Executive DirectorBusiness Risk and Audit Committees
Business Risk and Audit Committees (Business RACs), covering each asset group, assist management in providing the information to enable the RAC to fulfil its responsibilities. They are management committees and perform an important monitoring function in the governance of BHP. Meetings take place annually as part of our financial governance framework. As management committees, the appropriate member of the ELT participates, but the committee is chaired by a member of the RAC. Each committee also includes the Group Financial Controller, the Chief Risk Officer and the Group Assurance Officer. Significant operational and risk matters raised at Business RAC meetings are reported to the RAC by management. Risk function The Executive Director, Andrew Mackenzie,Risk function’s role is not considered independent becauseto create and maintain the Group’s Risk Framework, and to support, verify, oversee and provide insight on the effective application of his executive responsibilities. Mr Mackenzie does not hold directorships in any other company included in the ASX 100 or FTSE 100. Conflicts of interestRisk Framework for all risks, including strategic, operational and emerging risks.
The UK Companies Act 2006 requires that BHP Directors avoid a situation where they have or can have an unauthorised direct or indirect interest that conflicts, or possibly may conflict,RAC assists the Board with the Group’s interests, unless approved bynon-interested Directors.oversight of risk management, although the Board retains accountability for BHP’s risk profile. In accordance withaddition, the UK Companies Act 2006, BHP Group Plc’s ArticlesBoard requires the CEO to implement a system of Association allowcontrol for identifying and managing risk. The Directors, through the Directors to authorise conflicts and potential conflicts where appropriate. A procedure operates to ensureRAC, review the disclosure of conflicts and forsystems that have been established, regularly review the consideration and, if appropriate, the authorisationeffectiveness of those conflicts bynon-conflicted Directors.systems and monitor that necessary actions have been taken to remedy any significant failings or weaknesses identified from that review. The Nomination and Governance Committee supports the Board in this process by reviewing requests from Directors for authorisation of situations of actual or potential conflict and making recommendationsRAC regularly reports to the Board and by regularly reviewing any situations of actual or potential conflict that have previously been authorised byto enable the Board to review our Risk Framework at least annually to confirm that the Risk Framework continues to be sound and making recommendations regarding whetherthat BHP is operating with regard to the authorisation remains appropriate. In addition, in accordance with Australian law, if a situation arises for consideration in which a Director has a material personal interest, the affected Director takes no part in decision-making unless authorised bynon-interested Directors. Provisions for Directors’ interests arerisk appetite set out in the Constitution of BHP Group Limited. In FY2019, there was one occasion where a commercial dealing between BHP and Orica was considered by the Board. At its June 2019 meeting, the Board considered a prospective explosives contract between BHPA review was undertaken during FY2020, resulting in refinements to BHP’s Risk Framework. For more information, refer to section 1.5.4.
Internal Audit The Internal Audit function is carried out by Internal Audit and Orica. On that occasion, relevant papers were withheldAdvisory (IAA). IAA provides assurance on whether risk management, internal control and both Mr Broomheadgovernance processes are adequate and Mr Cockerill stepped outfunctioning. The Internal Audit function is independent of the meeting room. They therefore played no roleExternal Auditor. The RAC evaluates and, if thought fit, approves the terms of reference of IAA, the staffing levels and its scope of work to ensure it is appropriate in light of the decision-making, in accordance with relevant legal requirementskey risks we face. It also reviews and approves the BHP Articlesannual internal audit plan and monitors and reviews the effectiveness of Association and Constitution. 2.11 Board evaluationthe internal audit activities.
The Board is committed to transparency in assessingRAC approves the performance of Directors. The Board conducts regular evaluations of its performance, the performance of its committees, the Chairman, individual Directorsappointment 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. The evaluation considers the balance of skills, experience, independence and knowledgedismissal of the Group Assurance Officer and assesses their performance, independence and objectivity. The position was held throughout the period by Rama Devarajan who reported directly to the RAC. During the period, functional oversight of IAA was provided by the Chief External Affairs Officer.
Effectiveness of systems of internal control and risk management (RAC and Board) In delegating authority to the CEO, the Board its overall diversity,has established CEO limits, outlined in the Board Governance Document. Limits on the CEO’s authority require the CEO to ensure there is a system of control in place for identifying and managing risk in BHP. Through the RAC, the Directors regularly review these systems for their effectiveness. These reviews include assessing whether processes continue to meet evolving external governance requirements. The RAC oversees and reviews the internal controls and risk management systems. Any material breaches of Our Code, including gender diversity,breaches of our anti-bribery and howcorruption requirements, as well as any material incidents reported under our ‘speaking up with confidence’ requirements are reported quarterly to the Board works together as a unit. Evaluation process
* | May be internally or externally facilitated assessment. Our approach is to conduct an externally facilitated assessment of the Board or Directors and committees at least every three years.
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Directors provide anonymous feedback on their peers’ performance and individual contributionsRAC by the Chief Compliance Officer. These reports are then communicated to the Board which is passedthrough the report-out process. In undertaking this role, the RAC reviews:
procedures for identifying, assessing and managing material risks and controlling their impact on the Group, and other stakeholders where relevant, and the operational effectiveness of these procedures processes and systems for managing budgeting, forecasting and financial reporting the Group’s strategy and standards for insurance the Group’s standards and procedures for reporting reserves and resources the Group’s standards and procedures for closure and rehabilitation provision standards and practices for detecting, reporting and preventing fraud, serious breaches of business conduct and whistle-blowing procedures supporting reporting to the Committee procedures for ensuring compliance with relevant Director viaregulatory and legal requirements arrangements for the Chairman. In respectprotection of the Chairman’sGroup’s information and data systems and other non-physical assets operational effectiveness of the Business RAC structures overseeing the adequacy of the internal controls and allocation of responsibilities for monitoring internal financial controls Section 1.5.4 includes a description of the Group’s principal risks that could result in events or circumstances that might threaten BHP’s business model, future performance, feedback is provided directlysolvency or liquidity and reputation and also provides an explanation of how those risks are managed. During FY2020, management presented an assessment of the material risks facing BHP and the level of effectiveness of risk management over the material business risks. The reviews were overseen by the RAC, with findings and recommendations reported to the Senior Independent Director. External independent advisers are engagedBoard. In addition to assist with these processes, as necessary. The involvement of an independent third party has assisted in the evaluation processes being rigorous and fair, and ensuring continuous improvement in the operation ofconsidering key risks facing BHP, the Board and committees, as well asassessed the contributionseffectiveness of individual Directors. Director assessment
The assessment of individual Directors focuses on the contribution of the Director tointernal controls over key risks identified through the work of the Board Committees.
The Board is satisfied with the effectiveness of risk management and internal control systems. Management’s assessment of internal control over financial reporting Management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) and Rule 15d-15(f) under the Exchange Act). Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements and, even when determined to be effective, can only provide reasonable assurance with respect to financial statement preparation and presentation. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Under the supervision and with the participation of our management, including our CEO and CFO, the effectiveness of BHP’s internal control over financial reporting has been evaluated based on the framework and criteria established in Internal Controls – Integrated Framework (2013), issued by the Committee of the Sponsoring Organizations of the Treadway Commission (COSO). Based on this evaluation, management has concluded that internal control over financial reporting was effective as at 30 June 2020. There were no material weaknesses in BHP’s internal controls over financial reporting identified by management as at 30 June 2020. BHP has engaged our independent registered public accounting firm, EY, to issue an audit report on our internal control over financial reporting for inclusion in the Financial Statements section of the Annual Report and the expectationsAnnual Report on Form 20-F as filed with the SEC. There have been no changes in our internal control over financial reporting during FY2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. This includes COVID-19, which only had a minor impact on internal controls over financial reporting in relation to both the number and nature of Directorscontrols that were impacted. During FY2020, the RAC reviewed our compliance with the obligations imposed by SOX, including evaluating and documenting internal controls as specified inrequired by section 404 of SOX. Management’s assessment of disclosure controls and procedures Management, with the Group’s governance framework. The performanceparticipation of individual Directors is assessed against a rangeour CEO and CFO, performed an evaluation of criteria, including the ability of the Director to: focus on creating long-term shareholder value;
contribute to the development of strategy;
understand the major risks affecting BHP;
provide clear direction to management;
contribute to Board effectiveness;
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contribute to discussions relating to organisational culture and behaviour;
commit the time required to fulfil the role and perform their responsibilities effectively;
listen to and respect the ideas of fellow Directors and members of management.
Board effectiveness
The effectiveness of the Boarddesign and operation of our disclosure controls and procedures as a wholeat 30 June 2020. Disclosure controls and of its committees is assessed againstprocedures are designed to provide reasonable assurance that the accountabilities set outmaterial financial and non-financial information required to be disclosed by BHP, including in theBoard Governance Document reports it files or submits under the Exchange Act, is recorded, processed, summarised and each committee’s terms of reference. Matters consideredreported on a timely basis and this information is accumulated and communicated to BHP’s management, including our CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure. Based on the evaluation, management (including the CEO and CFO) has concluded that as at 30 June 2020, our disclosure controls and procedures are effective in evaluations include the:providing that reasonable assurance.
There are inherent limitations to the effectiveness of discussionany system of disclosure controls and debate at Boardprocedures, including the possibility of human error and committee meetings; effectivenessthe circumvention or overriding of the Board’scontrols and committees’ processesprocedures. Even effective disclosure controls and relationship with management;
quality and timelinessprocedures can only provide reasonable assurance of meeting agendas, Board and committee papers and secretariat support;
composition of the Board and each committee, focusing on the blend of skills, experience, independence and knowledge of the Group and its diversity, including geographic location, nationality and gender.
The process is managed by the Chairman, with feedback on the Chairman’s performance being provided to him by the Senior Independent Director. For information on the performance review process for executives, refer to section 2.15.
Assessments conducted in respect of FY2019
During FY2019, the Board commenced an external evaluation using Consilium, which has no other connection with the Group. This covered Board, Committee and Chairman effectiveness, along with an individual assessment of the Directors. The Board evaluation focused on Board performance, the value of individual contributions, training and development, Board and committee succession and composition, support provided by Group Governance, considerations for further improvement and external engagement. The evaluation included seeking feedback from the CEO, ELT, Group Company Secretary and senior management. These assessments were completed in early FY2020 and have been discussed with the Board.
In addition, a Board committee assessment was undertaken, which required each committee member to consider the relevant committee’s compliance with its respective terms of reference. The Board considered its compliance with theBoard Governance Document.
The outcomes of the assessment for each committee are set out in the following relevant sections.
Director review
An assessment of Directors’ performance was conducted in respect of FY2019. The assessments were undertaken with the assistance of an external service provider (Consilium), which does not have any other connection with the Group. TheConsilium-led assessment of the individual Directors focused on consistently taking the perspective of creating shareholder value, contributing to Board cohesion and effective relationships with fellow Directors, and committing the time required to fulfilachieving their role and effectively perform their responsibilities. Directors were specifically asked to comment on areas where their fellow directors contribute the greatest value and on potential areas for development.
Consilium sought feedback and provided it to the Chairman and the Senior Independent Director, and this was then discussed with the Directors. Feedback on the performance of the Chairman was discussed in a closed session without the Chairman or CEO present. The outcomes of the review supported the Board’s decision to endorse all Directors standing forre-election.
Board evaluation in action
A number of improvements were agreed and implemented following the FY2019 Board and committee evaluation. The key areas of agreed focus were to further enhance agenda planning; include an annual strategy day between the Board and the ELT, in addition to the strategy sessions held at each Board meeting; and provide further opportunities to increase the detailed understanding of the operations and transformation, including through updates to the Board induction program and continuation of asset reviews at Board meetings.
2.12 Board meetings and attendance
The Board meets as often as is appropriate to fulfil its role. Directors are required to allocate sufficient time to BHP to perform their responsibilities effectively, including adequate time to prepare for Board meetings. During the reporting year, the Board met 10 times, with eight of those meetings held in Australia and two in the United Kingdom. Regularly scheduled Board meetings generally run over three days (including committee meetings and Director training and development sessions).
Members of the ELT and other members of senior management attended meetings of the Board by invitation, with the CFO attending each meeting.
Attendance at Board and standing Board committee meetings during FY2019 is set out in the following table.
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BoardIn the design and Board Committee attendance in FY2019
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Board | | | Risk
and Audit | | | Nomination and
Governance | | | Remuneration | | | Sustainability | | | Tenure as at 30 June 2019 | | | | A | | | B | | | A | | | B | | | A | | | B | | | A | | | B | | | A | | | B | | | | Terry Bowen | | | 10 | | | | 10 | | | | 11 | | | | 10 | (2) | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | 1 year 9 months | Malcolm Broomhead | | | 10 | | | | 10 | | | | – | | | | – | | | | 6 | | | | 6 | | | | – | | | | – | | | | 5 | | | | 5 | | | 9 years 3 months | Ian Cockerill | | | 2 | | | | 2 | | | | 2 | | | | 2 | | | | – | | | | – | | | | – | | | | – | | | | 2 | | | | 2 | | | 3 months | Anita Frew | | | 10 | | | | 9 | (1) | | | 11 | | | | 11 | | | | – | | | | – | | | | 5 | | | | 5 | | | | – | | | | – | | | 3 years 10 months | Carolyn Hewson | | | 10 | | | | 10 | | | | – | | | | – | | | | 6 | | | | 6 | | | | 5 | | | | 5 | | | | – | | | | – | | | 9 years 3 months | Susan Kilsby | | | 2 | | | | 2 | | | | – | | | | – | | | | – | | | | – | | | | 2 | | | | 2 | | | | – | | | | – | | | 3 months | Andrew Mackenzie | | | 10 | | | | 10 | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | 6 years 3 months | Ken MacKenzie | | | 10 | | | | 10 | | | | – | | | | – | | | | 6 | | | | 6 | | | | – | | | | – | | | | 3 | | | | 3 | | | 2 years 10 months | Lindsay Maxsted | | | 10 | | | | 10 | | | | 11 | | | | 11 | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | 8 years 3 months | John Mogford | | | 10 | | | | 10 | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | 5 | | | | 5 | | | 1 year 9 months | Wayne Murdy | | | 5 | | | | 5 | | | | 5 | | | | 5 | | | | – | | | | – | | | | 2 | | | | 2 | | | | – | | | | – | | | Retired on 2 November 2018 | Shriti Vadera | | | 10 | | | | 10 | | | | – | | | | – | | | | 6 | | | | 6 | | | | 5 | | | | 5 | | | | – | | | | – | | | 8 years 5 months |
Column A: Scheduled indicates the numberevaluation of scheduled andad-hoc meetings held during the period the Director was a member of the Board and/or committee.
Column B: Attended indicates the number of scheduled andad-hoc meetings attended by the Director during the period the Director was a member of the Board and/or committee. The following Directors were not able to attend certain meetings:
(1) | Ms Frew did not attend the meeting on 19 March due to an administrative oversight by BHP.
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(2) | Mr Bowen was unable to attend the RAC meeting on 12 February due to a prior engagement.
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2.13 Board committees
The Board has established committees to assist it in exercising its authority, including monitoring the performance of BHP to gain assurance that progress is being made towards the corporate purpose within the limits imposed by the Board.
Each of the permanent committees has terms of reference under which authority is delegated by the Board.
Group Governance provides secretariat services for each of the committees. Committee meeting agendas, papers and minutes are made available to all members of the Board. Subject to appropriateour disclosure controls and procedures, management was required to apply its judgement in evaluating the overriding scrutinycost-benefit relationship of the Board, Committee Chairmen are free to use whatever resources they consider necessary to discharge their responsibilities.
Reports from each of the committees follow.possible controls and procedures.
The terms of reference for each committeethe RAC are available online at bhp.com/governance. 2.13.1 Risk and Audit2.11 Sustainability Committee Report
Role and focus The roleSustainability Committee assists the Board in overseeing the Group’s health, safety, environmental and community (HSEC) performance and governance responsibilities, and the adequacy of the RiskGroup’s HSEC framework. The Group’s HSEC framework consists of: | • | | the CEO limits outlined in the Board Governance Document. The Board Governance Document establishes the remit of the Board and delegates authority to the CEO, including in respect of the HSEC Management System, subject to CEO limits |
the Sustainability Committee, which is responsible for assisting the Board in overseeing the adequacy of the Group’s HSEC Framework and AuditHSEC Management System (among other things) the HSEC Management System, established by management in accordance with the CEO’s delegated authority. The HSEC Management System provides the processes, resources, structures and performance standards for the identification, management and reporting of HSEC risks and the investigation of any HSEC incidents a robust and independent internal audit process overseen by the RAC, in accordance with its terms of reference independent advice on HSEC matters, which may be requested by the Board and its Committees where deemed necessary in order to meet their respective obligations Our approach to sustainability is reflected in Our Charter, which defines our values, purpose and how we measure success, and in our sustainability performance targets, which define our public commitments to HSEC. HSEC considerations are also taken into account in employee and executive remuneration. For more information, refer to Sustainability in section 1.7 and section 3. The Committee (RAC)oversees the preparation and presentation of sustainability disclosures by management. This year, BHP has included material sustainability content in this Annual Report. The Sustainability Committee reviewed and recommended to the Board the approval of these disclosures in section 1.6 and 1.7 and the sustainability performance data in section 6.6, along with the Modern Slavery Statement FY2020. These disclosures identify our targets for HSEC matters and our performance against those targets. Our targets rely on fact-based measurement and quality data, and reflect a desire to move BHP to a position of industry leadership. Our sustainability reporting, including additional case studies and a databook of key ESG and sustainability data is available at bhp.com. For information on our material exposure to economic, environmental and social sustainability risks and how we manage or intend to manage those risks, refer to section 1.5.4. Activities of the Sustainability Committee The Sustainability Committee met five times during FY2020 and continued to assist the Board in monitoringits oversight of HSEC issues and performance. The Committee considered the decisions and actions ofGroup’s approach to climate change throughout the CEO and the Group and to gain assurance that progress is being made towards achieving the corporate purpose within the limits imposed by the Board, as set out in theBoard Governance Document. 153
The RAC discharges its responsibilities by overseeing:
the integrity of BHP’s Financial Statements and Annual Report;
the appointment, performance and remuneration of the External Auditor and integrity of the external audit process;
the effectiveness of the systems of risk management and internal control;
the plans, performance, objectivity and leadership of the Internal Audit function and the integrity of the internal audit process;
capital management (capital structure and funding, and capital management planning and initiatives) and other matters.
For moreyear. More information abouton our approach to risk management, refer to section 1.6.4.
The RAC met 11 times during FY2019. Information on meeting attendance by Committee members is included in the following table and information on Committee members’ qualifications, which includes competence relevant to the mining sector,climate change, is set out in section 2.2.1.1.7.8. For more information on our approach to tailings storage facilities, refer to section 1.7.10. The Committee also continues to monitor our water stewardship work and for more information on our water stewardship performance, see section 6.6.
In additionMembers of the Sustainability Committee also visited several sites during FY2020. During these site visits, Committee members received briefings on HSEC matters and the management of material HSEC risks, and met with key personnel. These visits offer access to a diverse cross-section of the workforce from frontline through to the regular business of the year, the Committee discussed mattersleadership team, including, those set out in the following diagram. The viability statementwhere possible, risk and the Board’s confirmation that it has carried out a robust risk assessment are in section 1.6.4. Statements relatingcontrol owners. During FY2020, several site visits were cancelled due to tendering of the external audit contract, significant matters relating to the Financial Statements and the process for evaluating the External Auditor are set out in the following diagram.COVID-19 restrictions.
Risk and AuditSustainability Committee members during the year
| | | | | | | Name | | Independent | | Status | | Attendance | Lindsay Maxsted (Chairman) (1)John Mogford (Chair from 7 November 2019)
| | Yes | | Member for whole period | | 11/115/5 | Terry Bowen (2)Malcolm Broomhead (Chair until 6 November 2019)
| | Yes | | Member for whole period | | 10/115/5 | Ian Cockerill | | Yes | | Member from 1 April 2019for whole period | | 2/25/5 | Gary Goldberg | | Yes | | Member from 1 February 2020 | | 3/3 |
Committee activities in FY2020 Assurance and adequacy of HSEC framework and HSEC management system Key HSEC risks, including tailings storage facility failure, climate change-related risks, and fatalities Audit planning and reporting on HSEC risks and processes Event management solution demonstration Review of the HSE function and Group HSE Officer Compliance and reporting Compliance with HSEC legal and regulatory requirements Updates on key legal and regulatory changes Consideration of threshold for reporting HSEC matters to the Committee Sustainability reporting, including consideration of processes for preparation and assurance provided by EY Social value and ESG metrics Performance Performance of BHP on HSEC matters Considering proposed HSEC key performance indicators (KPIs) for Key Management Personnel scorecard and considering performance against these KPIs Monitoring against the FY2018–FY2022 HSEC performance targets Update on Samarco remediation and the Fundação Renova BHP tailings dam review and actions Saraji mine fatality investigation Performance and key issues on sustainable development and community relations, including community issues update Social value update, including investor feedback Medium-term operational (Scope 1 and 2) greenhouse gas emissions target Link between climate change performance and executive remuneration Other governance matters Induction, training and development of Committee members Site visits and site visit reports Modern Slavery Statement FY2020 Sustainable development governance Our approach to HSEC and sustainable development governance is characterised by: the Sustainability Committee assisting the Board to oversee material HSEC matters and risks across BHP, including seeking continuous improvement and policy advocacy as applicable management having primary responsibility for the design and implementation of an effective HSEC management system management having accountability for HSEC performance the HSE function and Community sub-function providing advice and guidance directly to the Sustainability Committee and the Board the Board, Sustainability Committee and management seeking input and insight from external experts, such as the BHP Forum on Corporate Responsibility clear links between executive remuneration and HSEC performance For information on the key areas of focus for the Committee, management and the HSE function and Community sub-function, refer to section 1.7. Social investment We continued to monitor our progress on our social investment and met our target for investments in community programs. For more information, refer to section 1.7.9. The terms of reference for the Sustainability Committee are available at bhp.com/governance. 2.12 Remuneration Committee Report Role and focus The Remuneration Committee assists the Board in overseeing: the remuneration policy and its specific application to the CEO and other ELT members and its general application to all employees the adoption of annual and long-term incentive plans the determination of levels of reward for the CEO and approval of reward for other members of the ELT the annual evaluation of the performance of the CEO, by giving guidance to the Chair the preparation of the Remuneration Report for inclusion in the Annual Report compliance with applicable legal and regulatory requirements associated with remuneration matters the review, at least annually, of remuneration by gender The Sustainability Committee and the RAC assist the Remuneration Committee in determining appropriate HSEC and financial metrics, respectively, to be included in senior executive scorecards and in assessing performance against those measures. The Remuneration Committee met six times during FY2020 and also considered some matters out of session. Susan Kilsby was appointed Chair of the Remuneration Committee with effect from 7 November 2019. She served on the Committee from her appointment to the Board in April 2019, which provided an appropriate transition to become Chair. She also has relevant skills and experience, including her current appointment as the Chair of the remuneration committee of Diageo plc and as a member of the compensation committee of Fortune Brands Home & Security Inc. She therefore satisfies the requirement for the incoming Chair to have served on a remuneration committee for at least 12 months. Some of the items the Committee discussed are described below. For more information on the Committee’s work, refer to the Remuneration Report in section 3. The terms of reference of the Remuneration Committee were updated following the release of the new versions of the UK Code and the ASX Fourth Edition. In addition, areas in need of clarification were identified during the recent ASIC Corporate Governance Taskforce’s review (e.g. how information flows to the Board). Remuneration Committee members during the year | | | | | | | Name | | Independent | | Status | | Attendance | Susan Kilsby (Chair from 7 November 2019) | | Yes | | Member for whole period | | 6/6 | Anita Frew | | Yes | | Member for whole period | | 11/116/6 | Wayne MurdyGary Goldberg
| | Yes | | Member from 1 February 2020 | | 3/3 | Carolyn Hewson (Chair and member until 7 November 2019) | | Yes | | Member until 27 November 20182019 | | 5/53/3 | Dion Weisler | | Yes | | Member from 1 June 2020 | | 1/1 | Shriti Vadera | | Yes | | Member for whole period | | 6/6 |
Committee activities in FY2020 Remuneration of the ELT and the Board Remuneration policy review Remuneration of CEO and other ELT members and Group Company Secretary Remuneration arrangements for new ELT members Retirement arrangements for former CEO Consideration of COVID-19 impacts KPIs, performance levels, award outcomes FY2021 HSEC scorecard – climate enhanced Long-Term Incentive Plan sector peer group review Other remuneration matters Workforce remuneration and engagement Shareplus enrolment update Corporate Governance Code provisions Other Induction, training and development program Board committee procedures, including closed sessions Update of the Committee Terms of Reference Remuneration Details of our remuneration policies and practices, and the remuneration paid to the Directors (Executive and Non-executive) and other members of the Key Management Personnel, are set out in the Remuneration Report in section 3. The terms of reference for the Remuneration Committee are available at bhp.com/governance. 2.13 Risk management governance structure Identifying and managing risk are central to achieving our purpose. For information on our approach to risk and risk governance, including the role of the BHP Board and its Committees, refer to section 1.5.4. 2.14 Management Below the level of the Board, key management decisions are made by the CEO, the ELT, management committees and members of management who have delegated authority. Management committees consider BHP’s risks and controls. Strategic risks (both threats and opportunities) arising from changes in our business environment are regularly reviewed by the ELT and discussed by the Board. Performance evaluation for executives The performance of executives and other senior employees is reviewed on an annual basis. For the members of the ELT, this review includes their contribution, engagement and interaction at Board level. The annual performance review process considers the performance of executives against criteria designed to capture ‘what�� is achieved and ‘how’ it is achieved. All performance assessments of executives include how effective they have been in undertaking their role; what they have achieved against their specified key performance indicators; how they match up to the behaviours prescribed in our leadership model; and how those behaviours align with Our Charter values. A performance evaluation as outlined was conducted for all members of the ELT during FY2020. For the CEO, the performance evaluation was led by the Chair of the Board on behalf of all the Non-executive Directors, and was discussed with the Remuneration Committee. 
2.15 Our conduct Our Charter and Our Code of Conduct Our Code is based on Our Charter values. Our Code sets out standards of behaviour for our people when using BHP resources, in their dealings with governments and communities, third parties and each other. Our Code describes the behaviours expected to support a safe, respectful and legally compliant working environment and includes our policies on speaking up, anti-bribery and corruption. Our Charter and OurCode are accessible to all our people and external stakeholdersat bhp.com. BHP’s EthicsPoint We have mechanisms in place for anyone to raise a report if they feel Our Code has been breached. Employees and contractors can raise their concerns through a number of channels, including through line leaders. Anyone, including external stakeholders and the public, can lodge a concern, in the form of a report, either online in EthicsPoint, or via the 24-hour, multilingual call service. Reporters of misconduct can choose to raise their concern anonymously. Reports received are assigned by the Ethics Team to an investigator, line leader or team for investigation or resolution as appropriate, in accordance with internal policy and process documents. Both the reporting and investigations processes are transparent and summary information is accessible to all BHP employees via BHP’s intranet. Reports raised via EthicsPoint provide valuable insight into culture and organisational learning. All significant Code of Conduct matters, and key trends from investigations, are reported to the RAC. These are then reported to the Board as part of its report-out as set out in section 2.5. The most serious breaches of Our Code are also reported to the Integrity Working Group, which is accountable for oversight of the operational effectiveness of the Investigations Framework, including oversight of investigations completed by the Central Investigations team. The Integrity Working Group is chaired by the Chief Compliance Officer and comprises of a number of Senior Leaders across BHP. 2.16 Market disclosure We have disclosure controls in place for periodic disclosures, including the Operational Review, our results announcements, debt investor documents (such as the prospectus for the Euro or Australian Medium Term Notes) and Annual Report documents, which must comply with relevant regulatory requirements. Additional details about these verification processes can be found in the Periodic Disclosure – Disclosure Controls document at bhp.com. To safeguard the effective dissemination of information, we have developed mandatory minimum performance requirements for market disclosure, which outline how we identify and distribute information to shareholders and market participants and sets out the role of the Disclosure Committee in managing compliance with market disclosure obligations. Further, where an announcement is determined to be material by the Disclosure Committee, the Board receives a copy promptly after it has been made. Where BHP gives a new and substantive investor or analyst presentation, it releases a copy of the presentation materials on the ASX Market Announcements Platform ahead of the presentation. As a result of COVID-19, we introduced extra monitoring and disclosure controls. These included: increasing the regularity and breadth of information gathered from management (including Finance, Supply, Marketing, Legal, and Operational teams); more regular updates to the Disclosure Committee; and more regular discussions with UBS (our corporate broker in the UK), as well as our Investor Relations team. This enabled BHP to assess the materiality of developments and stay across market expectations, dynamics and emerging best practice. A copy of the market disclosure and communications document is available at bhp.com/governance. Copies of announcements to the stock exchanges on which BHP is listed, investor briefings, Financial Statements, the Annual Report and other relevant information can be found at bhp.com. To receive email alerts of news releases, subscribe at bhp.com. 2.17 Conformance with corporate governance standards Our compliance with the governance standards in our home jurisdictions of Australia and the United Kingdom, and with the governance requirements that apply to us as a result of our New York Stock Exchange (NYSE) listing and our registration with the Securities Exchange Commission (SEC) in the United States, is summarised in this Corporate Governance Statement, the Remuneration Report, the Directors’ Report and the Financial Statements. The UK Code (available at: frc.org.uk) and the ASX Principles and Recommendations (available at www.asx.com/au) require the Board to consider the application of the relevant corporate governance principles, while recognising that departures from those principles are appropriate in some circumstances. The Board considers that during FY2020 it applied the Principles and complied with the provisions set out in the 2018 edition of the UK Code, and complied with the ASX Third Edition, with no exceptions. Our Appendix 4G, which summarises our compliance with the ASX Third Edition is available at bhp.com/governance. BHP Group Limited and BHP Group Plc are registrants with the SEC in the United States. Each company is classified as a foreign private issuer and each has American Depositary Shares listed on the NYSE. We have reviewed the governance requirements applicable to foreign private issuers under SOX, including the rules promulgated by the SEC and the rules of the NYSE, and are satisfied that we comply with those requirements. Under NYSE rules, foreign private issuers such as BHP are required to disclose any significant ways our corporate governance practices differ from those followed by US companies under the NYSE corporate governance standards. After a comparison of our corporate governance practices with the requirements of Section 303A of the NYSE-Listed Company Manual followed by US companies, a significant difference was identified: Rule 10A-3 of the Exchange Act requires NYSE-listed companies to ensure their audit committees are directly responsible for the appointment, compensation, retention and oversight of the work of the External Auditor unless the company’s governing law or documents or other home country legal requirements require or permit shareholders to ultimately vote on or approve these matters. While the RAC is directly responsible for remuneration and oversight of the External Auditor, the ultimate responsibility for appointment and retention of the External Auditor rests with our shareholders, in accordance with UK law and our constitutional documents. The RAC does, however, make recommendations to the Board on these matters, which are reported to shareholders. | | | Compliance with the UK Code This table describes how BHP has applied the Principles of the UK Code | Board leadership and our purpose • Long-term sustainable success – we believe we put the long-term sustainable success of BHP at the centre of what we do (section 1.4.2 and 1.4.3). • Purpose, values, strategy and culture – we renewed our purpose in FY2019 to better capture the aspirations of all our stakeholders (sections 1.4.1, 1.4.2, 1.4.3, 1.6 and 1.7). • Performance measurement and control framework (sections 1.4 and 6.6). • Responsibilities to shareholders and stakeholders (sections 1.4.2, 1.4.3, 1.6.1 and 2.6). • Workforce policies and practices (sections 1.4.2, 1.4.3, 1.6.1, 1.6.2 and 2.6). | | Composition, succession and evaluation • Appointments – we have a rigorous process in place for Board appointments, and to consider succession having regard to diversity of gender, social and ethnic backgrounds and personal strengths (section 2.9). • Skills matrix – we have an appropriate mix of skills, experience and knowledge on the Board and in 2018 revised our skills matrix (section 2.7). Section 2.9 provides information on tenure and Board renewal. • Director review – the contribution of each Director to the work of the Board and its Committees, the expectations of Directors as specified in BHP’s governance framework and the performance of Directors. The review confirmed that each Director continues to contribute effectively (section 2.8). | | | Division of responsibilities • Chair of the Board – the Chair leads the Board and is responsible for its effectiveness and the effective contribution from all Non-executive Directors (section 2.3). • Board composition – the Board operates effectively with the appropriate balance of executives and Non-executives and believes the roles of the Chair and the CEO should be separated (section 2.3). • Non-executive Directors have sufficient time to meet their responsibilities – when we appoint new Directors we ensure they have sufficient time to undertake their responsibilities and are able to offer challenge, strategic guidance and specialist advice (section 2.2.1). • Time and resources – the Board ensures it has the necessary time, resources, policies and processes in place as part of its evaluation process (section 2.8). | | Audit Risk and Internal Control • Internal and external audit independence – we understand the importance of ensuring these lines of defence remain independent (section 2.10). • Fair balanced and understandable – the Board presents a fair balanced and understandable assessment of BHP’s position and prospects (section 2.10). • Management and oversight of risk – our risk and control environment is monitored and overseen by the Risk and Audit Committee. The Board, Risk and Audit Committee, and Sustainability Committee considered emerging and principal risk during the year (sections 1.5.4, 2.5, 2.10 and 2.11). | | Remuneration • Policies and practices – remuneration is designed to support our strategy and long-term sustainable success (section 3). • Formal and transparent procedure – we have formal and transparent procedures in place, and routinely engage with investors for their feedback (section 2.6.1). • Use of discretion – we have used discretion to adjust the formulaic remuneration outcomes (section 3). |
2.18 Additional UK disclosure The information specified in the UK FCA Disclosure and Transparency Rules, DTR 7.2.6, is located elsewhere in this Annual Report. The Directors’ Report in section 4 provides cross-references to where the information is located. This Corporate Governance Statement was current and approved by the Board on 3 September 2020 and signed on its behalf by: Ken MacKenzie Chair 3 September 2020 Section 3 Remuneration Report In this section This Remuneration Report describes the remuneration policies, practices, outcomes and governance for the KMP of BHP. BHP’s DLC structure means that we are subject to remuneration disclosure requirements in the United Kingdom and Australia. This results in some complexity in our disclosures, as there are some key differences in the requirements and the information that must be disclosed. For example, UK requirements give shareholders the right to a binding vote on the remuneration policy every three years and as a result, the remuneration policy needs to be described in a separate section in the Remuneration Report. Our remuneration policy is set out in section 3.2. In Australia, BHP is required to make certain disclosures for KMP as defined by the Australian Corporations Act 2001, Australian Accounting Standards and IFRS. The UK requirements focus on the remuneration of Executive and Non-executive Directors. At BHP, this is our Board, including the CEO, who is our sole Executive Director. In contrast, the Australian requirements focus on the remuneration of KMP, defined as those who have authority and responsibility for planning, directing and controlling the activities of the Group directly or indirectly. KMP includes the Board, as well as certain members of our senior executive team. After due consideration, the Committee has determined the KMP for FY2020 comprised the following roles: all Non-executive Directors, the CEO, the Chief Financial Officer, the President Minerals Australia, the President Minerals Americas, and the President Petroleum. The following individuals have held their positions and were KMP for the whole of FY2020, unless stated otherwise: Mike Henry, CEO and Executive Director (from 1 January 2020) and President Minerals Australia (to 31 December 2019) Andrew Mackenzie, CEO and Executive Director (to 31 December 2019) Peter Beaven, Chief Financial Officer Daniel Malchuk, President Minerals Americas Geraldine Slattery, President Petroleum Non-executive Directors - see section 3.3.14 for details of the Non-executive Directors, including dates of appointment or cessation (where relevant) | | | Abbreviation | | Item | AGM | | Annual General Meeting | | | CDP | | Cash and Deferred Plan | | | CEO | | Chief Executive Officer | | | DEP | | Dividend Equivalent Payment | | | DLC | | Dual Listed Company | | | ELT | | Executive Leadership Team | | | GHG | | Greenhouse Gas | | | GSTIP | | Group Short-Term Incentive Plan | | | HPIF | | High Potential Injury Frequency | | | HSEC | | Health, Safety, Environment and Community | | | IFRS | | International Financial Reporting Standards | | | | KMP | | Key Management Personnel | | | | KPI | | Key Performance Indicator | | | | LTIP | | Long-Term Incentive Plan | | | | MAP | | Management Award Plan | | | | MSR | | Minimum Shareholding Requirement | | | | OIF | | Occupational Illness Frequency | | | | ROCE | | Return on Capital Employed | | | | STIP | | Short-Term Incentive Plan | | | | TRIF | | Total Recordable Injury Frequency | | | | TSR | | Total Shareholder Return |
3.1 Annual statement by the Remuneration Committee Chair Dear Shareholders, I am pleased to introduce BHP’s Remuneration Report for the financial year to 30 June 2020, which is my first since assuming the Remuneration Committee Chair role, and I am looking forward to engaging with shareholders as the Committee undertakes its work. During FY2020, the Committee has continued its focus on achieving remuneration outcomes that fairly reflect the performance of BHP, and which are aligned to the interests of shareholders and other key stakeholders. FY2020 has been an unprecedented year, with the COVID-19 pandemic having widespread impacts on lives, society and the global economy. In the face of this, BHP employees have rallied in line with the Group’s purpose and values, working very effectively to keep the business running and performing strongly, and keeping each other safe. I would like to thank my predecessor as Remuneration Committee Chair, Carolyn Hewson, for her leadership and for establishing a Committee with a strong foundation of policies, principles and practices upon which our decisions are able to be made. This is especially so in the unpredictable times in which we find ourselves. We have also made other changes to the Committee this year. New Directors Gary Goldberg and Dion Weisler have joined Anita Frew and Shriti Vadera on the Committee and I would like to thank all members for their contributions. Remuneration policy The Committee sought and received approval from shareholders at last year’s AGMs for a revised remuneration policy, with almost 94 per cent of votes in favour, and we believe the policy will serve stakeholders well. The key changes approved for the CEO were: A change in the balance of incentive arrangements comprising: a significantly reduced LTIP grant size of 200 per cent of base salary (on a face value basis), down from 400 per cent a CDP with a longer term focus than the former STIP. The CDP outcome is delivered one-third as a cash award, with two-thirds delivered in equity, as two-year and five-year deferred share awards each of equivalent value to the cash award. This aligns participants’ incentive remuneration with performance over the short-, medium- and long-term These two changes in combination did not materially alter the target value or vesting profile of incentive remuneration, but resulted in a 12 per cent reduction in the maximum possible remuneration for a year. A significant reduction in the pension contribution rate to 10 per cent of base salary, down from 25 per cent (noting that the estimated workforce average is approximately 11.5 per cent of base salary). As a result of this change, fixed remuneration for the CEO role has been reduced by 12 per cent and overall target remuneration reduced by 4 per cent. The introduction of a two-year post-retirement shareholding requirement. While these changes took effect from 1 July 2019, existing short- and long-term equity awards made under prior policies remain on foot and will vest, subject to existing service and performance conditions, over coming years. We were also pleased to again receive strong support for our overall Remuneration Report from shareholders at the 2019 AGMs, with approximately 96 per cent voting ‘for’ the report. This continues our strong shareholder support over the past five years, where on average almost 97 per cent have voted in favour. The Committee strives to implement the remuneration policy in a considered way: We test the CEO’s remuneration against CEO roles in other global companies of similar complexity, size, reach and industry. The remuneration also reflects the CEO’s responsibilities, location, skills, performance, qualifications and experience. This detailed benchmarking ensures BHP’s executive remuneration packages are competitive enough to attract and retain talented executives, without being excessive. External benchmarking shows the CEO’s target remuneration package is below the average for similar global companies and importantly, can only be realised as actual remuneration if performance targets are met. The CEO’s remuneration is deliberately tied to the performance of the business, with the majority of remuneration delivered in BHP shares, not cash. The CEO also has a minimum shareholding requirement of five times pre-tax base salary, which continues for two years post-retirement. This aligns the CEO to the experience of BHP’s shareholders. The exercise of reasonable downward discretion has been a feature of BHP’s approach over many years where the status quo or a formulaic outcome does not align with the overall shareholder experience, and this remains unchanged. The Committee is focussed on having and applying a remuneration policy and approach that supports the Group’s strategy and enables us to attract, retain and motivate the executives critical to delivering the best outcomes for all of BHP’s stakeholders. In addition, the Committee is cognisant of the need to navigate the priorities of differing jurisdictions. COVID-19 In early 2020, BHP began to experience the impacts of the COVID-19 pandemic. All BHP employees have come together as one team to deal with the issues faced and despite the challenges, BHP’s results have been strong. The CEO and other ELT members have provided strong and effective leadership through this period, and the Committee is proud of the way BHP’s employees have found new ways of working, collaborated to solve problems, supported each other and their communities, and aligned around a common goal. Despite the challenges the COVID-19 pandemic has presented, in FY2020 BHP has not needed to furlough any employees without pay, has not sought any government assistance, and did not raise additional equity. In addition, BHP’s strong, safe operational performance through this year, together with solid profitability, enabled the Board to announce a robust final dividend payable to shareholders in September 2020. This follows a record interim dividend paid to shareholders in March 2020, and continues the delivery of strong and consistent returns to shareholders. The COVID-19 pandemic increased costs and reduced volumes during FY2020, which negatively impacted executive remuneration outcomes. During the COVID-19 pandemic, BHP has been especially conscious of contributing to the communities in which we operate, by doing all it can to keep employees, their families and their communities safe and healthy. BHP took action to slow the spread of COVID-19 into the workforce by investing in more transportation capacity, restricting travel to the operations and protecting at-risk workers. BHP has also created hundreds of operational jobs across our Minerals Australia business, funded local health and social programs in the communities where BHP operates, and for the Company’s small, local and Indigenous suppliers, BHP reduced the time taken to pay their invoices to help address the financial stress they might otherwise face as a result of the pandemic. Decisions and activities of the Committee A key element of the Committee’s work during the year was the remuneration implications of CEO succession. Mike Henry was appointed CEO and Executive Director effective 1 January 2020. Mike’s fixed remuneration on appointment was set at US$1.870 million per annum, which included a base salary of US$1.700 million per annum plus a pension contribution of 10 per cent of base salary. This level of fixed pay was a reduction of 12 per cent from Andrew Mackenzie’s fixed pay of US$2.125 million per annum. Mike participates in the CDP and LTIP in accordance with the approved remuneration policy. Andrew Mackenzie stepped down as CEO and a Director of the Group on 31 December 2019, and he retired from BHP on 31 March 2020. The terms of Andrew’s departure announced on 23 December 2019 reflected the Group’s remuneration policy and the rules of our incentive arrangements and leaving entitlements as approved by shareholders. Further information in respect of this is provided in sections 3.3.13 and 3.3.24. Other key decisions and activities of the Committee during FY2020 included: Completing the 2019 review of the remuneration policy and seeking and gaining the approval of shareholders at the 2019 AGMs Considering remuneration for other members of the ELT and the Group Company Secretary Aligning the determination of CDP equity award sizes to a 12-month pricing approach, also used for LTIP awards, to minimise potential volatility over time Setting and reviewing outcomes against performance measures and conditions of relevant incentive plans Redesigning, with the support of the Sustainability Committee, the HSEC component of the CDP scorecard to give greater weight and transparency to climate change Reviewing the fee for the BHP Chair Reviewing and adopting changes and improvements flowing from regulatory requirements and guidance, which in turn helps us improve our processes and approaches Engaging with shareholders and other key stakeholders Undertaking regular reviews of workforce engagement, workforce remuneration and related policies, remuneration by gender and the annual Shareplus enrolment update CEOs’ remuneration The scorecard against which the CEO’s annual performance is assessed comprises stretching performance measures, including HSEC, financial and individual performance elements. For FY2020, the Remuneration Committee has assessed Mike Henry’s and Andrew Mackenzie’s performance and determined CDP outcomes of 96 per cent for each of them, against the target of 100 per cent (and the maximum of 150 per cent), with the outcomes prorated to reflect their periods as CEO. These outcomes took into account BHP’s strong HSEC performance during the year, with no fatalities recorded, and improvements in all key health and safety indicators, while environment and community outcomes were broadly in line with expectations. Financial and operating performance was strong, yet fell slightly short of the stretching targets set at the commencement of the year. While the COVID-19 pandemic impacted BHP, society and the global economy, the Group maintained continuity of operations while keeping employees healthy and safe. Despite this, there were significant costs and other impacts of COVID-19 to BHP’s financial results for FY2020. The direct costs have been recorded as an exceptional item in the financial statements. Nevertheless, the Committee concluded that, while these COVID-19 related costs were outside the control of management, they, together with the volume impacts of COVID-19, should flow through to the financial measures for CDP scorecard purposes, thereby reducing the remuneration outcome for executives from what they would have otherwise been. The Committee considered this was appropriate in light of the global impacts of the COVID-19 pandemic. The Committee also considered each of the CEOs’ performance against their individual objectives. For Mike, this included assuming the CEO role, redefining and restructuring the ELT, enhancing the performance improvement focus, strategy review, portfolio value and options analysis, accelerating gender balance aspirations, and the work of the Tailings Dams Taskforce. For Andrew, this included enhancing the value of the portfolio, maximising performance options, and maintaining a robust ELT succession slate. The Committee considered both Mike’s and Andrew’s performance against their individual objectives to be in line with target. While the CEOs’ scorecard outcomes were determined at 96 per cent of target and the scorecard outcomes for other Executive KMP were on average marginally ahead of target, the short-term incentive pool applicable to the majority of BHP employees below the ELT level was above target. This was considered appropriate and due recognition, given the excellent performance across BHP’s whole workforce in the face of the COVID-19 pandemic, where, despite this, strong safety performance and operational continuity was achieved during FY2020. The vesting outcome for the 2015 LTIP against the relative TSR performance conditions was 48 per cent, and this is the first vesting under the program since 2014. BHP outperformed the sector peer group significantly, but did not meet the performance threshold for vesting against the MSCI World index. This 48 per cent level of vesting is aligned with the long-term average vesting under the LTIP since its inception 16 years ago. Consistent with prior practice, the Board and Committee has conducted a holistic review of business performance over the prior five years since grant to ensure this level of vesting was appropriate. Further details in respect of overall remuneration outcomes for the year for the CEOs, together with information on how the outcomes are aligned to performance during FY2020, are provided in section 3.3. As at the date of this report, Mike’s shareholding meets the minimum shareholding requirement of five times pre-tax base salary. For FY2021, the Committee determined that Mike’s base salary remains unchanged at US$1.700 million per annum, as it was at the time of his appointment. In addition, the other components of his total target remuneration (pension contributions, benefits, CDP and LTIP) also remain unchanged. A summary of Mike’s arrangements for FY2021 is set out below. FY2021 CEO remuneration | | | | | | | | | | | | | | | Fixed remuneration | | | | CDP | | | | LTIP | • Base salary US$1.700 million per annum. • No change to base salary. • Pension contribution 10 per cent of base salary. | | | | • Target cash award of 80 per cent of base salary (maximum 120 per cent). • Plus two awards of deferred shares each of equivalent value to the cash award, vesting in two and five years, respectively. • Three performance categories: – HSEC – 25 per cent – Financial – 50 per cent – Individual performance – 25 per cent | | | | • The annual LTIP grant is based on a face value of 200 per cent of base salary. • Our LTIP awards have rigorous relative TSR performance hurdles measured over five yeans. |
We have also addressed last year’s commitment to clarify and strengthen the link between executive remuneration and climate change for FY2021. The weighting on climate change is now 10 per cent of the 25 per cent HSEC weighting in the CDP scorecard, which compares to circa 4 per cent allocated to climate change in the prior STIP, and we have enhanced the disclosure of climate change-related performance targets. Further details are set out in section 3.3.9. Mike is BHP’s only Executive Director, however, the Committee has also reviewed the base salaries and total target remuneration packages for other Executive KMP and determined that there would be no increases to base salaries as a consequence of that review, and that other aspects of their remuneration arrangements would remain unchanged. Remuneration outcomes for the Chair and Non-executive Directors Fees for the Chair and Non-executive Directors are reviewed annually and are benchmarked against peer companies. No changes to the Chair’s fee will be made for FY2021. This follows a review in 2017, where a decision was made to reduce the Chair’s annual fee by approximately 8 per cent from US$0.960 million to US$0.880 million with effect from 1 July 2017, which followed an earlier reduction, effective 1 July 2015, of approximately 13 per cent from US$1.100 million to US$0.960 million. Base fee levels for Non-executive Directors will also remain unchanged, after they were also reduced effective 1 July 2015 by approximately 6 per cent, from US$0.170 million to US$0.160 million per annum. Prior to the above reductions in fee levels for the Chair and Non-executive Directors, their fees had remained unchanged since 2011. Summary With the COVID-19 pandemic this year, FY2020 has presented many challenges, not only for BHP, but also for many other companies, governments, employees, families and communities across the world. On behalf of the Remuneration Committee, I would like to recognise the hard work, dedication and sacrifices of all of our employees. They have aligned around a common cause, and through their steadfast commitment, they have remained safe and healthy, continued to support their communities, and enabled BHP to generate strong results for all stakeholders. The Committee believes the remuneration outcomes for FY2020 reflect an appropriate alignment between pay and performance during the year and are also fair in terms of the global context in which decisions have been made. We are confident that shareholders will recognise this as a continuation of our long-held approach. We look forward to ongoing dialogue with, and the support of, BHP’s shareholders, and I very much look forward to meeting shareholders face-to-face when once again we are able to do so. As always, we welcome your feedback and comments on any aspect of this Report. Susan Kilsby Chair, Remuneration Committee 3 September 2020 3.2 Remuneration policy report BHP has an overarching remuneration policy that guides the Remuneration Committee’s decisions. Under UK legislation, shareholders have the opportunity to vote on our remuneration policy every three years, with binding effect in regard to the Directors (including the CEO). Under Australian legislation, shareholders also have the opportunity to vote on our remuneration policy in conjunction with the broader Remuneration Report, each year at the AGMs as it applies to all KMP under a non-binding advisory vote. Our remuneration policy, which was approved by shareholders at the 2019 AGMs, has not changed and is repeated below. Remuneration policy for the Executive Director This section only refers to the remuneration policy for our CEO, who is our sole Executive Director. If any other executive were to be appointed an Executive Director, this remuneration policy would apply to that new role. 3.2.1 Components of remuneration The following table shows the components of total remuneration, the link to strategy, the applicable operation and performance frameworks, and the maximum opportunity for each component. | | | | | Remuneration component and link to strategy | | 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, denominated in US dollars, is broadly aligned with salaries for comparable roles in global companies of similar global complexity, size, reach and industry, and reflects the CEO’s responsibilities, location, skills, performance, qualifications and experience. • Base salary is reviewed annually with effect from 1 September. Reviews are informed, but not led, by benchmarking to comparable roles (as above), changes in responsibility and general economic conditions. Substantial weight is also given to the general base salary increases for employees. • Base salary is not subject to separate performance conditions. | | 8% increase per annum (annualised) or inflation if higher in Australia. | Pension contributions (2) Provides a market-competitive level of post-employment benefits provided to attract and retain a high-quality and experienced CEO. | | • Pension contributions are benchmarked to comparable roles in global companies and have been determined after considering the pension contributions provided to the wider workforce. • A choice of funding vehicles is offered, including a defined contribution plan, an unfunded retirement savings plan, an international retirement plan or a self-managed superannuation fund. Alternatively, a cash payment may be provided in lieu. | | A pension contribution rate of 10% of base salary applies. | Benefits Provides personal insurances, relocation benefits and tax assistance where BHP’s structure gives rise to tax obligations across multiple jurisdictions, and a market-competitive level of benefits to attract and retain a high-quality and experienced CEO. | | • Benefits may be provided, as determined by the Committee, and currently include costs of private family health insurance, death and disability insurance, car parking and personal tax return preparation in the required countries where BHP has requested the CEO relocate internationally, or where BHP’s DLC structure requires personal tax returns in multiple jurisdictions. • Costs associated with business-related travel for the CEO’s spouse/partner, including for Board meetings, may be covered. Where these costs are deemed to be taxable benefits for the CEO, BHP may reimburse the CEO for these tax costs. • The CEO is eligible to participate in Shareplus, BHP’s all-employee share purchase plan. • A relocation allowance and assistance is provided only where a change of location is made at BHP’s request. The Group’s mobility policies generally provide for ‘one-off’ payments with no material trailing entitlements. | | Benefits as determined by the Committee but to a limit not exceeding 10% of base salary and (if applicable) a one-off taxable relocation allowance up to US$700,000. |
| | | | | Remuneration component and link to strategy | | Operation and performance framework | | Maximum (1) | CDP The purpose of the CDP is to encourage and focus the CEO’s efforts on the delivery of the Group’s strategic priorities for the relevant financial year to deliver short, medium and long-term success, and to motivate the CEO to strive to achieve stretch performance objectives. The performance measures for each year are chosen on the basis that they are expected to have a significant short, medium and long-term impact on the success of the Group. Delivery of two-thirds of CDP awards in deferred shares encourages a longer-term focus aligned to that of shareholders. | | Setting performance measures and targets • The Committee sets a balanced scorecard of short, medium and long-term elements including HSEC, financial and individual performance measures, with targets and relative weightings at the beginning of the financial year in order to appropriately motivate the CEO to achieve outperformance that contributes to the long-term sustainability of the Group and shareholder wealth creation. • Specific financial measures will constitute the largest weighting and are derived from the annual budget as approved by the Board for the relevant financial year. • Appropriate HSEC measures that are consistent with the Group’s long-term five-year public HSEC targets, and their weightings, are determined by the Remuneration Committee with the assistance of the Sustainability Committee. • Individual measures are an important element of effective performance management, and are a combination of quantitative and qualitative targets. They are aligned with medium and long-term strategy aspirations that are intended to drive long-term value for shareholders and other stakeholders. • For HSEC and for individual measures the target is ordinarily expressed in narrative form and will be disclosed near the beginning of the performance period. However, the target for each financial measure will be disclosed retrospectively. In the rare instances where this may not be prudent on grounds of commercial sensitivity, we will seek to explain why and give an indication of when the target may be disclosed. • Should any other performance measures be added at the discretion of the Committee, we will determine the timing of disclosure of the relevant target with due consideration of commercial sensitivity. Assessment of performance • At the conclusion of the financial year, the CEO’s achievement against each measure is assessed by the Remuneration Committee and the Board, with guidance provided by other relevant Board Committees in respect of HSEC and other measures, and a CDP award determined. If performance is below the threshold level for any measure, no CDP award will be provided in respect of that portion of the CDP award opportunity. • The Board believes this method of assessment is transparent, rigorous and balanced, and provides an appropriate, objective and comprehensive assessment of performance. • In the event that the Remuneration Committee does not consider the outcome that would otherwise apply to be a true reflection of the performance of the Group or should it consider that individual performance or other circumstances makes this an inappropriate outcome, it retains the discretion to not provide all or a part of any CDP award. This is an important mitigation against the risk of unintended award outcomes. | | Maximum award A cash award of 120% of base salary plus two awards of deferred shares each of equivalent value to the cash award, vesting in two and five years respectively. Target performance A cash award of 80% of base salary plus two awards of deferred shares each of equivalent value to the cash award, vesting in two and five years respectively, for target performance on all measures. Threshold performance A cash award of 40% of base salary plus two awards of deferred shares each of equivalent value to the cash award, vesting in two and five years respectively, for threshold performance on all measures. Minimum award Zero. |
| | | | | Remuneration component and link to strategy | | Operation and performance framework | | Maximum (1) | | | Delivery of award • CDP awards are provided under the CDP as cash and two awards of deferred shares, each of equivalent value to the cash award, vesting in two and five years respectively. • The awards of deferred shares comprise rights to receive ordinary BHP shares in the future at the end of the deferral periods. Before the awards vest (or are exercised), these rights are not ordinary shares and do not carry entitlements to ordinary dividends or other shareholder rights; however, a DEP is provided on vested awards. The Committee also has a discretion to settle CDP awards in cash. Underpin, malus and clawback • To ensure any vesting of five-year deferred shares under the CDP is underpinned by satisfactory performance post-grant, the vesting will be subject to an underpin. This will encompass a holistic review of performance at the end of the five-year vesting period, including a five-year view on HSEC performance, profitability, cash flow, balance sheet health, returns to shareholders, corporate governance and conduct. • Both cash and deferred share CDP awards are subject to malus and clawback as described in section 3.2.2. | | | LTIP The purpose of the LTIP is to focus the CEO’s efforts on the achievement of sustainable long-term value creation and success of the Group (including appropriate management of business risks). It also encourages retention through long-term share exposure for the CEO over the five-year performance period (consistent with the long-term nature of resources), and aligns the long-term interests of the CEO and shareholders. The LTIP aligns the CEO’s reward with sustained shareholder wealth creation in excess of that of relevant comparator group(s), through the relative TSR performance condition. | | Relative TSR performance condition • The LTIP award is conditional on achieving five-year relative TSR (3) performance conditions as set out below. • The relevant comparator group(s) and the weighting between relevant comparator group(s) will be determined by the Committee in relation to each LTIP grant. Level of performance required for vesting • Vesting of the award is dependent on BHP’s TSR relative to the TSRof relevant comparator group(s) over a five-year performance period. • 25% of the award will vest where BHP’s TSR is equal to the median TSR of the relevant comparator group(s), as measured over the performance period. Where TSR is below the median, awards will not vest. • Vesting occurs on a sliding scale between the median TSR of the relevant comparator group(s) up to a nominated level of TSR outperformance (4) over the relevant comparator group(s), as determined by the Committee, above which 100% of the award will vest. • Where the TSR performance condition is not met, there is no retesting and awards will lapse. The Committee also retains discretion to lapse any portion or all of the award where it considers the vesting outcome is not appropriate given Group or individual performance. This is an important mitigation against the risk of unintended outcomes. | | Maximum award Face value of 200% of base salary. (6) |
| | | | | Remuneration component and link to strategy | | Operation and performance framework | | Maximum (1) | | Relative TSR has been chosen as an appropriate measure as it allows for an objective external assessment over a sustained period on a basis that is familiar to shareholders. | | Further performance measures • The Committee may add further performance conditions, in which case the vesting of a portion of any LTIP award may instead be linked to performance against the new condition(s). However, the Committee expects that in the event of introducing an additional performance condition(s), the weighting on relative TSR would remain the majority weighting. Delivery of award • LTIP awards are provided under the LTIP approved by shareholders at the 2013 AGMs. When considering the value of the award to be provided, the Committee primarily considers the face value of the award, and also considers its fair value which includes consideration of the performance conditions.(5) • LTIP awards consist of rights to receive ordinary BHP shares in the future if the performance and service conditions are met. Before vesting (or exercise), these rights are not ordinary shares and do not carry entitlements to ordinary dividends or other shareholder rights; however, a DEP is provided on vested awards. The Committee has a discretion to settle LTIP awards in cash. Underpin, malus and clawback • If the specified performance conditions are satisfied in part or in full, to ensure any vesting of LTIP awards is underpinned by satisfactory performance through the performance period, the vesting will be subject to an underpin. This will encompass a holistic review of performance at the end of the five-year performance period, including a five-year view on HSEC performance, profitability, cash flow, balance sheet health, returns to shareholders, corporate governance and conduct. • LTIP awards are subject to malus and clawback as described in section 3.2.2. | | |
| (1) | Mr MaxstedUK regulations require the disclosure of the maximum that may be paid in respect of each remuneration component. Where that is expressed as a maximum annual percentage increase that is annualised it should not be interpreted that it is BHP’s current intention to award an increase of that size in total in any one year, or in each year, and instead it is a maximum required to be disclosed under the Committee’s financial expert nominated by the Board.regulations.
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| (2) | Mr Bowen was unablePension contributions maximum column wording has been updated to attendreflect the meetingleadership transition of Executive Director and CEO on 12 February 2019 due1 January 2020 and the current application of policy with respect to pension contribution rate for Mike Henry. The FY2019 remuneration report policy table wording reflected the application of Andrew Mackenzie’s contribution rate: ’For the existing CEO, the current pension contribution rate of 25 per cent of base salary will reduce as follows: 25 per cent of base salary to 30 June 2020; 20 per cent of base salary from 1 July 2020; 15 per cent of base salary from 1 July 2021; 10 per cent of base salary from 1 July 2022 onwards. For a new appointment, the pension contribution rate will be 10 per cent of base salary immediately.’
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| (3) | BHP’s TSR is a weighted average of the TSRs of BHP Group Limited and BHP Group Plc. |
| (4) | Maximum vesting is determined with reference to a prior engagement.position against each comparator group. |
| (5) | Fair value is calculated by the Committee’s independent adviser and is different to fair value used for IFRS disclosures (which do not take into account forfeiture conditions on the awards). It reflects outcomes weighted by probability, taking into account the difficulty of achieving the performance conditions and the correlation between these and share price appreciation, together with other factors, including volatility and forfeiture risks. The current fair value is 41 per cent of the face value of an award, which may change should the Committee vary elements (such as adding a performance measure or altering the level of relative TSR outperformance). |
| (6) | In order to ensure there is a fair transitional outcome for participants, the LTIP grant made in late CY2019 was based on 400 per cent face value basis in accordance with the remuneration policy approved by shareholders in 2017, with potential vesting five years later in mid-CY2024. The first five-year deferred shares that result from performance under the CDP for FY2020 will be granted in late CY2020 and will first vest five years later in mid-CY2025. The LTIP grant to be made in late CY2020 will be made on the reduced 200 per cent face value basis, with potential vesting five years later also in mid-CY2025. |
The Remuneration Committee’s discretion in respect of each remuneration component applies up to the maximum shown in the table above. Any remuneration elements awarded or granted under the previous remuneration policy approved by shareholders in 2014 and 2017, but which have not yet vested or been awarded or paid, shall continue to be capable of vesting, awarded or payment made on their existing terms. 3.2.2 Malus and clawback The CDP, LTIP and STIP rule provisions allow the Committee activitiesto reduce or clawback awards in FY2019 Integrity of Financial Statements and funding mattersthe following circumstances:
Accounting matters for consideration, materiality limits, half-year and full-year resultsthe participant acting fraudulently or dishonestly or being in material breach of their obligations to the Group
SOX compliance, reserves and resourceswhere BHP becomes aware of a material misstatement or omission in the Financial Statements of a Group company or the Group
Capital Allocation Frameworkany circumstances occur that the Committee determines in good faith to have resulted in an unfair benefit to the participant
These malus and clawback provisions apply whether or not awards are made in the form of cash or equity, whether or not the equity has vested, and whether or not employment is ongoing. 3.2.3 Potential remuneration outcomes The Remuneration Committee recognises that market forces necessarily influence remuneration practices and it strongly believes the fundamental driver of remuneration outcomes should be business performance. It also believes that overall remuneration should be fair to the individual, such that remuneration levels accurately reflect the CEO’s responsibilities and contributions, and align with the expectations of our shareholders, while considering the positioning and relativities of pay and employment conditions across the wider BHP workforce. The amount of remuneration actually received each year depends on the achievement of superior business and individual performance generating sustained shareholder value. Before deciding on the final incentive outcomes for the CEO, the Committee first considers the achievement against the pre-determined performance conditions. The Committee then applies its overarching discretion on the basis of what it considers to be a fair and commensurate remuneration level to decide if the outcome should be reduced. When the CEO was appointed in January 2020 the Board advised him that the Committee would exercise its discretion on the basis of what it considered to be a fair and commensurate remuneration level to decide if the outcome should be reduced. In this way, the Committee believes it can set a remuneration level for the CEO that is sufficient to incentivise him and that is also fair to him and commensurate with shareholder expectations and prevailing market conditions. The diagram below provides the scenario for the potential total remuneration of the CEO at different levels of performance. 
Minimum: consists of fixed remuneration, which comprises base salary (US$1.700 million), pension contributions (10 per cent of base salary) and other benefits (notional 10 per cent of base salary). Target: consists of fixed remuneration, target CDP (a cash award of 80 per cent of base salary plus two awards of deferred shares each of equivalent value to the cash award, vesting in two and five years respectively) and target LTIP. The LTIP target value is based on the fair value of the award, which is 41 per cent of the face value of 200 per cent of base salary. The potential impact of future share price movements is not included in the value of deferred CDP awards or LTIP awards. Maximum: consists of fixed remuneration, maximum CDP (a cash award of 120 per cent of base salary plus two awards of deferred shares each of equivalent value to the cash award, vesting in two and five years respectively), and maximum LTIP (face value of 200 per cent of base salary). The potential impact of future share price movements is not included in the value of deferred CDP awards or LTIP awards. All other things being equal, if the share price at vesting of LTIP awards was 50 per cent higher than the share price at grant, then the total maximum value would be US$13.260 million. The maximum opportunity represented above is the most that could potentially be paid of each remuneration component, as required by UK regulations. It does not reflect any intention by the Group to award that amount. The Remuneration Committee reviews relevant benchmarking data and industry practices, and believes the maximum remuneration opportunity is appropriate. 3.2.4 Approach to recruitment and promotion remuneration The remuneration policy as set out in section 3.2 of this Report will apply to the remuneration arrangements for a newly recruited or promoted CEO, or for another Executive Director should one be appointed. A market-competitive level of base salary will be provided. The pension contributions, benefits and variable pay will be in accordance with the remuneration policy table in section 3.2.1. For external appointments, the Remuneration Committee may determine that it is appropriate to provide additional cash and/or equity components to replace any remuneration forfeited or not received from a former employer. It is anticipated that any foregone equity awards would be replaced by equity. The value of the replacement remuneration would not be any greater than the fair value of the awards foregone or not received (as determined by the Committee’s independent adviser). The Committee would determine appropriate service conditions and performance conditions within BHP’s framework, taking into account the conditions attached to the foregone awards. The Committee is mindful of limiting such payments and not providing any more compensation than is necessary. For any internal CEO (or another Executive Director) appointment, any entitlements provided under former arrangements will be honoured according to their existing terms. 3.2.5 Service contracts and policy on loss of office The terms of employment for the CEO are formalised in his employment contract. Key terms of the current contract and relevant payments on loss of office are shown below. If a new CEO or another Executive Director was appointed, similar contractual terms would apply, other than where the Remuneration Committee determines that different terms should apply for reasons specific to the individual or circumstances. The CEO’s current contract has no fixed term. It can be terminated by BHP on 12 months’ notice. BHP can terminate the contract immediately by paying base salary plus pension contributions for the notice period. The CEO must give 12 months’ notice for voluntary resignation(1). The table below sets out the basis on which payments on loss of office may be made. | | | | | | | | | Leaving reason (2)(3) | | | Voluntary resignation | | Termination for
cause | | Death, serious injury, illness, disability or total and permanent disablement | | Cessation of employment as agreed with the Board (4) | | Base salary | | • Paid as a lump sum for the notice period or progressively over the notice period. | | • No payment will be made. | | • Paid for a period of up to six months, after which time employment may cease. | | • Paid as a lump sum for the notice period or progressively over the notice period. | | Pension contributions | | • Paid as a lump sum for the notice period or progressively over the notice period. | | • No contributions will be provided. | | • Paid for a period of up to six months, after which time employment may cease. | | • Paid as a lump sum for the notice period or progressively over the notice period. | | Benefits | | • May continue to be provided during the notice period. • Accumulated annual leave entitlements and any statutory payments will be paid. • May pay repatriation expenses to the home location where a relocation was at the request of BHP. • Any unvested Shareplus matched shares held will lapse. | | • No benefits will be provided. • Accumulated annual leave entitlements and any statutory payments will be paid. • May pay repatriation expenses to the home location where a relocation was at the request of BHP. • Any unvested Shareplus matched shares held will lapse. | | • May continue to be provided for a period of up to six months, after which time employment may cease. • Accumulated annual leave entitlements and any statutory payments will be paid. • May pay repatriation expenses to the home location where a relocation was at the request of BHP. • Any unvested Shareplus matched shares held will vest in full. | | • May continue to be provided for year in which employment ceases. • Accumulated annual leave entitlements and any statutory payments will be paid. • May pay repatriation expenses to the home location where a relocation was at the request of BHP. • Any unvested Shareplus matched shares held will vest in full. |
| | | | | | | | | Leaving reason (2)(3) | | | Voluntary resignation | | Termination for
cause | | Death, serious injury, illness, disability or total and permanent disablement | | Cessation of employment as agreed with the Board (4) | CDP/STIP – cash and deferred shares Where the CEO leaves either during or after the end of the financial year, but before an award is provided. | | • No cash award will be paid. • Unvested CDP/STIP deferred shares will lapse. • Vested but unexercised CDP/STIP deferred shares will remain exercisable for the remaining exercise period unless the Committee determines they will lapse. • Vested but unexercised CDP/STIP awards remain subject to malus and clawback. | | • No cash award will be paid. • Unvested CDP/STIP deferred shares will lapse. • Vested but unexercised CDP/STIP deferred shares will remain exercisable for the remaining exercise period unless the Committee determines they will lapse. • Vested but unexercised CDP/STIP awards remain subject to malus and clawback. | | • The Committee has discretion to pay and/or award an amount in respect of the CEO’s performance for that year. • Unvested CDP/STIP deferred shares will vest in full and, where applicable become exercisable. • Vested but unexercised CDP/STIP deferred shares will remain exercisable for the remaining exercise period. • Unvested and vested but unexercised CDP/STIP awards remain subject to malus and clawback. | | • The Committee has discretion to pay and/or award an amount in respect of the CEO’s performance for that year. • Unvested two-year CDP/STIP deferred shares and a pro rata portion (based on the proportion of the vesting period served) of unvested five-year CDP deferred shares continue to be held on the existing terms for the deferral period before vesting (subject to Committee discretion to lapse some or all of the award). • Vested but unexercised CDP/STIP deferred shares remain exercisable for the remaining exercise period, or a reduced period, or may lapse, as determined by the Committee. • Unvested and vested but unexercised CDP/STIP awards remain subject to malus and clawback. | | LTIP – unvested and vested but unexercised awards | | • Unvested awards will lapse. • Vested but unexercised awards will remain exercisable for the remaining exercise period, or for a reduced period, or may lapse, as determined by the Committee. • Vested but unexercised awards remain subject to malus and clawback. | | • Unvested awards will lapse. • Vested but unexercised awards will remain exercisable for the remaining exercise period, or for a reduced period, or may lapse, as determined by the Committee. • Vested but unexercised awards remain subject to malus and clawback. | | • Unvested awards will vest in full. • Vested but unexercised awards will remain exercisable for remaining exercise period. • Unvested and vested but unexercised awards remain subject to malus and clawback. | | • 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. • Vested but unexercised awards will remain exercisable for the remaining exercise period, or for a reduced period, or may lapse, as determined by the Committee. • Unvested and vested but unexercised awards remain subject to malus and clawback. |
| (1) | Notice period for voluntary resignation updated to reflect the terms of the new Executive Director and CEO employment contract effective on 1 January 2020. |
| (2) | If the Committee deems it necessary, BHP may enter into agreements with a CEO, which may include the settlement of liabilities in return for payment(s), including reimbursement of legal fees subject to appropriate conditions; or to enter into new arrangements with the departing CEO (for example, entering into consultancy arrangements). |
| (3) | In the event of a change in control event (for example, takeover, compromise or arrangement, winding up of the Group) as defined in the CDP, STIP and LTIP rules: |
base salary, pension contributions and benefits will be paid until the date of the change of control event Funding updatein relation to the CDP and net debt targetSTIP: the Committee may determine that a cash payment be made in respect of performance during the current financial year and all unvested two-year deferred shares would vest in full and, in relation to the CDP, all unvested five-year deferred shares would vest prorata (based on the proportion of the vesting period served up to the date of the change of control event)
Euro medium-term note program updatethe Committee may determine that unvested LTIP awards will either (i) be prorated (based on the proportion of the performance period served up to the date of the change of control event) and vest to the extent the Committee determines appropriate (with reference to performance against the performance condition up to the date of the change of control event and expectations regarding future performance) or (ii) be lapsed if the Committee determines the holders will participate in an acceptable alternative employee equity plan as a term of the change of control event
| (4) | Defined as occurring when a participant leaves BHP due to forced early retirement, retrenchment or redundancy, termination by mutual agreement or retirement with the agreement of the Group, or such other circumstances that do not constitute resignation or termination for cause. |
FY2019 portfolio valuation reviewRemuneration policy for Non-executive Directors
Our Non-executive Directors are paid in line with the UK Corporate Governance Code (2018 edition) and the Australian Securities Exchange Corporate Governance Council’s Principles and Recommendations (3rd Edition). 3.2.6 Components of remuneration The following table shows the components of total remuneration, the link to strategy, the applicable operation and performance frameworks, and the maximum opportunity for each component | | | | | Remuneration component and link to strategy | | Operation and performance framework | | 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 Chair is paid a single fee for all responsibilities. • Non-executive Directors are paid a base fee and relevant committee membership fees. • Committee Chairs and the Senior Independent Director are paid an additional fee to reflect their extra responsibilities. • All fee levels are reviewed annually and any changes are effective from 1 July. • Fees are set at a competitive level based on benchmarks and advice provided by external advisers. Fee levels reflect the size and complexity of the Group, the multi-jurisdictional environment arising from the DLC structure, the multiple stock exchange listings and the geographies in which the Group operates. The economic environment and the financial performance of the Group are taken into account. Consideration is also given to salary reviews across the rest of the Group. • Where the payment of pension contributions is required by law, these contributions are deducted from the Director’s overall fee entitlements. | | 8% increase per annum (annualised), or inflation if higher in the location in which duties are primarily performed, on a per fee basis. |
Cost of capital and country risk premium review
| | | | | Remuneration component and link to strategy | | Operation and performance framework | | Maximum (1) | | | | Benefits Competitive benefits are paid in order to attract and retain high-quality individuals and adequately remunerate them for the role undertaken, including the considerable travel burden. | | • Travel allowances are paid on a per-trip basis reflecting the considerable travel burden imposed on members of the Board as a consequence of the global nature of the organisation and apply when a Director needs to travel internationally to attend a Board meeting or site visits at our multiple geographic locations. • | | 8% increase per annum (annualised), or inflation if higher in the location in which duties are primarily performed, on a per-trip basis. Up to a limit not exceeding 20% of fees. | | | | | Variable pay (CDP and LTIP) | | • Non-executive Directors are not eligible to participate in any CDP or LTIP award arrangements. | | | | | | | Payments on early termination | | • There are no provisions in any of the Non-executive Directors’ appointment arrangements for compensation payable on early termination of their directorship. | | |
| (1) | UK regulations require the disclosure of the maximum that may be paid in respect of each remuneration component. Where that is expressed as a maximum annual percentage increase that is annualised it should not be interpreted that it is BHP’s current intention to award an increase of that size in total in any one year, or in each year, and instead it is a maximum required to be disclosed under the regulations. |
Approach to recruitment remuneration The ongoing remuneration arrangements for a newly recruited Non-executive Director will reflect the remuneration policy in place for other Non-executive Directors, comprising fees and benefits as set out in the table above. No variable remuneration (CDP and LTIP award arrangements) will be provided to newly recruited Non-executive Directors. Letters of appointment and policy on loss of office The standard letter of appointment for Non-executive Directors is available at bhp.com. The Board has adopted a policy consistent with the UK Corporate Governance Code, under which all Non-executive Directors must seek re-election by shareholders annually if they wish to remain on the Board. As such, no Non-executive Directors seeking re-election have an unexpired term in their letter of appointment. A Non-executive Director may resign on reasonable notice. No payments are made to Non-executive Directors on loss of office. 3.2.7 How remuneration policy is set The Remuneration Committee sets the remuneration policy for the CEO and other Executive KMP. The Committee is briefed on and considers prevailing market conditions, the competitive environment and the positioning and relativities of pay and employment conditions across the wider BHP workforce. The Committee takes into account the annual base salary increases for our employee population when determining any change in the CEO’s base salary. Salary increases in Australia, where the CEO is located, are particularly relevant as they reflect the local economic conditions. The principles that underpin the remuneration policy for the CEO are the same as those that apply to other employees, although the CEO’s arrangements have a greater emphasis on and a higher proportion of remuneration in the form of performance-related variable pay. Similarly, the performance measures used to determine variable pay outcomes for the CEO and all other employees are linked to the delivery of our strategy and behaviours that are aligned to the values in Our Charter. Although BHP does not consult directly with employees on CEO and other Executive KMP remuneration, the Group conducts regular employee engagement surveys that give employees an opportunity to provide feedback on a wide range of employee matters. Further, many employees are ordinary shareholders through our all-employee share purchase plan, Shareplus, and therefore have the opportunity to vote on AGM resolutions. In addition, in line with changes to the UK Corporate Governance Code, the Remuneration Committee is considering additional means of engaging with the workforce to explain how executive remuneration aligns with wider Group pay policy. External auditor and integrityAs part of the audit processBoard’s commitment to good governance, the Committee also considers shareholder views, together with those of the wider community, when setting the remuneration policy for the CEO and other Executive KMP. We are committed to engaging and communicating with shareholders regularly and, as our shareholders are spread across the globe, we are proactive with our engagement on remuneration and governance matters with institutional shareholders and investor representative organisations. Feedback from shareholders and investors is shared with and used as input into decision-making by the Board and Remuneration Committee in respect of our remuneration policy and its application. The Committee considers that this approach provides a robust mechanism to ensure Directors are aware of matters raised, have a good understanding of current shareholder views, and can formulate policy and make decisions as appropriate. We encourage shareholders to always make their views known to us by directly contacting our Investor Relations team (contact details available at bhp.com).
3.3 Annual report on remuneration This section of the Report shows the impact of the remuneration policy in FY2020 and how remuneration outcomes are linked to actual performance. Remuneration for the Executive Directors (the CEOs) 3.3.1 Single total figure of remuneration This section shows a single total figure of remuneration as prescribed under UK requirements. It is a measure of actual remuneration received, rather than a figure calculated in accordance with IFRS (which is detailed in note 24 ‘Employee share ownership plan’ section 5). As Mike Henry assumed the role of CEO and became an Executive Director on 1 January 2020, the FY2020 actual remuneration shown relates to the period 1 January 2020 to 30 June 2020. The FY2020 actual remuneration for Andrew Mackenzie relates to the period 1 July 2019 to 31 December 2019, on which date he ceased to be CEO and an Executive Director. The components of remuneration are detailed in the remuneration policy table in section 3.2.1. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | US$(’000) | | | | | Base salary | | | Benefits (1) | | | Pension (2) | | | Total
fixed | | | CDP/
STIP (3) | | | LTIP (4) | | | Total
variable | | | Single
total
figure | | Mike Henry | | | FY2020 | | | | 850 | | | | 6 | | | | 85 | | | | 941 | | | | 1,959 | | | | 3,169 | | | | 5,128 | | | | 6,069 | | Andrew Mackenzie | | | FY2020 | | | | 850 | | | | 55 | | | | 213 | | | | 1,118 | | | | 1,306 | (5) | | | 0 | | | | 1,306 | | | | 2,424 | | | | | FY2019 | | | | 1,700 | | | | 100 | | | | 425 | | | | 2,225 | | | | 1,306 | | | | 0 | | | | 1,306 | | | | 3,531 | |
| (1) | Includes private family health insurance, spouse business-related travel, car parking and personal tax return preparation in required countries. |
External audit letters
| (2) | Pension contributions for Andrew Mackenzie in FY2019 and FY2020 (until the date he ceased as CEO and Executive Director) were made in accordance with the remuneration policy approved by shareholders in 2019 (i.e. based on 25 per cent of base salary). Mike Henry’s FY2020 pension contributions were also made in accordance with the remuneration policy approved by shareholders in 2019 (i.e. based on 10 per cent of base salary which applied for a new Executive Director appointment). Pension contributions for both were made into the international retirement plan. |
| (3) | FY2020 CDP award is provided one-third in cash and two-thirds in deferred equity (on the terms of the CDP) as shown in the table below. FY2019 STIP award was provided half in cash and half in deferred equity (on the terms of the STIP) as shown in the table below. No discretion was applied to the STIP awards when determining vesting of awards in FY2019 or FY2020. |
| (4) | Mike Henry’s LTIP award value is based on the full award he received in 2015 when he was President Coal (prior to becoming, and with no proration applied for time as, CEO and Executive Director). The value is based on 48 per cent of the award vesting, including a DEP amount of US$0.548 million paid in shares. The value delivered through share price appreciation between the date of grant and the vesting date was US$1.410 million. The value of Andrew Mackenzie’s vested LTIP award (which vested after Andrew retired from BHP) is detailed in section 3.3.24. No discretion was applied to the LTIP awards when determining vesting of awards for FY2020. |
| (5) | Andrew Mackenzie’s prorated CDP award for FY2020 was provided as cash covering the one-third cash component and the two-year deferred equity component. Nothing has been or will be granted or paid in respect of the remaining one-third, i.e. the five-year deferred equity award. |
For Mike Henry, the single total figure of engagement, external audit feesremuneration is calculated on the basis of his appointment on 1 January 2020. There have been no changes to his base salary, benefit entitlements or pension contribution since that date. For Andrew Mackenzie, the single total figure of remuneration is calculated on the on the basis of his period as CEO andnon-audit services Management Executive Director up until 31 December 2019. There were no changes to his base salary, benefit entitlements or pension contributions prior to the date of his cessation as CEO and external auditor closed sessions
Audit plan, reviewExecutive Director. Details of performanceremuneration received in the period 1 January 2020 to 31 March 2020 are set out in section 3.3.24. Changes from prior year outcomes of CDP/STIP and quality of service
EY independence andnon-audit services
EY audit transition and preliminary audit plan
Effectiveness of systems of internal control and risk management
Group risk framework including the risk appetite statement and priority group risk review
Regular reports on progress against the internal audit plan
Matters of note arising from internal audits
Internal assessments of performance of Internal Audit and Assurance
Fraud and misappropriation report
Committee and Group Assurance Officer and Chief Risk Officer closed sessions
Ethics and compliance report
154LTIP are set out below.
| | | | | | | | | | | CDP / STIP | | LTIP | | Mike Henry | | FY2020 | | CDP awarded for FY2020 performance. One-third was provided in cash in September 2020, one-third deferred in an equity award that is due to vest in FY2023, and one-third deferred in an equity award that is due to vest in FY2026. | | Based on performance during the five-year period to 30 June 2020, 48 per cent of Mike’s 192,360 awards from the 2015 LTIP (granted to him when he was President Coal before he was appointed CEO and Executive Director) have vested, and the remaining awards have lapsed. The value of the vested awards is inclusive of a DEP, which is paid in shares. | | Andrew Mackenzie | | FY2020 | | Prorated CDP awarded for FY2020 performance. Two-thirds of the award was paid in cash in September 2020 covering the cash and two-year deferred equity portion. Nothing has been or will be granted or paid in respect of the remaining one-third of the award i.e. the five-year deferred equity portion. | | Details of Andrew’s vested 2015 LTIP award (which vested after Andrew retired from BHP) are set out in section 3.3.24. | | | FY2019 | | STIP awarded for FY2019 performance. Half was provided in cash in September 2019 and half deferred in an equity award that is due to vest in FY2022. | | Based on performance during the five-year period to 30 June 2019, all of Andrew’s 224,859 awards from the 2014 LTIP did not vest and have lapsed. The value of the awards is zero and no DEP has been paid in respect of these awards. |
Insurance update3.3.2 FY2020 CDP performance outcomes
The Board and Directors’Remuneration Committee assessed both CEOs’ CDP outcomes (for the period they were, respectively, in the CEO role) in light of the Group’s performance in FY2020, taking into account each CEO’s performance against the KPIs in their CDP scorecards. Despite strong operational and Officers’ insurance updatefinancial performance in FY2020, when assessing performance against the targets set at the commencement the year the Board and Committee determined that the CDP outcome for Mike Henry for FY2020 is 96 per cent against the target of 100 per cent (which represents an outcome of 64 per cent against maximum) and that the CDP outcome for Andrew Mackenzie for FY2020 is also 96 per cent against the target of 100 per cent (which also represents an outcome of 64 per cent against maximum). The Board and Committee believe these outcomes are appropriately aligned with the shareholder experience and the interests of the Group’s other stakeholders. Other governance mattersThe CEOs’ CDP scorecard outcomes for FY2020 are summarised in the following tables, including a narrative description of each performance measure and the CEOs’ level of achievement, as determined by the Remuneration Committee and approved by the Board. The level of performance for each measure is determined based on a range of thresholds (the minimum necessary to qualify for any reward outcome), target (where the performance requirements are met), and maximum (where the performance requirements are significantly exceeded).
HSEC The HSEC targets for the CEOs are aligned to the Group’s suite of HSEC five-year public targets as set out in section 1.7. As it has done for several years, the Remuneration Committee seeks guidance each year from the Sustainability Committee when assessing HSEC performance against scorecard targets. The Remuneration Committee has taken a holistic view of Group performance in critical areas, including any matters outside the scorecard targets which the Sustainability Committee considers relevant. Inter-company loans and group guarantees updateThe performance commentary below is provided against the scorecard targets, which were set on the basis of operated assets only.
| | | | | | | HSEC measures | | Scorecard targets | | Performance against scorecard targets | | Measure outcome | | Fatalities | | Nil fatalities at operated assets. | | The weighting of fatalities is 10 percentage points of the 25 percentage points allocated to the HSEC category, and represents the greatest weighting of all HSEC items. Our imperative as a Group is to continue to build our focus on fatality prevention and safety through leadership, verification and effective risk management. Historically, this fatality measure has had a zero outcome in years where a fatality occurred. There were no fatalities during FY2020 at operated assets, and accordingly the maximum outcome against this measure has been awarded. | | Maximum. | | | | | | Environmental and community incidents | | Nil significant environmental and community incidents at operated assets. | | There were no significant environmental and community incidents during FY2020 at operated assets. This element carries a lesser weighting than for fatalities, as there have historically not been as many significant incidents. | | Target. | | | | | | HPIF, TRIF and OIF | | Improved performance compared with FY2019 results. | | HPIF is a critical lead indicator which provides insight into our performance on preventing future fatalities. It decreased year-on-year by 23% during FY2020. TRIF performance in FY2020 of 4.2 is also lower by 11% than the 4.7 recorded in FY2019. In addition, OIF performance in FY2020 of 2.46 is lower by 7% than the 2.64 recorded last year. | | Between target and maximum, closer to maximum. | | | | | | Risk management | | Operated assets to have controls for fatal risks verified as part of Field Leadership activities with fatal risk control improvement plans developed and executed and increased levels of in-field coaching. Achieve 90% compliance for critical control verification and execution tasks. | | All operated assets substantially increased levels of coaching of Field Leadership, thereby improving the quality of leader engagement, which exceeded target. The reduction in the rates of identified critical control failures was ahead of target. The implementation of critical control observation schedules covering all critical controls and improved discipline in closing actions created when critical controls have failed were in line with targets set. | | Above target. | | | | | | Health, environmental and community and social value initiatives | | All operated assets to achieve 100% of planned targets in respect of occupational exposure reduction, mental health, water and GHG, social value plans, quality of life, community perceptions and community complaints. | | Targeted asset level improvements were exceeded for mental health activities and social value and community plans and activities (which have all been especially important during the COVID-19 pandemic), and targets were met in respect of GHG reduction. However, we fell short on occupational exposure reduction targets and, despite meeting our water withdrawal reduction target, didn’t complete certain asset level actions regarding our water stewardship. | | Target overall (i.e. a blend of the above, on and below target). |
The outcome against the HSEC KPI for FY2020 was 32 per cent against the target of 25 per cent. As a Group-level outcome, this applied to both Mike and Andrew for their time as CEO. Financial ROCE is underlying profit after taxation (excluding after-taxation finance costs and exceptional items) divided by average capital employed. ROCE is the key financial KPI against which CDP outcomes for our senior executives are measured and is, in our view, a relevant measure to assess the financial performance of the Group for this purpose. While ROCE excludes exceptional items, the Remuneration Committee reviews each exceptional item to assess if it should be included in the result for the purposes of deriving the ROCE CDP outcome. When we are assessing management’s performance, we make adjustments to the ROCE result to allow for changes in commodity prices, foreign exchange movements and other material items to ensure the assessment appropriately measures outcomes that are within the control and influence of the Group and its executives. Of these, changes in commodity prices have historically been the most material due to volatility in prices and the impact on Group revenue and ROCE. | | | | | | | Financial
measure | | Scorecard targets | | Performance against scorecard targets | | Measure
outcome | | ROCE | | For FY2020, the target for ROCE was 19.9%, with a threshold of 16.3% and a maximum of 21.1%. The target ROCE is derived from the Group’s approved annual budget. It is the Group’s practice to build a material element of stretch performance into the budget. Achievement of this stretching ROCE target will result in a target CDP outcome. The threshold and maximum are a fair range of ROCE outcomes that represent a lower limit of underperformance below which no CDP award should be made, and an upper limit of outperformance that would represent the maximum CDP award. Because a material element of stretch performance is built into the budget (and hence the ROCE target derived from the budget), together with physical and regulatory asset constraints, the performance range around target is subject to a greater level of downside risk than there is upside opportunity. Accordingly, the range between threshold and target is greater than that between target and maximum. For maximum, the Committee takes care not to create leveraged incentives that encourage executives to push for short-term performance that goes beyond our risk appetite and current operational capacity. The Committee retains, and has a track record of applying, downward discretion to ensure that the CDP outcome is appropriately aligned with the overall performance of the Group for the year, and is fair to management and shareholders. | | ROCE of 16.9% was reported by BHP for FY2020. Adjusted for the factors outlined below, ROCE is 18.2%, which is below target. The following adjustments were made to ensure the outcomes appropriately reflect the performance of management for the year: • The impacts of movements in commodities prices and exchange rates increased ROCE by 1.2%. • Adjustments for other material items ordinarily made to ensure the outcomes reflect the performance of management for the year increased ROCE by 0.3%, mainly due to the exclusion of the impacts of unusually severe weather events during FY2020. • Having reviewed the FY2020 exceptional items (as described in note 3 ‘Exceptional items’ in section 5), the Committee determined they should not be considered for the purposes of determining the ROCE CDP outcome, with the exception of the exceptional item in relation to the costs of the COVID-19 pandemic on BHP’s FY2020 results. The Committee concluded that, while this was outside the control of management, the direct costs and volume impacts of COVID-19 should flow through to the ROCE outcomes for CDP scorecard purposes. The Committee considered this was appropriate in light of the global impacts of the COVID-19 pandemic. This adjustment reduced ROCE by 0.2%. Beyond this, the Committee concluded that no further action was required in respect of exceptional items. The key drivers of the ROCE performance being below target at 18.2% were: • In Minerals Australia and despite record volumes at Western Australia Iron Ore, Caval Ridge and Poitrel and record coal mined at Broadmeadow, production was lower than expected at Western Australian Iron Ore, Coal and Olympic Dam due mainly to reliability issues and shutdown timing, together with higher maintenance and contractor costs. • In Minerals Americas lower production than expected at Escondida (despite mill throughout being at record levels) and Pampa Norte due to unplanned maintenance, equipment failures and lower recoveries, partly offset by better than expected cost performance. • In Petroleum lower market demand for petroleum products resulted in lower than expected production volumes at Trinidad and Bass Strait, particularly in the last quarter of FY2020, together with extended maintenance in Australia impacting volumes, partly offset by better than expected cost performance. | | Below
target. |
The outcome against the ROCE KPI for FY2020 was 39 per cent against the target of 50 per cent. As a Group-level outcome, this outcome applied to Mike and Andrew for their time as CEO. Individual performance measures for the CEOs Individual measures for the CEOs are determined at the commencement of the financial year (or at the time of appointment for a new CEO). The application of personal measures remains an important element of effective performance management. These measures seek to provide a balance between the financial and non-financial performance requirements that maintain our position as a leader in our industry. The CEOs’ individual measures for FY2020 included contribution to BHP’s overall performance and the management team, and also the delivery of projects and initiatives within the scope of the CEO role as specified by the Board, as set out in the tables below. Tax/royalty disputes updateMike Henry
| | | | | | | Individual
measures | | Individual scorecard targets | | Performance against scorecard targets | | Measure
outcome | | Safety and sustainability | | • Future plan for reduction in near misses. • Risk management embedded. • Climate change next steps. | | • Near misses reduced significantly in FY2020 from FY2019; analysis completed and future action plans completed to achieve further significant reductions. • Material risks recorded appropriately, and agreed risk appetites being embedded in the business. • Next stage of climate change plans delivered. | | Target. | | | | | | Performance | | • Team restructuring. • BHP Operating System implementation. • Gender representation advanced. | | • New ELT members appointed, Technology and Transformation restructured, World Class Functions benefits accelerated, Operations Committee established. • BHP Operating System deployment proceeding according to plan, with volume and safety benefits delivered, as well as supporting compliance with COVID-19 protocols. • Positive improvements in gender representation in the second half, after a slow start to FY2020. By 30 June 2020 gender diversity had increased 2.0 percentage points to 26.5%, up from 24.5% at 30 June 2019, for a cumulative increase of 8.9 percentage points from 17.6% at 30 June 2016. | | Target. | | | | | | Portfolio | | • Portfolio value improvement. • Strategy review improvement. • Samarco strategy implemented. | | • Significant progress achieved on portfolio enhancement activities in spite of the challenges faced during the year with COVID-19, social unrest in Chile and unprecedented market volatility in oil and gas, including progressing agreed capital and operational options and projects at Petroleum, Escondida, Western Australia Iron Ore, Queensland Coal and Olympic Dam. • Developed an improved review process for our portfolio and strategy around existing portfolio and growth options, and successfully conducted a large portion of the process, including significant Board engagement. The process is ongoing and will complete during 2020. • While the agreed Samarco strategy has been executed consistent with the principles to achieve fair and reasonable compensation and remediation, there have been some delays due to COVID-19 and further work and focus is required in FY2021. Insurance recoveries have been progressed, class actions are being actively managed and the first phase of dam decommissioning has been approved. | | Target overall (i.e. a blend of above, on and below target). | | | | | | Tailings dams | | • Tailings Dam Taskforce work. • Long-term strategy development. | | • Delivered the work of the Tailings Dam Taskforce in accordance with agreed plans, schedules and targets, together with accelerating dam remediation activities across the Group. • Developed a long-term tailings management strategy to deliver step change risk reduction within 10 years. | | Target. |
New accounting standards updateAndrew Mackenzie
| | | | | | | Individual
measures | | Individual scorecard targets | | Performance against scorecard targets | | Measure
outcome | | | | | | Performance | | • Deliver value through Transformation. • Risk management embedded. | | • BHP Operating System implementation, value chain automation and World Class Functions activities on-track. • Material risks being recorded appropriately, and agreed risk appetites being embedded in the business. | | Target. | | | | | | Tailings dams | | • Tailings Dam Taskforce work. • Long-term strategy development. | | • Progressed the work of the Tailings Dam Taskforce in accordance with agreed plans, schedules and targets. • Progressed a long-term tailings management strategy to deliver step change risk reduction within 10 years. | | Target. | | | | | | Portfolio | | • Maximise the value of the current portfolio. • Progress delivery of value and returns from future options. • Exploration success. | | • Identified projects and options in Petroleum, Escondida, Western Australia Iron Ore, Queensland Coal and Olympic Dam progressed according to plans. • Future option projects continue to progress well, including identified options in Petroleum, Copper and Potash. • Achieved positive exploration outcomes, with extensions to the lives and reserves of conventional oil and gas fields. | | Target. | | | | | | Culture and capability | | • Gender representation advanced. • Maintain a robust succession slate. | | • Notwithstanding positive improvements in gender representation in the second half, there was a slow start to FY2020 in the first half. By 31 December 2019 gender diversity had increased to 24.8%, up from 24.5% at 30 June 2019. • A robust slate of potential successors to the CEO role and other ELT roles has been achieved through a deliberate focus on a strong long-term talent pool of candidates, evidenced by internal appointments to several key roles during the year. | | Target overall (i.e. a blend of above and below target). | | | | | | Social value | | • Manage risks to protect operating licence. • Samarco strategy implemented. • Create opportunities to enhance social value. | | • Continued to manage risks by meeting commitments to our workforce, partners, communities and governments through health and safety, the public commitment to and implementation of the climate change strategy including an action plan around our public commitments, and managing water permits, Native Title agreements and social investments. • Progress made in implementing the agreed Samarco strategy, however there were some delays and further work and focus required. • Continued to work closely with our communities and collaborate with various local, regional and global stakeholders, new employment models are building better outcomes for employees, and have a leading position on social value through placing a high value on the long-term needs of society and the environment. | | Target overall (i.e. a blend of above, on and below target). |
Overall, it was considered that the performance of both Mike and Andrew against their individual measures KPI was as expected for their respective periods as CEO. Accordingly, they were each awarded an outcome of 25 per cent, which is equal to target. 3.3.3 LTIP performance outcomes LTIP vesting based on performance to June 2020 The five-year performance period for the 2015 LTIP ended on 30 June 2020. Mike Henry’s 2015 LTIP award comprised 192,360 awards (granted as President Coal prior to his appointment as CEO) and Andrew Mackenzie’s 2015 LTIP award comprised 322,765 awards (reduced from 339,753 awards originally granted prorated for time served at the time of departure). Vesting is subject to achievement of the relative TSR performance conditions and any discretion applied by the Remuneration Committee (see section 3.3.5). Testing the performance condition For the award to vest in full, TSR must exceed the Peer Group TSR (for 67 per cent of the award) and the Index TSR (for 33 per cent of the award) by an average of 5.5 per cent per year for five years, being 30.7 per cent in total compounded over the performance period from 1 July 2015 to 30 June 2020. TSR includes returns to BHP shareholders in the form of share price movements along with dividends paid and reinvested in BHP (including cash and in-specie dividends). ManagementBHP’s TSR performance was positive 29.0 per cent over the five-year period from 1 July 2015 to 30 June 2020. This is above the weighted median Peer Group TSR of data protectionpositive 9.6 per cent and privacy risks updatebelow the Index TSR of positive 38.5 per cent over the same period. This level of performance results in 48 per cent vesting for the 2015 LTIP award, and accordingly 48 per cent of Mike Henry’s awards and Andrew Mackenzie’s retained awards have vested, and 52 per cent have lapsed. No compensation or DEP was paid in relation to the lapsed awards. The value of Mike’s vested 2015 LTIP award has been reported in section 3.3.1 and the value of Andrew’s vested 2015 LTIP award has been reported in section 3.3.24.
The graph below shows BHP’s performance relative to comparator groups. Technology risksBHP vs. Peer Group and Index TSR over the 2015 LTIP cycle
3.3.4 LTIP allocated during FY2020 Following shareholder approval at the 2019 AGMs, LTIP awards (in the form of performance rights) were granted to Mike Henry (in his role as President Minerals Australia) and Andrew Mackenzie (in his role as CEO) on 20 November 2019. The first LTIP grant to be made to Mike as the new CEO under the terms of the remuneration policy approved by shareholders in 2019 will be awarded in late CY2020 and will be made on the reduced 200 per cent of base salary (face value). The face value and fair value of the awards granted on 20 November 2019 are shown in the table below. The face value of Mike’s award is 350 per cent of his base salary of US$1.100 million at the time of grant. The face value of Andrew’s award is 400 per cent of his base salary of US$1.700 million. The fair value of the awards is ordinarily calculated by multiplying the face value of the award by the fair value factor of 41 per cent (for the current plan design, as determined by the independent adviser to the Committee).The number of LTIP awards for both Mike and Andrew as detailed below was determined based on the US$ face value of base salary and calculated using the average share price and US$/A$ exchange rate over the 12 months up to and including 30 June 2019. | | | | | | | | | | | | | | | | Number of LTIP
awards | | Face value US$(‘000) | | Face value % of salary | | Fair value US$(‘000) | | Fair value % of salary | | % of max(1) | Mike Henry | | 153,631 | | 3,850 | | 350 | | 1,579 | | 144 | | 100 | Andrew Mackenzie | | 271,348(2) | | 6,800 | | 400 | | 2,788 | | 164 | | 100 |
| (1) | The allocation is 100 per cent of the maximum award that was able to be provided under the remuneration policy approved by shareholders at the 2019 AGMs. |
| (2) | Subsequently reduced to 40,702 awards on a pro rata basis for time served. |
FinancialTerms of the LTIP award
In addition to those LTIP terms set in the remuneration policy for the CEO approved by shareholders in 2019, the Remuneration Committee has determined: | | | Performance period | | • 1 July 2019 to 30 June 2024 | | | Performance conditions | | • An averaging period of six months will be used in the TSR calculations. • BHP’s TSR relative to the weighted median TSR of sector peer companies selected by the Committee (Peer Group TSR) and the MSCI World index (Index TSR) will determine the vesting of 67% and 33% of the award, respectively. • Each company in the peer group is weighted by market capitalisation. The maximum weighting for any one company is 25% and the minimum is set at 0.4% to reduce sensitivity to any single peer company. • For the whole of either portion of the award to vest, BHP’s TSR must be at or exceed the weighted 80th percentile of the Peer Group TSR or the Index TSR (as applicable). Threshold vesting (25% of each portion of the award) occurs where BHP’s TSR equals the weighted 50th percentile of the Peer Group TSR or the Index TSR (as applicable). Vesting occurs on a sliding scale between the weighted 50th and 80th percentiles. | | | Sector peer group companies(1)(2) | | • Resources (85%): Anglo American, Fortescue Metals, Freeport-McMoRan, Glencore, Rio Tinto, Southern Copper, Teck Resources, Vale. • Oil and gas (15%): Anadarko Petroleum(3), Apache, BP, Canadian Natural Res., Chevron, ConocoPhillips, Devon Energy, EOG Resources, ExxonMobil, Occidental Petroleum, Royal Dutch Shell, Woodside Petroleum. |
| (1) | From December 2016, BG Group and Peabody Energy were removed from the comparator group. BG Group was acquired by Royal Dutch Shell and Peabody Energy had become a significantly less comparable peer. |
| (2) | From November 2018, CONSOL Energy was removed from the comparator group, as due to its internal restructuring it had become a less comparable peer. |
| (3) | Anadarko Petroleum was acquired by Occidental Petroleum in August 2019. |
3.3.5 Overarching discretion and vesting underpin The rules of the CDP, LTIP and STIP and the terms and conditions of the awards give the Committee an overarching discretion to reduce the number of awards that will vest, notwithstanding the fact that the performance condition for partial or full vesting, as tested following the end of the performance period, or the relevant service conditions, have been met. This holistic, qualitative judgement, which is applied as an underpin test before final vesting is confirmed, is an important risk management tool to ensure vesting is not simply driven by a formula or the passage of time that may give unexpected or unintended remuneration outcomes. The Committee considers its discretion carefully each year. It considers performance holistically over the five-year period, including a five-year ’look back’ on HSEC performance, profitability, cash flow, balance sheet health, returns to shareholders, corporate governance proceduresand conduct. Having undertaken this review, the Committee considered its discretion in respect of equity awards due to vest in August 2020. In respect of the STIP two-year deferred shares (granted in November 2018 in respect of performance in FY2018), the Committee chose not to exercise its discretion and allowed the STIP awards to vest in full. In respect of the LTIP five-year performance shares (granted in December 2015), the formulaic outcome of the 2015 LTIP was a 48 per cent vesting. Having undertaken the ‘look back’ review, the Committee concluded the vesting outcome was appropriate given Group and individual performance, and chose not to exercise its discretion and allowed 48 per cent of the LTIP awards to vest. There is no upwards discretion available to the Remuneration Committee in respect of the LTIP, as the overarching discretion may only reduce the number of awards that may vest. 3.3.6 CEO remuneration and returns to shareholders 10-year CEO remuneration The table below shows the single total figure of remuneration for Mike Henry, Andrew Mackenzie and Marius Kloppers over the last 10 years along with the proportion of maximum opportunity earned for each type of incentive. | | | | | | | | | | | | | | | | | Business RiskExternal Auditor
The RAC manages the relationship with the External Auditor on behalf of the Board. It considers the reappointment of the External Auditor each year, as well as remuneration and other terms of engagement and makes a recommendation to the Board. The lead audit engagement partners for EY in Australia and the United Kingdom (together, ‘EY’) were appointed for commencement from 1 July 2019. Audit tender and transition BHP confirms during FY2020 it was in compliance with the provisions of The Statutory Audit Services for Large Companies Market Investigation (Mandatory Use of Competitive Tender Processes and Audit CommitteesCommittee Responsibilities) Order 2014. Business RiskConsistent with the UK and Audit Committees, covering each asset group, assist managementEU requirements in providingregard to audit firm tender and rotation, the information necessaryCommittee conducted an audit tender process during FY2017 to allowappoint a new external auditor.
In August 2017, consistent with the Committee’s recommendation, the Board announced it had selected EY to be the Group’s auditor from the financial year beginning 1 July 2019, subject to shareholder approval, which was received at the AGMs in 2019. During FY2019, the RAC received updates from EY on the audit transition and preparation for commencement of its audit, including EY’s process in meeting all relevant independence criteria, audit plan for commencement from 1 July 2019 and reports on any non-audit services. KPMG was the auditor during FY2019 and FY2018, and EY was the auditor during FY2020. Evaluation of External Auditor and external audit process The RAC evaluates the objectivity and independence of the External Auditor and the quality and effectiveness of the external audit arrangements. As part of this evaluation, the RAC considers specified criteria, including delivering value to dischargeshareholders and BHP, and also assesses the adequacy of the external audit process with emphasis on quality, effectiveness and performance. It does so through a range of means, including: the Committee considers the External Audit Plan, in particular to gain assurance that it is tailored to reflect changes in circumstances from the prior year throughout the year, the Committee meets with the audit partners, particularly the lead Australian and UK audit engagement partners, without management present following the completion of the audit, the Committee considers the quality of the External Auditor’s performance drawing on survey results. The survey is based on a two-way feedback model where the BHP and EY teams assess each other against a range of criteria. The criteria against which the BHP team evaluates EY’s performance include ethics and integrity, insight, service quality, communication, reporting and responsiveness reviewing the terms of engagement of the External Auditor discussing with the audit engagement partners the skills and experience of the broader audit team reviewing audit quality inspection reports on EY published by the UK Financial Reporting Council in considering the effectiveness of the audit In addition, the RAC reviews the integrity, independence and objectivity of the External Auditor and assesses whether there is any element of the relationship that impairs or appears to impair the External Auditor’s judgement or independence. The External Auditor also certifies its responsibilities. Theyindependence to the RAC. Non-audit services Although the External Auditor does provide some non-audit services, the objectivity and independence of the External Auditor are safeguarded through restrictions on the provision of these services with some services prohibited from being undertaken, including services where the External Auditor: may be required to audit its own work participates in activities that would normally be undertaken by management committees is remunerated through a ‘success fee’ structure acts in an advocacy role for BHP The RAC has adopted a policy entitled ‘Provision of Audit and perform an important monitoring functionOther Services by the External Auditor’ covering the RAC’s pre-approval policies and procedures to maintain the independence of the External Auditor. This policy was reviewed and updated in FY2020, including to reflect only those services permitted to be provided by the External Auditor in the overall governancerevised Ethical Standard published by the UK Financial Reporting Council. Our policy on Provision of BHP. The meetings take place annually as part of our financial governance framework.Audit and Other Services by the External Auditor is available at bhp.com/governance. As management committees,In addition to audit services, the responsible memberExternal Auditor is permitted to provide other (non-audit) services that are not and are not perceived to be in conflict with their role. In accordance with the requirements of the Executive Leadership Team participates,Exchange Act and guidance contained in Public Company Accounting Oversight Board (PCAOB) Release 2004-001, certain specific activities are listed in our policy that have been ‘pre-approved’ by the RAC.
The categories of ‘pre-approved’ services are: Audit services – work that constitutes the agreed scope of the statutory audit and includes the statutory audits of BHP and its entities (including interim reviews). This category also includes work that is reasonably related to the performance of an audit or review and is a logical extension of the audit or review scope. The RAC monitors the audit services engagements and if necessary, approves any changes in terms and conditions resulting from changes in audit scope, Group structure or other relevant events. Audit-related and other assurance services – work that is outside the scope of the statutory audit but is consistent with the committeerole of the external statutory auditor, is chairedof an assurance or compliance nature, is work the External Auditor must or is best placed to undertake and is permissible under the relevant applicable standard. Activities outside the scope of the categories above are not ‘pre-approved’ and must be approved by the RAC prior to engagement, regardless of the dollar value involved. In addition, any engagement for other services with a membervalue over US$100,000, even if listed as a ‘pre-approved’ service, requires the approval of the RAC. Each committee also includesAll engagements for other services whether ‘pre-approved’ or not and regardless of the Group Financial Controller, the Chief Risk Officer and the Group Assurance Officer. Significant operational and risk matters raised at Business RAC meetingsdollar value involved are reported quarterly to the RACRAC.
While not prohibited by management. Activities undertaken by RAC during FY2019
Fair, balanced and understandable
Directors are requiredBHP’s policy, any proposed non-audit engagement of the External Auditor relating to confirm that they consider the Annual Report, takeninternal control (such as a whole,review of internal controls) requires specific prior approval from the RAC. With the exception of the external audit of BHP’s Financial Statements, any engagement identified that contains an internal control-related element is not considered to be fair, balanced and understandable and providespre-approved. In addition, while the information necessary for shareholders to assess BHP’s position, performance, business model and strategy.
BHP hascategories of ‘pre-approved’ services include a substantial governance framework in place forlist of certain pre-approved services, the Annual Report. This includes management representation letters, certifications, RAC oversightuse of the Financial Statements and a range of other financial governance procedures focused on the financial section of the Annual Report, together with verification procedures for the narrative reporting section of the Report.
The RAC advises the Board on whether the Annual Report meets the fair, balanced and understandable requirement. The process to support the giving of this confirmation involved the following:
ensuring all individuals involved in the preparation of any part of the Annual Report are briefed on the fair, balanced and understandable requirement through training sessions for each content manager that detail the key attributes of ‘fair, balanced and understandable’;
employees who have been closely involved in the preparation of the Financial Statements review the entire narrative for the fair, balanced and understandable requirement, and sign off an appropriatesub-certification;
key members of the team preparing the Annual Report confirm they have taken the fair, balanced and understandable requirement into account and they have raised, with the Annual Report project team, any concerns they have in relation to meeting this requirement;
the Annual Report suitesub-certification incorporates a fair, balanced and understandable declaration;
in relation to the requirement for the auditor to review parts of the narrative report for consistency with the audited Financial Statements, asking the External Auditor to raise any issues of inconsistency at an early stage.
As a result ofperform these services will always be subject to our overriding governance practices as articulated in the process outlined above, the RAC, and then the Directors, were able to confirm their view that BHP’s Annual Report 2019 taken as a whole is fair, balanced and understandable. For the Board’s statement on the Annual Report, refer to the Directors’ Report in section 4.
Integrity of Financial Statements
The RAC assists the Board in assuring the integrity of the Financial Statements. The RAC evaluates and makes recommendations to the Board about the appropriateness of accounting policies and practices, areas of judgement, compliance with accounting standards, stock exchange and legal requirements and the results of the external audit. It reviews the half-yearly and annual Financial Statements and makes recommendations on specific actions or decisions (including formal adoption of the Financial Statements and reports) the Board should consider in order to maintain the integrity of the Financial Statements.
For the FY2019 full-year and the half-year, the CEO and CFO have certified that BHP’s financial records have been properly maintained and that the FY2019 Financial Statements present a true and fair view, in all material respects, of our financial condition and operating results and are in accordance with accounting standards and applicable regulatory requirements.
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Significant issuespolicy.
In addition, to the Group’s key judgements and estimates disclosed throughout the FY2019 Financial Statements, the Committee also considered the following significant issues relating to financial reporting: Carrying value of long-term assets
The assessment of carrying values of long-term assets uses a number of significant judgements and estimates.
The Committee examined management’s review of impairment triggers and potential impairment charges or reversals for the Group’s cash generating units.
The results of impairment assessments for the Jansen potash assets in Canada were reviewed and the Committee concluded that no impairment was required.
Specific consideration was given to the most recent short, medium and long-term price forecasts, sanction date, expected production volumes and ramp up development plans, operating and capital costs, discount rates and other market indicators of fair value.
Conclusions from these reviews are reflected in note 11 ‘Property, plant and equipment’ in section 5.
Samarco dam failure
On 5 November 2015, the Samarco Mineração S.A (Samarco) iron ore operation in Minas Gerais, Brazil experienced a tailings dam failure that resulted in a release of mine tailings, flooding the community of Bento Rodrigues and impacting other communities downstream. Samarco is jointly owned by BHP Billiton Brasil Limitada (BHP Billiton Brasil) and Vale S.A. (Vale). BHP Billiton Brasil’s 50 per cent interest in Samarco is accounted for as an equity accounted joint venture investment.
Samarco’s provisions and contingent liabilities
The Committee reviewed updates to matters relating to the Samarco dam failure, including developments on existing and new legal proceedings, and changes to the estimated costs of remediation and provisions relating to the decommissioning of Samarco’s Germano tailings dam complex.
BHP Billiton Brasil has recognised a share of additional losses recorded by SamarcoRAC did not approve any services during the year ended 30 June 2019.2020 pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of SEC Regulation S-X (provision of services other than audit).
Potential direct financial impactsFees paid to BHP Billiton Brasil
The Committee considered:
the impactBHP’s External Auditor during FY2020 for audit and other services were US$16.7 million, of Brazilian Government legislation requiring the accelerated decommissioning of upstream raised tailings dams, specifically for Samarco’s Germano tailings dam complex;
the accounting implications of funding provided to the Renova Foundation and Samarco to support activities under the Framework Agreement, carry out remediation and stabilisation work and support Samarco’s operations;
changes to the estimated cost of remediation and compensation Programs under the Framework Agreement;
developments in existing and new legal proceedings, on the provision related to the Samarco dam failure and related disclosures;
the provisions recognised and contingent liabilities disclosed by BHP Billiton Brasil or other BHP entities.
Based on currently available information, the Committee concluded that the accounting for the equity investment in Samarco, the provision recognised by BHP Billiton Brasilwhich 75 per cent comprised audit fees (including the decommissioningUS Sarbanes-Oxley Act of 2002 as amended (SOX)), 11 per cent for audit-related fees, 2 per cent was for tax fees and 12 per cent for all other fees. Details of the Germano tailings dam complex) and contingent liabilities disclosedfees paid are set out in the Group’s Financial Statements are appropriate.
For further information refer to note 4 ‘Significant events – Samarco dam failure’35 ‘Auditor’s remuneration’ in section 5.
Onshore US divestment
The Committee considered and concurred withBased on the accounting implications of the completion of the Group’s Onshore US asset divestment, including the allocation of revenue and costs to discontinuing operations and tax accounting of the divestment. The Committee also reviewed the disclosure of the Financial Statement impacts resulting from the divestment including the discontinued operations disclosure.
Conclusions from these reviews are reflected in note 27 ‘Discontinued operations’ in section 5.
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Impact of new accounting standards
The Committee considered and approved accounting policy changes resulting from the application of new standards and interpretations commencing 1 July 2019, including IFRS 16/AASB 16 ‘Leases’.
The Committee reviewed management’s analysis of the adoption implications for the Group, including the selection of transition options, and concurred with its recommendations.
For further information, refer to note 38 ‘New and amended accounting standards and interpretations’ in section 5.
Tax and royalty liabilities
The Group is subject to a range of tax and royalty matters across many jurisdictions. The Committee considered updates on changes to the wider tax landscape, estimates and judgements supporting the measurement and disclosure of tax and royalty provisions and contingent liabilities including the following:
tax risks (including transfer pricing risks) arising from the Group’s cross-border operations and transactions, including settlement of the transfer pricing dispute with the Australian Taxation Office relating to the Group’s marketing operations in Singapore;
settlement of a dispute with the Western Australian Government in relation to a long-standing deduction madereview by the Group and its Joint Venture Partners inRAC, the calculation of royalties;
other matters where uncertainty exists in the application of the law.
The Committee concluded that provisions recognised and contingent liabilities disclosed for these matters were appropriate considering the range of possible outcomes, currently available information and legal advice obtained.
For further information refer to notes 6 ‘Income tax expense’ and 33 ‘Contingent liabilities’ in section 5.
Closure and rehabilitation provisions
Determining the closure and rehabilitation provisionBoard is a complex area requiring significant judgement and estimates, particularly given the timing and quantum of future costs, the unique nature of each site and the long timescales involved.
The Committee considered the various changes in estimates for closure and rehabilitation provisions recognised during the year. Consideration was given to the results of the most recently completed surveying data, current cost estimates and appropriate inclusion of contingency in cost estimates to allow for both known and residual risks. The Committee concludedsatisfied that the assumptions and inputs for closure and rehabilitation cost estimates were reasonable and the related provisions recorded were appropriate.External Auditor is independent.
For further information, refer to note 14 ‘Closure and rehabilitation provisions’ in section 5.
External Auditor The RAC manages the relationship with the External Auditor on behalf of the Board. It considers the reappointment of the External Auditor each year, as well as remuneration and other terms of engagement and makes a recommendation to the Board. There are no contractual obligations that restrict the RAC’s capacity to recommend a particular firm for appointment as auditor. The lead audit engagement partners for KPMGEY in Australia and the United Kingdom (together, (‘KPMG’‘EY’)), were rotated every five years. The most recent Australian audit engagement partner was appointed at the start of FY2015, while the UK audit engagement partner took formal responsibility at the start of FY2018 following a transition period. Audit engagement partners have been appointed in Australia and the United Kingdom to represent EY for commencement from 1 July 2019. Change in Registrant’s Certifying Accountant /
Audit tender and transition BHP confirms that during FY2019FY2020 it was in compliance with the provisions of The Statutory Audit Services for Large Companies Market Investigation (Mandatory Use of Competitive Tender Processes and Audit Committee Responsibilities) Order 2014. Consistent with the UK and EU requirements in regard to audit firm tender and rotation, the Committee conducted an audit tender process during FY2017 to appoint a new external auditor. In August 2017, consistent with the Committee’s recommendation, the Board announced that it had selected EY to be appointed as the Group’s auditor from the financial year beginning 1 July 2019, subject to shareholder approval. The Board intends to seek shareholder approval, which was received at the AGMs in 2019 of the appointment of EY as external auditor. KPMG, BHP’s current external auditor, did not participate in the tender due to UK and EU requirements which require a new external auditor to be in place by 1 July 2023. KPMG’s appointment as external auditor will come to an end on completion of its procedures on BHP’s Consolidated Financial Statements for the financial year ending 30 June 2019 and the filing of the relatedForm-20F. 157
2019. During the financial years ended 30 June 2018 and 2019 and the subsequent interim period through to 17 September 2019, (1) KPMG has not issued any reports on the financial statements of BHP 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 BHP qualified or modified as to uncertainty, audit scope, or accounting principles, and (2) there has not been any disagreement over any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedures, which disagreements if not resolved to KPMG’s satisfaction would have caused it to make reference to the subject matter of the disagreement in connection with its auditor’s reports for such years, or any “reportable event” as described in Item 16F(a)(1)(v) ofForm 20-F. BHP has provided KPMG with a copy of the foregoing disclosure and has requested that they furnish BHP with a letter addressed to the SEC stating whether or not they agree with the above statements. A copy of such letter is filed as an Exhibit to this 2019Form 20-F.
During FY2018 and FY2019, BHP did not consult with EY regarding: (i) the application of accounting principles to any specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on the Consolidated Financial Statements of the Group; or (ii) any matter that was either the subject of a disagreement as defined in Item 16F(a)(1)(iv) ofForm 20-F or reportable event as defined in Item 16F(a)(1)(v) ofForm 20-F.
In FY2019, the RAC received updates from EY on the audit transition and preparation for commencement of its audit, including EY’s process in meeting all relevant independence criteria, audit plan for commencement from 1 July 2019 and reports on anynon-audit services.
KPMG was the auditor during FY2019 and FY2018, and EY was the auditor during FY2020. Evaluation of External Auditor and external audit process The RAC evaluates the performanceobjectivity and independence of the External Auditor during its termand the quality and effectiveness of appointment againstthe external audit arrangements. As part of this evaluation, the RAC considers specified criteria, including delivering value to shareholders and BHP, and also assesses the effectivenessadequacy of the external audit process.process with emphasis on quality, effectiveness and performance. It does so through a range of means:means, including: the Committee considers the External Audit Plan, in particular to gain assurance that it is tailored to reflect changes in circumstances from the prior year;year throughout the year, the Committee meets with the audit partners, particularly the lead Australian and UK audit engagement partners, without management present;present following the completion of the audit, the Committee considers the quality of the External Auditor’s performance drawing on survey results. The survey is based on atwo-way feedback model where the BHP and KPMGEY teams assess each other against a range of criteria. The criteria against which the BHP team evaluates KPMG’sEY’s performance include ethics and integrity, insight, service quality, communication, and reporting and responsiveness;responsiveness reviewing the terms of engagement of the External Auditor;Auditor discussing with the audit engagement partners the skills and experience of the broader audit team;team reviewing audit quality inspection reports on KPMGEY published by the UK Financial Reporting Council in considering the effectiveness of the audit;audit overseeing (and approving where relevant)non-audit services as described below.
TheIn addition, the RAC also reviews the integrity, independence and objectivity of the External Auditor and assesses whether there is any element of the relationship that impairs or appears to impair the External Auditor’s judgement or independence. This review includes:
confirming the External Auditor is, in its judgement, independent of BHP;
obtaining from the External Auditor an account of all relationships between the External Auditor and BHP;
monitoring the number of former employees of the External Auditor currently employed in senior positions within BHP;
considering the various relationships between BHP and the External Auditor;
determining whether the compensation of individuals employed by the External Auditor who conduct the audit is tied to the provision ofnon-audit services;
reviewing the economic importance of BHP to the External Auditor.
The External Auditor also certifies its independence to the RAC. Non-audit services Although the External Auditor does provide somenon-audit services, the objectivity and independence of the External Auditor are safeguarded through restrictions on the provision of these services. For example, certain types ofnon-auditservices may bewith some services prohibited from being undertaken, by the External Auditor only with the prior approval of the RAC (as described in this section), while other services may not be undertaken at all, including services where the External Auditor: may be required to audit its own work;work 158
participates in activities that would normally be undertaken by management;management is remunerated through a ‘success fee’ structure;structure acts in an advocacy role for BHP.BHP The RAC has adopted a policy entitled ‘Provision of Audit and Other Services by the External Auditor’ covering the RAC’spre-approval policies and procedures to maintain the independence of the External Auditor. This policy was reviewed and updated in FY2020, including to reflect only those services permitted to be provided by the External Auditor in the revised Ethical Standard published by the UK Financial Reporting Council. Our policy on Provision of Audit and Other Services by the External Auditor is available online at bhp.com/governance. In addition to audit services, the External Auditor is permitted to provide other(non-audit) services that are not and are not perceived to be in conflict with the role of the External Auditor.their role. In accordance with the requirements of the Exchange Act and guidance contained in Public Company Accounting Oversight Board (PCAOB) Release2004-001, certain specific activities are listed in our detailed policy that have been‘pre-approved’ by the RAC. The categories of‘pre-approved’ services are as follows:are: Audit and audit-related services – work that constitutes the agreed scope of the statutory audit and includes the statutory audits of BHP and its entities (including interim reviews). This category also includes work that is reasonably related to the performance of an audit or review and is a logical extension of the audit or review scope. The RAC monitors the audit services engagements and if necessary, approves any changes in terms and conditions resulting from changes in audit scope, Group structure or other relevant events. OtherAudit-related and other assurance services – work that is outside the required scope of the statutory audit but is consistent with the role of the external statutory auditor, is of an assurance or compliance nature, and is work the External Auditor must or is best placed to undertake.undertake and is permissible under the relevant applicable standard.
Other services – work of an advisory nature that does not compromiseActivities outside the independencescope of the External Auditor.
Activitiescategories above are 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,In addition, any engagement for other services with a value over US$100,000, even if listed as a‘pre-approved’ service, requires the approval of the RAC. All engagements for other services whether‘pre-approved’ or not and regardless of the dollar value involved are reported quarterly to the RAC.
While not specifically prohibited by BHP’s policy, any proposednon-audit engagement of the External Auditor relating to internal control (such as a review of internal controls or assistance with implementing the regulatory requirements, including those of the Exchange Act)controls) requires specific prior approval from the RAC. With the exception of the external audit of BHP’s Financial Statements, any engagement identified that contains an internal control-related element is not considered to bepre-approved. In addition, while the categories of‘pre-approved’ services include a list of certainpre-approved services, the use of the External Auditor to perform suchthese services will always be subject to our overriding governance practices as articulated in the policy. An exception can be made to the policy where it is in BHP’s interests and appropriate arrangements are put in place to ensure the integrity and independence of the External Auditor. Any such exception requires the specific prior approval of the RAC and must be reported to the Board. No exceptions were approved during the year ended 30 June 2019.
In addition, the RAC approved nodid not approve any services during the year ended 30 June 20192020 pursuant to paragraph (c)(7)(i)(C) of Rule2-01 of SEC RegulationS-X (provision of services other than audit). Fees paid to BHP’s External Auditor during FY2019FY2020 for audit and other services were US$14.516.7 million, of which 6475 per cent comprised audit fees 32 per cent related to legislative requirements (including the US Sarbanes-Oxley Act of 2002 as amended (SOX)) and 4, 11 per cent for audit-related fees, 2 per cent was for tax fees and 12 per cent for all other services.fees. Details of the fees paid are set out in note 35 ‘Auditor’s remuneration’ in section 5. Based on the review by the RAC, the Board is satisfied that the External Auditor is independentindependent. Business Risk and thatAudit Committees Business Risk and Audit Committees (Business RACs), covering each asset group, assist management in providing the incoming auditorinformation to enable the RAC to fulfil its responsibilities. They are management committees and perform an important monitoring function in the governance of BHP. Meetings take place annually as part of our financial governance framework. As management committees, the appropriate member of the ELT participates, but the committee is chaired by a member of the RAC. Each committee also independent.includes the Group Financial Controller, the Chief Risk Officer and the Group Assurance Officer. Significant operational and risk matters raised at Business RAC meetings are reported to the RAC by management. Risk function The Risk function’s role is to create and maintain the Group’s Risk Framework, and to support, verify, oversee and provide insight on the effective application of the Risk function is to own the Group’s end to end Risk Framework to create, maintain, govern, support and report on the effective implementation of the risk management framework for all risks, (including material andnon-material,including strategic, operational reporting, compliance and emerging risks).risks. The RAC assists the Board with the oversight of risk management, although the Board retains overall accountability for BHP’s risk profile. In addition, the Board specifically requires the CEO to implement a system of control for identifying and managing risk. The Directors, through the RAC, review the systems that have been established, for this purpose, regularly review the effectiveness of those systems and monitor that necessary actions have been taken to remedy any significant failings or weaknesses identified from that review. The RAC regularly reports to the Board to enable the Board to review our Risk Framework. Refinements were madeFramework at least annually to confirm that the Risk Framework continues to be sound and that BHP is operating with regard to the risk appetite set by the Board. A review was undertaken during FY2020, resulting in refinements to BHP’s Risk Framework during FY2019.Framework. For more information, refer to section 1.6.4.1.5.4. 159
Additional information about the effectiveness of risk management is set out as follows.
Internal Audit
The Internal Audit function is carried out by Internal Audit and Advisory (IAA). The role of IAA is to provide assurance as to whether risk management, internal control and governance processes are adequate and functioning. The Internal Audit function is independent of the External Auditor. The RAC evaluates and, if thought fit, approves the terms of reference of IAA, the staffing levels and its scope of work to ensure it is appropriate in light of the key risks we face. It also reviews and approves the annual internal audit plan and monitors and reviews the overall effectiveness of the internal audit activities.
The RAC also approves the appointment and dismissal of the Group Assurance Officer and assesses his or her performance, independence and objectivity. The position was held until September 2018 by Kirsty Wallace, when Rama Devarajan was appointed to the role. Both Ms Wallace and Mr Devarajan reported directly to the RAC. During the period, functional oversight of IAA was provided by the Chief External Affairs Officer.
Effectiveness of systems of internal control and risk management (RAC and Board)
In delegating authority to the CEO, the Board has established CEO limits set out in theBoardCorporate Governance Document. Limits on the CEO’s authority require the CEO to ensure there is a system of control in place for identifying and managing risk in BHP. Through the RAC, the Directors review the systems that have been established for this purpose and regularly review their effectiveness. These reviews include assessing whether processes continue to meet evolving external governance requirements.
The RAC oversees and reviews the internal controls and risk management systems. In undertaking this role, the RAC reviews the following:
procedures for identifying material risks and controlling their impact on the Group, and the operational effectiveness of these procedures;Statement
processes and systems for managing budgeting, forecasting and financial reporting;Governance update – Section 172 mapping
Implementing provisions from the Group’s strategyUK Code and standards in respect of insurance;the ASX Fourth Edition the Group’s standardsUpdated Director Deed of Indemnity Insurance and procedures in respect of reporting of reserves and resources;Access
the Group’s standards and procedures in respectUpdated Terms of the closure and rehabilitation provision;Appointment for Directors
standards and practices for detecting, reporting and preventing fraud, serious breaches of business conduct and whistle-blowing procedures supporting reporting to the Committee;Crisis management
procedures for ensuring compliance with relevant regulatory and legal requirements;
arrangements for the protectionUpdate of the Group’s information and data systems and othernon-physical assets;Committee Terms of Reference
operational effectiveness of the Business RAC structures;
overseeing the adequacy of the internal controls and allocation of responsibilities for monitoring internal financial controls.
For more information on our approach to risk management, refer to section 1.6.4. Section 1.6.4 includes a description of the most significant Group risks which could materially and adversely affect our business, financial performance, financial condition, prospects or reputation, leading to a loss of long-term shareholder and/or investor confidence. Section 1.6.4 also provides an explanation of how those risks are managed.
During FY2019, management presented an assessment of the material business risks facing BHP and the level of effectiveness of risk management over the material business risks. The reviews were overseen by the RAC, with findings and recommendations reported to the Board. In addition to considering key risks facing BHP, the Board received an assessment of the effectiveness of internal controls over key risks identified through the work of the Board committees.
The Board is satisfied with the effectiveness of risk management and internal control systems.
Management’s assessment of internal control over financial reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule13a-15(f) and Rule15d-15(f) under the Exchange Act).
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements and, even when determined to be effective, can only provide reasonable assurance with respect to financial statement preparation and presentation. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate.
Under the supervision and with the participation of our management, including our CEO and CFO, the effectiveness of BHP’s internal control over financial reporting has been evaluated based on the framework and criteria established in Internal Controls – Integrated Framework (2013), issued by the Committee of the Sponsoring Organizations of the Treadway Commission (COSO). Based on this evaluation, management has concluded that internal control over financial reporting was effective as at 30 June 2019. There were no material weaknesses in BHP’s internal controls over financial reporting identified by management as at 30 June 2019.
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BHP has engaged our independent registered public accounting firms, KPMG and KPMG LLP, to issue an audit report on our internal control over financial reporting for inclusion in the Financial Statements section of the Annual Report and the Annual Report on Form20-F as filed with the SEC.
There have been no changes in our internal control over financial reporting during FY2019 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
The CEO and CFO have certified to the Board that the Financial Statements for the full-year and half-year are founded on a sound system of risk management and internal control and the system is operating efficiently and effectively.
During FY2019, the RAC reviewed our compliance with the obligations imposed by SOX, including evaluating and documenting internal controls as required by section 404 of SOX.
Management’s assessment of disclosure controls and procedures
Management, with the participation of our CEO and CFO, performed an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as at 30 June 2019. Disclosure controls and procedures are designed to provide reasonable assurance that the material financial andnon-financial information required to be disclosed by BHP, including in the reports that it files or submits under the Exchange Act, is recorded, processed, summarised and reported on a timely basis and that such information is accumulated and communicated to BHP’s management, including our CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure. Based on the evaluation, management, including the CEO and CFO, has concluded that as at 30 June 2019, our disclosure controls and procedures are effective in providing that reasonable assurance.
There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives.
Further, in the design and evaluation of our disclosure controls and procedures, management was required to apply its judgement in evaluating the cost-benefit relationship of possible controls and procedures.
Committee assessment
Following the committee assessment, the RAC was satisfied that it had continued to meet its terms of reference in FY2019.
The terms of reference for the RAC are available online at bhp.com/governance.
2.13.2 Remuneration Committee Report
Role and focus
The role of the Remuneration Committee is to assist the Board in overseeing:
the remuneration policy and its specific application to the CEO and other Key Management Personnel (those who have authority and responsibility for planning, directing and controlling the activities of the Group directly or indirectly), and its general application to all employees;
the adoption of annual and longer-term incentive plans;
the determination of levels of reward for the CEO and approval of reward for other Key Management Personnel;
the annual evaluation of the performance of the CEO, by giving guidance to the Chairman;
the preparation of the Remuneration Report for inclusion in the Annual Report;
compliance with applicable legal and regulatory requirements associated with remuneration matters;
the review, at least annually, of remuneration by gender.
The Sustainability Committee and the Risk and Audit Committee assist the Remuneration Committee in determining appropriate HSEC and financial metrics, respectively, to be included in senior executive scorecards and in assessing performance against those measures.
The Remuneration Committee met five times during FY2019 and also considered some matters out of session. Information on meeting attendance by Committee members is included in the following table.
Certain items the Committee discussed are set out below. For full details of the Committee’s work on behalf of the Board, refer to the Remuneration Report in section 3.
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Remuneration Committee members during the year
| | | | | | | Name
| | Independent
| | Status
| | Attendance
| Carolyn Hewson (Chairman)
| | Yes | | Member for whole period | | 5/5 | Anita Frew
| | Yes | | Member for whole period | | 5/5 | Susan Kilsby
| | Yes | | Member from 1 April 2019 | | 2/2 | Wayne Murdy
| | Yes | | Member until 2 November 2018 | | 2/2 | Shriti Vadera
| | Yes | | Member for whole period | | 5/5 |
Committee activities in FY2019
Remuneration of the KMP and the Board
Remuneration policy review
Remuneration of CEO and other Key Management Personnel
KPIs, performance levels, award outcomes
Long-Term Incentive Plan sector peer group review
Other remuneration matters
Shareplus enrolment update
Director travel expenses policy
Corporate Governance code provisions
Proxy adviser consultation
Other
Induction, training and development program
Board committee procedures, including closed sessions
Committee assessment
Following the committee assessment, the Remuneration Committee was satisfied that it had continued to meet its terms of reference in FY2019. Subsequent to year end, updates were made to the terms of reference, to reflect the latest version of the UK Corporate Governance Code.
The terms of reference for the Remuneration Committee are available online at bhp.com/governance.
2.13.3 Nomination and Governance Committee Report
Role and focus
The role of the Nomination and Governance Committee is to assist the Board in ensuring that the Board comprises individuals who are best able to discharge the responsibilities of a Director, having regard to the highest standards of governance, the strategic direction of BHP and the diversity aspirations of the Board. It does so by focusing on:
the succession planning process for the Board and its committees, including the identification of suitable candidates for appointment to the Board taking into account the skills, experience, independence and knowledge required on the Board, as well as the attributes required of potential Directors;
the succession planning process for the Chairman;
the succession planning process for the CEO and periodic evaluation of the process;
Board and Director performance evaluation, including evaluation of Directors seekingre-election prior to their endorsement by the Board as set out in sections 2.7 and 2.11;
the provision of appropriate training and development opportunities for Directors;
the independence ofNon-executive Directors;
the time required fromNon-executive Directors;
the assessment and, if appropriate, authorisation of situations of actual and potential conflict notified by Directors;
BHP’s corporate governance practices.
For details on the Board succession planning process, refer to section 2.8.
The Nomination and Governance Committee met six times during FY2019. Information on meeting attendance by Committee members is included in the following table. In addition to the regular business of the year, the Committee considered the appointments of Ian Cockerill and Susan Kilsby asNon-executive Directors and the retirement of Wayne Murdy. The Committee also oversaw several other targeted searches forNon-executive Director candidates in FY2019 which are continuing.
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Board changes
Ian Cockerill and Susan Kilsby joined the Board on 1 April 2019. As set out in the 2018 Annual Report, Wayne Murdy retired with effect from 2 November 2018. Our search for a newNon-executive Director with mining experience commenced in FY2017 and the appointment of Ian Cockerill satisfies that requirement as he has extensive mining experience, including in chief executive, operational, strategic and technical roles. Susan Kilsby has extensive experience in finance and strategy, having held several roles in global investment banking. Both new Directors also bring extensiveNon-executive Director experience. Ian Cockerill was appointed to the Risk and Audit Committee and the Sustainability Committee, and Susan Kilsby was appointed to the Remuneration Committee.
Carolyn Hewson will retire from the Board after 2019 BHP Group Limited Annual General Meeting.
Board policyPolicy on inclusion and diversity
Our Charter and theOur Requirementsfor Human Resources standard guide management on all aspects of human resource management, including inclusion and diversity. Underpinning theOur Requirements standards and supporting the achievement of diversity across BHP are principles and measurable objectives that define our approach to diversity and our focus on creating an inclusive work environment.
The Board and management believe that many facets of diversity areis required in order to meet the corporateour purpose, as set outwhich is outlined in section 2.8.1.6.1. Diversity is a core consideration inkey to ensuring the Board and its committeesCommittees have the right blend of perspectives so that the Board oversees BHP effectively for shareholders. The Board believes that critical mass In CY2019, we updated the Nomination and Governance Committee Terms of Reference to explicitly refer to age, social and ethnic backgrounds and personal strengths. This is important for diversity andin addition to diversity of all types remains a priority as the Board continues to be refreshedgender, nationality and renewed, as set out in section 2.8. We also have an aspirational goalgeography.
Our aspiration is to achieve gender balance on our Board, among our senior executives and across our workforce –by CY2025. We therefore welcome the ongoing Hampton-Alexander initiative for all FTSE 100 Boards to have at least 33 per cent female representation by the end of CY2020, and the objective of having at least 30 per cent of Directors of each gender in accordance with the ASX Fourth Edition. Our aspiration includes a fixed target of maintaining the level of Board diversity above 33 per cent, and we will be aligned with this requirement from 1 October 2020. We therefore satisfy the guidance in both the ASX Fourth Edition and also the UK Code. In addition, as at 30 June 2020, gender diversity among senior management (defined as the ELT plus Company Secretary and their direct reports) was 31 per cent. We also welcome the final Parker Report into ethnic diversity of UK boards and continue to seek additional ethnic diversity on our Board, –and throughout BHP. On our Board we meet the target of having ‘at least one Director of colour by FY2025. We believe this will help create a more diverse, inclusive, empowered and connected workforce, underpinned2021’ as recommended byOur Charter values. the Parker Review. Part of the Board’s role iscontinues to be to consider and approve BHP’s measurable objectives for workforce diversity each financial year and to oversee our progress in achieving those objectives. BHP’s progress will continue to be disclosed in the Annual Report, along with the proportion of women in our workforce, in senior management positions and on the Board. For more information, on inclusion and diversity at BHP, including our progress against our FY2019FY2020 measurable objectives and our employee profile more generally, refer to sections 1.9.11.6.1 and 1.9.2.1.6.2. External recruitment specialistsRenewal and re-election
The Board adopted a policy in 2011, consistent with the UK Code, under which all Directors must seek re-election by shareholders annually if they wish to remain on the Board. The Board believes annual re-election promotes and supports accountability to shareholders. When considering new appointments, the Board’s Nomination and Governance Committee retainedtakes the servicesfollowing approach: | | | | Step 1: Rigorous approach | | BHP adopts a structured and rigorous approach to Board succession planning and oversees the development of a diverse pipeline. The Nomination and Governance Committee considers Board diversity, size, tenure and the skills, experience and attributes needed to effectively govern and manage risk within BHP. | | | | Step 2: Continuous approach | | This process is continuous and for Non-executive Directors planning is based on a nine-year tenure as a guide, allowing the Board to ensure the right balance on the Board between experience and fresh perspectives. It also ensures the Board continues to be fit-for-purpose and evolves to take account of the changing external environment and BHP’s circumstances. It also prepares pipelines for Nomination and Governance Committee membership, considering relevant skills and requirements. | | | | Step 3: Role description | | When considering new appointments to the Board, the Nomination and Governance Committee oversees the preparation of a role description, which includes the criteria and attributes described in the Board Governance Document and section 2.7. | | | | Step 4: Selection and appointment of search firm | | The role description is provided to an external search firm retained to conduct a global search based on the Board’s criteria. | | | | Step 5: Board interviews | | The shortlisted candidates are considered by the Nomination and Governance Committee and interviewed by the Chair initially. Meetings for selected candidates are held with each Board member ahead of the Board deciding whether to appoint the candidate. |
| | | | Step 6: Committee recommendation | | The Nomination and Governance Committee recommends the Board appoint the preferred candidate. | | | | Step 7: Background checks | | The Board, with the assistance of external consultants, conducts appropriate background and reference checks. | | | | Step 8: Letter 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 by the Group. The letter of appointment defines the role of Directors, including the expectations in terms of independence, participation, time commitment and continuous improvement. Written agreements are in place for all Non-executive Directors. |
A copy of external recruitment specialists. Heidrickthe terms of appointment for Non-executive Directors is available atbhp.com/governance. Senior management succession A robust senior management succession process is also conducted to ensure pipeline stability for critical roles. A talent deep dive is conducted by the Board at least once a year to evaluate these pipelines. Senior management succession is viewed from a five-year perspective that considers the readiness of successors across time horizons, contexts and Struggles, Russell Reynoldsfuture capability demands. Select Board members are involved in the interview process for executive-level appointments one level below the CEO, and MWM Consulting assistedoccasionally for roles two levels below the CEO. BHP has a written agreement with each ELT member setting out the terms of their appointment. Further information about CEO and ELT succession is set out in sections 2.1 and 2.5. Director induction, training and development Upon appointment, each new Non-executive Director candidate searches throughoutundertakes an induction program tailored to their needs. A copy of an indicative induction program is available at bhp.com/governance. Following the year. induction program, Non-executive Directors participate in continuous improvement activities (training and development program), which are overseen by the Nomination and Governance Committee. The training and development program covers matters of a business nature, including environmental, social and governance matters and provides updates on BHP’s assets, commodities, geographies and markets. Programs are designed and periodically reviewed to maximise effectiveness, and the results of Director performance evaluations are incorporated into these programs. Training and development in FY2020 | | | | | Area | | Purpose | | FY2020 activity | Briefings and development sessions | | Provide each Director with a deeper understanding of the activities, environment, key issues and direction of the assets, along with HSEC and public policy considerations. | | • Strategy day with the ELT • Climate change sessions • Briefing on ESG issues from senior investor representative • WAIO deep dive | | | | Site visits | | Briefings on the assets, operations and other relevant issues and meetings with key personnel. During FY2020, several site visits were cancelled due to COVID-19 restrictions. | | • BMA, Metallurgical Coal, Australia (Group Chair only) • Jansen, Potash, Canada • Nickel West, Nickel, Australia • NSWEC, Thermal Coal, Australia • Olympic Dam, Copper, Australia • Santiago office and Escondida, Copper, Chile (Group Chair only) |
These sessions and site visits also allow an opportunity to discuss in detail the risk environment and the potential for impacts on the achievement of our purpose and strategy. For information on the management of principal risks, refer to section 1.5.4. Throughout the year, the Chair discusses development areas with each Director. Board Committees review and agree their needs for more briefings. The benefit of this approach is that induction and learning opportunities can be tailored to Directors’ committee memberships, as well as the Board’s specific areas of focus. This approach also ensures a coordinated process on succession planning, Board renewal, training and development and committee composition. These processes are all relevant to the Nomination and Governance Committee’s role in identifying appropriate Non-executive Director candidates. Each Board committee provides a standing invitation for any Non-executive Director to attend committee meetings (rather than just limiting attendance to committee members). Committee agendas and papers are provided to all Directors to ensure they are aware of matters to be considered. Independence The Board is committed to ensuring a majority of Directors are independent. The Board considers that all of the current Non-executive Directors, including the Chair, are independent. Process to determine independence The Board has adopted a policy that it uses to determine the independence of its Directors. This determination is carried out upon appointment, annually and at any other time where the change in circumstances of a Director warrant reconsideration. A copy of the policy on Independence of Directors is available at bhp.com/governance. Tenure At the end of FY2020, Malcolm Broomhead, who was appointed in March 2010, Shriti Vadera, appointed in January 2011 and Lindsay Maxsted, appointed in March 2011, had each served on the Board for more than nine years. The Board does not believe their tenure interferes with their ability to act in the best interests of BHP. The Board believes they have retained independence of character and judgement and have not formed associations with management (or others) that might compromise their ability to exercise independent judgement or act in the best interests of the Group. The Board was comfortable extending Mr Broomhead’s tenure for another year from the FY2020 AGMs in order to provide continued access to his corporate memory and his extensive experience in the mining sector. Mr Maxsted will retire on 4 September 2020, having completed the handover of the Risk and Audit Committee Chair position to Terry Bowen, and seen through the Group’s FY2020 financial reporting schedule. As previously disclosed, Ms Vadera is not standing for re-election at the 2020 AGMs. Relationships and associations Lindsay Maxsted was the CEO of KPMG in Australia from 2001 until 2007. The Board believes this prior relationship with KPMG (BHP’s former external auditor) did not materially interfere with Mr Maxsted’s exercise of objective, unfettered or independent judgement, or his ability to act in the best interests of BHP while KPMG was the Group’s auditor. The Board has determined, consistent with its policy on the independence of Directors, that Mr Maxsted is independent. Some of the Directors hold or have previously held positions in companies that BHP has commercial relationships with. Those positions and companies are listed in the Director profiles in section 2.2.1. The Board has assessed the relationships between the Group and the companies in which our Directors hold or held positions, and has concluded that the relationships do not interfere with the Directors’ exercise of objective, unfettered or independent judgement or their ability to act in the best interests of BHP. For example, Malcolm Broomhead and Ian Cockerill were Directors of Orica Limited (a company BHP has commercial dealings with) during FY2020. Orica provides commercial explosives, blasting systems and mineral processing chemicals and services to the mining and resources industry, among others. Mr Cockerill was appointed to the Orica Board in 2010 (prior to his appointment to the BHP Board) and Mr Broomhead was appointed to the Orica Board in 2016 (after his appointment to the BHP Board). At the time of Mr Broomhead’s appointment to the Board of Orica, and at the time of Mr Cockerill’s appointment to the Board of BHP, the BHP Board assessed the relationship between BHP and Orica and determined (and remains satisfied) that Mr Broomhead and Mr Cockerill were, during FY2020, and Mr Broomhead remains, able to apply objective, unfettered and independent judgement and to act in the best interests of BHP. Mr Cockerill retired from the Board of Orica in August 2019. Transactions during FY2020 that amounted to related party transactions with Directors or Director-related entities under International Financial Reporting Standards (IFRS) are outlined in note 32 ‘Related party transactions’ in section 5. Conflicts of interest BHP Group Plc’s Articles of Association allow the Directors to authorise conflicts and potential conflicts where appropriate. A procedure operates to ensure the disclosure of conflicts and for the consideration and, if appropriate, the authorisation of those conflicts by non-conflicted Directors. The Nomination and Governance Committee supports the Board in this process by reviewing requests from Directors for authorisation of situations of actual or potential conflict and making recommendations to the Board. It also regularly reviews any situations of actual or potential conflict that have previously been authorised by the Board and makes recommendations on whether the authorisation remains appropriate. In addition, in accordance with Australian law, if a situation arises for consideration where a Director has a material personal interest, the affected Director takes no part in decision-making unless authorised by non-interested Directors. Provisions for Directors’ interests are set out in the Constitution of BHP Group Limited. The terms of reference for the Nomination and Governance Committee are available at bhp.com/governance. 2.10 Risk and Audit Committee Report Role and focus The RAC assists the Board in monitoring the decisions and actions of the CEO and the Group and gaining assurance that progress is being made towards achieving our purpose within the limits imposed by the Board, as described in the Board Governance Document. The RAC oversees: the integrity of BHP’s Financial Statements and Annual Report the appointment, performance and remuneration of the External Auditor and integrity of the external audit process the effectiveness of the systems of risk management, including financial and non-financial risk, and internal control the plans, performance, objectivity and leadership of the Internal Audit function and the integrity of the internal audit process capital management (capital structure and funding, and capital management planning and initiatives) and other matters For more information on our approach to risk management, refer to section 1.5.4. The RAC met 11 times during FY2020. For information on Committee members’ qualifications, which include competence relevant to the mining sector, refer to section 2.2.1. The terms of reference for the RAC were updated in FY2020 to align with revisions made to the UK Code, the ASX Fourth Edition, and the revised Remuneration Committee Terms of Reference that were approved by the Board in August 2019. Risk and Audit Committee members during the year | | | | | | | Name | | Independent | | Status | | Attendance | Ken MacKenzie (Chairman)
| | Chairman of the Board | | Member for whole period | | 6/6 | Malcolm BroomheadLindsay Maxsted (Chair until 1 May 2020)
| | Yes | | Member for whole period | | 6/611/11 | Carolyn HewsonTerry Bowen (Chair from 1 May 2020)(1)
| | Yes | | Member for whole period | | 6/611/11 | Shriti VaderaIan Cockerill(2)
| | Yes | | Member for whole period | | 6/610/11 | Anita Frew | | Yes | | Member for whole period | | 11/11 |
| (1) | Mr Bowen is the Committee’s financial expert nominated by the Board. |
| (2) | Mr Cockerill was unable to attend the RAC meeting scheduled for 15 August 2019 due to the need to fly to London at that time in order to attend another board meeting in London the following day. As this was his transitional year, there were some inevitable clashes with pre-existing meetings, and this was one that could not be resolved. Since then, all meetings have been rescheduled where necessary to avoid clashes. Mr Cockerill provided detailed comments to the Chair of the Committee ahead of the meeting. |
Committee activities in FY2019FY2020 Succession planning processesIntegrity of Financial Statements and funding matters
Implementation of the new skillsAccounting matters for consideration, materiality limits, half-year and experience matrixfull-year results
Identification of suitableNon-executive Director candidatesCommentary and explanatory notes to the Financial Statements
BoardClosure and committee successionrehabilitation provision
Partnering with new search firms regarding candidate searches
Evaluation and training
Board evaluation approach for FY2019Sarbanes-Oxley Act compliance
Board and Director performance evaluationFinancial governance procedures
Provision of appropriate trainingReserves and development opportunitiesresources
InductionFY2020 portfolio valuation review
Weighted average cost of capital review Inter-company loans and group guarantees update External auditor and integrity of the audit process External audit letters of engagement, external audit fees and non-audit services Management and external auditor closed sessions Audit plan, review of performance and quality of service Ernst & Young (EY) independence and non-audit services Effectiveness of systems of internal control and risk management Approach to emerging risks Practical application of the new Risk Framework Updates to and review of the Risk Appetite Statement and confirmation that the Group is operating with due regard to that appetite Monitoring performance against risk appetite through key risk indicators Approval of the internal audit plan, plan principles and regular reports on progress against the internal audit plan Cultural assessments in internal audits Matters of note arising from internal audits Internal assessments of performance of Internal Audit and Advisory 163
Corporate governance practices
Independence ofNon-executive Directorsand Group Assurance Officer and Chief Risk Officer closed sessions
Authorisation of situations of actual or potential conflictEthics and compliance reports, grievance and investigation processes
Insurance update and Directors’ and Officers’ insurance update Material disputes updates Data protection and privacy risk update Updates on control framework and risks regarding COVID-19 Other governance matters Samarco dam failure provision Tailings storage facility failure material risk Escondida, Cerro Colorado, BMA guarantees Revolving credit facility Sexual harassment material risk Update of the Committee Terms of Reference Update of the Internal Audit and Advisory Terms of Reference Update of the Provision of Audit and Other Services Policy by the External Auditor Fair, balanced and understandable The RAC confirmed its view to the Board that BHP’s Annual Report 2020 taken as a whole is fair, balanced and understandable. For the Board’s statement on the Annual Report, refer to the Directors’ Report in section 4. In making this assessment, the RAC considers the substantial governance framework that is in place for the Annual Report. This includes management representation letters, certifications, RAC oversight of the Financial Statements and other financial governance procedures focused on the financial section of the Annual Report, together with verification procedures for the narrative reporting section of the Annual Report. Integrity of Financial Statements The RAC assists the Board in assuring the integrity of the Financial Statements. The RAC evaluates and makes recommendations to the Board about the appropriateness of accounting policies and practices, areas of judgement, compliance with accounting standards, stock exchange and legal requirements and the results of the external audit. It reviews the half-yearly and annual Financial Statements and makes recommendations on specific actions or decisions (including formal adoption of the Financial Statements and reports) the Board should consider in order to maintain the integrity of the Financial Statements. CEO and CFO assurance For the FY2020 full year and half year, the CEO and CFO have certified that BHP’s financial records have been properly maintained and the FY2020 Financial Statements present a true and fair view, in all material respects, of our financial condition and operating results and are in accordance with accounting standards and applicable regulatory requirements. The CEO and CFO have also certified to the Board that the Financial Statements for the full year and half year are founded on a sound system of risk management and internal control and the system is operating efficiently and effectively. Significant issues In addition to the Group’s key judgements and estimates disclosed throughout the FY2020 Financial Statements, the Committee considered these significant issues relating to financial reporting: Carrying value of long-term assets The assessment of carrying values of long-term assets uses a number of significant judgements and estimates. The Committee examined management’s review of impairment triggers and potential impairment charges or reversals for the Group’s cash generating units. Specific consideration was given to the most recent short, medium and long-term price forecasts (including the significant petroleum price volatility observed to date in CY2020), expected production volumes and updated development plans, operating and capital costs, the impacts of climate change and COVID-19, discount rates and other market indicators of fair value. The Committee concurred with management’s conclusion on significant impairments recognised, including the impairment of Cerro Colorado,and that no impairment reversals were appropriate. Conclusions from these reviews are reflected in note 11 ‘Property, plant and equipment’ in section 5. Samarco dam failure On 5 November 2015, the Samarco Mineração S.A (Samarco) iron ore operation in Minas Gerais, Brazil experienced a tailings dam failure that resulted in a release of mine tailings, flooding the community of Bento Rodrigues and impacting other communities downstream. Samarco is jointly owned by BHP Brasil and Vale S.A. BHP Brasil’s 50 per cent interest in Samarco is accounted for as an equity accounted joint venture investment. Samarco’s provisions and contingent liabilities The Committee reviewed updates to matters relating to the Samarco dam failure, including developments on existing and new legal proceedings, and changes to the estimated costs of remediation and compensation. BHP Brasil’s loss from Equity Accounted Investments includes impairments arising from working capital funding provided to Samarco and revisions to the Samarco dam failure and Germano decommissioning provisions during the year ended 30 June 2020. Potential direct financial impacts to BHP Brasil The Committee considered: changes to the estimated cost of remediation and compensatory programs under the Framework Agreement developments in existing and new legal proceedings, on the provision related to the Samarco dam failure and related disclosures the provisions recognised and contingent liabilities disclosed by BHP Brasil or other BHP entities Based on currently available information, the Committee concluded that the accounting for the equity investment in Samarco, the provision recognised by BHP Brasil (including the decommissioning of the Germano tailings dam complex) and contingent liabilities disclosed in the Group’s Financial Statements are appropriate. For more information, refer to note 4 ‘Significant events – Samarco dam failure’ in section 5. Closure and rehabilitation provisions Determining the closure and rehabilitation provision is a complex area requiring significant judgement and estimates, particularly given the timing and quantum of future costs, the unique nature of each site and the long timescales involved. The Committee considered the various changes in estimates for closure and rehabilitation provisions recognised during the year, including a reduction to the discount rates applied. Specific consideration was given to the results of the most recently completed survey data and characterisation activity, changes to current cost estimates and the appropriate inclusion of contingency in cost estimates to allow for both known and residual risks. The Committee concluded that the assumptions and inputs for closure and rehabilitation cost estimates were reasonable and the related provisions recorded were appropriate. For more information, refer to note 14 ‘Closure and rehabilitation provisions’ in section 5. Impact of new accounting standards The Group adopted IFRS 16/AASB 16 ‘Leases’ with effect from 1 July 2019. The Committee reviewed management’s analysis of the accounting outcomes and disclosure requirements for the Group, including the treatment of leases within the Group’s net debt definitions. In addition, the Committee: considered and approved the early adoption, for FY2020, of amendments to accounting standards relating to interest rate benchmark reforms noted that the Group is in the process of evaluating the implications of the IFRS Interpretations Committee agenda decision ‘Income Taxes – Multiple tax consequences of recovering an asset’ and approved that any changes to the Group’s accounting policy for income tax will be implemented from 1 July 2020 on a retrospective basis For more information, refer to note 38 ‘New and amended accounting standards and interpretations’ in section 5. Impact of COVID-19 The Committee considered the impacts of the global COVID-19 pandemic on the Group’s FY2020 financial reporting, including: the recognition and disclosure of costs incurred by the Group that are directly attributable to COVID-19 the impact on key judgements and estimates, particularly those relating to impairment indicator assessments The Committee concluded that the management’s judgements and the disclosure of the COVID-19 directly attributable costs were appropriate. External Auditor The RAC manages the relationship with the External Auditor on behalf of the Board. It considers the reappointment of the External Auditor each year, as well as remuneration and other terms of engagement and makes a recommendation to the Board. The lead audit engagement partners for EY in Australia and the United Kingdom (together, ‘EY’) were appointed for commencement from 1 July 2019. Audit tender and transition BHP confirms during FY2020 it was in compliance with the provisions of The Statutory Audit Services for Large Companies Market Investigation (Mandatory Use of Competitive Tender Processes and Audit Committee Responsibilities) Order 2014. Consistent with the UK and EU requirements in regard to audit firm tender and rotation, the Committee conducted an audit tender process during FY2017 to appoint a new external auditor. In August 2017, consistent with the Committee’s recommendation, the Board announced it had selected EY to be the Group’s auditor from the financial year beginning 1 July 2019, subject to shareholder approval, which was received at the AGMs in 2019. During FY2019, the RAC received updates from EY on the audit transition and preparation for commencement of its audit, including EY’s process in meeting all relevant independence criteria, audit plan for commencement from 1 July 2019 and reports on any non-audit services. KPMG was the auditor during FY2019 and FY2018, and EY was the auditor during FY2020. Evaluation of External Auditor and external audit process The RAC evaluates the objectivity and independence of the External Auditor and the quality and effectiveness of the external audit arrangements. As part of this evaluation, the RAC considers specified criteria, including delivering value to shareholders and BHP, and also assesses the adequacy of the external audit process with emphasis on quality, effectiveness and performance. It does so through a range of means, including: the Committee considers the External Audit Plan, in particular to gain assurance that it is tailored to reflect changes in circumstances from the prior year throughout the year, the Committee meets with the audit partners, particularly the lead Australian and UK audit engagement partners, without management present following the completion of the audit, the Committee considers the quality of the External Auditor’s performance drawing on survey results. The survey is based on a two-way feedback model where the BHP and EY teams assess each other against a range of criteria. The criteria against which the BHP team evaluates EY’s performance include ethics and integrity, insight, service quality, communication, reporting and responsiveness reviewing the terms of engagement of the External Auditor discussing with the audit engagement partners the skills and experience of the broader audit team reviewing audit quality inspection reports on EY published by the UK Financial Reporting Council in considering the effectiveness of the audit In addition, the RAC reviews the integrity, independence and objectivity of the External Auditor and assesses whether there is any element of the relationship that impairs or appears to impair the External Auditor’s judgement or independence. The External Auditor also certifies its independence to the RAC. Non-audit services Although the External Auditor does provide some non-audit services, the objectivity and independence of the External Auditor are safeguarded through restrictions on the provision of these services with some services prohibited from being undertaken, including services where the External Auditor: may be required to audit its own work participates in activities that would normally be undertaken by management is remunerated through a ‘success fee’ structure acts in an advocacy role for BHP The RAC has adopted a policy entitled ‘Provision of Audit and Other Services by the External Auditor’ covering the RAC’s pre-approval policies and procedures to maintain the independence of the External Auditor. This policy was reviewed and updated in FY2020, including to reflect only those services permitted to be provided by the External Auditor in the revised Ethical Standard published by the UK Financial Reporting Council. Our policy on Provision of Audit and Other Services by the External Auditor is available at bhp.com/governance. In addition to audit services, the External Auditor is permitted to provide other (non-audit) services that are not and are not perceived to be in conflict with their role. In accordance with the requirements of the Exchange Act and guidance contained in Public Company Accounting Oversight Board (PCAOB) Release 2004-001, certain specific activities are listed in our policy that have been ‘pre-approved’ by the RAC. The categories of ‘pre-approved’ services are: Audit services – work that constitutes the agreed scope of the statutory audit and includes the statutory audits of BHP and its entities (including interim reviews). This category also includes work that is reasonably related to the performance of an audit or review and is a logical extension of the audit or review scope. The RAC monitors the audit services engagements and if necessary, approves any changes in terms and conditions resulting from changes in audit scope, Group structure or other relevant events. Audit-related and other assurance services – work that is outside the scope of the statutory audit but is consistent with the role of the external statutory auditor, is of an assurance or compliance nature, is work the External Auditor must or is best placed to undertake and is permissible under the relevant applicable standard. Activities outside the scope of the categories above are not ‘pre-approved’ and must be approved by the RAC prior to engagement, regardless of the dollar value involved. In addition, any engagement for other services with a value over US$100,000, even if listed as a ‘pre-approved’ service, requires the approval of the RAC. All engagements for other services whether ‘pre-approved’ or not and regardless of the dollar value involved are reported quarterly to the RAC. While not prohibited by BHP’s policy, any proposed non-audit engagement of the External Auditor relating to internal control (such as a review of internal controls) requires specific prior approval from the RAC. With the exception of the external audit of BHP’s Financial Statements, any engagement identified that contains an internal control-related element is not considered to be pre-approved. In addition, while the categories of ‘pre-approved’ services include a list of certain pre-approved services, the use of the External Auditor to perform these services will always be subject to our overriding governance practices as articulated in the policy. In addition, the RAC did not approve any services during the year ended 30 June 2020 pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of SEC Regulation S-X (provision of services other than audit). Fees paid to BHP’s External Auditor during FY2020 for audit and other services were US$16.7 million, of which 75 per cent comprised audit fees (including the US Sarbanes-Oxley Act of 2002 as amended (SOX)), 11 per cent for audit-related fees, 2 per cent was for tax fees and 12 per cent for all other fees. Details of the fees paid are set out in note 35 ‘Auditor’s remuneration’ in section 5. Based on the review by the RAC, the Board is satisfied that the External Auditor is independent. Business Risk and Audit Committees Business Risk and Audit Committees (Business RACs), covering each asset group, assist management in providing the information to enable the RAC to fulfil its responsibilities. They are management committees and perform an important monitoring function in the governance of BHP. Meetings take place annually as part of our financial governance framework. As management committees, the appropriate member of the ELT participates, but the committee is chaired by a member of the RAC. Each committee also includes the Group Financial Controller, the Chief Risk Officer and the Group Assurance Officer. Significant operational and risk matters raised at Business RAC meetings are reported to the RAC by management. Risk function The Risk function’s role is to create and maintain the Group’s Risk Framework, and to support, verify, oversee and provide insight on the effective application of the Risk Framework for all risks, including strategic, operational and emerging risks. The RAC assists the Board with the oversight of risk management, although the Board retains accountability for BHP’s risk profile. In addition, the Board requires the CEO to implement a system of control for identifying and managing risk. The Directors, through the RAC, review the systems that have been established, regularly review the effectiveness of those systems and monitor that necessary actions have been taken to remedy any significant failings or weaknesses identified from that review. The RAC regularly reports to the Board to enable the Board to review our Risk Framework at least annually to confirm that the Risk Framework continues to be sound and that BHP is operating with regard to the risk appetite set by the Board. A review was undertaken during FY2020, resulting in refinements to BHP’s Risk Framework. For more information, refer to section 1.5.4. Corporate Governance Statement Update on UK governance reformsGovernance update – Section 172 mapping
Implementing newprovisions from the UK Corporate Governance Code provisionsand the ASX Fourth Edition Other governance matters
Updated Director Deed of Indemnity Insurance and Access Updated Terms of Appointment for Directors Update of the Committee Terms of Reference Policy on inclusion and diversity The Board and management advisory committees framework Committee assessment
Followingbelieve diversity is required to meet our purpose, which is outlined in section 1.6.1. Diversity is key to ensuring the committee assessment,Board and its Committees have the right blend of perspectives so that the Board oversees BHP effectively for shareholders. In CY2019, we updated the Nomination and Governance Committee Terms of Reference to explicitly refer to age, social and ethnic backgrounds and personal strengths. This is in addition to diversity of gender, nationality and geography.
