
purchase and sale
agreement with Hess
Corporation to acquire
an additional 28%
working interest in
Shenzi
Atlantis (Green Canyon 743)
Offshore
deepwater
Oil and gas
Gulf of Mexico
(2,155 m)
Mad Dog (Green Canyon 782)
Offshore
deepwater
Oil and gas
Gulf of Mexico
(1,310 m)
BHP 44%
BP 56%
BHP 23.9%
BP 60.5%
Chevron 15.6%
BP
BP
Lease from US
Government as
long as oil and gas
produced in paying
quantities
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
100 Mbbl/d oil
60 MMcf/d gas
Moored integrated
truss spar, facilities
for simultaneous
production and drilling
operations
236
BHP
Annual Report 2021
Operation & location
Product
Ownership
Operator
Title, leases
or options
Nominal production
capacity
Facilities, use
& condition
Australia
Bass Strait
Offshore and onshore
Victoria
Oil and gas
Esso Australia
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%
Mitsui E&P Australia
35%
65 Mbbl/d oil
1,040 TJ/d
5,150 tpd LPG
850 tpd Ethane
20 production
licences and
2 retention l
eases issued
by Australian
Government
Production licences
and leases expire
between 2032
and end of life of
field. Retention leases
expire between 2023
and end of life field
1 production licence
held with Mitsui
E&P Australia
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
North West Shelf
Offshore and onshore
Western Australia
Domestic gas,
LPG, condensate,
LNG
North West Shelf
Offshore
Western Australia
Oil
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
BHP 16.67%
Woodside 33.34%,
BP, Chevron, Japan
Australia LNG (MIMI)
16.67% each
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
Karratha Gas Plant:
630 MMcf/d gas
52,000 tpd LNG
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
Woodside Petroleum
Ltd
3 production licences
issued by Australian
Government
Production
capacity:
60 Mbbl/d
Storage: 1 MMbbl
12 subsea well
completions
(5 producers),
1 floating production
storage and offloading
(FPSO) unit
Pyrenees
Offshore
Western Australia
Oil
WA-42-L permit:
BHP
BHP 71.43%
Santos 28.57%
WA-43-L permit:
BHP 39.999%
Santos 31.501%
Inpex Alpha Ltd 28.5%
Macedon
Offshore and
onshore Western Australia
Gas and condensate WA-42-L permit
BHP
BHP 71.43%
Santos 28.57%
Licences expire
between 2033
and 2039
Production
licence issued
by Australian
Government
expires 5 years
after production
ceases
Production
licence issued
by Australian
Government
expires 5 years
after production
ceases
Production capacity:
96 Mbbl/d oil
Storage: 920 Mbbl
12 subsea well
completions
(5 producers),
1 FPSO unit
Production capacity:
4 well completions
213 MMcf/d gas
0.02 Mbbl/d
condensate
Single flow line
transports gas
to onshore gas
processing facility
Gas plant located
approximately 17 km
southwest of Onslow
BHP
Annual Report 2021
237
23Financial StatementsGovernance1Strategic Report4Additional Information 4.3.1 Information on oil and gas operations continued
Other production operations
Operation & location
Product
Ownership
Operator
Title, leases
or options
Nominal production
capacity
Facilities, use
& condition
Trinidad and Tobago
Greater Angostura
Offshore
Trinidad and Tobago
Oil and gas
BHP 45%
BHP
National Gas
Company 30%
Chaoyang 25%
100 Mbbl/d oil
340 MMcf/d gas
Production sharing
contract with
the Trinidad and
Tobago Government
entitles us to operate
Greater Angostura
until 2031
Ruby
Offshore
Trinidad
and Tobago
Oil and gas
BHP 68.46%
BHP
Heritage Petroleum
20.13%
National Gas Company
11.41%
16 Mbbl/d oil
80 MMcf/d gas
Production sharing
contract with
the Trinidad and
Tobago Government
entitles us to operate
Ruby until 2038
Algeria
ROD Integrated Development
Onshore
Oil
Berkine Basin
900 km southeast of
Algiers, Algeria
BHP 45% interest in
401a/402a production
sharing contract
Joint Sonatrach/
ENI entity
Production sharing
contract with
Sonatrach (title holder)
Approximately
80 Mbbl/d oil
ENI 55%
BHP effective 28.85%
interest in ROD
unitised integrated
development
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
Single well head
protector platform
(WPP) consisting of 5
oil/gas producers tied
back to the existing
CPP/GEP facilities in
the Greater Angostura
Block
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
238
BHP
Annual Report 2021
4.4 Financial Information 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 in
assessing our performance, refer to section 4.2. For the definition and method of calculation of alternative performance measures, refer to section 4.2.1.
For more information as to the statutory determination of our reportable segments, refer to note 1 ‘Segment reporting’ in section 3.1.
4.4.1 Petroleum
Detailed below is financial information for our Petroleum assets for FY2021 and FY2020.
Year ended 30 June 2021
US$M
Australia Production Unit(1)
Bass Strait
North West Shelf
Atlantis
Shenzi
Mad Dog
Trinidad/Tobago
Algeria
Exploration
Other(2)
Total Petroleum from
Group production
Third-party products
Total Petroleum
Adjustment for equity
accounted investments(3)
Total Petroleum statutory result
Year ended 30 June 2020
US$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)
Total Petroleum statutory result
Revenue(4)
327
1,066
893
560
417
231
204
164
−
85
3,947
11
3,958
(12)
3,946
Underlying
EBITDA
202
798
761
401
309
174
80
135
(296)
(262)
2,302
1
2,303
(3)
2,300
Revenue(4)
Underlying
EBITDA
361
1,102
1,076
561
277
216
191
159
−
104
4,047
39
4,086
(16)
4,070
253
761
731
431
174
164
92
111
(394)
(111)
2,212
(2)
2,210
(3)
2,207
D&A
186
775
239
162
175
54
44
−
122
113
1,870
−
1,870
(3)
1,867
D&A
197
449
260
175
139
64
46
12
41
77
1,460
−
1,460
(3)
1,457
Underlying
EBIT
Net operating
assets
Capital
expenditure
Exploration
gross(5)
Exploration
to profit(6)
16
23
522
239
134
120
36
135
(418)
(375)
432
1
433
−
433
64
1,136
1,281
1,109
970
1,885
433
107
1,148
(169)
7,964
−
7,964
−
7,964
23
70
104
178
113
308
152
2
−
44
994
−
994
−
994
322
−
322
382
−
382
Underlying
EBIT
Net operating
assets
Capital
expenditure
Exploration
gross(5)
Exploration
to profit(6)
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
394
−
394
(1) Australia Production Unit includes Macedon, Pyrenees and Minerva (divested in December 2019).
(2) Predominantly divisional activities, business development and Neptune (sale finalised in May 2021). 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$12 million (FY2020: US$16 million) revenue related to the Caesar oil pipeline and the Cleopatra gas pipeline. Total Petroleum statutory
result Underlying EBITDA includes US$3 million (FY2020: US$3 million) D&A related to the Caesar oil pipeline and the Cleopatra gas pipeline.
(4) Total Petroleum statutory result revenue includes: crude oil US$2,013 million (FY2020: US$2,033 million), natural gas US$977 million (FY2020: US$980 million), LNG US$682 million (FY2020:
US$774 million), NGL US$212 million (FY2020: US$198 million) and other US$62 million (FY2020: US$85 million) which includes third-party products.
Includes US$26 million of capitalised exploration (FY2020: US$170 million).
(5)
(6) Includes US$86 million of exploration expenditure previously capitalised, written off as impaired (included in depreciation and amortisation) (FY2020: US$ nil).
BHP
Annual Report 2021
239
23Financial StatementsGovernance1Strategic Report4Additional Information 4.4 Financial Information by Commodity continued
4.4.2 Copper
Detailed below is financial information for our Copper assets for FY2021 and FY2020.
Year ended 30 June 2021
US$M
Revenue
Underlying
EBITDA
Escondida(1)
Pampa Norte(2)
Antamina(3)
Olympic Dam
Other(3)(4)
Total Copper from
Group production
Third-party products
Total Copper
Adjustment for equity
accounted investments(5)
Total Copper statutory result
Year ended 30 June 2020
US$M
(Restated)
Escondida(1)
Pampa Norte(2)
Antamina(3)
Olympic Dam(6)
Other(3)(4)
Total Copper from
Group production
Third-party products
Total Copper
Adjustment for equity
accounted investments(5)
Total Copper statutory result
9,470
1,801
1,627
2,211
−
15,109
2,244
17,353
(1,627)
15,726
6,483
954
1,158
598
(230)
8,963
64
9,027
(538)
8,489
Revenue
Underlying
EBITDA
6,719
1,395
832
1,463
−
10,409
1,089
11,498
(832)
10,666
3,535
599
468
212
(202)
4,612
41
4,653
(306)
4,347
D&A
969
390
142
313
10
1,824
−
1,824
(144)
1,680
D&A
1,143
316
114
291
58
1,922
−
1,922
(165)
1,757
Underlying
EBIT
Net operating
assets
Capital
expenditure
Exploration
gross
Exploration
to profit
5,514
564
1,016
285
(240)
7,139
64
7,203
(394)
6,809
11,926
4,510
1,362
9,045
85
26,928
−
26,928
−
26,928
666
678
237
830
7
2,418
−
2,418
(238)
2,180
62
(9)
53
58
(5)
53
Underlying
EBIT
Net operating
assets
Capital
expenditure
Exploration
gross
Exploration
to profit
2,392
283
354
(79)
(260)
2,690
41
2,731
(141)
2,590
12,013
3,187
1,453
8,601
103
25,357
−
25,357
−
25,357
919
955
205
538
22
2,639
−
2,639
(205)
2,434
62
(8)
54
57
(3)
54
Includes Spence and Cerro Colorado.
(1) Escondida is consolidated under IFRS 10 and reported on a 100 per cent basis.
(2)
(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.
(5) Total Copper statutory result revenue excludes US$1,627 million (FY2020: US$832 million) revenue related to Antamina. Total Copper statutory result Underlying EBITDA includes
US$144 million (FY2020: US$165 million) D&A and US$394 million (FY2020: US$141 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$237 million (FY2020: US$205 million) related to Antamina and US$1 million (FY2020: US$ nil) related to SolGold.
Exploration gross excludes US$9 million (FY2020: US$8 million) related to SolGold of which US$5 million (FY2020: US$3 million) was expensed.
(6) Net operating assets has been restated to reflect changes to the Group’s accounting policy following a decision by the IFRS Interpretations Committee on IAS 12 ‘Income Taxes’, resulting in
the retrospective recognition of US$950 million of Goodwill at Olympic Dam. Note, an offsetting increase in Deferred tax liabilities of US$1,021 million which is not included in Net Operating
Assets above. Refer to note 39 ‘New and amended accounting standards and interpretations and changes to accounting policies’ in section 3.1 for further information.
4.4.3 Iron Ore
Detailed below is financial information for our Iron Ore assets for FY2021 and FY2020.
Underlying
EBIT
Net operating
assets
Capital
expenditure
Exploration
gross(4)
Exploration
to profit
2,186
−
2
2,188
−
2,188
−
2,188
100
−
100
55
−
55
Year ended 30 June 2021
US$M
Western Australia Iron Ore
Samarco(1)
Other(2)
Revenue
34,337
−
120
Underlying
EBITDA
26,270
−
7
Total Iron Ore from Group production
34,457
26,277
D&A
1,959
−
25
1,984
−
24,311
−
(18)
24,293
1
21,289
(2,794)
168
18,663
−
Third-party products(3)
Total Iron Ore
Adjustment for equity
accounted investments
18
1
34,475
26,278
1,984
24,294
18,663
−
−
−
−
−
Total Iron Ore statutory result
34,475
26,278
1,984
24,294
18,663
240
BHP
Annual Report 2021
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
Adjustment for equity
accounted investments
Total Iron Ore statutory result
Revenue
20,663
−
119
20,782
15
20,797
−
20,797
Underlying
EBITDA
14,508
−
53
14,561
(7)
14,554
−
14,554
D&A
1,606
−
24
1,630
−
1,630
−
1,630
Underlying
EBIT
Net operating
assets
Capital
expenditure
Exploration
gross(4)
Exploration to
profit
12,902
−
29
12,931
(7)
20,177
(2,045)
268
18,400
−
12,924
18,400
−
12,924
−
18,400
2,326
−
2
2,328
−
2,328
−
2,328
87
−
87
47
−
47
(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)
(4)
Includes inter-segment and external sales of contracted gas purchases.
Includes US$45 million of capitalised exploration (FY2020: US$40 million).
4.4.4 Coal
Detailed below is financial information for our Coal assets for FY2021 and FY2020.
Year ended 30 June 2021
US$M
Queensland Coal
New South Wales Energy Coal(1)
Colombia(1)(5)
Other(2)
Total Coal from Group production
Third-party products
Total Coal
Adjustment for equity
accounted investments(3)(4)
Total Coal statutory result
Year ended 30 June 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
Adjustment for equity
accounted investments(3)(4)
Total Coal statutory result
Revenue
4,315
927
281
−
5,523
−
5,523
(369)
5,154
Revenue
5,357
972
364
−
6,693
−
6,693
(451)
6,242
Underlying
EBITDA
593
(87)
74
(122)
458
−
458
(170)
288
Underlying
EBITDA
1,935
(19)
69
(155)
1,830
−
1,830
(198)
1,632
D&A
735
144
86
14
979
−
979
(114)
865
D&A
684
152
112
11
959
−
959
(138)
821
Underlying
EBIT
Net operating
assets
Capital
expenditure
Exploration
gross
Exploration
to profit
(142)
(231)
(12)
(136)
(521)
−
(521)
(56)
(577)
7,843
(289)
−
(42)
7,512
−
7,512
−
7,512
512
50
21
18
601
−
601
(22)
579
20
−
20
7
−
7
Underlying
EBIT
Net operating
assets
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
(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$281 million (FY2020: US$364 million) revenue related to Cerrejón. Total Coal statutory result Underlying EBITDA includes US$86 million
(FY2020: US$112 million) D&A and US$2 million (FY2020: US$25 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$21 million (FY2020: US$24 million) related to Cerrejón.
(4) Total Coal statutory result revenue excludes US$88 million (FY2020: US$87 million) revenue related to Newcastle Coal Infrastructure Group. Total Coal statutory result excludes US$82 million
(FY2020: US$61 million) Underlying EBITDA, US$28 million (FY2020: US$26 million) D&A and US$54 million (FY2020: US$35 million) Underlying EBIT related to Newcastle Coal Infrastructure
Group until future profits exceed accumulated losses. Total Coal Capital expenditure excludes US$1 million (FY2020: US$1 million) related to Newcastle Coal Infrastructure Group.
(5) On 28 June 2021, BHP announced that it had signed a Sale and Purchase Agreement with Glencore to divest its 33.3 per cent interest in Cerrejón. While BHP continued to report its share
of profit and loss within the Coal segment and asset tables, the Group’s investment of US$284 million in Cerrejón has subsequently been classified as ‘Assets held for sale’ and therefore
excluded from net operating assets.
BHP
Annual Report 2021
241
23Financial StatementsGovernance1Strategic Report4Additional Information 4.4 Financial Information by Commodity continued
4.4.5 Other assets
Detailed below is financial information for our Other assets for FY2021 and FY2020.
Year ended 30 June 2021
US$M
Potash
Nickel West
Revenue
−
1,545
Underlying
EBITDA
(167)
259
Year ended 30 June 2020
US$M
Potash
Nickel West
Revenue
−
1,189
Underlying
EBITDA
(127)
(37)
D&A
2
110
D&A
3
71
Underlying
EBIT
Net operating
assets
Capital
expenditure
Exploration
gross
Exploration
to profit
(169)
149
3,073
300
268
286
−
17
−
17
Underlying
EBIT
Net operating
assets
Capital
expenditure
Exploration
gross
Exploration
to profit
(130)
(108)
4,068
60
201
254
−
13
−
13
4.5 Production
4.5.1 Production – Minerals
The table below details our mineral and derivative product production for all operations (except Petroleum) for the three years ended 30 June 2021,
2020 and 2019. Unless otherwise stated, the production numbers represent our share of production and include BHP’s share of production from which
profit is derived from our equity accounted investments. Production information for equity accounted investments is included to provide insight into the
operational performance of these entities. For discussion of minerals pricing during the past three years, refer to section 1.17.
Copper(2)
Payable metal in concentrate (‘000 tonnes)
Escondida, Chile(3)
Pampa Norte, Chile(5)
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
242
BHP
Annual Report 2021
BHP share of production(1)
Year ended 30 June
BHP interest
%
2021
2020
2019
57.5
100
33.75
57.5
100
100
33.75
33.75
57.5
100
57.5
33.75
100
100
33.75
871.7
27.4
144.0
925.9
0
124.5
1,043.1
1,050.4
196.5
190.8
205.3
592.6
1,635.7
2.5
2.5
145.1
145.1
167.0
146.0
313.0
5,759
5,965
810
12,534
3,267
3,267
863
863
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
882.1
0
147.2
1,029.3
253.2
246.5
160.3
660.0
1,689.3
2.4
2.4
98.1
98.1
286.0
107.0
393.0
8,830
4,758
923
14,511
3,565
3,565
1,141
1,141
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
Total Western Australia Iron Ore
Samarco, Brazil(4)
Total iron ore
Coal
Metallurgical coal
Production (‘000 tonnes)(8)
Blackwater, Australia
Goonyella Riverside, Australia
Peak Downs, Australia
Saraji, Australia
Daunia, Australia
Caval Ridge, Australia
Total BHP Mitsubishi Alliance
South Walker Creek, Australia(9)
Poitrel, Australia(9)
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(10)
Total nickel
BHP Group share of production(1)
Year ended 30 June
BHP interest
%
2021
2020
2019
85
85
85
85
85
50
50
50
50
50
50
50
80
80
100
33.3
63,221
52,386
68,596
67,393
0
251,596
1,938
253,534
6,224
9,448
5,892
4,489
1,928
3,903
31,884
4,887
3,854
8,741
40,625
14,326
4,964
19,290
65,641
51,499
69,262
61,754
3
66,622
47,440
65,197
58,546
159
248,159
237,964
–
–
248,159
237,964
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
BHP Group share of production(1)
Year ended 30 June
BHP interest
%
2021
2020
2019
100
89.0
89.0
80.1
80.1
87.4
87.4
(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. BHP interest in saleable production is 57.5 per cent.
(4) For statutory financial reporting purposes, this is an equity accounted investment. We have included production numbers from our equity accounted investments as the level of production
and operating performance from these operations impacts Underlying EBITDA of the Group. Our use of Underlying EBITDA is explained in section 1.8.3.
Includes Cerro Colorado and Spence.
(5)
(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) Metallurgical coal production is reported on the basis of saleable product. Production figures include some thermal coal.
(9) Shown on 100 per cent basis. BHP interest in saleable production is 80 per cent.
(10) Nickel contained in refined nickel metal, including briquette and power, matte and by-product streams.
BHP
Annual Report 2021
243
23Financial StatementsGovernance1Strategic Report4Additional Information
4.5.2 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 2021, 2020 and 2019. 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.
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
BHP share of production
Year ended 30 June
2021
2020
2019
11,918
23,165
–
3,646
38,729
280.9
7.3
–
52.4
340.6
6,007
1,306
–
–
14,044
23,345
–
3,823
41,212
292.6
8.1
–
58.9
359.6
6,462
1,189
–
–
7,313
7,651
64.7
25.7
–
12.4
102.8
53.31
51.74
–
55.33
52.56
5.12
2.75
–
3.23
4.79
34.16
20.82
–
–
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
–
–
31.63
25.36
6.40
8.43
–
5.20
6.76
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
(1) Production for Onshore US assets is shown through the closing date of the divestment in FY2019. Production for Eagle Ford, Permian and Haynesville assets is 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.
244
BHP
Annual Report 2021
4.6 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.
4.6.1 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 and are included in the opening
balances in the accompanying tables. Footnotes have been included
with the 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, FY2020 and FY2021 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 on 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,
reserves were estimated using 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
Reserves 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 6 million barrels
of oil equivalent (MMboe) in FY2021, 12 MMboe in FY2020 and 16 MMboe
in FY2019. These amounts represent approximately 1 per cent of our total
reported proved reserves in FY2021, and approximately 2 per cent in each
of FY2020 and FY2019. 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.
BHP
Annual Report 2021
245
23Financial StatementsGovernance1Strategic Report4Additional Information
4.6 Resources and Reserves continued
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 40 years of diversified
industry experience in reservoir engineering, reserves assessment, field
development and technical management. He is a 40-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 4.6.1 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 Advisory 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 2.1.10.
FY2021 proved reserves
Production for FY2021 totalled 103 MMboe in sales with an additional
5 MMboe in non-sales production, which was used primarily for
fuel consumed in operations. Total production of 108 Mmboe was
approximately 6 MMboe lower than in FY2020. The decrease was
primarily due to natural declines in mature fields.
Net additions to reserves totalled 25 MMboe, driven primarily by the
acquisition of additional working interest in the Shenzi field and partially
offset by a negative performance revision in the Atlantis field in the US
Gulf of Mexico. The net additions replaced 23 per cent of production.
As of 30 June 2021, proved reserves totalled 665 MMboe.
Reserves have been calculated using the economic interest method and
represent net revenue interest volumes after deduction of applicable
royalties owned by others. Reserves of 61 MMboe were in production
and risk-sharing arrangements where BHP has a revenue interest in
production without transfer of ownership of the products. At 30 June
2021, approximately 9 per cent of the proved reserves were attributable
to these arrangements.
Extensions and discoveries
In the Atlantis field in the US Gulf of Mexico, Phase 3 development drilling
in the South West region of the field added approximately 1 MMboe by
extending the previously recognised proved reservoir limit.
Revisions
In Australia, revisions increased proved reserves by 4 MMboe, primarily
due to strong performance in the Macedon field. Small increases in the
Bass Strait and Pyrenees fields were offset by negative performance
revisions in the North West Shelf fields.
In the US Gulf of Mexico, revisions decreased reserves by 11 MMboe
overall, primarily driven by reductions related to lower than expected
well performance in the Atlantis and Mad Dog fields of 19 MMboe and
4 MMboe respectively. Approval of the Shenzi Subsea Multi Phase Pump
Project added 6 MMboe, while strong performance in the Eastern area of
the Shenzi field increased reserves by a further 5 MMboe
In Trinidad and Tobago, continued strong performance in the Angostura
field added 6 MMboe to proved reserves. This addition was partially offset
by a price-related reduction of approximately 1 MMboe.
Improved recovery revisions
There were no improved recovery revisions during the year.
Purchases and sales
In November 2020, BHP acquired Hess Corporation’s 28 per cent interest
in the Shenzi field located in the Gulf of Mexico. The acquisition resulted
in the addition of approximately 27 MMboe to proved reserves. BHP also
divested its 35 per cent interest in the Neptune field in May 2021 which
reduced reserves by approximately 1 MMboe. Overall, net additions from
Purchases and Sales were 26 MMboe.
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 4.5.2 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.
246
BHP
Annual Report 2021
Improved recovery revisions
There were no improved recovery revisions during the year.
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 4.5.2 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.
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(1) 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.
These results are summarised in the following tables, which detail
estimated oil, condensate, NGL and natural gas reserves at 30 June 2021,
30 June 2020 and 30 June 2019, with a reconciliation of the changes in
each year.
(1)
‘Other’ comprises Algeria, Trinidad and Tobago and the United Kingdom (sold in FY2019).
BHP
Annual Report 2021
247
23Financial StatementsGovernance1Strategic Report4Additional Information 4.6 Resources and Reserves continued
Millions of barrels
Australia
United States
Other(b)
Total
Proved developed and undeveloped oil and condensate reserves(a)
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
Improved recovery
Revisions of previous estimates
Extensions and discoveries
Purchase/sales of reserves
Production
Total changes
Reserves at 30 June 2021
Developed
Proved developed oil and condensate reserves
as of 30 June 2018
as of 30 June 2019
as of 30 June 2020
Developed reserves as of 30 June 2021
Undeveloped
Proved undeveloped oil and condensate reserves
as of 30 June 2018
as of 30 June 2019
as of 30 June 2020
Undeveloped reserves as of 30 June 2021
(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 FY2018 amounts include 86.1 million barrels attributable to Discontinued operations of Onshore US.
70.5
–
7.8
0.0
–
(14.4)
(6.5)
63.9
–
0.9
1.8
–
(14.0)
(11.3)
52.6
–
2.7
–
–
(11.9)
(9.2)
43.5
60.5
59.0
46.7
38.2
10.0
5.0
6.0
5.3
361.8(c)
–
25.9
0.8
(79.7)
(34.5)
(87.5)
274.4
–
21.3
–
–
(23.3)
(2.0)
272.3
–
(8.0)
1.1
23.9
(23.2)
(6.2)
266.1
181.2
128.9
131.0
138.9
180.7
145.4
141.3
127.2
21.9
–
1.0
–
–
(4.9)
(3.9)
18.0
–
(0.7)
5.0
–
(3.8)
0.4
18.4
–
(0.0)
–
–
(3.6)
(3.7)
14.7
19.2
16.3
11.9
10.6
2.8
1.7
6.5
4.2
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
–
(5.3)
1.1
23.9
(38.7)
(19.1)
324.3
260.8
204.2
189.6
187.6
193.4
152.1
153.8
136.7
248
BHP
Annual Report 2021
Millions of barrels
Proved developed and undeveloped NGL reserves(a)
Australia
United
States
Other(b)
Total
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
Improved recovery
Revisions of previous estimates
Extensions and discoveries
Purchase/sales of reserves
Production
Total changes
Reserves at 30 June 2021
Developed
Proved developed NGL reserves
as of 30 June 2018
as of 30 June 2019
as of 30 June 2020
Developed reserves as of 30 June 2021
Undeveloped
Proved undeveloped NGL reserves
as of 30 June 2018
as of 30 June 2019
as of 30 June 2020
Undeveloped reserves as of 30 June 2021
(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 FY2018 amounts include 62.2 million barrels attributable to Discontinued operations of Onshore US.
(d) For FY2018 amounts include 2.5 million barrels consumed as fuel for Discontinued operations of Onshore US.
