UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 20-F
(Mark One)
¨ | REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934 |
OR
x | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
FOR THE FISCAL YEAR ENDED 30 JUNE 20112014
OR
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES AND EXCHANGE ACT OF 1934 |
¨ | SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Date of event requiring this shell company report
For the transition period fromto
Commission file number: 001-09526 | Commission file number: 001-31714 | |
BHP BILLITON LIMITED | BHP BILLITON PLC | |
(ABN 49 004 028 077) | (REG. NO. 3196209) | |
(Exact name of Registrant as specified in its charter) | (Exact name of Registrant as specified in its charter) | |
VICTORIA, AUSTRALIA | ENGLAND AND WALES | |
(Jurisdiction of incorporation or organisation) | (Jurisdiction of incorporation or organisation) | |
VICTORIA 3000 AUSTRALIA | NEATHOUSE PLACE, UNITED KINGDOM | |
(Address of principal executive offices) | (Address of principal executive offices) |
Securities registered or to be registered pursuant to section 12(b) of the Act.
Title of each class | Name of each exchange on | Title of each class | Name of each exchange on | |||
American Depositary Shares* | New York Stock Exchange | American Depositary Shares* | New York Stock Exchange | |||
Ordinary Shares** | New York Stock Exchange | Ordinary Shares, nominal
| New York Stock Exchange |
* | Evidenced by American Depositary Receipts. Each American Depositary Receipt represents two ordinary shares of BHP Billiton Limited or BHP Billiton Plc, as the case may be. |
** | Not for trading, but only in connection with the listing of the applicable American Depositary Shares. |
Securities registered or to be registered pursuant to Section 12(g) of the Act.
None
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.
None
Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report.
BHP Billiton Limited | BHP Billiton Plc | |||
Fully Paid Ordinary Shares | 3,211,654,687 | 2,138,367,191 |
BHP Billiton Limited | BHP Billiton Plc | |||
Fully Paid Ordinary Shares | 3,211,691,105 | 2,136,185,454 |
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes x No ¨
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. Yes ¨ No x
Note – Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ¨ No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer x | Accelerated filer ¨ |
| Non-accelerated filer ¨ |
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
U.S. GAAP ¨ | International Financial Reporting Standards as issued by the International Accounting Standards Board x | Other ¨ |
If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow. Item 17 ¨ Item 18 ¨
If this is an annual report, indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x
i
6 | 198 | |||||
6.1 | 199 | |||||
6.2 | 200 | |||||
6.3 | 216 | |||||
6.4 | 218 | |||||
6.5 | 230 | |||||
6.6 | 230 | |||||
7 | 233 | |||||
7.1 | 233 | |||||
7.2 | 235 | |||||
7.3 | 237 | |||||
7.4 | 237 | |||||
7.5 | 237 | |||||
7.6 | 238 | |||||
7.7 | 238 | |||||
7.8 | 239 | |||||
7.9 | 240 | |||||
7.10 | 240 | |||||
7.11 | 240 | |||||
7.12 | 240 | |||||
7.13 | 241 | |||||
7.14 | 241 | |||||
7.15 | 241 | |||||
7.16 | 241 | |||||
7.17 | 241 | |||||
7.18 | 241 | |||||
7.19 | 242 | |||||
7.20 | 242 | |||||
7.21 | 243 | |||||
7.22 | 243 | |||||
7.23 | Share capital, restrictions on transfer of shares and other additional information | 244 | ||||
8 | 245 | |||||
9 | 248 | |||||
10 | 249 | |||||
10.1 | 249 | |||||
10.2 | 253 | |||||
10.3 | 256 | |||||
10.4 | 257 | |||||
11 | 258 | |||||
11.1 | 258 | |||||
11.2 | 258 | |||||
11.3 | 262 | |||||
11.4 | 263 | |||||
11.5 | 264 | |||||
11.6 | 265 | |||||
11.7 | 272 | |||||
12 | 274 |
3.24 | 272 | |||||
4 | 273 | |||||
4.1 | 274 | |||||
4.2 | 276 | |||||
4.3 | 278 | |||||
4.4 | 296 | |||||
5 | 335 | |||||
5.1 | Review of operations, principal activities and state of affairs | 335 | ||||
5.2 | 336 | |||||
5.3 | 337 | |||||
5.4 | 338 | |||||
5.5 | 338 | |||||
5.6 | 339 | |||||
5.7 | 339 | |||||
5.8 | 340 | |||||
5.9 | 340 | |||||
5.10 | 340 | |||||
5.11 | 340 | |||||
5.12 | 341 | |||||
5.13 | 341 | |||||
5.14 | 341 | |||||
5.15 | 341 | |||||
5.16 | 341 | |||||
5.17 | 341 | |||||
5.18 | 341 | |||||
5.19 | 342 | |||||
5.20 | Share capital, restrictions on transfer of shares and other additional information | 343 | ||||
6 | 344 | |||||
7 | 346 | |||||
8 | 347 | |||||
8.1 | Mining, oil and gas-related terms | 347 | ||||
8.2 | Non-mining, oil and gas terms | 351 | ||||
8.3 | Terms used in reserves and resources | 356 | ||||
8.4 | Units of measure | 357 | ||||
9 | 358 | |||||
9.1 | History and development | 358 | ||||
9.2 | Markets | 358 | ||||
9.3 | Organisational structure | 358 | ||||
9.4 | Material contracts | 361 | ||||
9.5 | Constitution | 361 | ||||
9.6 | Share ownership | 367 | ||||
9.7 | Dividends | 371 | ||||
9.8 | Share price information | 372 | ||||
9.9 | American Depositary Receipts fees and charges | 374 | ||||
9.10 | Taxation | 375 | ||||
9.11 | Government regulations | 383 | ||||
9.12 | Ancillary information for our shareholders | 386 | ||||
10 | 391 |
ii
Form 20-F Cross Reference Table
Item Number | Description | Report section reference | ||
1. | Identity of directors, senior management and advisors | Not applicable | ||
2. | Offer statistics and expected timetable | Not applicable | ||
3. | Key Information | |||
A | Selected financial information | |||
B | Capitalisation and indebtedness | Not applicable | ||
C | Reasons for the offer and use of proceeds | Not applicable | ||
D | Risk factors | |||
4. | Information on the company | |||
A | History and development of the company | |||
B | Business overview | |||
C | Organisational structure | |||
D | Property, plant and equipment | 1.12, 2.1 | ||
4A. | Unresolved staff comments | None | ||
5. | Operating and financial review and prospects | |||
A | Operating results | |||
B | Liquidity and capital resources | |||
C | Research and development, patents and licences etc | |||
D | Trend information | |||
E | Off-balance sheet arrangements | |||
F | Tabular disclosure of contractual obligations | |||
6. | Directors, senior management and employees | |||
A | Directors and senior management | |||
B | Compensation | |||
C | Board practices | |||
D | Employees | |||
E | Share ownership | |||
7. | Major shareholders and related party transactions | |||
A | Major shareholders | |||
B | Related party transactions | |||
C | Interests of experts and counsel | Not applicable | ||
8. | Financial | |||
A | Consolidated statements and other financial information | |||
B | Significant changes | |||
9. | The offer and listing | |||
A | Offer and listing details | |||
B | Plan of distribution | Not applicable | ||
C | Markets | |||
D | Selling shareholders | Not applicable | ||
E | Dilution | Not applicable | ||
F | Expenses of the issue | Not applicable | ||
10. | Additional Information | |||
A | Share capital | Not applicable | ||
B | Memorandum and articles of association | 9.5 and 9.11 | ||
C | Material contracts | 9.4 |
iii
Item Number | Description | Report section reference | Description | Report section reference | ||||
10. | Additional Information | |||||||
A | Share capital | Not applicable | ||||||
B | Memorandum and articles of association | 2.7.3 and 2.12 | ||||||
C | Material contracts | 2.11 | ||||||
D | Exchange controls | 2.7.3 | Exchange controls | 9.11.2 | ||||
E | Taxation | 11.6 | Taxation | 9.10 | ||||
F | Dividends and paying agents | Not applicable | Dividends and paying agents | Not applicable | ||||
G | Statement by experts | Not applicable | Statement by experts | Not applicable | ||||
H | Documents on display | 2.12.14 | Documents on display | 9.5.14 | ||||
I | Subsidiary information | 3.9 and Note 25 to the Financial Statements | Subsidiary information | 1.15.6 and Note 26 to the Financial Statements | ||||
11. | Quantitative and qualitative disclosures about market risk | 3.7.4 and Note 28 to the Financial Statements | Quantitative and qualitative disclosures about market risk | 1.15.6 and Note 29 to the Financial Statements | ||||
12. | Description of securities other than equity securities | Description of securities other than equity securities | ||||||
A | Debt Securities | Not Applicable | Debt Securities | Not applicable | ||||
B | Warrants and Rights | Not applicable | Warrants and Rights | Not applicable | ||||
C | Other Securities | Not applicable | Other Securities | Not applicable | ||||
D | American Depositary Shares | 11.5 | American Depositary Shares | 9.9 | ||||
13. | Defaults, dividend arrearages and delinquencies | There have been no defaults, dividend arrearages or delinquencies | Defaults, dividend arrearages and delinquencies | There have been no defaults, dividend arrearages or delinquencies | ||||
14. | Material modifications to the rights of security holders and use of proceeds | There have been no material modifications to the rights of security holders and use of proceeds since our last Annual Report | Material modifications to the rights of security holders and use of proceeds | There have been no material modifications to the rights of security holders and use of proceeds since our last Annual Report | ||||
15. | Controls and procedures | 5.5.1 | Controls and procedures | 3.14.1 | ||||
16. | ||||||||
A | Audit committee financial expert | 4.1 and 5.5.1 | Audit committee financial expert | 3.2.1 and 3.14.1 | ||||
B | Code of ethics | 5.9 | Code of ethics | 3.17 | ||||
C | Principal accountant fees and services | 5.5.1 and Note 34 to the Financial Statements | Principal accountant fees and services | 3.14.1 and Note 35 to the Financial Statements | ||||
D | Exemptions from the listing standards for audit committees | Not applicable | Exemptions from the listing standards for audit committees | Not applicable | ||||
E | Purchases of equity securities by the issuer and affiliated purchasers | 7.2 | Purchases of equity securities by the issuer and affiliated purchasers | 5.2 | ||||
F | Change in Registrant’s Certifying Accountant | There has been no change of the Registrant’s Certifying Accountant since our last Annual Report | Change in Registrant’s Certifying Accountant | 3.14.1 | ||||
G | Corporate Governance | 5.11 | Corporate Governance | 3.23 | ||||
J (proposed) | Mine Safety and Health Administration (MSHA) Disclosure | The information concerning mine safety violations or other regulatory matters required by section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act. This item is included in Exhibit 99.1 | ||||||
H (proposed) | Mine Safety and Health Administration (MSHA) Disclosure | The information concerning mine safety violations or other regulatory matters required by section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act. This item is included in Exhibit 95.1 | ||||||
17. | Financial statements | Not applicable as Item 18 complied with | Financial statements | Not applicable as Item 18 complied with | ||||
18. | Financial statements | F-1 to F-101 and F-107 to F-114, Exhibit 15.1 | Financial statements | The pages beginning on page F-1 in this Annual Report, Exhibit 15.1 | ||||
19. | Exhibits | 12 | Exhibits | 10 |
iv
1 Key informationStrategic Report
1.1.1 Group overview
We are BHP Billiton, a leading global resources company. We are among the world’s largest diversified natural resources company. top producers of major commodities, including iron ore, metallurgical and energy coal, conventional and unconventional oil and gas, copper, aluminium, manganese, uranium, nickel and silver.
Our corporate objectivestrategy is to create long-term shareholder value through the discovery, acquisition, developmentown and marketing of natural resources.
We pursue this through our consistent strategy of owning and operatingoperate large, long-life, low-cost, expandable, upstream assets diversified by commodity, geography and market. Our portfolio of high-quality growth opportunities positions BHP Billiton to continue to meet the changing needs of our customers and the resource demands of emerging and developed economies at every stage of their growth.
This strategy means more predictable business performance over time which,We extract and process minerals, oil and gas from our production operations located primarily in turn, underpinsAustralia, the creationAmericas and southern Africa. We sell our products globally with sales and marketing taking place principally through Singapore and Houston, United States. In FY2014, our workforce consisted of value for our shareholders, customers,approximately 123,800 employees and importantly,contractors at 130 locations in 21 countries.
The safety and health of our people and of the broader communities in which we operate.operate are central to the success of our organisation. Regardless of where our people are located, the area of the organisation in which they work or the type of work they undertake, we strive to create an environment that is free from occupational illness or injury.
The long-term nature of our operations allows us to build collaborative community relationships. Our size and scope mean we can make a meaningful contribution to communities in which we operate, while we support the continued development of global economic growth.
We have strong governance processes in place, high standards of ethical and responsible behaviour, and we are amongan active contributor to societal development. We care as much about how results are achieved as we do about the world’s top producersresults themselves. Our BHP BillitonCode of major commodities, including aluminium, energy coal, metallurgical coal, copper, manganese, iron ore, uranium, nickel, silverBusiness Conduct and titanium minerals,specific internal policies prohibit bribery and have substantial interestscorruption in oil and gas.
We continue to invest in the future.
The Group is headquartered in Melbourne, Australia, and consistsall our business dealings regardless of the country or culture within which our people work.
1.1.2 Our structure
BHP Billiton Limited Group and the BHP Billiton Plc Group asoperates under a combined enterprise, following the completion of the Dual Listed Company (DLC) merger in June 2001.
structure, with two parent companies BHP Billiton Limited and BHP Billiton Plc have each retained their separate corporate identities and maintained their separate stock exchange listings, but they are operated and managed as a single unified economic entity, with their boardsrun by a unified Board and senior executive management comprising the same people.team. Our headquarters are located in Melbourne, Australia.
BHP Billiton Limited has a primary listing on the Australian Securities Exchange (ASX) in Australia. BHP Billiton 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 (LSE) in the UKUnited Kingdom and a secondary listing on the Johannesburg Stock Exchange (JSE) in South Africa. In addition, BHP Billiton Limited American Depositary Receipts (ADRs) and BHP Billiton Plc ADRs trade on the New York Stock Exchange (NYSE) in the US.United States.
Our Operating Model describes the way the Company is organised and sets out the relationship between the Businesses, Group Functions and Marketing. The Operating Model defines how we work, how we are organised and how we measure performance.
The core principles of the Operating Model include mandatory performance requirements, common organisational design, common systems and processes, and common planning and reporting.
The Operating Model is designed to deliver a simple and scalable organisation to achieve a sustainable improvement in productivity by providing performance transparency, eliminating duplication of effort and enabling the more rapid identification and deployment of best practice.
1.1.3 Strategic context
The mineral and energy commodities we produce are crucial at all stages of economic development. Emerging economies require construction materials like steel as their populations expand and new cities and heavy industry develop. As economies grow and people become wealthier, a consumer economy emerges and steel intensity slows while demand increases for materials that are used in consumer goods, such as copper. Agricultural demand increases steadily with income.
Access to energy underpins economic development. The most rapid demand growth comes at the earliest stages when people first gain access to modern energy supplies. In the next 20 years, we expect 1.7 billion people to gain access to electricity for the first time. Reliable and affordable energy supports the development of industry and as incomes rise, more people can buy consumer goods, like cars and appliances, further increasing the demand for energy.
We are proud that the supply of our products supports global economic growth and development, with the associated reduction in poverty and improvement in living standards. Continued global development depends on access to affordable energy and other critical resources.
Demand for energy is widely expected to increase by more than 30 June 2011,per cent in the next 20 years, with two thirds of new demand originating from Asia and half from China and India. Africa is expected to see the fastest growth, albeit from a lower base. The way these regions meet their energy needs will significantly influence commodity demand.
Every nation will choose a different mix of energy sources, which balances affordability and security of supply. The Intergovernmental Panel on Climate Change (IPCC), the International Energy Agency and others believe that over the next few decades fossil fuels will remain central to the energy mix as their affordability and the scale of existing infrastructure make them hard to practically replace, although their exact percentage varies across a range of scenarios.
Our strategy is tied to economic growth in both emerging and developed economies. Sustainable growth requires an effective response to climate change. BHP Billiton accepts the IPCC’s assessment of climate change science, which has found that warming of the climate is unequivocal, the human influence is clear and physical impacts are unavoidable. We believe that the world must pursue the twin objectives of limiting climate change to the lower end of the IPCC emission scenarios in line with current international agreements, while providing access to the affordable energy required to continue the economic growth essential for maintaining living standards and alleviating poverty.
The global challenge of climate change remains a priority for us. Our approach to investment decision-making and portfolio management and the diversity of our overall portfolio positions us not only to manage and respond to changes, but also to capture opportunities to grow shareholder value over time. We are taking action by focusing on reducing our emissions, increasing our preparedness for physical climate impacts and working with others, including industry and governments, to support effective responses to climate change. We support development of a long-term policy framework that uses a portfolio of complementary measures, including a price on carbon that addresses competitiveness concerns, support for energy efficiency and low emissions technologies, and measures to build resilience. A price on carbon is an effective measure to drive greenhouse gas emission reductions and technological innovation. To effectively address the challenge of climate change, there must be a significant focus on developing and deploying low-emissions technologies. We will, through material investments in low-emissions technology, contribute to reducing emissions from fossil fuels.
1.1.4 FY2014 performance highlights
Not required for US reporting. Refer to sections 1.11 and 1.15.
1.1.5 About this Strategic Report
This Strategic Report meets the requirements of the Strategic Reporting required by the UK Companies Act and the Operating and Financial Review required by the Australian Corporations Act.
This Strategic Report provides insight into BHP Billiton’s strategy, operating and business model and objectives. It describes the principal risks the Company faces and how these risks might affect our future prospects. It also gives our perspective on our recent operational and financial performance.
We intend this disclosure to assist shareholders and other stakeholders to understand and interpret the Consolidated Financial Statements prepared in accordance with International Financial Reporting Standards (IFRS) included in this Annual Report. The basis of preparation of the Consolidated Financial Statements is set out in note 1 ‘Accounting policies’ to the Financial Statements. To obtain full details of the financial and operational performance of BHP Billiton this Strategic Report should be read in conjunction with the Consolidated Financial Statements and accompanying notes.
Section 1 of this Annual Report 2014 constitutes our Strategic Report 2014. References to sections beyond section 1 are references to sections in this Annual Report 2014. Shareholders may obtain a hard copy of the Annual Report free of charge by contacting our registrars, whose details are set out in our Corporate Directory at the end of this Annual Report.
All references to websites in this Annual Report are, unless expressly stated otherwise, intended to be inactive textual references for information only and any information contained in or accessible through any such website does not form a part of this Annual Report.
1.1.6 Forward looking statements
This Annual Report contains forward looking statements, including statements regarding trends in commodity prices and currency exchange rates; demand for commodities; production forecasts; plans, strategies and objectives of management; closure or divestment of certain operations or facilities (including associated costs); anticipated production or construction commencement dates; capital costs and scheduling; operating costs; anticipated productive lives of projects, mines and facilities; provisions and contingent liabilities; and tax and regulatory developments.
Forward looking statements can be identified by the use of terminology such as ‘intend’, ‘aim’, ‘project’, ‘anticipate’, ‘estimate’, ‘plan’, ‘believe’, ‘expect’, ‘may’, ‘should’, ‘will’, ‘continue’ or similar words. These statements discuss future expectations concerning the results of operations or financial condition, or provide other forward looking statements.
These forward looking statements are not guarantees or predictions of future performance, and involve known and unknown risks, uncertainties and other factors, many of which are beyond our control, and which may cause actual results to differ materially from those expressed in the statements contained in this Annual Report. Readers are cautioned not to put undue reliance on forward looking statements.
For example, our future revenues from our operations, projects or mines described in this Annual Report will be based, in part, upon the market price of the minerals, metals or petroleum products produced, which may vary significantly from current levels. These variations, if materially adverse, may affect the timing or the feasibility of the development of a particular project, the expansion of certain facilities or mines, or the continuation of existing operations.
Other factors that may affect the actual construction or production commencement dates, costs or production output and anticipated lives of operations, mines or facilities include our ability to profitably produce and transport the minerals, petroleum and/or metals extracted to applicable markets; the impact of foreign currency exchange rates on the market prices of the minerals, petroleum or metals we hadproduce; activities of government authorities in the countries where we are exploring or developing projects, facilities or mines, including increases in taxes, changes in environmental and other regulations and political uncertainty; labour unrest; and other factors identified in the risk factors in section 1.7.2 of this Annual Report.
Except as required by applicable regulations or by law, the Group does not undertake to publicly update or review any forward looking statements, whether as a market capitalisationresult of approximately US$233.9 billion. Fornew information or future events.
Past performance cannot be relied on as a guide to future performance.
1.1.7 Proposed demerger of assets
On 19 August 2014, we announced plans to create an independent global metals and mining company based on a selection of BHP Billiton’s high-quality aluminium, coal, manganese, nickel and silver assets. Separating these assets via a demerger has the FY2011,potential to unlock shareholder value by significantly simplifying the BHP Billiton Group and creating a new company specifically designed to enhance the performance of its assets.
Once simplified, BHP Billiton will be almost exclusively focused on our large, long-life iron ore, copper, coal, petroleum and potash basins. With fewer assets and a greater upstream focus, we reported net operatingplan to reduce costs and improve the productivity of our largest Businesses more quickly. As a result, our portfolio is expected to generate growth in free cash flow and a superior return on investment.
A final Board decision on the proposed demerger will only be made once the necessary government, taxation, regulatory and other third party approvals are secured on satisfactory terms. Once the necessary approvals are in place, shareholders will have the opportunity to vote on the proposed demerger.
For additional information on the proposed demerger of US$30.1 billion, profit attributableassets, refer to shareholderssection 1.6.4 of US$23.6 billion and revenue of US$71.7 billion. We have approximately 100,000 employees and contractors working in more than 100 locations worldwide.this Annual Report.
We operate nine businesses, called Customer Sector Groups (CSGs), which are aligned with the commodities we extract and market:
Petroleum
Aluminium
Base Metals (including Uranium)
Diamonds and Specialty Products
Stainless Steel Materials
Iron Ore
Manganese
Metallurgical Coal
Energy Coal
Dear Shareholder
I am pleased to report that despite the challenges in the global economy, BHP Billiton performed wellyour Company delivered strong performance this past financial year.
Net attributable BHP Billiton reported an Attributable profit (excluding exceptional items) of US$21.713.8 billion was up 74 per cent, with netand Net operating cash flowsflow of US$30 billion25.4 billion. These strong results were underpinned by increased production and an underlying return on capital of 39 per cent. During the year, we invested about US$18 billion in growthproductivity-led cost efficiencies.
Our balance sheet remains strong and exploration activities and returned US$15 billion to shareholders in dividends and capital returns. More recently, we committed US$15 billion to acquire additional tier one shale assets.
There are several reasons underpinning these good results, but let me highlight two key factors.
The first is the strength of our diversified portfolio of tier one natural resources. For many years, we have implementedmaintained our strategy of investing in large, high-quality assets that deliver growth and superior margins throughout the economic cycle to create long-term shareholder value. Our performance reflects our asset quality, our strategy to maximise production and our commitment to take market prices for our products. This year we achieved production records in four commodities, including an eleventh consecutive record in iron ore.
solid ‘A’ credit rating. The second factor is robust demand underpinnedfull-year progressive base dividend was increased by the urbanisation and industrialisation of China and other developing countries on a scale that is lifting hundreds of millions of people out of poverty. Resources are fundamental for the economic growth of developing countries as they are needed for buildings, transport and infrastructure. Over the past decade these economies have contributed more to global growth than the developed world.
However, we recognise that in the short term, global imbalances and high levels of debt in Europe and the United States create uncertainty, making volatility and a protracted recovery likely. At the same time, we are positive on the longer-term outlook for the global economy as overall growth will continue to be driven by the developing countries. We believe that the Chinese Government has the appropriate policy settings to sustain its long-term ambitions for economic growth. This level of economic development will support demand and operating margins for low-cost diversified producers like BHP Billiton.
As a result of our overall performance and outlook, we completed a US$10 billion share buy-back and increased our dividend by 164.3 per cent to 101121 US cents a share, or US$5.5 billion.
During the year your Board also approved eleven major growth projects with a total investment value of around US$13 billion in natural gas, iron ore, metallurgical and energy coal, copper and diamonds. Our organic growth program is expected to exceed US$80 billion over five years to 2015.
Investments in products like potash in Canada and recent acquisitions in the United States demonstrate our ability to meet our customers’ changing needs by continuing to build our diversified tier one resources portfolio, which generates options for long-term value creation.
Our US$4.8 billion acquisition of Chesapeake Energy’s Fayetteville assets, followed by our recent US$15 billion acquisition of Petrohawk Energy, provide us with a world-class on-shore shale gas and liquids resource in the US.
While the resources industry is critical for global economic development and growth, our commitment at the community level is just as significant. We create jobs, support local industry and invest capital in projects across communities and regions.
As part of our commitment, we contribute one per cent of our pre-tax profit, on a three-year rolling average, to community programs. This year, we allocated US$195.5 million to a wide range of community programs, some of which are detailed in our Sustainability Report.
We also pay taxes and royalties to governments. Last year our total tax and royalty expense (excluding the effects of exceptional items) was US$12.3 billion, and while we recognise it is appropriate for countries to periodically review tax law, we also believe any change should ensure the resources sector remains globally competitive.share. At the same time, the industry’s substantialCompany has continued to invest in high-return growth options within the existing portfolio.
Markets for our commodities have been affected by the mixed global economic environment, with solid but moderately slower Chinese growth, underlying momentum in the United States and ongoing investmentsome positive signs in jobs, skills,Japan, while the European Union has remained weak. Overall, demand for our commodities continues to be strong, underpinning the long-term outlook for our portfolio of products.
We continuously review our strategy against changes in the external environment, including climate change. We consider various scenarios and the risks and opportunities facing the natural resources sector and seek to optimise the investments we make on behalf of shareholders.
Our position on climate change is clear. Sustainable growth and development of new sectorsrequires an effective response to climate change. We accept the Intergovernmental Panel on Climate Change’s assessment that warming of the economy shouldclimate is unequivocal, the human influence is clear and the physical impacts are unavoidable. We believe that the Board’s approach to strategy, investment decision-making and portfolio management, as well as the diversity of our overall portfolio, positions us to manage and respond to changes and capture opportunities to grow shareholder value over time. We believe that the resilience of our portfolio under a range of climate change scenarios is underpinned by its diversity and by the relatively short pay-back periods for most of our present and future investments in fossil fuels production. BHP Billiton is committed to reducing greenhouse gas emissions in its own operations, to actively participating in the development and deployment of low-emissions technologies and to being a leader in our sector on climate change action and advocacy.
Next year marks the 130th anniversary of the founding and stock exchange listing of The Broken Hill Proprietary Company Limited. Over these years the Company has reshaped its business to maintain its industry leadership. We moved from mining silver, lead and zinc at Broken Hill, to producing steel, and then to petroleum in Bass Strait, iron ore in the Pilbara, metallurgical coal in the Bowen Basin and copper in the Andes.
For the past 10 years we have also been simplifying our portfolio and looking at ways to make your Company simpler and more productive. In the last two years alone we have sold US$6.7 billion of assets at attractive prices. This year, we have proposed another step in our evolution with the demerger of selected aluminium, coal, manganese, nickel and silver assets. This proposed demerger will allow BHP Billiton to improve the productivity of our largest businesses more quickly and create a new global metals and mining company specifically designed to enhance the performance of the demerged assets. All BHP Billiton shareholders would retain their existing shares in BHP Billiton and receive shares in the new company pro rata with your BHP Billiton shareholding. Following the demerger, BHP Billiton would seek to steadily increase or at least maintain its dividend per share in US dollar terms – implying a higher payout ratio. Subject to final Board approval to proceed, shareholder approval and the receipt of satisfactory third party approvals, the demerger is expected to be recognised.completed in the first half of the 2015 calendar year.
Your Board also recognises thatAgainst the backdrop of external and organisational change, we operate in an industry where the foundation for everythingcontinue to be guided byOur BHP Billiton Charter, which defines our values. Our first Charter value is Sustainability and we do is our commitment tomaintain a relentless focus on the health and safety of our people and sustainability of the environment and communities in which we work. We have a deep focus on both what we do and on how we do it. The safety and health of our employees, contractors and communities are values that will not be compromised.operate. This year, we had tworeported a record low total recordable injury frequency and no fatalities at our operations in South Africa; sadly, two fatalities too many. Thisoperated assets during the period. While this is unacceptablean encouraging result, our efforts to protect the health and safety of our people will be unrelenting.
We are committed to making a tragedy for their families, friendspositive contribution to the communities where we live and colleagues. On behalf of the Board, we extendconduct our sincere sympathies.
It is important to outline some key changes to your Board.business. This year, we announced the appointmentscontributed one per cent of Baroness Shriti Vaderapre-tax profit, investing US$242 million across a wide range of programs and Lindsay Maxsted who, together, bring deep expertise in finance, corporate restructuring, risk management, emerging markets and public policy. With regret, we also announced the retirement of Alan Boeckmann.
In summary, we face the future with some confidence. There continuesactivities to be robust demand forsupport our products. Our tier one resource base is diverse, of high quality and not easy to duplicate. We have talented people at all levels and we have a solid balance sheet that gives us the flexibility to pursue high-return investment opportunities while rewarding shareholders.
On your behalf, I thank the BHP Billiton team, led by your Chief Executive, Marius Kloppers, for another year of strong performance. I also thank you, our shareholders, for your continued support.
Jacques Nasser AO
Chairman
1.3 Chief Executive Officer’s Report
I am very pleased to report that in FY2011 BHP Billiton produced a record set of financial results and completed a significant capital management program while maintaining a strong balance sheet, allowing us to continue to grow and invest in our business.
This record result and sustained growth was achieved against the backdrop of a volatile global economy and a tightening of the regulatory environment worldwide. The strong performance was also delivered despite a number of unexpected operational challenges during the year,communities. These funds support local programs, such as the severe wet weather that affected our Queensland metallurgical coal operations andLEAD project which seeks to improve the drilling moratorium imposedlives of smallholder farmers in the Gulfrural Maputo Province of Mexico, and capital cost pressure on some of our large-scale projects.
Tragically, we lost two of our colleagues to workplace accidentsMozambique; an innovative education program in FY2011. Every fatality has a lasting impact on family, friends and colleagues and we will never be truly successful unless we eliminate all risk of injury from our business. Safety is not an aspiration, it is something we need to live and breathe every day we are at work. Reducing the risks in our business requires strong, accountable leadership with a focus on identifying and managing hazards.
While the recovery of commodity prices and the global economy was a major factor in our excellent financial position, it is the commitment to our tier one strategyPakistan that has not only allowed BHP Billitonseen 800 children graduate from the program with another 2,000 currently studying in 13 model schools; the ANDA project which addresses the needs of people displaced by conflict and vulnerable communities in the Cordoba District of Colombia to continue to outperform today, but will entrench strong relative performance through all parts ofcomplement poverty reduction efforts by the economic cycle.national government; and Bush Blitz, a unique species discovery program in Australia.
Our consistent strategy of investingcommunity programs are in large, long-life, low-cost, expandable assets, diversified by commodity, market and operating geography has left us in a positionaddition to continue to deliver value to our shareholders.
In our minerals businesses, we are particularly focused on our expandable resources basins – Western Australia Iron Ore, Queensland coal and Olympic Dam copper/uranium in Australia, potash in Saskatchewan Canada and Escondida copper in Chile – where large potential mineralisation can create significant options for growth. During the year, BHP Billiton outlined plans to invest in excess of US$809.9 billion in the next five years on these key resource hubs, which includes more than US$12.9 billiontaxes and royalties we paid to governments and our broader economic contribution in project approvals in the last financial year.
In addition, BHP Billiton made an entry into the United States shale gas business with our acquisitionterms of Chesapeake Energy Corporation’s interest in the Fayetteville Shale, US, a world-class onshore natural gas resource. We followed this with our acquisitionjobs, capital investment and support of Petrohawk Energy Corporation’s natural gas and liquid rich shale asset.
The past year also saw the industry take a big step forward in its approach to bulk commodity pricing. We have for a long time held the view that the most open and transparent way to discover the price for our products is through simple supply and demand economics. We are seeing this evolution across our business and now have higher volumes of our commodities sold on shorter-term reference pricing. For those businesses that in the past had to negotiate long-term prices each year, such as iron ore and metallurgical coal, this is a fundamental and positive shift to a new model that we believe is beneficial to both customers and producers, providing a clearer signal of the supply and demand picture.
As we grow, the creation of a simple, accountable and scalable organisation will ensure we remain capable of managing the larger footprint that will result over time. To this end, through the BHP Billiton Operating Model, we have set up the organisation to be more scalable, more functionally specialised and in a position to deploy capital easily when required. By having a simple structure, we can organise work more effectively and let our people focus on doing what is important.
We must earn the right to grow our business by growing safely, through operating discipline and strong leadership. As an organisation, we are committed to the highest level of governance and strive to foster a culture that values and rewards exemplary ethical standards, personal and corporate integrity and respect for others.local businesses.
I would like to take thethis opportunity to passacknowledge David Crawford who will retire from the BHP Billiton Board in November 2014. David has served with distinction on my thanksthe board of BHP and BHP Billiton for 20 years. In announcing our plans to create an independent global metals and mining company we said that David would become the new company’s inaugural chairman. His skills and experience make David the right person to guide the new company through its entry into the global resources sector.
In line with our planned approach to Board succession, we have appointed Malcolm Brinded to the Board as a Non-executive Director and member of the Sustainability Committee. Malcolm’s deep experience in energy, governance and sustainability will make a significant contribution to the Board.
In summary, a strong management team and over 123,000 talented employees and contractors in 21 countries have improved safety, increased production and delivered more value for shareholders and all our stakeholders. Your company does make a positive difference. BHP Billiton helps lift living standards for people around the world and we work hard to add value to the communities, regions and countries where we live and do business.
Jac Nasser AO
Chairman
1.4 Chief Executive Officer’s Report
I am pleased to report that BHP Billiton delivered a strong set of financial results in FY2014, with improvements in operating performance and safety supported by a continued focus on productivity. This performance was achieved against a background of improving economic conditions in the United States, Japan and the European Union, solid but slower Chinese economic growth and a decline in key commodity prices in a highly competitive global marketplace.
In a year of record production we had no fatalities at our operated assets and improved our total recordable injury frequency performance by nine per cent to 4.2 injuries per million hours worked. While we are encouraged to have recorded a year without fatalities, we must never rest on past performance. We will continue to relentlessly identify and manage material health and safety risks to protect our people and communities.
Annual production records were achieved at 12 of our operations and across four commodities. Western Australia Iron Ore and Queensland Coal both increased annual production volume by more than 20 per cent as we delivered more tonnes from existing infrastructure and growth projects ahead of schedule. These results were supported by our Onshore US petroleum asset delivering a 73 per cent increase in petroleum liquids production.
Our safety performance improves through our continued focus on accelerating sustainable improvements in productivity by finding more efficient and effective ways of performing day-to-day operations. We delivered more than US$6.6 billion of sustainable productivity-led gains over the last two years. There are more achievements in productivity still to come as our teams continue to innovate and learn from each other, replicating best practice and operating on a common data platform across the organisation.
We continue to invest selectively in those projects that meet our demanding criteria. In FY2014, we reduced our share of exploration and capital expenditure by 32 per cent to US$15.2 billion and expect this to decline to US$14.8 billion in FY2015. This approach has increased internal competition for capital, improved our capital efficiency and provides for long-term, sustainable shareholder value.
In August 2014, we announced a proposal to create an independent global metals and mining company based on a selection of BHP Billiton’s high-quality aluminium, coal, manganese, nickel and silver assets. Separating these assets via a demerger has the potential to unlock shareholder value by significantly simplifying the BHP Billiton Group and creating two portfolios of complementary assets. Once simplified, BHP Billiton would be almost exclusively focused on our large, long-life iron ore, copper, coal, petroleum and potash basins. With fewer assets and a greater upstream focus, BHP Billiton would be able to reduce costs and improve the productivity of our largest businesses more quickly. The proposed demerger remains subject to the receipt of satisfactory third party approvals, final Board approval and shareholder vote.
In addition to our work to simplify BHP Billiton’s portfolio, we continue to support the communities where we operate. We support local economies through employment, infrastructure development, taxes and royalties, as well as purchasing local goods and services. We are part of these communities and we strive to be a positive and active participant in community life. In FY2014, our voluntary community investment amounted to US$242 million.
We are proud that the supply of our products supports global economic growth and development, with the associated reduction in poverty and improvement in living standards. Continued global development depends on access to affordable energy and other critical resources.
Sustainable growth requires an effective response to climate change. We accept the Intergovernmental Panel on Climate Change’s assessment that warming of the climate is unequivocal, the human influence is clear, and physical impacts are unavoidable. We are taking action by focusing on reducing our emissions, increasing our preparedness for physical climate impacts and working with others, including industry and governments, to support effective responses to climate change. We will, through material investments in low-emissions technology, contribute to reducing emissions from fossil fuels. We view climate change as a critical element in our approach to risk management across our business.
In everything we do, we are guided by Our BHP Billiton Chartervalues of Sustainability, Integrity, Respect, Performance, Simplicity and Accountability. These are the foundation of who deal with BHP Billiton. And,we are, and how we perform our role as an active and engaged corporate citizen. I am honoured to be part of a company where we live our values every day.
Finally, I would like to thank all our suppliers, customers, host communities and shareholders for their continued support over the past year as we strive to be a valued partner of choice. I would especially like to thank our employees and contractors whose commitment and work have contributed so much tocontribution is the cornerstone of the success of this Company.
Marius KloppersAndrew Mackenzie
Chief Executive Officer
1.4 Selected key measures1.5 Our strategy and business model
1.4.1 Financial information1.5.1 Our consistent strategy
Our selectedpurpose
Our corporate purpose is to create long-term shareholder value through the discovery, acquisition, development and marketing of natural resources.
Our strategy
Our strategy is to own and operate large, long-life, low-cost, expandable, upstream assets diversified by commodity, geography and market.
Our unique position in the resources industry is due to our proven and consistent strategy. In line with our strategy, we pursue growth opportunities consistent with our core skills of:
We operate in a dynamic external environment and this strategy has delivered strong company performance over time which, in turn, underpins the creation of long-term sustainable value for our shareholders, customers, employees and the communities in which we operate. We aim to deliver long-term sustainable value rather than focusing on short-term returns.
Our values
In pursuing our strategy through all stages of the economic and commodity cycles, we are guided byOur BHP BillitonCharter values of Sustainability, Integrity, Respect, Performance, Simplicity and Accountability.
Our overriding commitment is to ensuring the safety of our people, and respecting our environment and the communities in which we work. This commitment informs everything we do and influences every aspect of our work.
Operational capability is fundamental to our strategy. It is reflected inOur Charter, in particular our values of Performance – achieving superior business results by stretching our capabilities, and Simplicity – focusing our efforts on the things that matter most.
Our success factors
We are successful when:
Our key performance indicators presented in section 1.10 of this Annual Report enable our Group Management Committee (GMC) to measure our performance.
1.5.2 Our business model
Exploration and evaluation
Over the past six years, brownfield exploration has increased our reserve base around our portfolio of existing assets in large resource basins, which now provide us with significant growth opportunities. This has allowed us to reduce brownfield exploration expenditure and rationalise our greenfield exploration program to focus on copper in Chile and Peru and conventional oil and gas, predominantly offshore in the Gulf of Mexico and Western Australia.
We evaluate the results of our brownfield and greenfield exploration to identify future growth projects consistent with our strategy to own and operate large, long-life, low-cost, expandable, upstream assets. We also continually evaluate our portfolio and consider divestment and acquisition opportunities.
Development
The evaluation and development of large-scale resource projects generates significant value for BHP Billiton. We have a number of high-quality growth projects currently under development. We also have a large number of growth opportunities in our project pipeline in varying stages of evaluation.
In our development process, these projects progress through feasibility to execution only after external approvals. Our rigorous internal review process requires projects to pass through various tollgates for internal approvals at each stage, including Board approval for major projects.
Potential expansion projects must compete for capital in BHP Billiton and are only approved if they meet our strict criteria for investment.
Extraction, processing and transportation
Across our global operations, the diversification of our portfolio of assets by commodity, geography and market continues to be one of our differentiating features. Our goal is to safely operate all our assets at capacity through mining, extracting, processing and transporting commodities.
We continue to set production records at a number of assets. Through the development and use of standard operating practices and technology, we are driving efficiencies through improved capital intensity, labour productivity and increased utilisation of plant and machinery.
Our extraction and processing activities are mindful of our ongoing sustainability obligations, including rehabilitation at the end of the asset life.
Marketing and logistics
BHP Billiton’s Marketing network manages the Group’s revenue line and is responsible for:
The primary hub for our marketing activities is Singapore, while our marketing of oil and gas is headquartered in Houston, United States. In addition, we have marketers located close to our customers in 14 cities around the world.
Marketing’s responsibilities require an active presence in the various commodities markets, the global freight market and the crude and gas pipeline transportation market, through which we manage the supply chain for our products and develop strong integrated relationships between our Businesses and our customers.
Our market insight is strengthened by the multi-commodity nature of our organisation, our proximity to our customers and the flow of information in our centralised marketing structure.
A description of our risk factors, including those that impact our business model, and our approach to risk management are presented in section 1.7 of this Annual Report.
1.5.3 External factors and trends
Economic outlook
The global economy grew at a moderate rate in FY2014. Momentum in the United States, Japan and the United Kingdom was underpinned by central bank monetary policy. Europe’s economy improved marginally, although the recovery was constrained by high levels of unemployment. Emerging markets, including China, experienced a moderate slowdown.
In a relative sense, the Chinese economy continues to grow strongly with signs that it is rebalancing. Consumption continued to be supported by higher household incomes while fixed asset investment softened, led by the property sector, as the central bank restricted access to credit. Rapid credit growth in the non-bank financial sector remained an important concern for policy makers.
We remain confident in the short-term to medium-term outlook for the Chinese economy. Measured stimulus recently introduced by the government demonstrates their commitment to maintain economic growth above seven per cent. We believe consumption and services will continue to increase in importance, while the market’s role in allocating capital will be enhanced. Greater transparency within the fiscal system is also expected to reshape the relationship between central and local government.
The underlying performance of the US economy continued to improve despite the significant disruption caused by severe weather in the March 2014 quarter. The curtailment of quantitative easing appears to have had a limited impact on sentiment as a solid increase in demand reflects a stronger labour market, rising disposable incomes, and higher equities and housing prices. Business investment has been a weak link in the recovery so far as companies have responded slowly to better economic conditions, despite higher levels of profitability. An increase in capital spending by the global business community will be required to sustain the recovery in the medium term.
The Japanese economy has responded strongly to expansionary monetary and fiscal policy over the past year. Investment spending and wages increased as corporate profits benefited from the depreciation of the Yen, while an increase in the national sales tax in April had a limited impact on consumption. These factors have increased the potential for faster growth in the short term, although a longer-term, sustainable recovery will be contingent on the scale and speed of structural reform.
With regard to the global economy, stronger US growth and an associated tightening of monetary policy could result in the rapid outflow of capital from emerging economies. However, developing nations with sound macroeconomic fundamentals would be less likely to experience a severe impact from this transition.
Climate change
The physical impacts of climate change on our operations are uncertain and particular to geographic circumstances. In addition, a number of national governments have already introduced or are contemplating the introduction of regulatory responses to greenhouse gas emissions from the combustion of fossil fuels to address the impacts of climate change. These physical effects and regulatory responses may adversely impact the productivity and financial performance of our operations.
Other external factors and trends
A number of external factors and trends have had and may continue to have a material impact on our financial condition and results of operations, as described in section 1.15.1 of this Annual Report. These factors include commodity prices, exchange rates, changes in product demand and supply, and operating costs.
The chart below presents the movements in annual average prices in our core Business commodities over the past 10 years to 30 June 2014. Over most of this period we have benefited from generally rising commodity prices while our diversified portfolio provides resilience to decreases in the price of some commodities.
Commodity prices 2005–2014
Commodity prices have generally declined over the past three fiscal years and this trend has continued post 30 June 2014. A summary of the pricing trends for our most significant commodities for FY2014 is presented in section 1.15.1 of this Annual Report, along with movements in the year end commodity price of 10 per cent or more subsequent to 30 June 2014 (as at 31 August 2014).
1.5.4 Corporate planning
At BHP Billiton, we have a long-standing and robust corporate planning process, which is central to the effective development and delivery of our strategy.
Our planning process continuously reviews our strategy against a constantly changing external environment and the risks and opportunities this presents, to optimise both our returns to our shareholders, and our broader contribution to society.
Core principles
The corporate planning process is designed with the following core principles:
Corporate planning framework
The flowchart below illustrates our corporate planning framework.
An annual Board Strategic Planning review is the start of each Corporate planning cycle, where the GMC and the Board actively discusses the Group’s strategy. A key outcome is the CEO Message to all employees which sets the long-term direction of the Group and aligns expectations.
The Directional Planning (long-term strategic planning) phase begins with the CEO Message and the issuing of long-term scenarios. Businesses use the CEO Message and scenarios to prepare their Directional Plans, which include life of asset resource plans. Plans are discussed with the GMC at the Business Directional Appraisals.
We prepare a Group-wide 20-year Plan which includes input from the Businesses’ Directional Plans. A total annual capital allocation limit is set to maximise total shareholder returns, while ensuring financial risks are appropriately mitigated. Within this capital ceiling, major growth options are optimally sequenced over the20-year Plan through our capital allocation process.
The capital allocation process includes analysis of net present value (NPV), internal rates of return (IRR), return on capital (ROC) and margin analysis to inform decision-making. This process is further described in section 1.6.3 of this Annual Report. All available growth options are assessed and prioritised to generate a high-value and capital-efficient portfolio which provides flexibility to return excess cash to shareholders. The increased competition for capital has improved our capital productivity.
The Delivery Planning (short-term to mid-term planning) phase begins with the CEO Letter of Intent which provides capital guidance and sets the context for the Business five-year plans and two-year budgets. Again, plans are discussed with the GMC, this time at the Business Delivery Appraisals.
We believe that the rigour of our corporate planning process, combined with the flexibility it provides the Group to quickly respond to an inherently dynamic external environment, is essential to maximise total shareholder returns.
Scenarios
The corporate planning process is underpinned by scenarios that encompass a wide spectrum of potential outcomes for key global uncertainties driven by factors external to BHP Billiton. Designed to interpret technical, economic, political and global governance trends facing the resources industry, the scenarios offer a means by which to explore potential portfolio discontinuities and opportunities, as well as to test the robustness of decisions.
It should be noted that the scenarios do not constitute preferred outcomes for BHP Billiton. The Company’s approach to critical global challenges, such as the importance of addressing climate change, continues to be based onOur Charter values, including our value of Sustainability. Our position on climate change is discussed further in section 1.6.1.
The starting point of our scenario development is the construction of a Central Case, built through an in-depth, bottom up analysis using rigorous processes, benchmarked with external views, thoroughly reviewed and endorsed annually by the GMC and the Board. Currently our Central Case considers expected levels of US economic recovery, progressive development of China and India, integration of developing economies into a multi-polar economic environment, as well as action on climate change centred on national policies withshort-term prioritisation to adaptation and a long-term shift to mitigation.
The scenarios are designed to be divergent, but also plausible and internally consistent, spanning different potential future business environments. A description of the key characteristics of each of our scenarios is summarised below:
Alongside scenarios, associated signposts (trends) and triggers (events) allow early awareness for the potential advent of a scenario, offering a powerful decision-making tool. For example, rising GDP per capita in key commodity importing countries is a signpost to an earlier shift to consumption driven economies. Another example of a potential trigger is if an accord on climate change were to be ratified during the 2015 United Nations Framework Convention on Climate Change Conference of the Parties, and then enacted globally.
We believe that our uniquely diversified portfolio is robust, both across these scenarios, and also shorter-term shock events. As an example, in a severely carbon constrained world, we believe there is significant upside for our potash and uranium commodities, and also for our high-quality hard coking coal (lower smelting emissions) and iron ore lump product (direct blast furnace feed), while copper is resilient. In aggregate these mitigate potential negative impacts in other commodities, given the relatively short pay-back periods for most present and future investments in fossil fuel production. Conversely, our portfolio allows us to capture upsides in an environment where developing countries experience strong global growth.
Our Group Management Committee (GMC) maintains a strong focus on the following strategic priorities in order to execute the Company’s strategy. A number of these priorities are monitored by the GMC using the key performance indicators as presented in section 1.10 of this Annual Report.
1.6.1 Continue to operate sustainably
We will continue to operate sustainably with our focus on the following areas:
Protect our people and improve the health and safety of our operations
The health, safety and wellbeing of our people are central to the success of our organisation. Regardless of where our people are located or the type of work they undertake, we strive to create a working environment that is free from occupational illness or injury. Identifying and managing material risk is a critical component of our management approach. By understanding and managing our risks, we provide greater protection for our people, communities and assets.
Support sustainable development of our host communities
We are a global company that values our host communities. We strive to be part of the communities in which we operate and through all our interactions seek to foster meaningful long-term relationships, which respect local cultures and create lasting benefits. Our contribution to our host communities is broad ranging. Through employment, taxes and royalties, we support local, regional and national economies. We purchase local goods and services and develop infrastructure that benefits entire communities.
We voluntarily invest one per cent of our pre-tax profit (calculated on the average of the previous three years’ pre-tax profit) in community programs that aim to have a long-lasting, positive impact on people’s quality of life. This includes implementing new and supporting existing community projects. During FY2014, our voluntary community investment totalled US$241.7 million, comprising US$141.7 million in cash, in-kind support and administrative costs, and a US$100 million contribution to the BHP Billiton Group,Foundation.
Strategic approach to climate change
As energy demand continues to increase, the global challenge of climate change remains a priority for our organisation. We are taking action by focusing on reducing our emissions, increasing our preparedness for physical climate impacts and should be read in conjunctionworking with others, including industry and governments, to support effective responses to climate change. Our approach to investment decision-making and portfolio management and the 2011 financial statements, together with the accompanying notes.diversity of our overall portfolio positions us not only to manage and respond to change, but also to capture opportunities to grow shareholder value over time.
Our position on climate change
We prepare our consolidated financial statements in accordance with International Financial Reporting Standards (IFRS), as issued byaccept the International Accounting Standards Board,Intergovernmental Panel on Climate Change’s (IPCC) assessment of climate change science which has found that warming of the climate is unequivocal, the human influence is clear and as outlined in note 1 ‘Accounting policies’ to the financial statements in this Annual Report. physical impacts are unavoidable.
We publish our consolidated financial statements in US dollars.believe that:
2011 | 2010 | 2009 | 2008 | 2007(a) | ||||||||||||||||
Consolidated Income Statement (US$M except per share data) | ||||||||||||||||||||
Revenue | 71,739 | 52,798 | 50,211 | 59,473 | 47,473 | |||||||||||||||
Profit from operations | 31,816 | 20,031 | 12,160 | 24,145 | 19,724 | |||||||||||||||
Profit attributable to members of BHP Billiton Group | 23,648 | 12,722 | 5,877 | 15,390 | 13,416 | |||||||||||||||
Dividends per ordinary share – paid during the period (US cents) | 91.0 | 83.0 | 82.0 | 56.0 | 38.5 | |||||||||||||||
Dividends per ordinary share – declared in respect of the period (US cents) | 101.0 | 87.0 | 82.0 | 70.0 | 47.0 | |||||||||||||||
Earnings per ordinary share (basic) (US cents)(b) | 429.1 | 228.6 | 105.6 | 275.3 | 229.5 | |||||||||||||||
Earnings per ordinary share (diluted) (US cents)(b) | 426.9 | 227.8 | 105.4 | 274.8 | 228.9 | |||||||||||||||
Number of ordinary shares (millions) | ||||||||||||||||||||
– At period end | 5,350 | 5,589 | 5,589 | 5,589 | 5,724 | |||||||||||||||
– Weighted average | 5,511 | 5,565 | 5,565 | 5,590 | 5,846 | |||||||||||||||
– Diluted | 5,540 | 5,595 | 5,598 | 5,605 | 5,866 | |||||||||||||||
Consolidated Balance Sheet (US$M) | ||||||||||||||||||||
Total assets | 102,891 | 88,852 | 78,770 | 76,008 | 61,404 | |||||||||||||||
Share capital (including share premium) | 2,771 | 2,861 | 2,861 | 2,861 | 2,922 | |||||||||||||||
Total equity attributable to members of BHP Billiton Group | 56,762 | 48,525 | 39,954 | 38,335 | 29,667 | |||||||||||||||
Other financial information | ||||||||||||||||||||
Underlying EBIT (US$M)(c) | 31,980 | 19,719 | 18,214 | 24,282 | 20,067 | |||||||||||||||
Underlying EBIT margin(c)(d)(e) | 47.0 | % | 40.7 | % | 40.1 | % | 47.5 | % | 48.4 | % | ||||||||||
Return on capital employed(e) | 38.5 | % | 26.4 | % | 24.6 | % | 37.5 | % | 38.4 | % | ||||||||||
Net operating cash flow (US$M)(f) | 30,080 | 16,890 | 17,854 | 16,958 | 15,418 | |||||||||||||||
Project investment (US$M)(e) | 24,517 | 10,770 | 13,965 | 11,440 | 12,781 | |||||||||||||||
Gearing(e) | 9.2 | % | 6.3 | % | 12.1 | % | 17.8 | % | 25.0 | % |
| limiting climate change to the |
| providing access to the |
|
|
We will:
Further information on our sustainability commitments, standards and performance can be found in sections 1.14 of this Annual Report.
Additional information is also available in the Sustainability Report 2014, which can be found online atwww.bhpbilliton.com.
1.6.2 Creating a more productive organisation
We are focused on achieving sustainable improvement in productivity across all aspects of our business. We believe our systems, structures, culture, people and portfolio should enable the creation of a competitive
advantage by working smarter to safely deliver greater volume growth from existing plant and equipment at lower unit costs.
During the past year, we have continued to implement and embed our Operating Model, which guides how we work, defines how we are organised and enables the measurement of operational and financial performance across the Group. The Operating Model lays the foundation for sustainable productivity gains by supporting the building of capability, eliminating the duplication of effort and enabling the rapid identification and deployment of best practices.
Recognising that culture also drives performance, BHP Billiton is continuing to create an inclusive environment where every employee feels engaged. We want our people to feel listened to, be motivated to contribute to their potential and work together to unlock world-class productivity from the ground up. We support the development of our people and encourage our teams to learn from each other, identify more productive ways of working and achieve functional excellence across the Group.
Following the October 2013 completion of our deployment of 1SAP, our single Group-wide common enterprise resource planning system, we are now using common world-class business processes, standard metrics and reports that are supported by robust data. The implementation of 1SAP across the organisation supports our ability to pursue sustained improvement through the application of standard processes and performance transparency.
Our long-term commitment to improve productivity across the organisation has the potential to create significant value for shareholders and other stakeholders. Our focus on productivity has already resulted in significant improvement in operating performance at each of our major Businesses this year and record output at 12 operations.
Case study: Cost and time reductions in Petroleum’s Onshore US shale drilling and completions
Objective: To reduce the time and cost required to put each well online.
Approach: Opportunities were identified through statistical analysis and comparison against internal best practice and external benchmarks. Improvements in performance were sought in three areas: engineering (changes in the design of each well); operations (changes in how operations are conducted in the field); and supply (shifts in what and how goods and services are procured and delivered).
Outcomes: Rig mobilisation times have been cut by 12 per cent in FY2014 through the development and implementation of an optimised rig move procedure. The average drilling time for a shale gas well has declined in FY2014, while the productivity of hydraulic fracturing crews (stages completed per crew per month) has grown in FY2014.
Productivity results: Overall, total Onshore US shale drilling costs per well decreased by 15 per cent in FY2014.
1.6.3 Disciplined approach to capital management
Our priorities for capital management remain unchanged. The quality of our assets and adherence to our strategy has differentiated our performance and maximised shareholder returns by allocating capital in a disciplined manner.
Our diversified and high-margin portfolio delivers a higher return on capital with lower volatility, when compared with many peers. Over the last 10 years, we have returned US$64 billion to shareholders in the form of dividends and buy-backs.
Many of the areas to which we direct our cash flow are interconnected. In order to make capital allocation decisions, we test each decision against a range of short-term and long-term criteria across several scenarios. We aim to optimise for net present value (NPV), return on capital (ROC), internal rate of return (IRR) and margin, while remaining mindful of portfolio construction and cash flow at risk. No single metric can dominate the process given the potential to create imbalances and all alternatives, including an investment in our own shares, actively compete.
Our portfolio remains a key point of difference. However, because it is opportunity-rich, capital discipline is more important. By reducing annual expenditure, we have created even more competition for capital and we have sharpened our focus on our core commodities and our high-margin major basins.
Given our portfolio of long-life orebodies, we also consider the value of future options as we must preserve their value at low cost.
The following factors are considered when making capital allocation decisions:
A strong balance sheet
Our solid ‘A’ credit rating provides flexibility and access to debt capital markets. The Group’s balance sheet continued to strengthen during FY2014. As at 30 June 2014, net debt was US$25.8 billion, a decrease of US$1.7 billion compared to the net debt position at 30 June 2013. As at 30 June 2014, the Group’s cash and cash equivalents on hand were US$8.8 billion.
During FY2014, the Group issued a four tranche Global Bond totalling US$5 billion comprising US$500 million Senior Floating Notes due 2016 paying interest at three-month US dollar LIBOR plus 25 basis points, US$500 million 2.050 per cent Senior Notes due 2018, US$1.5 billion, 3.850 per cent Senior Notes due 2023, and US$2.5 billion 5.000 per cent Senior Notes due 2043.
These funds and our balance sheet capacity were used to meet a series of financing commitments, including debt repayments of US$7.2 billion and dividend payments of US$6.4 billion.
Progressive base dividend
BHP Billiton has a progressive dividend policy. The aim of this policy is to steadily increase or at least maintain our base dividend in US dollars at each half-yearly payment. Our progressive base dividend is the minimum annual distribution that a shareholder should expect and is expected to grow broadly in accordance with the growth of our business.
On 19 August 2014, the Board determined a final dividend for the year of 62 US cents per share. Together with the interim dividend of 59 US cents per share paid to shareholders on 26 March 2014, this brought the total dividend determined for the year to 121 US cents per share, a 4.3 per cent increase over the previous year’sfull-year dividend of 116 US cents per share.
Year ended 30 June | 2014 | 2013 | 2012 | |||||||||
Dividends determined in respect of the period (US cents per share) | ||||||||||||
Interim dividend | 59.0 | 57.0 | 55.0 | |||||||||
Final dividend | 62.0 | 59.0 | 57.0 | |||||||||
|
|
|
|
|
| |||||||
121.0 | 116.0 | 112.0 | ||||||||||
|
|
|
|
|
|
Internal competition for capital investment
By reducing annual capital expenditure and increasing competition for capital within the Group, we have prioritised higher quality growth at a higher average rate of return on incremental investment. We continue to invest selectively in those projects that meet our criteria.
During FY2014, eight projects were completed, including:
Eight major projects were in execution at 30 June 2014. Seven of our development projects are brownfield in nature, which are inherently lower risk than new greenfield projects.
Capital expenditure
Capital and exploration expenditure is disclosed for each Business in the table below.
Year ended 30 June | 2014 | 2013 | 2012 | |||||||||
US$M | US$M | US$M | ||||||||||
Capital and exploration expenditure (1) | ||||||||||||
Petroleum and Potash | 7,070 | 8,439 | 7,063 | |||||||||
Copper | 3,873 | 4,204 | 3,889 | |||||||||
Iron Ore | 3,118 | 6,196 | 4,745 | |||||||||
Coal | 2,379 | 3,665 | 3,277 | |||||||||
Aluminium, Manganese and Nickel | 542 | 950 | 2,020 | |||||||||
Group and unallocated items | 21 | 140 | 136 | |||||||||
|
|
|
|
|
| |||||||
BHP Billiton Group | 17,003 | 23,594 | 21,130 | |||||||||
|
|
|
|
|
|
|
Capital expenditure encompasses expenditure on major projects, as set out in section 2.4 of this Annual Report, and capital expenditure on sustaining and other items.
|
Year ended 30 June Capital expenditure Growth Sustaining and other Total Exploration expenditure Petroleum Minerals Total Total capital and exploration expenditure (cash basis) Add: equity accounted investments Less: capitalised deferred stripping Less: non-controlling interests Total capital and exploration expenditure (BHP Billiton share) 1.4.2 Operational information 2014 2013 2012 US$M US$M US$M 13,130 18,678 14,994 2,863 3,565 3,643 15,993 22,243 18,637 600 675 1,355 410 676 1,138 1,010 1,351 2,493 17,003 23,594 21,130 871 1,493 1,164 (1,421 ) (1,650 ) (1,531 ) (1,272 ) (1,146 ) (970 ) 15,181 22,291 19,793
BHP Billiton’s share of capital and exploration expenditure declined by 32 per cent during FY2014 to US$15.2 billion. Our rate of investment is expected to decline further in FY2015 with planned capital and exploration expenditure of approximately US$14.8 billion (BHP Billiton share).
A detailed discussion of our project pipeline (including projects approved after 30 June 2014) is located in section 2.4 of this Annual Report.
Returning excess capital to shareholders
During the last 10 years, we supplemented our progressive base dividend by returning excess capital to shareholders and returned US$23 billion in the form of buy-backs, which is almost 35 per cent of total capital returned.
We have now returned US$64 billion in the form of dividends and buy-backs over the last 10 years, equivalent to an underlying payout ratio of approximately 50 per cent.
We continue to focus on the things we can control to maximise free cash flow, like productivity and the rate at which we invest. The pace at which our balance sheet strengthens, however, will also depend on external factors like prices and foreign exchange rates. We monitor this closely and seek to return excess cash consistently and predictably.
1.6.4 Active management of our portfolio
We are concentrating our efforts on those basins where we enjoy economies of scale and a competitive advantage. Our focus on four major Businesses of Iron Ore, Petroleum, Copper, and Coal, with Potash as a potential fifth, provides the benefits of diversification.
Proposed demerger of assets
On 19 August 2014, we announced a plan to create an independent global metals and mining company based on a selection of our high-quality aluminium, coal, manganese, nickel and silver assets.
As a result of the growth of our major Businesses and the Group’s substantial investment in recent years, BHP Billiton now has two great companies embedded within its portfolio. Separating these assets via a demerger has the potential to unlock shareholder value by significantly simplifying the Group.
BHP Billiton’s continued diversification
If the demerger is approved, we would focus almost exclusively on our large, long-life iron ore, copper, coal, petroleum and potash basins. By concentrating on the development and operation of these basins, BHP Billiton expects to reduce costs and improve productivity more quickly.
Following the demerger, BHP Billiton would have a simpler portfolio with fewer assets and a greater focus on upstream operations.
BHP Billiton would remain:
Consistent with our established strategy, our portfolio provides broad exposure to steelmaking raw materials, copper, energy and potentially agricultural markets and will remain diversified by commodity, geography and market.
Our Charter values and commitment to putting health and safety first, being environmentally responsible and supporting the communities in which we operate will remain unchanged.
We will continue to simplify our portfolio and as part of this process are reviewing our Nickel West, New Mexico Coal and smaller petroleum assets.
A new global metals and mining company
The new company would have assets in five countries. Many of its operations are among the most competitive in their industries. Its assets would include:
By tailoring its approach, and retaining some elements of BHP Billiton’s common systems and processes, the new company would be designed to operate safely, reduce overheads and deliver improved performance.
Management, board and listings
It is proposed that the Chairman of the new company would be David Crawford, who will retire from the BHP Billiton Board in November 2014. Graham Kerr, BHP Billiton’s Chief Financial Officer, would assume the role of Chief Executive Officer of the new company, based in Perth. It is intended that Keith Rumble will become a Non-executive Director of the new company that BHP Billiton plans to form in the proposed demerger. Mr Rumble would retire from the BHP Billiton Board at the time the shareholders vote on this demerger proposal. The BHP Billiton Board also intends to nominate Xolani Mkhwanazi, currently BHP Billiton’s Chairman South Africa, as a Non-executive Director of the new company.
The importance of South Africa to the new company would be reflected in the formation of its board and management team, as well as its commitment to the country’s economic development and transformation objectives.
The new company is intended to be listed on the Australian Securities Exchange (ASX) with an inward secondary listing on the Johannesburg Stock Exchange (JSE).
A responsible operator
The new company would be committed to responsible environmental management, the safe operation of its assets and to making a positive contribution to its host communities and nations. BHP Billiton’s existing community commitments will be fulfilled, while the new company would foster its own partnerships and establish its own community programs.
BHP Billiton shareholders
BHP Billiton Limited and Plc shareholders would be entitled to 100 per cent of the shares in the new listed company through a pro-rata, in-specie distribution, as well as retaining their existing shares in the Group.
Subject to final Board approval to proceed, shareholder approval and the receipt of satisfactory third party approvals, the demerger is expected to be completed in the first half of the 2015 calendar year.
Targeted divestment program
We also continue to execute a targeted divestment program, with major transactions totalling US$6.7 billion completed since FY2013. The transactions completed during FY2014 included:
1.7.1 Approach to risk management
We believe the identification and management of risk is central to achieving our corporate purpose of creating long-term shareholder value.
Risk can present itself in many forms, has the potential to impact our health and safety, environment, community, reputation, regulatory, market and financial performance and thereby the achievement of our corporate purpose.
By understanding and managing risk, we provide greater certainty and confidence for our shareholders, employees, customers, suppliers, and for the communities in which we operate. Successful risk management can be a source of competitive advantage.
Our Boardrisks are viewed and Group Management Committee monitor a range of financial and operational performance indicators, reportedmanaged on a monthly basis, to measure performance over time. We also monitorGroup-wide basis. The natural diversification in our portfolio of commodities, geographies, currencies, assets and liabilities is a comprehensive setkey element in our risk management approach.
Risk management is embedded in our critical business activities, functions and processes. Materiality and our tolerance for risk are key considerations in our decision-making.
Risk issues are identified, analysed and assessed in a consistent manner. Performance requirements exist for the identification, assessment, control and monitoring of health, safety, environmentmaterial risk issues that could threaten our corporate purpose and community contribution indicators.business plans. These include:
2011 | 2010 | 2009 | ||||||||||
People and Licence to operate – Health, safety, environment and community | ||||||||||||
Total recordable injury frequency (TRIF)(a) | 5.0 | 5.3 | 5.6 | |||||||||
Community investment (US$M)(a)(b) | 195.5 | 200.5 | 197.8 | (b) | ||||||||
Production(c) | ||||||||||||
Total Petroleum production (million barrels of oil equivalent) | 159.38 | 158.56 | 137.97 | |||||||||
Alumina (’000 tonnes) | 4,010 | 3,841 | 4,396 | |||||||||
Aluminium (’000 tonnes) | 1,246 | 1,241 | 1,233 | |||||||||
Copper cathode and concentrate (’000 tonnes) | 1,139.4 | 1,075.2 | 1,207.1 | |||||||||
Nickel (’000 tonnes) | 152.7 | 176.2 | 173.1 | |||||||||
Iron ore (’000 tonnes) | 134,406 | 124,962 | 114,415 | |||||||||
Manganese alloys (’000 tonnes) | 753 | 583 | 513 | |||||||||
Manganese ores (’000 tonnes) | 7,093 | 6,124 | 4,475 | |||||||||
Metallurgical coal (’000 tonnes) | 32,678 | 37,381 | 36,416 | |||||||||
Energy coal (’000 tonnes) | 69,500 | 66,131 | 66,401 |
|
|
|
Our risk management governance approach is described in sections 3.14.1 and 3.15 of this Annual Report.
We believe that because of the international scope of our operations and the industries in which we are engaged, there are numerous factors whichthat may have an adverse effect on our results and operations. The following describes the material risks that could affect the BHP Billiton Group.Billiton.
External risks Fluctuations in commodity prices and impacts of theongoing global financial crisiseconomic volatility may negatively affect our results,
The prices we obtain for our oil, gas minerals and other commoditiesminerals are determined by, or linked to, prices in world markets, which have historically been subject to substantial variations. The Group’svolatility. Our usual policy is to sell itsour products at the prevailing market prices. The diversity provided by the Group’sour relatively broad portfolio of commodities maydoes not fully insulate the effects of price changes. Fluctuations in commodity prices can occur due to sustained price shifts reflecting underlying global economic and geopolitical factors, industry demand, andincreased supply balances,due to the development of new productive resources, technological change, product substitution and national tariffs. The ongoing effectsWe are particularly exposed to price movements in iron ore, coal, copper, and oil and gas. For example, a US$1 per tonne decline in the average iron ore price and US$1 per barrel decline in the average oil price would have an estimated impact on FY2014 profit after taxation of the global financialUS$112 million and European sovereign debt crises have affected commodity market prices, demand and volatility. The ongoing uncertainty and impact onUS$54 million, respectively. Volatility in global economic growth, particularly in the developeddeveloping economies, mayhas the potential to adversely affectimpact future demand and prices for commodities. The impact of potential longer-termlong-term sustained price shifts and shorter-termshort-term price volatility, including the effects of unwinding the sustained monetary stimulus in the United States, creates the risk that our financial and operating results including cash flows and asset values, will be materially and adversely affected by unforeseen declines in the prevailing prices of our products.
We seek to maintain a solid ‘A’ credit rating as part of our strategy; however, fluctuations in commodity prices and the ongoing effects of the global financial and European sovereign debt crises may adversely impact our future cash flows, ability to adequately access and source capital from financial markets and our credit rating.
Our financial results may be negatively affected by currency exchange rate fluctuations
Our assets, earnings and cash flows are influenced by a wide variety of currencies due to the geographic diversity of the countries in which we operate. Fluctuations in the exchange rates of those currencies may have a significant impact on our financial results. The US dollar is the currency in which the majority of our sales are denominated. Operating costs are influenced by the currencies of those countries where our mines and processing plants are located and also by those currencies in which the costs of imported equipment and services are determined. The Australian dollar, South African rand, Chilean peso, Brazilian real and US dollar are some of the most important currencies influencing our operating costs. Over recent years, higher exchange rates (compared to the US dollar) of currencies in which the majority of our operating costs are incurred have and may continue to adversely impact our profit margins. Given the dominant role of the US currency in our affairs, the US dollar is the currency in which we present financial performance. It is also the natural currency for borrowing and holding surplus cash. We do not generally believe that active currency hedging provides long-term benefits to our shareholders. We mayFrom time to time, we consider currency protection measures appropriate in specific commercial circumstances, subject to strict limits established by our Board. Therefore, in any particular year, currency fluctuations may have a significant impact on our financial results.
The commercial counterparties we transact with may not meet their obligations which may negatively impact our results
We contract with a large number of commercial and financial counterparties including customers, suppliers, and financial institutions. The global financial and European sovereign debt crises have placed strains on global financial markets, reduced liquidity and impacted business conditions generally. Our existing counterparty credit controls may not prevent a material loss due to credit exposure to a major customer or financial counterparty. In addition, customers, suppliers, contractors or joint venture partners may fail to perform against existing contracts and obligations. Non-supply of key inputs or equipment may unfavourably impact our operations. Reduced liquidity and available sources of capital in financial markets may impact the cost and ability to fund planned investments. These factors could negatively affect our financial condition and results of operations.
Failure to discover new reserves, maintain or enhance existing reserves or develop new operations could negatively affect our future results and financial condition
The increased demand for our products and increased production rates from our operations in recent years has resulted in existing reserves being depleted at an accelerated rate. As our revenues and profits are related to our oil and gas and minerals operations, our results and financial condition are directly related to the success of our exploration and acquisition efforts, and our ability to replace existing reserves. Exploration activity occurs adjacent to established operations and in new regions, in developed and less developed countries. These activities may increase land tenure, infrastructure and related political risks. A failure in our ability to discover new reserves, enhance existing reserves or develop new operations in sufficient quantities to maintain or grow the current level of our reserves could negatively affect our results, financial condition and prospects.
There are numerous uncertainties inherent in estimating ore and oil and gas reserves, and geological, technical and economic assumptions that are valid at the time of estimation may change significantly when new information becomes available. The uncertain global financial outlook may affect economic assumptions related to reserve recovery and require reserve restatements. Reserve restatements could negatively affect our results and prospects.
Reduction in Chinese demand may negatively impact our results
The Chinese market has become a significant source of global demand for commodities. In CY2010, China represented 59 per cent of global seaborne iron ore demand, 39 per cent of copper demand, 38 per cent of nickel demand, 41 per cent of aluminium demand, 42 per cent of energy coal demand and 10 per cent of oil demand. China’s demand for these commodities has been driving global materials demand and pricing over the past decade.
Sales into China generated US$20.323.3 billion (FY2010:(FY2013: US$13.220.1 billion), or 28.234.7 per cent (FY2010: 25.1(FY2013: 30.4 per cent), of our revenue in the year ended 30 June 2011.FY2014. The FY2014 sales into China by Business included 64.9 per cent Iron Ore, 17.8 per cent Copper, 8.5 per cent Coal, 6.6 per cent Aluminium, Manganese and Nickel and 2.2 per cent Petroleum. A slowing in China’s economic growth could result in lower prices and less demand for our products and negatively impact our results.results including cash flows.
In response to its increased demand for commodities, China is increasingly seeking strategic self-sufficiency in key commodities, including investments in existing businesses or new developments in other countries. These investments may adversely impact future commodity demand and supply balances and prices.
Actions by governments or political events in the countries in which we operate could have a negative impact on our business
We have operations in many countries around the globe, which have varying degrees of political and commercial stability. We operate in emerging markets, which may involve additional risks that could have an adverse impact uponon the profitability of an operation. These risks could include terrorism, civil unrest, nationalisation, renegotiation or nullification of existing contracts, leases, permits or other agreements, restrictions on repatriation of earnings or capital and changes in laws and policy, as well as other unforeseeable risks. Risks relating to bribery and corruption, including possible delays or disruption resulting from a refusal to makeso-called facilitation payments, may be prevalent in some of the countries in which we operate. If any of our major projects isoperations are affected by one or more of these risks, it could have a negative effect on theour operations in those countries, as well as the Group’s overall operating results and financial condition and reputation.condition.
Our operations are based on material long-term investments that anticipateare dependent on long-term fiscal stability. Following the global financial crisis some governments face increased debtstability and funding obligations and may seek additional sourcescould be adversely impacted by changes in fiscal legislation. The natural resources industry continues to be regarded as a source of tax revenue and economic rentcan also be impacted by increasing rates of taxation, royalties or resource rent taxesbroader fiscal measures applying to levels that are globally uncompetitive to the resource industry. Such taxes may negatively impact the financial results of existing businesses and reduce the anticipated future returns and overall level of prospective investment in those countries.
On 2 July 2010, the Australian Government proposed a Minerals Resource Rent Tax (MRRT), at a rate of 30 per cent (with a 25 per cent extraction allowance – effectively resulting in a 22.5 per cent additional tax on
profits) for Australian iron ore and coal operations, while the current Petroleum Resource Rent Tax (PRRT) is proposed to be extended to all Australian oil and gas projects, including the North West Shelf. Legislation is proposed to be introduced into parliament in late CY2011, ahead of the proposed 1 July 2012 commencement date. The MRRT would operate in parallel with State and Territory royalty regimes, with all current and future royalties fully creditable against the MRRT. The proposed MRRT and PRRT extension will increase the effective tax rate of Australian coal and iron ore operations and the North West Shelf project. This could have a negative effect on the operating results of the Group’s Australian operations. The MRRT and PRRT extension is subject to the passing of legislation by the Australian Parliament, and the final legislation may differ (wholly or in part) in its final form from current expectations.business generally.
Our business could be adversely affected by new government regulation,regulations, such as controls on imports, exports, prices and prices.greenhouse gas emissions. Increasing requirements relating to regulatory, environmental and social approvals can potentially result in significant delays in construction and may adversely impact uponaffect the economics of new mining and oil and gas projects, the expansion of existing operations and results of our operations.
We have oil and gas operations located in the Gulf of Mexico region of the United States. In October 2010, the United States Government lifted the deepwater drilling moratorium in the Gulf of Mexico initially put in place in May 2010 in response to the oil spill from BP’s Macondo well. Although the moratorium was lifted the industry now faces more stringent permitting requirements. Despite our management processes, delays or additional costs may occur in receiving future permits and the conduct of deepwater drilling activities in the Gulf of Mexico.
Infrastructure, such as rail, ports, power and water, is critical to our business operations. We have operations or potential development projects in countries where government providedgovernment-provided infrastructure or regulatory regimes for access to infrastructure, including our own privately operated infrastructure, may be inadequate or uncertain.uncertain or subject to legislative change. These may adversely impact the efficient operations and expansion of our businesses. On 30 June 2010, the Australian Competition Tribunal granted declaration of BHP Billiton’s Goldsworthy rail line, but rejected the application for declaration of our Newman rail line under Part IIIA of the Trade Practices Act. Following the tribunal’s decision, access seekers may now negotiate for access to the Goldsworthy railway. These negotiations, and the availability and terms of access, would be governed by the Part IIIA statutory framework, and either the access seeker or BHP Billiton could refer disputed matters to the Australian Competition and Consumer Commission for arbitration. The outcome of this process would govern whether access would be provided and on what terms.
In South Africa, the Mineral and Petroleum Resources Development Act (2002) (MPRDA) came into effect on 1 May 2004. The law provides for the conversion of existing mining rights (so called ‘Old Order Rights’) to rights under the new regime (‘New Order Rights’) subject to certain undertakings to be made by the company applying for such conversion. The Mining Charter requires that mining companies achieve 15 per cent ownership by historically disadvantaged South Africans of South African mining assets by 1 May 2009 and 26 per cent ownership by 1 May 2014. If we are unable to convert our South African mining rights in accordance with the MPRDA and the Mining Charter, we could lose some of those rights. Where New Order Rights are obtained under the MPRDA, these rights may not be equivalent to the Old Order Rights in terms of duration, renewal, rights and obligations.Businesses.
We operate in several countries where ownership of land is uncertain and where disputes may arise in relation to ownership. In Australia, the Native Title Act (1993)1993 provides for the establishment and recognition of native title under certain circumstances. In South Africa, the Extension of Security of Tenure Act (1997) and the Restitution of Land Rights Act (1994) provide for various landholding rights. Such legislation could negatively affect new or existing projects.
These regulations are complex, difficult to predict and outside of our control and could negatively affect our businessCompany, future results and results.
Business risks
We may not be ableFailure to successfully integratediscover or acquire new resources, maintain reserves or develop new operations could negatively affect our acquired businessesfuture results and financial condition
We have grownThe demand for our businessproducts and production from our operations results in part through acquisitions. We expect that someexisting reserves being depleted over time. As our revenues and profits are derived from our oil and gas and minerals operations, our results and financial condition are directly related to the success of our exploration and acquisition efforts, and our ability to generate reserves to meet our production requirements. Exploration activity occurs adjacent to established operations and in new regions, in developed and less-developed countries. These activities may increase land tenure, infrastructure and related political risks. A failure in our ability to discover or acquire new resources, maintain reserves or develop new operations in sufficient quantities to maintain or grow the current level of our reserves could negatively affect our results, financial condition and prospects.
Future deterioration in commodities pricing may make some existing reserves uneconomic. Our actual drilling activities and future growthdrilling budget will stem from acquisitions. depend on our mineral inventory size and quality, drilling results, commodity prices, drilling and production costs, availability of drilling services and equipment, lease expirations, transportation pipelines and other infrastructure constraints, regulatory approvals and other factors.
There are numerous uncertainties inherent in estimating mineral and oil and gas reserves. Geological assumptions about our mineralisation that are valid at the time of estimation may change significantly when new information becomes available. Estimates that the indicated amount of reserves will be recovered or that it will be recovered at the cost we anticipate are based on uncertain assumptions. The uncertain global financial outlook may affect economic assumptions related to reserve recovery and may require reserve restatements. Reserve restatements could negatively affect our results and prospects.
Potential changes to our portfolio of assets through acquisitions and divestments may have a material adverse effect on our future results and financial condition
We regularly review the composition of our asset portfolio and from time to time may add assets to the portfolio or divest assets from the portfolio. There are a number of risks encountered in business combinations.associated with such acquisitions or divestments. These include adverse market reaction to such changes or the timing or terms on which such changes are made, the imposition of adverse regulatory conditions and obligations, commercial objectives not being achieved due to minority interests,as expected, unforeseen liabilities arising from such changes to the acquired businesses, retention of key staff,portfolio, sales revenues and the operational performance not meeting our expectations, anticipated synergies andor cost savings being delayed or not being achieved, uncertainty in sales proceeds from planned divestments,inability to retain key staff and planned expansion projectstransaction-related costs being delayed or costing more than anticipated. These factors could negatively affect our reputation, future results and financial condition.
Our human resource talent pool may not be adequate to support our growth
Our existing operations and especially our pipeline of development projects in regions of numerous large projects, such as Western Australia and Queensland, when activated, require many highly skilled staff with relevant industry and technical experience. In the competitive labour markets that exist in these regions, the inability of the Group and industry to attract and retain such people may adversely impact our ability to adequately meet demand in projects. Skills shortages in engineering, technical service, construction and maintenance may adversely affect activities. These shortages may adversely impact the cost and schedule of development projects and the cost and efficiency of existing operations.
Increased costs and schedule delays may adversely affect our development projects
Although we devote significant time and resources to our project planning, approval and review process, wemany of our development projects are highly complex and rely on factors that are outside our control, which may cause us to underestimate the cost or time required to complete a project. For instance, accidents during development projects may cause setbacks or cost overruns, required licences, permits or authorisations to build a project may be unobtainable at anticipated costs, or may be obtained only after significant delay and market conditions may change making a project less profitable than initially projected.
In addition, we may fail to manage projects as effectively as we anticipate and unforeseen challenges may emerge.
Any of these may result in increased capital costs and schedule delays at our development projects, adversely affecting our development projects and impacting anticipated financial returns.
Financial risks
If our liquidity and cash flow deteriorate significantly it could adversely affect our ability to fund our major capital programs
We seek to maintain a solid ‘A’ credit rating as part of our strategy. However, fluctuations in commodity prices and the ongoing global economic volatility may adversely impact our future cash flows and ability to access capital from financial markets at acceptable pricing. If our key financial ratios and credit rating are not maintained, our liquidity and cash reserves, interest rate costs on borrowed debt, future access to financial capital markets and the ability to fund current and future major capital programs could be adversely affected.
We may not recover our investments in mining, and oil and gas projectsassets, which may require financial write-downs
Our operationsOne or more of our assets may be impacted by changed market or industry structures, commodity prices, technical operating difficulties, inability to recover our mineral, oil or gas reserves and increased operating cost levels. These may impact the ability for assetscause us to fail to recover their historicalall or a portion of our investment in mining and oil and gas assets and may require financial write-downs, including goodwill adversely impacting our financial results.
Our non-controlled assetsThe commercial counterparties we transact with may not complymeet their obligations, which may negatively impact our results
We contract with our standardsa large number of commercial and financial counterparties, including end-customers, suppliers and financial institutions. Global economic volatility continues to strain global financial markets, with tighter liquidity in China and uncertain business conditions generally. We maintain a ‘one book’ approach with commercial counterparties to ensure all credit exposures are quantified. Our existing counterparty credit controls may not prevent a material loss due to credit exposure to a major customer or financial counterparty. In addition,
Some of our assets are controlled and managed by joint venture partners
customers, suppliers, contractors or by other companies. Some joint venture partners may have divergent business objectives whichfail to perform against existing contracts and obligations. Non-supply of key inputs, such as tyres, mining and mobile equipment, diesel and other key consumables, may unfavourably impact business and financial results. Management of our non-controlled assets may not comply with our management and operating standards, controls and procedures (including our health, safety, and environment standards). Failure to adopt equivalent standards, controls and procedures at these assets could lead to higher costs and reduced production at our operations. These factors could negatively affect our financial condition and adversely impact our results and reputation.of operations.
Operating costOperational risks
Cost pressures and shortagesreduced productivity could negatively impact our operating margins and expansion plans
Increasing costCost pressures and shortages in skilled personnel, contractors, materials and supplies that are required as critical inputsmay continue to our existing operations and planned developments may occur across the resources industry. As the prices for our products are determined by the global commodity markets in which we operate, we maydo not generally have the ability to offset these cost pressures through corresponding price increases, resulting inwhich can adversely affect our operating margins being reduced.margins. Notwithstanding our efforts to reduce costs and a number of key cost inputs being commodity price-linked, the inability to reduce costs and a timing lag may adversely impact our operating margins for an extended period. Our Australian-based operations may continue to be affected by the Australian Fair Work Act 2009 as labour
agreements expire and businesses are required to negotiate labour agreements with unions. There is some evidence that labour unions are increasingly likely to pursue claims in the bargaining process about union access and involvement in operational decision-making relating to the implementation of change. These claims may adversely affect workplace flexibility, productivity and costs. Industrial action in pursuit of claims associated with the bargaining process has occurred in a number of businesses and is likely to continue to occur as unions press for new claims as part of the negotiation around new agreements.
A number of our operations, such as aluminium and copper, are energy or water intensive and, as a result, the Group’s costs and earnings could be adversely affected by rising costs or by supply interruptions. These could include the unavailability of energy, fuel or water due to a variety of reasons, including fluctuations in climate, significant increases in costs, inadequate infrastructure capacity, interruptions in supply due to equipment failure or other causes and the inability to extend supply contracts on economicaleconomic terms.
Our Australian-based operations may continue to be affected by the Australian Fair Work Act 2009 as labour agreements expire and businesses are required to collectively bargain with unions. In some instances, labour unions are pursuing wage claims in the bargaining process, and/or claims about union involvement in operational decision-making. Claims or labour disputes may adversely affect productivity and costs. Industrial action in pursuit of claims associated with the bargaining process has occurred or been threatened in some Businesses, and is likely to continue to occur as unions press claims as part of the collective bargaining process.
These factors could lead to increased operating costs at existing operations and could negatively impact our operating margins and expansion plans.
Health,Unexpected natural and operational catastrophes may adversely impact our operations
We operate extractive, processing and logistical operations in many geographic locations, both onshore and offshore. Our key port facilities are located at Port Hedland and Hay Point in Australia. We have 11 underground mines, including seven underground coal mines. Our operational processes may be subject to operational accidents, such as port and shipping incidents, underground mine and processing plant fire and explosion, open-cut pit wall failures, loss of power supply, railroad incidents, loss of well control, environmental pollution and mechanical critical equipment failures. Our operations may also be subject to unexpected natural catastrophes such as earthquakes, flood, hurricanes and tsunamis. Our northwest Western Australia iron ore, Queensland coal and Gulf of Mexico oil and gas operations are located in areas subject to cyclones or hurricanes. Our Chilean copper operations are located in a known earthquake and tsunami zone. Based on our risk management and concerns about the value of external insurance in the natural resource sector, our risk financing (insurance) approach is to minimise or not to purchase external insurance for certain risks, including property damage, business interruption, construction-related risk, marine cargo and primary liability risks. Existing business continuity plans may not provide protection for all of the costs that arise from such events. The impact of these events could lead to disruptions in production, increased costs and loss of facilities more than offsetting external premiums saved, which would adversely affect our financial results and prospects. Where external insurance is purchased, third party claims arising from these events may exceed the limit of liability of the insurance policies we have in place.
Our non-operated assets may not comply with our standards
Some of our assets are operated and managed by joint venture partners or by other companies. Management of our non-operated assets may not comply with our management and operating standards, controls and procedures, including our health, safety, environment and community (HSEC) standards. Failure to adopt equivalent standards, controls and procedures at these assets could lead to higher costs and reduced production and adversely impact our results and reputation.
Breaches in our information technology security processes may adversely impact our business activities
We maintain global information technology (IT) systems, consisting of infrastructure, applications and communications networks to support our business activities. These systems could be subject to security breaches (e.g. cyber-crime) resulting in theft, disclosure or corruption of information, including information relating to acquisitions and divestments, strategic decision-making, non-public investment market communications or commercially sensitive information relating to major contracts. Security breaches could also result in misappropriation of funds or disruptions to our operations.
Sustainability risks
Safety, health, environmental and community impacts, incidents or accidents and related regulations may adversely affect our people, operations and reputation or licence to operate
We are a major producer of carbon-related products such as energy and metallurgical coal, oil, gas, and liquefied natural gas. Our oil and gas operations are both onshore and offshore.
The nature of the industries in which we operate means that many of our activities are highly regulated by health, safety and environmental laws. As regulatory standards and expectations are constantly developing, we may be exposed to increased litigation, compliance costs and unforeseen environmental rehabilitation expenses.Safety
Potential health, safety environmental and community events that may have a material adverse impact on our operations include rockfallfire, explosion or rock fall incidents in underground mining operations, personnel conveyance equipment failures in underground operations, aircraft incidents, incidents involving light vehicle incidents,vehicles and mining mobile equipment, ground control failures, well blowouts, explosions or gas leaks, incidentsand accidents involving mobile equipment, uncontrolled tailings breaches, escape of polluting substances, uncontrolled releases of hydrocarbons, human rights breachesinadequate isolation and community protestsworking from heights or civil unrest.lifting operations.
Health
Health risks faced include fatigue, musculoskeletal illnesses and occupational exposure to noise, silica, manganese, diesel exhaust particulate, fluorides, coal tar pitch, nickel and sulphuric acid mist. Longer-term health impacts may arise due to unanticipated workplace exposures or historical exposures of our workforce to employees or site contractors.hazardous substances. These effects may create future financial compensation obligations.
We may continue to be exposed to increased operational costs due to the costs and lost time associated with infectiousInfectious diseases such as HIV/AIDS and malaria mainly withinmay have a material adverse impact upon our African workforce and the increasing global burden of chronic disease.workers or on our communities, primarily in Africa. Because we operate globally, we may be affected by potential pandemic influenza outbreaks, such as A(H1N1) and avian flu, in any of the regions in which we operate.
Environment
Environmental incidents have the potential to lead to material adverse impacts on our operations. These include uncontrolled tailings containment breaches, subsidence from mining activities, escape of polluting substances and uncontrolled releases of hydrocarbons.
Our operations by their nature have the potential to adversely impact biodiversity, water resources and related ecosystem services. Changes in scientific understanding of these impacts, regulatory requirements or stakeholder expectations may prevent or delay project approvals and result in increased costs for mitigation, offsets or compensatory actions.
We provide for operational closure and site rehabilitation. Our operating and closed facilities are required to have closure plans. Changes in regulatory or community expectations may result in the relevant plans not being adequate. This may increase financial provisioning and costs at the affected operations.
Community
Local communities may become dissatisfied with the impact of our operations or oppose our new development projects, including through litigation, potentially affecting costs and production, and in extreme cases viability. Community related risks may include community protests or civil unrest, and may cause delays to proposed developments. Our operations or activities also risk inadvertent breaches of human rights or other international laws or conventions.
HSE legislation
The nature of the industries in which we operate means many of our activities are highly regulated by health, safety and environmental (HSE) laws. As regulatory standards and expectations are constantly developing, we may be exposed to increased litigation, compliance costs and unforeseen environmental rehabilitation expenses.
Legislation requiring manufacturers, importers and downstream users of chemical substances, including metals and minerals, to establish that the substances can be used without negatively affecting health or the environment may impact our operations and markets. These potential compliance costs, litigation expenses, regulatory delays, rehabilitation expenses and operational costs could negatively affect our financial results.
During FY2011, BHP Billiton acquired Chesapeake Energy Corporation’s interests in the Fayetteville Shale operation. On 14 July 2011, BHP Billiton announced an agreement to acquire Petrohawk Energy Corporation, an independent oil and natural gas company engaged in the exploration, development and production ofHydraulic fracturing
Our Onshore US shale gas, and on 21 August 2011, we announced that the tender offer had been completed successfully. Both businesses include operations which involve hydraulic fracturing, – a processan essential and common practice in the oil and gas industry to stimulate production of pumpingnatural gas and oil from dense subsurface rock formations. Hydraulic fracturing involves using water, sand and a small amount of chemical additives into the shale formationchemicals to fracture the hydrocarbon-bearing rock formation, to allow flow of hydrocarbons into the wellbore. We routinely apply hydraulic fracturing techniques in our drilling and releasecompletion programs.
Attention given to the resource.hydraulic fracturing process could lead to greater opposition to oil and gas production activities using hydraulic fracturing techniques. Increased regulation could impose more stringent permitting, public disclosure and well construction requirements on hydraulic fracturing operations. In responsethe United States, the hydraulic fracturing process is typically regulated by relevant US state regulatory bodies. Some states are considering changes to expressed healthregulations in relation to permitting, public disclosure, and/or well construction requirements on hydraulic fracturing and environmental concerns, variousrelated operations, including the possibility of outright bans on the process. Arkansas, Louisiana and Texas (the states in which shalewe currently operate) have adopted various laws, regulations or issued regulatory guidance concerning hydraulic fracturing.
Several US federal agencies are also reviewing or advancing regulatory proposals concerning hydraulic fracturing and related operations. The US Environmental Protection Agency (EPA) commenced a study of the potential impacts of hydraulic fracturing activities on drinking water resources and issued a non-determinative Progress Report in December 2012. A draft report, not including prospective case study work, is expected in late CY2014. The EPA is expected to issue a final report for peer review in CY2016. The EPA’s Office of Inspector General is researching the EPA’s and states’ ability to manage potential threats to water resources from hydraulic fracturing, with a possible longer-term study to follow. The US Bureau of Land Management (BLM) is planning to issue a revised proposed rule in CY2014 that would impose new requirements on hydraulic fracturing operations conducted on federal lands, including the disclosure of chemicals used, wellbore integrity, water use and disposal of flow back water. Activity at the federal level, including the ongoing EPA study, BLM rules and other analysis by federal and state agencies to assess the impacts of hydraulic fracturing could spur additional legislative or regulatory actions.
While we have not experienced a material delay or substantially higher operating costs as a result of current regulatory requirements in our Onshore US operations, we cannot predict whether additional federal, state or local laws or regulations will be enacted and what such actions would require or prohibit. Additional legislation or regulation could subject our operations to delays and increased costs, or prohibit certain activities, which could adversely affect the financial performance of our Onshore US operations.
occur have recently adopted disclosure regulations requiring companies to disclose the chemicals used in the fracturing operations. Additionally, some states have adopted, and other states are considering adopting, regulations that could restrict hydraulic fracturing in certain circumstances. Additional costs may result from more demanding regulatory requirements and potential class action claims.
We provide for operational closure and site rehabilitation. Our operating and closed facilities are required to have closure plans. Changes in regulatory or community expectations may result in the relevant plans not being adequate. This may impact financial provisioning and costs at the affected operations.
We contributeDue to the communities in which we operate by providing skilled employment opportunities, salaries and wages, taxes and royalties and community development programs. Notwithstanding these actions, local communities may become dissatisfied with the impactnature of our operations, potentially affecting costs and production, and in extreme cases viability.
Despite our best efforts and best intentions, there remains a risk that health, safety, environmental and/or communityHSEC incidents or accidents and related regulations may adversely affect our reputation or licence to operate.
Unexpected natural and operational catastrophes may adversely impact our operations
We operate extractive, processing and logistical operations in many geographic locations both onshore and offshore. Our operational processes may be subject to operational accidents such as port and shipping incidents, fire and explosion, pitwall failures, loss of power supply, railroad incidents, loss of well control, environmental pollution and mechanical failures. Our operations may also be subject to unexpected natural catastrophes such as earthquakes, flood, hurricanes and tsunamis. Based on our claims, insurance premiums and loss experience, our risk management approach is not to purchase insurance for property damage, business interruption and construction related risk exposures. Existing business continuity plans may not provide protection for all of the costs that arise from such events. The impact of these events could lead to disruptions in production, increased costs and loss of facilities more than offsetting premiums saved which would adversely affect our financial results and prospects. Third party claims arising from these events may exceed the limit of liability insurance policies we have in place.
Climate change and greenhouse effects may adversely impact the value of our Company, and our operations and markets
Carbon-based energy isThe physical impacts of climate change and various regulations that seek to address climate change may negatively affect our operations, productivity and the markets in which we sell our products. According to the Intergovernmental Panel on Climate Change (IPCC), fossil fuel-related emissions are a significant inputsource of greenhouse gases contributing to climate change. We produce fossil fuels such as coal, oil and gas for sale to customers, and we use fossil fuels in a number of the Group’sour mining and processing operations and we have significant saleseither directly or through the purchase of carbon-based energy products.fossil-fuel based electricity.
A number of national governments or governmental bodies have already introduced or are contemplating the introduction of regulatory change in responseresponses to greenhouse gas emissions from the combustion of fossil fuels to address the impacts of climate change. UnderThis includes countries where we have operations such as Australia, the December 2009 Copenhagen Accord, developed countries established individual greenhouse gas targetsUnited States, South Africa and developing countries established national mitigation actions. The European Union Emissions Trading System (EU ETS), which came into effect on 1 January 2005, has had an impact on greenhouse gasChile, as well as customer markets such as China, India and energy-intensive businesses based in the EU. Our Petroleum assets in the UK are currently subject to the EU ETS, as are our EU based customers. Elsewhere, there is current and emerging climate change regulation that will affect energy prices, demand and margins for carbon intensive products. The Australian Government’s plan of action on climate change includes the introduction of a fixed price on carbon emissions beginning 1 July 2012 and converting to an emissions trading scheme after three years, and a mandatory renewable energy target of 20 per cent by the year 2020.Europe. From a medium to long-term perspective, we are likely to see some adverse changes in the cost position of our greenhouse-gas-intensivegreenhouse gas-intensive assets and energy-intensive assets as a result of regulatory impacts in the countries in whichwhere we operate. These proposed regulatory mechanisms may impact our operations directly or indirectly viathrough our suppliers and customers. Inconsistency of regulations particularly between developed and developing countries may also change the competitive position of some of our assets. Assessments of the potential impact of future climate change regulation are uncertain given the wide scope of potential regulatory change in the many countries in which we operate.
There is a potential gap between the current valuation of fossil fuel reserves on the balance sheets of companies and in global equities markets and the reduced value that could result if a significant proportion of reserves were rendered incapable of extraction in an economically viable fashion due to regulatory or market responses to climate change. In such a scenario, reserve assets held on our balance sheet may need to be impaired or written off and our inability to make productive use of such assets may also negatively impact our financial condition and results.
Changing consumer demand towards alternative energy supply options could present a threat to existing fossil fuel markets.
The physical impactseffects of climate change on our operations are highly uncertain and will be particular to the geographic circumstances. These may include changes in rainfall patterns, water shortages, rising sea levels, increased storm intensities and higher average temperature levels.temperatures. These effects may adversely impact the productivity and financial performance of our operations.
Breaches in our information technology (IT) security processes may adversely impact the conduct of our business activities
We maintain global IT and communication networks and applications to support our business activities. IT security processes protecting these systems are in place and subject to assessment as part of the review of internal control over financial reporting. These processes may not prevent future malicious action or fraud by individuals or groups, resulting in the corruption of operating systems, theft of commercially sensitive data, misappropriation of funds and disruptions to our business operations.
A breach of our governance processes may lead to regulatory penalties and loss of reputation
We operate in a global environment straddlingthat encompasses multiple jurisdictions and complex regulatory frameworks. Our governance and compliance processes, which include the review of internal controlcontrols over financial reporting and specific internal controls in relation to offers of things of value to government officials and representatives of state-owned enterprises, may not prevent future potential breaches of law, accounting or governance practice. TheOurBHP BillitonCode of Business Conduct, together with our anti-briberymandatory policies, such as the anti-corruption, trade and corruption,financial sanctions and anti-trust standardscompetition policies, may not prevent instances of fraudulent behaviour and dishonesty nor guarantee compliance with legal or regulatory requirements. This may lead to regulatory fines, disgorgement of profits, litigation, loss of operating licences or lossreputational damage.
1.7.3 Management of reputation.principal risks
1.6 Forward looking statements
This Annual Report contains forward looking statements, including statements regarding:
estimated reserves
trendsThe scope of our operations and the number of industries in commodity priceswhich we operate and currency exchange rates
demand for commodities
plans, strategiesengage mean that a range of factors may impact our results. Material risks that could negatively affect our results and objectivesperformance are described in section 1.7.2 of management
closure or divestment of certain operations or facilities (including associated costs)
anticipated production or construction commencement dates
expected costs or production output
anticipated productive lives of projects, mines and facilities
provisions and contingent liabilities
tax and regulatory developments.
Forward looking statements can be identified by the use of terminology such as ‘intend’, ‘aim’, ‘project’, ‘anticipate’, ‘estimate’, ‘plan’, ‘believe’, ‘expect’, ‘may’, ‘should’, ‘will’, ‘continue’ or similar words. These statements discuss future expectations concerning the results of operations or financial condition, or provide other forward looking statements.
These forward looking statements are not guarantees or predictions of future performance, and involve known and unknown risks, uncertainties and other factors, many of which are beyond our control, and which may cause actual results to differ materially from those expressed in the statements contained in this Annual Report. Readers are cautioned notOur approach to put undue reliance on forward looking statements.
For example, our future revenues from our operations, projects or mines described in this Annual Report will be based, in part, upon 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 operations.
Other factors that may affect the actual construction or production commencement dates, costs or production output and anticipated lives of operations, mines or facilities include our ability to profitably produce and transport the minerals, petroleum and/or metals extracted to applicable markets; the impact of foreign currency exchange rates on the market prices of the minerals, petroleum or metals we produce; activities of government authorities in some of the countries where we are exploring or developingmanaging these projects, facilities or mines, including increases in taxes, changes in environmental and other regulations and political uncertainty; and other factors identified in the description of the risk factors above.
We cannot assure you that our estimated economically recoverable reserve figures, closure or divestment of such operations or facilities, including associated costs, actual production or commencement dates, cost or production output or anticipated lives of the projects, mines and facilities discussed in this Annual Report, will not differ materially from the statements contained in this Annual Report.
Except as required by applicable regulations or by law, the Group does not undertake any obligation to publicly update or review any forward looking statements, whether as a result of new information or future events.
Projects and exploration activities are not shown on this map.
Petroleum
Ref | Country | Fields | Description | Ownership | ||||||
1 | Algeria | Ohanet | Joint operator with Sonatrach for onshore wet gas production (a) | 45 | % | |||||
2 | Algeria | ROD Integrated Development | Onshore oil production (a) | 38 | % | |||||
3 | Australia | Bass Strait | Offshore Victoria oil, condensate, LPG, natural gas and ethane production (a) | 50 | % | |||||
4 | Australia | Minerva | Operator of offshore Victoria natural gas production | 90 | % | |||||
5 | Australia | North West Shelf | Offshore Western Australia oil, condensate, LPG, natural gas and LNG production (a) | 8.3 – 16.7 | % | |||||
6 | Australia | Pyrenees | Operator of offshore Western Australia oil production | 40 – 71.4 | % | |||||
7 | Australia | Stybarrow | Operator of offshore Western Australia oil production | 50 | % | |||||
8 | Pakistan | Zamzama | Operator of onshore natural gas production | 38.5 | % | |||||
9 | Trinidad and Tobago | Angostura | Operator of offshore oil and natural gas production | 45 | % | |||||
10 | UK | Bruce/Keith | Offshore North Sea oil and natural gas production (a) |
| Bruce – 16 Keith – 31.8 | % % | ||||
11 | UK | Liverpool Bay | Operator of offshore Irish Sea oil and natural gas production | 46.1 | % | |||||
12 | US | Fayetteville | Operator of onshore natural gas production | .03 – 100 | % | |||||
13 | US | Gulf of Mexico | Offshore oil, LPG and natural gas production from several fields - Shenzi 44% - Neptune 35% - Starlifter 31% - WestCameron 33.8% - Atlantis 44% (a) - MadDog 23.9% (a) - Genesis 5% (a) |
Aluminium
Ref | Country | Asset | Description | Ownership | ||||||
14 | Australia | Aluminium Australia | A joint venture where we operate the Worsley alumina refinery and Boddington bauxite mine in Western Australia | 86 | % | |||||
15 | Brazil | Alumar | Integrated alumina refinery and aluminium smelter (a) | 36 – 40 | % | |||||
16 | Brazil | Mineração Rio do Norte | An open-cut bauxite mine (a) | 14.8 | % | |||||
17 | Mozambique | Aluminium Mozambique | A joint venture where we operate the aluminium smelter (Mozal), located near Maputo | 47.1 | % | |||||
18 | South Africa | Aluminium South Africa | Hillside and Bayside aluminium smelters, located in Richards Bay | 100 | % |
Base Metals
Ref | Country | Asset | Description | Ownership | ||||||
19 | Australia | Cannington | Underground silver, lead and zinc mine, located in northwest Queensland | 100 | % | |||||
20 | Chile | Pampa Norte | Cerro Colorado and Spence open-cut mines producing copper cathode in the Atacama Desert, northern Chile | 100 | % | |||||
21 | Chile | Escondida | Comprises the world’s largest copper mine, concentrators and solvent extraction plants and port operations | 57.5 | % | |||||
22 | Peru | Antamina | A joint venture open-cut copper and zinc mine, located in the Andes north-central Peru(a) | 33.8 | % | |||||
23 | US | Base Metals North America | Includes the Pinto Valley open-cut copper mine, located in Arizona | 100 | % |
Uranium(b)
Ref | Country | Asset | Description | Ownership | ||||||
24 | Australia | Olympic Dam | Large poly-metallic orebody and the world’s largest uranium deposit, producing copper, uranium, gold and silver | 100 | % |
Diamonds and Specialty Products
Ref | Country | Asset | Description | Ownership | ||||||
25 | Canada | EKATI Diamond Mine | Open-cut and underground diamond mines, located in the Northwest Territories of Canada | 80 | % | |||||
26 | South Africa | Richards Bay Minerals | Integrated titanium smelter and mineral sands mining operation(a) | 37.8 | % |
Stainless Steel Materials
Ref | Country | Asset | Description | Ownership | ||||||
27 | Australia | Nickel West | Mt Keith and Leinster nickel-sulphide mines, Kalgoorlie nickel smelter, Kambalda nickel concentrator and the Kwinana nickel refinery | 100 | % | |||||
28 | Colombia | Cerro Matoso | Integrated laterite ferronickel mining and smelting operation in northern Colombia | 99.9 | % |
Iron Ore
Ref | Country | Asset | Description | Ownership | ||||||
29 | Australia | Western Australia Iron Ore | Integrated iron ore mines (Area C, Jimblebar, Yandi, Newman and Yarrie), and rail and port operations in the Pilbara region of Western Australia | 85 – 100 | % | |||||
30 | Brazil | Samarco | Open-cut mine that produces iron ore pellets(a) | 50 | % |
Manganese
Ref | Country | Asset | Description | Ownership | ||||||
31 | Australia | Manganese Australia | Producer of manganese ore in the Northern Territory (GEMCO) and manganese alloys in Tasmania (TEMCO) | 60 | % | |||||
32 | South Africa | Manganese South Africa | Mamatwan open-cut and Wessels underground manganese mines and the Metalloys manganese alloy plant | 44.4 – 60 | % |
Metallurgical Coal
Ref | Country | Asset | Description | Ownership | ||||||
33 | Australia | Illawarra Coal | Underground coal mines (West Cliff, Dendrobium, Appin) in southern NSW, with access to rail and port facilities | 100 | % | |||||
34 | Australia | BHP Billiton Mitsubishi Alliance | Saraji, Goonyella Riverside, Peak Downs, Norwich Park, Gregory Crinum, Blackwater and Broadmeadow open-cut and underground mines in the Queensland Bowen Basin and Hay Point Coal Terminal | 50 | % | |||||
35 | Australia | BHP Billiton Mitsui Coal | South Walker Creek and Poitrel open-cut coal mines in the Queensland Bowen Basin | 80 | % |
Energy Coal
Ref | Country | Asset | Description | Ownership | ||||||
36 | Australia | NSW Energy Coal | Mt Arthur open-cut coal mine | 100 | % | |||||
37 | Colombia | Cerrejón | An open-cut coal mine, with integrated rail and port operations(a) | 33.3 | % | |||||
38 | South Africa | Energy Coal South Africa | Khutala, Middelburg, Klipspruit, Wolvekrans open-cut and underground mines and coal processing operations | 50 – 100 | % | |||||
39 | US | New Mexico Coal | Navajo open-cut and San Juan underground mines | 100 | % |
BHP Billiton office locationsrisks is outlined below.
Principal risk area | Risk management approach | |
External risks | ||
Risks arise from falls in commodity prices and demand in major markets (such as China or Europe) or changes in currency exchange rates and actions by governments and political events that impact long-term fiscal stability. | The diversification of our portfolio of commodities, geographies and currencies is a key strategy for reducing the effects of volatility. Section 1.15.1 describes external factors and trends affecting our results and note 29 ‘Financial risk management’ to the Financial Statements outlines the Group’s financial risk management strategy, including market, commodity, and currency risk. The Financial Risk Management Committee oversees these risks as described in sections 3.15 and 3.16. We also engage with governments and other key stakeholders to ensure the potential adverse impacts of proposed fiscal, tax, resource investment, infrastructure access and regulatory changes are understood and where possible mitigated. | |
Business risks | ||
Risks include the inherent uncertainty of identifying and proving reserves, adding and divesting assets and managing our capital development projects. | The Group Resource and Business Optimisation function provides governance and technical leadership for Mineral Resource development and Ore Reserves reporting as described in section 2.3.2. Our governance over reporting of Petroleum reserves is described in section 2.3.1. We have established investment approval processes that apply to all major capital projects and asset divestment and acquisitions. The Investment Committee oversees these as described in sections 3.15 and 3.16. The Group Project Management function additionally seeks to ensure that projects are safe, predictable and competitive. We have established project hubs as operating centres for the study and execution of a pipeline of major capital projects using a program management approach. | |
Financial risks | ||
Continued volatility in global financial markets may adversely impact future cash flows, our ability to adequately access and source capital from financial markets and our credit rating. Volatility may impact planned expenditures, as well as the ability to recover investments in mining and oil and gas projects. In addition, the commercial counterparties (customers, suppliers and financial institutions) we transact with may, due to adverse market conditions, fail to meet their contractual obligations. | We seek to maintain a solid ‘A’ credit rating, supported by our portfolio risk management strategy. As part of this strategy, commodity prices and currency exchange rates are not hedged, and wherever possible we take the prevailing market price. We use Cash Flow at Risk analysis to monitor volatilities and key financial ratios. Credit limits and review processes are required to be established for all customers and financial counterparties. The Financial Risk Management Committee oversees these as described in sections 3.15 and 3.16. Note 29 ‘Financial risk management’ to the Financial Statements outlines our financial risk management strategy. |
|
| |||||
Operational risks | ||||||
Operating cost pressures and reduced productivity could negatively impact operating margins and expansion plans. Non-operated assets may not comply with our standards. Unexpected natural and operational catastrophes may adversely impact our operations. Breaches in IT security processes may adversely impact the conduct of our business activities. |
The capability to sustain productivity improvements is being further enhanced through continued refinements to our Operating Model. The Operating Model is designed to deliver a simple and scalable organisation, providing a competitive advantage through defining work, organisation and performance measurements. Defined global business processes, including 1SAP, provide a standardised way of working across the organisation. Common processes generate useful data and improve operating discipline. Global sourcing arrangements have been established to ensure continuity of supply and competitive costs for key supply inputs. We seek to influence the application of our standards to non-operated assets. Through the application of our risk management processes, we identify catastrophic operational risks and implement the critical controls and performance requirements to maintain control effectiveness. Business continuity plans are required to be established to mitigate consequences. Consistent with our portfolio risk management approach, we continue to be largely self-insured for losses arising from property damage, business interruption and construction. IT security controls to protect IT infrastructure, applications and communication networks and respond to security incidents are in place and subject to regular monitoring and assessment. To maintain adequate levels of protection, we also continue to monitor the development of threats in the external environment and assess potential responses to those threats. | |||||
Sustainability risks |
| |||||
|
Our approach to corporate planning, investment decision-making and portfolio management provides a focus on the identification, assessment and management of climate change risks. We have been applying an internal price on carbon in our investment decisions for more than a decade. Through a comprehensive and strategic approach to corporate planning, we work with a |
| Risk management approach | ||
OurCode of Business Conductsets out requirements related to working with integrity, including dealings with government officials and third parties. Processes and controls are in place for the internal control over financial reporting, including under Sarbanes-Oxley. We have established anti-corruption and antitrust related performance requirements, which are overseen by the Legal and Compliance function. Additionally, the Disclosure Committee oversees our compliance with securities dealing obligations and continuous and periodic disclosure obligations as described in section 3.15 and 3.16. |
1.8 Our approach to corporate governance
At BHP Billiton, we have a governance framework that goes beyond an interest in governance for its own sake or the need to simply comply with regulatory requirements. Instead, we believe high-quality governance supports long-term value creation. Simply put, we think good governance is good business, and our approach is to adopt what we consider to be the better of the prevailing governance standards in Australia, the United Kingdom and the United States.
In the same spirit, we do not see governance as just a matter for the Board. Good governance is also the responsibility of senior management and is embedded throughout the organisation.
The diagram below describes the governance framework at BHP Billiton. It shows the interaction between the shareholders and the Board, demonstrates how the Board Committee structure facilitates the interaction between the Board and the CEO and illustrates the flow of delegation from shareholders. We have robust processes in place to ensure the delegation flows through the Board and its committees to the CEO and the GMC and into the organisation. At the same time, accountability flows back upwards from the Company to shareholders. This process helps to ensure alignment with shareholders.
As part of our corporate planning cycle, we have embedded a range of scenarios that are reviewed annually and updated by the Group with the GMC’s involvement. The scenarios, and the governance process supporting them, also form part of the Board agenda.
These scenarios provide a lens to assess the performance of our business portfolio. They include assumptions around carbon and commodity prices, currencies, costs and tax rates and ranges for a number of risks that face the Group, including climate change, global growth, levels of trade, geopolitical situation and technology focus. All of the scenarios are used to inform BHP Billiton’s strategy and the resilience of our diversified asset portfolio over the short and long term.
As we set out in section 3 of this Annual Report, while the five committees have accountability for making recommendations to the Board on certain matters, such as remuneration and sustainability, we ensure all Board members have oversight and the opportunity for full discussion of those issues through the committee report-out process to the full Board.
Our Charter is core to the governance framework of BHP Billiton. It embodies our corporate purpose, strategy and values, and defines when we are successful. We foster a culture that values and rewards high ethical standards, personal and corporate integrity and respect for others.
We live the values enshrined inOur Charter and adhere to the standards of conduct required by ourCode of Business Conduct.
BHP Billiton governance structure
Part of the Board’s commitment to high-quality governance is expressed through the approach BHP Billiton takes to engaging and communicating with shareholders. We encourage shareholders to make their views known to us.
Our shareholders are based across the globe. Outside of the Annual General Meetings (AGM), which are an important step in the governance and investor engagement process, the Board uses a range of formal and informal communication channels to understand shareholder views to ensure it can represent shareholders in governing BHP Billiton. Regular proactive engagement with institutional shareholders and investor representative organisations takes place in Australia, South Africa, the United Kingdom and the United States. The purpose of these meetings is to discuss the full range of governance issues, as well as the broad strategy of the Group. They offer an important opportunity to build relationships and to engage directly with governance managers, fund managers and governance advisers.
For more information on our corporate governance processes, refer to section 3 of this Annual Report.
1.9 Our approach to remuneration
Our Remuneration Committee recognises that remuneration has an important role to play in supporting the implementation and achievement of the Group’s strategy and our ongoing performance, aligning the activities of management to the interests of shareholders, and in supportingOur BHP Billiton Charter. The remuneration
policy is reviewed annually and, where appropriate, fine-tuned to ensure that it continues to be effective in achieving these goals.
Remuneration at BHP Billiton
The key principles of our remuneration policy, which remain unchanged, are to:
Link to strategy
Our Charter sets out our purpose, strategy, values and how we measure our success. In framing how we remunerate our executives, we are guided by the measures of success contained inOur Charter. They are designed to ensure that executives take a long-term approach to decision-making and to minimise activities that focus only on short-term results at the expense of longer-term business growth and success. The Committee has considered the ways in which risk management and the long-term horizon are reflected throughout BHP Billiton’s remuneration arrangements for all executives, and is satisfied that our approach reinforces the desired behaviours.
This is largely achieved through the Group’s approach to short-term and long-term incentive awards, which comprise a significant portion of total remuneration for our Chief Executive Officer, Andrew Mackenzie, and other members of the Group Management Committee (GMC). The equity component of the short-term incentive award is deferred for a two-year period, and performance under the long-term incentive plan is measured over a five-year period. The actual rewards received by Mr Mackenzie and other members of the GMC therefore reflect the Group’s performance and share price over an extended period.
Our approach
There have been no substantial changes to our underlying approach – we ensure that remuneration outcomes reflect the performance of the Group, Businesses and individuals. This approach has enjoyed a strong level of support from shareholders, with a vote in favour for the Remuneration Report of 97 per cent at last year’s Annual General Meetings.
Our approach to incentive structures has been in place for more than a decade and has served both shareholders and participants well, delivering remuneration outcomes to executives aligned to the performance of the Group and of individuals. BHP Billiton adopted the deferral of a substantial portion of short-term incentive awards in equity in 2003, and a five-year term for long-term incentive awards in 2004. These approaches, which were then market leading, have since become more prevalent and acknowledged as best practice.
Notwithstanding our stable approach, the Committee and the Board continue to pay close attention to shareholders’ views so they can be factored into the Group’s future approach.
Summary
Our fundamental philosophies and approaches to remuneration have not changed – we trust that you will agree that our long held, consistent approach to aligning remuneration to performance has served shareholders well.
For more information on our remuneration policies and the remuneration outcomes for members of the GMC and Non-executive Directors, refer to section 4 of this Annual Report.
1.10 Key performance indicators
Our key performance indicators (KPIs) enable us to measure our financial and sustainable development performance. Their relevance to our strategy and our performance against these measures in FY2014 are explained below.
These KPIs are used as measures, directly and indirectly, in the short-term and/or long-term incentive arrangements for remuneration of senior executives. Certain KPIs (denoted with this symbol ) are used directly to calculate incentive outcomes and others (denoted with this symbol ) are considered more broadly in determining final overall results.
Our Remuneration Report is contained in section 4 of this Annual Report and provides information on our overall approach to remuneration of executives, including remuneration policies and the remuneration outcomes for members of the GMC and Non-executive Directors.
1.10.1 Sustainability KPIs
TRIF
|
Total recordable injury frequency (TRIF) is an indicator in highlighting broad personal injury trends and is calculated based on the number of recordable injuries per million hours worked. This data only includes wholly owned and operated assets or assets operated in a joint venture operation from 1 July 2012 to 30 June 2014. Link to strategy Our overriding commitment is to ensuring the safety and health of our people and this is supported byOur Charter value of Sustainability. FY2014 performance Our TRIF has improved by 21 per cent over the last five years. During FY2014, we improved our TRIF by nine per cent and had no fatalities at our operated assets. For information on our approach to health and safety and our performance, refer to section 1.14 of this Annual Report. |
GHG emissions
| Definition Greenhouse gas (GHG) emissions are measured according to the World Resources Institute/World Business Council for Sustainable Development Greenhouse Gas Protocol. This data only includes wholly owned and operated assets or assets operated in a joint venture operation from 1 July 2012 to 30 June 2014. Link to strategy The global challenge of climate change remains a priority for our organisation and is core to our strategic decision-making. Our GHG emissions are monitored and our performance is tracked against our target. FY2014 performance The Group’s GHG emissions declined by 1.7 Mt CO2-e to 45.0 Mt CO2-e, which keeps our emissions in line to achieve our target. For additional information on our GHG emissions, including a description of Scope 1 and Scope 2 GHG emissions, refer to section 1.14.4 of this Annual Report. |
Community investment
|
We believe that in addition to operating a responsible and ethical company, we can make a broader contribution to the communities in which we operate and supportOur Charter value of Sustainability. FY2014 performance Our voluntary community investment totalled US$241.7 million, comprising US$141.7 million in cash, in-kind support and administrative costs, and a US$100 million contribution to the BHP Billiton Foundation. For additional information on our community investment, refer to section 1.14 of this Annual Report. |
1.10.2 Financial KPIs
Attributable profit
| Definition Attributable profit represents Profit after taxation attributable to members of BHP Billiton Group. Link to strategy This is a key financial measure that provides insight on the amount of profit available to distribute to shareholders, which aligns to our purpose as presented inOur Charter. FY2014 performance Attributable profit increased by 23 per cent to US$13.8 billion, benefiting from a reduction in the Group’s effective tax rate to 31.5 per cent. For our Consolidated Financial Statements, refer to section 7 of this Annual Report. |
(1) |
Underlying EBIT
| Definition Underlying EBIT is earnings before net finance costs, taxation and any exceptional items. Link to strategy This is a key financial measure used across the Group. It gives insight to cost management, production growth and performance efficiency. FY2014 performance Underlying EBIT was unchanged for the year at US$22.9 billion as benefits attributable to productivity initiatives during the period and further volume increases from the successful commissioning and ramp-up of our low-risk, brownfield development projects were offset by the decrease in commodity prices, impact of inflation on costs and an increase in our depreciation and amortisation expense. For a reconciliation of Underlying EBIT to Profit from operations, refer to section 1.11 of this Annual Report. For our Consolidated Financial Statements, refer to section 7 of this Annual Report. |
(1) |
Net operating cash flow
| Definition Net operating cash flow represents the cash generated by the Group’s consolidated operations, after dividends received, interest, taxation and royalty-related taxation. This figure excludes cash flows relating to investing and financing activities. Link to strategy Net operating cash flow provides insight into how we are managing costs and increasing efficiency and productivity across the Company. FY2014 performance Net operating cash flows after interest and tax increased by 26 per cent to US$25.4 billion. A US$2.6 billion increase in cash generated from operations (after changes in working capital balances) and a US$2.1 billion decrease in net taxes paid were the major contributors to the strong increase. For our Consolidated Financial Statements, refer to section 7 of this Annual Report. |
(1) |
1.10.3 Capital Management KPIs
Total Shareholder Return (TSR)
| Definition TSR shows the total return to the shareholder during the year. It combines both movements in share prices and Link to strategy TSR measures performance of the organisation in terms of shareholder wealth generation, which aligns to our purpose as presented inOur Charter, and enables the comparison of our performance with that of our peer companies. FY2014 performance TSR grew 13 per cent as a result of increases in both the BHP Billiton share price and the dividends paid. BHP Billiton outperformed its peer companies by 17.8 per cent from 1 July 2009 to 30 June 2014. |
Long-term credit rating
| ||||||
|
Link to strategy One of BHP Billiton’s priorities for capital management is to maintain a solid ‘A’ credit rating, which indicates the strength of our balance sheet. FY2014 performance BHP Billiton has maintained a long-term credit rating of A+ from Standard & Poor’s and A1 from Moody’s over the last five years. For additional information on our liquidity and capital resources, refer to section 1.15.5 of this Annual Report. |
1.11 Summary of consolidated performance
1.11.1 Selected financial information
Our selected financial information reflects the operations of the BHP Billiton Group, and should be read in conjunction with the FY2014 Financial Statements, together with the accompanying notes.
We prepare our consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRS), as issued by the International Accounting Standards Board, and as outlined in note 1 ‘Accounting policies’ to the Financial Statements in this Annual Report. We publish our consolidated Financial Statements in US dollars.
Comparative financial information for FY2013 and FY2012 has been restated for the effects of new accounting standards and interpretations which are effective in the financial year commencing from 1 July 2013 relating to:
The Group has also changed its Exploration and Evaluation Expenditure policy from 1 July 2013 such that all acquisitions of exploration leases are classified as intangible exploration assets or tangible exploration assets based on the nature of the assets acquired. For further detail of the nature and the impact of these changes, on comparative financial information, refer to note 37 ‘Impact of new accounting standards and change in accounting policies’ to the Financial Statements.
We use several financial measures to monitor the financial performance of our overall strategy. The two key measures are Profit after taxation attributable to members of the BHP Billiton Group (Attributable profit) and Underlying EBIT.
Year ended 30 June US$M | 2014 | 2013 | 2012 | 2011 (5) | 2010 (5) | |||||||||||||||
Consolidated Income Statement | ||||||||||||||||||||
Revenue | 67,206 | 65,953 | 70,477 | 71,739 | 52,798 | |||||||||||||||
Profit from operations | 23,412 | 21,002 | 24,600 | 31,816 | 20,031 | |||||||||||||||
Profit attributable to members of BHP Billiton Group | 13,832 | 11,223 | 15,473 | 23,648 | 12,722 | |||||||||||||||
Dividends per ordinary share – paid during the period (US cents) | 118.0 | 114.0 | 110.0 | 91.0 | 83.0 | |||||||||||||||
Dividends per ordinary share – determined in respect of the period (US cents) | 121.0 | 116.0 | 112.0 | 101.0 | 87.0 | |||||||||||||||
Earnings per ordinary share (basic) (US cents) (1) | 260.0 | 210.9 | 290.7 | 429.1 | 228.6 | |||||||||||||||
Earnings per ordinary share (diluted) (US cents) (1) | 259.1 | 210.2 | 289.4 | 426.9 | 227.8 | |||||||||||||||
Number of ordinary shares (millions) | ||||||||||||||||||||
– At period end | 5,348 | 5,348 | 5,348 | 5,350 | 5,589 | |||||||||||||||
– Weighted average | 5,321 | 5,322 | 5,323 | 5,511 | 5,565 | |||||||||||||||
– Diluted | 5,338 | 5,340 | 5,346 | 5,540 | 5,595 | |||||||||||||||
Consolidated Balance Sheet | ||||||||||||||||||||
Total assets | 151,413 | 139,178 | 129,201 | 102,920 | 88,852 | |||||||||||||||
Share capital (including share premium) | 2,773 | 2,773 | 2,773 | 2,771 | 2,861 | |||||||||||||||
Total equity attributable to members of BHP Billiton Group | 79,143 | 70,667 | 65,526 | 56,762 | 48,525 | |||||||||||||||
Other financial information | ||||||||||||||||||||
Underlying EBITDA (2) | 32,359 | 30,308 | 34,617 | 37,093 | 24,513 | |||||||||||||||
Underlying EBIT (2) | 22,861 | 22,930 | 28,086 | 31,980 | 19,719 | |||||||||||||||
Underlying attributable profit (2) | 13,447 | 12,208 | 17,173 | 21,684 | 12,469 | |||||||||||||||
Underlying basic earnings per share (US cents) | 252.7 | 229.4 | 322.6 | 393.5 | 224.1 | |||||||||||||||
Capital and exploration expenditure (BHP Billiton share) (3) | 15,181 | 22,291 | 19,793 | 12,387 | 10,656 | |||||||||||||||
Net operating cash flow (4) | 25,364 | 20,154 | 25,259 | 30,080 | 16,890 |
(1) | ||||||
| ||||||
| ||||||
| ||||||
| ||||||
| ||||||
| ||||||
| ||||||
|
| |||||
|
| |||||
| ||||||
| ||||||
| ||||||
|
| |||||
| ||||||
|
| |||||
|
(3) | Represents the share of capital and exploration expenditure attributable to BHP Billiton |
Net operating cash flows are after net interest and taxation. On 1 July 2010, the Group adopted the policy of classifying exploration cash flows which are not recognised as assets as Net operating cash flows. |
Previously such cash flows were classified as Net investing cash flows. The change in policy arose from amendments to IAS7/AASB7 ‘Cash Flows’. Comparative figures have been |
(5) | FY2011 and FY2010 data has not been restated for the effects of new accounting standards and interpretations and other voluntary changes in accounting policy, which are effective in the financial year commencing from 1 July 2013. |
Non-IFRS measures
2.2 Business overviewWe use a number of non-IFRS measures to assess our performance. Non-IFRS measures include the following:
2.2.1 History and development
Since 29 June 2001, we have operated under a Dual Listed Company (DLC) structure. Under the DLC structure, the two parent companies, BHP Billiton Limited (formerly BHP Limited and before that The Broken Hill Proprietary Company Limited) and BHP Billiton Plc (formerly Billiton Plc) operate as a single economic entity, run by a unified Board and management team. More details of the DLC structure are located under section 2.10 of this Report.
BHP Billiton Limited was incorporated in 1885 and is registered in Australia with ABN 49 004 028 077. BHP Billiton Plc was incorporated in 1996 and is registered in England and Wales with registration number 3196209. Successive predecessor entities
The registered officemembers of BHP Billiton LimitedGroup less exceptional items as described in note 3 ‘Exceptional items’ to the Financial Statements.
In addition we analyse our change in revenue and costs using non-IFRS measures as noted in sections 1.15.3 and 2.5.
Financial results for year ended 30 June 2014 compared with year ended 30 June 2013
Revenue in FY2014 was US$67.2 billion, an increase of US$1.2 billion, or 1.9 per cent, from US$66.0 billion in the corresponding period. The revenue increase was primarily reflected in the Iron Ore and Petroleum and Potash Businesses, with increases of US$2.8 billion and US$1.6 billion, respectively. These increases were offset by decreases in our Copper Business of US$669 million, in our Coal Business of US$780 million, in our Aluminium, Manganese and Nickel Business of US$867 million and by the loss of revenue of our disposed former Diamonds and Specialty Products Business of US$325 million.
The increase in revenue in Iron Ore was primarily due to an increase in sales volumes of 17 per cent to 202 Mt, which contributed to an increase in revenue of US$3.2 billion, partially offset by a six per cent decline in average
realised price of iron ore to US$103 per wet metric tonne (FOB), which reduced revenue by US$522 million. The increase in revenue in Petroleum was primarily due to an increase in volume of four per cent in FY2014 to 246 MMboe, which contributed to an increase in revenue of US$1.4 billion, and to higher realised prices, which contributed to an additional increase of US$219 million. The decrease in other businesses mainly reflected lower realised prices in our Copper Business (US$1.2 billion), Coal Business (US$1.4 billion) and Aluminium, Manganese and Nickel Business (US$394 million).
Overall, the US$1.2 billion increase in revenue in FY2014 can be attributed to US$5.5 billion related to increased volumes, which are within our control, offset primarily by US$3.3 billion related to prices, which are uncontrollable, US$494 million for ceased and sold operations, and US$202 million for exchange rates.
Total expenses decreased from US$50.0 billion in FY2013 to US$46.5 billion in FY2014. Excluding exceptional items, the majority of which related to impairments in FY2013, total expenses have increased by US$1.6 billion or 3.5 per cent during FY2014 from US$45.0 billion to US$46.5 billion.
Year ended 30 June | 2014 | 2013 | 2012 | |||||||||
US$M | US$M | US$M | ||||||||||
Raw materials and consumables used | 8,842 | 8,926 | 8,128 | |||||||||
Employee benefits expense | 6,903 | 7,168 | 6,035 | |||||||||
External services (including transportation)(1) | 11,736 | 12,478 | 14,293 | |||||||||
Third party commodity purchases | 2,935 | 2,759 | 3,402 | |||||||||
Net foreign exchange losses/(gains) | 100 | (284 | ) | (571 | ) | |||||||
Fair value change on derivatives | (120 | ) | 79 | (141 | ) | |||||||
Government royalties paid and payable | 2,760 | 2,562 | 2,880 | |||||||||
Depreciation and amortisation expense | 8,701 | 7,031 | 6,431 | |||||||||
Exploration and evaluation expenditure | 716 | 1,047 | 1,644 | |||||||||
Impairment of assets(2) | 797 | 5,496 | 3,763 | |||||||||
Operating lease rentals | 759 | 776 | 658 | |||||||||
Other operating expenses(3) | 2,384 | 2,002 | 2,122 | |||||||||
|
|
|
|
|
| |||||||
Total expenses | 46,513 | 50,040 | 48,644 | |||||||||
|
|
|
|
|
| |||||||
Less exceptional items | – | (5,087 | ) | (3,786 | ) | |||||||
|
|
|
|
|
| |||||||
Total expenses excluding exceptional items | 46,513 | 44,953 | 44,858 | |||||||||
|
|
|
|
|
|
(1) | Includes exceptional items of US$ nil (2013: US$96 million; 2012: US$ nil). |
(2) | Includes exceptional items of US$ nil (2013: US$5,149 million; 2012: US$3,663 million). |
(3) | Includes exceptional items of US$ nil (2013: credit of US$158 million; 2012: US$ nil). |
The majority of the increase relates to non-cash expenses for depreciation and amortisation (US$1.7 billion), impairments not classified as exceptional items (US$450 million) and changes to provisions for mine site rehabilitation (US$300 million). Increases in other non-cash charges also included provisions for restructuring and a lower capitalisation rate for deferred stripping at Escondida and Pampa Norte. Increases in costs attributable to inflation were US$805 million.
Higher expenses associated with increased production across our four major Businesses of US$2.6 billion were more than offset by reduced operating costs. Our focus on reducing operating costs through productivity initiatives saw cost efficiencies in our Businesses, in particular our Coal Business.
Reductions in expenses (excluding exceptional items) were evident in Employee benefit expense (US$265 million), External services (US$646 million), Exploration and evaluation expenditure (US$331 million) and Raw materials and consumables (US$84 million). In total operating costs were aided by favourable exchange rate impacts of US$2.0 billion.
Other income decreased from US$3.9 billion in FY2013 to US$1.5 billion. Excluding exceptional items, the majority of which relates to gains on the sale of assets, other income increased from US$788 million to US$973 million.
Profit from operations increased by US$2.4 billion, or 11 per cent, from US$21.0 billion to US$23.4 billion. Exceptional items during FY2014 comprised a gain on sale of our Pinto Valley mining operation of US$551 million (before taxation), compared with net exceptional charges of US$1.9 billion (before taxation) in FY2013. In that context, in FY2014 Profit from operations excluding exceptional items, which we refer to as Underlying EBIT, declined by 0.3 per cent, or US$69 million, to US$22.9 billion.
Underlying EBIT
In discussing the operating results of the Group, we focus on a financial measure we refer to as Underlying EBIT. Underlying EBIT is 1300 55 47 57 (within Australia) or +61 3 9609 3333 (outside Australia). the key measure that management uses internally to assess the performance of our Businesses, make decisions on the allocation of resources and assess operational management. Management uses this measure because financing structures and tax regimes differ across our assets and substantial components of our tax and interest charges are levied at a Group level rather than an operational level.
We exclude exceptional items from Underlying EBIT in order to enhance the comparability of the measure from period to period and provide clarity into the underlying performance of our operations. Our management monitors exceptional items separately.
The registered officefollowing table reconciles Underlying EBIT to Profit from operations.
Year ended 30 June | 2014 | 2013 | 2012 | |||||||||
US$M | US$M | US$M | ||||||||||
Underlying EBIT | 22,861 | 22,930 | 28,086 | |||||||||
Exceptional items (before taxation) – refer section 1.15.3 | 551 | (1,928 | ) | (3,486 | ) | |||||||
|
|
|
|
|
| |||||||
Profit from operations (EBIT) | 23,412 | 21,002 | 24,600 | |||||||||
|
|
|
|
|
|
Attributable profit increased by 23 per cent to US$13.8 billion due to a decrease of the Group’s effective tax rate from 35.0 per cent to 31.5 per cent. Underlying attributable profit (comprising Profit after taxation attributable to members of BHP Billiton Plc is Neathouse Place, London SW1V 1BH, UK, and its telephone number is +44 20 7802 4000. Our agent for serviceGroup less exceptional items) of US$13.4 billion increased due to a decrease in the United StatesGroup’s adjusted effective tax rate from 34.2 per cent to 32.5 per cent.
Net operating cash flows after interest and tax increased by 26 per cent to US$25.4 billion in FY2014. A US$2.6 billion increase in cash generated from operations (after changes in working capital balances) and a US$2.1 billion decrease in net taxes paid were the major contributors to the strong increase. We delivered a substantial US$8.1 billion increase in free cash flow, being Net operating cash flows less Net investing cash flows, despite weaker commodity prices. In this context, capital and exploration expenditure (BHP Billiton share) declined by 32 per cent to US$15.2 billion in the period.
We finished the period with net debt of US$25.8 billion (2013: US$27.5 billion), which included finance leases of US$1.3 billion (2013: US$137 million), for a gearing ratio of 23 per cent (2013: 27 per cent).
Further analysis of Underlying EBIT for the Businesses is Marisa I. Reuterincluded in section 1.12 and for the Group in section 1.15.3 of this Annual Report.
1.11.2 Production performance
A summary of our production volumes for FY2014 and the previous two financial years is shown below. Further details appear in section 2.2 of this Annual Report.
Year ended 30 June | 2014 | 2013 | 2012 | |||||||||
Total Petroleum production (MMboe) | 246 | 236 | 222 | |||||||||
Copper (kt) | 1,727 | 1,689 | 1,468 | |||||||||
Iron ore (kt) | 203,564 | 169,856 | 159,478 | |||||||||
Metallurgical coal (kt) | 45,078 | 37,650 | 33,230 | |||||||||
Energy coal (kt) | 73,492 | 72,445 | 74,267 | |||||||||
Alumina (kt) | 5,178 | 4,880 | 4,152 | |||||||||
Aluminium (kt) | 1,174 | 1,179 | 1,153 | |||||||||
Manganese ores (kt) | 8,302 | 8,517 | 7,931 | |||||||||
Manganese alloys (kt) | 646 | 608 | 602 | |||||||||
Nickel (kt) | 143 | 154 | 158 |
1.11.3 Projects and pipeline
Our project pipeline focuses on commodities that are expected to be high-margin and create significant future value. During FY2014, eight projects were completed for a total capital expenditure (subject to finalisation) of US$10.3 billion. At the end of FY2014, we had seven major projects under development in execution and one other project in pre-development phase with a combined budget of US$14.1 billion. This budget does not include an additional US$4.0 billion of capital expenditure that we expect to spend in FY2015 on development of our Onshore US Asset.
For more information on our major projects and pipeline refer to sections 1.12, 2.1 and 2.4 of this Annual Report.
The description of our Businesses and a discussion of their performance is set out below.
For further information on our assets, production, results and reserves refer to section 2 of this Annual Report. For further information on the financial results of our Businesses, refer to note 2 ‘Segment reporting’ to the Financial Statements.
1.12.1 Revenue and Underlying EBIT performance by Business
The following tables provide a summary of Revenue and Underlying EBIT for FY2014 and the two prior corresponding periods of our Businesses and the Group. Our use of Underlying EBIT is explained in section 1.11.1.of this Annual Report.
Year ended 30 June | 2014 | 2013 | 2012 | |||||||||
US$M | US$M | US$M | ||||||||||
Revenue (1) | ||||||||||||
Petroleum and Potash | 14,833 | 13,224 | 12,933 | |||||||||
Copper | 13,868 | 14,537 | 13,553 | |||||||||
Iron Ore | 21,356 | 18,593 | 20,605 | |||||||||
Coal | 9,115 | 9,895 | 12,512 | |||||||||
Aluminium, Manganese and Nickel | 8,411 | 9,278 | 9,911 | |||||||||
Group and unallocated items (2) | (377 | ) | 426 | 963 | ||||||||
|
|
|
|
|
| |||||||
BHP Billiton Group | 67,206 | 65,953 | 70,477 | |||||||||
|
|
|
|
|
|
Year ended 30 June Underlying EBIT Petroleum and Potash Copper Iron Ore Coal Aluminium, Manganese and Nickel Group and unallocated items(2) BHP Billiton Group 2014 2013 2012 US$M US$M US$M 5,287 5,636 6,033 5,080 5,639 5,313 12,102 11,109 14,044 386 595 2,612 307 158 (24 ) (301 ) (207 ) 108 22,861 22,930 28,086
(1) | Includes the sale of third party products. |
(2) | Includes the Group’s diamonds business (divested effective 10 April 2013), interest in titanium minerals (divested effective 3 September 2012), non-Potash corporate costs incurred by the former Diamonds and Specialty Products Business, consolidation adjustments, unallocated items and external sales of freight and fuel via the Group’s transport and logistics operations. |
Year ended 30 June 2014 compared with year ended 30 June 2013
Underlying EBIT for FY2014 was US$22.9 billion, basically unchanged from FY2013.
A substantial reduction in commodity prices reduced Underlying EBIT by US$3.4 billion. This was offset by cost improvements which underpinned a decrease in operating cash costs of US$1.5 billion and a decrease in exploration and business development costs of US$398 million. In addition, higher volumes attributed to our development projects coming on line and through productivity efficiencies at 1360 Post Oak Boulevard, Suite 150, Houston, TX 77056.existing assets, primarily in Iron Ore and Petroleum, contributed an additional US$2.9 billion to Underlying EBIT. This was offset by increased depreciation and amortisation which reduced Underlying EBIT by US$1.7 billion.
2.2.2The use of the term operating cash costs is described in section 1.15.3 of this Annual Report.
1.12.2 Petroleum Customer Sector Groupand Potash Business
Our Petroleum CSGand Potash Business headquartered in Houston, United States, comprises a base of large, long-life, low-unit costconventional and non-conventional operations that are located in six countries throughout the world.world and a potash project based in Saskatchewan, Canada.
Year ended 30 June | 2014 | 2013 | 2012 | |||||||||
US$M | US$M | US$M | ||||||||||
Revenue | 14,833 | 13,224 | 12,933 | |||||||||
Underlying EBIT | 5,287 | 5,636 | 6,033 | |||||||||
Capital expenditure | 6,423 | 7,675 | 5,488 | |||||||||
Net operating assets | 39,514 | 37,525 | 33,583 | |||||||||
Total petroleum production (MMboe) | 246 | 236 | 222 |
Our Petroleum Business includes exploration, development, production and marketing activities. We pursue significant upstream opportunitieshave a high-quality resource base concentrated in the United States and Australia. Our core production operations are primarily located in the US Gulf of Mexico, Onshore US and in Australia. We also have operations in Trinidad and Tobago, Pakistan, Algeria and the United Kingdom. We produce crude oil and condensate, natural gas and natural gas liquids (NGLs). Our petroleum portfolio consisted of conventional oil and gas operations up until 2011, when we moved into the unconventional shale business. Our Onshore US operations evolved from the acquisition of the Fayetteville shale assets from Chesapeake Energy Corporation and the acquisition of Petrohawk Energy Corporation.
A summary of our Petroleum and Potash Business’ assets, capital projects and FY2014 performance is presented below.
Description of the Petroleum Business
Our production operations include the following:
Gulf of Mexico (United States)
We operate two fields in the Gulf of Mexico (Shenzi with multiple options for growth to ensure continued success.
During FY2011, Petroleum delivereda 44 per cent interest and Neptune with a 35 per cent interest) and hold non-operating interests in three other fields (Atlantis with a 44 per cent interest, Mad Dog with a 23.9 per cent interest, and Genesis with a 4.95 per cent interest). We have on-going infill drilling in our fourth consecutive annual production record by realising 159.4Gulf of Mexico fields. We completed water injection development projects at Shenzi and Atlantis in CY2013. All the fields are located between 155 and 210 kilometres offshore of 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. Production in FY2014 was 36.1 million barrels of oil equivalent (MMboe) up from 30.6 MMboe in FY2013.
Onshore US (United States)
We produce oil, condensate, NGLs and natural gas in four shale areas: Eagle Ford, Permian, Haynesville and Fayetteville. The Eagle Ford area has two sections, Black Hawk and Hawkville. Much of the Eagle Ford and Permian areas are focused on hydrocarbon liquids. The Haynesville and Fayetteville areas are focused on natural gas. Our combined leasehold acreage onshore in the United States is approximately 1.2 million net acres. Our ownership interests in those leases range from less than one per cent to 100 per cent. At 30 June 2014, we held an interest in approximately 7,700 gross wells and approximately 2,600 net wells. We acted as joint venture operator for approximately 32 per cent of our gross wells. Production in FY2014 was 108.1 MMboe, up from 99.2 MMboe in FY2013.
Oil and gas production from our diverse global portfolio. Our operations achieved continued high uptime rates with strong reservoir performance from the operated Pyrenees (Australia) and Shenzi (US) fields. The Angostura Gas facility (Trinidad and Tobago) was brought on stream during the fourth quarter of FY2011. New production volumes were realised from the acquisition of the Fayetteville onshore shale areas is sold domestically in the United States, via connections to intrastate and interstate pipelines. Prices for oil, NGLs and natural gas operations (US) duringare based on US regional price indices, including West Texas Intermediate prices for oil, Henry Hub prices for natural gas and Mont Belvieu prices for NGLs.
During FY2014, we sold our interest in our Onshore US South Midland shale operation, located in the fourth quarterPermian Basin, to EP Energy for a cash consideration of FY2011. Continued high margins were achieved due to operating costs being maintained on average close to US$6 per barrel on the entire global portfolio.153 million.
Production from ourMap of Onshore US and Gulf of Mexico projects was materially impacted through FY2011 by a drilling moratorium imposed by the US Department
Map of the Interior on all offshore oil and gas industry activities following the oil spill from BP’s Macondo well. Despite regulatory delays, BHP Billiton led the industry in returning to deepwater drilling operations and bringing the first new production on stream from our operated Shenzi field following the lifting of the moratorium on 12 October 2010. Drilling has not yet commenced in the Mad Dog and Atlantis fields operated by BP where we have a significant interest. Production in FY2011 was also adversely impacted by an active tropical cyclone season in Western Australia affecting our operated Pyrenees and Stybarrow oil operations and non-operated North West Shelf operations.
We continue to invest through economic cycles and maintain a long-term view. Our consistently strong project execution over the past five years has led us to successfully deliver five major operated projects, the latest one being the Angostura Gas platform offshore Trinidad and Tobago. This has continued our track record of delivering our projects safely, within budget and on schedule. We remain committed to growth through exploration and commenced a major international drilling campaign in FY2011 that will extend through FY2012
and beyond. We continue to build our inventory of acreage, leads and prospects as well as progressing our major capital projects. In February 2011, we successfully executed a major acquisition of the Fayetteville Shale gas interests in Arkansas for US$4.8 billion. On 21 August 2011, we announced the successful completion of the cash tender offer to acquire Petrohawk Energy Corporation, an independent oil and natural gas company engaged in the exploration, development and production of primarily shale gas and oil in Texas and Louisiana. The total price of the offer was approximately US$12.1 billion and the total enterprise value was approximately US$15.1 billion, including the assumption of net debt. We will continue to evaluate other commercial opportunities for growth as we move forward.
Our production operations are as follows:
Bass Strait
Bass Strait (Australia)
Together with our 50-50 joint venture partner, Esso Australia (a subsidiary of ExxonMobil), through the Gippsland Basin Joint Venture, we participated in the original discovery of hydrocarbons in 1965 and we have been producing oil and gas from Bass Strait for more than 40 years. The Bass Strait operations are located between 25 and 80 kilometres off the south-easternsoutheastern coast of Australia, for over 40 years, having participated in the original discovery of hydrocarbons in 1965. Australia.
We dispatchsell the majority of our Bass Strait crude oil and condensate production to refineries along the east coast of Australia.Australia under 12-month term contracts. The contract price is based on the average Dated Brent price. Gas is piped onshore to ourthe joint venture’s Longford processing facility, from which we sell our share of production to domestic distributors under contracts with periodic price reviews.
Production in FY2014 was 34.0 MMboe, down from 36.0 MMboe in FY2013.
North West Shelf (Australia)
We are a joint venture participant in the North West Shelf Project, located approximately 125 kilometres northwest of Dampier in Western Australia. The North West Shelf Project was developed in phases: the domestic gas phase supplies gas to the Western Australia domestic market, mainly under long-term contracts, and a series of liquefied natural gas (LNG) expansion phases supplying LNG to buyers in Japan, South Korea and China under a series of long-term contracts. Gas from North West Shelf is piped to the Karratha Gas Plant for processing. We are also a joint venture partner in four nearby oil fields. All North West Shelf gas and oil joint ventures are operated by Woodside. Production in FY2014 was 28.8 MMboe, down from 30.1 MMboe in FY2013.
Pyrenees (Australia)
We operate six oil fields in Pyrenees, which are located offshore approximately 23 kilometres northwest of Northwest Cape, Western Australia. We had an effective 62 per cent interest in the fields as at 30 June 2014, based on inception to-date production from two permits in which we have interests of 71.43 per cent and 40 per cent, respectively. The project uses a floating, production, storage and off-take (FPSO) facility. The crude oil produced is sold internationally on the spot market. Production in FY2014 was 7.5 MMboe down from 8.5 MMboe in FY2013.
Macedon (Australia)
We are the operator of Macedon (71.43 per cent interest), an offshore gas field located approximately 75 kilometres west of Onslow, Western Australia, and a gas processing facility onshore approximately 17 kilometres southwest of Onslow. The operation achieved first gas in August 2013 and consists of four subsea wells, with gas piped onshore to the processing plant. After processing, the gas is delivered into a pipeline and sold domestically under long-term contracts. First year production was 5.5 MMboe.
Greater Angostura (Trinidad and Tobago)
We operate the Greater Angostura field (45 per cent interest in the production sharing contract), an integrated oil and gas development, located offshore, 40 kilometres east of Trinidad. The crude oil is sold on a spot basis to international markets, while the gas is sold domestically under term contracts. Production in FY2014 was 7.5 MMboe, up from 7.4 MMboe in FY2013.
Other
We are the operator at the following operations: Minerva (90 per cent interest), a gas field located 11 kilometres south-southwest of Port Campbell in western Victoria, the Zamzama gas project (38.5 per cent interest) in the Sindh province of Pakistan and the Keith oil and gas field (31.83 per cent interest) in the North Sea. We have non-operating interests in ROD Integrated Development (38 per cent interest), which consists of six satellite oil fields in Algeria, and in the Bruce oil and gas field (16 per cent interest) in the North Sea. Production in FY2014 was 17.3 MMboe, down from 22.3 MMboe in FY2013.
More information on our assets and operations is presented in section 2.1.1 of this Annual Report.
Completed development projects
Macedon
Macedon is a domestic gas development that consists of a 200 million cubic feet per day (MMcf/d) standalone gas plant, four subsea production wells, a 90 kilometre 20-inch wet gas pipeline and a 67-kilometre 20-inch sales gas pipeline. The project was approved in August 2010. First gas occurred in August 2013.
North West Shelf North Rankin gas compression
The North West Shelf gas compression project was approved by the Board in March 2008 to recover remaining lower pressure gas from the North Rankin and Perseus gas fields. The project consisted of a new gas compression platform, North Rankin B, capable of processing 2,500 MMcf/d of gas, which was constructed adjacent to the existing North Rankin A platform, 135 kilometres offshore from Karratha on the northwest coast of Western Australia. The two platforms are connected by a 100-metre long bridge and operate as a single facility. First gas production occurred in October 2013. This project is operated by Woodside, with an equally shared interest between Woodside, BHP Billiton, BP, Chevron, MIMI and Shell.
Development projects in execution at year-end
North West Shelf Greater Western Flank–A
The North West Shelf Greater Western Flank–A (GWF-A) gas project was approved by the Board in November 2011 to recover gas from the near field Goodwyn H and Tidepole fields. The project consists of a five well subsea tie-back of the Goodwyn H and Tidepole fields to the Goodwyn A platform. The Goodwyn A platform is located in 130 metres of water, approximately 130 kilometres offshore from Karratha on the northwest coast of Australia. First gas production is expected in CY2016. Woodside is the operator and we own a 16.67 per cent interest.
Bass Strait Longford Gas Conditioning
The Longford Gas Conditioning Plant (LGCP) Project was approved by the Board in December 2012 to enable the production of Turrum reserves plus the production of Kipper and other undeveloped high carbon dioxide content hydrocarbons. The project scope includes a carbon dioxide extraction facility, brownfield tie-ins, an electrical upgrade and multiple supporting utilities. First gas production is expected in CY2016.
Onshore US Development
Drilling and development investment for Onshore US in FY2014 was US$4.2 billion, down from US$4.7 billion in FY2013, with US$3.6 billion (FY2013: US$3.8 billion) spent in the liquids-focused areas of Eagle Ford and Permian, and US$0.6 billion (FY2013: US$0.9 billion) in the gas-focused areas of Haynesville and Fayetteville. The expenditure primarily related to drilling and completion activities at all four areas. Our onshore drilling activity in FY2014 resulted in 413 net development wells completed primarily in the Eagle Ford and Permian areas.
Of the US$4.2 billion, approximately US$400 million was invested in the installation of more than 200 kilometres of pipeline infrastructure and additional gas processing facilities, primarily in our Eagle Ford and Permian areas. The majority of drilling and completion activity in Onshore US was directed towards the liquids-focused Eagle Ford and Permian areas to capitalise on the stronger liquid prices as compared with natural gas prices. At the end of FY2014, more than 85 per cent of drilling activity was conducted in these areas.
More information on our development and capital projects is presented in section 2.4 of this Annual Report.
Exploration and evaluation
Our exploration strategy is to focus on material opportunities, at high working interest, with a bias for liquids and operatorship. While the majority of our expenditure occurs in our two principal offshore areas of activity, the Gulf of Mexico and Western Australia, we also have exploration activities in Trinidad and Tobago, Brazil, South Africa, South East Asia and Onshore US.
We then perform development evaluation activities to determine the technical feasibility and commercial viability of prospective projects after exploration and appraisal.
More information on our development evaluation activities and exploration is presented in section 2.1.1 of this Annual Report.
Description of the Potash Business
Jansen Potash Project
Our Potash strategy is to build a material industry position over the long term.
We hold exploration permits and mining leases, issued by the Government of Saskatchewan, covering more than 14,000 square kilometres of mineral rights in the province of Saskatchewan in Canada. We have progressively explored our permit areas over the past seven years and continue to evaluate their economic development potential. We are converting our exploration permits to long-term leases as these permits mature in order to enable further evaluation. To date, we have secured 4,400 square kilometres under long-term mining leases.
We believe our Jansen Potash Project, a greenfield potash project in south-central Saskatchewan, is the world’s best undeveloped potash resource and is likely to be a low-cost source of supply once fully developed. Investment in Jansen could underpin a potential fifth pillar of BHP Billiton, given the opportunity to develop a multi-decade, multi-mine basin in Saskatchewan.
On 20 August 2013, we announced an additional US$2.6 billion investment for Jansen, bringing total approved spending to US$3.8 billion. This investment is funding the excavation and lining of the Project’s production and service shafts, and the installation of surface infrastructure and utilities. The level of expenditure on the Jansen Potash Project in FY2014 was US$596 million.
With our investment premised on the attractive longer-term market fundamentals for potash, we will continue to modulate the pace of development as we seek to time our entrance to meet market demand. The introduction of one or more minority partners, consistent with our approach for certain of our other resource operations, will be considered at the appropriate time.
On the basis of our current projections and assuming Board approval, the Jansen mine is likely to ramp-up to its nameplate capacity of approximately 10 Mtpa of agricultural grade potassium chloride in the decade beyond 2020.
Performance
Petroleum and Potash revenue increased by US$1.6 billion to US$14.8 billion, mainly due to Onshore US, which increased by 43 per cent to US$4.3 billion, and Atlantis, which increased by 80 per cent to US$1.5 billion.
The increase in revenue primarily resulted from an increase in volume of four per cent in FY2014 to 246 MMboe. A 16 MMboe increase in liquids production was underpinned by a 73 per cent increase in Onshore US liquids volumes and a near doubling of production at Atlantis. Natural gas volumes declined by four per cent as the delivery of first gas from Macedon partially offset lower demand at Bass Strait and natural field decline at Haynesville.
The average realised price of natural gas across our portfolio increased by 16 per cent to US$4.35 per thousand standard cubic feet (Mscf). This included a 25 per cent increase in the average realised price of US natural gas to US$4.10 per Mscf. This increase was partially offset by a four per cent decline in the average realised price of oil to US$102 per bbl, a one per cent decline in the average realised price of LNG to US$14.67 per Mscf and a seven per cent decline in the average realised price of natural gas liquids (NGL) to US$42.28 per barrel.
Underlying EBIT for Petroleum decreased by US$115 million to US$5.9 billion in FY2014. Price-related increases, net of price-linked costs, contributed US$113 million to Underlying EBIT and volumes contributed an additional US$994 million, although this was partially offset by an increase in depreciation and amortisation expense at Onshore US that reflected the ramp-up of liquids production and the progressive development of our Permian acreage. In this regard, our position within our focus area in the Permian increased by 25 per cent in the period to 74 thousand net acres.
Additional charges were also recognised during the period, including: a US$184 million impairment of minor Gulf of Mexico assets; a US$143 million adjustment to the Browse divestment proceeds; and a US$112 million UK pension plan expense. The Group also incurred a charge of US$135 million for underutilised gas pipeline capacity, primarily in the Haynesville.
The Onshore US Underlying EBIT for FY2014 was a loss of US$156 million compared with a loss in FY2013 of US$287 million. The Onshore US Underlying EBITDA for FY2014 was US$2.3 billion compared with US$1.5 billion in FY2013. Second half June 2014 EBITDA increased by more than 60 per cent to US$1.4 billion. As a result, Onshore US generated an Underlying EBIT of US$142 million during the second half of FY2014. This included the aforementioned underutilised gas pipeline capacity charges.
In FY2014, approximately 75 per cent of Onshore US drilling and development expenditure of US$4.2 billion was invested in the Eagle Ford, with the majority focused on our Black Hawk acreage. The repetitive, manufacturing-like nature of shale development is ideally suited to our productivity agenda. Drilling costs in the Black Hawk declined by 16 per cent to US$4.2 million per well during the period while spud to sales timing improved by 21 per cent.
Of the 24 operated drilling rigs in action at the end of the period (30 June 2013: 40), 17 were in the Eagle Ford (30 June 2013: 31), four were in the Permian (30 June 2013: four), three were in the Haynesville (30 June 2013: four), while no rigs were in the Fayetteville (30 June 2013: one).
A total of 138 net wells were put online in our prolific Black Hawk acreage during FY2014 (FY2013: 66 net wells) with an average 30-day initial production rate of 1,140 boe per day. An average one-year cumulative production rate per well of 208 thousand barrels of oil equivalent (Mboe) for the wells put online in FY2013 reflected advances in completions optimisation and the benefit of restricting initial flow rates. At the end of the period we had 284 net producing wells in the Black Hawk with an average rate of 82.4 Mboe per day achieved in the June 2014 quarter (43.0 Mboe per day in the June 2013 quarter).
Onshore US overview
Liquids- focused areas (Eagle Ford and Permian) | Gas- focused areas (Haynesville and Fayetteville) | Total | ||||||||||||||||||||||||
Year ended 30 June | 2014 | 2013 | 2014 | 2013 | 2014 | 2013 | ||||||||||||||||||||
Capital expenditure | US$ billion | 3.6 | 3.8 | 0.6 | 0.9 | 4.2 | 4.7 | |||||||||||||||||||
Production | MMboe | 51.9 | 33.4 | 56.2 | 65.8 | 108.1 | 99.2 | |||||||||||||||||||
Production mix | Natural gas | 36 | % | 42 | % | 100 | % | 100 | % | 69 | % | 80 | % | |||||||||||||
Natural gas liquids | 22 | % | 23 | % | – | – | 11 | % | 8 | % | ||||||||||||||||
Crude and condensate | 42 | % | 35 | % | – | – | 20 | % | 12 | % |
Petroleum exploration expenditure for FY2014 was US$600 million, of which US$369 million was expensed. During the period, we signed a production sharing contract for Block 23b (60 per cent interest and operator) and farmed into Blocks 23a and 14 (70 per cent interest and operator) in Trinidad and Tobago.
During the period, we completed the divestment of our 46.1 per cent interest in Liverpool Bay and our South Midland acreage in the Permian basin, Onshore US. Combined proceeds of US$182 million were realised (before customary adjustments) and a gain on sale of US$116 million was recognised in Underlying EBIT.
Potash recorded an Underlying EBIT loss of US$583 million. This included: a US$68 million impairment associated with our decision to allow the exclusivity agreement for Terminal 5 at the Port of Vancouver (US) to lapse; and a US$300 million charge related to the revision of mine site rehabilitation provisions for the Group’s North American closed mines, which are managed by our Potash Business. In addition, exploration expense for Potash was US$47 million, a US$42 million reduction from FY2013.
The Jansen Potash Project was 30 per cent complete at the end of the period with significant progress made on surface infrastructure and shaft excavation continuing.
Outlook
After adjusting for the sale of Liverpool Bay, Petroleum production is forecast to increase by five per cent in FY2015 to 255 MMboe with another 16 MMboe increase in total liquids production projected. Conventional volumes for FY2015 are forecast to remain broadly unchanged.
Petroleum capital expenditure of approximately US$5.6 billion is planned in FY2015. In our Onshore US Asset we will continue to prioritise investment in the liquids-focused Eagle Ford and Permian with up to 120 net wells expected to be put online in the Black Hawk. In our conventional business, we will remain focused on high-return infill drilling opportunities in the Gulf of Mexico and life extension projects at Bass Strait and North West Shelf.
A US$750 million exploration program, largely focused on the Gulf of Mexico, Western Australia and the collection of seismic data in Trinidad and Tobago is planned for FY2015.
1.12.3 Copper Business
Our Copper Business, headquartered in Santiago, Chile, is one of the world’s premier producers of copper, silver, lead and uranium, and is a leading producer of zinc. We market five primary products: copper cathodes, copper, lead and zinc concentrates and uranium oxide.
Year ended 30 June | 2014 | 2013 | 2012 | |||||||||
US$M | US$M | US$M | ||||||||||
Revenue | 13,868 | 14,537 | 13,553 | |||||||||
Underlying EBIT | 5,080 | 5,639 | 5,313 | |||||||||
Capital expenditure | 3,757 | 3,930 | 3,518 | |||||||||
Net operating assets | 22,231 | 20,074 | 16,721 | |||||||||
Production – copper (kt) | 1,727 | 1,689 | 1,468 |
A summary of our Copper Business’ assets and operations, development projects and FY2014 performance is presented below.
Description of the Copper Business
Our assets consist of the following:
Escondida (Chile)
Our 57.5 per cent owned and operated Escondida mine is the largest producer of copper in the world. Located in the Atacama Desert in northern Chile, Escondida employs approximately 14,000 operational employees and contractors and has the capacity to move in excess of 1.3 million tonnes (Mt) of material per day. Its two open-cut pits feed two concentrator plants, which use grinding and flotation technologies to produce copper concentrate, as well as two leaching operations (oxide and sulphide). In FY2014, our share of Escondida production was 485.7 kilotonnes (kt) of payable copper in concentrate and 177.1 kt of copper cathode. Escondida has a reserve life of 52 years.
Pampa Norte (Chile)
Pampa Norte consists of two wholly owned operations in the Atacama Desert in northern Chile – Spence and Cerro Colorado. During FY2014, Spence produced 152.8 kt of high-quality copper cathodes, using oxide and sulphide ore treatment through leaching, solvent extraction and electrowinning processes. Although production levels at Cerro Colorado have fallen in recent years as grades have declined, production in FY2014 reached 80.3 kt of copper cathode. Spence and Cerro Colorado have reserve lives of 10 and nine years, respectively.
A project, currently being studied, referred to as the Spence Growth Option (SGO), is being conducted to consider exploiting the hypogene sulphide resource with associated molybdenum sulphide by building a 95 kilotonnes per day (ktpd) concentrator at the Spence operation. SGO would extend the mine life by approximately 50 years following the current FY2025 closure date.
Antamina (Peru)
We own 33.75 per cent of Antamina, a large, long-life, low-cost copper and zinc mine in north central Peru. Our share of Antamina’s FY2014 production was 143.5 kt of copper in concentrate and 52.0 kt of zinc in concentrate. Antamina also produces molybdenum and lead/bismuth concentrate, as well as small amounts of silver in the form of by-products. Antamina has a reserve life of 13 years. In FY2014, Antamina commenced execution of a debottlenecking project, to increase milling capacity by 12 per cent to 145 ktpd.
Cannington (Australia)
Our wholly owned Cannington mine is one of the world’s largest producers of silver and lead. Located in northwest Queensland, Australia, the underground mine feeds a beneficiation processing facility that extracts silver/lead and zinc concentrates from sulphide ore. In FY2014, Cannington produced concentrates containing186.5 kt of lead, 57.9 kt of zinc and approximately 25.2 million ounces of silver. Cannington has a reserve life of nine years.
Olympic Dam (Australia)
Our wholly owned Olympic Dam mine in South Australia is a producer of copper cathode and uranium oxide and a refiner of gold and silver bullion. The site includes an underground mine, where the primary method of ore extraction is long-hole open stoping with cemented aggregate fill, and an integrated metallurgical processing plant. In FY2014, Olympic Dam produced 184.4 kt of copper cathode, 4.0 kt of uranium oxide, 121.3 kilo-ounces (koz) of refined gold and 972 koz of refined silver. Olympic Dam has a reserve life of 47 years.
A pre-feasibility study is being conducted into the proposed expansion of Olympic Dam. The objective of the study is to identify the full range of development path alternatives for Olympic Dam by investigating all possible mining methods and less capital-intensive designs, including new technologies.
In July 2014, we lodged an application for assessment by the Australian and South Australian Governments to construct and operate a demonstration plant on the existing mining lease at Olympic Dam. This process would enable heap leaching trials to progress to the next phase as part of our efforts to identify an alternative, less capital-intensive process for extracting metals from ore mined underground. Should Government and Board approvals be granted, construction of the demonstration plant is expected to commence in the second half of CY2015. A trial period of 36 months is envisaged, commencing in late 2016.
Divested asset – Pinto Valley (United States)
In October 2013, we completed the sale of our Pinto Valley mining operation and the associated San Manuel Arizona Railroad Company to Capstone Mining Corp. for US$653 million, after working capital adjustments.
More information on our assets and operations is presented in section 2.1.2 of this Annual Report.
Development projects in execution at year-end
Escondida
The Organic Growth Project 1 (OGP1) is the replacement for the Los Colorados concentrator with a new 152 ktpd plant. We expect this project to provide additional processing capacity and allows access to higher-grade ore. OGP1 was approved in February 2012 with budgeted expenditure of US$3.8 billion (BHP Billiton share US$2.2 billion). Project completion is targeted for the first half of CY2015. Work on OGP1 was 79 per cent complete at 30 June 2014.
We approved the Escondida Water Supply (EWS) project in July 2013, which consists of a new 2,500 litres per second sea water desalination facility. This project will provide an alternative water supply to Escondida, as water usage increases upon completion of the 152 ktpd OGP1 copper concentrator. Construction of the new desalination facility commenced in July 2013 and includes the development of two pipelines, four high-pressure pump stations, a reservoir at the mine site and high-voltage infrastructure to support the system. The new facility is expected to be commissioned in 2017 at a cost of US$3.4 billion (BHP Billiton share US$2.0 billion). Prior to completion of the EWS project, water supply for OGP1 will continue to be sourced from existing aquifers and the 500 litres per second desalination plant.
The Oxide Leach Area Project (OLAP), involves the creation of a new dynamic leaching pad and mineral handling system that will include several overland conveyors. The new pad is expected to maintain oxide leaching capacity at current levels following the exhaustion of the existing heap leach in CY2014. OLAP was approved in February 2012 with budgeted expenditure of US$721 million (BHP Billiton share US$414 million). A US$212 million increase in the budget of OLAP to US$933 million (BHP Billiton share US$536 million) was approved in March 2014. Work on the project was 93 per cent complete at 30 June 2014, and is expected to be completed in the second half of CY2014.
More information on our development projects is presented in section 2.4 of this Annual Report.
Exploration activities
Our greenfield copper exploration activities during FY2014 were focused on advancing targets within Chile and Peru. Greenfield activities include opportunity identification, application for and acquisition of mineral title, early reconnaissance operations and drilling programs.
Performance
Total copper production in FY2014 increased by two per cent to 1.7 Mt. Escondida copper production increased by two per cent to 1.2 Mt as an improvement in mill throughput and concentrator utilisation offset a nine per cent decline in ore grades. Record mining rates at Olympic Dam underpinned an 11 per cent increase in copper production to 184 kt while Pampa Norte copper production of 233 kt was unchanged from the prior period. Antamina achieved record annual mill throughput and copper production in FY2014.
Copper Business revenue decreased by US$669 million to US$13.9 billion. Revenue for Escondida decreased by six per cent to US$8.1 billion. The decrease in revenue primarily resulted from a five per cent decline in the average realised price of copper to US$3.22 per pound.
Lower average realised prices reduced Underlying EBIT by US$947 million, net of price-linked costs. In contrast, a stronger US dollar against the Chilean peso and Australian dollar increased Underlying EBIT by US$359 million.
Underlying EBIT for FY2014 decreased by US$559 million to US$5.1 billion. Unit cash costs, which we calculate excluding revenue from by-products, at our operated copper assets declined by six per cent during FY2014 despite the impact of the nine per cent reduction in ore grades at Escondida. In this context, productivity cost efficiencies increased Underlying EBIT by US$190 million and reflected insourcing initiatives and the broader optimisation of contractor activities across the business. A reduction in exploration and business development expenditure increased Underlying EBIT by a further US$217 million as the Group sharpened its focus on greenfield copper porphyry targets in Chile and Peru. In contrast, an increase in non-cash charges reflected a lower capitalisation rate for deferred stripping at Escondida and Pampa Norte, and a general increase in depreciation and amortisation, and reduced Underlying EBIT by US$337 million during the period.
Underlying EBIT of Olympic Dam for FY2014 increased by US$38 million to US$34 million, where costs efficiencies offset the decrease in commodities prices.
At 30 June 2014, the Group had 350 kt of outstanding copper sales that were revalued at a weighted average price of US$3.19 per pound. The final price of these sales will be determined in FY2015. In addition, 386 kt of copper sales from FY2013 were subject to a finalisation adjustment in FY2014. These provisional pricing and finalisation adjustments increased Underlying EBIT by US$73 million in FY2014 (FY2013: US$303 million decrease).
A gain on the sale of the Pinto Valley mining operation and the associated San Manuel Arizona Railroad Company of US$385 million (after tax) was recognised in FY2014 and was reported as an exceptional item.
Outlook
Total copper production is forecast to increase by five per cent in FY2015 to 1.8 Mt. With further improvements in productivity anticipated, Escondida is on track to produce approximately 1.27 Mt of copper in the period. Copper volumes at Pampa Norte and Olympic Dam are expected to remain at a similar level to FY2014, while lower average copper grades are expected to lead to a reduction in copper production at Antamina in FY2015, consistent with the mine plan.
The commissioning of OGP1, which remains on schedule to commence in the June 2015 quarter, will create 152 ktpd of valuable copper concentrator capacity. The Escondida OLAP and OGP1 are expected to maintain Escondida’s copper production.
1.12.4 Iron Ore Business
Our Iron Ore Business, headquartered in Perth, Australia, is one of the leading iron ore producers in the world. We sell lump and fines products produced in Australia and pellets from our operations in Brazil.
Year ended 30 June | 2014 | 2013 | 2012 | |||||||||
US$M | US$M | US$M | ||||||||||
Revenue | 21,356 | 18,593 | 20,605 | |||||||||
Underlying EBIT | 12,102 | 11,109 | 14,044 | |||||||||
Capital expenditure | 2,949 | 5,979 | 4,458 | |||||||||
Net operating assets | 23,390 | 22,126 | 17,375 | |||||||||
Production – iron ore (Mt) | 204 | 170 | 159 |
A summary of our Iron Ore Business’ assets, development projects and FY2014 performance is presented below.
Description of the Iron Ore Business
Our assets consist of the following:
Western Australia Iron Ore (Australia)
Operations at Western Australia Iron Ore (WAIO) involve an integrated system of mines and more than 1,000 kilometres of rail infrastructure and port facilities in the Pilbara region of northern Western Australia, with the headquarters located in Perth. Our focus is to safely maximise output through operating our mines and utilising available infrastructure at our disposal. This includes our plan to continue to grow production following the recent completion of a number of expansion projects and ongoing debottlenecking of the supply chain to underpin further potential growth in capacity to 290 million tonnes per annum (Mtpa).
We have expanded our WAIO operations in response to increasing demand for iron ore, particularly from China. Since 2001, we have completed eight expansion projects to increase our mine, rail and port capacity. Our share of FY2014 production was 193 Mt of ore, which is expected to increase in FY2015 to 211 Mtpa.
We have been transitioning to owner-operated mines since 2011. We completed this transition with the last contractor run site, Orebody 18, finalising its transition during FY2014.
Lump and fines products are sold to steel mills in China, South Korea, Japan, Singapore, Hong Kong, Taiwan, Switzerland and Australia, under long-term and short-term contracts. Contract prices are generally linked to market indices.
In order to establish a consistent, long-term, high-quality lump ore product having a stable grade, we recently transitioned to a blended lump product. The product is a blend of lump ores produced from the Newman, Area C and Jimblebar mining areas, known as Newman Blend lump. During FY2014, 23 per cent of sales were lump and 77 per cent were fines.
Our WAIO operations consist of four main joint ventures: Mt Newman, Yandi, Mt Goldsworthy and Jimblebar. Our interest in the joint ventures is 85 per cent with Mitsui and ITOCHU owning the remaining 15 per cent. The joint ventures are unincorporated except Jimblebar, where we diluted our interest in a subsidiary company to 85 per cent in July 2013 for which BHP Billiton received total consideration of US$1.5 billion.
The Mt Newman Joint Venture consists of a number of orebodies joined by conveyors and spur lines to a mining hub at Mt Whaleback. Ore is crushed, beneficiated (where necessary) and blended to create the Newman Blend for lump and fines. The ore is then transported to port using our rail facilities. The Yandi JV comprises the Yandi mine where ore is crushed and screened and then transported by rail on the Newman main line. The Mt Goldsworthy JV consists of the Area C mine in the central Pilbara and the Yarrie mine in northern Pilbara. Ore is crushed and screened at Area C and transported by rail to the hub at Mt Whaleback. Production at Yarrie was suspended on 25 February 2014. The Jimblebar operation was officially opened on 23 April 2014 and comprises the new Jimblebar mine located 40 kilometres east of Newman. Jimblebar delivered first production in the September 2013 quarter and produced 9 Mt during FY2014.
Map of Western Australia Iron Ore
Our rail operations are controlled from Perth via our integrated remote operations centre which co-locates rail control, port production control, mine dispatch control and mine fixed plant control.
Our port facilities are located on both sides of the harbour at Port Hedland. These facilities consist of Nelson Point and Finucane Island. The port facilities include five ore car dumpers, three screening plants, nine stackers, five reclaimers, stock and blending yards, and eight ship loaders.
The reserve life of our Western Australian mines is 16 years.
Samarco (Brazil)
We are a 50–50 joint venture partner with Vale at the Samarco operation in Brazil. Samarco is currently comprised of a mine and two concentrators, located in the state of Minas Gerais, and three pellet plants and a port, located in Anchieta in the state of Espirito Santo. Three 396-kilometre pipelines connect the mine site to the pelletising facilities.
Samarco’s main product is iron ore pellets. Extraction and beneficiation of iron ore is conducted at the Germano facilities in the municipalities of Mariana and Ouro Preto. Ore beneficiation occurs in concentrators after which concentrate is pumped through slurry pipelines to the pellet plant in Ubu, Anchieta. Pellets are independently marketed by Samarco and sold to steelmakers in 20 countries in the Americas, Asia, Africa, the Middle East and Europe, with prices generally linked to market indices. In FY2014, our share of production was 11 Mt of pellets. The reserve life of Samarco is 39 years.
More information on our assets and operations is presented in section 2.1.3 of this Annual Report.
Completed development projects
Western Australia Iron Ore
WAIO has been executing a number of expansion projects in recent years. These projects, approved in March 2011 for a total of US$7.4 billion (BHP Billiton share US$6.6 billion) plus pre-commitment funding of US$2.3 billion (BHP Billiton share US$2.1 billion) were designed to deliver an integrated operation with a minimum capacity of 220 Mtpa (100 per cent basis).
These projects included:
Western Australia Iron Ore – Orebody 24 mine
In FY2014, WAIO completed execution of its development of the Orebody 24 mine, located approximately 10 kilometres northeast of Newman. Orebody 24 is a sustaining mine to maintain iron ore production output from the Mt Newman JV operations. The project was approved in November 2011 and included the construction of an ore crushing plant, train loadout facility, rail spur and other associated support facilities. The project was delivered at a cost of US$0.5 billion (BHP Billiton share), subject to finalisation, in the September 2014 quarter versus a budget of US$0.7 billion.
Samarco
During FY2011, Samarco shareholders approved a US$3.5 billion (BHP Billiton share US$1.75 billion) expansion project, consisting of a fourth pellet plant, a new concentrator and a third slurry pipeline. The project
is complete, with its first pellet production in March 2014. This has expanded Samarco’s iron ore pellet production capacity from 22.3 Mtpa to 30.5 Mtpa. The final cost of the project was US$3.2 billion (BHP Billiton share US$1.6 billion).
More information on our development projects is presented in section 2.4 of this Annual Report.
Exploration activities
Western Australia
WAIO has a substantial existing reserve base supported by considerable additional mineralisation all within a 250-kilometre radius of our existing infrastructure. This concentration of orebodies also gives WAIO the flexibility to add growth tonnes to existing hub infrastructure and link brownfield developments to our existing mainline rail and port facilities. The total area covered by exploration and mining tenure amounts to 6,500 square kilometres.
Total exploration expenditure in FY2014 amounted to US$166 million.
Guinea Iron Ore
On 29 July 2014 we signed an agreement with ArcelorMittal for the sale of our 41.3 per cent interest in a joint venture that holds the Nimba Mining Concession and four iron ore prospecting permits in southeast Guinea. Completion of the transaction is subject to the receipt of regulatory approval and other customary closing conditions.
Liberia Iron Ore
We have a 100 per cent interest in a Mineral Development Agreement with the Government of Liberia. This enables the further exploration and development of our Liberian iron ore mineral leases.
Performance
Iron Ore revenue increased by US$2.8 billion to US$21.4 billion. Revenue for WAIO increased by US$2.6 billion, an increase of 13.9 per cent. An 18 per cent increase in WAIO sales volumes was the major contributor, which was partially offset by a six per cent decline in average realised price of iron ore to US$103 per wet metric tonne (FOB).
Iron ore production increased by 20 per cent in FY2014 to a record 204 Mt, exceeding initial full-year guidance by more than eight per cent. WAIO production of 225 Mt (100 per cent basis) represents a fourteenth consecutive annual record and was underpinned by the early commissioning of Jimblebar and our productivity agenda, which raised the capacity of our integrated supply chain.
Underlying EBIT for FY2014 increased by US$993 million to US$12.1 billion. The fall in the average realised price of iron ore reduced Underlying EBIT by US$864 million, net of price-linked costs, although this was partially offset by a weaker Australian dollar which increased Underlying EBIT by US$383 million. Iron ore sales, on average, were linked to the index price for the month of shipment, with price differentials reflecting product quality and the increase in WAIO sales volumes, adding US$1.8 billion to Underlying EBIT. Conversely, the progressive ramp-up of several major projects resulted in a US$425 million increase in depreciation and amortisation expense during the period. Having redirected the WAIO supply-chain bottleneck away from the mines and back to the port, WAIO unit costs decreased by six per cent in FY2014 to US$27.53 per tonne. A 12 per cent reduction in unit costs to US$25.89 per tonne was achieved in the June 2014 half year.
WAIO unit costs Revenue Underlying EBITDA Cash costs (gross) Less: freight Less: royalties Cash costs (net) Sales (kt, BHP Billiton share) Cash cost per tonne (US$) FY2014 FY2013 H1 FY2014 H2 FY2014 US$M US$M US$M US$M 21,013 18,452 10,849 10,164 12,988 11,668 6,801 6,187 8,025 6,784 4,048 3,977 1,274 856 625 649 1,497 1,192 744 753 5,254 4,736 2,679 2,575 190,843 160,955 91,327 99,516 27.53 29.42 29.33 25.89
Outlook
In FY2015, WAIO production is expected to increase by a further 20 Mt to approximately 245 Mt (100 per cent basis). We expect additional productivity gains to support another year of record performance despite the planned tie-in of ship loaders 1 and 2 during the December 2014 half year. Total iron ore production is forecast to increase by 11 per cent in FY2015 to 225 Mt (BHP Billiton share).
Our strategy includes expanding Jimblebar to 55 Mtpa (100 per cent basis) as well as a broader debottlenecking of the supply chain, which is expected to underpin further growth in WAIO supply-chain capacity to 290 Mtpa (100 per cent basis).
1.12.5 Coal Business
Our Coal Business, headquartered in Brisbane, Australia, is the world’s largest supplier of seaborne metallurgical coal, one of the world’s largest suppliers of seaborne energy coal and a significant domestic energy coal supplier in the countries where our mines are located.
Year ended 30 June | 2014 | 2013 | 2012 | |||||||||
US$M | US$M | US$M | ||||||||||
Revenue | 9,115 | 9,895 | 12,512 | |||||||||
Underlying EBIT | 386 | 595 | 2,612 | |||||||||
Capital expenditure | 2,345 | 3,626 | 3,103 | |||||||||
Net operating assets | 14,300 | 13,225 | 10,663 | |||||||||
Production – metallurgical coal (Mt) | 45 | 38 | 33 | |||||||||
Production – energy coal (Mt) | 73 | 72 | 74 |
A summary of our Coal Business’ assets, development projects and FY2014 performance is presented below.
Description of the Coal Business
Our assets comprise the following:
Queensland Coal (Australia)
Queensland Coal comprises the BHP Billiton Mitsubishi Alliance (BMA) and BHP Billiton Mitsui Coal (BMC) Assets in the Bowen Basin in Central Queensland, Australia.
The Bowen Basin is well positioned to supply the seaborne market because of its high-quality metallurgical coals, which are ideally suited to efficient blast furnace operations, and its geographical proximity to Asian customers. We have access to key infrastructure in the Bowen Basin, including a modern, multi-user rail
network, and our own coal loading terminal at Hay Point, located near the city of Mackay. We also have contracted capacity at three other multi-user port facilities including the Port of Gladstone (RG Tanna Coal Terminal), Dalrymple Bay Coal Terminal and Abbot Point Coal Terminal.
Map of Queensland Coal
BHP Billiton Mitsubishi Alliance – BMA owns and operates open-cut and underground metallurgical coal mines in the Bowen Basin, and also owns and operates the Hay Point Coal Terminal. We share 50–50 ownership with Mitsubishi Development. BMA operates the Goonyella Riverside, Broadmeadow, Daunia, Caval Ridge, Peak Downs, Saraji, Gregory Crinum and Blackwater mines. First production commenced at Caval Ridge in the June 2014 quarter. Our share of total production in FY2014 was 29.3 Mt. The reserve lives of our mines range from 2.8 years at Gregory Crinum to 37 years at Saraji.
BHP Billiton Mitsui Coal – BMC is a subsidiary company owned by BHP Billiton (80 per cent) and Mitsui and Co (20 per cent). BMC owns and operates South Walker Creek and Poitrel open-cut metallurgical coal mines. Total production in FY2014 was 8.3 Mt. The reserve lives of our mines are 15 years at Poitrel and 11 years at South Walker Creek.
Illawarra Coal (Australia)
Our wholly owned Illawarra Coal Asset owns and operates three underground coal mines – Appin, West Cliff and Dendrobium, in the Illawarra region of New South Wales, Australia. The mines supply metallurgical coal to the nearby BlueScope Port Kembla steelworks and to other domestic and export markets. The Appin mine is currently being developed to sustain Illawarra Coal’s production following the end of the mine life at West Cliff.
Coal is exported via the Port Kembla Coal Terminal, in which we own a 16.67 per cent interest. Total production in FY2014 was 7.5 Mt. The reserve lives of our mines range from 2.0 years at West Cliff to 25 years at Appin.
Energy Coal South Africa (South Africa)
Energy Coal South Africa (known as BECSA) operates four energy coal mines – Khutala, Klipspruit, Middelburg and Wolvekrans, in the Witbank region in the province of Mpumalanga, South Africa.
BECSA is 90 per cent owned by BHP Billiton, two per cent owned by its employees through an Employee Share Ownership Plan and eight per cent owned by a Broad-Based Black Economic Empowerment (B-BBEE) consortium led by Pembani Group Proprietary Limited.