Our aspiration is to achieve gender balance on our Board, among our senior executives and across our workforce by CY2025. We therefore welcome the ongoing Hampton-Alexander initiative for all FTSE 100 Boards to have at least 33 per cent female representation by the end of CY2020, and the objective of having at least 30 per cent of Directors of each gender in accordance with the ASX Fourth Edition. Our aspiration includes a fixed target of maintaining the level of Board diversity above 33 per cent, and we will be aligned with this requirement from 1 October 2020. We therefore satisfy the guidance in both the ASX Fourth Edition and also the UK Code. In addition, as at 30 June 2020, gender diversity among senior management (defined as the ELT plus Company Secretary and their direct reports) was satisfied31 per cent. We also welcome the final Parker Report into ethnic diversity of UK boards and continue to seek additional ethnic diversity on our Board, and throughout BHP. On our Board we meet the target of having ‘at least one Director of colour by 2021’ as recommended by the Parker Review. Part of the Board’s role continues to be to consider and approve BHP’s measurable objectives for workforce diversity each financial year and to oversee our progress in achieving those objectives. For more information, including our progress against our FY2020 measurable objectives and our employee profile more generally, refer to sections 1.6.1 and 1.6.2. Renewal and re-election The Board adopted a policy in 2011, consistent with the UK Code, under which all Directors must seek re-election by shareholders annually if they wish to remain on the Board. The Board believes annual re-election promotes and supports accountability to shareholders. When considering new appointments, the Board’s Nomination and Governance Committee takes the following approach: | | | | Step 1: Rigorous approach | | BHP adopts a structured and rigorous approach to Board succession planning and oversees the development of a diverse pipeline. The Nomination and Governance Committee considers Board diversity, size, tenure and the skills, experience and attributes needed to effectively govern and manage risk within BHP. | | | | Step 2: Continuous approach | | This process is continuous and for Non-executive Directors planning is based on a nine-year tenure as a guide, allowing the Board to ensure the right balance on the Board between experience and fresh perspectives. It also ensures the Board continues to be fit-for-purpose and evolves to take account of the changing external environment and BHP’s circumstances. It also prepares pipelines for Nomination and Governance Committee membership, considering relevant skills and requirements. | | | | Step 3: Role description | | When considering new appointments to the Board, the Nomination and Governance Committee oversees the preparation of a role description, which includes the criteria and attributes described in the Board Governance Document and section 2.7. | | | | Step 4: Selection and appointment of search firm | | The role description is provided to an external search firm retained to conduct a global search based on the Board’s criteria. | | | | Step 5: Board interviews | | The shortlisted candidates are considered by the Nomination and Governance Committee and interviewed by the Chair initially. Meetings for selected candidates are held with each Board member ahead of the Board deciding whether to appoint the candidate. |
| | | | Step 6: Committee recommendation | | The Nomination and Governance Committee recommends the Board appoint the preferred candidate. | | | | Step 7: Background checks | | The Board, with the assistance of external consultants, conducts appropriate background and reference checks. | | | | Step 8: Letter 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 by the Group. The letter of appointment defines the role of Directors, including the expectations in terms of independence, participation, time commitment and continuous improvement. Written agreements are in place for all Non-executive Directors. |
A copy of the terms of appointment for Non-executive Directors is available atbhp.com/governance. Senior management succession A robust senior management succession process is also conducted to ensure pipeline stability for critical roles. A talent deep dive is conducted by the Board at least once a year to evaluate these pipelines. Senior management succession is viewed from a five-year perspective that considers the readiness of successors across time horizons, contexts and future capability demands. Select Board members are involved in the interview process for executive-level appointments one level below the CEO, and occasionally for roles two levels below the CEO. BHP has a written agreement with each ELT member setting out the terms of their appointment. Further information about CEO and ELT succession is set out in sections 2.1 and 2.5. Director induction, training and development Upon appointment, each new Non-executive Director undertakes an induction program tailored to their needs. A copy of an indicative induction program is available at bhp.com/governance. Following the induction program, Non-executive Directors participate in continuous improvement activities (training and development program), which are overseen by the Nomination and Governance Committee. The training and development program covers matters of a business nature, including environmental, social and governance matters and provides updates on BHP’s assets, commodities, geographies and markets. Programs are designed and periodically reviewed to maximise effectiveness, and the results of Director performance evaluations are incorporated into these programs. Training and development in FY2020 | | | | | Area | | Purpose | | FY2020 activity | Briefings and development sessions | | Provide each Director with a deeper understanding of the activities, environment, key issues and direction of the assets, along with HSEC and public policy considerations. | | • Strategy day with the ELT • Climate change sessions • Briefing on ESG issues from senior investor representative • WAIO deep dive | | | | Site visits | | Briefings on the assets, operations and other relevant issues and meetings with key personnel. During FY2020, several site visits were cancelled due to COVID-19 restrictions. | | • BMA, Metallurgical Coal, Australia (Group Chair only) • Jansen, Potash, Canada • Nickel West, Nickel, Australia • NSWEC, Thermal Coal, Australia • Olympic Dam, Copper, Australia • Santiago office and Escondida, Copper, Chile (Group Chair only) |
These sessions and site visits also allow an opportunity to discuss in detail the risk environment and the potential for impacts on the achievement of our purpose and strategy. For information on the management of principal risks, refer to section 1.5.4. Throughout the year, the Chair discusses development areas with each Director. Board Committees review and agree their needs for more briefings. The benefit of this approach is that induction and learning opportunities can be tailored to Directors’ committee memberships, as well as the Board’s specific areas of focus. This approach also ensures a coordinated process on succession planning, Board renewal, training and development and committee composition. These processes are all relevant to the Nomination and Governance Committee’s role in identifying appropriate Non-executive Director candidates. Each Board committee provides a standing invitation for any Non-executive Director to attend committee meetings (rather than just limiting attendance to committee members). Committee agendas and papers are provided to all Directors to ensure they are aware of matters to be considered. Independence The Board is committed to ensuring a majority of Directors are independent. The Board considers that all of the current Non-executive Directors, including the Chair, are independent. Process to determine independence The Board has adopted a policy that it uses to determine the independence of its Directors. This determination is carried out upon appointment, annually and at any other time where the change in circumstances of a Director warrant reconsideration. A copy of the policy on Independence of Directors is available at bhp.com/governance. Tenure At the end of FY2020, Malcolm Broomhead, who was appointed in March 2010, Shriti Vadera, appointed in January 2011 and Lindsay Maxsted, appointed in March 2011, had each served on the Board for more than nine years. The Board does not believe their tenure interferes with their ability to act in the best interests of BHP. The Board believes they have retained independence of character and judgement and have not formed associations with management (or others) that might compromise their ability to exercise independent judgement or act in the best interests of the Group. The Board was comfortable extending Mr Broomhead’s tenure for another year from the FY2020 AGMs in order to provide continued access to meethis corporate memory and his extensive experience in the mining sector. Mr Maxsted will retire on 4 September 2020, having completed the handover of the Risk and Audit Committee Chair position to Terry Bowen, and seen through the Group’s FY2020 financial reporting schedule. As previously disclosed, Ms Vadera is not standing for re-election at the 2020 AGMs. Relationships and associations Lindsay Maxsted was the CEO of KPMG in Australia from 2001 until 2007. The Board believes this prior relationship with KPMG (BHP’s former external auditor) did not materially interfere with Mr Maxsted’s exercise of objective, unfettered or independent judgement, or his ability to act in the best interests of BHP while KPMG was the Group’s auditor. The Board has determined, consistent with its termspolicy on the independence of referenceDirectors, that Mr Maxsted is independent. Some of the Directors hold or have previously held positions in FY2019.companies that BHP has commercial relationships with. Those positions and companies are listed in the Director profiles in section 2.2.1. The Board has assessed the relationships between the Group and the companies in which our Directors hold or held positions, and has concluded that the relationships do not interfere with the Directors’ exercise of objective, unfettered or independent judgement or their ability to act in the best interests of BHP. For example, Malcolm Broomhead and Ian Cockerill were Directors of Orica Limited (a company BHP has commercial dealings with) during FY2020. Orica provides commercial explosives, blasting systems and mineral processing chemicals and services to the mining and resources industry, among others. Mr Cockerill was appointed to the Orica Board in 2010 (prior to his appointment to the BHP Board) and Mr Broomhead was appointed to the Orica Board in 2016 (after his appointment to the BHP Board). At the time of Mr Broomhead’s appointment to the Board of Orica, and at the time of Mr Cockerill’s appointment to the Board of BHP, the BHP Board assessed the relationship between BHP and Orica and determined (and remains satisfied) that Mr Broomhead and Mr Cockerill were, during FY2020, and Mr Broomhead remains, able to apply objective, unfettered and independent judgement and to act in the best interests of BHP. Mr Cockerill retired from the Board of Orica in August 2019. Transactions during FY2020 that amounted to related party transactions with Directors or Director-related entities under International Financial Reporting Standards (IFRS) are outlined in note 32 ‘Related party transactions’ in section 5. Conflicts of interest BHP Group Plc’s Articles of Association allow the Directors to authorise conflicts and potential conflicts where appropriate. A procedure operates to ensure the disclosure of conflicts and for the consideration and, if appropriate, the authorisation of those conflicts by non-conflicted Directors. The Nomination and Governance Committee supports the Board in this process by reviewing requests from Directors for authorisation of situations of actual or potential conflict and making recommendations to the Board. It also regularly reviews any situations of actual or potential conflict that have previously been authorised by the Board and makes recommendations on whether the authorisation remains appropriate. In addition, in accordance with Australian law, if a situation arises for consideration where a Director has a material personal interest, the affected Director takes no part in decision-making unless authorised by non-interested Directors. Provisions for Directors’ interests are set out in the Constitution of BHP Group Limited. The terms of reference for the Nomination and Governance Committee are available online at bhp.com/governance. 2.13.4 Sustainability2.10 Risk and Audit Committee Report
Role and focus The RAC assists the Board in monitoring the decisions and actions of the CEO and the Group and gaining assurance that progress is being made towards achieving our purpose within the limits imposed by the Board, as described in the Board Governance Document. The RAC oversees: the integrity of BHP’s Financial Statements and Annual Report the appointment, performance and remuneration of the External Auditor and integrity of the external audit process the effectiveness of the systems of risk management, including financial and non-financial risk, and internal control the plans, performance, objectivity and leadership of the Internal Audit function and the integrity of the internal audit process capital management (capital structure and funding, and capital management planning and initiatives) and other matters For more information on our approach to risk management, refer to section 1.5.4. The RAC met 11 times during FY2020. For information on Committee members’ qualifications, which include competence relevant to the mining sector, refer to section 2.2.1. The terms of reference for the RAC were updated in FY2020 to align with revisions made to the UK Code, the ASX Fourth Edition, and the revised Remuneration Committee Terms of Reference that were approved by the Board in August 2019. Risk and Audit Committee members during the year | | | | | | | Name | | Independent | | Status | | Attendance | Lindsay Maxsted (Chair until 1 May 2020) | | Yes | | Member for whole period | | 11/11 | Terry Bowen (Chair from 1 May 2020)(1) | | Yes | | Member for whole period | | 11/11 | Ian Cockerill(2) | | Yes | | Member for whole period | | 10/11 | Anita Frew | | Yes | | Member for whole period | | 11/11 |
| (1) | Mr Bowen is the Committee’s financial expert nominated by the Board. |
| (2) | Mr Cockerill was unable to attend the RAC meeting scheduled for 15 August 2019 due to the need to fly to London at that time in order to attend another board meeting in London the following day. As this was his transitional year, there were some inevitable clashes with pre-existing meetings, and this was one that could not be resolved. Since then, all meetings have been rescheduled where necessary to avoid clashes. Mr Cockerill provided detailed comments to the Chair of the Committee ahead of the meeting. |
Committee activities in FY2020 Integrity of Financial Statements and funding matters Accounting matters for consideration, materiality limits, half-year and full-year results Commentary and explanatory notes to the Financial Statements Closure and rehabilitation provision Sarbanes-Oxley Act compliance Financial governance procedures FY2020 portfolio valuation review Weighted average cost of capital review Inter-company loans and group guarantees update External auditor and integrity of the audit process External audit letters of engagement, external audit fees and non-audit services Management and external auditor closed sessions Audit plan, review of performance and quality of service Ernst & Young (EY) independence and non-audit services Effectiveness of systems of internal control and risk management Approach to emerging risks Practical application of the new Risk Framework Updates to and review of the Risk Appetite Statement and confirmation that the Group is operating with due regard to that appetite Monitoring performance against risk appetite through key risk indicators Approval of the internal audit plan, plan principles and regular reports on progress against the internal audit plan Cultural assessments in internal audits Matters of note arising from internal audits Internal assessments of performance of Internal Audit and Advisory Committee and Group Assurance Officer and Chief Risk Officer closed sessions Ethics and compliance reports, grievance and investigation processes Insurance update and Directors’ and Officers’ insurance update Material disputes updates Data protection and privacy risk update Updates on control framework and risks regarding COVID-19 Other governance matters Samarco dam failure provision Tailings storage facility failure material risk Escondida, Cerro Colorado, BMA guarantees Revolving credit facility Sexual harassment material risk Update of the Committee Terms of Reference Update of the Internal Audit and Advisory Terms of Reference Update of the Provision of Audit and Other Services Policy by the External Auditor Fair, balanced and understandable The RAC confirmed its view to the Board that BHP’s Annual Report 2020 taken as a whole is fair, balanced and understandable. For the Board’s statement on the Annual Report, refer to the Directors’ Report in section 4. In making this assessment, the RAC considers the substantial governance framework that is in place for the Annual Report. This includes management representation letters, certifications, RAC oversight of the Financial Statements and other financial governance procedures focused on the financial section of the Annual Report, together with verification procedures for the narrative reporting section of the Annual Report. Integrity of Financial Statements The RAC assists the Board in assuring the integrity of the Financial Statements. The RAC evaluates and makes recommendations to the Board about the appropriateness of accounting policies and practices, areas of judgement, compliance with accounting standards, stock exchange and legal requirements and the results of the external audit. It reviews the half-yearly and annual Financial Statements and makes recommendations on specific actions or decisions (including formal adoption of the Financial Statements and reports) the Board should consider in order to maintain the integrity of the Financial Statements. CEO and CFO assurance For the FY2020 full year and half year, the CEO and CFO have certified that BHP’s financial records have been properly maintained and the FY2020 Financial Statements present a true and fair view, in all material respects, of our financial condition and operating results and are in accordance with accounting standards and applicable regulatory requirements. The CEO and CFO have also certified to the Board that the Financial Statements for the full year and half year are founded on a sound system of risk management and internal control and the system is operating efficiently and effectively. Significant issues In addition to the Group’s key judgements and estimates disclosed throughout the FY2020 Financial Statements, the Committee considered these significant issues relating to financial reporting: Carrying value of long-term assets The assessment of carrying values of long-term assets uses a number of significant judgements and estimates. The Committee examined management’s review of impairment triggers and potential impairment charges or reversals for the Group’s cash generating units. Specific consideration was given to the most recent short, medium and long-term price forecasts (including the significant petroleum price volatility observed to date in CY2020), expected production volumes and updated development plans, operating and capital costs, the impacts of climate change and COVID-19, discount rates and other market indicators of fair value. The Committee concurred with management’s conclusion on significant impairments recognised, including the impairment of Cerro Colorado,and that no impairment reversals were appropriate. Conclusions from these reviews are reflected in note 11 ‘Property, plant and equipment’ in section 5. Samarco dam failure On 5 November 2015, the Samarco Mineração S.A (Samarco) iron ore operation in Minas Gerais, Brazil experienced a tailings dam failure that resulted in a release of mine tailings, flooding the community of Bento Rodrigues and impacting other communities downstream. Samarco is jointly owned by BHP Brasil and Vale S.A. BHP Brasil’s 50 per cent interest in Samarco is accounted for as an equity accounted joint venture investment. Samarco’s provisions and contingent liabilities The Committee reviewed updates to matters relating to the Samarco dam failure, including developments on existing and new legal proceedings, and changes to the estimated costs of remediation and compensation. BHP Brasil’s loss from Equity Accounted Investments includes impairments arising from working capital funding provided to Samarco and revisions to the Samarco dam failure and Germano decommissioning provisions during the year ended 30 June 2020. Potential direct financial impacts to BHP Brasil The Committee considered: changes to the estimated cost of remediation and compensatory programs under the Framework Agreement developments in existing and new legal proceedings, on the provision related to the Samarco dam failure and related disclosures the provisions recognised and contingent liabilities disclosed by BHP Brasil or other BHP entities Based on currently available information, the Committee concluded that the accounting for the equity investment in Samarco, the provision recognised by BHP Brasil (including the decommissioning of the Germano tailings dam complex) and contingent liabilities disclosed in the Group’s Financial Statements are appropriate. For more information, refer to note 4 ‘Significant events – Samarco dam failure’ in section 5. Closure and rehabilitation provisions Determining the closure and rehabilitation provision is a complex area requiring significant judgement and estimates, particularly given the timing and quantum of future costs, the unique nature of each site and the long timescales involved. The Committee considered the various changes in estimates for closure and rehabilitation provisions recognised during the year, including a reduction to the discount rates applied. Specific consideration was given to the results of the most recently completed survey data and characterisation activity, changes to current cost estimates and the appropriate inclusion of contingency in cost estimates to allow for both known and residual risks. The Committee concluded that the assumptions and inputs for closure and rehabilitation cost estimates were reasonable and the related provisions recorded were appropriate. For more information, refer to note 14 ‘Closure and rehabilitation provisions’ in section 5. Impact of new accounting standards The Group adopted IFRS 16/AASB 16 ‘Leases’ with effect from 1 July 2019. The Committee reviewed management’s analysis of the accounting outcomes and disclosure requirements for the Group, including the treatment of leases within the Group’s net debt definitions. In addition, the Committee: considered and approved the early adoption, for FY2020, of amendments to accounting standards relating to interest rate benchmark reforms noted that the Group is in the process of evaluating the implications of the IFRS Interpretations Committee agenda decision ‘Income Taxes – Multiple tax consequences of recovering an asset’ and approved that any changes to the Group’s accounting policy for income tax will be implemented from 1 July 2020 on a retrospective basis For more information, refer to note 38 ‘New and amended accounting standards and interpretations’ in section 5. Impact of COVID-19 The Committee considered the impacts of the global COVID-19 pandemic on the Group’s FY2020 financial reporting, including: the recognition and disclosure of costs incurred by the Group that are directly attributable to COVID-19 the impact on key judgements and estimates, particularly those relating to impairment indicator assessments The Committee concluded that the management’s judgements and the disclosure of the COVID-19 directly attributable costs were appropriate. External Auditor The RAC manages the relationship with the External Auditor on behalf of the Board. It considers the reappointment of the External Auditor each year, as well as remuneration and other terms of engagement and makes a recommendation to the Board. The lead audit engagement partners for EY in Australia and the United Kingdom (together, ‘EY’) were appointed for commencement from 1 July 2019. Audit tender and transition BHP confirms during FY2020 it was in compliance with the provisions of The Statutory Audit Services for Large Companies Market Investigation (Mandatory Use of Competitive Tender Processes and Audit Committee Responsibilities) Order 2014. Consistent with the UK and EU requirements in regard to audit firm tender and rotation, the Committee conducted an audit tender process during FY2017 to appoint a new external auditor. In August 2017, consistent with the Committee’s recommendation, the Board announced it had selected EY to be the Group’s auditor from the financial year beginning 1 July 2019, subject to shareholder approval, which was received at the AGMs in 2019. During FY2019, the RAC received updates from EY on the audit transition and preparation for commencement of its audit, including EY’s process in meeting all relevant independence criteria, audit plan for commencement from 1 July 2019 and reports on any non-audit services. KPMG was the auditor during FY2019 and FY2018, and EY was the auditor during FY2020. Evaluation of External Auditor and external audit process The RAC evaluates the objectivity and independence of the External Auditor and the quality and effectiveness of the external audit arrangements. As part of this evaluation, the RAC considers specified criteria, including delivering value to shareholders and BHP, and also assesses the adequacy of the external audit process with emphasis on quality, effectiveness and performance. It does so through a range of means, including: the Committee considers the External Audit Plan, in particular to gain assurance that it is tailored to reflect changes in circumstances from the prior year throughout the year, the Committee meets with the audit partners, particularly the lead Australian and UK audit engagement partners, without management present following the completion of the audit, the Committee considers the quality of the External Auditor’s performance drawing on survey results. The survey is based on a two-way feedback model where the BHP and EY teams assess each other against a range of criteria. The criteria against which the BHP team evaluates EY’s performance include ethics and integrity, insight, service quality, communication, reporting and responsiveness reviewing the terms of engagement of the External Auditor discussing with the audit engagement partners the skills and experience of the broader audit team reviewing audit quality inspection reports on EY published by the UK Financial Reporting Council in considering the effectiveness of the audit In addition, the RAC reviews the integrity, independence and objectivity of the External Auditor and assesses whether there is any element of the relationship that impairs or appears to impair the External Auditor’s judgement or independence. The External Auditor also certifies its independence to the RAC. Non-audit services Although the External Auditor does provide some non-audit services, the objectivity and independence of the External Auditor are safeguarded through restrictions on the provision of these services with some services prohibited from being undertaken, including services where the External Auditor: may be required to audit its own work participates in activities that would normally be undertaken by management is remunerated through a ‘success fee’ structure acts in an advocacy role for BHP The RAC has adopted a policy entitled ‘Provision of Audit and Other Services by the External Auditor’ covering the RAC’s pre-approval policies and procedures to maintain the independence of the External Auditor. This policy was reviewed and updated in FY2020, including to reflect only those services permitted to be provided by the External Auditor in the revised Ethical Standard published by the UK Financial Reporting Council. Our policy on Provision of Audit and Other Services by the External Auditor is available at bhp.com/governance. In addition to audit services, the External Auditor is permitted to provide other (non-audit) services that are not and are not perceived to be in conflict with their role. In accordance with the requirements of the Exchange Act and guidance contained in Public Company Accounting Oversight Board (PCAOB) Release 2004-001, certain specific activities are listed in our policy that have been ‘pre-approved’ by the RAC. The categories of ‘pre-approved’ services are: Audit services – work that constitutes the agreed scope of the statutory audit and includes the statutory audits of BHP and its entities (including interim reviews). This category also includes work that is reasonably related to the performance of an audit or review and is a logical extension of the audit or review scope. The RAC monitors the audit services engagements and if necessary, approves any changes in terms and conditions resulting from changes in audit scope, Group structure or other relevant events. Audit-related and other assurance services – work that is outside the scope of the statutory audit but is consistent with the role of the external statutory auditor, is of an assurance or compliance nature, is work the External Auditor must or is best placed to undertake and is permissible under the relevant applicable standard. Activities outside the scope of the categories above are not ‘pre-approved’ and must be approved by the RAC prior to engagement, regardless of the dollar value involved. In addition, any engagement for other services with a value over US$100,000, even if listed as a ‘pre-approved’ service, requires the approval of the RAC. All engagements for other services whether ‘pre-approved’ or not and regardless of the dollar value involved are reported quarterly to the RAC. While not prohibited by BHP’s policy, any proposed non-audit engagement of the External Auditor relating to internal control (such as a review of internal controls) requires specific prior approval from the RAC. With the exception of the external audit of BHP’s Financial Statements, any engagement identified that contains an internal control-related element is not considered to be pre-approved. In addition, while the categories of ‘pre-approved’ services include a list of certain pre-approved services, the use of the External Auditor to perform these services will always be subject to our overriding governance practices as articulated in the policy. In addition, the RAC did not approve any services during the year ended 30 June 2020 pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of SEC Regulation S-X (provision of services other than audit). Fees paid to BHP’s External Auditor during FY2020 for audit and other services were US$16.7 million, of which 75 per cent comprised audit fees (including the US Sarbanes-Oxley Act of 2002 as amended (SOX)), 11 per cent for audit-related fees, 2 per cent was for tax fees and 12 per cent for all other fees. Details of the fees paid are set out in note 35 ‘Auditor’s remuneration’ in section 5. Based on the review by the RAC, the Board is satisfied that the External Auditor is independent. Business Risk and Audit Committees Business Risk and Audit Committees (Business RACs), covering each asset group, assist management in providing the information to enable the RAC to fulfil its responsibilities. They are management committees and perform an important monitoring function in the governance of BHP. Meetings take place annually as part of our financial governance framework. As management committees, the appropriate member of the ELT participates, but the committee is chaired by a member of the RAC. Each committee also includes the Group Financial Controller, the Chief Risk Officer and the Group Assurance Officer. Significant operational and risk matters raised at Business RAC meetings are reported to the RAC by management. Risk function The Risk function’s role is to create and maintain the Group’s Risk Framework, and to support, verify, oversee and provide insight on the effective application of the Risk Framework for all risks, including strategic, operational and emerging risks. The RAC assists the Board with the oversight of risk management, although the Board retains accountability for BHP’s risk profile. In addition, the Board requires the CEO to implement a system of control for identifying and managing risk. The Directors, through the RAC, review the systems that have been established, regularly review the effectiveness of those systems and monitor that necessary actions have been taken to remedy any significant failings or weaknesses identified from that review. The RAC regularly reports to the Board to enable the Board to review our Risk Framework at least annually to confirm that the Risk Framework continues to be sound and that BHP is operating with regard to the risk appetite set by the Board. A review was undertaken during FY2020, resulting in refinements to BHP’s Risk Framework. For more information, refer to section 1.5.4. Internal Audit The Internal Audit function is carried out by Internal Audit and Advisory (IAA). IAA provides assurance on whether risk management, internal control and governance processes are adequate and functioning. The Internal Audit function is independent of the External Auditor. The RAC evaluates and, if thought fit, approves the terms of reference of IAA, the staffing levels and its scope of work to ensure it is appropriate in light of the key risks we face. It also reviews and approves the annual internal audit plan and monitors and reviews the effectiveness of the internal audit activities. The RAC approves the appointment and dismissal of the Group Assurance Officer and assesses their performance, independence and objectivity. The position was held throughout the period by Rama Devarajan who reported directly to the RAC. During the period, functional oversight of IAA was provided by the Chief External Affairs Officer. Effectiveness of systems of internal control and risk management (RAC and Board) In delegating authority to the CEO, the Board has established CEO limits, outlined in the Board Governance Document. Limits on the CEO’s authority require the CEO to ensure there is a system of control in place for identifying and managing risk in BHP. Through the RAC, the Directors regularly review these systems for their effectiveness. These reviews include assessing whether processes continue to meet evolving external governance requirements. The RAC oversees and reviews the internal controls and risk management systems. Any material breaches of Our Code, including breaches of our anti-bribery and corruption requirements, as well as any material incidents reported under our ‘speaking up with confidence’ requirements are reported quarterly to the RAC by the Chief Compliance Officer. These reports are then communicated to the Board through the report-out process. In undertaking this role, the RAC reviews: procedures for identifying, assessing and managing material risks and controlling their impact on the Group, and other stakeholders where relevant, and the operational effectiveness of these procedures processes and systems for managing budgeting, forecasting and financial reporting the Group’s strategy and standards for insurance the Group’s standards and procedures for reporting reserves and resources the Group’s standards and procedures for closure and rehabilitation provision standards and practices for detecting, reporting and preventing fraud, serious breaches of business conduct and whistle-blowing procedures supporting reporting to the Committee procedures for ensuring compliance with relevant regulatory and legal requirements arrangements for the protection of the Group’s information and data systems and other non-physical assets operational effectiveness of the Business RAC structures overseeing the adequacy of the internal controls and allocation of responsibilities for monitoring internal financial controls Section 1.5.4 includes a description of the Group’s principal risks that could result in events or circumstances that might threaten BHP’s business model, future performance, solvency or liquidity and reputation and also provides an explanation of how those risks are managed. During FY2020, management presented an assessment of the material risks facing BHP and the level of effectiveness of risk management over the material business risks. The reviews were overseen by the RAC, with findings and recommendations reported to the Board. In addition to considering key risks facing BHP, the Board assessed the effectiveness of internal controls over key risks identified through the work of the Board Committees. The Board is satisfied with the effectiveness of risk management and internal control systems. Management’s assessment of internal control over financial reporting Management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) and Rule 15d-15(f) under the Exchange Act). Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements and, even when determined to be effective, can only provide reasonable assurance with respect to financial statement preparation and presentation. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Under the supervision and with the participation of our management, including our CEO and CFO, the effectiveness of BHP’s internal control over financial reporting has been evaluated based on the framework and criteria established in Internal Controls – Integrated Framework (2013), issued by the Committee of the Sponsoring Organizations of the Treadway Commission (COSO). Based on this evaluation, management has concluded that internal control over financial reporting was effective as at 30 June 2020. There were no material weaknesses in BHP’s internal controls over financial reporting identified by management as at 30 June 2020. BHP has engaged our independent registered public accounting firm, EY, to issue an audit report on our internal control over financial reporting for inclusion in the Financial Statements section of the Annual Report and the Annual Report on Form 20-F as filed with the SEC. There have been no changes in our internal control over financial reporting during FY2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. This includes COVID-19, which only had a minor impact on internal controls over financial reporting in relation to both the number and nature of controls that were impacted. During FY2020, the RAC reviewed our compliance with the obligations imposed by SOX, including evaluating and documenting internal controls as required by section 404 of SOX. Management’s assessment of disclosure controls and procedures Management, with the participation of our CEO and CFO, performed an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as at 30 June 2020. Disclosure controls and procedures are designed to provide reasonable assurance that the material financial and non-financial information required to be disclosed by BHP, including in the reports it files or submits under the Exchange Act, is recorded, processed, summarised and reported on a timely basis and this information is accumulated and communicated to BHP’s management, including our CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure. Based on the evaluation, management (including the CEO and CFO) has concluded that as at 30 June 2020, our disclosure controls and procedures are effective in providing that reasonable assurance. There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives. In the design and evaluation of our disclosure controls and procedures, management was required to apply its judgement in evaluating the cost-benefit relationship of possible controls and procedures. The terms of reference for the RAC are available at bhp.com/governance. 2.11 Sustainability Committee is to assistReport Role and focus The Sustainability Committee assists the Board in its oversight ofoverseeing the Group’s health, safety, environmentenvironmental and community (HSEC) performance and governance responsibilities, and the adequacy of the Group’s HSEC framework, and in relation to various other governance responsibilities related to HSE and Community.framework. The Group’s HSEC framework consists of: | • | | the CEO limits set outoutlined in theBoard Governance Document. TheBoard Governance Document establishes the remit of the Board and delegates authority to the CEO, including in respect of the HSEC Management System, subject to CEO limits;limits |
the Sustainability Committee, which is responsible for assisting the Board in overseeing the adequacy of the Group’s HSEC Framework and HSEC Management System (among other things); the HSEC Management System, established by management in accordance with the CEO’s delegated authority. The HSEC Management System provides the processes, resources, structures and performance standards for the identification, management and reporting of HSEC risks and the investigation of any HSEC incidents;incidents a robust and independent internal audit process overseen by the RAC, in accordance with its terms of reference;reference independent advice on HSEC matters, which may be requested by the Board and its committeesCommittees where deemed necessary in order to meet their respective obligations.obligations 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.HSEC. HSEC considerations are also taken into account in employee and executive remuneration. MoreFor more information, is availablerefer to Sustainability in our Sustainability Report 2019section 1.7 and the Remuneration Report 2019.section 3. The Committee provides oversight ofoversees the preparation and presentation of thesustainability disclosures by management. This year, BHP has included material sustainability content in this Annual Report. The Sustainability Report by management, andCommittee reviewed and recommended to the Board the approval of these disclosures in section 1.6 and 1.7 and the Sustainability Report for publication. The Sustainability Report identifiessustainability performance data in section 6.6, along with the Modern Slavery Statement FY2020. These disclosures identify our targets for HSEC matters and our performance against those targets. Our targets rely on fact-based measurement and quality data, and reflect a desire to move BHP to a position of industry leadership. A copyOur sustainability reporting, including additional case studies and a databook of the Sustainability Reportkey ESG and sustainability data is available online at bhp.com.
For information on our material exposure to economic, environmental and social sustainability risks and how we manage or intend to manage those risks, refer to section 1.5.4. Activities of the Sustainability Committee The Sustainability Committee met five times during FY2019FY2020 and continued to assist the Board in its oversight of HSEC issues and performance. A summary ofThe Committee considered the main areas discussed andGroup’s approach to climate change throughout the year. More information on meeting attendance by Committee membersour approach to climate change, is includedset out in the following table. However, one of the major topics discussed by the Committee, particularly following the dam failure at Vale’s Brumadinho iron ore mine, was tailings storage facilities. These discussions included dam risk review actions, the industry review led by the ICMM and the Church of England Pensions Board led initiative. Furthersection 1.7.8. For more information abouton our approach to tailings storage facilities, is set out inrefer to section 1.8. Water stewardship was also important as the Group worked to finalise the Water Stewardship report in August 2018.1.7.10. The Committee also continues to monitor the work of theour water stewardship project.work and for more information on our water stewardship performance, see section 6.6. Members of the Sustainability Committee also visited a number of operated andnon-operatedseveral sites during FY2019 as part of a formal program of committee visits. These included West Australian Iron Ore, Iron Ore, Australia; Escondida and Spence, Copper, Chile; and Broadmeadow and Goonyella, BMA, Metallurgical Coal, Australia.FY2020. During these site visits, Committee members received briefings on relevant HSEC matters and the management of material HSEC risks, and met with key personnel. These visits offer access to a diverse cross-section of the workforce from frontline through to the leadership team, including, where possible, risk and control owners. This provides Directors with a sense of the risk management processes and culture at each site.During FY2020, several site visits were cancelled due to COVID-19 restrictions. 164
Sustainability Committee members during the year | | | | | | | Name | | Independent | | Status | | Attendance | John Mogford (Chair from 7 November 2019) | | Yes | | Member for whole period | | 5/5 | Malcolm Broomhead (Chairman)(Chair until 6 November 2019) | | Yes | | Member for whole period | | 5/5 | Ian Cockerill | | Yes | | Member from 1 April 2019for whole period | | 2/25/5 | Ken MacKenzieGary Goldberg
| | Yes | | Member untilfrom 1 April 2019February 2020 | | 3/3 | John Mogford
| | Yes | | Member for whole period | | 5/5 |
Committee activities in FY2019FY2020 Assurance and adequacy of HSEC framework and HSEC management system Key HSEC risks, including tailings damsstorage facility failure, climate change-related risks, and a deep dive on the risk of blasting incidentsfatalities Audit planning and reporting in relation toon HSEC risks and processes Event management solution demonstration Review of the HSE function and Group HSE Officer Compliance and reporting Compliance with HSEC legal and regulatory requirements Updates on key legal and regulatory changes Consideration of threshold for reporting HSEC matters to the Committee Sustainability Report,reporting, including consideration of processes for preparation and assurance provided by KPMGEY Social value and ESG metrics Performance Performance of BHP in relation toon HSEC matters Considering proposed HSEC KPIskey performance indicators (KPIs) for KMPKey Management Personnel scorecard and considering performance against suchthese KPIs Monitoring against the FY2018–FY2022 HSEC performance targets UpdatesUpdate on Samarco remediation and the Fundação Renova Foundation
Tailings management industry review
BHP tailings dam review and actions Saraji mine fatality ICAMinvestigation Performance and key issues on sustainable development and community relations, including community issues update Water stewardship and position statementSocial value update, including investor feedback
Climate change updatesScope 3 emissions goals
Social licenceMedium-term operational (Scope 1 and social value2) greenhouse gas emissions target
Link between climate change performance and executive remuneration Other governance matters Induction, training and development of Committee members Site visits and site visit reports to Board Investor approach to environmental, social and governance issues
Modern Slavery Act Statement FY2020 Sustainable development governance Our approach to HSEC and sustainable development governance is characterised by: the Sustainability Committee assisting the Board in its oversight ofto oversee material HSEC matters and risks across BHP, including seeking continuous improvement and policy advocacy as applicable;applicable management having primary responsibility for the design and implementation of an effective HSEC Management System;management system management having accountability for HSEC performance;performance the HSE function and Communitysub-function providing advice and guidance directly to the Sustainability Committee and the Board;Board the Board, Sustainability Committee and management seeking input and insight from external experts, such as the BHP Forum on Corporate Responsibility; andResponsibility clear links between executive remuneration and HSEC performance.performance 165
TheFor information on the key areas of focus for the Committee, management and the HSE function and Communitysub-function, are outlined in the Sustainability Report 2019.
Climate change
Climate change is treated as a Board-level governance issue, with the Sustainability Committee playing a key supporting role. The Committee work during FY2019 included reviewing the proposed approach to reduction in greenhouse gas emissions and the product stewardship project which aims to improve identification, assessment and management of climate change risks and opportunities in the value chain. For more information on our climate change position and how we consider the impacts on our portfolio, refer to section 1.10.8.1.7.
Social investment We also continued to monitor our progress in relation toon our social investment and met our target for investments in community programs. This was the equivalent of not less than 1 per cent of ourpre-tax profit, calculated on the average of the previous three years’pre-tax profit. Our social investment performance in FY2019 saw BHP deliver projects with a continued focus on good governance, human capability and social inclusion and environment. Our voluntary social investment in FY2019 totalled US$93.5 million, consisting of US$55.7 million in direct community development projects and donations, US$8.9 million equity share tonon-operated joint venture programs, a US$16.57 million donation to the BHP Foundation and US$4 million to the Matched Giving and community small grants programs. Administrative costs to facilitate social investment activities at our assets totalled US$6.27 million and US$2 million supported the operations of the BHP Foundation. HSEC matters and remuneration
In order to link HSEC matters to remuneration, 25 per cent of the short-term incentive opportunity for Key Management Personnel was based on HSEC performance during FY2019. The Sustainability Committee assists the Remuneration Committee in determining appropriate HSEC metrics to be included in the KMP scorecard and also assists in relation to assessment of performance against those measures. The Board believes this method of assessment is transparent, rigorous and balanced, and provides an appropriate, objective and comprehensive assessment of performance. For more information, on the metrics and their assessment, refer to the Remuneration Report in section 3.
Committee assessment
Following the committee assessment, the Sustainability Committee was satisfied that it had continued to meet its terms of reference in FY2019.1.7.9.
The terms of reference for the Sustainability Committee are available online at bhp.com/governance. 2.142.12 Remuneration Committee Report
Role and focus The Remuneration Committee assists the Board in overseeing: the remuneration policy and its specific application to the CEO and other ELT members and its general application to all employees the adoption of annual and long-term incentive plans the determination of levels of reward for the CEO and approval of reward for other members of the ELT the annual evaluation of the performance of the CEO, by giving guidance to the Chair the preparation of the Remuneration Report for inclusion in the Annual Report compliance with applicable legal and regulatory requirements associated with remuneration matters the review, at least annually, of remuneration by gender The Sustainability Committee and the RAC assist the Remuneration Committee in determining appropriate HSEC and financial metrics, respectively, to be included in senior executive scorecards and in assessing performance against those measures. The Remuneration Committee met six times during FY2020 and also considered some matters out of session. Susan Kilsby was appointed Chair of the Remuneration Committee with effect from 7 November 2019. She served on the Committee from her appointment to the Board in April 2019, which provided an appropriate transition to become Chair. She also has relevant skills and experience, including her current appointment as the Chair of the remuneration committee of Diageo plc and as a member of the compensation committee of Fortune Brands Home & Security Inc. She therefore satisfies the requirement for the incoming Chair to have served on a remuneration committee for at least 12 months. Some of the items the Committee discussed are described below. For more information on the Committee’s work, refer to the Remuneration Report in section 3. The terms of reference of the Remuneration Committee were updated following the release of the new versions of the UK Code and the ASX Fourth Edition. In addition, areas in need of clarification were identified during the recent ASIC Corporate Governance Taskforce’s review (e.g. how information flows to the Board). Remuneration Committee members during the year | | | | | | | Name | | Independent | | Status | | Attendance | Susan Kilsby (Chair from 7 November 2019) | | Yes | | Member for whole period | | 6/6 | Anita Frew | | Yes | | Member for whole period | | 6/6 | Gary Goldberg | | Yes | | Member from 1 February 2020 | | 3/3 | Carolyn Hewson (Chair and member until 7 November 2019) | | Yes | | Member until 7 November 2019 | | 3/3 | Dion Weisler | | Yes | | Member from 1 June 2020 | | 1/1 | Shriti Vadera | | Yes | | Member for whole period | | 6/6 |
Committee activities in FY2020 Remuneration of the ELT and the Board Remuneration policy review Remuneration of CEO and other ELT members and Group Company Secretary Remuneration arrangements for new ELT members Retirement arrangements for former CEO Consideration of COVID-19 impacts KPIs, performance levels, award outcomes FY2021 HSEC scorecard – climate enhanced Long-Term Incentive Plan sector peer group review Other remuneration matters Workforce remuneration and engagement Shareplus enrolment update Corporate Governance Code provisions Other Induction, training and development program Board committee procedures, including closed sessions Update of the Committee Terms of Reference Remuneration Details of our remuneration policies and practices, and the remuneration paid to the Directors (Executive and Non-executive) and other members of the Key Management Personnel, are set out in the Remuneration Report in section 3. The terms of reference for the Remuneration Committee are available at bhp.com/governance. 2.13 Risk management governance structure We believe the identificationIdentifying and management ofmanaging risk are central to achieving the corporateour purpose. OurFor information on our approach to risk and risk governance, including the role of the BHP Board and its committees is set out inCommittees, refer to section 1.6.4.1.5.4.
2.152.14 Management
Below the level of the Board, key management decisions are made by the CEO, the ELT, other management committees and individual members of management to whom authority has been delegated.who have delegated authority. Management committees perform roles in relation to riskconsider BHP’s risks and control.controls. Strategic risks (both threats and opportunitiesopportunities) arising from changes in our business environment are regularly reviewed by the ELT and discussed by the Board. The Financial Risk Management Committee (FRMC) reviews the effectiveness of internal controls relating to commodity price risk, counterparty credit risk, currency risk, financing risk, interest rate risk and insurance. Minutes of the FRMC meetings are provided to the Board through the RAC. The Investment Review Committee (IRC) provides oversight for investment processes across BHP and coordinates the investment toll-gating process for major investments. Reports are made to the Board on findings by the IRC in relation to major capital projects. The Disclosure Committee oversees BHP’s compliance with securities dealing and continuous and periodic disclosure requirements, including reviewing information that may require disclosure through stock exchanges and overseeing processes to ensure information disclosed is timely, accurate and complete. The following diagram describes the responsibilities of the CEO and four key management committees.
Performance evaluation for executives The performance of executives and other senior employees is reviewed on an annual basis. For the members of the ELT, this review includes their contribution, engagement and interaction at Board level. The annual performance review process that we employ considers the performance of executives against criteria designed to capture both ‘what’‘what�� is achieved and ‘how’ it is achieved. All performance assessments of executives include how effective they have been in undertaking their role; what they have achieved against their specified key performance indicators; how they match up to the behaviours prescribed in our leadership model; and how those behaviours align withOur Charter values. The assessment is therefore holistic and balances absolute achievement with the way performance has been delivered. Progression within BHP is driven equally by personal leadership behaviours and capability to produce excellent results. 166
A performance evaluation as outlined was conducted for all members of the ELT during FY2019.FY2020. For the CEO, the performance evaluation was led by the ChairmanChair of the Board on behalf of all theNon-executive Directors, and was discussed with the Remuneration Committee. CEO and management committee responsibilities
2.162.15 Our conduct
Our Charter and Our Code of Conduct Our Charter is central to our business. It articulates the values we uphold, our strategy and how we measure success. Our Code of Conduct (Our Code) is based onOur Charter values.Our Code sets out standards of behaviour for our people when using BHP resources, in their dealings with governments and communities, third parties and each other.Our Code describes the behaviours expected to support a safe, respectful and a legally compliant working environment.environment and includes our policies on speaking up, anti-bribery and corruption.
Working with integrity is a condition of employment with BHP and in some cases a contractual obligation of many of our contractors and suppliers. All our people are required to undertake annual training onOur Code to promote awareness and understanding of the behaviours expected of them. Demonstration of the values described inOur CharterandOur Code is part of the annual employee performance review process.
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OurCodeisare accessible to all our people and external stakeholdersonline stakeholdersat bhp.com. BHP’s EthicsPoint We have mechanisms in place for anyone to raise a report if they feelOur Code has been breached. Employees and contractors can raise reportstheir concerns through a number of channels, including through line leadersleaders. Anyone, including external stakeholders and the public, can lodge a concern, in the form of a report, either online in EthicsPoint, or Human Resources. Processesvia the 24-hour, multilingual call service. Reporters of misconduct can choose to raise their concern anonymously. Reports received are assigned by the Ethics Team to an investigator, line leader or team for investigation or resolution as appropriate, in accordance with internal policy and process documents. Both the communityreporting and investigations processes are transparent and summary information is accessible to report potentialall BHP employees via BHP’s intranet. Reports raised via EthicsPoint provide valuable insight into culture and organisational learning. All significant Code of Conduct matters, and key trends from investigations, are reported to the RAC. These are then reported to the Board as part of its report-out as set out in section 2.5. The most serious breaches ofOur Code are available at the asset level and these are thenalso reported to a central grievances system. Reports can also be raised by anyone, whether they are employees, contractors, vendors/suppliers, customers, shareholders or community members, through EthicsPoint, a24-hour, multilingual for confidential reporting of potential misconduct. This service is accessible online or via telephone and reports can be raised anonymously.
We acknowledge, investigate as appropriate and document all matters reported. Where matters are investigated and substantiated, we take appropriate remedial actions, advise the reporter (where possible) and document the outcome.
BHP does not tolerate any form of retaliation against anyone for speaking up about potential misconduct or participating in an investigation.
Enhancements
With culture at the centre of key strategic priorities, we have several initiatives to improve our policies, procedures and practices, building on changes already made. They include the implementation of:
• | | an updatedOur Requirements for Business Conduct standard, to strengthen our investigations framework, including providing clear guidance how each EthicsPoint concern is assessed and triaged;
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• | | an independent, dedicated Central Investigation team within our Ethics and Compliance function that investigates the most serious allegations of misconduct, including, allegations of sexual harassment, fraud, conflicts of interest, compliance related matters and any otherOur Code of Conduct allegations raised in relation to senior managers. The Central Investigations Team also provides guidance to drive a standardised, quality investigation process throughout BHP;
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an Integrity Working Group, Chaired by our Chief Compliance Officer and comprised of senior leaders across the Health, Safety and Environment; Risk; Internal Audit; Legal; and Ethics and Compliance functions, with accountabilitywhich is accountable for oversight of the operational effectiveness of the Investigations Framework, including oversight of investigations completed by the Central Investigations team.
Complaints raised through EthicsPoint provide valuable insight into cultural issues and areas for organisational improvement. Complaints are reported biannually to the Board’s Risk and Audit Committee The Integrity Working Group is chaired by the Chief Compliance Officer. In FY2019, we improved the EthicsPoint process, ethics reporting capabilityOfficer and the qualitycomprises of investigations and investigations outcomes. These changes will make the reporting more holistic and permit detailed reportinga number of ethical culture issues to management and the Board.Senior Leaders across BHP.
Political donations
We maintain a position of impartiality with respect to party politics and do not make political contributions or expenditure/donations for political purposes to any political party, politician, elected official or candidate for public office. We do, however, contribute to the public debate of policy issues that may affect BHP in the countries in which we operate. As explained in the Directors’ Report, the Australian Electoral Commission (AEC) disclosure requirements are broad and amounts that are not political donations can be reportable for AEC purposes. For example, where a political party or organisation owns shares in BHP, the AEC filing requires the political party or organisation to disclose the dividend payments received for their shareholding.
2.172.16 Market disclosure
We are committed to maintaininghave disclosure controls in place for periodic disclosures, including the highest standards of disclosure, ensuring that all investors and potential investors haveOperational Review, our results announcements, debt investor documents (such as the same access to high-quality, relevant information in an accessible and timely manner to assist them in making informed decisions. The Disclosure Committee manages our compliance with market disclosure obligations and is responsible for implementing reporting processes and controls and setting guidelinesprospectus for the release of information. As part of our commitment to continuous improvement, we continue to ensure alignmentEuro or Australian Medium Term Notes) and Annual Report documents, which must comply with best practice as it developsrelevant regulatory requirements. Additional details about these verification processes can be found in the jurisdictions in which BHP is listed. Periodic Disclosure officers have been appointed in BHP’s Asset groups, Marketing, Procurement, Maritime and Logistics, and functions. These officers are responsible for identifying and providing the– Disclosure Committee with referral information about the activities of the asset or functional areas using disclosure guidelines developed by the Committee. The Committee then makes the decision whether a particular piece of information is material and therefore needs to be disclosed to the market. 168
Controls document at bhp.com. To safeguard the effective dissemination of information, we have developed theOur Requirementsmandatory minimum performance requirements for market disclosure, standard, which outlinesoutline how we identify and distribute information to shareholders and market participants.participants and sets out the role of the Disclosure Committee in managing compliance with market disclosure obligations. Further, where an announcement is determined to be material by the Disclosure Committee, the Board receives a copy promptly after it has been made. Where BHP gives a new and substantive investor or analyst presentation, it releases a copy of the presentation materials on the ASX Market Announcements Platform ahead of the presentation. As a result of COVID-19, we introduced extra monitoring and disclosure controls. These included: increasing the regularity and breadth of information gathered from management (including Finance, Supply, Marketing, Legal, and Operational teams); more regular updates to the Disclosure Committee; and more regular discussions with UBS (our corporate broker in the UK), as well as our Investor Relations team. This enabled BHP to assess the materiality of developments and stay across market expectations, dynamics and emerging best practice. A copy of the market disclosure and communications document is available online at bhp.com/governance. Copies of announcements to the stock exchanges on which BHP is listed, investor briefings, Financial Statements, the Annual Report and other relevant information can be found online at bhp.com. Any person wishing toTo receive advice by email alerts of news releases, can subscribe at bhp.com. 2.18 Remuneration
Details of our remuneration policies and practices, and the remuneration paid to the Directors (Executive andNon-executive) and other members of the KMP, are set out in the Remuneration Report in section 3.
2.19 Directors’ share ownership
Non-executive Directors have agreed to apply at least 25 per cent of their remuneration (base fees plus committee fees) to the purchase of BHP shares until they achieve a shareholding equivalent in value to one year’s remuneration (base fees plus committee fees). Thereafter, they must maintain at least that level of shareholding throughout their tenure. All dealings by Directors are subject to theOur Requirements for Securities Dealingstandard and are reported to the Board and to the stock exchanges.
Information on our policy governing the use of hedging arrangements over shares in BHP by Directors and other members of the KMP is set out in section 3.3.21.
Details of the shares held by Directors are set out in section 3.3.20.
2.202.17 Conformance with corporate governance standards
Our compliance with the governance standards in our home jurisdictions of Australia and the United Kingdom, and with the governance requirements that apply to us as a result of our New York Stock Exchange (NYSE) listing and our registration with the SECSecurities Exchange Commission (SEC) in the United States, is summarised in this Corporate Governance Statement, the Remuneration Report, the Directors’ Report and the Financial Statements. The Listing Rules and the Disclosure and Transparency Rules of the UK Financial Conduct Authority require companies listed in the United Kingdom to report how they have applied the Main Principles and the extent to which they have complied with the provisions of the UK Corporate Governance Code (UK Code), and explain the reasons for anynon-compliance. The UK Code is available online at frc.org.uk/Our-Work/Corporate-Governance-Reporting/Corporate-governance.aspx. The Listing Rules of the ASX requireASX-listed companies to report on the extent to which they meet(available at: frc.org.uk) and the ASX Principles and Recommendations and explain the reasons for anynon-compliance. The ASX Principles and Recommendations are available online(available at asx.com.au/regulation/corporate-governance-council.htm.
Both the UK Code and the ASX Principles and Recommendationswww.asx.com/au) require the Board to consider the application of the relevant corporate governance principles, while recognising that departures from those principles are appropriate in some circumstances. We haveThe Board considers that during FY2020 it applied the Main Principles and complied with the provisions set out in the 20162018 edition of the UK Code, and complied with the ASX Principles and Recommendations during the financial period,Third Edition, with no exceptions.
Our Appendix 4G, summarisingwhich summarises our compliance with the ASX Principles and RecommendationsThird Edition is available online at bhp.com/governance. BHP Group Limited and BHP Group Plc are registrants with the SEC in the United States. Each company is classified as a foreign private issuer and each has American Depositary Shares listed on the NYSE. We have reviewed the governance requirements applicable to foreign private issuers under SOX, including the rules promulgated by the SEC and the rules of the NYSE, and are satisfied that we comply with those requirements. Section 303A of the NYSE-Listed Company Manual contains a broad regime of corporate governance requirements for NYSE-listed companies. Under the NYSE rules, foreign private issuers such as BHP are permitted to follow home country practice in lieu of the requirements of Section 303A, except for the rule relating to compliance with Rule10A-3 of the Exchange Act (audit committee independence) and certain notification provisions contained in Section 303A of the Listed Company Manual. Section 303A.11 of the Listed Company Manual, however, requires usrequired to disclose any significant ways in which our corporate governance practices differ from those followed by US companies under the NYSE corporate governance standards. After a comparison of our corporate governance practices with the requirements of Section 303A of the ListedNYSE-Listed Company Manual followed by US companies, the followinga significant difference was identified:
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Rule10A-3 of the Exchange Act requires NYSE-listed companies to ensure their audit committees are directly responsible for the appointment, compensation, retention and oversight of the work of the External Auditor unless the company’s governing law or documents or other home country legal requirements require or permit shareholders to ultimately vote on or approve these matters. While the RAC is directly responsible for remuneration and oversight of the External Auditor, the ultimate responsibility for appointment and retention of the External Auditor rests with our shareholders, in accordance with UK law and our constitutional documents. The RAC does, however, make recommendations to the Board on these matters, which are in turn reported to shareholders. While the Board is satisfied with its level of compliance with the governance requirements in Australia, the United Kingdom and the United States, it recognises that practices and procedures can always be improved and there is merit in continuously reviewing its own standards against those in a variety of jurisdictions. The Board’s program of review will continue throughout the year ahead.
| | | Compliance with the UK Code This table describes how BHP has applied the Principles of the UK Code | Board leadership and our purpose • Long-term sustainable success – we believe we put the long-term sustainable success of BHP at the centre of what we do (section 1.4.2 and 1.4.3). • Purpose, values, strategy and culture – we renewed our purpose in FY2019 to better capture the aspirations of all our stakeholders (sections 1.4.1, 1.4.2, 1.4.3, 1.6 and 1.7). • Performance measurement and control framework (sections 1.4 and 6.6). • Responsibilities to shareholders and stakeholders (sections 1.4.2, 1.4.3, 1.6.1 and 2.6). • Workforce policies and practices (sections 1.4.2, 1.4.3, 1.6.1, 1.6.2 and 2.6). | | Composition, succession and evaluation • Appointments – we have a rigorous process in place for Board appointments, and to consider succession having regard to diversity of gender, social and ethnic backgrounds and personal strengths (section 2.9). • Skills matrix – we have an appropriate mix of skills, experience and knowledge on the Board and in 2018 revised our skills matrix (section 2.7). Section 2.9 provides information on tenure and Board renewal. • Director review – the contribution of each Director to the work of the Board and its Committees, the expectations of Directors as specified in BHP’s governance framework and the performance of Directors. The review confirmed that each Director continues to contribute effectively (section 2.8). | | | Division of responsibilities • Chair of the Board – the Chair leads the Board and is responsible for its effectiveness and the effective contribution from all Non-executive Directors (section 2.3). • Board composition – the Board operates effectively with the appropriate balance of executives and Non-executives and believes the roles of the Chair and the CEO should be separated (section 2.3). • Non-executive Directors have sufficient time to meet their responsibilities – when we appoint new Directors we ensure they have sufficient time to undertake their responsibilities and are able to offer challenge, strategic guidance and specialist advice (section 2.2.1). • Time and resources – the Board ensures it has the necessary time, resources, policies and processes in place as part of its evaluation process (section 2.8). | | Audit Risk and Internal Control • Internal and external audit independence – we understand the importance of ensuring these lines of defence remain independent (section 2.10). • Fair balanced and understandable – the Board presents a fair balanced and understandable assessment of BHP’s position and prospects (section 2.10). • Management and oversight of risk – our risk and control environment is monitored and overseen by the Risk and Audit Committee. The Board, Risk and Audit Committee, and Sustainability Committee considered emerging and principal risk during the year (sections 1.5.4, 2.5, 2.10 and 2.11). | | Remuneration • Policies and practices – remuneration is designed to support our strategy and long-term sustainable success (section 3). • Formal and transparent procedure – we have formal and transparent procedures in place, and routinely engage with investors for their feedback (section 2.6.1). • Use of discretion – we have used discretion to adjust the formulaic remuneration outcomes (section 3). |
2.212.18 Additional UK disclosure
The information specified in the UK Financial Conduct AuthorityFCA Disclosure Guidance and Transparency Rules, DTR 7.2.6, is located elsewhere in this Annual Report. The Directors’ Report in section 4 provides cross-references to where the information is located. This Corporate Governance Statement was current and approved by the Board on 53 September 2019,2020 and signed on its behalf by: Ken MacKenzie Chairman 5Chair
3 September 2019 1702020
Section 3 Remuneration Report In this section This Remuneration Report describes the remuneration policies, practices, outcomes and governance for the KMP of BHP. BHP’s DLC structure means that we are subject to remuneration disclosure requirements in both the United Kingdom and Australia. This results in some complexity in our disclosures, as there are some key differences in the requirements and the information that must be disclosed. For example, UK requirements give shareholders the right to a binding vote on the remuneration policy every three years and as a result, the remuneration policy needs to be described in a separate section in the Remuneration Report. Our remuneration policy is set out in section 3.2. In Australia, BHP is required to make certain disclosures for KMP as defined by the Australian Corporations Act 2001, Australian Accounting Standards and IFRS. The UK requirements focus on the remuneration of executiveExecutive andnon-executiveNon-executive directors.Directors. At BHP, this is our Board, including the CEO, who is our sole Executive Director. In contrast, the Australian requirements focus on the remuneration of KMP, defined as those who have authority and responsibility for planning, directing and controlling the activities of the Group directly or indirectly. KMP includes the Board, as well as certain members of our senior executive team. After due consideration, the Committee has determined the KMP for FY2019 comprised:FY2020 comprised the following roles: allNon-executive Directors, the CEO, the Chief Financial Officer, the President Operations, Minerals Australia, the President Operations, Minerals Americas, and the President Operations, Petroleum. The following individuals have held their positions and were KMP for the whole of FY2019,FY2020, unless stated otherwise: Mike Henry, CEO and Executive Director (from 1 January 2020) and President Minerals Australia (to 31 December 2019) Andrew Mackenzie;Mackenzie, CEO and Executive Director (to 31 December 2019) Peter Beaven, Chief Financial Officer Daniel Malchuk, President Minerals Americas Geraldine Slattery, President Petroleum Non-executive Directors –- see section 3.3.133.3.14 for details of theNon-executive Directors, including dates of appointment or cessation (where relevant); Other Executive KMP, as set out in the table below.
| | | Name
| | Title
| Peter Beaven
| | Chief Financial Officer | Mike Henry
| | President Operations, Minerals Australia | Daniel Malchuk
| | President Operations, Minerals Americas | Steve Pastor
| | President Operations, Petroleum (to 17 March 2019) | Geraldine Slattery | | President Operations, Petroleum (from 18 March 2019) |
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| | | Contents
| 3.1 | | Annual statement by the Remuneration Committee Chairman | | | 3.2
| | Remuneration policy report | | | | | Remuneration policy for the Executive Director | | | | | Remuneration policy forNon-executive Directors | | | 3.3
| | Annual report on remuneration | | | | | Remuneration for the Executive Director (the CEO) | | | | | Remuneration for other Executive KMP (excluding the CEO) | | | | | Remuneration forNon-executive Directors | | | | | Remuneration governance | | | | | Other statutory disclosures |
| | | Abbreviation | | Item | AASB
| | Australian Accounting Standards Board | | | AGM | | Annual General Meeting | | | CDP | | Cash and Deferred Plan | | | CEO | | Chief Executive Officer | | | DEP | | Dividend Equivalent Payment | | | DLC | | Dual Listed Company | | | ELT | | Executive Leadership Team | | | GHG | | Greenhouse Gas | | | GSTIP | | Group Short-Term Incentive Plan | | | HPIF | | High Potential Injury Frequency | | | HSEC | | Health, Safety, Environment and Community | | | IFRS | | International Financial Reporting Standards | | | KMP | | Key Management Personnel | | | | KPI | | Key Performance Indicator | | | | LTIP | | Long-Term Incentive Plan | | | | MAP | | Management Award Plan | | | | MSR | | Minimum Shareholding Requirement | | | ROCOIF | | Occupational Illness Frequency | | | | ROCE | | Return on Capital Employed | | | | STIP | | Short-Term Incentive Plan | | | | TRIF | | Total Recordable Injury Frequency | | | | TSR | | Total Shareholder Return | | | UAP | | Underlying Attributable Profit |
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3.1 Annual statement by the Remuneration Committee ChairmanChair ‘Our FY2019 remuneration outcomes are aligned with performance, and the proposed enhancements to our remuneration policy will further strengthen this linkage and ensure our remuneration arrangements continue to support the delivery of our strategy.’
Carolyn Hewson, Chairman, Remuneration Committee`
Dear Shareholders, I am pleased to introduce BHP’s Remuneration Report for FY2019. During the past two years,financial year to 30 June 2020, which is my first since assuming the Remuneration Committee invested time reviewingChair role, and I am looking forward to engaging with shareholders as the Company’sCommittee undertakes its work. During FY2020, the Committee has continued its focus on achieving remuneration policy, to ensure it supportsoutcomes that fairly reflect the attractionperformance of BHP, and motivation of talented executives and, at the same time, aligns business performance and remuneration outcomes. Based on the findings of this review, several enhancements to the remuneration policywhich are being proposed.
Why change?
The purpose of BHP’s remuneration arrangements is to drive the delivery of strategy, attract and motivate talented executives, and ensure long-term alignment with our shareholders’ interests.
Shareholder support of BHP’s remuneration arrangements has been strong over many years, and we believe they have served stakeholders well. However, it is appropriate to regularly review opportunities to enhance the Group’s remuneration arrangements to deliver on their intended purpose. The LTIP is well understood, transparent and aligned to the interests of shareholders yetand other key stakeholders.
FY2020 has been an unprecedented year, with the reviews conductedCOVID-19 pandemic having widespread impacts on lives, society and the global economy. In the face of this, BHP employees have rallied in recent years have identifiedline with the following tendencies:Group’s purpose and values, working very effectively to keep the business running and performing strongly, and keeping each other safe. The LTIP rewards volatility in performance rather than sustained outperformance,I would like to thank my predecessor as Remuneration Committee Chair, Carolyn Hewson, for her leadership and for establishing a Committee with a strong foundation of policies, principles and practices upon which is an aspiration for BHP.
Thereour decisions are material time lags between key long-dated decisions and their LTIP outcomes, leading to a discrepancy between participants who are the decision-makers, and those who eventually experience the positive or negative remuneration outcomes.
The LTIP tends to deliver ‘all or nothing’ outcomes, often for extended periods.
When the LTIP next vests at 100 per cent (or similarly high levels), there is likelyable to be significant scrutiny by shareholders andmade. This is especially so in the unpredictable times in which we find ourselves. We have also made other stakeholders, due to the overall remuneration accruing from the awards granted.
The enhancements to the remuneration policy being proposed mitigate these concerns, without relinquishing the well understood and supported benefits of the LTIP.
Consultation with shareholders
During FY2019, the Committee engaged with shareholders on the concerns above and discussed various possible improvements; then with the benefit of valuable shareholder input from those discussions, several proposed changes were tested with shareholders in a second round of discussions. While a majority of those consulted were comfortable with the rationale for, and the specifics of, the proposed changes, constructive feedback was also received in relation to certain aspects. Three modifications were made to the proposal based on this shareholder feedback (see ‘Before and after comparison’ section).
What is proposed?
The following changes to the Committee this year. New Directors Gary Goldberg and Dion Weisler have joined Anita Frew and Shriti Vadera on the Committee and I would like to thank all members for their contributions.
Remuneration policy The Committee sought and received approval from shareholders at last year’s AGMs for a revised remuneration policy, are proposedwith almost 94 per cent of votes in favour, and we believe the policy will serve stakeholders well. The key changes approved for the CEO:CEO were: A change in the balance of incentive arrangements comprising: Aa significantly reduced LTIP grant size from 400 per cent toof 200 per cent of base salary (on a face value basis);, down from 400 per cent
Aa CDP that haswith a longer-termlonger term focus than the currentformer STIP. The CDP will includeoutcome is delivered one-third as a cash award, pluswith two-thirds delivered in equity, as two-year and five-year deferred share awards each of equivalent value to the actual cash award, which will alignaward. This aligns participants’ incentive remuneration with performance over the short, mediumshort-, medium- and long term;long-term
In aggregate, theseThese two changes in combination dodid not materially alter the target value or vesting profile of incentive remuneration, but resultresulted in a 12 per cent reduction in the maximum value of total annual remuneration.possible remuneration for a year.
A significant reduction in the pension contribution rate from 25 per cent of base salary down to 10 per cent of base salary, (thedown from 25 per cent (noting that the estimated workforce average is approximately 11.5 per cent of base salary), and because. As a result of this change, fixed remuneration for the CEO role has been reduced by 12 per cent and overall target remuneration is reduced by 4 per cent. The introduction of atwo-year post-retirement shareholding requirementrequirement. While these changes took effect from 1 July 2019, existing short- and long-term equity awards made under prior policies remain on foot and will vest, subject to existing service and performance conditions, over coming years. We were also pleased to again receive strong support for our overall Remuneration Report from shareholders at the CEO. What is2019 AGMs, with approximately 96 per cent voting ‘for’ the impact?report. This continues our strong shareholder support over the past five years, where on average almost 97 per cent have voted in favour.
The proposed changes mitigateCommittee strives to implement the leverageremuneration policy in a considered way: We test the CEO’s remuneration against CEO roles in other global companies of similar complexity, size, reach and industry. The remuneration also reflects the overallCEO’s responsibilities, location, skills, performance, qualifications and experience. This detailed benchmarking ensures BHP’s executive remuneration packages are competitive enough to attract and retain talented executives, without being excessive. External benchmarking shows the CEO’s target remuneration package is below the average for similar global companies and the likelihood of unpalatable quantum outcomes is reduced significantly. The chart below shows the ‘all or nothing’ LTIP vesting outcome pattern since 2009, projected to 2022.importantly, can only be realised as actual remuneration if performance targets are met. 173
LTIP vesting
While no LTIP awards have vested since 2014,performance-to-dateThe CEO’s remuneration is deliberately tied to 30 June 2019 for the next three LTIP awards indicates projected vesting of 70 per cent in FY2020, 100 per cent in FY2021 and 100 per cent in FY2022. Such vesting would continue the ‘all or nothing’ pattern, potentially giving rise to significant scrutiny of overall remuneration outcomes by shareholders and other stakeholders.
A comparison of actual total remuneration outcomes from FY2009-FY2019 against notional outcomes over the same period under the proposed changes, indicates the prior CEO’s total remuneration would have been lower by US$19 million (25 per cent lower) under the proposed remuneration policy. Conversely, the current CEO’s total remuneration would have been marginally higher by US$1 million (2 per cent higher). The Remuneration Committee consider that these remuneration outcomes would have been more appropriate, given the performance of the Group andbusiness, with the majority of remuneration delivered in BHP shares, not cash. The CEO also has a minimum shareholding requirement of five times pre-tax base salary, which continues for two years post-retirement. This aligns the CEO to the experience of shareholders over the period.
Comparison of actual and notional outcomes under the proposed changes
In addition, thede-weighting of the LTIP in the overall remuneration package mitigates the other concerns referred to above. The changes to pension arrangements and the introduction of post-retirement shareholding requirements conform to best practice governance.
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Before and after comparison
The following table details the elements of the CEO’s remuneration package that are changing and those that are not.
As noted above, three changes to the proposed remuneration policy were made based on shareholder feedback during the consultation meetings. These are referred to in the table; however, for ease of reference, they are:
Increasing the weighting on financial measures from 45 per cent to 50 per cent in the CDP scorecard (with a commensurate reduction from 30 per cent to 25 per cent for individual measures).BHP’s shareholders.
Replacing the CDP absolute underlying attributable profit financial measure with a return on capital measure.
Applying a policy ofpro-rata reduction to the CDP five-year deferred shares for leavers entitled to retain awards, instead of vesting in full (note that vesting is not accelerated; it will occur on their scheduled vesting date).
| | | | | | | | | Element
| | Before
| | After
| | Change
| Fixed pay
| | Base salary | | Fixed amount per annum | | Fixed amount per annum | | No change | | Pension contribution | | 25% of base salary | | 10% of base salary (reduced to 20% from 1 July 2020, 15% from 1 July 2021, and 10% from 1 July 2022 onwards, but immediate for new hires) | | Reduced to below workforce average of approximately 11.5% of base salary | | | Benefits | | Specified benefits up to a maximum of 10% of base salary | | Specified benefits up to a maximum of 10% of base salary | | No change | Variable pay
| | STIP/CDP | | STIP – Cash award with a target of 80% of base salary (maximum 120%) with an award oftwo-year deferred shares equivalent in value to the actual cash award
HSEC:
• 25% weighting
• Includes circa 4% on climate change
Financial:
• 45% weighting
• Absolute underlying attributable profit metric
Individual:
• 30% weighting
Good leavers:
• Two-year deferred shares vest in full on their scheduled vesting dates
| | CDP – Cash award with a target of 80% of base salary (maximum 120%) with awards oftwo-year and five-year deferred shares each equivalent in value to the actual cash award
HSEC:
• 25% weighting
• From 1 July 2020 to include increased weighting, specificity and transparency on climate change
Financial:
• 50% weighting
• Underlying return on capital metric
Individual:
• 25% weighting
Vesting underpin:
• A five-year holistic review of performance
Good leavers:
• Two-year deferred shares vest in full on their scheduled vesting dates
• Five-year deferred shares vestpro-rata for time served, vesting on their scheduled vesting date
| | The CDP has an additional component of five-year deferred shares of equivalent value to the actual cash award
KPIs reweighted as shown and return on capital metric introduced based on feedback during consultations with shareholders
Vesting of the five-year deferred shares is underpinned by a five-year holistic review of performance
Pro-rating for five-year deferred shares for good leavers introduced subsequent to consultations with shareholders
| | LTIP | | 400% of base salary on a face value basis (164% fair value)
Good leavers:
• LTIP awards reducedpro-rata based for time served, vesting on their scheduled vesting date and subject to original performance conditions
| | 200% of base salary on a face value basis (82% fair value)
Good leavers:
• LTIP awards reducedpro-rata based for time served, vesting on their scheduled vesting date and subject to original performance conditions
| | Grant size reduced by half
No other changes
| Remuneration package | | At target | | US$7.7 million | | US$7.4 million | | Reduced by 4% | | At maximum (fixed share price) | | US$13.1 million | | US$11.5 million | | Reduced by 12% | Shareholding requirements | | | | 500% of salary (based on owned shares only) | | 500% of salary (based on owned shares only) with a requirement to hold these shares for a minimum of two years post-retirement | | Introduction of atwo- year post-retirement shareholding requirement |
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Maintaining our long-term focus
One aspect of the proposal that attracted comment from a number of shareholders was whether a sufficiently long-term perspective would be retained despite a reduced weighting of five-year relative TSR in the overall remuneration arrangements. The Board and Remuneration Committee are committed to ensuring the CDP scorecard is a genuine combination of short-term business imperatives and progress towards long-term sustainable business outcomes that are subject to rigorous and transparent performance assessment. This will also be reflected in our disclosures in the annual remuneration report.
The scorecard set out below is a combination of short, medium and long-term elements that the Board and Remuneration Committee view as priorities for FY2020.
| | | Categories
| | Item
| HSEC (25%)
| | • Fatalities and other HSEC incidents
• HPIF, TRIF and Occupational illnesses
• HSEC risk management (including climate change)
• HSEC initiatives linked to five-year Public Targets (including climate change)
| Financial (50%)
| | • Return on Capital (adjusted for commodity prices, exchange movements and exceptional items that are not within management control during the performance year)
| Individual (25%)
| | • Portfolio/strategy (i.e. aligned to long-term plans)
• Tailings dams
• Future options and exploration (i.e. aligned to long-term plans)
• Culture and capability (including quantitative employee survey and diversity targets)
• Social value (including management of risk, community relationships and environmental performance linked to our long-term success)
|
Performance is measured on an annual basis against the scorecard, and CDP awards are made in the form of cash,two-year deferred shares and five-year deferred shares. While there are certain appropriate short-term components of the scorecard (e.g. financial performance), a number of the HSEC and Individual measures are long term elements which contribute to value creation in the longer term or will take multiple years to realise their full potential.
The Board and Committee take the view that long-term objectives (including items such as our public HSEC five-year targets, portfolio/strategy implementation, critical tailings dam work, capital projects, future options, exploration, culture, capability and social value) need to be broken down into milestones if they are to be successfully implemented and long-term value created. Many of these items in the scorecard are multi-year in nature, and while the Committee is measuring the milestones on an annual basis, they have been crafted to contribute to long-term successful implementation.
The CDP scorecard will be reviewed at the commencement of each performance year to ensure it captures the most important elements for the coming year. For example, the link between executive remuneration and climate change will be reviewed over FY2020, with a view to strengthening that link for the financial year that commences on 1 July 2020.
The first CDP awards will be made in late CY2020 in respect of FY2020. Awards to be made in late CY2019 in respect of FY2019 will be made under the existing STIP arrangements.
Vesting will also be subject to an underpin through a holistic performance review
To ensure the vesting of five-year deferred shares under the CDP is underpinned by ongoing performance post-grant, the vesting will also be subject to an underpin. This will take the form of a holistic review of performance at the end of the five-year vesting period, including a five-year view on HSEC performance, profitability, cash flow, balance sheet health, returns to shareholders, corporate governance and conduct.
If this holistic review determined that the scheduled vesting outcome would not be appropriate, the Committee has discretion to reduce vesting. The exercise of reasonable downward discretion – to adjust variable pay outcomes downwards – has been a feature of BHP’s approach over many years where the status quo or a formulaic outcome does not align with the overall shareholder experience. For example, underexperience, and this remains unchanged.
The Committee is focussed on having and applying a remuneration policy and approach that supports the LTIP, this holistic review resulted in discretion being applied in 2013 whenGroup’s strategy and enables us to attract, retain and motivate the LTIP vesting was reduced from 100 per centexecutives critical to 65 per cent. 176delivering the best outcomes for all of BHP’s stakeholders. In addition, the Committee is cognisant of the need to navigate the priorities of differing jurisdictions.
LTIPCOVID-19
In early 2020, BHP began to experience the impacts of the COVID-19 pandemic. All BHP employees have come together as one team to deal with the issues faced and despite the challenges, BHP’s results have been strong. The only changeCEO and other ELT members have provided strong and effective leadership through this period, and the Committee is proud of the way BHP’s employees have found new ways of working, collaborated to solve problems, supported each other and their communities, and aligned around a common goal. Despite the challenges the COVID-19 pandemic has presented, in FY2020 BHP has not needed to furlough any employees without pay, has not sought any government assistance, and did not raise additional equity. In addition, BHP’s strong, safe operational performance through this year, together with solid profitability, enabled the Board to announce a robust final dividend payable to shareholders in September 2020. This follows a record interim dividend paid to shareholders in March 2020, and continues the delivery of strong and consistent returns to shareholders. The COVID-19 pandemic increased costs and reduced volumes during FY2020, which negatively impacted executive remuneration outcomes. During the COVID-19 pandemic, BHP has been especially conscious of contributing to the LTIP is a reductioncommunities in which we operate, by doing all it can to keep employees, their families and their communities safe and healthy. BHP took action to slow the spread of COVID-19 into the workforce by investing in more transportation capacity, restricting travel to the operations and protecting at-risk workers. BHP has also created hundreds of operational jobs across our Minerals Australia business, funded local health and social programs in the sizecommunities where BHP operates, and for the Company’s small, local and Indigenous suppliers, BHP reduced the time taken to pay their invoices to help address the financial stress they might otherwise face as a result of the grant. The comparator groups, relative TSR condition, five-year performance term, vesting scale, leaver conditions, availabilitypandemic. Decisions and activities of discretion (downwards), malusthe Committee A key element of the Committee’s work during the year was the remuneration implications of CEO succession. Mike Henry was appointed CEO and clawback are unchanged. While the LTIP isde-weighted in the overallExecutive Director effective 1 January 2020. Mike’s fixed remuneration package, it does focus executive effort on sustainable long-term value creation, and is seen asappointment was set at US$1.870 million per annum, which included a successful program by many shareholders where remuneration outcomes and the shareholder experience are aligned. In order to ensure there isbase salary of US$1.700 million per annum plus a fair transitional outcome for participants, the LTIP grant to be made in late CY2019 will be made on the current 400pension contribution of 10 per cent of base salary (face value)salary. This level of fixed pay was a reduction of 12 per cent from Andrew Mackenzie’s fixed pay of US$2.125 million per annum. Mike participates in the CDP and LTIP in accordance with the approved remuneration policy.
Andrew Mackenzie stepped down as CEO and a Director of the Group on 31 December 2019, and he retired from BHP on 31 March 2020. The terms of Andrew’s departure announced on 23 December 2019 reflected the Group’s remuneration policy and the rules of our incentive arrangements and leaving entitlements as approved by shareholders. Further information in respect of this is provided in sections 3.3.13 and 3.3.24. Other key decisions and activities of the Committee during FY2020 included: Completing the 2019 review of the remuneration policy and seeking and gaining the approval of shareholders at the 2019 AGMs Considering remuneration for other members of the ELT and the Group Company Secretary Aligning the determination of CDP equity award sizes to a 12-month pricing approach, also used for LTIP awards, to minimise potential volatility over time Setting and reviewing outcomes against performance measures and conditions of relevant incentive plans Redesigning, with the support of the Sustainability Committee, the HSEC component of the CDP scorecard to give greater weight and transparency to climate change Reviewing the fee for the BHP Chair Reviewing and adopting changes and improvements flowing from regulatory requirements and guidance, which in turn helps us improve our processes and approaches Engaging with shareholders and other key stakeholders Undertaking regular reviews of workforce engagement, workforce remuneration and related policies, remuneration by gender and the annual Shareplus enrolment update CEOs’ remuneration The scorecard against which the CEO’s annual performance is assessed comprises stretching performance measures, including HSEC, financial and individual performance elements. For FY2020, the Remuneration Committee has assessed Mike Henry’s and Andrew Mackenzie’s performance and determined CDP outcomes of 96 per cent for each of them, against the target of 100 per cent (and the maximum of 150 per cent), with potential vesting five years laterthe outcomes prorated to reflect their periods as CEO. These outcomes took into account BHP’s strong HSEC performance during the year, with no fatalities recorded, and improvements in all key health and safety indicators, while environment and community outcomes were broadly in line with expectations. Financial and operating performance was strong, yet fell slightly short of the stretching targets set at the commencement of the year. While the mid-CY2024.COVID-19 pandemic impacted BHP, society and the global economy, the Group maintained continuity of operations while keeping employees healthy and safe. Despite this, there were significant costs and other impacts of COVID-19 to BHP’s financial results for FY2020. The first five-year deferred sharesdirect costs have been recorded as an exceptional item in the financial statements. Nevertheless, the Committee concluded that, resultwhile these COVID-19 related costs were outside the control of management, they, together with the volume impacts of COVID-19, should flow through to the financial measures for CDP scorecard purposes, thereby reducing the remuneration outcome for executives from what they would have otherwise been. The Committee considered this was appropriate in light of the global impacts of the COVID-19 pandemic. The Committee also considered each of the CEOs’ performance underagainst their individual objectives. For Mike, this included assuming the CDP will be granted in late CY2020CEO role, redefining and will first vest five years later inmid-CY2025.restructuring the ELT, enhancing the performance improvement focus, strategy review, portfolio value and options analysis, accelerating gender balance aspirations, and the work of the Tailings Dams Taskforce. For Andrew, this included enhancing the value of the portfolio, maximising performance options, and maintaining a robust ELT succession slate. The LTIP grantCommittee considered both Mike’s and Andrew’s performance against their individual objectives to be made in late CY2020 will be made online with target. While the reduced 200CEOs’ scorecard outcomes were determined at 96 per cent of target and the scorecard outcomes for other Executive KMP were on average marginally ahead of target, the short-term incentive pool applicable to the majority of BHP employees below the ELT level was above target. This was considered appropriate and due recognition, given the excellent performance across BHP’s whole workforce in the face of the COVID-19 pandemic, where, despite this, strong safety performance and operational continuity was achieved during FY2020. The vesting outcome for the 2015 LTIP against the relative TSR performance conditions was 48 per cent, and this is the first vesting under the program since 2014. BHP outperformed the sector peer group significantly, but did not meet the performance threshold for vesting against the MSCI World index. This 48 per cent level of vesting is aligned with the long-term average vesting under the LTIP since its inception 16 years ago. Consistent with prior practice, the Board and Committee has conducted a holistic review of business performance over the prior five years since grant to ensure this level of vesting was appropriate. Further details in respect of overall remuneration outcomes for the year for the CEOs, together with information on how the outcomes are aligned to performance during FY2020, are provided in section 3.3. As at the date of this report, Mike’s shareholding meets the minimum shareholding requirement of five times pre-tax base salary. For FY2021, the Committee determined that Mike’s base salary (face value), with potential vesting five years later also inmid-CY2025. CEO remuneration outcomes
Since his appointment as CEO in 2013, Andrew Mackenzie has not received a base salary increase and, after review in 2019, the Committee has again determined his salary will remainremains unchanged at US$1.700 million per annum.annum, as it was at the time of his appointment. In addition, prior to the changes being proposed this year, the other components of his total target remuneration (pension contributions, benefits, CDP and short-term and long-term incentive targets) have also remained unchanged since 2013. Mr Mackenzie is BHP’s only Executive Director.
From a performance perspective, while shareholders have benefited during FY2019 from positive share price growth and significant shareholder returns, the year was a challenging one operationally for BHP, and the remuneration outcomes for FY2019 for our senior executives reflect this.
The scorecard against which Mr Mackenzie’s performance is assessed comprises both short-term business imperatives and progress towards long-term sustainable business outcomes, including HSEC, financial and individual performance elements, which have stretching performance measures subject to rigorous and transparent performance assessment. For FY2019, the Remuneration Committee has assessed Mr Mackenzie’s performance and determined an STIP outcome of 48 per cent against the target of 100 per cent (which represents an outcome of 32 per cent against the maximum STIP opportunity available to him or 77 per cent of base salary).
This outcome took into account HSEC performance, which primarily reflected the tragic fatality that occurred at the Saraji coal mine in Queensland, Australia in December 2018. The Committee took advice from the Sustainability Committee, giving the Group’s safety performance the greatest weighting in the HSEC category.
Controllable financial performance was below the threshold financial target set at the commencement of the year, mainly due to operational issues leading to below target production performance across the Group.
The Committee considered the CEO’s performance against individual objectives to be ahead of target, including improved returns of major capital projects in development, progressing BHP’s rigorous Capital Allocation Framework, positive outcomes from exploration, and the successful completion of the Onshore US divestment, with the proceeds distributed in a value accretive manner, contributing to the positive shareholder experience during the year.
In relation to the LTIP awards granted in 2014, BHP’s TSR performance was positive 6.0 per cent over the five-year period from 1 July 2014 to 30 June 2019. This is below the weighted median TSR of peer companies of positive 15.3 per cent and below the TSR of the MSCI World index of positive 41.3 per cent. This level of performance results in zero vesting for the 2014 LTIP awards, and accordingly the awards have lapsed.
Overall, Mr Mackenzie’s actual total remuneration for FY2019 was US$3.531 million, compared with US$4.657 million for FY2018, with the decrease due to a lower STIP outcome this year compared with FY2018. The LTIP outcome was zero in both years.
In line with the approach for Mr Mackenzie, after review in 2019, the base salaries for all other Executive KMP willLTIP) also remain unchanged. A summary of Mike’s arrangements for FY2021 is set out below.
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FY2019 CEO remuneration
FY2020FY2021 CEO remuneration
| | | | | | | | | | | | | | | Fixed remuneration | | | | CDP | | | | LTIP | • Base salary US$1.700 million per annum. • No change to base salary. • Pension contribution 25%10 per cent of base salary, reducing thereafter as follows: to 20% from 1 July 2020, to 15% from 1 July 2021, and to 10% from 1 July 2022 onwards.salary. | | | | • Target cash award of 80%80 per cent of base salary (maximum 120%)120 per cent). • Plus two awards of deferred shares each of equivalent value to the cash award, vesting in two and five years, respectively. • Three performance categories: – HSEC – 25%25 per cent – Financial – 50%50 per cent – Individual performance – 25%25 per cent | | | | • The annual LTIP grant is to be based on a face value of 200%*200 per cent of base salary. • Our LTIP awards have rigorous relative TSR performance hurdles measured over five years. * 400% of base salary for the late 2019 LTIP grant with the late 2020 LTIP grant to be made under the new remuneration policy.yeans.
|
We have also addressed last year’s commitment to clarify and strengthen the link between executive remuneration and climate change for FY2021. The weighting on climate change is now 10 per cent of the 25 per cent HSEC weighting in the CDP scorecard, which compares to circa 4 per cent allocated to climate change in the prior STIP, and we have enhanced the disclosure of climate change-related performance targets. Further details are set out in section 3.3.9. Mike is BHP’s only Executive Director, however, the Committee has also reviewed the base salaries and total target remuneration packages for other Executive KMP and determined that there would be no increases to base salaries as a consequence of that review, and that other aspects of their remuneration arrangements would remain unchanged. ChairmanRemuneration outcomes for the Chair andNon-executive Director feesDirectors
Fee levelsFees for the ChairmanChair andNon-executive Directors are reviewed annually including benchmarkingand are benchmarked against peer companies. No changes to the Chairman’sChair’s fee will be made for FY2020.FY2021. This follows a review in 2017, where a decision was made to reduce the Chairman’sChair’s annual fee by approximately 8 per cent from US$0.960 million to US$0.880 million with effect from 1 July 2017, which followed an earlier reduction, effective 1 July 2015, of approximately 13 per cent from US$1.100 million to US$0.960 million.
Base fee levels forNon-executive Directors will also remain unchanged, after they were also reduced effective 1 July 2015 by approximately 6 per cent, from US$0.170 million to US$0.160 million per annum. Prior to the above reductions in fee levels for the ChairmanChair andNon-executive Directors, their fees had remained unchanged since 2011. TransitionSummary
With the COVID-19 pandemic this year, FY2020 has presented many challenges, not only for BHP, but also for many other companies, governments, employees, families and communities across the world. On behalf of the Remuneration Committee, Chairman role As youI would be aware, this will be my last statementlike to shareholders as Chairmanrecognise the hard work, dedication and sacrifices of the Remuneration Committee, as I will be retiring from the Boardall of our employees. They have aligned around a common cause, and the Committee after the Australian AGM later this year. A key focus during my tenure as Chairman of the Committee has beenthrough their steadfast commitment, they have remained safe and healthy, continued to arrive at pay outcomes that are fairsupport their communities, and enabled BHP to generate strong results for all stakeholders. That is, fair to executives reflecting the outcomes they have achieved, fair to shareholders in terms of the outcomes they have experienced, and fair to other stakeholders in terms of what is regarded as reasonable compensation for the complex and global roles our executives perform. Of course, sometimes this has not been straightforward, and it has involved careful consideration and balanced decisions on some occasions to achieve the right outcome.
I was fortunate when I assumed the role to have the wisdom and experience of my predecessors to lean on and to learn from, particularly Sir John Buchanan whom I succeeded as Chairman of the Committee. Sir John left a very strong legacy at BHP on remuneration matters for my fellow Committee members and me to build upon. I have taken that responsibility very seriously during my tenure and I am also committed to seeing this work continue. To that end, I have been working closely with the BHP Chairman and Committee members on an effective and seamless transition. I am confident that my colleagues on the Board will appoint a Chairman of BHP’s Remuneration Committee who, with the undoubted continuing support from the BHP Chairman and Committee members, will be very successful and effective.
Summary
The Committee believes the remuneration outcomes for FY2019FY2020 reflect an appropriate alignment between pay and performance during the year and weare also fair in terms of the global context in which decisions have been made. We are confident that shareholders will recognise this as a continuation of our long-held approach. In late 2019, our remuneration policy enhancements will be put before shareholders at the UK and Australian AGMs for approval. BHP’s Board and Remuneration Committee believe the proposed changes improve our senior executive remuneration arrangements and they will continue to promote long-term value creation. We look forward to your support.
As always, we look forward to ongoing dialogue with, ourand the support of, BHP’s shareholders, and I very much look forward to meeting shareholders face-to-face when once again we are able to do so. As always, we welcome your feedback and comments on any aspect of this Report.
Susan Kilsby | | Carolyn Hewson | Chairman, Remuneration Committee |
5Chair, Remuneration Committee
3 September 2019 1782020
Common questions and answers on the remuneration policy changes
Why are changes being made now?
Having invested time reviewing the Group’s remuneration policy, to ensure it supports the attraction and motivation of talented executives and, at the same time, aligns business performance and remuneration outcomes, the Remuneration Committee concluded that the time was right to make changes to mitigate concerns with our current arrangements, particularly regarding the LTIP.
In addition, other changes are proposed to conform with best practice governance, namely reducing our pension contribution rate to 10 per cent of base salary, which is below the workforce average, and introducingtwo-year post-retirement shareholding requirements for the CEO.
Is this a shift from the long-term to the short term?
No, the current high level of focus on the long-term business performance is maintained. While the current five-yearTSR-based LTIP isde-weighted, the CDP scorecard is a genuine combination of short-term business imperatives and progress towards long-term sustainable business outcomes that are subject to rigorous and transparent performance assessment. Disclosures in the annual remuneration report will reflect that.
In addition, awards under the CDP (being rights to receive ordinary BHP shares at the end of the relevant deferral periods) will include five-year deferred shares, which provide ongoing share price exposure over the long-term. At the time of vesting, the five-year deferred shares will be subject to a holistic review of business performance over the prior five years since grant to ensure vesting is appropriate.
What is the change to target and maximum remuneration outcomes?
Total target remuneration will reduce by 4 per cent from the current arrangements, and maximum total remuneration (at a fixed share price) will reduce by 12 per cent.
What reduction in quantum will apply for the switch from five-year LTIP to five-year CDP deferred shares?
The size of the discount in award numbers varies depending on the assumed CDP scorecard outcome. For example, when comparing the current LTIP awards at face value to the future CDP awards:
At a target CDP outcome, the proposal incorporates a 60 per cent discount.
At a maximum CDP outcome, the proposal incorporates a 40 per cent discount (albeit, a maximum outcome under the scorecard has never been achieved previously).
In reviewing these discounts, the following has been considered:
The quantum of the CDP grant is directly related to the scorecard performance condition outcomes (i.e. it is not a grant of deferred shares without performance conditions).
Achieving a maximum outcome under the CDP is highly unlikely, whereas LTIP maximum outcomes have occurred in the past.
The average short-term incentive outcome over the past 11 years has been 53 per cent of maximum (or 79 per cent of target) and a maximum outcome has never been achieved, whereas LTIP maximum outcomes against the performance conditions have been achieved in five of the past 11 years.
An underpin review will apply to the vesting of the five-year deferred shares, and BHP has a strong track record of applying discretion which ensures appropriate remuneration outcomes.
Why weren’t other measures introduced for the LTIP?
Our current relative TSR approach in the LTIP is well understood, transparent and simple, and is demonstrably aligned to the interests of shareholders, particularly through itsfive-year duration, longer than most other LTIPs in the market.
Through this and prior reviews, the Committee has concluded that it is difficult to identify substantive long-term KPIs as other measures for the LTIP that are an improvement on the current approach. Such KPIs do not generally have the transparency and rigour preferred by both shareholders and participants, or their nature can make it difficult to set new targets for each successive five-year performance period, or are derived from accounting results that can be volatile over the long-term due to movements in commodity prices and are challenging to measure against peer companies on a relative basis.
Why is this year’s LTIP grant being made at 400 per cent of base salary (face value)?
This is to ensure the proposed changes align the equity award grant and vesting timings between the current and proposed arrangements so as not to inadvertently create a benefit or a penalty for the CEO because of the changes.
The LTIP grant to be made in late CY2019 will be made on the current 400 per cent of base salary (face value), with potential vesting five years later inmid-CY2024. The first five-year deferred shares that result from performance under the CDP will be granted in late CY2020 and will first vest five years later inmid-CY2025. The LTIP grant to be made in late CY2020 will be made on the reduced 200 per cent of base salary (face value), with potential vesting five years later also inmid-CY2025.
Why will the five-year deferred shares bepro-rated under the CDP for leavers entitled to retain them?
The five-year LTIP haspro-rating applied for time served for leavers who are entitled to retain their awards. As the CDP five-year deferred shares are also long-term in nature, the same approach has been applied.
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As with the five-year LTIP, any retained CDP five-year deferred shares will only vest on the originally scheduled vesting date.
Will there be greater scope for payment for failure?
The Board and Committee consider it is important to ensure that remuneration outcomes align to business performance over the long term. This is achieved by the use of long-term equity awards, which are only granted and vested after satisfying stretching performance targets, and which provide long term share price exposure.
To ensure the vesting of five-year equity awards is underpinned by ongoing performance, any vesting, whether deferred shares under the CDP or performance shares under the LTIP, will be subject to a holistic review of performance as referred to above.
This review of business performance is an important safeguard against inappropriate remuneration outcomes. This process is also consistent with BHP’s past exercise of appropriate downward discretion where the status quo or a formulaic outcome does not align with the overall shareholder experience. Other examples in recent years include reducing the CEO’s remuneration package by 25 per cent in 2013, zero STI outcomes for the CEO (and Chief Executive Petroleum) in 2012 as a result of shale impairments, the reduction in Chairman fees in 2015 and 2017 and inNon-executive Director fees in 2015, and the zero STI outcome for the CEO in 2016 as a result of the dam failure at Samarco, and the ongoing decline in commodity markets and the associated negative impact on our performance.
Are the HSEC and Individual measures all qualitative?
No, many of the targets in the HSEC and Individual measure categories have quantitative targets. For example, in the HSEC measures, many of the targets are directly linked to the quantified five-year HSEC targets that BHP has published externally in its Sustainability Report. Additionally, under the Individual measures, many of the targets are expressed as quantified outcomes over which rigorous assessment can be applied.
Are the arrangements sufficiently linked and aligned to business performance?
The proposed variable pay arrangements have strong links to performance and the shareholder experience as outlined below:
Determining the size of CDP award outcomes – a balanced scorecard with a mix of short, medium and long-term elements.
Direct link to the share price – deferred shares under the CDP and performance shares under the LTIP vesting over the medium and long-term.
A rigorous LTIP with vesting of awards determined by long-term relative performance – five-year performance shares with vesting driven by relative TSR.
The proposed variable pay arrangements include long-term,‘at-risk’, equity-based features, to ensure the ultimate remuneration and wealth outcomes are aligned with performance. Of annual total target remuneration, almost 40 per cent is earned over a five-year timeframe, 75 per cent is performance-based variable pay and ‘at risk’, and almost 60 per cent is delivered in the form of equity awards with long-term share price exposure.
Once shares are owned, a significant MSR applies, being five times base salary for the CEO, and atwo-year post-retirement shareholding requirement for the CEO from 1 July 2020. Together these ensure long-term, material share price exposure.
Are the targets under the CDP scorecard sufficiently stretching and robust? Will outcomes be easier to achieve?
The Board and Committee will ensure the CDP scorecard includes rigorous and stretching performance targets. Evidence of this is seen in the outcomes against the short-term incentive scorecard historically which have averaged 53 per cent of maximum (or 79 per cent of target) over the past 11 years for the CEO, and this rigorous and stretching approach will be unchanged.
Why is the pension contribution rate changing? Will it change immediately?
When the current CEO assumed the role in 2013, the pension contribution rate was reduced from the former CEO’s 40 per cent of base salary to the current rate of 25 per cent of base salary. Our analysis indicates that the market-competitive pension contribution rates for a majority of employees across the Group’s global locations range from8-20 per cent of base salary, with an average of approximately 11.5 per cent of base salary. Accordingly, in order to promote a more equitable outcome, we have decided to reduce the pension contribution rate for senior executives to 10 per cent of base salary, lower than the workforce average.
In order to be fair to incumbents, this will be introduced gradually over the next three years. The rate of 25 per cent of base salary will apply until 30 June 2020, reducing to 20 per cent from 1 July 2020, reducing again to 15 per cent from 1 July 2021, and a rate of 10 per cent applying from 1 July 2022 onwards. For a new appointee, the pension contribution rate of 10 per cent of base salary will apply immediately.
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3.2 Remuneration policy report BHP has an overarching remuneration policy that guides the Remuneration Committee’s decisions. Under UK legislation, shareholders have the opportunity to vote on our remuneration policy every three years, with binding effect in regard to the Directors (including the CEO). The Committee undertook a review ofUnder Australian legislation, shareholders also have the policy during the past year and determined that while the current policy remains appropriate in many respects and alignedopportunity to vote on our business priorities, certain proposed enhancements to variable pay and pension arrangements will support the delivery of our strategic priorities. A summary of proposed changes to the remuneration policy forin conjunction with the Executive Director is outlined below. No changes are proposedbroader Remuneration Report, each year at the AGMs as it applies to theall KMP under a non-binding advisory vote. Our remuneration policy, for ourNon-executive Directors. This remuneration policy is subject to a binding votewhich was approved by shareholders at the 2019 AGMs, has not changed and if approved, will apply with effect from the November 2019 BHP Group Limited AGM.is repeated below.
Remuneration policy for the Executive Director This section only refers to the remuneration policy for our CEO, who is our sole Executive Director. If any other executive were to be appointed an Executive Director, this remuneration policy would apply to that new role. 3.2.1 Components of remuneration The following table shows the components of total remuneration, the link to strategy, the applicable operation and performance frameworks, and the maximum opportunity for each component, including a summary of the proposed enhancements to our variable pay plans and changes to pension arrangements.component. In summary, the proposed remuneration policy enhancements are detailed below:
A CDP which has a longer term focus than the STIP and which comprise a mix of short, medium and long-term award outcomes to align incentive remuneration with performance:
| ¡ | | Cash award of 80 per cent of base salary at target; 120 per cent of base salary at maximum.
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| ¡ | | An amount equivalent to the actual cash award in deferred shares restricted for two years.
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| ¡ | | An amount equivalent to the actual cash award in deferred shares restricted for five years.
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Reduction of the maximum face value of the LTIP award by half, from 400 per cent of base salary to 200 per cent of base salary. All other terms of the current LTIP remain unchanged.
Reduction in pension contribution rates for the existing CEO to 10 per cent of base salary from 25 per cent of base salary over the next three years.
| | | | | Remuneration component
and link to strategy | | 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, denominated in US dollars, is broadly aligned with salaries for comparable roles in global companies of similar global complexity, size, reach and industry, and reflects the CEO’s responsibilities, location, skills, performance, qualifications and experience. • Base salary is reviewed annually with effect from 1 September. Reviews are informed, but not led, by benchmarking to comparable roles (as above), changes in responsibility and general economic conditions. Substantial weight is also given to the general base salary increases for employees. • Base salary is not subject to separate performance conditions. | | 8% increase per annum (annualised), or inflation if higher in Australia. | | | | Pension contributions (2) Provides a market-competitive level of post-employment benefits provided to attract and retain a high-quality and experienced CEO. | | • Pension contributions are benchmarked to comparable roles in global companies and have been determined after considering the pension contributions provided to the wider workforce. • A choice of funding vehicles is offered, including a defined contribution plan, an unfunded retirement savings plan, an international retirement plan or a self-managed superannuation fund. Alternatively, a cash payment may be provided in lieu. | | For the existing CEO, the currentA pension contribution rate of 25% of base salary will reduce as follows:
• 20% of base salary from 1 July 2020.
• 15% of base salary from 1 July 2021.
• 10% of base salary from 1 July 2022 onwards.
For a new appointment, the pension contribution rate will be 10% of base salary immediately.
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| | | | | Remuneration component
and link to strategy
| | Operation and performance framework
| | Maximum (1)
applies. | Benefits Provides personal insurances, relocation benefits and tax assistance where BHP’s structure gives rise to tax obligations across multiple jurisdictions, and a market-competitive level of benefits to attract and retain a high-quality and experienced CEO. | | • Benefits may be provided, as determined by the Committee, and currently include costs of private family health insurance, death and disability insurance, car parking and personal tax return preparation in the required countries where BHP has requested the CEO relocate internationally, or where BHP’s DLC structure requires personal tax returns in multiple jurisdictions. • Costs associated with business-related travel for the CEO’s spouse/partner, including for Board meetings, may be covered. Where these costs are deemed to be taxable benefits for the CEO, BHP may reimburse the CEO for these tax costs. • The CEO is eligible to participate in Shareplus, BHP’sall-employee share purchase plan. • A relocation allowance and assistance is provided only where a change of location is made at BHP’s request. The Group’s mobility policies generally provide for‘one-off’ payments with no material trailing entitlements. | | Benefits as determined by the Committee but to a limit not exceeding 10% of base salary and (if applicable) aone-off taxable relocation allowance up to US$700,000. |
| | | | | Remuneration component and link to strategy | | Operation and performance framework | | CDPMaximum(2) (1)
| CDP The purpose of the CDP is to encourage and focus the CEO’s efforts on the delivery of the Group’s strategic priorities for the relevant financial year to deliver short, medium and long-term success, and to motivate the CEO to strive to achieve stretch performance objectives. The performance measures for each year are chosen on the basis that they are expected to have a significant short, medium and long-term impact on the success of the Group. Delivery oftwo-thirds of CDP awards in deferred shares encourages a longer-term focus aligned to that of shareholders. | | Setting performance measures and targets • The Committee sets a balanced scorecard of short, medium and long-term elements including HSEC, financial and individual performance measures, with targets and relative weightings at the beginning of the financial year in order to appropriately motivate the CEO to achieve outperformance that contributes to the long-term sustainability of the Group and shareholder wealth creation. • Specific financial measures will constitute the largest weighting and are derived from the annual budget as approved by the Board for the relevant financial year. • Appropriate HSEC measures that are consistent with the Company’sGroup’s long-term five-year public HSEC targets, and their weightings, are determined by the Remuneration Committee with the assistance of the Sustainability Committee. • Individual measures are an important element of effective performance management, and are a combination of quantitative and qualitative targets. They are aligned with medium and long-term strategy aspirations that are intended to drive long-term value for shareholders and other stakeholders. • For HSEC and for individual measures the target is ordinarily expressed in narrative form and will be disclosed near the beginning of the performance period. However, the target for each financial measure will be disclosed retrospectively. In the rare instances where this may not be prudent on grounds of commercial sensitivity, we will seek to explain why and give an indication of when the target may be disclosed. • Should any other performance measures be added at the discretion of the Committee, we will determine the timing of disclosure of the relevant target with due consideration of commercial sensitivity. Assessment of performance • At the conclusion of the financial year, the CEO’s achievement against each measure is assessed by the Remuneration Committee and the Board, with guidance provided by other relevant Board Committees in respect of HSEC and other measures, and a CDP award determined. If performance is below the Thresholdthreshold level for any measure, no CDP award will be provided in respect of that portion of the CDP award opportunity. • The Board believes this method of assessment is transparent, rigorous and balanced, and provides an appropriate, objective and comprehensive assessment of performance. • In the event that the Remuneration Committee does not consider the outcome that would otherwise apply to be a true reflection of the performance of the Group or should it consider that individual performance or other circumstances makes this an inappropriate outcome, it retains the discretion to not provide all or a part of any CDP award. This is an important mitigation against the risk of unintended award outcomes. | | Maximum award A cash award of 120% of base salary plus two awards of deferred shares each of equivalent value to the cash award, vesting in two and five years respectively. Target performance A cash award of 80% of base salary plus two awards of deferred shares each of equivalent value to the cash award, vesting in two and five years respectively, for target performance on all measures. Threshold performance A cash award of 40% of base salary plus two awards of deferred shares each of equivalent value to the cash award, vesting in two and five years respectively, for threshold performance on all measures. Minimum award Zero. |
| | | | | Remuneration component and link to strategy | | Operation and performance framework | | Maximum (1) | | | Delivery of award • CDP awards are provided under the CDP as cash and two awards of deferred shares, each of equivalent value to the cash award, vesting in two and five years respectively. • The awards of deferred shares comprise rights to receive ordinary BHP shares in the future at the end of the deferral periods. Before the awards vest (or are exercised), these rights are not ordinary shares and do not carry entitlements to ordinary dividends or other shareholder rights; however, a DEP is provided on vested awards. The Committee also has a discretion to settle CDP awards in cash. Underpin, malus and clawback • To ensure any vesting of five-year deferred shares under the CDP is underpinned by satisfactory performance post-grant, the vesting will be subject to an underpin. This will encompass a holistic review of performance at the end of the five-year vesting period, including a five-year view on HSEC performance, profitability, cash flow, balance sheet health, returns to shareholders, corporate governance and conduct. • Both cash and deferred share CDP awards are subject to malus and clawback as described in section 3.2.2. | | Maximum award
A cash award of 120% of base salary plus two awards of deferred shares each of equivalent value to the cash award, vesting in two and five years respectively.
Target performance
A cash award of 80% of base salary plus two awards of deferred shares each of equivalent value to the cash award, vesting in two and five years respectively, for target performance on all measures.
Threshold performance
A cash award of 40% of base salary plus two awards of deferred shares each of equivalent value to the cash award, vesting in two and five years respectively, for threshold performance on all measures.
Minimum award
Zero.
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| | | | | Remuneration component
and link to strategy
| | Operation and performance framework
| | Maximum (1)
| LTIP The purpose of the LTIP is to focus the CEO’s efforts on the achievement of sustainable long-term value creation and success of the Group (including appropriate management of business risks). It also encourages retention through long-term share exposure for the CEO over the five-year performance period (consistent with the long-term nature of resources), and aligns the long-term interests of the CEO and shareholders. The LTIP aligns the CEO’s reward with sustained shareholder wealth creation in excess of that of relevant comparator group(s), through the relative TSR performance condition. Relative TSR has been chosen as an appropriate measure as it allows for an objective external assessment over a sustained period on a basis that is familiar to shareholders.
| | Relative TSR performance condition • The LTIP award is conditional on achieving five-year relative TSR (3) performance conditions as set out below. • The relevant comparator group(s) and the weighting between relevant comparator group(s) will be determined by the Committee in relation to each LTIP grant. Level of performance required for vesting • Vesting of the award is dependent on BHP’s TSR relative to the TSRof relevant comparator group(s) over a five-year performance period. • 25% of the award will vest where BHP’s TSR is equal to the median TSR of the relevant comparator group(s), as measured over the performance period. Where TSR is below the median, awards will not vest. • Vesting occurs on a sliding scale between the median TSR of the relevant comparator group(s) up to a nominated level of TSR outperformance (4) over the relevant comparator group(s), as determined by the Committee, above which 100% of the award will vest. • Where the TSR performance condition is not met, there is no retesting and awards will lapse. The Committee also retains discretion to lapse any portion or all of the award where it considers the vesting outcome is not appropriate given Group or individual performance. This is an important mitigation against the risk of unintended outcomes. | | Maximum award Face value of 200% of base salary. (6) |
| | | | | Remuneration component and link to strategy | | Operation and performance framework | | Maximum (1) | | Relative TSR has been chosen as an appropriate measure as it allows for an objective external assessment over a sustained period on a basis that is familiar to shareholders. | | Further performance measures • The Committee may add further performance conditions, in which case the vesting of a portion of any LTIP award may instead be linked to performance against the new condition(s). However, the Committee expects that in the event of introducing an additional performance condition(s), the weighting on relative TSR would remain the majority weighting. Delivery of award • LTIP awards are provided under the LTIP approved by shareholders at the 2013 AGMs. When considering the value of the award to be provided, the Committee primarily considers the face value of the award, and also considers its fair value which includes consideration of the performance conditions.(5) • LTIP awards consist of rights to receive ordinary BHP shares in the future if the performance and service conditions are met. Before vesting (or exercise), these rights are not ordinary shares and do not carry entitlements to ordinary dividends or other shareholder rights; however, a DEP is provided on vested awards. The Committee has a discretion to settle LTIP awards in cash. Underpin, malus and clawback • If the specified performance conditions are satisfied in part or in full, to ensure any vesting of LTIP awards is underpinned by satisfactory performance through the performance period, the vesting will be subject to an underpin. This will encompass a holistic review of performance at the end of the five-year performance period, including a five-year view on HSEC performance, profitability, cash flow, balance sheet health, returns to shareholders, corporate governance and conduct. • LTIP awards are subject to malus and clawback as described below.in section 3.2.2. | | Maximum award
Face value of 200% of base salary. (6)
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| (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 whichthat is annualised it should not be interpreted that it is BHP’s current intention to award an increase of that size in total in any one year, or in each year, and instead it is a maximum required to be disclosed under the regulations. |
| (2) | SubjectPension contributions maximum column wording has been updated to shareholder approval,reflect the CDPleadership transition of Executive Director and CEO on 1 January 2020 and the current application of policy with respect to pension contribution rate for Mike Henry. The FY2019 remuneration report policy table wording reflected the application of Andrew Mackenzie’s contribution rate: ’For the existing CEO, the current pension contribution rate of 25 per cent of base salary will operate for FY2020. The termsreduce as follows: 25 per cent of CDP awards are similarbase salary to those provided under30 June 2020; 20 per cent of base salary from 1 July 2020; 15 per cent of base salary from 1 July 2021; 10 per cent of base salary from 1 July 2022 onwards. For a new appointment, the former STIP. STIP awards approved by shareholders at the 2019 AGMs and provided to the CEO for performance in FY2019pension contribution rate will be in accordance with the remuneration policy approved by shareholders in 2017, and are scheduled to vest in August 2021.10 per cent of base salary immediately.’
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| (3) | BHP’s TSR is a weighted average of the TSRs of BHP Group Limited and BHP Group Plc. |
| (4) | Maximum vesting is determined with reference to a position against each comparator group. |
| (5) | Fair value is calculated by the Committee’s independent adviser and is different to fair value used for IFRS disclosures (which do not take into account forfeiture conditions on the awards). It reflects outcomes weighted by probability, taking into account the difficulty of achieving the performance conditions and the correlation between these and share price appreciation, together with other factors, including volatility and forfeiture risks. The current fair value is 41 per cent of the face value of an award, which may change should the Committee vary elements (such as adding a performance measure or altering the level of relative TSR outperformance). |
| (6) | In order to ensure there is a fair transitional outcome for participants, the LTIP grant to be made in late CY2019 will be madewas based on the current 400 per cent face value basis in accordance with the remuneration policy approved by shareholders in 2017, with potential vesting five years later in mid CY2024.mid-CY2024. The first five-year deferred shares that result from performance under the CDP for FY2020 will be granted in late CY2020 and will first vest five years later inmid-CY2025. The LTIP grant to be made in late CY2020 will be made on the reduced 200 per cent face value basis, with potential vesting five years later also inmid-CY2025. |
The Remuneration Committee’s discretion in respect of each remuneration component applies up to the maximum shown in the table above. Any remuneration elements awarded or granted under the previous remuneration policy approved by shareholders in 2014 and 2017, but which have not yet vested or been awarded or paid, shall continue to be capable of vesting, awarded or payment made on their existing terms. 3.2.2.
3.2.2 Malus and clawback The CDP, LTIP and STIP rule provisions allow the Committee to reduce or clawback awards in the following circumstances: the participant acting fraudulently or dishonestly or being in material breach of their obligations to the Group;Group where BHP becomes aware of a material misstatement or omission in the Financial Statements of a Group company or the Group; orGroup any circumstances occur that the Committee determines in good faith to have resulted in an unfair benefit to the participant.participant These malus and clawback provisions apply whether or not awards are made in the form of cash or equity, whether or not the equity has vested, and whether or not employment is ongoing. 3.2.3 Potential remuneration outcomes The Remuneration Committee recognises that market forces necessarily influence remuneration practices and it strongly believes the fundamental driver of remuneration outcomes should be business performance. It also believes that overall remuneration should be both fair to the individual, such that remuneration levels accurately reflect the CEO’s responsibilities and contributions, and align with the expectations of our shareholders, while considering the positioning and relativities of pay and employment conditions across the wider BHP workforce. The amount of remuneration actually received each year depends on the achievement of superior business and individual performance generating sustained shareholder value. Before deciding on the final incentive outcomes for the CEO, the Committee first considers the achievement against thepre-determined performance conditions. The Committee then applies its overarching discretion on the basis of what it considers to be a fair and commensurate remuneration level to decide if the outcome should be reduced. When the CEO was appointed in May 2013,January 2020 the Board advised him that the Committee would exercise its discretion on the basis of what it considered to be a fair and commensurate remuneration level to decide if the outcome should be reduced. In this way, the Committee believes it can set a remuneration level for the CEO that is sufficient to incentivise him and that is also fair to him and commensurate with shareholder expectations and prevailing market conditions. The diagram below provides the scenario for the potential total remuneration of the CEO at different levels of performance under the new remuneration policy.performance. 184
Remuneration mix for the CEO
Minimum: consists of fixed remuneration, which comprises base salary (US$1.700 million), pension contributions (currently 25(10 per cent of base salary, but reducing as follows for the current CEO: 20 per cent of base salary from 1 July 2020, 15 per cent of base salary from 1 July 2021salary) and other benefits (notional 10 per cent of base salary from 1 July 2022 onwards; 10 per cent of base salary would be applied immediately for a new appointee) and other benefits (US$0.1 million)salary). Target: consists of fixed remuneration, target CDP (a cash award of 80 per cent of base salary plus two awards of deferred shares each of equivalent value to the cash award, vesting in two and five years respectively) and target LTIP. The LTIP target value is based on the fair value of the award, which is 41 per cent of the face value of 200 per cent of base salary. The potential impact of future share price movements is not included in the value of deferred CDP awards or LTIP awards. Maximum: consists of fixed remuneration, maximum CDP (a cash award of 120 per cent of base salary plus two awards of deferred shares each of equivalent value to the cash award, vesting in two and five years respectively), and maximum LTIP (face value of 200 per cent of base salary). The potential impact of future share price movements is not included in the value of deferred CDP awards or LTIP awards. All other things being equal, if the share price at vesting of LTIP awards was 50 per cent higher than the share price at grant, then the total maximum value would be US$13.19013.260 million. The maximum opportunity represented above is the most that could potentially be paid of each remuneration component, as required by UK regulations. It does not reflect any intention by the Group to award that amount. The Remuneration Committee reviews relevant benchmarking data and industry practices, and believes the maximum remuneration opportunity is appropriate. 3.2.4 Approach to recruitment and promotion remuneration The remuneration policy as set out in section 3.2 of this Report will apply to the remuneration arrangements for a newly recruited or promoted CEO, or for another Executive Director should one be appointed. A market-competitive level of base salary will be provided. The pension contributions, benefits and variable pay will be in accordance with the remuneration policy table in section 3.2.1 of this Report.3.2.1. For external appointments, the Remuneration Committee may determine that it is appropriate to provide additional cash and/or equity components to replace any remuneration forfeited or not received from a former employer. It is anticipated that any foregone equity awards would be replaced by equity. The value of the replacement remuneration would not be any greater than the fair value of the awards foregone or not received (as determined by the Committee’s independent adviser). The Committee would determine appropriate service conditions and performance conditions within BHP’s framework, taking into account the conditions attached to the foregone awards. The Committee is mindful of limiting such payments and not providing any more compensation than is necessary. For any internal CEO (or another Executive Director) appointment, any entitlements provided under former arrangements will be honoured according to their existing terms. 3.2.5 Service contracts and policy on loss of office The terms of employment for the CEO are formalised in his employment contract. Key terms of the current contract and relevant payments on loss of office are shown below. If a new CEO or another Executive Director was appointed, similar contractual terms would apply, other than where the Remuneration Committee determines that different terms should apply for reasons specific to the individual or circumstances. The CEO’s current contract has no fixed term. It can be terminated by BHP on 12 months’ notice. BHP can terminate the contract immediately by paying base salary plus pension contributions for the notice period. The CEO must give six12 months’ notice for voluntary resignation.resignation(1). The table below sets out the basis on which payments on loss of office may be made. 185
| | | | | | | | | Leaving reason (1)(2)(3) | | | | Voluntary
resignation | | Termination for
cause | | Death, serious
injury, illness,
disability or total
and permanent
disablement | | Cessation of
employment as agreed
with the Board (3)(4) | | Base salary | | • Paid as a lump sum for the notice period or progressively over the notice period. | | • No payment will be made. | | • Paid for a period of up to six months, after which time employment may cease. | | • Paid as a lump sum for the notice period or progressively over the notice period. | | Pension contributions | | • Paid as a lump sum for the notice period or progressively over the notice period. | | • No contributions will be provided. | | • Paid for a period of up to six months, after which time employment may cease. | | • Paid as a lump sum for the notice period or progressively over the notice period. | | Benefits | | • May continue to be provided during the notice period. • Accumulated annual leave entitlements and any statutory payments will be paid. • May pay repatriation expenses to the home location where a relocation was at the request of BHP. • Any unvested Shareplus Matched Sharesmatched shares held will lapse. | | • No benefits will be provided. • Accumulated annual leave entitlements and any statutory payments will be paid. • May pay repatriation expenses to the home location where a relocation was at the request of BHP. • Any unvested Shareplus Matched Sharesmatched shares held will lapse. | | • May continue to be provided for a period of up to six months, after which time employment may cease. • Accumulated annual leave entitlements and any statutory payments will be paid. • May pay repatriation expenses to the home location where a relocation was at the request of BHP. • Any unvested Shareplus Matched Sharesmatched shares held will vest in full. | | • May continue to be provided for year in which employment ceases. • Accumulated annual leave entitlements and any statutory payments will be paid. • May pay repatriation expenses to the home location where a relocation was at the request of BHP. • Any unvested Shareplus Matched Sharesmatched shares held will vest in full. |
| | | | | | | | | Leaving reason (2)(3) | | | Voluntary resignation | | Termination for
cause | | Death, serious injury, illness, disability or total and permanent disablement | | Cessation of employment as agreed with the Board (4) | CDP/STIP – cash and deferred shares Where the CEO leaves either during or after the end of the financial year, but before an award is provided. | | • No cash award will be paid. • Unvested CDP/STIP deferred shares will lapse. • Vested but unexercised CDP/STIP deferred shares will remain exercisable for the remaining exercise period unless the Committee determines they will lapse. • Vested but unexercised CDP/STIP awards remain subject to malus and clawback. | | • No cash award will be paid. • Unvested CDP/STIP deferred shares will lapse. • Vested but unexercised CDP/STIP deferred shares will remain exercisable for the remaining exercise period unless the Committee determines they will lapse. • Vested but unexercised CDP/STIP awards remain subject to malus and clawback. | | • The Committee has discretion to pay and/or award an amount in respect of the CEO’s performance for that year. • Unvested CDP/STIP deferred shares will vest in full and, where applicable become exercisable. • Vested but unexercised CDP/STIP deferred shares will remain exercisable for the remaining exercise period. • Unvested and vested but unexercised CDP/STIP awards remain subject to malus and clawback. | | • The Committee has discretion to pay and/or award an amount in respect of the CEO’s performance for that year. • Unvestedtwo-year CDP/STIP deferred shares and apro-rata pro rata portion (based on the proportion of the vesting period served) of unvested five-year CDP deferred shares continue to be held on the existing terms for the deferral period before vesting (subject to Committee discretion to lapse some or all of the award). |
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| | | | | | | | | Leaving reason (1)(2)
| | | Voluntary
resignation | | Termination for
cause
| | Death, serious
injury, illness,
disability or total
and permanent
disablement
| | Cessation of
employment as agreed
with the Board (3)
| | | | | | | | | • Vested but unexercised CDP/STIP deferred shares remain exercisable for the remaining exercise period, or a reduced period, or may lapse, as determined by the Committee. • Unvested and vested but unexercised CDP/STIP awards remain subject to malus and clawback. | | LTIP – unvested and vested but unexercised awards | | • Unvested awards will lapse. • Vested but unexercised awards will remain exercisable for the remaining exercise period, or for a reduced period, or may lapse, as determined by the Committee. • Vested but unexercised awards remain subject to malus and clawback. | | • Unvested awards will lapse. • Vested but unexercised awards will remain exercisable for the remaining exercise period, or for a reduced period, or may lapse, as determined by the Committee. • Vested but unexercised awards remain subject to malus and clawback. | | • Unvested awards will vest in full. • Vested but unexercised awards will remain exercisable for remaining exercise period. • Unvested and vested but unexercised awards remain subject to malus and clawback. | | • Apro-rata 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. • Vested but unexercised awards will remain exercisable for the remaining exercise period, or for a reduced period, or may lapse, as determined by the Committee. • Unvested and vested but unexercised awards remain subject to malus and clawback. |
| (1) | Notice period for voluntary resignation updated to reflect the terms of the new Executive Director and CEO employment contract effective on 1 January 2020. |
| (2) | If the Committee deems it necessary, BHP may enter into agreements with a CEO, which may include the settlement of liabilities in return for payment(s), including reimbursement of legal fees subject to appropriate conditions; or to enter into new arrangements with the departing CEO (for example, entering into consultancy arrangements). |
(2)(3) | In the event of a change in control event (for example, takeover, compromise or arrangement, winding up of the Group) as defined in the CDP, STIP and LTIP rules: |
base salary, pension contributions and benefits will be paid until the date of the change of control event;event in relation to the CDP and STIP: the Committee may determine that a cash payment be made in respect of performance during the current financial year and all unvestedtwo-year deferred shares would vest in full and, in relation to the CDP, all unvested five-year deferred shares would vestpro-rata prorata (based on the proportion of the vesting period served up to the date of the change of control event); the Committee may determine that unvested LTIP awards will either (i) bepro-rated prorated (based on the proportion of the performance period served up to the date of the change of control event) and vest to the extent the Committee determines appropriate (with reference to performance against the performance condition up to the date of the change of control event and expectations regarding future performance) or (ii) be lapsed if the Committee determines the holders will participate in an acceptable alternative employee equity plan as a term of the change of control event.event (3)(4) | Defined as occurring when a participant leaves BHP due to forced early retirement, retrenchment or redundancy, termination by mutual agreement or retirement with the agreement of the Group, or such other circumstances that do not constitute resignation or termination for cause. |
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Remuneration policy forNon-executive Directors OurNon-executive Directors are paid in line with the UK Corporate Governance Code (2016 edition; the 2018 edition will apply from FY2020)(2018 edition) and the Australian Securities Exchange Corporate Governance Council’s Principles and Recommendations (3rd(3rd Edition). 3.2.6 Components of remuneration The following table shows the components of total remuneration, the link to strategy, the applicable operation and performance frameworks, and the maximum opportunity for each component.component | | | | | Remuneration component
and link to strategy | | Operation and performance framework | | 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 ChairmanChair is paid a single fee for all responsibilities. • Non-executive Directors are paid a base fee and relevant committee membership fees. • Committee ChairmenChairs and the Senior Independent Director are paid an additional fee to reflect their extra responsibilities. • All fee levels are reviewed annually and any changes are effective from 1 July. • Fees are set at a competitive level based on benchmarks and advice provided by external advisers. Fee levels reflect the size and complexity of the Group, the multi-jurisdictional environment arising from the DLC structure, the multiple stock exchange listings and the geographies in which the Group operates. The economic environment and the financial performance of the Group are taken into account. Consideration is also given to salary reviews across the rest of the Group. • Where the payment of pension contributions is required by law, these contributions are deducted from the Director’s overall fee entitlements. | | 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 to strategy | | Operation and performance framework | | Maximum (1) | | | | Benefits Competitive benefits are paid in order to attract and retain high-quality individuals and adequately remunerate them for the role undertaken, including the considerable travel burden. | | • Travel allowances are paid on aper-trip basis reflecting the considerable travel burden imposed on members of the Board as a consequence of the global nature of the organisation and apply when a Director needs to travel internationally to attend a Board meeting or site visits at our multiple geographic locations. • both Australia and the UK, regardless of whether they reside in one or neither of those countries. They are accordingly reimbursed for the costs of personal tax return preparation in whichever of the UK and/or Australia is not their place of residence (including payment of the tax cost associated with the provision of the benefit). | | 8% increase per annum (annualised), or inflation if higher in the location in which duties are primarily performed, on aper-trip basis. Up to a limit not exceeding 20% of fees. | | | | | Variable pay (CDP and LTIP) | | • Non-executive Directors are not eligible to participate in any CDP or LTIP award arrangements. | | | | | | | Payments on early termination | | • There are no provisions in any of theNon-executive Directors’ appointment arrangements for compensation payable on early termination of their directorship. | | |
| (1) | UK regulations require the disclosure of the maximum that may be paid in respect of each remuneration component. Where that is expressed as a maximum annual percentage increase whichthat is annualised it should not be interpreted that it is BHP’s current intention to award an increase of that size in total in any one year, or in each year, and instead it is a maximum required to be disclosed under the regulations. |
Approach to recruitment remuneration The ongoing remuneration arrangements for a newly recruitedNon-executive Director will reflect the remuneration policy in place for otherNon-executive Directors, comprising fees and benefits as set out in the table above. No variable remuneration (CDP and LTIP award arrangements) will be provided to newly recruitedNon-executive Directors. 188
Letters of appointment and policy on loss of office The standard letter of appointment forNon-executive Directors is available on our website.at bhp.com. The Board has adopted a policy consistent with the UK Corporate Governance Code, under which allNon-executive Directors must seekre-election by shareholders annually if they wish to remain on the Board. As such, noNon-executive Directors seekingre-election have an unexpired term in their letter of appointment. ANon-executive Director may resign on reasonable notice. No payments are made toNon-executive Directors on loss of office. 3.2.7 How remuneration policy is set The Remuneration Committee sets the remuneration policy for the CEO and other Executive KMP. The Committee is briefed on and considers prevailing market conditions, the competitive environment and the positioning and relativities of pay and employment conditions across the wider BHP workforce. The Committee takes into account the annual base salary increases for our employee population when determining any change in the CEO’s base salary. Salary increases in Australia, where the CEO is located, are particularly relevant as they reflect the local economic conditions. The principles that underpin the remuneration policy for the CEO are the same as those that apply to other employees, although the CEO’s arrangements have a greater emphasis on and a higher proportion of remuneration in the form of performance-related variable pay. Similarly, the performance measures used to determine variable pay outcomes for the CEO and all other employees are linked to the delivery of our strategy and behaviours that are aligned to the values inOur Charter. Although BHP does not consult directly with employees on CEO and other Executive KMP remuneration, the Group conducts regular employee engagement surveys that give employees an opportunity to provide feedback on a wide range of employee matters. Further, many employees are ordinary shareholders through ourall-employee share purchase plan, Shareplus, and therefore have the opportunity to vote on AGM resolutions. In addition, in line with changes to the UK Corporate Governance Code, the Remuneration Committee is considering additional means of engaging with the workforce to explain how executive remuneration aligns with wider Group pay policy. As part of the Board’s commitment to good governance, the Committee also considers shareholder views, together with those of the wider community, when setting the remuneration policy for the CEO and other Executive KMP. We are committed to engaging and communicating with shareholders regularly and, as our shareholders are spread across the globe, we are proactive with our engagement on remuneration and governance matters with institutional shareholders and investor representative organisations. Feedback from shareholders and investors is shared with and used as input into decision-making by the Board and Remuneration Committee in respect of our remuneration policy and its application. The Committee considers that this approach provides a robust mechanism to ensure Directors are aware of matters raised, have a good understanding of current shareholder views, and can formulate policy and make decisions as appropriate. We encourage shareholders to always make their views known to us by directly contacting our Investor Relations team (contact details available on our website at bhp.com). 3.3 Annual report on remuneration This section of the Report shows the impact of the remuneration policy in FY2019FY2020 and how remuneration outcomes are linked to actual performance. Remuneration for the Executive DirectorDirectors (the CEO)CEOs) 3.3.1 Single total figure of remuneration This section shows a single total figure of remuneration as prescribed under UK requirements. It is a measure of actual remuneration received, rather than a figure calculated in accordance with IFRS (which is detailed in note 2324 ‘Employee share ownership plan’ section 5). As Mike Henry assumed the role of CEO and became an Executive Director on 1 January 2020, the FY2020 actual remuneration shown relates to the period 1 January 2020 to 30 June 2020. The FY2020 actual remuneration for Andrew Mackenzie relates to the period 1 July 2019 to 31 December 2019, on which date he ceased to be CEO and an Executive Director. The components of remuneration are detailed in the remuneration policy table in section 3.2.1. | US$(’000) | | | | | Base salary | | | Benefits (1) | | | STIP (2) | | | LTIP | | | Pension | | | Total | | | | | | Base salary | | | Benefits (1) | | | Pension (2) | | | Total
fixed | | | CDP/
STIP (3) | | LTIP (4) | | | Total
variable | | | Single
total
figure | | Mike Henry | | | | FY2020 | | | | 850 | | | | 6 | | | | 85 | | | | 941 | | | | 1,959 | | | | 3,169 | | | | 5,128 | | | | 6,069 | | Andrew Mackenzie | | | FY2019 | | | | 1,700 | | | | 100 | | | | 1,306 | | | | 0 | | | | 425 | | | | 3,531 | | | | FY2020 | | | | 850 | | | | 55 | | | | 213 | | | | 1,118 | | | | 1,306 | (5) | | | 0 | | | | 1,306 | | | | 2,424 | | | | | FY2018 | | | | 1,700 | | | | 84 | | | | 2,448 | | | | 0 | | | | 425 | | | | 4,657 | | | | FY2019 | | | | 1,700 | | | | 100 | | | | 425 | | | | 2,225 | | | | 1,306 | | | 0 | | | | 1,306 | | | | 3,531 | |
| (1) | Includes private family health insurance, spouse business-related travel, car parking and personal tax return preparation in required countries. |
| (2) | ProvidedPension contributions for Andrew Mackenzie in FY2019 and FY2020 (until the date he ceased as CEO and Executive Director) were made in accordance with the remuneration policy approved by shareholders in 2019 (i.e. based on 25 per cent of base salary). Mike Henry’s FY2020 pension contributions were also made in accordance with the remuneration policy approved by shareholders in 2019 (i.e. based on 10 per cent of base salary which applied for a new Executive Director appointment). Pension contributions for both were made into the international retirement plan.
|
| (3) | FY2020 CDP award is provided one-third in cash and two-thirds in deferred equity (on the terms of the CDP) as shown in the table below. FY2019 STIP award was provided half in cash and half in deferred equity (on the terms of the STIP) as shown in the table below. No discretion was applied to the STIP awards when determining vesting of awards in FY2019 or FY2020. |
| (4) | Mike Henry’s LTIP award value is based on the full award he received in 2015 when he was President Coal (prior to becoming, and with no proration applied for time as, CEO and Executive Director). The value is based on 48 per cent of the award vesting, including a DEP amount of US$0.548 million paid in shares. The value delivered through share price appreciation between the date of grant and the vesting date was US$1.410 million. The value of Andrew Mackenzie’s vested LTIP award (which vested after Andrew retired from BHP) is detailed in section 3.3.24. No discretion was applied to the LTIP awards when determining vesting of awards for FY2020. |
189
| (5) | Andrew Mackenzie’s prorated CDP award for FY2020 was provided as cash covering the one-third cash component and the two-year deferred equity component. Nothing has been or will be granted or paid in respect of the remaining one-third, i.e. the five-year deferred equity award. |
For the CEO,Mike Henry, the single total figure of remuneration is calculated on the same basis as atof his appointment in 2013.on 1 January 2020. There have been no changes to his base salary, benefit entitlements or pension contribution since that date. For Andrew Mackenzie, the single total figure of remuneration is calculated on the on the basis of his period as CEO and Executive Director up until 31 December 2019. There were no changes to his base salary, benefit entitlements or pension contributions prior to the date of his cessation as CEO and Executive Director. Details of remuneration received in the period 1 January 2020 to 31 March 2020 are set out in section 3.3.24. Changes from prior year outcomes of CDP/STIP and LTIP are set out below. | | | | | | | | | | | | FY2019CDP / STIP
| | FY2018LTIP
| STIPMike Henry | | FY2020 | | CDP awarded for FY2020 performance. One-third was provided in cash in September 2020, one-third deferred in an equity award that is due to vest in FY2023, and one-third deferred in an equity award that is due to vest in FY2026. | | Based on performance during the five-year period to 30 June 2020, 48 per cent of Mike’s 192,360 awards from the 2015 LTIP (granted to him when he was President Coal before he was appointed CEO and Executive Director) have vested, and the remaining awards have lapsed. The value of the vested awards is inclusive of a DEP, which is paid in shares. | | Andrew Mackenzie | | FY2020 | | Prorated CDP awarded for FY2020 performance. Two-thirds of the award was paid in cash in September 2020 covering the cash and two-year deferred equity portion. Nothing has been or will be granted or paid in respect of the remaining one-third of the award i.e. the five-year deferred equity portion. | | Details of Andrew’s vested 2015 LTIP award (which vested after Andrew retired from BHP) are set out in section 3.3.24. | | | FY2019 | | STIP awarded for FY2019 performance. Half was provided in cash in September 2019 and half deferred in an equity award that is due to vest in FY2022. | | STIP awarded for FY2018 performance. Half was provided in cash in September 2018, and half deferred in an equity award that is due to vest in FY2021. | LTIP | | Based on performance during the five-year period to 30 June 2019, all of Andrew Mackenzie’sAndrew’s 224,859 awards from the 2014 LTIP did not vest and have lapsed. The value of the awards is zero and no DEP has been paid in respect of these awards. | | Based on performance during the five-year period to 30 June 2018, all of Andrew Mackenzie’s 213,701 awards from the 2013 LTIP did not vest and have lapsed. The value of the awards is zero and no DEP has been paid in respect of these awards. |
3.3.2 FY2019 STIFY2020 CDP performance outcomes The Board and Remuneration Committee assessed both CEOs’ CDP outcomes (for the CEO’s STIP outcomeperiod they were, respectively, in the CEO role) in light of the Group’s performance in FY2019,FY2020, taking into account theeach CEO’s performance against the KPIs in his STIP scorecard. Thetheir CDP scorecards. Despite strong operational and financial performance in FY2020, when assessing performance against the targets set at the commencement the year the Board and Committee determined that the STIPCDP outcome for the CEOMike Henry for FY2019FY2020 is 4896 per cent against the target of 100 per cent (which represents an outcome of 3264 per cent against maximum), and that the CDP outcome for Andrew Mackenzie for FY2020 is also 96 per cent against the target of 100 per cent (which also represents an outcome of 64 per cent against maximum). The Board and Committee believe this outcome isthese outcomes are appropriately aligned with the shareholder experience and the interests of the Group’s other stakeholders. The CEO’s STIPCEOs’ CDP scorecard outcomes for FY2019FY2020 are summarised in the following tables, including a narrative description of each performance measure and the CEO’sCEOs’ level of achievement, as determined by the Remuneration Committee.Committee and approved by the Board. The level of performance for each measure is determined based on a range of thresholdthresholds (the minimum necessary to qualify for any reward outcome), target (where the performance requirements are met), and stretchmaximum (where the performance requirements are significantly exceeded). 
HSEC The HSEC targets for the CEOCEOs are aligned to the Group’s suite of HSEC five-year public targets as set out in BHP’s Sustainability Report.section 1.7. As it has done for several years, the Remuneration Committee seeks guidance each year from the Sustainability Committee when assessing HSEC performance against scorecard targets. The Remuneration Committee has taken a holistic view of Group performance in critical areas, including any matters outside the scorecard targets which the Sustainability Committee considers relevant. The performance commentary below is provided against the scorecard targets, which were set on the basis of operated assets only. | | | | | | | HSEC measures | | Scorecard targets | | Performance against scorecard targets | | Measure outcome | Fatalities environmental and community incidents | | Nil fatalities and nil actual significant environmental and community incidents at operated assets. | | Tragically we lost our colleague Allan Houston in December 2018 at the Saraji mine at our coal operations in Queensland, Australia. After undertaking an extensive investigation, consistent with our usual processes, we were unable to determine the cause of the fatality. This has not occurred for a fatality investigation for more than 15 years. Our investigation did identify a small number of possible causes, and those possible causes included both work andnon-work related circumstances, and both reasonably preventable andnon-preventable elements.
The weighting of fatalities is 10 percentage points of the 25 percentage points allocated to the HSEC category, and represents the greatest weighting of all HSEC items. Our imperative as a CompanyGroup is to continue to build our focus on fatality prevention and safety through leadership, verification and effective risk management. Historically, this fatality measure has had a zero outcome in years where a fatality occurred. No significant environment or community incidents occurredThere were no fatalities during FY2019.FY2020 at operated assets, and accordingly the maximum outcome against this measure has been awarded.
| | Below threshold for fatalities. Target for environmental and community incidents. |
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| | | | | | | HSEC measures
| | Scorecard targets
| | Performance against scorecard targets
| | Measure outcome
Maximum. | | | | | HPIF, TRIFEnvironmental and Occupational illnessescommunity incidents | | Improved performance compared with FY2018 results.Nil significant environmental and community incidents at operated assets. | | Our HPIF isThere were no significant environmental and community incidents during FY2020 at operated assets. This element carries a critical lead indicator which provides us with insight into our performance on preventing futurelesser weighting than for fatalities, and declined significantly by 18% during FY2019. While our TRIF performance in FY2019 (including Onshore US) of 4.7 is higher than the 4.4 recorded in FY2018, this was due to an increase in low impact injuries. We also experienced an 8% increase in occupational illnesses during FY2019, again driven by an increase in low impactas there have historically not been as many significant incidents. | | Target. | | | | | | HPIF, TRIF and OIF | | Improved performance compared with FY2019 results. | | HPIF is a critical lead indicator which provides insight into our performance on preventing future fatalities. It decreased year-on-year by 23% during FY2020. TRIF performance in FY2020 of 4.2 is also lower by 11% than the 4.7 recorded in FY2019. In addition, OIF performance in FY2020 of 2.46 is lower by 7% than the 2.64 recorded last year. | | Between target and maximum, closer to maximum. | | | | | | Risk management | | For all material risks, operatedOperated assets to have all critical control execution and critical control verification tasks evaluated and recorded with controls in placefor fatal risks verified as part of Field Leadership activities.activities with fatal risk control improvement plans developed and executed and increased levels of Year-on-yearin-field improvement in trendscoaching. Achieve 90% compliance for potential events associated with identified material risks.critical control verification and execution tasks. | | All operated assets completed reviewssubstantially increased levels of coaching of Field Leadership, thereby improving the quality of leader engagement, which exceeded target. The reduction in the rates of identified critical control failures was ahead of target. The implementation of critical control executionobservation schedules covering all critical controls and verification tasks for all material HSEC risks. Theimproved discipline in closing actions created when critical controls have failed were in line with targets for Field Leadership activities were exceeded, as were targets for critical control execution and verification close out. Targets for critical control improvements were met; however, significant event close out and critical control improvement activities fell short of target.set. | | Target.Above target. | | | | | | Health, environmental and community and social value initiatives | | All operated assets to achieve 100% of planned targets in respect of occupational exposure reduction, mental health, water and greenhouse gas,GHG, social investment,value plans, quality of life, community perceptions and community complaints. | | Targeted asset level improvement actionsimprovements were exceeded for mental health activities and projectssocial value and community plans and activities (which have all been especially important during the COVID-19 pandemic), and targets were deliveredmet in respect of water stewardship and greenhouse gas reduction; however, stretch performance, which required a reduction in both greenhouse gas intensity and total freshwater withdrawals, was not achieved. The assets met allGHG reduction. However, we fell short on occupational exposure reduction targets and, community targets.despite meeting our water withdrawal reduction target, didn’t complete certain asset level actions regarding our water stewardship. | | Target.Target overall (i.e. a blend of the above, on and below target). |
The outcome against the HSEC KPI for FY2019FY2020 was 1532 per cent against the target of 25 per cent. As a Group-level outcome, this applied to both Mike and Andrew for their time as CEO. Financial Underlying attributable profit (UAP)ROCE is theunderlying profit after taxation attributable to members of the Group, excluding(excluding after-taxation finance costs and exceptional items (see section 1.12.4 for a more detailed explanation of UAP). UAPitems) divided by average capital employed. ROCE is the key financial KPI against which FY2019 STIPCDP outcomes for our senior executives wereare measured and is, in our view, a relevant measure to assess the financial performance of the Group for this purpose. AtWhile ROCE excludes exceptional items, the commencementRemuneration Committee reviews each exceptional item to assess if it should be included in the result for the purposes of deriving the financial year when the target is approved, attributable profit is usually equal to UAP as thereROCE CDP outcome.
When we are usually no exceptional items. During the assessment ofassessing management’s performance, we make adjustments to the UAPROCE result are made to allow for changes in commodity prices, foreign exchange movements and other material items to ensure the assessment appropriately measures outcomes that are within the control and influence of the Group and its executives. Of these, changes in commodity prices hashave historically been the most material due to volatility in prices and the impact on Group revenue. The Remuneration Committee reviews each exceptional item to assess if it should be included in the result for the purposes of deriving the UAP STIP outcome.
191revenue and ROCE.
| | | | | | | Financial
measure | | Scorecard targets | | Performance against scorecard targets | | Measure
outcome | Underlying Attributable Profit (UAP)ROCE | | In respect of FY2019,For FY2020, the Board determined a Targettarget for UAP of US$10.3 billion,ROCE was 19.9%, with a Thresholdthreshold of US$9.6 billion16.3% and a Stretchmaximum of US$10.6 billion.21.1%.
The Target UAPtarget ROCE is derived from the Group’s approved annual budget. It is the Group’s practice to build a material element of stretch performance into the budget. Achievement of this stretching UAP TargetROCE target will result in a target STIPCDP outcome. The Thresholdthreshold and Stretchmaximum are a fair range of UAPROCE outcomes whichthat represent a lower limit of underperformance below which no STIPCDP award should be made, and an upper limit of outperformance whichthat would represent the maximum STIPCDP award. ForBecause a material element of stretch performance is built into the reasons set out above,budget (and hence the ROCE target derived from the budget), together with physical and regulatory asset constraints, the performance range around Targettarget is subject to a greater level of downside risk than there is upside opportunity, and accordingly,opportunity. Accordingly, the range between Thresholdthreshold and Targettarget is greater than that between Targettarget and Stretch.maximum. For Stretch,maximum, the Committee takes care not to create leveraged incentives that encourage executives to push for short-term performance that goes beyond our risk appetite and current operational capacity. Using themid-point of the Threshold and Stretch range as Target would provide a symmetrical distribution; however, this would not provide sufficient stretch for management to achieve a target STIP outcome. The Committee retains, and has a track record of applying, downward discretion to ensure that the STIPCDP outcome is appropriately aligned with the overall performance of the Group for the year, and is fair to management and shareholders.
| | UAPROCE of US$9.1 billion16.9% was reported by BHP for FY2019.FY2020. Adjusted for the factors outlined below, UAPROCE is US$8.6 billion,18.2%, which is below Threshold as determined by the Board.target. The following adjustments were made to ensure the outcomes appropriately reflect the performance of management for the year:
• Adjustments in relation to theThe impacts of movements in commodities prices of commodities and exchange rates reduced UAPincreased ROCE by US$1.6 billion. • An adjustment to exclude the impact of Onshore US, which was not included in the Target as the economic outcomes from 1 July 2018 accrued to the buyer, increased UAP by US$0.6 billion.1.2%.
• Adjustments for other material items ordinarily made to ensure the outcomes reflect the performance of management for the year increased UAPROCE by US$0.5 billion,0.3%, mainly due to the exclusion of the impacts of unusually severe cyclone weather events in Australia and non-cash taxation provision adjustments which are unable to be determined at the time of budget preparation.during FY2020. • Having reviewed the FY2019FY2020 exceptional items (as described in note 3 ‘Exceptional items’ in section 5), the Committee determined that they should not be considered for the purposes of determining the UAP STI outcome.ROCE CDP outcome, with the exception of the exceptional item in relation to the costs of the COVID-19 pandemic on BHP’s FY2020 results. The Committee concluded that, while this was outside the control of management, the direct costs and volume impacts of COVID-19 should flow through to the ROCE outcomes for CDP scorecard purposes. The Committee considered this was appropriate in light of the global impacts of the COVID-19 pandemic. This adjustment reduced ROCE by 0.2%. Beyond this, the Committee concluded that no further action was appropriate.required in respect of exceptional items. The key drivers of the UAPROCE performance being below Thresholdtarget at US$8.6 billion were18.2% were: • In Minerals Australia and despite record volumes at Western Australia Iron Ore, Caval Ridge and Poitrel and record coal mined at Broadmeadow, production was lower volumesthan expected at Western Australian Iron Ore, resulting from train derailment impacts, shutdown overruns,Coal and equipmentOlympic Dam due mainly to reliability issues and shutdown timing, together with higher maintenance and contractor costs. • In Minerals Americas lower production than expected at minesEscondida (despite mill throughout being at record levels) and port; at Olympic Dam caused by an acid plant outage; at CoalPampa Norte due to prime stripping shortfalls resulting in low raw coal production; at Escondida due to conveyor beltunplanned maintenance, equipment failures and lower mill performance, and unscheduled and extended maintenance; and at Spence due to an electrowinning plant fire;recoveries, partly offset by higher Petroleum volumes from improved well performance across most fields.better than expected cost performance. Notwithstanding this below Threshold outcome• In Petroleum lower market demand for petroleum products resulted in lower than expected production volumes at Trinidad and Bass Strait, particularly in the UAP KPI drivenlast quarter of FY2020, together with extended maintenance in Australia impacting volumes, partly offset by operational matters, the financial shareholder experience during FY2019 was positive, with increases in share prices, dividends and sharebuy-backs.better than expected cost performance.
| | Below
Threshold.target. |
The outcome against the UAPROCE KPI for FY2019FY2020 was zero39 per cent against the target of 4550 per cent. As a Group-level outcome, this outcome applied to Mike and Andrew for their time as CEO. Individual performance measures for the CEOCEOs Individual measures for the CEOCEOs are determined at the commencement of the financial year.year (or at the time of appointment for a new CEO). The application of personal measures remains an important element of effective performance management. These measures seek to provide a balance between the financial andnon-financial performance requirements that maintain our position as a leader in our industry. The CEO’sCEOs’ individual measures for FY2019FY2020 included contribution to BHP’s overall performance and the management team, and also the delivery of projects and initiatives within the scope of the CEO role as specified by the Board, as set out in the tabletables below. 192
Mike Henry | | | | | | | Individual
measures | | Individual scorecard targets | | Performance against scorecard targets | | Measure
outcome | | Safety and sustainability | | • Future plan for reduction in near misses. • Risk management embedded. • Climate change next steps. | | • Near misses reduced significantly in FY2020 from FY2019; analysis completed and future action plans completed to achieve further significant reductions. • Material risks recorded appropriately, and agreed risk appetites being embedded in the business. • Next stage of climate change plans delivered. | | Target. | | | | | | Performance | | • Team restructuring. • BHP Operating System implementation. • Gender representation advanced. | | • New ELT members appointed, Technology and Transformation restructured, World Class Functions benefits accelerated, Operations Committee established. • BHP Operating System deployment proceeding according to plan, with volume and safety benefits delivered, as well as supporting compliance with COVID-19 protocols. • Positive improvements in gender representation in the second half, after a slow start to FY2020. By 30 June 2020 gender diversity had increased 2.0 percentage points to 26.5%, up from 24.5% at 30 June 2019, for a cumulative increase of 8.9 percentage points from 17.6% at 30 June 2016. | | Target. | | | | | | Portfolio | | • Portfolio value improvement. • Strategy review improvement. • Samarco strategy implemented. | | • Significant progress achieved on portfolio enhancement activities in spite of the challenges faced during the year with COVID-19, social unrest in Chile and unprecedented market volatility in oil and gas, including progressing agreed capital and operational options and projects at Petroleum, Escondida, Western Australia Iron Ore, Queensland Coal and Olympic Dam. • Developed an improved review process for our portfolio and strategy around existing portfolio and growth options, and successfully conducted a large portion of the process, including significant Board engagement. The process is ongoing and will complete during 2020. • While the agreed Samarco strategy has been executed consistent with the principles to achieve fair and reasonable compensation and remediation, there have been some delays due to COVID-19 and further work and focus is required in FY2021. Insurance recoveries have been progressed, class actions are being actively managed and the first phase of dam decommissioning has been approved. | | Target overall (i.e. a blend of above, on and below target). | | | | | | Tailings dams | | • Tailings Dam Taskforce work. • Long-term strategy development. | | • Delivered the work of the Tailings Dam Taskforce in accordance with agreed plans, schedules and targets, together with accelerating dam remediation activities across the Group. • Developed a long-term tailings management strategy to deliver step change risk reduction within 10 years. | | Target. |
Andrew Mackenzie | | | | | | | Individual
measures | | Individual scorecard targets | | Performance against scorecard targets | | Measure
outcome | | | | | Strategy
| | • Improve the return profile of our major capital projects in development.
• Make commercial progress from exploration.
• Complete the Onshore US divestment.
| | • The expected returns of almost all major capital projects in development have been improved, within the application of the Capital Allocation Framework and adhering to the risk appetite.
• We continued to progress and work within BHP’s rigorous Capital Allocation Framework.
• Positive outcomes from oil and gas exploration during the year, together with options generated through copper exploration and acquisition.
• The Onshore US divestment was completed ahead of schedule and in an efficient and transparent way, with due regard to the significant people impacts. The proceeds were distributed in a value accretive manner, contributing to the positive shareholder experience during the year.
• BHP’s value increased consistent with the plans outlined previously, driven not only by commodity price appreciation, but also by management actions on strategic initiatives.
| | Between Target and Stretch; closer to Stretch. | | | | | Productivity
Performance | | • Deliver productivity initiatives.value through Transformation. • Return on capital. • Progress key projects driving latent capacity increases.
• Progress the BHP Operating System (BOS).
• Transformation of global functions.
• Technology five-year plan.Risk management embedded.
| | • Due mainly to the operational issues noted above, the expectations on productivity gainsBHP Operating System implementation, value chain automation and improvements and the targeted return on capital were not met.World Class Functions activities on-track. • Latent capacity projects on track to meet expected milestonesMaterial risks being recorded appropriately, and benefits. • BOS continues to be rolled outagreed risk appetites being embedded in line with the expected plan, aimed at delivering a step change in safety, productivity and culture outcomes, through standardising work to increase safety and efficiency at operations across the Company.
• We achieved most efficiency and effectiveness targets through our World Class Functions program; however, we need further design work and leadership engagement in FY2020 to fully embed the changes and realise the full benefits.
• We completed and commenced the implementation of the strategic Technology five-year plan, which is integrated and embedded within the assets’ plans.business.
| | Between Threshold and Target. | | | | | | Tailings dams | | Sustainability• Tailings Dam Taskforce work.
• Long-term strategy development. | | • Enhanced reputationProgressed the work of the Tailings Dam Taskforce in accordance with agreed plans, schedules and brand of BHP.targets. • Enhanced relationships with key stakeholders.Progressed a long-term tailings management strategy to deliver step change risk reduction within 10 years. | | • Continued strong leadership and representation on key issues such as indigenous representation, climate change, tailings dams, government policy development, taxation and inclusion.
• The global brand strategy execution continues to enhance BHP’s reputation in important markets.
• Close communication, regular updates and proactive relationship building continues to build strong engagement and relationships with shareholders and other stakeholders.
| | Above Target. | | | | | | Portfolio | | People• Maximise the value of the current portfolio.
• Progress delivery of value and culturereturns from future options. • Exploration success. | | • Achievement of inclusionIdentified projects and diversity aspirations.options in Petroleum, Escondida, Western Australia Iron Ore, Queensland Coal and Olympic Dam progressed according to plans. • Achievement of culture initiatives, as measured through the Company-wide annual EngagementFuture option projects continue to progress well, including identified options in Petroleum, Copper and Perception Survey (EPS).Potash. • ELT member developmentAchieved positive exploration outcomes, with extensions to the lives and succession.reserves of conventional oil and gas fields. | | Target. | | | | | | Culture and capability | | • Gender representation advanced. • Maintain a robust succession slate. | | • Solid progress on the goal to increase femaleNotwithstanding positive improvements in gender representation in the workforce globally – by 30 Junesecond half, there was a slow start to FY2020 in the first half. By 31 December 2019 gender diversity had increased 2.1 percentage points to 24.5%24.8%, up from 22.4%24.5% at 30 June 2018, for a cumulative increase of 6.9 percentage points from 17.6% at 30 June 2016.2019. • Our progressA robust slate of potential successors to the CEO role and other ELT roles has been achieved through a deliberate focus on flexible working arrangements across BHP has continued. • Our 2019 EPS showed flat or slightly negative results across a range of categories, reflecting the extent of disruptive transformational change occurring within the Company.
• The development of a strong long-term talent pool of candidates, for ELT, Asset President andevidenced by internal appointments to several key functional roles has been a strong and deliberate focus, resulting in a robust slate of potential successors.during the year.
| | MarginallyTarget overall (i.e. a blend of above and below Target.target). | | | | | | Social value | | • Manage risks to protect operating licence. • Samarco strategy implemented. • Create opportunities to enhance social value. | | • Continued to manage risks by meeting commitments to our workforce, partners, communities and governments through health and safety, the public commitment to and implementation of the climate change strategy including an action plan around our public commitments, and managing water permits, Native Title agreements and social investments. • Progress made in implementing the agreed Samarco strategy, however there were some delays and further work and focus required. • Continued to work closely with our communities and collaborate with various local, regional and global stakeholders, new employment models are building better outcomes for employees, and have a leading position on social value through placing a high value on the long-term needs of society and the environment. | | Target overall (i.e. a blend of above, on and below target). |
193
ItOverall, it was considered that the performance of the CEOboth Mike and Andrew against thetheir individual measures KPI warrantedwas as expected for their respective periods as CEO. Accordingly, they were each awarded an outcome for FY2019 of 3325 per cent, against the target of 30 per cent.which is equal to target.
3.3.3 LTIP performance outcomes LTIP vesting based on performance to June 20192020 The five-year performance period for the 20142015 LTIP ended on 30 June 2019. The CEO’s 20142020. Mike Henry’s 2015 LTIP award comprised 224,859192,360 awards (inclusive(granted as President Coal prior to his appointment as CEO) and Andrew Mackenzie’s 2015 LTIP award comprised 322,765 awards (reduced from 339,753 awards originally granted prorated for time served at the time of an uplift of 15,980 awards due to the demerger of South32),departure). Vesting is subject to achievement of the relative TSR performance conditions and any discretion applied by the Remuneration Committee.Committee (see section 3.3.5). Testing the performance condition For the award to vest in full, TSR must exceed the Peer Group TSR (for 67 per cent of the award) and the Index TSR (for 33 per cent of the award) by an average of 5.5 per cent per year for five years, being 30.7 per cent in total compounded over the performance period from 1 July 20142015 to 30 June 2019.2020. TSR includes returns to BHP shareholders in the form of share price movements along with dividends paid and reinvested in BHP (including cash andin-specie dividends). BHP’s TSR performance was positive 6.029.0 per cent over the five-year period from 1 July 20142015 to 30 June 2019.2020. This is belowabove the weighted median Peer Group TSR of positive 15.39.6 per cent and below the Index TSR of positive 41.338.5 per cent over the same period. This level of performance results in zero48 per cent vesting for the 20142015 LTIP award, and accordingly 48 per cent of Mike Henry’s awards and accordingly all of the CEO’sAndrew Mackenzie’s retained awards have vested, and 52 per cent have lapsed. No compensation or DEP was paid in relation to the lapsed awards. The value of Mike’s vested 2015 LTIP award has been reported in section 3.3.1 and the value of Andrew’s vested 2015 LTIP award has been reported in section 3.3.24. The graph below shows BHP’s performance relative to comparator groups. BHP vs. Peer Group and Index TSR over the 20142015 LTIP cycle 
3.3.4 LTIP allocated during FY2019FY2020 Following shareholder approval at the 20182019 AGMs, an LTIP awardawards (in the form of performance rights) waswere granted to Mike Henry (in his role as President Minerals Australia) and Andrew Mackenzie (in his role as CEO) on 20 November 2019. The first LTIP grant to be made to Mike as the new CEO under the terms of the remuneration policy approved by shareholders in 2019 will be awarded in late CY2020 and will be made on 18 December 2018. the reduced 200 per cent of base salary (face value). The face value and fair value of the awardawards granted on 20 November 2019 are shown in the table below. The face value of Mike’s award is 350 per cent of his base salary of US$1.100 million at the time of grant. The face value of Andrew’s award is 400 per cent of the CEO’shis base salary of US$1.700 million. The fair value of the awardawards is ordinarily calculated by multiplying the face value of the award by the fair value factor of 41 per cent (for the current plan design, as determined by the independent adviser to the Committee).UsingThe number of LTIP awards for both Mike and Andrew as detailed below was determined based on the US$ face value of base salary and calculated using the average share price and US$/A$ exchange rate over the 12 months up to and including 30 June 2018, the number of LTIP awards derived from a grant of 400 per cent of base salary with a face value of US$6.800 million was 304,523 LTIP awards.2019. 194
| | | | | | | | | | | Number of LTIP
awards | | Face value US$(‘000) | | Face value % of salary | | Fair value US$(‘000) | | Fair value % of salary | | % of max (1) | 304,523 | | 6,800 | | 400 | | 2,788 | | 164 | | 100 |
| | | | | | | | | | | | | | | | Number of LTIP
awards | | Face value US$(‘000) | | Face value % of salary | | Fair value US$(‘000) | | Fair value % of salary | | % of max(1) | Mike Henry | | 153,631 | | 3,850 | | 350 | | 1,579 | | 144 | | 100 | Andrew Mackenzie | | 271,348(2) | | 6,800 | | 400 | | 2,788 | | 164 | | 100 |
| (1) | The allocation is 100 per cent of the maximum award that was able to be provided under the remuneration policy approved by shareholders at the 20172019 AGMs. |
| (2) | Subsequently reduced to 40,702 awards on a pro rata basis for time served. |
Terms of the LTIP award In addition to those LTIP terms set in the remuneration policy for the CEO approved by shareholders in 2017,2019, the Remuneration Committee has determined: | | | Performance period | | • 1 July 20182019 to 30 June 20232024 | | | Performance conditions | | • An averaging period of six months will be used in the TSR calculations. • BHP’s TSR relative to the weighted median TSR of sector peer companies selected by the Committee (Peer Group TSR) and the MSCI World index (Index TSR) will determine the vesting of 67% and 33% of the award, respectively. • Each company in the peer group is weighted by market capitalisation. The maximum weighting for any one company is 25% and the minimum is set at 0.4% to reduce sensitivity to any single peer company. • For the whole of either portion of the award to vest, BHP’s TSR must be at or exceed the weighted 80th percentile of the Peer Group TSR or the Index TSR (as applicable). Threshold vesting (25% of each portion of the award) occurs where BHP’s TSR equals the weighted 50th percentile of the Peer Group TSR or the Index TSR (as applicable). Vesting occurs on a sliding scale between the weighted 50th and 80th percentiles. | | | Sector Peer Group Companiespeer group companies(1)(2)(3) | | • Resources (85%): Anglo American, Fortescue Metals, Freeport-McMoRan, Glencore, Rio Tinto, Southern Copper, Teck Resources, Vale. • Oil and Gasgas (15%): Anadarko Petroleum(3), Apache, BP, Canadian Natural Res., Chevron, ConocoPhillips, Devon Energy, EOG Resources, ExxonMobil, Occidental Petroleum, Royal Dutch Shell, Woodside Petroleum. |
| (1) | From December 2015, Alcoa, Cameco and MMC Norilsk Nickel were removed from the sector peer group following the demerger of South32 as they are less relevant comparator companies. |
(2) | From December 2016, BG Group and Peabody Energy were removed from the comparator group. BG Group was acquired by Royal Dutch Shell and Peabody Energy hashad become a significantly less comparable peer.
|
(3)(2) | From November 2018, CONSOL Energy was removed from the comparator group, as due to its internal restructuring it becamehad become a less comparable peer. |
| (3) | Anadarko Petroleum was acquired by Occidental Petroleum in August 2019. |
3.3.5 Overarching discretion and vesting underpin The rules of the CDP, LTIP and STIP and the terms and conditions of the awards give the Committee an overarching discretion to reduce the number of awards that will vest, notwithstanding the fact that the performance condition for partial or full vesting, as tested following the end of the performance period, or the relevant service conditions, have been met. This holistic, qualitative judgement, which is applied as an underpin test before final vesting is confirmed, is an important risk management aspecttool to ensure that vesting is not simply driven by a formula or the passage of time that may give unexpected or unintended remuneration outcomes. The Committee considers its discretion carefully each year. It considers performance holistically over the five-year period, including a five-year view’look back’ on HSEC performance, profitability, cash flow, balance sheet health, returns to shareholders, corporate governance and conduct. Having undertaken this review, the Committee considered its discretion in respect of equity awards due to vest in August 2019.2020. In respect of the STIPtwo-year deferred shares (granted in November 20172018 in respect of performance in FY2017)FY2018), the Committee chose not to exercise its discretion and allowed the STIP awards to vest in full. AsIn respect of the LTIP five-year performance shares (granted in December 2015), the formulaic outcome of the 20142015 LTIP was a zero48 per cent vesting. Having undertaken the ‘look back’ review, the Committee concluded the vesting thereoutcome was appropriate given Group and individual performance, and chose not to exercise its discretion and allowed 48 per cent of the LTIP awards to vest. There is no upwards discretion available to the Remuneration Committee in respect of the LTIP, as the overarching discretion may only reduce the number of awards that may vest. 195
3.3.6 CEO remuneration and returns to shareholders Ten-year10-year CEO remuneration
The table below shows the single total figure of remuneration earned byfor Mike Henry, Andrew Mackenzie and Marius Kloppers over the last 10 years along with the proportion of maximum opportunity earned for each type of incentive. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Financial year | | FY2010 | | | FY2011 | | | FY2012 | | | FY2013 (1) | | | FY2014 | | | FY2015 | | | FY2016 | | | FY2017 | | | FY2018 | | | FY2019 | | Andrew Mackenzie | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total single figure remuneration, US$(‘000) | | | – | | | | – | | | | – | | | | 2,468 | | | | 7,988 | | | | 4,582 | | | | 2,241 | | | | 4,554 | | | | 4,657 | | | | 3,531 | | STIP (% of maximum) | | | – | | | | – | | | | – | | | | 47 | | | | 77 | | | | 57 | | | | 0 | | | | 57 | | | | 60 | | | | 32 | | LTIP (% of maximum) | | | – | | | | – | | | | – | | | | 65 | | | | 58 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | Marius Kloppers | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total single figure remuneration, US$(‘000) | | | 14,789 | | | | 15,755 | | | | 16,092 | | | | 15,991 | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | STIP (% of maximum) | | | 71 | | | | 69 | | | | 0 | | | | 47 | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | LTIP (% of maximum) | | | 100 | | | | 100 | | | | 100 | | | | 65 | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | |
| | | | | | | | | | | | | | | | | Executive Director | | Financial year | | | Single total figure of
remuneration, US$(‘000) | | | STIP/CDP (% of
maximum) | | | LTIP (% of
maximum) | | Mike Henry | | | FY2020 | (1) | | | 6,069 | | | | 64 | | | | 48 | | Andrew Mackenzie | | | FY2020 | (1) | | | 2,424 | | | | 64 | | | | 48 | | | | | FY2019 | | | | 3,531 | | | | 32 | | | | 0 | | | | | FY2018 | | | | 4,657 | | | | 60 | | | | 0 | | | | | FY2017 | | | | 4,554 | | | | 57 | | | | 0 | | | | | FY2016 | | | | 2,241 | | | | 0 | | | | 0 | | | | | FY2015 | | | | 4,582 | | | | 57 | | | | 0 | | | | | FY2014 | | | | 7,988 | | | | 77 | | | | 58 | | | | | FY2013 | (2) | | | 9,740 | | | | 47 | | | | 65 | | Marius Kloppers | | | FY2013 | (2) | | | 5,624 | | | | 47 | | | | 65 | | | | | FY2012 | | | | 16,092 | | | | 0 | | | | 100 | | | | | FY2011 | | | | 15,755 | | | | 69 | | | | 100 | |
| (1) | As MrMike Henry assumed the role of CEO and Executive Director in January 2020, the FY2020 single total figure of remuneration shown includes remuneration relevant to that role for the period 1 January 2020 to 30 June 2020. The FY2020 single total figure of remuneration for Andrew Mackenzie includes remuneration relevant to his role as CEO and Executive Director for the period 1 July 2019 to 31 December 2019. The value of Mike’s vested 2015 LTIP award is included in full, while Andrew’s vested 2015 LTIP award is reported in full in section 3.3.24. |
| (2) | As Andrew Mackenzie assumed the role of CEO and Executive Director in May 2013, the FY2013 single total figure of remuneration shown relates onlyincludes remuneration relevant to that role for the period 10 May to 30 June 2013. The FY2013 single total figure of remuneration for MrMarius Kloppers relates onlyincludes remuneration relevant to his role as CEO and Executive Director for the period 1 July 2012 to 10 May 2013. The value of Andrew’s vested 2008 LTIP award of US$8.480 million (inclusive of vested sign-on awards provided when Andrew joined BHP) is included in full, while Marius’ vested 2008 LTIP award (with a value of US$12.051 million and which vested after Marius stepped down from his role as CEO and Executive Director) was reported in section 4.4.28 of the 2014 Annual Report. |
10-year TSR The graph below shows BHP’s TSR against the performance of relevant indices over the same10-year period. The indices shown in the graph were chosen as being broad market indices, which include companies of a comparable size and complexity to BHP. 