56.5
–
4.9
0.2
–
(6.3)
(1.2)
55.2
–
(17.8)
0.3
–
(6.5)
(23.9)
31.3
–
(1.6)
–
–
(6.0)
(7.6)
23.7
49.8
46.5
23.8
17.7
6.6
8.7
7.6
6.0
72.0(c)(d)
–
0.8
0.1
(58.7)
(5.1)
(62.9)
9.1
–
1.2
–
–
(1.2)
–
9.0
–
(1.1)
0.0
0.6
(1.3)
(1.7)
7.3
37.0
4.3
5.0
4.4
35.0
4.8
4.0
2.9
–
–
0.0
–
–
(0.0)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
128.4(c)(d)
–
5.7
0.2
(58.7)
(11.4)
(64.1)
64.3
–
(16.6)
0.3
–
(7.6)
(23.9)
40.4
–
(2.7)
0.0
0.6
(7.3)
(9.3)
31.0
86.8
50.8
28.8
22.1
41.6
13.5
11.6
8.9
BHP
Annual Report 2021
249
23Financial StatementsGovernance1Strategic Report4Additional Information 4.6 Resources and Reserves continued
Billions of cubic feet
Australia(c) United States
Other(d)
Total
Proved developed and undeveloped natural gas reserves(a)
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
Improved recovery
Revisions of previous estimates
Extensions and discoveries
Purchase/sales of reserves
Production(b)
Total changes
Reserves at 30 June 2021
Developed
Proved developed natural gas reserves
as of 30 June 2018
as of 30 June 2019
as of 30 June 2020
Developed reserves as of 30 June 2021
Undeveloped
Proved undeveloped natural gas reserves
as of 30 June 2018
as of 30 June 2019
as of 30 June 2020
Undeveloped reserves as of 30 June 2021
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)
–
15.4
–
–
(304.4)
(289.0)
–
14.2
–
–
(10.7)
3.5
115.8(f)
–
(8.6)
0.4
7.5
(9.9)
(10.6)
–
5.6
84.0
–
(60.7)
28.9
–
(92.0)
146.5
–
(388.7)
(334.2)
304.4(g)
2,185.5(h)
–
27.2
–
–
(54.9)
(27.7)
–
34.0
0.4
7.5
(369.2)
(327.3)
1,476.3(e)
105.2(f)
276.7(g)
1,858.2(h)
1,975.9
1,856.4
1,453.1
1,262.5
436.6
275.5
312.2
213.8
1,479.4
65.5
73.4
69.5
680.7
46.8
42.4
35.6
328.6
275.5
220.4
199.4
–
–
84.0
77.3
3,783.8
2,197.3
1,746.9
1,531.5
1,117.3
322.3
438.6
326.7
(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 FY2018, FY2019, FY2020 and FY2021 amounts include 295, 268, 246 and 204 billion cubic feet respectively, which are anticipated to be consumed as fuel
in operations in Australia.
(f) For FY2018, FY2019, FY2020 and FY2021 amounts include 160, 64, 65 and 67 billion cubic feet respectively, which are anticipated to be consumed as fuel
in operations in the United States.
(g) For FY2018, FY2019, FY2020 and FY2021 amounts include 16, 14, 17 and 13 billion cubic feet respectively, which are anticipated to be consumed as fuel in operations
in Other areas.
(h) For FY2018, FY2019, FY2020 and FY2021 amounts include 472, 346, 327 and 284 billion cubic feet respectively, which are anticipated to be consumed as fuel in operations.
(i) For FY2018 amounts include 2049 billion cubic feet attributable to Discontinued operations of Onshore US.
250
BHP
Annual Report 2021
Millions of barrels of oil equivalent(a)
Proved developed and undeveloped oil,
condensate, natural gas and NGL reserves(b)
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
Improved recovery
Revisions of previous estimates
Extensions and discoveries
Purchase/sales of reserves
Production(c)
Total changes
Reserves at 30 June 2021
Developed
Proved developed oil, condensate, natural gas and NGL reserves
as of 30 June 2018
as of 30 June 2019
as of 30 June 2020
Developed reserves as of 30 June 2021
Undeveloped
Proved undeveloped oil, condensate, natural gas and NGL reserves
as of 30 June 2018
as of 30 June 2019
as of 30 June 2020
Undeveloped reserves as of 30 June 2021
Australia
United States
Other(d)
Total
529.0(e)
–
21.6
0.6
–
(76.8)
(54.5)
793.8(f)(i)
–
29.1
0.9
(463.9)
(57.8)
(491.7)
474.5(e)
302.2(f)
–
(35.4)
12.5
–
(73.4)
(96.3)
–
24.8
–
–
(26.3)
(1.5)
378.2(e)
300.7(f)
–
3.7
–
(68.7)
(64.9)
–
(10.5)
1.2
25.7
(26.1)
(9.7)
76.7(g)
–
5.1
–
–
(17.9)
(12.8)
63.9(g)
–
0.2
19.0
–
(13.9)
5.2
69.1(g)
–
4.5
–
(12.8)
(8.3)
1,399.5(h)(i)
–
55.8
1.6
(463.9)
(152.4)
(558.9)
840.6(h)
–
(10.4)
31.5
–
(113.6)
(92.6)
748.0(h)
–
(2.3)
1.2
25.7
(107.6)
(83.0)
313.2(e)
290.9(f)
60.9(g)
665.0(h)
439.6
414.9
312.6
266.3
89.4
59.6
65.6
46.9
464.7
144.1
148.3
154.8
329.2
158.1
152.4
136.1
73.9
62.2
48.6
43.8
2.8
1.7
20.5
17.1
978.2
621.2
509.5
465.0
421.3
219.4
238.5
200.1
(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 FY2018, FY2019, FY2020 and FY2021 amounts include 49, 45, 41 and 34 million barrels equivalent respectively, which are anticipated to be consumed as fuel
in operations in Australia.
(f) For FY2018, FY2019, FY2020 and FY2021 amounts include 29, 11, 11 and 11 million barrels equivalent respectively, which are anticipated to be consumed as fuel
in operations in the United States.
(g) For FY2018, FY2019, FY2020 and FY2021 amounts include 3, 2, 3 and 2 million barrels equivalent respectively, which are anticipated to be consumed as fuel
in operations in Other areas.
(h) For FY2018, FY2019, FY2020 and FY2021 amounts include 81, 58, 55 and 47 million barrels equivalent respectively, which are anticipated to be consumed as fuel
in operations.
(i) For FY2018 amounts include 490 million barrels equivalent attributable to Discontinued operations of Onshore US.
BHP
Annual Report 2021
251
23Financial StatementsGovernance1Strategic Report4Additional Information 4.6 Resources and Reserves continued
FY2021 proved undeveloped reserves
At 30 June 2021, Petroleum had 200 MMboe of proved undeveloped
reserves, which corresponds to 30 per cent of the reported proved
reserves of 665 MMboe. This represents a decrease of 38 MMboe from
the 238 MMboe at 30 June 2020.
During FY2021, a total of 44 MMboe proved undeveloped reserves
were converted to proved developed reserves through development
activities. This was driven by the following four projects: the Barracouta
West development in the Bass Strait in Australia (14 MMboe), a gas
delivery pressure and compressor re-staging study in the Macedon
field in Offshore Western Australia (14 MMboe) and the Atlantis Phase
3 development in the US Gulf of Mexico (14 MMboe). Start-up of the
Ruby development project in Offshore Trinidad and Tobago also
converted 3 MMboe to proved developed with first oil production.
Increases to proved undeveloped reserves included approval of the
Shenzi Subsurface Multi-Phase Pump project which added 6 MMboe.
The effect of commodity prices relative to FY2020 resulted in the
addition of 5 MMboe to proved undeveloped reserves while the
acquisition of additional interest in the Shenzi field in the US Gulf
of Mexico increased proved undeveloped reserves by 3 MMboe.
Technical studies, revisions to expected performance and other
changes reduced proved undeveloped reserves by 2 Mmboe.
Over the past three years, the conversion of proved undeveloped
reserves to developed status has totalled 93 MMboe, averaging
31 MMboe per year. At 30 June 2021, a total of 114 MMboe proved
undeveloped reserves have been reported for five or more years.
Approximately 101 MMboe of this amount is associated with the Mad Dog
Phase 2 development which is anticipated to produce first oil in CY2022.
The remaining 13 MMboe is 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 FY2021, Petroleum spent US$1.1 billion on development activities
worldwide. Of this amount:
– US$0.9 billion was spent progressing the conversion of proved
undeveloped reserves for projects where developed status was
achieved in FY2021 or will be achieved when development is
completed in the future
– US$0.2 billion represented other development expenditures,
including compliance and infrastructure improvement
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.
The changes in proved undeveloped reserves in FY2021, FY2020
and FY2019 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.
252
BHP
Annual Report 2021
Year Ended 30 June
2021
238
(41)
(44)
(2)
–
5
–
3
(38)
200
2020
219
(12)
(8)
(1)
(0)
(4)
31
–
19
238
2019
421
(18)
(42)
16
8
–
1
(185)
(202)
219
4.6.2 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, December 2019 and the
Australasian Code for Reporting of Exploration Results, Mineral Resources
and Ore Reserves, December 2012 (JORC Code).
Predicted sales prices, based on supply and demand forecast and current
and long-term historical average price trends, have been used. The Ore
Reserves tabulated are held within existing, permitted mining tenements.
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. Ore Reserves
may include areas where some additional approvals remain outstanding,
however it is anticipated such approvals will be obtained within the time
frame required by the current life-of-mine schedule.
Declaration tables
– All Mineral Resources and Ore Reserves presented are reported in 100
per cent terms (unless otherwise stated) and represent estimates at
30 June 2021.
– Tonnes are reported as dry metric tonnes (unless otherwise stated).
All tonnes and grade/quality information have been rounded, so 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.
Competent Persons
This statement 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.
Each Competent Person listed is an employee of BHP or a company in which
BHP has a controlling interest (unless otherwise stated) and declares they
have no issues that could be perceived by investors as a material conflict
of interest in preparing the reported information. All Competent Persons
are 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.
Other reporting jurisdictions
The information contained in this document may differ 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.
Assurance and verification
Assurance programs are undertaken to verify the estimates and estimation
processes for Mineral Resources and Ore Reserves. The Resource Centre of
Excellence manages assurance and functional leadership for the reporting
of Mineral Resources and Ore Reserves supported by the following controls:
– standard BHP procedures for public reporting aligned with current
regulatory requirements
– independent audits or reviews 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
conducted on a frequency that is informed by asset materiality and
annual risk reviews
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)
Olympic Dam: K Ehrig (FAusIMM), D Clarke (MAusIMM)
Antamina: L Canchis (FAusIMM) employed by Compañía Minera
Antamina S.A.
Ore Reserves
Escondida: J Quiroz (MAusIMM) employed by Minera Escondida Limitada
Cerro Colorado: H Martinez (MAusIMM)
Spence: C Araya (MAusIMM)
Olympic Dam: D Tucker (MAusIMM)
Antamina: F Angeles (PEGBC) employed by Compañía 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, Norwich Park, Nebo West and Wards Well: C Williams
(MAusIMM)
Caval Ridge, Blackwater and Togara South: M Godfrey (MAIG)
Saraji, South Walker Creek and Saraji East: R Saha (MAusIMM)
Daunia: B Wesley (MAusIMM)
Poitrel: S Cutler (MAusIMM)
Mt Arthur Coal: J James (MAusIMM)
Cerrejón: G Hernandez (MGSSA) employed by Carbones del
Cerrejón LLC, D Lawrence (MAusIMM) employed by DJL Geological
Consulting Limited
Coal Reserves
Goonyella Riverside: V Grajdan (MAusIMM)
Broadmeadow: C McGahan (MAusIMM)
Peak Downs: P Gupta (MAusIMM)
Caval Ridge : H Mirabediny (MAusIMM)
Saraji and Norwich Park: N Mohtaj (MAusIMM)
Blackwater: A Hardy (MAusIMM)
Daunia: I Ferdowsi (MAusIMM)
Poitrel: K Nott (MAusIMM)
South Walker Creek: G Bustos (MAusIMM)
Mt Arthur Coal: D Perkins (MAusIMM)
Cerrejón: S Chaudari (MAusIMM) employed by Carbones del
Cerrejón LLC, D Lawrence (MAusIMM) employed by DJL Geological
Consulting Limited
Potash
Mineral Resources
Jansen: B Németh (MAusIMM), O Turkekul (APEGS)
Nickel
Mineral Resources
Leinster and Honeymoon Well: R Finch (MAusIMM), M Hope (MAusIMM)
Mt Keith, Cliffs, Yakabindie, Venus and Jericho: R Finch (MAusIMM)
West Jordan: M Hope (MAusIMM)
Ore Reserves
Leinster, Cliffs and Venus: C Barclay (MAusIMM)
Mt Keith and Yakabindie: C Barclay (MAusIMM), D Brosztl (MAusIMM)
Annual Report compilation
S Broun (MAusIMM)
BHP
Annual Report 2021
253
23Financial StatementsGovernance1Strategic Report4Additional Information As at 30 June 2020
Total Resources
0.2
0.42
0.09
981
0.39
90
2,390
10,400
3.0
23
6.0
20
26
1,610
−
−
−
6,000
15
37
84
Mt
3,170
80
Mt
621
240
242
168
0.78
0.45
0.53
0.59
0.66
0.43
0.37
−
−
−
0.43
0.54
0.45
0.60
%Cu
0.60
1.58
%Cu
0.82
1.03
1.31
1.20
0.41
0.10
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
0.20
0.43
%Zn
0.14
1.50
0.22
1.41
0.24
0.65
8
15
12
17
200
60
110
50
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
1
3
19,400
141
152
187
155
212
29
0.7
111
21
1,610
188
60
223
Mt
10,100
1,070
Mt
1,250
554
242
168
0.60
0.49
0.55
0.63
0.61
0.43
0.37
0.66
0.26
0.58
0.64
0.43
0.45
0.57
0.47
0.54
%Cu
0.62
1.67
%Cu
0.83
0.96
1.31
1.20
0.44
0.11
0.40
0.12
0.10
−
−
−
−
−
−
−
−
−
−
−
0.21
0.49
%Zn
0.13
1.67
0.22
1.41
−
−
−
−
−
−
−
−
−
−
−
−
−
−
100
120
g/tAu
0.28
0.64
8
16
12
17
0.04
7,440
0.05
BHP
interest
%
57.5
100
100
57.5
57.5
57.5
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
1
3
230
33.75
70
110
50
19,000
160
186
195
157
217
38
59
124
23
1,500
2,220
7,440
188
60
223
Mt
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
%Cu
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
0.05
280
90
210
80
kg/tU3O8
g/tAu
g/tAg
kg/tU3O8
g/tAg
kg/tU3O8
g/tAu
g/tAg
100
10,070
g/tAg
ppmMo
g/tAg
ppmMo
g/tAg
ppmMo
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
Copper
Mineral Resources
As at 30 June 2021
Commodity
deposit(1)
Copper operations
Escondida(2)
Ore type
Oxide
Mixed
Sulphide
Cerro Colorado(3)
Oxide
Supergene Sulphide
Transitional Sulphide
Hypogene Sulphide
Spence(4)
Oxide
Low-grade Oxide
Supergene Sulphide
Transitional Sulphide
Hypogene Sulphide
Copper projects
Pampa Escondida
Pinta Verde
Chimborazo
Sulphide
Oxide
Sulphide
Sulphide
Copper uranium gold operation
Olympic Dam
OC Sulphide
UG Sulphide
Copper zinc operation
Antamina(5)
Sulphide Cu only
Sulphide Cu-Zn
UG Suphide Cu only
UG Sulphide Cu-Zn
99
72
5,270
71
48
81
−
27
0.6
103
20
636
294
109
−
−
Mt
3,600
510
Mt
219
92
−
−
0.60
0.52
0.61
0.61
0.60
0.45
−
0.66
0.26
0.59
0.64
0.46
0.53
0.60
−
−
%Cu
0.66
1.73
%Cu
0.83
0.81
−
−
−
−
−
0.43
0.11
−
−
0.40
0.12
0.10
−
−
−
−
−
−
kg/tU3O8
0.21
0.50
%Zn
0.12
1.79
−
−
0.58
0.47
0.51
0.64
0.61
0.42
−
0.66
0.26
0.41
0.49
0.45
0.55
0.53
0.50
0.50
%Cu
0.60
1.62
%Cu
0.85
0.95
−
−
−
−
−
0.45
0.12
−
−
0.43
0.14
0.09
−
−
−
−
−
−
kg/tU3O8
0.20
0.48
%Zn
0.13
1.80
−
−
−
−
−
−
−
−
−
−
−
−
60
130
−
−
−
−
g/tAu
0.25
0.59
−
−
−
−
−
−
−
−
−
−
−
−
0.10
−
−
−
g/tAg
1
3
g/tAg
ppmMo
9
17
−
−
240
70
−
−
−
−
−
−
−
−
−
−
−
−
−
−
39
57
3,690
110
87
105
−
1.6
0.1
8.1
0.5
773
0.07
1,150
−
−
−
−
−
−
−
−
−
−
100
180
−
−
−
−
g/tAu
0.34
0.68
−
−
−
g/tAg
1
4
g/tAg
ppmMo
7
16
−
−
270
70
−
−
64
23
139
Mt
3,330
480
Mt
413
222
−
−
Ore Reserves
≥ 0.20%SCu
−
≥ 0.30%TCu and greater than variable cut-off (V_COG) of the
concentrator. Sulphide ore is processed in the concentrator
plants as a result of an 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 and with >30% of copper
carried by more leachable copper minerals . Sulphide Leach
ore is processed by dump leaching as an alternative to the
concentrator process.
≥ 0.30%TCu
≥ 0.30%TCu
−
≥ 0.30%TCu
−
≥ 0.20%TCu
−
−
−
(1) Cut-off criteria:
Deposit
Escondida
Ore type
Oxide
Mixed
Sulphide
Mineral Resources
≥ 0.20%SCu
≥ 0.30%TCu
≥0.25%TCu or ≥0.30%TCu depending on processing
Sulphide Leach
−
Cerro Colorado
Oxide & Supergene
Sulphide
≥ 0.30%TCu
Transitional Sulphide
≥ 0.20%TCu
Hypogene Sulphide
≥ 0.20%TCu
Spence
Oxide
Low-grade Oxide
Supergene Sulphide,
Transitional Sulphide &
Hypogene Sulphide
Pampa Escondida
Sulphide
Pinta Verde
Chimborazo
Oxide & Sulphide
Sulphide
≥ 0.30%TCu
≥ 0.20%TCu
≥ 0.20%TCu
≥ 0.30%TCu
≥ 0.30%TCu
≥ 0.30%TCu
254
BHP
Annual Report 2021
Mineral Resources
As at 30 June 2021
Commodity
deposit(1)
Copper operations
Escondida(2)
Cerro Colorado(3)
Oxide
Spence(4)
Oxide
Ore type
Oxide
Mixed
Sulphide
Supergene Sulphide
Transitional Sulphide
Hypogene Sulphide
Low-grade Oxide
Supergene Sulphide
Transitional Sulphide
Hypogene Sulphide
Copper projects
Pampa Escondida
Sulphide
Pinta Verde
Chimborazo
Olympic Dam
Oxide
Sulphide
Sulphide
OC Sulphide
UG Sulphide
Copper zinc operation
Antamina(5)
Sulphide Cu only
Sulphide Cu-Zn
UG Suphide Cu only
UG Sulphide Cu-Zn
5,270
99
72
71
48
81
−
27
0.6
103
20
636
294
109
−
−
Mt
510
Mt
219
92
−
−
3,600
0.60
0.52
0.61
0.61
0.60
0.45
−
0.66
0.26
0.59
0.64
0.46
0.53
0.60
%Cu
0.66
1.73
%Cu
0.83
0.81
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
0.43
0.11
0.40
0.12
0.10
0.21
0.50
%Zn
0.12
1.79
−
−
−
−
−
−
−
−
−
−
−
−
−
−
100
180
g/tAu
0.34
0.68
7
16
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
1
4
−
−
270
70
3,690
39
57
110
87
105
−
1.6
0.1
8.1
0.5
773
3,330
64
23
139
Mt
480
Mt
413
222
−
−
0.58
0.47
0.51
0.64
0.61
0.42
−
0.66
0.26
0.41
0.49
0.45
0.55
0.53
0.50
0.50
%Cu
0.60
1.62
%Cu
0.85
0.95
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
0.45
0.12
0.43
0.14
0.09
0.20
0.48
%Zn
0.13
1.80
−
−
−
−
−
−
−
−
−
−
−
−
−
−
60
130
g/tAu
0.25
0.59
9
17
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
1
3
−
−
240
70
g/tAg
ppmMo
g/tAg
ppmMo
0.07
1,150
0.10
Copper uranium gold operation
kg/tU3O8
g/tAg
kg/tU3O8
g/tAg
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
BHP
interest
%
As at 30 June 2020
Total Resources
Mt
%TCu
%SCu
ppmMo
g/tAu
3.0
23
10,400
6.0
20
26
1,610
−
−
0.2
−
981
6,000
15
37
84
Mt
3,170
80
Mt
621
240
242
168
0.78
0.45
0.53
0.59
0.66
0.43
0.37
−
−
0.42
−
0.39
0.43
0.54
0.45
0.60
%Cu
0.60
1.58
%Cu
0.82
1.03
1.31
1.20
−
−
−
0.41
0.10
−
−
−
−
0.09
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
90
−
−
−
−
kg/tU3O8
0.20
0.43
%Zn
0.14
1.50
0.22
1.41
g/tAu
g/tAg
0.24
0.65
1
3
g/tAg
ppmMo
8
15
12
17
200
60
110
50
−
−
−
−
−
−
−
−
−
−
−
−
141
152
19,400
187
155
212
1,610
29
0.7
111
21
2,390
0.04
7,440
−
−
−
188
60
223
Mt
10,100
1,070
Mt
1,250
554
242
168
0.60
0.49
0.55
0.63
0.61
0.43
0.37
0.66
0.26
0.58
0.64
0.43
0.45
0.57
0.47
0.54
%Cu
0.62
1.67
%Cu
0.83
0.96
1.31
1.20
−
−
−
0.44
0.11
−
−
0.40
0.12
0.10
−
−
−
−
−
−
kg/tU3O8
0.21
0.49
%Zn
0.13
1.67
0.22
1.41
−
−
−
−
−
−
−
−
−
−
100
120
−
−
−
−
g/tAu
0.28
0.64
−
−
−
−
−
−
−
−
−
−
−
−
0.05
−
−
−
g/tAg
1
3
57.5
100
100
57.5
57.5
57.5
160
186
19,000
195
157
217
1,500
38
59
124
23
2,220
7,440
188
60
223
Mt
100
10,070
g/tAg
ppmMo
8
16
12
17
230
33.75
70
110
50
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
%Cu
0.62
1.68
%Cu
0.82
0.94
1.31
1.28
−
−
−
0.44
0.11
−
−
0.42
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
100
130
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
0.05
−
−
−
kg/tU3O8
0.21
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
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
Ore Reserves
Variable between 0.10%Cu and 0.30%Cu
−
Variable between 0.80%Cu and 1.30%Cu
Variable between 1.10%Cu and 1.70%Cu
−
≥ 0.60%Cu
Net value per concentrator hour incorporating all material
revenue and cost factors and includes metallurgical
recovery (see footnote 8 for averages). Mineralisation at the
US$0/hr limit is equivalent 0.14%Cu, 1.9g/tAg, 95ppmMo
with 6,815t/hr mill throughput.
Net value per concentrator hour incorporating all material
revenue and cost factors and includes metallurgical recovery
(see footnote 8 for averages). Mineralisation at the US$6,000/
hr limit is equivalent to 0.15%Cu, 2.0g/tAg, 156ppmMo with
6,815t/hr mill throughput.
Net value per concentrator hour incorporating all material
revenue and cost factors and includes metallurgical
recovery (see footnote 8 for averages). Mineralisation at the
US$0/hr limit is equivalent to 0.06%Cu, 0.66%Zn, 6.7g/tAg
with 6,384t/hr mill throughput.
Net value per concentrator hour incorporating all material
revenue and cost factors and includes metallurgical recovery
(see footnote 8 for averages). Mineralisation at the US$6,000/
hr limit is equivalent to 0.06%Cu, 0.73%Zn, 4.2g/tAg with
6,384t/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 0.86%Cu, 8.7g/tAg
and 83ppmMo. NSR estimates are based on Cu price of
US$3.30/lb, Ag price of US$20.82/oz and Mo price of
US$10.54/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 0.78%Cu, 1.06%Zn and 12.3g/tAg. NSR
estimates are based on Cu price of US$3.30/lb, Zn price
of US$1.18/lb and Ag price of US$20.82/oz and predicted
metallurgical recoveries of 78% for Cu, 80% for Zn and
44% for Ag.
−
−
Antamina – All metals used in net value calculations are assumed to be recovered into concentrate and sold.
(2) Escondida – The decrease in Oxide and Mixed ore types was due to depletion partially offset by an update in the resource estimate supported by additional drilling.
(3) Cerro Colorado – The increase in Hypogene Sulphide ore type was mainly due to changes in economic assumptions used to define Mineral Resources.
(4) Spence – The decrease in Oxide and Supergene Sulphide ore types was mainly due to depletion. The decrease in Low-grade Oxide and Transitional Sulphide ore types was mainly due to
depletion and an increase in cut-off grade. The increase in Hypogene Sulphide ore type was mainly due to an update in the resource estimate supported by additional drilling and mining
factor adjustments.
(5) Antamina – The decrease in UG Sulphide Cu only ore type was mainly due to an update in the resource estimate supported by additional drilling.