Production in FY2014 was 30.4 Mt. The reserve lives of our mines range from 5.8 years at Khutala to 23 years at Middelburg.
New Mexico Coal (United States)
We own and operate the San Juan energy coal mine located in the US state of New Mexico. The mine transports its production directly to the nearby San Juan Generating Station. The San Juan mine has a reserve life of 3.5 years, which is the life of the current customer contract. Production for FY2014 was 5.7 Mt.
We also operate the nearby Navajo mine, located on Navajo Nation land in New Mexico. Full ownership of the Navajo Coal Company transferred to the Navajo Transitional Energy Company (NTEC), an entity of the Navajo Nation, effective 30 December 2013. New Mexico Coal and NTEC have entered into a Mine Management Agreement where New Mexico Coal will continue as mine operator until 31 December 2016.
New South Wales Energy Coal (Australia)
Our wholly owned New South Wales Energy Coal Asset owns and operates the Mt Arthur Coal open-cut energy coal mine in the Hunter Valley region of New South Wales, Australia.
New South Wales Energy Coal produced 20 Mt in FY2014 and has a reserve life of 33 years.
Cerrejón (Colombia)
We have a one-third interest in Cerrejón Coal Company, which owns and operates one of the world’s largest open-cut export energy coal mines, located in the La Guajira province of Colombia.
In FY2014, our share of Cerrejón production was approximately 12.3 Mt. Cerrejón has a reserve life of 17 years.
More information on our assets and operations is presented in section 2.1.4 of this Annual Report.
Completed development projects
BMA Expansions
In November 2011, we approved the development of the Caval Ridge mine project, with a revised investment of US$1.9 billion (BHP Billiton share). The Caval Ridge mine is an open-cut dragline and truck and shovel operation, with coal railed to the Hay Point Coal Terminal. First coal at the Caval Ridge mine occurred in the June 2014 quarter and the mine was 100 per cent completed at 30 June 2014.
Cerrejón P40 Project
In August 2011, we announced a US$437 million (BHP Billiton share) investment in the expansion of Cerrejón, known as the P40 Project, which is expected to enable Cerrejón’s thermal coal production to increase by 8 Mtpa to approximately 40 Mtpa. The project scope includes a second berth and dual quadrant ship loader at Cerrejón’s 100 per cent owned and operated Puerto Bolivar, along with necessary mine, rail and associated supply chain
infrastructure. Construction commenced in CY2011 and the project handled its first coal in the December 2013 quarter. The port expansion associated with the Cerrejón P40 project is currently being commissioned, although operational issues are expected to constrain capacity to approximately 35 Mtpa (100 per cent basis) in the medium term. At 30 June 2014, the project was 94 per cent complete.
Newcastle Port Third Phase Expansion
In August 2011, we announced a US$367 million (BHP Billiton share) investment in the third stage development of the Newcastle Coal Infrastructure Group’s coal handling facility in Newcastle. The port expansion project is expected to increase total capacity at the coal terminal from 53 Mtpa to 66 Mtpa. This is expected to increase New South Wales Energy Coal’s allocation by 4.6 Mtpa to 19.2 Mtpa. First coal on ship, being the first ship loading through the new facility, was achieved in June 2013, ahead of schedule. At 30 June 2014, the project was 86 per cent complete.
Development projects in execution
BMA Expansions
In March 2011, we approved the expansion of the Hay Point Coal Terminal. The expansion of the terminal will deliver an additional 11 Mt of annual port capacity (100 per cent basis). Following a review of the project during FY2013, first shipment is expected in CY2015 with a revised budget of US$1.5 billion (BHP Billiton share). The project was 87 per cent complete at 30 June 2014.
Appin Area 9 Project
In June 2012, approval was given to invest US$845 million to sustain operations at Illawarra Coal by establishing a replacement mining area at Appin mine. The replacement area will have a production capacity of 3.5 Mtpa and will sustain Illawarra Coal’s production capacity at 9 Mtpa. The Appin Area 9 project was 67 per cent complete at 30 June 2014 and is expected to be operational in CY2016, whereupon it will replace production at the West Cliff mine. The project includes roadway development, new ventilation infrastructure, new and reconfigured conveyors and other mine services.
More information on our development projects is presented in section 2.4 of this Annual Report.
Performance
Metallurgical coal production increased by 20 per cent in FY2014 to a record 45 Mt (BHP Billiton share). Record production and sales volumes at Queensland Coal reflected strong performance across all operations. This included first production from Caval Ridge, the successful ramp-up of Daunia and record production at Peak Downs, Saraji, South Walker Creek and Poitrel. Illawarra Coal production declined by five per cent as an extended outage at the Dendrobium mine impacted performance in the first half of FY2014.
Energy coal production of 73 Mt for FY2014 was broadly unchanged from the prior period. Another year of robust performance was underpinned by a fifth consecutive annual production record at New South Wales Energy Coal and record volumes at Cerrejón. Extended outages at both a local utility and the Richards Bay Coal Terminal led to lower production at Energy Coal South Africa, while Navajo Coal production declined following the permanent closure of three of the five power units at the Four Corners Power Plant.
Coal revenue for FY2014 decreased by US$780 million to US$9.1 billion. Revenue for Illawarra decreased by 31 per cent to US$886 million and revenues for New South Wales Energy Coal and Energy Coal South Africa also decreased; this was partially offset by an increase in revenues for Queensland Coal of five per cent to US$4.7 billion. The decrease in revenues was driven by a 20 per cent reduction in the average price for hard coking coal and 14 per cent reduction in the average price received for both weak coking coal and thermal coal.
Underlying EBIT for FY2014 declined by US$209 million to US$386 million despite productivity volume and cost efficiencies of US$1.3 billion being embedded during the period.
A stronger US dollar against both the Australian dollar and South African rand increased Underlying EBIT by US$543 million. This was more than offset by the reduction in the average price, which in total, reduced Underlying EBIT by US$1.4 billion, net of price-linked costs.
A sustainable increase in truck and wash plant utilisation rates underpinned the improvement in productivity while a reduction in labour, contractor and maintenance costs was also achieved. In this context, redundancies totalling US$40 million were recognised in FY2014 while an increase in non-cash charges reduced Underlying EBIT by a further US$497 million. The latter included a US$292 million impairment charge at Energy Coal South Africa. A US$84 million gain on the sale of the Energy Coal South Africa Optimum Coal purchase agreement was also recognised during the period.
Outlook
Metallurgical coal production for FY2015 is expected to increase by four per cent to approximately 47 Mt as the ramp-up of Caval Ridge is completed. Energy coal production for FY2015 is expected to remain broadly unchanged at 73 Mt.
As we will retain control of the Navajo mine until full consideration is received from NTEC, production and financial results for the Navajo mine will continue to be reported by the Group.
1.12.6 Aluminium, Manganese and Nickel Business
Our Aluminium, Manganese and Nickel Business, headquartered in Perth, Australia, is one of the world’s largest integrated producers of aluminium, nickel and manganese ore and alloy.
Year ended 30 June | 2014 | 2013 | 2012 | |||||||||
US$M | US$M | US$M | ||||||||||
Revenue | 8,411 | 9,278 | 9,911 | |||||||||
Underlying EBIT | 307 | 158 | (24 | ) | ||||||||
Capital expenditure | 498 | 893 | 1,941 | |||||||||
Net operating assets | 9,322 | 8,809 | 13,127 | |||||||||
Production – alumina (kt) | 5,178 | 4,880 | 4,152 | |||||||||
Production – aluminium (kt) | 1,174 | 1,179 | 1,153 | |||||||||
Production – manganese ores (kt) | 8,302 | 8,517 | 7,931 | |||||||||
Production – manganese alloys (kt) | 646 | 608 | 602 | |||||||||
Production – nickel (kt) | 143 | 154 | 158 |
A summary of our Aluminium, Manganese and Nickel Business’ assets, development projects and FY2014 performance is presented below.
Description of the Aluminium, Manganese and Nickel Business
Our assets include the following:
Boddington/Worsley (Australia)
Boddington/Worsley is an integrated bauxite mining/alumina refining operation located in Western Australia. The Boddington bauxite mine supplies bauxite ore to the Worsley alumina refinery via a 51-kilometre long
conveying system. We own 86 per cent of the mine and the refinery. Our share of Worsley’s FY2014 production was 3.9 Mt of alumina. Boddington has a reserve life of 17 years.
Hillside and Bayside (South Africa)
Our wholly owned Hillside and Bayside aluminium smelters are located at Richards Bay in South Africa. Hillside is the largest aluminium smelter in the southern hemisphere. In June 2014, Bayside completed the ramp-down of its remaining smelting capacity of 97 ktpa. The Bayside Casthouse continues to operate and began processing liquid metal transfers from Hillside in June 2014. Production in FY2014 for Hillside was 715 kt and Bayside was 89 kt.
Mozal (Mozambique)
We own 47.1 per cent of and operate the Mozal aluminium smelter located near Maputo, Mozambique. Mozal sources power generated by Hydro Cahora Basa via Motraco, a transmission joint venture between Eskom and the national electricity utilities of Mozambique and Swaziland. Our share of Mozal’s FY2014 production was 266 kt.
Alumar (Brazil)
Alumar is an integrated alumina refinery/aluminium smelter. We own 36 per cent of the Alumar refinery and 40 per cent of the smelter. Alcoa operates both facilities. The operations, and their integrated port facility, are located at São Luís in the Maranhão province of Brazil.
The Alumar smelter has currently suspended production from pot lines 2 and 3 reducing overall annual capacity to 124 kilotonnes per annum (ktpa), from 447 ktpa (100 per cent), due to challenging global market conditions in primary aluminium and increased costs. Our share of Alumar’s FY2014 saleable production was 1.3 Mt of alumina and 104 kt of aluminium.
HMM (South Africa)
We own a 44.4 per cent interest in Hotazel Manganese Mines (HMM), which owns the Mamatwan open-cut mine and the Wessels underground mine. In FY2014, the total manganese ore production was 3,526 kt. Wessels has a reserve life of 46 years and Mamatwan has a reserve life of 18 years.
GEMCO (Australia)
Our 60 per cent owned and operated GEMCO operation is an open-cut mining operation, located 16 kilometres from our port facilities at Milner Bay, Northern Territory. These operations, consisting of crushing, screening, washing and dense media separation, combined with its high-grade ore are in relative close proximity to the Asian export markets. FY2014 production of manganese ore was 4,776 kt. GEMCO has a reserve life of 11 years.
Metalloys (South Africa)
Our 60 per cent owned and operated Samancor Manganese Metalloys alloy plant, located in Meyerton, is one of the largest manganese alloy producers in the world. Metalloys produces high- and medium-carbon ferromanganese. Production of manganese alloy in FY2014 was 377 kt.
TEMCO (Australia)
Our 60 per cent owned and operated TEMCO operation, located in Tasmania, is a medium-sized producer of high-carbon ferromanganese, silicomanganese and sinter using ore shipped from GEMCO, primarily using hydroelectric power. Production of manganese alloy in FY2014 was 269 kt.
Nickel West (Australia)
Our wholly owned Nickel West Asset in Western Australia consists of an integrated system of mines, concentrators, a smelter and a refinery. Nickel West production in FY2014 was 98.9 kt of contained nickel. On 31 October 2013, production at the Nickel West Leinster Perseverance underground mine was suspended following a significant seismic event. A subsequent review of the incident determined it was unsafe to resume operations.
Cerro Matoso (Colombia)
Our 99.98 per cent owned Cerro Matoso Asset in Colombia combines a lateritic nickel ore deposit with a ferronickel smelter. The smelter produces high-purity, low-carbon ferronickel granules. Cerro Matoso has an estimated reserve life of 15 years. Production in FY2014 was 44.3 kt of nickel in ferronickel form.
More information on our assets and operations is presented in section 2.1.5 of this Annual Report.
Development projects
GEMCO expansion
The US$279 million GEMCO Expansion Project (GEEP2) (BHP Billiton share US$167 million), approved in July 2011, was delivered on time and on budget in the December 2013 quarter. GEEP2 increased GEMCO’s capacity from 4.2 Mtpa to 4.8 Mtpa through the introduction of a dense media circuit by-pass facility. The expansion has also addressed key infrastructure constraints by increasing road and port capacity to 5.9 Mtpa, creating 1.1 Mtpa of additional capacity for future expansions.
More information on our development projects is presented in section 2.4 of this Annual Report.
Performance
Aluminium, Manganese and Nickel revenues decreased by US$867 million to US$8.4 billion. Revenue for Cerro Matoso decreased by 25.9 per cent to US$595 million, driven by a decline in nickel prices by seven per cent and lower production. Production at Cerro Matoso was affected by kiln and furnace outages, and lower nickel grades. Aluminium revenues decreased by 8.5 per cent to US$2.4 billion primarily due to lower average realised prices which declined by six per cent.
Alumina production increased by six per cent in FY2014 to a record 5.2 Mt. The Efficiency and Growth project at Worsley reached nameplate capacity during the year and annual production records were achieved at both the Worsley and Alumar refineries. Aluminium production of 1.2 Mt was unchanged from FY2013 with production records at both Hillside and Mozal offset by lower volumes at Alumar following the phased suspension of 103 kt (BHP Billiton share) of annualised capacity.
Manganese ore production declined by three per cent in FY2014 to 8.3 Mt as GEMCO was affected by higher than usual rainfall during the wet season. Manganese alloy production increased by six per cent in FY2014 compared to FY2013, which was affected by the temporary suspension of operations at TEMCO.
Nickel production declined by seven per cent in FY2014 to 143 kt. Production at Cerro Matoso was affected by kiln and furnace outages, and lower nickel grades. Nickel West production declined by four per cent following the closure of the Perseverance underground mine in November 2013.
Notwithstanding a rebound in nickel and aluminium prices in the second half, lower average realised prices reduced Underlying EBIT by US$409 million during FY2014, net of price-linked costs. More specifically, lower average realised prices for aluminium (down six per cent to US$2,022 per tonne), manganese ore (down four per
cent to US$4.64 per dry metric tonne unit), manganese alloy (down six per cent to US$980 per tonne) and nickel (down seven per cent to US$14,925 per tonne) were only partially offset by an increase in the average realised price of alumina (up two per cent to US$307 per tonne).
Underlying EBIT for FY2014 increased by US$149 million to US$307 million. A reduction in headcount and consumable costs, as well as equipment debottlenecking at most assets, contributed to the US$335 million of productivity cost efficiencies embedded during the period. A stronger US dollar against both the Australian dollar and South African rand increased Underlying EBIT by a further US$469 million. In contrast, the cessation of aluminium smelting activities at Bayside (US$167 million) and costs associated with the closure of the Perseverance underground mine at Nickel West (US$174 million) contributed to a decrease in Underlying EBIT of US$341 million.
In May 2014, the Group announced a review of the Nickel West business, comprising the Mt Keith, Cliffs and Leinster mines, its concentrators, the Kalgoorlie smelter and the Kwinana refinery. The review is considering all options for the long-term future of Nickel West, including the potential sale of all or part of the business.
Outlook
Saleable nickel production at Nickel West is expected to decline by four per cent in FY2015 to 95 kt with approximately 55 per cent to be sourced from third party feed. Ferro-nickel production at Cerro Matoso is expected to decline by three per cent to 43 kt as a result of lower grades.
In contemplation of the proposed demerger, BHP Billiton and Anglo American have agreed to make certain changes to the agreement which governs their interests in the Manganese business. BHP Billiton manages and owns 60 per cent of the Manganese business with Anglo American owning the remaining 40 per cent.
Subject to obtaining the required approvals for the agreement, the changes will result in BHP Billiton and Anglo American agreeing to share joint control of the Manganese business. As a result, we will discontinue consolidation of the Manganese business and account for our 60 per cent interest as an equity accounted joint venture. We will therefore derecognise the existing carrying amounts of all assets, liabilities and the non-controlling interest in the Manganese business attributed to Anglo American and initially record our retained 60 per cent interest at fair value. The remeasurement at fair value will give rise to an estimated gain of approximately US$2 billion in the first half of FY2015.
People are the foundation of our organisation and underpin our success. We value our people and encourage the development of talented and motivated employees to support the continued performance and growth of our diverse operations. We strive to build a sense of purpose and achievement among all our people in the work we do.
1.13.1 Employees and contractors
By working toOur Charter we align our people around our common purpose and values.Our Charter provides a vital reference point for how we do business, wherever we are in the world, and whatever work we do.
The table below provides the average number of employees and contractors over the last three financial years.
Year ended 30 June | 2014 | 2013 | 2012 | |||||||||
Employees | 47,044 | 46,892 | 43,238 | |||||||||
Contractors | 76,759 | 79,330 | 78,813 | |||||||||
|
|
|
|
|
| |||||||
Total | 123,803 | 126,222 | 122,051 | |||||||||
|
|
|
|
|
|
The table below shows the gender composition of our workforce, senior leaders and Board over the last three financial years.
Year ended 30 June | 2014 | 2013 | 2012 | |||||||||
Male employees | 39,517 | 38,920 | 35,888 | |||||||||
Female employees | 7,527 | 7,972 | 7,350 | |||||||||
Female employees (per cent) | 16 | 17 | 17 | |||||||||
Male senior leaders (a) | 317 | 326 | 365 | |||||||||
Female senior leaders (a) | 55 | 40 | 41 | |||||||||
Female senior leaders (per cent) | 15 | 11 | 10 | |||||||||
Male Board members | 12 | 11 | 11 | |||||||||
Female Board members | 2 | 2 | 2 | |||||||||
Female Board members (per cent) | 14 | 15 | 15 |
(a) | For UK law purposes, we are required to show information for ‘senior managers’ which is defined to include both senior leaders and any persons who are directors of any subsidiary company even if they are not senior leaders. In FY2014, senior leaders comprise the top 372 people in the organisation. There are 33 directors of subsidiary companies who are not senior leaders, comprising 23 males and 10 females. Therefore, for UK law purposes, the total number of senior managers is 340 males and 65 females (16 per cent female). |
The tables below provide a breakdown of the weighted average number of employees across the Group, in accordance with our reporting requirements under the UK Companies Act 2006. The calculation includes the Executive Director, 100 per cent of employees of subsidiary companies, and our share of joint operations, for each of the past three financial years. Employees of equity accounted entities are not included. Part-time employees are included on a full-time equivalent basis. Employees of businesses acquired or disposed of during a particular year are included for the period of ownership. Contractors are not included.
On 1 July 2013 the Group adopted IFRS 10 and IFRS 11. This led to the full consolidation of Escondida employees (previously proportionately consolidated) and the exclusion of certain equity accounted entities including Samarco, Antamina and Cerrejón. The comparative periods have been restated on this basis.
The table below provides a breakdown of our average number of employees by Business for each of the last three financial years.
Year ended 30 June | 2014 | 2013 | 2012 | |||||||||
Petroleum and Potash | 4,207 | 4,449 | 4,067 | |||||||||
Copper | 10,070 | 10,435 | 9,445 | |||||||||
Iron Ore | 8,035 | 6,883 | 4,711 | |||||||||
Coal | 12,318 | 12,240 | 11,679 | |||||||||
Aluminium, Manganese and Nickel | 10,775 | 11,115 | 11,388 | |||||||||
Group Functions, Marketing and unallocated | 1,639 | 1,770 | 1,948 | |||||||||
|
|
|
|
|
| |||||||
Total | 47,044 | 46,892 | 43,238 | |||||||||
|
|
|
|
|
|
The table below provides a breakdown of our average number of employees by geographic region for each of the last three financial years.
Year ended 30 June | 2014 | 2013 | 2012 | |||||||||
Africa | 9,035 | 9,121 | 9,358 | |||||||||
Asia | 1,105 | 1,183 | 1,114 | |||||||||
Australasia | 23,048 | 21,977 | 19,305 | |||||||||
Europe | 146 | 231 | 532 | |||||||||
North America | 4,373 | 5,116 | 4,117 | |||||||||
South America | 9,337 | 9,264 | 8,812 | |||||||||
|
|
|
|
|
| |||||||
Total | 47,044 | 46,892 | 43,238 | |||||||||
|
|
|
|
|
|
The increase in Australasian headcount during FY2014 is primarily due to the increase in the Iron Ore Business as a result of the expansion of the Jimblebar operations and additional support required in non-process infrastructure and port and rail operations. The Coal Business also experienced an increase as a result of the addition of the Daunia and Caval Ridge workforce. The decreased headcount in Europe occurred with the closure of offices in The Hague and Antwerp, and in North America with the sale of the diamonds business and sale of the Pinto Valley mining operation. For further information regarding these sales, refer to sections 1.15.3 and 2.1.2 of this Annual Report.
1.13.2 Employee policies and engagement
We are committed to open, honest and productive relationships with our employees. At BHP Billiton, we recognise the most important ingredient for success is our talented and motivated workforce, whose members demonstrate behaviours that are aligned toOur BHP Billiton Chartervalues.
We have an integrated people strategy to effectively attract, retain and develop talented people. Our approach is outlined inOur Charter, the BHP BillitonCode of Business Conduct and the Group Level Documents (GLDs) that prescribe what we will do and how we will do it. All of these documents are published and accessible to employees.
Effective communication and employee engagement is critical for maintaining open and productive relationships between leaders and employees. Employees receive communication on BHP Billiton goals and performance, as well as on other important issues such as health and safety and the environment and theCode of Business Conduct. OurCode of Business Conduct is founded onOur Charter values, which make an unqualified commitment to working with integrity. Communication is undertaken through a variety of channels, including the internet, intranet, email, newsletters and other means designed to cater for the local environment. Our employees can access our Annual Reports either via the internet or hard copy. Communications tools are also used to facilitate employee feedback, as are a variety of consultative processes. Dispute and grievance handling processes are also in place to assist in equitably addressing workplace issues across the organisation. A business conduct advisory service, EthicsPoint, operates worldwide to allow concerns to be raised about conduct that is out of step withOur Charter values, our policies and procedures or legislation.
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. As at 30 June 2014, 27,401 employees, or approximately 53.1 per cent of those eligible for the April 2014 offer, were participants in Shareplus. The Shareplus employee plan is described in section 4.4.26 of this Annual Report. Short-term and long-term incentive schemes also operate across the Group. Rewards for eligible individuals are predicated on the need to meet targets relating to the Group’s performance in areas such as health, safety and achievement of financial measures and on the personal performance of each employee.
Our performance management process aligns individual performance and behaviour toOur Charter and our strategic and operational priorities as well as working to ensure individual and team performance is recognised. Our leaders are accountable for providing feedback and coaching and identifying development needs to help our employees maximise their performance and realise their full potential. In FY2014, 74 per cent of employees participated in a formal performance review process. Due to industrial agreements, not all employees are able to participate in individual performance or reward programs. The importance we place on employee development and training is demonstrated by the significant amount of training our employees undertake.
BHP Billiton is committed to building and maintaining a diverse workforce and providing a work environment in which every employee is treated fairly and with respect. We work actively to avoid discrimination on any basis, including disability. Where an employee suffers some disability while they are employed, we work to identify roles that meet their skill, experience and capability, and in some cases offer retraining. We also offer flexible work practices, where this is possible, taking into account the needs of the employee and those of the particular workplace. The employment packages under our remuneration policy, which must comply with local regulations, are aligned to our business requirements and are designed to be sufficiently attractive to recruit and retain the best people.
1.13.3 Diversity and inclusion at BHP Billiton
Our Charter and GLDs guide all aspects of our management, including diversity and inclusion.
Our GLDs are underpinned by principles that guide our approach to diversity and inclusion. Our GMC and the Board believe that a diverse workforce and inclusive work environment where the unique skills, experiences and perspectives of our people are embraced is pivotal to sustaining performance and increasing productivity. The Board approves the Group’s diversity and inclusion measurable objectives for each financial year and monitors its progress. In relation to gender, they have set a goal of increasing the number of women on the Board. Further details are set out below.
Principles that underpin our approach to diversity and inclusion:
• | creating an inclusive work environment will require every employee and leader to embrace diversity and act in a way that is consistent withOur Charter; |
Progress against measurable objectives
Progress against our FY2014 commitments is set out below.
1. | Each Business, Group Function and Marketing will be evaluated on progress in executing the measurable objectives that form part of its multi-year diversity plan. |
2. | Execute the diversity and inclusion strategy and actions approved by the GMC. |
3. | Increase female representation by one in each asset and operations leadership team by end of FY2015 (where the business leadership team comprises less than 50 per cent females). |
4. | Develop recommendations for providing childcare options and flexible work arrangements. |
5. | Increase the proportion of female and Indigenous graduates hired and retained year on year. |
6. | Maintain at least a 30 per cent female participation in our Accelerated Leadership Development Program (ALDP). |
Continuous improvement
In FY2015, we will continue focusing on creating work environments of greater inclusion and enhancing our gender and diversity profile. We will take the following steps to deliver against this commitment:
1. | Demonstrate progress against our diversity and inclusion plan to improve our gender and ethnicity profile and increase female representation year on year; |
2. | Demonstrate improvement in creating a work environment of inclusion, as measured by our employee survey. |
Each Business, Group Function and Marketing will continue to be evaluated on progress against their multi-year diversity and inclusion plan. Successful completion will be taken into account in determining bonus remuneration and tracked as part of the Group’s internal compliance requirements.
Our Charter value of Sustainability is core to our strategy and we integrate health, safety, environmental, social and economic factors into our decision-making. Maintaining our licence to operate as a global company is
dependent upon gaining access to natural resources and ensuring we earn the trust of our shareholders, employees, contractors, communities, customers and suppliers.
Our approach to sustainability reflects our priority to put health and safety first, be environmentally responsible and provide support to our host communities. In reporting our sustainability performance, we include our impact on the environment and approach to climate change, water stewardship, resource conservation and biodiversity; and our efforts to ensure the broader economic contributions of our operations benefit the regions in which we operate.
The information contained in this section, unless otherwise stated, covers assets that have been wholly owned and operated by BHP Billiton or that have been operated by BHP Billiton in a joint venture operation (operated assets) for FY2014.
1.14.1 Identifying our sustainability issues
To deliver successfully on our strategy we must identify and respond to the sustainability issues that have a direct or indirect impact on our business, to our stakeholders and society at large. Using a materiality assessment process, we identified and prioritised material sustainability issues included in this Annual Report and the Sustainability Report 2014. The following issues are discussed in this Annual Report:
Governance | Health and safety | Environment | Society | |||
• Governance and sustainability • Identifying and managing our material risks • Operating with integrity and conducting business transparently • Addressing climate change | • Keeping our people and operations safe • Focusing on the health of our people | • Energy and greenhouse gas management • Biodiversity and land management • Water stewardship • Responsibly managing hydraulic fracturing | • Supporting and engaging with our communities • Free, prior informed consent • Respecting human rights • Making a positive contribution to society |
Additional information relating to our sustainability performance for FY2014 is available in our Sustainability Report 2014 and can be found online atwww.bhpbilliton.com.
1.14.2 Governance
Governance and sustainability
Our Board governs the Group in a manner consistent withOur Charter values, our strategy and our commitment to a transparent and high-quality governance system. The Board has established a number of committees to assist it in exercising its authority and to monitor the performance of the Group. The Sustainability Committee assists the Board in oversight of health, safety, environment, community and climate change matters. This includes overseeing areas relating to risk control, compliance with applicable legal and regulatory requirements and overall health, safety, environment and community (HSEC) performance of the Group.
The Board delegates authority to the CEO to manage the Group in its pursuit of creating long-term shareholder value through the discovery, acquisition, development and marketing of natural resources. Established by the CEO, the GMC is the Group’s most senior executive body. The GMC’s purpose is to provide leadership to the Group, determining its priorities and the way it is to operate, thereby assisting the CEO in pursuing the corporate
purpose. The GMC is a forum to debate high-level matters important to the Group and to ensure consistent development of the Group’s strategy.
To link HSEC matters to remuneration, 20 per cent of the FY2014 short-term incentive opportunity for GMC members was based on HSEC performance. This was an increase from 15 per cent in FY2013, reflecting the importance the Board and GMC place on sustainability. The Sustainability Committee assists the Remuneration Committee in determining appropriate HSEC metrics to be included in GMC scorecards and in assessing performance against those measures. The Board also has discretion over both the short-term and long-term incentive opportunities for GMC members and takes into consideration HSEC performance.
Identifying and managing our material risks
In addition to the legal requirements of the countries in which we operate, our approach to sustainability risks is defined by our HSEC-related Group Level Documents (GLDs). These clearly describe our mandatory minimum performance requirements and accountabilities across the Group and are the foundation for developing and implementing management systems at our operations.
Our HSEC-related GLDs outline our approach to the Group’s material sustainability risks and highlight a commitment to international policies, standards and management practices. These include the principles and mandatory requirements of the position statements of the International Council on Mining and Metals (ICMM) Sustainable Development Framework, the United Nations (UN) Global Compact, the UN Declaration of Human Rights and the Voluntary Principles on Security and Human Rights.
We seek to ensure our customers, suppliers, agents, service providers and contractors maintain business practices and workplaces that are aligned with our GLDs. We also provide GLD performance requirements to our non-operated assets and seek to influence the asset to follow these requirements.
OurRisk Management GLD provides the framework for embedding risk identification and management into our business activities, functions and processes. This is the basis of an active and consistent risk-based approach to sustainability. We identify risks we consider material to our organisation and take into consideration the potential health, safety, environmental, community, reputational, legal and financial impacts. The severity of any particular risk is assessed according to the most severe impact associated with a specific risk. The objectives of the risk management process are to understand the nature and residual impact of the material risks for the Group and to ensure they are managed through the verification and effectiveness testing of critical controls. Information relating to the material risks for the Group, including sustainability risks, is available in section 1.7 of this Annual Report.
Operating with integrity and conducting business transparently
To maintain our position as one of the world’s leading companies, we are committed to ethical business practices and high levels of governance in all our dealings. Regardless of the country or culture within which our people work, ourAnti-corruption GLD andCode of Business Conduct prohibit bribery and corruption in all our business dealings. Particulars in relation to theCode of Business Conduct and anti-corruption are referred to in section 3.17 in this Annual Report. Specific discussion on legal proceedings is available in section 6 of this Annual Report.
Transparently reporting our payments to governments
We believe that transparency of government revenue from the extraction of natural resources is an important element in the fight against corruption. BHP Billiton has been a supporter of the Extractive Industries Transparency Initiative (EITI) since its inception in 2002 and we continue to engage actively with EITI processes in countries where we operate. In line with our support for the EITI, we have reported in the Sustainability
Report 2014, payments of taxes and royalties derived from resource developments on a country-by-country basis. Our payments to governments in FY2014 included US$9.9 billion in company taxes, royalties and certain indirect taxes and approximately US$1.5 billion in taxes collected on behalf of employees. More than 99 per cent of our payments were made to 14 countries. Of these, our largest payments are made in Australia, where we have the majority of our assets.
Sustainability in our supply chain
As a global organisation, we understand our responsibility to ensure we only engage with suppliers who have responsible and ethical business practices. Relationships with our partner suppliers are managed in accordance with relevant contractual arrangements,Our Charter, ourCode of Business Conduct, ourAnti-corruption GLD and relevant HSEC GLDs.
To identify sustainability risks across our supply chain, we use a risk-based approach within ourSupply ‘Source to Contract’ GLD to support our suppliers’ alignment with our HSEC and business conduct requirements. These requirements include zero tolerance of a number of human rights infringements including child labour, inhumane treatment of employees and forced or compulsory labour. Our suppliers are also required to adopt an open attitude towards legitimate activities of trade unions.
Contracted suppliers are assessed on a matrix for commercial dependency versus supplier risk and assigned a tiered segmentation. A procedure to engage with each supplier is developed appropriate to the level of risk.
Closure planning
Closure planning is a key consideration in the planning and development of our projects and operations. We recognise the significant risks associated with poorly managed closure activities and seek to minimise these throughout the life cycle of our operations. In line with ourCorporation Alignment Planning GLD, our operations are required to develop and maintain closure plans that address the details of rehabilitation activities for disturbed land, remediation requirements for contaminated land, and end uses for land and infrastructure. Closure plans are also required to include community livelihood opportunities post-closure, design and engineering specifications for structures remaining at closure and human resource strategies addressing retention and transition opportunities for employees. In addition, we require closure plans to be developed as part of our major capital investments to ensure we understand potential closure liabilities and have the opportunity to reduce them during the design stage. The closure plans provide the basis for estimating the closure costs and the associated accounting for closure and rehabilitation obligations. Information on these provisions can be found in note 18 ‘Provisions’ to the Financial Statements in our Annual Report 2014.
An ongoing internal closure planning audit program, established in FY2011, tests the effectiveness of the controls detailed in ourCorporation Alignment Planning GLD. Findings from these audits are reported to the relevant Business Presidents, while summary reports are considered by the Sustainability Committee of the Board. During FY2014, 10 audits were conducted and, where required, improvements to the closure plan or provisions were implemented.
Addressing climate change
Addressing climate change is a Board governance and strategic issue. Successful implementation of our strategy requires us to sustainably develop our asset portfolio to deliver superior long-term shareholder returns.
Climate change governance
We recognise our responsibility to take action by focusing on reducing our emissions, increasing our preparedness for physical climate impacts, and working with others, including our industry and governments, to enhance the global response to climate change. To effectively address the challenge of climate change, there
must be a significant focus on developing and deploying low-emissions technologies. We will, through material investments in low-emissions technology, contribute to reducing emissions from fossil fuels.
There is uncertainty around the physical impacts of climate change and how the world will respond to these impacts or seek to mitigate climate change. In light of this, our investment decisions are informed by a comprehensive understanding of a range of possible climate change outcomes and the associated risks and opportunities to delivering shareholder value. We use a broad range of scenarios that consider critical global uncertainties (e.g. macroeconomic and geopolitical) and their impacts on supply and demand assumptions to test our portfolio and investment decision-making.
Our approach to addressing climate change is to identify emerging trends, develop strategies, coordinate activity across the businesses and report our performance externally. Our GMC has primary responsibility for the design and implementation of an effective position and response to climate change, and accountability for performance against our climate change metrics. We also seek input and insight from external experts, such as the Forum on Corporate Responsibility.
To reflect updates in scientific knowledge and global regulatory and political responses, we regularly review our position on climate change. We incorporate climate change considerations into our Group scenarios to understand potential impacts on our portfolio. We also conduct annual reviews of performance against Business greenhouse gas (GHG) targets to ensure we are on track to achieve our company target. The Sustainability Committee has considered a range of climate change scenarios and continues to monitor the actions being taken to manage a range of climate change impacts and policy responses.
Our perspective on climate change
We accept the Intergovernmental Panel on Climate Change’s (IPCC) assessment of climate change science, which has found that warming of the climate is unequivocal, the human influence is clear and physical impacts are unavoidable. We believe the world must pursue the twin objectives of limiting climate change to the lower end of the IPCC emission scenarios in line with current international agreements, while providing access to the affordable energy required to continue the economic growth essential for maintaining living standards and alleviating poverty.
We use the IPCC’s findings to build our understanding of the impacts climate change will have on our business and to inform our decision-making. Limiting climate change will require substantial and sustained reductions of GHG emissions. Our view is that an effective, long-term climate change policy framework should use a portfolio of complementary measures to reduce emissions and build resilience. This should include a price on carbon that addresses competitiveness concerns, support for energy-efficiency improvements, and the development and deployment of low-emissions technologies, together with measures to respond to the physical impacts of climate change.
We will continue to take action to reduce our emissions and build the resilience of our operations, investments, communities and ecosystems to the impacts of climate change. Recognising their role as policy makers, we engage with governments to enhance the global response. We work in partnership with resource sector peers to improve sectoral performance and increase industry’s influence in policy development to deliver effective long-term regulatory responses.
The global challenge
Our diverse portfolio is important in meeting global demand for energy. We will continue to adjust the shape of our portfolio to match energy and commodity demand and meet society’s expectations while maximising shareholder returns.
Our approach to investment decision-making and portfolio management ensures that climate change risks are identified, assessed and appropriately addressed. We have been applying an internal price on carbon in our investment decisions and portfolio evaluation for more than a decade and were early adopters of this approach. We maintain a view on carbon pricing using a carbon price protocol which we update regularly. Our carbon price protocol tracks the progress of national commitments to tackle climate change throughout the world, including our major operating regions and customer demand centres, and considers various potential scenarios for how global emissions and policy will evolve over time. We look at the potential for reductions in emissions and the cost associated with those reductions to determine an appropriate price level for each relevant country or region. In doing so, we consider the effectiveness of different policies, political situations required to pass legislation, timing to implement reductions and the interaction between policy mechanisms.
Through a comprehensive and strategic approach to corporate planning, we work with a broad range of scenarios to assess our portfolio, including consideration of a range of policy responses to and impacts from climate change. Our work suggests that BHP Billiton’s portfolio diversification provides resilience to our overall asset valuation. The diversity of our overall portfolio, which includes energy (oil, coal and uranium) and minerals (including copper, premium quality iron ore and potash), uniquely positions us to manage and respond to changes and capture opportunities to grow shareholder value over time.
Stranded assets and the ‘carbon bubble’
The potential gap between the current valuation of fossil fuel reserves on the balance sheets of companies and in global equities markets and the reduced value that could result if a significant proportion of reserves were rendered incapable of extraction in an economically viable fashion due to responses to climate change, is known as the ‘carbon bubble’. Although this concept has been discussed by non-government organisations and academics for several years, there has recently been renewed interest in this topic, particularly from ratings agencies and investment analysts. There is, however, little consensus on what specific carbon prices, fossil fuel demand or market prices might trigger this devaluation.
Providing access to the affordable energy required to continue the economic growth is essential for maintaining living standards and alleviating poverty. Under all current plausible scenarios, fossil fuels will continue to be a significant part of the energy mix for decades.
BHP Billiton uses a scenario framework, including for forecasting commodity prices that considers critical global uncertainties (e.g. macroeconomic and geopolitical) and their impacts on supply and demand assumptions. Using a range of carbon prices and commodity demand and pricing assumptions across a variety of internally consistent scenarios, we have determined that BHP Billiton’s overall asset valuation is not at material risk, the pay-back periods for most present and future investments in fossil fuels production are relatively short and the portfolio remains robust.
Mitigation
We have been setting GHG targets for our Businesses since 1996 and have a goal to limit our overall emissions to below our FY2006 baseline by FY2017. Meeting an absolute target is not easy. Growth across our Businesses will increase emissions and we must continually look for opportunities to improve our energy efficiency and implement GHG reduction projects to mitigate this increase. All our Businesses are required to minimise their emissions to reduce our contribution to climate change. They must identify, evaluate and implement all suitable projects that prevent or minimise GHG emissions including in project design and equipment selection. For further information on our GHG emissions reduction projects, please refer to the Sustainability Report 2014.
Adaptation
We recognise that we must ensure our business is resilient and can adapt to physical climate change impacts that will occur. Our assets are long-lived so we take a robust, risk-based approach to managing these impacts. Our
assessment of the regional impacts on our Businesses shows that they are already exposed to risks as a result of climate change, including increasing storm intensities, greater water supply variability and an increasing number of high-temperature days. These impacts can affect health and safety, productivity and financial performance. Testing the resilience of our operations to these impacts has already changed the way we work. For example, the identification and assessment of increasing storm intensity and storm surge levels has resulted in raising the height of the trestle at our Hay Point coal port facility in Australia as part of our expansion plans.
We continue to look for enhancements to the Company-wide integrated planning framework to allow better assessment of the physical risks associated with climate change and to ensure resilience is embedded into our business plans and investment decisions. We will also look for opportunities to work in partnership to improve community and ecosystem resilience to the impacts of climate change.
Investing in technology and innovation
To effectively address the challenge of climate change, there must be a significant focus on developing and deploying low-emissions technologies over the next few decades. The rate of technology improvement and subsequent adoption must be faster than the usual commercial timeframes if these technologies are to be available at scale and at acceptable cost to meet the global challenge. Industry and government will need to work together in collaborative partnerships to facilitate this step-change.
We are a foundation member of the Cooperative Research Centre for Greenhouse Gas Technologies, one of the world’s leading collaborative research organisations focused on carbon capture and storage (CCS). We contribute a voluntary levy to the Australian Coal Association Low Emissions Technologies to facilitate the development of low-emissions technologies from coal use, including CCS. We are a member of the Global Carbon Capture and Storage Institute which aims to accelerate the development, demonstration and deployment of CCS globally through knowledge sharing, fact-based advice and advocacy and work to create favourable conditions to implement CCS.
We are developing a more integrated approach to low-emissions technology to provide a roadmap for our investments. We will investigate opportunities for investment across a range of technologies that have the potential to lead to material emission reductions in our operations and across our supply chains. To accelerate deployment of any prospective technologies, we will seek opportunities to partner with governments, industry leaders and key researchers.
Further information on our approach to climate change is available online atwww.bhpbilliton.com.
1.14.3 Health and safety
Keeping our people and operations safe
We recognise that the health and safety of our people comes first. This is core toOur Charter and to every aspect of our business. Our people are key to our long-term success and central to improving our HSEC performance.
To understand, manage and, where possible, eliminate the risks in our business, we have appropriate controls in place and provide our people with appropriate training. While eliminating hazards through engineering or physical controls has a strong place in safety management, we understand it is only part of the solution.
Our operations are required to have systems in place to identify and effectively manage foreseeable crises and emergencies. This ensures our operations can deal with potential causalities, to limit harm and to safely return to full function as soon as possible.
Across our business, we undertake annual assessments to verify that critical controls are effective in managing each material risk. During FY2014, we maintained this focus, which included assessing whether the critical controls were being deployed as designed and to the standard required.
In FY2014, there were no fatalities reported at our operated assets. Our total recordable injury frequency (TRIF) performance of 4.2 injuries per million hours worked improved by nine per cent compared with FY2013.
Total recordable injury frequency (per million hours worked)
Year ended 30 June | 2014 | 2013 | 2012 | |||||||||
Total recordable injury frequency (TRIF) | 4.2 | 4.6 | 4.7 | |||||||||
|
|
|
|
|
|
Focusing on the health of our people
To prevent occupational illness and injury, we are focused on ensuring the work our people are required to do does not impact their health and that they are fit for work. This means identifying and assessing risks and managing and minimising their impact.
Since FY2012, we have seen an increase in the reporting of musculoskeletal illnesses and in FY2014 we have also seen an increase in noise induced hearing loss case reporting. These changes in reported cases have been driven by the adoption of comprehensive musculoskeletal illness classification processes and the introduction of programs for the early detection of hearing loss at some of our Australian operations. This has resulted in more focus on both of these illnesses.
In FY2014, the incidence of employee occupational illness was 2.84 per million hours worked, an increase of 19 per cent compared with FY2013.
Employee occupational illness incidence (per million hours worked)
Year ended 30 June | 2014 | 2013 | 2012 | |||||||||
Noise induced hearing loss | 0.68 | 0.51 | 0.97 | |||||||||
Musculoskeletal | 1.61 | 1.24 | 1.04 | |||||||||
Other illnesses | 0.55 | 0.64 | 0.35 | |||||||||
|
|
|
|
|
| |||||||
Total | 2.84 | 2.39 | 2.36 | |||||||||
|
|
|
|
|
|
Our priority is to control occupational exposures at their source. We are focused on continuously improving our occupational exposure controls. In situations where we cannot control the source, we employ a range of measures, including the provision of personal protective equipment to safeguard our people.
Operations are required to identify and control health risks and to establish an exposure risk profile to harmful agents for employees and for contractors and to review the profile to validate exposure levels and to account for process changes. The implementation of exposure controls is required where exposure potentially exceeds or is anticipated to exceed occupational exposure limits (OELs). We establish our own OELs when we believe local regulatory limits do not provide adequate protection for our workers. If a potential exposure to harmful agents exceeds 50 per cent of the OEL, periodic medical surveillance is required.
In FY2012, we established a health target baseline and committed to reduce potential occupational exposure to carcinogens and airborne contaminants by 10 per cent by FY2017. In FY2014, we recorded a 22 per cent decrease in the number of potential exposures to carcinogens and airborne contaminants, if not for the use of personal protective equipment, compared with our FY2012 baseline. We have therefore currently exceeded our target; however, exposure control remains an area of focus to ensure our reductions are maintained.
1.14.4 Environment
We demonstrate environmental responsibility by minimising our environmental impacts and contributing to enduring benefits to biodiversity, ecosystems and other environmental resources. We classify environmental
incidents based on our Risk Severity table. We determine a significant environmental incident as one that causes one or more major impacts to land, biodiversity, ecosystem services, water resources or air, with effects lasting greater than one year. Incidents that may impact any of the environmental attributes listed previously are investigated and remediated according to internal or external requirements. In FY2014 there were no significant environmental incidents reported at our operated assets.
Energy and greenhouse gas management
We strive to continually improve energy and GHG management. Consistent with ourEnvironment GLD, our Businesses are required to identify, evaluate and implement suitable projects that prevent or minimise GHG emissions. We also evaluate and implement GHG emission reduction opportunities in capital project design.
In FY2013, we set a target to maintain our FY2017 GHG emissions below our FY2006 baseline levels, while continuing to grow our business. In FY2014, the Group’s total GHG emissions were 45.0 million tonnes (Mt) of carbon dioxide equivalent (CO2-e), a reduction of 1.7 Mt CO2-e compared to FY2013 (46.7 Mt CO2-e). This keeps us in line to achieve our GHG target. We will continue to focus on the implementation of abatement opportunities within our Businesses to further reduce our GHG emissions.
GHG Scope 1 and 2 (millions of tonnes CO2-e)
Year ended 30 June | 2014 | 2013 | 2012 | |||||||||
Scope 1 (a) | 22.7 | 22.0 | 20.2 | |||||||||
Scope 2 (b) | 22.3 | 24.7 | 20.0 | |||||||||
|
|
|
|
|
| |||||||
Total GHG millions of tonnes CO2-e | 45.0 | 46.7 | 40.2 | |||||||||
|
|
|
|
|
|
(a) | Scope 1 refers to direct GHG emissions from our operated assets. |
(b) | Scope 2 refers to indirect GHG emissions from the generation of purchased electricity and steam that is consumed by our operated assets. |
In FY2014, our total energy consumption across the Group increased by six per cent, compared to FY2013, to 343 petajoules. This increase was related to new projects coming online including our Jimblebar iron ore mine in Western Australia and our Daunia coal mine in Queensland, Australia. To further improve energy consumption and GHG emissions we have implemented projects across our Businesses.
In line with requirements of the UK Companies Act 2006, our reported FY2014 GHG intensity was 4.9 tonnes of CO2-e per tonne of copper equivalent production. We believe that attempting to benchmark energy use and/or greenhouse gas emissions on an intensity basis does not meaningfully contribute to an understanding of our performance, given the diverse range of products across our portfolio, fundamental differences in the grade, geology, accessibility and technological processes and changes in output levels that routinely occur in different directions in response to changing market conditions and other factors. Rather than use an intensity metric, we have set ourselves a more challenging goal to limit our overall emissions by setting an absolute target, keeping our FY2017 GHG emissions below our FY2006 baseline while we continue to grow our business.
Biodiversity and land management
Improving our management of land and enhancing biodiversity are essential to operating in a responsible and sustainable manner. We continue to demonstrate environmental responsibility by minimising our environmental impacts and seeking opportunities to contribute to enduring benefits to biodiversity, ecosystems and other environmental resources.
Our approach to land access is undertaken on a case-by-case basis and considers the potential environmental, societal, economic or cultural impacts. We consider what land we need for our activities and seek to identify the uses of the land and the stakeholders who may be affected by our activities. We then look at our possible short-term and long-term impacts on that land, including the effects that our use may have on biodiversity, water resources, air and communities.
In FY2013, we established a target to develop and maintain land and biodiversity management plans that include controls to avoid, minimise, rehabilitate and apply compensatory actions as appropriate, to manage the biodiversity and ecosystem impacts of our operations. This target is supported by the requirements of ourEnvironment GLD. In FY2014, all our operations developed land and biodiversity management plans, consistent with our target.
We also have explicit requirements in ourEnvironment GLD to avoid environmental impacts to protect our local and global environment. We continue to monitor the operational effectiveness of our controls. Where actual or reasonably foreseeable residual impacts remain to important biodiversity and ecosystems impacted by our activities, we look to undertake compensatory actions.
In addition to the environmental management actions of our Businesses, we have voluntarily committed to finance the conservation and ongoing management of areas of high biodiversity and ecosystem value that are of national or international conservation significance. We established an alliance with Conservation International to support the delivery of this target and improve our approach to biodiversity management more broadly. As a result, we will improve our environmental performance and broaden our contributions to lasting environmental benefits beyond what could be achieved by our operations alone. As of FY2014, we have committed more than US$30 million to conservation, in addition to the environmental management activities at our operations.
A central part of our approach to managing our impacts on land and biodiversity is the rehabilitation of land no longer required for our activities. Our Businesses are required to maintain rehabilitation plans that support life of asset and closure plans, and to rehabilitate disturbed areas no longer required for operational purposes, consistent with the pre-disturbance land use or alternate land use, taking into account regulatory requirements and stakeholder expectations.
Water stewardship
We recognise the role we have as responsible stewards of the water resources we share with our host communities and the environment. The sustainability of our operations relies on our ability to obtain an appropriate quality and quantity of water, use it responsibly and manage it appropriately, including taking account of natural supply variations.
Across our Businesses, water risks are required to be assessed and managed on a regional basis. In some locations, we operate in arid environments where water scarcity is an ongoing challenge while in other locations, we contend with water excess, water quality or water discharge issues. We anticipate climate change is likely to make the patterns and cycles of water flow less predictable and so we require our operations to implement adaptive responses. Managing our shared water resources is therefore a complex task for our Business.
In line with ourEnvironment GLD, our operations are required to assess direct, indirect and cumulative impacts and risks to water resources as a result of understanding social, cultural, ecological and economic values of these resources at a catchment level within our area of influence. Based on these risks and impacts, controls demonstrating application of the mitigation hierarchy (avoid, minimise and rehabilitate environmental impacts prior to applying compensatory actions) are required to be implemented and monitored for effectiveness. Target environmental outcomes for impacts to water resources consistent with the level of risk are also required. Compensatory actions are applied where residual impacts remain to important water-related biodiversity and ecosystems impacted by our activities to meet our target environmental outcomes and contribute to long-term environmental benefits.
Recognising the regional nature of our water risks, we introduced a target in FY2013 requiring our Businesses with water-related material risks, to implement projects to improve the management of water resources. The target allows our Businesses to focus on the water challenges specific to the regions in which they operate. In FY2014, all our operations that identified water-related material risks, implemented at least one project to improve the management of associated water resources.
Being a responsible water steward requires transparent and consistent reporting of water use and impacts. We have played a key role in the development and implementation of the Minerals Council of Australia’s Water Accounting Framework (WAF). The WAF aims to improve data integrity and comparability across the sector to allow a more meaningful analysis on which to base policy making and deliver improved outcomes. Our water reporting is consistent with the WAF approach, and we are working with the ICMM to support broader adoption across industry.
Under the WAF, water is categorised as Type 1 (close to drinking water standards), Type 2 (suitable for some purposes), and Type 3 (unsuitable for most purposes). In FY2014, our total water input (water intended for use) was 347,700 megalitres across the Group, with 84 per cent defined as Type 2 or Type 3. Our use of Type 2 and Type 3 water demonstrates our approach to utilising lower-quality water wherever feasible.
Responsibly managing hydraulic fracturing
The nature of our hydraulic fracturing operations at our North American Eagle Ford, Permian, Haynesville and Fayetteville shale areas means at times we work in close proximity to our host communities. We actively engage with local stakeholders to address public concerns about hydraulic fracturing fluids, groundwater contamination, land and water resources, GHG emissions, increased vehicular traffic and worker exposure to respirable crystalline silica. We continue to investigate ways to reduce or eliminate any potential impacts associated with our activities.
To protect and manage the land and water resources, we conduct environmental assessments prior to the execution of hydraulic fracturing work to minimise the impacts of our operations. In FY2014, we completed a water balance showing inputs, uses, losses, reuse and recycle, and disposal amounts of fresh water for each operation to identify opportunities to reduce water consumption in our hydraulic fracturing operations. We are pursuing non-potable water options, including the use of brackish water, recycled municipal effluents and recycled water from our production wells.
A number of controls are used to manage, minimise and recycle drilling residuals. We use closed loop systems that allows drilling muds to be recycled and lower the potential for contact with the environment. .As part of our commitment to transparency, we publicly report the ingredients of the fracturing fluids for each well completion in the hydraulic fracturing chemical disclosure registry, FracFocus. For a high percentage of our wells, we fully disclose all of the ingredients and additives by name (and Chemical Abstracts Service Number) and provide the maximum percentage of each ingredient present in the fracturing fluid mixture. In a few cases, the service providers who supply the ingredients and conduct our well completions elect to designate a small number of proprietary ingredients as confidential business information. In the Permian area, we pump a blend of produced water and fresh water treated with an advanced oxidation process which utilises ozone, a highly reactive oxidant that kills most bacteria. This process eliminates the need for clay stabiliser and biocide, thereby reducing the number of additives in the fracturing fluid mixture. Every well we drill is checked against our critical controls to ensure well integrity and the safety of our operations.
The majority of our air emissions relate to GHG emissions from fuel combustion and flaring or venting during well construction and production. We are working to reduce emissions by capturing and selling produced natural gas that may otherwise have been vented or flared.
1.14.5 Society
Supporting and engaging with our communities
We are a global company that values our host communities. We strive to be part of the communities in which we operate and through all our interactions seek to foster meaningful long-term relationships, which respect local cultures and create lasting benefits. Our contribution to our host communities is broad ranging. Through employment, taxes and royalties, we support local, regional and national economies. We purchase local goods and services and develop infrastructure that benefits entire communities.
From the earliest possible stage of a project’s life, we seek to build trust with our stakeholders. By defining the boundaries of our host communities, we assess the social, economic, political, security and environmental aspects and develop a social baseline, which is required to be updated every five years with changes tracked over time. Stakeholder engagement plans, which identify the interests and relationships of our stakeholders and contain a range of culturally and socially inclusive engagement activities to encourage open communication, are reviewed and updated annually. To ensure our engagement and community development activities are effective and to inform planning activities, our operations are required to complete a community perception survey every three years.
Free prior and informed consent
As one of the 22 member companies of the ICMM, we have worked to develop a progressive position statement on Indigenous Peoples and Mining. This statement, which comes into effect in May 2015, specifically addresses the issue of Free Prior and Informed Consent (FPIC).
FPIC is a concept based on good faith negotiation through which Indigenous peoples can give or withhold their consent using processes consistent with their traditional decision-making practices. Supporting commitments address understanding their rights and interests, building cross-cultural understanding, and agreeing on appropriate engagement processes and participation in decision-making. A number of related commitments address how ICMM members should engage where government is responsible for managing Indigenous peoples’ interests and how to move forward when differences of opinion arise. The ICMM’s position statement recognises the right of governments to ultimately make decisions on development of resources and that, in most countries, neither Indigenous peoples nor other groups have a right to veto projects. Where consent cannot be reached, a host government may decide to proceed with a project after balancing the rights and interests of Indigenous peoples with the wider population. In these circumstances, it will be up to ICMM member companies to determine whether they remain involved with the project.
Through ourCommunity GLD, we require our Businesses to prepare, design and implement Indigenous engagement programs that are consistent with the new ICMM Position Statement on Indigenous Peoples and Mining for new operations or major capital projects that are located on lands traditionally owned by or under customary use of Indigenous peoples and are likely to have significant adverse impacts on Indigenous peoples.
Respecting customary rights
At a very early stage in a project, we seek to identify landowners, occupiers and users who may be affected by our activities. Knowing who is connected to and uses the land is critical to establishing an effective community consultation and engagement program. This helps to ensure people potentially affected by our operations are fully aware of our activities and have an opportunity to express their concerns and aspirations. Arising from this engagement, the operational work plan may be amended to reduce potential impacts on landowners and users.
Surveys are commissioned to identify the customary owners and how the land is being used to ensure these uses are taken into account in our development plans. In instances where land may be used for customary purposes and no formal land title has been issued, information is requested from relevant organisations, including
government authorities with responsibilities for customary land uses and Indigenous peoples’ representative organisations, such as land and tribal councils. Further enquiries are also made directly with the people in the area to help identify those with connections to the land.
Respecting and including Indigenous communities
We recognise the traditional rights and values of Indigenous peoples, respect their cultural heritage and provide opportunities for inclusion and advancement. Many of our operations are located on or near Indigenous lands. We support our workers by providing cultural awareness and competency training for employees and contractors who engage with Indigenous peoples from our host communities. Training is developed and delivered in consultation with traditional owners. We also identify who is connected to and uses the land to ensure we establish effective community consultation and engagement programs.
Respecting human rights
We acknowledge our activities have the potential to impact human rights and we address these through our core business practices. We are committed to operating in accordance with the United Nations (UN) Universal Declaration of Human Rights, UN Guiding Principles on Business and Human Rights and the UN Global Compact Principles. We support these commitments throughOur Charter andCode of Business Conduct and the performance requirements detailed in our GLDs.
In line with ourCommunity GLD, our human rights due diligence process requires our operations to identify and document key potential human rights risks by completing a human rights impact assessment (HRIA). This includes assessing performance against the articles of the UN Universal Declaration of Human Rights, the UN Global Compact principles and host country legislation governing human rights issues. We require each HRIA to be reviewed on an annual basis. Every three years, each HRIA is required to be verified through an engagement process with stakeholders, and, in medium and high-risk jurisdictions, by a qualified human rights specialist. Where a HRIA identifies a material risk, a human rights management plan is required to be implemented and reviewed annually. Selected employees and contractors receive training on how to comply with our human rights commitments.
Through our commitment to the Voluntary Principles on Security and Human Rights (VPs), we seek to protect people and property from material risks presented by security threats. Performance requirements related to the VPs are implemented through ourSecurity and Emergency Management GLD. Our operations are required to identify security-related material risks to people and property and engage relevant stakeholders to develop and manage security programs that respect human rights and fundamental freedoms.
In addition, we require our operations to conduct a gap analysis annually using the VP’s Implementation Guidance Tool and to implement an improvement plan to close identified gaps. The process also provides an opportunity to further build awareness and understanding of the VPs across the Company.
Making a positive contribution to society
Creating lasting economic and social benefit for our communities is fundamental to our business. This helps create a diversified local economy and ensures our investment continues to benefit the community beyond the life of our operations. We are an active participant in industry and sustainable development forums, such as the ICMM. We seek to understand our socio-economic impact on local communities and host regions through our participation in the ICMM’s Mining: Partnerships for Development initiative. This global initiative builds on the ICMM’s Resource Endowment initiative and seeks to enhance mining’s contribution to development and poverty reduction through multi-stakeholder partnerships.
Wherever we operate, we contribute taxes and royalties to governments which, in turn are used to provide important public services and amenities to their communities. At many of our locations, we also develop
infrastructure to support our operations – including roads, aerodromes, emergency response facilities, housing, public amenities, community facilities – which can be accessed and utilised by local communities and businesses.
We are focused on providing training and employment opportunities to our local communities. Given the nature of the work we do, our ability to employ locally can be limited by the availability of industry and technical skills and experience at the local level. Our broader contribution to local economies can be realised through indirect employment and our support of local businesses that provide a range of services and products, which enable our operations to function effectively.
Improving the quality of life in our host communities
A focus on sustainability underpins all our investments in community economic development. This means we are committed to addressing the needs and priorities of the communities in which we operate and seek to invest in projects that will continue to promote benefits to the community after the funding is completed. We work with our host communities to identify the major social issues and development priorities. Using data from a social baseline study and social impact and opportunity assessment, we develop a community development management plan. Community development projects and donations are required to be aligned to the overall community development management plan, implemented in consultation with local stakeholders, and meet our due diligence and anti-corruption requirements.
We voluntarily invest one per cent of our pre-tax profit, calculated on the average of the previous three years’ pre-tax profit, in community programs that aim to have a long-lasting positive impact on people’s quality of life, including implementing new and supporting existing community projects. With a focus on improving quality of life, our community development programs are developed by working openly with governments and the communities in which we operate, and focusing on the needs and resources of our key stakeholders. This is how we are contributing to economic and social development.
During FY2014, our voluntary community investment totalled US$241.7 million, comprising US$141.7 million of cash, in-kind support and administrative costs, and a US$100 million contribution to the BHP Billiton Foundation. The BHP Billiton Foundation was established in FY2013 to identify and support large sustainable development projects in countries and regions of interest to BHP Billiton to complement the local programs managed by our assets. This builds on contributions that have previously been paid to the BHP Billiton Sustainable Communities charitable organisation. At the end of FY2014, BHP Billiton Sustainable Communities had a total of US$70.4 million and the BHP Billiton Foundation had a total of US$179 million in funds available for future sustainable development projects.
Community investment
Year ended 30 June | 2014 | 2013 | 2012 | |||||||||
US$M | US$M | US$M | ||||||||||
Expenditure (including in-kind support and administrative costs)(1) | 141.7 | 139.8 | 149.1 | |||||||||
Contribution into BHP Billiton Sustainable Communities and BHP Billiton Foundation | 100.0 | 106.0 | 65.0 | |||||||||
|
|
|
|
|
| |||||||
Total Community investment | 241.7 | 245.8 | 214.1 | |||||||||
|
|
|
|
|
|
(1) | Represents BHP Billiton’s equity share for both operated and non-operated joint venture operations. |
In FY2014, of the US$141.7 million cash expenditure, 46 per cent was invested in local communities; 44 per cent was invested regionally and 10 per cent was invested in national or international programs in countries where we operate.
Ok Tedi
BHP Billiton exited from Ok Tedi Mining Limited (OTML) in February 2002. The exit arrangements included the transfer of BHP Billiton’s shares in OTML to PNG Sustainable Development Program Limited (PNGSDP) and a statutory undertaking protecting BHP Billiton from environmental claims by the PNG Government.
In September 2013, the Papua New Guinea (PNG) Parliament passed laws which compulsorily acquired PNGSDP’s shares in OTML and changed other aspects of the exit arrangements, including the repeal of the protection from environmental claims by the PNG Government. BHP Billiton retains an indemnity from PNGSDP in respect of environmental claims by the PNG Government and certain environmental claims by third parties. This indemnity is secured against the assets of PNGSDP.
Following the passing of the new laws, PNGSDP has commenced legal proceedings and an International Centre for Settlement of Investment Disputes (ICSID) arbitration process against the State of PNG and others.
1.15.1 External factors and trends
The following section describes some of the external factors and trends that have had a material impact on our financial condition and results of operations. We operate our business in a dynamic and changing environment and with information that is rarely complete and exact. We primarily manage the risks discussed in this section under our portfolio risk management approach, which relies on the effects of diversification, rather than individual risk management programs. Details of our risk factors can be found in section 1.7.2 of this Annual Report. Details of our financial risk management strategies and financial instruments outstanding at 30 June 2014 can be found in section 1.7.3 and in note 29 ‘Financial risk management’ to the Financial Statements.
Management monitors particular trends arising from external factors with a view to managing the potential impact on our future financial condition and results of operations. The following external factors could have a material adverse effect on our business and areas where we make decisions on the basis of information that is incomplete or uncertain.
Commodity prices
The prices we obtain for our products represent a key driver of our business, and fluctuations in these commodity prices affect our results, including cash flows and asset values. The estimated impact on FY2014 profit after taxation of changes of commodity prices is set out below.
US$M | ||||
US$1/bbl on oil price | 54 | |||
US¢10/MMBtu on US gas price | 30 | |||
US¢1/lb on copper price | 24 | |||
US$1/t on iron ore price | 112 | |||
US$1/t on metallurgical coal price | 28 | |||
US$1/t on energy coal price | 25 | |||
US$50/t on aluminium price | 36 | |||
US¢10/dmtu on manganese ore price | 26 | |||
US$1/t on manganese alloy price | 1 | |||
US¢1/lb on nickel price | 2 |
During FY2014, commodity markets saw some support from a modest improvement in global economic activity, though growth was uneven across different regions. The United States and Japan saw underlying momentum
increase, but emerging economies, notably China, saw growth slow. For steelmaking raw materials, supply growth exceeded that of demand resulting in a decrease in prices. Metal commodity prices were relatively stable with the exception of nickel, which experienced a price increase primarily as a result of the Indonesian ore export ban. For energy commodities, US natural gas prices benefited from strong winter demand, while solid demand growth combined with supply disruptions and geopolitical tensions have provided price support for crude oil.
The following table shows prices of our most significant commodities for the years ended 30 June 2014, 2013 and 2012. These prices represent selected quoted prices from the relevant sources as indicated. These prices will differ from the realised prices on the sale of the Group’s production due to differences in quotation periods, quality of products, delivery terms and the range of quoted prices that are used for contracting sales in different markets.
Year ended 30 June | 2014 Closing | 2013 Closing | 2012 Closing | 2014 Average | 2013 Average | 2012 Average | ||||||||||||||||||
Aluminium (LME cash) (US$/t) | 1,851 | 1,731 | 1,835 | 1,764 | 1,938 | 2,168 | ||||||||||||||||||
Alumina (1) (US$/t) | 312 | 318 | 305 | 321 | 327 | 334 | ||||||||||||||||||
Copper (LME cash) (US$/lb) | 3.15 | 3.06 | 3.45 | 3.18 | 3.48 | 3.71 | ||||||||||||||||||
Crude oil (Brent) (2) (US$/bbl) | 111.02 | 102.46 | 94.50 | 109.36 | 108.64 | 112.49 | ||||||||||||||||||
Energy coal (3) (US$/t) | 70.89 | 78.89 | 89.22 | 78.38 | 89.10 | 111.95 | ||||||||||||||||||
Natural gas Henry Hub (4) (US$/MMBtu) | 4.39 | 3.73 | 2.81 | 4.25 | 3.44 | 3.05 | ||||||||||||||||||
Natural gas Asian Spot LNG(5) (US$/MMBtu) | 11.28 | 15.40 | 14.95 | 16.38 | 15.14 | 16.25 | ||||||||||||||||||
Iron ore (6) (US$/dmt) | 93.25 | 116.25 | 135.25 | 122.70 | 127.23 | 151.17 | ||||||||||||||||||
Manganese Alloys (7) (US$/t) | 999 | 1,038 | 1,160 | 1,020 | 1,106 | 1,177 | ||||||||||||||||||
Manganese Ores (8) (US$/dmtu) | 4.20 | 5.54 | 5.06 | 4.95 | 5.29 | 4.90 | ||||||||||||||||||
Metallurgical coal (9) (US$/t) | 110.50 | 130.00 | 221.50 | 128.40 | 159.13 | 239.18 | ||||||||||||||||||
Nickel (LME cash) (US$/lb) | 8.49 | 6.21 | 7.47 | 6.88 | 7.43 | 8.77 | ||||||||||||||||||
Ethane (10) (US$/bbl) | 12.02 | 9.92 | 12.29 | 11.92 | 12.15 | 27.31 | ||||||||||||||||||
Propane (11) (US$/bbl) | 44.47 | 35.52 | 34.44 | 48.05 | 37.31 | 54.72 | ||||||||||||||||||
Butane (12) (US$/bbl) | 54.39 | 49.51 | 51.29 | 56.70 | 61.74 | 76.72 |
(1) | Platts PAX Free on Board (FOB) Australia – market price assessment of calcined Metallurgical/ Smelter Grade Alumina. |
(2) | Platts Dated Brent is a benchmark price assessment of the spot market value of physical cargoes of North Sea light sweet crude oil. |
(3) | GlobalCoal FOB Newcastle 6,000kcal/kg NCV – typically applies to coal sales in the Asia Pacific market. |
(4) | Platts Gas based on Henry Hub – typically applies to gas sales in the US gas market. |
(5) | Platts Liquefied Natural Gas Delivery Ex-Ship (DES) Japan/Korea Marker – typically applies to Asian LNG spot sales. |
(6) | Platts 62 per cent Fe Cost and Freight (CFR) China – used for fines. |
(7) | Bulk FerroAlloy high-carbon ferromanganese (HCFeMn) Western Europe DDP. |
(8) | 2014 and 2013 Metal Bulletin manganese ore 44 per cent Mn Cost Insurance Freight (CIF), 2012 CRU CIF China import 43 per cent contained manganese. |
(9) | Platts Low-Vol hard coking coal Index FOB Australia – representative of high-quality hard coking coals. |
(10) | OPIS Mont Belvieu non-Tet Ethane – typically applies to ethane sales in the US Gulf Coast market. |
(11) | OPIS Mont Belvieu non-Tet Propane – typically applies to propane sales in the US Gulf Coast market. |
(12) | OPIS Mont Belvieu non-Tet Normal Butane – typically applies to butane sales in the US Gulf Coast market. |
The following summarises the pricing trends of our most significant commodities for FY2014.
Aluminium: The London Metals Exchange (LME) aluminium average cash settlement price decreased by nine per cent during FY2014. Demand continued to increase, but new supply offset the curtailment of high cost capacity. Delays in implementing changes to LME warehouse rules contributed to record high regional premiums ex-China as inventories were constrained by warehouse queues. Since 30 June 2014, the aluminium cash settlement price increased to US$2,114/t on 31 August 2014.
Alumina: The Platts FOB Australia average price decreased by two per cent during FY2014. Although demand grew, driven by the commissioning of new smelters in China, increasing supply outpaced the growth in demand.
Copper: The LME copper average cash settlement price decreased by nine per cent in FY2014. A shortage of copper scrap and growth in Chinese demand supported prices in the first half of the financial year, however, the price decreased in March amid concerns over the liquidation of Chinese stocks. Although seasonal demand strength helped regain some lost ground, strong growth of refined copper production limited price upside.
Crude oil: The Platts Dated Brent crude average price increased by one per cent during FY2014. Prices were supported by increased global demand, constrained Libyan supply, tensions in the Ukraine and a surge of unrest in Iraq in the latter part of the year. Moderating price drivers included slower growth in the Chinese economy during the December quarter of FY2014, combined with some progress towards resolving the deadlock over Iran’s nuclear program.
Energy coal: The Global Coal Newcastle FOB average price decreased by 12 per cent during FY2014. The decrease was driven by weaker import demand growth from India and China, coupled with supply growth from Australia, Russia and Indonesia.
Natural gas Henry Hub: The Platts US Henry Hub natural gas average price increased by 24 per cent during FY2014. The increase was driven by early winter heating demand in the residential and commercial sectors, depleting inventory levels significantly below the five-year average. Storage inventories in June closed 31 per cent below the five-year average at 1,829 billion cubic feet.
Natural gas Asian Spot LNG: The Asian liquefied natural gas average spot price increased by eight per cent during FY2014. The price rise was primarily caused by strong north Asian winter heating demand, combined with the closure of Japanese and South Korean nuclear reactors increasing the need for gas fired power generation in the first half of the year. Supply remained tight throughout the period, as Egypt, Nigeria and Angola experienced supply disruptions. The year-end price decrease of 31 per cent versus the average price for the year was principally due to low North Asian summer demand and new supply coming to market from Papua New Guinea in the second half of the year. Since 30 June 2014, the Asian liquefied natural gas spot price increased to US$12.45/MMBtu on 31 August 2014.
Iron ore: The Platts 62 per cent iron ore CFR China average price declined by four per cent during FY2014. The decrease was driven by seaborne iron ore supply growth which outpaced demand. The price fluctuated between US$89.00/dmt and US$142.50/dmt as large changes occurred in iron ore inventories. Global demand increased in the first half of the year, primarily driven by China’s record pig iron production; however the second half of the year saw demand growth decrease due to flat Chinese growth. Seaborne imports to China increased, primarily driven by supply from Australia and the year-end price decreased 24 per cent versus the average price for the year. Since 30 June 2014, the Platts 62 per cent iron ore CFR China price decreased to US$88/dmt on 31 August 2014.
Manganese: The Metal Bulletin manganese ore China CIF average price decreased by six per cent during FY2014. Demand growth slowed, while South African supply increased amid higher Chinese inventory levels. The year-end price also decreased 15 per cent versus the average price for the year. The Western Europe spot
high carbon ferromanganese average price decreased by eight per cent during FY2014. Weaker alloy prices led to decreased production in South Korea and the United States.
Metallurgical coal: The average Platts Low-Vol Hard Coking Coal Index decreased by 19 per cent during FY2014. While demand from traditional markets recovered steadily, the price decrease was mainly driven by continuing supply growth from Australia. The year-end price also decreased 14 per cent versus the average price for the year.
Nickel: The average LME cash settlement nickel price decreased by seven per cent during FY2014. Increased supply growth coming mainly from Chinese nickel pig iron and new production from greenfield projects was greater than demand growth in the first half of the year. The price increase in the second half of the year was driven by decreased low-cost supply due to the Indonesian ore export ban. Demand growth increased, supported by a recovery in stainless steel production in Europe and the United States. The year-end price increased 23 per cent versus the average price for the year.
NGL: The Mont Belvieu ethane average price decreased by two per cent during FY2014 following increases in ethane supply. Mont Belvieu propane average prices increased by 29 per cent during FY2014, supported by a decrease in supply growth. Mont Belvieu butane average prices decreased by eight per cent during FY2014 due to increased butane supply. Since 30 June 2014, the Mont Belvieu ethane price decreased to US$9.92 /bbl on 31 August 2014.
Exchange rates
We are exposed to exchange rate transaction risk on foreign currency sales and purchases, as we believe active currency hedging does not provide long-term benefits to our shareholders. Because a majority of our sales are denominated in US dollars, and the US dollar plays a dominant role in our business, we borrow and hold surplus cash predominantly in US dollars to provide a natural hedge. Operating costs and costs of locally sourced equipment are influenced by fluctuations in local currencies, primarily the Australian dollar, Brazilian real, Chilean peso and South African rand. Foreign exchange gains and losses reflected in operating costs owing to fluctuations in the local currencies relative to the US dollar may potentially offset one another. The US dollar strengthened in the last quarter of FY2013, resulting in a stronger average US dollar during FY2013 compared to FY2014. Overall, the Australian dollar ended the financial year stronger against the US dollar, while the Chilean peso, Brazilian real and South African rand weakened.
We are also exposed to exchange rate translation risk in relation to net monetary liabilities, being our foreign currency denominated monetary assets and liabilities, including debt and other long-term liabilities. Details of our exposure to foreign currency fluctuations are contained within note 29 ‘Financial risk management’ to the Financial Statements.
Changes in product demand and supply
Global demand and supply for the commodities we produce is a key driver of commodity prices, and fluctuations in product demand and supply affect our results, including cash flows and asset values.
The global economy grew at a moderate rate in FY2014. Momentum in the United States, Japan and the United Kingdom was underpinned by central bank monetary policy. Europe’s economy improved marginally, although the recovery was constrained by high levels of unemployment. Emerging markets, including China, experienced a moderate slowdown.
In a relative sense, the Chinese economy continues to grow strongly with signs that it is rebalancing. Consumption continued to be supported by higher household incomes while fixed asset investment softened, led by the property sector, as the central bank restricted access to credit. Rapid credit growth in the non-bank financial sector remained an important concern for policy makers.
We remain confident in the short-term to medium-term outlook for the Chinese economy. Measured stimulus recently introduced by the government demonstrates their commitment to maintain economic growth above seven per cent. We believe consumption and services will continue to increase in importance, while the market’s role in allocating capital will be enhanced. Greater transparency within the fiscal system is also expected to reshape the relationship between central and local government.
The underlying performance of the US economy continued to improve despite the significant disruption caused by severe weather in the March quarter of FY2014. The curtailment of quantitative easing appears to have had a limited impact on sentiment as a solid increase in demand reflects a stronger labour market, rising disposable incomes, and higher equities and housing prices. Business investment has been a weak link in the recovery so far as companies have responded slowly to better economic conditions, despite higher levels of profitability. An increase in capital spending will be required to sustain the recovery in the medium term.
The Japanese economy has responded strongly to expansionary monetary and fiscal policy over the past year. Investment spending and wages increased as corporate profits benefited from the depreciation of the yen, while an increase in the national sales tax in April had a limited impact on consumption. These factors have increased the potential for faster growth in the short term, although a longer-term, sustainable recovery will be contingent on the scale and speed of structural reform.
With regard to the global economy, stronger United States growth and an associated tightening of monetary policy could result in the rapid outflow of capital from emerging economies. However, developing nations with sound macroeconomic fundamentals would be less likely to experience a severe impact from this transition.
As anticipated, Chinese crude steel production growth decelerated in response to weakness in the construction sector. On average, we expect the ratio of Chinese crude steel production growth to underlying GDP growth to remain below one, although seasonal factors and policy settings will continue to influence short-term output. Global steel demand growth outside of China is likely to accelerate during the remainder of CY2014.
The supply of low-cost steelmaking raw materials has grown more quickly than demand. As predicted, lower-cost seaborne iron ore supply is increasingly displacing higher cost Chinese domestic production. As this trend continues, the cost curve is likely to flatten as high cost production exits the market. In metallurgical coal, high-cost, uneconomic supply has remained resilient although we do expect to see an increasing number of production cuts, particularly in the United States. Given robust underlying demand growth for premium hard coking coals, pricing for our products is likely to be well supported in the medium and longer term.
Indonesian and Australian exports continue to keep the thermal coal market well supplied, prolonging the weaker pricing environment. While demand from key importing regions remains steady, prices are unlikely to respond unless uneconomic supply exits the market.
In copper, robust demand for refined metal, supply disruptions and a shortage of scrap has ensured that the market remains broadly balanced. We believe the longer-term fundamentals for copper remain compelling as grades decline, rising costs and a scarcity of high-quality future development opportunities are likely to constrain low-cost supply.
Demand growth, supply disruptions and geopolitical tension have continued to support crude oil prices. We expect prices to remain supported by an increase in demand from non-OECD countries, which has recently outstripped growth in demand from OECD countries.
United States natural gas prices benefited from a cold winter, which reduced inventory levels significantly below the five-year average. In the longer term, demand is expected to benefit from increasing industrial use, growth in gas-fired power generation and the commencement of LNG exports. Conversely, high inventory levels at Asian utilities, mild summer temperatures and the commissioning of additional supply have led to a decline inAsia-Pacific LNG prices from their February peak.
The nickel price rose sharply during the second half of FY2014 as the Indonesian ore export ban took effect in the March quarter of FY2014. Demand growth remains robust given rising stainless steel production in China, Europe and the United States.
While aluminium demand growth has been strong, new supply continues to offset the curtailment of high cost capacity. However, we expect the premia currently being realised in certain regions to remain at elevated levels as warehouse bottlenecks are likely to take some time to be resolved.
Capital expenditure
Capital expenditure is important in pursuing our strategy through the development of large-scale resource projects and in sustaining our existing operations. Capital expenditure is disclosed for each Business in section 1.6.3 of this Annual Report.
Operating costs
As the prices for our products are determined by the global commodity markets in which we operate, we do not generally have the ability to offset cost pressures through corresponding price increases; therefore, controlling our operating costs is a key driver of our results. Operating costs for the last three years are set out in section 1.11 as well as an analysis of the change in Total expenses. Further analysis of the factors that impacted expenses during FY2014 is set out below and in section 1.15.3.
In discussing the factors that affected Total expenses, we refer to the change in operating cash costs and change in exploration and business development. Collectively we refer to these as change in controllable cash costs. Operating cash costs by definition do not include non-cash costs being depreciation, amortisation, impairments and movements in deferred stripping balances. The change in operating cash costs also excludes the impact of exchange rates and inflation on the actual costs incurred in the corresponding period, 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 the Businesses based on the factors that are within their control and responsibility.
Change in operating cash costs and change in controllable cash costs are not measures that are recognised under IFRS and they may differ from similarly titled measures reported by other companies. A reconciliation of the movements in Underlying EBIT to the financial statement line items in the Income Statement is included in section 2.5 of this Annual Report.
Our focus on reducing operating costs through productivity initiatives saw a decrease in operating cash costs of US$1.5 billion and a reduction in exploration and business development of US$398 million to give a reduction in controllable cash costs of US$1.9 billion in FY2014. In addition operating costs were aided by favourable exchange rate impacts of US$2.0 billion. These factors were offset by other factors such as inflation (US$805 million) and the production costs associated with higher volumes (US$2.6 billion). With higher depreciation and amortisation charges of US$1.7 billion and higher impairment charges of US$450 million, total expenses excluding exceptional items increased from US$45.0 billion to US$46.5 billion.
Exploration and development of resources
Minerals exploration
Over the past six years, brownfield exploration has increased our reserve base around our portfolio of existing assets in large resource basins, which now provide us with significant growth opportunities. This has allowed us to reduce brownfield exploration expenditure and rationalise our greenfield exploration program.
Greenfield minerals (new sites) exploration is focused on advancing targets within Chile and Peru, and is organised through our Copper Business. Greenfield activities include opportunity identification, application for and acquisition of mineral title, early reconnaissance operations and multi-million dollar delineation drilling programs.
In addition to our activities focused on finding new world-class deposits, several of our Businesses undertake brownfield (developments on existing sites) exploration, principally aimed at delineating and categorising mineral deposits near existing operations, and advancing projects through the development pipeline.
Our expenditure on minerals exploration over the last three financial years is set out below.
Year ended 30 June | 2014 | 2013 | 2012 | |||||||||
US$M | US$M | US$M | ||||||||||
Greenfield exploration | 46 | 179 | 324 | |||||||||
Brownfield exploration | 364 | 497 | 814 | |||||||||
|
|
|
|
|
| |||||||
Total minerals exploration | 410 | 676 | 1,138 | |||||||||
|
|
|
|
|
|
The Group’s minerals exploration expenditure declined by 39 per cent in FY2014 to US$410 million as we sharpened our focus on greenfield copper porphyry targets in Chile and Peru.
Petroleum exploration
We have reduced exploration expenditure in Petroleum over recent years with a sharpened focus on high impact liquids opportunities in the Gulf of Mexico, Western Australia and Trinidad and Tobago.
Year ended 30 June | 2014 | 2013 | 2012 | |||||||||
US$M | US$M | US$M | ||||||||||
Petroleum exploration | 600 | 675 | 1,355 |
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 1 ‘Accounting policies’ to the Financial Statements.
Exploration expense for each Business over the three-year period is set out below.
Year ended 30 June | 2014 | 2013 | 2012 | |||||||||
US$M | US$M | US$M | ||||||||||
Exploration expense (1) | ||||||||||||
Petroleum and Potash | 544 | 709 | 1,038 | |||||||||
Copper | 116 | 274 | 366 | |||||||||
Iron Ore | 56 | 74 | 135 | |||||||||
Coal | 34 | 39 | 174 | |||||||||
Aluminium, Manganese and Nickel | 38 | 53 | 68 | |||||||||
Group and unallocated items | – | – | 7 | |||||||||
|
|
|
|
|
| |||||||
BHP Billiton Group | 788 | 1,149 | 1,788 | |||||||||
|
|
|
|
|
|
(1) | Includes US$72 million (2013: US$102 million, 2012: US$144 million) exploration expense previously capitalised, written off as impaired. |
Following our focus on productivity and reducing costs, the reduction in the Group’s exploration expense excluding impairment of exploration expense previously capitalised increased Underlying EBIT in FY2014 by US$331 million.
Interest rates
We are exposed to interest rate risk on our outstanding borrowings and investments. Our policy on interest rate exposure is for interest on our borrowings to be on a US dollar floating interest rate basis. Deviation from our policy requires the prior approval of our Financial Risk Management Committee and is managed within our Cash Flow at Risk (CFaR) framework, which is described in note 29 ‘Financial risk management’ to the Financial Statements. When required under this strategy, we use interest rate swaps, including cross currency interest rate swaps, to convert a fixed rate exposure to a floating rate exposure. As at 30 June 2014, the Group held US$3.3 billion (2013: US$5.4 billion) of centrally managed fixed interest rate borrowings, as well as US$2.0 billion (2013: US$3.5 billion) of other fixed interest rate borrowings, that have not been swapped to floating interest rates, primarily arising from debt raised during FY2014, debt assumed as part of the acquisition of Petrohawk and debt raised prior to the DLC merger.
Our earnings are sensitive to changes in interest rates on the floating interest rate component of the Group’s net borrowings. Based on the net debt position as at 30 June 2014, taking into account interest rate swaps and cross currency interest rate swaps, it is estimated that a one percentage point increase in the US LIBOR interest rate will decrease the Group’s equity and profit after taxation by US$126 million (2013: decrease of US$128 million). This assumes that the change in interest rates is effective from the beginning of the financial year and the fixed/floating mix and balances are constant over the year. However, interest rates and the net debt profile of the Group may not remain constant over the coming financial year and therefore such sensitivity analysis should be used with care.
Health, safety, environment and community
We operate in an industry where many of our activities are highly regulated by laws governing health, safety and the environment. We are committed to compliance with the laws and regulations of the countries in which we operate and, where applicable, to exceeding legal and other requirements which are less stringent than our own. However, regulatory standards and community expectations are constantly evolving. As a result, we may be exposed to increased litigation, compliance costs and unforeseen environmental rehabilitation expenses, despite our best efforts to work with governments, community groups and scientists to keep pace with regulations, law and public expectations.
Further information about our compliance with HSEC regulations can be found in section 1.14 of this Annual Report.
Insurance
During FY2014, we maintained an insurance program encompassing property damage, business interruption, sabotage and terrorism, marine cargo, construction, directors’ and officers’ liability and public and certain other liabilities. The program includes a combination of self-insurance via subsidiary captive insurance companies, industry mutuals and external market insurance and reinsurance. Mandates are established as to risk retention levels, policy cover and, where applicable, insurance and reinsurance counterparty security. As part of our portfolio risk management approach, we regularly conduct an assessment of maximum foreseeable loss potential, cash flow at risk, loss experience, claims received and insurance premiums paid, and will make adjustments to the balance of self-insurance and external insurance and reinsurance as required.
The Group is largely self-insured for losses arising from property damage and business interruption, sabotage and terrorism, marine cargo, construction and primary public liability. For these risks, we internally insure our Businesses (for wholly owned assets and for our share of joint venture assets) via our captive insurance companies. Any losses incurred will consequently impact the Financial Statements as they arise.
1.15.2 Application of critical accounting policies
The preparation of our Financial Statements requires management to make estimates and judgements that affect the reported amounts of assets and liabilities, the disclosure of contingent liabilities at the date of the Financial Statements and the reported revenue and expenses during the periods presented therein. On an ongoing basis, management evaluates its estimates and judgements in relation to assets, liabilities, contingent liabilities, revenue and expenses. Management bases its estimates and judgements on historical experience and on various other factors it believes to be reasonable under the circumstances, the results of which form the basis of making judgements about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions and conditions.
We have identified the following critical accounting policies under which significant judgements, estimates and assumptions are made and where actual results may differ from these estimates under different assumptions and conditions and may materially affect financial results or the financial position reported in future periods:
In accordance with International Financial Reporting Standards (IFRS), we are required to include information regarding the nature of the estimates and judgements and potential impacts on our financial results or financial position in the Financial Statements. This information can be found in note 1 ‘Accounting policies’ to the Financial Statements.
1.15.3 Operating results
The following table describes the approximate impact of the principal factors that affected Underlying EBIT for FY2014 and FY2013.
Year ended 30 June | 2014 | 2013 | ||||||
US$M | US$M | |||||||
Underlying EBIT as reported in the prior year | 22,930 | 28,086 | ||||||
Change in volumes: | ||||||||
Productivity | 962 | 1,257 | ||||||
Growth | 1,929 | 707 | ||||||
|
|
|
| |||||
2,891 | 1,964 | |||||||
|
|
|
| |||||
Net price impact: | ||||||||
Change in sales prices | (3,396 | ) | (8,454 | ) | ||||
Price-linked costs | (80 | ) | 582 | |||||
|
|
|
| |||||
(3,476 | ) | (7,872 | ) | |||||
|
|
|
| |||||
Change in controllable cash costs: | ||||||||
Operating cash costs | 1,524 | 1,556 | ||||||
Exploration and business development | 398 | 949 | ||||||
|
|
|
| |||||
1,922 | 2,505 | |||||||
|
|
|
| |||||
Change in other costs: | ||||||||
Exchange rates | 1,760 | 229 | ||||||
Inflation on costs | (805 | ) | (646 | ) | ||||
Fuel and energy | (46 | ) | (133 | ) | ||||
Non-cash | (2,091 | ) | 154 | |||||
One-off items | – | (103 | ) | |||||
|
|
|
| |||||
(1,182 | ) | (499 | ) | |||||
|
|
|
| |||||
Asset sales | 53 | (66 | ) | |||||
Ceased and sold operations | (492 | ) | (657 | ) | ||||
Other | 215 | (531 | ) | |||||
|
|
|
| |||||
Underlying EBIT | 22,861 | 22,930 | ||||||
|
|
|
|
The method of calculation of the factors that affected Underlying EBIT and the Financial Statement line items of Revenue, Other income and Expenses (excluding net finance costs) that are affected by the factors are as follows.
Factor affecting | Method of calculation | Financial statement | ||
Volumes – Growth | Volume – Growth comprises Underlying EBIT for operations that are new or acquired in the current period minus Underlying EBIT for operations that are new or acquired in the corresponding period, change in volumes for operations identified as a Growth project from the corresponding period to the current period multiplied by the prior year Underlying EBIT margin, and change in volume for Petroleum Business from the corresponding period to the current period multiplied by the prior year Underlying EBIT margin. | Revenue and Expenses | ||
Volumes – Productivity | Change in volumes for each operation not included in the Growth category from the corresponding period to the current period multiplied by the prior year Underlying EBIT margin. | Revenue and Expenses | ||
Change in sales prices | Change in average realised price for each operation from the corresponding period to the current period multiplied by current period volumes. | Revenue | ||
Price-linked costs | Change in price-linked costs for each operation from the corresponding period to the current period multiplied by current period volumes. | Expenses | ||
Operating cash 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 corresponding period to the current period. | Expenses | ||
Exploration and business development | Exploration and business development expense in the current period minus exploration and business development expense in the corresponding period. | Expenses | ||
Exchange rates | Change in exchange rate multiplied by current period local currency revenue and expenses. The majority of the Group’s selling prices are denominated in US dollars and so there is little impact of exchange rate changes on Revenue. | Revenue and Expenses | ||
Inflation on costs | 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. | Expenses | ||
Fuel and energy | Fuel and energy expense in the current period minus fuel and energy expense in the corresponding period. | Expenses | ||
Non-cash | Includes non-cash items, mainly depreciation, amortisation, and impairments. | Expenses | ||
One-off items | Change in cash costs exceeding a predetermined 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. | Expenses |
Factor affecting | Method of calculation | Financial statement | ||
Asset sales | Profit/loss on the sale of assets or operations in the current period minus profit/loss on sale in the corresponding period. | Other income | ||
Ceased and sold operations | Underlying EBIT for operations that are ceased or sold operations in the current period minus Underlying EBIT for operations that are ceased or sold in the corresponding period. | Revenue, Other income and Expenses | ||
Other | Variances not explained by the above factors. | Expenses |
A reconciliation of the movements in Underlying EBIT for FY2014 to the financial statement line items in the Income Statement is included in section 2.5 of this Annual Report.
The following commentary describes the principal factors outlined in the table above for FY2014 and FY2013.
Volumes
Volume efficiencies attributed to productivity and the ramp-up of major projects underpinned an increase in production in a number of Businesses in FY2014 and an additional US$2.9 billion in Underlying EBIT. WAIO was the major contributor as the ramp-up of the Jimblebar mining hub and a series of productivity initiatives raised the capacity of our integrated supply chain and supported a US$1.8 billion increase in Underlying EBIT. Despite the impact of natural field decline, stronger volumes in our Petroleum Business generated an additional US$994 million of Underlying EBIT, reflecting 73 per cent growth in Onshore US liquids volumes and a near doubling of production at Atlantis.
Prices
Lower average prices reduced Underlying EBIT by US$3.4 billion in FY2014.
In metallurgical coal, an increase in seaborne supply and the resilience of higher cost, along with uneconomic capacity led to a 20 per cent and 14 per cent decline in the average realised price of hard coking coal and weak coking coal, respectively. The average price received for thermal coal also declined by 14 per cent during the period. In total, lower average realised prices in our Coal Business reduced Underlying EBIT by US$1.5 billion.
A five per cent decline in the average realised price of copper reflected the near-term rebalancing of the market, while the acceleration of low-cost, seaborne iron ore supply growth, predominantly from Australia’s Pilbara region, weighed on prices in the June 2014 half year. In total, lower average realised prices for copper and iron ore reduced Underlying EBIT by US$1.4 billion.
Nickel and aluminium prices rallied towards the end of FY2014 but remained lower on average for the period, reducing Underlying EBIT by a further US$258 million.
The value of diversification was again evident as higher average realised prices for our petroleum products increased Underlying EBIT by US$219 million. In this context, the average price achieved for our natural gas sales book, covering domestic and international markets, increased by 16 per cent.
Price-linked costs decreased Underlying EBIT by US$80 million during the period, primarily reflecting higher royalty charges in our Petroleum and Iron Ore Businesses.
Controllable cash costs
Our focus on improving operating costs through productivity initiatives saw a decrease in operating cash costs of US$1.5 billion and a decrease in exploration and business development costs of US$398 million, to give a decrease in controllable cash costs of US$1.9 billion during FY2014.
Operating cash costs
The Group’s commitment to further improve the competitive position of its assets delivered tangible results in FY2014 as operating cash costs declined by US$1.5 billion. A general increase in labour and contractor productivity had the greatest impact, increasing Underlying EBIT by US$1.3 billion.
An improvement in equipment productivity increased Underlying EBIT by a further US$268 million as contract stripping activities were further optimised at Queensland Coal. A reduction in consumable costs in our Aluminium, Manganese and Nickel Business more than accounted for a US$33 million decrease in Group supply costs.
Exploration and business development
The Group’s exploration expenditure declined by 25 per cent in FY2014 to US$1.0 billion as we sharpened our focus on greenfield copper porphyry targets in Chile and Peru, and high impact liquids opportunities in the Gulf of Mexico, Western Australia and Trinidad and Tobago. The associated reduction in the Group’s exploration expense increased Underlying EBIT by US$331 million, while a further decline in business development expenditure increased Underlying EBIT by US$67 million.
Other costs
Exchange rates
A stronger US dollar increased Underlying EBIT by US$1.8 billion and included the restatement of monetary items in the balance sheet, which reduced Underlying EBIT by US$352 million. Average and closing exchange rates for FY2014 and FY2013 are detailed in note 1 ‘Accounting policies’ to the Financial Statements.
Inflation on costs
Inflation had an unfavourable impact on all Businesses and reduced Underlying EBIT by US$805 million during FY2014. This was most notable in Australia, Chile and South Africa, which accounted for over 85 per cent of the total variance.
Non-cash
An increase in non-cash charges reduced Underlying EBIT by US$2.1 billion during the period.
A US$631 million increase in the depreciation and amortisation charge at Onshore US reflected the ramp-up of liquids production and the progressive development of our Permian acreage. We continue to expect the depreciation rate in the Permian to normalise at a lower level as reserves are booked and the production rate grows towards 100 Mboe per day over the medium term. The completion and progressive ramp-up of several major projects in our Iron Ore and Coal Businesses resulted in an US$871 million increase in the depreciation and amortisation expense during the period.
Depreciation and amortisation expense included the following impairment charges: a US$292 million charge at Energy Coal South Africa; a US$184 million charge related to minor Gulf of Mexico assets; and a US$68 million charge associated with our decision to allow the exclusivity agreement for Terminal 5 at the Port of Vancouver (United States) to lapse.
A US$300 million charge related to the revision of mine site rehabilitation provisions for the Group’s North American closed mines and a lower capitalisation rate for deferred stripping at Escondida and Pampa Norte also contributed to the increase in non-cash charges.
Asset sales
The divestment of Liverpool Bay more than accounted for the US$53 million increase in Underlying EBIT related to asset sales.
Ceased and sold operations
Underlying EBIT from ceased and sold operations decreased by US$492 million in FY2014 and largely reflected: a US$143 million negative adjustment to the Browse divestment price; the closure of the Nickel West Leinster Perseverance underground mine in November 2013; and the cessation of aluminium smelting activities at Bayside in June 2014.
Other
Other items increased Underlying EBIT by US$215 million and largely reflected an increase in margins at our equity accounted investments and an US$84 million profit related to the sale of the Energy Coal South Africa Optimum Coal purchase agreement. A US$112 million UK pension plan expense in our Petroleum Business is also reported in this category.
Net finance costs
Net finance costs of US$1.2 billion decreased by US$100 million from the prior period. This was primarily related to a decrease of US$245 million in net interest expenses, which was partially offset by a decrease in interest capitalised of US$108 million.
Taxation expense
Total taxation expense, including royalty-related taxation, exceptional items and exchange rate movements, was US$7.0 billion, representing a statutory effective tax rate of 31.5 per cent (30 June 2013: 35.0 per cent).
Government imposed royalty arrangements calculated by reference to profits are reported as royalty-related taxation. The Minerals Resource Rent Tax (MRRT) reduced taxation expense by US$238 million in FY2014 (30 June 2013: increase of US$321 million) as royalty-related credits in the Coal Business more than offset Iron Ore MRRT expense for the period. This included the remeasurement of deferred tax assets associated with the MRRT which decreased taxation expense by US$170 million in the period (30 June 2013: increase of US$207 million).
The Group’s adjusted effective tax rate, which excludes the influence of exchange rate movements, remeasurement of deferred tax assets associated with the MRRT and exceptional items, was 32.5 per cent (30 June 2013: 34.2 per cent).
Adjusted effective tax rate is not an IFRS measure and is reconciled to the statutory effective tax rate below:
2014 | 2013 | |||||||||||||||||||||||
Year ended 30 June | Profit before tax | Income tax expense | % | Profit before tax | Income tax expense | % | ||||||||||||||||||
US$M | US$M | US$M | US$M | |||||||||||||||||||||
Statutory effective tax rate | 22,236 | (7,012 | ) | 31.5 | % | 19,726 | (6,906 | ) | 35.0 | % | ||||||||||||||
Less: | ||||||||||||||||||||||||
Exchange rate movements | – | (24 | ) | – | 245 | |||||||||||||||||||
Remeasurement of deferred tax assets associated with the MRRT | – | (170 | ) | – | 207 | |||||||||||||||||||
Exceptional items | (551 | ) | 166 | 1,928 | (943 | ) | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Adjusted effective tax rate | 21,685 | (7,040 | ) | 32.5 | % | 21,654 | (7,397 | ) | 34.2 | % | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
Other royalty and excise arrangements that are not profit based are recognised as operating costs within Profit before taxation. These amounted to US$2.8 billion during the period (30 June 2013: US$2.6 billion).
Exceptional items
Year ended 30 June 2014 | Gross | Tax | Net | |||||||||
US$M | US$M | US$M | ||||||||||
Sale of Pinto Valley | 551 | (166 | ) | 385 | ||||||||
|
|
|
|
|
| |||||||
551 | (166 | ) | 385 | |||||||||
|
|
|
|
|
|
On 11 October 2013, BHP Billiton completed the sale of its Pinto Valley mining operation for a cash consideration of US$653 million, after working capital adjustments. A gain on sale of US$385 million (after tax expense) was recognised in FY2014.
Refer to note 3 ‘Exceptional items’ to the Financial Statements for more information.
Year ended 30 June 2013 | Gross | Tax | Net | |||||||||
US$M | US$M | US$M | ||||||||||
Exceptional items by category | ||||||||||||
Sale of Yeelirrie uranium deposit | 420 | – | 420 | |||||||||
Sale of Richards Bay Minerals | 1,212 | (183 | ) | 1,029 | ||||||||
Sale of diamonds business | (97 | ) | (42 | ) | (139 | ) | ||||||
Sale of East and West Browse Joint Ventures | 1,539 | (188 | ) | 1,351 | ||||||||
Impairment of Nickel West assets | (1,698 | ) | 454 | (1,244 | ) | |||||||
Impairment of Worsley assets | (2,190 | ) | 559 | (1,631 | ) | |||||||
Impairment of Permian Basin assets | (266 | ) | 99 | (167 | ) | |||||||
Other impairments arising from capital project review | (1,006 | ) | 291 | (715 | ) | |||||||
Newcastle steelworks rehabilitation | 158 | (47 | ) | 111 | ||||||||
|
|
|
|
|
| |||||||
(1,928 | ) | 943 | (985 | ) | ||||||||
|
|
|
|
|
|
The Group announced the sale of its wholly owned Yeelirrie uranium deposit resulting in a gain on sale of US$420 million, while the associated tax expense was offset by the recognition of deferred tax benefits on available tax losses.
The Group announced it had completed the sale of its 37.76 per cent effective interest in Richards Bay Minerals resulting in a gain on sale of US$1.0 billion (after tax expense).
The Group announced the sale of its diamonds business, comprising its interests in the EKATI Diamond Mine and Diamond Marketing operations. The transaction was completed on 10 April 2013 for an aggregate cash consideration of US$553 million (after adjustments). An impairment charge of US$139 million (after tax expense) was recognised based on the final consideration.
The Group signed a definitive agreement to sell its 8.33 per cent interest in the East Browse Joint Venture and 20 per cent interest in the West Browse Joint Venture resulting in a gain on sale of US$1.5 billion being recognised in FY2013. The associated tax expense of US$462 million was partly offset by the recognition of deferred tax benefits on available tax losses of US$241 million and the derecognition of deferred tax liabilities of US$33 million. The final sales price was determined during FY2014 requiring a loss of US$143 million recognised in FY2014.
As a result of expected continued strength in the Australian dollar and weak nickel prices, the Group recognised an impairment charge of US$1.2 billion (after tax benefit) at Nickel West in FY2013.
The Group recognised an impairment of assets at Worsley as a result of expected continued strength in the Australian dollar and weak alumina prices. A total impairment charge of US$1.6 billion (after tax benefit) was recognised.
An impairment charge of US$167 million (after tax benefit) was recognised as the performance of specific evaluation wells in certain areas of the Permian Basin (United States) did not support economic development.
In FY2013, WAIO refocused its attention on the capital efficient expansion opportunity that exists within the Port Hedland inner harbour, and all early works associated with the outer harbour development option were suspended. This revision to the WAIO development sequence and the change in status of other minor capital projects across the Group resulted in the recognition of impairment charges of US$639 million (after tax benefit) and other restructuring costs of US$76 million (after tax benefit) in FY2013, of which US$580 million (after tax benefit) were related to WAIO.
The Group recognised a decrease of US$158 million (before tax expense) to its rehabilitation obligations in respect of former operations at the Newcastle steelworks (Australia). This followed the completion of the Hunter River Remediation Project and reaching agreement with the Environment Protection Authority in March 2013 regarding the necessary scope of work to repeal the Environmental Classification at Steel River.
Exceptional items during FY2013 are classified by nature as follows:
Year ended 30 June 2013 US$M | Sale of assets | Impairment of goodwill and other assets | Restructuring costs | Closure and rehabilitation provisions released | Gross | |||||||||||||||
Sale of Yeelirrie uranium deposit | 420 | – | – | – | 420 | |||||||||||||||
Sale of Richards Bay Minerals | 1,212 | – | – | – | 1,212 | |||||||||||||||
Sale of diamonds business | – | (97 | ) | – | – | (97 | ) | |||||||||||||
Sale of East and West Browse Joint Ventures | 1,539 | – | – | – | 1,539 | |||||||||||||||
Impairment of Nickel West assets | – | (1,698 | ) | – | – | (1,698 | ) | |||||||||||||
Impairment of Worsley assets | – | (2,190 | ) | – | – | (2,190 | ) | |||||||||||||
Impairment of Permian Basin assets | – | (266 | ) | – | – | (266 | ) | |||||||||||||
Other impairments arising from capital project review | – | (898 | ) | (108 | ) | – | (1,006 | ) | ||||||||||||
Newcastle steelworks rehabilitation | – | – | – | 158 | 158 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
3,171 | (5,149 | ) | (108 | ) | 158 | (1,928 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
Refer to note 3 ‘Exceptional items’ to the Financial Statements for more information.
Third party sales
We differentiate sales of our production from sales of third party products due to the significant difference in profit margin earned on these sales. The table below shows the breakdown between our production and third party products.
Year ended 30 June (1) | 2014 | 2013 | 2012 | |||||||||
US$M | US$M | US$M | ||||||||||
Group production | ||||||||||||
Revenue | 64,227 | 63,067 | 66,969 | |||||||||
Related operating costs | (41,410 | ) | (40,264 | ) | (39,017 | ) | ||||||
|
|
|
|
|
| |||||||
Underlying EBIT | 22,817 | 22,803 | 27,952 | |||||||||
Underlying EBIT Margin | 35.5 | % | 36.2 | % | 41.7 | % | ||||||
|
|
|
|
|
| |||||||
Third party products | ||||||||||||
Revenue | 2,979 | 2,886 | 3,508 | |||||||||
Related operating costs | (2,935 | ) | (2,759 | ) | (3,374 | ) | ||||||
|
|
|
|
|
| |||||||
Operating profit | 44 | 127 | 134 | |||||||||
Margin on third party products (2) | 1.5 | % | 4.4 | % | 3.8 | % | ||||||
|
|
|
|
|
|
(1) | Excluding exceptional items. |
(2) | Operating profit divided by revenue. |
We engage in third party trading for the following reasons:
1.15.4 Cash flow analysis
A Consolidated Cash Flow Statement is contained in the Financial Statements. The explanatory notes appear in note 23 ‘Notes to the consolidated cash flow statement’ to the Financial Statements. A summary table has been presented below to show the key sources and uses of cash.
Year ended 30 June | 2014 | 2013 | 2012 | |||||||||
US$M | US$M | US$M | ||||||||||
Cash generated from operations | 31,384 | 28,793 | 32,987 | |||||||||
Dividends received | 1,284 | 721 | 722 | |||||||||
Net interest paid | (839 | ) | (786 | ) | (412 | ) | ||||||
Taxation paid | (6,465 | ) | (8,574 | ) | (8,038 | ) | ||||||
|
|
|
|
|
| |||||||
Net operating cash flows | 25,364 | 20,154 | 25,259 | |||||||||
|
|
|
|
|
| |||||||
Purchases of property plant and equipment | (15,993 | ) | (22,243 | ) | (18,637 | ) | ||||||
Exploration expenditure | (1,010 | ) | (1,351 | ) | (2,493 | ) | ||||||
Exploration expenditure expensed and included in operating cash flows | 716 | 1,047 | 1,644 | |||||||||
Purchases of intangibles | (192 | ) | (400 | ) | (219 | ) | ||||||
Investment in financial assets | (1,193 | ) | (475 | ) | (471 | ) | ||||||
Investment in subsidiaries, operations and jointly controlled entities | – | – | (12,556 | ) | ||||||||
Investment in equity accounted investments | (44 | ) | (84 | ) | (83 | ) | ||||||
Net proceeds from investing activities | 1,882 | 4,780 | 330 | |||||||||
|
|
|
|
|
| |||||||
Net investing cash flows | (15,834 | ) | (18,726 | ) | (32,485 | ) | ||||||
|
|
|
|
|
| |||||||
Net proceeds (repayment of)/from interest bearing liabilities | (910 | ) | 7,157 | 8,644 | ||||||||
Share buy-back | – | – | (83 | ) | ||||||||
Dividends paid | (6,639 | ) | (7,004 | ) | (6,220 | ) | ||||||
Contribution from non-controlling interest | 1,435 | 73 | 101 | |||||||||
Other financing activities | (354 | ) | (424 | ) | (403 | ) | ||||||
|
|
|
|
|
| |||||||
Net financing cash flows | (6,468 | ) | (198 | ) | 2,039 | |||||||
|
|
|
|
|
| |||||||
Net increase/(decrease) in cash and cash equivalents | 3,062 | 1,230 | (5,187 | ) | ||||||||
|
|
|
|
|
|
Net operating cash flows after interest and tax increased by 26 per cent to US$25.4 billion in FY2014. A US$2.6 billion increase in cash generated from operations (after changes in working capital balances) and a US$2.1 billion decrease in net taxes paid were the major contributors to the strong increase. The decrease in net taxes paid was attributed to lower income tax payments in the year of US$1.2 billion in line with our lower effective tax rate and income tax refunds of US$852 million.
Net investing cash outflows decreased by US$2.9 billion to US$15.8 billion during the period. This reflected a US$6.6 billion reduction in capital and exploration expenditure partially offset by a decline in proceeds from asset sales of US$2.9 billion. Expenditure on major growth projects totalled US$13.1 billion, including US$5.6 billion on petroleum projects and US$7.5 billion on minerals projects. Sustaining capital expenditure and other items totalled US$2.9 billion. Exploration expenditure was US$1.0 billion, including US$716 million classified within net operating cash flows.
Net financing cash flows included the proceeds from interest bearing liabilities of US$6.3 billion and contributions from non-controlling interests of US$1.4 billion. Proceeds from interest bearing liabilities included the issuance of a four tranche Global Bond of US$5.0 billion. These inflows were more than offset by debt repayments of US$7.2 billion and dividend payments to our shareholders of US$6.4 billion.
1.15.5 Net debt and sources of liquidity
Our policies on debt and treasury management are as follows:
Gearing and net debt
Net debt, comprising Interest bearing liabilities less Cash and cash equivalents, was US$25.8 billion, which represented a decrease of US$1.7 billion compared with the net debt position at 30 June 2013. Gearing, which is the ratio of net debt to net debt plus net assets, was 23.2 per cent at 30 June 2014, compared with 26.8 per cent at 30 June 2013.
Cash at bank and in hand less overdrafts at 30 June 2014 was US$8.8 billion compared with US$5.7 billion at 30 June 2013. Included within this were short-term deposits at 30 June 2014 of US$7.1 billion compared with US$3.2 billion at 30 June 2013.
Funding sources
During FY2014, the Group issued a four tranche Global Bond totalling US$5.0 billion comprising US$500 million Senior Floating Rate Notes due 2016 paying interest at three month US dollar LIBOR plus 25 basis points, US$500 million 2.050 per cent Senior Notes due 2018, US$1.5 billion 3.850 per cent Senior Notes due 2023, and US$2.5 billion 5.000 per cent Senior Notes due 2043.
None of our Group level borrowing facilities are subject to financial covenants. Certain specific financing facilities in relation to specific Businesses are the subject of financial covenants that vary from facility to facility, but which would be considered normal for such facilities.
Our maturity profile for US dollar bonds, Euro bonds and Australian dollar bonds for the following five years is set out below.
Year ended 30 June | 2015 | 2016 | 2017 | 2018 | 2019 | |||||||||||||||
US$M | US$M | US$M | US$M | US$M | ||||||||||||||||
USD Bonds | 3,825 | 1,050 | 3,250 | – | 2,250 | |||||||||||||||
Euro Bonds | – | 1,365 | – | – | 1,706 | |||||||||||||||
AUD Bonds | – | – | – | 939 | – | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
3,825 | 2,415 | 3,250 | 939 | 3,956 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
Facility available 2014 | Used 2014 | Unused 2014 | Facility available 2013 | Used 2013 | Unused 2013 | |||||||||||||||||||
US$M | US$M | US$M | US$M | US$M | US$M | |||||||||||||||||||
Commercial paper program (1) | 6,000 | – | 6,000 | 6,000 | (1,330 | ) | 4,670 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total financing facilities | 6,000 | – | 6,000 | 6,000 | (1,330 | ) | 4,670 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
(1) | The Group has a US$6.0 billion commercial paper program backed by US$6.0 billion of revolving credit facilities. In May 2014, the US$5.0 and US$1.0 billion revolving credit facilities expiring in December 2015 and December 2014, were replaced by a US$6.0 billion revolving credit facility. The new facility has a |
five-year maturity with two one-year extension options. The facility is used for general corporate purposes and as backup for the commercial paper programs. The interest rates under these facilities are based on an interbank rate plus a margin. The applicable margin is typical for a credit facility extended to a company with the Group’s credit rating. The Group had no US commercial paper outstanding in the market at the end of the financial year (2013: US$1.3 billion). |
Additional information regarding the maturity profile of our debt obligations and details of our standby and support agreements is included in note 29 ‘Financial risk management’ to the Financial Statements.
The Group’s credit ratings are currently A1/P-1 (Moody’s – long-term/short-term) and A+/A-1 (Standard & Poor’s – long-term/short-term). The ratings outlook from both agencies did not change during FY2014.
1.15.6 Other information
Quantitative and qualitative disclosures about market risk
We identified our primary market risks in section 1.15.1 of this Annual Report. A description of how we manage our market risks, including both quantitative and qualitative information about our market risk sensitive instruments outstanding at 30 June 2014, is contained in note 29 ‘Financial risk management’ to the Financial Statements.
Off-balance sheet arrangements and contractual commitments
Information in relation to our material off-balance sheet arrangements, principally contingent liabilities, commitments for capital expenditure and commitments under leases at 30 June 2014 is provided in note 21 ‘Contingent liabilities’ and note 22 ‘Commitments’ to the Financial Statements.
Subsidiary information
Information about our significant subsidiaries is included in note 26 ‘Subsidiaries’ to the Financial Statements.
Related party transactions
Related party transactions are outlined in note 32 ‘Related party transactions’ to the Financial Statements.
Significant changes since the end of the year
Significant changes since the end of the year are outlined in note 36 ‘Subsequent events’ to the Financial Statements.
The Strategic Report is made in accordance with a resolution of the Board.
Jac Nasser AO
Chairman
Dated: 11 September 2014
2.1.1 Petroleum and Potash Business
Our Petroleum and Potash Business headquartered in Houston, United States, comprises conventional and non-conventional operations located in six countries throughout the world and a potash project based in Saskatchewan, Canada.
Petroleum
Our Petroleum Business includes exploration, development, production and marketing activities. We have a high-quality resource base concentrated in the United States and Australia. Our core production operations are primarily located in the US Gulf of Mexico, Onshore US and in Australia. We also have operations in Trinidad and Tobago, Pakistan, Algeria and the United Kingdom. We produce crude oil and condensate, natural gas and natural gas liquids (NGLs).
The Petroleum portfolio consisted of conventional oil and gas operations up until 2011, when we moved into the unconventional shale business. Our Onshore US operations evolved from the acquisition of the Fayetteville shale assets from Chesapeake Energy Corporation and the acquisition of Petrohawk Energy Corporation.
Our overall production for FY2014 was 246.0 million barrels of oil equivalent (MMboe). This was mainly attributable to our US and Australian operations, which produced 144.3 MMboe and 80.0 MMboe, respectively, with the majority of US production coming from Onshore US, which produced 108.1 MMboe. Operations outside Australia and the United States delivered the remaining production volumes. Information relating to our oil and gas reserves is set out in section 2.3.1.
In line with our aim of simplification and a sharper strategic focus, we continue to evaluate our existing portfolio in order to optimise our position around our core business.
Our production operations include the following:
United States
Gulf of Mexico
We operate two fields in the Gulf of Mexico (Shenzi with a 44 per cent interest and Neptune with a 35 per cent interest) and hold non-operating interests in three other fields (Atlantis with a 44 per cent interest, Mad Dog with a 23.9 per cent interest, and Genesis with a 4.95 per cent interest). We have on going infill drilling in our Gulf of Mexico fields. We completed water injection development projects at Shenzi and Atlantis in CY2013. All the fields are located between 155 and 210 kilometres offshore of 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 all our Gulf of Mexico fields are located, to connecting pipelines that transport product onshore. Our US oil production is delivered to refineries along the Gulf Coast of the United States.
Onshore US
We produce oil, condensate, NGLs and natural gas in four shale areas: Eagle Ford, Permian, Haynesville and Fayetteville. The Eagle Ford area has two sections, Black Hawk and Hawkville. Our combined leasehold acreage onshore in the United States is approximately 1.2 million net acres. Our ownership interests in those leases range from less than one per cent to 100 per cent. At 30 June 2014, we held an interest in approximately 7,700 gross wells and approximately 2,600 net wells. We acted as joint venture operator for approximately 32 per cent of our gross wells. Production in FY2014 was 108.1 MMboe up from 99.2 MMboe in FY2013.
During FY2014, we sold our interest in our Onshore US South Midland shale operation, located in the Permian Basin, to EP Energy for cash consideration of US$153 million.
Shale reservoirs are characterised by low permeability, so it is necessary to stimulate the reservoir to create additional permeability and, therefore, the flow of liquids and gas to the wellbore. Extracting oil and gas from shale involves hydraulic fracturing, which is a process developed to efficiently access supplies of oil and natural gas locked inside dense subsurface rock formations, such as shale. Hydraulic fracturing involves using water, sand and a small amount of chemicals to fracture the hydrocarbon-bearing rock formation to allow the well to produce commercial volumes.
The development phase of an onshore shale operation requires an extensive drilling and completion program, which may include associated gas compression and treatment facilities and connecting pipelines. Shale development has a repetitive, manufacturing-like nature that provides opportunities for increased efficiency. Much of our development of the shale reservoirs utilises horizontal drilling with average lateral lengths between 1,400 and 1,700 metres. We enter into service contracts with third parties to provide drilling and completion services at our operated sites. At the end of FY2014, we had 24 drilling rigs in operation.
Much of the Eagle Ford and Permian areas are focused on hydrocarbon liquids. The Eagle Ford area is located in south Texas, where our leasehold acreage comprises 0.3 million net acres. The Permian area is located in west Texas, where our leasehold acreage currently comprises 0.2 million net acres following the sale of our South Midland interest and other leasehold acquisitions and disposals. Production volume from the Permian area was 3.8 MMboe. The combined production in FY2014 from our liquids-focused Eagle Ford and Permian areas was 51.9 MMboe, up from 33.4 MMboe in FY2013, with a production mix of 42 per cent crude oil and condensate (FY2013: 35 per cent), 36 per cent natural gas (FY2013: 42 per cent) and 22 per cent NGLs (FY2013: 23 per cent).
The Haynesville and Fayetteville areas are focused on natural gas. The Haynesville area is located in northwest Louisiana and east Texas, where our leasehold acreage comprises 0.3 million net acres. The Fayetteville field is located in north central Arkansas, where our leasehold acreage comprises 0.4 million net acres. The Haynesville and Fayetteville areas had combined production in FY2014 of 56.2 MMboe of natural gas (FY2013: 65.8 MMboe).
Oil and gas production from our onshore shale areas is sold domestically in the United States, via connections to intrastate and interstate pipelines. Prices for oil, NGLs and natural gas are based on US regional price indices, including West Texas Intermediate prices for oil, Henry Hub prices for natural gas and Mont Belvieu prices for NGLs.
Australia
Bass Strait
Together with our 50-50 joint venture partner, Esso Australia (a subsidiary of ExxonMobil), through the Gippsland Basin Joint Venture, we participated in the original discovery of hydrocarbons in 1965 and we have been producing oil and gas from Bass Strait for more than 40 years. The Bass Strait operations are located between 25 and 80 kilometres off the southeastern coast of Australia.
We sell the majority of our Bass Strait crude oil and condensate production to refineries along the east coast of Australia under 12-month term contracts. The contract price is based on the average Dated Brent price. Gas is piped onshore to the joint venture’s Longford processing facility, from which we sell our share of production to domestic distributors under contracts with periodic price reviews.
Minerva
We are the operator of Minerva (90 per cent interest), a gas field located 11 kilometres south-southwest of Port Campbell in western Victoria. The operation consists of two subsea wells, with gas piped onshore to a processing plant. After processing the gas is delivered into a pipeline and sold domestically under long-term contracts.
North West Shelf
We are a joint venture participant in the North West Shelf Project, located approximately 125 kilometres northwest of Dampier in Western Australia. The North West Shelf Project was developed in phases: the domestic gas phase supplies gas to the Western Australian domestic market, mainly under long-term contracts, and a series of liquifiedliquefied natural gas (LNG) expansion phases supplying LNG to buyers in Japan, South Korea and China under a series of long-term contracts.
We continue to expand our operations in North West Shelf. The North Rankin compression project also produces LPGwas completed during FY2014 to recover remaining lower pressure gas from the North Rankin and condensate.Perseus gas fields. North Rankin B platform was constructed adjacent to existing North Rankin A platform connected by a100-metre long bridge and operates as a single facility.
Gas from North West Shelf is piped to the Karratha Gas Plant for processing. Liquefied petroleum gas (LPG), condensate and LNG are transported to market by ship, while domestic gas is transported by the Natural Gas and Pilbara Energy pipelines. We are also a joint venture participantpartner in four nearby oil fields. Both thefields – Cossack, Wanaea, Lambert and Hermes. All North West Shelf gas and oil joint ventures are operated by Woodside Petroleum Ltd.Woodside.
Australia operatedPyrenees
We operate twosix oil fields offshore Western Australia and one gas field in Victoria.
The Pyrenees, oil development consists of three fields, two of which (Crosby and Stickle) are located in blocks WA-42-L (71.43offshore approximately 23 kilometres northwest of Northwest Cape, Western Australia. We had an effective 62 per cent interest), whileinterest in the third (Ravensworth) straddles blocks WA-42-L and WA-43-L (40fields as at 30 June 2014, based on inception-to-date production from two permits in which we have interests of 71.43 per cent interest).and 40 per cent, respectively. The project uses a floating, production, storage and off-take (FPSO) facility. The crude oil produced is sold internationally on the spot market.
Macedon
We are the operator of Macedon (71.43 per cent interest), an offshore gas field located approximately 75 kilometres west of Onslow, Western Australia and a gas processing facility onshore, approximately 17 kilometres southwest of Onslow. The operation achieved first gas in August 2013 and consists of four subsea wells, with gas piped onshore to the processing plant. After processing, the gas is delivered into a pipeline and sold domestically under long-term contracts.
Stybarrow operation
We are the operator of Stybarrow (50 per cent BHP Billiton share) isinterest), an oil developmentfield located offshore55 kilometres west-northwest of Exmouth, Western Australia. The project uses a FPSO facility. The crude oil produced is sold internationally on the spot market.
The Minerva operation (90 per cent BHP Billiton share) is a gas field located offshore Victoria. The operation consists of two subsea producing wells which pipe gas onshore to a processing plant. The gas is delivered into a pipeline and sold domestically.Other production operations
Gulf of Mexico
We operate three fields in the Gulf of Mexico (Neptune, Shenzi and consolidated operations in the West Cameron area), and hold non-operating interests in a further three fields (Atlantis, Mad Dog and Genesis). 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 which transport oil and gas from the Green Canyon area, where a number of our fields are located, to connecting pipelines that transport product to the mainland. We deliver our oil production to refineries along the Gulf Coast of the United States.
Fayetteville
Fayetteville Shale operations in central Arkansas in the US consist of approximately 504,451 net acres of leasehold and producing natural gas properties and extensive infield gathering pipelines and several compression stations.
Liverpool Bay and Bruce/Keith
The Liverpool Bay integrated development consists of six offshore gas and oil fields in the Irish Sea, the Point of Ayr onshore processing plant in north Wales, and associated infrastructure. We deliver the Liverpool Bay gas by pipeline to E.ON’s Connah’s Quay power station.
We own 46.1 per cent of and operate Liverpool Bay. We also hold a 16 per cent non-operating interest in the Bruce oil and gas field in the North Sea and operate the Keith field (31.83 per cent share), a subsea tie-back, that is processed via the Bruce platform facilities.
Algeria
Our Algerian operations comprise our effective 45 per cent interest in the Ohanet wet gas development and our effectivea 38 per cent interest in the ROD Integrated Development, which consists of six satellite oil fields that pump oil back to a dedicated processing train.
The oil is sold on a spot basis to international markets. Our interest in ROD is subject to a contractual determination to ensure interest from participating association leases is accurately reflected. Future redetermination ofwith our joint venture partner ENI, which could result in a future change in our interest may be possible under certain conditions.
United Kingdom
We hold a 16 per cent non-operating interest in the Bruce oil and gas field in the North Sea and operate the Keith oil and gas field (31.83 per cent interest), a subsea tie-back, which is processed via the Bruce platform facilities.
We divested our interest in Liverpool Bay (46.1 per cent interest) on 31 March 2014 to ENI ULX Limited for a cash consideration of US$29.1 million (subject to finalisation) and the transfer of the rehabilitation and restoration liability to the buyer. Liverpool Bay was an integrated development consisting of five producing offshore oil and gas fields in the Irish Sea, the Point of Ayr onshore processing plant in northern Wales and associated infrastructure.
Trinidad and Tobago
TheWe operate the Greater Angostura project isfield (45 per cent interest in the production sharing contract), an integrated oil and gas development, located offshore, 40 kilometres east of Trinidad. We operate the field and haveThe crude oil is sold on a 45 per cent interest in the production sharing contract for the project. Gas sales fromspot basis to international markets, while the gas export platform commenced in May 2011.is sold domestically under term contracts. During FY2014 we extended the termination date of our Production Sharing Contract with the Government of Trinidad and Tobago from 2021 to 2026.
ZamzamaPakistan
We hold a 38.5 per cent working interest in and operate the Zamzama gas project (38.5 per cent interest) in the Sindh province of Pakistan. Both gas and condensate are sold domestically.domestically under term contracts in accordance with the Pakistan Government’s pricing policies.
Information on Petroleum operations
The following table contains additional details of our production operations. This table should be read in conjunction with the production (see(refer to section 2.3.1)2.2.1) and reserve tables (see(refer to section 2.13.1)2.3.1).
Operation & | Product | Ownership | Operator | Title, | Nominal | Facilities, | ||||||
United States | ||||||||||||
Neptune (Green Canyon 613) | ||||||||||||
deepwater Gulf of Mexico (1,300m) | Oil and gas | BHP Billiton 35% Marathon Oil 30% Woodside Energy 20% Maxus US Exploration 15% | BHP Billiton | Lease from US Government as long as oil and gas produced in paying quantities | 50 Mbbl/d oil 50 MMcf/d gas | Permanently moored tension leg platform (TLP) | ||||||
Shenzi (Green Canyon 653) | ||||||||||||
Offshore deepwater Gulf of Mexico (1,310m) | Oil and gas | BHP Billiton 44% Hess Corporation 28% Repsol 28% | BHP Billiton | Lease from US Government as long as oil and gas produced in paying quantities | 100 Mbbl/d oil 50 MMcf/d gas | Stand-alone TLP Genghis Khan field (part of same geological structure) tied back to Marco Polo TLP | ||||||
| ||||||||||||
Offshore Gulf of Mexico (2,155m) | Oil and gas | BHP Billiton 44% BP 56% | BP | Lease from US Government as long as oil and gas produced in paying quantities | 200 Mbbl/d oil 180 MMcf/d gas | Permanently moored semi-submersible platform | ||||||
Mad Dog (Green Canyon 782) | ||||||||||||
Offshore deepwater Gulf of Mexico (1,310m) | Oil and gas | BHP Billiton 23.9% BP 60.5% Chevron 15.6% | BP | Lease from US Government as long as oil and gas produced in paying quantities | 80 Mbbl/d oil 60 MMcf/d gas | Permanently moored integrated truss spar, facilities for simultaneous production and drilling operations | ||||||
Genesis (Green Canyon 205) | ||||||||||||
Offshore deepwater Gulf of Mexico (approximately 790m) | Oil and gas | BHP Billiton 4.95% Chevron 56.67% ExxonMobil 38.38% | Chevron | Lease from US Government as long as oil and gas produced in paying quantities | 55 Mbbl/d oil 72 MMcf/d gas | Floating cylindrical hull (spar) moored to seabed with integrated drilling facilities |
Operation & | Product | Ownership | Operator | Title, leases or options | Nominal production | Facilities, use & condition | ||||||
Onshore US | ||||||||||||
Eagle Ford, south Texas Permian, west Texas Haynesville, northern Louisiana and east Texas Fayetteville, Arkansas | Oil, condensate, gas and NGL | BHP Billiton working interest in leases range from <1% to 100% BHP Billiton average net working interest is approximately 34% Largest partners include Southwestern Energy, XTO, Devon Energy | BHP Billiton operated approximately 32% of approximately 7,700 wells | We currently own leasehold interests in approximately 1.2 million net acres: Eagle Ford – 0.3 million acres Permian – 0.2 million acres Haynesville – 0.3 million acres Fayetteville – 0.4 million acres Other – 0.1 million acres Leases associated with producing wells remain in place as long as oil and gas is produced in paying quantities | Average daily production during FY2014 1,230 MMcf/d gas 60.1 Mbbl/d oil and condensate 31.3 Mbbl/d NGL | Eagle Ford – producing oil and gas wells and associated pipeline and compression facilities Permian – oil and gas wells with associated gathering systems, processing plant and compression facilities Haynesville – producing gas wells with a third party operated pipeline network Fayetteville – producing gas wells with associated pipeline and compression infrastructure All production from Onshore US fields is transported to various intrastate and interstate pipelines through multiple interconnects | ||||||
Australia | ||||||||||||
Bass Strait | ||||||||||||
Offshore and onshore Victoria | Oil and gas | Gippsland Basin Joint Venture (GBJV): BHP Billiton 50%
Esso Australia (Exxon Mobil subsidiary) 50% Oil Basins Ltd 2.5% royalty interest in 19 production licences Kipper Unit Joint Venture (KUJV): BHP Billiton 32.5% Esso Australia 32.5% Santos Offshore Pty Ltd 35% | Esso Australia | 20 production licences
Expire between 2016 and end of life of field
One production licence held with Santos Ltd |
| 20 producing fields with
Onshore infrastructure: – Longford – Interconnecting pipelines – Long Island Point LPG and oil storage facilities – Ethane pipeline |
Operation & | Product | Ownership | Operator | Title, leases or options | Nominal production | Facilities, use & condition | ||||||
Minerva | ||||||||||||
Offshore and onshore Victoria | Gas and condensate | BHP Billiton 90% Santos (BOL) 10% | BHP Billiton | Production licence issued by Australian Government expires 5 years after production ceases | 150 TJ/d gas 600 bbl/d condensate | 2 well completions Single flow line transports gas to onshore gas processing facility Gas plant located approximately 4 kms inland from Port Campbell | ||||||
North West Shelf | ||||||||||||
Offshore and
North Rankin Goodwyn Perseus | Domestic gas, LPG, condensate, LNG | North West Shelf Project is an unincorporated JV
BHP Billiton: 8.33% of original domestic gas JV, will 16.67% of Incremental Pipeline Gas (IPG) domestic gas JV 16.67% of original LNG JV 12.5% of China LNG JV 16.67% of LPG JV Other participants: subsidiaries of | Woodside Petroleum Ltd | 9 production licences issued by Australian Government
6 expire in 2022 and 3 expire 5 years from end of production | North Rankin 60 Mbbl/d condensate
Goodwyn A platform: 1,450 MMcf/d gas 110 Mbbl/d condensate
Angel platform: 960 MMcf/d gas 50 Mbbl/ Withnell Bay gas plant: 600 MMcf/d gas 5-train LNG plant: 45,000 tpd LNG | Production from North Rankin and Perseus processed through the interconnected North Rankin A
Production from Goodwyn
4 subsea wells in Perseus field tied into Goodwyn A platform
Production from Angel field processed through Angel platform |
|
|
|
|
|
|
| ||||||
| Onshore gas treatment plant at Withnell Bay processes gas for domestic market
5-train LNG plant | |||||||||||
North West Shelf | ||||||||||||
Offshore Western Australia
Wanaea Cossack Lambert and Hermes fields | Oil | BHP Billiton 16.67%
Woodside BP, Chevron, Japan Australia LNG (MIMI) 16.67% each | Woodside Petroleum Ltd | 3 production licences issued by Australian Government expire |
| Product |
| Operator | Title, leases or options | Nominal production | Facilities, use & condition | ||||||||||
Pyrenees | ||||||||||||||||
Offshore Western Australia
Moondyne Wild Bull Tanglehead Stickle and Ravensworth fields | Oil | WA-42-L permit: BHP Billiton 71.43% Apache PVG 28.57% WA-43-L permit: BHP Billiton 40% Apache APG Permits 31.5% Inpex Alpha 28.5% | BHP Billiton | Production licence issued by Australian Government expires 5 years after production ceases |
Storage: 920 Mbbl | 24 subsea well completions (19 producers, 4 water injectors, 1 gas injector), FPSO | ||||||||||
Macedon | ||||||||||||||||
Offshore and onshore Western Australia | Gas and condensate | WA-42-L permit BHP Billiton 71.43% Apache PVG 28.57% | BHP Billiton | Production licence issued by Australian Government expires 5 years after production ceases | Production: 200 MMcf/d gas
|
Single flow line transports gas to onshore gas processing facility Gas plant located approximately 17 km southwest of Onslow | ||||||||||
Stybarrow | ||||||||||||||||
Offshore Western Australia
Stybarrow and Eskdale fields | Oil and gas | BHP Billiton 50%
Woodside | BHP Billiton | Production licence issued by Australian Government expires 5 years after production ceases | Production: 80 Mbbl/d oil
Storage: 900 Mbbl | 10 subsea well completions (6 producers, 3 water injectors, 1 gas injector)
Gas production is reinjected | ||||||||||
|
|
|
|
|
|
|
|
|
|
| ||||||
operations | ||||||||||||
|
|
| ||||||||||
|
|
|
| |||||||||
|
|
|
| |||||||||
|
|
| ||||||||||
|
|
|
|
|
|
|
|
|
| ||||||
|
| |||||||||||
|
| |||||||||||
|
|
|
| |||||||||
|
|
|
|
|
|
|
|
|
| ||||||
|
|
|
|
| ||||||||
Onshore
|
|
| ||||||||||
| Oil | BHP Billiton 45% interest in 401a/402a production sharing contract
BHP Billiton effective 38% interest in ROD unitised integrated development | Joint Sonatrach/ENI entity | Production sharing contract with Sonatrach (title holder)
Expires in 2016 with option for two 5-year extensions under certain conditions specified in the contracts | Approximately 80 Mbbl/d oil | Development and production of 6 oil fields
2 largest fields (ROD and SFNE) extend into neighbouring blocks 403a, 403d
Production through dedicated processing train on block 403 |
Operation & | Product | Ownership | Operator | Title, | Nominal | Facilities, | ||||||
United Kingdom | ||||||||||||
Bruce/Keith | ||||||||||||
Offshore North Sea, UK | Oil and gas | Bruce: BHP Billiton 16% BP 37% Total SA 43.25% Marubeni 3.75% Keith: BHP Billiton 31.83% BP 34.84% Total SA 25% Marubeni 8.33% | Bruce – BP Keith – BHP Billiton | 3 production licences issued by UK Government expire in 2015, 2018 and 2046 | 920 MMcf/d gas | Integrated oil and gas platform Keith developed as tie-back to Bruce facilities | ||||||
Liverpool Bay | ||||||||||||
Offshore northwest England, Irish Sea Douglas and Douglas West oil fields, Lennox Hamilton Hamilton North gas fields | Oil and gas | BHP Billiton 46.1% ENI 53.9% BHP Billiton’s interest in Liverpool Bay divested 31 March 2014 | BHP Billiton | 3 production licences issued by UK Government expire in 2016, 2025 and 2027 | 308 MMcf/d gas 70 Mbbl/d oil and condensate | Integrated development of 5 producing fields Oil treated at Douglas complex then piped to oil storage barge for export by tankers Gas processed at Douglas complex then piped by subsea pipeline to Point of Ayr gas terminal for further processing |
Operation & | Product | Ownership | Operator | Title, leases or options | Nominal production | Facilities, use & condition | ||||||
Trinidad and Tobago | ||||||||||||
Greater Angostura | ||||||||||||
Offshore Trinidad and Tobago | Oil and gas | BHP Billiton 45%
Chaoyang 25% | BHP Billiton | Production sharing contract with the Trinidad and Tobago Government entitles us to operate Greater Angostura until | 100 Mbbl/d oil 280 MMcf/d gas | Integrated oil and gas development: central processing platform connected to theKairi-2 platform and gas export platform with 3 satellite wellhead protector platforms and flow lines
Oil pipeline from processing platform to storage and export at Guayaguayare
Gas | ||||||
Pakistan | ||||||||||||
Zamzama | ||||||||||||
Onshore Sindh Province, Pakistan | Gas and condensate | BHP Billiton 38.5%
ENI Pakistan 17.75% Government Holdings | BHP Billiton | 20-year development and production lease from the Pakistan Government expires in 2022 (option to extend 5 years) | 500 MMcf/d gas 3,350 bbl/d condensate |
4 process trains |
Note: Deepwater Gulf of Mexico relates to fields in water depths of over approximately 150 metres.
Development projects
Australia
North West Shelf North Rankin gas compression project
The North West Shelf gas compression project was approved by the Board in March 2008 to recover remaining lower pressure gas from the North Rankin and Perseus gas fields. The project consists of a new gas compression platform, North Rankin B, capable of processing 2,500 million cubic feet per day (MMcf/d) of gas, which will be constructed adjacent to the existing North Rankin A platform, 135 kilometres offshore from Karratha on the northwest coast of Western Australia. The two platforms will be connected by a 100 metre long bridge and operate as a single facility. Our 16.67 per cent share of development costs is approximately US$850 million, of which US$390 million was incurred as of 30 June 2011. First gas is expected in CY2013.
North West Shelf Cossack, Wanaea, Lambert, Hermes (CWLH) life extension
In December 2008, approval was announced to undertake a redevelopment project to replace and refurbish CWLH facilities as a result of the longer than originally planned field life. The project involves replacing the existing Cossack Pioneer FPSO vessel and selectively refurbishing subsea infrastructure and the riser turret mooring. Our 16.67 per cent share of the cost is approximately US$245 million, of which US$223 million was incurred as of 30 June 2011. First production through the redeveloped facilities is expected in the second half of CY2011.
Bass Strait Kipper gas field development
Initial development of the Kipper gas field in the Gippsland Basin located offshore Victoria was approved by the Board in December 2007. A supplemental approval of the development was granted in January 2011. The first phase of the project includes two new subsea wells, three new pipelines and platform modifications to supply 10 thousand barrels per day (Mbbl/d) of condensate and 80 MMcf/d of gas. Gas and liquids will be processed via the existing Gippsland Basin Joint Venture facilities. Our share of development costs is approximately US$900 million, of which US$515 million was incurred as of 30 June 2011. Facilities are expected to be ready for first production in CY2012 pending resolution of mercury content. Mercury has been encountered in the reservoir and a solution is being developed separately. The initial production target date is CY2014. The Kipper gas field development is comprised of the Kipper Unit Joint Venture and the Gippsland Basin Joint Venture. We own a 32.5 per cent interest in the Kipper Unit Joint Venture, with Esso Australia and Santos owning the remaining 67.5 per cent. We own a 50 per cent interest in the Gippsland Basin Joint Venture with Esso Australia owning the remaining 50 per cent.
Bass Strait Turrum field development
Further expansion of the Gippsland Basin facilities is underway following approval by the Board in July 2008 of the full field development of the Turrum oil and gas field. A supplemental approval of the development was obtained in January 2011. The project consists of a new platform, Marlin B, linked by a bridge to the existing Marlin A platform. The Turrum field, which has a capacity of 11 Mbbl/d and 200 MMcf/d of gas, is located 42 kilometres from shore in approximately 60 metres of water. Our share of development costs is approximately US$1,350 million, of which US$640 million was incurred as of 30 June 2011. Initial production is targeted for CY2013. The Turrum field development operates under the Gippsland Basin Joint Venture in which we own a 50 per cent interest.
Macedon
Macedon is a domestic gas development in Western Australia. The project will consist of a 200 MMcf/d of stand-alone gas plant, four subsea production wells, a 90 kilometre, 20 inch wet gas pipeline and a 67 kilometre, two inch sales gas pipeline. In August 2010, the project was approved at an investment level of US$1,050 million (net BHP Billiton share). Execution phase work, including award of principal Engineering Procurement and
Construction Management (EPCM) onshore and offshore installation contracts, has commenced. We are the operator, with a 71.43 per cent interest and Apache PVG Pty Ltd holds the remaining 28.57 per cent interest. First gas is expected in CY2013.
Exploration and appraisal
We focus on capturing and operating large acreage positions in areas that are material to the Group. We have exploration interests around the world, particularly in the Gulf of Mexico, Australia, and the South China Sea. During FY2011, our gross expenditure on exploration was US$557 million, of which US$404 million was expensed. Our major exploration interests are as follows:
Australia
We have a 50 per cent interest in the Gippsland Basin Joint Venture with Esso Australia Ltd. In November 2010, the Yellowfin well was plugged and abandoned and expensed as a dry hole. Operations for the South East Longtom well started the same month and encountered hydrocarbons. The well has been plugged and abandoned and continues being evaluated for development potential.
In June 2011, we increased our interest in block WA-351-P offshore Western Australia to 80 per cent by exercising a pre-emption right to acquire a 25 per cent interest from our joint venture partner Tap (Shelfal) Pty Ltd. The block is located on the Exmouth Plateau south of the Scarborough gas field. Tap holds the remaining 20 per cent.
Also in June 2011, we exercised our option to acquire an additional 16 per cent interest in block WA-335-P offshore Western Australia, taking our total participating interest to 46 per cent. In addition, we exercised our right to assume operatorship from Apache (35.1 per cent). Kufpec holds the remaining 18.9 per cent.
The Argus-2 appraisal well was spud in early June 2011 in the AC/RL8 retention lease over the Argus gas field. Woodside Browse Pty Ltd operates the AC/RL8 retention lease with 60 per cent interest while we hold the remaining 40 per cent.
United States
Deep Blue – Green Canyon 723
We currently own a 31.875 per cent interest in the Deep Blue prospect located in the Green Canyon area. Partners in the well are Noble (33.75 per cent), Statoil (15.625 per cent), Samson (9.375 per cent) and Murphy (9.375 per cent). Deep Blue exploration well-1 was drilled in November 2009 and concluded in May 2010. The sidetrack drilling started in May and was suspended in June 2010 due to the Gulf of Mexico drilling moratorium issued by the US Government. The Green Canyon 723 #1 original hole was drilled to a total depth of 32,684 feet and encountered hydrocarbons. Following the lifting of the drilling moratorium in October 2010, the forward plan is to complete the sidetrack operations once required permitting is granted and a rig is available. There is insufficient information to confirm the extent of hydrocarbons until drilling operations have been completed.
Other
Colombia
In September 2008, we entered into a technical evaluation of hydrocarbon potential in Block 5 in the Llanos basin onshore Colombia. We operate the project and hold a 71.4 per cent working interest in the joint venture, with SK Energy Co holding the remaining 28.6 per cent interest. The minimum work program includes the acquisition of 1,000 kilometres of 2D seismic plus the drilling of five stratigraphic wells. The airborne survey was completed in January 2010, and 621 kilometres of 2D seismic were acquired from December 2010 to May 2011. In addition, four stratigraphic wells were drilled.
Falkland Islands
In December 2007, we farmed into Northern and Southern area licences offshore the Falkland Islands. We acquired a 51 per cent interest from our joint venture partner Falkland Oil and Gas Limited (FOGL) and assumed operatorship in January 2008. The minimum exploration work program included drilling two wells in the first phase by the end of CY2010. Site surveys on both blocks were completed in 2009. The first exploration well began drilling in June 2010 and was plugged and abandoned and expensed as a dry hole in July 2010. A one year extension to the first phase of the licences was granted by the Falkland Islands Government in September 2010. In April 2011, we sent a request to the Falkland Islands Government to allow us to transfer our 51 per cent working interest and operatorship to FOGL. Final approval for the transfer was received from the Foreign Commonwealth Office in June 2011.
India
In December 2008, we were awarded seven offshore blocks in India. We are the operator of all seven blocks, each with its own production sharing contract. The minimum exploration program includes the acquisition and processing of 2D seismic data across the seven blocks and a small 3D seismic acquisition in one block. We currently own a 26 per cent interest in all seven blocks, with our partner GVK holding the remaining 74 per cent. In June 2010, we were awarded three additional offshore blocks. The minimum work program associated with the three blocks includes the acquisition and processing of 2D and 3D seismic data. We hold a 100 per cent interest in each of these three blocks. We have met the commitment for acquiring the 2D seismic in all 10 blocks and are processing the data for interpretation. The 3D seismic acquisition, processing and interpretation is being planned for a future date which will complete the committed exploration work program. We are currently working on permit issues with the Indian government.
Malaysia
In March 2007, we were awarded offshore Blocks N and Q in Malaysia with a 60 per cent interest and operatorship. Petronas Carigali holds the remaining 40 per cent. The minimum exploration program includes the acquisition and processing of seismic data across the two blocks and the drilling of four Block N exploration wells within the first seven years. The initial seismic acquisition program commenced in June 2008 and was completed in September 2008. The first exploration well was drilled in February 2010 and was plugged, abandoned and expensed as a dry hole. The second exploration well was spud at the beginning of May 2011 and was in the process of drilling at the end of FY2011.
Philippines
In November 2009, we acquired a 75 per cent interest in Service Contract 59, located offshore Philippines and we assumed operatorship in April 2010. PNOC Exploration Corp owns the remaining 25 per cent interest. As part of the minimum work program, the joint venture completed the acquisition and processing of a 2D seismic survey in April 2010. A 3D seismic acquisition was completed in January 2011 and processing is currently ongoing. The remaining obligations on the current work program require us to drill an exploration well prior to July 2012.
In May 2011, we exercised an option to farm-in to Service Contract 55, located offshore Philippines to acquire a 60 per cent working interest and assume operatorship of the block. The remaining interest will be divided between Otto Energy, which will own 33.18 per cent interest, and Trans-Asia, which will own 6.82 per cent interest. 3D seismic acquisition and processing were completed during the year.
In August 2009, we exercised our option with partner Mitra Energy (25 per cent) to acquire a 25 per cent non-operating interest in Service Contract 56 located offshore Philippines. The joint venture completed drilling the first exploration well in December 2009, and the second exploration well in February 2010. Both wells were expensed as dry holes. The drilling of these wells fulfilled our minimum work commitment against the service contract. The block is operated by ExxonMobil (50 per cent).
Vietnam
In October 2009, we became operator of Vietnam Blocks 28 and 29/03 located approximately 200 kilometres offshore southern Vietnam. We have a 50 per cent interest in each of the blocks, with Mitra Energy holding the remaining 50 per cent. The minimum work program for the first sub-phase includes 2D seismic data and two wells. We also acquired and processed 3D data. The first exploration well was drilled in May 2011 while drilling of the second well commenced in June 2011. Both wells were plugged, abandoned and expensed as dry holes in FY2011.
Brunei
In September 2010, we entered into a Deed of Amendment with respect to Block CA1 (formerly Block J) following the settlement of the maritime dispute between Brunei and Malaysia. We own a 22.5 per cent interest in the block, with the residual interests held by Total Deep Offshore Borneo (54 per cent and operator), Hess (Borneo Block J) Ltd (13.5 per cent), Petronas Carigali (five per cent) and Canam Brunei Oil Ltd (Murphy Oil) (five per cent). The minimum work obligation includes the drilling of seven exploration wells.
South Africa
In September 2010, we entered into exploration agreements for two blocks offshore South Africa. We own and operate a 60 per cent interest in Block 3A/4A, and a 90 per cent interest in block 3B/4B. The remaining interest in Block 3A/4A is held by PetroSA (30 per cent) and Sasol Petroleum International (10 per cent). Global Offshore Oil Exploration South Africa holds a 10 per cent interest in Block 3B/4B. The minimum work program includes the drilling of one exploration well within each block.
Present activities
Drilling
The number of wells in the process of being drilled (including temporarily suspended wells) as of 30 June 2011 was as follows:
Exploratory wells | Development wells | Total | ||||||||||||||||||||||
Gross | Net (1) | Gross | Net (1) | Gross | Net (1) | |||||||||||||||||||
Australia | 1 | — | — | — | 1 | — | ||||||||||||||||||
United States | 1 | — | 106 | 38 | 107 | 38 | ||||||||||||||||||
Other | 2 | 1 | 1 | — | 3 | 1 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total | 4 | 1 | 107 | 38 | 111 | 39 |
|
Other significant activities
Australia
Browse
The Browse LNG Development comprises development of the Torosa, Brecknock and Calliance gas fields, which were discovered in 1971, 1979, and 2000, respectively. The fields are located approximately 440 kilometres north-north-west of Broome, Western Australia in water depths up to 800 metres. Evaluation of the in-place resources continues together with definition of the on and offshore facilities required to extract hydrocarbons and produce and export LNG.
Woodside is the operator and we own 8.33 per cent of the East Browse resources and 20 per cent of West Browse. Efforts are ongoing to align equity interests for the overall development.
ScarboroughCapital projects
Development planning for the large Scarborough gas field offshore Western Australia is in progress. We are evaluating development options for a LNG plant and offshore production facilities. Esso is the operator of the WA-1-R lease and we hold a 50 per cent working interest. We also have a 100 per cent working interest in the WA-346-P block.
Greater Western Flank ‘A’
Planning is underway for the Greater Western Flank – a phased development of selected core undeveloped resources to the west of existing North West Shelf production infrastructure. The first phase of development, termed Greater Western Flank A, consists of two core fields, Goodwyn GHA/B and Tidepole, and has progressed to the feasibility stage in the second half of CY2011. Woodside is the operator and we own a 16.67 per cent share.
United States
Shenzi Water Injection
The Shenzi Water Injection program includes drilling and completion of five water injection wells and provides facilities to inject up to 125 Mbbl/d of water at 7,000 per square inch (psi). The program was approved as part of the original sanctioned Shenzi project, which began production in 2009, to supplement aquifer pressure for additional recovery. To date,The program included drilling and completion of three water injection wells and provides facilities to inject up to 125 thousand barrels per day (Mbbl/d) of water at 7,000 pounds per square inch (psi). The final Water Injector (WI) #1 has beenwell #3 was drilled and completed in August 2013. The additional recovery resulting from water injection is expected to be approximately 80 million barrels (gross). Our share of final development costs was approximately US$375 million. We are the operator with a 44 per cent interest and WI #2 has been drilled; plans to complete WI #2Repsol and drill and complete WI #3 in FY2012 are underway.Hess Corporation each hold a 28 per cent interest.
Atlantis South Water Injection
During the initial Atlantis South development, water injection topsides and subsea facilities were approved and installed. The Atlantis South Water Injection project iswas later approved in January 2009 to provide pressure support. The water injection project involved the execution phase and involves drilling of four subsea water injectors, tying them into the existing infrastructure and commissioning the 75 Mbbl/d of water injection facilities. Project completion took place in June 2013 and our 44 per cent share of the project costs was approximately US$242M. The Atlantis platform is operated by BP and located approximately 190 miles offshore from New Orleans, Louisiana.
Onshore US
BHP Billiton’s Onshore US drilling and development investment in FY2014 was US$4.2 billion, down from US$4.7 billion in FY2013, with US$3.6 billion (FY2013: US$3.8 billion) spent in the liquids-focused areas of Eagle Ford and Permian, and US$0.6 billion (FY2013: US$0.9 billion) in the gas-focused areas of Haynesville and Fayetteville. The expenditure primarily related to drilling and completion activities at all four areas. Our onshore drilling activity in FY2014 resulted in 413 net development wells completed primarily in the Eagle Ford and Permian areas.
Of the US$4.2 billion, approximately US$400 million was spent on the installation of more than 200 kilometres of pipeline infrastructure and additional gas processing facilities, primarily in our Eagle Ford and Permian areas.
The majority of drilling and completion activity in Onshore US was directed towards the liquids-focused Eagle Ford and Permian areas to capitalise on relatively stronger liquid prices as compared with natural gas prices. At the end of FY2014, more than 85 per cent of drilling activity was conducted in these areas.
Our Onshore US capital investment is expected to remain at approximately US$4.0 billion in FY2015, as we continue to optimise our drilling program. This includes an operated rig count of 26 for the period. Approximately 65 per cent of operated drilling activity will be conducted in our liquids-focused acreage in the Eagle Ford area. The remaining activity will occur in the Haynesville and Permian areas, where we are continuing to evaluate our most prospective acreage. Our operated drilling program in the Fayetteville area remains temporarily suspended; however, we continue to invest in wells operated by third parties where we see value.
Australia
Macedon
Macedon is a domestic gas development that consists of a 200 million cubic feet per day (MMcf/d) stand-alone gas plant, four subsea production wells, a 90-kilometre 20-inch wet gas pipeline and a 67-kilometre 20-inch sales
gas pipeline. The project was approved in August 2010 at an investment level of US$1.1 billion (BHP Billiton share). First gas occurred in August 2013 with a final development cost of approximately US$1.2 billion (BHP Billiton share).
Bass Strait Kipper gas field development
Initial development of the Kipper gas field in the Gippsland Basin, located offshore Victoria, was approved by the Board in December 2007. A supplemental approval of the development was granted in January 2011. The first phase of the project included two new subsea wells, three new pipelines and platform modifications to supply 10 Mbbl/d of condensate and 80 MMcf/d of gas. Facilities were completed in September 2012; however, first production did not commence due to the need to provide for mercury removal.
Gas and liquids will be processed via the existing Gippsland Basin Joint Venture facilities. The Kipper gas field development is comprised of the Kipper Unit Joint Venture and the Gippsland Basin Joint Venture. We own a 32.5 per cent interest in the Kipper Unit Joint Venture, with Esso Australia (32.5 per cent) and Santos (35 per cent). We own a 50 per cent interest in the Gippsland Basin Joint Venture, with Esso Australia owning the remaining 50 per cent.
Funding for the installation of the mercury treatment facilities of US$120 million was approved in March 2014 with completion expected to occur in CY2016. Our share of costs incurred to 30 June 2014 was US$25 million.
Bass Strait Turrum field development
Further expansion of the Gippsland Basin facilities is underway following approval by the Board in July 2008 of the full field development of the Turrum oil and gas field. A supplemental approval of the development was obtained in January 2011. The project consists of four production and two injection wells and a new platform, Marlin B, linked by a bridge to the existing Marlin A platform. The Turrum field, which has a capacity of 11 Mbbl/d of oil and 200 MMcf/d of gas, is located 42 kilometres offshore in approximately 60 metres of water. Our share of development costs is approximately US$1.4 billion, of which US$ 1.3 billion was incurred as of 30 June 2014. The Turrum field development operates under the Gippsland Basin Joint Venture, in which we own a 50 per cent interest, with Esso Australia owning the remaining 50 per cent. Initial production of low carbon dioxide gas through the Turrum facilities occurred in June 2013. High carbon dioxide production from the Turrum reservoir will come online with completion of the Longford Gas Conditioning Plant in CY2016.
Longford
The Longford Gas Conditioning Plant (LGCP) Project was approved by the Board in December 2012 to enable the production of Turrum reserves plus the production of Kipper and other undeveloped high carbon dioxide content hydrocarbons. The project scope includes a carbon dioxide extraction facility, brownfield tie-ins, an electrical upgrade and multiple supporting utilities. Our share of development costs is approximately US$520 million, of which US$202 million was incurred as of 30 June 2014. First gas production is expected in CY2016. Esso Australia is the operator of the LGCP, owning a 50 per cent interest and BHP Billiton owns the remaining 50 per cent.
North West Shelf North Rankin gas compression project
The North West Shelf gas compression project was approved by the Board in March 2008 to recover remaining lower pressure gas from the North Rankin and Perseus gas fields. The project consisted of a new gas compression platform, North Rankin B, capable of processing 2,500 MMcf/d of gas, which was constructed adjacent to the existing North Rankin A platform, 135 kilometres offshore from Karratha on the northwest coast of Western Australia. The two platforms are connected by a 100-metre long bridge and operate as a single facility. Our share of development costs was approximately US$721 million subject to finalisation. First gas production from this site occurred in October 2013. This project is operated by Woodside, with an equally shared interest between Woodside, BHP Billiton, BP, Chevron, MIMI and Shell.
North West Shelf Greater Western Flank–A
The North West Shelf Greater Western Flank–A (GWF-A) gas project was approved by the Board in November 2011 to recover gas from the near field Goodwyn H and Tidepole fields. The project consists of a five well subsea tie-back of the Goodwyn H and Tidepole fields to the Goodwyn A platform. The Goodwyn A platform is located in 130 metres of water, injection project mitigates low aquifer pressureapproximately 130 kilometres offshore from Karratha on the northwest coast of Australia. Our share of development costs is approximately US$400 million, of which could resultUS$206 million was incurred as of 30 June 2014. First gas production is expected in a swift production decline. BPCY2016. Woodside is the operator and we holdown a 4416.67 per cent working interest.
Atlantis North Phase 2BSignificant evaluation activities
The Atlantis North Flank began production in July 2009. The North Phase 2B is a brownfield capital investment program being developedWe perform development evaluation activities to improve production rates. Phase 2B includes a one well programdetermine the technical feasibility and associated subsea infrastructure. As withcommercial viability of prospective projects after exploration and appraisal. Our significant recent evaluation activities include the original Atlantis North project, BP is the operator, and we hold a 44 per cent working interest.following:
United States
Mad Dog Phase 2
The Mad Dog Phase 2 project is in response to the successful Mad Dog South appraisal well, which confirmed significant hydrocarbons in the southern portion of the Mad Dog field. Mad Dog Phase 2 will be a spar development with all subsea production and injection wells and includes water injection capability to provide supportThe project has been sent back to the east, weststudy phase to re-evaluate the concept. Discussions are ongoing with the operator to potentially modify the development plan. BP is the operator and southwe hold a 23.9 per cent working interest.
Stampede (formerly known as Knotty Head)
We decided effective April 2014, to withdraw from our 20 per cent non-operated working interest in the Stampede Operating Agreement following the completion of our development planning.
Australia
Scarborough
Development planning for the large Scarborough gas field offshore Western Australia is in progress. We continue to evaluate development options. Esso is the operator of the field.WA-1-R lease and we hold a 50 per cent working interest. We are the operator and have a 100 per cent working interest in the adjacent Thebe discovery and the WA-346-P block.
North West Shelf Other – Greater Western Flank ‘2’
Zamzama Front End Compression
Zamzama Front End Compression is a brownfield project in Pakistan which allowsPlanning continues for the additional drawdowndevelopment of Greater Western Flank ‘2’. Greater Western Flank ‘2’ represents the second phase of development of the reservoir, adding reservescore Greater Western Flank fields, behind the GWF-A development, and maintaining plateauis located to the southwest of the existing Goodwyn A platform. Woodside is the operator and we own a 16.67 per cent share.
Exploration and appraisal
Our exploration strategy is to focus on material opportunities, at high working interest, with a bias for liquids and operatorship. While the majority of our expenditure occurs in our two principal areas of activity, the Gulf of Mexico and Western Australia, we also have exploration activities in Trinidad and Tobago, Brazil, South Africa, South East Asia, and Onshore US.
Access
In FY2014, we gained access to acreage in Australia, Trinidad and Tobago, Brazil and the Gulf of Mexico region of the United States. In Australia, we farmed into Block 480-P in Western Australia (55 per cent working interest and operator; 12,585 square kilometres). In Trinidad and Tobago, we signed a production levels. Developmentsharing contract on Block 23b (60 per cent working interest and operator; 2,579 square kilometres) and farmed into Blocks 23a and 14 (70 per cent working interest and operator; 3,597 square kilometres). In Brazil, we signed a contract on two blocks in the Foz do Amazonas (100 per cent working interest and operator; 3,069 square kilometres). In the Gulf of Mexico, we were awarded eight blocks (100 per cent working interest and operator; 186 square kilometres) after being the highest bidder on Lease Sale 227, held during the March 2013 quarter.
Exploration program expenditure details
In Western Australia, we drilled Bunyip-1 exploration well on Block WA-335P in February 2014 (52.5 per cent working interest and operator). The well discovered gas in the target Triassic Mungaroo section.
Also in Western Australia, we drilled several near field targets that may be tied back to our existing infrastructure. The first of these, Stybarrow East-1 (50 per cent working interest and operator) was spud in December 2013 and discovered a non-commercial quantity of hydrocarbons. A subsequent sidetrack, Stybarrow East-2, was a dry hole. Both wells were plugged and abandoned and costs were expensed. A secondary near field target, Rydal-1 (50 per cent working interest and operator) was drilled in January 2014. The well encountered non-commercial hydrocarbons and was subsequently plugged, abandoned and expensed.
In the Gulf of Mexico, following the discovery of oil in the Raptor-1 well in FY2013 (50 per cent working interest, APC operator), we participated in a sidetrack, which spud in the June 2013 quarter. The sidetrack failed to find hydrocarbons and the costs associated with both the Raptor discovery well and the subsequent sidetrack were expensed as a non-commercial discovery. In the September 2013 quarter, we drilled the Sake exploration well (60 per cent working interest and operator). The well was plugged, abandoned and the costs were expensed in September 2013.
During FY2014, our gross expenditure on exploration was US$600 million, of which US$369 million was expensed.
Exploration and appraisal wells drilled or in the process of drilling during the year:
Well | Location | Target | BHP Billiton | Spud date | Water depth | Total well depth | Status | |||||||
Stybarrow East-1 | Carnarvon Basin WA-32-L | Oil | 50% (Operator) | 10 December 2013 | 675 metres | 2,533 metres | Plugged and abandoned Hydrocarbons encountered Non-commercial | |||||||
Stybarrow East-2 | Carnarvon Basin WA-32-L | Oil | 50% (Operator) | 26 December 2013 | 675 metres | 2,670 metres | Plugged and abandoned Dry hole | |||||||
Rydal-1 | Carnarvon Basin WA-255P | Oil | 50% (Operator) | 13 January 2014 | 752 metres | 3,268 metres | Plugged and abandoned Hydrocarbons encountered Non-commercial | |||||||
Bunyip-1 | Carnarvon Basin WA-335P | Gas | 52.5% (Operator) | 4 February 2014 | 1,187 metres | 4,579 metres | Plugged and abandoned Hydrocarbons encountered Under evaluation | |||||||
Raptor-1/ST-1 | Gulf of Mexico DC535 | Oil | 50% (Anadarko Operator) | 28 May 2013 | 2,490 metres | 6,348 metres | Plugged and abandoned Hydrocarbons encountered Non-commercial | |||||||
Sake-2 | Gulf of Mexico DC726 | Oil | 60% (Operator) | 4 August 2013 | 1,064 metres | 5,597 metres | Plugged and abandoned Dry hole |
In Trinidad and Tobago, we farmed out a 35 per cent interest in Block 5 and 6 to BG International Limited in the June 2014 quarter. We have retained 65 per cent interest and operatorship. Also in Trinidad and Tobago, we commenced acquisition of a 17,719 square kilometre 3D seismic survey in the March 2014 quarter over our seven operated deepwater blocks (Blocks 5, 6, 28, 29, 23a, 23b and 14). We expect the survey to be completed in the first half of FY2015.
In South Africa, we hold the exploration rights to Block 3B/4B, which is located off the country’s west coast. In the September 2013 quarter, we acquired Global Energy Holdings LLC’s 10 per cent interest in the block, bringing our equity in Block 3B/4B to 100 per cent. During the past year we completed the processing of the 10,075 square kilometre 3D seismic survey that was acquired in FY2013. Evaluation of this survey is ongoing.
In India, we hold interests and operate nine offshore blocks acquired during the NELP VII & VIII licensing rounds. Due to the inability to gain unencumbered access to explore and produce hydrocarbons in these blocks we have notified the government of our intent to exit and are currently underway and project completionawaiting government approval. We have retained our 50 per cent non-operated interest (BG operator) in one deep water block acquired during the NELP IX licensing round. All exploration expenditure to date on India has been expensed.
In Malaysia, we relinquished our interest in Block Q in the March 2014 quarter. Also in Malaysia, we are planning acquisition of a 2,940 square kilometre 3D seismic survey over Block SK-2A. The survey is expected to commence in 2011.the first half of FY2015.
Following a strategic review in the first half of FY2014, we decided to exit the Philippines. In SC55, we have formally reassigned our 60 per cent interest and operatorship back to Otto. In SC59, we have reassigned our 75 per cent interest and operatorship to the Philippines National Oil Company (PNOC).
Drilling
The number of wells in the process of drilling and/or completion as of 30 June 2014 was as follows:
Exploratory wells | Development wells | Total | ||||||||||||||||||||||
Gross | Net (1) | Gross | Net (1) | Gross | Net (1) | |||||||||||||||||||
Australia | – | – | 5 | 1 | 5 | 1 | ||||||||||||||||||
United States | – | – | 397 | 183 | 397 | 183 | ||||||||||||||||||
Other | – | – | 2 | 1 | 2 | 1 | ||||||||||||||||||
Total | – | – | 404 | 185 | 404 | 185 |
(1) | Represents our share of the gross well count. |
Delivery commitments
We have delivery commitments of natural gas and LNG of approximately 3,1472,353 billion cubic feet through 2031 (78(74 per cent Australia, seven per cent US and 2219 per cent Other) and crude, condensate, and natural gas liquids (NGL)
NGL commitments of 15.615.0 million barrels through 2012 (742018 (55 per cent Australia, eight43 per cent United States and 18two per cent Other). We have sufficient proved reserves and production capacity to fulfil these delivery commitments. Further information can be found
Primarily as a result of our recent acquisitions and asset purchases in Section 2.13.1.our Onshore US shale asset, we have obligations for contracted capacity on transportation pipelines and gathering systems for which we are the shipper. We have obligations to gather and transport 1,400 billion cubic feet of natural gas and 23 million barrels of oil in FY2015. The agreements with the gas gatherers and transporters have annual escalation clauses.
2.2.3 Aluminium Customer Sector GroupPotash
Our Aluminium CSGPotash strategy is to build a material industry position over the long term.
We hold exploration permits and mining leases, issued by the Government of Saskatchewan, covering more than 14,000 square kilometres of mineral rights in the province of Saskatchewan in Canada. We have progressively explored our permit areas over the past seven years and continue to evaluate their economic development potential. We are converting our exploration permits to long-term lease as these permits mature in order to enable further evaluation. To date, we have secured 4,400 square kilometres under long-term mining leases.
We continue to progress our Jansen Potash Project, a greenfield potash project, located approximately 140 kilometres east of Saskatoon in south-central Saskatchewan. We believe Jansen is the world’s best undeveloped potash resource and is likely to be a low-cost source of supply once fully developed. Investment in Jansen could underpin a potential fifth pillar of BHP Billiton, given the opportunity to develop a multi-decade, multi-mine basin in Saskatchewan.
On 20 August 2013, we announced an additional US$2.6 billion investment for Jansen, bringing total approved spending to US$3.8 billion. This investment is funding the excavation and lining of the Project’s production and service shafts, and the installation of essential surface infrastructure and utilities.
The level of expenditure on the Jansen Potash Project in FY2014 was US$596 million, which was lower than the annual instalment of US$800 million previously announced for FY2014. We suspended excavation of the production and service shafts in the December 2013 quarter to enable a thorough review of activities completed and to ensure all learnings were captured and adopted in future works. Shaft excavation resumed in the March 2014 quarter and progressed in a staggered manner to mitigate risk and optimise their development. As at 30 June 2014, the pre-development phase was 30 per cent complete.
During FY2014, we allowed our exclusivity for Terminal 5 at the Port of Vancouver to lapse. We are currently assessing a range of options to meet our port requirements.
With our investment premised on the attractive longer-term market fundamentals for potash, we will continue to modulate the pace of development as we seek to time our entrance to meet market demand. The introduction of one or more minority partners, consistent with our approach for certain of our other resource operations, will be considered at the appropriate time.
On the basis of our current projections and assuming Board approval, the Jansen Potash Project is likely to ramp-up to its nameplate capacity of approximately 10 Mtpa of agricultural grade potassium chloride (KCl) in the decade beyond 2020. The Government of Saskatchewan has issued a Potash Lease Special Agreement (KLSA) for our Jansen Project, which provides long-term security of tenure to allow the ongoing development and subsequent operation of Jansen for the life of the operation.
We are continuing to evaluate other areas for which we have exploration permits in the Saskatchewan potash basin, including Young, Boulder and Melville, through analysis of the extensive data collected from successive exploration programs.
In 2013, the management of the closed mine sites associated with Base Metals North America was transitioned from the Copper to the Potash Business. All locations are in care and maintenance or in various stages of closure.
Our Copper Business, headquartered in Santiago, Chile, is one of the world’s premier producers of copper, silver, lead and uranium, and is a leading producer of zinc. Our portfolio of assets at three stages ofmining operations includes the aluminium value chain: mining bauxite, refining bauxite into alumina, and smelting alumina into aluminium metal. We areEscondida mine in Chile, the world’s seventh-largestlargest single producer of aluminium, withcopper, and Olympic Dam in South Australia, a major producer of copper and uranium. Our total copper production in FY2011 of 1.2FY2014 was 1.7 million tonnes (Mt) of aluminium. We also produced 13.6 Mt of bauxite and 4.0 Mt of alumina.
During FY2011, we consumed 35. Our concentrate production, which represents 58 per cent of total production, results from flotation of sulphide ores mined at our aluminaEscondida and Antamina mines. Oxide ores and sulphide ores amenable to leaching are mined and
processed into copper cathode, using conventional heap leaching, followed by solvent extraction and electrowinning processes at Escondida, Cerro Colorado and Spence. Copper cathode is also produced at Olympic Dam, where sulphide ores are processed through conventional flotation and the resulting concentrate is further transformed into cathodes through a smelting and refining process.
We market five primary products: copper cathodes, copper, lead and zinc concentrates and uranium oxide. We sell most of our copper cathode production to wire rod mills, brass mills and casting plants around the world under contracts with prices at premiums to the London Metal Exchange (LME) prices. We sell the majority of our uranium oxide to electricity generating utilities, principally in our aluminium smelterswestern Europe, North America and weeast Asia. Uranium is typically sold the balance to other smelters. Our alumina sales areunder a mixturemix of long-term contract sales at LME-linked prices and spot sales atshort-term contracts. We sell most of our copper, lead and zinc concentrates to smelters located in diversified geographic markets such as China, South America, Japan, India and South Korea. Treatment charges and refining charges (collectively referred to as TCRCs) are negotiated prices. Prices for our aluminium saleswith counterparties on a variety of tenors. Some of the ores we mine contain quantities of silver and gold, which remain in the base metal concentrates we sell and are generally linkedtypically subject to prevailing LME prices.payment credits. We sell refined silver and gold from Olympic Dam.
Boddington/WorsleyOur five operating assets, which are located in South America and Australia, consist of the following:
Boddington/Worsley is an integrated bauxite mining/alumina refining operation. The Boddington bauxite mine in Western Australia supplies bauxite ore to the Worsley alumina refinery via a 51 kilometre long conveyor. We own 86Americas
Escondida
Our 57.5 per cent of theowned and operated Escondida mine and the refinery. It is our sole integrated bauxite mining/alumina refining asset. Worsley, one of the largest and lowest-cost refineriesproducer of copper in the world, is undergoing a major expansion (see Development projects below)world. Located in the Atacama Desert in northern Chile, Escondida employs approximately 14,000 operational employees and contractors and has the capacity to move in excess of 1.3 Mt of material per day. Its two open-cut pits feed two concentrator plants, which use grinding and flotation technologies to produce copper concentrate, as well as two leaching operations (oxide and sulphide). OurIn FY2014, our share of Worsley’s FY2011Escondida production was 2.9 Mt485.7 kilotonnes (kt) of alumina. Worsley’s export customers include our own Hillside, Baysidepayable copper in concentrate and Mozal smelters in southern Africa. Boddington177.1 kt of copper cathode. Escondida has a reserve life of 1852 years.
The availability of key inputs like power and water at competitive prices is an important focus for our Copper Business. In November 2013, we awarded a long-term energy contract to a consortium consisting of Korea Southern Power Co. and Samsung Construction & Trading Corp. for the development and operation of a 517 MW combined-cycle gas-fired power plant in the town of Mejillones, Chile. The plant, which will be connected to the Northern Interconnected Grid (SING), will supply the increasing demand for electricity at our operations, and is expected to reduce our carbon footprint. Construction work commenced in 2014 with commercial operation expected in the second half of CY2016.
A contract for the supply of natural gas to the Kelar power plant has been finalised with first deliveries under the supply contract with Gas Natural Fenosa scheduled to commence in 2016, simultaneously with the commissioning and commercial operation of the plant.
To address limitations on the availability of water, we desalinate sea water and carefully manage our use andMineração Rio dore-use of available water. The recently approved Escondida Water Supply (EWS) project, which involves the construction of a second desalination plant, will reduce our reliance on the region’s aquifers and help meet our environmental commitments. The EWS project is expected to be commissioned in 2017.
Pampa Norte
Pampa Norte consists of two operations – Spence and Cerro Colorado. Copper cathode is produced at both operations following a leaching, solvent extraction and electrowinning process.
Our wholly owned Spence copper mine is located in the Atacama Desert, 162 kilometres northeast of Antofagasta in Chile. During FY2014, Spence produced 152.8 kt of high quality copper cathode, using oxide and sulphide ore treatment through leaching, solvent extraction and electrowinning processes. Spence has a reserve life of 10 years.
Our wholly owned Cerro Colorado mine, located in the Atacama Desert, 120 kilometres east of Iquique in Chile, remains a significant producer of copper cathode, although production levels have fallen in recent years as grades have declined. Despite this, production in FY2014 reached 80.3 kt of copper cathode. Cerro Colorado has a reserve life of nine years. The extension of the existing environmental and mining licences to continue to enable Cerro Colorado to operate beyond December 2016 is currently pending approval.
Antamina
We own 14.833.75 per cent of Mineração Rio do Norte (MRN), which owns and operatesAntamina, a large, bauxitelow-cost copper and zinc mine in Brazil.
Alumar
Alumar is an integrated alumina refinery/aluminium smelter. We own 36 per cent of the Alumar refinery and 40 per cent of the smelter. Alcoa operates both facilities. The operations, and their integrated port facility, are located at São Luís in the Maranhão province of Brazil. Alumar sources bauxite from MRN. During FY2011 approximately 31 per cent of Alumar’s alumina production was used to feed the smelter, while the remainder was exported.north central Peru. Our share of Alumar’s FY2011 saleableAntamina’s FY2014 production was 1,108 kilotonnes (kt) of alumina and 174143.5 kt of aluminium. The Alumar refinerycopper in concentrate and 52.0 kt of zinc in concentrate. Antamina also produces molybdenum and lead/bismuth concentrate, as well as small amounts of silver in the form of by-products. Antamina has a reserve life of 13 years.
In FY2013, Antamina completed execution of an expansion project, increasing milling capacity to 130 kilotonnes per day (ktpd). In FY2014, following identification of further milling capacity upside, Antamina commenced execution of a significant expansion in October 2009.debottlenecking project, to increase milling capacity by 12 per cent to 145 ktpd.
Hillside and BaysideAustralia
Cannington
Our Hillside and Bayside smelters are located at Richards Bay, South Africa. Hillside’s capacity of approximately 715 kilotonnes per annum (ktpa) makes it the largest aluminium smelter in the southern hemisphere and itwholly owned Cannington mine is one of the most efficient. Followingworld’s largest producers of silver and lead. Located in northwest Queensland, Australia, the mothballingunderground mine feeds a beneficiation processing facility that extracts silver/lead and zinc concentrates from sulphide ore. In FY2014, Cannington produced concentrates containing186.5 kt of lead, 57.9 kt of zinc and approximately 25.2 million ounces of silver. Cannington has a reserve life of nine years.
Olympic Dam
Our wholly owned Olympic Dam mine is a producer of copper cathode and uranium oxide and a refiner of gold and silver bullion. The site includes an underground mine, where the primary method of ore extraction is long-hole open stoping with cemented aggregate fill, and an integrated metallurgical processing plant.
The underground mine extracts copper uranium ore and hauls the ore by an automated train and trucking network feeding underground crushing, storage and ore hoisting facilities. The processing plant consists of two grinding circuits in which high-quality copper concentrate is extracted from sulphide ore through a flotation extraction process. The operation includes a fully integrated metallurgical complex with a grinding and concentrating circuit, hydrometallurgical plant incorporating solvent extraction circuits for copper and uranium, a copper smelter, copper refinery and a recovery circuit for precious metals.
In FY2014, Olympic Dam produced 184.4 kt of copper cathode, 3,988 tonnes of uranium oxide, 121.3 fine kilo-ounces (koz) of refined gold and 972 koz of refined silver. Olympic Dam has a reserve life of 47 years.
Divested assets – Pinto Valley
In October 2013, we completed the sale of our Pinto Valley mining operation in the United States and the associated San Manuel Arizona Railroad Company to Capstone Mining Corp for US$653 million, after working capital adjustments.
As a consequence of the potlines Bsale, and Cdue to their location in supportNorth America, the management of a national energy conservation scheme, Bayside has reduced smelting capacity to approximately 95 ktpa since 2009. Hillside imports alumina22 closed sites transferred from our Worsley refineryCopper Business to our Potash Business. All locations are no longer actively producing and both Hillsideare in care and Bayside source power from Eskom, the South African state utility, under long-term contracts with prices linked to the LME pricemaintenance or in various stages of aluminium (except for Hillside Potline 3, the price of which is linked to the South African and US producer price indices).
Mozal
We own 47.1 per cent of and operate the Mozal aluminium smelter in Mozambique, which has a total capacity of approximately 563 ktpa. Mozal sources power generated by Hydro Cahora Basa via Motraco, a transmission joint venture between Eskom and the national electricity utilities of Mozambique and Swaziland. Our share of Mozal’s FY2011 production was 264 kt.closure.
Information on AluminiumCopper mining operations
The following table contains additional details of our mining operations. This table should be read in conjunction with the production (see(refer to section 2.3.2)2.2.2) and reserve tables (see(refer to section 2.13.2)2.3.2).
Mine & | Means of | Ownership | Operator | Title, leases or options | History |
style |
source |
|
| Facilities, | ||||||||||
|
|
|
|
|
|
| ||||||||||||||
|
|
|
|
Information on Aluminium smelters and refineries
|
|
|
|
|
|
|
| |||||||
|
| |||||||||||||
|
| |||||||||||||
|
| |||||||||||||
|
| |||||||||||||
|
|
|
Development projects
Worsley Efficiency and Growth project
In May 2008, we announced the Board’s approval of an expansion project to increase the capacity of the Worsley refinery from 3.5 million tonnes per annum (mtpa) of alumina to 4.6 mtpa (100 per cent capacity) through expanded mining operations at Boddington, additional refinery capacity and upgraded port facilities. The capital cost estimate for the project, encompassing the development of the Marradong mine, refinery expansion and connection to a multi-fuel cogeneration unit, has increased from US$1.964 billion to US$2.995 billion (BHP Billiton share). First production is now scheduled for the first quarter of CY2012.
Guinea Alumina
We have a one-third interest in a joint venture that is undertaking a feasibility study into the construction of a 10 mtpa bauxite mine, an alumina refinery with processing capacity exceeding 3.3 mtpa and associated infrastructure approximately 110 kilometres from the port of Kamsar in Guinea.
2.2.4 Base Metals Customer Sector Group
Our Base Metals CSG is one of the world’s premier producers of copper, silver, lead and uranium, and a leading producer of zinc. Our portfolio of large, low-cost mining operations includes the Escondida mine in Chile, the world’s largest single producer of copper, and Olympic Dam in South Australia, already a major producer of copper and uranium and with the potential for significant expansion.
Our total copper production in FY2011 was 1.1 million tonnes (Mt). In addition to conventional mine development, we continue to pursue advanced treatment technologies, such as leaching low-grade chalcopyrite ores which we believe have the potential to recover copper from ores previously uneconomic to treat.
We market five primary products: copper concentrates, copper cathodes, uranium oxide, lead concentrates and zinc concentrates.
We sell most of our copper, lead and zinc concentrates to smelters under long-term volume contracts at prices based on the LME price for the contained metal, typically set three or four months after shipment, less treatment charges and refining charges (collectively referred to as ‘TCRCs’) that are negotiated with the smelters mostly on an annual or bi-annual basis. Some of the ores we mine contain quantities of silver and gold, which remain in the base metal concentrates we sell. We receive payment credits for the silver and gold recovered by our customers in the smelting and refining process.
We sell most of our copper cathode production to wire rod mills, brass mills and casting plants around the world under annual contracts with prices at premiums to LME prices. We sell uranium oxide to electricity generating utilities, principally in western Europe, North America and north Asia. Uranium is typically sold under a mix of longer-term and shorter-term contracts. A significant portion of our uranium production is sold into fixed price contracts, although increasingly sales are based on flexible pricing terms.
We have six assets, with Pampa Norte having two operations:
Escondida
Our 57.5 per cent owned and operated Escondida mine is the largest and one of the lowest-cost copper producers in the world. In FY2011, our share of Escondida production was 390.5 kilotonnes (kt) of payable copper in concentrate and 179.1 kt of copper cathode. Our reserves will support mining for a further 35 years at the current production rates. The availability of key inputs like power and water at competitive prices is an important focus at Escondida. To ensure security of supply and competitive power costs in the long-term, we
supported the construction of an LNG facility to supply gas to the Northern grid system, which has been operating since June 2010. We have also signed off-take agreements underwriting the construction of a 460 megawatt (MW) coal-fired power plant, with supply beginning in CY2012. To address limitations on the availability of water, we desalinate and carefully manage our use and re-use of available water, and are exploring alternative sources including further desalination of seawater.
Olympic Dam
Olympic Dam is already a significant producer of copper cathode and uranium oxide and a refiner of smaller amounts of gold and silver bullion. We are exploring a series of staged development options that would make our wholly owned Olympic Dam operation one of the world’s largest producers of copper, the largest producer of uranium and a significant producer of gold (see Development projects below).
Production in FY2011 was higher than in FY2010 when the haulage system in the Clark Shaft at Olympic Dam was damaged. Olympic Dam produced 194.1 kt (FY2010 – 103.3 kt) of copper cathode, 4,045 tonnes (FY2010 – 2,279 tonnes) of uranium oxide, 111,368 ounces (FY2010 – 65,494 ounces) of refined gold and 982 kilo-ounces (FY2010 – 500 kilo-ounces) of refined silver in FY2011.
Antamina
We own 33.75 per cent of Antamina, a large, low-cost, long-life copper/zinc mine in Peru. Opened in 2001, its reserves will support mining at current rates for a further 17 years. Our share of Antamina’s FY2011 production was 97.8 kt of copper in concentrate, and 91,470 tonnes of zinc in concentrate. Antamina also produces smaller amounts of molybdenum and lead/bismuth concentrate.
Pampa Norte Spence Operation
Our wholly owned Spence copper mine produces copper cathode. During FY2011, we produced 179.8 kt of copper cathode. Spence’s current reserves will support mining at current rates for a further 12 years.
Pampa Norte Cerro Colorado Operation
Our wholly owned Cerro Colorado mine in Chile remains a significant producer of copper cathode, although production levels have declined in recent years as grades have declined. Production in FY2011 was 92.4 kt of copper cathode. Our current mine plan sees production continuing until FY2021.
In addition, we are currently evaluating the extent of deeper chalcopyrite mineralisation that may support further mine plan extension options in both the Spence and Cerro mines.
Cannington
Our wholly owned Cannington mine in northwest Queensland is one of the world’s largest producers of silver. In FY2011, Cannington produced concentrates containing 243,364 tonnes of lead, 60,657 tonnes of zinc and approximately 35,225 kilo-ounces of silver. The current mine plan sees production continuing until 2019.
North America – Pinto Valley
As a result of the global economic slowdown in FY2009, we made the decision to cease sulphide mining and milling operations at our Pinto Valley Mine located in Arizona, US, placing the operations on care and maintenance.
We continue to produce copper cathode at Pinto Valley and the neighbouring Miami Unit from our residual solvent extraction electrowinning (SXEW) operations. Current reserves are expected to support these operations for approximately four years.
Information on Base Metals mining operations
The following table contains additional details of our mining operations. This table should be read in conjunction with the production (see section 2.3.2) and reserve tables (see section 2.13.2).
|
| |||||||||||||||
| ||||||||||||||||
| Copper
|
|
|
|
|
| ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
|
|
|
|
| ||||||||||||
| ||||||||||||||||
|
|
|
|
|
|
|
| ||||||||||||||
|
|
|
|
|
|
|
|
| |||||||||||||||
|
|
|
|
|
| |||||||||||
|
|
|
|
Development projects
Olympic Dam
The first phase of the Olympic Dam Project (ODP1) to develop an open-pit mine moved into feasibility stage in March 2011. The proposed expansion would be a progressive development requiring construction activity to increase production to up to 750,000 tonnes per annum (tpa) of copper, 19,000 tpa of uranium oxide and 800,000 ounces of gold. The Group released a draft Environmental Impact Statement (EIS) in May 2009 and prepared and submitted a supplementary EIS in December 2010 for review by the Australian, South Australian and Northern Territory Governments in response to more than 4,000 public submissions on the project. The final supplementary EIS was released in May 2011. Government decisions on the project are expected in the second half of CY2011. After that, the expansion project will depend on successfully completing all required feasibility studies and on Board approval of the final investment case.