Value of US$100 invested over the 10-year period to 30 June 2019 (with dividends reinvested)
196
3.3.7 Changes in the CEO’sDirectors’ remuneration infrom FY2019 to FY2020 The table below sets out the CEO’s base salary, benefits and STIP amounts earned in respect of FY2019, with the percentage change in remuneration from FY2018. The table also showsFY2019 to FY2020 for the CEOs (for the time they were CEO) and Non– executive Directors, compared to the average change in each remuneration element for current employees in Australia (being approximately 18,00021,000 employees) during FY2019.over the same period. This has been chosen by the Committee as the most appropriate comparison, as Australia has the largest employee base, and the Committee considers remuneration levels in Australia when setting salaries and fees for Executive and Non– executive Directors and the CEO is located in Australia. The CEOs and Non– executive Directors’ remuneration described in the table align to what is disclosed in 3.3.1 and 3.3.14 respectively. | Changes from FY2019 to FY2020 | | | | | Base salary / fees
% change | | | Benefits
% change | | | CDP / STI
% change | | CEO(1) | | | Mike Henry | | | 0 | | | | 0 | | | | 0 | | | | | Andrew Mackenzie | | | 0 | | | | 0 | | | | 0 | | Non-executive Directors | | | Terry Bowen | | | 2 | | | | 33 | | | | – | | | | | | | | | | | | Malcolm Broomhead | | | (5 | ) | | | (53 | ) | | | – | | | | | | | | Base salary | | | Benefits | | | STIP | | | Ian Cockerill(2) | | | 0 | | | | 0 | | | | – | | Andrew Mackenzie | | | US$(‘000) | | | | 1,700 | | | | 100 | | | | 1,306 | | | | | | Anita Frew | | | 0 | | | | (2 | ) | | | – | | | | | Gary Goldberg(2) | | | 0 | | | | 0 | | | | – | | | | | Carolyn Hewson(3) | | | 0 | | | | 0 | | | | – | | | | | Susan Kilsby(2) | | | 0 | | | | 0 | | | | – | | | | | Ken MacKenzie | | | 0 | | | | 25 | | | | – | | | | | Lindsay Maxsted | | | (2 | ) | | | (44 | ) | | | – | | | | | John Mogford | | | 6 | | | | 13 | | | | – | | | | | Shriti Vadera | | | 0 | | | | 0 | | | | – | | | | | % change | | | | 0.0 | | | | 19.0 | | | | (46.7 | ) | | Dion Weisler(2) | | | 0 | | | | 0 | | | | – | | Australian employees | | | % change (average) | | | | 2.1 | | | | 28.0 | | | | (14.0 | ) | | | | | 2 | | | | (7 | ) | | | 43 | |
| (1) | The per cent changes in remuneration from FY2019 to FY2020 for Mike Henry are zero as he was appointed as CEO on 1 January 2020. There were no changes in remuneration for Andrew Mackenzie in either FY2019 or FY2020 so his per cent changes are zero. |
| (2) | The per cent changes in remuneration from FY2019 to FY2020 are zero as there were no changes made to the remuneration of Non– executive Directors who joined the Board either during FY2019 and FY2020 (Ian Cockerill and Susan Kilsby both joined on 1 April 2019, and Gary Goldberg and Dion Weisler joined on 1 February 2020 and 1 June 2020 respectively). |
| (3) | The per cent changes in remuneration from FY2019 to FY2020 for Carolyn Hewson are zero as there were no changes made to Carolyn’s remuneration up to the date of her retirement from the Board on 7 November 2019. |
3.3.8 CEO pay ratio disclosure As BHP is a global company and our UK employees represent less than 1 per cent of all of our employees worldwide, these disclosures are voluntary, and we have chosen to amend the comparison to all employees, an approach that is still compliant with UK requirements. The table below shows the CEO pay ratios, calculated using the reported single total figure of remuneration, and compared to employees at the 25th, Median and 75th percentile using Option A methodology as set out under UK requirements. | | | | | | | | | | | | | Year | | 25th percentile | | | Median | | | 75th percentile | | FY2020 | | | 116:1 | | | | 81:1 | | | | 67:1 | | FY2019 | | | 46:1 | | | | 31:1 | | | | 25:1 | |
Option A uses the full-time equivalent base salary and benefits paid during the year as it is the most accurate reflection of employee pay as a direct comparison to the single total figure of remuneration for the CEO. The FY2020 CEO remuneration used in the calculation is a combination of reported single total figure of remuneration data for Andrew Mackenzie and Mike Henry, recognising the transition in CEO leadership during FY2020. The remuneration calculation for all employees is based on actual earnings for the 12 months to 31 March 2020, including annual incentive payments for employees calculated using the Group performance outcome, and vested equity received if applicable. Pension contributions are calculated as the total cost of contributions made by the Group over the 12-month period. Employees on international assignments have been excluded from the analysis as their remuneration structures are generally not consistent with the single total figure of remuneration for the CEO. The FY2020 ratio of 81:1 at the median compared to the FY2019 ratio of 31:1 reflects the proportion of the CEO’s pay being more heavily weighted to variable pay, including share-based long-term incentives, than for other employees. Specifically, the change from FY2019 to FY2020 is driven by a higher FY2020 CDP outcome of 96 per cent against a target of 100 per cent compared to the STIP outcome of 48 per cent in FY2019, together with the 48 per cent LTIP vesting for FY2020, whereas there was zero LTIP vesting in FY2019. The Group believes the median pay ratio reflects the diversity of our global business footprint and employee population. BHP’s remuneration policies and practices are based on a high degree of alignment and consistency, with total remuneration at all levels providing a competitive package that enables the attraction and retention of the CEO to the median totaltalent while also providing at-risk remuneration of all BHP employees for FY2019 was 31:1 (2018: 37:1).based on performance. 3.3.83.3.9 Remuneration for the CEO in FY2020FY2021
The remuneration for the CEO in FY2020 will be in accordance with the remuneration policy to be approved by shareholders at the AGMs in 2019. In the event shareholders do not approve the remuneration policy at the AGMs in 2019, the remuneration for the CEO in FY2020FY2021 will be in accordance with the remuneration policy approved by shareholders at the AGMs in 2017.2019. Base salary review Base salary is reviewed annually and increases are applicable from 1 September. The CEO willcommenced in role on 1 January 2020 and did not receive a base salary increase in September 20192020 and it will remain unchanged at US$1.700 million per annum for FY2020.FY2021. FY2020FY2021 CDP performance measures
For FY2020,FY2021, the Remuneration Committee has set the following CDP scorecard performance measures: | | | | | | | Performance categories | | Weighting | | | Target measures | | | | HSEC | | | 25% | | | The following HSEC performance measures are designed to incentivise achievement of the Group’s public five-year HSEC targets. Fatalities, environmental andSignificant events (10%): No significant (actual level 4) health, safety (including fatalities), environment or community incidents:Nil fatalities and nil actual significant environmental and community incidents.events during the year.
HPIF, TRIFClimate change (10%): Steps in place to achieve reported GHG emissions in FY2022 at the FY2017 level. Decarbonisation plans developed in line with pathways to net zero and occupational illness:Improved performance comparedincorporated into the capital allocation plan process. Two partnerships formalised with FY2019 results, with severity and trends to also be considered as a moderating influence onstrategic customers in the overall HSEC assessment.steel sector.
Risk management:Operated assetsManagement of priority tailings storage facilities (5%): All priority tailings storage facilities are assessed based on key risk indicator data, and are either within appetite or continued operation outside appetite is approved with remediation progressing to have controls for fatal risks verified as part of Field Leadership activities with fatal risk control improvement plans developed and executed and increased levels ofin-field coaching. Achieve 90% compliance for critical control verification and execution tasks.plan.
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| | | | | | | Performance categories | | Weighting | | | Health, environmental and community/social value initiatives: All operated assets to achieve 100% of planned targets in respect of occupational exposure reduction, mental health, water and greenhouse gas, social value plans, quality of life, community perceptions and community complaints.Target measures
| Financial | | | 50% | | | ROCROCE is underlying profit after taxation (excluding after-taxation finance costs and exceptional items) divided by average capital employed. When we are assessing management’s performance, we make adjustments to the ROCROCE result to allow for changes in commodity prices, foreign exchange movements and other material items to ensure the assessment appropriately measures outcomes that are within the control and influence of the Group and its executives.
For reasons of commercial sensitivity, the target for ROCROCE will not be disclosed in advance; however, we plan to disclose targets and outcomes retrospectively in our next Remuneration Report, following the end of each performance year. In the rare instances where this may not be prudent on grounds of commercial sensitivity, we will explain why and give an indication of when they will be disclosed. |
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| | | | | | | Performance categories
| | Weighting | | | Target measures
| Individual | | | 25% | | | The CEO’s individual measures for FY2020FY2021 comprise contribution to BHP’s overall performance and the management team and the delivery of projects and initiatives within the scope of the CEO role as set out by the Board. These include strategy, productivityprojects and initiatives transformation programs, latent capacity enhancement projects, focus on the returnsin respect of future major capital projects, tailings dam activities, exploration, continued enhancement of BHP’s global brand, culture initiatives (includingperformance (material improvement in Group-wide leadership capabilities, employee engagement, diversitythe system that supports exceptional performance), social value (long term growth in value and inclusion, conductreturns for all stakeholders), people (right people, right skills, coming together in the right way to support exceptional performance) and risk management)portfolio (progress on our strategic objectives to create a winning portfolio and ELT member development and succession.set BHP up for the next 20 years). These performance measures are aligned with medium and long-term strategy aspirations that are intended to drive long-term value for shareholders and other stakeholders. |
The strong link between BHP’s HSEC performance and executive remuneration (with HSEC performance representing 25 per cent of the total scorecard) is well regarded by shareholders. The Board and Committee recognise that climate change is a material governance and strategic issue. Increasingly, shareholders expect action to address climate change to be linked to executive remuneration. We have been setting operational greenhouse gasGHG emissions targets and linking performance against them to executive remuneration through our HSEC scorecard for many years. However, recognising the increasing importance of this issue, we plan to clarifyhave clarified and strengthenstrengthened this link. In FY2020, we will enhancelink for FY2021 by enhancing our approach, including a weighting andof 10 per cent of the 25 per cent HSEC weighting under the CDP, which compares to circa 4 per cent allocated to climate change in the prior STIP, together with enhanced disclosure mechanisms forof our performance targets as set out above (against which we will take effect from FY2021.report at the end of the year). FY2020FY2021 LTIP award
The maximum face value of the CEO’s LTIP award under the remuneration policy approved by shareholders at the 20172019 AGMs is US$6.8003.400 million, being 400200 per cent of the CEO’s base salary. The number of LTIP awards in FY2020FY2021 has been determined using the share price and US$/A$ exchange rate over the 12 months up to and including 30 June 2019.2020. Based on this, a FY2020FY2021 grant of 271,348LTIP140,239 LTIP awards is proposed and approval for this LTIP grant will be sought from shareholders at the 20192020 AGMs. If approved, the award will be granted following the AGMs (i.e. in or around November/December 2019)October/November 2020 subject to securities dealing considerations). The FY2020FY2021 LTIP award will use the same performance, service conditions and peer groups as the FY2019FY2020 LTIP award. Subject toaward (with the approvalexception of the revised remuneration policysector peer group where Anadarko Petroleum was acquired by shareholders at the 2019 AGMs, andOccidental Petroleum in order to ensure there is a fair transitional outcome for participants, the LTIP grant to be made in late CY2019 will be made on the current 400 per cent of base salary (face value), with potential vesting five years later inmid-CY2024. The first five-year deferred shares that result from performance under the CDP for FY2020 will be granted in late CY2020 with potential vesting five years later inmid-CY2025, and the LTIP grant to be made in late CY2020 will then be made on the reduced 200 per cent of base salary (face value), with potential vesting five years later also inmid-CY2025.August 2019).
Remuneration for other Executive KMP (excluding the CEO)CEOs) The information in this section contains details of the remuneration policy that guided the Remuneration Committee’s decisions and resulted in the remuneration outcomes for other Executive KMP (excluding the CEO)CEOs). The remuneration policy and structures for other Executive KMP are essentially the same as those already described for the CEO in previous sections of the Remuneration Report, including the treatment of remuneration on loss of office as detailed in section 3.2.5. 3.3.9
3.3.10 Components of remuneration The components of remuneration for other Executive KMP are the same as for the CEO, with any differences described below. STIPCDP
The STIPCDP performance measures for other Executive KMP for FY2019FY2020 are similar to those of the CEO, which are outlined at section 3.3.2; however, the weighting of each performance measure will vary to reflect the focus required from each Executive KMP role. Individual performance measures are determined at the start of the financial year. These include the other Executive KMP’s contribution to the delivery of projects and initiatives within the scope of their role and the overall performance of the Group. Individual performance of other Executive KMP was reviewed against these measures by the Committee and, on average, was considered above target. 198
The diagram below represents the FY2019 STIPFY2020 CDP outcomes against the original scorecard.  
LTIP LTIP awards granted to other Executive KMP for FY2020FY2021 will be calculated in accordance with the remuneration policy approved by shareholders in 2019. Awards for other Executive KMP will have a maximum face value of 350175 per cent of base salary, which is a fair value of 143.572 per cent of base salary under the current plan design (with a fair value of 41 per cent, taking into account the performance condition: 350175 per cent x 41 per cent = 143.572 per cent). Subject to the approval of the new remuneration policy by shareholders at the 2019 AGMs, consistent with the CEO, the proposed reduction to the LTIP grant size of other Executive KMP awards to 200 per cent of base salary (face value) will apply to LTIP grants made from FY2021 onwards.
Equity awards provided forpre-KMP service Other Executive KMP who were promoted from executive roles within BHP may hold GSTIP and MAP awards that were granted to them in respect of their service innon-KMP roles. Shareplus Other Executive KMP are eligible to participate in Shareplus. For administrative simplicity, Executive KMP, including the CEO, do not currently participate in Shareplus. No Executive KMP, including the CEO, had any holdings under the Shareplus program during FY2019.FY2020. 3.3.103.3.11 Remuneration mix
A significant portion of other Executive KMP remuneration isat-risk, in order to provide strong alignment between remuneration outcomes and the interests of BHP shareholders. The diagram below sets out the relative mix of each remuneration component for the other Executive KMP for FY2019.FY2020. Each component is determined as a percentage of base salary (at the minimum, target and maximum levels of performance-based remuneration). Remuneration mix for other Executive KMP
The percentage numbers in the bars represent the percentage of base salary
| (1) | Base salary earned by each Executive KMP is set out in section 3.3.17.3.3.18. |
| (2) | Retirement benefits are 25 per cent of base salary.From FY2021 contribution rates will reduce in accordance with the remuneration policy approved by shareholders at the 2019 AGMs (progressive reduction to 10 per cent of base salary as follows: 20 per cent of base salary from 1 July 2020; 15 per cent of base salary from 1 July 2021; and 10 per cent of base salary from 1 July 2022 onwards. For a new Executive KMP appointment, the pension contribution rate will be 10 per cent of base salary immediately). |
| (3) | Other benefits is based on a notional 10 per cent of base salary. |
| (4) | As for the CEO, the minimum STIPCDP award is zero, with ana cash award of 80% of base salary in cash and 80 per cent of base salary plus two awards of deferred shares each of equivalent value to the cash award, vesting in deferred equitytwo and five years respectively, for target performance on all measures, and a maximum cash award of 120 per cent base salary plus two awards of deferred shares each of equivalent value to the cash award, vesting in two and 120 per cent deferred equity for exceptional performance against KPIs.five years respectively. |
| (5) | Other Executive KMP have a maximum LTIP award with a face value of 350175 per cent of base salary as shown in the diagram.salary. |
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3.3.113.3.12 Employment contracts
The terms of employment for other Executive KMP are formalised in employment contracts, which have no fixed term. They typically outline the components of remuneration paid to the individual, but do not prescribe how remuneration levels are to be modified fromyear-to-year. An year to year. Other Executive KMPKMP’s employment contractcontracts may be terminated by BHP on up to 12 months’ notice or can be terminated immediately by BHP making a payment of up to 12 months’ base salary plus pension contributions for the relevant period. AnOther Executive KMP must give sixup to 12 months’ notice for voluntary resignation. 3.3.123.3.13 Arrangements for Executive KMP leaving the Group
The arrangements for Executive KMP leaving the Group are within the approval provided by shareholders at the 2017 AGMs in regard to Australian termination benefits legislation, including the provision of performance-based remuneration in accordance with the rules of the relevant incentive plans. Steve PastorAndrew Mackenzie stepped down from his role as President, PetroleumCEO and Executive Director on 17 March31 December 2019, and exitedretired from BHP on 31 March 2019. Mr Pastor2020. Andrew received base salary, pension contributions,pro-rated STIP, statutory leave entitlements and applicable benefits up to the date of his exitretirement from BHP. Mr Pastor received a payment in lieu of notice upon exit and has been paid orAndrew will receive in the future the value of pension funds that he has accumulated during his service with the Group.Group and certain employment-related taxation return preparation services. When determining the Executive KMP STIPCDP awards for FY2019,FY2020, the Remuneration Committee resolved that Mr PastorAndrew would receive a prorated FY2020 CDP award for his time as CEO, covering both the cash and pro-ratedtwo-year FY2019 STIP awarddeferred equity portion, based on his performance, and paid in the form of cash based on his performance.cash. No deferral period will apply in respect of this cash STIPCDP award. No payment or award was or will be made in respect of the CDP five-year deferred share component for FY2020.
All unvested FY2017FY2018 and FY2018FY2019 STIP awards allocated to Mr PastorAndrew remained on foot on termination. FY2017FY2018 STIP vested in August 2019,2020, and FY2018FY2019 STIP will not vest untilin August 2020. MAP2021. Andrew’s unvested LTIP awards allocated to Mr Pastor prior to Executive KMP service vested upon termination,pro-ratedwere prorated to reflect the percentage of service during the service period to 31 March 2019. Mr Pastor’s unvested LTIP awards werepro-rated to reflect the percentage of therelevant performance period to 31 March 2019.2020. The outcomes in respect of Andrew’s 2015 LTIP award are set out in section 3.3.24. The vesting of the remaining retainedpro-rated prorated LTIP awards will be determined by the Committee at the relevant time in future years and will only vest if the performance conditions are met at the end of each five-year performance period, subject to the Committee’s ability to reduce vesting through its overarching discretion under the plan rules. Remuneration forNon-executive Directors The remuneration outcomes described below have been provided in accordance with the remuneration policy approved by shareholders at the 20172019 AGMs. The maximum aggregate fees payable toNon-executive Directors (including the Chairman)Chair) were approved by shareholders at the 2008 AGMs at US$3.800 million per annum. This sum includes base fees, Committee fees and pension contributions. Travel allowances andnon-monetary benefits are not included in this limit. 3.3.13
3.3.14 Single total figure of remuneration This section shows a single total figure of remuneration as prescribed under UK requirements. It is a measure of actual remuneration. Fees include the annual base fee, plus additional fees as applicable for the Senior Independent Director, Committee ChairmenChair and Committee memberships.Non-executive Directors do not have any performance-based at-risk remuneration or receive any equity awards as part of their remuneration.remuneration, therefore the totals shown below are total remuneration and total fixed fees. This table also meets the requirements of the Australian Corporations Act 2001 and relevant accounting standards. | | | | | | | | | | | | | | | | | | | | | US$(’000) | | Financial year | | | Fees | | | Benefits (1) | | | Pensions (2) | | | Total | | Terry Bowen (3) | | | FY2019 | | | | 183 | | | | 30 | | | | 10 | | | | 223 | | | | | FY2018 | | | | 135 | | | | 37 | | | | 7 | | | | 179 | | Malcolm Broomhead | | | FY2019 | | | | 212 | | | | 40 | | | | 11 | | | | 263 | | | | | FY2018 | | | | 200 | | | | 33 | | | | 11 | | | | 244 | | Ian Cockerill (4) | | | FY2019 | | | | 55 | | | | 30 | | | | – | | | | 85 | | Anita Frew | | | FY2019 | | | | 220 | | | | 48 | | | | – | | | | 268 | | | | | FY2018 | | | | 202 | | | | 62 | | | | – | | | | 264 | |
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| | | | | | | | | | | | | | | | | | | | | US$(’000) | | Financial year | | | Fees | | | Benefits (1) | | | Pensions (2) | | | Total | | Carolyn Hewson | | | FY2019 | | | | 212 | | | | 32 | | | | 11 | | | | 255 | | | | | FY2018 | | | | 195 | | | | 32 | | | | 10 | | | | 237 | | Susan Kilsby (4) | | | FY2019 | | | | 47 | | | | 22 | | | | – | | | | 69 | | Ken MacKenzie | | | FY2019 | | | | 865 | | | | 32 | | | | 15 | | | | 912 | | | | | FY2018 | | | | 749 | | | | 61 | | | | 16 | | | | 826 | | Lindsay Maxsted | | | FY2019 | | | | 209 | | | | 32 | | | | 11 | | | | 252 | | | | | FY2018 | | | | 209 | | | | 47 | | | | 11 | | | | 267 | | John Mogford (3) | | | FY2019 | | | | 187 | | | | 61 | | | | – | | | | 248 | | | | | FY2018 | | | | 138 | | | | 60 | | | | – | | | | 198 | | Wayne Murdy (5) | | | FY2019 | | | | 75 | | | | 35 | | | | – | | | | 110 | | | | | FY2018 | | | | 220 | | | | 80 | | | | – | | | | 300 | | Shriti Vadera | | | FY2019 | | | | 253 | | | | 48 | | | | – | | | | 301 | | | | | FY2018 | | | | 235 | | | | 63 | | | | – | | | | 298 | |
| | | | | | | | | | | | | | | | | | | US$(‘000) | | Financial year | | Fees | | | Benefits (1) | | | Pensions (2) | | | Total | | Terry Bowen | | FY2020 | | | 187 | | | | 40 | | | | 10 | | | | 237 | | | | FY2019 | | | 183 | | | | 30 | | | | 10 | | | | 223 | | Malcolm Broomhead | | FY2020 | | | 201 | | | | 19 | | | | 11 | | | | 231 | | | | FY2019 | | | 212 | | | | 40 | | | | 11 | | | | 263 | | Ian Cockerill (3) | | FY2020 | | | 220 | | | | 90 | | | | – | | | | 310 | | | | FY2019 | | | 55 | | | | 30 | | | | – | | | | 85 | | Anita Frew | | FY2020 | | | 220 | | | | 47 | | | | – | | | | 267 | | | | FY2019 | | | 220 | | | | 48 | | | | – | | | | 268 | | Gary Goldberg (4) | | FY2020 | | | 90 | | | | 15 | | | | – | | | | 105 | | Carolyn Hewson (5) | | FY2020 | | | 75 | | | | 18 | | | | 4 | | | | 97 | | | | FY2019 | | | 212 | | | | 32 | | | | 11 | | | | 255 | | Susan Kilsby (3) | | FY2020 | | | 205 | | | | 83 | | | | – | | | | 288 | | | | FY2019 | | | 47 | | | | 22 | | | | – | | | | 69 | | Ken MacKenzie | | FY2020 | | | 866 | | | | 40 | | | | 14 | | | | 920 | | | | FY2019 | | | 865 | | | | 32 | | | | 15 | | | | 912 | | Lindsay Maxsted | | FY2020 | | | 205 | | | | 18 | | | | 11 | | | | 234 | | | | FY2019 | | | 209 | | | | 32 | | | | 11 | | | | 252 | | John Mogford | | FY2020 | | | 199 | | | | 69 | | | | – | | | | 268 | | | | FY2019 | | | 187 | | | | 61 | | | | – | | | | 248 | | Wayne Murdy (6) | | FY2019 | | | 75 | | | | 35 | | | | – | | | | 110 | | Shriti Vadera | | FY2020 | | | 253 | | | | 48 | | | | – | | | | 301 | | | | FY2019 | | | 253 | | | | 48 | | | | – | | | | 301 | | Dion Weisler (4) | | FY2020 | | | 15 | | | | – | | | | 1 | | | | 16 | |
| (1) | The majority of the amounts disclosed for benefits are travel allowances for eachNon-executive Director: amounts of between US$22,000 nil and US$60,000.90,000. In addition, amounts of between US$ nil and US$3,0003,500 are included in respect of tax return preparation; and amounts of between US$ nil and US$2,0001,500 are included in respect of the reimbursement of the tax cost associated with the provision of taxable benefits. |
| (2) | BHP Group Limited made minimum superannuation contributions of up to 9.5 per cent of fees for FY2019FY2020 in accordance with Australian superannuation legislation. No other pension contributions are paid. |
| (3) | The FY2018 remuneration for Terry Bowen and John Mogford relates to part of the year only, as they both joined the Board on 1 October 2017.
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(4) | The FY2019 remuneration for Ian Cockerill and Susan Kilsby relates to part of the year only, as they both joined the Board on 1 April 2019. |
| (4) | The FY2020 remuneration for Gary Goldberg and Dion Weisler relates to part of the year only, as they joined the Board on 1 February 2020 and 1 June 2020 respectively. |
| (5) | The FY2020 remuneration for Carolyn Hewson relates to part of the year only, as she retired from the Board on 7 November 2019. |
| (6) | The FY2019 remuneration for Wayne Murdy relates to part of the year only, as he retired from the Board on 2 November 2018. |
3.3.143.3.15 Non-executive Directors’ remuneration in FY2020FY2021
In FY2020,FY2021, the remuneration for theNon-executive Directors will be paid in accordance with the remuneration policy to be approved by shareholders at the 2019 AGMs (which is unchanged from the remuneration policy forNon-executive Directors approved by shareholders at the 2017 AGMs). Fee levels for theNon-executive Directors and the ChairmanChair are reviewed annually. The review includes benchmarking against peer companies, with the assistance of external advisers, against peer companies.advisers. From 1 July 2017, the Chairman’sChair’s annual fee was reduced by approximately 8 per cent from US$0.960 million to US$0.880 million and will remain at that level for FY2020.FY2021. This fee reduction was in addition to the reduction of approximately 13 per cent from US$1.100 million to US$0.960 million effective 1 July 2015. Base fee levels forNon-executive Directors will remain at the reduced levels that took effect from 1 July 2015, at which time they were reduced by approximately 6 per cent from US$0.170 million to US$0.160 million per annum. The below table sets out the annualised fee levels for FY2020.FY2021. | | | | | Levels of fees and travel allowances forNon-executive Directors (in US$) | | From 1 July 20192020 | | Base annual fee | | | 160,000 | | | | | | | Plus additional fees for: | | | | | Senior Independent Director of
BHP Group Plc | | | 48,000 | | | | | | | Committee Chair: | | | | | Risk and Audit | | | 60,000 | | Remuneration | | | 45,000 | |
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| | | | | Levels of fees and travel allowances forNon-executive Directors (in US$)
| | From 1 July 2019 | | Sustainability | | | 45,000 | | Nomination and Governance | | | No additional fee | | | | | | | Committee membership: | | | | | Risk and Audit | | | 32,500 | | Remuneration | | | 27,500 | | Sustainability | | | 27,500 | | Nomination and Governance | | | 18,000 | | | | | | | Travel allowance:(1) | | | | | Greater than 3 but less than 10 hours | | | 7,000 | | 10 hours or more | | | 15,000 | | | | | | | Chairman’sChair’s fee
| | | 880,000 | | | | | | |
| (1) | In relation to travel for Board business, the time thresholds relate to the flight time to travel to the meeting location (i.e. one way flight time). Only one travel allowance is paid per round trip. |
Remuneration governance 3.3.153.3.16 Board oversight and the Remuneration Committee
Board The Board is responsible for ensuring the Group’s remuneration arrangements are equitable and aligned with the long-term interests of BHP and its shareholders. In performing this function, it is critical that the Board is independent of management when making decisions affecting remuneration of the CEO, other Executive KMP and the Group’s employees. The Board has therefore established a Remuneration Committee to assist it in making such decisions. The Committee is comprised solely ofNon-executive Directors, all of whom are independent. To ensure that it is fully informed, the Committee regularly invites members of management to attend meetings to provide reports and updates.updates however, members of management are not present when decisions are considered or taken concerning their own remuneration. The Committee can draw on services from a range of external sources, including remuneration advisers. Remuneration Committee The activities of the Remuneration Committee are governed by Terms of Reference (updated version approved by the Board in August 2019), which are available on our website.at bhp.com. The current members of the Remuneration Committee are Carolyn Hewson (Chairman)are: Susan Kilsby (Remuneration Committee Chair), Anita Frew, Susan KilsbyGary Goldberg, Shriti Vadera, and Shriti Vadera.Dion Weisler. The role and focus of the Committee and details of meeting attendances can be found in section 2.13.2.2.12. Other Directors and employees who regularly attended meetings were: Ken MacKenzie (Chairman); Wayne Murdy(Chair), Carolyn Hewson (Remuneration Committee memberChair to 27 November 2018);2019), Andrew Mackenzie (CEO);(CEO to 31 December 2019), Mike Henry (CEO from 1 January 2020), Athalie Williams (Chief People Officer);, Andrew Fitzgerald (Vice President Reward); Margaret Taylor (Group Company Secretary to 28 February 2019);, Caroline Cox (Group Company Secretary from 1 March 2019);Secretary), and Geof Stapledon (Vice President Governance). These individuals were not present when matters associated withdecisions regarding their own remuneration were considered.considered or taken. Engagement of independent remuneration advisers The Committee seeks and considers advice from independent remuneration advisers where appropriate. Remuneration consultants are engaged by, and report directly to, the Committee. Potential conflicts of interest are taken into account when remuneration consultants are selected and their terms of engagement regulate their level of access to, and require their independence from, BHP’s management. PricewaterhouseCoopers was appointed by the Committee in March 2016 to act as an independent remuneration adviser. The PricewaterhouseCoopers team that advises the Remuneration Committee does not provide any other services to the Group. Other parts of PricewaterhouseCoopers teams provide services to the Group in the areas of forensic and general technology, internal audit and international assignment solutions. Processes and arrangements are in place to protect independence (for example, ring-fencing of teams) and to manage any conflicts of interest that may arise. PricewaterhouseCoopers is currently the only remuneration adviser appointed by the Committee. In that capacity, they may provide remuneration recommendations in relation to KMP; however they did not do so in FY2019.FY2020. Total fees paid to the PricewaterhouseCoopers team advising the Committee on remuneration-related matters for FY2019FY2020 were £160,000.£177,100. These fees are based on an agreed fee for regular items with additional work charged at agreed rates. Total fees paid to PricewaterhouseCoopers for other services rendered to the Group for FY2019FY2020 were approximately US$2628 million. 3.3.163.3.17 Statement of voting at the 20182019 AGMs
BHP’s remuneration resolutions have attracted a high level of support by shareholders. Voting in regard to those resolutions put to shareholders at the 20182019 AGMs is shown below. 202
| AGM resolution | | Requirement | | | % vote ‘for’ | | | % vote ‘against’ | | | Votes withheld (1) | | | Requirement | | | % vote ‘for’ | | | % vote ‘against’ | | | Votes withheld (1) | | | Remuneration Report (excluding remuneration policy (2)) | | | UK | | | | 96.6 | | | | 3.4 | | | | 53,711,796 | | | Remuneration Report (remuneration policy) | | | | UK | | | | 93.5 | | | | 6.5 | | | | 23,166,578 | | Remuneration Report (excluding remuneration policy) | | | | UK | | | | 97.3 | | | | 2.7 | | | | 21,012,150 | | Remuneration Report (whole report) | | | Australia | | | | 95.2 | | | | 4.8 | | | | 44,236,128 | | | | Australia | | | | 96.7 | | | | 3.3 | | | | 11,217,511 | | Approval of grants to Executive Director | | | Australia | | | | 97.0 | | | | 3.0 | | | | 7,029,924 | | | | Australia | | | | 97.5 | | | | 2.5 | | | | 10,460,699 | |
| (1) | The sum of votes marked ‘Vote Withheld’withheld’ at BHP Group Plc’s 20182019 AGM and votes marked ‘Abstain’ at BHP Group Limited’s 20182019 AGM. |
(2) | The UK requirement for approval of the remuneration policy was met at the 2017 AGMs, where the following outcomes were recorded: a 97.1 per cent vote ‘for’, a 2.9 per cent vote ‘against’ with 9,658,674 votes withheld. This resolution was not required in 2018.
|
Other statutory disclosures This section provides details of any additional statutory disclosures required by Australian or UK regulations that have not been included in the previous sections of the Remuneration Report. 3.3.173.3.18 Executive KMP remuneration table
The table below has been prepared in accordance with relevant accounting standards and remuneration data for Executive KMP are for the periods of FY2018FY2019 and FY2019FY2020 that they were KMP. More information on the policy and operation of each element of remuneration is provided in priorprevious 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 FY2018FY2019 or FY2019.FY2020. These amounts are calculated in accordance with accounting standards and are the amortised IFRS fair values of equity and equity-related instruments that have been granted to the executives. For information on awards that were allocated and vested during FY2018FY2019 and FY2019,FY2020, refer to section 3.3.18.3.3.19. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Short-term benefits | | | Post-
employment
benefits | | | Share-based payments | | | Total | | US$(‘000) | | Financial
year | | | Base
salary (1) | | | Annual cash
incentive (2) | | | Non-monetary
benefits (3) | | | Other
benefits (4) | | | Retirement
benefits (5) | | | Value of STIP
awards (2)(6) | | | Value of LTIP
awards (6) | | Executive Director | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Andrew Mackenzie | | | FY2019 | | | | 1,700 | | | | 653 | | | | 100 | | | | – | | | | 425 | | | | 990 | | | | 4,037 | | | | 7,905 | | | | | FY2018 | | | | 1,700 | | | | 1,224 | | | | 84 | | | | – | | | | 425 | | | | 779 | | | | 3,894 | | | | 8,106 | | Other Executive KMP | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Peter Beaven | | | FY2019 | | | | 1,000 | | | | 480 | | | | 5 | | | | – | | | | 250 | | | | 637 | | | | 2,078 | | | | 4,450 | | | | | FY2018 | | | | 1,000 | | | | 728 | | | | 8 | | | | – | | | | 250 | | | | 549 | | | | 1,792 | | | | 4,327 | | Mike Henry | | | FY2019 | | | | 1,100 | | | | 440 | | | | 10 | | | | – | | | | 275 | | | | 623 | | | | 2,286 | | | | 4,734 | | | | | FY2018 | | | | 1,100 | | | | 722 | | | | 13 | | | | – | | | | 275 | | | | 546 | | | | 1,971 | | | | 4,627 | | Daniel Malchuk | | | FY2019 | | | | 1,000 | | | | 424 | | | | 30 | | | | 14 | | | | 250 | | | | 585 | | | | 2,078 | | | | 4,381 | | | | | FY2018 | | | | 1,000 | | | | 792 | | | | 13 | | | | 19 | | | | 250 | | | | 507 | | | | 1,751 | | | | 4,332 | | Steve Pastor(7) | | | FY2019 | | | | 712 | | | | 524 | | | | – | | | | 49 | | | | 178 | | | | 1,166 | | | | 1,087 | | | | 3,716 | | | | | FY2018 | | | | 1,000 | | | | 720 | | | | – | | | | 21 | | | | 250 | | | | 493 | | | | 1,076 | | | | 3,560 | | Geraldine Slattery(7) | | | FY2019 | | | | 219 | | | | 167 | | | | – | | | | – | | | | 55 | | | | 43 | | | | 213 | | | | 697 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Short-term benefits | | | Post-
employment
benefits | | | Share-based payments | | | Total | | US$(‘000) | | Financial
year | | | Base
salary(1) | | | Annual cash
incentive(2) | | | Non-monetary
benefits(3) | | | Other
benefits(4) | | | Retirement
benefits(5) | | | Value of STIP/CDP
awards(2)(6) | | | Value of LTIP
awards(6) | | Executive Director | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Mike Henry | | | FY2020 | | | | 850 | | | | 653 | | | | 86 | | | | – | | | | 85 | | | | 509 | | | | 1,143 | | | | 3,326 | | Andrew Mackenzie(7) | | | FY2020 | | | | 850 | | | | 653 | | | | 124 | | | | – | | | | 213 | | | | 1,202 | | | | 2,038 | | | | 5,080 | | | | | FY2019 | | | | 1,700 | | | | 653 | | | | 100 | | | | – | | | | 425 | | | | 990 | | | | 4,037 | | | | 7,905 | | Other Executive KMP | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Peter Beaven | | | FY2020 | | | | 1,000 | | | | 848 | | | | 41 | | | | – | | | | 250 | | | | 810 | | | | 2,090 | | | | 5,039 | | | | | FY2019 | | | | 1,000 | | | | 480 | | | | 5 | | | | – | | | | 250 | | | | 637 | | | | 2,078 | | | | 4,450 | | Mike Henry | | | FY2020 | | | | 550 | | | | 422 | | | | 43 | | | | – | | | | 138 | | | | 398 | | | | 1,156 | | | | 2,707 | | | | | FY2019 | | | | 1,100 | | | | 440 | | | | 10 | | | | – | | | | 275 | | | | 623 | | | | 2,286 | | | | 4,734 | | Daniel Malchuk | | | FY2020 | | | | 1,000 | | | | 816 | | | | 38 | | | | – | | | | 250 | | | | 797 | | | | 2,090 | | | | 4,991 | | | | | FY2019 | | | | 1,000 | | | | 424 | | | | 30 | | | | 14 | | | | 250 | | | | 585 | | | | 2,078 | | | | 4,381 | | Geraldine Slattery | | | FY2020 | | | | 750 | | | | 618 | | | | – | | | | – | | | | 188 | | | | 378 | | | | 903 | | | | 2,837 | | | | | FY2019 | | | | 219 | | | | 167 | | | | – | | | | – | | | | 55 | | | | 43 | | | | 213 | | | | 697 | |
| (1) | Base salaries shown in this table reflect the amounts paid over the12-month period from 1 July 20182019 to 30 June 20192020 for each Executive KMP. There were no changes to Executive KMP base salaries during the year except for Geraldine SlatteryMike Henry who was appointed Executive KMP during the yearas CEO on 1 January 2020 on an annual base salary of US$0.7501.700 million. |
| (2) | Annual cash incentive for FY2019 is the cash portion of STIP awards earned in respect of performance during each financial year for each executive. STIP iswas provided half in cash and half in deferred equity (which are included in the share-based payments columns of the table). Annual cash incentive for FY2020 is the cash portion of CDP awards earned in respect of performance during each financial year for each executive. CDP is provided one-third in cash and two-thirds in deferred equity (which are included in the Share-based payments columns of the table). The cash portion of CDP/ STIP awards is paid to Executive KMP in September of the year following the relevant financial year. The minimum possible value awarded to each individual is nil and the maximum is 240360 per cent of base salary (120 per cent in cash and 120240 per cent in deferred equity). For FY2019,FY2020, Executive KMP earned the following STIPCDP awards as a percentage of the maximum (the remaining portion has been forfeited): Mike Henry 64 per cent (for the time served as CEO and as President Minerals Australia),Andrew Mackenzie 3264 per cent (for the time served as CEO), Peter Beaven 40 per cent, Mike Henry 3371 per cent, Daniel Malchuk 35 per cent, Steve Pastor 6168 per cent, and Geraldine Slattery 6569 per cent. Steve Pastor’s FY2019 STIPAndrew’s FY2020 CDP was paid in cashpro-rated and prorated to reflect the period served until he ceased to be KMP on 17 March31 December 2019, as noted in 3.3.12.3.3.1 with 50 per cent of the total CDP award included in the Annual cash incentive column, and 50 per cent in the Value of STIP/CDP awards column. |
| (3) | Non-monetary benefits arenon-pensionable and include items such items as net leave accruals, health and other insurances, fees for tax return preparation (if required in multiple jurisdictions), car parking and travel costs. |
203
| (4) | Other benefits arenon-pensionable and for FY2019 include an international relocation benefit for Daniel Malchuk and an encashment of annual leave entitlements under the US Annual Leave policy and the cost of tax services for Steve Pastor.Malchuk. |
| (5) | RetirementIn FY2020, retirement benefits arewere 25 per cent of base salary for each Executive KMP.KMP except for Mike Henry who was appointed CEO on 1 January 2020 with a reduced pension contribution rate of 10 per cent of base salary as per the remuneration policy approved at the 2019 AGMs.
|
| (6) | The IFRS fair value of bothCDP, STIP and LTIP awards is estimated at grant date. In FY2020, the value of Mike Henry’s LTIP and STIP awards previously granted have been prorated based on time served as CEO and President Minerals Australia, whereas the CDP has been split based on what was earned as CEO and President Minerals Australia. Refer to note 2324 ‘Employee share ownership plans’ in section 5 for further details.details on IFRS. |
| (7) | The remuneration reported for Steve Pastor and Geraldine SlatteryAndrew Mackenzie reflects service as Executive KMP during the year.up to 31 December 2019. |
3.3.18
3.3.19 Equity awards The interests held by Executive KMP under the Group’s employee equity plans are set out below. Each equity award is a right to acquire one ordinary share in BHP Group Limited or in BHP Group Plc upon satisfaction of the vesting conditions. BHP Group Limited share awards are shown in Australian dollars. BHP Group Plc awards are shown in Pounds Sterling. TheOur Requirementsmandatory minimum performance requirements for Securities Dealing standardsecurities dealing governs and restricts dealing arrangements and the provision of shares on vesting or exercise of awards. No interests under the Group’s employee equity plans are held by related parties of Executive KMP. Dividend Equivalent Payments DEP applies to awards provided to Executive KMP under the CDP, STIP and LTIP as detailed in section 3.2.1. No DEP is payable on GSTIP awards or MAP awards. Equity awards provided for Executive KMP service Awards under the STIP, CDP and LTIP Executive KMP receivereceived or will receive awards under the STIP, CDP and LTIP. The terms and conditions of STIP, CDP and LTIP awards, including the performance conditions, are described in sections 3.2.1 and 3.2.5 of this Annual Report.3.2.5. The LTIP rules are available on our website.at bhp.com. Equity awards provided prior to Executive KMP service Awards under the GSTIP and MAP BHP senior management who are not KMP received awards under the GSTIP and receive awards under the MAP. While no GSTIP or MAP awards were granted to Executive KMP during FY2019, Steve Pastor andFY2020, Geraldine Slattery held GSTIP awards and still holdholds MAP awards that were allocated to themher prior to theirher Executive KMP service. 204
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Award type | | Date of grant | | | At 1 July
2018 | | | Granted | | | Vested | | | Lapsed | | | At 30 June
2019 | | | Award vesting
date(1) | | | Market price on date of: | | | Gain on
awards
(‘000) (4) | | | DEP on
awards
(‘000) | | | | Grant(2) | | | Vesting(3) | | Andrew Mackenzie | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | STIP | | | 18-Dec-18 | | | | – | | | | 52,061 | | | | – | | | | – | | | | 52,061 | | | | Aug 20 | | | | A$33.50 | | | | – | | | | – | | | | – | | STIP | | | 24-Nov-17 | | | | 56,217 | | | | – | | | | – | | | | – | | | | 56,217 | | | | Aug 19 | | | | A$27.97 | | | | – | | | | – | | | | – | | LTIP | | | 18-Dec-18 | | | | – | | | | 304,523 | | | | – | | | | – | | | | 304,523 | | | | Aug 23 | | | | A$33.50 | | | | – | | | | – | | | | – | | LTIP | | | 24-Nov-17 | | | | 385,075 | | | | – | | | | – | | | | – | | | | 385,075 | | | | Aug 22 | | | | A$27.97 | | | | – | | | | – | | | | – | | LTIP | | | 9-Dec-16 | | | | 339,753 | | | | – | | | | – | | | | – | | | | 339,753 | | | | Aug 21 | | | | A$25.98 | | | | – | | | | – | | | | – | | LTIP | | | 4-Dec-15 | | | | 339,753 | | | | – | | | | – | | | | – | | | | 339,753 | | | | Aug 20 | | | | A$17.93 | | | | – | | | | – | | | | – | | LTIP | | | 19-Dec-14 | | | | 224,859 | | | | – | | | | – | | | | – | | | | 224,859 | | | | Aug 19 | | | | A$28.98 | | | | – | | | | – | | | | – | | LTIP | | | 18-Dec-13 | | | | 213,701 | | | | – | | | | – | | | | 213,701 | | | | – | | | | 22 Aug 18 | | | | A$35.79 | | | | – | | | | – | | | | – | | Peter Beaven | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | STIP | | | 18-Dec-18 | | | | – | | | | 30,964 | | | | – | | | | – | | | | 30,964 | | | | Aug 20 | | | | A$33.50 | | | | – | | | | – | | | | – | | STIP | | | 24-Nov-17 | | | | 36,145 | | | | – | | | | – | | | | – | | | | 36,145 | | | | Aug 19 | | | | A$27.97 | | | | – | | | | – | | | | – | | STIP | | | 9-Dec-16 | | | | 10,958 | | | | – | | | | 10,958 | | | | – | | | | – | | | | 22 Aug 18 | | | | A$25.98 | | | | A$32.08 | | | | A$352 | | | | A$22 | | LTIP | | | 18-Dec-18 | | | | – | | | | 156,739 | | | | – | | | | – | | | | 156,739 | | | | Aug 23 | | | | A$33.50 | | | | – | | | | – | | | | – | | LTIP | | | 24-Nov-17 | | | | 198,200 | | | | – | | | | – | | | | – | | | | 198,200 | | | | Aug 22 | | | | A$27.97 | | | | – | | | | – | | | | – | | LTIP | | | 9-Dec-16 | | | | 174,873 | | | | – | | | | – | | | | – | | | | 174,873 | | | | Aug 21 | | | | A$25.98 | | | | – | | | | – | | | | – | | LTIP | | | 4-Dec-15 | | | | 174,873 | | | | – | | | | – | | | | – | | | | 174,873 | | | | Aug 20 | | | | A$17.93 | | | | – | | | | – | | | | – | | LTIP | | | 19-Dec-14 | | | | 115,736 | | | | – | | | | – | | | | – | | | | 115,736 | | | | Aug 19 | | | | A$28.98 | | | | – | | | | – | | | | – | | LTIP | | | 18-Dec-13 | | | | 109,993 | | | | – | | | | – | | | | 109,993 | | | | – | | | | 22 Aug 18 | | | | A$35.79 | | | | – | | | | – | | | | – | | Mike Henry | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | STIP | | | 18-Dec-18 | | | | – | | | | 30,692 | | | | – | | | | – | | | | 30,692 | | | | Aug 20 | | | | A$33.50 | | | | – | | | | – | | | | – | | STIP | | | 24-Nov-17 | | | | 36,376 | | | | – | | | | – | | | | – | | | | 36,376 | | | | Aug 19 | | | | A$27.97 | | | | – | | | | – | | | | – | | STIP | | | 9-Dec-16 | | | | 10,663 | | | | – | | | | 10,663 | | | | – | | | | – | | | | 22 Aug 18 | | | | A$25.98 | | | | A$32.08 | | | | A$342 | | | | A$21 | | LTIP | | | 18-Dec-18 | | | | – | | | | 172,413 | | | | – | | | | – | | | | 172,413 | | | | Aug 23 | | | | A$33.50 | | | | – | | | | – | | | | – | | LTIP | | | 24-Nov-17 | | | | 218,020 | | | | – | | | | – | | | | – | | | | 218,020 | | | | Aug 22 | | | | A$27.97 | | | | – | | | | – | | | | – | | LTIP | | | 9-Dec-16 | | | | 192,360 | | | | – | | | | – | | | | – | | | | 192,360 | | | | Aug 21 | | | | A$25.98 | | | | – | | | | – | | | | – | | LTIP | | | 4-Dec-15 | | | | 192,360 | | | | – | | | | – | | | | – | | | | 192,360 | | | | Aug 20 | | | | A$17.93 | | | | – | | | | – | | | | – | | LTIP | | | 19-Dec-14 | | | | 127,310 | | | | – | | | | – | | | | – | | | | 127,310 | | | | Aug 19 | | | | A$28.98 | | | | – | | | | – | | | | – | | LTIP | | | 18-Dec-13 | | | | 120,993 | | | | – | | | | – | | | | 120,993 | | | | – | | | | 22 Aug 18 | | | | A$35.79 | | | | – | | | | – | | | | – | |
205
| | Award type | | Date of grant | | | At 1 July
2018 | | | Granted | | | Vested | | | Lapsed | | | At 30 June
2019 | | | Award vesting
date(1) | | | Market price on date of: | | | Gain on
awards
(‘000) (4) | | | DEP on
awards
(‘000) | | | Date of grant | | At 1 July
2019 | | Granted | | Vested | | Lapsed | | At 30 June
2020 | | Award vesting
date (1) | | | Market price on date of: | | | Gain on
awards
(‘000) (4) | | DEP on
awards
(‘000) | | | | Grant(2) | | | Vesting(3) | | | Grant(2) | | Vesting(3) | | Mike Henry | | | | | | | | | | | | | | | | | | | | | | | | STIP | | | 20-Nov-19 | | | | – | | | 17,420 | | | | – | | | | – | | | 17,420 | | | Aug 21 | | | A$37.24 | | | | – | | | | – | | | | – | | STIP | | | 18-Dec-18 | | | 30,692 | | | | – | | | | – | | | | – | | | 30,692 | | | Aug 20 | | | A$33.50 | | | | – | | | | – | | | | – | | STIP | | | 24-Nov-17 | | | 36,376 | | | | – | | | 36,376 | | | | – | | | | – | | | 21 Aug 19 | | | A$27.97 | | | A$35.25 | | | A$1,282 | | | A$166 | | LTIP | | | 20-Nov-19 | | | | – | | | 153,631 | | | | – | | | | – | | | 153,631 | | | Aug 24 | | | A$37.24 | | | | – | | | | – | | | | – | | LTIP | | | 18-Dec-18 | | | 172,413 | | | | – | | | | – | | | | – | | | 172,413 | | | Aug 23 | | | A$33.50 | | | | – | | | | – | | | | – | | LTIP | | | 24-Nov-17 | | | 218,020 | | | | – | | | | – | | | | – | | | 218,020 | | | Aug 22 | | | A$27.97 | | | | – | | | | – | | | | – | | LTIP | | | 9-Dec-16 | | | 192,360 | | | | – | | | | – | | | | – | | | 192,360 | | | Aug 21 | | | A$25.98 | | | | – | | | | – | | | | – | | LTIP | | | 4-Dec-15 | | | 192,360 | | | | – | | | | – | | | | – | | | 192,360 | | | Aug 20 | | | A$17.93 | | | | – | | | | – | | | | – | | LTIP | | | 19-Dec-14 | | | 127,310 | | | | – | | | | – | | | 127,310 | | | | – | | | 21 Aug 19 | | | A$28.98 | | | | – | | | | – | | | | – | | Andrew Mackenzie(5) | | | | | | | | | | | | | | | | | | | | | | | | STIP | | | 20-Nov-19 | | | | – | | | 25,845 | | | | – | | | | – | | | 25,845 | | | Aug 21 | | | A$37.24 | | | | – | | | | – | | | | – | | STIP | | | 18-Dec-18 | | | 52,061 | | | | – | | | | – | | | | – | | | 52,061 | | | Aug 20 | | | A$33.50 | | | | – | | | | – | | | | – | | STIP | | | 24-Nov-17 | | | 56,217 | | | | – | | | 56,217 | | | | – | | | | – | | | 21 Aug 19 | | | A$27.97 | | | A$35.25 | | | A$1,982 | | | A$256 | | LTIP | | | 20-Nov-19 | | | | – | | | 271,348 | | | | – | | | | – | | | 271,348 | | | Aug 24 | | | A$37.24 | | | | – | | | | – | | | | – | | LTIP | | | 18-Dec-18 | | | 304,523 | | | | – | | | | – | | | | – | | | 304,523 | | | Aug 23 | | | A$33.50 | | | | – | | | | – | | | | – | | LTIP | | | 24-Nov-17 | | | 385,075 | | | | – | | | | – | | | | – | | | 385,075 | | | Aug 22 | | | A$27.97 | | | | – | | | | – | | | | – | | LTIP | | | 9-Dec-16 | | | 339,753 | | | | – | | | | – | | | | – | | | 339,753 | | | Aug 21 | | | A$25.98 | | | | – | | | | – | | | | – | | LTIP | | | 4-Dec-15 | | | 339,753 | | | | – | | | | – | | | | – | | | 339,753 | | | Aug 20 | | | A$17.93 | | | | – | | | | – | | | | – | | LTIP | | | 19-Dec-14 | | | 224,859 | | | | – | | | | – | | | 224,859 | | | | – | | | 21 Aug 19 | | | A$28.98 | | | | – | | | | – | | | | – | | Peter Beaven | | | | | | | | | | | | | | | | | | | | | | | | STIP | | | 20-Nov-19 | | | | – | | | 19,003 | | | | – | | | | – | | | 19,003 | | | Aug 21 | | | A$37.24 | | | | – | | | | – | | | | – | | STIP | | | 18-Dec-18 | | | 30,964 | | | | – | | | | – | | | | – | | | 30,964 | | | Aug 20 | | | A$33.50 | | | | – | | | | – | | | | – | | STIP | | | 24-Nov-17 | | | 36,145 | | | | – | | | 36,145 | | | | – | | | | – | | | 21 Aug 19 | | | A$27.97 | | | A$35.25 | | | A$1,274 | | | A$165 | | LTIP | | | 20-Nov-19 | | | | – | | | 139,664 | | | | – | | | | – | | | 139,664 | | | Aug 24 | | | A$37.24 | | | | – | | | | – | | | | – | | LTIP | | | 18-Dec-18 | | | 156,739 | | | | – | | | | – | | | | – | | | 156,739 | | | Aug 23 | | | A$33.50 | | | | – | | | | – | | | | – | | LTIP | | | 24-Nov-17 | | | 198,200 | | | | – | | | | – | | | | – | | | 198,200 | | | Aug 22 | | | A$27.97 | | | | – | | | | – | | | | – | | LTIP | | | 9-Dec-16 | | | 174,873 | | | | – | | | | – | | | | – | | | 174,873 | | | Aug 21 | | | A$25.98 | | | | – | | | | – | | | | – | | LTIP | | | 4-Dec-15 | | | 174,873 | | | | – | | | | – | | | | – | | | 174,873 | | | Aug 20 | | | A$17.93 | | | | – | | | | – | | | | – | | LTIP | | | 19-Dec-14 | | | 115,736 | | | | – | | | | – | | | 115,736 | | | | – | | | 21 Aug 19 | | | A$28.98 | | | | – | | | | – | | | | – | | Daniel Malchuk | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | STIP | | | 18-Dec-18 | | | | – | | | | 33,686 | | | | – | | | | – | | | | 33,686 | | | | Aug 20 | | | | A$33.50 | | | | – | | | | – | | | | – | | | 20-Nov-19 | | | | – | | | 16,786 | | | | – | | | | – | | | 16,786 | | | Aug 21 | | | A$37.24 | | | | – | | | | – | | | | – | | STIP | | | 24-Nov-17 | | | | 28,070 | | | | – | | | | – | | | | – | | | | 28,070 | | | | Aug 19 | | | | A$27.97 | | | | – | | | | – | | | | – | | | 18-Dec-18 | | | 33,686 | | | | – | | | | – | | | | – | | | 33,686 | | | Aug 20 | | | A$33.50 | | | | – | | | | – | | | | – | | STIP | | | 9-Dec-16 | | | | 9,694 | | | | – | | | | 9,694 | | | | – | | | | – | | | | 22 Aug 18 | | | | A$25.98 | | | | A$32.08 | | | | A$311 | | | | A$19 | | | 24-Nov-17 | | | 28,070 | | | | – | | | 28,070 | | | | – | | | | – | | | 21 Aug 19 | | | A$27.97 | | | A$35.25 | | | A$989 | | | A$128 | | LTIP | | | 18-Dec-18 | | | | – | | | | 156,739 | | | | – | | | | – | | | | 156,739 | | | | Aug 23 | | | | A$33.50 | | | | – | | | | – | | | | – | | | 20-Nov-19 | | | | – | | | 139,664 | | | | – | | | | – | | | 139,664 | | | Aug 24 | | | A$37.24 | | | | – | | | | – | | | | – | | LTIP | | | 24-Nov-17 | | | | 198,200 | | | | – | | | | – | | | | – | | | | 198,200 | | | | Aug 22 | | | | A$27.97 | | | | – | | | | – | | | | – | | | 18-Dec-18 | | | 156,739 | | | | – | | | | – | | | | – | | | 156,739 | | | Aug 23 | | | A$33.50 | | | | – | | | | – | | | | – | | LTIP | | | 9-Dec-16 | | | | 174,873 | | | | – | | | | – | | | | – | | | | 174,873 | | | | Aug 21 | | | | A$25.98 | | | | – | | | | – | | | | – | | | 24-Nov-17 | | | 198,200 | | | | – | | | | – | | | | – | | | 198,200 | | | Aug 22 | | | A$27.97 | | | | – | | | | – | | | | – | | LTIP | | | 4-Dec-15 | | | | 174,873 | | | | – | | | | – | | | | – | | | | 174,873 | | | | Aug 20 | | | | A$17.93 | | | | – | | | | – | | | | – | | | 9-Dec-16 | | | 174,873 | | | | – | | | | – | | | | – | | | 174,873 | | | Aug 21 | | | A$25.98 | | | | – | | | | – | | | | – | | LTIP | | | 19-Dec-14 | | | | 115,736 | | | | – | | | | – | | | | – | | | | 115,736 | | | | Aug 19 | | | | A$28.98 | | | | – | | | | – | | | | – | | | 4-Dec-15 | | | 174,873 | | | | – | | | | – | | | | – | | | 174,873 | | | Aug 20 | | | A$17.93 | | | | – | | | | – | | | | – | | LTIP | | | 18-Dec-13 | | | | 93,495 | | | | – | | | | – | | | | 93,495 | | | | – | | | | 22 Aug 18 | | | | A$35.79 | | | | – | | | | – | | | | – | | | 19-Dec-14 | | | 115,736 | | | | – | | | | – | | | 115,736 | | | | – | | | 21 Aug 19 | | | A$28.98 | | | | – | | | | – | | | | – | | Steve Pastor(5) | | | | | | | | | | | | | | | | | | | | | | | | STIP | | | 18-Dec-18 | | | | – | | | | 30,624 | | | | – | | | | – | | | | 30,624 | | | | Aug 20 | | | | A$33.50 | | | | – | | | | – | | | | – | | | STIP | | | 24-Nov-17 | | | | 30,659 | | | | – | | | | – | | | | – | | | | 30,659 | | | | Aug 19 | | | | A$27.97 | | | | – | | | | – | | | | – | | | Geraldine Slattery | | | | | | | | | | | | | | | | | | | | | | | | STIP | | | 9-Dec-16 | | | | 2,697 | | | | – | | | | 2,697 | | | | – | | | | – | | | | 22 Aug 18 | | | | A$25.98 | | | | A$32.08 | | | | A$87 | | | | A$5 | | | 20-Nov-19 | | | | – | | | 6,628 | | | | – | | | | – | | | 6,628 | | | Aug 21 | | | A$37.24 | | | | – | | | | – | | | | – | | LTIP | | | 18-Dec-18 | | | | – | | | | 156,739 | | | | – | | | | – | | | | 156,739 | | | | Aug 23 | | | | A$33.50 | | | | – | | | | – | | | | – | | | 20-Nov-19 | | | | – | | | 104,748 | | | | – | | | | – | | | 104,748 | | | Aug 24 | | | A$37.24 | | | | – | | | | – | | | | – | | LTIP | | | 24-Nov-17 | | | | 198,200 | | | | – | | | | – | | | | – | | | | 198,200 | | | | Aug 22 | | | | A$27.97 | | | | – | | | | – | | | | – | | | LTIP | | | 9-Dec-16 | | | | 139,898 | | | | – | | | | – | | | | – | | | | 139,898 | | | | Aug 21 | | | | A$25.98 | | | | – | | | | – | | | | – | | | MAP | | | 24-Feb-16 | | | | 21,775 | | | | – | | | | – | | | | – | | | | 21,775 | | | | Aug 20 | | | | A$16.18 | | | | – | | | | – | | | | – | | | MAP | | | 24-Feb-16 | | | | 21,775 | | | | – | | | | – | | | | – | | | | 21,775 | | | | Aug 19 | | | | A$16.18 | | | | – | | | | – | | | | – | | | MAP | | | 30-Oct-15 | | | | 21,775 | | | | – | | | | 21,775 | | | | – | | | | – | | | | 22 Aug 18 | | | | A$23.02 | | | | A$32.08 | | | | A$699 | | | | – | | | GSTIP | | | 9-Dec-16 | | | | 5,435 | | | | – | | | | 5,435 | | | | – | | | | – | | | | 22 Aug 18 | | | | A$25.98 | | | | A$32.08 | | | | A$174 | | | | – | | | Geraldine Slattery(6) | | | | | | | | | | | | | | | | | | | | | | | | MAP | | | 21-Feb-19 | | | | – | | | | 28,527 | | | | – | | | | – | | | | 28,527 | | | | Aug 23 | | | | A$34.83 | | | | – | | | | – | | | | – | | | 21-Feb-19 | | | 28,527 | | | | – | | | | – | | | | – | | | 28,527 | | | Aug 23 | | | A$34.83 | | | | – | | | | – | | | | – | | MAP | | | 21-Feb-19 | | | | – | | | | 28,527 | | | | – | | | | – | | | | 28,527 | | | | Aug 22 | | | | A$34.83 | | | | – | | | | – | | | | – | | | 21-Feb-19 | | | 28,527 | | | | – | | | | – | | | | – | | | 28,527 | | | Aug 22 | | | A$34.83 | | | | – | | | | – | | | | – | | MAP | | | 24-Sep-18 | | | | – | | | | 28,527 | | | | – | | | | – | | | | 28,527 | | | | Aug 21 | | | | A$33.83 | | | | – | | | | – | | | | – | | | 24-Sep-18 | | | 28,527 | | | | – | | | | – | | | | – | | | 28,527 | | | Aug 21 | | | A$33.83 | | | | – | | | | – | | | | – | | MAP | | | 25-Sep-17 | | | | 34,349 | | | | – | | | | – | | | | – | | | | 34,349 | | | | Aug 20 | | | | A$25.98 | | | | – | | | | – | | | | – | | | 25-Sep-17 | | | 34,349 | | | | – | | | | – | | | | – | | | 34,349 | | | Aug 20 | | | A$25.98 | | | | – | | | | – | | | | – | | MAP | | | 31-Oct-16 | | | | 21,775 | | | | – | | | | – | | | | – | | | | 21,775 | | | | Aug 19 | | | | A$23.07 | | | | – | | | | – | | | | – | | | 31-Oct-16 | | | 21,775 | | | | – | | | 21,775 | | | | – | | | | – | | | 21 Aug 19 | | | A$23.07 | | | A$35.25 | | | A$768 | | | | – | | GSTIP | | | 25-Sep-17 | | | | 14,951 | | | | – | | | | – | | | | – | | | | 14,951 | | | | Aug 19 | | | | A$25.98 | | | | – | | | | – | | | | – | | | 25-Sep-17 | | | 14,951 | | | | – | | | 14,951 | | | | – | | | | – | | | 21 Aug 19 | | | A$25.98 | | | A$35.25 | | | A$527 | | | | – | |
| (1) | Where the vesting date is not yet known, the estimated vesting month is shown. Where awards lapse, the lapse date is shown. If the vesting conditions are met, awards will vest on, or as soon as practicable after, the firstnon-prohibited period date occurring after 30 June of the preceding year of vest. The year of vestvesting is the second (STIP, CDP two-year awards and GSTIP), third (MAP), fourth (MAP) or fifth (MAP, CDP five-year awards and LTIP) financial year after grant. All awards are conditional awards and have no exercise period, exercise price or expiry date; instead ordinary fully paid shares are automatically delivered upon the vesting conditions being met. Where vesting conditions are not met, the conditional awards will immediately lapse. |
206
| (2) | The market price shown is the closing price of BHP shares on the relevant date of grant. No price is payable by the individual to receive a grant of awards. The IFRS fair value of the STIP and LTIP awards granted in FY2019FY2020 is at the grant date of 18 December 2018,20 November 2019, and are as follows: STIP – A$33.5037.24 and LTIP – A$24.13.20.07. |
| (3) | The market price shown is the closing price of BHP shares on the relevant date of vest. |
| (4) | The gain on awards is calculated using the market price on date of vesting or exercise (as applicable) less any exercise price payable. The amounts that vested and were lapsed for the awards during FY2019FY2020 are as follows: STIP – 100 per cent vested; LTIP – 100 per cent lapsed; GSTIP – 100 per cent vested; MAP – 100 per cent vested. |
| (5) | Awards shown as held by Steve PastorAndrew Mackenzie at 30 June 20192020 are his balances at the date he ceased being KMP (17 MarchCEO and Executive Director (31 December 2019). The subsequent treatment of his awards is set out in section 3.3.12.sections 3.3.13 and 3.3.24. |
(6) | The opening balances of awards for Geraldine Slattery reflects her holdings on the date she commenced being KMP (18 March 2019).
|
207
3.3.193.3.20 Estimated value range of equity awards
The current face value (and estimate of the maximum possible total value) of equity awards allocated during FY2019FY2020 and yet to vest are the awards as set out in the previous table multiplied by the current share price of BHP Group Limited or BHP Group Plc as applicable. The minimum possible total value of the awards is nil. The actual value that may be received by participants in the future cannot be determined as it is dependent on and therefore fluctuates with the share prices of BHP Group Limited and BHP Group Plc at the date that any particular award vests or is exercised. The table below provides five-year share price history for BHP Group Limited and BHP Group Plc, history of dividends paid and the Group’s earnings. Five-year share price, dividend and earnings history | | | | | FY2019 | | FY2018 | | | FY2017 | | | FY2016 | | FY2015 | | | | FY2020 | | | FY2019 | | FY2018 | | | FY2017 | | | FY2016 | | | BHP Group Limited | | Share price at beginning of year | | | A$33.60 | | | A$23.23 | | | | A$19.09 | | | | A$26.58 | | | A$36.00 | | | Share price at beginning of year | | | A$41.68 | | | | A$33.60 | | | A$23.23 | | | | A$19.09 | | | | A$26.58 | | | | Share price at end of year | | | A$41.16 | | | A$33.91 | | | | A$23.28 | | | | A$18.65 | | | A$27.05 | | | Share price at end of year | | | A$35.82 | | | | A$41.16 | | | A$33.91 | | | | A$23.28 | | | | A$18.65 | | | | Dividends paid | | | A$3.08 | (1) | | A$1.24 | | | | A$0.72 | | | | A$1.09 | | | A$3.72 | (2) | | Dividends paid | | | A$2.13 | | | | A$3.08 | (1) | | A$1.24 | | | | A$0.72 | | | | A$1.09 | | BHP Group Plc | | Share price at beginning of year | | | £16.53 | | | £12.15 | | | | £9.40 | | | | £12.58 | | | £19.45 | | | Share price at beginning of year | | | £20.33 | | | | £16.53 | | | £12.15 | | | | £9.40 | | | | £12.58 | | | | Share price at end of year | | | £20.15 | | | £17.06 | | | | £11.76 | | | | £9.43 | | | £12.49 | | | Share price at end of year | | | £16.54 | | | | £20.15 | | | £17.06 | | | | £11.76 | | | | £9.43 | | | | Dividends paid | | | £1.70 | (1) | | £0.72 | | | | £0.44 | | | | £0.51 | | | £1.95 | (2) | | Dividends paid | | | £1.13 | | | | £1.70 | (1) | | £0.72 | | | | £0.44 | | | | £0.51 | | | BHP | | Attributable profit /(loss)
(US$M, as reported) | | 8,306 | | | 3,705 | | | | 5,890 | | | | (6,385 | ) | | 1,910 | | | Attributable profit/(loss)
(US$M, as reported) | | | 7,956 | | | | 8,306 | | | 3,705 | | | | 5,890 | | | | (6,385 | ) |
| (1) | The FY2019 dividends paid includes A$1.41 or £0.80 in respect of the special dividend associated with the divestment of Onshore US. |
(2) | The FY2015 dividends paid includes A$2.25 or £1.15 in respect of thein-specie dividend associated with the demerger of South32.
|
The highest share prices during FY2019FY2020 were A$41.95for42.08for BHP Group Limited shares and £20.15£20.49 for BHP Group Plc shares. The lowest share prices during FY2019FY2020 were A$30.43and £14.91,25.20and £9.40, respectively. 3.3.203.3.21 Ordinary share holdings and transactions
The number of ordinary shares in BHP Group Limited or in BHP Group Plc held directly, indirectly or beneficially, by each individual (including shares held in the name of all close members of the Director’s or Executive KMP’s family and entities over which either the Director or Executive KMP or the family member has, directly or indirectly, control, joint control or significant influence) are shown below. No shares are held nominally by any KMP or their related parties. There have been no changes in the interests of any Directors in the period to 53 September 20192020 (being not less than one month prior to the date of the notice of the 20192020 AGMs), except as noted below. These are ordinary shares held without performance conditions or restrictions and are included in MSR calculations for each individual. 208
The interests of Directors and Executive KMP in the ordinary shares of each of BHP Group Limited and BHP Group Plc as at 30 June 20192020 did not exceed on an individual basis or in the aggregate 1 per cent of BHP Group Limited’s or BHP Group Plc’s issued ordinary shares. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | BHP Group Limited Shares | | | BHP Group Plc Shares | | | | | Held at
1 July 2018 | | | Purchased | | | Received as
remuneration (1) | | | Sold | | | Held at
30 June 2019 | | | Held at
1 July 2018 | | | Purchased | | | Received as
remuneration (1) | | | Sold | | | Held at
30 June 2019 | | Executive Director | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Andrew Mackenzie | | | 93,051 | | | | – | | | | – | | | | – | | | | 93,051 | | | | 266,205 | | | | – | | | | – | | | | – | | | | 266,205 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Other Executive KMP | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Peter Beaven | | | 296,690 | | | | – | | | | 11,644 | | | | 68,072 | | | | 240,262 | | | | – | | | | – | | | | – | | | | – | | | | – | | Mike Henry | | | 91,993 | | | | – | | | | 11,331 | | | | 5,262 | | | | 98,062 | | | | 196,262 | | | | – | | | | – | | | | – | | | | 196,262 | | Daniel Malchuk | | | 164,054 | | | | – | | | | 10,301 | | | | – | | | | 174,355 | | | | – | | | | – | | | | – | | | | – | | | | – | | Steve Pastor (2)(3) | | | 52,953 | | | | – | | | | 30,076 | | | | 12,234 | | | | 70,795 | | | | – | | | | – | | | | – | | | | – | | | | – | | Geraldine Slattery (2)(4) | | | 49,701 | | | | – | | | | – | | | | – | | | | 49,701 | | | | – | | | | – | | | | – | | | | – | | | | – | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Non-executive Directors | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Terry Bowen | | | 11,000 | | | | – | | | | – | | | | – | | | | 11,000 | | | | – | | | | – | | | | – | | | | – | | | | – | | Malcolm Broomhead | | | 19,000 | | | | – | | | | – | | | | – | | | | 19,000 | | | | – | | | | – | | | | – | | | | – | | | | – | | Ian Cockerill (4)(5) | | | 5,259 | | | | – | | | | – | | | | – | | | | 5,259 | | | | – | | | | 3,500 | | | | – | | | | – | | | | 3,500 | | Anita Frew | | | – | | | | – | | | | – | | | | – | | | | – | | | | 15,000 | | | | – | | | | – | | | | – | | | | 15,000 | | Carolyn Hewson | | | 19,000 | | | | – | | | | – | | | | – | | | | 19,000 | | | | – | | | | – | | | | – | | | | – | | | | – | | Susan Kilsby (4)(5) | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | Ken MacKenzie (6) | | | 52,351 | | | | – | | | | – | | | | – | | | | 52,351 | | | | – | | | | – | | | | – | | | | – | | | | – | | Lindsay Maxsted | | | 18,000 | | | | – | | | | – | | | | – | | | | 18,000 | | | | – | | | | – | | | | – | | | | – | | | | – | | John Mogford | | | – | | | | – | | | | – | | | | – | | | | – | | | | 12,000 | | | | – | | | | – | | | | – | | | | 12,000 | | Wayne Murdy (2)(3) | | | 8,000 | | | | – | | | | – | | | | – | | | | 8,000 | | | | 24,000 | | | | – | | | | – | | | | – | | | | 24,000 | | Shriti Vadera | | | – | | | | – | | | | – | | | | – | | | | – | | | | 25,000 | | | | – | | | | – | | | | – | | | | 25,000 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | BHP Group Limited shares | | | BHP Group Plc shares | | | | | Held at
1 July 2019 | | | Purchased | | | Received as
remuneration (1) | | | Sold | | | Held at
30 June 2020 | | | Held at
1 July 2019 | | | Purchased | | | Received as
remuneration (1) | | | Sold | | | Held at
30 June 2020 | | Executive Director | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Mike Henry | | | 98,062 | | | | – | | | | 41,080 | | | | 19,073 | | | | 120,069 | | | | 196,262 | | | | – | | | | – | | | | – | | | | 196,262 | | Andrew Mackenzie (2) | | | 93,051 | | | | – | | | | 63,486 | | | | 31,309 | | | | 125,228 | | | | 266,205 | | | | – | | | | – | | | | – | | | | 266,205 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Other Executive KMP | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Peter Beaven | | | 240,262 | | | | – | | | | 40,819 | | | | 19,794 | | | | 261,287 | | | | – | | | | – | | | | – | | | | – | | | | – | | Daniel Malchuk | | | 174,355 | | | | – | | | | 31,700 | | | | 11,447 | | | | 194,608 | | | | – | | | | – | | | | – | | | | – | | | | – | | Geraldine Slattery (3) | | | 49,701 | | | | – | | | | 36,726 | | | | 14,907 | | | | 71,520 | | | | – | | | | – | | | | – | | | | – | | | | – | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Non-executive Directors | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Terry Bowen | | | 11,000 | | | | – | | | | – | | | | – | | | | 11,000 | | | | – | | | | – | | | | – | | | | – | | | | – | | Malcolm Broomhead | | | 19,000 | | | | – | | | | – | | | | – | | | | 19,000 | | | | – | | | | – | | | | – | | | | – | | | | – | | Ian Cockerill | | | 5,259 | | | | 3,500 | | | | – | | | | – | | | | 8,759 | | | | 3,500 | | | | – | | | | – | | | | – | | | | 3,500 | | Anita Frew | | | – | | | | – | | | | – | | | | – | | | | – | | | | 15,000 | | | | – | | | | – | | | | – | | | | 15,000 | | Gary Goldberg (3)(4) | | | – | | | | 10,000 | | | | – | | | | – | | | | 10,000 | | | | – | | | | – | | | | – | | | | – | | | | – | | Carolyn Hewson (2) | | | 19,000 | | | | 5,638 | | | | – | | | | – | | | | 24,638 | | | | – | | | | – | | | | – | | | | – | | | | – | | Susan Kilsby | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | 6,900 | | | | – | | | | – | | | | 6,900 | | Ken MacKenzie | | | 52,351 | | | | – | | | | – | | | | – | | | | 52,351 | | | | – | | | | – | | | | – | | | | – | | | | – | | Lindsay Maxsted | | | 18,000 | | | | – | | | | – | | | | – | | | | 18,000 | | | | – | | | | – | | | | – | | | | – | | | | – | | John Mogford | | | – | | | | – | | | | – | | | | – | | | | – | | | | 12,000 | | | | – | | | | – | | | | – | | | | 12,000 | | Shriti Vadera | | | – | | | | – | | | | – | | | | – | | | | – | | | | 25,000 | | | | – | | | | – | | | | – | | | | 25,000 | | Dion Weisler (4) | | | 1,544 | | | | – | | | | – | | | | – | | | | 1,544 | | | | – | | | | – | | | | – | | | | – | | | | – | |
| (1) | Includes DEP in the form of shares on equity awards vesting as disclosed in section 3.3.18. |
| (2) | The following BHP Group Limited shares and BHP Group Plc shares were held in the form of American Depositary Shares: Wayne Murdy (4,000BHP Group Limited; 12,000 BHP Group Plc), Steve Pastor (1,574 BHP Group Limited), and Geraldine Slattery (868 BHP Group Limited). |
(3) | The closing balances for Steve PastorAndrew Mackenzie and Wayne MurdyCarolyn Hewson reflect their shareholdings on the date that each ceased being KMP, being 17 March31 December 2019 and 27 November 2018,2019, respectively.
|
| (3) | The following BHP Group Limited shares were held in the form of American Depositary Shares: Geraldine Slattery (868 BHP Group Limited) and Gary Goldberg (5,000 BHP Group Limited). |
| (4) | The opening balances for Geraldine Slattery, Ian CockerillGary Goldberg and Susan KilsbyDion Weisler reflect their shareholdings on the date that each became KMP being 18 March 2019, 1 April 2019February 2020 and 1 April 2019June 2020 respectively. |
209
(5) | Ian Cockerill acquired 3,500 shares in BHP Group Limited on 29 August 2019 and Susan Kilsby acquired 2,900 shares in BHP Group Plc on 23 August 2019.
|
(6) | The opening balance for Ken MacKenzie has been updated to include 4,495 BHP Group Limited shares that were purchased on 25 August 2017, which were inadvertently not included in the 2018 report.
|
3.3.213.3.22 Prohibition on hedging of BHP Group shares and equity instruments
The CEO and other Executive KMP may not use unvested BHP equity awards as collateral or protect the value of any unvested BHP equity awards or the value of shares and securities held as part of meeting the MSR. Any securities that have vested and are no longer subject to restrictions may be subject to hedging arrangements or used as collateral, provided that prior consent is obtained. 3.3.223.3.23 Share ownership guidelines and the MSR
The share ownership guidelines and the MSR help to ensure the interests of Directors, executives and shareholders remain aligned. The CEO and other Executive KMP are expected to grow their holdings to the MSR from the scheduled vesting of their employee awards over time. The MSR is tested at the time that shares are to be sold. Shares may be sold to satisfy tax obligations arising from the granting, holding, vesting, exercise or sale of the employee awards or the underlying shares whether the MSR is satisfied at that time or not. For FY2019:FY2020: the MSR for the CEO was five times annualpre-tax base salary and while he has met this requirement in the past, subsequent movements in foreign exchange rates and share prices have resulted in Andrew Mackenzie’sMike Henry’s shareholding being 4.8was 4.1 times his annualpre-tax base salary at the end of FY2019.FY2020. As at the date of this Report, Mr MackenzieMike met the MSR; the MSR for other Executive KMP was three times annualpre-tax base salary. At the end of FY2019,FY2020, Peter Beaven Mike Henry and Daniel Malchuk met the MSR, while Geraldine Slattery did not as she was only recently appointed as Executive KMP on 18 March 2019. While Mr Beaven sold shares during FY2019, he met the MSR both before and after the sale. Other than Mr Beaven, no No other Executive KMP sold shares during FY2019,FY2020, other than to satisfy taxation obligations. Effective 1 July 2020, atwo-year post-retirement shareholding requirement for the CEO will applyapplies from the date of retirement, which will be the lower of the CEO’s MSR or the CEO’s actual shareholding at the date of retirement. Subject to securities dealing constraints,Non-executive Directors have agreed to apply at least 25 per cent of their remuneration (base fees plus Committee fees) to the purchase of BHP shares until they achieve an MSR equivalent in value to one year’syear of remuneration (base fees plus Committee fees). Thereafter, they must maintain at least that level of shareholding throughout their tenure. At the end of FY2019,FY2020, eachNon-executive Director met the MSR with the exception of Ian CockerillSusan Kilsby and Susan KilsbyDion Weisler as they only recently joined the Board on 1 April 2019.2019 and 1 June 2020 respectively. As at the date of this Report Mr Cockerill metand since their commencement, Susan and Dion each hold shares that satisfy their requirement to build shareholdings to the MSR and Ms Kilsby met the agreed applicationequivalent of fees to purchase25 per cent of BHP shares in respect of her tenure since 1 April 2019.their annual remuneration. 3.3.233.3.24 Payments to past Directors and for loss of office
UK regulations require the inclusion in the Remuneration Report of certain payments to past Directors and payments made for loss of office. There is nothing The following payments were made to discloseAndrew Mackenzie that relate to the period when he was no longer an Executive Director and CEO and which have not been reported in sections 3.3.1 and 3.3.18: 48 per cent of the 322,765 retained LTIP awards granted in 2015, reduced from 339,753 awards originally granted and prorated for time served at the time of departure, vested on 19 August 2020. The value of these paymentsawards for FY2019. Andrew was US$5.317 million, including a related DEP of US$0.919 million which was paid in shares. Fixed remuneration comprising base salary, pension contributions and applicable benefits valued at US$0.533 million was provided to Andrew for the period 1 January to 31 March 2020. Upon his retirement from BHP, Andrew received his outstanding accrued statutory leave entitlements valued at US$0.500 million. The Remuneration Committee has adopted a de minimis threshold of US$7,500 for disclosure of payments to past Directors under UK requirements. 3.3.24There were no payments made for loss of office in FY2020.
3.3.25 Relative importance of spend on pay The table below sets out the total spend for continuingContinuing operations on employee remuneration during FY2019FY2020 (and the prior year) compared with other significant expenditure items, and includes items as prescribed in the UK requirements. BHP has included tax payments and purchases of property, plant and equipment being the most significant other outgoings in monetary terms. | | | | | | | | | US$ million | | FY2020 | | | FY2019 | | Aggregate employee benefits expense | | | 4,120 | | | | 4,117 | | Dividends paid to BHP shareholders | | | 6,876 | | | | 11,395 | | Share buy-backs | | | – | | | | 5,220 | | Income tax paid and royalty-related taxation paid (net of refunds) | | | 5,944 | | | | 5,940 | | Purchases of property, plant and equipment | | | 6,900 | | | | 6,250 | |
210
| | | | | | | | | US$ million | | FY2019 | | | FY2018 | | Aggregate employee benefits expense | | | 4,117 | | | | 4,072 | | Dividends paid to BHP shareholders | | | 11,395 | | | | 5,220 | | Sharebuy-backs | | | 5,220 | | | | – | | Income tax paid and royalty-related taxation paid (net of refunds) | | | 5,940 | | | | 4,918 | | Purchases of property, plant and equipment | | | 6,250 | | | | 4,979 | |
3.3.253.3.26 Transactions with KMP
During the financial year, there were no transactions between the Group and its subsidiaries and KMP (including their related parties) (2018:(2019: US$ nil; 2017:2018: US$ nil). There were no amounts payable at 30 June 2019 (2018: US$ nil). There were US$ nilby, or loans (2018: US$ nil) with, KMP (including their related parties) at 30 June 2020 (2019: US$ nil). A number of KMP hold or have held positions in other companies (i.e. personally related entities), where it is considered they control or significantly influence the financial or operating policies of those entities. There have been no transactions with those entities and no amounts were owed by the Group to personally related entities or any other related parties (2018:(2019: US$ nil). This Remuneration Report was approved by the Board on 5September20193 September 2020 and signed on its behalf by: | | Carolyn HewsonSusan Kilsby | Chairman,Chair, Remuneration Committee | 5September20193 September 2020 |
211
Section 4 Directors’ Report In this section 4.1 Review of operations, principal activities and state of affairs
4.2 Share capital andbuy-back programs
4.3 Results, financial instruments and going concern
4.4 Directors
4.5 Remuneration and share interests
4.6 Secretaries
4.7 Indemnities and insurance
4.8 Employee policies
4.9 Corporate governance
4.10 Dividends
4.11 Auditors
4.12Non-audit services
4.13 Political donations
4.14 Exploration, research and development
4.15 ASIC Instrument 2016/191
4.16 Proceedings on behalf of BHP Group Limited
4.17 Performance in relation to environmental regulation
4.18 Share capital, restrictions on transfer of shares and other additional information
212
The information presented by the Directors in this Directors’ Report relates to BHP Group Limited, BHP Group Plc and their respective subsidiaries. Section 1 ‘Strategic Report’ (which includes the Chairman’sChair’s Review in section 1.1 and the Chief Executive Officer’s Report in section 1.2, and incorporates the operating and financial review), section 2 ‘Governance at BHP’, section 3 ‘Remuneration Report’, section 5.5 ‘Lead Auditor’s Independence Declaration’ and section 7 ‘Shareholder information’ are each incorporated by reference into, and form part of, this Directors’ Report. In addition, for the purposes of UK law, the Strategic Report in section 1 and the Remuneration Report in section 3 form separate reports and have been separately approved by the Board for that purpose. For the purpose of the Financial Conduct Authority’s (FCA) Listing Rule 9.8.4C R, the applicable information required to be disclosed in accordance with FCA Listing Rule 9.8.4 R is set out in the sections below. | | | Applicable information required by FCA Listing Rule 9.8.4 R | | Section in this Annual Report | (1) Interest capitalised by the Group | | Section 5, note 20 | (6) Waiver of future emoluments
| | Section 3.3.1 | (12) Shareholder waivers of dividends
| | Section 5, note 23 | (13) Shareholder waivers of future dividends
| | Section 5, note 2321 |
Paragraphs (2), (4), (5), (6), (7), (8), (9), (10), (11), (12), (13) and (14) of Listing Rule 9.8.4 R are not applicable. The Directors confirm, on the advice of the Risk and Audit Committee (RAC), that they consider the Annual Report (including the Financial Statements), taken as a whole, is fair, balanced and understandable, and provides the information necessary for shareholders to assess BHP’s position, performance, business model and strategy. 213
4.1 Review of operations, principal activities and state of affairs A review of the operations of BHP during FY2019,FY2020, the results of those operations during FY2019FY2020 and the expected results of those operations in future financial years are set out in section 1, in particular in 1.1 to 1.10,1.8, 1.11 and 1.12 and 1.13 and in other material in this Annual Report. Information on the development of BHP and likely developments in future years also appears in those sections. Our principal activities during FY2019FY2020 are disclosed in section 1. We are among the world’s top producers of major commodities, including iron ore, metallurgical coal and copper. We also have substantial interests in oil, gas and energy coal. No significant changes in the nature of BHP’s principal activities occurred during FY2019FY2020 other than as disclosed in section 1. There were no significant changes in BHP’s state of affairs that occurred during FY2019FY2020 and no significant post balance date events other than as disclosed in section 1.1 and note 34 in section 5. No other matter or circumstance has arisen since the end of FY2019FY2020 that has significantly affected or is expected to significantly affect the operations, the results of operations or state of affairs of BHP in future years. 214
4.2 Share capital andbuy-back programs At the Annual General Meetings held in 20172018 and 2018,2019, shareholders authorised BHP Group Plc to makeon-market purchases of up to 211,207,180 of its ordinary shares, representing 10 per cent of BHP Group Plc’s issued share capital at that time. On 17 December 2018,During FY2020, we announced the completion of a US$5.2 billiondid not make any on-market or off-market tenderbuy-backpurchases of BHP Group Limited shares. Approximately 265.8 million shares (8.3 per cent ofor BHP Group Limited’s issuedPlc shares under any share capital and 5 per cent of the total issued share capital of BHP Group Limited and BHP Group Plc) were bought back at a price of A$27.64 per share.buy-back program. As at the date of this Directors’ Report, there were no currenton-marketbuy-backs.on-market buy-backs. Shareholders will be asked at the 20192020 Annual General Meetings to renew this authority. As at the date of this Directors’ Report, there is no intention to exercise this authority. Some of our executives receive rights over BHP shares as part of their remuneration arrangements. Entitlements may be satisfied by the transfer of existing shares, which are acquiredon-market by the Employee Share Ownership Plan (ESOP) Trusts or, in respect of some entitlements, by the issue of shares. The number of shares referred to in column A below were purchased to satisfy awards made under the various BHP Group Limited and BHP Group Plc employee share schemes during FY2019. | | | | | | | | | | | | | | | | | | | | | Period | | A
Total
number of
shares
purchased | | | B
Average
price paid
per share (1)
US$ | | | 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 programs | | | | | | | | | | | | | | BHP Group
Limited (2) | | | BHP Group Plc | | 1 Jul 2018 to 31 Jul 2018 | | | 86,722 | | | | 22.99 | | | | – | | | | – | | | | 211,207,180 | (3) | 1 Aug 2018 to 31 Aug 2018 | | | 2,706,718 | | | | 25.86 | | | | – | | | | – | | | | 211,207,180 | (3) | 1 Sep 2018 to 30 Sep 2018 | | | 20 | | | | 34.69 | | | | – | | | | – | | | | 211,207,180 | (3) | 1 Oct 2018 to 31 Oct 2018 | | | 424,230 | | | | 23.73 | | | | – | | | | – | | | | 211,207,180 | (3) | 1 Nov 2018 to 30 Nov 2018 | | | – | | | | – | | | | – | | | | – | | | | 211,207,180 | (3) | 1 Dec 2018 to 31 Dec 2018 | | | – | | | | 19.84 | | | | 265,839,711 | | | | – | | | | 211,207,180 | (3) | 1 Jan 2019 to 31 Jan 2019 | | | – | | | | – | | | | – | | | | – | | | | 211,207,180 | (3) | 1 Feb 2019 to 28 Feb 2019 | | | 3,852,173 | | | | 27.35 | | | | – | | | | – | | | | 211,207,180 | (3) | 1 Mar 2019 to 31 Mar 2019 | | | 24,306 | | | | 26.82 | | | | – | | | | – | | | | 211,207,180 | (3) | 1 Apr 2019 to 30 Apr 2019 | | | – | | | | – | | | | – | | | | – | | | | 211,207,180 | (3) | 1 May 2019 to 31 May 2019 | | | – | | | | – | | | | – | | | | – | | | | 211,207,180 | (3) | 1 Jun 2019 to 30 Jun 2019 | | | – | | | | – | | | | – | | | | – | | | | 211,207,180 | (3) | | | | | | | | | | | | | | | | | | | | | | Total | | | 7,094,169 | | | | 20.02 | | | | 265,839,711 | | | | – | | | | 211,207,180 | (3) | | | | | | | | | | | | | | | | | | | | | |
215FY2020.
| | | | | | | | | | | | | | | | | | | | | Period | | A
Total number of
shares
purchased and
transferred to
employees to
satisfy
employee
awards | | | B
Average
price paid
per share (1)
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 programs | | | | | | | | | | | | | | BHP Group Limited(2) | | | BHP Group Plc | | 1 Jul 2019 to 31 Jul 2019 | | | – | | | | – | | | | – | | | | – | | | | 211,207,180 | (3) | 1 Aug 2019 to 31 Aug 2019 | | | 4,094,559 | | | | 25.07 | | | | – | | | | – | | | | 211,207,180 | (3) | 1 Sep 2019 to 30 Sep 2019 | | | – | | | | – | | | | – | | | | – | | | | 211,207,180 | (3) | 1 Oct 2019 to 31 Oct 2019 | | | – | | | | – | | | | – | | | | – | | | | 211,207,180 | (3) | 1 Nov 2019 to 30 Nov 2019 | | | – | | | | – | | | | – | | | | – | | | | 211,207,180 | (3) | 1 Dec 2019 to 31 Dec 2019 | | | – | | | | – | | | | | | | | – | | | | 211,207,180 | (3) | 1 Jan 2020 to 31 Jan 2020 | | | – | | | | – | | | | – | | | | – | | | | 211,207,180 | (3) | 1 Feb 2020 to 29 Feb 2020 | | | – | | | | – | | | | – | | | | – | | | | 211,207,180 | (3) | 1 Mar 2020 to 31 Mar 2020 | | | 1,714,630 | | | | 19.42 | | | | – | | | | – | | | | 211,207,180 | (3) | 1 Apr 2020 to 30 Apr 2020 | | | 132,286 | | | | 19.45 | | | | – | | | | – | | | | 211,207,180 | (3) | 1 May 2020 to 31 May 2020 | | | 219,011 | | | | 22.65 | | | | – | | | | – | | | | 211,207,180 | (3) | 1 Jun 2020 to 30 Jun 2020 | | | – | | | | – | | | | – | | | | – | | | | 211,207,180 | (3) | | | | | | | | | | | | | | | | | | | | | | Total | | | 6,160,486 | | | | 23.29 | | | | – | | | | – | | | | 211,207,180 | (3) | | | | | | | | | | | | | | | | | | | | | |
| (1) | The shares were purchased in the currency of the stock exchange on which the purchase took place and the sale price has been converted into US dollars at the exchange rate on the day of purchase. |
| (2) | BHP Group Limited is able tobuy-back and cancel BHP Group Limited shares within the ‘10/12 limit’ without shareholder approval in accordance with section 257B of the Australian Corporations Act 2001. Any futureon-market sharebuy-back program would be conducted in accordance with the Australian Corporations Act 2001 and with the ASX Listing Rules. |
| (3) | At the Annual General Meetings held during 20172018 and 2018,2019, shareholders authorised BHP Group Plc to makeon-market purchases of up to 211,207,180 of its ordinary shares, representing 10 per cent of BHP Group Plc’s issued capital at the time. |
4.3 Results, financial instruments and going concern Information about the Group’s financial position and financial results is included in the Financial Statements in this Annual Report. The Consolidated Income Statement shows profit attributable to BHP members of US$8.38.0 billion in FY2019,FY2020, compared with a profit of US$3.78.3 billion in FY2018.FY2019. BHP’s business activities, together with the factors likely to affect its future development, performance and position, are discussed in section 1. In addition, sections 1.3 to 1.61.5 and 2.14,2.13, and note 2122 ‘Financial risk management’ in section 5 outline BHP’s capital management objectives, its approach to financial risk management and exposure to financial risks, liquidity and borrowing facilities. The Directors, having made appropriate enquiries, have a reasonable expectation that BHP has adequate resources to continue in operational existence for the foreseeable future. Therefore, they continue to adopt the going concern basis of accounting in preparing the annual Financial Statements. 4.4 Directors The Directors who served at any time during FY2019FY2020 or up until the date of this Directors’ Report were Ken MacKenzie, Mike Henry, Andrew Mackenzie, Terry Bowen, Malcolm Broomhead, Ian Cockerill, Anita Frew, Gary Goldberg, Carolyn Hewson, Susan Kilsby, Lindsay Maxsted, John Mogford, Wayne MurdyShriti Vadera and Shriti Vadera.Dion Weisler. Further details of the current Directors of BHP Group Limited and BHP Group Plc are set out in section 2.2. These details include the period for which each Director held office up to the date of this Directors’ Report, their qualifications, experience and particular responsibilities, the directorships held in other listed companies since 1 July 20162017 and the period for which each directorship has been held. Wayne MurdyCarolyn Hewson served as aNon-executive Director of BHP Group Limited and BHP Group Plc from June 2009March 2010 until her retirement on 7 November 2019. Lindsay Maxsted served as a Non-executive Director of BHP Group Limited and BHP Group Plc from March 2011 until he retired on 4 September 2020.
Andrew Mackenzie served as Chief Executive Officer of BHP Group Limited and BHP Group Plc until his retirement on 2 November 2018.31 December 2019. Ian CockerillMike Henry was appointed as aNon-executive DirectorChief Executive Officer of BHP Group Limited and BHP Group Plc with effect from 1 April 2019.January 2020. In accordance with the BHP Group Limited Constitution and BHP Group Plc Articles of Association, he will seek election at the 20192020 Annual General Meetings.
Susan Kilsby wasGary Goldberg, Dion Weisler and Xiaoqun Clever were appointed as aNon-executive DirectorDirectors of BHP Group Limited and BHP Group Plc with effect from 1 April 2019.February 2020, 1 June 2020 and 1 October 2020 respectively. In accordance with the BHP Group Limited Constitution and BHP Group Plc Articles of Association, shethey will seek election at the 20192020 Annual General Meetings.
Carolyn HewsonShriti Vadera has announced that she will retire as aNon-executive Director of BHP Group Limited and BHP Group Plc at the conclusion of the BHP Group LimitedPlc Annual General Meeting in November 2019.October 2020.
The number of meetings of the Board and its Committees held during the year and each Director’s attendance at those meetings are set out in section 2.12.2.4. 216
4.5 Remuneration and share interests 4.5.14.5.1�� Remuneration
The policy for determining the nature and amount of emoluments of the Executive Key Management Personnel (KMP) (including the Executive Director) and theNon-executive Directors, and information about the relationship between that policy and BHP’s performance are set out in sections 3.2 and 3.3. The remuneration tables contained in section 3.3 set out the remuneration of members of the Executive KMP (including the Executive Director) and theNon-executive Directors. 4.5.2 Directors Section 3.3.203.3.21 sets out the relevant interests in shares in BHP Group Limited and BHP Group Plc of the Directors who held office during FY2019,FY2020, at the beginning and end of FY2019.FY2020. No rights or options over shares in BHP Group Limited and BHP Group Plc are held by any of theNon-executive Directors. Interests held by the Executive Director under employee equity plans as at 30 June 20192020 are set out in the tables showing interests in incentive plans contained in section 3.3.18.3.3.19. Except for Andrew Mackenzie, Susan Kilsby and Ian Cockerill,Mike Henry, as at the date of this Directors’ Report, the information pertaining to shares in BHP Group Limited and BHP Group Plc held directly, indirectly or beneficially by Directors is the same as set out in the table in section 3.3.20.3.3.21. Where applicable, the information includes shares held in the name of a spouse, superannuation fund, nominee and/or other controlled entities. Non-executive Directors have agreed to apply at least 25 per cent of their remuneration (base fees plus committee fees) to the purchase of shares in BHP Group Limited and BHP Group Plc until they achieve a shareholding equivalent in value to one year’s remuneration (base fees plus committee fees). Thereafter, Non-executive Directors must maintain at least that level of shareholding throughout their tenure. All dealings by Directors are subject to mandatory minimum performance requirements for securities dealing and are reported to the Board and to the stock exchanges. Information on our policy governing the use of hedging arrangements over shares in BHP by Directors and other members of the KMP is set out in section 3.3.22. As at the date of this Directors’ Report, Andrew MackenzieMike Henry held: (either directly, indirectly or beneficially) 266,205196,262 shares in BHP Group Plc and 125,228198,979 shares in BHP Group Limited;Limited rights and options over nil shares in BHP Group Plc and 1,421,165753,844 shares in BHP Group Limited.Limited As at the date of this Directors’ Report, Susan Kilsby holds 2,900 shares in BHP Group Limited and Ian Cockerill indirectly holds 8,759 shares in BHP Group Limited and 3,500 shares in BHP Group Plc.
We have not made available to any Director any interest in a registered scheme. 4.5.3 Key Management Personnel Section 3.3.203.3.21 sets out the relevant interests in shares in BHP Group Limited and BHP Group Plc held directly, indirectly or beneficially at the beginning and end of FY2019FY2020 by those senior executives who were Executive KMP (other than the Executive Director) during FY2019.FY2020. Where applicable, the information includes shares held in the name of a spouse, superannuation fund, nominee and/or other controlled entities. Interests held by members of the Executive KMP under employee equity plans as at 30 June 20192020 are set out in the tables contained in section 3.3.18.3.3.19. The table below sets out the relevant interests in shares in BHP Group Limited and BHP Group Plc held directly, indirectly or beneficially, as at the date of this Directors’ Report by those senior executives who were Executive KMP (other than the Executive Director) on that date. Where applicable, the information also includes shares held in the name of a spouse, superannuation fund, nominee and/or other controlled entities. | | | | | | | Executive KMP member | | BHP Group entity | | As at date of
Directors’ Report | | Edgar Basto | | BHP Group Limited BHP Group Plc | |
| 134,863
– |
| Peter Beaven | | BHP Group Limited BHP Group Plc | |
| 261,287332,107
– |
| Mike Henry
| | BHP Group Limited
BHP Group Plc
| |
| 120,069
196,262
|
| Daniel Malchuk | | BHP Group Limited BHP Group Plc | |
| 194,608276,986
– |
| Geraldine Slattery | | BHP Group Limited BHP Group Plc | |
| 71,52097,325
– |
|
4.6 Secretaries Caroline Cox is the Group General Counsel and Company Secretary. Details of her qualifications and experience are set out in section 2.2. The following people also act, or have acted during FY2019,FY2020 as Company Secretaries of BHP Group Limited BHP Group Plc or both (as indicated): Margaret Taylor, BA, LLB, GAICD FCIS (BHP Group Limited and BHP Group Plc),Plc: Rachel Agnew, BComm (Economics), LLB (Hons), GAICD, (BHP Group Limited and BHP Group Plc), Kathryn Griffiths, BA, LLB (Hons), GDipACG, FCIS, FGIA, GAICD (BHP Group Limited), Megan Pepper, BA (Hons), LLB (Hons), GDipACG, FCIS, FGIA, GAICD (BHP Group Limited)until 1 September 2020 and Geof Stapledon, BEc, LLB (Hons), DPhil, FCIS (BHP Group Limited and BHP Group Plc).FCIS. Each individual has experience in a company secretariat role or other relevant fields arising from time spent in roles within BHP, other large listed companies or other relevant entities. 217
4.7 Indemnities and insurance Rule 146 of the BHP Group Limited Constitution and Article 146 of the BHP Group Plc Articles of Association require each Company to indemnify, to the extent permitted by law, each Officer of BHP Group Limited and BHP Group Plc, respectively, against liability incurred in, or arising out of, the conduct of the business of BHP or the discharge of the duties of the Officer. The Directors named in section 2.2, the Company Secretaries and other Officers of BHP Group Limited and BHP Group Plc have the benefit of this requirement, as do individuals who formerly held one of those positions. In accordance with this requirement, BHP Group Limited and BHP Group Plc have entered into Deeds of Indemnity, Access and Insurance (Deeds of Indemnity) with each of their respective Directors. The Deeds of Indemnity are qualifying third party indemnity provisions for the purposes of the UK Companies Act 2006 and each of these qualifying third party indemnities was in force as at the date of this Directors’ Report. We have a policy that BHP will, as a general rule, support and hold harmless an employee, including an employee appointed as a Director of a subsidiary who, while acting in good faith, incurs personal liability to others as a result of working for BHP. In addition, as part of the arrangements to effect the demerger of South32, we agreed to indemnify certain former Officers of BHP who transitioned to South32 from certain claims and liabilities incurred in their capacity as Directors or Officers of South32. From time to time, we engage our External Auditor, KPMG,Ernst & Young (EY), to conductnon-statutory audit work and provide other services in accordance with our policy on the provision of other services by the External Auditor. The terms of engagement in the United Kingdom include that we must compensate and reimburse KPMGEY LLP for, and protect KPMGEY LLP against, any loss, damage, expense, or liability incurred by KPMGEY LLP in respect of third party claims arising from a breach by BHP of any obligation under the engagement terms. We have insured against amounts that we may be liable to pay to Directors, Company Secretaries or certain employees (including former Officers) pursuant to Rule 146 of the Constitution of BHP Group Limited and Article 146 of the Articles of Association of BHP Group Plc or that we otherwise agree to pay by way of indemnity. The insurance policy also insures Directors, Company Secretaries and some employees (including former Officers) against certain liabilities (including legal costs) they may incur in carrying out their duties. For this Directors’ and Officers’ insurance, we paid premiums of US$5,449,91020,560,322 net during FY2019.FY2020. During FY2019,FY2020, BHP paid defence costs for: for certain employees and former employees of BHP Billiton Brasil (Affected Individuals) in relation to the charges filed by the Federal Prosecutors’ Office against BHP Billiton Brasil and the Affected Individuals;Individuals. certain employees and former employees of BHP in relation to the putative class action complaint that was filed in the US District Court for the Southern District of New York on behalf of purchasers of American Depositary Receipts of BHP Group Limited and BHP Group Plc between 25 September 2014 and 30 November 2015;
certain employees and former employees of BHP in relation to a putative class action complaint filed in the US District Court for the Southern District of New York on behalf of all purchasers of Samarco’s10-year bond notes due 2022–2024 between 31 October 2012 and 30 November 2015.
Other than as set out above, no indemnity in favour of a current or former officer of BHP Group Limited or BHP Group Plc, or in favour of the External Auditor, was called on during FY2019.FY2020. 4.8 Employee policies Our people are fundamental to our success. We are committed to shaping a culture where our employees are provided with opportunities to develop, are valued and encouraged to contribute towards making work safer, simpler and more productive. We strongly believe that having employees who are engaged and connected to BHP reinforces our shared purpose aligned toOur Charter and will result in a more productive workplace. For more information on employee engagement and employee policies, including communications and regarding disabilities, refer to section 1.9.1.4.3, 1.6.1, and 2.6.2. 218
4.9 Corporate governance The Financial Conduct Authority’sFCA’s Disclosure and Transparency Rules (DTR 7.2) require that certain information be included in a corporate governance statement. BHP has an existing practice of issuing a corporate governance statement as part of our Annual Report that is incorporated into the Directors’ Report by reference. The information required by the Disclosure and Transparency Rules and the Financial Conduct Authority’sFCA’s Listing Rules (LR 9.8.6) is located in section 2, with the exception of the information referred to in LR 9.8.6 (1), (3) and (4) and DTR 7.2.6, which is located in sections 4.2, 4.3, 4.5.2 and 4.18. 4.10 Dividends A final dividend of 7855 US cents per share will be paid on 2522 September 2019,2020, resulting in total dividends determined in respect of FY2019FY2020 of 235120 US cents per share. Details of the dividends paid are set out in notes 15 ‘Share capital’ and 17 ‘Dividends’ in section 5, and details of the Group’s dividend policy are set out in sections 1.4.3, 1.5.11.4.5, 1.4.7 and 7.7. 4.11 Auditors No current officer of BHP has held the role of director or partner of the Group’s current external auditor. During FY2019,FY2020, Lindsay Maxsted was the only officer of BHP who, prior to his appointment as an officer of BHP, previously held the role of director or partner of the Group’s External Auditorformer external auditor, at a time when the Group’s External Auditorformer external auditor conducted an audit of BHP. His prior relationship with KPMG (BHP’s former external auditor) is outlined in section 2.10.2.9. Lindsay Maxsted was not part of the KPMG audit practice after 1980 and, while at KPMG, was not in any way involved in, or able to influence, any audit activity associated with BHP. Each person who held the office of Director at the date the Board approved this Directors’ Report made the following statements: so far as the Director is aware, there is no relevant audit information of which BHP’s External Auditor is unaware;unaware the Director has taken all steps that he or she ought to have taken as a Director to make him or herself aware of any relevant audit information and to establish that BHP’s External Auditor is aware of that information.information This confirmation is given pursuant to section 418 of the UK Companies Act 2006 and should be interpreted in accordance with, and subject to, those provisions. Consistent with the UK and EU requirements in regard to audit firm tender and rotation, BHP conducted an audit tender during FY2017. KPMG, BHP’s current External Auditor, did not participate in the tender due to UK and EU requirements, which require a new External Auditor to be in place by 1 July 2023. After a comprehensive tender process, at a meeting held on 16 August 2017, the Board selected Ernst & YoungEY as its independent registered public accounting firm from the financial year beginning 1 July 2019, subject to approval ofand our shareholders approved EY’s appointment at the Annual General Meetings in 2019.
The law in each of Australia and the United Kingdom requires shareholders to approve the appointment of a new auditor. A resolution to appoint Ernst & Young as the auditor of BHP Group Limited and Ernst & Young LLP as the auditor of BHP Group Plc will be proposed at the 2019 Annual General Meetings.
4.12 Non-audit services Details of thenon-audit services undertaken by BHP’s External Auditor, including the amounts paid fornon-audit services, are set out in note 35 ‘Auditor’s remuneration’ in section 5. Allnon-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. Nonon-audit services were carried out that were specifically excluded by the Policy on Provision of Audit and Other Services by the External Auditor. Based on advice provided by the Risk and Audit Committee,RAC, the Directors have formed the view that the provision ofnon-audit services is compatible with the general standard of independence for auditors, and that the nature ofnon-audit services means that auditor independence was not compromised. For a statement of the reasons for this view and for more information about our policy in relation to the provision ofnon-audit services by the auditor, refer to section 2.13.1.2.10. 4.13 Political donations We maintain a position of impartiality with respect to party politics and do not make political contributions or expenditure/donations for political purposes to any political party, politician, elected official or candidate for public office. We do, however, contribute to the public debate of policy issues that may affect BHP in the countries in which we operate. No political contributions/donations for political purposes were made by BHP to any political party, politician, elected official or candidate for public office during FY2019.FY2020.(1) (1) | Note that Australian Electoral Commission (AEC) disclosure requirements are broad, such that amounts that are not political donations can be reportable for AEC purposes. For example, where a political party or organisation owns shares in BHP, the AEC filing requires the political party or organisation to disclose the dividend payments received in respect of their shareholding.
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4.14 Exploration, research and development Companies within the Group carry out exploration and research and development necessary to support their activities. Details are provided in sections 1.6.3,1.5.3, 1.9 to 1.11 to 1.12 and 6.3.6.4. 4.15 ASIC Instrument 2016/191 BHP Group Limited is an entity to which Australian Securities and Investments Commission (ASIC) Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191 dated 24 March 2016 applies. Amounts in this Directors’ Report and the Financial Statements, except estimates of future expenditure or where otherwise indicated, have been rounded to the nearest million dollars in accordance with ASIC Instrument 2016/191. 4.16 Proceedings on behalf of BHP Group Limited No proceedings have been brought on behalf of BHP Group Limited, nor has any application been made, under section 237 of the Australian Corporations Act 2001. 4.17 Performance in relation to environmental regulation BHP seeks to be compliant with all applicable environmental laws and regulations relevant to its operations. We monitor compliance on a regular basis, including through external and internal means, to minimise the risk ofnon-compliance. For more information on BHP’s performance in relation to health, safety and the environment, refer to section 1.10.1.7. Fines and prosecutions For the purposes of section 299 (1)(f) of the Australian Corporations Act 2001, in FY2019FY2020 BHP received fivelevied six fines in relation to Australian environmental laws and regulations at our operated assets, the total amount payable being US$45,529. One fine was received at Peak Downs: mine affected water (US$9,143).216,229. Two fines were received at Blackwater: contaminatednoise exceedance (US$9,123) and mine affected water and maintenance of other measures (US$17,922)8,937). One fine was received at Caval Ridge: mine affected waterGoonyella: unauthorised release (US$9,157)135,733) and one fine at Saraji: contaminated watertailings pipeline breach (US$9,307)8,830). One fine was received at NSWEC: dust event (US$10,198) and one fine at Nickel West: mining disturbance footprint non adherence (US$43,408). Greenhouse gas emissions TheRegulations made under the UK Companies Act 2006 requires BHP, to the extent practicable, to obtain relevant information on the Group’s annual quantity of greenhouse gas emissions, which is reported in tonnes of carbon dioxide equivalent.equivalent, and the Group’s energy consumption. In accordance with those UK requirements, information on BHP’s total FY2019FY2020 greenhouse gas emissions and intensity and energy consumption has been included in sections 1.5.21.4.8, 1.7.8 and 1.10.8.6.6.
For more information on environmental performance, including environmental regulation, refer to section 1.10 and the Sustainability Report 2019, which is available online at bhp.com1.7. | (1) | Note that Australian Electoral Commission (AEC) disclosure requirements are broad, such that amounts that are not political donations can be reportable for AEC purposes. For example, where a political party or organisation owns shares in BHP, the AEC filing requires the political party or organisation to disclose the dividend payments received in respect of their shareholding. |
4.18 Share capital, restrictions on transfer of shares and other additional information Information relating to BHP Group Plc’s share capital structure, restrictions on the holding or transfer of its securities or on the exercise of voting rights attaching to such securities, certain agreements triggered on a change of control and the existence of branches of BHP outside of the United Kingdom, is set out in the following sections: Section 1.4.61.9.1 (Our locations) Section 4.2 (Share capital andbuy-back programs) Section 7.3 (Organisational structure) Section 7.4 (Material contracts) Section 7.5 (Constitution) Section 7.6 (Share ownership) Section 7.9 (Government regulations) 220
Note 15 ‘Share capital’ and note 2324 ‘Employee share ownership plans’ in section 5.5 As at the date of this Directors’ Report, there were 17,234,37214,978,955 unvested equity awards outstanding in relation to BHP Group Limited ordinary shares held by 15,795 holders and 417,515364,889 unvested equity awards outstanding in relation to BHP Group Plc ordinary shares.shares held by 998 holders. The expiry dates of these unvested equity awards range between August 2020April 2021 and August 20232024 and there is no exercise price. No options over unissued shares or unissued interests in BHP have been granted since the end of FY2019FY2020 and no shares or interests were issued as a result of the exercise of an option over unissued shares or interests since the end of FY2019.FY2020. Further details are set out in note 2324 ‘Employee share ownership plans’ in section 5. Details of movements in share capital during and since the end of FY2019FY2020 are set out in note 15 ‘Share capital’ in section 5. The Directors’ Report is approved in accordance with a resolution of the Board. | | | | Ken MacKenzie | | Andrew MackenzieMike Henry | ChairmanChair | | Chief Executive Officer | Dated: 53 September 20192020 | | |
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Section 5 Financial Statements Refer to the pages beginning on page F-1 in this Annual Report 222annual report.
Section 6 Additional information In this section 6.1 Information on mining operations
6.2 Production
6.3 Reserves
6.4 Major projects
6.5 Climate change data
6.6 Legal proceedings
6.7 Glossary
223
6.1 Alternative Performance Measures We use various Alternative Performance Measures (APMs) to reflect our underlying financial performance. These APMs are not defined or specified under the requirements of IFRS, but are derived from the Group’s Consolidated Financial Statements prepared in accordance with IFRS. The APMs are consistent with how management review the financial performance of the Group with the Board and the investment community. Sections 6.1.1 and 6.1.2 outline why we believe the APMs are useful and the calculation methodology. We believe these APMs provide useful information, but they should not be considered as an indication of or as a substitute for statutory measures as an indicator of actual operating performance (such as profit or net operating cash flow) or any other measure of financial performance or position presented in accordance with IFRS, or as a measure of a company’s profitability, liquidity or financial position. The following tables provide reconciliations between the APMs and their nearest respective IFRS measure. The measures and below reconciliations included in this section for the year ended 30 June 2020 and comparative periods are unaudited and have been derived from the Group’s Consolidated Financial Statements. Exceptional items To improve the comparability of underlying financial performance between reporting periods, some of our APMs adjust the relevant IFRS measures for exceptional items. For more information on exceptional items, refer to note 3 ‘Exceptional items’ in section 5.1. Exceptional items are those gains or losses where their nature, including the expected frequency of the events giving rise to them, and impact is considered material to the Group’s Consolidated Financial Statements. The exceptional items included within the Group’s profit from Continuing and Discontinued operations for the financial years are detailed below. | | | | | | | | | | | | | Year ended 30 June | | 2020
US$M | | | 2019
US$M | | | 2018
US$M | | Continuing operations | | | | | | | | | | | | | Revenue | | | – | | | | – | | | | – | | Other income | | | 489 | | | | 50 | | | | – | | Expenses excluding net finance costs, depreciation, amortisation and impairments | | | (1,025 | ) | | | (57 | ) | | | (57 | ) | Depreciation and amortisation | | | – | | | | – | | | | – | | Net impairments | | | (409 | ) | | | – | | | | – | | (Loss)/profit from equity accounted investments, related impairments and expenses | | | (508 | ) | | | (945 | ) | | | (509 | ) | | | | | | | | | | | | | | Profit/(loss) from operations | | | (1,453 | ) | | | (952 | ) | | | (566 | ) | | | | | | | | | | | | | | Financial expenses | | | (93 | ) | | | (108 | ) | | | (84 | ) | Financial income | | | – | | | | – | | | | – | | | | | | | | | | | | | | | Net finance costs | | | (93 | ) | | | (108 | ) | | | (84 | ) | | | | | | | | | | | | | | Profit/(loss) before taxation | | | (1,546 | ) | | | (1,060 | ) | | | (650 | ) | | | | | | | | | | | | | | Income tax benefit/(expense) | | | 241 | | | | 242 | | | | (2,320 | ) | Royalty-related taxation (net of income tax benefit) | | | – | | | | – | | | | – | | | | | | | | | | | | | | | Total taxation benefit/(expense) | | | 241 | | | | 242 | | | | (2,320 | ) | | | | | | | | | | | | | | Profit/(loss) after taxation from Continuing operations | | | (1,305 | ) | | | (818 | ) | | | (2,970 | ) | | | | | | | | | | | | | | Discontinued operations | | | | | | | | | | | | | Profit/(loss) after taxation from Discontinued operations | | | – | | | | – | | | | (2,258 | ) | | | | | | | | | | | | | | Profit/(loss) after taxation from Continuing and Discontinued operations | | | (1,305 | ) | | | (818 | ) | | | (5,228 | ) | | | | | | | | | | | | | | Total exceptional items attributable to non-controlling interests | | | (201 | ) | | | – | | | | – | | Total exceptional items attributable to BHP shareholders | | | (1,104 | ) | | | (818 | ) | | | (5,228 | ) | | | | | | | | | | | | | | Exceptional items attributable to BHP shareholders per share (US cents) | | | (21.9 | ) | | | (15.8 | ) | | | (98.2 | ) | | | | | | | | | | | | | | Weighted basic average number of shares (Million) | | | 5,057 | | | | 5,180 | | | | 5,323 | | | | | | | | | | | | | | |
APMs derived from Consolidated Income Statement Underlying attributable profit | | | | | | | | | | | | | Year ended 30 June | | 2020
US$M | | | 2019
US$M | | | 2018
US$M | | Profit after taxation from Continuing and Discontinued operations attributable to BHP shareholders | | | 7,956 | | | | 8,306 | | | | 3,705 | | Total exceptional items attributable to BHP shareholders (1) | | | 1,104 | | | | 818 | | | | 5,228 | | | | | | | | | | | | | | | Underlying attributable profit | | | 9,060 | | | | 9,124 | | | | 8,933 | | | | | | | | | | | | | | |
| (1) | For more information, refer to note 3 ‘Exceptional items’ in section 5.1. |
Underlying attributable profit – Continuing operations | | | | | | | | | | | | | Year ended 30 June | | 2020
US$M | | | 2019
US$M | | | 2018
US$M | | Profit after taxation from Continuing and Discontinued operations attributable to BHP shareholders | | | 7,956 | | | | 8,306 | | | | 3,705 | | Loss attributable to members of BHP for Discontinued operations | | | – | | | | 342 | | | | 2,947 | | Total exceptional items attributable to BHP shareholders (1) | | | 1,104 | | | | 818 | | | | 5,228 | | Total exceptional items attributable to BHP shareholders for Discontinued operations (1) | | | – | | | | – | | | | (2,258 | ) | | | | | | | | | | | | | | Underlying attributable profit – Continuing operations | | | 9,060 | | | | 9,466 | | | | 9,622 | | | | | | | | | | | | | | |
| (1) | For more information, refer to note 3 ‘Exceptional items’ in section 5.1. |
Underlying basic earnings per share | | | | | | | | | | | | | Year ended 30 June | | 2020
US cents | | | 2019
US cents | | | 2018
US cents | | Basic earnings per ordinary share | | | 157.3 | | | | 160.3 | | | | 69.6 | | Exceptional items attributable to BHP shareholders per share (1) | | | 21.9 | | | | 15.8 | | | | 98.2 | | | | | | | | | | | | | | | Underlying basic earnings per ordinary share | | | 179.2 | | | | 176.1 | | | | 167.8 | | | | | | | | | | | | | | |
| (1) | For more information, refer to note 3 ‘Exceptional items’ in section 5.1. |
Underlying EBITDA | | | | | | | | | | | | | Year ended 30 June | | 2020
US$M | | | 2019
US$M | | | 2018
US$M | | Profit from operations | | | 14,421 | | | | 16,113 | | | | 15,996 | | Exceptional items included in profit from operations (1) | | | 1,453 | | | | 952 | | | | 566 | | | | | | | | | | | | | | | Underlying EBIT | | | 15,874 | | | | 17,065 | | | | 16,562 | | | | | | | | | | | | | | | Depreciation and amortisation expense | | | 6,112 | | | | 5,829 | | | | 6,288 | | Net impairments | | | 494 | | | | 264 | | | | 333 | | Exceptional item included in Depreciation, amortisation and impairments (1) | | | (409 | ) | | | – | | | | – | | | | | | | | | | | | | | | Underlying EBITDA | | | 22,071 | | | | 23,158 | | | | 23,183 | | | | | | | | | | | | | | |
| (1) | For more information, refer to note 3 ‘Exceptional items’ in section 5.1. |
Underlying EBITDA – Segment | | | | | | | | | | | | | | | | | | | | | | | | | Year ended 30 June 2020 US$M | | Petroleum | | | Copper | | | Iron Ore | | | Coal | | | Group and
unallocated
items/
eliminations (2) | | | Total Group | | Profit from operations | | | 744 | | | | 1,362 | | | | 12,310 | | | | 793 | | | | (788 | ) | | | 14,421 | | Exceptional items included in profit from operations (1) | | | 6 | | | | 1,228 | | | | 614 | | | | 18 | | | | (413 | ) | | | 1,453 | | Depreciation and amortisation expense | | | 1,445 | | | | 1,740 | | | | 1,608 | | | | 807 | | | | 512 | | | | 6,112 | | Net impairments | | | 12 | | | | 426 | | | | 22 | | | | 14 | | | | 20 | | | | 494 | | Exceptional item included in Depreciation, amortisation and impairments (1) | | | – | | | | (409 | ) | | | – | | | | – | | | | – | | | | (409 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | Underlying EBITDA | | | 2,207 | | | | 4,347 | | | | 14,554 | | | | 1,632 | | | | (669 | ) | | | 22,071 | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | Year ended 30 June 2019 US$M Restated | | Petroleum | | | Copper | | | Iron Ore | | | Coal | | | Group and
unallocated
items/
eliminations (2) | | | Total Group | | Profit from operations | | | 2,480 | | | | 2,587 | | | | 8,426 | | | | 3,400 | | | | (780 | ) | | | 16,113 | | Exceptional items included in profit from operations (1) | | | – | | | | – | | | | 971 | | | | – | | | | (19 | ) | | | 952 | | Depreciation and amortisation expense | | | 1,560 | | | | 1,835 | | | | 1,653 | | | | 632 | | | | 149 | | | | 5,829 | | Net impairments | | | 21 | | | | 128 | | | | 79 | | | | 35 | | | | 1 | | | | 264 | | Exceptional item included in Depreciation, amortisation and impairments (1) | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | | | | | | | | | | | | | | | | | | | | | | | | Underlying EBITDA | | | 4,061 | | | | 4,550 | | | | 11,129 | | | | 4,067 | | | | (649 | ) | | | 23,158 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Year ended 30 June 2018 US$M Restated | | Petroleum | | | Copper | | | Iron Ore | | | Coal | | | Group and
unallocated
items/
eliminations (2) | | | Total Group | | Profit from operations | | | 1,598 | | | | 4,389 | | | | 6,656 | | | | 3,682 | | | | (329 | ) | | | 15,996 | | Exceptional items included in profit from operations (1) | | | – | | | | – | | | | 539 | | | | – | | | | 27 | | | | 566 | | Depreciation and amortisation expense | | | 1,719 | | | | 1,920 | | | | 1,721 | | | | 686 | | | | 242 | | | | 6,288 | | Net impairments | | | 76 | | | | 213 | | | | 14 | | | | 29 | | | | 1 | | | | 333 | | Exceptional item included in Depreciation, amortisation and impairments (1) | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | | | | | | | | | | | | | | | | | | | | | | | | Underlying EBITDA | | | 3,393 | | | | 6,522 | | | | 8,930 | | | | 4,397 | | | | (59 | ) | | | 23,183 | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (1) | For more information, refer to note 3 ‘Exceptional items’ in section 5.1. |
| (2) | Group and unallocated items includes functions, other unallocated operations, including Potash, Nickel West and legacy assets (previously disclosed as closed mines in the Petroleum reportable segment), and consolidation adjustments. Comparative information for the year ended 30 June 2019 and 30 June 2018 have been restated to reflect the inclusion of legacy assets in Group and unallocated items. |
| | | | | | | | | | | | | | | | | | | | | | | | | Year ended 30 June 2020 US$M | | Profit from
operations | | | Exceptional
items
included in
profit from
operations (1) | | | Depreciation
and
amortisation | | | Net
impairments | | | Exceptional
item included
in Depreciation,
amortisation
and
impairments (1) | | | Underlying
EBITDA | | Potash | | | (130 | ) | | | – | | | | 3 | | | | – | | | | – | | | | (127 | ) | Nickel West | | | (113 | ) | | | 5 | | | | 68 | | | | 3 | | | | – | | | | (37 | ) | Corporate, legacy assets and eliminations | | | (545 | ) | | | (418 | ) | | | 441 | | | | 17 | | | | – | | | | (505 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | | (788 | ) | | | (413 | ) | | | 512 | | | | 20 | | | | – | | | | (669 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Year ended 30 June 2019 US$M Restated | | Profit from
operations | | | Exceptional
items
included in
profit from
operations (1) | | | Depreciation
and
amortisation | | | Net
impairments | | | Exceptional item
included in
Depreciation,
amortisation and
impairments (1) | | | Underlying
EBITDA | | Potash | | | (131 | ) | | | – | | | | 4 | | | | – | | | | – | | | | (127 | ) | Nickel West | | | 91 | | | | – | | | | 11 | | | | – | | | | – | | | | 102 | | Corporate, legacy assets and eliminations | | | (740 | ) | | | (19 | ) | | | 134 | | | | 1 | | | | – | | | | (624 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | | (780 | ) | | | (19 | ) | | | 149 | | | | 1 | | | | – | | | | (649 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Year ended 30 June 2018 US$M Restated | | Profit from
operations | | | Exceptional
items
included in
profit from
operations (1) | | | Depreciation
and
amortisation | | | Net
impairments | | | Exceptional item
included in
Depreciation,
amortisation and
impairments (1) | | | Underlying
EBITDA | | Potash | | | (139 | ) | | | – | | | | 4 | | | | – | | | | – | | | | (135 | ) | Nickel West | | | 215 | | | | – | | | | 76 | | | | – | | | | – | | | | 291 | | Corporate, legacy assets and eliminations | | | (405 | ) | | | 27 | | | | 162 | | | | 1 | | | | – | | | | (215 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | | (329 | ) | | | 27 | | | | 242 | | | | 1 | | | | – | | | | (59 | ) | | | | | | | | | | | | | | | | | | | | | | | | | |
| (1) | For more information, refer to note 3 ‘Exceptional items’ in section 5.1. |
Underlying EBITDA margin | | | | | | | | | | | | | | | | | | | | | | | | | Year ended 30 June 2020 US$M | | Petroleum | | | Copper | | | Iron Ore | | | Coal | | | Group and
unallocated
items/
eliminations (4) | | | Total Group | | Revenue – Group production | | | 4,031 | | | | 9,577 | | | | 20,782 | | | | 6,242 | | | | 1,128 | | | | 41,760 | | Revenue – Third party products | | | 39 | | | | 1,089 | | | | 15 | | | | – | | | | 28 | | | | 1,171 | | | | | | | | | | | | | | | | | | | | | | | | | | | Revenue | | | 4,070 | | | | 10,666 | | | | 20,797 | | | | 6,242 | | | | 1,156 | | | | 42,931 | | | | | | | | | | | | | | | | | | | | | | | | | | | Underlying EBITDA – Group production (1) | | | 2,209 | | | | 4,306 | | | | 14,561 | | | | 1,632 | | | | (669 | ) | | | 22,039 | | Underlying EBITDA – Third party products (1) | | | (2 | ) | | | 41 | | | | (7 | ) | | | – | | | | – | | | | 32 | | | | | | | | | | | | | | | | | | | | | | | | | | | Underlying EBITDA | | | 2,207 | | | | 4,347 | | | | 14,554 | | | | 1,632 | | | | (669 | ) | | | 22,071 | | | | | | | | | | | | | | | | | | | | | | | | | | | Segment contribution to the Group’s Underlying EBITDA (2) | | | 10% | | | | 19% | | | | 64% | | | | 7% | | | | | | | | 100% | | Underlying EBITDA margin (3) | | | 55% | | | | 45% | | | | 70% | | | | 26% | | | | | | | | 53% | | | | | | | | | Year ended 30 June 2019 US$M Restated | | Petroleum | | | Copper | | | Iron Ore | | | Coal | | | Group and
unallocated
items/
eliminations (4) | | | Total Group | | Revenue – Group production | | | 5,920 | | | | 9,729 | | | | 17,223 | | | | 9,102 | | | | 1,116 | | | | 43,090 | | Revenue – Third party products | | | 10 | | | | 1,109 | | | | 32 | | | | 19 | | | | 28 | | | | 1,198 | | | | | | | | | | | | | | | | | | | | | | | | | | | Revenue | | | 5,930 | | | | 10,838 | | | | 17,255 | | | | 9,121 | | | | 1,144 | | | | 44,288 | | | | | | | | | | | | | | | | | | | | | | | | | | | Underlying EBITDA – Group production (1) | | | 4,061 | | | | 4,434 | | | | 11,115 | | | | 4,068 | | | | (649 | ) | | | 23,029 | | Underlying EBITDA – Third party products (1) | | | – | | | | 116 | | | | 14 | | | | (1 | ) | | | – | | | | 129 | | | | | | | | | | | | | | | | | | | | | | | | | | | Underlying EBITDA | | | 4,061 | | | | 4,550 | | | | 11,129 | | | | 4,067 | | | | (649 | ) | | | 23,158 | | | | | | | | | | | | | | | | | | | | | | | | | | | Segment contribution to the Group’s Underlying EBITDA (2) | | | 17% | | | | 19% | | | | 47% | | | | 17% | | | | | | | | 100% | | Underlying EBITDA margin (3) | | | 69% | | | | 46% | | | | 65% | | | | 45% | | | | | | | | 53% | | | | | | | | | Year ended 30 June 2018 US$M Restated | | Petroleum | | | Copper | | | Iron Ore | | | Coal | | | Group and
unallocated
items/
eliminations (4) | | | Total Group | | Revenue – Group production | | | 5,396 | | | | 11,432 | | | | 14,756 | | | | 8,887 | | | | 1,222 | | | | 41,693 | | Revenue – Third party products | | | 12 | | | | 1,349 | | | | 54 | | | | 2 | | | | 19 | | | | 1,436 | | | | | | | | | | | | | | | | | | | | | | | | | | | Revenue | | | 5,408 | | | | 12,781 | | | | 14,810 | | | | 8,889 | | | | 1,241 | | | | 43,129 | | | | | | | | | | | | | | | | | | | | | | | | | | | Underlying EBITDA – Group production (1) | | | 3,392 | | | | 6,462 | | | | 8,929 | | | | 4,398 | | | | (60 | ) | | | 23,121 | | Underlying EBITDA – Third party products (1) | | | 1 | | | | 60 | | | | 1 | | | | (1 | ) | | | 1 | | | | 62 | | | | | | | | | | | | | | | | | | | | | | | | | | | Underlying EBITDA | | | 3,393 | | | | 6,522 | | | | 8,930 | | | | 4,397 | | | | (59 | ) | | | 23,183 | | | | | | | | | | | | | | | | | | | | | | | | | | | Segment contribution to the Group’s Underlying EBITDA (2) | | | 15% | | | | 28% | | | | 38% | | | | 19% | | | | | | | | 100% | | Underlying EBITDA margin (3) | | | 63% | | | | 57% | | | | 61% | | | | 49% | | | | | | | | 55% | |
| (1) | We differentiate sales of our production from sales of third party products to better measure the operational profitability of our operations as a percentage of revenue. These tables show the breakdown between our production and third party products, which is necessary for the calculation of the Underlying EBITDA margin and margin on third party products. |
We engage in third party trading for the following reasons: Production variability and occasional shortfalls from our assets means that we sometimes source third party materials to ensure a steady supply of product to our customers. To optimise our supply chain outcomes, we may buy physical product from third parties. To support the development of liquid markets, we will sometimes source third party physical products and manage risk through both the physical and financial markets. | (2) | Percentage contribution to Group Underlying EBITDA, excluding Group and unallocated items. |
| (3) | Underlying EBITDA margin excludes third party products. |
| (4) | Group and unallocated items includes functions, other unallocated operations, including Potash, Nickel West and legacy assets (previously disclosed as closed mines in the Petroleum reportable segment), and consolidation adjustments. Comparative information for the year ended 30 June 2019 and 30 June 2018 have been restated to reflect the inclusion of legacy assets in Group and unallocated items. Revenue not attributable to reportable segments comprises the sale of freight and fuel to third parties. Exploration and technology activities are recognised within relevant segments. |
Effective tax rate | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2020 | | | 2019 | | | 2018 | | Year ended 30 June | | Profit before
taxation
US$M | | | Income tax
expense
US$M | | | % | | | Profit before
taxation
US$M | | | Income tax
expense
US$M | | | % | | | Profit before
taxation
US$M | | | Income tax
expense
US$M | | | % | | Statutory effective tax rate | | | 13,510 | | | | (4,774 | ) | | | 35.3 | | | | 15,049 | | | | (5,529 | ) | | | 36.7 | | | | 14,751 | | | | (7,007 | ) | | | 47.5 | | Adjusted for: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Exchange rate movements | | | – | | | | 20 | | | | | | | | – | | | | (25 | ) | | | | | | | – | | | | (152 | ) | | | | | Exceptional items (1) | | | 1,546 | | | | (241 | ) | | | | | | | 1,060 | | | | (242 | ) | | | | | | | 650 | | | | 2,320 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Adjusted effective tax rate | | | 15,056 | | | | (4,995 | ) | | | 33.2 | | | | 16,109 | | | | (5,796 | ) | | | 36.0 | | | | 15,401 | | | | (4,839 | ) | | | 31.4 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (1) | For more information, refer to note 3 ‘Exceptional items’ in section 5.1. |
APMs derived from Consolidated Cash Flow Statement Capital and exploration expenditure | | | | | | | | | | | | | Year ended 30 June | | 2020
US$M | | | 2019
US$M | | | 2018
US$M | | Capital expenditure (purchases of property, plant and equipment) | | | 6,900 | | | | 6,250 | | | | 4,979 | | Add: Exploration expenditure | | | 740 | | | | 873 | | | | 874 | | | | | | | | | | | | | | | Capital and exploration expenditure (cash basis) – Continuing operations | | | 7,640 | | | | 7,123 | | | | 5,853 | | | | | | | | | | | | | | | Capital and exploration expenditure – Discontinued operations | | | – | | | | 443 | | | | 900 | | | | | | | | | | | | | | | Capital and exploration expenditure (cash basis) – Total operations | | | 7,640 | | | | 7,566 | | | | 6,753 | | | | | | | | | | | | | | |
Free cash flow | | | | | | | | | | | | | Year ended 30 June | | 2020
US$M | | | 2019
US$M | | | 2018
US$M | | Net operating cash flows | | | 15,706 | | | | 17,871 | | | | 18,461 | | Net investing cash flows | | | (7,616 | ) | | | 2,607 | | | | (5,921 | ) | | | | | | | | | | | | | | Free cash flow | | | 8,090 | | | | 20,478 | | | | 12,540 | | | | | | | | | | | | | | |
Free cash flow – Continuing operations | | | | | | | | | | | | | Year ended 30 June | | 2020
US$M | | | 2019
US$M | | | 2018
US$M | | Net operating cash flows from Continuing operations | | | 15,706 | | | | 17,397 | | | | 17,561 | | Net investing cash flows from Continuing operations | | | (7,616 | ) | | | (7,377 | ) | | | (5,060 | ) | | | | | | | | | | | | | | Free cash flow – Continuing operations | | | 8,090 | | | | 10,020 | | | | 12,501 | | | | | | | | | | | | | | |
APMs derived from Consolidated Balance Sheet With effect from 1 July 2019, the net debt definition includes the fair value of derivative financial instruments used to hedge cash and borrowings. Management believes this amendment is useful because it reflects the Group’s risk management strategy of reducing the volatility of net debt caused by fluctuations in foreign exchange and interest rates. Net debt related derivative financial instruments are a subset of the other financial assets and liabilities represented on the Consolidated Balance Sheet. Prior period comparatives have been restated to reflect the change in net debt calculation. As a result of the adoption of IFRS 16 ‘Leases’ from 1 July 2019, the current period ‘Total Interest bearing liabilities’ includes all leases under the new definition. The Group elected to apply the modified retrospective transition approach, with no restatement of comparative periods. Refer to note 38 ‘New and amended accounting standards and interpretations’ in section 5.1. Vessel lease contracts that are priced with reference to a freight index, which did not meet the definition of a lease under IAS 17, now meet the definition of a lease under IFRS 16. These contracts are required to be remeasured at each reporting date to the prevailing freight index. While these liabilities are included in the Group interest bearing liabilities, they are excluded from the net debt calculation as they do not align with how the Group assesses net debt for decision making in relation to the Capital Allocation Framework. In addition, the freight index has historically been volatile which creates significant short-term fluctuation in these liabilities. As of 1 January 2020, the Group excludes these liabilities from its net debt calculation. Net debt and gearing ratio | | | | | | | | | | | | | Year ended 30 June | | 2020
US$M | | | 2019
US$M
Restated | | | 2018
US$M
Restated | | Interest bearing liabilities – Current | | | 5,012 | | | | 1,661 | | | | 2,736 | | Interest bearing liabilities – Non current | | | 22,036 | | | | 23,167 | | | | 24,069 | | | | | | | | | | | | | | | Total interest bearing liabilities | | | 27,048 | | | | 24,828 | | | | 26,805 | | | | | | | | | | | | | | | Comprising: | | | | | | | | | | | | | Borrowing | | | 23,605 | | | | 24,113 | | | | 26,003 | | Lease liabilities (1) | | | 3,443 | | | | 715 | | | | 802 | | | | | | | | | | | | | | | Less: Lease liability associated with index-linked freight contracts | | | 1,160 | | | | – | | | | – | | | | | | | | | | | | | | | Less: Cash and cash equivalents | | | 13,426 | | | | 15,613 | | | | 15,871 | | | | | | | | | | | | | | | Less: Net debt management related instruments (2) | | | 433 | | | | (204 | ) | | | (805 | ) | Less: Net cash management related instruments (3) | | | (15 | ) | | | (27 | ) | | | 134 | | | | | | | | | | | | | | | Less: Total derivatives included in net debt | | | 418 | | | | (231 | ) | | | (671 | ) | | | | | | | | | | | | | | Net debt | | | 12,044 | | | | 9,446 | | | | 11,605 | | | | | | | | | | | | | | | Net assets | | | 52,246 | | | | 51,824 | | | | 60,670 | | | | | | | | | | | | | | | Gearing | | | 18.7% | | | | 15.4% | | | | 16.1% | | | | | | | | | | | | | | |
| (1) | Reflects the impact of IFRS 16. Refer to note 20 ‘Leases’ in section 5.1. |
| (2) | Represents the net cross currency and interest rate swaps included within current and non-current other financial assets and liabilities. |
| (3) | Represents the net forward exchange contracts included within current and non-current other financial assets and liabilities. |
Net debt waterfall | | | | | | | | | Year ended 30 June | | 2020
US$M | | | 2019
US$M
Restated | | Net debt at the beginning of the period | | | (9,446 | ) | | | (11,605 | ) | | | | | | | | | | Net operating cash flows | | | 15,706 | | | | 17,871 | | Net investing cash flows | | | (7,616 | ) | | | 2,607 | | Net financing cash flows | | | (9,752 | ) | | | (20,528 | ) | | | | | | | | | | Net decrease in cash and cash equivalents from Continuing and Discontinued operations | | | (1,662 | ) | | | (50 | ) | | | | | | | | | | Carrying value of interest bearing liability repayments | | | 1,533 | | | | 2,351 | | | | | | | | | | | Carrying value of debt related instruments repayments | | | 157 | | | | 160 | | | | | | | | | | | Carrying value of cash management related instruments proceeds | | | (451 | ) | | | (427 | ) | | | | | | | | | | Fair value adjustment on debt (including debt related instruments) | | | 88 | | | | 44 | | Foreign exchange impacts on cash (including cash management related instruments) | | | (26 | ) | | | 94 | | IFRS 16 leases taken on at 1 July | | | (1,778 | ) | | | – | | Lease additions | | | (363 | ) | | | – | | Other | | | (96 | ) | | | (13 | ) | | | | | | | | | | Non-cash movements | | | (2,175 | ) | | | 125 | | | | | | | | | | | Net debt at the end of the period (1) | | | (12,044 | ) | | | (9,446 | ) | | | | | | | | | |
| (1) | Includes US$1,633 million of additional leases due to the implementation of IFRS 16. |
Net operating assets The following table reconciles Net operating assets for the Group to Net assets on the Consolidated Balance Sheet: | | | | | | | | | Year ended 30 June | | 2020
US$M | | | 2019
US$M | | Net assets | | | 52,246 | | | | 51,824 | | Less: Non-operating assets | | | | | | | | | Cash and cash equivalents | | | (13,426 | ) | | | (15,613 | ) | Trade and other receivables (1) | | | (194 | ) | | | (222 | ) | Other financial assets (2) | | | (2,425 | ) | | | (1,188 | ) | Current tax assets | | | (366 | ) | | | (124 | ) | Deferred tax assets | | | (3,688 | ) | | | (3,764 | ) | | | | | | | | | | Add: Non-operating liabilities | | | | | | | | | Trade and other payables (3) | | | 310 | | | | 328 | | Interest bearing liabilities | | | 27,048 | | | | 24,828 | | Other financial liabilities (4) | | | 1,618 | | | | 1,020 | | Current tax payable | | | 913 | | | | 1,546 | | Non-current tax payable | | | 109 | | | | 187 | | Deferred tax liabilities | | | 2,758 | | | | 3,234 | | | | | | | | | | | Net operating assets | | | 64,903 | | | | 62,056 | | | | | | | | | | | Net operating assets | | | | | | | | | Petroleum | | | 8,247 | | | | 8,332 | | Copper | | | 24,407 | | | | 24,088 | | Iron Ore | | | 18,400 | | | | 17,486 | | Coal | | | 9,509 | | | | 9,674 | | Group and unallocated items (5) | | | 4,340 | | | | 2,476 | | | | | | | | | | | Total | | | 64,903 | | | | 62,056 | | | | | | | | | | |
| (1) | Represents loans to associates of US$40 million (FY2019: US$33 million), external finance receivable and accrued interest receivable of US$144 million (FY2019: US$51 million) included within other receivables. |
| (2) | Represents cross currency and interest rate swaps, forward exchange contracts of US$24 million (FY2019: US$35 million) and investment in shares and other investments (refer to note 22 ‘Financial risk management’ in section 5.1) included in other financial assets. |
| (3) | Represents accrued interest payable included within other payables. |
| (4) | Represents cross currency and interest rate swaps (refer to note 22 ‘Financial risk management’ in section 5.1) and forward exchange contracts included in other financial liabilities. |
| (5) | Group and unallocated items include functions, other unallocated operations including Potash, Nickel West and legacy assets (previously disclosed as closed mines in the Petroleum reportable segment), and consolidation adjustments. Comparative information for the year ended 30 June 2019 has been restated to reflect the inclusion of legacy assets in Group and unallocated items. |
Other APM Underlying Return on Capital Employed (ROCE) | | | | | | | | | | | | | Year ended 30 June | | 2020
US$M | | | 2019
US$M
Restated | | | 2018
US$M
Restated | | Profit after taxation from Continuing and Discontinued operations | | | 8,736 | | | | 9,185 | | | | 4,823 | | Exceptional items (1) | | | 1,305 | | | | 818 | | | | 5,228 | | | | | | | | | | | | | | | Subtotal | | | 10,041 | | | | 10,003 | | | | 10,051 | | | | | | | | | | | | | | | Adjusted for: | | | | | | | | | | | | | Net finance costs | | | 911 | | | | 1,072 | | | | 1,267 | | Exceptional items included within net finance costs (1) | | | (93 | ) | | | (108 | ) | | | (84 | ) | Income tax expense on net finance costs | | | (267 | ) | | | (319 | ) | | | (405 | ) | | | | | | | | | | | | | | Profit after taxation excluding net finance costs and exceptional items | | | 10,592 | | | | 10,648 | | | | 10,829 | | | | | | | | | | | | | | | Net assets at the beginning of the period | | | 51,824 | | | | 60,670 | | | | 62,726 | | Net debt at the beginning of the period (2) | | | 9,446 | | | | 11,605 | | | | 17,201 | | | | | | | | | | | | | | | Capital employed at the beginning of the period | | | 61,270 | | | | 72,275 | | | | 79,927 | | | | | | | | | | | | | | | Net assets at the end of the period | | | 52,246 | | | | 51,824 | | | | 60,670 | | Net debt at the end of the period (2) | | | 12,044 | | | | 9,446 | | | | 11,605 | | | | | | | | | | | | | | | Capital employed at the end of the period | | | 64,290 | | | | 61,270 | | | | 72,275 | | | | | | | | | | | | | | | Average capital employed | | | 62,780 | | | | 66,773 | | | | 76,101 | | | | | | | | | | | | | | | Underlying Return on Capital Employed | | | 16.9% | | | | 15.9% | | | | 14.2% | | | | | | | | | | | | | | |
| (1) | For more information, refer to note 3 ‘Exceptional items’ in section 5.1. |
| (2) | The Underlying ROCE calculation uses the restated net debt calculation for the comparative periods. |
6.1.1 Definition and calculation of Alternative Performance Measures | | | | | Alternative Performance Measure
(APM) | | Reasons why we believe the APMs are
useful | | Calculation methodology | Underlying attributable profit | | Allows the comparability of underlying financial performance by excluding the impacts of exceptional items and is a performance indicator against which short-term incentive outcomes for our senior executives are measured. It is also the basis on which our dividend payout ratio policy is applied. | | Profit after taxation attributable to BHP shareholders excluding any exceptional items attributable to BHP shareholders. | Underlying basic earnings per share | | On a per share basis, allows the comparability of underlying financial performance by excluding the impacts of exceptional items. | | Underlying attributable profit divided by the weighted basic average number of shares. | Underlying EBITDA | | Used to help assess current operational profitability excluding the impacts of sunk costs (i.e. depreciation from initial investment). Each is a measure that management uses internally to assess the performance of the Group’s segments and make decisions on the allocation of resources. | | Earnings before net finance costs, depreciation, amortisation and impairments, taxation expense, Discontinued operations and exceptional items. Underlying EBITDA includes BHP’s share of profit/(loss) from investments accounted for using the equity method including net finance costs, depreciation, amortisation and impairments and taxation expense/(benefit). | Underlying EBITDA margin | | | | Underlying EBITDA excluding third party product EBITDA, divided by revenue excluding third party product revenue. | Underlying EBIT | | Used to help assess current operational profitability excluding net finance costs and taxation expense (each of which are managed at the Group level), as well as Discontinued operations and any exceptional items. | | Earnings before net finance costs, taxation expense, Discontinued operations and any exceptional items. Underlying EBIT includes BHP’s share of profit/(loss) from investments accounted for using the equity method including net finance costs and taxation expense/(benefit). | Profit from operations | | | | Earnings before net finance costs, taxation expense and Discontinued operations. Profit from operations includes Revenue, Other income, Expenses excluding net finance costs and BHP’s share of profit/(loss) from investments accounted for using the equity method including net finance costs and taxation expense/(benefit). | Capital and exploration expenditure | | Used as part of our Capital Allocation Framework to assess efficient deployment of capital. Represents the total outflows of our operational investing expenditure. | | Purchases of property, plant and equipment and exploration expenditure. | Free cash flow | | It is a key measure used as part of our Capital Allocation Framework. Reflects our operational cash performance inclusive of investment expenditure, which helps to highlight how much cash was generated in the period to be available for the servicing of debt and distribution to shareholders. | | Net operating cash flows less Net investing cash flows. |
| | | | | Net debt | | Net debt shows the position of gross debt less index-linked freight contracts offset by cash immediately available to pay debt if required and any associated derivative financial instruments. Liability associated with index-linked freight contracts are excluded from the net debt calculation due to the short-term volatility of the index they relate to not aligning with how the Group uses net debt for decision making in relation to the Capital Allocation Framework. Net debt, along with the gearing ratio, is used to monitor the Group’s capital management by relating net debt relative to equity from shareholders. | | Interest bearing liabilities less liability associated with index-linked freight contracts less cash and cash equivalents less net cross currency and interest rate swaps less net cash management related instruments for the Group at the reporting date. | Gearing ratio
| | Ratio of Net debt to Net debt plus Net assets. | | | | | |
| | | | | Net operating assets | | Enables a clearer view of the assets deployed to generate earnings by highlighting the net operating assets of the business separate from the financing and tax balances. This measure helps provide an indicator of the underlying performance of our assets and enhances comparability between them. | | Operating assets net of operating liabilities, including the carrying value of equity accounted investments and predominantly excludes cash balances, loans to associates, interest bearing liabilities, derivatives hedging our net debt and tax balances. |
| | | | | Underlying Return on Capital Employed (ROCE) | | Indicator of the Group’s capital efficiency and is provided on an underlying basis to allow comparability of underlying financial performance by excluding the impacts of exceptional items. | | Profit after taxation excluding exceptional items and net finance costs (after taxation) divided by average capital employed. Profit after taxation excluding exceptional items and net finance costs (after taxation) is profit after taxation from Continuing and Discontinued operations excluding exceptional items, net finance costs and the estimated taxation impact of net finance costs. These are annualised for a half-year end reporting period. The estimated tax impact is calculated using a prima facie taxation rate on net finance costs (excluding any foreign exchange impact). Average capital employed is calculated as the average of net assets less net debt for the last two reporting periods. |
| | | | | Adjusted effective tax rate | | Provides an underlying tax basis to allow comparability of underlying financial performance by excluding the impacts of exceptional items. | | Total taxation expense/(benefit) excluding exceptional items and exchange rate movements included in taxation expense/(benefit) divided by Profit before taxation and exceptional items. | Unit cost | | Used to assess the controllable financial performance of the Group’s assets for each unit of production. Unit costs are adjusted for site specific non-controllable factors to enhance comparability between the Group’s assets. | | Ratio of net costs of the assets to the equity share of sales tonnage. Net costs is defined as revenue less Underlying EBITDA and excludes freight and other costs, depending on the nature of each asset. Freight is excluded as the Group believes it provides a similar basis of comparison to our peer group. Petroleum unit costs exclude: • exploration, development and evaluation expense as these costs do not represent our cost performance in relation to current production and the Group believes it provides a similar basis of comparison to our peer group; • other costs that do not represent underlying cost performance of the business. Escondida unit costs exclude: • by-product credits being the favourable impact of by-products (such as gold or silver) to determine the directly attributable costs of copper production. WAIO, Queensland Coal and NSWEC unit costs exclude royalties as these are costs that are not deemed to be under the Group’s control, and the Group believes exclusion provides a similar basis of comparison to our peer group. |
6.1.2 Definition and calculation of principal factors The method of calculation of the principal factors that affect the period on period movements of Revenue, Profit from operations and Underlying EBITDA are as follows: | | | | Principal factor | | Method of calculation | Change in sales prices | | Change in average realised price for each operation from the prior period to the current period, multiplied by current period sales volumes. | Price-linked costs | | Change in price-linked costs (mainly royalties) for each operation from the prior period to the current period, multiplied by current period sales volumes. | Change in volumes | | Change in sales volumes for each operation multiplied by the prior year average realised price less variable unit cost. | Controllable cash costs | | Total of operating cash costs and exploration and business development costs. | 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 prior period to the current period. | Exploration and business development | | Exploration and business development expense in the current period minus exploration and business development expense in the prior period. | Exchange rates | | Change in exchange rate multiplied by current period local currency 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. | Fuel and energy | | Fuel and energy expense in the current period minus fuel and energy expense in the prior period. | Non-cash | | Change in net impact of capitalisation and depletion of deferred stripping from the prior period to the current period. | One-off items | | Change in costs exceeding a pre-determined threshold associated with an unexpected event that had not occurred in the last two years and is not reasonably likely to occur within the next two years. | Asset sales | | Profit/(loss) on the sale of assets or operations in the current period minus profit/(loss) on sale of assets or operations in the prior period. | Ceased and sold operations | | Underlying EBITDA for operations that ceased or were sold in the current period minus Underlying EBITDA for operations that ceased or were sold in the prior period. | Share of profit/(loss) from equity accounted investments | | Share of profit/(loss) from equity accounted investments for the current period minus share of profit/(loss) from equity accounted investments in the prior period. | Other | | Variances not explained by the above factors. |
6.2 Information on mining operations Minerals Australia Copper mining operations The following table contains additional details of our mining operations. This table should be read in conjunction with the production table (refer to section 6.2.1)6.3.1) and reserves table (refer to section 6.3.2)6.4.2). | | | | | | | | | | | | | | | | | Mine & location | | Means of access | | Ownership | | Operator | | Title, leases or
options | | History | | Mine type &
mineralisation
style style
| | Power source | | Facilities, use &
condition | | | | | | | | | | Olympic Dam | | | | | | | | | | | | | | | | | | 560 km northwest of Adelaide, South Australia | | Public road Copper cathode trucked to ports Uranium oxide transported by road to ports | | BHP 100% | | BHP | | Mining lease granted by South Australian Government expires in 2036 Right of extension for 50 years (subject to remaining mine life) | | Acquired in 2005 as part of WMCWestern Mining Corporation (WMC) acquisition Copper production began in 1988 Nominal milling capacity raised to 9 Mtpa in 1999 Optimisation project completed in 2002 New copper solvent extraction plant commissioned in 2004 Major smelter maintenance campaign completed in 2018 | | Underground Large poly-metallic deposit of iron oxide-copper-uranium-gold mineralisation | | Electricity transmitted via (i) BHP’s 275 kV power line from Port Augusta and (ii) ElectraNet’s system upstream of Port Augusta Energy purchased via Retail Agreement | | Underground automated train and trucking network feeding crushing, storage and ore hoisting facilities 2 grinding circuits Nominal milling capacity: 10.3 Mtpa Flash furnace produces copper anodes, then refined to produce copper cathodes Electrowon copper cathode and uranium oxide concentrate produced by leaching and solvent extracting flotation tailings |
224
Iron ore mining operations The following table contains additional details of our iron ore mining operations. This table should be read in conjunction with the production table (refer to section 6.2.1)6.3.1) and reserves table (refer to section 6.3.2)6.4.2). | | | | | | | | | | | | | | | | | Mine & location | | Means of
access | | Ownership | | Operator | | Title, leases or
options | | History | | Mine type &
mineralisation
style | | Power source | | Facilities, use &
condition | WAIO | | Mt Newman joint venture | Pilbara region, Western Australia Mt Whaleback Orebodies 18, 24, 25, 29, 30, 31, 32 and 35 | | Private road Ore transported by Mt NewmanJV-owned rail to Port Hedland (427 km) | | BHP 85% Mitsui-ITOCHU Iron 10% ITOCHU Minerals and Energy of Australia 5% | | BHP | | Mineral lease granted and held under the Iron Ore (Mount Newman) Agreement Act 1964 expires in 2030 with right to successive renewals of 21 years each | | Production began at Mt Whaleback in 1969 Production from Orebodies 18, 24, 25, 29, 30, 31, 32 and 35 complements production from Mt Whaleback Production from Orebodies 31 and 32 started in 2015 and 2017 respectively | | Open-cut Bedded ore types classified as per host Archaean or Proterozoic iron formation, which are Brockman and Marra Mamba | | Power for all mine operations both in the Central and Eastern Pilbara is supplied by BHP’s natural gas fired Yarnima power station Power consumed in port operations is supplied via a contract with Alinta | | Newman Hub: primary crusher, ore handling plant, heavy media beneficiation plant, stockyard blending facility, single cell rotary car dumper, train load out (nominal capacity 7375 Mtpa) Orebody 25 Ore processing plant (nominal capacity 12 Mtpa) | | | | | | | | | Yandi joint venture | | | | | | | | | | | | | | | Pilbara region, Western Australia | | Private road Ore transported by Mt NewmanJV-owned rail to Port Hedland (316 km) Yandi JV’s railway spur links Yandi hub to Mt Newman JV main line | | BHP 85% ITOCHU Minerals and Energy of Australia 8% Mitsui Iron Ore Corporation 7% | | BHP | | Mining lease granted pursuant to the Iron Ore (Marillana Creek) Agreement Act 1991 expires in 2033 with 1 renewal right to a further 21 years to 2054 | | Production began at the Yandi mine in 1992 Capacity of Yandi hub expanded between 1994 and 2013 | | Open-cut Channel Iron Deposits are Cainozoic fluvial sediments | | Power for all mine operations both in the Central and Eastern Pilbara is supplied by BHP’s natural gas fired Yarnima power station Power consumed in port operations is supplied via a contract with Alinta | | 3 primary crushers, 3 ore handling plants, stockyard blending facility, and 2 train load outs (nominal capacity 80 Mtpa) |
225
| | | | | | | | | | | | | | | | | Mine & location
| | Means of
access
| | Ownership
| | Operator
| | Title, leases or
options
| | History
| | Mine type &
mineralisation
style
| | Power source
| | Facilities, use &
condition
| | | | | | | | | Jimblebar operation* | | | | | | | | | | | | | | | Pilbara region, Western Australia | | Private road Ore is transported via overland conveyor (12.4 km) | | BHP 85% ITOCHU Minerals and Energy ofIron Ore Australia 8% Mitsui & Co. Iron Ore Exploration & Mining 7% *Jimblebar is an ‘incorporated’ venture, with the above companies holding A Class Shares in Mining Lease 266SA Section 1 and Section 3 held by BHP Iron Ore Jimblebar Pty Ltd (BHPIOJ) BHP holds 100% of the B Class Shares, which has rights to all other BHPIOJ assets | | BHP | | Mining lease granted pursuant to the Iron Ore (McCamey’s Monster) Agreement Authorisation Act 1972 expires in 2030 with rights to successive renewals of 21 years each | | Production began in March 1989 From 2004, production was transferred to Wheelarra JV as part of the Wheelarra sublease agreement. agreement This sublease agreement expired in March 2018 Ore was first produced from the newly commissioned Jimblebar hub in late 2013 Jimblebar sells ore to the Newman JV proximate to the Jimblebar hub | | Open-cut Bedded ore types classified as per host Archaean or Proterozoic banded iron formation, which are Brockman and Marra Mamba | | Power for all mine operations both in the Central and Eastern Pilbara is supplied by BHP’s natural gas fired Yarnima power station Power consumed in port operations is supplied via a contract with Alinta | | 3 primary crushers, ore handling plant, train loadout, stockyard blending facility and supporting mining hub infrastructure (nominal capacity 6571 Mtpa) |
226
| | | | | | | | | | | | | | | | | Mine & location | | Means of
access | | Ownership | | Operator | | Title, leases or
options | | History | | Mine type &
mineralisation
style | | Power source | | Facilities, use &
condition | | | | | | | | | | Mt Goldsworthy joint venture | | | | | | | | | | | | | | | Pilbara region, Western Australia Yarrie Nimingarra Mining Area C | | Private road Yarrie and Nimingarra iron ore transported by Mt GoldsworthyJV-owned rail to Port Hedland (218 km) Mining Area C iron ore transported by Mt NewmanJV-owned rail to Port Hedland (360 km) Mt Goldsworthy JV railway spur links Mining Area C to Yandi railway spur | | BHP 85% Mitsui Iron Ore Corporation 7% ITOCHU Minerals and Energy of Australia 8% | | BHP | | 1 mineral lease and 1 mining lease both granted pursuant to the Iron Ore (Goldsworthy – Nimingarra) Agreement Act 1972, expire 2035, with rights to successive renewals of 21 years A number of smaller mining leases granted under the Mining Act 1978 expire in 2026 with rights to successive renewals of 21 years 3 mineral leases granted under the Iron Ore (Mount Goldsworthy) Agreement Act 1964, which expire 2028, with rights to successive renewals of 21 years each | | Operations commenced at Mt Goldsworthy in 1966 and at Shay Gap in 1973 Original Goldsworthy mine closed in 1982 Associated Shay Gap mine closed in 1993 Mining at Nimingarra mine ceased in 2007, then continued from adjacent Yarrie area Production commenced at Mining Area C mine in 2003 Yarrie mine operations were suspended in February 2014 | | Mining Area C, Yarrie and Nimingarra are allopen-cut Bedded ore types classified as per host Archaean or Proterozoic iron formation, which are Brockman, Marra Mamba and Nimingarra | | Power for Yarrie and Shay Gap is supplied by their own small diesel generating stations Power for all remaining mine operations both in the Central and Eastern Pilbara is supplied by BHP’s natural gas fired Yarnima power station Power consumed in port operations is supplied via a contract with Alinta | | 2 primary crushers, 2 ore handling plants, stockyard blending facility and train load out (nominal capacity 60 Mtpa) |
227
| | | | | | | | | | | | | | | | | Mine & location | | Means of
access | | Ownership | | Operator | | Title, leases or
options | | History | | Mine type &
mineralisation
style | | Power source | | Facilities, use &
condition | | | | | | | | | | POSMAC joint venture | | | | | | | | | | | | | | | Pilbara Region, region, Western Australia | | Private road POSMAC JV sells ore to Mt Goldsworthy JV at Mining Area C Ore is transported via Mt Goldsworthy JV-owned rail and Mt Newman JV-owned railed to Port Hedland | | BHP 65% ITOCHU Minerals and Energy of Australia 8%, Mitsui Iron Ore Corporation 7% POS-OrePOSCO-Ore 20%
| | BHP | | Sublease over part of Mt Goldsworthy Mining Area C mineral lease that expires on the earlier of termination of the mineral lease or the end of the POSMAC JV | | Production commenced in October 2003 POSMAC JV sells all ore to Mt Goldsworthy JV at Mining Area C (FY2020 ore production <1 Mt) | | Open-cut Bedded ore types classified as per host Archaean or Proterozoic iron formation, which is Marra Mamba | | Power for all mine operations both in the Central and Eastern Pilbara is supplied by BHP’s natural gas fired Yarnima power station Power consumed in port operations is supplied via a contract with Alinta | | POSMAC sells all ore to Mt Goldsworthy JV, which is then processed at Mining Area C |
228
Coal mining operations The following table contains additional details of our mining operations. This table should be read in conjunction with the production table (refer to section 6.2.1)6.3.1) and reserves table (refer to section 6.3.2)6.4.2). | | | | | | | | | | | | | | | | | Mine &
location | | Means of access | | Ownership | | Operator | | Title, leases or
options | | History | | Mine type &
mineralisation style | | Power
source | | Facilities, use &
condition | | Queensland Coal | | | Central Queensland Coal Associates joint venture | Bowen Basin, Queensland, Australia Goonyella Riverside, Broadmeadow Daunia Caval Ridge Peak Downs Saraji Blackwater and Norwich Park mines | | Public road Coal transported by rail to Hay Point, Gladstone, Dalrymple Bay and Abbot Point ports Distances between the mines and port are between 160 km and 315 km | | BHP 50% Mitsubishi Development 50% | | BMA | | Mining leases, including undeveloped tenements, expire in 2031,between 2021 and 2043, renewable for further periods as Queensland Government legislation allows Mining is permitted to continue under the legislation during the renewal application period | | Goonyella mine commenced in 1971, merged with adjoining Riverside mine in 1989 Operates as Goonyella Riverside Production commenced at: Peak Downs in 1972 Saraji in 1974 Norwich Park in 1979 Blackwater in 1967 Broadmeadow (longwall operations) in 2005 Daunia in 2013 and Caval Ridge in 2014 Production at Norwich Park ceased in May 2012 | | Allopen-cut except Broadmeadow: longwall underground Bituminous coal is mined from the Permian Moranbah and Rangal Coal measures Products range from premium quality, low volatile, high vitrinite, hard coking coal to medium volatile hard coking coal, to weak coking coal, some pulverised coal injection (PCI) coal and medium ash thermal coal as a secondary product | | Queensland electricity grid connection is under long-term contracts and energy purchased via Retail Agreements | | On-site beneficiation processing facilities Combined nominal capacity: in excess of 67 Mtpa |
229
| | | | | | | | | | | | | | | | | Mine &
location
| | Means of access
| | Ownership
| | Operator
| | Title, leases or
options
| | History
| | Mine type &
mineralisation style
| | Power
source
| | Facilities, use &
condition
| Gregory joint venture
| | | | | | | | | | | | | Bowen Basin, Queensland, Australia
Gregory and Crinum mines
| | Public road
Coal transported by rail to Hay Point and Gladstone ports
Distances between the mines and port are between 310 km and 370 km
| | BHP 50%
Mitsubishi Development 50%
| | BMA | | Mining leases, including undeveloped tenements, expire between 2019 and 2039, renewable for further periods as Queensland Government legislation allows
Mining is permitted to continue under the legislation during the renewal application period
| | Production commenced at:
Gregory in 1979
Crinum mine (longwall) commenced in 1997
Production at Gregoryopen-cut mine ceased in October 2012
Production at Crinum underground mine ceased in November 2015
Agreement entered for sale of our entire 50% interest in Gregory Joint Venture
On 27 March 2019, BMA completed the sale of Gregory Crinum Mine to Sojitz Corporation
| | Gregory:open-cut
Crinum: longwall underground
Bituminous coal is mined from the Permian German Creek Coal measures
Product is a high volatile, low ash hard coking coal
| | Queensland electricity grid connection is under long-term contracts and energy purchased via Retail Agreements | | On-site beneficiation processing facility
Facilities under care and maintenance
|
230
| | | | | | | | | | | | | | | | | Mine &
location
| | Means of access
| | Ownership
| | Operator
| | Title, leases or
options
| | History
| | Mine type &
mineralisation style
| | Power
source
| | Facilities, use &
condition
| | BHP Mitsui Coal | | | | | | | | | | | | | | | Bowen Basin, Queensland, Australia South Walker Creek and Poitrel mines | | Public road Coal transported by rail to Hay Point and Dalrymple Bay ports Distances between the mines and port are between 135 km and 165 km | | BHP 80% Mitsui and Co 20% | | BMC | | Mining leases, including undeveloped tenements, expire between 2020 and 2034 and are2041 (renewal pending), renewable for further periods as Queensland Government legislation allows Mining is permitted to continue under the legislation during the renewal application period | | South Walker Creek commenced in 1996 Poitrel commenced in 2006 BMC purchased remaining 50% share of Red Mountain processing facility in 2018 to secure 100% ownership | | Open-cut Bituminous coal is mined from the Permian Rangal Coal measures Produces a range of coking coal and pulverised coal injection (PCI) coal | | Queensland electricity grid connection is under long-term contracts and energy purchased via Retail Agreements | | South Walker Creek coal beneficiatedon-site Nominal capacity: in excess of 6 Mtpa Poitrel mine utilises Red Mountain for processing and rail loading facilities Nominal capacity: in excess of 4 Mtpa |
231
| | | | | | | | | | | | | | | | | Mine &
location | | Means of access | | Ownership | | Operator | | Title, leases or
options | | History | | Mine type &
mineralisation style | | Power
source | | Facilities, use &
condition | | New South Wales Energy Coal | | | Mt Arthur Coal | Approximately 126 km northwest of Newcastle, New South Wales, Australia | | Public road Domestic coal transported by conveyor to Bayswater and Liddell Power StationsStations. Domestic sales ceased during FY2020 and the conveyor has been decommissioned Export coal transported by third party rail to Newcastle port | | BHP 100% | | BHP | | Current Development Consent expires in 2026, an extensionnew state and federal approvals will be sought within the next few years to allow mining to continue beyond 30 June 2026 This work has commenced MAC holds 10 mining leases, 2 sub leases and 3 exploration licences MAC’s primary exploration licence (EL5965) is in the process of being renewed In December 2019, the NSW Department of Planning Infrastructure and Environment issued HVEC with a ‘Notice of Intent To Renew In Full’ with the final approval currently being renewedprocessed | | Production commenced in 2002 Government approval permits extraction of up to 36 Mtpa of run of mine coal from underground andopen-cut operations, withopen-cut extraction limited to 32 Mtpa | | Open-cut Produces a medium rank bituminous thermal coal | | NSW electricity grid connection under a deemed long-term contract and energy purchased via a Retail Agreement | | Beneficiation facilities: coal handling, preparation, washing plants Nominal capacity: in excess of 23 Mtpa |
232
Nickel mining operations The following table contains additional details of our mining operations. This table should be read in conjunction with the production table (refer to section 6.2.1)6.3.1) and reserves table (refer to section 6.3.2)6.4.2). | | | | | | | | | | | | | | | | | Mine &
location | | Means of access | | Ownership | | Operator | | Title, leases or options | | History | | Mine type &
mineralisation style | | Power source | | Facilities,
use &
condition | | Nickel West | | Mt Keith mine and concentrator | | 485 km north of Kalgoorlie, Western Australia | | Private road Nickel concentrate transported by road to Leinster nickel operations for drying andon- shipping | | BHP 100% | | BHP | | Mining leases granted by Western Australian Government Key leases expire between 2029 and 2036 Renewals at government discretion | | Commissioned in 1995 by WMC Acquired in 2005 as part of WMC acquisition | | Open-cut Disseminated textured magmatic nickel-sulphide mineralisation associated with a metamorphosed ultramafic intrusion | | On-site third partygas-fired turbines with backup from diesel engine generation Contracts expire in December 2023 Natural gas sourced and transported under separate long-term contracts | | Concentration plant with a nominal capacity: 11 Mtpa of ore | | Leinster mine complex and concentrator | | 375 km north of Kalgoorlie, Western Australia | | Public road Nickel concentrate shipped by road and rail to Kalgoorlie nickel smelterNickel Smelter | | BHP 100% | | BHP | | Mining leases granted by Western Australian Government Key leases expire between 2025 and 20342040 Renewals of principal mineral lease in accordance with Nickel (agnew)(Agnew) Agreement | | Production commenced in 1979 Acquired in 2005 as part of WMC acquisition Perseverance underground mine ceased operations during 2013 | | Open-cut and underground Steeply dipping disseminated and massive textured nickel-sulphide mineralisation associated with metamorphosed ultramafic lava flows and intrusions | | On-site third partygas-fired turbines with back up from diesel engine generation Contracts expire in December 2023 Natural gas sourced and transported under separate long-term contracts | | Concentration plant with a nominal capacity: 3 Mtpa of ore | | Cliffs mine | | | | | | | | | | | | | | | | | | 481 km north of Kalgoorlie, Western Australia | | Private road Nickel ore transported by road to Leinster nickel operationsor Mt Keith for further processing | | BHP 100% | | BHP | | Mining leases granted by Western Australian Government Key leases expire between 2025 and 2028 Renewals at government discretion | | Production commenced in 2008 Acquired in 2005 as part of WMC acquisition | | Underground Steeply dipping massive textured nickel-sulphide mineralisation associated with metamorphosed ultramafic lava flows | | Supplied from Mt Keith | | Mine site |
233
Nickel smelters, refineries and processing plants | | | | | | | | | | | | | | | Smelter, refinery or
processing plant | | Location | | Ownership | | Operator | | Title, leases or
options | | Product | | Nominal production
capacity | | Power
source | | Nickel West | | | | | | | | | | | | | | | | | | | | | | | | Kambalda | | | | | | | | | | | | | | | | Nickel concentrator | | 56 km south of Kalgoorlie, Western Australia | | BHP 100% | | BHP | | Mineral leases granted by Western Australian Government Key leases expire in 2028 No further term possible. New mining leases will be sought
| | Concentrate containing approximately 13% nickel | | 1.6 Mtpa ore Ore sourced through tolling and concentrate purchase arrangements with third parties in Kambalda region | | On-site third partygas-fired turbines supplemented by access to grid power Contracts expire in December 2023 Natural gas sourced and transported under separate long-term contracts | | | Kalgoorlie | | Nickel smelter | | Kalgoorlie, Western Australia | | BHP 100% | | BHP | | Freehold title over the property | | Matte containing approximately 65% nickel | | 110 ktpa matte | | On-site third partygas-fired turbines supplemented by access to grid power Contracts expire in December 2023 Natural gas sourced and transported under separate long-term contracts | | | Kwinana | | Nickel refinery | | 30 km south of Perth, Western Australia | | BHP 100% | | BHP | | Freehold title over the property | | LMELondon Metal Exchange (LME) grade nickel briquettes, nickel powder
Also intermediate products, including copper sulphide, cobalt-nickel-sulphide, ammonium-sulphate | | 7982.5 ktpa nickel matte | | Power is sourced from the local grid, which is supplied under a retail contract |
234
Minerals Americas Copper mining operations The following table contains additional details of our mining operations. This table should be read in conjunction with the production table (refer to section 6.2.1)6.3.1) and reserves table (refer to section 6.3.2)6.4.2). | | | | | | | | | | | | | | | | | Mine & location | | Means of access | | Ownership | | Operator | | Title, leases or
options | | History | | Mine type &
mineralisation
style | | Power source | | Facilities, use &
condition | | Escondida | | | | | | | | | | | | | | | | | Atacama Desert 170 km southeast of Antofagasta, Chile | | Private road available for public use Copper cathode transported by privately owned rail to ports at Antofagasta and Mejillones Copper concentrate transported by Escondida-owned pipelines to its Coloso port facilities | | BHP 57.5% Rio Tinto 30% JECO Corporation consortium comprising Mitsubishi, JX Nippon Mining and Metals 10%
JECO2 Ltd 2.5% | | BHP | | Mining concession from Chilean Government valid indefinitely (subject to payment of annual fees) | | Original construction completed in 1990 Sulphide leach copper production commencedStart of operations of the third concentrator plant in 2015
2006
Inauguration of Escondida Water Supply desalination plant (2018) and its extension (2019) | | 2 open-cut pits: Escondida and Escondida Norte Escondida and Escondida Norte mineral deposits are adjacent but distinct supergene enriched porphyry copper deposits | | Escondida-owned transmission lines connect to Chile’s northern power grid Electricity sourced from a combination of contracts with external vendors expiring in 2029 and Tamakaya SpA (100% owned by BHP), which generates power from the recently commissioned Kelargas-fired power plantplant. New renewable power agreements signed in 2019 | | 3 concentrator plants extract copper concentrate from sulphide ore by flotation extraction process 2 solvent extraction and electrowinning plants produce copper cathode Nominal capacity: 153.7 Mtpa (nominal milling capacity) and 350 ktpa copper cathode (nominal capacity of tank house) 2 x 168 km concentrate pipelines, 167 km water pipeline Port facilities at Coloso, Antofagasta Desalinated water plant (Nominal (total water capacity 2,500 litreof 3,800 litres per second) |
235
| | | | | | | | | | | | | | | | | Mine & location
| | Means of access
| | Ownership
| | Operator
| | Title, leases or
options
| | History
| | Mine type &
mineralisation
style
| | Power source
| | Facilities, use &
condition
| | Pampa Norte Spence | | | | | | | | | | | | | Atacama Desert 162 km northeast of Antofagasta, Chile | | Public road Copper cathode transported by rail to ports at Mejillones and Antofagasta | | BHP 100% | | BHP | | Mining concession from Chilean Government valid indefinitely (subject to payment of annual fees) | | Development cost of US$1.1 billion approved in 2004
First copper produced in 2006 Spence Growth Option (SGO) project (i.e. new 95ktpd concentrator plant) was approved in 2017 | | Open-cut Enriched and oxidised porphyry copper deposit containing in situ copper oxide mineralisation that overlies a near-horizontal sequence of supergene sulphides, transitional sulphides, and finally primary (hypogene) sulphide mineralisation | | Spence-owned transmission lines connect to Chile’s northern power grid Electricity purchased under contractfrom external vendors. New renewable power agreements signed in 2019 | | Processing and crushing facilities, separate dynamic(on-off) leach pads, solvent extraction plant,and electrowinning plantplants Nominal capacity of tank house: 200 ktpa copper cathode |
236
| | | | | | | | | | | | | | | | | Mine & location | | Means of access | | Ownership | | Operator | | Title, leases or
options | | History | | Mine type &
mineralisation
style | | Power source | | Facilities, use &
condition | | Pampa Norte Cerro Colorado | Atacama Desert 120 km east of Iquique, Chile | | Public road Copper cathode trucked to port at Iquique | | BHP 100% | | BHP | | Mining concession from Chilean Government valid indefinitely (subject to payment of annual fees) | | Commercial production commenced in 1994 Expansions in 1996 and 1998 | | Open-cut Enriched and oxidised porphyry copper deposit containing in situ copper oxide mineralisation that overlies a near-horizontal sequence of supergene sulphides, transitional sulphides, and finally primary (hypogene) sulphide mineralisation | | Long-term contracts with northern Chile power gridElectricity purchased from external vendors | | 2 primary, secondary and tertiary crushers, dynamic leachingleach pads, solvent extraction plant, electrowinning plant Nominal capacity of tank house: 130 ktpa copper cathode | | Antamina | Andes mountain range 270 km north of Lima, north central Peru | | Public road Copper and zinc concentrates transported by pipeline to port of Huarmey Molybdenum and lead/bismuth concentrates transported by truck | | BHP 33.75% Glencore 33.75%
Teck 22.5%
Mitsubishi 10% | | Compañía Minera Antamina S.A. | | Mining rights from Peruvian Government held indefinitely, subject to payment of annual fees and supply of information on investment and production | | Commercial production commenced in 2001 | | Open-cut Zoned porphyry and skarn deposit with central copper dominated ores and an outer band of copper-zinc dominated ores | | Long-term contracts with individual power producers | | Primary crusher, concentrator, copper and zinc flotation circuits, bismuth/moly cleaning circuit Nominal milling capacity 53 Mtpa 300 km concentrate pipeline Port facilities at Huarmey |
�� 237253
Iron ore mining operations The following table contains additional details of our mining operations. This table should be read in conjunction with the production table (refer to section 6.2.1)6.3.1) and reserves table (refer to section 6.3.2)6.4.2). | | | | | | | | | | | | | | | | | Mine & location | | Means of access | | Ownership | | Operator | | Title, leases or
options | | History | | Mine type &
mineralisation
style | | Power source | | Facilities, use &
condition | Samarco | Southeast Brazil | | Public road Conveyor belts were used to transport iron ore to beneficiation plant 3 slurry pipelines used to transport concentrate to pellet plants on coast Iron ore pellets were exported via port facilities | | BHP Billiton Brasil Limitada 50% of Samarco Mineração S.A. Vale S.A. 50% | | Samarco | | TheSamarco’s mining facilities are currently under administrative embargoes and judicial injunction giveninjunctions have been lifted, and restart can occur when the Fundão dam failurefiltration system is complete and all safety requirements are met. In October 2019, obtained the Corrective Operating Licence required to progress towards operational restart of one concentrator | | Production began at Germano mine in 1977 and at Alegria complex in 1992 Second pellet plant built in 1997 Third pellet plant, second concentrator and second pipeline built in 2008 Fourth pellet plant, third concentrator and third pipeline built in 2014 | | Open-cut Itabirites (metamorphic quartz-hematite rock) and friable hematite ores | | Samarco holds interests in 2 hydroelectric power plants, which supply part of its electricity Power supply contract with Cemig Geração e Transmissão expires in 2022 | | Samarco mining activities are currently suspended after the failure of Fundão dam
The beneficiation plants, pipelines, pellet plants and port facilities are intact intact. A re-start of operations is planned during FY2021. |
Coal mining operations The following table contains additional details of our mining operations. This table should be read in conjunction with the production table (refer to section 6.2.1)6.3.1) and reserves table (refer to section 6.3.2)6.4.2). | | | | | | | | | | | | | | | | | Mine & location | | Means of access | | Ownership | | Operator | | Title, leases or
options | | History | | Mine type &
mineralisation
style | | Power source | | Facilities, use &
condition | Cerrejón | | La Guajira province, Colombia | | Public road Coal exported by company-owned rail to Puerto Bolivar (150 km) | | BHP
33.33% Anglo American 33.33% Glencore 33.33% | | Cerrejón | | Mining leases expire progressively from 2028 to early 2034 Production not scheduled after 2033
| | Original mine began producing in 1976 BHP interest acquired in 2000 | | Open-cut Produces a medium rank bituminous thermal coal(non-coking, suitable for the export market) | | Local Colombian power system | | Beneficiation facilities: crushing plant with capacity in excess of 40 Mtpa and washing plant Nominal capacity in excess of 3 Mtpa |
238
| | | | | | | | | | | | | | | | | Mine & location
| | Means of access
| | Ownership
| | Operator
| | Title, leases or
options
| | History
| | Mine type &
mineralisation
style
| | Power source
| | Facilities, use &
condition
| Navajo
| 40 km southwest of Farmington, New Mexico, United States | | Public road
Coal transported by rail to Four Corners Power Plant
| | BHP 0%
Navajo Transitional Energy Company 100%
| | BHP | | Lease held by Navajo Transitional Energy Company | | Production commenced in 1963
Divested in FY2014
BHP continued to manage and operate the mine until the Mine Management Agreement with Navajo Transitional Energy Company (NTEC) ended on 31 December 2016
| | 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 in excess of 4 Mtpa
|
239
Petroleum Petroleum operations The following table contains additional details of our petroleum operations. This table should be read in conjunction with the production table (refer to section 6.2.2)6.3.2) and reserves table (refer to section 6.3.1)6.4.1). | | | | | | | | | | | | | Operation &
location | | Product | | Ownership | | Operator | | Title, leases or options | | Nominal production
capacity | | Facilities, use &
condition | United States | | | | | | | | | | | | | | | | | | | | Offshore Gulf of Mexico | | | | | | | | | | | | | | | | | | Neptune (Green Canyon 613) | | | | | | | | | | | Offshore deepwater Gulf of Mexico (1,300m)(1,300 m)
| | Oil and gas | | BHP 35% EnVen Energy 30% W&T Offshore 20% 31 Offshore 15% | | BHP | | Lease from US Government as long as oil and gas produced in paying quantities | | 50 Mbbl/d oil
50 MMcf/d gas | | Stand-alone tension leg platform (TLP) | | | | | | | | Shenzi (Green Canyon 653) | | | | | | | | | | | Offshore deepwater Gulf of Mexico (1,310m)(1,310 m)
| | Oil and gas | | BHP 44% Hess 28% Repsol 28% | | BHP | | 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 | | | | | | | | Atlantis (Green Canyon 743) | | | | | | | | | | | Offshore deepwater Gulf of Mexico (2,155m)(2,155 m)
| | Oil and gas | | BHP 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 | | Moored semi-submersible platform | | | | | | | | Mad Dog (Green Canyon 782) | | | | | | | | | | | Offshore deepwater Gulf of Mexico (1,310m)(1,310 m)
| | Oil and gas | | BHP 23.9% BP 60.5%
Chevron 15.6% | | BP | | Lease from US Government as long as oil and gas produced in paying quantities | | 100 Mbbl/d oil
60 MMcf/d gas | | Moored integrated truss spar, facilities for simultaneous production and drilling operations |
240
| | | | | | | | | | | | | Operation & location
| | Product
| | Ownership
| | Operator
| | Title, leases or options
| | Nominal production
capacity
| | Facilities, use &
condition
| | | | | | | | | Australia | | | | | | | | | | | | | | | Bass Strait | | Offshore and onshore Victoria | | Oil and gas | | Gippsland Basin joint venture (GBJV): BHP 50% Esso Australia (Exxon Mobil subsidiary) 50% Kipper Unit joint venture (KUJV): BHP 32.5% Esso Australia 32.5% MEPAU A Pty Ltd 35% | | Esso Australia | | 20 production licences and 2 retention leases issued by Australian Government ExpireLicences and leases expire between 20192020 and end of life of field
1 production licence held with MEPAU A Pty Ltd
| | 65 Mbbl/d oil 1,040 TJ/d 5,150 tpd LPG 850 tpd Ethane | | 411 offshore fields producing through offshore infrastructure, including 12 steel jacket platforms, 2 concrete gravity platforms and a subsea pipeline network
Onshore infrastructure:
– Longford facility (gas conditioning/processing and liquids processing facilities)
– interconnecting pipelines – Long Island Point (LPG processing and liquids storage/offtake) – heliport and onshore supply base |
241
| | | | | | | | | | | | | Operation & location | | Product | | Ownership | | Operator | | Title, leases or
options | | Nominal production
capacity | | Facilities, use &
condition | North West Shelf | Offshore and onshore Western Australia North Rankin
Goodwyn Perseus
Angel and Searipple fields
| | Domestic gas, LPG, condensate, LNG | | North West Shelf Project is an unincorporated JV BHP: 16.67% of Incremental Pipeline Gas (IPG) domestic gas JV 16.67% of original LNG JV 12.5% of China LNG JV 16.67% 15.78% of LPG JVExtended Interest Joint Venture Other participants: subsidiaries of Woodside, Chevron, BP, Shell, Mitsubishi/Mitsui and China National Offshore Oil Corporation | | Woodside Petroleum Ltd | | 14 production licences issued by Australian Government ExpireLicences expire between 2022 and 5 years after production ceases
| | North Rankin Complex: 3,010 MMcf/d gas 53 Mbbl/d condensate Goodwyn A platform: 1,746 MMcf/d gas
100 Mbbl/d condensate Angel platform: 960 MMcf/d gas 51 Mbbl/d condensate Withnell Bay gas plant: 630 MMcf/d gas 5-train LNG plant: 52,000 tpd LNG | | Production from offshore fields is processed over the North Rankin PersephoneComplex, Goodwyn Alpha and Perseus processed throughAngel platforms, then transported onshore to the interconnected North Rankin A and North Rankin B platformsKarratha Gas Plant by 2 subsea trunklines Production from Goodwyn processed through Goodwyn A platform
Production from Perseus, Tidepole, Keast, Dockrell, Sculptor, Rankin, Lady NoraThe Karratha Gas Plant comprises 5 LNG processing trains, two domestic gas trains, LPG fractionation and Pemberton fields tied back via subsea wells to the Goodwyn A platform
Production from Angel field processed through Angel platform
Onshore gas treatment plant at Withnell Bay processes gas for domestic market
5-train LNG plantcondensate stabilisation units and associated storage and loading facilities
|
242
| | | | | | | | | | | | | Operation & location
North West Shelf | | Product
| | Ownership
| | Operator
| | Title, leases or options
| | Nominal production
capacity
| | Facilities, use &
condition
| North West Shelf
| Offshore Western Australia Wanaea
Cossack
Lambert and
Hermes fields
| | Oil | | BHP 16.67% Woodside 33.34%, BP, Chevron, Japan Australia LNG (MIMI) 16.67% each | | Woodside Petroleum Ltd | | 3 production licences issued by Australian Government Expire
Licences expire between 2033 and 2039 | | Production: 60 Mbbl/d Storage: 1 MMbbl | | 12 subsea well completions (4 producers), FPSO unit | | | | | | | | Pyrenees | | | | | | | | | | | Offshore Western Australia Crosby
Moondyne
Wild Bull
Tanglehead
Stickle and
Ravensworth fields
| | Oil | | WA-42-L permit: BHP 71.43% Quadrant PVG P/L 28.57% WA-43-L permit:
BHP 39.999% Quadrant PVG P/L 31.501%
Inpex Alpha Ltd 28.5% | | BHP | | Production licence issued by Australian Government expires 5 years after production ceases | | Production: 96 Mbbl/d oil Storage: 920 Mbbl | | 26 subsea well completions (21 producers, 4 water injectors, 1 gas injector), FPSO unit | | | | | | | | Macedon | | | | | | | | | | | Offshore and onshore Western Australia | | Gas and condensate | | WA-42-L permit BHP 71.43%
Quadrant PVG P/L 28.57% | | BHP | | Production licence issued by Australian Government expires 5 years after production ceases | | Production: 213 MMcf/d gas 20 bbl/d condensate | | 4 well completions Single flow line transports gas to onshore gas processing facility Gas plant located approximately 17 km southwest of Onslow |
243
| | | | | | | | | | | | | Operation & location | | Product | | Ownership | | Operator | | Title, leases or options | | Nominal production
capacity | | Facilities, use &
condition | | | | | | | | Minerva | | | | | | | | | | | | Offshore and onshore Victoria | | Gas and condensate | | BHP 90%
Cooper Energy (MF) Pty Ltd 10% | | BHP | | Production licence issued by Australian Government expires 5 years after production ceases | | 150 TJ/d gas
600 bbl/d condensate | | 2 subsea well completions (2 producing wells) Single flow line transports gas to onshore gas processing facility Gas plant located approximately 4 km inland from Port Campbell On 3 September 2019, the Minerva gas field reached end-of-field life and production ceased at the Minerva gas plant On 1 May 2018, BHP entered into an agreement for the sale of its interests in the onshore gas plant with subsidiaries of Cooper Energy and Mitsui E&P Australia Pty Ltd. Agreement is conditionalThe sale was completed on regulatory approval |
244
| | | | | | | | | | | | | Operation & location
| | Product
| | Ownership
| | Operator
| | Title, leases or options
| | Nominal production
capacity
| | Facilities, use &
condition5 December 2019
| Other production operations | | | Trinidad and Tobago | | | Greater Angostura | Offshore Trinidad and Tobago | | Oil and gas | | BHP 45% National Gas
Company 30%
Chaoyang 25% | | BHP | | Production sharing contract with the Trinidad and Tobago Government entitles us to operate Greater Angostura until 20262031 | | 100 Mbbl/d oil 340 MMcf/d gas | | Integrated oil and gas development: central processing platform connected to 4 wellhead platforms and a gas export platform 31 wells completed for production and injection including: 17 oil producers, 7 gas producers (3 subsea) and 7 gas injectors | | Algeria | | | ROD Integrated Development | Onshore Berkine Basin 900 km southeast of Algiers, Algeria | | Oil | | BHP 45% interest in 401a/402a production sharing contract
ENI 55% BHP effective 29.3%29.2% interest in ROD unitised integrated development
| | Joint Sonatrach/ENI entity | | Production sharing contract with Sonatrach (title holder) | | Approximately 80 Mbbl/d oil | | Development and production of 6 oil fields 2 largest fields (ROD and SF SFNE) extend into neighbouring blocks 403a, 403d Production through dedicated processing train on block 403 |
245
6.26.3 Production
6.2.16.3.1 Production – Minerals
The table below details our mineral and derivative product production for all operations (except Petroleum) for the three years ended 30 June 2020, 2019 2018 and 2017.2018. Unless otherwise stated, the production numbers represent our share of production and include BHP’s share of production from which profit is derived from our equity accounted investments. Production information for equity accounted investments is included to provide insight into the operational performance of these entities. For discussion of minerals pricing during the past three years, refer to section 1.6.2.1.5.2. | | | | | | | | | | | | | | | | | | | | BHP Group
interest
% | | | BHP share of production(1)
Year ended 30 June | | | | | 2019 | | | 2018 | | | 2017 | | Copper(2) | | | | | | | | | | | | | | | | | Payable metal in concentrate (‘000 tonnes) | | | | | | | | | | | | | | | | | Escondida, Chile (3) | | | 57.5 | | | | 882.1 | | | | 925.8 | | | | 539.6 | | Antamina, Peru (4) | | | 33.75 | | | | 147.2 | | | | 139.5 | | | | 133.8 | | | | | | | | | | | | | | | | | | | Total copper concentrate | | | | | | | 1,029.3 | | | | 1,065.3 | | | | 673.4 | | | | | | | | | | | | | | | | | | | Copper cathode(‘000 tonnes) | | | | | | | | | | | | | | | | | Escondida, Chile (3) | | | 57.5 | | | | 253.2 | | | | 287.5 | | | | 232.0 | | Pampa Norte, Chile (5) | | | 100 | | | | 246.5 | | | | 263.8 | | | | 254.3 | | Olympic Dam, Australia | | | 100 | | | | 160.3 | | | | 136.7 | | | | 166.3 | | | | | | | | | | | | | | | | | | | Total copper cathode | | | | | | | 660.0 | | | | 688.0 | | | | 652.6 | | | | | | | | | | | | | | | | | | | Total copper concentrate and cathode | | | | | | | 1,689.3 | | | | 1,753.3 | | | | 1,326.0 | | | | | | | | | | | | | | | | | | | Lead | | | | | | | | | | | | | | | | | Payable metal in concentrate (‘000 tonnes) | | | | | | | | | | | | | | | | | Antamina, Peru (4) | | | 33.75 | | | | 2.4 | | | | 3.4 | | | | 5.5 | | | | | | | | | | | | | | | | | | | Total lead | | | | | | | 2.4 | | | | 3.4 | | | | 5.5 | | | | | | | | | | | | | | | | | | | Zinc | | | | | | | | | | | | | | | | | Payable metal in concentrate (‘000 tonnes) | | | | | | | | | | | | | | | | | Antamina, Peru (4) | | | 33.75 | | | | 98.1 | | | | 119.8 | | | | 87.5 | | | | | | | | | | | | | | | | | | | Total zinc | | | | | | | 98.1 | | | | 119.8 | | | | 87.5 | | | | | | | | | | | | | | | | | | | Gold | | | | | | | | | | | | | | | | | Payable metal in concentrate (‘000 ounces) | | | | | | | | | | | | | | | | | Escondida, Chile (3) | | | 57.5 | | | | 286.0 | | | | 229.1 | | | | 110.9 | | Olympic Dam, Australia (refined gold) | | | 100 | | | | 107.0 | | | | 91.6 | | | | 104.1 | | | | | | | | | | | | | | | | | | | Total gold | | | | | | | 393.0 | | | | 320.7 | | | | 215.0 | | | | | | | | | | | | | | | | | | | Silver | | | | | | | | | | | | | | | | | Payable metal in concentrate (‘000 ounces) | | | | | | | | | | | | | | | | | Escondida, Chile (3) | | | 57.5 | | | | 8,830 | | | | 8,796 | | | | 4,326 | | Antamina, Peru (4) | | | 33.75 | | | | 4,758 | | | | 5,437 | | | | 5,783 | | Olympic Dam, Australia (refined silver) | | | 100 | | | | 923 | | | | 792 | | | | 768 | | | | | | | | | | | | | | | | | | | Total silver | | | | | | | 14,511 | | | | 15,025 | | | | 10,877 | | | | | | | | | | | | | | | | | | | Uranium | | | | | | | | | | | | | | | | | Payable metal in concentrate (tonnes) | | | | | | | | | | | | | | | | | Olympic Dam, Australia | | | 100 | | | | 3,565 | | | | 3,364 | | | | 3,661 | | | | | | | | | | | | | | | | | | | Total uranium | | | | | | | 3,565 | | | | 3,364 | | | | 3,661 | | | | | | | | | | | | | | | | | | | Molybdenum | | | | | | | | | | | | | | | | | Payable metal in concentrate (tonnes) | | | | | | | | | | | | | | | | | Antamina, Peru (4) | | | 33.75 | | | | 1,141 | | | | 1,662 | | | | 1,144 | | | | | | | | | | | | | | | | | | | Total molybdenum | | | | | | | 1,141 | | | | 1,662 | | | | 1,144 | | | | | | | | | | | | | | | | | | |
246
| | | | | | | | | | | | | | | | | | | | BHP interest
% | | | BHP share of production (1)
Year ended 30 June | | | | | 2020 | | | 2019 | | | 2018 | | Copper (2) | | | | | | | | | | | | | | | | | Payable metal in concentrate (‘000 tonnes) | | | | | | | | | | | | | | | | | Escondida, Chile (3) | | | 57.5 | | | | 925.9 | | | | 882.1 | | | | 925.8 | | Antamina, Peru (4) | | | 33.75 | | | | 124.5 | | | | 147.2 | | | | 139.5 | | | | | | | | | | | | | | | | | | | Total copper concentrate | | | | | | | 1,050.4 | | | | 1,029.3 | | | | 1,065.3 | | | | | | | | | | | | | | | | | | | Copper cathode (‘000 tonnes) | | | | | | | | | | | | | | | | | Escondida, Chile (3) | | | 57.5 | | | | 259.4 | | | | 253.2 | | | | 287.5 | | Pampa Norte, Chile (5) | | | 100 | | | | 242.7 | | | | 246.5 | | | | 263.8 | | Olympic Dam, Australia | | | 100 | | | | 171.6 | | | | 160.3 | | | | 136.7 | | | | | | | | | | | | | | | | | | | Total copper cathode | | | | | | | 673.7 | | | | 660.0 | | | | 688.0 | | | | | | | | | | | | | | | | | | | Total copper concentrate and cathode | | | | | | | 1,724.1 | | | | 1,689.3 | | | | 1,753.3 | | | | | | | | | | | | | | | | | | | Lead | | | | | | | | | | | | | | | | | Payable metal in concentrate (‘000 tonnes) | | | | | | | | | | | | | | | | | Antamina, Peru (4) | | | 33.75 | | | | 1.7 | | | | 2.4 | | | | 3.4 | | | | | | | | | | | | | | | | | | | Total lead | | | | | | | 1.7 | | | | 2.4 | | | | 3.4 | | | | | | | | | | | | | | | | | | | Zinc | | | | | | | | | | | | | | | | | Payable metal in concentrate (‘000 tonnes) | | | | | | | | | | | | | | | | | Antamina, Peru (4) | | | 33.75 | | | | 88.5 | | | | 98.1 | | | | 119.8 | | | | | | | | | | | | | | | | | | | Total zinc | | | | | | | 88.5 | | | | 98.1 | | | | 119.8 | | | | | | | | | | | | | | | | | | | Gold | | | | | | | | | | | | | | | | | Payable metal in concentrate (‘000 ounces) | | | | | | | | | | | | | | | | | Escondida, Chile (3) | | | 57.5 | | | | 177.4 | | | | 286.0 | | | | 229.1 | | Olympic Dam, Australia (refined gold) | | | 100 | | | | 146.0 | | | | 107.0 | | | | 91.6 | | | | | | | | | | | | | | | | | | | Total gold | | | | | | | 323.4 | | | | 393.0 | | | | 320.7 | | | | | | | | | | | | | | | | | | | Silver | | | | | | | | | | | | | | | | | Payable metal in concentrate (‘000 ounces) | | | | | | | | | | | | | | | | | Escondida, Chile (3) | | | 57.5 | | | | 6,413 | | | | 8,830 | | | | 8,796 | | Antamina, Peru (4) | | | 33.75 | | | | 4,116 | | | | 4,758 | | | | 5,437 | | Olympic Dam, Australia (refined silver) | | | 100 | | | | 984 | | | | 923 | | | | 792 | | | | | | | | | | | | | | | | | | | Total silver | | | | | | | 11,513 | | | | 14,511 | | | | 15,025 | | | | | | | | | | | | | | | | | | | Uranium | | | | | | | | | | | | | | | | | Payable metal in concentrate (tonnes) | | | | | | | | | | | | | | | | | Olympic Dam, Australia | | | 100 | | | | 3,678 | | | | 3,565 | | | | 3,364 | | | | | | | | | | | | | | | | | | | Total uranium | | | | | | | 3,678 | | | | 3,565 | | | | 3,364 | | | | | | | | | | | | | | | | | | | Molybdenum | | | | | | | | | | | | | | | | | Payable metal in concentrate (tonnes) | | | | | | | | | | | | | | | | | Antamina, Peru (4) | | | 33.75 | | | | 1,666 | | | | 1,141 | | | | 1,662 | | | | | | | | | | | | | | | | | | | Total molybdenum | | | | | | | 1,666 | | | | 1,141 | | | | 1,662 | | | | | | | | | | | | | | | | | | |
| | | | BHP Group
interest
% | | | BHP Group share of production (1)
Year ended 30 June | | | BHP interest
% | | | BHP share of production (1)
Year ended 30 June | | | | | 2019 | | | 2018 | | | 2017 | | | 2020 | | | 2019 | | | 2018 | | Iron ore | | | | | | | | | | | | | | | | | Western Australia Iron Ore | | | | | | | | | | | | | | | | | Production (‘000 tonnes) (6) | | | | | | | | | | | | | | | | | Newman, Australia | | | 85 | | | | 66,622 | | | | 67,071 | | | | 68,283 | | | | 85 | | | | 65,641 | | | | 66,622 | | | | 67,071 | | Area C Joint Venture, Australia | | | 85 | | | | 47,440 | | | | 51,517 | | | | 48,744 | | | | 85 | | | | 51,499 | | | | 47,440 | | | | 51,517 | | Yandi Joint Venture, Australia | | | 85 | | | | 65,197 | | | | 64,048 | | | | 65,355 | | | | 85 | | | | 69,262 | | | | 65,197 | | | | 64,048 | | Jimblebar, Australia (7) | | | 85 | | | | 58,546 | | | | 30,627 | | | | 21,950 | | | | 85 | | | | 61,754 | | | | 58,546 | | | | 30,627 | | Wheelarra, Australia (8) | | | 85 | | | | 159 | | | | 25,158 | | | | 27,020 | | | | 85 | | | | 3 | | | | 159 | | | | 25,158 | | | | | | | | | | | | | | | | | | | | | | | | | Total Western Australia Iron Ore | | | | | 237,964 | | | | 238,421 | | | | 231,352 | | | | | | 248,159 | | | | 237,964 | | | | 238,421 | | | | | | | | | | | | | | | | | | | | | | | | | Samarco, Brazil (4) | | | 50 | | | | – | | | | – | | | | – | | | | 50 | | | | – | | | | – | | | | – | | | | | | | | | | | | | | | | | | | | | | | | | Total iron ore | | | | | 237,964 | | | | 238,421 | | | | 231,352 | | | | | | 248,159 | | | | 237,964 | | | | 238,421 | | | | | | | | | | | | | | | | | | | | | | | | | Coal | | | | | | | | | | | | | | | | | Metallurgical coal | | | | | | | | | | | | | | | | | Production (‘000 tonnes) (9) | | | | | | | | | | | | | | | | | Blackwater, Australia | | | 50 | | | | 6,603 | | | | 6,688 | | | | 7,296 | | | | 50 | | | | 5,545 | | | | 6,603 | | | | 6,688 | | Goonyella Riverside, Australia | | | 50 | | | | 8,563 | | | | 7,961 | | | | 7,355 | | | | 50 | | | | 8,765 | | | | 8,563 | | | | 7,961 | | Peak Downs, Australia | | | 50 | | | | 5,933 | | | | 6,350 | | | | 6,055 | | | | 50 | | | | 5,783 | | | | 5,933 | | | | 6,350 | | Saraji, Australia | | | 50 | | | | 4,892 | | | | 5,053 | | | | 4,734 | | | | 50 | | | | 4,963 | | | | 4,892 | | | | 5,053 | | Daunia, Australia | | | 50 | | | | 2,178 | | | | 2,556 | | | | 2,560 | | | | 50 | | | | 2,170 | | | | 2,178 | | | | 2,556 | | Caval Ridge, Australia | | | 50 | | | | 3,967 | | | | 4,285 | | | | 3,458 | | | | 50 | | | | 4,349 | | | | 3,967 | | | | 4,285 | | | | | | | | | | | | | | | | | | | | | | | | | Total BHP Mitsubishi Alliance | | | | | 32,136 | | | | 32,893 | | | | 31,458 | | | | | | 31,575 | | | | 32,136 | | | | 32,893 | | | | | | | | | | | | | | | | | | | | | | | | | South Walker Creek, Australia (10) | | | 80 | | | | 6,194 | | | | 6,029 | | | | 5,123 | | | | 80 | | | | 5,415 | | | | 6,194 | | | | 6,029 | | Poitrel, Australia (10) | | | 80 | | | | 4,071 | | | | 3,718 | | | | 3,189 | | | | 80 | | | | 4,128 | | | | 4,071 | | | | 3,718 | | | | | | | | | | | | | | | | | | | | | | | | | Total BHP Mitsui Coal | | | | | 10,265 | | | | 9,747 | | | | 8,312 | | | | | | 9,543 | | | | 10,265 | | | | 9,747 | | | | | | | | | | | | | | | | | | | | | | | | | Total Queensland Coal | | | | | 42,401 | | | | 42,640 | | | | 39,770 | | | | | | 41,118 | | | | 42,401 | | | | 42,640 | | | | | | | | | | | | | | | | | | | | | | | | | IndoMet, Haju, Indonesia (11) | | | 75 | | | | – | | | | – | | | | 129 | | | | | | | | | | | | | | | | Total metallurgical coal | | | | | 42,401 | | | | 42,640 | | | | 39,899 | | | | | | | | | | | | | | | | Energy coal | | | | | | | | | | | | | | | | | Production (‘000 tonnes) | | | | | | | | | | | | | | | | | Navajo, United States (12) | | | 100 | | | | – | | | | – | | | | 451 | | | San Juan, United States | | | 100 | | | | – | | | | – | | | | – | | | | | | | | | | | | | | | | Total New Mexico Coal | | | | | – | | | | – | | | | 451 | | | | | | | | | | | | | | | | | | | | | | | | | | New South Wales Energy Coal, Australia | | | 100 | | | | 18,257 | | | | 18,541 | | | | 18,176 | | | | 100 | | | | 16,052 | | | | 18,257 | | | | 18,541 | | Cerrejón, Colombia (4) | | | 33.3 | | | | 9,230 | | | | 10,617 | | | | 10,959 | | | | 33.3 | | | | 7,115 | | | | 9,230 | | | | 10,617 | | | | | | | | | | | | | | | | | | | | | | | | | Total energy coal | | | | | 27,487 | | | | 29,158 | | | | 29,586 | | | | | | 23,167 | | | | 27,487 | | | | 29,158 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | BHP Group
interest
% | | | BHP Group share of production (1)
Year ended 30 June | | | | | | 2019 | | | 2018 | | | 2017 | | | Other assets | | | | | | | | | | Nickel | | | | | | | | | | Saleable production (‘000 tonnes) | | | | | | | | | | Nickel West, Australia (13)(14) | | | 100 | | | | 87.4 | | | | 93.0 | | | | 85.8 | | | | | | | | | | | | | | | | Total nickel | | | | | 87.4 | | | | 93.0 | | | | 85.8 | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | BHP interest
% | | | BHP share of production (1)
Year ended 30 June | | | | | 2020 | | | 2019 | | | 2018 | | Other assets | | | | | | | | | | | | | | | | | Nickel | | | | | | | | | | | | | | | | | Saleable production (‘000 tonnes) | | | | | | | | | | | | | | | | | Nickel West, Australia (11)(12) | | | 100 | | | | 80.1 | | | | 87.4 | | | | 93.0 | | | | | | | | | | | | | | | | | | | Total nickel | | | | | | | 80.1 | | | | 87.4 | | | | 93.0 | | | | | | | | | | | | | | | | | | |
| (1) | BHP share of production includes the Group’s share of production for which profit is derived from our equity accounted investments, unless otherwise stated. |
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| (2) | Metal production is reported on the basis of payable metal. |
| (3) | Shown on 100 per cent basis following the application of IFRS 10. BHP interest in saleable production is 57.5 per cent. |
| (4) | For statutory financial reporting purposes, this is an equity accounted investment. We have included production numbers from our equity accounted investments as the level of production and operating performance from these operations impacts Underlying EBITDA of the Group. Our use of Underlying EBITDA is explained in section 1.12.1.10. Samarco operations are currently suspended following the Samarco dam failure as explained in section 1.7.1.8. |
| (5) | Includes Cerro Colorado and Spence. |
| (6) | Iron ore production is reported on a wet tonnes basis. |
| (7) | Shown on 100 per cent basis. BHP interest in saleable production is 85 per cent. |
| (8) | All production from Wheelarra is now processed via the Jimblebar processing hub. |
| (9) | Metallurgical coal production is reported on the basis of saleable product. Production figures include some thermal coal. |
| (10) | Shown on 100 per cent basis. BHP interest in saleable production is 80 per cent. |
| (11) | Shown on 100 per cent basis. BHP interest in saleable production is 75 per cent.