BHP
Annual Report 2021
255
23Financial StatementsGovernance1Strategic Report4Additional Information
Copper continued
Ore Reserves
As at 30 June 2021
Commodity
deposit(1)(6)(7)(8)
Copper operations
Escondida(10)
Ore type
Oxide
Sulphide
Sulphide Leach
Cerro Colorado(9)(11)
Oxide
Supergene Sulphide
Transitional Sulphide
Spence(9)(12)
Oxide
Oxide Low Solubility
Supergene Sulphide
Transitional Sulphide
Hypogene Sulphide
Copper uranium gold operation
Olympic Dam(13)
UG Sulphide
Low-grade
Copper zinc operation
Antamina(14)
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
76
3,450
1,330
6.6
6.1
10
26
−
104
20
636
Mt
239
−
Mt
128
59
0.62
0.68
0.42
0.46
0.54
0.50
0.67
−
0.59
0.64
0.46
%Cu
2.09
−
%Cu
0.93
0.85
−
−
−
0.32
0.12
−
0.41
−
0.10
−
−
kg/tU3O8
0.61
−
%Zn
0.14
2.02
−
−
−
−
−
−
−
−
–
100
180
g/tAu
0.73
−
g/tAg
5
−
g/tAg
ppmMo
7
12
360
70
123
1,700
286
0.4
0.7
0.6
0.3
−
7.8
0.5
725
Mt
174
31
Mt
94
76
0.53
0.57
0.39
0.42
0.48
0.46
0.57
−
0.41
0.49
0.45
%Cu
1.97
0.83
%Cu
0.99
0.84
−
−
−
0.28
0.10
−
0.39
−
0.09
−
−
kg/tU3O8
0.60
0.27
%Zn
0.16
2.13
−
−
−
−
−
−
−
−
–
60
130
g/tAu
0.66
0.34
g/tAg
4
2
g/tAg
ppmMo
8
13
340
70
Reserve
BHP
life
interest
(years)
%
58
57.5
2.3
100
38
100
g/tAg
5
2
350
70
40
100
6.7
33.75
As at 30 June 2020
Total Reserves
Reserve
life
(years)
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
kg/tU3O8
−
−
−
−
−
−
−
−
−
95
150
g/tAu
0.69
0.34
7
13
g/tAg
4
2
340
80
58
3.4
36
43
7.7
g/tAg
ppmMo
g/tAg
ppmMo
199
5,150
1,620
7.0
6.8
11
26
−
112
20
Mt
413
31
Mt
222
135
1,360
0.56
0.64
0.41
0.46
0.53
0.50
0.67
−
0.58
0.64
0.45
%Cu
2.04
0.83
%Cu
0.95
0.84
−
−
−
−
−
−
−
0.32
0.12
0.41
0.10
0.61
0.27
%Zn
0.15
2.08
kg/tU3O8
−
−
−
−
−
−
−
−
–
100
150
g/tAu
0.70
0.34
7
13
(6) Approximate drill hole spacings used to classify the reserves were:
Deposit
Escondida
Proved Reserves
Oxide: 30m × 30m
Sulphide: 50m × 50m
Probable Reserves
Oxide: 45m × 45m
Sulphide: 90m × 90m
Sulphide Leach: 60m × 60m
Sulphide Leach: 115m × 115m
Cerro Colorado
40m to 50m
Spence
Oxide: 50m × 50m
100m
100m × 100m for all ore types
Supergene Sulphide, Transitional Sulphide &
Hypogene Sulphide: 70m × 70m
35m to 70m
40m to 80m
Olympic Dam
Antamina
20m to 35m
25m to 45m
(7) Ore delivered to process plant.
(8) Metallurgical recoveries for the operations were:
Deposit
Escondida
Metallurgical recovery
Oxide: 58%
Sulphide: 84%
Sulphide Leach: 40%
Cerro Colorado
Oxide: 75%
Spence
Oxide: 80%
Supergene Sulphide: 80%
Olympic Dam
Antamina
Supergene Sulphide (Leach): 82%
Cu 94%, U3O8 68%, Au 70%, Ag 63%
Sulphide Cu only: Cu 93%, Zn 0%, Ag 84%, Mo 62%
Sulphide Cu-Zn: Cu 81%, Zn 85%, Ag 74%, Mo 0%
(9) Metallurgical recoveries based on testwork:
Deposit
Metallurgical recovery
Cerro Colorado
Transitional Sulphide: 65%
Spence
Transitional Sulphide and Hypogene Sulphide: Cu 86%,
Mo variable depending on mineralogy
(10) Escondida – Oxide and Sulphide Leach ore types contribute 13 years and 27 years respectively to the reported reserve life.
(11) Cerro Colorado – The decrease in Ore Reserves was mainly due to depletion and a reduction in the nominated production rate with reserve life constrained by mining permit expiry in 2023.
(12) Spence – The decrease in Oxide and Transitional Sulphide ore types was mainly due to depletion. The increase in Supergene Sulphide and Hypogene Sulphide ore types was mainly due to
an update in the resource estimate supported by additional drilling and updated mine design, resulting with an increase in reserve life.
(13) Olympic Dam – The decrease in UG Sulphide ore type and reduction in reserve life was due to updated mine stope designs and depletion partially offset by an updated resource estimate
supported by additional drilling.
(14) Antamina – The decrease in Ore Reserves and reduction in reserve life was mainly due to depletion.
256
BHP
Annual Report 2021
Ore Reserves
As at 30 June 2021
Commodity
deposit(1)(6)(7)(8)
Copper operations
Escondida(10)
Cerro Colorado(9)(11)
Oxide
Spence(9)(12)
Oxide
Ore type
Oxide
Sulphide
Sulphide Leach
Supergene Sulphide
Transitional Sulphide
Oxide Low Solubility
Supergene Sulphide
Transitional Sulphide
Hypogene Sulphide
Copper uranium gold operation
Olympic Dam(13)
UG Sulphide
Low-grade
Copper zinc operation
Antamina(14)
Sulphide Cu only
Sulphide Cu-Zn
Proved Reserves
Probable Reserves
Total Reserves
Mt
%TCu
%SCu
ppmMo
Mt
%TCu
%SCu
ppmMo
Mt
%TCu
%SCu
ppmMo
76
3,450
1,330
6.6
6.1
10
26
−
104
20
636
Mt
239
−
Mt
128
59
0.62
0.68
0.42
0.46
0.54
0.50
0.67
−
0.59
0.64
0.46
%Cu
2.09
−
%Cu
0.93
0.85
0.32
0.12
0.41
0.10
−
−
−
−
−
−
−
−
%Zn
0.14
2.02
kg/tU3O8
0.61
−
−
−
−
−
−
−
−
–
100
180
g/tAu
0.73
−
7
12
g/tAg
5
−
360
70
123
1,700
286
0.4
0.7
0.6
0.3
−
7.8
0.5
725
Mt
174
31
Mt
94
76
0.53
0.57
0.39
0.42
0.48
0.46
0.57
−
0.41
0.49
0.45
%Cu
1.97
0.83
%Cu
0.99
0.84
−
−
−
−
−
−
−
0.28
0.10
0.39
0.09
0.60
0.27
%Zn
0.16
2.13
kg/tU3O8
−
−
−
−
−
−
−
−
–
60
130
g/tAu
0.66
0.34
8
13
g/tAg
4
2
340
70
g/tAg
ppmMo
g/tAg
ppmMo
199
5,150
1,620
7.0
6.8
11
26
−
112
20
1,360
Mt
413
31
Mt
222
135
0.56
0.64
0.41
0.46
0.53
0.50
0.67
−
0.58
0.64
0.45
%Cu
2.04
0.83
%Cu
0.95
0.84
−
−
−
0.32
0.12
−
0.41
−
0.10
−
−
kg/tU3O8
0.61
0.27
%Zn
0.15
2.08
−
−
−
−
−
−
−
−
–
100
150
g/tAu
0.70
0.34
g/tAg
5
2
g/tAg
ppmMo
7
13
350
70
Reserve
life
(years)
BHP
interest
%
58
57.5
2.3
100
38
100
40
100
6.7
33.75
As at 30 June 2020
Total Reserves
Mt
%TCu
%SCu
ppmMo
Reserve
life
(years)
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
58
3.4
36
43
7.7
BHP
Annual Report 2021
257
23Financial StatementsGovernance1Strategic Report4Additional Information Iron ore
Mineral Resources
As at 30 June 2021
Commodity
deposit(1)(2)
Iron ore operations
Australia
WAIO(3)(4)(5)(6)(7)
Brazil
Samarco(8)
Ore Reserves
As at 30 June 2021
Commodity
deposit
Iron ore operation
Australia
WAIO(1)(3)(4)(9)(10)(11)(12)(13)(14)
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 2020
Total Resources
BKM
CID
DID
MM
NIM
ROM
2,390
370
−
1,350
10
Mt
3,290
61.0
55.7
−
61.8
59.0
%Fe
39.1
0.14
0.05
−
0.07
0.08
%Pc
0.05
4.3
6.4
−
3.0
10.1
2.5
2.2
−
1.7
1.2
5.3
11.1
−
6.4
3.9
5,410
340
200
2,100
120
Mt
1,950
59.9
56.2
61.7
60.3
61.6
%Fe
37.4
0.14
0.06
0.05
0.06
0.06
%Pc
0.05
5.1
6.5
3.8
4.3
8.0
2.5
2.3
3.6
2.1
1.1
6.0
10.3
3.5
6.8
1.7
12,640
910
20
4,830
70
Mt
660
58.9
54.9
59.9
59.5
60.4
%Fe
37.2
0.14
0.06
0.07
0.07
0.05
%Pc
0.06
5.7
6.7
5.3
4.7
10.0
2.7
2.9
3.6
2.3
1.2
6.6
11.0
4.5
7.2
1.7
20,440
1,630
210
8,280
200
Mt
59.4
55.3
61.6
60.1
61.1
%Fe
5,900
38.3
0.14
0.06
0.06
0.07
0.06
%Pc
0.05
5.4
6.6
3.9
4.3
8.8
2.6
2.6
3.6
2.2
1.2
6.3
10.9
3.6
6.9
1.8
88
20,080
8,090
60.2
1,810
−
200
Mt
59.5
55.4
−
61.1
%Fe
38.1
0.14
0.06
−
0.07
0.06
%Pc
0.05
50
6,440
5.3
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
(years)
%
Mt
%Fe
%P
%SiO2
%Al2O3
%LOI
(years)
Proved Reserves
Probable Reserves
Total Reserves
Reserve
BHP
life
interest
As at 30 June 2020
Total Reserves
BKM
BKM Bene
CID
MM
980
10
50
810
62.8
59.6
56.9
62.3
0.13
0.14
0.05
0.06
3.1
7.3
5.8
2.8
2.1
3.4
1.7
1.5
4.4
2.0
10.6
6.0
1,500
10
10
1,070
62.1
59.1
57.9
61.1
0.13
0.13
0.04
0.06
3.5
7.9
4.9
3.6
2.2
3.5
1.5
1.8
4.8
2.1
10.4
6.7
2,480
30
60
1,880
62.4
59.4
57.2
61.6
0.13
0.13
0.05
0.06
3.4
7.5
5.6
3.2
2.2
3.4
1.7
1.7
4.7
2.0
10.5
6.4
15
88
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
15
(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%, DID – Detrital Iron Deposits 4%,
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 50-58%Fe with an additional threshold of <6%Al203 applied to the DID ore type. 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) WAIO – First time reporting of DID ore type.
(6) WAIO – The increase in Mineral Resources was due to updated resource estimates supported by additional drilling partially offset by depletion.
(7) WAIO – Mineral Resources are restricted to areas which have been identified for inclusion based on a risk assessment, including heritage sites.
(8) Samarco – The decrease in Mineral Resources was due to changes in geotechnical parameters and increased stand-off distances from natural drainage. Operations have recommenced
and an Ore Reserves estimate is in progress.
(9) Approximate drill hole spacings used to classify the reserves were:
Deposit
WAIO
Proved Reserves
50m × 50m
Probable Reserves
150m × 50m
(10) WAIO – Recovery was 100%, except for BKM Bene where Whaleback beneficiation plant recovery was 88% (tonnage basis).
(11) WAIO – Iron ore is marketed for WAIO as Lump (direct blast furnace feed) and Fines (sinter plant feed).
(12) WAIO – Cut-off grades used to estimate Ore Reserves range from 50–62%Fe for all material types. Ore delivered to process facility.
(13) 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.
(14) WAIO – The decrease in CID ore type was due to depletion.
258
BHP
Annual Report 2021
Mineral Resources
As at 30 June 2021
Commodity
deposit(1)(2)
Iron ore operations
Australia
WAIO(3)(4)(5)(6)(7)
Brazil
Samarco(8)
Ore Reserves
As at 30 June 2021
Commodity
deposit
Iron ore operation
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 2020
Total Resources
Mt
%Fe
%P %SiO2 %Al2O3
%LOI
BKM
CID
DID
MM
NIM
ROM
2,390
370
−
1,350
10
Mt
3,290
61.0
55.7
−
61.8
59.0
%Fe
39.1
0.14
0.05
−
0.07
0.08
%Pc
0.05
4.3
6.4
−
3.0
10.1
2.5
2.2
−
1.7
1.2
5.3
11.1
−
6.4
3.9
5,410
340
200
2,100
120
Mt
1,950
59.9
56.2
61.7
60.3
61.6
%Fe
37.4
0.14
0.06
0.05
0.06
0.06
%Pc
0.05
5.1
6.5
3.8
4.3
8.0
2.5
2.3
3.6
2.1
1.1
6.0
10.3
3.5
6.8
1.7
12,640
910
20
4,830
70
Mt
660
58.9
54.9
59.9
59.5
60.4
%Fe
37.2
0.14
0.06
0.07
0.07
0.05
%Pc
0.06
5.7
6.7
5.3
4.7
10.0
2.7
2.9
3.6
2.3
1.2
6.6
11.0
4.5
7.2
1.7
20,440
1,630
210
8,280
200
Mt
59.4
55.3
61.6
60.1
61.1
%Fe
5,900
38.3
0.14
0.06
0.06
0.07
0.06
%Pc
0.05
5.4
6.6
3.9
4.3
8.8
2.6
2.6
3.6
2.2
1.2
6.3
10.9
3.6
6.9
1.8
88
20,080
1,810
−
59.5
55.4
−
8,090
60.2
200
Mt
50
6,440
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
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
Reserve
life
(years)
BHP
interest
%
As at 30 June 2020
Total Reserves
Mt
%Fe
%P
%SiO2
%Al2O3
%LOI
WAIO(1)(3)(4)(9)(10)(11)(12)(13)(14)
BKM
BKM Bene
CID
MM
980
10
50
810
62.8
59.6
56.9
62.3
0.13
0.14
0.05
0.06
3.1
7.3
5.8
2.8
2.1
3.4
1.7
1.5
4.4
2.0
10.6
6.0
1,500
10
10
1,070
62.1
59.1
57.9
61.1
0.13
0.13
0.04
0.06
3.5
7.9
4.9
3.6
2.2
3.5
1.5
1.8
4.8
2.1
10.4
6.7
2,480
30
60
1,880
62.4
59.4
57.2
61.6
0.13
0.13
0.05
0.06
3.4
7.5
5.6
3.2
2.2
3.4
1.7
1.7
4.7
2.0
10.5
6.4
15
88
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)
15
BHP
Annual Report 2021
259
23Financial StatementsGovernance1Strategic Report4Additional Information Metallurgical coal
Coal Resources
As at 30 June 2021
Commodity
deposit(1)(2)
Mining
method
Coal
type
Metallurgical coal operations
Queensland coal
CQCA JV
Goonyella Riverside
Broadmeadow
Peak Downs
Caval Ridge
Saraji
Norwich Park
Blackwater
Daunia(3)
BHP Mitsui Coal
South Walker Creek
Poitrel
OC
UG
OC
OC
OC
OC
UG
OC
UG
OC
OC
OC
OC
UG
OC
Metallurgical coal projects
Queensland coal
CQCA JV
Red Hill
Saraji East
BHP Mitsui Coal
Nebo West
Bee Creek
Wards Well(4)
OC
UG
OC
UG
OC
OC
UG
UG
Met
Met
Met
Met
Met
Met
Met
Met/Th
Met/Th
Met/PCI
PCI
Met
Met/PCI
Met/PCI
Met
Met
Met
Met
Met
Anth
Met/Th
Met/PCI
Met
Measured Resources
Indicated Resources
Inferred Resources
Total Resources
Mt
%Ash
%VM
%S
Mt
%Ash
%VM
%S
Mt
%Ash
%VM
%S
Mt
%Ash
%VM
%S
Mt
%Ash
%VM
%S
As at 30 June 2020
Total Resources
BHP
interest
%
748
564
1,036
318
788
221
−
335
−
91
−
−
201
36
42
−
−
8.8
9.4
10.2
12.3
10.6
9.6
−
5.2
−
7.8
−
−
10.2
10.0
7.9
22.6
21.2
19.4
22.0
17.6
17.6
−
29.6
−
20.9
−
−
13.3
13.8
23.9
0.53
0.52
0.60
0.56
0.64
0.66
−
0.42
−
0.36
−
−
0.31
0.31
0.35
−
−
−
−
−
−
458
10.2
16.0
0.63
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
32
423
508
216
104
128
20
528
−
35
−
−
119
154
49
25
1,123
676
35
−
9.4
1,164
−
11.2
10.2
10.4
11.9
12.0
9.9
9.4
5.5
−
8.2
−
−
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
−
20.6
−
−
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
−
0.36
−
−
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
11
−
−
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
9.9
−
−
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
20.2
−
−
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
0.35
−
−
0.40
0.35
0.36
−
0.52
0.68
0.59
0.67
0.42
0.52
−
820
1,002
1,968
681
932
465
42
1,642
222
137
−
−
391
298
150
25
1,686
1,637
51
71
23
1,313
−
9.1
9.8
10.5
12.1
10.8
9.8
9.7
6.0
7.2
8.1
−
−
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
20.8
−
−
14.0
13.7
24.0
19.8
19.8
15.7
13.7
7.2
15.2
20.8
−
0.53
0.53
0.64
0.54
0.66
0.70
0.69
0.43
0.36
0.36
−
−
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
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
(1) Tonnages are reported on an in situ moisture basis. Coal qualities are for a potential product on an air-dried basis.
(2) Cut-off criteria:
Deposit
Mining method
Coal Resources
Goonyella Riverside,
Norwich Park, Saraji
Peak Downs
Caval Ridge
Blackwater
Daunia
Broadmeadow
Norwich Park
Blackwater
OC
OC
OC
OC
OC
UG
UG
UG
≥ 0.5m seam thickness, core yield ≥50% and <35% raw ash
≥ 0.5m seam thickness and <35% raw ash
≥ 0.3m seam thickness, core yield ≥30% and <35% raw ash
≥ 0.3m seam thickness, core yield ≥50% and <40% raw ash
≥ 0.3m seam thickness, core yield ≥50% and <35% raw ash
≥ 2.0m seam thickness, core yield ≥50% and <35% raw ash
≥ 2.0m seam thickness, core yield ≥50% and <35% raw ash
≥ 2.0m seam thickness, core yield ≥50% and <40% raw ash
Coal Reserves
≥ 0.5m seam thickness
≥ 0.5m seam thickness
≥ 0.4m seam thickness
≥ 0.3m seam thickness
≥ 0.3m seam thickness
≥ 2.5m seam thickness
−
−
South Walker Creek OC
≥ 0.5m seam thickness, core yield ≥ 50%, <35% raw ash and 100m lease boundary buffer
≥ 0.3m seam thickness
Poitrel
Red Hill, Saraji East
Nebo West
Bee Creek
Wards Well
UG
OC
OC
UG
OC
OC
UG
≥ 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) Daunia – The decrease in Coal Resources was due to depletion. Change in coal type from Met and PCI to Met/PCI.
(4) Wards Well – Change in coal type from Met to Met/PCI.
260
BHP
Annual Report 2021
Coal Resources
As at 30 June 2021
Queensland coal
CQCA JV
Goonyella Riverside
Broadmeadow
Peak Downs
Caval Ridge
Saraji
Norwich Park
Blackwater
Daunia(3)
BHP Mitsui Coal
South Walker Creek
Poitrel
Metallurgical coal projects
Queensland coal
CQCA JV
Red Hill
Saraji East
BHP Mitsui Coal
Nebo West
Bee Creek
Wards Well(4)
OC
UG
OC
OC
OC
OC
UG
OC
UG
OC
OC
OC
OC
UG
OC
OC
UG
OC
UG
OC
OC
UG
UG
Commodity
deposit(1)(2)
Mining
method
Coal
type
Metallurgical coal operations
Measured Resources
Indicated Resources
Inferred Resources
Total Resources
Mt
%Ash
%VM
%S
Mt
%Ash
%VM
%S
Mt
%Ash
%VM
%S
Mt
%Ash
%VM
%S
BHP
interest
%
As at 30 June 2020
Total Resources
Mt
%Ash
%VM
%S
Met
Met
Met
Met
Met
Met
Met
Met/Th
Met/Th
Met/PCI
PCI
Met
Met/PCI
Met/PCI
Met
Met
Met
Met
Met
Anth
Met/Th
Met/PCI
Met
748
564
1,036
318
788
221
−
335
−
91
−
−
201
36
42
−
−
−
−
−
−
−
8.8
9.4
10.2
12.3
10.6
9.6
5.2
7.8
−
−
−
−
10.2
10.0
7.9
−
−
−
−
−
−
−
22.6
21.2
19.4
22.0
17.6
17.6
0.53
0.52
0.60
0.56
0.64
0.66
29.6
0.42
20.9
0.36
13.3
13.8
23.9
0.31
0.31
0.35
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
458
10.2
16.0
0.63
32
423
508
216
104
128
20
528
35
−
−
−
119
154
49
25
1,123
676
35
−
9.4
1,164
−
11.2
10.2
10.4
11.9
12.0
9.9
9.4
5.5
8.2
−
−
−
9.4
10.4
8.0
12.4
9.8
10.3
8.3
−
8.9
8.9
−
20.6
0.36
24.3
22.9
19.1
20.1
17.9
17.5
17.4
29.7
−
−
−
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
0.28
0.35
0.49
0.52
0.67
0.59
0.40
0.52
−
−
40
15
424
147
40
116
22
779
222
11
−
−
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
9.9
−
−
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
20.2
−
−
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
0.35
−
−
0.40
0.35
0.36
−
0.52
0.68
0.59
0.67
0.42
0.52
−
820
1,002
1,968
681
932
465
42
1,642
222
137
−
−
391
298
150
25
1,686
1,637
51
71
23
1,313
−
9.1
9.8
10.5
12.1
10.8
9.8
9.7
6.0
7.2
8.1
−
−
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
20.8
−
−
14.0
13.7
24.0
19.8
19.8
15.7
13.7
7.2
15.2
20.8
−
0.53
0.53
0.64
0.54
0.66
0.70
0.69
0.43
0.36
0.36
−
−
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
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
BHP
Annual Report 2021
261
23Financial StatementsGovernance1Strategic Report4Additional Information 405
108
623
196
318
165
331
73
98
39
9.2
9.3
10.6
11.0
10.5
10.3
9.0
8.2
9.2
8.1
25.3
23.5
21.8
22.3
18.0
16.7
26.3
20.2
13.5
23.1
0.53
0.55
0.61
0.57
0.65
0.70
0.42
0.34
0.29
0.31
31
38
27
31
65
25
16
15
8.5
50
50
50
50
50
50
50
80
80
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
Reserve
life
(years)
35
27
27
33
65
27
17
16
9.6
Metallurgical coal continued
Coal Reserves
As at 30 June 2021
Commodity
deposit(1)(2)(5)(6)(7)(8)
Mining
method
Coal
type
Metallurgical coal operations
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 2020
Queensland coal
CQCA JV
Goonyella Riverside(9)
Broadmeadow(9)
Peak Downs(10)(11)
Caval Ridge
Saraji(10)(12)
Norwich Park(13)
Blackwater(10)(14)
Daunia(15)
OC
UG
OC
OC
OC
OC
OC
OC
BHP Mitsui Coal
South Walker Creek(16) OC
Poitrel(17)
OC
Met
Met
Met/Th
Met
Met/Th
Met
Met/Th
Met/PCI
Met/PCI
Met
494
53
769
222
457
159
161
60
87
24
19
106
296
111
54
70
225
25
36
24
513
159
1,065
333
511
229
386
85
123
48
391
41
455
128
294
116
140
53
69
20
9.1
8.1
10.6
11.0
10.5
10.3
8.8
8.1
9.2
7.9
25.2
23.9
21.8
22.3
17.9
16.8
26.5
20.4
13.6
23.0
0.53
0.54
0.58
0.57
0.63
0.70
0.43
0.34
0.29
0.31
14
67
168
68
24
49
191
20
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
22.1
22.4
19.2
16.6
26.2
20.0
13.2
23.3
0.56
0.55
0.69
0.57
0.88
0.70
0.42
0.35
0.29
0.31
(5) 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:
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
Deposit
Proved Reserves
Goonyella Riverside, Broadmeadow
900m to 1,300m plus 3D seismic coverage for UG
Peak Downs
Caval Ridge
Saraji
Norwich Park
Blackwater
Daunia
South Walker Creek
Poitrel
250m to 1,500m
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
(6) Product recoveries for the operations were:
Deposit
Product recovery
Goonyella Riverside, Broadmeadow
Peak Downs
Caval Ridge
Saraji
Norwich Park
Blackwater
Daunia
South Walker Creek
Poitrel
74%
59%
59%
63%
71%
86%
85%
78%
79%
(7) Total Coal Reserves were at the moisture content when mined (4% CQCA JV and BHP Mitsui Coal). Total Marketable Reserves were at a product specification moisture content (9.5-10%
Goonyella Riverside Broadmeadow; 9.5% Peak Downs; 10% Caval Ridge; 10.1% 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.
(8) Coal delivered to handling plant.
(9) 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 and an increase
in nominated production rate.
(10) Percentage of secondary thermal products for Coal Reserves with coal type Met/Th are: Peak Downs 1.7%; Saraji 1.0%; Blackwater 14%. Contributions may vary year on year based
on market demand.
(11) Peak Downs – The increase in Coal Reserves and reserve life was mainly due to conversion of tenure from an exploration lease to a mining lease.
(12) Saraji – The decrease in Coal Reserves and reserve life was mainly due to depletion.
(13) Norwich Park – Remains on care and maintenance.
(14) Blackwater – The decrease in Coal Reserves was mainly due to depletion and exclusion of reserves to allow for in-pit tailings storage.
(15) Daunia – The decrease in Coal Reserves and reserve life was mainly due to depletion and changes in the mine plan.
(16) South Walker Creek – The decrease in reserve life was due to depletion.
(17) Poitrel – The decrease in Coal Reserves and reserve life was due to depletion.