Yeelirrie
The project at the proposed Yeelirrie uranium oxide mine is in pre-feasibility stage, with a focus on technology developments, resource size and improving project economics. The work currently includes resource definition and estimation, processing test work, ongoing environment studies, community consultation and capital and operating cost evaluation.
Escondida
Exploration of the Escondida lease and early drilling results have resulted in an announcement of extensive additional mineralisation in close proximity to existing infrastructure and processing facilities, including the Pampa Escondida and Pinta Verde prospects. In FY2011, Escondida has expensed US$128 million (US$74 million our share) in exploration.
The Escondida Ore Access project provides access to higher-grade ore and moved into execution phase during FY2011. In addition, the Laguna Seca Debottlenecking project which will provide additional processing capacity also moved into execution phase. Organic Growth Project 1, which is the replacement of the Los Colorados concentrator allowing access to higher-grade ore and additional processing capacity, moved into the feasibility phase.
Antamina
In FY2011, Antamina continued execution of the expansion project. With a total investment of US$1.3 billion (US$434.7 million our share), the project will expand milling capacity by 38 per cent to 130,000 tonnes per day (tpd). The expansion project includes a new SAG mill, a new 55 kilometre power transmission line, an expanded truck shop facility and upgrades to the crushing and tailing systems, flotation circuit and port capacity. Commissioning of the project is scheduled to start at the end of CY2011. Our share of the capital expenditures in the project totalled US$147 million in FY2011. In addition, Antamina announced an increase to its estimated Ore Reserves during the second half of FY2011. Refer to section 2.13.2 for further details.
Resolution Copper
We hold a 45 per cent interest in the Resolution Copper project in Arizona, US, operated by Rio Tinto (55 per cent interest). Resolution Copper is undertaking a pre-feasibility study into a substantial underground copper mine and processing facility.
Resolution Copper continued to advance the sinking of the No. 10 Shaft in order to gain access to the ore deposit for characterisation work of mineralisation and geotechnical conditions. Work also continued towards gaining approval from the US Congress for a Federal Land Exchange to access the ore deposit.
2.2.5 Diamonds and Specialty Products Customer Sector Group
Our Diamonds and Specialty Products CSG operates our diamonds and titanium minerals businesses and the exploration and development of a potash business.
Diamonds
The EKATI diamond mine in the Northwest Territories of Canada is the cornerstone of our diamonds business. EKATI has produced on average more than three million carats per year of rough diamonds over the last four years. The grade of ore we process fluctuates from year to year, resulting in variations in carats produced. In addition, the proportion of our production consisting of high-value carats (larger and/or higher-quality stones) and low-value carats (smaller and/or lower-quality stones) fluctuates from year to year. The mine life based on the mine plan is seven years from 30 June 2011.
EKATI consists of our 80 per cent interest in the Core Zone Joint Venture, comprising existing operations and our 58.8 per cent interest in the Buffer Zone Joint Venture, primarily focusing on exploration targets.
Annual sales from EKATI (100 per cent terms) represented approximately three per cent of current world rough diamond supply by weight and approximately 11 per cent by value in FY2011. We sell most of our rough diamonds to international diamond buyers through our Antwerp sales office. We also offer for sale, an amount of the EKATI production to Canadian manufacturers based in the Northwest Territories.
Titanium minerals
Our principal interest in titanium minerals consists of our 37.76 per cent economic interest in Richards Bay Minerals (RBM). RBM is one of the largest and lowest-cost producers of titania slag, high-purity pig iron, rutile and zircon from mineral sands. Approximately 90 per cent of the titanium dioxide slag produced by RBM is suitable for the chloride process of titanium dioxide pigment manufacture and is sold internationally under a variety of short, medium and long-term contracts.
Potash
Our potash strategy is to build a material industry position over the long term. We continue advancing the Jansen Project, a greenfield potash project, in Saskatchewan, Canada. Jansen progressed into the feasibility study phase (an advanced stage of our project approvals process) in February 2011.
Based on the current schedule, Jansen is expected to start producing saleable potash in CY2015. Jansen is designed ultimately to produce approximately eight million tonnes per annum (mtpa) of agricultural grade potash with an estimated 70-year life.
We are also continuing to study other potential projects in the Saskatchewan potash basin, including Young, Boulder and Melville, and are progressing these projects in the context of our development portfolio. We are conducting an extensive potash exploration program including 3D seismic survey and drilling programs.
Our permit positions for potash extend over 14,500 square kilometres in the Saskatchewan basin and have expiry dates between 2013 and 2016.
On 15 November 2010, we announced the withdrawal of our offer to acquire all of the issued and outstanding common shares of Potash Corporation of Saskatchewan Inc. We determined that the condition of our offer relating to receipt of a net benefit determination by the Minister of Industry under the Investment Canada Act could not be satisfied, and accordingly, the offer was withdrawn.
Information on Diamonds and Specialty Products mining operations
The following table contains additional details of our mining operations. This table should be read in conjunction with the production (see
section 2.3.2) and reserve tables (see section 2.13.2).
|
|
|
|
|
|
|
|
| ||||||||||
Escondida | ||||||||||||||||||
Atacama Desert, 170 km southeast of Antofagasta, Chile |
Copper concentrate transported by Escondida-owned pipelines to its Coloso port facilities |
|
| BHP Billiton | Mining concession from Chilean Government valid indefinitely (subject to payment of annual fees) |
|
|
| ||||||||||
|
|
|
|
|
|
Nominal
Two 168 km concentrate pipelines 166 km water pipeline Port facilities at Coloso, Antofagasta |
Development projects
Jansen Potash Project
We are currently executing the ground freezing program. The ground will be frozen using a closed system of refrigeration pipes through which brine is circulated. On 24 June 2011, we approved US$488 million of pre-commitment spending to fund early-stage site preparation for surface construction, procurement of long lead time items and the first 350 metres of shaft sinking at Jansen. On 30 June 2011, the Saskatchewan Ministry of Environment approved our Environmental Impact Statement for the development of the Jansen project.
Diamonds
On 9 May 2011, we approved the Misery open-pit project at the EKATI diamond mine in the Northwest Territories, Canada. This project consists of a pushback of the existing Misery open-pit which was mined from 2001 to 2005. Stripping operations are expected to begin in October 2011, with ore production beginning late 2015 and final production from Misery in mid 2017. The estimated capital expenditure required to complete the execution phase is US$323 million (BHP Billiton share).
2.2.6 Stainless Steel Materials Customer Sector Group
Our Stainless Steel Materials CSG is primarily a supplier of nickel to the stainless steel industry. Nickel is an important component of the most commonly used types of stainless steel. We also supply nickel to other markets, including the specialty alloy, foundry, chemicals and refractory material industries. We are the world’s fourth-largest producer of nickel and we sell our nickel products under a mix of long-term, medium-term and spot volume contracts, with prices linked to the LME nickel price.
Our nickel business comprises two assets:
Nickel West
Nickel West is the name for our wholly owned Western Australian nickel asset, which consists of an integrated system of mines, concentrators, a smelter and a refinery. We mine nickel-bearing sulphide ore at our Mt Keith, Leinster and Cliffs operations north of Kalgoorlie. We operate concentrator plants at Mt Keith and at Leinster, which also concentrate ore from Cliffs. Leinster and Mt Keith have reserve lives of eight and 13 years respectively, both have options for further expansion. Cliffs is a high-grade underground mine with a reserve life of three years. The extraction of ore at Cliffs commenced in FY2008.
We also operate the Kambalda concentrator south of Kalgoorlie, where we source ore through tolling and concentrate purchase arrangements with third parties in the Kambalda region. We also have regular purchase agreements in place for the direct purchase of concentrate, which we re-pulp, dry and blend with other concentrate processed at Kambalda.
We transport concentrate from Leinster, Mt Keith and Kambalda to our Kalgoorlie smelter, where it is processed into nickel matte, containing approximately 67 per cent nickel. In FY2011, we exported approximately 60 per cent of our nickel matte production. We processed the remaining nickel matte at our Kwinana nickel refinery, which produces nickel metal in the form of LME grade briquettes, and nickel powder together with a range of saleable by-products.
During FY2011, production of nickel metal from the Kwinana nickel refinery continued to be impacted by a restriction in hydrogen supply, resulting in the redirection of matte feed stocks for external sale. We are constructing a new hydrogen plant at the Kwinana nickel refinery and construction is expected to be completed in FY2012. Production in FY2011 was 112,700 tonnes of contained nickel.
Cerro Matoso
Cerro Matoso, our 99.94 per cent owned nickel asset in Colombia, combines a lateritic nickel ore deposit with a low-cost ferronickel smelter. Cerro Matoso is the world’s second-largest producer of ferronickel and is one of the lowest-cost producers of ferronickel. The smelter produces high-purity, low-carbon ferronickel granules. Cerro Matoso has an estimated current reserve life of 31 years. Production in FY2011 was 40 kilotonnes (kt) of nickel in ferronickel form, which was below the nominal capacity of 50 kilotonnes per annum (ktpa) of nickel in ferronickel form as production was impacted by the planned Line 1 furnace replacement.
Information on Stainless Steel Materials mining operations
The following table contains additional details of our mining operations. This table should be read in conjunction with the production (see section 2.3.2) and reserve tables (see section 2.13.2).
Mine & | Means of access | Ownership | Operator | Title, leases or | History | Mine type & style | Power source | Facilities, use & | ||||||||||
Pampa Norte Spence | ||||||||||||||||||
Atacama Desert, 162 km northeast of Antofagasta, Chile | Public road Copper cathode transported by rail to ports at Mejillones and Antofagasta | 100% | BHP Billiton | Mining concession from Chilean Government valid indefinitely (subject to payment of annual fees) | Development cost of US$1.1 billion approved in 2004 First copper produced in 2006 | Open-cut Enriched and oxidised porphyry copper deposit that presents dominantly in situ copper oxide mineralisation that overlies a near-horizontal sequence of supergene sulphide, transitional sulphide, and lower-most primary (hypogene) sulphide mineralisation | Spence-owned transmission lines connect to Chile’s northern power grid Electricity purchased under contract | Processing and crushing facilities, separate dynamic (on-off) leach pads, solvent extraction plant, electrowinning plant Nominal capacity of tank house: 170 ktpa copper cathode | ||||||||||
Pampa Norte Cerro Colorado | ||||||||||||||||||
Atacama Desert, 120 km east of Iquique, Chile | Public road Copper cathode trucked to port at Iquique | 100% | BHP Billiton | Mining concession from Chilean Government valid indefinitely (subject to payment of annual fees) | Commercial production commenced in 1994 Expansions in 1996 and 1998 | Open-cut Enriched and oxidised porphyry copper deposit that presents dominantly in situ copper oxide mineralisation that overlies anear-horizontal sequence of supergene sulphide, transitional sulphide, and lower-most primary (hypogene) sulphide mineralisation |
Nominal capacity of tank house: 86 ktpa copper cathode |
Mine & location |
|
|
| Title, leases or options | History | Mine type & style | Power source | Facilities, | ||||||||||||||
Antamina | ||||||||||||||||||||||
Andes mountain range, 270 km north of Lima, north central Peru | Public road Copper and zinc concentrates transported by pipeline to port of Huarmey Molybdenum and lead/bismuth concentrates transported by truck | BHP Billiton 33.75% of Compañía Minera Antamina SA Glencore Xstrata 33.75% Teck 22.5% Mitsubishi 10% | Compañía Minera Antamina SA | 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 Capital cost US$2.3 billion (100%) | Open-cut Zoned porphyry and skarn deposit with central copper-only ores and an outer band of copper-zinc ore zone | Long-term contracts with individual power producers | Primary crusher, concentrator, copper and zinc flotation circuits, bismuth/moly cleaning circuit Nominal milling capacity 52 Mtpa 300 km concentrate pipeline Port facilities at Huarmey | ||||||||||||||
Australia | ||||||||||||||||||||||
Silver, lead and zinc | ||||||||||||||||||||||
Cannington | ||||||||||||||||||||||
200 km southeast of Mt
|
| 100% | BHP Billiton |
| Concentrate production commenced in 1997, subsequent projects improved mill throughput and metal recovery | Underground Broken Hill-type silver-lead-zinc sulphide deposit | On-site power station operated under contract |
|
|
| ||||||||||||
|
|
|
|
|
|
Mine & | Means of |
|
| Operator | History |
style |
| |||||||||||||
|
| |||||||||||||||||||
Copper and uranium |
|
|
| |||||||||||||||||
|
|
|
|
|
|
Information on Stainless Steel Materials smelters, refineries and processing plants
|
|
|
|
|
|
|
| |||||||||||||||||||||
| ||||||||||||||||||||||||||||
Olympic Dam | ||||||||||||||||||||||||||||
Public road Copper cathode trucked to ports Uranium oxide transported by road to ports | 100% | BHP Billiton |
expires in 2036
|
|
| |||||||||||||||||||||||
Optimisation project completed in 2002 New copper solvent extraction plant commissioned in 2004 |
| |||||||||||||||||||||||||||
Nominal milling capacity: 10.3 Mtpa Flash furnace produces copper |
(1) |
Development projects
Cerro Matoso Nickel Ore Smelting SystemAmericas
In 2010,Escondida
The Organic Growth Project 1 (OGP1), is the Nickel Ore Smelting Systemreplacement project for the Los Colorados concentrator with a new 152 ktpd plant. This project is in execution. We expect this project to provide additional processing capacity and allow access to high-grade ore. OGP1 was approved to progress into execution phase. The project replaces the 27-year-old Line 1 furnace to improve operational reliability and accommodate changes in the mineralogyFebruary 2012 with budgeted expenditure of the ore feed. ConstructionUS$3.8 billion (US$2.2 billion BHP Billiton share). Project completion and ramp-up to stable production is expected duringtargeted for the first half of FY2012.CY2015. Work on OGP1 was 79 per cent complete at 30 June 2014.
Cerro Matoso expansion options
Cerro Matoso has undertaken conceptual studies on options for expanding production. DuringWe announced the second half of FY2011, the Cerro Matoso Heap LeachEscondida Water Supply project progressed into feasibility.
Mt Keith Talc co-processing
In 2009, the Mt Keith Talc redesign project was approved to move into execution phase. This will enable Mt Keith to process talcose ore to supplement the current ore supply. The project involves the installation of additional grinding and flotation equipment within the existing circuits at Mt Keith and the addition(EWS) in July 2013, which consists of a high-magnesium oxide concentrate flotation circuit.new 2,500 litres per second sea water desalination facility. This project will allow Mt Keithprovide an alternative water supply to treat talcose ores, which make up approximately 25 per centEscondida, as water usage increases upon completion of the remaining Mt Keith ore reserve152 ktpd OGP1 copper concentrator. Construction of the new desalination facility commenced in July 2013 and which were not previously ableincludes the development of two pipelines, four high-pressure pump stations, a reservoir at the mine site and high-voltage infrastructure to be processed economically.support the system. The projectnew facility is expected to be commissioned in FY2012.2017 at a cost of US$3.4 billion (US$2.0 billion BHP Billiton share). Prior to completion of the EWS project, water supply for OGP1 will continue to be sourced from aquifers and the existing 500 litres per second desalinisation plant.
2.2.7 Iron Ore Customer Sector GroupThe Oxide Leach Area Project (OLAP), is also in execution phase. This project involves the creation of a new dynamic leaching pad and mineral handling system that will include several overland conveyors. The new pad is expected to maintain oxide leaching capacity at current levels following the exhaustion of the existing heap leach in CY2014. OLAP was approved in February 2012 with budgeted expenditure of US$721 million (US$414 million BHP Billiton share). A US$212 million increase in the budget of OLAP to US$933 million (US$536 million BHP Billiton share) was approved in March 2014. Work on the project was 93 per cent complete at 30 June 2014, and is expected to be completed in the second half of CY2014.
Our Iron Ore CSG consistsPampa Norte
The Spence Growth Option (SGO) project, currently being studied in pre-feasibility stage, plans to exploit the hypogene sulphide resource with associated molybdenum sulphide by building a 95 ktpd concentrator at the current Spence operation. SGO would extend the mine life by 50 years following the current 2025 closure date. As the hypogene ore underlies the supergene reserves currently being exploited, the need for pre-stripping and additional mine maintenance infrastructure is minimised. The option of using existing solvent extraction and electrowinning infrastructure to recover copper by leaching low-grade chalcopyrite ores in parallel to the concentrator is also being considered. SGO would increase the overall copper production at Spence by approximately 220 kilotonnes per annum (ktpa) in the first 10 years.
Olympic Dam
A pre-feasibility study is being conducted regarding the proposed expansion of Olympic Dam. The objective of the study is to identify the full range of development path alternatives for Olympic Dam by investigating all possible mining methods and less capital-intensive designs, including new technologies.
In July 2014, we lodged an application for assessment by the Australian and South Australian Governments to construct and operate a demonstration plant on the existing mining lease at Olympic Dam. This process would enable heap leaching trials to progress to the next phase as part of our Western Australia Iron Ore (WAIO) assetefforts to identify an alternative, less capital intensive process for extracting metals from ore mined underground. Should Government and Board approvals be granted, construction of the demonstration plant is expected to commence in the second half of CY2015. A trial period of 36 months is envisaged, commencing in late 2016.
Resolution Copper
We hold a 5045 per cent interest in the Samarco joint ventureResolution Copper project in Brazil. We arethe US state of Arizona, a project which is operated by Rio Tinto (55 per cent interest). Resolution is among the top 10 largest undeveloped copper assets in the world and could eventually become the largest copper producer in North America. In FY2014, Resolution Copper completed a pre-feasibility study into a 120 ktpd underground panel cave operation and processing facility. Further opportunities to economically optimise the project and minimise any technical risks have been identified, and the project plans to study these opportunities. Additionally, a Mine Plan of Operations was submitted to the U.S. Forest Service in November 2013. Approval of the plan would allow mining to occur on lands where the Company currently holds mineral title.
Throughout FY2014, Resolution Copper continued to advance sinking of the No #10 Shaft to gain access to the orebody. Following cooling and ventilation upgrades during FY2014, No #10 Shaft is expected to reach a final depth of 2,116 metres by December 2014. Our share of project expenditure for FY2014 was US$38 million.
Exploration activities
Our greenfield copper exploration activities during FY2014 were focused on advancing targets within Chile and Peru. Greenfield activities include opportunity identification, application for and acquisition of mineral title, early reconnaissance operations and drilling programs.
Our Iron Ore Business is one of the leading iron ore producers in the world. We sell lump and fines productproducts produced in Australia and pellets from our operations in Brazil.
Our two assets consist of the following:
Western Australia Iron Ore
Operations at Western Australia Iron Ore (WAIO)
WAIO’s operations involve a complexan integrated system of mines and more than 1,000 kilometres of rail infrastructure and port facilities in the Pilbara region of northern Western Australia.Australia, with our headquarters located in Perth. Our strategyfocus is to safely maximise output through operating our mines and utilising available infrastructure at our disposal. This includes our plan to continue to grow production following the recent completion of a number of expansion projects and ongoing debottlenecking of the supply chain to underpin potential further growth in capacity to 290 Mtpa.
We have been expandingexpanded our WAIO operations in response to increasing demand for iron ore.ore, particularly from China. Since 2001, we have completed sixeight expansion projects to increase our system production capacity from 69 million tonnes per annum (mtpa) to 155 mtpa (100 per cent basis).mine, rail and port capacity. Our share of FY2011FY2014 production was 122.7 million tonnes (Mt)193 Mt of ore. ore, which is expected to increase in FY2015 to 211 Mtpa.
We now have additional projects in various stages ofbeen transitioning to owner-operated mines since September 2011 when we acquired the project life cycle (including construction)HWE Mining subsidiaries from Leighton Holdings. We completed the transition to further increase system capacity (see Development projects below).owner-operated mines with the last contractor run site, Orebody 18, finalising its transition during FY2014.
Our Pilbara reserve base is relatively concentrated, allowing us to plan our development around a series of integrated ‘mining hubs’mining hubs joined to the orebodies by conveyors or spur lines. This approach enables us to maximise the value of installed infrastructure by using the same processing plant and rail infrastructure for a number of orebodies. Blending
Lump and fines products are sold to steel mills in China, South Korea, Japan, Singapore, Hong Kong, Taiwan, Switzerland and Australia under long-term and short-term contracts. Contract prices are generally linked to market indices.
In order to establish a consistent, long-term, high-quality lump ore product with a stable grade, we recently transitioned to a blended lump product. The product is a blend of lump ores produced from the Newman, Area C and Jimblebar mining areas, known as Newman Blend lump. During FY2014, 23 per cent of our sales were lump and 77 per cent were fines.
WAIO operations
Our WAIO operations consist of four main joint ventures: Mt Newman, Yandi, Mt Goldsworthy and Jimblebar. Our interest in the joint ventures is 85 per cent with Mitsui and ITOCHU owning the remaining 15 per cent. The joint ventures are unincorporated except Jimblebar, where we diluted our interest in a subsidiary company to 85 per cent in July 2013 for which BHP Billiton received total consideration of US$1.5 billion.
The Mt Newman Joint Venture (JV) consists of a number of orebodies joined by conveyors and spur lines to a mining hub at Mt Whaleback. Ore is crushed, beneficiated (where necessary) and blended to create the Newman Blend for lump and fines. The ore is then transported to port using Mt Newman JV-owned rail facilities. The Yandi JV comprises the Yandi mine where ore is crushed and screened and then transported by rail on the Newman main line. The Mt Goldsworthy JV consists of the Area C mine in the central Pilbara and the Yarrie mine in northern Pilbara. Ore is crushed and screened at Area C and transported by rail to the hub gives us greater flexibility to respond to changing customer requirements as well as changing propertiesat Mt Whaleback. Production at Yarrie was suspended on 25 February 2014, following improved productivity at our other mining operations. The Jimblebar operation was officially opened on 23 April 2014 and comprises the new Jimblebar mine located 40 kilometres east of Newman. Jimblebar delivered first production in the September 2013 quarter and produced 9 Mt during FY2014. Jimblebar is expected to deliver phase one capacity of 35 Mtpa by the end of FY2015. Production from Wheelarra, a sublease of the Jimblebar tenement, which was previously processed through Newman, was permanently connected to the Jimblebar processing hub during the period.
All ore being minedis transported by rail on the Mt Newman JV and reducesMt Goldsworthy JV rail lines to our port facilities. A typical train configuration consists of two locomotives per 124 ore cars, called a rake, with two rakes per train. Each individual ore car carries approximately 128 tonnes of iron ore. Our rail operations are controlled from Perth via our integrated remote operations centre which co-locates rail control, port production control, mine dispatch control and mine fixed plant control.
Our port facilities are located on both sides of the riskharbour at Port Hedland. These facilities consist of Nelson Point, owned by the Mt Newman JV, and Finucane Island, owned by the Mt Goldsworthy JV. The port bottlenecks.facilities include five ore car dumpers, three screening plants, nine stackers, five reclaimers, stock and blending yards, and eight ship loaders. Vessels depart the harbour via a dredged channel that is approximately 45 kilometres long and has a width of 300 metres.
We
Map of WAIO operations
Along with the other joint venture partners, we have also continuedentered into marketing agreements in the form of joint ventures with certain customers. These customer joint ventures, JW4, Wheelarra and POSMAC, involve subleases of part of WAIO’s existing mineral leases. The ore is sold to explore and refine our understanding ofthe existing tenements. Our proven ore reservesjoint ventures with contractual terms applying to the customers’ share. As a consequence, we are high-grade, with average iron content ranging from 57.1entitled to 85 per cent at Yandiof production from these subleases and the customer joint ventures are not jointly controlled operations for accounting purposes.
WAIO Mineral Resources and Ore Reserves are reported for the Pilbara as a whole by ore type, to 63.8 per cent at Mt Newman.reflect our production of the Newman Blend lump product and our single logistics chain and associated management system. The reserve liveslife of our Western Australian mines at current production levels range from 13 years at Mt Goldsworthy (JV Northern) to 42 years at Jimblebar.
Samarco
We are a 50–50 joint venture partner with Vale at the Samarco operationsoperation in Brazil. During FY2008, Samarco completed an expansion project consistingis currently comprised of a mine and two concentrators located in the state of Minas Gerais, and three pellet plants and a port located in Anchieta in the state of Espirito Santo. Three 396-kilometre pipelines connect the mine site to the pelletising facilities.
Samarco’s main product is iron ore pellets. Extraction and beneficiation of iron ore is conducted at the Germano facilities in the municipalities of Mariana and Ouro Preto. Conveyor systems are used to extract the ore and convey it from the mines. Ore beneficiation then occurs in concentrators, where crushing, milling, desliming and flotation processes produce iron concentrate. The concentrate leaves the concentrators as slurry and is pumped through the slurry pipelines from the Germano facilities to the pellet plants in Ubu, Anchieta, where the slurry is processed into pellets. The iron ore pellets are then heat treated. The pellet output is stored in a stockpile yard before being shipped out of the constructionSamarco-owned Port of a third pellet plant, a mine expansion, a new concentrator, port enhancementsUbu in Anchieta.
Pellets are independently marketed by Samarco and a second slurry pipeline.sold to steelmakers in 20 countries in the Americas, Asia, Africa, the Middle East and Europe, with prices generally linked to market indices.
In FY2011,FY2014, our share of production was 10.911 Mt of pellets. Samarco’s total oreThe reserve life of Samarco is about 2.0 billion tonnes. During FY2011, Samarco introduced the use of natural gas at its pelletising plants allowing for cleaner production and better quality products.39 years.
In April 2011, Samarco shareholders approved a US$3.5 billion (BHP Billiton share US$1.75 billion) expansion project consisting of a fourth pellet plant, a new concentrator and a third slurry pipeline. The project will increase Samarco’s iron ore pellet production capacity by 8.3 Mt to 30.5 mtpa (100 per cent share). First pellet production is expected in the first half of CY2014.
Information on Iron Ore mining operations
The following table contains additional details of our mining operations. This table should be read in conjunction with the production (see(refer to section 2.3.2)2.2.2) and reserve tables (see(refer to section 2.13.2)2.3.2).
Mine &
| Means of access | Ownership | Operator | Title, options | History |
style | Power source | Facilities, | ||||||||
Iron ore | ||||||||||||||||
Mt Newman Joint Venture | ||||||||||||||||
Pilbara region, Western Australia Mt Whaleback Orebodies 18, |
Iron ore | BHP Billiton 85%
Mitsui ITOCHU Iron 10% ITOCHU Minerals and Energy of Australia 5% | BHP Billiton: Mt Whaleback
| Mining lease under the Iron Ore (Mt Newman) Agreement Act 1964 expires in 2030 with right to successive renewals of 21 years | Production began at Mt Whaleback orebody in 1969
Production from
First ore from Newman Hub as part of RGP4 construction delivered in 2009 | Open-cut
Bedded ore types classified as per | Newman Hub: primary and secondary crushing and screening plants (nominal capacity
Orebody | |||||||||
Yandi Joint Venture | ||||||||||||||||
Pilbara region, Western Australia | Private road Iron ore transported by Mt Newman JV-owned rail to Port Hedland (316 km) Yandi JV’s railway spur links Yandi mine to Newman main line | BHP Billiton 85% Mitsui Iron Ore Corporation 7% ITOCHU Minerals and Energy of Australia 8% | BHP Billiton | Mining lease under the Iron Ore (Marillana Creek) Agreement Act 1991 expires in 2033 with one renewal right to a further 21 years | Development began in 1991 First shipment in 1992 Capacity expanded between 1994 and 2013 | Open-cut Channel Iron Deposits are Cainozoic fluvial sediments | From May 2014 Yarnima power station started supplying approximately two thirds of power, with a supplementary contract with Alinta Dewap Newman power station | Three processing plants, primary crusher and overland conveyor (nominal capacity 78 Mtpa) Ore delivered to two train-loading facilities |
Mine &
| Means of access | Ownership | Operator | Title, options | History |
style | Power source | Facilities, | ||||||||
JW4 Joint Venture | ||||||||||||||||
Pilbara region, Western Australia |
Iron ore | BHP Billiton 68%
JFE Steel Australia 20% Sublease agreement over JW4 deposit | BHP Billiton | Sublease over part of the mining lease under the Iron Ore (Marillana Creek) Agreement Act 1991 expires in 2033 with one renewal right for a further 21 years | Operations began in April 2006 Ore currently being produced is sold to Yandi JV and blended with Yandi ore | Open-cut Channel Iron Deposits are Cainozoic fluvial sediments | From May 2014 Yarnima power station started supplying approximately two thirds of power, with a supplementary contract with Alinta Dewap Newman power station | Mine site | ||||||||
Jimblebar operation | ||||||||||||||||
Pilbara region, Western Australia | Private road | BHP Billiton 85% ITOCHU Minerals and Energy of Australia 8%, Mitsui Iron Ore Corporation 7% | BHP Billiton | Mining lease under the Iron Ore (McCamey’s Monster) Agreement Authorisation Act 1972 expires in 2030 with rights to successive renewals of 21 years | Production at Jimblebar began in March 1989 From 2004, production was transferred to Wheelarra as part of the Wheelarra sublease agreement First ore from newly commissioned Jimblebar mine was delivered in September 2013 | Open-cut Bedded ore types classified as per host Archaean or Proterozoic banded iron formation, which are Brockman and Marra Mamba | From May 2014 Yarnima power station started supplying approximately two thirds of power, with a supplementary contract with Alinta Dewap Newman power station | Two primary and secondary crusher, ore handling plant, stockyards and supporting mining hub infrastructure (nominal capacity 55 Mtpa) |
Mine & location | Means of access | Ownership | Operator | Title, leases or options | History | Mine type & style | Power source | Facilities, use & | ||||||||
Wheelarra Joint Venture | ||||||||||||||||
Pilbara region, Western Australia | Private road Rail spur line to Newman Hub closed and iron ore is now transported via conveyor to Jimblebar mine (6 km) | BHP Billiton 51% ITOCHU Minerals and Energy of Australia 4.8% Mitsui Iron Ore Corporation 4.2% Maanshan Iron & Steel Australia 10% Shagang Australia 10% Hebei Iron & Steel Australia 10% Wugang Australia 10% Sublease agreement over Wheelarra deposit | BHP Billiton Operatorship transitioned to BHP Billiton in January 2014 | Sublease agreement over the Wheelarra deposit of Jimblebar lease with ITOCHU Minerals and Energy of Australia, Mitsui Iron Ore and four separate subsidiaries of Chinese steelmakers This arrangement, entitles us to 85% of production from the Wheelarra sublease consistent with BHP Billiton ownership in Mt Newman JV | Wheelarra JV produces iron ore from Wheelarra deposit of Jimblebar lease Ore produced is processed and blended with Jimblebar ore at Jimblebar mine and then sold to Mt Newman JV | Open-cut Bedded ore types classified as per host Archaean or Proterozoic banded iron formation, which is Brockman | From May 2014 Yarnima power station started supplying approximately two thirds of power, with a supplementary contract with Alinta Dewap Newman power station | Two primary and secondary crusher, ore handling plant, stockyards and supporting mining hub infrastructure (nominal capacity 55 Mtpa) |
Mine & location | Means of access | Ownership | Operator | Title, leases or options | History | Mine type & style | Power source | Facilities, use & | ||||||||
Mt Goldsworthy Joint Venture | ||||||||||||||||
Pilbara region, Western Australia Area C Yarrie Nimingarra | Private road Yarrie and Nimingarra iron ore transported by Mt Goldsworthy JV-owned rail to Port Hedland (218 km) Area C iron ore transported by Mt Newman JV-owned rail to Port Hedland (360 km) Mt Goldsworthy JV railway spur links | BHP Billiton 85%
Mitsui Iron Ore Corporation 7% ITOCHU Minerals and Energy of Australia 8% |
|
|
| |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
|
| BHP Billiton
| 4 mineral leases under the Iron Ore (Mt Goldsworthy) Agreement Act 1964 and the Iron Ore (Goldsworthy – Nimingarra) Agreement Act 1972, expire between 2014 and 2028, with rights to successive renewals of 21
A number of smaller mining leases granted under the Mining Act 1978 expire in 2026 | 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,
Yarrie mine suspended operations in February 2014 |
Bedded ore types classified as per |
|
| |||||||||
POSMAC Joint Venture | ||||||||||||||||
Pilbara Region, Western Australia |
Iron ore on-sold to Mt Goldsworthy JV, it is then transported via Mt Goldsworthy JV-owned rail and Mt Newman JV-owned rail to Port Hedland | BHP Billiton 65% ITOCHU Minerals and Energy of Australia 8%, Mitsui Iron Ore Corporation 7% POSCO 20% Sublease agreement over POSMAC deposit | BHP Billiton | Sublease over part of mineral lease held by Mt Goldsworthy JV under the Iron Ore (Mt Goldsworthy) Agreement Act 1964 with rights to successive renewals of 21 years | Operations commenced in October 2003 Iron ore currently being produced is sold to Mt Goldsworthy JV and blended with Area C ore | Open-cut Bedded ore types classified as per host Archaean or Proterozoic iron formation, which is Marra Mamba | From May 2014 Yarnima power station started supplying approximately two thirds of power, with a supplementary contract with Alinta Dewap Newman power station | Ore processing plant, primary crusher and overland conveyor (nominal capacity: 50 Mtpa) |
Mine & location | Means of access | Ownership | Operator | Title, leases or options | History | Mine type & style | Power source | Facilities, use & | ||||||||||
Samarco | ||||||||||||||||||
Southeast Brazil | Public road
Iron pellets exported via port facilities | BHP Billiton 50% of Samarco Mineração SA
Vale 50% | Samarco | Mining concessions granted by Brazilian Government as long as Alegria complex mined according to agreed plan | Production began at Germano mine in 1977 and at Alegria complex in 1992
Third pellet plant, second concentrator and second pipeline built in 2008
| Open-cut
Itabirites (metamorphic quartz-hematite rock) and friable hematite ores | Samarco holds interests in 2 hydroelectric power plants which supply
| Facilities with capacity to process and pump 24 |
Development projects
Western Australia Iron Ore
ConstructionWAIO has been executing a number of Rapid Growth Project 5 (RGP5) is ongoing. Our share of project expenditure to 30 June 2011 amounted to US$4.8 billion. This project, which was announcedexpansion projects in November 2008, will substantially double track the Newman main rail line, construct two new shipping berths on the Finucane Island side of the Port Hedland harbour and add crushing, screening and stockpiling facilities at Yandi.
Inrecent years. These projects, approved in March 2011 we announced approvalfor a total of an additional US$7.4 billion (BHP Billiton share US$6.6 billion) of capital expenditure to continue production growth in our WAIO operations. This investment is the final approval of projects initiated in 2010, withplus pre-commitment funding of US$2.3 billion (BHP Billiton share US$2.1 billion). It will, were designed to deliver an integrated operation with a minimum capacity of 220 mtpaMtpa (100 per cent basis), with first production expected from Jimblebar early in CY2014..
This additional investment includes:These projects included:
US$3.4 billion (BHP Billiton share US$3.3 billion)the Jimblebar Mine Expansion project to develop the Jimblebar mine and rail links, and procure mining equipment and rolling stock in order to deliver an initiala capacity of 35 mtpa, expandableMtpa. Initial production was achieved in the September 2013 quarter. The project costs as at 30 June 2014 amounted to 55 mtpa;
US$2.33.4 billion (BHP Billiton shareshare); final costs are expected to be delivered below the revised budget of US$1.9 billion) to 3.6 billion;
stock. Initial production was achieved in the December 2012 quarter. The project costs as at 30 June 2014 amounted to US$1.7 billion (BHP Billiton shareshare); final costs are expected to be delivered below the revised budget of US$1.4 billion) for 1.9 billion;
Western Australia Iron Ore – Rio Tinto joint ventureOrebody 24 mine
On 5 June 2009, together with Rio Tinto, we signed core principlesIn FY2014, WAIO completed execution of its development of the Orebody 24 mine, located approximately 10 kilometres northeast of Newman. Orebody 24 is a sustaining mine to establish amaintain iron ore production joint venture coveringoutput from the entirety of both companies’ Western Australia Iron Ore assets. This resulted in the signing of definitive agreements on 5 December 2009. The completion of these agreements was subject to a number of conditions, including regulatory approvals.
After the agreements were signed, it became apparent that the necessary regulatory approvals required to allow the deal to close were unlikely to be achieved. As a result, both parties agreed to dissolve the proposed joint venture.
Western Australia Iron Ore – Acquisition of HWE Mining Subsidiaries
On 9 August 2011, BHP Billiton signed a non-binding Heads of Agreement with Leighton Holdings to acquire the HWE Mining subsidiaries that provide contract mining services to its Western Australia Iron OreMt Newman JV operations. The Headsproject was approved in November 2011 and included the construction of Agreement relates to the mining equipment, peoplean ore crushing plant, train loadout facility, rail spur and related assets that service the Area C, Yandi and Orebody 23 and 25 operations. These operations collectively account for almost 70 per centother associated support facilities. The project was delivered at a cost of WAIO’s total material movement. The purchase price is US$735 million (A$705 million)0.5 billion (BHP Billiton share), subject to working capital adjustments. Subjectfinalisation, in the September 2014 quarter versus a budget of US$0.7 billion.
Samarco
During FY2011, Samarco shareholders approved a US$3.5 billion (US$1.75 billion BHP Billiton share) expansion project, the Fourth Pellet Plant Project (P4P), consisting of a fourth pellet plant, a new concentrator and a third slurry pipeline. The project is complete, with its first pellet production in March 2014. This has expanded Samarco’s iron ore pellet production capacity from 22.3 Mtpa to due diligence, definitive agreements30.5 Mtpa. The final cost of the project was US$3.2 billion (US$1.6 billion BHP Billiton share).
Exploration activities
Western Australia
WAIO has a substantial existing reserve base supported by considerable additional mineralisation all within a 250-kilometre radius of our existing infrastructure. This concentration of orebodies also gives WAIO the flexibility to add growth tonnes to existing hub infrastructure and relevant internallink brownfield developments to our existing mainline rail and regulatory approvals,port facilities. The total area covered by exploration and mining tenure amounts to 6,500 square kilometres. This excludes crown leases, and general purpose and miscellaneous licences, which are used for infrastructure space and access.
The majority of deposits are located on five main lease areas held by BHP Billiton and our joint venture partners, as appropriate. Iron ore mineralised materials fall mainly within the Hamersley Ranges of the Pilbara district, with a minor component of the inventory lying within the Pilbara Craton of northwest Western Australia.
In FY2014, exploration activity was completed over multiple project areas and deposits. The total drilling carried out amounts to 492,000 metres, composed of reverse circulation drilling of 421,500 metres, diamond drilling of 52,500 metres and hydrology drilling of 18,000 metres consisting of approximately 5,300 drill holes. Total exploration expenditure amounted to US$166 million.
Guinea Iron Ore
BHP Billiton has a 41.3 per cent interest in a joint venture that holds the Nimba Mining Concession and four iron ore prospecting permits in southeast Guinea.
On 29 July 2014, BHP Billiton and ArcelorMittal signed an agreement for the acquisition by ArcelorMittal of BHP Billiton’s 43.5 per cent stake in Euronimba Limited, which holds an effective 95 per cent interest in the Mount Nimba iron ore project in Guinea. Completion of the transaction is expectedsubject to close during the fourth quarterreceipt of CY2011.regulatory approval and other customary closing conditions.
West AfricaLiberia Iron Ore
We are carrying out exploration activitiesBHP Billiton has a 100 per cent interest in Guinea and Liberia, West Africa. At Nimba, in Guinea, we have completed our concept study and are now undertaking a pre-feasibility study to determine the optimal investment alternative by assessing viability, sustainability impacts and management implications of operations
in this area. During the year, our Mineral Development Agreement with the Government of Liberia was ratified by the Liberian Legislature and became effective.Liberia. This agreement enables the further exploration and development of our Liberian iron ore mineral leases in Liberia.leases.
2.2.8 Manganese Customer Sector Group2.1.4 Coal Business
Our Manganese CSG produces a combination of ores and alloys from sitesCoal Business, headquartered in South Africa and Australia. We are the world’s largest producer of manganese ore and among the top three global producers of manganese alloy. Manganese alloy is a key input into the steelmaking process. Manganese high-grade ore is particularly valuable to alloy producers because of the ‘value in use differential’ over low-grade ore, which is the degree to which high-grade ore is proportionately more efficient than low-grade ore in the alloying process.
Our strategy is to focus on upstream resource businesses. Manganese alloy smelters are a key conduit of manganese units into steelmaking and enable us to access markets with an optimal mix of ore and alloy, optimise production to best suit market conditions and give us technical insight into the performance of our ores in smelters.
Approximately 80 per cent of ore production is sold directly to external customers and the remainder is used as feedstock in our alloy smelters.
We own and manage all manganese mining operations and alloy plants through a joint venture with Anglo American in which we own 60 per cent. Our joint venture interests are held through Samancor Manganese, which operates our global Manganese assets. In South Africa, Samancor owns 74 per cent of Hotazel Manganese Mines (Pty) Ltd (HMM) and 100 per cent of Metalloys. This gives BHP Billiton an effective interest of 44.4 per cent in HMM and 60 per cent in Metalloys. The remaining 26 per cent of HMM is owned under the terms of South African Black Economic Empowerment (BEE) legislation, which reflects our commitment to economic transformation in South Africa. InBrisbane, Australia, we have an effective interest of 60 per cent in Groote Eylandt Mining Company Pty Ltd (GEMCO) and Tasmanian Electro Metallurgical Company Pty Ltd (TEMCO).
Mines
HMM
HMM owns the Mamatwan open-cut mine and the Wessels underground mine. The ore from these mines only requires crushing and screening to create saleable product. In FY2011, the total manganese production was 3,007 kilotonnes (kt), 10.6 percent higher than FY2010 production.
GEMCO
As a result of its location near our own port facilities and its simple, open-cut mining operation, GEMCO is one of the world’s lowest-cost manganese ore producers. These simple operations, combined with its high-grade ore and relative proximity to Asian export markets, make GEMCO unique among the world’s manganese mines. FY2011 production of manganese was 4,086 kt, 20 per cent higher than FY2010 production.
Alloy Plants
Metalloys
The Samancor Manganese Metalloys alloy plant is one of the largest manganese alloy producers in the world. Due to its size and access to high-quality feedstock from Hotazel operations, it is also one of the lowest-cost alloy producers. Metalloys produces high and medium-carbon ferromanganese and silicomanganese.
TEMCO
TEMCO is a medium-sized producer of high-carbon ferromanganese, silicomanganese and sinter using ore shipped from GEMCO, primarily using hydroelectric power.
Information on Manganese mining operations
The following table contains additional details of our mining operations. These tables should be read in conjunction with the production (see section 2.3.2) and reserve tables (see section 2.13.2).
|
|
|
|
|
|
|
| |||||||||
|
|
|
|
|
|
| ||||||||||
| ||||||||||||||||
|
|
|
|
Information on Manganese smelters, refineries and processing plants
|
|
|
|
|
| |||||||||
| ||||||||||||||
|
|
| ||||||||||||
|
|
Development projects
GEMCO expansion
The partners in Samancor Manganese have approved the second expansion of the GEMCO operation in the Northern Territory of Australia. This follows the successful commissioning of the GEMCO expansion phase 1 (GEEP1) project in April 2009. The US$279 million GEEP2 project (BHP Billiton share US$167 million) will increase GEMCO’s beneficiated product capacity from 4.2 million tonnes per annum (mtpa) to 4.8 mtpa through the introduction of a dense media circuit by-pass facility. The project is expected to be completed in late CY2013. The expansion will also address infrastructure constraints by increasing road and port capacity to 5.9 mtpa, creating 1.1 mtpa of additional capacity for future expansions.
HMM
The central block development project at Wessels mine is expected to be completed during the last quarter of FY2013. The project will enable the mine to increase current production from 1 mtpa to 1.5 mtpa of capacity (100 per cent, or about 0.7 mtpa BHP Billiton share). The remaining forecast capital expenditure to completion of the project is an estimated US$26 million (BHP Billiton share).
Metalloys
The High Carbon Ferro Manganese (HCFeMn) furnace M14 at the Metalloys West Plant was approved for execution in November 2010 with a total approved investment of US$91 million (US$54.6 million BHP Billiton share). This furnace would add an additional 130 kilotonnes per annum (ktpa) capacity (100 per cent or about 78 ktpa BHP Billiton share) of HCFeMn and replace smaller, less efficient furnaces from the South Plant with a current capacity of 55 ktpa. The M14 furnace will contribute to power efficiency at Metalloys site as it will add to the site’s own generation capacity utilising the furnace off-gases.
Samancor Gabon Manganese project
The feasibility phase study for the establishment of a 300 ktpa mine in Franceville, Gabon, commenced in July 2010 and the study is expected to be completed in the first quarter of FY2012.
The pre-feasibility phase study for phase 2 to increase the production capacity to 1.8 mtpa is expected to commence in the second quarter of FY2012.
2.2.9 Metallurgical Coal Customer Sector Group
Our Metallurgical Coal CSG is the world’s largest supplier of seaborne metallurgical coal. Metallurgical coal, along with iron ore and manganese, is a key input in steel production. Our Coal Business is also one of the productionlargest suppliers of steel.seaborne energy coal (also known as thermal or steaming coal) and a significant domestic energy coal supplier in the countries where its mines are located.
Our export metallurgical coal customers are steel producers around the world.world, principally in China, India, Japan and Europe. In FY2011, mostFY2014, the majority of our metallurgical coal sales contracts were based on annual or long-term volume contractsvolumes, with prices largely negotiated on a quarterly basismonthly, index or monthlyspot basis.
We haveare a domestic supplier of energy coal to the electricity generation industry in Australia, South Africa and the United States. Our domestic energy sales are generally made to nearby power stations under long-term fixed price or cost plus arrangements. Export sales are delivered to power generators and industrial users principally in China, India, Japan, Europe and the Middle East, under contracts that are generally index linked or short-term fixed.
Total metallurgical coal production in FY2014 was 45.1 Mt and total energy coal production in FY2014 was 73.5 Mt.
Our assets, located in two major resource basins:Australia, South Africa, Colombia and the United States, consist of both open-cut and underground mines. At our open-cut mines, overburden is removed after blasting, using either draglines or truck and shovel. Coal is then extracted using excavators or loaders and loaded onto trucks to be taken to stockpiles. At our underground mines, coal is extracted by either longwall or continuous miner. The coal is then transported to stockpiles on the surface by conveyor. Coal from stockpiles is then crushed, and for a number of the operations, washed and processed through the coal preparation plant. Domestic coal is then transported to the nearby customer via conveyor, truck or rail. Export coal is transported to the port via trucks or trains, and as part of this coal supply chain both single and multi-user rail and port infrastructure is used.
Our assets consist of the following:
Queensland Coal
Queensland Coal comprises the BHP Billiton Mitsubishi Alliance (BMA) and BHP Billiton Mitsui Coal (BMC) Assets in the Bowen Basin in Central Queensland, Australia, and the Illawarra region of New South Wales, Australia.
Bowen Basin
In comparison with many other coal mining regions, theThe Bowen Basin is well positioned to supply the seaborne market because of its high-quality metallurgical coals, which are ideally suited to efficient blast furnace operations, relatively low cost of production from extensive near-surface deposits and its geographical proximity to Asian customers.
We also have access to key infrastructure in the Bowen Basin, including a modern, integrated electricmulti-user rail network, and our own coal loading terminal at Hay Point, located near the city of Mackay. We also have contracted capacity at three other multi-user port facilities including the Port of Gladstone (RG Tanna Coal Terminal), Dalrymple Bay Coal Terminal and Abbot Point Coal Terminal.
Map of Queensland Coal
BHP Billiton Mitsubishi Alliance
BMA comprises two unincorporated joint ventures – Central Queensland Coal Associates Joint Venture (CQCA) and Gregory Joint Venture. We share 50–50 ownership with Mitsubishi Development.
BMA owns and operates open-cut and underground metallurgical coal mines in the Bowen Basin and also owns and operates the Hay Point Coal Terminal. The terminal consists of coal inloading dump stations, stacker reclaimers and two ship loaders, capable of loading 44 Mtpa of coal. The terminal is undergoing expansion to increase its capacity to 55 Mtpa through the addition of a third ship loader. This infrastructure enables us to maximise throughput and blending ofblend products from multiple mines of BMA to optimise the value of our production and to satisfy customer requirements.
Our Bowen Basin mines are owned through a series of joint ventures. We share 50–50 ownership with Mitsubishi Development Pty Ltd in BHP Billiton Mitsubishi Alliance (BMA), which
BMA operates the Goonyella Riverside, Broadmeadow, Daunia, Caval Ridge, Peak Downs, Saraji, Gregory Crinum and Blackwater mines. In May 2012, production ceased at Norwich Park Blackwater andmine, following a review of the mine’s viability. In October 2012, production also ceased at the Gregory open-cut mine, part of the Gregory Crinum complex. First production commenced at Caval Ridge in the June 2014 quarter.
Our share of total production in FY2014 was 29.3 Mt. Production figures for BMA include some energy coal (less than three per cent). The reserve lives of our mines together with the Hay Point Coal terminal through the Central Queensland Coal Associates (CQCA) joint venture and therange from 2.8 years at Gregory joint venture. Our Crinum to 37 years at Saraji. The reserve life for each mine is set out in section 2.3.2.
BHP Billiton Mitsui Coal (BMC) asset operates South Walker Creek and Poitrel mines.
BMC is a subsidiary company owned by BHP Billiton (80 per cent) and Mitsui and Co (20 per cent).
The reserve lives of the Bowen Basin BMC owns and operates South Walker Creek and Poitrel, both open-cut metallurgical coal mines range from six years to 62 years. Total attributable production in FY2011 was approximately 25.7 million tonnes (Mt) compared with 30.8 Mt in FY2010. Production in FY2011 was significantly impacted by persistent and severe wet weather in the Bowen Basin.
Production figuresTotal production in FY2014 was 8.3 Mt. The reserve lives of our mines are 15 years at Poitrel and 11 years at South Walker Creek. The reserve life for the Bowen Basin include some energy coal (less than 11 per cent).
Illawarra Coal
We ownOur wholly owned Illawarra Coal Asset owns and operateoperates three underground coal mines – Appin, West Cliff and Dendrobium, in the Illawarra region of New South Wales, whichAustralia. The mines supply metallurgical coal to the nearby BlueScope Port Kembla steelworks and to other domestic and export markets. The Appin mine is currently being developed to sustain Illawarra Coal’s production following the end of the mine life at West Cliff.
Coal is exported via the Port Kembla Coal Terminal, in which we own a 16.67 per cent interest. Total production in FY2011FY2014 was approximately 6.9 Mt compared with 6.5 Mt in FY2010.7.5 Mt. Production figures for Illawarra Coal include some energy coal (approximately 20 per cent). The reserve lives of the Illawarraour mines range from three2.0 years at West Cliff to 19 years.25 years at Appin. The reserve life for each mine is set out in section 2.3.2.
Energy Coal South Africa
Energy Coal South Africa (known as BECSA) operates four energy coal mines – Khutala, Klipspruit, Middelburg and Wolvekrans, in the Witbank region in the province of Mpumalanga, South Africa.
BECSA is 90 per cent owned by BHP Billiton, two per cent owned by its employees through an Employee Share Ownership Plan (ESOP) and eight per cent owned by a Broad-Based Black Economic Empowerment (B-BBEE) consortium led by Pembani Group Proprietary Limited.
Production figuresin FY2014 was 30.4 Mt. The reserve lives of our mines range from 5.8 years at Khutala to 23 years at Middelburg. The reserve life for Illawarra include someeach mine is set out in section 2.3.2.
In FY2014, approximately 55 per cent of BECSA’s sales were to Eskom, the government-owned electricity utility in South Africa. The remaining production was exported, predominantly to India and China, via the Richards Bay Coal Terminal (RBCT), in which we own a 21 per cent interest.
New Mexico Coal
We own and operate the San Juan energy coal (less than 18mine located in the US state of New Mexico. The mine transports its production directly to the nearby San Juan Generating Station. The San Juan mine has a reserve life of 3.5 years, which is the life of the current customer contract. Production for FY2014 was 5.7 Mt.
We also operate the nearby Navajo mine, located on Navajo Nation land in New Mexico. Full ownership of the Navajo Coal Company transferred to the Navajo Transitional Energy Company (NTEC), an entity of the Navajo Nation, effective 30 December 2013. New Mexico Coal and NTEC have entered into a Mine Management Agreement where New Mexico Coal will continue as mine operator until 31 December 2016.
Navajo mine transports its production directly to the nearby Four Corners Power Plant. Navajo mine reduced capacity during FY2014 from 7.4 Mtpa to 5.4 Mtpa in response to reduced customer demand. Production for FY2014 was 5.1 Mt. As we retain control of the mine until full consideration is paid, production continues to be reported by the Group.
New South Wales Energy Coal
Our wholly owned New South Wales Energy Coal Asset owns and operates the Mt Arthur Coal open-cut energy coal mine in the Hunter Valley region of New South Wales, Australia. New South Wales Energy Coal produced 20 Mt in FY2014 and has a reserve life of 33 years. In FY2014, we delivered approximately seven per cent)cent of Mt Arthur’s production to a local power station and exported the rest, predominantly to Japan and China, via the port of Newcastle.
We own a 35.5 per cent interest in the Newcastle Coal Infrastructure Group, which operates the Newcastle Third Port export coal loading facility. The facility currently has a port expansion project in execution (refer to Development projects). We also have a 1.75 per cent interest in Port Waratah Coal Services Limited, which operates two coal loading facilities at the port of Newcastle.
Cerrejón
We have a one-third interest in Cerrejón Coal Company, which owns and operates one of the world’s largest open-cut export energy coal mines, located in the La Guajira province of Colombia. Cerrejón also owns and operates integrated rail and port facilities through which the majority of production is exported to European, Middle Eastern, North and South American customers. In FY2014, our share of Cerrejón production was approximately 12.3 Mt. Cerrejón has a reserve life of 17 years.
In FY2012, Cerrejón commenced an expansion project (P40), which is ultimately expected to increase our share of production from 10.7 Mtpa to 13.3 Mtpa (refer to Development projects).
Information on Metallurgical Coal mining operations
The following table contains additional details of our mining operations. The tables should be read in conjunction with the production (see(refer to section 2.3.2)2.2.2) and reserves tables (see(refer to section 2.13.2)2.3.2).
Mine & |
|
|
| |||||||||||||
| Title, leases or options | History | Mine type & style | Power source | Facilities, use & | |||||||||||
Australia | ||||||||||||||||
Central Queensland Coal Associates | ||||||||||||||||
Bowen Basin, Queensland, Australia
Goonyella Riverside Broadmeadow Daunia Caval Ridge Peak Downs Saraji Blackwater and | Public
Coal Distances between the mines and port are between 160 km and 315 km | BHP Billiton
Mitsubishi | BMA | Mining leases, including undeveloped tenements, expire between
Mining is permitted to continue under the legislation during the renewal application | Goonyella mine commenced in 1971, merged with adjoining Riverside mine
Production Peak Downs in 1972 Saraji in 1974 Norwich Park in 1979 Blackwater in 1967
Broadmeadow (longwall operations) in 2005 Daunia in 2013 and Caval Ridge in 2014 | All open-cut except Broadmeadow: longwall underground
Bituminous coal is mined from the Permian Moranbah and Rangal Coal measures
Products range from | Queensland electricity grid underlong-term contracts | On-site
Combined
|
Mine & |
|
|
| Operator | Title, leases or options | History | Mine type & style | Power source | Facilities, use & | |||||||||||||||
| ||||||||||||||||||||||||
Bowen Basin, Queensland, Australia
Gregory and Crinum mines | Public
Coal Distances between the mines and port are between 310 km and 370 km | BHP Billiton
Mitsubishi | BMA | Mining leases, including undeveloped tenements, expire between 2014 Mining is permitted to continue under the legislation during the renewal application period | Production Gregory in 1979 Crinum mine (longwall) in 1997 Production at Gregory open-cut mine ceased in October 2012 | Gregory: open-cut
Crinum: longwall underground
Bituminous coal is mined from the Permian German Creek Coal measures
Product is a high volatile, low ash hard coking coal | Queensland electricity grid under long-term contracts | On-site beneficiation processing facility
Nominal capacity: in excess of | ||||||||||||||||
BHP Billiton Mitsui Coal | ||||||||||||||||||||||||
Bowen Basin, Queensland, Australia
South Walker Creek and Poitrel mines | Public
Coal Distances between the mines and port are between 135 km and 165 km | BHP Billiton
Mitsui and | Mining leases, including undeveloped tenements expire Mining is permitted to continue under the legislation during the renewal application period | South Walker Creek commenced in 1996 Poitrel commenced in 2006 | Open-cut
Bituminous coal is mined from the Permian Rangal Coal measures
Produces a range of coking coal, | Queensland electricity grid | South Walker Creek coal beneficiated on-site
Nominal capacity:
Poitrel
Nominal capacity: in excess of 3 |
Mine & |
|
|
|
| Operator | Title, leases or options | History | Mine type & style | Power source | Facilities, | ||||||||||||||
Illawarra Coal | ||||||||||||||||||||||||
Illawarra, New South Wales, Australia
DendrobiumAppin and West Cliff mines | Public road
Coal Distances between the mines and port are between 8 km and 38 km | 100% | BHP Billiton | Mining leases expire between
| Production Appin in 1962 (longwall operations 1969) West Cliff in 1976 and Dendrobium in 2005 | Underground
Bituminous coal is mined from the Permian Illawarra Coal Measures
Produces premium quality hard coking coal and some thermal coal from the Wongawilli and Bulli seams | New South Wales electricity grid | 2 beneficiation
Nominal | ||||||||||||||||
Mt Arthur Coal | ||||||||||||||||||||||||
Approximately 126 km northwest of Newcastle, New South Wales, Australia | Public road Domestic coal transported by conveyor to Bayswater Power Station Export coal transported by third party rail to Newcastle port | 100% | BHP Billiton | Various mining leases and licences expire between 2010 and 2032 Renewal is being sought for expired mining leases The original approvals permit mining and other activities to continue during renewal application | 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 | Open-cut Produces a medium rank bituminous thermal coal (non- coking) | Local energy providers | Beneficiation facilities: coal handling, preparation, washing plants Nominal capacity: in excess of 23 Mtpa |
Mine & location Means of access Ownership Operator Title, leases or options History Mine type & style Power source Facilities, use & Public road Domestic coal transported by overland conveyor to Kendal Power Station BHP Billiton 90% Newshelf 1129 Proprietary Limited (BEE SPV) 8% Eyami Trust Management Company (RF) Proprietary Limited (ESOP) 2% BECSA holds a 100% share of Converted Mining Right, granted October 2011 Mining Right was amended 15 February 2013 to include Portion 16 of Zondagsvlei 9 IS Production commenced in 1984 Open-cut operations in 1996 Commenced mining thermal/metallurgical coal for domestic market in 2003 Combination open-cut and underground Produces a medium rank bituminous thermal coal (non-coking) Public road Export coal transported to RBCT by third party rail (558 km) Domestic coal transported by conveyor to Duvha Power Station BHP Billiton 90% Newshelf 1129 Proprietary Limited (BEE SPV) 8% Eyami Trust Management Company (RF) Proprietary Limited (ESOP) 2% Previous JV (84:16) with Glencore Xstrata Plc (through Tavistock Collieries Pty Limited) was amended in February 2008 BECSA and Tavistock are joint holders of 3 Converted Mining Rights in the previous JV ratio (84:16) BECSA is the 100% holder of a fourth Converted Mining Right All 4 Rights comprise the Middelburg Mine Complex(1) The Converted Mining Rights were granted during October and December 2011(2) Production commenced in 1982 Middelburg Mines and Duvha Colliery became one operation in 1995 Douglas-Middelburg Optimisation project completed in July 2010 Mine was split into Middelburg and Wolvekrans during 2011 Open-cut Produces a medium rank bituminous thermal coal, most of which can be beneficiated for the European or Asian export markets Beneficiation facilities: tips and crushing plants, 2 export wash plants, middlings wash plant, de-stone plant Nominal capacity: in excess of 17 Mtpa
mineralisation
conditionSouth Africa Khutala 100 km east of Johannesburg, Gauteng Province, South Africa BHP Billiton Eskom (national power supplier) under long-term contracts Underground and open-cut crushers: Nominal capacity: in excess of 12 Mtpa Middelburg/Wolvekrans 20 km southeast of Witbank, Mpumalanga Province, South Africa BHP Billiton Eskom under long-term contracts
Mine & location | Means of access | Ownership | Operator | Title, leases or options | History | Mine type & style | Power source | Facilities, use & | ||||||||
Klipspruit | ||||||||||||||||
30 km west of Witbank, Mpumalanga Province, South Africa | Public road Export coal transported to RBCT by third party rail (611 km) | BHP Billiton 90% Newshelf 1129 Proprietary Limited (BEE SPV) 8% Eyami Trust Management Company (RF) Proprietary Limited (ESOP) 2% Phola Coal Plant in JV with Anglo Inyosi Coal 50% | BHP Billiton | BECSA holds a Converted Mining Right, granted on 11 October 2011 | Production commenced in 2003 Expansion project completed in FY2010, includes 50% share in Phola Coal Plant | Open-cut Produces a medium rank bituminous thermal coal, most of which can be beneficiated for the export market | Eskom, under long-term contracts | Beneficiation facilities: tip and crushing plant, export wash plant Nominal capacity Phola Coal Processing Plant: in excess of 7 Mtpa | ||||||||
United States | ||||||||||||||||
San Juan | ||||||||||||||||
25 km west of Farmington, New Mexico, US | Public road Coal transported by truck and conveyor to San Juan Generating Station | 100% | BHP Billiton | Mining leases from federal and state governments Leases viable as long as minimum production criteria achieved | Surface mine operations commenced in 1973 Development of underground mine to replace open-cut mine approved in 2000 | Underground Produces a medium rank bituminous thermal coal (non-coking suitable for the domestic market only) | San Juan Generating Station | Coal sized and blended to meet contract quantities and specification Nominal capacity: 6 Mtpa | ||||||||
Navajo | ||||||||||||||||
40 km southwest of Farmington, New Mexico, US | Public road Coal transported by rail to Four Corners Power Plant | BHP Billiton 0% Navajo Transitional Energy Company 100% | BHP Billiton | Lease held by Navajo Transitional Energy Company | Production commenced in 1963 Divested FY2014 BHP Billiton continues as operator | Open-cut Produces a medium rank bituminous thermal coal (non-coking suitable for the domestic market only) | Four Corners Power Plant | Stackers and reclaimers used to size and blend coal to meet contract quantities and specification Nominal capacity: 5.4 Mtpa | ||||||||
Mine & location | Means of access | Ownership | Operator | Title, leases or options | History | Mine type & style | Power source | Facilities, use & | ||||||||
Colombia | ||||||||||||||||
Cerrejón | ||||||||||||||||
La Guajira province, Colombia | Public road Coal exported by company-owned rail to Puerto Bolivar (150 km) | BHP Billiton 33.33% Anglo American 33.33% Glencore Xstrata 33.33% | Cerrejón Coal Company | Mining leases expire in 2034 | Original mine began producing in 1976 BHP Billiton interest acquired in 2000 | Open-cut Produces a medium rank bituminous thermal coal (non-coking, suitable for the export market) | Local Colombian power system | Beneficiation facilities: crushing plant with capacity of 32 Mtpa and washing plant Nominal capacity: 3 Mtpa | ||||||||
(1) | This includes the Wolvekrans and Middelburg collieries and excludes the portion Tavistock obtained as a result of the amendment of the Douglas-Tavistock JV agreement. |
(2) | The JV agreement has been amended so that upon the Department of Mineral Resources amending the Converted Mining Rights, the mining area will be divided into an area wholly owned and operated by Tavistock and an area wholly owned and operated by BECSA as the new Douglas-Middelburg mine. Applications were made in December 2008 to the Department of Mineral Resources to amend the Converted Mining Rights, but a date for execution has not yet been provided. Ministerial consent to amend the Mining Rights has been granted. |
Development projects
Bowen BasinBMA Expansions
In November 2011, we approved the development of the Caval Ridge mine project, with a revised investment of US$1.9 billion (BHP Billiton share). The Caval Ridge mine is an open-cut dragline and truck and shovel operation, with coal railed to the Hay Point Coal Terminal. First coal at the Caval Ridge mine occurred in the June 2014 quarter and the mine was 100 per cent completed at 30 June 2014.
In March 2011, approval was given for three key metallurgical coal projects located inwe approved the Bowen Basin in Central Queensland, Australia. The projects are expected to add 4.9 Mt of annual mine capacity (100 per cent basis) through developmentexpansion of the Daunia operation and a new mining area at Broadmeadow. In addition,Hay Point Coal Terminal. The expansion of the terminal will deliver an additional 11 Mt of annual port capacity (100 per cent basis). Following a review of the project during FY2013, first shipment is expected in CY2015 with a revised budget of US$1.5 billion (BHP Billiton share). The project was 87 per cent complete at 30 June 2014.
Appin Area 9 Project
In June 2012, approval was given to invest US$845 million to sustain operations at Illawarra Coal by establishing a replacement mining area at Appin mine. The replacement area will be developedhave a production capacity of 3.5 Mtpa and will sustain Illawarra Coal’s production capacity at the Hay Point Coal terminal.9 Mtpa. The total investmentAppin Area 9 project was 67 per cent complete at 30 June 2014 and is expected to be operational in CY2016, whereupon it will replace production at the West Cliff mine. The project includes roadway development, new ventilation infrastructure, new and reconfigured conveyors and other mine services.
Cerrejón P40 Project
In August 2011, we announced a US$5 billion,437 million (BHP Billiton share) investment in the expansion of Cerrejón, known as the P40 Project, which BHP Billiton’s share is US$2.5 billion.
expected to enable Cerrejón’s thermal coal production to increase by 8 Mtpa to approximately 40 Mtpa. The Dauniaproject scope includes a second berth and dual quadrant ship loader at Cerrejón’s 100 per cent owned and operated Puerto Bolivar, along with necessary mine, adjacentrail and associated supply chain infrastructure. Construction commenced in CY2011 and the project handled its first coal in the December 2013 quarter. The port expansion associated with the Cerrejón P40 project is currently being commissioned, although operational issues are expected to BMC’s Poitrel mine, will have theconstrain capacity to produce 4.5approximately 35 Mtpa (100 per cent basis) in the medium term. At 30 June 2014, the project was 94 per cent complete.
Newcastle Port Third Phase Expansion
In August 2011, we announced a US$367 million tonnes per annum (mtpa)(BHP Billiton share) investment in the third stage development of export metallurgicalthe Newcastle Coal Infrastructure Group’s coal through a new processing facility.handling facility in Newcastle. The port expansion project is expected to increase total capacity at the coal terminal from 53 Mtpa to 66 Mtpa. This is expected to increase New South Wales Energy Coal’s allocation by 4.6 Mtpa to 19.2 Mtpa. First coal is expectedon ship, being the first ship loading through the new facility, was achieved in 2013. The investment will also extendJune 2013, ahead of schedule. At 30 June 2014, the life of the Broadmeadow mine by a further 21 years and increase production capacity by 0.4 mtpa to a new total capacity of 4.8 mtpa. The project is due for completion in 2013. The expansion at Hay Point terminal will increase its capacity from 44 mtpa to 55 mtpa and includes the replacement of the existing jetty to increase its ability to withstand high seas and winds. First shipments from the expanded terminal are expected in 2014.was 86 per cent complete.
Metallurgical Coal is continuing to investigate a number of brownfield and greenfield expansion and logistics options in the Bowen Basin, including the construction of the proposed Caval Ridge Mine which will utilise the expanded Hay Point terminal capacity.
IndoMet Coal Project (Indonesia)
IndoMet Coal comprises seven coal contracts of work (CCoWs) covering a large metallurgical coal resource in Central and East Kalimantan, Indonesia, which was discovered by BHP Billiton in the 1990s. Following an assessment of the importance of local participation in developing the project, in 2010 we sold a 25 per cent interest in the project to a subsidiary of PT Adaro Energy TBK. We retain 75 per cent of the project and hold management responsibilityresponsibility.
Construction works on infrastructure development for the project.this project is ongoing with initial production from a small mine expected in CY2015.
Study work is underway to identify development options across our CCoWs.
2.1.5 Aluminium, Manganese and Nickel Business
2.2.10 Energy Coal Customer Sector GroupAluminium
Our Energy Coal CSGAluminium, Manganese and Nickel Business, headquartered in Perth, Australia, has a portfolio of assets in three stages of the aluminium value chain: mining bauxite, refining bauxite into alumina and smelting alumina into aluminium metal. We are a major producer of aluminium, with total production in FY2014 of 1.2 Mt. We also produced 5.2 Mt of alumina in FY2014.
During FY2014, we consumed 35 per cent of our alumina production in our aluminium smelters and sold the balance to third party smelters. Our alumina and aluminium customers are located mostly in western Europe and Asia. Our alumina sales are a mixture of legacy long-term contract sales at LME-linked prices and long-term contracts priced from an alumina index or spot negotiated prices. Prices for our aluminium sales are generally linked to prevailing LME and premium prices. We have a diversified customer portfolio, with demand driven by end-use consumption in transportation, packaging, construction and household items.
Our assets consist of the following operations:
Boddington/Worsley
Boddington/Worsley is an integrated bauxite mining/alumina refining operation located in Western Australia. The Boddington bauxite mine supplies bauxite ore to the Worsley alumina refinery via a 51-kilometre long conveying system. We own 86 per cent of the mine and the refinery. It is our sole integrated bauxite, mining/alumina refining asset, and one of the world’s largest producers and marketers of export energy coal (also known as thermal or steaming coal) and is also a significant domestic supplier to the electricity generation industry in Australia, South Africa and the US. Our global portfolio of energy coal assets and our insights into the broader energy market through our sales of other fuels (gas, uranium and oil) provide our business with substantial advantages as a supplier. We generally make our domestic sales under long-term fixed-price contracts with nearby power stations. We make export sales to power generators and some industrial users in Asia, Europe and the US, usually under contracts for delivery of a fixed volume of coal. Pricing is either index-linked or fixed, in which case we use financial instruments to swap our fixed-price exposure for exposure to market indexed prices.
We operate three assets: a group of mines and associated infrastructure collectively known as BHP Billiton Energy Coal South Africa; our New Mexico Coal operationslowest cost refineries in the US;world. Worsley’s Efficiency and our NSW Energy Coal operationsGrowth project reached nameplate capacity in Australia. We also own a 33.33FY2014, bringing the capacity of the refinery to 4.6 Mtpa (100 per centcent) of alumina. Our share of the Cerrejón Coal Company, which operates a coal mineWorsley’s FY2014 production was 3.9 Mt of alumina. Worsley’s export customers include our own Hillside and Mozal smelters in Colombia.
BHP Billiton Energy Coal South Africa (BECSA)
BECSA operates four coal mines Khutala, Klipspruit, Middelburg and Wolvekrans in the Witbank region of Mpumalanga province of South Africa, which in FY2011 produced approximately 34 million tonnes (Mt). In FY2011, BECSA sold approximately 62 per cent of its production to Eskom, the government-owned electricity utility in South Africa and exported the rest via the Richards Bay Coal Terminal (RBCT), in which we own a 22 per cent share. The reserve lives of the BECSA mines range from nine to 30 years.
New Mexico Coal
We own and operate the Navajo mine, located on Navajo Nation land in New Mexico, and the nearby San Juan mine located in the state of New Mexico. Each mine transports its production directly to a nearby power station. The reserve lives of Navajo Mine and San Juan Mine are 5 and 7 years, respectively. New Mexico Coal produced approximately 12 Mt in FY2011.
NSW Energy Coal
NSW Energy Coal’s operating asset is the Mt Arthur open-cut coal mine in the Hunter Valley region of New South Wales, which produced approximately 14 Mt in FY2011 andsouthern Africa. Boddington has a reserve life of 5017 years.
Hillside and Bayside
Our wholly owned Hillside and Bayside smelters are located at Richards Bay in South Africa. Hillside is the largest aluminium smelter in the southern hemisphere. Hillside and Bayside imported alumina from our Worsley refinery and Alcoa during FY2014; however, the Alcoa supply was discontinued by 30 June 2014. In June 2014, Bayside completed the ramp-down of its remaining smelting capacity of 97 ktpa. The Bayside Casthouse continues to operate and began processing liquid metal transfers from Hillside in June 2014. Hillside sources power from Eskom, the South African state utility, under long-term contracts, with prices linked to the LME price of aluminium (except for Hillside Potline 3, where the price is linked to the South African and US producer price indices). The Bayside Casthouse sources power from the grid at market rates. Production in FY2014 for Hillside was 715 kt and Bayside was 89 kt.
Mozal
We commenced the first stage of our long-term mine expansion project (RX1) in FY2011 (see Development projects below). In FY2011, we delivered approximately nineown 47.1 per cent of Mt Arthur’sand operate the Mozal aluminium smelter located near Maputo, Mozambique. Mozal sources power generated by Hydro Cahora Basa via Motraco, a transmission joint venture between Eskom and the national electricity utilities of Mozambique and Swaziland. Our share of Mozal’s FY2014 production towas 266 kt.
Mineração Rio do Norte
We own a local power station and exported the rest via the port of Newcastle. We are also a 35.514.8 per cent shareholderinvestment in Newcastle Coal Infrastructure Group a joint controlled entity that is operating the Newcastle Third Port export coal loading facility.
Cerrejón Coal Company
Cerrejón Coal CompanyMineração Rio do Norte (MRN), which owns and operates one of the largest open-cut export coal minesa large bauxite mine, located at Porto Trombetas in the world in La Guajira province of Colombia, as well as integrated rail and port facilities through which the majority of production is exported to European and Middle Eastern customers. Cerrejón has a current capacity of 32 million tonnes per annum (mtpa) (100 per cent terms) andPará, Brazil. MRN has a reserve life of 236.1 years.
Alumar Alumar is an integrated alumina refinery/aluminium smelter. We own 36 per cent of the Alumar refinery and 40 per cent of the smelter. Alcoa operates both facilities. The operations, and their integrated port facility, are located at São Luís in the Maranhão province of Brazil. BHP Billiton sources the majority of the bauxite it processes at Alumar from MRN. The Alumar smelter has currently suspended production from pot lines 2 and 3 reducing overall annual capacity to 124 ktpa, from 447 ktpa (100 per cent), due to challenging global market conditions in primary aluminium and increased costs. During FY2014, approximately 16 per cent of Alumar’s alumina production was used to feed the smelter, while the remainder was exported. Our share of Alumar’s FY2014 saleable production was 1.3 Mt of alumina and 104 kt of aluminium.
Information on Energy CoalAluminium mining operations
The following table contains additional details of our mining operations. TheThis table should be read in conjunction with the production (see(refer to section 2.3.2)2.2.2) and reservesreserve tables (see(refer to section 2.13.2)2.3.2).
Mine & | Means of | Ownership | Operator | Title, options | History |
style | Power | Facilities, | ||||||||
| ||||||||||||||||
Boddington bauxite mine | ||||||||||||||||
Boddington, 123 km
| Public road
| BHP Billiton 86% Sojitz Alumina 4% Japan Alumina Associates 10% Ownership structure of operator as per Worsley JV | BHP Billiton Worsley Alumina Pty Ltd | Mining leases from Western Australia Government expire over the period 2014–2032, all with 21-year renewal available. Renewal process in progress for lease that expires in September 2014. 2 subleases from Alcoa of Australia | Opened in 1983 Significantly extended in 2000 | Open-cut Surficial gibbsite-rich lateritic weathering of Darling Range rocks | JV-owned power line connected to | Crushing plant Nominal capacity: 19 Mtpa bauxite | ||||||||
Mineração Rio do Norte | ||||||||||||||||
Porto Trombetas, 880 km from Belém, the capital of Pará state, Brazil | Sealed road and 28 km of rail connects mine area with Porto Trombetas | BHP Billiton 14.8% Alcoa and affiliates 18.2% Vale 40% Rio Tinto Alcan 12% Votorantim 10% Hydro 5% | MRN | Mining rights granted by Brazilian Government until reserves exhausted | Production commenced in 1979 Expanded in 2003 | Open-cut Lateritic weathering of nepheline syenite occurring primarily as gibbsite in a clay matrix overlain by clay sediments | On-site fuel oil generators | Crushing facilities, conveyors, wash plant Nominal capacity: 18 Mtpa washed bauxite |
Information on Aluminium smelters and refineries
Smelter, refinery or | Location | Ownership | Operator | Title, leases or options | Product | Nominal production | Power | |||||||
Aluminium and alumina | ||||||||||||||
Hillside | ||||||||||||||
Aluminium smelter | Richards Bay, 200 km north of Durban, South Africa | 100% | BHP Billiton | Freehold title to property, plant, equipment Leases over harbour facilities | Standard aluminium ingots Liquid metal transferred to Bayside Casthouse | 726 ktpa primary aluminium | Eskom (national power supplier) under long-term contracts Contract prices for Hillside 1 and 2 linked to LME aluminium price Prices for Hillside 3 linked to SA and US producer price indices | |||||||
Bayside | ||||||||||||||
Aluminium smelter | Richards Bay, 200 km north of Durban, South Africa | 100% | BHP Billiton | Primary aluminium, slab products | Ramp-down activities completed in June 2014, going forward only the Casthouse will operate processing liquid metal from Hillside |
| ||||||||
Mozal | ||||||||||||||
Aluminium smelter | 17 km from Maputo, Mozambique | BHP Billiton 47.1% of Mozal SARL
Mozambique Government 3.9% | BHP Billiton | 50-year government concession to use the land Renewable for | Standard aluminium ingots | 561 ktpa | Motraco underlong-term contract Contract price-linked to SA producer price index |
Smelter, refinery or |
| Ownership | Operator | Title, leases or options | Product | Nominal production | Power source | |||||||
Worsley | ||||||||||||||
Alumina refinery | 55 km northeast of Bunbury, Western Australia | BHP Billiton 86% Sojitz Alumina 4% Japan Alumina Associates 10% Ownership structure of operator as per Worsley JV | BHP Billiton Worsley Alumina Pty Ltd | 2,480 ha refinery lease from Western Australia Government expires in 2025 21-year renewal available | Metallurgical grade alumina | 4.6 Mtpa | JV-owned on-site coal power station, third party on-site gas-fired steam power generation plant, third party leased on-site multifuel co-generation steam and power generation plant | |||||||
Alumar | ||||||||||||||
Alumina refinery and aluminium smelter | São Luís, Maranhão, Brazil | Aluminium smelter: BHP Billiton 40% Alcoa 60% Alumina refinery: BHP Billiton 36% Alcoa and affiliates 54% Rio Tinto 10% | Alcoa operates both facilities | All property held freehold | Alumina and aluminium ingots | Refinery: 3.5 Mtpa alumina Smelter: 124 ktpa primary aluminium (Potline 1) | Electronorte (Brazilian public power generation concessionaire), under long-term contract |
Development projects
There were no active aluminium development projects in FY2014.
Manganese
Our Aluminium, Manganese and Nickel Business produces a combination of manganese ores and alloys from sites in South Africa and Australia. We are the world’s largest producer of manganese ore and one of the top global producers of manganese alloy. Manganese alloy is a key input into the steelmaking process. Manganese high-grade ore is particularly valuable to alloy producers because of the value in use differential over low-grade ore. The value in use differential is the degree to which high-grade ore is proportionately more efficient than low-grade ore to process in the production of alloy.
Manganese alloy smelters are a key conduit of manganese alloy and ore into steelmaking and enable us to access markets with an optimal mix of ore and alloy, optimise production to best suit market conditions and give us technical insight into the performance of our ores in smelters.
Approximately 83 per cent of our ore production is sold directly to external customers, predominantly located in China, South Korea and India, and the remainder is used as feedstock in our alloy smelters. Manganese alloy is sold to steel mills, mainly in Europe and North America. Manganese ore and alloy are sold on short-term or spot contracts, with prices linked to published indices. Neither commodity is exchange traded, and prices are largely determined by supply and demand balances. Ore is priced per dry metric tonne unit and referenced to a benchmark ore of 44 per cent manganese grade cost insurance freight (CIF) China. Alloy is priced per tonne, typically on a delivered basis (DDP). Manganese production in FY2014 was 8,302 kt of ore and 646 kt of alloy.
We own and manage all of our manganese mining operations and alloy plants through the Manganese joint ventures with Anglo American. In South Africa, we own 60 per cent of Samancor Holdings (Pty) Ltd which via its wholly owned subsidiary, Samancor Manganese (Pty) Ltd, operates the Metalloys division. Samancor Manganese owns 74 per cent of Hotazel Manganese Mines (Pty) Ltd (HMM), which gives us an effective interest of 44.4 per cent in HMM. The remaining 26 per cent of HMM is owned under the terms of the South AfricanB-BBEE legislation, which reflects our commitment to economic transformation in South Africa. In Australia, we own 60 per cent of Groote Eylandt Mining Company Pty Ltd (GEMCO) and we have an effective interest of 60 per cent in GEMCO’s wholly owned subsidiary, Tasmanian Electro Metallurgical Company Pty Ltd (TEMCO).
Our assets, Manganese Australia and Manganese South Africa, consist of the following:
Mines
HMM
HMM owns the Mamatwan open-cut mine and the Wessels underground mine. Mined ore is processed into a saleable product through a crushing and wet screening operation, with some ore undergoing further processing in the form of dense media separation and sintering. Approximately 25 per cent of the ore mined is beneficiated into alloy at Metalloys, with the rest being exported via road and rail through Port Elizabeth (approximately 950 kilometres) and Durban (approximately 1,100 kilometres). In FY2014, the total manganese ore production was 3,526 kt. Wessels has a reserve life of 46 years and Mamatwan has a reserve life of 18 years.
GEMCO
GEMCO is an open-cut mining operation, located 16 kilometres from our port facilities at Milner Bay, Northern Territory. These operations, consisting of crushing, screening, washing and dense media separation, combined with its high-grade ore are in relative close proximity to the Asian export markets. FY2014 production of manganese ore was 4,776 kt. GEMCO has a reserve life of 11 years.
Alloy Plants
Metalloys
The Samancor Manganese Metalloys alloy plant is one of the largest manganese alloy producers in the world. Metalloys produces high- and medium-carbon ferromanganese using ore transported by rail from HMM. Production of manganese alloy in FY2014 was 377 kt.
TEMCO
TEMCO, located in Tasmania, is a medium-sized producer of high-carbon ferromanganese, silicomanganese and sinter using ore shipped from GEMCO, primarily using hydroelectric power. Production of manganese alloy in FY2014 was 269 kt.
Information on Manganese mining operations
The following table contains additional details of our mining operations. These tables should be read in conjunction with the production (refer to section 2.2.2) and reserve tables (refer to section 2.3.2).
Mine & location | Means of access | Ownership | Operator | Title, leases or options | History | Mine type & style | Power source | Facilities, use & | ||||||||
Manganese ore | ||||||||||||||||
Hotazel Manganese Mines (HMM) | ||||||||||||||||
Kalahari Basin, South Africa Mamatwan and Wessels mines | Public road Most ore and sinter products transported by rail Approximately 34% of ore beneficiated locally, balance exported via Port Elizabeth (approximately 950 km) and Durban (approximately 1,100 km) | BHP Billiton 44.4% Anglo American 29.6% Ntsimbintle 9% NCAB 7% Iziko 5% HMM Education Trust 5% | BHP Billiton | Existing New Order Rights valid until 2035 | Mamatwan commissioned in 1964 Wessels commissioned in 1973 | Mamatwan: open-cut Wessels: underground
Banded iron manganese ore type | Eskom (national power supplier) under |
| ||||||||
|
| |||||||||||||||
Groote Eylandt, Northern Territory, Australia | Ore transported 16 km from concentrator by road
|
| BHP Billiton |
Valid until 2031 | Commissioned in | Open-cut
| On-site diesel power generation | Beneficiation process: crushing, screening, washing and dense media separation Produces lump and fines products Capacity: 4.8 wet Mtpa |
(1) | Capacity: Mamatwan – approximately 3.5 Mtpa of |
Information on Manganese smelters, refineries and processing plants
Smelter, refinery or |
| Ownership | Operator | Title, leases or options | Product | Nominal production | Power source | |||||||
Manganese alloy | ||||||||||||||
Metalloys | ||||||||||||||
Manganese alloy plant (division of Samancor Manganese (Pty) Ltd) | Meyerton, South Africa | BHP Billiton 60% Anglo American 40% | BHP Billiton | Freehold title over property, plant and equipment | Manganese alloys including high-carbon ferromanganese, refined (medium-carbon ferromanganese) alloy | 410 ktpa high-carbon ferromanganese (including hot metal) 90 ktpa medium-carbon ferromanganese | Eskom 32 MW of internal power generated from furnace off-gases | |||||||
Tasmanian Electro Metallurgical Company (TEMCO) | ||||||||||||||
Manganese alloy plant | Bell Bay, Tasmania, Australia | BHP Billiton 60% Anglo American 40% | BHP Billiton | Freehold title over property, plant and equipment | Ferroalloys, including high-carbon ferromanganese, silicomanganese and sinter | 150 ktpa high-carbon ferromanganese 120 ktpa silicomanganese 325 ktpa sinter | Aurora Energy On-site energy recovery unit generates 11 MW for internal use |
Development projects
GEMCO expansion
The US$279 million GEMCO Expansion Project (GEEP2) (US$167 million BHP Billiton share), approved in July 2011, was delivered on time and on budget in the December 2013 quarter. GEEP2 increased GEMCO’s capacity from 4.2 Mtpa to 4.8 Mtpa through the introduction of a dense media circuit by-pass facility. The expansion has also addressed key infrastructure constraints by increasing road and port capacity to 5.9 Mtpa, creating 1.1 Mtpa of additional capacity for future expansions.
Premium Concentrate (PC02)
In August 2014 a project to build a stand-alone PC02 plant at GEMCO was approved for US$139 million (BHP Billiton share US$83 million). The project is expected to complete by the December 2015 quarter and produce 0.2 Mtpa in FY2016 and ramp-up to 0.5 Mtpa in FY2017.
HMM
The central block development project at the Wessels underground mine is being progressed in two phases. The first phase of the project was commissioned in December 2013 at a cost of US$92.4 million (US$40.7 million BHP Billiton share) and comprised the construction of the ventilation shaft and development of the associated underground ventilation network.
The second phase will complete infrastructure required to expand the mine to 1.5 Mtpa and comprises the development of a run of mine infrastructure handling system for central block, the development and equipping of underground workshops, including materials handling design, procurement and installation. A feasibility study was successfully completed in FY2014 and was approved for execution in July 2014 at a cost of US$30.8 million (US$13.7 million BHP Billiton share). The project is expected to complete in the September 2016 quarter.
Nickel
Our Aluminium, Manganese and Nickel Business primarily supplies nickel products to customers in the stainless steel industry, principally in northern Asia and western Europe. Nickel is an important component of the most commonly used types of stainless steel. We also supply nickel to other markets, including the specialty alloy, foundry, chemicals and refractory material industries. We are a major producer of nickel with total production in FY2014 of 143 kt of contained nickel. We sell our nickel products at various stages including concentrate, matte and metal under a mix of long-term, medium-term and spot volume contracts, with prices linked to the LME nickel price.
Our assets, located in Australia and Colombia, consist of the following operations:
Nickel West
Our wholly owned Nickel West Asset in Western Australia consists of an integrated system of mines, concentrators, a smelter and a refinery. We mine nickel-bearing sulphide ore at our Mt Keith and Cliffs operations, located north of Kalgoorlie. Mt Keith has a reserve life of 5.9 years. Cliffs is an underground mine with a reserve life of 3.2 years. We operate concentrator plants at Mt Keith and at Leinster, which also concentrate ore from Cliffs. On 31 October 2013, production at the Nickel West Leinster Perseverance underground mine was suspended following a significant seismic event. A subsequent review of the incident determined it was unsafe to resume operations. The Rocky’s Reward open-cut mine, near Leinster, provided a temporary alternative ore supply to Nickel West, with mining operations completed in July 2014.
We also operate the Kambalda concentrator south of Kalgoorlie, where we source ore through tolling and concentrate purchase arrangements with third parties in the Kambalda region. We also have purchase agreements in place for the direct purchase of concentrate, which we re-pulp, dry and blend with other concentrate processed at Kambalda.
Ore from our Mt Keith mine is concentrated at Mt Keith and then transported by road approximately 110 kilometres to Leinster for drying. Ore from the Cliffs and Leinster mines is concentrated and dried at Leinster. Dry nickel concentrate is then transported via road and rail approximately 375 kilometres to our Kalgoorlie smelter. Concentrate from Kambalda is transported via rail approximately 60 kilometres to our Kalgoorlie smelter.
Small volumes of concentrate are sold into the external market; however, the majority of volumes are processed into nickel matte, containing approximately 65 per cent nickel. In FY2014, we exported approximately 29 per cent of our nickel matte production. The remaining nickel matte is transported, principally by rail, to our Kwinana nickel refinery, a distance of approximately 650 kilometres. The nickel matte is processed into nickel metal in the form of LME grade briquettes and nickel powder, together with a range of saleable by-products.
Nickel West production in FY2014 was 98.9 kt of contained nickel.
Cerro Matoso
Our 99.98 per cent owned Cerro Matoso Asset in Colombia combines a lateritic nickel ore deposit with a ferronickel smelter. The smelter produces high-purity, low-carbon ferronickel granules. Cerro Matoso has an estimated reserve life of 15 years. Production in FY2014 was 44.3 kt of nickel in ferronickel form.
During FY2013, Cerro Matoso successfully extended its mining concessions with the Colombian Government until 2029, with a conditional extension until 2044. The agreement includes an increase in the royalty rate from 12 per cent to 13 per cent. The extension of the contract term to 2044 is conditional on Cerro Matoso increasing processing capacity by 50 per cent by 2022.
Information on Nickel mining operations
The following table contains additional details of our mining operations. This table should be read in conjunction with the production (refer to section 2.2.2) and reserve tables (refer to section 2.3.2).
Mine | Means of access | Ownership | Operator | Title, leases or | History | Mine type & | Power source | Facilities, use & | ||||||||
Nickel | ||||||||||||||||
Mt Keith 485 km north of Kalgoorlie, Western Australia | Private road Nickel concentrate transported by road to Leinster nickel operations for drying and | 100% | BHP Billiton | Mining leases granted by Western Australia Government Key leases expire between 2015 and 2034 Renewals at government discretion | Officially commissioned in 1995 by WMC
Acquired in
| Open-cut
| On-site third party leased gas-fired turbines Contracts expire in 2024 Natural gas sourced and transported under separate long-term contracts | Concentration plant with a nominal capacity: 11 Mtpa of ore | ||||||||
Leinster | ||||||||||||||||
375 km north of Kalgoorlie, Western Australia |
Nickel concentrate shipped by road and | 100% | BHP Billiton | Mining leases granted by Western Australia Government Key leases expire between 2019 and 2034 Renewals at government discretion | Production commenced in 1979
Perseverance underground mine ceased operations during 2013 | |||||||||||
Open-cut
| On-site third party leased gas-fired turbines Contracts expire in 2024 Natural gas sourced and transported under separate long-term contracts | Concentration plant with a nominal capacity: 3 Mtpa of |
Mine & | Means of | Ownership | Operator | Title, | History |
| Power | Facilities, | ||||||||||
| ||||||||||||||||||
481 km north of Kalgoorlie, Western Australia |
| 100%
| BHP Billiton | Mining Key leases expire between 2025 and 2028 Renewals at government discretion | Production commenced
Acquired in |
Steeply dipping massive textured nickel-sulphide mineralisation, associated with metamorphosed ultramafic lava flows |
| |||||||||||
| ||||||||||||||||||
Montelibano, Córdoba, Colombia | Public road | BHP Billiton 99.98%
| BHP Billiton |
|
Ownership increased to Expansion project to double installed capacity completed in 2001 | Open-cut
| National electricity grid under contracts expiring in December 2014 New supply contract agreed for 2016 to 2018 Renewal process for 2015 in progress Domestic natural gas for drier and kiln operation supplied by owned pipeline Gas supply contracts expiring December 2021 | Ferronickel smelter and refinery integrated with the mine Beneficiation
Nominal capacity: 50 ktpa of nickel in | ||||||||||
|
|
|
|
Information on Nickel smelters, refineries and processing plants
|
| Ownership | Operator | Title, |
|
| Power | |||||||||
Nickel |
| |||||||||||||||
| ||||||||||||||||
| 56 km south of Kalgoorlie, Western Australia | 100% | BHP Billiton |
Renewals at government discretion |
|
Natural gas sourced and transported under separate long-term contracts | ||||||||||
Kalgoorlie | ||||||||||||||||
| Kalgoorlie, Western Australia | 100% | BHP Billiton | Freehold title over the property | Matte containing approximately 65% nickel | 110 ktpa nickel matte |
Natural gas sourced and transported under separate long-term contracts | |||||||||
Kwinana | ||||||||||||||||
| BHP Billiton | Freehold title over the property |
|
|
|
Development projects
Mt Arthur open-cut expansions (RX1)There were no active nickel development projects in FY2014.
On 25 March 2011, we announced2.1.6 Marketing
BHP Billiton’s Marketing organisation manages the first stageGroup’s revenue line and is responsible for:
Our responsibilities require an active presence in the various commodities markets, the global freight market, and in crude and gas pipeline transportation. We manage the supply chain for our products and develop strong relationships with our customers. We actively manage the levels of finished goods inventory, supply vendor payables and trade receivables, thereby ensuring we do not carry excess working capital. We also manage credit and price risk by approximately 4 Mt, to approximately 24 mtpa and followsassessing customers for creditworthiness while ensuring our investment in capacitysales positions are reflective of the market at the Porttime of Newcastle. Knowndelivery by linking to commodity market indices.
Marketing adds value by releasing full economic value of the Group’s products through maximising unit price; minimising the costs of distribution and major traded raw materials that are consumed in the Businesses’ production processes; supporting the Businesses in optimising the value of our resources via our approach to quality and other commercial parameters; and ensuring the Group’s view of long-run markets is well informed and insightful.
Our market insight is strengthened by our proximity to our customers and the flow of information in our centralised marketing structure. We research and analyse the fundamentals of demand and supply and integrate this knowledge into long-run views of the commodity markets, enabling the Group to plan and invest optimally.
The primary hub for our marketing activities is Singapore, while our marketing of oil and gas is headquartered in Houston, United States. The two hub offices incorporate all the functions required to manage marketing and distribution from our Businesses to our customers. In addition, we have marketers located close to our customers in 14 cities across the world. This model enables centralised decision-making supported by regional liaison offices close to our customers that build long-term value-creating relationships.
The consolidation of commercial accountabilities through our centralised model enables the optimisation of our sales positions, provides greater value to distribution activities, and ensures more effective risk management, which improves our commercial capability. Marketing demonstrates leadership in the drive towards improved liquidity and transparency in the markets for many of our commodities through our investments in electronic platforms as physical sales channels, such as the RX1 Project, itdevelopment and introduction of globalORE, globalCOAL and the China Beijing International Mining Exchange. We actively focus on sustaining relationships with our customers to assure our access to market and to sell our products at market prices.
Within the Singapore hub, we have a centralised ocean freight business that manages our in-house freight requirements for the Group. The objective of the freight business is expected to commence operation increate a competitive advantage through the second halfprocurement of 2013 at an estimated capital investmentsafe, sustainable shipping solutions, which both maximise production throughput and minimise costs through the Group’s supply chains.
As one of US$400 million.
The environmental assessment approval granted in September 2010 will allowthe largest global shippers of bulk commodities, we are seen as a key trading partner, allowing us to develop additional coal reserves inselect among the future with studies underway to examine the expansionhighest quality freight service providers and ship owners. The scope and scale of the mine.our commodity portfolio
Expansionand extensive fleet of Cerrejón Coal (P40 Project)hire chartered vessels allows us to arbitrage and optimise positions to minimise freight costs. This includes flexibility in diverting tonnages between markets; maximising tonnages for both inbound and outbound journeys; and parcelling of commodities.
On 18 August 2011, we announced a $US437 million (BHP Billiton share) investmentWe are proud of our strong partnerships with our customers. We provide them with reliable supply of product at market-reflective prices. We engage in the expansiontechnical collaboration with many of Cerrejón Coal, known as the P40 Project, which will enable Cerrejón Coal’s saleable thermal coal productionour customers, to increase by eight mtpaimprove our understanding of their needs and help ensure they are able to approximately 40 mtpa. The expansion project will seemake optimal use of our 33.3 per cent share of production and sales increase from 10.7 mtpa to 13.3 mtpa. Construction will commence in CY2011 with completion expected in CY2013. The project scope includes a second berth and dual quadrant ship loader at Cerrejón’s 100 per cent owned and operated Puerto Bolivar, along with necessary mine, rail and associated supply chain infrastructure.
Newcastle Port Third Phase Expansion
On 31 August 2011, we announced a US$367 million (BHP Billiton share) investment in the third stage development of the Newcastle Coal Infrastructure Group’s coal handling facility in Newcastle, Australia, in which, NSW Energy Coal is a 35.5 per cent shareholder. The port expansion project will increase total capacity at the coal terminal from 53 mtpa to 66 mtpa. This will increase NSW Energy Coal’s allocation by a further 4.6 mtpa to 19.2 mtpa supporting the future expansions of the Mt Arthur Coal mine. The first coal on the new ship loader is scheduled to occur in FY2014, with the terminal expected to operate at full capacity within the following 12 months.products.
2.3.12.2.1 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 2011, 20102014, 2013 and 2009.2012. We have shown volumes of marketable production after deduction of applicable royalties, fuel and flare. We have included in the table average production costs per unit of production and average sales prices for oil and condensate and natural gas for each of those periods.
BHP Billiton Group share of production Year ended 30 June | BHP Billiton Group share of production Year ended 30 June | |||||||||||||||||||||||
2011 | 2010 | 2009 | 2014 | 2013 | 2012 | |||||||||||||||||||
Production volumes | ||||||||||||||||||||||||
Crude oil and condensate(’000 of barrels) | ||||||||||||||||||||||||
Australia | 40,447 | 31,540 | 32,496 | 23,645 | 25,922 | 31,145 | ||||||||||||||||||
United States | 30,157 | 41,522 | 20,818 | 53,964 | 38,724 | 30,824 | ||||||||||||||||||
Other | 9,987 | 11,325 | 13,014 | |||||||||||||||||||||
Other(5) | 6,452 | 7,866 | 9,232 | |||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||
Total crude oil and condensate | 80,591 | 84,387 | 66,328 | 84,061 | 72,512 | 71,201 | ||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||
Natural gas(billion cubic feet) | ||||||||||||||||||||||||
Australia | 274.74 | 259.65 | 258.14 | 287.5 | 276.13 | 249.97 | ||||||||||||||||||
United States | 49.09 | 17.68 | 11.91 | 460.2 | 489.03 | 456.69 | ||||||||||||||||||
Other | 81.23 | 91.24 | 92.75 | |||||||||||||||||||||
Other(5) | 91.6 | 109.11 | 115.60 | |||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||
Total natural gas | 405.06 | 368.57 | 362.80 | 839.3 | 874.27 | 822.26 | ||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||
Natural Gas Liquids(1) (’000 of barrels) | ||||||||||||||||||||||||
Australia | 7,962 | 8,652 | 7,977 | 8,448 | 7,927 | 7,943 | ||||||||||||||||||
United States | 1,980 | 2,545 | 1,128 | 13,620 | 9,575 | 5,744 | ||||||||||||||||||
Other | 1,341 | 1,552 | 2,071 | |||||||||||||||||||||
Other(5) | 18 | 37 | 398 | |||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||
Total NGL(1) | 11,283 | 12,749 | 11,176 | 22,086 | 17,539 | 14,085 | ||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||
Total petroleum products production(million barrels of oil equivalent)(2) | ||||||||||||||||||||||||
Total production of petroleum products(million barrels of oil equivalent)(2) | ||||||||||||||||||||||||
Australia | 94.20 | 83.47 | 83.50 | 80.01 | 79.87 | 80.75 | ||||||||||||||||||
United States | 40.32 | 47.01 | 23.93 | 144.28 | 129.80 | 112.69 | ||||||||||||||||||
Other | 24.86 | 28.08 | 30.54 | |||||||||||||||||||||
Other(5) | 21.74 | 26.09 | 28.90 | |||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||
Total petroleum products production(million barrels of oil equivalent)(2) | 159.38 | 158.56 | 137.97 | |||||||||||||||||||||
Total production of petroleum products | 246.03 | 235.76 | 222.34 | |||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||
Average sales price | ||||||||||||||||||||||||
Crude oil and condensate(US$ per barrel) | ||||||||||||||||||||||||
Australia | 96.32 | 74.12 | 70.32 | 111.88 | 110.83 | 114.33 | ||||||||||||||||||
United States | 90.01 | 71.55 | 62.90 | 97.57 | 102.33 | 106.22 | ||||||||||||||||||
Other | 90.69 | 75.57 | 60.69 | |||||||||||||||||||||
Other(5) | 108.13 | 107.46 | 113.26 | |||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||
Total crude oil and condensate | 93.29 | 73.05 | 66.18 | 102.47 | 105.91 | 110.66 | ||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||
Natural gas(US$ per thousand cubic feet) | ||||||||||||||||||||||||
Australia | 4.21 | 3.52 | 3.07 | 5.20 | 4.73 | 4.62 | ||||||||||||||||||
United States | 3.48 | 4.80 | 6.61 | 4.10 | 3.29 | 2.82 | ||||||||||||||||||
Other | 3.92 | 3.05 | 4.08 | |||||||||||||||||||||
Other(5) | 3.92 | 4.42 | 4.13 | |||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||
Total natural gas | 4.00 | 3.43 | 3.57 | 4.35 | 3.76 | 3.40 | ||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||
Natural Gas Liquids(US$ per barrel) | ||||||||||||||||||||||||
Australia | 58.05 | 48.20 | 44.71 | 63.12 | 63.13 | 61.61 | ||||||||||||||||||
United States | 49.79 | 39.51 | 48.19 | 30.28 | 30.41 | 45.72 | ||||||||||||||||||
Other | 59.54 | 49.40 | 38.88 | |||||||||||||||||||||
Other(5) | 32.00 | 28.61 | 55.06 | |||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||
Total NGL | 56.77 | 46.47 | 43.91 | 42.28 | 45.70 | 54.85 | ||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||
Total Average production cost(US$ per barrel of oil equivalent)(3) (4) | ||||||||||||||||||||||||
Australia | 8.18 | 8.23 | 7.95 | |||||||||||||||||||||
United States | 7.80 | 6.27 | 5.91 | |||||||||||||||||||||
Other(5) | 9.58 | 8.45 | 7.84 | |||||||||||||||||||||
|
|
| ||||||||||||||||||||||
Total Average production cost | 8.08 | 7.18 | 6.90 | |||||||||||||||||||||
|
|
|
Average Production Cost(US$ per barrel of oil equivalent)(3) Australia United States Other Average Production Cost(US$ per barrel of oil equivalent)(3) BHP Billiton Group share
of production
Year ended 30 June 2011 2010 2009 5.75 5.59 4.51 6.45 5.62 7.20 8.39 7.48 6.74 6.34 5.93 5.47
(1) | LPG and |
(2) | Total |
(3) | Average production costs include direct and indirect costs relating to the production of hydrocarbons and the foreign exchange effect of translating local currency denominated costs into US dollars, but excludes ad valorem and severance taxes. |
2.3.2
(4) | Total average production costs reported here do not include the costs to transport our produced hydrocarbons to the point of sale. Total production costs, including transportation costs, but excluding ad valorem and severance taxes, were US$11.70 per boe, US$10.85 per boe, and US$10.00 per boe for the years ended 30 June 2014, 2013 and 2012, respectively. |
(5) | Other is comprised of Algeria, Pakistan, Trinidad and Tobago, and the United Kingdom. |
2.2.2 Minerals
The table below details our mineral and derivative product production for all CSGsBusinesses except Petroleum for the three years ended 30 June 2011, 20102014, 2013 and 2009. Production shows2012. The production numbers represent our share of production, including our proportional share of production for which income is derived from our equity accounted investments, unless otherwise stated. The Group changed its accounting policy for equity accounted investments from 1 July 2013 as set out in note 1 ‘Accounting policies’ and note 37 ‘Impact of new accounting standards and change in accounting policies’ in the Financial Statements. For discussion of minerals pricing during the past three years, refer to section 1.15.1.
BHP Billiton Group interest % | BHP Billiton Group share of production Year ended 30 June | |||||||||||||||
2011 | 2010 | 2009 | ||||||||||||||
Aluminium | ||||||||||||||||
Alumina | ||||||||||||||||
Production (’000 tonnes) | ||||||||||||||||
Worsley, Australia | 86.0 | 2,902 | 3,054 | 2,924 | ||||||||||||
Paranam, Suriname(1) | 45.0 | — | 78 | 935 | ||||||||||||
Alumar, Brazil | 36.0 | 1,108 | 709 | 537 | ||||||||||||
|
|
|
|
|
| |||||||||||
Total alumina | 4,010 | 3,841 | 4,396 | |||||||||||||
|
|
|
|
|
| |||||||||||
Aluminium | ||||||||||||||||
Production (’000 tonnes) | ||||||||||||||||
Hillside, RSA | 100.0 | 711 | 710 | 702 | ||||||||||||
Bayside, RSA | 100.0 | 97 | 98 | 99 | ||||||||||||
Alumar, Brazil | 40.0 | 174 | 174 | 177 | ||||||||||||
Mozal, Mozambique | 47.1 | 264 | 259 | 255 | ||||||||||||
|
|
|
|
|
| |||||||||||
Total aluminium | 1,246 | 1,241 | 1,233 | |||||||||||||
|
|
|
|
|
| |||||||||||
Base Metals(2) | ||||||||||||||||
Copper | ||||||||||||||||
Payable metal in concentrate (’000 tonnes) | ||||||||||||||||
Escondida, Chile | 57.5 | 390.5 | 448.1 | 417.6 | ||||||||||||
Antamina, Peru | 33.8 | 97.8 | 98.6 | 109.0 | ||||||||||||
Pinto Valley, US(3) | 100.0 | — | — | 33.3 | ||||||||||||
|
|
|
|
|
| |||||||||||
Total copper concentrate | 488.3 | 546.7 | 559.9 | |||||||||||||
|
|
|
|
|
| |||||||||||
Cathode(’000 tonnes) | ||||||||||||||||
Escondida, Chile | 57.5 | 179.1 | 174.2 | 172.1 | ||||||||||||
Pampa Norte, Chile(4) | 100.0 | 272.2 | 244.8 | 274.8 | ||||||||||||
Pinto Valley, US(3) | 100.0 | 5.7 | 6.2 | 6.2 |
BHP Billiton Group interest % | BHP Billiton Group share of production Year ended 30 June | |||||||||||||||
2014 | 2013 | 2012 | ||||||||||||||
Copper Business (1) | ||||||||||||||||
Copper | ||||||||||||||||
Payable metal in concentrate (’000 tonnes) | ||||||||||||||||
Escondida, Chile (2) | 57.5 | 844.7 | 831.5 | 580.5 | ||||||||||||
Antamina, Peru | 33.75 | 143.5 | 139.7 | 127.0 | ||||||||||||
Pinto Valley, United States (3) | 100 | 12.5 | 16.6 | – | ||||||||||||
|
|
|
|
|
| |||||||||||
Total copper concentrate | 1,000.7 | 987.8 | 707.5 | |||||||||||||
|
|
|
|
|
| |||||||||||
Copper cathode(’000 tonnes) | ||||||||||||||||
Escondida, Chile (2) | 57.5 | 308.0 | 297.9 | 299.1 | ||||||||||||
Pampa Norte, Chile (4) | 100 | 233.1 | 232.6 | 263.7 | ||||||||||||
Pinto Valley, United States (3) | 100 | 0.9 | 4.9 | 5.4 | ||||||||||||
Olympic Dam, Australia | 100 | 184.4 | 166.2 | 192.6 | ||||||||||||
|
|
|
|
|
| |||||||||||
Total copper cathode | 726.4 | 701.6 | 760.8 | |||||||||||||
|
|
|
|
|
| |||||||||||
Total copper concentrate and cathode | 1,727.1 | 1,689.4 | 1,468.3 | |||||||||||||
|
|
|
|
|
| |||||||||||
Lead | ||||||||||||||||
Payable metal in concentrate (’000 tonnes) | ||||||||||||||||
Cannington, Australia | 100 | 186.5 | 213.4 | 239.1 | ||||||||||||
Antamina, Peru | 33.75 | 1.5 | 1.0 | 0.8 | ||||||||||||
|
|
|
|
|
| |||||||||||
Total lead | 188.0 | 214.4 | 239.9 | |||||||||||||
|
|
|
|
|
|
BHP Billiton Group interest % | BHP Billiton Group share of production Year ended 30 June | BHP Billiton Group interest % | BHP Billiton Group share of production Year ended 30 June | |||||||||||||||||||||||||||||
2011 | 2010 | 2009 | ||||||||||||||||||||||||||||||
Olympic Dam, Australia | 100.0 | 194.1 | 103.3 | 194.1 | ||||||||||||||||||||||||||||
|
|
| ||||||||||||||||||||||||||||||
Total copper cathode | 651.1 | 528.5 | 647.2 | |||||||||||||||||||||||||||||
|
|
| ||||||||||||||||||||||||||||||
Total copper concentrate and cathode | 1,139.4 | 1,075.2 | 1,207.1 | |||||||||||||||||||||||||||||
|
|
| ||||||||||||||||||||||||||||||
Lead | ||||||||||||||||||||||||||||||||
Payable metal in concentrate (’000 tonnes) | ||||||||||||||||||||||||||||||||
Cannington, Australia | 100.0 | 243.4 | 245.4 | 226.8 | ||||||||||||||||||||||||||||
Antamina, Peru | 33.8 | 1.2 | 3.0 | 3.3 | ||||||||||||||||||||||||||||
|
|
| ||||||||||||||||||||||||||||||
Total lead | 244.6 | 248.4 | 230.1 | |||||||||||||||||||||||||||||
|
|
| BHP Billiton Group interest % | 2014 | 2013 | 2012 | ||||||||||||||||||||||||||
Zinc | ||||||||||||||||||||||||||||||||
Payable metal in concentrate (’000 tonnes) | ||||||||||||||||||||||||||||||||
Cannington, Australia | 100.0 | 60.7 | 62.7 | 54.8 | 100 | 57.9 | 56.3 | 54.7 | ||||||||||||||||||||||||
Antamina, Peru | 33.8 | 91.5 | 135.6 | 108.4 | 33.75 | 52.0 | 71.9 | 57.5 | ||||||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||||||||
Total zinc | 152.2 | 198.3 | 163.2 | 109.9 | 128.2 | 112.2 | ||||||||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||||||||
Gold | ||||||||||||||||||||||||||||||||
Payable metal in concentrate (’000 ounces) | ||||||||||||||||||||||||||||||||
Escondida, Chile | 57.5 | 84.7 | 76.4 | 67.3 | ||||||||||||||||||||||||||||
Escondida, Chile(2) | 57.5 | 72.9 | 71.5 | 88.5 | ||||||||||||||||||||||||||||
Pinto Valley, United States(3) | 100 | 0.1 | – | – | ||||||||||||||||||||||||||||
Olympic Dam, Australia (refined gold) | 100.0 | 111.4 | 65.5 | 108.0 | 100 | 121.3 | 113.3 | 117.8 | ||||||||||||||||||||||||
Pinto Valley, US(3) | 100.0 | — | — | 0.9 | ||||||||||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||||||||
Total gold | 196.1 | 141.9 | 176.2 | 194.3 | 184.8 | 206.3 | ||||||||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||||||||
Silver | ||||||||||||||||||||||||||||||||
Payable metal in concentrate (’000 ounces) | ||||||||||||||||||||||||||||||||
Escondida, Chile | 57.5 | 2,849 | 2,874 | 2,765 | ||||||||||||||||||||||||||||
Escondida, Chile(2) | 57.5 | 4,271 | 2,960 | 3,341 | ||||||||||||||||||||||||||||
Antamina, Peru | 33.8 | 3,600 | 4,712 | 4,090 | 33.75 | 4,359 | 3,952 | 4,272 | ||||||||||||||||||||||||
Cannington, Australia | 100.0 | 35,225 | 37,276 | 33,367 | 100 | 25,161 | 31,062 | 34,208 | ||||||||||||||||||||||||
Olympic Dam, Australia (refined silver) | 100.0 | 982 | 500 | 937 | 100 | 972 | 880 | 907 | ||||||||||||||||||||||||
Pinto Valley, US(3) | 100.0 | — | — | 182 | ||||||||||||||||||||||||||||
Pinto Valley, United States(3) | 100 | 41 | 59 | – | ||||||||||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||||||||
Total silver | 42,656 | 45,362 | 41,341 | 34,804 | 38,913 | 42,728 | ||||||||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||||||||
Uranium oxide | ||||||||||||||||||||||||||||||||
Uranium | ||||||||||||||||||||||||||||||||
Payable metal in concentrate (tonnes) | ||||||||||||||||||||||||||||||||
Olympic Dam, Australia | 100.0 | 4,045 | 2,279 | 4,007 | 100 | 3,988 | 4,066 | 3,853 | ||||||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||||||||
Total uranium oxide | 4,045 | 2,279 | 4,007 | |||||||||||||||||||||||||||||
Total uranium | 3,988 | 4,066 | 3,853 | |||||||||||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||||||||
Molybdenum | ||||||||||||||||||||||||||||||||
Payable metal in concentrate (tonnes) | ||||||||||||||||||||||||||||||||
Antamina, Peru | 33.8 | 1,445 | 813 | 1,363 | 33.75 | 1,201 | 1,561 | 2,346 | ||||||||||||||||||||||||
Pinto Valley, US(3) | 100.0 | — | — | 159 | ||||||||||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||||||||
Total molybdenum | 1,445 | 813 | 1,522 | 1,201 | 1,561 | 2,346 | ||||||||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||||||||
Diamonds and Specialty Products | ||||||||||||||||||||||||||||||||
Diamonds | ||||||||||||||||||||||||||||||||
Production (’000 carats) | ||||||||||||||||||||||||||||||||
EKATI, Canada | 80.0 | 2,506 | 3,050 | 3,221 | ||||||||||||||||||||||||||||
Iron Ore Business | ||||||||||||||||||||||||||||||||
WAIO | ||||||||||||||||||||||||||||||||
Production (’000 tonnes)(5) | ||||||||||||||||||||||||||||||||
Newman, Australia | 85 | 56,915 | 44,620 | 39,988 | ||||||||||||||||||||||||||||
Yarrie, Australia(6) | 85 | 836 | 1,106 | 768 | ||||||||||||||||||||||||||||
Area C Joint Venture, Australia | 85 | 46,960 | 44,717 | 42,425 | ||||||||||||||||||||||||||||
Yandi Joint Venture, Australia | 85 | 68,518 | 60,054 | 53,536 | ||||||||||||||||||||||||||||
Jimblebar, Australia(7) | 85 | 8,863 | – | – | ||||||||||||||||||||||||||||
Wheelarra, Australia(8) | 85 | 10,553 | 8,377 | 11,338 | ||||||||||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||||||||
Total diamonds | 2,506 | 3,050 | 3,221 | |||||||||||||||||||||||||||||
Total WAIO | 192,645 | 158,874 | 148,055 | |||||||||||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||||||||
Samarco, Brazil | 50 | 10,919 | 10,982 | 11,423 | ||||||||||||||||||||||||||||
|
|
| ||||||||||||||||||||||||||||||
Total iron ore | 203,564 | 169,856 | 159,478 | |||||||||||||||||||||||||||||
|
|
|
Titanium minerals(5) Production (’000 tonnes) Titanium slag Richards Bay Minerals, RSA(6) Rutile Richards Bay Minerals, RSA(6) Zircon Richards Bay Minerals, RSA(6) Total titanium minerals Stainless Steel Materials Nickel Production (’000 tonnes) Cerro Matoso, Colombia Yabulu, Australia(7) Nickel West, Australia Total nickel Cobalt Production (’000 tonnes) Yabulu, Australia(7) Total cobalt Iron Ore(8) Production (’000 tonnes) Newman, Australia(9) Mt Goldsworthy, Australia Area C Australia Yandi, Australia Samarco, Brazil Total iron ore Manganese Manganese ores Saleable production (’000 tonnes) HMM, RSA (10) GEMCO, Australia (10) Total manganese ores Manganese alloys Saleable production (’000 tonnes) Metalloys, RSA (10)(11) TEMCO, Australia (10) Total manganese alloys Metallurgical Coal (12) Production (’000 tonnes) Blackwater, Australia Goonyella Riverside, Australia (13) Peak Downs, Australia Saraji, Australia Coal Business Metallurgical coal Production (’000 tonnes) (9) Blackwater, Australia Goonyella Riverside, Australia Peak Downs, Australia Saraji, Australia Gregory Joint Venture, Australia Daunia, Australia Caval Ridge, Australia (10) Norwich Park, Australia Total BMA South Walker Creek, Australia (11) Poitrel, Australia (11) Total BHP Billiton Mitsui Coal Total Queensland Coal Illawarra Coal, Australia Total metallurgical coal Energy coal Production (’000 tonnes) Navajo, United States (12) San Juan, United States Total New Mexico Coal Middelburg/Wolvekrans, South Africa (13) Khutala, South Africa (13) Klipspruit, South Africa (13) Total Energy Coal South Africa Mt Arthur Coal, Australia Cerrejón, Colombia Total energy coal Aluminium, Manganese and Nickel Business Alumina Saleable production (’000 tonnes) Worsley, Australia Alumar, Brazil Total alumina Aluminium Production (’000 tonnes) Hillside, South Africa Bayside, South Africa (14) Alumar, Brazil Mozal, Mozambique Total aluminium BHP Billiton
Group
interest % BHP Billiton Group share
of production
Year ended 30 June 2011 2010 2009 37.76 366 317 490 37.76 32 34 44 37.76 83 83 120 481 434 654 99.9 40.0 49.6 50.5 100.0 — 2.8 33.9 100.0 112.7 123.8 88.7 152.7 176.2 173.1 100.0 — 0.1 1.4 0.0 0.1 1.4 85.0 45,245 32,097 31,350 85.0 1,198 1,688 1,416 85.0 39,794 38,687 35,513 85.0 36,460 41,396 37,818 50.0 11,709 11,094 8,318 134,406 124,962 114,415 44.4 3,007 2,718 2,191 60.0 4,086 3,406 2,284 7,093 6,124 4,475 60.0 486 364 301 60.0 267 219 212 753 583 513 50.0 4,589 5,733 5,382 50.0 5,359 6,668 6,685 50.0 3,402 4,332 4,390 50.0 2,779 3,402 3,505 BHP Billiton
Group interest
% BHP Billiton Group share of production
Year ended 30 June 2014 2013 2012 50 6,730 5,432 4,435 50 7,330 6,221 5,003 50 4,909 4,545 3,534 50 4,558 3,449 3,053 50 2,965 2,523 1,411 50 2,201 475 – 50 563 – – 50 – – 1,175 29,256 22,645 18,611 80 5,246 4,351 4,081 80 3,063 2,712 2,612 8,309 7,063 6,693 37,565 29,708 25,304 100 7,513 7,942 7,926 45,078 37,650 33,230 100 5,127 7,468 7,054 100 5,685 5,323 5,514 10,812 12,791 12,568 90 13,368 14,669 14,848 90 9,718 9,554 10,863 90 7,298 7,404 7,568 30,384 31,627 33,279 100 19,964 18,010 16,757 33.3 12,332 10,017 11,663 73,492 72,445 74,267 86 3,916 3,675 2,917 36 1,262 1,205 1,235 5,178 4,880 4,152 100 715 665 621 100 89 96 98 40 104 154 170 47 266 264 264 1,174 1,179 1,153
Norwich Park, Australia Gregory Joint Venture, Australia Total BMA, Australia South Walker Creek, Australia Poitrel, Australia Total BHP Billiton Mitsui Coal, Australia (14) Illawarra, Australia Total metallurgical coal Energy Coal Production (’000 tonnes) Navajo. US San Juan, US Total New Mexico Middelburg/Wolvekrans, RSA (15) Khutala, RSA Klipspruit, RSA Total BECSA Mt Arthur Coal, Australia Cerrejón Coal Company, Colombia Total energy coal Manganese ores Saleable production (’000 tonnes) Hotazel Manganese Mines, South Africa (15) GEMCO, Australia (15) Total manganese ores Manganese alloys Saleable production (’000 tonnes) Metalloys, South Africa (15) (16) TEMCO, Australia (15) Total manganese alloys Nickel Saleable production (’000 tonnes) Cerro Matoso, Colombia Nickel West, Australia Total nickel Divested businesses Diamonds Production (’000 carats) EKATI™, Canada Total diamonds Titanium minerals Production (’000 tonnes) Titanium slag Richards Bay Minerals, South Africa Rutile Richards Bay Minerals, South Africa Zircon Richards Bay Minerals, South Africa Total titanium minerals BHP Billiton
Group
interest % BHP Billiton Group share
of production
Year ended 30 June 2011 2010 2009 50.0 1,055 1,870 1,984 50.0 2,717 2,398 2,762 19,901 24,403 24,708 3,134 3,609 2,978 2,759 2,834 2,457 80.0 5,893 6,443 5,435 100.0 6,884 6,535 6,273 32,678 37,381 36,416 100.0 7,472 7,465 8,363 100.0 4,140 6,013 5,773 11,612 13,478 14,136 100.0 14,328 14,704 14,807 100.0 12,928 10,868 11,125 100.0 7,072 4,887 3,964 34,328 30,459 29,896 100.0 13,671 12,039 11,775 33.3 9,889 10,155 10,594 69,500 66,131 66,401 BHP Billiton
Group interest
% BHP Billiton Group share of production
Year ended 30 June 2014 2013 2012 44.4 3,526 3,490 3,625 60 4,776 5,027 4,306 8,302 8,517 7,931 60 377 374 404 60 269 234 198 646 608 602 99.9 44.3 50.8 48.9 100 98.9 103.3 109.0 143.2 154.1 157.9 80 – 972 1,784 – 972 1,784 37.76 – 53 384 37.76 – 6 38 37.76 – 16 100 – 75 522
(1) |
|
Metal production is reported on the basis of payable metal. |
|
(3) | On 11 October 2013 BHP Billiton completed the sale of its Pinto Valley operations. |
(4) | Includes Cerro Colorado and Spence. |
(5) |
|
|
|
Iron ore production is reported on a wet tonnes |
|
(7) | Shown on 100 per cent basis. BHP Billiton interest in saleable production is 85 per cent. |
(8) | All production from Wheelarra is now processed via the Jimblebar processing hub. |
(9) | Metallurgical coal production is reported on the basis of saleable product. Production figures include some thermal coal. |
(10) | Caval Ridge achieved first production in the June 2014 quarter. |
(11) | Shown on 100 per cent basis. BHP Billiton interest in saleable production is 80 per cent. |
(12) | BHP Billiton completed the sale of Navajo Mine on 30 December 2013. As BHP Billiton will retain control of the mine until full consideration is received, production will continue to be reported by the Group. |
(13) | Shown on 100 per cent basis. BHP Billiton interest in saleable production is 90 per cent. |
(14) | Aluminium smelting at Bayside ceased with the closure of the final potline in June 2014. |
(15) | Shown on 100 per cent basis. BHP Billiton interest in saleable production is 60 per cent, except |
Production includes |
|
|
|
|
BHP Billiton’s Marketing network manages the Group’s revenue line and is responsible for:
selling our products and for the purchase of all major raw materials;
the supply chain for our various products, from assets to market, and also for raw materials, from suppliers to our assets;
managing credit and price risk associated with the revenue line;
achieving market clearing prices for the Group’s products;
defining our view of long-term market fundamentals.
This requires an active and significant presence in the various commodities markets and also the global freight market.
Our marketing activities are centralised in Singapore, The Hague (Netherlands) and Antwerp (Belgium). Our Iron Ore, Metallurgical Coal, Manganese, Base Metals, Stainless Steel Materials, Petroleum and Uranium marketing teams are headquartered in Singapore. The Hague is the hub for our Aluminium, Energy Coal and Freight marketing teams. Our Antwerp office serves our diamonds customers.
These three marketing offices incorporate all the functions required to manage product marketing and distribution – from the point of production to final customer delivery. In addition, we have marketers located in 17 regional offices around the world.
We have a centralised ocean freight business that manages our in-house freight requirements. The primary purpose of the freight business is to create a competitive advantage for our shipments through the procurement and operation of quality, cost-effective shipping. From time to time, we carry complementary cargoes for external parties to optimise profitability.
Our minerals exploration program is integral to our growth strategy and is focused on identifying and capturing new world-class projects for future development or projects that add significant value to existing operations. Targets for exploration are generally resources to underpin development of large low-cost mining projects in a range of minerals, including copper, iron ore, potash, nickel, uranium, manganese and diamond deposits.
Our greenfield exploration activities are organised from four principal offices in Singapore, Perth (Australia), Johannesburg (South Africa) and Santiago (Chile). We continue to pursue opportunities and build our title position in prospective regions, focusing on the Americas, Asia, Africa and Australia. The process of discovery runs from early-stage mapping through to drilling and evaluation. The exploration program is global in scope and prioritises targets based on our assessment of the relative attractiveness of each mineral.
In addition to our activities focused on finding new world-class deposits, several of our CSGs undertake brownfield exploration, principally aimed at delineating and categorising mineral deposits near existing operations, and advancing projects through the development pipeline.
In FY2011, we spent US$683 million on minerals exploration. Of this, US$207 million was spent on greenfield exploration and US$476 million was spent on brownfield exploration and advanced projects.
2.6 Resource and Business Optimisation
Group Resource and Business Optimisation (RBO) provides governance and technical leadership for resource development and Ore Reserve reporting. RBO’s 50 professionals are focused on ensuring optimal value recovery from our resources. The team includes functional experts in mineral resource evaluation, brownfields exploration, planning, research and development, work management, production reporting, mine engineering and mineral process engineering.
RBO engages directly with assets to deliver guidance and assess compliance in resource development and Ore Reserve reporting. It provides the Group Management Committee with assurance reports and portfolio analysis. RBO also provides functional expertise to audits and to investment review programs conducted by other Group Functions.
RBO’s accountabilities include governance for all resource and reserve estimation and Ore Reserve reporting.
Government regulations touch all aspects of our operations. However, because of the geographical diversity of our operations, no one set of government regulations is likely to have a material effect on our business, taken as a whole.
The ability to extract minerals, oil and natural gas is fundamental to our business. In most jurisdictions, the rights to undeveloped mineral or petroleum deposits are owned by the state. Accordingly, we rely upon the rights granted to us by the government that owns the mineral, oil or natural gas. These rights usually take the form of a lease or licence, which gives us the right to access the land and extract the product. The terms of the lease or licence, including the time period for which it is effective, are specific to the laws of the relevant government. Generally, we own the product we extract and royalties or similar taxes are payable to the government. Some of our operations, such as our oil and gas operations in Trinidad and Tobago and Algeria, are subject to production sharing contracts under which both we as the contractor and the government are entitled to a share of the production. Under such production sharing contracts, the contractor is entitled to recover its exploration and production costs from the government’s share of production.
Related to the ability to extract is the ability to process the minerals, oil or natural gas. Again, we rely upon the relevant government to grant the rights necessary to transport and treat the extracted material in order to ready it for sale.
Underlying our business of extracting and processing natural resources is the ability to explore for those orebodies. The rights to explore for minerals, oil and natural gas are granted to us by the government that owns those natural resources that 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.
Governments also impose obligations on us in respect of environmental protection, land rehabilitation, occupational health and safety, and native land title with which we must comply in order to continue to enjoy the right to conduct our operations within that jurisdiction. These obligations often require us to make substantial expenditures to minimise or remediate the environmental impact of our operations, to ensure the safety of our employees and contractors and the like. For further information on these types of obligations, refer to section 2.8 of this Report.
Of particular note are the following regulatory regimes:
2.7.1 South African Mining Charter and Black Economic Empowerment
In 2003, the South African Government released a strategy for broad-based black economic empowerment (BBBEE) that defined empowerment as ‘an integrated and coherent socio-economic process that directly contributes to the economic transformation of South Africa and brings significant increases in the numbers of black people who manage, own and control the country’s economy, as well as significant decreases in income inequalities’. This strategy laid the foundation for the Black Economic Empowerment Act of 2003, which granted government the power to legislate how it wanted black economic empowerment (BEE) to be implemented in South Africa.
As outlined in section 1.5 of this Report, on 1 May 2004, the Mineral and Petroleum Resources Development Act 2002 (MPRDA) took effect, providing for state custodianship of all mineral deposits and abolishing the prior system of privately held mineral rights. It is administered by the Department of Mineral Resources (formerly the Department of Minerals and Energy) of South Africa. In February 2007, the codes of good practice were gazetted, further crystallising the government’s BEE strategy into a single binding document. The codes make provision for businesses to measure their success in contributing to the economic transformation and empowerment of historically disadvantaged South Africans (HDSAs) in the local economy and a scorecard comprising seven metrics was also developed to assist businesses in achieving this success.
In terms of the MPRDA, holders of mining rights granted under the previous system, known as ‘Old Order Rights’, must have applied to convert their rights to ‘New Order Rights’ prior to 30 April 2009. In order for the conversions to be effected, applicants are required to comply with the terms of the Black Economic Empowerment Act of 2003 and the Mining Charter, which has been published under the MPRDA. The Mining Charter requires holders of mining rights to achieve 26 per cent ownership participation by HDSAs in their mining operations by 30 April 2014, of which 15 per cent needed to have been achieved by 30 April 2009. We have submitted to the Department of Mineral Resources of South Africa transactions to meet the legislative requirements and support the conversion to ‘New Order Rights’.
We support broad-based black economic empowerment in South Africa. We believe it is imperative to both the growth and stability of the South African economy and the Group’s strategic objectives and long-term sustainability in that country.
The principles of transformation and empowerment are in line with Our BHP Billiton Charter.
We have established a transformation and empowerment technical committee comprising senior managers with diverse skills to ensure our transformation and empowerment agenda is coordinated and comprehensive.
2.7.2 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 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 for Resources and Energy.
A special transport permit will be required under the Non-Proliferation Act by a party that transports nuclear material from one specified location to another specified location. As we engage service providers to transport uranium, those service providers are required to hold a special transport permit.
2.7.3 Exchange controls and shareholding limits
BHP Billiton Plc
There are no laws or regulations currently in force in the UK that restrict the export or import of capital or the remittance of dividends to non-resident holders of BHP Billiton Plc’s shares, although the Group does operate in some other jurisdictions where remittances of funds could be affected as they are subject to exchange control approvals. There are certain sanctions adopted by the UK Government which implement resolutions of the Security Council of the United Nations and sanctions imposed by the European Union (EU) against certain countries, entities and individuals. Any enforcement of the sanctions by the UK Government would be initiated by HM Treasury. Such sanctions may be in force from time to time and include those against: (i) certain entities and/or individuals associated with the Burmese regime (Myanmar), Cote d’Ivoire, The Democratic People’s Republic of Korea (North Korea), the Democratic Republic of Congo, Egypt, Eritrea, the Republic of Guinea, Lebanon, Liberia, Libya, Iran, Somalia, Sudan, Tunisia and the previous regimes of Iraq and Yugoslavia; (ii) certain officials of Belarus, Syria and Zimbabwe; (iii) individuals indicted by the International Criminal Tribunal for the former Yugoslavia; and (iv) entities and individuals linked with the Taliban, Al-Qaeda and other terrorist organisations.
There are no restrictions under BHP Billiton 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 Billiton Plc’s shares.
There are certain restrictions on shareholding levels under BHP Billiton Plc’s Articles of Association described under the heading ‘BHP Billiton Limited’ below.
BHP Billiton Limited
Under the Australian Banking (Foreign Exchange) Regulations 1959, the Reserve Bank of Australia may impose restrictions on certain financial transactions and require the consent of the Reserve Bank of Australia for the movement of funds into and out of Australia. Based on our searches, restrictions currently apply if funds are to be paid to or received from specified supporters of the former Government of the Federal Republic of Yugoslavia, specified ministers and senior officials of the Government of Zimbabwe, certain specified entities associated with the Democratic People’s Republic of Korea (North Korea), specified individuals associated with the Burmese regime, and certain Iranian organisations and ministers. In addition, from time to time the United Nations Security Council and the Australian Government impose international sanctions on certain countries and organisations. The countries and organisations that are currently subject to United Nations (UN) sanctions are certain individuals or entities linked with the Taliban, Al-Qaeda and other terrorist organisations and certain entities and individuals associated with the Democratic Republic of Congo, Cote d’Ivoire, the Democratic People’s Republic of Korea (North Korea), Eritrea, Iran, Iraq, Lebanon, Liberia, Libya, Sudan and Somalia. The countries currently subject to the Australian Government’s autonomous sanctions are Burma, the Democratic People’s Republic of Korea (North Korea), Fiji, the former Federal Republic of Yugoslavia, Iran, Libya, Syria and Zimbabwe. The controls impose certain approval and reporting requirements on transactions involving such countries, entities and individuals and/or assets controlled or owned by them. Transfers into or out of Australia of amounts greater than A$10,000 in any currency are also subject to reporting requirements.
Remittances of any dividends, interest or other payments by BHP Billiton Limited to non-resident holders of BHP Billiton Limited’s securities are not restricted by exchange controls or other limitations, save that in certain circumstances, BHP Billiton may be required to withhold Australian taxes.
There are no limitations, either under the laws of Australia or under the Constitution of BHP Billiton Limited, on the right of non-residents to hold or vote BHP Billiton Limited ordinary shares other than as set out below.
The Australian Foreign Acquisitions and Takeovers Act 1975 (the FATA) restricts certain acquisitions of interests in shares in BHP Billiton. 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 associates) to acquire control of 15 per cent or more of the voting power or issued shares in BHP Billiton Limited.
The FATA also empowers the Treasurer to make certain orders prohibiting acquisitions by foreign persons in BHP Billiton Limited (and requiring divestiture if the acquisition has occurred) where he considers the acquisition to be contrary to the national interest and the 15 per cent threshold referred to above would be exceeded as a result. Such orders may also be made in respect of acquisitions by foreign persons where two or more foreign persons (and their associates) in aggregate already control 40 per cent or more of the issued shares or voting power in BHP Billiton Limited.
There are certain other statutory restrictions, and restrictions under BHP Billiton Limited’s Constitution and BHP Billiton Plc’s Articles of Association, that apply generally to acquisitions of shares in BHP Billiton (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:
20 per cent in relation to BHP Billiton Limited on a ‘stand-alone’ basis, i.e. calculated as if there were no special voting share and only counting BHP Billiton Limited’s ordinary shares.
30 per cent of BHP Billiton 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 Billiton Plc (therefore including voting rights attached to the BHP Billiton Plc Special Voting Share).
30 per cent in relation to BHP Billiton Plc on a ‘stand-alone’ basis, i.e. calculated as if there were no special voting share and only counting BHP Billiton Plc’s ordinary shares.
20 per cent in relation to the BHP Billiton Group, calculated having regard to all the voting power on a joint electorate basis, i.e. calculated on the aggregate of BHP Billiton Limited’s and BHP Billiton Plc’s ordinary shares.
Under BHP Billiton Limited’s Constitution and BHP Billiton 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.
Our approach to sustainability is reflected inOur BHP Billiton Charter, which defines our values, purpose and how we measure success, and the BHP Billiton Sustainable Development Policy, which defines our public commitments to safety, health, environmental and social responsibility.
The systems that support our Sustainable Development Policy are in line with our wider corporate governance processes. The Sustainability Committee of the BHP Billiton Board continues to oversee this Policy.
Management is accountable for sustainability-related processes and performance. At controlled assets, BHP Billiton sets the performance requirements and enforces those requirements through direct supervision. At monitored assets that we do not control, we provide our requirements and seek to influence the operation to follow them.
Our Health, Safety, Environment and Community (HSEC) Group Level Documents (GLD) set Group-wide mandatory performance requirements and performance controls, which are the basis for developing and implementing management systems at all BHP Billiton operations. These HSEC documents are part of a wider suite of corporate GLDs. We are embedding these performance requirements in the organisation across all Customer Sector Groups (CSGs). A full set of sustainability performance data and our Sustainability Framework are available in our Sustainability Report at our website.
We conduct regular internal audits to test compliance with the requirements of the GLDs. Audits are led by professional audit managers and supported by experienced personnel drawn from across the organisation. Audit results are used by management to create detailed action plans where the businesses have not yet achieved full compliance with the requirements. Key findings are reported to senior management and summary reports are considered by the Sustainability Committee of the Board. The Sustainability Committee of the Board also oversees risks specific to BHP Billiton’s performance in the areas of health, safety, environment and community.
2.8.1 Our focus areas
Identifying our sustainability issues
We identify the sustainability issues that are included in our Sustainability Report through our three-step materiality process. Step one of the process includes identifying issues by reviewing our internal risk registers, requests from our shareholders and investors, daily print media coverage and an independent review of issues raised by non-government organisations and global electronic and print media. Step two involves rating the significance of these issues to our stakeholders and the potential impact on our business as low, medium or high.
Our third step is to review the issues and seek feedback. One of the ways we do this is through our Forum on Corporate Responsibility. We also ask our HSEC leaders in each of our CSGs to review the issues, assign ratings and advise of any gaps. The issues are provided to the Sustainability Committee of the Board and reviewed throughout the preparation of the Sustainability Report. Common themes for a number of material issues were grouped together into focus areas for the purpose of the Report.
2.8.2 Keeping our people safe and healthy
The best investment we can make in any community is to ensure our people return home safe and well at the end of each day. In the current climate of rapid growth, managing the impacts of that growth on the safety and wellbeing of our people is critical.
Growing safely
Our ability to grow our organisation safely is essential. We are expanding across a number of operations and to support these expansions project hubs were created in Perth, Brisbane, Houston, Santiago and Toronto. The hubs are established using Engineering, Procurement and Construction Management (EPCM) contractors who develop the projects on our behalf and under our oversight.
While the EPCM model is not new to BHP Billiton, our rapid growth presents a challenge to the effective management of our health and safety risks. EPCM contractors bring their own individual management and safety approaches to each project and we recognise the importance of understanding and enabling these diverse management systems. We have set minimum performance requirements, including safety standards, which we require our EPCM partners to meet, while allowing them to work to their own internal standards. We review each EPCM contractor to check performance and ensure the standards they are using meet or exceed our own.
Key issues
The key health and safety issues faced by the Group in FY2011 were vehicles and mobile equipment interaction, adherence to isolation and permit-to-work procedures and reducing occupational health exposures, particularly to carcinogens.
Our fatal risk controls were developed to improve control of specific areas of risk, based on detailed analysis of BHP Billiton’s incident history. Our GLD for fatal risk controls articulates the steps to be taken to identify, assess and mitigate seven fatal risks: vehicles and mobile equipment; explosives and blasting; ground control; hazardous materials; isolation and permit-to-work; work at height; and lifting operations.
Occupational health exposures
Health risks faced by our people include fatigue, disease and occupational exposure to noise, silica, manganese, diesel exhaust particulate, fluorides, coal tar pitch, nickel and sulphuric acid mist. Our goal is to control occupational exposures at their source. This goal is supported by a key performance indicator assigned to our Group Management Committee (GMC).
Each operation establishes and maintains an ‘exposure risk profile’ for every employee and contractor and implements appropriate controls. Potential exposures do not take into account the protection afforded by personal protective equipment (PPE). If the potential exposure exceeds 50 per cent of our occupational exposure limit (OEL), then medical surveillance is mandatory. Drug and alcohol education programs are conducted, as well as substance abuse testing where necessary.
In FY2011, potential carcinogenic exposure was reported by some of our operations as one of their highest health risks, which resulted in a concerted effort to reduce potential carcinogenic exposures to below the OEL.
Specific programs are successfully being applied at an operational level to reduce the causes of occupational exposures.
Serious disease
BHP Billiton operations with a high exposure to serious diseases, such as HIV/AIDS, malaria and tuberculosis, have education, training and counselling programs in place to assist employees. We also offer prevention and risk-control programs to employees and, where appropriate, to employees’ families and local communities.
In some communities where we operate; for example, in South Africa and Mozambique, the incidence of HIV/AIDS is among the highest in the world. We accept a responsibility to help manage the impact of the disease and to care for our employees, support the wellbeing and development of our host communities and protect the viability of our operations.
For many years, we have adopted a proactive approach to managing the disease within our workplaces, an approach that draws upon the International Labour Organisation (ILO) code of practice on HIV/AIDS and the world of work. This includes conducting education programs, offering voluntary testing and counselling programs under the strictest confidentiality, seeking to achieve appropriate access to medical care for employees and their dependants, and reducing hostel-type accommodation for employees, known to be a risk factor for the disease.
Our safety and health performance
The FY2011 total recordable injury frequency (TRIF) performance of 5.0 per million hours worked improved by six per cent compared with FY2010 (5.3). Although we improved, we will require a substantial reduction in total recordable injuries to meet our five-year target of 3.7 in FY2012. We had two fatalities against
our target of zero. In response to the fatal incidents, we focused on improving our approach to: risk-based safety, in particular our fatal risk controls; keeping it simple; leaders verifying control effectiveness; and ensuring competency through training and awareness of all aspects of our existing safety programs.
Establishing measurable goals
We apply uniform expectations for safety outcomes wherever we work in the world and safety rules and definitions that classify incidents are applied equally to our people.
To further improve our performance in controlling occupational health exposures, we test the effectiveness of those controls to ensure they continue to function as designed. Each of our operations regularly records and communicates potential occupational health exposures up to Group level, in accordance with our HSEC Reporting GLD.
In FY2011, we conducted regional workshops to support regular audits that check the implementation of health controls at individual operations. Our Group Safety and Security function also ran a series of regional workshops in FY2011 aimed at educating key members of management and supervision on the expectations of each performance requirement. The workshops also enabled Group Safety and Security to gather feedback on the suitability of the requirements. This feedback confirmed the performance requirements are well positioned and required no material changes.
Security, emergency response and business continuity
Our Asset Protection GLD requires our businesses and operations to have systems in place to identify, manage and effectively respond to foreseeable crises and emergencies, including the development of plans to return our operations to full function as swiftly and smoothly as possible. It also requires the development of processes to maintain and test emergency response resources on an ongoing basis, as well as training employees, contractors, visitors and external stakeholders on relevant systems.
A crisis or emergency may be an incident, extreme climatic event, disease outbreak, security issue or any other event that poses a significant threat to: the safety or health of employees, contractors, customers or the public; the environment; our reputation; and/or the physical integrity of an asset.
2.8.3 Employing and developing our people
Finding, employing, developing and retaining skilled people with values that are aligned to ours is crucial to our success. Our business is long term in nature. If we do not safely deliver growth today, then we cannot leave for future generations the legacy we have enjoyed from generations past.
Supporting workforce diversity
We are striving to achieve diversity, in all its forms, at all levels of our organisation.
The GMC took active steps in FY2010 to improve the diversity profile of the Group. It oversaw the analysis of the profile of each part of the business to better understand representation by gender, age and nationality. It then required each business group to develop a diversity plan to address shortcomings. Those plans were completed and assessed as part of the annual performance process. Each plan is targeted at addressing the particular issues facing individual business groups and each contains a range of strategies, including targets. Plans will be tracked and monitored throughout FY2012 and will again form part of the annual performance review process at year-end.
Females currently represent 16 per cent of our workforce. Approximately 10 per cent of senior management positions are held by females.
We remain committed to increasing female participation in the Accelerated Leadership Development Program to 40 per cent by the end of FY2012.
Another focus area for us is ensuring that the right gender balance is struck in our graduate intake.
Approach to local employment
Recruitment is managed on a local basis by each CSG, Minerals Exploration, Marketing and Group Functions. Mandatory Group-wide performance requirements contained in our GLD stipulate recruitment standards and ensure candidates possess the appropriate skills, experiences, capability and values.
The remote locations within which we operate and the limited numbers of appropriately skilled employees can result in the need for operations to employ staff who work on-site, but reside outside the community; generally known as fly in, fly out staff. A workforce of this kind can create challenges and opportunities and we continue to address the impact on our people, as well as local community concerns, so that together we can identify ways in which our operations can make a positive and meaningful impact.
Fostering mutually beneficial employee relations
Relationships with all our stakeholders, including our employees, are built on trust, which we regard as a key aspect ofOur Charter value of respect.
The breadth and geographic diversity of BHP Billiton means we have a mix of collective and individually regulated employment arrangements. We work closely with contracting companies to encourage them to ensure that their employee relations are governed in a manner consistent withOur Charter.
We manage significant organisational change at the local level and consult with our employees about changes that affect them, seeking input and guidance where possible. We are committed to complying with applicable legislative requirements across the myriad jurisdictions in which we work.
In line with our employee relations approach, we believe that ensuring our employees are directly engaged with the business and aligned with business goals is the most effective way of avoiding any form of industrial action.
Under Australian law, employees are entitled to take industrial action on the expiry of applicable industrial agreements, which is protected from challenge. Given this legislative exposure to potential industrial action, we develop comprehensive contingency plans to ensure that our operations experience as little disruption as possible. In instances where we do encounter industrial disruption, our aim is to minimise the impact on our customers in line with our commitment to shareholders and, above all, to avoid compromising the safety of our employees and contractors.
Developing our employees
We are committed to developing the skills and capabilities of our workforce through regular performance reviews combined with training and development programs. Due to the structure and provisions of some industrial agreements, not all employees participate in individual performance reviews.
Training and development programs are designed and implemented at the local operational level to support local requirements. BHP Billiton operations include health and safety training and training onOur Charter and the BHP BillitonCode of Business Conduct as part of the mandatory induction process for all employees and permanent contractors.
Our practices and processes are designed to ensure performance is measured on fact-based outcomes and to reward people for their achievements. We seek to ensure strong internal candidate representation for roles, supplemented with external recruitment where necessary. Our internal development programs are therefore the key to succession.
Investing in graduate development
Our two-year Foundations for Graduates Program has been recognised as a leader in the field and has been designed specifically for graduates from tertiary institutions. Our aim is for our graduates to build a long and successful career with BHP Billiton. Each year, we recruit approximately 400 graduates in meaningful business roles, who each have the opportunity to work across teams, businesses and geographic regions.
The program is facilitated by business schools in Australia, Chile and South Africa. It is designed to move graduates seamlessly from study to work by complementing site-based technical development with a combination of classroom-based and virtual learning experiences, providing a unique insight into our business. Graduates develop their decision-making and communication skills, access executive coaching, take part in intensive residential programs and gain on-the-job experience analysing and solving real business issues.
2.8.4 Reducing our climate change impacts
We recognise that we have a social and economic responsibility to constructively engage on climate change issues. By understanding the risks and opportunities around climate change, and how these affect our organisation, we believe we can reduce our own impact on the environment and make a positive international contribution to the issue.
The potential impacts to our organisation
Our energy-intensive operations and fossil fuel products are exposed to potential financial risks from regulations to control greenhouse gas (GHG) emissions. In the medium and long term, we are likely to see changes in the profit margins of our GHG-intensive assets as a result of regulatory impacts in the countries where we operate. These regulatory mechanisms may impact our operations directly or indirectly via our customers. Inconsistency of regulations, particularly between developed and developing countries, may also affect the investment attractiveness of assets in different jurisdictions.
Potential physical impacts of climate change include more extreme weather events. These present risks to our personnel, as well as a loss of business continuity, production interruption and damaged or lost facilities. Sea level changes may also impact access to ports, a significant issue for many of our assets. Changes in rainfall are particularly relevant to the mining industry, where water is a critical resource. These changes vary regionally and may involve extended drought or increased flooding.
A discussion of regulatory, physical and other risks and opportunities of climate change is included in our 2011 Sustainability Report.
Engaging in policy development
While energy is a significant input in a number of the Group’s mining and processing operations, we recognise the global imperative of minimising carbon-based energy consumption. BHP Billiton believes that the mainstream science of climate change is correct; human activities are having a negative impact on our climate and this poses risks to our social and economic wellbeing. While uncertainty remains, there is enough evidence to warrant action in a way that does not damage the economy.
We believe that a global solution to climate change, which includes a carbon price of some form, is likely, but also some time away. Until then, nations around the world are likely to continue to accelerate their domestic emissions reduction and establish low-carbon economies, balancing their needs to ensure a reliable energy supply and to sustain economic growth.
A low-carbon emissions power sector could become a source of long-term competitive advantage for countries in a world where carbon emissions will be constrained. We are committed to contributing to the public debate on climate change, including sharing our knowledge and experience, but we recognise that it is for government and society as a whole to decide which direction to take.
We take an active role in climate change policy development in the key regions where we operate and market our products. We analyse and compare the various policy options by evaluating the degree to which they meet a defined set of principles: clear price signal; revenue neutral; trade friendly; broad-based, predictable and gradual; simple and effective.
We have actively engaged with the Australian Government as it develops its climate change policy response. In addition to recommending a policy approach that is consistent with our principles, we propose that an effective strategy for minimising Australia’s exposure to a future global carbon price includes avoiding the construction of new long-life, carbon emissions-intensive assets where affordable low-carbon alternatives are available, especially in the power and building sectors.
Reducing energy and GHG emissions
We continue to strive for significant reductions in energy consumption and GHG emissions, in line with and above our FY2012 targets. In FY2011, both carbon-based energy intensity and GHG emissions intensity were lower than the FY2006 baseline, by 17 per cent and 18 per cent respectively against a target of 13 per cent and six per cent. This was primarily driven by the agreement to use hydroelectric power at the Mozal aluminium smelter, in Mozambique, which now provides more than 98 per cent of the smelter’s electricity needs.
Within Australia, in compliance with the national Energy Efficiency Opportunities (EEO) Act 2006, we also implemented a number of energy efficiency measures.
We continue to track progress against our US$300 million commitment to support the implementation of energy efficiency and low GHG emission technologies. To date, we have exceeded our commitment, with US$325 million worth of projects in implementation stages.
Future GHG emissions abatement cost curves
In FY2011, our highest GHG-emitting operations worked to develop GHG emissions abatement cost curves. This work allows our assets to identify opportunities to save GHG emissions.
Energy sourcing and use
We recognise that the need to control carbon dioxide emissions has substantial implications for the use of thermal coal as an energy source. In March 2011, we made a significant investment in natural gas by acquiring all of Chesapeake Energy Corporation’s interests in the US Fayetteville Shale onshore natural gas resource. Our strategy is to invest in natural gas as one of the cleanest burning and lowest carbon dioxide intensity fossil fuels. We recognise that community concern exists over the extraction process, which involves ‘hydraulic fracturing’, and the possibility of groundwater contamination in certain situations. Our shale gas operations will be conducted to the same standards as all other BHP Billiton Petroleum operations, with the same goal of protecting the health and safety of our people, the environment and our communities.
2.8.5 Managing our water use
Water is an essential resource for all of our operations and production can be impacted by both the quality and quantity of water available. More importantly, the communities within which we operate rely on having access to clean, safe drinking water. This is critical to sustaining local health, industry and a sound environment.
Water management as a global issue
The mining and minerals processing industry uses a wide variety of water sources for a range of purposes. As with GHG emissions, water management is an issue that extends beyond BHP Billiton boundaries. Water risks also vary from region to region and therefore cannot be addressed through a ‘one-size-fits-all’ solution, which makes managing our water use a consistently complex and critical task.
Water has social, cultural, environmental and economic value at a local, regional, national and international level and is therefore critical to maintaining a ‘social licence to operate’. We support the priority considerations of strategic water planning, improving operational performance through effective water management, identifying conservation opportunities and promoting industry projects.
Addressing the issue
Water stress is defined as a ‘situation of actual or potential adverse impact on water availability for potable, agricultural, environmental or cultural needs’. In FY2011, we intensified our focus on addressing water stress and quality, which will allow us to reduce our use of water that is most likely to compete with human or environmental needs.
Our material sites are those where high-quality water use exceeds, or is anticipated to exceed, 3,000 megalitres per annum for an operation or project, or where water management may be a material risk issue. By developing water reduction cost curves at our most material sites, we identified opportunities including water substitution and water stewardship, both of which lend themselves readily to our expanded focus on high-quality water and alleviating water stress.
Managing water within our operations
In accordance with our Environment GLD, we are implementing water management plans at all our operations, including controls to mitigate the impacts of water use and discharge. It is expected that these controls are monitored and reviewed to verify their effectiveness. Additional controls are expected to be implemented at our material sites.
In recognition that water is a critical input for our mining, smelting, refining and petroleum businesses, we continue to identify opportunities for water re-use or recycling, efficient use and responsible wastewater disposal.
Managing wastewater and related waste
Mining operations produce large quantities of mineral waste that may include waste rock, tailings and slag, which need to be effectively managed to control potential environmental impacts. Our operations have waste management plans to minimise the waste generated and mitigate its impact, in accordance with the Environment GLD, which also stipulates that operations monitor transport and disposal of waste to ensure regulatory requirements are met throughout the waste cycle.
Tailings dams are also assessed to manage the risk of failure. Tailings dams are typically unlined and are designed and operated to well-established engineering standards. Mineral wastes are analysed for physical and geochemical characteristics to identify potential impacts arising from erosion, acid rock drainage, salinity, radioactivity and metal leaching.
Developing new water accounting standards
Unlike the more developed accounting approach to GHG emissions, there is not yet an internationally consistent approach to water accounting, which adds to the complexity of finding solutions to address water quantity and quality concerns. We are working with the Minerals Council of Australia to develop the Water Accounting Framework, an industry-wide approach to water reporting and accounting. The framework seeks to establish a nationally consistent water accounting and reporting framework for the minerals industry, which will lead to improved data transparency and water management.
2.8.6 Enhancing biodiversity and land management
Securing access to land and managing it effectively are essential components of our commitment to operate in a responsible manner. We fully appreciate the importance of protecting biodiversity and we also recognise the increasing competition for land and the challenge this presents to all land users.
Our approach to biodiversity and land management
We take a holistic approach to managing land and biodiversity, which means we assess and manage the potential impacts of our operations throughout their life cycle, across social, environmental and economic spheres. We have minimum requirements of all BHP Billiton operations that include adhering to a formal hierarchy process that begins with avoiding disturbance, followed by mitigating negative impacts, rehabilitating the environment and undertaking compensatory actions.
We recognise that effective land management is about optimising all land uses within a given region, whether they are for the provision of mining, industrial, agricultural or environmental services. Obtaining community support is most challenging when there is strong competition for the use of the land, such as a competition between resource development and agriculture.
Over the years, we have made a number of commitments with regard to protected areas and threatened species. In addition, our operations have land management plans, in accordance with the Environment GLD, that include baseline and impact assessments, implementation of controls to mitigate impacts on biodiversity and other ecosystem services, and monitoring programs to ensure the controls are effective.
Contributing to conservation
Biodiversity, and the ecosystem services it provides, is being lost at an accelerated rate due to human activities. In recognition of this, Conservation International and BHP Billiton from July 2011 embarked on a five-year alliance to deliver significant and lasting benefits to the environment by preserving land of high conservation value in key regions where BHP Billiton operates. This outcome will be achieved in collaboration with local partners.
In addition, Conservation International will provide technical and professional expertise to BHP Billiton aimed at contributing to improved approaches to land management across our Group.
Managing land rehabilitation and mine closures
Our Sustainability Framework in the Appendix of our 2011 Sustainability Report outlines the key Health, Safety, Environment and Community performance requirements that are incorporated into the planning of development projects, through operation and into closure. Significant projects are governed by the performance requirements of our project management GLDs. HSEC risks, legislated obligations and stakeholder requirements are important inputs to the project planning and execution process.
Once in operation, our assets undertake annual life of asset planning, a process that incorporates all aspects of the business. In FY2011, detailed closure planning requirements were integrated into the Directional Planning GLD, with each asset required to develop a closure plan as part of their life of asset plan. In addition, a new audit process was implemented focusing on closure planning, cost estimation and closure valuation at operating assets.
We are responsible for a number of legacy operations that are in various stages of decommissioning, rehabilitation or post-closure care and maintenance. The HSEC audit program covers the activities of these closed operations. Closure plans provide the basis for estimating the financial costs of closure and the associated accounting closure and rehabilitation provisions. Information on our closure and rehabilitation provisions can be found in note 18 ‘Provisions’ of the attached financial statements.
Managing our responsibilities
Our approach to land compensation is undertaken on a case-by-case basis. We first consider what land we need. We then look at our possible impacts on that land, both short term and long term, the present and past use of the land and the effects that our use may have on biodiversity and the associated ecosystem services, as well as existing land owners and occupiers.
We implement compensatory activities where residual impacts exceed the acceptable level of impact to biodiversity, land use, watersheds and/or water sources.
When financial compensation is appropriate, we take into account relevant legislative requirements, industry practices, standards or norms that may exist within a country or region and any special circumstances that may apply. In some countries and regions, legislation prescribes who is to be paid land compensation, the amount, what it is for and how it is to be calculated. In other places, compensation may be by negotiation with the affected parties.
2.8.7 Ensuring meaningful engagement with our stakeholders
Engaging openly with our host communities, governments and other key stakeholders is critical if we are to make a positive contribution to the lives of people who live near our operations and to society more broadly. Only through meaningful engagement are we able to understand and address potential impacts and concerns about our projects and operations and create opportunities that are aligned with the interests of the affected people.
Our stakeholders
We define stakeholders as those who are potentially impacted by our operations, or who have an interest in what we do, or who have an influence over what we do. Our key stakeholders include: the investment community; shareholders; customers; media; business partners; employees and contractors; local and Indigenous communities; industry associations; suppliers; governments and regulators; non-government organisations (NGOs); and labour unions.
Systems to ensure dialogue is regular, ongoing and effective
We seek to build trust with our stakeholders at the earliest possible stage of a project’s life. Our Community GLD stipulates that our operations implement a stakeholder engagement management plan, which is to be in place from a project’s exploration phase. The plans identify stakeholders, describe their interests and relationships and contain a range of culturally appropriate engagement activities to encourage open communication.
Engagement activities vary from monthly meetings to open public forums, with topics ranging from town amenity and housing to impacts of growth and expansion projects, contractor management, security, cultural issues and social development. Our responses to concerns or complaints are recorded, as are any commitments we may make.
Operations measure the effectiveness of their stakeholder engagement by conducting community perception surveys in their communities, which, since FY2010, have become mandatory every three years. These surveys provide a valuable external perspective of the quality of our engagement and whether our stakeholders believe we are doing what we say we will do.
Resolving complaints
Our operations are currently implementing local-level processes to facilitate resolution of complaints and grievances, as required by our Community GLD. As part of this process, all complaints and grievances are required to be acknowledged, documented and investigated. Appropriate remedial actions are undertaken where a complaint is legitimate, complainants are promptly advised of the remedial action and outcomes are documented. More robust processes are to be established in countries with high levels of corruption or conflict.
We continue to learn from our experience
Our history contains both positive and challenging examples of community engagement. We continue to learn from those experiences and to build the capacity of people within our community teams to improve outcomes for our stakeholders. Our aim is to develop and sustain meaningful and trusting relationships with people impacted by and interested in our business.
Engaging with NGOs through the Forum on Corporate Responsibility
In addition to building relationships with stakeholders locally, engagement with civil society is highly valued by our senior management. In 1999, we established the Forum on Corporate Responsibility as a mechanism by which representatives from NGOs could discuss, challenge and actively influence the Group’s approach to sustainable development issues.
In FY2011, the Forum comprised five members of our GMC and 11 leaders from NGOs, who represent current views on environment, socio-economic, geopolitical and ethical issues. The NGO members have extensive experience in regions where we have business interests, including Chile, Colombia, west Africa, Australia and the United Kingdom. The Group CEO chairs the meetings, which were held twice during FY2011.
While the Group is not bound by the advice of the Forum and the Forum does not necessarily endorse the Group’s decisions, the meeting discussions are robust and give our executives an insight into society’s current priorities and a chance to understand and debate issues from a range of viewpoints.
Issues discussed by the Forum in FY2011 included: proposed changes in external regulations; standards and policies such as free, prior and informed consent (FPIC); revenue transparency; carbon-related issues; the development of the Group’s new public targets; strategic discussions on topics such as the Group’s role in the world’s future energy challenges; and how we can best contribute to the development of communities and, more broadly, to society.
Engaging early in the project life cycle on customary rights
At a very early stage in a project, before any substantive work is carried out on the ground, we seek to identify any landowners, occupiers and users who may be affected by the project’s activities.
Where land may be used for customary purposes and there may be no formal titles issued, this information is sought from relevant government authorities with responsibilities for customary land uses and any Indigenous peoples’ representative organisations, such as land and tribal councils. Further enquiries are also made directly with the people in the area. Specific surveys are commissioned to identify the customary owners and how the land is being used. Depending on circumstances, these surveys are likely to occur at the exploration stage.
Knowing who owns and uses the land is critical to an effective community consultation and engagement program. It helps to ensure that affected people are fully aware of the project and that they have an opportunity to express their concerns and aspirations. Arising from this engagement, the work plan may be amended to reduce potential impacts on landowners and users.
Committed to broad-based community support
We require that any new greenfield project or significant expansion project obtains broad-based community support – defined as support from the majority of stakeholders – before proceeding. Broad-based community support is distinct from achieving FPIC, which we seek when it is mandated and defined by law.
2.8.8 Understanding and managing our human rights impact
We are committed to operating in accordance with the United Nations Universal Declaration of Human Rights and the Global Compact.Our Charter values and theCode of Business Conduct, in conjunction with policies and standards that accord with international laws and regulations and strong leadership, support this commitment. We have a responsibility to understand our potential impacts on human rights and to mitigate or eliminate them.
Our human rights due diligence process
As part of our human rights due diligence process, we require all operations to identify and document key potential human rights risks by completing a human rights impact assessment. The process includes a review of policies, procedures, practice and performance. Stakeholder participation forms an important part of the process and the assessments are validated by a human rights specialist. Material risks are then managed through action plans, which require employees and contractors to receive human rights training.
In an effort to increase the focus on human rights due diligence in FY2011, completion of the assessments was included as a key performance indicator (KPI) for the GMC.
Security forces and human rights
Our Asset Protection GLD requires that all our operations have in place preventative controls and a security management plan to address any potential security risks to our personnel and property.
The Voluntary Principles (VPs) on Security and Human Rights require organisations to act in a manner consistent with the laws of the local country while promoting the observance of applicable international law enforcement principles. The VPs acknowledge that security and respect for human rights can and should be consistent. As a signatory to and participant in the VPs, we take into account these expectations when developing in-country security plans.
To protect our people and our assets, we employ public and private security agencies. Regardless of their location, we stipulate that these agencies comply with the requirements and intent of the VPs.
Security and country risk
The nature of our business and our global footprint often see our people working in countries where there is potential exposure to personal and business risk. We require each country to be assessed for the degree of risk associated with visiting, exploring and operating, with appropriate plans in place to mitigate identified risks.
Occasionally, it is necessary to provide armed security protection for the safety of our personnel. Firearms are only to be deployed under a set of approved rules of engagement where it is necessary to protect a human life, for stewardship requirements (such as injured livestock management) or as a means of last resort when threatened by dangerous wildlife.
2.8.9 Making a positive contribution to society
As a large organisation, we have an economic and social responsibility to make a positive contribution to the communities, regions and countries where we operate.
Our broad socio-economic contribution
At a global level, we are active participants in industry and sustainable development forums such as the International Council on Mining and Metals (ICMM) and we are members of the World Business Council for Sustainable Development (WBCSD). Our aim is to advocate continual improvement of standards and performance across our sector.
We actively seek to understand our socio-economic impact on local communities and host regions through our participation in the ICMM’s multi-stakeholder Resource Endowment initiative (REi). The initiative aims to enhance the mining industry’s socio-economic contribution to the countries and communities where organisations such as BHP Billiton operate by better understanding the factors that either inhibit or promote social and economic development linked to large-scale mining projects.
Nationally and regionally, we contribute taxes and royalties to governments that, in turn, provide infrastructure and services to their constituents, and we often develop infrastructure ourselves that provides community, as well as business, benefits. Examples include airports, roads, community childcare centres and medical clinics.
Training and employing local people is important to us; however, our ability to have a significant impact on unemployment is limited by the nature of our operations, which are highly technical and mechanised. We make a broader economic contribution via indirect employment, where we focus on building the capacity of local businesses to provide us with a diverse range of services and products.
We also invest in community projects that are aimed at having long-lasting, positive impacts on people’s quality of life. This includes implementing new, and supporting existing, community projects in the areas of education, health and environment.
Economic value
Economic value for regional economies is generated through revenues, operating costs, employee compensation, donations and other community investments, retained earnings and payments to capital providers and to governments.
Community development
Our community development programs are driven by our desire to improve the quality of life of people in our host communities. Our operations implement their programs using community development plans that have been developed in consultation with local stakeholders. The plans are formulated from data gathered from an impacts and opportunities assessment and a baseline social study that includes education, health and environment quality of life indicators. The requirement that this occurs in all our operations is part of the implementation of GLDs.
Community development projects are selected on the basis of their capacity to impact positively on the quality of life indicators. We monitor progress by tracking changes in these indicators every three years. All community projects are assessed in relation to anti-corruption requirements prior to approval and are implemented in accordance with the ethical requirements in theCode of Business Conduct. This approach is mandated under the Community GLD.
During FY2011, our voluntary community investment totalled US$195.5 million, comprising cash, in-kind support and administrative costs and included a US$30 million contribution to our UK-based charitable company, BHP Billiton Sustainable Communities.
The cash component of our FY2011 community investment of US$149.1 million comprises:
direct investment in community programs made from BHP Billiton companies on an equity share basis;
contributions to the Group’s charitable foundations, excluding BHP Billiton Sustainable Communities;
the Enterprise Development and Socio-economic Development components of our Broad-Based Black Economic Empowerment programs in South Africa.
Local procurement
Due to the scale of our operations, we create a strong demand for products and services. We recognise the potential benefit that supporting local businesses to meet this demand can bring to our host communities and regions. Our approach is to source locally if a product or service that meets our requirements is available locally.
2.8.10 Reporting transparently and behaving ethically
Founded onOur Charter values, theCode of Business Conductrepresents our unqualified commitment to uphold ethical business practices. TheCode of Business Conduct sets standards of behaviour for how we should work. In following these standards our people can be confident they are working in the right way.
Upholding theCode of Business Conduct
We recognise that at times our people may find themselves in situations where complying with theCode of Business Conduct may appear to conflict with the ability to win or retain business. TheCode of Business Conduct makes it clear that no employee may allow anything – meeting production, competitive instincts or even a direct order from a manager – to compromise the commitment to working with integrity.
To ensure the requirements of theCode of Business Conduct are effectively communicated across BHP Billiton, each business leader has the responsibility for ensuring that all employees and agency contractors attend an annual face-to-face meeting to discuss the Code. A training and communication plan for each business and function is completed and executed each year. Business leaders report against these requirements on an annual basis and retain records of training undertaken.
TheCode of Business Conduct is supported by the Business Conduct Advisory Service, which includes a multilingual, 24-hour hotline and online case management system. The general public is also able to access the Service via the hotline or the internet. In FY2011, 474 cases, as well as 144 service contacts were recorded. An annual reporting cycle assists us to identify trends and patterns of reported incidents.
Anti-corruption
Regardless of the country or culture within which our people work, theCode of Business Conduct prohibits corrupt practices to further BHP Billiton’s goals. TheCode of Business Conduct requires appropriate due diligence in selecting and engaging third parties, the maintenance of accurate and reasonably detailed records of expenditures and the implementation and maintenance of specific approval requirements for corruption sensitive transactions.
We also now prohibit the making of facilitation payments, which are payments involving small sums to low-level government officials to obtain routine services to which we are otherwise legally entitled.
Transparently reporting taxes
We support the Extractive Industries Transparency Initiative (EITI), an international initiative dedicated to the enhancement of transparency around the payments of taxes and royalties derived from resource development. In line with our support for the EITI, we have reported this data on a country-by-country basis in our 2011 Sustainability Report. We have broken the data down into the taxes and royalty payments that we make as BHP Billiton (e.g. corporate income taxes and royalties) and those that we collect on behalf of employees.
Product stewardship
As our primary activities are in the extraction (and, in some cases, processing) stages of a product’s life cycle, we recognise that the majority of the life cycle of our products occurs after the point of our immediate activity. We also recognise there is strong business merit in implementing product stewardship programs in collaboration with other players in the life cycles of each of our products. We seek to work with those involved in the life cycles of our products and by-products to enhance performance along the supply chain and promote the responsible use and management of those products to minimise harm to people and the environment.
As a member of the International Council on Mining and Metals (ICMM), we have also committed to implementing the ICMM Sustainable Development Framework, which requires that we facilitate and encourage responsible product design, use, re-use, recycling and disposal of our products.
Our products are required to have a specific materials safety data sheet (MSDS). These MSDSs outline the relevant health, safety and environment aspects of the product and are provided to both the customer and the transporter delivering our products to our customers.
2.8.11 Effectively managing our material risks
Identifying and managing material risk is a fundamental part of any business and, for BHP Billiton, this includes focusing on sustainability-specific risks for our people, the environment and our host communities.
Our approach to risk management
Our approach to governance and risk management processes is based on a precautionary approach to achieving business outcomes. A broader discussion of our risk management approach is provided in section 5.6. We have processes in place to ensure the management of material risk is approached consistently across the Group. The Group Risk Management Policy and GLDs work together to embed risk management into our business activities, functions and processes.
Assessing material risks and setting appropriate controls
We mandate materiality and tolerability criteria to identify material risk issues that consider non-financial impacts such as health and safety, social and cultural, reputation, legal and environmental impacts. The severity of any risk event is assessed according to a matrix that describes the degree of harm, injury or loss from the most severe impact associated with that risk event, assuming reasonable effectiveness of controls.
Risk management plans are established to assess, control, mitigate and monitor material risk issues. In FY2011, BHP Billiton increased the emphasis on establishing performance standards for material risk critical controls and ensuring these standards are effectively implemented through a GMC KPI. The KPI stipulates that individual BHP Billiton assets develop performance standards for safety-related material risks.
The objectives of the risk assessment process are to understand the nature and tolerance of material risk issues for the Group, and ensure material risks are well controlled through the development and monitoring of critical controls.
Our Group HSEC material risks range from financial and reputation issues to potential impacts from changes in regulations relevant to our products. For example, as a major producer of carbon-related products, an area where regulatory standards and expectations are emerging, we may be exposed to increased litigation, compliance costs and unforeseen environmental rehabilitation expenses.
Potential events that may materially impact our operations include rockfalls in underground mines, aircraft incidents, vehicle and mobile equipment incidents, well blowouts, explosions or gas leaks, uncontrolled tailings breaches, escape of polluting substances or hydrocarbons, human rights breaches, community protests or civil unrest. Unanticipated long-term health impacts due to potential work exposures as well as infectious diseases and pandemics pose potential risks and these effects may create future lost time and/or financial compensation obligations. Additionally, the dissatisfaction of our host communities regarding our impacts may potentially affect costs and production and in extreme cases viability; and changing legislative requirements and compliance issues may affect our financial results.
Failure to manage these risks has the potential to adversely affect our reputation and licence to operate.
Following the oil spill from BP’s Macondo well in the Gulf of Mexico in April 2010, BHP Billiton Petroleum reviewed its deepwater drilling safety standards. The effectiveness of our existing controls was enhanced in the area of worst-case discharge scenario planning. This involved developing and implementing a consistent modelling methodology.
Assessing risk when entering a new country
The performance measure we have set under the Country Risk Management GLD is that in countries of extreme or high governance risk, proposed new activities that expose the Group to a material risk issue – such as a reputation, legal or business conduct impact – will be assessed to ensure a tolerable risk profile. New activities may include establishing new trade agreements, undertaking new community investment programs or interactions with government officials. Consideration is given to the application of theCode of Business Conduct and compliance with legislation, including anti-corruption and potential application of any UN, EU, Australian or US government sanctions or trade embargos.
People are the foundation of our business and underpin our success. We value our people and encourage the development of talented and motivated individuals to support the continued performance and growth of our diverse operations. It is our aim as an organisation to strive to build a sense of purpose and achievement amongst all of our people in the work we do.
By working toOur Charter we align our people around our common purpose and values. We all useOur Charter as a vital reference point for how we do business, wherever we are in the world, and whatever work we do.
Our organisation is structured in four component parts: CSGs, Minerals Exploration, Marketing and Group Functions.
Each part of our organisation has a clear mandate that sets out the scope of responsibilities and accountabilities. For further information about our employees, refer to section 2.8.3.
In FY2011, we had an average of 40,757 employees working in more than 100 locations worldwide. We had an average of 64,548 contractors globally. The multitude of cultures and nationalities represented offer a diversity that enriches the working lives of all.
The table below provides a breakdown of the average number of employees, in accordance with our International Financial Reporting Standards (IFRS) reporting requirements, which includes our proportionate share of jointly controlled entities’ employees and Executive Directors, by CSG for each of the past three financial years.
CSG | FY2011 | FY2010 | FY2009 | |||||||||
Petroleum | 2,308 | 2,178 | 2,105 | |||||||||
Aluminium | 4,599 | 4,471 | 4,938 | |||||||||
Base Metals | 7,602 | 7,434 | 7,731 | |||||||||
Diamonds and Specialty Products | 1,737 | 1,689 | 1,923 | |||||||||
Stainless Steel Materials | 3,412 | 3,481 | 4,039 | |||||||||
Iron Ore | 4,047 | 3,624 | 3,254 | |||||||||
Manganese | 2,426 | 2,549 | 2,532 | |||||||||
Metallurgical Coal | 4,019 | 3,533 | 3,892 | |||||||||
Energy Coal | 8,752 | 8,762 | 8,437 | |||||||||
Group and unallocated | 1,855 | 1,849 | 2,139 | |||||||||
|
|
|
|
|
| |||||||
Total(1) | 40,757 | 39,570 | 40,990 | |||||||||
|
|
|
|
|
|
|
The table below provides a breakdown of our average number of employees by geographic location for each of the past three financial years.
FY2011 | FY2010 | FY2009 | ||||||||||
Africa | 10,061 | 10,622 | 10,755 | |||||||||
Asia | 970 | 816 | 1,254 | |||||||||
Australasia | 16,290 | 15,178 | 15,697 | |||||||||
Europe | 492 | 515 | 563 | |||||||||
North America | 3,168 | 2,971 | 2,824 | |||||||||
South America | 9,776 | 9,468 | 9,897 | |||||||||
|
|
|
|
|
| |||||||
Total | 40,757 | 39,570 | 40,990 | |||||||||
|
|
|
|
|
|
2.10.1 General
The BHP Billiton Group consists of the BHP Billiton Limited Group and the BHP Billiton Plc Group as a combined enterprise, following the completion of the Dual Listed Company (DLC) merger in June 2001. Refer to note 25 ‘Subsidiaries’ in the financial statements for a list of BHP Billiton Limited and BHP Billiton Plc significant subsidiaries.
The BHP Billiton DLC merger was designed to place shareholders of both companies in a position where they effectively have an interest in a single group that combines the assets and is subject to the liabilities of both companies. BHP Billiton Limited and BHP Billiton Plc have each retained their separate corporate identities and maintained separate stock exchange listings, but they are operated and managed as if they are a single unified economic entity, with their boards and senior executive management comprising the same people.
2.10.2 DLC structure
The principles of the BHP Billiton DLC are reflected in the BHP Billiton Sharing Agreement and include the following:
the two companies are to 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;
the Directors of both companies will, in addition to their duties to the company concerned, have regard to the interests of BHP Billiton Limited shareholders and BHP Billiton Plc shareholders 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 Billiton Limited share and a BHP Billiton Plc share is 1:1, the economic and voting interests in the combined BHP Billiton Group resulting from the holding of one BHP Billiton Limited share are equivalent to that resulting from one BHP Billiton Plc share. Further details are set out in the sub-section ‘Equalisation of economic and voting rights’ below.
Additional documents that affect the DLC include:
BHP Billiton Limited Constitution
BHP Billiton Plc Memorandum and Articles of Association
BHP Billiton Special Voting Shares Deed
BHP Billiton Limited Deed Poll Guarantee
BHP Billiton Plc Deed Poll Guarantee.
Australian Foreign Investment Review Board (FIRB) 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 Billiton Limited continues to:
be an Australian company, which is managed from Australia;
ultimately manage and control the companies conducting the business that was conducted by it at the time of the merger for as long as those businesses form part of the BHP Billiton Group.
The conditions have effect indefinitely, subject to amendment of the Australian Foreign Acquisitions and Takeover Act 1975 or any revocation or amendment by the Treasurer of Australia. If BHP Billiton Limited no longer wishes to comply with these conditions, it must obtain the prior approval of the Treasurer. Failure to comply with the conditions attracts substantial penalties under the Act.
Equalisation of economic and voting rights
BHP Billiton Limited shareholders and BHP Billiton Plc shareholders have economic and voting interests in the combined BHP Billiton Group. The economic and voting interests represented by a share in one company relative to the economic and voting interests of a share in the other company is determined by reference to a ratio known as the ‘Equalisation Ratio’. Presently, the economic and voting interests attached to each BHP Billiton Limited share and each BHP Billiton Plc share are the same, since the Equalisation Ratio is 1:1. The Equalisation Ratio would change if either BHP Billiton Limited or BHP Billiton Plc returned value to only its shareholders and no matching action were taken.
This means that the amount of any cash dividend paid by BHP Billiton Limited in respect of each BHP Billiton Limited share is normally matched by an equivalent cash dividend by BHP Billiton Plc in respect of each BHP Billiton Plc share, and vice versa. If one company has insufficient profits or is otherwise unable to pay the agreed dividend, BHP Billiton Limited and BHP Billiton Plc will, as far as practicable, enter into such transactions as are necessary so as to enable both companies to pay the amount of pre-tax dividends per share.
Joint Electorate Actions
Under the terms of the DLC agreements, the BHP Billiton Limited Constitution and the BHP Billiton Plc Articles of Association special voting arrangements have been implemented so that the shareholders of both companies vote together as a single decision-making body on matters affecting the shareholders of each company in similar ways (such matters are referred to as Joint Electorate Actions). For so long as the Equalisation Ratio remains 1:1, each BHP Billiton Limited share will effectively have the same voting rights as each BHP Billiton Plc 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 Billiton Limited, with both the BHP Billiton Limited ordinary shareholders and the holder of the BHP Billiton Limited Special Voting Share voting as a single class and also of BHP Billiton Plc, with the BHP Billiton Plc ordinary shareholders and the holder of the BHP Billiton Plc Special Voting Share voting as a single class.
Class Rights Actions
In the case of certain actions in relation to which the two bodies of shareholders may have divergent interests (referred to as Class Rights Actions), the company wishing to carry out the Class Rights Action requires the prior approval of the shareholders in the other company voting separately and, where appropriate, the approval of its own 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.
These voting arrangements are secured through the constitutional documents of the two companies, the BHP Billiton Sharing Agreement, the 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 Billiton Limited and BHP Billiton Plc have each executed a Deed Poll Guarantee, pursuant to which creditors entitled to the benefit of the BHP Billiton Limited Deed Poll Guarantee and the BHP Billiton 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 Billiton Limited and BHP Billiton Plc combined.
Restrictions on takeovers of one company only
The BHP Billiton Limited Constitution and the BHP Billiton 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 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.
2.11.1 DLC agreements
On 29 June 2001, BHP Billiton Limited (then known as BHP Limited) and BHP Billiton Plc (then known as Billiton Plc) merged by way of a DLC structure. To effect the DLC, BHP Limited and Billiton Plc (as they were then known) entered into the following agreements designed to place the shareholders of both companies in a position where they effectively have an interest in a single group that combines the assets, and is subject to all the liabilities, of both companies:
BHP Billiton Sharing Agreement
BHP Billiton Special Voting Shares Deed
BHP Billiton Limited Deed Poll Guarantee
BHP Billiton Plc Deed Poll Guarantee.
The effect of each of these agreements and the manner in which they operate are described in section 2.10 of this Report.
2.11.2 Merger Agreement with Petrohawk Energy Corporation
The Offer
On 14 July 2011, BHP Billiton Limited, BHP Billiton Petroleum (North America) Inc. (Parent), North America Holdings II Inc., (Purchaser) and Petrohawk Energy Corporation, (Petrohawk), entered into an Agreement and Plan of Merger (Merger Agreement), pursuant to which Purchaser commenced an offer (Offer) to acquire all of the outstanding shares of Petrohawk’s common stock, par value US$0.001 per share (Shares), for US$38.75 per Share, net to the seller in cash (Offer Price), without interest.
The Merger and the Top-Up Option
The Merger Agreement also provides that, following consummation of the Offer and satisfaction or waiver of certain customary conditions, Purchaser will be merged with and into Petrohawk (Merger), with Petrohawk surviving as a wholly owned subsidiary of Parent. Upon completion of the Merger, each untendered Share outstanding immediately prior to the effective time of the Merger (excluding those Shares that are held by (i) Parent, Petrohawk or their respective wholly owned subsidiaries and (ii) stockholders of Petrohawk who properly demand appraisal in connection with the Merger under the Delaware General Corporation Law (DGCL) will be converted into the right to receive the Offer Price.
If Purchaser holds 90 per cent or more of the outstanding Shares following the consummation of the Offer (Short-Form Threshold), the parties will effect the Merger as a short-form merger under the DGCL without the need for approval by Petrohawk’s stockholders. In addition, subject to the terms of the Merger Agreement and applicable law, Petrohawk has granted Purchaser an irrevocable option (Top-Up Option), exercisable after consummation of the Offer, to purchase from Petrohawk that number of Shares as would be necessary for Parent and its affiliates to own one Share more than the Short-Form Threshold. If the Offer is consummated but the Short-Form Threshold is not attained, Petrohawk, Parent and Purchaser will effect the Merger following stockholder approval, either pursuant to an action by written consent or a special stockholders’ meeting. In either case, Purchaser will vote all Shares it acquires pursuant to the Offer in favour of the adoption of the Merger Agreement, thereby assuring approval.
Conditions to the Offer
Consummation of the Offer is subject to several conditions, including: (i) that a majority of the Shares outstanding (generally determined on a fully diluted basis) be validly tendered and not properly withdrawn prior to the expiration date of the Offer (as such expiration date may be extended pursuant to the Merger Agreement);
(ii) clearance from the Committee on Foreign Investment in the United States; (iii) the absence of a material adverse effect on Petrohawk; and (iv) certain other customary conditions. The Offer is not subject to a financing condition.
Representations and Warranties, Covenants, Termination Fee
Petrohawk has made customary representations, warranties and covenants in the Merger Agreement. Petrohawk’s covenants include covenants relating to Petrohawk’s conduct of its business between the date of the Merger Agreement and the closing of the Merger, restrictions on soliciting proposals for alternative transactions, public disclosures and other matters. The Merger Agreement contains certain termination rights of Parent and Petrohawk and provides that, upon the termination of the Merger Agreement under specified circumstances, Petrohawk will be required to pay Parent a termination fee of US$395 million.
The Petrohawk Board Recommendation
The board of directors of Petrohawk resolved to recommend that stockholders of Petrohawk tender their Shares into the Offer and, if necessary, vote to adopt the Merger Agreement.
The foregoing description of the Offer, the Merger and the Merger Agreement does not purport to be complete and is qualified in its entirety by reference to the Merger Agreement.
Completion of the Offer
On 21 August 2011, we announced that at the end of Friday, 19 August 2011, approximately 293.9 million Petrohawk shares had been validly tendered and not withdrawn, including approximately 36 million Petrohawk shares tendered by guaranteed delivery. The tendered shares represented 97.4 per cent of the outstanding shares of Petrohawk, thus satisfying the Short-Form Threshold provision of the Merger Agreement. We also announced that following payment for all shares validly tendered and not withdrawn, we expected to effect a short-form merger under Delaware law as promptly as possible.