|
(12) | BHP completed the sale of Navajo Mine on 30 December 2013. As BHP retained control of the mine until 29 July 2016, production has been reported through such date.
|
(13) | Production restated to include other nickelby-products. |
(14)(12) | Nickel contained in refined nickel metal, including briquette and power, matte andby-product streams. |
6.2.2
6.3.2 Production – Petroleum The table below details Petroleum’s historical net crude oil and condensate, natural gas and natural gas liquids production, primarily by geographic segment, for each of the three years ended 30 June 2020, 2019 2018 and 2017.2018. We have shown volumes of marketable production after deduction of applicable royalties, fuel and flare. We have included in the table average production costs per unit of production and average sales prices for oil and condensate and natural gas for each of those periods. | | | | | | | | | | | | | | | | BHP Group share of production
Year ended 30 June | | | | | 2019 | | | 2018 | | | 2017 | | Production volumes | | | | | | | | | | | | | Crude oil and condensate(‘000 of barrels) | | | | | | | | | | | | | Australia | | | 14,365 | | | | 16,545 | | | | 18,658 | | United States – Conventional | | | 28,047 | | | | 27,476 | | | | 29,933 | | United States – Onshore US (5) | | | 6,411 | | | | 19,464 | | | | 22,944 | | Other (4) | | | 4,885 | | | | 4,616 | | | | 4,850 | | | | | | | | | | | | | | | Total crude oil and condensate | | | 53,708 | | | | 68,101 | | | | 76,385 | | | | | | | | | | | | | | | Natural gas(billion cubic feet) | | | | | | | | | | | | | Australia | | | 310.1 | | | | 325.0 | | | | 345.7 | | United States – Conventional | | | 10.4 | | | | 9.5 | | | | 10.3 | | United States – Onshore US (5) | | | 96.3 | | | | 258.5 | | | | 275.0 | | Other (4) | | | 76.2 | | | | 42.5 | | | | 36.8 | | | | | | | | | | | | | | | Total natural gas | | | 493.0 | | | | 635.5 | | | | 667.8 | | | | | | | | | | | | | | | Natural gas liquids (1)(‘000 of barrels) | | | | | | | | | | | | | Australia | | | 6,265 | | | | 6,955 | | | | 7,423 | | United States – Conventional | | | 1,581 | | | | 1,725 | | | | 1,725 | | United States – Onshore US (5) | | | 3,505 | | | | 9,560 | | | | 11,427 | | Other (4) | | | 42 | | | | 88 | | | | 119 | | | | | | | | | | | | | | | Total NGL (1) | | | 11,392 | | | | 18,328 | | | | 20,694 | | | | | | | | | | | | | | | Total production of petroleum products(million barrels of oil equivalent) (2) | | | | | | | | | | | | | Australia | | | 72.3 | | | | 77.7 | | | | 83.7 | | United States – Conventional | | | 31.4 | | | | 30.8 | | | | 33.4 | | United States – Onshore US (5) | | | 26.0 | | | | 72.1 | | | | 80.2 | | Other (4) | | | 17.6 | | | | 11.8 | | | | 11.1 | | | | | | | | | | | | | | | Total production of petroleum products | | | 147.3 | | | | 192.4 | | | | 208.4 | | | | | | | | | | | | | | | Average sales price | | | | | | | | | | | | | Crude oil and condensate(US$ per barrel) | | | | | | | | | | | | | Australia | | | 69.50 | | | | 63.69 | | | | 50.59 | | United States – Conventional | | | 64.65 | | | | 58.55 | | | | 45.45 | | United States – Onshore US | | | 68.02 | | | | 59.03 | | | | 47.91 | | Other (4) | | | 68.86 | | | | 61.73 | | | | 47.96 | | | | | | | | | | | | | | | Total crude oil and condensate | | | 66.73 | | | | 60.12 | | | | 47.61 | | | | | | | | | | | | | | | Natural gas(US$ per thousand cubic feet) | | | | | | | | | | | | | Australia | | | 7.00 | | | | 5.97 | | | | 5.06 | |
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| | | | BHP Group share of production
Year ended 30 June | | | BHP share of production
Year ended 30 June | | | | | 2019 | | | 2018 | | | 2017 | | | 2020 | | | 2019 | | | 2018 | | Production volumes | | | | | | | | Crude oil and condensate (‘000 of barrels) | | | | | | | | Australia | | | | 14,044 | | | | 14,365 | | | | 16,545 | | United States – Conventional | | | 3.22 | | | | 3.12 | | | | 4.39 | | | | 23,345 | | | | 28,047 | | | | 27,476 | | United States – Onshore US | | | 2.90 | | | | 2.79 | | | | 2.82 | | | Other (4) | | | 2.87 | | | | 3.19 | | | | 2.72 | | | United States – Onshore US (1) | | | | – | | | | 6,411 | | | | 19,464 | | Other (2) | | | | 3,823 | | | | 4,885 | | | | 4,616 | | | | | | | | | | | | | Total crude oil and condensate | | | | 41,212 | | | | 53,708 | | | | 68,101 | | | | | | | | | | | | | Natural gas (billion cubic feet) | | | | | | | | Australia | | | | 292.6 | | | | 310.1 | | | | 325.0 | | United States – Conventional | | | | 8.1 | | | | 10.4 | | | | 9.5 | | United States – Onshore US (1) | | | | – | | | | 96.3 | | | | 258.5 | | Other (2) | | | | 58.9 | | | | 76.2 | | | | 42.5 | | | | | | | | | | | | | Total natural gas | | | | 359.6 | | | | 493.0 | | | | 635.5 | | | | | | | | | | | | | Natural gas liquids (3) (‘000 of barrels) | | | | | | | | Australia | | | | 6,462 | | | | 6,265 | | | | 6,955 | | United States – Conventional | | | | 1,189 | | | | 1,581 | | | | 1,725 | | United States – Onshore US (1) | | | | – | | | | 3,505 | | | | 9,560 | | Other (2) | | | | – | | | | 42 | | | | 88 | | | | | | | | | | | | | Total NGL (3) | | | | 7,651 | | | | 11,392 | | | | 18,328 | | | | | | | | | | | | | Total production of petroleum products (million barrels of oil equivalent) (4) | | | | | | | | Australia | | | | 69.3 | | | | 72.3 | | | | 77.7 | | United States – Conventional | | | | 25.9 | | | | 31.4 | | | | 30.8 | | United States – Onshore US (1) | | | | – | | | | 26.0 | | | | 72.1 | | Other (2) | | | | 13.6 | | | | 17.6 | | | | 11.8 | | | | | | | | | | | | | Total production of petroleum products | | | | 108.8 | | | | 147.3 | | | | 192.4 | | | | | | | | | | | | | Average sales price | | | | | | | | Crude oil and condensate (US$ per barrel) | | | | | | | | Australia | | | | 52.38 | | | | 69.50 | | | | 63.69 | | United States – Conventional | | | | 46.69 | | | | 64.65 | | | | 58.55 | | United States – Onshore US (1) | | | | – | | | | 68.02 | | | | 59.03 | | Other (2) | | | | 56.05 | | | | 68.86 | | | | 61.73 | | | | | | | | | | | | | Total crude oil and condensate | | | | 49.53 | | | | 66.73 | | | | 60.12 | | | | | | | | | | | | | Natural gas (US$ per thousand cubic feet) | | | | | | | | Australia | | | | 5.60 | | | | 7.00 | | | | 5.97 | | United States – Conventional | | | | 2.20 | | | | 3.22 | | | | 3.12 | | United States – Onshore US (1) | | | | – | | | | 2.90 | | | | 2.79 | | Other (2) | | | | 2.60 | | | | 2.87 | | | | 3.19 | | | | | | | | | | | | | | | | | | | | | Total natural gas | | | 5.50 | | | | 4.44 | | | | 4.00 | | | | 5.02 | | | | 5.50 | | | | 4.44 | | | | | | | | | | | | | | | | | | | | | Natural gas liquids(US$ per barrel) | | | | | | | | | | | | | Australia | | | 36.54 | | | | 35.99 | | | | 27.76 | | | | 27.51 | | | | 36.54 | | | | 35.99 | | United States – Conventional | | | 25.73 | | | | 27.52 | | | | 21.29 | | | | 13.44 | | | | 25.73 | | | | 27.52 | | United States – Onshore US | | | 27.74 | | | | 22.15 | | | | 15.14 | | | Other (4) | | | 28.66 | | | | 25.85 | | | | 21.10 | | | United States – Onshore US (1) | | | | – | | | | 27.74 | | | | 22.15 | | Other (2) | | | | – | | | | 28.66 | | | | 25.85 | | | | | | | | | | | | | | | | | | | | | Total NGL | | | 32.17 | | | | 27.95 | | | | 20.37 | | | | 25.36 | | | | 32.17 | | | | 27.95 | | | | | | | | | | | | | | | | | | | | | Total average production cost(US$ per barrel of oil equivalent) (3) | | | | | | | | Total average production cost (US$ per barrel of oil equivalent) (5) | | | | | | | | Australia | | | 8.98 | | | | 8.06 | | | | 5.78 | | | | 7.12 | | | | 8.98 | | | | 8.06 | | United States – Conventional | | | 5.29 | | | | 7.43 | | | | 6.62 | | | | 4.57 | | | | 5.29 | | | | 7.43 | | United States – Onshore US | | | 4.93 | | | | 6.43 | | | | 7.87 | | | Other (4) | | | 6.41 | | | | 9.31 | | | | 13.55 | | | United States – Onshore US (1) | | | | – | | | | 4.93 | | | | 6.43 | | Other (2) | | | | 4.94 | | | | 6.41 | | | | 9.31 | | | | | | | | | | | | | | | | | | | | | Total average production cost | | | 7.18 | | | | 7.43 | | | | 7.14 | | | | 6.24 | | | | 7.18 | | | | 7.43 | | | | | | | | | | | | | | | | | | | | |
| (1) | Production for Onshore US assets shown through the closing date of the divestment in FY2019. Production for Eagle Ford, Permian and Haynesville assets are shown through 31 October 2018 and production for Fayetteville is shown through 28 September 2018. |
| (2) | Other comprises Algeria, Trinidad and Tobago, and the United Kingdom (divested 30 November 2018). |
| (3) | LPG and ethane are reported as natural gas liquids (NGL). |
(2)(4) | Total barrels of oil equivalent (boe) conversion is based on the following: 6,000 standard cubic feet (scf) of natural gas equals one boe. |
(3)(5) | Average production costs include direct and indirect costs relating to the production of hydrocarbons and the foreign exchange effect of translating local currency denominated costs into US dollars, but excludes ad valorem and severance taxes, and the cost to transport our produced hydrocarbons to the point of sale. |
(4) | Other comprises Algeria, Canada, Mexico, Trinidad and Tobago, and the United Kingdom (divested 30 November 2018).
|
(5) | Production for Onshore US assets shown through the closing date of the divestment. Production for Eagle Ford, Permian, and Haynesville assets are shown through 31 October 2018 and production for Fayetteville is shown through 28 September 2018.
|
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6.36.4 Reserves
Resources are the estimated quantities of material that can potentially be commercially recovered from the Group’sBHP’s properties. Reserves are a subset of resources that can be demonstrated to be able to be economically and legally extracted. In order to estimate reserves, assumptions are required about a range of technical and economic factors, including quantities, qualities, production techniques, recovery efficiency, production and transport costs, commodity supply and demand, commodity prices and exchange rates. Estimating the quantity and/or quality of reserves requires the size, shape and depth of ore bodies or oil and gas reservoirs to be determined by analysing geological data, such as drilling samples and geophysical survey interpretations. Economic assumptions used to estimate reserves change fromperiod-to-period period to period as additional technical and operational data is generated. 6.3.16.4.1 Petroleum reserves
Estimates of oil and gas reserves involve some degree of uncertainty, are inherently imprecise, require the application of judgement and are subject to future revision. Accordingly, financial and accounting measures (such as the standardised measure of discounted cash flows, depreciation, depletion and amortisation charges, the assessment of impairments and the assessment of valuation allowances against deferred tax assets) that are based on reserve estimates are also subject to change. How we estimate and report reserves Petroleum’s reserves are estimated as of 30 June each year. Reported reserves include both Conventional Petroleum reserves and Onshore US reserves for FY2017 and FY2018. Footnotes have been included with the accompanying tables to identify the contribution of the discontinued Onshore USDiscontinued operations (Onshore US) for these years.this period. The sale of Petroleum’s interests in Onshore US reserves was completed in FY2019. Remaining reserves at the end of FY2019 and FY2020 reflect the continuing conventionalContinuing operations only. Our proved reserves are estimated and reported on a net interest basis according to SECthe US Securities and Exchange Commission (SEC) regulations and have been determined in accordance with SEC Rule4-10(a) of RegulationS-X. Proved oil and gas reserves Proved oil and gas reserves are those quantities of crude oil, natural gas and natural gas liquids (NGL) that, by analysis of geoscience and engineering data, can be estimated with reasonable certainty to be economically producible from a given date forward from known reservoirs and under existing economic conditions, operating methods, operating contracts and government regulations. Unless evidence indicates that renewal of existing operating contracts is reasonably certain, estimates of economically producible reserves reflect only the period before the contracts expire. The project to extract the hydrocarbons must have commenced or the operator must be reasonably certain that it will commence within a reasonable time. As specified in SEC Rule4-10(a) of RegulationS-X, oil and gas prices are taken as the unweighted average of the corresponding first day of the month prices for the 12 months prior to the ending date of the period covered. Proved reserves were estimated by reference to available well and reservoir information, including but not limited to well logs, well test data, core data, production and pressure data, geologic data, seismic data and in some cases, to similar data from analogous, producing reservoirs. A wide range of engineering and geoscience methods, including performance analysis, numerical simulation, well analogues and geologic studies were used to estimate high confidence proved developed and undeveloped reserves in accordance with SEC regulations. Proved reserve estimates were attributed to future development projects only where there is a significant commitment to project funding and execution and for which applicable government and regulatory approvals have been secured or are reasonably certain to be secured. Furthermore, estimates of proved reserves include only volumes for which access to market is assured with reasonable certainty. All proved reserve estimates are subject to revision (either upward or downward) based on new information, such as from development drilling and production activities or from changes in economic factors, including product prices, contract terms or development plans. Developed oil and gas reserves Proved developed oil and gas reserves are reserves that can be expected to be recovered through: existing wells with existing equipment and operating methods;methods installed extraction equipment and infrastructure operational at the time of the reserve estimate if the extraction is by means not involving a well.well Performance-derived reserve assessments for producing wells were primarily based in the following manner: for our conventional operations, reserves were estimated using rate and pressure decline methods, including material balance, supplemented by reservoir simulation models where appropriate;appropriate for our discontinued Onshore USDiscontinued operations (Onshore US) reported for FY2017 and FY2018, rate-transient analysis and decline curve analysis methods;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.characteristics Proved undeveloped reserves Proved undeveloped oil and gas reserves are reserves that are expected to be recovered from new wells on undrilled acreage where commitment has been made to commence development within five years from first reporting or from existing wells where a relatively major expenditure is required for recompletion. A combination of geologic and engineering data and where appropriate, statistical analysis was used to support the assignment of proved undeveloped reserves when assessing planned drilling locations. Performance data along with log and core data was used to delineate consistent, continuous reservoir characteristics in core areas of the development. Proved undeveloped locations were included in core areas between known data and adjacent to productive wells using performance-based type curves and offset location analogues with similar geologic and reservoir characteristics. Locations where a high degree of certainty could not be demonstrated using the above technologies and techniques were not categorised as proved. 250
Methodology used to estimate reserves Reserve estimates have been estimated with deterministic methodology, with the exception of the North West Shelf gas operation in Australia, where probabilistic methodology has been used to estimate and aggregate reserves for the reservoirs dedicated to the gas project only. The probabilistic based portion of these reserves totals 1612 million barrels of oil equivalent (MMboe) in FY2020, 16 MMboe in FY2019 and 23 MMboe in FY2018 and 39 MMboe in 2017.FY2018. These amounts represent approximately 2 per cent of our total reported proved reserves in FY2020, FY2019 2 per cent in FY2018 and 3 per cent in FY2017, respectively.FY2018. Total boe conversion is based on the following: 6,000 standard cubic feet (scf) of natural gas equals 1 boe. Aggregation of proved reserves beyond the field/project level has been performed by arithmetic summation. Due to portfolio effects, aggregates of proved reserves may be conservative. The custody transfer point(s) or point(s) of sale applicable for each field or project are the reference point for reserves. The reserves replacement ratio is the change in reserves during the year excluding production, divided by the production during the year and stated as a percentage. Governance The Petroleum Reserves Group (PRG) is a dedicated group that provides oversight of the reserves’ assessment and reporting processes. It is independent of the various operation teams directly responsible for development and production activities. The PRG is staffed by individuals averaging more than 30 years’ experience in the oil and gas industry. The manager of the PRG, Abhijit Gadgil, is a full-time employee of BHP and is responsible for overseeing the preparation of the reserve estimates and compiling the information for inclusion in this Annual Report. He has an advanced degree in engineering and more than 35 years of diversified industry experience in reservoir engineering, reserves assessment, field development and technical management. He is a35-year member of the Society of Petroleum Engineers (SPE). He has also served on the Society of Petroleum Engineers Oil and Gas Reserves Committee. Mr Gadgil has the qualifications and experience required to act as a qualified petroleum reserves evaluator under the Australian Securities Exchange (ASX) Listing Rules. The estimates of petroleum reserves are based on and fairly represent information and supporting documentation prepared under the supervision of Mr Gadgil. He has reviewed and agrees with the information included in section 6.3.16.4.1 and has given his prior written consent for its publication. No part of the individual compensation for members of the PRG is dependent on reported reserves. Reserve assessments for all Petroleum operations were conducted by technical staff within the operating organisation. These individuals meet the professional qualifications outlined by the SPE, are trained in the fundamentals of SEC reserves reporting and the reserves processes and are endorsed by the PRG. Each reserve assessment is reviewed annually by the PRG to ensure technical quality, adherence to internally published Petroleum guidelines and compliance with SEC reporting requirements. Once endorsed by the PRG, all reserves receive final endorsement by senior management and the Risk and Audit Committee prior to public reporting. Our Internal Audit and Assurance function provides secondary assurance of the oil and gas reserve reporting processes through auditsthe testing of the effectiveness of key controls that have been implemented as required by the U.S.US Sarbanes-Oxley Act of 2002. For more information on our risk management governance, refer to section 2.13.1.2.10. FY2020 proved reserves Production for FY2020 totalled 109 MMboe in sales with an additional 5 MMboe in non-sales production, which was used primarily for fuel consumed in operations. Total production was approximately 13 MMboe lower than conventional production in FY2019. The decrease was due to a number of factors, including natural declines in mature fields, weather events that necessitated precautionary shut ins and lower demand as a consequence of the COVID-19 pandemic, (refer to section 6.3.2 for more information). Discoveries, extensions and revisions to reserves added a total of 21 MMboe, which replaced 19 per cent of production. As of 30 June 2020, proved reserves totalled 748 MMboe. Reserves have been calculated using the economic interest method and represent net interest volumes after deduction of applicable royalty. Reserves of 69 MMboe are in two production and risk-sharing arrangements where BHP has a revenue interest in production without transfer of ownership of the products. At 30 June 2020, approximately 9 per cent of the proved reserves were attributable to such arrangements. Extensions and discoveries Board approval of the North West Shelf Greater Western Flank Phase 3 project in Australia added 12 MMboe for development of the Goodwyn South and Lambert Deep fields. Board approval of the Ruby development project in Trinidad and Tobago during the September 2019 quarter also added 19 MMboe to proved reserves. The Ruby project is comprised of the Ruby oil field and the Delaware gas field. Revisions In Australia, reserves decreased by 35 MMboe overall due to downward revisions. This reduction was primarily in the Bass Strait due to poor reservoir performance in the Turrum field and lower overall condensate and natural gas liquids (NGL) recovery from the Bass Strait gas fields totalling 40 MMboe. Included in this reduction was a decrease of 4 MMboe due to lower product prices. Improved reservoir performance in the Pyrenees operated field added 5 MMboe partially offsetting the Bass Strait reduction. In the North West Shelf fields, reserves increased 4 MMboe for better performance and other revisions, however, this increase was offset by product price related reductions of 4 MMboe. In the US Gulf of Mexico, strong reservoir performance and technical studies in the Atlantis, Shenzi and Mad Dog fields added a total of 25 MMboe to proved reserves. In the Angostura field in Trinidad and Tobago and the ROD integrated development in Algeria, increases of 1 MMboe were offset by product price related reductions of approximately 1 MMboe. During FY2020, net revisions reduced reserves by a total of 10 MMboe overall. Improved recovery revisions There were no improved recovery revisions during the year. Purchases and sales There were no purchases or sales during the year. FY2019 proved reserves Production for FY2019 totalled 147 MMboe in sales, which was comprised of 121 MMboe for our conventional fields and 26 MMboe that was produced from our US Onshore fields prior to the closure of the divestment agreements. In comparison, our conventional fields produced approximately 1 MMboe more than in FY2018. This increase was due to a number of factors, includingstart-up of the Greater Western Flank Phase B project in the North West Shelf in Australia and higher uptime in several fields, which more than offset natural production declines in more mature fields. Referfields (refer to section 6.2.26.3.2 for more information.information). There was also an additional 5 MMboe innon-sales production, primarily for fuel consumed in our Petroleum operations. The combined sales andnon-sales production totalled 152 MMboe for FY2019. For our conventional fields, additions and revisions to reserves added 57 MMboe, which replaced 45 per cent of the production in FY2019. As of 30 June 2019, our proved reserves totalled 841 MMboe. Reserves have been calculated using the economic interest method and represent net interest volumes after deduction of applicable royalty. Reserves of 64 MMboe are in two production and risk-sharing arrangements where BHP has a revenue interest in production without transfer of ownership of the products. At 30 June 2019, approximately 8 per cent of the proved reserves were attributable to such arrangements. DiscoveriesExtensions and extensionsdiscoveries
Extensions added a total of approximately 2 MMboe to proved reserves, of which 1 MMboe was added for the Atlantis field in the US Gulf of Mexico with the balance being added in the Snapper field in the Bass Strait in Australia. Improved recovery revisions There were no improved recovery revisions during the year. Revisions Revisions for FY2019 added a total of 56 MMboe. The largest addition was in the Atlantis field where 28 MMboe was added for performance and approval of Phase 3 infill drilling. Other revisions, primarily in the Mad Dog field, brought the total revisions for our US Gulf of Mexico assets to 29 MMboe. Additions through revisions in Australia totalled 22 MMboe, with the North West Shelf project adding 11 MMboe. The Goodwyn field was the largest component of this change adding 10 MMboe for strong performance. In the Bass Strait, 11 MMboe was added with the largest changes occurring in the Snapper and Turrum fields, which added 5 MMboe and 2 MMboe, respectively. In otherOther geographic areas, 4 MMboe was added for better performance in the Offshore Angostura project in Trinidad and Tobago, while 1 MMboe was added for improved performance in the ROD Integrated Developmentintegrated development in Algeria. SalesPurchases and sales
The sale of Petroleum’s interests in the US Onshore Permian, Eagle Ford, Haynesville and Fayetteville fields accounted for reported sales of approximately 464 MMboe. There were no purchases during FY2019. FY2018 proved reserves Production for FY2018 totalled 192 MMboe in sales, which iswas a decrease of 16 MMboe from FY2017. ReferFY2017 (refer to section 6.2.26.3.2 for more information.information). There was an additional 5 MMboe innon-sales production, primarily for fuel consumed in our Petroleum operations. The combined sales andnon-sales production totalled 198 MMboe. The natural decline of production in our Onshore US fields and mature fields in other locations was the primary reason for the lower amount produced. 251
As of 30 June 2018, our proved reserves totalled 14001,400 MMboe and reflected a net increase of 62 MMboe and production of 198 MMboe from the 15351,535 MMboe reported at FY2017. This increase was primarily the result of continued strong performance in our Offshore US fields in the Gulf of Mexico and Offshore Trinidad and Tobago, along with better performance and improved liquid product prices for our North American shale operations. These increases were partially offset by reductions in the North West Shelf (Australia) and reduced gas prices received for production from our Onshore US fields. Net additions to reserves resulted in a reserves replacement of 32 per cent overall (Conventional: 25 per cent reserves replacement, Onshore US: 43 per cent reserves replacement). As of 30 June 2018, approximately 65 per cent of our proved reserves were in conventional fields, while about 35 per cent of our proved reserves were in unconventional fields. DiscoveriesExtensions and extensionsdiscoveries
DiscoveriesExtensions and extensionsdiscoveries added 75 MMboe to proved reserves during FY2018. This was comprised of 69 MMboe of extensions related to planned drilling in new locations in our Onshore US operations within the next five years and an additional 4 MMboe in the Mad Dog field and 2 MMboe in the Shenzi field, both of which are in the US Gulf of Mexico.
Improved recovery revisions There were no improved recovery revisions during the year. Revisions Overall, net revisions decreased proved reserves by 7 MMboe during FY2018. In our Australian operations, reductions of 21 MMboe occurred, primarily in the North West Shelf, due to revisions related to updated technical assessments. In the United States, net revisions increased reserves by approximately 4 MMboe. This was a result of additions of 35 MMboe, primarily for strong performance in the Atlantis field in the Offshore US Gulf of Mexico, and better performance in our Onshore US Eagle Ford and Permian assets. These additions were partially offset by reductions of 33 MMboe, mainly in our Onshore US fields as a result of lower planned drilling activity in light of our previously announced plan to exit our shale operations and the effect of lower gas prices. In otherOther areas outside of Australia and the United States, revisions increased reserves by 10 MMboe, primarily for strong performance in the Angostura Phase 3 project in Offshore Trinidad and Tobago. Of the overall decrease in proved reserves of 7 MMboe through revisions, the impact of commodity prices using the required SEC price-basis represented a decrease of 4 MMboe while well performance, interest changes and other revisions resulted in a net decrease of 3 MMboe. Virtually all of the price-related decrease occurred in our Onshore US fields where increases of 26 MMboe occurred in the Eagle Ford and Permian fields as a result of higher liquids prices, but these additions were more than offset by 31 MMboe in reductions in Haynesville and Fayetteville due to lower gas prices. Sales
Purchases and sales The sale of Petroleum’s interests in the US Onshore Eagle Ford field accounted for our reported sales of approximately 5 MMboe. There were no purchases during FY2018. FY2017 reserves
Production for FY2017 totalled 208 MMboe in sales, which was a decrease of 32 MMboe from FY2016. Refer to section 6.2.2 for more information. There was an additional 5 MMboe innon-sales production, primarily for fuel consumed in our Petroleum operations. The combined sales andnon-sales production totalled 213 MMboe. The natural decline of production, primarily in our Onshore US fields and mature fields in other locations was the primary reason for the lower amount produced.
As of 30 June 2017, our proved reserves totalled 1535 MMboe and reflected a net increase of 445 MMboe and annual production of 213 MMboe from the 1303 MMboe reported at FY2016. This increase was primarily the result of higher product prices experienced during the reporting period, reductions in unconventional well operating costs and an increase in planned drilling activity which enabled the addition of new proved undeveloped reserves for our Onshore US fields. As of 30 June 2017, approximately 65 per cent of our proved reserves were in conventional fields, while about 35 per cent of our proved reserves were in unconventional fields.
Discoveries and extensions
Discoveries and extensions added 172 MMboe to proved reserves during FY2017. This was comprised of 105 MMboe of extensions related to the decision to proceed and funding of the Phase 2 development of the Mad Dog field and 3 MMboe related to drilling in the Atlantis field in the US Gulf of Mexico along with 65 MMboe related to planned drilling in new locations in our Onshore US operations within the next five years.
Improved recovery revisions
There were no improved recovery revisions during the year.
Revisions
Overall, net revisions increased proved reserves by 274 MMboe during FY2017. Of this, the impact of commodity prices using the required SEC price-basis represented an increase of 271 MMboe. Well performance, interest changes and other revisions resulted in a net increase of 3 MMboe. Virtually all of the price-related increase occurred in our Onshore US fields.
In our US operations, the overall increase in proved reserves through revisions totalled 258 MMboe. This included price related additions of 269 MMboe, 32 MMboe for additional drilling locations planned in our Onshore US fields and a reduction of 51 MMboe related to performance and other revisions in our Onshore US operations. There were also additions of 8 MMboe for better than expected performance and increased prices in the Shenzi, Atlantis and Mad Dog fields in our Gulf of Mexico operations.
In our Australian operations, continued strong performance of the North West Shelf and Minerva fields added a total of 7 MMboe through revisions. This was partially offset by performance and other related reductions of 3 MMboe in Bass Strait fields. Overall, revisions for Australian fields totalled about 4 MMboe.
Operations outside of Australia and the United States also added approximately 12 MMboe through revisions. In the Angostura area fields in Trinidad and Tobago, 6 MMboe was added for better than expected performance. The ROD Integrated Development in Algeria also added 4 MMboe primarily for better than expected performance. Our fields in the United Kingdom also added 1 MMboe offsetting production during the year.
252
Sales
The sale of acreage in our Eagle Ford and Permian fields accounted for our reported sales of approximately 1 MMboe. There were no purchases during FY2017.
These results are summarised in the following tables, which detail estimated oil, condensate, NGL and natural gas reserves at 30 June 2020, 30 June 2019, 30 June 2018, and 30 June 2017, with a reconciliation of the changes in each year. 253
| Millions of barrels | | Australia | | United
States | | Other (b) | | Total | | | Australia | | United
States | | Other (b) | | Total | | Proved developed and undeveloped oil and condensate reserves (a) | | | | | | | | | | | | | | | | | Reserves at 30 June 2016 | | | 113.2 | | | | 253.7 | (c) | | | 26.5 | | | | 393.4 | (c) | | | | | | | | | | | | | | | | Improved recovery | | | – | | | | – | | | | – | | | | – | | | Revisions of previous estimates | | | (5.9 | ) | | 17.0 | | | 4.4 | | | 15.4 | | | Extensions and discoveries | | | – | | | 123.3 | | | | – | | | 123.3 | | | Purchase/sales of reserves | | | – | | | (0.4 | ) | | | – | | | (0.4 | ) | | Production | | | (18.7 | ) | | (52.9 | ) | | (4.8 | ) | | (76.4 | ) | | | | | | | | | | | | | | | | Total changes | | | (24.6 | ) | | 87.0 | | | (0.5 | ) | | 61.9 | | | | | | | | | | | | | | | | | Reserves at 30 June 2017 | | | 88.6 | | | | 340.7 | (c) | | | 26.0 | | | | 455.3 | (c) | | | 88.6 | | | | 340.7 | (c) | | | 26.0 | | | | 455.3 | (c) | | | | | | | | | | | | | | | | | | | | | | | | | | Improved recovery | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | Revisions of previous estimates | | | (1.6 | ) | | 41.2 | | | 0.6 | | | 40.1 | | | | (1.6 | ) | | 41.2 | | | 0.6 | | | 40.1 | | Extensions and discoveries | | | – | | | 27.6 | | | | – | | | 27.6 | | | | – | | | 27.6 | | | | – | | | 27.6 | | Purchase/sales of reserves | | | – | | | (0.7 | ) | | | – | | | (0.7 | ) | | | – | | | (0.7 | ) | | | – | | | (0.7 | ) | Production | | | (16.5 | ) | | (46.9 | ) | | (4.6 | ) | | (68.1 | ) | | | (16.5 | ) | | (46.9 | ) | | (4.6 | ) | | (68.1 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | Total changes | | | (18.2 | ) | | 21.1 | | | (4.0 | ) | | (1.1 | ) | | | (18.2 | ) | | 21.1 | | | (4.0 | ) | | (1.1 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | Reserves at 30 June 2018 | | | 70.5 | | | | 361.8 | (c) | | | 21.9 | | | | 454.2 | (c) | | | 70.5 | | | | 361.8 | (c) | | | 21.9 | | | | 454.2 | (c) | | | | | | | | | | | | | | | | | | | | | | | | | | Improved recovery | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | Revisions of previous estimates | | | 7.8 | | | 25.9 | | | 1.0 | | | 34.7 | | | | 7.8 | | | 25.9 | | | 1.0 | | | 34.7 | | Extensions and discoveries | | | 0.0 | | | 0.8 | | | | – | | | 0.9 | | | | 0.0 | | | 0.8 | | | | – | | | 0.9 | | Purchase/sales of reserves | | | – | | | (79.7 | ) | | | – | | | (79.7 | ) | | | – | | | (79.7 | ) | | | – | | | (79.7 | ) | Production | | | (14.4 | ) | | (34.5 | ) | | (4.9 | ) | | (53.7 | ) | | | (14.4 | ) | | (34.5 | ) | | (4.9 | ) | | (53.7 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | Total changes | | | (6.5 | ) | | (87.5 | ) | | (3.9 | ) | | (97.9 | ) | | | (6.5 | ) | | (87.5 | ) | | (3.9 | ) | | (97.9 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | Reserves at 30 June 2019 | | | 63.9 | | | | 274.4 | | | | 18.0 | | | | 356.3 | | | | 63.9 | | | | 274.4 | | | | 18.0 | | | | 356.3 | | | | | | | | | | | | | | | | | | | | | | | | | | | Improved recovery | | | | – | | | | – | | | | – | | | | – | | Revisions of previous estimates | | | | 0.9 | | | 21.3 | | | (0.7 | ) | | 21.5 | | Extensions and discoveries | | | | 1.8 | | | | – | | | 5.0 | | | 6.7 | | Purchase/sales of reserves | | | | – | | | | – | | | | – | | | | – | | Production | | | | (14.0 | ) | | (23.3 | ) | | (3.8 | ) | | (41.2 | ) | | | | | | | | | | | | | | | Total changes | | | | (11.3 | ) | | (2.0 | ) | | 0.4 | | | (13.0 | ) | | | | | | | | | | | | | | | Reserves at 30 June 2020 | | | | 52.6 | | | | 272.3 | | | | 18.4 | | | | 343.4 | | | | | | | | | | | | | | | | Developed | | | | | | | | | | | | | | | | | Proved developed oil and condensate reserves | | | | | | | | | | | | | | | | | as of 30 June 2016 | | | 82.2 | | | 187.3 | | | 20.0 | | | 289.5 | | | as of 30 June 2017 | | | 76.2 | | | 162.3 | | | 21.9 | | | 260.5 | | | | 76.2 | | | 162.3 | | | 21.9 | | | 260.5 | | as of 30 June 2018 | | | 60.5 | | | 181.2 | | | 19.2 | | | 260.8 | | | | 60.5 | | | 181.2 | | | 19.2 | | | 260.8 | | Developed reserves as of 30 June 2019 | | | 59.0 | | | | 128.9 | | | | 16.3 | | | | 204.2 | | | as of 30 June 2019 | | | | 59.0 | | | 128.9 | | | 16.3 | | | 204.2 | | Developed reserves as of 30 June 2020 | | | | 46.7 | | | | 131.0 | | | | 11.9 | | | | 189.6 | | | | | | | | | | | | | | | | | | | | | | | | | | | Undeveloped | | | | | | | | | | | | | | | | | Proved undeveloped oil and condensate reserves | | | | | | | | | | | | | | | | | as of 30 June 2016 | | | 31.0 | | | 66.4 | | | 6.5 | | | 103.9 | | | as of 30 June 2017 | | | 12.4 | | | 178.4 | | | 4.0 | | | 194.8 | | | | 12.4 | | | 178.4 | | | 4.0 | | | 194.8 | | as of 30 June 2018 | | | 10.0 | | | 180.7 | | | 2.8 | | | 193.4 | | | | 10.0 | | | 180.7 | | | 2.8 | | | 193.4 | | Undeveloped reserves as of 30 June 2019 | | | 5.0 | | | | 145.4 | | | | 1.7 | | | | 152.1 | | | as of 30 June 2019 | | | | 5.0 | | | 145.4 | | | 1.7 | | | 152.1 | | Undeveloped reserves as of 30 June 2020 | | | | 6.0 | | | | 141.3 | | | | 6.5 | | | | 153.8 | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (a) | Small differences are due to rounding to first decimal place. |
| (b) | ‘Other’ comprises Algeria, Trinidad and Tobago and the United Kingdom.Kingdom (sold in FY2019). |
| (c) | For FY2016, FY2017 and FY2018 amounts include 62.9, 73.0 and 86.1 million barrels respectively attributable to discontinued operations of Onshore US. |
254
| Millions of barrels | | Australia | | United
States | | Other (c) | | Total | | | Australia | | United
States | | Other (c) | | Total | | Proved developed and undeveloped NGL reserves (a) | Proved developed and undeveloped NGL reserves (a) | | | | | | | | | | | | | | | | Reserves at 30 June 2016 | | | 71.3 | | | | 35.6 | (d)(e) | | | – | | | | 107.0 | (d)(e) | | | | | | | | | | | | | | | | Improved recovery | | | – | | | | – | | | | – | | | | – | | | Revisions of previous estimates | | | 1.2 | | | 23.4 | | | 0.1 | | | 24.8 | | | Extensions and discoveries | | | – | | | 13.1 | | | | – | | | 13.1 | | | Purchase/sales of reserves | | | – | | | (0.1 | ) | | | – | | | (0.1 | ) | | Production (b) | | | (7.4 | ) | | (13.2 | ) | | (0.1 | ) | | (20.7 | ) | | | | | | | | | | | | | | | | Total changes | | | (6.2 | ) | | 23.2 | | | | – | | | 17.0 | | | | | | | | | | | | | | | | | Reserves at 30 June 2017 | | | 65.2 | | | | 58.9 | (d)(e) | | | – | | | | 124.0 | (d)(e) | | | 65.2 | | | | 58.9 | (d)(e) | | | – | | | | 124.0 | (d)(e) | | | | | | | | | | | | | | | | | | | | | | | | | | Improved recovery | | | – | | | | – | | | | – | | | | – | | | | – | | | | | | – | | | | – | | Revisions of previous estimates | | | (1.7 | ) | | 12.7 | | | 0.1 | | | 11.0 | | | | (1.7 | ) | | 12.7 | | | 0 .1 | | | 11.0 | | Extensions and discoveries | | | – | | | 13.4 | | | | – | | | 13.4 | | | | – | | | 13.4 | | | | – | | | 13 .4 | | Purchase/sales of reserves | | | – | | | (1.7 | ) | | | – | | | (1.7 | ) | | | – | | | (1.7 | ) | | | – | | | (1.7 | ) | Production (b) | | | (7.0 | ) | | (11.3 | ) | | (0.1 | ) | | (18.3 | ) | | | (7.0 | ) | | (11.3 | ) | | (0.1 | ) | | (18.3 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | Total changes | | | (8.7 | ) | | 13.1 | | | | – | | | 4.4 | | | | (8.7 | ) | | 13.1 | | | | – | | | 4.4 | | | | | | | | | | | | | | | | | | | | | | | | | | | Reserves at 30 June 2018 | | | 56.5 | | | | 72.0 | (d)(e) | | | – | | | | 128.4 | (d)(e) | | | 56.5 | | | | 72.0 | (d)(e) | | | – | | | | 128.4 | (d)(e) | | | | | | | | | | | | | | | | | | | | | | | | | | Improved recovery | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | Revisions of previous estimates | | | 4.9 | | | 0.8 | | | | – | | | 5.7 | | | | 4 .9 | | | 0.8 | | | 0 .0 | | | 5 .7 | | Extensions and discoveries | | | 0.2 | | | 0.1 | | | | – | | | 0.2 | | | | 0 .2 | | | 0.1 | | | | – | | | 0 .2 | | Purchase/sales of reserves | | | – | | | (58.7 | ) | | | – | | | (58.7 | ) | | | – | | | (58.7 | ) | | | – | | | (58.7 | ) | Production (b) | | | (6.3 | ) | | (5.1 | ) | | | – | | | (11.4 | ) | | | (6.3 | ) | | (5.1 | ) | | (0.0 | ) | | (11.4 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | Total changes | | | (1.2 | ) | | (62.9 | ) | | | – | | | (64.1 | ) | | | (1.2 | ) | | (62.9 | ) | | | – | | | (64.1 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | Reserves at 30 June 2019 | | | 55.2 | | | | 9.1 | (d) | | | – | | | | 64.3 | (d) | | | 55.2 | | | | 9.1 | | | | – | | | | 64.3 | | | | | | | | | | | | | | | | | | | | | | | | | | | Improved recovery | | | | – | | | | – | | | | – | | | | – | | Revisions of previous estimates | | | | (17.8 | ) | | 1.2 | | | | – | | | (16.6 | ) | Extensions and discoveries | | | | 0 .3 | | | | – | | | | – | | | 0 .3 | | Purchase/sales of reserves | | | | – | | | | – | | | | – | | | | – | | Production (b) | | | | (6.5 | ) | | (1.2 | ) | | | – | | | (7 .6 | ) | | | | | | | | | | | | | | | Total changes | | | | (23.9 | ) | | | – | | | | – | | | (23.9 | ) | | | | | | | | | | | | | | | Reserves at 30 June 2020 | | | | 31.3 | | | 9.0 | | | | – | | | 40.4 | | | | | | | | | | | | | | | | Developed | | | | | | | | | | | | | | | | | Proved developed NGL reserves | | | | | | | | | | | | | | | | | as of 30 June 2016 | | | 38.0 | | | 30.7 | | | | – | | | 68.7 | | | as of 30 June 2017 | | | 56.6 | | | 31.4 | | | | – | | | 88.0 | | | | 56.6 | | | 31.4 | | | | – | | | 88 .0 | | as of 30 June 2018 | | | 49.8 | | | 37.0 | | | | – | | | 86.8 | | | | 49.8 | | | 37.0 | | | | – | | | 86 .8 | | Developed reserves as of 30 June 2019 | | | 46.5 | | | | 4.3 | | | | – | | | | 50.8 | | | as of 30 June 2019 | | | | 46.5 | | | 4.3 | | | | – | | | 50 .8 | | Developed reserves as of 30 June 2020 | | | | 23.8 | | | | 5.0 | | | | – | | | | 28.8 | | | | | | | | | | | | | | | | | | | | | | | | | | | Undeveloped | | | | | | | | | | | | | | | | | Proved undeveloped NGL reserves | | | | | | | | | | | | | | | | | as of 30 June 2016 | | | 33.3 | | | 4.9 | | | | – | | | 38.2 | | | as of 30 June 2017 | | | 8.6 | | | 27.5 | | | | – | | | 36.1 | | | | 8 .6 | | | 27.5 | | | | – | | | 36 .1 | | as of 30 June 2018 | | | 6.6 | | | 35.0 | | | | – | | | 41.6 | | | | 6 .6 | | | 35.0 | | | | – | | | 41.6 | | Undeveloped reserves as of 30 June 2019 | | | 8.7 | | | | 4.8 | | | | – | | | | 13.5 | | | as of 30 June 2019 | | | | 8 .7 | | | 4.8 | | | | – | | | 13 .5 | | Undeveloped reserves as of 30 June 2020 | | | | 7.6 | | | 4.0 | | | | – | | | 11.6 | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (a) | Small differences are due to rounding to first decimal place. |
| (b) | Production includes volumes consumed by operations. |
| (c) | ‘Other’ comprises Algeria, Trinidad and Tobago and the United Kingdom.Kingdom (sold in FY2019). |
| (d) | For FY2016, FY2017andFY2017 and FY2018 amounts include 0.2, 2.1 and 2.5 million barrels respectively, which are anticipated to be consumed as fuel in the United States. |
| (e) | For FY2016, FY2017 and FY2018 amounts include 28.3, 51.0 and 62.2 million barrels respectively attributable to discontinued operations of Onshore US. |
255
| Billions of cubic feet | | Australia (c) | | United
States | | Other (d) | | Total | | | Australia (c) | | United
States | | Other (d) | | Total | | Proved developed and undeveloped natural gas reserves (a) | | | | | | | | | Proved developed and undeveloped natural gas reserves (a) | | | | | | | | Reserves at 30 June 2016 | | | 3,192.0 | (e) | | | 1,311.1 | (f)(i) | | | 310.8 | (g) | | | 4,813.8 | (h)(i) | | | | | | | | | | | | | | | | Improved recovery | | | – | | | | – | | | | – | | | | – | | | Revisions of previous estimates | | | 49.9 | | | 1,307.4 | | | 43.5 | | | 1,400.7 | | | Extensions and discoveries | | | – | | | 216.5 | | | | – | | | 216.5 | | | Purchase/sales of reserves | | | – | | | (0.7 | ) | | | – | | | (0.7 | ) | | Production (b) | | | (372.1 | ) | | (287.9 | ) | | (38.3 | ) | | (698.4 | ) | | | | | | | | | | | | | | | | Total changes | | | (322.3 | ) | | 1,235.3 | | | 5.1 | | | 918.1 | | | | | | | | | | | | | | | | | Reserves at 30 June 2017 | | | 2,869.7 | (e) | | | 2,546.3 | (f)(i) | | | 315.9 | (g) | | | 5,731.9 | (h)(i) | | | 2,869.7 | (e) | | | 2,546.3 | (f)(i) | | | 315.9 | (g) | | | 5,731.9 | (h)(i) | | | | | | | | | | | | | | | | | | | | | | | | | | Improved recovery | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | Revisions of previous estimates | | | (105.3 | ) | | (302.0 | ) | | 57.0 | | | (350.2 | ) | | | (105.3 | ) | | (302.0 | ) | | 57.0 | | | (350.2 | ) | Extensions and discoveries | | | – | | | 204.1 | | | | – | | | 204.1 | | | | – | | | 204.1 | | | | – | | | 204.1 | | Purchase/sales of reserves | | | – | | | (17.8 | ) | | | – | | | (17.8 | ) | | | – | | | (17.8 | ) | | | – | | | (17.8 | ) | Production (b) | | | (351.9 | ) | | (270.7 | ) | | (44.3 | ) | | (666.9 | ) | | | (351.9 | ) | | (270.7 | ) | | (44.3 | ) | | (666.9 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | Total changes | | | (457.2 | ) | | (386.3 | ) | | 12.7 | | | (830.7 | ) | | | (457.2 | ) | | (386.3 | ) | | 12.7 | | | (830.7 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | Reserves at 30 June 2018 | | | 2,412.5 | (e) | | | 2,160.1 | (f)(i) | | | 328.6 | (g) | | | 4,901.2 | (h)(i) | | | 2,412.5 | (e) | | | 2,160.1 | (f)(i) | | | 328.6 | (g) | | | 4,901.2 | (h)(i) | | | | | | | | | | | | | | | | | | | | | | | | | | Improved recovery | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | Revisions of previous estimates | | | 53.7 | | | 14.0 | | | 24.7 | | | 92.4 | | | | 53.7 | | | 14.0 | | | 24.7 | | | 92.4 | | Extensions and discoveries | | | 2.5 | | | 0.4 | | | | – | | | 3.0 | | | | 2.5 | | | 0.4 | | | | – | | | 3.0 | | Purchase/sales of reserves | | | – | | | (1,952.8 | ) | | | – | | | (1,952.8 | ) | | | – | | | (1,952.8 | ) | | | – | | | (1,952.8 | ) | Production (b) | | | (336.8 | ) | | (109.4 | ) | | (77.8 | ) | | (524.1 | ) | | | (336.8 | ) | | (109.4 | ) | | (77.8 | ) | | (524.1 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | Total changes | | | (280.6 | ) | | (2,047.8 | ) | | (53.1 | ) | | (2,381.5 | ) | | | (280.6 | ) | | (2,047.8 | ) | | (53.1 | ) | | (2,381.5 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | Reserves at 30 June 2019 | | | 2,131.9 | (e) | | | 112.3 | (f)(i) | | | 275.5 | (g) | | | 2,519.7 | (h)(i) | | | 2,131.9 | (e) | | | 112.3 | (f) | | | 275.5 | (g) | | | 2,519.7 | (h) | | | | | | | | | | | | | | | | | | | | | | | | | | Improved recovery | | | | – | | | | – | | | | – | | | | – | | Revisions of previous estimates | | | | (111.7 | ) | | 14.2 | | | 5.6 | | | (92.0 | ) | Extensions and discoveries | | | | 62.4 | | | | – | | | 84.0 | | | 146.5 | | Purchase/sales of reserves | | | | – | | | | – | | | | – | | | | – | | Production (b) | | | | (317.3 | ) | | (10.7 | ) | | (60.7 | ) | | (388.7 | ) | | | | | | | | | | | | | | | Total changes | | | | (366.6 | ) | | 3.5 | | | 28.9 | | | (334.2 | ) | | | | | | | | | | | | | | | Reserves at 30 June 2020 | | | | 1,765.3 | (e) | | | 115.8 | (f) | | | 304.4 | (g) | | | 2,185.5 | (h) | | | | | | | | | | | | | | | Developed | | | | | | | | | | | | | | | | | Proved developed natural gas reserves | | | | | | | | | | | | | | | | | as of 30 June 2016 | | | 2,204.6 | | | 1,268.1 | | | 182.9 | | | 3,655.6 | | | as of 30 June 2017 | | | 2,346.3 | | | 1,556.4 | | | 315.9 | | | 4,218.5 | | | | 2,346.3 | | | 1,556.4 | | | 315.9 | | | 4,218.5 | | as of 30 June 2018 | | | 1,975.9 | | | 1,479.4 | | | 328.6 | | | 3,783.8 | | | | 1,975.9 | | | 1,479.4 | | | 328.6 | | | 3,783.8 | | Developed reserves as of 30 June 2019 | | | 1,856.4 | | | | 65.5 | | | | 275.5 | | | | 2,197.3 | | | as of 30 June 2019 | | | | 1,856.4 | | | 65.5 | | | 275.5 | | | 2,197.3 | | Developed reserves as of 30 June 2020 | | | | 1,453.1 | | | 73.4 | | | 220.4 | | | 1,746.9 | | | | | | | | | | | | | | | | | | | | | | | | | | | Undeveloped | | | | | | | | | | | | | | | | | Proved undeveloped natural gas reserves | | | | | | | | | | | | | | | | | as of 30 June 2016 | | | 987.4 | | | 43.0 | | | 127.8 | | | 1,158.2 | | | as of 30 June 2017 | | | 523.4 | | | 989.9 | | | | – | | | 1,513.3 | | | | 523.4 | | | 989.9 | | | | – | | | 1,513.3 | | as of 30 June 2018 | | | 436.6 | | | 680.7 | | | | – | | | 1,117.3 | | | | 436.6 | | | 680.7 | | | | – | | | 1,117.3 | | Undeveloped reserves as of 30 June 2019 | | | 275.5 | | | | 46.8 | | | | – | | | | 322.3 | | | as of 30 June 2019 | | | | 275.5 | | | 46.8 | | | | – | | | 322.3 | | Undeveloped reserves as of 30 June 2020 | | | | 312.2 | | | 42.4 | | | 84.0 | | | 438.6 | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (a) | Small differences are due to rounding to first decimal place. |
| (b) | Production includes volumes consumed by operations. |
| (c) | Production for Australia includes gas sold as LNG. |
| (d) | ‘Other’ comprises Algeria, Trinidad and Tobago and the United Kingdom.Kingdom (sold in FY2019). |
| (e) | For FY2016, FY2017, FY2018, FY2019 and FY2019FY2020 amounts include 321, 295, 295, 268 and 268246 billion cubic feet respectively, which are anticipated to be consumed as fuel in operations in Australia. |
| (f) | For FY2016, FY2017, FY2018, FY2019 and FY2019FY2020 amounts include 75, 155, 160, 64 and 6465 billion cubic feet respectively, which are anticipated to be consumed as fuel in operations in the United States. |
| (g) | For FY2016, FY2017, FY2018, FY2019 and FY2019FY2020 amounts include 17, 17, 16, 14 and 1417 billion cubic feet respectively, which are anticipated to be consumed as fuel in operations in Other areas. |
| (h) | For FY2016, FY2017, FY2018, FY2019 and 20192020 amounts include 413, 467, 472, 346 and 346327 billion cubic feet respectively, which are anticipated to be consumed as fuel in operations. |
| (i) | For FY2016, FY2017 and FY2018 amounts include 1238, 2444 and 2049 billion cubic feet respectively attributable to discontinued operations of Onshore US. |
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| Millions of barrels of oil equivalent (a) | | Australia | | United
States | | Other (d) | | Total | | | Australia | | United
States | | Other (d) | | Total | | Proved developed and undeveloped oil, condensate, natural gas and NGL reserves (b) | | | | | | | | | | | | | | | | | Reserves at 30 June 2016 | | | 716.5 | (e) | | | 507.9 | (f)(i) | | | 78.2 | (g) | | | 1,302.7 | (h)(i) | | | | | | | | | | | | | | | | Improved recovery | | | – | | | | – | | | | – | | | | – | | | Revisions of previous estimates | | | 3.6 | | | 258.3 | | | 11.7 | | | 273.6 | | | Extensions and discoveries | | | – | | | 172.4 | | | | – | | | 172.4 | | | Purchase/sales of reserves | | | – | | | (0.6 | ) | | | – | | | (0.6 | ) | | Production (c) | | | (88.1 | ) | | (114.0 | ) | | (11.4 | ) | | (213.5 | ) | | | | | | | | | | | | | | | | Total changes | | | (84.5 | ) | | 316.1 | | | 0.4 | | | 232.0 | | | | | | | | | | | | | | | | | Reserves at 30 June 2017 | | | 632.1 | (e) | | | 824.0 | (f)(i) | | | 78.6 | (g) | | | 1,534.6 | (h)(i) | | | 632.1 | (e) | | | 824.0 | (f)(i) | | | 78.6 | (g) | | | 1,534.6 | (h)(i) | | | | | | | | | | | | | | | | | | | | | | | | | | Improved recovery | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | Revisions of previous estimates | | | (20.9 | ) | | 3.5 | | | 10.2 | | | (7.3 | ) | | | (20.9 | ) | | 3.5 | | | 10.2 | | | (7.3 | ) | Extensions and discoveries | | | – | | | 75.0 | | | | – | | | 75.0 | | | | – | | | 75.0 | | | | – | | | 75.0 | | Purchase/sales of reserves | | | – | | | (5.3 | ) | | | – | | | (5.3 | ) | | | – | | | (5.3 | ) | | | – | | | (5.3 | ) | Production (c) | | | (82.2 | ) | | (103.3 | ) | | (12.1 | ) | | (197.6 | ) | | | (82.2 | ) | | (103.3 | ) | | (12.1 | ) | | (197.6 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | Total changes | | | (103.1 | ) | | (30.1 | ) | | (1.9 | ) | | (135.1 | ) | | | (103.1 | ) | | (30.1 | ) | | (1.9 | ) | | (135.1 | ) | | | | | | | | | | | | | | | | | | | | | | | | | �� | | Reserves at 30 June 2018 | | | 529.0 | (e) | | | 793.8 | (f)(i) | | | 76.7 | (g) | | | 1,399.5 | (h)(i) | | | 529.0 | (e) | | | 793.8 | (f)(i) | | | 76.7 | (g) | | | 1,399.5 | (h)(i) | | | | | | | | | | | | | | | | | | | | | | | | | | Improved recovery | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | Revisions of previous estimates | | | 21.6 | | | 29.1 | | | 5.1 | | | 55.8 | | | | 21.6 | | | 29.1 | | | 5.1 | | | 55.8 | | Extensions and discoveries | | | 0.6 | | | 0.9 | | | | – | | | 1.6 | | | | 0.6 | | | 0 .9 | | | | – | | | 1.6 | | Purchase/sales of reserves | | | – | | | (463.9 | ) | | | – | | | (463.9 | ) | | | – | | | (463.9 | ) | | | – | | | (463.9 | ) | Production (c) | | | (76.8 | ) | | (57.8 | ) | | (17.9 | ) | | (152.4 | ) | | | (76.8 | ) | | (57.8 | ) | | (17.9 | ) | | (152.4 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | Total changes | | | (54.5 | ) | | (491.7 | ) | | (12.8 | ) | | (558.9 | ) | | | (54.5 | ) | | (491.7 | ) | | (12.8 | ) | | (558.9 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | Reserves at 30 June 2019 | | | 474.5 | (e) | | | 302.2 | (f)(i) | | | 63.9 | (g) | | | 840.6 | (h)(i) | | | 474.5 | (e) | | | 302.2 | (f) | | | 63.9 | (g) | | | 840.6 | (h) | | | | | | | | | | | | | | | | | | | | | | | | | | Improved recovery | | | | – | | | | – | | | | – | | | | – | | Revisions of previous estimates | | | | (35.4 | ) | | 24.8 | | | 0.2 | | | (10.4 | ) | Extensions and discoveries | | | | 12.5 | | | | – | | | 19.0 | | | 31.5 | | Purchase/sales of reserves | | | | – | | | | – | | | | – | | | | – | | Production (c) | | | | (73.4 | ) | | (26.3 | ) | | (13.9 | ) | | (113.6 | ) | | | | | | | | | | | | | | | Total changes | | | | (96.3 | ) | | (1.5 | ) | | 5.2 | | | (92.6 | ) | | | | | | | | | | | | | | | Reserves at 30 June 2020 | | | | 378.2 | (e) | | | 300.7 | (f) | | | 69.1 | (g) | | | 748.0 | (h) | | | | | | | | | | | | | | | Developed | | | | | | | | | | | | | | | | | Proved developed oil, condensate, natural gas and NGL reserves | | | | | | | | | | | | | | | | | as of 30 June 2016 | | | 487.6 | | | 429.4 | | | 50.5 | | | 967.5 | | | as of 30 June 2017 | | | 523.8 | | | 453.1 | | | 74.6 | | | 1,051.6 | | | | 523.8 | | | 453.1 | | | 74.6 | | | 1,051.6 | | as of 30 June 2018 | | | 439.6 | | | 464.7 | | | 73.9 | | | 978.2 | | | | 439.6 | | | 464.7 | | | 73.9 | | | 978.2 | | Developed reserves as of 30 June 2019 | | | 414.9 | | | | 144.1 | | | | 62.2 | | | | 621.2 | | | as of 30 June 2019 | | | | 414.9 | | | 144.1 | | | 62.2 | | | 621.2 | | Developed reserves as of 30 June 2020 | | | | 312.6 | | | 148.3 | | | 48.6 | | | 509.5 | | | | | | | | | | | | | | | | | | | | | | | | | | | Undeveloped | | | | | | | | | | | | | | | | | Proved undeveloped oil, condensate, natural gas and NGL reserves | | | | | | | | | Proved undeveloped oil, condensate, natural gas and NGL reserves | | | | | | | | as of 30 June 2016 | | | 228.9 | | | 78.5 | | | 27.8 | | | 335.2 | | | as of 30 June 2017 | | | 108.2 | | | 370.8 | | | 4.0 | | | 483.1 | | | | 108.2 | | | 370.8 | | | 4.0 | | | 483.1 | | as of 30 June 2018 | | | 89.4 | | | 329.2 | | | 2.8 | | | 421.3 | | | | 89.4 | | | 329.2 | | | 2.8 | | | 421.3 | | Undeveloped reserves as of 30 June 2019 | | | 59.6 | | | | 158.1 | | | | 1.7 | | | | 219.4 | | | as of 30 June 2019 | | | | 59.6 | | | 158.1 | | | 1.7 | | | 219.4 | | Undeveloped reserves as of 30 June 2020 | | | | 65.6 | | | 152.4 | | | 20.5 | | | 238.5 | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (a) | Barrel oil equivalent conversion based on 6,000 scf of natural gas equals 1 boe. |
| (b) | Small differences are due to rounding to first decimal place. |
| (c) | Production includes volumes consumed by operations. |
| (d) | ‘Other’ comprises Algeria, Trinidad and Tobago and the United Kingdom.Kingdom (sold in FY2019). |
| (e) | For FY2016, FY2017, FY2018, FY2019 and FY2019FY2020 amounts include 53, 49, 49, 45 and 4541 million barrels equivalent respectively, which are anticipated to be consumed as fuel in operations in Australia. |
| (f) | For FY2016, FY2017, FY2018, FY2019 and FY2019FY2020 amounts include 13, 28, 29, 11 and 11 million barrels equivalent respectively, which are anticipated to be consumed as fuel in operations in the United States. |
| (g) | For FY2016, FY2017, FY2018, FY2019 and FY2019FY2020 amounts include 3, 3, 32 and 23 million barrels equivalent respectively, which are anticipated to be consumed as fuel in operations in Other areas. |
| (h) | For FY2016, FY2017, FY2018, FY2019 and FY2019FY2020 amounts include 69, 80, 81, 58 and 5855 million barrels equivalent respectively, which are anticipated to be consumed as fuel in operations. |
| (i) | For FY2016, FY2017 and FY2018 amounts include 298, 531 and 490 million barrels equivalent respectively attributable to discontinued operations of Onshore US. |
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FY2020 proved undeveloped reserves At 30 June 2020, Petroleum had 238 MMboe of proved undeveloped reserves, which corresponds to 32 per cent of the reported proved reserves of 748 MMboe. This represents an increase of 19 MMboe from the 219 MMboe at 30 June 2019. The most significant drivers of this increase were the additions of 19 MMboe for the Ruby development project in Offshore Trinidad and Tobago and 12 MMboe for the Greater Western Flank Phase 3 development project in Australia as extensions and discoveries. Reclassifications from proved undeveloped to proved developed occurred in Australia in the Macedon field (7 MMboe), the Cobia field in Bass Strait (2 MMboe) and in the Offshore US Gulf of Mexico in the Mad Dog Spar A field (3 MMboe). In the Shenzi field, the need to perform a producer redrill resulted in the reclassification of 4 MMboe proved developed into proved undeveloped. In Australia, in the Bass Strait, 18 MMboe was moved into proved undeveloped for the Turrum field as a result of the reservoir performance reassessment while in the Kipper field, a reduction of the gas delivery pressure requirements enabled more gas to be delivered prior to the installation of compression. This resulted in the movement of 16 MMboe from proved undeveloped to proved developed reserves. Bass Strait proved undeveloped fuel was also increased by 3 MMboe as a result of a fuel utilisation study. Performance revisions in the Mad Dog Spar A and the Shenzi fields in the US Gulf of Mexico reduced proved undeveloped by 6 MMboe. Lower commodity prices resulted in a 4 MMboe reduction to proved undeveloped reserves. Over the past three years, the conversion of proved undeveloped reserves to developed status has totalled 98 MMboe, averaging 33 MMboe per year. At 30 June 2020, a total of 30 MMboe proved undeveloped reserves have been reported for five or more years. These reserves are in our currently producing fields and will be developed and brought on stream in a phased manner to best optimise the use of production facilities and to meet sales commitments. During FY2020, Petroleum spent US$1.0 billion on development activities worldwide. Of this amount: US$0.8 billion was spent progressing the conversion of proved undeveloped reserves for conventional projects where developed status was achieved in FY2020 or, will be achieved when development is completed in the future US$0.2 billion represented other development expenditures, including compliance and infrastructure improvements FY2019 proved undeveloped reserves At 30 June 2019, Petroleum had 219 MMboe of proved undeveloped reserves, which corresponds to 26 per cent of the reported proved reserves of 841 MMboe. This represents a reduction in proved undeveloped reserves of 202 MMboe from the 421 MMboe at 30 June 2018. The largest element of this reduction was 185 MMboe, which occurred with the divestment of unconventional Onshore US assets. A reclassification from proved undeveloped to proved developed status of approximately 40 MMboe that occurred in the North West Shelf, Australia, with the completion of development and the start of production from the Greater Western Flank Phase B project, also contributed to the reduction. An additional 1 MMboe was also reclassified from proved undeveloped to proved developed status with the completion of an infill well in the ROD Integrated Developmentintegrated development in Algeria. Partially offsetting these reductions were revisions for technical studies of 10 MMboe for the Kipper field in the Bass Strait, Australia. Additions following the approval of the Atlantis Phase 3 project in the Offshore US Gulf of Mexico added 8 MMboe for development plan changes, 7 MMboe for performance and 1 MMboe as an extension. A performance reduction of 2 MMboe in the Mad Dog field partially offset the Atlantis performance addition. Over the past three years, the conversion of proved undeveloped reserves to developed has totalled 267MMboe, averaging 89 MMboe per year. At 30 June 2019, a total of 69 MMboe proved undeveloped reserves have been reported for five or more years. These reserves are in our currently producing fields and will be developed and brought on stream in a phased manner to best optimise the use of production facilities and to meet sales commitments. During FY2019, Petroleum spent US$1.0 billion on development activities worldwide. Of this amount:
US$0.5 billion was spent progressing the conversion of previously reported proved undeveloped reserves for conventional projects where developed status was achieved in FY2019 or, will be achieved when development is completed in the future;
US$0.3 billion related to development expenditures occurring in divested Onshore US fields; and
US$0.2 billion represented other development expenditures, including compliance and infrastructure improvements.
FY2018 proved undeveloped reserves At 30 June 2018, Petroleum had 421 MMboe of proved undeveloped reserves, which represented 30 per cent ofyear-end 2018 proved reserves of 14001,400 MMboe. Approximately 237 MMboe or 56 per cent of the proved undeveloped reserves resided in our conventional offshore fields in Australia, the Gulf of Mexico and Algeria, while 185 MMboe or 44 per cent resided in our Onshore US fields. The proved undeveloped reserves at 30 June 2018 reflect a net decrease of 62 MMboe from the 483 MMboe reported at 30 June 2017. This decrease was in large part the result of changes to development plans and reduced pace of drilling, which resulted in a reduction of 67 MMboe, the majority of which occurred in our Onshore US fields. This was partially offset by extensions of 50 MMboe for new drilling locations in our Onshore US fields. The conversion of 48 MMboe from proved undeveloped to proved developed through drilling and development activities also contributed to the decrease. The largest component of this conversion occurred in our Onshore US fields where 26 MMboe was moved to proved developed status. An additional 11 MMboe was converted in the North West Shelf Persephone development in Australia, while 10 MMboe was converted in the Atlantis field in the Offshore US Gulf of Mexico. An additional 1 MMboe was also converted as a result of drilling in the ROD Integrated Developmentintegrated development in Algeria. Improved liquids prices but reduced gas prices led to a net reduction due to price in Onshore US proved undeveloped reserves of 4 MMboe. Performance revisions overall totalled 9 MMboe, with an increase of 11 MMboe in Onshore US fields, primarily in Eagle Ford and Permian, and a net reduction of 2 MMboe in Australia. FY2017 proved undeveloped reserves
At 30 June 2017, Petroleum had 483 MMboe of proved undeveloped reserves, which represented 31 per cent ofyear-end 2017 proved reserves of 1535 MMboe. Approximately 263 MMboe or 54 per cent of the proved undeveloped reserves resided in our conventional offshore fields in Australia, the Gulf of Mexico and Trinidad and Tobago, while 220 MMboe or 46 per cent resided in our Onshore US fields. The proved undeveloped reserves at 30 June 2017 reflected a net increase of 148 MMboe from the 335 MMboe reported at 30 June 2016. This increase was primarily the result of adding 202 MMboe of new proved undeveloped reserves for drilling planned over the next five years in our Onshore US fields. In the Gulf of Mexico, 105 MMboe was also added for the Mad Dog Phase 2 project approval and 3 MMboe was added in the Atlantis field as a result of drilling and reservoir assessments. The portion of these additions reported as extensions totalled 161 MMboe with the balance being reported as revisions. The additions from revisions were offset by development activities that converted 177 MMboe of proved undeveloped to proved developed reserves. The largest of these conversions occurred in Australia where 111 MMboe were converted to proved developed in the Kipper, Tuna and Turrum fields in the Bass Strait with thestart-up of the Longford gas conditioning plant. Thestart-up and first gas from the Tidepole field in the Greater Western Flank A project in the North West Shelf also converted 10 MMboe to proved developed. In Trinidad and Tobago, 23 MMboe was converted to proved developed for the completion of Angostura Phase 3 development. In the United States, drilling and completion activities resulted in the conversion of 15 MMboe to proved developed in the Eagle Ford field, 9 MMboe in the Atlantis and 8 MMboe in the Mad Dog (Spar A) fields in the Gulf of Mexico. Price related additions in our Onshore US fields added 163 MMboe due to improved product prices.
The changes in proved undeveloped reserves in FY2020, FY2019 FY2018 and FY2017FY2018 are summarised by change category in the table below. Additional information detailing the effect of price, performance, changes in capital development plans and technical studies are also provided for Revisions.revisions. | | | | | | | | | | | | | Proved Undeveloped Reserves (PUD) Reconciliation (MMboe)(a) | | Year Ended 30 June | | | | | 2020 | | | 2019 | | | 2018 | | PUD Opening Balance | | | 219 | | | | 421 | | | | 483 | | Revisions of Previous Estimates | | | (12 | ) | | | (18 | ) | | | (111 | ) | Reclassifications to developed | | | (8 | ) | | | (42 | ) | | | (48 | ) | Performance, Technical Studies and Other | | | (1 | ) | | | 16 | | | | 9 | | Development Plan Changes | | | (0 | ) | | | 8 | | | | (67 | ) | Price | | | (4 | ) | | | – | | | | (4 | ) | Extensions and Discoveries | | | 31 | | | | 1 | | | | 50 | | Acqusitions/Sales | | | – | | | | (185 | ) | | | – | | | | | | | | | | | | | | | Total Change | | | 19 | | | | (202 | ) | | | (62 | ) | | | | | | | | | | | | | | PUD Closing Balance | | | 238 | | | | 219 | | | | 421 | | | | | | | | | | | | | | |
258
| (a) | Small differences are due to rounding. |
| | | | | | | | | | | | | Proved Undeveloped Reserves (PUD) Reconciliation (MMboe) | | Year Ended 30 June | | | | | 2019 | | | 2018 | | | 2017 | | PUD Opening Balance | | | 421 | | | | 483 | | | | 335 | | Improved Recovery | | | – | | | | – | | | | – | | Revisions of Previous Estimates | | | (18 | ) | | | (111 | ) | | | (13 | ) | Reclassifications to developed | | | (42 | ) | | | (48 | ) | | | (177 | ) | Price | | | – | | | | (4 | ) | | | 163 | | Performance | | | 5 | | | | 9 | | | | – | | Development Plan Changes | | | 8 | | | | (67 | ) | | | 1 | | Technical Studies and Other | | | 10 | | | | (1 | ) | | | – | | Extensions/Discoveries | | | 1 | | | | 50 | | | | 161 | | Acqusitions/Sales | | | (185 | ) | | | – | | | | – | | | | | | | | | | | | | | | Total Change | | | (202 | ) | | | (62 | ) | | | 148 | | | | | | | | | | | | | | | PUD Closing Balance | | | 219 | | | | 421 | | | | 483 | | | | | | | | | | | | | | |
259
6.3.26.4.2 Ore Reserves
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 technical and economic factors, including quantities, qualities, production techniques, recovery efficiency, production and transport costs, commodity supply and demand, commodity prices and exchange rates. Estimating the quantity and/or quality of Ore Reserves requires the size, shape and depth of ore bodies to be determined by analysing geological data such as drilling samples and geophysical survey interpretations. Economic assumptions used to estimate reserves may change from period to period as additional technical, financial and operational data is generated. All of the Ore Reserves presented are reported in 100 per cent terms and represent estimates at 30 June 20192020 (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 document do not exceed the quantities that we estimate and could be extracted economically if future prices for each commodity were equal to the average historical prices for the three years to 31 December 2018,2019, using current operating costs. 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 Report are as follows: | | | | | | | Commodity Price(1) | | | | | | US$ | Copper | | | | | | 2.65/2.83/lb | Gold | | | | | | 1,258/1,306/ozt | Molybdenum | | | | | | 8.87/10.50/lb | Nickel | | | | | | 5.01/5.66/lb | Silver | | | | | | 16.62/16.32/ozt | Zinc | | | | | | 1.20/1.27/lb | Uranium(2) | | | | | | 24.33/24.20/lb | Iron Ore – Fines | | | | | | 59.56/70.06/dmt | Iron Ore – Lump | | | | | | 72.06/84.60/dmt | Metallurgical Hard Coking Coal | | | | | | 179.37/191.00/t | Metallurgical Weak Coking Coal | | | | | | 106.20/108.59/t | Thermal Coal Newcastle(2) | | | | | | 87.34/91.22/t | Thermal Coal Colombia(2) | | | | | | 73.28/71.97/t |
| (1) | Some commodities are traded on a contractual basis for which we are unable to disclose prices due to commercial sensitivity. |
| (2) | The Uranium price reported is sourced from NEUXCO spotIMF World Uranium U3O8.8 Restricted Price Nuexco Exchange Spot.Thermal coal prices reported are sourced from the McCloskey Report FOB by region, Newcastle and Colombia 6,000 kcal/t Net As Received. These are comparable to realised prices used to test for impairment. |
The reported Ore Reserves may differ in some respects from the Ore Reserves we report in 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 2012 (the JORC Code), which provides guidance on the use of reasonable investment assumptions in calculating Ore Reserves estimates. 260
Copper Ore Reserves in accordance with Industry Guide 7 | As at 30 June 2019 | | As at 30 June 2018 | | | As at 30 June 2020 | | As at 30 June 2020 | | As at 30 June 2019 | | Commodity Deposit
(1)(2)(3)(4) | | Ore Type | | Proven Reserves | | Probable Reserves | | Total Reserves | | | Reserve
Life
(years) | | BHP
Interest
% | | | Total Reserves | | | Reserve
Life
(years) | | | Ore Type | | Proven Reserves | | Probable Reserves | | Total Reserves | | | Reserve
Life
(years) | | BHP
Interest
% | | | Total Reserves | | | Reserve
Life
(years) | | | | Mt | | %TCu | | %SCu | | ppmMo | | | | Mt | | %TCu | | %SCu | | ppmMo | | | | Mt | | %TCu | | %SCu | | ppmMo | | | | Mt | | %TCu | | %SCu | | ppmMo | | | | | Mt | | %TCu | | %SCu | | ppmMo | | | | Mt | | %TCu | | %SCu | | ppmMo | | | | Mt | | %TCu | | %SCu | | ppmMo | | | | Mt | | %TCu | | %SCu | | ppmMo | | | | | Copper | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Escondida(5) | | Oxide | | 104 | | | 0.68 | | | | – | | | | – | | | | | 124 | | | 0.54 | | | | – | | | | – | | | | | 228 | | | 0.60 | | | | – | | | | – | | | | | 58 | | | 57.5 | | | 250 | | | 0.62 | | | | – | | | | – | | | | | 58 | | | Oxide | | 77 | | | 0.64 | | | | – | | | | – | | | | | 129 | | | 0.55 | | | | – | | | | – | | | | | 206 | | | 0.58 | | | | – | | | | – | | | | | 58 | | | 57.5 | | | 228 | | | 0.60 | | | | – | | | | – | | | | | 58 | | | | Sulphide | | 3,570 | | | 0.70 | | | | – | | | | – | | | | | 1,850 | | | 0.56 | | | | – | | | | – | | | | | 5,420 | | | 0.65 | | | | – | | | | – | | | | | | | | | 5,610 | | | 0.66 | | | | – | | | | – | | | | | | | Sulphide | | 3,420 | | | 0.70 | | | | – | | | | – | | | | | 1,790 | | | 0.57 | | | | – | | | | – | | | | | 5,210 | | | 0.66 | | | | – | | | | – | | | | | | | | | 5,420 | | | 0.65 | | | | – | | | | – | | | | | | | | Sulphide
Leach | | 1,330 | | | 0.42 | | | | – | | | | – | | | | | 335 | | | 0.41 | | | | – | | | | – | | | | | 1,670 | | | 0.42 | | | | – | | | | – | | | | | | | | | 1,740 | | | 0.41 | | | | – | | | | – | | | | | | | Sulphide
Leach | | 1,330 | | | 0.42 | | | | – | | | | – | | | | | 326 | | | 0.41 | | | | – | | | | – | | | | | 1,660 | | | 0.42 | | | | – | | | | – | | | | | | | | | 1,670 | | | 0.42 | | | | – | | | | – | | | | | | Cerro Colorado(6) | | Oxide | | 33 | | | 0.59 | | | 0.43 | | | | – | | | | | 7.6 | | | 0.54 | | | 0.39 | | | | – | | | | | 41 | | | 0.58 | | | 0.42 | | | | – | | | | | 4.3 | | | 100 | | | 57 | | | 0.60 | | | 0.43 | | | | – | | | | | 5.3 | | | Oxide | | 29 | | | 0.58 | | | 0.42 | | | | – | | | | | 6.0 | | | 0.58 | | | 0.42 | | | | – | | | | | 35 | | | 0.58 | | | 0.42 | | | | – | | | | | 3.4 | | | 100 | | | 41 | | | 0.58 | | | 0.42 | | | | – | | | | | 4.3 | | | | Supergene
Sulphide | | 19 | | | 0.62 | | | 0.15 | | | | – | | | | | 5.2 | | | 0.53 | | | 0.13 | | | | – | | | | | 24 | | | 0.61 | | | 0.15 | | | | – | | | | | | | | | 36 | | | 0.61 | | | 0.15 | | | | – | | | | | | | Supergene
Sulphide | | 14 | | | 0.57 | | | 0.17 | | | | – | | | | | 4.0 | | | 0.63 | | | 0.15 | | | | – | | | | | 18 | | | 0.58 | | | 0.17 | | | | – | | | | | | | | | 24 | | | 0.61 | | | 0.15 | | | | – | | | | | | | | Transitional
Sulphide | | 13 | | | 0.50 | | | 0.10 | | | | – | | | | | 3.8 | | | 0.49 | | | 0.10 | | | | – | | | | | 17 | | | 0.49 | | | 0.10 | | | | – | | | | | | | | | 17 | | | 0.53 | | | 0.10 | | | | – | | | | | | | Transitional
Sulphide | | 12 | | | 0.51 | | | 0.10 | | | | – | | | | | 1.6 | | | 0.51 | | | 0.09 | | | | – | | | | | 14 | | | 0.51 | | | 0.10 | | | | – | | | | | | | | | 17 | | | 0.49 | | | 0.10 | | | | – | | | | | | Spence (7) | | Oxide | | 1.3 | | | 0.96 | | | 0.77 | | | | – | | | | | 20 | | | 0.61 | | | 0.39 | | | | – | | | | | 21 | | | 0.63 | | | 0.42 | | | | – | | | | | 46 | | | 100 | | | 29 | | | 0.63 | | | 0.42 | | | | – | | | | | 32 | | | Oxide | | 31 | | | 0.61 | | | 0.42 | | | | – | | | | | 0.11 | | | 0.95 | | | 0.63 | | | | – | | | | | 31 | | | 0.61 | | | 0.42 | | | | – | | | | | 36 | | | 100 | | | 21 | | | 0.63 | | | 0.42 | | | | – | | | | | 46 | | | | Oxide Low
Solubility | | 13 | | | 0.69 | | | 0.29 | | | | – | | | | | 0.75 | | | 0.52 | | | 0.23 | | | | – | | | | | 14 | | | 0.68 | | | 0.28 | | | | – | | | | | | | | | 18 | | | 0.72 | | | 0.30 | | | | – | | | | | | | Oxide Low
Solubility | | 9.9 | | | 0.68 | | | 0.29 | | | | – | | | | | 0.59 | | | 0.56 | | | 0.31 | | | | – | | | | | 10 | | | 0.67 | | | 0.30 | | | | – | | | | | | | | | 14 | | | 0.68 | | | 0.28 | | | | – | | | | | | | | Supergene
Sulphide | | 80 | | | 0.71 | | | 0.10 | | | | – | | | | | 51 | | | 0.53 | | | 0.18 | | | | – | | | | | 131 | | | 0.64 | | | 0.13 | | | | – | | | | | | | | | 121 | | | 0.73 | | | 0.10 | | | | – | | | | | | | Supergene
Sulphide | | 100 | | | 0.62 | | | 0.10 | | | | – | | | | | 6.6 | | | 0.43 | | | 0.08 | | | | – | | | | | 107 | | | 0.61 | | | 0.10 | | | | – | | | | | | | | | 131 | | | 0.64 | | | 0.13 | | | | – | | | | | | | | Transitional
Sulphide | | 19 | | | 0.67 | | | 0.06 | | | 100 | | | | | 0.53 | | | 0.55 | | | 0.04 | | | 60 | | | | | 20 | | | 0.67 | | | 0.06 | | | 100 | | | | | | | | | 20 | | | 0.68 | | | 0.06 | | | 100 | | | | | | | Transitional
Sulphide | | 22 | | | 0.67 | | | 0.05 | | | 100 | | | | | 0.51 | | | 0.53 | | | 0.04 | | | 60 | | | | | 23 | | | 0.66 | | | 0.05 | | | 95 | | | | | | | | | 20 | | | 0.67 | | | 0.06 | | | 100 | | | | | | | | Hypogene
Sulphide | | 576 | | | 0.45 | | | 0.02 | | | 190 | | | | | 733 | | | 0.45 | | | 0.02 | | | 130 | | | | | 1,310 | | | 0.45 | | | 0.02 | | | 160 | | | | | | | | | 954 | | | 0.51 | | | 0.02 | | | 180 | | | | | | | Hypogene
Sulphide | | 615 | | | 0.46 | | | 0.02 | | | 180 | | | | | 694 | | | 0.46 | | | 0.02 | | | 130 | | | | | 1,310 | | | 0.46 | | | 0.02 | | | 150 | | | | | | | | | 1,310 | | | 0.45 | | | 0.02 | | | 160 | | | | | | | | ROM | | | – | | | | – | | | | – | | | | – | | | | | 0.74 | | | 0.65 | | | 0.06 | | | | – | | | | | 0.74 | | | 0.65 | | | 0.06 | | | | – | | | | | | | | | 3.4 | | | 0.53 | | | 0.12 | | | | – | | | | | | | ROM | | | – | | | | – | | | | – | | | | – | | | | | | – | | | | – | | | | – | | | | – | | | | | | – | | | | – | | | | – | | | | – | | | | | | | | | 0.74 | | | 0.65 | | | 0.06 | | | | – | | | | | | | | | | 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 | | | | | 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 Gold | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Olympic Dam (8) | | UG
Sulphide | | 203 | | | 1.92 | | | 0.60 | | | 0.74 | | | 5 | | | 334 | | | 1.84 | | | 0.55 | | | 0.69 | | | 4 | | | 537 | | | 1.87 | | | 0.57 | | | 0.71 | | | 4 | | | 54 | | | 100 | | | 500 | | | 1.98 | | | 0.58 | | | 0.72 | | | 4 | | | 51 | | | UG
Sulphide | | 210 | | | 1.92 | | | 0.58 | | | 0.74 | | | 4 | | | 238 | | | 1.85 | | | 0.56 | | | 0.65 | | | 4 | | | 448 | | | 1.88 | | | 0.57 | | | 0.69 | | | 4 | | | 43 | | | 100 | | | 537 | | | 1.87 | | | 0.57 | | | 0.71 | | | 4 | | | 54 | | | | Low-grade | | | – | | | | – | | | | – | | | | – | | | | – | | | 24 | | | 0.99 | | | 0.33 | | | 0.40 | | | 2 | | | 24 | | | 0.99 | | | 0.33 | | | 0.40 | | | 2 | | | | | | | 35 | | | 1.15 | | | 0.37 | | | 0.51 | | | 3 | | | | | Low-grade | | | – | | | | – | | | | – | | | | – | | | | – | | | 25 | | | 0.86 | | | 0.29 | | | 0.34 | | | 2 | | | 25 | | | 0.86 | | | 0.29 | | | 0.34 | | | 2 | | | | | | | 24 | | | 0.99 | | | 0.33 | | | 0.40 | | | 2 | | | | | | | | | | Mt | | | | %Cu | | | | %Zn | | | | g/tAg | | | | ppmMo | | | | Mt | | | | %Cu | | | | %Zn | | | | g/tAg | | | | ppmMo | | | | Mt | | | | %Cu | | | | %Zn | | | | g/tAg | | | | ppmMo | | | | | | | | Mt | | | | %Cu | | | | %Zn | | | | g/tAg | | | | ppmMo | | | | | | | | 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(9) | | Sulphide
Cu only | | 142 | | | 0.98 | | | 0.15 | | | 7 | | | 380 | | | 124 | | | 0.96 | | | 0.18 | | | 8 | | | 350 | | | 266 | | | 0.97 | | | 0.16 | | | 7 | | | 370 | | | 8.8 | | | 33.75 | | | 298 | | | 0.99 | | | 0.17 | | | 8 | | | 350 | | | 9.7 | | | Sulphide
Cu only | | 137 | | | 0.92 | | | 0.12 | | | 6 | | | 350 | | | 108 | | | 0.97 | | | 0.15 | | | 8 | | | 330 | | | 245 | | | 0.94 | | | 0.13 | | | 7 | | | 340 | | | 7.7 | | | 33.75 | | | 266 | | | 0.97 | | | 0.16 | | | 7 | | | 370 | | | 8.8 | | | | Sulphide
Cu-Zn | | 79 | | | 0.84 | | | 1.91 | | | 17 | | | 70 | | | 123 | | | 0.80 | | | 2.01 | | | 13 | | | 80 | | | 202 | | | 0.82 | | | 1.97 | | | 15 | | | 70 | | | | | | | 216 | | | 0.83 | | | 2.05 | | | 14 | | | 80 | | | | | Sulphide
Cu-Zn | | 69 | | | 0.89 | | | 2.09 | | | 13 | | | 80 | | | 94 | | | 0.82 | | | 2.18 | | | 13 | | | 80 | | | 163 | | | 0.85 | | | 2.14 | | | 13 | | | 80 | | | | | | | 202 | | | 0.82 | | | 1.97 | | | 15 | | | 70 | | | |
| | | | | | Deposit | | Ore Type | | Ore Reserves | | Escondida | | Oxide | | ³ 0.20%SCu | | | Sulphide | | ³ 0.30%TCu and greater than variable cut-off (V_COG) of concentrator. Sulphide ore is processed in the concentrator plants as a result of optimised mine plan with consideration of technical and economical parameters in order to maximise Net Present Value. | | | | Sulphide Leach | | ³ 0.30%0.25%TCu and lower than V_COG. Sulphide Leach ore is processed by dump leaching as an alternative to the concentrator process. | Cerro Colorado | | Oxide, Supergene Sulphide & Transitional Sulphide | | ³ 0.30%TCu | | Spence | | Oxide & Oxide Low Solubility | | ³ 0.30%TCu | | | Supergene Sulphide, Transitional Sulphide & Hypogene Sulphide | | ³ 0.20%TCu |
261
| | | | | | | ROM | | ³ 0.10%TCu | Olympic Dam | | UG Sulphide | | Variable between 1.20%1.10%Cu and 1.40%Cu | | | | Low-grade | | ³ 0.60%0.65%Cu | Antamina | | Sulphide Cu only | | Net value per concentrator hour incorporating all material revenue and cost factors and includes metallurgical recovery (see footnote 4 for averages). Mineralisation at the US$6,000/hr limit is equivalent to 0.16%0.17%Cu, 2.0g/2.2g/tAg, 141ppmMo139ppmMo with 6,700t/hr mill throughput. | | | Sulphide Cu-Zn | | Net value per concentrator hour incorporating all material revenue and cost factors and includes metallurgical recovery (see footnote 4 for averages). Mineralisation at the US$6,000/hr limit is equivalent to 0.08%Cu, 0.71%0.72%Zn, 11.7g/8.7g/tAg with 6,500t/hr mill throughput. |
Antamina – All metals used in net value calculations are assumed to be recovered into concentrate and sold. | (2) | Approximate drill hole spacings used to classify the reserves were: |
| | | | | | Deposit | | Proven Reserves | | Probable Reserves | Escondida | | Oxide: 30m × 30m
Sulphide: 50m × 50m
Sulphide Leach: 60m × 60m | | Oxide: 45m × 45m
Sulphide: 90m × 90m
Sulphide Leach: 115m × 115m | Cerro Colorado | | 40m to 50m | | 100m | Spence | | Oxide & Oxide Low Solubility: maximum 50m × 50m
Supergene Sulphide, Transitional Sulphide & Hypogene Sulphide: maximum 70m × 70m | | 100m × 100m for all Ore Types | | Olympic Dam | | 20m to 35m | | 35m to 70m | | Antamina | | 25m to 40m45m | | 40m to 60m80m |
| (3) | Ore delivered to process plant. |
| (4) | Metallurgical recoveries for the operations were: |
| | | Deposit | | Metallurgical Recovery | Escondida | | Oxide: 62%59%
Sulphide: 85%83%
Sulphide Leach: 38%42% | Cerro Colorado | | Oxide: 75%
Supergene Sulphide: 80%
Transitional Sulphide: 65%
| Spence | | Oxide & Oxide Low Solubility: 80%
Supergene Sulphide: 82%
Transitional Sulphide & Hypogene Sulphide: 84%
ROM: 30%Cu 86%, Mo 56% | Olympic Dam | | Cu 94%, U3O8 68%, Au 70%, Ag 63% | Antamina | | Sulphide Cu only: Cu 93%, Zn 0%, Ag 80%, Mo 65%
Sulphide Cu-Zn: Cu 78%, Zn 81%80%, Ag 63%, Mo 0% |
| (5) | Escondida – The decrease in the Oxide ore type was mainly due to depletion. Incorporated within the Reserve Life calculation were Oxide and Sulphide Leach ore types, which have a Reserve Life ofcontribute 10 years and 1624 years respectively. |
| (6) | Cerro Colorado – The decrease in the Oxide and Supergene Sulphide ore typesOre Reserves was mainly due to depletion and reductionwith Reserve Life constrained to mining permit expiry in annual nominated production rate from 20.7Mtpa to 19.2Mtpa partially offset by improved commodity prices. Metallurgical recoveries are2023. Transitional Sulphide ore type recovery based on metallurgical testwork. |
| (7) | Spence – The increase in the HypogeneOxide and Transitional Sulphide ore type and Reserve Lifetypes was mainly due to improved commodity prices.an update in the resource estimate supported by additional drilling. The decrease in the Oxide, Oxide Low Solubility, Supergene Sulphide and ROM ore types was mainly due to depletion. Reduction in Reserve Life from 46 years to 36 years was mainly due to increased overall processing rate assumptions. Transitional Sulphide and Hypogene Sulphide ore type recoveries are based on metallurgical testwork. |
| (8) | Olympic Dam – The increasedecrease in the UG Sulphide ore type and reduction in Reserve Life was due to improvedupdated commodity prices and mine stope design changes partially offset by an update in the resource classificationestimate supported by additional drilling. The decrease in the Low-grade ore type was due to a revised methodology used to define Low-grade ore in the mine design. |
| (9) | Antamina – The decrease in the Ore Reserves and reduction in Reserve Life was mainly due to depletion.depletion partially offset by an update in the resource estimate and changes to reserves classification. |
262
Iron Ore(1) Ore Reserves in accordance with Industry Guide 7 | As at 30 June 2019 | | As at 30 June 2018 | | | As at 30 June 2020 | | As at 30 June 2020 | | As at 30 June 2019 | | | | | Proven Reserves | | Probable Reserves | | Total Reserves | | | Reserve
Life
(years) | | BHP
Interest
% | | | Total Reserves | | | Reserve
Life
(years) | | | Proven Reserves | | Probable Reserves | | Total Reserves | | | Reserve
Life
(years) | | BHP
Interest
% | | | Total Ore Reserves | | | Reserve
Life
(years) | | Commodity Deposit | | Ore
Type | | Mt | | %Fe | | %P | | %SiO2 | | %Al2O3 | | %LOI | | Mt | | %Fe | | %P | | %SiO2 | | %Al2O3 | | %LOI | | Mt | | %Fe | | %P | | %SiO2 | | %Al2O3 | | %LOI | | Mt | | %Fe | | %P | | %SiO2 | | %Al2O3 | | %LOI | | | Ore
Type | | Mt | | %Fe | | %P | | %SiO2 | | %Al2O3 | | %LOI | | Mt | | %Fe | | %P | | %SiO2 | | %Al2O3 | | %LOI | | Mt | | %Fe | | %P | | %SiO2 | | %Al2O3 | | %LOI | | Mt | | %Fe | | %P | | %SiO2 | | %Al2O3 | | %LOI | | Australia | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | WAIO (2)(3)(4)(5)(6)(7)(8)(9) | | BKM | | 1,010 | | | 62.9 | | | 0.12 | | | 3.0 | | | 2.1 | | | 4.3 | | | 1,700 | | | 62.0 | | | 0.13 | | | 3.6 | | | 2.3 | | | 4.8 | | | 2,710 | | | 62.3 | | | 0.13 | | | 3.4 | | | 2.2 | | | 4.6 | | | 17 | | | 89 | | | 2,600 | | | 62.4 | | | 0.12 | | | 3.4 | | | 2.2 | | | 4.5 | | | 16 | | | BKM | | 910 | | | 63.1 | | | 0.12 | | | 2.9 | | | 2.1 | | | 4.3 | | | 1,570 | | | 62.2 | | | 0.13 | | | 3.5 | | | 2.2 | | | 4.8 | | | 2,480 | | | 62.5 | | | 0.13 | | | 3.3 | | | 2.2 | | | 4.6 | | | 15 | | | 88 | | | 2,710 | | | 62.3 | | | 0.13 | | | 3.4 | | | 2.2 | | | 4.6 | | | 17 | | | | BKM Bene | | 20 | | | 59.6 | | | 0.13 | | | 7.2 | | | 3.4 | | | 2.1 | | | 20 | | | 59.5 | | | 0.14 | | | 7.4 | | | 3.2 | | | 2.0 | | | 40 | | | 59.5 | | | 0.13 | | | 7.3 | | | 3.3 | | | 2.1 | | | | | | | 50 | | | 57.8 | | | 0.11 | | | 10.1 | | | 3.3 | | | 2.1 | | | | | BKM Bene | | 10 | | | 59.8 | | | 0.13 | | | 6.9 | | | 3.5 | | | 2.1 | | | 10 | | | 59.6 | | | 0.13 | | | 7.4 | | | 3.1 | | | 2.0 | | | 30 | | | 59.7 | | | 0.13 | | | 7.1 | | | 3.3 | | | 2.0 | | | | | | | 40 | | | 59.5 | | | 0.13 | | | 7.3 | | | 3.3 | | | 2.1 | | | | | | CID | | 240 | | | 56.6 | | | 0.05 | | | 6.3 | | | 1.6 | | | 10.6 | | | 60 | | | 57.0 | | | 0.04 | | | 6.4 | | | 1.4 | | | 10.3 | | | 300 | | | 56.7 | | | 0.04 | | | 6.4 | | | 1.5 | | | 10.6 | | | | | | | 400 | | | 56.7 | | | 0.04 | | | 6.1 | | | 1.6 | | | 10.7 | | | | | CID | | 120 | | | 57.0 | | | 0.05 | | | 5.7 | | | 1.6 | | | 10.7 | | | 30 | | | 57.9 | | | 0.05 | | | 5.1 | | | 1.5 | | | 10.3 | | | 150 | | | 57.2 | | | 0.05 | | | 5.5 | | | 1.5 | | | 10.6 | | | | | | | 300 | | | 56.7 | | | 0.04 | | | 6.4 | | | 1.5 | | | 10.6 | | | | | | MM | | 430 | | | 62.4 | | | 0.06 | | | 2.7 | | | 1.5 | | | 5.9 | | | 1,340 | | | 61.6 | | | 0.06 | | | 3.2 | | | 1.7 | | | 6.5 | | | 1,760 | | | 61.8 | | | 0.06 | | | 3.1 | | | 1.7 | | | 6.3 | | | | | | | 1,680 | | | 61.7 | | | 0.06 | | | 3.2 | | | 1.7 | | | 6.3 | | | | | MM | | 560 | | | 62.4 | | | 0.06 | | | 2.7 | | | 1.5 | | | 6.0 | | | 1,240 | | | 61.4 | | | 0.06 | | | 3.4 | | | 1.8 | | | 6.5 | | | 1,800 | | | 61.7 | | | 0.06 | | | 3.1 | | | 1.7 | | | 6.3 | | | | | | | 1,760 | | | 61.8 | | | 0.06 | | | 3.1 | | | 1.7 | | | 6.3 | | | |
| (1) | Samarco – Following the failure of the Fundão tailings dam in November 2015 and the continued shutdown of its operations, Samarco is reviewing the operation’s reserves. Under these circumstances, BHP is currently not in a position to report reserves for Samarco as of 30 June 2019.2020. However, developments in the future may provide additional information and operating approvals for which a different conclusion might be reached. |
| (2) | Approximate drill hole spacings used to classify the reserves were: |
| | | | | Deposit | | Proven Reserves | | Probable Reserves | WAIO | | 50m x 50m | | 150m x 50m |
| (3) | WAIO recovery was 100%, except for BKM Bene where Whaleback beneficiation plant recovery was 91%87% (tonnage basis). |
| (4) | The Ore Reserves qualities listed refer to in situ mass percentage on a dry weight basis. Wet tonnes are reported for WAIO deposits based on the following moisture contents: BKM – Brockman 3%, BKM Bene – Brockman Beneficiation 3%, CID – Channel Iron Deposits 8%, MM – Marra Mamba 4%. Iron ore is marketed for WAIO as Lump (direct blast furnace feed) and Fines (sinter plant feed). |
| (5) | Cut-off grades used to estimate Ore Reserves range from 50–62%Fe for all material types. Ore delivered to process facility. |
| (6) | Ore Reserves are reported on a Pilbara basis by ore type to align with our production of the blended lump products which comprises BKM, BKM Bene and MM ore types and blended fines products including CID. This also reflects our single logistics chain and associated management system. |
| (7) | BHP interest is reported as Pilbara Ore Reserve tonnes weighted average across all joint ventures which can vary from year to year. BHP ownership varies between 85% and 100%. |
| (8) | Ore Reserves are all located on State Agreement mining leases that guarantee the right to mine. Across WAIO, State Government approvals (including environmental and heritage clearances) are required before commencing mining operations in a particular area. Included in the Ore Reserves are select areas where one or more approvals remain outstanding, but where, based on the technical investigations carried out as part of the mine planning process and company knowledge and experience of the approvals process, it is expected that such approvals will be obtained as part of the normal course of business and within the time frame required by the current mine schedule. |
| (9) | The decreasesdecrease in BKM and BKM Bene ore typetypes was mainly due to the application of a higher cut-off grade anddepletion. The decrease in CID ore type was due to depletion.depletion and changes to the mine plan. The increasereduction in the MM ore typeReserve Life was mainly due to updated reserves estimates including satellite deposits additional to existing operations.depletion. |
263
Metallurgical Coal Coal Reserves in accordance with Industry Guide 7 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | As at 30 June 2019 | | | As at 30 June 2018 | | | | | | | | | | | Proven
Reserve | | | Probable
Reserve | | | Total
Reserve | | | Proven Marketable
Reserves | | | Probable Marketable
Reserves | | | Total Marketable
Reserves | | | Reserve
Life
(years) | | | BHP
Interest
% | | | Total Marketable
Reserves | | | Reserve
Life
(years) | | Commodity
Deposit
(1)(2)(3)(4)(5) | | Mining
Method | | | Coal Type | | | Mt | | | Mt | | | Mt | | | Mt | | | %Ash | | | %VM | | | %S | | | Mt | | | %Ash | | | %VM | | | %S | | | Mt | | | %Ash | | | %VM | | | %S | | | Mt | | | %Ash | | | %VM | | | %S | | Metallurgical Coal Operations | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Queensland Coal | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | CQCA JV | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Goonyella Riverside(6) | | | OC | | | | Met | | | | 530 | | | | 19 | | | | 549 | | | | 418 | | | | 9.1 | | | | 25.2 | | | | 0.53 | | | | 14 | | | | 10.9 | | | | 28.4 | | | | 0.56 | | | | 432 | | | | 9.1 | | | | 25.3 | | | | 0.53 | | | | 38 | | | | 50 | | | | 444 | | | | 9.2 | | | | 22.8 | | | | 0.53 | | | | 40 | | Broadmeadow(6)(7) | | | UG | | | | Met | | | | 67 | | | | 114 | | | | 181 | | | | 48 | | | | 8.1 | | | | 23.7 | | | | 0.54 | | | | 72 | | | | 9.9 | | | | 23.5 | | | | 0.55 | | | | 120 | | | | 9.2 | | | | 23.6 | | | | 0.54 | | | | | | | | | | | | 128 | | | | 9.1 | | | | 23.6 | | | | 0.54 | | | | | | Peak Downs | | | OC | | | | Met/Th | | | | 379 | | | | 339 | | | | 718 | | | | 235 | | | | 10.6 | | | | 22.3 | | | | 0.60 | | | | 208 | | | | 10.6 | | | | 22.7 | | | | 0.65 | | | | 443 | | | | 10.6 | | | | 22.5 | | | | 0.62 | | | | 26 | | | | 50 | | | | 456 | | | | 10.6 | | | | 22.5 | | | | 0.62 | | | | 26 | | Caval Ridge | | | OC | | | | Met | | | | 252 | | | | 95 | | | | 347 | | | | 151 | | | | 11.0 | | | | 22.4 | | | | 0.57 | | | | 52 | | | | 11.0 | | | | 22.0 | | | | 0.58 | | | | 203 | | | | 11.0 | | | | 22.3 | | | | 0.58 | | | | 28 | | | | 50 | | | | 211 | | | | 11.0 | | | | 22.3 | | | | 0.58 | | | | 29 | | Saraji(8) | | | OC | | | | Met | | | | 442 | | | | 60 | | | | 502 | | | | 264 | | | | 10.1 | | | | 17.7 | | | | 0.64 | | | | 29 | | | | 11.2 | | | | 18.8 | | | | 0.79 | | | | 293 | | | | 10.2 | | | | 17.8 | | | | 0.65 | | | | 31 | | | | 50 | | | | 270 | | | | 10.2 | | | | 17.9 | | | | 0.66 | | | | 25 | | Norwich Park(9) | | | OC | | | | Met | | | | 159 | | | | 70 | | | | 229 | | | | 116 | | | | 10.3 | | | | 16.8 | | | | 0.70 | | | | 49 | | | | 10.2 | | | | 16.6 | | | | 0.70 | | | | 165 | | | | 10.3 | | | | 16.7 | | | | 0.70 | | | | 65 | | | | 50 | | | | 165 | | | | 10.3 | | | | 16.7 | | | | 0.70 | | | | 65 | | Blackwater(10) | | | OC | | | | Met/Th | | | | 136 | | | | 144 | | | | 280 | | | | 124 | | | | 8.1 | | | | 26.6 | | | | 0.43 | | | | 133 | | | | 8.8 | | | | 26.9 | | | | 0.44 | | | | 257 | | | | 8.5 | | | | 26.8 | | | | 0.44 | | | | 16 | | | | 50 | | | | 266 | | | | 8.4 | | | | 26.7 | | | | 0.43 | | | | 15 | | Daunia(11) | | | OC | | | | Met/PCI | | | | 74 | | | | 25 | | | | 99 | | | | 64 | | | | 8.1 | | | | 20.4 | | | | 0.34 | | | | 21 | | | | 8.3 | | | | 20.0 | | | | 0.35 | | | | 85 | | | | 8.2 | | | | 20.3 | | | | 0.34 | | | | 18 | | | | 50 | | | | – | | | | – | | | | – | | | | – | | | | 22 | | | | | OC | | | | Met | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | | | | | | | | | 99 | | | | 8.4 | | | | 20.4 | | | | 0.35 | | | | | | Gregory JV | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Gregory (12) | | | OC | | | | Met | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | 5.6 | | | | 7.0 | | | | 34.8 | | | | 0.60 | | | | 4.0 | | BHP Mitsui Coal | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | South Walker Creek(13) | | | OC | | | | Met/PCI | | | | 101 | | | | 36 | | | | 137 | | | | 80 | | | | 9.2 | | | | 13.6 | | | | 0.29 | | | | 29 | | | | 9.2 | | | | 13.2 | | | | 0.29 | | | | 108 | | | | 9.2 | | | | 13.5 | | | | 0.30 | | | | 17 | | | | 80 | | | | 114 | | | | 9.2 | | | | 13.5 | | | | 0.30 | | | | 18 | | Poitrel(14) | | | OC | | | | Met | | | | 37 | | | | 24 | | | | 61 | | | | 29 | | | | 7.9 | | | | 23.0 | | | | 0.31 | | | | 19 | | | | 8.4 | | | | 23.3 | | | | 0.31 | | | | 48 | | | | 8.1 | | | | 23.1 | | | | 0.31 | | | | 10 | | | | 80 | | | | 49 | | | | 8.7 | | | | 23.6 | | | | 0.33 | | | | 11 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | As at 30 June 2020 | | | As at 30 June 2019 | | | | | | | | | | | Proven
Reserve | | | Probable
Reserve | | | Total
Reserve | | | Proven Marketable
Reserves | | | Probable Marketable
Reserves | | | Total Marketable
Reserves | | | Reserve
Life
(years) | | | BHP
Interest
% | | | Total Marketable
Reserves | | | Reserve
Life
(years) | | Commodity
Deposit
(1)(2)(3)(4)(5) | | Mining
Method | | | Coal Type | | | Mt | | | Mt | | | Mt | | | Mt | | | %Ash | | | %VM | | | %S | | | Mt | | | %Ash | | | %VM | | | %S | | | Mt | | | %Ash | | | %VM | | | %S | | | Mt | | | %Ash | | | %VM | | | %S | | Metallurgical Coal Operations | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Queensland Coal | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | CQCA JV | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Goonyella Riverside (6) | | | OC | | | | Met | | | | 513 | | | | 19 | | | | 532 | | | | 405 | | | | 9.1 | | | | 25.2 | | | | 0.53 | | | | 14 | | | | 10.9 | | | | 28.4 | | | | 0.56 | | | | 419 | | | | 9.1 | | | | 25.3 | | | | 0.53 | | | | 35 | | | | 50 | | | | 432 | | | | 9.1 | | | | 25.3 | | | | 0.53 | | | | 38 | | Broadmeadow (6) | | | UG | | | | Met | | | | 59 | | | | 106 | | | | 165 | | | | 46 | | | | 8.1 | | | | 23.9 | | | | 0.54 | | | | 67 | | | | 10.0 | | | | 23.3 | | | | 0.55 | | | | 112 | | | | 9.2 | | | | 23.5 | | | | 0.55 | | | | | | | | | | | | 120 | | | | 9.2 | | | | 23.6 | | | | 0.54 | | | | | | Peak Downs (7) | | | OC | | | | Met/Th | | | | 669 | | | | 91 | | | | 760 | | | | 393 | | | | 10.6 | | | | 22.1 | | | | 0.59 | | | | 51 | | | | 10.6 | | | | 24.2 | | | | 0.84 | | | | 444 | | | | 10.6 | | | | 22.3 | | | | 0.62 | | | | 27 | | | | 50 | | | | 443 | | | | 10.6 | | | | 22.5 | | | | 0.62 | | | | 26 | | Caval Ridge | | | OC | | | | Met | | | | 232 | | | | 101 | | | | 333 | | | | 134 | | | | 11.0 | | | | 22.2 | | | | 0.57 | | | | 61 | | | | 11.0 | | | | 22.3 | | | | 0.57 | | | | 196 | | | | 11.0 | | | | 22.2 | | | | 0.57 | | | | 27 | | | | 50 | | | | 203 | | | | 11.0 | | | | 22.3 | | | | 0.58 | | | | 28 | | Saraji (7)(8) | | | OC | | | | Met/Th | | | | 487 | | | | 54 | | | | 541 | | | | 315 | | | | 10.5 | | | | 17.9 | | | | 0.63 | | | | 24 | | | | 10.6 | | | | 19.2 | | | | 0.88 | | | | 339 | | | | 10.5 | | | | 18.0 | | | | 0.65 | | | | 33 | | | | 50 | | | | – | | | | – | | | | – | | | | – | | | | 31 | | | | | OC | | | | Met | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | | | | | | | | | 293 | | | | 10.2 | | | | 17.8 | | | | 0.65 | | | | | | Norwich Park (9) | | | OC | | | | Met | | | | 159 | | | | 70 | | | | 229 | | | | 116 | | | | 10.3 | | | | 16.8 | | | | 0.70 | | | | 49 | | | | 10.2 | | | | 16.6 | | | | 0.70 | | | | 165 | | | | 10.3 | | | | 16.7 | | | | 0.70 | | | | 65 | | | | 50 | | | | 165 | | | | 10.3 | | | | 16.7 | | | | 0.70 | | | | 65 | | Blackwater (7)(10) | | | OC | | | | Met/Th | | | | 181 | | | | 229 | | | | 410 | | | | 157 | | | | 8.8 | | | | 26.5 | | | | 0.43 | | | | 195 | | | | 9.1 | | | | 26.2 | | | | 0.42 | | | | 352 | | | | 9.0 | | | | 26.3 | | | | 0.42 | | | | 27 | | | | 50 | | | | 396 | | | | 8.4 | | | | 26.7 | | | | 0.43 | | | | 24 | | Daunia (11) | | | OC | | | | Met/PCI | | | | 68 | | | | 25 | | | | 93 | | | | 59 | | | | 8.1 | | | | 20.4 | | | | 0.34 | | | | 21 | | | | 8.3 | | | | 20.0 | | | | 0.35 | | | | 80 | | | | 8.2 | | | | 20.3 | | | | 0.34 | | | | 17 | | | | 50 | | | | 85 | | | | 8.2 | | | | 20.3 | | | | 0.34 | | | | 18 | | BHP Mitsui Coal | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | South Walker Creek (12) | | | OC | | | | Met/PCI | | | | 93 | | | | 36 | | | | 129 | | | | 74 | | | | 9.2 | | | | 13.6 | | | | 0.29 | | | | 29 | | | | 9.2 | | | | 13.2 | | | | 0.29 | | | | 102 | | | | 9.2 | | | | 13.5 | | | | 0.29 | | | | 16 | | | | 80 | | | | 108 | | | | 9.2 | | | | 13.5 | | | | 0.30 | | | | 17 | | Poitrel (13) | | | OC | | | | Met | | | | 31 | | | | 24 | | | | 55 | | | | 25 | | | | 7.9 | | | | 23.0 | | | | 0.31 | | | | 19 | | | | 8.4 | | | | 23.3 | | | | 0.31 | | | | 44 | | | | 8.1 | | | | 23.1 | | | | 0.31 | | | | 9.6 | | | | 80 | | | | 48 | | | | 8.1 | | | | 23.1 | | | | 0.31 | | | | 10 | |
| (1) | Cut-off criteria applied were: Goonyella Riverside, Peak Downs, Norwich Park, South Walker CreekSaraji ³ 0.5m seam thickness; Caval Ridge Saraji³ 0.4m seam thickness; Blackwater, Daunia, South Walker Creek, Poitrel³ 0.3m seam thickness; Broadmeadow³ 2.5m seam thickness. |
| (2) | Only geophysically logged, fully analysed cored holes with greater than 95% recovery (or <± 10% expected error at 95% confidence for Goonyella Riverside Broadmeadow) were used to classify Coal Reserves. Drill hole spacings vary between seams and geological domains and were determined in conjunction with geostatistical analysis where applicable. The range of maximum drill hole spacings used to classify the Coal Reserves were: |
| | | | | Deposit | | Proven Reserves | | Probable Reserves | Goonyella Riverside, Broadmeadow | | 900m to 1,300m plus 3D seismic coverage for UG | | 1,750m to 2,400m | Peak Downs | | 250m to 1,500m | | 500m to 2,500m | Caval Ridge | | 500m to 1,050m | | 500m to 2,100m | Saraji | | 450m to 1,800m | | 800m to 2,600m | Norwich Park | | 500m to 1,400m | | 1,000m to 2,800m | Blackwater | | 450m to 1,000m | | 900m to 1,850m | Daunia | | 450m to 850m | | 900m to 1,400m | South Walker Creek | | 400m to 800m | | 650m to 1,500m | Poitrel | | 300m to 550m | | 600m to 1,050m |
264
| (3) | Product recoveries for the operations were: |
| | | Deposit | | Product Recovery | Goonyella Riverside, Broadmeadow | | 74% | Peak Downs | | 61%58% | Caval Ridge | | 58%59% | Saraji | | 58%63% | Norwich Park | | 71% | Blackwater | | 92%86% | Daunia | | 85% | South Walker Creek | | 75%78% | Poitrel | | 79% |
| (4) | Total Coal Reserves were at the moisture content when mined (4% CQCA JV and BHP Mitsui Coal). Total Marketable Reserves were at a product specification moisture content (9.5-10%(9.5-10% Goonyella Riverside Broadmeadow,Broadmeadow; 9.5% Peak Downs,Downs; 10.5% Caval Ridge; 10% Caval Ridge, 10% Saraji, Saraji; 10-11% Norwich Park, Park; 7.5-11.5% Blackwater, Blackwater; 10-10.5% Daunia, Daunia; 9% South Walker Creek, Creek; 10-12% Poitrel) and at an air-dried quality basis for sale after the beneficiation of the Total Coal Reserves. |
| (5) | Coal delivered to handling plant. |
| (6) | Goonyella Riverside and Broadmeadow deposits use the same infrastructure and Reserve Life applies to both. The decrease in Reserve Life was mainly due to depletion, change in mine plan at Broadmeadow and an increase in nominated production rate from 19Mtpa to 20Mtpa. |
| (7) | Broadmeadow – The decrease in CoalPercentage of secondary thermal products for Reserves was due to depletion and the exclusion of some mining areas impacted by geotechnical issues and the Isaac River.with coal type Met/Th are: Peak Downs 1%; Saraji 1%; Blackwater 14%. Contributions will vary year on year based on market demand.
|
| (8) | Saraji – The increase in Coal Reserves and Reserve Life was mainly due to additional resources transferredchanges in the mine design and revised yield. Change in Coal Type from Saraji East project dueMet to approval of an operating license.Met/Th. |
| (9) | Norwich Park remains on care and maintenance. |
| (10) | Blackwater – The increase in Coal Reserves and Reserve Life iswas mainly due to a reduction in the nominated annual production rate from 20Mtpa to 17.2Mtpa.improved commodity price. |
| (11) | Daunia – The decrease in Coal Reserves and Reserve Life was mainly due to depletion. Changes in Coal Reserves classification was due to an update in the resource classification supported by drill hole spacing analysis and additional drilling. Change in Coal Type from Met to Met/PCI. |
| (12) | Divestment of Gregory JV completed on 27 March 2019.
|
(13) | South Walker Creek – The decrease in Coal Reserves and Reserve Life was mainly due to depletion. |
(14)(13) | Poitrel – The decrease in Reserve LifeCoal Reserves was mainly due to depletion. |
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Energy Coal Coal Reserves in accordance with Industry Guide 7 | As at 30 June 2019 | | As at 30 June 2018 | | | As at 30 June 2020 | | As at 30 June 2020 | | As at 30 June 2019 | | Commodity
Deposit
(1)(2)(3)(4) | | Mining
Method | | Coal
Type | | | Proven
Reserves | | Probable
Reserves | | Total
Reserves | | Proven Marketable Reserves | | Probable Marketable
Reserves | | Total Marketable Reserves | | | Reserve
Life
(years) | | BHP
Interest
% | | | Total Marketable Reserves | | | Reserve
Life
(years) | | | Mining
Method | | Coal
Type | | | Proven
Reserves | | Probable
Reserves | | Total
Reserves | | Proven Marketable Reserves | | Probable Marketable
Reserves | | Total Marketable Reserves | | | Reserve
Life
(years) | | BHP
Interest
% | | | Total Marketable 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 | | | 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 | | Energy Coal | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Australia | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Mt Arthur Coal(5)(6) | | OC | | | Th | | | 292 | | | 299 | | | 591 | | | 228 | | | 15.9 | | | 28.6 | | | 0.52 | | | 5,990 | | | 225 | | | 14.7 | | | 28.2 | | | 0.46 | | | 6,010 | | | 453 | | | 15.3 | | | 28.4 | | | 0.49 | | | 6,050 | | | 21 | | | 100 | | | 574 | | | 17.7 | | | 31.0 | | | 0.56 | | | 6,320 | | | 27 | | | OC | | | Th | | | 269 | | | 299 | | | 568 | | | 211 | | | 15.9 | | | 28.6 | | | 0.52 | | | 5,990 | | | 225 | | | 14.7 | | | 28.2 | | | 0.46 | | | 6,100 | | | 436 | | | 15.3 | | | 28.4 | | | 0.49 | | | 6,050 | | | 20 | | | 100 | | | 453 | | | 15.3 | | | 28.4 | | | 0.49 | | | 6,050 | | | 21 | | Colombia | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Cerrejón (7)(8) | | OC | | | Th | | | 294 | | | 48 | | | 342 | | | 286 | | | 11.7 | | | 32.3 | | | 0.61 | | | 6,091 | | | 47 | | | 8.5 | | | 32.8 | | | 0.60 | | | 6,155 | | | 333 | | | 11.2 | | | 32.4 | | | 0.61 | | | 6,101 | �� | | 15 | | | 33.33 | | | 445 | | | 9.3 | | | 32.6 | | | 0.57 | | | 6,144 | | | 16 | | | OC | | | Th | | | 192 | | | 137 | | | 329 | | | 186 | | | 12.3 | | | 32.3 | | | 0.61 | | | 6,070 | | | 133 | | | 11.0 | | | 33.0 | | | 0.60 | | | 5,980 | | | 319 | | | 11.8 | | | 32.6 | | | 0.61 | | | 6,032 | | | 14 | | | 33.33 | | | 333 | | | 11.2 | | | 32.4 | | | 0.61 | | | 6,101 | | | 15 | |
| | | Deposit | | Coal Reserves | Mt Arthur Coal | | ³ 0.3m seam thickness,£ 32% ash,³ 40% coal washery yield | Cerrejón | | ³ 0.35m seam thickness |
| (2) | Approximate drill hole spacings used to classify the reserves were: |
| | | | | Deposit | | Proven Reserves | | Probable Reserves | Mt Arthur Coal | | 200m to 800m (geophysically logged, >95%³95% core recovery) | | 400m to 1,550m (geophysically logged, >95%³95% core recovery) | Cerrejón | | >6 drill holes per 100ha | | 2 to 6 drill holes per 100ha |
| (3) | Product recoveries for the operations were: |
| | | Deposit | | Product Recovery | Mt Arthur Coal | | 77% | Cerrejón | | 97% |
| (4) | Total Coal Reserves were at the moisture content when mined (8%(9% Mt Arthur Coal; 13.2% Cerrejón). Total Marketable Reserves were at a product specific moisture content (9.3%(9.6% Mt Arthur Coal; 14.2%14.5% Cerrejón) and at an air-driedas received quality basis for Mt Arthur Coal and at a total moisture quality basis for Cerrejón. |
| (5) | Mt Arthur Coal – Coal delivered to handling plant. |
| (6) | Mt Arthur Coal – The decreaseMining studies are in Marketable Coal Reserves and Reserve Life was due to additional data informingprogress that may result in changes in the mine plan based on revised geotechnicaldesign and geological understanding.the Coal Reserves cut-off criteria reported for ROM; superseding export product cut-off criteria reported in 2018.Reserves. |
| (7) | Cerrejón – Marketable Coal Reserves decreased due to depletion delayed approval of the Bruno Creek diversion permits and a reduction in the nominated annual production rate from 29.5Mt to 25.7Mt partially offset by a change in cut-off criteria from³ 0.65m to³ 0.35m seam thickness. Approximately 10% of extracted reserves was beneficiated. Lease expiry in 2033.improved resource classification supported by additional drilling. Coal is beneficiated by exception. |
| (8) | Cerrejón – While there have been delays in some permits as at 30 June 2019 inIn response to ongoing local community legal challenges, some replacement reserves have been identified within the mine plan utilitising existing fleet capacity.permits remain suspended. BHP continues to monitor the situation for potential impact on mining. |
266
Other Assets Ore Reserves in accordance with Industry Guide 7 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | As at 30 June 2019 | | | As at 30 June 2018 | | | | | | | Proven Reserves | | | Probable Reserves | | | Total Reserves | | | Reserve
Life
(years) | | | BHP
Interest
% | | | Total Reserves | | | Reserve
Life
(years) | | Commodity Deposit
(1)(2)(3)(4) | | Ore Type | | Mt | | | %Ni | | | Mt | | | %Ni | | | Mt | | | %Ni | | | Mt | | | %Ni | | Nickel West Operations | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Leinster(5) | | OC | | | 1.3 | | | | 0.96 | | | | 1.5 | | | | 0.90 | | | | 2.8 | | | | 0.93 | | | | 1.0 | | | | 100 | | | | – | | | | – | | | | – | | Mt Keith(6) | | OC | | | 69 | | | | 0.57 | | | | 19 | | | | 0.55 | | | | 88 | | | | 0.57 | | | | 12 | | | | 100 | | | | 11 | | | | 0.61 | | | | 2.0 | | SP | | | | | 4.7 | | | | 0.51 | | | | 3.7 | | | | 0.45 | | | | 8.4 | | | | 0.48 | | | | | | | | | | | | 11 | | | | 0.48 | | | | | | Yakabindie (7) | | OC | | | 58 | | | | 0.60 | | | | 41 | | | | 0.62 | | | | 99 | | | | 0.61 | | | | 10 | | | | 100 | | | | – | | | | – | | | | – | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | As at 30 June 2020 | | | As at 30 June 2019 | | Commodity
Deposit (1)(2)(3)(4) | | | | | Proven Reserves | | | Probable Reserves | | | Total Reserves | | | Reserve
Life
(years) | | | BHP
Interest
% | | | Total Reserves | | | Reserve
Life
(years) | | | | Ore Type | | | Mt | | | %Ni | | | Mt | | | %Ni | | | Mt | | | %Ni | | | Mt | | | %Ni | | Nickel West Operations | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Leinster (5) | | | OC | | | | 2.9 | | | | 0.75 | | | | 1.0 | | | | 0.68 | | | | 3.9 | | | | 0.74 | | | | 8.0 | | | | 100 | | | | 2.8 | | | | 0.93 | | | | 1.0 | | | | | UG | | | | – | | | | – | | | | 5.1 | | | | 1.6 | | | | 5.1 | | | | 1.6 | | | | | | | | | | | | – | | | | – | | | | | | Mt Keith (6) | | | OC | | | | 65 | | | | 0.57 | | | | 19 | | | | 0.55 | | | | 84 | | | | 0.57 | | | | 15 | | | | 100 | | | | 88 | | | | 0.57 | | | | 12 | | | | | SP | | | | 6.2 | | | | 0.58 | | | | 0.9 | | | | 0.45 | | | | 7.1 | | | | 0.58 | | | | | | | | | | | | 8.4 | | | | 0.48 | | | | | | Yakabindie | | | OC | | | | 55 | | | | 0.60 | | | | 41 | | | | 0.62 | | | | 96 | | | | 0.61 | | | | 8.9 | | | | 100 | | | | 99 | | | | 0.61 | | | | 10 | |
| | | | | Deposit | | Ore Type | | Ore Reserves | Leinster | | OC | | ³ 0.40%Ni | | | UG | | ³ 0.90%Ni | Mt Keith | | OC | | | | | SP
| | Variable between 0.35%Ni and 0.40%Ni and³ 0.18% recoverable Ni | | | SP | Yakabindie | | OC | | ³ 0.35%Ni |
| (2) | Approximate drill hole spacings used to classify the reserve were: |
| | | | | Deposit | | Proven Reserves | | Probable Reserves | Leinster | | 25m × 25m | | 25m × 50m | Mt Keith | | 40m × 40m | | 80m × 80m | Yakabindie | | 40m × 60m | | 80m × 60m |
| (3) | Ore delivered to the process plant. |
| (4) | Metallurgical recovery for the operations were: |
| | | | | Deposit | | | | Metallurgical Recovery | Leinster | | 83%OC | | 80% | | | UG | | 88% | Mt Keith | | 64% | | 63% | Yakabindie | | | | 63% (based on metallurgical test work) |
| (5) | Leinster – The increase in the OC ore type was due to improved resource classification which enabled increase conversion to Ore Reserves were reportedand mine design changes. The increase in the Reserve Life was due to a higher three year historical average Nickel price.the addition of the UG ore type and the increase in OC ore type reserves. Incorporated within the Reserve Life calculation were OC and UG ore types, which contribute 2 years and 8 years respectively. |
| (6) | Mt Keith – The increasedecrease in Ore Reserves and Reserve Life was mainly due to the inclusion of additional mining areas and a higher three year historical average Nickel price. |
(7) | Yakabindie – Ore Reserves were reporteddepletion. The increase in Reserve Life was due to a higher three year historical average Nickel price.decrease in nominated production rate from 8Mtpa to 6Mtpa.