262
BHP
Annual Report 2021
Coal Reserves
As at 30 June 2021
Commodity
deposit(1)(2)(5)(6)(7)(8)
Mining
method
Coal
type
Metallurgical coal operations
Queensland coal
CQCA JV
Goonyella Riverside(9)
Broadmeadow(9)
Peak Downs(10)(11)
Caval Ridge
Saraji(10)(12)
Norwich Park(13)
Blackwater(10)(14)
Daunia(15)
BHP Mitsui Coal
OC
UG
OC
OC
OC
OC
OC
OC
Met
Met
Met/Th
Met
Met/Th
Met
Met/Th
Met/PCI
South Walker Creek(16) OC
Met/PCI
Poitrel(17)
OC
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 2020
494
53
769
222
457
159
161
60
87
24
19
106
296
111
54
70
225
25
36
24
513
159
1,065
333
511
229
386
85
123
48
391
41
455
128
294
116
140
53
69
20
9.1
8.1
10.6
11.0
10.5
10.3
8.8
8.1
9.2
7.9
25.2
23.9
21.8
22.3
17.9
16.8
26.5
20.4
13.6
23.0
0.53
0.54
0.58
0.57
0.63
0.70
0.43
0.34
0.29
0.31
14
67
168
68
24
49
191
20
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
22.1
22.4
19.2
16.6
26.2
20.0
13.2
23.3
0.56
0.55
0.69
0.57
0.88
0.70
0.42
0.35
0.29
0.31
405
108
623
196
318
165
331
73
98
39
9.2
9.3
10.6
11.0
10.5
10.3
9.0
8.2
9.2
8.1
25.3
23.5
21.8
22.3
18.0
16.7
26.3
20.2
13.5
23.1
0.53
0.55
0.61
0.57
0.65
0.70
0.42
0.34
0.29
0.31
31
38
27
31
65
25
16
15
8.5
50
50
50
50
50
50
50
80
80
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
BHP
Annual Report 2021
263
23Financial StatementsGovernance1Strategic Report4Additional Information Energy coal
Coal Resources
As at 30 June 2021
Commodity
deposit(1)(2)
Mining
method
Coal
type
Energy coal operations
Australia
Mt Arthur Coal
Colombia
Cerrejón(3)(4)
Energy coal project
Australia
OC
OC
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 2020
Total Resources
BHP
interest
%
792
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
3,380
20.3
30.0
0.62
6,120
100
3,402
20.3
30.0
0.62
6,120
3,016
3.9
34.9
0.52
6,550
1,167
3.9
34.8
0.51
6,570
588
4.8
33.9
0.56
6,360
4,771
4.0
34.8
0.52
6,530
33.33
4,782
4.0
34.8
0.52
6,539
Togara South(5)
UG
Th
–
–
–
–
–
1,420
13.7
29.0
0.31
6,550
201
16.1
28.5
0.32
6,270
1,620
14.0
29.0
0.31
6,510
100
1,947
14.8
28.9
0.31
6,420
Coal Reserves
As at 30 June 2021
Commodity
deposit(1)(6)(7)(8)
Mining
method
Coal
type
Energy coal operations
Australia
Mt Arthur Coal(9)(10)
Colombia
Cerrejón(3)(11)(12)
OC
OC
Th
Th
(1) Cut-off criteria:
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 KCal/kg CV
Mt %Ash %VM
%S KCal/kg CV
Mt
%Ash
%VM
%S KCal/kg CV
(years)
%
Mt
%Ash
%VM
%S KCal/kg CV
152
140
292
104
15.8
30.8
0.51
5,870
106
15.9
30.5 0.48
5,870
211
15.9
30.6
0.50
5,870
100
436
15.3
28.4
0.49
6,050
255
89
344
248
9.6
32.3 0.60
6,200
87
10.6
32.8 0.63
6,240
335
9.9
32.4
0.61
6,210
33.33
319
11.8
32.6
0.61
6,032
Reserve
BHP
life
interest
16
13
As at 30 June 2020
Reserve
life
(years)
20
14
Deposit
Coal Resources
Coal Reserves
Mt Arthur Coal
≥ 0.3m seam thickness and ≤35% raw ash
≥ 0.3m seam thickness, ≤32%ash, ≥40% coal plant yield
Cerrejón
≥ 0.35m seam thickness
≥ 0.35m seam thickness
Togara South
≥ 2.0m seam thickness and ≤25% raw ash
−
(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 – Divestment of Cerrejón is in progress.
(4) Cerrejón – The Coal Resources are restricted to areas which have been identified for inclusion by BHP based on a risk assessment.
(5) Togara South – The decrease in Coal Resources was due to an updated resource estimate including changes in cut-off criteria and resource classification.
(6) Approximate drill hole spacings used to classify the reserves were:
Deposit
Proved Reserves
Probable Reserves
Mt Arthur Coal
200m to 800m (geophysical logged, ≥95% core recovery) 400m to 1,550m (geophysical logged, ≥95% core recovery)
Cerrejón
>6 drill holes per 100ha
2 to 6 drill holes per 100ha
(7) Overall product recoveries for the operations were:
Deposit
Product recovery
Mt Arthur Coal
Cerrejón
74%
97%
(8) Total Coal Reserves were at the moisture content when mined (8.5% Mt Arthur Coal; 12.4% Cerrejón). Total Marketable Reserves were at a product specific moisture content (9.5% Mt Arthur
Coal; 12.9% Cerrejón) and at an as received quality basis for Mt Arthur Coal and at a total moisture quality basis for Cerrejón.
(9) Mt Arthur Coal – Coal is delivered to handling plant.
(10) Mt Arthur Coal – The decrease in Marketable Coal Reserves and reserve life was mainly due to changes in geotechnical parameters, costs and lower commodity prices impacting
mine design.
(11) Cerrejón – The increase in Marketable Coal Reserves was due to changes in mine design and an increase in nominated annual production rate. Coal is beneficiated by exception.
(12) Cerrejón – In response to ongoing local community legal challenges, some permits remain suspended. BHP continues to monitor the situation for potential impact on mining.
264
BHP
Annual Report 2021
Coal Resources
As at 30 June 2021
Commodity
deposit(1)(2)
Mining
method
Coal
type
Energy coal operations
Australia
Mt Arthur Coal
Colombia
Cerrejón(3)(4)
Energy coal project
Australia
OC
OC
Th
Th
Coal Reserves
As at 30 June 2021
Commodity
deposit(1)(6)(7)(8)
Mining
method
Coal
type
Energy coal operations
Australia
Colombia
Cerrejón(3)(11)(12)
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
BHP
interest
%
As at 30 June 2020
Total Resources
Mt
%Ash
%VM
%S KCal/kg CV
792
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
3,380
20.3
30.0
0.62
6,120
100
3,402
20.3
30.0
0.62
6,120
3,016
3.9
34.9
0.52
6,550
1,167
3.9
34.8
0.51
6,570
588
4.8
33.9
0.56
6,360
4,771
4.0
34.8
0.52
6,530
33.33
4,782
4.0
34.8
0.52
6,539
Togara South(5)
UG
Th
–
–
–
–
–
1,420
13.7
29.0
0.31
6,550
201
16.1
28.5
0.32
6,270
1,620
14.0
29.0
0.31
6,510
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
Mt Arthur Coal(9)(10)
OC
152
140
292
104
15.8
30.8
0.51
5,870
106
15.9
30.5 0.48
5,870
211
15.9
30.6
0.50
5,870
OC
255
89
344
248
9.6
32.3 0.60
6,200
87
10.6
32.8 0.63
6,240
335
9.9
32.4
0.61
6,210
Reserve
life
(years)
BHP
interest
%
As at 30 June 2020
Total Marketable Reserves
Mt
%Ash
%VM
%S KCal/kg CV
16
13
100
436
15.3
28.4
0.49
6,050
33.33
319
11.8
32.6
0.61
6,032
Reserve
life
(years)
20
14
BHP
Annual Report 2021
265
23Financial StatementsGovernance1Strategic Report4Additional Information Other assets
Mineral Resources
As at 30 June 2021
Measured Resources
Indicated Resources
Inferred Resources
Total Resources
As at 30 June 2020
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
BHP
interest
%
O
g
M
%
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 × 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 2021
Commodity
deposit(1)(2)
Ore type
Mt
%Ni
Mt
%Ni
Mt
%Ni
Mt
%Ni
Measured
Resources
Indicated
Resources
Inferred
Resources
Total Resources
As at 30 June 2020
BHP
interest
%
Total Resources
Mt
%Ni
Nickel West operations
Leinster(3)
OC Disseminated Sulphide
OC Massive Sulphide
OC
UG Disseminated Sulphide
UG Massive Sulphide
UG
Oxide
SP
SP Oxidised
Mt Keith(4)
OC Disseminated Sulphide
Cliffs(5)
UG Disseminated Sulphide
SP
Disseminated Sulphide
UG Massive Sulphide
Massive Sulphide
Yakabindie(6)
OC Disseminated Sulphide
Venus(7)
UG Disseminated Sulphide
SP
Disseminated Sulphide
UG Massive Sulphide
Massive Sulphide
OC Disseminated Sulphide
UG Disseminated Sulphide
UG Massive Sulphide
OC Disseminated Sulphide
OC Disseminated Sulphide
Nickel West projects
Honeymoon Well(8)
Jericho(8)
West Jordan(8)
Ore Reserves
As at 30 June 2021
Commodity
deposit(1)(9)(10)(11)(12)
Ore type
Nickel West operations
Leinster(13)(14)
OC
Mt Keith(15)
Cliffs(16)
Yakabindie(17)
Venus(18)
UG
SP
OC
SP
UG
OC
SP
UG
266
BHP
Annual Report 2021
4.1
0.25
−
15
0.63
−
−
−
−
133
3.6
−
−
0.79
−
137
2.1
1.2
−
0.11
−
−
9.1
0.35
−
−
0.72
4.4
−
1.9
4.5
−
−
−
−
0.54
0.49
−
−
3.6
−
0.59
0.59
1.5
−
6.0
−
−
0.72
6.0
−
−
77
1.0
−
10
2.4
−
−
1.5
−
67
−
0.58
4.9
−
1.3
4.9
−
−
0.76
−
0.52
−
6.3
0.86
−
1.1
−
107
−
5.4
−
0.70
−
138
18
0.92
−
−
−
3.6
−
0.62
−
1.8
−
6.4
−
0.62
0.75
6.4
−
−
52
0.37
0.64
4.7
−
3.2
1.1
−
5.2
−
1.9
24
−
1.6
−
0.47
−
170
−
1.1
−
0.35
−
6.5
3.8
0.17
31
43
−
1.2
4.1
−
1.8
−
1.7
0.52
−
1.0
−
3.6
−
0.61
−
1.1
−
6.2
−
0.66
0.74
6.6
0.59
0.52
133
1.6
−
28
4.2
−
5.2
1.5
1.9
224
3.6
7.9
−
2.3
−
414
2.1
7.7
−
1.2
−
144
31
1.4
31
43
0.60
100
167
0.53
4.8
−
1.6
4.6
−
1.8
0.76
1.7
0.53
0.49
0.89
−
3.6
−
0.61
0.59
1.7
−
6.3
−
0.62
0.74
6.3
0.59
0.52
100
100
100
100
100
100
100
−
12
−
−
32
5.3
0.89
1.9
224
7.1
−
8.3
−
2.6
425
−
−
8.1
−
1.1
−
−
−
31
−
−
1.1
−
−
2.0
1.8
0.75
1.7
0.53
0.58
−
0.90
−
3.7
0.61
−
−
1.7
−
6.3
−
−
−
0.59
−
Proved
Reserves
Probable
Reserves
Mt
%Ni
Mt
%Ni
1.9
0.63
−
−
65
2.6
0.36
123
1.7
−
−
−
0.57
0.52
2.0
0.54
0.62
−
1.5
5.0
1.5
19
0.99
0.68
49
0.35
8.6
0.63
1.6
0.76
0.55
0.45
1.9
0.59
0.46
1.5
Total Reserves Reserve
life
(years)
%Ni
Mt
As at 30 June 2020
BHP
interest
%
Total Reserves
Mt
%Ni
Reserve
life
(years)
3.4
5.0
1.5
84
3.6
1.0
172
2.1
8.6
0.63
1.6
0.76
0.57
0.49
1.9
0.56
0.59
1.5
9.0
100
15
100
3.0
16
100
100
12
100
5.3
5.1
0.89
84
7.1
1.1
163
−
9.3
0.72
1.6
0.75
0.57
0.58
2.0
0.57
−
1.5
8.0
15
4.0
15
13
(1) Cut-off criteria:
Deposit
Leinster
Ore type
Mineral Resources
Ore Reserves
OC
OC Disseminated
Sulphide
−
≥ 0.40%Ni
Stratigraphic
≥ 0.40%Ni
−
−
OC Massive
Sulphide
UG
UG Disseminated
Sulphide
UG Massive
Sulphide
Oxide
−
≥ 0.90%Ni
Variable between
stratigraphic for block
cave and ≥1.0% Ni
Stratigraphic
≥ 1.2%Ni
−
−
−
−
−
≥ 0.35%Ni and
≥ 0.18% recoverable Ni
–
−
−
≥ 1.2%Ni
−
≥ 0.35%Ni and
≥ 0.18% recoverable Ni
–
−
−
≥ 0.9%Ni
−
−
−
−
−
SP, SP oxidised
−
Mt Keith
OC Disseminated
Sulphide
Variable between
0.35%Ni and 0.40%Ni
OC
SP
−
−
Cliffs
UG Disseminated
Sulphide
≥ 0.40%Ni
UG Massive
Sulphide
UG
Yakabindie
OC Disseminated
Sulphide
Stratigraphic
−
≥ 0.35%Ni
OC
SP
−
–
Venus
UG Disseminated
Sulphide
≥ 0.40%Ni
UG Massive
Sulphide
UG
Honeymoon
Well
OC Disseminated
Sulphide
Stratigraphic
−
≥ 0.35%Ni
UG Disseminated
Sulphide
≥ 0.40%Ni
UG Massive
Sulphide
Stratigraphic
Jericho
OC Disseminated
Sulphide
≥ 0.40%Ni
West Jordan OC Disseminated
≥ 0.40%Ni
Sulphide
(2) All Mineral Resources ore types were changed to include mining method for alignment
with the Ore Reserves ore types.
(3) Leinster – The decrease in OC Disseminated Sulphide and OC Massive Sulphide ore types
was due to an update in the resource estimate. The increase in SP ore type was due to
movement of extracted ore onto stockpiles.
(4) Mt Keith – The decrease in SP ore type was due to depletion.
(5) Cliffs – The decrease in Mineral Resources was mainly due to depletion and an update in
the resource estimate supported by additional drilling.
(6) Yakabindie – First time reporting of SP ore type. Change in Mineral Resources cut-off
criteria aligned to Ore Reserves cut-off criteria.
(7) Venus – The decrease in UG Disseminated Sulphide ore type was due to depletion.
The increase in UG Massive Sulphide ore type was mainly due to an update in the resource
estimate supported by additional drilling.
(8) Change of ownership of Jericho to 100% and first-time reporting of Mineral Resources for
Honeymoon Well and West Jordan deposits following the acquisition of the deposits.
(9) Approximate drill hole spacings used to classify the reserves were:
Deposit
Leinster
Mt Keith
Cliffs
Proved Reserves
Probable Reserves
25m × 25m
40m × 40m
25m × 50m
80m × 80m
25m × 25m (and development)
25m × 25m
Yakabindie
40m × 60m
Venus
25m x 25m
80m × 60m
50m x 50m
(10) Ore delivered to the process plant.
(11) Metallurgical recoveries for the operations were:
OC
Deposit
Leinster
Mt Keith
Cliffs
Yakabindie
Venus
Metallurgical recovery
80%
63%
83%
63%
88%
(12) Predicted metallurgical recoveries for the projects were:
Deposit
Leinster
UG
Metallurgical recovery
88%
(13) Leinster – Ore Reserves includes operations and projects.
(14) Leinster – The decrease in OC ore type was due to depletion. The increase in SP ore type
was due to movement of extracted ore onto stockpiles. The increase in the reserve life
was due to a decrease in the nominated annual production rate. OC and UG ore types
contribute 6 years and 9 years respectively to the reported reserve life.
(15) Mt Keith – The decrease in SP ore type was due to depletion.
(16) Cliffs – The decrease in UG ore type and reserve life was due to depletion partially offset by
an updated resource estimate.
(17) Yakabindie – First time reporting of SP ore type. The increase in the OC ore type and
reserve life was due to changes in processing parameters.
(18) Venus – The decrease in Ore Reserves and reserve life was due to depletion.
BHP
Annual Report 2021
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23Financial StatementsGovernance1Strategic Report4Additional Information 4.7 Major projects
Capital and exploration expenditure of US$7.1 billion in FY2021 was in line with guidance. This included maintenance(1) expenditure of US$2.3 billion
and exploration expenditure of US$514 million.
Capital and exploration expenditure of approximately US$6.7 billion for minerals and US$2.3 billion for petroleum is expected in FY2022. In total, this
is US$0.5 billion higher than previous guidance predominantly due to unfavourable impacts of a stronger Australian dollar. Guidance is subject to
exchange rate movements.
This guidance includes a US$800 million exploration program in FY2022, with approximately US$260 million for our minerals exploration program
and approximately US$540 million for our petroleum exploration and appraisal program.
In August 2021, the BHP Board approved two major projects:
– an investment of US$5.7 billion (C$7.5 billion) for the Jansen Stage 1 Potash Project in the province of Saskatchewan, Canada; and
– an investment of US$544 million for the Shenzi North development in the US Gulf of Mexico, following the successful acquisition of an additional
28 per cent working interest in Shenzi in November 2020. The capital expenditure approved represents a 100 per cent share interest. BHP is operator
and holds a 72 per cent share in Shenzi North. Repsol holds the remaining 28 per cent working interest and is expected to make a Final Investment
Decision later this calendar year
At the end of the 2021 financial year, BHP had two major projects under development, which were Mad Dog Phase 2 in petroleum and Jansen mine
shafts in potash. Both of these projects are tracking to plan.
Projects in execution at the end of FY2021
Commodity
Project and ownership
Project scope/capacity(2)
Projects achieved first production during the 2021 financial year
Petroleum
Atlantis Phase 3
(US Gulf of Mexico)
44% (non-operator)
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. First production achieved in
July 2020, ahead of schedule and on budget.
Copper
Spence Growth Option
(Chile)
Iron Ore
Petroleum
South Flank (Australia)
85% (operator)
Ruby
(Trinidad and Tobago)
68.46% (operator)
Projects in execution at 30 June 2021
Petroleum
Mad Dog Phase 2 (US Gulf of
Mexico) 23.9% (non-operator)
Other projects in progress at 30 June 2021
Potash(3)
Jansen Potash Project
(Canada) 100%
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. First production achieved in December
2020, on schedule and on budget.
Sustaining iron ore mine to replace production
from the 80 Mtpa (100 per cent basis) Yandi
Mine. First production achieved in May 2021,
on schedule and on budget.
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. First production achieved in May
2021, ahead of schedule and on budget.
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. The
overall project is 93% complete.
Investment to finish the excavation and lining of
the production and service shafts, and continue
the installation of essential surface infrastructure
and utilities.
Date of initial
production
Target
Capital expenditure
(US$M)(1)
Budget
CY2020
696
FY2021
2,460
CY2021
3,061
CY2021
283
CY2022
2,154
2,972
(1) Maintenance capital includes non-discretionary spend for the following purposes: deferred development and production stripping; risk reduction, compliance and asset integrity.
(2) 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.
(3) Capital expenditure of approximately US$100 million (related to the above scope) is expected for FY2022.
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4.8 Sustainability – performance data
Definition and calculation of sustainability performance metrics
We use sustainability performance metrics (SPMs) to assess progress against our sustainability commitments and targets. These metrics are commonly
used by many of our stakeholders and most are industry standard.
Management also uses the SPMs to evaluate our sustainability performance against the positive and negative impacts of our operational activities.
We align our SPMs with credible international standards, such as the Global Reporting Initiative (GRI) sustainability reporting standards, to ensure our
performance is relevant and assessed against a range of reporting.
The SPMs listed in the tables below relate to each SPM for the year ended 30 June 2021. We have obtained external limited assurance over our disclosures
in this section as well as in section 1.12 People and culture and 1.13 Sustainability. A copy of the EY assurance statement is available in section 1.13.16.
A definition and explanation that outlines why we believe the SPMs are useful to the Board, management, investors and other stakeholders, and the
methodology behind our most material SPMs is provided in our methodology tables disclosed in our online ESG Standards and Databook.
4.8.1 People – performance data FY2021(1)(2)
Workforce data and diversity by region for FY2021
Region
Asia
Australia
Europe
North America
South America
Total
Employees by gender number and %
Average number and %
of employees
Male
Male %
Female
Female %
Average number and %
of contractors(2)
1,907
23,828
54
1,299
7,390
34,478
5.5
69.1
0.2
3.8
21.4
100.0
735
17,530
25
840
5,674
24,804
38.5
73.6
46.3
64.7
76.8
71.9
1,172
6,298
29
459
1,716
9,674
61.5
26.4
53.7
35.3
23.2
28.1
2,474
21,467
8
1,333
16,630
41,912
5.9
51.2
<0.1
3.2
39.7
100.0
Average no.
hours (EE)
absenteeism
rate(3)
27.4
88.5
3.0
31.6
59.3
77.7
Employees by category and diversity for FY2021
Gender %
Age group %
Ratio male to female
Category
Total %
Male %
Female %
Under 30
30–39
40–49
Senior leaders
Managers
Supervisory and professional
Operators and general support
0.7
3.3
40.0
56.0
72.1
70.1
67.3
76.4
27.9
29.9
32.7
23.6
0.0
0.4
10.2
17.3
12.0
28.2
40.9
30.3
53.9
45.5
30.9
27.1
Average
basic salary
US$
Average total
remuneration
US$
1.08
1.05
1.14
1.28
1.13
1.08
1.17
1.33
50+
34.1
25.9
18.0
25.3
Employment category
Full time
Part time
Fixed term full time
Fixed term part time
Casual
Turnover and new hires for FY2021
Gender %
Region %
Total %
Male %
Female %
Asia
Australia
Europe
94.7
2.8
2.4
0.1
<0.1
73.5
53.8
57.7
31.3
50
26.5
46.2
42.3
68.7
50
5.1
0.2
4.7
3.1
0
71.4
98.5
71.6
96.9
100
0.1
0.5
<0.1
0
0
North
America
South
America
3.6
0.8
0.2
0
0
19.8
0
23.5
0
0
Gender
Age group
Region
Total
Male
Female
Under 30
30–39
40–49
Over 50
Asia Australia
Europe
North
America
South
America
Employee new hires
5,813
15.22%
3,225
24.64%
2,588
11.64%
1,860
35.41%
2,029
15.46%
1,217
10.82%
707
8.24%
194
10.17%
4,979
18.07%
5
9.26%
76
5.85%
559
7.56%
Gender
Age group
Region
Employee turnover
Total
4,264
11.16%
Male
Female
Under 30
30–39
40–49
Over 50
Asia Australia
Europe
North
America
South
America
2,988
10.79%
1,276
12.15%
768
1,355
14.62%
10.32%
1,054
9.37%
1,087
12.67%
254
3,118
6
118
768
13.32%
11.32%
11.11%
9.08%
10.39%
Employee remuneration for FY2021
Region
Asia
Australia
Europe
North America
South America
Total
Ratio male to female
Ratio highest to median(4)
Average basic
salary US$
Average total
remuneration US$
Salary increase
percentage
Total
remuneration
1.65
1.12
1.40
1.17
0.86
1.12
1.75
1.14
1.49
1.19
0.96
1.14
0:1
0:1
0:1
88:1
53:1
4:1
13:1
77:1
Ratio standard entry level wage
to local minimum wage(5)
Male
4:1
3:1
4:1
Female
4:1
2:1
4:1
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23Financial StatementsGovernance1Strategic Report4Additional Information 4.8 Sustainability – performance data continued
Employee parental leave for FY2021(7)
Employee parental leave for FY2020(7)
Number of employees
Number of employees
Percentage
By gender
Female
Male
Total
Parental
leave
Due to
return
Return to
work
Return
rate % By gender
Parental
leave
Due to
return
Return to
work
830
717
1,547
384
489
873
352
473
825
92 Female
97 Male
95 Total
731
570
1,301
361
411
772
334
405
739
Returned
and
Retained
309
378
687
Return
rate %
Retention
rate %
93
99
96
93
93
93
Employee regular performance discussion records for FY2021(8)
Region
Asia
Australia
Europe
North America
South America
Total
Male %
Female %
Overall % Category
Male %
Female %
Overall %
91.3
92.5
96.2
84.3
95.6
92.4
92.6
91.6
92.9
91.5
93.9
92.0
92.1 Senior leaders
92.2 Managers
94.4 Supervisory and professional
86.9 Operators and general support
95.0 Total
92.2
90.8
93.1
94.3
90.2
92.4
90.6
93.5
94.5
88.6
92
90.7
93.3
94.4
89.7
92.2
Active employee workforce globally on collective bargaining agreements(9)
Region
Asia
Australia
Europe
North America
South America
Total
Employee training for FY2021(6)
Category
Senior leaders
Managers
Supervisory and professional
Operators and general support
Total
Collective
agreements %
Non-collective
agreements %
0
49
0
0
80
51
100
51
100
100
20
49
Average number of hours
Male
Female
Total
8
14
23
32
28
9
12
19
114
64
8
14
21
51
38
(1) Proportional data in the 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, injury on duty, short-term disability, unauthorised absence, industrial action, union absence, leave without pay, unpaid absence and
workers’ compensation.
(4) The salary increase ratio represents the percentage increase in annual total compensation for the highest-paid individual to the median percentage increase in annual total compensation for
all employees (excluding the highest-paid individual) in the same location for each significant region. Salary increases do not include promotional increases. Contractors are excluded from
the remuneration data.
Individuals classified as entry level are those in operations and general support roles and have been with the company for less than one year. Minimum wage is determined for all locations
with the exception of Singapore and Switzerland as they do not have a minimum wage mandated by their respective governments and therefore have been excluded from the calculation.
Contractors are excluded from the remuneration data.
(5)
(6) 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. This data includes the training provided to apprentices and trainees as part of the FutureFit
Academy in Australia during FY2021, which totals more than 500,000 hours (on average over 1,100 hours per employee).
(7) 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. Retention rate for employees that returned from Parental leave in FY2020 calculated as at least 12 months from date of return.
(8) Data reflects the number of employees as at 30 June 2021 that have at least one performance review record in our core HR system for performance review records. Performance review
records for some employees at operations in Chile and Australia are not recorded in the core HR system and not captured in this data.
(9) Data at 30 April 2021, no major fluctuation in workforce throughout the year.
270
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Annual Report 2021
4.8.2 Health and Safety – performance data FY2021
Regional summary for FY2021(1)
Per 1,000,000 hours worked
Asia
Australia
Europe
North America
South America
Total
Employee
fatalities
Contractor
fatalities
Employee
TRIF
Contractor
TRIF
Employee
occupational
illness
incidence(2)
Contractor
occupational
illness
incidence(2)
Employee
high potential
injury
frequency(3)
Contractor
high potential
injury
frequency(3)
0
0
0
0
0
0
0
0
0
0
0
0
0.0
4.5
0.0
0.0
0.9
3.3
0.0
5.4
0.0
1.8
2.0
4.0
0.0
5.1
0.0
1.4
3.6
4.4
0.0
2.5
0.0
0.4
1.0
1.9
0.0
0.1
0.0
0.0
0.2
0.1
0.0
0.3
0.0
0.4
0.2
0.3
(1) Due to the lag nature of incident reporting and subsequent verification, final results may vary post reporting.