The following text summarises the Constitution of BHP Billiton Limited and the Articles of Association of BHP Billiton Plc. The effect of the Constitution of BHP Billiton Limited and the Articles of Association of BHP Billiton Plc is, so far as possible, identical. Where the term ‘BHP Billiton’ is used in this description of the Constitution and Articles of Association, it can be read to mean either BHP Billiton Limited or BHP Billiton Plc.
Certain provisions of the Constitution of BHP Billiton Limited and the Articles of Association of BHP Billiton Plc can only be amended 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.
A description of Joint Electorate Actions and Class Rights Actions is contained under the heading ‘Equalisation of economic and voting rights’ in section 2.10.2 of this Report.
2.12.1 Directors
The management and control of the business and affairs of BHP Billiton are vested in the Board of Directors, which may exercise all powers of BHP Billiton, other than what is required to be exercised or done by BHP Billiton in a general meeting.
2.12.2 Power to issue securities
BHP Billiton may, pursuant to the Constitution and Articles of Association, issue any shares or other securities (including redeemable shares) with preferred, deferred or other special rights, obligations or restrictions as and when the Directors may determine and on any other terms the Directors consider appropriate, provided that any such issue:
does not affect any special rights conferred on the holders of any shares;
is subject to the provisions regarding shareholder approval in the Constitution and Articles of Association.
The rights attaching to a class other than ordinary shares are expressed at the date of issue.
2.12.3 Restrictions on voting by Directors
A Director may not vote in respect of any contract or arrangement or any other proposal in which he or she has a material personal interest. A Director shall not be counted in the quorum at a meeting in relation to any resolution on which he or she is not entitled to vote.
In addition, under the UK Companies Act 2006, a Director has a duty to avoid a situation in which he or she has (or can have) a direct or indirect interest that conflicts (or may conflict) with the interests of the company. The duty is not infringed, if among other things, the situation is authorised by non-interested Directors. In 2008, the Articles of Association of BHP Billiton Plc were amended to enable the Board to authorise a matter that might otherwise involve a Director breaching his or her duty to avoid conflicts of interest. An interested Director may not vote or be counted towards a quorum for a resolution authorising such a situation. Where the Board gives such authorisation, the Board may prohibit, or may establish regulations which prohibit, the relevant Director from voting on any matter relating to the conflict. The Board has adopted procedures to manage these voting restrictions.
Subject to applicable laws, a Director is entitled to vote, and be counted in the quorum, in respect of any resolution concerning any of the following matters, namely where the material personal interest:
arises because the Director is a shareholder of BHP Billiton and is held in common with the other shareholders of BHP Billiton;
arises in relation to the Director’s remuneration as a Director of BHP Billiton;
relates to a contract BHP Billiton is proposing to enter into that is subject to approval by the shareholders and will not impose any obligation on BHP Billiton 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 Billiton;
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 Billiton, but only if the contract does not make BHP Billiton or a related body corporate the insurer;
relates to any payment by BHP Billiton 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.
2.12.4 Loans by Directors
Any Director may lend money to BHP Billiton at interest with or without security or may, for a commission or profit, guarantee the repayment of any money borrowed by BHP Billiton and underwrite or guarantee the subscription of shares or securities of BHP Billiton or of any corporation in which BHP Billiton may be interested without being disqualified as a Director and without being liable to account for BHP Billiton for any commission or profit.
2.12.5 Retirement of Directors
In August 2011, the Board adopted 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 new policy will take effect at the 2011 Annual General Meetings, and replaces the previous system, as set out in the Constitution of BHP Billiton Limited and the Articles of Association of BHP Billiton Plc, under which Directors were required to submit themselves to shareholders for re-election at least every three years.
2.12.6 Rights attaching to shares
Dividend rights
Under English law, dividends on shares may only be paid out of profits available for distribution. Under Australian law, dividends on shares may only be paid out of net assets, provided that the payment 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 Billiton Limited or BHP Billiton Plc declared that dividend, until claimed or, in the case of BHP Billiton Limited, otherwise disposed of according to law. In the case of BHP Billiton Plc, any dividend unclaimed after a period of 12 years from the date on which such dividend was declared or became due for payment shall be forfeited and shall revert to BHP Billiton Plc.
Voting rights
Voting at any general meeting of BHP Billiton Limited shareholders is in the first instance to be conducted by a show of hands unless a poll is demanded by any of the following (except in relation to the election of a chairman of a meeting or, unless the Chairman otherwise determines, the adjournment of a meeting):
the Chairman;
any shareholder under the law; or
the holder of the BHP Billiton Limited Special Voting Share.
Voting at any general meeting of BHP Billiton Plc is in the first instance to be conducted by a show of hands unless a poll is demanded by any of the following:
the Chairman;
not less than five members present in person or by proxy and entitled to vote;
a member or members present in person or by proxy and representing not less than five per cent of the total voting rights of all the members having the right to vote at the meeting; or
the holder of the Billiton Special Voting Share.
As described under the heading ‘Equalisation of economic and voting rights’ in section 2.10.2 of this Report, certain matters may be decided as Joint Electorate Actions or Class Rights Actions. Any matter considered by shareholders at an Annual General Meeting of BHP Billiton Limited or BHP Billiton Plc constitutes a Joint Electorate Action and shall therefore be decided on a poll. Therefore, in practice, generally all items of business at Annual General Meetings proceed directly to poll.
In addition, at any general meeting a resolution, other than a procedural resolution, put to the vote of the meeting on which the holder of the relevant BHP Billiton Special Voting Share is entitled to vote shall be decided on a poll.
For the purposes of determining which shareholders are entitled to attend or vote at a meeting of BHP Billiton Plc or BHP Billiton Limited, and how many votes such shareholder may cast, the relevant company will specify in any notice of meeting a time, not more than 48 hours before the time fixed for the meeting, by which a shareholder must be entered on the Register of Shareholders in order to have the right to attend or vote at the relevant meeting.
Shareholders who wish to appoint a proxy to attend, vote or speak at a meeting of BHP Billiton Plc or BHP Billiton Limited (as appropriate) on their behalf, must deposit the relevant form appointing a proxy in accordance with the instructions contained in any notice of meeting, so as to be received in the specified manner not less than 48 hours before the time appointed for holding the meeting to which the appointment of a proxy relates.
Rights to share in BHP Billiton Limited’s profits
The rights attached to the shares of BHP Billiton Limited, as regards the participation in the profits available for distribution, are as follows:
The holders of any preference shares shall be entitled, in priority to any payment of dividend to the holders of any other class of shares, to a preferred right to participate as regards dividends up to but not beyond a specified amount in distribution.
Subject to the special rights attaching to any preference shares, but in priority to any payment of dividends on all other classes of shares, the holder of the Equalisation Share (if any) shall be entitled to be paid such dividends as are declared.
Any surplus remaining after payment of the distributions above shall be payable to the holders of BHP Billiton Limited ordinary shares and the BHP Billiton Limited Special Voting Share in equal amounts per share.
Rights to share in BHP Billiton Plc’s profits
The rights attached to the shares of BHP Billiton Plc, in relation to the participation in the profits available for distribution, are as follows:
The holders of the cumulative preference shares shall 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 shall be a Saturday, Sunday or public holiday in England, on the first business day following such date in each year. Payments of Preferential Dividends shall 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 Billiton Plc Special Voting Share shall 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 Billiton Plc Special Voting Share, but in priority to any payment of dividends on all other classes of shares, the holder of the Equalisation Share shall be entitled to be paid such dividends as the Board may decide to pay thereupon.
Any surplus remaining after payment of the distributions above shall be payable to the holders of the BHP Billiton Plc ordinary shares in equal amounts per BHP Billiton Plc ordinary share.
2.12.7 Right on a return of assets on liquidation
On a return of assets on liquidation of BHP Billiton Limited, the assets of BHP Billiton Limited remaining available for distribution among shareholders, after giving effect to the payment of all prior ranking amounts owed to all creditors and holders of preference shares, shall be applied in paying to the holders of the BHP Billiton Limited Special Voting Share and the Equalisation Share (if any) 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 Billiton Limited ordinary shares, and any surplus remaining shall be applied in making payments solely to the holders of BHP Billiton Limited ordinary shares in accordance with their entitlements.
On a return of assets on liquidation of BHP Billiton Plc, subject to the payment of all prior ranking amounts owed to the creditors of BHP Billiton Plc and prior ranking statutory entitlements, the assets of BHP Billiton Plc to be distributed on a winding-up shall 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 accrual, if any, of the Preferential Dividend, whether such dividend has been earned or declared or not, calculated up to the date of commencement of the winding-up.
To the holders of the BHP Billiton Plc ordinary shares and to the holders of the BHP Billiton Plc Special Voting Share and the Equalisation Share , the payment out of surplus, if any, remaining after the distribution above of an equal amount for each BHP Billiton Plc ordinary share, the BHP Billiton Plc Special Voting Share and the Equalisation Share, if issued, subject to a maximum in the case of the BHP Billiton Plc Special Voting Share and the Equalisation Share of the nominal capital paid up on such shares.
2.12.8 Redemption of preference shares
If BHP Billiton Limited at any time proposes to create and issue any preference shares, the preference shares may be issued on the terms that they are to be redeemed or, at the option of either or both BHP Billiton Limited and the holder, are liable to be redeemed, whether out of share capital, profits or otherwise.
The preference shares confer on the holders the right to convert the preference shares into ordinary shares if, and on the basis, the Board determines at the time of issue of the preference shares.
The preference shares are to confer on 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; (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 Billiton Plc although as noted in section 2.12.2 above, BHP Billiton can issue preference shares which are subject to a right of redemption on terms the Board considers appropriate.
2.12.9 Capital calls
Subject to the terms on which any shares may have been issued, the Board may make calls on the shareholders in respect of all monies unpaid on their shares. BHP Billiton 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.
2.12.10 Borrowing powers
Subject to relevant law, the Directors may exercise all powers of BHP Billiton 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 Billiton or of any third party.
2.12.11 Changes to rights of shareholders
Rights attached to any class of shares issued by either BHP Billiton Limited or BHP Billiton Plc can only be varied (whether as a Joint Electorate Action or a Class Rights Action) where such variation is approved both:
by the Company that issued the relevant shares, as a special resolution;
by 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.
2.12.12 Conditions governing general meetings
All provisions relating to general meetings apply with any necessary modifications to any special meeting of any class of shareholders that may be held. Therefore, the following information relates equally to general meetings and any special meeting of any class of shareholders.
The Board may and shall 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 Billiton 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. Notice of a general meeting must be given to each shareholder entitled to vote at the meeting and such notice of meeting must be given in the form and manner in which the Board thinks fit. Five shareholders of the relevant company present in person or by proxy constitute a quorum for a meeting. A shareholder who is entitled to attend and cast a vote at a general meeting of BHP Billiton may appoint a person as a proxy to attend and vote for the shareholder in accordance with the law.
2.12.13 Limitations on rights to own securities
Neither the Constitution of BHP Billiton Limited nor the Articles of Association of BHP Billiton Plc impose any limitations on the rights to own securities other than restrictions that reflect the takeovers codes under relevant Australian and UK law. In addition, the Australian Foreign Acquisitions and Takeovers Act 1975 imposes a number of conditions that restrict foreign ownership of Australian-based companies.
Share control limits imposed by the Constitution and the Articles of Association, as well as relevant laws, are described in sections 2.7 and 2.10.2 of this Report.
2.12.14 Documents on display
You can consult reports and other information about BHP Billiton Limited that it has filed pursuant to the rules of the ASX atwww.asx.com.au. You can consult reports and other information filed for publication by BHP Billiton Plc pursuant to the rules of the UK Listing Authority at the Authority’s document viewing facility. Information filed on the ASX, or pursuant to the rules of the UK Listing Authority is not incorporated by reference into this Annual Report. The documents referred to in this Annual Report as being available on our website,www.bhpbilliton.com, are not incorporated by reference and do not form part of this Annual Report.
BHP Billiton Limited and BHP Billiton Plc both file annual and special reports and other information with the US Securities Exchange Commission (SEC). You may read and copy any document that either BHP Billiton Limited or BHP Billiton Plc files at the SEC’s public reference room located at 100 F Street, NE, Room 1,580, Washington, DC 20549. Please call the SEC at 1-800-SEC-0330 or access the SEC website atwww.sec.gov for further information on the public reference room. The SEC filings of BHP Billiton Limited since December 2002, and those of BHP Billiton Plc since October 2003, are also available on the SEC website.
2.13.12.3.1 Petroleum reserves
Reserves and production
BHP Billiton Petroleum proved reserves are estimated and reported according to SEC standards. For FY2011, our proved oilUS Securities and gas reservesExchange Commission (SEC) standards and have been determined in accordance with SEC Rule 4-10(a) ofRegulation S-X. Proved oil and gas reserves are those quantities of crude oil, natural gas and natural gas liquids (NGL), 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, operating contracts and government regulations. Unless evidence indicates that renewal of existing operating contracts is reasonably certain, estimates of economically producible reserves reflect only reflect the period before the contracts providing the right to operate 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. Developed oil and gas reserves are reserves that can be expected to be recovered through existing wells with existing equipment and operating methods, and through installed extraction equipment and infrastructure operational at the time of the reserve estimate if the extraction is by means not involving a well. 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.
Estimates of oil and gas reserves 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.
Proved reserves arewere estimated by reference to available seismic, well and reservoir information, including but not limited to well logs, well test data, core data, production and pressure trends for producing reservoirsdata, geologic data, seismic data and, in some cases, to similar data from other analogous, producing reservoirs. A wide range of engineering and geoscience methods, including performance analysis, well analogues and geologic studies were used to estimate high confidence proved developed and undeveloped reserves in accordance with SEC regulations. For our conventional assets, performance of producing wells was based on rate and pressure decline methods, including material balance, and was supplemented by reservoir simulation models where appropriate. In our Onshore US shale assets, performance of producing wells was based on decline and pressure normalised 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. When assessing proved undeveloped locations, a combination of geologic and engineering data, and where appropriate, statistical analysis was used to support the assignment of proved undeveloped reserves. Performance data, along with log and core data, was used to delineate consistent, continuous reservoir characteristics in core areas of the
development. Proved reservesundeveloped locations were included in core areas between known data and adjacent to productive wells. Locations where a high degree of certainty could not be demonstrated using the above technologies and techniques, were not categorised as proved.
Proved reserve estimates arewere 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 include 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.
Reserve estimates contained in this section have been estimated with deterministic methodology, with the exception of the North West Shelf gas operation in Australia where probabilistic methodology has been utilised to estimate and aggregate reserves for the reservoirs dedicated to the gas project only. The probabilistic based portion of these reserves totals 30 MMboe (total boe conversion is based on the following: 6,000 scf of natural gas equals 1 boe) and represents approximately one per cent of our total reported proved reserves. 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 reserves change during the year before production, divided by the production during the year stated as a percentage.
The Petroleum Reserves Group (PRG) is a dedicated group that provides overall oversight of the reservesreserves’ assessment and reporting processes. It is independent of the various asset teams directly responsible for
development and production activities. The PRG is staffed by individuals averaging over 30 yearsmore than 25 years’ experience in the Oiloil and Gasgas industry. The Managermanager of the PRG, Abhijit Gadgil, is a full-time employee of BHP Billiton and is the individual primarily responsible for overseeing and supervising the preparation of the reserves estimate.reserve estimates and compiling the information for inclusion in this Annual Report. He has an advanced degree in engineering and overmore than 30 years of diversified industry experience in reservoir engineering, reserves assessment, field development and technical management. Hemanagement and is a 30+ year30-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 and he has reviewed and agrees with the information included in section 2.3.1 of this Annual Report and has given his prior written consent for its publication. No part of the individual compensation for members of this groupthe PRG is dependent on reported reserves.
During FY2011, Petroleum added 599 million barrels of oil equivalent (MMboe)(1) of proved oil and gas reserves. The largest component was the acquisition of the Fayetteville Shale gas assets accounting for 415 MMboe of proved developed and undeveloped reserves. Excluding this purchase, Petroleum added 184 MMboe of proved reserves, replacing 115 per cent of sales of 159 MMboe. For the first time, Petroleum added 91 MMboe proved reserves effective 30 June 2011 associated with future production that will be consumed in operations (typically fuel gas). The remaining additions during the year were comprised of revisions of 49 MMboe that resulted from analysis of performance and drilling results affecting previous assessments, improved recovery additions of 23 MMboe and extensions of 21 MMboe, with the largest portion associated with commitment to the development of additional production capability in the North West Shelf gas project. Improved recovery reserves were added at the Shenzi project in the Gulf of Mexico where pressures encountered by the first injection well established connectivity to offset producers. Based on a combination of high resolution seismic interpretation and engineering analysis, as well as comparison with water injection projects in other Miocene sands in the area, the incremental impact of the one current water injector was estimated at 23 MMboe.
Petroleum’s reserves are estimated as of 30 June 2011. For the first time the Group engaged the services of Netherland, Sewell & Associates, Inc. (NSAI), an independent petroleum engineering firm, to estimate the reserves for the newly acquired Fayetteville Shale gas assets. Those reserves represent approximately 24 per cent of the Group’s total proven reserves on a boe basis (35 per cent of proven gas reserves) and are incorporated in the summary tables below. A copy of NSAI’s report has been filed as an exhibit to our Annual Report filed on Form 20-F. As noted therein, Fayetteville project undeveloped reserves are estimated based on specific drilling locations expected to be drilled at the current rate within the next five years, current government regulations and a FY2011 Henry Hub reference price of US$4.21 per Million British Thermal Units (MMBtu), as adjusted for transportation fees and regional price differentials, among other assumptions.
As in previous years, reserve2014. Reserve assessments for all other Petroleum propertiesoperations were conducted by technical staff within the operating organisation. These individuals meet the professional qualifications outlined by the Society of Petroleum Engineers, are trained in the fundamentals of SEC reserves reporting and the corporate 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 CSG Guidelinesguidelines and compliance with SEC reporting requirements. Once endorsed by the PRG, all reserves receive final endorsement by senior management and the corporate Risk and Audit Committee prior to public reporting. Our internal Group Audit ServicesRisk Assessment and Assurance provides secondary assurance of the oil and gas reserve reporting processes through annual audits.
Production for FY2014 totalled 246 MMboe in sales, which is an increase of 10 MMboe from FY2013. There were an additional 6 MMboe in non-sales production, primarily for fuel consumed in our Petroleum operations. During FY2014, Petroleum added a total of 131 MMboe of proved oil and gas reserves. Excluding net purchases and sales of negative 14 MMboe, proved additions of 145 MMboe replaced 58 per cent of production sales and fuel through extensions, discoveries, and revisions. At 30 June 2014, approximately 47 per cent of our proved reserves were in conventional assets, while approximately 53 per cent were in unconventional assets.
New additions from extensions and discoveries totalled 368 MMboe, primarily for new development projects in the North American shale fields where areas with high liquids production and greater value are being targeted. The Eagle Ford shale area contributed 157 MMboe to these new additions, while the Haynesville and Fayetteville areas contributed 131 MMboe. Revisions were negative 222 MMboe and are primarily related to deferral of drilling and adjustments to predicted well performance in undeveloped areas of the Eagle Ford, Permian, Haynesville and Fayetteville areas. The locations of the wells where drilling has been deferred are in relatively dry gas areas and are now planned to be drilled in more than five years’ time, as a result of our refocused drilling plans, and have been reclassified out of proved undeveloped reserves. None of the current unconventional proved undeveloped reserves will be more than five years old at the time they are drilled.
Our proved additions through extensions and revisions for conventional assets excluding purchases and sales totalled 83 MMboe in FY2014. Strong production performance in Macedon and other fields, and the Pyrenees Phase III infill project allowed the addition of 42 MMboe in our Australian operated fields while the non-operated joint interest Bass Strait and North West Shelf fields added 6 MMboe. Our US Gulf of Mexico fields had additions of 16 MMboe from extensions and revisions, while 27 MMboe was added for the extended gas sales project and production performance for the Angostura project in Trinidad and Tobago. During the year, we sold our interest in the Liverpool Bay fields in the UK offshore, which reduced proved reserves by 13 MMboe.
These results are summarised in the tables below, which detail estimated oil, condensate, NGL and natural gas reserves at 30 June 2011,2014, 30 June 20102013 and 30 June 2009,2012, with a reconciliation of the changes in each year. Reserves have been calculated using the economic interest method and represent net interest volumes after deduction of applicable royalty. Reserves include quantities of oil, condensate, NGL and gas that will be produced under several75 MMboe are in two production and risk sharingrisk-sharing arrangements that involve the Group in upstream risks and rewards without transfer of ownership of the products. At 30 June 2011,2014, approximately sixthree per cent (2010: six per cent; 2009: seven per cent) of the proved developed and undeveloped oil, condensate and NGL reserves and four per cent (2010: five per cent; 2009: five per cent) of natural gas reserves are attributable to those arrangements. Reserves also include volumes calculated by probabilistic aggregation of certain fields that share common infrastructure. These aggregation procedures result in enterprise-wide proved reserves volumes which may not be realised upon divestment on an individual property basis.
Millions of barrels Proved developed and undeveloped oil and condensate reserves (a) Reserves at 30 June 2011 Improved recovery Revisions of previous estimates Extensions and discoveries Purchase/sales of reserves Production Total changes Reserves at 30 June 2012 Improved recovery Revisions of previous estimates Extensions and discoveries Purchase/sales of reserves Production Total changes Reserves at 30 June 2013 Improved recovery Revisions of previous estimates Extensions and discoveries Purchase/sales of reserves Production Total changes Reserves at 30 June 2014 Developed Proved developed oil and condensate reserves as of 30 June 2011 as of 30 June 2012 as of 30 June 2013 Developed Reserves as of 30 June 2014 Undeveloped Proved undeveloped oil and condensate reserves as of 30 June 2011 as of 30 June 2012 as of 30 June 2013 Undeveloped Reserves as of 30 June 2014 Australia United
States Other (b) Total 171.2 257.9 40.8 469.9 – 33.2 – 33.2 8.7 120.6 5.1 134.4 8.8 2.9 – 11.7 – 32.0 – 32.0 (31.2 ) (30.8 ) (9.2 ) (71.2 ) (13.6 ) 157.8 (4.1 ) 140.1 157.6 415.7 36.6 610.0 – 12.6 0.1 12.7 13.7 (65.7 ) 1.1 (50.9 ) 0.2 137.5 0.2 137.9 – (1.9 ) – (1.9 ) (25.9 ) (38.7 ) (7.9 ) (72.5 ) (12.0 ) 43.8 (6.5 ) 25.4 145.7 459.6 30.1 635.4 – – – – 14.2 (50.0 ) (0.4 ) (36.1 ) – 99.0 0.3 99.3 – (0.4 ) (3.5 ) (3.9 ) (23.6 ) (54.0 ) (6.5 ) (84.1 ) (9.4 ) (5.4 ) (10.0 ) (24.8 ) 136.2 454.2 20.1 610.5 116.0 92.2 38.5 246.7 101.5 148.6 36.5 286.6 105.0 209.5 27.7 342.2 96.5 237.8 14.7 349.0 55.2 165.7 2.2 223.1 56.2 267.1 0.1 323.4 40.6 250.1 2.5 293.2 39.7 216.4 5.4 261.5
|
Petroleum Reserves
Millions of barrels | Australia | United States | Other | Total | ||||||||||||
Proved developed and undeveloped oil, condensate and | ||||||||||||||||
NGL reserves(a)(b) | ||||||||||||||||
Reserves at 30 June 2008 | 354.3 | 197.8 | 46.5 | 598.6 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Improved Recovery | 0.0 | 0.0 | 1.2 | 1.2 | ||||||||||||
Revisions of previous estimates | 13.3 | 5.0 | 24.0 | 42.3 | ||||||||||||
Extensions and discoveries | 5.9 | 14.0 | 0.0 | 19.9 | ||||||||||||
Purchase/sales of reserves | 0.0 | 0.0 | 0.0 | 0.0 | ||||||||||||
Production(c) | (40.4 | ) | (20.9 | ) | (15.1 | ) | (76.4 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total changes | (21.2 | ) | (1.9 | ) | 10.1 | (13.0 | ) | |||||||||
|
|
|
|
|
|
|
| |||||||||
Reserves at 30 June 2009 | 333.1 | 195.9 | 56.6 | 585.6 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Improved Recovery | 11.0 | 0.0 | 0.0 | 11.0 | ||||||||||||
Revisions of previous estimates | 5.9 | 73.4 | (2.4 | ) | 76.9 | |||||||||||
Extensions and discoveries | 6.9 | 49.2 | 7.5 | 63.6 | ||||||||||||
Purchase/sales of reserves | 0.0 | 0.0 | 0.0 | 0.0 | ||||||||||||
Production(c) | (40.2 | ) | (44.1 | ) | (12.8 | ) | (97.1 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total changes | (16.4 | ) | 78.5 | (7.7 | ) | 54.4 | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Reserves at 30 June 2010 | 316.7 | 274.4 | 48.9 | 640.0 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Improved Recovery | 0.7 | 22.0 | 0.0 | 22.7 | ||||||||||||
Revisions of previous estimates | 2.0 | 1.6 | 3.7 | 7.3 | ||||||||||||
Extensions and discoveries | 3.2 | 1.6 | 0.2 | 5.0 | ||||||||||||
Purchase/sales of reserves | 0.0 | 0.0 | 0.0 | 0.0 | ||||||||||||
Production(c) | (48.4 | ) | (32.2 | ) | (11.3 | ) | (91.9 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total changes | (42.5 | ) | (7.0 | ) | (7.4 | ) | (56.9 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Reserves at 30 June 2011(d) | 274.2 | 267.4 | 41.5 | 583.1 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Developed | ||||||||||||||||
Proved developed oil, condensate and NGL reserves | ||||||||||||||||
at 30 June 2008 | 189.1 | 90.0 | 42.0 | 321.1 | ||||||||||||
at 30 June 2009 | 182.2 | 98.7 | 51.5 | 332.4 | ||||||||||||
at 30 June 2010 | 217.1 | 108.9 | 44.4 | 370.4 | ||||||||||||
Developed Reserves at 30 June 2011 | 176.3 | 94.8 | 39.2 | 310.3 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Undeveloped | ||||||||||||||||
Proved undeveloped oil, condensate and NGL reserves | ||||||||||||||||
at 30 June 2008 | 165.2 | 107.8 | 4.5 | 277.5 | ||||||||||||
at 30 June 2009 | 150.9 | 97.2 | 5.1 | 253.2 | ||||||||||||
at 30 June 2010 | 99.6 | 165.5 | 4.5 | 269.6 | ||||||||||||
Undeveloped Reserves at 30 June 2011 | 97.9 | 172.6 | 2.3 | 272.8 | ||||||||||||
|
|
|
|
|
|
|
|
(a) | Small differences are due to rounding to first decimal place. |
(b) |
|
Millions of barrels Proved developed and undeveloped NGL reserves(a) Reserves at 30 June 2011 Improved recovery Revisions of previous estimates Extensions and discoveries Purchase/sales of reserves Production(b) Total changes Reserves at 30 June 2012 Improved recovery Revisions of previous estimates Extensions and discoveries Purchase/sales of reserves Production(b) Total changes Reserves at 30 June 2013 Improved recovery Revisions of previous estimates Extensions and discoveries Purchase/sales of reserves Production(b) Total changes Reserves at 30 June 2014 Developed Proved developed NGL reserves as of 30 June 2011 as of 30 June 2012 as of 30 June 2013 Developed Reserves as of 30 June 2014 Undeveloped Proved undeveloped NGL reserves as of 30 June 2011 as of 30 June 2012 as of 30 June 2013 Undeveloped Reserves as of 30 June 2014 Australia United
States Other (c) Total 102.9 9.6 0.7 113.2 – 0.9 – 0.9 0.2 49.7 (0.1 ) 49.9 – 2.1 – 2.1 – 41.9 – 41.9 (7.9 ) (5.7 ) (0.4 ) (14.1 ) (7.7 ) 89.0 (0.5 ) 80.8 95.2 98.6 (d) 0.2 194.0 (d) – 1.0 – 1.0 3.5 (23.3 ) – (19.8 ) 0.1 82.2 – 82.3 – – – – (7.9 ) (9.6 ) – (17.5 ) (4.3 ) 50.3 – 45.9 90.9 148.9 (d) 0.2 239.9 (d) – – – – (0.3 ) (25.3 ) (0.1 ) (25.7 ) – 46.9 – 46.9 – (0.2 ) – (0.2 ) (8.5 ) (13.6 ) – (22.1 ) (8.8 ) 7.7 (0.1 ) (1.2 ) 82.1 156.6 (d) – 238.7 (d) 60.3 2.6 0.7 63.6 53.9 22.5 0.2 76.6 54.7 54.1 0.2 108.9 46.0 75.0 – 121.0 42.6 7.0 0.1 49.7 41.3 76.1 – 117.4 36.2 94.8 – 131.0 36.1 81.5 – 117.7
|
|
Billions of cubic feet Proved developed and undeveloped natural gas reserves Reserves at 30 June 2008(a) (e) Improved Recovery Revisions of previous estimates Extensions and discoveries Purchase/sales of reserves Production(c) Total changes Reserves at 30 June 2009(e) Improved Recovery Revisions of previous estimates Extensions and discoveries Purchase/sales of reserves Production(c) Total changes Reserves at 30 June 2010(e) Improved Recovery Revisions of previous estimates Extensions and discoveries Purchase/sales of reserves Production(c) Total changes Reserves at 30 June 2011(d) Developed Proved developed natural gas reserves at 30 June 2008(e) at 30 June 2009(e) at 30 June 2010 Developed Reserves at 30 June 2011 Undeveloped Proved undeveloped natural gas reserves at 30 June 2008(e) at 30 June 2009(e) at 30 June 2010 Undeveloped Reserves at 30 June 2011 Australia (b) United States Other Total 3,756.0 99.6 802.6 4,658.2 0.0 0.0 179.5 179.5 24.5 1.5 2.7 28.7 267.5 7.5 0.0 275.0 0.0 (2.4 ) 0.0 (2.4 ) (258.3 ) (13.4 ) (92.9 ) (364.6 ) 33.7 (6.8 ) 89.3 116.2 3,789.7 92.8 892.0 4,774.5 40.5 0.0 23.6 64.1 94.2 2.2 (51.5 ) 44.9 1.6 9.3 0.0 10.9 0.0 0.0 0.0 0.0 (259.7 ) (17.7 ) (91.3 ) (368.7 ) (123.4 ) (6.2 ) (119.2 ) (248.8 ) 3,666.3 86.6 772.8 4,525.7 0.0 3.5 0.0 3.5 582.8 197.9 12.4 793.1 63.7 0.3 31.6 95.6 0.0 2,490.6 0.0 2,490.6 (274.7 ) (49.1 ) (81.2 ) (405.0 ) 371.8 2,643.2 (37.2 ) 2,977.8 4,038.1 2,729.8 735.6 7,503.5 1,882.3 46.4 441.4 2,370.1 1,899.0 38.5 383.7 2,321.2 1,724.8 30.3 236.8 1,991.9 1,754.0 1,122.1 719.9 3,596.0 1,873.7 53.2 361.2 2,288.1 1,890.7 54.3 508.3 2,453.3 1,941.5 56.3 536.0 2,533.8 2,284.1 1,607.7 15.7 3,907.5
(a) | Small differences are due to rounding to first decimal place. |
(b) | Production includes volumes consumed in operations. |
(c) | Other is comprised of Algeria, Pakistan, Trinidad and Tobago, and the United Kingdom. |
(d) | For 2012, 2013 and 2014, amounts include 1.7, 4.0 and 3.9 million barrels, respectively that are anticipated to be consumed in operations in the United States. |
Billions of cubic feet Proved developed and undeveloped natural gas reserves (a) Reserves at 30 June 2011 Improved recovery Revisions of previous estimates Extensions and discoveries Purchase/sales of reserves Production (b) Total changes Reserves at 30 June 2012 Improved recovery Revisions of previous estimates Extensions and discoveries Purchase/sales of reserves Production (b) Total changes Reserves at 30 June 2013 Improved recovery Revisions of previous estimates Extensions and discoveries Purchase/sales of reserves Production (b) Total changes Reserves at 30 June 2014 Developed Proved developed natural gas reserves as of 30 June 2011 as of 30 June 2012 as of 30 June 2013 Developed Reserves as of 30 June 2014 Undeveloped Proved undeveloped natural gas reserves as of 30 June 2011 as of 30 June 2012 as of 30 June 2013 Undeveloped Reserves as of 30 June 2014 Australia (c) United
States Other (d) Total 4,038.1 2,729.8 735.6 7,503.5 – 3.3 – 3.3 90.1 328.1 29.1 447.3 6.6 128.3 – 134.9 – 3,297.3 – 3,297.3 (276.1 ) (458.4 ) (122.6 ) (857.2 ) (179.5 ) 3,298.7 (93.5 ) 3,025.7 3,858.6 (e) 6,028.5 (f) 642.1 (g) 10,529.2 (h) – 3.4 – 3.4 34.6 (1,159.5 ) (54.9 ) (1,179.8 ) 8.7 1,675.4 – 1,684.1 – (0.5 ) – (0.5 ) (299.3 ) (491.3 ) (116.3 ) (906.9 ) (255.9 ) 27.4 (171.2 ) (399.7 ) 3,602.6 (e) 6,055.9 (f) 471.0 (g) 10,129.5 (h) – – – – 207.9 (1,174.3 ) 3.4 (962.9 ) – 1,205.9 123.6 1,329.5 – (1.5 ) (58.4 ) (59.9 ) (315.2 ) (462.7 ) (96.9 ) (874.8 ) (107.2 ) (432.4 ) (28.4 ) (568.0 ) 3,495.4 (e) 5,623.5 (f) 442.6 (g) 9,561.5 (h) 1,754.0 1,122.1 719.9 3,596.0 1,619.0 2,742.5 634.5 4,996.0 2,674.4 3,094.3 471.0 6,239.7 2,553.7 3,208.3 315.5 6,077.5 2,284.1 1,607.7 15.7 3,907.4 2,239.6 3,286.0 7.6 5,533.2 928.2 2,961.6 – 3,889.8 941.7 2,415.2 127.1 3,484.0
(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. |
|
|
|
Millions of barrels oil equivalent(a) Proved developed and undeveloped oil, condensate, natural gas and NGL reserves (b) Reserves at 30 June 2008(e) Improved Recovery Revisions of previous estimates Extensions and discoveries Purchase/sales of reserves Production(c) Total changes Reserves at 30 June 2009(e) Improved Recovery Revisions of previous estimates Extensions and discoveries Purchase/sales of reserves Production(c) Total changes Reserves at 30 June 2010(e) Improved Recovery Revisions of previous estimates Extensions and discoveries Purchase/sales of reserves Production(c) Total changes Reserves at 30 June 2011(d) Developed Proved developed oil, condensate and NGL reserves at 30 June 2008(e) at 30 June 2009(e) at 30 June 2010 Developed Reserves at 30 June 2011 Undeveloped Proved undeveloped oil, condensate and NGL reserves at 30 June 2008(e) at 30 June 2009(e) at 30 June 2010 Undeveloped Reserves at 30 June 2011 Australia United
States Other Total 980.3 214.4 180.3 1,375.0 0.0 0.0 31.1 31.1 17.4 5.3 24.5 47.1 50.5 15.3 0.0 65.7 0.0 (0.4 ) 0.0 (0.4 ) (83.5 ) (23.1 ) (30.6 ) (137.2 ) (15.7 ) (3.0 ) 25.0 6.4 964.7 211.4 205.3 1,381.4 17.8 0.0 3.9 21.7 21.6 73.8 (11.0 ) 84.4 7.2 50.8 7.5 65.4 0.0 0.0 0.0 0.0 (83.5 ) (47.1 ) (28.0 ) (158.6 ) (36.9 ) 77.5 (27.6 ) 12.9 927.8 288.8 177.7 1,394.3 0.7 22.6 0.0 23.3 99.1 34.5 5.9 139.5 13.9 1.6 5.4 20.9 0.0 415.1 0.0 415.1 (94.2 ) (40.3 ) (24.9 ) (159.4 ) 19.5 433.5 (13.6 ) 439.4 947.3 722.3 164.1 1,833.7 502.8 97.7 115.6 716.1 498.7 105.1 115.5 719.3 504.6 114.0 83.9 702.4 468.6 281.9 159.2 909.7 477.5 116.7 64.7 658.9 466.0 106.3 89.8 662.1 423.2 174.9 93.8 691.9 478.7 440.4 4.9 924.0
(g) | For 2012, 2013 and 2014, amounts include 65, 49 and 30 billion cubic feet, respectively that are anticipated to be consumed in operations in Other areas. |
(h) | For 2012, 2013 and 2014, amounts include 566, 527 and 575 billion cubic feet, respectively that are anticipated to be consumed in operations. |
Millions of barrels of oil equivalent(a) Proved developed and undeveloped oil, condensate, natural gas and NGL reserves(b) Reserves at 30 June 2011 Improved recovery Revisions of previous estimates Extensions and discoveries Purchase/sales of reserves Production (c) Total changes Reserves at 30 June 2012 Improved recovery Revisions of previous estimates Extensions and discoveries Purchase/sales of reserves Production (c) Total changes Reserves at 30 June 2013 Improved recovery Revisions of previous estimates Extensions and discoveries Purchase/sales of reserves Production (c) Total changes Reserves at 30 June 2014 Developed Proved developed oil, condensate, natural gas and NGL reserves as of 30 June 2011 as of 30 June 2012 as of 30 June 2013 Developed Reserves as of 30 June 2014 Undeveloped Proved undeveloped oil, condensate, natural gas and NGL reserves as of 30 June 2011 as of 30 June 2012 as of 30 June 2013 Undeveloped Reserves as of 30 June 2014 Australia United
States Other (d) Total 947.2 722.4 164.1 1,833.7 – 34.7 – 34.7 23.9 225.0 9.9 258.8 9.9 26.4 – 36.3 – 623.5 – 623.5 (85.1 ) (113.0 ) (30.1 ) (228.2 ) (51.3 ) 796.6 (20.2 ) 725.2 895.9 (e) 1,519.0 (f) 143.9 (g) 2,558.8 (h) – 14.2 – 14.2 23.0 (282.3 ) (8.1 ) (267.3 ) 1.8 498.9 0.2 500.9 – (2.0 ) – (2.0 ) (83.7 ) (130.2 ) (27.3 ) (241.2 ) (59.0 ) 98.7 (35.1 ) 4.7 837.0 (e) 1,617.7 (f) 108.8 (g) 2,563.5 (h) – – – – 48.6 (271.0 ) 0.1 (222.4 ) – 346.8 20.9 367.7 – (0.9 ) (13.2 ) (14.1 ) (84.6 ) (144.7 ) (22.6 ) (251.9 ) (36.1 ) (69.7 ) (14.9 ) (120.6 ) 800.9 (e) 1,548.0 (f) 93.9 (g) 2,442.8 (h) 468.6 281.9 159.2 909.7 425.1 628.2 142.5 1,195.8 605.5 779.2 106.3 1,491.0 568.1 847.6 67.3 1,483.0 478.6 440.5 4.9 924.0 470.8 890.8 1.4 1,363.0 231.5 838.5 2.5 1,072.5 232.8 700.4 26.6 959.8
(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 |
(d) | Other is comprised of Algeria, Pakistan, Trinidad and Tobago and the United Kingdom. |
Total proved reserves
(e) | For 2012, 2013 and 2014, amounts include |
|
(g) | For 2012, 2013 and 2014, amounts include 11, 8 and 5 million barrels equivalent, respectively that are anticipated to be consumed in operations in Other areas. |
(h) | For 2012, 2013 and 2014, amounts include 96, 92 and 100 million barrels equivalent, respectively that are anticipated to be consumed in operations. |
Proved undeveloped reserves
At year-end,30 June 2014, Petroleum had 924960 MMboe of proved undeveloped reserves, as comparedof which 604 MMboe, or 63 per cent, resided in our North American shale fields, while 356 MMboe or 37 per cent resided primarily in our offshore conventional fields in Australia, the Gulf of Mexico and the Caribbean. Compared to 692the total proved undeveloped of 1,072 MMboe reported at the end30 June 2013, this represents a net reduction of FY2010. A significant portion of these112 MMboe in proved undeveloped reserves are associated with their Fayetteville Shale gas acquisition, with 236 MMboe added upon acquisition and 17 MMboe added priorduring the year. This reduction was the combined result of development activities that converted proved undeveloped reserves into proved developed, the addition of new North American shale drilling locations, as well as revisions to the end of FY2011. Petroleum matured 79proved undeveloped reserves previously reported at 30 June 2013. Our active development program successfully drilled and converted 190 MMboe from proved undeveloped reserves to proved developed reserves during FY2011, mostly associatedthe year. Development activities in our North American shale fields converted 132 MMboe of this amount, while 34 MMboe of proved undeveloped were converted into proved developed in the Atlantis field in the Gulf of Mexico, with the start-upremaining 20 MMboe of conversions in the Pyrenees, Macedon and Minerva fields in Australia.
New additions to proved undeveloped reserves through extensions to existing proven acreage for new planned drilling locations totalled 280 MMboe. Of this amount, 218 MMboe was added in our North American Shale fields for new planned wells, which will be fully drilled within the next five years. Other extensions totalling 41 MMboe occurred in the Atlantis and Mad Dog fields in the US Gulf of Mexico, with the remaining 21 MMboe for the Angostura gas projectfield Phase III expansion in Trinidad and Tobago and the Zamzama booster compression project in Pakistan. An additional sum total of 58 MMboe was booked in FY2011, mostly attributable to maturing North West Shelf gas development, fuel gas associated with undeveloped proved reserves, Shenzi water injection volumes and the major repairs necessary to resume production from Atlantis North. During FY2011, Petroleum spent US$2,139 million progressing development ofTobago. Offsetting these new additions were revisions which reduced proved undeveloped reserves worldwide.
Mostby 203 MMboe. Virtually all of these revisions were in our North American shale fields and resulted from refocusing of our drilling program to target the most productive and highest value drilling locations. This resulted in the deferral of planned drilling for selected locations beyond our five-year plan and reclassification of the Group’s projects require significant capital expenditure and multi-year lead times before initial production can be achieved withrelated volumes from proved undeveloped into non-proved categories. Technical adjustments reflecting observed well performance also contributed to this reduction.
Of the associated movement of reserves from undeveloped to developed. Based on current project schedules, more than 99 per cent of the 924960 MMboe currently classified as proved undeveloped at 30 June 2014, 210 MMboe has been reported for five or more years. All of this amount is in our offshore conventional fields that are currently producing or being actively being pursued, andwhich are scheduled to be on streamstart producing within the next five years. The remaininglargest component of this is 128 MMboe in the Kipper-Tuna-Turrum project in Bass Strait, Australia. This project is expected to be on production in 2016. The Atlantis field in the Gulf of Mexico contains 39 MMboe, which is actively being drilled. The remainder resides in other Australian offshore fields that have active development plans. Our North American shale fields do not contain any proved undeveloped reserves are locatedreported for five or more years. In addition, management plans anticipate drilling all the proved undeveloped reserves in activethe North American shale fields expected to produce well intoin the next decade andfive years, with none of the proved undeveloped reserves being more than five years old at the time they are drilled.
During FY2014, Petroleum continued timely development of our inventory of proved undeveloped projects by converting 190 MMboe to proved developed reserves. Over the past three years, the conversion of proved undeveloped to developed has totalled 585 MMboe, averaging 195 MMboe per year. In currently producing conventional fields, the remaining proved undeveloped reserves will be developed and brought on stream in a phased manner to best optimise the use of production facilities and to meet long-term gas supply contracts. Thesales commitments. During FY2014, Petroleum Group has a dependable history of progressing large undeveloped volumes from undeveloped to developed, evidenced by the past three years, which have averaged nearly 80 MMboe per year.spent US$6.1 billion on development activities worldwide.
2.3.2 Ore Reserves2.13.2
Introduction
Ore Reserves are estimates of the amount of ore that can be economically and legally extracted and processed from our mining properties. In order to estimate reserves, assumptions are required about a range of geological, technical and economic factors, including quantities, grades, production techniques, recovery rates, production costs, transport costs, commodity demand, commodity prices and exchange rates. Estimating the quantity and/or grade of Ore Reserves requires the size, shape and depth of ore bodies to be determined by analysing geological data such as drilling samples. Because the economic assumptions used to estimate reserves change from period to period and because additional geological and operational data is generated during the course of operations, estimates of reserves may change from period to period. All of the Ore Reserve figures presented are reported in 100 per cent terms and represent estimates at 30 June 20112014 (unless otherwise stated). All tonnes and grade information has been rounded, hence small differences may be present in the totals. Tonnes are reported as dry metric tonnes unless otherwise stated.
Our mineral leases are of sufficient duration (or convey a legal right to renew for sufficient duration) to enable all Ore Reserves on the leased properties to be mined in accordance with current production schedules. Our Ore Reserves may include areas where some additional approvals remain outstanding but where, based on the technical investigations we carry out as part of our mine planning process and our knowledge and experience of the approvals process, we expect that such approvals will be obtained as part of the normal course of business and within the timeframe required by the current life of mine schedule.
The reported Ore Reserves contained in this annual reportAnnual Report do not exceed the quantities that we estimate could be extracted economically if future prices for each commodity were equal to the average historical prices for the three years to 31 December 2010, and2013, using current operating costs. However, we do not use a bauxite, aluminium or alumina price to determine bauxite reserves. The primary criteria for determining bauxite reserves are the feed specifications required by the captive alumina refinery. In addition to these specifications a number of modifying factors are used to differentiate bauxite reserves from other mineralised material. For our Hotazel Manganese assets,Mines, geological stratigraphic controls, cut-off grade and plant feed requirements are used to determine reserves.
Also, in some cases where commodities are produced as by-products (or co-products) with other metals, we use the three-year average historical prices for the combination of commodities produced at the relevant mine in order to verify that each ore reserve is economic. The three-year historical average prices used for each traded commodity to test for impairment of the Ore Reserves contained in this annual reportAnnual Report are as follows:
Commodity Price | US$ | |||
Copper | ||||
Gold | ||||
Nickel | ||||
Silver | ||||
Lead | ||||
Zinc | ||||
Uranium | ||||
Iron Ore – Fines Iron Ore – Lump |
| |||
Metallurgical Hard Coking Coal | ||||
Thermal Coal Newcastle | ||||
Thermal Coal Colombia (1) | 88.4/t |
(1) |
|
Thermal coal |
The reported reserves may differ in some respects from the reserves we report in our home jurisdictions of Australia and the UK. Those jurisdictions require the use of the Australasian Code for reporting of Exploration Results, Mineral Resources and Ore Reserves, December 20042012 (the JORC Code), which contemplates the use of reasonable investment assumptions in calculating reserve estimates.
Copper Business
Aluminium Customer Sector Group
Ore Reserves in accordance with Industry Guide 7
As at 30 June 2011 | As at 30 June 2010 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commodity | Ore Type | Proven Ore Reserve | Probable Ore Reserve | Total Ore Reserve | Reserve Life (years) | BHP Billiton Interest % | Total Ore Reserve | Reserve Life (years) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Mt | % A. Al2O3 | % R. SiO2 | Mt | % A. Al2O3 | % R. SiO2 | Mt | % A. Al2O3 | % R. SiO2 | Mt | % A. Al2O3 | % R.SiO2 | |||||||||||||||||||||||||||||||||||||||||||||||||||
Bauxite Australia | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Worsley | Laterite | 240 | 31.2 | 1.8 | 59 | 30.4 | 1.8 | 299 | 31.0 | 1.8 | 18 | 86 | 311 | 31.0 | 1.8 | 19 | ||||||||||||||||||||||||||||||||||||||||||||||
Brazil | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
MRN(4) | MRN Washed | 13 | 50.3 | 4.6 | — | — | — | 13 | 50.3 | 4.6 | 1 | 14.8 | 27 | 49.8 | 4.8 | 2 |
As at 30 June 2014 | As at 30 June 2013 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commodity | Ore Type | Proven Ore Reserves | Probable Ore Reserves | Total Ore Reserves | Reserve Life (years) | BHP Billiton Interest % | Total Ore Reserves | Reserve Life (years) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Mt | % TCu | % SCu | Mt | % TCu | % SCu | Mt | % TCu | % SCu | Mt | % TCu | % SCu | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Copper | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Escondida | Oxide | 92 | 0.88 | – | 53 | 0.67 | – | 145 | 0.80 | – | 145 | 0.81 | – | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Sulphide | 3,540 | 0.75 | – | 1,610 | 0.59 | – | 5,150 | 0.70 | – | 52 | 57.5 | 5,100 | 0.72 | – | 54 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Sulphide Leach | 1,650 | 0.46 | – | 610 | 0.40 | – | 2,260 | 0.44 | – | 2,020 | 0.44 | – | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cerro Colorado | Oxide | 30 | 0.59 | 0.42 | 73 | 0.55 | 0.37 | 103 | 0.56 | 0.38 | 9.0 | 100 | 113 | 0.59 | 0.42 | 9 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Sulphide | 33 | 0.65 | 0.13 | 29 | 0.66 | 0.11 | 62 | 0.65 | 0.12 | 66 | 0.64 | 0.13 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Spence | Oxide | 34 | 0.76 | 0.53 | 2.8 | 0.77 | 0.63 | 37 | 0.76 | 0.54 | 10 | 100 | 35 | 0.79 | 0.57 | 10 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Oxide Low Solubility | 21 | 0.96 | 0.44 | 12 | 0.57 | 0.22 | 33 | 0.82 | 0.36 | 38 | 0.83 | 0.36 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Sulphide | 121 | 0.96 | 0.12 | 32 | 0.64 | 0.11 | 153 | 0.90 | 0.12 | 153 | 0.92 | 0.12 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
ROM | – | – | – | 61 | 0.39 | 0.09 | 61 | 0.39 | 0.09 | 85 | 0.35 | 0.09 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Pinto Valley (5) | Sulphide | – | – | – | – | – | – | – | – | – | – | – | 67 | 0.39 | – | 4 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Low-grade Leach | – | – | – | – | – | – | – | – | – | 13 | 0.21 | – | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Mt | % Cu | kg/t U3O8 | g/tAu | g/tAg | Mt | % Cu | kg/t U3O8 | g/tAu | g/tAg | Mt | % Cu | kg/t U3O8 | g/tAu | g/tAg | Mt | % Cu | kg/t U3O8 | g/tAu | g/tAg | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Copper Uranium | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Olympic Dam(6) | Sulphide | 129 | 1.97 | 0.59 | 0.72 | 4 | 389 | 1.82 | 0.56 | 0.72 | 4 | 518 | 1.86 | 0.57 | 0.72 | 4 | 47 | 100 | 619 | 1.76 | 0.57 | 0.74 | 3 | 56 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Mt | % Cu | % Zn | g/tAg | ppmMo | Mt | % Cu | % Zn | g/tAg | ppmMo | Mt | % Cu | % Zn | g/tAg | ppmMo | Mt | % Cu | % Zn | g/tAg | ppmMo | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Copper Zinc | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Antamina | Sulphide Cu only | 136 | 1.00 | 0.14 | 9 | 350 | 277 | 0.98 | 0.17 | 9 | 290 | 413 | 0.99 | 0.16 | 9 | 310 | 13 | 33.75 | 498 | 0.92 | 0.11 | 9 | 290 | 14 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Sulphide Cu-Zn | 53 | 1.12 | 2.02 | 18 | 90 | 207 | 0.91 | 1.86 | 14 | 70 | 260 | 0.95 | 1.89 | 15 | 74 | 226 | 0.96 | 2.08 | 15 | 70 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Mt | g/tAg | % Pb | % Zn | Mt | g/tAg | % Pb | % Zn | Mt | g/tAg | % Pb | % Zn | Mt | g/tAg | % Pb | % Zn | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Silver Lead Zinc | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cannington | UG Sulphide | 18 | 239 | 6.38 | 3.92 | 2.7 | 240 | 6.15 | 4.01 | 21 | 239 | 6.35 | 3.93 | 9.0 | 100 | 25 | 247 | 6.45 | 3.81 | 11 |
|
Deposit |
|
| ||
| ||||
Sulphide Leach | ³ 0.30%TCu and lower than variable cut-off grade (V_COG) of concentrator – this is a complementary process to concentrators. | |||
Concentrator | V_COG – mine plans optimised considering financial and technical parameters in order to maximise Net Present Value. | |||
|
|
0.30%TCu | ||||
| Oxide | |||
Oxide Low Solubility | ³ 0.30%TCu | |||
Sulphide | ³ 0.30%TCu | |||
ROM | ³ 0.10%TCu | |||
| Variable between 1.2%Cu and 1.5%Cu | |||
| Net value incorporating all material revenue and cost factors and includes metallurgical recovery (see footnote 4 for averages). Mineralisation at the US$6,000/hr limit averages 0.23%Cu, 7g/tAg, 31ppmMo and 5,530t/hr mill throughput. | |||
Sulphide Cu-Zn | Net value incorporating all material revenue and cost factors and includes metallurgical recovery (see footnote 4 for averages). Mineralisation at the US$6,000/hr limit averages 0.11%Cu, 0.83%Zn, 12g/tAg and 5,760t/hr mill throughput. | |||
Cannington | UG Sulphide | Net value cut-off incorporating material revenue and cost factors and includes metallurgical recovery (see footnote 4 for averages). Mineralisation at A$140/t averages 99g/tAg, 4.40%Pb and 2.82%Zn. |
|
Base Metals Customer Sector Group
Ore ReservesAntamina and Cannington: All metals used in accordance with Industry Guide 7net value calculations for the Antamina and Cannington reserves are recovered into concentrate (see footnote 4 for averages) and sold.
As at 30 June 2011 | As at 30 June 2010 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commodity Deposit(6)(7) | Ore Type | Proven Ore Reserve | Probable Ore Reserve | Total Ore Reserve | Reserve Life (years) | BHP Billiton Interest % | Total Ore Reserve | Reserve Life (years) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Mt | % TCu | % SCu | Mt | % TCu | % SCu | Mt | % TCu | %SCu | Mt | % TCu | % SCu | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Copper | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Escondida (8) | Oxide | 62 | 0.79 | — | 60 | 0.95 | — | 121 | 0.87 | — | 35 | 57.5 | 139 | 0.80 | — | 30 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Sulphide | 1,294 | 1.03 | — | 718 | 0.87 | — | 2,012 | 0.97 | — | 1,638 | 1.02 | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Sulphide leach | 1,593 | 0.53 | — | 1,947 | 0.47 | — | 3,540 | 0.50 | — | 2,543 | 0.53 | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cerro Colorado | Oxide | 84 | 0.61 | 0.45 | 64 | 0.63 | 0.44 | 149 | 0.62 | 0.45 | 10 | 100 | 141 | 0.63 | 0.45 | 11 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Sulphide | 26 | 0.73 | 0.13 | 28 | 0.68 | 0.13 | 54 | 0.70 | 0.13 | 60 | 0.70 | 0.13 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Spence | Oxide | 21 | 0.91 | 0.76 | 5.1 | 0.82 | 0.71 | 26 | 0.89 | 0.75 | 12 | 100 | 28 | 0.94 | 0.79 | 16 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Oxide - low solubility | 28 | 1.15 | 0.65 | 9.0 | 0.91 | 0.45 | 37 | 1.09 | 0.60 | 35 | 1.19 | 0.65 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Sulphide | 127 | 1.07 | 0.15 | 74 | 0.70 | 0.12 | 201 | 0.93 | 0.14 | 209 | 0.94 | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
ROM | — | — | — | 39 | 0.50 | 0.07 | 39 | 0.50 | 0.07 | 39 | 0.51 | 0.07 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Pinto Valley (9) | Sulphide | 36 | 0.37 | — | 53 | 0.42 | — | 89 | 0.40 | — | 4 | 100 | 89 | 0.40 | — | 4 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Low-grade leach | 6 | 0.22 | — | 7 | 0.21 | — | 13 | 0.21 | — | 13 | 0.21 | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Mt | % Cu | kg/t U3O8 | g/t Au | g/t Ag | Mt | % Cu | kg/t U3O8 | g/t Au | g/t Ag | Mt | % Cu | kg/t U3O8 | g/t Au | g/t Ag | Mt | % Cu | kg/t U3O8 | g/t Au | g/t Ag | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Copper Uranium | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Olympic Dam (10) | Sulphide | 146 | 1.98 | 0.58 | 0.69 | 4.01 | 406 | 1.79 | 0.57 | 0.78 | 3.19 | 552 | 1.84 | 0.57 | 0.76 | 3.41 | 50 | 100 | 598 | 1.84 | 0.58 | 0.71 | 3.44 | 54 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Mt | % Cu | % Zn | g/t Ag | % Mo | Mt | % Cu | % Zn | g/t Ag | % Mo | Mt | % Cu | % Zn | g/t Ag | % Mo | Mt | % Cu | % Zn | g/t Ag | % Mo | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Copper Zinc | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Antamina(11) | Sulphide Cu only | 95 | 1.07 | 0.2 | 8.3 | 0.03 | 485 | 0.95 | 0.1 | 8.9 | 0.03 | 580 | 0.97 | 0.2 | 8.8 | 0.03 | 17 | 33.75 | 516 | 1.06 | 0.2 | 9.5 | 0.03 | 20 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Sulphide Cu-Zn | 43 | 0.81 | 1.8 | 14.8 | 0.01 | 180 | 0.83 | 2.0 | 14.4 | 0.01 | 223 | 0.83 | 2.0 | 14.5 | 0.01 | 161 | 1.03 | 2.0 | 17.5 | 0.01 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Mt | g/t Ag | % Pb | % Zn | Mt | g/t Ag | % Pb | % Zn | Mt | g/t Ag | % Pb | % Zn | Mt | g/t Ag | % Pb | % Zn | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Silver Lead Zinc | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cannington | UG Sulphide | 21 | 292 | 7.4 | 3.8 | 4.4 | 209 | 5.5 | 3.6 | 25 | 278 | 7.1 | 3.7 | 8 | 100 | 27 | 283 | 7.2 | 3.7 | 9 |
Approximate drill hole spacings used to classify the reserves |
Deposit | Proven Ore Reserves | Probable Ore Reserves | ||
Escondida | Oxide: 30m
| Oxide: 45m x 45m Sulphide: 90m x 90m Sulphide Leach: 115m x 115m | ||
Cerro Colorado |
| |||
120m x 120m on second kriging pass | ||||
Spence |
| |||
Sulphide: maximum 75m x 75m | ||||
Olympic Dam | Drilling grid of 20m to 30m | Drilling grid of 30m to 70m | ||
Antamina | ||||
Cannington |
Ore delivered to process plant. |
(4) | Metallurgical recoveries for the operations |
Deposit | Metallurgical | |
Escondida | Sulphide: 84% Sulphide | |
Cerro Colorado | ||
Spence | Oxide Sulphide: 72% ROM: 30% | |
Olympic Dam | ||
Cu 94%, U3O8 72%, Au 70%, Ag | ||
Antamina | Sulphide Cu 64% | |
Cannington | Ag 87%, Pb |
|
|
Olympic Dam – The decrease in |
|
Diamonds and Speciality Products Customer Sector GroupIron Ore Business
Ore Reserves in accordance with Industry Guide 7
As at 30 June 2011 | As at 30 June 2010 | |||||||||||||||||||||||||||||||||||||||||||||||
Commodity Deposit(5)(6) | Ore Type | Proven Ore Reserve | Probable Ore Reserve | Total Ore Reserve | Reserve Life (years) | BHP Billiton Interest % | Total Ore Reserve | Reserve Life (years) | ||||||||||||||||||||||||||||||||||||||||
Mt | cpt | Mt | cpt | Mt | cpt | Mt | cpt | |||||||||||||||||||||||||||||||||||||||||
Diamonds | ||||||||||||||||||||||||||||||||||||||||||||||||
EKATI Core Zone | OC | — | — | 20 | 0.9 | 20 | 0.9 | 5 | 80 | 20 | 0.3 | 5 | ||||||||||||||||||||||||||||||||||||
SP | — | — | 0.3 | 0.4 | 0.3 | 0.4 | 0.1 | 0.4 | ||||||||||||||||||||||||||||||||||||||||
UG | — | — | 4.8 | 0.6 | 4.8 | 0.6 | 5.7 | 0.7 | ||||||||||||||||||||||||||||||||||||||||
Mt | Mt | Mt | Mt | |||||||||||||||||||||||||||||||||||||||||||||
Mineral Sands | ||||||||||||||||||||||||||||||||||||||||||||||||
Richards Bay Minerals | TiO2 Slag | — | — | — | — | 37.76 | 25 | 25 |
As at 30 June 2014 | As at 30 June 2013 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Proven Ore Reserves | Probable Ore Reserves | Total Ore Reserves | Reserve Life (years) | BHP Billiton Interest % | Total Ore Reserves | Reserve Life (years) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commodity | Ore | Mt | % Fe | % P | % SiO2 | % Al2O3 | % LOI | Mt | % Fe | % P | % SiO2 | % Al2O3 | % LOI | Mt | % Fe | % P | % SiO2 | % Al2O3 | % LOI | Mt | % Fe | % P | % SiO2 | % Al2O3 | % LOI | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Iron Ore | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
WAIO (1)(2)(8)(9) | BKM | 700 | 63.7 | 0.10 | 2.9 | 1.9 | 3.5 | 1,400 | 61.5 | 0.12 | 4.1 | 2.3 | 5.0 | 2,100 | 62.2 | 0.12 | 3.7 | 2.2 | 4.5 | 16 | 88 | 2,000 | 62.6 | 0.11 | 3.5 | 2.1 | 4.3 | 17 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
BKM Bene | 90 | 61.3 | 0.09 | 6.7 | 2.7 | 1.7 | 80 | 60.0 | 0.09 | 8.3 | 2.8 | 1.8 | 170 | 60.7 | 0.09 | 7.5 | 2.7 | 1.7 | 160 | 60.6 | 0.09 | 7.5 | 2.9 | 1.7 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
CID | 650 | 56.3 | 0.05 | 6.3 | 1.8 | 10.9 | 190 | 57.3 | 0.05 | 5.7 | 1.5 | 10.4 | 840 | 56.5 | 0.05 | 6.1 | 1.7 | 10.8 | 950 | 56.6 | 0.05 | 6.2 | 1.6 | 10.8 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
MM | 220 | 62.1 | 0.07 | 3.1 | 1.7 | 5.7 | 310 | 61.0 | 0.07 | 3.8 | 2.0 | 6.2 | 530 | 61.5 | 0.07 | 3.5 | 1.9 | 6.0 | 500 | 61.7 | 0.07 | 3.4 | 1.9 | 5.9 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
NIM | 10 | 59.6 | 0.06 | 10.2 | 1.4 | 2.5 | 20 | 60.0 | 0.05 | 10.1 | 1.0 | 2.1 | 30 | 59.8 | 0.05 | 10.2 | 1.2 | �� | 2.3 | 20 | 59.9 | 0.06 | 10.0 | 1.2 | 2.3 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Mt | % Fe | % Pc | Mt | % Fe | % Pc | Mt | % Fe | % Pc | Mt | % Fe | % Pc | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Samarco JV | ROM | 1,800 | 40.1 | 0.05 | 1,100 | 38.8 | 0.05 | 2,900 | 39.6 | 0.05 | 39 | 50 | 3,000 | 39.7 | 0.05 | 40 |
Western Australia Iron Ore (WAIO) Reserves are reported on a Pilbara basis by ore type to align with our production of the Newman Blend lump product which comprises of BKM, BKM Bene and MM ore types, in addition to other lump and fines products. This also reflects our single logistics chain and associated management system and our equalisation of joint venture equity. |
(2) | WAIO BHP Billiton interest is reported as Pilbara reserve tonnes weighted average across all Joint Ventures. |
(3) | Approximate drill hole spacings used to classify the reserves |
Deposit | Proven Ore Reserves | Probable Ore Reserves | ||
| ||||
|
|
|
| |
Stainless Steel Materials Customer Sector Group
Ore Reserves in accordance with Industry Guide 7
As at 30 June 2011 | As at 30 June 2010 | |||||||||||||||||||||||||||||||||||||||||||||
Commodity Deposit (1)(2) | Ore Type | Proven Ore Reserve | Probable Ore Reserve | Total Ore Reserve | Reserve Life (years) | BHP Billiton Interest % | Total Ore Reserve | Reserve Life (years) | ||||||||||||||||||||||||||||||||||||||
Mt | % Ni | Mt | % Ni | Mt | % Ni | Mt | % Ni | |||||||||||||||||||||||||||||||||||||||
Nickel | ||||||||||||||||||||||||||||||||||||||||||||||
Colombia | ||||||||||||||||||||||||||||||||||||||||||||||
Cerro Matoso (3) | Laterite | 33 | 1.4 | 15 | 1.2 | 48 | 1.3 | 31 | 99.94 | 89 | 1.2 | 39 | ||||||||||||||||||||||||||||||||||
SP | 38 | 1.3 | — | — | 38 | 1.3 | 32 | 1.4 | ||||||||||||||||||||||||||||||||||||||
MNR – ore | 20 | 0.2 | — | — | 20 | 0.2 | 21 | 0.2 | ||||||||||||||||||||||||||||||||||||||
Low Grade Stockpiles (4) | 7.1 | 1.0 | — | — | 7.1 | 1.0 | — | — | ||||||||||||||||||||||||||||||||||||||
Nickel West | ||||||||||||||||||||||||||||||||||||||||||||||
Leinster | OC | 2.9 | 1.3 | 0.2 | 0.9 | 3.1 | 1.3 | 8 | 100 | 3.1 | 1.3 | 8 | ||||||||||||||||||||||||||||||||||
UG | 4.9 | 1.9 | 6.9 | 1.7 | 12 | 1.8 | 12 | 1.8 | ||||||||||||||||||||||||||||||||||||||
SP | — | — | 1.4 | 1.0 | 1.4 | 1.0 | 1.4 | 1.0 | ||||||||||||||||||||||||||||||||||||||
SP Oxidised | — | — | 1.8 | 1.7 | 1.8 | 1.7 | 1.9 | 1.7 | ||||||||||||||||||||||||||||||||||||||
Mt Keith | OC | 103 | 0.56 | 1.8 | 0.44 | 105 | 0.56 | 13 | 100 | 119 | 0.56 | 14 | ||||||||||||||||||||||||||||||||||
SP | 29 | 0.52 | 3.4 | 0.58 | 33 | 0.53 | 32 | 0.53 | ||||||||||||||||||||||||||||||||||||||
Cliffs | UG | 0.3 | 2.9 | 1.3 | 2.9 | 1.6 | 2.9 | 3 | 100 | 1.2 | 3.0 | 3 |
|
|
|
| ||
| ||||
| ||||
| ||||
|
|
|
| |
| ||
| ||
| ||
|
|
|
Iron Ore Customer Sector Group
Ore Reserves in accordance with Industry Guide 7
As at 30 June 2011 | As at 30 June 2010 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Proven Ore Reserve | Probable Ore Reserve | Total Ore Reserve | Total Ore Reserve | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commodity | Ore Type | Mt | % Fe | % P | % SiO2 | % Al2O3 | % LOI | Mt | % Fe | % P | % SiO2 | % Al2O3 | % LOI | Mt | % Fe | % P | % SiO2 | % Al2O3 | % LOI | Reserve Life (years) | BHP Billiton Interest % | Mt | % Fe | % P | % SiO2 | % Al2O3 | % LOI | Reserve Life (years) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Iron Ore | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Mt Newman JV (13) | BKM | 302 | 63.8 | 0.08 | 4.1 | 2.0 | 2.0 | 896 | 62.6 | 0.11 | 4.2 | 2.0 | 3.6 | 1,198 | 62.9 | 0.10 | 4.1 | 2.0 | 3.2 | 29 | 85 | 1,104 | 63.0 | 0.09 | 4.3 | 2.0 | 2.9 | 32 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
MM | 12 | 61.2 | 0.07 | 2.8 | 1.6 | 7.5 | 71 | 61.7 | 0.06 | 3.1 | 1.8 | 6.3 | 83 | 61.6 | 0.07 | 3.0 | 1.8 | 6.5 | 66 | 61.8 | 0.07 | 2.9 | 1.8 | 6.2 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Jimblebar (14) | BKM | 151 | 63.0 | 0.11 | 3.3 | 2.3 | 3.9 | 223 | 62.7 | 0.11 | 3.3 | 2.3 | 4.2 | 374 | 62.8 | 0.11 | 3.3 | 2.3 | 4.1 | 42 | 100 | 375 | 62.9 | 0.11 | 3.2 | 2.3 | 4.1 | 72 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
MM | — | — | — | — | — | — | 92 | 61.3 | 0.08 | 3.2 | 2.2 | 6.2 | 92 | 61.3 | 0.08 | 3.2 | 2.2 | 6.2 | 131 | 62.1 | 0.08 | 2.8 | 1.8 | 5.8 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Mt Goldsworthy JV Northern | NIM | 6.0 | 60.9 | 0.06 | 7.6 | 1.7 | 2.7 | 19 | 60.7 | 0.06 | 8.4 | 1.2 | 2.6 | 25 | 60.8 | 0.06 | 8.2 | 1.3 | 2.6 | 13 | 85 | 22 | 61.1 | 0.06 | 8.2 | 1.2 | 2.3 | 11 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Mt Goldsworthy JV Area C (15) | BKM | 71 | 63.2 | 0.14 | 2.4 | 1.8 | 4.8 | 289 | 61.9 | 0.13 | 3.6 | 2.1 | 5.3 | 361 | 62.2 | 0.13 | 3.4 | 2.0 | 5.2 | 17 | 85 | 264 | 62.2 | 0.13 | 3.4 | 2.0 | 5.1 | 14 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
MM | 195 | 62.5 | 0.06 | 2.9 | 1.6 | 5.6 | 204 | 61.6 | 0.06 | 3.8 | 1.8 | 5.8 | 399 | 62.1 | 0.06 | 3.4 | 1.7 | 5.7 | 385 | 61.8 | 0.06 | 3.4 | 1.8 | 5.9 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Yandi JV (16) | CID | 641 | 57.1 | 0.05 | 5.5 | 1.5 | 10.8 | 299 | 57.4 | 0.04 | 5.9 | 1.4 | 10.3 | 940 | 57.2 | 0.04 | 5.7 | 1.5 | 10.7 | 21 | 85 | 996 | 57.1 | 0.04 | 5.8 | 1.5 | 10.6 | 20 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Mt | % Fe | % Pc | Mt | % Fe | % Pc | Mt | % Fe | % Pc | Mt | % Fe | % Pc | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Samarco JV (17) | ROM | 1,120 | 42.4 | 0.05 | 928 | 39.8 | 0.05 | 2,048 | 41.2 | 0.05 | 41 | 50 | 2,078 | 41.3 | 0.05 | 42 |
|
|
|
|
| ||
| ||||
| ||||
| ||||
| ||||
| 50m x 50m | 150m x | ||
Samarco JV |
|
The |
Cut-off |
|
(8) | The operations to support NIM ore type are currently on care and maintenance. |
(9) | WAIO reserves are all located on State Agreement mining leases that guarantee the right to mine, except |
|
|
|
|
|
Manganese Customer Sector GroupCoal Business
Ore Reserves in accordance with Industry Guide 7
As at 30 June 2011 | As at 30 June 2010 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commodity | Ore Type | Proven Ore Reserve | Probable Ore Reserve | Total Ore Reserve | Reserve Life (years) | BHP Billiton Interest % | Total Ore Reserve | Reserve Life (years) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Mt | % Mn | % Yield | Mt | % Mn | % Yield | Mt | % Mn | % Yield | Mt | % Mn | % Yield | |||||||||||||||||||||||||||||||||||||||||||||||||||
GEMCO(8) | ROM | 83 | 46.6 | 54 | 26 | 45.6 | 54 | 109 | 46.3 | 54 | 12 | 60 | 109 | 46.7 | 49 | 13 | ||||||||||||||||||||||||||||||||||||||||||||||
Mt | % Mn | % Fe | Mt | % Mn | % Fe | Mt | % Mn | % Fe | Mt | % Mn | % Fe | |||||||||||||||||||||||||||||||||||||||||||||||||||
Wessels(2)(3) | Lower Body-HG | 2.6 | 47.2 | 11.0 | 12 | 47.9 | 11.3 | 15 | 47.8 | 11.2 | 48 | 44.4 | 7.9 | 47.2 | 11.7 | 49 | ||||||||||||||||||||||||||||||||||||||||||||||
Lower Body-LG | 2.3 | 41.5 | 11.4 | 8.1 | 41.6 | 12.9 | 10 | 41.6 | 12.6 | 10 | 41.6 | 14.1 | ||||||||||||||||||||||||||||||||||||||||||||||||||
NTS-Lower Body-HG | — | — | — | — | — | — | — | — | — | 6.9 | 48.5 | 11.4 | ||||||||||||||||||||||||||||||||||||||||||||||||||
NTS-Lower Body-LG | — | — | — | — | — | — | — | — | — | 1.0 | 42.9 | 16.3 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Upper Body | — | — | — | 47 | 42.0 | 17.8 | 47 | 42.0 | 17.8 | 47 | 42.1 | 17.3 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Mamatwan (2)(4) | M, C, N Zones | 33 | 37.2 | 4.5 | 12 | 37.0 | 4.4 | 46 | 37.1 | 4.4 | 25 | 44.4 | 48 | 37.6 | 4.5 | 22 | ||||||||||||||||||||||||||||||||||||||||||||||
X Zone | 2.8 | 36.8 | 4.8 | 0.3 | 37.0 | 4.4 | 3.1 | 36.8 | 4.8 | 4.1 | 37.4 | 4.8 | ||||||||||||||||||||||||||||||||||||||||||||||||||
NTS-M,C,N Zones | 8.6 | 37.2 | 4.6 | 16 | 37.2 | 4.6 | 24 | 37.2 | 4.6 | 22 | 37.7 | 4.5 | ||||||||||||||||||||||||||||||||||||||||||||||||||
NTS-X Zone | 1.1 | 37.0 | 4.8 | 2.2 | 36.9 | 4.6 | 3.3 | 36.9 | 4.7 | 3.0 | 37.4 | 4.7 |
As at 30 June 2014 | As at 30 June 2013 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commodity | Mining | Coal | Proven Coal Reserves | Probable Coal Reserves | Total Coal Reserves | Proven Marketable Coal Reserves | Probable Marketable Coal Reserves | Total Marketable Coal Reserves | Reserve Life (years) | BHP Billiton Interest % | Total Marketable Coal Reserves | Reserve Life (years) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Mt | Mt | Mt | Mt | % Ash | % VM | % S | Mt | % Ash | % VM | % S | Mt | % Ash | % VM | % S | Mt | % Ash | % VM | % S | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Metallurgical Coal | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Queensland Coal | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
CQCA JV | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goonyella Riverside Broadmeadow | OC | Met | 321 | 224 | 545 | 244 | 9.3 | 22.7 | 0.50 | 160 | 10.5 | 22.7 | 0.50 | 404 | 9.8 | 22.7 | 0.50 | 30 | 50 | 417 | 9.8 | 22.7 | 0.50 | 32 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
UG | Met | 43 | 160 | 203 | 35 | 8.0 | 23.0 | 0.52 | 109 | 9.3 | 23.6 | 0.54 | 144 | 9.0 | 23.4 | 0.54 | 146 | 7.0 | 24.2 | 0.52 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Peak Downs(6) | OC | Met | 492 | 548 | 1,040 | 296 | 10.6 | 22.3 | 0.60 | 317 | 10.3 | 21.9 | 0.59 | 613 | 10.5 | 22.1 | 0.60 | 34 | 50 | 626 | 10.5 | 22.1 | 0.60 | 34 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Saraji | OC | Met | 386 | 153 | 539 | 240 | 10.6 | 18.0 | 0.60 | 87 | 10.6 | 18.5 | 0.70 | 327 | 10.6 | 18.1 | 0.63 | 37 | 50 | 336 | 10.6 | 18.1 | 0.63 | 39 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Norwich Park(7) | OC | Met | 154 | 62 | 216 | 111 | 10.3 | 16.8 | 0.70 | 42 | 10.3 | 16.4 | 0.70 | 153 | 10.3 | 16.7 | 0.70 | 25 | 50 | 153 | 10.3 | 16.7 | 0.70 | 25 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Blackwater(8) | OC | Met/Th | 143 | 379 | 522 | 126 | 8.0 | 26.7 | 0.40 | 333 | 9.1 | 26.1 | 0.40 | 459 | 8.8 | 26.3 | 0.40 | 30 | 50 | 472 | 8.8 | 26.3 | 0.40 | 35 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Daunia (9) | OC | Met | 88 | 50 | 138 | 72 | 8.2 | 20.8 | 0.36 | 40 | 8.4 | 20.5 | 0.34 | 112 | 8.3 | 20.7 | 0.35 | 25 | 50 | 116 | 8.2 | 20.7 | 0.36 | 32 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Gregory JV | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Gregory Crinum (7) | OC | Met | 6.6 | 0.3 | 6.9 | 5.4 | 7.0 | 34.8 | 0.60 | 0.2 | 7.0 | 35.3 | 0.60 | 5.6 | 7.0 | 34.8 | 0.60 | 2.8 | 50 | 5.6 | 7.0 | 34.8 | 0.60 | 3 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
UG | Met | – | 13 | 13 | – | – | – | – | 11 | 7.2 | 33.8 | 0.58 | 11 | 7.2 | 33.8 | 0.58 | 14 | 7.5 | 33.7 | 0.60 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
BHP Billiton Mitsui | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
South Walker Creek (10) | OC | Met | 68 | �� | 21 | 89 | 50 | 9.0 | 14.3 | 0.32 | 15 | 9.0 | 13.9 | 0.31 | 65 | 9.0 | 14.2 | 0.32 | 11 | 80 | 85 | 9.0 | 14.3 | 0.30 | 21 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Poitrel-Winchester (11) | OC | Met | 33 | 33 | 66 | 23 | 8.3 | 23.2 | 0.33 | 22 | 8.3 | 24.0 | 0.34 | 45 | 8.3 | 23.6 | 0.34 | 14 | 80 | 38 | 8.5 | 23.5 | 0.34 | 13 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Illawarra Coal | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Appin | UG | Met/Th | 24 | 133 | 157 | 20 | 8.9 | 23.5 | 0.37 | 112 | 8.9 | 24.9 | 0.36 | 132 | 8.9 | 24.7 | 0.36 | 25 | 100 | 134 | 8.9 | 24.7 | 0.36 | 26 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
West Cliff | UG | Met/Th | 5.4 | 0.4 | 5.8 | 3.8 | 8.9 | 20.6 | 0.36 | 0.3 | 8.9 | 20.1 | 0.36 | 4.1 | 8.9 | 20.6 | 0.36 | 2.0 | 100 | 5.8 | 8.9 | 20.7 | 0.36 | 3 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Dendrobium | UG | Met/Th | 21 | 24 | 45 | – | – | – | – | – | – | – | – | – | – | – | – | 100 | – | – | – | – | 10 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
UG | Met | – | – | – | 8.6 | 9.7 | 23.8 | 0.59 | 9.9 | 9.7 | 24.2 | 0.59 | 18 | 9.7 | 24.0 | 0.59 | 8.9 | 20 | 9.7 | 24.0 | 0.59 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
UG | Th | – | – | – | 5.2 | 23.0 | – | – | 6.3 | 23.0 | – | – | 12 | 23.0 | – | – | 13 | 23.0 | – | – |
|
|
|
|
|
|
| ||
| ||||
| ||||
|
|
|
| |
| ||
| ||
|
|
Metallurgical Coal Customer Sector Group
Ore Reserves in accordance with Industry Guide 7
As at 30 June 2011 | As at 30 June 2010 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Deposit(1)(2) | Mining Method | Coal | Proven��Coal Reserve | Probable Coal Reserve | Total Coal Reserve | Total Marketable Coal Reserve | Reserve Life (years) | BHP Billiton Interest % | Total Marketable Coal Reserve | Reserve Life (years) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Mt | Mt | Mt | Mt | % Ash | % VM | % S | Mt | % Ash | % VM | % S | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Queensland Coal CQCA JV | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goonyella Riverside Broadmeadow(3) | OC | Met | 363 | 224 | 587 | 437 | 9.7 | 22.7 | 0.50 | 35 | 50 | 387 | 9.8 | 23.0 | 0.50 | 32 | ||||||||||||||||||||||||||||||||||||||||||||||
UG | Met | 44 | 111 | 154 | 132 | 7.0 | 23.9 | 0.51 | 130 | 6.9 | 23.9 | 0.51 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Peak Downs | OC | Met | 407 | 612 | 1,018 | 574 | 9.1 | 21.0 | 0.60 | 62 | 50 | 581 | 9.1 | 21.0 | 0.60 | 65 | ||||||||||||||||||||||||||||||||||||||||||||||
Saraji(4) | OC | Met | 423 | 153 | 576 | 350 | 10.2 | 18.1 | 0.62 | 41 | 50 | 308 | 10.2 | 18.1 | 0.63 | 39 | ||||||||||||||||||||||||||||||||||||||||||||||
Norwich Park | OC | Met | 173 | 98 | 271 | 194 | 10.3 | 16.9 | 0.70 | 29 | 50 | 196 | 10.2 | 16.9 | 0.69 | 30 | ||||||||||||||||||||||||||||||||||||||||||||||
Blackwater (5) | OC | Met/Th | 183 | 379 | 562 | 494 | 8.7 | 26.3 | 0.40 | 36 | 50 | 448 | 9.9 | 24.8 | 0.40 | 33 | ||||||||||||||||||||||||||||||||||||||||||||||
Daunia(6) | OC | Met/Th | 94 | 50 | 145 | 117 | 8.2 | 20.7 | 0.34 | 26 | 50 | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
Gregory JV | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Gregory Crinum | OC | Met | 10 | 1.2 | 12 | 9.2 | 7.4 | 33.0 | 0.60 | 6 | 50 | 11 | 7.7 | 32.8 | 0.60 | 6 | ||||||||||||||||||||||||||||||||||||||||||||||
UG | Met | — | 27 | 27 | 22 | 6.5 | 33.7 | 0.59 | 20 | 6.8 | 33.2 | 0.60 | ||||||||||||||||||||||||||||||||||||||||||||||||||
BHP Billiton Mitsui Coal Pty Ltd | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
South Walker Creek | OC | Met/Th | 84 | 38 | 122 | 91 | 9.1 | 13.0 | 0.34 | 23 | 80 | 98 | 9.3 | 13.1 | 0.30 | 23 | ||||||||||||||||||||||||||||||||||||||||||||||
Poitrel – Winchester (7) | OC | Met | 30 | 29 | 60 | 42 | 8.1 | 23.0 | 0.34 | 14 | 80 | 47 | 8.9 | 23.8 | 0.40 | 17 | ||||||||||||||||||||||||||||||||||||||||||||||
Illawarra Coal | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Appin | UG | Met/Th | 3.5 | 76 | 79 | 68 | 8.9 | 23.9 | 0.37 | 19 | 100 | 69 | 8.9 | 24.0 | 0.37 | 19 | ||||||||||||||||||||||||||||||||||||||||||||||
West Cliff | UG | Met/Th | 7.8 | 3.6 | 11 | 8.8 | 8.9 | 21.4 | 0.36 | 3 | 100 | 10 | 8.9 | 21.3 | 0.36 | 4 | ||||||||||||||||||||||||||||||||||||||||||||||
Dendrobium | UG | Met/Th | 9.2 | 45 | 54 | 38 | 9.7 | 24.0 | 0.59 | 12 | 100 | 40 | 9.7 | 24.0 | 0.59 | 13 |
(1) | Only geophysically logged, fully analysed cored holes with greater than 95% recovery |
Deposit | Proven | Probable | ||
Goonyella Riverside Broadmeadow | 500m to | |||
Peak Downs | 500m to | 500m to | ||
Saraji | 500m to | 900m to | ||
Norwich Park | 500m to | |||
Blackwater | 500m | 500m to | ||
Daunia | 500m to 1,000m | 1,000m to 2,000m | ||
Gregory Crinum | 850m plus 3D seismic coverage for UG | 850m to | ||
South Walker Creek | 500m to 800m | 1,000m to 1,500m | ||
Poitrel-Winchester | 300m to 950m | 550m to | ||
Appin | 700m | 1,500m | ||
West Cliff | 700m | 1,500m | ||
Dendrobium | 700m | 1,500m |
(2) | Product recoveries for the operations were: |
Deposit | Product Recovery | |||
Goonyella Riverside Broadmeadow | 73% | |||
Peak Downs | Peak Downs: 62% Caval Ridge: 56% | |||
Saraji | 61% | |||
Norwich Park | 71% | |||
Blackwater | 88% | |||
Daunia | 80% | |||
Gregory Crinum | 80% | |||
South Walker Creek | ||||
| ||||
Appin | 84% | |||
West Cliff | 71% | |||
Dendrobium |
Total Coal |
Cut-off criteria applied were – Goonyella Riverside, Peak Downs, Caval Ridge, Saraji, Norwich Park, Blackwater, Gregory, South Walker Creek³ 0.5m seam thickness; Broadmeadow |
|
|
|
Blackwater – The decrease in Reserve Life was due to an increased nominated production rate from 15.4Mtpa in FY2013 to 17.7Mtpa in FY2014. |
(9) | Daunia – The decrease in Reserve Life was due to an increased nominated production rate from 4.5Mtpa in FY2013 to 5.5Mtpa in FY2014. |
(10) | South Walker Creek – The decrease in Coal Reserves was mainly due to revised price and cost assumptions. The decrease in Reserve Life was due to the decrease in Coal Reserves and an increased nominated production rate from 5.6Mtpa in FY2013 to 7.9Mtpa in FY2014. |
(11) | Poitrel-Winchester – The |
Energy Coal Customer Sector GroupBusiness
Ore Reserves in accordance with Industry Guide 7
As at 30 June 2011 | As at 30 June 2010 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Proven Coal Reserve | Probable Coal Reserve | Total Coal Reserve | Total Marketable Coal Reserves | Total Marketable Coal Reserves | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Deposit (7) | Mining Method | Coal Type | Mt | Mt | Mt | Mt | % Ash | % VM | % S | kCal/kg CV | %Total Moisture(14) | Reserve Life (years) | BHP Billiton Interest % | Mt | % Ash | % VM | % S | KCal/kg CV | % Total Moisture | Reserve Life (years) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
New Mexico | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
San Juan(8) | UG | Th | 44 | 1 | 45 | 45 | 19.0 | — | 0.70 | 5,600 | 8.5 | 7 | 100 | 62 | 19.1 | — | 0.74 | 5,600 | 10.0 | 10 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Navajo(9) | OC | Th | 36 | — | 36 | 36 | 23.0 | — | 0.90 | 4,800 | 13.0 | 5 | 100 | 162 | 23.0 | — | 0.90 | 4,800 | 13.0 | 21 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
South Africa | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Khutala(10) | OC | Met | 12 | — | 12 | 10 | 18.9 | 29.1 | 1.90 | 6,100 | 7.0 | 16 | 100 | 12 | 17.2 | 31.1 | 1.57 | 5,600 | 7.0 | 22 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
OC | Th | 139 | — | 139 | 139 | 33.5 | 21.7 | 1.22 | 4,700 | 7.0 | 150 | 38.3 | 19.4 | 0.99 | 4,400 | 7.0 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
UG | Th | 75 | — | 75 | 75 | 34.5 | 20.4 | 0.80 | 4,400 | 7.0 | 93 | 34.2 | 20.5 | 0.86 | 4,500 | 7.0 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Wolvekrans (3) | OC | Th | 298 | 124 | 423 | 281 | 20.0 | 23.5 | 0.66 | 6,000 | 7.2 | 30 | 100 | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Middelburg(3)(11) | OC | Th | 139 | — | 139 | 106 | 20.4 | 23.1 | 0.63 | 6,000 | 7.2 | 23 | 100 | 436 | 20.2 | 22.9 | 0.59 | 6,000 | 7.4 | 24 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Klipspruit | OC | Th | 66 | 6.8 | 73 | 61 | 18.8 | 23.3 | 0.50 | 6,100 | 7.6 | 9 | 100 | 70 | 21.6 | 22.5 | 0.58 | 5,700 | 7.6 | 11 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Australia | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Mt Arthur Coal(12) | OC | Th | 563 | 569 | 1,132 | 877 | 16.1 | 30.5 | 0.55 | 6,500 | 8.3 | 50 | 100 | 869 | 16.9 | 30.3 | 0.55 | 6,400 | 8.2 | 55 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Colombia | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cerrejon Coal | OC | Th | 674 | 73 | 747 | 718 | 9.4 | 32.9 | 0.60 | 6,200 | 12.0 | 23 | 33.33 | 655 | 9.4 | 32.9 | 0.59 | 6,200 | 12.0 | 21 |
As at 30 June 2014 | As at 30 June 2013 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commodity Deposit(1)(2)(3)(4)(5) | Mining Method | Coal Type | Proven Coal Reserves | Probable Coal Reserves | Total Coal Reserves | Proven Marketable Coal Reserves | Probable Marketable Coal Reserves | Total Marketable Coal Reserves | Reserve Life (years) | BHP Billiton Interest % | Total Marketable Coal Reserves | Reserve Life (years) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Mt | Mt | Mt | Mt | % Ash | % VM | % S | KCal/kg CV | Mt | % Ash | % VM | % S | KCal/kg CV | Mt | % Ash | % VM | % S | KCal/kg CV | Mt | % Ash | % VM | % S | KCal/kg CV | % Total Moisture (6) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Energy Coal | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
New Mexico | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
San Juan (7) | UG | Th | 21 | – | 21 | 21 | 17.2 | 0.99 | 5,640 | – | – | – | – | – | 21 | 17.2 | – | 0.99 | 5,640 | 3.5 | 100 | 25 | 22.7 | – | 0.85 | 5,400 | 8.5 | 4 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Navajo(7)(8) | OC | Th | 17 | – | 17 | 17 | 21.8 | 0.76 | 4,900 | – | – | – | – | – | 17 | 21.8 | – | 0.76 | 4,900 | 3.1 | – | 22 | 21.8 | – | 0.76 | 4,900 | 13.0 | 3 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
South Africa(9) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Khutala (10) | OC | Th | 1.4 | – | 1.4 | 1.3 | 35.7 | 21.1 | 1.15 | 4,640 | – | – | – | – | – | 1.3 | 35.7 | 21.1 | 1.15 | 4,640 | 90 | 3.0 | 34.0 | 21.6 | 1.25 | 4,700 | 7.0 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
UG | Th | 36 | – | 36 | 33 | 33.6 | 20.3 | 0.76 | 4,440 | – | – | – | – | – | 33 | 33.6 | 20.3 | 0.76 | 4,440 | 5.8 | 90 | 44 | 34.4 | 20.1 | 0.70 | 4,400 | 7.0 | 7 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Wolvekrans (11) | OC | Th | 389 | 17 | 406 | 273 | 21.8 | 23.4 | 0.47 | 6,010 | 12 | 22.5 | 23.7 | 0.45 | 5,950 | 285 | 21.8 | 23.4 | 0.46 | 6,010 | 21 | 90 | 328 | 24.2 | 22.6 | 0.48 | 5,900 | 8.0 | 22 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Middelburg (12) | OC | Th | 97 | – | 97 | 80 | 23.2 | 23.0 | 0.47 | 5,890 | – | – | – | – | – | 80 | 23.2 | 23.0 | 0.47 | 5,890 | 23 | 90 | 93 | 24.5 | 22.5 | 0.50 | 5,900 | 8.0 | 24 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Klipspruit (13) | OC | Th | 43 | – | 43 | 36 | 23.0 | 23.3 | 0.82 | 5,800 | – | – | – | – | – | 36 | 23.0 | 23.3 | 0.82 | 5,800 | 6.0 | 90 | 47 | 22.9 | 23.3 | 0.61 | 5,800 | 8.7 | 7 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Australia | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Mt Arthur Coal(14) | OC | Th | 560 | 464 | 1,024 | 445 | 16.6 | 30.7 | 0.57 | 6,420 | 372 | 16.8 | 29.9 | 0.50 | 6,410 | 817 | 16.7 | 30.3 | 0.54 | 6,410 | 33 | 100 | 837 | 16.7 | 30.3 | 0.54 | 6,400 | 8.7 | 40 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Colombia | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cerrejón(15) | OC | Th | 629 | 96 | 725 | 610 | 9.4 | 33.8 | 0.60 | 6,180 | 94 | 9.0 | 32.7 | 0.60 | 6,110 | 704 | 9.3 | 33.7 | 0.60 | 6,170 | 17 | 33.33 | 730 | 9.3 | 33.7 | 0.60 | 6,200 | 12.5 | 19 |
|
Approximate drill hole spacings used to classify the reserves |
Deposit | Proven | Probable | ||
San Juan | ||||
| <500m (250m radius from drill hole) | 500m to | ||
Navajo | <500m (250m radius from drill hole) | 500m to 1,000m (250m to 500m radius from drill hole) | ||
Khutala | >8 boreholes per 100ha | 4 to 8 boreholes per 100ha | ||
Wolvekrans | > | |||
Middelburg | >8 boreholes per 100ha | 4 to 8 boreholes per 100ha | ||
Klipspruit | >8 boreholes per 100ha | 4 to 8 boreholes per 100ha | ||
Mt Arthur Coal | <500 m | 500m to | ||
| >6 boreholes per 100ha |
|
|
|
|
|
|
|
3 Operating and financial review and prospects
This section is intended to convey management’s perspective of the BHP Billiton Group and its operational and financial performance as measured and prepared in accordance with International Financial Reporting Standards (IFRS). We intend this disclosure to assist readers to understand and interpret the financial statements included in this Report. This section should be read in conjunction with the financial statements, together with the accompanying notes.
We are the world’s largest diversified natural resources company, with a combined market capitalisation of approximately US$233.9 billion as at 30 June 2011. We generated revenue of US$71.7 billion and profit attributable to shareholders of US$23.6 billion for FY2011.
We extract and process minerals, oil and gas from our production operations located primarily in Australia, the Americas and southern Africa. We sell our products globally with sales and marketing taking place through our principal hubs of The Hague and Singapore.
The following table shows the revenue by location of our customers:
Revenue by location of customer | ||||||||||||
Year ended 30 June | 2011 | 2010 | 2009 | |||||||||
US$M | US$M | US$M | ||||||||||
Australia | 5,487 | 4,515 | 4,621 | |||||||||
United Kingdom | 1,043 | 1,289 | 3,042 | |||||||||
Rest of Europe | 8,370 | 8,554 | 7,764 | |||||||||
China | 20,261 | 13,236 | 9,873 | |||||||||
Japan | 9,002 | 5,336 | 7,138 | |||||||||
Rest of Asia | 15,805 | 9,840 | 9,280 | |||||||||
North America | 6,167 | 5,547 | 4,020 | |||||||||
South America | 2,592 | 2,013 | 1,652 | |||||||||
Southern Africa | 1,548 | 1,227 | 1,374 | |||||||||
Rest of world | 1,464 | 1,241 | 1,447 | |||||||||
|
|
|
|
|
| |||||||
Total revenue | 71,739 | 52,798 | 50,211 | |||||||||
|
|
|
|
|
|
We operate nine Customer Sector Groups (CSGs) aligned with the commodities we extract and market, reflecting the structure we use to assess the performance of the Group:
|
| |
| ||
100% | ||
| ||
100% | ||
| ||
92% | ||
| ||
70% | ||
| ||
82% | ||
| ||
84% | ||
| ||
| ||
79% | ||
|
The work of our nine CSGs is supported by our Minerals Exploration and Marketing teams and Group Functions.
A detailed discussion on our CSGs is located in section 2.2 of this Report. A detailed discussion of our Marketing and Minerals Exploration functions is located in sections 2.4 and 2.5 respectively of this Report.
Our objective as a corporation is to create long-term shareholder value through the discovery, acquisition, development and marketing of natural resources. We sell into globally integrated markets and wherever possible operate at full capacity. Our unique position in the resources industry is due to our proven strategy.
Our strategy is to own and operate large, long-life, low-cost, expandable, upstream assets diversified by commodity, geography and market, and to pursue growth opportunities consistent with our core skills by:
discovering resources through our exploration activities;
developing and converting them in our CSGs;
developing customer and market-focused solutions through our Marketing teams;
adding shareholder value beyond the capacity of these groups through the activities of the Group Functions.
In pursuing our objective, we are guided by our commitment to safety, simplicity and accountability.
Our overriding commitment is to safety: ensuring the safety of our people, respecting our environment and the communities in which we work. This commitment transcends everything we do and guides every aspect of our work.
Our commitment to simplicity and accountability allows us to focus on the most important drivers of value while empowering our people to operate within their authority and make a difference.
Our objective and commitments are pursued through our six strategic drivers:
(3) |
|
Deposit | Coal Reserves | |
San Juan | ||
Navajo | ³ 0.6m seam thickness | |
Khutala | ³ 1.0m seam thickness for OC and³ 3.6m seam thickness for UG | |
Wolvekrans | ³ 1.0m seam thickness,³ 2,870KCal/kg CV,£ 45% ash,³ 17.9% volatile matter | |
Middelburg | ³ 1.0m seam thickness,³ 2,870KCal/kg CV,£ 45% ash,³ 17.9% volatile matter | |
Klipspruit | ³ 1.0m seam thickness, varying³ 3,580KCal/kg to | |
Mt Arthur Coal | ³ 0.3m mineable seam thickness,£ 26.5% ash,³ 50% product yield | |
Cerrejón | ³ 0.65m seam thickness |
(4) |
|
(5) |
|
reinvest in our extensive pipeline of world-class projects that carry attractive rates of return regardless of the economic climate;
ensure a solid balance sheet;
return excess capital to shareholders.
|
(6) |
|
Our management and Board monitor a range of financial and operational performance indicators, reported on a monthly basis, to measure performance over time.
Overall financial success
We use several financial measures to monitor the financial success of our overall strategy. The two key measures are profit after taxation attributable to members (attributable profit) of the BHP Billiton Group and Underlying EBIT.
Year ended 30 June US$M except where stated | 2011 | 2010 | 2009 | |||||||||
Revenue | 71,739 | 52,798 | 50,211 | |||||||||
Profit from operations | 31,816 | 20,031 | 12,160 | |||||||||
Underlying EBIT(1) | 31,980 | 19,719 | 18,214 | |||||||||
Profit attributable to members | 23,648 | 12,722 | 5,877 | |||||||||
Net operating cash flow(2) | 30,080 | 16,890 | 17,854 | |||||||||
Underlying EBIT margin(1)(3)(4) | 47.0 | % | 40.7 | % | 40.1 | % | ||||||
Return on capital employed(3)(5)(6) | 38.5 | % | 26.4 | % | 24.6 | % | ||||||
Gearing(3) | 9.2 | % | 6.3 | % | 12.1 | % | ||||||
Basic earnings per share (US cents) | 429.1 | 228.6 | 105.6 |
|
Year ended 30 June | 2011 | 2010 | 2009 | |||||||||
US$M | US$M | US$M | ||||||||||
Underlying EBIT | 31,980 | 19,719 | 18,214 | |||||||||
Exceptional items (before taxation) | (164 | ) | 312 | (6,054 | ) | |||||||
|
|
|
|
|
| |||||||
Profit from operations (EBIT) | 31,816 | 20,031 | 12,160 | |||||||||
|
|
|
|
|
|
|
|
|
Year ended 30 June | 2011 | 2010 | 2009 | |||||||||
US$M | US$M | US$M | ||||||||||
Revenue – Group production | 67,903 | 48,193 | 44,113 | |||||||||
Underlying EBIT | 31,980 | 19,719 | 18,214 | |||||||||
Profit from operations (EBIT) – Third party products | (98 | ) | (111 | ) | (503 | ) | ||||||
|
|
|
|
|
| |||||||
Profit from operations – Group production, excluding exceptional items | 31,882 | 19,608 | 17,711 | |||||||||
|
|
|
|
|
| |||||||
Underlying EBIT margin | 47.0 | % | 40.7 | % | 40.1 | % |
|
Year ended 30 June | 2011 | 2010 | 2009 | |||||||||
US$M | US$M | US$M | ||||||||||
Adjusted earnings from operations: | ||||||||||||
Profit after taxation | 23,946 | 13,009 | 6,338 | |||||||||
Net exceptional items | (1,964 | ) | (253 | ) | 4,845 | |||||||
|
|
|
|
|
| |||||||
Earnings from operations | 21,982 | 12,756 | 11,183 | |||||||||
|
|
|
|
|
| |||||||
Net finance costs | 561 | 459 | 543 | |||||||||
Income tax benefit of net finance costs(6) | (153 | ) | (139 | ) | (178 | ) | ||||||
|
|
|
|
|
| |||||||
Net finance costs after tax | 408 | 320 | 365 | |||||||||
|
|
|
|
|
| |||||||
Adjusted earnings from operations | 22,390 | 13,076 | 11,548 | |||||||||
Capital employed: | ||||||||||||
Net assets | 57,755 | 49,329 | 40,711 | |||||||||
Net debt | 5,823 | 3,308 | 5,586 | |||||||||
|
|
|
|
|
| |||||||
Capital employed | 63,578 | 52,637 | 46,297 | |||||||||
|
|
|
|
|
| |||||||
Average capital employed | 58,108 | 49,467 | 46,899 | |||||||||
Return on capital employed | 38.5 | % | 26.4 | % | 24.6 | % |
|
The following are other measures that assist us to monitor our overall performance.
People and licence to operate
We monitor a comprehensive set of health, safety, environment and community (HSEC) contribution indicators. Two key measures are the total recordable injury frequency (TRIF) and community investment. These measures are a subset of the HSEC Targets Scorecard, which can be found in our Sustainability Report atwww.bhpbilliton.com.
Year ended 30 June | 2011 | 2010 | 2009 | |||||||||
People and licence to operate – health, safety, environment and community | ||||||||||||
Total recordable injury frequency(1) | 5.0 | 5.3 | 5.6 | |||||||||
Community investment (US$M)(1) | 195.5 | 200.5 | 197.8 |
|
Safety – Sadly, we experienced the loss of two colleagues at our controlled operations during the year. We made an incremental improvement in TRIF (which comprises fatalities, lost-time cases, restricted work cases and medical treatment cases per million hours worked) from 5.3 for FY2010 to 5.0 for FY2011 per million hours worked.
Health – We are progressing well with our health performance objectives. We had 148 new cases of occupational disease reported in FY2011, 68 fewer new cases compared with the FY2007 base year. The overall reduction in the incidence of occupational disease since FY2007 is 39 per cent, which to date has exceeded our target of a 30 per cent reduction in the incidence of occupational disease among our employees by June 2012.
It is mandatory for our employees who may be potentially exposed to airborne substances or noise in excess of our occupational exposure limits (OELs) to wear personal protective equipment. Compared with the FY2007 base year there was a 7.8 per cent reduction in the proportion of employees potentially exposed in excess of OELs in FY2011, which is behind schedule to meet our target of a 15 per cent reduction in potential employee exposures over our occupational exposure limits.
Environment – In FY2011, we reduced absolute greenhouse gas (GHG) emissions by more than five million tonnes (Mt) compared to FY2010.
We have five-year targets of a six per cent reduction in our GHG emissions intensity index and a 13 per cent reduction in our carbon-based energy intensity index, both by 30 June 2012. Our greenhouse intensity index is currently tracking at 18 per cent below our FY2006 base year. Our carbon-based energy intensity index is currently tracking at 17 per cent below our FY2006 base year. This was primarily driven by the agreement to use hydroelectric power at the Mozal aluminium smelter, in Mozambique, which now provides more than 98 per cent of the smelter’s electricity needs.
We have exceeded our US$300 million commitment to support the implementation of energy efficiency and low GHG emission technologies by the end of FY2012, with US$325 million worth of projects in implementation stages.
We have a five-year target of a 10 per cent improvement in our land rehabilitation index by 30 June 2012. This index is based on a ratio of land rehabilitated compared with our land footprint. In FY2011, the index improved by one per cent on our FY2007 base year.
We have a five-year target of a 10 per cent improvement in the ratio of water recycled to high-quality water consumed by 30 June 2012. This water use index has improved eight per cent on our FY2007 base year.
We define a significant environmental incident as one with a severity rating of four or above based on our internal severity rating scale (tiered from one to seven by increasing severity). We reported no significant incidents during FY2011.
Community – We continue to invest one per cent of our pre-tax profits in community programs, based on the average of the previous three years’ pre-tax profit publicly reported in each of those years. During FY2011, our voluntary investment totalled US$195.5 million comprising cash, in-kind support and administrative costs and includes a US$30 million contribution to BHP Billiton Sustainable Communities.
World-class assets
Actual production volumes for this year and the previous two years are shown below. Further details appear in section 2.3 of this Report.
Year ended 30 June | 2011 | 2010 | 2009 | |||||||||
World-class assets | ||||||||||||
Production | ||||||||||||
Total Petroleum production (millions of barrels of oil equivalent) | 159.38 | 158.56 | 137.97 | |||||||||
Alumina (’000 tonnes) | 4,010 | 3,841 | 4,396 | |||||||||
Aluminium (’000 tonnes) | 1,246 | 1,241 | 1,233 | |||||||||
Copper (’000 tonnes) | 1,139.4 | 1,075.2 | 1,207.1 | |||||||||
Nickel (’000 tonnes) | 152.7 | 176.2 | 173.1 | |||||||||
Iron ore (’000 tonnes) | 134,406 | 124,962 | 114,415 | |||||||||
Manganese alloys (’000 tonnes) | 753 | 583 | 513 | |||||||||
Manganese ores (’000 tonnes) | 7,093 | 6,124 | 4,475 | |||||||||
Metallurgical coal (’000 tonnes) | 32,678 | 37,381 | 36,416 | |||||||||
Energy coal (’000 tonnes) | 69,500 | 66,131 | 66,401 |
Financial strength and discipline
Financial strength is measured by attributable profit and Underlying EBIT as overall measures, along with liquidity and capital management. Our credit rating and gearing and net debt are discussed in section 3.7.3 of this Report. The final dividend declared for FY2011 maintains our progressive dividend policy. Our capital management initiatives and successful completion of the US$10 billion capital management program are discussed in section 3.7.6 of this Report.
Project pipeline and growth options
Our project pipeline focuses on high-margin commodities that are expected to create significant future value. The details of our project pipeline are located in section 3.7.2 of this Report, with a summary presented below.
Year ended 30 June | 2011 | 2010 | 2009 | |||||||||
Project pipeline and growth options (major projects) | ||||||||||||
Number of projects approved during the year | 11 | 2 | 4 | |||||||||
Number of projects currently under development (approved in prior years) | 7 | 8 | 8 | |||||||||
Number of completed projects | 3 | 5 | 7 | |||||||||
Budgeted capital expenditure for projects (approved in the year) (US$M) | 12,942 | 695 | 5,850 | |||||||||
Budgeted capital expenditure for projects under development (approved in prior years) (US$M) | 11,575 | 10,075 | 8,115 | |||||||||
Capital expenditure of completed projects (US$M) | 1,202 | 4,738 | 4,061 |
3.4 External factors and trends affecting our results
The following section describes some of the external factors and trends that have had a material impact on our financial condition and results of operations. We operate our business in a dynamic and changing environment and with information that is rarely complete and exact. We primarily manage the risks discussed in this section under our portfolio management approach, which relies on the effects of diversification, rather than individual price risk management programs. Details of our financial risk management strategies and financial instruments outstanding at 30 June 2011 may be found in note 28 ‘Financial risk management’ in the financial statements.
Management monitors particular trends arising in the external factors with a view to managing the potential impact of our future financial condition and results of operations. The following external factors could have a material adverse effect on our business and areas where we make decisions on the basis of information that is incomplete or uncertain.
3.4.1 Commodity prices
FY2011 saw prices for most commodities in our suite increase substantially over FY2010. During the first half of the year, the global recovery gathered pace, with developing economies clearly leading economic growth. Commodity prices increased through to February 2011 with a weak US dollar, improved manufacturing and trade in Europe and the US, and strong manufacturing and construction in Asia.
The Japanese Fukushima nuclear incident, which occurred during March 2011, caused a correction in commodity markets. This was closely followed by civil unrest in the Middle East and North Africa, which held global sentiment for commodities back from its February highs until late in FY2011. Macro risks, including concern about sovereign debt levels in Europe, persistent weakness in US employment and a slowing Chinese economy, limited upside to prices in the latter part of FY2011.
The following table shows prices of our most significant commodities for the years ended 30 June 2011, 2010 and 2009. These prices represent the average quoted price except where otherwise indicated.
Year ended 30 June | 2011 | 2010 | 2009 | |||||||||
Commodity | ||||||||||||
Aluminium (LME cash)(1) (US$/t) | 2,375 | 2,018 | 1,862 | |||||||||
Alumina(2) (US$/t) | 369 | 314 | 255 | |||||||||
Copper (LME cash)(1) (US$/lb) | 3.92 | 3.04 | 2.23 | |||||||||
Crude oil (WTI) (US$/bbl) | 89.47 | 75.14 | 70.29 | |||||||||
Energy coal (API 4)(1) (US$/t) | 116.7 | 75.93 | 95.16 | |||||||||
Natural gas (US$/MMbtu)(3) | 4.16 | 4.21 | 5.96 | |||||||||
Iron ore(4)(5) (US$/dmt) | 162.98 | 118.61 | 89.83 | |||||||||
Manganese Alloys(6) (US$/t) | 1,319 | 1,328 | 1,854 | |||||||||
Manganese Ores(7)(8) (US$/dmtu) | 6.29 | 6.46 | 9.43 | |||||||||
Metallurgical coal(9)(10) (US$/t) | 244.47 | 146.75 | 257.25 | |||||||||
Nickel (LME cash)(1) (US$/lb) | 10.86 | 8.78 | 6.03 |
|
|
|
|
|
|
|
|
Cerrejón – The decrease in Reserve Life was due to an increased nominated production rate from 40 Mtpa in FY2013 to 41.5 Mtpa in FY2014. |
Aluminium, Manganese & Nickel Business
Ore Reserves in accordance with Industry Guide 7
As at 30 June 2014 | As at 30 June 2013 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commodity | Proven Ore Reserves | Probable Ore Reserves | Total Ore Reserves | Reserve Life (years) | BHP Billiton Interest % | Total Ore Reserves | Reserve Life (years) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ore Type | Mt | % A.Al2O3 | % R.SiO2 | Mt | % A.Al2O3 | % R.SiO2 | Mt | % A.Al2O3 | % R.SiO2 | Mt | % A.Al2O3 | % R.SiO2 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Bauxite | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Australia | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Worsley | Laterite | 274 | 31.0 | 1.6 | 22 | 30.2 | 1.7 | 295 | 31.0 | 1.6 | 17 | 86 | 301 | 30.9 | 1.8 | 17 | ||||||||||||||||||||||||||||||||||||||||||||||||
Brazil | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
MRN (5)(6) | | MRN Washed | | 79 | 49.3 | 4.6 | 19 | 49.8 | 4.8 | 98 | 49.4 | 4.6 | 6.1 | 14.8 | 51 | 50.9 | 4.1 | 3 |
(1) | Cut-off grades – Worsley: variable ranging from 24-29.5%A.Al2O3,£ 3%R.SiO2 and |
|
The following summarises the trends of our most significant commodities for FY2011.
Aluminium:London Metal Exchange (LME) prices increased from US$1,924 per tonne at the beginning of FY2011 to US$2,509 per tonne at year-end. The average LME aluminium price for FY2011 was US$2,375 per tonne, 18 per cent above the average for FY2010. The LME reached a lowest point of US$1,912 per tonne in July 2010, and a highest point of US$2,772 per tonne in April 2011. The price rise was mainly driven by a combination of rising energy prices, US dollar weakness, strong investor activities and tighter aluminium fundamentals. During the year, demand recovered globally. Aluminium consumption was up by 12 per cent year-on-year in FY2011 on a world ex-China basis. In China, 1.6 million tonnes per annum (mtpa) of production capacity was reduced to meet energy intensity reduction targets by December 2010. However, higher prices brought 1.1 mtpa of idled capacity back to production in the second half of FY2011.
Alumina: Spot prices increased from US$320 per tonne free on board (FOB) Australia at the beginning of FY2011 to US$395 per tonne at year-end. The average alumina price for FY2011 was US$369 per tonne, 18 per cent above the average in FY2010. Higher prices were due to rising energy prices, higher aluminium demand and production disruptions in Australia and Brazil. Non-Chinese alumina production increased approximately four per cent year-on-year. China domestic supply grew by 13 per cent in FY2011 compared with the same period in the prior year. China’s growing demand for bauxite to feed growing domestic alumina capacity meant it imported 37.1 million tonnes (Mt) in FY2011, an increase of 38 per cent from the prior year.
Copper: LME prices increased from US$2.96 per pound (lb) at the beginning of FY2011 to US$4.22 per lb at year-end. The average LME copper price for FY2011 was US$3.92 per lb, 29 per cent above the average for FY2010. The trading range through the year was volatile with a low of US$2.88 per lb in July 2010, rising to a peak of US$4.60 per lb in February 2011. During the first half of FY2011, prices were driven by the quicker than expected demand recovery in the developed world and the continued strength of Chinese net cathode imports. Chinese imports for the first half of FY2011 totalled 1,368 kilotonne (kt). In the second half of FY2011, Chinese fabricators were reluctant to increase copper cathode purchases, relying instead on drawing down their own inventory levels, with only 954 kt imported from January to June 2011. In addition, US and Europe demand growth slowed from the first half of FY2011, pushing copper premia down across the developed regions.
Crude oil: The New York Mercantile Exchange West Texas Intermediate (NYMEX WTI) crude oil price increased from US$75.59 per barrel (bbl) at the beginning of FY2011 to US$95.42 per bbl at year-end. The average WTI oil price for FY2011 was US$89.47 per bbl, 19 per cent above the FY2010 average. The Intercontinental Exchange (ICE) Brent oil price increased from US$74.97 per bbl at the beginning of FY2011 to US$112.48 per bbl at year-end. The average ICE Brent oil price for FY2011 was US$96.45 per bbl, 28 per cent above the FY2010 average. During the year, WTI oil reached a low of US$71.63 per bbl in August 2010 and a peak of US$113.93 per bbl in April 2011, while ICE Brent experienced a low of US$71.45 per bbl in July 2010 and a high of US$126.65 per bbl in April 2011 as both benchmarks were impacted by the Middle East and North Africa unrest in the second half of FY2011. The WTI-Brent differential was an important feature of the oil market as the spread exceeded a record US$20 per bbl level due in part to the US pipeline bottleneck issues and some tightness in the North Sea markets. However, the oil price gains were later partially offset by growing concerns over the global macroeconomic outlook and subsequent impact on global oil demand.
Energy coal: The Amsterdam-Rotterdam-Antwerp CFR (API 2) price increased from US$94.47 per tonne at the beginning of FY2011 to US$122.9 per tonne at year-end. The Richards Bay Coal Terminal (RBCT) FOB (API 4) price increased from US$91.6 per tonne at the beginning of FY2011 to US$117.5 per tonne at year-end. The Newcastle FOB (API 3) price increased from US$98.3 per tonne at the beginning of FY2011 to US$121 per tonne at year-end. The average Newcastle FOB (API 3) price for FY2011 was US$120.4 per tonne, 40 per cent above the average for FY2010. The average RBCT FOB (API 4) price for FY2011 was US$116.7 per tonne, 54 per cent above the average for FY2010. Strong price levels were supported by supply disruptions in the key export regions (including Australia, South Africa, Colombia and Indonesia) during the Northern Hemisphere winter period, particularly in January 2011 when both RBCT and Newcastle FOB prices reached the highest
levels since October 2008. Prices eased towards the end of the financial year as supply showed some recovery and demand from China and India was weaker than expected. Estimated unadjusted Chinese imports in FY2011 were at 81 Mt, compared with 85 Mt in FY2010. Lower demand was driven by high stockpiles at key ports and power plants, sufficient hydro power generation and high global prices.
Gas: The US Henry Hub natural gas price decreased from US$4.68 per million British thermal units (MMBtu) at the beginning of FY2011 to US$4.39 per MMBtu at year-end. The UK National Balancing Point (NBP) natural gas price increased from US$6.55 per MMBtu at the beginning of FY2011 to US$9.36 per MMBtu at year-end. The Asian spot LNG price as reflected by the Platts Japan Korea Marker (JKM) increased from US$7.8 per MMBtu at the beginning of FY2011 to US$13.80 per MMBtu at year-end. The average Henry Hub gas price for FY2011 was US$4.16 per MMBtu, one per cent below the average for FY2010. The average UK National Balancing Point (NBP) natural gas price for FY2011 was US$8.33 per MMBtu, 69 per cent above the average for FY2010. The trading ranges through the year were volatile, with the Henry Hub price reaching a high of US$4.94 per MMBtu in August 2010 and dropping to a low of US$3.18 per MMBtu in October 2010. The NBP price ranged from a low of US$5.10 per MMBtu in September 2010 to a high of US$10.50 per MMBtu in March 2011. During FY2011, global gas demand increased, particularly in the power generation sector in both the Atlantic and Pacific markets. This was supported by some improvement in underlying economic activity, extreme weather conditions and the Japanese Fukushima nuclear incident in the second half of FY2011. The US market remained largely insulated from global events and was over-supplied due to strong shale gas production, which pushed the Henry Hub price lower.
Iron Ore: The iron ore spot price increased from US$134 per tonne at the beginning of FY2011 to US$170.75 per tonne at year-end. The average spot iron ore price for FY2011 was US$162.98 per tonne, 37 per cent above the average for FY2010. Prices ranged from a low of US$116 per tonne in July 2010 to a high of US$193 per tonne in February 2011. Prices for the first quarter of FY2011 were constrained by the seasonal decrease in global pig iron production, which reached its FY2011 low in September 2010. Prices broadly followed an upward trajectory driven by increased global steel production, and a corresponding increase in iron ore demand, combined with seasonally constrained supply from Australia and Brazil. Post the price peak of February 2011, iron ore prices decreased to an average of US$178 per tonne in the last quarter of FY2011 due to uncertainty in the Chinese downstream steel market and further rounds of credit tightening.
Manganese: Manganese ore prices decreased from US$8.70 per dry metric tonne unit (dmtu) at the beginning of FY2011 to US$5.24 per dmtu at year-end. The average manganese ore price delivered to China for FY2011 was US$6.29 per dmtu, three per cent below the average for FY2010. Silicomanganese alloy prices in the US decreased from US$1,435 per tonne at the beginning of FY2011 to US$1,367 per tonne by year-end. Manganese alloy prices in Europe decreased from US$1,458 per tonne at the beginning of FY2011 to US$1,286 per tonne at year-end. High-carbon ferromanganese alloy prices in the US decreased from US$1,400 per tonne at the beginning of FY2011 to US$1,320 per tonne by year-end. High-carbon ferromanganese alloy prices in Europe decreased from US$1,458 per tonne at the beginning of FY2011 to US$1,257 per tonne by year-end. Despite substantially lower ore input costs, manganese alloy prices continued to trade in a relatively narrow band due to increased costs of coking coal and power from the second half of FY2011 onwards.
Metallurgical coal: The quarterly negotiated prices increased from US$225 per tonne at the beginning of FY2011 to US$330 per tonne at year-end. Platts 64 Mid Volatile Index spot coking coal prices increased from US$202 per tonne at the beginning of FY2011 to US$273 per tonne at year-end. The coking coal market weakened in the first half of FY2011 on subdued demand growth in traditional coking coal importing countries and more than adequate supply to meet this demand. However, heavy rains in Queensland during September to November 2010, and resultant floods in late December, caused significant supply disruptions. With the sharp reduction in available seaborne tonnages, the market became very tight in the third quarter of FY2011 and the Platts 64 Mid Volatile Index price rose to a peak of US$336 per tonne in January 2011.
Nickel: LME prices increased from US$8.81 per lb at the beginning of FY2011 to US$10.49 per lb at year-end. The average nickel price for FY2011 was US$10.86 per lb, 24 per cent above the average for FY2010.
Higher prices were underpinned by the improved global economic recovery, service centre re-stocking and strong underlying consumption. The fall of the nickel price in early May 2011 was caused by a general sell-off by investors. This drop led to a wait-and-see purchasing behaviour among stainless distributors and end-users in the following months. On the supply side, more nickel production was added in the first half of FY2011, whereas the second half of the year was characterised by supply disruptions. Partially offsetting these disruptions was a particularly high level of nickel pig iron production in China.
The following table indicates the estimated impact on FY2011 profit after taxation of changes in the prices of our most significant commodities. With the exception of price-linked costs, the sensitivities below assume that all other variables, such as exchange rate, costs, volumes and taxation, remain constant. There is an inter-relationship between changes in commodity prices and changes in currencies that is not reflected in the sensitivities below. Volumes are based on FY2011 actual results and sale prices of our commodities under a mix of short-, medium- and long-term contracts. Movements in commodity prices can cause movements in exchange rates and vice versa. These sensitivities should therefore be used with care.
(3) | Approximate drill hole spacings used to classify the reserves were: |
| Proven Ore Reserves | Probable Ore Reserves | ||
Worsley | Maximum 80m | Maximum 160m | ||
MRN | A bauxite intersection grid of 200m, plus at least 10 samples reached by search ellipsoid. Mining and metallurgical characterisation (test pit/bulk sample), plus a reliable suite of chemical and size distribution data | Those areas with a bauxite intersection grid spacing of less than 400m and/or a 400m spaced grid with a 200m offset fill in, plus a minimum of 7 samples reached by search ellipsoid, plus a reliable suite of chemical and size distribution data |
(4) | Metallurgical recoveries for the operations were: |
Deposit | Estimated Metallurgical Recovery of A.Al2O3 | |
Worsley (Worsley Refinery) | 91% | |
MRN (Alumar Refinery) | 92% |
(5) | MRN – Washed tonnes and grade represent expected product based on forecast beneficiated yield. |
(6) | MRN – The reserves are located on mining leases that provide MRN the right to mine. Current mining areas have environmental approval to operate. The increase in reserves was due to the approval of mining permits for additional plateaus. |
Aluminium, Manganese & Nickel Business
Ore Reserves in accordance with Industry Guide 7
As at 30 June 2014 | As at 30 June 2013 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commodity Deposit(1)(2)(3)(4) | Ore Type | Proven Ore Reserves | Probable Ore Reserves | Total Ore Reserves | Reserve Life (years) | BHP Billiton Interest % | Total Ore Reserves | Reserve Life (years) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Mt | % Mn | % Yield | Mt | % Mn | % Yield | Mt | % Mn | % Yield | Mt | % Mn | % Yield | |||||||||||||||||||||||||||||||||||||||||||||||||||
Manganese | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Australia | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
GEMCO(5) | ROM | 78 | 45.0 | 58 | 16 | 42.6 | 57 | 94 | 44.6 | 58 | 11 | 60 | 101 | 44.7 | 59 | 12 | ||||||||||||||||||||||||||||||||||||||||||||||
South Africa(6) | Mt | % Mn | % Fe | Mt | % Mn | % Fe | Mt | % Mn | % Fe | Mt | % Mn | % Fe | ||||||||||||||||||||||||||||||||||||||||||||||||||
Wessels | Lower Body-HG | 1.2 | 48.0 | 12.2 | 7.2 | 47.6 | 12.3 | 8.4 | 47.7 | 12.3 | 46 | 44.4 | 11 | 47.6 | 11.9 | 48 | ||||||||||||||||||||||||||||||||||||||||||||||
Lower Body-LG | 2.2 | 41.3 | 11.9 | 13 | 41.8 | 13.2 | 15 | 41.7 | 13.0 | 13 | 42.1 | 13.2 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Upper Body | 46 | 41.4 | 18.2 | 46 | 41.4 | 18.2 | 48 | 41.5 | 17.9 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Mamatwan | M, C, N Zones | 19 | 37.6 | 4.4 | 41 | 37.1 | 4.5 | 60 | 37.3 | 4.5 | 18 | 44.4 | 65 | 37.2 | 4.5 | 20 | ||||||||||||||||||||||||||||||||||||||||||||||
X Zone | 1.6 | 38.2 | 4.7 | 2.4 | 36.7 | 4.8 | 4.0 | 37.3 | 4.8 | 4.0 | 36.7 | 4.8 |
(1) | Cut-off grades – GEMCO: |
(2) | Approximate drill hole spacings used to classify the reserves were: |
Deposit | Proven Ore Reserves | Probable Ore Reserves | ||
GEMCO | 60m x 120m and 60m x 60m | 120m x 120m | ||
Wessels | Defined as rim ±30m wide around mined-out areas, supplemented by some economically viable remnant blocks within mined-out areas | Defined as all ground beyond 30m | ||
Mamatwan | 80m x 80m | 160m x 160m |
(3) | Metallurgical recoveries for the operations were: |
Deposit | Metallurgical Recovery | |
GEMCO | See yield in Ore Reserves table | |
Wessels | 88% | |
Mamatwan | 96% |
(4) | Ore delivered to process plant. |
(5) | GEMCO – Tonnes are stated as ROM, manganese grades are reported as expected product and should be read together with their respective tonnage yields. |
(6) | Wessels and Mamatwan – Tonnes are stated as wet tonnes. |
Aluminium, Manganese & Nickel Business
Ore Reserves in accordance with Industry Guide 7
As at 30 June 2014 | As at 30 June 2013 | |||||||||||||||||||||||||||||||||||||||||||||
Commodity Deposit(1)(2)(3)(4) | Ore Type | Proven Ore Reserves | Probable Ore Reserves | Total Ore Reserves | Reserve Life (years) | BHP Billiton Interest % | Total Ore Reserves | Reserve Life (years) | ||||||||||||||||||||||||||||||||||||||
Mt | % Ni | Mt | % Ni | Mt | % Ni | Mt | % Ni | |||||||||||||||||||||||||||||||||||||||
Nickel Colombia | ||||||||||||||||||||||||||||||||||||||||||||||
Cerro Matoso(5) | Laterite | 16 | 1.2 | 7.7 | 1.0 | 24 | 1.1 | 15 | 99.94 | 43 | 1.2 | 28 | ||||||||||||||||||||||||||||||||||
SP | 24 | 1.3 | – | – | 24 | 1.3 | 40 | 1.2 | ||||||||||||||||||||||||||||||||||||||
MNR Ore | – | – | – | – | – | – | 18 | 0.2 | ||||||||||||||||||||||||||||||||||||||
Australia – Nickel West | ||||||||||||||||||||||||||||||||||||||||||||||
Leinster(6) | OC | 2.8 | 1.3 | 0.2 | 0.9 | 3.0 | 1.3 | 1.5 | 100 | 3.1 | 1.3 | 8 | ||||||||||||||||||||||||||||||||||
SP | – | – | – | – | – | – | 0.1 | 2.3 | ||||||||||||||||||||||||||||||||||||||
UG | – | – | – | – | – | – | 9.3 | 1.8 | ||||||||||||||||||||||||||||||||||||||
Mt Keith(7) | OC | 51 | 0.6 | 1.1 | 0.5 | 52 | 0.6 | 5.9 | 100 | 93 | 0.6 | 12 | ||||||||||||||||||||||||||||||||||
SP | 5.7 | 0.5 | 5.5 | 0.5 | 11 | 0.5 | 20 | 0.5 | ||||||||||||||||||||||||||||||||||||||
Cliffs | UG | 0.7 | 2.6 | 0.9 | 2.5 | 1.6 | 2.6 | 3.2 | 100 | 1.6 | 2.8 | 4 |
(1) | Cut-off grades – Cerro Matoso:³ 0.7%Ni for Laterite and SP; Leinster:³ 0.6%Ni for OC,³ 0.9%Ni for UG and SP; Mt Keith: variable ranging from 0.35-0.40% Ni and³ 0.18% recoverable Ni for OC and SP; Cliffs:³ 1.1% Ni for UG. |
(2) | Approximate drill hole spacings used to classify the reserves were: |
Deposit | Proven Ore Reserves | Probable Ore Reserves | ||
Cerro Matoso | 35m or less with three drill holes | 35m to 100m with three drill holes | ||
Leinster | 25m x 25m | 25m x 50m | ||
Mt Keith | 60m x 40m | 80m x 80m | ||
Cliffs | 25m x 25m (and development) | 50m x 50m | ||
(3) Metallurgical recoveries for the operations were: | ||||
Deposit | Metallurgical Recovery | |||
Cerro Matoso | 82% (reserves to metal) | |||
Leinster Concentrator (including Cliffs) | 84% at 12% concentrate grade | |||
Mt Keith | 57% at 16% concentrate grade |
(4) | Ore delivered to process plant. |
(5) | Cerro Matoso – The decrease in laterite reserves was due to the exclusion of La Esmerelda (environmental licence approval delay), lower nickel price assumptions, an updated geotechnical model, revised processing plant specifications and changed stockpile assumptions. |
(6) | Leinster – The decrease in reserves was due to suspension of mining at the Perseverance underground mine subsequent to a seismic event in October 2013. |
(7) | Mt Keith – The decrease in in-situ reserves was due to the exclusion of Stage H2 after testing with current prices. |
Major projects
At the end of FY2014, BHP Billiton had seven low-risk, relatively brownfield major projects under development and one major ‘pre-development’ project in evaluation (Jansen Potash) with a combined budget of US$14.1 billion. The Group completed the WAIO Jimblebar Mine Expansion and Caval Ridge projects during the year. In addition a further four projects were successfully completed; namely: Macedon; North West Shelf North Rankin B Gas Compression; Samarco Fourth Pellet Plant; and WAIO Port Blending and Rail Yard Facilities. Another two projects, Newcastle Third Port Stage 3 and Cerrejón P40, delivered first coal during the year.
The port expansion associated with the Cerrejón P40 project is currently being commissioned, although operational issues are expected to constrain capacity at approximately 35 Mtpa (100 per cent basis) in the medium term.
A US$212 million increase in the budget of the Escondida Oxide Leach Area Project (OLAP) to US$933 million was approved during the period. The project is now expected to be completed in the second half of CY2014, with no associated impact to production.
In July 2013, BHP Billiton announced an investment of US$3.4 billion to construct a desalination facility which will deliver sustainable water supply to Escondida over the long term. In August 2013, BHP Billiton also approved a US$2.6 billion investment to finish the excavation and lining of the Jansen Potash Project production and service shafts, and to continue the installation of essential surface infrastructure and utilities.
BHP Billiton’s share of capital and exploration expenditure declined by 32 per cent during FY2014, to US$15.2 billion. Capital and exploration expenditure is expected to remain broadly unchanged in the 2015 financial year with a planned investment rate of US$14.8 billion.
Projects completed or delivered first production during the 2014 financial year
Business | Project | Capacity(1) | Capital expenditure (US$M)(1) | Date of initial production | ||||||||||||||||
Actual (2) | Budget | Actual | Target | |||||||||||||||||
Petroleum | Macedon (Australia) 71.43% (operator) | 200 million cubic feet of gas per day. | 1,200 | 1,050 | Q3 CY13 | CY13 | ||||||||||||||
North West Shelf North Rankin B Gas Compression (Australia) 16.67% (non-operator) | 2,500 million cubic feet of gas per day. | 721 | 850 | Q4 CY13 | CY13 | |||||||||||||||
Iron Ore | Samarco Fourth Pellet Plant (Brazil) 50% | Increases Samarco iron ore pellet production capacity by 8.3 million tonnes per annum to 30.5 million tonnes per annum. | 1,576 | 1,750 | Q1 CY14 | H1 CY14 | ||||||||||||||
WAIO Jimblebar Mine Expansion (Australia) 85% | Increases mining and processing capacity to 35 million tonnes per annum with incremental debottlenecking opportunities to 55 million tonnes per annum. | 3,380 | 3,640 | (3)(4) | Q3 CY13 | Q4 CY13 | (4) |
Business Project Capacity(1) Coal Capital
expenditure
(US$M)(1) Date of initial production Actual (2) Budget Actual Target WAIO Port Blending and Rail Yard Facilities (Australia) 85% Optimises resource and enhances efficiency across the WAIO supply chain. 916 1,000 (3)(4) Q4 CY13 H2 CY14 Caval Ridge (Australia) 50% Greenfield mine development to produce an initial 5.5 million tonnes per annum of export metallurgical coal. 1,706 1,870 (3) Q2 CY14 CY14 Newcastle Third Port Project Stage 3 (Australia) 35.5% Increases total coal terminal capacity from 53 million tonnes per annum to 66 million tonnes per annum. 367 367 Q3 CY13 CY14 Cerrejón P40 Project (Colombia) 33.3% Increases saleable thermal coal production by 8 million tonnes per annum to approximately 40 million tonnes per annum. 437 437 Q4 CY13 CY13 10,303 10,964
Projects in execution at the end of the 2014 financial year
Business | Project | Capacity(1) | Capital expenditure (US$M) (1) | Date of initial production | ||||||||||||
| Budget | Target | ||||||||||||||
| North West Shelf Greater Western Flank-A (Australia) 16.67%(non-operator) | To maintain LNG plant throughput from the North West Shelf operations | 400 | CY16 | ||||||||||||
Bass Strait Longford Gas Conditioning Plant (Australia) 50%(non-operator) | Designed to process approximately 400 million cubic feet of high CO2 gas | 520 | CY16 | |||||||||||||
Copper | Escondida Oxide Leach Area Project (Chile) 57.5% | New dynamic leaching pad and mineral handling system. Maintains oxide leaching capacity | 933 | (4) | H2 CY14 | (4) | ||||||||||
Escondida Organic Growth Project 1 (Chile) 57.5% | Replaces the Los Colorados concentrator with a new 152,000 tonnes per day plant | 3,838 | H1 CY15 | |||||||||||||
Escondida Water Supply (Chile) 57.5% | New desalination facility to ensure continued water supply to Escondida | 3,430 | CY17 |
Business | Project | Capacity(1) | Capital expenditure (US$M) (1) | Date of initial production | ||||||||||||
Projects under development | Budget | Target | ||||||||||||||
| Hay Point Stage Three Expansion (Australia) 50% | Increases port capacity from 44 million tonnes per annum to 55 million tonnes per annum and reduces storm vulnerability | 1,505 | (3)(4) | CY15 | (4) | ||||||||||
Appin Area 9 (Australia) 100% | Maintains Illawarra Coal’s production capacity with a replacement mining domain and capacity to produce 3.5 million tonnes per annum of metallurgical coal | 845 | CY16 | |||||||||||||
11,471 | ||||||||||||||||
|
Other projects in progress at the end of the 2014 financial year
Business | Project | Capacity(1) | Capital expenditure (US$M) (1) | |||||
| Budget | |||||||
| Jansen Potash (Canada) 100% | Investment to finish the excavation and lining of the production and service shafts, and to continue the installation of essential surface infrastructure and utilities. | ||||||
| ||||||||
| ||||||||
|
(1) | Unless noted otherwise, references to capacity are on a 100 per cent basis, references to capital expenditure from subsidiaries are reported on a 100 per cent basis and references to capital expenditure from equity accounted investments and other operations are reported at our equity share. |
(2) | Number subject to finalisation. |
(3) | Excludes announced pre-commitment funding. |
(4) | As per revised budget schedule. |
The impactdiscussion of the commodity price movements in FY2011results for our Businesses is discussedset out in section 3.6 ‘Operating results’.
3.4.2 Freight markets
The bulk freight market is typically categorised by the size of the vessel. Capesize vessels are typically classified as having deadweight above 150 thousand deadweight tonnes (kdwt) compared with Panamax and Supramax vessels, which are 60 to 100 kdwt and 50 to 60 kdwt respectively.
The Capesize average 4 Time Charter rate, being a particular rate published by the Baltic Exchange, declined from US$24,239 per day at the beginning of FY2011 to US$12,732 per day at year end. Capesize freight rates dropped as low as US$4,567 per day in February 2011 as major supplying regions suffered adverse weather conditions resulting in lower cargo availability. The Panamax average 6 Time Charter rate declined from US$22,113 per day at the beginning of FY2011 to US$12,823 per day at the year-end. The Supramax average 4 Time Charter rate decreased from US$21,607 per day at the beginning of FY2011 to US$13,682 per day at the year-end. Although the demand for bulk commodities was strong, the freight market saw oversupply due to the many newbuild vessels entering the market. The total dry bulk fleet grew by 17 per cent year-on-year in CY2010, the fastest growth for many years.
3.4.3 Exchange rates
We are exposed to exchange rate transaction risk on foreign currency sales and purchases as we believe that active currency hedging does not provide long-term benefits to our shareholders. Because a majority of our sales are denominated in US dollars, and the US dollar plays a dominant role in our business, we borrow and hold surplus cash predominantly in US dollars to provide a natural hedge. Operating costs and costs of local equipment are influenced by the fluctuations in the Australian dollar, South African rand, Chilean peso and Brazilian real. Foreign exchange gains and losses reflected in operating costs owing to fluctuations in the abovementioned currencies relative to the US dollar may potentially offset one another. The Australian dollar, Brazilian real, Chilean peso and South African rand strengthened against the US dollar during FY2011.
We are also exposed to exchange rate translation risk in relation to net monetary liabilities, being our foreign currency denominated monetary assets and liabilities, including debt and other long-term liabilities (other than closure and rehabilitation provisions at operating sites where foreign currency gains and losses are capitalised in property, plant and equipment).
Details of our exposure to foreign currency fluctuations are contained within note 28 ‘Financial risk management’ to the financial statements.
3.4.4 Interest rates
We are exposed to interest rate risk on our outstanding borrowings and investments. Our policy on interest rate exposure is for interest on our borrowings to be on a US dollar floating interest rate basis. Deviation from our policy requires the prior approval of our Financial Risk Management Committee, and is managed within our Cash Flow at Risk (CFaR) limit, which is described in note 28 ‘Financial risk management’ in the financial statements. When required under this strategy, we use interest rate swaps, including cross currency interest rate swaps, to convert a fixed rate exposure to a floating rate exposure. As at 30 June 2011, we had US$0.8 billion of fixed interest borrowings that had not been swapped to floating rates, arising principally from legacy positions that were in existence prior to the merger that created the DLC structure.
3.4.5 Changes in product demand
Global economic growth slowed during the second half of FY2011 as emerging economies tightened monetary policy, the Japanese tsunami disrupted trade flows and fiscal austerity measures adversely affected demand. Global imbalances and high levels of sovereign debt continue to create uncertainty and a protracted recovery remains our base case assumption for the developed world. However, a coordinated policy response has the potential to engender confidence and ease the volatility that has been the dominant theme of recent years.
Across the important growth economies of China and India, recent economic data suggests monetary policy is having the intended effect. That said, growth in fixed asset investment in China has remained resilient and is yet to fully reflect the recent policy response.
Despite these near term challenges, we remain positive on the longer-term outlook for the global economy. Over the past decade, emerging economies have contributed more to global growth than the developed world and we expect their share to expand as the process of urbanisation and industrialisation continues.
3.4.6 Operating costs and capital expenditure
During FY2011, total cash costs increased by four per cent, which arose from increases in costs that are structural in nature. Higher fuel and energy prices (of which BHP Billiton is a net beneficiary) together with increased maintenance, labour and contractor costs are consistent with the corresponding level of activity occurring within the mining industry as a whole. In conjunction with safety and volumes, cost control continues to be a key area of focus for each area of operation.
Our commitment to long-term growth and shareholder value remains unchanged, and we continued to invest strongly in capital expenditure and growth projects. Details of our growth projects can be found in section 3.7.2.
3.4.7 Exploration and development of resources
Because most of our revenues and profits are related to our oil and gas and minerals operations, our results and financial condition are directly related to the success of our exploration efforts and our ability to replace existing reserves. However, there are no guarantees that our exploration program will be successful. When we
identify an economic deposit, there are often significant challenges and hurdles entailed in its development, such as negotiating rights to extract ore with governments and landowners, design and construction of required infrastructure, utilisation of new technologies in processing and building customer support.
3.4.8 Health, safety, environment and community
We are subject to extensive regulation surrounding the health and safety of our people and the environment. We make every effort to comply with the regulations and, where less stringent than our standards, exceed applicable legal and other requirements. However, regulatory standards and community expectations are constantly evolving. As a result, we may be exposed to increased litigation, compliance costs and unforeseen environmental rehabilitation expenses, despite our best efforts to work with governments, community groups and scientists to keep pace with regulations, law and public expectations.
Further information about our compliance with HSEC regulations can be found in section 2.81.12 of this Report.Annual Report with further information below.
3.4.9 Insurance2.5.1 Group Revenue and Underlying EBIT
During FY2011, we maintained an insurance program with policies encompassing property damage, business interruption, public and certain other liabilities and directors and officers’ exposures. The program includes a combination of self-insurance via subsidiary captive insurance companies, industry mutuals and external market re-insurance. Mandates are established as to risk retention levels, policy cover and, where applicable, reinsurance counter parties. As part of our portfolio risk management policy, we regularly conduct an assessment of maximum foreseeable loss potential, cash flow at risk, loss experience, claims received and insurance premiums paid and will make adjustments to the balance of self-insurance and reinsurance as required.
The Group continues to be largely self-insured for losses arising from property damage and business interruption, sabotage and terrorism, marine cargo and construction. For these risks, we internally insure our operations (for wholly-owned assets and for our share of joint venture assets) via our captive insurance companies. Any losses incurred will consequently impact the financial statements as they arise.
3.5 Application of critical accounting policies
The preparation of our consolidated financial statements requires management to make estimates and judgements that affect the reported amounts of assets and liabilities, the disclosure of contingent liabilities at the date of the financial statements and the reported revenue and costs during the periods presented therein. On an ongoing basis, management evaluates its estimates and judgements in relation to assets, liabilities, contingent liabilities, revenue and costs. Management bases its estimates and judgements on historical experience and on various other factors it believes to be reasonable under the circumstances, the results of which form the basis of making judgements about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions and conditions.
We have identified the following critical accounting policies under which significant judgements, estimates and assumptions are made and where actual results may differ from these estimates under different assumptions and conditions and may materially affect financial results or the financial position reported in future periods:
reserve estimates;
exploration and evaluation expenditure;
development expenditure;
property, plant and equipment – recoverable amount;
defined benefit pension schemes;
provision for closure and rehabilitation;
taxation.
In accordance with IFRS, we are required to include information regarding the nature of the estimates and judgements and potential impacts on our financial results or financial position in the financial statements. This information can be found in note 1 ‘Accounting policies’ in the financial statements.
3.6.1 Consolidated results
Year ended 30 June 20112014 compared with year ended 30 June 20102013
Our strategic focus on large, low-cost and expandable assets once again delivered recordAn analysis of the financial performance and returns. Underlying EBITDA and attributable profit (excluding exceptional items) increased by 51 per cent and 74 per cent respectively, while Underlying return on capital, excluding investment associated with projects not yetof the Group for FY2014 compared to FY2013 is included in production, increasedsection 1.15.3.
The following table reconciles our statutory income statement to 50 per cent. The strong increase in the Group’sprincipal factors that affected Underlying EBIT margin to 47 per cent emphasises the quality of BHP Billiton’s diversified portfolio.for FY2014.
An ongoing commitment to invest through all points of the economic cycle delivered record annual production across four commodities and 10 operations. Our decision to invest in our Western Australia Iron Ore business during the depths of the global financial crisis facilitated an eleventh consecutive annual increase in iron ore production, as prices continued to test new highs. Three major projects delivered first production in FY2011, including the New South Wales Energy Coal MAC20 Project (Australia), which was completed ahead of schedule.
Robust demand, industry-wide cost pressures and persistent supply side constraints continued to support the fundamentals for the majority of BHP Billiton’s core commodities. In that context, another strong year of growth in Chinese crude steel production ensured steelmaking material prices were the major contributing factor to the US$17,228 million price related increase in Underlying EBIT.
However, we have regularly highlighted our belief that costs tend to lag the commodity price cycle as consumable, labour and contractor costs are broadly correlated with the mining industry’s level of activity. In the current environment, tight labour and raw material markets are presenting a challenge for all operators, and BHP Billiton is not immune from that trend. The devaluation of the US dollar and inflation reduced Underlying EBIT by a further US$3,161 million.
Record operating cash flow of US$30,080 million continues to create substantial flexibility for the Group. In the 12-month period alone, we have invested US$12,387 million across our tier one portfolio of minerals and energy assets, completed a US$10 billion capital management program and finalised the acquisition of Chesapeake Energy Corporation’s interests in the Fayetteville Shale assets (US). Notwithstanding those achievements, net gearing of nine per cent at the end of FY2011 ensures BHP Billiton has the capacity to comfortably fund its extensive organic growth program and the US$15.1 billion acquisition of Petrohawk Energy Corporation that was announced on 14 July 2011. Importantly, the Group remains committed to a solid ‘A’ credit rating.
The consistent and disciplined manner in which we return excess capital to shareholders was further illustrated by the completion of our expanded US$10 billion capital management program on 29 June 2011, six months ahead of schedule. Completion of the substantial program in such a timely manner highlights our commitment to maintain an appropriate capital structure, irrespective of the economic cycle. Since 2004, the Group has repurchased a cumulative US$22,600 million of Limited (Ltd) and Plc shares, representing 15 per cent of then issued capital.
US$M | Revenue | Total expenses, other income and share of equity accounted investments | Profit from operations | Exceptional items | Underlying EBIT | |||||||||||||||
For the year ended 30 June 2013 | ||||||||||||||||||||
Revenue | 65,953 | |||||||||||||||||||
Other income | 3,947 | |||||||||||||||||||
Expenses excluding net finance costs | (50,040 | ) | ||||||||||||||||||
Share of operating profit of equity accounted investments | 1,142 | |||||||||||||||||||
|
| |||||||||||||||||||
Total expenses, other income and share of equity accounted investments | (44,951 | ) | ||||||||||||||||||
|
| |||||||||||||||||||
Profit from operations | 21,002 | |||||||||||||||||||
Exceptionals items | 1,928 | |||||||||||||||||||
|
| |||||||||||||||||||
Underlying EBIT | 22,930 | |||||||||||||||||||
Changes in volumes: | ||||||||||||||||||||
Productivity | 2,260 | (1,298 | ) | 962 | – | 962 | ||||||||||||||
Growth | 3,221 | (1,292 | ) | 1,929 | – | 1,929 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
5,481 | (2,590 | ) | 2,891 | – | 2,891 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net price impact: | ||||||||||||||||||||
Change in sales prices | (3,301 | ) | (95 | ) | (3,396 | ) | – | (3,396 | ) | |||||||||||
Price-linked costs | – | (80 | ) | (80 | ) | – | (80 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
(3,301 | ) | (175 | ) | (3,476 | ) | – | (3,476 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Change in controllable cash costs: | ||||||||||||||||||||
Operating cash costs | – | 1,524 | 1,524 | – | 1,524 | |||||||||||||||
Exploration and business development | – | 398 | 398 | – | 398 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
– | 1,922 | 1,922 | – | 1,922 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Change in other costs: | ||||||||||||||||||||
Exchange rates | (202 | ) | 1,962 | 1,760 | – | 1,760 | ||||||||||||||
Inflation on costs | – | (805 | ) | (805 | ) | – | (805 | ) | ||||||||||||
Fuel and energy | – | (46 | ) | (46 | ) | – | (46 | ) | ||||||||||||
Non-cash | – | (2,091 | ) | (2,091 | ) | – | (2,091 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
(202 | ) | (980 | ) | (1,182 | ) | – | (1,182 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Asset sales | – | 53 | 53 | – | 53 | |||||||||||||||
Ceased and sold operations | (494 | ) | 2 | (492 | ) | – | (492 | ) | ||||||||||||
Exceptional items | – | 2,479 | 2,479 | (2,479 | ) | – | ||||||||||||||
Other | (231 | ) | 446 | 215 | – | 215 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
For the year ended 30 June 2014 | ||||||||||||||||||||
Revenue | 67,206 | |||||||||||||||||||
Other income | 1,524 | |||||||||||||||||||
Expenses excluding net finance costs | (46,513 | ) | ||||||||||||||||||
Share of operating profit of equity accounted investments | 1,195 | |||||||||||||||||||
|
| |||||||||||||||||||
Total expenses, other income and share of equity accounted investments | (43,794 | ) | ||||||||||||||||||
|
| |||||||||||||||||||
Profit from operations | 23,412 | |||||||||||||||||||
Exceptionals items | (551 | ) | ||||||||||||||||||
|
| |||||||||||||||||||
Underlying EBIT | 22,861 |
Confidence in the long-term outlook for our core commodity markets and the accelerated purchase and cancellation of four per cent of issued capital during FY2011 has enabled the BHP Billiton Board to declare a 22 per cent rebasing of the final dividend. The increase in the full year payout to 101 US cents per share is consistent with the Group’s commitment to its progressive dividend policy.
Revenue was US$71.7 billion, an increase of 35.9 per cent from US$52.8 billion in the corresponding period.
Our profit attributable to members of BHP Billiton of US$23.6 billion represents an increase of 85.9 per cent from the corresponding period. Attributable profit excluding exceptional items of US$21.7 billion represents an increase of 73.9 per cent from the corresponding period.
On 24 August 2011, the Board declared a final dividend of 55 US cents per share, thus bringing the total dividends declared for FY2011 to 101 US cents per share, an increase of 16.1 per cent over the corresponding period. Capital management initiatives are discussed in section 3.7.6 of this Report.
Year ended 30 June 20102013 compared with year ended 30 June 20092012
We delivered another strong set of resultsRevenue in FY2010 despite significant volatility in the macroeconomic environment with growth in Underlying EBIT of eight per cent. Record sales volumes were achieved in three of our major commodities as our focus on efficiency and productivity at all points in the cycle ensured we were well positioned to capitalise on the recovery in demand and prices. Local currency costs were well controlled across the Group; however, the weaker US dollar hadFY2013 was US$66.0 billion, a negative exchange rate impactdecrease of US$2,150 million.
The combination of these factors underpinned strong margins and returns. For the sixth consecutive year, we recorded an Underlying EBIT margin of around 40 per cent, while Underlying return on capital was 26 per cent. Excluding capital investment associated with projects not yet in production, Underlying return on capital was 30 per cent.
Operating cash flow for the year remained strong at US$16,890 million and resulted in net debt declining further to US$3,308 million, with net gearing falling to six per cent. These results continue to demonstrate the strength of our uniquely diversified business model and world-class, low-cost asset portfolio.
We invested heavily in our business and successfully delivered another five growth projects, including those in petroleum and iron ore. We approved two major growth projects (with a combined budget of US$695 million) and made pre-commitments totalling US$2,237 million (our share) to accelerate early works for another four. To underline the depth of our project pipeline, there were 20 projects in various stages of execution and feasibility with an estimated budget in excess of US$25 billion.
We also bolstered our upstream resource base with the acquisition of Athabasca Potash Inc. (Canada) and United Minerals Corporation NL (Australia, Iron Ore). On 20 August 2010, we launched an all-cash offer to acquire all of the issued and outstanding common shares of Potash Corporation of Saskatchewan Inc. (PotashCorp) at a price of US$130 in cash per PotashCorp common share.
Revenue was US$52.84.5 billion, an increase of 5.2or 6.4 per cent, from US$50.270.5 billion in FY2009.the corresponding period. The revenue decrease was primarily driven by the Iron Ore and Coal Businesses, with decreases of US$2.0 billion and US$2.6 billion, respectively. The loss of revenue due to the sale of assets previously reported in the former Diamonds and Specialty Products Business (decrease of US$382 million) and the decrease in the Aluminium, Manganese and Nickel Business (US$633 million) were offset by the increase in the Copper Business of US$1.0 billion. The breakdown of revenue by Business for FY2013 and FY2012 is set out in section 1.12.1.
The decrease in revenue in Iron Ore was driven by a 17 per cent fall in the average realised price of iron ore to US$110 per tonne which more than offset record sales volumes at WAIO, which increased 9.6 per cent. The revenue decrease in Coal also reflected lower realised prices as hard coking coal and weak coking coal prices fell 34 per cent and 31 per cent, respectively, partially offset by higher sales volumes driven by a 19 per cent increase (100 per cent basis) in production at Queensland Coal. The revenue increase in Copper was largely driven by an increase in production at Escondida of 28 per cent, partially offset by a five per cent decrease in average realised copper prices to US$3.41 per pound.
Total expenses increased from US$48.6 billion in FY2012 to US$50.0 billion in FY2013. Excluding exceptional items, the majority of which related to impairments in FY2013, total expenses were almost unchanged at US$45.0 billion in FY2013 compared to US$44.9 billion in FY2012.
Year ended 30 June | 2013 | 2012 | ||||||
US$M | US$M | |||||||
Raw materials and consumables used | 8,926 | 8,128 | ||||||
Employee benefits expense | 7,168 | 6,035 | ||||||
External services (including transportation)(1) | 12,478 | 14,293 | ||||||
Third party commodity purchases | 2,759 | 3,402 | ||||||
Net foreign exchange (gains)/losses | (284 | ) | (571 | ) | ||||
Fair value change on derivatives | 79 | (141 | ) | |||||
Government royalties paid and payable | 2,562 | 2,880 | ||||||
Depreciation and amortisation expense | 7,031 | 6,431 | ||||||
Exploration and evaluation expenditure | 1,047 | 1,644 | ||||||
Impairment of assets(2) | 5,496 | 3,763 | ||||||
Operating lease rentals | 776 | 658 | ||||||
Other operating expenses(3) | 2,002 | 2,122 | ||||||
|
|
|
| |||||
Total expenses | 50,040 | 48,644 | ||||||
|
|
|
| |||||
Less exceptional items | (5,087 | ) | (3,786 | ) | ||||
|
|
|
| |||||
Total expenses excluding exceptional items | 44,953 | 44,858 | ||||||
|
|
|
|
(1) | Includes exceptional items of US$96 million (2012: US$ nil). |
(2) | Includes exceptional items of US$5,149 million (2012: US$3,663 million). |
(3) | Includes exceptional items credit of US$158 million (2012: US$ nil). |
Reductions in various costs were offset by higher non-cash costs and one-off items. Our focus on reducing operating costs was demonstrated by a decrease of external services costs of US$1.8 billion In addition we reduced exploration and evaluation expenditure by US$597 million. These savings were predominantly offset by higher impairment charges of US$1.7 billion, higher depreciation and amortisation charges of US$600 million and an unfavourable variance in the change in fair value on derivatives of US$220 million. Increases in costs attributable to inflation were US$646 million.
Other income increased from US$898 million in FY2012 to US$3.9 billion, mainly due to US$3.2 billion related to sale of Yeelirrie, Richards Bay Minerals and interests in the East and West Browse Joint Ventures, which were all classified as exceptional items. Excluding exceptional items, other income increased from US$598 million to US$788 million.
Profit from operations decreased by US$3.6 billion or 15 per cent from US$24.6 billion to US$21.0 billion. Exceptional items during FY2013 were a charge of US$1.9 billion, mainly comprised of US$3.2 billion (before taxation) of assets sales offset by impairment charges and related costs of US$5.3 billion (before taxation), compared with net exceptional before taxation charges mainly impairment charges, of US$3.5 billion in FY2012.
Year ended 30 June | 2013 | 2012 | ||||||
US$M | US$M | |||||||
Underlying EBIT | 22,930 | 28,086 | ||||||
Exceptional items (before taxation) – refer section 2.5.5 below | (1,928 | ) | (3,486 | ) | ||||
|
|
|
| |||||
Profit from operations (EBIT) | 21,002 | 24,600 | ||||||
|
|
|
|
Attributable profit in FY2013 of US$11.2 billion was negatively affected by an increase in the Group’s effective tax rate from 30.6 per cent to 35.0 per cent. In addition Attributable profit decreased due to an increase in net interest expense and a change in fair value on non-hedging instruments of US$572 million, including financing charges of US$280 million incurred in managing interest rate exposure on debt securities issued during FY2013.
Underlying Attributable profit (comprising Profit after taxation attributable to members of the BHP Billiton Group less exceptional items) of US$12.712.2 billion representeddecreased by US$5.0 billion from US$17.2 billion in FY2012.
Net operating cash flows of US$20.2 billion declined by 20 per cent from US$25.3 billion in FY2012. A decrease of US$4.2 billion in cash generated from operations, an increase of 116.5 per cent from FY2009. Attributable profit excluding exceptional itemsUS$374 million in net interest paid and an income tax refund of US$12.5 billion represented an increase530 million received in FY2012 were the major contributors to that decline.
2.5.2 Underlying EBIT
Year ended 30 June 2014 compared with year ended 30 June 2013
An analysis of 16.3 per cent from FY2009.
On 25 August 2010, the Board declared a final dividend of 45 US cents per share, thus bringing the total dividends declaredconsolidated EBIT for FY2010FY2014 compared to 87 US cents per share. Capital management initiatives are discussedFY2013 is included in section 3.7.6 of this Report.
3.6.2 Consolidated results – Underlying EBIT
In discussing the operating results of our business, we focus on a financial measure we refer to as Underlying EBIT. Underlying EBIT is the key measure that management uses internally to assess the performance of our business, make decisions on the allocation of resources and assess operational management. Management uses this measure because financing structures and tax regimes differ across our assets and substantial components of our tax and interest charges are levied at a Group, rather than an operational level. Underlying EBIT is calculated as earnings before interest and taxation (EBIT), which is referred to as ‘profit from operations’ in the income statement, excluding the effects of exceptional items.
We exclude exceptional items from Underlying EBIT in order to enhance the comparability of the measure from period to period and provide clarity into the underlying performance of our operations. Our management monitors exceptional items separately.Year ended 30 June 2013 compared with year ended 30 June 2012
A reconciliation from Underlying EBIT to profit from operations can be found in section 3.3 ‘Key measures’.
The following table and commentary describedescription of the approximate impact of the principal factors that affected Underlying EBIT for FY2011 and FY2010.
Year ended 30 June | 2011 | 2011 | 2010 | 2010 | ||||||||||||
US$M | US$M | US$M | US$M | |||||||||||||
Underlying EBIT as reported in the prior year | 19,719 | 18,214 | ||||||||||||||
Change in volumes: | ||||||||||||||||
Increase in volumes | 841 | 2,142 | ||||||||||||||
Decrease in volumes | (1,422 | ) | (206 | ) | ||||||||||||
|
|
|
| |||||||||||||
(581 | ) | 1,936 | ||||||||||||||
Net price impact: | ||||||||||||||||
Change in sales prices | 18,648 | 778 | ||||||||||||||
Price-linked costs | (1,420 | ) | 241 | |||||||||||||
|
|
|
| |||||||||||||
17,228 | 1,019 | |||||||||||||||
Change in costs: | ||||||||||||||||
Costs (rate and usage) | (1,412 | ) | (2 | ) | ||||||||||||
Exchange rates | (2,526 | ) | (2,150 | ) | ||||||||||||
Inflation on costs | (635 | ) | (400 | ) | ||||||||||||
|
|
|
| |||||||||||||
(4,573 | ) | (2,552 | ) | |||||||||||||
Asset sales | (85 | ) | 82 | |||||||||||||
Ceased and sold operations | (140 | ) | 526 | |||||||||||||
New and acquired operations | 1,153 | 966 | ||||||||||||||
Exploration and business development | (328 | ) | 239 | |||||||||||||
Other | (413 | ) | (711 | ) | ||||||||||||
|
|
|
| |||||||||||||
Underlying EBIT | 31,980 | 19,719 | ||||||||||||||
|
|
|
|
Year ended 30 June 2011in FY2013 as compared with year ended 30 June 2010to FY2012 is set out in the table in section 1.15.3.
Underlying EBIT for FY2011FY2013 was US$32.022.9 billion, compared with US$19.728.1 billion in the corresponding period, an increasea decrease of 62.218.4 per cent.
Volumes
BHP Billiton achieved production records across four commodities and 10 operations during FY2011. Western Australia Iron Ore shipments rose to a record annualised rate of 155 million tonnes per annum (mtpa) in
the June 2011 quarter and, when combined with strongStrong operating performance across the Group’s major basins in FY2013 delivered an increase in total production volumes in a number of Businesses. This was underpinned by a thirteenth consecutive annual production record at Samarco (Brazil), enabled iron ore volumes to contribute an additional US$572 million to Underlying EBIT.
The completionWAIO and successful ramp-up of the MAC20 Project ahead of schedule underpinned record production at New South Wales Energy Coal in the period. When considered in conjunction with a 1328 per cent increase in South Africacopper production at Escondida. This volume growth was supported by a significant recovery in production at Queensland Coal and a 76 per cent increase in liquids production Energy Coalat our Onshore US Asset.
In this context, stronger sales volumes increased Underlying EBIT by US$177 million2.0 billion in FY2011.FY2013, of which US$1.3 billion were volume efficiencies attributed to productivity. Increased iron ore, copper and coal sales were
However, broader challenges continued to delay
the supply response of the industry over the 12-month period. For example, metallurgical coal supply was significantly affected by persistent wet weather in the Bowen Basin (Australia), while ongoing permitting delays in the Gulf of Mexico (US) continued to impact drilling activity. In aggregate, volumes reduced BHP Billiton Underlying EBIT by US$581 million in FY2011 despite generally strong operating performance.
Prices
Robust demand driven by the emerging economies, a general elevationmajor contributors and steepening of global (commodity) cost curves and the persistent theme of supply side constraint, were all catalysts for higher commodity prices thattogether increased Underlying EBIT by US$18,6482.5 billion. In contrast, natural field decline at our conventional Australian oil and gas assets contributed to a US$526 million volume related reduction in the period. Another strong year of growth in Chinese crude steel production ensured steelmaking materialPetroleum’s Underlying EBIT.
Prices
Substantially lower prices were the major contributing factor, as they alone increased Underlying EBIT by US$11.1 billion. Price-linked costs (including royalties) reduced Underlying EBIT by US$1,420 million.
Costs
BHP Billiton has regularly highlighted its belief that costs tend8.5 billion in FY2013. The major contributor to lag the commoditydecline was a 17 per cent reduction in the average realised price cycle as consumable, labour and contractor costs are broadly correlated with the mining industry’s level of activity. In the current environment of elevated commodity prices, tight labour and raw material markets are presenting a challenge for all operators. Excluding the impact of a weaker US dollar, inflation and an increase in non-cash items, costs decreased Underlying EBIT by US$1.2 billion.
Higher fuel and energy prices (ofiron ore, which BHP Billiton is a net beneficiary), together with increased maintenance, labour and contractor costs, accounted for the majority of the impact and reduced Underlying EBIT by US$878 million.
Cost performance in the large bulk commodity businesses is heavily influenced by the ability to leverage infrastructure and maximise volumes. In this regard, the weather related disruption at our Queensland Coal (Australia) business had a negative impact on unit costs in the period.3.8 billion. The major cost offset was related to the recovery in operating performance that followed last year’s Clark Shaft outage at Olympic Dam (Australia).
Non-cash items, predominantly depreciation,low-cost supply led to a significant decline in metallurgical coal prices, which, together with softer energy coal prices, reduced Underlying EBIT by a further US$255 million3.5 billion. Overcapacity in the nickel and reflectedaluminium markets, and concerns of a near-term rebalancing in the ongoing delivery of our organic growth program.
Exchange rates
A weaker US dollar against producer currenciescopper market, also weighed on metals prices and reduced Underlying EBIT by US$2,526 million, which included a combined US$735 million variance related to the restatement of monetary items1.2 billion.
A 17 per cent increase in the balance sheet. The Australian operations wereaverage realised price of US natural gas and a four per cent rise in the most heavily impacted. The strong Australian dollar reducedaverage realised price of liquefied natural gas (LNG) benefited Underlying EBIT during the period; however, this was largely offset by a four per cent decrease in the average realised price of oil.
A reduction in price-linked costs increased Underlying EBIT by US$2.1582 million during the period and primarily reflected lower price-linked royalty charges in our Iron Ore and Metallurgical Coal Businesses.
Controllable cash costs
The Group’s concentrated effort to reduce operating costs and drive productivity improvements realised tangible results, with a decrease in controllable cash costs of US$2.5 billion which includedduring the period, being a decrease in operating cash costs of US$640 million variance related1.6 billion and a decrease in exploration and business development costs of US$949 million.
Operating cash costs
The reduction in costs was underpinned by a reduction of US$1.6 billion of operating cash costs. A strong focus on contractor usage and rates and a significant reduction in consumables expenditure contributed to the restatement of monetary itemssubstantial reduction in operating costs at Queensland Coal, which contributed to a US$933 million reduction in operating cash costs. Productivity gains at Escondida associated with a 12 per cent improvement in concentrator throughput following a major maintenance campaign and a 24 per cent increase in the balance sheet. The absolute impact on costs as a resultore grade mined during the period contributed US$653 million to Underlying EBIT. With productivity improvements already well advanced, consisting principally of the restatementimprovement plan at Worsley, substantial cost savings of US$368 million were achieved during the period in Aluminium, Manganese and Nickel. These savings were offset by an increase in operating cash costs of US$405 million in Iron Ore which reflects our decision to invest in operating capability prior to the full commissioning and ramp-up of expanded capacity at WAIO.
Exploration and business development
Our increased focus on reducing our cost base in FY2013 and our confidence in the quality and longevity of our asset base led to a substantial US$949 million reduction in the Group’s exploration and business development expenditure. Total exploration expenditure declined by 46 per cent to US$1.4 billion in FY2013, with a focus on greenfield copper porphyry targets in Chile and Peru and oil and gas prospects in the Gulf of Mexico and offshore Western Australia. The associated decline in the Group’s exploration expense increased Underlying EBIT by US$597 million.
A general reduction in business development expenditure increased Underlying EBIT by a further US$352 million in FY2013, primarily in Iron Ore for US$102 million and Coal for US$194 million.
Other costs
Exchange rates
A stronger US dollar against several producer currencies, in particular the South African rand, benefited our cost base during the period and increased Underlying EBIT but this was partially offset by the revaluation of monetary items in the balance sheet was a loss ofwith year-end exchange rates. In total, exchange rate volatility increased Underlying EBIT by US$807 million in FY2011.229 million.
Average and closing exchange rates for FY2011FY2013 and FY2010FY2012 are detailed in note 1 ‘Accounting policies’ to the financial statements.
Inflation on costs
Inflationary pressure on costs across all businessesInflation had an unfavourable impact on all Businesses and reduced Underlying EBIT ofby US$635 million. The pressure646 million in FY2013. This was most evidentnotable in Australia and South Africa, which accounted for over two-thirds75 per cent of the total impact.variance.
Asset salesNon-cash
The profit on the sale of assets was US$85 million lower than the corresponding period largely due to the dissolution of the Douglas Tavistock Joint Venture (South Africa), which increased Underlying EBIT in the prior period.
Ceased and sold operations
The currency revaluation of rehabilitation and closure provisions for ceased operations was the major driver of the US$140 million reduction in Underlying EBIT.
New and acquired operations
Assets are reported as new and acquired operations until there is a full year comparison. New operations increased Underlying EBIT by US$1,153 million primarily due to strong performance at the BHP Billiton operated Pyrenees oil facility (Australia) and the inaugural contribution from the recently acquired Fayetteville Shale assets.
Exploration and business development
Group exploration expense increased marginally in FY2011 to US$1.1 billion. Within Minerals (US$577 million expense), the focus centred upon copper targets in South America, Mongolia and Zambia; nickel and copper targets in Australia; and diamond targets in Canada. Exploration for iron ore, potash, uranium and manganese was undertaken in a number of regions including Australia, Asia, Africa and the Americas.
Petroleum exploration expense was US$477 million and included a US$73 million impairment of exploration previously capitalised. Exploration drilling activity was delayed in the Gulf of Mexico due to new regulatory permitting processes, but was partially offset by an increase in the acquisition and processing of geophysical data. BHP Billiton’s proven operating capability in the deepwater remains an important competitive advantage and the Group will continue to invest in an extensive exploration program that is focused on the Gulf of Mexico, South China Sea and Australia.
Expenditure on business development reduced Underlying EBIT by an additional US$303 million compared with the prior period as Base Metals progressed a number of its development options, including Olympic Dam Project (ODP1) and the Spence Hypogene project (Chile). Increased activity on the Scarborough and Browse liquefied natural gas projects (both Australia) in FY2011 also contributed to the rise in the business development expense.
Other
Other items decreased Underlying EBIT by US$413 million and included provisions totalling US$189 million related to indirect taxes in the Aluminium and Iron Ore businesses, and Colombian net worth tax in Stainless Steel Materials and Energy Coal.
Year ended 30 June 2010 compared with year ended 30 June 2009
Underlying EBIT for FY2010 was US$19.7 billion, compared with US$18.2 billion, an increase of 8.3 per cent from FY2009.
Volumes
Strong performance from steelmaking raw materials was the major contributor to the volume related increase in Underlying EBIT of US$1,936 million. In that context, our strategy to maximise production from our low-cost assets at all points in the cycle ideally positioned our Metallurgical Coal and Manganese businesses to capitalise on the improvement in market demand. In Western Australia’s Pilbara region, ongoing commitment to growth delivered the tenth consecutive record in iron ore sales, while a recovery in pellet demand enabled Samarco (Brazil) to return to full capacity.
Solid operating performance was recorded across the remaining CSGs. In Base Metals, Escondida (Chile) and Cannington (Australia) both benefited from higher throughput and grade, while Olympic Dam (Australia) and Spence (Chile) were impacted by unplanned interruptions.
Escondida production is expected to decline by five to 10 per cent in FY2011, mainly due to lower grade.
Prices
Prices (including the impact of linked costs) increased Underlying EBIT by US$1,019 million, of which iron ore and the base and precious metals complex contributed US$5,265 million. Lower prices for coal (both forms) and manganese were the offsetting factors and reduced Underlying EBIT by US$4,401 million.
Price-linked costs were US$241 million lower than FY2009.
During the second half of FY2010, the old benchmark pricing system for iron ore and metallurgical coal was substantially replaced by shorter-term market-based pricing. The transformation ensures the majority of BHP Billiton’s bulk commodities (iron ore, manganese, metallurgical coal and energy coal) are now linked to market-based prices.
Additional detail on the effect of price changes appears in section 3.4.1.
Costs
Excluding the significant impact of a weaker US dollar and an increase in non-cash items (US$219 million), costs were well controlled across the Group, adding US$217 million to Underlying EBIT in FY2010.
Raw materials, including fuel and energy, generated the greatest benefit and increased Underlying EBIT by US$576 million, although the majority of the benefit was non-structural in nature.
In contrast, higher labour and contractor rates continued to negatively impact the cost base, particularly in South America and Australia. At Spence, Escondida and Cerro Colorado (Chile) one-off wage negotiations, bonuses and contractor payments reduced Underlying EBIT by US$145 million. Similarly, Western Australia’s higher labour costs associated with the tight labour market reduced Western Australia Iron Ore Underlying EBIT by US$45 million.
Non-cash and other items reduced Underlying EBIT by a combined US$537 million. The major negative factors were higher depreciation in Western Australia Iron Ore and a provision for a payment to the Western Australian Government that was expected following the announced amendments to the State Agreements.
Exchange rates
A weaker US dollar against all producer currencies reduced Underlying EBIT by US$2,150 million. The Australian operations were the most impacted, with the strong Australian dollar decreasing Underlying EBIT by US$1,779 million.
Average and closing exchange rates for FY2010 and FY2009 are detailed in note 1 to the financial statements.
Inflation on costs
Inflationary pressure on input costs across all businesses had an unfavourable impact on Underlying EBIT of US$400 million. The effect was most evident in Australia and South Africa.
Asset sales
The profit on the sale of assets increased Underlying EBIT by US$82 million. This was mainly due to the profit that followed dissolution of the Douglas Tavistock Joint Venture arrangement (South Africa).
Ceased and sold operations
Lower operational losses for Yabulu and Ravensthorpe (both Australia) and the Suriname alumina refinery, which were sold during FY2010, resulted in a favourable impact on Underlying EBIT of US$526 million.154 million in FY2013. This was principally due to a higher capitalisation rate for deferred stripping mainly in Copper and Iron Ore.
NewOne-off items
The only One-off item was due to higher costs at Escondida relating to major maintenance activities undertaken on the conveyor belt system and acquired operationsat both concentrator plants.
Asset sales
New greenfield assets areThe divestments of Yeelirrie, Richards Bay Minerals, the East and West Browse Joint Ventures and our diamonds business were completed during the period. The gains or losses arising from each sale were reported within exceptional items, and therefore were not included in new and acquired operations variance until there is a full year comparison. BHP Billiton operated oil and gas facilities, Shenzi (US) and Pyrenees (Australia), contributed an additional US$966 millionUnderlying EBIT.
The contribution of asset sales to Underlying EBIT declined by US$66 million in FY2010.FY2013. The variance was largely attributable to a post-closing payment received during FY2012 that followed the divestment of our interests in Cascade and Chinook.
ExplorationCeased and business developmentsold operations
Exploration expense was broadly flat for FY2010 atUnderlying EBIT from ceased and sold operations declined by US$1,030657 million in FY2013. The decline largely reflected a reduced contribution, decrease in Underlying EBIT of US$310 million, from EKATI, following the sale of our diamonds business. Ceased and sold operations included a further reduction of Underlying EBIT of US$126 million related to the sale of Pinto Valley mining operation and the associated San Manuel Arizona Railroad Company.
Other
A decrease in our share of operating profit in equity accounted investments primarily contributed to the reduction of Underlying EBIT by US$531 million. Within Minerals (US$467Cerrejon profit after taxation decreased by US$177 million expense), the focus centred upon copper in Chile and Zambia, nickel in Australia, manganese in Gabon, and diamonds in Canada. Exploration for iron ore, coal, bauxite, potash and manganese was also undertaken in a number of regions, including Australia, Canada, South America, Russia and Africa.
The Petroleum CSG’s exploration expense increased to US$563117 million as the business commenced a multi-year drilling campaign.
Expenditure on business development was US$195 million lower than FY2009. This was mainly due to reduced activity in the Base Metalsproduction and Stainless Steel Materials CSGs.
Other
Other items decreased Underlying EBITthermal coal prices. Antamina profit after taxation decreased by US$71183 million predominantlyto US$531 million as increased copper production was more than offset by weaker sales prices and general cost pressure over our Copper portfolio. Samarco profit after taxation decreased by US$396 million to US$513 million mainly due to the influence of third party producta decrease in sales and the fair valueprices.
These decreases were partially offset by a non-cash adjustment of derivative contracts.our Angostura (Trinidad and Tobago) Production Sharing Contract.
2.5.3 Net finance costs3.6.3
Year ended 30 June 20112014 compared with year ended 30 June 20102013
An analysis of net finance costs for FY2014 compared to FY2013 is included in section 1.15.3.
Year ended 30 June 2013 compared with year ended 30 June 2012
Net finance costs increased to US$561 million1.3 billion from US$459668 million in the corresponding period. This was primarily driven by exchange rate variationsattributable to an increase in net interest expense on higher net debt and lower amountsfinancing charges of US$280 million incurred in managing interest capitalised.rate exposure on debt securities issued in FY2013. The US$280 million was composed of realised fair value losses of US$97 million on non-hedging derivatives recognised in interest on borrowings and unrealised fair value losses of US$183 million on similar instruments. Net interest expense on other debt securities increased net finance costs by an additional US$270 million.
2.5.4 Taxation expense
Year ended 30 June 20102014 compared with year ended 30 June 20092013
Net finance costs decreasedAn analysis of taxation expenses for FY2014 compared to US$459 million from US$543 millionFY2013 is included in FY2009. This was primarily driven by higher levels of capitalised interest.
3.6.4 Taxation expense
Year ended 30 June 20112013 compared with year ended 30 June 20102012
Excluding the impacts ofTotal taxation expense, including royalty-related taxation, exceptional items and exchange rate movements, taxation expense was US$10.16.9 billion, representing an underlying effective tax rate of 32.135.0 per cent (2010: 30.9 per cent; 2009: 31.4(2012: 30.6 per cent).
Exceptional items decreased taxation expense by US$943 million (2012: decrease of US$1.7 billion), predominantly due to the income tax benefit on impairments of US$1.4 billion, which more than offset the income tax expense associated with divestments of US$371 million, as detailed in section 1.15.3.
Government imposed royalty arrangements calculated by reference to profits after adjustment for temporary differences are reported as royalty-related taxation. Royalty-related taxation, excluding exceptional items, contributed US$828 million1.2 billion to taxation expense. The Minerals Resource Rent Tax (MRRT) came into effect in Australia on 1 July 2012 and the Group expensed US$321 million of MRRT in FY2013, mainly due to Iron Ore MRRT expense representing anfor the period. This included the remeasurement of deferred tax assets associated with the MRRT which increased taxation expense by US$207 million in FY2013.
The Group’s adjusted effective tax rate of 2.6was 34.2 per cent (2010: US$451 million and 2.3 per cent; 2009: US$495 million and 4.3(2012: 31.8 per cent).
Year ended 30 June | 2013 | 2012 | ||||||||||||||||||||||
Profit before tax | Income tax expense | % | Profit before tax | Income tax expense | % | |||||||||||||||||||
US$M | US$M | US$M | US$M | |||||||||||||||||||||
Statutory effective tax rate | 19,726 | (6,906 | ) | 35.0 | % | 23,932 | (7,315 | ) | 30.6 | % | ||||||||||||||
Less: | ||||||||||||||||||||||||
Exchange rate movements | – | 245 | – | 347 | ||||||||||||||||||||
Remeasurement of deferred tax assets associated with the MRRT | – | 207 | – | – | ||||||||||||||||||||
Exceptional items | 1,928 | (943 | ) | 3,486 | (1,745 | ) | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Adjusted effective tax rate | 21,654 | (7,397 | ) | 34.2 | % | 27,418 | (8,713 | ) | 31.8 | % | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
Other royalty and excise arrangements, which doare not have these characteristics,profit based, are recognised as operating costs within profitProfit before taxation. These amounted to US$2.92.6 billion during the period (2010:(2012: US$1.7 billion; 2009: US$1.92.9 billion).
2.5.5 Exceptional items decreased taxation expense by US$2.1 billion (2010: increase of US$59 million; 2009: decrease of US$1.2 billion) predominantly due to the reversal of deferred tax liabilities of US$1.5 billion following the election of eligible Australian entities to adopt a US dollar tax functional currency, as well as the release of tax provisions of US$718 million following the Group’s position being confirmed with respect to Australian Taxation Office (ATO) amended assessments.
Exchange rate movements decreased taxation expense by US$1.5 billion (2010: increase of US$106 million; 2009: increase of US$444 million) predominantly due to the revaluation of local currency deferred tax assets arising from future tax depreciation of US$2.5 billion, partly offset by the revaluation of local currency tax liabilities and deferred tax balances arising from other monetary items and temporary differences, which amounted to US$1.0 billion.
Total taxation expense, including royalty-related taxation and the predominantly non-cash exceptional items and exchange rate movements described above, was US$7.3 billion, representing an effective tax rate of 23.4 per cent (2010: 33.5 per cent; 2009: 45.4 per cent).
YearYears ended 30 June 2010 compared with year ended2014 and 30 June 20092013
The taxation expense, including royalty-related taxation and tax onAn analysis of the exceptional items was US$6,563 million. This represented an effective rate of 34 per cent on profit before tax of US$19,572 millionfor FY2014 and including tax on exceptional items of US$59 million. Excluding the impacts of exceptional items, the taxation expense was US$6,504 million.
Exchange rate movements increased the taxation expense by US$106 million predominantly due to the revaluation of local currency tax liabilities and other monetary items, which amounted to US$502 million. This was offset by the increase in the US dollar value of future tax depreciation of US$396 million.
Royalty-related taxation represents an effective rate of two per cent for FY2010. Excluding the impacts of royalty-related taxation, the impact of exchange rate movementsFY2013 are included in taxation expense and tax on exceptional items, the underlying effective rate was 31 per cent.
Government imposed royalty arrangements, which are calculated by reference to profits (revenue net of allowable deductions) after the adjustment for items comprising temporary differences, is reported as royalty-related taxation. Other royalty and excise arrangements that do not have these characteristics are recognised as operating costs (US$1,653 million).
3.6.5 Exceptional items
Year ended 30 June 2011section 1.15.3.
Year ended 30 June 2011 | Gross | Tax | Net | |||||||||
US$M | US$M | US$M | ||||||||||
Exceptional items by category | ||||||||||||
Withdrawn offer for PotashCorp | (314 | ) | — | (314 | ) | |||||||
Newcastle steelworks rehabilitation | 150 | (45 | ) | 105 | ||||||||
Release of income tax provisions | — | 718 | 718 | |||||||||
Reversal of deferred tax liabilities | — | 1,455 | 1,455 | |||||||||
|
|
|
|
|
| |||||||
(164 | ) | 2,128 | 1,964 | |||||||||
|
|
|
|
|
|
The Group withdrew its offer for Potash Corporation of Saskatchewan (PotashCorp) on 15 November 2010 following the Board’s conclusion that the condition of the offer relating to receipt of a net benefit as determined by the Minister of Industry under the Investment Canada Act could not be satisfied. The Group incurred fees associated with the US$45 billion debt facility (US$240 million), investment bankers’, lawyers’ and accountants’ fees, printing expenses and other charges (US$74 million) in progressing this matter during the period up to the withdrawal of the offer, which were expensed as operating costs in FY2011.
The Group recognised a decrease of US$150 million (US$45 million tax charge) to rehabilitation obligations in respect of former operations at the Newcastle steelworks (Australia) following a full review of the progress of the Hunter River Remediation Project (Australia) and estimated costs to completion.
The ATO issued amended assessments in prior years denying bad debt deductions arising from the investments in Beenup and Boodarie Iron (both Australia) and the denial of capital allowance claims made on the Boodarie Iron project. The Group challenged the assessments and was successful on all counts before the Full Federal Court. The ATO obtained special leave in September 2010 to appeal to the High Court in respect of the denial of capital allowance claims made on the Boodarie Iron project. The Group’s position in respect of the capital allowance claims on the Boodarie Iron project was confirmed by the High Court in June 2011. As a result of these appeals, US$138 million was released from the Group’s income tax provision in September 2010 and US$580 million in June 2011.
Consistent with the functional currency of the Group’s operations, eligible Australian entities elected to adopt a US dollar tax functional currency from 1 July 2011. As a result, the deferred tax liability relating to certain US dollar denominated financial arrangements has been derecognised, resulting in a credit to income tax expense of US$1,455 million.
Refer to note 3 ‘Exceptional items’ in the financial statements for more information.
Year ended 30 June 2010
Year ended 30 June 2012 | Gross | Tax | Net | |||||||||
US$M | US$M | US$M | ||||||||||
Exceptional items by category | ||||||||||||
Impairment of Fayetteville goodwill and other assets | (2,835 | ) | 996 | (1,839 | ) | |||||||
Impairment of Nickel West goodwill and other assets | (449 | ) | 94 | (355 | ) | |||||||
Suspension or early closure of operations and the change in status of specific projects (1) | (502 | ) | 108 | (394 | ) | |||||||
Settlement of insurance claims(1) | 300 | (90 | ) | 210 | ||||||||
Recognition of deferred tax assets on enactment of MRRT and PRRT extension legislation in Australia | – | 637 | 637 | |||||||||
|
|
|
|
|
| |||||||
(3,486 | ) | 1,745 | (1,741 | ) | ||||||||
|
|
|
|
|
|
Year ended 30 June 2010 | Gross | Tax | Net | |||||||||
US$M | US$M | US$M | ||||||||||
Exceptional items by category | ||||||||||||
Pinal Creek rehabilitation | 186 | (53 | ) | 133 | ||||||||
Disposal of the Ravensthorpe nickel operation | 653 | (196 | ) | 457 | ||||||||
Restructuring of operations and deferral of projects | (298 | ) | 12 | (286 | ) | |||||||
Renegotiation of power supply agreements | (229 | ) | 50 | (179 | ) | |||||||
Release of income tax provisions | — | 128 | 128 | |||||||||
|
|
|
|
|
| |||||||
312 | (59 | ) | 253 | |||||||||
|
|
|
|
|
|
(1) | Includes amounts attributable to non-controlling interests of US$(34) million (US$7 million tax expense). |
On 22 February 2010, a settlement was reached in relation to the Pinal Creek (US) groundwater contamination, which resulted in other parties taking on full responsibility for groundwater rehabilitation and partly funding the Group for past and future rehabilitation costs incurred. As a result, a gain of US$186 million (US$53 million tax expense) has been recognised reflecting the release of rehabilitation provisions and cash received.