|
267
6.46.5 Major projects
At the end of FY2019,FY2020, BHP had fivesix major projects under development in petroleum, copper, iron ore and potash, with a combined budget of US$11.111.4 billion over the life of the projects. Capital and exploration expenditure of US$7.6 billion in FY2019FY2020 was within guidance. Capital and exploration expenditure of approximately US$7 billion is now expected for FY2021 and is approximately US$1 billion lower than previous guidance for FY2020 is unchanged at below US$8 billion.predominantly due to the deferral of a number of our petroleum projects in order to maximise value. This guidance includes a US$0.90.7 billion exploration program in FY2020,FY2021, with approximately US$0.7 billion450 million for petroleum exploration and appraisal expenditure. Projects in execution at the end of FY2019FY2020 | | | | | | | | | | | | | | | | | Commodity | | Project and
ownership | | Capacity(1) | | Date of initial
production | | | Capital
expenditure
(US$M) (1) | | | | | | | | Target | | | Budget | | Projects under development | | | | | | | | | | Petroleum | | Atlantis Phase 3 (US Gulf of Mexico) 44% (non-operator) | | New subsea production system that will tie back to the existing Atlantis facility, with capacity to produce up to 38,000 gross barrels of oil equivalent per day. On schedule and on budget. First production achieved in July 2020. Overall project is 13%79% complete | | | | | | | CY2020 | | | | 696 | | Petroleum | | Ruby (Trinidad and Tobago) 68.46% (operator) | | Five production wells tied back into existing operated processing facilities, with capacity to produce up to 16,000 gross barrels of oil per day and 80 million gross standard cubic feet of natural gas per day. On schedule and on budget. Overall project is 28% complete | | | | | | | CY2021 | | | | 283 | | Petroleum | | Mad Dog Phase 2 (US Gulf of Mexico) 23.9% (non-operator) | | New floating production facility with the capacity to produce up to 140,000 gross barrels of crude oil per day. On schedule and on budget, overallbudget. Overall project is 53%77% complete | | | | | | | CY2022 | | | | 2,154 | | Iron Ore | | South Flank (Australia) 85% (operator) | | Sustaining iron ore mine to replace production from the 80 Mtpa Yandi Mine. Overall project is 39%76% complete | | | | | | | CY2021 | | | | 3,061 | | Copper | | Spence Growth Option (Chile) | | New 95 ktpd concentrator is expected to incrementally increase Spence’s payable copper in concentrate production by approximately 185 ktpa in the first 10 years of operation and extend the mining operations by more than 50 years. Overall project is 60%93% complete. Project approved on 17 August 2017 | | | | | | | FY2021 | | | | 2,460 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 8,3718,654 | | | | | | | | | | | | | | | | | | |
Other projects in progress at the end of FY2019FY2020 | | | | | | | | | | | | | | | | Capital
expenditure
(US$M)(1) | | Commodity | | Project and ownership | | Scope | | Budget | | Projects under development | | | | | | | | Potash | | Jansen Potash Project (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 | | | 2,700 | | | | | | | | | | | | | | | | | | 2,700 | | | | | | | | | | |
| (1) | Unless noted otherwise, references to capacity are on a 100 per cent basis, references to capital expenditure from subsidiaries are reported on a 100 per cent basis and references to capital expenditure from joint operations reflect BHP’s share. |
268
6.56.6 Sustainability – performance data
Definition and calculation of sustainability performance metrics We use various sustainability performance metrics (SPMs) to reflect our sustainability performance. Management uses these SPMs to evaluate BHP’s performance against both positive and negative impacts of operational activities and our progress against our sustainability commitments and targets. These SPMs are commonly used measures by many of our stakeholders and most are industry standard. To ensure our sustainability performance is relevant and considers breadth and depth of reporting, we align our SPMs with credible international standards, such as the Global Reporting Initiative (GRI) sustainability reporting standards. The standards relevant to each SPM for the year ended 30 June 2020 are listed in the tables below. This section outlines why we believe the SPMs are useful to the Board, management, investors and other stakeholders, and the methodology behind the metrics. A detailed definition and explanation is provided in the below methodology tables for each of our most material SPMs. Health and safety-related metrics Our highest priority is the safety of our people and the communities in which we operate. This is why we focus on identifying safety risks and implementing controls designed to minimise the likelihood and potential impact of those risks. The health and safety SPMs allow the Board, management, investors and other stakeholders to measure and track health and safety performance at our operated assets, including trends related to personal injuries, occupational illness and exposures. We focus on strengthening in-field verification of material and fatal risks; enhancing our internal investigation process and widely sharing and applying lessons and enabling additional quality field time to engage our workforce. | | | | Reference and SPM | | Section 1.4.8 Sustainability KPIs, section 1.7.3 Safety and section 6.6.1 People – performance data –TRIF | | | | Methodology | | TRIF (total recordable injury frequency) is an indicator highlighting broad personal injury trends and refers to the number of recordable injuries per hours worked during the financial year. TRIF equals the sum of (fatalities + lost-time cases + restricted work cases + medical treatment cases) x 1,000,000 (or 200,000) ÷ actual hours worked. In accordance with SASB Metals and Mining Standard we also report TRIF per 200,000 hours worked in section 6.6.1 People – performance data FY2020. BHP adopts the US Government Occupational Safety and Health Administration (OSHA) guidelines for the recording and reporting of occupational injury and illnesses. TRIF statistics exclude non-operated assets. Year-on-year improvement of TRIF is one of our five-year sustainability targets and is one of the indicators used to assess our safety performance. FY2016 to FY2018 data includes Continuing operations and Discontinued operations (Onshore US assets). FY2019 data includes Discontinued operations (Onshore US assets) to 28 February 2019 and Continuing operations. This methodology has been prepared in accordance with GRI standard 403-9 and OSHA guidelines. |
| | | | Reference and SPM | | Section 1.7.3 Safety and section 6.6.1 People – performance data –High potential injury events | | | | Methodology | | High potential injury (HPI) events refers to the number of recordable injuries and first aid cases where there was the potential for a fatality during the financial year. High potential injury event trends remain a primary focus to assess progress against our most important safety objective: to eliminate fatalities and provides insight into our performance on preventing future fatalities. | | | | | The basis of calculation for high potential injuries was revised in FY2020 from event count to injury count as part of a safety reporting methodology improvement. FY2016 to FY2018 data includes Continuing operations and Discontinued operations (Onshore US assets). FY2019 data includes Discontinued operations (Onshore US assets) to 28 February 2019 and Continuing operations. This methodology has been prepared in accordance with GRI standard 403-9. |
| | | | Reference and SPM | | Section 1.7.4 Health and section 6.6.1 People – performance data –Occupational illness incidence | | | | Methodology | | An occupational illness is an illness that occurs as a consequence of work-related activities or exposure and includes acute or chronic illnesses or diseases, which may be caused by inhalation, absorption, ingestion or direct contact. Illness is determined by reference to the US OSHA Recordkeeping Handbook. Occupational illness incidence is a lag indicator highlighting broad occupational illness trends and refers to the number of employees that suffer from an occupational illness per million hours worked during the financial year. Incidence of occupational illness is used to identify situations where exposure controls were effective (no illness occurrence) and where exposure controls were potentially ineffective (illness occurs). It also informs priorities for exposure reduction projects. The data for FY2016 to FY2018 includes Continuing operations and Discontinued operations. FY2019 data includes Discontinued operations (Onshore US assets) to 31 October 2018 and Continuing operations. This methodology has been prepared in accordance with GRI standard 403-10 and the OSHA Recordkeeping Handbook. |
| | | | Reference and SPM | | Section 1.4.8 Sustainability KPIs and section 1.7.4 Health –Occupational exposures | | | | Methodology | | Occupational exposures refers to the number of employees who have potential exposure to an agent in the workplace that exceeds either regulatory or the sometimes stricter BHP internal occupational exposure limits (OELs). These employees are required to wear personal protective equipment (PPE). Reported occupational exposure data discounts the effect of the PPE worn. | | | BHP has adopted a five-year sustainability target to reduce by at least 50 per cent (compared to the adjusted FY2017 exposure data) the number of employees exposed to diesel exhaust particulate matter, coal mine dust and silica. An OEL is the level of exposure to an agent to which it is believed nearly all people may be repeatedly exposed throughout a working life without adverse effect. The exposure profile is derived through a combination of quantitative exposure measurements and qualitative assessments undertaken by specialist occupational hygienists consistent with best practice as defined by the American Industrial Hygiene Association. The 95 per cent upper confidence limit of the mean exposure is compared to our OELs. | | | | | Where employees are exposed in excess of an OEL • exposure controls in accordance with the hierarchy of control must be implemented • PPE is provided and must be worn • health surveillance must be undertaken Quantitative occupational exposure measurements are undertaken to provide assurance that implemented controls remain effective. |
People-related metrics Our global workforce is the foundation of our business and we believe that supporting the wellbeing of our people and promoting an inclusive and diverse culture are vital for maintaining a competitive advantage. The SPMs for gender, employment type and turnover are key indicators, which allow the Board, management, investors and other stakeholders to measure and track our near and long-term progress. | | | | Reference and SPM | | Section 1.6.1 Our people, section 1.6.2 Employees and contractors, and section 6.6.1 People – performance data –Workforce by gender, region, category and employment type | | | | Methodology | | Proportional data for average number of employees is based on the average of the number of employees at the last day of each calendar month for a 10-month period from July to April, which is then used as the average for the FY2020. The number and average number (and percentages) of employees by region shows the weighted average number of employees based on BHP ownership. Contractor data is collected from internal surveys and the organisation systems and averages for a 10-month period from July 2019 to April 2020, which is then used as the average for the FY2020. The gender numbers in section 1.6.1 are a ‘point in time’ snapshot at 30 June 2020 used in internal management reporting for the purposes of monitoring progress against our aspiration goal of a gender balanced workforce by FY2025. There is no significant seasonal variation in employment numbers. These methodologies have been prepared in accordance with GRI standard 102-8 and GRI standard 405-1. |
| | | | Reference and SPM | | Section 1.6.1 Our people and section 6.6.1 People – performance data – Employee new hires and turnover | | | | Methodology | | Data for employee new hires, including by gender, age group and region, is based on the number of employee new hires for a 10-month period from July 2019 through to April 2020 divided by the average number of employees at the last day of each calendar month for the same period, which is then used to calculate a weighted average for FY2020 based on our operated assets. Employee new hires refers to all employment types. Data for employee turnover, including by gender, age group and region, is based on the number of employee new terminations for a 10-month period from July 2019 through to April 2020 divided by the average number of employees at the last day of each calendar month for the same period, which is then used to calculate a weighted average for FY2020 based on our operated assets. Employee new terminations refers to all employment types. | | | | | These methodologies have been prepared in accordance with GRI standard 401-1. |
Community-related metrics We seek to create and contribute to social value in the communities where we operate through the positive social and economic benefits generated by our core business, our constructive engagement and advocacy on important issues and our contribution as community partners. Our community SPMs allow the Board, management, investors and other stakeholders to track our performance in contributing to social value in the communities in which we operate and monitor our relationships and engagement with this important stakeholder group. | | | | Reference and SPM | | Section 1.4.8 Sustainability KPIs and section 1.7.9 Community –Social investment spend | | | | Methodology | | Our voluntary social investment is calculated as 1 per cent of the average of the previous three years’ pre-tax profit. Social investment is our voluntary contribution towards projects or donations with the primary purpose of contributing to the resilience of the communities where we operate and the environment, aligned with our broader business priorities. By building common ground through collective impact and partnerships, our social investments will purposefully create social value to strengthen the communities of which we are a part, to improve the resilience of the natural environment, and address the strategic priorities of the business. Donations from BHP to the BHP Foundation are included in the calculation of our 1 per cent target as are the costs of administering our social investment programs. The Sustainability Committee reviews our social investment spend on a quarterly basis. Our social investment spend is one of the metrics used to monitor our performance against our commitment to making a contribution to social value and meeting our five-year sustainability target. |
| | | | Reference and SPM | | Section 1.4.8 Sustainability KPIs and section 1.7.9 Community –Significant community events | | | | Methodology | | A significant event resulting from BHP operated activities, is one with an actual severity rating of four and above, based on our internal severity rating scale (tiered from one to five by increasing severity) as defined in our mandatory minimum requirements for risk management. A significant community event is an event that could have a serious impact on community, including impacts to livelihoods, infrastructure, health, safety, security or cultural heritage. A significant event could also include a substantiated human rights violation. This metric assists the Board and management in monitoring BHP’s social performance and is one indicator of the health of our relationship with the communities where we operate. This methodology has been prepared in accordance with GRI standard 413-2 and GRI standard MM6. |
| | | | Reference and SPM | | Section 1.7.9 Community and section 6.6.2 Society – performance data – Community complaints | | | | Methodology | | Community complaints refer to a verbal or written notification made directly to a BHP representative by a member of a community relating to an alleged adverse impact on that community arising from BHP’s activities and/or employee or contractor behaviour at our operated assets. Trends in community complaints are analysed by management every six months, and this data is used as one of the inputs for management to determine whether we are operating within our risk appetite. This metric assists the Board and management to monitor BHP’s social performance and is one indicator of the health of our relationship with the communities where we operate. | | | | | This methodology has been prepared in accordance with GRI standard MM7. |
Environment-related metrics We acknowledge the nature of our operations can have significant environmental impacts. Our environmental SPMs allow the Board and management to manage and monitor the inherent risks relating to, and any adverse impacts our operations may have on, air quality, water resources, biodiversity and habitats. They also allow the Board, management, investors and other stakeholders to measure and track our performance towards our environmental commitments. These measures are used to inform strategic focus areas, support planning and investments in infrastructure and identify improvement opportunities that potentially reduce environmental impacts. BHP respects legally designated protected areas and commits to avoiding areas or activities where we consider the environmental risk is outside BHP’s risk appetite. Additionally, our operations and growth strategy depend on obtaining and maintaining access to environmental resources, such as land and water. Significant environmental events and incidents of non-compliance, such as tailings storage facilities failures, can lead to costly environmental liabilities, which hinder our growth and expansion strategies. | | | | Reference and SPM | | Section 1.7.6 Environment and section 6.6.3 Environment – performance data – Land owned, leased or managed, Land disturbed, Land rehabilitated and Land set aside for conservation. | | | | Methodology | | Land may refer to sea, lake or river beds if appropriate and includes land for infrastructure to support extractive operations. Land disturbed includes the total land area at the time of reporting that is physically impacted by the activities of the business that substantially disrupts the pre-existing habitats and land cover. Land managed for conservation is the total area at the time of reporting managed for the purposes of biodiversity conservation only. It includes land that the business has formally assigned and manages as a compensatory action as well as other land that the business has protected from disturbance activities and manages for conservation. Land data is calculated as the total land area owned, leased or managed by BHP as at 30 June of the reporting year, expressed as hectares. Data does not include land managed for rehabilitation or conservation as part of voluntary social investment. This methodology has been prepared in accordance with GRI standard MM1 and these metrics assist the Board and management in understanding the magnitude of land that is under direct control of the company and its operational footprint. |
| | | | Reference and SPM | | Section 1.4.8 Sustainability KPIs, section 1.7.6 Environment and section 6.6.5 Water – performance data – Water withdrawals, Water discharges, Water diversions, Water consumption and Water sensitivity | | | | Methodology | | Water withdrawals The volume of water, in megalitres (ML), received and intended for use by the operated asset from the water environment and/or a third party supplier. We disclose water withdrawal in ML by operated asset and source (sea, ground and surface waters as defined in section 6.8.2). Volumes by quality type (as defined in section 6.8.2) are also disclosed. Withdrawal volumes disclosed per annum include rainfall and runoff volumes captured and used during the reporting year. Rainfall and runoff volumes that have been captured and stored are excluded and will be reported in the future year of use. Withdrawal volumes also include water entrained (see section 6.8.2) in ore. Water withdrawal metrics assist the Board and management in understanding the significance of our water resource use, collectively for the Group and by individual operated assets, and to assess trends over time. It also helps inform investment in infrastructure to reduce water withdrawals and improve efficiency of water use. |
| | | | | Water discharges The volume of water, in ML, removed from the operated asset and returned to the environment and/or distributed to a third party. This may include discharge to sea, surface waters, groundwater seepage or aquifer reinjection. We disclose water discharges in ML by operated asset and destination. Volumes by quality type (as defined in section 6.8.2) are also disclosed. Water discharge metrics assist the Board and management in understanding the amount of water that operated assets must handle and release in line with water quality requirements. It also helps inform investment in infrastructure to improve water quality, reduce water withdrawals and improve efficiency of water use. Water diversions The volume of water, in ML, that is actively managed by an operated asset but not used for any operational purposes. Diversions are reported as both withdrawals and discharges and may include: • flood waters that are discharged to an external surface water body • dewatering volumes produced by aquifer interception that are reinjected to groundwater or discharged to surface water • ground or surface water that is removed by or supplied to a third party, such as a community • water removed as part of accessing crude oil that is returned to the sea without use • water used for ecosystem irrigation Withdrawal and discharge diverted water may occur in different annual reporting periods, so in any given annual period there may be a differential between withdrawals and discharges for diverted water. Water diversion metrics assist the Board and management in understanding the volumes of water handled by the operated asset. This information assists in forecasting water management costs and identifying opportunities to reduce them. Water consumption The volume of water, in ML, used by the operated asset and not returned to the environment or a third party. We disclose consumption by total consumption and use (evaporation, entrainment and other as defined in section 6.8.2). Water consumption metrics assist the Board and management in the planning of water supplies and infrastructure for future production, expansions or new projects. The metrics are also used to identify the areas where we have opportunity to reduce water use. Water recycled/reused The volume of water, in ML, that is reused or recycled at an operated asset. Reused water is water that has previously being used at the operated asset that is used again without further treatment. Recycled water is water that is reused but is treated before it is used again. Efficiency of this recycling and reuse is calculated in percentage by calculating the proportion of recycled or reused water volumes to total water volumes withdrawn (excluding seawater) by BHP in accordance with section 3.6.1 of the Minerals Council of Australia’s Water Accounting Framework (WAF). Water recycled/reused metrics assist the Board and management in assessing opportunities to reduce water withdrawals. These metrics assist with comparisons of water recycling/reuse performance and trends between our operated assets and with peers, which can be used to inform and prioritise reuse and recycling improvements and technological investments. Water sensitivity We define water sensitivity as the degree (high, moderate or low) to which a region is sensitive to a range of water-influencing factors. Water sensitivity metrics assist the Board and management in understanding the relativity and contributing factors to water-related risk management at individual operated assets, and in understanding if this changes over time. These methodologies have been prepared in accordance with GRI standard 303-3, GRI standard 303-4 and GRI standard 303-5 and these metrics assist the Board and management in understanding the volumes of water that the company interacts with the and water volume and use efficiency trends over time. |
| | | | Reference and SPM | | Section 6.6.3 Environment – performance data –Mineral waste (including tailings) | | | | Methodology | | Mineral waste refers to the large quantities of material arising as a result of extractive activities. Non-product materials (overburden) have to be removed to give access to product-bearing material (ores), which are processed, physically or chemically, to release them from their matrix and convert them into output products and waste products (tailings, slags, sludges, slimes or other process residues). For minerals waste, the figures represent the total deposited in the reporting year, expressed as kilotonnes (kt). Mineral waste (hazardous) Includes the following if classified as hazardous by local legislation: • mineral waste from raw or intermediate materials that have been processed as part of the production sequence, such as beneficiation, refining and smelting • tailings, slimes, sludge, residues, slag, fly ash, gypsum, coal rejects Includes non-hazardous waste co-disposed/mingled with hazardous material. Excludes any hazardous mineral waste that is rehandled to prevent double counting. Tailings waste (non-hazardous) Includes tailings, slimes and residue resulting from the processing of ore which is not classified as hazardous by local legislation. This methodology has been prepared in accordance with GRI standard MM3 and these metrics assist the Board and management in understanding the volumes and types of waste generated and trends over time. | | | | | Reference and SPM | | Section 1.4.8 Sustainability KPIs and section 1.7.6 Environment –Significant environmental events | | | | Methodology | | A significant event resulting from BHP operated activities is one with an actual severity rating of four and above, based on our internal severity rating scale (tiered from one to five by increasing severity) as defined in our mandatory minimum requirements for risk management. The severity rating considers the nature, extent and duration of the impact and any corrective actions required to restore ecosystem function. This metric assists the Board and management in monitoring BHP’s environment performance and is one indicator of the impacts on the environments where we operate. |
Climate change-related metrics We recognise the impacts of climate change may impact BHP in a range of areas (refer to section 1.5.4 for more information). Climate-related risks include the potential physical impacts of acute and chronic risks, and transition impacts arising from the transition to a lower carbon economy. Our climate change SPMs help us monitor our climate change commitments (refer to section 1.7) to mitigate the risks and potential impacts associated with climate change to BHP, as well as fulfil our regulatory reporting obligations. The SPMs allow the Board, management, investors and other stakeholders to measure BHP’s performance against these commitments. | | | | Reference and SPM | | Section 1.7.8 Climate change and section 6.6.4 Climate Change – performance data –Operational energy consumption | | | | Methodology | | Definition Energy means all forms of energy products where ‘energy products’ means combustible fuels, heat, renewable energy, electricity or any other form of energy from operations that are owned or controlled by BHP. The primary sources of energy consumption come from fuel consumed by haul trucks at our operated assets, as well as purchased electricity used at our operated assets. Energy consumption has been calculated on an operational control basis in accordance with mandatory minimum performance requirements for HSEC reporting, which are in line with the World Resources Institute/World Business Council for Sustainable Development guidance and are measured in terawatt-hours or petajoules (measurement unit specified in the relevant table). Calculation methodology The energy figures are calculated using the activity data collected at our operated assets. Activity data is multiplied by an energy content factor (where necessary) to derive the energy consumption associated with a process or an operation. Examples of activity data include, kilowatt-hours of electricity used or quantity of fuel used. Energy content factors are sourced from the regulations and guidance specified in Scope 1 and Scope 2 GHG emissions calculation methodology below. All other energy figures in section 1.7.8 are derived from the approach specified above with further information detailed in the footnotes. This methodology has been prepared in accordance with GRI standard 302-1. |
| | | | | | | | | | | | Reference and SPM | | Section 1.4.8 Sustainability KPIs, section 1.7.8 Climate change and section 6.6.4 Climate change – performance data – Operational GHG emissions,Scope 1 GHG emissions – Scope 2 GHG emissions | | | | Methodology | | Definition Scope 1 greenhouse gas emissions are direct emissions from operations that are owned or controlled by BHP, primarily emissions from fuel consumed by haul trucks at our operated assets, as well as fugitive methane emissions from coal and petroleum production at our operated assets. Scope 1 refers to direct GHG emissions from our operated assets. Scope 2 greenhouse gas emissions are indirect emissions from the generation of purchased or acquired electricity, steam, heat or cooling that is consumed by operations that are owned or controlled by BHP. Our Scope 2 emissions have been calculated using the market-based method using supplier-specific emission factors unless otherwise specified. | | | | | Scope 1 and 2 emissions have been calculated on an operational control basis in accordance with mandatory minimum performance requirements for HSEC reporting, which are in line with the Greenhouse Gas Protocol definitions and are measured in tonnes of carbon dioxide equivalent, and in line with the Greenhouse Gas Protocol Corporate Accounting and Reporting Standard and the Greenhouse Gas Protocol Scope 2 Guidance. Calculation methodology The emissions figures are calculated using the activity data collected at our operated assets. Activity data is multiplied by an energy content (where necessary) and emission factors to derive the energy consumption and GHG emissions associated with a process or an operation.. Examples of activity data include kilowatt-hours of electricity used or quantity of fuel used. Energy and Scope 1 emissions for facilities already reporting to mandatory local regulatory programs are required to use the same emission factors and methodologies for reporting under BHP’s operational control boundary. This ensures a single emissions and energy inventory is maintained for consistency and efficiency. Local regulatory programs were applicable to the majority of BHP’s Scope 1 emissions inventory in FY2020 (operational control boundary), as listed in the table below. A local regulatory program in this context refers to any scheme requiring emissions to be calculated using mandated references (e.g. the Green Tax legislation in Chile, which requires emissions to be calculated using the Intergovernmental Panel on Climate Change (IPCC) factors) or mandated emission factors (e.g. the Australian National Greenhouse and Energy Reporting (NGER) Scheme or US EPA GHG reporting program, which publish factors specific to the programs). In the absence of local mandatory regulations, the Australian NGER (Measurement) Determination has been set as the default source for emission factors and methodologies for consistency with the majority of the emissions inventory. | | | | | Asset | | Location | | Local regulations | | | | | | | BMA, BMC, NSW Energy Coal, Olympic Dam, Nickel West, WA Iron ore, Petroleum – Australia | | Australia | | National Greenhouse and Energy Reporting Scheme | | | | | | | Escondida, Pampa Norte | | Chile | | Green Tax legislation (referencing IPCC factors) | | | | | | | Petroleum – Gulf of Mexico | | USA | | US EPA GHG reporting program | | | | | | | Potash – Canada | | Canada | | Canadian Greenhouse Gas Reporting Program (referencing IPCC factors) | | | | | | | | | | | | | Petroleum – Trinidad | | Trinidad | | None | | | | | |
| | | | | Scope 2 emissions totals are reported using the market-based method (default calculation approach unless otherwise stated) and the location-based method, as recommended by the GHG Protocol Scope 2 Guidance. Definitions of location and market-based reporting used in BHP’s accounting are consistent with the Greenhouse Gas Protocol terminology as follows: • Market-based reporting: Scope 2 GHG emissions based on the generators (and therefore the generation fuel mix from which the reporter contractually purchases electricity and/or is directly provided electricity via a direct line transfer). • Location-based reporting: Scope 2 GHG emissions based on average energy generation emission factors for defined geographic locations, including local, subnational or national boundaries (i.e. grid factors). In the case of a direct line transfer, the location-based emissions are equivalent to the market-based emissions. For facilities where market-based reporting is required, electricity emission factors are sourced directly from the supplier in the first instance. An emission factor in the public domain, which is specific to the generation plant supplying the facility, is considered equivalent to a supplier-specific factor in this context. Where supplier-specific factors are not available, a default emission factor for off-grid electricity is used instead, as published in local regulations or industry frameworks (or the default off-grid electricity emission factor from the Australian NGER (Measurement) Determination) in the case where no local default is available. The location-based method is applied using electricity emission factors for the relevant grid network, as sourced from local regulations, industry frameworks or publications from the local grid administrator. These methodologies have been prepared in accordance with GRI standard 305-1 and GRI standard 305-2. All other emission figures in section 1.7.8 are derived from the approach specified above with further information detailed in the footnotes. More information on the calculation methodologies for other reported categories, boundaries assumptions and key references used in the preparation of our Scope 1 and Scope 2 emissions data can be found in the BHP Scope 1, 2 and 3 Emissions Calculation Methodology, available at bhp.com/climate. | | | | | Reference and SPM | | Section 1.7.8 Climate change and section 6.6.4 Climate change – performance data –Scope 3 GHG emissions | | | | Methodology | | Scope 3 emissions have been calculated on a carbon dioxide equivalent basis using methodologies consistent with the Greenhouse Gas Protocol Corporate Value Chain (Scope 3) Accounting and Reporting Standard (Scope 3 Standard). Scope 3 emissions refers to all other indirect emissions (not included in Scope 2) that occur in BHP’s value chain, primarily emissions resulting from our customers using the fossil fuel commodities and processing the non-fossil fuel commodities we sell, as well as upstream emissions associated with the extraction, production and transportation of the goods, services, fuels and energy we purchase for use at our operated assets; emissions resulting from the transportation and distribution of our products; and operational emissions (on an equity basis) from our non-operated joint ventures. Scope 3 emissions reporting necessarily requires a degree of overlap in reporting boundaries due to our involvement at multiple points in the life cycle of the commodities we produce and consume. A significant example of this is that Scope 3 emissions reported under Category 10: ‘Processing of sold products’ include the processing of our iron ore to steel. This third party activity also consumes metallurgical coal as an input, a portion of which is produced by us. For reporting purposes, we account for Scope 3 emissions from combustion of metallurgical coal with all other fossil fuels under the Category 11: ‘Use of sold products’, such that a portion of metallurgical coal emissions is accounted for under two categories. This is an expected outcome of emissions reporting between the different scopes defined under the standard GHG accounting practices and is not considered to detract from the overall value of our Scope 3 emissions disclosure. This double counting means that the emissions reported under each category should not be added up, as to do so would give an inflated total figure. For this reason, we do not report a total Scope 3 emissions figure. |
| | | | | The below methodology describes the emissions from Category 10: Processing of sold products and Category 11: Use of sold products. These categories are the most material Scope 3 emission categories and together account for almost 95 per cent of Scope 3 emissions. Category 10: Processing of sold products Emissions from the processing of intermediate products sold in the reporting year by downstream companies (e.g. manufacturers) subsequent to sale by the reporting company. Calculation methodology The average-data method as described in the Greenhouse Gas Protocol Technical Guidance for Calculating Scope 3 Emissions (Scope 3 Guidance) is used to calculate these emissions, with industry-average emission factors applied to production volumes (on an equity basis) for each commodity to calculate an overall emissions estimate for this category. Assumptions • To estimate emissions from the processing of iron ore, all iron ore production is assumed to be processed to steel. To estimate the higher-end estimate, the crude steel emission factor is applied to the volume of crude steel produced from BHP’s iron ore. • To estimate the lower-end emissions number from the processing of iron ore, it is assumed that the crude steel emission factor already takes into account emissions from both iron ore and metallurgical coal. Therefore, the crude steel emission factor is apportioned based on the ratio of iron ore and metallurgical coal input to produce 1,000 kilograms of crude steel (based on World Steel Association’s integrated blast furnace and basic oxygen furnace route). The crude steel emission factor is split to estimate the emissions from iron ore and metallurgical coal (calculated in Category 11: Use of sold products). The split factor is applied to the volume of crude steel produced from BHP’s iron ore. The estimated crude steel produced with BHP’s iron ore is significantly higher than with BHP’s metallurgical coal (due to higher iron ore production). Therefore, this approach does not capture third party metallurgical coal emissions in the steelmaking process. • To estimate emissions from the processing of copper, we apply an emission factor for the processing of copper to copper wire (rather than alternative products, such as tubes or sheets), as this is the most emissions-intensive process and therefore the most ‘conservative’ assumption. Category 11: Use of sold products Emissions from the end use of goods and services sold by the reporting company in the reporting year. Calculation methodology The method recommended in the Scope 3 Guidance for ‘direct use-phase’ emissions calculations for ‘Fuels and feedstocks’ is used to calculate these emissions, with industry-average emission factors applied to production volumes (on an equity basis) for each commodity to calculate an overall emissions estimate for this category. For the lower-end estimate emissions from metallurgical coal, the average-data method as described in the Scope 3 Guidance is used to calculate these emissions, with industry-average emission factors applied to production volumes (on an equity basis) for metallurgical coal to calculate an overall emissions estimate for this category. |
| | | | | Assumptions • All metallurgical coal (higher-end estimate), energy coal, natural gas and petroleum products are assumed to be combusted. • In practice, metallurgical coal is primarily used in steelmaking and a portion of the carbon content remains embedded in the final steel product and is not released to the atmosphere; the quantities involved vary according to the feedstocks, processing technologies and output specifications of the process route used. • To estimate the lower-end emissions number from the use of metallurgical coal, it is assumed that crude steel emission factor already takes into account emissions from both iron ore and metallurgical coal. Therefore, the crude steel emission factor is apportioned based on the ratio of iron ore and metallurgical coal input to produce 1,000 kilograms of crude steel (based on World Steel Association’s integrated blast furnace and basic oxygen furnace route). The crude steel emission factor is split to estimate the emissions from metallurgical coal and iron ore (calculated in Category 10: Processing of sold products). The split factor is applied to the volume of crude steel produced from BHP’s metallurgical coal. It should be noted that in reality, BHP’s metallurgical coal may not end up with the same customer as our iron ore. • All energy coal is assumed to be bituminous, which has a mid-range energy content among the three sub-categories of black coal (the others being sub-bituminous coal and anthracite) listed in the NGER Measurement Determination published by the Australian Government (Australian NGER Determination), from which these emission factors are sourced. • All crude oil and condensates are assumed to be refined and combusted as diesel (rather than alternative products such as gasoline) as the most emissions-intensive, therefore the most conservative assumption. The energy content of the crude oil and condensate volumes is used to estimate the corresponding quantity of diesel that would be produced, assuming that no fuel is ‘lost’ during the refining process. • Emissions from LPG and ethane volumes are included in emissions reported for ‘natural gas liquids’ (NGL) production and are assumed to be combusted with the same NGL emission factors. This assumption has minimal impact on estimated emissions due to the small volumes involved. This methodology has been prepared in accordance with GRI standard 305-3. More information on the calculation methodologies for other reported categories, boundaries assumptions and key references used in the preparation of our Scope 3 emissions data can be found in the associated BHP Scope 1, 2 and 3 Emissions Calculation Methodology, available at bhp.com/climate. |
6.6.1 People - performance data FY2020 Performance data – Workforce health and safety for FY2020 Regional summary for FY2020 Per 1,000,000 hours worked | | | | | | | | | | | | | | | | | | | | | | | | | | | | Fatalities | | | TRIF | | | Employee
occupational
illness incidence(1) | | | Contractor
occupational
illness incidence(1) | | | Employee high
potential injury
frequency(2) | | | Contractor high
potential injury
frequency(2) | | Asia | | | 0 | | | | 0.0 | | | | 0.0 | | | | 0.0 | | | | 0.0 | | | | 0.0 | | Australia | | | 0 | | | | 5.6 | | | | 5.1 | | | | 2.3 | | | | 0.2 | | | | 0.3 | | Europe | | | 0 | | | | 0.0 | | | | 0.0 | | | | 0.0 | | | | 0.0 | | | | 0.0 | | North America | | | 0 | | | | 0.6 | | | | 0.0 | | | | 0.4 | | | | 0.0 | | | | 0.0 | | South America | | | 0 | | | | 2.0 | | | | 2.5 | | | | 0.5 | | | | 0.3 | | | | 0.2 | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | | 0 | | | | 4.2 | | | | 4.3 | | | | 1.4 | | | | 0.2 | | | | 0.3 | | | | | | | | | | | | | | | | | | | | | | | | | | |
Injury rates for FY2020 SASB basis – per 200,000 hours worked | | | | | | | | | | | | | | | | Employees | | | Contractors | | Total recordable injury frequency | | Per 200,000 hours worked | | | 0.88 | | | | 0.81 | | High potential injury events frequency | | Per 200,000 hours worked | | | 0.04 | | | | 0.05 | | Number of recordable work-related injuries | | | | | 286 | | | | 451 | | Number of hours worked | | | | | 65,188,193 | | | | 110,806,784 | |
Regional safety fines levied in FY2020 | | | | | | | | | Regional safety fines levied | | 2020 | | | Number of fines | | Australia | | | US$34,860 | | | | 1 | | Europe | | | US$0 | | | | 0 | | North America | | | US$0 | | | | 0 | | South America | | | US$0 | | | | 0 | |
| (1) | Occupational illnesses excludes COVID-19 related illnesses. |
| (2) | High potential injury basis of calculation revised in FY2020 from event count to injury count as part of a safety reporting methodology improvement. |
Performance data – Workforce (1)(2) Workforce data and diversity by region for FY2020 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Region | | Average number and
% of employees | | | Employees by gender % | | | Average number
and % of
contractors(2) | | | Average (EE)
absenteeism
rate (3) | | | | Male | | | Female | | Asia | | | 1,939 | | | | 6.1 | | | | 39.2 | | | | 60.8 | | | | 2,033 | | | | 4.2 | | | | 33.4 | | Australia | | | 20,967 | | | | 66.4 | | | | 76.5 | | | | 23.5 | | | | 23,948 | | | | 49.4 | | | | 76.0 | | Europe | | | 57 | | | | 0.2 | | | | 48.0 | | | | 52.0 | | | | 11 | | | | <0.1 | | | | 8.0 | | North America | | | 1,296 | | | | 4.1 | | | | 66.0 | | | | 34.0 | | | | 1,165 | | | | 2.4 | | | | 45.1 | | South America | | | 7,330 | | | | 23.2 | | | | 79.6 | | | | 20.4 | | | | 21,375 | | | | 44.0 | | | | 63.9 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | | 31,589 | | | | 100.0 | | | | 74.4 | | | | 25.6 | | | | 48,532 | | | | 100.00 | | | | 70.1 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Employees by category and diversity for FY2020 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Gender% | | | Age group % | | | Ratio male to female | | Category | | Male | | | Female | | | Under 30 years | | | 30–39 | | | 40–49 | | | 50+ | | | Average basic
salary US$ | | | Average
total rem
US$ | | Senior leaders | | | 72.7 | | | | 27.3 | | | | 0.0 | | | | 12.5 | | | | 52.1 | | | | 35.4 | | | | 1.10 | | | | 1.14 | | Managers | | | 71.9 | | | | 28.1 | | | | 0.3 | | | | 28.5 | | | | 45.3 | | | | 25.9 | | | | 1.06 | | | | 1.08 | | Supervisory and professional | | | 69.2 | | | | 30.8 | | | | 11.1 | | | | 41.1 | | | | 30.4 | | | | 17.4 | | | | 1.13 | | | | 1.18 | | Operators and general support | | | 79.5 | | | | 20.5 | | | | 16.3 | | | | 30.4 | | | | 28.3 | | | | 25.0 | | | | 1.30 | | | | 1.30 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | | 74.4 | | | | 25.6 | | | | 13.5 | | | | 34.5 | | | | 29.9 | | | | 22.1 | | | | 1.11 | | | | 1.14 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | Employment category | | Total % | | | Male % | | | Female % | | Full time | | | 94.1 | | | | 76.1 | | | | 23.9 | | Part time | | | 3.1 | | | | 57.5 | | | | 42.5 | | Fixed term full time | | | 2.8 | | | | 58.4 | | | | 41.6 | | Fixed perm part time | | | 0.1 | | | | 36.9 | | | | 63.1 | | Casual | | | 0.0 | | | | 68.3 | | | | 31.7 | | | | | | | | | | | | | | | Total | | | 100.0 | | | | 74.4 | | | | 25.6 | | | | | | | | | | | | | | |
Turnover and new hires for FY2020 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | | Gender | | | Age group | | | | | | | | | | | | | | | | | | | | Male | | | Female | | | Under 30 | | | 30–39 | | | 40–49 | | | 50+ | | | Asia | | | Australia | | | Europe | | | North
America | | | South
America | | | | | 7,998 | | | | 4,926 | | | | 3,072 | | | | 2,499 | | | | 2,789 | | | | 1,829 | | | | 881 | | | | 496 | | | | 6,553 | | | | 5 | | | | 132 | | | | 812 | | Employee new hires | | | 22.75 | % | | | 18.67 | % | | | 35.00 | % | | | 52.49 | % | | | 23.01 | % | | | 17.39 | % | | | 11.36 | % | | | 25.58 | % | | | 26.71 | % | | | 8.85 | % | | | 10.18 | % | | | 11.08 | % | | | | | | | | | | | | | Total | | | Gender | | | Age group | | | | | | | | | | | | | | | | | | | | Male | | | Female | | | Under 30 | | | 30–39 | | | 40–49 | | | 50+ | | | Asia | | | Australia | | | Europe | | | North
America | | | South
America | | | | | 3,988 | | | | 2,603 | | | | 1,385 | | | | 733 | | | | 1,265 | | | | 1,122 | | | | 868 | | | | 250 | | | | 2,890 | | | | 7 | | | | 296 | | | | 545 | | Employee turnover | | | 11.34 | % | | | 9.87 | % | | | 15.78 | % | | | 15.40 | % | | | 10.43 | % | | | 10.67 | % | | | 11.19 | % | | | 12.89 | % | | | 11.78 | % | | | 12.28 | % | | | 22.87 | % | | | 7.43 | % |
Remuneration for FY2020(4) | | | | | | | | | | | | | | | | | | | | | | | | | | | | Ratio male to female | | | Ratio highest to lowest | | | Ratio standard entry
level wage to local
minimum wage | | Region | | Average
basic salary
US$ | | | Average total
remuneration
US$ | | | Salary
increase | | | Total
remuneration | | | Male | | | Female | | Asia | | | 1.69 | | | | 1.78 | | | | 0:1 | | | | 99:1 | | | | 3:1 | | | | 4:1 | | Australia | | | 1.10 | | | | 1.13 | | | | 0:1 | | | | 54:1 | | | | 2:1 | | | | 2:1 | | Europe | | | 1.37 | | | | 1.53 | | | | 1:1 | | | | 5:1 | | | | | | | | 3:1 | | North America | | | 1.21 | | | | 1.24 | | | | 0:1 | | | | 11:1 | | | | 6:1 | | | | 4:1 | | South America | | | 0.87 | | | | 0.95 | | | | 0:1 | | | | 112:1 | | | | 3:1 | | | | 4:1 | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | | 1.11 | | | | 1.14 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Employee training for FY2020(5) | | | | | | | | | | | | | | | | Average number of hours | | Category | | Total | | | Male | | | Female | | Senior leaders | | | 17 | | | | 17 | | | | 17 | | Managers | | | 17 | | | | 17 | | | | 18 | | Supervisory and professional | | | 30 | | | | 32 | | | | 24 | | Operators and general support | | | 47 | | | | 46 | | | | 51 | | | | | | | | | | | | | | | Total | | | 39 | | | | 39 | | | | 36 | | | | | | | | | | | | | | |
Employee parental leave for FY2020(6) | | | | | | | | | | | | | | | | | By gender | | Number of employees | | | | | | | Parental
leave | | | Return to work | | | Due to
return | | | Return rate % | | Female | | | 731 | | | | 334 | | | | 361 | | | | 93 | | Male | | | 570 | | | | 405 | | | | 411 | | | | 99 | | | | | | | | | | | | | | | | | | | Total | | | 1,301 | | | | 739 | | | | 772 | | | | 96 | | | | | | | | | | | | | | | | | | |
Employee regular performance discussion records for FY2020(7) | | | | | Region | | % | | Asia | | | 95.64 | | Australia | | | 82.88 | | Europe | | | 94.64 | | North America | | | 95.72 | | South America | | | 47.13 | | | | | | | Total | | | 76.85 | | | | | | |
| (1) | Proportional data in Our people section are based on the average of the number of employees at the last day of each calendar month for a 10-month period which calculates the average for the year with the exception of the average number (and %) of employees in the data tables by region which shows the weighted average number of employees based on BHP ownership. There is no significant seasonal variation in employment numbers. |
| (2) | Contractor data is collected from internal surveys and the organisation systems and averages for a 10-month period. |
| (3) | Absenteeism comprises sick leave, hospitalisation leave, and injury on duty, short-term disability, unauthorised absence, industrial action, union absence, unpaid absence and workers’ compensation. |
Contractors are excluded from the Report. The highest paid individual in each significant region has been excluded from the median determination. Salary increases do not include promotional increases. Individuals classified as entry level are those in an Operators and General Support role, and have been with the organisation for less than one year. Minimum wage is determined for all locations except for Singapore and Switzerland, as they do not have a minimum wage mandated by the government. | (5) | The number of training hours has been annualised using data from a 10-month period, July to April, to determine a total for the year. Percentages are calculated using the average of the number of employees at the last day of each calendar month for the same 10-month period. |
| (6) | Return to work rates of employees that took parental leave of 96 per cent. The calculation includes primary parental leave only and does not include secondary parental leave. Secondary parental leave is a two-week parental leave benefit for the non-primary caregiver. All BHP employees are eligible for parental leave. |
| (7) | Data reflects the number of employees as at 30 June 2020 that have at least one performance review record in our core HR system for performance review records. Performance review records for some employees in Chile are not recorded in the core HR system and not captured in this data. |
6.6.2 Society – performance data FY2020 | | | | | | | Community complaints for FY2020(1) | | | | Blasting | | | 7 | | Conduct/behaviour | | | 11 | | Dust | | | 9 | | Lighting | | | 18 | | Noise | | | 22 | | Odour | | | 37 | | Other | | | 6 | | Road/rail | | | 4 | | | | | | | Total | | | 114 | | | | | | |
| | | | | | | | | | | | Operations
located
in or adjacent to
Indigenous
peoples’
territories for
FY2020 | | | Operations with a
formal agreement
with Indigenous
peoples for FY2020 | | Australia | | | 24 | | | | 13 | | Canada | | | 7 | | | | 1 | | Chile | | | 2 | | | | 2 | | USA | | | 2 | | | | 0 | |
| (1) | Based on data reported to BHP’s operated assets. |
6.6.3 Environment – performance data | | | | | | | | | | | | | | | | | | | | | | | 2020 | | | 2019(1) | | | 2018(1) | | Land(2) | | | | | | | | | | | | | | | | | Land owned, leased or managed | | | hectares | | | | 8,704,300 | | | | 10,018,600 | | | | 10,001,500 | | – Land disturbed | | | hectares | | | | 151,000 | | | | 144,413 | | | | 141,500 | | – Land rehabilitated(3) | | | hectares | | | | 26,050 | | | | 25,649 | | | | 27,180 | | – Land set aside for conservation(3)(4) | | | hectares | | | | 66,500 | | | | 66,500 | | | | 28,000 | | Water(5) | | | | | | | | | | | | | | | | | Withdrawals(6) | | | ML | | | | 380,330 | | | | 352,950 | | | | 339,870 | | Water withdrawals by quality – Type 1 | | | ML | | | | 51,610 | | | | 58,850 | | | | 34,900 | | Water withdrawals by quality – Type 2 | | | ML | | | | 35,670 | | | | 37,560 | | | | 44,150 | | Water withdrawals by quality – Type 3 | | | ML | | | | 293,060 | | | | 256,550 | | | | 260,820 | | Water withdrawals by source – Surface water(7) | | | ML | | | | 45,190 | | | | 50,660 | | | | 43,380 | | Water withdrawals by source – Groundwater | | | ML | | | | 123,660 | | | | 140,020 | | | | 134,319 | | Water withdrawals by source – Seawater | | | ML | | | | 211,510 | | | | 162,260 | | | | 162,161 | | Discharges | | | ML | | | | 147,850 | | | | 119,250 | | | | 118,940 | | Water discharges by quality – Type 1 | | | ML | | | | 0 | | | | 0 | | | | 0 | | Water discharges by quality – Type 2 | | | ML | | | | 3,740 | | | | 3,060 | | | | 1,150 | | Water discharges by quality – Type 3 | | | ML | | | | 144,110 | | | | 116,190 | | | | 117,790 | | Water discharges by destination – Surface water | | | ML | | | | 3,970 | | | | 2,940 | | | | 2,730 | | Water discharges by destination – Groundwater | | | ML | | | | 9,440 | | | | 1,540 | | | | 840 | | Water discharges by destination – Seawater | | | ML | | | | 134,116 | | | | 114,460 | | | | 115,040 | | Water discharges by destination – Third party | | | ML | | | | 310 | | | | 320 | | | | 320 | | Consumption(8) | | | ML | | | | 258,120 | | | | 268,620 | | | | | | Consumption – evaporation | | | ML | | | | 126,120 | | | | 139,980 | | | | 140,760 | | Consumption – entrainment | | | ML | | | | 109,550 | | | | 107,270 | | | | 17,870 | | Consumption – other | | | ML | | | | 22,440 | | | | 21,370 | | | | 1,330 | | Recycled/reused | | | ML | | | | 250,090 | | | | 246,420 | | | | 261,620 | | Diversions | | | ML | | | | | | | | | | | | | | Diversions – withdrawals | | | ML | | | | 102,780 | | | | 101,520 | | | | 16,290 | | Diversions – discharges | | | ML | | | | 79,430 | | | | 72,500 | | | | 7,860 | | Waste | | | | | | | | | | | | | | | | | Hazardous waste – Mineral total (including tailings)(9) | | | kt | | | | 15,000 | | | | 13,500 | | | | 13,100 | | Non-hazardous waste – Mineral tailings(9)(10) | | | kt | | | | 175,000 | | | | 167,000 | | | | 137,000 | | Accidental discharges of water and tailings(11)(12) | | | ML | | | | 0 | | | | 0 | | | | 0 | |
Air emissions for FY2020(13) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Petroleum | | | Legacy
sites | | | Queensland
Coal | | | NSWEC | | | WAIO(14) | | | Olympic
Dam | | | Nickel
West | | | Escondida | | | Pampa
Norte | | | Potash | | Total oxides of sulphur | | | tonnes | | | | 43 | | | | 0 | | | | 73 | | | | 15 | | | | 93 | | | | 1,246 | | | | 14,677 | | | | 26 | | | | 99 | | | | 1 | | Total oxides of nitrogen | | | tonnes | | | | 2,824 | | | | 8 | | | | 29,772 | | | | 6,115 | | | | 24,921 | | | | 742 | | | | 3,354 | | | | 10,595 | | | | 4,529 | | | | 38 | |
Regional environment fines levied(12) in FY2020 | | | | | | | | | Regional environment fines levied | | 2020 | | | Number of Fines | | Australia | | | US$216,229 | | | | 6 | | North America | | | US$0 | | | | 0 | | South America | | | US$0 | | | | 0 | |
| (1) | FY2018 and FY2019 data includes Continuing and Discontinued operations (Onshore US assets) and FY2019 data includes Discontinued operations (Onshore US assets) to 28 February 2019 and Continuing operations unless otherwise stated data in italics indicates that data has been adjusted since it was previously reported. Water restatements are because of the change from the Minerals Council of Australia’s Water Accounting Framework to ICMM’s Water Reporting guidelines in 2019 and ongoing improvements in data quality. Land restatement is due to an improvement to BMA data collection. |
| (2) | Land data is calculated as the total land area at the time of reporting. |
| (3) | Data does not include land managed for rehabilitation or conservation as part of social investment. |
| (4) | Material contributor (38,022 ha) includes the Emerald Springs Significant Environment Benefit credit area approved by the South Australian government. |
| (5) | Data has been rounded to the nearest ten to be consistent with asset/regional Water information in this report. In some instances the sum of totals for quality, source and destination may differ due to rounding. All water performance data excludes Discontinued operations (Onshore US). |
| (6) | Third party water withdrawals have been reported by source. |
| (7) | Data includes rainfall and run-off volumes captured and used during the reporting year; rainfall and run-off volumes that have been captured and stored are excluded and will be reported in the future year of use. |
| (8) | Data for water consumption metrics was collected for the first time in FY2019 across all operations. FY2018 data reflects partial volumes collected from Queensland and NSW Energy Coal, WAIO and Pampa Norte operations only. |
| (9) | For tailings related minerals waste these figures represent the total deposited in the reporting year. |
| (10) | Year-on-year movement has been largely caused by an improvement in calculation methodology at our Coal assets from FY2019. |
| (11) | Data reported for environmentally significant incidents. |
| (12) | Does not include the dam failure at Samarco, our non-operated minerals joint venture. |
| (13) | Data drawn from Australian NPI and US EPA Reporting and represent emissions over the 2020 calendar year for all Assets except Olympic Dam and US Petroleum, which report emissions for the FY2020 financial year. |
| (14) | WAIO includes “Other Iron Ore” including “Projects” and “Planning & Technical” data. |
Species distributions for IUCN, the International Union for Conservation of Nature, listed species were downloaded from the Integrated Biodiversity Assessment Tool, provided by Proteus Partners, in June 2020. Analysis was undertaken utilising ArcGIS by identifying all species that occur within the area of influence of BHP’s operated assets, or areas where disturbance activities have been undertaken in the previous 12 months. Lists of national species were identified from relevant national databases where available. Where national databases were not available, species lists were compiled from in-house impact assessment reports and/or management plans. A screening assessment was undertaken to remove any species that occur in biomes or habitats not impacted by the operated asset, or where the operation occurs outside of the known distribution for the species, or where surveys/ monitoring has determined that the species or its habitat does not occur. Where national classifications differ to that utilised by the IUCN, species have been attributed to the category that most closely aligns to their national ranking. In Canada, species may occur under more than one category. In these instances, the higher ranking has been reported. This information is correct as of 30 June 2020 and is subject to change as more information is obtained about species ranges, habitats and impacts from operated assets. Total number of IUCN Red List species and national conservation list species with habitats in areas affected by the operated assets of BHP as at 30 June 2020 Note the following: ☐ Species only included that are listed at an international or national level. ☐ Data obtained for this table from the Integrated Biodiversity Assessment Tool (IBAT) or national species databases (where available). ☐ Not all countries utilise IUCN rankings. In these cases, species have been attributed to the designation that most closely aligns to their national ranking. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Location | | Operated
asset | | Commodity | | IUCN listed species | | | National listed species | | | | Critically
Endangered | | | Endangered | | | Vulnerable | | | Near
Threatened | | | Least
Concern | | | Critically
Endangered | | | Endangered | | | Vulnerable | | Australia | | West Australia | | WAIO | | Iron Ore | | | 3 | | | | 7 | | | | 6 | | | | 12 | | | | 463 | | | | 4 | | | | 7 | | | | 8 | | West Australia | | Nickel West | | Nickel | | | 0 | | | | 2 | | | | 6 | | | | 15 | | | | 394 | | | | 0 | | | | 0 | | | | 1 | | West Australia | | Beenup (closed site) | | Titanium | | | 1 | | | | 4 | | | | 4 | | | | 14 | | | | 283 | | | | 4 | | | | 12 | | | | 8 | | South Australia | | Olympic Dam | | Copper, uranium, gold, silver | | | 1 | | | | 4 | | | | 5 | | | | 11 | | | | 396 | | | | 3 | | | | 7 | | | | 11 | | West Australia, Victoria | | Australian Production Unit | | Oil and Gas | | | 12 | | | | 31 | | | | 122 | | | | 160 | | | | 2094 | | | | 8 | | | | 15 | | | | 46 | | Queensland | | BMC | | Coal | | | 0 | | | | 2 | | | | 6 | | | | 21 | | | | 594 | | | | 3 | | | | 7 | | | | 15 | | Queensland | | BMA | | Coal | | | 8 | | | | 25 | | | | 137 | | | | 177 | | | | 2,250 | | | | 5 | | | | 20 | | | | 36 | | New South Wales | | NSWEC | | Coal | | | 4 | | | | 3 | | | | 17 | | | | 27 | | | | 619 | | | | 6 | | | | 8 | | | | 24 | | Canada | | Saskatchewan | | Jansen | | Potash | | | 0 | | | | 1 | | | | 6 | | | | 8 | | | | 298 | | | | 0 | | | | 2 | | | | 7 | | British Columbia, Nova Scotia, Ontario, Quebec | | Legacy Assets | | Various | | | 4 | | | | 13 | | | | 40 | | | | 50 | | | | 834 | | | | 0 | | | | 215 | | | | 105 | | United States | | Arizona, California, New Mexico, Utah | | Legacy Assets | | Various | | | 5 | | | | 21 | | | | 32 | | | | 29 | | | | 1070 | | | | 0 | | | | 8 | | | | 10 | | Gulf of Mexico | | Gulf of Mexico Production Unit | | Oil and Gas | | | 5 | | | | 13 | | | | 16 | | | | 7 | | | | 494 | | | | 0 | | | | 8 | | | | 13 | | Central America | | Trinidad & Tobago | | Trinidad Production Unit | | Oil and Gas | | | 11 | | | | 17 | | | | 46 | | | | 36 | | | | 1613 | | | | 1 | | | | 1 | | | | 4 | | Mexico | | Trion | | Oil and Gas | | | 5 | | | | 13 | | | | 16 | | | | 6 | | | | 468 | | | | 0 | | | | 13 | | | | 0 | | Chile | | Antofagasta | | Escondida | | Copper | | | 2 | | | | 9 | | | | 9 | | | | 17 | | | | 141 | | | | 2 | | | | 9 | | | | 18 | | Antofagasta | | Pampa Norte | | Copper | | | 2 | | | | 10 | | | | 9 | | | | 17 | | | | 168 | | | | 2 | | | | 5 | | | | 15 | |
Designated Protected Areas (DPAs) were identified by reference to the World Database on Protected Areas, IUCN Red List of Threatened Species, and the World Database of Key Biodiversity Areas, which we access via the Integrated Biodiversity Assessment Tool (IBAT) through our by Proteus partnership. The result reported is as at 30 June of the year of reporting. Analysis was undertaken utilising ArcGIS by identifying all tenure that overlaps with, or occurs within 500 metres, a designated protected area (DPA) or key biodiversity area (KBA). Operated assets were defined as sites for which current, future or historic activities have been undertaken and where a revenue has been received by BHP for these activities. Exploration activities are not to be included unless future operations have been announced, i.e. permits have been received from mining operations. ‘Land managed areas’ are included in this assessment. DPAs and KBAs are only included if they are listed at an international or national level. Operated assets owned, leased, managed in, or adjacent to, protected areas and areas of high biodiversity value outside protected areas as at 30 June 2020 Note the following: Sites only included that are listed at an international or national level. Extractive defined as mining, exploration, closure activities relating to mining, including transportation. Manufacturing/production includes pastoral activities, refineries and other locations where products are made. Some operated assets may include both, but for purposes of disclosure refers to the activity that has the highest operational footprint. In the Area = The entire operated asset occurs within the DPA/HBVA boundary or the entire DPA/HBVA site occurs within the boundary of the operated asset. Adjacent to = The operated asset occurs within 500 metres of the boundary. Contains portions of = The operated asset contains some but not all of the DPA/HBVA site or the DPA/HBVA site contains some but not all of the operated asset. Data obtained for this table from the Integrated Biodiversity Assessment Tool (IBAT). | | | | | | | | | | | | | | | | | | | | | | | | | Country/ Region | | Commodity | | Operated asset | | Operated asset size (km2) | | Type of Operated asset | | Biodiversity Area Classification | | Habitat Type | | Area Name | | Position of owned, leased or managed land relative to DPA
or HBVA | | For DPA - Basis of recognition (i.e. protected status) | | DPA Designation Type | | IUCN Category | | For HBVA - Basis of recognition | Australia | Queensland | | Coal | | BMA | | 1263 | | Extractive | | DPA | | Maritime | | Great Barrier Reef World Heritage Area | | Contains portions of | | World Database on Protected Areas | | International | | NA | | | Queensland | | Coal | | BMA | | 1263 | | Extractive | | DPA | | Terrestrial | | Norwich Park | | Adjacent to | | Nature Refuge | | National | | VI | | | Queensland | | Coal | | BMA | | 880 | | Manufacturing/ production | | Designated Protected Area | | Terrestrial | | Norwich Park | | Contains portions of | | Nature Refuge | | National | | VI | | | Queensland | | Coal | | BMA | | 1263 | | Extractive | | DPA | | Terrestrial | | Blackwater | | Adjacent to | | Conservation Park | | National | | III | | | Queensland | | Coal | | BMA | | 880 | | Manufacturing/ production | | DPA | | Terrestrial | | Kenmare | | Adjacent to | | National Park (scientific) | | National | | VI | | | Queensland | | Coal | | BMC | | 349 | | Extractive | | DPA | | Terrestrial | | Dipperu | | Adjacent to | | National Park | | National | | Ia | | | South Australia | | Copper, uranium, gold, silver | | Olympic Dam | | 21889 | | Manufacturing/ production | | HBVA | | Terrestrial | | Lake Eyre | | Adjacent to | | | | | | | | IBA - migratory birds/congregations | South Australia | | Copper, uranium, gold, silver | | Olympic Dam | | 21889 | | Manufacturing/ production | | HBVA | | Terrestrial | | Strezelecki Desert Lakes | | Adjacent to | | | | | | | | IBA - endemic, migratory birds/congregations, other | South Australia | | Copper, uranium, gold, silver | | Olympic Dam | | 21889 | | Manufacturing/ production | | HBVA | | Terrestrial | | Lake Torrens | | Contains portions of | | | | | | | | IBA - migratory birds/congregations | South Australia | | Copper, uranium, gold, silver | | Olympic Dam | | 21889 | | Manufacturing/ production | | HBVA | | Terrestrial | | Arcoona Lakes | | Contains portions of | | | | | | | | IBA - migratory birds/congregations | South Australia | | Copper, uranium, gold, silver | | Olympic Dam | | 21889 | | Manufacturing/ production | | DPA | | Terrestrial | | Witchelina Nature Reserve | | Adjacent to | | Heritage Agreement | | National | | Ia | | | South Australia | | Copper, uranium, gold, silver | | Olympic Dam | | 21889 | | Manufacturing/ production | | DPA | | Terrestrial | | Lake Torrens National Park | | Contains portions of | | National Park | | National | | VI | | | South Australia | | Copper, uranium, gold, silver | | Olympic Dam | | 21889 | | Manufacturing/ production | | DPA | | Terrestrial | | Strezelecki Regional Reserve | | Adjacent to | | Regional Reserve | | National | | VI | | | South Australia | | Copper, uranium, gold, silver | | Olympic Dam | | 21889 | | Manufacturing/ production | | DPA | | Terrestrial | | Elliot Price Conservation Park | | Adjacent to | | Conservation Park | | National | | Ia | | | South Australia | | Copper, uranium, gold, silver | | Olympic Dam | | 21889 | | Manufacturing/ production | | DPA | | Terrestrial | | Kati Thanda-Lake Eyre | | Adjacent to | | National Park | | National | | VI | | | South Australia | | Copper, uranium, gold, silver | | Olympic Dam | | 21889 | | Manufacturing/ production | | DPA | | Terrestrial | | Wabma Kadarbu Mound Springs | | Adjacent to | | Conservation Park | | National | | III | | |
| | | | | | | | | | | | | | | | | | | | | | | | | Country/ Region | | Commodity | | Operated asset | | Operated asset size (km2) | | Type of Operated asset | | Biodiversity Area Classification | | Habitat Type | | Area Name | | Position of owned, leased or managed land relative to DPA
or HBVA | | For DPA - Basis of recognition (i.e. protected status) | | DPA Designation Type | | IUCN Category | | For HBVA - Basis of recognition | South Australia | | Copper, uranium, gold, silver | | Olympic Dam | | 21889 | | Manufacturing/ production | | DPA | | Freshwater | | Coongie Lakes | | Contains portions of | | Ramsar Site, Wetland of International Importance | | International | | Not Reported | | | South Australia | | Copper, uranium, gold, silver | | Olympic Dam | | 21889 | | Manufacturing/ production | | DPA | | Terrestrial | | Unnamed (No.HA1545) | | In the Area | | Heritage Agreement | | National | | III | | | South Australia | | Copper, uranium, gold, silver | | Olympic Dam | | 21889 | | Manufacturing/ production | | DPA | | Terrestrial | | Unnamed (No.HA1022) | | Adjacent to | | Heritage Agreement | | National | | III | | | Western Australia | | Nickel | | NiW | | 5414 | | Manufacturing/ production | | DPA | | Terrestrial | | Wanjarri | | Adjacent to | | Nature Reserve | | National | | Ia | | | Western Australia | | Nickel | | NiW | | 1384 | | Extractive | | DPA | | Terrestrial | | Wanjarri | | Adjacent to | | Nature Reserve | | National | | Ia | | | Western Australia | | Nickel | | NiW | | 5414 | | Manufacturing/ production | | DPA | | Terrestrial | | Kambalda | | Adjacent to | | Nature Reserve | | National | | Ia | | | Western Australia | | Nickel | | NiW | | 5414 | | Manufacturing/ production | | DPA | | Terrestrial | | Dordie Rocks | | Adjacent to | | Nature Reserve | | National | | II | | | Western Australia | | Nickel | | NiW | | 5414 | | Manufacturing/ production | | DPA | | Terrestrial | | Leda | | Adjacent to | | Nature Reserve | | National | | Ia | | | Western Australia | | Nickel | | NiW | | 5414 | | Manufacturing/ production | | DPA | | Terrestrial | | Unnamed WA51658 | | Adjacent to | | 5(1)(h) Reserve | | National | | II | | | Western Australia | | Iron ore | | WAIO | | 3667 | | Extractive | | DPA | | Terrestrial | | Karijini | | Adjacent to | | National Park | | National | | II | | | Western Australia | | Iron ore | | WAIO | | 3667 | | Extractive | | HBVA | | Freshwater | | Fortescue Marshes | | Contains portions of | | | | | | | | IBA - CR/EN, VU, migratory birds/congregations, others | Western Australia | | Iron ore | | WAIO | | 8295 | | Manufacturing/ production | | HBVA | | Freshwater | | Fortescue Marshes | | Adjacent to | | | | | | | | IBA - CR/EN, VU, migratory birds/congregations, others | Western Australia | | Titanium | | Beenup | | 3 | | Extractive | | DPA | | Terrestrial | | Scott National Park | | Adjacent to | | National Park | | National | | II | | | Western Australia | | Oil and Gas | | Pyrenees | | 558 | | Manufacturing/ production | | DPA | | Maritime | | Ningaloo | | Adjacent to | | Australian Marine Park | | National | | II | | | Western Australia | | Oil and Gas | | Pyrenees | | 558 | | Manufacturing/ production | | DPA | | Maritime | | Ningaloo Coast | | Adjacent to | | World Heritage Site (natural or mixed) | | International | | NA | | | Western Australia | | Oil and Gas | | Stybarrow | | 240 | | Manufacturing/ production | | DPA | | Maritime | | Gascoyne | | Adjacent to | | Australian Marine Park | | National | | VI | | | Victoria | | Oil and Gas | | Minerva | | 66 | | Manufacturing/ production | | DPA | | Terrestrial | | Port Campbell | | Contains portions of | | National Park | | National | | II | | |
| | | | | | | | | | | | | | | | | | | | | | | | | Country/ Region | | Commodity | | Operated asset | | Operated asset size (km2) | | Type of Operated asset | | Biodiversity Area Classification | | Habitat Type | | Area Name | | Position of owned, leased or managed land relative to DPA
or HBVA | | For DPA - Basis of recognition (i.e. protected status) | | DPA Designation Type | | IUCN Category | | For HBVA - Basis of recognition | Canada | Saskatchewan | | Potash | | Jansen | | 56 | | Extractive | | DPA | | Terrestrial | | Private Conservation Lands | | Adjacent to | | Private Conservation Lands | | National | | IV | | | Nova Scotia | | Legacy Assets / Closed Sites / R&CM | | East Kemptville | | 11 | | Extractive | | DPA | | Terrestrial | | Tobeatic Wilderness | | Adjacent to | | Wilderness Area | | National | | Ib | | | United States | Arizona | | Legacy Assets / Closed Sites / R&CM | | San Manuel | | 115 | | Extractive | | HBVA | | Terrestrial | | Lower San Pedro River | | Contains portions of | | | | | | | | IBA - other | Chile | Antofagasta | | Copper | | Spence | | 627 | | Extractive | | HBVA | | Terrestrial | | Reserva Nacional Los Flamencos-Soncor | | Adjacent to | | | | | | | | IBA - VU, migratory birds/ congregations | Antofagasta | | Copper | | Spence | | 627 | | Extractive | | DPA | | Terrestrial | | Los Flamencos | | Adjacent to | | National Reserve | | National | | IV | | | Antofagasta | | Copper | | Escondida | | 4019 | | Extractive | | DPA | | Terrestrial | | Llullaillaco | | In the Area | | National Park | | National | | II | | | Antofagasta | | Copper | | Escondida | | 4019 | | Extractive | | HBVA | | Terrestrial | | Bahía de Mejillones | | Contains portions of | | | | | | | | IBA - CR/EN, migratory birds/ congregations |
6.6.4 Climate change – performance data(1) 6.5.1 Energy consumption(2)
Operational energy consumption by source | | | | Year ended
30 June | | | Operational energy consumption (petajoules) | | 2019 | | | 2018 | | | 2017 | | | | | | | Year ended 30 June | | Operational energy consumption (PJ) | | | 2020 | | 2019 | | 2018 | | 2017 | | Consumption of fuel | | | 114 | | | | 115 | | | | 112 | | | | 114 | | | 114 | | | 115 | | | 112 | | – Coal & coke | | | 1 | | | | 1 | | | | 1 | | | | | | | 100 | % | | 100 | % | | 100 | % | | 100 | % | – Coal and coke | | | | 1 | | | 1 | | | 1 | | | 1 | | | | | | 1 | % | | 1 | % | | 1 | % | | 1 | % | – Natural gas | | | 24 | | | | 31 | | | | 33 | | | | 21 | | | 24 | | | 31 | | | 33 | | – Distillate/Gasoline | | | 87 | | | | 81 | | �� | | 76 | | | | | | | 18 | % | | 21 | % | | 27 | % | | 30 | % | – Distillate/gasoline | | | | 90 | | | 87 | | | 81 | | | 76 | | | | | | 79 | % | | 76 | % | | 71 | % | | 68 | % | – Other | | | 3 | | | | 2 | | | | 2 | | | | 2 | | | 3 | | | 2 | | | 2 | | | | | | 2 | % | | 2 | % | | 2 | % | | 2 | % | Consumption of electricity | | | 35 | | | | 35 | | | | 28 | | | | 36 | | | 35 | | | 35 | | | 28 | | | | | | 100 | % | | 100 | % | | 100 | % | | 100 | % | Consumption of electricity from grid | | | | 32 | | | 31 | | | 31 | | | 24 | | Percentage consumption of electricity from grid | | | | 88 | % | | 88 | % | | 89 | % | | 85 | % | | | | | | | | | | | | | | | | | | | | | | | Total operational energy consumption | | | 149 | | | | 150 | | | | 140 | | | | 150 | | | | 149 | | | | 150 | | | | 140 | | | | | | | | | | | | | | | | | | | | | | | | Operational energy consumption from renewable sources (petajoules) | | | 0.31 | | | | 0.38 | | | | 0.26 | | | Operational energy intensity (gigajoules per tonne of copper equivalent production) (3) | | | 22 | | | | 21 | | | | 19 | | | Operational energy consumption from renewable sources (PJ) | | | | 0.04 | | | | 0.05 | | | | 0.05 | | | | 0.04 | | | | | | 0.03 | % | | 0.04 | % | | 0.04 | % | | 0.04 | % | Operational energy intensity (GJ per tonne of copper equivalent production) (3) | | | | 19 | | | 22 | | | 21 | | | 19 | | | | | | | Year ended 30 June | | Operational energy consumption (TWh) | | | 2020 | | 2019 | | 2018 | | 2017 | | Consumption of fuel | | | | 31.6 | | | 31.6 | | | 31.9 | | | 31.1 | | – Coal and coke | | | | 0.2 | | | 0.2 | | | 0.2 | | | 0.2 | | – Natural gas | | | | 5.8 | | | 6.6 | | | 8.6 | | | 9.2 | | – Distillate/gasoline | | | | 25.0 | | | 24.1 | | | 22.6 | | | 21.0 | | – Other | | | | 0.6 | | | 0.7 | | | 0.6 | | | 0.6 | | Consumption of electricity | | | | 10.1 | | | 9.6 | | | 9.6 | | | 7.8 | | Consumption of electricity from grid | | | | 8.9 | | | 8.5 | | | 8.5 | | | 6.6 | | | | | | | | | | | | | | | | Total operational energy consumption | | | | 42 | | | 41 | | | 42 | | | 39 | | | | | | | | | | | | | | | | Operational energy consumption from renewable sources (TWh) | | | | 0.01 | | | | 0.01 | | | | 0.01 | | | | 0.01 | |
Operational energy consumption by commodity | Year ended 30 June 2019 | | Consumption
of fuel
(petajoules) | | | Consumption
of electricity
(petajoules) | | | Total
operational
energy
consumption
(petajoules) | | | Year ended 30 June 2020 | | | Consumption
of fuel
(PJ) | | | Consumption
of electricity
(PJ) | | | Total
operational
energy
consumption
(PJ) | | Petroleum | | | 15.0 | | | | 0.2 | | | | 15.2 | | | | 11.1 | | | | 0.1 | | | | 11.2 | | Copper | | | 20.7 | | | | 24.6 | | | | 45.3 | | | | 20.5 | | | | 26.2 | | | | 46.7 | | Iron Ore | | | 31.0 | | | | 1.2 | | | | 32.2 | | | Iron ore | | | | 33.3 | | | | 1.2 | | | | 34.5 | | Coal | | | 39.3 | | | | 5.3 | | | | 44.6 | | | | 40.7 | | | | 5.3 | | | | 46.0 | | Nickel | | | | 7.9 | | | | 3.4 | | | | 11.3 | | | | | | | | | | | | | | | | | | | | | Total | | | 114.4 | | | | 34.6 | | | | 149.0 | | | | 114 | | | | 36 | | | | 150 | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | Year ended 30 June 2018 | | Consumption
of fuel
(petajoules) | | | Consumption
of electricity
(petajoules) | | | Total
operational
energy
consumption
(petajoules) | | Petroleum | | | 24.1 | | | | 0.3 | | | | 24.4 | | Copper | | | 19.6 | | | | 24.6 | | | | 44.2 | | Iron Ore | | | 29.3 | | | | 1.2 | | | | 30.5 | | Coal | | | 34.7 | | | | 5.2 | | | | 39.9 | | | | | | | | | | | | | | | Total | | | 115.5 | | | | 34.5 | | | | 150.0 | | | | | | | | | | | | | | |
269
| | | | | | | | | | | | | Year ended 30 June 2019 | | Consumption
of fuel
(PJ) | | | Consumption
of electricity
(PJ) | | | Total
operational
energy
consumption
(PJ) | | Petroleum | | | 15.0 | | | | 0.2 | | | | 15.2 | | Copper | | | 20.7 | | | | 24.6 | | | | 45.3 | | Iron ore | | | 31.0 | | | | 1.2 | | | | 32.2 | | Coal | | | 39.3 | | | | 5.3 | | | | 44.6 | | Nickel | | | 7.7 | | | | 3.2 | | | | 10.9 | | | | | | | | | | | | | | | Total | | | 114 | | | | 35 | | | | 149 | | | | | | | | | | | | | | |
6.5.2 Greenhouse gas emissions
Operational GHG emissions by source (2)(4)(5) | | | | | | | | | | | | | | | | Year ended 30 June | | Operational GHG emissions (million tonnes CO2-e) | | 2019 | | | 2018 | | | 2017 | | Scope 1 GHG emissions (6) | | | 9.7 | | | | 10.6 | | | | 10.5 | | Scope 2 GHG emissions (7) | | | 5.0 | | | | 5.9 | | | | 5.8 | | | | | | | | | | | | | | | Total operational GHG emissions | | | 14.7 | | | | 16.5 | | | | 16.3 | | | | | | | | | | | | | | | Operational GHG emissions intensity (tonnes CO2-e per tonne of copper equivalent production) (3) | | | 2.2 | | | | 2.3 | | | | 2.2 | | Operational GHG emissions by commodity and asset (4)(5) | | | | | | | | | | | | | | | | | Year ended 30 June 2019 | | Scope 1
GHG
emissions
(kilotonnes
CO2-e) | | | Scope 2
GHG
emissions
(kilotonnes
CO2-e) | | | Operational
GHG
emissions
Total
(kilotonnes
CO2-e) | | Petroleum | | | | | | | | | | | | | United States – Conventional | | | 200 | | | | 0 | | | | 200 | | United States – US Onshore (8) | | | 467 | | | | 3 | | | | 470 | | Australia | | | 320 | | | | 0 | | | | 320 | | Other | | | 250 | | | | 10 | | | | 260 | | | | | | | | | | | | | | | Total petroleum | | | 1,237 | | | | 13 | | | | 1,250 | | | | | | | | | | | | | | | Copper | | | | | | | | | | | | | Escondida, Chile | | | 930 | | | | 2,140 | | | | 3,070 | | Pampa Norte, Chile | | | 340 | | | | 330 | | | | 670 | | Olympic Dam, Australia | | | 200 | | | | 470 | | | | 670 | | | | | | | | | | | | | | | Total copper | | | 1,470 | | | | 2,940 | | | | 4,410 | | | | | | | | | | | | | | | Iron Ore | | | | | | | | | | | | | Western Australia Iron Ore, Australia | | | 2,050 | | | | 260 | | | | 2,310 | | | | | | | | | | | | | | | Total iron ore | | | 2,050 | | | | 260 | | | | 2,310 | | | | | | | | | | | | | | | Coal | | | | | | | | | | | | | Metallurgical coal – Queensland Coal, Australia | | | 3,980 | | | | 1,090 | | | | 5,070 | | Energy coal – New South Wales Energy Coal, Australia | | | 520 | | | | 90 | | | | 610 | | | | | | | | | | | | | | | Total coal | | | 4,500 | | | | 1,180 | | | | 5,680 | | | | | | | | | | | | | | | Nickel | | | | | | | | | | | | | Nickel West, Australia | | | 460 | | | | 530 | | | | 990 | | | | | | | | | | | | | | | Total nickel | | | 460 | | | | 530 | | | | 990 | | | | | | | | | | | | | | | Total (9) | | | 9,730 | | | | 4,970 | | | | 14,700 | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | Year ended 30 June | | Operational GHG emissions (Mt CO2-e) | | 2020 | | | 2019 | | | 2018 | | | 2017 | | Scope 1 GHG emissions (6) | | | 9.5 | | | | 9.7 | | | | 10.6 | | | | 10.5 | | Scope 2 GHG emissions (7) | | | 6.3 | | | | 6.1 | | | | 6.4 | | | | 5.8 | | | | | | | | | | | | | | | | | | | Total operational GHG emissions | | | 15.8 | | | | 15.8 | | | | 17.0 | | | | 16.3 | | | | | | | | | | | | | | | | | | | Total operational GHG emissions (adjusted for Discontinued operations) (8) | | | 15.8 | | | | 15.3 | | | | 15.3 | | | | 14.6 | | | | | | | | | | | | | | | | | | | Operational GHG emissions intensity (tonnes CO2-e per tonne of copper equivalent production) (3) | | | 2.0 | | | | 2.4 | | | | 2.4 | | | | 2.2 | | Percentage of Scope 1 GHG emissions covered under an emissions-limiting regulation (9) | | | 79 | % | | | 74 | % | | | 81 | % | | | 79 | % | Percentage of Scope 1 GHG emissions from methane | | | 19 | % | | | 19 | % | | | 21 | % | | | 20 | % | Scope 2 GHG emissions (location based) (7) | | | 5.1 | | | | 5.1 | | | | 6.1 | | | | 6.0 | |
Operational Scope 1 GHG emissions from Petroleum operations by source (kt CO2-e) (10) 270
| | | | | | | | | | | | | | | | | | | | Year ended 30 June 2020 | | | | | Other
combustion | | | Process
emissions | | | Other
vented
emissions | | | Fugitive
emissions
from
operations | | Scope 1 GHG emissions | | | 586.3 | | | | 0.3 | | | | 0.0 | | | | 180.3 | |
| | | | | | | | | | | | | Year ended 30 June 2018 | | Scope 1
GHG
emissions
(kilotonnes
CO2-e) | | | Scope 2
GHG
emissions
(kilotonnes
CO2-e) | | | Operational
GHG
emissions
Total
(kilotonnes
CO2-e) | | Petroleum | | | | | | | | | | | | | United States – Conventional | | | 220 | | | | 0 | | | | 220 | | United States – US Onshore | | | 1,680 | | | | 10 | | | | 1,690 | | Australia | | | 430 | | | | 0 | | | | 430 | | Other | | | 240 | | | | 0 | | | | 240 | | | | | | | | | | | | | | | Total petroleum | | | 2,570 | | | | 10 | | | | 2,580 | | | | | | | | | | | | | | | Copper | | Escondida, Chile | | | 890 | | | | 3,040 | | | | 3,930 | | Pampa Norte, Chile | | | 320 | | | | 480 | | | | 800 | | Olympic Dam, Australia | | | 180 | | | | 420 | | | | 600 | | | | | | | | | | | | | | | Total copper | | | 1,390 | | | | 3,940 | | | | 5,330 | | | | | | | | | | | | | | | Iron Ore | | | | | | | | | | | | | Western Australia Iron Ore, Australia | | | 1,930 | | | | 260 | | | | 2,190 | | | | | | | | | | | | | | | Total iron ore | | | 1,930 | | | | 260 | | | | 2,190 | | | | | | | | | | | | | | | Coal | | | | | | | | | | | | | Metallurgical coal – Queensland Coal, Australia | | | 3,820 | | | | 1,070 | | | | 4,890 | | Energy coal – New South Wales Energy Coal, Australia | | | 460 | | | | 80 | | | | 540 | | | | | | | | | | | | | | | Total coal | | | 4,280 | | | | 1,150 | | | | 5,430 | | | | | | | | | | | | | | | Nickel | | | | | | | | | | | | | Nickel West, Australia | | | 380 | | | | 540 | | | | 920 | | | | | | | | | | | | | | | Total nickel | | | 380 | | | | 540 | | | | 920 | | | | | | | | | | | | | | | Total (9) | | | 10,590 | | | | 5,950 | | | | 16,540 | | | | | | | | | | | | | | | | | | | Scope 3 GHG emissions by category (10) | | | | | | | | | | | | | | | | | | Year ended 30 June | | Scope 3 GHG emissions (million tonnes CO2-e) | | 2019 | | | 2018 | | | 2017 | | Upstream | | | | | | | | | | | | | Purchased goods and services (including capital goods) | | | 17.3 | | | | 8.2 | | | | 7.7 | | Fuel and energy related activities | | | 1.3 | | | | 1.4 | | | | 1.4 | | Upstream transportation and distribution (11) | | | 3.6 | | | | 3.6 | | | | 3.2 | | Business travel | | | 0.1 | | | | 0.1 | | | | 0.1 | | Employee commuting | | | <0.1 | | | | <0.1 | | | | <0.1 | | Downstream | | | | | | | | | | | | | Downstream transportation and distribution (12) | | | 4.0 | | | | 5.0 | | | | 2.8 | | Investments (i.e. our non-operated assets) (13) | | | 3.1 | | | | 1.7 | | | | 1.9 | | Processing of sold products (14) | | | | | | | | | | | | | Iron ore processing (15) | | | 299.6 | | | | 317.4 | | | | 309.5 | | Copper processing | | | 5.1 | | | | 5.2 | | | | 4.2 | | | | | | | | | | | | | | | Total processing of sold products | | | 304.7 | | | | 322.6 | | | | 313.7 | | | | | | | | | | | | | | | Use of sold products | | | | | | | | | | | | | Metallurgical coal(15) | | | 111.4 | | | | 112.3 | | | | 105.5 | | Energy coal | | | 67.0 | | | | 71.0 | | | | 72.1 | | Natural gas | | | 28.3 | | | | 36.4 | | | | 38.3 | | Crude oil and condensates (16) | | | 23.3 | | | | 29.6 | | | | 33.1 | | Natural gas liquids | | | 2.8 | | | | 4.5 | | | | 5.1 | | | | | | | | | | | | | | | Total use of sold products | | | 232.7 | | | | 253.8 | | | | 254.1 | | | | | | | | | | | | | | |
Operational GHG emissions by commodity and asset (2)(4)(5) 271
| | | | | | | | | | | | | | | | | Year ended 30 June 2020 | | Scope 1
GHG
emissions
(kt CO2-e) | | | Scope 2
GHG
emissions
(kt CO2-e) | | | Operational
GHG
emissions
Total
(kt CO2-e) | | | Operational
GHG
emissions
intensity
(kt CO2-e/unit
of
production) (12) | | Petroleum | | | | | | | | | | | | | | | | | United States – Conventional | | | 200 | | | | – | | | | 200 | | | | 0.03 | | Australia | | | 350 | | | | – | | | | 350 | | | | 0.03 | | Other | | | 200 | | | | 20 | | | | 220 | | | | 0.02 | | | | | | | | | | | | | | | | | | | Total petroleum | | | 750 | | | | 20 | | | | 770 | | | | 0.03 | | | | | | | | | | | | | | | | | | | Copper | | | | | | | | | | | | | | | | | Escondida, Chile | | | 860 | | | | 3,260 | | | | 4,120 | | | | 3.48 | | Pampa Norte, Chile | | | 360 | | | | 530 | | | | 890 | | | | 3.67 | | Olympic Dam, Australia | | | 230 | | | | 450 | | | | 680 | | | | 3.96 | | | | | | | | | | | | | | | | | | | Total copper | | | 1,450 | | | | 4,240 | | | | 5,690 | | | | 3.56 | | | | | | | | | | | | | | | | | | | Iron ore | | | | | | | | | | | | | | | | | Western Australia Iron Ore, Australia | | | 2,210 | | | | 260 | | | | 2,470 | | | | 0.01 | | | | | | | | | | | | | | | | | | | Total iron ore | | | 2,210 | | | | 260 | | | | 2,470 | | | | 0.01 | | | | | | | | | | | | | | | | | | | Coal | | | | | | | | | | | | | | | | | Metallurgical coal – Queensland Coal, Australia | | | 4,040 | | | | 1,120 | | | | 5,160 | | | | 0.07 | | Energy coal – New South Wales Energy Coal, Australia | | | 530 | | | | 80 | | | | 610 | | | | 0.04 | | | | | | | | | | | | | | | | | | | Total coal | | | 4,570 | | | | 1,200 | | | | 5,770 | | | | 0.07 | | | | | | | | | | | | | | | | | | | Nickel | | | | | | | | | | | | | | | | | Nickel West, Australia | | | 490 | | | | 550 | | | | 1,040 | | | | 12.86 | | | | | | | | | | | | | | | | | | | Total nickel | | | 490 | | | | 550 | | | | 1,040 | | | | 12.86 | | | | | | | | | | | | | | | | | | | Total (11) | | | 9,490 | | | | 6,280 | | | | 15,800 | | | | | | | | | | | | | | | | | | | | | | | Emissions from Discontinued operations | | | 0 | | | | 0 | | | | 0 | | | | | | | | | | | | | | | | | | | | | | | Total (excluding Discontinued operations) (8)(11) | | | 9,490 | | | | 6,280 | | | | 15,800 | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | Year ended 30 June 2019 | | Scope 1
GHG
emissions
(kt CO2-e) | | | Scope 2
GHG
emissions
(kt CO2-e) | | | Operational
GHG
emissions
Total
(kt CO2-e) | | | Operational
GHG
emissions
intensity
(kt CO2-e/unit
of
production) (12) | | Petroleum | | | | | | | | | | | | | | | | | United States – Conventional | | | 200 | | | | – | | | | 200 | | | | 0.02 | | Australia | | | 310 | | | | – | | | | 310 | | | | 0.03 | | Other | | | 250 | | | | 20 | | | | 270 | | | | 0.03 | | | | | | | | | | | | | | | | | | | Total petroleum | | | 760 | | | | 20 | | | | 780 | | | | 0.02 | | | | | | | | | | | | | | | | | | | Copper | | | | | | | | | | | | | | | | | Escondida, Chile | | | 930 | | | | 3,060 | | | | 3,990 | | | | 3.51 | | Pampa Norte, Chile | | | 340 | | | | 530 | | | | 870 | | | | 3.53 | | Olympic Dam, Australia | | | 200 | | | | 470 | | | | 670 | | | | 4.18 | | | | | | | | | | | | | | | | | | | Total copper | | | 1,470 | | | | 4,060 | | | | 5,530 | | | | 3.59 | | | | | | | | | | | | | | | | | | | Iron Ore | | | | | | | | | | | | | | | | | Western Australia Iron Ore, Australia | | | 2,050 | | | | 260 | | | | 2,310 | | | | 0.01 | | | | | | | | | | | | | | | | | | | Total iron ore | | | 2,050 | | | | 260 | | | | 2,310 | | | | 0.01 | | | | | | | | | | | | | | | | | | | Coal | | | | | | | | | | | | | | | | | Metallurgical coal – Queensland Coal, Australia | | | 3,980 | | | | 1,090 | | | | 5,070 | | | | 0.07 | | Energy coal – New South Wales Energy Coal, Australia | | | 520 | | | | 90 | | | | 610 | | | | 0.03 | | | | | | | | | | | | | | | | | | | Total coal | | | 4,500 | | | | 1,180 | | | | 5,680 | | | | 0.06 | | | | | | | | | | | | | | | | | | | Nickel | | | | | | | | | | | | | | | | | Nickel West, Australia | | | 460 | | | | 530 | | | | 990 | | | | 11.21 | | | | | | | | | | | | | | | | | | | Total nickel | | | 460 | | | | 530 | | | | 990 | | | | 11.21 | | | | | | | | | | | | | | | | | | | Total (11) | | | 9,730 | | | | 6,080 | | | | 15,810 | | | | | | | | | | | | | | | | | | | | | | | Emissions from Discontinued operations | | | 470 | | | | 0 | | | | 470 | | | | | | | | | | | | | | | | | | | | | | | Total (excluding Discontinued operations) (8)(11) | | | 9,260 | | | | 6,080 | | | | 15,340 | | | | | | | | | | | | | | | | | | | | | | |
Equity share GHG emissions by commodity and asset (4)(13) | | | | | | | | | | | | | Year ended 30 June 2020 | | Scope 1
GHG
emissions
(kt CO2-e) | | | Scope 2
GHG
emissions
(kt CO2-e) | | | Equity share
GHG
emissions
Total
(kt CO2-e) | | Petroleum | | | | | | | | | | | | | United States – Conventional | | | 80 | | | | – | | | | 80 | | Australia | | | 250 | | | | – | | | | 250 | | Other | | | 90 | | | | 10 | | | | 100 | | | | | | | | | | | | | | | Total petroleum | | | 420 | | | | 10 | | | | 430 | | | | | | | | | | | | | | | Copper | | | | | | | | | | | | | Escondida, Chile | | | 490 | | | | 1,880 | | | | 2,370 | | Pampa Norte, Chile | | | 360 | | | | 530 | | | | 890 | | Olympic Dam, Australia | | | 230 | | | | 450 | | | | 680 | | | | | | | | | | | | | | | Total copper | | | 1,080 | | | | 2,860 | | | | 3,940 | | | | | | | | | | | | | | | Iron Ore | | | | | | | | | | | | | Western Australia Iron Ore, Australia | | | 1,900 | | | | 220 | | | | 2,120 | | | | | | | | | | | | | | | Total iron ore | | | 1,900 | | | | 220 | | | | 2,120 | | | | | | | | | | | | | | | Coal | | | | | | | | | | | | | Metallurgical coal – Queensland Coal, Australia | | | 2,150 | | | | 580 | | | | 2,730 | | Energy coal – New South Wales Energy Coal, Australia | | | 530 | | | | 80 | | | | 610 | | | | | | | | | | | | | | | Total coal | | | 2,680 | | | | 660 | | | | 3,340 | | | | | | | | | | | | | | | Nickel | | | | | | | | | | | | | Nickel West, Australia | | | 490 | | | | 550 | | | | 1,040 | | | | | | | | | | | | | | | Total nickel | | | 490 | | | | 550 | | | | 1,040 | | | | | | | | | | | | | | | Non-operated assets (15) | | | 3,800 | | | | 130 | | | | 3,930 | | | | | | | | | | | | | | | Total (11) | | | 10,400 | | | | 4,440 | | | | 14,840 | | | | | | | | | | | | | | | Emissions from Discontinued operations | | | 0 | | | | 0 | | | | 0 | | | | | | | | | | | | | | | Total (excluding Discontinued operations) (8)(11) | | | 10,400 | | | | 4,440 | | | | 14,840 | | | | | | | | | | | | | | |
Financial control GHG emissions by commodity and asset (4)(14) | | | | | | | | | | | | | Year ended 30 June 2020 | | Scope 1
GHG
emissions
(kt CO2-e) | | | Scope 2
GHG
emissions
(kt CO2-e) | | | Financial
control
GHG
emissions
Total
(kt CO2-e) | | Petroleum | | | | | | | | | | | | | United States – Conventional | | | 80 | | | | 0 | | �� | | 80 | | Australia | | | 250 | | | | 0 | | | | 250 | | Other | | | 90 | | | | 10 | | | | 100 | | | | | | | | | | | | | | | Total petroleum | | | 420 | | | | 10 | | | | 430 | | | | | | | | | | | | | | | Copper | | | | | | | | | | | | | Escondida, Chile | | | 860 | | | | 3,260 | | | | 4,120 | | Pampa Norte, Chile | | | 360 | | | | 530 | | | | 890 | | Olympic Dam, Australia | | | 230 | | | | 450 | | | | 680 | | | | | | | | | | | | | | | Total copper | | | 1,450 | | | | 4,240 | | | | 5,690 | | | | | | | | | | | | | | | Iron ore | | | | | | | | | | | | | Western Australia Iron Ore, Australia | | | 1,920 | | | | 220 | | | | 2,140 | | | | | | | | | | | | | | | Total iron ore | | | 1,920 | | | | 220 | | | | 2,140 | | | | | | | | | | | | | | | Coal | | | | | | | | | | | | | Metallurgical coal – Queensland Coal, Australia | | | 2,240 | | | | 590 | | | | 2,830 | | Energy coal – New South Wales Energy Coal, Australia | | | 530 | | | | 80 | | | | 610 | | | | | | | | | | | | | | | Total coal | | | 2,770 | | | | 670 | | | | 3,440 | | | | | | | | | | | | | | | Nickel | | | | | | | | | | | | | Nickel West, Australia | | | 490 | | | | 550 | | | | 1,040 | | | | | | | | | | | | | | | Total nickel | | | 490 | | | | 550 | | | | 1,040 | | | | | | | | | | | | | | | Non-operated assets (15) | | | 3,430 | | | | 10 | | | | 3,440 | | | | | | | | | | | | | | | Total (11) | | | 10,510 | | | | 5,730 | | | | 16,240 | | | | | | | | | | | | | | | Emissions from Discontinued operations | | | 0 | | | | 0 | | | | 0 | | | | | | | | | | | | | | | Total (excluding Discontinued operations) (8)(11) | | | 10,510 | | | | 5,730 | | | | 16,240 | | | | | | | | | | | | | | |
Scope 3 GHG emissions by category (16) | | | | | | | | | | | | | | | | | | | | Year ended 30 June | | | | | 2020 | | | 2019 | | | 2018 | | | 2017 | | Scope 3 GHG emissions (Mt CO2-e) | | | | | | | | | | | | | | | | | Upstream | | | | | | | | | | | | | | | | | Purchased goods and services (including capital goods) | | | 16.9 | | | | 17.3 | | | | 8.2 | | | | 7.7 | | Fuel and energy related activities | | | 1.3 | | | | 1.3 | | | | 1.4 | | | | 1.4 | | Upstream transportation and distribution (17) | | | 3.8 | | | | 3.6 | | | | 3.6 | | | | 3.2 | | Business travel | | | 0.1 | | | | 0.1 | | | | 0.1 | | | | 0.1 | | Employee commuting | | | 0.2 | | | | <0.1 | | | | <0.1 | | | | <0.1 | | Downstream | | | | | | | | | | | | | | | | | Downstream transportation and distribution (18) | | | 4.0 | | | | 4.0 | | | | 5.0 | | | | 2.8 | | Investments (i.e. our non-operated assets) (19) | | | 3.9 | | | | 3.1 | | | | 1.7 | | | | 1.9 | | Processing of sold products (20) | | | | | | | | | | | | | | | | | Iron ore processing (21) | | | 205.6-322.6 | | | | 197.2-299.6 | | | | 201.2-317.4 | | | | 194.1-309.5 | | Copper processing | | | 5.2 | | | | 5.1 | | | | 5.2 | | | | 4.2 | | | | | | | | | | | | | | | | | | | Total processing of sold products | | | 210.8-327.8 | | | | 202.3-304.7 | | | | 206.4-322.6 | | | | 198.3-313.7 | | | | | | | | | | | | | | | | | | | Use of sold products | | | | | | | | | | | | | | | | | Metallurgical coal (21) | | | 33.7-108.2 | | | | 34.7-111.4 | | | | 35.0-112.3 | | | | 32.5-105.5 | | Energy coal (22) | | | 56.4 | | | | 67.0 | | | | 71.0 | | | | 72.1 | | Natural gas (22) | | | 20.6 | | | | 28.3 | | | | 36.4 | | | | 38.3 | | Crude oil and condensates (22) | | | 17.9 | | | | 23.3 | | | | 29.6 | | | | 33.1 | | Natural gas liquids (22) | | | 1.9 | | | | 2.8 | | | | 4.5 | | | | 5.1 | | | | | | | | | | | | | | | | | | | Total use of sold products | | | 130.5-205.0 | | | | 156.0-232.7 | | | | 176.5-253.8 | | | | 181.1-254.1 | | | | | | | | | | | | | | | | | | |
| (1) | Unless otherwise noted, FY2017 and FY2018 data includes Continuing operations and Discontinued operations (Onshore US assets). Unless otherwise noted, FY2019 data includes Continuing operations and Discontinued operations (Onshore US assets) to 31 October 2018. Data in italics indicates that data has been adjusted since it was previously reported. FY2019 originally reported data that was restated is 5.0 million tonnes CO2-e for Scope 2 GHG emissions, 14.7 million tonnes CO2-e for total operational GHG emissions, and 2.2 tonnes CO2-e per tonne of copper equivalent production for operational GHG emissions intensity. |
| (2) | Calculated based on an operational control basisapproach in line with World Resources Institute/World Business Council for Sustainable Development guidance. Consumption of fuel and consumption of electricity refers to annual quantity of energy consumed from the combustion of fuel; and the operation of any facility; and energy consumed resulting from the purchase of electricity, heat, steam or cooling by the company for its own use. Over 99.9 per cent of BHP’s energy consumption and emissions occurs outside the UK offshore area (as defined in the relevant UK reporting regulations). UK energy consumption of 222,368 kWh and emissions of 52 tonnes CO2-e is associated with electricity consumption from our office in London. One TWh equals 1,000,000,000 kWh. |
| (3) | Copper equivalent production has been calculated based on FY2020 average realised product prices for FY2020 production, FY2019 average realised product prices for FY2019 production, FY2018 average realised product prices for FY2018 production, and FY2017 average realised product prices for FY2017 production. Production figures used are consistent with energy and emissions reporting boundaries (i.e. BHP operational control). and are taken on 100 per cent basis. |
| (4) | BHP currently uses Global Warming Potentials (GWP) from the Intergovernmental Panel on Climate Change (IPCC) Assessment Report 4 (AR4) based on 100-year timeframe. |
| (5) | Scope 1 and Scope 2 emissions have been calculated based on an operational control basisapproach (unless otherwise stated) in line with the GHGGreenhouse Gas Protocol Corporate Accounting and Reporting Standard. BHP Scope 1, 2 and 3 Emissions Calculation Methodology, available at bhp.com/climate. |
| (6) | Scope 1 refers to direct GHG emissions from operated assets. |
| (7) | Scope 2 refers to indirect GHG emissions from the generation of purchased or acquired electricity, and steam, heat or cooling that is consumed by operated assets. Our Scope 2 emissions have been calculated using the market-based method using supplier specific emissionsemission factors, in line with the GHGGreenhouse Gas Protocol Scope 2 Guidance. Our market-based Scope 2 emissions were 5.0 Mt CO2-e which compares to 5.1 Mt CO2-e if calculated using the location-based method.Guidance unless otherwise specified. A residual mix is currently unavailable to account for voluntary purchases and this may result in double counting between electricity consumers. |
| (8) | Includes four months of emissionsExcludes Onshore US assets, which were divested in FY2019 prior to divestment of this asset.FY2019.
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| (9) | Scope 1 emissions from BHP’s facilities covered by the Safeguard Mechanism administered by the Clean Energy Regulator in Australia and the distillate and gasoline emissions from turbine boilers at the cathode plant at Escondida covered by the Green Tax legislation in Chile. |
| (10) | Calculated emissions are based on 11-month data, annualised for June for FY2020 total. Emissions from flared hydrocarbons are included in fugitive emissions. |
| (11) | Total includes functions, projects, exploration, closed sites and consolidation adjustments. |
(10)(12) | Based on FY2020 and FY2019 production figures. Production figures used are consistent with emissions reporting boundary (i.e. BHP operational control and are taken on a 100 per cent basis). Production data for Copper assets does not include gold, silver or uranium in the calculation. Saleable production data used for Nickel West. |
| (13) | Equity share approach to calculate emissions reflects BHP’s equity share in the operations as defined under the Greenhouse Gas Protocol Corporate Accounting and Reporting Standard. As BHP does not control or have access to the data from all operations in which it holds equity, certain assumptions had to be made to estimate equity share of operations not under BHP’s operational control. Details on assumptions and operations included are provided in note (15). |
| (14) | Financial control approach to report GHG emissions is based on the accounting treatment in the company’s consolidated financial statements, as follows: 100 per cent for operations accounted for as subsidiaries, regardless of equity interest owned; and for operations accounted for as a joint operation, the company’s interest in the operation. It does not report GHG emissions from operations which are accounted for using the equity method in the company’s financial statements. As BHP does not control or have access to the data from all operations in which it holds equity, certain assumptions had to be made to estimate equity share of operations not under BHP’s operational control. Details are provided in note (15). |
| (15) | Non-operated assets include Antamina, Cerrejón, Kelar and the petroleum assets in Australia, the United States and Algeria. Emissions data was sourced directly from the operator in the first instance and, where not readily available for the current reporting year, FY2019 data was extrapolated to reflect FY2020 production levels. Emissions intensity estimates were applied for any remaining assets based on analogous BHP operations. |
| (16) | Scope 3 emissions have been calculated using methodologies consistent with the GHGGreenhouse Gas Protocol Corporate Value Chain (Scope 3) Accounting and Reporting Standard. Scope 3 emissions reporting necessarily requires a degree of overlap in reporting boundaries due to our involvement at multiple points in the life cycle of the commodities we produce and consume. A significant example of this is that Scope 3 emissions reported under the ‘Processing of sold products’ category include the processing of our iron ore to steel. This third party activity also consumes metallurgical coal as an input, a portion of which is produced by us. For reporting purposes, we account for Scope 3 emissions from combustion of metallurgical coal with all other fossil fuels under the ‘Use of sold products’ category, such that a portion of metallurgical coal emissions is accounted for under two categories. This is an expected outcome of emissions reporting between the different scopes defined under standard GHG accounting practices and is not considered to detract from the overall value of our Scope 3 emissions disclosure. This double counting means that the emissions reported under each category should not be added up, as to do so would give an inflated total figure. For this reason, we do not report a total Scope 3 emissions figure. Further details of the calculation methodologies, assumptions and key references used in the preparation of our Scope 3 emissions data can be found in the associated BHP Scope 1, 2 and 3 calculation methodology documentEmissions Calculation Methodology, available online at bhp.com/climate. |
(11)(17) | Includes product transport where freight costs are covered by BHP, for example under Cost and Freight (CFR) or similar terms, as well as purchased transport services for process inputs to our operations. |
(12)(18) | Product transport where freight costs are not covered by BHP, for example under Free on Board (FOB) or similar terms. |
(13)(19) | For BHP, this category covers the Scope 1 and Scope 2 emissions (on an equity basis) from our assets that are owned as a joint venture but not operated by BHP. |
(14)(20) | All iron ore production is assumed to be processed into steel and all copper metal production is assumed to be processed into copper wire for end-use.end use. Processing of nickel, zinc, gold, silver, ethane and uranium oxide is not currently included, as production volumes are much lower than iron ore and copper and a large range of possible end uses apply. Processing/refining of petroleum products is also excluded as these emissions are considered immaterial compared to the end-use product combustion reported in the ‘Use of sold products’ category. |
(15)(21) | Scope 3 emissions reported under the ‘Processing of sold products’ category include the processing of our iron ore to steel. This third party activity also consumes metallurgical coal as an input, a portion of which is produced by us. For reporting purposes,the higher-end estimate, we account for Scope 3 emissions from combustion of metallurgical coal with all other fossil fuels under the ‘Use of sold products’ category, such that a portion of metallurgical coal emissions is accounted for under two categories. The low-end estimate apportions the emission factor for steel between iron ore and metallurgical coal inputs. The low-end estimate for iron ore only accounts for BHP’s Scope 3 emissions from iron ore and does not account for BHP’s or third party coal used in the steelmaking process. Scope 3 emissions from BHP’s coal are captured in the ‘Use of sold products’ category under metallurgical coal. |
(16)(22) | All crude oil and condensates are conservatively assumed to be refined and combusted as diesel. Energy coal, Natural gas and Natural gas liquids are assumed to be combusted. |
6.6.5 Water – performance data This section provides detailed disclosure of our various water metrics. All water performance data presented in this Report are from operated assets during FY2020, and exclude Discontinued operations. (Onshore US assets). Definitions of water metrics, sources and types is provided in sections 6.6 and 6.8.2. BHP has continued to classify water quality into three categories in line with the Minerals Council of Australia’s Water Accounting Framework (WAF) as this provides more granularity. Type 1 and Type 2 equate to high-quality water, while Type 3 equates to low-quality water under the International Council on Mining and Metals (ICMM) Guidelines. Water withdrawals Water withdrawals represent the volume of water, in megalitres (ML) received and intended for use by the operated asset from the water environment and/or a third party supplier.(1) 
Water withdrawals for FY2020 across our operations increased by 8 per cent from FY2019 (from 352,950 ML to 380,330 ML), due primarily to increased use at Escondida. Minor increases at other assets (e.g. Olympic Dam) were offset by a decrease in withdrawal at our Queensland Coal operated assets due to lower than average rainfall in the region. Despite the increase in water withdrawal, our withdrawal of high-quality (Type 1) water reduced from 58,850 ML in FY2019 to 51,610 ML. The majority of our water withdrawals now come from seawater. Escondida stopped drawing groundwater from the Monturaqui borefield in the second half of FY2020 and water for operational purposes is now supplied entirely by desalinated seawater, other than small quantities of groundwater extracted for pit dewatering to allow safe mining. The proportion of withdrawals relating to groundwater across BHP reduced from 40 per cent in FY2019 to 33 per cent in FY2020, and is expected to reduce further when the effect of Escondida’s cessation of groundwater extraction from the Andean aquifers is seen over a full year. WAIO and Queensland Coal account for more than 50 per cent of terrestrial water withdrawal across our business. All of the WAIO withdrawals are from groundwater. Queensland Coal draws from a mix of surface water (collected rainfall runoff represents approximately 75 per cent of surface water withdrawal) and groundwater. Due to ongoing improvement in our water data, it was identified that water extracted during the petroleum production process to access hydrocarbon products should be classified as groundwater withdrawal under the ICMM and WAF guidance. Prior to FY2019, this was reported as seawater withdrawal. Freshwater(2) withdrawal decreased 18 per cent in FY2020 compared to FY2019 and 19 per cent compared to our FY2017 baseline. This was primarily due to the early cessation of groundwater extraction at Escondida. The withdrawals, and the material contributors to these, were within expectations for FY2020 and in line with our ambition to minimise our withdrawal of high-quality fresh water and replace these with seawater/low-quality withdrawals where feasible. As the results are within expectations, there is no implications for current commitments, strategy and costs for the business with respect to water withdrawals. For more information on freshwater withdrawal, refer to section 1.7.6. | (1) | Volumes of withdrawal by source have been updated for FY 2019, FY2018 and FY2017 for the Nickel West, Kwinana operated asset. Previously the total volumes of water supplied to the site by third party, Water Corporation, was proportionately to source in alignment with the public information (48 per cent from seawater, 42 per cent from groundwater and 10 per cent from surface water). In FY2020, Water Corporation supplied BHP site specific proportions of water sources for our Kwinana operations for the FY2017 to FY2020 period. |
| (2) | ‘Freshwater’ is defined as waters other than seawater, wastewater from third parties and hypersaline ground water. Freshwater withdrawal also excludes entrained water that would not be available for other uses. These exclusions have been made to align with the target’s intent to reduce the use of freshwater sources of potential value other users or the environment. |
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Water discharges Water discharges includes water that has been removed from the operated asset and returned to the environment or distributed to a third party. This includes seepage from tailings dams to groundwater, discharges from operations to surface waters (which are also affected by periods of higher rainfall) and discharges to seawater. Water we treat and then on-supply to third parties is captured as a diversion consistent with ICMM Guidelines as it is not intended for operational purposes. Water that is evaporated or entrained(3) is also excluded from discharges and instead reported under the water consumption category.(4) 
Total water discharges for FY2020 were 147,850 ML, an increase from FY2019 as expected due to the increased throughout of the desalination facility at our Escondida asset. The majority of water discharges are to seawater at over 90 per cent, with Escondida and Petroleum being the largest contributors. The second largest discharge volume is to groundwater, the majority of which is Type 3 seawater that is withdrawn as a by-product during the recovery of hydrocarbons from below the seabed (and therefore classed as groundwater in the ICMM and WAF guidance) and which is returned by re-injection to below the seabed. Discharges to surface water (usually riverine systems) are influenced by climatic conditions such as rainfall and occurrence of extreme weather events, therefore are subject to higher variability and less predictable. These scenarios may occur at our Queensland Coal operated assets. In FY2020, some localised high rainfall events resulted in discharges to surface waters at those operated assets. Our water management practices at the operated assets where this may occur are designed to accommodate this variability and therefore the occurrence of such events does not affect our current management activities and strategy or result in elevated risks. Approximately 40 per cent of our assets do not have any water discharges due to water being either consumed in operational activities or reused/recycled. This is similar to previous years, but note that prior to FY2019, the definition of water discharges included water that was evaporated or entrained. This is now reported as consumption, in line with ICMM Guidelines. The extent of this change is shown in the data tables in section 6.6.3. Water recycled/reused During FY2020, the total volume of water recycled/reused was 250,090 ML. This represents an efficiency of 66 per cent of withdrawals excluding seawater. Increases in recycled/reused volumes was observed at five of our operated assets in FY2020. The ability of our operated assets to reuse and recycle water varies depending on the recovery processes used and the water quality requirements. The accuracy of the recycled/reused metric currently varies depending on the complexity of the process and how closely water movements are measured and understood. As our data collection and analysis improves, we can more robustly assess opportunities to improve efficiency of water use. Water diversions FY2019 was the first year that BHP disclosed diversions. Diverted water is water that is actively managed by an operated asset but not used for any operational purposes. For example, this includes the water that is removed from below the water table at WAIO to access the ore but is returned to the environment and not consumed in operations. Another example is when we withdraw water and treat it for use as drinking water by local communities, as Olympic Dam does for the town of Roxby Downs in South Australia. In FY2020, 102,780 ML of water was withdrawn without any intention to be used at BHP operated assets, predominantly relating to water that is treated by our legacy assets in North America, and by dewatering as noted above for WAIO, and described further in the WAIO water case study. Note the withdrawal of diverted water may occur in a different annual reporting period to its discharge, so in any given annual period there may be a differential between withdrawal and discharge volumes for diverted water. | (3) | Entrained water includes water incorporated into product and/or waste streams, such as tailings, that cannot be easily recovered. |
| (4) | Evaporation and entrainment, previously reported as water outputs under the WAF, have been reported under consumption to align with the ICMM Guidelines. |
Water consumption Prior to FY2019, water consumption was included within the reporting of water outputs. In the ICMM Guidelines, consumption (the volume of water used by the operated asset and not returned to the water environment or a third party) is a separate reporting category. Available data for evaporation and entrainment from the FY2017 and FY2018 reporting periods was moved to the consumption category from FY2019 in order to allow representative year-on-year comparisons. This data is shown in section 6.6.3. In FY2020, evaporation and entrainment were the most significant contributors to consumption, representing more than 91 per cent of total consumption, slightly less than in FY2019 due to a reduction in evaporation. Evaporation consumption is inherently linked with climatic conditions during the reporting period. Evaporation data is estimated or simulated using average climatic conditions and therefore consumption due to evaporation should remain relatively stable but may vary due to climatic conditions outside of BHP’s control. The Minerals Council of Australia has indicated there will be some updates in the WAF guidance with respect to reporting of evaporation. The new guidance states that evaporation should be reported by source water quality type (instead of as Type 1). This change is to better align the WAF with other global water metrics. Classifying the quality of evaporated water by the source water quality allows the consumptive use of lower-quality water to be better represented in the water account. BHP has reported evaporation in line with this intended update to the WAF. Entrainment may show variability due to the type and location of ore during any given reporting period. The category of ‘other’ for consumption includes water consumed, for example as a result of potable water consumption at operated assets. The increased focus on consumption will assist with increased and improved data accuracy for entrainment and evaporation, and assist with identifying opportunities to reduce, where possible, losses such as those associated with evaporation. The operated assets in FY2020 that consumed the most water were Escondida, WAIO and Queensland Coal. Entrainment of water in tailings is the largest contributor to consumption at Escondida, whereas evaporation is the key driver of consumption at WAIO and Queensland Coal. It should be noted that in any given reporting period, consumption and discharges volumes might be higher than withdrawals as evaporation can occur from water that has been captured and stored during previous periods. 
Progress against our Water Stewardship Strategy | | | | Water Stewardship Strategy pillar | | What we did in FY2020 | Risk Embed processes and systems to effectively manage water-related risk and realise opportunities at a catchment level in the short and longer term. | | BHP issued three Group-wide water standards for our operated assets in FY2019: water management, drinking water and water data. Performance against all three standards will be assured as part of BHP’s ‘three lines of defence’ model of risk governance and management. For more information on this model, refer to section 1.5.4. The Technical Centre of Excellence will undertake ‘second line of defence’ assurance activities to ensure our operated assets are meeting the minimum requirements set out in these three water standards. Our Internal Audit and Advisory team, which provides independent assurance over the risk control environment, will include assurance against the standards as part of the ‘third line of defence’ and operated assets will monitor and review their water management activities as part of the ‘first line of defence’. In FY2020, each of our operated assets executed a gap assessment for each of the three water standards. Action plans are in place to progress towards compliance with these new standards. For example, a number of technology data management solutions were assessed in FY2020 to assist with improvements in water data storage and analysis. We undertook an assessment of water-related risks within the catchments and marine regions in which we operate, taking account of environmental, community and third party interactions and assessed water-related operational risk in alignment with the BHP Risk Framework. | Technology Leverage technology solutions that drive a step-change reduction in water-related risks, realise opportunities and deliver multiple benefits. | | The technologies available for water recovery from tailings and water treatment options were shortlisted for further assessment and or development for each operated asset (as applicable), thereby creating a pipeline of technology projects designed to contribute to the delivery of the FY2030 longer-term goal. For more information, refer to the technology case study at bhp.com. | Value Effectively value water in investment and operated asset decisions through integration into strategy, planning and evaluation frameworks. | | In FY2020, an approach was developed to help integrate social value considerations (including environment and community aspects of water) into BHP’s planning and project evaluation processes. The approach is expected to be trialed and further developed in FY2021. | Disclosure Transparently disclose water-related risks, management and performance at an operated asset level. | | We incorporated feedback from external parties on our FY2018 Water Report within our FY2019 Sustainability Report and FY2020 Annual Report (e.g. presentation of relativity of water-related risk). We increased our water disclosure by providing withdrawal, discharge, and consumption and diversion data at an operated asset level. In FY2020, we commenced a case study with the ICMM to help inform improvements and increase consistency of water disclosures in the mining sector. | Collective action Collaborate with stakeholders to improve regional water policy and catchment governance and address shared water challenges within our communities and across our value chain. | | In FY2020, we continued work with the CEO Water Mandate to develop a Common Water Accounting Framework (see the CEO Water Mandate case study). We believe this is the first step required to advance effective multi-stakeholder conversations on water. We also continued to work in the Gulf of Mexico to improve water, biodiversity and climate change outcomes (see the Bayou Terrebonne Biodiversity and Resiliency Project case study). | | | | | We partnered with industry and research peers to launch the Groundwater Modelling Decision Support Initiative (GMDSI) in October 2019. The GMDSI is an industry-funded project designed to improve the contribution of groundwater modelling in supporting environmental management and decision-making (see the Groundwater Modelling Support Initiative (GMDSI) case study). The GMDSI reflects our recognition of the value that deep knowledge brings to addressing water challenges. We continued our dialogue with customers and suppliers in the China region to assess water-related risks (both threats and opportunities) in our value chain. We began a program of Water Resource Situational Analyses (WRSA) to inform post-FY2022 operated asset context-based water targets. The targets will seek to minimise our impacts and address shared water challenges in the regions in which we operate, in line with our commitments in our Water Stewardship Position Statement. This work is also expected to contribute towards our longer-term goal to support integrated water resource management in all the catchments where we operate by FY2030. |
Asset summary table FY2020 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Metric (1)(2) | | Total | | | Escondida | | | Legacy
assets | | | Nickel
West | | | NSW
Energy
Coal | | | Olympic
Dam | | | Pampa
Norte | | | Petroleum(3) | | | Jansen
Potash
Project | | | Queensland
Coal | | | Western
Australia
Iron Ore | | Water sensitivity (BHP assessed) | | | | | | | High | | |
| Low to
moderate |
| | | Moderate | | | | High | | | | High | | | | High | | | | Low | | | | Low | | |
| Moderate
to high |
| | | Moderate | | Withdrawals(4) (ML) | | | 380,330 | | | | 199,160 | | | | 1,150 | | | | 17,590 | | | | 9,360 | | | | 13,460 | | | | 10,770 | | | | 43,500 | | | | 510 | | | | 37,440 | | | | 47,380 | | Water withdrawals by quality – Type 1 | | | 51,610 | | | | 0 | | | | 1,150 | | | | 2,520 | | | | 3,860 | | | | 0 | | | | 0 | | | | 50 | | | | 0 | | | | 14,910 | | | | 29,120 | | Water withdrawals by quality – Type 2 | | | 35,670 | | | | 0 | | | | 0 | | | | 5,320 | | | | 2,780 | | | | 11,280 | | | | 0 | | | | 0 | | | | 510 | | | | 15,650 | | | | 130 | | Water withdrawals by quality – Type 3 | | | 293,060 | | | | 199,160 | | | | 0 | | | | 9,760 | | | | 2,720 | | | | 2,180 | | | | 10,780 | | | | 43,440 | | | | 0 | | | | 6,890 | | | | 18,130 | | Water withdrawals by source – Surface water (5) | | | 45,190 | | | | 0 | | | | 1,150 | | | | 350 | | | | 7,420 | | | | 310 | | | | 7,090 | | | | 50 | | | | 460 | | | | 28,360 | | | | 0 | | Water withdrawals by source – Groundwater | | | 123,660 | | | | 24,330 | | | | 0 | | | | 16,080 | | | | 1,950 | | | | 13,160 | | | | 3,690 | | | | 7,930 | | | | 50 | | | | 9,090 | | | | 47,380 | | Water withdrawals by source – Seawater | | | 211,510 | | | | 174,830 | | | | 0 | | | | 1,170 | | | | 0 | | | | 0 | | | | 0 | | | | 35,510 | | | | 0 | | | | 0 | | | | 0 | | Discharges (ML) | | | 147,850 | | | | 99,740 | | | | 0 | | | | 310 | | | | 0 | | | | 0 | | | | 0 | | | | 43,440 | | | | 10 | | | | 2,790 | | | | 1,560 | | Water discharges by quality – Type 1 | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | Water discharges by quality – Type 2 | | | 3,740 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 2,790 | | | | 950 | | Water discharges by quality – Type 3 | | | 144,110 | | | | 99,740 | | | | 0 | | | | 310 | | | | 0 | | | | 0 | | | | 0 | | | | 43,440 | | | | 10 | | | | 0 | | | | 610 | | Water discharges by destination – Surface water | | | 3,970 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 2,490 | | | | 1,480 | | Water discharges by destination – Groundwater | | | 9,440 | | | | 1,500 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 7,930 | | | | 10 | | | | 0 | | | | 0 | | Water discharges by destination – Seawater | | | 134,116 | | | | 98,240 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 35,506 | | | | 0 | | | | 290 | | | | 80 | | Water discharges by destination – Third party | | | 310 | | | | 0 | | | | 0 | | | | 310 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | Consumption (ML) | | | 258,120 | | | | 95,680 | | | | 2,010 | | | | 15,600 | | | | 7,660 | | | | 12,190 | | | | 8,800 | | | | 850 | | | | 80 | | | | 53,250 | | | | 62,000 | | Consumption – evaporation | | | 126,120 | | | | 28,380 | | | | 2,010 | | | | 350 | | | | 4,390 | | | | 5,890 | | | | 5,810 | | | | 0 | | | | 50 | | | | 38,500 | | | | 40,740 | | Consumption – entrainment | | | 109,550 | | | | 66,770 | | | | 0 | | | | 0 | | | | 3,120 | | | | 1,990 | | | | 2,820 | | | | 0 | | | | 0 | | | | 13,590 | | | | 21,260 | | Consumption – other | | | 22,440 | | | | 530 | | | | 0 | | | | 15,250 | | | | 150 | | | | 4,310 | | | | 160 | | | | 850 | | | | 30 | | | | 1,160 | | | | 0 | | Recycled/reused (ML) | | | 250,090 | | | | 38,000 | | | | 10 | | | | 10,020 | | | | 0 | | | | 14,590 | | | | 170,150 | | | | 0 | | | | 0 | | | | 5,860 | | | | 11,460 | | Diversions (ML) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Diversions – withdrawals | | | 102,780 | | | | 380 | | | | 41,080 | | | | 0 | | | | 0 | | | | 0 | | | | 780 | | | | 1,240 | | | | 0 | | | | 17,200 | | | | 42,100 | | Diversions – discharges | | | 79,430 | | | | 380 | | | | 42,740 | | | | 0 | | | | 0 | | | | 960 | | | | 780 | | | | 1,090 | | | | 230 | | | | 8,630 | | | | 24,620 | |
| (1) | Data has been rounded to the nearest 10. In some instances, the sum of totals for quality, source and destination may differ due to rounding. |
| (2) | Excludes Discontinued operations (Onshore US assets). |
| (3) | Petroleum assets have been grouped due to their relatively lower volumes of water withdrawals, discharges and consumption compared to the mining assets. |
| (4) | Third party water withdrawals have been reported by source. |
| (5) | Includes rainfall and run-off volumes captured and used during the reporting year; rainfall and run-off volumes that have been captured and stored are excluded and will be reported in the future year of use. |
6.66.7 Legal proceedings
We areThe Group is involved from time-to-timetime to time in legal proceedings and governmental investigations of a character normally incidental to our business, including claims and pending actions against usit seeking damages, or clarification or prosecution of legal rights and regulatory inquiries regarding business practices. Insurance or other indemnification protection may offset the financial impact on the Group of a successful claim.
This section summarises the significant legal proceedings and investigations and associated matters in which we arethe Group is currently involved or havehas finalised since our last Annual Report. The timing of many of the legal proceedings and investigations has been delayed or is uncertain as a result of court closures or delays in response to the COVID-19 pandemic. Legal proceedings relating to the failure of the Fundão tailings dam at the Samarco iron ore operations of Samarco in Minas Gerais and Espírito Santo (Samarco dam failure) We areThe Group is engaged in numerous legal proceedings relating to the Samarco dam failure. Given allthe stage of these proceedings, are in early stages, it is not possible at this time to provide a range of possible outcomes or a reliable estimate of potential future exposures. The most significant of these proceedings are summarised below. As described below, many of these proceedings involve claims for compensation for the similar or possibly the same damages. There are numerous additional lawsuits against Samarco relating to the Samarco dam failure to which we arethe Group is not party.
R$20 billion public civil claim commenced by the Federal Government of Brazil, states of Espírito Santo and Minas Gerais and other authorities (R$20 billion Public Civil Claim) On 30 November 2015, the Federal Government of Brazil, states of Espírito Santo and Minas Gerais and other public authorities collectively filed a public civil claim before the 12th Federal Court of Belo Horizonte against Samarco and its shareholders, BHP Billiton Brasil Ltda (BHP Brasil) and Vale, seeking the establishment of a fund of up to R$20 billion (approximately US$5.23.7 billion) in aggregate for clean-up costs and damages. The plaintiffs also requested certain interim injunctions in connection with the public civil claim. On 18 December 2015, the Federal Court granted the injunctions and, among other things, ordered Samarco to deposit R$2 billion (approximately US$605365 million) into a court-managedCourt-managed bank account for use towards community and environmental rehabilitation. BHP Billiton Brasil, Vale and Samarco immediately appealed against the injunction. On 4 November 2016, the Federal Court reduced the R$2 billion (approximately US$365 million) injunction to R$1.2 billion (approximately US$365220 million). On 2 March 2016, BHP Billiton Brasil, together with Vale and Samarco, entered into a Framework Agreement with the plaintiffs to establish a foundation (Fundação Renova) to develop and execute environmental and socioeconomic programs (Programs) to remediate and provide compensation for damage caused by the Samarco dam failure. The term of the Framework Agreement is 15 years, renewable for periods of one year successively until all obligations under the Framework Agreement have been performed. Under the Framework Agreement, Samarco is responsible for funding Fundação Renova’s annual calendar year budget for the duration of the Framework Agreement. The amount of funding for each calendar year will be dependent on the remediation and compensation projects to be undertaken in a particular year. To the extent that Samarco does not meet its funding obligations under the Framework Agreement, each of Vale and BHP Billiton Brasil has funding obligations under the Framework Agreement in proportion to its 50 per cent shareholding in Samarco. On 25 June 2018, a Governance Agreement (summarised below), was entered into providing for the settlement of this public civil claim, suspension of the Federal Public Prosecutors’ Claim for R$155 billion (approximately US$4028 billion) Federal Public Prosecution Office claim(also summarised below) for 24 months partial ratification of the Framework Agreement and a formal declaration that the Framework Agreement remains valid for the signing parties. On 8 August 2018, the 12th Federal Court of Minas Gerais ratified the Governance Agreement. Ratification of the Governance Agreement on 8 August 2018 settled this public civil claim, including the R$1.2 billion (approximately US$365220 million) injunction order. On 13 April 2020, the 12th Federal Court granted a request made by the states of Minas Gerais and Espírito Santo to allow R$100 million (approximately US$20 million) Interim Security (defined below) held on escrow with the Court to be used in implementation of preventive measures and control and management of risks and damages relating to the COVID-19 pandemic. The amount made available is in the process of being allocated to the healthcare systems in the state of Minas Gerais and the state of Espírito Santo. Preliminary Agreement On 18 January 2017, BHP Billiton Brasil, together with Vale and Samarco, entered into a Preliminary Agreement with the Federal Prosecutors’ Office in Brazil, which outlines the process and timeline for further negotiations towards a final settlement regarding the R$20 billion (approximately US$5.23.7 billion) public civil claim and the R$155 billion (approximately US$4028 billion) Federal Public ProsecutionProsecutors’ Office claim relating to the dam failure. Under the Preliminary Agreement, BHP Billiton Brasil, Vale and Samarco agreed interim security (Interim Security) comprising: R$1.3 billion (approximately US$335240 million) in insurance bonds;bonds R$100 million (approximately US$20 million) in liquid assets;assets which was made available to the states of Minas Gerais and Espírito Santo for the implementation of preventive measures and control and management of risks and damages relating to the COVID-19 pandemic Aa charge of R$800 million (approximately US$210145 million) over Samarco’s assets;
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R$200 million (approximately US$50 million) to be allocated within the next four years through existing Framework Agreement programs in the Municipalities of Barra Longa, Rio Doce, Santa Cruz do Escalvado and Ponte Nova.assets
On 24 January 2017, BHP Billiton Brasil, Vale and Samarco provided the Interim Security to the 12th Federal Court of Belo Horizonte, which was to remain in place until the earlier of 30 June 2017 and the date that a final settlement arrangement was agreed between the Federal Prosecutors and BHP Billiton Brasil, Vale and Samarco. Following a series of extensions, on 25 June 2018, the parties reached an agreement in the form of the Governance Agreement (summarised below). Governance Agreement On 25 June 2018, BHP Billiton Brasil, Vale, Samarco, the other parties to the Framework Agreement, the Public Prosecutors Office and the Public DefenceDefense Office entered into a Governance Agreement, which settlessettled the R$20 billion (approximately US$5.23.7 billion) public civil claim, enhances community participation in decisions related to Programs under the Framework Agreement and establishesestablished a process to renegotiate the Programs over two years to progress settlement of the R$155 billion (approximately US$4028 billion) Federal Public ProsecutionProsecutors’ Office claim (Governance Agreement).claim. Renegotiation of the Programs will be based on certain agreed principles, such as full reparation consistent with Brazilian law, the requirement for a technical basis for any proposed changes, consideration of findings from experts appointed by BHP Billiton Brasil, Samarco and Vale, consideration of findings from experts appointed by Prosecutors and consideration of feedback from impacted communities. The renegotiation process remains outstanding as certain pre-requisites established in the Governance Agreement are yet to be implemented. The renegotiation term may be extended for a further two years by mutual consent of the parties to the Governance Agreement. During the renegotiation period and up until revisions to the Programs are agreed, theFundação Renova Foundation will continue to implement the Programs in accordance with the terms of the Framework Agreement and the Governance Agreement. The Governance Agreement was ratified by the 12th Federal Court of Minas Gerais on 8 August 2018, settling the R$20 billion (approximately US$5.2 billion) public civil claim and suspending the R$155 billion (approximately US$40 billion) Federal Public Prosecution Office claim for a period of two years from the date of ratification. Interim Security provided under the Preliminary Agreement is maintained for a period of 30 months under the Governance Agreement, after which BHP Billiton Brasil, Vale and Samarco will be required to provide security of an amount equal to Fundação Renova’s annual budget up to a limit of R$2.2 billion (approximately US$570400 million). R$155 billion public civil claim commenced by the Federal Public Prosecution ServiceProsecutors’ Office (R$155 billion Federal Public ProsecutionProsecutors’ Office claim) On 3 May 2016, the Federal Public ProsecutionProsecutors’ Office filed a public civil claim before the 12th Federal Court of Belo Horizonte against BHP Billiton Brasil, Vale and Samarco – as well as 18 other public entities (which has since been reduced to five defendants(19)(23) by the 12th Federal Court) – seeking R$155 billion (approximately US$4028 billion) for reparation, compensation and collective moral damages in relation to the Samarco dam failure. In addition, the claim includes a number of preliminary injunction requests, seeking orders that BHP Billiton Brasil, Vale and Samarco deposit R$7.7 billion (approximately US$21.4 billion) in a special company account and provide guarantees equivalent to R$155 billion (approximately US$4028 billion). The injunctions also seek to prohibit BHP Billiton Brasil, Vale and Samarco from distributing dividends and selling certain assets (among other things). TheThis public civil claim and the R$20 billion Public Civil Claim are broad claims that encompass the majority of the public civil claims filed against BHP Brasil, Samarco and Vale. For this reason, the 12th Federal Court previouslyhas suspended other public civil claims while negotiations continue in relation to the settlement of this public civil claim.
Ratification of the Governance Agreement settled the R$20 billion Public Civil Claim and suspended this public civil claim, including the R$7.7 billion (approximately US$21.4 billion) injunction request. SuspensionDespite suspension of thethis public civil claim continuesbeing for a period of two years from the date of ratification of the Governance Agreement on 8 August 2018.2018, the claim has not been resumed and the parties may negotiate a further extension. Enforcement Proceedings On 7 January 2020, the 12th Federal Court of Belo Horizonte issued a decision creating 10 enforcement proceedings (Enforcement Proceedings) linked to the R$20 billion and R$155 billion Public Civil Claims described above with two additional proceedings added in subsequent months. The 12 Enforcement Proceedings seek to expedite the remediation process related to the Samarco dam failure, addressing issues considered to be priority in this context. No substantive new claims were made under these proceedings. Issues covered by these Enforcement Proceedings include environmental recovery, human health risk and ecological risk, resettlement of affected communities, infrastructure and development, registration of certain impacted individuals under the Programs and indemnities for people impacted by the dam failure, resumption of economic activities, water supply for human consumption and hiring of technical advisors to impacted people among other key delivery areas. | (23) | Currently, solely BHP Brasil, Vale and Samarco, the Federal Government and the state of Minas Gerais are defendants. |
In the context of these Enforcement Proceedings, BHP Brasil, Samarco and Vale are seeking determinations, including the repealing of fishing bans ordered by the courts or administration entities, final compensation of impacted communities, the end of registration of new indemnification requests for compensation and indemnification of impacted people, and set-off of compensation paid against future damages that may need to be paid. Public civil claims commenced by the State Prosecutors’ Office in the state of Minas Gerais On 10 December 2015, the State Prosecutors’ Office in the state of Minas Gerais filed a public civil claim against BHP Billiton Brasil, Vale and Samarco before the State Court in Mariana claiming indemnification (amount not specified) for moral and material damages to an unspecified group of individuals affected by the Samarco dam failure, including the payment of costs for housing and social and economic assistance. The State Prosecutors’ Office also requested certain interim injunctions in connection with this claim, including orders for BHP Billiton Brasil, Vale and Samarco to provide housing, health care, financial assistance and education facilities to the people affected by the Samarco dam failure. The plaintiff also sought an order to freeze R$300 million (approximately US$8055 million) in Samarco’s bank accounts. The Court granted the injunction, freezing R$300 million (approximately US$8055 million) in Samarco’s bank accounts for use towards the compensation and remediation measures requested under this public civil claim. At a Court hearing on 20 January 2016, the parties agreed that Samarco should unilaterally provide: (19) | Currently, solely BHP Billiton Brasil, Vale and Samarco, the Federal Government and the State of Minas Gerais are defendants.
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flexible housing solutions for 271 displaced families;families monthly salaries to the displaced families for at least 12 months;months a R$20,000 (approximately US$5,000)3,700) payment to each displaced family;family a R$100,000 (approximately US$25,000)18,000) payment to each of the families of those deceased, as advance compensation.compensation There have been multiple hearings, injunctions and enforcement petitions of previous settlements requested in this public civil claim. Following Samarco’s request, the Court released part of the frozen amount to pay for (i) the technical entity hired to assist the impacted community and (ii) payments related to the Preliminary Agreement. On 2 October 2018, the parties reached an agreement that was ratified by the Court for the dismissal of the claim. Under this settlement, Fundação Renova Foundation has reached more than 83 individual agreements with impacted families in Mariana for the payment of damages. On 2 February 2016, the State Prosecutors’ Office in the state of Minas Gerais filed another public civil claim against BHP Billiton Brasil, Vale and Samarco before the State Court in Ponte Nova, claiming compensation of R$7.5 billion (approximately US$2.31.4 billion) for moral and material damages suffered by 1,350 individuals in Ponte Nova and collective moral damages allegedly suffered by the community in Ponte Nova.Nova (Ponte Nova 1). The claim also sought a number of preliminary injunctions, including orders to: freeze R$1 billion (approximately US$305185 million) of cash in the defendants’ bank accounts in order to secure the compensation requested under the public civil claim;claim require the defendants to pay minimum wages and basic food supplies to the families in Ponte Nova affected by the Samarco dam failure;failure require the defendants to pay R$30,000 (approximately US$8,000)5,500) per affected family and compensation to provide dignified and adequate housing for the affected families.families On 5 February 2016, the Ponte Nova Court granted an injunction to freeze R$475 million (approximately US$14587 million) from bank accounts of BHP Billiton Brasil, Vale and Samarco and ordered them to pay preliminary amounts to families in Ponte Nova affected by the Samarco dam failure. This injunction was revoked on 9 November 2016 and the Ponte Nova Court, on 8 May 2018, also ordered the R$475 million (approximately US$87 million) in frozen funds to be returned to BHP Billiton Brasil (R$2 million).returned. Samarco and BHP Billiton Brasil filed their defences, respectively on 6 December 2016 and 9 March 2017. This case has been remitted to the 12th Federal Court in Belo Horizonte and is currently suspended. In November 2018, the State Prosecutor’s Office in the Statestate of Minas Gerais filed another public civil claim against BHP Billiton Brasil, Vale, Samarco and Fundação Renova Foundation claiming approximately R$2 billion (approximately US$500366 million) for damages. The public civil claim was terminated before the subpoenas on the basis that the claim has already been addressed in the first public civil claim filed on 10 December 2015, which has been settled. The State Prosecutor’s Office has appealed the decision. On 15 December 2015, Prosecutors filed a civil public action against Samarco and Vale claiming implementation of water capture infrastructure and payment of moral damages of R$5 billion (approximately US$915 million). The injunction relief requested remains suspended, awaiting for a decision by the Court. On 13 August 2018, State Prosecutor’s Office in the state of Minas Gerais filed a public civil action against BHP Brasil, Vale, Samarco and Fundação Renova claiming several measures related to healthcare in Mariana. On 25 April 2019, the parties settled the case, and the execution of such settlement is ongoing. Public civil claim commenced by the Public Defender Department in Minas Gerais On 25 April 2016, the Public Defender Department filed a public civil claim against BHP Billiton Brasil, Vale and Samarco in the State Court in Belo Horizonte, Minas Gerais, Brazil claiming R$10 billion (approximately US$2.61.8 billion) for collective moral damages to be deposited in the State Human Rights Defense Fund. The Public Defender Department is also seeking a number of social and environmental remediation measures in relation to the Samarco dam failure, including orders requiring the reparation of the environmental damage and the reconstruction of properties and populations, including historical, religious, cultural, social, environmental and immaterial heritages affected by the dam failure. On 16 March 2016, the Court denied the remediation measures requested as an injunction by the Public Defender Department. The public civil claim was remitted to the 12th Federal Court in Belo Horizonte and is currently suspended. Public civil claim commenced by the State Prosecutors’ Office in the state of Espírito Santo On 15 January 2016, the State Prosecutors’ Office of Espírito Santo filed a public civil claim before the State Court in Espírito Santo against BHP Billiton Brasil, Vale and Samarco seeking compensation for collective moral damages in relation to the suspension of the water supply of the Municipality of Colatina as a result of the Samarco dam failure. As part of the public civil claim, the State Prosecutors’ Office sought a number of injunctions, including an order to freeze R$2 billion (approximately US$520366 million) in the defendants’ bank accounts in order to secure the requested compensation. On 11 February 2016, the Court denied all of the injunction requests made by the State Prosecutors’ Office. The State Prosecutors’ Office appealed the decision and on 2 August 2016 the State Court of Appeal decided to remit the case to the 12th Federal Court in Belo Horizonte. This public civil claim is suspended. Public civil claim commenced by the state of Espírito Santo On 8 January 2016, the state of Espírito Santo filed a public civil claim against BHP Billiton Brasil, Vale and Samarco before the State Court in Colatina (later remitted to the 12th Federal Court in Belo Horizonte) seeking the remediation and restoration of the water supply of the residents of Baixo Guandu, Linhares, Colatina and Marilândia. In addition, the claim sought injunctions ordering, among other things, the execution of several works and improvements in public equipment in order to repair and upgrade the sewerage system and water network in Colatina and Linhares, and an order to freeze R$1 billion (approximately US$260185 million) of the defendants’ assets. On 4 February 2016, the Court ordered Samarco to deposit approximately R$7 million (approximately US$21.3 million) in a fund of the state of Espírito Santo to be created and granted certain injunctions relating to remediation measures. At the same time it denied the injunction request to freeze assets of R$1 billion (approximately US$260185 million). On 6 April 2016, the Court of Appeals suspended the injunctions granted. BHP Billiton Brasil, Vale and Samarco filed their defences in March 2016 and also requested the suspension of this public civil claim. On 18 December 2017,16 July 2019, the case was remitted toformally received by the 12th Federal Court.Court of Belo Horizonte. The 12th Federal Court has not made a decision regarding the suspension of this public civil claim. 275
Public civil claim commenced by the Association for the Defense of Collective Interests – ADIC On 17 November 2015, ADIC, a non-governmental organisation (NGO) in Brazil, filed a public civil claim solely against Samarco before the 12th Federal Court in Belo Horizonte claiming at least R$10 billion (approximately US$2.61.85 billion) for environmental and social damages in relation to the Samarco dam failure, in addition to collective moral damages and reparation measures. The NGO also requested preliminary injunctions ordering the deposit of R$1 billion (approximately US$260185 million) and prohibiting Samarco from distributing dividends to its shareholders. Samarco presented its defence on 12 February 2016. The Court did not decide on the injunction request and on 27 March 2017, the 12th Federal Court suspended this public civil claim. Other civil proceedings in Brazil As noted above, BHP Billiton Brasil has been named as a defendant in numerous other lawsuits that are at early stages of proceedings.lawsuits. The lawsuits seek various remedies, including rehabilitation costs, compensation to injuredimpacted individuals and families of the deceased, recovery of personal and property losses and injunctive relief. In addition, government inquiries and investigations relating to the Samarco dam failure have been commenced by numerous agencies of the Brazilian Government and are ongoing, including criminal investigations by the federal and state police, and by federal prosecutors. OurBHP Brasil’s potential liabilities, if any, resulting from other pending and future claims, lawsuits and enforcement actions relating to the Samarco dam failure, together with the potential cost of implementing remedies sought in the various proceedings, cannot be reliably estimated at this time and therefore a provision has not been recognised and nor has any contingent liability been quantified for these matters. Ultimately, these could have a material adverse impact on BHP’s business, competitive position, cash flows, prospects, liquidity and shareholder returns. For more information on the Samarco dam failure, refer to section 1.7.1.8.
As at June 2019,2020, Samarco had been named as a defendant in more than 74,00079,000 small claims for moral damages in which people argue their public water service was interrupted for between five and 10 days, and courts have awarded damages, generally ranging from R$1,000 (approximately US$260) to R$10,000 (approximately US$2,600) per impacted person.days. BHP Billiton Brasil is a co-defendant in more than 15,50023,000 of these cases. Over 260,000More than 270,000 people have received moral damages related to the temporary suspension of public water supply through settlements reached with Fundação Renova. Criminal charges On 20 October 2016, the Federal Prosecutors’ Office filed criminal charges against BHP Billiton Brasil, Vale and Samarco and certain employees and former employees of BHP Billiton Brasil (Affected Individuals) in the Federal Court of Ponte Nova, Minas Gerais. On 3 March 2017, BHP Billiton Brasil and the Affected Individuals filed their preliminary defences. The Federal Court granted Habeas Corpus petitions in favour of threeeight of the Affected Individuals terminating the charges against those individuals. The Federal Prosecutors’ Office appealed twoseven of the decisions. BHP Billiton Brasil rejects outright the charges against the CompanyBHP Brasil and the Affected Individuals and will defend the charges and fully support each of the Affected Individuals in their defence of the charges. United States class action complaint – shareholders
In February 2016, a putative class action complaint (Complaint) was filed in the U.S. District Court for the Southern District of New York on behalf of purchasers of American Depositary Receipts of BHP Group Limited and BHP Group Plc between 25 September 2014 and 30 November 2015 against BHP Group Limited and BHP Group Plc and certain of its current and former executive officers and directors. The Complaint asserted claims under US federal securities laws and indicated that the plaintiff would seek certification to proceed as a class action.
In 6 August 2018, the parties reached an in-principle settlement agreement of US$50 million to resolve all claims with no admission of liability by the Defendants, subject to Court approval. On 10 April 2019, the District Court made orders granting final approval of the settlement and the settlement became final on 10 May 2019. The majority of the settlement payment was covered by BHP’s external insurance arrangements.
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United States class action complaint – bondholders On 14 November 2016, a putative class action complaint (Bondholder Complaint) was filed in the U.S. District Court for the Southern District of New York on behalf of purchasers of Samarco’s 10-year bond notes due 2022–2024 between 31 October 2012 and 30 November 2015. The Bondholder Complaint was initially filed against Samarco and the former chief executive officer of Samarco. The Complaint asserted claims under the U.S. federal securities laws and indicated that the plaintiff will seek certification to proceed as a class action. The Bondholder Complaint was subsequently amended to include BHP Group Limited, BHP Group Plc, BHP Billiton Brasil Ltda, Vale S.A. and officers of Samarco, including four of Vale S.A. and BHP Billiton Brasil Ltda’s nominees to the Samarco Board. On 5 April 2017, the Plaintiff discontinued its claims against the individual defendants. The amount of damages sought by the putative class is unspecified. On 7 March 2018, the District Court granted a joint motion from the remaining corporate defendants to dismiss the Bondholder Complaint. A second amended Bondholder Complaint was also dismissed by the Court on 18 June 2019. On 9 July 2019. The Plaintiff has2019, the plaintiff filed a motion which remains pending before the Court, for reconsideration of that decision or for leave to file a third amended complaint. On 30 October 2019, the Court denied the plaintiff’s motion for reconsideration and for leave to amend its complaint. The amountplaintiff has filed a notice of damages sought byappeal of both of those orders. This appeal remains pending before the putative class is unspecified.Court of Appeals. Australian class action complaints Three separateBHP Group Limited is named as a defendant in a shareholder class actions were filedaction in the Federal Court of Australia on behalf of persons who acquired shares in BHP Group Ltd on the Australian Securities Exchange or shares in BHP Group Plc on the London Stock Exchange and Johannesburg Stock Exchange in periods prior to the Samarco dam failure.
Following an appeal to the Full Court of the Federal Court, two of the actions have been consolidated into the one action and the third action is expected to be dismissed.
The amount of damages sought in the consolidated action is unspecified. BHP filed an application for a temporary stay of the class action pending resolution of certain Brazilian criminal proceedings. On 17 March 2020, the Court declined to order the temporary stay. Instead, the Court ordered that interlocutory steps in the class action be considered on a case by case basis and allowed to proceed only if any prejudice in connection with the Brazilian criminal proceedings does not outweigh the other interests of justice. On 12 May 2020, BHP Group Ltd filed an application seeking declaratory relief which, if successful, would narrow the group of claimants in the class action. This application is scheduled to be heard on 7-8 September 2020. United Kingdom group action complaint BHP Group Plc and BHP Group Ltd are named as defendants in group action claims for damages that have been filed in the courts of England. These claims have been filed on behalf of certain individuals, governments, businesses and communities in Brazil allegedly impacted by the Samarco dam failure. On 7 August 2019, the BHP parties filed a preliminary application seeking to strike out or stay this action on jurisdictional and other procedural grounds. The amount of damages soughtapplication was heard in July 2020. The Court has not yet issued its judgment on this class action is unspecified.application. Tax and royalty matters
Transfer pricing dispute – Sales of commodities to BHP Billiton Marketing AG in Singapore
On 19 November 2018, BHP reached an agreement with the Australian Taxation Office (ATO) to settle the transfer pricing dispute relating to its marketing operations in Singapore.
The settlement fully resolves the longstanding dispute between BHP and the ATO for all prior years, being 2003 to 2018, with no admission of tax avoidance by BHP, and provides certainty in relation to the future taxation treatment.
The dispute related to the amount of Australian tax payable as a result of the sale of BHP’s Australian commodities to BHP’s Singapore marketing business. The ATO had issued amended assessments for A$661 million primary tax (A$1,042 million including interest and penalties) for the income years 2003 to 2013.
As part of the settlement, BHP paid a total of approximately A$529 million in additional taxes for the income years 2003 to 2018. BHP had already paid A$328 million of this amount to the ATO, following receipt of amended tax assessments and in accordance with the ATO’s normal practice.
A further element of the settlement is that BHP Group Limited will increase its ownership of BHP Billiton Marketing AG from 58 per cent to 100 per cent. BHP Billiton Marketing AG is the main company that BHP utilises to conduct its Singapore marketing business. The change in ownership will result in all profits made in Singapore in relation to the Australian assets owned by BHP Group Limited being fully subject to Australian tax.
The change in ownership will provide certainty for BHP and the ATO regarding the Australian taxation treatment of BHP’s Singapore marketing business for future years.
BHP’s marketing operations will continue to be located in Singapore and remain an important part of BHP’s value chain.
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Unresolved tax and royalty matters The Group presently has unresolved tax and royalty matters for which the timing of resolution and potential economic outflow is uncertain. For details of those matters, refer to note 56 ‘Income and tax expense’ in section 5. 2785.1.
6.76.8 Glossary
6.7.16.8.1 Mining, oil and gas-related terms
2D Two dimensional. 3D Three dimensional. AIG The Australian Institute of Geoscientists. Anthracite Coal of high rank with the highest carbon content. APEGS Association of Professional Engineers and Geoscientists of Saskatchewan. AusIMM The Australasian Institute of Mining and Metallurgy. Beneficiation The process of physically separating ore from waste material prior to subsequent processing of the improved ore. Bituminous Coal of intermediate rank with relatively high carbon content. Brownfield The development or exploration located inside the area of influence of existing mine operations which can share infrastructure/management. Butane A component of natural gas. Where sold separately, is largely butane gas that has been liquefied through pressurisation. One tonne of butane is approximately equivalent to 14,000 cubic feet of gas. Coal Reserves Equivalent to Ore Reserves, but specifically concerning coal. 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. Condensate A mixture of hydrocarbons that exist in gaseous form in natural underground reservoirs, but which condense to form a liquid at atmospheric conditions. Conventional Petroleum Resources Hydrocarbon accumulations that can be produced by a well drilled into a geologic formation in which the reservoir and fluid characteristics permit the hydrocarbons to readily flow to the wellbore without the use of specialised extraction technologies. Copper cathode Electrolytically refined copper that has been deposited on the cathode of an electrolytic bath of acidified copper sulphate solution. The refined copper may also be produced through leaching and electrowinning. Crude oil A mixture of hydrocarbons that exist in liquid form in natural underground reservoirs, and remain liquid at atmospheric pressure after being produced at the well head and passing through surface separating facilities. Cut-off grade A nominated grade above which an Ore Reserve is defined. For example, the lowest grade of mineralised material that qualifies as economic for estimating an Ore Reserve. 279
Dated Brent A benchmark price assessment as of a specified date of the spot market value of physical cargoes of North Sea light sweet crude oil. Electrowinning/electrowon An electrochemical process in which metal is recovered by dissolving a metal within an electrolyte and plating it onto an electrode. Energy coal Used as a fuel source in electrical power generation, cement manufacture and various industrial applications. Energy coal may also be referred to as steaming or thermal coal. Ethane A component of natural gas. Where sold separately, is largely ethane gas that has been liquefied through pressurisation. One tonne of ethane is approximately equivalent to 28,000 cubic feet of gas. FAusIMM Fellow of the Australasian Institute of Mining and Metallurgy. Field An area consisting of a single reservoir or multiple reservoirs all grouped on or related to the same individual geological structural feature and/or stratigraphic condition. There may be two or more reservoirs in a field that are separated vertically by intervening impervious strata, or laterally by local geologic barriers, or by both. Reservoirs that are associated by being in overlapping or adjacent fields may be treated as a single or common operational field. The geological terms ‘structural feature’ and ‘stratigraphic condition’ are intended to identify localised geological features as opposed to the broader terms of basins, trends, provinces, plays, areas-of-interest, etc. (per SEC Regulation S-X, Rule 4-10). Flotation A method of selectively recovering minerals from finely ground ore using a froth created in water by specific reagents. In the flotation process, certain mineral particles are induced to float by becoming attached to bubbles of froth and the unwanted mineral particles sink. Fly ash The finer particle fraction of coal ash. FPSO (Floating production, storage and off-take) A floating vessel used by the offshore oil and gas industry for the processing of hydrocarbons and for storage of oil. An FPSO vessel is designed to receive hydrocarbons produced from nearby platforms or subsea templates, process them and store oil until it can be offloaded onto a tanker. Grade or Quality Any physical or chemical measurement of the characteristics of the material of interest in samples or product. Greenfield The development or exploration located outside the area of influence of existing mine operations/infrastructure. Heap leach(ing) A process used for the recovery of metals such as copper, nickel, uranium and gold from low-grade ores. The crushed material is laid on a slightly sloping, impermeable pad and leached by uniformly trickling (gravity fed) a chemical solution through the beds to ponds. The metals are recovered from the solution. Hypogene Sulphide Hypogene mineralisation is formed by fluids at high temperature and pressure derived from magmatic activity. Copper in Hypogene sulphide consists predominantly of chalcopyrite.Sulphide is mainly provident from the copper bearing mineral chalcopyrite and higher metal recoveries are achieved via grinding/flotation concentration processes. 280
Joint Ore Reserves Committee (JORC) Code A set of minimum standards, recommendations and guidelines for public reporting in Australasia of Exploration Results, Mineral Resources and Ore Reserves. The guidelines are defined by the Australasian Joint Ore Reserves Committee (JORC), which is sponsored by the Australian mining industry and its professional organisations. Leaching The process by which a soluble metal can be economically recovered from minerals in ore by dissolution. LNG (liquefied natural gas) Consists largely of methane that has been liquefied through chilling and pressurisation. One tonne of LNG is approximately equivalent to 46,000 cubic feet of natural gas. LOI (loss on ignition) A measure of the percentage of volatile matter (liquid or gas) contained within a mineral or rock. LOI is determined to calculate loss in mass when subjected to high temperatures. LPG (liquefied petroleum gas) Consists of propane and butane and a small amount (less than 2 per cent) of ethane that has been liquefied through pressurisation. One tonne of LPG is approximately equivalent to 12 barrels of oil. MAIG Member of the Australian Institute of Geoscientists. Marketable Coal Reserves Tonnes of coal available, at specified moisture content and air-dried qualities, for sale after the beneficiation of Coal Reserves. 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. MGSSA Member of the Geological Society of South Africa. Mineralisation Any single mineral or combination of minerals occurring in a mass, or deposit, of economic interest. NGL (natural gas liquids) Consists of propane, butane and ethane – individually or as a mixture. Nominated production rate The approved average production rate for the remainder of the life-of-asset plan or five-year plan production rate if significantly different to life-of-asset production rate. OC (open-cut) Surface working in which the working area is kept open to the sky. Ore Reserves That part of a mineral deposit that can be economically and legally extracted or produced at the time of the reserves determination. To establish this, studies appropriate to this type of mineral deposit involved have been carried out to estimate the quantity, grade and value of the ore mineral(s) present. In addition, technical studies have been completed to determine realistic assumptions for the extraction of minerals including estimates of mining, processing, economic, marketing, legal, environmental, social and governmental factors. The degree of these studies is sufficient to demonstrate the technical and economic feasibility of the project and depends on whether or not the project is an extension of an existing project or operation. The estimates of minerals to be produced include allowances for ore losses and the treatment of unmineralised materials which may occur as part of the mining and processing activities. Ore Reserves are sub-divided in order of increasing confidence into Probable Ore Reserves and Proven Ore Reserves Such studies demonstrate that, at the time of reporting, extraction could reasonably be justified (JORC Code, 2012 Edition).Reserves.
PCI Pulverised coal injection. PEGBC 281
P. Eng. PEGNL
Professional Engineer of the Association of Professional Engineers and Geoscientists of Newfoundland and Labrador.the Province of British Columbia.
Probable Ore Reserves Ore Reserves for which quantity and grade and/or quality are estimated for information similar to that used for Proven Ore Reserves, that 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 Ore Reserves, is high enough to assume continuity between points of observation. Propane A component of natural gas. Where sold separately, is largely propane gas that has been liquefied through pressurisation. One tonne of propane is approximately equivalent to 19,000 cubic feet of gas. Proved oil and gas reserves Those quantities of oil, gas and natural gas liquids, which by analysis of geoscience and engineering data can be estimated with reasonable certainty to be economically producible – from a given date forward, from known reservoirs, and under existing economic conditions, operating methods, and government regulations – prior to the time at which contracts providing the right to operate expire, unless evidence indicates that renewal is reasonably certain, regardless of whether deterministic or probabilistic methods are used for the estimation (from SEC Modernization of Oil and Gas Reporting, 2009, 17 CFR Parts 210, 211, 229 and 249). Proven Ore Reserves Ore Reserves for which (a) quantity is estimated from dimensions revealed in outcrops, trenches, workings or drill holes; grade and/or quality are computed from the results of detailed samplings and (b) the sites for inspection, sampling and measurement are paced so closely and the geologic character is so well defined that size, shape, depth and mineral content of reserves are well established. Qualified petroleum reserves and resources evaluator A qualified petroleum reserves and resources evaluator, as defined in Chapter 19 of the ASX Listing Rules. Reserve Life Current stated Ore Reserves estimate divided by the current approved nominated production rate as at the end of the financial year. ROM (run of mine) Run of mine product mined in the course of regular mining activities. Tonnes include allowances for diluting materials and for losses that occur when the material is mined. Slag A by-product of smelting after the desired metal has been extracted from its ore. Slimes A mixture of liquid and the finer particle sized fraction of minerals, typically related to tailings. Sludge A thick, soft, wet mud or similar viscous mixture of liquid and solid components, especially the product of minerals processing or refining activities. Smelting The process of extracting metal from its ore by heating and melting. Solvent extraction A method of separating one or more metals from a leach solution by treating with a solvent that will extract the required metal, leaving the others. The metal is recovered from the solvent by further treatment. SP (stockpile) An accumulation of ore or mineral built up when demand slackens or when the treatment plant or beneficiation equipment is incomplete or temporarily unable to process the mine output; any heap of material formed to create a buffer for loading or other purposes or material dug and piled for future use. Spud Commence drilling of an oil or gas well. Supergene Sulphide Supergene is a term used to describe near-surface processes and their products, formed at low temperature and pressure by the activity of descendingmeteoric or surface water. Copper in Supergene sulphideSulphide is mainly formed ofprovident from the copper bearing minerals chalcocite and covellite and is amenable to heap leaching.both grinding/flotation concentration and leaching processes. Tailings Those portions of washed or milled ore that are too poor to be treated further or remain after the required metals and minerals have been extracted. 282
TLP (tension leg platform) A vertically moored floating facility for production of oil and gas. Total Ore Reserves The sum of Proven and Probable Ore Reserves. Transitional Sulphide Transitional is a term used to describe the zone of mineralisation that is a gradation between Supergene Sulphide and Hypogene Sulphide resulting from the incomplete development of the former as it overprints the latter. This results in a more irregular distribution of the three main copper bearing minerals and is amenable to both grinding/flotation concentration and leaching processes. UG (underground) Below the surface mining activities. Unconventional Petroleum Resources
Hydrocarbon accumulations that are generally pervasive in nature and may be continuous throughout a large area requiring specialised extraction technologies to produce or recover. Examples include, but are not limited to coalbed methane, basin-centred gas, shale gas, gas hydrates, natural bitumen (tar sands), and oil shale deposits.
Examples of specialised technologies include: dewatering of coalbed methane, massive fracturing programs for shale gas, steam and/or solvents to mobilise bitumen for in situ recovery, and, in some cases, mining activities.
Wet tonnes Production is usually quoted in terms of wet metric tonnes (wmt). To adjust from wmt to dry metric tonnes (dmt) a factor is applied based on moisture content. 283
6.7.26.8.2 Other terms
AASB (Australian Accounting Standards Board) Accounting standards as issued by the Australian Accounting Standards Board. Activity data A quantitative measure of a level of activity that results in greenhouse gas emissions. Activity data is multiplied by an energy factor and/or an emission factor to derive the energy consumption and greenhouse gas emissions associated with a process or an operation. Examples of activity data include kilowatt-hours of electricity used, quantity of fuel used, output of a process, hours equipment is operated, distance travelled and floor area of a building. ADR (American Depositary Receipt) An instrument evidencing American DepositoryDepositary Shares or ADSs, which trades on a stock exchange in the United States. ADS (American Depositary Share) A share issued under a deposit agreement that has been created to permit US-resident investors to hold shares in non-US companies and trade them on the stock exchanges in the United States. ADSs are evidenced by American Depositary Receipts, or ADRs, which are the instruments that trade on a stock exchange in the United States. ASIC (Australian Securities and Investments Commission) The Australian Government agency that enforces laws relating to companies, securities, financial services and credit in order to protect consumers, investors and creditors. Assets Assets are a set of one or more geographically proximate operations (including open-cut mines, underground mines, and onshore and offshore oil and gas production and production facilities). Assets include our operated and non-operated assets. Asset groups We group our assets into geographic regions in order to provide effective governance and accelerate performance improvement. Minerals assets are grouped under Minerals Australia or Minerals Americas based on their geographic location. Oil, gas and petroleum assets are grouped together as Petroleum. ASX (Australian Securities Exchange) ASX is a multi-asset class vertically integrated exchange group that functions as a market operator, clearing house and payments system facilitator. It oversees compliance with its operating rules, promotes standards of corporate governance among Australia’s listed companies and helps educate retail investors. BHP Both companies in the DLC structure, being BHP Group Limited and BHP Group Plc and their respective subsidiaries. BHP Group Limited BHP Group Limited and its subsidiaries. BHP Group Limited share A fully paid ordinary share in the capital of BHP Group Limited. BHP Group Limited shareholders The holders of BHP Group Limited shares. BHP Group Limited Special Voting Share A single voting share issued to facilitate joint voting by shareholders of BHP Group Limited on Joint Electorate Actions. BHP Group Plc BHP Group Plc and its subsidiaries. BHP Group Plc share A fully paid ordinary share in the capital of BHP Group Plc. BHP Group Plc shareholders The holders of BHP Group Plc shares. 284
BHP Group Plc Special Voting Share A single voting share issued to facilitate joint voting by shareholders of BHP Group Plc on Joint Electorate Actions. BHP shareholders In the context of BHP’s financial results, BHP shareholders refers to the holders of shares in BHP Group Limited and BHP Group Plc. Board The Board of Directors of BHP. Canadian Greenhouse Gas Reporting Program (previously listed as ECCC) The Greenhouse Gas Reporting Program (GHGRP) collects information on greenhouse gas (GHG) emissions annually from facilities across Canada. Carbon dioxide equivalent (CO2-e) The universal unit of measurement to indicate the global warming potential (GWP) of each greenhouse gas, expressed in terms of the GWP of one unit of carbon dioxide. It is used to evaluate releasing (or avoiding releasing) different greenhouse gases against a common basis. CQCA Central Queensland Coal Associates. Commercial Our Commercial function optimises value creation and minimises costs across our end-to-end supply chain. It is organised around our core value chain activities – Sales and Marketing; Maritime and Supply Chain Excellence; Procurement; and Warehousing Inventory and Logistics and Property – supported by short and long-term market insights, strategy and planning activities, and close partnership with our assets. Company BHP Group Limited, BHP Group Plc and their respective subsidiaries. Continuing operations Assets/operations/entities that are owned and/or operated by BHP, excluding major assets/operations/entities classified as Discontinued Operations.operations. Discontinued operations Major assets/operations/entities that have either been disposed of or are classified as held for sale in accordance with IFRS 5/AASB 5Non-current Assets Held for Sale and Discontinued Operations. Dividend record date The date, determined by a company’s board of directors, by when an investor must be recorded as an owner of shares in order to qualify for a forthcoming dividend. DLC Dividend Share A share to enable a dividend to be paid by BHP Group Plc to BHP Group Limited or by BHP Group Limited to BHP Group Plc (as applicable). DLC (Dual Listed Company) BHP’s Dual Listed Company structure has two parent companies (BHP Group Limited and BHP Group Plc) operating as a single economic entity as a result of the DLC merger. DLC merger The Dual Listed Company merger between BHP Group Limited and BHP Group Plc on 29 June 2001. Emission factor A factor that converts activity data into greenhouse gas emissions data (e.g. kg CO2-e emitted per GJ of fuel consumed, kg CO2-e emitted per KWh of electricity used). Equity share approach A consolidation approach whereby a company accounts for greenhouse gas emissions from operations according to its share of equity in the operation. The equity share reflects economic interest, which is the extent of rights a company has to the risks and rewards flowing from an operation. Also see the definition for ‘Operational control approach’. ELT (Executive Leadership Team) The Executive Leadership Team directly reports to the Chief Executive Officer and is responsible for the day-to-day management of BHP and leading the delivery of our strategic objectives. Energy Energy means all forms of energy products where ‘energy products’ means combustible fuels, heat, renewable energy, electricity, or any other form of energy from operations that are owned or controlled by BHP. The primary sources of energy consumption come from fuel consumed by haul trucks at our operated assets, as well as purchased electricity used at our operated assets. Energy content factor The energy content of a fuel is an inherent chemical property that is a function of the number and types of chemical bonds in the fuel. Entrainment Entrained water includes water incorporated into product and/or waste streams, such as tailings, that cannot be easily recovered. EPA (Environmental Protection Agency) The EPA is a government regulator working to protect the environment. Evaporation Volumes of water that are consumed via evaporation of water from water storage facilities and for dust suppression activities. Evaporation volumes are calculated using both climate and physical information. Evaporation may be calculated by multiplying the evaporation rate (measured through on-site instruments or sourced from meteorological authorities) by the surface areas of the water body, or it may be estimated from the change in stored water volumes when the other inputs and outputs are directly measured. Executive KMP (Key Management Personnel) Executive KMP includes the Executive Director (our CEO), the Chief Financial Officer, the President, Operations, Minerals Australia, the President, Operations, Minerals Americas, and the President, Operations, Petroleum. It does not include the Non-Executive Directors (our Board). Financial control approach A consolidation approach whereby a company reports greenhouse gas emissions based on the accounting treatment in the company’s consolidated financial statements, as follows: 100 per cent for operations accounted for as subsidiaries, regardless of equity interest owned for operations accounted for as a joint operation, the company’s interest in the operation It does not report greenhouse gas emissions from operations that are accounted for using the equity method in the company’s financial statements. Functions Functions operate along global reporting lines to provide support to all areas of the organisation. Functions have specific accountabilities and deep expertise in areas such as finance, legal, governance, technology, human resources, corporate affairs, health, safety and community. Gearing ratio The ratio of net debt to net debt plus net assets. 285
GHG (Greenhouse gas) For BHP reporting purposes, these are the aggregate anthropogenic carbon dioxide equivalent emissions of carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O), hydrofluorocarbons (HFCs), perfluorocarbons (PFCs) and sulphur hexafluoride (SF6). GRI (Global Reporting Initiative) GRI works with businesses and governments to understand and communicate their impact on critical sustainability issues. Groundwater Water beneath the earth’s surface, including beneath the seabed, which fills pores or cracks between porous media such as soil, rock, coal, and sand, often forming aquifers. For accounting purposes, water that is entrained in the ore can be considered as groundwater (e.g. dewatering, abstraction from bore field, ore entrainment). Group BHP Group Limited, BHP Group Plc and their respective subsidiaries. GWP (Global warming potential) A factor describing the radiative forcing impact (degree of harm to the atmosphere) of one unit of a given greenhouse gas relative to one unit of CO2. BHP currently uses GWP from the Intergovernmental Panel on Climate Change (IPCC) Assessment Report 4 (AR4) based on 100-year timeframe. Henry Hub A natural gas pipeline located in Erath, Louisiana that serves as the official delivery location for futures contracts on the New York Mercantile Exchange. HPI (High potential injuries) High potential injuries (HPI) are recordable injuries and first aid cases where there was the potential for a fatality. ICMM (International Council on Mining and Metals) The International Council on Mining and Metals is an international organisation dedicated to a safe, fair and sustainable mining and metals industry. IFRS (International Financial Reporting Standards) Accounting standards as issued by the International Accounting Standards Board. IPCC (Intergovernmental Panel on Climate Change) The Intergovernmental Panel on Climate Change (IPCC) is the United Nations body for assessing the science related to climate change. IUCN (International Union for Conservation of Nature) The International Union for Conservation of Nature is an international organisation working in the field of nature conservation and sustainable use of natural resources. KMP (Key Management Personnel) Persons having authority and responsibility for planning, directing and controlling the activities of the Group, directly or indirectly. For BHP, KMP includes the Executive Director (our CEO), the Non-Executive Directors (our Board), as well as the Chief Financial Officer, the President Operations (Minerals Australia), the President Operations (Minerals Americas), and the President Operations (Petroleum). KPI (Key performance indicator) Used to measure the performance of the Group, individual businesses and executives in any one year. LME (London Metal Exchange) A major futures exchange for the trading of industrial metals. Location-based reporting Scope 2 greenhouse gas emissions based on average energy generation emission factors for defined geographic locations, including local, subnational, or national boundaries (i.e. grid factors). In the case of a direct line transfer, the location-based emissions are equivalent to the market-based emissions. Market-based reporting Scope 2 greenhouse gas emissions based on the generators (and therefore the generation fuel mix from which the reporter contractually purchases electricity and/or is directly provided electricity via a direct line transfer). Minerals Americas A group of assets located in Brazil, Canada, Chile, Colombia, Peru and the United States (see ‘Asset groups’) focusing on copper, zinc, iron ore, energy coal and potash. Minerals Australia A group of assets located in Australia (see ‘Asset groups’). Minerals Australia includes operations in Western Australia, Queensland, New South Wales and South Australia, focusing on iron ore, copper, metallurgical, and energy coal and nickel. NGER (National Greenhouse and Energy Reporting Scheme) The Australian National Greenhouse and Energy Reporting (NGER) scheme is a single national framework for reporting and disseminating company information about greenhouse gas emissions, energy production, energy consumption and other information specified under NGER legislation. Non-operated asset/Non-operatednon-operated joint venture (NOJV) Non-operated assets/non-operated joint ventures include interests in assets that are owned as a joint venture but not operated by BHP. References in this Annual Report to a ‘joint venture’ are used for convenience to collectively describe assets that are not wholly owned by BHP. Such references are not intended to characterise the legal relationship between the owners of the asset. Occupational illness An illness that occurs as a consequence of work-related activities or exposure. It includes acute or chronic illnesses or diseases, which may be caused by inhalation, absorption, ingestion or direct contact. OELs (occupational exposure limits) An occupational exposure limit is an upper limit on the acceptable concentration of a hazardous substance in workplace air for a particular material or class of materials. OELs may also be set for exposure to physical agents such as noise, vibration or radiation. OMC (Operations Management Committee) Prior to FY2018, the Operations Management Committee had responsibility for planning, directing and controlling the activities of BHP under the authorities that have been delegated to it by the Board. This included key strategic, investment and operational decisions, and recommendations to the Board. During FY2018 the OMC was dissolved and the Remuneration Committee re-examined the classification of KMP for FY2018 to determine which persons have the authority and responsibility for planning, directing and controlling the activities of BHP. After due consideration, the Remuneration Committee determined the KMP for FY2018 comprised of all Non-executive Directors (the Board), the Executive Director (the CEO), the Chief Financial Officer, the President, Operations, Minerals Australia, the President, Operations, Minerals Americas, and the President, Operations, Petroleum. The Committee also determined that, effective 1 July 2017, the Chief External Affairs Officer and Chief People Officer roles are no longer considered KMP. 286
Onshore US BHP’s Petroleumpetroleum asset (divested in year ended 30 June 2019) in four US shale areas (Eagle Ford, Permian, Haynesville and Fayetteville), where we produceproduced oil, condensate, gas and natural gas liquids. OPEC (Organization of the Petroleum Exporting Countries) OPEC is a permanent intergovernmental organisation of 13 oil-exporting developing nations that coordinates and unifies the petroleum policies of its Member Countries. Operated assets Operated assets include assets that are wholly owned and operated by BHP and assets that are owned as a joint venture and operated by BHP. References in this Annual Report to a ‘joint venture’ are used for convenience to collectively describe assets that are not wholly owned by BHP. Such references are not intended to characterise the legal relationship between the owners of the asset. Operational control approach A consolidation approach whereby a company accounts for 100 per cent of the greenhouse gas emissions over which it has operational control (a company is considered to have operational control over an operation if it or one of its subsidiaries has the full authority to introduce and implement its operating policies at the operation). It does not account for greenhouse gas emissions from operations in which it owns an interest but does not have operational control. Also see the definition for ‘Equity share approach’. Operations Open-cut mines, underground mines, offshore oil and gas production and processing facilities. Operating Model The Operating Model outlines how BHP is organised, works and measures performance and includes mandatory performance requirements and common systems, processes and planning. The Operating Model has been simplified and BHP is organised by assets, asset groups, Commercial, and functions. OperationsOSHA (Occupational Safety and Health Administration)
Open-cut mines, underground mines, onshoreThe Occupational Safety and offshore oilHealth Administration is an agency of the United States Department of Labor that regulates workplace health and gas productionsafety.