(2) Occupational illnesses excludes COVID-19 related data.
(3) High potential injuries (HPI) are recordable injuries and first aid cases where there was the potential for a fatality.
Injury rates for FY2021(1)
SASB basis – per 200,000 hours worked
Total recordable injury frequency
High potential injury events frequency(3)
High consequence injury events frequency
Number of recordable work-related injuries
Number of high consequence work-related injuries
Number of hours worked
(1) Due to the lag nature of incident reporting and subsequent verification, final results may vary post reporting.
(2) Occupational illnesses excludes COVID-19 related data.
(3) High potential injuries (HPI) are recordable injuries and first aid cases where there was the potential for a fatality
Average hours of health, safety and emergency response training
Type
Employee
Average number of hours
11.45
Per 200,000 hours worked
Per 200,000 hours worked
Per 200,000 hours worked
Employees Contractors
0.67
0.02
0.07
235
25
0.80
0.05
0.04
385
19
70,648,290 96,323,097
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. The training relates to the health, safety, or emergency preparedness of employees with respect
to occupational risks or hazards to which employees are reasonably likely to be exposed as assessed by BHP. This includes training related to general health and safety behavioral expectations
covered in Our Code of Conduct, inductions and general leadership courses.
Significant fines for non-compliance with health, safety and environmental laws and/or regulations
Australia
Europe
North America
South America
Number of fines
Total monetary value of fines (US$)
Environmental(1]
Health
Safety
Other(2)
Environmental(1]
Health
Safety
Other(2)
3
0
0
1
0
0
0
6
0
0
0
0
0
0
0
1
30,933
0
0
0
0
0
4,593
48,494
0
0
0
0
0
0
0
342
(1) Does not include the dam failure at Samarco, our non-operated minerals joint venture.
(2)
Includes a fine at Escondida relating to a building permit under general construction and town planning laws (US$340).
BHP
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23Financial StatementsGovernance1Strategic Report4Additional Information 4.8 Sustainability – performance data continued
4.8.3 Society – performance data FY2021
Community complaints
Blasting
Conduct/behaviour
Cultural heritage
Dust
Infrastructure damage
Lighting
Noise
Odour
Other
Road/rail
Spill or contamination
Water
Total
Indigenous peoples territories(1)
Country
Australia
Canada
Chile
Mexico
Trinidad and Tobago
USA
(1) The term Operations includes proved and probable reserves.
9
7
1
6
4
14
20
22
11
4
1
4
103
Operations located
in or adjacent
to Indigenous
peoples’ territories
Operations with a
formal agreement
with Indigenous
peoples
24
6
2
0
0
5
13
1
2
0
0
0
272
BHP
Annual Report 2021
4.8.4 Environment – performance data(1)
Land(2)
Land owned, leased or managed
– Land disturbed
– Land rehabilitated(3)
– Land set aside for conservation(3)(4)
Water(5)(8)
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 – Sea water
Water withdrawals by source – Third-party water(6)
Total water withdrawals (water stress areas)(9)
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 – Sea water
Water discharges by destination – Third-party
Total water discharges (water stress areas)
Consumption
Consumption – evaporation
Consumption – entrainment
Consumption – other
Total consumption (water stress areas)
Recycled/reused
Diversions
Diversions – withdrawals
Diversions – discharges
Waste
Hazardous waste – Mineral total (including tailings)(10)
Non-hazardous waste – Mineral tailings(10)
Accidental discharges of water and tailings(11)(12)
Air emissions for FY2021(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
ML
ML
ML
ML
kilotonnes
kilotonnes
megalitres
2021
2020
2019
8,661,679 8,704,300
10,018,600
175,168
27,377
66,822
151,000
26,050
66,500
438,660 380,330
51,610
54,310
36,970
35,670
347,390
293,060
30,350
100,700
284,700
22,910
233,190
203,450
0
2,390
201,060
2,450
9,670
45,190
123,660
211,510
147,850
0
3,740
144,110
3,970
9,440
190,660
134,120
660
123,200
267,130
141,430
310
259,070
127,080
107,270
109,550
18,450
22,440
106,950
144,413
25,649
66,500
352,950
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
271,680
143,040
107,270
21,370
262,430
250,090
246,420
103,220
103,750
68,910
79,430
20,420
15,000
178,000
175,000
0
0
122,670
72,500
13,500
167,000
0
Petroleum
Legacy
sites
BMA
BMC NSWEC
WAIO
Olympic
Dam
Nickel
West Escondida
Pampa
Norte
Potash
Total oxides of sulphur
Total oxides of nitrogen
Total mercury
tonnes
tonnes
tonnes
26
3,809
0
0
8
0
13
2
3
19
24,541
3,554
5,648
22,143
0
0
0
0
1,145
2,125
0
16,605
3,422
0
26
83
10,594
3,803
0
0
1
59
0
(1) 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 a result of external assurance
outcomes and ongoing improvements in data quality.
(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 10 megalitres to be consistent with asset/regional water information in this Annual 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 assets, divested in FY2019).
(6) Third-party water withdrawals have been reported as a distinct category in FY2021 to align with external reporting frameworks (e.g. GRI/SASB). These volumes were included under the
originating source in prior years.
(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.
(9) Based on the physical risk rating from the WWF Water Risk filter and the definition of water stress in the CEO Water Mandate’s ‘Corporate Water Disclosure Guidelines (2014)’.
(10) For tailings related minerals waste these figures represent the total deposited in the reporting year.
(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 Emission Factors and represent emissions over CY2021 for all assets except Olympic Dam and US Petroleum, which report emissions for FY2021.
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23Financial StatementsGovernance1Strategic Report4Additional Information
4.8 Sustainability – performance data continued
Operated assets owned, leased or managed in, or adjacent to protected areas, or areas of high biodiversity value outside protected areas,
as at 30 June 2021.
Designated Protected Area (DPAs) and areas of high biodiversity value (HBVA) were identified using the Integrated Biodiversity Assessment Tool
(IBA) accessed via Proteus Partners in June 2021. Analysis was undertaken utilising ArcGIS by identifying all tenure that overlaps with or occurs within
500 metres of a DPA or HBVA. For the purposes of this table, operated assets were defined as sites for which current, future or historic activities have
been undertaken and where revenue has been received by BHP for these activities. Exploration activities are not included unless future operations
have been announced, i.e. permits have been received from mining operations. DPAs and HBVAs are only included if they are listed on IBAT.
Country/
Region
Australia
Queensland
Queensland
Queensland
Queensland
Queensland
Queensland
South Australia
Commodity
Operated
asset
Operated asset
size (km2)
Type of operated
asset
Biodiversity
area classification
Habitat
type
Area
name
Position of owned,
leased or managed land
DPA
type
designation
IUCN
relative to DPA or HBVA For DPA – Basis of recognition
category
For HBVA – Basis of recognition
Coal
Coal
Coal
BMA
BMA
BMA
Coal
Coal
Coal
Copper, uranium, gold, silver Olympic Dam
BMA
BMA
BMC
1,263
1,263
890
1,263
890
349
21,889
Extractive
Extractive
Manufacturing/production
Extractive
Manufacturing/production
Extractive
Manufacturing/production
DPA
DPA
DPA
DPA
DPA
DPA
HBVA
Maritime
Terrestrial
Terrestrial
Terrestrial
Terrestrial
Terrestrial
Terrestrial
Great Barrier Reef World Heritage Area
Contains portions
World Heritage Area
International NA
of
Adjacent to
Nature Refuge
Contains portions of
Nature
Refuge
Adjacent to
Adjacent to
Adjacent to
Adjacent to
Conservation Park
National Park (scientific)
National Park
South Australia
Copper, uranium, gold, silver Olympic Dam
21,889
Manufacturing/production
HBVA
Terrestrial
Strezelecki Desert Lakes
Contains portions of
South Australia
South Australia
South Australia
South Australia
South Australia
South Australia
South Australia
South Australia
South Australia
South Australia
South Australia
Western Australia
Western Australia
Western Australia
Western Australia
Western Australia
Western Australia
Western Australia
Western Australia
Western Australia
Copper, uranium, gold, silver Olympic Dam
Copper, uranium, gold, silver Olympic Dam
Copper, uranium, gold, silver Olympic Dam
Copper, uranium, gold, silver Olympic Dam
Copper, uranium, gold, silver Olympic Dam
Copper, uranium, gold, silver Olympic Dam
Copper, uranium, gold, silver Olympic Dam
Copper, uranium, gold, silver Olympic Dam
Copper, uranium, gold, silver Olympic Dam
Copper, uranium, gold, silver Olympic Dam
Copper, uranium, gold, silver Olympic Dam
Nickel
Nickel
Nickel
Nickel
Nickel
Nickel
Nickel
Iron ore
Iron ore
Nickel West
Nickel West
Nickel West
Nickel West
Nickel West
Nickel West
Nickel West
WAIO
WAIO
Manufacturing/production
Manufacturing/production
Manufacturing/production
Manufacturing/production
Manufacturing/production
Manufacturing/production
Manufacturing/production
Manufacturing/production
Manufacturing/production
Manufacturing/production
Manufacturing/production
Manufacturing/production
Extractive
Manufacturing/production
Manufacturing/production
Manufacturing/production
Manufacturing/production
Manufacturing/production
Extractive
Extractive
HBVA
HBVA
DPA
DPA
DPA
DPA
DPA
DPA
DPA
DPA
DPA
DPA
DPA
DPA
DPA
DPA
DPA
DPA
DPA
HBVA
Terrestrial
Terrestrial
Terrestrial
Terrestrial
Terrestrial
Terrestrial
Terrestrial
Terrestrial
Freshwater
Terrestrial
Terrestrial
Terrestrial
Terrestrial
Terrestrial
Terrestrial
Terrestrial
Terrestrial
Terrestrial
Terrestrial
Freshwater
Manufacturing/production
HBVA
Freshwater
Fortescue Marshes
21,889
21,889
21,889
21,889
21,889
21,889
21,889
21,889
21,889
21,889
21,889
5,427
701
5,427
5,427
5,427
5,427
5,427
3,667
3,667
8,295
7
558
558
240
66
WAIO
Beenup
Pyrenees
Pyrenees
Stybarrow
Minerva
Extractive
Manufacturing/production
Manufacturing/production
Manufacturing/production
Manufacturing/production
DPA
DPA
DPA
DPA
DPA
DPA
DPA
DPA
Terrestrial
Maritime
Maritime
Maritime
Terrestrial
Terrestrial
Terrestrial
Terrestrial
Jansen
East Kemptville
56
11
East Kemptville
11
Extractive
Extractive
Extractive
Witchelina Nature Reserve
Adjacent to
Heritage Agreement
Contains portions of
National Park
Adjacent to
Contains portions of
Kati Thanda-Lake Eyre
Wabma Kadarbu Mound Springs
Coongie Lakes
Contains portions of
Ramsar Site, Wetland of
International Not reported
IBA – migratory
birds/congregations
IBA – endemic, migratory birds/
congregations, other
IBA – migratory birds/congregations
IBA – migratory birds/congregations
Norwich Park
Norwich Park
Blackwater
Kenmare
Dipperu
Lake Eyre
Lake Torrens
Arcoona Lakes
Lake Torrens
Strezelecki
Elliot Price
Unnamed (No.HA1545)
Unnamed (No.HA1022)
Wanjarri
Wanjarri
Kambalda
Ngadju
Dordie Rocks
Leda
Karijini
Unnamed WA51658
Scott
Ningaloo
Ningaloo Coast
Gascoyne
Port Campbell
National
National
National
National
National
National
National
National
National
National
National
National
National
National
National
National
National
National
National
National
National
National
National
National
National
VI
VI
III
VI
Ia
Ia
VI
VI
Ia
VI
III
III
III
Ia
Ia
Ia
VI
II
Ia
II
II
II
IV
II
II
IV
Ib
Regional Reserve
Conservation Park
National Park
Conservation Park
International Importance
Heritage Agreement
Heritage Agreement
Nature Reserve
Nature Reserve
Nature Reserve
5(1)(h) Reserve
National Park
Contains portions of
Nature Reserve
Adjacent to
Nature Reserve
Contains portions of
Indigenous Protected Area
Adjacent to
Adjacent to
Adjacent to
Adjacent to
In the Area
Adjacent to
Adjacent to
Adjacent to
Adjacent to
Adjacent to
Adjacent to
Adjacent to
Adjacent to
Adjacent to
Adjacent to
National Park
Australian Marine Park
mixed)
World Heritage Site (natural or
International N/A
Adjacent to
Australian Marine Park
Contains portions of National Park
Private Conservation Lands
Tobeatic Wilderness
Adjacent to
Adjacent to
Private Conservation Lands
N/A
Wilderness Area
National
South West Nova
Adjacent to
UNESCO-MAB Biosphere
International N/A
Reserve
Fortescue Marshes
Contains portions of
IBA – CR/EN, VU, migratory birds/
congregations, others
IBA – CR/EN, VU, migratory birds/
congregations, others
San Manuel
115
Extractive
HBVA
Terrestrial
Lower San Pedro River
Contains portions of
IBA – other
624
Spence
624
Spence
624
Spence
Cerro Colorado 326
1,572
Escondida
1,572
Escondida
Extractive
Extractive
Extractive
Extractive
Extractive
Extractive
HBVA
DPA
HBVA
HBVA
DPA
HBVA
Terrestrial
Terrestrial
Terrestrial
Terrestrial
Terrestrial
Terrestrial
Reserva Nacional Los Flamencos-Soncor Adjacent to
IBA – VU, migratory birds/congregations
Adjacent to
National Reserve
National
IV
Los Flamencos
Bahía de Mejillones
Llullaillaco
Bahía de Mejillones
Parque Nacional Salar del Huasco
Contains portions of
Contains portions of
Contains portions of
Contains portions of National Park
National
II
IBA – CR/EN, migratory birds/congregations
IBA – VU, migratory birds/congregations
IBA – CR/EN, migratory birds/congregations
Western Australia
Iron ore
Western Australia
Western Australia
Western Australia
Western Australia
Victoria
Canada
Saskatchewan
Nova Scotia
Nova Scotia
United States
Arizona
Chile
Antofagasta
Antofagasta
Antofagasta
Antofagasta
Antofagasta
Antofagasta
Titanium
Oil and gas
Oil and gas
Oil and gas
Oil and gas
Potash
Legacy assets/closed
sites/R&CM
Legacy assets/closed
sites/R&CM
Legacy assets/closed
sites/R&CM
Copper
Copper
Copper
Copper
Copper
Copper
274
BHP
Annual Report 2021
Commodity
Operated
asset
Operated asset
Type of operated
size (km2)
asset
Biodiversity
Habitat
area classification
type
Area
name
Position of owned,
leased or managed land
relative to DPA or HBVA For DPA – Basis of recognition
DPA
designation
type
IUCN
category
For HBVA – Basis of recognition
South Australia
Copper, uranium, gold, silver Olympic Dam
21,889
Manufacturing/production
HBVA
Terrestrial
Strezelecki Desert Lakes
Contains portions of
Great Barrier Reef World Heritage Area
Norwich Park
Norwich Park
Blackwater
Kenmare
Dipperu
Lake Eyre
Contains portions
of
Adjacent to
Contains portions of
Adjacent to
Adjacent to
Adjacent to
Adjacent to
World Heritage Area
International NA
Nature Refuge
Nature
Refuge
Conservation Park
National Park (scientific)
National Park
National
National
National
National
National
VI
VI
III
VI
Ia
Operated assets owned, leased or managed in, or adjacent to protected areas, or areas of high biodiversity value outside protected areas,
as at 30 June 2021.
Designated Protected Area (DPAs) and areas of high biodiversity value (HBVA) were identified using the Integrated Biodiversity Assessment Tool
(IBA) accessed via Proteus Partners in June 2021. Analysis was undertaken utilising ArcGIS by identifying all tenure that overlaps with or occurs within
500 metres of a DPA or HBVA. For the purposes of this table, operated assets were defined as sites for which current, future or historic activities have
been undertaken and where revenue has been received by BHP for these activities. Exploration activities are not included unless future operations
have been announced, i.e. permits have been received from mining operations. DPAs and HBVAs are only included if they are listed on IBAT.
Country/
Region
Australia
Queensland
Queensland
Queensland
Queensland
Queensland
Queensland
South Australia
South Australia
South Australia
South Australia
South Australia
South Australia
South Australia
South Australia
South Australia
South Australia
South Australia
South Australia
Western Australia
Western Australia
Western Australia
Western Australia
Western Australia
Western Australia
Western Australia
Western Australia
Western Australia
Western Australia
Western Australia
Western Australia
Western Australia
Western Australia
Victoria
Canada
Saskatchewan
Nova Scotia
United States
Arizona
Chile
Antofagasta
Antofagasta
Antofagasta
Antofagasta
Antofagasta
Antofagasta
Copper, uranium, gold, silver Olympic Dam
21,889
Manufacturing/production
HBVA
Coal
Coal
Coal
Coal
Coal
Coal
BMA
BMA
BMA
BMA
BMA
BMC
Copper, uranium, gold, silver Olympic Dam
Copper, uranium, gold, silver Olympic Dam
Copper, uranium, gold, silver Olympic Dam
Copper, uranium, gold, silver Olympic Dam
Copper, uranium, gold, silver Olympic Dam
Copper, uranium, gold, silver Olympic Dam
Copper, uranium, gold, silver Olympic Dam
Copper, uranium, gold, silver Olympic Dam
Copper, uranium, gold, silver Olympic Dam
Copper, uranium, gold, silver Olympic Dam
Copper, uranium, gold, silver Olympic Dam
1,263
1,263
890
1,263
890
349
21,889
21,889
21,889
21,889
21,889
21,889
21,889
21,889
21,889
21,889
21,889
5,427
701
5,427
5,427
5,427
5,427
5,427
3,667
3,667
8,295
7
558
558
240
66
56
11
Nickel West
Nickel West
Nickel West
Nickel West
Nickel West
Nickel West
Nickel West
WAIO
WAIO
WAIO
Beenup
Pyrenees
Pyrenees
Stybarrow
Minerva
Jansen
Spence
Spence
Spence
Escondida
Escondida
624
624
624
1,572
1,572
Cerro Colorado 326
Extractive
Extractive
Extractive
Extractive
Manufacturing/production
Manufacturing/production
Manufacturing/production
Manufacturing/production
Manufacturing/production
Manufacturing/production
Manufacturing/production
Manufacturing/production
Manufacturing/production
Manufacturing/production
Manufacturing/production
Manufacturing/production
Manufacturing/production
Manufacturing/production
Extractive
Manufacturing/production
Manufacturing/production
Manufacturing/production
Manufacturing/production
Manufacturing/production
Extractive
Extractive
Extractive
Manufacturing/production
Manufacturing/production
Manufacturing/production
Manufacturing/production
Extractive
Extractive
Extractive
Extractive
Extractive
Extractive
Extractive
Extractive
Extractive
HBVA
HBVA
DPA
DPA
DPA
DPA
DPA
DPA
DPA
DPA
DPA
DPA
DPA
DPA
DPA
DPA
DPA
DPA
DPA
DPA
DPA
DPA
DPA
DPA
DPA
DPA
DPA
DPA
DPA
DPA
DPA
DPA
DPA
HBVA
DPA
HBVA
HBVA
DPA
HBVA
Maritime
Terrestrial
Terrestrial
Terrestrial
Terrestrial
Terrestrial
Terrestrial
Terrestrial
Terrestrial
Terrestrial
Terrestrial
Terrestrial
Terrestrial
Terrestrial
Terrestrial
Freshwater
Terrestrial
Terrestrial
Terrestrial
Terrestrial
Terrestrial
Terrestrial
Terrestrial
Terrestrial
Terrestrial
Terrestrial
Terrestrial
Maritime
Maritime
Maritime
Terrestrial
Terrestrial
Terrestrial
Terrestrial
Terrestrial
Terrestrial
Terrestrial
Terrestrial
Terrestrial
Terrestrial
HBVA
Freshwater
Nickel
Nickel
Nickel
Nickel
Nickel
Nickel
Nickel
Iron ore
Iron ore
Iron ore
Titanium
Oil and gas
Oil and gas
Oil and gas
Oil and gas
Potash
sites/R&CM
sites/R&CM
sites/R&CM
Copper
Copper
Copper
Copper
Copper
Copper
Lake Torrens
Arcoona Lakes
Witchelina Nature Reserve
Lake Torrens
Strezelecki
Elliot Price
Kati Thanda-Lake Eyre
Wabma Kadarbu Mound Springs
Coongie Lakes
Unnamed (No.HA1545)
Unnamed (No.HA1022)
Wanjarri
Wanjarri
Kambalda
Ngadju
Dordie Rocks
Leda
Unnamed WA51658
Karijini
Fortescue Marshes
Manufacturing/production
HBVA
Freshwater
Fortescue Marshes
Scott
Ningaloo
Ningaloo Coast
Gascoyne
Port Campbell
Legacy assets/closed
East Kemptville
Nova Scotia
Legacy assets/closed
East Kemptville
11
Private Conservation Lands
Tobeatic Wilderness
South West Nova
Adjacent to
Adjacent to
Adjacent to
Heritage Agreement
National Park
Regional Reserve
Conservation Park
National Park
Conservation Park
Ramsar Site, Wetland of
International Importance
Heritage Agreement
Heritage Agreement
Nature Reserve
Nature Reserve
Nature Reserve
Indigenous Protected Area
Nature Reserve
Nature Reserve
5(1)(h) Reserve
National Park
Adjacent to
Contains portions of
Adjacent to
Contains portions of
Adjacent to
Adjacent to
Adjacent to
Adjacent to
Contains portions of
In the Area
Adjacent to
Adjacent to
Contains portions of
Adjacent to
Contains portions of
Adjacent to
Adjacent to
Adjacent to
Adjacent to
Contains portions of
Adjacent to
Adjacent to
Adjacent to
Adjacent to
IBA – migratory
birds/congregations
IBA – endemic, migratory birds/
congregations, other
IBA – migratory birds/congregations
IBA – migratory birds/congregations
IBA – CR/EN, VU, migratory birds/
congregations, others
IBA – CR/EN, VU, migratory birds/
congregations, others
National
National
National
National
National
National
International Not reported
Ia
VI
VI
Ia
VI
III
National
National
National
National
National
National
National
National
National
National
III
III
Ia
Ia
Ia
VI
II
Ia
II
II
National
National
International N/A
II
IV
National Park
Australian Marine Park
World Heritage Site (natural or
mixed)
Australian Marine Park
Adjacent to
Contains portions of National Park
National
National
II
II
IV
Ib
Private Conservation Lands
Wilderness Area
N/A
National
UNESCO-MAB Biosphere
Reserve
International N/A
Legacy assets/closed
San Manuel
115
Extractive
HBVA
Terrestrial
Lower San Pedro River
Contains portions of
IBA – other
Reserva Nacional Los Flamencos-Soncor Adjacent to
Adjacent to
Los Flamencos
Contains portions of
Bahía de Mejillones
Contains portions of
Parque Nacional Salar del Huasco
Contains portions of National Park
Llullaillaco
Contains portions of
Bahía de Mejillones
National Reserve
National
IV
National
II
IBA – VU, migratory birds/congregations
IBA – CR/EN, migratory birds/congregations
IBA – VU, migratory birds/congregations
IBA – CR/EN, migratory birds/congregations
BHP
Annual Report 2021
275
23Financial StatementsGovernance1Strategic Report4Additional Information
4.8 Sustainability – performance data continued
Total number of International Union for Conservation of Nature (IUCN) Red List species and national conservation list species with habitats
in areas affected by the operated assets of BHP as at 30 June 2021
Species distributions for IUCN, listed species were downloaded from the Integrated Biodiversity Assessment Tool (IBAT), accessed via Proteus Partners,
in June 2021. 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 associated with exploration have been undertaken in the previous 12 months. Lists of species protected under national
legislation 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. Where information or in-house expertise was available, 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 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 2021 and is subject to change as more information is obtained about species ranges, habitats and impacts from operated assets.
In FY2021, 0.074 km2 of disturbance was associated with exploration activities in Chile, Ecuador, Peru and USA. As per BHP’s Our Requirements
for Environment and Climate Change standard baseline biodiversity studies were undertaken prior to exploration activities to identify key species
and habitats. The mitigation hierarchy was implemented to avoid, minimise and rehabilitate impacts from the activities. Due to the small amount of
disturbance over a short time period, species potentially impacted by these activities are not included.
Location
Operated asset
Commodity
IUCN listed species
National listed species
Critically
endangered Endangered Vulnerable
Near
threatened
Least
concern
Critically
endangered Endangered Vulnerable
Australia
West Australia
West Australia
West Australia
WAIO
Nickel West
Beenup
(closed site)
South Australia
Olympic Dam
West Australia,
Victoria
Australian
Production Unit
Iron ore
Nickel
Titanium
Copper,
uranium,
gold, silver
Oil and gas
Queensland
Queensland
BMC
BMA
New South Wales NSWEC
Coal
Coal
Coal
Canada
Saskatchewan
British Columbia,
Nova Scotia,
Ontario, Quebec
United States
Arizona, California,
New Mexico, Utah
Gulf of Mexico
Central America
Trinidad and
Tobago
Mexico
Chile
Antofagasta
Antofagasta
Jansen
Potash
Legacy assets
Various
Legacy assets
Various
Gulf of Mexico
Production Unit
Oil and gas
Trinidad
Production Unit
Oil and gas
Trion
Oil and gas
Escondida
Pampa Norte
Copper
Copper
3
0
1
1
19
0
8
4
0
6
5
13
28
4
3
4
7
6
4
11
70
3
29
4
1
12
18
23
43
14
17
21
9
9
4
13
185
7
146
22
7
33
29
52
72
11
26
25
13
16
14
26
181
20
174
27
8
47
26
48
487
390
283
550
3,149
607
2,419
653
327
870
1,132
1,853
48
2,216
6
31
31
487
488
502
4
0
4
6
7
3
5
6
0
0
0
0
1
0
8
7
7
3
12
10
23
7
20
8
2
5
8
8
1
14
9
12
8
1
8
15
59
15
36
24
7
26
8
13
4
0
28
31
276
BHP
Annual Report 2021
Areas of habitat protected or restored by the operated assets of BHP as at 30 June 2021
Areas were determined using BHP’s internal GIS databases. Definitions align with those provided by GRI 304-3.