On 9 December 2009, the Group announced it had signed an agreement to sell the Ravensthorpe nickel operations (Australia). The sale was completed on 10 February 2010. As a result of the sale, impairment charges recognised as exceptional itemsfall in FY2009 have been partially reversed totalling US$611 million (US$183 million tax expense). In addition, certain obligations that remained withUnited States domestic gas prices and the Company’s decision to adjust its development plans, the Group were mitigatedrecognised impairments of goodwill and related provisions released, together with minor net operating costs this resultedother assets in a gain of US$42 million (US$13 million tax expense).
Continuing power supply constraints impacting the Group’s three Aluminium smelters in southern Africa, and temporary delays with the Guinea Alumina project, have given riserelation to charges for the impairment of property, plant and equipment and restructuring provisions.its Fayetteville shale gas assets. A total impairment charge of US$298 million (US$12 million1.8 billion (after tax benefit) was recognised byin FY2012.
The Group recognised impairments of goodwill and other assets at Nickel West as a result of the Groupcontinued downturn in FY2010.
Renegotiation of long-term power supply arrangements in southern Africa impacted the value of embedded derivatives contained within those arrangements.nickel price and margin deterioration. A total impairment charge of US$229355 million (US$50 million(after tax benefit) was recognised byin FY2012.
As part of our regular portfolio review, various operations and projects around the Group were either suspended, closed early or changed in FY2010.
The ATO issued amended assessmentsstatus. These included: the change in prior years denying bad debt deductions arising fromstatus of the investments in Hartley (Zimbabwe), Beenup and Boodarie Iron (both Australia)Olympic Dam expansion project; the temporary suspension of production at TEMCO and the denial of capital allowance claims made on the Boodarie Iron project. BHP Billiton lodged objections and has been successful on all counts in the Federal Court and the Full Federal Court. The ATO has not sought to appeal the Boodarie Iron bad debt disallowance to the High Court, which resulted in a release of US$128 million from the Group’s income tax provisions. The ATO sought special leave to appeal to the High Court in relation to the Beenup bad debt disallowance and the denialpermanent closure of the capital allowance claims onMetalloys South Plant in South Africa; the Boodarie Iron projectindefinite cessation of production at Norwich Park; and has been granted special leave only in relation to the denial of the capital allowance claims on the Boodarie Iron project.
Refer to note 3 ‘Exceptional items’ in the financial statements for more information.
Year ended 30 June 2009
Year ended 30 June 2009 | Gross | Tax | Net | |||||||||
US$M | US$M | US$M | ||||||||||
Exceptional items by category | ||||||||||||
Suspension of Ravensthorpe nickel operations | (3,615 | ) | 1,076 | (2,539 | ) | |||||||
Announced sale of Yabulu refinery | (510 | ) | (175 | ) | (685 | ) | ||||||
Withdrawal or sale of other operations | (665 | ) | (23 | ) | (688 | ) | ||||||
Deferral of projects and restructuring of operations | (306 | ) | 86 | (220 | ) | |||||||
Newcastle steelworks rehabilitation | (508 | ) | 152 | (356 | ) | |||||||
Lapsed offers for Rio Tinto | (450 | ) | 93 | (357 | ) | |||||||
|
|
|
|
|
| |||||||
(6,054 | ) | 1,209 | (4,845 | ) | ||||||||
|
|
|
|
|
|
On 21 January 2009, we announced the suspension of operations at the Ravensthorpe nickel operations (Australia) and as a consequence stopped the processing of the mixed nickel cobalt hydroxide product at Yabulu (Australia). As a result, charges relating to impairment, increased provisions for contract cancellation, redundancy and other closure costs of US$3,615 million (US$1,076 million tax benefit) were recognised. This exceptional item did not include the loss from operations of Ravensthorpe nickel operations of US$173 million.
On 3 July 2009, we announced the sale of the Yabulu nickel operations.minor capital projects. As a result, impairment charges of US$510338 million (US$ nil(after tax benefit), idle capacity costs and inventory write-down of US$28 million (after tax benefit) and other restructuring costs of US$28 million (after tax benefit) were recognised in additionFY2012, of which US$242 million (after tax benefit) related to those recognised on suspensionOlympic Dam.
During 2008, extreme weather across the central Queensland coalfields affected production from the BMA and BMC operations. The Group settled insurance claims in respect of the Ravensthorpe nickel operations. As a resultlost production and insurance claim income of the sale, deferred tax assets of US$175210 million that were no longer expected to be realised by the Group were recognised as a charge to income tax expense. The remaining assets and liabilities of the Yabulu operations were classified as held for sale as at 30 June 2009.
As part of our regular review of the long-term viability of operations, a total charge of US$665 million (US$23 million(after tax expense) was recognised primarily in relationFY2012.
The Australian MRRT and PRRT extension legislation were enacted in March 2012. Under the legislation, the Group is entitled to a deduction against future MRRT and PRRT liabilities based on the market value of its Coal, Iron Ore and Petroleum assets. A deferred tax asset, and an associated net income tax benefit of US$637 million, was recognised in FY2012 to reflect the future deductibility of these market values for MRRT and PRRT purposes, to the decisions to cease development of the Maruwai Haju trial mine (Indonesia), sell the Suriname operations, suspend copper sulphide mining operations at Pinto Valley (US) and cease the pre-feasibility study at Corridor Sands (Mozambique). The remaining assets and liabilities of the Suriname operationsextent they were considered recoverable.
Exceptional items during FY2012 are classified by nature as held for sale as at 30 June 2009.
A further charge of US$306 million (US$86 million tax benefit) was recognised primarily in relation to the deferral of expansions at the Nickel West operations (Australia), deferral of the Guinea Alumina project (Guinea) and the restructuring of the Bayside Aluminium Casthouse operations (South Africa).
We recognised a charge of US$508 million (US$152 million tax benefit) for additional rehabilitation obligations in respect of former operations at the Newcastle steelworks (Australia). The increase in obligations related to changes in the estimated volume of sediment in the Hunter River requiring rehabilitation and treatment, and increases in estimated treatment costs.
Our offers for Rio Tinto lapsed on 27 November 2008 following the Board’s decision that it believed that completion of the offers was no longer in the best interests of BHP Billiton shareholders. We incurred fees associated with the US$55 billion debt facility (US$156 million cost, US$31 million tax benefit), investment bankers’, lawyers’ and accountants’ fees, printing expenses and other charges (US$294 million cost, US$62 million tax benefit) up to the lapsing of the offers, which were expensed in FY2009.
Refer to note 3 ‘Exceptional items’ in the financial statements for more information.
3.6.6 Customer Sector Group summary
The following tables provide a summary of the CSG revenues and results for FY2011 and the two prior corresponding periods.follows.
Year ended 30 June | 2011 | 2010 | 2009 | |||||||||
US$M | US$M | US$M | ||||||||||
Revenues(1) | ||||||||||||
Petroleum | 10,737 | 8,782 | 7,211 | |||||||||
Aluminium | 5,221 | 4,353 | 4,151 | |||||||||
Base Metals | 14,152 | 10,409 | 7,105 | |||||||||
Diamonds and Specialty Products | 1,517 | 1,272 | 896 | |||||||||
Stainless Steel Materials | 3,861 | 3,617 | 2,355 | |||||||||
Iron Ore | 20,412 | 11,139 | 10,048 | |||||||||
Manganese | 2,423 | 2,150 | 2,536 | |||||||||
Metallurgical Coal | 7,573 | 6,059 | 8,087 | |||||||||
Energy Coal | 5,507 | 4,265 | 6,524 | |||||||||
Group and unallocated items(2)(3) | 336 | 752 | 1,298 | |||||||||
|
|
|
|
|
| |||||||
BHP Billiton Group | 71,739 | 52,798 | 50,211 | |||||||||
|
|
|
|
|
|
Year ended 30 June 2012 US$M | Impairment of goodwill and other assets | Idle capacity costs and inventory write-downs | Restructuring costs | Insurance recoveries | Gross | |||||||||||||||
Impairment of Fayetteville goodwill and other assets | (2,835 | ) | – | – | – | (2,835 | ) | |||||||||||||
Impairment of Nickel West goodwill and other assets | (406 | ) | (43 | ) | – | – | (449 | ) | ||||||||||||
Suspension or early closure of operations and the change in status of specific projects | (422 | ) | (40 | ) | (40 | ) | – | (502 | ) | |||||||||||
Settlement of insurance claims | – | – | – | 300 | 300 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
(3,663 | ) | (83 | ) | (40 | ) | 300 | (3,486 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
2.5.6 Petroleum and Potash Business
Year ended 30 June Underlying EBIT(1) Petroleum Aluminium Base Metals Diamonds and Specialty Products Stainless Steel Materials Iron Ore Manganese Metallurgical Coal Energy Coal Group and unallocated items(2)(3) BHP Billiton Group 2011 2010 2009 US$M US$M US$M 6,330 4,573 4,085 266 406 192 6,790 4,632 1,292 587 485 145 588 668 (854 ) 13,328 6,001 6,229 697 712 1,349 2,670 2,053 4,711 1,129 730 1,460 (405 ) (541 ) (395 ) 31,980 19,719 18,214
|
|
|
The discussion of results for our CSGs is set out below and focuses on Underlying EBIT. The factors affecting Underlying EBIT have also affected revenue, except where stated. For further information on our CSG results, including depreciation, refer note 2 ‘Segment reporting’ in the financial statements.
Petroleum
Year ended 30 June 20112014 compared with year ended 30 June 20102013
The successful integrationAn analysis of the Fayetteville Shale gas assets,financial performance of our Petroleum and Potash Business for FY2014 compared to FY2013 is included in section 1.12.2.
Financial information for the start-up of the Angostura Gas Phase II project on schedule,Petroleum and strong underlying performance from existing assets, delivered 159.4Potash Business for FY2014 and FY2013 is presented below.
Year ended 30 June 2014 US$ million | Revenue (i)(ii) | Underlying EBITDA | D&A | Underlying EBIT | Net operating assets | Capital expenditure (iii) | Exploration gross(iv) | Exploration to profit(v) | ||||||||||||||||||||||||
Bass Strait | 1,885 | 1,555 | 132 | 1,423 | 2,864 | 259 | ||||||||||||||||||||||||||
North West Shelf (vi) | 2,432 | 1,599 | 175 | 1,424 | 1,691 | 193 | ||||||||||||||||||||||||||
Atlantis | 1,535 | 1,407 | 335 | 1,072 | 2,272 | 409 | ||||||||||||||||||||||||||
Shenzi | 1,430 | 1,281 | 243 | 1,038 | 1,598 | 306 | ||||||||||||||||||||||||||
Mad Dog | 217 | 171 | 16 | 155 | 461 | 83 | ||||||||||||||||||||||||||
Onshore US | 4,264 | 2,270 | 2,426 | (156 | ) | 26,945 | 4,226 | |||||||||||||||||||||||||
Algeria | 465 | 396 | 30 | 366 | 104 | 19 | ||||||||||||||||||||||||||
UK(vii) | 155 | 70 | 52 | 18 | (38 | ) | 15 | |||||||||||||||||||||||||
Exploration | – | (369 | ) | 113 | (482 | ) | 464 | – | ||||||||||||||||||||||||
Other(viii)(ix) | 2,027 | 1,744 | 735 | 1,009 | 1,907 | 369 | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total Petroleum | 14,410 | 10,124 | 4,257 | 5,867 | 38,268 | 5,879 | 600 | 497 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Potash | – | (211 | ) | 74 | (285 | ) | 2,255 | 544 | 47 | 47 | ||||||||||||||||||||||
Other(x) | – | (298 | ) | – | (298 | ) | (1,009 | ) | – | – | – | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total Petroleum and Potash from Group production | 14,410 | 9,615 | 4,331 | 5,284 | 39,514 | 6,423 | 647 | 544 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Third party products | 437 | 3 | – | 3 | – | – | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total Petroleum and Potash | 14,847 | 9,618 | 4,331 | 5,287 | 39,514 | 6,423 | 647 | 544 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Statutory adjustments (xi) | (14 | ) | (3 | ) | (3 | ) | – | – | – | – | – | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total Petroleum and Potash statutory result | 14,833 | 9,615 | 4,328 | 5,287 | 39,514 | 6,423 | 647 | 544 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended 30 June 2013 (Republished) US$ million Bass Strait North West Shelf Atlantis Shenzi Mad Dog Onshore US Algeria UK Exploration Other(viii)(ix) Total Petroleum Potash Other(x) Total Petroleum and Potash from Group production Third party products Total Petroleum and Potash Statutory adjustments(xi) Total Petroleum and Potash statutory result Revenue (i)(ii) Underlying
EBITDA D&A Underlying
EBIT Net
operating
assets Capital
expenditure (iii) Exploration
gross(iv) Exploration
to profit(v) 1,921 1,564 119 1,445 2,834 526 2,578 1,913 234 1,679 1,880 221 853 710 147 563 2,166 419 1,614 1,519 283 1,236 1,524 289 276 233 98 135 420 89 2,987 1,508 1,795 (287 ) 25,019 4,699 533 460 18 442 90 22 244 95 46 49 45 8 – (522 ) 230 (752 ) 529 – 2,032 1,746 282 1,464 1,973 794 13,038 9,226 3,252 5,974 36,480 7,067 675 620 – (309 ) 25 (334 ) 1,758 608 89 89 18 (15 ) – (15 ) (713 ) – – – 13,056 8,902 3,277 5,625 37,525 7,675 764 709 175 11 – 11 – – 13,231 8,913 3,277 5,636 37,525 7,675 764 709 (7 ) (3 ) (3 ) – – – – – 13,224 8,910 3,274 5,636 37,525 7,675 764 709
(i) | Petroleum revenue from Group production includes: crude oil US$8,645 million (2013: US$7,604 million), natural gas US$3,119 million (2013: US$2,842 million), LNG US$1,614 million (2013: US$1,686 million), NGL US$916 million (2013: US$823 million) and other US$102 million (2013: US$76 million). |
(ii) | Includes inter-segment revenue of US$262 million (2013: US$ nil). |
(iii) | Capital expenditure in aggregate comprises Petroleum US$5,600 million growth and US$279 million other (2013: US$6,883 million growth and US$184 million other) and Potash US$533 million growth and US$11 million other (2013: US$597 million growth and US$11 million other). |
(iv) | Includes US$231 million of Petroleum capitalised exploration (2013: US$153 million). |
(v) | Includes US$128 million of Petroleum exploration expenditure previously capitalised, written off as impaired (included in depreciation and amortisation) (2013: US$98 million). |
(vi) | Includes an expense of US$143 million incurred in May 2014 related to the purchase price adjustment for the Browse asset sale completed in the 2013 financial year. |
(vii) | Includes an expense of US$112 million incurred in November 2013 related to the closure of the UK pension plan. Also includes a gain of US$120 million related to the sale of the Liverpool Bay asset in March 2014. |
(viii) | Includes Macedon, Pyrenees, Stybarrow, Neptune, Minerva, Angostura, Genesis, Pakistan, divisional activities, business development and ceased and sold operations. Also includes the Caesar oil pipeline and the Cleopatra gas pipeline which are equity accounted investments and are reported on a proportionate consolidation basis (with the exception of net operating assets). |
(ix) | Includes an unrealised gain of US$74 million related to Angostura embedded derivative (2013: US$84 million unrealised loss). |
(x) | Includes closed mining and smelting operations in Canada and the United States. |
(xi) | Includes statutory adjustments for the Caesar oil pipeline and the Cleopatra gas pipeline to reconcile the proportionately consolidated business total to the statutory result. |
Year ended 30 June 2013 compared with year ended 30 June 2012
Petroleum production increased by six per cent in FY2013, to 236 million barrels of oil equivalent (MMboe) for FY2011, the fourth consecutive increase in annual petroleum production. BHP(BHP Billiton brought the first new deepwater well intoshare) and included strong performance from Onshore US, which delivered 99 MMboe (BHP Billiton share). The Eagle Ford area contributed 33 per cent of total Onshore US production since the Gulf of Mexico moratorium was enacted in May 2010 and this important milestone, achievedto become Petroleum’s largest producing field at the BHP Billiton operated Shenzi field (US), followed previous regulatory approvalsend of the period.
Petroleum and Potash revenue increased by US$291 million to US$13.2 billion in FY2013. Revenue for water injection and production well drilling.
Underlying EBIT ofOnshore US grew by US$6,330818 million representedto US$3.0 billion, an increase of US$1,757 million or 38.437.7 per cent when compared with the prior period. Higher average realised prices were a major contributor to thecent. The increase in Underlying EBIT (US$1,521 million, net of price-linked costs) and reflectedrevenue in Onshore US resulted from higher volumes, which grew by 15.9 per cent. The increase in volume included a 2876 per cent increase in oil prices to US$93.29 per bbl,higher value liquids production and a 22seven per cent increase in realised liquefied natural gas pricesproduction. Increases in revenue at Mad Dog of US$276 million, with recommencement of operations during the year, and an increase at North West Shelf of US$203 million, due to US$11.03higher LNG sales, were partially offset by reductions in our other assets, primarily due to natural field decline at our operated Australian oil and gas assets.
The average realised price of natural gas across our portfolio increased by 11 per thousand standard cubic feet (scf), andcent in FY2013 to US$3.76 per Mscf. This included a 17 per cent increase in the average realised price of US natural gas prices to US$4.003.29 per thousand scf . BHP Billiton’s operating capabilityMscf. The average realised price of LNG also increased during the period, rising by four per cent to US$14.82 per Mscf. These gains were partially offset by a four per cent decrease in the average realised price of oil to US$106 per barrel. The average realised price of natural gas liquids (NGLs) was further underscoredUS$45.70 per barrel.
Petroleum and Potash Underlying EBIT for FY2013 declined by the success of Pyrenees althoughUS$397 million to US$5.6 billion. Petroleum’s Underlying EBIT decreased by US$363 million to US$6.0 billion. The natural field decline worldwide wasat our Australian assets and the negative contribution of Onshore US contributed to a US$526 million volume related reduction in Underlying EBIT. A series of charges, which included Onshore US drill rig contract termination costs and an impairment that followed the suspension of studies and re-evaluation of alternative development options associated with the Mad Dog Phase 2 project, reduced Underlying EBIT by a further impacted by the deferral ofUS$160 million. In contrast, a US$126 million reduction in exploration and business development expense reflected our sharpened focus on high volume wellsvalue oil and gas prospects in the Gulf of Mexico.Mexico and offshore Western Australia.
Gross exploration spendThe Onshore US Underlying EBIT was a loss of US$557287 million compared with a loss of US$140 million in FY2012. The FY2013 loss included a charge for the drill rig termination costs of US$77 million. The FY2012 loss included a gain of US$192 million associated with legacy US gas derivatives. Adjusting for the gains and losses, the loss in Underlying EBIT reduced year-over-year. The reduced loss was primarily due to increased volumes and prices partially offset by higher depreciation and amortisation of US$355 million and higher transportation costs due to higher volumes.
Capital expenditure for our conventional and unconventional operations totalled US$7.1 billion in FY2013. This included US$4.7 billion in Onshore US drilling and development expenditure, with over 80 per cent of drilling activity directed towards the Eagle Ford and Permian areas. While still in its early stages, the Permian evaluation program continues to deliver encouraging results, as demonstrated by the 1 MMboe produced in FY2013.
Petroleum exploration expenditure for FY2013 was US$675 million, of which US$522 million was similarly impacted, although an increaseexpensed.
The Potash Business is not in seismic acquisitionproduction and processing partiallyhad a loss, in Underlying EBIT terms, for FY2013 of US$334 million, which was largely unchanged from the prior period. A reduction in our global potash exploration activity was offset by higher costs associated with the decreaseestablishment of our Potash Business in drilling activity. Recommencement of development drilling at Atlantis (US) is still pending although a step out exploration well at Mad Dog (US) is currently underway.
From a longer-term perspective, the growth potential of the Petroleum business has been significantly enhanced by the acquisition of onshore US shale gas resources while organic growth projects, such as the Macedon gas project (Australia), continue to move through the execution phase.Saskatchewan (Canada).
2.5.7 Copper Business
Year ended 30 June 20102014 compared with year ended 30 June 20092013
Total productionAn analysis of the financial performance of our Copper Business for FY2014 compared to FY2013 is included in section 1.12.3.
Financial information for the year of 159 MMboe was a full year production recordCopper Business for FY2014 and an increase of 21 MMboe. The 15 per cent increase in production reflected strong performance from BHP Billiton operated Shenzi (US) and Pyrenees (Australia), the latter being delivered on schedule during the period. In addition, improved reservoir performance from Atlantis (US) and an absence of weather related interruptions supported such strong production.FY2013 is presented below.
Underlying EBIT was US$4,573 million, an increase of US$488 million, or 11.9 per cent, from FY2009. The increase was primarily due to higher production as noted and higher realised oil prices, which averaged US$73.05 per bbl for the year (compared with US$66.18 per bbl). The major offsets were a lower average realised natural gas price of US$3.43 per thousand scf (compared with US$3.57 per thousand scf) and a lower average realised liquefied natural gas price of US$9.07 per thousand scf (compared with US$12.07 per thousand scf)
Year ended 30 June 2014 US$ million | Revenue | Underlying EBITDA | D&A | Underlying EBIT | Net operating assets | Capital expenditure (i) | Exploration gross | Exploration to profit | ||||||||||||||||||||||||
Escondida (ii) | 8,085 | 4,754 | 760 | 3,994 | 11,779 | 3,186 | ||||||||||||||||||||||||||
Pampa Norte (iii) | 1,796 | 785 | 429 | 356 | 2,575 | 336 | ||||||||||||||||||||||||||
Antamina (iv) | 1,261 | 818 | 84 | 734 | 1,341 | 262 | ||||||||||||||||||||||||||
Cannington | 1,079 | 459 | 47 | 412 | 234 | 60 | ||||||||||||||||||||||||||
Olympic Dam | 1,777 | 299 | 265 | 34 | 6,320 | 167 | ||||||||||||||||||||||||||
Other (iv)(v) | 101 | (193 | ) | 7 | (200 | ) | (18 | ) | 13 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
Total Copper from Group production | 14,099 | 6,922 | 1,592 | 5,330 | 22,231 | 4,024 | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
Third party products | 1,030 | 8 | – | 8 | – | – | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total Copper | 15,129 | 6,930 | 1,592 | 5,338 | 22,231 | 4,024 | 118 | 118 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Statutory adjustments(vi) | (1,261 | ) | (344 | ) | (86 | ) | (258 | ) | – | (267 | ) | (2 | ) | (2 | ) | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total Copper statutory result | 13,868 | 6,586 | 1,506 | 5,080 | 22,231 | 3,757 | 116 | 116 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended 30 June 2013 (Republished) US$ million | Revenue | Underlying EBITDA | D&A | Underlying EBIT | Net operating assets | Capital expenditure (i) | Exploration gross | Exploration to profit | ||||||||||||||||||||||||
Escondida(ii) | 8,596 | 5,175 | 649 | 4,526 | 9,450 | 2,859 | ||||||||||||||||||||||||||
Pampa Norte (iii) | 1,913 | 841 | 291 | 550 | 2,643 | 348 | ||||||||||||||||||||||||||
Antamina(iv) | 1,295 | 901 | 80 | 821 | 1,311 | 326 | ||||||||||||||||||||||||||
Cannington | 1,365 | 646 | 40 | 606 | 206 | 39 | ||||||||||||||||||||||||||
Olympic Dam | 1,873 | 245 | 249 | (4 | ) | 6,418 | 399 | |||||||||||||||||||||||||
Other (iv)(v) | 90 | (554 | ) | 19 | (573 | ) | 46 | 289 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
Total Copper from Group production | 15,132 | 7,254 | 1,328 | 5,926 | 20,074 | 4,260 | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
Third party products | 700 | 3 | – | 3 | – | – | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total Copper | 15,832 | 7,257 | 1,328 | 5,929 | 20,074 | 4,260 | 277 | 277 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Statutory adjustments(vi) | (1,295 | ) | (372 | ) | (82 | ) | (290 | ) | – | (330 | ) | (3 | ) | (3 | ) | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total Copper statutory result | 14,537 | 6,885 | 1,246 | 5,639 | 20,074 | 3,930 | 274 | 274 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(i) | Capital expenditure in aggregate comprises US$2,629 million growth and US$1,128 million other (2013: US$2,167 million growth and US$1,763 million other). |
(ii) | Escondida is consolidated under IFRS 10 and reported on a 100 per cent basis. |
(iii) | Includes Spence and Cerro Colorado. |
(iv) | Antamina and Resolution are equity accounted investments and are reported on a proportionate consolidation basis (with the exception of net operating assets). |
Gross exploration expenditure was US$817 million, US$269 million higher than FY2009 resulting primarily from increased drilling activity in the Gulf of Mexico (US), Canada, Malaysia, the Falklands and the Philippines. Several exploration wells were not commercial and resulted in the increase in exploration expense of US$163 million (US$563 million compared with US$400 million in FY2009).
(v) | Predominantly comprises divisional activities, greenfield exploration, business development and ceased and sold operations. Includes Pinto Valley and Resolution. Pinto Valley was sold effective 11 October 2013. |
(vi) | Includes statutory adjustments for Antamina and Resolution to reconcile the proportionately consolidated business total to the statutory result. Statutory Underlying EBIT includes net finance costs of US$4 million and taxation of US$254 million (2013: net finance costs of US$ nil and taxation of US$290 million). |
Drilling activities at Atlantis and Shenzi ceased during the June 2010 quarter based on the drilling moratorium then in place in the deepwater Gulf of Mexico. We continued to monitor and assess the impact of the suspension of certain permitting and drilling activities.
All other drilling operations outside of the Gulf of Mexico progressed as planned. Underlying EBIT was impacted by a US$59 million charge related to idle rig time in the Gulf of Mexico for BHP Billiton controlled rigs. This was part of BHP Billiton’s ongoing management of rig contracts, which included negotiating revised terms for the rigs during the moratorium to provide BHP Billiton with continued access to the rigs and experienced crews when the moratorium ceases.
Aluminium
Year ended 30 June 20112013 compared with year ended 30 June 20102012
The ongoing ramp-up ofCopper production increased by 10 per cent in FY2013 to 1.7 Mt. Escondida copper production increased by 28 per cent to 1.1 Mt (100 per cent basis) as the Alumar refinery (Brazil)average copper grade mined rose to 1.4 per cent and milling rates improved. Record annual copper production at Antamina also contributed to the strong result having benefited from a sevenfull-year contribution from the recently expanded concentrator.
Copper revenue increased by US$984 million to US$14.5 billion, largely driven by production increases at Escondida, partially offset by a five per cent decrease in average realised copper prices. Revenue for Escondida increased to US$8.6 billion due to the 28 per cent increase in total alumina production, for FY2011. Metal production remained largely unchanged with all operations running at or close to technical capacity.
Underlying EBIT was US$266 million, a decrease of US$140 million, or 34.5 per cent, when compared with the corresponding period. Higher pricesdriven by higher average copper grades mined and premia for aluminium had a favourable impact of US$559 million (net of price-linked costs), but were largelyimproved milling rates partially offset by a US$519 millionlower average realised prices. This increase was partially offset by decreases at Pampa Norte , Cannington and Olympic Dam in costs largely associatedline with the devaluation of the US dollar, inflationlower production and rising raw material and energy costs. lower average realised prices.
The average realised aluminium price increasedof copper for the period declined by 19five per cent to US$2,5153.41 per tonne, while the average realised alumina price rose 21pound.
Underlying EBIT for FY2013 increased by US$326 million to US$5.6 billion. Increased sales volumes and operating cash cost savings associated with productivity gains and broader economies of scale increased Underlying EBIT by US$1.1 billion. In this context, strong production growth and a material reduction in operating cash costs contributed to a 15 per cent to US$342 per tonne.reduction in unit cash costs at Escondida. In contrast, the external influences of lower prices, inflation and foreign exchange variations reduced Underlying EBIT was unfavourably impactedby US$808 million. Payments associated with major planned maintenance programs at Escondida reduced Underlying EBIT by a provision relatedfurther US$103 million.
Revenue for Olympic Dam decreased by US$273 million to indirect taxesUS$1.9 billion, primarily due to lower prices and reduced volumes. Price, grade and smelter availability contributed to the decrease in FY2011.Underlying EBIT from US$214 million in FY2012 to an Underlying EBIT loss of US$4 million in FY2013.
The US$2,995 million (BHP Billiton share) Worsley Efficiency and Growth Project (Australia) will confirm Worsley as one of the world’s leading alumina refineries. The investment will raise capacity at the refinery by 1.1 mtpa to 4.6 mtpa (100 per cent basis) and first production is now scheduled for the first quarter of CY2012.2.5.8 Iron Ore Business
Year ended 30 June 20102014 compared with year ended 30 June 20092013
Total aluminaAn analysis of the financial performance of our Iron Ore Business for FY2014 compared to FY2013 is included in section 1.12.4.
Financial information for the Iron Ore Business for FY2014 and FY2013 is presented below.
Year ended 30 June 2014 US$ million | Revenue (i) | Underlying EBITDA | D&A | Underlying EBIT | Net operating assets | Capital expenditure (ii) | Exploration gross(iii) | Exploration to profit (iv) | ||||||||||||||||||||||||
Western Australia | 21,013 | 12,988 | 1,429 | 11,559 | 22,278 | 2,947 | ||||||||||||||||||||||||||
Samarco(v) | 1,634 | 846 | 56 | 790 | 1,072 | 424 | ||||||||||||||||||||||||||
Other(vi) | – | (54 | ) | – | (54 | ) | 40 | – | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
Total Iron Ore from Group production | 22,647 | 13,780 | 1,485 | 12,295 | 23,390 | 3,371 | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
Third party products(vii) | 343 | (3 | ) | – | (3 | ) | – | – | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total Iron Ore | 22,990 | 13,777 | 1,485 | 12,292 | 23,390 | 3,371 | 169 | 56 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Statutory adjustments(viii) | (1,634 | ) | (246 | ) | (56 | ) | (190 | ) | – | (422 | ) | – | – | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total Iron Ore statutory result | 21,356 | 13,531 | 1,429 | 12,102 | 23,390 | 2,949 | 169 | 56 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended 30 June 2013 (Republished) US$ million | Revenue (i) | Underlying EBITDA | D&A | Underlying EBIT | Net operating assets | Capital expenditure (ii) | Exploration gross(iii) | Exploration to profit (iv) | ||||||||||||||||||||||||
Western Australia | 18,452 | 11,668 | 1,004 | 10,664 | 21,074 | 5,979 | ||||||||||||||||||||||||||
Samarco(v) | 1,622 | 811 | 61 | 750 | 1,037 | 772 | ||||||||||||||||||||||||||
Other(vi) | – | (84 | ) | – | (84 | ) | 15 | – | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
Total Iron Ore from Group production | 20,074 | 12,395 | 1,065 | 11,330 | 22,126 | 6,751 | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
Third party products(vii) | 141 | 31 | – | 31 | – | – | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total Iron Ore | 20,215 | 12,426 | 1,065 | 11,361 | 22,126 | 6,751 | 217 | 74 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Statutory adjustments(viii) | (1,622 | ) | (313 | ) | (61 | ) | (252 | ) | – | (772 | ) | – | – | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total Iron Ore statutory result | 18,593 | 12,113 | 1,004 | 11,109 | 22,126 | 5,979 | 217 | 74 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(i) | Includes inter-segment revenue of US$213 million (2013: US$55 million). |
(ii) | Capital expenditure in aggregate comprises US$2,762 million growth and US$187 million other (2013: US$5,848 million growth and US$131 million other). |
(iii) | Includes US$57 million capitalised exploration (2013: US$143 million). |
(iv) | Includes a reversal of US$56 million of exploration expenditure previously written off as impaired (included in depreciation and amortisation) (2013: US$ nil). |
(v) | Samarco is an equity accounted investment and is reported on a proportionate consolidation basis (with the exception of net operating assets). |
(vi) | Predominantly comprises divisional activities, business development and ceased operations. |
(vii) | Includes inter-segment and external sales of contracted gas purchases. |
(viii) | Includes statutory adjustments for Samarco to reconcile the proportionately consolidated business total to the statutory result. Statutory Underlying EBIT includes net finance costs of US$87 million and taxation of US$103 million (2013: net finance costs of US$25 million and taxation of US$227 million). |
Year ended 30 June 2013 compared with year ended 30 June 2012
Iron ore production increased by seven per cent in FY2013 to 170 Mt (BHP Billiton share). WAIO production of 3,841 kt in FY2010 decreased from 4,396 kt in FY2009 mainly attributable to lower production as a result of the sale of Suriname on 31 July 2009. Aluminium smelter production increased from 1,233 kt in FY2009 to 1,241 kt in FY2010 as a result of the amperage increases at the Aluminium operations in southern Africa.
Underlying EBIT was US$406 million, an increase of US$214 million, or 111.5187 Mt (100 per cent from FY2009. Higher pricesbasis) represented a thirteenth consecutive annual production record. The delivery of WAIO’s capital efficient growth program and premiacontinued strong operating performance across the supply chain contributed to this record result. The three pellet plants at Samarco continued to operate at capacity during the period.
Iron Ore revenue decreased by US$2.0 billion to US$18.6 billion in FY2013. Revenue for aluminium hadWAIO decreased US$2.0 billion to US$18.5 billion, a favourable impactdecrease of US$253 million that was partially9.9 per cent. Record sales volumes at WAIO, which increased 9.6 per cent, were more than offset by a US$19 million unfavourable impact of price-linked costs. The17 per cent fall in the average LME aluminium price increased to US$2,018 per tonne compared with FY2009’srealised price of iron ore to US$1,862 per tonne. The average realised alumina prices was US$291110 per tonne.
Underlying EBIT excludes exceptionalfor FY2013 declined by US$2.9 billion to US$11.1 billion. The increased sales volumes at WAIO increased Underlying EBIT by US$1.5 billion. However, this was more than offset by the fall in the average realised price of iron ore, which reduced Underlying EBIT by US$3.6 billion, net of price-linked costs. WAIO’s export volumes for FY2013 were sold on the basis of shorter term, market-based prices. Revenue for FY2013 reflected the average index price one month prior to the month of shipment, adjusted for product characteristics such as iron and moisture content. Approximately 65 per cent of shipments were delivered on a Cost and Freight (CFR) basis.
Increased operating cash costs associated with labour and contractor costs were the main contributor to the reduction in Underlying EBIT of US$405 million during FY2013. This largely reflected our decision to invest in operating capability prior to the full commissioning and ramp-up of expanded capacity at WAIO. WAIO unit cash costs, including freight and royalty charges of US$527856 million relatingand US$1.2 billion, respectively, remained largely unchanged during FY2013.
2.5.9 Coal Business
Year ended 30 June 2014 compared with year ended 30 June 2013
An analysis of the financial performance of our Coal Business for FY2014 compared to impairments (US$298 million)FY2013 is included in section 1.12.5.
Financial information for the Coal Business for FY2014 and FY2013 is presented below.
Year ended 30 June 2014 US$ million | Revenue | Underlying EBITDA | D&A | Underlying EBIT | Net operating assets | Capital expenditure (i) | Exploration gross | Exploration to profit | ||||||||||||||||||||||||
Queensland Coal | 4,666 | 949 | 514 | 435 | 9,115 | 1,790 | ||||||||||||||||||||||||||
Illawarra(ii) | 886 | 131 | 170 | (39 | ) | 1,384 | 309 | |||||||||||||||||||||||||
Energy Coal South Africa (ii) | 1,279 | 315 | 485 | (170 | ) | 989 | 65 | |||||||||||||||||||||||||
New Mexico | 520 | 105 | 46 | 59 | 202 | 26 | ||||||||||||||||||||||||||
New South Wales Energy Coal (ii) | 1,350 | 324 | 150 | 174 | 1,392 | 170 | ||||||||||||||||||||||||||
Colombia (ii) | 814 | 305 | 85 | 220 | 1,037 | 133 | ||||||||||||||||||||||||||
Other (iii) | – | (166 | ) | 2 | (168 | ) | 162 | 34 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
Total Coal from Group production | 9,515 | 1,963 | 1,452 | 511 | 14,281 | 2,527 | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
Third party products | 456 | 18 | – | 18 | 19 | – | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total Coal | 9,971 | 1,981 | 1,452 | 529 | 14,300 | 2,527 | 34 | 34 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Statutory adjustments (iv) | (856 | ) | (264 | ) | (121 | ) | (143 | ) | – | (182 | ) | – | – | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total Coal statutory result | 9,115 | 1,717 | 1,331 | 386 | 14,300 | 2,345 | 34 | 34 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended 30 June 2013 (Republished) US$ million Queensland Coal Illawarra (ii) Energy Coal South Africa (ii) New Mexico New South Wales Energy Coal (ii) Colombia (ii) Other (iii) Total Coal from Group production Third party products Total Coal Statutory adjustments (iv) Total Coal statutory result Revenue Underlying
EBITDA D&A Underlying
EBIT Net
operating
assets Capital
expenditure (i) Exploration
gross Exploration
to profit 4,452 627 376 251 7,988 2,771 1,287 311 148 163 1,238 357 1,457 177 211 (34 ) 1,334 133 588 95 49 46 164 28 1,526 314 120 194 1,372 366 828 307 65 242 997 265 – (158 ) 2 (160 ) 111 85 10,138 1,673 971 702 13,204 4,005 585 44 – 44 21 – 10,723 1,717 971 746 13,225 4,005 42 42 (828 ) (237 ) (86 ) (151 ) – (379 ) (3 ) (3 ) 9,895 1,480 885 595 13,225 3,626 39 39
(i) | Capital expenditure in aggregate comprises US$1,563 million growth and US$782 million other (2013: US$2,898 million growth and US$728 million other). |
(ii) | Cerrejón, Newcastle Coal Infrastructure Group, Port Kembla Coal Terminal and Richards Bay Coal Terminal are equity accounted investments and are reported on a proportionate consolidation basis (with the exception of net operating assets). |
(iii) | Predominantly comprises divisional activities and greenfield projects. |
(iv) | Includes statutory adjustments for Cerrejón, Newcastle Coal Infrastructure Group, Port Kembla Coal Terminal and Richards Bay Coal Terminal to reconcile the proportionately consolidated business total to the statutory result. Statutory Underlying EBIT includes net finance income of US$1 million and taxation of US$81 million (2013: net finance income of US$1 million and taxation of US$99 million). |
Year ended 30 June 2013 compared with year ended 30 June 2012
Metallurgical coal production increased by 13 per cent in FY2013 to 38 Mt. A 19 per cent increase (100 per cent basis) in production at Queensland Coal was underpinned by record annual performance at both Peak Downs and South Walker Creek, and this was achieved despite the renegotiationindefinite closure of long-term power contracts (US$229 million). Refer section 3.6.6Norwich Park and Gregory. In addition, Illawarra Coal achieved record annual production in FY2013.
Energy coal production increased by two per cent in FY2013 to 72 Mt, which included record annual production from New South Wales Energy Coal following the successful ramp-up of the RX1 project.
Coal revenue for details.FY2013 decreased by US$2.6 billion to US$9.9 billion. Revenue at Queensland Coal decreased US$1.4 billion to US$4.5 billion, a decrease of 24.2 per cent. Volume increases at Queensland Coal were more than offset by the effect of decreases in average realised prices. Hard coking coal and weak coking coal prices fell 34 per cent and 31 per cent, respectively. Revenue at Energy Coal South Africa (BECSA) decreased by US$437 million reflecting reduced production and decreased thermal coal prices, which fell 18 per cent during FY2013. Revenue at New South Wales Energy Coal and New Mexico Coal were in line with FY2012, with volume increases offset by reduced thermal coal prices.
Overall, operating costs were lower mainly dueUnderlying EBIT for FY2013 declined by US$2.0 billion to US$595 million. The fall in hard coking coal, weak coking coal and thermal coal prices, reduced raw materials and energyUnderlying EBIT by US$3.2 billion, net of price-linked costs. This was partially offset by a weaker US dollar against the Australian dollarincreased sales volumes, operating cash cost savings and South African randreduced exploration and inflationary pressures in Australia, South Africa and Brazil.
business development expenses, which increased Underlying EBIT was favourably impacted by US$68 million1.7 billion. A strong focus on contractor usage and rates and a significant reduction in consumables expenditure contributed to the substantial reduction in operating costs at Queensland Coal, as a resultdemonstrated by the 30 per cent decline in mine site unit cash costs at BMA.
During FY2013, the Daunia and Broadmeadow Life Extension projects (both Australia) delivered first production, ahead of the divestment of Suriname on 31 July 2009.schedule.
Base Metals
2.5.10 Aluminium, Manganese and Nickel Business
Year ended 30 June 20112014 compared with year ended 30 June 20102013
Copper production increased during FY2011 as Olympic Dam (Australia) reported annual material minedAn analysis of the financial performance of our Aluminium, Manganese and milling records. Strong operating performance was similarly reported at Pampa Norte (Chile) and Antamina (Peru), where record annual milling rates mitigated the impact of lower grades. Total copper cathode production represented another recordNickel Business for FY2014 compared to FY2013 is included in section 1.12.6.
Financial information for the period.Aluminium, Manganese and Nickel Business for FY2014 and FY2013 is presented below.
Underlying EBIT for FY2011 increased by US$2,158 million, or 46.6 per cent, to US$6,790 million. Higher average realised prices for all of our core products favourably impacted Underlying EBIT by US$3,348 million (net of price-linked costs). The supportive pricing environment was similarly reflected in a number of our key input costs with higher energy, fuel and contractor costs the major offset. The devaluation of the US dollar and inflation reduced Underlying EBIT by US$418 million. In addition, BHP Billiton refined the basis on which the metal content of its leach pads is estimated at Escondida (Chile) and Pampa Norte, which resulted in a non-cash reduction in Underlying EBIT of US$168 million.
Year ended 30 June 2014 US$ million | Revenue (i) | Underlying EBITDA | D&A | Underlying EBIT | Net operating assets | Capital expenditure (ii) | Exploration gross (iii) | Exploration to profit (iv) | ||||||||||||||||||||||||
Alumina | 1,548 | 217 | 202 | 15 | 4,454 | 60 | ||||||||||||||||||||||||||
Aluminium | 2,398 | 178 | 145 | 33 | 1,790 | 41 | ||||||||||||||||||||||||||
Intra-divisional adjustment | (659 | ) | – | – | – | – | – | |||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
3,287 | 395 | 347 | 48 | 6,244 | 101 | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
Manganese | 2,096 | 639 | 163 | 476 | 1,613 | 178 | ||||||||||||||||||||||||||
Nickel West | 1,605 | (91 | ) | 117 | (208 | ) | 534 | 163 | ||||||||||||||||||||||||
Cerro Matoso | 595 | 104 | 94 | 10 | 860 | 56 | ||||||||||||||||||||||||||
Other (v) | – | (36 | ) | 1 | (37 | ) | 71 | – | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
Total Aluminium, Manganese and Nickel from Group production | 7,583 | 1,011 | 722 | 289 | 9,322 | 498 | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
Third party products | 828 | 18 | – | 18 | – | – | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
Total Aluminium, Manganese and Nickel | 8,411 | 1,029 | 722 | 307 | 9,322 | 498 | 44 | 38 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Statutory adjustments | – | – | – | – | – | – | – | – | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total Aluminium, Manganese and Nickel statutory result | 8,411 | 1,029 | 722 | 307 | 9,322 | 498 | 44 | 38 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended 30 June 2013 (Republished) US$ million Alumina Aluminium Intra-divisional adjustment Manganese Nickel West Cerro Matoso Other (v) Total Aluminium, Manganese and Nickel from Group production Third party products Total Aluminium, Manganese and Nickel Statutory adjustments Total Aluminium, Manganese and Nickel statutory result At 30 June 2011, the Group had 239,156 tonnes of outstanding copper sales that were revalued at a weighted average price of US$4.25 per lb. The final price of these sales will be determined in FY2012. In addition, 236,584 tonnes of copper sales from FY2010 were subject to a finalisation adjustment in FY2011. The finalisation adjustment and provisional pricing impact increased Underlying EBIT by US$650 million for the period. Revenue (i) Underlying
EBITDA D&A Underlying
EBIT Net
operating
assets Capital
expenditure (ii) Exploration
gross(iii) Exploration
to profit (iv) 1,422 114 239 (125 ) 3,844 157 2,620 88 127 (39 ) 2,154 27 (638 ) – – – – – 3,404 202 366 (164 ) 5,998 184 2,113 623 116 507 1,658 375 1,773 (104 ) 210 (314 ) 123 280 803 235 79 156 955 50 – (79 ) (14 ) (65 ) 75 4 8,093 877 757 120 8,809 893 1,185 38 – 38 – – 9,278 915 757 158 8,809 893 57 53 – – – – – – – – 9,278 915 757 158 8,809 893 57 53
(i) | Includes inter-segment revenue of US$5 million (2013: US$20 million). |
BHP Billiton’s Base Metals business is characterised by its large, tier one resource position and its numerous options for growth. In that context, a combined investment of US$492 million (BHP Billiton share) was approved during the period for the Escondida Ore Access and Laguna Seca Debottlenecking projects (Chile). The quality of the Base Metals investment pipeline was further emphasised by the progression of both the Escondida Organic Growth Project (OGP1) and the Olympic Dam Project (ODP1) development options into feasibility.
(ii) | Capital expenditure in aggregate comprises US$43 million growth and US$455 million other (2013: US$285 million growth and US$608 million other). |
(iii) | Includes US$6 million capitalised exploration (2013: US$8 million). |
(iv) | Includes US$ nil exploration expenditure previously capitalised, written off as impaired (included in depreciation and amortisation) (2013: US$4 million). |
(v) | Predominantly comprises divisional activities and business development. |
Year ended 30 June 20102013 compared with year ended 30 June 20092012
An increase in zincAlumina production of 21.5 per cent, or 198.3 kt, compared with FY2009 was due to higher plant throughput and utilisation and higher grades at Antamina (Peru) and Cannington (Australia). Attributable uranium production at Olympic Dam (Australia) was 2,279 tonnes for the period compared with 4,007 tonnes for FY2009 due to the Clark Shaft outage. Silver production was 45.4 million ounces compared with 41.3 million ounces in FY2009. Lead production was 248.4 kt compared with 230.1 kt in FY2009.
Payable copper production was primarily impactedincreased by the Olympic Dam Clark shaft outage and industrial action at Spence (Chile). During the second quarter of FY2010, the haulage system in the Clark Shaft at Olympic Dam was damaged. Ore hoisting operated at approximately 25 per cent of capacity until the fourth quarter of FY2010. The incident impacted earnings by US$455 million, but was partially offset by insurance recoveries of US$297 million. The recommissioning of Olympic Dam’s Clark Shaft occurred during the final quarter of FY2010 and was returned to full production. Payable copper production was also impacted by the cessation of sulphide mining at Pinto Valley (US) following the decision to place the Pinto Valley operation in a state of care and maintenance in FY2009. This was partly offset by higher grade and recovery at Escondida and the earlier than planned completion of the SAG mill repairs in the Laguna Seca Concentrator plant.
Underlying EBIT was US$4,632 million, an increase of US$3,340 million, or 258.5 per cent, from FY2009. This increase was predominantly attributable to higher prices for all key commodities in Base Metals, except uranium. The LME price for copper averaged US$3.04 per lb compared with US$2.23 per lb in FY2009, or an increase of 36.3 per cent. The impact of higher prices for copper, zinc, lead and silver in FY2010 contributed US$3,977 million to the Underlying EBIT increase. Lower sales volumes reduced Underlying EBIT by US$117 million.
Underlying EBIT excludes exceptional gains of US$186 million in relation to Pinal Creek. Refer section 3.6.6 for details.
Higher costs were incurred during FY2009, mostly due to the Clark Shaft incident at Olympic Dam (Australia) and higher labour costs, including one-off bonus payments from collective labour negotiations completed FY2009 in the South American operations. The effect of inflation and the weaker US dollar against the Australian dollar and the Chilean peso had also impacted negatively. Higher costs was partially mitigated by lower business development costs resulting from the decision to scale back Olympic Dam Expansion project activity in line with completion of feasibility studies and required approvals.
At 30 June 2010, the Group had 236,584 tonnes of outstanding copper sales that were revalued at a weighted average price of US$2.96 per lb. The final price of these sales have been determined in FY2011. In addition, 234,871 tonnes of copper sales from FY2009 were subject to a finalisation adjustment in FY2010. The finalisation adjustment and provisional pricing impact as at 30 June 2010 increased earnings by US$303 million for FY2010.
Diamonds and Specialty Products
Year ended 30 June 2011 compared with year ended 30 June 2010
EKATI (Canada) diamond production for FY2011 was 2.5 million carats, an 18 per cent decreasein FY2013 to a record 4.9 Mt (BHP Billiton share), underpinned by the ramp-up of the Efficiency and Growth project at Worsley. Aluminium production increased by two per cent to 1.2 Mt (BHP Billiton share), with improved performance at our southern African smelters.
Total manganese ore production increased by seven per cent in FY2013 to a record 8.5 Mt (100 per cent basis) and reflected a substantial improvement in plant availability at GEMCO (Australia). Total manganese alloy volumes were largely unchanged from FY2012. The recovery in TEMCO (Australia) production that followed the temporary suspension of operations in the prior period was offset by the permanent closure of energy-intensive silicomanganese production at Metalloys in January 2012.
Nickel production in FY2013 was largely unchanged from the prior period. BHP Billiton expectsStrong operating performance at Cerro Matoso was offset by planned maintenance at the Nickel West Kalgoorlie smelter and Kwinana refinery.
Aluminium, Manganese and Nickel revenue decreased by 6.4 per cent, or US$633 million, to US$9.3 billion. The reduction was primarily due to decreases at Nickel West of US$270 million and from sales of third party products of US$398 million. The decrease in revenue was mainly driven by lower realised prices across all parts of the Business. In this context, lower average ore gradesrealised prices for aluminium (down six per cent to impact EKATI productionUS$2,191 per tonne), alumina (down nine per cent to US$302 per tonne), nickel (down 15 per cent to US$16,319 per tonne) and manganese alloy (down 10 per cent to US$1,051 per tonne) were only partially offset by an increase in the medium term, consistent with the mine plan.average realised price of manganese ore (up nine per cent to US$4.83 per dry metric tonne unit).
Underlying EBIT for the Diamonds and Specialty Products businessFY2013 increased by 21.0 per centUS$182 million to US$587158 million. Strong demand and a shortageWith productivity improvements already well advanced, consisting principally of rough diamonds resulted in higher prices, which increased Underlying EBIT by US$254 million. A 28 per cent increase in titanium prices added a further US$112 million to Underlying EBIT. Gross exploration expenditure was US$81 million, a decreasethe improvement plan at Worsley, substantial controllable cash cost savings of US$14442 million from the prior period. BHP Billiton continues to accelerate its potash exploration program in Saskatchewan, with a significant increase in activity planned at the Melville prospect in FY2012.
BHP Billiton’s goal of becoming a significant producer in the potash market took another important step forward in FY2011. The approval of a further US$488 million of pre-commitment fundingwere achieved during the Jansen Potash Project feasibility study phase will fund site preparation, the procurement of long lead time items and the sinking of the first 350 metres of the production and service shafts.
Year ended 30 June 2010 compared with year ended 30 June 2009
EKATI diamond production was 3,050,000 carats,period, while a decrease of 5.3 per cent compared with FY2009, which reflected a higher proportion of ore sourced from Fox pit as mining of the higher grade Panda underground was completed during FY2010.
Underlying EBIT was US$485 million, an increase of US$340 million from FY2009. Strong operating earnings at EKATI (Canada) resulted from higher volumes and realised diamond prices and lower unit costs due to the continued emphasis on cost control. There was also a decrease in exploration expense of US$43 million, mainly due to reduced diamonds exploration activity. Potash exploration expenditure of US$73 million in Saskatchewan (Canada) was US$21 million lower as the exploration work program for Jansen was completed in FY2009. Higher diamond earnings was partially offset by the reduction in operating earnings in Titanium Minerals as a result of lower realised prices and higher energy costs.
Stainless Steel Materials
Year ended 30 June 2011 compared with year ended 30 June 2010
The Nickel West Kalgoorlie smelter (Australia) achieved record matte production during FY2011, while Cerro Matoso (Colombia) successfully progressed its planned furnace replacement into the commissioning phase.
Underlying EBIT decreased by US$80 million, or 12.0 per cent, to US$588 million for FY2011 as a weakerstronger US dollar impacted both operating costs and year-end balance sheet revaluations. In total, the weaker US dollar and inflation reduced Underlying EBIT by US$227 million. The planned loss of production at Cerro Matoso and the absence of stockpiled concentrate sales at Nickel West that benefited FY2010 decreased Underlying EBIT by a combined US$122 million. Underlying EBIT at Cerro Matoso was impacted by a further US$53 million due to a provision related to the Colombian net worth tax and additional royalty charges. In contrast, a 24 per cent rise in the LME nickel price for the period increased Underlying EBIT by approximately US$435 million (net of price-linked costs).
During the second half of FY2011, the Cerro Matoso Heap Leach project progressed into feasibility. The Nickel West Talc redesign project remains on schedule for expected commissioning in FY2012.
Year ended 30 June 2010 compared with year ended 30 June 2009
Nickel production was 176,200 tonnes in FY2010, a 1.8 per cent increase above 173,100 tonnes in FY2009. Production for FY2010 was a record performance at Nickel West (Australia) and attributable to the completion of the furnace rebuild at the Kalgoorlie Nickel Smelter (Australia) in FY2009 and the drawdown in FY2010 of the concentrate stocks that had accumulated since FY2009. Production from Cerro Matoso (Colombia) was in line with FY2009.
Underlying EBIT was US$668 million, an increase of US$1,522 million compared with FY2009. This was mainly due to higher average LME prices for nickel of US$8.81 per lb compared with US$6.03 per lb in FY2009. Higher prices (net of price-linked costs) increased Underlying EBIT by US$866 million.
Underlying EBIT excluded exceptional gains of US$653 million relating to the disposal of the Ravensthorpe nickel operations in FY2010. Refer section 3.6.5 for details.
Proactive portfolio restructuring and ongoing improvement at the operating level also contributed to the strong result in FY2010. Lower operational losses from Yabulu and Ravensthorpe in FY2010 increased Underlying EBIT by US$458 million.
The Kalgoorlie nickel smelter furnace rebuild and concurrent maintenance at the Kwinana nickel refinery (both Australia) in FY2009 set the platform for record total production at Nickel West in FY2010. Ongoing cost saving initiatives and lower labour costs were offset by the devaluation in the US dollar and inflation. Underlying EBIT also benefited from lower exploration and business development expenditure.
Iron Ore
Year ended 30 June 2011 compared with year ended 30 June 2010
BHP Billiton’s commitment to invest through all phases of the economic cycle delivered an eleventh consecutive annual production record in iron ore. Western Australia Iron Ore (WAIO) benefited from the dual tracking of the Company’s rail infrastructure, which has substantially increased overall system capability. WAIO shipments rose to a record annualised rate of 155 mtpa (100 per cent basis) in the June quarter of FY2011, confirming the successful ramp-up of recently expanded capacity.
Underlying EBIT increased by 122.1 per cent to US$13,328 million for FY2011 driven by record production and a significant improvement in iron ore prices. For the period, average realised iron ore prices increased Underlying EBIT by US$8,548 million following the important transition to shorter-term, landed, market-based pricing. The significant appreciation in product prices and the adjustment of WAIO royalty rates contributed to a significant increase in price-linked costs, which reduced Underlying EBIT by US$648 million. Broader inflationary pressures and the devaluation of the US dollar reduced Underlying EBIT by a further US$813 million, while non-cash depreciation also increased with the ramp-up of expanded iron ore capacity.
The investment approval for major projects totalling US$8,350 million (BHP Billiton share) in FY2011 highlighted the Company’s commitment to accelerate the development of its tier one, low-cost and expandable iron ore operations. BHP Billiton also243 million. In contrast, weaker markets continued to laychallenge the foundations for longer-term growthBusiness as lower average realised prices contributed to a US$474 million reduction in the WAIO business with the release of its Public Environmental Review/Draft Environmental Impact Statement that seeks Commonwealth and Western Australian Government approvals for the proposed development of an Outer Harbour facility in Port Hedland (Australia).
Year ended 30 June 2010 compared with year ended 30 June 2009
For FY2010, 39 per cent of WAIO shipments on a wet metric tonne (wmt) basis were priced on annually agreed terms, with the remainder sold on a shorter-term basis.
During the second half of FY2010, the annual benchmark pricing system was substantially replaced by shorter-term market-based, landed pricing. The expectation was that future WAIO shipments would continue to be priced on that basis.
Underlying EBIT, was US$6,001 million, a decreasenet of US$228 million, or 3.6 per cent, compared with FY2009 with record sales volumes as the major positive contributor. WAIO increased by six per cent to 113.4 million wmt and Samarco (Brazil) increased 42 per cent to 11.1 Mt, adding US$546 million to Underlying EBIT.price-linked costs.
Costs were unfavourably impacted by a weaker US dollar, general inflationary pressure and the ongoing ramp-up of Western Australia RGP4, which reduced Underlying EBIT by US$759 million. In addition, a provision that related to proposed amendments to the Western Australian State Agreements reduced Underlying EBIT by US$126 million.
Manganese
Year ended 30 June 2011 compared with year ended 30 June 2010
Record annual ore production and sales reflected a full year contribution from the GEMCO Expansion Phase 1 (GEEP1) project (Australia). Record annual sales were also achieved for manganese alloy as the business intensified its volume maximising strategy.
Underlying EBIT remained largely unchanged at US$697 million as stronger volumes and prices were offset by higher costs. Notably, controllable costs remained largely unchanged during the period, although the combined impact of a weaker US dollar and inflation reduced Underlying EBIT by US$186 million. Average realised ore and alloy prices increased by nine per cent and seven per cent respectively during FY2011.
After the successful commissioning of the GEEP1 project, the partners have approved the next phase of expansion that will confirm GEMCO’s status as the world’s largest and lowest-cost producer of manganese ore. The US$167 million (BHP Billiton share) GEEP2 project will increase GEMCO’s beneficiated product capacity from 4.2 mtpa to 4.8 mtpa (100 per cent basis). In addition, road and port capacity will increase to 5.9 mtpa, creating 1.1 mtpaexpansion at GEMCO delivered first production during FY2013, ahead of latent capacity for future expansion.schedule.
2.5.11 Cash flow analysis Year ended 30 June 20102014 compared with year ended 30 June 2009
Manganese alloy production at 583 kt was 13.6 per cent higher and manganese ore production at 6.1 Mt was 36.8 per cent higher when compared with FY2009.
Underlying EBIT was US$712 million, a decrease of US$637 million, or 47.2 per cent, from FY2009. The decrease was directly attributable to lower realised prices, which reduced Underlying EBIT by US$1,680 million. In comparison to FY2009, average realised prices for ore fell by 46 per cent and alloy prices fell by 43 per cent. Offsetting this was the positive impact of price-linked costs of US$261 million.
The decrease in realised prices was partially offset by a demand driven rise in sales volumes that increased Underlying EBIT by US$799 million. Local operating costs were well controlled throughout FY2010, although the impacts of inflation and a weaker US dollar mitigated any benefit.
All Manganese assets were running at full supply chain capacity at the endAn analysis of the June quartercash flow for FY2014 compared to FY2013 is included in FY2010.section 1.15.4.
Metallurgical Coal
Year ended 30 June 20112013 compared with year ended 30 June 2010
The remnant effects of wet weather that persisted for much of FY2011 continued to restrict our Queensland Coal business, despite an unrelenting focus on recovery efforts. Although Queensland Coal production did recover strongly in the June 2011 quarter, total metallurgical coal production declined by 13 per cent in FY2011.
Underlying EBIT was US$2,670 million, an increase of US$617 million, or 30.1 per cent, from the corresponding period. The increase was mainly attributable to the 48 per cent and 45 per cent improvement in average realised prices for hard coking coal and weak coking coal, respectively. In total, stronger prices increased Underlying EBIT by US$2,138 million, net of price-linked costs. Uncontrollable factors were the major contributor to a significant increase in operating costs. In that context, inflation and the weaker US dollar reduced Underlying EBIT by US$664 million, while the weather related disruption to production at Queensland Coal placed additional pressure on unit costs. We continue to expect production, sales and unit costs to be impacted, to some extent, for the remainder of CY2011.
In March 2011, BHP Billiton approved three major metallurgical coal projects located in the Bowen Basin. The projects are expected to add 4.9 Mt of annual capacity (100 per cent basis) through development of the Daunia operation and a new mining area at Broadmeadow (both Australia). In addition, 11 Mt of valuable port capacity (100 per cent basis) will be developed at the Hay Point Coal Terminal (Australia). The cumulative US$2,500 million (BHP Billiton share) investment sets the foundations for strong and sustainable metallurgical coal production growth that will be required to meet the growing needs of our customers.
Year ended 30 June 2010 compared with year ended 30 June 2009
Record annual sales volumes were delivered despite wet weather disruptions in Queensland (Australia) during the March quarter of FY2010. Production was 37.4 Mt in FY2010, an increase of 2.6 per cent compared with 36.4 Mt in FY2009. This increase was due to improved operational and supply chain performance, supported by strong demand.
Underlying EBIT was US$2,053 million, a decrease of US$2,658 million, or 56.4 per cent, from FY2009. The decrease was mainly due to lower realised prices for hard coking coal (34 per cent lower), weak coking coal (33 per cent lower) and thermal coal (11 per cent lower), partly offset by a reduction in price-linked costs.
The weaker US dollar and inflationary pressure had an unfavourable impact of US$632 million on Underlying EBIT despite operating costs being well controlled.
As with iron ore, the old benchmark system was substantially replaced by shorter-term market-based pricing. For FY2010, 34 per cent of metallurgical coal shipments were priced on a shorter-term basis. The majority of product sold in the June quarter of FY2010 was priced in this manner.
Energy Coal
Year ended 30 June 2011 compared with year ended 30 June 2010
Annual production and sales records for New South Wales Energy Coal (Australia) followed the successful commissioning and ramp-up of the MAC20 Project, while strong performance at South Africa Coal delivered a 13 per cent increase in annual production.
Underlying EBIT increased by 54.7 per cent to US$1,129 million in FY2011. The 31 per cent rise in average realised prices, which increased Underlying EBIT by US$917 million for the period, reflected a higher proportion of export sales as BHP Billiton continued to optimise its product mix in response to evolving market demand. Broad cost pressures were accentuated by an increase in cash and non-cash costs associated with the ramp-up of growth projects in Australia and South Africa. The weaker US dollar and inflation reduced Underlying EBIT by US$298 million, while a non-recurring charge related to the recognition of the Colombian net worth tax reduced Underlying EBIT by a further US$32 million. The dissolution of the Douglas Tavistock Joint Venture arrangement increased Underlying EBIT in the corresponding period by US$69 million.
The MAC20 Project was successfully completed during FY2011, ahead of schedule. The Company’s confidence in the outlook for demand in the Asia Pacific Basin was subsequently illustrated by the approval of the US$400 million RX1 Project (Australia) that is designed to get product to market rapidly, ahead of further coal preparation plant expansions. Further expansion of our world-class Cerrejón Coal operation (Colombia) to 40 mtpa (100 per cent basis) was approved by the partners in August 2011 and highlights the strong growth outlook for BHP Billiton’s Energy Coal business.
Year ended 30 June 2010 compared with year ended 30 June 2009
Production was 66.1 Mt in FY2010, in line with FY2009, due to the continued ramp-up of the Klipspruit (South Africa) expansion and record production at Mt Arthur (Australia). Weaker production at New Mexico Coal (US) reflected a downturn in demand from the power generators.
Underlying EBIT was US$730 million, a decrease of US$730 million, or 50.0 per cent, from FY2009. This decrease was mainly attributed to lower average export prices (net price impact US$459 million) and reduced earnings from trading activities (US$309 million). Export sales from BECSA and Mt Arthur increased due to higher demand from China and India, and offset the effects of reduced demand from the Atlantic market. Dissolution of the Douglas Tavistock Joint Venture arrangement favourably impacted Underlying EBIT in FY2010. Costs were well controlled other than the adverse impacts of the weakening US dollar (US$133 million) and inflation (US$70 million).
Group and unallocated items
This category represents corporate activities, including Group Treasury, Freight, Transport and Logistics operations.
Year ended 30 June 2011 compared with year ended 30 June 2010
The Underlying EBIT expense for Group and Unallocated decreased by US$136 million in FY2011 to US$405 million. The weaker US dollar and inflation had an unfavourable impact on Underlying EBIT of US$105 million. Self insurance claims related to the Clark Shaft incident at Olympic Dam reduced Underlying EBIT in the prior period by US$297 million.
Year ended 30 June 2010 compared with year ended 30 June 2009
Underlying EBIT was a loss of US$541 million compared with US$395 million in FY2009, an increase of US$146 million. Self insurance claims relating to the Clark shaft incident at Olympic Dam decreased Underlying EBIT by US$297 million. A weaker US dollar had an unfavourable impact on Underlying EBIT of US$140 million.
3.6.7 Third party sales
We differentiate sales of our production from sales of third party products due to the significant difference in profit margin earned on these sales. The table below shows the breakdown between our production and third party products.2012
Year ended 30 June(1) | 2011 | 2010 | 2009 | |||||||||
US$M | US$M | US$M | ||||||||||
Group production | ||||||||||||
Revenue | 67,903 | 48,193 | 44,113 | |||||||||
Related operating costs | (36,021 | ) | (28,585 | ) | (26,402 | ) | ||||||
|
|
|
|
|
| |||||||
Operating profit | 31,882 | 19,608 | 17,711 | |||||||||
Margin(2) | 47.0 | % | 40.7 | % | 40.1 | % | ||||||
|
|
|
|
|
| |||||||
Third party products | ||||||||||||
Revenue | 3,836 | 4,605 | 6,098 | |||||||||
Related operating costs | (3,738 | ) | (4,494 | ) | (5,595 | ) | ||||||
|
|
|
|
|
| |||||||
Operating profit/(loss) | 98 | 111 | 503 | |||||||||
Margin(2) | 2.6 | % | 2.4 | % | 8.2 | % | ||||||
|
|
|
|
|
|
|
|
We engage in third party trading for three reasons:
In providing solutions for our customers, sometimes we provide products that we do not produce, such as a particular grade of coal. To meet customer needs and contractual commitments, we may buy physical product from third parties and manage risk through both the physical and financial markets.
Production variability and occasional shortfalls from our own assets means that we sometimes source third party materials to ensure a steady supply of product to our customers.
The active presence in the commodity markets provides us with physical market insight and commercial knowledge. From time to time, we actively engage in these markets in order to take commercial advantage of business opportunities. These trading activities provide not only a source of revenue, but also a further insight into planning, and can, in some cases, give rise to business development opportunities.
3.7 Liquidity and capital resources
As a result of our record production volumes and record prices in many of our key commodities over the past several years, we have generated very strong cash flows throughout our operations. Despite the changing market conditions, our net operating cash flow remained strong and resulted in net debt declining to US$5,823 million. These cash flows have been fundamental to our ability to internally fund our existing operations, maintain a pipeline of growth projects and return capital to shareholders through dividends. Our priority for cash is to reinvest in the business. In line with our strategy, we have grown our business rapidly and consistently through project developments and acquisitions. Through a combination of borrowings and payments to shareholders, we manage our balance sheet with the goal of maintaining levels of gearing that we believe optimise our costs of capital and return on capital employed.
Year ended 30 June | 2013 | 2012 | ||||||
US$M | US$M | |||||||
Cash generated from operations | 28,793 | 32,987 | ||||||
Dividends received | 721 | 722 | ||||||
Net interest paid | (786 | ) | (412 | ) | ||||
Taxation paid | (8,574 | ) | (8,038 | ) | ||||
|
|
|
| |||||
Net operating cashflows | 20,154 | 25,259 | ||||||
|
|
|
| |||||
Purchases of property plant and equipment | (22,243 | ) | (18,637 | ) | ||||
Exploration expenditure | (1,351 | ) | (2,493 | ) | ||||
Exploration expenditure expensed and included in operating cash flows | 1,047 | 1,644 | ||||||
Purchases of intangibles | (400 | ) | (219 | ) | ||||
Investment in financial assets | (475 | ) | (471 | ) | ||||
Investment in subsidiaries, operations and jointly controlled entities | – | (12,556 | ) | |||||
Investment in equity accounted investments | (84 | ) | (83 | ) | ||||
Net proceeds from investing activities | 4,780 | 330 | ||||||
|
|
|
| |||||
Net investing cash flows | (18,726 | ) | (32,485 | ) | ||||
|
|
|
| |||||
Net proceeds (repayment of)/from interest bearing liabilities | 7,157 | 8,644 | ||||||
Share buy-back | – | (83 | ) | |||||
Dividends paid | (7,004 | ) | (6,220 | ) | ||||
Contribution from non-controlling interest | 73 | 101 | ||||||
Other financing activities | (424 | ) | (403 | ) | ||||
|
|
|
| |||||
Net financingcash flows | (198 | ) | 2,039 | |||||
|
|
|
| |||||
Net increase/(decrease) in cash and cash equivalents | 1,230 | (5,187 | ) | |||||
|
|
|
|
Net operating cash flows are our principal source of cash. We also raise cash from debt financing to manage temporary fluctuations in liquidity arrangements and to refinance existing debt. Our liquidity position is supported by our strong and stable credit rating and committed debt facilities.
3.7.1 Cash flow analysis
A full consolidated cash flow statement is contained in the financial statements. The explanatory notes appear in note 23 ‘Notes to the consolidated cash flow statement’ in the financial statements. A summary table has been presented below to show the key sources and uses of cash.
Year ended 30 June | 2011 | 2010 | 2009 | |||||||||
US$M | US$M | US$M | ||||||||||
Net operating cash flows | 30,080 | 16,890 | 17,854 | |||||||||
|
|
|
|
|
| |||||||
Cash outflows from investing activities | (16,662 | ) | (10,527 | ) | (10,319 | ) | ||||||
Net proceeds from investing activities | 198 | 542 | 277 | |||||||||
|
|
|
|
|
| |||||||
Net investing cash flows | (16,464 | ) | (9,985 | ) | (10,042 | ) | ||||||
|
|
|
|
|
| |||||||
Net (repayment of)/proceeds from interest bearing liabilities | (577 | ) | (485 | ) | 3,929 | |||||||
Share buy-back | (9,860 | ) | — | — | ||||||||
Dividends paid | (5,144 | ) | (4,895 | ) | (4,969 | ) | ||||||
Other financing activities | (437 | ) | 73 | (140 | ) | |||||||
|
|
|
|
|
| |||||||
Net financing activities | (16,018 | ) | (5,307 | ) | (1,180 | ) | ||||||
|
|
|
|
|
| |||||||
Net (decrease)/increase in cash and cash equivalents | (2,402 | ) | 1,598 | 6,632 | ||||||||
|
|
|
|
|
|
Year ended 30 June 2011 compared with year ended 30 June 2010
Net operating cash flows after interest and tax increased by 78 per cent to US$30,080 million. This was primarily driven by an increase in cash generated from operations (before changes in working capital balances) of US$12,259 million and changes in working capital balances having a positive year-on-year impact on operating cash flow of US$2,576 million.
In accordance with IFRS, exploration expenditure incurred which has not been capitalised is now classified within net operating20.2 billion declined by 20 per cent from US$25.3 billion in FY2012. A decrease of US$4.2 billion in cash flows, which has resulted inflow generated from the classificationoperation, an increase of US$981374 million in net operatinginterest paid and an income tax refund of US$530 million received in FY2012 were the major contributors to that decline.
A US$13.8 billion reduction in net investing cash flows for FY2011outflows to US$18.7 billion primarily reflected the acquisition of Petrohawk Energy Corporation in the prior period and a US$1,030 million for FY2010.
4.5 billion increase in proceeds from asset sales. Capital and exploration expenditure totalled US$12,387 million for the year.23.6 billion in FY2013. Expenditure on major growth projects was US$9,139 million,18.7 billion, including US$1,786 million6.9 billion on Petroleum projects and US$7,353 million11.8 billion on Minerals projects. Capital expenditure on sustaining and other items was US$2,008 million.3.5 billion. Exploration expenditure was US$1,240 million,1.4 billion, including US$981 million1.0 billion classified within net operating cash flows.
FinancingNet financing cash flows include payments related to the US$10 billion capital management program, dividend paymentsincluded proceeds from borrowings of US$5,054 million9.2 billion and netwere partially offset by debt repayments of US$5772.0 billion and dividend payments to our shareholders of US$6.2 billion. Proceeds from
borrowings include the issuance of a two tranche Euro bond of €2.0 billion, a two tranche Sterling bond of £1.75 billion, an Australian dollar bond of A$1.0 billion, a Euro bond of €750 million and a Canadian dollar bond of C$750 million.
2.5.12 Net debt and sources of liquidity
Gearing and net debt
Year ended 30 June 20102014 compared with year ended 30 June 20092013
Net operating cash flow after interestAn analysis of the gearing and tax decreased by five per cent to US$16,890 million. This was primarily driven by changes in working capital balances having a negative year-on-year impact on operating cash flow of US$4,780 million, offset by higher levels of cash generated from operations (before changes in working capital balances) of US$2,853 million and lower net tax and royalty-related tax payments of US$1,080 million.
Capital and exploration expenditure totalled US$10,656 million for the period. Expenditure on major growth projects was US$7,655 million, including US$1,902 million on Petroleum projects and US$5,753 million on Minerals projects. Capital expenditure on sustaining and other items was US$1,668 million. Exploration expenditure was US$1,333 million, including US$303 million, which has been capitalised.
Cash flows from investing activities included acquisitions of US$508 million relating to Athabasca Potash Inc. of US$323 million and United Minerals Corporation NL of US$185 million.
Financing cash flows include net debt repayments of US$485 million and dividend payments of US$4,618 million, excluding dividends paidfor FY2014 compared to non-controlling interests.FY2013 is included in section 1.15.5.
3.7.2 Growth projects
BHP Billiton approved 11 major projects for a total investment value of US$12,942 million (BHP Billiton share) during FY2011. Following the progression of the Jansen Potash Project into feasibility during the March 2011 quarter, BHP Billiton also announced an additional US$488 million of pre-commitment funding to support development of the project in Saskatchewan, Canada. The progression of these projects forms a meaningful component of the Group’s anticipated organic growth program that is expected to exceed US$80 billion over the five years to the end of FY2015.
Industry-wide cost pressures remain a feature of the development landscape and reflect stronger producer currencies as well as underlying inflation on raw material and labour costs. BHP Billiton approved revised capital budgets and schedules during FY2011 for the Esso Australia Resources Pty Ltd operated Kipper (US$900 million, BHP Billiton share) and Turrum (US$1,350 million, BHP Billiton share) Petroleum projects and the BHP Billiton operated Worsley Efficiency and Growth (US$2,995 million, BHP Billiton share) alumina refinery expansion (all Australia).
Three major projects delivered first production in the 12-month period: namely the New South Wales Energy Coal MAC20 Project, the Douglas-Middelburg Optimisation Project in South Africa Coal and Angostura Gas Phase II (Trinidad and Tobago).
Completed projects
Customer | Project | Capacity(1) | Capital expenditure (US$M) (1) | Date of initial production (2) | ||||||||||||||||
Budget | Actual | Target | Actual | |||||||||||||||||
Petroleum | Angostura Gas Phase II (Trinidad and Tobago) BHP Billiton – 45% | 280 MMcf/d of gas | 180 | 157 | (3) | H1 2011 | H1 2011 | |||||||||||||
Energy Coal | Douglas-Middelburg Optimisation (South Africa) BHP Billiton – 100% | 10 mtpa export thermal coal and 8.5 mtpa domestic thermal coal (sustains current output) | 975 | 760 | (3) | Mid 2010 | July 2010 | |||||||||||||
MAC20 Project (Australia) BHP Billiton – 100% | Increases saleable thermal coal production by approximately 3.5 mtpa | 260 | 285 | (3) | H1 2011 | H1 2011 | ||||||||||||||
|
|
|
| |||||||||||||||||
1,415 | 1,202 | |||||||||||||||||||
|
|
|
|
|
|
|
Projects currently under development (approved in prior years)
Customer | Project | Capacity (1) | Budgeted capital expenditure (US$M)(1) | Target date of initial production (2) | ||||||||
Petroleum | Bass Strait Kipper (Australia) BHP Billiton – 32.5% – 50% | 10,000 bbl/d of condensate and processing capacity of 80 MMcf/d of gas | 900 | (3) | 2012 | (3)(4) | ||||||
Bass Strait Turrum (Australia) BHP Billiton – 50% | 11,000 bbl/d of condensate and processing capacity of 200 MMcf/d of gas | 1,350 | (3) | 2013 | (3) | |||||||
North West Shelf CWLH Life Extension (Australia) BHP Billiton – 16.67% | Replacement vessel with capacity of 60,000 bbl/d of oil | 245 | 2011 | |||||||||
North West Shelf North Rankin B Gas Compression (Australia) BHP Billiton – 16.67% | 2,500 MMcf/d of gas | 850 | 2013 | |||||||||
Aluminium | Worsley Efficiency and Growth (Australia) BHP Billiton – 86% | 1.1 mtpa of additional alumina capacity | 2,995 | (3) | | Q1 2012 | (3) | |||||
Base Metals | Antamina Expansion (Peru) BHP Billiton – 33.75% | Increases ore processing capacity to 130,000 tpd | 435 | | Q4 2011 | | ||||||
Iron Ore | WAIO Rapid Growth Project 5 (Australia) BHP Billiton – 85% | Project integrated into subsequent expansion approvals that will increase WAIO capacity to 220 mtpa (5) | 4,800 | | H2 2011 | | ||||||
|
| |||||||||||
11,575 | ||||||||||||
|
|
|
|
|
|
|
Projects approved during FY2011
Customer | Project | Capacity (1) | Budgeted capital expenditure (US$M) (1) | Target date of initial production (2) | ||||||||
Petroleum | Macedon (Australia) BHP Billiton – 71.43% | 200 MMcf/d of gas | 1,050 | 2013 | ||||||||
Base Metals | Escondida Ore Access (Chile) BHP Billiton – 57.5% | The relocation of the in-pit crushing and conveyor infrastructure provides access to higher-grade ore | 319 | Q2 2012 | ||||||||
Diamonds and Specialty Products | EKATI Misery Open Pit Project (Canada) BHP Billiton – 80% | Project consists of a pushback of the existing Misery open-pit which was mined from 2001 to 2005 | 323 | 2015 | ||||||||
Iron Ore | WAIO Jimblebar Mine Expansion (Australia) BHP Billiton – 96% | Increases mining and processing capacity to 35 mtpa | 3,300 | (3) | Q1 2014 | |||||||
WAIO Port Hedland Inner Harbour Expansion (Australia) BHP Billiton – 85% | Increases total inner harbour capacity to 220 mtpa with debottlenecking opportunities to 240 mtpa | 1,900 | (3) | H2 2012 | ||||||||
WAIO Port Blending and Rail Yard Facilities (Australia) BHP Billiton – 85% | Optimises resource and enhances efficiency across the WAIO supply chain | 1,400 | (3) | H2 2014 | ||||||||
Samarco Fourth Pellet Plant (Brazil) BHP Billiton – 50% | Increases iron ore pellet production capacity by 8.3 mtpa to 30.5 mtpa | 1,750 | H1 2014 | |||||||||
Metallurgical Coal | Daunia (Australia) BHP Billiton –50% | Greenfield mine development with capacity to produce 4.5 mtpa of export metallurgical coal | 800 | 2013 | ||||||||
Broadmeadow Life Extension (Australia) BHP Billiton – 50% | Increases productive capacity by 0.4 mtpa and extends the life of the mine by 21 years | 450 | 2013 | |||||||||
Hay Point Stage Three Expansion (Australia) BHP Billiton – 50% | Increases port capacity from 44 mtpa to 55 mtpa and reduces storm vulnerability | 1,250 | (3) | 2014 | ||||||||
Energy Coal | RX1 Project (Australia) BHP Billiton – 100% | Increases run-of-mine thermal coal production by approximately 4 mtpa | 400 | H2 2013 | ||||||||
|
| |||||||||||
12,942 | ||||||||||||
|
|
|
|
|
3.7.3 Net debt and sources of liquidity
Our policies on debt and treasury management are as follows:
a commitment to a solid ‘A’ credit rating;
to be cash flow positive before dividends, debt service and capital management;
for net gearing (net debt/net debt + net assets) to be a maximum of 40 per cent;
diversification of funding sources;
generally to maintain borrowings and excess cash in US dollars.
Solid ‘A’ credit ratings
The Group’s credit ratings are currently A1/P-1 (Moody’s) and A+/A-1 (Standard & Poor’s). The ratings outlook from both agencies has not changed during the financial year.
Interest rate risk
Interest rate risk on our outstanding borrowings and investments is managed as part of the Portfolio Risk Management Strategy. Refer to note 28 ‘Financial risk management’ in the financial statements for a detailed discussion on the strategy. When required under this strategy, we use interest rate swaps, including cross currency interest rate swaps, to convert a fixed rate exposure to a floating rate exposure. All interest swaps have been designated and are effective as hedging instruments under IFRS.
Gearing and net debt
Year ended 30 June 20112013 compared with year ended 30 June 20102012
Net debt, comprising cash and interestInterest bearing liabilities less Cash and cash equivalents, was US$5,823 million,27.5 billion, which isrepresented an increase of US$2,515 million5.3 billion compared towith the net debt position at 30 June 2010. Net gearing,2012. Gearing, which is the ratio of net debt to net debt plus net assets, was 9.226.8 per cent at 30 June 2011,2013, compared with 6.324.3 per cent at 30 June 2010.2012. The primary reason for the increase in gearing during FY2013 was due to the issue of bonds during the period.
Cash at bank and in hand less overdrafts at 30 June 20112013 was US$10,080 million5.7 billion compared with US$12,455 million4.5 billion at 30 June 2010.2012. Included within this arewere short-term deposits at 30 June 20112013 of US$8,723 million3.2 billion compared with US$11,087 million3.3 billion at 30 June 2010.
30 June 2010 compared with 30 June 2009
Net debt, comprising cash and interest-bearing liabilities, was US$3,308 million, a decrease of US$2,278 million, or 41 per cent, compared with 30 June 2009. Net gearing, which is the ratio of net debt to net debt plus net assets, was 6.3 per cent at 30 June 2010, compared with 12.1 per cent at 30 June 2009.
Cash at bank and in hand less overdrafts at 30 June 2010 was US$12,455 million compared with US$10,831 million at 30 June 2009. Included within this are short-term deposits at 30 June 2010 of US$11,087 million compared with US$9,677 million at 30 June 2009.2012.
Funding sources3 Corporate Governance Statement
3.1 Governance at BHP Billiton
Dear Shareholder
Welcome to BHP Billiton’s Corporate Governance Statement.
At BHP Billiton, we have a governance framework that goes beyond an interest in governance for its own sake or the need to comply with regulatory requirements. Instead, we believe that high-quality governance supports long-term value creation. Simply put, we think good governance is good business, and our approach is to adopt what we consider to be the better of the prevailing governance standards in Australia, the United Kingdom and the United States.
In the same spirit, we do not see governance as just a matter for the Board. Good governance is also the responsibility of executive management and is embedded throughout the organisation.
The maturity profilediagram on the following page describes the governance framework at BHP Billiton. It shows the interaction between the shareholders and the Board, demonstrates how the Board Committee structure facilitates the interaction between the Board and the Chief Executive Officer (CEO) and illustrates the flow of delegation from shareholders. We have robust processes in place to ensure that the delegation flows through the Board and its committees to the CEO and Group Management Committee (GMC) and into the organisation. At the same time, accountability flows back upwards from the Company to shareholders. This process helps to ensure alignment with shareholders.
As part of our debt obligationscorporate planning cycle, we have embedded a range of scenarios that are reviewed annually and detailsupdated by the Group with the GMC’s involvement. The scenarios, and the governance process supporting them, also form part of the Board agenda.
These scenarios provide a lens to assess the performance of our undrawn committed facilitiesbusiness portfolio. They include assumptions around carbon and commodity prices, currencies, costs and tax rates and ranges for a number of risks that face the Group, including climate change, global growth, levels of trade, geopolitical situation and technology focus. All of the scenarios are set forth in note 28 ‘Financial risk management’ inused to inform BHP Billiton’s strategy and the financial statements.
During FY2011, no debt was issued or matured.
Noneresilience of our general borrowing facilitiesdiversified asset portfolio over the short and long term.
Regardless of which direction the world may take, we will always be guided byOur Charter values, including our value of Sustainability, in how we operate our business, interact with our stakeholders and plan for the future.
As we set out later in this report, while the five committees have accountability for making recommendations to the Board on certain matters such as remuneration and sustainability, we ensure that all the Board members have oversight and the opportunity for full discussion of those issues through the committee report-out process to the full Board.
Our BHP Billiton Charter is core to the governance framework of BHP Billiton. It embodies our corporate purpose, strategy and values, and defines when we are subjectsuccessful. We foster a culture that values and rewards high ethical standards, personal and corporate integrity and respect for others.
We live the values ofOur Charter and adhere to financial covenants. Certain specific financing facilitiesthe standards of conduct required by our BHP BillitonCode of Business Conduct.
BHP Billiton governance structure
Appointment of Mr Brinded
We are focused on enhancing the diversity of perspective on the Board. We do this in a structured manner, looking out over a five-year period at the skills, backgrounds, knowledge, experience and diversity on the Board. The right blend of skills, experience and perspective is critical to ensuring the Board oversees BHP Billiton effectively for shareholders. As a result of this process, and as described in last year’s Annual Report, we have been seeking additional upstream oil, gas and shale experience.
We are therefore pleased that Malcolm Brinded joined the Board as a Non-executive Director and member of the Sustainability Committee in April 2014. Mr Brinded served on the Board of Royal Dutch Shell plc between 2002 and 2012. During his 37-year career with Shell, he held leadership roles, including Executive Director of Exploration and Production, Executive Director of Upstream International and UK Country Chair and Managing Director. His appointment reflects the structured and rigorous approach to the Board’s succession and planning.
Ongoing renewal
As part of our ongoing renewal of the Board, we announced in August that David Crawford will be retiring from the Board after the forthcoming Annual General Meetings. Mr Crawford has been appointed Chairman-designate of the new company that BHP Billiton plans to form in a demerger. On behalf of all shareholders, I would like to thank him for his exceptional service to the Board and the Group over many years and wish him all the best for the future. It is also intended that Keith Rumble will become a Non-executive Director of the demerged company, and that he will retire from the BHP Billiton Board at or around the time the demerger is completed (currently scheduled for mid-2015).
In relation to specific businesses are the subject of financial covenants that vary from facility to facility, but which would be considered normal for such facilities.
3.7.4 Quantitative and qualitative disclosures about market risk
We identified our primary market risks in section 3.4. A description of how we manage our market risks, including both quantitative and qualitative information about our market risk sensitive instruments outstanding at 30 June 2011, is contained in note 28 ‘Financial risk management’ to the financial statements.
3.7.5 Portfolio management
Our strategy is focused on long-life, low-cost, expandable, upstream assets and we continually review our portfolio to identify assets that do not fit this strategy. These activities continued during the year, with proceeds amounting to US$198 million being realised from divestments of property, plant and equipment and financial assets. There were no divestments of subsidiaries or operations during the year.
We will purchase interests in assets where they fit our strategy. On 31 March 2011, the Group completed the acquisition of 100 per cent of Chesapeake Energy Corporation’s (Chesapeake) interests in its Fayetteville Shale gas assets and associated midstream pipeline system (Fayetteville Shale gas business) located in Arkansas (US) for US$4,819 million.
3.7.6 Dividend and capital management
On 24 August 2011,gender diversity, the Board declaredhas set a final dividend forgoal of increasing the yearnumber of 55 US cents per share. Together withwomen on the interim dividend of 46 US cents per share paidBoard to shareholders on 31 March 2011, this brings the total dividend declared for the yearat least three. This remains our target, which we aim to 101 US cents per share, a 16.1 per cent increase over last year’s full year dividend of 87 US cents per share.
Notwithstanding BHP Billiton’s commitment to invest more than US$80 billion in the growth of its tier one portfolio, the Group reactivated the remaining US$4.2 billion component of a previously suspended US$13 billion buy-back program on 15 November 2010. BHP Billiton subsequently expanded that capital management initiative to US$10 billion and committed to complete the programachieve by the end of CY2011.2015. More details about the Board’s diversity of skills and experience are set out in section 3.8 of this Annual Report.
Continuous improvement
The subsequent completionBoard has a commitment to ongoing improvement. This year, we conducted an externally facilitated review of the Board, and a range of improvements to the Board’s work and effectiveness has been agreed, which are set out in section 3.11. In particular, the formalising of a US$6.3 billion off-market tender buy-backfocused strategy day built around scenarios and sign posts for future developments provides an opportunity for the Board to undertake a deeper dive into a range of BHP Billiton Ltd shares during the period enabled the Group to successfully complete its US$10 billion capital management program on 29 June 2011, six months ahead of schedule.
During FY2011, the combination of on-market purchases of Plc sharesstrategic and the off-market purchase of Ltd shares enabled BHP Billiton to buy (and cancel) 241.8 million shares, representing four per cent of total issued capital.
Completion of this substantial program in such a timely manner highlighted BHP Billiton’s commitment to maintain an appropriate capital structure through all points of the economic cycle. Since 2004, BHP Billiton has repurchased a cumulative US$22.6 billion of Ltd and Plc shares, representing 15 per cent of then issued capital. Total returns to shareholders, including dividends paid and share buy-backs, have exceeded US$48 billion since the formation of BHP Billiton in 2001.long-term plans.
I hope you find this description of our corporate governance useful and look forward to receiving any feedback that fellow shareholders may have.
Jac Nasser AO
Chairman
11 September 2014
3.8 Off-balance sheet arrangements and contractual commitments
Information in relation to our material off-balance sheet arrangements, principally contingent liabilities, commitments for capital expenditure and other expenditure and commitments under leases at 30 June 2011 is provided in note 21 ‘Contingent liabilities’ and note 22 ‘Commitments’ to the financial statements.
We expect that these contractual commitments for expenditure, together with other expenditure and liquidity requirements will be met from internal cash flow and, to the extent necessary, from the existing facilities described in section 3.7.3.
3.9 Subsidiaries and related party transactions
Subsidiary information
Information about our significant subsidiaries is included in note 25 ‘Subsidiaries’ to the financial statements.
Related party transactions
Related party transactions are outlined in note 31 ‘Related party transactions’ to the financial statements.
Since 30 June 2011, the Group has completed its acquisition of Petrohawk Energy Corporation; signed a Heads of Agreement with Leighton Holdings to acquire the HWE Mining subsidiaries; and arranged a US$7.5 billion multicurrency term and revolving credit facility.
Further information about these transactions is outlined in note 24 ‘Business combinations’ and note 35 ‘Subsequent events’ to the financial statements.
Other than the matters outlined above, or elsewhere in this Report, no matters or circumstances have arisen since the end of the year that have significantly affected, or may significantly affect, the operations, results of operations or state of affairs of the BHP Billiton Group in subsequent accounting periods.
43.2 Board of Directors and Group Management Committee
JacquesJac Nasser AO, BBus, Hon DT, 6366
Term of office:Chairman and Independent Non-executive Director
Director of BHP Billiton Limited and BHP Billiton Plc since June 2006. Appointed Chairman of BHP Billiton Limited and BHP Billiton Plc fromon 31 March 2010.
Independent: Yes
Skills and experience:Following a 33-year career with Ford Motor Company in various leadership positions in Europe, Australia, Asia, South America and the US, JacquesUnited States, Mr Nasser served as a member of the Board of Directors and as President and Chief Executive Officer of Ford Motor Company from 1998 to 2001. He has more than 30 years’three decades of experience in large-scale global businesses and a decade of private equity investment and operating expertise.
Other directorships and offices (current and recent):
Director of British Sky Broadcasting Group plc21st Century Fox (since November 2002)June 2013).
Non-executive advisory partner (since March 2010) ofConsultant to One Equity Partners ‘JPMorgan Chase & Co’s Private Equity Business’(since March 2013) (Partner from November 2002 until March 2010)2010, Non-Executive Advisory Partner from March 2010 to March 2013).
Former Director of Brambles LimitedBritish Sky Broadcasting Group plc (from March 2004November 2002 to January 2008)November 2012).
Board Committee membership:
Chairman of the Nomination and Governance Committee.
Marius KloppersAndrew MackenzieBE (Chem) BSc (Geology), MBA, PhD (Materials Science)(Chemistry), 4957
Term of office:Non-independent
Director of BHP Billiton Limited and BHP Billiton Plc since January 2006.May 2013. Mr KloppersMackenzie was appointed Chief Executive Officer on 1 October 2007. He was appointed Group President Non-Ferrous Materials and Executive Director in January 2006 and was previously Chief Commercial Officer.10 May 2013.
Independent: No
Skills and experience: Marius KloppersMr Mackenzie has extensive knowledge of the mining industryover 30 years’ experience in oil and ofgas, petrochemicals and minerals. He joined BHP Billiton’s operations. ActiveBilliton in the mining and resources industry since 1993,November 2008 as Chief Executive Non-Ferrous. Prior to BHP Billiton, Mr Mackenzie worked at Rio Tinto, where he was appointed Chief Commercial Officer in December 2003. He was previously Chief Marketing Officer, Group Executive of Billiton Plc, Chief Executive of Samancor ManganeseDiamonds and Minerals, and BP, where he held various positions at Billiton Aluminium,a number of senior roles, including Chief Operating OfficerGroup Vice President for Technology and General Manager of Hillside Aluminium.Engineering, and Group Vice President for Chemicals.
Other directorships and offices (current and recent):
Deputy Chairman
Board Committee membership:
None.
Malcolm Brinded CBE, MA, 61
Independent Non-executive Director
Director of BHP Billiton Limited and BHP Billiton Plc since April 2014.
Skills and experience: Malcolm has extensive experience in energy, governance and sustainability. He served as a member of the Board of Directors of Royal Dutch Shell plc from 2002 to 2012. During his 37-year career with Shell, he held various leadership positions in the United Kingdom, Europe, the Middle East and Asia, including Executive Director of Exploration and Production, Executive Director of Upstream International and Chairman and Upstream Managing Director of Shell UK.
Other directorships and offices (current and recent):
Board Committee membership:
Malcolm Broomhead MBA, BE, 5962
Term of office:Independent Non-executive Director
Director of BHP Billiton Limited and BHP Billiton Plc since March 2010.
Independent: Yes
Skills and experience: MalcolmMr Broomhead has extensive experience in running industrial and mining companies with a global footprint and broad global experience in project development in many of the countries in which BHP Billiton operates. Mr Broomhead was Managing Director and Chief Executive Officer of Orica Limited from 2001 until September 2005, a global business that controlled interests in more than 45 countries.2005. Prior to joining Orica, Mr Broomhead 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. Mr Broomhead has extensive experience in running industrial and mining companies with a global footprint and broad global experience in project development in many of the countries in which BHP Billiton operates.
Other directorships and offices (current and recent):
Chairman of Asciano Limited (since October 2009).
Former Director of Coates Group Holdings Pty Ltd (since(from January 2008)2008 to July 2013).
Board Committee membership:memberships:
Member of the Sustainability Committee.
Sir John Buchanan BSc, MSc (Hons 1), PhD, 6871
Term of office:Senior Independent Director, BHP Billiton Plc
Director of BHP Billiton Limited and BHP Billiton Plc since February 2003. Dr Buchanan has been designated as the Senior Independent Director of BHP Billiton Plc since his appointment.
Independent: Yes
Skills and experience: Educated at Auckland, Oxford and Harvard, Sir John Buchanan has broad international business experience gained in large and complex international businesses. HeSir John has substantial experience in the petroleum industry and knowledge of the international investor community. HeSir John has held various leadership roles in commercial, strategic, financial, operational and marketing positions, including executive experience in different countries. HeSir John is a former Executive Director and Group Chief Financial Officer of BP, serving on the BP Board for six years.BP.
Other directorships and offices (current and recent):
Chairman of Smith & Nephew Plc (since April 2006) and former Deputy Chairman (from February 2005 to April 2006).
Chairman of the International Chamber of Commerce (UK) (since May 2008).
Senior Independent Director and Deputy Chairman of Vodafone Group Plc (since July 2006) and Director (since April 2003).
Member of Advisory Board of Ondra Bank (since June 2009).
Former Chairman of the UK Trustees for the Christchurch Earthquake appeal.
Board Committee membership:memberships:
Chairman of the Remuneration Committee.
Member of the Nomination and Governance Committee.
Carlos Cordeiro AB,, MBA, 5558
Term of office:Independent Non-executive Director
Director of BHP Billiton Limited and BHP Billiton Plc since February 2005.
Independent: Yes
Skills and experience: CarlosMr Cordeiro brings to the Board more than 30 years’ experience in providing strategic and financial advice to corporations, financial institutions and governments around the world. HeMr Cordeiro was previously Partner and Managing Director of Goldman Sachs Group Inc.Inc and Vice Chairman of Goldman Sachs (Asia) LLC.
Other directorships and offices (current and recent):
Non-executive Advisory Director of The Goldman Sachs Group Inc (since December 2001).
Non-executive Vice Chairman of Goldman Sachs (Asia) LLC (since December 2001).
Board Committee membership:
Member of the Remuneration Committee.
David Crawford AO, BComm, LLB, FCA, FCPA, FAICD, 6770
Term of office:Independent Non-executive Director
Director of BHP Limited since May 1994. Director of BHP Billiton Limited and BHP Billiton Plc since June 2001.
Independent: Yes
Skills and experience: DavidMr Crawford has extensive experience in risk management and business reorganisation. He has acted as a consultant, scheme manager, receiver and manager and liquidator to very large and complex groups of companies. HeMr Crawford was previously Australian National Chairman of KPMG, Chartered Accountants.
Mr Crawford was Chairmanis the Chairman-designate of the Risk and Audit Committee andnew company that BHP Billiton plans to form in the Board’s nominated ‘audit committee financial expert’ forproposed demerger. Mr Crawford will retire from the purposes of the US Securities and Exchange Commission Rules until 6 September 2011. During that period, theBHP Billiton Board was satisfied that he had recent and relevant financial experience for the purposes of the UK Financial Services Authority’s Disclosure and Transparency Rules and the UK Corporate Governance Code.in November 2014.
Other directorships and offices (current and recent):
Former Chairman (from November 2007 to December 2011) and former Director (from August 2001 to December 2011) of Foster’s Group Limited (since November 2007) and Director of Foster’s Group Limited (since August 2001).
Former Director of Westpac Banking Corporation (from May 2002 to December 2007).
Former Chairman of National Foods Limited (Director from November 2001 to June 2005).
Board Committee membership:
None.
Pat Davies BSc (Mechanical Engineering), 63
Independent Non-executive Director
Director of BHP Billiton Limited and BHP Billiton Plc since June 2012.
Skills and experience: Mr Davies has broad experience in the natural resources sector across a number of geographies, commodities and markets. From July 2005 until June 2011, Mr Davies was Chief Executive of Sasol Limited, an international energy, chemical and mining company with operations in 38 countries and listings on the Johannesburg and New York stock exchanges. Mr Davies began his career at Sasol in 1975 and held a number of diverse roles, including managing the group’s oil and gas businesses, before becoming Chief Executive in July 2005. He is a former Director of various Sasol Group companies and joint ventures.
Other directorships and offices (current and recent):
Board Committee membership:
Carolyn Hewson AO, BEc (Hons), MA (Econ), FAICD, 5659
Term of office:Independent Non-executive Director
Director of BHP Billiton Limited and BHP Billiton Plc since March 2010.
Independent: Yes
Skills and experience: CarolynMs Hewson is a former investment banker and has over 30 years’ experience in the finance sector. Ms Hewson was previously an Executive Director of Schroders Australia Limited and has
extensive financial markets, risk management and investment management expertise. Ms Hewson is a Non-executiveformer Director of Stockland CorporationBT Investment Management Limited, Westpac Banking Corporation, BT Investment Management Limited and previously served as a Director on the boards of AMP Limited, CSR Limited, AGL Energy Limited, the Australian Gas Light Company, South AustraliaAustralian Water and the Economic Development Board of South Australia. She has current board or advisory roles with Nanosonics Limited, the Australian Charities Fund, Neurosurgical Research Foundation and is Chair of the Westpac Foundation.
Other directorships and offices (current and recent):
Director of BT Investment Management Limited (since December 2007).
Director of Westpac Banking Corporation (since February 2003).
Member of the Advisory Board of Nanosonics Limited (since June 2007).
Former Director of Australian Charities Fund (since March 2001)BT Investment Management Limited (from December 2007 to December 2013).
MemberFormer Director and Patron of the Neurosurgical Research Foundation Council (since(from April 1993)1993 to December 2013).
Chair of the Westpac Foundation (since January 2011).
Board Committee membership:memberships:
Member of the Risk and Audit Committee.
Lindsay MaxstedDipBus (Gordon), FCA, 57FAICD, 60
Term of office:Independent Non-executive Director
Director of BHP Billiton Limited and BHP Billiton Plc with effect fromsince March 2011.
Independent: Yes
Skills and experience: LindsayMr Maxsted is a corporate recovery specialist who has managed a number of Australia’s largest corporate insolvency and restructuring engagements and, until 2011, continued to undertake consultancy work in the restructuring advisory field. He was the Chief Executive Officer of KPMG Australia between 2001 and 2007. His principal area of practice prior to becoming Chief Executive Officer was in the corporate recovery field managing a number of Australia’s largest corporate, insolvency and restructuring engagements. He continues to undertake consultancy work in the restructuring advisory field. At the request of the Victorian State Government (Australia), Mr Maxsted was appointed tois the Board of the Public Transport Corporation in December 1995 and was its Chairman from 1997 to 2001. As Chairman, he had the responsibility of guiding the Public Transport Corporation through the final stages of a significant reform process. The Board hasBoard’s nominated Mr Maxsted as the ‘audit committee financial expert’ for the purposes of the US Securities and Exchange Commission Rules, from 6 September 2011 and the Board is satisfied that he has recent and relevant financial experience for the purposes of the UK Financial ServicesConduct Authority’s Disclosure and Transparency Rules and the UK Corporate Governance Code.
Other directorships and offices (current and recent):
Chairman-elect of Westpac Banking CorporationDirector and a Director since March 2008.
Honorary Treasurer of Baker IDI Heart and Diabetes Institute.
Former KPMG Australia Chief Executive Officer from January 2001 to December 2007.
Board Committee membership:
Chairman of the Risk and Audit Committee.
Wayne Murdy BSc (Business Administration), CPA, 6770
Term of office:Independent Non-executive Director
Director of BHP Billiton Limited and BHP Billiton Plc since June 2009.
Independent: Yes
Skills and experience: WayneMr Murdy served as the Chief Executive Officer of Newmont Mining Corporation from January 2001 to June 2007 and Chairman of Newmont from January 2002 to December 2007. Hishas a background is in finance and accounting, where he has gained comprehensive experience in the financial management of mining, oil and gas companies during his career with Getty Oil, Apache Corporation and Newmont.Newmont Mining Corporation. He served as the Chief Executive Officer of Newmont Mining Corporation from 2001 to 2007 and Chairman from 2002 to 2007. Mr Murdy is also a former Chairman of the International Council on Mining and Metals, a former Director of the US National Mining Association and a former member of the Manufacturing Council of the US Department of Commerce.
Other directorships and offices (current and recent):
Director of Weyerhaeuser Company (since January 2009).
Former Director of Qwest Communications International Inc (from September 2005 to April 2011).
Former Chief Executive Officer (from January 2001 to June 2007) and Chairman (from January 2002 to December 2007) of Newmont Mining Corporation.
Former Chairman of the International Council on Mining and Metals (from January 2004 to December 2006).
Former Director of the US National Mining Association (from January 2002 to December 2007).
Board Committee membership:memberships:
Member of the Risk and Audit Committee.
Keith Rumble BSc, MSc (Geology), 5760
Term of office:Independent Non-executive Director
Director of BHP Billiton Limited and BHP Billiton Plc since September 2008.
Independent: Yes
Skills and experience: KeithMr Rumble was previously Chief Executive Officer of SUN Mining, a wholly owned entity of the SUN Group, a principal investor and private equity fund manager in Russia, India and other emerging and transforming markets. HeMr Rumble has over 30 years’ experience in the resources industry, specifically in titanium and platinum mining, and is a former Chief Executive Officer of Impala Platinum (Pty) Ltd and former Chief Executive Officer of Rio Tinto Iron and Titanium Inc. HeInc in Canada. Mr Rumble began his career at Richards Bay Minerals in 1980 and held various management positions before becoming Chief Executive Officer in 1996.
It is intended that Mr Rumble will become a Non-executive Director of the new company that BHP Billiton plans to form in the proposed demerger. Mr Rumble would retire from the BHP Billiton Board at the time the shareholders vote on this demerger proposal.
Other directorships and offices (current and recent):
Director of The Aveng GroupEnzyme Technologies (Pty) Limited (since September 2009)2011).
Trustee of the World Wildlife Fund, South Africa (since October 2006).
Board Committee membership:
Member of the Sustainability Committee.
John Schubert AO, BCh Eng, PhD (Chem Eng), FIE Aust, FTSE, 6871
Term of office:Independent Non-executive Director
Director of BHP Limited since June 2000 and a Director of BHP Billiton Limited and BHP Billiton Plc since June 2001.
Independent: Yes
Skills and experience: JohnDr Schubert has considerable experience in the international oil industry, including at Chief Executive Officer level. HeDr Schubert has had executive mining and financial responsibilities and was Chief Executive Officer of Pioneer International Limited for six years, where he operated in the building materials industry in 16 countries. HeDr Schubert has experience in mergers, acquisitions and divestments, project analysis and management. He was previously Chairman and Managing Director of Esso Australia Limited and President of the Business Council of Australia.
Other directorships and offices (current and recent):
DirectorChairman of Qantas Airways LimitedGarvan Institute of Medical Research (since October 2000)May 2013).
Former Chairman and Director of Worley Parsons Limited (from November 2002 until February 2005).
Board Committee membership:memberships:
Chairman of the Sustainability Committee.
Member of the Remuneration Committee.
Member of the Nomination and Governance Committee.
Baroness Shriti Vadera MA, 4952
Term of office:Independent Non-executive Director
Director of BHP Billiton Limited and BHP Billiton Plc with effect fromsince January 2011.
Independent: Yes
Skills and experience: ShritiBaroness Vadera brings wide-ranging experience in finance, economics and public policy, as well as extensive experience of emerging markets and international institutions. In the last year,recent years, she has undertaken a number of international assignments, including advising the G20 chair under the Republic of Korea, Temasek Holdings, Singapore on strategy and the Government of Dubai on the restructuringEurozone crisis and working with the Korean chair of Dubai World. Shethe G20. Baroness Vadera was a Minister in the British Government from 2007 to 2009 in the Department for International Development, the Business Department and the Cabinet Office, where she was responsible for the response to the global financial crisis. She was on the Council of Economic Advisers, H MHM Treasury from 1999 to 2007 focusing on business and international economic issues. Prior to her time in the British Government, sheBaroness Vadera spent 14 years in investment banking at UBS Warburg, where she specialised in advisory work in emerging markets.
Other directorships and offices (current and recent):
Director of AstraZeneca Plc (since January 2011).
Former Trustee of Oxfam (from 2000 to 2005).
Board Committee membership:
Member of the Risk and Audit Committee.
Group Company Secretary
Jane McAloon BEc (Hons), LLB, GDipGov, FCIS, 4750
President, Governance and Group Company Secretary and Chairman of the Disclosure Committee.
Term of office:Skills and experience: JaneMs McAloon was appointed to the Group Management Committee as President, Governance and Group Company Secretary in May 2013 after serving as Group Company Secretary since July 2007 and2007. Ms McAloon joined the BHP Billiton Group in September 2006 as Company Secretary for BHP Billiton Limited.
Skills and experience: Prior to joining BHP Billiton, Jane McAloonshe held the position of Company Secretary and Group Manager External and Regulatory Services in the Australian Gas Light Company. She previously held various Australian State and Commonwealth government positions, including Director General of the NSWNew South Wales Ministry of Energy and Utilities and Deputy Director General for the NSWNew South Wales Cabinet Office, as well as working in private legal practice. She is a Non-executive Director of Energy Australia, a Fellow of the Institute of Chartered Secretaries and a MemberFellow of the Corporations and Markets Advisory Committee.Australian Institute of Company Directors.
4.23.2.2 Group Management Committee
Marius KloppersAndrew Mackenzie BE (Chem)BSc (Geology), MBA, PhD (Materials Science)(Chemistry), 4957
Chief Executive Officer and Executive Director
Chairman of the Group Management Committee
Marius Kloppers has been active in the mining and resources industry since 1993 and was appointedMr Mackenzie commenced as Chief Executive Officer in October 2007.May 2013. He was previously Chief Commercial Officer, Chief Marketing Officer, Group Executive of Billiton Plc, Chief Executive of Samancor Manganese and held various positions at Billiton Aluminium, among them Chief Operating Officer and General Manager of Hillside Aluminium.
Alberto Calderon PhD Econ, M Phil Econ, JD Law, BA Econ, 51
Group Executive and Chief Commercial Officer
Member of the Group Management Committee
Alberto Calderon joined the Group as President Diamonds and Specialty Products in February 2006 and was appointed to his current position as Chief Commercial Officer in July 2007. Prior to this, he was Chief Executive Officer of Cerrejón Coal Company and President of the oil company Ecopetrol. In the early 1990s, he was President of the Power Company of Bogotá and held various senior roles in investment banking and in the Colombian Government and the International Monetary Fund.
Andrew Mackenzie BSc (Geology), PhD (Chemistry), 54
Group Executive and Chief Executive Non-Ferrous
Member of the Group Management Committee
Andrew Mackenzie joined BHP Billiton in November 2008 in his current position as Chief Executive Non-Ferrous. His prior career included time withPrior to BHP Billiton, he worked at Rio Tinto, where he was Chief Executive of Diamonds and Minerals, and with BP, where he held a number of senior roles, including Group Vice President for Technology and Engineering, and Group Vice President for Chemicals. In July 2014 he was elected a Fellow of the Royal Society.
Peter Beaven BAcc, CA, 47
President, Copper
Mr Beaven was appointed President, Copper in May 2013. Previously he was the President of Base Metals and prior to that appointment, in November 2010, President of BHP Billiton’s Manganese business, and Vice President and Chief Development Officer for Carbon Steel Materials. He ishas wide experience across a Non-executiverange of regions and businesses in BHP Billiton, UBS Warburg, Kleinwort Benson and PricewaterhouseCoopers.
Mr Beaven will be appointed as Chief Financial Officer, effective 1 October 2014.
Tony Cudmore BA (Politics and Economics), 45
President, Corporate Affairs (since 3 March 2014)
Mr Cudmore joined BHP Billiton as President, Corporate Affairs in March 2014. Prior to BHP Billiton, Mr Cudmore worked with ExxonMobil for 13 years and held a wide range of senior and global Corporate Affairs roles in Australia and the United States. Before joining ExxonMobil, Mr Cudmore was a Media Relations and Policy Adviser before becoming Principal Adviser to then Premier of Victoria, The Hon Jeff Kennett MP, followed by his role as Assistant Director of Centrica plc.the Australian Institute of Petroleum.
Marcus RandolphTim Cutt BSc, MBA, 5554
Group ExecutivePresident, Petroleum and Chief Executive FerrousPotash (since 2 July 2013)
Mr Cutt was appointed President, Petroleum and Coal
MemberPotash in July 2013. He joined BHP Billiton in 2007 as the President of the Group Management CommitteeProduction Division in the Petroleum business. Mr Cutt was appointed to the position of
Marcus Randolph was previously Chief Organisation Development Officer,
President, Diamonds and Specialty Products Chiefin 2011. Before joining BHP Billiton, Mr Cutt had a successful 24-year career with ExxonMobil in roles of significant oil and gas responsibility, including President of ExxonMobil de Venezuela and President of Hibernia Management and Development Officer MineralsCompany.
Dean Dalla Valle MBA, 55
President, Coal
Mr Dalla Valle was appointed President, Coal in May 2013. He has 37 years’ experience in BHP Billiton. Mr Dalla Valle was previously the President of the Uranium business for three years and Chief Strategic Officer Minerals for BHP Billiton.
His prior career includes Chief Executive Officer, First Dynasty Mines, Miningto that held the positions of Asset President, Olympic Dam, Asset President, Cannington silver mine and Minerals Executive, Rio Tinto Plc, Director of Acquisitions and Strategy, Kennecott Inc,Vice President Ports, Iron Ore. He was also the General Manager Corporación Minera Nor Peru, Asarco Inc,of the Appin, Tower and various mine operating positionsWest Cliff Collieries for Illawarra Coal.
Mike Fraser BCom, MBL, 49
President, Human Resources (since 27 August 2013)
Mr Fraser joined BHP Billiton in the US with Asarco Inc. He has been in his current position as Chief Executive Ferrous and Coal since July 2007.
Alex Vanselow BComm, Wharton AMP, 49
Group Executive and Chief Financial Officer
Member ofJanuary 2000. Mr Fraser joined the Group Management Committee in August 2013 as President, Human Resources. He was previously Head of Group Human Resources. Before becoming Head of Human Resources, Mike was Asset President Mozal, based in Mozambique. His previous roles with the Company included Human Resources Vice President for the Aluminium and Energy Coal businesses.
Geoff Healy BEc, LLB, 48
Chief Legal Counsel
Mr Healy joined BHP Billiton as Chief Legal Counsel in June 2013. Prior to BHP Billiton, Mr Healy was a partner at Herbert Smith Freehills for 16 years, and a member of its Global Partnership Council, and worked widely across its network of Australian and international offices. His core field of expertise is complex corporate and regulatory advisory work, risk management, investigations and disputes.
Mike Henry BSc (Chem), 48
President, HSE, Marketing and Technology
Mr Henry joined BHP Billiton in 2003 and has served as President, HSE, Marketing and Technology since May 2013. Prior to this, he was Chief Marketing Officer. His earlier career with BHP Billiton included various business development and marketing roles, including Marketing Director for Petroleum, Marketing Director for Energy Coal and Freight and Vice President, Business Development for the Energy Coal Business. Prior to joining BHP Billiton, Mr Henry worked for Mitsubishi Corporation, where he held a number of commercial roles.
Graham Kerr BBus, FCPA, 43
Chief Financial Officer and Chairman of the Investment Committee and Financial Risk Management Committee
Alex VanselowMr Kerr joined the GroupBHP Billiton in 19891994 and was appointed Chief Financial Officer in March 2006. HeNovember 2011. Prior to this, he was previously President Aluminium,of Diamonds and Specialty Products. Mr Kerr has worked in a wide range of finance, treasury and operational roles across the Group, and has held the positions of Chief Financial Officer of Aluminium,Stainless Steel Materials, Vice President, Finance – BHP Billiton Diamonds and Finance Director for the EKATI diamond mine. In 2004, Mr Kerr left BHP Billiton for a two-year period, when he was General Manager Commercial for Iluka Resources Ltd.
In August 2014, Mr Kerr was appointed as Chief Executive Officer-designate of the new company that BHP Billiton plans to form in the proposed demerger. Mr Kerr will retire from the Group Management Committee, and as Chief Financial Officer of OrinocoBHP Billiton, on 1 October 2014.
Jane McAloon BEc (Hons), LLB, GDipGov, FCIS, 50
President, Governance and Group Company Secretary and Chairman of the Disclosure Committee
Ms McAloon was appointed to the Group Management Committee as President, Governance and Group Company Secretary in May 2013, after serving as Group Company Secretary since July 2007. Ms McAloon joined the BHP Billiton Group in September 2006 as Company Secretary for BHP Billiton Limited.
Daniel Malchuk BEng, MBA, 49
President, Aluminium, Manganese and Nickel
Mr Malchuk was appointed President Aluminium, Manganese and Nickel in May 2013. Previously, he was the President of Minerals Exploration, a position he held from July 2012. He worked for the Company between 1996 and 1998 in BHP Copper, in the United States, and has held a number of roles in the Base Metals business since he rejoined BHP Billiton in 2002. In 2006, he took the role of Asset Leader Joint Ventures and a year later was appointed Vice President Strategy and Development in Base Metals.
Jimmy Wilson BSc (Mechanical Engineering), 52
President, Iron CA,Ore
Mr Wilson was appointed President, Iron Ore in March 2012. He has had an extensive career in the mining industry, and held key managerial and operational roles throughout BHP Billiton including President, Energy Coal (2009 – 2012) and President, Stainless Steel Materials (2007 – 2009). Prior to these roles, Mr Wilson was President and Chief Operating Officer Nickel West, President and Chief Operating Officer Samancor Chrome and General Manager Accounting and Control BHP Iron Ore. His prior career was with Arthur Andersen.of Billiton’s Bayside Aluminium.
Karen Wood BEd, LLB (Hons), 5558
Group Executive and Chief People and Public Affairs OfficerPresident (until 19 August 2014)
Member of the Group Management Committee
KarenMs Wood joined BHP Billiton in 2001. Her previous positions with the Company were President Corporate Affairs, Chief People Officer, Chief Governance Officer, Special Adviser and Head of Group Secretariat and Group Company Secretary. She was appointedPrior to her retirement from the GMC, she provided advice to the Chief PeopleExecutive Officer in 2007 and in 2010 assumed responsibility for Public Affairs. She isworked on a memberrange of significant corporate and Board issues. Ms Wood retired from BHP Billiton on 20 August 2014 and will continue to provide advice and assistance, on an ongoing consultancy basis, to the Takeovers Panel (Australia)Chief Executive Officer and a FellowBoard of Directors on several matters including the Institute of Chartered Secretaries.proposed demerger. Before joining BHP Billiton, she was General Counsel and Company Secretary for Bonlac Foods Limited.
J Michael Yeager3.3 Shareholder engagement BSc, MSc, 58
Group Executive and Chief Executive Petroleum
MemberPart of the Group Management CommitteeBoard’s commitment to high-quality governance is expressed through the approach BHP Billiton takes to engaging and communicating with shareholders. We encourage shareholders to make their views known to us.
Mike Yeager joinedOur shareholders are based across the Group in April 2006 as Chief Executive Petroleum after 25 years with Mobil and later ExxonMobil. He was previously Vice President, ExxonMobil Development Company, and heldglobe. Outside of the roles of Senior Vice President, Imperial Oil Ltd and Chief Executive Officer, Imperial Oil Resources, Vice President Africa, ExxonMobil Production Company, Vice President Europe, ExxonMobil Production Company and President, Mobil Exploration and ProductionAnnual General Meeting (AGM), which is an important step in the US.
5 Corporate Governance Statement
5.1 Governance at BHP Billiton
‘Welcome to BHP Billiton’s Corporate Governance Statement, which outlines the approach your Board has adopted in relation to governing the Group. The Board represents yougovernance and investor engagement process and is ultimately accountable fordescribed below, the Group’s performanceBoard uses a range of formal and informal communication channels to understand shareholder views to ensure it can represent shareholders in creatinggoverning BHP Billiton. Regular proactive engagement with institutional shareholders and delivering shareholder value throughinvestor representative organisations takes place in Australia, South Africa, the effective governanceUnited Kingdom and the United States. The purpose of BHP Billiton.
BHP Billiton’s objectivethese meetings is to create long-term value for shareholders throughdiscuss the discovery, acquisition, development and marketing of natural resources. We have unique assets that are important to the growth of many of the world’s economies, and a geographic and commodity spread that reduces risk and optimises opportunity.
In doing this, we have committed to the highest levelfull range of governance and strive to foster a culture that values and rewards exemplary ethical standards, personal and corporate integrity and respect for others. The Board governs the Group consistent with our long-stated business strategy and commitment to a transparent and high-quality governance system.
Our approach to governance is based on the belief that there is a link between high-quality governance and the creation of long-term shareholder value. Our view remains that governance is not just a matter for the Board and a good governance culture must be fostered throughout the organisation. Our expectations of our employees and those to whom we contract business are set out in the BHP Billiton Code of Business Conduct.
This statement outlines our system of governance. BHP Billiton operates as a single economic entity under a Dual Listed Company (DLC) structure with a unified Board and management. We have a primary listing in Australia and a premium listing in the UK. We are also registered with the US Securities and Exchange Commission and have a secondary listing on the New York Stock Exchange (NYSE),issues, as well as the Johannesburg Stock Exchange. Ourbroad strategy of the Group. They offer an important opportunity to build relationships and to engage directly with governance framework takes into account managers, fund managers and governance advisers. The meetings are led by:
• | the CEO, Chief Financial Officer (CFO), senior management and the Investor Relations team – strategy, financial and operating performance. Important briefings are webcast live from our website:www.bhpbilliton.com. During FY2014, meetings between management, shareholders and bondholders were held in Australia, Canada, South Africa, Singapore, the UK and the US as part of our commitment to engage with providers of all types of capital; |
The Chairman’s meetings are scheduled throughout the year to ensure continual feedback. This is designed to ensure that issues can be discussed separate to the AGM, and, where appropriate, allows time to respond to feedback and shape new policies for the forthcoming financial year. During FY2014, the Chairman’s meetings included investors in Australia, the UK and the US, togetherUS. Alongside these meetings, Group Governance and Investor Relations met with prevailing standards of best practice. Where governance principles vary across these jurisdictions, the Board adopts whatshareholders in South Africa.
As a Group, we consider to be the higher of the prevailing standards.
Corporate governance principles continue to be refined by regulators, including new guidance on Board effectiveness from the UK Financial Reporting Council, additional legislative measures in Australia in relation to executive remuneration and the use of remuneration consultants, the implementation of the Stewardship Code for investors in the UK andtake a continued focus on diversity of skills, experience, nationality and gender on Boards. BHP Billiton adopted early the Australian Securities Exchange Corporate Governance Council Principles and Recommendations on diversity in 2010 and this year the Board has spent time considering its aspirational diversity goals. The Board believes that critical mass is important for diversity and, in relation to gender, has set an aspirational goal of increasing the number of women on the Board to at least three over the next two years (which, if achieved, would see the proportion of women on the Board increase from 17 per cent currently to 25 per cent, based on a Board size of 12). This is consistent with Lord Davies’ report in the UK, which recommends that FTSE 350 companies should set aspirational goals for Board gender composition.
In relationcoordinated approach to investor stewardship, through the Boardengagement, and Remuneration Committee Chairmen, we continue our long-standing practice of proactive communication and meetings with institutional investors and governance advisers. This engagement is valuable and we support the UK Financial Reporting Council’s focus on this issue.
Further Board renewal activities occurred during the year responded to a wide range of shareholders, their representatives and non-governmental organisations. Issues covered included climate change and strategic risk assessment; water management; hydraulic fracturing; joint venture governance; tax; remuneration; and collective bargaining.
Shareholders can contact us at any time through our Investor Relations team, with contact details available on our website:www.bhpbilliton.com. Feedback from shareholders is regularly reported to the Board. Shareholder and analyst feedback is shared with the appointmentBoard through the Chairman, the Chairman of twothe Remuneration Committee (also the Senior Independent Director), other Directors, Baroness Shriti Vaderathe CEO, the CFO and Lindsay Maxsted,the Group Company Secretary. In addition, the Head of Investor Relations and with Alan Boeckmann retiring.Vice President Governance is an ongoing processprovide regular reports to the Board on shareholder and we aimgovernance manager feedback and analysis. This approach provides a robust mechanism to maintain our focus on continuous improvement by buildingensure Directors are aware of issues raised and have a multi-skilled and diversified Board supported by a first-class management team.good understanding of current shareholder views.
I hope you find this report useful and look forward to feedback fellow shareholders may have.’
Jacques Nasser, AO, Chairman
5.2 Shareholder engagementAnnual General Meetings
The Board representsAGMs are an opportunity for shareholders to ask questions of the Board.
Our Dual Listed Company (DLC) structure means that we hold two AGMs each year. The AGMs are important dates in the BHP Billiton calendar. In October each year, the BHP Billiton Plc meeting is held in the United Kingdom, and in November, the BHP Billiton Limited meeting is held in Australia. These meetings provide an update for shareholders on the Group’s performance and offer an opportunity for shareholders to ask questions and is accountable to them for creating and delivering value through the effective governance of the business.
The Board has developed a strategy for engaging and communicating with shareholders, key aspects of which are outlined below.
vote. Shareholders vote on important matters affecting the business,Group, including the election of Directors, any changes to our constitutional documents, the receipt of annual financial statementsFinancial Statements and incentive arrangements for the Executive Directors.
Director. Shareholders are encouraged to make their views known to usmay appoint proxies electronically through our website and to raise directly any matters of concern. The Board uses a range of formal and informal measures to ensure that it understands and effectively responds to shareholder questions and concerns relating tomay also use the management and governance of the Group:
The Chairman, with support from the Company Secretariat team, has regular meetings with institutional shareholders and investor representatives to discuss governance matters.
The Remuneration Committee Chairman and Senior Independent Director also meets with institutional shareholders and investor representatives to discuss executive remuneration and other governance issues.
The Chief Executive Officer (CEO), Chief Financial Officer (CFO) and Investor Relations team meet regularly with major shareholders to discuss our strategy, financial and operating performance.
The Investor Relations team provides quarterly reports in relation to shareholder feedback generally, which the Board uses to assess how the Group is responding to shareholder views and issues.
Finally, shareholders are encouraged to attend BHP Billiton’s Annual General Meetings and to use these opportunities to ask questions (discussed further below).
In each case, the views and concerns that have been raised are reported to the Board, which ensures Directors are aware of the issues raised and assists Directors in developing an understanding of the views of shareholders, in particular in relation to strategic, financial and operating issues.
The Dual Listed Company structure means that Annual General Meetings of BHP Billiton Plcmobile voting service for smart phones. The Notice of Meeting describes how this can be done. As described above, a key part of our approach to governance is that shareholders’ views are heard and BHP Billiton Limited are held in the United Kingdom and Australia in October and November, respectively, each year. understood. The AGMs provide an important forum to enable this.
Questions can be registered prior to the meeting by completing the relevant form accompanying the Notice of Meeting or by emailingMeeting. Shareholders can also email the Group atinvestor.relations@bhpbilliton.com. Questions that have beencan be lodged ahead of the meeting and the answers to the most frequently asked questions are posted to our website.
Key members of management, including the CEO and CFO, are present and available to answer questions. The External Auditor attends the Annual General MeetingsAGMs and is also available to answer questions. Shareholders may appoint proxies electronically through our website. The Notice of Meeting describes how this can be done.
Proceedings at shareholder meetings and important briefings are broadcastwebcast live from our website. Copies of the speeches delivered by the Chairman and CEO to the Annual General MeetingsAGMs are released to the stock exchanges and posted to 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 to our website as soon as they are available following the completion of the BHP Billiton Limited meeting.
Information relating to the 2013 AGM is available online at
www.bhpbilliton.com/home/investors/shareholderinfo/Pages/Meetings.aspx.
5.3.13.4 Role and responsibilities of the Board
The Board’s role is to represent the shareholders and itshareholders. It is accountable to them for creating and delivering value through the effective governance of the business. The performance of theGroup. This role requires a high-performing Board, and the corresponding contributions ofwith all Directors contributing to the Board’s collective decision-making processes are essential to fulfil this role.processes.
The Board has published aBoard Governance Document, which is a statement of the practices and processes the Board has adopted to discharge its responsibilities. It includes the processes the Board has implemented to undertake its own tasks and activities; the matters it has reserved for its own consideration and decision-making; the authority it has delegated to the CEO, including the limits on the way in which the CEO can execute that authority; and provides guidance on the relationship between the Board and the CEO.
TheBoard Governance Document also specifies the role of the Chairman, the membership of the Board and the role and conduct of Non-executive Directors. Further information is at sections 5.3.23.5 to 5.3.4.3.8.
TheBoard Governance Document is available online at www.bhpbilliton.com/home/aboutus/ourcompany/Pages/governance.aspx. Allocation of decision-making authority |
The matters that the Board has specifically reserved for its decision are:
appointments to the appointmentposition of the CEO and approval of the appointmentsappointment of direct reportsexecutives reporting directly to the CEO;
approval of the overall strategy and annual budgets of the business;Group;
determination of matterscapital and non-capital items in accordance with the approved delegations of authority;
formal determinationsdetermination and adoption of documents (including the publication of reports and statements to shareholders) that are required by the Group’s constitutional documents, by statute or by other external regulation or governance codes.
The Board is free to alter the matters reserved for its decision, subject to the limitations imposed by the constitutional documents and the law.
Beyond those matters, the Board hasThe CEO is delegated all authority to achieve the corporate objective to the CEO, who takestake all decisions and actions which, inthat further the CEO’s judgement, are reasonable having regardcorporate purpose of creating long-term shareholder value through the discovery, acquisition, development and marketing of natural resources. This is subject to the limits imposed by the Board.Board on the CEO’s decision-making authority and set out in theBoard Governance Document, and the matters the Board has specifically reserved for its decision, including in the Group’s authorities framework. The CEO remains accountable to the Board for the authority that is delegated and for the performance of the business.Group with the expectation that the CEO works in a constructive partnership with the Board. The Board monitors the decisions and actions of the CEO and the performance of the businessGroup to gain assurance that progress is being made towards the corporate objective,purpose within the limits it has imposed through the
Group’s governance assurance framework. The Board also monitors the performance of the Group and assesses its risk profile through its Committees.committees. Reports from each of the Committeescommittees are set out in section 5.5.3.14.
The CEO is required to report regularly in a spirit of openness and trust on the progress being made by the business.Group. The Board and its Committeescommittees determine the information required from the CEO and any employee or external party, including the External Auditor. Open dialogue between individual members of the Board and the CEO and other employeesmembers of the management team is encouraged to enable Directors to gain a better understanding of our business.the Group.
Key activities duringIndependent advice
The Board and its committees may seek advice from independent experts whenever it is considered appropriate. Individual Directors, with the consent of the Chairman, may seek independent professional advice on any matter connected with the discharge of their responsibilities at the Group’s expense.
Strategic focus and review
Within this framework, at the start of the calendar year, the Board agrees its strategic focus and priorities for the year
A key activity during ahead. This ensures that the year was Board and Committee succession planning and renewal. The Board believes that orderly succession and renewal is in the best interests of the Group. Two new Non-executive Directors, Baroness Shriti Vadera and Lindsay Maxsted, were appointed to the Board on 1 January 2011 and 23 March 2011, respectively. Alan Boeckmann, a Non-executive Director, retired during the year. In addition, and as discussed in further detail in section 5.4.3, a succession process for the Risk and Audit Committee (RAC) Chairman led to the appointment of Lindsay Maxsted to that position in September 2011. The former RAC Chairman, David Crawford, has stepped down from the Committee and, at the requestwork of the Board is standing for re-electionaligned with the corporate purpose and takes into account external factors, such as commodity market developments, and changes to the Board.operating and regulatory environment.
Another significant activity during the year forThe Board also evaluates its activities on a regular basis taking into account:
investments of US$570 million and US$6.6 billion of capital expenditure to underpin continued growth in the Western Australian Iron Ore business;
an investment of US$2.5 billion in three key metallurgical coal projects located in the Bowen Basin in Central Queensland, Australia;
the acquisitionoutcomes of all of Chesapeake Energy Corporation’s interests in the Fayetteville Shale, US, for US$4.75 billion;
the expanded capital management program of US$10 billion, which included a A$6.0 billion (US$6.3 billion) off-market buy-back of BHP Billiton Limited shares;
the termination of the agreements with Rio Tinto to establish an iron ore production joint venture covering both entities’ Western Australia iron ore assets;
the withdrawal of the Group’s all-cash offer to acquire all of the issued and outstanding common shares of Potash Corporation of Saskatchewan Inc.
The Board is satisfied that it has discharged its obligations as set out in theBoard Governance Document.
5.3.2 MembershipKey activities during the year
BHP Billiton’s strategy to own and operate large, long-life, low-cost, expandable, upstream assets diversified by commodity, geography and market remains the foundation for creating shareholder value. At the end of FY2014, the Group had seven major projects and one other project under development with a combined budget of US$14.1 billion. Beyond our current projects in execution, the Board believes that the Group’s diversified portfolio is a point of differentiation and allows us to maintain an internal focus. As we concentrate investment in our major basins, it is expected that fewer projects will pass through our tollgate and prospective investment returns will rise. We believe that an average rate of return of greater than 20 per cent (ungeared, after tax, nominal dollars) is achievable for our favoured development options.
No major growth projects were approved during FY2014. Our commitment to maintain a solid ‘A’ credit rating remains unchanged. Within this context, the Board approved a range of business decisions, including:
Board and committee renewal
Another significant activity during the year was Board and committee succession planning and renewal. The Board believes that orderly succession planning and renewal is in the best interests of the Group. During FY2014, Mr Brinded was appointed to the Board, with effect from 15 April 2014, and subsequently joined the Sustainability Committee. In addition, Carolyn Hewson joined the Remuneration Committee in January 2014. As noted above, David Crawford intends to retire from the Board following the BHP Billiton Limited AGM. He has been appointed as Chairman-designate of the planned demerged company. The Board also intends to appoint Keith Rumble to the demerged company Board.
The Board currently has 12 members.14 members, each of whom must seek re-election by shareholders annually. Of these, 11,13, including the Chairman, are independent Non-executive Directors. The Non-executive Directors are considered by the Board to be independent of management and free from any business relationship or other circumstance that could materially interfere with the exercise of objective, unfettered or independent judgement. Further information on the process for assessing independence is in section 5.3.5.3.10.
DuringIn terms of Non-executive Directors, the year, there were a numberNomination and Governance Committee retains the services of changesexternal recruitment specialists to continue to assist in the compositionidentification of potential candidates for the Board. Shriti Vadera and Lindsay Maxsted joined the Board in January 2011 and March 2011, respectively, and Alan Boeckmann retired from the Board in March 2011.
Following completion of the succession planning process for the Board Chairman in 2010, the Board continued the succession planning process for the Chairman of the RAC. As discussed in section 5.4.3, Lindsay Maxsted was appointed as RAC Chairman in September 2011.
The Board considers that there is an appropriate balance between Executive and Non-executive Directors with a view to promotingpromote shareholder interests and governinggovern the businessCompany effectively. While the Board includes a smaller number of Executive Directors than is common for UK listedUK-listed companies, its composition is appropriate for the Dual Listed CompanyDLC structure and is in line with Australian listedAustralian-listed company practice. In addition, the Board has extensive access to members of senior management. Members of the Group Management Committee (the most senior executives in the Group)management, who frequently attend all the regularly scheduled Board meetings, by invitation, where they make presentations and engage in discussions with Directors, answer questions, and provide input and perspective on their areas of responsibility. The Board, led by the Chairman, also deliberates in the absence of management for partat the beginning and end of each meeting, which is chaired by the Group Chairman.meeting.
The Directors of the Group are:
Mr Jacques Nasser (Chairman)
Mr Marius Kloppers
Mr Malcolm Broomhead
Dr John Buchanan
Mr Carlos Cordeiro
Mr David Crawford
Ms Carolyn Hewson
Mr Lindsay Maxsted
Mr Wayne Murdy
Mr Keith Rumble
Dr John Schubert
Baroness Shriti Vadera
Thealong with their biographical details of the Directors are set out in section 4.1 of this Annual Report.3.2.1.
5.3.3 Skills, knowledge, experience and attributes of Directors
The Board considers that a diversity of skills, backgrounds, knowledge, experience and gender is required in order to effectively govern the business. The Board and its Committees actively work to ensure that the Executive and Non-executive Directors continue to have the right balance of skills, experience, independence and Group knowledge necessary to discharge their responsibilities in accordance with the highest standards of governance.
The Non-executive Directors contribute international and operational experience; understanding of the sectors in which we operate; knowledge of world capital markets; and an understanding of the health, safety, environmental and community challenges that we face. The Executive Director brings additional perspectives to the Board’s work through a deep understanding of the Group’s business. The Board works together as a whole to oversee strategy for the Group and monitor pursuit of the corporate objective.
Directors must demonstrate unquestioned honesty and integrity, preparedness to question, challenge and critique, and a willingness to understand and commit to the highest standards of governance. Each Director must ensure that no decision or action is taken that places his or her interests in front of the interests of the business.
It is made clear in the Terms of Appointment that Directors must be prepared to commit sufficient time and resources to perform the role effectively. (Section 5.3.7 provides further information on the Director Terms of Appointment.) The Nomination Committee takes account of the other positions held by each potential Director candidate and assesses whether they will have adequate time to devote to the Board prior to making a recommendation to the Board on whether to appoint them as a Director.
Directors commit to the collective decision-making processes of the Board. Individual Directors debate issues openly and constructively and are free to question or challenge the opinions of others. Directors also commit to active involvement in Board decisions, the application of strategic thought to matters in issue and are prepared to question, challenge and critique. Directors are clear communicators and good listeners who actively contribute to the Board in a collegial manner.
The Nomination Committee assists the Board in ensuring that the Board is comprised of high-calibre individuals whose background, skills, experience and personal characteristics will augment the present Board and meet its future needs and diversity aspirations.
Diversity on the Board
Corporate governance reviews have highlighted that there is a continuing lack of diversity amongst experienced Director candidates in Australia, the UK and the US. The Board reviewed its existing practices during the year, including how the Board and the Nomination Committee have taken into account diversity criteria, including gender, nationality and geography, as part of a Director candidate’s general background and experience. The review included an assessment of the Board Committees’ Terms of Reference, and resulted in amendments to the Terms of Reference of the Nomination Committee and the Remuneration Committee to formalise diversity considerations. The Board has set an aspirational goal of increasing the number of female Directors to at least three over the next two years (which, if achieved, would see the proportion of women on the Board increase from 17 per cent currently to 25 per cent, based on a Board size of 12). Further information in relation to how diversity is being addressed within the broader Group is contained in section 5.8.
Group and industry knowledge
In order to govern the Group effectively, Non-executive Directors must have a clear understanding of the Group’s overall strategy, together with knowledge about the Group and the industries in which it operates. Non-executive Directors must be sufficiently familiar with the Group’s core business to be effective contributors to the development of strategy and to monitor performance.
Structured opportunities are provided to build Director knowledge through initiatives such as regular periodic visits to BHP Billiton sites. Non-executive Directors also build their Group and industry knowledge through the involvement of the Group Management Committee (GMC) and other senior employees in Board meetings and specific business briefings. In addition, while the Business Group Risk and Audit Committees (Business Group RACs) are management committees, and therefore do not entail any delegation of responsibility from the Board’s RAC, the Board believes that the link back to the Board RAC facilitates a deeper understanding of risk management and assurance issues throughout the Group. Further information on the Business Group RACs is at section 5.5.1 and further information on induction and training of Non-executive Directors is at section 5.3.8.
Director skills and experience
The Board believes that a mix of skills and a breadth of experience is important to ensure that the Board and its Committees function cohesively as a whole and effectively lead the Group. The Nomination Committee has a formal process by which it assesses the overall skills and experience required on the Board, which involves having regard to the direction of the Group and the diversity aspirations of the Board, and works with the Board to ensure that it has the appropriate mix of skills and experience to meet the future needs of the business. Further information on the Nomination Committee’s process is at 5.5.3.
In addition, Directors have an individual development plan to provide a personalised approach to updating industry knowledge in particular (discussed further in sections 5.3.8 and 5.4.1).
The following table sets out some of the key skills of the Directors and the extent to which they are represented on the Board and its Committees. In addition to the skills and experience indicators set out in the table, theBoard Governance Document provides that each Director must have the following skills, attributes and experience: unquestioned honesty and integrity; a proven track record of creating value for shareholders; time available to undertake the responsibilities; an ability to apply strategic thought to matters in issue; a preparedness to question, challenge and critique; and a willingness to understand and commit to the highest standards of governance. The Board considers that each Director has the skills, attributes and experience required by theBoard Governance Document.
| ||||||||||||||||||||
| ||||||||||||||||||||
| ||||||||||||||||||||
| ||||||||||||||||||||
| ||||||||||||||||||||
| ||||||||||||||||||||
| ||||||||||||||||||||
| ||||||||||||||||||||
| ||||||||||||||||||||
| ||||||||||||||||||||
| ||||||||||||||||||||
| ||||||||||||||||||||
| ||||||||||||||||||||
| ||||||||||||||||||||
| ||||||||||||||||||||
The Chairman, of the Group is responsible for leading the Board and ensuring that it is operating to the highest governance standards. The Chairman is charged with building an effective, high performing and collegial team of Directors and ensuring that they operate effectively as a Board.
The Chairman, JacquesJac Nasser, is considered by the Board to be independent. He was appointed Chairman of the Group from 31 March 2010 and has been a Non-executive Director of the Group since 6 June 2006. Mr Nasser was last re-elected at the 2010 Annual General Meetings2013 AGMs and, in accordance with the Group’s policy that each Director stand for election annually, will stand for re-election in 2011.2014.
The Chairman’s role includes:
leading the Board and ensuring that it is operating to the principleshighest governance standards;
encouraging debate and constructive criticism;
setting agendas for meetings of the Board, in conjunctionconsultation with the CEO and Group Company Secretary, that focus on the strategic direction and performance of ourthe Group’s business;
ensuring that adequate time is available for discussion on strategic issues;
leading the Board and individual Director performance assessments;
speaking and acting for the Board and representing the Board to shareholders;
presenting shareholders’ views to the Board;
facilitating the relationship between the Board and the CEO.
The Board considers that none of Mr Nasser’s other commitments (set out in section 4.1 of this Annual Report)3.2.1) interfere with the discharge of his responsibilities to the Group. The Board is satisfied that he makes sufficient time available to serve the Group effectively.
The Group does not have a Deputy Chairman, but has identified John Schubert to act as Chairman should the need arise at short notice.
3.7 Senior Independent Director
The Board has appointed Sir John Buchanan isas the Senior Independent Director forof BHP Billiton Plc.Plc in accordance with the UK Corporate Governance Code. Sir John is available to shareholders who have concerns that cannot be addressed through the Chairman, CEO or CFO. As Senior Independent Director, he also provides a sounding board for the Chairman and serves as an intermediary for other Directors if necessary.
5.3.53.8 Director skills, experience and attributes
Skills, experience and attributes required
The Board considers that a diversity of skills, backgrounds, knowledge, experience, geographic location, nationalities and gender is required in order to effectively govern the business. The Board and its Nomination and Governance Committee work to ensure that the Board continues to have the right balance of skills, experience, independence and Group knowledge necessary to discharge its responsibilities in accordance with the highest standards of governance.
In order to govern the Group effectively, Non-executive Directors must have a clear understanding of the Group’s overall strategy, together with knowledge about the Group and the industries in which it operates. Non-executive Directors must be sufficiently familiar with the Group’s core business to be effective contributors to
the development of strategy and to monitor performance. Part of the required understanding of strategy and the core business is the requirement to understand the risks that the Group faces and the processes in place to mitigate and manage those risks. We operate in an uncertain external environment, and the Group is exposed to many material risks across its operations, including some that are systemic such as financial risks and climate change. All those risks are factored into the Board’s approach to strategy and its assessment of an optimised portfolio. The risk management governance structure is set out in section 3.15.
TheBoard Governance Document requires that Directors demonstrate unquestioned honesty and integrity, preparedness to question, challenge and critique, and a willingness to understand and commit to the highest standards of governance. Directors must commit to the collective decision-making processes of the Board. Individual Directors are required to debate issues openly and constructively, and are free to question or challenge the opinions of others. Directors must also commit to active involvement in Board decisions and the application of strategic thought to matters in issue. Directors must be clear communicators and good listeners who actively contribute to the Board in a collegial manner. Each Director must ensure that no decision or action is taken that places his or her interests in front of the interests of the Company.
Directors must be prepared to commit sufficient time and resources to perform their role effectively. The Nomination and Governance Committee takes account of the other positions held by each potential Director candidate. It assesses whether they will have adequate time to devote to the Board, prior to making a recommendation to the Board on whether to appoint them as a Director. In addition, Directors are required to consult with the Chairman before accepting any additional commitments that could conflict with or impact on the time Directors can devote to their role.
The Nomination and Governance Committee is required to assist the Board in ensuring that the Board is comprised of high-calibre individuals whose background, skills, experience and personal characteristics will augment the present Board and meet its future needs and diversity aspirations.
Current Board profile
The following table sets out the key skills and experience of the Directors and the extent to which they are represented on the Board and its committees. As a Board, the Non-executive Directors contribute:
The Executive Director brings additional perspectives to the Board’s work through a deep understanding of the Group’s business.
In addition to the skills and experience set out in the table, the Board considers that each Director has the following attributes:
Skills and experience | Board | Risk and Audit | Nomination and Governance | Remuneration | Sustainability | Finance | ||||||||||||||||||
Total Directors | 14 Directors | 4 Directors | 3 Directors | 5 Directors | 4 Directors | 4 Directors | ||||||||||||||||||
Executive leadership | ||||||||||||||||||||||||
Sustainable success in business at a very senior executive level in a successful career. | 13 Directors | 3 Directors | 3 Directors | 4 Directors | 4 Directors | 4 Directors | ||||||||||||||||||
Global experience | ||||||||||||||||||||||||
Senior management or equivalent experience in multiple global locations, exposed to a range of political, cultural, regulatory and business environments. | 14 Directors | 4 Directors | 3 Directors | 5 Directors | 4 Directors | 4 Directors | ||||||||||||||||||
Governance | ||||||||||||||||||||||||
Commitment to the highest standards of governance, including experience with a major organisation that is subject to rigorous governance standards, and an ability to assess the effectiveness of senior management. | 14 Directors | 4 Directors | 3 Directors | 5 Directors | 4 Directors | 4 Directors | ||||||||||||||||||
Strategy / Risk | ||||||||||||||||||||||||
Track record of developing and implementing a successful strategy, including appropriately probing and challenging management on the delivery of agreed strategic planning objectives. Track record in developing an asset or business portfolio over the long term that remains resilient to systemic risk. | 14 Directors | 4 Directors | 3 Directors | 5 Directors | 4 Directors | 4 Directors |
Skills and experience | Board | Risk and Audit | Nomination and Governance | Remuneration | Sustainability | Finance | ||||||||||||||||||
Financial acumen | ||||||||||||||||||||||||
Senior executive or equivalent experience in financial accounting and reporting, corporate finance and internal financial controls, including an ability to probe the adequacies of financial and risk controls. | 14 Directors | 4 Directors | 3 Directors | 5 Directors | 4 Directors | 4 Directors | ||||||||||||||||||
Capital projects | ||||||||||||||||||||||||
Experience working in an industry with projects involving large-scale capital outlays and long-term investment horizons. | 12 Directors | 3 Directors | 3 Directors | 3 Directors | 4 Directors | 4 Directors | ||||||||||||||||||
Health, safety and environment | ||||||||||||||||||||||||
Experience related to workplace health and safety, environmental and social responsibility, and community. | 13 Directors | 4 Directors | 3 Directors | 4 Directors | 4 Directors | 4 Directors | ||||||||||||||||||
Remuneration | ||||||||||||||||||||||||
Board Remuneration Committee membership or management experience in relation to remuneration, including incentive programs and pensions/superannuation and the legislation and contractual framework governing remuneration. | 14 Directors | 4 Directors | 3 Directors | 5 Directors | 4 Directors | 4 Directors | ||||||||||||||||||
Mining | ||||||||||||||||||||||||
Senior executive experience in a large mining organisation combined with an understanding of the Group’s corporate purpose to create long-term shareholder value through the discovery, acquisition, development and marketing of natural resources. | 5 Directors | 1 Director | 0 Directors | 1 Director | 2 Directors | 2 Directors |
Skills and experience | Board | Risk and Audit | Nomination and Governance | Remuneration | Sustainability | Finance | ||||||||||||||||||
Oil and gas | ||||||||||||||||||||||||
Senior executive experience in the oil and gas industry, including in-depth knowledge of the Group’s strategy, markets, competitors, operational issues, technology and regulatory concerns. | 6 Directors | 1 Director | 2 Directors | 3 Directors | 2 Directors | 1 Director | ||||||||||||||||||
Marketing | ||||||||||||||||||||||||
Senior executive experience in marketing and a detailed understanding of the Group’s corporate purpose to create long-term shareholder value through the discovery, acquisition, development and marketing of natural resources. | 12 Directors | 2 Directors | 3 Directors | 4 Directors | 4 Directors | 4 Directors | ||||||||||||||||||
Public policy | ||||||||||||||||||||||||
Experience in public and regulatory policy, including how it affects corporations. | 14 Directors | 4 Directors | 3 Directors | 5 Directors | 4 Directors | 4 Directors |
Renewal
The Board plans for its own succession, with the assistance of the Nomination and Governance Committee. In doing this, the Board:
The Board believes that orderly succession and renewal is achieved as a result of careful planning, where the appropriate composition of the Board is continually under review.
When considering new appointments to the Board, the Nomination and Governance Committee oversees the preparation of a position specification that is provided to an independent recruitment organisation retained to conduct a global search. Independent search firms are instructed to consider a wide range of candidates, including taking into account geographic location, nationality and gender. In addition to the specific skills, knowledge and experience deemed necessary, the specification contains the criteria required by theBoard Governance Document.
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. The letter of appointment clearly defines the role of Directors, including the expectations in terms of independence, participation, time commitment and continuous improvement. In summary, Directors are expected to constructively challenge; set the values and standards of the Group; monitor the performance of management and of the Group; satisfy themselves as to the adequacy and integrity of the Financial Statements; and satisfy themselves that the systems for the identification and management of risks are robust and appropriate. Directors are also expected to commit sufficient time to carry out their role and to participate in continuous improvement programs and internal reviews to support ongoing development. The letter of appointment also makes it clear that Directors are required to disclose circumstances that may affect, or be perceived to affect, their ability to exercise independent judgement so that the Board can assess independence on a regular basis.
A copy of the terms of appointment is available online at
www.bhpbilliton.com/home/aboutus/ourcompany/Pages/governance.aspx.
Diversity
The Board is committed to ensuring gender diversity is actively pursued and implemented in terms of current and future Board composition. Diversity is a core consideration in ensuring that the Board and its committees have the right balance of skills, experience, independence and Group knowledge necessary to discharge their responsibilities. The right blend of perspectives is critical to ensuring the Board oversees BHP Billiton effectively for shareholders.
In 2011, the Board outlined its aspirational goal of increasing the number of women on the Board to at least three, having appointed Carolyn Hewson and Baroness Shriti Vadera in 2010 and 2011, respectively. The Board remains committed to this goal, and continues to work towards it in a structured manner, looking out over a five-year period. We have used this structured approach now for several years and it provides a robust framework to consider what the Board requires over time, including diversity of gender, background, geography, skills, knowledge and experience.
For the past two years, two executive search firms, JCA Group and Heidrick & Struggles, have produced all-women short lists focused on the United Kingdom, Europe and the United States, which are continually refreshed. The two lists – combined with our skills and experience profile five-year matrix – ensure we maximise the number of female candidates we talk with and consider for appointment. Short-listed candidates are considered by the Nomination and Governance Committee, and during FY2014, the Chairman met regularly with potential female candidates who have a range of backgrounds.
While we are making good progress, our goal is unlikely to be achieved until the end of 2015. Our immediate business imperative in FY2014 has been to appoint an additional Director with skills and experience in the upstream oil and gas sector. The candidate search actively considered both potential female candidates and other diversity considerations, including background, experience and culture. Former Royal Dutch Shell Director, Malcolm Brinded, was appointed to the Board in 2014, bringing specific oil and gas sector experience. The Board also considers that it is important to continue to develop the potential of women at all levels of the Company, and part of the Board’s role is to consider and approve the Group’s measurable objectives, and oversee the Group’s progress towards these objectives. Further information, in relation to the initiatives in place to address diversity across the broader Group, and the impact they are having, is contained in section 1.13.
Board skills, experience and diversity
Note: Percentages in the diagram reflect the number of Directors represented in each category.
3.9 Director induction, training and development
The Board considers that the development of industry and Group knowledge is a continuous and ongoing process.
Upon appointment, each new Non-executive Director undertakes an induction program specifically tailored to their needs.
A copy of an indicative induction program is available online at
www.bhpbilliton.com/home/aboutus/ourcompany/Pages/governance.aspx.
BHP Billiton’s long-stated strategy is to own and operate large, long-life, low-cost, expandable, upstream assets diversified by commodity, geography and market. The Board’s development activity reflects this diversification through the provision of regular updates to Directors on each of the Group’s commodities, geographies and markets.
Non-executive Directors also participate in continuous improvement programs, in accordance with their terms of appointment. Programs are designed to maximise the effectiveness of the Directors throughout their tenure and link in with their individual Director performance evaluations. The Training and Development Program covers a range of matters of a business nature, including environmental, social and governance matters.
Structured opportunities are provided to build knowledge through initiatives such as visits to BHP Billiton sites and briefings provided at Board meetings. Non-executive Directors also build their Group and industry knowledge through the involvement of the GMC and other senior Group employees in Board meetings.
Briefings, site visits and development sessions underpin and support the Board’s work in monitoring and overseeing progress towards the corporate purpose. We therefore continuously build Directors’ knowledge to ensure the Board remains up to date with developments within our Businesses, as well as developments in the markets in which we operate.
During the year, Non-executive Directors participated in the following activities:
These sessions and site visits provide not only an update on the main Businesses and assets, but also allow an opportunity to discuss, in detail, the changing risk environment and the potential for impacts on the achievement of our corporate purpose and business plans. More detail on the management of principal risks is set out in sections 1.7.3 and 3.15. Director involvement and continuous development through site visits, Business Risk and Audit Committee (Business RAC) meetings and on-site briefings are summarised in the following map.
Business RAC meetings take place twice yearly as part of our financial governance framework. Directors who are members of the Board’s Risk and Audit Committee chair the Business RAC meetings. Further information on Business RACs is at section 3.14.1.
Director site visits, on-site briefings and Business RAC meetings 2012-2014
The Nomination and Governance Committee oversees the Directors’ Training and Development Program, and, as part of the yearly review process, the Chairman discusses development areas with each Director. Board committees in turn review and agree their training needs. The benefit of this approach is that induction and learning opportunities can be tailored to Directors’ committee memberships, as well as the Board’s specific areas of focus. In addition, this approach ensures a coordinated process in relation to succession planning, Board renewal, training and development and committee composition, which are all relevant to the Nomination and Governance Committee’s role in securing the supply of talent to the Board.
In addition, 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 are provided to all Directors to ensure that Directors are aware of matters to be considered by the committees, and can elect to attend meetings where appropriate.
The Board is committed to ensuring a majority of Directors are independent. The Board considers that all the current Non-executive Directors, including the Chairman, are independent.
Process to determine independence
The Board has 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 circumstances of a Director change such as to warrant reconsideration.
A copy of the |
The policy provides thaton Independence of Directors is available online at
www.bhpbilliton.com/home/aboutus/ourcompany/Pages/governance.aspx.
Under the test of independencepolicy, an ‘independent’ Director is whether the Directorone who is: ‘independent of management and any business or other relationship that could materially interfere with the exercise of objective, unfettered or independent judgement by the Director or the Director’s ability to act in the best interests of the BHP Billiton Group’.
Where a Director is considered by the Board to be independent, but is affected by circumstances that appear relevant to the Board’s assessment of independence, the Board has undertaken to explain the reasons why it reached its conclusion. In applying the independence test, the Board considers relationships with management, major shareholders, subsidiary and associated companies and other parties with whom the Group transacts business against predetermined materiality thresholds, all of which are set out in the policy. A summary of the factors that may be perceived to impact the independence of certain Directors is set out below.
Tenure
TwoDuring the year under review, four Directors, David Crawford, and John Schubert, Sir John Buchanan and Carlos Cordeiro, have each served on the Board for more than nine years from the date of their first election. Bothyears. Dr Schubert, Sir John and Mr Crawford and Dr SchubertCordeiro are standing for re-election at the 2011 Annual General Meetings,2014 AGMs, having each undergone a formal performance assessment. AlthoughAs noted above, Mr Crawford will retire from the BHP Billiton Board following the BHP Billiton Limited AGM in November 2014.
Dr Schubert was first appointedelected to the Board of BHP Limited in 2000. The Board in 1994,is of the Board considersview that he makesDr Schubert continues to make a significantvaluable contribution through his role as Chairman of the Sustainability Committee, his roles on the Remuneration and Nomination and Governance Committees, as well as to the work of the Board more broadly. Dr Schubert’s extensive experience as an executive, particularly in the international oil industry, and that his deep knowledgesubsequently as a public company director across multiple industries, adds significantly to the skills and expertise of the GroupBoard.
Sir John was first appointed to the Board (and as Senior Independent Director) in February 2003. The Board believes that he continues to act independently in the best interests of the Group. His expertise and broad international experience materially enhance the skills and experience profile of the Board and he continues to make a substantial contribution in his roles, as a member of the Board, Chairman of the Remuneration Committee, a member of the Nomination and Governance Committee and as Senior Independent Director.
Mr Cordeiro was first appointed to the Board in February 2005. The Board is particularly important atof the view that Mr Cordeiro continues to make a time when almost halfvaluable contribution through his role on the Non-executive Directors have between zeroRemuneration Committee as well as to three years tenure. the work of the Board. The Board believes that he continues to act independently in the best interests of the Group.
The Board does not believe that either Mr Crawford’s, or Dr Schubert’s, Sir John’s or Mr Cordeiro’s tenure materially interferes with their ability to act in the best interests of the Group. The Board also believes that each of them has retained independence of character and judgement and has not formed associations with management (or others) that might compromise their ability to exercise independent judgement or act in the best interests of the Group.
Retirement plan
As former Directors of BHP Limited, Davidprior to the merger with Billiton Plc, which formed the Group in 2001, Mr Crawford and JohnDr Schubert participated in a retirement plan approved by shareholders in 1989. The plan was closed on 24 October 2003 and benefits2003. Benefits accrued to that date,
together with interest earned on the benefits, have been preserved and will be paid on retirement. The Board does not believe that the independence of any participating Director is compromised as a result of this plan.
Relationships and associations
Lindsay Maxsted was the Chief Executive OfficerCEO of KPMG in Australia from January 2001 until December 2007. The Board considers that this prior relationship with KPMG does not materially interfere with Mr Maxsted’s exercise of objective, unfettered or
independent judgement, or his ability to act in the best interests of the BHP Billiton Group, andGroup. The Board has determined, consistent with its policy on the independence of Directors, that Mr Maxsted is independent. The Board notes in particular that:
Atat the time of his appointment to the Board, more than three years had elapsed since Mr Maxsted’s retirement from KPMG. The Director independence rules and guidelines that apply to the Group – which are a combination of Australian, UK and US rules and guidelines – all use three years as the benchmark ‘cooling off’ period for former audit firm partners;
Mr Maxsted has no financial (eg.(e.g. pension, retainer or advisory fee) or consulting arrangements with KPMG;
Mr Maxsted haswas not been part of the KPMG audit practice sinceafter 1980 and, haswhile at KPMG, was not been in any way involved in, or able to influence, any audit activity associated with BHP Billiton.
The Board considers Mr Maxsted’s financial acumen and extensive experience in the corporate restructuring field to be important in the discharge of the Board’s responsibilities. Accordingly, hisHis membership of the Board and Chairmanship of the RAC are considered by the Board to be appropriate and desirable.
DavidMr Crawford was a partner of KPMG in Australia until his retirement in June 2001; however, he2001. He has had no commercial relationship with KPMG since that time and the Board does not consider Mr Crawford’s independence to be compromised as a result of this relationshipassociation that ended more than 1013 years ago.
Some of the Directors hold or previously held positions in companies with which we have commercial relationships. Those positions and companies are set out in the Director profiles in section 4.1 of this Annual Report.3.2.1. The Board has assessed all of the relationships between the Group and companies in which Directors hold or held positions and has concluded that in all cases the relationships do not interfere with the Directors’ exercise of objective, unfettered or independent judgement or their ability to act in the best interests of our business.the Group.
A specific instance is Malcolm Broomhead, who, until 29 July 2013, was a Non-executive Director of Coates Group Holdings Pty Limited, a company with which BHP Billiton has commercial dealings. Coates Group provides equipment hire to the mining and resources industry, among others. Prior to and since the appointment of Mr Broomhead as a Director of BHP Billiton, the Board has assessed the relationship between BHP Billiton and Coates Group and remained satisfied that Mr Broomhead was able to apply objective, unfettered and independent judgement and act in the best interests of BHP Billiton. In addition, no commercial dealings with Coates Group were discussed at Board or Board committee level.
A second instance is Mr Crawford, who is an Advisory Board member for the commercial law firm Allens, which advises BHP Billiton on specific matters from time to time, but is not one of BHP Billiton’s relationship law firms. Mr Crawford’s role is as a member of the Advisory Board, a wholly advisory body that does not have decision-making authority for Allens. The Board has assessed the relationship and remains satisfied that Mr Crawford is independent in mind and judgement and is able to apply objective, unfettered and independent judgement and act in the best interests of BHP Billiton. In addition, the allocation of business to Allens was not discussed at Board or Board committee level, and to the extent it is in the future, Mr Crawford will absent himself fully from those deliberations.
A third instance is Malcolm Brinded who is a former executive Director of Royal Dutch Shell Plc, which is a material customer of the BHP Billiton Group. Mr Brinded stepped down from the Board of Shell on 1 April 2012 and left Shell group employment on 30 April 2012. Prior to and since the appointment of Mr Brinded as a Director of BHP Billiton, the Board has assessed the relationship between BHP Billiton and Shell group and remains satisfied that Mr Brinded is able to apply objective, unfettered and independent judgement and act in the best interests of BHP Billiton.
Transactions during the year that amounted to related-party transactions with Directors or Director-related entities under International Financial Reporting Standards (IFRS) are outlined in note 30 ‘Key Management Personnel’31 to the financial statements.Financial Statements.
Carolyn Hewson and Lindsay Maxsted are both Directors and currently Audit, Risk Management and Nomination Committee members of Westpac Banking Corporation. Mr Maxsted is Chairman-elect of Westpac and is scheduled to become Westpac’s Chairman in December 2011. The Board has assessed this cross directorship and concluded that it does not interfere with the Directors’ exercise of objective, unfettered or independent judgement or the Directors’ ability to act in the Group’s best interests.
Executive Director
The Executive Director, Marius Kloppers,Andrew Mackenzie, is not considered independent because of his executive responsibilities. Mr KloppersMackenzie does not hold directorships in any other company included in the ASX 100 or FTSE 100.
Conflicts of interest
The UK Companies Act requires that BHP Billiton Directors avoid a situation where they have, or can have, an unauthorised direct or indirect interest that conflicts, or possibly may conflict, with the Company’s interests.interests, unless approved by non-interested Directors. In accordance with the UK Companies Act, BHP Billiton Plc’s Articles of Association were amended at the 2008 Annual General Meetings to 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 them by non-conflicted Directors. The Nomination and Governance Committee supports the Board in this process, both by reviewing requests from Directors for authorisation of situations of actual or potential conflict and making recommendations to the Board, and by regularly reviewing any situations of actual or potential conflict that have previously been authorised by the Board, and making recommendations regarding whether the authorisation remains appropriate. In addition, in accordance with Australian law, if a situation arises for consideration in which a Director has a material personal interest, the affected Director takes no part in decision-making.
5.3.6 Senior Independent Director
The3.11 Board has appointed John Buchanan as the Senior Independent Director of BHP Billiton Plc in accordance with the UK Corporate Governance Code. Dr Buchanan is available to shareholders who have concerns that cannot be addressed through the Chairman, CEO or CFO. Dr Buchanan, as Senior Independent Director, also provides a sounding board for the Chairman and serves as an intermediary for other Directors if necessary.
5.3.7 Terms of appointment
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. The letter of appointment clearly defines the role of Directors, including the expectations in terms of independence, participation, time commitment and continuous improvement. In summary, Directors are expected to constructively challenge; set values and standards of the Group; monitor the performance of management; satisfy themselves as to the adequacy and integrity of financial statements; and satisfy themselves that the systems for the identification and management of risks are robust and appropriate. Directors are also expected to commit sufficient time to carry out their role and to participate in continuous improvement programs and internal review to support ongoing development. The letter of appointment also makes it clear that Directors are required to disclose circumstances that may affect, or be perceived to affect, their ability to exercise independent judgement so that the Board can assess independence on a regular basis.
5.3.8 Induction and training
The Board considers that the development of Group and industry knowledge is a continuous and ongoing process.
Upon appointment, each new Non-executive Director undertakes an induction program specifically tailored to their needs.
Non-executive Directors undertake to participate in continuous improvement programs, as required by their terms of appointment.
Structured opportunities for improvement are provided to continuously build a Director’s knowledge. During the year, Non-executive Directors participated in development activities, including:
business briefings intended to provide each Director with a deeper understanding of the activities, environment and key issues and direction of CSGs;
development sessions on specific topics of relevance, such as climate change, commodity markets and changes in corporate governance standards;
visits to key sites;
addresses by external speakers, who are generally experts in their field.
In addition, each Non-executive Director has an individual development plan in order to provide a personalised approach to updating the Director’s skills and knowledge. The program is designed to maximise the effectiveness of the Directors throughout their tenure and links in with their individual performance reviews (discussed further in section 5.4.1). The training and development program covers not only matters of a business nature, but also matters falling into the environmental, social and governance (ESG) area.
The Nomination Committee has oversight of the Directors’ Training and Development Program. The benefit of this approach is that induction and learning opportunities can be tailored to Directors’ Committee memberships and that the process in relation to Committee composition, succession and training and development is coordinated to ensure a link with the Nomination Committee’s role in securing the supply of talent to the Board.
5.3.9 Independent advice
The Board and its Committees may seek advice from independent experts whenever it is considered appropriate. Individual Directors, with the consent of the Chairman, may seek independent professional advice on any matter connected with the discharge of their responsibilities, at the Group’s expense.
5.3.10 Remuneration
Details of our remuneration policies and practices and the remuneration paid to the Directors (Executive and Non-executive) and members of the GMC are set out in the Remuneration Report in section 6 of this Annual Report. Shareholders will be invited to consider and to approve the Remuneration Report at the 2011 Annual General Meetings.
5.3.11 Share ownership
Non-executive Directors have agreed to apply at least 25 per cent of their remuneration to the purchase of BHP Billiton shares until they achieve a shareholding equivalent in value to one year’s remuneration. Thereafter, they must maintain at least that level of shareholding throughout their tenure. All dealings by Directors are subject to the Group’s Securities Dealing document and are reported to the Board and to the stock exchanges.
Information on our policy governing the use of hedge arrangements over shares in BHP Billiton by both Directors and members of the GMC is set out in section 6.3 of this Annual Report.
Details of the shares held by Directors are set out in section 7.20 of this Annual Report.
5.3.12 Meetings
The Board meets as often as necessary to fulfil its role. Directors are required to allocate sufficient time to the Group to perform their responsibilities effectively, including adequate time to prepare for Board meetings. During the reporting year the Board met 10 times, with six of those meetings being held in Australia, three in the
UK and one in the US. Generally, meetings run over three days (includes Committee meetings). The Non-executive Directors meet during each Board meeting in the absence of the Executive Director and management and the session is chaired by the Group Chairman. Attendance by Directors at Board and Board Committee meetings is set out in the table in section 5.4.1.
Members of the GMC and other members of senior management attended meetings of the Board by invitation. Senior managers delivered presentations on the status and performance of our businesses and matters reserved for the Board, including the approval of budgets, annual financial statements and business strategy.
5.3.13 Company Secretaries
Jane McAloon is the Group Company Secretary. Ms McAloon’s qualifications and experience are set out in section 4.1. The Group Company Secretary is responsible for developing and maintaining the information systems and processes that enable the Board to fulfil its role. The Group Company Secretary is also responsible to the Board for ensuring that Board procedures are complied with and advising the Board on governance matters. All Directors have access to the Group Company Secretary for advice and services. Independent advisory services are retained by the Group Company Secretary at the request of the Board or Board Committees. Ms McAloon is supported by Elisabeth Joyner, who was appointed in March 2011 as Deputy Company Secretary of BHP Billiton Limited, and Elizabeth Hobley and Geof Stapledon, who are Deputy Company Secretaries of BHP Billiton Plc. The Board appoints and removes the Company Secretaries.
5.4 Board of Directors – Review, re-election and renewalevaluation
5.4.1 Review
The Board is committed to transparency in determining Board membership and in assessing the performance of Directors. The Board assessesevaluates its performance through a combination of both internal peer review and externally facilitated evaluation.assessments. Contemporary performance measures are considered an important part of this process. Directors’ performance is also measured against their individual development plans (see section 5.3.8).plans.
The Board conducts regular evaluations of its performance, the performance of its Committees,committees, the Chairman, individual Directors and the governance processes that support the Board’s work. The Board evaluation process comprises both assessment and review, as summarised in the diagram below. This includes analysis of how the Board and its Directors are functioning, the time spent by the Board considering matters and whether the Termsterms of Referencereference of the Board Committeescommittees have been met, as well as compliance with theBoard Governance Document.
In addition, the evaluation considers the balance of skills, experience, independence and knowledge of the Company and the Board, its overall diversity, including gender, and how the Board works together as a unit.
The evaluationassessment of the Board’s performance is conducted by focusing on individual Directors and Board Committeescommittees in one year and the Board as a whole in the following year. Our approach has been to conduct an externally facilitated review of the Board of Directors and committees at least every two years. As described in last year’s Annual Report, the FY2013 Board assessment was internally rather than externally facilitated. This was to provide an opportunity for the new management structure to become sufficiently established for a meaningful review, while also adhering to our commitment of continuous improvement. We therefore conducted an external assessment of the Board during FY2014, as set out in more detail below.
In addition, each year the Board, with the assistance of the Nomination and Governance Committee, conducts evaluationsa review of the performance of Directors retiring andeach Director seeking re-election and uses the results of the evaluationthat review when
considering whether to recommend the re-election of particular Directors.each Director. As the Board has adopted a policy of annual election, this effectively means that all Directors are subject to a performance review annually should they wish to remain on the Board.
During internally facilitated individual Director reviews, each of the Directors giveprovide anonymous feedback on their peers’ performance and individual contributions to the Board, which is passed on to the relevant Director via the Chairman. In respect of the Chairman’s performance, Directors provide feedback directly to either Dr Schubert or Sir John Schubert to be passed on anonymously to the Chairman.as Senior Independent Director. External independent advisers are engaged to assist these processes, as necessary and an externally facilitated review of the Board, Directors or Committees takes place at least every two years. It is thought that thenecessary. The involvement of an independent third party has assisted in the evaluation processes to be bothbeing rigorous, fair and fair.
Duringensuring continuous improvement in the year an externally facilitated evaluationoperation of the Board which commenced inand committees, as well as the previous financial year, was undertaken. The review indicated that the Board is continuing to function effectively and in accordance with the terms of theBoard Governance Document. In addition, externally facilitated reviewscontributions of individual Directors and of each Board Committee have been undertaken.Directors.
Director evaluation
The evaluation of individual Directors focuses on the contribution of the Director to the work of the Board and the expectations of Directors as specified in the Group’s governance framework. The performance of individual Directors is assessed against a range of criteria, including the ability of the Director to:
consistently take the perspective of creating shareholder value;
contribute to the development of strategy;
understand the major risks affecting the business;
provide clear direction to management;
contribute to Board cohesion;
commit the time required to fulfil the role and perform their responsibilities effectively;
listen to and respect the ideas of fellow Directors and members of management.
Board effectiveness
The effectiveness of the Board as a whole and of its Committeescommittees is assessed against the accountabilities set down in theBoard Governance Document and each committee’s terms of the Committees’ Terms of Reference.reference. Matters considered in the assessmentevaluations include:
the effectiveness of discussion and debate at Board and Committeecommittee meetings;
the effectiveness of the Board’s and Committees’committees’ processes and relationship with management;
the quality and timeliness of meeting agendas, Board and Committeecommittee papers and secretariat support;
the composition of the Board and each Committee,committee, focusing on the blend of skills, experience, independence and experience.knowledge of the Group and its diversity, including geographic location, nationality and gender.
The process is managed by the Chairman, but feedback on the Chairman’s performance is provided to him by JohnDr Schubert.
Information about the performance review process for executives is set out in section 5.7.
Evaluations conducted in FY2014
During the year under review, the Board conducted an externally facilitated Board assessment, an internal assessment of each Director and an internal committee review to ensure continued compliance with the recently updated committee terms of reference.
Board assessment
The external assessment focused in particular on the Board’s interface with the CEO and senior management; the Board’s priorities; and the focus of the Board committees and their interface with the Board. It also sought the views of the Directors for suggestions for improving the Board’s overall effectiveness. The review was facilitated by JCA Group, and involved an interview with each Director. The findings were discussed in depth by the Board. A range of improvements to the Board’s work and effectiveness will be incorporated into the work of the Board and procedures, including: streamlining of the Board meeting processes and procedures, the introduction of regular Asset President meetings to allow Board members to engage with operating executives on a broad range of issues, and formalisation of the focused Board strategy day. This annual event is built around scenarios and sign posts for future developments and provides an opportunity for the Board to undertake a deeper dive into a range of strategic and long-term plans.
Director assessment
Due to the previous year’s externally facilitated Board assessment, the FY2014 Director assessment was internally facilitated. The overall findings were presented to the Board and discussed. Each Director was provided feedback on their contribution to the Board and its committees. This review supported the Board’s decision to endorse all retiring Directors standing for re-election.
Committee review
During FY2014, an internal review was conducted to confirm continued compliance with each committee’s respective terms of reference, which were updated in FY2013.
During the previous year, we conducted external assessments of the committees, which utilised an electronic survey tool provided by Lintstock, and were focused to draw out views on work, overall effectiveness, decision-making and other processes. Outcomes and recommendations from each committee were considered and approved by the Board prior to implementation.
Enhancements following previous evaluations
Board and committee evaluations conducted in recent years have led to a number of enhancements to Board meeting processes:
3.12 Board meetings and attendance
The Board meets as often as necessary to fulfil its role. Directors are required to allocate sufficient time to the Group to perform their responsibilities effectively, including adequate time to prepare for Board meetings. During the reporting year, the Board met eight times, with five of those meetings being held in Australia, two in the United Kingdom and one in the United States. Regularly scheduled Board meetings run over three days (including committee meetings and Director training and development sessions).
Members of the GMC and other members of senior management attended meetings of the Board by invitation. Senior managers delivered presentations on the status and performance of our Businesses and matters reserved for the Board, including the approval of budgets, annual Financial Statements and strategy.
Attendance at Board and Board Committeecommittee meetings during the year ended 30 June 20112014 is set out in the table below.
Board | Risk and Audit | Nomination | Remuneration | Sustainability | Board | Risk and Audit | Nomination and Governance | Remuneration | Sustainability | Finance | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
A | B | A | B | A | B | A | B | A | B | A | B | A | B | A | B | A | B | A | B | A | B | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Alan Boeckmann(1) | 7 | 6 | — | — | — | — | 6 | 6 | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Malcolm Brinded | 2 | 2 | – | – | – | – | – | – | 2 | 2 | – | – | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Malcolm Broomhead | 10 | 10 | — | — | — | — | — | — | 7 | 7 | 8 | 8 | – | – | – | – | – | – | 7 | 7 | 10 | 10 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
John Buchanan | 10 | 10 | — | — | 7 | 7 | 8 | 8 | — | — | 8 | 8 | – | – | 6 | 6 | 7 | 7 | – | – | – | – | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Carlos Cordeiro | 10 | 10 | — | — | — | — | 8 | 8 | — | — | 8 | 8 | – | – | – | – | 7 | 7 | – | – | – | – | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
David Crawford | 10 | 10 | 9 | 9 | — | — | — | — | — | — | 8 | 8 | – | – | – | – | – | – | – | – | 10 | 10 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Pat Davies | 8 | 8 | – | – | – | – | 7 | 7 | – | – | – | – | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Carolyn Hewson | 10 | 10 | 9 | 9 | — | — | — | — | — | — | 8 | 8 | 9 | 9 | – | – | 3 | 3 | – | – | – | – | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Marius Kloppers | 10 | 10 | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Lindsay Maxsted(3) | 3 | 3 | 1 | 1 | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Andrew Mackenzie | 8 | 8 | – | – | – | – | – | – | – | – | – | – | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Lindsay Maxsted | 8 | 8 | 9 | 9 | – | – | – | – | – | – | 10 | 10 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Wayne Murdy | 10 | 10 | 9 | 8 | — | — | — | — | — | — | 8 | 8 | 9 | 9 | – | – | – | – | – | – | 10 | 10 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Jacques Nasser | 10 | 10 | — | — | 7 | 7 | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Jac Nasser | 8 | 8 | – | – | 6 | 6 | – | – | – | – | – | – | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Keith Rumble | 10 | 9 | — | — | — | — | — | — | 7 | 7 | 8 | 8 | – | – | – | – | – | – | 7 | 7 | – | – | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
John Schubert | 10 | 10 | — | — | 7 | 7 | 8 | 8 | 7 | 7 | 8 | 8 | – | – | 6 | 6 | 7 | 7 | 7 | 7 | – | – | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Shriti Vadera(4) | 4 | 4 | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Shriti Vadera | 8 | 8 | 9 | 9 | – | – | – | – | – | – | – | – |
Column A – indicates the number of scheduled and ad-hoc meetings held during the period the Director was a member of the Board and/or Committee.committee.
Column B – indicates the number of scheduled and ad-hoc meetings attended during the period the Director was a member of the Board and/or Committee.committee.
|
|
|
|
5.4.2 Re-election3.13 Director re-election
In August 2011 theThe Board has adopted a policy consistent with the UK Corporate Governance Code, under which all Directors must seek re-election by shareholders annually, if they wish to remain on the Board, seek re-election by shareholders annually.Board. This new policy will taketook effect at the 2011 Annual General Meetings,AGMs. The Board believes that annual re-election promotes and replacessupports accountability to shareholders, and the previous system, as set out incombined voting outcome of the Constitution ofBHP Billiton Plc and BHP Billiton Limited and the Articles2013 AGMs meant that each Director received more than 97.5 per cent in support of Association of BHP Billiton Plc, under which Directors were required to submit themselves to shareholders for re-election at least every three years.their re-election.
Board support for reappointment is not automatic. Retiring Directors who are seeking re-election are subject to a performance appraisal overseen by the Nomination Committee. Following thatand Governance Committee of the Board. Annual re-election effectively means all Directors are subject to a performance appraisal theannually. The Board, on the recommendation of the Nomination and Governance Committee, makes a determination as to whether it will endorse a retiring Director for re-election. The Board will not endorse a Director for re-election if his or her performance is not considered satisfactory. The Board will advise shareholders in the Notice of Meeting whether or not re-election is supported.
BHP Billiton does not apply or implement a ‘no vacancy’ rule in relation to Board appointments. Accordingly, Director candidates can be elected to the Board by ordinary resolution and are not required to out-poll an incumbent Director in order to be elected.
5.4.3 Renewal
The3.14 Board plans for its own succession with the assistance of the Nomination Committee. In doing this, the Board:
considers the diversity of skills, backgrounds, knowledge, experience and gender necessary to allow it to meet the strategic vision for the business;
assesses the skills, backgrounds, knowledge, experience and gender currently represented;
identifies any inadequate representation of those attributes and agrees the process necessary to ensure a candidate is selected who brings them to the Board;
reviews how Board performance might be enhanced, both at an individual Director level and for the Board as a whole.
The Board believes that an orderly succession and renewal process is in the best interests of the Group. The Board believes that orderly succession and renewal is achieved as a result of careful planning, where the appropriate composition of the Board is continually under review.
When considering new appointments to the Board, the Nomination Committee oversees the preparation of a position specification that is provided to an independent recruitment organisation retained to conduct a global search. Independent search firms retained are instructed to consider a wide range of candidates, including taking into account geographic location, nationality and gender. In addition to the specific skills, knowledge and experience deemed necessary, the specification contains criteria such as:
a proven track record of creating shareholder value;
unquestioned integrity;
a commitment to the highest standards of governance;
having the required time available to devote to the job;
strategic mind set, an awareness of market leadership, outstanding monitoring skills;
a preparedness to question, challenge and critique;
an independent point of view.
Newly appointed Directors must submit themselves to shareholders for election at the first Annual General Meeting following their appointment.
Risk and Audit Committee Chairman succession
Following completion of the succession planning process for Board Chairman in 2010, the Board continued the succession planning process for the Chairman of the RAC. The succession planning process involved careful consideration of the skills, knowledge and experience required on the Board, in particular the skills and experience required to properly fulfil the duties of the RAC Chairman, given the size and complexity of the Group. Mr Lindsay Maxsted, a corporate recovery specialist who has managed a number of Australia’s largest corporate insolvency and restructuring engagements, was appointed as the new RAC Chairman from 6 September 2011. David Crawford retired as RAC Chairman and as a member of the RAC on 6 September 2011. At the request of the Board, Mr Crawford is standing for re-election to the Board.
5.5 Board Committeescommittees
The Board has established Committeescommittees to assist it in exercising its authority, including monitoring the performance of the businessGroup to gain assurance that progress is being made towards the corporate objectivepurpose within the limits imposed by the Board. The permanent Committees of the Board are the RAC, the Sustainability Committee, the Nomination Committee and the Remuneration Committee. Other Committees are formed from time to time to deal with specific matters.
Each of the permanent Committeescommittees has Termsterms of Referencereference under which authority is delegated by the Board.
|
The office of the Company Secretary provides secretariat services for each of the Committees.committees. Committee meeting agendas, papers and minutes are made available to all members of the Board. Subject to appropriate controls and the overriding scrutiny of the Board, Committee Chairmencommittee chairmen are free to use whatever resources they consider necessary to discharge their responsibilities.
Reports from each of the Committees appear below.committees follow.
5.5.1
The terms of reference for each committee are available online atwww.bhpbilliton.com/home/aboutus/ourcompany/Pages/governance.aspx.
3.14.1 Risk and Audit Committee Report
Role and focus
The role of the Risk and Audit Committee (RAC) met nine times during the year. Information on meeting attendance by Committee members is included in the table in section 5.4.1 and information on their qualifications is included in section 4.1.
Risk and Audit Committee members during the year(3)
|
| |
| ||
| ||
| ||
|
|
|
|
Role and focus
The role of the RAC is to assist the Board in monitoring the decisions and actions of the CEO and the Group and to gain assurance that progress is being made towards the corporate objectivepurpose within the CEO limits.limits imposed by the Board, as set out in theBoard Governance Document. The RAC undertakes thisdischarges its responsibilities by overseeing:
the integrity of the financial statements;
the appointment, remuneration, qualifications, independence and performance of the External Auditor and the integrity of the audit process as a whole;
the plans, performance, objectivity and leadership of the internal audit function;
the effectiveness of the systems of internal controls and risk management;
the Group’s systems for compliance with applicable legal and regulatory requirements;
the CEO’s compliance by management with constraints imposed by the Board.relevant CEO limits.
The role of the RAC in the context of the Board’s broader governance framework is summarised in the diagram below. Further information about our approach to risk can be found in sections 1.7 and 3.15 of this Annual Report.
Business GroupBHP Billiton governance structure – Risk and Audit CommitteesCommittee
The RAC met nine times during the year. Information on meeting attendance by Committee members is included in the table in section 3.12 and information on their qualifications is included in section 3.2.1.
In addition to the regular business of the year, the Committee discussed the proposals for change in the regulatory environment across the jurisdictions in which our securities are listed. These included revisions to the 2012 UK Corporate Governance Code relating to annual reports being fair, balanced and understandable, and the proposals in respect of audit from the European Union and the UK Competition and Markets Authority. Statements relating to tendering of the external audit contract, significant matters relating to the Financial Statements, and the process for evaluating the external audit are set out below.
The RAC continues to monitor regulatory developments in relation to the audit regime and the role of risk and audit committees, and will continue to review and assess how these will impact the Group in the future. In addition, the RAC considered and discussed updates in relation to the ongoing anti-corruption investigation outlined in section 3.17.
Business Risk and Audit committees
To assist management in providing the information necessary to allow the RAC to discharge its responsibilities, Business Risk and Audit Committeescommittees have been established, for each of our Business Groups, incorporating each CSGBusiness, and for key functional areas such as Marketing and Treasury. As illustrated in the diagram below, these Committees,These committees, known as Business Group RACs, have been established and operate as committees of management, but are chaired by members of the RAC. TheyThe responsible member of the GMC participates in those meetings. Business RACs perform an important monitoring function in the overall governance of the Group.