Other (with respect to water consumption volumes) This includes water volumes used for purposes such as potable water consumption and processing facilities.amenity facilities at our operated assets. Our Requirements The standards that give effect to the mandatory requirements arising from the BHP Operating Model as approved by the Executive Leadership Team (ELT). They describe the mandatory minimum performance requirements and accountabilities for definitive business obligations, processes, functions and activities across BHP. Previously called Group Level Documents (GLDs), theOur Requirements standards reflect a simpler organisation with the purpose of being more user-friendly and easier to read. Paris Agreement The Paris Agreement is an agreement between countries party to the United Nations Framework Convention on Climate Change (UNFCC) to strengthen efforts to combat climate change and adapt to its effects, with enhanced support to assist developing countries to do so. Paris Agreement goals The central objective of the Paris Agreement is its long-term temperature goal to hold global average temperature increase to well below 2°C above preindustrial levels and pursue efforts to limit the temperature increase to 1.5°C above pre-industrial levels. Petroleum (asset group) A group of conventional and non-conventional oil and gas assets (see ‘Asset groups’). Petroleum’s core production operations are located in the US Gulf of Mexico, Australia and Trinidad and Tobago. Petroleum produces crude oil and condensate, gas and natural gas liquids. Platts Platts is a global provider of energy, petrochemicals, metals and agriculture information and a premier source of benchmark price assessments for those commodity markets. PPE (personal protective equipment) PPE means anything used or worn to minimise risk to worker’s health and safety, including air supplied respiratory equipment. Quoted In the context of American Depositary Shares (ADS) and listed investments, the term ‘quoted’ means ‘traded’ on the relevant exchange. Residual mix The mix of energy generation resources and associated attributes such as greenhouse gas emissions in a defined geographic boundary left after contractual instruments have been claimed/ retired/cancelled. The residual mix can provide an emission factor for companies without contractual instruments to use in a market-based method calculation. A residual mix is currently unavailable to account for voluntary purchases and this may result in double counting between electricity consumers. SASB (Sustainability Accounting Standards Board) The Sustainability Accounting Standards Board is a non-profit organisation that develops standards focused on the financial impacts of sustainability. Scope 1 Greenhousegreenhouse gas emissions Scope 1 greenhouse gas emissions are direct emissions from operations that are owned or controlled by BHP, primarily emissions from fuel consumed by haul trucks at our operated assets, as well as fugitive methane emissions from coal and petroleum production at our operated assets. Scope 1 refers to direct greenhouse gas emissions from operated assets. Scope 2 Greenhousegreenhouse gas emissions Scope 2 greenhouse gas emissions are indirect emissions from the generation of purchased energyor acquired electricity, steam, heat or cooling that is consumed by BHP, primarilyoperations that are owned or controlled by BHP. Our Scope 2 emissions from electricity we buy fromhave been calculated using the grid for use at our operated assets.market-based method using supplier specific emissions factors unless otherwise specified. Scope 3 Greenhousegreenhouse gas emissions Scope 3 greenhouse gas emissions are all other indirect emissions (not included in Scope 2) that occur in BHP’s value chain, primarily emissions resulting from our customers using the fossil fuel commodities and processing the non-fossil fuel commodities we sell, as well as upstream emissions associated with the extraction, production and transportation of the goods, services, fuels and energy we purchase for use at our operations; emissions resulting from the transportation and distribution of our products; and operational emissions (on an equity basis) from our non-operated joint ventures. Seawater 287Water from oceans, seas and estuaries.
SEC (United States Securities and Exchange Commission) The US regulatory commission that aims to protect investors, maintain fair, orderly and efficient markets and facilitate capital formation. Senior manager An employee who has responsibility for planning, directing or controlling the activities of the entity or a strategically significant part of it. In the Strategic Report, senior manager includes senior leaders and any persons who are directors of any subsidiary company even if they are not senior leaders. Shareplus All-employee share purchase plan. Social investment Voluntary contributions to support communities through cash donations to community programs and associated administrative costs. BHP’s targeted level of contribution is one1 per cent of pre-tax profit calculated on the average of the previous three years’ pre-tax profit as reported. South32 During FY2015, BHP demerged a selection of our alumina, aluminium, coal, manganese, nickel, silver, lead and zinc assets into a new company – South32 Limited. SPM (sustainability performance metric) The sustainability performance metrics are the metrics used to measure and evaluate our sustainability performance. Strate South Africa’s Central Securities Depositary for the electronic settlement of financial instruments. Surface water All water naturally open to the atmosphere, except for water from oceans, seas and estuaries (e.g. precipitation and runoff, including snow and hail), rivers and creeks external water dams. Third party water Water supplied by an entity external to the operational facility. Third party water contains water from the other three sources. When the source is known, the physical source (surface water, groundwater and seawater) should prevail. Our disclosures have allocated all third party water withdrawals to the physical source. TRIF (Total recordable injury frequency) The sum of (fatalities + lost-time cases + restricted work cases + medical treatment cases) x 1,000,000 ÷ actual hours worked. Stated in units of per million hours worked. BHP adopts the US Government Occupational Safety and Health Administration guidelines for the recording and reporting of occupational injury and illnesses. TRIF statistics exclude non-operated assets. TSR (Total shareholder return) TSR measures the return delivered to shareholders over a certain period through the movements in share price and dividends paid (which are assumed to be reinvested). It is the measure used to compare BHP’s performance to that of other relevant companies under the Long-Term Incentive Plan. UKLA (United Kingdom Listing Authority) Term used when the UK Financial Conduct Authority (FCA) acts as the competent authority under Part VI of the UK Financial Services and Markets Act (FSMA). Underlying attributable profit Profit/(loss) after taxation attributable to BHP shareholders excluding any exceptional items attributable to BHP shareholders as described in note 3 ‘Exceptional items’ in section 5. Refer to section 1.126.1 for further information. Underlying EBIT Underlying EBITDA, including depreciation, amortisation and impairments. Refer to section 1.126.1 for further information. Underlying EBITDA Earnings before net finance costs, depreciation, amortisation and impairments, taxation expense, Discontinued operations and exceptional items. Refer to section 1.126.1 for further information. Unit costs One of the financial measures BHP uses to monitor the performance of individual assets. Unit costs are calculated as ratio of net costs of the assets to the equity share of sales tonnage. Net costs is defined as revenue less Underlying EBITDA excluding third party. Conventional petroleumfreight and other costs, depending on the nature of each asset. Petroleum unit costs exclude inventory movements, freight, exploration and development and evaluation expense; WAIO,expense and other costs that do not represent underlying cost performance of the business; Western Australia Iron Ore, Queensland Coal and New South Wales Energy Coal unit costs exclude freight and royalties; Escondida unit costs exclude freightby-product credits. WAF (Water Accounting Framework) The Water Accounting Framework is a common mining and by-product credits.metals industry approach to water accounting in Australia. Water quality – Type 1 288Water of high quality that would require minimal (if any) treatment to meet drinking water standards. This water is considered high quality/high-grade in the International Council on Mining and Metals (ICMM) ‘A Practical Guide to Consistent Water Reporting’.
Water quality – Type 2 Water of medium quality that would require moderate treatment to meet drinking water standards (it may have a high salinity threshold of no higher than 5,000 milligrams per litre total dissolved solids and other individual constituents). This water is considered high quality/high grade in the International Council on Mining and Metals (ICMM) ‘A Practical Guide to Consistent Water Reporting’. Water quality – Type 3 Water of low quality that would require significant treatment to meet drinking water standards. It may have individual constituents with high values of total dissolved solids, elevated levels of metals or extreme levels of pH. This type of water also includes seawater. This water is considered low quality/low-grade in the International Council on Mining and Metals (ICMM) ‘A Practical Guide to Consistent Water Reporting’.
6.7.3WRSA (Water Resource Situational Analysis)
A situational analysis is an analysis of the water resources and catchments that the operated asset interacts with, including assessment of: (i) the sustainability of the volume and quality of the water resources taking into account interactions of all other parties and climate change forecasts; (ii) BHP’s direct, indirect and cumulative impacts on the sustainability of the volume and quality of the water resources and any related environmental, social or cultural values, taking into account climate change forecasts in accordance with the Water Management Standard; (iii) the state of water infrastructure, water access, sanitation and hygiene of local communities; (iv) the environmental health of the water catchments that feed the water resources taking into account the extent of vegetation, runoff, and any conservation of the area; (v) external water governance arrangements and their effectiveness. 6.8.3 Terms used in reserves Ag
silver
AI2O3
alumina
Anth
anthracite
Ash
inorganic material remaining after combustion
Au
gold
Cu
copper
CV
calorific value
Fe
iron
Insol.
insolubles
K2O
potassium oxide
KCl
potassium chloride
LOI
loss on ignition
Met
metallurgical coal
MgO
magnesium oxide
Mo
molybdenum
Ni
nickel
P
phosphorous
Pc
phosphorous in concentrate
PCI
pulverised coal injection
S
sulphur
289
| | | Ag | | silver | | | AI2O3 | | alumina | | | Anth | | anthracite | | | Ash | | inorganic material remaining after combustion | | | Au | | gold | | | Cu | | copper | | | CV | | calorific value | | | Fe | | iron | | | Insol. | | insolubles | | | K2O | | potassium oxide | | | KCl | | potassium chloride | | | LOI | | loss on ignition | | | Met | | metallurgical coal | | | MgO | | magnesium oxide | | | Mo | | molybdenum | | | Ni | | nickel | | | P | | phosphorous | | | Pc | | phosphorous in concentrate | | | PCI | | pulverised coal injection | | | S | | sulphur | | | SCu | | soluble copper | | | SiO2 | | silica | | | TCu | | total copper | | | Th | | thermal coal | | | U3O8 | | uranium oxide | | | VM | | volatile matter | | | Yield | | the percentage of material of interest that is extracted during mining and/or processing | | | Zn | | zinc |
SCu
soluble copper
SiO2
silica
TCu
total copper
Th
thermal coal
U3O8
uranium oxide
VM
volatile matter
Yield
the percentage of material of interest that is extracted during mining and/or processing
Zn
zinc
6.7.46.8.4 Units of measure
%
percentage or per cent
bbl
barrel (containing 42 US gallons)
bbl/d
barrels per day
Bcf
billion cubic feet (measured at the pressure bases set by the regulator)
bcm
bank cubic metres
boe
barrels of oil equivalent – 6,000 scf of natural gas equals 1 boe
dmt
dry metric tonne
dmtu
dry metric tonne unit
g/t
grams per tonne
ha
hectare
kcal/kg
kilocalories per kilogram
kg/tonne or kg/t
kilograms per tonne
290
| | | % | | percentage or per cent | | | bbl | | barrel (containing 42 US gallons) | | | bbl/d | | barrels per day | | | Bcf | | billion cubic feet (measured at the pressure bases set by the regulator) | | | boe | | barrels of oil equivalent – 6,000 scf of natural gas equals 1 boe | | | CO2-e | | carbon dioxide equivalent | | | dmt | | dry metric tonne | | | GJ | | gigajoule | | | GL | | gigalitre | | | g/t | | grams per tonne | | | ha | | hectare | | | kcal/kg | | kilocalories per kilogram | | | kg/tonne or kg/t | | kilograms per tonne | | | km | | kilometre | | | kt | | kilotonnes | | | ktpa | | kilotonnes per annum | | | ktpd | | kilotonnes per day | | | kV | | kilovolt | | | kW | | kilowatt | | | kWh | | kilowatt hour | | | lb | | pound | | | m | | metre | | | m3 | | cubic metre | | | Mbbl/d | | thousand barrels per day | | | Mcf | | thousand cubic feet (measured at the pressure bases set by the regulator) | | | ML | | megalitre | | | mm | | millimetre | | | MMbbl/d | | million barrels per day | | | MMboe | | million barrels of oil equivalent | | | MMBtu | | million British thermal units – 1 scf of natural gas equals approximately 1,010 Btu | | | MMcf/d | | million cubic feet per day | | | Mt | | million tonnes | | | Mtpa | | million tonnes per annum | | | MW | | megawatt | | | oz | | ounce | | | ppm | | parts per million | | | PJ | | petajoules | | | scf | | standard cubic feet | | | t | | tonne | | | tCO2-e | | tonne of carbon dioxide equivalent | | | TJ | | terajoule | | | TJ/d | | terajoules per day | | | TW | | terawatt | | | TWh | | terawatt hour | | | tpa | | tonnes per annum | | | tpd | | tonnes per day | | | t/h | | tonnes per hour | | | wmt | | wet metric tonnes |
km
kilometre
kt
kilotonnes
ktpa
kilotonnes per annum
ktpd
kilotonnes per day
kV
kilovolt
lb
pound
m
metre
Mbbl/d
thousand barrels per day
Mcf
thousand cubic feet (measured at the pressure bases set by the regulator)
ML
megalitre
mm
millimetre
MMbbl/d
million barrels per day
MMboe
million barrels of oil equivalent
MMBtu
million British thermal units – 1 scf of natural gas equals approximately 1,010 Btu
MMcf/d
million cubic feet per day
MMcm/d
million cubic metres per day
Mscf
thousand standard cubic feet
Mt
million tonnes
Mtpa
million tonnes per annum
MW
megawatt
oz
ounce
291
ppm
parts per million
psi
pounds per square inch
scf
standard cubic feet
t
tonne
TJ
terajoule
TJ/d
terajoules per day
tpa
tonnes per annum
tpd
tonnes per day
t/h
tonnes per hour
wmt
wet metric tonnes
292
Section 7 Shareholder information In this section 7.1 History and development
7.2 Markets
7.3 Organisational structure
7.4 Material contracts
7.5 Constitution
7.6 Share ownership
7.7 Dividends
7.8 American Depositary Receipts fees and charges
7.9 Taxation
7.10 Government regulations
7.11 Ancillary information for our shareholders
293
7.1 History and development BHP Group Limited (formerly BHP Billiton Limited, then BHP Limited and, before that, The Broken Hill Proprietary Company Limited) was incorporated in 1885 and is registered in Australia with ABN 49 004 028 077. BHP Group Plc (formerly BHP Billiton Plc, and before that Billiton Plc) was incorporated in 1996 and is registered in England and Wales with registration number 3196209. Successive predecessor entities to BHP Group Plc have operated since 1860. We have operated under a Dual Listed Company (DLC) structure since 29 June 2001. Under the DLC structure, the two parent companies, BHP Group Limited and BHP Group Plc, operate as a single economic entity, run by a unified Board and senior executive management team. For more information on the DLC structure, refer to section 7.3. 294
7.2 Markets As at the date of this Annual Report, BHP Group Limited has a primary listing on the Australian Securities Exchange (ASX) (ticker BHP) in Australia and BHP Group Plc has a premium listing on the UK Financial Conduct Authority’sFCA’s Official List and its ordinary shares are admitted to trading on the London Stock Exchange (LSE) (ticker BHP). BHP Group Plc also has a secondary listing on the Johannesburg Stock Exchange (JSE) (ticker BHP) in South Africa. In addition, BHP Group Limited and BHP Group Plc are listed on the New York Stock Exchange (NYSE) in the United States. Trading on the NYSE is via American Depositary Receipts (ADRs) evidencing American Depositary Shares (ADSs), with each ADS representing two ordinary shares of BHP Group Limited or BHP Group Plc. Citibank N.A. (Citibank) is the Depositary for both ADS programs. BHP Group Limited’s ADSs have been listed for trading on the NYSE (ticker BHP) since 28 May 1987 and BHP Group Plc’s since 25 June 2003 (ticker BBL). 295
7.3 Organisational structure 7.3.1 General BHP consists of the BHP Group Limited and the BHP Group Plc, operating as a single unified economic entity, following the completion of the DLC merger in June 2001 (the DLC merger). For a full list of BHP Group Limited and BHP Group Plc subsidiaries, refer to note 29 ‘Subsidiaries’ in section 5.2 note 13.5.1 and in Exhibit 8.1 - List of Subsidiaries. 7.3.2 DLC structure BHP shareholders approved the DLC merger in 2001, which was designed to place ordinary shareholders of both companies in a position where they have economic and voting interests in a single group. The principles of the BHP DLC structure are reflected in the DLC Structure Sharing Agreement and include the following: The two companies must operate as if they are a single unified economic entity, through Boards of Directors that comprise the same individuals and a unified senior executive management team. The Directors of both companies will, in addition to their duties to the company concerned, have regard to the interests of the ordinary shareholders in the two companies as if the two companies were a single unified economic entity and, for that purpose, the Directors of each company take into account in the exercise of their powers the interests of the shareholders of the other. Certain DLC equalisation principles must be observed. These are designed to ensure that for so long as the Equalisation Ratio between a BHP Group Limited ordinary share and a BHP Group Plc ordinary share is 1:1, the economic and voting interests resulting from holding one BHP Group Limited ordinary share and one BHP Group Plc ordinary share are, so far as practicable, equivalent. For more information, refer to sub-section ‘Equalisation of economic and voting rights’ below. Australian Foreign Investment Review Board conditions The Treasurer of Australia approved the DLC merger subject to certain conditions, the effect of which was to require that, among other things, BHP Group Limited continues to: be an Australian company, which is headquartered in Australia;Australia ultimately manage and control the companies that conducted the businesses that were conducted by its subsidiaries at the time of the DLC merger for as long as those businesses form part of BHP.BHP The conditions also require the global headquarters of BHP to be in Australia. The conditions have effect indefinitely, subject to amendment of the AustralianForeign Acquisitions and Takeovers Act 1975 (FATA) or any revocation or amendment by the Treasurer of Australia. If BHP Group Limited no longer wishes to comply with these conditions, it must obtain the prior approval of the Treasurer. Failure to comply with the conditions results in substantial penalties under the FATA. Equalisation of economic and voting rights The economic and voting interests attached to each BHP Group Limited ordinary share relative to each BHP Group Plc ordinary share are determined by a ratio known as the Equalisation Ratio. The Equalisation Ratio is currently 1:1, meaning one BHP Group Limited ordinary share currently has the same economic and voting interests as one BHP Group Plc ordinary share. The Equalisation Ratio governs the proportions in which dividends and capital distributions are paid on the ordinary shares in each company relative to the other. Given the current Equalisation Ratio of 1:1, the amount of any cash dividend paid by BHP Group Limited on each BHP Group Limited ordinary share must be matched by an equivalent cash dividend by BHP Group Plc on each BHP Group Plc ordinary share, and vice versa. If one company is prohibited by applicable law or is otherwise unable to pay a matching dividend, the DLC Structure Sharing Agreement requires that BHP Group Limited and BHP Group Plc will, as far as practicable, enter into such transactions with each other as their Boards agree to be necessary or desirable to enable both companies to pay matching dividends at the same time. These transactions may include BHP Group Limited or BHP Group Plc making a payment to the other company or paying a dividend on the DLC Dividend Share held by the other company (or a subsidiary of it). The DLC Dividend Share may be used to ensure that the need to trigger the matching dividend mechanism does not arise. BHP Group Limited issued a DLC Dividend Share on 23 February 2016. No DLC Dividend Share has been issued by BHP Group Plc. For more information on the DLC Dividend Share, refer to the following ‘DLC Dividend Share’ sectionsub-section below and section 7.5. The Equalisation Ratio may be adjusted to maintain economic equivalence between an ordinary share in each of the two companies where, broadly speaking (and subject to certain exceptions): 296
a distribution or action affecting the amount or nature of issued share capital is proposed by one of BHP Group Limited and BHP Group Plc and that distribution or action would result in the ratio of economic returns on, or voting rights in relation to Joint Electorate Actions (see below) of, a BHP Group Limited ordinary share to a BHP Group Plc ordinary share not being the same, or would benefit the holders of ordinary shares in one company relative to the holders of ordinary shares in the other company;company no ‘matching action’ is taken by the other company. A matching action is a distribution or action affecting the amount or nature of issued share capital in relation to the holders of ordinary shares in the other company, which ensures that the economic and voting rights of a BHP Group Limited ordinary share and BHP Group Plc ordinary share are maintained in proportion to the Equalisation Ratio.Ratio For example, an adjustment would be required if there were to be a capital issue or distribution by one company to its ordinary shareholders that does not give equivalent value (before tax) on a per share basis to the ordinary shareholders of the other company and no matching action was undertaken. Since the establishment of the DLC structure in 2001, no adjustment to the Equalisation Ratio has ever been made. DLC Dividend Share Each of BHP Group Limited and BHP Group Plc is authorised to issue a DLC Dividend Share to the other company or a wholly owned subsidiary of it. In effect, only that other company or a wholly owned subsidiary of it may be the holder of the share. The share is redeemable. The holder of the share is entitled to be paid such dividends as the Board may decide to pay on that DLC Dividend Share provided that: the amount of the dividend does not exceed the cap mentioned below;below the Board of the issuing company in good faith considers paying the dividend to be in furtherance of any of the DLC principles, including the principle of BHP Group Limited and BHP Group Plc operating as a single unified economic entity.entity The amounts that may be paid as dividends on a DLC Dividend Share are capped. Broadly speaking, the cap is the total amount of the preceding ordinary cash dividend (whether interim or final) paid on BHP Group Limited ordinary shares or BHP Group Plc ordinary shares, whichever is greater. The cap will not apply to any dividend paid on a DLC Dividend Share if the proceeds of that dividend are to be used to pay a special cash dividend on ordinary shares. A DLC Dividend Share otherwise has limited rights and does not carry a right to vote. DLC Dividend Shares cannot be used to transfer funds outside of BHP as the terms of issue contain structural safeguards to ensure that a DLC Dividend Share may only be used to pay dividends within the Group. For more information on the rights attaching to and terms of DLC Dividend Shares, refer to section 7.5, the Constitution of BHP Group Limited and the Articles of Association of BHP Group Plc. Joint Electorate Actions Under the terms of the DLC agreements, BHP Group Limited and BHP Group Plc have implemented special voting arrangements so that the ordinary shareholders of both companies vote together as a single decision-making body on matters that affect the ordinary shareholders of each company in similar ways. These are referred to as Joint Electorate Actions. For so long as the Equalisation Ratio remains 1:1, each BHP Group Limited ordinary share will effectively have the same voting rights as each BHP Group Plc ordinary share on Joint Electorate Actions. A Joint Electorate Action requires approval by ordinary resolution (or special resolution if required by statute, regulation, applicable listing rules or other applicable requirements) of BHP Group Limited and BHP Group Plc. In the case of BHP Group Limited, both the BHP Group Limited ordinary shareholders and the holder of the BHP Group Limited Special Voting Share vote as a single class and, in the case of BHP Group Plc, the BHP Group Plc ordinary shareholders and the holder of the BHP Group Plc Special Voting Share vote as a single class. Class Rights Actions Matters on which ordinary shareholders of BHP Group Limited may have divergent interests from the ordinary shareholders of BHP Group Plc are referred to as Class Rights Actions. The company wishing to carry out the Class Rights Action requires the prior approval of the ordinary shareholders in the other company voting separately and, where appropriate, the approval of its own ordinary shareholders voting separately. Depending on the type of Class Rights Action undertaken, the approval required is either an ordinary or special resolution of the relevant company. The Joint Electorate Action and Class Rights Action voting arrangements are secured through the constitutional documents of the two companies, the DLC Structure Sharing Agreement, the BHP Special Voting Shares Deed and rights attaching to a specially created Special Voting Share issued by each company and held in each case by a special voting company. The shares in the special voting companies are held legally and beneficially by Law Debenture Trust Corporation Plc. 297
Cross guarantees BHP Group Limited and BHP Group Plc have each executed a Deed Poll Guarantee in favour of the creditors of the other company. Under the Deed Poll Guarantees, each company has guaranteed certain contractual obligations of the other company. This means that creditors entitled to the benefit of the BHP Group Limited Deed Poll Guarantee and the BHP Group Plc Deed Poll Guarantee will, to the extent possible, be placed in the same position as if the relevant debts were owed by both BHP Group Limited and BHP Group Plc on a combined basis. Restrictions on takeovers of one company only The BHP Group Limited Constitution and the BHP Group Plc Articles of Association have been drafted to ensure that, except with the consent of the Board, a person cannot gain control of one company without having made an equivalent offer to the ordinary shareholders of both companies on equivalent terms. Sanctions for breach of these provisions would include withholding of dividends, voting restrictions and the compulsory divestment of shares to the extent a shareholder and its associates exceed the relevant threshold. 298
7.4 Material contracts DLC structure agreements BHP Group Limited (then known as BHP Limited) and BHP Group Plc (then known as Billiton Plc) merged by way of a DLC structure on 29 June 2001. To effect the DLC structure, BHP Limited and Billiton Plc (as they were then known) entered into the following contractual agreements: BHP Billiton DLC Structure Sharing Agreement BHP Billiton Special Voting Shares Deed BHP Billiton Limited Deed Poll Guarantee BHP Billiton Plc Deed Poll Guarantee For information on the effect of each of these agreements, refer to section 7.3. Framework Agreement On 2 March 2016, BHP Billiton Brasil together with Vale and Samarco, entered into a Framework Agreement with the Federal Government of Brazil, states of Espírito Santo and Minas Gerais and certain other authorities to establish a foundation (Fundação Renova) that will develop and execute environmental and socio-economic programs to remediate and provide compensation for damage caused by the Samarco dam failure. For a description of the terms of the Framework Agreement, refer to section 6.6. 2996.7.
7.5 Constitution This section sets out a summary of the Constitution of BHP Group Limited and the Articles of Association of BHP Group Plc. Where the term ‘BHP’ is used in this section, it can mean either BHP Group Limited or BHP Group Plc. Provisions of the Constitution of BHP Group Limited and the Articles of Association of BHP Group Plc can be amended only where such amendment is approved by special resolution either: by approval as a Class Rights Action, where the amendment results in a change to an ‘Entrenched Provision’;, or otherwise, as a Joint Electorate Action.Action In 2015, shareholders approved a number of amendments to our constitutional documents to amend the terms of the Equalisation Shares (which were renamed as DLC Dividend Shares) and to facilitate the more streamlined conduct of simultaneous general meetings. For a description of Joint Electorate Actions and Class Rights Actions, refer to section 7.3.2. 7.5.1 Directors The Board may exercise all powers of BHP, other than those that are reserved for BHP shareholders to exercise in a general meeting. 7.5.2 Power to issue securities Under the Constitution and Articles of Association, the Board of Directors has the power to issue any BHP shares or other securities (including redeemable shares) with preferred, deferred or other special rights, obligations or restrictions. The Board may issue shares on any terms it considers appropriate, provided that: the issue does not affect any special rights of shareholders;shareholders if required, the issue is approved by shareholders;shareholders if the issue is of a class other than ordinary shares, the rights attaching to the class are expressed at the date of issue.issue 7.5.3 Restrictions on voting by Directors A Director may not vote in respect of any contract or arrangement or any other proposal in which they have a material personal interest except in certain prescribed circumstances, including (subject to applicable laws) where the material personal interest: arises because the Director is a shareholder of BHP and is held in common with the other shareholders of BHP;BHP arises in relation to the Director’s remuneration as a Director of BHP;BHP relates to a contract BHP is proposing to enter into that is subject to approval by the shareholders and will not impose any obligation on BHP if it is not approved by the shareholders;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;BHP arises merely because the Director has a right of subrogation in relation to a guarantee or indemnity referred to above;above relates to a contract that insures, or would insure, the Director against liabilities the Director incurs as an officer of BHP, but only if the contract does not make BHP or a related body corporate the insurer;insurer relates to any payment by BHP or a related body corporate in respect of an indemnity permitted by law, or any contract relating to such an indemnity;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.corporate If a Director has a material personal interest and is not entitled to vote on a proposal, they will not be counted in the quorum for any vote on a resolution concerning the material personal interest. In addition, under the UK Companies Act 2006, a Director has a duty to avoid conflicts of interest between their interests and the interests of the company. The duty is not breached if, among other things, the conflict of interest is authorised by non-interested Directors. The Articles of Association of BHP Group Plc enable the Board to authorise a matter that might otherwise involve a Director breaching their duty to avoid conflicts of interest. An interested Director may not vote or be counted towards a quorum for a resolution authorising a conflict of interest. Where the Board authorises a conflict of interest, the Board may prohibit the relevant Director from voting on any matter relating to the conflict. The Board has adopted procedures to manage these voting restrictions. 300
7.5.4 Loans by Directors Any Director may lend money to BHP at interest with or without security or may, for a commission or profit, guarantee the repayment of any money borrowed by BHP and underwrite or guarantee the subscription of shares or securities of BHP or of any corporation in which BHP may be interested without being disqualified as a Director and without being liable to account to BHP for any commission or profit. 7.5.5 Appointment and retirement of Directors Appointment of Directors The Constitution and Articles of Association provide that a person may be appointed as a Director of BHP by the existing Directors of BHP or may be elected by the shareholders in a general meeting. Any person appointed as a Director of BHP by the existing Directors will hold office only until the next general meeting that includes an election of Directors. A person may be nominated by shareholders as a Director of BHP if: a shareholder provides a valid written notice of the nomination;nomination the person nominated by the shareholder satisfies candidature for the office and consents in writing to his or her nomination as a Director in each case, at least 40 business days before the earlier of the date of the general meeting of BHP Group Plc and the corresponding general meeting of BHP Group Limited. The person nominated as a Director may be elected to the Board by ordinary resolution passed in a general meeting. Under the Articles of Association, if a person is validly nominated for election as a Director at a general meeting of BHP Group Limited, the Directors of BHP Group Plc must nominate that person as a Director at the corresponding general meeting of BHP Group Plc. An equivalent requirement is included in the Constitution, which requires any person validly nominated for election as a Director of BHP Group Plc to be nominated as a Director of BHP Group Limited. Retirement of Directors The Board has a policy consistent with the UK Corporate Governance Code under which all Directors must, if they wish to remain on the Board, seek re-election by shareholders annually. This policy took effect from the 2011 Annual General Meetings (AGMs) and replaced the previous system that required Directors to submit themselves to shareholders for re-election at least every three years. A Director may be removed by BHP in accordance with applicable law and must vacate his or her office as a Director in certain circumstances set out in the Constitution and Articles of Association. There is no requirement for a Director to retire on reaching a certain age. 7.5.6 Rights attaching to shares Dividend rights Under English law, dividends on shares may only be paid out of profits available for distribution. Under Australian law, dividends on shares may be paid only if the company’s assets exceed its liabilities immediately before the dividend is determined and the excess is sufficient for payment of the dividend, the payment of the dividend is fair and reasonable to the company’s shareholders as a whole and the payment of the dividend does not materially prejudice the company’s ability to pay its creditors. The Constitution and Articles of Association provide that payment of any dividend may be made in any manner, by any means and in any currency determined by the Board. All unclaimed dividends may be invested or otherwise used by the Board for the benefit of whichever of BHP Group Limited or BHP Group Plc determined that dividend, until claimed or, in the case of BHP Group Limited, otherwise disposed of according to law. BHP Group Limited is governed by the Victorian unclaimed monies legislation, which requires BHP Group Limited to pay to the State Revenue Office any unclaimed dividend payments of A$20 or more that have remained unclaimed for over 12 months. In the case of BHP Group Plc, any dividend unclaimed after a period of 12 years from the date the dividend was determined or became due for payment will be forfeited and returned to BHP Group Plc. Voting rights Voting at any general meeting of BHP shareholders can, in the first instance, be conducted by a show of hands unless a poll is demanded in accordance with the Constitution or Articles of Association (as applicable) or is otherwise required (as outlined below).
301
Generally, matters considered by shareholders at an AGM of BHP Group Limited or BHP Group Plc constitute Joint Electorate Actions or Class Rights Actions and must be decided on a poll and in the manner described under the headings ‘Joint Electorate Actions’ and ‘Class Rights Actions’ in section 7.3.2. This means that, in practice, most items of business at AGMs are decided by way of a poll.poll even though the Constitution and Articles of Association generally permit voting to be conducted by a show of hands in the first instance. In addition, at any general meeting, a resolution, other than a procedural resolution, put to the vote of the meeting on which the holder of the relevant BHP Special Voting Share is entitled to vote must be decided on a poll. For the purposes of determining which shareholders are entitled to attend or vote at a meeting of BHP Group Plc or BHP Group Limited, and how many votes such shareholder may cast, the Notice of Meeting will specify when a shareholder must be entered on the Register of Shareholders in order to have the right to attend or vote at the meeting. The specified time must be not more than 48 hours before the time of the meeting. Shareholders who wish to appoint a proxy to attend, vote or speak at a meeting of BHP Group Plc or BHP Group Limited (as appropriate) on their behalf must deposit the relevant form appointing a proxy so that it is received by that company not less than 48 hours before the time of the meeting. Rights to share in BHP Group Limited’s profits The rights attached to the ordinary shares of BHP Group Limited, as regards the participation in the profits available for distribution, are as follows: The holders of any preference shares will be entitled, in priority to any payment of dividend to the holders of any other class of shares, to a preferred right to participate as regards dividends up to but not beyond a specified amount in distribution. Subject to the special rights attaching to any preference shares, but in priority to any payment of dividends on all other classes of shares, the holder of the DLC Dividend Share (if any) will be entitled to be paid such non-cumulative dividends as the Board may, subject to the cap referred to in section 7.37.3.2 and the DLC Dividend Share being held by BHP Group Plc or a wholly owned member of its group, decide to pay on that DLC Dividend Share. Any surplus remaining after payment of the distributions above will be payable to the holders of BHP Group Limited ordinary shares and the BHP Group Limited Special Voting Share in equal amounts per share. Rights to share in BHP Group Plc’s profits The rights attached to the ordinary shares of BHP Group Plc, in relation to the participation in the profits available for distribution, are as follows: The holders of the cumulative preference shares will be entitled, in priority to any payment of dividend to the holders of any other class of shares, to be paid a fixed cumulative preferential dividend (Preferential Dividend) at a rate of 5.5 per cent per annum, to be paid annually in arrears on 31 July in each year or, if any such date will be a Saturday, Sunday or public holiday in England, on the first business day following such date in each year. Payments of Preferential Dividends will be made to holders on the register at any date selected by the Directors up to 42 days prior to the relevant fixed dividend date. Subject to the rights attaching to the cumulative preference shares, but in priority to any payment of dividends on all other classes of shares, the holder of the BHP Group Plc Special Voting Share will be entitled to be paid a fixed dividend of US$0.01 per annum, payable annually in arrears on 31 July. Subject to the rights attaching to the cumulative preference shares and the BHP Group Plc Special Voting Share, but in priority to any payment of dividends on all other classes of shares, the holder of the DLC Dividend Share will be entitled to be paid such non-cumulative dividends as the Board may, subject to the cap referred to in section 7.3 of this Annual Report7.3.2 and the DLC Dividend Share being held by BHP Group Limited or a wholly owned member of its group, decide to pay on that DLC Dividend Share. Any surplus remaining after payment of the distributions above will be payable to the holders of the BHP Group Plc ordinary shares in equal amounts per BHP Group Plc ordinary share. DLC Dividend Share As set out in section 7.3.2, each of BHP Group Limited and BHP Group Plc is authorised to issue a DLC Dividend Share to the other company or a wholly owned subsidiary of it. The dividend rights attaching to a DLC Dividend Share are described above and in section 7.3.7.3.2. The DLC Dividend Share issued by BHP Group Limited (BHP Group Limited DLC Dividend Share) and the DLC Dividend Share that may be issued by BHP Group Plc (BHP Group Plc DLC Dividend Share) have no voting rights and, as set out in section 7.5.7 below, very limited rights to a return of capital on a winding-up. A DLC Dividend Share may be redeemed at any time, and must be redeemed if a person other than: in the case of the BHP Group Limited DLC Dividend Share, BHP Group Plc or a wholly owned member of its group;group in the case of the BHP Group Plc DLC Dividend Share, BHP Group Limited or a wholly owned member of its group becomes the beneficial owner of the DLC Dividend Share. 302
7.5.7 Rights on return of assets on liquidation Under the DLC structure, there are special provisions designed to ensure that, as far as practicable, the holders of ordinary shares in BHP Group Limited and holders of ordinary shares in BHP Group Plc are treated equitably having regard to the Equalisation Ratio, whichRatio. These special provisions would apply in the event of an insolvency of either or both companies. On a return of assets on liquidation of BHP Group Limited, the assets of BHP Group Limited remaining available for distribution among shareholders after the payment of all prior ranking amounts owed to all creditors and holders of preference shares, and to all prior ranking statutory entitlements, are to be applied subject to the special provisions referred to above in paying to the holders of the BHP Group Limited Special Voting Share and the DLC Dividend Share of an amount of up to A$2.00 on each such share, on an equal priority with any amount paid to the holders of BHP Group Limited ordinary shares, and any surplus remaining is to be applied in making payments solely to the holders of BHP Group Limited ordinary shares in accordance with their entitlements. On a return of assets on liquidation of BHP Group Plc, subject to the payment of all amounts payable under the special provisions referred to earlier, prior ranking amounts owed to the creditors of BHP Group Plc and to all prior ranking statutory entitlements, the assets of BHP Group Plc to be distributed on a winding-up are to be distributed to the holders of shares in the following order of priority: To the holders of the cumulative preference shares, the repayment of a sum equal to the nominal capital paid up or credited as paid up on the cumulative preference shares held by them and any accrued Preferential Dividend, whether or not such dividend has been earned or declared, calculated up to the date of commencement of the winding-up. To the holders of the BHP Group Plc ordinary shares and to the holders of the BHP Group Plc Special Voting Share and the DLC Dividend Share, the payment out of surplus, if any, remaining after the distribution above of an equal amount for each BHP Group Plc ordinary share, the BHP Group Plc Special Voting Share and the DLC Dividend Share subject to a maximum in the case of the BHP Group Plc Special Voting Share and the DLC Dividend Share of the nominal capital paid up on such shares. 7.5.8 Redemption of preference shares If BHP Group Limited at any time proposes to create and issue any preference shares, the terms of the preference shares may give either or both of BHP Group Limited and the holder the right to redeem the preference shares. The preference shares terms may also give the holder the right to convert the preference shares into ordinary shares. Under the Constitution, the preference shares must give the holders: the right (on redemption and on a winding-up) to payment in cash in priority to any other class of shares of (i) the amount paid or agreed to be considered as paid on each of the preference shares; and (ii) the amount, if any, equal to the aggregate of any dividends accrued but unpaid and of any arrears of dividends;dividends the right, in priority to any payment of dividend on any other class of shares, to the preferential dividend.dividend There is no equivalent provision in the Articles of Association of BHP Group Plc, although as noted above in section 7.5.2, BHP can issue preference shares that are subject to a right of redemption on terms the Board considers appropriate. 7.5.9 Capital calls Subject to the terms on which any shares may have been issued, the Board may make calls on the shareholders in respect of all monies unpaid on their shares. BHP has a lien on every partly paid share for all amounts payable in respect of that share. Each shareholder is liable to pay the amount of each call in the manner, at the time and at the place specified by the Board (subject to receiving at least 14 days’ notice specifying the time and place for payment). A call is considered to have been made at the time when the resolution of the Board authorising the call was passed. 7.5.10 Borrowing powers Subject to relevant law, the Directors may exercise all powers of BHP to borrow money, and to mortgage or charge its undertaking, property, assets (both present and future) and all uncalled capital or any part or parts thereof and to issue debentures and other securities, whether outright or as collateral security for any debt, liability or obligation of BHP or of any third party. Rights attached to any class of shares issued by either BHP Group Limited or BHP Group Plc can only be varied (whether as a Joint Electorate Action or a Class Rights Action) where such variation is approved by: the company that issued the relevant shares, as a special resolution;resolution 303
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.class 7.5.11 Annual General Meetings The AGMs provide a forum to facilitate the sharing of shareholder views and are important events in the BHP calendar. These meetings provide an update for shareholders on our performance and offer an opportunity for shareholders to ask questions and vote. To vote at an AGM, a shareholder must be a registered holder of BHP Group Limited shares (in the case of the AGM of BHP Group Limited) or a registered holder of BHP Group Plc shares (in the case of the AGM of BHP Group Plc) at a designated date before the relevant AGM. Key members of management, including the CEO and CFO, are present and available to answer questions. The External Auditor attends the AGMs and is also available to answer questions. Proceedings at shareholder meetings are webcast live from our website. Copies of the speeches delivered by the Chair and CEO to the AGMs are released to the relevant stock exchanges and posted on our website. A summary of proceedings and the outcome of voting on the items of business are released to the relevant stock exchanges and posted on our website as soon as they are available following completion of the BHP Group Limited AGM. More information on our AGMs is available at bhp.com/meetings. 7.5.12 Conditions governing general meetings The Board may, and must on requisition in accordance with applicable laws, call a general meeting of the shareholders at the time and place or places and in the manner determined by the Board. No shareholder may convene a general meeting of BHP except where entitled under law to do so. Any Director may convene a general meeting whenever the Director thinks fit. General meetings can also be cancelled, postponed or adjourned, where permitted by law or the Constitution or Articles of Association. Notice of a general meeting must be given to each shareholder entitled to vote at the meeting and such notice of meeting must be given in the form and manner in which the Board thinks fit.fit subject to any applicable law. Five shareholders of the relevant company present in person or by proxy constitute a quorum for a meeting. A shareholder who is entitled to attend and cast a vote at a general meeting of BHP may appoint a person as a proxy to attend and vote for the shareholder in accordance with applicable law. All provisions relating to general meetings apply with any necessary modifications to any special meeting of any class of shareholders that may be held. 7.5.127.5.13 Limitations of rights to own securities
There are no limitations under the Constitution or the Articles of Association restricting the right to own BHP shares other than restrictions that reflect the takeovers codes under relevant Australian and English law. In addition, the Australian Foreign Acquisitions and Takeovers Act 1975 imposes a number of conditions that restrict foreign ownership of Australian-based companies. For information on share control limits imposed by the Constitution and the Articles of Association, as well as relevant laws, refer to sections 7.9 and 7.3.2. 7.5.13
7.5.14 Documents on display Documents filed by BHP Group Limited on the Australian Securities Exchange (ASX) are available at asx.com.au and documents filed on the London Stock Exchange (LSE) by BHP Group Plc are available at morningstar.co.uk/uk/NSM.https://data.fca.org.uk/#/nsm/nationalstoragemechanism. Documents filed on the ASX, or on the LSE are not incorporated by reference into this Annual Report. The documents referred to in this Annual Report as being available on our website, bhp.com, are not incorporated by reference and do not form part of this Annual Report. BHP Group Limited and BHP Group Plc both file Annual Reports and other reports and information with the US Securities and Exchange Commission (SEC). These filings are available on the SEC website at sec.gov. 304
7.6 Share ownership Share capital The details of the share capital for both BHP Group Limited and BHP Group Plc are presented in note 15 ‘Share capital’ in section 5 and remain current as at 2321 August 2019.2020. Major shareholders The tables in section 3.3.203.3.21 and the information set out in section 4.184.5.3 present information pertaining to the shares in BHP Group Limited and BHP Group Plc held by Directors and members of the Key Management Personnel (KMP). Neither BHP Group Limited nor BHP Group Plc is directly or indirectly controlled by another corporation or by any government. Other than as described in section 7.3.2, no major shareholder possesses voting rights that differ from those attaching to all of BHP Group Limited and BHP Group Plc’s voting securities. Substantial shareholders in BHP Group Limited The following table shows holdings of 5 per cent or more of voting rights in BHP Group Limited’s shares as notified to BHP Group Limited under the Australian Corporations Act 2001, Section 671B as at 30 June 2019.2020.(1) |
Title of class
| | Identity of person
or group | | Date of last notice | | Percentage of
total voting rights (2) | | | Identity of
person or group | | Date of last notice | | % of total voting
rights (2) | | | Date
received | | Date of
change | | Number
owned | | 2019 | | 2018 | | 2017 | | | Date received | | Date of change | | Number
owned | | 2020 | | 2019 | | 2018 | Ordinary shares | | BlackRock Group | |
| 19 December
2016 |
| |
| 15 December
2016 |
| | | 160,784,672 | | | | 5.46% | | | | 5.00% | | | | 5.00% | | | BlackRock Group | | 21 November 2019 | | 18 November 2019 | | | 176,981,268 | | | 6.00 | | 5.46 | | 5.00 | Ordinary shares | | | Vanguard Group | | 18 June 2020 | | 19 March 2020 | | | 177,088,930 | | | 6.01 | | – | | – |
| (1) | No changes in the holdings of 5 per cent or more of the voting rights in BHP Group Limited’s shares have been notified to BHP Group Limited between 1 July 20192020 and 2321 August 2019.2020. |
| (2) | The percentages quoted are based on the total voting rights conferred by ordinary shares in BHP Group Limited as at 2321 August 20192020 of 2,945,851,394. |
Substantial shareholders in BHP Group Plc The following table shows holdings of 3 per cent or more of voting rights conferred by BHP Group Plc’s ordinary shares as notified to BHP Group Plc under the UK Disclosure and Transparency Rule 5 as at 30 June 2019.2020.(1) | Title of class | | Identity of
person or group | | Date of last notice | | Percentage of total
voting rights (2) | | | Identity of
person or group | | Date of last notice | | % of total voting
rights (2) | | | Date
received | | Date of
change | | Number
owned | | 2019 | | 2018 | | 2017 | | | Date received | | Date of change | | Number
owned | | 2020 | | 2019 | | 2018 | Ordinary shares | | Aberdeen Asset Managers Limited | |
| 8 October
2015 |
| |
| 7 October
2015 |
| | | 103,108,283 | | | | 4.88% | | | | 4.88% | | | | 4.88% | | | Aberdeen Asset Managers Limited | | 8 October 2015 | | 7 October 2015 | | | 103,108,283 | | | 4.88 | | 4.88 | | 4.88 | Ordinary shares | | BlackRock, Inc. | |
| 3 December
2009 |
| |
| 1 December
2009 |
| | | 213,014,043 | | | | 10.08% | | | | 10.08% | | | | 10.08% | | | BlackRock, Inc. | | 3 December 2009 | | 1 December 2009 | | | 213,014,043 | (3) | | <10.00 | | <10.00 | | <10.00 | Ordinary shares | | Elliott Capital Advisors, L.P. (3) | |
| 3 February
2018 |
| |
| 1 February
2018 |
| | | 115,183,724 | | | | 5.45% | | | | 5.45% | | | | 5.04% | | | Elliott International, L.P. (4) | | 4 January 2020 | | 1 January 2020 | | | 106,940,721 | | | 5.07 | | 5.45 | | 5.45 | Ordinary shares | | Norges Bank | |
| 20 February
2019 |
| |
| 19 February
2019 |
| | | 64,753,649 | | | | 3.07% | | | | – | | | | – | | | Norges Bank | | 24 February 2020 | | 21 February 2020 | | | 85,812,981 | | | 4.06 | | 3.07 | | – |
| (1) | NoThere have been three changes in the holdings of 3 per cent or more of the voting rights in BHP Group Plc’s shares notified to BHP Group Plc between 1 July 20192020 and 2321 August 2019.2020. On 16 July 2020, 20 July 2020 and 21 July 2020 Norges Bank advised changes took place on 15 July 2020, 17 July 2020 and 20 July 2020 respectively. The number of ordinary shares it owned in the final disclosure was 105,881,783 or 5.01 per cent of total voting rights.
|
| (2) | The percentages quoted are based on the total voting rights conferred by ordinary shares in BHP Group Plc as at 2321 August 20192020 of 2,112,071,796. |
| (3) | The TR1 dated 1 December 2009 showed, as at that date, an interest in 213,014,043 shares which amounted to 9.65 per cent of the BHP Group Plc issued share capital. Changes in the share capital of BHP Group Plc since the TR1 was received on 3 December 2009, including certain share buy-backs conducted by BHP Group Plc, indicated a formulaic holding above 10 per cent; however, given no revised TR1 has been received by BHP Group Plc, the BlackRock holding is considered to be below 10 per cent. |
| (4) | Holding is made up of 4.654.66 per cent ordinary shares and 0.800.41 per cent by financial instruments. |
Twenty largest shareholders as at 2321 August 20192020 (as named on the Register of Shareholders)(1) | | BHP Group Limited | BHP Group Limited | | Number of fully
paid shares | | % of issued
capital | | BHP Group Limited | | Number of fully
paid shares | | % of issued
capital | | | 1. | | HSBC Custody Nominees (Australia) Limited | | 696,525,894 | | | 23.64 | | | HSBC Custody Nominees (Australia) Limited | | 666,307,800 | | | 22.62 | | | 2. | | J P Morgan Nominees Australia Pty Limited | | 505,431,943 | | | 17.16 | | | J P Morgan Nominees Australia Pty Limited | | 534,089,074 | | | 18.13 | | | 3. | | Citicorp Nominees Pty Ltd | | 149,846,097 | | | 5.09 | | | Citicorp Nominees Pty Limited <Citibank NY ADR DEP A/C> | | 144,595,262 | | | 4.91 | | | 4. | | Citicorp Nominees Pty Limited <Citibank NY ADR DEP A/C> | | 149,653,998 | | | 5.08 | | | Citicorp Nominees Pty Ltd | | 140,416,220 | | | 4.77 | | | 5. | | National Nominees Limited | | 102,921,248 | | | 3.49 | | | National Nominees Limited | | 102,305,317 | | | 3.47 | | | 6. | | BNP Paribas Nominees Pty Ltd <Agency Lending DRP A/C> | | 70,188,694 | | | 2.38 | | | BNP Paribas Nominees Pty Ltd <Agency Lending DRP A/C> | | 75,828,947 | | | 2.57 | | | 7. | | | BNP Paribas Noms Pty Ltd <DRP> | | 35,922,389 | | | 1.22 | | | 8. | | | Citicorp Nominees Pty Limited <Colonial First State INV A/C> | | 28,993,633 | | | 0.98 | | | 9. | | | HSBC Custody Nominees (Australia) Limited <Nt-Comnwlth Super Corp A/C> | | 21,035,595 | | | 0.71 | | | 10. | | | Computershare Nominees CI Ltd <ASX Shareplus Control A/C> | | 16,760,114 | | | 0.57 | | | 11. | | | Australian Foundation Investment Company Limited | | 13,413,159 | | | 0.46 | | | 12. | | | Netwealth Investments Limited <Wrap Services A/C> | | 7,996,830 | | | 0.27 | | | 13. | | | Argo Investments Limited | | 7,406,304 | | | 0.25 | | | 14. | | | Solium Nominees (Australia) Pty Ltd <VSA A/C> | | 6,301,578 | | | 0.21 | | | 15. | | | HSBC Custody Nominees (Australia) Limited-GSCO ECA | | 5,209,719 | | | 0.18 | | | 16. | | | BNP Paribas Nominees Pty Ltd Hub24 Custodial Serv Ltd <DRP A/C> | | 5,077,233 | | | 0.17 | | | 17. | | | Milton Corporation Limited | | 4,854,921 | | | 0.16 | | | 18. | | | AMP Life Limited | | 4,575,652 | | | 0.16 | | | 19. | | | HSBC Custody Nominees (Australia) Limited <Euroclear Bank SA NV A/C> | | 4,401,170 | | | 0.15 | | | 20. | | | Navigator Australia Ltd <MlC Investment Sett A/C> | | 3,672,850 | | | 0.12 | | | | | | | | | | | | | | | | | | 1,829,163,767 | | | | 62.09 | | | | | | | | | | | |
305
| | | | | | | | | | | | BHP Group Limited | | Number of fully
paid shares | | | % of issued
capital | | | 7. | | BNP Paribas Noms Pty Ltd <DRP> | | | 28,029,996 | | | | 0.95 | | | 8. | | Citicorp Nominees Pty Limited <Colonial First State INV A/C> | | | 27,997,279 | | | | 0.95 | | | 9. | | HSBC Custody Nominees (Australia) Limited<NT-Comnwlth Super Corp A/C> | | | 20,238,305 | | | | 0.69 | | | 10. | | Computershare Nominees CI Ltd <ASX Shareplus Control A/C> | | | 15,248,848 | | | | 0.52 | | | 11. | | Australian Foundation Investment Company Limited | | | 13,413,159 | | | | 0.46 | | | 12. | | AMP Life Limited | | | 8,320,146 | | | | 0.28 | | | 13. | | HSBC Custody Nominees (Australia) Limited <Euroclear Bank SA NV A/C> | | | 8,101,034 | | | | 0.27 | | | 14. | | Argo Investments Limited | | | 7,406,304 | | | | 0.25 | | | 15. | | HSBC Custody Nominees (Australia) Limited | | | 7,402,439 | | | | 0.25 | | | 16. | | HSBC Custody Nominees (Australia) Limited-GSCO ECA | | | 6,456,673 | | | | 0.22 | | | 17. | | Netwealth Investments Limited <Wrap Services A/C> | | | 5,144,844 | | | | 0.17 | | | 18. | | Solium Nominees (Australia) Pty Ltd <VSA A/C> | | | 5,057,527 | | | | 0.17 | | | 19. | | Milton Corporation Limited | | | 4,288,921 | | | | 0.15 | | | 20. | | HSBC Custody Nominees (Australia) Limited – A/C 2 | | | 3,832,347 | | | | 0.13 | | | | | | | | | | | | | | | | | | 1,835,505,696 | | | | 62.31 | | | | | | | | | | | | |
| | BHP Group Plc | BHP Group Plc | | Number of fully
paid shares | | % of issued
capital | | BHP Group Plc | | Number of fully
paid shares | | % of issued
capital | | | 1. | | PLC Nominees (Proprietary) Limited (2) | | 283,125,532 | | | 13.41 | | | PLC Nominees (Proprietary) Limited(2) | | 270,434,351 | | | 12.80 | | | 2. | | State Street Nominees Limited <OM02> | | 142,600,568 | | | 6.75 | | | State Street Nominees Limited <OM02> | | 110,668,368 | | | 5.24 | | | 3. | | National City Nominees Limited | | 113,078,903 | | | 5.35 | | | National City Nominees Limited | | 108,881,961 | | | 5.16 | | | 4. | | Chase Nominees Limited | | 103,013,309 | | | 4.88 | | | Vidacos Nominees Limited <13559> | | 101,929,550 | | | 4.83 | | | 5. | | The Bank of New York (Nominees) Limited | | 87,150,571 | | | 4.13 | | | Chase Nominees Limited <USRESLD> | | 84,850,483 | | | 4.02 | | | 6. | | Vidacos Nominees Limited <13559> | | 65,613,350 | | | 3.11 | | | The Bank of New York (Nominees) Limited | | 75,501,860 | | | 3.57 | | | 7. | | State Street Nominees Limited <OM04> | | 49,448,257 | | | 2.34 | | | State Street Nominees Limited <OM04> | | 62,978,858 | | | 2.98 | | | 8. | | Nortrust Nominees Limited | | 42,734,802 | | | 2.02 | | | Nortrust Nominees Limited | | 40,386,501 | | | 1.91 | | | 9. | | Government Employees Pension Fund – PIC | | 36,172,491 | | | 1.71 | | | Hanover Nominees Limited <UBS03> | | 40,004,656 | | | 1.89 | | | 10. | | Chase Nominees Limited <BBHLEND> | | 34,378,755 | | | 1.63 | | | Government Employees Pension Fund – Public Investment Corporation | | 36,212,548 | | | 1.71 | | | 11. | | Hanover Nominees Limited <UBS03> | | 32,924,725 | | | 1.56 | | | Chase Nominees Limited <BBHLEND> | | 36,059,172 | | | 1.71 | | | 12. | | Hanover Nominees Limited <JPM17> | | 32,305,273 | | | 1.53 | | | State Street Nominees Limited <OD64> | | 30,605,959 | | | 1.45 | | | 13. | | State Street Nominees Limited <OD64> | | 29,947,828 | | | 1.42 | | | State Street Nominees Limited <OD43> | | 28,024,620 | | | 1.33 | | | 14. | | Vidacos Nominees Limited <CLRLUX2> | | 29,876,776 | | | 1.41 | | | Hanover Nominees Limited <JPM17> | | 27,463,879 | | | 1.30 | | | 15. | | Industrial Development Corporation of South Africa | | 23,537,693 | | | 1.11 | | | Vidacos Nominees Limited <CLRLUX2> | | 26,208,676 | | | 1.24 | | | 16. | | HSBC Global Custody Nominee (UK) Limited <357206> | | 23,041,488 | | | 1.09 | | | Chase Nominees Limited | | 24,085,532 | | | 1.14 | | | 17. | | Lynchwood Nominees Limited <2006420> | | 22,504,189 | | | 1.07 | | | Industrial Development Corporation of South Africa | | 23,537,693 | | | 1.11 | | | 18. | | Chase Nominees Limited <ELUCIT> | | 20,748,128 | | | 0.98 | | | Lynchwood Nominees Limited <2006420> | | 23,196,964 | | | 1.10 | | | 19. | | Nutraco Nominees Limited <781221> | | 19,541,800 | | | 0.93 | | | HSBC Global Custody Nominee (UK) Limited <357206> | | 21,474,128 | | | 1.02 | | | 20. | | Nortrust Nominees Limited <SLEND> | | 19,389,241 | | | 0.92 | | | Nutraco Nominees Limited <781221> | | 18,768,923 | | | 0.89 | | | | | | | | | | | | | | | | | | | | | | | | 1,211,133,679 | | | | 57.35 | | | | | | 1,191,274,682 | | | | 56.40 | | | | | | | | | | | | | | | | | | |
| (1) | Many of the 20 largest shareholders shown for BHP Group Limited and BHP Group Plc hold shares as a nominee or custodian. In accordance with the reporting requirements, the tables reflect the legal ownership of shares and not the details of the underlying beneficial holders. |
| (2) | The largest holder on the South African register of BHP Group Plc is the Strate nominee in which the majority of shares in South Africa (including some of the shareholders included in this list) are held in dematerialised form. |
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US share ownership as at 2321 August 20192020 | | | | BHP Group Limited | | BHP Group Plc | | | BHP Group Limited | | | BHP Group Plc | | | | | Number of
shareholders | | % | | Number of
shares | | % | | Number of
shareholders | | % | | Number of
shares | | % | | | Number of
shareholders | | | % | | | Number of
shares | | % | | | Number of
shareholders | | | % | | | Number of
shares | | % | | Classification of holder | Classification of holder | | | | | | | | | | | | | | | | Classification of holder | | | | | | | | | | | | | | | | | Registered holders of voting securities | | 1,569 | | | 0.31 | | | 3,849,670 | | | 0.13 | | | 77 | | | 0.52 | | | 97,751 | | | 0.01 | | | | 1,562 | | | | 0.29 | | | | 3,700,401 | | | 0.13 | | | | 75 | | | | 0.52 | | | | 91,145 | | | 0.01 | | ADR holders | | 1,541 | | | 0.30 | | | | 148,315,626 | (1) | | 5.03 | | | 191 | | | 1.30 | | | | 113,078,902 | (2) | | 5.35 | | | | 1,638 | | | | 0.30 | | | | 144,492,012 | (1) | | 4.90 | | | | 190 | | | | 1.33 | | | | 108,881,960 | (2) | | 5.16 | |
| (1) | These shares translate to 74,157,81372,246,006 ADRs. |
| (2) | These shares translate to 56,539,45154,440,980 ADRs. |
Geographical distribution of shareholders and shareholdings as at 2321 August 20192020 | | | | BHP Group Limited | | BHP Group Plc | | | BHP Group Limited | | | BHP Group Plc | | | | | Number of
shareholders | | % | | Number of
shares | | % | | Number of
shareholders | | % | | Number of
shares | | % | | | Number of
shareholders | | | % | | | Number of
shares | | % | | | Number of
shareholders | | | % | | | Number of
shares | | | % | | Registered address | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Australia | | 494,756 | | | 96.60 | | | 2,889,109,284 | | | 98.07 | | | 1,529 | | | 10.38 | | | 2,027,134 | | | 0.09 | | | | 528,947 | | | | 96.84 | | | | 2,888,854,021 | | | 98.07 | | | | 1,503 | | | | 10.52 | | | | 1,990,143 | | | | 0.09 | | New Zealand | | 9,506 | | | 1.86 | | | | 21,786,810 | | | 0.74 | | | 31 | | | 0.21 | | | | 48,586 | | | 0.01 | | | | 9,307 | | | | 1.70 | | | | 20,822,830 | | | 0.71 | | | | 30 | | | | 0.21 | | | | 49,669 | | | | 0.01 | | United Kingdom | | 2,613 | | | 0.51 | | | 7,083,145 | | | 0.24 | | | 9,968 | | | 67.68 | | | 1,807,028,803 | | | 85.55 | | | | 2,577 | | | | 0.47 | | | | 6,827,940 | | | 0.23 | | | | 9,647 | | | | 67.52 | | | | 1,817,353,859 | | | | 86.04 | | United States | | 1,569 | | | 0.31 | | | | 3,849,670 | | | 0.13 | | | 77 | | | 0.52 | | | | 97,751 | | | 0.01 | | | | 1,562 | | | | 0.29 | | | | 3,700,401 | | | 0.13 | | | | 75 | | | | 0.52 | | | | 91,145 | | | | 0.01 | | South Africa | | 112 | | | 0.02 | | | 242,427 | | | 0.01 | | | 2,038 | | | 13.84 | | | 300,017,550 | | | 14.20 | | | | 110 | | | | 0.02 | | | | 237,922 | | | 0.01 | | | | 2,001 | | | | 14.01 | | | | 287,509,791 | | | | 13.61 | | Other | | 3,637 | | | 0.70 | | | | 23,780,058 | | | 0.81 | | | 1,086 | | | 7.37 | | | | 2,851,972 | | | 0.14 | | | | 3,682 | | | | 0.68 | | | | 25,408,280 | | | 0.85 | | | | 1,031 | | | | 7.22 | | | | 5,077,189 | | | | 0.24 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | 512,193 | | | 100.00 | | | 2,945,851,394 | | | 100.00 | | | 14,729 | | | 100.00 | | | 2,112,071,796 | | | 100.00 | | | | 546,185 | | | | 100.00 | | | | 2,945,851,394 | | | 100.00 | | | | 14,287 | | | | 100.00 | | | | 2,112,071,796 | | | | 100.00 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Distribution of shareholdings by size as at 2321 August 20192020 | | | | BHP Group Limited | | BHP Group Plc | | | BHP Group Limited | | | BHP Group Plc | | | | | Number of
shareholders | | % | | Number of
shares (1) | | % | | Number of
shareholders | | % | | Number of
shares (1) | | % | | | Number of
shareholders | | | % | | | Number of
shares(1) | | % | | | Number of
shareholders | | | % | | | Number of
shares(1) | | | % | | Size of holding | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 1 – 500 (2) | | 224,117 | | | 43.76 | | | 49,924,453 | | | 1.69 | | | 7,805 | | | 52.99 | | | 1,602,338 | | | 0.08 | | | | 250,357 | | | | 45.84 | | | | 53,064,327 | | | 1.80 | | | | 7,590 | | | | 53.13 | | | | 1,543,091 | | | | 0.07 | | 501 – 1,000 | | 98,935 | | | 19.32 | | | | 75,872,633 | | | 2.58 | | | 2,545 | | | 17.28 | | | | 1,871,715 | | | 0.09 | | | | 102,679 | | | | 18.79 | | | | 78,715,867 | | | 2.67 | | | | 2,462 | | | | 17.23 | | | | 1,811,389 | | | | 0.09 | | 1,001 – 5,000 | | 148,391 | | | 28.97 | | | 332,264,482 | | | 11.28 | | | 2,549 | | | 17.31 | | | 5,137,813 | | | 0.24 | | | | 152,026 | | | | 27.83 | | | | 340,532,413 | | | 11.56 | | | | 2,445 | | | | 17.11 | | | | 4,972,678 | | | | 0.24 | | 5,001 – 10,000 | | 23,896 | | | 4.67 | | | | 168,844,054 | | | 5.73 | | | 363 | | | 2.46 | | | | 2,580,765 | | | 0.12 | | | | 24,306 | | | | 4.45 | | | | 171,276,806 | | | 5.81 | | | | 365 | | | | 2.55 | | | | 2,608,717 | | | | 0.12 | | 10,001 – 25,000 | | 12,663 | | | 2.47 | | | 190,344,546 | | | 6.46 | | | 353 | | | 2.40 | | | 5,769,986 | | | 0.27 | | | | 12,664 | | | | 2.32 | | | | 190,135,982 | | | 6.45 | | | | 327 | | | | 2.29 | | | | 5,345,222 | | | | 0.25 | | 25,001 – 50,000 | | 2,750 | | | 0.54 | | | | 93,470,093 | | | 3.17 | | | 221 | | | 1.50 | | | | 8,117,167 | | | 0.38 | | | | 2,760 | | | | 0.51 | | | | 93,617,943 | | | 3.18 | | | | 200 | | | | 1.40 | | | | 7,155,662 | | | | 0.34 | | 50,001 – 100,000 | | 929 | | | 0.18 | | | 63,488,321 | | | 2.17 | | | 211 | | | 1.43 | | | 15,473,078 | | | 0.73 | | | | 921 | | | | 0.17 | | | | 63,165,072 | | | 2.14 | | | | 207 | | | | 1.45 | | | | 15,010,886 | | | | 0.71 | | 100,001 – 250,000 | | 373 | | | 0.07 | | | | 52,823,350 | | | 1.79 | | | 242 | | | 1.64 | | | | 38,955,495 | | | 1.85 | | | | 333 | | | | 0.06 | | | | 47,160,113 | | | 1.60 | | | | 236 | | | | 1.65 | | | | 37,581,108 | | | | 1.78 | | 250,001 – 500,000 | | 77 | | | 0.01 | | | 26,239,996 | | | 0.89 | | | 122 | | | 0.83 | | | 44,406,501 | | | 2.10 | | | | 75 | | | | 0.01 | | | | 25,798,872 | | | 0.88 | | | | 139 | | | | 0.97 | | | | 50,478,374 | | | | 2.39 | | 500,001 – 1,000,000 | | 19 | | | 0.00 | | | | 13,634,490 | | | 0.46 | | | 113 | | | 0.77 | | | | 82,536,133 | | | 3.91 | | | | 23 | | | | 0.01 | | | | 15,328,906 | | | 0.52 | | | | 98 | | | | 0.69 | | | | 70,039,310 | | | | 3.32 | | 1,000,001 and over | | 43 | | | 0.01 | | | 1,878,944,976 | | | 63.78 | | | 205 | | | 1.39 | | | 1,905,620,805 | | | 90.23 | | | | 41 | | | | 0.01 | | | | 1,867,055,093 | | | 63.39 | | | | 218 | | | | 1.53 | | | | 1,915,525,359 | | | | 90.69 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | 512,193 | | | 100.00 | | | | 2,945,851,394 | | | 100.00 | | | 14,729 | | | 100.00 | | | | 2,112,071,796 | | | 100.00 | | | | 546,185 | | | | 100.00 | | | | 2,945,851,394 | | | 100.00 | | | | 14,287 | | | | 100.00 | | | | 2,112,071,796 | | | | 100.00 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (1) | One ordinary share entitles the holder to one vote. |
| (2) | The number of BHP Group Limited shareholders holding less than a marketable parcel (A$500) based on the market price of A$35.4238.36 as at 2321 August 20192020 was 5,712.5,195. |
307
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | BHP Group Limited | | | BHP Group Plc | | | | | Number of
shareholders | | | % | | | Number of
shares | | | % | | | Number of
shareholders | | | % | | | Number of
shares | | | % | | Classification of holder | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Corporate | | | 155,120 | | | | 28.40 | | | | 2,127,074,432 | | | | 72.21 | | | | 5,198 | | | | 36.38 | | | | 2,103,711,453 | | | | 99.60 | | Private | | | 391,065 | | | | 71.60 | | | | 818,776,962 | | | | 27.79 | | | | 9,089 | | | | 63.62 | | | | 8,360,343 | | | | 0.40 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | | 546,185 | | | | 100.00 | | | | 2,945,851,394 | | | | 100.00 | | | | 14,287 | | | | 100.00 | | | | 2,112,071,796 | | | | 100.00 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | BHP Group Limited | | | BHP Group Plc | | | | | Number of
shareholders | | | % | | | Number of
shares | | | % | | | Number of
shareholders | | | % | | | Number of
shares | | | % | | Classification of holder | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Corporate | | | 147,355 | | | | 28.77 | | | | 2,122,333,644 | | | | 72.04 | | | | 5,421 | | | | 36.80 | | | | 2,103,437,640 | | | | 99.59 | | Private | | | 364,838 | | | | 71.23 | | | | 823,517,750 | | | | 27.96 | | | | 9,308 | | | | 63.20 | | | | 8,634,156 | | | | 0.41 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | | 512,193 | | | | 100.00 | | | | 2,945,851,394 | | | | 100.00 | | | | 14,729 | | | | 100.00 | | | | 2,112,071,796 | | | | 100.00 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
308
7.7 Dividends Policy The Group adopted a dividend policy in February 2016 that provides for a minimum 50 per cent payout of Underlying attributable profit at every reporting period. For information on Underlying attributable profit for FY2019,FY2020, refer to section 1.12.1.1.10.1. The Board will assess, at every reporting period, the ability to pay amounts additional to the minimum payment, in accordance with the Capital Allocation Framework, as described in section 1.4.3.1.4.5. In FY2019,FY2020, we determined our dividends and other distributions in US dollars as it is our main functional currency. BHP Group Limited paid its dividends in Australian dollars, UK pounds sterling, New Zealand dollars and US dollars. BHP Group Plc paid its dividends in UK pounds sterling (or US dollars, if elected) to shareholders registered on its principal register in the United Kingdom and in South African rand to shareholders registered on its branch register in South Africa. Currency conversions were based on the foreign currency exchange rates on the dividend reinvestment plan election date, except for the conversion into South African rand, which takes place one week before the record date. Aligning the currency conversion date with the dividend reinvestment plan election date (for all currencies except the conversion into South African rand) enables a high level of certainty around the currency required to pay the dividend. This helps to reduce the Group’s exposure to movements in exchange rates since the number of shares on which dividends are payable (and the elected currency) is final at close of business on the dividend reinvestment election date. BHP paid a special dividend in FY2019 where the dividend reinvestment plan was not offered to shareholders, currency conversions were based on the foreign currency exchange rates on the record date, except for the conversion into South African rand, which took place a week before the recordelection date. Aligning the final date to receive currency elections (currency election date) with the dividend reinvestment plan election date further simplifies the process. Payments BHP Group Limited shareholders may currently have their cash dividends paid directly into their bank account in Australian dollars, UK pounds sterling, New Zealand dollars or US dollars, provided they have submitted direct credit details and if required, a valid currency election nominating a financial institution to the BHP Share Registrar in Australia no later than close of business on the dividend reinvestment plan election date. BHP Group Limited shareholders who do not provide their direct credit details will receive dividend payments by way of a cheque in Australian dollars. BHP Group Plc shareholders on the UK register who wish to receive their dividends in US dollars must complete the appropriate election form and return it to the BHP Share Registrar in the United Kingdom no later than close of business on the dividend reinvestment plan election date. BHP Group Plc shareholders may have their cash dividends paid directly into a bank or building society by completing a dividend mandate form, which is available from the BHP Share Registrar in the United Kingdom or South Africa. Dividend reinvestment plan BHP offers a dividend reinvestment plan to registered shareholders, which provides the opportunity to use cash dividends to purchase BHP shares in the market. 309
7.8 American Depositary Receipts fees and charges We have American Depositary Receipts (ADR) programs for BHP Group Limited and BHP Group Plc. Depositary fees Citibank serves as the depositary bank for both of our ADR programs. ADR holders agree to the terms in the deposit agreement filed with the SEC for depositing ADSs or surrendering the ADSs for cancellation and for certain services as provided by Citibank. Holders are required to pay all fees for general depositary services provided by Citibank in each of our ADR programs, as set forth in the tables below. Standard depositary fees: | | | Depositary service | | Fee payable by the ADR holders | | Issuance of ADSs upon deposit of shares | | Up to US$5.00 per 100 ADSs (or fraction thereof) issued | | | | Delivery of Deposited Securities against surrender of ADSs | | Up to US$5.00 per 100 ADSs (or fraction thereof) surrendered | | | | Distribution of Cash Distributions | | No fee |
Corporate actions depositary fees: | | | Depositary service | | Fee payable by the ADR holders | | Cash Distributions (i.e. sale of rights, other entitlements, return of capital) | | Up to US$2.00 per 100 ADSs (or fraction thereof) held | | | | Distribution of ADSs pursuant to exercise of rights to purchase additional ADSs. Excludes stock dividends and stock splits | | 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 net reimbursement of US$1.5 million1,157,500 in FY2019FY2020 for ADR program-related expenses for both of BHP’s ADR programs (FY2018(FY2019 US$1.5 million)1,229,094). ADR program-related expenses include legal and accounting fees, listing fees, expenses related to investor relations in the United States, fees payable to service providers for the distribution of material to ADR holders, expenses of Citibank as administrator of the ADS Direct Plan and expenses to remain in compliance with applicable laws. Citibank has further agreed to waive other ADR program-related expenses for FY2019,FY2020, amounting to less than US$0.03 million, which are associated with the administration of the ADR programs (FY2018(FY2019 less than US$0.03 million). Our ADR programs trade on the NYSE under the stock tickers BHP and BBL for the BHP Group Limited and BHP Group Plc programs, respectively. As of 2321 August 2019,2020, there were 74,157,81372,246,006 ADRs on issue and outstanding in the BHP Group Limited ADR program and 56,539,45154,440,980 ADRs on issue and outstanding in the BHP Group Plc ADR program. Both of the ADR programs have a 2:1 ordinary shares to ADR ratio. 310
7.9 Government regulations Our assets are subject to a broad range of laws and regulations imposed by governments and regulatory bodies. These regulations touch all aspects of our assets, including how we extract, process and explore for minerals, oil and natural gas and how we conduct our business, including regulations governing matters such as environmental protection, land rehabilitation, occupational health and safety, human rights, the rights and interests of Indigenous peoples, competition, foreign investment, export, marketing of minerals, oil and natural gas and taxes. The ability to extract minerals, oil and natural gas is fundamental to BHP. In most jurisdictions, the rights to extract mineral or petroleum deposits are owned by the government. We obtain the right to access the land and extract the product by entering into licences or leases with the government that owns the mineral, oil or natural gas deposit. The terms of the lease or licence, including the time period of the lease or licence, vary depending on the laws of the relevant government or terms negotiated with the relevant government. Generally, we own the product we extract and we are required to pay royalties or similar taxes to the government. Related to our ability to extract is our ability to process the extracted minerals, oil or natural gas. Again, we rely on governments to grant the rights necessary to transport and treat the extracted material to prepare it for sale. The rights to explore for minerals, oil and natural gas are granted to us by the government that owns the natural resources we wish to explore. Usually, the right to explore carries with it the obligation to spend a defined amount of money on the exploration, or to undertake particular exploration activities. In certain jurisdictions where we have assets, such as Trinidad and Tobago, a production sharing contract (PSC) governs the relationship between the government and companies concerning how much of the oil and gas extracted from the country each party will receive. In PSCs, the government awards rights for the execution of exploration, development and production activities to the company. The company bears the financial risk of the initiative and explores, develops and ultimately produces the field as required. When successful, the company is permitted to use the money from a certain set percentage of produced oil and gas to recover its capital and operational expenditures, known as ‘cost oil’. The remaining production is known as ‘profit oil’ and is split between the government and the company at a rate determined by the government and set out in the PSC. Environmental protection, mine closure and land rehabilitation, and occupational health and safety are principally regulated by governments and to a lesser degree, if applicable, by leases. These obligations often require us to make substantial expenditures to minimise or remediate the environmental impact of our assets and to ensure the safety of our employees and contractors and the communities where we operate. Regulations setting emissions standards for fuels used to power vehicles and equipment at our assets and the modes of transport used in our supply chains can also have a substantial impact, both directly and indirectly, on the markets for these products, with flow-on impacts on our costs. For more information on these types of obligations, refer to section 1.7. From time to time, certain trade sanctions are adopted by the United Nations (UN) Security Council and/or various governments, including in the United Kingdom, the United States, the European Union (EU) and Australia against certain countries, entities or individuals, that may restrict our ability to sell extracted minerals, oil or natural gas to, and/or our ability to purchase goods or services from, these countries, entities or individuals. Disclosure of Iran-related activities pursuant to section 13(r) of the US Securities Exchange Act of 1934 Section 13(r) of the US Securities Exchange Act of 1934, as amended (the Exchange Act) requires an issuer to disclose in its annual reports whether it or any of its affiliates knowingly engaged in certain activities, transactions or dealings relating to Iran. If applicable, disclosure is required even where the activities, transactions or dealings are conducted outside the United States by non-U.S. persons in compliance with applicable law, and whether or not the activities are sanctionable under U.S. law. Provided in this section is certain information concerning activities of certain affiliates of BHP that took place in FY2020. BHP believes that these activities are not sanctionable either as being outside the scope of U.S. sanctions, or within the scope of a specific licence issued by the U.S. Department of the Treasury‘s Office of Foreign Assets Control (OFAC). On 30 November 2018, BHP Billiton Petroleum Great Britain Ltd (BHP GB), a wholly owned subsidiary of BHP, and its co-venturers in the Bruce and Keith gas and oil fields offshore United Kingdom (BP Exploration Operating Company (BP), Marubeni Oil & Gas (UK) Limited (Marubeni) and Total E&P UK Limited (Total)) completed the sale of their interests in the Bruce and Keith gas and oil fields to Serica Energy (UK) Limited (Serica) (the Bruce and Keith Transaction). BHP divested its entire licence interests in Bruce and Keith but retained the obligation to fund decommissioning in accordance with its previous licence interest. The transfer of licence interests and retention of decommissioning liabilities for the Bruce and Keith co-venturers in the respective gas and oil fields is described below: | | | | | | | | | | | | | | | | | | | | | | | | | | | | Bruce | | | Keith | | | | Pre-sale
interest % | | | Post-sale
licence
interest % | | | Post-sale
decom.
Interest % | | | Pre-sale
interest % | | | Post-sale
licence
interest% | | | Post-sale
decom.
Interest % | | BP | | | 37 | | | | 1 | | | | 37 | | | | 34.83 | | | | 0 | | | | 34.83 | | Total | | | 43.25 | | | | 1 | | | | 43.25 | | | | 25 | | | | 0 | | | | 25 | | BHP GB | | | 16 | | | | 0 | | | | 16 | | | | 31.83 | | | | 0 | | | | 31.83 | | Marubeni | | | 3.65 | | | | 0 | | | | 0 | | | | 8.33 | | | | 0 | | | | 0 | | Serica | | | 0 | | | | 98 | | | | 3.75 | | | | 0 | | | | 100 | | | | 8.33 | |
While the sale closed on 30 November 2018, it was effective in economic terms as of 1 January 2018. In addition to initial cash consideration received from Serica at completion, BHP subsequently received, and will continue to receive: a share of pre-tax net cash flow attributable to its historic interest in the Bruce and Keith gas and oil fields of 60 per cent during December 2018, 50 per cent in CY2019 and 40 per cent in each of CY2020 and CY2021 under a Net Cash Flow Sharing Deed a share of projected decommissioning costs up to a specified cap The Bruce platform provides transportation and processing services to the nearby Rhum gas field pursuant to a contract between the Bruce owners and Rhum owners (the Bruce-Rhum Agreement). At the same time as the Bruce and Keith Transaction, Serica acquired from BP its 50 per cent interest and operatorship of the Rhum gas field. The Rhum gas field is now owned by a 50:50 unincorporated joint venture arrangement between Serica and Iranian Oil Company (UK) Limited (IOC). IOC is an indirect subsidiary of the National Iranian Oil Company (NIOC), which is a corporation owned by the Government of Iran. OFAC issued licence No. IA-2018-352294-2 (the OFAC Licence) authorising BP, Serica and all U.S. persons and U.S.-owned or controlled foreign entities identified in the licence application to provide goods, services and support for the operation, maintenance and production of the Rhum gas field, and goods, services and support to the Bruce platform for a period from 2 November 2018 through 31 October 2019. On 22 October 2019, OFAC renewed this licence through to 28 February 2021. OFAC also provided an assurance that non-U.S. persons would not be exposed to U.S. secondary sanctions for engaging in these activities and transactions involving Rhum or the Bruce platform, namely providing goods, services, and support to the Rhum field. BHP continues to monitor developments concerning U.S. sanctions with respect to Iran to maintain compliance with applicable sanctions laws and requirements. Although BHP has no ongoing direct dealings with any Iranian party, because BHP will receive ongoing consideration from Serica related to the sale of its interest in the Bruce-Rhum Agreement, BHP has included this disclosure. BHP recognised the following transaction in FY2020 related to the Bruce-Rhum Agreement. For the period 1 July 2019 to 30 June 2020, BHP received US$2.4 million from Serica under the Net Cash Flow Sharing Deed. Uranium production in Australia To mine, process, transport and sell uranium from within Australia, we are required to hold possession and export permissions, which are also subject to regulation by the Australian Government or bodies that report to the Australian Government. To possess nuclear material, such as uranium, in Australia, a Permit to Possess Nuclear Materials (Possession Permit) must be held pursuant to the Australian Nuclear Non-Proliferation (Safeguards) Act 1987 (Non-Proliferation Act). A Possession Permit is issued by the Australian Minister for Foreign Affairs. Compliance with the Non-Proliferation Act is monitored by the Australian Safeguards and Non-Proliferation Office, an office established under the Non-Proliferation Act, which administers Australia’s domestic nuclear safeguards requirements and reports to the Australian Government. To export uranium from Australia, a Permit to Export Natural Uranium (Export Permit) must be held pursuant to the Australian Customs (Prohibited Exports) Regulations 1958. The Export Permit is issued by the Minister with responsibility for Resources and Energy. A special permit to transport nuclear material is required under the Non-Proliferation Act by a party that transports nuclear material from one specified location to another specified location. As we engage service providers to transport uranium, each of those service providers is required to hold a permit to transport nuclear material issued by the Australian Safeguards and Non-Proliferation Office. BHP Group Plc There are no laws or regulations currently in force in the United Kingdom that restrict the export or import of capital or the payment of dividends to non-resident holders of BHP Group Plc’s shares, although the Group does operate in some other jurisdictions where the payment of dividends could be affected by exchange control approvals. From time to time, certain sanctions are adopted by the UN Security Council and/or various governments, including in the United Kingdom, the United States, the EU and Australia against certain countries, entities or individuals that may restrict the export or import of capital or the remittance of dividends to certain non-resident holders of BHP Group Plc’s shares. There are no restrictions under BHP Group Plc’s Articles of Association or (subject to the effect of any sanctions) under English law that limit the right of non-resident or foreign owners to hold or vote BHP Group Plc’s shares. There are certain restrictions on shareholding levels under BHP Group Plc’s Articles of Association described below. BHP Group Limited Under current Australian legislation, the payment of any dividends, interest or other payments by BHP Group Limited to non-resident holders of BHP Group Limited’s shares is not restricted by exchange controls or other limitations, except that, in certain circumstances, BHP Group Limited may be required to withhold Australian taxes. From time to time, certain sanctions are adopted by the UN Security Council and/or various governments, including in the United Kingdom, the United States, the EU and Australia. Those sanctions prohibit or, in some cases, impose certain approval and reporting requirements on transactions involving sanctioned countries, entities and individuals and/or assets controlled or owned by them. Certain transfers into or out of Australia of amounts greater than A$10,000 in any currency may also be subject to reporting requirements. The Australian Foreign Acquisitions and Takeovers Act 1975 (the FATA) restricts certain acquisitions of interests in shares in Australian companies, including BHP Group Limited. Generally, under the FATA, the prior approval of the Australian Treasurer must be obtained for proposals by a foreign person (either alone or together with its associates) to acquire 20 per cent or more of the voting power or issued shares in an Australian company. Any acquisition by a foreign government investor of the voting power or issued shares in an Australian company will require the prior approval of the Australian Treasurer to be obtained. The FATA also empowers the Treasurer to make certain orders prohibiting acquisitions by foreign persons in Australian companies, including BHP Group Limited (and requiring divestiture if the acquisition has occurred) where the Treasurer considers the acquisition to be contrary to the national interest. Such orders may also be made in respect of acquisitions by foreign persons where two or more foreign persons (and their associates) in aggregate already control 40 per cent or more of the issued shares or voting power in an Australian company, including BHP Group Limited. The restrictions in the FATA on share acquisitions in BHP Group Limited described above apply equally to share acquisitions in BHP Group Plc because BHP Group Limited and BHP Group Plc are dual listed entities. Except for the restrictions under the FATA, there are no limitations, either under Australian law or under the Constitution of BHP Group Limited, on the right of non-residents to hold or vote BHP Group Limited ordinary shares. Shareholding limits under the Constitution and Articles of Association There are certain other statutory restrictions and restrictions under BHP Group Limited’s Constitution and BHP Group Plc’s Articles of Association that apply generally to acquisitions of shares in BHP Group Limited and BHP Group Plc (i.e. the restrictions are not targeted at foreign persons only). These include restrictions on a person (and associates) breaching a voting power threshold of: above 20 per cent in relation to BHP Group Limited on a ‘stand-alone’ basis (i.e. calculated as if there were no Special Voting Share and only counting BHP Group Limited’s ordinary shares) 30 per cent of BHP Group Plc. This is the threshold for a mandatory offer under Rule 9 of the UK takeover code and this threshold applies to all voting rights of BHP Group Plc (therefore including voting rights attached to the BHP Group Plc Special Voting Share) 30 per cent in relation to BHP Group Plc on a ‘stand-alone’ basis (i.e. calculated as if there were no Special Voting Share and only counting BHP Group Plc’s ordinary shares) above 20 per cent in relation to BHP Group Plc, calculated having regard to all the voting power on a joint electorate basis (i.e. calculated on the aggregate of BHP Group Limited’s and BHP Group Plc’s ordinary shares) Under BHP Group Limited’s Constitution and BHP Group Plc’s Articles of Association, sanctions for breach of any of these thresholds, other than by means of certain ‘permitted acquisitions’, include withholding of dividends, voting restrictions and compulsory divestment of shares to the extent a shareholder and its associates exceed the relevant threshold. 7.10 Taxation The taxation discussion below describes the material Australian, UK and US federal income tax consequences to a US holder of owning BHP Group Limited ordinary shares or ADSs or BHP Group Plc ordinary shares or ADSs. The discussion below also outlines the potential South African tax issues for US holders of BHP Group Plc shares that are listed on the JSE. The following discussion is not relevant tonon-US holders of BHP Group Limited ordinary shares or ADSs or BHP Group 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 citizen or resident alien of the US; 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; an estate, the income of which is subject to US federal income taxation regardless of its source; or (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
| (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)
| (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 Group Limited (a) Australian taxation Dividends Dividends (including other distributions treated as dividends for Australian tax purposes) paid by BHP Group 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 Group Limited is imputed to the shareholders). Dividends paid to such US holders, which are not fully franked, will generally be subject to Australian withholding tax not exceeding 15 per cent only to the extent (if any) that the dividend is neither: declared by BHP Group Limited to be conduit foreign income. (Broadly, this means that the relevant part of the dividend is declared to have been paid out of foreign source amounts received by BHP Group Limited that are not subject to tax in Australia, such as dividends remitted to Australia by foreign subsidiaries). 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 Group Limited to a US holder may instead be taxed by assessment in Australia if the US holder: is an Australian resident for Australian tax purposes (although the tax will generally not exceed 15 per cent where the US holder is eligible for benefits under the Australian Tax Treaty as a treaty resident of the US and any franking credits may be creditable against their Australian income tax liability); or carries on business in Australia through a permanent establishment as defined in the Australian Tax Treaty, or performs personal services from a fixed base in Australia, and the shareholding in respect of which the dividend is paid is effectively connected with that permanent establishment or fixed base, (however, in such a case any franking credits may be creditable against the Australian income tax liability). The treatment of dividends outlined above may be modified where the shareholding in BHPGroupLimited is held through a trust, limited partnership, limited liability company, pension fund, sovereign wealth fund or other investment vehicle. Affected US holders should seek their own advice in relation to such arrangements. 311
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 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: they are not eligible for benefits under the Australian Tax Treaty and the gain is sourced in Australia for Australian tax purposes; or they are eligible for benefits under the Australian Tax Treaty but the gain constitutes any of the following (in which case the gain will be deemed to have an Australian source): | | – | | business profits of an enterprise attributable to a permanent establishment situated in Australia through which the enterprise carries on business in Australia; or |
| | – | | income or gains from the alienation of property that form part of the business property of a permanent establishment of an enterprise that the US holder has in Australia, or pertain to a fixed base available to the US holder in Australia for the purpose of performing independent personal services; or |
| | – | | income derived from the disposition of shares in a company, the assets of which consist wholly or principally of real property (which includes rights to exploit or to explore for natural resources) situated in Australia, whether such assets are held directly or indirectly through one or more interposed entities. |
Where the gain is not taxed as Australian sourced income, 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 is an Australian resident for Australian tax purposes; or the ordinary shares or ADSs have been used by the US holder in carrying on a business through a permanent establishment in Australia; or the ordinary shares or ADSs constitute an ‘indirect Australian real property interest’ for Australian CGT purposes – this will generally be the case if 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 Group Limited at the time of the disposal or throughout a12-month period during the two years prior to the time of disposal and, at the time of the disposal, the sum of the market values of BHP Group Limited’s assets that are taxable Australian real property (held directly or through interposed entities) exceeds the sum of the market values of BHP Group Limited’s assets (held directly or through interposed entities) that are not taxable Australian real property at that time (which, for these purposes includes mining, quarrying or prospecting rights in respect of minerals, petroleum or quarry materials situated in Australia); or the US holder is an individual who is not eligible for benefits under the Australian Tax Treaty as a treaty resident of the US and elected on becoming anon-resident of Australia to continue to have the ordinary shares or ADSs subject to Australian capital gains tax. In certain circumstances, if the ordinary shares or ADSs constitute an ‘indirect Australian real property interest’ for Australian CGT purposes, the purchaser may be required to withhold under thenon-resident CGT withholding regime an amount equal to 12.5 per cent of the purchase price in situations including where the acquisition is undertaken by way of anoff-market transfer. Affected US holders should seek their own advice in relation to how this withholding regime may apply to them. The comments above on the sale of ordinary shares and ADSs do not apply: to temporary residents of Australia who should seek advice that is specific to their circumstances; or if the Investment Management Regime (IMR) applies to the US holder, which exempts from Australian income tax and capital gains tax gains made on disposals by certain categories ofnon-resident funds – called IMR entities – of (relevantly) portfolio interests in Australian public companies (subject to a number of conditions). The IMR exemptions broadly apply to widely held IMR entities in relation to their direct investments and indirect investments made through an independent Australian fund manager. The exemptions apply to gains made by IMR entities that are treated as companies for Australian tax purposes as well as gains made bynon-resident investors in IMR entities that are treated as trusts and partnerships for Australian tax purposes. 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. 312
(b)(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 discussion addresses only US federal income taxation and does not discuss all of the tax consequences that may be relevant to US holders in light of their individual circumstances, including foreign, state or local tax consequences, estate and gift tax consequences, and tax consequences arising under the Medicare contribution tax on net investment income or the alternative minimum tax. 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 amark-to-market method of accounting for its securities holdings, atax-exempt organisation, a life insurance company, a person thatliable for alternative minimum tax, a person who actually or constructively owns 10 per cent or more of the combined voting power of the voting stock or of the total value of the stock of BHP Group 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 an entity or arrangement that is treated as a partnership for US federal income tax purposes 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 based on the Internal Revenue Code of 1986, as amended, its legislative history, existing and proposed regulations, published rulings and court decisions, and the Australian Tax Treaty, all as currently in effect. These authorities are subject to change, possibly on a retroactive basis. 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. The tax treatment of the ordinary shares or ADSs will depend in part on whether or not BHP Group Limited is classified as a passive foreign investment company, or PFIC, for US federal income tax purposes. Except as discussed below under “– Passive Foreign Investment Company rules”, this discussion assumes that BHP Group Limited is not classified as a PFIC for US federal income tax purposes.
DistributionsDividends
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 distribution (other than certainpro-rata distributions of shares)dividend paid by BHP Group 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 distributiondividend payment even though the holder does not receive it, will be treated as a dividend that is subjectit. However, BHP Group Limited does not expect to calculate earnings and profits in accordance with US federal income taxation.tax principles. Accordingly, holders should expect to generally treat distributions made by BHP Group Limited as dividends. 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 anon-corporate US holder on ordinary shares or ADSs that constitute qualified dividend income will generally 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 the121-day period beginning 60 days before theex-dividend date and does not enter into certain risk reduction transactions with respect to the shares or ADSs during the abovementioned holding period. Dividends paid with respect to the shares or ADSs generally will be qualified dividend income provided that, in the year that the US holder receives the dividend, BHP Group Limited is eligible for the benefits of the Australian Tax Treaty. BHP Group Limited believes that it is currently eligible for the benefits of the Australian Tax Treaty and therefore expects that dividends on the ordinary shares and ADSs will be qualified dividend income, but there can be no assurance that it will continue to be eligible for the benefits of the Australian Tax Treaty. Further,However, anon-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 anon-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 ordinary income or loss ineligible for the special tax rate applicable to qualified dividend income and generally will be income or loss from US sources for foreign tax credit limitation purposes. Subject to certain limitations, Australian tax withheld in accordance with the Australian Tax 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 reduction or refund of the tax withheld is available to a US holder under Australian law or under the Australian Tax Treaty, the amount of tax withheld that could have been reduced or 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 generally be income from sources outside the US, and generally will be “passive”‘passive category’ income 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. 313
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 anon-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 Group Limited ordinary shares or ADSs should not currentlywill be treated as stock of a PFIC for US federal income tax purposes, and BHP Group Limited does not expect to become a PFIC in the foreseeable future. However,but this conclusion is a factual determination that is made annually at the end of the year and thus may be subject to change. It is therefore possible that BHP Group Limited could become a PFIC in a future taxable year. If BHP Group 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. 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 amark-to-market basis with respect to such shares or ADSs. In addition, regardless of whether or not such election is made, 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 Group 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 Group 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: they are 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 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: had sole UK residence in the UK tax year preceding his/her departure from the UK; had sole UK residence at any time during at least four of the seven UK tax years preceding his/her year of departure from the UK; and subsequently becomes treated as having sole UK residence again before five complete UK tax years ofnon-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 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. 314
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 ADRs (as an integral part of a fresh capital raising) was incompatible with EU 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 and it has also been confirmed that the UK Government intends to continue this approach following the UK’s withdrawal from the EU. 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 discussion addresses only US federal income taxation and does not discuss all of the tax consequences that may be relevant to US holders in light of their individual circumstances, including foreign, state or local tax consequences, estate and gift tax consequences, and tax consequences arising under the Medicare contribution tax on net investment income or the alternative minimum tax. 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 thatwho elects to use amark-to-market method of accounting for its securities holdings, atax-exempt organisation, a life insurance company, a person thatliable for alternative minimum tax, a person who actually or constructively owns 10 per cent or more of the combined voting power of the voting stock or of the total value of the stock of BHP Group 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 an entity or arrangement that is treated as a partnership for US federal income tax purposes 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 based on the Internal Revenue Code of 1986, as amended, its legislative history, existing and proposed regulations, published rulings and court decisions, and the UK Tax Treaty, all as currently in effect. These authorities are subject to change, possibly on a retroactive basis. 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. The tax treatment of the ordinary shares or ADSs will depend in part on whether or not BHP Group Plc is classified as a passive foreign investment company, or PFIC, for US federal income tax purposes. Except as discussed below under “– Passive Foreign Investment Company rules”, this discussion assumes that BHP Group Plc is not classified as a PFIC for US federal income tax purposes.
DistributionsDividends
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 distribution (other than certainpro-rata distributions of shares)dividend paid by BHP Group Plc out of its current or accumulated earnings and profits (as determined for US federal income tax purposes) will be treated as a dividend that is subject. However, BHP Group Plc does not expect to calculate earnings and profits in accordance with US federal income taxation.tax principles. Accordingly, holders should expect to generally treat distributions made by BHP Group Plc as dividends. 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 anon-corporate US holder on ordinary shares or ADSs that constitute qualified dividend income will generally 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 the121-day period beginning 60 days before theex-dividend date and does not enter into certain risk reduction transactions with respect to the shares or ADSs during the abovementioned holding period. Dividends paid with respect to the shares or ADSs generally will be qualified dividend income provided that, in the year that the US holder receives the dividend, BHP Group Plc is eligible for the benefits of the UK Tax Treaty. BHP Group Plc believes that it is currently eligible for the benefits of the UK Tax Treaty and therefore expects that dividends on the ordinary shares and ADSs will be qualified dividend income, but there can be no assurance that it will continue to be eligible for the benefits of the UK Tax Treaty. Further,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. 315
Distributions in excess of current and accumulated earnings and profits, as determined for US federal income tax purposes, will be treated as anon-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 ordinary income or loss ineligible for the special tax rate applicable to qualified dividend income and generally will be income or loss from US sources for foreign tax credit limitation purposes. Dividends will generally be income from sources outside the US, and generally will be “passive”‘passive category’ income 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 anon-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 Group Plc ordinary shares or ADSs should not currentlywill be treated as stock of a PFIC for US federal income tax purposes, and BHP Group Plc does not expect to become a PFIC in the foreseeable future. However,but this conclusion is a factual determination that is made annually at the end of the year and thus may be subject to change. It is therefore possible that BHP Group Plc could become a PFIC in a future taxable year. If BHP Group 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. 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 amark-to-market basis with respect to such shares or ADSs. In addition, regardless of whether or not such election is made, 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 Group 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 Dividends paid or payable on or after 22 February 2017 in respect of shares in foreign companies that are listed on a South African exchange will attract South African Dividends Tax at the rate of 20 per cent, unless an exemption or a reduced rate in terms of a Double Tax Agreement applies. In this regard, we note that where a foreign tax resident company, listed on the JSE declares a cash dividend to anon-South African tax resident, dividend withholding tax would not apply (refer section 64F(j) of the South African Income Tax Act). Accordingly, it is unlikely that a US tax resident (or any other foreign tax resident) that is a holder of BHP Group Plc shares listed on the JSE would be subject to South African Dividends Tax on any cash dividends received or accrued in respect of their JSE listed BHP Group Plc shares. However, to qualify for the exemption, the US tax resident holder (or other foreign resident holder) must within the appropriate time period provide the prescribed declaration form confirming the application of the exemption to the regulated intermediary responsible for making payment of the dividend to that party (or any other appropriate party responsible for payment of the dividend). With effect from 1 October 2020, the declaration will no longer be valid after a period of five years. If the US holder (or any othernon-resident) is tax resident in South Africa they would likely be subject to dividends tax at a rate of 20%. Investors are cautioned to be certain of their tax residence to ensure correct tax treatment. 316
Although the beneficial owner of the dividend is liable for the South African Dividends Tax on a cash dividend, the South African Dividends Tax would 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, South African tax resident corporate shareholders (including South African companies, 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 exemption declarations and written undertakings to the regulated intermediaries (or the person who is obliged to withhold the dividends tax) making the cash dividend payments before they are paid. We reiterate that with effect from 1 October 2020, the declaration will no longer be valid after a period of five years. South African tax resident shareholders who are natural persons (individuals) or trusts, other than closure rehabilitation trusts, do not qualify for an exemption from South African Dividends Tax. 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 South African Dividends Tax may be considered as a final andnon-creditable levy. Sale of ordinary shares and ADSs A US holder who or which is tax resident in South Africa would be liable for either income tax on any profit on disposal of BHP Group Plc shares or ADSs, or capital gains tax on any gain on disposal of BHP Group Plc shares or ADSs, depending on whether the BHP Group Plc shares and ADSs are held on revenue or capital account. Income tax is payable on any profit on disposal of BHP Group Plc shares or ADSs held by a US holder who or which is tax resident in the US, 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. We highlight that this Double Tax Agreement contains a limitation on benefits clause that should be carefully scrutinised to ensure application of the Double Tax Agreement. 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 BHP GroupBilliton Plc shares or ADSs are held on capital account, US holders will not be liable for South African tax on capital gains realised on the disposal of BHP GroupBilliton Plc shares or ADSs unless: such US holders are tax resident in South Africa; or 80 per cent or more of the market value of the BHP Group Plc shares or ADSs is attributable (at the time of disposal of those BHP Group Plc shares or ADSs) directly or indirectly to immovable property situated in South Africa and the US holder (alone or together with a connected person) in question directly or indirectly holds 20 per cent of such BHP Group Plc shares or ADSs; or the US holder’s BHP Group Plc shares or ADSs form part of the business property of a permanent establishment which an enterprise of the US holder has in South Africa. For a US holder who will recognise a capital gain or loss for South African income tax purposes on a disposal of BHP Group Plc shares or ADSs, such gain or loss will be equal to the difference between the Rand value of the amount realised and the holder’s tax basis, determined in Rand, in those BHP Group Plc shares or ADSs. The holder’s tax basis will generally be equal to the cost that was incurred to acquire the BHP Group Plc shares or ADSs, if such shares or ADSs were acquired after 1 October 2001. South African capital gains tax is levied at an effective rate of 22.4 per cent for companies, up to 18 per cent for individuals (depending on the applicable tax bracket), and 36 per cent for trusts. Securities Transfer Tax South African Securities Transfer Tax is levied at 0.25 per cent in respect of the transfer of shares in a foreign company that areis listed on the JSE. Accordingly, a transfer of those BHP Group Plc shares listed on the JSE will be subject to this tax. The tax is levied on the amount of consideration at which the BHP Group Plc share is transferred or, where no amount/value is declared or if the amount so declared is less than the lowest price of the BHP Group Plc share, the closing price of the BHP Group Plc share. The tax is ultimately borne by the person to whom that BHP Group Plc share is transferred. 317
7.10 Government regulations
Our assets are subject to a broad range of laws and regulations imposed by governments and regulatory bodies. These regulations touch all aspects of our assets, including how we extract, process and explore for minerals, oil and natural gas and how we conduct our business, including regulations governing matters such as environmental protection, land rehabilitation, occupational health and safety, the rights and interests of Indigenous peoples, competition, foreign investment, export, marketing of minerals, oil and natural gas and taxes.
The ability to extract minerals, oil and natural gas is fundamental to BHP. In most jurisdictions, the rights to extract mineral or petroleum deposits are owned by the government. We obtain the right to access the land and extract the product by entering into licences or leases with the government that owns the mineral, oil or natural gas deposit. The terms of the lease or licence, including the time period of the lease or licence, vary depending on the laws of the relevant government or terms negotiated with the relevant government. Generally, we own the product we extract and we are required to pay royalties or similar taxes to the government.
Related to our ability to extract is our ability to process the extracted minerals, oil or natural gas. Again, we rely on governments to grant the rights necessary to transport and treat the extracted material to prepare it for sale.
The rights to explore for minerals, oil and natural gas are granted to us by the government that owns the natural resources we wish to explore. Usually, the right to explore carries with it the obligation to spend a defined amount of money on the exploration, or to undertake particular exploration activities.
In certain jurisdictions where we have assets, such as Trinidad and Tobago, a production sharing contract (PSC) governs the relationship between the government and companies concerning how much of the oil and gas extracted from the country each will receive. In PSCs, the government awards rights for the execution of exploration, development and production activities to the company. The company bears the financial risk of the initiative and explores, develops and ultimately produces the field as required. When successful, the company is permitted to use the money from a certain set percentage of produced oil and gas to recover its capital and operational expenditures, known as ‘cost oil’. The remaining production is known as ‘profit oil’ and is split between the government and the company at a rate determined by the government and set out in the PSC.
Environmental protection, mine closure and land rehabilitation, and occupational health and safety are principally regulated by governments and to a lesser degree, if applicable, by leases. These obligations often require us to make substantial expenditures to minimise or remediate the environmental impact of our assets and to ensure the safety of our employees and contractors. Regulations setting emissions standards for fuels used to power vehicles and equipment at our assets and the modes of transport used in our supply chains can also have a substantial impact, both directly and indirectly, on the markets for these products, withflow-on impacts on our costs. For more information on these types of obligations, refer to section 1.10.
Fromtime-to-time, certain trade sanctions are adopted by the United Nations (UN) Security Council and/or various governments, including in the United Kingdom, the United States, the European Union (EU) and Australia against certain countries, entities or individuals, that may restrict our ability to sell extracted minerals, oil or natural gas and/or our ability to purchase goods or services.
Disclosure of Iran-related activities pursuant to section 13(r) of the US Securities Exchange Act of 1934
Section 13(r) of the US Securities Exchange Act of 1934, as amended (the Exchange Act) requires an issuer to disclose in its annual reports whether it or any of its affiliates knowingly engaged in certain activities, transactions or dealings relating to Iran. If applicable, disclosure is required even where the activities, transactions or dealings are conducted outside the United States bynon-U.S. persons in compliance with applicable law, and whether or not the activities are sanctionable under U.S. law. Provided in this section is certain information concerning activities of certain affiliates of BHP that took place in FY2019. BHP believes that these activities are not sanctionable either as being outside the scope of U.S. sanctions, or within the scope of a specific licence issued by the U.S. Department of the Treasury‘s Office of Foreign Assets Control (OFAC).
On 30 November 2018, BHP Billiton Petroleum Great Britain Ltd (BHP GB), a wholly owned subsidiary of BHP, and itsco-venturers in the Bruce and Keith gas and oil fields offshore United Kingdom (BP Exploration Operating Company (BP), Marubeni Oil & Gas (UK) Limited (Marubeni) and Total E&P UK Limited (Total)) completed the sale of their interests in the Bruce and Keith gas and oil fields to Serica Energy (UK) Limited (Serica) (the Bruce and Keith Transaction). BHP divested its entire licence interests in Bruce and Keith but retained the obligation to fund decommissioning in accordance with its previous licence interest.
The transfer of licence interests and retention of decommissioning liabilities for the Bruce and Keithco-venturers in the respective gas and oil fields is described below:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | Bruce | | | Keith | | | | Pre sale
interest % | | | Post sale
licence
interest% | | | Post-sale
decom.
interest | | | Pre sale
interest % | | | Post sale
licence
interest% | | | Post-sale
decom.
interest | | BP | | | 37% | | | | 1% | | | | 37% | | | | 34.83% | | | | 1% | | | | 34.83% | | Total | | | 43.25% | | | | 1% | | | | 43.25% | | | | 25% | | | | 1% | | | | 25% | | BHP GB | | | 16% | | | | 0% | | | | 16% | | | | 31.83% | | | | 0% | | | | 31.83% | | Marubeni | | | 3.65% | | | | 0% | | | | 0% | | | | 8.33% | | | | 0% | | | | 0% | | Serica | | | 0% | | | | 98% | | | | 3.65% | | | | 0% | | | | 98% | | | | 8.33% | |
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While the sale closed on 30 November 2018, it was effective in economic terms as of 1 January 2018. BHP received initial cash consideration from Serica, and will subsequently receive (1) a share ofpre-tax net cash flow attributable to its historic interest in the Bruce and Keith gas and oil fields of 60 per cent during December 2018, 50 per cent in 2019 and 40 per cent in each of 2020 and 2021 under a Net Cash Flow Sharing Deed, and (2) a share of projected decommissioning costs up to a specified cap.
The Bruce platform provides transportation and processing services to the nearby Rhum gas field pursuant to a contract between the Bruce owners and Rhum owners (the Bruce-Rhum Agreement). At the same time as the Bruce and Keith Transaction, Serica acquired from BP its 50 per cent interest and operatorship of the Rhum gas field. The Rhum gas field is now owned by a 50:50 unincorporated joint venture arrangement between Serica and Iranian Oil Company (UK) Limited (IOC). IOC is an indirect subsidiary of the National Iranian Oil Company (NIOC), which is a corporation owned by the Government of Iran.
OFAC issued licence No.IA-2018-352294-2 (the OFAC Licence) authorising BP, Serica and all U.S. persons and U.S.-owned or -controlled foreign entities identified in the licence application to provide goods, services, and support for the operation, maintenance, and production of the Rhum gas field, and goods, services and support to the Bruce platform for a period from 2 November 2018 through 31 October 2019. OFAC also provided an assurance thatnon-U.S. companies would not be subject to U.S. sanctions for supporting these Rhum activities.
BHP continues to monitor developments concerning U.S. sanctions with respect to Iran to maintain compliance with applicable sanctions laws and requirements. Although BHP has no ongoing direct dealings with any Iranian party, because BHP will receive ongoing consideration from Serica related to the sale of its interest in the Bruce-Rhum Agreement, BHP has included this disclosure.
BHP has recognised the following transactions in FY2019 related to the Bruce-Rhum Agreement:
(i) | for the period from 1 July 2018 to 30 November 2018, BHP recognised US$5.5 million in cost recovery under the terms of the Bruce-Rhum Agreement, which was booked as a reduction in operating expenses for the Bruce gas field;
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(ii) | for the period from 1 January 2018 to 30 November 2018, BHP paid US$4.6 million from the Bruce-Rhum Agreement to Serica as part of a completion payment under the sale and purchase agreement governing the Bruce and Keith Transaction;
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(iii) | for the period 1 December 2018 to 30 June 2019, BHP received US$2.1 million from Serica under the Net Cash Flow Sharing Deed.
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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 NuclearNon-Proliferation (Safeguards) Act 1987(Non-Proliferation Act). A Possession Permit is issued by the Australian Safeguards andNon-Proliferation Office, an office established under theNon-Proliferation Act, which administers Australia’s domestic nuclear safeguards requirements and reports to the Australian Government.
To export uranium from Australia, a Permit to Export Natural Uranium (Export Permit) must be held pursuant to the Australian Customs (Prohibited Exports) Regulations 1958. The Export Permit is issued by the Minister with responsibility for Resources and Energy.
A special permit to transport nuclear material is required under theNon-Proliferation Act by a party that transports nuclear material from one specified location to another specified location. As we engage service providers to transport uranium, each of those service providers is required to hold a permit to transport nuclear material issued by the Australian Safeguards andNon-Proliferation Office.
Exchange controls and shareholding limits
BHP Group Plc
There are no laws or regulations currently in force in the United Kingdom that restrict the export or import of capital or the payment of dividends tonon-resident holders of BHP Group Plc’s shares, although the Group does operate in some other jurisdictions where the payment of dividends could be affected by exchange control approvals.
Fromtime-to-time, certain sanctions are adopted by the UN Security Council and/or various governments, including in the United Kingdom, the United States, the EU and Australia against certain countries, entities or individuals that may restrict the export or import of capital or the remittance of dividends to certainnon-resident holders of BHP Group Plc’s shares.
There are no restrictions under BHP Group Plc’s Articles of Association or (subject to the effect of any sanctions) under English law that limit the right ofnon-resident or foreign owners to hold or vote BHP Group Plc’s shares.
There are certain restrictions on shareholding levels under BHP Group Plc’s Articles of Association described below.
BHP Group Limited
Under current Australian legislation, the payment of any dividends, interest or other payments by BHP Group Limited tonon-resident holders of BHP Group Limited’s shares is not restricted by exchange controls or other limitations, except that, in certain circumstances, BHP Group Limited may be required to withhold Australian taxes.
Fromtime-to-time, certain sanctions are adopted by the UN Security Council and/or various governments, including in the United Kingdom, the United States, the EU and Australia. Those sanctions prohibit or, in some cases, impose certain approval and reporting requirements on transactions involving sanctioned countries, entities and individuals and/or assets controlled or owned by them. Certain transfers into or out of Australia of amounts greater than A$10,000 in any currency may also be subject to reporting requirements.
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The Australian Foreign Acquisitions and Takeovers Act 1975 (the FATA) restricts certain acquisitions of interests in shares in Australian companies, including BHP Group Limited. Generally, under the FATA, the prior approval of the Australian Treasurer must be obtained for proposals by a foreign person (either alone or together with its associates) to acquire 20 per cent or more of the voting power or issued shares in an Australian company. Any acquisition by a foreign government investor of the voting power or issued shares in an Australia company will require the prior approval of the Australian Treasurer to be obtained.
The FATA also empowers the Treasurer to make certain orders prohibiting acquisitions by foreign persons in Australian companies, including BHP Group Limited (and requiring divestiture if the acquisition has occurred) where the Treasurer considers the acquisition to be contrary to the national interest. Such orders may also be made in respect of acquisitions by foreign persons where two or more foreign persons (and their associates) in aggregate already control 40 per cent or more of the issued shares or voting power in an Australian company, including BHP Group Limited.
The restrictions in the FATA on share acquisitions in BHP Group Limited described above apply equally to share acquisitions in BHP Group Plc because BHP Group Limited and BHP Group Plc are dual listed entities.
There are certain other statutory restrictions and restrictions under BHP Group Limited’s Constitution and BHP Group Plc’s Articles of Association that apply generally to acquisitions of shares in BHP Group Limited and BHP Group Plc (i.e. the restrictions are not targeted at foreign persons only). These include restrictions on a person (and associates) breaching a voting power threshold of:
above 20 per cent in relation to BHP Group Limited on a ‘stand-alone’ basis (i.e. calculated as if there were no Special Voting Share and only counting BHP Group Limited’s ordinary shares);
30 per cent of BHP Group Plc. This is the threshold for a mandatory offer under Rule 9 of the UK takeover code and this threshold applies to all voting rights of BHP Group Plc (therefore including voting rights attached to the BHP Group Plc Special Voting Share);
30 per cent in relation to BHP Group Plc on a ‘stand-alone’ basis (i.e. calculated as if there were no Special Voting Share and only counting BHP Group Plc’s ordinary shares);
above 20 per cent in relation to BHP Group Plc, calculated having regard to all the voting power on a joint electorate basis (i.e. calculated on the aggregate of BHP Group Limited’s and BHP Group Plc’s ordinary shares).
Under BHP Group Limited’s Constitution and BHP Group Plc’s Articles of Association, sanctions for breach of any of these thresholds, other than by means of certain ‘permitted acquisitions’, include withholding of dividends, voting restrictions and compulsory divestment of shares to the extent a shareholder and its associates exceed the relevant threshold.
Except for the restrictions under the FATA, there are no limitations, either under Australian law or under the Constitution of BHP Group Limited, on the right ofnon-residents to hold or vote BHP Group Limited ordinary shares.
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7.11 Ancillary information for our shareholders This Annual Report provides the detailed financial data and information on BHP’s performance required to comply with the reporting regimes in Australia, the United Kingdom and the United States. Shareholders of BHP Group Limited and BHP Group Plc will receive a copy of the Annual Report if they have requested a copy. ADR holders may view all documents online at bhp.com or opt to receive a hard copy by accessing citibank.ar.wilink.comorhttps://app.irdirect.net/company/0/hotline/or calling Citibank Shareholder Services during normal business hours using the details listed in the Corporate Directorydirectory at the end of this Annual Report. Change of shareholder details and enquiries Shareholders wishing to contact BHP on any matter relating to their shares or ADR holdings are invited to telephone the appropriate office of the BHP Share Registrar or Transfer Office listed in the Corporate Directorydirectory at the end of this Annual Report. Any change in shareholding details should be notified by the shareholder to the relevant Registrar in a timely manner. Shareholders can also access their current shareholding details and change many of those details online at bhp.com. The website requires shareholders to quote their Shareholder Reference Number (SRN) or Holder Identification Number (HIN) in order to access this information. Alternative access to the Annual Report We offer an alternative for all shareholders who wish to be advised of the availability of the Annual Report through our website via an email notification. By providing an email address through our website, shareholders will be notified by email when the Annual Report has been released. Shareholders will also receive notification of other major BHP announcements by email. Shareholders requiring further information or wishing to make use of this service should visit our website, bhp.com. ADR holders wishing to receive a hard copy of the Annual Report 20192020 can do so by accessing citibank.ar.wilink.comorhttps://app.irdirect.net/company/0/hotline/or calling Citibank Shareholder Services during normal business hours. ADR holders may also contact the adviser that administers their investments. Holders of BHP Group Plc shares dematerialised into Strate should liaise directly with their Central Securities Depository Participant (CSDP) or broker. 321
Key dates for shareholders The following table sets out future dates in the next financial and calendar year of interest to our shareholders. If there are any changes to these dates, all relevant stock exchanges (see section 7.2) will be notified. | | | | | Date | | | | Event | 2522 September 20192020
| | | | Final dividend payment date | | | | 1715 October 20192020
| | | | BHP Group Plc Annual General Meeting in London Venue:
The QEII Centre
Broad Sanctuary
Westminster
London SW1P 3EE
United Kingdom
Time: 11.00 am9.30am (local time) Details of the business of the meeting are contained in the separate Notice of Meeting | | | | 7 November 201914 October 2020
| | | | BHP Group Limited Annual General Meeting in Sydney Venue:
International Convention Centre (ICC)
14 Darling Drive
Sydney
New South Wales
AustraliaVirtual Meeting
Time: 10.00am5.00pm (local time) Details of the business of the meeting are contained in the separate Notice of Meeting | | | | 1816 February 20202021
| | | | Interim results announced | | | | 65 March 20202021
| | | | Interim dividend record date | | | | 2423 March 20202021
| | | | Interim dividend payment date |
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Corporate Directorydirectory BHP Registered Offices BHP Group Limited Australia 171 Collins Street Melbourne VIC 3000 Telephone Australia 1300 55 47 57 Telephone International +61 3 9609 3333 Facsimile +61 3 9609 3015 BHP Group Plc United Kingdom Nova South, 160 Victoria Street London SW1E 5LB Telephone +44 20 7802 4000 Facsimile +44 20 7802 4111 Group General Counsel & Company Secretary Caroline Cox BHP Corporate Centres 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 Jennifer Lopez-Burkland at: 1500 Post Oak Boulevard, Suite 150 Houston TX 77056-302077056-3004 Telephone +1 713 961 8500 Facsimile +1 713 961 8400 Commercial Office Singapore 10 Marina Boulevard,#07-01 Marina Bay Financial Centre, Tower 2 Singapore 018983 Telephone +65 6421 6000 Facsimile +65 6421 6800 323
Share Registrars and Transfer Offices Australia BHP Group Limited Registrar Computershare Investor Services Pty Limited Yarra Falls, 452 Johnston Street Abbotsford VIC 3067 Postal address – GPO Box 2975 Melbourne VIC 3001 Telephone 1300 656 780 (within Australia) +61 3 9415 4020 (outside Australia) Facsimile +61 3 9473 2460 Email enquiries: investorcentre.com/bhp United Kingdom BHP Group Plc Registrar Computershare Investor Services PLC The Pavilions, Bridgwater Road Bristol BS13 8AE Postal address (for general enquiries) The Pavilions, Bridgwater Road Bristol BS99 6ZZ Telephone +44 344 472 7001 Facsimile +44 370 703 6101 Email enquiries: investorcentre.co.uk/contactus South Africa BHP Group Plc Branch Register and Transfer Secretary Computershare Investor Services (Pty) Limited Rosebank Towers 15 Biermann Avenue Rosebank 2196 2196, South Africa
Postal address – PO Box 61051Private Bag X9000 Marshalltown 2107Saxonwold,
2132 South Africa Telephone +27 11 373 0033 Facsimile +27 11 688 5217 Email enquiries: web.queries@computershare.co.za Holders of shares dematerialised into Strate should contact their CSDP or stockbroker. 324
New Zealand Computershare Investor Services Limited Level 2/159 Hurstmere Road Takapuna Auckland 0622 Postal address – Private Bag 92119 Auckland 1142 Telephone +64 9 488 8777 Facsimile +64 9 488 8787 United States Computershare Trust Company, N.A. 250150 Royall Street
Canton MA 02021 Postal address – PO Box 43078 Providence RI 02940-3078 Telephone +1 888 404 6340 (toll-free within US) Facsimile +1 312 601 4331 ADR Depositary, Transfer Agent and Registrar Citibank Shareholder Services PO Box 43077 Providence RI 02940-3077 Telephone +1 781 575 4555 (outside of US) +1 877 248 4237(+1-877-CITIADR) (toll-free within US) Facsimile +1 201 324 3284 Email enquiries: citibank@shareholders-online.com Website:citi.com/dr 325
8 Exhibits Exhibits marked “*” have been filed as exhibits to this annual report on Form20-F. Remaining exhibits have been incorporated by reference as indicated. Exhibit 1 Constitution Exhibit 2 Securities Exhibit 4 Material Contracts | 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)(P) |
| 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)(P) |
| 4.4 | Deed Poll Guarantee, dated 29 June 2001, of BHP Limited (2)(P) |
| 4.5 | Deed Poll Guarantee, dated 29 June 2001, of Billiton Plc (2)(P) |
| 4.8 | BHP Billiton Ltd Long Term Incentive Plan Rules, dated November 2010(2)(P) |
| 4.10 | BHP Billiton Plc Long Term Incentive Plan Rules, dated November 2010 (2)(P) |
Exhibit 8 List of Subsidiaries Exhibit 12 Certifications (section 302) Exhibit 13 Certifications (section 906) 326
Exhibit 15 Additional ExhibitsConsent of Independent Registered Public Accounting Firm Footnotes | (1) | Previously filed as an exhibit to BHP’s annual report on Form20-F for the year ended 30 June 2016 on 21 September 2016. |
| (2) | Previously filed on paper form as an exhibit to BHP’s annual report on Form20-F for the year ended 30 June 2001 on 19 November 2001. |
| (3) | Previously filed as an exhibit to BHP’s annual report on Form20-F for the year ended 30 June 2013 on 25 September 2013. |
(4) | Previously filed as an exhibit to BHP’s annual report on Form20-F for the year ended 30 June 2008 on 15 September 2008.
|
| (P) | Previously filed on paper form. |
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SIGNATURE The registrants hereby certify that they meet all of the requirements for filing on Form20-F and that they have duly caused and authorised the undersigned to sign this annual report on their behalf. BHP Group Limited BHP Group Plc /s/ Peter Beaven Peter Beaven Chief Financial Officer Date: 1722 September 20192020
Section 5 – Financial Statements
About these Financial Statements Reporting entity In 2001, BHP BillitonGroup Limited, (previously known as BHP Limited), an incorporated Australian-listed company, and BHP BillitonGroup Plc, (previously known as Billiton Plc), a UK listedan incorporated UK-listed company, entered intoform a Dual Listed Company (DLC) merger. In November 2018, BHP Billiton Limited and BHP Billiton Plc changed their names to BHP Group Limited and BHP Group Plc, respectively.. These entities and their subsidiaries operate together as a singlefor-profit economic entity (referred to as ‘BHP’ or ‘the Group’) with a common Board of Directors, unified management structure and joint objectives. In effect, the DLC structure provides the same voting rights and dividend entitlements from BHP Group Limited and BHP Group Plc irrespective of whether investors hold shares in BHP Group Limited or BHP Group Plc.
Group and related party information is presented in note 3132 ‘Related party transactions’ in section 5.1. This details transactions between the Group’s subsidiaries, associates, joint arrangements and other related parties. The nature of the operations and principal activities of the Group are described in the segment information (refer to note 1 ‘Segment reporting’ in section 5.1). Presentation of the Consolidated Financial Statements BHP Group Limited and BHP Group Plc Directors have included information in this report they deem to be material and relevant to the understanding of the Consolidated Financial Statements (the Financial Statements). Disclosure may be considered material and relevant if the dollar amount is significant due to its size or nature, or the information is important to understand the: Group’s current year results; impact of significant changes in the Group’s business; or aspects of the Group’s operations that are important to future performance. These Financial Statements were approved by the Board of Directors on 53 September 2019.2020. The Directors have the authority to amend the Financial Statements after issuance. F-1
5.1 Consolidated Financial Statements 5.1.1 Consolidated Income Statement for the year ended 30 June 20192020 | | | | Notes | | 2019 | | 2018 | | 2017 | | | Notes | | | 2020 | | 2019 | | 2018 | | | | | | | US$M | | US$M Restated | | US$M Restated | | | | | | US$M | | US$M | | US$M | | Continuing operations | | | | | | | | | | | | | | | | | Revenue | | 2 | | | | 44,288 | | | 43,129 | | | 35,740 | | | | 2 | | | | 42,931 | | | 44,288 | | | 43,129 | | Other income | | 5 | | | | 393 | | | 247 | | | 662 | | | | 5 | | | | 777 | | | 393 | | | 247 | | Expenses excluding net finance costs | | 5 | | | | (28,022 | ) | | (27,527 | ) | | (24,120 | ) | | | 5 | | | | (28,775 | ) | | (28,022 | ) | | (27,527 | ) | (Loss)/profit from equity accounted investments, related impairments and expenses | | 29 | | | | (546 | ) | | 147 | | | 272 | | | | 30 | | | | (512 | ) | | (546 | ) | | 147 | | | | | | | | | | | | | | | | | | | | | | | | | Profit from operations | | | | | 16,113 | | | 15,996 | | | 12,554 | | | | | | 14,421 | | | 16,113 | | | 15,996 | | | | | | | | | | | | | | | | | | | | | | | | | Financial expenses | | | | | (1,510 | ) | | (1,567 | ) | | (1,560 | ) | | | | | (1,262 | ) | | (1,510 | ) | | (1,567 | ) | Financial income | | | | | 446 | | | 322 | | | 143 | | | | | | 351 | | | 446 | | | 322 | | | | | | | | | | | | | | | | | | | | | | | | | Net finance costs | | 20 | | | | (1,064 | ) | | (1,245 | ) | | (1,417 | ) | | | 21 | | | | (911 | ) | | (1,064 | ) | | (1,245 | ) | | | | | | | | | | | | | | | | | | | | | | | | Profit before taxation | | | | | 15,049 | | | 14,751 | | | 11,137 | | | | | | 13,510 | | | 15,049 | | | 14,751 | | | | | | | | | | | | | | | | | | | | | | | | | Income tax expense | | | | | (5,335 | ) | | (6,879 | ) | | (4,276 | ) | | | | | (4,708 | ) | | (5,335 | ) | | (6,879 | ) | Royalty-related taxation (net of income tax benefit) | | | | | (194 | ) | | (128 | ) | | (167 | ) | | | | | (66 | ) | | (194 | ) | | (128 | ) | | | | | | | | | | | | | | | | | | | | | | | | Total taxation expense | | 6 | | | | (5,529 | ) | | (7,007 | ) | | (4,443 | ) | | | 6 | | | | (4,774 | ) | | (5,529 | ) | | (7,007 | ) | | | | | | | | | | | | | | | | | | | | | | | | Profit after taxation from Continuing operations | | | | | 9,520 | | | 7,744 | | | 6,694 | | | | | | 8,736 | | | 9,520 | | | 7,744 | | | | | | | | | | | | | | | | | | | | | | | | | Discontinued operations | | | | | | | | | | | | | | | | | Loss after taxation from Discontinued operations | | 27 | | | | (335 | ) | | (2,921 | ) | | (472 | ) | | | 28 | | | | – | | | (335 | ) | | (2,921 | ) | | | | | | | | | | | | | | | | | | | | | | | | Profit after taxation from Continuing and Discontinued operations | | | | | 9,185 | | | 4,823 | | | 6,222 | | | | | | 8,736 | | | 9,185 | | | 4,823 | | | | | | | | | | | | | | | | | | | | | | | | | Attributable tonon-controlling interests | | | | | 879 | | | 1,118 | | | 332 | | | | | | 780 | | | 879 | | | 1,118 | | Attributable to BHP shareholders | | | | | 8,306 | | | 3,705 | | | 5,890 | | | | | | 7,956 | | | 8,306 | | | 3,705 | | | | | | | | | | | | | | | | | | | | | | | | | Basic earnings per ordinary share (cents) | | 7 | | | | 160.3 | | | 69.6 | | | 110.7 | | | | 7 | | | | 157.3 | | | 160.3 | | | 69.6 | | Diluted earnings per ordinary share (cents) | | 7 | | | | 159.9 | | | 69.4 | | | 110.4 | | | | 7 | | | | 157.0 | | | 159.9 | | | 69.4 | | | | | | | | | | | | | | | Basic earnings from Continuing operations per ordinary share (cents) | | 7 | | | | 166.9 | | | 125.0 | | | 119.8 | | | | 7 | | | | 157.3 | | | 166.9 | | | 125.0 | | Diluted earnings from Continuing operations per ordinary share (cents) | | 7 | | | | 166.5 | | | 124.6 | | | 119.5 | | | | 7 | | | | 157.0 | | | 166.5 | | | 124.6 | | | | | | | | | | | | | | | | | | | | | | | | |
The accompanying notes form part of these Financial Statements. F-2
5.1.2 Consolidated Statement of Comprehensive Income for the year ended 30 June 20192020 | | | | Notes | | | 2019 | | 2018 | | 2017 | | | Notes | | | 2020 | | 2019 | | 2018 | | | | | | | | US$M | | US$M | | US$M | | | | | | US$M | | US$M | | US$M | | Profit after taxation from Continuing and Discontinued operations | | | | | 9,185 | | | 4,823 | | | 6,222 | | | | | | 8,736 | | | 9,185 | | | 4,823 | | Other comprehensive income | | | | | | | | | | | | | | | | | Items that may be reclassified subsequently to the income statement: | | | | | | | | | | | | | | | | | Net valuation gains/(losses) on investments taken to equity | | | | | – | | | 11 | | | (1 | ) | | Net valuation gains on investments taken to equity | | | | | | – | | | | – | | | 11 | | Hedges: | | | | | | | | | | | | | | | | | (Losses)/gains taken to equity | | | | | (327 | ) | | 82 | | | 351 | | | | | | (315 | ) | | (327 | ) | | 82 | | Losses/(gains) transferred to the income statement | | | | | 299 | | | (215 | ) | | (432 | ) | | | | | 297 | | | 299 | | | (215 | ) | Exchange fluctuations on translation of foreign operations taken to equity | | | | | 1 | | | 2 | | | (1 | ) | | | | | 1 | | | 1 | | | 2 | | Exchange fluctuations on translation of foreign operations transferred to income statement | | | | | (6 | ) | | | – | | | | – | | | | | | – | | | (6 | ) | | | – | | Tax recognised within other comprehensive income | | | 6 | | | | 8 | | | 36 | | | 24 | | | | 6 | | | | 5 | | | 8 | | | 36 | | | | | | | | | | | | | | | | | | | | | | | | | Total items that may be reclassified subsequently to the income statement | | | | | (25 | ) | | (84 | ) | | (59 | ) | | | | | (12 | ) | | (25 | ) | | (84 | ) | | | | | | | | | | | | | | | | | | | | | | | | Items that will not be reclassified to the income statement: | | | | | | | | | | | | | | | | | Re-measurement (losses)/gains on pension and medical schemes | | | | | (20 | ) | | 1 | | | 36 | | | | | | (81 | ) | | (20 | ) | | 1 | | Equity investments held at fair value | | | | | 1 | | | | – | | | | – | | | | | | (2 | ) | | 1 | | | | – | | Tax recognised within other comprehensive income | | | 6 | | | | 19 | | | (14 | ) | | (26 | ) | | | 6 | | | | 26 | | | 19 | | | (14 | ) | | | | | | | | | | | | | | | | | | | | | | | | Total items that will not be reclassified to the income statement | | | | | – | | | (13 | ) | | 10 | | | | | | (57 | ) | | | – | | | (13 | ) | | | | | | | | | | | | | | | | | | | | | | | | Total other comprehensive loss | | | | | (25 | ) | | (97 | ) | | (49 | ) | | | | | (69 | ) | | (25 | ) | | (97 | ) | | | | | | | | | | | | | | | | | | | | | | | | Total comprehensive income | | | | | 9,160 | | | 4,726 | | | 6,173 | | | | | | 8,667 | | | 9,160 | | | 4,726 | | | | | | | | | | | | | | | | | | | | | | | | | Attributable tonon-controlling interests | | | | | 878 | | | 1,118 | | | 332 | | | | | | 769 | | | 878 | | | 1,118 | | Attributable to BHP shareholders | | | | | 8,282 | | | 3,608 | | | 5,841 | | | | | | 7,898 | | | 8,282 | | | 3,608 | | | | | | | | | | | | | | | | | | | | | | | | |
The accompanying notes form part of these Financial Statements. F-3
5.1.3 Consolidated Balance Sheet as at 30 June 20192020 | | | | Notes | | | 2019 | | 2018 | | | Notes | | | 2020 | | 2019 | | | | | | | | US$M | | US$M | | | | | | US$M | | US$M | | ASSETS | | | | | | | | | | | | | Current assets | | | | | | | | | | | | | Cash and cash equivalents | | | 19 | | | | 15,613 | | | 15,871 | | | | 19 | | | | 13,426 | | | 15,613 | | Trade and other receivables | | | 8 | | | | 3,462 | | | 3,096 | | | | 8 | | | | 3,364 | | | 3,462 | | Other financial assets | | | 21 | | | | 87 | | | 200 | | | | 22 | | | | 84 | | | 87 | | Inventories | | | 10 | | | | 3,840 | | | 3,764 | | | | 10 | | | | 4,101 | | | 3,840 | | Assets held for sale | | | | | – | | | 11,939 | | | Current tax assets | | | | | 124 | | | 106 | | | | | | 366 | | | 124 | | Other | | | | | 247 | | | 154 | | | | | | 130 | | | 247 | | | | | | | | | | | | | | | | | | | Total current assets | | | | | 23,373 | | | 35,130 | | | | | | 21,471 | | | 23,373 | | | | | | | | | | | | | | | | | | | Non-current assets | | | | | | | | | | | | | Trade and other receivables | | | 8 | | | | 313 | | | 180 | | | | 8 | | | | 267 | | | 313 | | Other financial assets | | | 21 | | | | 1,303 | | | 999 | | | | 22 | | | | 2,522 | | | 1,303 | | Inventories | | | 10 | | | | 768 | | | 1,141 | | | | 10 | | | | 1,221 | | | 768 | | Property, plant and equipment | | | 11 | | | | 68,041 | | | 67,182 | | | | 11 | | | | 72,362 | | | 68,041 | | Intangible assets | | | 12 | | | | 675 | | | 778 | | | | 12 | | | | 624 | | | 675 | | Investments accounted for using the equity method | | | 29 | | | | 2,569 | | | 2,473 | | | | 30 | | | | 2,585 | | | 2,569 | | Deferred tax assets | | | 13 | | | | 3,764 | | | 4,041 | | | | 13 | | | | 3,688 | | | 3,764 | | Other | | | | | 55 | | | 69 | | | | | | 43 | | | 55 | | | | | | | | | | | | | | | | | | | Totalnon-current assets | | | | | 77,488 | | | 76,863 | | | | | | 83,312 | | | 77,488 | | | | | | | | | | | | | | | | | | | Total assets | | | | | 100,861 | | | 111,993 | | | | | | 104,783 | | | 100,861 | | | | | | | | | | | | | | | | | | | LIABILITIES | | | | | | | | | | | | | Current liabilities | | | | | | | | | | | | | Trade and other payables | | | 9 | | | | 6,717 | | | 5,977 | | | | 9 | | | | 5,767 | | | 6,717 | | Interest bearing liabilities | | | 19 | | | | 1,661 | | | 2,736 | | | | 19 | | | | 5,012 | | | 1,661 | | Liabilities held for sale | | | | | – | | | 1,222 | | | Other financial liabilities | | | 21 | | | | 127 | | | 138 | | | | 22 | | | | 225 | | | 127 | | Current tax payable | | | | | 1,546 | | | 1,773 | | | | | | 913 | | | 1,546 | | Provisions | | | 4,14,18,24 | | | | 2,175 | | | 2,025 | | | | 4,14,18,25 | | | | 2,810 | | | 2,175 | | Deferred income | | | | | 113 | | | 118 | | | | | | 97 | | | 113 | | | | | | | | | | | | | | | | | | | Total current liabilities | | | | | 12,339 | | | 13,989 | | | | | | 14,824 | | | 12,339 | | | | | | | | | | | | | | | | | | | Non-current liabilities | | | | | | | | | | | | | Trade and other payables | | | 9 | | | | 5 | | | 3 | | | | 9 | | | | 1 | | | 5 | | Interest bearing liabilities | | | 19 | | | | 23,167 | | | 24,069 | | | | 19 | | | | 22,036 | | | 23,167 | | Other financial liabilities | | | 21 | | | | 896 | | | 1,093 | | | | 22 | | | | 1,414 | | | 896 | | Non-current tax payable | | | | | 187 | | | 137 | | | | | | 109 | | | 187 | | Deferred tax liabilities | | | 13 | | | | 3,234 | | | 3,472 | | | | 13 | | | | 2,758 | | | 3,234 | | Provisions | | | 4,14,18,24 | | | | 8,928 | | | 8,223 | | | | 4,14,18,25 | | | | 11,185 | | | 8,928 | | Deferred income | | | | | 281 | | | 337 | | | | | | 210 | | | 281 | | | | | | | | | | | | | | | | | | | Totalnon-current liabilities | | | | | 36,698 | | | 37,334 | | | | | | 37,713 | | | 36,698 | | | | | | | | | | | | | | | | | | | Total liabilities | | | | | 49,037 | | | 51,323 | | | | | | 52,537 | | | 49,037 | | | | | | | | | | | | | | | | | | | Net assets | | | | | 51,824 | | | 60,670 | | | | | | 52,246 | | | 51,824 | | | | | | | | | | | | | | | | | | | EQUITY | | | | | | | | | | | | | Share capital – BHP Group Limited | | | | | 1,111 | | | 1,186 | | | | | | 1,111 | | | 1,111 | | Share capital – BHP Group Plc | | | | | 1,057 | | | 1,057 | | | | | | 1,057 | | | 1,057 | | Treasury shares | | | | | (32 | ) | | (5 | ) | | | | | (5 | ) | | (32 | ) | Reserves | | | 16 | | | | 2,285 | | | 2,290 | | | | 16 | | | | 2,306 | | | 2,285 | | Retained earnings | | | | | 42,819 | | | 51,064 | | | | | | 43,467 | | | 42,819 | | | | | | | | | | | | | | | | | | | Total equity attributable to BHP shareholders | | | | | 47,240 | | | 55,592 | | | | | | 47,936 | | | 47,240 | | Non-controlling interests | | | 16 | | | | 4,584 | | | 5,078 | | | | 16 | | | | 4,310 | | | 4,584 | | | | | | | | | | | | | | | | | | | Total equity | | | | | 51,824 | | | 60,670 | | | | | | 52,246 | | | 51,824 | | | | | | | | | | | | | | | | | | |
The accompanying notes form part of these Financial Statements. The Financial Statements were approved by the Board of Directors on 53 September 20192020 and signed on its behalf by: | | | Ken MacKenzie | | Andrew MackenzieMike Henry | ChairmanChair
| | Chief Executive Officer |
F-4
5.1.4 Consolidated Cash Flow Statement for the year ended 30 June 20192020 | | | | Notes | | | 2019 | | 2018 | | 2017 | | | Notes | | | 2020 | | 2019 | | 2018 | | | | | | | | US$M | | US$M | | US$M | | | | | | US$M | | US$M | | US$M | | Operating activities | | | | | | | | | | | | | | | | | Profit before taxation | | | | | 15,049 | | | 14,751 | | | 11,137 | | | | | | 13,510 | | | 15,049 | | | 14,751 | | Adjustments for: | | | | | | | | | | | | | | | | | Depreciation and amortisation expense | | | | | 5,829 | | | 6,288 | | | 6,184 | | | | | | 6,112 | | | 5,829 | | | 6,288 | | Impairments of property, plant and equipment, financial assets and intangibles | | | | | 264 | | | 333 | | | 193 | | | | | | 494 | | | 264 | | | 333 | | Net finance costs | | | | | 1,064 | | | 1,245 | | | 1,417 | | | | | | 911 | | | 1,064 | | | 1,245 | | Loss/(profit) from equity accounted investments, related impairments and expenses | | | | | 546 | | | (147 | ) | | (272 | ) | | | | | 512 | | | 546 | | | (147 | ) | Other | | | | | 308 | | | 597 | | | 194 | | | | | | 720 | | | 308 | | | 597 | | Changes in assets and liabilities: | | | | | | | | | | | | | | | | | Trade and other receivables | | | | | (211 | ) | | (662 | ) | | 267 | | | | | | 291 | | | (211 | ) | | (662 | ) | Inventories | | | | | 298 | | | (182 | ) | | (687 | ) | | | | | (715 | ) | | 298 | | | (182 | ) | Trade and other payables | | | | | 406 | | | 719 | | | 512 | | | | | | (755 | ) | | 406 | | | 719 | | Provisions and other assets and liabilities | | | | | (125 | ) | | 7 | | | (333 | ) | | | | | 1,188 | | | (125 | ) | | 7 | | | | | | | | | | | | | | | | | | | | | | | | | Cash generated from operations | | | | | 23,428 | | | 22,949 | | | 18,612 | | | | | | 22,268 | | | 23,428 | | | 22,949 | | Dividends received | | | | | 516 | | | 709 | | | 636 | | | | | | 137 | | | 516 | | | 709 | | Interest received | | | | | 443 | | | 290 | | | 164 | | | | | | 385 | | | 443 | | | 290 | | Interest paid | | | | | (1,346 | ) | | (1,177 | ) | | (1,148 | ) | | | | | (1,225 | ) | | (1,346 | ) | | (1,177 | ) | Proceeds/(settlements) of cash management related instruments | | | | | 296 | | | (292 | ) | | (140 | ) | | | | | 85 | | | 296 | | | (292 | ) | Net income tax and royalty-related taxation refunded | | | | | 59 | | | 17 | | | 337 | | | | | | 48 | | | 59 | | | 17 | | Net income tax and royalty-related taxation paid | | | | | (5,999 | ) | | (4,935 | ) | | (2,585 | ) | | | | | (5,992 | ) | | (5,999 | ) | | (4,935 | ) | | | | | | | | | | | | | | | | | | | | | | | | Net operating cash flows from Continuing operations | | | | | 17,397 | | | 17,561 | | | 15,876 | | | | | | 15,706 | | | 17,397 | | | 17,561 | | | | | | | | | | | | | | | | | | | | | | | | | Net operating cash flows from Discontinued operations | | | 27 | | | | 474 | | | 900 | | | 928 | | | | 28 | | | | – | | | 474 | | | 900 | | | | | | | | | | | | | | | | | | | | | | | | | Net operating cash flows | | | | | 17,871 | | | 18,461 | | | 16,804 | | | | | | 15,706 | | | 17,871 | | | 18,461 | | | | | | | | | | | | | | | | | | | | | | | | | Investing activities | | | | | | | | | | | | | | | | | Purchases of property, plant and equipment | | | | | (6,250 | ) | | (4,979 | ) | | (3,697 | ) | | | | | (6,900 | ) | | (6,250 | ) | | (4,979 | ) | Exploration expenditure | | | | | (873 | ) | | (874 | ) | | (966 | ) | | | | | (740 | ) | | (873 | ) | | (874 | ) | Exploration expenditure expensed and included in operating cash flows | | | | | 516 | | | 641 | | | 610 | | | | | | 517 | | | 516 | | | 641 | | Net investment and funding of equity accounted investments | | | | | (630 | ) | | 204 | | | (234 | ) | | | | | (618 | ) | | (630 | ) | | 204 | | Proceeds from sale of assets | | | | | 145 | | | 89 | | | 529 | | | | | | 265 | | | 145 | | | 89 | | Proceeds from divestment of subsidiaries, operations and joint operations, net of their cash | | | | | 4 | | | | – | | | 187 | | | Other investing | | | | | (289 | ) | | (141 | ) | | (153 | ) | | | | | (140 | ) | | (285 | ) | | (141 | ) | | | | | | | | | | | | | | | | | | | | | | | | Net investing cash flows from Continuing operations | | | | | (7,377 | ) | | (5,060 | ) | | (3,724 | ) | | | | | (7,616 | ) | | (7,377 | ) | | (5,060 | ) | | | | | | | | | | | | | | | | | | | | | | | | Net investing cash flows from Discontinued operations | | | 27 | | | | (443 | ) | | (861 | ) | | (437 | ) | | | 28 | | | | – | | | (443 | ) | | (861 | ) | | | | | | | | | | | | | | | | | | | | | | | | Proceeds from divestment of Onshore US, net of its cash | | | 27 | | | | 10,427 | | | | – | | | | – | | | | 28 | | | | – | | | 10,427 | | | | – | | | | | | | | | | | | | | | | | | | | | | | | | Net investing cash flows | | | | | 2,607 | | | (5,921 | ) | | (4,161 | ) | | | | | (7,616 | ) | | 2,607 | | | (5,921 | ) | | | | | | | | | | | | | | | | | | | | | | | | Financing activities | | | | | | | | | | | | | | | | | Proceeds from interest bearing liabilities | | | | | 250 | | | 528 | | | 1,577 | | | | | | 514 | | | 250 | | | 528 | | (Settlements)/proceeds of debt related instruments | | | | | (160 | ) | | (218 | ) | | 36 | | | | | | (157 | ) | | (160 | ) | | (218 | ) | Repayment of interest bearing liabilities | | | | | (2,604 | ) | | (4,188 | ) | | (7,114 | ) | | | | | (2,047 | ) | | (2,604 | ) | | (4,188 | ) | Purchase of shares by Employee Share Ownership Plan (ESOP) Trusts | | | | | (188 | ) | | (171 | ) | | (108 | ) | | | | | (143 | ) | | (188 | ) | | (171 | ) | Sharebuy-back – BHP Group Limited | | | | | (5,220 | ) | | | – | | | | – | | | | | | – | | | (5,220 | ) | | | – | | Dividends paid | | | | | (11,395 | ) | | (5,220 | ) | | (2,921 | ) | | | | | (6,876 | ) | | (11,395 | ) | | (5,220 | ) | Dividends paid tonon-controlling interests | | | | | (1,198 | ) | | (1,582 | ) | | (575 | ) | | | | | (1,043 | ) | | (1,198 | ) | | (1,582 | ) | | | | | | | | | | | | | | | | | | | | | | | | Net financing cash flows from Continuing operations | | | | | (20,515 | ) | | (10,851 | ) | | (9,105 | ) | | | | | (9,752 | ) | | (20,515 | ) | | (10,851 | ) | | | | | | | | | | | | | | | | | | | | | | | | Net financing cash flows from Discontinued operations | | | 27 | | | | (13 | ) | | (40 | ) | | (28 | ) | | | 28 | | | | – | | | (13 | ) | | (40 | ) | | | | | | | | | | | | | | | | | | | | | | | | Net financing cash flows | | | | | (20,528 | ) | | (10,891 | ) | | (9,133 | ) | | | | | (9,752 | ) | | (20,528 | ) | | (10,891 | ) | | | | | | | | | | | | | | | | | | | | | | | | Net (decrease)/increase in cash and cash equivalents from Continuing operations | | | | | (10,495 | ) | | 1,650 | | | 3,047 | | | | | | (1,662 | ) | | (10,495 | ) | | 1,650 | | Net increase/(decrease) in cash and cash equivalents from Discontinued operations | | | | | 18 | | | (1 | ) | | 463 | | | | | | – | | | 18 | | | (1 | ) | Proceeds from divestment of Onshore US, net of its cash | | | | | 10,427 | | | | – | | | | – | | | | | | – | | | 10,427 | | | | – | | Cash and cash equivalents, net of overdrafts, at the beginning of the financial year | | | | | 15,813 | | | 14,108 | | | 10,276 | | | | | | 15,593 | | | 15,813 | | | 14,108 | | Foreign currency exchange rate changes on cash and cash equivalents | | | | | (170 | ) | | 56 | | | 322 | | | | | | (505 | ) | | (170 | ) | | 56 | | | | | | | | | | | | | | | | | | | | | | | | | Cash and cash equivalents, net of overdrafts, at the end of the financial year | | | 19 | | | | 15,593 | | | 15,813 | | | 14,108 | | | | 19 | | | | 13,426 | | | 15,593 | | | 15,813 | | | | | | | | | | | | | | | | | | | | | | | | |
The accompanying notes form part of these Financial Statements. F-5
5.1.5 Consolidated Statement of Changes in Equity for the year ended 30 June 20192020 | | | | Attributable to BHP shareholders | | | | | | | Attributable to BHP shareholders | | | | | | | | | Share capital | | Treasury
shares | | | Reserves | | Retained
earnings | | Total equity
attributable
to BHP
shareholders | | Non-
controlling
interests | | Total
equity | | | Share capital | | | Treasury
shares | | | Reserves | | Retained
earnings | | Total equity
attributable
to BHP
shareholders | | Non-
controlling
interests | | Total
equity | | US$M | | BHP
Group
Limited | | BHP
Group
Plc | | BHP
Group
Limited | | BHP
Group
Plc | | | BHP
Group
Limited | | BHP
Group
Plc | | | BHP
Group
Limited | | BHP
Group
Plc | | Balance as at 1 July 2019 | | | | 1,111 | | | 1,057 | | | | (32 | ) | | – | | | 2,285 | | | 42,819 | | | 47,240 | | | 4,584 | | | 51,824 | | Total comprehensive income | | | | – | | | – | | | | – | | | – | | | (12 | ) | | 7,910 | | | 7,898 | | | 769 | | | 8,667 | | Transactions with owners: | | | | | | | | | | | | | | | | | | | | Purchase of shares by ESOP Trusts | | | | – | | | – | | | | (139 | ) | | (4 | ) | | – | | | – | | | (143 | ) | | – | | | (143 | ) | Employee share awards exercised net of employee contributions net of tax | | | | – | | | – | | | | 166 | | | 4 | | | (132 | ) | | (38 | ) | | – | | | – | | | – | | Vested employee share awards that have lapsed, been cancelled or forfeited | | | | – | | | – | | | | – | | | – | | | (10 | ) | | 10 | | | – | | | – | | | – | | Accrued employee entitlement for unexercised awards net of tax | | | | – | | | – | | | | – | | | – | | | 175 | | | – | | | 175 | | | – | | | 175 | | Dividends | | | | – | | | – | | | | – | | | – | | | – | | | (7,234 | ) | | (7,234 | ) | | (1,043 | ) | | (8,277 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Balance as at 30 June 2020 | | | | 1,111 | | | 1,057 | | | | (5 | ) | | – | | | 2,306 | | | 43,467 | | | 47,936 | | | 4,310 | | | 52,246 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Balance as at 1 July 2018 | | | 1,186 | | | | 1,057 | | | | (5 | ) | | | – | | | | 2,290 | | | | 51,064 | | | | 55,592 | | | | 5,078 | | | | 60,670 | | | | 1,186 | | | 1,057 | | | | (5 | ) | | | – | | | 2,290 | | | 51,064 | | | 55,592 | | | 5,078 | | | 60,670 | | Impact of adopting IFRS 9 | | | – | | | | – | | | | – | | | | – | | | | – | | | | (7 | ) | | | (7 | ) | | | – | | | | (7 | ) | | | – | | | | – | | | | – | | | | – | | | | – | | | (7 | ) | | (7 | ) | | | – | | | (7 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Balance as at 1 July 2018 | | | 1,186 | | | | 1,057 | | | | (5 | ) | | | – | | | | 2,290 | | | | 51,057 | | | | 55,585 | | | | 5,078 | | | | 60,663 | | | | 1,186 | | | 1,057 | | | | (5 | ) | | | – | | | 2,290 | | | 51,057 | | | 55,585 | | | 5,078 | | | 60,663 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total comprehensive income | | | – | | | | – | | | | – | | | | – | | | | (24 | ) | | | 8,306 | | | | 8,282 | | | | 878 | | | | 9,160 | | | | – | | | | – | | | | – | | | | – | | | (24 | ) | | 8,306 | | | 8,282 | | | 878 | | | 9,160 | | Transactions with owners: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Purchase of shares by ESOP Trusts | | | – | | | | – | | | | (182 | ) | | | (6 | ) | | | – | | | | – | | | | (188 | ) | | | – | | | | (188 | ) | | | – | | | | – | | | | (182 | ) | | (6 | ) | | | – | | | | – | | | (188 | ) | | | – | | | (188 | ) | Employee share awards exercised net of employee contributions | | | – | | | | – | | | | 155 | | | | 6 | | | | (100 | ) | | | (61 | ) | | | – | | | | – | | | | – | | | Employee share awards forfeited | | | – | | | | – | | | | – | | | | – | | | | (18 | ) | | | 18 | | | | – | | | | – | | | | – | | | Employee share awards exercised net of employee contributions net of tax | | | | – | | | | – | | | | 155 | | | 6 | | | (100 | ) | | (61 | ) | | | – | | | | – | | | | – | | Vested employee share awards that have lapsed, been cancelled or forfeited | | | | – | | | | – | | | | – | | | | – | | | (18 | ) | | 18 | | | | – | | | | – | | | | – | | Accrued employee entitlement for unexercised awards | | | – | | | | – | | | | – | | | | – | | | | 138 | | | | – | | | | 138 | | | | – | | | | 138 | | | | – | | | | – | | | | – | | | | – | | | 138 | | | | – | | | 138 | | | | – | | | 138 | | Dividends | | | – | | | | – | | | | – | | | | – | | | | – | | | | (11,302 | ) | | | (11,302 | ) | | | (1,205 | ) | | | (12,507 | ) | | | – | | | | – | | | | – | | | | – | | | | – | | | (11,302 | ) | | (11,302 | ) | | (1,205 | ) | | (12,507 | ) | BHP Group Limited shares bought back and cancelled | | | (75 | ) | | | – | | | | – | | | | – | | | | – | | | | (5,199 | ) | | | (5,274 | ) | | | – | | | | (5,274 | ) | | | (75 | ) | | | – | | | | – | | | | – | | | | – | | | (5,199 | ) | | (5,274 | ) | | | – | | | (5,274 | ) | Divestment of subsidiaries, operations and joint operations | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | (168 | ) | | | (168 | ) | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | (168 | ) | | (168 | ) | Transfer to non-controlling interests | | | – | | | | – | | | | – | | | | – | | | | (1 | ) | | | – | | | | (1 | ) | | | 1 | | | | – | | | | – | | | | – | | | | – | | | | – | | | (1 | ) | | | – | | | (1 | ) | | 1 | | | | – | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Balance as at 30 June 2019 | | | 1,111 | | | | 1,057 | | | | (32 | ) | | | – | | | | 2,285 | | | | 42,819 | | | | 47,240 | | | | 4,584 | | | | 51,824 | | | | 1,111 | | | 1,057 | | | | (32 | ) | | | – | | | 2,285 | | | 42,819 | | | 47,240 | | | 4,584 | | | 51,824 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Balance as at 1 July 2017 | | 1,186 | | | 1,057 | | | (2 | ) | | (1 | ) | | 2,400 | | | 52,618 | | | 57,258 | | | 5,468 | | | 62,726 | | | | 1,186 | | | 1,057 | | | | (2 | ) | | (1 | ) | | 2,400 | | | 52,618 | | | 57,258 | | | 5,468 | | | 62,726 | | Total comprehensive income | | | – | | | | – | | | | – | | | | – | | | (87 | ) | | 3,695 | | | 3,608 | | | 1,118 | | | 4,726 | | | | – | | | | – | | | | – | | | | – | | | (87 | ) | | 3,695 | | | 3,608 | | | 1,118 | | | 4,726 | | Transactions with owners: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Purchase of shares by ESOP Trusts | | | – | | | | – | | | (159 | ) | | (12 | ) | | | – | | | | – | | | (171 | ) | | | – | | | (171 | ) | | | – | | | | – | | | | (159 | ) | | (12 | ) | | | – | | | | – | | | (171 | ) | | | – | | | (171 | ) | Employee share awards exercised net of employee contributions | | | – | | | | – | | | 156 | | | 13 | | | (139 | ) | | (30 | ) | | | – | | | | – | | | | – | | | Employee share awards forfeited | | | – | | | | – | | | | – | | | | – | | | (2 | ) | | 2 | | | | – | | | | – | | | | – | | | Accrued employee entitlement for unexercised awards | | | – | | | | – | | | | – | | | | – | | | 123 | | | | – | | | 123 | | | | – | | | 123 | | | Employee share awards exercised net of employee contributions net of tax | | | | – | | | | – | | | | 156 | | | 13 | | | (139 | ) | | (30 | ) | | | – | | | | – | | | | – | | Vested employee share awards that have lapsed, been cancelled or forfeited | | | | – | | | | – | | | | – | | | | – | | | (2 | ) | | 2 | | | | – | | | | – | | | | – | | Accrued employee entitlement for | | | | | | | | | | | | | | | | | | | | unexercised awards | | | | – | | | | – | | | | – | | | | – | | | 123 | | | | – | | | 123 | | | | – | | | 123 | | Distribution tonon-controlling interests | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | (14 | ) | | (14 | ) | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | (14 | ) | | (14 | ) | Dividends | | | – | | | | – | | | | – | | | | – | | | | – | | | (5,221 | ) | | (5,221 | ) | | (1,499 | ) | | (6,720 | ) | | | – | | | | – | | | | – | | | | – | | | | – | | | (5,221 | ) | | (5,221 | ) | | (1,499 | ) | | (6,720 | ) | Transfer tonon-controlling interests | | | – | | | | – | | | | – | | | | – | | | (5 | ) | | | – | | | (5 | ) | | 5 | | | | – | | | | – | | | | – | | | | – | | | | – | | | (5 | ) | | | – | | | (5 | ) | | 5 | | | | – | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Balance as at 30 June 2018 | | 1,186 | | | 1,057 | | | (5 | ) | | | – | | | 2,290 | | | 51,064 | | | 55,592 | | | 5,078 | | | 60,670 | | | | 1,186 | | | 1,057 | | | | (5 | ) | | | – | | | 2,290 | | | 51,064 | | | 55,592 | | | 5,078 | | | 60,670 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Balance as at 1 July 2016 | | 1,186 | | | 1,057 | | | (7 | ) | | (26 | ) | | 2,538 | | | 49,542 | | | 54,290 | | | 5,781 | | | 60,071 | | | Total comprehensive income | | | – | | | | – | | | | – | | | | – | | | (59 | ) | | 5,900 | | | 5,841 | | | 332 | | | 6,173 | | | Transactions with owners: | | | | | | | | | | | | | | | | | | | | Purchase of shares by ESOP Trusts | | | – | | | | – | | | (105 | ) | | (3 | ) | | | – | | | | – | | | (108 | ) | | | – | | | (108 | ) | | Employee share awards exercised net of employee contributions | | | – | | | | – | | | 110 | | | 28 | | | (167 | ) | | 29 | | | | – | | | | – | | | | – | | | Employee share awards forfeited | | | – | | | | – | | | | – | | | | – | | | (18 | ) | | 18 | | | | – | | | | – | | | | – | | | Accrued employee entitlement for unexercised awards | | | – | | | | – | | | | – | | | | – | | | 106 | | | | – | | | 106 | | | | – | | | 106 | | | Distribution tonon-controlling interests | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | (16 | ) | | (16 | ) | | Dividends | | | – | | | | – | | | | – | | | | – | | | | – | | | (2,871 | ) | | (2,871 | ) | | (601 | ) | | (3,472 | ) | | Divestment of subsidiaries, operations and joint operations | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | (28 | ) | | (28 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Balance as at 30 June 2017 | | 1,186 | | | 1,057 | | | (2 | ) | | (1 | ) | | 2,400 | | | 52,618 | | | 57,258 | | | 5,468 | | | 62,726 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
The accompanying notes form part of these Financial Statements. F-6
Basis of preparation The Group’s Financial Statements as at and for the year ended 30 June 2019:2020: isare a consolidated general purpose financial report;
hashave been prepared in accordance with the requirements of the:
| | ¡ | | Australian Corporations Act 2001; |
hashave been prepared in accordance with accounting standards and interpretations collectively referred to as ‘IFRS’ in this report, which encompass the:
| | ¡ | | International Financial Reporting Standards and interpretations as issued by the International Accounting Standards Board; |
| | ¡ | | Australian Accounting Standards, being Australian equivalents to International Financial Reporting Standards and interpretations as issued by the Australian Accounting Standards Board (AASB); |
| | ¡ | | International Financial Reporting Standards and interpretations adopted by the European Union (EU); |
isare prepared on a going concern basis;
measuresmeasure items on the basis of historical cost principles, except for the following items:
| | ¡ | | derivative financial instruments and certain other financial assets and liabilities, which are carried at fair value; |
| | ¡ | | non-current assets or disposal groups that are classified asheld-for-sale orheld-for-distribution, which are measured at the lower of carrying amount and fair value less costs to sell; |
includesinclude significant accounting policies in the notes to the Financial Statements that summarise the recognition and measurement basis used and are relevant to an understanding of the Financial Statements;
appliesapply a presentation currency of US dollars, consistent with the predominant functional currency of the Group’s operations. Amounts are rounded to the nearest million dollars, unless otherwise stated, in accordance with ASIC (Rounding in Financial/Directors’ Reports) Instrument 2016/191;
presentspresent reclassified comparative information where required for consistency with the current year’s presentation;
adoptsadopt all new and amended standards and interpretations under IFRS issued by the relevant bodies (listed above), that are mandatory for application in periods beginning on or after 1 July 2018. The2019;
early adopt amendments to IFRS 9/AASB 9 ‘Financial Instruments’ (IFRS 9) and IFRS 7/AASB 7 ‘Financial Instruments: Disclosures’ (IFRS 7) in relation to Interest Rate Benchmark Reform; apply accounting policies have been consistently applied in all prior years presented with the exception of the new standards and amendments adopted from 1 July 2019 and 1 July 2018. Refer to note 38 ‘New and amended accounting standards and interpretations’ for the impact on the Financial Statements; hashave not early adopted any other standards and interpretations that have been issued or amended but are not yet effective.