Location
Australia
West Australia
West Australia
West Australia
South Australia
West Australia, Victoria
Queensland
Queensland
New South Wales
Canada
Saskatchewan
British Columbia, Nova
Scotia, Ontario, Quebec
United States
Arizona, California, New
Mexico, Utah
Gulf of Mexico
Central America
Trinidad and Tobago
Mexico
Chile
Antofagasta
Antofagasta
Operated asset Commodity
Area
protected
(km2)
Area
restored
(km2)
External
approval
Status
Area
protected
(km2)
Area
restored
(km2)
External
partner
Status
Within operational site area
Outside operational site area
Iron ore
Nickel
Titanium
WAIO
Nickel West
Beenup (closed
site)
Olympic Dam Copper,
uranium,
gold, silver
Oil and gas
Australian
Production Unit
BMC
BMA
NSWEC
Coal
Coal
Coal
Jansen
Legacy assets
Potash
Various
Legacy assets
Various
Gulf of Mexico
Production Unit
Oil and gas
Trinidad
Production Unit
Trion
Oil and gas
Oil and gas
Escondida
Pampa Norte
Copper
Copper
47.04
3.81
3.65
0
0
3.41
0
6.5
0
0
0
0
0
0
0
0
0.04
0
3.35
No Complete
NA In progress
Yes Complete
0
76.73
0
NA
489.85
0
0
0
0
0
NA
NA
NA
NA Complete
NA
NA
NA Complete
0.65
0
Yes Complete
NA
NA
0
0
0
0
0
0
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
0
9.16
21.68
19.49
0
0
0.07
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
NA
NA
No In progress
NA
NA
No In progress
NA
NA
No Complete
No Complete
No Complete
NA
NA
NA
NA
Yes Complete
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
BHP
Annual Report 2021
277
23Financial StatementsGovernance1Strategic Report4Additional Information 4.8 Sustainability – performance data continued
4.8.5 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
Total operational energy consumption
Operational energy consumption from renewable sources(3)
Operational energy intensity (gigajoules per tonne of copper equivalent production)(4)
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
Operational energy consumption (%)
Consumption of fuel
– Coal and coke
– Natural gas
– Distillate/gasoline
– Other
Consumption of electricity
Consumption of electricity from grid
Operational energy consumption from renewable sources
Year ended 30 June
2021
2020
2019
117
1
23
92
2
37
33
154
0.5
21
114
1
21
90
2
36
32
150
0.0
19
114
1
24
87
3
35
31
149
0.0
22
Year ended 30 June
2021
2020
2019
32.6
0.2
6.3
25.5
0.6
10.3
9.1
42.9
0.1
31.6
0.2
5.8
25.0
0.7
10.1
8.9
41.7
0.0
31.7
0.2
6.6
24.2
0.7
9.6
8.5
41.3
0.0
Year ended 30 June
2021
2020
2019
100%
100%
100%
1%
19%
78%
2%
100%
89%
0.3%
1%
18%
79%
2%
100%
88%
0.0%
1%
21%
76%
2%
100%
88%
0.0%
278
BHP
Annual Report 2021
Operational energy consumption by commodity (PJ)
Petroleum
Copper
Iron Ore
Coal
Nickel
Total(16)
Consumption of fuel
Consumption of electricity
Total operational energy consumption
Consumption of fuel
Consumption of electricity
Total operational energy consumption
Consumption of fuel
Consumption of electricity
Total operational energy consumption
Consumption of fuel
Consumption of electricity
Total operational energy consumption
Consumption of fuel
Consumption of electricity
Total operational energy consumption
Consumption of fuel
Consumption of electricity
Total operational energy consumption
Greenhouse gas emissions
Operational GHG emissions by source(2)(5)(6)
Operational GHG emissions (MtCO2-e)
Scope 1 GHG emissions(7)
Scope 2 GHG emissions(8)
Total operational GHG emissions
Total operational GHG emissions (adjusted for Discontinued operations)
Operational GHG emissions intensity (tonnes CO2-e per tonne of copper equivalent production)(4)
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)(8)
Carbon offsets retired(11)
Total operational GHG emissions (including carbon offsets)(12)
Operational Scope 1 GHG emissions from Petroleum operations by source (ktCO2-e)(13)
Other combustion
Process emissions
Other vented emissions
Fugitive emissions from operations
Operational Scope 1 GHG emissions by source (MtCO2-e)
Scope 1
Diesel
Natural gas
Coal and coke
Fugitive sources
Other
Scope 2 (market-based)
Electricity
Total operational GHG emissions
Year ended 30 June
2021
2020
2019
13
0.0
13
20
27
47
34
1
35
43
5
48
8
3
12
117
37
154
11
0.1
11
21
26
47
33
1
35
41
5
46
8
3
11
114
36
150
15
0.1
15
21
25
45
31
1
33
39
5
45
8
3
11
114
35
149
Year ended 30 June
2021
2020
2019
9.6
6.3
15.9
15.9
2.0
80%
19%
5.1
9.7
6.2
15.9
15.5
2.4
75%
19%
5.1
10.0
6.2
16.2
16.2
2.2
81%
21%
5.0
0.3
15.9
Year ended 30 June
2021
660
0
0
120
2020
570
0
0
180
Year ended 30 June
2021
10.0
6.4
1.2
0.1
2.2
0.1
6.2
6.2
2020
2019
9.6
6.3
1.1
0.1
2.0
0.1
6.3
6.3
9.7
6.1
1.2
0.1
2.2
0.1
6.2
6.2
16.2
15.9
15.9
BHP
Annual Report 2021
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23Financial StatementsGovernance1Strategic Report4Additional Information 4.8 Sustainability – performance data continued
Operational GHG emissions by source, commodity and asset (ktCO2-e)
Petroleum
United States – Conventional
Australia
Other
Total petroleum
Copper
Escondida, Chile
Year ended 30 June
Scope 1
Scope 2 (market-based)
Operational GHG total
Production (Mboe)
Operational GHG emissions intensity (ktCO2-e/Mboe)(14)
Scope 1(15)
Scope 2 (market-based)
Operational GHG total
Production (Mboe)
Operational GHG emissions intensity (ktCO2-e/Mboe)(14)
Scope 1
Scope 2 (market-based)
Operational GHG total
Production (Mboe)
Operational GHG emissions intensity (ktCO2-e/Mboe)(14)
Scope 1
Scope 2
Operational control GHG total
Scope 1
Scope 2 (market-based)
Operational GHG total
Production (kt)
Pampa Norte, Chile
Scope 1
Operational GHG emissions intensity (ktCO2-e/kt)(14)
Scope 2 (market-based)
Operational GHG total
Production (kt)
Olympic Dam, Australia
Scope 1
Operational GHG emissions intensity (ktCO2-e/kt)(14)
Total copper
Iron ore
Western Australia Iron Ore, Australia
Total iron ore
Coal
Metallurgical coal – BMA, Queensland
Coal, Australia
Scope 2 (market-based)
Operational GHG total
Production (kt)
Operational GHG emissions intensity (ktCO2-e/kt)(14)
Scope 1
Scope 2
Operational control GHG total
Scope 1
Scope 2 (market-based)
Operational GHG total
Production (kt)
Operational GHG emissions intensity (ktCO2-e/kt)(14)
Scope 1
Scope 2
Operational control GHG total
Scope 1
Scope 2 (market-based)(10)
Operational GHG total
Production (kt)
Operational GHG emissions intensity (ktCO2-e/kt)(14)
Metallurgical coal – BMC, Queensland
Coal, Australia
Scope 1
Scope 2 (market-based)(10)
Operational GHG total
Production (kt)
Operational GHG emissions intensity (ktCO2-e/kt)(14)
Energy coal – New South Wales Energy
Coal, Australia
Scope 1
Scope 2 (market-based)
280
BHP
Annual Report 2021
2021
2020
2019
190
0.0
190
200
0.0
200
200
0.0
200
8,820
7,800
9,340
0.02
260
0
260
0.03
350
0
350
11,420
11,570
0.02
310
0
310
12,170
0.03
710
20
730
0.03
200
20
220
10,320
13,630
0.02
750
20
770
860
3,260
4,120
1,190
3.46
360
530
890
240
3.71
230
450
680
170
4.00
1,450
4,240
5,690
2,210
260
2,470
0.05
1,220
20
1,240
930
3,190
4,120
1,140
3.61
340
550
890
250
3.56
200
470
670
160
4.19
1,470
4,210
5,680
2,050
260
2,310
0.02
330
0
330
9,310
0.04
780
0
780
860
3,320
4,180
1,070
3.91
300
550
850
220
3.86
230
460
690
210
3.29
1,390
4,330
5,720
2,230
260
2,490
284,100
281,060
269,600
0.01
2,230
260
2,490
3,950
870
4,820
63,770
0.08
510
60
570
8,740
0.07
550
80
0.01
2,210
260
2,470
3,620
1,040
4,660
63,150
0.07
460
80
540
9,540
0.06
530
80
0.01
2,050
260
2,310
3,520
1,030
4,550
64,270
0.07
420
60
480
10,270
0.05
520
90
Total coal
Nickel
Nickel West, Australia
Total nickel
Total(16)
Emissions from Discontinued
operations
Total (excluding Discontinued
operations)(16)(17)
Year ended 30 June
Operational GHG total
Production (kt)
Operational GHG emissions intensity (ktCO2-e/kt)(14)
Scope 1
Scope 2
Operational control GHG total
Scope 1
Scope 2 (market-based)
Operational GHG total
Production (kt)
Operational GHG emissions intensity (ktCO2-e/kt)(14)
Scope 1
Scope 2
Operational control GHG total
Scope 1
Scope 2
Operational control GHG total
Scope 1
Scope 2
Operational control GHG total
Scope 1
Scope 2 (market-based)
Operational GHG total
Production (t Cu-eq)
2021
630
2020
610
2019
610
14,330
16,050
18,260
0.04
5,010
1,010
6,020
530
550
1,080
90
12.00
530
550
1,080
9,970
6,190
16,160
0
0
0
0.04
4,610
1,200
5,810
510
550
1,060
80
13.25
510
550
1,060
9,570
6,280
0.03
4,460
1,180
5,640
470
550
1,020
90
11.33
470
550
1,020
9,730
6,210
15,850
15,940
0
0
0
470
0
470
9,970
6,190
9,570
6,280
9,260
6,210
16,160
15,470
7,331,620 8,085,570 6,580,850
15,850
Equity share GHG emissions by commodity and asset (ktCO2-e)(5)(18)
Operational GHG emissions intensity (tonnes CO2-e per tonne of copper
equivalent production)(4)
2.2
2.0
2.4
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
Year ended 30 June
Scope 1
Scope 2
Equity share GHG total
Scope 1(15)
Scope 2
Equity share GHG total
Scope 1
Scope 2
Equity share GHG total
Scope 1
Scope 2
Equity share GHG total
Scope 1
Scope 2
Equity share GHG total
Scope 1
Scope 2
Equity share GHG total
Scope 1
Scope 2
Equity share GHG total
Scope 1
Scope 2
Equity share GHG total
Scope 1
Scope 2
Equity share GHG total
Scope 1
Scope 2
Equity share GHG total
2021
2020
110
0
110
170
0
170
160
0
160
440
0
440
490
570
1,060
300
550
850
230
460
690
1,020
1,580
2,600
1,900
220
2,120
1,900
220
2,120
80
0
80
250
0
250
90
10
100
420
10
430
490
640
1,130
360
530
890
230
450
680
1,080
1,620
2,700
1,880
220
2,100
1,880
220
2,100
BHP
Annual Report 2021
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23Financial StatementsGovernance1Strategic Report4Additional Information 4.8 Sustainability – performance data continued
Coal
Metallurgical coal – BMA, Queensland Coal, Australia
Metallurgical coal – BMC, Queensland Coal, Australia
Year ended 30 June
Scope 1
Scope 2(10)
Equity share GHG total
Scope 1
Scope 2(10)
Equity share GHG total
Energy coal – New South Wales Energy Coal, Australia Scope 1
Total coal
Nickel
Nickel West, Australia
Total nickel
Non-operated assets(20)
Total(16)
Emissions from Discontinued operations
Total (excluding Discontinued operations)(16)(17)
Scope 2
Equity share GHG total
Scope 1
Scope 2
Equity share GHG total
Scope 1
Scope 2
Equity share GHG total
Scope 1
Scope 2
Equity share GHG total
Scope 1
Scope 2
Equity share GHG total
Scope 1
Scope 2
Equity share GHG total
Scope 1
Scope 2
Equity share GHG total
Scope 1
Scope 2
Equity share GHG total
2021
2020
1,970
440
2,410
410
50
460
550
80
630
2,930
570
3,500
530
550
1,080
530
550
1,080
3,770
90
3,860
10,620
3,040
13,660
50
0
50
10,570
3,040
13,610
1,810
520
2,330
370
70
440
530
80
610
2,710
670
3,380
510
550
1,060
510
550
1,060
3,780
100
3,880
10,420
3,190
13,610
230
20
250
10,190
3,170
13,360
Financial control GHG emissions by commodity and asset (ktCO2-e)(5)(19)
Year ended 30 June
2021
2020
Petroleum
United States – Conventional
Australia
Other
Total petroleum
Copper
Escondida, Chile
Pampa Norte, Chile
Olympic Dam, Australia
Total copper
282
BHP
Annual Report 2021
Scope 1
Scope 2
Financial control GHG total
Scope 1(15)
Scope 2
Financial control GHG total
Scope 1
Scope 2
Financial control GHG total
Scope 1
Scope 2
Financial control GHG total
Scope 1
Scope 2
Financial control GHG total
Scope 1
Scope 2
Financial control GHG total
Scope 1
Scope 2
Financial control GHG total
Scope 1
Scope 2
Financial control GHG total
110
0
110
170
0
170
160
0
160
440
0
440
860
1,990
2,850
300
550
850
230
460
690
1,390
3,000
4,390
90
0
90
250
0
250
80
10
90
420
10
430
860
2,030
2,890
360
530
890
230
450
680
1,450
3,010
4,460
Year ended 30 June
2021
2020
Iron ore
Western Australia Iron Ore, Australia
Total iron ore
Coal
Metallurgical coal – BMA, Queensland Coal, Australia
Metallurgical coal – BMC, Queensland Coal, Australia
Scope 1
Scope 2
Financial control GHG total
Scope 1
Scope 2
Financial control GHG total
Scope 1
Scope 2
Financial control GHG total
Scope 1
Scope 2
Financial control GHG total
Energy coal – New South Wales Energy Coal, Australia Scope 1
Total coal
Nickel
Nickel West, Australia
Total nickel
Non-operated assets(20)
Total(16)
Emissions from Discontinued operations
Total (excluding Discontinued operations)(16)(17)
Scope 2
Financial control GHG total
Scope 1
Scope 2
Financial control GHG total
Scope 1
Scope 2
Financial control GHG total
Scope 1
Scope 2
Financial control GHG total
Scope 1
Scope 2
Financial control GHG total
Scope 1
Scope 2
Financial control GHG total
Scope 1
Scope 2
Financial control GHG total
Scope 1
Scope 2
Financial control GHG total
1,940
220
2,160
1,940
220
2,160
1,970
440
2,410
510
60
570
550
80
630
3,030
580
3,610
530
550
1,080
530
550
1,080
3,580
20
3,600
10,940
4,400
15,340
0
0
0
1,930
220
2,150
1,930
220
2,150
1,810
520
2,330
460
80
540
530
80
610
2,800
680
3,480
510
550
1,060
510
550
1,060
3,420
20
3,440
10,560
4,520
15,080
0
0
0
10,940
4,400
15,340
10,560
4,520
15,080
BHP
Annual Report 2021
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23Financial StatementsGovernance1Strategic Report4Additional Information 4.8 Sustainability – performance data continued
Scope 3 GHG emissions by category(21)
Scope 3 GHG emissions (MtCO2-e)
Upstream
Purchased goods and services (including capital goods)(22)
Fuel and energy related activities(23)
Upstream transportation and distribution(24)
Business travel
Employee commuting
Downstream
Downstream transportation and distribution(25)
Investments (i.e. our non-operated assets)(26)
Processing of sold products(20)
GHG emissions from steelmaking(28)
– Iron ore processing to crude steel
– Metallurgical coal processing to crude steel
Copper processing
Total processing of sold products
Use of sold products
Energy coal(29)
Natural gas(29)
Crude oil and condensates(29)
Natural gas liquids(29)
Total use of sold products
Total Scope 3 GHG emissions(30)
Year ended 30 June
2021
2020
2019
8.9
1.1
3.8
0.1
0.4
3.8
2.5
300.5
260.7
39.8
5.0
305.5
38.3
19.5
16.8
1.8
76.4
402.5
8.8
1.2
3.8
0.1
0.2
4.0
2.6
292.9
252.8
40.1
5.2
298.1
56.4
20.6
17.9
1.9
96.8
415.7
8.7
1.2
3.6
0.2
0.2
4.0
3.1
283.7
242.4
41.3
5.1
288.8
67.0
28.3
23.3
2.8
121.4
431.1
(1) 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. FY2020 originally reported data that has been restated is 9.5 MtCO2-e for Scope 1 GHG emissions and 15.8 MtCO2-e for total operational GHG
emissions, due to minor amendments to fugitive emissions from the coal operated assets as part of the annual reconciliation process for Australian regulatory reporting purposes.
FY2019 data that has been restated is 6.1 MtCO2-e for Scope 2 GHG emissions, 15.8 MtCO2-e for total operational GHG emissions, and 15.3 MtCO2-e for total operational GHG emissions
(adjusted for Discontinued operations) due to minor amendments to market-based emission factors for Minerals Americas operated assets. Additionally, non-material adjustments in prior
year asset-level data and changes to presentation of the data has, in certain instances, resulted in minor impacts to the rounding of data since it was previously reported.
(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 operational GHG emissions occurs outside the UK and offshore
area (as defined in the relevant UK reporting regulations). UK energy consumption of 99,762 kWh and GHG emissions of 21 tCO2-e is associated with electricity consumption from our office
in London. One TWh equals 1,000,000,000 kWh. Data has been rounded to the nearest 1 PJ or 0.1 TWh to be consistent with asset/regional energy information in this Annual Report. In some
instances, the sum of totals for sources, commodities, and assets may differ due to rounding.
In FY2021, we revised and tightened the definition of renewable energy consumption for our operations to better align with our market-based GHG emissions reporting. This has resulted in
the restatement of operational consumption from renewable energy sources figures. Previously reported numbers for FY2020 and FY2019 for this data were 0.01 TWh for both years.
(4) For this purpose, copper equivalent production has been calculated based on FY2021 average realised product prices for FY2021 production, FY2020 average realised product prices for
FY2020 production and FY2019 average realised product prices for FY2019 production. Production figures used are consistent with energy and GHG emissions reporting boundaries (i.e.
BHP operational control) and are taken on 100 per cent basis.
(3)
(5) BHP currently uses Global Warming Potentials (GWP) from the Intergovernmental Panel on Climate Change (IPCC) Assessment Report 5 (AR5) based on a 100-year timeframe for Minerals
Australia and Petroleum. Minerals Americas currently use IPCC Assessment Report 4 (AR4) and will be transitioning to AR5 GWP in FY2022.
(6) Scope 1 and Scope 2 GHG 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. For more information, see BHP Scope 1, 2 and 3 GHG Emissions Calculation Methodology, available at bhp.com/climate. Data has been rounded to the
nearest 10 ktCO2-e or 0.1 MtCO2-e to be consistent with asset/regional GHG emissions information in this Annual Report. In some instances, the sum of totals for sources, commodities and
assets may differ due to rounding.
(7) Scope 1 refers to direct GHG emissions from operated assets.
(8) 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 GHG 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 emission factor is currently unavailable to account for grid electricity emissions remaining after removal of quantities directly contracted between parties; this may result in
double counting of low emissions or renewable electricity contributions across grid-supplied consumers.
(9) Scope 1 GHG emissions from BHP’s facilities covered by the Safeguard Mechanism administered by the Clean Energy Regulator in Australia and the distillate and gasoline GHG emissions
from turbine boilers at the cathode plant at Escondida covered by the Green Tax legislation in Chile.
(10) In the absence of a residual mix default emission factor for Queensland, the default grid factor has been applied for volumes supplied under contracts without generation mix specifications.
This may result in some double-counting between electricity consumers in the region. We are continuing to evaluate options to improve the accuracy of our Scope 2 GHG emissions
reporting and may refine this approach in future years.
(11) Although we prioritise our internal GHG emission reduction projects, we acknowledge a role for high-quality offsets in a temporary or transitional capacity while abatement options are being
studied, as well as for ‘hard to abate’ emissions with limited or no current technological solutions. In this context, we retired a quantity of high-quality carbon offsets in FY2021 equivalent to
the net increase in our total Scope 1 and Scope 2 GHG emissions from FY2020 to FY2021. Further detail on our approach to carbon offset use is provided in this Annual Report including
information on the projects from which retired carbon offsets were sourced.
(12) In FY2021, we have calculated an additional operational GHG emissions total for the reporting year including contributions from the retirement of a quantity of carbon offsets. This figure has
been calculated by subtracting the number of carbon offsets retired (each equivalent to a single tonne of CO2-e reduced or ‘removed’ from the atmosphere) from the total GHG emissions
reported under our operational control boundary for the year. We do not intend to establish a consistent or ongoing approach to the use of carbon offsets towards delivery of our operational
GHG emissions targets and as such this carbon offset retirement is not integrated into the FY2021 Scope 1 and Scope 2 GHG emissions totals used to assess performance against these
targets. Instead, we may retire offsets as a viable low-cost abatement option during some reporting periods in the short term while we pursue material decarbonisation opportunities with
medium to long-term implementation timeframes. Further detail on our approach to carbon offset use, and the specifics of the carbon offsets retired in FY2021, is provided at bhp.com/
offsets-2021.
(13) GHG emissions from flared hydrocarbons are included in fugitive GHG emissions.
(14) Based on FY2021, FY2020 and FY2019 production figures. Production figures used are consistent with the GHG 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 is used for Nickel West.
(15) The methodology for capturing this data is currently under review. A correction to this data may be made in the next reporting period.
(16) Total includes functions, projects, exploration, legacy assets and consolidation adjustments. Excludes material acquisitions and divestments.
(17) For the operational control organisational boundary, excludes Onshore US assets, which were divested in FY2019. For the equity share and financial control organisational boundaries,
FY2021 Scope 1 and Scope 2 GHG emissions (on equity basis) from Cerrejón are only accounted for H1FY2021 due to the effective economic date of 31 December 2020 for sale of BHP’s
interest in Cerrejón. Non-material acquisitions and divestments have not been included in Discontinued operations and are included in the Total.
(18) The equity share approach to calculate GHG 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 have been made to estimate equity share GHG emissions from
operations not under BHP’s operational control. Details on assumptions and operations included are provided in note (20). Comparison of year-on-year equity share GHG emissions may not
be possible due to the assumptions made.
284
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Annual Report 2021
(19) The 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. This approach 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 have been made to estimate equity share GHG emissions from operations not under BHP’s operational control. Details are provided
in note (20). Comparison of year on year financial control GHG emissions may not be possible due to the assumptions made.
(20) Non-operated assets include Antamina, Cerrejón, the Kelar Power Station and the Petroleum assets in Australia, USA and Algeria. Samarco is excluded as operations re-commenced in
FY2021 and Samarco has not published their latest data and prior year data will not reflect Samarco becoming operational in FY2021. GHG emissions data was sourced directly from the
operator in the first instance and, where not readily available for the current reporting year, FY2020 or CY2020 data was extrapolated to reflect FY2021 production levels. This allowed
recalculation of prior year GHG emissions for some assets which were previously estimated using GHG emissions intensities based on analogous BHP operations. For equity share reporting
of GHG emissions from non-operated assets, FY2020 originally reported data that is restated on this basis is 3,800 ktCO2-e for Scope 1 GHG emissions, 130 ktCO2-e for Scope 2 GHG
emissions and 3,930 ktCO2-e for total GHG emissions. For financial control based GHG emissions reported from non-operated assets, FY2020 originally reported data that is restated is
3,430 ktCO2-e for Scope 1 GHG emissions, 10 ktCO2-e for Scope 2 GHG emissions and 3,440 ktCO2-e for total GHG emissions. Non-operated assets’ GHG emissions are based on third
party (operators’) estimates and are therefore not subject to the same level of review and assurance by BHP as GHG emissions within BHP’s operational control boundary.
(21) Scope 3 GHG emissions have been calculated using methodologies consistent with the Greenhouse Gas Protocol Corporate Value Chain (Scope 3) Accounting and Reporting Standard
(Scope 3 Standard). Scope 3 GHG 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. More information on the calculation methodologies, assumptions and key references used in the preparation of our Scope 3 GHG emissions data
can be found in the associated BHP Scope 1, 2 and 3 GHG Emissions Calculation Methodology, available at bhp.com/climate.
(22) In FY2021, we have made improvements in how we calculate Scope 3 GHG emissions associated with the purchased goods and services category by assigning more accurate emission
factors to some procurement categories and improving the accuracy of spend data. Previously reported GHG emissions for the ‘Purchased goods and services (including capital goods)’
category are 16.9 MtCO2-e in FY2020 and 17.3 MtCO2-e in FY2019. Previously reported emissions for FY2019 are 0.1 MtCO2-e in the ‘Business travel’ category and <0.1 MtCO2-e for the
‘Employee commuting’ category. GHG emissions in FY2020 did not materially change as a result of the improved methodology.
(23) In FY2021, we have made improvements in how we calculate Scope 3 GHG emissions associated with the ‘Fuel and Energy related activities’ category by removing the Scope 3 GHG
emissions associated with natural gas consumption at our Petroleum operations as the majority of those emissions would be captured in our Scope 1 GHG emissions. Previously reported
GHG emissions for the ‘Fuel and Energy related activities’ category are 1.3 MtCO2-e in FY2020 and also in FY2019.
(24) 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.
(25) Product transport where freight costs are not covered by BHP, for example under Free on Board (FOB) or similar terms.
(26) For BHP, this category covers the Scope 1 and Scope 2 GHG emissions (on an equity basis) from our assets that are owned as a joint venture but not operated by BHP. In FY2021, GHG
emissions estimates from non-operated assets were developed from data provided directly by operators. GHG emissions from our non-operated Kelar Power Station asset are reported as
Scope 2 GHG emissions at the Minerals Americas operated assets supplied by the facility and therefore excluded from our Scope 3 GHG emissions totals. The previous FY2020 value of
3.9 MtCO2-e has been restated to remove GHG emissions from the Kelar Power Station and include updated Scope 3 GHG emissions estimates for non-operated assets for which data was
previously unavailable from operators. FY2021 Scope 1 and Scope 2 GHG emissions (on an equity basis) from Cerrejón are only accounted for H1FY2021 due to the effective economic date
of 31 December 2020 for sale of BHP’s interest in Cerrejón. Details on assumptions and operations included are provided in note (20).