Significant financial and risk matters raised at Business Group RAC meetings are reported to the RAC by the Head of Group Reporting and Taxation and the Head of Group Risk Assessment and Assurance.
Risk and Audit Committee members during the year
Name | Status | |
Lindsay Maxsted (Chairman)(a) | Member for whole period | |
Carolyn Hewson | Member for whole period | |
Wayne Murdy | Member for whole period | |
Shriti Vadera | Member for whole period |
(a) | Mr Maxsted is the Committee’s financial expert nominated by the Board. |
Activities undertaken during the year
Fair, balanced and understandable
One of the major items of discussion by the RAC during the year were the revisions to the UK Corporate Governance Code, which requires the Directors to confirm that they consider the Annual Report, taken as a whole, is fair, balanced and understandable, and provides the information necessary for shareholders to assess the Group’s performance, business model and strategy.
The Group has a substantial assurance framework for the Annual Report already in place. This includes management representation letters, CEO and CFO certifications, RAC oversight of the Financial Statements and a range of other financial governance procedures focused on the financial section of the Annual Report, together with detailed verification and internal audit procedures for the narrative reporting section of the Report.
The Board requested the RAC provide advice on whether the Annual Report meets the fair, balanced and understandable requirement and, as a result, the RAC terms of reference were updated to reflect this role. The RAC considered it appropriate to use the UK Corporate Governance Code revisions to enhance the existing project plans that support the preparation of the Annual Report suite, in order to provide the Board with appropriate assurance.
As part of the enhanced assurance process, the following is required:
As a result of the existing and enhanced process, the RAC, and then the Board, were able to confirm their view that BHP Billiton’s 2014 Annual Report taken as a whole is fair, balanced and understandable. The Board’s statement on the report is on page 209.
Integrity of financial statementsFinancial Statements
TheIn addition to the enhanced process above, the RAC assistscontinues to assist the Board in assuring the integrity of the financial statements.Financial Statements. The RAC evaluates and makes recommendations to the Board about the appropriateness of accounting policies and practices, areas of judgement, compliance with Accounting Standards, stock exchange and legal requirements and the results of the external audit. It reviews the half yearlyhalf-yearly and annual financial statementsFinancial Statements and makes recommendations on specific actions or decisions (including formal adoption of the financial statementsFinancial Statements and reports) the Board should consider in order to maintain the integrity of the financial statements.Financial Statements. From time to time, the Board may delegate authority to the RAC to approve the release of the statements to the stock exchanges, shareholders and the financial community.
The CEO and CFO have certified that the 2011 financial statements2014 Financial Statements present a true and fair view, in all material respects, of our financial condition and operating results and are in accordance with applicable regulatory requirements.
Significant matters Another of the new UK Corporate Governance Code provisions that applies to the Group is the requirement to report the significant issues that the RAC considered in relation to the Financial Statements, and how these issues were addressed. During FY2014, the Committee considered the following significant issues: New accounting standards The Committee considered and approved accounting policy changes resulting from the application of: Significant consideration was given to the appropriate application of these new and amended standards and interpretations to BHP Billiton. The Committee reviewed management’s analysis and concurred with its recommendations, which resulted in significant changes to the basis of accounting for Escondida, Samarco and Antamina. Impairment The Committee reviewed the results of impairment assessments for Nickel West and Worsley assets in Western Australia and concluded that no further impairment charges or reversals were appropriate. In all cases, specific consideration was given to the most recent foreign exchange and price curves. In the case of Nickel West, specific consideration was given to the following: Income tax liabilities The Committee reviewed the measurement and disclosure of contingent liabilities arising from various income tax matters including the following: Divestments The Committee reviewed the accounting treatment for the sale of Pinto Valley, United States, and concluded that the gain on sale of US$385 million (after tax) required disclosure as an exceptional item. The Committee also reviewed the sale of the BHP Navajo Coal Company and, while binding agreements for the sale have been entered into, determined that the disposal date for accounting purposes will be achieved only when the risks and rewards ultimately transfer to the acquirer. Closure and rehabilitation provisions The Committee reviewed the various changes in estimates for closure and rehabilitation provisions recognised during the year. Consideration was given to the results of the most recently completed surveying data, current cost estimates and appropriate inclusion of contingency in cost estimates to allow for both known and residual risks.
External Auditor
The RAC manages the relationship with the External Auditor on behalf of the Board. It considers the reappointment of the External Auditor each year, as well as remuneration and other terms of engagement, and makes a recommendation to the Board. The last competitive audit review was in 2003, when KPMG was appointed by the Board on the recommendation of the RAC. There are no contractual obligations that restrict the RAC’s capacity to recommend a particular firm for appointment as auditor. Shareholders are asked to approve
The last audit tender was in 2002, at which time the reappointmentGroup had three external auditors following the completion of the auditor each yearDLC merger. The tender resulted in KPMG and PricewaterhouseCoopers being appointed as joint auditors for FY2003 and a reduction in audit providers. A competitive audit review was undertaken in 2003, which resulted in KPMG being appointed as the External Auditor by the Board on the recommendation of the RAC.
The lead audit engagement partners in both Australia and the United Kingdom have been rotated every five years. The current Australian audit engagement partner was appointed for the FY2010 year-end, and therefore FY2014 was his last year. There has therefore been a transition period to the new engagement partner who took formal responsibility at the start of FY2015. A new UK audit engagement partner was appointed for the FY2013 year-end, and therefore FY2017 is scheduled to be his last year.
During FY2014, the Committee continued to monitor and discuss the UK and EU developments in regard to audit firm tender and rotation. The Committee is satisfied with the External Auditor’s performance and independence and therefore does not believe a tender in the UK.
Evaluation of External Auditor and external audit process
The RAC evaluates the performance of the External Auditor during its term of appointment against specified criteria, including delivering value to shareholders and ourselves.the Group, and also assesses the effectiveness of the external audit process. It does so through a range of means, including:
The RAC also reviews the integrity, independence and objectivity of the External Auditor. This review includes:
confirming that the External Auditor is, in its judgement, independent of the Group;
obtaining from the External Auditor an account of all relationships between the External Auditor and the Group;
monitoring the number of former employees of the External Auditor currently employed in senior positions within the Group and assessing whether those appointments impair, or appear to impair, the External Auditor’s judgement or independence;
considering whether the various relationships between the Group and the External Auditor collectively impair, or appear to impair, the External Auditor’s judgement or independence;
determining whether the compensation of individuals employed by the External Auditor who conduct the audit is tied to the provision of non-audit services and, if so, whether this impairs, or appears to impair, the External Auditor’s judgement or independence;
reviewing the economic importance of our businessthe Group to the External Auditor and assessing whether that importance impairs, or appears to impair, the External Auditor’s judgement or independence.
The External Auditor also certifies its independence to the RAC.
The audit engagement partner rotates every five years.Non-audit services
Although the External Auditor does provide some non-audit services, the objectivity and independence of the External Auditor is safeguarded through restrictions on the provision of these services. For example, certain types of non-audit serviceservices may only be undertaken by the External Auditor with the prior approval of the RAC (as described below), while other services may not be undertaken at all, including services where the External Auditor:
may be required to audit its own work;
participates in activities that would normally be undertaken by management;
is remunerated through a ‘success fee’ structure;
acts in an advocacy role for our business.
The RAC has adopted a policy entitled ‘Provision of Audit and Other Services by the External Auditor’, covering the RAC’s pre-approval policies and procedures to maintain the independence of the External Auditor.
|
Our policy on Provision of Audit and Other Services by the External Auditor is available online atwww.bhpbilliton.com/home/aboutus/ourcompany/Pages/governance.aspx.
In addition to audit services, the External Auditor will be permitted to provide other (non-audit) services that are not, and are not perceived to be, in conflict with the role of the External Auditor. In accordance with the requirements of the US Securities Exchange Act and guidance contained in Public Company Accounting Oversight Board (PCAOB) Release 2004-001, certain specific activities are listed in our detailed policy whichthat have been ‘pre-approved’ by the RAC.
The categories of ‘pre-approved’ services are as follows:
Audit services – work that constitutes the agreed scope of the statutory audit and includes the statutory audits of the Group and its entities (including interim reviews). The RAC will monitor the Auditaudit services engagements and approve, if necessary, any changes in terms and conditions resulting from changes in audit scope, Group structure or other relevant events.
Audit-related/assurance services – work that is outside the required scope of the statutory audit, but is consistent with the role of the external statutory auditor. This category 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, is of an assurance or compliance nature and is work that the External Auditor must or is best placed to undertake.
Tax services – work of a tax nature that does not compromise the independence of the External Auditor.
Other advisory services – work of an advisory nature that does not compromise the independence of the External Auditor.
Activities not listed specifically are therefore not ‘pre-approved’ and must be approved by the RAC prior to engagement, regardless of the dollar value involved. Additionally, any engagement for other services with a value over US$100,000, even if listed as a ‘pre-approved’ service, can only be approved by the RAC, and all engagements for other services, whether ‘pre-approved’ or not, and regardless of the dollar value involved, are reported quarterly to the RAC.
While not specifically prohibited by our policy, any proposed non-audit engagement of the External Auditor relating to internal control (such as a review of internal controls or assistance with implementing the regulatory requirements, including those of the US Securities Exchange Act) must obtain specific prior approval byfrom the RAC. With the exception of the external audit of the Group financial report,Financial Statements, any engagement identified that contains an internal control-related element is not considered to be pre-approved. In addition, whilstwhile the categories shown above include a list of certain pre-approved services, the use of the External Auditor to perform such services shall always be subject to our overriding governance practices as articulated in the policy.
An exception can be made to the above policy where such an exception is in our interests and appropriate arrangements are put in place to ensure the integrity and independence of the External Auditor. Any such exception requires the specific prior approval of the RAC and must be reported to the Board. No exceptions were approved during the year ended 30 June 2011.2014.
In addition, the RAC approved no services during the year ended 30 June 20112014 pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of the US Securities and Exchange Commission’s (SEC)SEC Regulation S-X.
Fees paid to the Group’s External Auditor during the year for audit and other services were US$23.728.2 million, of which 6061 per cent comprised audit fees, 3034 per cent related to legislative requirements (including Sarbanes-Oxley) and 10five per cent werewas for other services. Details of the fees paid are set out in note 3435 ‘Auditor’s remuneration’ to the financial statements.Financial Statements.
Based on the review by the RAC, the Board is satisfied that the External Auditor is independent.
Change in registrant’s certifying accountant
The former auditor of BHP Billiton Plc for the 2013 and 2012 financial years, KPMG Audit Plc, has instigated an orderly wind down of business; accordingly KPMG Audit Plc did not stand for re-election at our annual general meeting on 24 October 2013. A resolution was approved at the annual general meeting for the appointment of KPMG LLP as auditor of BHP Billiton Plc. The decision to change auditor was recommended to the Board of Directors by the Risk and Audit Committee.
During the years ended 30 June 2013 and 30 June 2012, (1) KPMG Audit Plc has not issued any reports on the financial statements of the Group or on the effectiveness of internal control over financial reporting that contained an adverse opinion or a disclaimer of opinion, nor were the auditors’ reports of KPMG Audit Plc qualified or modified as to uncertainty, audit scope, or accounting principles, (2) there has not been any disagreement over any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedures, which disagreement if not resolved to KPMG Audit Plc’s satisfaction would have caused it to make reference to the subject matter of the disagreement in connection with its auditors’ reports, or any “reportable event” as described in Item 16F(a)(1)(v) of Form 20-F.
The Group has provided KPMG Audit Plc with a copy of the foregoing disclosure and has requested that KPMG Audit Plc furnish the Group with a letter addressed to the Securities and Exchange Commission (the “SEC”) stating whether KPMG Audit Plc agrees with such disclosure and, if not, stating the respects in which it does not agree. A copy of KPMG Audit Plc’s letter, dated 25 September 2014, in which KPMG Audit Plc stated that it agrees with such disclosure, is filed herewith as Exhibit 15.1.
There were no changes to the auditor of BHP Billiton Limited during FY2014.
Internal Audit
The Internal Audit function is carried out internally by Group Audit Services (GAS)Risk Assessment and Assurance (RAA). The role of GASRAA is to determine whether risk management, control and governance processes are adequate and functioning. The Internal Audit function is independent of the External Auditor. The RAC reviews the mission and charter of GAS,RAA, the staffing levels and its scope of work to ensure that it is appropriate in light of the key risks we face. It also reviews and approves the annual internal audit plan.plan and monitors and reviews the overall effectiveness of the internal audit activities.
The RAC also approves the appointment and dismissal of the Head of Group Risk Assessment and Assurance and assesses his or her performance, independence and objectivity. The role of the Head of Group Risk Assessment and Assurance includes achievement of the internal audit objectives, risk management policies and insurance strategy. The position iswas held throughout the year by Stefano Giorgini.Alistair Mytton. Mr Giorgini reportsMytton reported to senior management and hashad all necessary access to management and the right to see information and explanations, and has unfettered access to the RAC.
Effectiveness of systems of internal control and risk management
In delegating authority to the CEO, the Board has established CEO limits set out in theBoard Governance DocumentDocument.. Limits on the CEO’s authority require the CEO to ensure that there is a system of control in place for identifying and managing risk.risk in the Group. The Directors, through the RAC, review the systems that have been established for this purpose and regularly review their effectiveness. These reviews include assessing whether processes continue to meet evolving external governance requirements.
The RAC is responsible for the oversight of risk management and reviews the internal controls and risk management systems. In undertaking this role, the RAC reviews the following:
procedures for identifying business and operational risks and controlling their financial impact on the Group and the operational effectiveness of the policies and procedures related to risk and control;
budgeting and forecasting systems, financial reporting systems and controls;
policies and practices put in place by the CEO for detecting, reporting and preventing fraud and serious breaches of business conduct and whistle-blowing procedures;
procedures for ensuring compliance with relevant regulatory and legal requirements;
arrangements for protecting intellectual property and other non-physical assets;
operational effectiveness of the Business Group RAC structures;
overseeing the adequacy of the internal controls and allocation of responsibilities for monitoring internal financial controls.
For further discussion on our approach to risk management, refer to section 5.6.sections 1.7 and 3.15 of this Annual Report.
During the year, the Board conducted reviews of the effectiveness of the Group’s systemsystems of risk management and internal controls for the financial year and up to the date of this Annual Report in accordance with the UK Corporate Governance Code (Turnbull(including the Turnbull Guidance) and the Principles and Recommendations published by the ASXAustralian Securities Exchange (ASX) Corporate Governance Council. These reviews covered financial, operational and compliance controls and risk assessment. During the year, management presented an assessment of the material business risks facing the Group 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 the Group, the Board received an assessment of the effectiveness of internal controls over key risks identified through the work of the Board Committees.committees. The Board is satisfied that the effectiveness of the internal controls has been properly reviewed.
Management’s assessment of our internal control over financial reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) under the US Securities Exchange Act of 1934). Under the supervision and with the participation of our management, including our CEO and CFO, we have evaluated the effectiveness of the Group’s internal control over financial reporting has been evaluated based on the framework and criteria established in Internal Controls – Integrated Framework, issued by the Sponsoring OrganisationOrganization of the Treadway Commission (COSO). Based on this evaluation, management has concluded that internal control over financial reporting was effective as at 30 June 2011.2014. There were no material weaknesses in the Group’s internal controls over financial reporting identified by management.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements and, even when determined to be effective, can only provide reasonable assurance with respect to financial statement preparation and presentation. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
OurBHP Billiton has engaged our independent registered public accounting firms, KPMG and KPMG Audit Plc, have issuedLLP, to issue an audit report on our internal control over financial reporting which is contained on page F-104for inclusion in the Financial Statements section of this Annual Report.Report on Form 20-F as filed with the SEC.
There have been no changes in our internal control over financial reporting during FY2011FY2014 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
The CEO and CFO have certified to the Board that the financial statementsFinancial Statements are founded on a sound system of risk management and internal control and that the system is operating efficiently and effectively in all material respects.
During the year, the RAC reviewed our compliance with the obligations imposed by the US Sarbanes-Oxley Act, including evaluating and documenting internal controls as required by section 404 of the Act.
Management’s assessment of our disclosure controls and procedures
Our management, with the participation of our CEO and CFO, has performed an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of 30 June 2011.2014. Disclosure controls and procedures are designed to provide reasonable assurance that the material financial and non-financial information required to be disclosed by BHP Billiton, including in the reports that it files or submits under the US Securities Exchange Act of 1934, is recorded, processed, summarised and reported on a timely basis and that such information is accumulated and communicated to BHP Billiton’s management, including our CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure. Based on the foregoing, our management, including the CEO and CFO, has concluded that our disclosure controls and procedures are effective in providing that reasonable assurance.
There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives.
Further, in the design and evaluation of our disclosure controls and procedures, our management was necessarily required to apply its judgement in evaluating the cost-benefit relationship of possible controls and procedures.
Assessment of RAC performance
During 2011, the
Committee retained the services of the JCA Group, a UK based provider of board evaluation services, to assist with an externallyreview
An internally facilitated review was conducted during the year to confirm continued compliance with the RAC’s terms of reference. The terms of reference were updated during FY2013, and further updated during FY2014 to reflect the Committee’s effectiveness. The Committee also assessed itsrole of providing advice to the Board on whether the Annual Report, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Group’s performance, in accordance with its Terms of Reference.business model and strategy. As a result of its own assessment and feedback from the JCA Group,this review, the Committee is satisfied that it has met its Termsterms of Reference.reference.
5.5.2
The updated terms of reference for the RAC are available online atwww.bhpbilliton.com/home/aboutus/ourcompany/Pages/governance.aspx.
3.14.2 Remuneration Committee Report
The Remuneration Committee met eight times during the year. Information on meeting attendance by Committee members is included in the table in section 5.4.1.
Remuneration Committee members during the year
|
| |
| ||
| ||
| ||
|
Role and focus
The role of the Remuneration Committee is to assist the Board in its oversight of:overseeing:
the remuneration policy and its specific application to the CEO and the CEO’s direct reports, and its general application to all employees;
the annual evaluation of the performance of the CEO, by giving guidance to the Group Chairman;
communication to shareholders regarding remuneration policy and the Committee’s work on behalf of the Board, including the preparation of the Remuneration Report for inclusion in the Annual Report;
compliance with applicable legal and regulatory requirements associated with remuneration matters.
Changes to Terms of Reference
During the year, in response to corporate governance reviews that had highlighted the continuing lack of diversity among experienced Director candidates in Australia and the UK, the Committee’s Terms of Reference were reviewed to consider whether amendments were required to formalise diversity considerations. As a result, the Committee’s Terms of Reference were amended so that its role includes assisting the Board in its oversight of
The role of the relative proportion of men and womenRemuneration Committee in the Group’s workforce and the Group’s progress in achieving its diversity objectives.
Activities undertaken during the year
Full detailscontext of the Committee’s work on behalf of the Board are set outBHP Billiton’s broader governance framework is summarised in the diagram below.
BHP Billiton governance structure – Remuneration Report in section 6.Committee*
During 2011, the Committee retained the services of the JCA Group to assist with an externally facilitated review of the Committee’s effectiveness. The Committee also assessed its performance in accordance with its Terms of Reference. As a result of its own assessment and feedback from the JCA Group, the Committee is satisfied it has met its Terms of Reference.
5.5.3 Nomination Committee Report
* | The Sustainability, RAC and Finance Committees assist the Remuneration Committee in determining appropriate HSEC, financial and capital projects metrics, respectively, to be included in GMC scorecards and in assessing performance against those measures. |
The NominationRemuneration Committee met seven times during the year. Information on meeting attendance by Committee members is included in the table in section 5.4.1.3.12.
Full details of the Committee’s work on behalf of the Board, including the review of our remuneration structures conducted by the Committee during FY2014, are set out in the Remuneration Report in section 4. Remuneration Committee members during the yearNomination
Name | Status | |
| Member for whole period | |
| Member for whole period | |
Pat Davies | Member for whole period | |
Carolyn Hewson | Member since 6 January 2014 | |
John Schubert | Member for whole period |
Committee review
An internally facilitated review was conducted during the year to confirm continued compliance with the Committee’s terms of reference, which were updated during FY2013. As a result of this review, the Committee is satisfied that it has met its terms of reference.
The terms of reference for the Remuneration Committee are available online at
www.bhpbilliton.com/home/aboutus/ourcompany/Pages/governance.aspx.
3.14.3 Nomination and Governance Committee Report
Role and focus
The role of the Nomination and Governance Committee is to assist in ensuring that the Board comprises individuals who are best able to discharge the responsibilities of a Director, having regard to the highest standards of governance, the strategic direction of the Group and the diversity aspirations of the Board. It does so by focusing on:
assessingthe succession planning process for the Board and its committees, including the identification of the skills, backgrounds,experience, independence and knowledge required on the Board, as well as the attributes required of potential Directors;
retaining the services of independent search firms and identifying suitable candidates (possessing the skills identified by the skills assessment referred to above)succession planning process for the Board;Chairman;
overseeing the reviewsuccession planning process for the CEO and periodic evaluation of the assessmentprocess;
the plan for succession of the Chairman and the CEO and the periodic evaluation of it;
the provision of appropriate training and development opportunities for Directors;
supporting the Board in its review and, where appropriate,independence of Non-executive Directors;
communicating
The Board has an aspirational goal of increasing the number of women on the Board to at least three by the end of 2015. The Nomination and Governance Committee continues to take diversity into account in its deliberations and works continuously to identify future candidates for the Board. The appointment this year focused on upstream oil and gas experience, as part of the ongoing five-year plan for Board succession. However, at the same time the Committee has added further emphasis to the need to appoint a female Non-executive Director and has met a number of potential candidates. We are planning on the basis that an appointment will be made before the end of 2015. The target set for Board diversity, and the approach undertaken by the Nominations and Governance Committee, is set out in more detail in section 3.8.
Information regarding the work ofBoard’s policy on diversity and the Committee on behalf of the Board.Committee’s role in this regard is set out in sections 3.8 and 3.18.
The Nomination and Governance Committee also has oversight of trainingoversaw the Director Training and development activityDevelopment Program for all Directors.FY2014. The Board considersbelieves this enhances the Committee’s ongoing consideration and review in relation to the appropriate skills mix for the Board.
Activities undertakenThe role of the Nomination and Governance Committee in the context of BHP Billiton’s broader governance framework is summarised in the diagram below.
BHP Billiton governance structure – Nomination and Governance Committee
The Nomination and Governance Committee met six times during the yearyear. Information on meeting attendance by Committee members is included in the table in section 3.12.
There were changes to the composition of the Board during the year. Shriti Vadera and Lindsay Maxsted joinedyear, with the Board on 1 January 2011 and 23 March 2011, respectively. Alan Boeckmann retiredappointment of Mr Brinded as a Non-executive Director with effect from 15 April 2014. This followed a process involving the Board on 23 March 2011. The Committee retained the services of external recruitment specialists Heidrick & Struggles and Egon Zehnder to assistJCA Group, who have assisted in the identification of potential candidates for the Board. TheBoard, as set out in section 3.8.
Aside from conducting external searches, in previous years Heidrick & Struggles Leadership Assessment has provided services in respect of Director performance assessment. This year, JCA Group provided non-executive search services and facilitated the external Board assessment. In both cases, the search and assessment services operate independently, and neither firm has any other connection with the Group. In addition, Lintstock, whose services have been used by the Group in prior years for assessment, also has no other connection with the Group.
Nomination and Governance Committee also oversawmembers during the Director training and development program and the induction of new Directors (see section 5.3.8 for further information on Director induction and training).year
The Committee’s Terms of Reference were reviewed
Name | Status | |
Jac Nasser (Chairman) | Member for whole period | |
John Buchanan | Member for whole period | |
John Schubert | Member for whole period |
Committee review
An internally facilitated review was conducted during the year to consider whether amendments were required to formalise diversity considerations. Amendments were subsequently made so that the diversity aspirations of the Board are expressly taken into account when identifying skills that may be required and suitable candidates.
During 2011, the Committee retained the services of the JCA Group to assistconfirm continued compliance with an externally facilitated review of the Committee’s effectiveness. The Committee also assessed its performance in accordance with its Termsterms of Reference.reference, which were updated during FY2013. As a result of its own assessment and feedback from the JCA Group,this review, the Committee is satisfied that it has met its Termsterms of Reference.reference.
5.5.4
The terms of reference for the Nomination and Governance Committee are available online atwww.bhpbilliton.com/home/aboutus/ourcompany/Pages/governance.aspx.
3.14.4 Sustainability Committee Report
Role and focus
The role of the Sustainability Committee is to assist the Board to take reasonable steps in overseeing the:
- | the CEO limits, which delegate authority to the CEO, including for HSEC matters; |
- | the Committee itself and its terms of reference; |
- | a robust independent assurance and audit process, established by the RAC; |
- | independent legal and specialist advice on HSEC matters; |
- | the Group’s HSEC Management System; |
Our approach to sustainability is reflected inOur Charter, which defines our values, purpose and how we measure success, and in our sustainability performance targets, which define our public commitments to safety, health, environment and community. Further information is set out in the Group’s Sustainability Report 2014.
A copy of the Sustainability Report and further information is available online at
www.bhpbilliton.com/home/aboutus/sustainability/Pages/default.aspx.
The Committee provides oversight of the preparation and presentation of the Sustainability Report by management, including oversight of internal control systems relevant to the preparation of the Sustainability Report.
The role of the Sustainability Committee in the context of BHP Billiton’s broader governance framework is summarised in the diagram below.
BHP Billiton governance structure – Sustainability Committee
Sustainable development governance
Our approach to HSEC and sustainable development governance is characterised by:
The Sustainability Committee met seven times during the year. Information on meeting attendance by Committee members is included in the table in section 5.4.1.3.12.
Sustainability Committee members duringDuring the year,
|
| |
| ||
| ||
|
Role and focus
The role of the Sustainability Committee iscontinued to assist the Board in its oversight of:
the effectiveness of the Group’s strategies, policiesHSEC issues and systems associated with health, safety, environmentperformance. This included consideration of strategic environmental and community (HSEC) matters;
our compliance with applicable legal and regulatory requirements associated with HSEC matters;
our performance in relation to HSEC matters;
the performance and leadership of the HSEC function;
HSEC risks;
our annual Sustainability Report;
communication to shareholders regarding the work of the Committee on behalf of the Board.
Sustainable development governance
Our approach to HSEC and sustainable development governance is characterised by:
the Sustainability Committee overseeing material HSEC matters and risks across the Group;
business line management having primary responsibility and accountability for HSEC performance;
the HSEC function providing advice and guidance directly, as well as through a series of networks across the business;
seeking input and insight from external experts such as our Forum for Corporate Responsibility;
clear links between remuneration and HSEC performance.
Activities undertaken during the year
During the year, the Sustainability Committee considered reports on strategic environmental issues, HSEC audits and trends, review of health and hygiene standards, learningsthe findings and action items from fatal accidents and other incidents,incidents.
The key areas on which the Committee, management and the potential impactHSE and Community functions focus are outlined in the diagram below.
In addition to our focus on the health, safety and wellbeing of our people, the Committee spent considerable time considering environment and climate change regulation onscenarios and the Group’s portfolios and actions being taken to manage the implications of this regulation. It also reviewedclimate change regulation in light of the Group’s performance againstpublic target for emissions through to FY2017 as set out in section 1.14.2 of this Annual Report.
Climate change
Climate change is treated as a Board-level governance issue with the HSEC public targetsSustainability Committee playing a key supporting role. The Committee, along with the Risk and Audit Committee, spends considerable time considering systemic climate change considerations relating to the Key Performance Indicatorsresilience of, and opportunities for, the HSEC function.Group’s portfolio. The Committee also reviewedreceives reports on scenarios and sign posts, which point to longer-term directional change and considers actions to manage the performanceimplications of climate change on the Company. Further information on our climate change position and how we consider the impacts on our portfolio is set out in section 1.14.2.
Community investment
We also continued to monitor our progress in relation to our community investment, and met our target for investments in community programs, with such investments consisting of cash, in-kind support and administration. This was the equivalent of one per cent of our pre-tax profits, calculated on the average of the Headprevious three years pre-tax profit. During FY2014, our voluntary community investment totalled US$241.7 million, comprising US$141.7 million of Group HSEC. cash, in-kind support and administrative costs and a US$100 million contribution to the BHP Billiton Foundation.
The Committee reviewed and recommended to the Board the approval of the annual Sustainability Report for publication. The Sustainability Report identifies our targets for HSEC matters and our performance against those targets, with an emphasis on fact-based measurement and quality data in setting targets.
HSEC matters and remuneration
In order to link HSEC matters to remuneration, 20 per cent of the short-term incentive opportunity for GMC members was based on HSEC performance during the year, an increase from 15 per cent in FY2013. The Sustainability Committee assists the Remuneration Committee in determining appropriate HSEC metrics to be included in GMC scorecards, and also assists in relation to assessment of performance against those measures. The Board believes this method of assessment is transparent, rigorous and balanced, and provides an appropriate, objective and comprehensive assessment of performance. Further information on the metrics and their assessment is set out in the Remuneration Report in section 4.
Sustainability Committee members during the year
| Status | |
John Schubert (Chairman) | Member for whole period | |
Malcolm Brinded | Member from 15 April 2014 | |
Malcolm Broomhead | Member for whole period | |
Keith Rumble | Member for whole period |
During 2011, the Committee retained the services of the JCA Group to assist with an externallyreview
An internally facilitated review ofwas conducted during the year to confirm continued compliance with the Committee’s effectiveness. The Committee also assessed its performance in accordance with its Termsterms of Reference.reference, which were updated during FY2013. As a result of its own assessment and feedback from the JCA Group,this review, the Committee is satisfied that it has met its Termsterms of Reference.reference.
The terms of reference for the Sustainability Committee are available online at
www.bhpbilliton.com/home/aboutus/ourcompany/Pages/governance.aspx.
3.14.5 Finance Committee Report
Role and focus
The role of the Finance Committee is to assist the Board in its consideration for approval and ongoing oversight of matters pertaining to:
Recognising that the focus of the Committee’s activities encompasses matters of strategy reserved for the Board, the Committee does not, as a matter of course, have a decision-making role. Instead, its focus is to advise the Board and make recommendations. The Board may, where it considers it appropriate, delegate decision-making power to the Committee in relation to specific matters.
The role of the Finance Committee in the context of BHP Billiton’s broader governance framework is summarised in the diagram below.
BHP Billiton governance structure – Finance Committee
The Committee met 10 times during the year. Information on meeting attendance by Committee members is included in the table in section 3.12.
During the year, the Finance Committee continued to assist the work of the Board by considering matters relating to capital structure and funding, capital management planning and initiatives, capital expenditure, divestments and other matters referred to the Committee. In addition, the Committee assisted the Board in its consideration of the creation of a new global metals and mining company to accelerate portfolio simplification. The Committee’s considerations resulted in recommendations to the Board on the matters considered.
Finance Committee members during the year
Name | Status | |
David Crawford (Chairman) | Member for whole period | |
Malcolm Broomhead | Member for whole period | |
Lindsay Maxsted | Member for whole period | |
Wayne Murdy | Member for whole period |
Committee review
An internally facilitated review was conducted during the year to confirm continued compliance with the Committee’s terms of reference, which were updated during FY2013. As a result of this review, the Committee is satisfied that it has met its terms of reference.
The terms of reference for the Finance Committee are available online at
www.bhpbilliton.com/home/aboutus/ourcompany/Pages/governance.aspx.
5.63.15 Risk management governance structure
5.6.1 Approach to risk management
We believe that the identification and management of risk is central to achieving the corporate objectivepurpose of deliveringcreating long-term shareholder value. Our approach to risk is set out in section 1.7.
The principal aim of the Group’s risk management governance structure and internal control systems is to identify, evaluate and manage business risks, with a view to enhancing the value to shareholders. of shareholders’ investments and safeguarding assets.
Each year, the Board reviews and considers the Group’s risk profile, for the whole business. This risk profilewhich covers both operational and strategic risks. The risk profile is assessed to ensure it supports the achievement of the Group’s strategy while maintaining a strongsolid ‘A’ credit rating. The Board’s approach to investment decision-making and portfolio management, and the consideration of risk in that process is set out in sections 1.5.4 and 1.7 and includes a broad range of scenarios to assess our portfolio. This process allows us to be able to continually adjust the shape of our portfolio to match energy and commodity demand and meet society’s expectations while maximising shareholder returns.
The Board has delegated the oversight of risk management to the RAC, although the Board retains overall accountability for the Group’s risk profile. In addition, the Board specifically requires the CEO to implement a system of control for identifying and managing risk. The Directors, through the RAC, review the systems that have been established for this purpose and regularly review their effectiveness. The RAC regularly reports to the Board to enable it to review the Group’s risk framework.
During the year, theThe RAC consideredhas established review processes for the nature and extent of material risks taken in achieving theour corporate objective.purpose. These processes include the application of materiality and tolerance criteria to determine and assess material risks. Materiality criteria include maximum foreseeable loss and residual risk thresholds.thresholds and are set at the Group level. Tolerance criteria additionally assess the control effectiveness of material risks.
The Group has established a Risk Management governance framework with supporting processes and performance requirements that provide an overarching and consistent approach fordiagram below outlines the identification, assessment and management of risks. Risks are ranked using a common methodology. Where a risk is assessed as material it is reported and reviewed by senior management. During the year, updated Risk Management Group Level Documents were approved and implemented across the Group.reporting process.
|
5.6.2 Business risks
The scope of our operations and the number of industries in which we operate and engage mean that a range of factors may impact our results. Material risks that could negatively affect our results and performance include:
impacts arising from the global financial crisis;
fluctuations in commodity prices;
fluctuations in currency exchange rates;
failure or non-performance of counterparties;
failure to discover new reserves, maintain or enhance existing reserves or develop new operations;
influence of demand from China;
actions by governments, including additional taxation, infrastructure development, permitting requirements and political events in the countries in which we operate;
inability to successfully integrate acquired businesses;
inadequate human resource talent pool;
impact of increased costs or schedule delays on development projects;
inability to recover investments in mining and oil and gas projects;
non-compliance with the Group’s standards by non-controlled assets;
operating cost pressures and shortages could negatively impact our operating margins and expansion plans;
impact of health, safety, environmental and community exposures and related regulations on operations and reputation;
unexpected natural and operational catastrophes;
climate change, greenhouse effects and related regulations and taxes;
breaches in information technology security;
breaches in governance processes.
These risks are described in more detail in section 1.5.
5.6.3 Risk management governance structure
The principal aim of the Group’s risk management governance structure and internal control systems is to identify, evaluate and manage business risks, with a view to enhancing the value of shareholders’ investments and safeguarding assets.
Management has put in place a number of key policies, processes, performance requirements and independent controls to provide assurance to the Board and the RAC as to the integrity of our reporting and effectiveness of our systems of internal control and risk management. The BHP Billiton Governance structure diagram in section 5.1 highlights the relationship between the Board and the various controls in the assurance process. Some of the more significant internal control systems include Board and management committees, Business Group RACs the Risk Management Policy and internal audit.
Business Group Risk and Audit Committees
The Business Group RACs illustrated in the diagram in section 5.5.1 assist the RAC to monitor the Group’s obligations in relation to financial reporting, internal control structure, risk management processes and the internal and external audit functions.
Board Committeescommittees
Directors also monitor risks and controls through the RAC, the Remuneration Committee and the Sustainability Committee.
Management Committeescommittees
Management committees also perform roles in relation to risk and control. Strategic risks and opportunities arising from changes in our business environment are regularly reviewed by the GMC and discussed by the Board. The Financial Risk Management Committee (FRMC) reviews the effectiveness of internal controls relating to commodity price risk, counterparty credit risk, currency risk, financing risk, interest rate risk and insurance. Minutes of the GMC and the FRMC meetings are provided to the Board. The Investment Committee provides oversight for investment processes across the businessCompany and coordinates the investment toll-gating process for major investments. Reports are made to the Board on findings by the Investment Committee in relation to major capital projects.
Below the level of the Board, key management decisions are made by the CEO, the GMC, other management committees and individual members of management to whom authority has been delegated.
On 27 August 2013, Mike Fraser was appointed to the GMC as President, Human Resources and on 3 March 2014, Tony Cudmore joined the GMC as President, Corporate Affairs.
On 19 August 2014, the Group announced Graham Kerr’s retirement from the GMC with effect from 1 October 2014, his appointment as Chief Executive Officer-designate of the planned demerged company, his replacement as BHP Billiton CFO by Peter Beaven, currently President, Copper, and the retirement from the GMC of Karen Wood with effect from 19 August 2014. Full details and biographies of the GMC are set out in section 3.2.2.
The diagram below describes the positionresponsibilities of the CEO and threefour key management committees.
Performance evaluation for executives
The performance of executives and other senior employees is reviewed on an annual basis. For the members of the GMC, this review includes their contribution, engagement and interaction at Board level. The annual performance review process that we employ considers the performance of executives against criteria designed to capture both ‘what’ is achieved and ‘how’ it is achieved. All performance assessments of executives consider 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 withOur BHP Billiton Charter values. The assessment is therefore holistic and balances absolute achievement with the way performance has been delivered. Progression within the Group is driven equally by personal leadership behaviours and capability to produce excellent results.
A performance evaluation as outlined above wasis conducted for all members of the GMC in FY2011.annually. For the CEO, the performance evaluation was led by the Chairman of the Board on behalf of all the Non-executive Directors, drawing on guidance from the Remuneration Committee.
Corporate governance reviews have highlighted that there is a continuing lack of diversity among experienced Director candidates in Australia and the UK. The Board reviewed its existing practices during the year, including how the Board and the Nomination Committee take into account diversity criteria, including
gender, nationality and geography, as part of a Director candidate’s general background and experience. See section 5.3.3 for further detail about gender diversity on the Board. The review included an assessment of the Board Committees’ Terms of Reference, and resulted in amendments to the Terms of Reference of the Nomination Committee and the Remuneration Committee to formalise diversity considerations. The BHP BillitonHuman Resources Policy guides the Board and management in developing diversity objectives for the Group. TheHuman Resources Policy is supported by internal processes that set out measurable objectives to support the achievement of diversity across the Group.
|
Our approach to diversity is underpinned by key principles, including:
a diverse workforce is necessary to the delivery of our strategy that is predicated on diversification by commodity, geography and market;
our aspiration is to have a workforce that best represents the communities in which our assets are located and our employees live;
actions that support our diversity aspirations should be consistent with our established approach to talent, performance and reward;
achieving an appropriate level of diversity will require structured programs at an early career stage that ensure the development of necessary skills and experience for leadership roles;
measurable objectives in support of diversity will be transparent, achievable over a period of time and fit for purpose;
the set of measurable objectives will focus on (i) enabling a diverse workforce by way of removing barriers and (ii) establishing appropriate representation targets.
The key measurable objective for FY2011 was the development and implementation of diversity plans by each CSG, Minerals Exploration, Marketing and Group Function. Each group was required to develop a diversity plan that takes into account the diversity principles. The diversity composition of each was analysed to provide a base line in the areas of gender, age and nationality. This was a key input into the development of the plans and the means of highlighting the key diversity challenges to be addressed.
Completion of the diversity plans in FY2011 formed part of the performance requirements for each business and was taken into account in assessing bonus remuneration. Execution against those plans will be monitored and tracked in FY2012 and will again form part of the assessment of bonus remuneration. Monitoring and tracking performance against plan is undertaken as part of the Group’s internal compliance requirements.
Going forward, progress against each year’s measurable objectives will be disclosed in the Annual Report, along with the proportion of women in our workforce, in senior management and on the Board. There are currently two women on the Board and the proportion of women in our workforce and in senior management is set out in section 2.8.3, where you can also find further information on diversity and our employee profile more generally.
Code of Business Conduct
We have published the BHP BillitonCode of Business Conduct. TheCode of Business Conduct, which reflectsOur Charter values, particularly those of integrity, respect, trustIntegrity and openness.Respect. It provides clear direction and advice on conducting business internationally, interacting with communities, governments and business partners and general workplace
behaviour. TheCode of Business Conduct applies to Directors and to all employees, regardless of their position or location. Consultants and contractors are also expected to act in accordance with theCode of Business Conduct.
TheCode of Business Conduct can be found on our website at www.bhpbilliton.com/home/aboutus/ourcompany/Pages/codeofbusconduct.aspx. Anti-corruption investigation As previously disclosed, BHP Billiton received requests for information in August 2009 from the US Securities and Exchange Commission (SEC). Following that request, the Group commenced an internal investigation and disclosed to relevant authorities evidence that it has uncovered regarding possible violations of applicable anti-corruption laws involving interactions with government officials. The issues relate primarily to matters in connection with previously terminated exploration and development efforts, as well as hospitality provided as part of the Company’s sponsorship of the 2008 Beijing Olympics. The Group is currently discussing a potential resolution of the matter. As has been publicly reported, the Australian Federal Police has indicated that it has commenced an investigation and the Group continues to fully cooperate with the relevant authorities. In light of the continuing nature of the investigations, it is not appropriate at this stage for BHP Billiton to predict outcomes.
|
Insider trading
We have aSecurities Dealing Group Level Document GLD that covers dealings by Directors and identified employees, is consistent with the UK Model Code contained in the UK Financial ServicesConduct Authority Listing Rules and complies with the ASX Listing Rule requirements for a trading policy. TheSecurities Dealing document GLD restricts dealings by Directors and identified employees in shares and other securities during designated prohibited periods and at any time that they are in possession of unpublished price-sensitive information. As part of a regular, planned process, theSecurities Dealing GLD is reviewed every two years to ensure it remains current, fit for purpose and in line with our broader governance framework.
A copy of theSecurities Dealing GLD can be found on our website at |
Business Conduct Advisory Service
We havewww.bhpbilliton.com/home/aboutus/ourcompany/Pages/governance.aspx.
EthicsPoint, BHP Billiton’s business conduct advisory service
EthicsPoint, BHP Billiton’s business conduct advisory service, has been established a Business Conduct Advisory Service so that employees, contractors or members of the community can seek guidance or express concerns on business-related issues and report cases of suspected misappropriations, fraud, briberyhow we work with fellow employees, governments, communities, third parties or corruption.how we use our Company resources. Reports can be made anonymously and without fear of retaliation. Arrangements are in place to investigate such matters. Where appropriate, investigations are conducted independently. Levels of activity and support processes for the Business Conduct Advisory ServiceEthicsPoint are monitored, with activity reports presented to the Board. Further information on the Business Conduct Advisory ServiceEthicsPoint can be found in theCode of Business Conduct.
Political donations
We maintain a position of impartiality with respect to party politics and do not make political contributions/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 our businessthe Company in the countries in which we operate. As explained in the Directors’ Report, the 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 Billiton, the AEC filing requires the political party or organisation to disclose the dividend payments received for their shareholding.
SEC investigation3.18 Diversity and inclusion at BHP Billiton
An internal investigation is continuing into allegationsOur Charter andHuman Resources GLDs guide management on all aspects of possible misconduct involving interactions with government officials. Following requests for information fromhuman resource management, including diversity and inclusion. Underpinning the US SecuritiesGLDs and Exchange Commission,supporting the achievement of diversity across the Group are principles and measurable objectives that define our approach to diversity and our focus on creating an inclusive work environment.
The Board believes that critical mass is important for diversity and, in relation to gender, has set a goal of increasing the number of women on the Board. See section 3.8 for further details. Alongside Board composition, part of the Board’s role is to consider and approve the Group’s measurable objectives for each financial year, and to oversee the Group’s progress in achieving those objectives. This progress will continue to be disclosed to relevant authorities evidence that it has uncovered regarding possible violations of applicable anti-corruption laws involving interactions with government officials. The Group is continuing to cooperatein the Annual Report, along with the relevant authorities. Itproportion of women in our workforce, in senior management positions and on the Board. Further information on diversity, and our employee profile more generally, is not possible at this time to predict the scope or duration of the investigation or its likely outcomes.set out in section 1.13.
We are committed to maintaining the highest standards of disclosure ensuring that all investors and potential investors have the same access to high-quality, relevant information in an accessible and timely manner to assist them in making informed decisions. AThe Disclosure Committee manages our compliance with the market disclosure obligations and is responsible for implementing reporting processes and controls and setting guidelines for the release of information. As part of our commitment to continuous improvement we continue to ensure alignment with best practice as it develops in the jurisdictions in which we are listed.
Disclosure Officersofficers have been appointed in the Group’s CSGsBusinesses, Group Functions and Group Functions.Marketing. These officers are responsible for identifying and providing the Disclosure Committee with materialreferral information about the activities of the CSGBusiness or functional areas using disclosure guidelines developed by the Committee. The Committee then makes the decision whether a particular piece of information is material and therefore needs to be disclosed to the market.
To safeguard the effective dissemination of information, we have developed a Market Disclosuremarket disclosure and Communicationscommunications document, which outlines how we identify and distribute information to shareholders and market participants.
A copy of the Market Disclosure and Communications document is available online at www.bhpbilliton.com/home/aboutus/ourcompany/Pages/governance.aspx.
|
Copies of announcements to the stock exchanges on which we are listed, investor briefings, half-yearly financial statements,Financial Statements, the Annual Report and other relevant information are posted to the Group’scan be found on our website atwww.bhpbilliton.com.Any person wishing to receive advice by email of news releases can subscribe atwww.bhpbilliton.com.
Details of our remuneration policies and practices and the remuneration paid to the Directors (Executive and Non-executive) and members of the GMC are set out in the Remuneration Report in section 4 of this Annual Report. Shareholders will be invited to consider and to approve the Remuneration Report at the 2014 AGMs. The Australian Corporations Act and the ASX Listing Rules prohibit Directors and members of the GMC from voting on various resolutions relating to Key Management Personnel remuneration, including, for example, the adoption of the Remuneration Report, an increase in the maximum aggregate remuneration payable to the Non-executive Directors and the grant of equity to the Executive Director. 3.21 Directors’ share ownership Non-executive Directors have agreed to apply at least 25 per cent of their remuneration to the purchase of BHP Billiton shares until they achieve a shareholding equivalent in value to one year’s remuneration. Thereafter, they must maintain at least that level of shareholding throughout their tenure. All dealings by Directors are subject to the Group’sSecurities Dealing GLD and are reported to the Board and to the stock exchanges. Information on our policy governing the use of hedge arrangements over shares in BHP Billiton by both Directors and members of the GMC is set out in section 4.4.2 of this Annual Report. Details of the shares held by Directors are set out in section 4.4.27 of this Annual Report. Jane McAloon is the President, Governance and Group Company Secretary. Ms McAloon’s qualifications and experience are set out in section 3.2.1. The Group Company Secretary is responsible for developing and maintaining the information systems and processes that enable the Board to fulfil its role. The Group Company Secretary is also responsible to the Board for ensuring that Board procedures are complied with and advising the Board on governance matters. All Directors have access to the Group Company Secretary for advice and services. Independent advisory services are retained by the Group Company Secretary at the request of the Board or Board committees. Other persons appointed to act as company secretary of BHP Billiton Limited or BHP Billiton Plc, or both are Nicole Duncan (BHP Billiton Limited and BHP Billiton Plc); Elizabeth Hobley (BHP Billiton Plc); and Geof Stapledon (BHP Billiton Plc). The Board appoints and removes the company secretaries.
Our compliance with the governance standards in our home jurisdictions of Australia and the UK,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 and Exchange Commission (SEC)SEC in the US,United States, is summarised in this Corporate Governance Statement, the Remuneration Report, the Directors’ Report and the financial statements.Financial Statements.
The Listing Rules and the Disclosure and Transparency Rules of the UK Financial ServicesConduct Authority require UK-listed companies listed in the UK to report on the extent to which they comply with the Main Principles and the provisions of the UK Corporate Governance Code (UK Code), and explain the reasons for any non-compliance. The UK Code is available online atwww.frc.org.uk/corporate/ukcgcode.cfmukcgcode.cfm..
The Listing Rules of the ASX require Australian-listed companies to report on the extent to which they meet the Corporate Governance Principles and Recommendations published by the ASX Corporate Governance Council (ASX Principles and Recommendations) and explain the reasons for any non-compliance. The ASX Principles and Recommendations are available online atwww.asx.com.au/about/corporate_governance/index.htmwww.asxgroup.com.au/corporate-governance-council.htm..
Both the UK Code and the ASX Principles and Recommendations require the Board to consider the application of the relevant corporate governance principles, while recognising that departures from those principles are appropriate in some circumstances. We have complied with the provisions set out in the UK Code and with the ASX Principles and Recommendations throughoutduring the financial period and have continuedcontinue to comply up to the date of this Annual Report.
|
A checklist summarising our compliance with the UK Code and the ASX Principles and Recommendations are available online atwww.bhpbilliton.com/home/aboutus/ourcompany/Pages/governance.aspx.
BHP Billiton Limited and BHP Billiton Plc are registrants with the SEC in the US.United States. Both companies are classified as foreign private issuers and both have American Depositary ReceiptsShares listed on the NYSE.
We have reviewed the governance requirements currently applicable to foreign private issuers under the Sarbanes-Oxley Act (US), including the rules promulgated by the SEC and the rules of the NYSE and are satisfied that we comply with those requirements.
Section 303A of the NYSE ListedNYSE-Listed Company Manual has institutedcontains a broad regime of corporate governance requirements for NYSE-listed companies. Under the NYSE rules, foreign private issuers, such as ourselves, are permitted to follow home country practice in lieu of the requirements of Section 303A, except for the rule relating to compliance with Rule 10A-3 of the US Securities Exchange Act of 1934 (audit committee independence) and certain notification provisions contained in Section 303A of the Listed Company Manual. Section 303A.11 of the Listed Company Manual, however, requires us to disclose any significant ways in which our corporate governance practices differ
from those followed by US listed companies under the NYSE corporate governance standards. Following a comparison of our corporate governance practices with the requirements of Section 303A of the NYSE Listed Company Manual followed by domestic issuers,US companies, the following significant differences weredifference was identified:
Our Nomination Committee’s Terms of Reference (charter) do not include the purpose of developing and recommending to the Board a set of corporate governance principles applicable to the corporation. While we have a Nomination Committee, it is not specifically charged with this responsibility. We believe that this task is integral to the governance of the Group and is therefore best dealt with by the Board as a whole.
Rule 10A-3 of the US Securities Exchange Act of 1934 requires NYSE-listed companies to ensure that 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 AuditorsAuditor rests with our shareholders, in accordance with UK law and our constitutional documents. The RAC does, however, make recommendations to the Board on these matters, which are in turn reported to shareholders.
While the Board is satisfied with its level of compliance with the governance requirements in Australia, the UKUnited Kingdom and the US,United States, it recognises that practices and procedures can always be improved, and there is merit in continuously reviewing its own standards against those in a variety of jurisdictions. The Board’s program of review will continue throughout the year ahead.
5.123.24 Additional UK disclosure
The information specified in the UK Financial ServicesConduct Authority Disclosure and Transparency Rules, DTR 7.2.6, is located elsewhere in this Annual Report. The Directors’ Report, at section 7.23,5.9, provides cross-references to where the information is located.
This Corporate Governance Statement was approved by the Board on 611 September 20112014 and signed on its behalf by:
JacquesJac Nasser AO
Chairman
611 September 20112014
Using this Remuneration Report
The following guide is intended to help the reader to understand and navigate through this Remuneration Report, and to understand the linkages between BHP Billiton’s remuneration strategy and the remuneration outcomes for Directors and senior executives. All acronyms used in the Remuneration Report are defined on this contents page or in section 10 of this Report.
Section | Subsection | What it covers | Section number | |||||
6.1 | Message from the Chairman | |||||||
6.2 | Our approach to remuneration | Our overarching remuneration principles | The key principles that underpin the Group’s remuneration strategy. | 6.2.1 | ||||
Our remuneration policy underpins our Group strategy | Shows how BHP Billiton’s remuneration policy is linked to our strategic objectives, and how remuneration is structured to reinforce achievement of these objectives. | 6.2.2 | ||||||
Our remuneration approach is focused on the long term | Explains how the structure of at risk remuneration encourages effective risk management and long-term decision-making by management. | 6.2.3 | ||||||
How remuneration is determined | Describes how the Remuneration Committee determined remuneration outcomes for members of the GMC. | 6.2.4 | ||||||
Remuneration mix | Describes the core components of Total Remuneration and their different roles. | 6.2.5 | ||||||
When remuneration is delivered | Explains the timing of the different components of remuneration and deferral to subsequent years. | 6.2.6 | ||||||
Fixed remuneration | Details the components of GMC remuneration that are not at risk. | 6.2.7 | ||||||
Short-term incentives (STI) | Outlines the key features of the Group Incentive Scheme (GIS), and Key Performance Indicators (KPIs) and STI rewards for GMC members. | 6.2.8 | ||||||
Long-term incentives (LTI) | Outlines the key features of the Long Term Incentive Plan (LTIP), LTI awards for GMC members and LTIP. | 6.2.9 | ||||||
Share ownership guidelines | Describes the Group’s minimum shareholding requirements for the Chief Executive Officer (CEO) and other members of the GMC. | 6.2.10 | ||||||
6.3 | Remuneration Governance | Explains how the Board and Remuneration Committee make remuneration decisions, including the use of external remuneration consultants. | ||||||
6.4 | Executive remuneration disclosures | Senior management in FY2011 | Shows the individuals comprising the Key Management Personnel (KMP), which are the GMC, with a summary of key service contract terms (including termination entitlements). | 6.4.1 | ||||
Statutory disclosures | Provides total remuneration for GMC members calculated pursuant to legislative and accounting requirements. | 6.4.2 | ||||||
Equity awards | Sets out the interests of GMC members resulting from BHP Billiton’s remuneration programs (including those granted and vested during FY2011). | 6.4.3 |
Contents of the Remuneration Report | ||||
4.1 | Annual statement by the Remuneration Committee Chairman | |||
4.2 | Introduction to the Remuneration Report | |||
4.3 | Remuneration policy report • Remuneration policy for Executive Directors • Remuneration policy for Non-executive Directors | |||
4.4 | Annual report on remuneration • Remuneration governance • Remuneration outcomes for the Executive Director (the CEO) • Remuneration outcomes for Non-executive Directors • Remuneration for members of the GMC (other than the CEO) • Other statutory disclosures | |||
Abbreviation | Item | |||
AGM | Annual General Meeting | |||
CEO | Chief Executive Officer | |||
DEP | Dividend Equivalent Payment | |||
EBIT | Earnings Before Interest and Tax | |||
GIS | Group Incentive Scheme | |||
GMC | Group Management Committee | |||
GSTIP | Group Short Term Incentive Plan | |||
HSEC | Health, Safety, Environment and Community | |||
IFRS | International Financial Reporting Standards | |||
KMP | Key Management Personnel | |||
LTI | Long-Term Incentive | |||
LTIP | Long-Term Incentive Plan | |||
MAP | Management Award Plan | |||
MSR | Minimum Shareholding Requirements | |||
STI | Short-Term Incentive | |||
STIP | Short-Term Incentive Plan | |||
TRIF | Total Recordable Injury Frequency | |||
TSR | Total Shareholder Return |
Section Subsection What it covers Section
number6.5 Aggregate Directors’ remuneration The total remuneration provided to executive and Non-executive Directors. 6.6 Non-executive Director arrangements Non-executive Directors in FY2011 Shows the individual Non-executive Directors. 6.6.1 Remuneration structure Explains the basis on which Non-executive Director remuneration is set and outlines the components. 6.6.2 Retirement benefits Details the retirement benefits payable to participating Directors under the now-closed Retirement Plan. 6.6.3 Statutory disclosures Provides total remuneration for non-executive Directors (calculated pursuant to legislative and accounting standards). 6.6.4
6.1 Message from4.1 Annual statement by the Remuneration Committee Chairman
Dear Shareholder
Welcome to BHP Billiton’s Remuneration Report for the financial year to 30 June 2014.
I am pleased to introduce a revised structure to our report this year. The new look is driven by revised disclosure requirements in the UK, together with our constant pursuit of more accessible information. I am equally pleased to report that there has been no change to our underlying remuneration philosophy and no change to how we reflect performance in remuneration outcomes – 2014 marks a decade since the Company introduced its current incentive arrangements.
As BHP Billiton’sBilliton is an Australian / UK dual-listed company, the disclosures in our report must comply with both Australian and UK reporting requirements, which unavoidably leads to a lengthy report. However, the report is intended to be comprehensible as well as comprehensive.
Structure of the 2014 Remuneration Report
This Annual Statement introduces the 2014 Remuneration Report. Following this is the Remuneration Policy Report, which sets out the remuneration policies applicable to Andrew Mackenzie (our CEO and only Executive Director) and our Non-executive Directors.
Our remuneration governance arrangements and the remuneration outcomes for Mr Mackenzie, Non-executive Directors and other members of the GMC are covered in the Annual Report on Remuneration, including the various detailed disclosures required under UK and Australian regulatory regimes.
The new structure of the report allows for a specific binding vote by shareholders in regard to the Remuneration Policy Report for the year ended 30 June 2011.first time at our 2014 AGMs.
In preparing the Report, we have maintainedLink to strategy
Our BHP Billiton Charter sets out our approach of providing relevant performance and remuneration information, enabling shareholders to assess the linkages between executive remuneration, execution of the Group’spurpose, strategy, and Group performance. The Report contains the remuneration disclosures required by Australian and UK regulations. In addition, we have again reported the actual remuneration paid to our executive team during the year.
Over FY2011, the Committee has continued to apply the remuneration framework that has been in place since 2004. This has served us well, requiring minimal alteration during a period of considerable change. There are no changes proposed in our approach to remuneration for FY2012.
However, the tenth anniversary of the BHP and Billiton merger in June 2011 provides a fitting backdrop to consider the growth and development of the Group since that date and the opportunities and challenges ahead. We believe our remuneration strategy should reinforce sustainable, long term value creation. To achieve our business goals, our remuneration must remain competitive to attract and retain talented executives, enabling us to realise our opportunities and further develop our business. Striking the appropriate balance between these considerations is important for the continued long term success of the Group.
To ensure that our remuneration policy continues to reinforce the Group’s strategies, the Committee has commenced a comprehensive review of our remuneration structures. We are reviewing the external environment within which we operatevalues and how that environment may evolve. We will also consider the global market status, the risk environment and strategic priorities for BHP Billiton. Over the course of FY2012, we will progress this review, developing appropriate remuneration proposals that will supportmeasure our focus on operational excellence, risk management and the execution of the Group’s strategy.
We consider effective governance and clear reporting on remuneration essential to maintaining the strong level of support that shareholders have demonstrated for the Remuneration Report. As in prior years, the FY2011 Report is designed to be clear and concise, to meet regulatory requirements and, above all, provide you with the information required to consider the alignment of remuneration and the Group’s success.
John Buchanan
Chairman, Remuneration Committee
6 September 2011
6.2 Our approach to remuneration
This section outlines the overarching Group strategy and the remuneration framework that guides decisions on remuneration design and outcomes for senior In framing how we remunerate our executives including the GMC members. Details of GMC membershipwe are included in section 6.4.1.
The information in this section demonstrates:
how the remuneration strategy translates into practice for the members of the GMC;
how executive remuneration is determined annuallyguided by the Remuneration Committee and Board;
the impact of business and individual performance on remuneration outcomes.
The focus is on the remuneration outcomes provided to executives and is different from, and complementary to, the statutory and accounting view of remuneration as set out in section 6.4.2.
6.2.1 Our overarching remuneration principles
The key principles of our remuneration policy are unchanged and are to:
support the execution of the Group’s business strategy in accordance with a risk appetite that is appropriate for the organisation;
provide competitive rewards to attract, motivate and retain highly skilled executives willing to work around the world;
apply demanding performance measures, including key financial and non financial measures of performance;
link a large component of pay to our performance and the creation of value for our shareholders;
ensure remuneration arrangements are equitable and facilitate the deployment of people around our businesses;
limit severance payments on termination to pre established contractual arrangements (which do not commit us to making any unjustified payments).
The Remuneration Committee is confident that these principles continue to meet the Group’s objectives.
6.2.2 success contained inOur remuneration policy underpins our Group strategy
The Remuneration Committee recognises that the implementation of the Group’s strategy and our ongoing performance depends on the quality and motivation of our people.
Our purpose is to create long-term shareholder value through the discovery, acquisition, development and marketing of natural resources.
Our strategy is to own and operate large, low-cost, expandable, upstream assets diversified by commodity, geography and market.
Our focus on the safety and health of our workforce, our fundamental drive for sustainability across all our business operations, our concern for the environment and communities within which we work, and our management of operational risks are reflected through our remuneration policy and structures.
The diagram below illustrates how BHP Billiton’s remuneration policy and structures serve to support and reinforce the six key drivers of our strategy.
6.2.3 Our remuneration approach is focused on the long term
The focus at BHP Billiton is on long-term sustainability and our remuneration frameworksCharter. They are designed to ensure that executives take a long-term approach to decision makingdecision-making and to minimise activities that focus only on short-term results at the expense of longer termlonger-term business growth and success. The Remuneration Committee has considered the ways in which risk management and the long-term horizon are reflected throughout BHP Billiton’s rewardremuneration arrangements for all executives, and is satisfied that our approach reinforces the desired behaviours.
This is largely achieved through the Group’s approach to short-term and long-term incentive awards, which comprise a significant portion of total remuneration for Mr Mackenzie and other members of the GMC. The equity component of the short-term incentive award is deferred for a two-year period, and performance under the long term incentive plan is measured over a five-year period. The actual rewards received by Mr Mackenzie and other members of the GMC therefore reflect the Group’s performance and share price over an extended period.
Our approach
Despite the report’s new look, there have been no substantial changes to our underlying approach – we ensure that remuneration outcomes reflect the performance of the Group, Businesses and individuals. This approach has enjoyed a strong level of support from shareholders, with a vote in favour for the remuneration report of 97 per cent at last year’s AGMs.
Our approach to incentive structures has been in place for more than a decade and has served both shareholders and participants well, delivering remuneration outcomes to executives aligned to the performance of the Group and of individuals. BHP Billiton adopted the deferral of a substantial portion ofshort-term incentive awards in equity in 2003 and a five-year term for long-term incentive awards in 2004. These approaches, which were then market leading, have since become more prevalent and acknowledged as best practice.
Notwithstanding our stable approach, the Committee and the Board continue to pay close attention to shareholders’ views so they can be factored into the Group’s future approach.
Our remuneration policy in action
Each year, the Committee makes decisions regarding a range of remuneration matters, including any changes in base salary, fees and benefits, and adjudicating on short-term and long-term incentive outcomes relating to Mr Mackenzie and other members of the GMC.
Last year, when Mr Mackenzie was appointed to the CEO role, the Board and Committee believed that some downward rebasing of his remuneration package, relative to that of the former CEO, was appropriate; a view supported by Mr Mackenzie.
This year, following the Committee’s annual review process, the FY2015 base salary of Mr Mackenzie has not been increased. Likewise, other elements of Mr Mackenzie’s total target remuneration (pension contributions, benefits and short-term and long-term incentive targets) will remain the same in FY2015 as in FY2014.
Mr Mackenzie’s annual short-term incentive is at risk. The scorecard against which his performance is assessed is made up of a number of performance measures, including HSEC, financial performance, capital project management and individual personal measures. For FY2014, the Committee has assessed the performance of Mr Mackenzie and concluded it was in excess of target with a bonus outcome of 115.3 per cent, against a target of 100 per cent, a maximum of 150 per cent, and a minimum of zero. This outperformance was mainly due to positive outcomes across a range of HSEC measures, together with above-target production and productivity achievements.
Mr Mackenzie’s long-term incentive is also at risk. BHP Billiton’s business is long term, and decisions are made that are likely to have an impact for many years. It is therefore important that a significant part of senior executives’ pay reflects long-term performance. BHP Billiton’s long-term incentive plan measures performance over five years.
The Committee has now considered performance and vesting outcomes for the long-term incentive award granted in 2009, covering the five years to 30 June 2014. The performance condition benchmarked BHP Billiton’s TSR against the TSR of a tailored comparator group of resources companies. The five-year TSR performance for BHP Billiton was 60.6 per cent, exceeding the weighted average TSR of the comparator group by 17.8 per cent, resulting in a 58 per cent vesting.
The Committee considered whether there were any circumstances that merited it exercising its discretion to reduce this vesting outcome (as was the case last year where the Committee reduced vesting from 100 per cent to 65 per cent). This discretion is an important safeguard in circumstances where the Committee does not believe that the vesting outcome truly reflects performance.
After carefully considering the relative TSR outcome and both Group and individual performance over the vesting period, the Committee determined that the TSR outcome was a fair reflection of performance.
Consistent with the approach for Mr Mackenzie, the base salaries and total target remuneration packages for other GMC members have also been held constant for FY2015. Aligned with this, Non-executive Director fees were again frozen, for the third consecutive year.
Summary
This year’s Remuneration Report represents a change in format, structure and content from prior years. However, our fundamental philosophies and approaches to remuneration have not changed – we trust that you will agree that our long held, consistent approach to aligning remuneration to performance has served shareholders well.
As ever, we welcome your comments.
John Buchanan |
Chairman, Remuneration Committee |
11 September 2014
4.2 Introduction to the Remuneration Report
The contents of this Remuneration Report are governed by legislation in the United Kingdom and Australia.
The UK Companies Act 2006 and the Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008 (as amended), which are generally described as UK requirements in this Remuneration Report, require BHP Billiton to make certain disclosures in regard to Directors, which for BHP Billiton includes the Non-executive Directors and the Executive Director, being the CEO.
The Australian Corporations Act 2001, Australian Accounting Standards and IFRS require BHP Billiton to make certain disclosures for KMP, defined as those persons having authority and responsibility for planning, directing and controlling the activities of the Group, directly or indirectly. For the purposes of this Remuneration Report, it has been determined that the KMP includes the Non-executive Directors, and the members of the GMC including the CEO.
4.2.1 Members of the GMC
The GMC makes key management decisions under the authorities that have been delegated to it by the Board. The composition and structure of the GMC reflects a commitment to a relentless focus on the safe execution of the Group’s strategy, and provides BHP Billiton with the right balance of skills and experience to lead the Group. The members of the GMC during FY2014 are shown in the table below.
Name | Title | |
Andrew Mackenzie | Chief Executive Officer and Executive Director | |
Peter Beaven | President, Copper | |
Tony Cudmore | President, Corporate Affairs since 3 March 2014 | |
Tim Cutt | President, Petroleum and Potash since 2 July 2013 | |
Dean Dalla Valle | President, Coal | |
Mike Fraser | President, Human Resources since 27 August 2013 | |
Geoff Healy | Chief Legal Counsel | |
Mike Henry | President, HSE, Marketing and Technology since 5 May 2014 President, HSEC, Marketing and Technology to 4 May 2014 | |
Graham Kerr | Chief Financial Officer | |
Jane McAloon | President, Governance and Group Company Secretary | |
Daniel Malchuk | President, Aluminium, Manganese and Nickel | |
Jimmy Wilson | President, Iron Ore | |
Karen Wood | President since 3 March 2014 President, Corporate Affairs from 1 December 2013 to 2 March 2014 President, Public Affairs from 27 August 2013 to 30 November 2013 President, People and Public Affairs to 26 August 2013 |
Section3.2.2for dates of appointment of GMC members
4.2.2 Non-executive Directors
Details of the Non-executive Directors who held office during FY2014 are set out below. Each Non-executive Director held office for the whole of FY2014 unless otherwise indicated.
Name | Title | Name | Title | |||
Malcolm Brinded(1) | Non-executive Director | Lindsay Maxsted | Non-executive Director | |||
Malcolm Broomhead | Non-executive Director | Wayne Murdy | Non-executive Director | |||
John Buchanan | Senior Independent Director | Jac Nasser | Chairman | |||
Carlos Cordeiro | Non-executive Director | Keith Rumble | Non-executive Director | |||
David Crawford | Non-executive Director | John Schubert | Non-executive Director | |||
Pat Davies | Non-executive Director | Shriti Vadera | Non-executive Director | |||
Carolyn Hewson | Non-executive Director |
(1) | Malcolm Brinded joined BHP Billiton as a Non-executive Director from 15 April 2014. |
Section 3.2.1 for dates of appointment of Non-executive Directors |
4.3 Remuneration policy report
This section of the report describes the overarching remuneration policy that guides the Remuneration Committee’s decisions. The remuneration policy report is presented as follows.
Contents of the remuneration policy report |
4.3.1 to 4.3.8 Remuneration policy for Executive Directors |
4.3.9 Remuneration policy for Non-executive Directors |
Section 4.4.14 for remuneration policy for the GMC (excluding the CEO)
The contents of this section are determined by new UK legislation, under which this policy report is required to be put to a binding vote at the Group’s 2014 AGMs. Subject to shareholder approval, this remuneration policy will become effective for Directors of BHP Billiton immediately after our final 2014 AGM. Under the UK legislation, the policy will be binding only in regard to the Directors (including the CEO) and not for other members of the GMC. The UK legislation requires BHP Billiton to present the remuneration policy for this vote at least every three years.
Where the remuneration policy report includes cross-references to other sections of the Remuneration Report or the Annual Report, these are solely for the purposes of assisting the reader to locate related information. The referenced information is not part of the remuneration policy report.
Remuneration policy for Executive Directors
BHP Billiton currently has a single Executive Director, being the CEO. Therefore, for simplicity, this section refers only to the CEO. This remuneration policy would, however, apply for any new Executive Director role, in the event that one were created during the life of this remuneration policy. In that case, references in this section to the CEO should be read as being to each Executive Director.
4.3.1 Overarching principles
The Remuneration Committee recognises that remuneration has an important role to play in supporting the implementation and achievement of the Group’s strategy and our ongoing performance, aligning the activities of management to the interests of shareholders, and in supporting Our Charter.
Inside front cover of the Annual Report:Our Charter sets out our purpose, strategy, values and how we judge our success
The Committee determines the appropriate remuneration for the CEO, taking into account his responsibilities, location, skills, experience and performance within the Group. In doing so, the Committee recognises that levels of remuneration should be sufficient to attract, motivate and retain a highly skilled CEO, but also that the Group should avoid paying more than is necessary for this purpose.
The key principles of our remuneration policy, which remain unchanged, are to:
4.3.2 The purpose of remuneration at BHP Billiton
BHP Billiton’s remuneration arrangements reinforce the achievement of our success, as set out inOur Charter, and are designed to ensure that the CEO takes a long-term approach to decision-making and to minimise activities that focus only on short-term results at the expense of longer-term business growth and success. The Remuneration Committee has considered the ways in which risk management and the long-term horizon are reflected throughout BHP Billiton’s remuneration arrangements for the CEO and all executives, and is satisfied that the approach reinforces the desired behaviours.
This is largely achieved through the Group’s approach to STI and LTI rewards,awards, which comprise a significant portion of total remuneration for the members of the GMC.remuneration. The equity component of any STI rewardsaward is deferred for a two-year period, and performance under the LTIP is measured over a five yearfive-year period. The actual rewards received by members of the GMCCEO therefore reflect the Group’s performance and share price over an extended period.
It is the Remuneration Committee’s view that this provides an appropriate focus on BHP Billiton’s sustained performance beyond the end of the initial measurement period. This approach also provides a transparent mechanism for clawback or adjustment in the event of a restatement of Group results, through changes to the vesting or non-vesting of deferred equity.awards.
In addition, STI and LTI outcomes are not driven by a purely formulaic approach. The Remuneration Committee applies qualitative judgement in determining STI and LTI outcomes, and mayholds discretion to determine that rewardsawards are not to be provided or vested in circumstances where it would be inappropriate or would provide unintended outcomes. The Remuneration Committee has no discretion to allow vesting of equity awards when performance conditions have not been satisfied.
6.2.4 How remuneration is determined
The Remuneration Committee considerssatisfied (other than in the appropriate Total Remuneration for each memberevent of death or serious injury, disability, illness that prohibits continued employment or total and permanent disablement of the GMC by examining the remuneration provided to comparable roles in organisations of similar global complexity, size, reach and industry.CEO).
Each year, the Remuneration Committee’s independent adviser, Kepler Associates, sources and consolidates relevant remuneration data for appropriate roles, based on their analysis of relevant organisations and markets. The adviser prepares a comparison to current GMC remuneration, but does not make specific recommendations regarding individual executives’ remuneration(1).
From this market comparison, the Remuneration Committee determines the appropriate Total Remuneration level for each individual, taking into account their location, skills, experience and performance within the Group. In doing so, the Remuneration Committee recognises that levels4.3.3 Components of remuneration should be sufficient to attract, motivate and retain highly skilled executives, but also that the Group should avoid paying more than is necessary for this purpose.
6.2.5 Remuneration mix
The Remuneration Committee then considers the appropriate mix and weighting of different remuneration components to make up Total Remuneration for GMC members. This includes fixed and at risk components, which are designed to deliver appropriate pay over a one-, three- and five-year time horizons.
While the Board recognises that market forces necessarily influence remuneration practices, it strongly believes that the fundamental driver of our remuneration structure should be business performance. Accordingly,
while target remuneration is structured to attract and retain executives, the amount of remuneration actually received is dependent on the achievement of superior business and individual performance and on generating sustained shareholder value. At risk components therefore represent a significant portion of Total Remuneration and are subject to performance conditions and to ongoing service.
The components of Total Remuneration that are considered by the Remuneration Committee are:
Fixed remuneration – determined relative to comparable roles in other companies and comprising base salary, pension/retirement benefits and other non-pensionable benefits such as medical and life insurance;
Short-term incentive (STI) – intended to support a high-performance culture and delivered in cash with a matching award of Deferred Shares or Options;
Long-term incentive (LTI) – appropriate to the long-term nature of business decision making and delivered in Performance Shares with vesting determined under a five-year performance hurdle.
More detail in regard to each component is included in the following sections of this Remuneration Report.
Maximum and actual remuneration mix
The diagram to the left illustrates the relative proportion of these components for the members of the GMC.
Base salary forms the foundation of the remuneration mix and each of the other components is described as a percentage of base salary. The diagram therefore shows base salary as 100 per cent with each additional component relative to that base salary.
The first column of the diagram shows the mix that would have applied if themaximumat risk rewards had been earned and the second column shows the comparativeactualTotal Remuneration received in relation to FY2011 as shown in the table overleaf in section 6.2.6 (as an average across the seven GMC members).
6.2.6 When remuneration is delivered
The delivery time frame varies for different components of Total Remuneration.
Total Remuneration is the key measure considered by the Remuneration Committee. The Total Remuneration for each member of the GMC in respect of the 2011 performance year was determined by the Committee over a series of meetings from July 2010. Total Remuneration is allocated across different elements
of remuneration to reflect a focus on both short- and long-term performance, and delivery of these elements occurs over different time frames as shown in the table and diagram below. As set out in sections 6.2.7 to 6.2.9, the process followed by the Remuneration Committee for determining the Total Remuneration is as follows:
A review of base salary effective from 1 September 2010 applying (along with the retirement benefits shown below) over the period from 1 September 2010 to 31 August 2011.
A target STI is set for the 2011 financial year, to reflect performance from 1 July 2010 to 30 June 2011, with performance assessed in August 2011:
Cash awards will be provided in September 2011; and
Deferred Shares and/or Options are expected to be allocated in December 2011 following the Group’s 2011 Annual General Meetings.
An LTI award of Performance Shares is allocated in December 2010 following the Group’s 2010 Annual General Meetings.
Non-statutory table: The following table shows Total Remuneration for the GMC as a resultcomponents of total remuneration, the determinations of the Remuneration Committee. The crystallisation of the Deferred STIlink to strategy, how each component operates, how performance is assessed and will impact remuneration, and the LTI awards will be after a two-year and five-year period respectively and will depend on performance and service conditions. Given the requirements to use Accounting Standards under the Australian Corporations Act 2001 and the UK Companies Act 2006maximum opportunity for determining and measuring executive remuneration, including allocation across the vesting period for longer-term incentives, the ‘non-statutory remuneration’ data set out below do not reconcile directly to the Statutory Total Remuneration Table as shown in section 6.4.2.
US dollars | Total Remuneration as determined by the Remuneration Committee in respect of FY 2011 | Base salary effective from 1 September 2010 | Retirement benefits effective from 1 September 2010 | Cash STI awards to be provided in September 2011 | Deferred STI awards to be allocated in December 2011 (Face Value) | LTI awards allocated in December 2010 (Expected Value) | ||||||||||||||||||
Marius Kloppers | 10,994,689 | 2,130,000 | 852,000 | 2,351,448 | 2,351,448 | 3,309,793 | ||||||||||||||||||
Alberto Calderon | 5,542,641 | 1,100,000 | 385,000 | 1,179,200 | 1,179,200 | 1,699,241 | ||||||||||||||||||
Andrew Mackenzie | 5,571,241 | 1,100,000 | 396,000 | 1,188,000 | 1,188,000 | 1,699,241 | ||||||||||||||||||
Marcus Randolph | 6,062,321 | 1,230,000 | 418,200 | 1,338,240 | 1,338,240 | 1,737,641 | ||||||||||||||||||
Alex Vanselow | 5,614,041 | 1,100,000 | 418,000 | 1,179,200 | 1,179,200 | 1,737,641 | ||||||||||||||||||
Karen Wood | 4,615,812 | 967,500 | 332,820 | 1,037,160 | 1,037,160 | 1,241,172 | ||||||||||||||||||
J Michael Yeager | 6,167,417 | 1,240,000 | 443,920 | 1,372,928 | 1,372,928 | 1,737,641 |
6.2.7 Fixed remuneration
Base salary
Base salary is reviewed annually and changes are effective from 1 September each year. It is benchmarked relative to comparable roles in global companies of similar complexity, size, reach and industry and reflects an individual’s responsibilities, location, performance, qualifications and experience within the Group. Pay reviews also consider general economic conditions and salary reviews across the rest of the Group. It is stated and paid in US dollars for all GMC members.
Non-statutory table: Base salary amounts in the table below are effective 1 September and are not linked to any specific financial year. They therefore do not match with the 1 July 2010 to 30 June 2011 salaries shown in section 6.4.2.
US dollars | 1 September 2009 | 1 September 2010 | % change | 1 September 2011 | % change | |||||||||||||||
Marius Kloppers | 2,038,885 | 2,130,000 | 4.47 | 2,215,200 | 4.00 | |||||||||||||||
Alberto Calderon | 1,057,000 | 1,100,000 | 4.07 | 1,144,000 | 4.00 | |||||||||||||||
Andrew Mackenzie | 1,057,000 | 1,100,000 | 4.07 | 1,200,000 | 9.09 | |||||||||||||||
Marcus Randolph | 1,182,751 | 1,230,000 | 3.99 | 1,279,200 | 4.00 | |||||||||||||||
Alex Vanselow | 1,057,000 | 1,100,000 | 4.07 | 1,144,000 | 4.00 | |||||||||||||||
Karen Wood | 930,000 | 967,500 | 4.03 | 1,006,200 | 4.00 | |||||||||||||||
J Michael Yeager | 1,190,000 | 1,240,000 | 4.20 | 1,289,600 | 4.00 |
Retirement benefits
As part of fixed remuneration, all GMC members are entitled to retirement benefits under defined contribution plans (for all new entrants) and legacy defined benefit plans. Employees in legacy defined benefit plans continue to accrue benefits in those plans for past and future service unless they have elected to transfer to a defined contribution plan. The table below sets out the retirement benefits payable to each member of the GMC.component.
Remuneration component and link to strategy | Operation and performance framework | Maximum (1) | ||
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. | • Base salary 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. • Base salary is denominated in US dollars. | 8% increase per annum (annualised), or inflation if higher in Australia. |
and link to strategy |
| Maximum (1) | ||||
• The Remuneration Committee’s discretion in respect of base salary | ||||||
| ||||||
Provides a market-competitive level of post-employment benefit to attract and retain a high-quality and experienced CEO. | ||||||
| ||||||
| ||||||
| ||||||
| ||||||
|
Notes• Pension contributions are benchmarked to comparable roles in global companies.
|
| 25% of |
Shareplus all-employee share purchase plan
Like all permanent employees, members of the GMC are eligible to participate in Shareplus, an all-employee share purchase plan. Participants in Shareplus contribute from their post-tax base salary (capped at US$5,000 per year) to acquire shares in BHP Billiton. Each of the GMC members chose to contribute the maximum allowable amount to the plan from their post-tax salary in FY2011.
Provided the participant remains employed by BHP Billiton on the third anniversary of the shares being acquired, the plan provides for a grant of matching shares on a 1:1 basis. The accounting value of the rights acquired is included in remuneration over the share purchase period in the table in section 6.4.2.
A grant of Matching Shares was made to participants (including the members of the GMC) on 1 April 2011, and details of the resulting share holdings for GMC members are shown in section 6.4.3. Further details regarding Shareplus are set out in note 32 ‘Employee share ownership plans’ to the financial statements.
6.2.8 Short-term incentives
An individual scorecard of measures is set for each executive at the commencement of each financial year under the Group Incentive Scheme (GIS).
These measures are linked to the achievement of the business strategy and financial outcomes and also individual non-financial objectives reflecting individual contribution to the business (as shown in the scorecard table below). These measures have been chosen as they reward members of the GMC for their overall performance in the current year, comprising both financial performance and delivery against measures that impact the long-term sustainability of the Group.
At the conclusion of the financial year, each executive’s achievement against their measures is assessed by the Remuneration Committee and Board and their cash STI award is determined. The Board believes this method of assessment is transparent, rigorous and balanced, and provides an appropriate and objective assessment of performance.
Cash awards are paid in September following the release of the Group’s annual results. The rules of the GIS outline the circumstances in which participants may be entitled to a cash award for the financial year in which they cease employment. Such circumstances depend on the reason for leaving. The only circumstance in which the Remuneration Committee has considered using its discretion to allow members of the GMC to receive a cash award in event of departure is for those individuals who have retired or are retiring.
The value of any cash STI award is matched by an equivalent face value of Deferred Shares (or an approximately equivalent value in Options, or a combination of the two, at the election of the participant) to which the executive will not have access for two years (unless they leave the Group under specific circumstances). More details on the terms of these awards are provided below. Deferred Shares and Options are allocated in December after the Annual General Meetings. Allocations to the CEO are subject to shareholder approval.
Details of the interests held in BHP Billiton by members of the GMC as a result of participation in the GIS are provided in section 6.4.3.
Determining STI outcomes
The key measures for the GMC in FY2011 and the level of achievement against Group measures are set out below. The Remuneration Committee believes that the KPIs set and their relative weightings appropriately incentivise short term performance.
The table below shows how, for the Group CEO and other Group Executives, all non-individual measures are assessed on a Group basis. For the Business CEOs, the weighting of assessment for measures is split between the Group and the businesses for which they are responsible as shown in the table below.
FY2011 key performance | Weighting for Group CEO | Weighting for Business CEOs (1) | Weighting for other Group Executives(2) | FY2011 assessment for | ||||||||||||||
Group | Business | |||||||||||||||||
Health, safety, environment and community (HSEC) includes:
• Total recordable injury frequency (TRIF)
• Fatalities/Significant environmental incidents
• HSE risk management
• Human rights impact assessment
• Environment and occupational health | 15 | % | 7.5 | % | 7.5 | % | 15 | % | The Sustainability and Remuneration Committees reviewed HSEC performance. The two fatalities arising in the Manganese business were tragic reminders for the need for constant management focus on safety and were at the forefront of consideration when determining the outcomes for the Group and businesses. Both Committees noted the good progress made on TRIF and, in particular, the strong progress in risk management, environmental risk control and employee health initiatives. Performance in HSEC was differentiated across the businesses with the overall Group result considered marginally above Target, performance in the Non-Ferrous Materials businesses and Petroleum considered to be between Target and Stretch and an outcome in Ferrous and Coal businesses of below Target. | |||||||||
Profit after tax (adjusted for foreign exchange, price and exceptional items) | 50% | 25% | — | 35% | Performance was considered to be between Target and Stretch, reflecting positive outcomes against targets, primarily in respect of production volumes and cost management. |
FY2011 key performance FY2011 assessment for
indicators Weighting for
Group CEO Weighting for
Business CEOs (1) Weighting for
other Group
Executives(2)
Group-based measures (3) Group Business Underlying EBIT for the relevant business(es) (adjusted for foreign exchange, price and exceptional items) — — 25% — Performance for each business varied with results for Petroleum and the Non Ferrous Materials businesses being between Stretch and Exceptional reflecting positive outcomes against targets, primarily in respect of production volumes and cost management. Ferrous and Coal performance was between Target and Stretch Capital management – cost and schedule 15% 7.5% 7.5% 10% With the exception of the Ferrous and Coal businesses that achieved a result above Stretch, the overall performance was below Target for a portfolio of eight major projects. This reflected the cost and schedule overruns experienced. Individual measures based on contribution to management team, key project deliverables of each role, and the operating model (1SAP system, scalable organisational structure and people strategy including diversity) 20% 20% 40% Personal performance of the CEO and other members of the GMC was strong across the range of personal measures.
Notes
|
|
|
Threshold: the minimum necessary to qualify for any reward.
Target: where the performance requirements are met.
Stretch: where the performance requirements are exceeded.
Exceptional: where the performance requirements are significantly exceeded.
Actual STI provided for FY2011 performance
STI targets for FY2011 were set by the Remuneration Committee as part of Total Remuneration as described in section 6.2.6. The target cash award was 80 per cent of base salary for all members of the GMC, with a maximum cash award of 160 per cent of base salary for exceptional performance against all scorecard measures.
The following table shows the amount of at risk remuneration awarded by the Board as STI in cash (in September 2011) and in Deferred Shares and/or Options (to be allocated in December 2011) as a result of Group, business and individual performance against the above scorecard objectives.
As described above, the Deferred Share and/or Option awards shown below have not yet delivered any realised value to the executives, as they generally do not vest and cannot be exercised for at least two years from the end of the relevant financial year (i.e. the FY2011 awards are expected to vest in August 2013). The number and value of Deferred Shares and/or Options thatvested during FY2011 are shown in section 6.4.3.
Non-statutory table: Cash STI rewards shown below are the same as those reported in section 6.4.2, but this table shows the market value of the Deferred Shares and/or Options at the time of allocation (rather than amortising the accounting value of each award over the relevant performance and service periods as per accounting standards).
US dollars | FY 2010 Cash STI | FY 2010 Deferred Shares and Options (1) | FY 2010 Total | % of max FY 2010 | FY 2011 Cash STI | FY 2011 Deferred Shares and Options (1) | FY 2011 Total | % of max FY 2011 | ||||||||||||||||||||||||
Marius Kloppers | 2,330,527 | 2,330,527 | 4,661,054 | 71.4 | 2,351,448 | 2,351,448 | 4,702,896 | 69.0 | ||||||||||||||||||||||||
Alberto Calderon | 1,129,066 | 1,129,066 | 2,258,132 | 66.8 | 1,179,200 | 1,179,200 | 2,358,400 | 67.0 | ||||||||||||||||||||||||
Andrew Mackenzie | 1,120,620 | 1,120,620 | 2,241,240 | 66.3 | 1,188,000 | 1,188,000 | 2,376,000 | 67.5 | ||||||||||||||||||||||||
Marcus Randolph | 1,309,945 | 1,309,945 | 2,619,890 | 69.2 | 1,338,240 | 1,338,240 | 2,676,480 | 68.0 | ||||||||||||||||||||||||
Alex Vanselow | 1,120,610 | 1,120,610 | 2,241,220 | 66.3 | 1,179,200 | 1,179,200 | 2,358,400 | 67.0 | ||||||||||||||||||||||||
Karen Wood | 985,967 | 985,967 | 1,971,934 | 66.3 | 1,037,160 | 1,037,160 | 2,074,320 | 67.0 | ||||||||||||||||||||||||
J Michael Yeager | 1,336,407 | 1,336,407 | 2,672,814 | 70.2 | 1,372,928 | 1,372,928 | 2,745,856 | 69.2 | ||||||||||||||||||||||||
|
|
|
| |||||||||||||||||||||||||||||
Total | 18,666,284 | 19,292,352 | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
Average(2) | 68.1 | 67.8 | ||||||||||||||||||||||||||||||
|
|
|
|
Note
|
|
Relationship between STI rewards and Group performance
The following graphs are included as part of satisfying an Australian disclosure requirement to show the relationship between KMP remuneration and earnings.
As shown on the previous page of this report, STI rewards for members of the GMC are based on a balanced scorecard of key performance measures. A substantial component of each scorecard is based on measures that will drive the long-term success and sustainability of the Group, but which may not have a direct correlation to annual profitability.
Only a proportion of STI outcomes are directly related to financial measures, and that proportion varies for different members of the GMC. The profit measure used for calculating scorecard outcomes (as defined in that section) is not the same as the disclosed profit attributable to shareholders used in the graph below.
Due to the factors described above, some correlation between STI outcomes and the measures used in the graphs below is evident over the last five years, but there is no guarantee that this will be the case in the future. Further details of the Group’s attributable profit and basic earnings per share over the past five years can be found in section 1.4.1 of this Annual Report (including definitions of these terms).
Provides personal insurances and assistance where BHP Billiton’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. |
Terms of deferred STI
Each Deferred Share and each Option is a conditional right to acquire one ordinary BHP Billiton share upon satisfaction of the vesting conditions. They will not deliver any value to the holder for at least two years from the end of the financial year (unless the executive’s employment with the Group ends earlier in specific circumstances such as on death, serious injury, disability or illness, retirement and redundancy/retrenchment).
The Remuneration Committee considers it as an important principle that Deferred Shares and Options will be forfeited by the individual in specific circumstances, including if they resign from the Group or are terminated for cause within the two-year vesting period. Deferred Shares are not ordinary shares and do not carry entitlements to ordinary dividends or other shareholder rights. Dividends are not received by the executives during the vesting period. However, a Dividend Equivalent Payment (as described in section 6.4.2) is made to cover the period between grant and exercise, but only on Deferred Shares and/or Options that have vested. This payment is not made in relation to any securities that are forfeited during the vesting period.
Deferred Shares that vest may be exercised at no cost to the participant. Options have an exercise price that reflects the market price of BHP Billiton shares at the time of allocation, and a greater number of Options are therefore allocated if an executive chooses this alternative. The Group’s Securities Dealing Group Level Document governs and restricts dealing arrangements and the exercise of Deferred Shares and Options (as described in section 6.3).
6.2.9 Long-term incentives
An allocation of Performance Shares is determined as part of Total Remuneration (relative to market as described in section 6.2.4) and provided to each member of the GMC under the Group’s Long Term Incentive Plan (LTIP).
The purpose of the LTIP is to focus management’s efforts on the achievement of sustainable long-term growth and success of the Group (including appropriate management of business risks) and to align senior executive rewards with sustained shareholder wealth creation through the relative TSR performance condition. TSR is detailed and described in the table of terms later in this section.
Details of the interests held in BHP Billiton by members of the GMC as a result of participation in the LTIP are provided in section 6.4.3.
LTI granted in December 2010
The following table shows the LTI awards determined by the Remuneration Committee as part of Total Remuneration for FY2011 and provided as an award of Performance Shares in December 2010 (following approval of the CEO’s award by shareholders at the Annual General Meetings) to drive long-term performance of the Group over a five-year period (with comparative prior year data).
Whether the grants deliver any value to executives will not be determined until the end of the performance period. In order for any benefit to be obtained by the executives from the Performance Shares, the relative five-year TSR performance hurdle must be achieved over the period from 1 July 2010 to 30 June 2015, and the individual must remain employed by the Group (unless they leave the Group in specific circumstances as described in the table of terms later in this section).
Expected Value of LTI awards
The value of Performance Shares within the remuneration mix is based on the Expected Value of the Performance Shares (being a percentage of the share price).
Shareholders approved changes to the LTI plan at the 2010 Annual General Meetings, which applied to the December 2010 allocations. The impact of the changes and the new LTI terms are set out in detail in the table of terms later in this section. The table includes information on the Expected Value of the LTI awards, as calculated by Kepler Associates, which takes the performance hurdle into account along with other factors as described in the table. The Expected Value is used to represent the expected remuneration outcomes from the LTIP for the GMC members when the Remuneration Committee is considering Total Remuneration and the appropriate remuneration mix (as described in sections 6.2.5 and 6.2.6).
The changes in LTI terms from FY2011 resulted in an increase in the Expected Value of LTI awards from 31 per cent to 41 per cent of the face value of a BHP Billiton share. This has resulted in a reduction in the number of Performance Shares allocated as shown in the table below.
Non-statutory table:LTI awards shown below are included in the table in section 6.4.2, but this table shows the Expected Value of the awards as described above (rather than amortising the accounting value of each award over the relevant performance and service periods as per accounting standards).
Name | Number of Performance Shares allocated in December 2009 | December 2009 Expected Value (1) | % of max December 2009 (3) | Number of Performance Shares allocated in December 2010 | December 2010 Expected Value (2) | % of max December 2010 (3) | ||||||||||||||||||
Marius Kloppers | 250,000 | 2,864,636 | 70.3 | 200,000 | 3,309,793 | 77.7 | ||||||||||||||||||
Alberto Calderon | 120,000 | 1,150,279 | 54.4 | 120,000 | 1,699,241 | 77.2 | ||||||||||||||||||
Andrew Mackenzie | 120,000 | 1,150,279 | 54.4 | 120,000 | 1,699,241 | 77.2 | ||||||||||||||||||
Marcus Randolph | 120,000 | 1,375,025 | 58.1 | 105,000 | 1,737,641 | 70.6 | ||||||||||||||||||
Alex Vanselow | 120,000 | 1,375,025 | 65.0 | 105,000 | 1,737,641 | 79.0 | ||||||||||||||||||
Karen Wood | 90,000 | 1,031,269 | 55.4 | 75,000 | 1,241,172 | 64.1 | ||||||||||||||||||
J Michael Yeager | 120,000 | 1,375,025 | 57.8 | 105,000 | 1,737,641 | 70.1 | ||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||
Total | 940,000 | 10,321,538 | 830,000 | 13,162,370 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Average | 59.3 | 73.7 | ||||||||||||||||||||||
|
|
|
|
Notes
• Benefits may be provided as determined by the Committee. Currently, this includes such items as the costs of private family health insurance, death and disability insurance, car parking, and personal tax return preparation in the required countries where BHP Billiton has requested that the CEO relocate internationally, or where BHP Billiton’s Dual Listed Company structure requires personal tax returns in multiple jurisdictions.
• The CEO is eligible to participate in Shareplus, which is BHP Billiton’s all- employee share purchase plan. Section 4.4.26 for information about Shareplus and • The Committee’s discretion in respect of benefits applies up to the maximums shown. • A relocation allowance and assistance is provided only where a change of location is made at BHP | Benefits as determined by the |
|
|
Proposed allocation of FY2012 LTI in December 2011
On the advice of the Remuneration Committee, the Board has approved an award of Performance Shares with an Expected Value (as described above the table) of US $3,441,000. This represents a small increase from the FY2011 LTI for the CEO (as shown in the table). The actual number of Performance Shares to be granted will depend on the share price and exchange rate over the three months up to the date of grant. At the time of determination by the Remuneration Committee this value was equal to approximately 180,000 Performance Shares (compared to 200,000 in FY2011). This Expected Value was determined with the input of independent advisers, and takes into account the appropriate level of total remuneration for the CEO, as assessed by reference to a number of factors, including the extent to which the total remuneration is market competitive. If approved by shareholders, the Performance Shares will be granted following the Annual General Meetings (i.e. in or around December 2011). The number of Performance Shares allocated will be notified to shareholders when provided, along with the number of Performance Shares which will be granted to the other members of the GMC on the same date in respect of FY2012 LTI.
LTI vesting outcomes and the delivery of LTIP rewards
The performance hurdle for the 2005 and 2006 LTIP awards requires BHP Billiton’s TSR to exceed the weighted median TSR of a group of peer companies by 5.5 per cent per annum (on average over the five years) which is 30.7 per cent over five years. Details of the comparator group companies are set out in section 6.4.3.
2005 allocations under the LTIP – vested in FY2011
The 2005 LTIP vested in August 2010. The number and value of vested Performance Shares for each GMC member are provided in section 6.4.3. Over the performance period, BHP Billiton’s TSR was 187.7 per cent. In contrast, the average TSR for the peer group against which the Group’s performance was measured was 113.6 per cent. The impact of the Company’s outperformance was to add US$59.2 billion of shareholder value from 1 July 2005 to 30 June 2010 over and above performance in line with the average of the peer group.
2006 allocations under the LTIP – tested to the end of FY2011
BHP Billiton’s TSR performance from 1 July 2006 to 30 June 2011 was assessed as 138.3 per cent compared with an average TSR performance for the comparator group companies of 66.8 per cent. This outperformance of 71.5 per cent based on BHP Billiton’s 1 July 2006 market capitalisation of US$122.7 billion represents outperformance of US$87.7 billion over and above performance in line with the average of the peer group.
The Remuneration Committee has considered the TSR outcome in the context of the Group’s financial performance over the five-year performance period and determined that the recorded TSR outperformance is a genuine reflection of BHP Billiton’s underlying financial outperformance. This qualitative judgement, which is applied before final vesting is confirmed, is an important risk management aspect to ensure that vesting is not simply driven by a formula that may give unexpected or unintended remuneration outcomes.
The graph below highlights BHP Billiton’s strong comparative performance against the LTIP comparator group companies and the ASX 100 and FTSE 100.
5-year share price and dividend history
2007 | 2008 | 2009 | 2010 | 2011 | ||||||||
BHP Billiton Limited (AUD) | Share price at beginning of year | $28.96 | $35.38 | $44.45 | $33.96 | $36.94 | ||||||
Share price at end of year | $35.03 | $43.70 | $34.72 | $37.65 | $43.80 | |||||||
Dividends paid | $ 0.50 | $ 0.66 | $ 1.12 | $ 0.95 | $ 0.95 | |||||||
BHP Billiton Plc (GBP) | Share price at beginning of year | £10.61 | £13.76 | £18.97 | £13.75 | £17.28 | ||||||
Share price at end of year | £13.90 | £19.20 | £13.64 | £17.54 | £24.47 | |||||||
Dividends paid | £ 0.20 | £ 0.28 | £ 0.51 | £ 0.53 | £ 0.58 |
Terms of LTI and the performance hurdle
Each Performance Share is a conditional right to acquire one ordinary BHP Billiton share upon satisfaction of the vesting conditions. It will therefore not deliver any value to the holder for at least five years from the end of the financial year.
Upon vesting, Performance Shares become exercisable (at no cost to the participant) in accordance with the terms of grant and BHP Billiton’s Securities Dealing Group Level Document (as described in section 6.3). Participants are prohibited from entering into hedge arrangements in respect of unvested Performance Shares. All other terms and details of the performance hurdle are outlined below.
| ||||
and link to strategy |
| |||
| ||||
STI | Setting performance measures and targets | Maximum award | ||
The purpose of STI is to The performance measures for each year are chosen on the basis that they are expected to have a significant short- and long-term impact on the success of the | ||||
Deferral of a portion of STI awards in deferred equity over BHP Billiton Section 4.4.3 for Section 1.10 for a description of KPIs for the | ||||
| • • The measures and their relative weightings are chosen by the Committee, in their discretion, in order to appropriately drive overall performance for the coming year. Specified financial measures will constitute the largest weighting. The scorecard will also include measures that impact the long-term sustainability of the
• • The target is determined for each performance measure, at a level which will motivate the CEO to achieve an appropriately stretching annual performance outcome and which will contribute to the longer-term success of the • 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. For reasons of | |||
• Section 4.4.6 for details of performance measures and Section 4.4.11 for details of performance measures for 2015 |
Target performance 160% of base salary (cash 80% and Threshold performance 80% of base salary (cash 40% and 40% in deferred equity). Minimum award Zero |
and link to strategy | Operation and performance framework | Maximum (1) | ||
Assessment of performance | ||||
• | ||||
•
| ||||
| ||||
• 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 level of vesting that would otherwise apply
| ||||
| ||||
| ||||
• STI awards are provided under the STIP. | ||||
• The | ||||
• The award of deferred equity comprises rights to receive ordinary BHP Billiton | ||||
• | ||||
|
| ||||
and link to strategy |
| Maximum (1) | ||
LTI The It aligns the CEO’s reward with sustained shareholder wealth creation in excess of that The provision of LTIP awards over BHP Billiton shares also encourages long-term share exposure for the CEO, and aligns the long-term interests of the CEO and shareholders. Demonstration of this alignment between the interests of the CEO and shareholders is seen through the five-year performance period of the LTI which is consistent with the long-term nature of the resources industry. Section 4.4.3 for information on MSR for the CEO Section 4.4.21 for a | Relative TSR performance condition
•The Section 4.4.8 for further detail on LTIP comparator group(s)
• |
Notes
Relative TSR has been chosen as the most appropriate measure as it allows for an objective external assessment over a sustained period on a basis Level of performance required for vesting • None of the award will vest if BHP Billiton’s TSR is below the Peer Group TSR (being the weighted median TSR (6) where the comparator group is a specified group of peer companies) and/or below Index TSR (being the index value where the comparator group is a market index such as the MSCI World index). • For each award, the Committee will determine the level of relative TSR outperformance required on a per annum basis, or on a compounded basis over the five-year period, against the peer group and/or market index in order for the whole of the LTI award to vest. Section 4.4.8 for details of the outperformance required for recent grants • 25% of the award will vest if BHP Billiton’s TSR is equal to the Peer Group TSR and/or Index TSR (as applicable), and vesting occurs on a sliding scale between that point and the point of full vesting. • There is no retesting if the performance condition is not met. In the event that the Committee does not consider the level of vesting that would otherwise apply based on the Group’s achievement of the relative TSR performance condition to be a true reflection of the underlying performance of the Group, or should it consider that individual performance or other circumstances makes this an inappropriate outcome, it retains the discretion to lapse any portion or all of the award. This is an important mitigation against the risk of unintended vesting outcomes. | Normal Maximum Award Face value of 400% of base salary. Exceptional Maximum Award (5) Face value of 488% of base salary. |
Remuneration component and link to strategy | Operation and performance framework | Maximum (1) | ||
Section 1.10 for a description of KPIs for the Group | • To ensure that the LTI performance conditions continue to support operational excellence, risk management and the execution of the Group’s strategy, the Committee retains discretion to add further performance measures to supplement the existing relative TSR performance condition. Prior to doing so, consultation would be undertaken with key stakeholders. Should this be the case, the vesting of a portion of any LTI award may instead be linked to performance against the new measure(s). The Committee expects that in the event of introducing an additional performance measure(s), the weighting on relative TSR would remain the majority weighting. | |||
Delivery of award | ||||
• LTI 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. (7) | ||||
• The award of deferred equity comprises rights to receive ordinary BHP Billiton shares in the future if the performance and service conditions are met (2). 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 (3). The Committee has a discretion to settle LTI awards in cash. | ||||
• LTI awards are subject to malus and clawback as described below this table. |
Section 4.3.5for how the remuneration policy considers other employees |
(1) | UK regulations require the disclosure of the maximum that may be paid in respect of each remuneration component. Where that is expressed as a maximum annual percentage increase which is annualised it should not be interpreted that it is the Company’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) | The award may be retained if the CEO has left the Group in certain circumstances. |
Section 4.3.8 for payments on loss of office |
(3) | A DEP is provided when the award vests (or is exercised). The CEO will receive the value of dividends that would have been payable on ordinary BHP Billiton shares over the period from grant to vest (or exercise). The Committee intends that DEP will be provided in the form of shares, although the plan accommodates a cash equivalent. A DEP is not provided in relation to any STI and LTI awards that are forfeited or lapse. |
(4) | BHP Billiton’s TSR is a weighted average of the TSRs of BHP Billiton Limited and BHP Billiton Plc. |
(5) | The maximum award permitted with the LTIP rules (as approved by shareholders at the 2013 AGMs) is expressed as a fair value equal to 200 per cent of base salary. A fair value takes into account the probability of meeting the performance condition and other factors. The current plan design (for FY2014 and FY2015 |
awards) produces a fair value of 41 per cent of face value. The maximum fair value of 200 per cent of base salary is therefore currently equivalent to a face value of 488 per cent of base salary (488% x 41% = 200%). This is shown as the Exceptional Maximum Award in the table. However, it is current policy to provide a maximum award of 400 per cent of base salary which is therefore shown in the table as the Normal Maximum Award. In any case, all LTI awards to the CEO will only be provided with prior approval by shareholders in the relevant AGMs. |
(6) | The weighted median TSR means the median outcome when the companies are listed by their TSR, after weighting by market capitalisation. |
(7) | The fair value is calculated by the Committee’s independent adviser, Kepler Associates. 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 fair value for the current plan design (current comparator groups, outperformance percentage, etc.) is 41 per cent of the face value of an award. This fair value of 41 per cent may change should the Committee vary elements (such as adding a performance measure or altering the level of relative TSR outperformance) not specified in this remuneration policy report. This fair value is different from the fair value used for IFRS disclosures elsewhere in this report. In particular, the IFRS fair value does not take into account forfeiture conditions on the awards. |
Malus and clawback
The STIP and LTIP provisions allow the Committee to reduce or clawback awards in the following circumstances:
These malus and clawback provisions apply whether or not awards are made in the form of cash or equity, and whether or not the equity has vested.
Legacy incentive plans under which awards may vest
The remuneration policy approved by shareholders is required to cover awards which were granted under legacy plans and which may vest in the future on their existing terms. Key terms are shown in the table below.
Remuneration component | Operation and performance framework | Maximum value on | ||
STI under the GIS The former GIS was replaced by the STIP (described in the previous table) from FY2014. Awards were provided for the same purpose as the STIP. | • The terms of STI awards provided under the GIS were similar to those provided under the STIP. • Awards were provided to the CEO for performance in FY2013, and are scheduled to vest in August 2015. • Section 4.4.20 for a table of awards held under the GIS | The face value of the award on vesting plus the value of any associated DEP. |
Remuneration component | Operation and performance framework | Maximum value on | ||
LTI under the former LTIP The former LTIP was replaced by the new LTIP (described in the previous table) from FY2014. Awards were provided for the same purpose as the new LTIP. | • The terms of LTI awards provided under the former LTIP were similar to those provided under the new LTIP as described in the previous table, including the performance conditions. • Awards provided to the CEO in December 2010, 2011, and 2012 are due to vest from FY2016 to FY2018 to the extent that the performance conditions are met. • Section 4.4.21 for a table of awards held under the former LTIP | The face value of the awards on vesting plus the value of any associated DEP. |
4.3.4 Approach to recruitment and promotion remuneration
The ongoing remuneration arrangements for a newly recruited or promoted CEO, or for another Executive Director should one be appointed, will reflect the remuneration policy as set out in this report. The ongoing components will therefore comprise base salary, pension contributions, benefits, STI and LTI.
A market competitive level of base salary, benefits and pension contributions will be provided to a newly recruited or promoted CEO, or another Executive Director. The same maximum STI and LTI apply as per the remuneration policy for the current CEO. The combined maximum level of STI and LTI that may be provided is 728 per cent of base salary, which is the combination of the maximum 240 per cent of base salary in STI and the exceptional maximum 488 per cent of base salary in LTI as per the remuneration policy for the CEO.
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 from a former employer. It is anticipated that any foregone equity awards would be replaced by equity. The value of the replacement remuneration would not be any greater than the fair value of the awards forgone (as determined by the Committee’s independent adviser). The Committee would determine appropriate service conditions and performance conditions within BHP Billiton’s framework, taking into account the conditions attached to the forgone award. 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) appointments, any entitlements provided under former arrangements will be honoured according to their existing terms.
4.3.5 Consideration of employment conditions elsewhere in the Group
When setting remuneration for the CEO, the Remuneration Committee considers the prevailing market conditions, the competitive environment and the positioning and relativities of pay and employment conditions across the wider BHP Billiton workforce.
The Committee is briefed regularly about the pay and conditions of the wider employee population, and 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 performance-related pay and a higher proportion of the CEO’s total remuneration is variable in the form of STI and LTI. Like those for the CEO, the performance measures used to determine STI outcomes for all employees are linked to achievement of the Group’s strategy and behaviours aligned to the values inOur Charter.
Although BHP Billiton does not consult directly with employees on Directors’ remuneration, the Group conducts regular employee engagement surveys which give employees an opportunity to provide feedback on remuneration matters. Many employees are ordinary shareholders and have the opportunity to vote on AGM resolutions. In FY2014 more than 27,000 employees enrolled to purchase BHP Billiton shares under Shareplus, our all-employee share plan.
4.3.6 Consideration of shareholder views
Part of the Board’s commitment to high-quality governance is expressed through the approach we take to engaging and communicating with shareholders. We encourage shareholders to make their views known to us.
Our shareholders are based across the globe. Regular proactive engagement on remuneration and governance matters takes place with institutional shareholders and investor representative organisations. This is overseen by the Remuneration Committee Chairman (who is also the Senior Independent Director).
In addition, shareholders can contact us at any time through our Investor Relations team, with contact details available on our website:www.bhpbilliton.com.
Feedback from shareholders and investors is shared with the Board and Remuneration Committee through the Chairman and the Remuneration Committee Chairman and is used as input to decision-making by the Board and the Committee, in respect of executive remuneration policy and application. In particular, this feedback has had a direct bearing on the Committee’s decisions in formulating this remuneration policy report content.
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 formulate policy and make decisions as appropriate.
4.3.7 Potential remuneration outcomes for the CEO
While the Remuneration Committee recognises that market forces necessarily influence remuneration practices, it strongly believes that the fundamental driver of remuneration outcomes should be business performance. It also believes that overall remuneration should be both fair to the individual and commensurate with the expectations of our shareholders.
Accordingly, while target total remuneration is structured to attract and retain a high calibre CEO, the amount of remuneration actually received each year depends on:
STI and LTI are the two components of remuneration that are measured on business performance, with the outcome assessed against pre-determined performance conditions.
The minimum amount the CEO could earn in respect of FY2015 is US$2.217 million, which is fixed remuneration, and made up of his base salary of US$1.700 million, pension contributions of US$0.425 million and benefits of US$0.092 million.
The maximum is US$13.097 million. This assumes he earns the maximum under the STI of US$4.080 million and the normal maximum under the LTI of US$6.800 million. All of these components are shown in the table below at the minimum, target and maximum levels. The normal maximum amount of the LTI has been calculated on the basis of full vesting at the share price on the date of grant. The normal maximum LTI is 400 per cent of base salary.
Before deciding on the final outcome for the CEO (and for other members of the GMC), the Committee first considers the outcome against the pre-determined performance conditions. It then applies its overarching discretion. It can exercise discretion downwards only (i.e. to reduce remuneration).
When the CEO was appointed in May 2013, the Board advised him that the Committee would exercise its discretion on the basis of what it considered to be a fair and commensurate remuneration level to decide if the outcome should be reduced.
To be fair to the individual, remuneration levels need to accurately reflect the CEO’s responsibilities and contributions. To be commensurate with the expectations of shareholders, remuneration levels need to reflect the expectations of our shareholders that their Company’s funds would be used to remunerate our employees in a way that is proportionate to both performance and overall value.
In this way, the Committee believes it can set a remuneration level for the CEO that is sufficient to incentivise him and that is also fair to him and commensurate with shareholder expectations and prevailing market conditions. These same considerations led the Committee to set the incoming CEO’s remuneration when he was appointed in 2013 at a lower level than the previous level for this role.
The diagram below shows the relative proportion of each remuneration component for the CEO if the minimum, target and maximum levels of performance were achieved.
(1) | Fixed remuneration comprises base salary (US$1.700 million per annum), pension contributions (25 per cent of base salary) and other benefits (US$0.092 million). The amount included for other benefits is based on FY2014 actual figures for the CEO, excluding non-recurring items. |
(2) | The STI target amount is based on target performance of 160 per cent of base salary. The STI maximum amount is based on a maximum award of 240 per cent of base salary. The impact of potential future share price movements (up and down) on the value of deferred STI awards is not included. |
(3) | The LTI amount (target and maximum) is based on the CEO’s normal maximum award equal to the face value of 400 per cent of base salary, which is lower than the maximum permissible award size under the plan rules. The ‘target’ value for the LTI award is based on the fair value of the award, which is 41 per cent of the face value, as this is the expected outcome on the balance of probabilities for the current plan design as calculated by the independent advisor to the Remuneration Committee, Kepler Associates. The minimum value for the LTI award is zero, and applies where the relative TSR of BHP Billiton is lower than the Peer Group and/or Index TSR (as applicable for each grant). The impact of potential future share price movements (up and down) on the value of LTI awards is not included. |
Section 4.3.3 for more information on the components of remuneration for the CEO |
4.3.8 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.
The CEO’s contract has no fixed term. It can be terminated by BHP Billiton on 12 months’ notice. BHP Billiton can terminate the contract immediately by paying base salary plus pension contributions for the notice period. The CEO must give six months’ notice for voluntary resignation. The table below sets out the basis on which payments on loss of office may be made.
Leaving reason (1) (2) | ||||||||
Voluntary resignation | Termination for | Death, serious | Cessation of | |||||
Base salary | • Base salary for the notice period will be paid as a lump sum or progressively over the notice period. | • No payment will be made. | • Base salary will be paid for a period of up to four months, after which time employment may cease. | • Base salary for the notice period will be paid as a lump sum or progressively over the notice period. | ||||
Pension | • Pension contributions for the notice period will be paid as a lump sum or progressively over the notice period. | • No pension contributions will be provided from the date of termination. | • Pension contributions will be paid for a period of up to four months, after which time employment may cease. | • Pension contributions for the notice period will be paid as a lump sum or progressively over the notice period. | ||||
Benefits | • Applicable benefits may continue to be provided during the notice period. • Accumulated annual leave entitlements and any statutory payments will also be paid. • Applicable expenses may be paid for repatriation to the home location where a relocation has been requested by BHP Billiton. | • No benefits will be provided. • Accumulated annual leave entitlements and any statutory payments will be paid. • Applicable expenses may be paid for repatriation to the home location where a relocation has been requested by BHP Billiton. | • Applicable benefits may continue to be provided during the notice period. • Accumulated annual leave entitlements and any statutory payments will also be paid. • Applicable expenses may be paid for repatriation to the home location where a relocation has been requested by BHP Billiton. | • Applicable benefits may continue to be provided for the relevant year in which employment ceases. • Accumulated annual leave entitlements and any statutory payments will also be paid. |
Leaving reason (1) (2) | ||||||||
Voluntary resignation | Termination for | Death, serious | Cessation of | |||||
• Unvested Shareplus Matched Shares will lapse. | • Unvested Shareplus Matched Shares will lapse. | • Unvested Shareplus Matched Shares will vest in full. | • Applicable expenses may be paid for repatriation to the home location where a relocation has been requested by BHP Billiton. • Unvested Shareplus Matched Shares will vest in full. | |||||
STI Where CEO leaves during the financial year or after the end of the financial year, but before an award is provided. | • No STI will be paid. | • No STI will be paid. | • The Committee may determine in its discretion to pay an amount in respect of the participant’s performance for that year. | • The Committee may determine in its discretion to pay an amount in respect of the participant’s performance for that year. | ||||
Unvested STIP equity | • Will lapse. | • Will lapse. | • Will vest in full. | • Will continue to be held, on the existing terms, for the scheduled deferral period before vesting (subject to a Committee discretion to lapse some or all of the award). • The awards remain subject to malus and clawback. |
Leaving reason (1) (2) | ||||||||
Voluntary resignation | Termination for | Death, serious | Cessation of | |||||
Vested but unexercised STIP equity | • Will remain exercisable for the rest of the exercise period, unless the Committee determines they will lapse. | • Will remain exercisable for the rest of the exercise period, unless the Committee determines they will lapse. | • Will remain exercisable for the rest of the exercise period. | • Will remain exercisable for the rest of the exercise period, or for a reduced exercise period, unless the Committee determines they will lapse. | ||||
Unvested GIS equity | • Will lapse. | • Will lapse. | • Will vest in full. | • Will vest in full, except in the case of a leaving reason not specified in the plan rules, in which case the Committee has discretion to determine the treatment of equity awards. | ||||
Vested GIS Options (with a market-based exercise price) previously provided to the CEO – if still held on leaving. | • Will be retained for the scheduled exercise period, and on the existing terms. | • Will lapse. | • Will be retained for the scheduled exercise period, and on the existing terms. | • Will be retained for the scheduled exercise period, and on the existing terms. | ||||
LTI Unvested awards | • Will lapse. | • Will lapse. | • Will vest in full. | • A pro rata portion of unvested 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. • The awards remain subject to malus and clawback. |
Leaving reason (1) (2) | ||||||||
Voluntary resignation | Termination for | Death, serious | Cessation of | |||||
Vested but unexercised awards | • Will remain exercisable for the rest of the exercise period, unless the Committee determines they will lapse. | • Will remain exercisable for the rest of the exercise period, unless the Committee determines they will lapse. | • Will remain exercisable for the rest of the exercise period. | • Will remain exercisable for the rest of the exercise period, or for a reduced exercise period, unless the Committee determines they will lapse. |
|
(2) | In the event of a change in control event (e.g. takeover, compromise or arrangement, winding up of the Company) as defined in the STIP and LTIP rules: |
(3) | Defined as occurring when a participant leaves BHP Billiton due to death, serious injury, disability or illness that prohibits continued employment or total and permanent disablement. |
(4) | Defined as occurring when a participant leaves BHP Billiton due to forced early retirement, retrenchment or redundancy, termination by mutual agreement or retirement with the agreement of the Company, or such other circumstances that do not constitute resignation or termination for cause. |
Remuneration policy for Non-executive Directors
Our Non-executive Directors are paid in compliance with the UK Corporate Governance Code (2012) and the ASX Corporate Governance Council’s Principles and Recommendations (3rd Edition).
4.3.9 Components of remuneration
The following table shows the components of total remuneration for Non-executive Directors, the link to strategy, how each component operates, and how performance is assessed and will impact remuneration and the maximum opportunity for each component.
Remuneration component and link | Operation and performance | Maximum (1) | ||
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. | • The Chairman is paid a single fee for all responsibilities. • Non-executive Directors are paid a base fee and relevant committee membership fees. • Committee Chairmen and the Senior Independent Director are paid an additional fee to reflect their extra responsibilities. • All fee levels are reviewed annually and any changes are effective from 1 July. • Fees are set at a competitive level with advice on benchmark fees in equivalent size companies provided by external advisers. Fee levels reflect the size and complexity of the Group, the multi-jurisdictional environment arising from the Dual Listed Company structure, the multiple stock exchange listings and the extent of the geographic regions 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. • Section 4.4.13 for current fee levels provided to Non- executive Directors | 8% increase per annum (annualised), or inflation if higher in the location in which duties are primarily performed, on a per fee basis. |
Remuneration component and link | Operation and performance | Maximum (1) | ||
Pension • As required by law. | • Pension contributions provided on fees only where required by law. | As required by law. | ||
Benefits | ||||
Travel allowances • Competitive benefits are paid in order to attract and retain high-quality individuals and adequately compensate for the considerable travel burden. | • Non-executive Directors receive travel allowances on a per trip basis reflecting the considerable travel burden imposed on members of the Board as a consequence of the Dual Listed Company structure and the resulting Board meetings in Australia and the UK, along with 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. | ||
Other benefits • Competitive benefits are paid in order to attract and retain high-quality individuals, and to provide appropriate remuneration for the role undertaken. | • As a consequence of the Dual Listed Company structure, Non-executive Directors are required to prepare personal tax returns in both Australia and the UK, regardless of whether they reside in one or neither of those countries. They are accordingly reimbursed for the costs of personal tax return preparation in whichever of the UK and/or Australia is not their place of residence (including payment of the tax cost associated with the provision of the benefit). • Non-executive Directors may from time to time be accompanied by their spouse/partner to business meetings. The costs associated with spouse/partner attendance at one business meeting per annum are met by BHP | Up to a limit not exceeding 20% of fees. | ||
STI and LTI | • Non-executive Directors are not eligible to participate in |
Remuneration component and link | Operation and performance | Maximum (1) | ||
Payments on early termination | • There are no provisions in |
(1) | UK regulations require the disclosure of the maximum that may be paid in respect of each remuneration component. Where that is expressed as a maximum annual percentage increase which is annualised, it should not be interpreted that it is the Company’s current intention to award an increase of that size in total in any one year, or in each year, and |
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, as above. The components will therefore comprise fees, pension contributions where required by law and benefits as set out in the table above. No variable remuneration (STI and LTI) 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. A legacy arrangement provides accrued retirement benefits under the now closed Retirement Plan of BHP Billiton Limited, and this will continue to be honoured.
Section4.4.30for retirement disclosures for the Non-executive Directors
Considerations when setting Non-executive Director remuneration
When Non-executive Director remuneration is determined, the same considerations in respect of employment conditions elsewhere in the Group and shareholder views, as described in relation to setting remuneration for the CEO, are taken into account.
Section4.3.5for consideration of employment conditions elsewhere in the Group
Section4.3.6for consideration of shareholder views
4.4 Annual report on remuneration
This section of the report shows the impact of the remuneration policy in FY2014 and how actual performance outcomes are linked to remuneration outcomes. It is divided as follows:
Contents of the annual report on remuneration | ||
4.4.1 to 4.4.4 | Remuneration governance | |
4.4.5 to 4.4.11 | Remuneration outcomes for the Executive Director (the CEO) | |
4.4.12 to 4.4.13 | Remuneration outcomes for Non-executive Directors | |
4.4.14 to 4.4.18 | Remuneration for members of the GMC (other than the CEO) | |
4.4.19 to 4.4.31 | Other statutory disclosures |
Remuneration governance
4.4.1 Board oversight and retention pressures were greatest. As a result, the Remuneration Committee introduced a second TSR comparison based on a broad stock market index for assessing the Group’s TSR performance in order to provide a fairer and more balanced measure of performance. The Morgan Stanley Capital Index World was chosen as a suitable broad stock market index for this second comparison.
6.2.10 Share ownership guidelines
The CEO is required to hold BHP Billiton securities with a value at least equal to 300 per cent of (i.e. three times) one year’s pre-tax (gross) base salary under the Group’s Minimum Shareholding Requirements policy. For other members of the GMC, the minimum requirement is 200 per cent of (i.e. two times) one year’s pre-tax (gross) base salary. These requirements reflect a strengthening of the policy effective from 1 July 2010 (previously the guidelines were set as a percentage of net base salary). The value of the securities for the purposes of the policy is the market value of the underlying shares. Unvested securities do not qualify. All of the members of the GMC currently hold sufficient securities to meet these requirements.
Under the policy, employees are not required to meet the holding requirement before awards are allocated to them, but if they are not holding the required number of shares at the time of exercise of an award, then they will be prohibited from selling all of the underlying shares on exercise. GMC members are also not allowed to hedge or otherwise protect the value of unvested securities.
Board oversight
The Board is responsible for ensuring that the Group’s remuneration structuresarrangements are equitable and aligned with the long-term interests of BHP Billiton and its shareholders. In performing this function, it is critical that the Board is independent of management when making decisions affecting employee remuneration.
Accordingly, theThe Board has therefore established a Remuneration Committee to assist it in making decisions affecting employee remuneration.such decisions. The Remuneration Committee is comprised solely of Non-executive Directors, all of whom are independent. In order to ensure that it is fully informed, when making remuneration decisions, the Remuneration Committee receives regular reports and updates fromregularly invites members of management (who the Remuneration Committee invites to attend meetings asto provide reports and when appropriate) andupdates. The Committee can draw on services from a range of external sources, including remuneration consultants.
Remuneration Committee |
| |
| ||
|
Note
|
Remuneration Committee
The activities of the Remuneration Committee are governed by Terms of Reference (approved(most recently approved by the Board in March 2008)June 2013), which are available on our website. The Remunerationpurpose of the Committee focuses on:is to assist the Board in its oversight of:
the remuneration policy and its specific application to the CEO, andthe other members of the GMC as well as theand its general application to all Group employees;
the determination of levels of reward tofor the CEO and approval of reward to the other members of the GMC;
the annual evaluation of the performance of the CEO, by providing guidance to the Chairman on evaluating the performance of the CEO;
effective communication with shareholders on the Group’s remuneration policy and the Remuneration Committee’s work on behalf of the Board.
Use
Remuneration Committee members | • John Buchanan (Chairman) • Carlos Cordeiro • Pat Davies • John Schubert • Carolyn Hewson (appointed 28 January 2014) | |
Number of meetings in FY2014 | • Seven | |
Other individuals who regularly attended meetings(1) | • Jac Nasser (Chairman) • Andrew Mackenzie (CEO) • Karen Wood (President) • Mike Fraser (President, Human Resources) • Andrew Fitzgerald (Vice President, Group Reward) • Jane McAloon (President, Governance and Group Company Secretary) • Geof Stapledon (Vice President, Governance) |
(1) | These individuals were not present when matters associated with their own remuneration were considered. |
Section3.14.2for further information regarding the Committee |
The use of remuneration consultants
The BoardCommittee seeks and considers advice from independent remuneration consultantsadvisors where appropriate. Remuneration consultants are engaged by, and report directly to, the Remuneration 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 Billiton’s management. The advice and recommendations of external consultantsadvisers are used as a guide, but do not serve as a substitute for thorough consideration of the issues by each Director.
Kepler Associates who werewas appointed by the Remuneration Committee to act as an independent remuneration advisers,adviser to provide specialist remuneration advice and dodoes not provide other services to the Group. Kepler Associates is a member of the UK Remuneration Consultants Group, and adheres to its Code of Conduct. During the year, Kepler Associates provided advice and assistance to the Remuneration Committee on a wide range of matters, including:
provision of information and commentary on global trends in executive remuneration;
calculation of accounting fair values for accounting and remuneration setting purposes of equity awards and performance analysis for LTI awards;
review of, and commentary on, management proposals;
analysis and support in the review of LTI arrangements;
other ad hocad-hoc support and advice as requested by the Committee.
Kepler Associates is the only remuneration consultant appointed by the Committee.
Remuneration Committee.recommendations
HedgingAs part of its role, Kepler Associates provided ‘remuneration recommendations’ (as defined in the Australian Corporations Act 2001) to the Committee during the year. Each time Kepler Associates provides a remuneration recommendation, Kepler Associates provides a declaration that the remuneration recommendation was made free from undue influence by the individual to whom the recommendation relates. The Board considered the
processes outlined above, the constraints incorporated into Kepler Associates’ terms of engagement, the implementation of a comprehensive protocol for the engagement of remuneration advisors and the receipt of the declaration of no undue influence. It is satisfied that the remuneration recommendations received from Kepler Associates were made free from undue influence by any member of the KMP to whom the recommendations related.
Total fees paid to Kepler Associates for the above services for the period from 1 July 2013 to 30 June 2014 were £125,520, of which £51,920 was for attendance at Committee meetings and commentary on management proposals, and a total of £73,600 for the provision of remuneration recommendations and other technical advice and support on executive remuneration.
Management also appoints external firms from time to time to assist with remuneration benchmarking, data provision and the like. While other external firms did provide certain information to management to assist them in deliberations, no remuneration advisor other than Kepler Associates provided remuneration recommendations during the year in relation to KMP.
4.4.2 Prohibition on hedging of BHP Billiton shares and equity instruments
EmployeesThe CEO and other members of the GMC are not allowed to protect the value of any unvested BHP Billiton equity instrumentsawards allocated to them under employee programsprogrammes, or the value of shares and equity instrumentssecurities held as part of meeting BHP Billiton’s minimum shareholding requirements (asMSR as described below. The policy also prohibits GMC members from using unvested BHP Billiton equity awards as collateral in section 6.2.10).any financial transaction, including hedging and margin loan arrangements.
Any securities that have vested and are no longer subject to restrictions or performance conditions may be subject to hedging arrangements or used as collateral, provided that consent is obtained from BHP Billiton in advance of the employee entering into the arrangement. Such arrangements need to be reported in the Remuneration Report, and no such arrangements were in place during FY2011 or at the date of this Annual Report.
BHP Billiton treats compliance with this policy as a serious issue, and takes appropriate measures to ensure that the policy is adhered to.
In addition,4.4.3 Share ownership guidelines and the Group hasMSR
The share ownership guidelines and the MSR help to ensure that the interests of directors, executives and shareholders remain aligned. For FY2014:
The value of equity awards and any other securities for the purposes of the MSR is the market value of the underlying shares. Unvested employee equity awards do not qualify, and neither do any options with a market-based exercise price.
The CEO and other members of the GMC are expected to grow their holdings to the MSR from the scheduled vesting of their employee awards over time. Under the policy, employees are not required to meet the holding requirement before awards are allocated to them. Rather, the MSR is tested at the time that shares are to be sold. The GMC members are entitled to sell sufficient shares to satisfy tax obligations arising from the granting, holding, vesting, exercise or sale of the employee awards or the underlying shares. However, if a GMC member wishes to sell additional shares, they will be prohibited from doing so unless they will meet the MSR after the sale.
Section 4.4.27 for details of share ownership information of the CEO and other members of the GMC
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 Billiton shares until they achieve a shareholding equivalent in value to one year’s remuneration. Thereafter, they must maintain at least that level of shareholding throughout their tenure. All Non-executive Directors met the MSR as at the date of this report.
Section 4.4.27 for details of share ownership information of the Non-executive Directors
4.4.4 Statement of voting at the 2013 AGMs
BHP Billiton’s remuneration resolutions have attracted a high level of support by shareholders. Voting in regard to those resolutions put to shareholders at the 2013 AGMs is shown below, in accordance with UK legislation.
AGM Resolution | % vote ‘for’ | % vote ‘against’ | Votes withheld (1) | |||||||||
Remuneration Report | 97.28 | 2.72 | 19,292,876 | |||||||||
Adoption of new LTIP Rules | 97.22 | 2.78 | 41,873,567 | |||||||||
Approval of grants to Executive Director | 97.28 | 2.72 | 17,772,663 |
(1) | The sum of votes marked ‘Vote Withheld’ at BHP Billiton Plc’s AGM and votes marked ‘Abstain’ at BHP Billiton Limited’s AGM. |
Remuneration outcomes for the Executive Director (the CEO)
The CEO remuneration policy that prohibits Non-executive Directorsapplied in FY2014 is the same as set out in the remuneration policy report, and senior executives from using BHP Billiton securities as collateralthe remuneration outcomes described below have therefore been provided in any financial transaction, including margin loan arrangements.accordance with that same policy.
6.4 ExecutiveSection 4.3 for the remuneration disclosurespolicy for the CEO
4.4.5 Single total figure of remuneration
This section provides full detailsshows a single total figure of service contract terms, disclosedremuneration as prescribed under UK requirements. It is a measure of actual remuneration and equity holdingsis not intended to meet IFRS accounting standards.
Section 4.4.19 for the Statutory IFRS Remuneration table
This measure of remuneration is required to be reported only in relation to the performance of the services of an Executive Director. As Andrew Mackenzie assumed the role of CEO and Executive Director in May 2013, the FY2013 figures therefore relate only to a part-year period.
US dollars (’000) | Base salary | Benefits | STI (1) | LTI | Pension | Total | ||||||||||||||||||||||
Andrew Mackenzie | FY2014 | 1,700 | 92 | 3,136 | 2,635 | 425 | 7,988 | |||||||||||||||||||||
FY2013 | 242 | 702 | 256 | 1,208 | 60 | 2,468 |
(1) | Provided half in cash and half in deferred equity as shown in the table below. |
For Mr Mackenzie, the single total figure of remuneration is calculated as set out below.
FY2013 – 10 May to 30 June 2013 | FY2014 | |||
Base salary | Base salary earned for the period, based on a full-year base salary in the CEO role of US$1.700 million. | Base salary earned from 1 July 2013 to 30 June 2014 based on a full-year base salary of US$1.700 million as Mr Mackenzie did not receive any salary increase for FY2014. | ||
Benefits(1) Section 4.3.3 for policy for specific benefits | Personal tax return preparation in required countries, a pro-rated portion of private family health insurance, plus the full amount of the US$0.700 million relocation allowance paid in respect of Mr Mackenzie’s move from the UK to Australia. | The full amount of private family health insurance and personal tax return preparation in required countries provided during FY2014, together with spouse business-related travel. | ||
STI Section 4.4.6 for how STI is determined | A pro-rated portion of STI awarded for FY2013 performance. Half or US$0.128 million was provided in cash in September 2013, and half or US$0.128 million deferred in an equity award, which is due to vest in FY2016. | STI awarded for FY2014 performance. Half or US$1.568 million will be provided in cash in September 2014, and half or US$1.568 million deferred in an equity award (subject to shareholder approval at the 2014 AGMs), which will be due to vest in FY2017. | ||
LTI Section 4.4.7 for the LTI performance condition Section 4.4.8 for LTI awarded during FY2014 | A pro-rated portion of the value of 243,126 LTI awards that vested on 22 August 2013, based on performance during the five-year period to 30 June 2013. The total value of that award (based on a share price on 22 August 2013 of £19.20, converted to US dollars on that date) plus the associated DEP (of US$1.017 million) on the date of vesting and exercise was US$8.480 million. | The value of 69,600 LTI awards that vested on 20 August 2014, based on performance during the five-year period to 30 June 2014. This value of that award is based on a share price on 20 August 2014 of £19.65, (converted to US dollars on that date) plus the associated DEP of US$0.359 million. | ||
Pension | BHP Billiton’s contribution to defined contribution pension plans during the period at 25% of base salary. | BHP Billiton’s contribution to defined contribution pension plans at 25% of base salary. |
(1) | Although eligible, the CEO does not currently participate in Shareplus, for reasons of administrative simplicity in terms of stock exchange dealings and announcements. |
When the components of remuneration are provided
The following graph illustrates the usual time frame for delivery of the components of remuneration. It shows how STI and LTI outcomes are deferred.
4.4.6 FY2014 STI performance outcomes
The CEO scorecard for the FY2014 performance year is summarised in the following table. A description of each performance measure and the CEO’s level of achievement, as determined by the Committee, are shown below the table. The performance range is set for each measure with the level of performance determined on a range of Threshold (the minimum necessary to qualify for any reward outcome), Target (where the performance requirements are met), and Stretch (where the performance requirements are exceeded).
HSEC
The HSEC KPI for the CEO is aligned to the Group’s suite of HSEC Five Year Public Targets as set out in BHP Billiton’s Sustainability Report. As it has done for several years, the Remuneration Committee sought guidance from the Sustainability Committee when assessing HSEC performance. The Sustainability Committee reviewed performance against each of the designated measures. Consistent with prior years, the Remuneration Committee then took a holistic view of how the Group had performed in critical areas.
Targets for FY2014
Performance for FY2014
Attributable profit
Profit after taxation attributable to members of the GMC.
6.4.1 Senior management in FY2011
Australian Accounting Standards and International Financial Reporting Standards require BHP Billiton to make certain disclosures for Key Management Personnel (KMP). KMPGroup (attributable profit) is defined as those persons having authority and responsibility for planning, directing and controlling the activities ofprimary measure used by the Group, directly or indirectly.
Board when assessing the Group’s financial performance. For the purposes of assessing the actual reported outcome against a directly comparable target, the attributable profit KPI is adjusted for changes in commodity prices, foreign exchange movements, and exceptional items to ensure that it appropriately measures outcomes that are within the control and influence of the Group and its executives. Of these, changes in commodity prices are ordinarily the most material due to volatility in prices and the impact on Group revenue.
Targets for FY2014
In respect of FY2014, the Board determined a target for attributable profit of US$13.3 billion, after the adjustments described above.
Performance for FY2014
Attributable profit of US$13.8 billion was reported by BHP Billiton, which was in excess of the target. The drivers of this outperformance were higher than expected sales volumes, particularly in Iron Ore and, to a lesser extent, in Coal, together with positive productivity and cost performance across a range of Businesses, particularly in Aluminium, Manganese and Nickel, and in Coal. These gains were partly offset by the impact of non-cash costs in Copper.
Capital project management (cost and schedule)
Capital project management measures based on the cost and the schedule outcomes for major capital projects in execution are considered to be effective measures of the delivery of our project pipeline, and consistent with other companies in our sector. The cost KPI is adjusted for foreign exchange movements to ensure that it appropriately measures outcomes that are within the control and influence of the Group and its executives.
Targets for FY2014
In respect of FY2014, the Board determined a target for cost of US$23.9 billion, after adjusting for foreign exchange movements, and a target for schedule of 36.0 months which are weighted averages of the portfolio of major projects under development.
Performance for FY2014
The outcome of US$24.0 billion on cost was slightly behind the target. While the performance outcome on schedule was nominally on target at 36.0 months, the actual outcome was determined to be marginally behind target for the purposes of STI outcomes. While the majority of major capital projects proceeded in accordance with approved targets, cost budgets were exceeded on certain projects in Copper and Iron Ore, while favourable cost outcomes were observed in respect of certain other projects in Coal and Iron Ore. Negative impacts on schedule were observed on certain major capital projects in Copper, Iron Ore and Petroleum and Potash, while certain other projects progressed ahead of approved schedule in Iron Ore and Coal.
Individual performance measures for the CEO
Individual measures for the CEO are determined at the commencement of the financial year. The application of personal, qualitative 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.
Targets for FY2014
The CEO’s individual measures for FY2014 comprised contribution to the overall performance of the Group and the management team, and delivery against projects and initiatives within the scope of the CEO role as set out by the Board, including productivity and cost improvement, enhanced stakeholder relations and portfolio optimisation.
Performance for FY2014
The CEO has completed his first full financial year in the role, and is considered by the Committee to have performed well against the individual measures set at the commencement of the year, as set out above. The CEO has contributed positively to the performance of the Company and the GMC, significant productivity improvements have been achieved during FY2014, relations with stakeholders have improved, and the Group’s portfolio optimisation efforts are progressing well. Accordingly, the Committee is of the view the CEO has performed ahead of target on individual measures.
4.4.7 LTI performance outcomes
LTI vested based on performance to June 2014
The five-year performance period for the 2009 LTI awards ended on 30 June 2014. The CEO’s 2009 LTI comprised 120,000 awards, subject to achievement of the relative TSR performance condition, and any discretion applied by the Remuneration Report, itCommittee as described below.
Testing the performance condition
For the award to vest in full, BHP Billiton was required to deliver a TSR that exceeded the Peer Group TSR by an average of 5.5 per cent per year for five years, being 30.7 per cent in total compounded over the five-year performance period from 1 July 2009 to 30 June 2014.
Section 4.3.3 for the definition of Peer Group TSR
In respect of the 2009 LTI, the Peer Group TSR was 42.8 per cent, compared to BHP Billiton’s TSR of 60.6 per cent. Accordingly, BHP Billiton outperformed its peer companies by 17.8 per cent, and therefore 58 per cent of awards vested. As a result, 69,600 of the CEO’s 2009 LTI award (granted under the former LTIP) vested on 20 August 2014. The closing price of ordinary BHP Billiton Limited shares on the LSE on that date was £19.65 and so the value of the vested award was US$2.635 million, including the associated DEP of US$0.359 million in relation to dividends over the five-year performance period in the form of shares (by applying the net cash DEP towards the purchase of ordinary BHP Billiton Limited shares for the CEO).
If BHP Billiton’s relative performance had been equal to or less than the Peer Group TSR, then Threshold vesting would not have been achieved, and none of the award would have vested.
Section 4.4.8 for the 2009 peer group companies
The impact of the TSR outperformance by BHP Billiton was to add US$25 billion of shareholder value from 1 July 2009 to 30 June 2014 over and above the weighted average performance of the comparators, as shown in the graphs below. Starting from the LTI award scheduled to vest next year, being the LTI allocated in 2010, relative TSR will be measured against both a peer group, and also a broader market index.
Application of discretion to reduce vesting
The rules of the LTIP and the terms and conditions of the award 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 has been met.
In accordance with its overarching discretion, the Committee has considered the TSR outcome in the context of the Group’s performance over the five-year performance period and determined that the KMPrecorded TSR outcome is a fair reflection of performance.
This qualitative judgement, which is applied before final vesting is confirmed, is an important risk management aspect to ensure that vesting is not simply driven by a formula that may give unexpected or unintended remuneration outcomes. The Committee considers its discretion carefully each year, taking account of the circumstances that are relevant to the Directorsfive-year period under consideration.
Section4.4.25for a five-year history of BHP Billiton share prices and dividends
The graphs below show BHP Billiton’s performance under the 2009 LTIP performance condition.
The graph below shows BHP Billiton’s comparative performance against the ASX 100, FTSE 100 and the membersMSCI World index.
LTI vested during FY2014 based on performance to June 2013
As detailed in last year’s Remuneration Report, the five-year performance period for the 2008 LTIP ended on 30 June 2013. For awards to vest in full, BHP Billiton was required to deliver a TSR that exceeded the Peer Group TSR of a by an average of 5.5 per cent per year for five years, being 30.7 per cent in total compounded over the five-year performance period. The Peer Group TSR was negative 44.0 per cent, which compared to BHP Billiton’s TSR of negative 9.4 per cent. As a result, BHP Billiton outperformed its peer companies by 34.6 per cent, and therefore met the requisite performance condition for full vesting.
Section 4.3.3 for the definition of Peer Group TSR
Section 4.4.8 for the 2008 peer group companies
As described above, the Committee then considered their overarching discretion under the LTIP rules to reduce the number of awards that vested, notwithstanding the fact that the performance condition for full vesting had been met. The Committee, with the support of the GMC who servedBoard, exercised that discretion and reduced vesting by 35 per cent for all participants. Accordingly, 35 per cent of the CEO’s awards did not vest and instead lapsed.
In applying its discretion, the Committee took into account a range of factors, including the negative TSR over the five-year performance period that shareholders have experienced. While the Committee recognised that the TSR was delivered in a difficult business environment, it also felt that more closely aligning the experience of shareholders and executives was important. As always, the Committee also looked at the total remuneration for executives. While the Committee exercised its discretion in respect of the 2008 LTIP vesting, based on its consideration of all relevant factors, this does not imply that the discretion will or will not be exercised to reduce the vesting result in future years.
Section 4.4.5 for the number and value of vested LTI awards for the CEO
4.4.8 LTI allocated during FY2011. FY2014
Following shareholder approval at the 2013 AGMs, an LTI award was granted to the CEO on 18 December 2013. The face value and fair value of the award are shown in the table below.
Number of LTI | Face value US$ (‘000) (2) | Face value % of salary | Fair value US$ (‘000) (3) | Fair value % of salary | % of max (4) | |||||
198,514 | 6,800 | 400 | 2,788 | 164 | 82 |
(1) | The number of LTI rights is calculated by dividing the face value by the average closing share price over the 12 months up to and including the grant date (being A$35.33) and rounding down to the nearest number of rights. |
(2) | The face value of the award was determined as 400 per cent of Andrew Mackenzie’s base salary of US$1.700 million. |
(3) | The fair value of the award is 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 Kepler Associates). |
(4) | The allocation is 82 per cent of the maximum award that may be provided under the LTIP rules. The maximum is a fair value of 200 per cent of base salary, or face value of 488 per cent of base salary, based on the fair value of 41 per cent for the current plan design (488% x 41% = 200%). |
Terms of the LTI award
Section 4.3.3 for the terms of LTI that are set in the remuneration policy for the CEO
In addition to those terms, the Remuneration Committee has determined:
The sector peer group companies for the FY2014 allocations in December 2013 are below, along with those for prior LTI grants.
December 2008 and 2009 (1) | December 2010 to 2012 | December 2013 | ||||||||||
Resources (75%) (2) | ||||||||||||
Alcoa | — | — | — | |||||||||
Anglo American | — | — | — | |||||||||
Cameco | — | — | — | |||||||||
Consol Energy | — | |||||||||||
Fortescue Metals | — | |||||||||||
Freeport McMoRan | — | — | — | |||||||||
Glencore Xstrata (3) | — | — | — | |||||||||
Norilsk | — | — | — | |||||||||
Peabody Energy | — | — | — | |||||||||
Rio Tinto | — | — | — | |||||||||
Southern Copper | — | — | — | |||||||||
Teck Cominco | — | — | — | |||||||||
Vale | — | — | — |
December 2008 and 2009 (1) | December 2010 to 2012 | December 2013 | ||||||||||
Oil and Gas (25%) | ||||||||||||
Andarko Petroleum | — | |||||||||||
Apache | — | — | — | |||||||||
BG Group | — | — | — | |||||||||
BP | — | — | ||||||||||
Canadian Natural Res. | — | |||||||||||
Chevron | — | |||||||||||
ConocoPhillips | — | |||||||||||
Devon Energy | — | — | — | |||||||||
EOG Resources | — | |||||||||||
Exxon Mobil | — | — | ||||||||||
Occidental Petroleum | — | |||||||||||
Shell | — | — | ||||||||||
Woodside Petroleum | — | — | — |
(1) | In 2008 and 2009, the share price averaging period used in the TSR calculations to account for short-term price fluctuations was 3 months. This was extended to 6 months from the December 2010 grants. |
(2) | This peer group was the only comparator group for the 2008 and 2009 LTIP grants. The Index TSR was introduced as a secondary comparator (for 33 per cent of the award) from the December 2010 grant. |
(3) | GlencoreXstrata has replaced Xstrata in the peer group for December 2008 to 2012 awards from the merger of Glencore and Xstrata in May 2013. |
4.4.9 CEO remuneration and returns to shareholders
Five-year CEO remuneration
The table below shows the total remuneration earned by Andrew Mackenzie and Marius Kloppers over the last five years, along with the proportion of maximum opportunity earned in relation to each type of incentive. As Mr Mackenzie assumed the role of CEO in May 2013, the FY2013 total remuneration shown relates only to the period 10 May to 30 June 2013. The FY2013 total remuneration for Mr Kloppers relates only to the period 1 July 2012 to 10 May 2013.
Section 4.4.5 for the methodology used to calculate the single total figure of remuneration as used in this table
Financial year | FY2010 | FY2011 | FY2012 | FY2013 | FY2014 | |||||||||||||||
Andrew Mackenzie | ||||||||||||||||||||
Total remuneration (single figure, $’000) | – | – | – | 2,468 | 7,988 | |||||||||||||||
STI (% of maximum) | – | – | – | 47 | 77 | |||||||||||||||
LTI (% of maximum) | – | – | – | 65 | 58 | |||||||||||||||
Marius Kloppers | ||||||||||||||||||||
Total remuneration (single figure, $’000) | 14,789 | 15,755 | 16,092 | 15,991 | – | |||||||||||||||
STI (% of maximum) | 71 | 69 | 0 | 47 | – | |||||||||||||||
LTI (% of maximum) | 100 | 100 | 100 | 65 | – |
Five-year TSR
The graph below shows BHP Billiton’s TSR against the performance of relevant indices over the same five-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 Billiton.
4.4.10 Change in CEO’s remuneration in FY2014
The table below sets out the CEO’s base salary, benefits and STI amounts earned in respect of FY2014, with the percentage change from FY2013. The table also shows the average change in each element for employees of the Group in Australia (being approximately 26,500 employees). This has been chosen by the Committee as the most appropriate comparison, as the CEO is located in Australia.
Base salary | Benefits | STI | ||||||||||||||
CEO | $’000 | 1,700 | 92 | 3,136 | ||||||||||||
% change | (1) | 0.0 | (87.0) | 23.2 | ||||||||||||
Australian employees | % change (average) | 2.3 | (10.0) | 17.9 |
(1) | The percentage changes for the CEO have been determined with reference to annualised numbers for FY2013. |
4.4.11 Remuneration for the CEO in FY2015
Subject to approval of the remuneration policy by shareholders at the 2014 AGMs, the remuneration for the CEO in FY2015 will be provided in accordance with that policy.
Section 4.3.3 for the remuneration policy for the CEO
Base salary increase in September 2014
Base salary is reviewed annually, and increases are applicable from 1 September. The CEO will not receive a base salary increase in September 2014 and it will remain unchanged at US$1.700 million per annum for FY2015.
FY2015 STI performance measures
STI awards will be determined and provided on the same basis as set out for FY2014, and the HSEC, attributable profit, capital project management and individual performance measures are unchanged.
Section 4.4.6 for a description of STI for FY2014, including the performance measures
The performance measures set out in the table below have been set by the Remuneration Committee for the CEO in FY2015.
Performance measure | Weighting | Target performance | ||||
HSEC | 20% | • Fatalities, Environment and Community Incidents:Nil fatalities and nil actual significant environmental and community incidents. | ||||
• TRIF and Occupational Illness: Improved performance compared with FY2014 results, with severity and trends to be considered as a moderating influence on the overall HSEC assessment. | ||||||
• HSEC Risk Management: Each Business is to have all material risks with HSEC impacts recorded and controlled. For all material risks Businesses to have all critical control designs and critical control assessment test plans reviewed by the material risk owner. |
Performance measure | Weighting | Target performance | ||||
• Health, Environment and Community Initiatives: All assets to achieve 100% of planned targets in respect of occupational exposure reduction, water and greenhouse gas projects reduction and local procurement and cultural awareness targets. | ||||||
Attributable profit (adjusted for commodity prices foreign exchange movements and exceptional items) | 40% | • For reasons of commercial sensitivity, the target for attributable profit will not be disclosed in advance; however, we plan to disclose targets and outcomes retrospectively. In the rare instances where this may not be prudent or grounds of commercial sensitivity, we will explain why and give an indication of when they will be disclosed. | ||||
Capital project management (cost and schedule) | 20% | • For reasons of commercial sensitivity, the targets for capital project management cost and schedule will not be disclosed in advance; however, we plan to disclose targets and outcomes retrospectively. In the rare instances where this may not be prudent or grounds of commercial sensitivity, we will explain why and give an indication of when they will be disclosed. | ||||
Individual performance | 20% | • The CEO’s individual measures for FY2015 comprise contribution to BHP Billiton’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, including portfolio optimisation and simplification, capital management, improvement in leadership capabilities and employee engagement throughout the Group, and GMC member development and succession. |
FY2015 LTI award
On the advice of the Committee, the Board has proposed an FY2015 LTI award for the CEO with a face value of US$6.800 million, being 400 per cent of the CEO’s base salary. Taking into account the performance condition as represented by the fair value factor of 41 per cent, the fair value of these awards is US$2.788 million.
The FY2015 LTI award will use the same performance and service conditions, vesting schedule and peer groups as the FY2014 LTI award.
Section 4.4.8 for a description of LTI for FY2014
If approved by shareholders, this FY2015 LTI award will be granted following the AGMs (i.e. in or around December 2014). The number of awards will be notified to shareholders at the time that they are provided.
Remuneration outcomes for Non-executive Directors
The remuneration policy for the Non-executive Directors set out in the remuneration policy report also applied in FY2014, and the remuneration outcomes described below have therefore been provided in accordance with that same policy.
Section 4.3.9 for the remuneration policy for the Non-executive Directors
The maximum aggregate fees payable to Non-executive Directors (including the Chairman) was approved by shareholders at the 2008 AGMs at US$3.8 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.
4.4.12 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. As Non-executive Directors do not receive any equity awards as part of their remuneration, this table also meets the requirements of the Australian Corporations Act 2001 requires and relevant accounting standards.
US dollars (’000) | Fees (1) | Benefits (2) | Pension (3) | Total | ||||||||||||||||
Malcolm Brinded (4) | 2014 | 42 | 15 | – | 57 | |||||||||||||||
Malcolm Broomhead | 2014 | 230 | 75 | 12 | 317 | |||||||||||||||
2013 | 230 | 59 | 12 | 301 | ||||||||||||||||
John Buchanan | 2014 | 263 | 84 | �� | – | 347 | ||||||||||||||
2013 | 263 | 67 | – | 330 | ||||||||||||||||
Carlos Cordeiro | 2014 | 198 | 103 | – | 301 | |||||||||||||||
2013 | 198 | 115 | – | 313 | ||||||||||||||||
David Crawford | 2014 | 230 | 69 | 12 | 311 | |||||||||||||||
2013 | 230 | 88 | 12 | 330 | ||||||||||||||||
Pat Davies | 2014 | 198 | 88 | – | 286 | |||||||||||||||
2013 | 198 | 118 | – | 316 | ||||||||||||||||
Carolyn Hewson | 2014 | 214 | 48 | 12 | 274 | |||||||||||||||
2013 | 203 | 60 | 10 | 273 | ||||||||||||||||
Lindsay Maxsted | 2014 | 263 | 53 | 14 | 330 | |||||||||||||||
2013 | 263 | 69 | 14 | 346 | ||||||||||||||||
Wayne Murdy | 2014 | 235 | 113 | – | 348 | |||||||||||||||
2013 | 235 | 161 | – | 396 | ||||||||||||||||
Jac Nasser | 2014 | 1100 | 114 | – | 1214 | |||||||||||||||
2013 | 1100 | 107 | – | 1207 | ||||||||||||||||
Keith Rumble | 2014 | 198 | 129 | – | 327 | |||||||||||||||
2013 | 198 | 154 | – | 352 | ||||||||||||||||
John Schubert | 2014 | 243 | 45 | 13 | 301 | |||||||||||||||
2013 | 243 | 90 | 12 | 345 | ||||||||||||||||
Shriti Vadera | 2014 | 203 | 79 | – | 282 | |||||||||||||||
2013 | 203 | 93 | – | 296 |
(1) | Fees include the annual base fee, plus additional fees as applicable for the Senior Independent Director, Committee Chairs and Committee memberships. |
Section4.4.13for details of the fee structure for FY2013 and FY2014 |
(2) | The majority of the amounts disclosed for benefits are travel allowances for each Non-executive Director: amounts of between US$15,000 and US$112,000 (US$59,000 and US$119,000 for FY2013). In addition, amounts of between US$ nil and US$5,000 (US$ nil and US$5,000 for FY2013) are included in respect of |
tax return preparation; amounts of between US$ nil and US$32,000 (US$ nil and US$25,000 for FY2013) are included in respect of costs associated with spouse/partner attendance at a business meeting location; and amounts of between US$ nil and US$19,000 (US$ nil and US$16,000 for FY2013) are included in respect of reimbursement of the tax cost associated with the provision of taxable benefits. |
(3) | BHP Billiton Limited made minimum superannuation contributions of 9.25 per cent of fees for FY2014 in accordance with Australian superannuation legislation (increasing to 9.5 per cent of fees paid in FY2015). |
(4) | The FY2014 remuneration for Malcolm Brinded relates to part of that year only, as he joined the Board on 15 April 2014. |
4.4.13 Non-executive Directors’ remuneration in FY2015
Subject to make certain disclosures in respectapproval of the top five highest paid executivesremuneration policy by shareholders at the 2014 AGMs, the remuneration for the Non-executive Directors in FY2015 will be provided in accordance with that policy.
Section 4.3.9 for the remuneration policy for the Non-executive Directors
Fees for the Non-executive Directors are determined by the Chairman and the CEO. The Non-executive Directors do not take part in these discussions. Fees for the Chairman are determined by the Board on the recommendation of the Remuneration Committee.
Fees for the Non-executive Directors and Chairman were reviewed in June 2014 and benchmarked against peer companies, with the assistance of externally provided benchmark data. As a result of the review, a decision was taken to keep FY2015 fees unchanged from FY2014. The table below Board level. In FY2011,sets out the five highest paid executives below Board level were allfee levels for FY2015, and the changes in fee levels since FY2011.
Levels of fees and travel allowances | From 1 July 2010 | From 1 July 2011 | From 1 July 2012 | From 1 July 2013 | From 1 July 2014 | |||||||||||||||
Base annual fee | 154,000 | 170,000 | 170,000 | 170,000 | 170,000 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Plus additional fees for: | ||||||||||||||||||||
Senior Independent Director of BHP Billiton Plc | 35,000 | 48,000 | 48,000 | 48,000 | 48,000 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Committee Chair: | ||||||||||||||||||||
Risk and Audit | 55,000 | 60,000 | 60,000 | 60,000 | 60,000 | |||||||||||||||
Finance(1) | – | – | 60,000 | 60,000 | 60,000 | |||||||||||||||
Remuneration | 40,000 | 45,000 | 45,000 | 45,000 | 45,000 | |||||||||||||||
Sustainability | 40,000 | 45,000 | 45,000 | 45,000 | 45,000 | |||||||||||||||
Nomination | | No additional fees | | | No additional fees | | | No additional fees | | | No additional fees | | | No additional fees | | |||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Committee membership: | ||||||||||||||||||||
Risk and Audit | 30,000 | 32,500 | 32,500 | 32,500 | 32,500 | |||||||||||||||
Finance(1) | – | – | 32,500 | 32,500 | 32,500 | |||||||||||||||
Remuneration | 25,000 | 27,500 | 27,500 | 27,500 | 27,500 | |||||||||||||||
Sustainability | 25,000 | 27,500 | 27,500 | 27,500 | 27,500 | |||||||||||||||
Nomination | | No additional fees | | | No additional fees | | | No additional fees | | | No additional fees | | | No additional fees | | |||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Travel allowance: (2) | ||||||||||||||||||||
Greater than 3 but less than 10 hours | 7,000 | 7,000 | 7,000 | 7,000 | 7,000 | |||||||||||||||
10 hours or more | 15,000 | 15,000 | 15,000 | 15,000 | 15,000 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Chairman’s remuneration | 1,000,000 | 1,100,000 | 1,100,000 | 1,100,000 | 1,100,000 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
(1) | The Finance Committee was created on 23 April 2012, and the fees shown are annualised and commenced from that date. |
(2) | 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). Until 30 June 2011, the time frames were ‘Greater than 3 but less than 12 hours’ and ‘12 hours or more’. |
Remuneration for members of the GMC (other than the CEO)
The information in this section contains details of the remuneration policy that guided the Remuneration Committee’s decisions and therefore their remuneration details are already includedresulted in the KMP disclosures.
Details of theremuneration outcomes for members of the GMC, during FY2011other than the CEO (or any other Executive Directors should any be appointed in future).
Section4.2.1 for members of the GMC
The remuneration policy and structures for the other members of the GMC are essentially the same as those already described for the CEO in previous sections of the Remuneration Report. Where this is the case, to avoid repetition, this section of the report cross references that prior content.
4.4.14 Remuneration policy
In designing and determining the remuneration for members of the GMC, the Remuneration Committee applies the Group’s remuneration policy. This contains the key principles that support and reinforce the Group’s strategy and ongoing performance and align activities of management with the interests of shareholders.
Section 4.3.1 and 4.3.2 for overarching principles and purpose of remuneration at BHP Billiton
The Remuneration Committee considers the appropriate total remuneration for each member of the GMC by examining the remuneration provided to comparable roles in organisations of similar global complexity, size, reach and industry.
Each year, the Committee’s independent adviser, Kepler Associates, sources and consolidates relevant remuneration data for comparable roles, in relevant organisations and markets. The adviser prepares a comparison to current GMC remuneration, but does not make specific recommendations regarding the level of individual executives’ remuneration.
Section 4.4.1 for more information on services provided by Kepler Associates
From this market comparison, the Committee determines the appropriate remuneration for each individual, taking into account their responsibilities, location, skills, qualifications, experience and performance within the Group. In doing so, the Committee recognises that levels of remuneration should be sufficient to attract, motivate and retain high quality, experienced executives, but also that the Group should avoid paying more than is necessary for this purpose.
4.4.15 Components of remuneration
The components of remuneration for members of the GMC are the same as the CEO, with any differences described below.
Section 4.3.3 for the components of CEO remuneration (including how remuneration links to strategy, how each component operates and how performance is assessed)
Fixed remuneration
As for the CEO, the other members of the GMC receive:
Section 4.4.19 for details of significant components of fixed remuneration for each member of the GMC
STI
Members of the GMC are entitled to participate in the STIP on the same basis as the CEO.
Section 4.3.3 for details of the STIP, including the setting of performance measures, assessment of performance, and delivery of awards in cash and deferred equity (including terms in relation to malus and clawback)
Section 4.3.8 for the terms of STI awards on cessation of employment
The performance measures for members of the GMC are similar to those of the CEO, as determined by the Committee. However, the weighting of each performance measure will vary to reflect the focus required from each GMC role. In particular, there are different weightings for GMC members with specific Business responsibilities. The relevant performance measures and weightings and the performance outcomes for FY2014 (as assessed by the Committee) are set out in this table. Each individual wasthe diagram below.
Section 4.4.6 for a comparable table of performance measures and outcomes for the CEO
Section 4.4.19 for details of the STI amount provided to each member of the GMC for FY2014 performance
FY2014 performance measures and outcomes
The description of the wholeSTI outcomes for the CEO explains the FY2014 performance outcomes against targets for HSEC, attributable profit, EBIT and capital project management. This includes the material variations from target performance for BHP Billiton and for its separate Businesses, which correspond to the Business outcomes shown in the diagram above.
Individual measures are determined at the commencement of FY2011. Datesthe financial year. These comprise each individual’s contribution to the GMC, delivery against projects and initiatives within the scope of appointmenthis or her role, and his or her contribution to the overall performance of allthe Group. Personal performance of other GMC members appear in section 4.2was reviewed against these measures by the Committee and, on average, was considered marginally above target, with a range of this Annual Report, and the dates21 to 23 per cent against a target of their current service contracts appear in the table on the right.20 per cent.
The service contracts for allLTI
Other members of the GMC receive LTI awards under the LTIP, which are made on the same basis and with the same performance hurdles and vesting conditions as those provided to the CEO.
LTI awards granted to other members of the GMC generally have a maximum face value of 350 per cent of base salary, which is a fair value of 143.5 per cent of base salary under the current plan design (with an expected value of 41 per cent, taking into account the performance condition: 350% x 41% = 143.5%). The exception is for Jane McAloon and Tony Cudmore, for whom the maximum face value is 300 per cent of base salary (or a fair value of 123.0 per cent of base salary).
Section 4.3.3 for details of the LTIP, including the relative TSR performance condition, and the level of performance required for vesting (including terms in relation to malus and clawback)
Section 4.3.8 for the terms of LTI awards on cessation of employment
Section 4.4.7 for details of the performance outcomes for the 2009 LTIP
Section 4.4.21 for details of LTI awards, that vested during FY2014
Shareplus all-employee share purchase plan
Like the CEO, other members of the GMC are also eligible to participate in Shareplus. For administrative simplicity in regard to stock exchange dealings and announcements, the other members of the GMC do not currently participate in Shareplus.
Section 4.4.26 for information about Shareplus and the current holdings of GMC members
4.4.16 Remuneration mix
The Group approach to remuneration for members of the GMC is that a significant portion should be ‘at risk’ to provide strong alignment between remuneration outcomes and the interests of BHP Billiton shareholders.
The diagram below sets out the relative mix of each remuneration component for other members of the GMC. Each component is determined as a percentage of base salary (at the minimum, target and maximum levels of performance-based remuneration).
(1) | Base salary earned by each member of the GMC is set out in section 4.4.19. |
(2) | As for the CEO, the minimum STI award is zero, with an award of 80 per cent of base salary in cash and 80 per cent in deferred equity for target performance, and a maximum award of 120 per cent cash and 120 per cent deferred equity for exceptional performance against KPIs. |
Section 4.4.19 for actual cash STI awards for FY2014 performance, which are shown in the annual cash incentive column of the table
(3) | Other members of GMC have a maximum LTI award with a face value of 350 per cent of base salary as shown in the chart, with the exception of Jane McAloon and Tony Cudmore, who each have a maximum LTI award with a face value of 300 per cent of base salary. |
Section 4.4.21 for actual LTI awards for FY2014, which were granted on 18 December 2013
4.4.17 Employment contracts
The terms of employment for other members of the GMC 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. The contracts are all capable of terminationyear-to-year. A GMC employment contract may be terminated by BHP Billiton on up to 12 months’ notice. BHP Billiton can terminate a contract immediately by making a
payment of up to 12 months’ base salary plus pension contributions for the relevant period. The GMC member must give six months’ notice. In addition,notice for voluntary resignation.
Section 4.2.1 for members of the GMC (including the date they commenced in their role if during the current financial year)
4.4.18 Arrangements for a GMC member leaving the Group retainsafter 30 June 2014
Karen Wood retired from BHP Billiton on 20 August 2014
Karen Wood retired from her role as President on the right to terminate a contract immediately by making a payment equal to 12 months’GMC on 19 August 2014 and from BHP Billiton on 20 August 2014. Ms Wood has received base salary, pluspension contributions and applicable benefits up to the date of her retirement. She received no payments in lieu of notice upon retirement, but has been paid the value of the pension and superannuation funds that she has accumulated during her service with the Group. When determining the STI awards for GMC members, the Remuneration Committee resolved that Ms Wood would receive a FY2014 short-term incentive award in the form of cash, which was assessed by the Committee, based on her performance. No deferral period will apply in respect of this cash STI award. Upon her retirement, the unvested deferred shares allocated to her in respect of the FY2013 GIS award vested to her in full. In accordance with the Group’s usual practice, Ms Wood’s unvested LTIP awards were pro-rated, to reflect the percentage of the performance period that had elapsed to 20 August 2014. The vesting of the retained pro-rated awards will be determined by the Committee at the relevant time in future years. The awards will only vest if the performance condition is met at the end of each five-year performance period, subject to the Committee’s ability to reduce vesting through its discretion under the plan rules.
The arrangements for GMC members leaving the Group are within the approval provided by shareholders at the 2011 and 2013 AGMs in regard to Australian termination benefits forlegislation, including the provision of performance-based remuneration in accordance with the rules of the relevant incentive plans. Ms Wood will continue to provide advice and assistance to the CEO on a consultancy basis.
Other statutory disclosures
This section provides details of any additional statutory disclosures required by Australian or UK regulations that period.have not been included in the previous sections of the Remuneration Report.
|
|
| ||
| ||||
| ||||
| ||||
| ||||
| ||||
| ||||
|
6.4.2 Statutory disclosures4.4.19 GMC remuneration table
The table overleafbelow has been prepared in accordance with the requirementsrelevant accounting standards. Remuneration data for all members of the UK Companies Act 2006 (andGMC are pro-rated for the Largeperiods of FY2013 and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008 made thereunder) andFY2014 that each individual served as a member of the Australian Corporations Act 2001 and relevant accounting standards.
ExplanationGMC. An explanation of the share-based payments terms used in the table is provided following the table and associated footnotes. Comparative FY2013 figures for many of the current members of the GMC therefore relate only to a small portion of the year following their appointment to the GMC. Tony Cudmore, Tim Cutt and Mike Fraser joined the GMC during FY2014 and there is no relevant FY2013 comparison.
More information on the policy and operation of each element of remuneration is provided in prior sections of this report.
Share-based payments
The figures included in the shaded columns of the statutory table below for share-based payments were not actually provided to the KMP during FY2013 or FY2014. 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, either in relation to FY2013 and FY2014 performance or that of prior financial years. Please refer to sections 4.4.20 to 4.4.26 for information on awards allocated during FY2013 and FY2014. A further explanation of the share-based payments terms used in the table is provided following the table and its associated footnotes.
Short-term benefits | Post- employment benefits | Share-based payments (6) | Total | |||||||||||||||||||||||||||||||||
US dollars (’000) | Base salary (1) | Annual cash incentive (2) | Non- monetary benefits (3) | Other benefits (4) | Retirement benefits (5) | Value of STI and Shareplus awards (7) | Value of LTI awards (8) | |||||||||||||||||||||||||||||
Executive Directors | ||||||||||||||||||||||||||||||||||||
Andrew Mackenzie | 2014 | 1,700 | 1,568 | 92 | – | 425 | 992 | 2,346 | 7,123 | |||||||||||||||||||||||||||
2013 | 1,271 | 899 | 10 | 700 | 431 | 902 | 888 | 5,101 | ||||||||||||||||||||||||||||
Other GMC members | ||||||||||||||||||||||||||||||||||||
Peter Beaven | 2014 | 1,000 | 850 | 17 | – | 250 | 588 | 1,342 | 4,047 | |||||||||||||||||||||||||||
2013 | 142 | 77 | 1 | – | 36 | 69 | 159 | 484 | ||||||||||||||||||||||||||||
Tony Cudmore | 2014 | 247 | 223 | – | – | 62 | 30 | 22 | 584 | |||||||||||||||||||||||||||
Tim Cutt | 2014 | 1,000 | 867 | 12 | 550 | 250 | 525 | 1,173 | 4,377 | |||||||||||||||||||||||||||
Dean Dalla Valle | 2014 | 1,000 | 936 | – | – | 250 | 565 | 1,173 | 3,924 | |||||||||||||||||||||||||||
2013 | 142 | 60 | – | 100 | 36 | 62 | 119 | 519 | ||||||||||||||||||||||||||||
Mike Fraser | 2014 | 717 | 656 | 13 | – | 179 | 284 | 604 | 2,453 | |||||||||||||||||||||||||||
Geoff Healy | 2014 | 1,000 | 914 | 29 | – | 250 | 294 | 271 | 2,758 | |||||||||||||||||||||||||||
2013 | 77 | – | – | – | 19 | – | – | 96 | ||||||||||||||||||||||||||||
Mike Henry | 2014 | 1,083 | 1,015 | 20 | – | 271 | 816 | 1,365 | 4,570 | |||||||||||||||||||||||||||
2013 | 1,000 | 817 | 11 | 700 | 250 | 687 | 1,231 | 4,696 | ||||||||||||||||||||||||||||
Graham Kerr | 2014 | 1,083 | 1,006 | 68 | – | 271 | 828 | 1,383 | 4,639 | |||||||||||||||||||||||||||
2013 | 1,000 | 897 | 4 | – | 250 | 642 | 1,285 | 4,078 | ||||||||||||||||||||||||||||
Jane McAloon | 2014 | 750 | 686 | – | – | 188 | 402 | 796 | 2,822 | |||||||||||||||||||||||||||
2013 | 106 | 41 | – | – | 27 | 42 | 76 | 292 | ||||||||||||||||||||||||||||
Daniel Malchuk | 2014 | 871 | 797 | 29 | – | 218 | 441 | 817 | 3,173 | |||||||||||||||||||||||||||
2013 | 121 | 51 | 3 | 475 | 31 | 42 | 64 | 787 | ||||||||||||||||||||||||||||
Jimmy Wilson | 2014 | 1,000 | 951 | – | – | 250 | 647 | 1,342 | 4,190 | |||||||||||||||||||||||||||
2013 | 142 | 75 | – | – | 36 | 77 | 159 | 489 | ||||||||||||||||||||||||||||
Karen Wood | 2014 | 1,000 | 922 | – | – | 250 | 711 | 1,542 | 4,425 | |||||||||||||||||||||||||||
2013 | 1,005 | 741 | 16 | – | 333 | 740 | 1,881 | 4,716 |
(1) | Base salaries shown in this table reflect the amounts paid over the 12-month period from 1 July 2013 to 30 June 2014. No changes to salaries occurred during FY2014 except as follows: |
Section 4.3.3 and 4.4.15 for base salary policy and operation
(2) | Annual cash incentive is the cash portion of STI awards earned in respect of performance during each financial year. |
Section 4.3.3, 4.4.6 and 4.4.15 for STI policy and operation and for FY2014 STI outcomes
STI is provided half in cash and half in deferred equity (which are included in the share-based payments columns of the table). The minimum possible value awarded to each individual is nil. The maximum STI is 240 per cent of base salary (120 per cent in cash and 120 per cent in deferred equity). For FY2014 GMC members earned the following STI awards as a percentage of the maximum (the remaining portion has not been earned (i.e. has been ‘forfeited’)): Andrew Mackenzie 77 per cent, Peter Beaven 71 per cent, Tony Cudmore 76 per cent, Tim Cutt 72 per cent, Dean Dalla Valle 78 per cent, Mike Fraser 76 per cent, Geoff Healy 76 per cent, Mike Henry 77 per cent, Graham Kerr 76 per cent, Jane McAloon 76 per cent, Daniel Malchuk 76 per cent, Jimmy Wilson 79 per cent and Karen Wood 77 per cent.
(3) | Non-monetary benefits are non-pensionable and include such items as health and other insurances and fees for tax return preparation (if required in multiple jurisdictions). |
(4) | Other benefits are non-pensionable and included one-off relocation allowances (with no trailing entitlements) provided to Andrew Mackenzie, Mike Henry and Daniel Malchuk in FY2013 and to Tim Cutt in FY2014 in regard to their international relocations, and to Dean Dalla Valle in FY2013 in regard to his domestic relocation. |
(5) | Retirement benefits are 25 per cent of base salary for each GMC member. |
(6) | The percentage of the total remuneration for FY2014, which is made up of equity awards, ranges from 9 per cent for Tony Cudmore to 51 per cent for Karen Wood. |
(7) | The amounts shown in this column are described in the section below these notes. They may include awards paid in the form of cash where the individual ceases employment prior to the scheduled allocation date of the STI awards (in December 2014 for FY2014 awards). Footnote (2) shows the percentage of the FY2014 STI award not earned (i.e. ‘forfeited’) as a percentage of the maximum award. These share-based payments may also be forfeited after allocation in specific circumstances as described in section 4.3.8 and therefore, the minimum possible value of the awards is nil. The maximum possible value cannot be determined as it depends on future share price movements, but is estimated by the IFRS fair value used for accounting purposes in this table. |
Section 4.4.20,4.4.23 and 4.4.26 for the actual numbers of awards allocated to and held by members of the GMC
(8) | The amounts shown in this column are described in the section below these notes. These share-based payments may also be forfeited after allocation in specific circumstances as described in section 4.3.8 and therefore the minimum possible value of the awards is nil. The maximum possible value cannot be determined as it depends on future share price movements, but is estimated by the IFRS fair value used for accounting purposes in this table. |
Section 4.4.21, 4.4.22 and 4.4.24 for the actual numbers of awards allocated to the GMC
This column also includes an amount allocated to remuneration in FY2013 and in FY2014 in respect of awards received by Mr Mackenzie on commencement of employment with BHP Billiton, which vested during FY2013. The final value of the awards will be determined at the time that Mr Mackenzie chooses to redeem the award, and this column will incorporate an annual true-up amount until that time. Full details of the award and the relevant terms and conditions were provided in the FY2013 Annual Report.
ValueThe value of STI and Shareplus awards: The amountsawards shown in the table include:includes:
the estimated IFRS fair value of Deferred Shares and OptionsSTI awards provided as deferred equity or cash settled share-based payments under the GIS, as described in section 6.2.8, subsequentGSTIP and STIP;
Section 4.4.20 and 4.4.23 for awards allocated to meeting KPIs. Theeach individual
the estimated IFRS fair value of rights to MatchingMatched Shares acquired during each share purchase period under the Shareplus program, as described in section 6.2.7.program. These rights are acquired on each of the quarterly share-purchaseshare purchase dates under the program (grant dates), and the IFRS fair value is apportioned to annual remuneration based on the future service period required for the MatchingMatched Shares to be allocated (i.e. the vesting date of the rights). Where entitlements to the MatchingMatched Shares are accelerated on leaving the Group, the expected future service period is amended.
Section 4.4.26 for awards under Shareplus
ValueThe value of LTI awards: Performance Shares allocated underawards shown in the LTIP as described in section 6.2.9 are defined as equity-settled share-based payments. Thetable includes:
• | the estimated IFRS fair value of awards provided under the LTIP, MAP and as Transitional GMC awards which are defined as equity-settled share-based payments;Section 4.4.21, 4.4.22 and 4.4.24 for awards allocated to each individual |
award under the LTIP is the estimated IFRS fair value of the Performance Sharesaward as determined by Kepler Associates using a Monte Carlo simulation methodology taking account of the performance hurdle,condition, the term of the award, the share price at grant date, the expected price volatility of the underlying share, the risk-free interest rate for the term of the award and the value of the DEP that will be received on exercise of the award. The 2010 figures in the table overleaf have been restated to include the change in accounting policy of DEP from cash settled to equity settled. TheIFRS fair value of each award is apportioned to annual remuneration in equal amounts to each of the years in the expected future service period, which is normally five years. Where entitlements to Performance SharesLTI awards are preserved on leaving the Group, the expected future service period is amended.
The figures provided in the shaded columns of the statutory table below for share-based payments were not actually provided to the KMP during FY2011. These amounts are calculated in accordance with accounting standards and are the amortised accounting fair values of equity and equity-related instruments that have been granted to the executives, either in relation to FY2011 performance or that of prior financial years. Please refer to sections 6.2 and 6.4.3 for information on awards allocated during FY2011.
US dollars | Short-term benefits | Subtotal: UK requirements | Post- employment benefits | Share-based payments | Total: Australian requirements | |||||||||||||||||||||||||||||||||||
Base Salary(1) | Annual cash bonus(2) | Non- monetary benefits (3) | Other benefits (4) | Retirement benefits (5) | Value of STI and Shareplus awards(6) | Value of LTI awards(7) | ||||||||||||||||||||||||||||||||||
Executive Director |
| |||||||||||||||||||||||||||||||||||||||
Marius Kloppers | 2011 | 2,114,814 | 2,351,448 | 85,708 | — | 4,551,970 | 845,926 | 2,002,603 | 4,233,635 | 11,634,134 | ||||||||||||||||||||||||||||||
2010 | 2,038,885 | 2,330,527 | 67,067 | — | 4,436,479 | 815,554 | 1,817,191 | 3,653,589 | 10,722,813 | |||||||||||||||||||||||||||||||
Other GMC members |
| |||||||||||||||||||||||||||||||||||||||
Alberto Calderon (8) | 2011 | 1,092,833 | 1,179,200 | 20,489 | 177,009 | 2,469,531 | 382,492 | 1,082,048 | 1,878,134 | 5,812,205 | ||||||||||||||||||||||||||||||
2010 | 1,056,934 | 1,129,066 | 13,776 | 175,000 | 2,374,776 | 369,927 | 970,040 | 1,531,235 | 5,245,978 | |||||||||||||||||||||||||||||||
Andrew Mackenzie | 2011 | 1,092,833 | 1,188,000 | 3,112 | — | 2,283,945 | 393,420 | 917,887 | 5,806,514 | 9,401,766 | ||||||||||||||||||||||||||||||
2010 | 1,025,603 | 1,120,620 | 3,067 | — | 2,149,290 | 369,217 | 522,517 | 3,234,167 | 6,275,191 | |||||||||||||||||||||||||||||||
Marcus Randolph | 2011 | 1,222,125 | 1,338,240 | 78,520 | 2,839 | 2,641,724 | 415,523 | 1,121,021 | 2,231,715 | 6,409,983 | ||||||||||||||||||||||||||||||
2010 | 1,182,751 | 1,309,945 | 46,561 | — | 2,539,257 | 402,135 | 1,060,796 | 1,915,152 | 5,917,340 | |||||||||||||||||||||||||||||||
Alex Vanselow (8) | 2011 | 1,092,833 | 1,179,200 | 80,356 | 800 | 2,353,189 | 415,277 | 985,468 | 2,313,101 | 6,067,035 | ||||||||||||||||||||||||||||||
2010 | 1,077,468 | 1,120,610 | 34,908 | — | 2,232,986 | 409,438 | 930,710 | 1,996,538 | 5,569,672 | |||||||||||||||||||||||||||||||
Karen Wood | 2011 | 961,250 | 1,037,160 | — | — | 1,998,410 | 330,670 | 861,644 | 1,766,402 | 4,957,126 | ||||||||||||||||||||||||||||||
2010 | 928,375 | 985,967 | 4,852 | — | 1,919,194 | 319,361 | 782,339 | 1,541,489 | 4,562,383 | |||||||||||||||||||||||||||||||
J Michael Yeager | 2011 | 1,231,667 | 1,372,928 | 17,057 | 66,767 | 2,688,419 | 440,937 | 1,192,946 | 2,289,142 | 6,611,444 | ||||||||||||||||||||||||||||||
2010 | 1,183,092 | 1,336,407 | 20,119 | — | 2,539,618 | 423,547 | 1,086,731 | 2,153,609 | 6,203,505 |
Notes
|
|
|
|
A relocation allowance of US$175,000 for Alberto Calderon in each year in relation to a change in his place of employment from London to Melbourne.
Payment of US$66,767 in lieu for leave accrued but not taken by J Michael Yeager in FY2011, as Group policy does not allow GMC members to roll forward annual leave entitlements from one financial year to the next.
|
|
|
6.4.3 Equity awards
The following tablessections set out the interests held by members of the GMC inunder the Group’s employee equity schemes.plans. Each vested security can be exercised forequity award is a right to acquire one ordinary share in BHP Billiton LtdLimited or in BHP Billiton Plc.Plc upon satisfaction of the vesting conditions. The vesting conditions will include performance and/or service requirements as relevant to the purpose of the award and as described in each of the following sections. The value of securitiesawards over BHP Billiton LtdLimited shares is shown in Australian dollars and the value of securitiesawards over BHP Billiton Plc shares is shown in Sterling.pounds sterling for awards over shares on the LSE and in South African rand for awards over shares on the JSE.
Awards of Deferred SharesDividend Equivalent Payments
The awards are not ordinary shares and do not carry entitlements to ordinary dividends or other shareholder rights. Dividends are not received by the executives during the vesting period. For awards provided under the GIS and the LTIP, a DEP is provided to cover dividends that would have been payable on ordinary BHP Billiton shares over the period from the allocation date to the time that the holder receives ordinary shares in BHP Billiton in respect of the award (on vesting or on exercise). A DEP is only provided in relation to awards that have vested upon satisfaction of the relevant conditions. This payment is not made in relation to any securities that are forfeited or lapse.
Each employee may nominateTheSecurities Dealing GLD governs and restricts dealing arrangements and the provision of shares on vesting or exercise of awards.
Equity awards provided for GMC service
4.4.20 STI awards under the GIS
Awards under the GIS will not deliver any value to receive GIS awardsthe holder for at least two years from the beginning of the financial year in which they are granted (unless the formexecutive’s employment with the Group ends earlier in specific circumstances, such as on death, serious injury, disability or illness, retirement with the agreement of Deferred Shares (as shown in this table) or inBHP Billiton and redundancy/retrenchment).
At the form2013 AGMs, shareholders approved a new STIP which applies from FY2014. Awards have not yet been allocated under the STIP. The terms and conditions of Options (as shown in the next table) or a combination thereof.new STIP are largely the same as those of the GIS.