The accounting policies are consistently applied by all entities included in the Financial Statements. Principles of consolidation In preparing the Financial Statements the effects of all intragroup balances and transactions have been eliminated. F-7
A list of significant entities in the Group, including subsidiaries, joint arrangements and associates atyear-end is contained in note 2829 ‘Subsidiaries’, note 2930 ‘Investments accounted for using the equity method’ and note 3031 ‘Interests in joint operations’. Subsidiaries: The Financial Statements of the Group include the consolidation of BHP Group Limited, BHP Group Plc and their respective subsidiaries, being the entities controlled by the parent entities during the year. Control exists where the Group: is exposed to, or has rights to, variable returns from its involvement with the entity; has the ability to affect those returns through its power to direct the activities of the entity. The ability to approve the operating and capital budget of a subsidiary and the ability to appoint key management personnel are decisions that demonstrate that the Group has the existing rights to direct the relevant activities of a subsidiary. Where the Group’s interest is less than 100 per cent, the interest attributable to outside shareholders is reflected innon-controlling interests. The financial statementsFinancial Statements of subsidiaries are prepared for the same reporting period as the Group. The acquisition method of accounting is used to account for the Group’s business combinations. Joint arrangements: The Group undertakes a number of business activities through joint arrangements, which exist when two or more parties have joint control. Joint arrangements are classified as either joint operations or joint ventures, based on the contractual rights and obligations between the parties to the arrangement: | • | | Joint operations: A joint operation is an arrangement in which the Group shares joint control, primarily via contractual arrangements with other parties. In a joint operation, the Group has rights to the assets and obligations for the liabilities relating to the arrangement. This includes situations where the parties benefit from the joint activity through a share of the output, rather than by receiving a share of the results of trading. In relation to the Group’s interest in a joint operation, the Group recognises: its assets and liabilities, including its share of any assets and liabilities held or incurred jointly; revenue from the sale of its share of the output and its share of any revenue generated from the sale of the output by the joint operation; and its expenses including its share of expenses.expenses incurred jointly. All such amounts are measured in accordance with the terms of the arrangement, which is usually in proportion to the Group’s interest in the joint operation. |
| • | | Joint ventures: A joint venture is a joint arrangement in which the parties that share joint control have rights to the net assets of the arrangement. A separate vehicle, not the parties, will have the rights to the assets and obligations to the liabilities relating to the arrangement. More than an insignificant share of output from a joint venture is sold to third parties, which indicates the joint venture is not dependent on the parties to the arrangement for funding, nor do the parties have an obligation for the liabilities of the arrangement. Joint ventures are accounted for using the equity accounting method. |
Associates: The Group accounts for investments in associates using the equity accounting method. An entity is considered an associate where the Group is deemed to have significant influence but not control or joint control. Significant influence is presumed to exist where the Group: has over 20 per cent but less than 50 per cent of the voting rights of an entity, unless it can be clearly demonstrated that this is not the case; or holds less than 20 per cent of the voting rights of an entity; however, has the power to participate in the financial and operating policy decisions affecting the entity. The Group uses the term ‘equity accounted investments’ to refer to joint ventures and associates collectively. F-8
Foreign currencies Transactions related to the Group’s worldwide operations are conducted in a number of foreign currencies. The majority of the subsidiaries, joint arrangements and associates within each of the operations have assessed US dollars as the functional currency, however, some subsidiaries, joint arrangements and associates have functional currencies other than US dollars. Transactions and monetary items denominated in foreign currencies are translated into US dollars as follows: | | | Foreign currency item | | Applicable exchange rate | Transactions | | Date of underlying transaction | Monetary assets and liabilities | | Period-end rate |
Foreign exchange gains and losses resulting from translation are recognised in the income statement, except for qualifying cash flow hedges (which are deferred to equity) and foreign exchange gains or losses on foreign currency provisions for site closure and rehabilitation costs (which are capitalised in property, plant and equipment for operating sites). On consolidation, the assets, liabilities, income and expenses ofnon-US dollar denominated functional currency entities are translated into US dollars using the following applicable exchange rates: | | | Foreign currency amount | | Applicable exchange rate | Income and expenses | | Date of underlying transaction | Assets and liabilities | | Period-end rate | Equity | | Historical rate | Reserves | | Historical rate |
Foreign exchange differences resulting from translation are initially recognised in the foreign currency translation reserve and subsequently transferred to the income statement on disposal of a foreign operation. | Critical accounting policies, judgements and estimates | The Group has identified a number of critical accounting policies under which significant judgements, estimates and assumptions are made. All judgements, estimates and assumptions are based on most current facts and circumstances and are reassessed on an ongoing basis. Actual results may differ for these estimates under different assumptions and conditions. This may materially affect financial results and the carrying amount of assets and liabilities to be reported in the next and future periods. Significant judgements and key estimates and assumptions made in applying these critical accounting policies are embedded within the following notes:
| Significant judgements and key estimates and assumptions made in applying these critical accounting policies are embedded within the following notes: |
| | | | | Note | | | 4 | | Significant events – Samarco dam failure | 6 | | Taxation | 10 | | Inventories | 11 and 12 | | Exploration and evaluation | 11 | | Development expenditure | 11 | | Overburden removal costs | 11 | | Depreciation of property, plant and equipment | 11 and 12 | | Impairments ofnon-current assets – recoverable amount | 14 | | Closure and rehabilitation provisions |
F-9
Reserve estimates
Reserves are estimates of the amount of product that can be economically and legally extracted from the Group’s properties. In order to estimate reserves, estimates are required for a range of geological, technical and economic factors, including quantities, grades, production techniques, recovery rates, production costs, transport costs, commodity demand, commodity prices and exchange rates.
Estimating the quantity and/or grade of reserves requires the size, shape and depth of ore bodies or fields to be determined by analysing geological data such as drilling samples. This process may require complex and difficult geological judgements to interpret the data.
Additional information on the Group’s mineral and oil and gas reserves can be viewed within section 6.3.
Section 6.3 is unaudited and does not form part of these Financial Statements.
Reserve impact on financial reporting
Estimates of reserves may change fromperiod-to-period as the economic assumptions used to estimate reserves change and additional geological data is generated during the course of operations. Changes in reserves may affect the Group’s financial results and financial position in a number of ways, including:
| • 20 | | Leases | 30 | | Impairments of investments accounted for using the equity method |
| Reserve estimates | | Reserves are estimates of the amount of product that can be demonstrated to be able to be economically and legally extracted from the Group’s properties. In order to estimate reserves, assumptions are required about a range of technical and economic factors, including quantities, qualities, production techniques, recovery efficiency, production and transport costs, commodity supply and demand, commodity prices and exchange rates. | | Estimating the quantity and/or quality of reserves requires the size, shape and depth of ore bodies or oil and gas reservoirs to be determined by analysing geological data, such as drilling samples and geophysical survey interpretations. Economic assumptions used to estimate reserves change from period to period as additional technical and operational data is generated. This process may require complex and difficult geological judgements to interpret the data. | | Additional information on the Group’s mineral and oil and gas reserves can be viewed within section 6.4. | | Section 6.4 is unaudited and does not form part of these Financial Statements. | | Reserve impact on financial reporting | | Estimates of reserves may change from period-to-period as the economic assumptions used to estimate reserves change and additional geological data is generated during the course of operations. Changes in reserves may affect the Group’s financial results and financial position in a number of ways, including: | | • asset carrying values may be affected due to changes in estimated future production levels; | |
| • | | depreciation, depletion and amortisation charged in the income statement may change where such charges are determined on the units of production basis, or where the useful economic lives of assets change; | |
| • | | overburden removal costs recorded on the balance sheet or charged to the income statement may change due to changes in stripping ratios or the units of production basis of depreciation; | |
| • | | decommissioning, site restoration closure and environmentalrehabilitation provisions may change where changes in estimated reserves affect expectations about the timing or cost of these activities;
| |
| • | | the carrying amount of deferred tax assets may change due to changes in estimates of the likely recovery of the tax benefits. | |
Impact of COVID-19 pandemic F-10The Group continues to actively monitor the impact of the COVID-19 pandemic, including the impact on economic activity and financial reporting. During FY2020, the Group experienced lower volumes at certain operated assets, temporary shutdowns at non-operated equity accounted investments (Antamina and Cerrejón) and incurred incremental directly attributable costs including those associated with the increased provision of health and hygiene services and the impacts of maintaining social distancing requirements. These incremental costs have been classified as an exceptional item, as outlined in note 3 ‘Exceptional items’.
As the pandemic continues to progress and evolve, it is difficult to predict the full extent and duration of resulting operational and economic impacts for the Group, which are expected to impact a number of reporting periods. This uncertainty impacts judgements made by the Group, including those relating to assessing collectability of receivables and determining the recoverable values of the Group’s non-current assets as outlined in notes 8 ‘Trade and other receivables’ and 11 ‘Property, plant and equipment’, respectively. The ongoing uncertainty has also been considered in the Group’s assessment of the appropriateness of adopting the going concern basis of preparation of the Consolidated Financial Statements. The Group’s financial forecasts, including downside commodity price and production scenarios that include the potential impact of COVID-19, demonstrate that the Group believes that it has sufficient financial resources to meet its obligations as they fall due throughout the going concern period. As such, the Consolidated Financial Statements continue to be prepared on the going concern basis.
5.1.6 Notes to the Financial Statements Performance 1 Segment reporting Reportable segments The Group operated four reportable segments during FY2019,FY2020, which are aligned with the commodities that are extracted and marketed and reflect the structure used by the Group’s management to assess the performance of the Group. | | | Reportable segment | | Principal activities | | | Petroleum | | Exploration, development and production of oil and gas | | | Copper | | Mining of copper, silver, zinc, molybdenum, uranium and gold | | | Iron Ore | | Mining of iron ore | | | Coal | | Mining of metallurgical coal and energy coal |
Unless otherwise noted, the segment reporting information for the years ended 30 June 2019 and 30 June 2018 excludes Discontinued operations, being the Petroleum Onshore US operations comprising the Eagle Ford, Haynesville, Permian and Fayetteville oil and gas assets. Group and unallocated items includes functions, and other unallocated operations including Potash, Nickel West and legacy assets (previously disclosed as closed mines in the Petroleum reportable segment), and consolidation adjustments. Comparative information for the years ended 30 June 2019 and 30 June 2018 have been restated to reflect the inclusion of legacy assets in Group and unallocated items. Revenue not attributable to reportable segments comprises the sale of freight and fuel to third parties, as well as revenues from unallocated operations. Exploration and technology activities are recognised within relevant segments. | | | | | | | | | | | | | | | | | | | | | | | | | Year ended 30 June 2019 US$M | | Petroleum | | | Copper | | | Iron Ore | | | Coal | | | Group and
unallocated
items/
eliminations | | | Group
total | | Revenue | | | 5,853 | | | | 10,838 | | | | 17,251 | | | | 9,121 | | | | 1,225 | | | | 44,288 | | Inter-segment revenue | | | 77 | | | | – | | | | 4 | | | | – | | | | (81 | ) | | | – | | | | | | | | | | | | | | | | | | | | | | | | | | | Total revenue | | | 5,930 | | | | 10,838 | | | | 17,255 | | | | 9,121 | | | | 1,144 | | | | 44,288 | | | | | | | | | | | | | | | | | | | | | | | | | | | Underlying EBITDA | | | 3,801 | | | | 4,550 | | | | 11,129 | | | | 4,067 | | | | (389 | ) | | | 23,158 | | | | | | | | | | | | | | | | | | | | | | | | | | | Depreciation and amortisation (1) | | | (1,560 | ) | | | (1,835 | ) | | | (1,653 | ) | | | (632 | ) | | | (149 | ) | | | (5,829 | ) | Impairment losses (2) | | | (21 | ) | | | (128 | ) | | | (79 | ) | | | (35 | ) | | | (1 | ) | | | (264 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | Underlying EBIT | | | 2,220 | | | | 2,587 | | | | 9,397 | | | | 3,400 | | | | (539 | ) | | | 17,065 | | | | | | | | | | | | | | | | | | | | | | | | | | | Exceptional items (3) | | | – | | | | – | | | | (971 | ) | | | – | | | | 19 | | | | (952 | ) | Net finance costs | | | | | | | | | | | | | | | | | | | | | | | (1,064 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | Profit before taxation | | | | | | | | | | | | | | | | | | | | | | | 15,049 | | | | | | | | | | | | | | | | | | | | | | | | | | | Capital expenditure (cash basis) | | | 645 | | | | 2,735 | | | | 1,611 | | | | 655 | | | | 604 | | | | 6,250 | | | | | | | | | | | | | | | | | | | | | | | | | | | (Loss)/profit from equity accounted investments, related impairments and expenses | | | (2 | ) | | | 303 | | | | (945 | ) | | | 103 | | | | (5 | ) | | | (546 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | Investments accounted for using the equity method | | | 239 | | | | 1,472 | | | | – | | | | 853 | | | | 5 | | | | 2,569 | | | | | | | | | | | | | | | | | | | | | | | | | | | Total assets | | | 12,465 | | | | 27,428 | | | | 22,592 | | | | 12,124 | | | | 26,252 | | | | 100,861 | | | | | | | | | | | | | | | | | | | | | | | | | | | Total liabilities | | | 5,237 | | | | 3,340 | | | | 5,106 | | | | 2,450 | | | | 32,904 | | | | 49,037 | | | | | | | | | | | | | | | | | | | | | | | | | | |
F-11
| | | | | | | | | | | | | | | | | | | | | | | | | Year ended 30 June 2020 US$M | | Petroleum | | | Copper | | | Iron Ore | | | Coal | | | Group and
unallocated
items/
eliminations | | | Group
total | | Revenue | | | 4,008 | | | | 10,666 | | | | 20,797 | | | | 6,241 | | | | 1,219 | | | | 42,931 | | Inter-segment revenue | | | 62 | | | | – | | | | – | | | | 1 | | | | (63 | ) | | | – | | | | | | | | | | | | | | | | | | | | | | | | | | | Total revenue | | | 4,070 | | | | 10,666 | | | | 20,797 | | | | 6,242 | | | | 1,156 | | | | 42,931 | | | | | | | | | | | | | | | | | | | | | | | | | | | Underlying EBITDA | | | 2,207 | | | | 4,347 | | | | 14,554 | | | | 1,632 | | | | (669 | ) | | | 22,071 | | | | | | | | | | | | | | | | | | | | | | | | | | | Depreciation and amortisation | | | (1,445 | ) | | | (1,740 | ) | | | (1,608 | ) | | | (807 | ) | | | (512 | ) | | | (6,112 | ) | Impairment losses (1) | | | (12 | ) | | | (17 | ) | | | (22 | ) | | | (14 | ) | | | (20 | ) | | | (85 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | Underlying EBIT | | | 750 | | | | 2,590 | | | | 12,924 | | | | 811 | | | | (1,201 | ) | | | 15,874 | | | | | | | | | | | | | | | | | | | | | | | | | | | Exceptional items (2) | | | (6 | ) | | | (1,228 | ) | | | (614 | ) | | | (18 | ) | | | 413 | | | | (1,453 | ) | Net finance costs | | | | | | | | | | | | | | | | | | | | | | | (911 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | Profit before taxation | | | | | | | | | | | | | | | | | | | | | | | 13,510 | | | | | | | | | | | | | | | | | | | | | | | | | | | Capital expenditure (cash basis) | | | 909 | | | | 2,434 | | | | 2,328 | | | | 603 | | | | 626 | | | | 6,900 | | | | | | | | | | | | | | | | | | | | | | | | | | | (Loss)/profit from equity accounted investments, related impairments and expenses | | | (4 | ) | | | 67 | | | | (508 | ) | | | (68 | ) | | | 1 | | | | (512 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | Investments accounted for using the equity method | | | 245 | | | | 1,558 | | | | – | | | | 776 | | | | 6 | | | | 2,585 | | | | | | | | | | | | | | | | | | | | | | | | | | | Total assets | | | 13,071 | | | | 27,942 | | | | 23,841 | | | | 12,110 | | | | 27,819 | | | | 104,783 | | | | | | | | | | | | | | | | | | | | | | | | | | | Total liabilities | | | 4,824 | | | | 3,535 | | | | 5,441 | | | | 2,601 | | | | 36,136 | | | | 52,537 | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year ended 30 June 2018 US$M | | Petroleum | | Copper | | Iron Ore | | Coal | | Group and
unallocated
items/
eliminations (4) | | Group
total | | | Year ended 30 June 2019 US$M Restated | | | Petroleum | | Copper | | Iron Ore | | Coal | | Group and
unallocated
items/
eliminations | | Group
total | | Revenue | | | 5,333 | | | 12,781 | | | 14,797 | | | 8,889 | | | 1,329 | | | 43,129 | | | | 5,853 | | | 10,838 | | | 17,251 | | | 9,121 | | | 1,225 | | | 44,288 | | Inter-segment revenue | | | 75 | | | | – | | | 13 | | | | – | | | (88 | ) | | | – | | | | 77 | | | | – | | | 4 | | | | – | | | (81 | ) | | | – | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total revenue | | | 5,408 | | | 12,781 | | | 14,810 | | | 8,889 | | | 1,241 | | | 43,129 | | | | 5,930 | | | 10,838 | | | 17,255 | | | 9,121 | | | 1,144 | | | 44,288 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Underlying EBITDA | | | 3,341 | | | 6,522 | | | 8,930 | | | 4,397 | | | (7 | ) | | 23,183 | | | | 4,061 | | | 4,550 | | | 11,129 | | | 4,067 | | | (649 | ) | | 23,158 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Depreciation and amortisation (1) | | | (1,719 | ) | | (1,920 | ) | | (1,721 | ) | | (686 | ) | | (242 | ) | | (6,288 | ) | | Impairment losses (2) | | | (76 | ) | | (213 | ) | | (14 | ) | | (29 | ) | | (1 | ) | | (333 | ) | | Depreciation and amortisation | | | | (1,560 | ) | | (1,835 | ) | | (1,653 | ) | | (632 | ) | | (149 | ) | | (5,829 | ) | Impairment losses (1) | | | | (21 | ) | | (128 | ) | | (79 | ) | | (35 | ) | | (1 | ) | | (264 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Underlying EBIT | | | 1,546 | | | 4,389 | | | 7,195 | | | 3,682 | | | (250 | ) | | 16,562 | | | | 2,480 | | | 2,587 | | | 9,397 | | | 3,400 | | | (799 | ) | | 17,065 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Exceptional items (3) | | | – | | | | – | | | (539 | ) | | | – | | | (27 | ) | | (566 | ) | | Exceptional items (2) | | | | – | | | | – | | | (971 | ) | | | – | | | 19 | | | (952 | ) | Net finance costs | | | | | | | | | | | | (1,245 | ) | | | | | | | | | | | | (1,064 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | Profit before taxation | | | | | | | | | | | | 14,751 | | | | | | | | | | | | | 15,049 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Capital expenditure (cash basis) | | | 656 | | | 2,428 | | | 1,074 | | | 409 | | | 412 | | | 4,979 | | | | 645 | | | 2,735 | | | 1,611 | | | 655 | | | 604 | | | 6,250 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | (Loss)/profit from equity accounted investments, related impairments and expenses | | | (4 | ) | | 467 | | | (509 | ) | | 192 | | | 1 | | | 147 | | | | (2 | ) | | 303 | | | (945 | ) | | 103 | | | (5 | ) | | (546 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Investments accounted for using the equity method | | | 249 | | | 1,335 | | | | – | | | 883 | | | 6 | | | 2,473 | | | | 239 | | | 1,472 | | | | – | | | 853 | | | 5 | | | 2,569 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total assets | | | 12,938 | | | 26,824 | | | 22,208 | | | 12,257 | | | 37,766 | | | 111,993 | | | | 12,434 | | | 27,428 | | | 22,592 | | | 12,124 | | | 26,283 | | | 100,861 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total liabilities | | | 4,886 | | | 3,145 | | | 3,888 | | | 2,404 | | | 37,000 | | | 51,323 | | | | 4,102 | | | 3,340 | | | 5,106 | | | 2,450 | | | 34,039 | | | 49,037 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Year ended 30 June 2017 US$M | | Petroleum | | Copper | | Iron Ore | | Coal | | Group and
unallocated
items/
eliminations (4) | | Group
total | | | Year ended 30 June 2018 US$M Restated | | | Petroleum | | Copper | | Iron Ore | | Coal | | Group and
unallocated
items/
eliminations (3) | | Group
total | | Revenue | | | 4,639 | | | 7,942 | | | 14,606 | | | 7,578 | | | 975 | | | 35,740 | | | | 5,333 | | | 12,781 | | | 14,797 | | | 8,889 | | | 1,329 | | | 43,129 | | Inter-segment revenue | | | 83 | | | | – | | | 18 | | | | – | | | (101 | ) | | | – | | | | 75 | | | | – | | | 13 | | | | – | | | (88 | ) | | | – | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total revenue | | | 4,722 | | | 7,942 | | | 14,624 | | | 7,578 | | | 874 | | | 35,740 | | | | 5,408 | | | 12,781 | | | 14,810 | | | 8,889 | | | 1,241 | | | 43,129 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Underlying EBITDA | | | 3,117 | | | 3,545 | | | 9,077 | | | 3,784 | | | (173 | ) | | 19,350 | | | | 3,393 | | | 6,522 | | | 8,930 | | | 4,397 | | | (59 | ) | | 23,183 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Depreciation and amortisation (1) | | | (1,648 | ) | | (1,525 | ) | | (1,828 | ) | | (719 | ) | | (252 | ) | | (5,972 | ) | | Impairment losses (2) | | | (102 | ) | | (14 | ) | | (52 | ) | | (15 | ) | | (5 | ) | | (188 | ) | | Depreciation and amortisation | | | | (1,719 | ) | | (1,920 | ) | | (1,721 | ) | | (686 | ) | | (242 | ) | | (6,288 | ) | Impairment losses (1) | | | | (76 | ) | | (213 | ) | | (14 | ) | | (29 | ) | | (1 | ) | | (333 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Underlying EBIT | | | 1,367 | | | 2,006 | | | 7,197 | | | 3,050 | | | (430 | ) | | 13,190 | | | | 1,598 | | | 4,389 | | | 7,195 | | | 3,682 | | | (302 | ) | | 16,562 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Exceptional items (3) | | | – | | | (546 | ) | | (203 | ) | | 164 | | | (51 | ) | | (636 | ) | | Exceptional items (2) | | | | – | | | | – | | | (539 | ) | | | – | | | (27 | ) | | (566 | ) | Net finance costs | | | | | | | | | | | | (1,417 | ) | | | | | | | | | | | | (1,245 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | Profit before taxation | | | | | | | | | | | | 11,137 | | | | | | | | | | | | | 14,751 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Capital expenditure (cash basis) | | | 917 | | | 1,484 | | | 805 | | | 246 | | | 245 | | | 3,697 | | | | 656 | | | 2,428 | | | 1,074 | | | 409 | | | 412 | | | 4,979 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | (Loss)/profit from equity accounted investments, related impairments and expenses | | | (3 | ) | | 295 | | | (172 | ) | | 152 | | | | – | | | 272 | | | | (4 | ) | | 467 | | | (509 | ) | | 192 | | | 1 | | | 147 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Investments accounted for using the equity method | | | 264 | | | 1,306 | | | | – | | | 873 | | | 5 | | | 2,448 | | | | 249 | | | 1,335 | | | | – | | | 883 | | | 6 | | | 2,473 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total assets | | | 13,726 | | | 26,743 | | | 22,781 | | | 11,996 | | | 41,760 | | | 117,006 | | | | 12,896 | | | 26,824 | | | 22,208 | | | 12,257 | | | 37,808 | | | 111,993 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total liabilities | | | 4,715 | | | 2,643 | | | 3,606 | | | 1,860 | | | 41,456 | | | 54,280 | | | | 3,977 | | | 3,145 | | | 3,888 | | | 2,404 | | | 37,909 | | | 51,323 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (1) | Depreciation and amortisation excludesImpairment losses exclude exceptional items of US$ nil (FY2018:409 million (FY2019: US$ nil; FY2017:FY2018: US$212 million) nil).
|
| (2) | Impairment losses excludes exceptional items of US$ nil (FY2018: US$ nil; FY2017: US$5 million).
|
(3) | Exceptional items reported in Group and unallocated include Samarco dam failure costs of US$(32) million (FY2019: US$(31) million (FY2018:million; FY2018: US$(27) million; FY2017: US$(51) million) and Samarco related other income of US$489 million (FY2019: US$50 million (FY2018: US$ nil; FY2017:million; FY2018: US$ nil). Refer to note 3 ‘Exceptional items’ for further information. |
(4)(3) | Total assets and total liabilities include balances for the yearsyear ended 30 June 2018 and 2017 relating to Onshore US assets. |
F-12
Geographical information | | | | Revenue by location of customer | | | Revenue by location of customer | | | | | 2019 | | | 2018 | | | 2017 | | | 2020 | | | 2019 | | | 2018 | | | | | US$M | | | US$M | | | US$M | | | US$M | | | US$M | | | US$M | | Australia | | | 2,568 | | | | 2,304 | | | | 2,037 | | | | 2,232 | | | | 2,568 | | | | 2,304 | | Europe | | | 1,875 | | | | 1,886 | | | | 1,641 | | | | 1,156 | | | | 1,875 | | | | 1,886 | | China | | | 24,274 | | | | 22,660 | | | | 18,644 | | | | 26,576 | | | | 24,274 | | | | 22,660 | | Japan | | | 4,193 | | | | 4,628 | | | | 3,036 | | | | 3,904 | | | | 4,193 | | | | 4,628 | | India | | | 2,479 | | | | 2,439 | | | | 1,891 | | | | 1,475 | | | | 2,479 | | | | 2,439 | | South Korea | | | 2,550 | | | | 2,588 | | | | 2,271 | | | | 2,666 | | | | 2,550 | | | | 2,588 | | Rest of Asia | | | 2,940 | | | | 2,620 | | | | 3,152 | | | | 2,583 | | | | 2,940 | | | | 2,620 | | North America | | | 2,442 | | | | 2,715 | | | | 2,233 | | | | 1,827 | | | | 2,442 | | | | 2,715 | | South America | | | 662 | | | | 1,054 | | | | 649 | | | | 315 | | | | 662 | | | | 1,054 | | Rest of world | | | 305 | | | | 235 | | | | 186 | | | | 197 | | | | 305 | | | | 235 | | | | | | | | | | | | | | | | | | | | | | | | 44,288 | | | | 43,129 | | | | 35,740 | | | | 42,931 | | | | 44,288 | | | | 43,129 | | | | | | | | | | | | | | | | | | | | | | | | | Non-current assets by location of assets | | | Non-current assets by location of assets | | | | | 2019 | | | 2018 | | | 2017 | | | 2020 | | | 2019 | | | 2018 | | | | | US$M | | | US$M | | | US$M | | | US$M | | | US$M | | | US$M | | Australia | | | 45,013 | | | | 45,157 | | | | 46,949 | | | | 47,286 | | | | 45,013 | | | | 45,157 | | North America (1) | | | 8,633 | | | | 8,246 | | | | 22,860 | | | North America | | | | 9,682 | | | | 8,633 | | | | 8,246 | | South America | | | 18,404 | | | | 18,267 | | | | 18,899 | | | | 18,179 | | | | 18,404 | | | | 18,267 | | Rest of world | | | 371 | | | | 154 | | | | 173 | | | | 1,955 | | | | 371 | | | | 154 | | Unallocated assets (2)(1) | | | 5,067 | | | | 5,039 | | | | 7,069 | | | | 6,210 | | | | 5,067 | | | | 5,039 | | | | | | | | | | | | | | | | | | | | | | | | 77,488 | | | | 76,863 | | | | 95,950 | | | | 83,312 | | | | 77,488 | | | | 76,863 | | | | | | | | | | | | | | | | | | | | |
| (1) | Balance for the year ended 30 June 2017 includesnon-current assets relating to Onshore US assets.
|
(2) | Unallocated assets comprise deferred tax assets and other financial assets. |
Underlying EBITDA Underlying EBITDA is earnings before net finance costs, depreciation, amortisation and impairments, taxation expense, Discontinued operations and any exceptional items. Underlying EBITDA includes BHP’s share of profit/(loss) from investments accounted for using the equity method including net finance costs, depreciation, amortisation and impairments and taxation expense. Exceptional items are excluded from Underlying EBITDA in order to enhance the comparability of such measures fromperiod-to-period and provide investors with further clarity in order to assess the underlying performance of the Group’s operations. Management monitors exceptional items separately. Refer to note 3 ‘Exceptional items’ for additional detail. Segment assets and liabilities Total segment assets and liabilities of reportable segments represents operating assets and operating liabilities, including the carrying amount of equity accounted investments and predominantly excludes cash balances, loans to associates, interest bearing liabilities and deferred tax balances. The carrying value of investments accounted for using the equity method represents the balance of the Group’s investment in equity accounted investments, with no adjustment for any cash balances, interest bearing liabilities or deferred tax balances of the equity accounted investment. F-13
2 Revenue Revenue by segment and asset | | | | | | | | | 2020 | | 2019 | | 2018 | | | | | 2019
US$M | | 2018
US$M | | 2017
US$M | | | US$M | | US$M | | US$M | | Australia Production Unit | | | 507 | | | 568 | | | 601 | | | | 361 | | | 507 | | | 568 | | Bass Strait | | | 1,237 | | | 1,285 | | | 1,096 | | | | 1,102 | | | 1,237 | | | 1,285 | | North West Shelf | | | 1,657 | | | 1,400 | | | 1,190 | | | | 1,076 | | | 1,657 | | | 1,400 | | Atlantis | | | 979 | | | 833 | | | 677 | | | | 561 | | | 979 | | | 833 | | Shenzi | | | 540 | | | 576 | | | 509 | | | | 277 | | | 540 | | | 576 | | Mad Dog | | | 319 | | | 229 | | | 202 | | | | 216 | | | 319 | | | 229 | | Trinidad/Tobago | | | 287 | | | 161 | | | 110 | | | | 191 | | | 287 | | | 161 | | Algeria | | | 258 | | | 234 | | | 212 | | | | 159 | | | 258 | | | 234 | | Third party products | | | 10 | | | 12 | | | 9 | | | | 39 | | | 10 | | | 12 | | Other | | | 136 | | | 110 | | | 116 | | | | 88 | | | 136 | | | 110 | | | | | | | | | | | | | | | | | | | | | Total Petroleum (1) | | | 5,930 | | | 5,408 | | | 4,722 | | | | 4,070 | | | 5,930 | | | 5,408 | | | | | | | | | | | | | | | | | | | | | Escondida | | | 6,876 | | | 8,346 | | | 4,242 | | | | 6,719 | | | 6,876 | | | 8,346 | | Pampa Norte | | | 1,502 | | | 1,831 | | | 1,401 | | | | 1,395 | | | 1,502 | | | 1,831 | | Olympic Dam | | | 1,351 | | | 1,255 | | | 1,287 | | | | 1,463 | | | 1,351 | | | 1,255 | | Third party products | | | 1,109 | | | 1,349 | | | 1,012 | | | | 1,089 | | | 1,109 | | | 1,349 | | | | | | | | | | | | | | | | | | | | | Total Copper (2) | | | 10,838 | | | 12,781 | | | 7,942 | | | | 10,666 | | | 10,838 | | | 12,781 | | | | | | | | | | | | | | | | | | | | | Western Australia Iron Ore | | | 17,066 | | | 14,596 | | | 14,395 | | | | 20,663 | | | 17,066 | | | 14,596 | | Third party products | | | 32 | | | 54 | | | 81 | | | | 15 | | | 32 | | | 54 | | Other | | | 157 | | | 160 | | | 148 | | | | 119 | | | 157 | | | 160 | | | | | | | | | | | | | | | | | | | | | Total Iron Ore | | | 17,255 | | | 14,810 | | | 14,624 | | | | 20,797 | | | 17,255 | | | 14,810 | | | | | | | | | | | | | | | | | | | | | Queensland Coal | | | 7,679 | | | 7,388 | | | 6,316 | | | | 5,357 | | | 7,679 | | | 7,388 | | New South Wales Energy Coal | | | 1,421 | | | 1,499 | | | 1,251 | | | | 885 | | | 1,421 | | | 1,499 | | Third party products | | | 19 | | | 2 | | | | – | | | | – | | | 19 | | | 2 | | Other | | | 2 | | | | – | | | 11 | | | | – | | | 2 | | | | – | | | | | | | | | | | | | | | | | | | | | Total Coal (3) | | | 9,121 | | | 8,889 | | | 7,578 | | | | 6,242 | | | 9,121 | | | 8,889 | | | | | | | | | | | | | | | | | | | | | Group and unallocated items (4) | | | 1,225 | | | 1,329 | | | 975 | | | | 1,219 | | | 1,225 | | | 1,329 | | Inter-segment adjustment | | | (81 | ) | | (88 | ) | | (101 | ) | | | (63 | ) | | (81 | ) | | (88 | ) | | | | | | | | | | | | | | | | | | | | Total revenue | | | 44,288 | | | 43,129 | | | 35,740 | | | | 42,931 | | | 44,288 | | | 43,129 | | | | | | | | | | | | | | | | | | | | |
| (1) | Total Petroleum revenue includes: crude oil US$2,033 million (2019: US$3,171 million (2018:million; 2018: US$2,933 million; 2017: US$2,528 million), natural gas US$980 million (2019: US$1,259 million (2018:million; 2018: US$1,124 million; 2017: US$1,029 million), LNG US$774 million (2019: US$1,179 million (2018:million; 2018: US$920 million; 2017: US$858 million), NGL US$198 million (2019: US$263 million (2018:million; 2018: US$294 million; 2017: US$265 million) and other US$85 million (2019: US$58 million (2018:million; 2018: US$137 million; 2017: US$42 million). |
| (2) | Total Copper revenue includes: copper US$10,044 million (2019: US$10,215 million (2018:million; 2018: US$12,059 million; 2017: US$7,323 million) and other US$622 million (2019: US$623 million (2018:million; 2018: US$722 million; 2017: US$619 million). Other consists of silver, zinc, molybdenum, uranium and gold. |
| (3) | Total Coal revenue includes: metallurgical coal US$5,311 million (2019: US$7,568 million (2018:million; 2018: US$7,331 million; 2017: US$6,266 million) and thermalenergy coal US$931 million (2019: US$1,553 million (2018:million; 2018: US$1,558 million; 2017: US$1,312 million). |
| (4) | Group and unallocated items revenue includes: Nickel West US$1,189 million (2019: US$1,193 million (2018:million; 2018: US$1,297 million; 2017: US$950 million) and other revenue US$3230 million (2018:(2019: US$32 million; 2017:2018: US$2532 million). |
F-14
Revenue consists of revenue from contracts with customers of US$43,087 million (2019: US$44,361 million (2018:million; 2018: US$42,748 million; 2017: US$35,036 million) and other revenue of US$(156) million (2019: US$(73) million (2018:million; 2018: US$381 million; 2017: US$704 million). Recognition and measurement The Group generates revenue from the production and sale of commodities. Revenue is recognised when or as control of the promised goods or services passes to the customer. In most instances, control passes when the goods are delivered to a destination specified by the customer, typically on board the customer’s appointed vessel. Revenue from the provision of services is recognised over time, but does not represent a significant proportion of total revenue and is aggregated with the respective asset and product revenue for disclosure purposes. The amount of revenue recognised reflects the consideration to which the Group expects to be entitled in exchange for the goods or services. Where the Group’s sales are provisionally priced, the final price depends on future index prices. The amount of revenue initially recognised is based on the relevant forward market price. Adjustments between the provisional and final price are accounted for under IFRS 9/AASB 9 ‘Financial Instruments’ (IFRS 9) and separately recorded as other revenue. The period between provisional pricing and final invoicing is typically between 60 and 120 days. Revenue from concentrate is net of treatment costs and refining charges. Revenue from the sale of significantby-products is included within revenue. Where aby-product is not significant, revenue is credited against costs. The Group applies the practical expedient to not adjust the expected consideration for the effects of the time value of money if the period between the delivery and when the customer pays for the promised good or service is one year or less. For commodity sales contracts, each individual metric unit is a separate performance obligation. Where the Group has contracts with unfulfilled performance obligations at period end, it is required to disclose the transaction price allocated to these performance obligations. The Group applies the practical expedient to not disclose this information for contracts with an expected duration of one year or less. The Group has a number of long-term contracts which are primarily priced on variable terms, based on quoted index prices near the time of delivery, and at times include fixed pricing components. Fixed pricing components, such as premiums and other charges, do not represent a significant proportion of the total price. Any estimate of the future transaction price would exclude estimated amounts of variable consideration. The amount of future consideration from fixed pricing components has not been disclosed, as the Group does not consider this relevant or useful information. F-15
3 Exceptional items Exceptional items are those gains or losses where their nature, including the expected frequency of the events giving rise to them, and amountimpact is considered material to the Financial Statements. Such items included within the Group’s profit from Continuing operations for the year are detailed below. Exceptional items attributable to Discontinued operations are detailed in note 2728 ‘Discontinued operations’:. | Year ended 30 June 2019 | | Gross | | Tax | | | Net | | | Year ended 30 June 2020 | | | Gross | | Tax | | Net | | | | | US$M | | US$M | | | US$M | | | US$M | | US$M | | US$M | | Exceptional items by category | | | | | | | | | | | | | Samarco dam failure | | | (1,060 | ) | | | – | | | | (1,060 | ) | | | (176 | ) | | | – | | | | (176 | ) | Global taxation matters | | | – | | | | 242 | | | | 242 | | | Cancellation of power contracts | | | | (778 | ) | | | 271 | | | | (507 | ) | COVID-19 related costs | | | | (183 | ) | | | 53 | | | | (130 | ) | Cerro Colorado impairment | | | | (409 | ) | | | (83 | ) | | | (492 | ) | | | | | | | | | | | | | | | | | | | | Total | | | (1,060 | ) | | | 242 | | | | (818 | ) | | | (1,546 | ) | | | 241 | | | | (1,305 | ) | | | | | | | | | | | | | | | | | | | | Attributable tonon-controlling interests | | | – | | | | – | | | | – | | | | (291 | ) | | | 90 | | | | (201 | ) | Attributable to BHP shareholders | | | (1,060 | ) | | | 242 | | | | (818 | ) | | | (1,255 | ) | | | 151 | | | | (1,104 | ) | | | | | | | | | | | | | | | | | | | |
Samarco Mineração S.A. (Samarco) dam failure The FY2020 exceptional loss of US$176 million related to the Samarco dam failure in November 2015 and comprises the following: | | | | | Year ended 30 June 2020 | | US$M | | Other income | | | 489 | | Expenses excluding net finance costs: | | | | | Costs incurred directly by BHP Brasil and other BHP entities in relation to the Samarco dam failure | | | (64 | ) | Loss from equity accounted investments, related impairments and expenses: | | | | | Samarco impairment expense (1) | | | (95 | ) | Samarco Germano dam decommissioning | | | 46 | | Samarco dam failure provision | | | (459 | ) | Net finance costs | | | (93 | ) | | | | | | Total (2) | | | (176 | ) | | | | | |
| (1) | Following a change to IAS 28 ‘Investments in Associates and Joint Ventures’ the loss from working capital funding provided during the period will be disclosed as an impairment included within the Samarco impairment expense line item and not as operating loss. Comparative periods have been restated to reflect the change. |
| (2) | Refer to note 4 ‘Significant events – Samarco dam failure’ for further information. |
Cancellation of power contracts Reflects an onerous contract provision in relation to the cancellation of power contracts at the Group’s Escondida and Spence operations, as part of the shift towards 100 per cent renewable energy supply contracts. COVID-19 related costs COVID-19 can be considered a single protracted globally pervasive event with financial impacts expected over a number of reporting periods. The exceptional item reflects the directly attributable COVID-19 pandemic related additional costs for the Group for FY2020, including costs associated with the increased provision of health and hygiene services and the impacts of maintaining social distancing requirements. Cerro Colorado impairment The Group recognised an impairment charge of US$492 million (after tax) in relation to Cerro Colorado. This reflects the decision taken by the Group to reduce Cerro Colorado’s throughput for the remaining period of its current environmental licence, which expires at the end of CY2023. The exceptional items relating to the year ended 30 June 2019 and the year ended 30 June 2018 are detailed below. 30 June 2019 | | | | | | | | | | | | | Year ended 30 June 2019 | | Gross | | | Tax | | | Net | | | | | US$M | | | US$M | | | US$M | | | | | | Exceptional items by category | | | | | | | | | | | | | Samarco dam failure | | | (1,060 | ) | | | – | | | | (1,060 | ) | Global taxation matters | | | – | | | | 242 | | | | 242 | | | | | | | | | | | | | | | Total | | | (1,060 | ) | | | 242 | | | | (818 | ) | | | | | | | | | | | | | | Attributable to non-controlling interests | | | – | | | | – | | | | – | | Attributable to BHP shareholders | | | (1,060 | ) | | | 242 | | | | (818 | ) | | | | | | | | | | | | | |
Samarco Mineração S.A. (Samarco) dam failure The FY2019 exceptional loss of US$1,060 million related to the Samarco dam failure in November 2015 and comprises the following: | | | | | Year ended 30 June 2019 | | US$M | | Other income | | | 50 | | Expenses excluding net finance costs: | | | | | Costs incurred directly by BHP Billiton Brasil Ltda and other BHP entities in relation to the Samarco dam failure | | | (57 | ) | Loss from equity accounted investments, related impairments and expenses: | | | | | Share of loss relating to the Samarco dam failureimpairment expense (1)
| | | (96 | ) | Samarco Germano dam decommissioning | | | (263 | ) | Samarco dam failure provision | | | (586 | ) | Net finance costs | | | (108 | ) | | | | | | Total (1)(2) | | | (1,060 | ) | | | | | |
| (1) | Following a change to IAS 28 ‘Investments in Associates and Joint Ventures’ the loss from working capital funding provided during the period will be disclosed as an impairment included within the Samarco impairment expense line item and not as operating loss. Comparative periods have been restated to reflect the change. |
| (2) | Refer to note 4 ‘Significant events – Samarco dam failure’ for further information. |
Global taxation matters Global taxation matters includes amounts released from provisions for tax matters and other claims resolved during the period. 30 June 2018 | | | | | | | | | | | Year ended 30 June 2018 | | Gross | | | Tax | | | Net | | | | US$M | | | US$M | | | US$M | | | | | | | | | | | | Exceptional items by category | | | | | | | | | | | Samarco dam failure | | | (650 | ) | | | – | | | (650) | US tax reform | | | – | | | | (2,320 | ) | | (2,320) | | | | | | | | | | | | Total | | | (650 | ) | | | (2,320 | ) | | (2,970) | | | | | | | | | | | | Attributable tonon-controlling interests | | | – | | | | – | | | – | Attributable to BHP shareholders | | | (650 | ) | | | (2,320 | ) | | (2,970) | | | | | | | | | | | |
F-16
| | | | | | | | | | | | | Year ended 30 June 2018 | | Gross | | | Tax | | | Net | | | | | US$M | | | US$M | | | US$M | | | | | | Exceptional items by category | | | | | | | | | | | | | Samarco dam failure | | | (650 | ) | | | – | | | | (650 | ) | US tax reform | | | – | | | | (2,320 | ) | | | (2,320 | ) | | | | | | | | | | | | | | Total | | | (650 | ) | | | (2,320 | ) | | | (2,970 | ) | | | | | | | | | | | | | | Attributable to non-controlling interests | | | – | | | | – | | | | – | | Attributable to BHP shareholders | | | (650 | ) | | | (2,320 | ) | | | (2,970 | ) | | | | | | | | | | | | | |
Samarco Mineração S.A. (Samarco) dam failure The FY2018 exceptional loss of US$650 million related to the Samarco dam failure in November 2015 and comprises the following: | | | | | Year ended 30 June 2018 | | US$M | | Expenses excluding net finance costs: | | | | | Costs incurred directly by BHP Billiton Brasil Ltda and other BHP entities in relation to the Samarco dam failure | | | (57 | ) | Loss from equity accounted investments, related impairments and expenses: | | | | | Share of loss relating to the Samarco dam failureimpairment expense (1)
| | | (80 | ) | Samarco dam failure provision | | | (429 | ) | Net finance costs | | | (84 | ) | | | | | | Total (1)(2) | | | (650 | ) | | | | | |
| (1) | Following a change to IAS 28 ‘Investments in Associates and Joint Ventures’ the loss from working capital funding provided during the period will be disclosed as an impairment included within the Samarco impairment expense line item and not as operating loss. Comparative periods have been restated to reflect the change. |
| (2) | Refer to note 4 ‘Significant events – Samarco dam failure’ for further information. |
US tax reform On 22 December 2017, the US President signed the Tax Cuts and Jobs Act (the TCJA) into law. The TCJA (effective 1 January 2018) includes a broad range of tax reforms affecting the Group, including, but not limited to, a reduction in the US corporate tax rate from 35 per cent to 21 per cent and changes to international tax provisions. Following enactment of the TCJA, the Group has recognised an exceptional income tax charge of US$2,320 million, primarily relating to the reduced US corporate income tax rate, which resulted inre-measurement of the Group’s deferred tax position and impairment of foreign tax credits due to reduced forecast utilisation, together with tax charges on the deemed repatriation of accumulated earnings ofnon-US subsidiaries. | | | | | Year ended 30 June 2018 | | US$M | | Re-measurement of deferred taxes as a result of reduced US corporate income tax rate | | | (1,390 | ) | Impairment of foreign tax credits | | | (834 | ) | Net impact of tax charges on deemed repatriation of accumulated earnings ofnon-US subsidiaries | | | (194 | ) | Recognition of Alternative Minimum Tax Credits | | | 95 | | Other impacts | | | 3 | | | | | | | Total(1) | | | (2,320 | ) | | | | | |
(1) | Refer to note 6 ‘Income tax expense’ for further information.
|
F-17
| | | | | | | | | | | | | Year ended 30 June 2017 | | Gross | | | Tax | | | Net | | | | | US$M | | | US$M | | | US$M | | | | | | | | | | | | | | | Exceptional items by category | | | | | | | | | | | | | Samarco dam failure | | | (381 | ) | | | – | | | | (381 | ) | Escondida industrial action | | | (546 | ) | | | 179 | | | | (367 | ) | Cancellation of the Caroona exploration licence | | | 164 | | | | (49 | ) | | | 115 | | Withholding tax on Chilean dividends | | | – | | | | (373 | ) | | | (373 | ) | | | | | | | | | | | | | | Total | | | (763 | ) | | | (243 | ) | | | (1,006 | ) | | | | | | | | | | | | | | Attributable tonon-controlling interests – Escondida industrial action | | | (232 | ) | | | 68 | | | | (164 | ) | Attributable to BHP shareholders | | | (531 | ) | | | (311 | ) | | | (842 | ) | | | | | | | | | | | | | |
Samarco Mineração S.A. (Samarco) dam failure
The FY2017 exceptional loss of US$381 million related to the Samarco dam failure in November 2015 and comprises the following:
| | | | | Year ended 30 June 2017
| | US$M | | Expenses excluding net finance costs:
| | | | | Costs incurred directly by BHP Billiton Brasil Ltda and other BHP entities in relation to the Samarco dam failure
| | | (82 | ) | Loss from equity accounted investments, related impairments and expenses:
| | | | | Share of loss relating to the Samarco dam failure
| | | (134 | ) | Samarco dam failure provision
| | | (38 | ) | Net finance costs | | | (127 | ) | | | | | | Total (1)
| | | (381 | ) | | | | | |
| (1) | Refer to note 4 ‘Significant events – Samarco dam failure’6 ‘Income tax expense’ for further information. |
Escondida industrial action
Our Escondida asset in Chile began negotiations with Union N°1 on a new collective agreement in December 2016, as the existing agreement was expiring on 31 January 2017. Negotiations, includinggovernment-led mediation, failed and the union commenced strike action on 9 February 2017 resulting in a total shutdown of operations, including work on the expansion of key projects. On 24 March 2017, following a44-day strike and a revised offer being presented to union members, Union N°1 exercised its rights under Article 369 of the Chilean Labour Code to extend the existing collective agreement for 18 months.
Industrial action through this period resulted in a reduction to FY2017 copper production of 214 kt and gave rise to idle capacity charges of US$546 million, including depreciation of US$212 million.
Cancellation of the Caroona exploration licence
Following the Group’s agreement with the New South Wales Government in August 2016 to cancel the exploration licence of the Caroona Coal project, a net gain of US$115 million (after tax expense) has been recognised.
Withholding tax on Chilean dividends
BHP Billiton Chile Inversiones Limitada paid aone-off US$2.3 billion dividend to its parent in April 2017 while a concessional tax rate was available, resulting in withholding tax of US$373 million.
F-18
4 Significant events – Samarco dam failure On 5 November 2015, the Samarco Mineração S.A. (Samarco) iron ore operation in Minas Gerais, Brazil, experienced a tailings dam failure that resulted in a release of mine tailings, flooding the communities of Bento Rodrigues, Gesteira and Paracatu and impacting other communities downstream (the Samarco dam failure). Refer to section 1.71.8 ‘Samarco’. Samarco is jointly owned by BHP Billiton Brasil Ltda (BHP Billiton Brasil) and Vale S.A. (Vale). BHP Billiton Brasil’s 50 per cent interest is accounted for as an equity accounted joint venture investment. BHP Billiton Brasil does not separately recognise its share of the underlying assets and liabilities of Samarco, but instead records the investment as one line on the balance sheet. Each period, BHP Billiton Brasil recognises its 50 per cent share of Samarco’s profit or loss and adjusts the carrying value of the investment in Samarco accordingly. Such adjustment continues until the investment carrying value is reduced to US$ nil, with any additional share of Samarco losses only recognised to the extent that BHP Billiton Brasil has an obligation to fund the losses, or when future investment funding is provided.losses. After applying equity accounting, any remaining carrying value of the investment is tested for impairment. Any charges relating to the Samarco dam failure incurred directly by BHP Billiton Brasil or other BHP entities are recognised 100 per cent in the Group’s results. The financial impacts of the Samarco dam failure on the Group’s income statement, balance sheet and cash flow statement for the year ended 30 June 20192020 are shown in the table below and have been treated as an exceptional item. | Financial impacts of Samarco dam failure | | 2019 | | 2018 | | 2017 | | | 2020 | | 2019 | | 2018 | | | | | US$M | | US$M | | US$M | | | US$M | | US$M | | US$M | | Income statement | | | | | | | | | | | | | Other income (1) | | | 50 | | | | – | | | | – | | | | 489 | | | 50 | | | – | | Expenses excluding net finance costs: | | | | | | | | | | | | | Costs incurred directly by BHP Billiton Brasil and other BHP entities in relation to the Samarco dam failure (2) | | | (57 | ) | | (57 | ) | | (82 | ) | | Costs incurred directly by BHP Brasil and other BHP entities in relation to the Samarco dam failure (2) | | | | (64 | ) | | (57 | ) | | (57 | ) | Loss from equity accounted investments, related impairments and expenses: | | | | | | | | | | | | | Share of loss relating to the Samarco dam failure (3) | | | (96 | ) | | (80 | ) | | (134 | ) | | Samarco impairment expense (3) | | | | (95 | ) | | (96 | ) | | (80 | ) | Samarco Germano dam decommissioning | | | (263 | ) | | | – | | | | – | | | | 46 | | | (263 | ) | | – | | Samarco dam failure provision (4)(5) | | | (586 | ) | | (429 | ) | | (38 | ) | | | (459 | ) | | (586 | ) | | (429 | ) | | | | | | | | | | | | | | | | | | | | Loss from operations | | | (952 | ) | | (566 | ) | | (254 | ) | | | (83 | ) | | (952 | ) | | (566 | ) | Net finance costs (5)(6) | | | (108 | ) | | (84 | ) | | (127 | ) | | | (93 | ) | | (108 | ) | | (84 | ) | | | | | | | | | | | | | | | | | | | | Loss before taxation | | | (1,060 | ) | | (650 | ) | | (381 | ) | | | (176 | ) | | (1,060 | ) | | (650 | ) | Income tax benefit | | | – | | | | – | | | | – | | | | – | | | – | | | – | | | | | | | | | | | | | | | | | | | | | Loss after taxation | | | (1,060 | ) | | (650 | ) | | (381 | ) | | | (176 | ) | | (1,060 | ) | | (650 | ) | | | | | | | | | | | | | | | | | | | | Balance sheet movement | | | | | | | | | | | | | Trade and other payables | | | 4 | | | 4 | | | (3 | ) | | | (5 | ) | | 4 | | | 4 | | Provisions | | | (629 | ) | | (228 | ) | | 143 | | | | (137 | ) | | (629 | ) | | (228 | ) | | | | | | | | | | | | | | | | | | | | Net (liabilities)/assets | | | (625 | ) | | (224 | ) | | 140 | | | Net liabilities | | | | (142 | ) | | (625 | ) | | (224 | ) | | | | | | | | | | | | | | | | | | | |
| | | | | | 2019 | | | | 2018 | | | | | 2017 | | | | | 2020 | | | | 2019 | | | | 2018 | | | | | | | US$M | | | | US$M | | | | | US$M | | | | | US$M | | | | US$M | | | | US$M | | Cash flow statement | | | | | | | | | | | | | | | | | | | | | | | | | Loss before taxation | | | | | (1,060 | ) | | | | (650 | ) | | | | | (381 | ) | | | | | (176 | ) | | | | (1,060 | ) | | | | (650 | ) | Adjustments for: | | | | | | | | | | | | | | | | | | | | | | | | | Share of loss relating to the Samarco dam failure (3) | | | 96 | | | | | 80 | | | | | 134 | | | | | Samarco impairment expense (3) | | | | 95 | | | | | 96 | | | | | 80 | | | | Samarco Germano dam decommissioning | | | 263 | | | | | | – | | | | | | – | | | | | | (46 | ) | | | | 263 | | | | | – | | | | Samarco dam failure provision (4)(5) | | | 586 | | | | | 429 | | | | | 38 | | | | | | 459 | | | | | 586 | | | | | 429 | | | | Net finance costs (5)(6) | | | 108 | | | | | 84 | | | | | 127 | | | | | | 93 | | | | | 108 | | | | | 84 | | | | Changes in assets and liabilities: | | | | | | | | | | | | | | | | | | | | | | | | | Trade and other payables | | | (4 | ) | | | | (4 | ) | | | | 3 | | | | | | 5 | | | | | (4 | ) | | | | (4 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Net operating cash flows | | | | | (11 | ) | | | | (61 | ) | | | | | (79 | ) | | | | | 430 | | | | | (11 | ) | | | | (61 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Net investment and funding of equity accounted investments(6)(7) | | | | | (424 | ) | | | | (365 | ) | | | | | (442 | ) | | | | | (464 | ) | | | | (424 | ) | | | | (365 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Net investing cash flows | | | | | (424 | ) | | | | (365 | ) | | | | | (442 | ) | | | | | (464 | ) | | | | (424 | ) | | | | (365 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Net decrease in cash and cash equivalents | | | | | (435 | ) | | | | (426 | ) | | | | | (521 | ) | | | | | (34 | ) | | | | (435 | ) | | | | (426 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (1) | Proceeds from insurance settlements. |
| (2) | Includes legal and advisor costs incurred. |
| (3) | LossFollowing a change to IAS 28 ‘Investments in Associates and Joint Ventures’ the loss from working capital funding provided during the period.period will be disclosed as an impairment included within the Samarco impairment expense line item and not as operating loss. Comparative periods have been restated to reflect the change.
|
| (4) | US$(579)37 million change in estimate and US$(7)(83) million exchange translation. |
| (5) | US$916 million change in estimate and US$(457) million exchange translation. |
| (6) | Amortisation of discounting of provision. |
(6)(7) | Includes US$(96)(95) million funding provided during the period, and US$(328)(365) million utilisation of the Samarco dam failure provision, and US$(4) million utilisation of which US$(313) million allowed for the continuation of reparatory and compensatory programs in relation to the Framework Agreement and a further US$(15) million for dam stabilisation and expert costs.Samarco Germano decommissioning provision. |
F-19
Equity accounted investment in Samarco BHP Billiton Brasil’s investment in Samarco remains at US$ nil. BHP Billiton Brasil provided US$9695 million funding under a working capital facility during the period and recognised additional share ofimpairment losses of US$9695 million. No dividends have been received by BHP Billiton Brasil from Samarco during the period.period and Samarco currently does not have profits available for distribution and is legally prevented from paying previously declared and unpaid dividends.distribution. Provisions related to the Samarco dam failure | | | | | | 2019 | | | | | 2018 | | | | | 2020 | | | | | 2019 | | | | | | | US$M | | | | | US$M | | | | | US$M | | | | | US$M | | At the beginning of the financial year | | | | | 1,285 | | | | | 1,057 | | | | | | 1,914 | | | | | 1,285 | | Movement in provisions | | | | | 629 | | | | | 228 | | | | | | 137 | | | | | 629 | | Comprising: | | | | | | | | | | | | | | | | | Utilised | | | (328 | ) | | | | | (285 | ) | | | | | (369 | ) | | | | | (328 | ) | | | Adjustments charged to the income statement: | | | | | | | | | | | | | | | | | Change in estimate | | | 579 | | | | | | 560 | | | | | Samarco Germano dam decommissioning | | | 263 | | | | | | – | | | | | Change in estimate - Samarco dam failure provision | | | | 916 | | | | | | 579 | | | | Change in estimate - Samarco Germano dam decommissioning | | | | 37 | | | | | | 263 | | | | Amortisation of discounting impacting net finance costs | | | 108 | | | | | | 84 | | | | | | 93 | | | | | | 108 | | | | Exchange translation | | | 7 | | | | | | (131 | ) | | | | | (540 | ) | | | | | 7 | | | | | | | | | | | | | | | | | | | | | | | | | At the end of the financial year | | | | | 1,914 | | | | | 1,285 | | | | | | 2,051 | | | | | 1,914 | | | | | | | | | | | | | | | | | | | | | | | Comprising: | | | | | | | | | | | | | | | | | Current | | | | | 440 | | | | | 313 | | | | | | 896 | | | | | 440 | | Non-current | | | | | 1,474 | | | | | 972 | | | | | | 1,155 | | | | | 1,474 | | | | | | | | | | | | | | | | | | | | | | | At the end of the financial year | | | | | 1,914 | | | | | 1,285 | | | | | | 2,051 | | | | | 1,914 | | | | | | | | | | | | | | | | | | | | | | |
Samarco dam failure provisions and contingencies As at 30 June 2019,2020, BHP Billiton Brasil has identified provisions and contingent liabilities arising as a consequence of the Samarco dam failure as follows: Provisions Provision for Samarco dam failure On 2 March 2016, BHP Billiton Brasil, Samarco and Vale, entered into a Framework Agreement with the Federal Government of Brazil, the states of Espírito Santo and Minas Gerais and certain other public authorities to establish a foundation (Fundação Renova) that will develop and execute environmental and socio-economic programs (Programs) to remediate and provide compensation for damage caused by the Samarco dam failure. Key Programs include those for financial assistance and compensation of impacted persons, including fisherfolk impacted by the dam failure, and those for remediation of impacted areas and resettlement of impacted communities. A committee (Interfederative Committee) comprising representatives from the Brazilian Federal and State Governments, local municipalities, environmental agencies, impacted communities and Public Defence Office oversees the activities of the Fundação Renova in order to monitor, guide and assess the progress of actions agreed in the Framework Agreement. F-20 In addition, the 12th Federal Court is supervising the work of the Fundação Renova and in July 2020 made decisions relating to financial compensation for impacted persons in two municipalities, which have been considered in the Samarco dam failure provision change in estimate. Further decisions are anticipated in FY2021.
The term of the Framework Agreement is 15 years, renewable for periods of one year successively until all obligations under the Framework Agreement have been performed. Under the Framework Agreement, Samarco is responsible for funding Fundação Renova’s annual calendar year budget for the duration of the Framework Agreement. The funding amounts for each calendar year will be dependent on the remediation and compensation projects to be undertaken in a particular year. Annual contributions may be reviewed under the Framework Agreement. To the extent that Samarco does not meet its funding obligations, each of BHP Billiton Brasil and Vale has funding obligations under the Framework Agreement in proportion to its 50 per cent shareholding in Samarco. Mining and processing operations remain suspended and Samarco is currently progressing plans to resume operations, however significant uncertainties surrounding the nature and timingextent of ongoing future operations remain. In light of these uncertainties and based on currently available information, BHP Billiton Brasil’s provision for its obligations under the Framework Agreement Programs is US$1.71.8 billion before tax and after discounting at 30 June 20192020 (30 June 2018:2019: US$1.31.7 billion).
Under a Governance Agreement ratified on 8 August 2018, BHP Billiton Brasil, Samarco and Vale willwere to establish a process to renegotiate the Programs over two years to progress settlement of the R$155 billion (approximately US$4028 billion) Federal Public Prosecution Office claim (described below). The renegotiation process remains outstanding as certain pre-requisites established in the Governance Agreement are yet to be implemented. However, the renegotiation may be extended for a further two years by mutual consent of the parties. BHP Billiton Brasil, Samarco and Vale maintain security comprising R$1.3 billion (approximately US$340240 million) in insurance bonds R$100 million (approximately US$25 million) in liquid assets and a charge of R$800 million (approximately US$210145 million) over Samarco’s assets. A further R$100 million (approximately US$20 million) in liquid assets previously maintained as security has been released for COVID-19 related response efforts in Brazil. The security is maintained for a period of 30 months from ratification of the Governance Agreement, after which BHP Billiton Brasil, Vale and Samarco will be required to provide security of an amount equal to the Fundação Renova’s annual budget up to a limit of R$2.2 billion (approximately US$575400 million). Samarco Germano dam decommissioning Due to legislative changes in Brazil in the current year, Samarco is currently progressing plans for the accelerated decommissioning of its upstream tailings dams (the Germano dam complex).
Given the significant uncertainties surrounding the nature and timingextent of Samarco’s future operations and related cash flows, BHP Billiton Brasil has recognisedrecognises a provision of US$227 million (30 June 2019: US$263 millionmillion) for a 50 per cent share of the remaining expected Germano decommissioning cost. Plans for theThe decommissioning areis at an early stage and as a result, further engineering work and required validation by Brazilian authorities could lead to material changes to estimates in future reporting periods. If Samarco successfully restarts and generates sufficient cash flows during the period in which the Germano decommissioning activity occurs, BHP Billiton Brasil may not be required to provide funding for the decommissioning, resulting in a reversal of the provision in future reporting periods.
F-21
| | | Key judgements and estimates Judgements
The outcomes of litigation are inherently difficult to predict and significant judgement has been applied in assessing the likely outcome of legal claims and determining which legal claims require recognition of a provision or disclosure of a contingent liability. The facts and circumstances relating to these cases are regularly evaluated in determining whether a provision for any specific claim is required.
Management have determined that a provision can only be recognised for obligations under the Framework Agreement and Samarco Germano dam decommissioning as at 30 June 2019. It is not yet possible to provide a range of possible outcomes or a reliable estimate of potential future exposures to BHP in connection to the contingent liabilities noted below, given their status.
Estimates
The provisions for Samarco dam failure and Samarco Germano dam decommissioning currently reflect the estimated remaining costs to complete Programs under the Framework Agreement and estimated costs to complete the Germano dam decommissioning and require the use of significant judgements, estimates and assumptions. Based on current estimates, it is expected that approximately 45 per cent of remaining costs for Programs under the Framework Agreement will be incurred by December 2020.
While the provisions have been measured based on information available as at 30 June 2019, likely changes in facts and circumstances in future reporting periods may lead to revisions to these estimates. However, it is currently not possible to determine what facts and circumstances may change, therefore the possible revisions in future reporting periods cannot be reliably measured.
The key estimates that may have a material impact upon the provisions in the next and future reporting periods include:
timing of repealing the fishing ban along the Rio Doce, which is subject to certain regulatory approvals and could impact upon the length of financial assistance and compensation payments;
number of people eligible for financial assistance and compensation, as duration of registration periods and changes to geographical boundaries or eligibility criteria could impact estimated future costs;
costs to complete resettlement of the Bento Rodrigues, Gesteira and Paracatu communities;
costs to complete the Germano dam decommissioning.
The provision may also be affected by factors including but not limited to:
potential changes in scope of work and funding amounts required under the Framework Agreement including the impact of the decisions of the Interfederative Committee along with further technical analysis and community participation required under the Governance Agreement;
the outcome of ongoing negotiations with State and Federal Prosecutors, including review of Fundação Renova’s Programs as provided in the Governance Agreement;
resolution of uncertainty in respect of operational restart;
updates to discount and foreign exchange rates;
resolution of existing and potential legal claims.
Given these factors, future actual expenditures may differ from the amounts currently provided and changes to key assumptions and estimates could result in a material impact to the provision in the next and future reporting periods.
F-22
| Judgements | The outcomes of litigation are inherently difficult to predict and significant judgement has been applied in assessing the likely outcome of legal claims and determining which legal claims require recognition of a provision or disclosure of a contingent liability. The facts and circumstances relating to these cases are regularly evaluated in determining whether a provision for any specific claim is required. | Management has determined that a provision can only be recognised for obligations under the Framework Agreement and Samarco Germano dam decommissioning as at 30 June 2020. It is not yet possible to provide a range of possible outcomes or a reliable estimate of potential future exposures to BHP in connection to the contingent liabilities noted below, given their status. | Estimates | | The provisions for Samarco dam failure and Samarco Germano dam decommissioning currently reflect the estimated remaining costs to complete Programs under the Framework Agreement and estimated costs to complete the Germano dam decommissioning and require the use of significant judgements, estimates and assumptions. Based on current estimates, it is expected that approximately 75 per cent of remaining costs for Programs under the Framework Agreement will be incurred by December 2021. | | While the provisions have been measured based on latest information available, likely changes in facts and circumstances in future reporting periods may lead to revisions to these estimates. However, it is currently not possible to determine what facts and circumstances may change, therefore the possible revisions in future reporting periods cannot be reliably measured. | | The key estimates that may have a material impact upon the provisions in the next and future reporting periods include: | | | • | | timing of repealing the fishing ban along the Rio Doce, which is subject to certain regulatory approvals and could impact upon the duration of financial assistance and compensation payments; | | | • | | number of people eligible for financial assistance and compensation, as duration of registration periods and changes to geographical boundaries or eligibility criteria could impact estimated future costs; | | | • | | costs to complete resettlement of the Bento Rodrigues, Gesteira and Paracatu communities. | | The provisions may also be affected by factors including but not limited to: | | | • | | resolution of existing and potential legal claims; | | | • | | potential changes in scope of work and funding amounts required under the Framework Agreement including the impact of the decisions of the Interfederative Committee along with further technical analysis, community participation required under the Governance Agreement and rulings made by the 12th Federal Court; | | | • | | the outcome of ongoing negotiations with State and Federal Prosecutors, including review of Fundação Renova’s Programs as provided in the Governance Agreement; | | | • | | actual costs incurred; | | | • | | resolution of uncertainty in respect of the nature and extent of Samarco’s future operations; | | | • | | costs to complete the Germano dam decommissioning; | | | • | | updates to discount and foreign exchange rates. | | Given these factors, future actual expenditures may differ from the amounts currently provided and changes to key assumptions and estimates could result in a material impact to the provision in the next and future reporting periods. |
Contingent liabilities The following matters are disclosed as contingent liabilities and given the status of proceedings it is not possible to provide a range of possible outcomes or a reliable estimate of potential future exposures for BHP, unless otherwise stated. Ultimately, all the legal matters disclosed as contingent liabilities could have a material adverse impact on BHP’s business, competitive position, cash flows, prospects, liquidity and shareholder returns. Federal Public Prosecution Office claim BHP Billiton Brasil is among the defendants named in a claim brought by the Federal Public Prosecution Office on 3 May 2016, seeking R$155 billion (approximately US$4028 billion) for reparation, compensation and moral damages in relation to the Samarco dam failure. The 12th Federal Court previously suspended the Federal Public Prosecution Office claim, including a R$7.7 billion (approximately US$21.4 billion) injunction request. SuspensionDespite suspension of the claim continuesbeing for a period of two years from the date of ratification of the Governance Agreement on 8 August 2018.2018, the claim has not been resumed and the parties may negotiate a further extension. United States class action complaint – Samarco bond holders On 14 November 2016, a putative class action complaint (Bondholder Complaint) was filed in the U.S. District Court for the Southern District of New York on behalf of purchasers of Samarco’s ten-year bond notes (Plaintiff) due 2022-2024 between 31 October 2012 and 30 November 2015. The Bondholder Complaint was initially filed against Samarco and the former chief executive officer of Samarco. The Bondholder Complaint was subsequently amended to include BHP Group Limited,Ltd, BHP Group Plc, BHP Billiton Brasil, Ltda, Vale S.A. and officers of Samarco, including four of Vale S.A. and BHP Billiton Brasil Ltda’sBrasil’s nominees to the Samarco Board. On 5 April 2017, the Plaintiffplaintiff discontinued its claims against the individual defendants. On 7 March 2018, the District Court grantedThe complaint, along with a joint motion from the remaining corporate defendants to dismiss the Bondholder Complaint. A second amended Bondholder Complaint was alsocomplaint, has previously been dismissed by the Court on 18 July 2019.Court. The Plaintiff hasplaintiff filed a motion which remains pending before the Court, for reconsideration, of that decision or leave to file a third amended complaint.complaint, which was denied by the Court on 30 October 2019. The plaintiff has appealed this decision and the appeal remains pending before the Court.
The amount of damages sought by the putative class is unspecified. Australian class action complaints Three separateBHP Group Ltd is named as a defendant in a shareholder class actions wereaction filed in the Federal Court of Australia on behalf of persons who acquired shares in BHP Group Ltd on the Australian Securities Exchange or shares in BHP Group Plc on the London Stock Exchange and Johannesburg Stock Exchange in periods prior to the Samarco dam failure.
Following an appeal to the Full Court of the Federal Court, two of the actions have been consolidated into one action and the third action is expected to be dismissed. The amount of damages sought in the consolidated action is unspecified.
United Kingdom group action complaint BHP Group Plc and BHP Group Ltd are named as defendants in group action claims for damages that have been filed in the courts of England. These claims have been filed on behalf of certain individuals, governments, businesses and communities in Brazil allegedly impacted by the Samarco dam failure. The amount of damages sought in these claims is unspecified. On 7 August 2019, the BHP parties filedThe court heard a preliminary application filed by BHP to strike out or stay this action on jurisdictional and other procedural grounds.
grounds in July 2020. The amount of damages sought in these claims is unspecified. F-23court has not yet issued its judgement on this application.
Criminal charges The Federal Prosecutors’ Office has filed criminal charges against BHP Billiton Brasil, Samarco and Vale and certain employees and former employees of BHP Billiton Brasil (Affected Individuals) in the Federal Court of Ponte Nova, Minas Gerais. On 3 March 2017, BHP Billiton Brasil filed its preliminary defences. The Federal Court granted Habeas Corpus petitions in favour of threeterminated the charges against eight of the Affected Individuals terminating the charges against those individuals.Individuals. The Federal Prosecutors’ Office has appealed twoseven of those decisions. BHP Billiton Brasil rejects outright the charges against the company and the Affected Individuals and will defend the charges and fully support each of the Affected Individuals in their defence of the charges. Other claims The civil public actions filed by State Prosecutors in Minas Gerais (claiming damages of approximately R$7.5 billion, US$21.4 billion), State Prosecutors in Espírito Santo (claiming damages of approximately R$2 billion, US$520365 million), and public defenders in Minas Gerais (claiming damages of approximately R$10 billion, US$2.61.8 billion), have been consolidated before the 12th Federal Court and suspended. The Governance Agreement provides for a process to review whether these civil public claims should be terminated or suspended. BHP Billiton Brasil is among the companies named as defendants in a number of legal proceedings initiated by individuals, non-governmental organisations, corporations and governmental entities in Brazilian Federal and State courts following the Samarco dam failure. The other defendants include Vale, Samarco and Fundação Renova. The lawsuits include claims for compensation, environmental rehabilitation and violations of Brazilian environmental and other laws, among other matters. The lawsuits seek various remedies including rehabilitation costs, compensation to injured individuals and families of the deceased, recovery of personal and property losses, moral damages and injunctive relief. In addition, government inquiries and investigations relating to the Samarco dam failure have been commenced by numerous agencies of the Brazilian government and are ongoing. Additional lawsuits and government investigations relating to the Samarco dam failure could be brought against BHP Billiton Brasil and possibly other BHP entities in Brazil or other jurisdictions. BHP insurance BHP has various third party liability insurances for claims related to the Samarco dam failure made directly against BHP Billiton Brasil or other BHP entities, their directors and officers, including class actions. External insurers have been notified of the Samarco dam failure, the third party claims and the class actions referred to above. In the year ended 30 June 2019,2020, BHP recognised income of US$50489 million relating to proceeds from insurance settlements. As at 30 June 2019,2020, an insurance receivable has not been recognised for any potential recoveries in respect of ongoing matters. Commitments Under the terms of the Samarco joint venture agreement, BHP Billiton Brasil does not have an existing obligation to fund Samarco. For the year ended 30 June In November 2019, BHP Billiton Brasil has providedapproved US$9644 million for BHP Brasil’s share of funding for work related to supportthe restart of Samarco’s operations andoperations. In December 2019, a further US$15 million for dam stabilisation and prosecutor experts costs, with undrawn amounts of US$17 million expiring as at 30 June 2019. In June 2019, BHP Billiton Brasil made available a new short-term facility of up to US$79212 million was made available to carry out remediation and stabilisation work and support Samarco’s operations. Fundscare and maintenance and operational restart. In the six months to 30 June 2020, US$68 million of the total amount approved has been provided to Samarco. Further funds will be released to Samarco only as required and subject to the achievement of key milestones with amounts undrawn expiring at 31 December 2019.2020. Any additional requests for funding or future investment provided would be subject to a future decision by BHP, accounted for at that time. F-24
| The following section includes disclosure required by IFRS of Samarco Mineração S.A.’s provisions, contingencies and other matters arising from the dam failure for matters in addition to the above-mentioned claims to which Samarco is a party. Samarco
Dam failure related provisions and contingencies
In addition to its obligations under the Framework Agreement as at 30 June 2019, Samarco has recognised provisions of US$0.2 billion (30 June 2018: US$0.2 billion), based on currently available information. The magnitude, scope and timing of these additional costs are subject to a high degree of uncertainty and Samarco has indicated that it anticipates that it will incur future costs beyond those provided. These uncertainties are likely to continue for a significant period and changes to key assumptions could result in a material change to the amount of the provision in future reporting periods. Any such unrecognised obligations are therefore contingent liabilities and, at present, it is not practicable to estimate their magnitude or possible timing of payment. Accordingly, it is also not possible to provide a range of possible outcomes or a reliable estimate of total potential future exposures at this time.
Samarco is also named as a defendant in a number of other legal proceedings initiated by individuals, non-governmental organisations, corporations and governmental entities in Brazilian Federal and State courts following the Samarco dam failure. The lawsuits include claims for compensation, environmental rehabilitation and violations of Brazilian environmental and other laws, among other matters. The lawsuits seek various remedies including rehabilitation costs, compensation to injured individuals and families of the deceased, recovery of personal and property losses, moral damages and injunctive relief. In addition, government inquiries and investigations relating to the Samarco dam failure have been commenced by numerous agencies of the Brazilian government and are ongoing. Given the status of proceedings it is not possible to provide a range of possible outcomes or a reliable estimate of total potential future exposures to Samarco.
Additional lawsuits and government investigations relating to the Samarco dam failure could be brought against Samarco.
Samarco insurance
Samarco has standalone insurance policies in place with Brazilian and global insurers. In the year ended 30 June 2019, Samarco recognised income relating to proceeds from certain of its insurance policies. Insurers’ loss adjusters or claims representatives continue to investigate and assist with the claims process for matters not yet settled. As at 30 June 2019, an insurance receivable has not been recognised by Samarco in respect of ongoing matters.
Samarco commitments
At 30 June 2019, Samarco has commitments of US$0.5 billion (30 June 2018: US$1.1 billion). Following the dam failure Samarco invoked force majeure clauses in a number of long-term contracts with suppliers and service providers to suspend contractual obligations.
Samarco non-dam failure related contingent liabilities
The following non-dam failure related contingent liabilities pre-date and are unrelated to the Samarco dam failure. Samarco is currently contesting both of these matters in the Brazilian courts. Given the status of these tax matters, the timing of resolution and potential economic outflow for Samarco is uncertain.
Brazilian Social Contribution Levy
Samarco has received tax assessments for the alleged non-payment of Brazilian Social Contribution Levy for the calendar years 2007-2014 totalling approximately R$5.5 billion (approximately US$1.4 billion).
Brazilian corporate income tax rate
Samarco has received tax assessments for alleged incorrect calculation of Corporate Income Tax (IRPJ) in respect of the 2000-2003 and 2007-2014 income years totalling approximately R$4.3 billion (approximately US$1.1 billion).
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| | Samarco | | Dam failure related provisions and contingencies | | In addition to its obligations under the Framework Agreement as at 30 June 2020, Samarco has recognised provisions of US$0.2 billion (30 June 2019: US$0.2 billion), based on currently available information. The magnitude, scope and timing of these additional costs are subject to a high degree of uncertainty and Samarco has indicated that it anticipates that it will incur future costs beyond those provided. These uncertainties are likely to continue for a significant period and changes to key assumptions could result in a material change to the amount of the provision in future reporting periods. Any such unrecognised obligations are therefore contingent liabilities and, at present, it is not practicable to estimate their magnitude or possible timing of payment. Accordingly, it is also not possible to provide a range of possible outcomes or a reliable estimate of total potential future exposures at this time. | | Samarco is also named as a defendant in a number of other legal proceedings initiated by individuals, non-governmental organisations, corporations and governmental entities in Brazilian Federal and State courts following the Samarco dam failure. The lawsuits include claims for compensation, environmental rehabilitation and violations of Brazilian environmental and other laws, among other matters. The lawsuits seek various remedies including rehabilitation costs, compensation to injured individuals and families of the deceased, recovery of personal and property losses, moral damages and injunctive relief. In addition, government inquiries and investigations relating to the Samarco dam failure have been commenced by numerous agencies of the Brazilian government and are ongoing. Given the status of proceedings it is not possible to provide a range of possible outcomes or a reliable estimate of total potential future exposures to Samarco. | | Additional lawsuits and government investigations relating to the Samarco dam failure could be brought against Samarco. | | Samarco insurance | | Samarco has standalone insurance policies in place with Brazilian and global insurers. Insurers’ loss adjusters or claims representatives continue to investigate and assist with the claims process for matters not yet settled. As at 30 June 2020, an insurance receivable has not been recognised by Samarco in respect of ongoing matters. | | Samarco commitments | | At 30 June 2020, Samarco has commitments of US$0.4 billion (30 June 2019: US$0.5 billion). Following the dam failure Samarco invoked force majeure clauses in a number of long-term contracts with suppliers and service providers to suspend contractual obligations. | | Samarco non-dam failure related contingent liabilities | | The following non-dam failure related contingent liabilities pre-date and are unrelated to the Samarco dam failure. Samarco is currently contesting both of these matters in the Brazilian courts. Given the status of these tax matters, the timing of resolution and potential economic outflow for Samarco is uncertain. | | Brazilian Social Contribution Levy | | Samarco has received tax assessments for the alleged non-payment of Brazilian Social Contribution Levy for the calendar years 2007-2014 totalling approximately R$5.5 billion (approximately US$1 billion). | | Brazilian corporate income tax rate | | Samarco has received tax assessments for alleged incorrect calculation of Corporate Income Tax (IRPJ) in respect of the 2000-2003 and 2007-2014 income years totalling approximately R$4.5 billion (approximately US$0.8 billion). |
5 Expenses and other income | | | | 2019 | | 2018 | | 2017 | | | 2020 | | 2019 | | 2018 | | | | | US$M | | US$M | | US$M | | | US$M | | US$M | | US$M | | Employee benefits expense: | | | | | | | | | | | | | Wages, salaries and redundancies | | | 3,683 | | | 3,653 | | | 3,392 | | | | 3,706 | | | 3,683 | | | 3,653 | | Employee share awards | | | 138 | | | 123 | | | 105 | | | | 129 | | | 138 | | | 123 | | Social security costs | | | 4 | | | 4 | | | 3 | | | | 2 | | | 4 | | | 4 | | Pension and other post-retirement obligations | | | 292 | | | 292 | | | 273 | | | | 283 | | | 292 | | | 292 | | Less employee benefits expense classified as exploration and evaluation expenditure | | | (85 | ) | | (82 | ) | | (79 | ) | | | (65 | ) | | (85 | ) | | (82 | ) | Changes in inventories of finished goods and work in progress | | | 496 | | | (142 | ) | | (743 | ) | | | (326 | ) | | 496 | | | (142 | ) | Raw materials and consumables used | | | 4,591 | | | 4,389 | | | 3,830 | | | | 5,509 | | | 4,591 | | | 4,389 | | Freight and transportation | | | 2,378 | | | 2,294 | | | 1,786 | | | | 1,981 | | | 2,378 | | | 2,294 | | External services | | | 4,745 | | | 4,786 | | | 4,037 | | | | 4,404 | | | 4,745 | | | 4,786 | | Third party commodity purchases | | | 1,069 | | | 1,374 | | | 1,060 | | | | 1,139 | | | 1,069 | | | 1,374 | | Net foreign exchange (gains)/losses | | | (147 | ) | | (93 | ) | | 103 | | | Net foreign exchange gains | | | | (603 | ) | | (147 | ) | | (93 | ) | Fair value change on derivatives (1) | | | | 422 | | | 8 | | | 208 | | Government royalties paid and payable | | | 2,538 | | | 2,168 | | | 1,986 | | | | 2,362 | | | 2,538 | | | 2,168 | | Exploration and evaluation expenditure incurred and expensed in the current period | | | 516 | | | 641 | | | 610 | | | | 517 | | | 516 | | | 641 | | Depreciation and amortisation expense | | | 5,829 | | | 6,288 | | | 6,184 | | | | 6,112 | | | 5,829 | | | 6,288 | | Net impairments: | | | | | | | | | | | | | Property, plant and equipment | | | 250 | | | 318 | | | 160 | | | | 494 | | | 250 | | | 318 | | Goodwill and other intangible assets | | | 14 | | | 14 | | | 33 | | | | – | | | 14 | | | 14 | | Available for sale financial assets | | | – | | | 1 | | | | – | | | | – | | | | – | | | 1 | | Operating lease rentals | | | 405 | | | 421 | | | 391 | | | Lease costs (2) | | | | 675 | | | 405 | | | 421 | | All other operating expenses | | | 1,306 | | | 1,078 | | | 989 | | | | 2,034 | | | 1,298 | | | 870 | | | | | | | | | | | | | | | | | | | | | Total expenses | | | 28,022 | | | 27,527 | | | 24,120 | | | | 28,775 | | | | 28,022 | | | | 27,527 | | | | | | | | | | | | | | | | | | | | | (Gains)/losses on disposal of property, plant and equipment | | | (22 | ) | | 10 | | | (286 | ) | | Other income | | | (371 | ) | | (257 | ) | | (376 | ) | | Insurance recoveries (3) | | | | (489 | ) | | (57 | ) | | | – | | Other income (4) | | | | (288 | ) | | (336 | ) | | (247 | ) | | | | | | | | | | | | | | | | | | | | Total other income | | | (393 | ) | | (247 | ) | | (662 | ) | | | (777 | ) | | | (393 | ) | | | (247 | ) | | | | | | | | | | | | | | | | | | | |
| (1) | Fair value change on derivatives is principally related to commodity price contracts, foreign exchange contracts and embedded derivatives used in the ordinary course of business as well as derivatives used as part of the funding of dividends. |
| (2) | Lease costs for FY2020 represent short-term, low-value and variable lease costs that continue to be charged against profit from operations under IFRS 16. Refer to note 20 ‘Leases’ for details. Lease costs for FY2019 and FY2018 represent the operating lease rentals under IAS 17. |
| (3) | Insurance recoveries is principally related to claims received from Samarco dam failure. Refer to note 4 ‘Significant events – Samarco dam failure’ for further information. |
| (4) | Other income is generally income earned from transactions outside the course of the Group’s ordinary activities and may include certain management fees fromnon-controlling interests and joint arrangements, dividend income, royalties, commission income and gains or losses on divestment of subsidiaries or operations. |
Recognition and measurement Income is recognised when it is probable that the economic benefits associated with a transaction will flow to the Group and they can be reliably measured. Dividends are recognised upon declaration. F-26
6 Income tax expense | | | | | | | | | | | | | | | | 2019 | | | 2018 | | | 2017 | | | | | US$M | | | US$M | | | US$M | | Total taxation expense comprises: | | | | | | | | | | | | | Current tax expense | | | 5,408 | | | | 5,052 | | | | 4,412 | | Deferred tax expense | | | 121 | | | | 1,955 | | | | 31 | | | | | | | | | | | | | | | | | | 5,529 | | | | 7,007 | | | | 4,443 | | | | | | | | | | | | | | | | | | | | | | 2019 | | | 2018 | | | 2017 | | | | | US$M | | | US$M | | | US$M | | Factors affecting income tax expense for the year | | | | | | | | | | | | | Income tax expense differs to the standard rate of corporation tax as follows: | | | | | | | | | | | | | Profit before taxation | | | 15,049 | | | | 14,751 | | | | 11,137 | | | | | | | | | | | | | | | Tax on profit at Australian prima facie tax rate of 30 per cent | | | 4,515 | | | | 4,425 | | | | 3,341 | | | | | | | | | | | | | | | Impact of US tax reform | | | | | | | | | | | | | Tax rate changes | | | – | | | | 1,390 | | | | – | | Non-tax effected operating losses and capital gains | | | – | | | | 834 | | | | – | | Tax on remitted and unremitted foreign earnings (1) | | | – | | | | 194 | | | | – | | Recognition of previously unrecognised tax assets | | | – | | | | (95 | ) | | | – | | Other | | | – | | | | (3 | ) | | | – | | | | | | | | | | | | | | | Subtotal | | | – | | | | 2,320 | | | | – | | Other items not related to US tax reform | | | | | | | | | | | | | Non-tax effected operating losses and capital gains | | | 742 | | | | 721 | | | | 242 | | Tax on remitted and unremitted foreign earnings | | | 283 | | | | 401 | | | | 478 | | Tax effect of (loss)/profit from equity accounted investments, related impairments and expenses (2) | | | 164 | | | | (44 | ) | | | (82 | ) | Tax rate changes | | | 6 | | | | (79 | ) | | | 25 | | Recognition of previously unrecognised tax assets | | | (10 | ) | | | (170 | ) | | | (21 | ) | Amounts over provided in prior years | | | (21 | ) | | | (51 | ) | | | 175 | | Foreign exchange adjustments | | | (25 | ) | | | (152 | ) | | | 88 | | Investment and development allowance | | | (94 | ) | | | (180 | ) | | | (53 | ) | Impact of tax rates applicable outside of Australia | | | (312 | ) | | | (484 | ) | | | (136 | ) | Other | | | 87 | | | | 172 | | | | 219 | | | | | | | | | | | | | | | Income tax expense | | | 5,335 | | | | 6,879 | | | | 4,276 | | | | | | | | | | | | | | | Royalty-related taxation (net of income tax benefit) | | | 194 | | | | 128 | | | | 167 | | | | | | | | | | | | | | | Total taxation expense | | | 5,529 | | | | 7,007 | | | | 4,443 | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | 2020 | | | 2019 | | | 2018 | | | | | US$M | | | US$M | | | US$M | | Total taxation expense comprises: | | | | | | | | | | | | | Current tax expense | | | 5,109 | | | | 5,408 | | | | 5,052 | | Deferred tax (benefit)/expense | | | (335 | ) | | | 121 | | | | 1,955 | | | | | | | | | | | | | | | | | | 4,774 | | | | 5,529 | | | | 7,007 | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | 2020 | | | 2019 | | | 2018 | | | | | US$M | | | US$M | | | US$M | | Factors affecting income tax expense for the year | | | | | | | | | | | | | Income tax expense differs to the standard rate of corporation tax as follows: | | | | | | | | | | | | | Profit before taxation | | | 13,510 | | | | 15,049 | | | | 14,751 | | | | | | | | | | | | | | | Tax on profit at Australian prima facie tax rate of 30 per cent | | | 4,053 | | | | 4,515 | | | | 4,425 | | | | | | | | | | | | | | | Impact of US tax reform | | | | | | | | | | | | | Tax rate changes | | | – | | | | – | | | | 1,390 | | Non-tax effected operating losses and capital gains | | | – | | | | – | | | | 834 | | Tax on remitted and unremitted foreign earnings (1) | | | – | | | | – | | | | 194 | | Recognition of previously unrecognised tax assets | | | – | | | | – | | | | (95 | ) | Other | | | – | | | | – | | | | (3 | ) | | | | | | | | | | | | | | Subtotal | | | – | | | | – | | | | 2,320 | | Other items not related to US tax reform | | | | | | | | | | | | | Non-tax effected operating losses and capital gains | | | 707 | | | | 742 | | | | 721 | | Tax on remitted and unremitted foreign earnings | | | 225 | | | | 283 | | | | 401 | | Tax effect of (loss)/profit from equity accounted investments, related impairments and expenses (2) | | | 154 | | | | 164 | | | | (44 | ) | Amounts under/(over) provided in prior years | | | 64 | | | | (21 | ) | | | (51 | ) | Foreign exchange adjustments | | | 20 | | | | (25 | ) | | | (152 | ) | Tax rate changes | | | (8 | ) | | | 6 | | | | (79 | ) | Recognition of previously unrecognised tax assets | | | (30 | ) | | | (10 | ) | | | (170 | ) | Investment and development allowance | | | (99 | ) | | | (94 | ) | | | (180 | ) | Impact of tax rates applicable outside of Australia (3) | | | (167 | ) | | | (312 | ) | | | (484 | ) | Other | | | (211 | ) | | | 87 | | | | 172 | | | | | | | | | | | | | | | Income tax expense | | | 4,708 | | | | 5,335 | | | | 6,879 | | | | | | | | | | | | | | | Royalty-related taxation (net of income tax benefit) | | | 66 | | | | 194 | | | | 128 | | | | | | | | | | | | | | | Total taxation expense | | | 4,774 | | | | 5,529 | | | | 7,007 | | | | | | | | | | | | | | |
| (1) | Comprising US$797 million repatriation tax andnet of US$603 million of previously unrecognised tax credits. |
| (2) | The (loss)/profit from equity accounted investments, related impairments and expenses is net of income tax. This item removes the prima facie tax effect on such (loss)/profit, related impairments and expenses. |
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| (3) | All profits earned in Singapore by BHP’s Sales and Marketing organisation from the sale of our Australian commodities acquired from entities controlled by BHP Group Limited are subject to Australian ‘top up tax’ under the Controlled Foreign Company tax rules in FY2020. This reflects the change in ownership of the main Sales and Marketing entity, in accordance with the settlement agreement entered into with the Australian Taxation Office in FY2019 to resolve a long-standing transfer pricing dispute. |
Income tax recognised in other comprehensive income is as follows: | | | | 2019 | | 2018 | | 2017 | | | 2020 | | 2019 | | 2018 | | | | | US$M | | US$M | | US$M | | | US$M | | US$M | | US$M | | Income tax effect of: | | | | | | | | | | | | | Items that may be reclassified subsequently to the income statement: | | | | | | | | | | | | | Available for sale investments: | | | | | | | | Net valuation losses taken to equity | | | – | | | (3 | ) | | – | | | Hedges: | | | | | | | | Net valuation gains on investments taken to equity | | | | – | | | | – | | | (3 | ) | Cash flow hedges: | | | | | | | | Gains/(losses) taken to equity | | | 98 | | | (25 | ) | | (105 | ) | | | 94 | | | 98 | | | (25 | ) | (Gains)/losses transferred to the income statement | | | (90 | ) | | 64 | | | 129 | | | | (89 | ) | | (90 | ) | | 64 | | | | | | | | | | | | | | | | | | | | | Income tax credit relating to items that may be reclassified subsequently to the income statement | | | 8 | | | 36 | | | 24 | | | | 5 | | | 8 | | | 36 | | | | | | | | | | | | | | | | | | | | | Items that will not be reclassified to the income statement: | | | | | | | | | | | | | Remeasurement gains/(losses) on pension and medical schemes | | | 7 | | | (22 | ) | | (12 | ) | | | 25 | | | 7 | | | (22 | ) | Employee share awards transferred to retained earnings on exercise | | | 12 | | | 8 | | | (14 | ) | | Others | | | | 1 | | | 12 | | | 8 | | | | | | | | | | | | | | | | | | | | | Income tax credit/(charge) relating to items that will not be reclassified to the income statement | | | 19 | | | (14 | ) | | (26 | ) | | | 26 | | | 19 | | | (14 | ) | | | | | | | | | | | | | | | | | | | | Total income tax credit/(charge) relating to components of other comprehensive income (1) | | | 27 | | | 22 | | | (2 | ) | | Total income tax credit relating to components of other comprehensive income (1) | | | | 31 | | | 27 | | | 22 | | | | | | | | | | | | | | | | | | | | |
| (1) | Included within total income tax relating to components of other comprehensive income is US$1531 million relating to deferred taxes and US$12 million nil relating to current taxes (2018:(2019: US$15 million and US$12 million; 2018: US$17 million and US$5 million; 2017: US$12 million and US$(14) million). |
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Recognition and measurement Taxation on the profit/(loss) for the year comprises current and deferred tax. Taxation is recognised in the income statement except to the extent that it relates to items recognised directly in equity, in which case the tax effect is also recognised in equity. | | | | | Current tax | | Deferred tax | | Royalty-related taxation | | Current tax is the expected tax on the taxable income for the year, using tax rates and laws enacted or substantively enacted at the reporting date, and any adjustments to tax payable in respect of previous years. | | Deferred tax is provided in full, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the Financial Statements. Deferred tax assets are recognised to the extent that it is probable that future taxable profits will be available against which the temporary differences can be utilised. Deferred tax is not recognised for temporary differences relating to: • initial recognition of goodwill; • initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit; • investment in subsidiaries, associates and jointly controlled entities where the Group is able to control the timing of the reversal of the temporary difference and it is probable that they will not reverse in the foreseeable future. Deferred tax is measured at the tax rates that are expected to be applied when the asset is realised or the liability is settled, based on the laws that have been enacted or substantively enacted at the reporting date. Current and deferred tax assets and liabilities are offset when the Group has a legally enforceable right to offset and when the tax balances are related to taxes levied by the same tax authority and the Group intends to settle on a net basis, or realise the asset and settle the liability simultaneously. | | Royalties and resource rent taxes are treated as taxation arrangements (impacting income tax expense/(benefit)) when they are imposed under government authority and the amount payable is calculated by reference to revenue derived (net of any allowable deductions) after adjustment for temporary differences. Obligations arising from royalty arrangements that do not satisfy these criteria are recognised as current provisions and included in expenses. |
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Uncertain tax and royalty matters The Group operates across many tax jurisdictions. Application of tax law can be complex and requires judgement to assess risk and estimate outcomes, particularly in relation to the Group’s cross-border operations and transactions. The evaluation of tax risks considers both amended assessments received and potential sources of challenge from tax authorities. The status of proceedings for these matters will impact the ability to determine the potential exposure and in some cases, it may not be possible to determine a range of possible outcomes or a reliable estimate of the potential exposure. The Group has unresolved tax and royalty matters for which the timing of resolution and potential economic outflow are uncertain. Tax and royalty matters with uncertain outcomes arise in the normal course of business and occur due to changes in tax law, changes in interpretation of tax law, periodic challenges and disagreements with tax authorities and legal proceedings. Tax and royalty obligations assessed as having probable future economic outflows capable of reliable measurement are provided for as at 30 June 2019.2020. Matters with a possible economic outflow and/or presently incapable of being measured reliably are contingent liabilities and disclosed in note 33 ‘Contingent liabilities’. Irrespective of whether the potential economic outflow of the matter has been assessed as probable or possible, individuallyIndividually significant matters, including those resolved during the financial year, are includedoutlined below to the extent that disclosure does not prejudice the Group. | | | | | Transfer pricing – Sales of commodities to BHP Billiton Marketing AG in Singapore | | On 19 November 2018, BHP settled a long-standing transfer pricing dispute relating to its Sales and Marketing operations in Singapore with the Australian Taxation Office (ATO). The settlement fully resolved all prior years and provides certainty in relation to the future Australian taxation treatment of BHP’s Sales and Marketing operations. The settlement did not involve any admission of tax avoidance by BHP. As part of the settlement, BHP paid a total of approximately A$529 million (US$388 million) in additional taxes for the prior years, being 2003 to 2018 (BHP paid A$328 million (US$243 million) of this amount when the amended assessments were received in prior years, with the balance of A$201 million (US$145 million) paid in the December 2018 quarter). From the 2020 financial year, all profits made in Singapore in relation to the Australian assets owned by BHP Group Limited will be fully subject to Australian tax under the Controlled Foreign Company tax rules, due to a change in ownership of the main Sales and Marketing entity. | | | | Controlled Foreign Companies dispute | | TheOn 11 March 2020, the Australian High Court ruled that BHP Group is currently in dispute withLimited and BHP Group Plc are ‘associates’ under the ATO regarding whetherControlled Foreign Companies rules, and therefore profits earned globally by the Group’sBHP’s Sales and Marketing organisation from the sale of commodities acquired from Australian subsidiaries of BHP Group Plc are subject to ‘top-up tax’ in Australia underat the Controlled Foreign Companies rules. In June 2011 and December 2014, the Group received amended assessments relating to the 2006-2010 income years. Between May 2016 and August 2019, the Group received amended assessments relating to the 2012-2018 income years. The Group has formally objected or intends to formally object to all the amended assessments received. The earlier years (2006-2010) are the subjectcorporate tax rate of litigation and the case will be heard by the High Court30 per cent. As a result of Australia. It is estimated that the total primary tax subject to disputethis ruling, BHP paid approximately US$115 million in additional taxes for the 2006-2018 incomeprior years, isbeing FY2006 to FY2019, with US$8732 million (A$125 million), of whichpaid in prior periods and US$3083 million (A$43 million) relates to the 2006-2010 income years, which are being litigated. The ATO has not determined that the Group is liable for any penalties.paid in FY2020. | | | | Samarco tax assessments | | Details of uncertain tax and royalty matters relating to Samarco are disclosed in note 4 ‘Significant events – Samarco dam failure’. |
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| Key judgements and estimates Income tax classification
Judgements:The Group’s accounting policy for taxation, including royalty-related taxation, requires management’s judgement as to the types of arrangements considered to be a tax on income in contrast to an operating cost.
Deferred tax
Judgements:Judgement is required to determine the amount of deferred tax assets that are recognised based on the likely timing and the level of future taxable profits. Judgement is applied in recognising deferred tax liabilities arising from temporary differences in investments. These deferred tax liabilities caused principally by retained earnings held in foreign tax jurisdictions are recognised unless repatriation of retained earnings can be controlled and is not expected to occur in the foreseeable future.
Estimates:The Group assesses the recoverability of recognised and unrecognised deferred taxes, including losses in Australia, the United States and Canada on a consistent basis, using estimates and assumptions relating to projected earnings and cash flows as applied in the Group impairment process for associated operations.
Uncertain tax matters
Judgements: Management applies judgements about the application of income tax legislation and its interaction with income tax accounting principles. These judgements are subject to risk and uncertainty, hence there is a possibility that changes in circumstances will alter expectations, which may impact the amount of deferred tax assets and deferred tax liabilities recognised on the balance sheet and the amount of other tax losses and temporary differences not yet recognised.
Where the final tax outcomes are different from the amounts that were initially recorded, these differences impact the current and deferred tax provisions in the period in which the determination is made.
Measurement of uncertain tax and royalty matters considers a range of possible outcomes, including assessments received from tax authorities. Where management is of the view that potential liabilities have a low probability of crystallising, or it is not possible to quantify them reliably, they are disclosed as contingent liabilities (refer to note 33 ‘Contingent liabilities’).
F-31
| | Income tax classification | | Judgements: The Group’s accounting policy for taxation, including royalty-related taxation, requires management’s judgement as to the types of arrangements considered to be a tax on income in contrast to an operating cost. | | Deferred tax | | Judgements: Judgement is required to determine the amount of deferred tax assets that are recognised based on the likely timing and the level of future taxable profits. Judgement is applied in recognising deferred tax liabilities arising from temporary differences in investments. These deferred tax liabilities caused principally by retained earnings held in foreign tax jurisdictions are recognised unless repatriation of retained earnings can be controlled and is not expected to occur in the foreseeable future. | | Estimates: The Group assesses the recoverability of recognised and unrecognised deferred taxes, including losses in Australia, the United States and Canada on a consistent basis, using estimates and assumptions relating to projected earnings and cash flows as applied in the Group impairment process for associated operations. | | Uncertain tax matters | | Judgements: Management applies judgements about the application of income tax legislation and its interaction with income tax accounting principles. These judgements are subject to risk and uncertainty, hence there is a possibility that changes in circumstances will alter expectations, which may impact the amount of tax assets and tax liabilities, including deferred tax, recognised on the balance sheet and the amount of other tax losses and temporary differences not yet recognised. | | Where the final tax outcomes are different from the amounts that were initially recorded, these differences impact the current and deferred tax provisions in the period in which the determination is made. | | Measurement of uncertain tax and royalty matters considers a range of possible outcomes, including assessments received from tax authorities. Where management is of the view that potential liabilities have a low probability of crystallising, or it is not possible to quantify them reliably, they are disclosed as contingent liabilities (refer to note 33 ‘Contingent liabilities’). |
7 Earnings per share | | | | 2019 | | | 2018 | | | 2017 | | | 2020 | | | 2019 | | | 2018 | | Earnings attributable to BHP shareholders (US$M) | | | | | | | | | | | | | - Continuing operations | | | 8,648 | | | | 6,652 | | | | 6,375 | | | | 7,956 | | | | 8,648 | | | | 6,652 | | - Total | | | 8,306 | | | | 3,705 | | | | 5,890 | | | | 7,956 | | | | 8,306 | | | | 3,705 | | Weighted average number of shares (Million) | | | | | | | | | | | | | - Basic | | | 5,180 | | | | 5,323 | | | | 5,323 | | | | 5,057 | | | | 5,180 | | | | 5,323 | | - Diluted | | | 5,193 | | | | 5,337 | | | | 5,336 | | | | 5,069 | | | | 5,193 | | | | 5,337 | | Basic earnings per ordinary share (US cents) | | | | | | | | | | | | | - Continuing operations | | | 166.9 | | | | 125.0 | | | | 119.8 | | | | 157.3 | | | | 166.9 | | | | 125.0 | | - Total | | | 160.3 | | | | 69.6 | | | | 110.7 | | | | 157.3 | | | | 160.3 | | | | 69.6 | | Diluted earnings per ordinary share (US cents) | | | | | | | | | | | | | - Continuing operations | | | 166.5 | | | | 124.6 | | | | 119.5 | | | | 157.0 | | | | 166.5 | | | | 124.6 | | - Total | | | 159.9 | | | | 69.4 | | | | 110.4 | | | | 157.0 | | | | 159.9 | | | | 69.4 | |
Refer to note 2728 ‘Discontinued operations’ for basic earnings per share and diluted earnings per share for Discontinued operations. Earnings on American Depositary Shares represent twice the earnings for BHP Group Limited or BHP Group Plc ordinary shares. Recognition and measurement Diluted earnings attributable to BHP shareholders are equal to the earnings attributable to BHP shareholders. The calculation of the number of ordinary shares used in the computation of basic earnings per share is the aggregate of the weighted average number of ordinary shares of BHP Group Limited and BHP Group Plc outstanding during the period after deduction of the number of shares held by the Billiton Employee Share Ownership Trust and the BHP Billiton Limited Employee Equity Trust. During December 2018, 266 million BHP Group Limited shares were bought back and then cancelled during the period following an off-market buy-back program of US$5.2 billion related to the disbursement of proceeds from the disposal of Onshore US. For the purposes of calculating diluted earnings per share, the effect of 1312 million dilutive shares has been taken into account for the year ended 30 June 2019 (2018: 142020 (2019: 13 million shares; 2017: 132018: 14 million shares). The Group’s only potential dilutive ordinary shares are share awards granted under the employee share ownership plans for which terms and conditions are described in note 2324 ‘Employee share ownership plans’. Diluted earnings per share calculation excludes instruments which are considered antidilutive. At 30 June 2019,2020, there are no instruments which are considered antidilutive (2018:(2019: nil; 2017:2018: nil). F-32
Working capital 8 Trade and other receivables | | | | 2019 | | | 2018 | | | 2020 | | | 2019 | | | | | US$M | | | US$M | | | US$M | | | US$M | | Trade receivables | | | 2,403 | | | | 1,857 | | | | 1,974 | | | | 2,403 | | Loans to equity accounted investments | | | 33 | | | | 13 | | | | 40 | | | | 33 | | Other receivables | | | 1,339 | | | | 1,406 | | | | 1,617 | | | | 1,339 | | | | | | | | | | | | | | | Total | | | 3,775 | | | | 3,276 | | | | 3,631 | | | | 3,775 | | | | | | | | | | | | | | | Comprising: | | | | | | | | | Current | | | 3,462 | | | | 3,096 | | | | 3,364 | | | | 3,462 | | Non-current | | | 313 | | | | 180 | | | | 267 | | | | 313 | | | | | | | | | | | | | | |
Recognition and measurement Trade receivables are recognised initially at their transactions price or, for those receivables containing a significant financing component, at fair value andvalue. Trade receivables are subsequently measured at amortised cost using the effective interest method, less an allowance for impairment, except for provisionally priced receivables which are subsequently measured at fair value through the income statement under IFRS 9. The collectability of trade receivables is assessed continuously. At the reporting date, specific allowances are made for any expected credit losses based on a review of all outstanding amounts at reportingperiod-end. Individual receivables are written off when management deems them unrecoverable. The net carrying amount of trade and other receivables approximates their fair values. For further information on the changes under IFRS 9 refer to note 38 ‘New and amended accounting standards and interpretations’. Credit risk Trade receivables generally have terms of less than 30 days. The Group has no material concentration of credit risk with any single counterparty and is not dominantly exposed to any individual industry. Credit risk can arise from thenon-performance by counterparties of their contractual financial obligations towards the Group. To manage credit risk, the Group maintains Group-wide procedures covering the application for credit approvals, granting and renewal of counterparty limits, proactive monitoring of exposures against these limits and requirements triggering secured payment terms. As part of these processes, the credit exposures with all counterparties are regularly monitored and assessed on a timely basis. The credit quality of the Group’s customers is reviewed and the solvency of each debtor and their ability to pay on the receivable is considered in assessing receivables for impairment. The 10 largest customers represented 34% (2018: 33%)32 per cent (2019: 34 per cent) of total credit risk exposures managed by the Group. Receivables are deemed to be past due or impaired in accordance with the Group’s terms and conditions. These terms and conditions are determined on acase-by-case basis with reference to the customer’s credit quality, payment performance and prevailing market conditions. As at 30 June 2019,2020, trade receivables of US$1423 million (2018:(2019: US$3214 million) were past due but not impaired. The majority of these receivables were less than 30 days overdue. The assessment of recoverability of trade receivables at 30 June 2020 has considered the impacts of COVID-19 and no material recoverability issues have been identified. Enhanced credit monitoring of commercial counterparties commenced from late January 2020 as COVID-19 impacted key markets in Asia, Europe and the United States and increased commodity price volatility. At 30 June 2019,2020, trade receivables are stated net of provisions for expected credit losses of US$2 million (2019: US$3 million (2018: US$1 million). As at the reporting date, there are no indications that the debtors will not meet their payment obligations. F-33
9 Trade and other payables | | | | 2019 | | | 2018 | | | 2020 | | | 2019 | | | | | US$M | | | US$M | | | US$M | | | US$M | | Trade creditors | | | 5,162 | | | | 4,574 | | | Other creditors | | | 1,560 | | | | 1,406 | | | Trade payables | | | | 4,396 | | | | 5,162 | | Other payables | | | | 1,372 | | | | 1,560 | | | | | | | | | | | | | | | Total | | | 6,722 | | | | 5,980 | | | | 5,768 | | | | 6,722 | | | | | | | | | | | | | | | Comprising: | | | | | | | | | Current | | | 6,717 | | | | 5,977 | | | | 5,767 | | | | 6,717 | | Non-current | | | 5 | | | | 3 | | | | 1 | | | | 5 | | | | | | | | | | | | | | |
10 Inventories | | | | 2019 | | | 2018 | | Definitions | | 2020 | | | 2019 | | | Definitions | | | | US$M | | | US$M | | | US$M | | | US$M | | | | Raw materials and consumables | | | 1,406 | | | | 1,266 | | | Spares, consumables and other supplies yet to be utilised in the production process or in the rendering of services. | | | 1,797 | | | | 1,406 | | | Spares, consumables and other supplies yet to be utilised in the production process or in the rendering of services. | Work in progress | | | 2,515 | | | | 2,965 | | | Commodities currently in the production process that require further processing by the Group to a saleable form. | | | 2,814 | | | | 2,515 | | | Commodities currently in the production process that require further processing by the Group to a saleable form. | Finished goods | | | 687 | | | | 674 | | | Commoditiesheld-for-sale and not requiring further processing by the Group. | | | 711 | | | | 687 | | | Commodities held-for-sale and not requiring further processing by the Group. | | | | | | | | | | | | | | | | | | Total (1) | | | 4,608 | | | | 4,905 | | | | | | 5,322 | | | | 4,608 | | | | | | | | | | | | | | | | | | | | | Comprising: | | | | | | | | | | | | | Current | | | 3,840 | | | | 3,764 | | | | | | 4,101 | | | | 3,840 | | | | Non-current | | | 768 | | | | 1,141 | | | Inventories classified asnon-current are not expected to be utilised or sold within 12 months after the reporting date. | | | 1,221 | | | | 768 | | | Inventories classified as non-current are not expected to be utilised or sold within 12 months after the reporting date or within the operating cycle of the business. | | | | | | | | | | | | | | | | | |
| (1) | Inventory write-downs of US$1637 million were recognised during the year (2018:(2019: US$1816 million; 2017:2018: US$11218 million). Inventory write-downs of US$2113 million made in previous periods were reversed during the year (2018:(2019: US$221 million; 2017:2018: US$192 million). |
Recognition and measurement Regardless of the type of inventory and its stage in the production process, inventories are valued at the lower of cost and net realisable value. Cost is determined primarily on the basis of average costs. For processed inventories, cost is derived on an absorption costing basis. Cost comprises costs of purchasing raw materials and costs of production, including attributable mining and manufacturing overheads taking into consideration normal operating capacity. Minerals inventory quantities are assessed primarily through surveys and assays, while petroleum inventory quantities are derived through flow rate or tank volume measurement and the composition is derived via sample analysis. F-34
| Key estimates | | Accounting for inventory involves the use of estimates, particularly related to the measurement and valuation of inventory on hand within the production process. Critical estimates, including expected metal recoveries and work in progress volumes, are calculated by engineers using available industry, engineering and scientific data. Estimates used are periodically reassessed by the Group taking into account technical analysis and historical performance. Changes in estimates are adjusted for on a prospective basis. |
Key estimates
Accounting for inventory involves the use of estimates, particularly related to the measurement and valuation of inventory on hand within the production process. Critical estimates, including expected metal recoveries and work in progress volumes, are calculated by engineers using available industry, engineering and scientific data. Estimates used are periodically reassessed by the Group taking into account technical analysis and historical performance. Changes in estimates are adjusted for on a prospective basis.
ResourceMining and Petroleum assets
11 Property, plant and equipment | | | | Land and
buildings | | Plant and
equipment | | Other
mineral
assets | | Assets under
construction | | Exploration
and
evaluation | | Total | | | Land and
buildings | | Plant and
equipment | | Other
mineral
assets | | Assets under
construction | | Exploration
and
evaluation | | Total | | | | | US$M | | US$M | | US$M | | US$M | | US$M | | US$M | | | US$M | | US$M | | US$M | | US$M | | US$M | | US$M | | Net book value – 30 June 2020 | | | | | | | | | | | | | | At the beginning of the financial year | | | | 7,885 | | | | 38,174 | | | | 9,211 | | | | 11,149 | | | | 1,622 | | | | 68,041 | | Impact of adopting IFRS 16 (1) | | | | 754 | | | | 1,400 | | | | – | | | | – | | | | – | | | | 2,154 | | Additions (2) | | | | 115 | | | | 1,719 | | | | 684 | | | | 6,100 | | | | 218 | | | | 8,836 | | Remeasurements of index-linked freight contracts (3) | | | | – | | | | 733 | | | | – | | | | – | | | | – | | | | 733 | | Depreciation for the year | | | | (630 | ) | | | (5,104 | ) | | | (294 | ) | | | – | | | | – | | | | (6,028 | ) | Impairments, net of reversals | | | | (17 | ) | | | (189 | ) | | | (288 | ) | | | – | | | | – | | | | (494 | ) | Disposals | | | | (12 | ) | | | (22 | ) | | | – | | | | – | | | | (65 | ) | | | (99 | ) | Transfers and other movements | | | | 292 | | | | 2,718 | | | | (661 | ) | | | (3,475 | ) | | | 345 | | | | (781 | ) | | | | | | | | | | | | | | | | | | | | | At the end of the financial year | | | | 8,387 | | | | 39,429 | | | | 8,652 | | | | 13,774 | | | | 2,120 | | | | 72,362 | | | | | | | | | | | | | | | | | | | | | | – Cost | | | | 13,932 | | | | 97,230 | | | | 13,736 | | | | 13,774 | | | | 2,899 | | | | 141,571 | | – Accumulated depreciation and impairments | | | | (5,545 | ) | | | (57,801 | ) | | | (5,084 | ) | | | – | | | | (779 | ) | | | (69,209 | ) | | | | | | | | | | | | | | | | | | | | | Net book value – 30 June 2019 | | | | | | | | | | | | | | | | | | | | | | | | | At the beginning of the financial year | | | 8,152 | | | | 40,885 | | | | 8,974 | | | | 7,554 | | | | 1,617 | | | | 67,182 | | | | 8,152 | | | 40,885 | | | 8,974 | | | 7,554 | | | 1,617 | | | 67,182 | | Additions (1)(2) | | | 5 | | | | 515 | | | | 1,023 | | | | 5,799 | | | | 418 | | | | 7,760 | | | Additions (2) | | | | 5 | | | 515 | | | 1,023 | | | 5,799 | | | 418 | | | 7,760 | | Depreciation for the year | | | (585 | ) | | | (4,885 | ) | | | (277 | ) | | | – | | | | – | | | | (5,747 | ) | | | (585 | ) | | (4,885 | ) | | (277 | ) | | | – | | | | – | | | (5,747 | ) | Impairments, net of reversals(3) | | | (9 | ) | | | (234 | ) | | | – | | | | – | | | | (7 | ) | | | (250 | ) | | Impairments, net of reversals | | | | (9 | ) | | (234 | ) | | | – | | | | – | | | (7 | ) | | (250 | ) | Disposals | | | (2 | ) | | | (40 | ) | | | (5 | ) | | | – | | | | – | | | | (47 | ) | | | (2 | ) | | (40 | ) | | (5 | ) | | | – | | | | – | | | (47 | ) | Transferred to assets held for sale | | | – | | | | – | | | | – | | | | (331 | ) | | | – | | | | (331 | ) | | | – | | | | – | | | | – | | | (331 | ) | | | – | | | (331 | ) | Exchange variations taken to reserve | | | – | | | | (1 | ) | | | – | | | | – | | | | – | | | | (1 | ) | | | – | | | (1 | ) | | | – | | | | – | | | | – | | | (1 | ) | Transfers and other movements | | | 324 | | | | 1,934 | | | | (504 | ) | | | (1,873 | ) | | | (406 | ) | | | (525 | ) | | | 324 | | | 1,934 | | | (504 | ) | | (1,873 | ) | | (406 | ) | | (525 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | At the end of the financial year | | | 7,885 | | | | 38,174 | | | | 9,211 | | | | 11,149 | | | | 1,622 | | | | 68,041 | | | | 7,885 | | | 38,174 | | | 9,211 | | | 11,149 | | | 1,622 | | | 68,041 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | – Cost | | | 12,825 | | | | 92,090 | | | | 13,681 | | | | 11,149 | | | | 2,404 | | | | 132,149 | | | | 12,825 | | | 92,090 | | | 13,681 | | | 11,149 | | | 2,404 | | | 132,149 | | – Accumulated depreciation and impairments | | | (4,940 | ) | | | (53,916 | ) | | | (4,470 | ) | | | – | | | | (782 | ) | | | (64,108 | ) | | | (4,940 | ) | | (53,916 | ) | | (4,470 | ) | | | – | | | (782 | ) | | (64,108 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Net book value – 30 June 2018 | | | | | | | | | | | | | | At the beginning of the financial year | | 8,547 | | | 49,427 | | | 15,557 | | | 5,536 | | | 1,430 | | | 80,497 | | | Additions (1)(2) | | (20 | ) | | 110 | | | 873 | | | 5,423 | | | 258 | | | 6,644 | | | Depreciation for the year | | (548 | ) | | (6,467 | ) | | (730 | ) | | | – | | | | – | | | (7,745 | ) | | Impairments, net of reversals (3) | | (9 | ) | | (507 | ) | | (260 | ) | | | – | | | (62 | ) | | (838 | ) | | Disposals | | (7 | ) | | (26 | ) | | (36 | ) | | (1 | ) | | (9 | ) | | (79 | ) | | Transferred to assets held for sale | | (21 | ) | | (4,426 | ) | | (5,563 | ) | | (662 | ) | | | – | | | (10,672 | ) | | Exchange variations taken to reserve | | | – | | | 1 | | | | – | | | | – | | | | – | | | 1 | | | Transfers and other movements | | 210 | | | 2,773 | | | (867 | ) | | (2,742 | ) | | | – | | | (626 | ) | | | | | | | | | | | | | | | | | | | | | | At the end of the financial year | | 8,152 | | | 40,885 | | | 8,974 | | | 7,554 | | | 1,617 | | | 67,182 | | | | | | | | | | | | | | | | | | | | | | | – Cost | | 12,525 | | | 91,037 | | | 13,212 | | | 7,554 | | | 2,400 | | | 126,728 | | | – Accumulated depreciation and impairments | | (4,373 | ) | | (50,152 | ) | | (4,238 | ) | | | – | | | (783 | ) | | (59,546 | ) | | | | | | | | | | | | | | | | | | | | | |
| (1) | Refer to note 38 ‘New and amended accounting standards and interpretations’. |
| (2) | Includes change in estimates and net foreign exchange gains/(losses) related to the closure and rehabilitation provisions.provisions for operating sites. Refer to note 14 ‘Closure and rehabilitation provisions’. |
(2)(3) | Property, plant and equipmentRelates to remeasurements of US$ nil (2018: US$3 million; 2017: US$593 million) was acquired under finance lease. This is anon-cash investing transaction that has been excluded from the Consolidated Cash Flow Statement.index-linked freight contracts including continuous voyage charters (CVCs). Refer to note 20 ‘Leases’.
|
(3)(4) | Includes impairment charges relatedthe carrying value of the Group’s right-of-use assets relating to Onshore US assetsland and buildings and plant and equipment of US$ nil (2018:3,047 million (2019: US$520 million)492 million relating to finance leases). Refer to note 27 ‘Discontinued operations’.20 ‘Leases’ for the movement of the right-of-use assets during FY2020. |
F-35
Recognition and measurement Property, plant and equipment Property, plant and equipment is recorded at cost less accumulated depreciation and impairment charges. Cost is the fair value of consideration given to acquire the asset at the time of its acquisition or construction and includes the direct costs of bringing the asset to the location and the condition necessary for operation and the estimated future costs of closure and rehabilitation of the facility. Equipment leases
Assets held under lease, which result in the Group receiving substantially all of the risk and rewards of ownership are capitalised as property, plant and equipment at the lower of the fair value of the leased assets or the estimated present value of the minimum lease payments. Leased assets are depreciated on the same basis as owned assets or, where shorter, the lease term. The corresponding finance lease obligation is included within interest bearing liabilities. The interest component is charged to the income statement over the lease term to reflect a constant rate of interest over the remaining balance of the obligation.
Operating leases are not capitalised and rental payments are included in the income statement on a straight-line basis over the lease term. Ongoing contracted commitments under finance and operating leases are disclosed within note 32 ‘Commitments’.
From 1 July 2019, IFRS 16/AASB 16 ‘Leases’ became effective for the Group. Refer to note 38 ‘New and amended accounting standards and interpretations’.
Exploration and evaluation Exploration costs are incurred to discover mineral and petroleum resources.deposits. Evaluation costs are incurred to assess the technical feasibility and commercial viability of resourcesdeposits found. Exploration and evaluation expenditure is charged to the income statement as incurred, except in the following circumstances in which case the expenditure may be capitalised: In respect of minerals activities: the exploration and evaluation activity is within an area of interest that was previously acquired as an asset acquisition or in a business combination and measured at fair value on acquisition; or the existence of a commercially viable mineral deposit has been established. In respect of petroleum activities: the exploration and evaluation activity is within an area of interest for which it is expected that the expenditure will be recouped by future exploitation or sale; or exploration and evaluation activity has not reached a stage that permits a reasonable assessment of the existence of commercially recoverable reserves. A regular review of each area of interest is undertaken to determine the appropriateness of continuing to carry forward costs in relation to that area. Capitalised costs are only carried forward to the extent that they are expected to be recovered through the successful exploitation of the area of interest or alternatively by its sale. To the extent that capitalised expenditure is no longer expected to be recovered, it is charged to the income statement. F-36
Key judgements and estimates
Judgements: Exploration and evaluation expenditure results in certain items of expenditure being capitalised for an area of interest where a judgement is made that it is likely to be recoverable by future exploitation or sale, or where the activities are judged not to have reached a stage that permits a reasonable assessment of the existence of reserves.
Estimates: Management makes certain estimates and assumptions as to future events and circumstances, in particular when making quantitative assessment of whether an economically viable extraction operation can be established. These estimates and assumptions may change as new information becomes available. If, after having capitalised the expenditure under the policy, new information suggests that recovery of the expenditure is unlikely, the relevant capitalised amount is charged to the income statement.
| Key judgements and estimates | | Judgements: Exploration and evaluation expenditure results in certain items of expenditure being capitalised for an area of interest where a judgement is made that it is likely to be recoverable by future exploitation or sale, or where the activities are judged not to have reached a stage that permits a reasonable assessment of the existence of reserves. | | Estimates: Management makes certain estimates and assumptions as to future events and circumstances, in particular when making quantitative assessment of whether an economically viable extraction operation can be established. These estimates and assumptions may change as new information becomes available. If, after having capitalised the expenditure under the policy, new information suggests that recovery of the expenditure is unlikely, the relevant capitalised amount is charged to the income statement. |
Development expenditure When proven mineral reserves are determined and development is sanctioned, capitalised exploration and evaluation expenditure is reclassified as assets under construction within property, plant and equipment. All subsequent development expenditure is capitalised and classified as assets under construction, provided commercial viability conditions continue to be satisfied. The Group may use funds sourced from external parties to finance the acquisition and development of assets and operations. Finance costs are expensed as incurred, except where they relate to the financing of construction or development of qualifying assets. Borrowing costs directly attributable to acquiring or constructing a qualifying asset are capitalised during the development phase. Development expenditure is net of proceeds from the saleable material extracted during the development phase. On completion of development, all assets included in assets under construction are reclassified as either plant and equipment or other mineral assets and depreciation commences. Key judgements and estimates
Judgements: Development activities commence after project sanctioning by the appropriate level of management. Judgement is applied by management in determining when a project is economically viable.
Estimates: In determining whether a project is economically viable, management is required to make certain estimates and assumptions as to future events and circumstances, including reserve estimates, existence of an accessible market and forecast prices and cash flows. Estimates and assumptions may change as new information becomes available. If, after having commenced the development activity, new information suggests that a development asset is impaired, the appropriate amount is charged to the income statement.
| Key judgements and estimates | | Judgements: Development activities commence after project sanctioning by the appropriate level of management. Judgement is applied by management in determining when a project is economically viable. | | Estimates: In determining whether a project is economically viable, management is required to make certain estimates and assumptions as to future events and circumstances, including reserve estimates, existence of an accessible market and forecast prices and cash flows. Estimates and assumptions may change as new information becomes available. If, after having commenced the development activity, new information suggests that a development asset is impaired, the appropriate amount is charged to the income statement. |
Other mineral assets Other mineral assets comprise: capitalised exploration, evaluation and development expenditure for assets in production; mineral rights and petroleum interests acquired; capitalised development and production stripping costs. Overburden removal costs The process of removing overburden and other waste materials to access mineral deposits is referred to as stripping. Stripping is necessary to obtain access to mineral deposits and occurs throughout the life of anopen-pit mine. Development and production stripping costs are classified as other mineral assets in property, plant and equipment. F-37
Stripping costs are accounted for separately for individual components of an ore body. The determination of components is dependent on the mine plan and other factors, including the size, shape and geotechnical aspects of an ore body. The Group accounts for stripping activities as follows: Development stripping costs These are initial overburden removal costs incurred to obtain access to mineral deposits that will be commercially produced. These costs are capitalised when it is probable that future economic benefits (access to mineral ores) will flow to the Group and costs can be measured reliably. Once the production phase begins, capitalised development stripping costs are depreciated using the units of production method based on the proven and probable reserves of the relevant identified component of the ore body to which the initial stripping activity benefits. Production stripping costs These are post initial overburden removal costs incurred during the normal course of production activity, which commences after the first saleable minerals have been extracted from the component. Production stripping costs can give rise to two benefits, the accounting for which is outlined below: | | | | | | | | Production stripping activity | Benefits of stripping activity | | Extraction of ore (inventory) in current period. | | Improved access to future ore extraction. | | | | Period benefited | | Current period | | Future period(s) | | | | Recognition and measurement criteria | | When the benefits of stripping activities are realised in the form of inventory produced; the associated costs are recorded in accordance with the Group’s inventory accounting policy. | | When the benefits of stripping activities are improved access to future ore; production costs are capitalised when all the following criteria are met: • the production stripping activity improves access to a specific component of the ore body and it is probable that economic benefits arising from the improved access to future ore production will be realised; • the component of the ore body for which access has been improved can be identified; • costs associated with that component can be measured reliably. | | | Allocation of costs | | Production stripping costs are allocated between the inventory produced and the production stripping asset using alife-of-componentwaste-to-ore (or mineral contained) strip ratio. When the current strip ratio is greater than the estimatedlife-of-component ratio a portion of the stripping costs is capitalised to the production stripping asset. | | | | Asset recognised from stripping activity | | Inventory | | Other mineral assets within property, plant and equipment. | | | | Depreciation basis | | Not applicable | | On acomponent-by-component basis using the units of production method based on proven and probable reserves. |
F-38
Key judgements and estimates
Judgements: Judgement is applied by management in determining the components of an ore body.
Estimates: Estimates are used in the determination of stripping ratios and mineral reserves by component. Changes to estimates related tolife-of-componentwaste-to-ore (or mineral contained) strip ratios and the expected ore production from identified components are accounted for prospectively and may affect depreciation rates and asset carrying values.
| Key judgements and estimates | | Judgements: Judgement is applied by management in determining the components of an ore body. | | Estimates: Estimates are used in the determination of stripping ratios and mineral reserves by component. Changes to estimates related to life-of-componentwaste-to-ore (or mineral contained) strip ratios and the expected ore production from identified components are accounted for prospectively and may affect depreciation rates and asset carrying values. |
Depreciation Depreciation of assets, other than land, assets under construction and capitalised exploration and evaluation that are not depreciated, is calculated using either the straight-line (SL) method or units of production (UoP) method, net of residual values, over the estimated useful lives of specific assets. The depreciation method and rates applied to specific assets reflect the pattern in which the asset’s benefits are expected to be used by the Group. The Group’s reported reserves are used to determine UoP depreciation unless doing so results in depreciation charges that do not reflect the asset’s useful life. Where this occurs, alternative approaches to determining reserves are applied, such as using management’s expectations of future oil and gas prices rather than yearly average prices, to provide a phasing of periodic depreciation charges that better reflects the asset’s expected useful life. Where assets are dedicated to a mine or petroleum lease, the below useful lives are subject to the lesser of the asset category’s useful life and the life of the mine or petroleum lease, unless those assets are readily transferable to another productive mine or lease. Key estimates
The determination of useful lives, residual values and depreciation methods involves estimates and assumptions and is reviewed annually. Any changes to useful lives or any other estimates or assumptions may affect prospective depreciation rates and asset carrying values. The table below summarises the principal depreciation methods and rates applied to major asset categories by the Group.
| Key estimates | | The determination of useful lives, residual values and depreciation methods involves estimates and assumptions and is reviewed annually. Any changes to useful lives or any other estimates or assumptions may affect prospective depreciation rates and asset carrying values. The table below summarises the principal depreciation methods and rates applied to major asset categories by the Group. |
| | | | | | | | | | | | | | | | | | | | | | Category | | Buildings | | Plant and
equipment | | Mineral rights and
petroleum interests | | Capitalised exploration,
evaluation and
development
expenditure | | | | | Typical depreciation methodology | | SL | | SL | | UoP | | UoP | | | | | | | | | | | | Depreciation rate | | 25-50 years | | 3-30 years | | Based on the rate of depletion of reserves | | Based on the rate of depletion of reserves | | |
Commitments F-39The Group’s commitments for capital expenditure were US$2,585 million as at 30 June 2020 (2019: US$3,308 million). The Group’s commitments related to leases are included in note 20 ‘Leases’.
Impairment ofnon-current assets Recognition and measurement Impairment tests for all assets are performed when there is an indication of impairment, although goodwill is tested at least annually. If the carrying amount of the asset exceeds its recoverable amount, the asset is impaired and an impairment loss is charged to the income statement so as to reduce the carrying amount in the balance sheet to its recoverable amount. Previously impaired assets (excluding goodwill) are reviewed for possible reversal of previous impairment at each reporting date. Impairment reversal cannot exceed the carrying amount that would have been determined (net of depreciation) had no impairment loss been recognised for the asset or cash generating units (CGUs). There were no reversals of impairment in the current or prior year. How recoverable amount is calculated The recoverable amount is the higher of an asset’s fair value less cost of disposal (FVLCD) and its value in use (VIU). For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows. Valuation methods Fair value less cost of disposal FVLCD is an estimate of the amount that a market participant would pay for an asset or CGU, less the cost of disposal. FVLCD for mineral and petroleum assets is generally determined using independent market assumptions to calculate the present value of the estimated futurepost-tax cash flows expected to arise from the continued use of the asset, including the anticipated cash flow effects of any capital expenditure to enhance production or reduce cost, and its eventual disposal where a market participant may take a consistent view. Cash flows are discounted using an appropriatepost-tax market discount rate to arrive at a net present value of the asset, which is compared against the asset’s carrying value. FVLCD may also take into consideration other market-based indicators of fair value. Value in use VIU is determined as the present value of the estimated future cash flows expected to arise from the continued use of the asset in its present form and its eventual disposal. VIU is determined by applying assumptions specific to the Group’s continued use and cannot take into account future development. These assumptions are different to those used in calculating FVLCD and consequently the VIU calculation is likely to give a different result (usually lower) to a FVLCD calculation. F-40
| Key judgements and estimates Judgements:Assessment of indicators of impairment or impairment reversal and the determination of CGUs for impairment purposes require significant management judgement.
Indicators of impairment may include changes in the Group’s operating and economic assumptions, including those arising from changes in reserves or mine planning, updates to the Group’s commodity supply, demand and price forecasts (which include carbon price forecasts), or the possible additional impacts from emerging risks such as those related to climate change and the transition to a lower carbon economy.
Additional impacts related to climate change and the transition to a lower carbon economy may include:
a proportion of a CGU’s reserves becoming incapable of extraction in an economically viable fashion;
demand for the Group’s commodities decreasing, due to policy, regulatory (including carbon pricing mechanisms), legal, technological, market or societal responses to climate change;
physical impacts related to acute risks resulting from increased severity of extreme weather events, and those related to chronic risks resulting from longer-term changes in climate patterns.
Estimates:In determining the recoverable amount of assets, in the absence of quoted market prices, estimates are made regarding the present value of futurepost-tax cash flows. These estimates require significant management judgements and assumptions and are subject to risk and uncertainty that may be beyond the control of the Group; hence, there is a possibility that changes in circumstances will materially alter projections, which may impact the recoverable amount of assets at each reporting date. The estimates are made from the perspective of a market participant and include prices, future production volumes, operating costs, tax attributes and discount rates.
An indicator of impairment has been identified for the Jansen potash CGU at 30 June 2019 as the Group continues to assess project feasibility and the timing of project approval in accordance with the Group’s Capital Allocation Framework. Accordingly, the Group has assessed the recoverable amount of the Jansen CGU using FVLCD methodology including a market participant’s perspective of the net present value of future post-tax cash flows and other market-based indicators of fair value. The Jansen CGU carrying amount of US$3.0 billion as at 30 June 2019 is supported by the recoverable amount determination and as such, no impairment has been recognised.
The recoverable amount estimate is most sensitive to assumptions regarding the long-term forecasts of potash prices and discount rates:
Potash price: prices are based on the latest internal forecasts taking into account expected demand and supply for potash globally (which includes, amongst a range of factors, carbon price forecasts), benchmarked with external sources of information;
Discount rate: the discount rate is derived using the weighted average cost of capital methodology adjusted for any risks that are not reflected in the underlying cash flows, including where appropriate a country risk premium. A real post-tax discount rate of 7.5 per cent was applied to post-tax cash flows.
Changes in circumstances may affect the assumptions used to determine recoverable amount and could result in an impairment of non-current assets at future reporting dates.
F-41
| | Judgements: Assessment of indicators of impairment or impairment reversal and the determination of CGUs for impairment purposes require significant management judgement. | | Indicators of impairment may include changes in the Group’s operating and economic assumptions, including those arising from changes in reserves or mine planning, updates to the Group’s commodity supply, demand and price forecasts, or the possible additional impacts from emerging risks such as those related to climate change and the transition to a lower carbon economy and pandemics similar to COVID-19. | | Climate change | | Impacts related to climate change and the transition to a lower carbon economy may include: | | • demand for the Group’s commodities decreasing, due to policy, regulatory (including carbon pricing mechanisms), legal, technological, market or societal responses to climate change, resulting in a proportion of a CGU’s reserves becoming incapable of extraction in an economically viable fashion; | | • physical impacts related to acute risks resulting from increased severity of extreme weather events, and those related to chronic risks resulting from longer-term changes in climate patterns. | | The Group continues to develop its assessment of the potential impacts of climate change and the transition to a lower carbon economy. Where sufficiently developed, the potential financial impacts on the Group of climate change and the transition to a lower carbon economy have been considered in the assessment of indicators of impairment, including: | | • the Group’s current assumptions relating to demand for commodities and carbon pricing and their impact on the Group’s long term price forecasts; | | • the Group’s operational emissions reduction strategy. For example, transitioning to renewable power supply contracts at the Group’s Escondida and Spence operations. | | COVID-19 The macro economic disruptions relating to COVID-19 and mitigating actions enforced by health authorities create uncertainty in the Group’s operating and economic assumptions, including commodity prices, demand and supply volumes, operating costs, and discount rates. However, given the long-lived nature of the majority of the Group’s assets, COVID-19 did not, in isolation, result in the identification of indicators of impairment for the Group’s asset values at 30 June 2020. Due to ongoing uncertainty as to the extent and duration of COVID-19 restrictions and the overall impact on economic activity, actual experience may materially differ from internal forecasts and may result in the reassessment of indicators of impairment for the Group’s assets in future reporting periods. Petroleum Given the significant petroleum price volatility in CY2020 and the potential impact of climate change on long term petroleum prices, the Group considered a range of long term price assumptions, including oil prices at US$55 a barrel (Brent), when determining that no indicators of impairment existed at 30 June 2020. Estimates: In determining the recoverable amount of assets, in the absence of quoted market prices, estimates are made regarding the present value of future post-tax cash flows. These estimates are made from the perspective of a market participant and include prices, future production volumes, operating costs, tax attributes and discount rates. All estimates require significant management judgements and assumptions and are subject to risk and uncertainty that may be beyond the control of the Group; hence, there is a possibility that changes in circumstances will materially alter projections, which may impact the recoverable amount of assets at each reporting date. | | |
12 Intangible assets | | | | 2019 | | 2018 | | | 2020 | | 2019 | | | | | Goodwill | | | Other
intangibles | | Total | | Goodwill | | Other
intangibles | | Total | | | Goodwill | | | Other
intangibles | | Total | | Goodwill | | | Other
intangibles | | Total | | | | | US$M | | | US$M | | US$M | | US$M | | US$M | | US$M | | | US$M | | | US$M | | US$M | | US$M | | | US$M | | US$M | | Net book value | | | | | | | | | | | | | | | | | | | | | | | | | At the beginning of the financial year | | | 247 | | | | 531 | | | | 778 | | | 3,269 | | | 699 | | | 3,968 | | | | 247 | | | | 428 | | | | 675 | | | 247 | | | | 531 | | | 778 | | Additions | | | – | | | | 31 | | | | 31 | | | | – | | | 50 | | | 50 | | | | – | | | | 98 | | | | 98 | | | | – | | | | 31 | | | 31 | | Amortisation for the year | | | – | | | | (142 | ) | | | (142 | ) | | | – | | | (197 | ) | | (197 | ) | | | – | | | | (118 | ) | | | (118 | ) | | | – | | | | (142 | ) | | (142 | ) | Impairments for the year (1) | | | – | | | | (14 | ) | | | (14 | ) | | (2,339 | ) | | (14 | ) | | (2,353 | ) | | | – | | | | – | | | | – | | | | – | | | | (14 | ) | | (14 | ) | Disposals | | | – | | | | – | | | | – | | | (16 | ) | | (7 | ) | | (23 | ) | | Transferred to assets held for sale | | | – | | | | – | | | | – | | | (667 | ) | | | – | | | (667 | ) | | Transfers and other movements | | | – | | | | 22 | | | | 22 | | | | – | | | | – | | | | – | | | | – | | | | (31 | ) | | | (31 | ) | | | – | | | | 22 | | | 22 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | At the end of the financial year (2) | | | 247 | | | | 428 | | | | 675 | | | 247 | | | 531 | | | 778 | | | At the end of the financial year (1) | | | | 247 | | | | 377 | | | | 624 | | | 247 | | | | 428 | | | 675 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | – Cost | | | 247 | | | | 1,697 | | | | 1,944 | | | 247 | | | 1,665 | | | 1,912 | | | | 247 | | | | 1,580 | | | | 1,827 | | | 247 | | | | 1,697 | | | 1,944 | | – Accumulated amortisation and impairments | | | – | | | | (1,269 | ) | | | (1,269 | ) | | | – | | | (1,134 | ) | | (1,134 | ) | | | – | | | | (1,203 | ) | | | (1,203 | ) | | | – | | | | (1,269 | ) | | (1,269 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (1) | Includes impairment charges related to Onshore US assets of US$ nil (2018: US$2,339 million). Refer to note 27 ‘Discontinued operations’.
|
(2) | The Group’s aggregate net carrying value of goodwill for Continuing operations is US$247 million (2018:(2019: US$247 million), representing less than 1one per cent of net equity at 30 June 2019 (2018:2020 (2019: less than 1one per cent). The goodwill is allocated across a number of CGUs. |
Recognition and measurement Goodwill Where the fair value of the consideration paid for a business acquisition exceeds the fair value of the identifiable assets, liabilities and contingent liabilities acquired, the difference is treated as goodwill. Where consideration is less than the fair value of acquired net assets, the difference is recognised immediately in the income statement. Goodwill is not amortised and is measured at cost less any impairment losses. Other intangibles The Group capitalises amounts paid for the acquisition of identifiable intangible assets, such as software, licences and initial payments for the acquisition of mineral lease assets, where it is considered that they will contribute to future periods through revenue generation or reductions in cost. These assets, classified as finite life intangible assets, are carried in the balance sheet at the fair value of consideration paid less accumulated amortisation and impairment charges. Intangible assets with finite useful lives are amortised on a straight-line basis over their useful lives. The estimated useful lives are generally no greater than eight years. Initial payments for the acquisition of intangible mineral lease assets are capitalised and amortised over the term of the permit. A regular review is undertaken of each area of interest to determine the appropriateness of continuing to carry forward costs in relation to that area. Capitalised costs are only carried forward to the extent that they are expected to be recovered through the successful exploitation of the area of interest or alternatively by its sale. To the extent that capitalised expenditure is no longer expected to be recovered, it is charged to the income statement. F-42
| Key judgements and estimates | | Judgements: Assessment of impairment indicators requires management judgement. If a judgement is made that recovery of previously capitalised intangible mineral lease assets is unlikely, the relevant amount will be charged to the income statement. | | Estimates: Determining the recoverable amount requires management to make certain estimates and assumptions as to future events and circumstances, in particular whether an economically viable extraction operation can be established. | | Where indicators of impairment exist for intangible assets, in the absence of quoted market prices, estimates are made regarding the present value of future post-tax cash flows. These estimates require management judgement and assumptions and are subject to risk and uncertainty that may be beyond the control of the Group; hence, there is a possibility that changes in circumstances will materially alter projections, which may impact the recoverable amount of assets at each reporting date. The estimates are made from the perspective of a market participant and include prices, future production volumes, operating costs, tax attributes and discount rates. |
Key judgements and estimates
Judgements: Assessment of impairment indicators requires management judgement. If a judgement is made that recovery of previously capitalised intangible mineral lease assets is unlikely, the relevant amount will be charged to the income statement.
Estimates: Determining the recoverable amount requires management to make certain estimates and assumptions as to future events and circumstances, in particular whether an economically viable extraction operation can be established.
Where indicators of impairment exist for intangible assets, in the absence of quoted market prices, estimates are made regarding the present value of futurepost-tax cash flows. These estimates require management judgement and assumptions and are subject to risk and uncertainty that may be beyond the control of the Group; hence, there is a possibility that changes in circumstances will materially alter projections, which may impact the recoverable amount of assets at each reporting date. The estimates are made from the perspective of a market participant and include prices, future production volumes, operating costs, tax attributes and discount rates.
13 Deferred tax balances The movement for the year in the Group’s net deferred tax position is as follows: | | | | | | | | | 2020 | | | 2019 | | 2018 | | | | | 2019
US$M | | 2018
US$M | | 2017
US$M | | | US$M | | | US$M | | US$M | | Net deferred tax asset | | | | | | | | | | | | | At the beginning of the financial year | | | 569 | | | 2,023 | | | 1,823 | | | | 530 | | | | 569 | | | 2,023 | | Income tax (charge)/credit recorded in the income statement (1) | | | (81 | ) | | (1,445 | ) | | 188 | | | Income tax credit/(charge) recorded directly in equity | | | 15 | | | 17 | | | 12 | | | Income tax credit/(charge) recorded in the income statement (1) | | | | 335 | | | | (81 | ) | | (1,445 | ) | Income tax credit recorded directly in equity | | | | 34 | | | | 15 | | | 17 | | Other movements | | | 27 | | | (26 | ) | | | – | | | | 31 | | | | 27 | | | (26 | ) | | | | | | | | | | | | | | | | | | | | At the end of the financial year | | | 530 | | | 569 | | | 2,023 | | | | 930 | | | | 530 | | | 569 | | | | | | | | | | | | | | | | | | | | |
| (1) | Includes Discontinued operations income tax credit to the income statement of US$ nil (2019: US$40 million (2018:million; 2018: US$510 million, 2017: US$219 million). |
For recognition and measurement refer to note 6 ‘Income tax expense’. F-43
The composition of the Group’s net deferred tax assets and liabilities recognised in the balance sheet and the deferred tax expense charged/(credited)/charged to the income statement is as follows: | | | | Deferred tax
assets | | Deferred tax
liabilities | | Charged/(credited) to
the income statement | | | Deferred tax
assets | | Deferred tax
liabilities | | (Credited)/charged to
the income statement | | | | | 2019 | | 2018 | | 2019 | | 2018 | | 2019 | | 2018 | | 2017 | | | 2020 | | 2019 | | 2020 | | 2019 | | 2020 | | 2019 | | 2018 | | | | | US$M | | US$M | | US$M | | US$M | | US$M | | US$M | | US$M | | | US$M | | US$M | | US$M | | US$M | | US$M | | US$M | | US$M | | Type of temporary difference | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Depreciation | | | (1,717 | ) | | (2,756 | ) | | | 1,444 | | | 1,356 | | | | (951 | ) | | (752 | ) | | 391 | | | | (2,749 | ) | | (1,717 | ) | | | 1,807 | | | 1,444 | | | | 1,394 | | | (951 | ) | | (752 | ) | Exploration expenditure | | | 449 | | | 492 | | | | – | | | | – | | | | 43 | | | 51 | | | (22 | ) | | | 398 | | | 449 | | | | – | | | | – | | | | 51 | | | 43 | | | 51 | | Employee benefits | | | 310 | | | 321 | | | | (6 | ) | | (2 | ) | | | 14 | | | 31 | | | (37 | ) | | | 353 | | | 310 | | | | (26 | ) | | (6 | ) | | | (38 | ) | | 14 | | | 31 | | Closure and rehabilitation | | | 1,671 | | | 1,627 | | | | (203 | ) | | (194 | ) | | | (53 | ) | | 218 | | | (151 | ) | | | 2,100 | | | 1,671 | | | | (109 | ) | | (203 | ) | | | (334 | ) | | (53 | ) | | 218 | | Resource rent tax | | | 431 | | | 468 | | | | 1,112 | | | 1,328 | | | | (179 | ) | | (194 | ) | | (189 | ) | | | 359 | | | 431 | | | | 921 | | | 1,112 | | | | (119 | ) | | (179 | ) | | (194 | ) | Other provisions | | | 144 | | | 141 | | | | (1 | ) | | (2 | ) | | | (2 | ) | | (11 | ) | | 14 | | | | 173 | | | 144 | | | | (239 | ) | | (1 | ) | | | (268 | ) | | (2 | ) | | (11 | ) | Deferred income | | | 24 | | | 21 | | | | (5 | ) | | | – | | | | (9 | ) | | (13 | ) | | 3 | | | | (4 | ) | | 24 | | | | – | | | (5 | ) | | | 33 | | | (9 | ) | | (13 | ) | Deferred charges | | | (416 | ) | | (374 | ) | | | 286 | | | 272 | | | | 56 | | | (119 | ) | | (77 | ) | | | (383 | ) | | (416 | ) | | | 187 | | | 286 | | | | (132 | ) | | 56 | | | (119 | ) | Investments, including foreign tax credits | | | 412 | | | 546 | | | | 600 | | | 691 | | | | 70 | | | 615 | | | (17 | ) | | | 348 | | | 412 | | | | 458 | | | 600 | | | | (77 | ) | | 70 | | | 615 | | Foreign exchange gains and losses | | | (97 | ) | | (120 | ) | | | (6 | ) | | 16 | | | | (45 | ) | | (20 | ) | | (77 | ) | | | (134 | ) | | (97 | ) | | | (61 | ) | | (6 | ) | | | (18 | ) | | (45 | ) | | (20 | ) | Tax losses | | | 2,611 | | | 3,758 | | | | – | | | | – | | | | 1,147 | | | 1,595 | | | (381 | ) | | | 2,759 | | | 2,611 | | | | – | | | | – | | | | (148 | ) | | 1,147 | | | 1,595 | | Lease liability (1) | | | | 548 | | | – | | | | (245 | ) | | – | | | | (793 | ) | | – | | | – | | Other | | | (58 | ) | | (83 | ) | | | 13 | | | 7 | | | | (10 | ) | | 44 | | | 355 | | | | (80 | ) | | (58 | ) | | | 65 | | | 13 | | | | 114 | | | (10 | ) | | 44 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | | 3,764 | | | 4,041 | | | | 3,234 | | | 3,472 | | | | 81 | | | 1,445 | | | (188 | ) | | | 3,688 | | | 3,764 | | | | 2,758 | | | 3,234 | | | | (335 | ) | | 81 | | | 1,445 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (1) | Includes deferred tax associated with the recognition of right-of-use assets and lease liabilities on adoption of IFRS 16. Refer to note 20 ‘Leases’. |
The Group recognisesamount of deferred tax assets dependent on future taxable profits not arising from the benefitreversal of existing deferred tax losses amountingliabilities, and which relate to tax jurisdictions where the taxable entity has suffered a loss in the current or preceding year, was US$2,6112,865 million (2018:at 30 June 2020 (2019: US$3,7582,229 million) only to the extent of. It is considered probable that these benefits will be utilised based on anticipated future taxable income or gains in relevant jurisdictions. The amounts recognised in the Financial Statements in respect of each matter are derived fromreflect the Group’s best judgements and estimates as described in note 6 ‘Income tax expense’. The composition of the Group’s unrecognised deferred tax assets and liabilities is as follows: | | | | 2019 | | | 2018 | | | 2020 | | | 2019 | | | | | US$M | | | US$M | | | US$M | | | US$M | | Unrecognised deferred tax assets | | | | | | | | | Tax losses and tax credits (1) | | | 3,720 | | | | 3,028 | | | | 4,088 | | | | 3,720 | | Investments in subsidiaries (2) | | | 1,656 | | | | 1,659 | | | | 1,575 | | | | 1,656 | | Deductible temporary differences relating to PRRT (3) | | | 2,197 | | | | 2,282 | | | | 2,079 | | | | 2,197 | | Mineral rights (4) | | | 2,230 | | | | 2,263 | | | | 2,244 | | | | 2,230 | | Other deductible temporary differences (5) | | | 412 | | | | 437 | | | | 673 | | | | 412 | | | | | | | | | | | | | | | Total unrecognised deferred tax assets | | | 10,215 | | | | 9,669 | | | | 10,659 | | | | 10,215 | | | | | | | | | | | | | | | Unrecognised deferred tax liabilities | | | | | | | | | Investments in subsidiaries (2) | | | 2,253 | | | | 2,216 | | | | 2,375 | | | | 2,253 | | Taxable temporary differences relating to unrecognised deferred tax asset for PRRT (3) | | | 659 | | | | 685 | | | Future taxable temporary differences relating to unrecognised deferred tax asset for PRRT (3) | | | | 624 | | | | 659 | | | | | | | | | | | | | | | Total unrecognised deferred tax liabilities | | | 2,912 | | | | 2,901 | | | | 2,999 | | | | 2,912 | | | | | | | | | | | | | | |
| (1) | At 30 June 2019,2020, the Group had income and capital tax losses with a tax benefit of US$2,2652,405 million (2018:(2019: US$1,9462,265 million) and tax credits of US$1,4551,683 million (2018:(2019: US$1,0821,455 million), which are not recognised as deferred tax assets, because it is not probable that future taxable profits or capital gains will be available against which the Group can utilise the benefits. |
F-44
The gross amount of tax losses carried forward that have not been recognised is as follows: | | | | | Year of expiry | | Total2020 | | | | | US$M | | Income tax losses | | | | | Not later than one year | | | 359474 | | Later than one year and not later than two years | | | 443240 | | Later than two years and not later than five years | | | 2,7232,525 | | Later than five years and not later than 10 years | | | 530679 | | Later than 10 years and not later than 20 years | | | 2,3122,379 | | Unlimited | | | 2,0012,262 | | | | | | | | | | 8,3688,559 | | | | | | | Capital tax losses | | | | | Not later than one year | | | – | | Later than two years and not later than five years | | | – | | Unlimited | | | 4,1144,150 | | | | | | | Gross amount of tax losses not recognised | | | 12,48212,709 | | | | | | | Tax effect of total losses not recognised | | | 2,2652,405 | | | | | | |
Of the US$1,4551,683 million of tax credits, US$1,4491,637 million expires not later than 10 years and US$646 million expires later than 10 years and not later than 20 years. | (2) | The Group had deferred tax assets of US$1,656 million at 30 June 2019 (2018: US$1,659 million) and deferred tax liabilities of US$2,253 million (2018: US$2,216 million) associated with undistributed earnings of subsidiaries that have not been recognised because the Group is able to control the timing of the reversal of the temporary differences and it is not probable that these differences will reverse in the foreseeable future. |
| (3) | The Group had US$2,197 million of unrecognised deferred tax assets relating to Australian Petroleum Resource Rent Tax (PRRT) at 30 June 2019 (2018: US$2,282 million relating to Australian PRRT), with a corresponding unrecognised deferred tax liability for income tax purposes of US$659 million (2018: US$685 million). Recognition of a deferred tax asset for PRRT depends on benefits expected to be obtained from the deduction against PRRT liabilities. As PRRT payments are deductible for income tax purposes, to the extent these PRRT deferred tax assets are recognised this would give rise to a corresponding deferred tax liability for income tax (presented as the future taxable temporary differences relating to the unrecognised PRRT deferred tax assets). |
| (4) | The Group had deductible temporary differences relating to mineral rights for which deferred tax assets of US$2,230 million at 30 June 2019 (2018: US$2,263 million) had not been recognised because it is not probable that future capital gains will be available against which the Group can utilise the benefits. The deductible temporary differences do not expire under current tax legislation. |
| (5) | The Group had other deductible temporary differences for which deferred tax assets of US$412 million at 30 June 2019 (2018: US$437 million) had not been recognised because it is not probable that future taxable profits will be available against which the Group can utilise the benefits. The deductible temporary differences do not expire under current tax legislation. |
F-45
14 Closure and rehabilitation provisions | | | | 2019 | | 2018 | | | 2020 | | 2019 | | | | | US$M | | US$M | | | US$M | | US$M | | At the beginning of the financial year | | | 6,330 | | | 6,738 | | | | 6,977 | | | 6,330 | | Capitalised amounts for operating sites: | | | | | | | | | Change in estimate | | | 494 | | | 35 | | | | 1,255 | | | 494 | | Exchange translation | | | (194 | ) | | (122 | ) | | | (188 | ) | | (194 | ) | Adjustments charged/(credited) to the income statement: | | | | | | | | | Increases to existing and new provisions | | | 318 | | | 132 | | | | 731 | | | 318 | | Exchange translation | | | (7 | ) | | (11 | ) | | | (19 | ) | | (7 | ) | Released during the year | | | (33 | ) | | (165 | ) | | | (43 | ) | | (33 | ) | Other adjustments to the provision: | | | | | | | | | Amortisation of discounting impacting net finance costs | | | 353 | | | 352 | | | | 356 | | | 353 | | Expenditure on closure and rehabilitation activities | | | (201 | ) | | (178 | ) | | | (258 | ) | | (201 | ) | Exchange variations impacting foreign currency translation reserve | | | (2 | ) | | | – | | | | (1 | ) | | (2 | ) | Divestment and demerger of subsidiaries and operations | | | (80 | ) | | | – | | | | – | | | (80 | ) | Transferred to liabilities held for sale | | | – | | | (450 | ) | | Other movements | | | (1 | ) | | (1 | ) | | | – | | | (1 | ) | | | | | | | | | | | | | | At the end of the financial year | | | 6,977 | | | 6,330 | | | | 8,810 | | | 6,977 | | | | | | | | | | | | | | | Comprising: | | | | | | | | | Current | | | 361 | | | 274 | | | | 373 | | | 361 | | Non-current | | | 6,616 | | | 6,056 | | | | 8,437 | | | 6,616 | | | | | | | | | | | | | | | Operating sites | | | 5,535 | | | 5,120 | | | | 6,636 | | | 5,535 | | Closed sites | | | 1,442 | | | 1,210 | | | | 2,174 | | | 1,442 | | | | | | | | | | | | | | |
The Group is required to rehabilitate sites and associated facilities at the end of, or in some cases, during the course of production, to a condition acceptable to the relevant authorities, as specified in licence requirements and the Group’s environmental performance requirements as set out within Our Charter. The key components of closure and rehabilitation activities are: the removal of all unwanted infrastructure associated with an operation; the return of disturbed areas to a safe, stable, productive and self-sustaining condition, consistent with the agreed end land use. Recognition and measurement Provisions for closure and rehabilitation are recognised by the Group when: it has a present legal or constructive obligation as a result of past events; it is more likely than not that an outflow of resources will be required to settle the obligation; the amount can be reliably estimated. F-46
| | | Initial recognition | | Subsequent remeasurement | | | Closure and rehabilitation provisions are initially recognised when an environmental disturbance first occurs. The individual site provisions are an estimate of the expected value of future cash flows required to rehabilitate the relevant site using current restoration standards and techniques and taking into account risks and uncertainties. Individual site provisions are discounted to their present value using countrycurrency specific discount rates aligned to the estimated timing of cash outflows. When provisions for closure and rehabilitation are initially recognised, the corresponding cost is capitalised as an asset, representing part of the cost of acquiring the future economic benefits of the operation. | | The closure and rehabilitation asset, recognised within property, plant and equipment, is depreciated over the life of the operations. The value of the provision is progressively increased over time as the effect of discounting unwinds, resulting in an expense recognised in net finance costs. The closure and rehabilitation provision is reviewed at each reporting date to assess if the estimate continues to reflect the best estimate of the obligation. If necessary, the provision is remeasured to account for factors, including: • revisions to estimated reserves resources and lives of operations; • developments in technology; • regulatory requirements and environmental management strategies; • changes in the estimated extent and costs of anticipated activities, including the effects of inflation and movements in foreign exchange rates; • movements in interest rates affecting the discount rate applied. Changes to the closure and rehabilitation estimate for operating sites are added to, or deducted from, the related asset and amortised on a prospective basis accordingly over the remaining life of the operation, generally applying the units of production method. Costs arising from unforeseen circumstances, such as the contamination caused by unplanned discharges, are recognised as an expense and liability when the event gives rise to an obligation that is probable and capable of reliable estimation. |
Closed sites Where future economic benefits are no longer expected to be derived through operation, changes to the associated closure and remediation costs are charged/(credited) to the income statement in the period identified. This amounted to a charge of US$251669 million in the year ended 30 June 2019 (2018:2020 (2019: charge of US$251 million; 2018: credit of US$(21) million; 2017: charge of US$33 million). F-47
| Key estimates | | The recognition and measurement of closure and rehabilitation provisions requires the use of significant estimates and assumptions, including, but not limited to: | | • the extent (due to legal or constructive obligations) of potential activities required for the removal of infrastructure and rehabilitation activities (including activities to mitigate the potential physical impact of climate change); | | • costs associated with future rehabilitation activities; | | • applicable real discount rates; | | • the timing of cash flows and ultimate closure of operations. | | Rehabilitation activities are generally undertaken at the end of the production life at the individual sites, the estimated timing of which is informed by the Group’s current assumptions relating to demand for commodities and carbon pricing, and their impact on the Group’s long-term price forecasts. Remaining production lives range from 4-91 years with an average for all sites, weighted by current closure provision, of approximately 28 years. The discount rates applied to the Group’s closure and rehabilitation provisions were revised during the year to reflect decreases in market interest rates. The effect of changes to discount rates was an increase of approximatively US$675 million in the closure and rehabilitation provision of which US$90 million in respect of closed sites was recognised in the income statement. | | A further 0.5 per cent decrease in the real discount rates applied at 30 June 2020 would result in an increase to the closure and rehabilitation provision of US$772 million, an increase in property, plant and equipment of US$606 million in relation to operating sites and an income statement charge of US$166 million in respect of closed sites. In addition, the change would result in an increase of approximately US$35 million to depreciation expense and a US$16 million reduction in net finance costs for the year ending 30 June 2021. | | Given the long-lived nature of the majority of the Group’s assets, closure activities are not expected to occur for a significant period of time. While the closure and rehabilitation provisions reflect management’s best estimates based on current knowledge and information, further studies and detailed analysis of the closure activities for individual assets will be performed as the assets near the end of their operational life and/or detailed closure plans are required to be submitted to relevant regulatory authorities. Such studies and analysis can impact the estimated costs of closure activities. Estimates can also be impacted by the emergence of new restoration techniques, changes in regulatory requirements for rehabilitation, risks relating to climate change and the transition to a lower carbon economy, and experience at other operations. These uncertainties may result in future actual expenditure differing from the amounts currently provided for in the balance sheet. |
The recognition and measurement of closure and rehabilitation provisions requires the use of significant estimates and assumptions, including, but not limited to:
the extent (due to legal or constructive obligations) of potential activities required for the removal of infrastructure and rehabilitation activities;
costs associated with future rehabilitation activities;
applicable real discount rates;
the timing of cash flows and ultimate closure of operations.
Rehabilitation activities are generally undertaken at the end of the production life at the individual sites. Remaining production lives range from 1-98 years with an average for all sites, weighted by current closure provision, of approximately 32 years. A 0.5 per cent decrease in the real discount rates applied at 30 June 2019 would result in an increase to the closure and rehabilitation provision of US$618 million, an increase in property, plant and equipment of US$524 million in relation to operating sites and an income statement charge of US$94 million in respect of closed sites. In addition, the change would result in an increase of approximately US$42 million to depreciation expense and an immaterial reduction in net finance costs for the year ending 30 June 2020.
Estimates can also be impacted by the emergence of new restoration techniques, changes in regulatory requirements for rehabilitation, and experience at other operations. These uncertainties may result in future actual expenditure differing from the amounts currently provided for in the balance sheet.