(27) All iron ore production and metallurgical coal 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 or
downstream GHG emissions are estimated to be immaterial. Processing/refining of petroleum products is also excluded as these GHG emissions are considered immaterial compared to the
end-use product combustion reported in the ‘Use of sold products’ category.
(28) In FY2021, we have addressed some key limitations associated with estimating Scope 3 GHG emissions. We have worked to eliminate double counting in our reported inventory in relation
to GHG emissions from the processing of iron ore and metallurgical coal in steelmaking, by allocating GHG emissions between the two and reporting a single total Scope 3 GHG emissions
figure for GHG emissions from steelmaking. Allocation of steelmaking GHG emissions to BHP’s metallurgical coal is based on the global average input mass ration of metallurgical vs iron ore
to the blast furnace-basic oxygen furnace (BF-BOF) steelmaking route. This approach to improving accuracy is consistent with the Scope 3 Standard. We have also improved the accuracy of
the emission factor used to estimate Scope 3 GHG emissions by reflecting the blast furnace integrated steelmaking route into which the majority of BHP’s steelmaking raw materials portfolio
is sold. The improved estimation also considers BHP iron ore product quality and its impact on the amount of ore required to produce steel. As our product evolves in its quality and flow
through to other pathways (such as direct reduced iron electric arc furnace (DRI-EAF)), we will adjust the balance of intensity factors to reflect these changes. Previously reported numbers
for iron ore processing are 205.6-322.6 MtCO2-e for FY2020 and 197.2-299.6 MtCO2-e for FY2019. Previously reported numbers for metallurgical coal are 33.7-108.2 MtCO2-e for FY2020
and 34.7–111.4 MtCO2-e for FY2019.
(29) 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.
FY2021 Scope 3 GHG emissions associated with energy coal products from Cerrejón are only accounted for H1FY2021 due to the effective economic date of 31 December 2020 for
sale of BHP’s interest in Cerrejón.
(30) We reported a total figure for the Scope 3 GHG emissions inventory this year as major double counting of GHG emissions from the processing of iron ore and metallurgical coal in
steelmaking was removed, however a degree of overlap in reporting boundaries still occurs due to our involvement at multiple points in the life cycle of the commodities we produce
and consume.
BHP
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23Financial StatementsGovernance1Strategic Report4Additional Information 4.8 Sustainability – performance data continued
4.8.6 Water – performance data
This section provides detailed disclosure of our various water metrics
in line with the International Council on Mining and Metals (ICMM)
Guidelines. All water performance data presented in this Report are from
operated assets during FY2021 and exclude Discontinued operations
(Onshore US assets).
Definitions of water metrics, sources and types are provided in our online
ESG Standards and Databook and in section 4.11.4.
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.
In FY2021, BHP commenced use of the WWF Water Risk Filter(1) for our
disclosures of basin risk for our operated assets. Using the WWF Water
Risk Filter, it was found that two of our operated assets (approximately
18 per cent), as of the end of FY2021, are classified as being under high
or very high water stress due to location. These are shown in the Asset
Summary Table.
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.(2)(3) Third-party water
withdrawals were reported by source in prior years however from
FY2021 we have reported as a distinct category to align with reporting
frameworks such as ICMM guidelines and GRI.
FY2017 – FY2021 Withdrawals (by source)
Megalitres
450,000
400,000
350,000
300,000
250,000
200,000
150,000
100,000
50,000
0
2017
2018
2019
2020
2021
Seawater Groundwater Surface water Third party water
(1) https://waterriskfilter.panda.org/
(2) These withdrawal volumes include rainfall and runoff volumes captured and used during
the reporting year but exclude rainfall and runoff volumes that have been captured and
stored, and will be reported in the future year of use.
(3) Volumes of withdrawal by source have been updated for FY2019, FY2018 and FY2017 for
the Nickel West operated asset at Kwinana. Previously, the total volumes of water suppled
to the site by a 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
and will continue to do so.
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FY2017 – FY2021 Withdrawals (by quality)
Megalitres
450,000
400,000
350,000
300,000
250,000
200,000
150,000
100,000
50,000
0
2017
2018
2019
2020
2021
Type 3 Type 2 Type 1
FY2021 Withdrawals by asset (by source)
Megalitres
250,000
200,000
150,000
100,000
50,000
0
W
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Seawater
Groundwater
Surface Water
Third party water
Water withdrawals for FY2021 across our operations increased by 15
per cent from FY2020 (from 380,330 ML to 438,660 ML) due primarily
to increased withdrawal of seawater at Escondida and our Petroleum
operated assets. The large increase (33,500 ML) in Petroleum seawater
withdrawals results from a decision to include the water withdrawals
resulting from our well and seismic operations from FY2021. BHP deemed
it has operational control while well and seismic activities are undertaken
by us. Minor increases at other assets (e.g. Olympic Dam and WAIO) were
offset by a minor decrease in withdrawal at our BMA and BMC operated
assets and at our Nickel West operations. Despite the 15 per cent increase
in water withdrawal, our withdrawal of high-quality water (Type 1 and
Type 2) increased by less than 5 per cent from 87,280 ML in FY2020
to 91,280 ML in FY2021. Total water withdrawals from operated assets
located in high or very high water-stressed areas (as determined by WWF
water risk filter) was 233,190 ML.
The majority of our water withdrawals (65 per cent) come from seawater.
Escondida stopped drawing groundwater from the Monturaqui
borefield in the second half of FY2020. Currently, the majority of
Escondida’s operational water consumption is met by desalinated
water.(4) The proportion of withdrawals relating to groundwater across
BHP reduced from 33 per cent of withdrawals in FY2020 to 23 per cent
of withdrawals in FY2021, in part due to the reporting of third-party
withdrawals as a distinct category. WAIO, BMA and BMC account for more
than half of terrestrial water withdrawal across our business.
(4) Small quantities of groundwater are extracted for pit dewatering to allow safe mining.
Freshwater(5) withdrawal decreased 11 per cent in FY2021 compared
to FY2020 and 27 per cent compared to our FY2017 baseline.
The withdrawals, and the material contributors to these, were within
expectations for FY2021 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 are 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 1.13.13.
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 diverted water consistent
with ICMM Guidelines as it is not intended for operational purposes.
FY2017 – FY2021 Total discharges (by destination)
Megalitres
250,000
200,000
150,000
100,000
50,000
0
2017
2018
2019
2020
2021
Seawater Groundwater Surface water Third party water
FY2017 – FY2021 Total discharges (by quality)
Megalitres
250,000
200,000
150,000
100,000
50,000
0
2017
2018
2019
2020
2021
Type 3 Type 2 Type 1
(5) 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.
FY2021 Discharges by asset (by destination)
Megalitres
125,000
100,000
75,000
50,000
25,000
0
B
M
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Seawater Groundwater Surface water Third party water
Total water discharges for FY2021 were 203,450 ML, an increase from
147,850 in FY2020 as expected due to the increased throughput of
the desalination facility at our Escondida asset and inclusion of well
and seismic operations for our Petroleum operated asset. Total water
discharges in high or very high water-stressed areas was 123,200 ML.
The majority of water discharges are to seawater at over 93 per cent,
with Escondida (which accounts for approximately 60 per cent of our
discharges) and Petroleum being the largest contributors. The second-
largest discharge volume is to groundwater, the majority of which is
Type 3 water that is withdrawn as a by-product during the recovery
of hydrocarbons from below the seabed (and therefore classed as
groundwater in the ICMM, GRI and WAF guidance) and which is returned
by re-injection to below the seabed or to the ocean.
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.
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 45 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 4.8.4.
Water recycled/reused
The ICMM Guidance defines reused water as water that has previously
been used at the operated asset that is used again without further
treatment and recycled water is water that is reused but is treated before
it is used again.
During FY2021, the total volume of water recycled/reused was
262,430 ML.
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 recycle
or reuse water.
BHP
Annual Report 2021
287
23Financial StatementsGovernance1Strategic Report4Additional Information
FY2021 Consumption by asset
Megalitres
100,000
80,000
60,000
40,000
20,000
0
W
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Evaporation
Entrainment
Other
Changes in water storage
BHP has a commitment to contribute to improved mining sector water
reporting through strengthened ICMM guidance, aligned with GRI
requirements. In FY2021 we collated information on change in water
storage as described in the revised ICMM Water Reporting Guidance
and used it to support further assessment of the validity of assumptions
underpinning asset water models and water balances. Water modelling
contains a degree of uncertainty due to inclusion of estimates and
assumptions. The collation of information to inform reporting of change
in water storage has identified areas for improvement in the estimated
and simulated data within the water models as currently used at our coal
assets. We intend to undertake work during FY2022 to assess underlying
assumptions in an effort to improve the water modelling at our coal
assets, as well as further maturing the measurement of changes in water
storage across the Group. For this reason, we have not included change
in water storage data in our reporting for FY2021.
Water-related legal performance
During FY2021 we had three incidents of water-related non-compliance
that resulted in a formal enforcement action. These all occurred in our
Minerals Australia assets with two at BMA and one at BMC. None of
these were associated with non-compliance with discharge limits
set by regulatory permits.
4.8 Sustainability – performance data continued
Water diversions
Diverted water is water that is actively managed by an operated asset
but not used for any operational purposes. For example, we withdraw
water and treat it for use as drinking water by local communities, such as
in the town of Roxby Downs in South Australia. In FY2021, 103,220 ML of
water was withdrawn without any intention to be used at BHP operated
assets with 1,130 ML diverted in high or very high water-stressed areas.
Diversions predominantly relate to water that is treated by our legacy
assets in North America, and by dewatering for WAIO, and described
further in the our sustainability case studies.
As the withdrawal of diverted water may occur in a different annual
reporting period to its discharge, in any given annual period there
may be a differential between withdrawal and discharge volumes
for diverted water.
Under ICMM Water Reporting: Good practice guide (2nd Edition),
diversions need to be reported as ‘Other managed water’. From FY2022,
we will update our reporting and data in line with this proposed change
in terminology.
Water consumption
In FY2021, evaporation and entrainment remained the most significant
contributors to consumption. Evaporation occurs during a number of
operational activities including dust suppression, storage of tailings
and storage of water.
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. Due to the link with climatic
conditions, the volumes consumed via evaporation are predominately
outside of BHP’s direct control.
Entrained water includes water incorporated into product and/
or waste streams, such as tailings, that cannot be easily recovered.
Entrainment may show variability due to the type and location of ore
during any given reporting period. The use of water in our processing
facilities, or for reducing dust release during storage of product, can
result in entrainment of water.
The category of ‘other’ for consumption includes several uses, the
most significant being water used by people for drinking or ablutions
at operated assets.
The collation and disclosure of consumption will assist in identifying
areas for improvements in data accuracy for entrainment and
evaporation, and assist with identifying opportunities to reduce,
where possible, loss of water.
Total consumption in FY2021 was 267,130 ML and 106,950 ML in high
or very high water-stressed locations respectively. The operated assets
in FY2021 that consumed the most water were Escondida, WAIO
and BMA. Entrainment of water in tailings is the largest contributor to
consumption at Escondida, whereas evaporation is the key driver of
consumption at WAIO. Entrainment in ore during processing, as well as
evaporation from dust suppression and tailings and water storage all
contribute to consumption at BMA. It should be noted that in any given
reporting period, consumption and discharge volumes might be higher
than withdrawals as evaporation can occur from water that has been
captured and stored during previous periods.
288
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Annual Report 2021
Progress against our Water Stewardship Strategy
Water Stewardship Strategy pillar
What we did in FY2021
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.
In FY2021, operated assets progressed their action plans towards achieving compliance with the
new BHP Water management standards, for example, through development of Water Safety Plans
for drinking water, updates to water data management systems and operated asset water strategies.
We progressed the development of control effectiveness standards for each critical control for
management of our water-related catchment risks and these will be implemented in FY2022. Water-
related risks are managed in line with the BHP risk process. For more information, refer to section 1.9.
Water treatment technologies that were shortlisted in FY2020 commenced bench-scale trials and
techno-economic assessments at our Olympic Dam operations in FY2021.
Water Stewardship is identified as a social value priority at all our operated assets. In FY2021, we
undertook a review of available evaluation tools and mapped these against the current water
evaluation process undertaken in BHP. We are currently scoping the next phase of work which will
include a broader review of where water valuation sits within BHP’s decision-making processes and
will support the integration of future valuation methods.
In FY2021, we completed a case study with the ICMM to help inform improvements and increase
consistency of water disclosures in the mining sector and to inform an update of the ICMM water
reporting guidance.
In FY2021, we assessed alignment of our water sensitivity and water related risk disclosures with
current widely used frameworks, (which have matured in the last two to three years). We decided to
align our disclosure of basin risk with the WWF Water Risk Filter(6) and have updated our disclosures
accordingly. This allows for more direct comparison with other organisations.
Collective action activities in FY2021 included:
– completed a thought leadership paper with Pollination consultants to use the lessons from
climate change (such as the importance to unify around a common goal, and agreement on
the science) to bring about change in Water Stewardship
– continued to fund and contribute to the development of the Water Resilience Accounting
Framework (designed to provide a common way to describe water stresses in a catchment)
by the CEO Water Mandate and other technical civil society partners. We believe this is a key
foundation for effective multi-stakeholder conversations on water
– started a study with the University of Notre Dame on the inherent rights of people to access
water and preserve its cultural values
BHP co-funds with Rio Tinto the groundwater modelling decision support initiative (GMDSI).
The GMDSI is managed by the Groundwater Research and Training (NCGRT) at Flinders University,
South Australia, on our behalf and it promotes and supports the improved use of models in
groundwater management, regulation and decision-making.
We continued a program of Water Resource Situational Analyses (WRSA) in FY2021 to inform
our post-FY2022 operated asset context-based water targets (CBWT). Each WRSA will identify
the shared water challenges in the region through stakeholder consultation and review of public
information by a trusted third party (for example, a university). Once finalised, the WRSA reports
will be publicly available to support continued collaboration between stakeholders. The CBWTs
will address one or more of the shared challenges in the region, through BHP’s own internal action
targets (completed by BHP alone) in conjunction with the collective action targets (completed
with one or more external partners). We will publish the approach to setting CBWTs in FY2022.
We will share it at public forums, and presented it at World Water Week in August 2021. Through this
public disclosure, we aim to build validity for the approach, support others to set effective targets
and ultimately help improve management of shared water resources. This work is in line with our
commitments in our Water Stewardship Position Statement(7) to develop CBWT, be transparent,
collaborative and share knowledge and innovation.
(6) https://waterriskfilter.panda.org/
(7) https://www.bhp.com/-/media/documents/environment/2020/water-stewardship-position-statement-2020-p2.pdf?la=en
BHP
Annual Report 2021
289
23Financial StatementsGovernance1Strategic Report4Additional Information 4.8 Sustainability – performance data continued
Asset summary table FY2021
Metric(1)
Assets in water stress
location(3)
Withdrawals(4) (megalitres)
Water withdrawals by quality
– Type 1
Water withdrawals by quality
– Type 2
Water withdrawals by quality
– Type 3
Water withdrawals by source –
Surface water(4)
Water withdrawals by source –
Groundwater
Water withdrawals by source
– Seawater
Water withdrawals by source –
Third party(5)
Total water withdrawals (water
stress areas)(3)
Discharges (megalitres)
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
Total water discharges (water
stress areas)(3)
Consumption (megalitres)
Consumption – evaporation
Consumption – entrainment
Consumption – other
Total consumption (water
stress areas)(3)
Recycled/reused
(megalitres)
Diversions (megalitres)
Diversions – withdrawals
Diversions – discharges
Total Escondida
Legacy
assets
Nickel
West
NSW
Energy
Coal
Olympic
Dam
Pampa
Norte
Petroleum(2)
Jansen
Potash
Project
BMA
BMC
Western
Australia
Iron Ore
Yes
Yes
438,660
223,330
1,090 16,290
9,500
14,680 9,860
76,850
350 32,370
4,510 49,830
54,310
36,970
0
0
1,090 2,620
3,540
0
0 4,590
3,170
10,840
0
0
40
0
0 13,600
2,230
31,190
350 11,370
1,540
5,110
347,390
223,330
0 9,090
2,790
3,840 9,860
76,810
0 7,400
740
13,530
30,350
0
1,090
160
6,710
820
0
0
260 19,670
1,640
0
100,700
7,630
0 13,990
1,950
13,860 3,980
7,800
90 5,420
740
45,240
0
0
0
0
69,010
0
0
0
7,270
2,140
4,590
284,700
215,690
22,910
0
233,190
223,330
203,450
123,200
0
2,390
0
0
201,060
123,200
2,450
0
9,670
1,860
190,660
121,340
660
0
123,200
123,200
0
0
0
0
0
0
0
0
0
0
0
0
2,150
840
0 5,880
0
360
0
0
360
0
0
0
360(7)
0
0
0
0
0
0
0
0
0
0
0
0 9,860(6)
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
267,130
141,430
107,270
18,450
97,820
31,980
65,330
520
1,950 13,090
8,350
13,790
9,130
1,950
0
520
0
5,110
3,180
7,780 6,420
1,940 2,560
0 12,560
60
4,080
150
106,950
97,820
0
0
262,430
41,150
20 9,490
103,220
68,910
400
400
37,890
38,810
0
0
0
0
0
0
0
9,130
13,250 183,710
0
0
0
40
0
0
76,810
100
1,540
0
0
0
0
90
1,540
76,810
10
0
0
90
970
7,800
10
0
0
0
0
0
0
0
0
0
0
0
0
1,440
0
760
680
1,390
0
50
0
0
69,000
0
0
70
0
0
70
0
0
0
0
0
270
300(8)
0
100 45,900
4,870
72,060
60 32,680
0 12,310
40
920
0
0
3,380
1,440
51,550
20,510
50
0
0
0
0 4,890
600
9,320
950
950
730
790
1,260
1,260
0
0
11,710
890
0 50,280
0
25,810
(1) Data has been rounded to the nearest ten. In some instances the sum of totals for quality, source and destination may differ due to rounding.
(2) Petroleum assets have been grouped due to their relatively lower volumes of water withdrawals, discharges and consumption compared to the mining assets.
(3) Based on the physical risk rating from the WWF Water Risk filter and is based on the definition of water stress in the CEO Water Mandate’s ‘Corporate Water Disclosure Guidelines (2014)’.
(4)
Those assets with a high or very high physical risk rating are defined as being located in a ‘water-stressed area’.
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.
(5) Third-party water withdrawals were reported by source in prior years however have been reported as a distinct category in FY2021 for transparency.
(6) This third-party water is sourced from a combination of seawater (desalination), groundwater and surface water sources in varying proportions across the reporting period.
(7) This volume was discharged as water supply to a neighbouring organisation.
(8) This volume was discharged from BMA and supplied to BMC and is therefore not considered as water supplied to another organisation.
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4.9 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 it 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 continue to be delayed or 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. While there has been progress in priority areas,
such as individual compensation and indemnification for the damage
caused by the dam failure, it is not possible at this time to provide a range
of possible outcomes for all proceedings or a reliable estimate of potential
future exposures. There are numerous additional lawsuits against Samarco
relating to the dam failure to which the Group is not party. Currently, there
are approximately 50 ongoing public civil claims and 20 that are suspended.
The most significant of these proceedings are summarised below.
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$4 billion)
in aggregate for clean-up costs and damages.
On 2 March 2016, BHP Brasil, together with Vale and Samarco, entered into
a Framework Agreement with the states of Espírito Santo and Minas Gerais
and other public authorities 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, as a primary obligor, 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, as secondary obligors, in
proportion to its 50 per cent shareholding in Samarco.
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 Brazilian 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(1) by the 12th Federal Court) – seeking
R$155 billion (approximately US$30 billion) for reparation, compensation
and collective moral damages in relation to the Samarco dam failure.
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 the R$155 billion Federal Public Prosecutors’ Office claim.
Despite suspension of this public civil claim being for a period of two years
from the date of ratification of the Governance Agreement (described
below) on 8 August 2018 the claim has not been resumed. On 19 March
2021, the parties to the case agreed to extend the suspension of this
case until 27 April 2021. Although the stay period has formally elapsed,
neither party has made any filings to date, and the parties are engaged
in negotiations to seek a definitive settlement (summarised below).
Governance Agreement
On 25 June 2018, BHP Brasil, Vale, Samarco, the other parties to the
Framework Agreement, the Public Prosecutors’ Office(2) and the Public
Defense Office(3) entered into a Governance Agreement, which settled the
R$20 billion Public Civil Claim and established a process to renegotiate
the Programs over two years to progress settlement of the R$155 billion
Federal Public Prosecutors’ Office claim.
Under the Governance Agreement, renegotiation of the Programs will be
based on certain agreed principles, including 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.
Since early CY2021, the parties have been engaging in negotiations, to
seek a definitive and substantive settlement of claims relating to the dam
failure. The mediation is ongoing as at the date of this Report. It is not
possible to provide a range of outcomes or a reliable estimate of potential
settlement outcomes and there is a risk that a negotiated outcome may
be materially higher than amounts currently reflected in the Samarco dam
failure provision. 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.
Enforcement Proceedings
Since 7 January 2020, the 12th Federal Court of Belo Horizonte has issued
several decisions creating 13 enforcement proceedings (Enforcement
Proceedings) linked to the R$20 billion Public Civil Claim and R$155 billion
Federal Public Prosecutors’ Office claim described above. The 13
Enforcement Proceedings seek to expedite the remediation process
related to the Samarco dam failure. 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 advisers to
impacted people, and restructuring Fundação Renova’s management
system, 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, set-off of
compensation paid against future damages that may need to be paid,
and determination regarding the hiring and supervision of technical
assistants to impacted people.
Samarco’s judicial reorganisation
On 9 April 2021, Samarco filed for judicial reorganisation (JR) with the
Second Business State Court for the Belo Horizonte District of Minas Gerais
(JR Court). The JR proceeding seeks to enable Samarco to negotiate and
implement an orderly restructuring of its financial indebtedness in order
to establish a sustainable financial position for Samarco, among other
things, to continue to rebuild its operations and meet its Fundação Renova
obligations. Samarco filed for JR following multiple enforcement actions
filed by Samarco’s creditors that threatened its operations. The JR Court
granted Samarco’s JR petition on 12 April 2021 and granted a stay of the
enforcement actions.
On 10 June 2021, Samarco submitted its first proposed Plan of
Reorganisation (Plan) to the JR Court. Certain of Samarco’s creditors have
submitted formal objections to the Plan. It is expected that a general
meeting of creditors will be convened for creditors to vote on whether
to approve, reject or modify the Plan.
According to the list of creditors filed with the JR Court by the Judicial
Administrators (who are in charge of a first review of the list of creditors
(1) Currently, solely BHP Brasil, Vale and Samarco, the Federal Government and the state of Minas Gerais are defendants.
(2) The Public Prosecutors’ Office includes the Federal, State of Minas Gerais and State of Espírito Santo public prosecutors’ offices.
(3) The Public Defense Office includes the Federal, State of Minas Gerais and State of Espírito Santo public defense offices.
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23Financial StatementsGovernance1Strategic Report4Additional Information 4.9 Legal proceedings continued
filed by Samarco), Fundação Renova’s funding obligations undertaken by
Samarco are not subject to the JR, although some financial creditors of
Samarco have objected to this position. It is expected that such creditors
will challenge the list of creditors filed by the Judicial Administrators, in order
to, among other things, prevent Samarco from funding Fundação Renova.
It is also expected that such creditors will litigate against Samarco and its
shareholders over the course of the JR proceeding, particularly with respect
to the treatment of Samarco’s Fundação Renova obligations. Such lenders
have objected to the financing that BHP Brasil and Vale have offered to
Samarco on a super-priority basis, known as debtor-in-possession funding.
No BHP entity is a debtor in Samarco’s judicial reorganisation case. BHP Brasil
is participating in Samarco’s JR proceeding in its capacities as a shareholder
and creditor.
United States Chapter 15 Case
On 19 April 2021, Samarco filed a petition with the U.S. Bankruptcy Court for
the Southern District of New York seeking recognition of the JR proceeding
under Chapter 15 of the U.S. Bankruptcy Code. On 13 May 2021, the U.S.
bankruptcy court granted recognition of the JR proceeding as a ‘foreign
main proceeding’ and accordingly stayed enforcement actions against
Samarco in the U.S. territory. No BHP entity is a debtor in Samarco’s Chapter
15 case. BHP Brasil is participating in Samarco’s Chapter 15 proceeding in its
capacities as a shareholder and creditor of Samarco.
Civil public actions commenced by the State Prosecutors’ Office
in the state of Minas Gerais (Mariana CPA cases)
The State Prosecutors of Mariana have commenced several civil public
actions (CPA) against BHP Brasil, Samarco and Vale.
On 10 December 2015, the State Prosecutors’ Office in the state of Minas
Gerais filed a CPA against Samarco, BHP Brasil and Vale 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 (CPA Mariana I).
On 2 October 2018, the parties reached a settlement dismissing the claim,
which was ratified by the Court. Under this settlement, Fundação Renova
has reached more than 85 individual agreements with impacted families
in Mariana for the payment of damages.
In connection with CPA Mariana I, the State Prosecutors (Minas Gerais)
started four enforcement proceedings against Samarco, BHP Brasil
and Vale seeking to set a deadline for completion of resettlement and
for fines to be imposed for delays to resettlement and for payment
of compensation to affected individuals for delivery of houses
below standard.
In addition to CPA Mariana I, the State Prosecutors (Minas Gerais)
commenced eight other CPAs in Mariana against Samarco, BHP Brasil,
Vale and, in some cases, Fundação Renova. The claims presented
in those CPAs are related to damages that, according to the State
Prosecutors, are not covered by CPA Mariana I.
The remaining CPAs have either been settled by the parties, including
BHP, or the claims to which the CPAs relate have been dismissed (though
the decisions are not yet final). Fundação Renova is responsible for any
pending obligations set forth in the settlement agreements relating to
the CPAs.
Fundação Renova dissolution lawsuit
On 24 February 2021, the Minas Gerais State Prosecutor filed a CPA
against Samarco, BHP Brasil, Vale and Fundação Renova seeking the
dissolution of Fundação Renova. The plaintiffs are seeking R$10 billion
(approximately US$2 billion) for moral damages and an injunction for the
immediate intervention of Fundação Renova was also made, alleging the
need to preserve information and documents produced by Fundação
Renova to evaluate criminal and civil responsibilities. On 25 May 2021, the
Superior Court of Justice granted urgent relief to suspend the lawsuit.