Name | Date of grant | At 1 July 2010 | Granted | Vested | Lapsed | Exercised | At 30 June 2011 | Date award may vest and becomes exercisable (1) | Market price on date of grant(2) | Market price on date of vesting (3) | Market price on date of exercise (4) | Aggregate gain of shares exercised (4) | ||||||||||||||||||||||||||||||||||||
Executive Director |
| |||||||||||||||||||||||||||||||||||||||||||||||
Marius Kloppers |
| 6 Dec 2010 14 Dec 2009 4 Dec 2008 |
|
| — 46,951 95,847 |
|
| 54,831 — — |
|
| — — 95,847 |
|
| — — — |
|
| — — 95,847 |
|
| 54,831 46,951 — |
|
| Aug 2012 Aug 2011 7 Sep 2010 |
| A$ A$ A$ | 44.53 40.65 27.50 |
|
A$ | — — 38.44 |
|
A$ | — — 37.91 |
|
A$ | — — 3,633,560 |
| ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||
Total | 142,798 | 54,831 | 95,847 | — | 95,847 | 101,782 | ||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||
Other members of the GMC |
| |||||||||||||||||||||||||||||||||||||||||||||||
Alberto Calderon |
| 6 Dec 2010 14 Dec 2009 4 Dec 2008 |
|
| — 33,343 — |
|
| 30,495 — — |
|
| — — — |
|
| — — — |
|
| — — — |
|
| 30,495 33,343 — |
|
| Aug 2012 Aug 2011 — |
| £ £
| 24.40 19.06 — |
|
| — — — |
|
| — — — |
|
| — — — |
| ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||
Total | 33,343 | 30,495 | — | — | — | 63,838 | ||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||
Andrew Mackenzie |
| 6 Dec 2010 14 Dec 2009 |
|
| — 12,476 |
|
| 22,700 — |
|
| — — |
|
| — — |
|
| — — |
|
| 22,700 12,476 |
|
| Aug 2012 Aug 2011 |
| £ £ | 24.40 19.06 |
|
| — — |
|
| — — |
|
| — — |
| ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||
Total | 12,476 | 22,700 | — | — | — | 35,176 | ||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||
Marcus Randolph |
| 6 Dec 2010 14 Dec 2009 4 Dec 2008 |
|
| — 25,126 45,027 |
|
| 30,819 — — |
|
| — — 45,027 |
|
| — — — |
|
| — — 45,027 |
|
| 30,819 25,126 — |
|
| Aug 2012 Aug 2011 7 Sep 2010 |
| A$ A$ A$ | 44.53 40.65 27.50 |
|
A$ | — — 38.44 |
|
A$ | — — 37.91 |
|
A$ | — — 1,706,974 |
| ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||
Total | 70,153 | 30,819 | 45,027 | — | 45,027 | 55,945 | ||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||
Alex Vanselow |
| 6 Dec 2010 14 Dec 2009 4 Dec 2008 |
|
| — 27,727 — |
|
| 26,365 — — |
|
| — — — |
|
| — — — |
|
| — — — |
|
| 26,365 27,727 — |
|
| Aug 2012 Aug 2011 — |
| A$ A$
| 44.53 40.65 — |
|
| — — — |
|
| — — — |
|
| — — — |
| ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||
Total | 27,727 | 26,365 | — | — | — | 54,092 | ||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||
Karen Wood |
| 6 Dec 2010 14 Dec 2009 4 Dec 2008 |
|
| — 23,686 30,778 |
|
| 23,197 — — |
|
| — — 30,778 |
|
| — — — |
|
| — — 30,778 |
|
| 23,197 23,686 — |
|
| Aug 2012 Aug 2011 7 Sep 2010 |
| A$ A$ A$ | 44.53 40.65 27.50 |
|
A$ | — — 38.44 |
|
A$ | — — 37.91 |
|
A$ | — — 1,166,794 |
| ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||
Total | 54,464 | 23,197 | 30,778 | — | 30,778 | 46,883 | ||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||
J Michael Yeager |
| 6 Dec 2010 14 Dec 2009 4 Dec 2008 |
|
| — 29,877 56,373 |
|
| 31,442 — — |
|
| — — 56,373 |
|
| — — — |
|
| — — 56,373 |
|
| 31,442 29,877 — |
|
| Aug 2012 Aug 2011 7 Sep 2010 |
| A$ A$ A$ | 44.53 40.65 27.50 |
|
A$ | — — 38.44 |
|
A$ | — — 37.91 |
|
A$ | — — 2,137,100 |
| ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||
Total | 86,250 | 31,442 | 56,373 | — | 56,373 | 61,319 | ||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
Notes
Name | Date of grant | Option Exercise price payable (1) | At 1 July 2013 | Granted | Vested | Lapsed | Exercised | At 30 June 2014 | Date award may vest (2) | Market price on date of grant (3) | Market price on date of vesting (4) | Market price on date of exercise (5) | Aggregate gain on awards (’000) (5) | DEP on awards (’000) (6) | ||||||||||||||||||||||||||||||||||||||||||
Executive Director | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Andrew Mackenzie | 18 Dec 2013 | – | – | 28,157 | – | – | – | 28,157 | Aug 2015 | A$35.79 | – | – | – | – | ||||||||||||||||||||||||||||||||||||||||||
5 Dec 2012 | – | 20,023 | – | – | – | – | 20,023 | Aug 2014 | £19.98 | – | – | – | – | |||||||||||||||||||||||||||||||||||||||||||
5 Dec 2011 | – | 39,230 | – | 39,230 | – | 39,230 | – | 21 Aug 2013 | £20.12 | £18.73 | £18.73 | £735 | US$88 | |||||||||||||||||||||||||||||||||||||||||||
6 Dec 2010 | £ | 23.71 | 30,389 | – | – | – | – | 30,389 | 2 Oct 2012 | £24.40 | £19.45 | – | – | – | ||||||||||||||||||||||||||||||||||||||||||
16 Dec 2009 | £ | 18.68 | 16,119 | – | – | – | 16,119 | – | 25 Aug 2011 | £19.06 | £19.44 | £18.73 | £1 | US$64 | ||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||
Total | 105,761 | 28,157 | 39,230 | – | 55,349 | 78,569 | ||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||
Other members of the GMC |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Peter Beaven | 18 Dec 2013 | – | – | 2,423 | – | – | – | 2,423 | Aug 2015 | A$35.79 | – | – | – | – | ||||||||||||||||||||||||||||||||||||||||||
Dean Dalla Valle | 18 Dec 2013 | – | – | 1,895 | – | – | – | 1,895 | Aug 2015 | A$35.79 | – | – | – | – | ||||||||||||||||||||||||||||||||||||||||||
Mike Henry | 18 Dec 2013 | – | – | 25,594 | – | – | – | 25,594 | Aug 2015 | A$35.79 | – | – | – | – | ||||||||||||||||||||||||||||||||||||||||||
5 Dec 2012 | – | 15,058 | – | – | – | – | 15,058 | Aug 2014 | £19.98 | – | – | – | – | |||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||
Total | 15,058 | 25,594 | – | – | – | 40,652 | ||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||
Graham Kerr | 18 Dec 2013 | – | – | 28,101 | – | – | – | 28,101 | Aug 2015 | A$35.79 | – | – | – | – | ||||||||||||||||||||||||||||||||||||||||||
5 Dec 2012 | – | 13,230 | – | – | – | – | 13,230 | Aug 2014 | A$34.29 | – | – | – | – | |||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||
Total | 13,230 | 28,101 | – | – | – | 41,331 | ||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||
Jane McAloon | 18 Dec 2013 | – | – | 1,270 | – | – | – | 1,270 | Aug 2015 | A$35.79 | – | – | – | – | ||||||||||||||||||||||||||||||||||||||||||
Daniel Malchuk | 18 Dec 2013 | – | – | 1,598 | – | – | – | 1,598 | Aug 2015 | A$35.79 | – | – | – | – | ||||||||||||||||||||||||||||||||||||||||||
Jimmy Wilson | 18 Dec 2013 | – | – | 2,360 | – | – | – | 2,360 | Aug 2015 | A$35.79 | – | – | – | – | ||||||||||||||||||||||||||||||||||||||||||
Karen Wood | 18 Dec 2013 | – | – | 23,231 | – | – | – | 23,231 | Aug 2015 | A$35.79 | – | – | – | – | ||||||||||||||||||||||||||||||||||||||||||
5 Dec 2012 | – | 15,685 | – | – | – | – | 15,685 | Aug 2014 | A$34.29 | – | – | – | – | |||||||||||||||||||||||||||||||||||||||||||
5 Dec 2011 | – | 28,539 | – | 28,539 | – | 28,539 | – | 21 Aug 2013 | A$37.26 | A$35.74 | A$35.74 | A$1,020 | US$64 | |||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||
Total | 44,224 | 23,231 | 28,539 | – | 28,539 | 38,916 | ||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
(1) |
|
|
|
|
Awards of Options under the GIS
Each employee may nominate to receive GIS awards in the form of Options (as shown in this table) or in the form of Deferred Shares (as shown in the previous table) or a combination thereof.
Name | Date of grant | Exercise price payable (1) | At 1 July 2010 | Granted | Vested | Lapsed | Exercised | At 30 June 2011 | Date award may vest and becomes exercisable (2) | Market price on date of grant(3) | Market price on date of vesting | Market price on date of exercise | Aggregate gain of shares exercised | |||||||||||||||||||||||||||||||||||||||
Alberto Calderon | 4 Dec 2008 | £ | 10.89 | 143,227 | — | 143,277 | — | 143,277 | — | 7 Sep 2010 | £ | 10.60 | £ | 18.93 | £ | 18.93 | £ | 1,151,947 | ||||||||||||||||||||||||||||||||||
Andrew Mackenzie |
| 6 Dec 2010 14 Dec 2009 |
| £ £ | 23.71 18.68 |
|
| — 16,119 |
|
| 30,389 — |
|
| — — |
|
| — — |
|
| — — |
|
| 30,389 16,119 |
|
| Aug 2012 Aug 2011 |
| £ £ | 24.40 19.06 |
|
| — — |
|
| — — |
|
| — — |
| |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||
Total | 16,119 | 30,389 | — | — | — | 46,508 | ||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||
Alex Vanselow | 4 Dec 2008 | A$ | 29.15 | 153,768 | — | 153,768 | — | 153,768 | — | 7 Sep 2010 | A$ | 27.50 | $ | 38.44 | A$ | 37.91 | A$ | 1,347,008 |
Notes
shown. The exercise price is determined by the weighted average price at which BHP Billiton shares were traded over the one week up to and including the date of grant. |
(2) |
|
(3) | The market price shown for the December |
Awards of Matched Shares under the Shareplus all-employee share plan
Each member of the GMC may choose to participate in the Shareplus all-employee share plan on the same basis as other employees. Matched shares were allocated under the plan on 1 April 2011 in relation to contributions made from base salary during the 2008 Shareplus Plan Year (i.e. during the period from June 2008 to May 2009). Differences in exchange rates in relation to the base salaries of the GMC members and the currencies of each securities exchange result in minor differences in the numbers of shares allocated. GMC interests in BHP Billiton as a result of the plan are shown below. Further detail on Shareplus is provided in section 6.2.7.
Name | Allocation Date | At 1 July 2010 | Number of shares granted(1) | Transferred from trust or sold | At 30 June 2011 | Market price on date of allocation/vesting (2) | ||||||||||||||||||
Marius Kloppers |
| 1 Apr 2011 1 Apr 2010 |
|
| — 160 |
|
| 168 — |
|
| 36 — |
|
| 132 160 |
|
| A$46.68 A$43.95 |
| ||||||
|
|
|
|
|
|
|
| |||||||||||||||||
Total | 160 | 168 | 36 | 292 | ||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||
Alberto Calderon |
| 1 Apr 2011 1 Apr 2010 |
|
| — 156 |
|
| 188 — |
|
| 23 — |
|
| 165 156 |
|
| £25.12 £23.01 |
| ||||||
|
|
|
|
|
|
|
| |||||||||||||||||
Total | 156 | 188 | 23 | 321 | ||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||
Marcus Randolph |
| 1 Apr 2011 1 Apr 2010 |
|
| — 157 |
|
| 172 — |
|
| — — |
|
| 172 157 |
|
| A$46.68 A$43.95 |
| ||||||
|
|
|
|
|
|
|
| |||||||||||||||||
Total | 157 | 172 | — | 329 | ||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||
Alex Vanselow |
| 1 Apr 2011 1 Apr 2010 |
|
| — 157 |
|
| 168 — |
|
| — — |
|
| 168 157 |
|
| A$46.68 A$43.95 |
| ||||||
|
|
|
|
|
|
|
| |||||||||||||||||
Total | 157 | 168 | — | 325 | ||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||
Karen Wood |
| 1 Apr 2011 1 Apr 2010 |
|
| — 157 |
|
| 168 — |
|
| — — |
|
| 168 157 |
|
| A$46.68 A$43.95 |
| ||||||
|
|
|
|
|
|
|
| |||||||||||||||||
Total | 157 | 168 | — | 325 | ||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||
J Michael Yeager(3) | 1 Apr 2011 | — | 210 | 64 | 146 | US$48.42 | ||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||
Total | — | 210 | 64 | 146 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
Notes
|
The |
|
(6) | The amounts shown in |
Awards of Performance Shares4.4.21 LTI awards under the LTIP
Awards under the LTIP will not deliver any value to the holder for at least five years from the beginning of the financial year in which they are granted (unless the executive’s employment with the Group ends earlier in specific circumstances, such as on death, serious injury, disability or illness).
A new LTIP was approved by shareholders at the 2013 AGMs and was effective for grants from December 2013. The terms and conditions of the new LTIP, including the performance conditions, are described in sections 4.3.3 and 4.3.8 and are largely the same as the former LTIP. The rules are available on the BHP Billiton website.
Name | Date of grant | At 1 July 2010 | Granted | Vested | Lapsed | Exercised | At 30 June 2011 | Date award may vest and become exercisable (1) | Market price on date of grant(2) | Market price on date of vesting(3) | Market price on date of exercise (4) | Aggregate gain of shares exercised (4) | Date of grant | At 1 July 2013 | Granted | Vested | Lapsed | Exercised | At 30 June 2014 | Date award may vest (1) | Market price on date of grant (2) | Market price on date of vesting (3) | Market price on date of exercise (4) | Aggregate gain on awards (’000) (4) | DEP on awards (’000) (5) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Executive Director | Executive Director |
| Executive Director |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Marius Kloppers |
| 6 Dec 2010 4 Dec 2009 4 Dec 2008 14 Dec 2007 7 Dec 2006 5 Dec 2005 |
|
| — 250,000 500,000 333,327 225,000 225,000 |
|
| 200,000 — — — — — |
|
| — — — — — 225,000 |
|
| — — — — — — |
|
| — — — — — 225,000 |
|
| 200,000 250,000 500,000 333,327 225,000 — |
|
| Aug 2015 Aug 2014 Aug 2013 Aug 2012 Aug 2011 7 Sep 2010 |
| A$ A$ A$ A$ £ £ | 44.53 40.65 27.50 42.05 9.72 8.90 |
|
£ | — — — — — 18.93 |
|
£ | — — — — — 18.93 |
|
£ | — — — — — 4,259,250 |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Andrew Mackenzie | 18 Dec 2013 | – | 198,514 | – | – | – | 198,514 | Aug 2018 | A$35.79 | – | – | – | – | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
5 Dec 2012 | 140,326 | – | – | – | – | 140,326 | Aug 2017 | £19.98 | – | – | – | – | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
5 Dec 2011 | 146,510 | – | – | – | – | 146,510 | Aug 2016 | £20.12 | – | – | – | – | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
6 Dec 2010 | 120,000 | – | – | – | – | 120,000 | Aug 2015 | £24.40 | – | – | – | – | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
14 Dec 2009 | 120,000 | – | – | – | – | 120,000 | Aug 2014 | £19.06 | – | – | – | – | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
4 Dec 2008 | 325,839 | – | 211,795 | 114,044 | 211,795 | – | 21 Aug 2013 | £10.60 | £18.73 | £18.73 | £3,967 | US$1,017 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total | 1,533,327 | 200,000 | 225,000 | — | 225,000 | 1,508,327 | 852,675 | 198,514 | 211,795 | 114,044 | 211,795 | 725,350 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other members of the GMC | Other members of the GMC |
| Other members of the GMC |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Alberto Calderon |
| 6 Dec 2010 14 Dec 2009 4 Dec 2008 14 Dec 2007 7 Dec 2006 5 Dec 2005 |
|
| — 120,000 225,000 211,993 80,000 40,000 |
|
| 120,000 — — — — — |
|
| — — — — — 40,000 |
|
| — — — — — — |
|
| — — — — — 40,000 |
|
| 120,000 120,000 225,000 211,993 80,000 — |
|
| Aug 2015 Aug 2014 Aug 2013 Aug 2012 Aug 2011 7 Sep 2010 |
| £ £ £ £ £ £ | 24.40 19.06 10.60 15.45 9.72 8.90 |
|
£ | — — — — — 18.93 |
|
£ | — — — — — 18.93 |
|
£ | — — — — — 757,200 |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Peter Beaven | 18 Dec 2013 | – | 102,176 | – | – | – | 102,176 | Aug 2018 | A$35.79 | – | – | – | – | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Tony Cudmore | 3 Mar 2014 | – | 22,273 | – | – | – | 22,273 | Aug 2018 | A$37.40 | – | – | – | – | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Tim Cutt | 18 Dec 2013 | – | 102,176 | – | – | – | 102,176 | Aug 2018 | A$35.79 | – | – | – | – | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Dean Dalla Valle | 18 Dec 2013 | – | 102,176 | – | – | – | 102,176 | Aug 2018 | A$35.79 | – | – | – | – | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Mike Fraser | 18 Dec 2013 | – | 86,850 | – | – | – | 86,850 | Aug 2018 | A$35.79 | – | – | – | – | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Geoff Healy | 18 Dec 2013 | – | 102,176 | – | – | – | 102,176 | Aug 2018 | A$35.79 | – | – | – | – | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Mike Henry | 18 Dec 2013 | – | 112,394 | – | – | – | 112,394 | Aug 2018 | A$35.79 | – | – | – | – | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
5 Dec 2012 | 121,179 | – | – | – | – | 121,179 | Aug 2017 | £19.98 | – | – | – | – | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total | 676,993 | 120,000 | 40,000 | — | 40,000 | 756,993 | 121,179 | 112,394 | – | – | – | 233,573 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Andrew Mackenzie (5) |
| 6 Dec 2010 14 Dec 2009 4 Dec 2008 |
|
| — 120,000 325,839 |
|
| 120,000 — — |
|
| — — — |
|
| — — — |
|
| — — — |
|
| 120,000 120,000 325,839 |
|
| Aug 2015 Aug 2014 Aug 2013 |
| £ £ £ | 24.40 19.06 10.60 |
|
| — — — |
|
| — — — |
|
| — — — |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Graham Kerr | 18 Dec 2013 | – | 112,394 | – | – | – | 112,394 | Aug 2018 | A$35.79 | – | – | – | – | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
5 Dec 2012 | 108,939 | – | – | – | – | 108,939 | Aug 2017 | A$34.29 | – | – | – | – | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total | 445,839 | 120,000 | — | — | — | 565,839 | 108,939 | 112,394 | – | – | – | 221,333 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Marcus Randolph |
| 6 Dec 2010 14 Dec 2009 4 Dec 2008 14 Dec 2007 7 Dec 2006 5 Dec 2005 |
|
| — 120,000 225,000 197,676 175,000 110,000 |
|
| 105,000 — — — — — |
|
| — — — — — 110,000 |
|
| — — — — — — |
|
| — — — — — 110,000 |
|
| 105,000 120,000 225,000 197,676 175,000 — |
|
| Aug 2015 Aug 2014 Aug 2013 Aug 2012 Aug 2011 7 Sep 2010 |
| A$ A$ A$ A$ A$ A$ | 44.53 40.65 27.50 42.05 26.40 22.03 |
|
A$ | — — — — — 38.44 |
|
A$ | — — — — — 37.91 |
|
A$ | — — — — — 4,170,100 |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total | 827,676 | 105,000 | 110,000 | — | 110,000 | 822,676 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
Name Alex Vanselow 14 Dec 2009 4 Dec 2008 14 Dec 2007 7 Dec 2006 5 Dec 2005 120,000 225,000 197,676 225,000 110,000 — — — — — — — — — 110,000 — — — — — — — — — 110,000 120,000 225,000 197,676 225,000 — Aug 2014 Aug 2013 Aug 2012 Aug 2011 7 Sep 2010 A$ A$ A$ A$ A$ 40.65 27.50 42.05 26.40 22.03 A$ — — — — 38.44 A$ — — — — 37.91 A$ — — — — 4,170,100 Total Karen Wood 1 Feb 2010 4 Dec 2008 14 Dec 2007 7 Dec 2006 5 Dec 2005 90,000 175,000 154,187 175,000 80,000 — — — — — — — — — 80,000 — — — — — — — — — 80,000 90,000 175,000 154,187 175,000 — Aug 2014 Aug 2013 Aug 2012 Aug 2011 7 Sep 2010 A$ A$ A$ A$ A$ 40.65 27.50 42.05 26.40 22.03 A$ — — — — 38.44 A$ — — — — 37.91 A$ — — — — 3,032,800 Total J Michael Yeager 14 Dec 2009 4 Dec 2008 14 Dec 2007 7 Dec 2006 26 Apr 2006 120,000 225,000 187,702 225,000 325,000 — — — — — — — — — 325,000 — — — — — — — — — 325,000 120,000 225,000 187,702 225,000 — Aug 2014 Aug 2013 Aug 2012 Aug 2011 7 Sep 2010 A$ A$ A$ A$ A$ 40.65 27.50 42.05 26.40 31.06 A$ — — — 38.44 A$ — — — 37.91 A$ — — — 12,320,750 Total Date of grant At
1 July
2010 Granted Vested Lapsed Exercised At
30 June
2011 Date award
may vest and
become
exercisable (1) Market
price on
date of
grant(2) Market
price
on date of
vesting(3) Market
price on
date of
exercise (4) Aggregate
gain of
shares
exercised (4) 6 Dec 2010 — 105,000 — — — 105,000 Aug 2015 A$ 44.53 — — — 877,676 105,000 110,000 — 110,000 872,676 6 Dec 2010 — 75,000 — — — 75,000 Aug 2015 A$ 44.53 — — — 674,187 75,000 80,000 — 80,000 669,187 6 Dec 2010 — 105,000 — — — 105,000 Aug 2015 A$ 44.53 — — — 1,082,702 105,000 325,000 — 325,000 862,702
Notes
Name | Date of grant | At 1 July 2013 | Granted | Vested | Lapsed | Exercised | At 30 June 2014 | Date award may vest (1) | Market price on date of grant (2) | Market price on date of vesting (3) | Market price on date of exercise (4) | Aggregate gain on awards (’000) (4) | DEP on awards (’000) (5) | |||||||||||||||||||||||||||||||||||||||
Jane McAloon | 18 Dec 2013 | – | 65,684 | – | – | – | 65,684 | Aug 2018 | A$35.79 | – | – | – | – | |||||||||||||||||||||||||||||||||||||||
Daniel Malchuk | 18 Dec 2013 | – | 86,850 | – | – | – | 86,850 | Aug 2018 | A$35.79 | – | – | – | – | |||||||||||||||||||||||||||||||||||||||
Jimmy Wilson | 18 Dec 2013 | – | 102,176 | – | – | – | 102,176 | Aug 2018 | A$35.79 | – | – | – | – | |||||||||||||||||||||||||||||||||||||||
Karen Wood | 18 Dec 2013 | – | 102,176 | – | – | – | 102,176 | Aug 2018 | A$35.79 | – | – | – | – | |||||||||||||||||||||||||||||||||||||||
5 Dec 2012 | 90,234 | – | – | – | – | 90,234 | Aug 2017 | A$34.29 | – | – | – | – | ||||||||||||||||||||||||||||||||||||||||
5 Dec 2011 | 85,027 | – | – | – | – | 85,027 | Aug 2016 | A$37.26 | – | – | – | – | ||||||||||||||||||||||||||||||||||||||||
6 Dec 2010 | 75,000 | – | – | – | – | 75,000 | Aug 2015 | A$44.53 | – | – | – | – | ||||||||||||||||||||||||||||||||||||||||
1 Feb 2010 | 90,000 | – | – | – | – | 90,000 | Aug 2014 | A$39.20 | – | – | – | – | ||||||||||||||||||||||||||||||||||||||||
4 Dec 2008 | 175,000 | – | 113,750 | 61,250 | 50,813 | 62,937 | 21 Aug 2013 | A$27.50 | A$35.74 | A$35.74 | A$1,816 | US$244 | ||||||||||||||||||||||||||||||||||||||||
14 Dec 2007 | 64,187 | – | – | – | 64,187 | – | 2 Oct 2012 | A$42.05 | A$33.54 | A$35.74 | A$2,294 | US$344 | ||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||
Total | 579,448 | 102,176 | 113,750 | 61,250 | 115,000 | 505,374 | ||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
(2) | The market price shown for the |
(3) |
|
(4) | The market price shown (and used for calculating the aggregate gain) is the closing price of BHP Billiton shares on the date that the individual exercised their |
(5) | The amounts shown in this column |
4.4.22 Transitional GMC awards
As the MAP awards that are allocated to individuals in their non-GMC management positions have a three-year service condition, and the LTIP awards provided to GMC members have a five-year service and performance condition, as a transitional step, the Committee may determine that new GMC members recruited from within BHP Billiton receive Transitional GMC awards to bridge the gap between the two programs.
Transitional GMC awards have two tranches. Tranche one has a three-year service and performance condition. Tranche two has a four-year service and performance condition. The Remuneration Committee has absolute discretion to determine if the performance condition has been met and whether any, all or part of the award will vest (or otherwise lapse), having regard to (but not limited to) BHP Billiton’s TSR over the three- or four-year performance period (respectively), the participant’s contribution to Group outcomes and the participant’s personal performance (with guidance on this assessment from the CEO). No DEP is payable on these awards.
The treatment of Transitional GMC awards on cessation of employment will depend on the circumstances and is similar to those for LTIP awards. If the participant’s employment ceases due to dismissal or resignation, any unvested awards will lapse immediately. If the reason for cessation is death, serious injury, disability or illness, then the awards will vest in full on the date of cessation. If the participant retires from the Group with the agreement of BHP Billiton, is made redundant or employment is terminated by mutual agreement, then a proportion of the award (pro-rated to reflect the percentage of the performance period that has elapsed) will continue on foot and vest, subject to the performance condition, on the future vesting date. The remaining portion of the award will lapse. In all other circumstances, the Committee in its absolute discretion will determine the portion of the award that vests (or lapses).
Name | Date of grant | At 1 July 2013 | Granted | Vested | Lapsed | Exercised | At 30 June 2014 | Date award may vest (1) | Market price on date of grant (2) | Market price on date of vesting | Aggregate gain on awards (’000) | |||||||||||||||||||||||||||||||
Peter Beaven | 18 Dec 2013 | – | 18,245 | – | – | – | 18,245 | Aug 2017 | A$35.79 | �� | – | – | ||||||||||||||||||||||||||||||
18 Dec 2013 | – | 18,245 | – | – | – | 18,245 | Aug 2016 | A$35.79 | – | – | ||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||
Total | – | 36,490 | – | – | – | 36,490 | ||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||
Tim Cutt | 18 Dec 2013 | – | 18,245 | – | – | – | 18,245 | Aug 2017 | A$35.79 | – | – | |||||||||||||||||||||||||||||||
18 Dec 2013 | – | 18,245 | – | – | – | 18,245 | Aug 2016 | A$35.79 | – | – | ||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||
Total | – | 36,490 | – | – | – | 36,490 | ||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||
Dean Dalla Valle | 18 Dec 2013 | – | 18,245 | – | – | – | 18,245 | Aug 2017 | A$35.79 | – | – | |||||||||||||||||||||||||||||||
18 Dec 2013 | – | 18,245 | – | – | – | 18,245 | Aug 2016 | A$35.79 | – | – | ||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||
Total | – | 36,490 | – | – | – | 36,490 | ||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||
Mike Fraser | 18 Dec 2013 | – | 15,508 | – | – | – | 15,508 | Aug 2017 | A$35.79 | – | – | |||||||||||||||||||||||||||||||
18 Dec 2013 | – | 15,508 | – | – | – | 15,508 | Aug 2016 | A$35.79 | – | – | ||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||
Total | – | 31,016 | – | – | – | 31,016 | ||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||
Mike Henry | 5 Dec 2012 | 19,930 | – | – | – | – | 19,930 | Aug 2016 | £19.98 | – | – | |||||||||||||||||||||||||||||||
5 Dec 2012 | 19,930 | – | – | – | – | 19,930 | Aug 2015 | £19.98 | – | – | ||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||
Total | 39,860 | – | – | – | – | 39,860 | ||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||
Graham Kerr | 5 Dec 2012 | 17,917 | – | – | – | – | 17,917 | Aug 2016 | A$34.29 | – | – | |||||||||||||||||||||||||||||||
5 Dec 2012 | 17,917 | – | – | – | – | 17,917 | Aug 2015 | A$34.29 | – | – | ||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||
Total | 35,834 | – | – | – | – | 35,834 | ||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||
Jane McAloon | 18 Dec 2013 | – | 13,684 | – | – | – | 13,684 | Aug 2017 | A$35.79 | – | – | |||||||||||||||||||||||||||||||
18 Dec 2013 | – | 13,684 | – | – | – | 13,684 | Aug 2016 | A$35.79 | – | – | ||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||
Total | – | 27,368 | – | – | – | 27,368 | ||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||
Daniel Malchuk | 18 Dec 2013 | – | 15,508 | – | – | – | 15,508 | Aug 2017 | A$35.79 | – | – | |||||||||||||||||||||||||||||||
18 Dec 2013 | – | 15,508 | – | – | – | 15,508 | Aug 2016 | A$35.79 | – | – | ||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||
Total | – | 31,016 | – | – | – | 31,016 | ||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||
Jimmy Wilson | 18 Dec 2013 | – | 18,245 | – | – | – | 18,245 | Aug 2017 | A$35.79 | – | – | |||||||||||||||||||||||||||||||
18 Dec 2013 | – | 18,245 | – | – | – | 18,245 | Aug 2016 | A$35.79 | – | – | ||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||
Total | – | 36,490 | – | – | – | 36,490 | ||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
(1) | The holding period for each award ends on 30 June in |
(2) | The market price shown for the December 2013 grant is the closing price of BHP Billiton shares on 18 December 2013. No price is payable by the individual for acquiring the award at the time of grant. The grant date IFRS fair values of the awards are estimated at the start of the vesting period, being 1 July 2013, and were A$28.09 for tranche one, and A$27.20 for tranche two. |
Equity awards provided for pre-GMC service
4.4.23 STI awards under the GSTIP
The table below shows GSTIP awards that were held by the executives at the time that they were appointed to the GMC or which were allocated in relation to performance and service before they became GMC members.
Prior to their appointment as members of the GMC, the individuals shown in the table below received STl awards under the GSTIP which has applied for the non-GMC management of BHP Billiton since the awards allocated in FY2009 (in relation to FY2008 performance).
The terms and conditions of the GSTIP awards are essentially the same as those provided under the GIS. Under both plans, participants must satisfy applicable STl performance conditions in order to be eligible for any award. Due to changes in the GSTIP, which applied to all participants in that plan, no DEP is payable on the GSTIP awards that were allocated in FY2012 (in relation to FY2011 performance) or since that time.
Name | Date of grant | Option Exercise price payable (1) | At 1 July 2013 | Granted | Vested | Lapsed | Exercised | At 30 June 2014 | Date award may vest (2) | Market price on date of grant (3) | Market price on date of vesting (4) | Market price on date of exercise (5) | Aggregate gain on awards (’000) (5) | DEP on awards (’000) (6) | ||||||||||||||||||||||||||||||||||||||||||
Awards under the GSTIP | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Peter Beaven | 18 Dec 2013 | – | – | 12,082 | – | – | – | 12,082 | Aug 2015 | A$35.79 | – | – | – | – | ||||||||||||||||||||||||||||||||||||||||||
31 Oct 2012 | – | 13,756 | – | – | – | – | 13,756 | Aug 2014 | A$34.25 | – | – | – | – | |||||||||||||||||||||||||||||||||||||||||||
31 Oct 2011 | – | 13,256 | – | 13,256 | – | 13,256 | – | 21 Aug 2013 | A$37.80 | A$35.74 | A$35.74 | A$474 | – | |||||||||||||||||||||||||||||||||||||||||||
29 Oct 2010 | – | 10,596 | – | – | – | 10,596 | – | 23 Aug 2012 | A$41.92 | A$33.41 | A$35.74 | A$379 | US$33 | |||||||||||||||||||||||||||||||||||||||||||
30 Oct 2009 | A$ | 38.41 | 10,002 | – | – | – | 10,002 | – | 25 Aug 2011 | A$37.45 | A$38.61 | A$37.23 | (A$12 | ) | US$46 | |||||||||||||||||||||||||||||||||||||||||
30 Oct 2009 | – | 8,335 | – | – | – | 8,335 | – | 25 Aug 2011 | A$37.45 | A$38.61 | A$35.74 | A$298 | US$33 | |||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||
Total | 55,945 | 12,082 | 13,256 | – | 42,189 | 25,838 | ||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||
Tim Cutt | 18 Dec 2013 | – | – | 10,637 | – | – | – | 10,637 | Aug 2015 | A$35.79 | – | – | – | – | ||||||||||||||||||||||||||||||||||||||||||
14 Nov 2012 | – | 11,402 | – | – | – | – | 11,402 | Aug 2014 | A$33.73 | – | – | – | – | |||||||||||||||||||||||||||||||||||||||||||
31 Oct 2011 | – | 10,917 | – | 10,917 | – | 10,917 | – | 21 Aug 2013 | A$37.80 | A$35.74 | A$35.74 | A$390 | – | |||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||
Total | 22,319 | 10,637 | 10,917 | – | 10,917 | 22,039 | ||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||
Dean Dalla Valle | 18 Dec 2013 | – | – | 10,009 | – | – | – | 10,009 | Aug 2015 | A$35.79 | – | – | – | – | ||||||||||||||||||||||||||||||||||||||||||
31 Oct 2012 | – | 12,407 | – | – | – | – | 12,407 | Aug 2014 | A$34.25 | – | – | – | – | |||||||||||||||||||||||||||||||||||||||||||
31 Oct 2011 | – | 13,561 | – | 13,561 | – | 13,561 | – | 21 Aug 2013 | A$37.80 | A$35.74 | A$35.74 | A$485 | – | |||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||
Total | 25,968 | 10,009 | 13,561 | – | 13,561 | 22,416 | ||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
Name Mike Fraser (7) Total Mike Henry (8) Total Graham Kerr (8) Total Jane McAloon Total Daniel Malchuk Total Jimmy Wilson Total Date of grant Option
Exercise
price
payable (1) At
1 July
2013 Granted Vested Lapsed Exercised At
30 June
2014 Date award
may vest (2) Market
price on
date of
grant (3) Market
price on
date of
vesting (4) Market
price on
date of
exercise (5) Aggregate
gain on
awards
(’000) (5) DEP on
awards
(’000) (6) 18 Dec 2013 – – 5,020 – – – 5,020 Aug 2015 A$35.79 – – – – 31 Oct 2012 – 3,831 – – – – 3,831 Aug 2014 £19.86 – – – – 29 Oct 2010 – 5,470 – – – 5,470 – 23 Aug 2012 ZAR246.68 ZAR258.16 ZAR303.12 ZAR1,658 US$20 9,301 5,020 – – 5,470 8,851 22 Aug 2013 – 5,715 – – – – 5,715 Aug 2014 A$35.37 – – – – 31 Oct 2011 – 16,566 – 16,566 – 16,566 – 21 Aug 2013 £19.68 – – – – 22,281 – 16,566 – 16,566 5,715 22 Aug 2013 – 4,501 – – – – 4,501 Aug 2014 A$35.37 – – – – 31 Oct 2011 – 11,963 – 11,963 – 11,963 – 21 Aug 2013 A$37.80 A$35.74 A$35.74 A$428 – 30 Oct 2009 A$ 38.41 17,345 – – – 17,345 – 25 Aug 2011 A$37.45 A$38.61 A$36.80 (A$28 ) US$79 30 Oct 2009 – 4,818 – – – 4,818 – 25 Aug 2011 A$37.45 A$38.61 A$35.74 A$172 US$19 38,627 – 11,963 – 34,126 4,501 18 Dec 2013 – – 6,709 – – – 6,709 Aug 2015 A$35.79 – – – – 14 Nov 2012 – 8,698 – – – – 8,698 Aug 2014 A$33.73 – – – – 31 Oct 2011 – 9,119 – 9,119 – 9,119 – 21 Aug 2013 A$37.80 A$35.74 A$35.74 A$326 – 17,817 6,709 9,119 – 9,119 15,407 18 Dec 2013 – – 8,577 – – – 8,577 Aug 2015 A$35.79 – – – – 31 Oct 2012 – 6,884 – – – – 6,884 Aug 2014 A$34.25 – – – – 31 Oct 2011 – 8,855 – 8,855 – 8,855 – 21 Aug 2013 A$37.80 A$35.74 A$35.74 A$316 – 29 Oct 2010 – 4,791 – – – 4,791 – 23 Aug 2012 A$41.92 A$33.41 A$35.74 A$171 US$15 30 Oct 2009 – 5,939 – – �� – 5,939 – 25 Aug 2011 A$37.45 A$38.61 A$35.74 A$212 US$24 26,469 8,577 8,855 – 19,585 15,461 18 Dec 2013 – – 12,466 – – – 12,466 Aug 2015 A$35.79 – – – – 31 Oct 2012 – 16,611 – – – – 16,611 Aug 2014 A$34.25 – – – – 31 Oct 2011 – 16,127 – 16,127 – 16,127 – 21 Aug 2013 A$37.80 A$35.74 A$35.74 A$576 – 32,738 12,466 16,127 – 16,127 29,077
(1) | Prior to FY2011, each employee could nominate to receive a portion of their award in the form of options with a market-based exercise price. Where an individual has made this choice, the option exercise price payable is shown. The exercise price is determined by the weighted average price at which BHP Billiton shares were traded over the one week up to and including the date of grant. A greater number of options were allocated if an individual chose this alternative (as opposed to choosing awards with no exercise price to pay). |
(2) | Awards will vest and become exercisable on, or as soon as practicable after, the first non-prohibited period date occurring after 30 June of the second financial year after allocation, if the conditions for vesting are met (including the relevant service conditions). The estimated vesting month is shown in the table. Where applicable, the expiry date of awards is the day prior to the third anniversary of that vesting date. |
(3) | The market price shown for grants made during FY2014 is the closing price of BHP Billiton shares on the relevant date of grant. No price is payable by the individual for acquiring the award at the time of grant. The grant date IFRS fair value of the awards is estimated as at the start of the vesting period, being 1 July 2013, and was A$29.01 No exercise requirement or expiry date applies to these awards (as described above the table). |
(4) | The awards granted under the GSTIP in October 2011 became fully vested on 21 August 2013 as the service conditions were met. The price shown is the closing price of BHP Billiton shares on that date. |
(5) | The market price shown (and used for calculating the aggregate gain of the total award) is the closing price of BHP Billiton shares on the date that the individual exercised their award. |
(6) | The amounts shown in this column are the value of the DEP paid on the awards. |
(7) | The opening balance shown for Mike Fraser reflects his holdings on 27 August 2013 (rather than on 1 July 2013) being the date he joined the GMC. |
(8) | The awards |
4.4.24 LTI awards under the MAP and LTIP
The table below shows awards that were held by the executives at the time that they were appointed to the GMC.
Prior to their appointment as members of the GMC, the individuals listed in the tables below received LTI awards:
Section 4.4.21 for details of LTIP awards allocated for GMC service
The vesting of MAP awards is subject to a service condition of continued employment with the Group through to the vesting date as shown in the table. Where a participant resigns or is terminated for cause prior to the vesting date, their unvested MAP awards are forfeited. If a participant’s employment ends due to death, illness or injury, a pro rata number of unvested Restricted Shares will vest based on the portion of the relevant vesting period served. Due to changes in the MAP, which applied to all participants in that plan, no DEP is payable on the MAP awards that were allocated in FY2012 or since that time.
Name | Date of grant | At 1 July 2013 | Granted | Vested | Lapsed | Exercised | At 30 June 2014 | Date award may vest (1) | Market price on date of grant (2) | Market price on date of vesting (3) | Market price on date of exercise (4) | Aggregate gain on awards (’000) (4) | DEP on awards (’000) (5) | |||||||||||||||||||||||||||||||||||||||
Awards under the MAP | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Peter Beaven | 31 Oct 2012 | 34,250 | – | – | – | – | 34,250 | Aug 2015 | A$34.25 | – | – | – | – | |||||||||||||||||||||||||||||||||||||||
31 Oct 2011 | 31,700 | – | – | – | – | 31,700 | Aug 2014 | A$37.80 | – | – | – | – | ||||||||||||||||||||||||||||||||||||||||
29 Oct 2010 | 30,500 | – | 30,500 | – | 30,500 | – | 21 Aug 2013 | A$41.92 | A$35.74 | A$35.74 | A$1,090 | US$101 | ||||||||||||||||||||||||||||||||||||||||
30 Oct 2009 | 21,000 | – | – | – | 21,000 | – | 23 Aug 2012 | A$37.45 | A$33.41 | A$35.74 | A$751 | US$96 | ||||||||||||||||||||||||||||||||||||||||
19 Nov 2008 | 21,000 | – | – | – | 21,000 | – | 25 Aug 2011 | A$23.20 | A$38.61 | A$35.74 | A$751 | US$84 | ||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||
Total | 138,450 | – | 30,500 | – | 72,500 | 65,950 | ||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||
Tim Cutt | 14 Nov 2012 | 27,000 | – | – | – | – | 27,000 | Aug 2015 | A$33.73 | – | – | – | – | |||||||||||||||||||||||||||||||||||||||
31 Oct 2011 | 25,000 | – | – | – | – | 25,000 | Aug 2014 | A$37.80 | – | – | – | – | ||||||||||||||||||||||||||||||||||||||||
29 Oct 2010 | 24,000 | – | 24,000 | – | 24,000 | – | 21 Aug 2013 | A$41.92 | A$35.74 | A$35.74 | A$858 | US$76 | ||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||
Total | 76,000 | – | 24,000 | – | 24,000 | 52,000 | ||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
Name Dean Dalla Valle Total Mike Fraser (6) Total Mike Henry Total Graham Kerr Total Jane McAloon Total Daniel Malchuk Total Jimmy Wilson Total Date of grant At
1 July
2013 Granted Vested Lapsed Exercised At
30 June
2014 Date award
may vest (1) Market
price on
date of
grant (2) Market
price on
date of
vesting (3) Market
price on
date of
exercise (4) Aggregate
gain on
awards
(’000) (4) DEP on
awards
(’000) (5) 31 Oct 2012 27,000 – – – – 27,000 Aug 2015 A$34.25 – – – – 31 Oct 2011 25,000 – – – – 25,000 Aug 2014 A$37.80 – – – – 29 Oct 2010 19,500 – 19,500 – 19,500 – 21 Aug 2013 A$41.92 A$35.74 A$35.74 A$697 US$61 71,500 – 19,500 – 19,500 52,000 22 Aug 2013 10,045 – – – – 10,045 Aug 2015 A$35.37 – – – – 31 Oct 2011 11,330 – – – – 11,330 Aug 2014 £19.68 – – – – 29 Oct 2010 9,250 – 9,250 – 9,250 – 21 Aug 2013 ZAR246.68 ZAR301.99 ZAR303.12 ZAR2,804 US$35 30,625 – 9,250 – 9,250 21,375 25 Nov 2011 5,900 – – – – 5,900 Aug 2014 £17.60 – – – – 31 Oct 2011 29,500 – – – – 29,500 Aug 2014 £19.68 – – – – 29 Oct 2010 19,500 – 19,500 – 19,500 – 21 Aug 2013 £22.14 £18.73 £18.73 £365 US$61 54,900 – 19,500 – 19,500 35,400 25 Nov 2011 9,750 – – – – 9,750 Aug 2014 A$34.05 – – – – 31 Oct 2011 20,250 – – – – 20,250 Aug 2014 A$37.80 – – – – 29 Oct 2010 19,500 – 19,500 – 19,500 – 21 Aug 2013 A$41.92 A$35.74 A$35.74 A$697 US$61 19 Nov 2008 21,000 – – – 21,000 – 25 Aug 2011 A$23.20 A$38.61 A$35.74 A$751 US$101 70,500 – 19,500 – 40,500 30,000 14 Nov 2012 17,900 – – – – 17,900 Aug 2015 A$33.73 – – – – 31 Oct 2011 16,600 – – – – 16,600 Aug 2014 A$37.80 – – – – 29 Oct 2010 11,000 – 11,000 – 11,000 – 21 Aug 2013 A$41.92 A$35.74 A$35.74 A$393 US$35 45,500 – 11,000 – 11,000 34,500 31 Oct 2012 21,900 – – – – 21,900 Aug 2015 A$34.25 – – – – 31 Oct 2011 9,600 – – – – 9,600 Aug 2014 A$37.80 – – – – 29 Oct 2010 9,250 – 9,250 – 9,250 – 21 Aug 2013 A$41.92 A$35.74 A$35.74 A$331 US$34 30 Oct 2009 7,000 – – – 7,000 – 23 Aug 2012 A$37.45 A$33.41 A$35.74 A$250 US$29 19 Nov 2008 7,000 – – – 7,000 – 25 Aug 2011 A$23.20 A$38.61 A$35.74 A$250 US$28 54,750 – 9,250 – 23,250 31,500 31 Oct 2012 34,250 – – – – 34,250 Aug 2015 A$34.25 – – – – 31 Oct 2011 31,700 – – – – 31,700 Aug 2014 A$37.80 – – – – 29 Oct 2010 30,500 – 30,500 – 30,500 – 21 Aug 2013 A$41.92 A$35.74 A$35.74 A$1,090 US$96 96,450 – 30,500 – 30,500 65,950
Name Awards under the LTIP Peter Beaven Total Graham Kerr Total Daniel Malchuk Total Jimmy Wilson Total Date of grant At
1 July
2013 Granted Vested Lapsed Exercised At
30 June
2014 Date award
may vest (1) Market
price on
date of
grant (2) Market
price on
date of
vesting (3) Market
price on
date of
exercise (4) Aggregate
gain on
awards
(’000) (4) DEP on
awards
(’000) (5) 14 Dec 2007 40,000 – – – 35,000 5,000 23 Aug 2012 A$42.05 A$33.41 A$35.74 A$1,251 US$252 7 Dec 2006 40,000 – – – 40,000 – 25 Aug 2011 A$26.40 A$38.61 A$35.74 A$1,430 US$230 5 Dec 2005 40,000 – – – – 40,000 25 Aug 2010 A$22.03 A$37.44 – – – 3 Dec 2004 40,000 – – – 40,000 – 12 Aug 2009 A$15.28 A$37.99 A$35.74 A$1,430 US$188 160,000 – – – 115,000 45,000 7 Dec 2006 20,000 – – – 20,000 – 25 Aug 2011 A$26.40 A$38.64 A$35.74 A$715 US$115 20,000 – – – 20,000 – 14 Dec 2007 7,500 – – – 7,500 – 23 Aug 2012 A$42.05 A$33.41 A$35.74 A$268 US$40 7 Dec 2006 5,000 – – – 5,000 – 25 Aug 2011 A$26.40 A$38.61 A$35.74 A$179 US$30 5 Dec 2005 5,000 – – – 5,000 – 25 Aug 2010 A$22.03 A$37.44 A$35.74 A$179 US$29 17,500 – – – 17,500 – 14 Dec 2007 80,000 – – – 22,500 57,500 23 Aug 2012 A$42.05 A$33.41 A$35.74 A$804 US$121 7 Dec 2006 80,000 – – – 80,000 – 25 Aug 2011 A$26.40 A$38.61 A$35.74 A$2,859 US$460 3 Dec 2004 13,400 – – – 13,400 – 12 Aug 2009 ZAR66.00 ZAR207.28 ZAR303.12 ZAR4,062 US$84 173,400 – – – 115,900 57,500
(1) | Awards will vest on, or as soon as practicable after, the first non-prohibited period date occurring after 30 June of the third (MAP awards) or fifth (LTIP awards) financial year after allocation, if the conditions for vesting are met (including the relevant service conditions). The estimated vesting month is shown in the table. Where applicable, expiry date of awards is the day prior to |
(2) | The market price shown for grants made during FY2014 is the closing price of BHP Billiton shares on the relevant date of grant. No price is payable by the individual for acquiring the award at the time of grant. The grant date IFRS fair value of the awards is estimated as at the start of the vesting period, being 1 July 2013, and was A$28.09. No exercise requirement or expiry date applies to these awards (as described above the table). |
(3) | The awards granted under the MAP in |
(4) | The market price shown (and used for calculating the aggregate gain of the total award) is the closing price of BHP Billiton shares on the date that the individual exercised their award. No price is payable by the individual for exercising the award. |
(5) | The amounts shown in this column are the value of the DEP paid on the awards |
(6) | The opening balance shown for Mike Fraser reflects his holdings on 27 August 2013 (rather than on 1 July 2013) being the date he joined the GMC. The awards shown with a grant date of 22 August 2013 hold this allocation date due to |
4.4.25 Estimated value range of equity awards
The current face value of STI and LTI awards allocated during FY2011FY2014 and yet to vest (to be disclosed under the Australian Corporations Act 2001) is the number of awards as set out in the previous tables multiplied by the current share price of BHP Billiton LtdLimited or BHP Billiton Plc as applicable.
The actual value that may be received by participants in the future can notcannot be determined as it is dependent on, and therefore fluctuates with, the share prices of BHP Billiton Limited and BHP Billiton Plc at the date that any particular award is exercised. The table below provides FY2011five-year share price details for BHP Billiton Limited and BHP Billiton Plc.
30 June 2011 | Highest | Lowest | ||||||||||
BHP Billiton Limited | A$ | 43.80 | A$ | 49.55 | A$ | 36.98 | ||||||
BHP Billiton Plc | £ | 24.47 | £ | 26.32 | £ | 16.85 |
Comparator group for LTIP awards
The index of peer group companies for the LTIP since its implementation in 2004 is shown below:
| ||||||||||||
| ||||||||||||
| ||||||||||||
| ||||||||||||
| ||||||||||||
| ||||||||||||
| ||||||||||||
| ||||||||||||
| ||||||||||||
| ||||||||||||
| ||||||||||||
| ||||||||||||
| ||||||||||||
| ||||||||||||
| ||||||||||||
| ||||||||||||
| ||||||||||||
| ||||||||||||
| ||||||||||||
| ||||||||||||
| ||||||||||||
| ||||||||||||
| ||||||||||||
| ||||||||||||
| ||||||||||||
| ||||||||||||
| ||||||||||||
| ||||||||||||
| ||||||||||||
|
A brief description of the performance hurdle applying to the LTIP Performance Shares is set out in section 6.2.9.
6.5 Aggregate Directors’ remuneration
This table sets out the aggregate remuneration of Executive and Non-executive Directors in accordance with the requirements of the UK Companies Act 2006 (and the Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008 made thereunder).
US dollars million | 2010 | 2011 | ||||||
Emoluments | 8 | 8 | ||||||
Termination payments | — | — | ||||||
Awards vesting under LTI plans | 7 | 10 | ||||||
Gains on exercise of Options | — | — | ||||||
Pension contributions | 3 | 1 | ||||||
|
|
|
| |||||
Total | 18 | 19 | ||||||
|
|
|
|
6.6 Non-executive Director arrangements
This section explains the remuneration policy, structure and outcomes for Non-executive Directors as listed below.
6.6.1 Non-executive Directors in FY2011
Details of the Non-executive Directors who held office during FY2011 are set out below. Except where otherwise indicated, the Directors held office for the whole of FY2011. Dates of appointment of all Directors appear in section 4.1 of this Annual Report.
|
| |||
| ||||
| ||||
| ||||
| ||||
| ||||
| ||||
| ||||
| ||||
| ||||
| ||||
| ||||
|
6.6.2 Remuneration structure
Our Non-executive Directors are paid in compliance with the UK Corporate Governance Code (2010) and the ASX Corporate Governance Council Principles of Good Corporate Governance (2007, with 2010 amendments).
The Board is conscious that, just as it must set remuneration levels to attract and retain talented executives, it must also ensure that remuneration rates for Non-executive Directors are set at a level that will attract and retain the calibre of Director necessary to contribute effectively to a high-performing Board. The remuneration levels reflect the size and complexity of the Group, the multi-jurisdictional environment arising from the Dual Listed Companies structure, the multiple stock exchange listings, the extent of the geographic regions in which the Group operates and the enhanced responsibilities associated with membership of Board Committees. They also reflect the considerable travel burden imposed on members of the Board. In setting the remuneration of the Directors, the Remuneration Committee takes into account the economic environment and the financial performance of the Group, along with pay and employment conditions of employees elsewhere in the Group.
Fees for the Non-executive Directors are determined by the Chairman and the CEO. The Non-executive Directors do not take part in these discussions. Fees for the Non-executive Directors and Chairman were reviewed in June 2011 and benchmarked against peer companies with the assistance of external advisers. The table on the following page sets out the fees before and after the 2011 review. The aggregate sum available to remunerate Non-executive Directors was approved by shareholders at the 2008 Annual General Meetings at US$3.8 million.
Levels of fees and travel allowances for | From 1 July 2008 | From 1 July 2009 | From 1 July 2010 | From 1 July 2011 | ||||||||||||
Base annual fee | 140,000 | 140,000 | 154,000 | 170,000 | ||||||||||||
Plus additional fees for: | ||||||||||||||||
Senior Independent Director of BHP Billiton Plc | 30,000 | 30,000 | 35,000 | 48,000 | ||||||||||||
Committee Chair: | ||||||||||||||||
Risk and Audit | 50,000 | 50,000 | 55,000 | 60,000 | ||||||||||||
Remuneration | 35,000 | 35,000 | 40,000 | 45,000 | ||||||||||||
Sustainability | 35,000 | 35,000 | 40,000 | 45,000 | ||||||||||||
Nomination | No additional fees | No additional fees | No additional fees | No additional fees | ||||||||||||
Committee membership: | ||||||||||||||||
Risk and Audit | 25,000 | 25,000 | 30,000 | 32,500 | ||||||||||||
Remuneration | 20,000 | 20,000 | 25,000 | 27,500 | ||||||||||||
Sustainability | 20,000 | 20,000 | 25,000 | 27,500 | ||||||||||||
Nomination | No additional fees | No additional fees | No additional fees | No additional fees | ||||||||||||
Travel allowance: | ||||||||||||||||
Greater than 3 but less than 10 hours * | 7,000 | 7,000 | 7,000 | 7,000 | ||||||||||||
10 hours or more * | 15,000 | 15,000 | 15,000 | 15,000 | ||||||||||||
Chairman’s remuneration | 1,000,000 | 1,000,000 | 1,000,000 | 1,100,000 |
Non-executive Directors are not eligible to participate in any of our incentive arrangements. A standard letter of appointment has been developed for Non-executive Directors and is available on our website. Each Non-executive Director is appointed subject to periodic re-election by shareholders (see section 5 of this Annual Report for an explanation of the process). There are no provisions in any of the Non-executive Directors’ appointment arrangements for compensation payable on early termination of their directorship.
6.6.3 Retirement benefits
The following table sets out the accrued retirement benefits under the now-closed Retirement Plan of BHP Billiton Limited. The Retirement Plan was closed on 24 October 2003 and entitlements that had accumulated in respect of each of the participants were frozen. These will be paid on retirement. An earnings rate equal to the five-year Australian Government Bond Rate is being applied to the frozen entitlements from that date.
US dollars | Completed service at 30 June 2011 (years) | Increase in lump sum entitlement during the year(1) | Lump sum entitlement at (2) | |||||||||||||
30 June 2011 | 30 June 2010 | |||||||||||||||
David Crawford | 17 | 144,726 | 582,572 | 437,846 | ||||||||||||
John Schubert | 11 | 72,317 | 291,100 | 218,783 |
Notes
|
|
6.6.4 Statutory disclosures
The table below has been prepared in accordance with the requirements of the UK Companies Act 2006 (and the Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008 made thereunder) and the Australian Corporations Act 2001, and relevant accounting standards.
US dollars | Short-term benefits | Subtotal: UK Requirements | Post-employment benefits(2) | Total: Australian requirements | ||||||||||||||||||||||||||||||||||||
Fees | Committee Chair fees | Committee membership fees | Travel allowances | Other benefits (non- monetary) (1) | Superannuation benefits | Retirement benefits | ||||||||||||||||||||||||||||||||||
Alan Boeckmann(3) | 2011 | 112,188 | — | 18,212 | 44,000 | — | 174,400 | — | — | 174,400 | ||||||||||||||||||||||||||||||
2010 | 140,000 | — | 20,000 | 66,000 | 8,296 | 234,296 | — | — | 234,296 | |||||||||||||||||||||||||||||||
Malcolm Broomhead (4) | 2011 | 154,000 | — | 25,000 | 52,000 | — | 231,000 | 9,541 | — | 240,541 | ||||||||||||||||||||||||||||||
2010 | 35,376 | — | 5,054 | — | — | 40,430 | 2,131 | — | 42,561 | |||||||||||||||||||||||||||||||
John Buchanan | 2011 | 189,000 | 40,000 | — | 60,000 | 1,664 | 290,664 | — | — | 290,664 | ||||||||||||||||||||||||||||||
2010 | 170,000 | 35,000 | — | 68,000 | 1,327 | 274,327 | — | — | 274,327 | |||||||||||||||||||||||||||||||
Carlos Cordeiro | 2011 | 154,000 | — | 25,000 | 59,000 | 1,664 | 239,664 | — | — | 239,664 | ||||||||||||||||||||||||||||||
2010 | 140,000 | — | 20,000 | 89,000 | — | 249,000 | — | — | 249,000 | |||||||||||||||||||||||||||||||
David Crawford | 2011 | 154,000 | 55,000 | — | 52,000 | — | 261,000 | 11,162 | — | 272,162 | ||||||||||||||||||||||||||||||
2010 | 140,000 | 50,000 | — | 45,000 | 22,410 | 257,410 | 9,952 | — | 267,362 | |||||||||||||||||||||||||||||||
Carolyn Hewson(4) | 2011 | 154,000 | — | 30,000 | 37,000 | — | 221,000 | 9,808 | — | 230,808 | ||||||||||||||||||||||||||||||
2010 | 35,376 | — | 6,317 | — | — | 41,693 | 2,198 | — | 43,891 | |||||||||||||||||||||||||||||||
Lindsay Maxsted(3) | 2011 | 42,226 | — | — | 15,000 | — | 57,226 | 2,113 | — | 59,339 | ||||||||||||||||||||||||||||||
Wayne Murdy | 2011 | 154,000 | — | 30,000 | 88,000 | 1,664 | 273,664 | — | — | 273,664 | ||||||||||||||||||||||||||||||
2010 | 140,000 | — | 25,000 | 81,000 | 24,932 | 270,932 | — | — | 270,932 | |||||||||||||||||||||||||||||||
Jacques Nasser (5) | 2011 | 1,000,000 | — | — | 97,000 | 1,889 | 1,098,889 | — | — | 1,098,889 | ||||||||||||||||||||||||||||||
2010 | 357,312 | — | 18,683 | 88,000 | 1,856 | 465,851 | — | — | 465,851 | |||||||||||||||||||||||||||||||
Keith Rumble | 2011 | 154,000 | — | 25,000 | 89,000 | 1,664 | 269,664 | — | — | 269,664 | ||||||||||||||||||||||||||||||
2010 | 140,000 | — | 20,000 | 81,000 | 17,879 | 258,879 | — | — | 258,879 | |||||||||||||||||||||||||||||||
John Schubert | 2011 | 154,000 | 40,000 | 25,000 | 52,000 | — | 271,000 | 14,037 | — | 285,037 | ||||||||||||||||||||||||||||||
2010 | 140,000 | 35,000 | 5,430 | 45,000 | — | 225,430 | 9,430 | — | 234,860 | |||||||||||||||||||||||||||||||
Shriti Vadera(3) | 2011 | 77,000 | — | — | 30,000 | — | 107,000 | — | — | 107,000 |
Notes
|
|
|
|
|
This Report was approved by the Board on 6 September 2011 and signed on its behalf by:
John Buchanan
Chairman, Remuneration Committee
6 September 2011
The information presented by the Directors in this Directors’ Report relates to BHP Billiton Limited and BHP Billiton Plc and their subsidiaries. The Chairman’s Review in section 1.2, Chief Executive Officer’s Report in section 1.3 and section 1 Key information, section 2 Information on the Company, section 3 Operating and financial review and prospects and section 11 Shareholder information of this Annual Report are each incorporated by reference into, and form part of, this Directors’ Report.
7.1 Principal activities, state of affairs and business review
The UK Companies Act 2006 requires this Directors’ Report to include a fair review of the business of the Group during FY2011 and of the position of the Group at the end of the financial year and a description of the principal risks and uncertainties facing the Group (known as the ‘business review’). In addition to the information set out below, the information that fulfils the requirements of the business review can be found in the following sections of this Annual Report (which are each incorporated by reference into this Directors’ Report):
| ||||
| ||||
| ||||
| ||||
| ||||
| ||||
|
A review of the operations of the Group during FY2011, the results of those operations during FY2011 and the expected results of those operations in future financial years, is set out in sections 1.2, 1.3, 2.2 and 3 and other material in this Annual Report. Information on the development of the Group and likely developments in future years also appear in those sections of this Annual Report. The Directors believe that to include further information on those matters and on the strategies and expected results of the operations of the Group in this Annual Report would be likely to result in unreasonable prejudice to the Group.
Our principal activities during FY2011 were minerals exploration, development, production and processing (in respect of bauxite, alumina, aluminium, copper, silver, lead, zinc, molybdenum, gold, iron ore, metallurgical coal, energy coal, nickel, manganese ore, manganese metal and alloys, diamonds, titanium minerals, potash and uranium), and oil and gas exploration, development and production. No significant changes in the nature of any of the Group’s principal activities occurred during FY2011.
Significant changes in the state of affairs of the Group that occurred during FY2011 and significant post-balance date events are set out below and in sections 2.2 and 3 of this Annual Report.
There were changes to the composition of the Board during FY2011. Alan Boeckmann retired from the Board on 23 March 2011. Shriti Vadera and Lindsay Maxsted were appointed to the Board with effect from 1 January 2011 and 23 March 2011 respectively, and have also been appointed members of the Risk and Audit Committee, with Mr Maxsted appointed as Chairman of the Risk and Audit Committee effective from 6 September 2011. Ms Vadera and Mr Maxsted will seek election at the 2011 Annual General Meetings.
On 2 July 2010, we announced that BHP Billiton was encouraged by the Australian Government’s decision to replace the proposed Resource Super Profits Tax with a proposed Minerals Resource Rent Tax on mined iron ore and coal from 1 July 2012. The Minerals Resource Rent Tax is subject to passing by the Australian Parliament and may differ (wholly or in part) in its final form. BHP Billiton will continue to work constructively with the Australian Government to ensure the detailed design of minerals taxation maintains the international competitiveness of the Australian resources industry into the future.
On 24 September 2010, we announced approval for the development of the Macedon gas field in the Exmouth Sub-basin, Western Australia. BHP Billiton’s expected share of costs is approximately US$1,050 million. The Macedon project is a joint venture between BHP Billiton (71.43 per cent) and Apache Northwest Energy (28.57 per cent). First production is expected during CY2013.
On 18 October 2010, BHP Billiton and Rio Tinto announced their joint decision to end plans for an iron ore production joint venture in the Pilbara in Western Australia following extensive discussions with regulators.
On 15 November 2010, we announced the withdrawal of our offer to acquire all of the issued and outstanding common shares of Potash Corporation of Saskatchewan Inc. The all-cash offer was announced on 18 August 2010, and subsequently amended on 20 September 2010. BHP Billiton determined that the condition of its offer relating to receipt of a net benefit determination by the Minister of Industry under the Investment Canada Act could not be satisfied.
On 20 January 2011, we announced the approval of increased capital expenditure for the Esso Australia operated Kipper and Turrum projects in the Gippsland Basin, offshore Victoria. Kipper’s expenditure has increased to US$900 million (BHP Billiton share) and the facilities are now forecast to be completed in CY2012. Turrum’s expenditure has been adjusted to US$1,350 million (BHP Billiton share) and is now forecast to begin production in CY2013.
On 22 February 2011, we announced our agreement to acquire all of Chesapeake Energy Corporation’s interests in the Fayetteville Shale, US, including the midstream pipeline system, for US$4.75 billion. Chesapeake’s Fayetteville Shale assets include approximately 487,000 acres of leasehold and producing natural gas properties located in Arkansas, US.
On 24 March 2011, we announced the approval of US$7.4 billion (BHP Billiton share US$6.6 billion) of capital investment to continue production growth in the company’s Western Australian Iron Ore operations. This followed an earlier announcement on 17 November 2010 of a further US$635 million (BHP Billiton share US$570 million) of capital expenditure. This additional capital expenditure will facilitate the ongoing development of important port, rail and Jimblebar mine infrastructure. The investment will deliver an integrated operation with capacity in excess of 220 million tonnes per annum (mtpa), on a 100 per cent basis.
On 24 March 2011, we announced the approval of three metallurgical coal projects located in the Bowen Basin in Central Queensland. The projects will add 4.9 million tonnes (Mt) of annual mine capacity (100 per cent basis) through development of the Daunia operation and a new mining area at Broadmeadow. In addition, 11 Mt of annual port capacity (100 per cent basis) will be developed at the Hay Point Coal Terminal. The total investment is US$5 billion, of which BHP Billiton’s share is US$2.5 billion.
On 24 March 2011, we announced the approval of US$400 million investment to expand Hunter Valley Energy Coal in New South Wales. The expansion, known as the RX1 Project, will enable Mt Arthur Coal’s run-of-mine thermal coal production to increase by 4 mtpa to approximately 24 mtpa.
On 30 March 2011, we announced approval for the Escondida Ore Access project, which will relocate the crushing and conveying facilities currently located inside Escondida’s main pit to improve access to higher grade ore and thereby support higher production from 2013. The project is expected to cost US$554 million (US$319 million BHP Billiton share) and will be completed by mid CY2012.
On 11 April 2011, we announced the completion of a US$6 billion off-market tender buy-back of BHP Billiton Limited shares. 147 million shares (4.4 per cent of BHP Billiton Limited’s issued share capital) were bought back at a price of A$40.85 per share. BHP Billiton’s capital management program for BHP Billiton Plc was reactivated on 16 November 2010 and expanded to US$10 billion to apply to the Group’s issued capital on 16 February 2011. Completion of the expanded US$10 billion capital management program was announced on 30 June 2011.
On 29 April 2011, we announced that the partners of Samarco had approved the US$3.5 billion (BHP Billiton share US$1.75 billion) Fourth Pellet Plant Project at Samarco in Brazil. The expansion will increase Samarco iron ore pellet production capacity by 8.3 mtpa to 30.5 mtpa (100 per cent basis).
On 1 June 2011, we welcomed the High Court’s decision in favour of BHP Billiton in its dispute with the Australian Taxation Office over certain tax issues relating to BHP Billiton’s former Hot Briquetted Iron project. As a result of the resolution of the entire dispute with the Australian Taxation Office over these issues an income tax credit of US$718 million has been recognised as an exceptional item in the financial results.
On 23 June 2011, we announced the completion of the budget and schedule review for the Worsley Efficiency and Growth project. The capital cost estimate for the project, encompassing the development of the Marradong mine, refinery expansion and connection to a multi-fuel cogeneration unit, has increased to US$2,995 million (BHP Billiton share).
On 23 June 2011, we announced the approval for US$488 million of further investment to support development of the Jansen Potash Project in Saskatchewan, Canada. This additional pre-commitment capital will fund site preparation and the procurement of long lead time items during the project’s feasibility study. Based on the current schedule, Jansen is expected to start producing saleable potash in CY2015.
On 9 August 2011, we signed a Heads of Agreement with Leighton Holdings to acquire the HWE Mining subsidiaries that provide contract mining services to our Western Australia Iron Ore operations. The purchase price is US$735 million, subject to working capital assumptions. The definitive agreements are subject to due diligence and relevant internal and regulatory approvals. It is expected to close during the fourth quarter of CY2011.
On 18 August 2011, we arranged a new unsecured 364-day multicurrency term and revolving credit facility for an amount of US$7.5 billion consisting of two tranches: a US$5 billion term loan and US$2.5 billion revolving credit facility.
On 21 August 2011, we announced the successful completion of the cash tender offer to acquire Petrohawk Energy Corporation in the US for US$38.75 per share, representing a total equity value of approximately US$12.1 billion and a total enterprise value of approximately US$15.1 billion, including the assumption of net debt. Combined with the Fayetteville Shale acquisition, this expands BHP Billiton’s interest in US shale.
No other matter or circumstance has arisen since the end of FY2011 that has significantly affected or is expected to significantly affect the operations, the results of operations or state of affairs of the Group in future years.
7.2 Share capital and buy-back programs
The BHP Billiton share buy-back program was reactivated after being suspended since FY2008.
At the Annual General Meetings held in 2010, shareholders authorised BHP Billiton Plc to make on-market purchases of up to 223,112,120 of its ordinary shares, representing approximately 10 per cent of BHP Billiton Plc’s issued share capital at that time. Shareholders will be asked at the 2011 Annual General Meetings to renew this authority.
During FY2011, 94.9 million ordinary shares in BHP Billiton Plc, with a nominal value of US$0.50 per share and representing 4.3 per cent of BHP Billiton Plc’s issued share capital, were purchased by BHP Billiton Limited, and immediately transferred to BHP Billiton Plc for nil consideration and cancellation. These shares were bought back at an average price of £23.96 for an aggregate consideration of US$3,678 million to return value to shareholders under our capital management program. This represented a discount to the average BHP Billiton Limited share price over the buy-back period (being 16 November 2010 to 29 June 2011) of 16.4 per cent. The completion of this program was announced on 30 June 2011.
In February 2011 BHP Billiton Limited commenced an off market share buy-back program under which 146.9 million shares of BHP Billiton Limited, representing 4.4 per cent of BHP Billiton Limited’s issued share capital, were purchased off-market and cancelled. These shares were bought back at an average price of A$40.85 for an aggregate consideration of US$6.3 billion to return value to shareholders under our capital management program. This represented a discount to the BHP Billiton Limited market price of A$47.50 (volume weighted average price (VWAP) of BHP Billiton Limited ordinary shares over the five trading days up to and including the closing date of 8 April 2011) of 14 per cent. We did not make any on-market share purchases of BHP Billiton Limited shares during FY2011.
Some of our executives receive options over BHP Billiton shares as part of their remuneration arrangements. Entitlements may be satisfied by the transfer of existing shares, which are acquired on-market, or in respect of some entitlements, by the issue of new shares.
The shares in column ‘A’ below were purchased to satisfy awards made under the various BHP Billiton Limited and BHP Billiton Plc employee share schemes, and those shares purchased in BHP Billiton Limited and BHP Billiton Plc as part of our capital management program during FY2011.
Period | A Total number of shares purchased | B Average price paid per share (a) US$ | C Total number of shares purchased as part of publicly announced plans or programs | D Maximum number of shares that may yet be purchased under the plans or program | ||||||||||||||||
BHP Billiton Limited | BHP Billiton Plc (b) | |||||||||||||||||||
1 July 2010 to 31 July 2010 | 163,891 | 30.47 | — | — | (c) | 223,112,120 (d) | ||||||||||||||
1 Aug 2010 to 31 Aug 2010 | 3,663,275 | 32.01 | — | — | (c) | 223,112,120 (d) | ||||||||||||||
1 Sep 2010 to 30 Sep 2010 | 3,365,765 | 34.09 | — | — | (c) | 223,112,120 (d) | ||||||||||||||
1 Oct 2010 to 31 Oct 2010 | 1,275,444 | 36.88 | — | — | (c) | 223,112,120 (d) | ||||||||||||||
1 Nov 2010 to 30 Nov 2010 | 5,863,837 | 37.23 | 5,275,000 | — | (c) | 217,837,120 (d) | ||||||||||||||
1 Dec 2010 to 31 Dec 2010 | 1,929,884 | 40.28 | 1,550,007 | — | (c) | 216,287,113 (d) | ||||||||||||||
1 Jan 2011 to 31 Jan 2011 | 9,699,003 | 39.33 | 9,277,372 | — | (c) | 207,009,741 (d) | ||||||||||||||
1 Feb 2011 to 28 Feb 2011 | 7,962,036 | 40.52 | 7,719,003 | — | (c) | 199,290,738 (d) | ||||||||||||||
1 Mar 2011 to 31 Mar 2011 | 16,592,224 | 38.32 | 15,368,580 | — | (c) | 183,922,158 (d) | ||||||||||||||
1 Apr 2011 to 30 Apr 2011 | 156,648,900 | 43.09 | 156,296,296 | (e) | — | (c) | 174,525,671 (d) | |||||||||||||
1 May 2011 to 31 May 2011 | 23,706,320 | 39.24 | 22,947,021 | — | (c) | 151,578,650 (d) | ||||||||||||||
1 June 2011 to 30 June 2011 | 23,626,827 | 37.69 | 23,402,278 | — | (c) | 128,176,372 (d) | ||||||||||||||
Total | 254,497,406 | 41.22 | 241,835,557 | — | 128,176,372 (d) |
|
|
|
|
|
7.3 Results, financial instruments and going concern
Information about our financial position and financial results is included in the financial statements in this Annual Report. The income statement shows profit attributable to BHP Billiton members of US$23,648 million compared with US$12,722 million in 2010.
The Group’s business activities, together with the factors likely to affect its future development, performance and position are discussed in section 3 of this Annual Report. In addition, section 5.6 and note 28 ‘Financial risk management’ to the financial statements detail the Group’s capital management objectives, its approach to financial risk management and exposure to financial risks, liquidity and borrowing facilities. Each of these sections is incorporated into, and forms part of, this Directors’ Report.
The Directors, having made appropriate enquiries, have a reasonable expectation that the Group 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.
The Directors who served at any time during or since the end of the financial year were Jacques Nasser, Marius Kloppers, Alan Boeckmann, Malcolm Broomhead, John Buchanan, Carlos Cordeiro, David Crawford, Carolyn Hewson, Lindsay Maxsted, Wayne Murdy, Keith Rumble, John Schubert and Shriti Vadera. Further details of the Directors of BHP Billiton Limited and BHP Billiton Plc are set out in section 4.1 of this Annual Report. 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 2008, and the period for which each directorship has been held.
Mr Boeckmann retired as a Director of BHP Billiton Limited and BHP Billiton Plc with effect from 23 March 2011, having been a Director since September 2008.
Ms Vadera was appointed as a Director of BHP Billiton Limited and BHP Billiton Plc with effect from 1 January 2011 and Mr Maxsted was appointed a Director with effect from 23 March 2011.
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 sections 5.3.12 and 5.4.1 of this Annual Report.
7.5 Remuneration and share interests
7.5.1 Remuneration
The policy for determining the nature and amount of emoluments of members of the Group Management Committee (GMC) (including the Executive Director) and the Non-executive Directors and information about the relationship between that policy and our performance are set out in sections 6.2, 6.4 and 6.6 of this Annual Report.
The remuneration tables contained in sections 6.4 and 6.5 of this Annual Report set out the remuneration of members of the GMC (including the Executive Director) and the Non-executive Directors.
7.5.2 Directors
The tables contained in section 7.20 of this Directors’ Report set out the relevant interests in shares in BHP Billiton Limited and BHP Billiton Plc of the Directors who held office during FY2011, at the beginning and end of FY2011, and in relation to all Directors in office as at the date of this Directors’ Report, their relevant interests in shares in BHP Billiton Limited and BHP Billiton Plc as at the date of this Directors’ Report. No rights or options over shares in BHP Billiton Limited and BHP Billiton Plc are held by any of the Non-executive
Directors. Interests held by the Executive Director under share and option plans as at 30 June 2011 are set out in the tables showing interests in incentive plans contained in section 6.4.3 and note 30 ‘Key Management Personnel’ in the financial statements of this Annual Report.
We have not made available to any Director any interest in a registered scheme.
The former Directors of BHP Limited participated in a retirement plan under which they were entitled to receive a payment on retirement calculated by reference to years of service. This plan was closed on 24 October 2003, and benefits accrued to that date are held by BHP Billiton Limited and will be paid on retirement. Further information about this plan and its closure are set out in section 6.6.3 of this Annual Report.
7.5.3 GMC members
The table contained in section 7.21 of this Directors’ Report sets out the relevant interests held by members of the GMC (other than Directors) in shares of BHP Billiton Limited and BHP Billiton Plc at the beginning and end of FY2011, and at the date of this Directors’ Report. Interests held by members of the GMC under share and option plans as at 30 June 2011 are set out in the tables showing interests in incentive plans contained in section 6.4.3 and note 30 ‘Key Management Personnel’ in the financial statements of this Annual Report.
Jane McAloon is the Group Company Secretary. Details of her qualifications and experience are set out in section 4.1 of this Annual Report. The following people also act as the Company Secretaries of either BHP Billiton Limited or BHP Billiton Plc: Elisabeth Joyner, BA (Jurisprudence), LLM, FCIS, Deputy Company Secretary BHP Billiton Limited, and Geof Stapledon, BEc LLB (Hons), DPhil, FCIS, Deputy Company Secretary BHP Billiton Plc and Elizabeth Hobley, BA (Hons), ACIS, Deputy Company Secretary BHP Billiton Plc. Each such individual has experience in a company secretariat role arising from time spent in such roles within BHP Billiton, large listed companies or other relevant entities.
Rule 146 of the BHP Billiton Limited Constitution and Article 146 of the BHP Billiton Plc Articles of Association require each Company to indemnify to the extent permitted by law, each Director, Secretary or executive officer of BHP Billiton Limited and BHP Billiton Plc respectively against liability incurred in, or arising out of, the conduct of the business of the Company or the discharge of the duties of the Director, Secretary or executive officer. The Directors named in section 4.1 of this Annual Report, the executive officers and the Company Secretaries of BHP Billiton Limited and BHP Billiton Plc have the benefit of this requirement, as do individuals who formerly held one of those positions.
In accordance with this requirement, BHP Billiton Limited and BHP Billiton 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.
We have a policy that we 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 us.
From time to time, we engage our External Auditor, KPMG, to conduct non-statutory audit work and provide other services in accordance with our policy on the provision of other services by the External Auditor. The terms of engagement include an indemnity in favour of KPMG:
against all losses, claims, costs, expenses, actions, demands, damages, liabilities or any proceedings (liabilities) incurred by KPMG in respect of third party claims arising from a breach by the Group under the engagement terms;
for all liabilities KPMG has to the Group or any third party as a result of reliance on information provided by the Group that is false, misleading or incomplete.
We have insured against amounts that we may be liable to pay to Directors, Company Secretaries or certain employees pursuant to Rule 146 of the Constitution of BHP Billiton Limited and Article 146 of the Articles of Association of BHP Billiton Plc or that we otherwise agree to pay by way of indemnity. The insurance policy also insures Directors, Company Secretaries and some employees against certain liabilities (including legal costs) they may incur in carrying out their duties for us.
We have paid premiums for this ‘Directors and Officers’ insurance of US$2,335,600 net during FY2011. Directors, Company Secretaries and employees contribute to the premium for this insurance.
No indemnity in favour of a current or former officer of BHP Billiton Limited or BHP Billiton Plc, or in favour of the External Auditor, has been called on during FY2011.
7.8 Employee policies and involvement
We are committed to open, honest and productive relationships with our employees. At BHP Billiton, we recognise the most important ingredient for success is our talented and motivated workforce, whose members demonstrate behaviours that are aligned toOur Charter values.
We have an integrated people strategy to effectively attract, retain and develop talented people. Our approach is outlined in our Human Resources Policy, theCode of Business Conduct and the Group Level Documents that prescribe what we will do and how we will do it. All of these documents are published and accessible to employees.
Effective communication and employee engagement is critical for maintaining open and productive relationships between leaders and employees. All employees receive communication on BHP Billiton goals and performance, as well as on important issues such as health and safety and the environment and theCode of Business Conduct. Our Code is founded onOur Charter values, which make an unqualified commitment to working with integrity. Communication is undertaken through a variety of channels, including the internet, intranet, email, newsletters and other means designed to cater for the local environment. These tools are also used to facilitate employee feedback, as are a variety of consultative processes. Dispute and grievance handling processes are also in place to assist in equitably addressing workplace issues in all businesses. A Business Conduct Advisory Service operates worldwide to allow concerns to be raised about conduct that is out of step withOur Charter values, our policies and procedures or the law.
Our all-employee share purchase plan, Shareplus, is available to all employees, except where local regulations limit operation of the scheme. In these instances, alternative arrangements are in place. As at 30 June 2011, approximately 43 per cent of employees were participants in Shareplus. The Shareplus employee plan is described in section 6.2.7 of this Annual Report. Short-term and long-term incentive schemes also operate across the Group. Rewards for individuals are predicated on the need to meet targets relating to our Company’s performance in areas such as health, safety and achievement of financial measures and on the personal performance of each employee.
All employees are entitled to balanced and realistic feedback coupled with the identification of development and training needs to help maximise their performance and realise their full potential. In FY2011, 71 per cent of employees participated in a formal performance review process. Due to industrial agreements, not all employees are able to participate in individual performance reviews. The importance we place on employee development and training is demonstrated by the significant amount of training our employees undertake.
BHP Billiton is committed to developing and maintaining a diverse workforce and providing a work environment in which every employee is treated fairly and with respect. We work actively to avoid discrimination on any basis, including disability. Where an employee suffers some disability while they are employed, we work to identify roles that meet their skill, experience and capability, and in some cases offer retraining. We also work hard to offer flexible work practices, where this is possible, taking into account the needs of the employee and those of the particular workplace. Our remuneration policy and employment packages, which must comply with local regulations, are based on merit, aligned to our business requirements and sufficiently attractive to recruit and retain the best people.
Our employees can access our Annual Reports either via the intranet or hard copy.
Particulars in relation to environmental performance are referred to in sections 2.8, 3.3 and 7.22 of this Annual Report and in the Sustainability Report, available at www.bhpbilliton.com.
The UK Financial Services Authority’s Disclosure and Transparency Rules (DTR 7.2) require that certain information be included in a corporate governance statement set out in the Directors’ Report. BHP Billiton has an existing practice of issuing a separate corporate governance statement as part of its Annual Report. The information required by the Disclosure and Transparency Rules and the UK Financial Services Authority’s Listing Rules (LR 9.8.6) is located in section 5 of this Annual Report, with the exception of the information referred to in DTR 7.2.6, which is located in section 7.23 of this Annual Report.
A final dividend of 55.0 US cents per share will be paid on 29 September 2011. Details of the dividends paid and the dividend policy are set out in sections 3.7.6 and 11.3 of this Annual Report.
A resolution to reappoint KPMG Audit Plc as the auditor of BHP Billiton Plc will be proposed at the 2011 Annual General Meetings in accordance with section 489 of the UK Companies Act 2006.
Lindsay Maxsted was the only officer of BHP Billiton during FY2011 who was a director or partner of the Group’s External Auditor at a time when the Group’s External Auditor conducted an audit of the Group. Mr Maxsted’s prior relationship with KPMG is set out in section 5.3.5 of the Annual Report. Mr Maxsted has not been part of the KPMG audit practice since 1980 and has not been in any way involved in, or able to influence, any audit activity associated with BHP Billiton.
Each person who held the office of Director at the date the Board resolved to approve this Directors’ Report makes the following statements:
so far as the Director is aware, there is no relevant audit information of which the Group’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 the Group’s External Auditor is aware of that information.
Details of the non-audit services undertaken by our External Auditor, including the amounts paid for non-audit services, are set out in note 34 ‘Auditor’s remuneration’ in the financial statements of this Annual Report. Based on advice provided by the Risk and Audit Committee, the Directors have formed the view that the provision of non-audit services is compatible with the general standard of independence for auditors, and that the nature of non-audit services means that auditor independence was not compromised. Further information about our policy in relation to the provision of non-audit services by the auditor is set out in section 5.5.1 of this Annual Report.
Much of our interest in land consists of leases and other rights that permit the working of such land and the erection of buildings and equipment thereon for the purpose of extracting and treating minerals. Such land is mainly carried in the accounts at cost and it is not possible to estimate the market value, as this depends on product prices over the long term, which will vary with market conditions.
7.15 Political and charitable donations
No political contributions/donations for political purposes were made to any political party, politician, elected official or candidate for public office during FY2011.
In FY2011, we made charitable donations for the purposes of funding community programs in the United Kingdom of US$193,324 (cash) (2010: US$250,946) and worldwide, including in-kind support and administrative costs totalling US$195,544,063 (2010: US$200,452,251).
The total amount of charitable donations made worldwide in FY2011 includes US$30 million contributed to BHP Billiton Sustainable Communities (registered with the UK Charities Commission) established for the purposes of funding community investment globally.
7.16 Exploration, research and development
Companies within the Group carry out exploration and research and development necessary to support their activities. Further details are provided in sections 2.5 and 2.6 of this Annual Report.
When we enter into a contract with a supplier, payment terms will be agreed when the contract begins and the supplier will be made aware of these terms. We do not have a specific policy towards our suppliers and do not follow any code or standard practice. However, we settle terms of payment with suppliers when agreeing overall terms of business, and seek to abide by the terms of the contracts to which we are bound. As at 30 June 2011, BHP Billiton Plc (the unconsolidated parent entity) had US$12,000 of trade creditors outstanding which represents 1 day of purchases outstanding in respect of costs, based on the total invoiced by suppliers during FY2011.
BHP Billiton Limited is a company of a kind referred to in Australian Securities and Investments Commission Class Order No. 98/100, dated 10 July 1998. 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 that Class Order.
7.19 Proceedings on behalf of BHP Billiton Limited
No proceedings have been brought on behalf of BHP Billiton Limited, nor any application made under section 237 of the Australian Corporations Act 2001.
The tables below set out information pertaining to the shares held by Directors in BHP Billiton Limited and BHP Billiton Plc.
BHP Billiton Limited shares | As at date of Directors’ Report | As at 30 June 2011 | As at 30 June 2010 | |||||||||
Alan Boeckmann(1)(2)(3) | Not applicable | 4,330 | 3,150 | |||||||||
Malcolm Broomhead(2) | 9,000 | 9,000 | 9,000 | |||||||||
John Buchanan | — | — | — | |||||||||
Carlos Cordeiro(3) | 6,550 | 6,550 | 6,550 | |||||||||
David Crawford(2) | 33,127 | 33,127 | 33,127 | |||||||||
Carolyn Hewson(2) | 7,000 | 3,500 | 2,000 | |||||||||
Marius Kloppers(2)(5)(6) | 171,325 | 124,374 | 28,264 | |||||||||
Lindsay Maxsted(2)(4) | 3,000 | — | — | |||||||||
Wayne Murdy(2)(3) | 8,000 | 4,030 | 4,030 | |||||||||
Jacques Nasser(2)(3) | 10,400 | 5,600 | 5,600 | |||||||||
Keith Rumble | — | — | — | |||||||||
John Schubert | 23,675 | 23,675 | 23,675 | |||||||||
Shriti Vadera | — | — | — |
BHP Billiton Plc shares | As at date of Directors’ Report | As at 30 June 2011 | As at 30 June 2010 | |||||||||
Alan Boeckmann(1)(2)(3) | Not applicable | 5,880 | 3,680 | |||||||||
Malcolm Broomhead | — | — | — | |||||||||
John Buchanan | 20,000 | 20,000 | 20,000 | |||||||||
Carlos Cordeiro | — | — | — | |||||||||
David Crawford(2) | 6,000 | 6,000 | 6,000 | |||||||||
Carolyn Hewson | — | — | — | |||||||||
Marius Kloppers(2)(5)(6) | 688,895 | 608,591 | 548,678 | |||||||||
Lindsay Maxsted | — | — | — | |||||||||
Wayne Murdy(2)(3) | 14,000 | 3,512 | 3,512 | |||||||||
Jacques Nasser(2)(3) | 64,000 | 40,000 | — | |||||||||
Keith Rumble(2) | 14,500 | 12,200 | 12,200 | |||||||||
John Schubert | — | — | — | |||||||||
Shriti Vadera(2)(4) | 5,000 | 5,000 | — |
|
|
|
|
|
|
7.21 GMC members’ shareholdings (other than Directors)
The following tables sets out information pertaining to the shares in BHP Billiton Limited and BHP Billiton Plc held by those senior executives who were members of the GMC during FY2011 (other than the Executive Director).
BHP Billiton Limited shares | As at date of Directors’ Report | As at 30 June 2011 | As at 30 June 2010 | |||||||||
Alberto Calderon | — | — | — | |||||||||
Andrew Mackenzie | — | — | — | |||||||||
Marcus Randolph(1) | 391,872 | 191,746 | 191,415 | |||||||||
Alex Vanselow(1) | 441,886 | 270,925 | 174,263 | |||||||||
Karen Wood(1) | 266,303 | 161,914 | 109,133 | |||||||||
J Michael Yeager(1) (2) | 426,773 | 264,506 | 23,980 |
|
|
BHP Billiton Plc shares | As at date of Directors’ Report | As at 30 June 2011 | As at 30 June 2010 | |||||||||
Alberto Calderon(1) | 175,611 | 90,015 | 17,827 | |||||||||
Andrew Mackenzie(1) | 61,215 | 55,311 | 55,175 | |||||||||
Marcus Randolph | — | — | — | |||||||||
Alex Vanselow | — | — | — | |||||||||
Karen Wood | — | — | — | |||||||||
J Michael Yeager | — | — | — |
|
7.22 Performance in relation to environmental regulation
A significant environmental incident is one with a severity rating of four or above based on our internal severity rating scale (tiered from one to five by increasing severity). There were no significant incidents reported in FY2011.
Fines and prosecutions
In FY2011, BHP Billiton received a fine with a total value of US$2,454, levied in Chile.
Further information about our performance, including in relation to environmental regulation can be found in sections 2.8 and 3.3 of this Annual Report and in the Sustainability Report available atwww.bhpbilliton.com.
7.23 Share capital, restrictions on transfer of shares and other additional information
Information relating to BHP Billiton 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 and certain agreements triggered on a change of control, is set out in the following sections of this Annual Report:
Section 2.1 (BHP Billiton locations)
Section 2.7 (Government regulations)
Section 2.10 (Organisational structure)
Section 2.11 (Material contracts)
Section 2.12 (Constitution)
Section 5.4 (Board of Directors – Review, re-election and renewal)
Section 7.2 (Share capital and buy-back programs)
Section 11.2 (Share ownership)
Note 19 ‘Share capital’ and note 32 ‘Employee share ownership plans’ in the financial statements of this Annual Report.
Further details of all options and rights outstanding as at the date of this Directors’ Report, including shares issued upon exercise of options and rights, are set out in note 32 ‘Employee share ownership plans’ in the financial statements of this Annual Report. Details of movements in share capital during and since the end of the financial year are set out in note 19 ‘Share capital’ in the financial statements of this Annual Report.
Each of the above sections is incorporated by reference into, and forms part of, this Directors’ Report.
The Directors’ Report is made in accordance with a resolution of the Board.
|
|
Dated: 6 September 2011
We are involved from time to time in legal proceedings and governmental investigations of a character normally incidental to our business, including claims and pending actions against us seeking damages or clarification of legal rights and regulatory inquiries regarding business practices. In many cases, insurance or other indemnification protection afforded to us relates to such claims and may offset the financial impact on the Group of a successful claim.
This section summarises the significant legal proceedings and investigations in which we are currently involved.
Rio Algom Pension Plan
In June 2003, Alexander E. Lomas, a retired member of the Pension Plan for Salaried Employees of Rio Algom Mines Limited (Plan), filed a Notice of Application in a representative capacity in the Ontario Superior Court of Justice Commercial List against Rio Algom Limited (RAL) and the Plan Trustee alleging certain improprieties in their administration of the Pension Plan and use of Pension Plan funds from January 1966 onward.
Mr Lomas seeks relief, both quantified and unquantified, for himself and those Plan members he purports to represent in respect of a number of alleged breaches committed by RAL, including allegations of breach of employment contracts, breach of trust, and breach of the Trust Agreement underlying the Pension Plan. In particular:
Mr Lomas seeks US$115.26 million (C$121.6 million) on account of monies alleged to have been improperly paid out or withheld from the Pension Plan, together with compound interest calculated from the date of each alleged wrongdoing; and
punitive, aggravated and exemplary damages in the sum of US$1.84 million (C$1.94 million).
Mr Lomas purports to represent members of the defined benefits portion of the Pension Plan. In 2005, the defined contribution members of the Pension Plan were included as parties to this action.
A motion to strike Mr Lomas’ request for the winding-up of the Plan was heard on 27 November 2006. The court struck out part of Mr Lomas’ claim, but allowed the remainder to proceed. RAL’s appeal from that decision was dismissed, but further leave to appeal to the Ontario Court of Appeal was granted. On 10 March 2010, the Ontario Court of Appeal ruled in favour of RAL’s motion to strike out that part of the plaintiff’s claim that sought a court order to wind-up the Plan.
RAL has notified its insurers of the application and has advised other third parties of possible claims against them in respect of matters alleged in the application.
Class actions concerning Cerrejón privatisation
The non-government organisation, Corporación Colombia Transparente (CCT), brought three separate class actions (Popular Actions 1,029, 1,032 and 1,048) against various defendants in connection with the privatisation of 50 per cent of the Cerrejón Zona Norte mining complex in Colombia in 2002. Actions 1,029 and 1,048 were dismissed leaving only the action against Cerrejón Zona Norte SA (CZN). The mining complex is currently owned by CZN and Carbones del Cerrejón Limited (CDC). Our subsidiary Billiton Investment 3 BV owns a 33 per cent share in CDC, and our subsidiaries Billiton Investment 3 BV and Billiton Investment 8 BV (BHP Billiton Shareholders) collectively own a 33.33 per cent share in CZN.
CCT alleges, in part, that the defendants failed to comply with the privatisation process, and that the offer price for shares in CZN between Stages 1 and 2 of the privatisation process was not correctly adjusted for inflation.
Our share of the alleged adjustment of the CZN share price would be approximately US$4 million. In the alternative, CCT seeks declaration that the privatisation is null and void and forfeiture of the transfer price paid, of which our share would be approximately US$148 million. In both instances, CCT also seeks unquantified sanctions, including payment of stamp taxes, an award of 15 per cent of all monies recovered by the defendants, together with interest on all amounts at the maximum rate authorised by law.
The CZN action was dismissed on 18 February 2011, the Court determining that there were no irregularities in the privatisation of the Cerrejón Zona Norte mining complex.
CCT’s request for a reconsideration of the judgment was denied. On 15 March 2011 CCT filed an appeal against the dismissal.
A separate class action (Popular Action no. 242) arising out of the privatisation of the Cerrejón Zona Norte mining complex has been brought by Mr Martín Nicolás Barros Choles, against various defendants including CDC.
Mr Choles claims that the transfer of rights by CDC to CZN was ineffective because it only involved a transfer of shares and not the transfer of the underlying rights in the properties and assets used in the Cerrejón Zona Norte mining complex. Consequently, he is seeking orders that CDC pays for the use and lease of the properties and assets until November 2009, and that from that date the properties and assets of the Cerrejón project revert to the State.
Australian Taxation Office assessments
The Australian Taxation Office (ATO) issued amended assessments in prior years denying bad debt deductions arising from the investments in Beenup and Boodarie Iron and the denial of capital allowance claims made on the Boodarie Iron project. The Group challenged the assessments and was successful on all counts before the Full Federal Court. The ATO obtained special leave in September 2010 to appeal to the High Court in respect of the denial of capital allowance claims made on the Boodarie Iron project. The Group’s position in respect of the capital allowance claims on the Boodarie Iron project was confirmed by the High Court in June 2011. As a result of these appeals, US$138 million was released from the Group’s income tax provision in September 2010 and US$580 million in June 2011.
Petroleum Resource Rent Tax litigation
BHP Billiton Petroleum (Bass Strait) Pty Ltd is involved in litigation in the Federal Court of Australia, disputing whether certain receipts are subject to Petroleum Resource Rent Tax, as well as the ATO’s assessment of the taxing point for Petroleum Resource Rent Tax purposes in relation to sales of gas and LPG produced from the Gippsland Joint Venture, and the treatment of gas used for electricity generation. The Federal Court’s decision was handed down in April 2011, finding in favour of the Commissioner in respect of the taxing point and one of the receipts in issue. The Federal Court found in favour of BHP Billiton on another receipt issue and on the gas used for electricity generation issue. BHP Billiton has appealed to the Full Federal Court on the findings on which it was unsuccessful. The Commissioner has appealed on the receipt issue but not the gas used for electricity generation issue. The latter has resulted in the recognition of an income tax credit of approximately US$12 million in the 30 June 2011 financial results.
Petroleum Resource Rent Tax has been paid and expensed based on the ATO’s assessment, and any success on the remaining issues in dispute will result in an income tax benefit.
Given the complexity of the matters under dispute, it is not possible at this time to accurately quantify the anticipated benefit.
As part of the May 2011 Federal Budget, the Australian Government announced that it will amend the tax law, with effect from 1 July 1990, to provide greater certainty around how the taxing point is calculated for the purposes of the Petroleum Resource Rent Tax. It stated that the amendments will provide further statutory support for the Federal Court’s judgment above. The proposed legislative amendments are yet to be introduced.
North West Shelf Excise on Condensate litigation
BHP Billiton Petroleum (North West Shelf) Pty Ltd is involved in litigation in both the Federal Court of Australia and the Administrative Appeals Tribunal seeking orders that excise by-laws, enacted in 2008, prescribing a condensate production area for the purposes of the Excise Tariff Act incorrectly define the relevant fields.
As part of the May 2011 Federal Budget, the Australian Government announced that it would make several technical legislative amendments, with effect from 13 May 2008, to ensure that condensate production is subject to crude oil excise as announced in the 2008–09 Budget. The amendments include changes to the Excise Tariff Act to introduce a statutory definition of the production area ‘Rankin Trend’, and to ensure that production from ‘Rankin Trend’ does not represent ‘exempt offshore oil and condensate’. These legislative amendments were introduced into Parliament on 6 July 2011 but are yet to be enacted.
Refer to F-1 to F-101 and F-107 to F-114.
|
| |
| ||
| ||
| ||
|
| |
| ||
| ||
| ||
| ||
| ||
| ||
| ||
| ||
| ||
| ||
| ||
|
|
| |
| ||
| ||
| ||
| ||
| ||
| ||
| ||
| ||
| ||
| ||
| ||
| ||
| ||
| ||
| ||
| ||
| ||
|
|
| |
| ||
| ||
| ||
| ||
| ||
| ||
| ||
| ||
| ||
| ||
| ||
| ||
| ||
| ||
| ||
| ||
|
|
| |
| ||
| ||
| ||
| ||
| ||
| ||
| ||
| ||
| ||
| ||
| ||
| ||
| ||
|
10.2 Mining and mining-related terms
|
| |
| ||
| ||
| ||
| ||
| ||
| ||
| ||
| ||
| ||
| ||
| ||
| ||
| ||
| ||
| ||
| ||
|
|
| |
| ||
| ||
| ||
| ||
| ||
| ||
| ||
| ||
| ||
| ||
| ||
| ||
| ||
| ||
| ||
| ||
| ||
| ||
|
|
| |
| ||
| ||
| ||
| ||
| ||
| ||
| ||
| ||
| ||
| ||
| ||
| ||
| ||
| ||
| ||
| ||
|
|
| |
| ||
|
|
| |
| ||
| ||
| ||
| ||
| ||
| ||
| ||
| ||
| ||
| ||
| ||
| ||
| ||
| ||
| ||
| ||
| ||
| ||
| ||
| ||
| ||
| ||
| ||
| ||
| ||
| ||
| ||
| ||
| ||
| ||
|
|
| |
| ||
| ||
| ||
| ||
| ||
| ||
| ||
| ||
| ||
| ||
| ||
| ||
| ||
| ||
| ||
| ||
| ||
| ||
| ||
| ||
| ||
| ||
| ||
| ||
| ||
| ||
| ||
| ||
| ||
| ||
| ||
|
BHP Billiton Limited has a primary listing on the Australian Securities Exchange (ASX) in Australia and BHP Billiton 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 (LSE). BHP Billiton Plc also has a secondary listing on the Johannesburg Stock Exchange (JSE) in South Africa.
In addition, BHP Billiton Limited and BHP Billiton Plc are listed on the New York Stock Exchange (NYSE) in the US. Trading on the NYSE is via American Depositary Shares (ADSs), each representing two ordinary shares evidenced by American Depositary Receipts (ADRs). Citibank N.A. is the Depositary for both ADR programs. BHP Billiton Limited’s ADSs have been listed for trading on the NYSE (ticker BHP) since 28 May 1987 and BHP Billiton Plc’s since 25 June 2003 (ticker BBL).
Share capital
The details of the share capital for both BHP Billiton Limited and BHP Billiton Plc are presented in note 19 ‘Share capital’ in the financial statements.
Major shareholders
The tables in sections 7.20 and 7.21 of this Annual Report present information pertaining to the shares held by Directors and members of the Group Management Committee (GMC) in BHP Billiton Limited and BHP Billiton Plc.
Neither BHP Billiton Limited nor BHP Billiton Plc is directly or indirectly controlled by another corporation or by any government. Other than as described in section 2.10.2, no major shareholder possesses voting rights that differ from those attaching to all of BHP Billiton Limited’s voting securities.
BHP Billiton Limited
The tables in sections 7.20 and 7.21 of this Annual Report show the holdings for Directors and members of the GMC of BHP Billiton Limited, as a group, of BHP Billiton Limited’s voting securities. No person beneficially owned more than five per cent of BHP Billiton Limited’s voting securities. The following table shows holdings of five per cent or more of voting rights in BHP Billiton Limited’s shares as notified to BHP Billiton Limited under the Corporations Act 2001, Section 671B.
Percentage of total voting rights (2) | ||||||||||||||||||||||
Title of class | Identity of person | Date of notice received | Date of change | Number owned | 2011 | 2010 | 2009 | |||||||||||||||
Ordinary shares | BlackRock Investment Management (Australia) Limited (1) | 4 January 2010 | 2 December 2009 | 183,990,864 | 5.73 | % | 5.48 | % | — |
|
|
BHP Billiton Plc
The following table shows holdings of three per cent or more of voting rights in BHP Billiton Plc’s shares as notified to BHP Billiton Plc under the UK Disclosure and Transparency Rule 5.(1)
Date of last notice | Percentage of total voting rights (2) | |||||||||||||||||||||
Title of class | Identity of person or group | Date received | Date of change | Number owned | 2011 | 2010 | 2009 | |||||||||||||||
Ordinary shares | Legal & General Group Plc(3) | 17 February 2010 | 16 February 2010 | 88,103,187 | 4.17 | % | 3.99 | % | 4.54 | % | ||||||||||||
Ordinary shares | BlackRock, Inc. (4) | 3 December 2009 | 1 December 2009 | 213,014,043 | 10.08 | % | 9.65 | % | — |
|
|
|
|
The following table shows holdings of Directors and members of the GMC of BHP Billiton Plc who were in office as at 30 June 2011, as a group, of BHP Billiton Plc’s voting securities as at that date.(1)
Title of class | Identity of person or group | Number owned | Percentage of total voting rights at 30 June 2011(2) | |||||||
Ordinary shares | Directors and Executives as a group | 840,652 | 0.04 | % |
|
|
Twenty largest shareholders as at 26 August 2011 (as named on the Register of Shareholders)
BHP Billiton Limited | Number of fully paid shares | % of issued capital | ||||||||
1. | HSBC Australia Nominees Pty Ltd | 557,639,660 | 17.36 | |||||||
2. | J P Morgan Nominees Australia Limited | 367,083,966 | 11.43 | |||||||
3. | National Nominees Ltd | 322,837,804 | 10.05 | |||||||
4. | Citicorp Nominees Pty Limited <BHP Billiton ADR Holders A/C> | 211,082,608 | 6.57 | |||||||
5. | Citicorp Nominees Pty Limited | 134,103,375 | 4.18 | |||||||
6. | Australian Mutual Provident Society | 78,570,157 | 2.45 | |||||||
7. | J P Morgan Nominees Australia Limited <Cash Income A/C> | 59,699,015 | 1.86 | |||||||
8. | Citicorp Nominees Pty Limited <Colonial First State Inv A/C> | 21,495,590 | 0.67 | |||||||
9. | Potter Warburg Nominees Pty Ltd | 15,296,927 | 0.48 | |||||||
10. | Australian Foundation Investment Company Limited | 14,257,441 | 0.44 | |||||||
11. | Queensland Investment Corporation | 11,396,183 | 0.35 | |||||||
12. | Perpetual Trustee Australia Group | 9,425,426 | 0.29 | |||||||
13. | Australian Reward Investment Alliance | 9,020,225 | 0.28 | |||||||
14. | ARGO Investments Limited | 7,813,209 | 0.24 | |||||||
15. | RBC Dexia Investor Services Australia Nominees Pty Limited <PIPOOLED A/C> | 7,742,455 | 0.24 | |||||||
16. | Bond Street Custodians Limited | 7,483,839 | 0.23 | |||||||
17. | RBC Dexia Investor Services Australia Nominees Pty Limited <MLCI A/C> | 6,531,782 | 0.20 | |||||||
18. | UBS Nominees Pty Ltd | 5,073,010 | 0.16 | |||||||
19. | INVIA Custodian Pty Limited | 4,731,057 | 0.15 | |||||||
20. | Computershare Nominees CI Ltd <ASX Shareplus Control A/C> | 4,726,717 | 0.15 | |||||||
|
|
|
| |||||||
1,856,010,446 | 57.78 | |||||||||
|
|
|
|
BHP Billiton Plc | Number of fully paid shares | % of issued capital | ||||||||
1. | PLC Nominees (Proprietary) Limited | 421,314,153 | 19.72 | |||||||
2. | GEPF Equity | 84,777,543 | 3.97 | |||||||
3. | State Street Nominees Limited < OM02> | 75,724,298 | 3.54 | |||||||
4. | Chase Nominees Limited <LEND> | 72,729,606 | 3.40 | |||||||
5. | National City Nominees Limited | 61,844,575 | 2.90 | |||||||
6. | Chase Nominees Limited | 61,096,900 | 2.86 | |||||||
7. | Nortrust Nominees Limited | 53,287,271 | 2.49 | |||||||
8. | HSBC Global Custody Nominee (UK) Limited <357206> | 51,073,913 | 2.39 | |||||||
9. | The Bank of New York (Nominees) Limited | 39,211,464 | 1.84 | |||||||
10. | BNY Mellon Nominees Limited <BSDTGUSD> | 39,058,277 | 1.83 | |||||||
11. | Nutraco Nominees Limited <781221> | 36,800,000 | 1.72 | |||||||
12. | Nortrust Nominees Limited <SLEND> | 35,994,595 | 1.68 | |||||||
13. | Vidacos Nominees Limited <CLRLUX2> | 35,514,442 | 1.66 | |||||||
14. | Lynchwood Nominees Limited <2006420> | 34,565,090 | 1.62 | |||||||
15. | State Street Nominees Limited <OM04> | 34,383,999 | 1.61 | |||||||
16. | Industrial Development Corporation | 33,804,582 | 1.58 | |||||||
17. | State Street Nominees Limited <OD64> | 33,673,463 | 1.58 | |||||||
18. | Vidacos Nominees Limited <FGN> | 25,979,661 | 1.22 | |||||||
19. | Chase Nominees Limited <BGILIFEL> | 23,910,630 | 1.12 | |||||||
20. | State Street Nominees Limited <6H1E> | 18,306,000 | 0.86 | |||||||
|
|
|
| |||||||
1,273,050,462 | 59.59 | |||||||||
|
|
|
|
US share ownership as at 30 June 2011
BHP Billiton Limited | BHP Billiton Plc | |||||||||||||||||||||||||||||||
Shareholders Numbers | % | Shares Numbers | % of issued capital | Shareholders Numbers | % | Shares Numbers | % of issued capital | |||||||||||||||||||||||||
Classification of holder | ||||||||||||||||||||||||||||||||
Registered holders of voting securities | 1,879 | 0.32 | 5,592,195 | 0.17 | 71 | 0.35 | 208,255 | 0.01 | ||||||||||||||||||||||||
ADR holders | 1,168 | 0.20 | 206,187,970 | (a) | 6.42 | 171 | 0.84 | 62,259,902 | (b) | 2.91 |
|
|
Distribution of shareholders and shareholdings as at 26 August 2011
BHP Billiton Limited | BHP Billiton Plc | |||||||||||||||||||||||||||||||
Shareholders Numbers | % | Shares Numbers | % | Shareholders Numbers | % | Shares Numbers | % | |||||||||||||||||||||||||
Registered address | ||||||||||||||||||||||||||||||||
Australia | 574,229 | 96.11 | 3,141,088,437 | 97.80 | 253 | 1.23 | 1,160,582 | 0.05 | ||||||||||||||||||||||||
New Zealand | 14,236 | 2.38 | 38,432,854 | 1.20 | 32 | 0.15 | 107,250 | 0.01 | ||||||||||||||||||||||||
United Kingdom | 3,383 | 0.57 | 10,963,904 | 0.34 | 17,888 | 86.99 | 1,680,002,743 | 78.64 | ||||||||||||||||||||||||
United States | 1,867 | 0.31 | 5,493,051 | 0.17 | 68 | 0.33 | 165,261 | 0.01 | ||||||||||||||||||||||||
South Africa | 121 | 0.02 | 220,481 | 0.01 | 1,367 | 6.65 | 436,372,576 | 20.43 | ||||||||||||||||||||||||
Other | 3,622 | 0.61 | 15,492,378 | 0.48 | 956 | 4.65 | 18,377,042 | 0.86 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total | 597,458 | 100.00 | 3,211,691,105 | 100.00 | 20,564 | 100.00 | 2,136,185,454 | 100.00 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BHP Billiton Limited | BHP Billiton Plc | |||||||||||||||||||||||||||||||
Shareholders Numbers | % | Shares Numbers(a) | % | Shareholders Numbers | % | Shares Numbers | % | |||||||||||||||||||||||||
Size of holding | ||||||||||||||||||||||||||||||||
1 – 500(b) | 267,118 | 44.71 | 60,994,963 | 1.90 | 10,791 | 52.48 | 2,737,804 | 0.13 | ||||||||||||||||||||||||
501 – 1,000 | 113,931 | 19.07 | 88,334,332 | 2.75 | 4,270 | 20.76 | 3,175,107 | 0.15 | ||||||||||||||||||||||||
1,001 – 5,000 | 167,404 | 28.02 | 376,705,139 | 11.73 | 3,439 | 16.72 | 7,098,410 | 0.33 | ||||||||||||||||||||||||
5,001 – 10,000 | 28,137 | 4.70 | 198,905,703 | 6.19 | 461 | 2.24 | 3,255,880 | 0.15 | ||||||||||||||||||||||||
10,001 – 25,000 | 15,452 | 2.59 | 232,539,570 | 7.24 | 377 | 1.83 | 6,046,164 | 0.28 | ||||||||||||||||||||||||
25,001 – 50,000 | 3,444 | 0.58 | 117,670,365 | 3.66 | 224 | 1.09 | 8,138,452 | 0.38 | ||||||||||||||||||||||||
50,001 – 100,000 | 1,265 | 0.21 | 86,605,095 | 2.70 | 246 | 1.20 | 17,704,552 | 0.83 | ||||||||||||||||||||||||
100,001 – 250,000 | 497 | 0.08 | 72,035,148 | 2.24 | 264 | 1.28 | 43,028,762 | 2.01 | ||||||||||||||||||||||||
250,001 – 500,000 | 114 | 0.02 | 39,621,594 | 1.23 | 172 | 0.84 | 62,374,367 | 2.92 | ||||||||||||||||||||||||
500,001 – 1,000,000 | 38 | 0.01 | 24,529,965 | 0.76 | 106 | 0.52 | 75,080,870 | 3.52 | ||||||||||||||||||||||||
1,000,001 and over | 58 | 0.01 | 1,913,749,231 | 59.60 | 214 | 1.04 | 1,907,545,086 | 89.30 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total | 597,458 | 100.00 | 3,211,691,105 | 100.00 | 20,564 | 100.00 | 2,136,185,454 | 100.00 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Classification of holder Corporate Private Total BHP Billiton Limited BHP Billiton Plc Shareholders
Numbers % Shares
Numbers % Shareholders
Numbers % Shares
Numbers % 133,906 22.41 2,205,096,399 68.66 10,972 53.36 2,122,564,541 99.36 463,552 77.59 1,006,594,706 31.34 9,592 46.64 13,620,913 0.64 597,458 100.00 3,211,691,105 100.00 20,564 100.00 2,136,185,454 100.00
Policy
We have a progressive dividend policy that seeks to steadily increase or at least to maintain the dividend in US dollars at each half yearly payment.
We declare our dividends and other distributions in US dollars as it is our main functional currency. BHP Billiton Limited pays its dividends in Australian dollars, UK pounds sterling, New Zealand dollars or US dollars, depending on the country of residence of the shareholder. BHP Billiton Plc pays its dividends in UK pounds sterling to shareholders registered on its principal register in the UK and in South African rand to shareholders registered on its branch register in South Africa. If shareholders on the UK register wish to receive dividends in US dollars they must complete an appropriate election form and return it to the BHP Billiton Share Registrar no later than close of business on the Dividend Record Date.
Payments
BHP Billiton Limited shareholders may have their cash dividends paid directly into a nominated bank, building society or credit union, depending on the shareholder’s country of residence as shown below.
|
| |
| ||
| ||
| ||
|
Shareholders from the abovementioned locations who do not provide their direct credit details and shareholders with registered addresses outside Australia, UK, New Zealand and US will receive dividend payments by way of a cheque in Australian dollars.
BHP Billiton 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 Billiton Share Registrar in the UK or South Africa.
The following tables show the share prices for the period indicated for ordinary shares and ADSs for each of BHP Billiton Limited and BHP Billiton Plc. The share prices are the highest and lowest closing market quotations for ordinary shares reported on the Daily Official List of the Australian and London Stock Exchanges respectively, and the highest and lowest closing prices for ADSs quoted on the NYSE, adjusted to reflect stock dividends.
BHP Billiton Limited
Ordinary shares | American Depositary Shares (1) | |||||||||||||||||
BHP Billiton Limited | High A$ | Low A$ | High US$ | Low US$ | ||||||||||||||
FY2006 | 32.00 | 18.09 | 49.21 | 27.35 | ||||||||||||||
FY2007 | 35.38 | 23.86 | 60.39 | 36.19 | ||||||||||||||
FY2008 | 49.55 | 31.00 | 95.00 | 52.27 | ||||||||||||||
FY2009 | 44.40 | 21.10 | 82.86 | 24.62 | ||||||||||||||
FY2010 | First quarter | 39.59 | 32.14 | 68.89 | 49.54 | |||||||||||||
Second quarter | 43.12 | 36.20 | 77.90 | 62.63 | ||||||||||||||
Third quarter | 44.47 | 39.20 | 81.80 | 67.90 | ||||||||||||||
Fourth quarter | 44.63 | 36.28 | 82.86 | 58.44 | ||||||||||||||
FY2011 | First quarter | 41.55 | 36.98 | 76.97 | 62.42 | |||||||||||||
Second quarter | 46.47 | 39.46 | 92.92 | 76.38 | ||||||||||||||
Third quarter | 47.36 | 42.97 | 96.02 | 84.88 | ||||||||||||||
Fourth quarter | 49.55 | 41.36 | 102.68 | 88.38 |
Ordinary shares | American Depositary Shares (1) | |||||||||||||||
BHP Billiton Limited | High A$ | Low A$ | High US$ | Low US$ | ||||||||||||
Month of January 2011 | 46.05 | 44.25 | 92.91 | 87.20 | ||||||||||||
Month of February 2011 | 47.36 | 44.62 | 95.69 | 91.45 | ||||||||||||
Month of March 2011 | 47.25 | 42.97 | 96.02 | 84.88 | ||||||||||||
Month of April 2011 | 49.55 | 45.83 | 102.68 | 96.84 | ||||||||||||
Month of May 2011 | 46.15 | 42.97 | 100.16 | 90.55 | ||||||||||||
Month of June 2011 | 44.53 | 41.36 | 94.63 | 88.38 | ||||||||||||
Month of July 2011 | 44.95 | 41.42 | 96.80 | 89.65 | ||||||||||||
Month of August 2011 | 42.30 | 36.60 | 90.72 | 71.88 |
|
The total market capitalisation of BHP Billiton Limited at 30 June 2011 was A$140.6 billion (US$150.6 billion equivalent), which represented approximately 9.52 per cent of the total market capitalisation of all companies listed on the ASX. The closing price for BHP Billiton Limited ordinary shares on the ASX on that date was A$43.80.
BHP Billiton Plc
Ordinary shares | American Depositary Shares (1) | |||||||||||||||||
BHP Billiton Plc | High UK pence | Low UK pence | High US$ | Low US$ | ||||||||||||||
FY2006 | 1,211.50 | 722.00 | 45.50 | 25.90 | ||||||||||||||
FY2007 | 1,390.00 | 853.00 | 56.40 | 33.20 | ||||||||||||||
FY2008 | 2,196.00 | 1,183.00 | 85.62 | 47.83 | ||||||||||||||
FY2009 | 1,841.00 | 752.50 | 74.18 | 21.16 | ||||||||||||||
FY2010 | First quarter | 1,766.00 | 1,287.50 | 58.69 | 41.88 | |||||||||||||
Second quarter | 2,012.50 | 1,627.00 | 64.66 | 51.93 | ||||||||||||||
Third quarter | 2,268.50 | 1,824.50 | 68.88 | 57.26 | ||||||||||||||
Fourth quarter | 2,334.50 | 1,735.00 | 70.95 | 49.45 | ||||||||||||||
FY2011 | First quarter | 2,038.50 | 1,684.50 | 64.61 | 51.61 | |||||||||||||
Second quarter | 2,616.00 | 2,026.50 | 80.91 | 64.18 | ||||||||||||||
Third quarter | 2,561.00 | 2,213.50 | 82.38 | 70.53 | ||||||||||||||
Fourth quarter | 2,631.50 | 2,244.00 | 85.47 | 72.95 |
Ordinary shares | American Depositary Shares (1) | |||||||||||||||
BHP Billiton Plc | High UK pence | Low UK pence | High US$ | Low US$ | ||||||||||||
Month of January 2011 | 2,553.50 | 2,379.00 | 80.36 | 75.20 | ||||||||||||
Month of February 2011 | 2,561.00 | 2,337.50 | 82.38 | 76.29 | ||||||||||||
Month of March 2011 | 2,491.50 | 2,213.50 | 80.97 | 70.53 | ||||||||||||
Month of April 2011 | 2,631.50 | 2,454.50 | 85.47 | 80.31 | ||||||||||||
Month of May 2011 | 2,487.00 | 2,304.00 | 83.30 | 74.46 | ||||||||||||
Month of June 2011 | 2,452.00 | 2,244.00 | 78.43 | 72.95 | ||||||||||||
Month of July 2011 | 2,521.50 | 2,273.00 | 80.69 | 73.72 | ||||||||||||
Month of August 2011 | 2,258.00 | 1,846.00 | 74.02 | 57.61 |
|
The total market capitalisation of BHP Billiton Plc at 30 June 2011 was £51.8 billion (US$83.3 billion equivalent), which represented approximately 2.65 per cent of the total market capitalisation of all companies listed on the LSE. The closing price for BHP Billiton Plc ordinary shares on the LSE on that date was £24.52.
11.5 American Depositary Receipts (ADR) fees and charges
Depositary fees
Citibank, N.A. (Citibank) serves as the depositary bank for both of our American Depositary Receipt (ADR) programs. ADR holders agree to the terms in the deposit agreement filed with the Securities and Exchange Commission for depositing American Depositary Shares (ADSs) or surrendering shares 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 the BHP Billiton ADR programs, as set forth in the tables below.
Standard depositary fees:
|
| |
| ||
| ||
|
Corporate actions depositary fees:
|
| |
| ||
| ||
| ||
|
Fees payable by the Depositary to the Issuer
Citibank has reimbursed BHP Billiton US$2.2 million in FY2011 for ADR program related expenses for both of BHP Billiton’s ADR programs (FY2010 US$2.6 million). ADR program related expenses include legal and accounting fees, listing fees, expenses related to investor relations in the US, 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 FY2011 amounting to less than US$0.02 million which are associated with the administration of the ADR programs ( FY2010 less than US$0.02 million).
Our ADR programs trade on the New York Stock Exchange under the stock tickers BHP and BBL for the Limited and Plc programs respectively. As of 30 June 2011, there were 103,093,985 shares outstanding in the BHP Billiton Limited ADR program and 31,129,951 shares outstanding in the BHP Billiton Plc ADR program. Both of the ADR programs have a 2:1 ordinary shares to ADR ratio.
The taxation discussion below describes the material Australian income tax, UK tax and US federal income tax consequences to a US holder (as hereinafter defined) of owning BHP Billiton Limited ordinary shares or ADSs or BHP Billiton Plc ordinary shares or ADSs. Accordingly, the following discussion is not relevant to non-US holders of BHP Billiton Limited ordinary shares or ADSs or BHP Billiton Plc ordinary shares or ADSs.
The discussion is based on the Australian, UK and US tax laws currently in effect, as well as on the double taxation convention between Australia and the US (the Australian Treaty), the double taxation convention between the UK and the US (the UK Treaty) and the estate tax convention between the UK and the US (the UK–US Inheritance and Gift Tax Treaty). These laws are subject to change, possibly on a retroactive basis. For purposes of this discussion, a US holder is a beneficial owner of ordinary shares or ADSs who is, for US federal income tax purposes: (i) a citizen or resident alien of the US, (ii) a corporation (or other entity treated as a corporation for US federal income tax purposes) that is created or organised under the laws of the US or any political subdivision thereof, (iii) an estate the income of which is subject to US federal income taxation regardless of its source, or (iv) a trust (A) if a court within the US is able to exercise primary supervision over its administration and one or more US persons have the authority to control all of its substantial decisions or (B) that has made a valid election to be treated as a US person for tax purposes.
We recommend that holders of ordinary shares or ADSs consult their own tax advisers regarding the Australian, UK and US federal, state and local tax and other tax consequences of owning and disposing of ordinary shares and ADSs in their particular circumstances.
Shareholdings in BHP Billiton Limited
Australian taxation
In this section, references to ‘resident’ and ‘non-resident’ refer to residence status for Australian income tax purposes.
Dividends
Dividends (including other distributions treated as dividends for Australian tax purposes) paid by BHP Billiton Limited to a US holder who or which is a resident of Australia, or whose holding is effectively connected with a permanent establishment in Australia, may be subject to income tax.
Under the Australian Treaty, dividends paid by BHP Billiton Limited to a US holder who or which is eligible for treaty benefits and whose holding is not effectively connected with a permanent establishment in Australia or, in the case of a shareholder who performs independent personal services from a ‘fixed base’ situated therein, is not connected with that ‘fixed base’, may be subject to Australian withholding tax at a rate not exceeding 15 per cent of such gross dividend.
The payment of Australian income tax by an Australian company, such as BHP Billiton Limited, generates a ‘franking credit’ for the company. Broadly, an amount of tax paid by the company flows through to shareholders (as a franking credit) when the company pays a dividend which is franked by the company. Fully franked dividends paid to non-resident shareholders are not subject to withholding tax.
Dividends paid to non-residents of Australia are also exempt from withholding tax to the extent to which such dividends are declared by BHP Billiton Limited to be conduit foreign income (CFI). CFI is made up of certain amounts that are earned by BHP Billiton Limited that are not subject to tax in Australia, such as dividends remitted to Australia by foreign subsidiaries.
Any part of a dividend paid to a US holder that is not ‘franked’ and is not CFI will generally be subject to Australian withholding tax unless a specific exemption applies.
Sale of ordinary shares and ADSs
A US holder who or which is a resident of Australia (other than certain temporary residents) may be liable for income tax on any profit on disposal of ordinary shares or ADSs, or Australian capital gains tax on any gain on disposal of ordinary shares or ADSs acquired after 19 September 1985.
No income or other tax is payable on any profit on disposal of ordinary shares or ADSs held by a US holder who or which is a non-resident of Australia except if the profit is of an income nature and sourced in Australia, or the sale is subject to Australian capital gains tax because the ordinary shares or ADSs are ‘taxable Australian property’. Under the Australian Treaty, if the profit is sourced in Australia, it will not be taxable in Australia if it represents business profits of an enterprise carried on by a US holder entitled to treaty benefits and the enterprise does not carry on business in Australia through a permanent establishment situated in Australia. Australian capital gains tax will not generally apply to a disposal of the ordinary shares or ADSs by a US holder who or which is a non-resident of Australia unless the shares or ADSs have been acquired after 19 September 1985 and:
the ordinary shares or ADSs have been used by the US holder in carrying on a trade or business through a permanent establishment in Australia;
the US holder (together with associates) directly or indirectly owns or owned 10 per cent or more of the issued share capital of BHP Billiton Limited at the time of the disposal or throughout a 12-month period during the two years prior to the time of disposal and the market values of BHP Billiton Limited’s assets that are taxable Australian real property at the time of disposal exceeds the market
|
the US holder is an individual who elected on becoming a non-resident of Australia to continue to have the ordinary shares or ADSs subject to Australian capital gains tax.
Gift, estate and inheritance tax
Australia does not impose any gift, estate or inheritance taxes in relation to gifts of shares or ADSs or upon the death of a shareholder.
Stamp duty
An issue or transfer of BHP Billiton Limited shares or ADSs does not require the payment of Australian stamp duty.
US taxation
This section describes the material US federal income tax consequences to a US holder of owning ordinary shares or ADSs. It applies only to ordinary shares or ADSs that are held as capital assets for tax purposes. This section does not apply to a holder of ordinary shares or ADSs who is a member of a special class of holders subject to special rules, including a dealer in securities, a trader in securities that elects to use a mark-to-market method of accounting for its securities holdings, a tax-exempt organisation, a life insurance company, a person liable for alternative minimum tax, a person who actually or constructively owns 10 per cent or more of the voting stock of BHP Billiton Limited, a person who holds ordinary shares or ADSs as part of a straddle or a hedging or conversion transaction, or a person whose functional currency is not the US dollar.
If a partnership holds the ordinary shares or ADSs, the US federal income tax treatment of a partner will generally depend on the status of the partner and the tax treatment of the partnership. A partner in a partnership holding the ordinary shares or ADSs should consult its tax adviser with regard to the US federal income tax treatment of an investment in the ordinary shares or ADSs.
This section is based in part upon the representations of the Depositary and the assumption that each obligation in the deposit agreement and any related agreement will be performed in accordance with its terms.
In general, for US federal income tax purposes, a holder of ADSs will be treated as the owner of the ordinary shares represented by those ADSs. Exchanges of ordinary shares for ADSs, and ADSs for ordinary shares, will generally not be subject to US federal income tax.
Dividends
Under US federal income tax laws and subject to the passive foreign investment company, (PFIC) rules discussed below, a US holder must include in its gross income the gross amount of any dividend paid by BHP Billiton Limited out of its current or accumulated earnings and profits (as determined for US federal income tax purposes). The holder must include any Australian tax withheld from the dividend payment in this gross amount even though the holder does not in fact receive it. The dividend is taxable to the holder when the holder, in the case of ordinary shares, or the Depositary, in the case of ADSs, actually or constructively receives the dividend.
Dividends paid to a non-corporate US holder on shares or ADSs in taxable years beginning before 1 January 2013 will be taxable at the rate applicable to long-term capital gains (generally at a rate of 15 per cent) provided that the US holder holds the shares or ADSs for more than 60 days during the 121-day period beginning 60 days before the ex-dividend date and does not enter into certain risk reduction transactions with respect to the shares or ADSs during the abovementioned holding period. In addition, a non-corporate US holder that elects to treat the dividend income as ‘investment income’ pursuant to Section 163(d)(4) of the US Internal Revenue Code
will not be eligible for the reduced rate of taxation. In the case of a corporate US holder, dividends on shares and ADSs are taxed as ordinary income and will not be eligible for the dividends received deduction generally allowed to US corporations in respect of dividends received from other US corporations.
Distributions in excess of current and accumulated earnings and profits, as determined for US federal income tax purposes, will be treated as a non-taxable return of capital to the extent of the holder’s tax basis, determined in US dollars, in the ordinary shares or ADSs and thereafter as a capital gain.
The amount of any cash distribution paid in any foreign currency will be equal to the US dollar value of such currency, calculated by reference to the spot rate in effect on the date such distribution is received by the US holder or, in the case of ADSs, by the Depositary, regardless of whether and when the foreign currency is in fact converted into US dollars. If the foreign currency is converted into US dollars on the date received, the US holder generally should not recognise foreign currency gain or loss on such conversion. If the foreign currency is not converted into US dollars on the date received, the US holder will have a basis in the foreign currency equal to its US dollar value on the date received, and generally will recognise foreign currency gain or loss on a subsequent conversion or other disposal of such currency. Such foreign currency gain or loss generally will be treated as US source ordinary income or loss.
Subject to certain limitations, Australian tax withheld in accordance with the Australian Treaty and paid over to Australia will be creditable against your US federal income tax liability. Special rules apply in determining the foreign tax credit limitation with respect to dividends that are taxed at the capital gains rate. To the extent a refund of the tax withheld is available to a US holder under Australian law or under the Australian Treaty, the amount of tax withheld that is refundable will not be eligible for credit against the holder’s US federal income tax liability. A US holder that does not elect to claim a US foreign tax credit may instead claim a deduction for Australian income tax withheld, but only for a taxable year in which the US holder elects to do so with respect to all foreign income taxes paid or accrued in such taxable year.
Dividends will be income from sources outside the US, and generally will be ‘passive category’ income or, for certain taxpayers, ‘general category’ income, which are treated separately from each other for the purpose of computing the foreign tax credit allowable to a US holder. In general, your ability to use foreign tax credits may be limited and is dependent on your particular circumstances. US holders should consult their own tax advisers with respect to these matters.
Sale of ordinary shares and ADSs
Subject to the PFIC rules discussed below, a US holder who sells or otherwise disposes of ordinary shares or ADSs will recognise a capital gain or loss for US federal income tax purposes equal to the difference between the US dollar value of the amount realised and the holder’s tax basis, determined in US dollars, in those ordinary shares or ADSs. The gain or loss will generally be income or loss from sources within the US for foreign tax credit limitation purposes. The capital gain of a non-corporate US holder is generally taxed at preferential rates where the holder has a holding period greater than 12 months in the shares or ADSs sold. There are limitations on the deductibility of capital losses.
The US dollar value of any foreign currency received upon a sale or other disposition of ordinary shares or ADSs will be calculated by reference to the spot rate in effect on the date of sale or other disposal (or, in the case of a cash basis or electing accrual basis taxpayer, on the settlement date). A US holder will have a tax basis in the foreign currency received equal to that US dollar amount, and generally will recognise foreign currency gain or loss on a subsequent conversion or other disposal of the foreign currency. This foreign currency gain or loss generally will be treated as US source ordinary income or loss.
Passive Foreign Investment Company Rules
We do not believe that the BHP Billiton Limited ordinary shares or ADSs will be treated as stock of a PFIC for US federal income tax purposes, but this conclusion is a factual determination that is made annually at the end of the year and thus may be subject to change. If BHP Billiton Limited were treated as a PFIC, any gain realised on the sale or other disposition of ordinary shares or ADSs would in general not be treated as a capital gain. Instead, a US holder would be treated as if it had realised such gain and certain ‘excess distributions’ ratably over its holding period for the ordinary shares or ADSs and would be taxed at the highest tax rate in effect for each such year to which the gain was allocated, together with an interest charge in respect of the tax attributable to each such year. In addition, dividends received with respect to ordinary shares or ADSs would not be eligible for the special tax rates applicable to qualified dividend income if BHP Billiton Limited were a PFIC either in the taxable year of the distribution or the preceding taxable year, but instead would be taxable at rates applicable to ordinary income. Assuming the shares or ADSs are ‘marketable stock’, a US holder may mitigate the adverse tax consequences described above by electing to be taxed annually on a mark-to-market basis with respect to such shares or ADSs.
Shareholdings in BHP Billiton Plc
UK taxation
Dividends
Under UK law, no UK tax is required to be withheld at source from dividends paid on ordinary shares or ADSs.
Sale of ordinary shares and ADSs
US holders will not be liable for UK tax on capital gains realised on disposal of ordinary shares or ADSs unless:
they are resident or ordinarily resident in the UK; or
they carry on a trade, profession or vocation in the UK through a branch or agency for the year in which the disposal occurs and the shares or ADSs have been used, held or acquired for the purposes of such trade (or profession or vocation), branch or agency. In the case of a trade, the term ‘branch’ includes a permanent establishment.
An individual who ceases to be resident in the UK for tax purposes while owning shares or ADSs and then disposes of those shares or ADSs while not UK resident may become subject to UK tax on capital gains if he/she subsequently becomes treated as UK resident again before five complete UK tax years of non-UK residence have elapsed from the date he/she left the UK. In this situation US holders will generally be entitled to claim US tax paid on such a disposition as a credit against any corresponding UK tax payable.
UK inheritance tax
Under the current the UK–US Inheritance and Gift Tax Treaty, ordinary shares or ADSs held by a US holder who is domiciled for the purposes of the UK–US Inheritance and Gift Tax Treaty in the US, and is not for the purposes of the UK–US Inheritance and Gift Tax Treaty a national of the UK, will generally not be subject to UK inheritance tax on the individual’s death or on a chargeable gift of the ordinary shares or ADSs during the individual’s lifetime, provided that any applicable US federal gift or estate tax liability is paid, unless the ordinary shares or ADSs are part of the business property of a permanent establishment of the individual in the UK or, in the case of a shareholder who performs independent personal services, pertain to a fixed base situated in the UK. Where the ordinary shares or ADSs have been placed in trust by a settlor who, at the time of settlement, was a US resident shareholder, the ordinary shares or ADSs will generally not be subject to UK inheritance tax unless the settlor, at the time of settlement, was not domiciled in the US and was a UK national.
In the exceptional case where the ordinary shares or ADSs are subject to both UK inheritance tax and US federal gift or estate tax, the UK–US Inheritance and Gift Tax Treaty generally provides for double taxation to be relieved by means of credit relief.
UK stamp duty and stamp duty reserve tax
UK stamp duty or stamp duty reserve tax (SDRT) will, subject to certain exemptions, be payable on any issue or transfer of shares to the Depositary or their nominee where those shares are for inclusion in the ADR program at a rate of 1.5 per cent of their price (if issued), the amount of any consideration provided (if transferred on sale) or their value (if transferred for no consideration). From 1 October 2009, this 1.5 per cent charge has generally ceased to apply to issues of shares into EU depositary receipt systems and into EU clearance systems. However, the 1.5 per cent charge continues to apply to the issue of shares to a clearance service or a depositary receipt issuer located outside the EU. No SDRT would be payable on the transfer of an ADS. No UK stamp duty should be payable on the transfer of an ADS provided that the instrument of transfer is executed and remains at all times outside the UK. Transfers of ordinary shares to persons other than the Depositary or their nominee will give rise to stamp duty or SDRT at the time of transfer. The relevant rate is currently 0.5 per cent of the amount payable for the shares. The purchaser normally pays the stamp duty or SDRT.
Special rules apply to transactions involving intermediates and stock lending.
US taxation
This section describes the material US federal income tax consequences to a US holder of owning ordinary shares or ADSs. It applies only to ordinary shares or ADSs that are held as capital assets for tax purposes. This section does not apply to a holder of ordinary shares or ADSs that is a member of a special class of holders subject to special rules, including a dealer in securities, a trader in securities who elects to use a mark-to-market method of accounting for its securities holdings, a tax-exempt organisation, a life insurance company, a person liable for alternative minimum tax, a person who actually or constructively owns 10 per cent or more of the voting stock of BHP Billiton Plc, a person who holds ordinary shares or ADSs as part of a straddle or a hedging or conversion transaction, or a person whose functional currency is not the US dollar.
If a partnership holds the ordinary shares or ADSs, the US federal income tax treatment of a partner will generally depend on the status of the partner and the tax treatment of the partnership. A partner in a partnership holding the ordinary shares or ADSs should consult its tax adviser with regard to the US federal income tax treatment of an investment in the ordinary shares or ADSs.
This section is based in part upon the representations of the Depositary and the assumption that each obligation in the deposit agreement and any related agreement will be performed in accordance with its terms.
In general, for US federal income tax purposes, a holder of ADSs will be treated as the owner of the ordinary shares represented by those ADSs. Exchanges of ordinary shares for ADSs, and ADSs for ordinary shares will generally not be subject to US federal income tax.
Dividends
Under US federal income tax laws and subject to the PFIC rules discussed below, a US holder must include in its gross income the gross amount of any dividend paid by BHP Billiton Plc out of its current or accumulated earnings and profits (as determined for US federal income tax purposes). The dividend is taxable to the holder when the holder, in the case of ordinary shares, or the Depositary, in the case of ADSs, actually or constructively receives the dividend.
Dividends paid to a non-corporate US holder on shares or ADSs in taxable years beginning before 1 January 2013 will be taxable at the rate applicable to long-term capital gains (generally at a rate of 15 per cent) provided that the US holder holds the shares or ADSs for more than 60 days during the 121-day period beginning 60 days before the ex-dividend date, and does not enter into certain risk reduction transactions with respect to the shares or ADSs during the abovementioned holding period. In addition, a non-corporate US holder that elects to treat the dividend income as ‘investment income’ pursuant to Section 163(d)(4) of the Internal Revenue Code will not be eligible for the reduced rate of taxation. In the case of a corporate US holder, dividends on shares and ADSs are taxed as ordinary income and will not be eligible for the dividends received deduction generally allowed to US corporations in respect of dividends received from other US corporations.
Distributions in excess of current and accumulated earnings and profits, as determined for US federal income tax purposes, will be treated as a non-taxable return of capital to the extent of the holder’s tax basis, determined in US dollars, in the ordinary shares or ADSs and thereafter as a capital gain.
The amount of any cash distribution paid in any foreign currency will be equal to the US dollar value of such currency, calculated by reference to the spot rate in effect on the date such distribution is received by the US holder or, in the case of ADSs, by the Depositary, regardless of whether and when the foreign currency is in fact converted into US dollars. If the foreign currency is converted into US dollars on the date received, the US holder generally should not recognise foreign currency gain or loss on such conversion. If the foreign currency is not converted into US dollars on the date received, the US holder will have a basis in the foreign currency equal to its US dollar value on the date received, and generally will recognise foreign currency gain or loss on a subsequent conversion or other disposal of such currency. Such foreign currency gain or loss generally will be treated as US source ordinary income or loss.
Dividends will be income from sources outside the US, and generally will be ‘passive category’ income or, for certain taxpayers, ‘general category’ income, which are treated separately from each other for the purpose of computing the foreign tax credit allowable to a US holder. In general, your ability to use foreign tax credits may be limited and is dependent on your particular circumstances. US holders should consult their own tax advisers with respect to these matters.
Sale of ordinary shares and ADSs
Subject to the PFIC rules discussed below, a US holder who sells or otherwise disposes of ordinary shares or ADSs will recognise a capital gain or loss for US federal income tax purposes equal to the difference between the US dollar value of the amount realised and the holder’s tax basis, determined in US dollars, in those ordinary shares or ADSs. The gain or loss will generally be income or loss from sources within the US for foreign tax credit limitation purposes. The capital gain of a non-corporate US holder is generally taxed at preferential rates where the holder has a holding period greater than 12 months in the shares or ADSs sold. There are limitations on the deductibility of capital losses.
The US dollar value of any foreign currency received upon a sale or other disposition of ordinary shares or ADSs will be calculated by reference to the spot rate in effect on the date of sale or other disposal (or, in the case of a cash basis or electing accrual basis taxpayer, on the settlement date). A US holder will have a tax basis in the foreign currency received equal to that US dollar amount, and generally will recognise foreign currency gain or loss on a subsequent conversion or other disposal of the foreign currency. This foreign currency gain or loss generally will be treated as US source ordinary income or loss.
Passive Foreign Investment Company Rules
We do not believe that the BHP Billiton Plc ordinary shares or ADSs will be treated as stock of a PFIC for US federal income tax purposes, but this conclusion is a factual determination that is made annually at the end of the year and thus may be subject to change. If BHP Billiton Plc were treated as a PFIC, any gain realised on the sale or other disposition of ordinary shares or ADSs would in general not be treated as a capital gain. Instead, a
US holder would be treated as if it had realised such gain and certain ‘excess distributions’ ratably over its holding period for the ordinary shares or ADSs and would be taxed at the highest tax rate in effect for each such year to which the gain was allocated, together with an interest charge in respect of the tax attributable to each such year. In addition, dividends received with respect to ordinary shares or ADSs would not be eligible for the special tax rates applicable to qualified dividend income if BHP Billiton Plc were a PFIC either in the taxable year of the distribution or the preceding taxable year, but instead would be taxable at rates applicable to ordinary income. Assuming the shares or ADSs are ‘marketable stock’, a US holder may mitigate the adverse tax consequences described above by electing to be taxed annually on a mark-to-market basis with respect to such shares or ADSs.
11.7 Ancillary information for our shareholders
Informationhistory for BHP Billiton Limited and BHP Billiton Plc, shareholders is provided in the BHP Billiton Group Annual Report 2011history of dividends paid and the Summary Review 2011.Group’s earnings.
The Annual Report provides the detailed financial dataFive-year share price, dividend and information on the BHP Billiton Group’s performance required to comply with the reporting regimes in Australia, UK and the US. There are no specific disclosure requirements for the Summary Review, which is published as an investor communication for shareholders.
Shareholders of BHP Billiton Limited will receive a copy of the Annual Report or the Summary Review if they have requested a copy. Shareholders of BHP Billiton Plc will receive the Annual Report if they have requested a copy. ADR holders may view all documents online atwww.bhpbilliton.com or opt to receive a hard copy by application to the appropriate BHP Billiton Share Registrar.
Change of shareholder details and enquiries
Shareholders wishing to contact BHP Billiton on any matter relating to their shares or ADR holdings are invited to telephone the appropriate office of the BHP Billiton Share Registrar or Transfer Office listed on the inside back cover of the Annual Report.
Please ensure any changes to your shareholding details are notified to the relevant Registrar in a timely manner.
Shareholders can also access their current shareholding details and change many of these details online via BHP Billiton’s websitewww.bhpbilliton.com. The website requires you to quote your Shareholder Reference Number (SRN) or Holder Identification Number (HIN) in order to access this information.
Alternative access to the Annual Report and Summary Review
We offer an alternative for all shareholders who wish to be advised of the availability of the Annual Report and Summary Review 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 and Summary Review have been released. Shareholders will also receive notification of other major BHP Billiton announcements by email. If you require further information or you would like to make use of this service, please visit our websitewww.bhpbilliton.com.
ADR holders wishing to receive a hard copy of the Annual Report 2011 can do so by accessingcitibank.ar.wilink.com or by calling Citibank Shareholder Services during business hours. ADR holders may also contact the adviser that administers their investments. Holders of BHP Billiton Plc shares dematerialised into STRATE should liaise directly with their Central Securities Depository Participant (CSDP) or broker.
Key dates for shareholders
The following table sets out future dates in the next financial and calendar year of interest to our shareholders. If there are any changes to these dates, all relevant stock exchanges (see section 11.1) will be notified.earnings history
|
| |
| ||
|
| |
|
| |
| ||
| ||
| ||
|
Exhibits marked “*” have been filed as exhibits to this annual report on Form 20-F. Remaining exhibits have been incorporated by reference as indicated.
Exhibit 1 Constitution
Exhibit 4 Material Contracts
|
|
|
|
|
|
|
|
|
|
Exhibit 8 List of Subsidiaries
Exhibit 12 Certifications (section 302)
Exhibit 13 Certifications (section 906)
Exhibit 15 Consent of Independent Registered Public Accounting Firm
Exhibit 99 Miscellaneous
Footnotes
|
|
|
|
SIGNATURE
The registrants hereby certify that they meet all of the requirements for filing on Form 20-F and that they have duly caused and authorised the undersigned to sign this annual report on their behalf.
BHP Billiton Limited
FY2010 | FY2011 | FY2012 | FY2013 | FY2014 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
BHP Billiton Limited | Share price at beginning of year | A$33.96 | A$36.94 | A$43.97 | A$31.72 | A$30.94 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share price at end of year | A$37.65 | A$43.80 | A$31.45 | A$31.37 | A$35.90 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Dividends paid | A$0.95 | A$0.95 | A$1.03 | A$1.10 | A$1.29 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
BHP Billiton Plc
The highest share price during FY2014 was A$39.38 for BHP Billiton Limited shares and £19.95 for BHP Billiton Plc shares. The lowest share prices during FY2014 were A$30.94 and £16.67, respectively. 4.4.26 Awards of Matched Shares under the Shareplus all-employee share purchase plan Like all permanent employees, members of the GMC are eligible to participate in Shareplus, an all-employee share purchase plan. For administrative simplicity in regard to stock exchange dealings and announcements, no GMC members currently participate. This table shows Shareplus holdings previously accumulated by members of the GMC, including during the period before they joined the GMC. Participants in Shareplus contribute from their post-tax base salary (capped at US$5,000 per year) to acquire shares in BHP Billiton Limited or in BHP Billiton Plc. For each share purchased, the participant receives a right to acquire a Matched Share, which vests provided the participant remains employed by BHP Billiton on the third anniversary of the start of the relevant Shareplus Plan Year. Differences in exchange rates in relation to the base salaries of the participants in previous financial years and the currencies of each securities exchange result in minor differences in the numbers of shares allocated.
Name Tim Cutt(3) Total Dean Dalla Valle Total Mike Fraser(4) Total Mike Henry Total Graham Kerr Total Jane McAloon Total Jimmy Wilson Total Karen Wood Total |
|
|
|
Other disclosures 4.4.27 Ordinary share holdings and transactions The number of ordinary shares in BHP Billiton Limited or in BHP Billiton Plc held directly, indirectly or beneficially, by each individual (including shares held in the name of the spouse, superannuation fund, nominee and/or other controlled entities) are shown in table below as at 30 June 2014. In addition, there have been no changes in the interests of any Directors in the period to 11 August 2014 (being one month prior to the date of the notice of the 2014 AGMs). These are ordinary shares held without performance conditions or restrictions and are included in MSR calculations for each individual. MSR calculations for members of the GMC (including the CEO) also include any vested but unexercised employee awards as shown in previous sections of the report.
|
|
4.4.28 Payments to past Directors UK regulations require the disclosure of payments to past Directors(1). As foreshadowed in the 2013 Remuneration Report, the following payments were made to Marius Kloppers (CEO and Executive Director until 10 May 2013): 325,000 LTI awards, granted in 2008, vested on 21 August 2013. The closing price of ordinary BHP Billiton Limited shares on that date was A$35.74 and so the value of the vested award was US$12.051 million (including the related DEP of US$1.560 million). 123,250 LTI awards, granted in 2009, vested on 20 August 2014. The closing price of ordinary BHP Billiton Limited shares on that date was A$38.13 and so the value of the vested award was US$5.883 million (including the related DEP of US$0.636 million). For the period 10 May to 1 October 2013, base salary, pension contributions and applicable benefits were provided. There were no payments made for loss of office in FY2014. |
4.4.29 Relative importance of spend on pay The table below sets out the total spend on employee remuneration during FY2014 (and the prior year), compared with other significant expenditure items. The table includes items as prescribed in the UK requirements. BHP Billiton has included tax payments and purchases of property, plant and equipment, being the most significant other outgoings in monetary terms.
4.4.30 Retirement disclosures for the Non-executive Directors The following table sets out the accrued retirement benefits under the now-closed Retirement Plan of BHP Billiton Limited. The Retirement Plan was closed on 24 October 2003 and entitlements that had accumulated in respect of each of the participants were frozen. These will be paid on retirement. An earnings rate equal to the five-year Australian Government Bond Rate is being applied to the frozen entitlements from that date.
|
4.4.31 Transactions with KMP During the financial year, there were no purchases by KMP from the Group (2013: US$ nil; 2012: US$ nil). There are no amounts payable at 30 June 2014 (2013: US$ nil). Loans with KMP There are US$ nil loans (2013: US$ nil) with KMP. Transactions with personally related entities A number of Directors of the Group hold or have held positions in other companies, 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 (2013: US$ nil). This Remuneration Report was approved by the Board on 11 September 2014 and signed on its behalf by: |
The information presented by the Directors in this Directors’ Report relates to BHP Billiton Limited and BHP Billiton Plc and their subsidiaries. Section 1 Strategic Report (which includes the Chairman’s Review in section 1.3 and the Chief Executive Officer’s Report in section 1.4, and incorporates the operating and financial review), section 2 Our Assets, section 3 Corporate Governance Statement, section 4 Remuneration Report, section 7 Financial Statements and section 9 Shareholder information of this Annual Report are each incorporated by reference into, and form part of, this Directors’ Report. The Directors confirm, on the advice of the Risk and Audit Committee, that they consider the Annual Report (including the Financial Statements), taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Group’s performance, business model and strategy. 5.1 Review of operations, principal activities and state of affairs A review of the operations of the Group during FY2014, the results of those operations during FY2014 and the expected results of those operations in future financial years, are set out in section 1, in particular in sections 1.1, 1.3 to 1.5, 1.11, 1.12 and 1.15 and other material in this Annual Report. Information on the development of the Group and likely developments in future years also appears in those sections of this Annual Report. Our principal activities during FY2014 were exploration, development, production and processing of minerals (in respect of iron ore, metallurgical and energy coal, copper, aluminium, manganese, uranium, nickel, silver and potash), and exploration, development and production of conventional and unconventional oil and gas. No significant changes in the nature of the Group’s principal activities occurred during FY2014. Information in relation to significant changes in the state of affairs of the Group that occurred during FY2014 and significant post-balance date events is set out below and in sections 1.12 and 2.1 of this Annual Report. On 1 July 2013 Mike Yeager retired from the Group Management Committee (GMC) and from his role as Group Executive and Chief Executive – Petroleum and Tim Cutt joined the GMC as President, Petroleum and Potash on 2 July 2013. During FY2014, we made further announcements relating to GMC changes: Mike Fraser joined the GMC as President, Human Resources on 27 August 2013 and Tony Cudmore joined the GMC as President, Corporate Affairs on 3 March 2014. On 25 July 2013 we announced the investment of US$1.97 billion (BHP Billiton share) to sustain operations at Escondida in Chile by constructing a new 2,500 litre per second seawater desalination plant. On 23 July 2014 we announced the seawater desalination plant was on schedule and budget, with 12 per cent of the overall project complete. On 20 August 2013 we announced the investment of US$2.6 billion to finish the excavation and lining of the Jansen Potash Project’s production and services shafts, and to continue the installation of essential surface infrastructure and utilities. We made further announcements in FY2014 that the investment will be spread over a number of years with the timeframes for both shaft completions being extended with no changes to the budget or long-term development plans. On 19 August 2014 we announced the overall project was 30 per cent complete and on budget. On 26 September 2013 we announced the pricing of US$5.0 billion Global Bonds (four tranches) under the debt shelf registration statement, which had previously been filed with the US Securities and Exchange Commission. On 2 January 2014 we announced the redemption of Petrohawk Energy Corporation 10.5 per cent Senior Notes due 2014 and 7.875 per cent Senior Notes due 2015. The total aggregate principal value of the notes redeemed was approximately US$1.4 billion. On 15 April 2014 Malcolm Brinded was appointed as a Non-executive Director of BHP Billiton Limited and BHP Billiton Plc. In accordance with the Constitution of BHP Billiton Limited and the Articles of Association of BHP Billiton Plc, Mr Brinded will seek election at the 2014 Annual General Meetings. On 14 July 2014 we announced the redemption of Petrohawk Energy Corporation 7.25 per cent Senior Notes due 2018 and 6.25 per cent Senior Notes due 2019. The total aggregate principal value of the notes to be redeemed was approximately US$1.8 billion. On 19 August 2014 we announced the proposal to create a new global metals and mining company based on a demerger of a selection of the Group’s high-quality aluminium, coal, manganese, nickel and silver assets to accelerate portfolio simplification. We also announced that shareholders will have the opportunity to vote on the proposal once all necessary approvals are in place. On 19 August 2014, following the announcement in relation to creating a new global metals and mining company, we announced that Graham Kerr, currently Chief Financial Officer, is appointed Chief Executive Officer-designate of the new company. Graham will retire from the GMC on 1 October 2014 and will be replaced as Chief Financial Officer by Peter Beaven, currently President, Copper. On 19 August 2014 Karen Wood retired from the GMC from her role as President, Corporate. No other matter or circumstance has arisen since the end of FY2014 that has significantly affected or is expected to significantly affect the operations, the results of operations or state of affairs of the Group in future years. 5.2 Share capital and buy-back programs At the Annual General Meetings held in 2013, shareholders authorised BHP Billiton Plc to make on-market purchases of up to 213,618,545 of its ordinary shares, representing 10 per cent of BHP Billiton Plc’s issued share capital at that time. During FY2014, we did not make any on-market or off-market purchases of BHP Billiton Limited shares or BHP Billiton Plc shares under any share buy-back program. As at the date of this Directors’ Report there are no current on-market buy-backs. Shareholders will be asked at the 2014 Annual General Meetings to renew this authority. The Directors have no present intention to exercise this authority, if granted. Some of our executives receive rights over BHP Billiton shares as part of their remuneration arrangements. Entitlements may be satisfied by the transfer of existing shares, which are acquired on-market, or in respect of some entitlements, by the issue of new shares. The shares in column ‘A’ below were purchased to satisfy awards made under the various BHP Billiton Limited and BHP Billiton Plc employee share schemes during FY2014.
|
|
|
|
5.3 Results, financial instruments and going concern Information about our financial position and financial results is included in the Financial Statements in this Annual Report. The income statement shows profit attributable to BHP Billiton members of US$13.8 billion compared with US$11.2 billion in FY2013. The Group’s business activities, together with the factors likely to affect its future development, performance and position are discussed in section 1 of this Annual Report. In addition, sections 1.5 to 1.7 and 3.15, and note 29 ‘Financial risk management’ to the Financial Statements detail the Group’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 the Group 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. The Directors who served at any time during or since the end of the financial year are Jac Nasser, Andrew Mackenzie, Malcolm Brinded, Malcolm Broomhead, John Buchanan, Carlos Cordeiro, David Crawford, Pat Davies, Carolyn Hewson, Lindsay Maxsted, Wayne Murdy, Keith Rumble, John Schubert and Shriti Vadera. Further details of the Directors of BHP Billiton Limited and BHP Billiton Plc are set out in section 3.2 of this Annual Report. 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 2011, and the period for which each directorship has been held. Mr Brinded was appointed as a Non-executive Director of BHP Billiton Limited and BHP Billiton Plc with effect from 15 April 2014 and, in accordance with the Constitution of BHP Billiton Limited and the Articles of Association of BHP Billiton Plc, he will seek election at the 2014 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 3.12 of this Annual Report. 5.5 Remuneration and share interests 5.5.1 Remuneration The policy for determining the nature and amount of emoluments of members of the GMC (including the Executive Director) and the Non-executive Directors and information about the relationship between that policy and our performance are set out in sections 4.3 and 4.4 of this Annual Report. The remuneration tables contained in section 4.4 of this Annual Report set out the remuneration of members of the GMC (including the Executive Director) and the Non-executive Directors. 5.5.2 Directors The information contained in section 4.4.27 and section 5.17 of this Directors’ Report sets out the relevant interests in shares in BHP Billiton Limited and BHP Billiton Plc of the Directors who held office during FY2014, at the beginning and end of FY2014, and in relation to all Directors in office as at the date of this Directors’ Report, their relevant interests in shares in BHP Billiton Limited and BHP Billiton Plc as at the date of this Directors’ Report. No rights over shares in BHP Billiton Limited and BHP Billiton Plc are held by any of the Non-executive Directors. Interests held by the Executive Director under employee equity plans as at 30 June 2014 are set out in the tables showing interests in incentive plans contained in section 4.4 and note 31 ‘Key Management Personnel’ to the Financial Statements of this Annual Report. We have not made available to any Director any interest in a registered scheme. The former Directors of BHP Limited participated in a retirement plan under which they were entitled to receive a payment on retirement calculated by reference to years of service. This plan was closed on 24 October 2003, and benefits accrued to that date are held by BHP Billiton Limited and will be paid on retirement. Further information about this plan and its closure are set out in section 4.4.30 of this Annual Report. 5.5.3 GMC members The information contained in section 4.4.27 and section 5.18 of this Directors’ Report sets out the relevant interests held by those senior executives who were members of the GMC (other than the Executive Director) during FY2014 in shares of BHP Billiton Limited and BHP Billiton Plc at the beginning and end of FY2014, and at the date of this Directors’ Report. Interests held by members of the GMC under employee equity plans as at 30 June 2014 are set out in the tables showing interests in incentive plans contained in section 4.4 and note 31 ‘Key Management Personnel’ to the Financial Statements of this Annual Report. Jane McAloon is the Group Company Secretary. Details of her qualifications and experience are set out in section 3.2 of this Annual Report. The following people also act as company secretaries of BHP Billiton Limited, BHP Billiton Plc or both (as indicated): Nicole Duncan BA (Hons), LLB (BHP Billiton Limited and BHP Billiton Plc), Geof Stapledon, BEc, LLB (Hons), DPhil, FCIS (BHP Billiton Plc) and Elizabeth Hobley, BA (Hons), ACIS (BHP Billiton Plc). Each such individual has experience in a company secretariat role or other relevant fields arising from time spent in such roles within BHP Billiton, large listed companies or other relevant entities. Rule 146 of the BHP Billiton Limited Constitution and Article 146 of the BHP Billiton Plc Articles of Association require each Company to indemnify to the extent permitted by law, each Director, Secretary or Executive Officer of BHP Billiton Limited and BHP Billiton Plc respectively against liability incurred in, or arising out of, the conduct of the business of the Company or the discharge of the duties of the Director, Secretary and Executive Officer. The Directors named in section 3.2 of this Annual Report, the Executive Officers and the Company Secretaries of BHP Billiton Limited and BHP Billiton Plc have the benefit of this requirement, as do individuals who formerly held one of those positions. In accordance with this requirement, BHP Billiton Limited and BHP Billiton 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. We have a policy that we 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 us. From time to time, we engage our External Auditor, KPMG, to conduct non-statutory audit work and provide other services in accordance with our policy on the provision of other services by the External Auditor. The terms of engagement typically include an indemnity in favour of KPMG: against all losses, claims, costs, expenses, actions, demands, damages, liabilities or any proceedings (liabilities) incurred by KPMG in respect of third party claims arising from a breach by the Group under the engagement terms; for all liabilities KPMG has to the Group or any third party as a result of reliance on information provided by the Group that is false, misleading or incomplete. We have insured against amounts that we may be liable to pay to Directors, Company Secretaries or certain employees pursuant to Rule 146 of the Constitution of BHP Billiton Limited and Article 146 of the Articles of Association of BHP Billiton Plc or that we otherwise agree to pay by way of indemnity. The insurance policy also insures Directors, Company Secretaries and some employees against certain liabilities (including legal costs) they may incur in carrying out their duties for us. We have paid premiums for this Directors’ and Officers’ insurance of US$2,088,352 net during FY2014. No indemnity in favour of a current or former officer of BHP Billiton Limited or BHP Billiton Plc, or in favour of the External Auditor, has been called on during FY2014. We are committed to open, honest and productive relationships with our employees. At BHP Billiton, we recognise the most important ingredient for success is our talented and motivated workforce, whose members demonstrate behaviours that are aligned toOur BHP Billiton Chartervalues. Further information in relation to employee engagement and employee policies, including communications and disabilities, can be found in section 1.13.2. The UK Financial Conduct Authority’s Disclosure and Transparency Rules (DTR 7.2) require that certain information be included in a corporate governance statement set out in the Directors’ Report. BHP Billiton has an existing practice of issuing a separate corporate governance statement as part of its Annual Report. The information required by the Disclosure and Transparency Rules and the UK Financial Conduct Authority’s Listing Rules (LR 9.8.6) is located in section 3 of this Annual Report, 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 5.2, 5.3, 5.17 and 5.20 of this Annual Report. A final dividend of 62 US cents per share will be paid on 23 September 2014, resulting in total dividends in respect of FY2014 of 121 US cents per share. Details of the dividends paid and the dividend policy are set out in sections 1.6.3 and 9.7 of this Annual Report. A resolution to reappoint KPMG LLP as the auditor of BHP Billiton Plc will be proposed at the 2014 Annual General Meetings in accordance with section 489 of the UK Companies Act 2006. During FY2014 Mr Maxsted was the only officer of BHP Billiton who previously held the role of director or partner of the Group’s External Auditor at a time when the Group’s External Auditor conducted an audit of the Group. Mr Maxsted’s prior relationship with KPMG is set out in section 3.10 of this Annual Report. Mr Maxsted was not part of the KPMG audit practice after 1980 and, while at KPMG, was not in any way involved in, or able to influence, any audit activity associated with BHP Billiton. Each person who held the office of Director at the date the Board resolved to approve this Directors’ Report makes the following statements: so far as the Director is aware, there is no relevant audit information of which the Group’s External Auditor is unaware; and 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 the Group’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 these provisions. Details of the non-audit services undertaken by our External Auditor, including the amounts paid for non-audit services, are set out in note 35 ‘Auditor’s remuneration’ to the Financial Statements of this Annual Report. 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, and no non-audit services were carried out which were specifically excluded by the Policy on Provision of Audit and Other Services by the External Auditor. Based on advice provided by the Risk and Audit Committee, the Directors have formed the view that the provision of non-audit services is compatible with the general standard of independence for auditors, and that the nature of non-audit services means that auditor independence was not compromised. Further information about our policy in relation to the provision of non-audit services by the auditor is set out in section 3.14.1 of this Annual Report. No political contributions/donations for political purposes were made to any political party, politician, elected official or candidate for public office during FY2014.(1) |
5.14 Exploration, research and development Companies within the Group carry out exploration and research and development necessary to support their activities. Further details are provided in sections 1.6.3, 1.12, 1.15.1, 2.1 and 2.3.2 of this Annual Report. BHP Billiton Limited is a company of a kind referred to in Australian Securities and Investments Commission Class Order No. 98/100, dated 10 July 1998. 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 that Class Order. 5.16 Proceedings on behalf of BHP Billiton Limited No proceedings have been brought on behalf of BHP Billiton Limited, nor any application made under section 237 of the Australian Corporations Act 2001. Except for Mr Maxsted and Mr Mackenzie, as at the date of this Directors’ Report, the information pertaining to shares in BHP Billiton Limited and BHP Billiton Plc held directly, indirectly or beneficially, by Directors is the same as set out in the table in section 4.4.27. Where applicable, the information includes shares held in the name of a spouse, superannuation fund, nominee and/or other controlled entities. As at the date of this Directors’ Report, Mr Maxsted indirectly holds 8,000 shares in BHP Billiton Limited and Mr Mackenzie holds (either directly, indirectly or beneficially) 266,164 shares in BHP Billiton Plc. 5.18 GMC members’ shareholdings (other than Directors) As at 30 June 2014, the information pertaining to shares in BHP Billiton Limited and BHP Billiton Plc held directly, indirectly or beneficially, by those senior executives who were members of the GMC during FY2014 (other than the Executive Director) is set out in the table in section 4.4.27. Where applicable, the information includes shares held in the name of a spouse, superannuation fund, nominee and/or other controlled entities. As at the date of this Directors’ Report, the information pertaining to shares in BHP Billiton Limited and BHP Billiton Plc held directly, indirectly or beneficially, by those senior executives who were members of the GMC during FY2014 (other than the Executive Director) is as follows and, where applicable, the information includes shares held in the name of a spouse, superannuation fund, nominee and/or other controlled entities: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Peter Beaven | BHP Billiton Limited BHP |
| 184,473
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| BHP Billiton Limited
|
| – – | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Tim Cutt(3) | BHP Billiton Limited BHP Billiton Plc | 56,459 – | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Dean Dalla Valle | BHP Billiton Limited BHP Billiton Plc | 126,907 – | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Mike Fraser | BHP Billiton Limited BHP Billiton Plc | – 172,696 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Geoff Healy | BHP Billiton Limited BHP Billiton Plc | 3,000 – | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Mike Henry | BHP Billiton Limited BHP Billiton Plc | 21,879 162,632 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Graham Kerr | BHP Billiton Limited BHP Billiton Plc | 119,272 – | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Jane McAloon | BHP Billiton Limited BHP Billiton Plc | 59,581 – | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Daniel Malchuk | BHP Billiton Limited BHP Billiton Plc | 66,307 – | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Jimmy Wilson | BHP Billiton Limited BHP Billiton Plc | 115,965 59,301 |
(1) | New members appointed to the GMC during FY2014: Tim Cutt (appointed 2 July 2013), Mike Fraser (appointed 26 August 2013) and Tony Cudmore (appointed 15 January 2014). |
(2) | Karen Wood ceased to be a member of the GMC on 19 August 2014. The disclosed holdings as at 30 June |
Notes | 2011 | 2010 | ||||||||||
US$M | US$M | |||||||||||
ASSETS | ||||||||||||
Current assets | ||||||||||||
Cash and cash equivalents | 23 | 10,084 | 12,456 | |||||||||
Trade and other receivables | 10 | 8,197 | 6,543 | |||||||||
Other financial assets | 11 | 264 | 292 | |||||||||
Inventories | 12 | 6,154 | 5,334 | |||||||||
Current tax assets | 273 | 189 | ||||||||||
Other | 308 | 320 | ||||||||||
|
|
|
| |||||||||
Total current assets | 25,280 | 25,134 | ||||||||||
|
|
|
| |||||||||
Non-current assets | ||||||||||||
Trade and other receivables | 10 | 2,093 | 1,381 | |||||||||
Other financial assets | 11 | 1,602 | 1,510 | |||||||||
Inventories | 12 | 363 | 343 | |||||||||
Property, plant and equipment | 13 | 68,468 | 55,576 | |||||||||
Intangible assets | 14 | 904 | 687 | |||||||||
Deferred tax assets | 7 | 3,993 | 4,053 | |||||||||
Other | 188 | 168 | ||||||||||
|
|
|
| |||||||||
Total non-current assets | 77,611 | 63,718 | ||||||||||
|
|
|
| |||||||||
Total assets | 102,891 | 88,852 | ||||||||||
|
|
|
| |||||||||
LIABILITIES | ||||||||||||
Current liabilities | ||||||||||||
Trade and other payables | 15 | 9,718 | 6,467 | |||||||||
Interest bearing liabilities | 16 | 3,519 | 2,191 | |||||||||
Other financial liabilities | 17 | 288 | 511 | |||||||||
Current tax payable | 3,693 | 1,685 | ||||||||||
Provisions | 18 | 2,256 | 1,899 | |||||||||
Deferred income | 259 | 289 | ||||||||||
|
|
|
| |||||||||
Total current liabilities | 19,733 | 13,042 | ||||||||||
|
|
|
| |||||||||
Non-current liabilities | ||||||||||||
Trade and other payables | 15 | 555 | 469 | |||||||||
Interest bearing liabilities | 16 | 12,388 | 13,573 | |||||||||
Other financial liabilities | 17 | 79 | 266 | |||||||||
Deferred tax liabilities | 7 | 2,683 | 4,320 | |||||||||
Provisions | 18 | 9,269 | 7,433 | |||||||||
Deferred income | 429 | 420 | ||||||||||
|
|
|
| |||||||||
Total non-current liabilities | 25,403 | 26,481 | ||||||||||
|
|
|
| |||||||||
Total liabilities | 45,136 | 39,523 | ||||||||||
|
|
|
| |||||||||
Net assets | 57,755 | 49,329 | ||||||||||
|
|
|
| |||||||||
EQUITY | ||||||||||||
Share capital – BHP Billiton Limited | 19 | 1,183 | 1,227 | |||||||||
Share capital – BHP Billiton Plc | 19 | 1,070 | 1,116 | |||||||||
Treasury shares | 19 | (623 | ) | (525 | ) | |||||||
Reserves | 20 | 2,001 | 1,906 | |||||||||
Retained earnings | 20 | 53,131 | 44,801 | |||||||||
|
|
|
| |||||||||
Total equity attributable to members of BHP Billiton Group | 56,762 | 48,525 | ||||||||||
Non-controlling interests | 20 | 993 | 804 | |||||||||
|
|
|
| |||||||||
Total equity | 57,755 | 49,329 | ||||||||||
|
|
|
|
The accompanying notes form part of these financial statements.
The financial statements were approved by the Board of Directors on 6 September 2011 and signed on its behalf by:
| ||
|
Consolidated Cash Flow Statement
for the year ended 30 June 2011
Notes | 2011 | 2010 | 2009 | |||||||||||||
US$M | US$M | US$M | ||||||||||||||
Operating activities | ||||||||||||||||
Profit before taxation | 31,255 | 19,572 | 11,617 | |||||||||||||
Adjustments for: | ||||||||||||||||
Non-cash exceptional items | (150 | ) | (255 | ) | 5,460 | |||||||||||
Depreciation and amortisation expense | 5,039 | 4,759 | 3,871 | |||||||||||||
Net gain on sale of non-current assets | (41 | ) | (114 | ) | (38 | ) | ||||||||||
Impairments of property, plant and equipment, financial assets and intangibles | 74 | 35 | 190 | |||||||||||||
Employee share awards expense | 266 | 170 | 185 | |||||||||||||
Financial income and expenses | 561 | 459 | 543 | |||||||||||||
Other | (384 | ) | (265 | ) | (320 | ) | ||||||||||
Changes in assets and liabilities: | ||||||||||||||||
Trade and other receivables | (1,960 | ) | (1,713 | ) | 4,894 | |||||||||||
Inventories | (792 | ) | (571 | ) | (116 | ) | ||||||||||
Trade and other payables | 2,780 | 565 | (847 | ) | ||||||||||||
Net other financial assets and liabilities | 46 | (90 | ) | (769 | ) | |||||||||||
Provisions and other liabilities | 387 | (306 | ) | (497 | ) | |||||||||||
|
|
|
|
|
| |||||||||||
Cash generated from operations | 37,081 | 22,246 | 24,173 | |||||||||||||
Dividends received | 12 | 20 | 30 | |||||||||||||
Interest received | 107 | 99 | 205 | |||||||||||||
Interest paid | (562 | ) | (520 | ) | (519 | ) | ||||||||||
Income tax refunded | 74 | 552 | — | |||||||||||||
Income tax paid | (6,025 | ) | (4,931 | ) | (5,129 | ) | ||||||||||
Royalty related taxation paid | (607 | ) | (576 | ) | (906 | ) | ||||||||||
|
|
|
|
|
| |||||||||||
Net operating cash flows | 30,080 | 16,890 | 17,854 | |||||||||||||
|
|
|
|
|
| |||||||||||
Investing activities | ||||||||||||||||
Purchases of property, plant and equipment | (11,147 | ) | (9,323 | ) | (9,492 | ) | ||||||||||
Exploration expenditure | (1,240 | ) | (1,333 | ) | (1,243 | ) | ||||||||||
Exploration expenditure expensed and included in operating cash flows | 981 | 1,030 | 1,009 | |||||||||||||
Purchase of intangibles | (211 | ) | (85 | ) | (141 | ) | ||||||||||
Investment in financial assets | (238 | ) | (152 | ) | (40 | ) | ||||||||||
Investment in subsidiaries, operations and jointly controlled entities, net of their cash | (4,807 | ) | (508 | ) | (286 | ) | ||||||||||
Payment on sale of operations | — | (156 | ) | (126 | ) | |||||||||||
|
|
|
|
|
| |||||||||||
Cash outflows from investing activities | (16,662 | ) | (10,527 | ) | (10,319 | ) | ||||||||||
Proceeds from sale of property, plant and equipment | 80 | 132 | 164 | |||||||||||||
Proceeds from financial assets | 118 | 34 | 96 | |||||||||||||
Proceeds from sale or partial sale of subsidiaries, operations and jointly controlled entities, net of their cash | — | 376 | 17 | |||||||||||||
|
|
|
|
|
| |||||||||||
Net investing cash flows | (16,464 | ) | (9,985 | ) | (10,042 | ) | ||||||||||
|
|
|
|
|
| |||||||||||
Financing activities | ||||||||||||||||
Proceeds from interest bearing liabilities | 1,374 | 567 | 7,323 | |||||||||||||
Proceeds from debt related instruments | 222 | 103 | 354 | |||||||||||||
Repayment of interest bearing liabilities | (2,173 | ) | (1,155 | ) | (3,748 | ) | ||||||||||
Proceeds from ordinary shares | 32 | 12 | 29 | |||||||||||||
Contributions from non-controlling interests | — | 335 | — | |||||||||||||
Purchase of shares by Employee Share Ownership Plan (ESOP) Trusts | (469 | ) | (274 | ) | (169 | ) | ||||||||||
Share buy-back – BHP Billiton Limited | (6,265 | ) | — | — | ||||||||||||
Share buy-back – BHP Billiton Plc | (3,595 | ) | — | — | ||||||||||||
Dividends paid | (5,054 | ) | (4,618 | ) | (4,563 | ) | ||||||||||
Dividends paid to non-controlling interests | (90 | ) | (277 | ) | (406 | ) | ||||||||||
|
|
|
|
|
| |||||||||||
Net financing cash flows | (16,018 | ) | (5,307 | ) | (1,180 | ) | ||||||||||
|
|
|
|
|
| |||||||||||
Net (decrease)/increase in cash and cash equivalents | (2,402 | ) | 1,598 | 6,632 | ||||||||||||
Cash and cash equivalents, net of overdrafts, at the beginning of financial year | 12,455 | 10,831 | 4,173 | |||||||||||||
Effect of foreign currency exchange rate changes on cash and cash equivalents | 27 | 26 | 26 | |||||||||||||
|
|
|
|
|
| |||||||||||
Cash and cash equivalents, net of overdrafts, at the end of the financial year | 23 | 10,080 | 12,455 | 10,831 | ||||||||||||
|
|
|
|
|
|
The accompanying notes form part of these financial statements.
Consolidated Statement of Changes in Equity
for the year ended 30 June 2011
Attributable to members of the BHP Billiton Group | ||||||||||||||||||||||||||||||||
Share capital – BHP Billiton Limited | Share capital – BHP Billiton Plc | Treasury shares | Reserves | Retained earnings | Total | Non- controlling interests | Total equity | |||||||||||||||||||||||||
US$M | ||||||||||||||||||||||||||||||||
Balance as at 1 July 2010 | 1,227 | 1,116 | (525 | ) | 1,906 | 44,801 | 48,525 | 804 | 49,329 | |||||||||||||||||||||||
Total comprehensive income | — | — | — | (66 | ) | 23,637 | 23,571 | 284 | 23,855 | |||||||||||||||||||||||
Transactions with owners: | ||||||||||||||||||||||||||||||||
BHP Billiton Limited shares bought back and cancelled | (44 | ) | — | — | — | (6,301 | ) | (6,345 | ) | — | (6,345 | ) | ||||||||||||||||||||
BHP Billiton Plc shares bought back | — | — | (3,678 | ) | — | — | (3,678 | ) | — | (3,678 | ) | |||||||||||||||||||||
BHP Billiton Plc shares cancelled | — | (46 | ) | 3,595 | 46 | (3,595 | ) | — | — | — | ||||||||||||||||||||||
Purchase of shares by ESOP Trusts | — | — | (469 | ) | — | — | (469 | ) | — | (469 | ) | |||||||||||||||||||||
Employee share awards exercised net of employee contributions | — | — | 454 | (121 | ) | (294 | ) | 39 | — | 39 | ||||||||||||||||||||||
Employee share awards forfeited | — | — | — | (9 | ) | 9 | — | — | — | |||||||||||||||||||||||
Accrued employee entitlement for unvested awards | — | — | — | 266 | — | 266 | — | 266 | ||||||||||||||||||||||||
Distribution to option holders | — | — | — | (21 | ) | — | (21 | ) | (17 | ) | (38 | ) | ||||||||||||||||||||
Dividends | — | — | — | — | (5,126 | ) | (5,126 | ) | (90 | ) | (5,216 | ) | ||||||||||||||||||||
Equity contributed | — | — | — | — | — | — | 12 | 12 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Balance as at 30 June 2011 | 1,183 | 1,070 | (623 | ) | 2,001 | 53,131 | 56,762 | 993 | 57,755 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Balance as at 1 July 2009 | 1,227 | 1,116 | (525 | ) | 1,305 | 36,831 | 39,954 | 757 | 40,711 | |||||||||||||||||||||||
Total comprehensive income | — | — | — | 197 | 12,738 | 12,935 | 294 | 13,229 | ||||||||||||||||||||||||
Transactions with owners: | ||||||||||||||||||||||||||||||||
Purchase of shares by ESOP Trusts | — | — | (274 | ) | — | — | (274 | ) | — | (274 | ) | |||||||||||||||||||||
Employee share awards exercised net of employee contributions | — | — | 274 | (88 | ) | (178 | ) | 8 | — | 8 | ||||||||||||||||||||||
Employee share awards forfeited | — | — | — | (28 | ) | 28 | — | — | — | |||||||||||||||||||||||
Accrued employee entitlement for unvested awards | — | — | — | 170 | — | 170 | — | 170 | ||||||||||||||||||||||||
Issue of share options to non-controlling interests | — | — | — | 43 | — | 43 | 16 | 59 | ||||||||||||||||||||||||
Distribution to option holders | — | — | — | (10 | ) | — | (10 | ) | (6 | ) | (16 | ) | ||||||||||||||||||||
Dividends | — | — | — | — | (4,618 | ) | (4,618 | ) | (277 | ) | (4,895 | ) | ||||||||||||||||||||
Equity contributed | — | — | — | 317 | — | 317 | 20 | 337 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Balance as at 30 June 2010 | 1,227 | 1,116 | (525 | ) | 1,906 | 44,801 | 48,525 | 804 | 49,329 | �� | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Balance as at 1 July 2008 | 1,227 | 1,116 | (514 | ) | 750 | 35,756 | 38,335 | 708 | 39,043 | |||||||||||||||||||||||
Total comprehensive income | — | — | — | 404 | 5,742 | 6,146 | 458 | 6,604 | ||||||||||||||||||||||||
Transactions with owners: | ||||||||||||||||||||||||||||||||
Purchase of shares by ESOP Trusts | — | — | (169 | ) | — | — | (169 | ) | — | (169 | ) | |||||||||||||||||||||
Employee share awards exercised net of employee contributions | — | — | 158 | (34 | ) | (104 | ) | 20 | — | 20 | ||||||||||||||||||||||
Accrued employee entitlement for unvested awards | — | — | — | 185 | — | 185 | — | 185 | ||||||||||||||||||||||||
Dividends | — | — | — | — | (4,563 | ) | (4,563 | ) | (406 | ) | (4,969 | ) | ||||||||||||||||||||
Equity contributed | — | — | — | — | — | — | (3 | ) | (3 | ) | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Balance as at 30 June 2009 | 1,227 | 1,116 | (525 | ) | 1,305 | 36,831 | 39,954 | 757 | 40,711 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes form part of these financial statements.
Dual Listed Companies’ structure and basis of preparation of financial statements
Merger terms
On 29 June 2001,
(3) | 736 BHP Billiton Limited |
5.19 Performance in relation to environmental regulation
A significant environmental incident is one with a severity rating of four and above based on our internal severity rating scale (tiered from one to seven by increasing severity). An environmental incident with a severity level four is one that causes a major impact/s to land, biodiversity, ecosystem services, water resources or air, with effects lasting greater than one year. There were no significant environmental incidents reported at our operated assets in FY2014.
Fines and prosecutions
In FY2014, BHP Billiton received nine fines at our operated assets, with a total value of US$128,898.
A fine of US$94,455 was levied at Energy Coal South Africa’s Khutala Colliery, which self-reported a non-compliance against its environmental impact assessment requirements defined by the National Environmental Management Act. As a result, the asset has appointed an independent Environmental Control Officer and introduced a strengthened land disturbance permit procedure.
NSW Energy Coal incurred three fines totalling US$6,971 at its Mt Arthur Operations for blasting penalty infringements outside the manufacturer’s recommended sleep time, failure to comply with the approved erosion and sediment control plan and carrying out dumping operations on an elevated and exposed area during adverse weather conditions. Actions are in place to prevent these infringements occurring again.
The five other fines, totalling US$27,472, were levied in North and South America, where our operations were cited for activities in relation to regulatory breaches against permit requirements and for loss of containment. The impacted assets are reviewing measures to prevent these incidents from occurring in the future.
Greenhouse gas emissions
The UK Companies Act 2006 requires, to the extent practicable, the Company to obtain relevant information on the Company’s annual quantity of greenhouse gas emissions which is reported in tonnes of carbon dioxide equivalent. The Company’s total 2014 greenhouse gas emissions and intensity are set out in sections 1.10 and 1.14.4 of this Annual Report.
Further information in relation to environmental performance, including environmental regulation, can be found in section 1.14.4 of this Annual Report and in the Sustainability Report available online atwww.bhpbilliton.com.
5.20 Share capital, restrictions on transfer of shares and other additional information
Information relating to BHP Billiton 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 Billiton outside of the United Kingdom, is set out in the following sections of this Annual Report:
Further details of all unvested equity awards as at the date of this Directors’ Report, including shares issued upon exercise of equity awards, are set out in note 33 ‘Employee share ownership plans’ to the Financial Statements of this Annual Report. Details of movements in share capital during and since the end of the financial year are set out in note 19 ‘Share capital’ to the Financial Statements of this Annual Report.
The Directors’ Report is made in accordance with a resolution of the Board.
Jac Nasser AO
Chairman
Andrew Mackenzie
Chief Executive Officer
Dated: 11 September 2014
We are involved from time to time in legal proceedings and governmental investigations of a character normally incidental to our business, including claims and pending actions against us seeking damages or clarification of legal rights and regulatory inquiries regarding business practices. In many cases, insurance or other indemnification protection afforded to us relates to such claims and may offset the financial impact on the Group of a successful claim.
This section summarises the significant legal proceedings and investigations in which we are currently involved.
Rio Algom Pension Plan
In June 2003, Alexander E Lomas, a retired member of the Rio Algom Limited Pension Plan for Salaried Employees (Pension Plan), filed a Notice of Application in a representative capacity in the Ontario Superior Court of Justice Commercial List against Rio Algom Limited (RAL) and the Plan Trustee alleging certain improprieties in their administration of the Pension Plan and use of Pension Plan funds from January 1966 onward.
Mr Lomas sought relief, both quantified and unquantified, for himself and those Pension Plan members he purported to represent in respect of a number of alleged breaches committed by RAL, including allegations of breach of employment contracts, breach of trust, and breach of the Trust Agreement underlying the Pension Plan. In particular:
Mr Lomas purported to represent members of the defined benefits portion of the Pension Plan. In 2005, the defined contribution members of the Pension Plan were included as parties to this action.
Between October 2006 and March 2010, various motions and appeals were argued by the parties. Among other things, these motions and appeals resulted in an order that the portion of the Application seeking an order directing RAL to apply for a wind-up of the Pension Plan be struck out of the Application.
In January 2014, the Court ordered that Ray Larson be substituted for Mr Lomas as the applicant in the Application. This motion was not opposed by RAL.
On 11 March 2014, RAL entered into a settlement with Mr Larson and other members of a committee of retired members of the Pension Plan. Subject to certain conditions being satisfied or waived, the settlement agreement provides for termination of the Pension Plan, the dismissal of the Application and releases from liability and subject to regulatory approval, the sharing of the surplus remaining in the Pension Plan upon wind-up between RAL and Pension Plan members and other persons entitled to benefits from the Pension Plan as at 11 March 2014, and those persons who had an entitlement under the Pension Plan at any time after 11 June 2003, but received payment of the commuted value of their entitlement under the Pension Plan prior to 11 March 2014. Court approval of the settlement agreement was granted on 25 June 2014.
Class actions concerning Cerrejón privatisation
The non-government organisation, Corporación Colombia Transparente (CCT), brought three separate class actions (Popular Actions 1,029, 1,032 and 1,048) against various defendants in connection with the privatisation of 50 per cent of the Cerrejón Zona Norte (CZN) mining complex in Colombia in 2002. The mining complex is
currently owned by CZN and Carbones del Cerrejón Limited (CDC). Our subsidiary Billiton Investment 3 BV owns a 33 per cent share in CDC, and our subsidiaries Billiton Investment 3 BV and Billiton Investment 8 BV (BHP Billiton Shareholders) collectively own a 33.33 per cent share in CZN.
CCT alleges, in part, that the defendants failed to comply with the privatisation process, and that the offer price for shares in CZN between Stages 1 and 2 of the privatisation process was not correctly adjusted for inflation.
Our share of the alleged adjustment of the CZN share price would be approximately US$4.41 million. In the alternative, CCT seeks declaration that the privatisation is null and void and forfeiture of the transfer price paid, of which our share would be approximately US$147.14 million. In both instances, CCT also seeks unquantified sanctions, including payment of stamp taxes, an award of 15 per cent of all monies recovered by the defendants, together with interest on all amounts at the maximum rate authorised by law.
Popular Action 1,048 was dismissed in December 2008. Popular Action 1,032, the CZN action, was originally dismissed on 18 February 2011, the Court determining that there were no irregularities in the privatisation of the Cerrejón Zona Norte mining complex.
CCT’s request for a reconsideration of the judgment was denied. In March 2011, CCT filed an appeal against the dismissal. This appeal was dismissed in February 2013 and the plaintiff filed for a revision of the judgment. Revision of judgment is a new avenue of review introduced by the Columbian Administrative Code that applies to the last instance judgments and may be used when the plaintiff believes certain issues were not considered in the decision. In January 2014, the request for revision was denied and the action is therefore concluded. Popular Action 1,029 was dismissed in December 2008. Despite the fact that this dismissal was final, the plaintiff filed a tutela action at the Council of State challenging the dismissal and obtained from the Council of State a decision ordering the first instance judge to continue with the action. Neither CZN nor BHP Billiton shareholders were informed of this action. In August 2013, at the request of the defendants, the Council of State annulled the steps that had been taken in the proceeding and the defendants filed a reply to the action. The tutela action was then subsequently dismissed; however, an appeal has been filed against the dismissal.
A separate class action arising out of the privatisation of the CZN mining complex has been brought by Mr Martín Nicolás Barros Choles, against various defendants including CDC.
Mr Choles claims that the transfer of rights by CDC to CZN was ineffective because it only involved a transfer of shares and not the transfer of the underlying rights in the properties and assets used in the CZN mining complex. Consequently, he is seeking orders that CDC pays for the use and lease of the properties and assets until November 2009, and that from that date the properties and assets of the Cerrejón project revert to the State. This action remains in the discovery phase.
Investigations
As previously disclosed, BHP Billiton received requests for information in August 2009 from the US Securities and Exchange Commission (SEC). Following that request, the Group commenced an internal investigation and disclosed to relevant authorities evidence that it has uncovered regarding possible violations of applicable anti-corruption laws involving interactions with government officials.
The issues relate primarily to matters in connection with previously terminated exploration and development efforts, as well as hospitality provided as part of the Company’s sponsorship of the 2008 Beijing Olympics. The Group is currently discussing a potential resolution of the matter.
As has been publicly reported, the Australian Federal Police has indicated that it has commenced an investigation and the Group continues to fully cooperate with the relevant authorities.
In light of the continuing nature of the investigations it is not appropriate at this stage for BHP Billiton to predict outcomes.
Refer to the pages beginning on page F-1 in this annual report.
8.1 Mining, oil and gas-related terms
Term | Definition | |
2D | Two dimensional. | |
3D | Three dimensional. | |
Alumina | Aluminium oxide (Al2O3). Alumina is produced from bauxite in the refining process. Alumina is then converted (reduced) in an electrolysis cell to produce aluminium metal. | |
Ash | Inorganic material remaining after combustion. | |
AusIMM | The Australasian Institute of Mining and Metallurgy. | |
Bauxite | The chief ore of aluminium. | |
Beneficiation | The process of physically separating ore from gangue prior to subsequent processing of the beneficiated ore. | |
Brownfield | An exploration or development project located within an existing mineral province, which can share infrastructure and management with an existing operation. | |
Coal Reserves | The same meaning as Ore Reserves, 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). | |
Condensate | A mixture of hydrocarbons that exist in gaseous form in natural underground reservoirs, but which condense to form a liquid at atmospheric conditions. | |
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 is defined an Ore Reserve or Mineral Resource. For example, the lowest grade of mineralised material that qualifies as economic for estimating an Ore Reserve. |
Term | Definition | |
CQCA | Central Queensland Coal Associates. | |
Dated Brent | A benchmark price assessment of the spot market value of physical cargoes of North Sea light sweet crude oil. | |
Electrowinning/electrowon | An electrochemical process in which metal is recovered by dissolving a metal within an electrolyte and plating it onto an electrode. | |
Energy coal | Used as a fuel source in electrical power generation, cement manufacture and various industrial applications. Energy coal may also be referred to as steaming or thermal coal. | |
Ethane | A component of natural gas. Where sold separately, is largely ethane gas that has been liquefied through pressurisation. One tonne of ethane is approximately equivalent to 26.8 thousand 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 termsstructural feature andstratigraphic condition are intended to identify localised geological features as opposed to the broader terms of basins, trends, provinces, plays, areas-of-interest, etc. (per SEC Regulation S-X, Rule 4-10). | |
Flotation | A method of selectively recovering minerals from finely ground ore using a froth created in water by specific reagents. In the flotation process, certain mineral particles are induced to float by becoming attached to bubbles of froth and the unwanted mineral particles sink. | |
FPSO (Floating, production, storage andoff-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 | 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. | |
GSSA | Geological Society of South Africa | |
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. |
Term | Definition | |
ICSID (International Centre for Settlement of Investment Disputes) | ICSID is an autonomous international institution that provides facilities and services to support conciliation and arbitration of international investment disputes between investors and States. ICSID was established under the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (the ICSID Convention), with over 140 member States. | |
Kriging | A geostatistical method of estimating resources based on a mathematical function known as a semivariogram. | |
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 45.9 thousand 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 during pyroprocessing. | |
LPG (Liquefied petroleum gas) | Consists of propane and butane and a small amount (less than two per cent) of ethane that has been liquefied through pressurisation. One tonne of LPG is approximately equivalent to 11.6 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. | |
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. | |
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. | |
OC/OP (Open-cut/open-pit) | 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 |
Term | Definition | |
level as appropriate that include application of Modifying Factors. Such studies demonstrate that, at the time of reporting, extraction could reasonably be justified. | ||
PEGNL | Association of Professional Engineers and Geoscientists of Newfoundland and Labrador. | |
Probable Ore Reserves | Reserves for which quantity and grade and/or quality are computed from information similar to that used for proven reserves, but the sites for inspection, sampling, and measurement are farther apart or are otherwise less adequately spaced. The degree of assurance, although lower than that for proven reserves, is high enough to assume continuity between points of observation. | |
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). | |
Proven Ore Reserves | Reserves for which quantity and grade and/or quality are computed from information similar to that used for proven reserves, but the sites for inspection, sampling, and measurement are farther apart or are otherwise less adequately spaced. The degree of assurance, although lower than that for proven reserves, is high enough to assume continuity between points of observation. | |
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. | |
Run of mine product | Product mined in the course of regular mining activities. | |
SACNASP | South African Council for Natural Scientific Professions. | |
SAIMM | The Southern African Institute of Mining and Metallurgy. | |
SME reg’d member | Registered member of the Society of Mining, Metallurgy and Exploration. | |
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. | |
Spud | Commence drilling of an oil or gas well. | |
SP (Stockpile) | An accumulation of ore or mineral built up when demand slackens or when the treatment plant or beneficiation equipment |
Term | Definition | |
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. | ||
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 Coal Reserves | Run of mine reserves as outputs from the mining activities. | |
Total Ore Reserves | Proven Ore Reserves plus Probable Ore Reserves. |
8.2 Non-mining, oil and gas terms
Term | Definition | |
A$ | Australian dollars being the currency of the Commonwealth of Australia. | |
ADR (American Depositary Receipt) | Instruments that trade on the NYSE. | |
ADS (American Depositary Share) | A share issued under a deposit agreement that has been created to permit US-resident investors to hold shares in non-US companies and trade them on the stock exchanges in the United States. One ADS is equal to two BHP | |
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. | |
ASX (Australian Securities Exchange) | ASX is a multi-asset class vertically integrated exchange group that functions as | |
Australian Tax Treaty | A tax convention between Australia and the United | |
BHP Billiton | Being both companies in the Dual Listed Company
| |
BHP Billiton Limited | A fully paid ordinary share in the capital of BHP Billiton Limited. | |
BHP Billiton Limited shareholders | The holders of BHP Billiton Limited shares. | |
BHP Billiton Limited Special Voting Share | A single voting share issued to facilitate joint voting by shareholders of BHP Billiton Limited on Joint Electorate Actions. | |
BHP Billiton Plc | A share that has been authorised to be issued to enable a distribution to be made by BHP Billiton Plc |
Term | Definition | |
BHP Billiton Plc 5.5 per cent preference share | Shares that have the right to repayment of the amount paid up on the nominal value and any unpaid dividends in priority of any other class of shares in BHP Billiton Plc on a return of capital or winding up. | |
BHP Billiton Plc share | A fully paid ordinary share in the capital of BHP Billiton Plc. | |
BHP Billiton Plc shareholders | The holders of BHP Billiton Plc shares. | |
BHP Billiton Plc Special Voting Share | A single voting share issued to facilitate joint voting by shareholders of BHP Billiton Plc on Joint Electorate Actions. | |
Board | The Board of Directors of BHP Billiton. | |
Business | Refers to one of BHP Billiton’s Petroleum and Potash; Copper; Iron Ore; Coal; Aluminium, Manganese and Nickel Business Groups formed in May 2013. Collectively, they are referred to as the Businesses. | |
CEO | Chief Executive Officer. | |
CFR (Cost and freight... named port of destination) | The seller must pay the costs and freight necessary to bring the goods to the named port of destination, but the risk of loss of, or damage to the goods, as well as any additional costs due to events occurring after the time the goods have been delivered on board the vessel, is transferred from the seller to the buyer when the goods pass the ship’s rail in the port of shipment. The CFR term requires the seller to clear the goods for shipment. | |
Community investment | Contributions made to support communities in which we operate | |
CSG (Customer Sector Group) | Prior to 10 May 2013, referred to as a | |
CY20XX | Refers to the calendar year ending 31 December 20XX, where XX is the | |
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 | Dual Listed Company. | |
DLC merger | The Dual Listed Company merger between BHP Billiton Limited and BHP Billiton Plc | |
DLC structure | The corporate structure resulting from the DLC merger. | |
EBIT | Earnings before net finance costs and taxation. | |
EITI (Extractive Industries Transparency Initiative) | An international initiative dedicated to the enhancement of transparency around the payments of taxes and royalties derived from resource development. |
Term | Definition | |
FOB (Free on board... named port of shipment) | The seller delivers when the goods pass the ship’s rail at the named port of shipment. This means that the buyer has to bear all costs and risks of loss of, or damage to the goods from that point. The FOB term requires the seller to clear the goods for export. This term can be used only for sea or inland waterway transport. | |
FPIC (Free prior informed consent) | A principle requiring that individuals and communities should be informed – in appropriate, accessible language – about projects that might take place on their land. It also guarantees that they are given the opportunity to give or withhold their consent to a | |
FY20XX | Refers to the | |
GAAP | Generally accepted accounting principles. | |
Gearing | The ratio of net debt to net debt plus net assets. | |
GHG (Greenhouse gas) | For BHP Billiton | |
Group
| BHP Billiton Limited, BHP Billiton Plc and their | |
Group Function | Group Functions act as agents of the Group Management Committee (GMC). They operate under a defined set of mandates that relate to: • the governance of BHP Billiton; • the CEO limits established by • the activities necessary to | |
GLD (Group Level Document) | The documents that give effect to | |
GMC (Group Management Committee) | The executive management group within BHP Billiton as determined by the CEO. Its role is | |
IFRS (International Financial Reporting Standards) | Accounting standards as issued by the International Accounting Standards Board. | |
JSE | Johannesburg Stock Exchange. | |
JV | Joint venture. | |
KMP (Key Management Personnel) | Persons having authority and responsibility for planning, directing and controlling the activities of the Group, directly or indirectly (including Executive Directors), and Non-executive Directors. For BHP Billiton it includes the GMC. |
Term | Definition | |
KPI (Key Performance Indicator) | Used to | |
LME | London Metal Exchange. | |
LSE | London Stock Exchange. | |
Major capital projects | Projects where the investment commitment exceeds the Group approval threshold, or complexity or associated reputational risk or exposure necessitates review at a Group level (and within the Group | |
Marketing | Refers to the BHP Billiton staff, processes and activities that provide marketing services to the whole organisation. | |
NYMEX (New York Mercantile Exchange) | A New York physical futures exchange that trades energy commodities (i.e. crude oil and natural gas) and precious metals in futures and options markets. | |
NYSE | New York Stock Exchange. | |
| The | |
Occupational illness | An illness that occurs as a consequence of | |
OSHA | United States Government Occupational Safety and Health Administration. | |
Platts | Platts is a global provider of energy, petrochemicals, metals and agriculture information, and a premier source of benchmark price assessments for those commodity markets. | |
Project investment | Total budgeted capital expenditure on growth projects under development at year-end. Refer to section 2.4 Major projects, for a full listing of these growth projects. | |
Quality-of-life indicators | Measures of people’s overall wellbeing, including material well-being (standard of living) and non-material components such as the | |
Quoted | In the | |
REi (Resource Endowment initiative) | An initiative of the | |
ROCE (Return on capital employed) | Calculated as earnings from operations, excluding exceptional items and net finance costs (after tax), divided by average capital |
Jointly controlled entities
Term |
| |
employed. Average capital employed is | ||
SEC (United States Securities and Exchange Commission) | United States 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 | |
Shareplus | All-employee share purchase plan. | |
Strate | South Africa’s Central Securities Depositary for the electronic settlement of financial instruments. | |
TRIF (Total recordable injury frequency) | The sum of (fatalities + lost-time cases + restricted work cases + medical treatment cases) x 1,000,000 ÷ actual hours worked. Stated in units of per million hours worked. BHP Billiton adopts the US Government Occupational Safety and | |
TSR (Total shareholder return) | TSR measures the return delivered to shareholders over a certain period through the change in | |
UKLA (United Kingdom Listing Authority) | Term used when the | |
Underlying EBIT | Calculated as earnings before net finance costs, taxation and any exceptional items. | |
Underlying EBIT margin | Calculated as Underlying EBIT excluding third party EBIT, divided by revenue net of | |
US$
| The Group’s reporting currency and the functional currency of the majority of its operations is the US dollar, as this is assessed to be the principal currency of the economic environments in which they operate. | |
WTI (West Texas Intermediate) | A mixture of hydrocarbons that exists in liquid phase in natural underground reservoirs and remains liquid at atmospheric pressure after passing through surface separating facilities. Crude oil is refined to produce a wide array of petroleum products, including heating oils; gasoline, diesel and jet fuels; lubricants; asphalt; ethane, propane, and butane; and many other products used for their energy or chemical content.
West Texas Intermediate refers to a crude stream produced in |
8.3 Terms used in reserves and resources
Term | Definition | |
A.Al2O3 | available alumina | |
Ag | Silver | |
Al2O3 | Alumina | |
Anth | Anthracite | |
Au | Gold | |
Cu | Copper | |
CV | calorific value | |
Fe | Iron | |
Fe2O3 | iron oxide | |
Insol | Insolubles | |
K2O | potassium oxide | |
KCl | potassium chloride | |
Met | metallurgical coal | |
MgO | magnesium oxide | |
Mn | manganese | |
Mo | molybdenum | |
Ni | nickel | |
P | phosphorous | |
Pb | lead | |
Pc | phosphorous in concentrate | |
R.SiO2 | reactive silica | |
S | sulphur | |
SCu | soluble copper | |
SiO2 | silica | |
TCu | total copper | |
Th | thermal coal | |
U3O8 | uranium oxide | |
VM | volatile matter | |
Zn | zinc |
Abbreviation | Description | |
% | percentage or per cent | |
bbl/d | barrels per day | |
boe | barrels of | |
dmt | dry metric tonne | |
dmtu | dry metric tonne unit | |
g/t | grams per tonne | |
ha | hectare | |
kcal/kg | kilocalories per kilogram | |
kg/tonne or kg/t | kilograms per tonne | |
km | kilometre | |
koz | kilo-ounce | |
kV | kilovolt | |
kt | kilotonnes | |
ktpa | kilotonnes per annum | |
ktpd | kilotonnes per day | |
kdwt | thousand deadweight tonnes | |
m | metre | |
ML | megalitre | |
mm | millimetre | |
MMboe | million barrels of oil equivalent | |
MMBtu | million British thermal units – 1 scf of natural gas equals 1,010 Btu | |
MMcf/d | million cubic feet per day | |
Mbbl/d | thousand barrels per day | |
MMbbl/d | million barrels per day | |
MMcm/d | million cubic metres per day | |
Mscf | thousand standard cubic feet | |
Mt | million tonnes | |
Mtpa | million tonnes per annum | |
MW | megawatt | |
psi | pounds per square inch | |
ppm | parts per million | |
scf | standard cubic feet | |
t | tonne | |
TJ | terajoule | |
TJ/d | terajoules per day | |
tpa | tonnes per annum | |
tpd | tonnes per day | |
tph | tonnes per hour | |
wmt | wet metric tonnes |
BHP Billiton Limited (formerly 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 Billiton Plc (formerly Billiton Plc) was incorporated in 1996 and is registered in England and Wales with registration number 3196209. Successive predecessor entities to BHP Billiton Plc have operated since 1860.
Since 29 June 2001, we have operated under a Dual Listed Company (DLC) structure. Under the DLC structure, the two parent companies, BHP Billiton Limited and BHP Billiton Plc operate as a single economic entity, run by a unified Board and management team. More details of the DLC structure can be found in section 9.3.2 of this Annual Report.
BHP Billiton Limited has a primary listing on the Australian Securities Exchange (ASX) in Australia. BHP Billiton 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 (LSE) in the United Kingdom and a secondary listing on the Johannesburg Stock Exchange (JSE) in South Africa. In addition, BHP Billiton Limited American Depositary Receipts (ADRs) and BHP Billiton Plc ADRs trade on the New York Stock Exchange (NYSE) in the United States.
As at the date of this Annual Report, BHP Billiton Limited has a primary listing on the Australian Securities Exchange (ASX) in Australia and BHP Billiton 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 (LSE). BHP Billiton Plc also has a secondary listing on the Johannesburg Stock Exchange (JSE) in South Africa.
In addition, BHP Billiton Limited and BHP Billiton Plc are listed on the New York Stock Exchange (NYSE) in the United States. Trading on the NYSE is via American Depositary Shares (ADSs), each representing two ordinary shares evidenced by American Depositary Receipts (ADRs). Citibank N.A. (Citibank) is the Depositary for both ADR programs. BHP Billiton Limited’s ADSs have been listed for trading on the NYSE (ticker BHP) since 28 May 1987 and BHP Billiton Plc’s since 25 June 2003 (ticker BBL).
9.3.1 General
The BHP Billiton Group consists of the BHP Billiton Limited Group and the BHP Billiton Plc Group as a combined enterprise, following the completion of the Dual Listed Company (DLC) merger in June 2001. Refer to note 26‘Subsidiaries’ to the Financial Statements for a list of BHP Billiton Limited and BHP Billiton Plc significant subsidiaries.
The BHP Billiton DLC merger was designed to place shareholders of both companies in a position where they effectively have an interest in a single group that combines the assets, and is subject to the liabilities, of both companies. BHP Billiton Limited and BHP Billiton Plc have each retained their separate corporate identities and maintain separate stock exchange listings, but they are operated and managed as if they are a single unified economic entity, with their Boards and senior executive management comprising the same people.
9.3.2 DLC structure
The principles of the BHP Billiton DLC are reflected in the BHP Billiton Sharing Agreement and include the following:
Additional documents that affect the DLC include:
Australian Foreign Investment Review Board (FIRB) 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 Billiton Limited continues to:
The conditions have effect indefinitely, subject to amendment of the Australian Foreign Acquisitions and Takeovers Act 1975 or any revocation or amendment by the Treasurer of Australia. If BHP Billiton Limited no longer wishes to comply with these conditions, it must obtain the prior approval of the Treasurer. Failure to comply with the conditions attracts substantial penalties under the Foreign Acquisitions and Takeovers Act 1975.
Equalisation of economic and voting rights
BHP Billiton Limited shareholders and BHP Billiton Plc shareholders have economic and voting interests in the combined BHP Billiton Group. The economic and voting interests represented by a share in one company relative to the economic and voting interests of a share in the other company are determined by reference to a ratio known as the Equalisation Ratio. Presently, the economic and voting interests attached to each BHP Billiton Limited share and each BHP Billiton Plc share are the same, since the Equalisation Ratio is 1:1. The Equalisation Ratio would change if either BHP Billiton Limited or BHP Billiton Plc returned value to only its shareholders and no matching action was taken.
This means that the amount of any cash dividend paid by BHP Billiton Limited in respect of each BHP Billiton Limited share is normally matched by an equivalent cash dividend by BHP Billiton Plc in respect of each BHP Billiton Plc share, and vice versa. If one company has insufficient profits or is otherwise unable to pay the agreed dividend, BHP Billiton Limited and BHP Billiton Plc will, as far as practicable, enter into such transactions as are necessary to enable both companies to pay the agreed amount of pre-tax dividends per share.
Joint Electorate Actions
Under the terms of the DLC agreements, the BHP Billiton Limited Constitution and the BHP Billiton Plc Articles of Association have implemented special voting arrangements so that the shareholders of both companies vote together as a single decision-making body on matters affecting the shareholders of each company in similar ways (such matters are referred to as Joint Electorate Actions). For so long as the Equalisation Ratio remains 1:1, each BHP Billiton Limited share will effectively have the same voting rights as each BHP Billiton Plc 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 Billiton Limited and also of BHP Billiton Plc. Both the BHP Billiton Limited ordinary shareholders and the holder of the BHP Billiton Limited Special Voting Share vote as a single class and, in the case of BHP Billiton Plc, the BHP Billiton Plc ordinary shareholders and the holder of the BHP Billiton Plc Special Voting Share vote as a single class.
Class Rights Actions
In the case of certain actions in relation to which the two bodies of shareholders may have divergent interests (referred to as Class Rights Actions), the company wishing to carry out the Class Rights Action requires the prior approval of the shareholders in the other company voting separately and, where appropriate, the approval of its own 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.
These voting arrangements are secured through the constitutional documents of the two companies, the BHP Billiton Sharing Agreement, the BHP Billiton 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 Billiton Limited and BHP Billiton Plc have each executed a Deed Poll Guarantee, pursuant to which creditors entitled to the benefit of the BHP Billiton Limited Deed Poll Guarantee and the BHP Billiton 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 Billiton Limited and BHP Billiton Plc on a combined basis.
Restrictions on takeovers of one company only
The BHP Billiton Limited Constitution and the BHP Billiton 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 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.
DLC agreements
On 29 June 2001, BHP Billiton Limited (then known as BHP Limited) and BHP Billiton Plc (then known as Billiton Plc) merged by way of a DLC structure. To effect the DLC, BHP Limited and Billiton Plc (as they were then known) entered into the following agreements designed to place the shareholders of both companies in a position where they effectively have an interest in a single group that combines the assets, and is subject to all the liabilities, of both companies:
The effect of each of these agreements and the manner in which they operate are described in section 9.3 of this Annual Report.
The following text summarises the Constitution of BHP Billiton Limited and the Articles of Association of BHP Billiton Plc. The effect of the Constitution of BHP Billiton Limited and the Articles of Association of BHP Billiton Plc is, so far as possible, identical. Where the term ‘BHP Billiton’ is used in this description of the Constitution and Articles of Association, it can be read to mean either BHP Billiton Limited or BHP Billiton Plc.
Certain provisions of the Constitution of BHP Billiton Limited and the Articles of Association of BHP Billiton Plc can only be amended where such amendment is approved by special resolution either:
A description of Joint Electorate Actions and Class Rights Actions is contained under the heading ‘Equalisation of economic and voting rights’ in section 9.3.2 of this Annual Report.
9.5.1 Directors
The management and control of the business and affairs of BHP Billiton are vested in the Board of Directors, which may exercise all powers of BHP Billiton, other than those which are required to be exercised or done by BHP Billiton in a general meeting.
9.5.2 Power to issue securities
BHP Billiton may, pursuant to the Constitution and Articles of Association, issue any shares or other securities (including redeemable shares) with preferred, deferred or other special rights, obligations or restrictions as and when the Directors may determine and on any other terms the Directors consider appropriate, provided that:
9.5.3 Restrictions on voting by Directors
A Director may not vote in respect of any contract or arrangement or any other proposal in which he or she has a material personal interest. A Director shall not be counted in the quorum at a meeting in relation to any resolution on which he or she is not entitled to vote.
In addition, under the UK Companies Act 2006, a Director has a duty to avoid a situation in which he or she has (or can have) a direct or indirect interest that conflicts (or may conflict) with the interests of the company. The duty is not infringed, if among other things, the situation is authorised by non-interested Directors. The Articles of Association of BHP Billiton Plc enable the Board to authorise a matter that might otherwise involve a Director breaching his or her duty to avoid conflicts of interest. An interested Director may not vote or be counted towards a quorum for a resolution authorising such a situation. Where the Board gives such authorisation, the Board may prohibit, or may establish regulations which prohibit, the relevant Director from voting on any matter relating to the conflict. The Board has adopted procedures to manage these voting restrictions.
Subject to applicable laws, a Director is entitled to vote, and be counted in the quorum, in respect of any resolution concerning any of the following matters, namely where the material personal interest:
9.5.4 Loans by Directors
Any Director may lend money to BHP Billiton at interest with or without security or may, for a commission or profit, guarantee the repayment of any money borrowed by BHP Billiton and underwrite or guarantee the subscription of shares or securities of BHP Billiton or of any corporation in which BHP Billiton may be interested without being disqualified as a Director and without being liable to account to BHP Billiton for any commission or profit.
9.5.5 Retirement of Directors
In 2011, the Board adopted 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 at the 2011 Annual General Meetings (AGMs), and replaced the previous system, as set out in the Constitution and Articles of Association, under which Directors were required to submit themselves to shareholders for re-election at least every three years.
9.5.6 Rights attaching to shares
Dividend rights
Under English law, dividends on shares may only be paid out of profits available for distribution. Under Australian law, dividends on shares may only be paid out of net assets, provided that the payment 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 Billiton Limited or BHP Billiton Plc declared that dividend, until claimed or, in the case of BHP Billiton Limited, otherwise disposed of according to law. In the case of BHP Billiton Plc, any dividend unclaimed after a period of 12 years from the date on which such dividend was declared or became due for payment shall be forfeited and shall revert to BHP Billiton Plc.
Voting rights
Voting at any general meeting of BHP Billiton Limited shareholders can, in the first instance, be conducted by a show of hands unless a poll is demanded by any of the following (except in relation to the election of a chairman of a meeting or, unless the Chairman otherwise determines, the adjournment of a meeting), or is otherwise required (as outlined below):
Voting at any general meeting of BHP Billiton Plc can, in the first instance, be conducted by a show of hands unless a poll is demanded by any of the following (except in relation to the election of a chairman of a meeting or, unless the Chairman otherwise determines, the adjournment of a meeting) or is otherwise required (as outlined below):
As described under the heading ‘Equalisation of economic and voting rights’ in section 9.3.2 of this Annual Report, certain matters may be decided as Joint Electorate Actions or Class Rights Actions. Any matter considered by shareholders at an AGM of BHP Billiton Limited or BHP Billiton Plc constitutes a Joint Electorate Action and shall therefore be decided on a poll. Therefore, in practice, generally all items of business at AGMs are decided by way of a poll.
In addition, at any general meeting a resolution, other than a procedural resolution, put to the vote of the meeting on which the holder of the relevant BHP Billiton Special Voting Share is entitled to vote shall be decided on a poll.
For the purposes of determining which shareholders are entitled to attend or vote at a meeting of BHP Billiton Plc or BHP Billiton Limited, and how many votes such shareholder may cast, the relevant company will specify
in any notice of meeting a time, not more than 48 hours before the time fixed for the meeting, by which a shareholder must be entered on the Register of Shareholders in order to have the right to attend or vote at the relevant meeting.
Shareholders who wish to appoint a proxy to attend, vote or speak at a meeting of BHP Billiton Plc or BHP Billiton Limited (as appropriate) on their behalf, must deposit the relevant form appointing a proxy in accordance with the instructions contained in any notice of meeting, so as to be received in the specified manner not less than 48 hours before the time appointed for holding the meeting to which the appointment of a proxy relates.
Rights to share in BHP Billiton Limited’s profits
The rights attached to the shares of BHP Billiton Limited, as regards the participation in the profits available for distribution, are as follows:
Rights to share in BHP Billiton Plc’s profits
The rights attached to the shares of BHP Billiton Plc, in relation to the participation in the profits available for distribution, are as follows:
9.5.7 Right on a return of assets on liquidation
On a return of assets on liquidation of BHP Billiton Limited, the assets of BHP Billiton Limited remaining available for distribution among shareholders, after giving effect to the payment of all prior ranking amounts owed to all creditors and holders of preference shares, and to all prior ranking statutory entitlements, shall be applied in paying to the holders of the BHP Billiton Limited Special Voting Share and the Equalisation Share
(if any) 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 Billiton Limited ordinary shares, and any surplus remaining shall be applied in making payments solely to the holders of BHP Billiton Limited ordinary shares in accordance with their entitlements.
On a return of assets on liquidation of BHP Billiton Plc, subject to the payment of all prior ranking amounts owed to the creditors of BHP Billiton Plc and to all prior ranking statutory entitlements, the assets of BHP Billiton Plc to be distributed on a winding-up shall be distributed to the holders of shares in the following order of priority:
9.5.8 Redemption of preference shares
If BHP Billiton Limited at any time proposes to create and issue any preference shares, the preference shares may be issued on the terms that they are to be redeemed or, at the option of either or both BHP Billiton Limited and the holder, are liable to be redeemed, whether out of share capital, profits or otherwise.
The preference shares confer on the holders the right to convert the preference shares into ordinary shares if, and on the basis, the Board determines at the time of issue of the preference shares.
The preference shares are to confer on the holders:
There is no equivalent provision in the Articles of Association of BHP Billiton Plc although as noted in section 9.5.2, above, BHP Billiton can issue preference shares which are subject to a right of redemption on terms the Board considers appropriate.
9.5.9 Capital calls
Subject to the terms on which any shares may have been issued, the Board may make calls on the shareholders in respect of all monies unpaid on their shares. BHP Billiton 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.
9.5.10 Borrowing powers
Subject to relevant law, the Directors may exercise all powers of BHP Billiton 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 Billiton or of any third party.
9.5.11 Changes to rights of shareholders
Rights attached to any class of shares issued by either BHP Billiton Limited or BHP Billiton Plc can only be varied (whether as a Joint Electorate Action or a Class Rights Action) where such variation is approved both:
9.5.12 Conditions governing general meetings
All provisions relating to general meetings apply with any necessary modifications to any special meeting of any class of shareholders that may be held. Therefore, the following information relates equally to general meetings and any special meeting of any class of shareholders.
The Board may and shall 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 Billiton except where entitled under law to do so. Any Director may convene a general meeting whenever the Director thinks fit. General meetings can also be cancelled, postponed or adjourned, where permitted by law or the Constitution or Articles of Association. Notice of a general meeting must be given to each shareholder entitled to vote at the meeting and such notice of meeting must be given in the form and manner in which the Board thinks fit. Five shareholders of the relevant company present in person or by proxy constitute a quorum for a meeting. A shareholder who is entitled to attend and cast a vote at a general meeting of BHP Billiton may appoint a person as a proxy to attend and vote for the shareholder in accordance with the law.
9.5.13 Limitations on rights to own securities
Neither the Constitution of BHP Billiton Limited nor the Articles of Association of BHP Billiton Plc impose any limitations on the rights to own securities other than restrictions that reflect the takeovers codes under relevant Australian and UK law. In addition, the Australian Foreign Acquisitions and Takeovers Act 1975 imposes a number of conditions that restrict foreign ownership of Australian-based companies.
Share control limits imposed by the Constitution and the Articles of Association, as well as relevant laws, are described in sections 9.11.2 and 9.3.2 of this Annual Report.
9.5.14 Documents on display
You can consult reports and other information about BHP Billiton Limited that it has filed pursuant to the rules of the Australian Securities Exchange (ASX) atwww.asx.com.au. You can consult reports and other information filed for publication by BHP Billiton Plc pursuant to the rules of the UK Listing Authority at the Authority’s document viewing facility (the National Storage Mechanism) atwww.morningstar.co.uk/uk/NSM. Information filed on the ASX, or pursuant to the rules of the UK Listing Authority is not incorporated by reference into this Annual Report. The documents referred to in this Annual Report as being available on our website,www.bhpbilliton.com, are not incorporated by reference and do not form part of this Annual Report.
BHP Billiton Limited and BHP Billiton Plc both file annual and special reports and other information with the US Securities and Exchange Commission (SEC). These filings are available on the SEC website atwww.sec.gov.
You may also read and copy any document that either BHP Billiton Limited or BHP Billiton Plc files at the SEC’s public reference room located at 100 F Street, NE, Washington, DC 20549. Please call the SECat 1-800-SEC-0330 or access the SEC website atwww.sec.gov for further information on the public reference room.
Share capital
The details of the share capital for both BHP Billiton Limited and BHP Billiton Plc are presented in Note 19 ‘Share capital’ in the Financial Statements and remain current as at 22 August 2014.
Major shareholders
The tables in section 4.4.27 and the information set out in sections 5.17 and 5.18 of this Annual Report present information pertaining to the shares in BHP Billiton Limited and BHP Billiton Plc held by Directors and members of the Group Management Committee (GMC).
Neither BHP Billiton Limited nor BHP Billiton Plc is directly or indirectly controlled by another corporation or by any government. Other than as described in section 9.3.2, no major shareholder possesses voting rights that differ from those attaching to all of BHP Billiton Limited’s voting securities.
Substantial shareholders in BHP Billiton Limited
As at 22 August 2014, there are no substantial shareholders in BHP Billiton Limited. A substantial shareholder is a person who (together with associates) has a relevant interest in five per cent or more of voting rights conferred by ordinary shares in BHP Billiton Limited. Notifications to BHP Billiton Limited under section 671B of the Corporations Act 2001 indicate that no person (together with their associates) beneficially owned more than five per cent of BHP Billiton Limited’s voting securities.
Substantial Shareholders in BHP Billiton Plc
The following table shows holdings of three per cent or more of voting rights conferred by BHP Billiton Plc’s ordinary shares as notified to BHP Billiton Plc under the UK Disclosure and Transparency Rule 5.(1)
Title of class | Identity of person | Date of last notice | Number owned | Percentage of total voting rights (2) | ||||||||||||||||||
Date received | Date of change | 2014 | 2013 | 2012 | ||||||||||||||||||
Ordinary shares | Aberdeen Asset Managers Limited | 30 June 2014 | 31 March 2014 | 133,883,328 | 6.34 | % | – | – | ||||||||||||||
Ordinary shares | BlackRock, Inc. | 3 December 2009 | 1 December 2009 | 213,014,043 | 10.08 | % | 10.08 | % | 10.08 | % |
(1) | There has been no change in the holdings of three per cent or more of the voting rights in BHP Billiton Plc’s shares notified to BHP Billiton Plc as at the date of this Annual Report. |
(2) | The percentages quoted are |
The following table shows holdings of Directors and members of the GMC of BHP Billiton Plc who were in office as at 30 June 2014, as a group, of BHP Billiton Plc’s voting securities as at that date.(1)
Title of class | Identity of person or group | Number owned | Percentage of | |||||||
Ordinary shares | Directors and Executives as a group | 723,451 | 0.03 | % |
Exchange variations resulting from the retranslation at closing rate of the net investments in subsidiaries and joint ventures arising after 1 July 2004 are accounted for in accordance with the policy stated below. Exchange variations arising before this date were transferred to retained earnings
(1) | As at the date of |
(2) | The percentages quoted are based on the total voting rights of ordinary shares in BHP Billiton Plc of 2,112,071,796. |
Twenty largest shareholders as at 22 August 2014 (as named on the Register of Shareholders)(1)
BHP Billiton Limited | Number of fully paid shares | % of issued capital | ||||||||
1. | HSBC Australia Nominees Pty Limited | 580,069,546 | 18.06 | |||||||
2. | JP Morgan Nominees Australia Limited | 493,708,553 | 15.38 | |||||||
3. | National Nominees Ltd | 279,035,779 | 8.69 | |||||||
4. | Citicorp Nominees Pty Limited <BHP Billiton ADR Holders A/C> | 200,154,676 | 6.23 | |||||||
5. | Citicorp Nominees Pty Ltd | 144,522,993 | 4.50 | |||||||
6. | BNP Paribas Noms Pty Ltd | 66,415,472 | 2.07 | |||||||
7. | Citicorp Nominees Pty Limited <Colonial First State Inv A/C> | 36,766,575 | 1.14 | |||||||
8. | Aust Mutual Prov Society | 24,144,150 | 0.75 | |||||||
9. | Australian Foundation Investment Company Limited | 13,990,941 | 0.44 | |||||||
10. | HSBC Custody Nominees (Australia) Limited <NT-Comnwlth Super Corp A/C> | 13,984,916 | 0.44 | |||||||
11. | UBS Wealth Management | 13,138,628 | 0.41 | |||||||
12. | BNP Paribas Nominees Pty Ltd <Agency Lending DRP A/C> | 9,275,120 | 0.29 | |||||||
13. | Computershare Nominees CI Ltd <ASX Shareplus Control A/C> | 8,586,884 | 0.27 | |||||||
14. | Argo Investments Limited | 8,065,004 | 0.25 | |||||||
15. | RBC Investor Services Australia Nominees Pty Limited <PI Pooled A/C> | 7,073,914 | 0.22 | |||||||
16. | National Nominees Limited <DB A/C> | 6,926,358 | 0.22 | |||||||
17. | Computershare Trustees Jey Ltd < RE 3000101 A/C> | 6,843,005 | 0.21 | |||||||
18. | RBC Investor Services Australia Nominees Pty Limited <BK Cust A/C> | 6,550,059 | 0.20 | |||||||
19. | Bond Street Custodians Limited | 5,884,026 | 0.18 | |||||||
20. | Navigator Australia Ltd <MLC Investment Settlement A/C> | 5,776,473 | 0.18 | |||||||
|
|
|
| |||||||
1,930,913,072 | 60.14 | |||||||||
|
|
|
|
BHP Billiton Plc Number of fully
paid shares % of issued
capital 1. PLC Nominees (Proprietary) Limited (2) 363,932,699 17.04 2. State Street Nominees Limited <OM02> 96,811,610 4.53 3. Chase Nominees Limited 90,836,599 4.25 4. The Bank of New York (Nominees) Limited 82,462,791 3.86 5. Chase Nominees Limited <LEND> 73,705,274 3.45 6. State Street Nominees Limited <OM04> 70,118,416 3.28 7. GEPF Equity 67,947,072 3.18 8. Nortrust Nominees Limited 58,025,085 2.72 9. Vidacos Nominees Limited <CLRLUX2> 49,220,595 2.30 10. National City Nominees Limited 45,555,961 2.13 11. State Street Nominees Limited <OD64> 38,827,954 1.82 12. Lynchwood Nominees Limited <2006420> 38,310,348 1.79 13. HSBC Global Custody Nominee (UK) Limited <357206> 36,209,783 1.70 14. Industrial Development Corporation of South Africa 33,804,582 1.58 15. BNY Mellon Nominees Limited <BSDTGUSD> 30,735,445 1.44 16. Nutraco Nominees Limited <492762> 23,979,189 1.12 17. Nutraco Nominees Limited <781221> 22,930,000 1.07 18. Nortrust Nominees Limited <SLEND> 22,760,910 1.07 19. Roy Nominees Limited <999999> 21,097,861 0.99 20. Computershare Nominees Pty Ltd 16,865,810 0.79 1,284,137,984 60.11
(1) | The largest holder on the South African register of BHP Billiton 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. |
(2) | Many of the twenty largest shareholders shown for BHP Billiton Limited and BHP Billiton 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. |
United States share ownership as at 30 June 2014
BHP Billiton Limited | BHP Billiton Plc | |||||||||||||||||||||||||||||||
Number of Shareholders | % | Number of shares | % | Number of Shareholders | % | Number of shares | % | |||||||||||||||||||||||||
Classification of holder | ||||||||||||||||||||||||||||||||
Registered holders of voting securities | 1,728 | 0.30 | 4,752,247 | 0.14 | 66 | 0.30 | 103,209 | 0.01 | ||||||||||||||||||||||||
ADR holders | 1,202 | 0.23 | 195,937,364 | (1) | 6.1 | 184 | 0.93 | 47,399,620 | (2) | 2.24 |
(1) | These shares translate to |
(2) | These shares translate to 23,699,810 ADRs. |
Geographical distribution of shareholders and shareholdings as at 22 August 2014
BHP Billiton Limited | BHP Billiton Plc | |||||||||||||||||||||||||||||||
Number of Shareholders | % | Number of shares | % | Number of Shareholders | % | Number of shares | % | |||||||||||||||||||||||||
Registered address | ||||||||||||||||||||||||||||||||
Australia | 554,637 | 96.25 | 3,138,694,670 | 97.73 | 481 | 2.04 | 1,244,093 | 0.06 | ||||||||||||||||||||||||
New Zealand | 13,079 | 2.27 | 34,571,262 | 1.08 | 40 | 0.17 | 112,343 | 0.01 | ||||||||||||||||||||||||
United Kingdom | 2,994 | 0.52 | 8,485,842 | 0.26 | 20,098 | 85.44 | 1,749,491,835 | 81.89 | ||||||||||||||||||||||||
United States | 1,737 | 0.30 | 4,748,562 | 0.15 | 69 | 0.29 | 97,393 | 0.01 | ||||||||||||||||||||||||
South Africa | 131 | 0.02 | 234,160 | 0.01 | 1,502 | 6.39 | 382,755,922 | 17.92 | ||||||||||||||||||||||||
Other | 3,642 | 0.63 | 24,956,609 | 0.78 | 1,333 | 5.67 | 2,483,868 | 0.11 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total | 576,220 | 100.00 | 3,211,691,105 | 100.00 | 23,523 | 100.00 | 2,136,185,454 | 100.00 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distribution of shareholdings by size as at 22 August 2014
BHP Billiton Limited | BHP Billiton Plc | |||||||||||||||||||||||||||||||
Number of Shareholders | % | Number of shares(1) | % | Number of Shareholders | % | Number of shares(1) | % | |||||||||||||||||||||||||
Size of holding | ||||||||||||||||||||||||||||||||
1 – 500 (2) | 257,655 | 44.71 | 58,549,553 | 1.82 | 12,883 | 54.77 | 3,203,269 | 0.15 | ||||||||||||||||||||||||
501 – 1,000 | 111,769 | 19.40 | 85,968,746 | 2.68 | 4,794 | 20.38 | 3,520,204 | 0.16 | ||||||||||||||||||||||||
1,001 – 5,000 | 160,931 | 27.93 | 360,013,381 | 11.21 | 3,858 | 16.40 | 7,751,488 | 0.36 | ||||||||||||||||||||||||
5,001 – 10,000 | 26,521 | 4.60 | 187,271,116 | 5.83 | 437 | 1.86 | 3,083,295 | 0.14 | ||||||||||||||||||||||||
10,001 – 25,000 | 14,375 | 2.49 | 216,472,195 | 6.74 | 349 | 1.48 | 5,586,860 | 0.26 | ||||||||||||||||||||||||
25,001 – 50,000 | 3,209 | 0.56 | 110,083,509 | 3.43 | 193 | 0.82 | 7,031,471 | 0.33 | ||||||||||||||||||||||||
50,001 – 100,000 | 1,137 | 0.20 | 77,910,360 | 2.43 | 234 | 0.99 | 16,747,258 | 0.78 | ||||||||||||||||||||||||
100,001 – 250,000 | 453 | 0.08 | 65,223,012 | 2.03 | 284 | 1.21 | 44,975,481 | 2.11 | ||||||||||||||||||||||||
250,001 – 500,000 | 82 | 0.01 | 27,095,771 | 0.84 | 145 | 0.62 | 52,250,236 | 2.45 | ||||||||||||||||||||||||
500,001 – 1,000,000 | 35 | 0.01 | 24,713,833 | 0.77 | 117 | 0.50 | 80,650,327 | 3.78 | ||||||||||||||||||||||||
1,000,001 and over | 53 | 0.01 | 1,998,389,629 | 62.22 | 229 | 0.97 | 1,911,385,565 | 89.48 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total | 576,220 | 100.00 | 3,211,691,105 | 100.00 | 23,523 | 100.00 | 2,136,185,454 | 100.00 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) | One ordinary share entitles the holder to one vote. |
(2) | Number of BHP Billiton Limited shareholders holding less than a marketable parcel (A$500) based on the market price of A$37.80 as at 22 August 2014 was 4,870. |
BHP Billiton Limited | BHP Billiton Plc | |||||||||||||||||||||||||||||||
Number of Shareholders | % | Number of shares | % | Number of Shareholders | % | Number of shares | % | |||||||||||||||||||||||||
Classification of holder | ||||||||||||||||||||||||||||||||
Corporate | 156,647 | 27.19 | 2,252,285,413 | 70.13 | 13,816 | 58.73 | 2,122,547,470 | 99.36 | ||||||||||||||||||||||||
Private | 419,573 | 72.81 | 959,405,692 | 29.87 | 9,707 | 41.27 | 13,637,984 | 0.64 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total | 576,220 | 100.00 | 3,211,691,105 | 100.00 | 23,523 | 100.00 | 2,136,185,454 | 100.00 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Policy
We have a progressive dividend policy that seeks to steadily increase or at least to maintain the dividend in US dollars at each half-yearly payment.
We declare our dividends and other distributions in US dollars as it is our main functional currency. BHP Billiton Limited pays its dividends in Australian dollars, UK pounds sterling, New Zealand dollars or US dollars, depending on the country of residence of the shareholder. BHP Billiton Plc pays its dividends in UK pounds sterling 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. If shareholders on the United Kingdom register wish to receive dividends in US dollars, they must complete the appropriate election form and return it to the BHP Billiton Share Registrar in the United Kingdom no later than close of business on the Dividend Record Date.
Currency conversions will be based on the foreign currency exchange rates on the Record Date, except for the conversion into South African rand, which will take place on the last day to trade (cum dividend) on the JSE.
Aligning the currency conversion date with the Record Date (for all currencies except the conversion into South African rand, which takes place on and is aligned to the last day to trade on the JSE as explained above) enables a high level of certainty around the currency required to pay the dividend and helps to eliminate the Group’s exposure to movements in exchange rates since the number of shares on which dividends are payable (and the elected currency) is final at close of business on the Record Date.
Aligning the final date to receive currency elections (currency election date) with the Record Date further simplifies the process.
Payments
BHP Billiton Limited shareholders may have their cash dividends paid directly into a nominated bank, building society or credit union, depending on the shareholder’s country of residence as shown below.
| Financial institution | |
Australia | Bank, building society, credit union | |
United Kingdom | Bank, building society | |
New Zealand | Bank | |
United States | Bank |
Shareholders from the abovementioned locations who do not provide their direct credit details and shareholders with registered addresses outside Australia, the United Kingdom, New Zealand and the United States will receive dividend payments by way of a cheque in Australian dollars.
BHP Billiton 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 Billiton Share Registrar in the United Kingdom or South Africa.
The following tables show the share prices for the period indicated for ordinary shares and ADSs for each of BHP Billiton Limited and BHP Billiton Plc. The share prices are the highest and lowest closing market quotations for ordinary shares reported on the Daily Official List of the ASX and LSE respectively, and the highest and lowest closing prices for ADSs quoted on the NYSE, adjusted to reflect stock dividends.
BHP Billiton Limited
Ordinary shares | American Depositary Shares(1) | |||||||||||||||||
BHP Billiton Limited | High A$ | Low A$ | High US$ | Low US$ | ||||||||||||||
FY2009 | 44.40 | 21.10 | 82.86 | 24.62 | ||||||||||||||
FY2010 | 44.63 | 32.14 | 82.86 | 49.54 | ||||||||||||||
FY2011 | 49.55 | 36.98 | 102.68 | 62.42 | ||||||||||||||
FY2012 | 44.95 | 30.60 | 96.80 | 60.87 | ||||||||||||||
FY2013 | First quarter | 34.22 | 30.18 | 72.28 | 61.84 | |||||||||||||
Second quarter | 37.40 | 32.93 | 78.44 | 67.78 | ||||||||||||||
Third quarter | 39.00 | 32.76 | 80.46 | 68.43 | ||||||||||||||
Fourth quarter | 35.27 | 30.65 | 71.09 | 57.38 | ||||||||||||||
FY2014 | First quarter | 37.33 | 30.94 | 70.02 | 56.32 | |||||||||||||
Second quarter | 38.24 | 34.62 | 72.81 | 63.73 | ||||||||||||||
Third quarter | 39.38 | 35.20 | 70.82 | 62.76 | ||||||||||||||
Fourth quarter | 38.40 | 35.28 | 72.40 | 66.38 | ||||||||||||||
Ordinary shares | American Depositary Shares(1) | |||||||||||||||||
BHP Billiton Limited | High A$ | Low A$ | High US$ | Low US$ | ||||||||||||||
Month of January 2014 | 38.20 | 35.93 | 68.20 | 62.99 | ||||||||||||||
Month of February 2014 | 39.38 | 35.28 | 70.82 | 62.76 | ||||||||||||||
Month of March 2014 | 37.80 | 35.20 | 68.58 | 63.86 | ||||||||||||||
Month of April 2014 | 38.40 | 37.05 | 72.40 | 69.16 | ||||||||||||||
Month of May 2014 | 38.30 | 37.01 | 71.97 | 67.88 | ||||||||||||||
Month of June 2014 | 36.59 | 35.28 | 69.26 | 66.38 | ||||||||||||||
Month of July 2014 | 39.10 | 36.00 | 73.50 | 69.20 | ||||||||||||||
Month of August 2014 | 39.68 | 36.67 | 72.76 | 68.23 |
(1) | Each ADS represents the right to receive two BHP Billiton Limited ordinary shares. |
The total market capitalisation of BHP Billiton Limited at 30 June 2014 was A$115.3 billion (US$108.3 billion equivalent), which represented approximately 7.53 per cent of the total market capitalisation of the ASX All Ordinaries Index. The closing price for BHP Billiton Limited ordinary shares on the ASX on that date was A$35.90.
BHP Billiton Plc
Ordinary shares | American Depositary Shares(1) | |||||||||||||||||
BHP Billiton Plc | High UK pence | Low UK pence | High US$ | Low US$ | ||||||||||||||
FY2009 | 1,841.00 | 752.50 | 74.18 | 21.16 | ||||||||||||||
FY2010 | 2,334.50 | 1,287.50 | 70.95 | 41.88 | ||||||||||||||
FY2011 | 2,631.50 | 1,684.50 | 85.47 | 51.61 | ||||||||||||||
FY2012 | 2,521.50 | 1,667.00 | 80.69 | 51.30 | ||||||||||||||
FY2013 | First quarter | 2,049.00 | 1,751.00 | 66.19 | 54.76 | |||||||||||||
Second quarter | 2,156.50 | 1,873.00 | 70.37 | 60.10 | ||||||||||||||
Third quarter | 2,236.00 | 1,915.00 | 72.07 | 58.06 | ||||||||||||||
Fourth quarter | 2,001.00 | 1,673.00 | 60.15 | 51.27 | ||||||||||||||
FY2014 | First quarter | 1,994.50 | 1,666.50 | 62.80 | 50.29 | |||||||||||||
Second quarter | 1,983.00 | 1,754.50 | 63.79 | 56.84 | ||||||||||||||
Third quarter | 1,979.00 | 1,759.00 | 65.78 | 57.24 | ||||||||||||||
Fourth quarter | 1,995.00 | 1,850.00 | 66.73 | 62.35 | ||||||||||||||
Ordinary shares | American Depositary Shares(1) | |||||||||||||||||
BHP Billiton Plc | High UK pence | Low UK pence | High US$ | Low US$ | ||||||||||||||
Month of January 2014 | 1,890.00 | 1,772.00 | 62.12 | 58.36 | ||||||||||||||
Month of February 2014 | 1,979.00 | 1,759.00 | 65.78 | 57.24 | ||||||||||||||
Month of March 2014 | 1,927.00 | 1,778.50 | 64.18 | 58.61 | ||||||||||||||
Month of April 2014 | 1,961.00 | 1,882.00 | 65.60 | 62.90 | ||||||||||||||
Month of May 2014 | 1,995.00 | 1,868.00 | 66.73 | 62.65 | ||||||||||||||
Month of June 2014 | 1,938.00 | 1,850.00 | 66.06 | 62.35 | ||||||||||||||
Month of July 2014 | 2,096.00 | 1,944.50 | 71.02 | 66.39 | ||||||||||||||
Month of August 2014 | 2,067.00 | 1,891.00 | 69.52 | 63.04 |
(1) | Each ADS represents the right to receive two BHP Billiton Plc ordinary shares. |
The total market capitalisation of BHP Billiton Plc at 30 June 2014 was £41.4 billion (US$70.5 billion equivalent), which represented approximately 1.80 per cent of the total market capitalisation of the FTSEAll-Share Index. The closing price for BHP Billiton Plc ordinary shares on the LSE on that date was £18.90.
9.9 American Depositary Receipts fees and charges
We have American Depositary Receipts (ADR) programs for BHP Billiton Limited and BHP Billiton Plc.
Depositary fees
Citibank serves as the depositary bank for both of our ADR programs. ADR holders agree to the terms in the deposit agreement filed with the SEC for depositing ADSs or surrendering the ADSs for cancellation and for certain services as provided by Citibank. Holders are required to pay all fees for general depositary services provided by Citibank in each of our ADR programs, as set forth in the tables below.
Standard depositary fees:
Depositary service | Fee payable by the ADR holders | |
Issuance of ADSs upon deposit of shares | Up to US$5.00 per 100 ADSs (or fraction thereof) issued | |
Delivery of Deposited Securities against surrender of ADSs | Up to US$5.00 per 100 ADSs (or fraction thereof) surrendered | |
Distribution of Cash Distributions | No fee |
Corporate actions depositary fees:
Depositary service | Fee payable by the ADR holders | |
Cash Distributions (i.e. sale of rights, other entitlements, return of capital) | Up to US$2.00 per 100 ADSs (or fraction thereof) held | |
Distribution of ADSs pursuant to exercise of rights to purchase additional ADSs. Excludes stock dividends and | Up to US$5.00 per 100 ADSs (or fraction thereof) held | |
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 | |
Distribution of ADSs pursuant to an ADR ratio change in which shares are not distributed | No fee |
Fees payable by the Depositary to the Issuer
Citibank has provided BHP Billiton net reimbursement of US$1.4 million in FY2014 for ADR program-related expenses for both of BHP Billiton’s ADR programs (FY2013 US$1.6 million). 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 FY2014, amounting to less than US$0.03 million, which are associated with the administration of the ADR programs (FY2013 less than US$0.03 million).
Our ADR programs trade on the NYSE under the stock tickers BHP and BBL for the BHP Billiton Limited and BHP Billiton Plc programs, respectively. As of 30 June 2014, there were 97,994,434 ADRs on issue and outstanding in the BHP Billiton Limited ADR program and 23,715,933 ADRs on issue and outstanding in the BHP Billiton Plc ADR program. Both of the ADR programs have a 2:1 ordinary shares to ADR ratio.
The taxation discussion below describes the material Australian, UK and US federal income tax consequences to a US holder of owning BHP Billiton Limited ordinary shares or ADSs or BHP Billiton Plc ordinary shares or ADSs. The discussion below also outlines the potential South African tax issues for US holders of BHP Billiton Plc shares that are listed on the JSE.
The following discussion is not relevant to non-US holders of BHP Billiton Limited ordinary shares or ADSs or BHP Billiton Plc ordinary shares or ADSs. By its nature, the commentary below is of a general nature and we recommend that holders of ordinary shares or ADSs consult their own tax advisers regarding the Australian, UK, South African and US federal, state and local tax and other tax consequences of owning and disposing of ordinary shares and ADSs in their particular circumstances.
For purposes of this commentary, a US holder is a beneficial owner of ordinary shares or ADSs who is, for US federal income tax purposes:
(a) | if a court within the US |
(b) | that has made a valid election to be treated as a US person for tax purposes. |
This discussion of material tax consequences for US holders is based on the Australian, UK, US and South African laws currently in effect, the published practice of tax authorities in those jurisdictions and the double taxation treaties and conventions currently in existence. These laws are subject to change, possibly on a retroactive basis.
US holders in BHP Billiton Limited
(a) Australian taxation
Dividends
Dividends (including other distributions treated as dividends for Australian tax purposes) paid by BHP Billiton Limited to a US holder that is not an Australian resident for Australian tax purposes will generally not be subject to Australian withholding tax if they are fully franked (broadly, where a dividend is franked, tax paid by BHP Billiton Limited is imputed to the shareholders).
Dividends paid to such US holders, which are not fully franked, will generally be subject to 15 per cent Australian withholding tax only to the extent (if any) that the dividend is neither:
The Australian withholding tax outcome described above applies to US holders who are eligible for benefits under the Tax Convention between Australia and the US as to the Avoidance of Double Taxation (the Australian Tax Treaty). Otherwise, the rate of Australian withholding tax may be 30 per cent.
In contrast, dividends (including other distributions treated as dividends for Australian tax purposes) paid by BHP Billiton Limited to a US holder may instead be taxed by assessment in Australia if the US holder:
Sale of ordinary shares and ADSs
Gains made by US holders on the sale of ordinary shares or ADSs will generally not be taxed in Australia.
However, the precise Australian tax treatment of gains made by US holders on the sale of ordinary shares or ADSs generally depends on whether or not the gain is an Australian sourced gain of an income nature for Australian income tax purposes.
Where the gain is Australian sourced and of an income nature, a US holder will generally only be liable to Australian income tax on an assessment basis (whether or not they are also an Australian resident for Australian tax purposes) if:
– | business profits of an enterprise attributable to a permanent establishment situated in Australia through which the enterprise carries on business in Australia; or |
– | income |
– | income derived from the |
Where the gain is either not Australian sourced or is not of an income nature, the US holder will generally only be liable to Australian capital gains tax on an assessment basis if they acquired (or are deemed to have acquired) their shares or ADSs after 19 September 1985 and one or more of the following applies:
the US holder (either alone or together with associates) directly or indirectly owns or owned 10 per cent or more of the issued share capital of BHP Billiton Limited at the time of the disposal or throughout a
12-month period during the two years prior to |
The comments above on the sale of ordinary shares and ADSs do not apply:
Stamp duty, gift, estate and inheritance tax
Australia does not impose any stamp duty, gift, estate or inheritance taxes in relation to transfers or gifts of shares or ADSs or upon the death of a shareholder.
(b) US taxation
This section describes the material US federal income tax consequences to a US holder of owning ordinary shares or ADSs. It applies only to ordinary shares or ADSs that are held as capital assets for tax purposes. This section does not apply to a holder of ordinary shares or ADSs that is a member of a special class of holders subject to special rules, including a dealer in securities, a trader in securities that elects to use a mark-to-market method of accounting for its securities holdings, a tax-exempt organisation, a life insurance company, a person liable for alternative minimum tax, a person who actually or constructively owns 10 per cent or more of the voting stock of BHP Billiton Limited, a person that holds ordinary shares or ADSs as part of a straddle or a hedging or conversion transaction, a person that purchases or sells ordinary shares or ADSs as part of a wash sale for tax purposes, or a person whose functional currency is not the US dollar.
If a partnership holds the ordinary shares or ADSs, the US federal income tax treatment of a partner generally will depend on the status of the partner and the tax treatment of the partnership. A partner in a partnership holding the ordinary shares or ADSs should consult its tax adviser with regard to the US federal income tax treatment of an investment in the ordinary shares or ADSs.
This section is in part based on the representations of the Depositary and the assumption that each obligation in the deposit agreement and any related agreement will be performed in accordance with its terms.
In general, for US federal income tax purposes, a holder of ADSs will be treated as the owner of the ordinary shares represented by those ADSs. Exchanges of ordinary shares for ADSs, and ADSs for ordinary shares, generally will not be subject to US federal income tax.
Dividends
Under US federal income tax laws and subject to the Passive Foreign Investment Company (PFIC) rules discussed below, a US holder must include in its gross income the amount of any dividend paid by BHP Billiton Limited out of its current or accumulated earnings and profits (as determined for US federal income tax purposes) plus any Australian tax withheld from the dividend payment even though the holder does not receive it. The dividend is taxable to the holder when the holder, in the case of ordinary shares, or the Depositary, in the case of ADSs, actually or constructively receives the dividend.
Dividends paid to a non-corporate US holder on shares or ADSs will be taxable at the preferential rates applicable to long-term capital gains provided the US holder holds the shares or ADSs for more than 60 days during the 121-day period beginning 60 days before the ex-dividend date and does not enter into certain risk reduction transactions with respect to the shares or ADSs during the abovementioned holding period. However, a non-corporate US holder that elects to treat the dividend income as ‘investment income’ pursuant to Section 163(d)(4) of the US Internal Revenue Code will not be eligible for such preferential rates. In the case of a corporate US holder, dividends on shares and ADSs are taxed as ordinary income and will not be eligible for the dividends received deduction generally allowed to US corporations in respect of dividends received from other US corporations.
Distributions in excess of current and accumulated earnings and profits, as determined for US federal income tax purposes, will be treated as a non-taxable return of capital to the extent of the holder’s tax basis, determined in US dollars, in the ordinary shares or ADSs and thereafter as a capital gain.
The amount of any cash distribution paid in any foreign currency will be equal to the US dollar value of such currency, calculated by reference to the spot rate in effect on the date such distribution is received by the US holder or, in the case of ADSs, by the Depositary, regardless of whether and when the foreign currency is in fact converted into US dollars. If the foreign currency is converted into US dollars on the date received, the US holder generally should not recognise foreign currency gain or loss on such conversion. If the foreign currency is not converted into US dollars on the date received, the US holder will have a basis in the foreign currency equal to its US dollar value on the date received, and generally will recognise foreign currency gain or loss on a subsequent conversion or other disposal of such currency. Such foreign currency gain or loss generally will be treated as US source ordinary income or loss for foreign tax credit limitation purposes.
Subject to certain limitations, Australian tax withheld in accordance with the Australian Treaty and paid over to Australia will be creditable against an individual’s US federal income tax liability. Special rules apply in determining the foreign tax credit limitation with respect to dividends that are taxed at the preferential rates applicable to long-term capital gains. To the extent a refund of the tax withheld is available to a US holder under Australian law or under the Australian Treaty, the amount of tax withheld that is refundable will not be eligible for credit against the holder’s US federal income tax liability. A US holder that does not elect to claim a US foreign tax credit may instead claim a deduction for Australian income tax withheld, but only for a taxable year in which the US holder elects to do so with respect to all foreign income taxes paid or accrued in such taxable year.
Dividends will be income from sources outside the US, and generally will be ‘passive category’ income or, for certain taxpayers, ‘general category’ income, which are treated separately from each other for the purpose of computing the foreign tax credit allowable to a US holder. In general, a taxpayer’s ability to use foreign tax credits may be limited and is dependent on the particular circumstances. US holders should consult their tax advisers with respect to these matters.
Sale of ordinary shares and ADSs
Subject to the PFIC rules discussed below, a US holder who sells or otherwise disposes of ordinary shares or ADSs will recognise a capital gain or loss for US federal income tax purposes equal to the difference between the
US dollar value of the amount realised and the holder’s tax basis, determined in US dollars, in those ordinary shares or ADSs. The gain or loss will generally be income or loss from sources within the US for foreign tax credit limitation purposes. The capital gain of a non-corporate US holder is generally taxed at preferential rates where the holder has a holding period greater than 12 months in the shares or ADSs sold. There are limitations on the deductibility of capital losses.
The US dollar value of any foreign currency received upon a sale or other disposition of ordinary shares or ADSs will be calculated by reference to the spot rate in effect on the date of sale or other disposal (or, in the case of a cash basis or electing accrual basis taxpayer, on the settlement date). A US holder will have a tax basis in the foreign currency received equal to that US dollar amount, and generally will recognise foreign currency gain or loss on a subsequent conversion or other disposal of the foreign currency. This foreign currency gain or loss generally will be treated as US source ordinary income or loss for foreign tax credit limitation purposes.
Passive Foreign Investment Company rules
We do not believe that the BHP Billiton Limited ordinary shares or ADSs will be treated as stock of a PFIC for US federal income tax purposes, but this conclusion is a factual determination that is made annually at the end of the year and thus may be subject to change. If BHP Billiton Limited were treated as a PFIC, any gain realised on the sale or other disposition of ordinary shares or ADSs would in general not be treated as a capital gain. Instead, a US holder would be treated as if it had realised such gain and certain ‘excess distributions’ ratably over its holding period for the ordinary shares or ADSs and would be taxed at the highest tax rate in effect for each such year to which the gain was allocated, together with an interest charge in respect of the tax attributable to each such year. In addition, dividends received with respect to ordinary shares or ADSs would not be eligible for the special tax rates applicable to qualified dividend income if BHP Billiton Limited were a PFIC either in the taxable year of the distribution or the preceding taxable year, but instead would be taxable at rates applicable to ordinary income. Assuming the shares or ADSs are ‘marketable stock’, a US holder may mitigate the adverse tax consequences described above by electing to be taxed annually on a mark-to-market basis with respect to such shares or ADSs.
US Holders in BHP Billiton Plc
(a) UK taxation
Dividends
Under UK law, no UK tax is required to be withheld at source from dividends paid on ordinary shares or ADSs.
Sale of ordinary shares and ADSs
US holders will not be liable for UK tax on capital gains realised on disposal of ordinary shares or ADSs unless:
An individual who ceases to be a resident in the UK for tax purposes while owning shares or ADSs and then disposes of those shares or ADSs while not a UK resident may become subject to UK tax on capital gains if he/she:
In this situation US holders will generally be entitled to claim US tax paid on such a disposition as a credit against any corresponding UK tax payable.
UK inheritance tax
Under the current UK – US Inheritance and Gift Tax Treaty, ordinary shares or ADSs held by a US holder who is domiciled for the purposes of the UK – US Inheritance and Gift Tax Treaty in the US, and is not for the purposes of the UK – US Inheritance and Gift Tax Treaty a national of the UK, will generally not be subject to UK inheritance tax on the individual’s death or on a chargeable gift of the ordinary shares or ADSs during the individual’s lifetime, provided that any applicable US federal gift or estate tax liability is paid, unless the ordinary shares or ADSs are part of the business property of a permanent establishment of the individual in the UK or, in the case of a shareholder who performs independent personal services, pertain to a fixed base situated in the UK. Where the ordinary shares or ADSs have been placed in trust by a settlor who, at the time of settlement, was a US resident shareholder, the ordinary shares or ADSs will generally not be subject to UK inheritance tax unless the settlor, at the time of settlement, was not domiciled in the US and was a UK national. In the exceptional case where the ordinary shares or ADSs are subject to both UK inheritance tax and US federal gift or estate tax, the UK – US Inheritance and Gift Tax Treaty generally provides for double taxation to be relieved by means of credit relief.
UK stamp duty and stamp duty reserve tax
Under applicable legislation, UK stamp duty or stamp duty reserve tax (SDRT) is, subject to certain exemptions, payable on any issue or transfer of shares to the Depositary or their nominee where those shares are for inclusion in the ADR program at a rate of 1.5 per cent of their price (if issued), the amount of any consideration provided (if transferred on sale) or their value (if transferred for no consideration). However, from 1 October 2009, this 1.5 per cent charge has generally ceased to apply to issues of shares into European Union (EU) depositary receipt systems and into EU clearance systems. Further, the First-tier Tribunal has held that the 1.5 per cent SDRT charge on a transfer of shares to an issuer of American Depositary Receipts (as an integral part of a fresh capital raising) was incompatible with European Union law. Her Majesty’s Revenue and Customs has confirmed that it will no longer seek to impose the 1.5 per cent SDRT charge on the issue of shares (or, where it is integral to the raising of new capital, the transfer of shares) to a depositary receipt issuer or a clearance service, wherever located. The law in this area may still be susceptible to change. We recommend advice should be sought in relation to paying the 1.5 per cent SDRT or stamp duty charge in any circumstances.
No SDRT would be payable on the transfer of an ADS. No UK stamp duty should be payable on the transfer of an ADS provided that the instrument of transfer is executed and remains at all times outside the UK. Transfers of ordinary shares to persons other than the Depositary or their nominee will give rise to stamp duty or SDRT at the time of transfer. The relevant rate is currently 0.5 per cent of the amount payable for the shares. The purchaser normally pays the stamp duty or SDRT.
Special rules apply to transactions involving intermediates and stock lending.
(b) US taxation
This section describes the material US federal income tax consequences to a US holder of owning ordinary shares or ADSs. It applies only to ordinary shares or ADSs that are held as capital assets for tax purposes. This section does not apply to a holder of ordinary shares or ADSs that is a member of a special class of holders subject to special rules, including a dealer in securities, a trader in securities who elects to use a mark-to-market method of accounting for its securities holdings, a tax-exempt organisation, a life insurance company, a person liable for alternative minimum tax, a person who actually or constructively owns 10 per cent or more of the voting stock of BHP Billiton Plc, a person that holds ordinary shares or ADSs as part of a straddle or a hedging or conversion transaction, a person that purchases or sells ordinary shares or ADSs as part of a wash sale for tax purposes, or a person whose functional currency is not the US dollar.
If a partnership holds the ordinary shares or ADSs, the US federal income tax treatment of a partner generally will depend on the status of the partner and the tax treatment of the partnership. A partner in a partnership holding the ordinary shares or ADSs should consult its tax adviser with regard to the US federal income tax treatment of an investment in the ordinary shares or ADSs.
This section is in part based on the representations of the Depositary and the assumption that each obligation in the deposit agreement and any related agreement will be performed in accordance with its terms.
In general, for US federal income tax purposes, a holder of ADSs will be treated as the owner of the ordinary shares represented by those ADSs. Exchanges of ordinary shares for ADSs, and ADSs for ordinary shares generally will not be subject to US federal income tax.
Dividends
Under US federal income tax laws and subject to the PFIC rules discussed below, a US holder must include in its gross income the gross amount of any dividend paid by BHP Billiton Plc out of its current or accumulated earnings and profits (as determined for US federal income tax purposes). The dividend is taxable to the holder when the holder, in the case of ordinary shares, or the Depositary, in the case of ADSs, actually or constructively receives the dividend.
Dividends paid to a non-corporate US holder on shares or ADSs will be taxable at the preferential rates applicable to long-term capital gains provided that the US holder holds the shares or ADSs for more than 60 days during the 121-day period beginning 60 days before the ex-dividend date, and does not enter into certain risk reduction transactions with respect to the shares or ADSs during the abovementioned holding period. However, a non-corporate US holder that elects to treat the dividend income as ‘investment income’ pursuant to Section 163(d)(4) of the Internal Revenue Code will not be eligible for such preferential rates. In the case of a corporate US holder, dividends on shares and ADSs are taxed as ordinary income and will not be eligible for the dividends received deduction generally allowed to US corporations in respect of dividends received from other US corporations.
Distributions in excess of current and accumulated earnings and profits, as determined for US federal income tax purposes, will be treated as a non-taxable return of capital to the extent of the holder’s tax basis, determined in US dollars, in the ordinary shares or ADSs and thereafter as a capital gain.
The amount of any cash distribution paid in any foreign currency will be equal to the US dollar value of such currency, calculated by reference to the spot rate in effect on the date such distribution is received by the US holder or, in the case of ADSs, by the Depositary, regardless of whether and when the foreign currency is in fact converted into US dollars. If the foreign currency is converted into US dollars on the date received, the US holder generally should not recognise foreign currency gain or loss on such conversion. If the foreign currency is not converted into US dollars on the date received, the US holder will have a basis in the foreign currency equal to its US dollar value on the date received, and generally will recognise foreign currency gain or loss on a subsequent conversion or other disposal of such currency. Such foreign currency gain or loss generally will be treated as US source ordinary income or loss for foreign tax credit limitation purposes.
Dividends will be income from sources outside the US, and generally will be ‘passive category’ income or, for certain taxpayers, ‘general category’ income, which are treated separately from each other for the purpose of computing the foreign tax credit allowable to a US holder. In general, a taxpayer’s ability to use foreign tax credits may be limited and is dependent on the particular circumstances. US holders should consult their own tax advisers with respect to these matters.
Sale of ordinary shares and ADSs
Subject to the PFIC rules discussed below, a US holder who sells or otherwise disposes of ordinary shares or ADSs will recognise a capital gain or loss for US federal income tax purposes equal to the difference between the US dollar value of the amount realised and the holder’s tax basis, determined in US dollars, in those ordinary shares or ADSs. The gain or loss will generally be income or loss from sources within the US for foreign tax credit limitation purposes. The capital gain of a non-corporate US holder is generally taxed at preferential rates where the holder has a holding period greater than 12 months in the shares or ADSs sold. There are limitations on the deductibility of capital losses.
The US dollar value of any foreign currency received upon a sale or other disposition of ordinary shares or ADSs will be calculated by reference to the spot rate in effect on the date of sale or other disposal (or, in the case of a cash basis or electing accrual basis taxpayer, on the settlement date). A US holder will have a tax basis in the foreign currency received equal to that US dollar amount, and generally will recognise foreign currency gain or loss on a subsequent conversion or other disposal of the foreign currency. This foreign currency gain or loss generally will be treated as US source ordinary income or loss for foreign tax credit limitation purposes.
Passive Foreign Investment Company rules
We do not believe that the BHP Billiton Plc ordinary shares or ADSs will be treated as stock of a PFIC for US federal income tax purposes, but this conclusion is a factual determination that is made annually at the end of the year and thus may be subject to change. If BHP Billiton Plc were treated as a PFIC, any gain realised on the sale or other disposition of ordinary shares or ADSs would in general not be treated as a capital gain. Instead, a US holder would be treated as if it had realised such gain and certain ‘excess distributions’ ratably over its holding period for the ordinary shares or ADSs and would be taxed at the highest tax rate in effect for each such year to which the gain was allocated, together with an interest charge in respect of the tax attributable to each such year. In addition, dividends received with respect to ordinary shares or ADSs would not be eligible for the special tax rates applicable to qualified dividend income if BHP Billiton Plc were a PFIC either in the taxable year of the distribution or the preceding taxable year, but instead would be taxable at rates applicable to ordinary income. Assuming the shares or ADSs are ‘marketable stock’, a US holder may mitigate the adverse tax consequences described above by electing to be taxed annually on a mark-to-market basis with respect to such shares or ADSs.
(c) South African taxation
Dividends
As from 1 April 2012, it is possible that US holders of BHP Billiton Plc shares or ADSs that remain South African residents may be subject to South African Dividends Tax, at a maximum rate of 15 per cent, on any dividends received from shares listed on the JSE. The South African Dividends Tax will be withheld from the gross amount of the dividend paid to the shareholder.
No South African Dividends Tax is required to be withheld from cash dividends provided the dividends are paid to, inter alia, non-South African tax resident shareholders or South African tax resident corporate shareholders (including South African pension, provident, retirement annuity and benefit funds). However, these dividends will only be exempt from South African Dividends Tax if these types of shareholders provide the requisite exempt declarations to the regulated intermediaries making the cash dividend payments.
Dividends Tax is nevertheless required to be withheld on dividends paid on ordinary shares and ADSs of BHP Billiton Plc listed on the JSE, where such dividends are paid to South African tax resident shareholders who are natural persons (individuals) or trusts, other than closure rehabilitation trusts.
Except for certain exclusions, generally speaking such dividends paid to South African tax resident natural persons or trusts are exempt from South African income tax and as such, the Dividends Tax may be considered as a final and non-creditable levy.
Sale of ordinary shares and ADSs
A US holder who or which is tax resident in South Africa would be liable for income tax on any profit on disposal of ordinary shares or ADSs, or capital gains tax on any gain on disposal of ordinary shares or ADSs, depending on whether the shares and ADSs are held on revenue or capital account.
Income tax is payable on any profit on disposal of ordinary shares or ADSs held by a non-resident US holder where the profit is of a revenue nature and sourced in South Africa unless relief is afforded under the Double Tax Agreement concluded between South Africa and the US. In such a case, the profit would only be taxed in South Africa if it is attributable to a permanent establishment of that US holder in South Africa.
Where the ordinary shares or ADSs are not held on revenue account, non-resident US holders will not be liable for South African tax on capital gains realised on the disposal of ordinary shares or ADSs unless:
A US holder who holds ordinary shares or ADSs connected to a permanent establishment in South Africa will recognise a capital gain or loss for South African income tax purposes equal to the difference between the Rand value of the amount realised and the holder’s tax basis, determined in Rand, in those ordinary shares or ADSs. The holder’s tax basis will generally be equal to the cost that was incurred to acquire the shares, if such shares were acquired after 1 October 2001. The capital gain of a non-resident’s permanent establishment in South Africa will be taxed at an effective rate of 18.6 per cent.
Securities Transfer Tax
South African Securities Transfer Tax is levied at 0.25 per cent in respect of the transfer of ordinary shares or ADSs. The tax is levied on the amount of consideration at which the ordinary share or ADS is transferred or, where no value is declared, the closing price of the ordinary shares or ADSs. The tax is ultimately borne by the person to whom that ordinary share or ADS is transferred.
Government regulations touch all aspects of our operations. However, the geographical diversity of our operations reduces the risk that any one set of government regulations would have a material effect on our business, taken as a whole.
The ability to extract minerals, oil and natural gas is fundamental to BHP Billiton. In most jurisdictions, the rights to undeveloped mineral or petroleum deposits are owned by the state. In those jurisdictions, we rely upon the rights granted to us by the government that owns the mineral, oil or natural gas. These rights usually take the form of a lease or licence, which gives us the right to access the land and extract the product. The terms of the lease or licence, including the time period for which it is effective, are specific to the laws of the relevant government. Generally, we own the product we extract and royalties or similar taxes are payable to the government. In certain jurisdictions in which we operate, 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 will receive. In production sharing contracts 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 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.
Related to the ability to extract is the ability to process the minerals, oil or natural gas. Again, we rely upon the relevant government to grant the rights necessary to transport and treat the extracted material in order to ready it for sale.
Underlying our business of extracting and processing natural resources is the ability to explore for those natural resources. Typically, the rights to explore for minerals, oil and natural gas are granted to us by the government that owns those natural resources that 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.
Although onshore oil and gas rights in the United States can be derived from government (state and federal) mineral rights, they are primarily derived from private ownership of the rights, which is the case for our onshore oil and gas rights. Oil and gas rights primarily take the form of a lease, but also can be owned onshore outright in fee. If the rights granted are by lease, we are afforded the rights to access, explore, extract, produce and market the oil and gas for a period of years and then generally so long thereafter as there is oil or gas production or operations on the leased lands.
Governments also impose obligations on us in respect of environmental protection, land rehabilitation, occupational health and safety, and the rights and interests of Indigenous peoples with which we must comply in order to continue to enjoy the right to conduct our operations within that jurisdiction. These obligations often require us to make substantial expenditures to minimise or remediate the environmental impact of our operations, to ensure the safety of our employees and contractors and the like. Environmental protection, land rehabilitation and occupational health and safety onshore in the United States are principally regulated by the government and to a lesser degree, if applicable, by the lease contract with the landowner. For further information on these types of obligations, refer to section 1.14 of this Annual Report.
Of particular note are the following regulatory regimes:
9.11.1 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 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 for Resources and Energy.
A special transport permit is required under the Non-Proliferation Act by a party that transports nuclear material from one specified location to another specified location. As we engage service providers to transport uranium, those service providers are required to hold a special transport permit.
9.11.2 Exchange controls and shareholding limits
BHP Billiton Plc
There are no laws or regulations currently in force in the United Kingdom that restrict the export or import of capital or the remittance of dividends to non-resident holders of BHP Billiton Plc’s shares, although the Group does operate in some other jurisdictions where remittances of funds could be affected as they are subject to exchange control approvals. There are certain sanctions adopted by the UK Government which implement resolutions of the Security Council of the United Nations and sanctions imposed by the European Union (EU) against certain countries, entities and individuals and may restrict the export or import of capital or the remittance of dividends to certain non-resident holders of BHP Billiton Plc’s shares. Any enforcement of financial sanctions by the UK Government would be initiated by HM Treasury. Such sanctions may be in force from time to time and include those against:
(i) certain entities and/or individuals associated with Afghanistan, Belarus, the Central African Republic, Cote d’Ivoire, the Democratic People’s Republic of Korea (North Korea), the Democratic Republic of Congo, Egypt, Eritrea, the Republic of Guinea, the Republic of Guinea-Bissau, Iran, Lebanon, Liberia, the Russian Federation, Somalia, South Sudan, Sudan, Syria, Tunisia, Ukraine, Zimbabwe and the previous regimes of Iraq, Libya and Yugoslavia;
(ii) individuals indicted by the International Criminal Tribunal for the former Yugoslavia;
(iii) entities and individuals linked with the Taliban, Al-Qaeda and other terrorist organisations.
There are no restrictions under BHP Billiton 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 Billiton Plc’s shares.
There are certain restrictions on shareholding levels under BHP Billiton Plc’s Articles of Association described under the heading ‘BHP Billiton Limited’ below.
BHP Billiton Limited
From time to time, the United Nations Security Council and the Australian Government impose international sanctions on certain countries and organisations. The countries and organisations that are currently subject to United Nations sanctions are certain individuals or entities linked with the Taliban, Al-Qaeda and associated individuals and entities, other designated individuals and entities associated with terrorism, certain entities and individuals associated with the Central African Republic, the Democratic Republic of Congo, Cote d’Ivoire, the Democratic People’s Republic of Korea (North Korea), Eritrea, Guinea-Bissau, Iran, Iraq, Lebanon, Liberia, Libya, Sudan, Somalia and Yemen. The countries currently subject to the Australian Government’s autonomous sanctions are Myanmar, the Democratic People’s Republic of Korea (North Korea), Fiji, the former Federal Republic of Yugoslavia, Iran, Libya, Syria, Ukraine and Zimbabwe. The controls impose certain approval and reporting requirements on transactions involving such 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. In addition, under the Australian Banking (Foreign Exchange) Regulations 1959, the Reserve Bank of Australia may impose restrictions on certain financial transactions and require the consent of the Reserve Bank of Australia for the movement of funds into and out of Australia. No such restrictions are currently in place.
Remittances of any dividends, interest or other payments by BHP Billiton Limited to non-resident holders of BHP Billiton Limited’s securities are not restricted by exchange controls or other limitations, save that in certain circumstances, BHP Billiton may be required to withhold Australian taxes.
There are no limitations, either under the laws of Australia or under the Constitution of BHP Billiton Limited, on the right of non-residents to hold or vote BHP Billiton Limited ordinary shares other than as set out below.
The Australian Foreign Acquisitions and Takeovers Act 1975 (the FATA) restricts certain acquisitions of interests in shares in BHP Billiton. 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 associates) to acquire control of 15 per cent or more of the voting power or issued shares in BHP Billiton Limited.
The FATA also empowers the Treasurer to make certain orders prohibiting acquisitions by foreign persons in BHP Billiton Limited (and requiring divestiture if the acquisition has occurred) where he considers the acquisition to be contrary to the national interest and the 15 per cent threshold referred to above would be exceeded as a result. Such orders may also be made in respect of acquisitions by foreign persons where two or more foreign persons (and their associates) in aggregate already control 40 per cent or more of the issued shares or voting power in BHP Billiton Limited.
There are certain other statutory restrictions, and restrictions under BHP Billiton Limited’s Constitution and BHP Billiton Plc’s Articles of Association, that apply generally to acquisitions of shares in BHP Billiton (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:
Under BHP Billiton Limited’s Constitution and BHP Billiton 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.
9.12 Ancillary information for our shareholders
Information for BHP Billiton Limited and BHP Billiton Plc shareholders is provided in the BHP Billiton Group Annual Report 2014 and the Summary Review 2014.
This Annual Report provides the detailed financial data and information on the BHP Billiton Group’s performance required to comply with the reporting regimes in Australia, the United Kingdom and the United States. There are no specific disclosure requirements for the Summary Review, which is published as a communication for shareholders.
Shareholders of BHP Billiton Limited will receive a copy of the Annual Report or the Summary Review if they have requested a copy. Shareholders of BHP Billiton Plc will receive the Annual Report if they have requested a copy. ADR holders may view all documents online atwww.bhpbilliton.com or opt to receive a hard copy by application to Citibank Shareholder Services, details as listed on the inside back cover of the Annual Report.
Change of shareholder details and enquiries
Shareholders wishing to contact BHP Billiton on any matter relating to their shares or ADR holdings are invited to telephone the appropriate office of the BHP Billiton Share Registrar or Transfer Office listed on the inside back cover of the 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 online atwww.bhpbilliton.com. The website requires shareholders to quote their Shareholder Reference Number (SRN) or Holder Identification Number (HIN) in order to access this information.
Alternative access to the Annual Report and Summary Review
We offer an alternative for all shareholders who wish to be advised of the availability of the Annual Report and Summary Review 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 and Summary Review have been released. Shareholders will also receive notification of other major BHP Billiton announcements by email. Shareholders requiring further information or to make use of this service, should visit our websitewww.bhpbilliton.com.
ADR holders wishing to receive a hard copy of the Annual Report 2014 can do so by accessingcitibank.ar.wilink.com or by calling Citibank Shareholder Services during normal business hours. ADR holders may also contact the adviser that administers their investments. Holders of BHP Billiton Plc shares dematerialised into Strate should liaise directly with their Central Securities Depository Participant (CSDP) or broker.
Key dates for shareholders
The following table sets out future dates in the next financial and calendar year of interest to our shareholders. If there are any changes to these dates, all relevant stock exchanges (refer to section 9.2) will be notified.
Date | Event | |
23 September 2014 | Final Dividend Payment Date | |
23 October 2014 | BHP Billiton Plc Annual General Meeting in London
The Broad Sanctuary Westminster London SW1P 3EE United Kingdom Time: 11.00 am (local time) Details of | |
|
Venue: Adelaide Entertainment Centre Corner Port Road and Adam Street Hindmarsh South Australia Australia Time: 10.00 am (local time) Details of the business of the meeting are contained in the separate Notice of Meeting | |
24 February 2015 | Interim Results Announced | |
13 March 2015 | Interim Dividend Record Date | |
31 March 2015 | Interim Dividend Payment Date | |
25 August 2015 | Annual Results Announced |
Corporate Directory
BHP Billiton Group Registered Offices
BHP Billiton Limited
Australia
BHP Billiton Centre
171 Collins Street
Melbourne VIC 3000
Telephone 1300 554 757 (within Australia)
+61 3 9609 3333 (outside Australia)
Facsimile +61 3 9609 3015
BHP Billiton Plc
United Kingdom
Neathouse Place
London SW1V 1LH
Telephone +44 20 7802 4000
Facsimile +44 20 7802 4111
Group Company Secretary
Jane McAloon
BHP Billiton Corporate Centres
South Africa
6 Hollard Street
Marshalltown
Johannesburg 2107
Telephone +27 11 376 9111
Facsimile +27 11 838 4716
Chile
Cerro El Plomo 6000
Piso 18
Las Condes 7560623
Santiago
Telephone +56 2 2579 5000
Facsimile +56 2 2207 6517
United States
Our agent for service in the United States is Maria Isabel Reuter at:
1360 Post Oak Boulevard, Suite 150
Houston, TX 77056-3020
Telephone +1 713 961 8500
Facsimile +1 713 961 8400
Marketing Offices
Singapore
10 Marina Boulevard,#50-01
Marina Bay Financial Centre, Tower 2
Singapore 018983
Telephone +65 6421 6000
Facsimile +65 6421 7000
Share Registrars and Transfer Offices
Australia
BHP Billiton Limited Registrar
Computershare Investor Services Pty Limited
Yarra Falls, 452 Johnston Street
Abbotsford VIC 3067
Postal Address – GPO Box 2975
Melbourne VIC 3001
Telephone 1300 656 780 (within Australia)
+61 3 9415 4020 (outside Australia)
Facsimile +61 3 9473 2460
Email enquiries:
www.investorcentre.com/bhp
United Kingdom
BHP Billiton Plc Registrar
Computershare Investor Services PLC
The Pavilions, Bridgwater Road
Bristol BS99 6ZZ
Telephone +44 844 472 7001
Facsimile +44 870 703 6101
Email enquiries:
www.investorcentre.co.uk/contactus
South Africa
BHP Billiton Plc Branch Register
and Transfer Secretary
Computershare Investor Services
(Pty) Limited
70 Marshall Street
Johannesburg 2001
Postal Address – PO Box 61051
Marshalltown 2107
Telephone +27 11 373 0033
Facsimile +27 11 688 5217
Email enquiries:
web.queries@computershare.co.za
Holders of shares dematerialised
into Strate should contact their
CSDP or stockbroker.
New Zealand
Computershare Investor Services Limited
Level 2/159 Hurstmere Road
Takapuna Auckland
Postal Address – Private Bag 92119
Auckland 1142
Telephone +64 9 488 8777
Facsimile +64 9 488 8787
United States
Computershare Trust Company, N.A.
250 Royall Street
Canton, MA 02021
Postal Address – PO Box 43078
Providence, RI 02940-3078
Telephone +1 888 404 6340
(toll-free within US)
Facsimile +1 312 601 4331
ADR Depositary, Transfer Agent and Registrar
Citibank Shareholder Services
PO Box 43077
Providence, RI 02940-3077
Telephone +1 781 575 4555 (outside of US) +1 877 248 4237(+1-877-CITIADR)
(toll-free within US)
Facsimile +1 201 324 3284
Email enquiries:
citibank@shareholders-online.com
Website: www.citi.com/dr
BHP Billiton is a Dual Listed Company comprising BHP Billiton Limited and BHP Billiton Plc. The two entities continue to exist as separate companies but operate as a combined Group known as BHP Billiton.
The headquarters of BHP Billiton Limited and the global headquarters of the combined BHP Billiton Group are located in Melbourne, Australia. BHP Billiton Plc is located in London, 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 BHP Billiton Group as a whole.
Throughout this Annual Report, the terms BHP Billiton, the Company and the Group refer to the combined group, including both BHP Billiton Limited and subsidiary companies and BHP Billiton Plc and subsidiary companies.
Exhibits marked “*” have been filed as exhibits to this annual report on Form 20-F. Remaining exhibits have been incorporated by reference as indicated.
Exhibit 1 Constitution
1.1 | Constitution of BHP Billiton Limited(1) |
1.2 | Memorandum and Articles of Association of BHP Billiton Plc.(1) |
Exhibit 4 Material Contracts
4.1 | DLC Structure Sharing Agreement, dated 29 June 2001, between BHP Limited and Billiton Plc.(2) |
4.2 | SVC Special Voting Shares Deed, dated 29 June 2001, among BHP Limited, BHP SVC Pty Limited, Billiton Plc, Billiton SVC Limited and The Law Debenture Trust Corporation p.l.c. (2) |
4.3 | SVC Special Voting Shares Amendment Deed, dated 13 August 2001, among BHP Limited, BHP SVC Pty Limited, Billiton Plc, Billiton SVC Limited and The Law Debenture Trust Corporation p.l.c. (2) |
4.4 | Deed Poll Guarantee, dated 29 June 2001, of BHP Limited (2) |
4.5 | Deed Poll Guarantee, dated 29 June 2001, of Billiton Plc (2) |
4.6 | Form of Service Agreement for Specified Executive (referred to in this Annual Report as the Key Management Personnel)(3) |
4.7 | BHP Billiton Ltd Group Incentive Scheme Rules 2004, dated August 2008(4) |
4.8 | BHP Billiton Ltd Long Term Incentive Plan Rules, dated November 2010(1) |
4.9 | BHP Billiton Plc |
4.10 | BHP Billiton Plc Long Term Incentive Plan Rules, dated November 2010 (1) |
4.11 | Agreement and Plan of Merger by |
Exhibit 8 List of Subsidiaries
*8.1 | List of subsidiaries of BHP Billiton Limited and BHP Billiton Plc |
Exhibit 12 Certifications (section 302)
*12.1 | Certification by Chief Executive Officer, Mr Andrew Mackenzie, dated 25 September 2014 |
*12.2 | Certification by Chief Financial Officer, Mr Graham Kerr, dated 25 September 2014 |
Exhibit 13 Certifications (section 906)
*13.1 | Certification by Chief Executive Officer, Mr Andrew Mackenzie, dated 25 September 2014 |
*13.2 | Certification by Chief Financial Officer, Mr Graham Kerr, dated 25 September 2014 |
Exhibit 15 Consent of Independent Registered Public Accounting Firm
*15.1 | Consent of Independent Registered Public Accounting Firms KPMG and KPMG Audit Plc for incorporation by reference of audit reports in registration statements on Form F-3 and Form S-8 |
Exhibit 95 Mine Safety Health Administration
*95.1 | Disclosure of Mine Safety and Health Administration (“MSHA”) Safety Data. |
Footnotes
(1) | Previously filed as an exhibit to |
(2) | Previously filed as an exhibit to BHP Billiton’s annual report on Form 20-F for the year ended 30 June 2001 on 19 November 2001. |
(3) | Previously filed as an exhibit to BHP Billiton’s annual report on Form 20-F for the year ended 30 June 2013 on 25 September 2013. |
(4) | Previously filed as an exhibit to BHP Billiton’s annual report on Form 20-F for the year ended 30 June 2008 on 15 September 2008. |
(5) | Previously filed as an exhibit to BHP Billiton Limited’s tender offer statement on schedule TO on 15 July 2011. |
SIGNATURE
The registrants hereby certify that they meet all of the requirements for filing on Form 20-F and that they have duly caused and authorised the undersigned to sign this annual report on their behalf.
BHP Billiton Limited
BHP Billiton Plc
/s/ Graham Kerr
Graham Kerr
Chief Financial Officer
Date: 25 September 2014
7 Financial Statements
Contents | ||
F-1 | ||
F-1 | ||
F-2 | ||
F-3 | ||
F-4 | ||
F-5 | ||
F-7 | ||
F-123 | ||
F-123 | ||
F-124 | ||
F-125 | ||
7.6 Report of Independent Registered Public Accounting Firms | F-126 | |
F-130 |
7.1 Consolidated Financial Statements
7.1.1 Consolidated Income Statement for the year ended 30 June 2014
Notes | 2014 | 2013 | 2012 | |||||||||||||
US$M | US$M Restated | US$M Restated | ||||||||||||||
Revenue | ||||||||||||||||
Group production | 64,227 | 63,067 | 66,969 | |||||||||||||
Third party products | 2 | 2,979 | 2,886 | 3,508 | ||||||||||||
|
|
|
|
|
| |||||||||||
Revenue | 2 | 67,206 | 65,953 | 70,477 | ||||||||||||
Other income | 4 | 1,524 | 3,947 | 898 | ||||||||||||
Expenses excluding net finance costs | 5 | (46,513 | ) | (50,040 | ) | (48,644 | ) | |||||||||
Share of operating profit of equity accounted investments | 27 | 1,195 | 1,142 | 1,869 | ||||||||||||
|
|
|
|
|
| |||||||||||
Profit from operations | 23,412 | 21,002 | 24,600 | |||||||||||||
|
|
|
|
|
| |||||||||||
Comprising: | ||||||||||||||||
Group production | 23,368 | 20,875 | 24,466 | |||||||||||||
Third party products | 44 | 127 | 134 | |||||||||||||
|
|
|
|
|
| |||||||||||
23,412 | 21,002 | 24,600 | ||||||||||||||
|
|
|
|
|
| |||||||||||
Financial expenses | (1,273 | ) | (1,384 | ) | (836 | ) | ||||||||||
Financial income | 97 | 108 | 168 | |||||||||||||
|
|
|
|
|
| |||||||||||
Net finance costs | 6 | (1,176 | ) | (1,276 | ) | (668 | ) | |||||||||
|
|
|
|
|
| |||||||||||
Profit before taxation | 22,236 | 19,726 | 23,932 | |||||||||||||
|
|
|
|
|
| |||||||||||
Income tax expense | (6,538 | ) | (5,714 | ) | (7,053 | ) | ||||||||||
Royalty-related taxation (net of income tax benefit) | (474 | ) | (1,192 | ) | (262 | ) | ||||||||||
|
|
|
|
|
| |||||||||||
Total taxation expense | 7 | (7,012 | ) | (6,906 | ) | (7,315 | ) | |||||||||
|
|
|
|
|
| |||||||||||
Profit after taxation | 15,224 | 12,820 | 16,617 | |||||||||||||
|
|
|
|
|
| |||||||||||
Attributable to non-controlling interests | 1,392 | 1,597 | 1,144 | |||||||||||||
Attributable to members of BHP Billiton Group | 13,832 | 11,223 | 15,473 | |||||||||||||
|
|
|
|
|
| |||||||||||
Basic earnings per ordinary share (cents) | 8 | 260.0 | 210.9 | 290.7 | ||||||||||||
Diluted earnings per ordinary share (cents) | 8 | 259.1 | 210.2 | 289.4 | ||||||||||||
|
|
|
|
|
| |||||||||||
Dividends per ordinary share – paid during the period (cents) | 9 | 118.0 | 114.0 | 110.0 | ||||||||||||
Dividends per ordinary share – determined in respect of the period (cents) | 9 | 121.0 | 116.0 | 112.0 | ||||||||||||
|
|
|
|
|
|
The accompanying notes form part of these financial statements.
7.1.2 Consolidated Statement of Comprehensive Income for the year ended 30 June 2014
Notes | 2014 | 2013 | 2012 | |||||||||||||
US$M | US$M Restated | US$M Restated | ||||||||||||||
Profit after taxation | 15,224 | 12,820 | 16,617 | |||||||||||||
Other comprehensive income | ||||||||||||||||
Items that may be reclassified subsequently to the income statement: | ||||||||||||||||
Available for sale investments: | ||||||||||||||||
Net valuation losses taken to equity | (15 | ) | (101 | ) | (32 | ) | ||||||||||
Net valuation gains transferred to the income statement | (14 | ) | (1 | ) | (2 | ) | ||||||||||
Cash flow hedges: | ||||||||||||||||
Gains/(losses) taken to equity | 681 | 223 | (320 | ) | ||||||||||||
(Gains)/losses transferred to the income statement | (678 | ) | 73 | 205 | ||||||||||||
Exchange fluctuations on translation of foreign operations taken to equity | (1 | ) | 2 | 19 | ||||||||||||
Tax recognised within other comprehensive income | 7 | 3 | (76 | ) | 23 | |||||||||||
|
|
|
|
|
| |||||||||||
Total items that may be reclassified subsequently to the income statement | (24 | ) | 120 | (107 | ) | |||||||||||
|
|
|
|
|
| |||||||||||
Items that will not be reclassified to the income statement: | ||||||||||||||||
Actuarial gains/(losses) on pension and medical schemes | 57 | 61 | (250 | ) | ||||||||||||
Tax recognised within other comprehensive income | 7 | 12 | (16 | ) | 66 | |||||||||||
|
|
|
|
|
| |||||||||||
Total items that will not be reclassified to the income statement | 69 | 45 | (184 | ) | ||||||||||||
|
|
|
|
|
| |||||||||||
Total other comprehensive income/(loss) | 45 | 165 | (291 | ) | ||||||||||||
|
|
|
|
|
| |||||||||||
Total comprehensive income | 15,269 | 12,985 | 16,326 | |||||||||||||
|
|
|
|
|
| |||||||||||
Attributable to non-controlling interests | 1,392 | 1,599 | 1,146 | |||||||||||||
Attributable to members of BHP Billiton Group | 13,877 | 11,386 | 15,180 | |||||||||||||
|
|
|
|
|
|
The accompanying notes form part of these financial statements.
7.1.3 Consolidated Balance Sheet as at 30 June 2014
Notes | 2014 | 2013 | ||||||||||
US$M | US$M Restated | |||||||||||
ASSETS | ||||||||||||
Current assets | ||||||||||||
Cash and cash equivalents | 23 | 8,803 | 5,677 | |||||||||
Trade and other receivables | 10 | 6,741 | 6,310 | |||||||||
Other financial assets | 11 | 87 | 161 | |||||||||
Inventories | 12 | 6,013 | 5,821 | |||||||||
Assets classified as held for sale | 25 | – | 286 | |||||||||
Current tax assets | 318 | 267 | ||||||||||
Other | 334 | 431 | ||||||||||
|
|
|
| |||||||||
Total current assets | 22,296 | 18,953 | ||||||||||
|
|
|
| |||||||||
Non-current assets | ||||||||||||
Trade and other receivables | 10 | 1,867 | 1,998 | |||||||||
Other financial assets | 11 | 2,349 | 1,719 | |||||||||
Inventories | 12 | 463 | 619 | |||||||||
Property, plant and equipment | 13 | 108,787 | 100,565 | |||||||||
Intangible assets | 14 | 5,439 | 5,496 | |||||||||
Investments accounted for using the equity method | 27 | 3,664 | 3,675 | |||||||||
Deferred tax assets | 7 | 6,396 | 6,069 | |||||||||
Other | 152 | 84 | ||||||||||
|
|
|
| |||||||||
Total non-current assets | 129,117 | 120,225 | ||||||||||
|
|
|
| |||||||||
Total assets | 151,413 | 139,178 | ||||||||||
|
|
|
| |||||||||
LIABILITIES | ||||||||||||
Current liabilities | ||||||||||||
Trade and other payables | 15 | 10,145 | 10,860 | |||||||||
Interest bearing liabilities | 16 | 4,262 | 5,088 | |||||||||
Liabilities classified as held for sale | 25 | – | 220 | |||||||||
Other financial liabilities | 17 | 16 | 210 | |||||||||
Current tax payable | 919 | 1,158 | ||||||||||
Provisions | 18 | 2,504 | 2,372 | |||||||||
Deferred income | 218 | 231 | ||||||||||
|
|
|
| |||||||||
Total current liabilities | 18,064 | 20,139 | ||||||||||
|
|
|
| |||||||||
Non-current liabilities | ||||||||||||
Trade and other payables | 15 | 113 | 286 | |||||||||
Interest bearing liabilities | 16 | 30,327 | 28,099 | |||||||||
Other financial liabilities | 17 | 303 | 582 | |||||||||
Deferred tax liabilities | 7 | 7,066 | 6,312 | |||||||||
Provisions | 18 | 9,891 | 8,178 | |||||||||
Deferred income | 267 | 291 | ||||||||||
|
|
|
| |||||||||
Total non-current liabilities | 47,967 | 43,748 | ||||||||||
|
|
|
| |||||||||
Total liabilities | 66,031 | 63,887 | ||||||||||
|
|
|
| |||||||||
Net assets | 85,382 | 75,291 | ||||||||||
|
|
|
| |||||||||
EQUITY | ||||||||||||
Share capital – BHP Billiton Limited | 19 | 1,186 | 1,186 | |||||||||
Share capital – BHP Billiton Plc | 19 | 1,069 | 1,069 | |||||||||
Treasury shares | 19 | (587 | ) | (540 | ) | |||||||
Reserves | 20 | 2,927 | 1,970 | |||||||||
Retained earnings | 20 | 74,548 | 66,982 | |||||||||
|
|
|
| |||||||||
Total equity attributable to members of BHP Billiton Group | 79,143 | 70,667 | ||||||||||
Non-controlling interests | 20 | 6,239 | 4,624 | |||||||||
|
| �� |
| |||||||||
Total equity | 85,382 | 75,291 | ||||||||||
|
|
|
|
The accompanying notes form part of these financial statements.
The financial statements were approved by the Board of Directors on 11 September 2014 and signed on its behalf by:
Jac Nasser AO | Andrew Mackenzie | |
Chairman | Chief Executive Officer |
7.1.4 Consolidated Cash Flow Statement for the year ended 30 June 2014
Notes | 2014 | 2013 | 2012 | |||||||||||||
US$M | US$M Restated | US$M Restated | ||||||||||||||
Operating activities | ||||||||||||||||
Profit before taxation | 22,236 | 19,726 | 23,932 | |||||||||||||
Adjustments for: | ||||||||||||||||
Non-cash or non-operating exceptional items | (551 | ) | 1,893 | 3,417 | ||||||||||||
Depreciation and amortisation expense | 8,701 | 7,031 | 6,431 | |||||||||||||
Net gain on sale of non-current assets | (95 | ) | (46 | ) | (118 | ) | ||||||||||
Impairments of property, plant and equipment, financial assets and intangibles | 797 | 330 | 100 | |||||||||||||
Employee share awards expense | 247 | 210 | 270 | |||||||||||||
Net finance costs | 1,176 | 1,276 | 668 | |||||||||||||
Share of operating profit of equity accounted investments | (1,195 | ) | (1,142 | ) | (1,869 | ) | ||||||||||
Other | (83 | ) | (21 | ) | (376 | ) | ||||||||||
Changes in assets and liabilities: | ||||||||||||||||
Trade and other receivables | (252 | ) | 1,037 | 1,755 | ||||||||||||
Inventories | (54 | ) | (70 | ) | 16 | |||||||||||
Trade and other payables | 77 | (767 | ) | (187 | ) | |||||||||||
Net other financial assets and liabilities | (49 | ) | 119 | (27 | ) | |||||||||||
Provisions and other liabilities | 429 | (783 | ) | (1,025 | ) | |||||||||||
|
|
|
|
|
| |||||||||||
Cash generated from operations | 31,384 | 28,793 | 32,987 | |||||||||||||
Dividends received | 34 | 11 | 10 | |||||||||||||
Dividends received from equity accounted investments | 1,250 | 710 | 712 | |||||||||||||
Interest received | 136 | 140 | 221 | |||||||||||||
Interest paid | (975 | ) | (926 | ) | (633 | ) | ||||||||||
Income tax refunded | 852 | – | 530 | |||||||||||||
Income tax paid | (6,445 | ) | (7,618 | ) | (7,492 | ) | ||||||||||
Royalty-related taxation refunded | 216 | – | – | |||||||||||||
Royalty-related taxation paid | (1,088 | ) | (956 | ) | (1,076 | ) | ||||||||||
|
|
|
|
|
| |||||||||||
Net operating cash flows | 25,364 | 20,154 | 25,259 | |||||||||||||
|
|
|
|
|
| |||||||||||
Investing activities | ||||||||||||||||
Purchases of property, plant and equipment | (15,993 | ) | (22,243 | ) | (18,637 | ) | ||||||||||
Exploration expenditure | (1,010 | ) | (1,351 | ) | (2,493 | ) | ||||||||||
Exploration expenditure expensed and included in operating cash flows | 716 | 1,047 | 1,644 | |||||||||||||
Purchase of intangibles | (192 | ) | (400 | ) | (219 | ) | ||||||||||
Investment in financial assets | (1,193 | ) | (475 | ) | (471 | ) | ||||||||||
Investment in subsidiaries, operations and joint operations, net of their cash | – | – | (12,556 | ) | ||||||||||||
Investment in equity accounted investments | (44 | ) | (84 | ) | (83 | ) | ||||||||||
|
|
|
|
|
| |||||||||||
Cash outflows from investing activities | (17,716 | ) | (23,506 | ) | (32,815 | ) | ||||||||||
Proceeds from sale of property, plant and equipment | 114 | 2,338 | 146 | |||||||||||||
Proceeds from financial assets | 956 | 240 | 178 | |||||||||||||
Proceeds from divestment of subsidiaries, operations and joint operations, net of their cash | 812 | 502 | 6 | |||||||||||||
Proceeds from sale or partial sale of equity accounted investments | – | 1,700 | – | |||||||||||||
|
|
|
|
|
| |||||||||||
Net investing cash flows | (15,834 | ) | (18,726 | ) | (32,485 | ) | ||||||||||
|
|
|
|
|
| |||||||||||
Financing activities | ||||||||||||||||
Proceeds from interest bearing liabilities | 6,251 | 9,157 | 12,817 | |||||||||||||
Proceeds/(settlements) from debt related instruments | 37 | 14 | (180 | ) | ||||||||||||
Repayment of interest bearing liabilities | (7,198 | ) | (2,014 | ) | (3,993 | ) | ||||||||||
Proceeds from ordinary shares | 14 | 21 | 21 | |||||||||||||
Contributions from non-controlling interests | 1,435 | 73 | 101 | |||||||||||||
Purchase of shares by Employee Share Ownership Plan (ESOP) Trusts | (368 | ) | (445 | ) | (424 | ) | ||||||||||
Share buy-back – BHP Billiton Plc | – | – | (83 | ) | ||||||||||||
Dividends paid | (6,387 | ) | (6,167 | ) | (5,877 | ) | ||||||||||
Dividends paid to non-controlling interests | (252 | ) | (837 | ) | (343 | ) | ||||||||||
|
|
|
|
|
| |||||||||||
Net financing cash flows | (6,468 | ) | (198 | ) | 2,039 | |||||||||||
|
|
|
|
|
| |||||||||||
Net increase/(decrease) in cash and cash equivalents | 3,062 | 1,230 | (5,187 | ) | ||||||||||||
Cash and cash equivalents, net of overdrafts, at the beginning of the financial year | 5,667 | 4,454 | 9,671 | |||||||||||||
Foreign currency exchange rate changes on cash and cash equivalents | 23 | (17 | ) | (30 | ) | |||||||||||
|
|
|
|
|
| |||||||||||
Cash and cash equivalents, net of overdrafts, at the end of the financial year | 23 | 8,752 | 5,667 | 4,454 | ||||||||||||
|
|
|
|
|
|
The accompanying notes form part of these financial statements.
7.1.5 Consolidated Statement of Changes in Equity for the year ended 30 June 2014
Attributable to members of BHP Billiton Group | ||||||||||||||||||||||||||||||||
Share capital | ||||||||||||||||||||||||||||||||
US$M | BHP Billiton Limited | BHP Billiton Plc | Treasury shares | Reserves | Retained earnings | Total | Non- controlling interests | Total equity | ||||||||||||||||||||||||
Balance as at 1 July 2013 | 1,186 | 1,069 | (540 | ) | 1,970 | 66,982 | 70,667 | 4,624 | 75,291 | |||||||||||||||||||||||
Total comprehensive income | – | – | – | (24 | ) | 13,901 | 13,877 | 1,392 | 15,269 | |||||||||||||||||||||||
Transactions with owners: | ||||||||||||||||||||||||||||||||
Purchase of shares by ESOP Trusts | – | – | (368 | ) | – | – | (368 | ) | – | (368 | ) | |||||||||||||||||||||
Employee share awards exercised net of employee contributions | . – | – | 321 | (221 | ) | (91 | ) | 9 | – | 9 | ||||||||||||||||||||||
Employee share awards forfeited | – | – | – | (32 | ) | 32 | – | – | – | |||||||||||||||||||||||
Accrued employee entitlement for unexercised awards | – | – | – | 247 | – | 247 | – | 247 | ||||||||||||||||||||||||
Distribution to option holders | – | – | – | (2 | ) | – | (2 | ) | (2 | ) | (4 | ) | ||||||||||||||||||||
Dividends | – | – | – | – | (6,276 | ) | (6,276 | ) | (252 | ) | (6,528 | ) | ||||||||||||||||||||
Equity contributed | – | – | – | 989 | – | 989 | 477 | 1,466 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Balance as at 30 June 2014 | 1,186 | 1,069 | (587 | ) | 2,927 | 74,548 | 79,143 | 6,239 | 85,382 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Restated | ||||||||||||||||||||||||||||||||
Balance as at 1 July 2012 | 1,186 | 1,069 | (533 | ) | 1,912 | 61,892 | 65,526 | 3,789 | 69,315 | |||||||||||||||||||||||
Total comprehensive income | – | – | – | 77 | 11,309 | 11,386 | 1,599 | 12,985 | ||||||||||||||||||||||||
Transactions with owners: | ||||||||||||||||||||||||||||||||
Purchase of shares by ESOP Trusts | – | – | (445 | ) | – | – | (445 | ) | – | (445 | ) | |||||||||||||||||||||
Employee share awards exercised net of employee contributions | – | – | 438 | (243 | ) | (178 | ) | 17 | – | 17 | ||||||||||||||||||||||
Employee share awards forfeited | – | – | – | (17 | ) | 17 | – | – | – | |||||||||||||||||||||||
Accrued employee entitlement for unexercised awards | – | – | – | 210 | – | 210 | – | 210 | ||||||||||||||||||||||||
Issue of share options to non-controlling interests | – | – | – | 49 | – | 49 | – | 49 | ||||||||||||||||||||||||
Dividends | – | – | – | – | (6,076 | ) | (6,076 | ) | (837 | ) | (6,913 | ) | ||||||||||||||||||||
Equity contributed | – | – | – | – | – | – | 73 | 73 | ||||||||||||||||||||||||
Divestment of equity accounted investment | – | – | – | (18 | ) | 18 | – | – | – | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Balance as at 30 June 2013 | 1,186 | 1,069 | (540 | ) | 1,970 | 66,982 | 70,667 | 4,624 | 75,291 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
US$M Restated Balance as at 1 July 2011 Total comprehensive income Transactions with owners: Proceeds from the issue of shares BHP Billiton Plc shares cancelled Purchase of shares by ESOP Trusts Employee share awards exercised net of employee contributions Employee share awards forfeited Accrued employee entitlement for unexercised awards Dividends Equity contributed Balance as at 30 June 2012 Attributable to members of BHP Billiton Group Share capital BHP
Billiton
Limited BHP
Billiton
Plc Treasury
shares Reserves Retained
earnings Total Non-
controlling
interests Total
equity 1,183 1,070 (623 ) 2,001 52,731 56,362 2,825 59,187 – – – (163 ) 15,343 15,180 1,146 16,326 3 – – – – 3 – 3 – (1 ) 83 1 (83 ) – – – – – (424 ) – – (424 ) – (424 ) – – 431 (189 ) (213 ) 29 – 29 – – – (8 ) 8 – – – – – – 270 – 270 – 270 – – – – (5,894 ) (5,894 ) (343 ) (6,237 ) – – – – – – 161 161 1,186 1,069 (533 ) 1,912 61,892 65,526 3,789 69,315
The accompanying notes form part of these financial statements.
7.1.6 Notes to Financial Statements
Dual Listed Companies’ structure and basis of preparation of financial statements
Merger terms
On 29 June 2001, BHP Billiton Limited (previously known as BHP Limited), an Australian-listed company, and BHP Billiton Plc (previously known as Billiton Plc), a United Kingdom (UK) listed company, entered into a Dual Listed Company (DLC) merger. This was effected by contractual arrangements between the Companies and amendments to their constitutional documents.
The effect of the DLC merger is that BHP Billiton Limited and its subsidiaries (the BHP Billiton Limited Group) and BHP Billiton Plc and its subsidiaries (the BHP Billiton Plc Group) operate together as a single for-profit economic entity (the Group). Under the arrangements:
If either BHP Billiton Limited or BHP Billiton Plc proposes to pay a dividend to its shareholders, then the other Company must pay a matching cash dividend of an equivalent amount per share to its shareholders. If either Company is prohibited by law or is otherwise unable to declare, pay or otherwise make all or any portion of such a matching dividend, then BHP Billiton Limited or BHP Billiton Plc will, so far as it is practicable to do so, enter into such transactions with each other as the Boards agree to be necessary or desirable so as to enable both Companies to pay dividends as nearly as practicable at the same time.
The DLC merger did not involve the change of legal ownership of any assets of BHP Billiton Limited or BHP Billiton Plc, any change of ownership of any existing shares or securities of BHP Billiton Limited or BHP Billiton Plc, the issue of any shares or securities or any payment by way of consideration, save for the issue by each Company of one special voting share to a trustee company which is the means by which the joint electoral procedure is operated.
Accounting for the DLC merger
The basis of accounting for the DLC merger was established under Australian and UK Generally Accepted Accounting Practice (GAAP), pursuant to the requirements of the Australian Securities and Investments Commission (ASIC) Practice Note 71 ‘Financial Reporting by Australian Entities in Dual Listed Company Arrangements’, an order issued by ASIC under section 340 of the Corporations Act 2001 on 2 September 2002, and in accordance with the UK Companies Act 1985. In accordance with the transitional provisions of IFRS 1/AASB 1 ‘First-time Adoption of International Financial Reporting Standards’, the same basis of accounting is applied under International Financial Reporting Standards. Accordingly, these financial statements consolidate the Group as follows:
Basis of preparation
This general purpose financial report for the year ended 30 June 2014 has been prepared on a going concern basis and in accordance with the requirements of the Australian Corporations Act 2001, the UK Companies Act 2006 and with:
The above accounting standards and interpretations are collectively referred to as ‘IFRS’ in this report.
The principal accounting standards or interpretations that have been adopted for the first time in these financial statements are:
In addition, the Group has early-adopted amendments to IAS 36/AASB 136 ‘Impairment of Assets’. The amendment has been adopted early in conjunction with the initial adoption of IFRS 13 ‘Fair Value Measurement’, as it reverses the unintended requirement in that standard to disclose the recoverable amount of every cash-generating unit to which significant goodwill has been allocated. Under the amendment, the recoverable amount of cash-generating units to which significant goodwill has been allocated is required to be disclosed only when an impairment loss has been recognised or reversed.
The Group has also changed its Exploration and Evaluation Expenditure policy from 1 July 2013 such that all acquisitions of exploration leases are classified as intangible exploration assets or tangible exploration assets based on the nature of the assets acquired.
The impact of the above changes on the financial statements is described in detail in note 37 ‘Impact of new accounting standards and change in accounting policies’.
The following new accounting standard and interpretation are not yet effective but may have an impact on the Group in financial years commencing from 1 July 2014:
The Group is currently in the process of determining the potential impact of adopting the above standard and interpretation. The standard and interpretation are available for early adoption in the 30 June 2014 financial year as permitted by the Australian Corporations Act 2001, but have not been applied in the preparation of these financial statements. Both the standard and interpretation have been endorsed by the EU and hence are available for early adoption in the EU.
The following new accounting standards are not yet effective but may have an impact on the Group in financial years commencing from 1 July 2015 or later:
The Group is currently in the process of determining the potential impact of adopting the above standards. These standards have not been applied in the preparation of these financial statements. Neither of these standards have been endorsed by the EU or issued by the AASB and hence are not available for early adoption in the EU or under the Australian Corporations Act 2001.
Basis of measurement
The financial statements are drawn up on the basis of historical cost principles, except for derivative financial instruments and certain other financial assets, which are carried at fair value.
Rounding of amounts
Amounts in these financial statements have, unless otherwise indicated, been rounded to the nearest million dollars.
Currency of presentation
All amounts are expressed in millions of US dollars, unless otherwise stated, consistent with the predominant functional currency of the Group’s operations.
Consistent application of accounting policies
The accounting policies have been consistently applied by all entities included in the Group consolidated financial statements and are consistent with those applied in all prior years presented.
Comparatives
Where applicable, comparatives have been adjusted to measure or present them on the same basis as current period figures.
Principles of consolidation
The financial statements of the Group include the consolidation of BHP Billiton Limited, BHP Billiton Plc and their respective subsidiaries. Subsidiaries are entities controlled by either parent entity. Control exists where
either parent entity is exposed, or has rights to, variable returns from its involvement with the subsidiary and has the ability to affect those returns through its power over the subsidiary. A parent entity has power over the subsidiary, when it has existing rights to direct the relevant activities of the subsidiary. The relevant activities are those which significantly affect the subsidiary’s returns. 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. Subsidiaries are included in the consolidated financial report from the date control commences until the date control ceases. Where the Group’s interest is less than 100 per cent, the interest attributable to outside shareholders is reflected in non-controlling interests. The effects of all transactions between entities within the Group have been eliminated.
Joint arrangements
The Group undertakes a number of business activities through joint arrangements. Joint arrangements exist when two or more parties have joint control. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require the unanimous consent of the parties sharing control. The Group’s joint arrangements are of two types:
Joint operations
Joint operations are joint arrangements in which the parties with joint control have rights to the assets and obligations for the liabilities relating to the arrangement. The activities of a joint operation are primarily designed for the provision of output to the parties to the arrangement, indicating that:
The financial statements of the Group include its 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. All such amounts are measured in accordance with the terms of each arrangement, which are usually in proportion to the Group’s interest in the joint operation.
Joint ventures
Joint ventures are joint arrangements in which the parties with joint control of the arrangement have rights to the net assets of the arrangement. A separate vehicle, not the parties, will have the rights to the assets and obligations to the liabilities, relating to the arrangement. More than an insignificant share of output from a joint venture is sold to third parties which indicates that the joint venture is not dependent on the parties to the arrangement for funding and that the parties to the arrangement have no obligation for the liabilities of the arrangement.
Joint ventures are accounted for using the equity method. Under the equity method the joint venture is recorded initially at cost to the Group, including the value of any goodwill on acquisition. In subsequent periods, the carrying amount of the joint venture is adjusted to reflect the Group’s share of its post-acquisition profit or loss and other comprehensive income. After application of the equity method, including recognising the Group’s share of the joint ventures’ results, the value of the investment will be assessed for impairment if there is objective evidence that an impairment of the investment may have occurred. Where the Group’s investment in a joint venture is nil after having applied equity accounting principles (and the Group has no legal or constructive obligation to make further payments, nor has made payments on behalf of the joint venture), dividends received from the joint venture will be recognised in the Group’s result as a ‘Share of operating profit of equity accounted investments’.
Associates
Associates are entities in which the Group holds significant influence. Significant influence is the power to participate in the financial and operating policy decisions of an entity but is not control or joint control. If the Group holds 20 per cent or more of the voting power of an entity, it is presumed that the Group has significant influence, unless it can be clearly demonstrated that this is not the case. Significant influence can also arise when the Group has less than 20 per cent of voting power but it can be demonstrated that the Group has the power to participate in the financial and operating policy decisions of the associate.
Investments in associates are accounted for using the equity method as described above. The Group uses the term ‘equity accounted investments’ to refer to associates and joint ventures collectively.
Business combinations
Business combinations that occurred between 1 July 2004 and 30 June 2009 were accounted for by applying the purchase method of accounting, whereby the purchase consideration of the combination is allocated to the identifiable net assets acquired. Business combinations prior to 1 July 2004 have been accounted for in accordance with the Group’s previous policies under Australian GAAP and UK GAAP and have not been restated.
Business combinations undertaken from 1 July 2010 are accounted for by applying the acquisition method of accounting, whereby the identifiable assets, liabilities and contingent liabilities (identifiable net assets) are measured on the basis of fair value at the date of acquisition.
Goodwill
Where the fair value of consideration paid for a business combination exceeds the fair value of the Group’s share of the identifiable net assets acquired, the difference is treated as purchased goodwill. Where the fair value of the Group’s share of the identifiable net assets acquired exceeds the cost of acquisition, the difference is immediately recognised in the income statement. The recognition and measurement of goodwill attributable to a non-controlling interest in a business combination is determined on a transaction by transaction basis. Goodwill is not amortised, however, its carrying amount is assessed annually against its recoverable amount as explained below under ‘Impairment and reversal of impairment of non-current assets’. On the subsequent disposal or termination of a previously acquired business, any remaining balance of associated goodwill is included in the determination of the profit or loss on disposal or termination.
Intangible assets
Amounts paid for the acquisition of identifiable intangible assets, such as software and licences, are capitalised at the fair value of consideration paid and are recorded at cost less accumulated amortisation and impairment charges. Identifiable intangible assets with a finite life are amortised on a straight-line basis over their expected useful life, which is typically no greater than eight years. The Group has no identifiable intangible assets for which the expected useful life is indefinite.
Foreign currencies
The Group’s reporting currency and the functional currency of the majority of its operations is the US dollar as this is assessed to be the principal currency of the economic environments in which they operate.
Transactions denominated in foreign currencies (currencies other than the functional currency of an operation) are recorded using the exchange rate ruling at the date of the underlying transaction. Monetary assets and liabilities denominated in foreign currencies are translated using the rate of exchange prevailing at year-end and
the gains or losses on retranslation are included in the income statement, with the exception of foreign exchange gains or losses on foreign currency provisions for site closure and rehabilitation, which are capitalised in property, plant and equipment for operating sites.
Exchange variations resulting from the retranslation at closing rate of the net investment in each subsidiary, joint arrangement and associate, arising after 1 July 2004, are accounted for in accordance with the policy stated below. Exchange variations arising before this date were transferred to retained earnings on 1 July 2004, being the date of transition to IFRS.
Subsidiaries, joint arrangements and associates that have functional currencies other than US dollars are foreign operations and translate their income statement items to US dollars using the exchange rate prevailing at the date of each transaction. Assets and liabilities are translated using exchange rates prevailing at year-end. Exchange variations resulting from the retranslation at closing rate of the net investment in foreign operations, together with differences between their income statement items translated at actual and closing rates, are recognised in the foreign currency translation reserve. For the purpose of foreign currency translation, the net investment in a foreign operation is determined inclusive of foreign currency intercompany balances for which settlement is neither planned nor likely to occur in the foreseeable future. The balance of the foreign currency translation reserve relating to a foreign operation that is disposed of, or partially disposed of, is recognised in the income statement at the time of disposal.
Share-based payments
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 corresponding accrued employee entitlement is recorded in the employee share awards reserve. The fair value of awards is calculated using an option pricing model which considers the following factors:
Where awards are forfeited because non-market based vesting conditions are not satisfied, the expense previously recognised is proportionately reversed. Where shares in BHP Billiton Limited or BHP Billiton Plc are acquired by on-market purchases prior to settling vested entitlements, the cost of the acquired shares is carried as treasury shares and deducted from equity. Where awards are satisfied by delivery of acquired shares, any difference between their acquisition cost and the remuneration expense recognised is charged directly to retained earnings. The tax effect of awards granted is recognised in income tax expense, except to the extent that the total tax deductions are expected to exceed the cumulative remuneration expense. In this situation, the excess of the associated current or deferred tax is recognised in other comprehensive income and forms part of the employee share awards reserve.
Sales revenue
Revenue from the sale of goods and disposal of other assets is recognised when persuasive evidence (usually in the form of an executed sales agreement) of an arrangement exists and;
Revenue is therefore generally recognised when title passes. In the majority of sales for most commodities, sales agreements specify that title passes on the bill of lading date, which is the date the commodity is delivered to the shipping agent. For these sales, revenue is recognised on the bill of lading date. For certain sales (principally coal sales to adjoining power stations and diamond sales), title passes and revenue is recognised when the goods have been delivered.
In cases where the terms of the executed sales agreement allow for an adjustment to the sales price based on a survey of the goods by the customer (for instance an assay for mineral content), recognition of the sales revenue is based on the most recently determined estimate of product specifications.
For certain commodities, the sales price is determined on a provisional basis at the date of sale and adjustments to the sales price subsequently occurs based on movements in quoted market or contractual prices up to the date of final pricing. The period between provisional invoicing and final pricing is typically between 60 and 120 days. Revenue on provisionally priced sales is recognised based on the estimated fair value of the total consideration receivable. The revenue adjustment mechanism embedded within provisionally priced sales arrangements has the character of a commodity derivative. Accordingly, the fair value of the final sales price adjustment is re-estimated continuously and changes in fair value are recognised as an adjustment to revenue. In all cases, fair value is estimated by reference to forward market prices.
Revenue is not reduced for royalties and other taxes payable from the Group’s production.
The Group separately discloses sales of Group production from sales of third party products because of the significant difference in profit margin earned on these sales.
Exploration and evaluation expenditure
Exploration and evaluation activity involves the search for mineral and petroleum resources, the determination of technical feasibility and the assessment of commercial viability of an identified resource. Exploration and evaluation activity includes:
Administration costs that are not directly attributable to a specific exploration area are charged to the income statement. Initial payments for the acquisition of intangible lease assets are capitalised and amortised over the term of the permit.
Exploration and evaluation expenditure (including amortisation of capitalised licence and lease costs) is charged to the income statement as incurred except in the following circumstances, in which case the expenditure may be capitalised:
Capitalised exploration and evaluation expenditure considered to be a tangible asset is recorded as a component of property, plant and equipment at cost less impairment charges. Otherwise, it is recorded as an intangible asset (such as certain licence and lease arrangements). In determining whether the purchase of an exploration licence or lease is an intangible asset or a component of property, plant and equipment, consideration is given to the substance of the item acquired not its legal form. Licences or leases purchased which allow exploration over an extended period of time meet the definition of an intangible exploration lease asset where they cannot be reasonably associated with a known resource (minerals) or reserves (petroleum). All capitalised exploration and evaluation expenditure is monitored for indications of impairment. When a potential impairment is indicated, assessment is performed for each area of interest in conjunction with the group of operating assets (representing a cash-generating unit) to which the exploration is attributed. Exploration areas in which reserves have been discovered but require major capital expenditure before production can begin, are continually evaluated to ensure that commercial quantities of reserves exist or to ensure that additional exploration work is under way or planned. To the extent that capitalised expenditure is no longer expected to be recovered, it is charged to the income statement.
Development expenditure
When proved reserves are determined and development is sanctioned, capitalised exploration and evaluation expenditure is reclassified as assets under construction, and is disclosed as a component of property, plant and equipment. All subsequent development expenditure is capitalised and classified as assets under construction, provided commercial viability conditions continue to be satisfied. Development expenditure is net of proceeds from the sale of ore 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.
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 cost of bringing the asset to the location and condition necessary for operation and the estimated future cost of closure and rehabilitation of the facility.
Other mineral assets
Other mineral assets comprise:
Depreciation of property, plant and equipment
The carrying amounts of property, plant and equipment are depreciated to their estimated residual value over the estimated useful lives of the specific assets concerned, or the estimated life of the associated mine, field or lease, if shorter. Estimates of residual values and useful lives are reassessed annually and any change in estimate is taken into account in the determination of remaining depreciation charges. Depreciation commences on the date of commissioning. The major categories of property, plant and equipment are depreciated on a unit of production and/or straight-line basis using estimated lives indicated below. However, where assets are dedicated to a mine, field or lease and are not readily transferable, the below useful lives are subject to the lesser of the asset category’s useful life and the life of the mine, field or lease:
• Buildings | – | 25 to 50 years | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
• Land | – | not depreciated | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
• Plant and equipment | – | 3 to 30 years straight-line | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
• Mineral rights and petroleum interests | – | based on reserves on a unit of production basis | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
• Capitalised exploration, evaluation and development expenditure
|
Leased assets
Assets held under lease, which result in the Group receiving substantially all the risks and rewards of ownership of the asset (finance leases), are capitalised at the lower of the fair value of the property, plant and equipment or the estimated present value of the minimum lease payments.
The corresponding finance lease obligation is included within interest bearing liabilities. The interest component is charged to financial expenses over the lease term to reflect a constant rate of interest on the remaining balance of the obligation.
Operating lease assets are not capitalised and rental payments are included in the income statement on a straight-line basis over the lease term. Provision is made for the present value of future operating lease payments in relation to surplus lease space, when it is first determined that the space will be of no probable future benefit. Operating lease incentives are recognised as a liability when received and subsequently reduced by allocating lease payments between rental expense and reduction of the liability.
Impairment and reversal of impairment of non-current assets
Formal impairment tests are carried out annually for goodwill. In addition, formal impairment tests for all assets are performed when there is an indication of impairment. The Group conducts an internal review of asset values annually, which is used as a source of information to assess for any indications of impairment or reversal of previously recognised impairment losses. External factors, such as changes in expected future prices, costs and other market factors, are also monitored to assess for indications of impairment or reversal of previously recognised impairment losses. If any such indication exists, an estimate of the asset’s recoverable amount is calculated, being the higher of fair value less direct costs of disposal and the asset’s value in use.
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. A reversal of a previously recognised impairment loss is limited to the lesser of the amount that would not cause the carrying amount to exceed (a) its recoverable amount; or (b) the carrying amount that would have been determined (net of depreciation) had no impairment loss been recognised for the asset or cash-generating unit.
Fair value is determined as the amount that would be obtained from the sale of the asset in an orderly transaction between market participants. Fair value for mineral assets is generally determined as the present value of the estimated future cash flows expected to arise from the continued use of the asset, including any expansion prospects, and its eventual disposal, using assumptions that an independent market participant may take into account. These cash flows are discounted at an appropriate rate to arrive at a net present value of the asset.
Value in use 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. Value in use 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 fair value and consequently the value in use calculation is likely to give a different result (usually lower) to a fair value calculation.
In testing for indications of impairment and performing impairment calculations, assets are considered as collective groups and referred to as cash-generating units. Cash-generating units are the smallest identifiable group of assets, liabilities and associated goodwill that generate cash inflows that are largely independent of the cash inflows from other assets or groups of assets.
The impairment assessments are based on a range of estimates and assumptions, including:
Estimates/assumptions: | Basis: | |||
• Future production | • | proved and probable reserves, resource estimates and, in certain cases, expansion projects | ||
• Commodity prices | • | forward market and contract prices, and longer-term price protocol estimates | ||
• Exchange rates | • | current (forward) market exchange rates | ||
• Discount rates | • | cost of capital risk-adjusted appropriate to the resource |
Overburden removal costs
The process of removing overburden and other mine waste materials to access mineral deposits is referred to as stripping. In open-pit mining, stripping costs are accounted for separately for each component of an ore body. A component is a specific section within an ore body that is made more accessible by the stripping activity. The identification of components is dependent on the mine plan and will often comprise a separate pushback or phase identified in the plan.
There are two types of stripping activity:
Development stripping costs are capitalised as a development stripping asset when:
Production stripping can give rise to two benefits being the extraction of ore in the current period and improved access to the ore body component in future periods. To the extent that the benefit is the extraction of ore the stripping costs are recognised as an inventory cost. To the extent the benefit is improved access to future ore, the stripping costs are recognised as a production stripping asset if the following criteria are met:
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 life-of-component ratio a portion of the stripping costs is capitalised to the production stripping asset.
The development and production stripping assets are depreciated on a units of production basis based on the proven and probable reserves of the relevant components. Stripping assets are classified as other mineral assets in property, plant and equipment.
Inventories
Inventories, including work in progress, 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 cost of purchasing raw materials and cost of production, including attributable mining and manufacturing overheads. In respect of minerals inventory, quantities are assessed primarily through surveys and assays. In respect of petroleum inventory, quantities are derived through flow rate or tank volume measurement; volume calculation and composition is derived via sample analysis.
Finance costs
Finance costs are expensed as incurred except where they relate to the financing of construction or development of qualifying assets requiring a substantial period of time to prepare for their intended future use, in which case finance costs are capitalised up to the date when the asset is ready for its intended use. The amount of finance costs capitalised (before the effects of income tax) for the period is determined by applying the interest rate applicable to appropriate borrowings outstanding during the period, to the average amount of capitalised expenditure for the qualifying assets during the period.
Taxation
Taxation on the profit or loss for the year comprises current and deferred tax. Taxation is recognised in the income statement except to the extent that it relates to items recognised directly in equity, in which case the tax is recognised in equity.
Current tax is the expected tax payable on the taxable income for the year using rates enacted or substantively enacted at period end, and includes any adjustment to tax payable in respect of previous years.
Deferred tax is provided using the balance sheet liability method, providing for the tax effect of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for tax assessment or deduction purposes. Where an asset has no deductible or depreciable amount for income tax purposes, but has a deductible amount on sale or abandonment for capital gains tax purposes, that amount is included in the determination of temporary differences. The tax effect of certain temporary differences is not recognised, principally with respect to: goodwill; temporary differences arising on the initial recognition of assets or liabilities (other than those arising in a business combination or in a manner that initially impacted
accounting or taxable profit); and temporary differences relating to investments in subsidiaries, joint ventures and associates to the extent that the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. The amount of deferred tax recognised is based on the expected manner and timing of realisation or settlement of the carrying amount of assets and liabilities, with the exception of items that have a tax base solely derived under capital gains tax legislation, using tax rates enacted or substantively enacted at period end. To the extent that an item’s tax base is solely derived from the amount deductible under capital gains tax legislation, deferred tax is determined as if such amounts are deductible in determining future assessable income.
A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised. Deferred tax assets are reviewed at each balance sheet date and amended to the extent that it is no longer probable that the related tax benefit will be realised. Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same taxation authority and the Group has both the right and the intention to settle its current tax assets and liabilities on a net or simultaneous basis.
Royalties and resource rent taxes are treated as taxation arrangements when they have the characteristics of a tax. This is considered to be the case 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. For such arrangements, current and deferred tax is provided on the same basis as described above for other forms of taxation. Obligations arising from royalty arrangements that do not satisfy these criteria are recognised as current provisions and included in expenses.
Provision for employee benefits
Provision is made in the financial statements for all employee benefits, including on costs. In relation toindustry-based long service leave funds, the Group’s liability, including obligations for funding shortfalls, is determined after deducting the fair value of dedicated assets of such funds.
Liabilities for unpaid wages and salaries are recognised in sundry creditors. Current entitlements to annual leave and accumulating sick leave accrued for services up to the reporting date are recognised in provision for employee benefits and are measured at the amounts expected to be paid. Entitlements to non-accumulating sick leave are recognised when the leave is taken.
The current liability for long service leave (for which settlement within 12 months of the reporting date cannot be deferred) is recognised in the current provision for employee benefits and is measured in accordance with annual leave described above. The non-current liability for long service leave is recognised in the non-current provision for employee benefits and measured as the present value of expected future payments to be made in respect of services provided by employees up to the reporting date. Consideration is given to expected future wage and salary levels, experience of employee departures and periods of service. Expected future payments are discounted using market yields at the reporting date on national government bonds with terms to maturity and currency that match, as closely as possible, the estimated future cash outflows.
Superannuation, pensions and other post-retirement benefits
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.
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.
For defined benefit schemes, the cost of providing pensions is charged to the income statement so as to recognise current and past service costs, interest cost on defined benefit obligations, and the effect of any curtailments or settlements, net of returns on plan assets. Actuarial 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.
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. In some schemes there is no funding of the benefits before retirement. These schemes are recognised on the same basis as described above for defined benefit pension schemes.
Closure and rehabilitation
The mining, extraction and processing activities of the Group normally give rise to obligations for site closure or rehabilitation. Closure and rehabilitation works can include facility decommissioning and dismantling; removal or treatment of waste materials; site and land rehabilitation. The extent of work required and the associated costs are dependent on the requirements of relevant authorities and the Group’s environmental policies.
Provisions for the cost of each closure and rehabilitation program are recognised at the time that environmental disturbance occurs. When the extent of disturbance increases over the life of an operation, the provision is increased accordingly. Costs included in the provision encompass all closure and rehabilitation activity expected to occur progressively over the life of the operation and at or after the time of closure, for disturbance existing at the reporting date. Routine operating costs that may impact the ultimate closure and rehabilitation activities, such as waste material handling conducted as an integral part of a mining or production process, are not included in the provision. 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 which is probable and capable of reliable estimation.
The timing of the actual closure and rehabilitation expenditure is dependent upon a number of factors such as the life and nature of the asset, the operating licence conditions, the principles of Our BHP Billiton Charter and the environment in which the mine operates. Expenditure may occur before and after closure and can continue for an extended period of time dependent on closure and rehabilitation requirements. The majority of the expenditure is expected to be paid over periods of up to 50 years with some payments into perpetuity.
Closure and rehabilitation provisions are measured at the expected value of future cash flows, discounted to their present value and determined according to the probability of alternative estimates of cash flows occurring for each operation. Discount rates used are specific to the country in which the operation is located. Significant judgements and estimates are involved in forming expectations of future activities and the amount and timing of the associated cash flows. Those expectations are formed based on existing environmental and regulatory requirements or, if more stringent, Group environmental policies which give rise to a constructive obligation.
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 capitalised cost of closure and rehabilitation activities is recognised in property, plant and equipment and depreciated accordingly. The value of the provision is progressively increased over time as the effect of discounting unwinds, creating an expense recognised in financial expenses.
Closure and rehabilitation provisions are also adjusted for changes in estimates. Those adjustments are accounted for as a change in the corresponding capitalised cost, except where a reduction in the provision is greater than the undepreciated capitalised cost of the related assets, in which case the capitalised cost is reduced to nil and the remaining adjustment is recognised in the income statement. In the case of closed sites, changes to estimated costs are recognised immediately in the income statement. Changes to the capitalised cost result in an adjustment to future depreciation. Adjustments to the estimated amount and timing of future closure and rehabilitation cash flows are a normal occurrence in light of the significant judgements and estimates involved. Factors influencing those changes include:
Financial instruments
All financial assets are initially recognised at the fair value of consideration paid. Subsequently, financial assets are carried at fair value or amortised cost less impairment. Where non-derivative financial assets are carried at fair value, gains and losses on remeasurement are recognised directly in equity unless the financial assets have been designated as being held at fair value through profit or loss, in which case the gains and losses are recognised directly in the income statement. Financial assets are designated as being held at fair value through profit or loss where this is necessary to reduce measurement inconsistencies for related assets and liabilities. All financial liabilities other than derivatives are initially recognised at fair value of consideration received net of transaction costs as appropriate (initial cost) and, with the exception of financial liabilities which have been designated in fair value hedging relationships, are subsequently carried at amortised cost.
Derivatives, including those embedded in other contractual arrangements but separated for accounting purposes because they are not clearly and closely related to the host contract, are initially recognised at fair value on the date the contract is entered into and are subsequently remeasured at their fair value. The method of recognising the resulting gain or loss on remeasurement depends on whether the derivative is designated as a hedging instrument, and, if so, the nature of the item being hedged. The measurement of fair value is based on quoted market 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 credit and other risks implicit in such estimates.
Forward exchange contracts and interest rate swaps held for hedging purposes are accounted for as either cash flow or fair value hedges. Derivatives embedded within other contractual arrangements and the majority of commodity-based transactions executed through derivative contracts do not qualify for hedge accounting.
Fair value hedges
Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recorded in the income statement, together with any changes in the fair value of the hedged asset or liability that are attributable to the hedged risk. Any difference between the change in fair value of the derivative and the hedged risk constitutes ineffectiveness of the hedge and is recognised immediately in the income statement.
Cash flow hedges
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognised in equity in the hedging reserve. The gain or loss relating to the ineffective portion is recognised immediately in the income statement.
Amounts accumulated in equity are recycled to the income statement in the periods when the hedged item affects profit or loss. However, when the forecast transaction that is hedged results in the recognition of a non-financial asset (for example, plant and equipment purchases) or a non-financial liability, the gains and losses previously deferred in equity are transferred from equity and included in the measurement of the initial carrying amount of the asset or liability.
When a hedging instrument expires or is sold or terminated, or when a hedge ceases to meet the criteria for hedge accounting, any cumulative gain or loss existing in equity at that time remains in equity and is recognised when the forecast transaction is ultimately recognised in the income statement. When a hedged forecast transaction is no longer expected to occur, the cumulative hedge gain or loss that was reported in equity is immediately transferred to the income statement.
Derivatives that do not qualify for hedge accounting
Certain derivative instruments do not qualify for hedge accounting. Changes in the fair value of any derivative instrument that does not qualify for hedge accounting are recognised immediately in the income statement.
Available for sale and trading investments
Available for sale and trading investments are measured at fair value. Gains and losses on the remeasurement of trading investments are recognised directly in the income statement. Gains and losses on the remeasurement of available for sale investments are recognised directly in equity and subsequently recognised in the income statement when realised by sale or redemption, or when a reduction in fair value is judged to represent an impairment.
Application of critical accounting policies and estimates
The preparation of the consolidated financial statements requires management to make judgements and estimates and form assumptions that affect the amounts of assets, liabilities, contingent liabilities, revenues and expenses reported in the financial statements. On an ongoing basis, management evaluates its judgements and estimates in relation to assets, liabilities, contingent liabilities, revenue and expenses. Management bases its judgements and estimates on historical experience and on other factors it believes to be reasonable under the circumstances, the results of which form the basis of the reported amounts that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions and conditions.
The Group has identified the following critical accounting policies under which significant judgements, estimates and assumptions are made and where actual results may differ from these estimates under different assumptions and conditions and may materially affect financial results or the financial position reported in future periods.
Further details of the nature of these assumptions and conditions may be found in the relevant notes to the financial statements.
Reserve estimates
Reserves are estimates of the amount of product that can be economically and legally extracted from the Group’s properties. In order to estimate reserves, estimates are required for a range of geological, technical and economic factors, including quantities, grades, production techniques, recovery rates, production costs, transport costs, commodity demand, commodity prices and exchange rates.
Estimating the quantity and/or grade of reserves requires the size, shape and depth of ore bodies or fields to be determined by analysing geological data such as drilling samples. This process may require complex and difficult geological judgements to interpret the data.
The Group determines and reports ore reserves in Australia and the United Kingdom under the principles incorporated in the Australasian Code for Reporting Exploration Results of Mineral Resources and Ore Reserves December 2012 known as the JORC Code, and the Australian Securities Exchange (ASX) Listing Rules 2012 for minerals. The JORC Code requires the use of reasonable investment assumptions when reporting reserves. As a result, management will form a view of forecast sales prices, based on current and long-term historical average price trends. For example, if current prices remain above long-term historical averages for an extended period of time, management may assume that lower prices will prevail in the future and as a result, those lower prices are used to estimate reserves under the JORC Code. Lower price assumptions generally result in lower estimates of reserves.
Reserve reporting requirements for SEC (United States of America) filings are specified in Industry Guide 7, which requires economic assumptions to be based on current economic conditions (which may differ from assumptions based on reasonable investment assumptions). Accordingly, for SEC filings, we test our reserve estimates derived under JORC against assumed ‘current economic conditions’. ‘Current economic conditions’ are based on the three-year average of historical contract and market prices for commodities such as iron ore and coal, and the three-year average of historical market prices for commodities that are traded on the London Metal Exchange, such as copper and nickel. However, we only report a different reserve in the United States if, based on the United States SEC pricing assumptions test, the reserve will be lower than that reported under JORC in Australia and the United Kingdom.
Oil and gas reserves reported in Australia and the United Kingdom, and the United States for SEC filing purposes, are based on the average of prices prevailing on the first day of each month for the past 12 months as required under the SEC Rules ‘Modernisation of Oil & Gas Reporting’.
Because the economic assumptions used to estimate reserves change from period to period, and because additional geological data is generated during the course of operations, estimates of reserves may change from period to period. Changes in reported reserves may affect the Group’s financial results and financial position in a number of ways, including the following:
Exploration and evaluation expenditure
The Group’s accounting policy for exploration and evaluation expenditure results in certain items of expenditure being capitalised for an area of interest where it is considered likely to be recoverable by future exploitation or sale or where the activities have not reached a stage which permits a reasonable assessment of the existence of reserves. This policy requires management to make certain estimates and assumptions as to future events and circumstances, in particular whether an economically viable extraction operation can be established. Any such
estimates and assumptions may change as new information becomes available. If, after having capitalised the expenditure under the policy, a judgement is made that recovery of the expenditure is unlikely, the relevant capitalised amount will be written off to the income statement.
Development expenditure
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. In exercising this judgement, management is required to make certain estimates and assumptions similar to those described above for capitalised exploration and evaluation expenditure. Any such estimates and assumptions may change as new information becomes available. If, after having commenced the development activity, a judgement is made that a development asset is impaired, the appropriate amount will be written off to the income statement.
Property, plant and equipment and Intangible assets – recoverable amount
In accordance with the Group’s accounting policy, each asset or cash-generating unit is evaluated every reporting period to determine whether there are any indications of impairment or reversal of previously recognised impairment losses. If any such indication exists, a formal estimate of recoverable amount is performed. Where carrying amount exceeds recoverable amount an impairment loss is recognised. A reversal of previously recognised impairment loss is limited to the lesser of the amount that would not cause the increased carrying amount to exceed (a) its recoverable amount; or (b) the carrying amount that would have been determined (net of depreciation) had no impairment loss been recognised for the asset or cash-generating unit. The recoverable amount of an asset or cash-generating group of assets is measured at the higher of fair value less costs of disposal and value in use.
The determination of fair value and value in use requires management to make estimates and assumptions about expected production and sales volumes, commodity prices (considering current and historical prices, price trends and related factors), reserves (see ‘Reserve estimates’ above), operating costs, closure and rehabilitation costs and future capital expenditure. These estimates and assumptions are subject to risk and uncertainty; hence there is a possibility that changes in circumstances will alter these projections, which may impact the recoverable amount of the assets. In such circumstances, some or all of the carrying amount of the assets may be further impaired or the impairment charge reduced with the impact recorded in the income statement.
Defined benefit pension schemes
The Group’s accounting policy for defined benefit pension schemes requires management to make judgements as to the nature of benefits provided by each scheme and thereby determine the classification of each scheme. For defined benefit schemes, management is required to make annual estimates and assumptions about future returns on classes of scheme assets, future remuneration changes, employee attrition rates, administration costs, changes in benefits, inflation rates, exchange rates, life expectancy and expected remaining periods of service of employees. In making these estimates and assumptions, management considers advice provided by external advisers, such as actuaries. Where actual experience differs to these estimates, actuarial gains and losses are recognised directly in equity. Refer to note 30 ‘Pension and other post-retirement obligations’ for details of the key assumptions.
Provision for closure and rehabilitation
The Group’s accounting policy for the recognition of closure and rehabilitation provisions requires significant estimates and assumptions such as: requirements of the relevant legal and regulatory framework; the magnitude of possible contamination; and the timing, extent and costs of required closure and rehabilitation activity. These uncertainties may result in future actual expenditure differing from the amounts currently provided.
The provision recognised for each site is periodically reviewed and updated based on the facts and circumstances available at the time. Changes to the estimated future costs for operating sites are recognised in the balance sheet by adjusting both the closure and rehabilitation asset and provision. For closed sites, changes to estimated costs are recognised immediately in the income statement.
In addition to the uncertainties noted above, certain closure and rehabilitation activities are subject to legal disputes and depending on the ultimate resolution of these issues, the final liability for these matters could vary.
Taxation
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. Judgement is also required in assessing whether deferred tax assets and certain deferred tax liabilities are recognised on the balance sheet. Deferred tax assets, including those arising from unrecouped tax losses, capital losses, foreign tax credits and temporary differences, are recognised only where it is considered more likely than not that they will be recovered, which is dependent on the generation of sufficient future taxable profits. Deferred tax liabilities arising from temporary differences in investments, caused principally by retained earnings held in foreign tax jurisdictions, are recognised unless repatriation of retained earnings can be controlled and are not expected to occur in the foreseeable future.
Assumptions about the generation of future taxable profits and repatriation of retained earnings depend on management’s estimates of future cash flows. These depend on estimates of future production and sales volumes, commodity prices, reserves, operating costs, closure and rehabilitation costs, capital expenditure, dividends and other capital management transactions. Judgements are also required about the application of income tax legislation and its interaction with income tax accounting principles. These judgements and assumptions are subject to risk and uncertainty, hence there is a possibility that changes in circumstances will alter expectations, which may impact the amount of deferred tax assets and deferred tax liabilities recognised on the balance sheet and the amount of other tax losses and temporary differences not yet recognised. In such circumstances, some or all of the carrying amount of recognised deferred tax assets and liabilities may require adjustment, resulting in a corresponding credit or charge to the income statement.
Exchange rates
The following exchange rates relative to the US dollar have been applied in the financial statements:
Average year ended 30 June 2014 | Average year ended 30 June 2013 | Average year ended 30 June 2012 | As at 30 June 2014 | As at 30 June 2013 | As at 30 June 2012 | |||||||||||||||||||
Australian dollar(a) | 0.92 | 1.03 | 1.03 | 0.94 | 0.92 | 1.00 | ||||||||||||||||||
Brazilian real | 2.29 | 2.04 | 1.78 | 2.20 | 2.18 | 2.08 | ||||||||||||||||||
Canadian dollar | 1.07 | 1.00 | 1.00 | 1.07 | 1.05 | 1.03 | ||||||||||||||||||
Chilean peso | 532 | 479 | 492 | 551 | 504 | 510 | ||||||||||||||||||
Colombian peso | 1,935 | 1,814 | 1,825 | 1,881 | 1,923 | 1,807 | ||||||||||||||||||
Euro | 0.74 | 0.77 | 0.75 | 0.73 | 0.77 | 0.80 | ||||||||||||||||||
South African rand | 10.39 | 8.84 | 7.77 | 10.60 | 10.00 | 8.41 | ||||||||||||||||||
UK pound sterling | 0.62 | 0.64 | 0.63 | 0.59 | 0.66 | 0.64 |
(a) | Displayed as US$ to A$1 based on common convention. |
Business segments
The Group operates five Businesses aligned with the commodities which we extract and market, reflecting the structure used by the Group’s management to assess the performance of the Group.
Reportable segment | Principal activities | |
Petroleum and Potash | Exploration, development and production of oil and gas Potash pre-development | |
Copper | Mining of copper, silver, lead, zinc, molybdenum, uranium and gold | |
Iron Ore | Mining of iron ore | |
Coal | Mining of metallurgical coal and thermal (energy) coal | |
Aluminium, Manganese and Nickel | Mining of bauxite, refining of bauxite into alumina and smelting of alumina into aluminium metal Mining of manganese ore and production of manganese metal and alloys Mining and production of nickel products |
Group and unallocated items represent Group centre functions, unallocated operations and consolidation adjustments. Exploration and technology activities are recognised within relevant segments.
It is the Group’s policy that inter-segment sales are made on a commercial basis.
Year ended 30 June 2014 Revenue Group production Third party products Rendering of services Inter-segment revenue Total revenue(a) Underlying EBITDA (b) Depreciation and amortisation Impairment (losses)/reversals Underlying EBIT (b) Comprising: Group production Third party products Share of operating profit of equity accounted investments Underlying EBIT (b) Net finance costs(c) Exceptional items(d) Profit before taxation Capital expenditure Investments accounted for using the equity method (e) Total assets (e) Total liabilities (e) Petroleum
and Potash Copper Iron Ore Coal Aluminium,
Manganese
and Nickel Group and
unallocated
items/
eliminations (f) BHP
Billiton
Group US$M 14,022 12,838 20,882 8,659 7,583 – 63,984 437 1,030 130 456 823 103 2,979 112 – 131 – – – 243 262 – 213 – 5 (480 ) – 14,833 13,868 21,356 9,115 8,411 (377 ) 67,206 9,615 6,586 13,531 1,717 1,029 (119 ) 32,359 (3,951 ) (1,418 ) (1,464 ) (1,039 ) (670 ) (159 ) (8,701 ) (377 ) (88 ) 35 (292 ) (52 ) (23 ) (797 ) 5,287 5,080 12,102 386 307 (301 ) 22,861 5,288 4,634 11,498 218 289 (305 ) 21,622 3 8 (3 ) 18 18 – 44 (4 ) 438 607 150 – 4 1,195 5,287 5,080 12,102 386 307 (301 ) 22,861 (1,176 ) 551 22,236 6,423 3,757 2,949 2,345 498 21 15,993 115 1,386 1,069 1,089 – 5 3,664 47,046 24,690 27,412 18,863 12,713 20,689 151,413 7,532 2,459 4,022 4,563 3,391 44,064 66,031
Year ended 30 June 2013 Revenue Group production Third party products Rendering of services Inter-segment revenue Total revenue(a) Underlying EBITDA (b) Depreciation and amortisation Impairment (losses)/reversals Underlying EBIT (b) Comprising: Group production Third party products Share of operating profit of equity accounted investments Underlying EBIT (b) Net finance costs(c) Exceptional items(d) Profit before taxation Capital expenditure Investments accounted for using the equity method(e) Total assets(e) Total liabilities(e) Petroleum
and Potash Copper Iron Ore Coal Aluminium,
Manganese
and Nickel Group and
unallocated
items/
eliminations (f) BHP
Billiton
Group US$M 12,951 13,837 18,331 9,310 8,093 326 62,848 175 700 86 585 1,165 175 2,886 98 – 121 – – – 219 – – 55 – 20 (75 ) – 13,224 14,537 18,593 9,895 9,278 426 65,953 8,910 6,885 12,113 1,480 915 5 30,308 (3,068 ) (1,197 ) (917 ) (885 ) (772 ) (192 ) (7,031 ) (206 ) (49 ) (87 ) – 15 (20 ) (347 ) 5,636 5,639 11,109 595 158 (207 ) 22,930 5,616 5,181 10,565 410 120 (231 ) 21,661 11 3 31 44 38 – 127 9 455 513 141 – 24 1,142 5,636 5,639 11,109 595 158 (207 ) 22,930 (1,276 ) (1,928 ) 19,726 7,675 3,930 5,979 3,626 893 140 22,243 130 1,351 1,044 1,150 – – 3,675 44,383 22,623 25,877 17,568 12,092 16,635 139,178 6,858 2,549 3,751 4,343 3,283 43,103 63,887
Year ended 30 June 2012 Revenue Group production Third party products Rendering of services Inter-segment revenue Total revenue(a) Underlying EBITDA (b) Depreciation and amortisation Impairment (losses)/reversals Underlying EBIT (b) Comprising: Group production Third party products Share of operating profit of equity accounted investments Underlying EBIT (b) Net finance costs(c) Exceptional items(d) Profit before taxation Capital expenditure Investments accounted for using the equity method (e) Total assets (e) Total liabilities(e) Petroleum
and Potash Copper Iron Ore Coal Aluminium,
Manganese
and Nickel Group and
unallocated
items/
eliminations (f) BHP
Billiton
Group US$M 12,617 13,090 20,171 11,638 8,334 706 66,556 230 463 86 856 1,563 310 3,508 86 – 309 18 – – 413 – – 39 – 14 (53 ) – 12,933 13,553 20,605 12,512 9,911 963 70,477 9,097 6,203 14,815 3,340 809 353 34,617 (3,045 ) (960 ) (771 ) (730 ) (811 ) (114 ) (6,431 ) (19 ) 70 – 2 (22 ) (131 ) (100 ) 6,033 5,313 14,044 2,612 (24 ) 108 28,086 6,023 4,800 13,104 2,195 (43 ) 4 26,083 3 (9 ) 31 90 19 – 134 7 522 909 327 – 104 1,869 6,033 5,313 14,044 2,612 (24 ) 108 28,086 (668 ) (3,486 ) 23,932 5,488 3,518 4,458 3,103 1,941 129 18,637 129 1,073 876 1,103 – – 3,181 39,937 20,417 21,214 15,635 16,759 15,239 129,201 6,354 3,696 3,839 4,972 3,632 37,393 59,886
(a) | Revenue not attributable to reportable segments comprises the sale of freight and fuel to third parties, as well as revenues from unallocated operations described in footnote (f). |
(b) | Underlying EBIT is earnings before net finance costs, taxation and any exceptional items. Underlying EBIT is reported net of the Group’s share of net finance costs and taxation of equity accounted investments. Underlying EBITDA is Underlying EBIT before depreciation, impairments and amortisation. |
(c) | Refer to note 6 Net finance costs. |
(d) | Refer to note 3 Exceptional items. |
(e) | Total segment assets and liabilities of businesses represent operating assets and operating liabilities including the carrying amount of
balances. The carrying amount 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 and deferred tax |
(f) | Includes the
|
Property, plant and equipment – recoverable amount
Geographical information
Revenue by location of customer | ||||||||||||
2014 | 2013 | 2012 | ||||||||||
US$M | US$M | US$M | ||||||||||
Australia | 3,957 | 4,591 | 5,300 | |||||||||
United Kingdom | 1,284 | 1,598 | 378 | |||||||||
Rest of Europe | 4,767 | 5,609 | 6,649 | |||||||||
China | 23,287 | 20,079 | 21,670 | |||||||||
Japan | 7,143 | 8,147 | 9,095 | |||||||||
India | 2,798 | 2,581 | 3,751 | |||||||||
South Korea | 4,789 | 4,483 | 5,773 | |||||||||
Rest of Asia | 5,137 | 6,176 | 5,605 | |||||||||
North America | 10,149 | 8,510 | 7,896 | |||||||||
South America | 2,212 | 2,181 | 2,165 | |||||||||
Southern Africa | 1,143 | 1,311 | 1,415 | |||||||||
Rest of world | 540 | 687 | 780 | |||||||||
|
|
|
|
|
| |||||||
67,206 | 65,953 | 70,477 | ||||||||||
|
|
|
|
|
|
Non-current assets by location of assets | ||||||||||||
2014 | 2013 | 2012 | ||||||||||
US$M | US$M | US$M | ||||||||||
Australia | 60,408 | 56,173 | 53,809 | |||||||||
United Kingdom | 516 | 436 | 359 | |||||||||
North America | 35,845 | 33,844 | 28,094 | |||||||||
South America | 15,926 | 13,695 | 11,003 | |||||||||
Southern Africa | 4,570 | 5,081 | 6,316 | |||||||||
Rest of world | 3,107 | 3,208 | 4,335 | |||||||||
Unallocated assets(a) | 8,745 | 7,788 | 6,358 | |||||||||
|
|
|
|
|
| |||||||
129,117 | 120,225 | 110,274 | ||||||||||
|
|
|
|
|
|
In accordance with the Group’s accounting policy, each asset or cash generating unit is evaluated every reporting period to determine whether there are any indications of impairment. If any such indication exists, a formal estimate of recoverable amount is performed and an impairment loss recognised to the extent that carrying amount exceeds recoverable amount. The recoverable amount of an asset or cash generating group of
(a) | Unallocated assets
|
Exceptional items are those items where their nature and amount is considered material to the financial statements. Such items included within the Group’s profit for the year are detailed below.
Year ended 30 June 2014 | Gross | Tax | Net | |||||||||
US$M | US$M | US$M | ||||||||||
Exceptional items by category | ||||||||||||
Sale of Pinto Valley | 551 | (166 | ) | 385 | ||||||||
|
|
|
|
|
| |||||||
551 | (166 | ) | 385 | |||||||||
|
|
|
|
|
|
Exceptional items are classified by nature as follows:
Year ended 30 June 2014 | Sale of assets | Gross | ||||||
US$M | US$M | |||||||
Sale of Pinto Valley | 551 | 551 | ||||||
|
|
|
| |||||
551 | 551 | |||||||
|
|
|
|
Sale of Pinto Valley:
On 11 October 2013, the Group announced it had completed the sale of its Pinto Valley mining operation for cash consideration of US$653 million, after working capital adjustments. A gain on sale of US$385 million (after tax expense) was recognised in the year ended 30 June 2014.
Year ended 30 June 2013 | Gross | Tax | Net | |||||||||
US$M | US$M | US$M | ||||||||||
Exceptional items by category | ||||||||||||
Sale of Yeelirrie uranium deposit | 420 | – | 420 | |||||||||
Sale of Richards Bay Minerals | 1,212 | (183 | ) | 1,029 | ||||||||
Sale of diamonds business | (97 | ) | (42 | ) | (139 | ) | ||||||
Sale of East and West Browse Joint Ventures | 1,539 | (188 | ) | 1,351 | ||||||||
Impairment of Nickel West assets | (1,698 | ) | 454 | (1,244 | ) | |||||||
Impairment of Worsley assets | (2,190 | ) | 559 | (1,631 | ) | |||||||
Impairment of Permian Basin assets | (266 | ) | 99 | (167 | ) | |||||||
Other impairments arising from capital project review | (1,006 | ) | 291 | (715 | ) | |||||||
Newcastle steelworks rehabilitation | 158 | (47 | ) | 111 | ||||||||
|
|
|
|
|
| |||||||
(1,928 | ) | 943 | (985 | ) | ||||||||
|
|
|
|
|
|
Exceptional items are classified by nature as follows:
Year ended 30 June 2013 | Sale of assets | Impairment of goodwill and other assets | Restructuring costs | Closure and rehabilitation provisions released | Gross | |||||||||||||||
US$M | US$M | US$M | US$M | US$M | ||||||||||||||||
Sale of Yeelirrie uranium deposit | 420 | – | – | – | 420 | |||||||||||||||
Sale of Richards Bay Minerals | 1,212 | – | – | – | 1,212 | |||||||||||||||
Sale of diamonds business | – | (97 | ) | – | – | (97 | ) | |||||||||||||
Sale of East and West Browse Joint Ventures | 1,539 | – | – | – | 1,539 | |||||||||||||||
Impairment of Nickel West assets | – | (1,698 | ) | – | – | (1,698 | ) | |||||||||||||
Impairment of Worsley assets | – | (2,190 | ) | – | – | (2,190 | ) | |||||||||||||
Impairment of Permian Basin assets | – | (266 | ) | – | – | (266 | ) | |||||||||||||
Other impairments arising from capital project review | – | (898 | ) | (108 | ) | – | (1,006 | ) | ||||||||||||
Newcastle steelworks rehabilitation | – | – | – | 158 | 158 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
3,171 | (5,149 | ) | (108 | ) | 158 | (1,928 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
Sale of Yeelirrie uranium deposit:
On 27 August 2012, the Group announced the sale of its wholly owned Yeelirrie uranium deposit and the transaction was completed on 19 December 2012. A gain on sale of US$420 million was recognised in the year ended 30 June 2013, while the associated tax expense was offset by the recognition of deferred tax benefits on available tax losses of US$126 million.
Sale of Richards Bay Minerals:
On 7 September 2012, the Group announced it had completed the sale of its 37.76 per cent effective interest in Richards Bay Minerals. A gain on sale of US$1,029 million (after tax expense) was recognised in the year ended 30 June 2013.
Sale of diamonds business:
On 13 November 2012, the Group announced the sale of its diamonds business, comprising its interests in the EKATI Diamond Mine and Diamond Marketing operations. The transaction was completed on 10 April 2013 for an aggregate cash consideration of US$553 million (after adjustments). An impairment charge of US$139 million (after tax expense) was recognised based on the final consideration.
Sale of East and West Browse Joint Ventures:
On 12 December 2012, the Group signed a definitive agreement to sell its 8.33 per cent interest in the East Browse Joint Venture and 20 per cent interest in the West Browse Joint Venture. A gain on sale of US$1,539 million was recognised in the year ended 30 June 2013. The associated tax expense of US$462 million was partly offset by the recognition of deferred tax benefits on available tax losses of US$241 million and the derecognition of deferred tax liabilities of US$33 million. The transaction was completed on 7 June 2013.
Impairment of Nickel West assets:
As a result of expected continued strength in the Australian dollar and weak nickel prices, the Group recognised an impairment charge of US$1,244 million (after tax benefit) in the year ended 30 June 2013.
Impairment of Worsley assets:
The Group recognised an impairment of assets at Worsley as a result of expected continued strength in the Australian dollar and weak alumina prices. A total impairment charge of US$1,631 million (after tax benefit) was recognised in the year ended 30 June 2013.
Impairment of Permian Basin assets:
An impairment charge of US$167 million (after tax benefit) was recognised as the performance of specific evaluation wells in certain areas of the Permian Basin (US) do not support economic development.
Other impairments arising from capital project review:
In the year ended 30 June 2013, WAIO refocused its attention on the capital-efficient expansion opportunity that exists within the Port Hedland inner harbour and all early works associated with the outer harbour development option were suspended. This revision to the WAIO development sequence and the change in status of other minor capital projects across the Group has resulted in the recognition of impairment charges of US$639 million (after tax benefit) and other restructuring costs of US$76 million (after tax benefit) in the year ended 30 June 2013.
Newcastle steelworks rehabilitation:
The Group recognised a decrease of US$158 million (before tax expense) to its rehabilitation obligations in respect of former operations at the Newcastle steelworks (Australia). This followed the completion of the Hunter River Remediation Project and reaching agreement with the Environment Protection Authority in March 2013 regarding the necessary scope of work to repeal the Environmental Classification at Steel River.
Year ended 30 June 2012 | Gross | Tax | Net | |||||||||
US$M | US$M | US$M | ||||||||||
Exceptional items by category | ||||||||||||
Impairment of Fayetteville goodwill and other assets | (2,835 | ) | 996 | (1,839 | ) | |||||||
Impairment of Nickel West goodwill and other assets | (449 | ) | 94 | (355 | ) | |||||||
Suspension or early closure of operations and the change in status of specific projects(a) | (502 | ) | 108 | (394 | ) | |||||||
Settlement of insurance claims(a) | 300 | (90 | ) | 210 | ||||||||
Recognition of deferred tax assets on enactment of MRRT and PRRT extension legislation in Australia | – | 637 | 637 | |||||||||
|
|
|
|
|
| |||||||
(3,486 | ) | 1,745 | (1,741 | ) | ||||||||
|
|
|
|
|
|
(a) | Includes gross amounts attributable to non-controlling interest of US$(34) million (US$7 million tax |
Exceptional items are classified by nature as follows:
Year ended 30 June 2012 | Impairment of goodwill and other assets | Idle capacity costs and inventory write-downs | Restructuring costs | Insurance recoveries | Gross | |||||||||||||||
US$M | US$M | US$M | US$M | US$M | ||||||||||||||||
Impairment of Fayetteville goodwill and other assets | (2,835 | ) | – | – | – | (2,835 | ) | |||||||||||||
Impairment of Nickel West goodwill and other assets | (406 | ) | (43 | ) | – | – | (449 | ) | ||||||||||||
Suspension or early closure of operations and the change in status of specific projects | (422 | ) | (40 | ) | (40 | ) | – | (502 | ) | |||||||||||
Settlement of insurance claims | – | – | – | 300 | 300 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
(3,663 | ) | (83 | ) | (40 | ) | 300 | (3,486 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
Impairment of Fayetteville goodwill and other assets:
As a result of the fall in United States domestic gas prices and the Company’s decision to adjust its development plans, the Group recognised impairments of goodwill and other assets in relation to its Fayetteville shale gas assets. A total impairment charge of US$1,839 million (after tax benefit) was recognised in the year ended 30 June 2012.
Impairment of Nickel West goodwill and other assets:
The Group recognised impairments of goodwill and other assets at Nickel West as a result of the continued downturn in the nickel price and margin deterioration. A total impairment charge of US$355 million (after tax benefit) was recognised in the year ended 30 June 2012.
Suspension or early closure of operations and the change in status of specific projects:
As part of our regular portfolio review, various operations and projects around the Group were either suspended, closed early or changed in status. These included the change in status of the Olympic Dam expansion project; the temporary suspension of production at TEMCO and the permanent closure of the Metalloys South Plant in South Africa; the indefinite cessation of production at Norwich Park; and the suspension of other minor capital projects. As a result, impairment charges of US$338 million (after tax benefit), idle capacity costs and inventorywrite-down of US$28 million (after tax benefit) and other restructuring costs of US$28 million (after tax benefit) were recognised in the year ended 30 June 2012.
Settlement of insurance claims:
During 2008, extreme weather across the central Queensland coalfields affected production from the BHP Billiton Mitsubishi Alliance (BMA) and BHP Billiton Mitsui Coal (BMC) operations. The Group settled insurance claims in respect of the lost production and insurance claim income of US$210 million (after tax expense) was recognised in the year ended 30 June 2012.
Recognition of deferred tax assets on enactment of MRRT and PRRT extension legislation in Australia:
The Australian Minerals Resource Rent Tax (MRRT) and Petroleum Resource Rent Tax (PRRT) extension legislation was enacted in March 2012. Under the legislation, the Group is entitled to a deduction against future MRRT and PRRT liabilities based on the market value of its coal, iron ore and petroleum assets. A deferred tax asset, and an associated net income tax benefit of US$637 million, was recognised in the year ended 30 June 2012 to reflect the future deductibility of these market values for MRRT and PRRT purposes, to the extent they were considered recoverable.
2014 | 2013 | 2012 | ||||||||||
US$M | US$M | US$M | ||||||||||
Dividend income | 31 | 16 | 10 | |||||||||
Royalties | 18 | 35 | 28 | |||||||||
(Losses)/gains on sale of property, plant and equipment (a) | (35 | ) | 1,984 | 101 | ||||||||
Gains/(losses) on sale of investments | 8 | 9 | (2 | ) | ||||||||
Gains on divestment of equity accounted investments (b) | – | 1,212 | – | |||||||||
Gains on divestment of subsidiaries and operations(c) | 673 | – | 19 | |||||||||
Commission income | 85 | 93 | 131 | |||||||||
Insurance recoveries (d) | 41 | 16 | 304 | |||||||||
Other income | 703 | 582 | 307 | |||||||||
|
|
|
|
|
| |||||||
Total other income | 1,524 | 3,947 | 898 | |||||||||
|
|
|
|
|
|
(a) | Includes exceptional items of US$ nil (2013: US$1,947 million; 2012: US$ nil). Refer to note 3 Exceptional items. |
(b) | Includes exceptional items of US$ nil (2013: US$1,212 million; 2012: US$ nil). Refer to note 3 Exceptional items. |
(c) | Includes exceptional items of US$551 million (2013: US$ nil; 2012: US$ nil). Refer to note 3 Exceptional items. |
(d) | Includes exceptional items of US$ nil (2013: US$ nil; 2012: US$300 million). Refer to note 3 Exceptional items. |
2014 | 2013 | 2012 | ||||||||||
US$M | US$M | US$M | ||||||||||
Changes in inventories of finished goods and work in progress | (128 | ) | 180 | 317 | ||||||||
Raw materials and consumables used | 8,842 | 8,926 | 8,128 | |||||||||
Employee benefits expense | 6,903 | 7,168 | 6,035 | |||||||||
External services (including transportation) (a) | 11,736 | 12,478 | 14,293 | |||||||||
Third party commodity purchases | 2,935 | 2,759 | 3,402 | |||||||||
Net foreign exchange losses/(gains) | 100 | (284 | ) | (571 | ) | |||||||
Research and development costs before crediting related grants | 43 | 64 | 75 | |||||||||
Fair value change on derivatives(b) | (120 | ) | 79 | (141 | ) | |||||||
Impairment of available for sale financial assets | – | 1 | 1 | |||||||||
Reversal of previously impaired financial assets | (2 | ) | – | – | ||||||||
Government royalties paid and payable | 2,760 | 2,562 | 2,880 | |||||||||
Depreciation and amortisation expense | 8,701 | 7,031 | 6,431 | |||||||||
Exploration and evaluation expenditure incurred and expensed in the current period | 716 | 1,047 | 1,644 | |||||||||
Exploration and evaluation expenditure previously capitalised, written off as unsuccessful or abandoned(c) | 167 | 1,099 | 144 | |||||||||
Reversal of previously written off capitalised exploration and evaluation expenditure | (56 | ) | – | – | ||||||||
Impairment of property, plant and equipment(d) | 623 | 4,456 | 3,114 | |||||||||
Reversal of previously impaired property, plant and equipment | – | (67 | ) | (71 | ) | |||||||
Impairment of goodwill and other intangible assets (e) | 65 | 7 | 575 | |||||||||
Operating lease rentals | 759 | 776 | 658 | |||||||||
All other operating expenses (f) | 2,469 | 1,758 | 1,730 | |||||||||
|
|
|
|
|
| |||||||
Total expenses | 46,513 | 50,040 | 48,644 | |||||||||
|
|
|
|
|
|
2014 | 2013 | 2012 | ||||||||||
US$M | US$M | US$M | ||||||||||
Aggregate employee benefits expense | ||||||||||||
Wages, salaries and redundancies | 6,143 | 6,625 | 5,564 | |||||||||
Employee share awards(g) | 239 | 214 | 258 | |||||||||
Social security costs | 7 | 7 | 12 | |||||||||
Pensions and other post-retirement obligations – refer to note 30 | 649 | 510 | 456 | |||||||||
|
|
|
|
|
| |||||||
7,038 | 7,356 | 6,290 | ||||||||||
|
|
|
|
|
| |||||||
Less employee benefits expense classified as exploration and evaluation expenditure above | (135 | ) | (188 | ) | (255 | ) | ||||||
|
|
|
|
|
| |||||||
Employee benefits expense | 6,903 | 7,168 | 6,035 | |||||||||
|
|
|
|
|
|
(a) | Includes exceptional items of US$ nil (2013: US$96 million; 2012: US$ nil). Refer to note 3 Exceptional items. |
(b) | Fair value change on |
(c) | Includes exceptional items of US$ nil (2013: US$832 million; 2012: US$ nil). Refer to note 3 Exceptional items. |
(d) | Includes exceptional items of US$ nil (2013: US$4,310 million; 2012: US$3,088 million). Refer to note 3 Exceptional items. |
(e) | Includes exceptional items of US$ nil (2013: US$7 million; 2012: US$575 million). Refer to note 3 Exceptional items. |
(f) | Includes exceptional items of US$ nil (2013: decrease of US$158 million; 2012: US$ nil). Refer to note 3 Exceptional items. |
(g) | Employee share awards expense is |
2014 | 2013 | 2012 | ||||||||||
US$M | US$M | US$M | ||||||||||
Financial expenses | ||||||||||||
Interest on bank loans and overdrafts(a) | 14 | 13 | 19 | |||||||||
Interest on all other borrowings(a) (b) | 708 | 965 | 641 | |||||||||
Finance lease and hire purchase interest | 55 | 11 | 37 | |||||||||
Dividends on redeemable preference shares | – | – | – | |||||||||
Discounting on provisions and other liabilities | 475 | 478 | 485 | |||||||||
Net interest expense on post-retirement employee benefits | 22 | 19 | 26 | |||||||||
Interest capitalised(c) | (182 | ) | (290 | ) | (272 | ) | ||||||
Fair value change on hedged loans | 328 | (505 | ) | 345 | ||||||||
Fair value change on hedging derivatives | (292 | ) | 489 | (381 | ) | |||||||
Fair value change on non-hedging derivatives(b) | 101 | 183 | (11 | ) | ||||||||
Exchange variations on net debt | 44 | 21 | (53 | ) | ||||||||
|
|
|
|
|
| |||||||
1,273 | 1,384 | 836 | ||||||||||
|
|
|
|
|
| |||||||
Financial income | ||||||||||||
Interest income(d) | (97 | ) | (108 | ) | (168 | ) | ||||||
|
|
|
|
|
| |||||||
(97 | ) | (108 | ) | (168 | ) | |||||||
|
|
|
|
|
| |||||||
Net finance costs | 1,176 | 1,276 | 668 | |||||||||
|
|
|
|
|
|
(a) | Interest on
|
(b) | Interest on all other borrowings includes financial income of US$52 million of realised fair value changes on non-hedging derivatives used to manage interest rate exposure on debt securities (2013: expense of US$97 million; 2012: US$ nil). The fair value change on non-hedging derivatives includes the |
(c) | Interest has been capitalised at the
Year ended 30 June 2011 Revenue Group production Third party products Rendering of services Inter-segment revenue Total revenue(a) Underlying EBITDA(b) Depreciation and amortisation Impairment (losses)/reversals recognised Underlying EBIT(b) Comprising: Group production Third party products Underlying EBIT(b) Net finance costs(c) Exceptional items(d) Profit before taxation Capital expenditure Total assets Total liabilities Year ended 30 June 2010 Revenue Group production Third party products Rendering of services Inter-segment revenue Total revenue(a) Underlying EBITDA(b) Depreciation and amortisation Impairment (losses)/reversals recognised Underlying EBIT(b) Comprising: Group production Third party products Underlying EBIT(b) Net finance costs(c) Exceptional items(d) Profit before taxation Capital expenditure Total assets Total liabilities Year ended 30 June 2009 Revenue Group production Third party products Rendering of services Inter-segment revenue Total revenue(a) Underlying EBITDA(b) Depreciation and amortisation Impairment (losses)/reversals recognised Underlying EBIT(b) Comprising: Group production Third party products Underlying EBIT(b) Net finance costs(c) Exceptional items(d) Profit before taxation Capital expenditure Total assets Total liabilities
|
Newcastle steelworks rehabilitation:
The Group recognised a decrease of US$150 million (US$45 million tax charge)
(d) | Interest income relates to |
2014 | 2013 | 2012 | ||||||||||
US$M | US$M | US$M | ||||||||||
Total taxation expense comprises: | ||||||||||||
Current tax expense | 6,586 | 7,399 | 7,889 | |||||||||
Deferred tax expense/(benefit) | 426 | (493 | ) | (574 | ) | |||||||
|
|
|
|
|
| |||||||
7,012 | 6,906 | 7,315 | ||||||||||
|
|
|
|
|
| |||||||
Total taxation expense attributed to geographical jurisdiction: | ||||||||||||
UK | (44 | ) | 84 | (70 | ) | |||||||
Australia | 4,871 | 4,512 | 5,837 | |||||||||
Rest of world | 2,185 | 2,310 | 1,548 | |||||||||
|
|
|
|
|
| |||||||
7,012 | 6,906 | 7,315 | ||||||||||
|
|
|
|
|
|
2014 | 2013 | 2012 | ||||||||||||||||||||||
% | US$M | % | US$M | % | US$M | |||||||||||||||||||
Factors affecting income tax expense for the period | ||||||||||||||||||||||||
Income tax expense differs to the standard rate of corporation tax as follows: | ||||||||||||||||||||||||
Profit before taxation | 22,236 | 19,726 | 23,932 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Tax on profit at standard rate of 30 per cent | 30.0 | 6,671 | 30.0 | 5,918 | �� | 30.0 | 7,180 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Tax on remitted and unremitted foreign earnings | 0.8 | 169 | 0.6 | 109 | 0.8 | 181 | ||||||||||||||||||
Non-deductible depreciation, amortisation and exploration expenditure (a) | 0.3 | 84 | 1.1 | 222 | 0.6 | 150 | ||||||||||||||||||
Non-tax-effected operating losses and capital gains | 0.1 | 28 | (0.3 | ) | (56 | ) | 0.7 | 169 | ||||||||||||||||
Tax rate changes | 0.1 | 20 | 0.4 | 68 | – | – | ||||||||||||||||||
Tax rate differential on foreign income | 0.1 | 15 | (0.4 | ) | (74 | ) | (1.2 | ) | (287 | ) | ||||||||||||||
Exchange variations and other translation adjustments | (0.1 | ) | (24 | ) | 1.2 | 245 | 1.4 | 347 | ||||||||||||||||
Initial recognition of tax assets(b) | (0.2 | ) | (45 | ) | (1.9 | ) | (370 | ) | (0.6 | ) | (136 | ) | ||||||||||||
Amounts (over)/under provided in prior years | (0.4 | ) | (81 | ) | (0.2 | ) | (36 | ) | 0.3 | 72 | ||||||||||||||
Investment and development allowance | (1.0 | ) | (225 | ) | (1.3 | ) | (260 | ) | (0.9 | ) | (224 | ) | ||||||||||||
Tax effect of share of profits of equity accounted investments (c) | (1.6 | ) | (359 | ) | (1.7 | ) | (343 | ) | (2.3 | ) | (561 | ) | ||||||||||||
Other | 1.3 | 285 | 1.5 | 291 | 0.7 | 162 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Income tax expense | 29.4 | 6,538 | 29.0 | 5,714 | 29.5 | 7,053 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Royalty-related taxation (net of income tax benefit) (d) | 2.1 | 474 | 6.0 | 1,192 | 1.1 | 262 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total taxation expense | 31.5 | 7,012 | 35.0 | 6,906 | 30.6 | 7,315 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
Release of income tax provisions:
The Australian Taxation Office (ATO) issued amended assessments in prior years denying bad debt deductions arising from the investments in Beenup and Boodarie Iron and the denial of capital allowance claims made on the Boodarie Iron project. The Group challenged the assessments and was successful on all counts before the Full Federal Court. The ATO obtained special leave in September 2010 to appeal to the High Court in respect of the denial of capital allowance claims made on the Boodarie Iron project. The Group’s position in respect of the capital allowance claims on the Boodarie Iron project was confirmed by the High Court in June 2011. As a result of these appeals, US$138 million was released from the Group’s income tax provision in September 2010 and US$580 million in June 2011.
Reversal of deferred tax liabilities:
Consistent with the functional currency of the Group’s operations, eligible Australian entities elected to adopt a US dollar tax functional currency from 1 July 2011. As a result, the deferred tax liability relating to certain US dollar denominated financial arrangements has been derecognised, resulting in a credit to income tax
(a) | Includes exceptional expense of US$ |
Year ended 30 June 2010 | Gross | Tax | Net | |||||||||
US$M | US$M | US$M | ||||||||||
Exceptional items by category | ||||||||||||
Pinal Creek rehabilitation | 186 | (53 | ) | 133 | ||||||||
Disposal of Ravensthorpe nickel operations | 653 | (196 | ) | 457 | ||||||||
Restructuring of operations and deferral of projects | (298 | ) | 12 | (286 | ) | |||||||
Renegotiation of power supply agreements | (229 | ) | 50 | (179 | ) | |||||||
Release of income tax provisions | — | 128 | 128 | |||||||||
|
|
|
|
|
| |||||||
312 | (59 | ) | 253 | |||||||||
|
|
|
|
|
|
(b) | Includes exceptional benefit of US$ nil (2013: US$367 million; 2012: US$ nil). Refer to note 3 Exceptional |
Year ended 30 June 2010 | (Impairment)/ impairment reversal of property, plant and equipment | Closure and rehabilitation provisions released | Funding received for past and future rehabilitation costs | Contract cancellation, redundancy and other restructuring costs (incurred)/released | Embedded derivative revaluations | Gross | ||||||||||||||||||
US$M | ||||||||||||||||||||||||
Renegotiation of power supply agreements | — | — | — | — | (229 | ) | (229 | ) | ||||||||||||||||
Restructuring of operations and deferral of projects | (292 | ) | — | — | (6 | ) | — | (298 | ) | |||||||||||||||
Disposal of the Ravensthorpe nickel operations | 611 | — | — | 42 | — | 653 | ||||||||||||||||||
Pinal Creek rehabilitation | — | 130 | 56 | — | — | 186 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
319 | 130 | 56 | 36 | (229 | ) | 312 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
Pinal Creek rehabilitation:
On 22 February 2010 a settlement was reached in relation to the Pinal Creek (US) groundwater contamination which resulted in other parties taking on full responsibility for groundwater remediation and partly funding the Group for past and future rehabilitation costs. As a result, a gain