As at the date of this Report, the Court’s decision regarding the merits
remains pending.
Civil public action commenced by the State Prosecutors’ Office
in the state of Espírito Santo and Minas Gerais (CPA Advertising)
On 11 May 2021, Federal and State Prosecutors (Minas Gerais and
Espírito Santo) filed a CPA against Fundação Renova, Samarco,
BHP Brasil and Vale, challenging Fundação Renova’s advertising
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expenditures. The plaintiffs requested injunctive relief for Fundação
Renova to cease advertisements and stop incurring new expenses
on advertising. The plaintiffs requested payment of approximately
R$56 million (approximately US$11 million) to be paid as compensation
to the communities and approximately R$28 million (approximately
US$6 million) to be spent on execution of Fundação Renova’s socio-
economic and socio-environmental programs. A ruling is still pending.
Public civil claims currently suspended
Approximately 20 of the proceedings to which BHP Brasil is a party are
currently suspended due to their connection with R$20 billion Public
Civil Claim and R$155 billion Federal Public Prosecutors’ Office claim.
There has not yet been a ruling in these cases.
The suspended proceedings include proceedings commenced by the
State Prosecutors (Minas Gerais and Espírito Santo), Public Defenders
(Minas Gerais and Espírito Santo), and the states of Minas Gerais and
Espírito Santo against Samarco, BHP Brasil, Vale and Fundação Renova.
The claims relate to environmental remediation measures, compensation
for the impacts of the dam failure, including moral damages,
reconstruction of properties and populations, including historical,
religious, cultural, social, environmental and intangible heritages affected
by the dam failure, and suspension of public water supply, among others.
Other civil proceedings in Brazil
As noted above, BHP Brasil has been named as a defendant in numerous
lawsuits relating to the Samarco dam failure. 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 1.15.
As at June 2021, Samarco had been named as a defendant in more
than 80,000 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 24,000 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.
The Brazilian Code of Civil Procedure provides that repetitive claims
can be settled through a system known as Incident of Resolution of
Repetitive Demands (IRDR). Under the IRDR, a court will hear a ‘pilot case’
representative of a recurring claim and the judgment in that decision
will set a precedent for the resolution of similar cases in that jurisdiction.
An IRDR has been established in Minas Gerais and the court in the pilot
case has ruled that the mandatory parameter for resolution of claims
will be the payment of R$2,000 per individual claim for moral damages
due to the suspension and quality of public water supply. That decision
is pending an appeal before higher courts. Meanwhile, Samarco has
reached settlement in more than 5,300 individual cases.
Criminal charges
On 20 October 2016, the Federal Prosecutors’ Office in Brazil filed criminal
charges against Samarco, BHP Brasil, 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 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 with hearings of the
appeals still pending. 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 defences 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 Bondholder Complaint
asserted claims under the U.S. federal securities laws and indicated that
the plaintiff would seek certification to proceed as a class action.
The Bondholder Complaint was subsequently amended to include BHP
Group Limited, 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 amount of damages sought by the putative class
was 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 District Court denied the plaintiff’s
motion for reconsideration and for leave to amend its complaint.
On 4 March 2021, the U.S. Court of Appeals for the Second Circuit
affirmed the dismissal with prejudice and the plaintiff did not seek
any further review of that decision.
Australian class action complaint
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 Limited 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 class action is unspecified.
On 12 May 2020, BHP Group Limited filed an application seeking
declaratory relief which, if successful, would narrow the group of
claimants in the class action. BHP Group Limited was unsuccessful at first
instance and on appeal to the Full Court of the Federal Court of Australia.
BHP Group Limited has now sought leave to appeal the decision of the
Full Court to the High Court of Australia.
United Kingdom group action complaint
BHP Group Plc and BHP Group Limited 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. That application was successful and the action was dismissed.
The claimants sought and were denied permission to appeal the
dismissal decision.
On 29 April 2021, the claimants applied to reopen the action. The Court
of Appeal heard this application on 22 June 2021 and gave judgment on
27 July 2021, allowing the claimants to reopen the action and granting
them permission to appeal the dismissal decision. A date for this
appeal has not yet been set.
4.10 Shareholder information
4.10.1 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 4.10.3.
4.10.2 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).
4.10.3 Organisational structure
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 note 13 ‘Related undertakings
of the Group’ in section 3.2.
On 17 August 2021, BHP announced its intention to unify its current DLC
structure. For further details of the unification proposal, see section 1.5.
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.
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Annual Report 2021
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23Financial StatementsGovernance1Strategic Report4Additional Information 4.10 Shareholder information continued
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 below and section 4.10.5.
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.
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Annual Report 2021
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 4.10.5, 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.
4.10.4 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 4.10.3.
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 4.9.
4.10.5 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 ‘DLC structure’ in section 4.10.3.
Directors
The Board may exercise all powers of BHP, other than those that are
reserved for BHP shareholders to exercise in a general meeting.
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
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.
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.
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.
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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.
– 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 ‘DLC structure’ in section 4.10.3 and the DLC Dividend Share being
held by BHP Group Plc or a wholly owned member of its group, decide
to pay on that DLC Dividend Share.
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.
Rights attaching to shares
Dividend rights
Under English law, dividends on shares may only be paid out of profits
available for distribution. Under Australian law, dividends on shares may be
paid only if the company’s assets exceed its liabilities immediately before
the dividend is determined and the excess is sufficient for payment of
the dividend, the payment of the dividend is fair and reasonable to the
company’s shareholders as a whole and the payment of the dividend does
not materially prejudice the company’s ability to pay its creditors.
The Constitution and Articles of Association provide that payment of any
dividend may be made in any manner, by any means and in any currency
determined by the Board.
All unclaimed dividends may be invested or otherwise used by the Board for
the benefit of whichever of BHP Group Limited or BHP Group Plc determined
that dividend, until claimed or, in the case of BHP Group Limited, otherwise
disposed of according to law. BHP Group Limited is governed by the
Victorian unclaimed monies legislation, which requires BHP Group Limited to
pay to the State Revenue Office any unclaimed dividend payments of A$20
or more that have remained unclaimed for over 12 months.
In the case of BHP Group Plc, any dividend unclaimed after a period of
12 years from the date the dividend was determined or became due for
payment will be forfeited and returned to BHP Group Plc.
Voting rights
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 ‘DLC
structure’ in section 4.10.3.
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 that the
Board determines to distribute, 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.
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Annual Report 2021
– 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 that the Board determines
to distribute, 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 ‘DLC structure’ in section
4.10.3 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 ‘DLC structure’ in section 4.10.3, 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 ‘DLC structure’ in section 4.10.3. The DLC Dividend Share
issued by BHP Group Limited (BHP Group Limited DLC Dividend Share)
and the DLC Dividend Share that may be issued by BHP Group Plc (BHP
Group Plc DLC Dividend Share) have no voting rights and, as set out in
‘Rights on return of assets on liquidation’ 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.
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.
Redemption of preference shares
If BHP Group Limited at any time proposes to create and issue any
preference shares, the terms of the preference shares may give either
or both 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 ‘Power to issue securities’, BHP can
issue preference shares that are subject to a right of redemption on terms
the Board considers appropriate.
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.
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
Annual General Meetings
The AGMs provide a forum to facilitate the sharing of shareholder views
and are important events in the BHP calendar. These meetings provide an
update for shareholders on our performance and offer an opportunity for
shareholders to ask questions and vote. 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 time
before the relevant AGM.
Key members of management, including the CEO and CFO, are present
and available to answer questions. The External Auditor will also be
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.
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 and
finalisation of the polls.
More information on our AGMs is available at bhp.com/meetings.
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.
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 or other securities
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 4.10.9
and ‘DLC structure’ in section 4.10.3.
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.
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4.10.6 Share ownership
Share capital
The details of the share capital for both BHP Group Limited and BHP Group Plc are presented in note 16 ‘Share capital’ in section 3 and remain current as
at 20 August 2021.
Major shareholders
The table in ‘Ordinary share holdings and transactions’ in section 2.2.3 and the information set out ‘Key Management Personnel’ in section 2.3.5 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 ‘DLC Structure’ in section 4.10.3, no 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 2021.(1)
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
Ordinary shares
Vanguard Group
18 June 2020
19 March 2020
176,981,268
177,088,930
2021
6.00
6.00
2020
6.00
6.01
2019
5.46
–
Date of last notice
% of total voting rights(2)
(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 2021 and 20 August 2021.
(2) The percentages quoted are based on the total voting rights conferred by ordinary shares in BHP Group Limited as at 20 August 2021 of 2,950,251,394.
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 2021.(1)
Date of last notice
% of total voting rights(2)
Date received
Date of change
Number owned
2021
2020
2019
Title of class
Ordinary shares
Identity of person
or group
Aberdeen Asset
Managers Limited
Ordinary shares
BlackRock, Inc.
3 December 2009
1 December 2009
Ordinary shares
Ordinary shares
Elliott
International, L.P.(4)
Norges Bank(5)
4 January 2020
1 January 2020
21 July 2020
20 July 2020
106,940,721
105,910,183
8 October 2015
7 October 2015
103,108,283
213,014,043(3)
4.88
<10.00
5.06
5.01
4.88
<10.00
5.06
5.01
4.88
<10.00
5.45
3.07
(1) No changes in the holdings of 3 per cent or more of voting rights in BHP Group Plc’s shares have been notified to BHP Group Plc between 1 July 2021 and 20 August 2021.
(2) The percentages quoted are based on the total voting rights conferred by ordinary shares in BHP Group Plc as at 20 August 2021 of 2,112,071,796.
(3) The TR-1 notification of major holdings form 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.
(5) Holding is made up of 5.01 per cent ordinary shares and 0.001 per cent by financial instruments.
Twenty largest shareholders as at 20 August 2021 (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. BNP Paribas Nominees PTY Ltd Six Sis Ltd
10. HSBC Custody Nominees (Australia) Limited
11. Computershare Nominees CI Ltd
12. Australian Foundation Investment Company Limited
13. HSBC Custody Nominees (Australia) Limited
14. Netwealth Investments Limited
15. BNP Paribas Nominees Pty Ltd ACF Clearstream
16. Argo Investments Limited
17. CS Third Nominees Pty Limited
18. BNP Paribas Nominees Pty Ltd Hub24 Custodial Serv Ltd
19. Solium Nominees (Australia) Pty Ltd
20. Milton Corporation Limited
298
BHP
Annual Report 2021
Number of fully
paid shares
% of issued
capital
645,004,218
469,192,067
227,232,926
133,872,944
95,294,905
53,391,864
49,862,404
29,303,581
26,792,321
21,100,336
16,974,417
13,413,159
12,599,528
9,723,904
8,859,295
7,618,304
6,991,188
6,466,956
6,344,025
4,854,921
21.86
15.90
7.70
4.54
3.23
1.81
1.69
0.99
0.91
0.72
0.58
0.45
0.43
0.33
0.30
0.26
0.24
0.22
0.22
0.16
1,844,893,263
62.53
BHP Group Plc
1. PLC Nominees (Proprietary) Limited(2)
2. National City Nominees Limited
3. State Street Nominees Limited
4. Vidacos Nominees Limited <13559>
5. Chase Nominees Limited
6. The Bank Of New York (Nominees)
7. State Street Nominees Limited
8. Government Employees Pension Fund-Public Investment Corporation
9. Nortrust Nominees Limited
10. State Street Nominees Limited
11. Chase Nominees Limited
12. Hanover Nominees Limited
13. Hanover Nominees Limited
14. Chase Nominees Limited
15. Lynchwood Nominees Limited
Industrial Development Corporation of South Africa
16. State Street Nominees Limited
17.
18. State Street Nominees Limited
19. Hanover Nominees Limited
20. Vidacos Nominees Limited
Number of fully
paid shares
% of issued
capital
271,064,311
121,100,203
108,021,608
103,135,721
91,777,141
67,444,587
50,880,990
40,389,304
39,359,904
35,523,641
29,919,629
29,263,154
28,040,186
27,621,622
26,221,509
24,820,368
23,537,693
21,080,452
18,945,039
18,009,571
1,176,156,633
12.83
5.73
5.11
4.88
4.35
3.19
2.41
1.91
1.86
1.68
1.42
1.39
1.33
1.31
1.24
1.18
1.11
1.00
0.90
0.85
55.69
(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 20 August 2021
BHP Group Limited
BHP Group Plc
Number of
shareholders
1,533
1,533
%
0.28
0.28
Number
of shares
3,711,268
228,895,234(1)
%
0.13
7.76
Number of
shareholders
76
189
%
0.57
1.41
Number
of shares
92,970
121,100,202(2)
%
0.01
5.73
Classification of holder
Registered holders of voting securities
ADR holders
(1) These shares translate to 114,447,617 ADRs.
(2) These shares translate to 60,550,101 ADRs.
Geographical distribution of shareholders and shareholdings as at 20 August 2021
Registered address
Australia
New Zealand
United Kingdom
United States
South Africa
Other
Total
BHP Group Limited
BHP Group Plc
Number of
shareholders
526,748
8,859
2,486
1,533
96
3,559
%
96.96
1.63
0.46
0.28
0.02
0.65
Number
of shares
2,895,280,282
20,016,647
6,504,235
3,711,268
217,529
24,521,433
%
98.14
0.68
0.22
0.13
0.01
0.82
Number of
shareholders
1,495
25
9,172
76
1,935
741
%
11.12
0.19
68.22
0.57
14.39
5.51
Number
of shares
1,986,279
34,208
1,836,043,487
92,970
271,244,446
2,670,406
%
0.09
0.01
86.93
0.01
12.84
0.13
543,281
100.00
2,950,251,394 100.00
13,444 100.00
2,112,071,796 100.00
Distribution of shareholdings by size as at 20 August 2021
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
BHP Group Limited
BHP Group Plc
Number of
shareholders
%
Number
of shares(1)
%
Number of
shareholders
%
Number
of shares(1)
%
254,525
100,846
148,183
23,571
12,189
2,620
880
322
72
28
45
543,281
46.85
18.56
27.28
4.34
2.24
0.48
0.16
0.06
0.01
0.01
0.01
100.00
53,184,352
77,206,333
331,352,333
166,292,785
182,978,713
89,156,739
60,146,735
45,485,094
24,988,342
19,404,350
1,900,055,618
2,950,251,394
1.80
2.62
11.23
5.64
6.20
3.02
2.04
1.54
0.85
0.66
64.40
100.00
7,169
2,229
2,300
355
328
196
187
242
121
110
207
53.32
16.58
17.11
2.64
2.44
1.46
1.39
1.80
0.90
0.82
1.54
13,444 100.00
1,423,059
1,641,003
4,722,591
2,528,873
5,415,961
7,137,840
13,643,993
39,735,115
43,918,465
78,002,808
1,913,902,088
2,112,071,796
0.07
0.09
0.24
0.12
0.25
0.34
0.71
1.78
2.39
3.32
90.62
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$44.34 as at 20 August 2021 was 5,703.
BHP
Annual Report 2021
299
23Financial StatementsGovernance1Strategic Report4Additional Information 4.10 Shareholder information continued
Classification of holder
Corporate
Private
Total
BHP Group Limited
BHP Group Plc
Number of
shareholders
%
Number
of shares
%
Number of
shareholders
%
Number
of shares
%
156,217
387,064
28.75
71.25
2,164,415,676
785,835,718
73.36
26.64
4,591
8,853
34.15
66.85
2,103,853,273
8,218,523
99.61
0.39
543,281
100.00
2,950,251,394 100.00
13,444 100.00
2,112,071,796 100.00
4.10.7 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
FY2021, refer to section 1.8.1.
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 1.6.
In FY2021, 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 are based on foreign currency exchange rates
on a single day or an average for a period of days ending on or before
the dividend record date. Different periods are used for each currency,
based on the size of the dividend and each currency’s liquidity and
market dynamics.
Setting currency conversion rates based on a single day or over a range
of days helps to reduce the Group’s exposure to movements in exchange
rates, while optimising currency market liquidity to accommodate
potential larger dividend currency requirements.
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.
4.10.8 American Depositary Receipts
fees and charges
We have American Depositary Receipts (ADR) programs for BHP Group
Limited and BHP Group Plc. Both of the ADR programs have a 2:1 ordinary
shares to American Depositary Share (ADS) ratio.
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)
Up to US$5.00 per 100 ADSs
(or fraction thereof) held
Up to US$5.00 per 100 ADSs
(or fraction thereof) held
Fees payable by the Depositary to the Issuer
Citibank has provided BHP net reimbursement of US$1,157,500 in FY2021 for
ADR program-related expenses for both of BHP’s ADR programs (FY2020
US$1,157,500). 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 FY2021, amounting to US$24,189.85 (BHP Group Limited: US$17,663.41;
BHP Group Plc: $6,526.44) which are associated with the administration of
the ADR programs (FY2020 less than US$0.03 million).
The ADSs issued under 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 20 August 2021, there were 114,447,617
ADSs on issue and outstanding in the BHP Group Limited ADR program
and 60,550,101 ADSs on issue and outstanding in the BHP Group Plc
ADR program.
300
BHP
Annual Report 2021
4.10.9 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 and process 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. We also rely
on governments to grant the rights necessary to transport and treat the
extracted material to prepare it for sale. 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 other taxes to the government.
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 1.13.
The Western Australia Government is currently progressing the Aboriginal
Cultural Heritage Bill 2020 (ACH Bill), which, if passed into law, is expected
to strengthen the government’s authority to regulate land use including
mining activities, and the consultation process in relation to Aboriginal cultural
heritage sites in Western Australia. For more information, refer to section 1.13.10.
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), China
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.
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 FY2021.
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
BHP
Annual Report 2021
301
23Financial StatementsGovernance1Strategic Report4Additional Information Shareholding limits
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 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.
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 securities 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 securities in an Australian company.
Lower approval thresholds apply in certain circumstances, including for
acquisitions by a foreign government investor of voting power or issued
securities in an Australian company.
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 national
security or 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 securities or voting power in an Australian company, including BHP
Group Limited.
The restrictions in the FATA on acquisitions of securities in BHP Group
Limited described above apply equally to acquisitions of securities 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.
4.10 Shareholder information continued
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; and
– 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, and on 19 January
2021, OFAC renewed the license through to 31 January 2023. 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 transactions in FY2021 related to the Bruce-
Rhum Agreement. For the period 1 July 2020 to 30 June 2021, BHP received
US$2.2 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. Each of the service
providers we engage to transport uranium is required to hold a permit to
transport nuclear material issued by the Australian Safeguards and Non-
Proliferation Office.
302
BHP
Annual Report 2021
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 2021
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 or times, all relevant stock exchanges (see section 4.10.2) will
be notified.
Date
21 September 2021
14 October 2021
11 November 2021
15 February 2022
Event
Final dividend payment date
BHP Group Plc Annual General Meeting
in London
Time: 9.00am (local time)
Details of the business of the meeting
are contained in the separate Notice
of Meeting
BHP Group Limited Annual General
Meeting in Perth
Time: 1.00pm (local time)
Details of the business of the meeting
are contained in the separate Notice
of Meeting
BHP Results for the half year ended
31 December 2021
Shareholding limits under the Constitution and Articles of Association
There are certain other statutory restrictions and restrictions that are
reflected in 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)
– above 20 per cent in relation to BHP Group Plc, calculated having 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.
4.10.10 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.
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.
BHP
Annual Report 2021
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23Financial StatementsGovernance1Strategic Report4Additional Information 4.11 Glossary
4.11.1 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.
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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.
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).
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 (or 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.
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.
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 Sulphide 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.
4.11.2 Terms used in
reserves and resources
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
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
4.11.3 Units of measure
%
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
koz
thousand troy ounces
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)
ML
megalitre
mm
millimetre
MMbbl/d
million barrels per day (measured at the pressure bases set
by the regulator)
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
Mscf
thousand standard cubic feet
Mt
million tonnes
Mtpa
million tonnes per annum
MW
Megawatt
oz
troy 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
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4.11.4 Other terms
AASB (Australian Accounting Standards Board)
Accounting standards as issued by the Australian
Accounting Standards Board.
Activity data
A quantitative measure of a level of activity that results in
greenhouse gas emissions. Activity data is multiplied by
an energy and/or emissions 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, if listed, trade them on the stock
exchanges in the United States.
ADSs are evidenced by American Depositary Receipts, or
ADRs, which are the instruments that, if listed, trade on a
stock exchange in the United States.
ASIC (Australian Securities and
Investments Commission)
The Australian Government agency that enforces laws
relating to companies, securities, financial services
and credit in order to protect consumers, investors
and creditors.
Assets
Assets are a set of one or more geographically proximate
operations (including open-cut mines, underground
mines, and onshore and offshore oil and gas production
and production facilities). Assets include our operated and
non-operated assets.
Asset groups
We group our assets into geographic regions in order to
provide effective governance and accelerate performance
improvement. Minerals assets are grouped under Minerals
Australia or Minerals Americas based on their geographic
location. Oil, gas and petroleum assets are grouped
together as Petroleum.
ASX (Australian Securities Exchange)
ASX is a multi-asset class vertically integrated exchange
group that functions as a market operator, clearing house
and payments system facilitator. It oversees compliance
with its operating rules, promotes standards of corporate
governance among Australia’s listed companies and helps
educate retail investors.
BHP
Both companies in the DLC structure, being BHP Group
Limited and BHP Group Plc and their respective subsidiaries.
BHP Group Limited
BHP Group Limited and its subsidiaries.
BHP Group Limited share
A fully paid ordinary share in the capital of BHP
Group Limited.
BHP Group Limited shareholders
The holders of BHP Group Limited shares.
BHP Group Limited Special Voting Share
A single voting share issued to facilitate joint voting
by shareholders of BHP Group Limited on Joint
Electorate Actions.
BHP Group Plc
BHP Group Plc and its subsidiaries.
BHP Group Plc share
A fully paid ordinary share in the capital of BHP Group Plc.
BHP Group Plc shareholders
The holders of BHP Group Plc shares.
BHP Group Plc Special Voting Share
A single voting share issued to facilitate joint voting by
shareholders of BHP Group Plc on Joint Electorate Actions.
BHP shareholders
In the context of BHP’s financial results, BHP shareholders
refers to the holders of shares in BHP Group Limited and
BHP Group Plc.
Board
The Board of Directors of BHP.
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Canadian Greenhouse Gas Reporting Program
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.
Carbon offsets
The central purpose of a carbon offset for an organisation
is to substitute for internal GHG emission reductions.
Offsets may be generated through projects in which
GHG emissions are avoided, reduced, removed from
the atmosphere or permanently stored (sequestration).
Carbon offsets are generally created and independently
verified in accordance with either a voluntary program or
under a regulatory program. The purchaser of a carbon
offset can ‘retire’ or ‘surrender’ it to claim the underlying
reduction towards their own GHG emissions reduction
targets or goals or to meet legal obligations.
CQCA
Central Queensland Coal Associates.
Commercial
Our Commercial function seeks to maximise commercial
value across our end-to-end supply chain. It provides
effective and efficient service levels to our assets and
customers through world class insights and market
intelligence, deep subject-matter expertise, simple
processes and centralised standard activities. The function
is organised around the core activities in our inbound and
outbound value chains, supported by business partnering,
credit and market risk management, and strategy and
planning activities.
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. kgCO2-e emitted per GJ of fuel
consumed, kgCO2-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.
Entrained water
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 through regulation of pollution and waste.
Evaporation volume
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 Operations
(Minerals Australia), the President Operations (Minerals
Americas), and the President Operations (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 the equity interest owned
– for operations accounted for as a joint operation, the
company’s interest in the operations
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). Nitrogen trifluoride
(NF3) GHG emissions are currently not relevant for BHP
reporting purposes
Goal (in respect of greenhouse gas emissions)
An ambition to seek an outcome for which there is no
current pathway(s), but for which efforts will be pursued
towards addressing that challenge, subject to certain
assumptions or conditions.
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.
Legacy assets
Legacy assets refer to those BHP-operated assets, or
part thereof, located in the Americas that are in the
closure phase.
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.
Net zero (for a BHP greenhouse gas goal,
target or pathway, or similar)
Net zero includes the use of carbon offsets as required.
Net zero (for industry sectors, the global economy,
transition or future, or similar)
Net zero refers to a state in which the greenhouse gases
(as defined in this Glossary) going into the atmosphere are
balanced by removal out of the atmosphere.
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.
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 Operations, Minerals
Australia, the President Operations, Minerals Americas, and
the President Operations, Petroleum. The Committee also
determined that, effective 1 July 2017, the Chief External
Affairs Officer and Chief People Officer roles are no longer
considered KMP.
Onshore US
BHP’s petroleum asset (divested in the 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.
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.
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.
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 pre-industrial levels and
pursue efforts to limit the temperature increase to 1.5°C
above pre-industrial levels.
Paris-aligned
Aligned to the Paris Agreement goals.
Petroleum (asset group)
A group of 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.
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 the
reporting company. For BHP, these are primarily emissions
from fuel consumed by haul trucks at our operated assets,
as well as fugitive methane emissions from coal and
petroleum production at our operated assets.
Scope 2 greenhouse gas emissions
Scope 2 greenhouse gas emissions are indirect emissions
from the generation of purchased or acquired electricity,
steam, heat or cooling that is consumed by operations that
are owned or controlled by the reporting company. BHP’s
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 the
reporting company’s value chain. For BHP, these are
primarily emissions resulting from our customers using
and processing the 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.
BHP
Annual Report 2021
307
23Financial StatementsGovernance1Strategic Report4Additional 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.
4.11 Glossary continued
Shareplus
All-employee share purchase plan.
Social investment
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. 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 and external water dams.
Target (in respect of greenhouse gas emissions)
An intended outcome in relation to which we have
identified one or more pathways for delivery of that
outcome, subject to certain assumptions or conditions.
Third-party water
Water supplied by an entity external to the operational
facility. Third-party water contains water from the other
three sources, surface water, groundwater and seawater.
Tier 1 asset
An asset that we believe is large, long life and low cost.
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 3. Refer to section 4.2 for further information.
Underlying EBIT
Underlying EBITDA, including depreciation,
amortisation and impairments. Refer to section 4.2 for
further information.
Underlying EBITDA
Earnings before net finance costs, depreciation,
amortisation and impairments, taxation expense,
Discontinued operations and exceptional items. Refer to
section 4.2 for further information.
308
BHP
Annual Report 2021
Corporate directory
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Read our reports at bhp.com
Economic
Contribution
Report 2021
Modern Slavery
Statement
2021
Climate
Transition Action
Plan 2021
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