Capital structure 15 Share capital | | | | BHP Group Limited | | BHP Group Plc | | | BHP Group Limited | | BHP Group Plc | | | | | 2019
shares | | 2018
shares | | 2017
shares | | 2019
shares | | 2018
shares | | 2017
shares | | | 2020
shares | | 2019
shares | | 2018
shares | | 2020
shares | | 2019
shares | | 2018
shares | | Share capital issued | | | | | | | | | | | | | | | | | | | | | | | | | Opening number of shares | | | 3,211,691,105 | | | 3,211,691,105 | | | 3,211,691,105 | | | | 2,112,071,796 | | | 2,112,071,796 | | | 2,112,071,796 | | | | 2,945,851,394 | | | 3,211,691,105 | | | 3,211,691,105 | | | | 2,112,071,796 | | | 2,112,071,796 | | | 2,112,071,796 | | Purchase of shares by ESOP Trusts | | | (6,854,057 | ) | | (7,469,236 | ) | | (6,481,292 | ) | | | (274,069 | ) | | (679,223 | ) | | (225,646 | ) | | | (5,975,189 | ) | | (6,854,057 | ) | | (7,469,236 | ) | | | (185,297 | ) | | (274,069 | ) | | (679,223 | ) | Employee share awards exercised following vesting | | | 5,902,588 | | | 7,339,522 | | | 6,945,570 | | | | 275,984 | | | 711,705 | | | 940,070 | | | | 6,893,113 | | | 5,902,588 | | | 7,339,522 | | | | 222,245 | | | 275,984 | | | 711,705 | | Movement in treasury shares under Employee Share Plans | | | 951,469 | | | 129,714 | | | (464,278 | ) | | | (1,915 | ) | | (32,482 | ) | | (714,424 | ) | | | (917,924 | ) | | 951,469 | | | 129,714 | | | | (36,948 | ) | | (1,915 | ) | | (32,482 | ) | Shares bought back and cancelled (1) | | | (265,839,711 | ) | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | (265,839,711 | ) | | | – | | | | – | | | | – | | | | – | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Closing number of shares (2) | | | 2,945,851,394 | | | 3,211,691,105 | | | 3,211,691,105 | | | | 2,112,071,796 | | | 2,112,071,796 | | | 2,112,071,796 | | | | 2,945,851,394 | | | 2,945,851,394 | | | 3,211,691,105 | | | | 2,112,071,796 | | | 2,112,071,796 | | | 2,112,071,796 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Comprising: | | | | | | | | | | | | | | | | | | | | | | | | | Shares held by the public | | | 2,944,703,079 | | | 3,211,494,259 | | | 3,211,623,973 | | | | 2,112,032,077 | | | 2,112,030,162 | | | 2,111,997,680 | | | | 2,945,621,003 | | | 2,944,703,079 | | | 3,211,494,259 | | | | 2,112,069,025 | | | 2,112,032,077 | | | 2,112,030,162 | | Treasury shares | | | 1,148,315 | | | 196,846 | | | 67,132 | | | | 39,719 | | | 41,634 | | | 74,116 | | | | 230,391 | | | 1,148,315 | | | 196,846 | | | | 2,771 | | | 39,719 | | | 41,634 | | Other share classes | | | | | | | | | | | | | | | | | | | | | | | | | Special Voting share of no par value | | | 1 | | | 1 | | | 1 | | | | – | | | | – | | | | – | | | | 1 | | | 1 | | | 1 | | | | – | | | | – | | | | – | | Special Voting share of US$0.50 par value | | | – | | | | – | | | | – | | | | 1 | | | 1 | | | 1 | | | | – | | | | – | | | | – | | | | 1 | | | 1 | | | 1 | | 5.5% Preference shares of £1 each | | | – | | | | – | | | | – | | | | 50,000 | | | 50,000 | | | 50,000 | | | | – | | | | – | | | | – | | | | 50,000 | | | 50,000 | | | 50,000 | | DLC Dividend share | | | 1 | | | 1 | | | 1 | | | | – | | | | – | | | | – | | | | 1 | | | 1 | | | 1 | | | | – | | | | – | | | | – | | | | | | | | | | | | | | | |
| (1) | During December 2018, BHP completed an off-market buy-back program of US$5.2 billion of BHP Group Limited shares related to the disbursement of proceeds from the disposal of Onshore US. |
| (2) | No fully paid ordinary shares in BHP Group Limited or BHP Group Plc were issued on the exercise of Group Incentive Schemeemployee share awards during the period 1 July 20192020 to 53 September 2019.2020. |
F-48
Recognition and measurement Share capital of BHP Group Limited and BHP Group Plc is composed of the following classes of shares: | | | | | Ordinary shares fully paid | | Special Voting shares | | Preference shares | | BHP Group Limited ordinary shares fully paid and BHP Group Plc ordinary shares fully paid of US$0.50 par value, represent 99.99 per cent of the total number of shares. Any profit remaining after payment of preferred distributions is available for distribution to the holders of BHP Group Limited and BHP Group Plc ordinary shares in equal amounts per share. | | Each of BHP Group Limited and BHP Group Plc issued one Special Voting share to facilitate joint voting by shareholders of BHP Group Limited and BHP Group Plc on Joint Electorate Actions. There has been no movement in these shares. | | Preference shares have the right to repayment of the amount paid up on the nominal value and any unpaid dividends in priority to the holders of any other class of shares in BHP Group Plc on a return of capital or winding up. The holders of preference shares have limited voting rights if payment of the preference dividends are six months or more in arrears or a resolution is passed changing the rights of the preference shareholders. There has been no movement in these shares, all of which are held by JP Morgan Limited. |
| | | | | DLC Dividend share | | Treasury shares | | | | The DLC Dividend share supports the Dual Listed Company (DLC) equalisation principles in place since the merger in 2001, including the requirement that ordinary shareholders of BHP Group Plc and BHP Group Limited are paid equal cash dividends per share. This share enables efficient and flexible capital management across the DLC and was issued on 23 February 2016 at par value of US$10. | | Treasury shares are shares of BHP Group Limited and BHP Group Plc and are held by the ESOP Trusts for the purpose of issuing shares to employees under the Group’s Employee Share Plans. Treasury shares are recognised at cost and deducted from equity, net of any income tax effects. When the treasury shares are subsequently sold or reissued, any consideration received, net of any directly attributable costs and income tax effects, is recognised as an increase in equity. Any difference between the carrying amount and the consideration, if reissued, is recognised in retained earnings. | | |
F-49
16 Other equity | | | | | | | | | | | | | | | | | | 2019 | | | 2018 | | | 2017 | | | Recognition and measurement | | | | US$M | | | US$M | | | US$M | | | | Share premium account | | | 518 | | | | 518 | | | | 518 | | | The share premium account represents the premium paid on the issue of BHP Group Plc shares recognised in accordance with the UK Companies Act 2006. | Foreign currency translation reserve | | | 37 | | | | 42 | | | | 40 | | | The foreign currency translation reserve represents exchange differences arising from the translation ofnon-US dollar functional currency operations within the Group into US dollars. | Employee share awards reserve | | | 213 | | | | 196 | | | | 214 | | | The employee share awards reserve represents the accrued employee entitlements to share awards that have been charged to the income statement and have not yet been exercised. Once exercised, the difference between the accumulated fair value of the awards and their historicalon-market purchase price is recognised in retained earnings. | Cash flow hedge reserve | | | 114 | | | | 58 | | | | 153 | | | The cash flow hedging reserve represents hedging gains and losses recognised on the effective portion of cash flow hedges. The cumulative deferred gain or loss on the hedge is recognised in the income statement when the hedged transaction impacts the income statement, or is recognised as an adjustment to the cost ofnon-financial hedged items. The hedging reserve records the portion of the gain or loss on a hedging instrument in a cash flow hedge that is determined to be an effective hedge relationship. | Cost of hedging reserve | | | (74 | ) | | | – | | | | – | | | The cost of hedging reserve represents the recognition of certain costs of hedging for example, basis adjustments, which have been excluded from the hedging relationship and deferred in other comprehensive income until the hedged transaction impacts the income statement. | Equity investments reserve | | | 17 | | | | 16 | | | | 10 | | | The financial assets reserve represents the revaluation of investments in shares recognised through other comprehensive income. Where a revalued financial asset is sold, the relevant portion of the reserve is transferred to retained earnings. | Capital redemption reserve | | | 177 | | | | 177 | | | | 177 | | | The capital redemption reserve represents the par value of BHP Group Plc shares that were purchased and subsequently cancelled. The cancellation of the shares creates anon-distributable capital redemption reserve. | Non-controlling interest contribution reserve | | | 1,283 | | | | 1,283 | | | | 1,288 | | | Thenon-controlling interest contribution reserve represents the excess of consideration received over the book value of net assets attributable to equity instruments when acquired bynon-controlling interests. | | | | | | | | | | | | | | | | Total reserves | | | 2,285 | | | | 2,290 | | | | 2,400 | | | | | | | | | | | | | | | | | | |
F-50
| | | | | | | | | | | | | | | | | | 2020 | | | 2019 | | | 2018 | | | Recognition and measurement | | | | US$M | | | US$M | | | US$M | | | | Share premium account | | | 518 | | | | 518 | | | | 518 | | | The share premium account represents the premium paid on the issue of BHP Group Plc shares recognised in accordance with the UK Companies Act 2006. | Foreign currency translation reserve | | | 39 | | | | 37 | | | | 42 | | | The foreign currency translation reserve represents exchange differences arising from the translation of non-US dollar functional currency operations within the Group into US dollars. | Employee share awards reserve | | | 246 | | | | 213 | | | | 196 | | | The employee share awards reserve represents the accrued employee entitlements to share awards that have been charged to the income statement and have not yet been exercised. Once exercised, the difference between the accumulated fair value of the awards and their historical on-market purchase price is recognised in retained earnings. | Cash flow hedge reserve | | | 50 | | | | 114 | | | | 58 | | | The cash flow hedge reserve represents hedging gains and losses recognised on the effective portion of cash flow hedges. The cumulative deferred gain or loss on the hedge is recognised in the income statement when the hedged transaction impacts the income statement, or is recognised as an adjustment to the cost of non-financial hedged items. The hedging reserve records the portion of the gain or loss on a hedging instrument in a cash flow hedge that is determined to be an effective hedge relationship. | Cost of hedging reserve | | | (23 | ) | | | (74 | ) | | | – | | | The cost of hedging reserve represents the recognition of certain costs of hedging for example, basis adjustments, which have been excluded from the hedging relationship and deferred in other comprehensive income until the hedged transaction impacts the income statement. | Equity investments reserve | | | 16 | | | | 17 | | | | 16 | | | The financial assets reserve represents the revaluation of investments in shares recognised through other comprehensive income. Where a revalued financial asset is sold, the relevant portion of the reserve is transferred to retained earnings. | Capital redemption reserve | | | 177 | | | | 177 | | | | 177 | | | The capital redemption reserve represents the par value of BHP Group Plc shares that were purchased and subsequently cancelled. The cancellation of the shares creates a non-distributable capital redemption reserve. | Non-controlling interest contribution reserve | | | 1,283 | | | | 1,283 | | | | 1,283 | | | The non-controlling interest contribution reserve represents the excess of consideration received over the book value of net assets attributable to equity instruments when acquired by non-controlling interests. | | | | | | | | | | | | | | | | Total reserves | | | 2,306 | | | | 2,285 | | | | 2,290 | | | | | | | | | | | | | | | | | | |
Summarised financial information relating to each of the Group’s subsidiaries withnon-controlling interests (NCI) that are material to the Group before any intra-group eliminations is shown below: | | | | 2019 | | 2018 | | | 2020 | | 2019 | | US$M | | Minera
Escondida
Limitada | | Other
individually
immaterial
subsidiaries
(incl. intra-
group
eliminations) | | Total | | Minera
Escondida
Limitada | | Other
individually
immaterial
subsidiaries
(incl. intra-
group
eliminations) | | Total | | | Minera
Escondida
Limitada | | Other
individually
immaterial
subsidiaries
(incl. intra
-group
eliminations) | | | Total | | Minera
Escondida
Limitada | | Other
individually
immaterial
subsidiaries
(incl. intra
-group
eliminations) | | Total | | Group share (per cent) | | | 57.5 | | | | | | | 57.5 | | | | | | | | 57.5 | | | | | | | 57.5 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Current assets | | | 2,456 | | | | | | | 2,751 | | | | | | | | 2,432 | | | | | | | 2,456 | | | | | | Non-current assets | | | 12,538 | | | | | | | 13,389 | | | | | | | | 12,121 | | | | | | | 12,538 | | | | | | Current liabilities | | | (1,826 | ) | | | | | | (1,781 | ) | | | | | | | (1,614 | ) | | | | | | (1,826 | ) | | | | | Non-current liabilities | | | (4,122 | ) | | | | | | (4,352 | ) | | | | | | | (4,613 | ) | | | | | | (4,122 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Net assets | | | 9,046 | | | | | | | 10,007 | | | | | | | | 8,326 | | | | | | | 9,046 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Net assets attributable to NCI | | | 3,845 | | | | 739 | | | | 4,584 | | | 4,253 | | | 825 | | | 5,078 | | | | 3,539 | | | | 771 | | | | 4,310 | | | 3,845 | | | 739 | | | 4,584 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Revenue | | | 6,876 | | | | | | | 8,775 | | | | | | | | 6,719 | | | | | | | 6,876 | | | | | | Profit after taxation | | | 1,360 | | | | | | | 2,221 | | | | | | | | 1,088 | | | | | | | 1,360 | | | | | | Other comprehensive income | | | (1 | ) | | | | | | (2 | ) | | | | | | | (27 | ) | | | | | | (1 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total comprehensive income | | | 1,359 | | | | | | | 2,219 | | | | | | | | 1,061 | | | | | | | 1,359 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Profit after taxation attributable to NCI | | | 578 | | | | 301 | | | | 879 | | | 944 | | | 174 | | | 1,118 | | | | 462 | | | | 318 | | | | 780 | | | 578 | | | 301 | | | 879 | | Other comprehensive income attributable to NCI | | | – | | | | (1 | ) | | | (1 | ) | | (1 | ) | | 1 | | | | – | | | | (11 | ) | | | – | | | | (11 | ) | | | – | | | (1 | ) | | (1 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Net operating cash flow | | | 3,283 | | | | | | | 5,041 | | | | | | | | 2,637 | | | | | | | 3,283 | | | | | | Net investing cash flow | | | (1,034 | ) | | | | | | (997 | ) | | | | | | | (919 | ) | | | | | | (1,034 | ) | | | | | Net financing cash flow | | | (2,517 | ) | | | | | | (3,392 | ) | | | | | | | (1,920 | ) | | | | | | (2,517 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Dividends paid to NCI (1) | | | 986 | | | | 219 | | | | 1,205 | | | 1,469 | | | 135 | | | 1,604 | | | | 757 | | | | 286 | | | | 1,043 | | | 986 | | | 219 | | | 1,205 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (1) | Includes dividends paid tonon-controlling interests related to Onshore US of US$ nil (2019: US$7 million (2018: US$22 million). Refer to note 2728 ‘Discontinued operations’. |
While the Group controls Minera Escondida Limitada, thenon-controlling interests hold certain protective rights that restrict the Group’s ability to sell assets held by Minera Escondida Limitada, or use the assets in other subsidiaries and operations owned by the Group. Minera Escondida Limitada is also restricted from paying dividends without the approval of thenon-controlling interests. F-51
17 Dividends | | | | Year ended
30 June 2019 | | | Year ended
30 June 2018 | | | Year ended
30 June 2017 | | | Year ended
30 June 2020 | | | Year ended
30 June 2019 | | | Year ended
30 June 2018 | | | | | Per share | | | Total | | | Per share | | | Total | | | Per share | | | Total | | | Per share | | | Total | | | Per share | | | Total | | | Per share | | | Total | | | | | US cents | | | US$M | | | US cents | | | US$M | | | US cents | | | US$M | | | US cents | | | US$M | | | US cents | | | US$M | | | US cents | | | US$M | | Dividends paid during the period (1) | | | | | | | | | | | | | | | | | | | | | | | | | Prior year final dividend | | | 63 | | | | 3,356 | | | | 43 | | | | 2,291 | | | | 14 | | | | 746 | | | | 78 | | | | 3,946 | | | | 63 | | | | 3,356 | | | | 43 | | | | 2,291 | | Interim dividend | | | 55 | | | | 2,788 | | | | 55 | | | | 2,930 | | | | 40 | | | | 2,125 | | | | 65 | | | | 3,288 | | | | 55 | | | | 2,788 | | | | 55 | | | | 2,930 | | Special dividend | | | 102 | | | | 5,158 | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | 102 | | | | 5,158 | | | | – | | | | – | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 220 | | | | 11,302 | | | | 98 | | | | 5,221 | | | | 54 | | | | 2,871 | | | | 143 | | | | 7,234 | | | | 220 | | | | 11,302 | | | | 98 | | | | 5,221 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (1) | 5.5 per cent dividend on 50,000 preference shares of £1 each determined and paid annually (2018:(2019: 5.5 per cent; 2017:2018: 5.5 per cent). |
Dividends paid during the period differs from the amount of dividends paid in the Cash Flow Statement as a result of foreign exchange gains and losses relating to the timing of equity distributions between the record date and the payment date. An additional derivative settlement of US$322 million was made as part of the funding of the interim dividend and is disclosed in Proceeds/(settlements) of cash management related instruments in the Cash Flow Statement. The Dual Listed Company merger terms require that ordinary shareholders of BHP Group Limited and BHP Group Plc are paid equal cash dividends on a per share basis. Each American Depositary Share (ADS) represents two ordinary shares of BHP Group Limited or BHP Group Plc. Dividends determined on each ADS represent twice the dividend determined on BHP Group Limited or BHP Group Plc ordinary shares. Dividends are determined afterperiod-end and announced with the results for the period. Interim dividends are determined in February and paid in March. Final dividends are determined in August and paid in September. Dividends determined are not recorded as a liability at the end of the period to which they relate. On 17 December 2018, BHP Group Limited and BHP Group Plc determined a special dividend of US$1.02 per share (US$5.2 billion), which was paid on 30 January 2019 and relatedSubsequent to the disbursement of proceeds from the disposal of Onshore US. Subsequent toyear-end, on 2018 August 2019,2020, BHP Group Limited and BHP Group Plc determined a final dividend of 7855 US cents per share (US$3,9442,782 million), which will be paid on 2522 September 20192020 (30 June 2019: final dividend of 78 US cents per share – US$3,944 million; 30 June 2018: final dividend of 63 US cents per share – US$3,354 million; 30 June 2017: final dividend of 43 US cents per share – US$2,2893,356 million). BHP Group Limited dividends for all periods presented are, or will be, fully franked based on a tax rate of 30 per cent. | | | | 2019 | | | 2018 | | | 2017 | | | 2020 | | | 2019 | | | 2018 | | | | | US$M | | | US$M | | | US$M | | | US$M | | | US$M | | | US$M | | Franking credits as at 30 June | | | 8,681 | | | | 10,400 | | | | 10,155 | | | | 10,980 | | | | 8,681 | | | | 10,400 | | Franking credits arising from the payment of current tax | | | 1,194 | | | | 1,330 | | | | 1,239 | | | | 471 | | | | 1,194 | | | | 1,330 | | | | | | | | | | | | | | | | | | | | | Total franking credits available (1) | | | 9,875 | | | | 11,730 | | | | 11,394 | | | | 11,451 | | | | 9,875 | | | | 11,730 | | | | | | | | | | | | | | | | | | | | |
| (1) | The payment of the final 20192020 dividend determined after 30 June 20192020 will reduce the franking account balance by US$984694 million. |
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18 Provisions for dividends and other liabilities The disclosure below excludes closure and rehabilitation provisions (refer to note 14 ‘Closure and rehabilitation provisions’), employee benefits, restructuring and post-retirement employee benefits provisions (refer to note 2425 ‘Employee benefits, restructuring and post-retirement employee benefits provisions’) and provisions related to the Samarco dam failure (refer to note 4 ‘Significant events – Samarco dam failure’). | | | | | | | | | | | | 2019 | | | 2018 | | | | | US$M | | | US$M | | Movement in provision for dividends and other liabilities | | | | | | | | | At the beginning of the financial year | | | 944 | | | | 984 | | Dividends determined | | | 11,302 | | | | 5,221 | | Charge/(credit) for the year: | | | | | | | | | Underlying | | | 372 | | | | 337 | | Discounting | | | 10 | | | | 4 | | Exchange variations | | | 101 | | | | 3 | | Released during the year | | | (391 | ) | | | (78 | ) | Utilisation | | | (338 | ) | | | (150 | ) | Dividends paid | | | (11,395 | ) | | | (5,325 | ) | Transferred to liabilities held for sale | | | – | | | | (39 | ) | Transfers and other movements | | | (104 | ) | | | (13 | ) | | | | | | | | | | At the end of the financial year | | | 501 | | | | 944 | | | | | | | | | | | Comprising: | | | | | | | | | Current | | | 220 | | | | 290 | | Non-current | | | 281 | | | | 654 | | | | | | | | | | |
F-53
| | | | | | | | | | | | 2020 | | | 2019 | | | | | US$M | | | US$M | | Movement in provision for dividends and other liabilities | | | | | | | | | At the beginning of the financial year | | | 501 | | | | 944 | | Dividends determined | | | 7,234 | | | | 11,302 | | Charge/(credit) for the year: | | | | | | | | | Underlying | | | 1,027 | | | | 372 | | Discounting | | | 3 | | | | 10 | | Exchange variations | | | (356 | ) | | | 101 | | Released during the year | | | (94 | ) | | | (391 | ) | Utilisation | | | (99 | ) | | | (338 | ) | Dividends paid | | | (6,876 | ) | | | (11,395 | ) | Transfers and other movements | | | (100 | ) | | | (104 | ) | | | | | | | | | | At the end of the financial year | | | 1,240 | | | | 501 | | | | | | | | | | | Comprising: | | | | | | | | | Current | | | 258 | | | | 220 | | Non-current | | | 982 | | | | 281 | | | | | | | | | | |
Financial management 19 Net debt The Group seeks to maintain a strong balance sheet and deploys its capital with reference to the Capital Allocation Framework. The Group monitors capital using the net debt balance and the gearing ratio, being the ratio of net debt to net debt plus net assets. With effect from 1 July 2019, the net debt definition includes the fair value of derivative financial instruments used to hedge cash and borrowings. Management believes this amendment is useful because it reflects the Group’s risk management strategy of reducing the volatility of net debt caused by fluctuations in foreign exchange and interest rates. | | | | | | | | | | | | | | | | | | | | 2019 | | | 2018 | | US$M | | Current | | | Non-current | | | Current | | | Non-current | | Interest bearing liabilities | | | | | | | | | | | | | | | | | Bank loans | | | 508 | | | | 1,990 | | | | 308 | | | | 2,247 | | Notes and debentures | | | 1,002 | | | | 20,527 | | | | 2,228 | | | | 21,070 | | Finance leases | | | 65 | | | | 650 | | | | 77 | | | | 725 | | Bank overdraft and short-term borrowings | | | 20 | | | | – | | | | 58 | | | | – | | Other | | | 66 | | | | – | | | | 65 | | | | 27 | | | | | | | | | | | | | | | | | | | Total interest bearing liabilities | | | 1,661 | | | | 23,167 | | | | 2,736 | | | | 24,069 | | | | | | | | | | | | | | | | | | | Less cash and cash equivalents | | | | | | | | | | | | | | | | | Cash | | | 2,210 | | | | – | | | | 1,065 | | | | – | | Short-term deposits | | | 13,403 | | | | – | | | | 14,806 | | | | – | | | | | | | | | | | | | | | | | | | Total cash and cash equivalents | | | 15,613 | | | | – | | | | 15,871 | | | | – | | | | | | | | | | | | | | | | | | | Net debt | | | | | | | 9,215 | | | | | | | | 10,934 | | | | | | | | | | | | | | | | | | | Net assets | | | | | | | 51,824 | | | | | | | | 60,670 | | | | | | | | | | | | | | | | | | | Gearing | | | | | | | 15.1 | % | | | | | | | 15.3 | % | | | | | | | | | | | | | | | | | |
Net debt-related derivative financial instruments are a subset of the other financial assets and liabilities presented in the Consolidated Balance Sheet. Prior period comparatives have been restated to reflect the change in net debt calculation. As a result of the adoption of IFRS 16/AASB 16 ‘Leases’ (IFRS 16) from 1 July 2019, the current period ‘Total Interest bearing liabilities’ includes a US$2,793 million increase in gross debt during the year. The Group elected to apply the modified retrospective transition approach to IFRS 16, with no restatement of comparative periods. Refer to note 20 ‘Leases’ for information on lease liabilities. Vessel lease contracts that are priced with reference to a freight index, which did not meet the definition of a lease under IAS 17/AASB 117 ‘Leases’ (IAS 17) , now meet the definition of a lease under IFRS 16. These contracts are required to be remeasured at each reporting date to the prevailing freight index. While these liabilities are included in the Group interest bearing liabilities, they are excluded from the net debt calculation as they do not align with how the Group assesses net debt for decision making in relation to the Capital Allocation Framework. In addition, the freight index has historically been volatile which creates significant short-term fluctuation in these liabilities. As of 1 January 2020, the Group excludes these liabilities from its net debt calculation. | | | | | | | | | | | | | | | | | | | | 2020 | | | 2019
Restated | | US$M | | Current | | | Non-current | | | Current | | | Non-current | | Interest bearing liabilities | | | | | | | | | | | | | | | | | Bank loans | | | 737 | | | | 1,755 | | | | 508 | | | | 1,990 | | Notes and debentures | | | 3,354 | | | | 17,691 | | | | 1,002 | | | | 20,527 | | Lease liabilities (1) | | | 853 | | | | 2,590 | | | | 65 | | | | 650 | | Bank overdraft and short-term borrowings | | | – | | | | – | | | | 20 | | | | – | | Other | | | 68 | | | | – | | | | 66 | | | | – | | | | | | | | | | | | | | | | | | | Total interest bearing liabilities | | | 5,012 | | | | 22,036 | | | | 1,661 | | | | 23,167 | | | | | | | | | | | | | | | | | | | Less: Lease liability associated with index-linked freight contracts | | | 379 | | | | 781 | | | | – | | | | – | | | | | | | | | | | | | | | | | | | Less: Cash and cash equivalents | | | | | | | | | | | | | | | | | Cash | | | 3,493 | | | | – | | | | 2,210 | | | | – | | Short-term deposits | | | 9,933 | | | | – | | | | 13,403 | | | | – | | | | | | | | | | | | | | | | | | | Less: Total cash and cash equivalents | | | 13,426 | | | | – | | | | 15,613 | | | | – | | | | | | | | | | | | | | | | | | | Less: Derivatives included in net debt | | | | | | | | | | | | | | | | | Net debt management related instruments (2) | | | (162 | ) | | | 595 | | | | (48 | ) | | | (156 | ) | Net cash management related instruments (3) | | | (15 | ) | | | – | | | | (27 | ) | | | – | | | | | | | | | | | | | | | | | | | Less: Total derivatives included in net debt | | | (177 | ) | | | 595 | | | | (75 | ) | | | (156 | ) | | | | | | | | | | | | | | | | | | Net debt | | | | | | | 12,044 | | | | | | | | 9,446 | | | | | | | | | | | | | | | | | | | Net assets | | | | | | | 52,246 | | | | | | | | 51,824 | | | | | | | | | | | | | | | | | | | Gearing | | | | | | | 18.7% | | | | | | | | 15.4% | | | | | | | | | | | | | | | | | | |
| (1) | Reflects the impact of IFRS 16. Refer to note 20 ‘Leases’. |
| (2) | Represents the net cross currency and interest rate swaps designated as effective hedging instruments included within current and non-current other financial assets and liabilities. |
| (3) | Represents the net forward exchange contracts included within current and non-current other financial assets and liabilities. |
Cash and short-term deposits are disclosed in the cash flow statement net of bank overdrafts and interest bearing liabilities at call. | | | | 2019 | | 2018 | | 2017 | | | 2020 | | | 2019 | | 2018 | | | | | US$M | | US$M | | US$M | | | US$M | | | US$M | | US$M | | Total cash and cash equivalents | | | 15,613 | | | 15,871 | | | 14,153 | | | | 13,426 | | | | 15,613 | | | 15,871 | | Bank overdrafts and short-term borrowing | | | (20 | ) | | (58 | ) | | (45 | ) | | Bank overdrafts and short-term borrowings | | | | – | | | | (20 | ) | | (58 | ) | | | | | | | | | | | | | | | | | | | | Total cash and cash equivalents, net of overdrafts | | | 15,593 | | | 15,813 | | | 14,108 | | | | 13,426 | | | | 15,593 | | | 15,813 | | | | | | | | | | | | | | | | | | | | |
Recognition and measurement Cash and short-term deposits in the balance sheet comprise cash at bank and on hand and highly liquid cash deposits with short-term maturities that are readily convertible to known amounts of cash with insignificant risk of change in value. The Group considers that the carrying value of cash and cash equivalents approximate fair value due to their short term to maturity. Cash and cash equivalents includes US$10896 million (2018:(2019: US$98108 million) restricted by legal or contractual arrangements. F-54
Interest bearing liabilities and cash and cash equivalents include balances denominated in the following currencies: | | | | Interest bearing liabilities | | | Cash and cash equivalents | | | Interest bearing liabilities | | | Cash and cash equivalents | | | | | 2019 | | | 2018 | | | 2019 | | | 2018 | | | 2020 | | | 2019 | | | 2020 | | | 2019 | | | | | US$M | | | US$M | | | US$M | | | US$M | | | US$M | | | US$M | | | US$M | | | US$M | | USD | | | 12,485 | | | | 12,981 | | | | 9,214 | | | | 7,024 | | | | 14,625 | | | | 12,485 | | | | 9,555 | | | | 9,214 | | EUR | | | 7,680 | | | | 9,070 | | | | 6 | | | | 5,845 | | | | 7,323 | | | | 7,680 | | | | 4 | | | | 6 | | GBP | | | 3,118 | | | | 3,104 | | | | 48 | | | | 1,560 | | | | 3,272 | | | | 3,118 | | | | 519 | | | | 48 | | AUD | | | 951 | | | | 1,077 | | | | 3,023 | | | | 9 | | | | 1,055 | | | | 951 | | | | 1,011 | | | | 3,023 | | CAD | | | 594 | | | | 573 | | | | 3,092 | | | | 1,301 | | | | 597 | | | | 594 | | | | 2,131 | | | | 3,092 | | Other | | | – | | | | – | | | | 230 | | | | 132 | | | | 176 | | | | – | | | | 206 | | | | 230 | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | | 24,828 | | | | 26,805 | | | | 15,613 | | | | 15,871 | | | | 27,048 | | | | 24,828 | | | | 13,426 | | | | 15,613 | | | | | | | | | | | | | | | | | | | | | | | | | | |
The Group enters into derivative transactions to convert the majority of its exposures above into US dollars. Further information on the Group’s risk management activities relating to these balances is provided in note 2122 ‘Financial risk management’. Liquidity risk The Group’s liquidity risk arises from the possibility that it may not be able to settle or meet its obligations as they fall due and is managed as part of the portfolio risk management strategy. Operational, capital and regulatory requirements are considered in the management of liquidity risk, in conjunction with short-term and long-term forecast information. Recognising the cyclical volatility of operating cash flows, the Group has defined minimum target cash and liquidity buffers to be maintained to mitigate liquidity risk and support operations through the cycle. The Group’s strong credit profile, diversified funding sources, its minimum cash buffer and its committed credit facilities ensure that sufficient liquid funds are maintained to meet its daily cash requirements. Standard & Poor’s credit rating of the Group remained at the A level with stable outlook throughout FY2019.FY2020. On 1 May 2020, Moody’s upgradedaffirmed its credit rating of the Group from A3 toat A2 on 31 October 2018 with a stable outlook thereafter in FY2019.outlook. There were no defaults on the Group’s liabilities during the period. Counterparty risk The Group is exposed to credit risk from its financing activities, including short-term cash investments such as deposits with banks and derivative contracts. This risk is managed by Group Treasury in line with the counterparty risk framework, which aims to minimise the exposure to a counterparty and mitigate the risk of financial loss through counterparty failure. Exposure to counterparties is monitored at a Group level across all products and includes exposure with derivatives and cash investments. Investments and derivatives are only transacted with approved counterparties who have been assigned specific limits based on a quantitative credit risk model. These limits are updated at leastbi-annually. Additionally, derivatives are subject to tenor limits and investments are subject to concentration limits by rating. Derivative fair values are inclusive of valuation adjustments that take into account consideration of both the counterparty and the Group’s risk of default. F-55
Standby arrangements and unused credit facilities The Group’s committed revolving credit facility operates as a back-stop to the Group’s uncommitted commercial paper program. The combined amount drawn under the facility or as commercial paper will not exceed US$6.05.5 billion. As at 30 June 2019,2020, US$ nil commercial paper was drawn (2018:(2019: US$ nil). The revolving credit facility was refinanced on 10 October 2019 and has a five-year maturity ending 7 May 2021.10 October 2024. A commitment fee is payable on the undrawn balance and an interest rate comprising an interbank rate plus a margin applies to any drawn balance. The agreed margins are typical for a credit facility extended to a company with the Group’s credit rating. Maturity profile of financial liabilities The maturity profile of the Group’s financial liabilities based on the undiscounted contractual amounts, taking into account the derivatives related to debt, is as follows: | 2020 US$M | | | Bank loans,
debentures and
other loans | | Expected
future
interest
payments | | Derivatives
related to
debentures | | Other
derivatives | | Obligations
under
lease
liabilities (1) | | Trade and
other
payables (2) | | Total | | Due for payment: | | | | | | | | | | | | | | | | In one year or less or on demand | | | | 4,138 | | | | 813 | | | | 260 | | | | 60 | | | | 927 | | | | 5,622 | | | | 11,820 | | In more than one year but not more than two years | | | | 1,665 | | | | 702 | | | | 81 | | | | – | | | | 630 | | | | 1 | | | | 3,079 | | In more than two years but not more than five years | | | | 5,727 | | | | 1,713 | | | | 819 | | | | – | | | | 1,335 | | | | – | | | | 9,594 | | In more than five years | | | | 10,101 | | | | 4,368 | | | | 974 | | | | – | | | | 1,043 | | | | – | | | | 16,486 | | | | | | | | | | | | | | | | | | | | | | | | | Total | | | | 21,631 | | | | 7,596 | | | | 2,134 | | | | 60 | | | | 3,935 | | | | 5,623 | | | | 40,979 | | | | | | | | | | | | | | | | | | | | | | | | | Carrying amount | | | | 23,605 | | | | – | | | | 1,579 | | | | 60 | | | | 3,443 | | | | 5,623 | | | | 34,310 | | | | | | | | | | | | | | | | | | | | | | | | | | 2019 US$M | | Bank loans,
debentures and
other loans | | Expected
future
interest
payments | | Derivatives
related to
debentures | | Other
derivatives | | Obligations
under
finance
leases | | Trade and
other
payables(1) | | Total | | | Bank loans,
debentures and
other loans | | Expected
future
interest
payments | | Derivatives
related to
debentures | | Other
derivatives | | Obligations
under
lease
liabilities (1) | | Trade and
other
payables (2) | | Total | | Due for payment: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | In one year or less or on demand | | | 1,587 | | | | 864 | | | | 200 | | | | 64 | | | | 110 | | | | 6,555 | | | | 9,380 | | | 1,587 | | | 864 | | | 200 | | | 64 | | | 110 | | | 6,555 | | | 9,380 | | In more than one year but not more than two years | | | 4,107 | | | | 775 | | | | 226 | | | | 1 | | | | 110 | | | | 5 | | | | 5,224 | | | 4,107 | | | 775 | | | 226 | | | 1 | | | 110 | | | 5 | | | 5,224 | | In more than two years but not more than five years | | | 5,513 | | | | 1,864 | | | | 558 | | | | – | | | | 307 | | | | – | | | | 8,242 | | | 5,513 | | | 1,864 | | | 558 | | | | – | | | 307 | | | | – | | | 8,242 | | In more than five years | | | 11,662 | | | | 4,896 | | | | 1,102 | | | | – | | | | 501 | | | | – | | | | 18,161 | | | 11,662 | | | 4,896 | | | 1,102 | | | | – | | | 501 | | | | – | | | 18,161 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | | 22,869 | | | | 8,399 | | | | 2,086 | | | | 65 | | | | 1,028 | | | | 6,560 | | | | 41,007 | | | 22,869 | | | 8,399 | | | 2,086 | | | 65 | | | 1,028 | | | 6,560 | | | 41,007 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Carrying amount | | | 24,113 | | | | – | | | | 958 | | | | 65 | | | | 715 | | | | 6,560 | | | | 32,411 | | | 24,113 | | | | – | | | 958 | | | 65 | | | 715 | | | 6,560 | | | 32,411 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2018 US$M | | Bank loans,
debentures and
other loans | | Expected
future
interest
payments | | Derivatives
related to
debentures | | Other
derivatives | | Obligations
under
finance
leases | | Trade and
other
payables(1) | | Total | | | Due for payment: | | | | | | | | | | | | | | | | In one year or less or on demand | | 2,647 | | | 682 | | | 302 | | | 17 | | | 127 | | | 5,788 | | | 9,563 | | | In more than one year but not more than two years | | 1,545 | | | 957 | | | 188 | | | 1 | | | 113 | | | 3 | | | 2,807 | | | In more than two years but not more than five years | | 8,019 | | | 2,203 | | | 823 | | | | – | | | 335 | | | | – | | | 11,380 | | | In more than five years | | 13,287 | | | 5,519 | | | 1,191 | | | | – | | | 590 | | | | – | | | 20,587 | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | 25,498 | | | 9,361 | | | 2,504 | | | 18 | | | 1,165 | | | 5,791 | | | 44,337 | | | | | | | | | | | | | | | | | | | | | | | | | | Carrying amount | | 26,003 | | | | – | | | 1,213 | | | 18 | | | 802 | | | 5,791 | | | 33,827 | | | | | | | | | | | | | | | | | | | | | | | | | |
| (1) | Lease obligations as at 30 June 2020 and 30 June 2019 relate to lease liabilities under IFRS 16 and finance lease liabilities under IAS 17, respectively. |
| (2) | Excludes input taxes of US$162145 million (2018:(2019: US$189162 million) included in other payables. Refer to note 9 ‘Trade and other payables’. |
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20 Leases The Group applied IFRS 16/AASB 16 ‘Leases’ (IFRS 16) from 1 July 2019. The Group elected to apply the modified retrospective transition approach, with no restatement of comparative periods. The comparative information relating to leases presented throughout the Financial Statements is in accordance with IAS 17/AASB 117 ‘Leases’ (IAS 17). Refer to note 38 ‘New and amended accounting standards and interpretations’ for information on the transition effects of IFRS 16 and policy choices made on implementation. Movements in the Group’s lease liabilities during the year are as follows: | | | | | | | 2020 | | | | US$M | | At the beginning of the financial year (1) | | | 715 | | IFRS 16 transition | | | 2,301 | | Additions | | | 436 | | Remeasurements of index-linked freight contracts | | | 733 | | Lease payments | | | (761 | ) | Foreign exchange movement | | | (43 | ) | Amortisation of discounting | | | 90 | | Transfers and other movements | | | (28 | ) | | | | | | At the end of thefinancial year | | | 3,443 | | | | | | | Comprising: | | | | | Current liabilities | | | 853 | | Non-current liabilities | | | 2,590 | | | | | | |
| (1) | Relates to existing finance leases at 1 July 2019. |
A significant proportion by value of the Group’s lease contracts relate to plant facilities, office buildings and vessels. Lease terms for plant facilities and office buildings typically run for over 10 years and vessels for four to 10 years. Other leases include port facilities, various equipment and vehicles. The lease contracts contain a wide range of different terms and conditions including extension and termination options and variable lease payments. The Group’s lease obligations are included in the Group’s Interest bearing liabilities and, with the exception of vessel lease contracts that are priced with reference to a freight index, form part of the Group’s net debt. The maturity profile of lease liabilities based on the undiscounted contractual amounts is as follows: | | | | | | | | | Lease liability (1) | | 2020 | | | 2019 | | | | | US$M | | | US$M | | Due for payment: | | | | | | | | | In one year or less or on demand | | | 927 | | | | 110 | | In more than one year but not more than two years | | | 630 | | | | 110 | | In more than two years but not more than five years | | | 1,335 | | | | 307 | | In more than five years | | | 1,043 | | | | 501 | | | | | | | | | | | Total | | | 3,935 | | | | 1,028 | | | | | | | | | | | Carrying amount | | | 3,443 | | | | 715 | | | | | | | | | | |
| (1) | Lease liability as at 30 June 2019 represents finance lease liabilities under IAS 17. |
At 30 June 2020, commitments for leases not yet commenced based on undiscounted contractual amounts were US$1,458 million; and commitments relating to short-term leases were US$103 million. The Group’s aggregate amounts of minimum lease payments under non-cancellable operating leases at 30 June 2019 under IAS 17 were as follows (reported under note 32 ‘Commitments’ in FY2019): | | | | | Commitments under operating leases | | 2019 | | | | US$M | | Due not later than one year | | | 440 | | Due later than one year and not later than five years | | | 876 | | Due later than five years | | | 589 | | | | | | | Total | | | 1,905 | | | | | | |
Movements in the Group’s right-of-use assets during the year are as follows: | | | | | | | | | | | | | 2020 | | Land and
buildings | | | Plant and
equipment | | | Total | | | | | US$M | | | US$M | | | US$M | | | Net book value | | | | | | | | | | | | | At the beginning of the financial year (1) | | | – | | | | 492 | | | | 492 | | Assets recognised on adoption of IFRS 16 | | | 754 | | | | 1,400 | | | | 2,154 | | Additions | | | 104 | | | | 332 | | | | 436 | | Remeasurements of index-linked freight contracts | | | – | | | | 733 | | | | 733 | | Depreciation expensed during the period | | | (113 | ) | | | (543 | ) | | | (656 | ) | Depreciation classified as exploration | | | – | | | | (34 | ) | | | (34 | ) | Impairments, net of reversals | | | (2 | ) | | | (22 | ) | | | (24 | ) | Transfers and other movements | | | (54 | ) | | | – | | | | (54 | ) | | | | | | | | | | | | | | At the end of the financial year | | | 689 | | | | 2,358 | | | | 3,047 | | | | | | | | | | | | | | | – Cost | | | 804 | | | | 3,349 | | | | 4,153 | | – Accumulated depreciation and impairments | | | (115 | ) | | | (991 | ) | | | (1,106 | ) |
| (1) | Relates to assets previously held under finance leases under IAS 17. |
Right-of-use assets are included within the underlying asset classes in Property, plant and equipment. Refer to note 11 ‘Property, plant and equipment’. Amounts recorded in the income statement and the cash flow statement for the year were: | | | | | | | | | 2020 | | | | | | US$M | | | Included within | Income statement | | | | | | | Depreciation of right-of-use assets | | | 656 | | | Profit from operations | Short-term, low-value and variable lease costs (1) | | | 675 | | | Profit from operations | Interest on lease liabilities | | | 90 | | | Financial expenses | Cash flow statement | | | | | | | Principal lease payments | | | 671 | | | Cash flows from financing activities | Lease interest payments | | | 90 | | | Cash flows from operating activities |
| (1) | Relates to US$438 million of variable lease costs, US$211 million of short-term lease costs and US$26 million of low-value lease costs. |
Recognition and measurement (following adoption of IFRS 16) All leases with the exception of short-term (under 12 months) and low-value leases are recognised on the balance sheet, as a right-of-use asset and a corresponding interest bearing liability. Lease liabilities are initially measured at the present value of the future lease payments from the lease commencement date and are subsequently adjusted to reflect the interest on lease liabilities, lease payments and any remeasurements due to, for example, lease modifications or a change to future lease payments linked to an index or rate. Lease payments are discounted using the interest rate implicit in the lease, where this is readily determinable. Where the implicit interest rate is not readily determinable, the interest payments are discounted at the Group’s incremental borrowing rate, adjusted to reflect factors specific to the lease, including where relevant the currency, tenor and location of the lease. Low-value and short-term leases continue to be expensed to the income statement. Variable lease payments not dependent on an index or rate are excluded from lease liabilities, and expensed to the income statement. Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any remeasurement of lease liabilities. The cost will initially correspond to the lease liability, adjusted for initial direct costs, lease payments made prior to lease commencement, capitalised provisions for closure and rehabilitation and any lease incentives. The lease asset and liability associated with all index-linked freight contracts, including continuous voyage charters (CVCs), are measured at each reporting date based on the prevailing freight index (generally the Baltic C5 index). Lease costs are recognised in the income statement over the lease term in the form of depreciation on the right-of-use asset and finance charges representing the unwind of the discount on the lease liability, replacing certain operating lease expenses previously reported under IAS 17. Where the Group is the operator of an unincorporated joint operation and all investors are parties to a lease, the Group recognises its proportionate share of the lease liability and associated right-of-use asset. In the event the Group is the sole signatory to a lease, and therefore has the sole legal obligation to make lease payments, the lease liability is recognised in full. Where the associated right-of-use asset is sub-leased (under a finance sub-lease) to a joint operation, for instance where it is dedicated to a single operation and the joint operation has the right to direct the use of the asset, the Group recognises its proportionate share of the right-of-use asset and a net investment in the lease, representing amounts to be recovered from the other parties to the joint operation. If the Group is not party to the lease contract but sub-leases the associated right-of-use asset, it recognises its proportionate share of the right-of-use asset and a lease liability which is payable to the operator. | Key judgements and estimates Judgements: Certain contractual arrangements not in the form of a lease require the Group to apply significant judgement in evaluating whether the Group controls the right to direct the use of assets and therefore whether the contract contains a lease. Management considers all facts and circumstances in determining whether the Group or the supplier has the rights to direct how, and for what purpose, the underlying assets are used in certain mining contracts and other arrangements, including outsourcing arrangements, shipping arrangements and power purchase agreements. Judgement is used to assess which decision-making rights mostly affect the benefits of use of the assets for each arrangement. In addition to containing a lease, the Group’s contractual arrangements may include non-lease components. For example, certain mining services arrangements involve the provision of additional services, including maintenance, drilling activities and the supply of personnel. The Group has elected to separate these non-lease components from the lease components in measuring lease liabilities. Judgement is required to identify the lease and non-lease components. | | Estimates: Where the Group cannot readily determine the interest rate implicit in the lease, estimation is involved in the determination of the weighted average incremental borrowing rate to measure lease liabilities. The incremental borrowing rate reflects the rates of interest a lessee would have to pay to borrow over a similar term, with similar security, the funds necessary to obtain an asset of similar value to the right-of-use asset in a similar economic environment. Under the Group’s portfolio approach to debt management, the Group does not specifically borrow for asset purchases. Therefore, the incremental borrowing rate is estimated with reference to the Group’s corporate borrowing portfolio, adjusted to reflect the terms and conditions of the lease (including the impact of currency, credit rating of subsidiary entering into the lease and the term of the lease), at the inception of the lease arrangement or the time of lease modification. | | The Group estimates stand-alone prices, where such prices are not readily observable, in order to allocate the contractual payments between lease and non-lease components. |
21 Net finance costs | | | | 2019 | | 2018 | | 2017 | | | 2020 | | 2019 | | 2018 | | | | | US$M | | US$M | | US$M | | | US$M | | US$M | | US$M | | Financial expenses | | | | | | | | | | | | | Interest expense using the effective interest rate method: | | | | | | | | | | | | | Interest on bank loans, overdrafts and all other borrowings | | | 1,296 | | | 1,168 | | | 1,130 | | | | 1,099 | | | 1,296 | | | 1,168 | | Interest capitalised at 4.96% (2018: 4.24%; 2017: 3.25%) (1) | | | (248 | ) | | (139 | ) | | (113 | ) | | Interest on finance leases | | | 47 | | | 59 | | | 33 | | | Interest capitalised at 4.14% (2019: 4.96%; 2018: 4.24%) (1) | | | | (308 | ) | | (248 | ) | | (139 | ) | Interest on lease liabilities | | | | 90 | | | 47 | | | 59 | | Discounting on provisions and other liabilities | | | 470 | | | 414 | | | 450 | | | | 452 | | | 470 | | | 414 | | Other gains and losses: | | | | | | | | | | | | | Fair value change on hedged loans | | | 729 | | | (265 | ) | | (1,185 | ) | | | 721 | | | 729 | | | (265 | ) | Fair value change on hedging derivatives | | | (809 | ) | | 329 | | | 1,244 | | | | (788 | ) | | (809 | ) | | 329 | | Exchange variations on net debt | | | 6 | | | (19 | ) | | (23 | ) | | | (18 | ) | | 6 | | | (19 | ) | Other | | | 19 | | | 20 | | | 24 | | | | 14 | | | 19 | | | 20 | | | | | | | | | | | | | | | | | | | | | Total financial expenses | | | 1,510 | | | 1,567 | | | 1,560 | | | | 1,262 | | | 1,510 | | | 1,567 | | | | | | | | | | | | | | | | | | | | | Financial income | | | | | | | | | | | | | Interest income | | | (446 | ) | | (322 | ) | | (143 | ) | | | (351 | ) | | (446 | ) | | (322 | ) | | | | | | | | | | | | | | | | | | | | Net finance costs | | | 1,064 | | | 1,245 | | | 1,417 | | | | 911 | | | 1,064 | | | 1,245 | | | | | | | | | | | | | | | | | | | | |
| (1) | Interest has been capitalised at the rate of interest applicable to the specific borrowings financing the assets under construction or, where financed through general borrowings, at a capitalisation rate representing the average interest rate on such borrowings. Tax relief for capitalised interest is approximately US$92 million (2019: US$74 million (2018:million; 2018: US$42 million; 2017: US$34 million). |
Recognition and measurement Interest income is accrued using the effective interest rate method. Finance costs are expensed as incurred, except where they relate to the financing of construction or development of qualifying assets. 2122 Financial risk management
21.122.1 Financial risks
Financial and capital risk management strategy The financial risks arising from the Group’s operations comprise market, liquidity and credit risk. These risks arise in the normal course of business and the Group manages its exposure to them in accordance with the Group’s portfolio risk management strategy. The objective of the strategy is to support the delivery of the Group’s financial targets, while protecting its future financial security and flexibility by taking advantage of the natural diversification provided by the scale, diversity and flexibility of the Group’s operations and activities. A Cash Flow at Risk (CFaR) framework is used to measure the aggregate and diversified impact of financial risks upon the Group’s financial targets. The principal measurement of risk is CFaR measured on a portfolio basis, which is defined as the worst expected loss relative to projected business plan cash flows over aone-year horizon under normal market conditions at a confidence level of 90 per cent. Market risk management The Group’s activities expose it to market risks associated with movements in interest rates, foreign currencies and commodity prices. Under the strategy outlined above, the Group seeks to achieve financing costs, currency impacts, input costs and commodity prices on a floating or index basis. This strategy gives rise to a risk of variability in earnings, which is measured under the CFaR framework. F-57
In executing the strategy, financial instruments are potentially employed in three distinct but related activities. The following table summarises these activities and the key risk management processes: | | | Activity | | Key risk management processes | | | 1 Risk mitigation | | | | | On an exception basis, hedging for the purposes of mitigating risk related to specific and significant expenditure on investments or capital projects will be executed if necessary to support the Group’s strategic objectives. | | Execution of transactions within approved mandates. | | | 2 Economic hedging of commodity sales, operating costs, short-term cash deposits and debt instruments | | | | | Where Group commodity production is sold to customers on pricing terms that deviate from the relevant index target and where a relevant derivatives market exists, financial instruments may be executed as an economic hedge to align the revenue price exposure with the index target and US dollars. | | Measuring and reporting the exposure in customer commodity contracts and issued debt instruments. | | | Where debt is issued in a currency other than the US dollar and/or at a fixed interest rate, fair value and cash flow hedges may be executed to align the debt exposure with the Group’s functional currency of US dollars and/or to swap to a floating interest rate. | | Executing hedging derivatives to align the total group exposure to the index target. | | | Where short-term cash deposits are held in a currency other than US dollars, derivative financial instruments may be executed to align the foreign exchange exposure to the Group’s functional currency of US dollars. | | Measuring and reporting the exposure in customer commodity contracts and issued debt instruments. Executing hedging derivatives to align the total group exposure to the index target. Execution of transactions within approved mandates. | | | 3 Strategic financial transactions | | | | | Opportunistic transactions may be executed with financial instruments to capture value from perceived market over/under valuations. | | Execution of transactions within approved mandates. |
Primary responsibility for the identification and control of financial risks, including authorising and monitoring the use of financial instruments for the above activities and stipulating policy thereon, rests with the Financial Risk Management Committee under authority delegated by the Chief Executive Officer. Interest rate risk The Group is exposed to interest rate risk on its outstanding borrowings and short-term cash deposits from the possibility that changes in interest rates will affect future cash flows or the fair value of fixed interest rate financial instruments. Interest rate risk is managed as part of the portfolio risk management strategy. The majority of the Group’s debt is issued at fixed interest rates. The Group has entered into interest rate swaps and cross currency interest rate swaps to convert most of its fixed interest rate exposure to floating US dollar interest rate exposure. As at 30 June 2019,2020, 87 per cent of the Group’s borrowings were exposed to floating interest rates inclusive of the effect of swaps (2018: 89(2019: 87 per cent). The fair value of interest rate swaps and cross currency interest rate swaps in hedge relationships used to hedge both interest rate and foreign currency risks are shown in the valuation hierarchy of this note. The Group has early adopted amendments to IFRS 9 ‘Financial Instruments’ and IFRS 7 ‘Financial Instruments: Disclosures’ in relation to Interest Rate Benchmark Reform. There is no impact on the Group’s hedge accounting as a result of adopting the amendments and for further information refer to note 38 ‘New and amended accounting standards and interpretations’. F-58
Based on the net debt position as at 30 June 2019,2020, taking into account interest rate swaps and cross currency interest rate swaps, it is estimated that a one percentage point increase in the US LIBOR interest rate will decrease the Group’s equity and profit after taxation by US$3947 million (2018:(2019: decrease of US$5439 million). This assumes the change in interest rates is effective from the beginning of the financial year and the fixed/floating mix and balances are constant over the year. However, interest rates and the net debt profile of the Group may not remain constant over the coming financial year and therefore such sensitivity analysis should be used with care. Currency risk The US dollar is the predominant functional currency within the Group and as a result, currency exposures arise from transactions and balances in currencies other than the US dollar. The Group’s potential currency exposures comprise: translational exposure in respect ofnon-functional currency monetary items; transactional exposure in respect ofnon-functional currency expenditure and revenues. The Group’s foreign currency risk is managed as part of the portfolio risk management strategy. Translational exposure in respect ofnon-functional currency monetary items Monetary items, including financial assets and liabilities, denominated in currencies other than the functional currency of an operation are periodically restated to US dollar equivalents and the associated gain or loss is taken to the income statement. The exception is foreign exchange gains or losses on foreign currency denominated provisions for closure and rehabilitation at operating sites, which are capitalised in property, plant and equipment. The Group has entered into cross currency interest rate swaps and foreign exchange forwards to convert its significant foreign currency exposures in respect of monetary items into US dollars. ChangesFluctuations in foreign exchange rates willare therefore not expected to have an insignificanta significant impact on equity and profit after tax. The principalnon-functional currencies to which the Group is exposed are the Australian dollar, the Euro, the Pound sterling and the Chilean peso; however, 8280 per cent (2018: 88(2019: 82 per cent) of the Group’s net financial liabilities are denominated in US dollars. Based on the Group’s net financial assets and liabilities as at 30 June 2019,2020, a weakening of the US dollar against these currencies (one cent strengthening in Australian dollar, one cent strengthening in Euro, one penny strengthening in Pound sterling and 10 pesos strengthening in Chilean peso), with all other variables held constant, would decrease the Group’s equity and profit after taxation by US$12 million (2018:(2019: decrease of US$1012 million). Transactional exposure in respect ofnon-functional currency expenditure and revenues Certain operating and capital expenditure is incurred in currencies other than an operation’s functional currency. To a lesser extent, certain sales revenue is earned in currencies other than the functional currency of operations and certain exchange control restrictions may require that funds be maintained in currencies other than the functional currency of the operation. These currency risks are managed as part of the portfolio risk management strategy. The Group may enter into forward exchange contracts when required under this strategy. Commodity price risk The risk associated with commodity prices is managed as part of the portfolio risk management strategy. Contracts for the sale and physical delivery of commodities are executed whenever possible on a pricing basis intended to achieve a relevant index target. While substantiallySubstantially all of the Group’s commodity production is sold on market-based index pricing terms, with derivatives mayused from time to time be used to align realised prices with the relevant index.achieve a specific outcome. F-59
Financial instruments with commodity price risk comprise forward commodity and other derivative contracts with a net assets fair value of US$199159 million (2018:(2019: US$210199 million). Significant commodity price risk instruments within other derivative balances include derivatives embedded in physical commodity purchase and sales contracts of gas in Trinidad and Tobago with a net assets fair value of US$202180 million (2018:(2019: US$216202 million). These are included within other derivatives.derivatives and fair value measurement related to these resulted in an expense of US$22 million (2019: expense of US$14 million). The potential effect on these derivatives’ fair values of using reasonably possible alternative assumptions in these models, based on a change in the most significant input, such as commodity prices, by a 10 per cent change with all other factors held constant (including the pricing on underlying physical exposures), would increase or decrease profit after taxation by US$558 million (2018:(2019: US$955 million). Provisionally priced commodity sales and purchases contracts Provisionally priced sales or purchases volumes are those for which price finalisation, referenced to the relevant index, is outstanding at the reporting date. Provisional pricing mechanisms within these sales and purchases arrangements have the character of a commodity derivative. Trade receivables or payables under these contracts are carried at fair value through profit and loss.loss using a method categorised as Level 2 based on forecast selling prices in the quotation period. The Group’s exposure at 30 June 20192020 to the impact of movements in commodity prices upon provisionally invoiced sales and purchases volumes was predominately around copper. The Group had 277301 thousand tonnes of copper exposure as at 30 June 2019 (2018: 3562020 (2019: 277 thousand tonnes) that was provisionally priced. The final price of these sales and purchases volumes will be determined during the first half of FY2020.FY2021. A 10 per cent change in the price of copper realised on the provisionally priced sales, with all other factors held constant, would increase or decrease profit after taxation by US$114134 million (2018:(2019: US$178114 million). The relationship between commodity prices and foreign currencies is complex and movements in foreign exchange rates can impact commodity prices. The sensitivities should therefore be used with care. Liquidity risk Refer to note 19 ‘Net debt’ for details on the Group’s liquidity risk. Credit risk Credit risk is the risk that a counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Group is exposed to credit risk from its operating activities (primarily from customer receivables) and from its financing activities, including deposits with banks and financial institutions, other short-term investments, interest rate and currency derivative contracts and other financial instruments. Refer to note 8 ‘Trade and other receivables’ and note 19 ‘Net debt’ for details on the Group credit risk. 21.222.2 Recognition and measurement (following adoption of IFRS 9)
All financial assets and liabilities, other than derivatives and trade receivables, are initially recognised at the fair value of consideration paid or received, net of transaction costs as appropriate. Financial assets are initially recognised on their trade date. Financial assets are subsequently carried at fair value or amortised cost based on: the Group’s purpose, or business model, for holding the financial asset; whether the financial asset’s contractual terms give rise to cash flows that are solely payments of principal and interest. F-60
The resulting financial statement classifications of financial assets can be summarised as follows: | | | | | Contractual cash flows | | Business model | | Category | Solely principal and interest | | Hold in order to collect contractual cash flows | | Amortised cost | | | | Solely principal and interest | | Hold in order to collect contractual cash flows and sell | | Fair value through other comprehensive income | | | | Solely principal and interest | | Hold in order to sell | | Fair value through profit or loss | | | | Other | | Any of those mentioned above | | Fair value through profit or loss |
Solely principal and interest refers to the Group receiving returns only for the time value of money and the credit risk of the counterparty for financial assets held. The main exceptions for the Group are provisionally priced receivables and derivatives. The Group has the intention of collecting payment directly from its customers in most cases, however the Group also participates in receivables financing programs in respect of selected customers. Receivables in these portfolios are therefore held at fair value through profit or loss prior to sale to the financial institution. With the exception of derivative contracts and provisionally priced trade payables, the Group’s financial liabilities are classified as subsequently measured at amortised cost. The Group may in addition elect to designate certain financial assets or liabilities at fair value through profit or loss or to apply hedge accounting where they are not mandatorily held at fair value through profit or loss. Derivatives are initially recognised at fair value on the date the contract is entered into and are subsequently remeasured at their fair value. Fair value measurement The carrying amount of financial assets and liabilities measured at fair value is principally calculated based on inputs other than quoted prices that are observable for these financial assets or liabilities, either directly (i.e. as unquoted prices) or indirectly (i.e. derived from prices). Where no price information is available from a quoted market source, alternative market mechanisms or recent comparable transactions, fair value is estimated based on the Group’s views on relevant future prices, net of valuation allowances to accommodate liquidity, modelling and other risks implicit in such estimates. The inputs used in fair value calculations are determined by the relevant segment or function. The functions support the assets and operate under a defined set of accountabilities authorised by the Executive Leadership Team. Movements in the fair value of financial assets and liabilities may be recognised through the income statement or in other comprehensive income. For financial assets and liabilities carried at fair value, the Group uses the following to categorise the method used based on the lowest level input that is significant to the fair value measurement as a whole: | | | | | | | IFRS 13 Fair value hierarchy | | Level 1 | | Level 2 | | Level 3 | | Valuation method | | Based on quoted prices (unadjusted) in active markets for identical financial assets and liabilities. | | Based on inputs other than quoted prices included within Level 1 that are observable for the financial asset or liability, either directly (i.e. as unquoted prices) or indirectly (i.e. derived from prices). | | Based on inputs not observable in the market using appropriate valuation models, including discounted cash flow modelling. |
F-61
21.322.3 Financial assets and liabilities
The financial assets and liabilities are presented by class in the table below at their carrying amounts. | | | | | | | | | | | | | | | | IFRS 13
Fair value
hierarchy
Level | | IFRS 9 Classification (1) | | 2019
US$M | | | 2018
US$M | | Fair value hierarchy (2) | | | | | | | | | | | | | Current cross currency and interest rate swaps | | 2 | | Fair value through profit or loss | | | 15 | | | | 12 | | Current other derivative contracts (3) | | 2,3 | | Fair value through profit or loss | | | 57 | | | | 170 | | Current other investments (4) | | 1,2 | | Fair value through profit or loss | | | 15 | | | | 18 | | Non-current cross currency and interest rate swaps | | 2 | | Fair value through profit or loss | | | 739 | | | | 396 | | Non-current other derivative contracts (3) | | 2,3 | | Fair value through profit or loss | | | 180 | | | | 195 | | Non-current investment in shares | | 3 | | Fair value through other comprehensive income | | | 34 | | | | 33 | | Non-current investment in shares | | 3 | | Fair value through profit or loss | | | 6 | | | | – | | Non-current other investments (4)(5) | | 1,2,3 | | Fair value through profit or loss | | | 344 | | | | 375 | | | | | | | | | | | | | | | Total other financial assets | | | | | | | 1,390 | | | | 1,199 | | Cash and cash equivalents | | | | Amortised cost | | | 15,613 | | | | 15,871 | | Trade and other receivables (6) | | | | Amortised cost | | | 1,929 | | | | 1,799 | | Provisionally priced trade receivables (6) | | 2 | | Fair value through profit or loss | | | 1,446 | | | | 1,126 | | Loans to equity accounted investments | | | | Amortised cost | | | 33 | | | | 13 | | | | | | | | | | | | | | | Total financial assets | | | | | | | 20,411 | | | | 20,008 | | | | | | | | | | | | | | | Non-financial assets | | | | | | | 80,450 | | | | 91,985 | | | | | | | | | | | | | | | Total assets | | | | | | | 100,861 | | | | 111,993 | | | | | | | | | | | | | | | Current cross currency and interest rate swaps | | 2 | | Fair value through profit or loss | | | 63 | | | | 121 | | Current other derivative contracts (3) | | 2,3 | | Fair value through profit or loss | | | 64 | | | | 17 | | Non-current cross currency and interest rate swaps | | 2 | | Fair value through profit or loss | | | 895 | | | | 1,092 | | Non-current other derivative contracts (3) | | 2,3 | | Fair value through profit or loss | | | 1 | | | | 1 | | | | | | | | | | | | | | | Total other financial liabilities | | | | | | | 1,023 | | | | 1,231 | | Trade and other payables (7) | | | | Amortised cost | | | 6,283 | | | | 5,414 | | Provisionally priced trade payables (7) | | 2 | | Fair value through profit or loss | | | 277 | | | | 377 | | Bank overdrafts and short-term borrowings (8) | | | | Amortised cost | | | 20 | | | | 58 | | Bank loans (8) | | | | Amortised cost | | | 2,498 | | | | 2,555 | | Notes and debentures (8) | | | | Amortised cost | | | 21,529 | | | | 23,298 | | Finance leases | | | | Amortised cost | | | 715 | | | | 802 | | Other (8) | | | | Amortised cost | | | 66 | | | | 92 | | | | | | | | | | | | | | | Total financial liabilities | | | | | | | 32,411 | | | | 33,827 | | | | | | | | | | | | | | | Non-financial liabilities | | | | | | | 16,626 | | | | 17,496 | | | | | | | | | | | | | | | Total liabilities | | | | | | | 49,037 | | | | 51,323 | | | | | | | | | | | | | | |
F-62
| | | | | | | | | | | | | | | | IFRS 13
Fair value
hierarchy
Level (1) | | IFRS 9 Classification | | 2020
US$M | | | 2019
US$M | | Current cross currency and interest rate swaps (2) | | 2 | | Fair value through profit or loss | | | 3 | | | | 15 | | Current other derivative contracts (3) | | 2,3 | | Fair value through profit or loss | | | 45 | | | | 57 | | Current other investments (4) | | 1,2 | | Fair value through profit or loss | | | 36 | | | | 15 | | Non-current cross currency and interest rate swaps (2) | | 2 | | Fair value through profit or loss | | | 2,009 | | | | 739 | | Non-current other derivative contracts (3) | | 2,3 | | Fair value through profit or loss | | | 159 | | | | 180 | | Non-current investment in shares | | 3 | | Fair value through other comprehensive income | | | 32 | | | | 34 | | Non-current investment in shares | | 3 | | Fair value through profit or loss | | | – | | | | 6 | | Non-current other investments (4)(5) | | 1,2,3 | | Fair value through profit or loss | | | 322 | | | | 344 | | | | | | | | | | | | | | | Total other financial assets | | | | | | | 2,606 | | | | 1,390 | | Cash and cash equivalents | | | | Amortised cost | | | 13,426 | | | | 15,613 | | Trade and other receivables (6) | | | | Amortised cost | | | 1,633 | | | | 1,929 | | Provisionally priced trade receivables | | 2 | | Fair value through profit or loss | | | 1,480 | | | | 1,446 | | Loans to equity accounted investments | | | | Amortised cost | | | 40 | | | | 33 | | | | | | | | | | | | | | | Total financial assets | | | | | | | 19,185 | | | | 20,411 | | | | | | | | | | | | | | | Non-financial assets | | | | | | | 85,598 | | | | 80,450 | | | | | | | | | | | | | | | Total assets | | | | | | | 104,783 | | | | 100,861 | | | | | | | | | | | | | | | Current cross currency and interest rate swaps (2) | | 2 | | Fair value through profit or loss | | | 165 | | | | 63 | | Current other derivative contracts (3) | | 2,3 | | Fair value through profit or loss | | | 60 | | | | 64 | | Non-current cross currency and interest rate swaps (2) | | 2 | | Fair value through profit or loss | | | 1,414 | | | | 895 | | Non-current other derivative contracts (3) | | 2,3 | | Fair value through profit or loss | | | – | | | | 1 | | | | | | | | | | | | | | | Total other financial liabilities | | | | | | | 1,639 | | | | 1,023 | | Trade and other payables (7) | | | | Amortised cost | | | 5,354 | | | | 6,283 | | Provisionally priced trade payables | | 2 | | Fair value through profit or loss | | | 269 | | | | 277 | | Bank overdrafts and short-term borrowings (8) | | | | Amortised cost | | | – | | | | 20 | | Bank loans (8) | | | | Amortised cost | | | 2,492 | | | | 2,498 | | Notes and debentures (8) | | | | Amortised cost | | | 21,045 | | | | 21,529 | | Leases liabilities | | | | Amortised cost | | | 3,443 | | | | 715 | | Other (8) | | | | Amortised cost | | | 68 | | | | 66 | | | | | | | | | | | | | | | Total financial liabilities | | | | | | | 34,310 | | | | 32,411 | | | | | | | | | | | | | | | Non-financial liabilities | | | | | | | 18,227 | | | | 16,626 | | | | | | | | | | | | | | | Total liabilities | | | | | | | 52,537 | | | | 49,037 | | | | | | | | | | | | | | |
| (1) | For classifications under IAS 39 refer to note 38 ‘New and amended accounting standards and interpretations’.
|
(2) | All of the Group’s financial assets and financial liabilities recognised at fair value were valued using market observable inputs categorised as Level 2 with the exception of the specified items in the following footnotes. |
| (2) | Cross currency and interest rate swaps are measured at forward rate and swap models and present value calculations. |
| (3) | Includes other derivative contracts of US$200179 million (2018:(2019: US$213200 million) categorised as Level 3. Significant items are derivatives embedded in physical commodity purchase and sales contracts of gas in Trinidad and Tobago with net assets fair value of US$202180 million (2018:(2019: US$216202 million). |
| (4) | Includes investments held by BHP Billiton Foundation which are restricted and not available for general use by the Group of US$309296 million (2018:(2019: US$343309 million) of which other investment (US Treasury Notes) of US$12887 million categorised as Level 1 (2018:(2019: US$108128 million). |
| (5) | Includes other investments of US$47 million (2018:(2019: US$47 million) categorised as Level 3. |
| (6) | Excludes input taxes of US$367478 million (2018:(2019: US$338367 million) included in other receivables. Refer to note 8 ‘Trade and other receivables’. |
| (7) | Excludes input taxes of US$162145 million (2018:(2019: US$189162 million) included in other payables. Refer to note 9 ‘Trade and other payables’. |
| (8) | All interest bearing liabilities, excluding finance leases, are unsecured. |
The carrying amounts in the table above generally approximate to fair value. In the case of US$3,019 million (2018:(2019: US$3,019 million) of fixed rate debt not swapped to floating rate, the fair value at 30 June 20192020 was US$4,114 million (2019: US$3,757 million (2018: US$3,434 million). The fair value is determined using a method that can be categorised as Level 2 and uses inputs based on benchmark interest rates, alternative market mechanisms or recent comparable transactions. For financial instruments that are carried at fair value on a recurring basis, the Group determines whether transfers have occurred between levels in the hierarchy by reassessing categorisation at the end of each reporting period. There were no transfers between categories during the period. For financial instruments not valued at fair value on a recurring basis, the Group uses a method that can be categorised as Level 2.
Offsetting financial assets and liabilities The Group enters into money market deposits and derivative transactions under International Swaps and Derivatives Association master netting agreements that do not meet the criteria for offsetting, but allow for the related amounts to be set-off in certain circumstances. The amounts set out as cross currency and interest rate swaps in the table above represent the derivative financial assets and liabilities of the Group that may be subject to the above arrangements and are presented on a gross basis. 21.422.4 Derivatives and hedge accounting
The Group uses derivatives to hedge its exposure to certain market risks and may elect to apply hedge accounting. Hedge accounting The Group has early adopted amendments to IFRS 9 ‘Financial Instruments’ and IFRS 7 ‘Financial Instruments: Disclosures’ in relation to Interest Rate Benchmark Reform. There is no impact on the Group’s hedge accounting as a result of adopting the amendments. Refer to note 38 ‘New and amended accounting standards and interpretations’ for further information. Derivatives are included within financial assets or liabilities at fair value through profit or loss unless they are designated as effective hedging instruments. Financial instruments in this category are classified as current if they are expected to be settled within 12 months otherwise they are classified as non-current. The Group uses derivatives to hedge its exposure to certain market risks and may elect to apply hedge accounting. Where hedge accounting is applied, at the start of the transaction, the Group documents the type of hedge, the relationship between the hedging instrument and hedged items and its risk management objective and strategy for undertaking various hedge transactions. The documentation also demonstrates that the hedge is expected to be effective.
F-63
The Group applies the following types of hedge accounting to its derivatives hedging the interest rate and currency risks in its notes and debentures: Fair value hedges – the fair value gain or loss on interest rate and cross currency swaps relating to interest rate risk, together with the change in the fair value of the hedged fixed rate borrowings attributable to interest rate risk are recognised immediately in the income statement. If the hedge no longer meets the criteria for hedge accounting, the fair value adjustment on the note or debenture is amortised to the income statement over the period to maturity using a recalculated effective interest rate. Cash flow hedges – changes in the fair value of cross currency interest rate swaps which hedge foreign currency cash flows on the notes and debentures are recognised directly in other comprehensive income and accumulated in the cash flow hedging reserve. To the extent a hedge is ineffective, changes in fair value are recognised immediately in the income statement. When a hedging instrument expires, or is sold, terminated or exercised, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss existing in equity at that time remains in equity and is amortised to the income statement over the period to the hedged item’s maturity. When hedged, the Group hedges the full notional value of notes or debentures. However, certain components of the fair value of derivatives are not permitted under IFRS 9 to be included in the hedge accounting above. Certain costs of hedging are permitted to be recognised in other comprehensive income. Any change in the fair value of a derivative that does not qualify for hedge accounting, or is ineffective in hedging the designated risk due to contractual differences between the hedged item and hedging instrument, is recognised immediately in the income statement. The table below shows the carrying amounts of the Group’s notes and debentures by currency and the derivatives which hedge them: The carrying amount of the notes and debentures includes foreign exchange remeasurement to period end rates and fair value adjustments when included in a fair value hedge. The breakdown of the hedging derivatives includes remeasurement of foreign currency notional values at period end rates, fair value movements due to interest rate risk, foreign currency cash flows designated into cash flow hedges, costs of hedging recognised in other comprehensive income, ineffectiveness recognised in the income statement and accruals or prepayments. The hedged value of notes and debentures includes their carrying amounts adjusted for the offsetting derivative fair value movements due to foreign currency and interest rate risk remeasurement. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Fair value of derivatives | | | | | 2020 US$M | | Carrying
amount of
notes and
debentures | | | Foreign
exchange
notional
at spot
rates | | | Interest
rate risk | | | Recognised
in cash flow
hedging
reserve | | | Recognised
in cost of
hedging
reserve | | | Recognised
in the
income
statement (1) | | | Accrued
cash
flows | | | Total | | | Hedged
value of
notes and
debentures (2) | | | | | A | | | B | | | C | | | D | | | E | | | F | | | G | | | B to G | | | A + B + C | | USD | | | 9,926 | | | | – | | | | (742 | ) | | | – | | | | – | | | | 29 | | | | 74 | | | | (639 | ) | | | 9,184 | | GBP | | | 3,245 | | | | 764 | | | | (730 | ) | | | (16 | ) | | | 13 | | | | (18 | ) | | | 47 | | | | 60 | | | | 3,279 | | EUR | | | 7,294 | | | | 500 | | | | (576 | ) | | | (55 | ) | | | 21 | | | | 65 | | | | 32 | | | | (13 | ) | | | 7,218 | | CAD | | | 580 | | | | 199 | | | | (32 | ) | | | – | | | | (2 | ) | | | (4 | ) | | | (2 | ) | | | 159 | | | | 747 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | | 21,045 | | | | 1,463 | | | | (2,080 | ) | | | (71 | ) | | | 32 | | | | 72 | | | | 151 | | | | (433 | ) | | | 20,428 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Fair value of derivatives | | | | | 2019 US$M | | Carrying
amount of
notes and
debentures | | | Foreign
exchange
notional
at spot
rates | | | Interest
rate risk | | | Recognised
in cash flow
hedging
reserve | | | Recognised
in cost of
hedging
reserve | | | Recognised
in the
income
statement (1) | | | Accrued
cash
flows | | | Total | | | Hedged
value of
notes and
debentures (2) | | | | | A | | | B | | | C | | | D | | | E | | | F | | | G | | | B to G | | | A + B + C | | USD | | | 9,433 | | | | – | | | | (253 | ) | | | – | | | | – | | | | 20 | | | | 111 | | | | (122 | ) | | | 9,180 | | GBP | | | 3,118 | | | | 678 | | | | (517 | ) | | | (57 | ) | | | 70 | | | | (2 | ) | | | 62 | | | | 234 | | | | 3,279 | | EUR | | | 7,680 | | | | 378 | | | | (566 | ) | | | (100 | ) | | | 33 | | | | 54 | | | | 82 | | | | (119 | ) | | | 7,492 | | CAD | | | 594 | | | | 175 | | | | (22 | ) | | | (5 | ) | | | 3 | | | | (4 | ) | | | 1 | | | | 148 | | | | 747 | | AUD | | | 704 | | | | 73 | | | | (4 | ) | | | (1 | )�� | | | – | | | | – | | | | (5 | ) | | | 63 | | | | 773 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | | 21,529 | | | | 1,304 | | | | (1,362 | ) | | | (163 | ) | | | 106 | | | | 68 | | | | 251 | | | | 204 | | | | 21,471 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
F-64
| (1) | Predominantly related to ineffectiveness. |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Fair value of derivatives | | 2019 US$M | | Carrying
amount of
notes and
debentures | | | Foreign
exchange
notional
at spot
rates | | | Interest
rate risk | | | Recognised
in cash flow
hedging
reserve | | | Recognised
in cost of
hedging
reserve | | | Recognised
in the
income
statement | | | Accrued
cash
flows | | | Total | | | Hedged
value of
notes and
debentures | | | | | A | | | B | | | C | | | D | | | E | | | F | | | G | | | B to G | | | A + B + C | | USD | | | 9,433 | | | | – | | | | (253 | ) | | | _ | | | | – | | | | 20 | | | | 111 | | | | (122 | ) | | | 9,180 | | GBP | | | 3,118 | | | | 678 | | | | (517 | ) | | | (57 | ) | | | 70 | | | | (2 | ) | | | 62 | | | | 234 | | | | 3,279 | | EUR | | | 7,680 | | | | 378 | | | | (566 | ) | | | (100 | ) | | | 33 | | | | 54 | | | | 82 | | | | (119 | ) | | | 7,492 | | CAD | | | 594 | | | | 175 | | | | (22 | ) | | | (5 | ) | | | 3 | | | | (4 | ) | | | 1 | | | | 148 | | | | 747 | | AUD | | | 704 | | | | 73 | | | | (4 | ) | | | (1 | ) | | | – | | | | – | | | | (5 | ) | | | 63 | | | | 773 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | | 21,529 | | | | 1,304 | | | | (1,362 | ) | | | (163 | ) | | | 106 | | | | 68 | | | | 251 | | | | 204 | | | | 21,471 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2018 US$M | | | 23,298 | | | | 1,145 | | | | (633 | ) | | | (85 | ) | | | – | | | | 71 | | | | 307 | | | | 805 | | | | 23,810 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (2) | Includes US$3,019 million (2019: US$3,019 million) of fixed rate debt not swapped to floating rate that is not in a hedging relationship. |
The weighted average interest rate payable is USD LIBOR + 2.3%2.95 per cent (2019: USD LIBOR + 2.3 per cent). Refer to note 2021 ‘Net finance costs’ for details of net finance costs for the year. Movements in reserves relating to hedge accounting The following table shows a reconciliation of the components of equity and an analysis of the movements in reserves for all hedges. For a description of these reserves, refer to note 16 ‘Other equity’. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2019 US$M | | Cash flow hedging
reserve | | | Cost of hedging
reserve | | | Total | | | | | Gross | | | Tax | | | Net | | | Gross | | | Tax | | | Net | | | | | At the beginning of the financial year | | | 85 | | | | (27 | ) | | | 58 | | | | – | | | | – | | | | – | | | | 58 | | Impact of adoption of IFRS 9 | | | 176 | | | | (52 | ) | | | 124 | | | | (176 | ) | | | 52 | | | | (124 | ) | | | – | | Add: Change in fair value of hedging instrument recognised in OCI | | | (327 | ) | | | 98 | | | | (229 | ) | | | – | | | | – | | | | – | | | | (229 | ) | Less: Reclassified from reserves to interest expense – recognised through OCI | | | 229 | | | | (68 | ) | | | 161 | | | | 70 | | | | (20 | ) | | | 50 | | | | 211 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | At the end of the financial year | | | 163 | | | | (49 | ) | | | 114 | | | | (106 | ) | | | 32 | | | | (74 | ) | | | 40 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
F-65
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2020 US$M | | Cash flow hedging
reserve | | | Cost of hedging
reserve | | | Total | | | | | Gross | | | Tax | | | Net | | | Gross | | | Tax | | | Net | | | | | At the beginning of the financial year | | | 163 | | | | (49 | ) | | | 114 | | | | (106 | ) | | | 32 | | | | (74 | ) | | | 40 | | Add: Change in fair value of hedging instrument recognised in OCI | | | (315 | ) | | | 94 | | | | (221 | ) | | | – | | | | – | | | | – | | | | (221 | ) | Less: Reclassified from reserves to interest expense – recognised through OCI | | | 223 | | | | (66 | ) | | | 157 | | | | 74 | | | | (23 | ) | | | 51 | | | | 208 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | At the end of the financial year | | | 71 | | | | (21 | ) | | | 50 | | | | (32 | ) | | | 9 | | | | (23 | ) | | | 27 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2019 US$M | | Cash flow hedging
reserve | | | Cost of hedging
reserve | | | Total | | | | | Gross | | | Tax | | | Net | | | Gross | | | Tax | | | Net | | | | | At the beginning of the financial year | | | 85 | | | | (27 | ) | | | 58 | | | | – | | | | – | | | | – | | | | 58 | | Impact of adoption of IFRS 9 | | | 176 | | | | (52 | ) | | | 124 | | | | (176 | ) | | | 52 | | | | (124 | ) | | | – | | Add: Change in fair value of hedging instrument recognised in OCI | | | (327 | ) | | | 98 | | | | (229 | ) | | | – | | | | – | | | | – | | | | (229 | ) | Less: Reclassified from reserves to interest expense – recognised through OCI | | | 229 | | | | (68 | ) | | | 161 | | | | 70 | | | | (20 | ) | | | 50 | | | | 211 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | At the end of the financial year | | | 163 | | | | (49 | ) | | | 114 | | | | (106 | ) | | | 32 | | | | (74 | ) | | | 40 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Changes in interest bearing liabilities and related derivatives resulting from financing activities The movement in the year in the Group’s interest bearing liabilities and related derivatives are as follows: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2019 US$M | | Interest bearing liabilities | | | Derivatives
(assets)/
liabilities | | | | | | | | Bank
loans | | | Notes and
debentures | | | Finance
leases | | | Bank
overdraft
and short-
term
borrowings | | | Other | | | Cross
currency
and
interest
rate swaps | | | Total | | At the beginning of the financial year | | | 2,555 | | | | 23,298 | | | | 802 | | | | 58 | | | | 92 | | | | 805 | | | | | | Proceeds from interest bearing liabilities | | | 250 | | | | – | | | | – | | | | – | | | | – | | | | – | | | | 250 | | Settlements of debt related instruments | | | – | | | | – | | | | – | | | | – | | | | – | | | | (160 | ) | | | (160 | ) | Repayment of interest bearing liabilities | | | (308 | ) | | | (2,198 | ) | | | (75 | ) | | | – | | | | (23 | ) | | | – | | | | (2,604 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Change from Net financing cash flows | | | (58 | ) | | | (2,198 | ) | | | (75 | ) | | | – | | | | (23 | ) | | | (160 | ) | | | (2,514 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Other movements: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Interest rate impacts | | | – | | | | 729 | | | | – | | | | – | | | | – | | | | (809 | ) | | | | | Foreign exchange impacts | | | – | | | | (311 | ) | | | (11 | ) | | | – | | | | – | | | | 319 | | | | | | Other interest bearing liabilities/derivative related changes | | | 1 | | | | 11 | | | | (1 | ) | | | (38 | ) | | | (3 | ) | | | 49 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | At the end of the financial year | | | 2,498 | | | | 21,529 | | | | 715 | | | | 20 | | | | 66 | | | | 204 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2018 US$M | | Interest bearing liabilities | | | Derivatives
(assets)/
liabilities | | | | | | | | Bank
loans | | | Notes and
debentures | | | Finance
leases | | | Bank
overdraft
and short-
term
borrowings | | | Other | | | Cross
currency
and interest
rate swaps | | | Total | | At the beginning of the financial year | | | 2,281 | | | | 27,041 | | | | 897 | | | | 45 | | | | 210 | | | | 740 | | | | | | Proceeds from interest bearing liabilities | | | 500 | | | | – | | | | – | | | | – | | | | 28 | | | | – | | | | 528 | | Settlements of debt related instruments | | | – | | | | – | | | | – | | | | – | | | | – | | | | (218 | ) | | | (218 | ) | Repayment of interest bearing liabilities | | | (221 | ) | | | (3,736 | ) | | | (81 | ) | | | – | | | | (150 | ) | | | – | | | | (4,188 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Change from Net financing cash flows | | | 279 | | | | (3,736 | ) | | | (81 | ) | | | – | | | | (122 | ) | | | (218 | ) | | | (3,878 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Other movements: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Interest rate impacts | | | – | | | | (353 | ) | | | – | | | | – | | | | – | | | | 329 | | | | | | Foreign exchange impacts | | | – | | | | 245 | | | | (9 | ) | | | – | | | | – | | | | (254 | ) | | | | | Other interest bearing liabilities/derivative related changes | | | (5 | ) | | | 101 | | | | – | | | | 13 | | | | 4 | | | | 208 | | | | | | Liabilities transferred to held for sale | | | – | | | | – | | | | (5 | ) | | | – | | | | – | | | | – | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | At the end of the financial year | | | 2,555 | | | | 23,298 | | | | 802 | | | | 58 | | | | 92 | | | | 805 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
F-66
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2020 US$M | | Interest bearing liabilities | | | Derivatives
(assets)/
liabilities | | | | | | | | Bank
loans | | | Notes and
debentures | | | Lease
liabilities | | | Bank
overdraft
and short-
term
borrowings | | | Other | | | Cross
currency
and
interest
rate swaps | | | Total | | At the beginning of the financial year | | | 2,498 | | | | 21,529 | | | | 715 | | | | 20 | | | | 66 | | | | 204 | | | | | | Proceeds from interest bearing liabilities | | | 514 | | | | – | | | | – | | | | – | | | | – | | | | – | | | | 514 | | Settlements of debt related instruments | | | – | | | | – | | | | – | | | | – | | | | – | | | | (157 | ) | | | (157 | ) | Repayment of interest bearing liabilities | | | (522 | ) | | | (859 | ) | | | (671 | ) | | | – | | | | 5 | | | | – | | | | (2,047 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Change from Net financing cash flows | | | (8 | ) | | | (859 | ) | | | (671 | ) | | | – | | | | 5 | | | | (157 | ) | | | (1,690 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Other movements: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Interest rate impacts | | | – | | | | 720 | | | | – | | | | – | | | | – | | | | (788 | ) | | | | | Foreign exchange impacts | | | – | | | | (354 | ) | | | (43 | ) | | | – | | | | (4 | ) | | | 316 | | | | | | Leases recognised on IFRS 16 transition | | | – | | | | – | | | | 2,301 | | | | – | | | | – | | | | – | | | | | | Lease additions | | | – | | | | – | | | | 436 | | | | – | | | | – | | | | – | | | | | | Remeasurement of index-linked freight contracts | | | – | | | | – | | | | 733 | | | | – | | | | – | | | | – | | | | | | Other interest bearing liabilities/derivative related changes | | | 2 | | | | 9 | | | | (28 | ) | | | (20 | ) | | | 1 | | | | (8 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | At the end of the financial year | | | 2,492 | | | | 21,045 | | | | 3,443 | | | | – | | | | 68 | | | | (433 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2019 US$M | | Interest bearing liabilities | | | Derivatives
(assets)/
liabilities | | | | | | | | Bank
loans | | | Notes and
debentures | | | Lease
liabilities | | | Bank
overdraft
and short-
term
borrowings | | | Other | | | Cross
currency
and
interest
rate swaps | | | Total | | At the beginning of the financial year | | | 2,555 | | | | 23,298 | | | | 802 | | | | 58 | | | | 92 | | | | 805 | | | | | | Proceeds from interest bearing liabilities | | | 250 | | | | – | | | | – | | | | – | | | | – | | | | – | | | | 250 | | Settlements of debt related instruments | | | – | | | | – | | | | – | | | | – | | | | – | | | | (160 | ) | | | (160 | ) | Repayment of interest bearing liabilities | | | (308 | ) | | | (2,198 | ) | | | (75 | ) | | | – | | | | (23 | ) | | | – | | | | (2,604 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Change from Net financing cash flows | | | (58 | ) | | | (2,198 | ) | | | (75 | ) | | | – | | | | (23 | ) | | | (160 | ) | | | (2,514 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Other movements: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Interest rate impacts | | | – | | | | 729 | | | | – | | | | – | | | | – | | | | (809 | ) | | | | | Foreign exchange impacts | | | – | | | | (311 | ) | | | (11 | ) | | | – | | | | – | | | | 319 | | | | | | Other interest bearing liabilities/derivative related changes | | | 1 | | | | 11 | | | | (1 | ) | | | (38 | ) | | | (3 | ) | | | 49 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | At the end of the financial year | | | 2,498 | | | | 21,529 | | | | 715 | | | | 20 | | | | 66 | | | | 204 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Employee matters 2223 Key management personnel
Key management personnel compensation comprises: | | | | 2019 | | | 2018 | | | 2017 | | | 2020 | | | 2019 | | | 2018 | | | | | US$ | | | US$ | | | US$ | | | US$ | | | US$ | | | US$ | | Short-term employee benefits | | | 11,557,506 | | | | 13,190,838 | | | | 16,439,948 | | | | 12,564,637 | | | | 11,557,506 | | | | 13,190,838 | | Post-employment benefits | | | 1,490,716 | | | | 1,506,108 | | | | 1,895,828 | | | | 1,172,727 | | | | 1,490,716 | | | | 1,506,108 | | Share-based payments | | | 15,821,972 | | | | 13,356,657 | | | | 13,747,355 | | | | 13,514,588 | | | | 15,821,972 | | | | 13,356,657 | | | | | | | | | | | | | | | | | | | | | Total | | | 28,870,194 | | | | 28,053,603 | | | | 32,083,131 | | | | 27,251,952 | | | | 28,870,194 | | | | 28,053,603 | | | | | | | | | | | | | | | | | | | | |
Following the dissolution of the Operations Management Committee (OMC) in FY2018, the Remuneration Committee re-examined the classification of Key Management Personnel (KMP) for FY2018 and determined thatincludes the roles which have the authority and responsibility for planning, directing and controlling the activities of BHPBHP. These are Non-executive Directors, the CEO, the Chief Financial Officer, the President Operations, Minerals Australia, the President Operations, Minerals Americas, and the President Operations, Petroleum. The Remuneration Committee also determined that, effective 1 July 2017 the Chief External Affairs Officer and Chief People Officer roles are no longer considered KMP.
Transactions and outstanding loans/amounts with key management personnel There were no purchases by key management personnel from the Group during the financial year (2018:FY2020 (2019: US$ nil; 2017:2018: US$ nil). There were no amounts payable by key management personnel at 30 June 2019 (2018:2020 (2019: US$ nil; 2017:2018: US$ nil). There were no loans receivable from or payable to key management personnel at 30 June 2019 (2018:2020 (2019: US$ nil; 2017:2018: US$ nil). Transactions with personally related entities A number of Directors of the Group hold or have held positions in other companies (personally related entities) where it is considered they control or significantly influence the financial or operating policies of those entities. There were no reportable transactions with those entities and no amounts were owed by the Group to personally related entities at 30 June 2019 (2018:2020 (2019: US$ nil; 2017:2018: US$ nil). For more information on remuneration and transactions with key management personnel, refer to section 3. 2324 Employee share ownership plans
Awards, in the form of the right to receive ordinary shares in either BHP Group Limited or BHP Group Plc, have been granted under the following employee share ownership plans: Long-Term Incentive Plan (LTIP), Cash and Deferred Plan (CDP), Short-Term Incentive Plan (STIP), Management Award Plan (MAP), Group Short-Term Incentive Plan (GSTIP), Transitional Executive KMP awards and theall-employee share plan, Shareplus. Some awards are eligible to receive a cash payment, or the equivalent value in shares, equal to the dividend amount that would have been earned on the underlying shares awarded to those participants (the Dividend Equivalent Payment, or DEP). The DEP is provided to the participants once the underlying shares are allocated or transferred to them. Awards under the plans do not confer any rights to participate in a share issue; however, there is discretion under each of the plans to adjust the awards in response to a variation in the share capital of BHP Group Limited or BHP Group Plc. F-67
The table below provides a description of each of the plans. | | | | | | | | | Plan | | CDP/STIP and GSTIP | | LTIP and MAP | | Transitional Executive
KMP awardsShareplus
| Type | | Shareplus
| Type | | Short-term incentive | | Long-term incentive | | Long-term incentive | | All-employee share purchase plan | | | | | | | | | | | | | | | Overview | | The CDP was implemented in FY2020 as a replacement of the STIP, is both of which are generally a planplans for the Executive KMP and the Executive Leadership Team who are not Executive KMP. GSTIP is a plan for BHP senior management who are not KMP. Under both plans,the CDP, two thirds of the value of a participant’s short-term incentive amount is awarded as rights to receive BHP Group Limited or BHP Group Plc shares at the end of the vesting period (and the remaining one third is delivered in cash). Two awards of deferred shares are granted, each of the equivalent value to the cash award, vesting in two and five years respectively. Under STIP and GSTIP, half of the value of a participant’s short-term incentive amount is awarded as rights to receive BHP Group Limited or BHP Group Plc shares at the end of the two-year vesting period. | | The LTIP is a plan for Executive KMP and awards are granted annually. The MAP is a plan for BHP senior management who are not KMP. The number of share rights awarded is determined by a participant’s role and grade. | | Awards may be granted to new Executive KMP recruited from within the Group to bridge the gap created by the different timeframes of the vesting of MAP awards, granted in theirnon-KMP roles, and LTIP awards, granted to Executive KMP. No awards were granted to Executive KMP in FY2019. | | Employees may contribute up to US$5,000 to acquire shares in any plan year. On the third anniversary of the start of a plan year, the Group will match the number of acquired shares. | | | | | | | | | |
| | | | | | | Plan | | CDP/STIP and GSTIP | | LTIP and MAP | | Shareplus | | | | | | Vesting conditions | | CDP: Service conditions and performance conditions for the awards of five-year deferred shares only. Vesting of the five-year award is subject to a satisfactory performance underpin which encompasses a holistic review of performance at the end of the five-year vesting period, including a five-year view on HSEC performance, profitability, cash flow, balance sheet health, returns to shareholders, corporate governance and conduct. STIP and GSTIP: Service conditions only. | | LTIP: Service and performance conditions. For awards granted from December 2013 onwards, BHP’s Total Shareholder Return (TSR)(1) performance relative to the Peer Group TSR over a five-year performance period determines the vesting of 67 per cent of the awards, while performance relative to the Index TSR (being the index value where the comparator group is a market index) determines the vesting of 33 per cent of the awards. For the awards to vest in full, BHP’s TSR must exceed the Peer Group TSR and Index TSR (if applicable) by a specified percentage per year, determined for each grant by the Remuneration Committee. From the establishment of the LTIP in 2004 until the awards granted in December 2016, this percentage was set at 5.5 per cent per year.
For awards granted from December 2017 onwards, 25 per cent of the award will vest where BHP’s TSR is equal to the median TSR of the relevant comparator group(s), as measured over the performance period. Where TSR is below the median, awards will not vest. Vesting occurs on a sliding scale when BHP’s TSR measured over the performance period is between the median TSR of the relevant comparator group(s) up to a nominated level of TSR outperformance over the relevant comparator group(s), as determined by the Committee, above which 100 per cent of the award will vest. MAP: Service conditions only. | | Service conditions and performance conditions.only. The Remuneration Committee has absolute discretion to determine if the performance condition has been met and whether any, all or part of the award will vest (or otherwise lapse), having regard to (but not limited to) the BHP’s TSR(1) over the three-or four-year performance period (respectively), the participant’s contribution to Group outcomes and the participant’s personal performance (with guidance on this assessment from the CEO).
| | Service conditions only. | | | | | | | | | |
F-68
| | | | | | | | | Plan
| | STIP and GSTIP
| | LTIP and MAP
| | Transitional Executive
KMP awards
| | Shareplus
| | | | | | | Vesting period | | CDP – 2 and 5 years STIP and GSTIP – 2 years | | LTIP – 5 years MAP – 1 to 5 years | | 3 or 4 years | | 3 years | | | | | | | | | | | | | | | | Dividend Equivalent Payment | | CDP – Yes STIP – Yes GSTIP – No | | LTIP – Yes MAP – No | | No | | No | | | | | | | | | | | | | | | | Exercise period | | None | | LTIP – None
MAP – None
| | None | | None |
| (1) | BHP’s TSR is the weighted average of the TSRs of BHP Group Limited and BHP Group Plc. |
Employee share awards | 2019 | | Number
of awards
at the
beginning
of the
financial
year | | | Number of
awards
issued
during the
year | | | Number of
awards
vested and
exercised | | | Number of
awards
lapsed | | | Number of
awards at
the end of
the
financial
year | | | Number of
awards
vested and
exercisable
at the end
of the
financial
year | | | Weighted
average
remaining
contractual
life (years) | | | 2020 | | | Number of
awards
at the
beginning
of the
financial
year | | Number of
awards
issued
during the
year | | Number of
awards
vested and
exercised | | Number of
awards
lapsed | | Number of
awards
at the end
of the
financial
year | | Number of
awards
vested and
exercisable
at the end
of the
financial
year | | Weighted
average
remaining
contractual
life (years) | | Weighted
average
share
price at
exercise
date | | BHP Group Limited | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | STIP awards | | | 308,028 | | | | 271,355 | | | | 65,392 | | | | – | | | | 513,991 | | | | – | | | | 0.7 | | | | 513,991 | | | | 157,865 | | | | 294,713 | | | | 3 | | | | 377,140 | | | | – | | | | 0.5 | | | | A$35.33 | | GSTIP awards | | | 2,008,455 | | | | – | | | | 780,315 | | | | 85,656 | | | | 1,142,484 | | | | 15,932 | | | | 0.2 | | | | 1,142,484 | | | | – | | | | 1,130,443 | | | | – | | | | 12,041 | | | | – | | | | 0.2 | | | | A$35.51 | | LTIP awards | | | 5,980,975 | | | | 947,153 | | | | – | | | | 1,197,239 | | | | 5,730,889 | | | | – | | | | 2.1 | | | | 5,730,889 | | | | 809,055 | | | | – | | | | 1,602,438 | | | | 4,937,506 | | | | – | | | | 1.7 | | | | – | | Transitional Executive KMP awards | | | 46,840 | | | | – | | | | 16,160 | | | | 7,260 | | | | 23,420 | | | | – | | | | 0.2 | | | | 23,420 | | | | – | | | | 19,439 | | | | 3,981 | | | | – | | | | – | | | | – | | | | A$35.25 | | MAP awards | | | 10,379,263 | | | | 4,604,638 | | | | 2,416,107 | | | | 1,077,449 | | | | 11,490,345 | | | | 94,921 | | | | 1.3 | | | | 11,490,345 | | | | 3,898,575 | | | | 3,465,901 | | | | 763,029 | | | | 11,159,990 | | | | 25,549 | | | | 1.2 | | | | A$35.62 | | Shareplus | | | 4,775,079 | | | | 2,025,302 | | | | 2,590,297 | | | | 352,939 | | | | 3,857,145 | | | | – | | | | 1.2 | | | | 3,857,145 | | | | 2,483,483 | | | | 1,985,787 | | | | 297,459 | | | | 4,057,382 | | | | – | | | | 1.3 | | | | A$32.16 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | BHP Group Plc | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | GSTIP awards | | | 63,868 | | | | – | | | | 22,911 | | | | 11,531 | | | | 29,426 | | | | – | | | | 0.2 | | | | 29,426 | | | | – | | | | 29,426 | | | | – | | | | – | | | | – | | | | – | | | | £17.14 | | MAP awards | | | 315,451 | | | | 132,676 | | | | 107,756 | | | | 67,340 | | | | 273,031 | | | | – | | | | 1.3 | | | | 273,031 | | | | 80,033 | | | | 76,267 | | | | 58,394 | | | | 218,403 | | | | – | | | | 1.1 | | | | £17.14 | | Shareplus | | | 282,159 | | | | 111,866 | | | | 145,666 | | | | 24,289 | | | | 224,070 | | | | – | | | | 1.2 | | | | 224,070 | | | | 142,168 | | | | 116,005 | | | | 20,771 | | | | 229,462 | | | | – | | | | 1.3 | | | | £12.96 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (1) | Awards were granted to new Executive KMP to bridge the gap created by the different timeframes of the vesting of MAP awards, granted in their non-KMP roles, and LTIP awards, granted to Executive KMP. Awards were last granted in FY2016. All awards had vested or lapsed at 30 June 2020. |
Employee share awards pre-tax expense is US$128.999 million (2019: US$138.275 million (2018:million; 2018: US$123.313 million; 2017: US$106.214 million) and includes Onshore US.. F-69
Fair value and assumptions in the calculation of fair value for awards issued | 2019 | | Weighted
average fair
value of
awards
granted
during the
year US$ | | | Risk-free
interest
rate | | Estimated
life of
awards | | | Share
price at
grant
date | | | Estimated
volatility
of share
price | | Dividend
yield | | | 2020 | | | Weighted
average fair
value of
awards
granted
during the
year US$ | | Risk-free
interest
rate | | Estimated
life of
awards | | Share
price at
grant
date | | Estimated
volatility
of share
price | | Dividend
yield | | BHP Group Limited | | | | | | | | | | | | | | | | | | | | | | | | | STIP awards | | | 24.10 | | | | n/a | | | | 3 years | | | | A$33.50 | | | | n/a | | | | n/a | | | | 25.36 | | | | n/a | | | | 3 years | | | | A$37.24 | | | | n/a | | | | n/a | | LTIP awards | | | 17.36 | | | | 2.04 | % | | | 5 years | | | | A$33.50 | | | | 30.0 | % | | | n/a | | | | 13.67 | | | | 0.78% | | | | 5 years | | | | A$37.24 | | | | 22.0% | | | | n/a | | MAP awards (1) | | | 21.29 | | | | n/a | | | | 1-5 years | | |
| A$33.83 /
A$33.41 /
A$33.50 |
| | | n/a | | | | 5.30 | % | | | 21.46 | | | | n/a | | | | 1-5 years | | |
| A$36.53
/A$37.24 |
| | | n/a | | | | 5.30% | | Shareplus | | | 20.68 | | | | 2.13 | % | | | 3 years | | | | A$28.29 | | | | n/a | | | | 4.71 | % | | | 19.03 | | | | 1.49% | | | | 3 years | | | | A$39.07 | | | | n/a | | | | 5.08% | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | BHP Group Plc | | | | | | | | | | | | | | | | | | | | | | | | | MAP awards | | | 18.68 | | | | n/a | | | | 1-5 years | | | | £16.71 | | | | n/a | | | | 5.80 | % | | | 17.94 | | | | n/a | | | | 3 years | | | | £17.33 | | | | n/a | | | | 6.00% | | Shareplus | | | 14.71 | | | | 0.86 | % | | | 3 years | | | | £14.04 | | | | n/a | | | | 5.40 | % | | | 12.17 | | | | 0.66% | | | | 3 years | | | | £19.02 | | | | n/a | | | | 5.60% | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (1) | Includes MAP awards granted on 2425 September 2018, 122019 and 20 November 2018 and 18 December 2018.2019. |
Recognition and measurement The fair value at grant date of equity-settled share awards is charged to the income statement over the period for which the benefits of employee services are expected to be derived. The fair values of awards granted were estimated using a Monte Carlo simulation methodology and Black-Scholes option pricing technique and consider the following factors: expected life of the award; current market price of the underlying shares; expected volatility using an analysis of historic volatility over different rolling periods. For the LTIP, it is calculated for all sector comparators and the published MSCI World index; risk-free interest rate, which is an applicable government bond rate; market-based performance hurdles; Where awards are forfeited becausenon-market-based vesting conditions are not satisfied, the expense previously recognised is proportionately reversed. The tax effect of awards granted is recognised in income tax expense, except to the extent that the total tax deductions are expected to exceed the cumulative remuneration expense. In this situation, the excess of the associated current or deferred tax is recognised in other comprehensive incomeequity and forms part of the employee share awards reserve. The fair value of awards as presented in the tables above represents the fair value at grant date. In respect of employee share awards, the Group utilises the Billiton Employee Share Ownership Trust and the BHP Billiton Limited Employee Equity Trust. The trustees of these trusts are independent companies, resident in Jersey. The trusts use funds provided by the Group to acquire ordinary shares to enable awards to be made or satisfied. The ordinary shares may be acquired by purchase in the market or by subscription at not less than nominal value. The BHP Billiton Limited Employee Equity Trust has waived its rights to current and future dividends on shares held to meet future awards under the plans. F-70
2425 Employee benefits, restructuring and post-retirement employee benefits provisions
| | | | 2019 | | | 2018 | | | 2020 | | | 2019 | | | | | US$M | | | US$M | | | US$M | | | US$M | | Employee benefits (1) | | | 1,140 | | | | 1,232 | | | | 1,313 | | | | 1,140 | | Restructuring (2) | | | 78 | | | | 8 | | | | 34 | | | | 78 | | Post-retirement employee benefits | | | 493 | | | | 449 | | | | 547 | | | | 493 | | | | | | | | | | | | | | | Total provisions | | | 1,711 | | | | 1,689 | | | | 1,894 | | | | 1,711 | | | | | | | | | | | | | | | Comprising: | | | | | | | | | Current | | | 1,154 | | | | 1,148 | | | | 1,283 | | | | 1,154 | | Non-current | | | 557 | | | | 541 | | | | 611 | | | | 557 | |
| 2019 | | Employee
benefits | | Restructuring | | Post-
retirement
employee
benefits (3) | | Total | | | 2020 | | | Employee
benefits | | Restructuring | | Post-
retirement
employee
benefits (3) | | Total | | | | | US$M | | US$M | | US$M | | US$M | | | US$M | | US$M | | US$M | | US$M | | At the beginning of the financial year | | | 1,232 | | | | 8 | | | | 449 | | | | 1,689 | | | | 1,140 | | | | 78 | | | | 493 | | | | 1,711 | | Charge/(credit) for the year: | | | | | | | | | | | | | | | | | Underlying | | | 1,011 | | | | 160 | | | | 55 | | | | 1,226 | | | | 1,224 | | | | 26 | | | | 65 | | | | 1,315 | | Discounting | | | – | | | | – | | | | 42 | | | | 42 | | | | – | | | | – | | | | 36 | | | | 36 | | Net interest expense | | | – | | | | – | | | | (21 | ) | | | (21 | ) | | | – | | | | – | | | | (21 | ) | | | (21 | ) | Exchange variations | | | (49 | ) | | | 1 | | | | (6 | ) | | | (54 | ) | | | (31 | ) | | | (1 | ) | | | (34 | ) | | | (66 | ) | Released during the year | | | (146 | ) | | | (11 | ) | | | – | | | | (157 | ) | | | (127 | ) | | | (12 | ) | | | (1 | ) | | | (140 | ) | Remeasurement gains taken to retained earnings | | | – | | | | – | | | | 20 | | | | 20 | | | | – | | | | – | | | | 81 | | | | 81 | | Utilisation | | | (908 | ) | | | (80 | ) | | | (46 | ) | | | (1,034 | ) | | | (893 | ) | | | (58 | ) | | | (70 | ) | | | (1,021 | ) | Transfers and other movements | | | | – | | | | 1 | | | | (2 | ) | | | (1 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | At the end of the financial year | | | 1,140 | | | | 78 | | | | 493 | | | | 1,711 | | | | 1,313 | | | | 34 | | | | 547 | | | | 1,894 | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (1) | The expenditure associated with total employee benefits will occur in a pattern consistent with when employees choose to exercise their entitlement to benefits. |
| (2) | Total restructuring provisions include provisions for terminations and office closures. |
| (3) | Refer to note 2526 ‘Pension and other post-retirement obligations’. |
Recognition and measurement Provisions are recognised by the Group when: there is a present legal or constructive obligation as a result of past events; it is more likely than not that a permanent outflow of resources will be required to settle the obligation; the amount can be reliably estimated and measured at the present value of management’s best estimate of the cash outflow required to settle the obligation at reporting date. F-71
| | | Provision | | Description | Employee benefits | | Liabilities for annual leave and any accumulating sick leave accrued up until the reporting date that are expected to be settled within 12 months are measured at the amounts expected to be paid when the liabilities are settled. Liabilities for long service leave are measured as the present value of estimated future payments for the services provided by employees up to the reporting date and disclosed within employee benefits. Liabilities that are not expected to be settled within 12 months are discounted at the reporting date using market yields of high-quality corporate bonds or government bonds for countries where there is no deep market for corporate bonds. The rates used reflect the terms to maturity and currency that match, as closely as possible, the estimated future cash outflows. In relation to industry-based long service leave funds, the Group’s liability, including obligations for funding shortfalls, is determined after deducting the fair value of dedicated assets of such funds. Liabilities for unpaid wages and salaries are recognised in other creditors. | | | Restructuring | | Restructuring provisions are recognised when: • the Group has a detailed formal plan identifying the business or part of the business concerned, the location and approximate number of employees affected, a detailed estimate of the associated costs, and an appropriate timeline; • the restructuring has either commenced or been publicly announced and can no longer be withdrawn. Payments falling due greater than 12 months after the reporting date are discounted to present value. |
F-72
2526 Pension and other post-retirement obligations
The Group operates or participates in a number of pension (including superannuation) schemes throughout the world. The funding of the schemes complies with local regulations. The assets of the schemes are generally held separately from those of the Group and are administered by trustees or management boards. | | | Schemes/Obligations | | Description | | Defined contribution pension schemes and multi-employer pension schemes | | For defined contribution schemes or schemes operated on an industry-wide basis where it is not possible to identify assets attributable to the participation by the Group’s employees, the pension charge is calculated on the basis of contributions payable. The Group contributed US$274260 million during the financial year (2018:(2019: US$277274 million; 2017:2018: US$247277 million) to defined contribution plans and multi-employer defined contribution plans. These contributions are expensed as incurred. | | | | Defined benefit pension schemes | | For defined benefit pension schemes, the cost of providing pensions is charged to the income statement so as to recognise current and past service costs, net interest cost on the net defined benefit obligations/plan assets and the effect of any curtailments or settlements. Remeasurement gains and losses are recognised directly in equity. An asset or liability is consequently recognised in the balance sheet based on the present value of defined benefit obligations less the fair value of plan assets, except that any such asset cannot exceed the present value of expected refunds from and reductions in future contributions to the plan. Defined benefit obligations are estimated by discounting expected future payments using market yields at the reporting date on high-quality corporate bonds in countries that have developed corporate bond markets. However, where developed corporate bond markets do not exist, the discount rates are selected by reference to national government bonds. In both instances, the bonds are selected with terms to maturity and currency that match, as closely as possible, the estimated future cash flows. The Group has closed all defined benefit pension schemes to new entrants. Defined benefit pension schemes remain operating in Australia, the United States, Canada and Europe for existing members. Full actuarial valuations are prepared and updated annually to 30 June by local actuaries for all schemes. The Group operates final salary schemes (that provide final salary benefits only),non-salary related schemes (that provide flat dollar benefits) and mixed benefit schemes (that consist of a final salary defined benefit portion and a defined contribution portion). | | | | Defined benefit post-retirement medical schemes | | The Group operates a number of post-retirement medical schemes in the United States, Canada and Europe and certain Group companies provide post-retirement medical benefits to qualifying retirees. In some cases, the benefits are provided through medical care schemes to which the Group, the employees, the retirees and covered family members contribute. Full actuarial valuations are prepared by local actuaries for all schemes. These schemes are recognised on the same basis as described for defined benefit pension schemes. All of the post-retirement medical schemes in the Group are unfunded. | | | | Defined benefit post-employment obligations | | The Group has a legal obligation to provide post-employment benefits to employees in Chile. The benefit is a function of an employee’s final salary and years of service.These obligations are recognised on the same basis as described for defined benefit pension schemes. Full actuarial valuations are prepared by local actuaries. These post-employment obligations are unfunded. |
F-73
Risk The Group’s defined benefit schemes/obligations expose the Group to a number of risks, including asset value volatility, interest rate variations, inflation, longevity and medical expense inflation risk. Recognising this, the Group has adopted an approach of moving away from providing defined benefit pensions. The majority of Group-sponsored defined benefit pension schemes have been closed to new entrants for many years. Existing benefit schemes and the terms of employee participation in these schemes are reviewed on a regular basis. Fund assets The Group follows a coordinated strategy for the funding and investment of its defined benefit pension schemes (subject to meeting all local requirements). The Group’s aim is for the value of defined benefit pension scheme assets to be maintained at close to the value of the corresponding benefit obligations, allowing for some short-term volatility. Scheme assets are invested in a diversified range of asset classes, predominantly comprising bonds and equities. The Group’s aim is to progressively shift defined benefit pension scheme assets towards investments that match the anticipated profile of the benefit obligations, as funding levels improve and benefit obligations mature. Over time, this is expected to result in a further reduction in the total exposure of pension scheme assets to equity markets. For pension schemes that pay lifetime benefits, the Group may consider and support the purchase of annuities to back these benefit obligations if it is commercially sensible to do so. Net liability recognised in the Consolidated Balance Sheet The net liability recognised in the Consolidated Balance Sheet is as follows: | | | | Defined benefit pension
schemes / post-
employment obligations | | Post-retirement medical
schemes | | | Defined benefit pension
schemes / post-
employment obligations | | Post-retirement medical
schemes | | | | | 2019 | | 2018 | | 2019 | | | 2018 | | | 2020 | | 2019 | | 2020 | | | 2019 | | | | | US$M | | US$M | | US$M | | | US$M | | | US$M | | US$M | | US$M | | | US$M | | Present value of funded defined benefit obligation | | | 632 | | | 616 | | | | – | | | | – | | | | 613 | | | 632 | | | | – | | | | – | | Present value of unfunded defined benefit obligation | | | 306 | | | 274 | | | | 203 | | | | 192 | | | | 354 | | | 306 | | | | 214 | | | | 203 | | Fair value of defined benefit scheme assets | | | (648 | ) | | (633 | ) | | | – | | | | – | | | | (634 | ) | | (648 | ) | | – | | | | – | | | | | | | | | | | | | | | | | | | | | | | | | | | Scheme deficit | | | 290 | | | 257 | | | | 203 | | | | 192 | | | | 333 | | | 290 | | | | 214 | | | | 203 | | | | | | | | | | | | | | | | | | | | | | | | | | | Unrecognised surplus | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | Unrecognised past service credits | | | – | | | | – | | | | – | | | | – | | | | – | | | – | | | | – | | | | – | | Adjustment for employer contributions tax | | | – | | | | – | | | | – | | | | – | | | | – | | | – | | | | – | | | | – | | | | | | | | | | | | | | | | | | | | | | | | | | | Net liability recognised in the Consolidated Balance Sheet | | | 290 | | | 257 | | | | 203 | | | | 192 | | | | 333 | | | 290 | | | | 214 | | | | 203 | | | | | | | | | | | | | | | | | | | | | | | | | | |
The Group has no legal obligation to settle these liabilities with any immediate contributions or additionalone-off contributions. The Group intends to continue to contribute to each defined benefit pension and post-retirement medical scheme in accordance with the latest recommendations of each scheme actuary. F-74
2627 Employees
| | | | 2019 | | | 2018 | | | 2017 | | | 2020 | | | 2019 | | | 2018 | | | | | Number | | | Number | | | Number | | | Number | | | Number | | | Number | | Average number of employees (1) | | | | | | | | | | | | | Australia | | | 18,146 | | | | 16,504 | | | | 15,906 | | | | 20,967 | | | | 18,146 | | | | 16,504 | | South America | | | 6,979 | | | | 6,729 | | | | 6,361 | | | | 7,330 | | | | 6,979 | | | | 6,729 | | North America | | | 1,999 | | | | 1,839 | | | | 2,072 | | | | 1,296 | | | | 1,999 | | | | 1,839 | | Asia | | | 1,743 | | | | 1,368 | | | | 1,019 | | | | 1,939 | | | | 1,743 | | | | 1,368 | | Europe | | | 59 | | | | 70 | | | | 74 | | | | 57 | | | | 59 | | | | 70 | | | | | | | | | | | | | | | | | | | | | Total average number of employees from Continuing operations | | | 28,926 | | | | 26,510 | | | | 25,432 | | | | 31,589 | | | | 28,926 | | | | 26,510 | | | | | | | | | | | | | | | | | | | | | Total average number of employees from Discontinued operations | | | – | | | | 651 | | | | 714 | | | | – | | | | – | | | | 651 | | | | | | | | | | | | | | | | | | | | | Total average number of employees | | | 28,926 | | | | 27,161 | | | | 26,146 | | | | 31,589 | | | | 28,926 | | | | 27,161 | | | | | | | | | | | | | | | | | | | | |
| (1) | Average employee numbers include the Executive Director and 100 per cent of employees of subsidiary companies. Employees of equity accounted investments and joint operations are not included. Part-time employees are included on a full-time equivalent basis. Employees of businesses disposed of during the year are included for the period of ownership. Contractors are not included. |
Group and related party information 2728 Discontinued operations
On 28 September 2018, BHP completed the sale of 100 per cent of the issued share capital of BHP Billiton Petroleum (Arkansas) Inc. and 100 per cent of the membership interests in BHP Billiton Petroleum (Fayetteville) LLC, which held the Fayetteville assets, for a gross cash consideration of US$0.3 billion. On 31 October 2018, BHP completed the sale of 100 per cent of the issued share capital of Petrohawk Energy Corporation, the BHP subsidiary which held the Eagle Ford (being Black Hawk and Hawkville), Haynesville and Permian assets, for a gross cash consideration of US$10.3 billion (net of preliminary customary completion adjustments of US$0.2 billion). While the effective date at which the right to economic profits transferred to the purchasers was 1 July 2018, the Group continued to control the Onshore US assets until the completion dates of their respective transactions. As such the Group continued to recognise its share of revenue, expenses, net finance costs and associated income tax expense related to the operation until the completion date. In addition, the Group provided transitional services to the buyer, which ceased in July 2019. The completion adjustments included a reduction in sale proceeds, based on the operating cash generated and retained by the Group in the period prior to completion, in order to transfer the economic profits from 1 July 2018 to completion date to the buyers. Therefore, thepre-tax profit from operating the assets is largely offset by apre-tax loss on disposal. Accordingly, the net loss from discontinuedDiscontinued operations predominantly relates to incremental costs arising as a consequence of the divestment, including restructuring costs and provisions for surplus office accommodation, and tax expenses largely triggered by the completion of the transactions. F-75
There was no contribution of Discontinued operations for the year ended 30 June 2020. The contribution of Discontinued operations included within the Group’s profit and cash flows for the year ended 30 June 2019 and the year ended 30 June 2018 are detailed below: Income statement – Discontinued operations | | | | | | | | | | | | | | | | 2019 | | | 2018 | | | 2017 | | | | | US$M | | | US$M | | | US$M | | Revenue | | | 851 | | | | 2,171 | | | | 2,150 | | Other income | | | 94 | | | | 34 | | | | 74 | | Expenses excluding net finance costs | | | (729 | ) | | | (5,790 | ) | | | (3,025 | ) | | | | | | | | | | | | | | Profit/(loss) from operations | | | 216 | | | | (3,585 | ) | | | (801 | ) | | | | | | | | | | | | | | Financial expenses | | | (8 | ) | | | (22 | ) | | | (14 | ) | | | | | | | | | | | | | | Net finance costs | | | (8 | ) | | | (22 | ) | | | (14 | ) | | | | | | | | | | | | | | Profit/(loss) before taxation | | | 208 | | | | (3,607 | ) | | | (815 | ) | | | | | | | | | | | | | | Income tax (expense)/benefit | | | (33 | ) | | | 686 | | | | 343 | | | | | | | | | | | | | | | Profit/(loss) after taxation from operating activities | | | 175 | | | | (2,921 | ) | | | (472 | ) | | | | | | | | | | | | | | Net loss on disposal | | | (510 | ) | | | – | | | | – | | | | | | | | | | | | | | | Loss after taxation | | | (335 | ) | | | (2,921 | ) | | | (472 | ) | | | | | | | | | | | | | | Attributable tonon-controlling interests | | | 7 | | | | 26 | | | | 13 | | Attributable to BHP shareholders | | | (342 | ) | | | (2,947 | ) | | | (485 | ) | | | | | | | | | | | | | | Basic loss per ordinary share (cents) | | | (6.6 | ) | | | (55.4 | ) | | | (9.1 | ) | Diluted loss per ordinary share (cents) | | | (6.6 | ) | | | (55.4 | ) | | | (9.1 | ) | | | | | | | | | | | | | |
| | | | | | | | | | | | 2019 | | | 2018 | | | | | US$M | | | US$M | | Profit/(loss) after taxation from operating activities | | | 175 | | | | (2,921 | ) | | | | | | | | | | Net loss on disposal | | | (510 | ) | | | – | | | | | | | | | | | Loss after taxation | | | (335 | ) | | | (2,921 | ) | | | | | | | | | | Attributable to non-controlling interests | | | 7 | | | | 26 | | Attributable to BHP shareholders | | | (342 | ) | | | (2,947 | ) | | | | | | | | | | Basic loss per ordinary share (cents) | | | (6.6 | ) | | | (55.4 | ) | Diluted loss per ordinary share (cents) | | | (6.6 | ) | | | (55.4 | ) | | | | | | | | | |
The total comprehensive income attributable to BHP shareholders from Discontinued operations was a loss of US$342 million (2018:in FY2019 and a loss of US$2,943 million; 2017: loss of US$489 million).million in FY2018. The conversion of options and share rights would decrease the loss per share for the years ended 30 June 2019 2018 and 20172018 and therefore its impact has been excluded from the diluted earnings per share calculation. Cash flows from Discontinued operations | | | | 2019 | | 2018 | | 2017 | | | 2019 | | 2018 | | | | | US$M | | US$M | | US$M | | | US$M | | US$M | | Net operating cash flows | | | 474 | | | 900 | | | 928 | | | | 474 | | | 900 | | Net investing cash flows (1) | | | (443 | ) | | (861 | ) | | (437 | ) | | | (443 | ) | | (861 | ) | Net financing cash flows (2) | | | (13 | ) | | (40 | ) | | (28 | ) | | | (13 | ) | | (40 | ) | | | | | | | | | | | | | | | | | Net increase/(decrease) in cash and cash equivalents from Discontinued operations | | | 18 | | | (1 | ) | | 463 | | | | 18 | | | (1 | ) | | | | | | | | | | | | | | | | | Net proceeds received from the sale of Onshore US | | | 10,531 | | | | – | | | | – | | | | 10,531 | | | | – | | Less Cash and cash equivalents | | | (104 | ) | | | – | | | | – | | | | (104 | ) | | | – | | | | | | | | | | | | | | | | | | Proceeds from divestment of Onshore US, net of its cash | | | 10,427 | | | | – | | | | – | | | | 10,427 | | | | – | | | | | | | | | | | | | | | | | | Total cash impact | | | 10,445 | | | (1 | ) | | 463 | | | | 10,445 | | | (1 | ) | | | | | | | | | | | | | | | | |
| (1) | Includes purchases of property, plant and equipment of US$443 million in FY2019 (2018: US$900 million; 2017: US$555 million) less proceeds from sale of assets of US$ nil in FY2019 (2018: US$39 million; 2017: US$118 million). |
| (2) | Includes net repayment of interest bearing liabilities of US$6 million in FY2019 (2018: US$4 million; 2017: US$6 million), distribution tonon-controlling interests of US$ nil in FY2019 (2018: US$14 million; 2017: US$16 million) and dividends paid tonon-controlling interests of US$7 million in FY2019 (2018: US$22 million; 2017: US$6 million). |
F-76
Net loss on disposal of Discontinued operations Details of the net loss on disposal for the year ended 30 June 2019 is presented in the table below: | | | | | | | | 2019 | | | | | US$M | | Assets
| | | | | Cash and cash equivalents
| | | 104 | | Trade and other receivables
| | | 562 | | Other financial assets
| | | 31 | | Inventories
| | | 34 | | Property, plant and equipment
| | | 10,998 | | Intangible assets
| | | 667 | | | | | | | Total assets
| | | 12,396 | | | | | | | Liabilities
| | | | | Trade and other payables
| | | 794 | | Provisions
| | | 491 | | | | | | | Total liabilities
| | | 1,285 | | | | | | | Net assets | | | 11,111 | | | | | | | Lessnon-controlling interest share of net assets disposed | | | (168 | ) | | | | | | BHP Share of net assets disposed | | | 10,943 | | | | | | | Gross consideration | | | 10,555 | | Less transaction costs | | | (54 | ) | Income tax expense | | | (68 | ) | | | | | | Net loss on disposal | | | (510 | ) | | | | | |
Exceptional items – Discontinued operations Exceptional items are those gains or losses where their nature, including the expected frequency of the events giving rise to them, and amountimpact is considered material to the Financial Statements. There were no exceptional items related to Discontinued operations for the yearyears ended 30 June 20192020 and 30 June 2017.2019. Items related to Discontinued operations included within profit for the year ended 30 June 2018 are detailed below. | | | | | | | | | | | | | Year ended 30 June 2018 | | Gross | | | Tax | | | Net | | | | | US$M | | | US$M | | | US$M | | Exceptional items by category | | | | | | | | | | | | | US tax reform | | | – | | | | 492 | | | | 492 | | Impairment of Onshore US assets | | | (2,859 | ) | | | 109 | | | | (2,750 | ) | | | | | | | | | | | | | | Total | | | (2,859 | ) | | | 601 | | | | (2,258 | ) | | | | | | | | | | | | | | Attributable tonon-controlling interests | | | – | | | | – | | | | – | | Attributable to BHP shareholders | | | (2,859 | ) | | | 601 | | | | (2,258 | ) | | | | | | | | | | | | | |
F-77
| | | | | | | | | | | | | Year ended 30 June 2018 | | Gross | | | Tax | | | Net | | | | | US$M | | | US$M | | | US$M | | Exceptional items by category | | | | | | | | | | | | | US tax reform | | | – | | | | 492 | | | | 492 | | Impairment of Onshore US assets | | | (2,859 | ) | | | 109 | | | | (2,750 | ) | | | | | | | | | | | | | | Total | | | (2,859 | ) | | | 601 | | | | (2,258 | ) | | | | | | | | | | | | | | Attributable to non-controlling interests | | | – | | | | – | | | | – | | Attributable to BHP shareholders | | | (2,859 | ) | | | 601 | | | | (2,258 | ) | | | | | | | | | | | | | |
US tax reform On 22 December 2017, the US President signed the Tax Cuts and Jobs Act (TCJA) into law. The TCJA (effective 1 January 2018) includes a broad range of tax reforms affecting the Group, including, but not limited to, a reduction in the US corporate tax rate from 35 per cent to 21 per cent and changes to international tax provisions. As a result of the TCJA, the Group has recognised an exceptional income tax benefit of US$492 million relating to there-measurement of the Onshore US deferred tax positions arising from temporary differences. Impairment of Onshore US assets For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows. At 30 June 2018, the Onshore US assets, including goodwill, have been allocated to two CGUs reflecting the separately identifiable cash flows expected from the divestment of the assets. The Group recognised impairment charges as follows: | Cash generating unit | | Property,
plant and
equipment | | Goodwill | | Total | | | Property,
plant and
equipment | | Goodwill | | Total | | | | | US$M | | US$M | | US$M | | | US$M | | US$M | | US$M | | Petrohawk | | | – | | | (2,253 | ) | | (2,253 | ) | | | – | | | (2,253 | ) | | (2,253 | ) | Fayetteville | | | (520 | ) | | (86 | ) | | (606 | ) | | | (520 | ) | | (86 | ) | | (606 | ) | | | | | | | | | | | | | | | | | | | | Total impairment ofnon-current assets | | | (520 | ) | | (2,339 | ) | | (2,859 | ) | | | (520 | ) | | (2,339 | ) | | (2,859 | ) | | | | | | | | | | | | | | | | | | | |
The charges reflect a robust and competitive exit process with fair value based on the agreed sales consideration (Level 2 of the fair value hierarchy) less expected costs of disposal. In previous reporting periods the Group performed impairment testing of the five individual Onshore US assets as each asset had separately identifiable cash flows. In addition, the goodwill attributable to the Onshore US group of CGUs (2017: US$3,022 million) was tested for impairment after the assessment of the individual CGUs. The recoverable amount determinations for the Onshore US CGUs were based on FVLCD using discounted cash flow techniques. The FVLCD calculations were based primarily on Level 3 inputs and significant assumptions included management’s assessment of a market participant’s perspective of crude oil and natural gas prices, production volumes and discount rates.
F-78
2829 Subsidiaries
Significant subsidiaries of the Group are those with the most significant contribution to the Group’s net profit or net assets. The Group’s interest in the subsidiaries results are listed in the table below. For a complete list of the Group’s subsidiaries refer to Exhibit 8.1 –- List of Subsidiaires.Subsidiaries. | | | | | | | | Group’s interest | | | | | | | | Group’s interest | | Significant subsidiaries | | Country of
incorporation | | Principal activity | | 2019
% | | | 2018
% | | | Country of
incorporation | | | Principal activity | | 2020
% | | | 2019
% | | Coal | | | | | | | | | | | | | | | | | BHP Billiton Mitsui Coal Pty Ltd | | Australia | | Coal mining | | | 80 | | | | 80 | | | | Australia | | | Coal mining | | | 80 | | | | 80 | | Hunter Valley Energy Coal Pty Ltd | | Australia | | Coal mining | | | 100 | | | | 100 | | | | Australia | | | Coal mining | | | 100 | | | | 100 | | Copper | | | | | | | | | | | | | | | | | BHP Billiton Olympic Dam Corporation Pty Ltd | | Australia | | Copper and uranium mining | | | 100 | | | | 100 | | | | Australia | | | Copper and uranium mining | | | 100 | | | | 100 | | Compañia Minera Cerro Colorado Limitada | | Chile | | Copper mining | | | 100 | | | | 100 | | | | Chile | | | Copper mining | | | 100 | | | | 100 | | Minera Escondida Limitada (1) | | Chile | | Copper mining | | | 57.5 | | | | 57.5 | | | | Chile | | | Copper mining | | | 57.5 | | | | 57.5 | | Minera Spence S.A. | | Chile | | Copper mining | | | 100 | | | | 100 | | | | Chile | | | Copper mining | | | 100 | | | | 100 | | Iron Ore | | | | | | | | | | | | | | | | | BHP Billiton Iron Ore Pty Ltd | | Australia | | Service company | | | 100 | | | | 100 | | | | Australia | | | Service company | | | 100 | | | | 100 | | BHP Billiton Minerals Pty Ltd | | Australia | | Iron ore and coal mining | | | 100 | | | | 100 | | | | Australia | | | Iron ore and coal mining | | | 100 | | | | 100 | | BHP Iron Ore (Jimblebar) Pty Ltd (2) | | Australia | | Iron ore mining | | | 85 | | | | 85 | | | | Australia | | | Iron ore mining | | | 85 | | | | 85 | | BHP (Towage Service) Pty Ltd | | Australia | | Towing services | | | 100 | | | | 100 | | | | Australia | | | Towing services | | | 100 | | | | 100 | | Marketing | | | | | | | | | | | | | | | | | BHP Billiton Freight Singapore Pte Limited | | Singapore | | Freight services | | | 100 | | | | 100 | | | | Singapore | | | Freight services | | | 100 | | | | 100 | | BHP Billiton Marketing AG | | Switzerland | | Marketing and trading | | | 100 | | | | 100 | | | | Switzerland | | | Marketing and trading | | | 100 | | | | 100 | | BHP Billiton Marketing Asia Pte Ltd | | Singapore | | Marketing support and other services | | | 100 | | | | 100 | | | | Singapore | | | Marketing support and other services | | | 100 | | | | 100 | | Group and Unallocated | | | | | | | | | | | | | | | | | BHP Billiton Canada Inc. | | Canada | | Potash development | | | 100 | | | | 100 | | | | Canada | | | Potash development | | | 100 | | | | 100 | | BHP Billiton Finance BV | | The
Netherlands | | Finance | | | 100 | | | | 100 | | | | The Netherlands | | | Finance | | | 100 | | | | 100 | | BHP Billiton Finance Limited | | Australia | | Finance | | | 100 | | | | 100 | | | | Australia | | | Finance | | | 100 | | | | 100 | | BHP Billiton Finance (USA) Ltd | | Australia | | Finance | | | 100 | | | | 100 | | | | Australia | | | Finance | | | 100 | | | | 100 | | BHP Billiton Nickel West Pty Ltd | | | | Australia | | | Nickel mining, smelting, refining and administrative services | | | 100 | | | | 100 | | BHP Group Operations Pty Ltd | | Australia | | Administrative services | | | 100 | | | | 100 | | | | Australia | | | Administrative services | | | 100 | | | | 100 | | BHP Billiton Nickel West Pty Ltd | | Australia | | Nickel mining, smelting, refining and administrative services | | | 100 | | | | 100 | | | WMC Finance (USA) Limited | | Australia | | Finance | | | 100 | | | | 100 | | | | Australia | | | Finance | | | 100 | | | | 100 | | | | | | | | | | | | | | | | | | |
| (1) | As the Group has the ability to direct the relevant activities at Minera Escondida Limitada, it has control over the entity. The assessment of the most relevant activity in this contractual arrangement is subject to judgement. The Group establishes the mine plan and the operating budget and has the ability to appoint the key management personnel, demonstrating that the Group has the existing rights to direct the relevant activities of Minera Escondida Limitada. |
| (2) | The Group has an effective interest of 92.5 per cent in BHP Iron Ore (Jimblebar) Pty Ltd; however, by virtue of the shareholder agreement with ITOCHU Iron Ore Australia Pty Ltd and Mitsui & Co. Iron Ore Exploration & Mining Pty Ltd, the Group’s interest in the Jimblebar mining operation is 85 per cent, which is consistent with the other respective contractual arrangements at Western Australia Iron Ore. |
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2930 Investments accounted for using the equity method
Significant interests in equity accounted investments of the Group are those with the most significant contribution to the Group’s net profit or net assets. The Group’s ownership interest in equity accounted investments results are listed in the table below. For a complete list of the Group’s associates and joint ventures, refer to Exhibit 8.1 –- List of Subsidiaries. | Significant associates and joint ventures | | Country of
incorporation/
principal place of
business | | Associate or
joint
venture | | Principal
activity | | Reporting
date | | Ownership interest | | | Country of
incorporation/ principal
place of business | | Associate or joint venture | | Principal activity | | Reporting date | | Ownership interest | | | | 2019
% | | 2018
% | | | 2020
% | | 2019
% | | Cerrejón | | Anguilla/
Colombia/
Ireland | | Associate | | Coal mining in Colombia | | 31 December | | | 33.33 | | | | 33.33 | | | Anguilla/
Colombia/
Ireland | | Associate | | Coal mining in Colombia | | 31 December | | | 33.33 | | | | 33.33 | | Compañía Minera Antamina S.A. (Antamina) | | Peru | | Associate | | Copper and zinc mining | | 31 December | | | 33.75 | | | | 33.75 | | | Peru | | Associate | | Copper and zinc mining | | 31 December | | | 33.75 | | | | 33.75 | | Samarco Mineração S.A. (Samarco) | | Brazil | | Joint
venture | | Iron ore mining | | 31 December | | | 50.00 | | | | 50.00 | | | Brazil | | Joint venture | | Iron ore mining | | 31 December | | | 50.00 | | | | 50.00 | |
Voting in relation to relevant activities in Antamina and Cerrejón, determined to be the approval of the operating and capital budgets, does not require unanimous consent of all participants to the arrangement, therefore joint control does not exist. Instead, because the Group has the power to participate in the financial and operating policies of the investee, these investments are accounted for as associates. Samarco is jointly owned by BHP Billiton Brasil Ltda (BHP Brasil) and Vale.Vale S.A. (Vale). As the Samarco entity has the rights to the assets and obligations to the liabilities relating to the joint arrangement and not its owners, this investment is accounted for as a joint venture. The Group is restricted in its ability to make dividend payments from its investments in associates and joint ventures as any such payments require the approval of all investors in the associates and joint ventures. The ownership interest at the Group’s and the associates’ or joint ventures’ reporting dates are the same. When the annual financial reporting date is different to the Group’s, financial information is obtained as at 30 June in order to report on an annual basis consistent with the Group’s reporting date. The movement for the year in the Group’s investments accounted for using the equity method is as follows: | Year ended 30 June 2019 US$M | | Investment in
associates | | Investment in
joint ventures | | Total equity
accounted
investments | | | Year ended 30 June 2020 US$M | | | Investment in
associates | | Investment in
joint ventures | | Total equity
accounted
investments | | At the beginning of the financial year | | | 2,473 | | | | – | | | | 2,473 | | | | 2,569 | | | | – | | | | 2,569 | | (Loss)/profit from equity accounted investments, related impairments and expenses (1) | | | 399 | | | | (945 | ) | | | (546 | ) | | | (4 | ) | | | (508 | ) | | | (512 | ) | Investment in equity accounted investments | | | 207 | | | | 96 | | | | 303 | | | | 147 | | | | 95 | | | | 242 | | Dividends received from equity accounted investments | | | (510 | ) | | | – | | | | (510 | ) | | | (126 | ) | | | – | | | | (126 | ) | Other | | | – | | | | 849 | | | | 849 | | | | (1 | ) | | | 413 | | | | 412 | | | | | | | | | | | | | | | | | | | | | At the end of the financial year | | | 2,569 | | | | – | | | | 2,569 | | | | 2,585 | | | | – | | | | 2,585 | | | | | | | | | | | | | | | | | | | | |
| (1) | US$(945)(508) million represents US$(96)(95) million share of loss fromimpairment relating to US$(96)(95) million funding provided during the period, US$(459) million movement in the Samarco dam failure provision including US$(916) million change in estimate and US$(849)457 million exchange translation and US$46 million movement in provisions related to the Samarco Germano dam failuredecommissioning provision including US$(579)(37) million change in estimate and US$(7)83 million exchange translation and US$(263) million Samarco Germano dam decommissioning provision.translation. Refer to note 4 ‘Significant events – Samarco dam failure’ for further information. |
F-80Key judgements and estimates
Estimates: An indicator of impairment was identified for the Group’s net investment in Cerrejón at 30 June 2020 as a result of reductions in the Group’s forecast prices for Colombian thermal coal and the reduced production volumes in Cerrejón’s latest mine plan. Accordingly the Group assessed the recoverable amount of Cerrejón in line with the impairment of non-current assets principles (including key judgements and estimates) detailed in note 11 ‘Property, Plant and Equipment’. The recoverable amount was assessed using the FVLCD methodology including a market participant’s perspective of the net present value of future post-tax cash flows and other market-based indicators of fair value. The Cerrejón carrying amount of US$776 million is supported by the recoverable amount determination and as such, no impairment has been recognised. The recoverable amount assessment is most susceptible to assumptions regarding the long term forecasts of Colombian thermal coal prices and discount rates: | • | | Colombian thermal coal prices: At 30 June 2020 the price assumptions used in determining the recoverable amount considered the Group’s latest internal price forecasts, taking into account expected demand and supply for Colombian thermal coal, and price forecasts available from external sources (including consensus pricing). The short to long term range of prices used in the valuations were consistent with those published by market commentators of approximately US$45 to US$65 per tonne; | |
| • | | Discount rate: the discount rate is derived using the weighted average cost of capital methodology adjusted for any risks that are not reflected in the underlying cash flows, including where appropriate a country risk premium. A real post-tax discount rate of 9.5 per cent was applied to post-tax cash flows. | |
Changes in circumstances may affect the assumptions used to determine recoverable amount at future reporting dates.
The following table summarises the financial information relating to each of the Group’s significant equity accounted investments. BHP Billiton Brasil’s 50 per cent portion of Samarco’s commitments, for which BHP Billiton Brasil has no funding obligation, is US$250200 million (2018:(2019: US$550250 million). | | | | | | | | | | | | | | | | | | | | | | | | | | | | Associates | | | Joint ventures | | | | | 2019 US$M | | Antamina | | | Cerrejón | | | Individually
immaterial (1) | | | Samarco (2) | | | Individually
immaterial | | | Total | | Current assets | | | 1,065 | | | | 845 | | | | | | | | 290 | (3) | | | | | | | | | Non-current assets | | | 4,495 | | | | 2,664 | | | | | | | | 6,103 | | | | | | | | | | Current liabilities | | | (498 | ) | | | (344 | ) | | | | | | | (6,704 | ) (4) | | | | | | | | | Non-current liabilities | | | (1,076 | ) | | | (801 | ) | | | | | | | (5,830 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Net assets/(liabilities) – 100% | | | 3,986 | | | | 2,364 | | | | | | | | (6,141 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Net assets/(liabilities) – Group share | | | 1,345 | | | | 788 | | | | | | | | (3,071 | ) | | | | | | | | | Adjustments to net assets related to accounting policy adjustments | | | – | | | | 65 | | | | | | | | 366 | (5) | | | | | | | | | Impairment of the carrying value of the investment in Samarco | | | – | | | | – | | | | | | | | (525 | ) (6) | | | | | | | | | Additional share of Samarco losses | | | – | | | | – | | | | | | | | 3,145 | (7) | | | | | | | | | Unrecognised losses | | | – | | | | – | | | | | | | | 85 | (8) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Carrying amount of investments accounted for using the equity method | | | 1,345 | | | | 853 | | | | 371 | | | | – | | | | – | | | | 2,569 | | | | | | | | | | | | | | | | | | | | | | | | | | | Revenue – 100% | | | 3,203 | | | | 2,094 | | | | | | | | 24 | | | | | | | | | | Profit/(loss) from Continuing operations – 100% | | | 1,168 | | | | 309 | | | | | | | | (2,166 | ) (9) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Share of operating profit/(loss) of equity accounted investments | | | 394 | | | | 103 | | | | | | | | (1,075 | ) | | | | | | | | | Additional share of Samarco losses | | | – | | | | – | | | | | | | | 108 | | | | | | | | | | Unrecognised losses | | | – | | | | – | | | | | | | | 22 | (8) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | (Loss)/profit from equity accounted investments, related impairments and expenses | | | 394 | | | | 103 | | | | (98 | ) | | | (945 | ) | | | – | | | | (546 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | Comprehensive income/(loss) – 100% | | | 1,168 | | | | 309 | | | | | | | | (2,166 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Share of comprehensive income/(loss) – Group share in equity accounted investments | | | 394 | | | | 103 | | | | (98 | ) | | | (945 | ) | | | – | | | | (546 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | Dividends received from equity accounted investments | | | 361 | | | | 134 | | | | 15 | | | | – | | | | – | | | | 510 | | | | | | | | | | | | | | | | | | | | | | | | | | |
F-81
| | | | | | | | | | | | | | | | | | | | | | | | | | | | Associates | | | Joint ventures | | | | | 2020 US$M | | Antamina | | | Cerrejón | | | Individually
immaterial (1) | | | Samarco (2) | | | Individually
immaterial | | | Total | | Current assets | | | 974 | | | | 712 | | | | | | | | 49 | (3) | | | | | | | | | Non-current assets | | | 4,743 | | | | 2,462 | | | | | | | | 3,601 | | | | | | | | | | Current liabilities | | | (239 | ) | | | (170 | ) | | | | | | | (7,961 | ) (4) | | | | | | | | | Non-current liabilities | | | (1,173 | ) | | | (854 | ) | | | | | | | (5,447 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Net assets/(liabilities) – 100% | | | 4,305 | | | | 2,150 | | | | | | | | (9,758 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Net assets/(liabilities) – Group share | | | 1,453 | | | | 717 | | | | | | | | (4,879 | ) | | | | | | | | | Adjustments to net assets related to accounting policy adjustments | | | – | | | | 59 | | | | | | | | 256 | (5) | | | | | | | | | Investment in Samarco | | | – | | | | – | | | | | | | | 405 | (6) | | | | | | | | | Impairment of the carrying value of the investment in Samarco | | | – | | | | – | | | | | | | | (930 | ) (7) | | | | | | | | | Additional share of Samarco losses | | | – | | | | – | | | | | | | | 3,341 | (8) | | | | | | | | | Unrecognised losses | | | – | | | | – | | | | | | | | 1,807 | (9) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Carrying amount of investments accounted for using the equity method | | | 1,453 | | | | 776 | | | | 356 | | | | – | | | | – | | | | 2,585 | | | | | | | | | | | | | | | | | | | | | | | | | | | Revenue – 100% | | | 2,464 | | | | 1,091 | | | | | | | | 26 | | | | | | | | | | Profit/(loss) from Continuing operations – 100% | | | 629 | | | | (182 | ) | | | | | | | (3,617 | ) (10) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Share of operating profit/(loss) of equity accounted investments | | | 212 | | | | (68 | ) | | | | | | | (1,918 | ) (11) | | | | | | | | | Impairment of the carrying value of the investment in Samarco | | | – | | | | – | | | | | | | | (95 | ) (7) | | | | | | | | | Additional share of Samarco losses | | | – | | | | – | | | | | | | | 93 | | | | | | | | | | Unrecognised losses | | | – | | | | – | | | | | | | | 1,412 | (9) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | (Loss)/profit from equity accounted investments, related impairments and expenses | | | 212 | | | | (68 | ) | | | (148 | ) | | | (508 | ) | | | – | | | | (512 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | Comprehensive income – 100% | | | 629 | | | | (182 | ) | | | | | | | (3,617 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Share of comprehensive income/(loss) – Group share in equity accounted investments | | | 212 | | | | (68 | ) | | | (148 | ) | | | (508 | ) | | | – | | | | (512 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | Dividends received from equity accounted investments | | | 105 | | | | 9 | | | | 12 | | | | – | | | | – | | | | 126 | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | Associates | | | Joint ventures | | | | | 2018 US$M | | Antamina | | | Cerrejón | | | Individually
immaterial (1) | | | Samarco (2) | | | Individually
immaterial | | | Total | | Current assets | | | 1,099 | | | | 1,187 | | | | | | | | 79 | (3) | | | | | | | | | Non-current assets | | | 4,385 | | | | 2,485 | | | | | | | | 6,023 | | | | | | | | | | Current liabilities | | | (532 | ) | | | (585 | ) | | | | | | | (5,811 | ) (4) | | | | | | | | | Non-current liabilities | | | (1,064 | ) | | | (663 | ) | | | | | | | (4,265 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Net assets/(liabilities) – 100% | | | 3,888 | | | | 2,424 | | | | | | | | (3,974 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Net assets/(liabilities) – Group share | | | 1,312 | | | | 808 | | | | | | | | (1,987 | ) | | | | | | | | | Adjustments to net assets related to accounting policy adjustments | | | 1 | | | | 75 | | | | | | | | 357 | (5) | | | | | | | | | Impairment of the carrying value of the investment in Samarco | | | – | | | | – | | | | | | | | (525 | ) (6) | | | | | | | | | Additional share of Samarco losses | | | – | | | | – | | | | | | | | 2,092 | (7) | | | | | | | | | Unrecognised losses | | | – | | | | – | | | | | | | | 63 | (8) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Carrying amount of investments accounted for using the equity method | | | 1,313 | | | | 883 | | | | 277 | | | | – | | | | – | | | | 2,473 | | | | | | | | | | | | | | | | | | | | | | | | | | | Revenue – 100% | | | 3,866 | | | | 2,453 | | | | | | | | 30 | | | | | | | | | | Profit/(loss) from Continuing operations – 100% | | | 1,613 | | | | 576 | | | | | | | | (1,558 | ) (9) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Share of operating profit/(loss) of equity accounted investments | | | 544 | | | | 192 | | | | | | | | (823 | ) | | | | | | | | | Additional share of Samarco losses | | | – | | | | – | | | | | | | | 251 | | | | | | | | | | Unrecognised losses | | | – | | | | – | | | | | | | | 63 | (8) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Profit/(loss) from equity accounted investments, related impairments and expenses | | | 544 | | | | 192 | | | | (80 | ) | | | (509 | ) | | | – | | | | 147 | | | | | | | | | | | | | | | | | | | | | | | | | | | Comprehensive income/(loss) – 100% | | | 1,613 | | | | 576 | | | | | | | | (1,558 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Share of comprehensive income/(loss) – Group share in equity accounted investments | | | 544 | | | | 192 | | | | (80 | ) | | | (509 | ) | | | – | | | | 147 | | | | | | | | | | | | | | | | | | | | | | | | | | | Dividends received from equity accounted investments | | | 496 | | | | 181 | | | | 16 | | | | – | | | | – | | | | 693 | | | | | | | | | | | | | | | | | | | | | | | | | | |
F-82
| | | | | | | | | | | | | | | | | | | | | | | | | | | | Associates | | | Joint ventures | | | | | 2019 US$M | | Antamina | | | Cerrejón | | | Individually
immaterial (1) | | | Samarco (2) | | | Individually
immaterial | | | Total | | Current assets | | | 1,065 | | | | 845 | | | | | | | | 290 | (3) | | | | | | | | | Non-current assets | | | 4,495 | | | | 2,664 | | | | | | | | 6,103 | | | | | | | | | | Current liabilities | | | (498 | ) | | | (344 | ) | | | | | | | (6,704 | ) (4) | | | | | | | | | Non-current liabilities | | | (1,076 | ) | | | (801 | ) | | | | | | | (5,830 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Net assets/(liabilities) – 100% | | | 3,986 | | | | 2,364 | | | | | | | | (6,141 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Net assets/(liabilities) – Group share | | | 1,345 | | | | 788 | | | | | | | | (3,071 | ) | | | | | | | | | Adjustments to net assets related to accounting policy adjustments | | | – | | | | 65 | | | | | | | | 366 | (5) | | | | | | | | | Investment in Samarco | | | – | | | | – | | | | | | | | 310 | (6) | | | | | | | | | Impairment of the carrying value of the investment in Samarco | | | – | | | | – | | | | | | | | (835 | ) (7) | | | | | | | | | Additional share of Samarco losses | | | – | | | | – | | | | | | | | 2,835 | (8) | | | | | | | | | Unrecognised losses | | | – | | | | – | | | | | | | | 395 | (9) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Carrying amount of investments accounted for using the equity method | | | 1,345 | | | | 853 | | | | 371 | | | | – | | | | – | | | | 2,569 | | | | | | | | | | | | | | | | | | | | | | | | | | | Revenue – 100% | | | 3,203 | | | | 2,094 | | | | | | | | 24 | | | | | | | | | | Profit/(loss) from Continuing operations – 100% | | | 1,168 | | | | 309 | | | | | | | | (2,166 | ) (10) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Share of operating profit/(loss) of equity accounted investments | | | 394 | | | | 103 | | | | | | | | (1,075 | ) (11) | | | | | | | | | Impairment of the carrying value of the investment in Samarco | | | – | | | | – | | | | | | | | (96 | ) (7) | | | | | | | | | Additional share of Samarco losses | | | – | | | | – | | | | | | | | 108 | | | | | | | | | | Unrecognised losses | | | – | | | | – | | | | | | | | 118 | (9) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | (Loss)/profit from equity accounted investments, related impairments and expenses | | | 394 | | | | 103 | | | | (98 | ) | | | (945 | ) | | | – | | | | (546 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | Comprehensive income/(loss) – 100% | | | 1,168 | | | | 309 | | | | | | | | (2,166 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Share of comprehensive income/(loss) – Group share in equity accounted investments | | | 394 | | | | 103 | | | | (98 | ) | | | (945 | ) | | | – | | | | (546 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | Dividends received from equity accounted investments | | | 361 | | | | 134 | | | | 15 | | | | – | | | | – | | | | 510 | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Associates | | Joint ventures | | | | | Associates | | Joint ventures | | | | | 2017 US$M | | Antamina | | Cerrejón | | Individually
immaterial | | Samarco (2) | | Individually
immaterial | | Total | | | 2018 US$M | | | Antamina | | | Cerrejón | | | Individually
immaterial | | Samarco (2) | | Individually
immaterial | | | Total | | Revenue – 100% | | 2,905 | | | 2,247 | | | | | 28 | | | | | | | | 3,866 | | | | 2,453 | | | | | 30 | | | | | | Profit/(loss) from Continuing operations – 100% | | 1,010 | | | 388 | | | | | (1,520 | ) (9) | | | | | | | 1,613 | | | | 576 | | | | | (1,558 | ) (10) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Share of operating profit/(loss) of equity accounted investments | | 341 | | | 129 | | | | | (760 | ) | | | | | | | 544 | | | | 192 | | | | | (823 | ) (11) | | | | | Impairment of the carrying value of the investment in Samarco | | | | – | | | | – | | | | | (80 | ) (7) | | | | | Additional share of Samarco losses | | | – | | | | – | | | | | 588 | | | | | | | | – | | | | – | | | | | 117 | | | | | | Unrecognised losses | | | | – | | | | – | | | | | 277 | (9) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Profit/(loss) from equity accounted investments, related impairments and expenses | | 341 | | | 129 | | | (26 | ) | | (172 | ) | | | – | | | 272 | | | | 544 | | | | 192 | | | | (80 | ) | | (509 | ) | | | – | | | | 147 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Comprehensive income/(loss) – 100% | | 1,010 | | | 388 | | | | | (1,520 | ) | | | | | | | 1,613 | | | | 576 | | | | | (1,558 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Share of comprehensive income/(loss) – Group share in equity accounted investments | | 341 | | | 129 | | | (26 | ) | | (172 | ) | | | – | | | 272 | | | | 544 | | | | 192 | | | | (80 | ) | | (509 | ) | | | – | | | | 147 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Dividends received from equity accounted investments | | 425 | | | 163 | | | 32 | | | | – | | | | – | | | 620 | | | | 496 | | | | 181 | | | | 16 | | | | – | | | | – | | | | 693 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (1) | The unrecognised share of loss for the period was US$12 million (2019: unrecognised share of profit for the period was US$15 million (2018: unrecognised share of loss for the period was US$56 million), which decreasedincreased the cumulative losses to US$181193 million (2018: increase(2019: decrease to US$196181 million). |
| (2) | Refer to note 4 ‘Significant events – Samarco dam failure’ for further information regarding the financial impact of the Samarco dam failure in November 2015 on BHP Billiton Brasil’s share of Samarco’s losses. |
| (3) | Includes cash and cash equivalents of US$24615 million (2018:(2019: US$23246 million). |
| (4) | Includes current financial liabilities (excluding trade and other payables and provisions) of US$5,5106,023 million (2018:(2019: US$5,0665,510 million). |
| (5) | Relates mainly to dividends declared by Samarco that remain unpaid at balance date and which, in accordance with the Group’s accounting policy, are recognised when received not receivable. |
| (6) | Working capital funding provided to Samarco is capitalised as part of the Group’s investments in joint ventures. Following a change to IAS 28 the Group no longer recognises an additional share of Samarco’s losses related to working capital funding provided during the period. This is now disclosed as an impairment included within the Samarco impairment expense line item. Comparative periods, including the impact on unrecognised losses have been restated to reflect the change. |
| (7) | In the year ended 30 June 2016 BHP Billiton Brasil adjusted its investment in Samarco to US$ nil (resulting from US$(655) million share of loss from Samarco and US$(525) million impairment). Additional cumulative impairment losses relating to working capital funding of US$(405) million have also been recognised. |
(7)(8) | BHP Billiton Brasil has recognised accumulated additional share of Samarco losses of US$(3,145)(3,341) million resulting from US$(310)(2,929) million share of loss from funding provided to Samarco and US$(2,835) million from provisions relating to the Samarco dam failure, including US$(319)(412) million recognised as net finance costs. |
(8)(9) | Share of Samarco’s losses for which BHP Billiton Brasil does not have an obligation to fund. |
(9)(10) | Includes depreciation and amortisation of US$84 million (2019: US$85 million (2018:million; 2018: US$73 million; 2017: US$88 million), interest income of US$16 million (2019: US$22 million (2018:million; 2018: US$31 million; 2017: US$57 million), interest expense of US$588 million (2019: US$342 million (2018:million; 2018: US$385 million; 2017: US$473 million) and income tax benefit/(expense) of US$(256) million (2019: US$52 million (2018:million; 2018: US$(154) million; 2017: US$(851) million). |
F-83
| (11) | Includes accounting policy adjustments mainly related to the removal of foreign exchange gains on excluded dividends payable. |
3031 Interests in joint operations
Significant joint operations of the Group are those with the most significant contributions to the Group’s net profit or net assets. The Group’s interest in the joint operations results are listed in the table below. For a complete list of the Group’s investments in joint operations, refer to ExibitExhibit 8.1 –- List of Subsidiaries. | | | | | | | | Group’s interest | | | Group’s interest | | Significant joint operations | | Country of operation | | Principal activity | | 2019
% | | | 2018
% | | | Country of operation | | Principal activity | | 2020
% | | 2019
% | | Atlantis | | | US | | Hydrocarbons production | | | 44 | | | 44 | | Bass Strait | | Australia | | Hydrocarbons production | | | 50 | | | | 50 | | | Australia | | Hydrocarbons production | | | 50 | | | 50 | | Greater Angostura | | Trinidad and Tobago | | Hydrocarbons production | | | 45 | | | | 45 | | | Trinidad and Tobago | | Hydrocarbons production | | | 45 | | | 45 | | Gulf of Mexico | | US | | Hydrocarbons exploration and production | | | 23.9–44 | | | | 23.9–44 | | | Macedon (1) | | Australia | | Hydrocarbons exploration and production | | | 71.43 | | | | 71.43 | | | Australia | | Hydrocarbons production | | | 71.43 | | | 71.43 | | Mad Dog | | | US | | Hydrocarbons production | | | 23.9 | | | 23.9 | | North West Shelf | | Australia | | Hydrocarbons production | | | 12.5–16.67 | | | | 12.5–16.67 | | | Australia | | Hydrocarbons production | | | 12.5–16.67 | | | 12.5–16.67 | | Pyrenees (1) | | Australia | | Hydrocarbons exploration and production | | | 40–71.43 | | | | 40–71.43 | | | Australia | | Hydrocarbons production | | | 40–71.43 | | | 40–71.43 | | ROD Integrated Development (2) | | Algeria | | Hydrocarbons exploration and production | | | 29.50 | | | | 29.50 | | | Algeria | | Hydrocarbons production | | | 29.50 | | | 29.50 | | Shenzi | | | US | | Hydrocarbons production | | | 44 | | | 44 | | Mt Goldsworthy (3) | | Australia | | Iron ore mining | | | 85 | | | | 85 | | | Australia | | Iron ore mining | | | 85 | | | 85 | | Mt Newman (3) | | Australia | | Iron ore mining | | | 85 | | | | 85 | | | Australia | | Iron ore mining | | | 85 | | | 85 | | Yandi (3) | | Australia | | Iron ore mining | | | 85 | | | | 85 | | | Australia | | Iron ore mining | | | 85 | | | 85 | | Central Queensland Coal Associates | | Australia | | Coal mining | | | 50 | | | | 50 | | | Australia | | Coal mining | | | 50 | | | 50 | |
| (1) | While the Group may hold a greater than 50 per cent interest in these joint operations, all the participants in these joint operations approve the operating and capital budgets and therefore the Group has joint control over the relevant activities of these arrangements. |
| (2) | Group interest reflects the working interest and may varyyear-on-year based on the Group’s effective interest in producing wells. |
| (3) | These contractual arrangements are controlled by the Group and do not meet the definition of joint operations. However, as they are formed by contractual arrangement and are not entities, the Group recognises its share of assets, liabilities, revenue and expenses arising from these arrangements. |
Assets held in joint operations subject to significant restrictions are as follows: | | | | Group’s share | | | Group’s share | | | | | 2019 | | | 2018 | | | 2020 | | | 2019 | | | | | US$M | | | US$M | | | US$M | | | US$M | | Current assets | | | 1,946 | | | | 2,445 | | | | 2,059 | | | | 1,946 | | Non-current assets | | | 35,682 | | | | 36,144 | | | | 37,193 | | | | 35,682 | | | | | | | | | | | | | | | Total assets (1) | | | 37,628 | | | | 38,589 | | | | 39,252 | | | | 37,628 | | | | | | | | | | | | | | |
| (1) | While the Group is unrestricted in its ability to sell a share of its interest in these joint operations, it does not have the right to sell individual assets that are used in these joint operations without the unanimous consent of the other participants. The assets in these joint operations are also restricted to the extent that they are only available to be used by the joint operation itself and not by other operations of the Group. |
F-84
3132 Related party transactions
The Group’s related parties are predominantly subsidiaries, joint operations, joint ventures and associates and key management personnel of the Group. Disclosures relating to key management personnel are set out in note 2223 ‘Key management personnel’. Transactions between each parent company and its subsidiaries are eliminated on consolidation and are not disclosed in this note. All transactions to/from related parties are made at arm’s length, i.e. at normal market prices and rates and on normal commercial terms. Outstanding balances atyear-end are unsecured and settlement occurs in cash. Loan amounts owing from related parties represent secured loans made to joint operations, associates and joint ventures underco-funding arrangements. Such loans are made on an arm’s length basis with interest charged at market ratesbasis. Such loans made to joint operations are payable on demand and loans made to associates are due to be repaid by 16 August 2022. No guarantees are provided or received for any related party receivables or payables. No provision for expected credit losses has been recognised in relation to any outstanding balances and no expense has been recognised in respect of expected credit losses due from related parties. There were no other related party transactions in the year ended 30 June 2019 (2018:2020 (2019: US$ nil), other than those with post-employment benefit plans for the benefit of Group employees. These are shown in note 2526 ‘Pension and other post-retirement obligations’. Transactions with related parties Further disclosures related to other related party transactions are as follows: | | | | Joint operations | | | Joint ventures | | | Associates | | | Joint operations | | | Joint ventures | | | Associates | | | | | 2019 | | | 2018 | | | 2019 | | | 2018 | | | 2019 | | | 2018 | | | 2020 | | | 2019 | | | 2020 | | | 2019 | | | 2020 | | | 2019 | | | | | US$M | | | US$M | | | US$M | | | US$M | | | US$M | | | US$M | | | US$M | | | US$M | | | US$M | | | US$M | | | US$M | | | US$M | | Sales of goods/services | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | Purchases of goods/services | | | – | | | | – | | | | – | | | | – | | | | 1,141.230 | | | | 1,358.016 | | | | – | | | | – | | | | – | | | | – | | | | 967.276 | | | | 1,141.230 | | Interest income | | | 1.532 | | | | 1.764 | | | | – | | | | – | | | | 0.826 | | | | 19.337 | | | | 1.306 | | | | 1.532 | | | | – | | | | – | | | | 2.370 | | | | 0.826 | | Interest expense | | | – | | | | – | | | | – | | | | – | | | | 0.011 | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | 0.011 | | Dividends received | | | – | | | | – | | | | – | | | | – | | | | 509.577 | | | | 693.105 | | | | – | | | | – | | | | – | | | | – | | | | 126.187 | | | | 509.577 | | Net loans made to/(repayments from) related parties | | | 12.539 | | | | 60.566 | | | | – | | | | – | | | | 14.547 | | | | (599.979 | ) | | | 4.851 | | | | 12.539 | | | | – | | | | – | | | | 12.273 | | | | 14.547 | |
Outstanding balances with related parties Disclosures in respect of amounts owing to/from joint operations represent the amount that does not eliminate on consolidation. | | | | | | | | | | | | | | | | | | | | | | | | | | | | Joint operations | | | Joint ventures | | | Associates | | | | | 2019 | | | 2018 | | | 2019 | | | 2018 | | | 2019 | | | 2018 | | | | | US$M | | | US$M | | | US$M | | | US$M | | | US$M | | | US$M | | Trade amounts owing to related parties | | | – | | | | – | | | | – | | | | – | | | | 169.773 | | | | 210.716 | | Loan amounts owing to related parties | | | 40.513 | | | | 55.667 | | | | – | | | | – | | | | 10.097 | | | | 4.097 | | Trade amounts owing from related parties | | | – | | | | – | | | | – | | | | – | | | | 3.828 | | | | 3.932 | | Loan amounts owing from related parties | | | 15.474 | | | | 18.089 | | | | – | | | | – | | | | 33.486 | | | | 12.939 | |
F-85
| | | | | | | | | | | | | | | | | | | | | | | | | | | | Joint operations | | | Joint ventures | | | Associates | | | | | 2020 | | | 2019 | | | 2020 | | | 2019 | | | 2020 | | | 2019 | | | | | US$M | | | US$M | | | US$M | | | US$M | | | US$M | | | US$M | | Trade amounts owing to related parties | | | – | | | | – | | | | – | | | | – | | | | 69.490 | | | | 169.773 | | Loan amounts owing to related parties | | | 33.812 | | | | 40.513 | | | | – | | | | – | | | | 5.097 | | | | 10.097 | | Trade amounts owing from related parties | | | – | | | | – | | | | – | | | | – | | | | 0.473 | | | | 3.828 | | Loan amounts owing from related parties | | | 13.625 | | | | 15.474 | | | | – | | | | – | | | | 40.759 | | | | 33.486 | |
Unrecognised items and uncertain events 32 Commitments
The Group’s commitments for capital expenditure were US$3,308 million as at 30 June 2019 (2018: US$2,110 million). The Group’s other commitments are as follows:
| | | | | | | | | | | | | | | | | | | | Commitments under
finance leases | | | Commitments under
operating leases | | | | | 2019 | | | 2018 | | | 2019 | | | 2018 | | | | | US$M | | | US$M | | | US$M | | | US$M | | Due not later than one year | | | 110 | | | | 127 | | | | 440 | | | | 388 | | Due later than one year and not later than five years | | | 417 | | | | 448 | | | | 876 | | | | 785 | | Due later than five years | | | 501 | | | | 590 | | | | 589 | | | | 839 | | | | | | | | | | | | | | | | | | | Total | | | 1,028 | | | | 1,165 | | | | 1,905 | | | | 2,012 | | | | | | | | | | | | | | | | | | | Future financing liability | | | (313 | ) | | | (363 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | Finance lease liability | | | 715 | | | | 802 | | | | | | | | | | | | | | | | | | | | | | | | | | |
Finance leases include leases of power generation and transmission assets. Certain lease payments may be subject to inflation escalation clauses on which contingent rentals are determined. The leases contain extension and renewal options.
Operating leases include leases of property, plant and equipment. Rental payments are generally fixed, but with inflation escalation clauses on which contingent rentals are determined. Certain leases contain extension and renewal options. From 1 July 2019, IFRS 16/AASB 16 ‘Leases’ became effective for the Group. Refer to note 38 ‘New and amended accounting standards and interpretations’.
33 Contingent liabilities | | | | 2019 | | | 2018 | | | 2020 | | | 2019 | | | | | US$M | | | US$M | | | US$M | | | US$M | | Associates and joint ventures (1) | | | 1,822 | | | | 1,588 | | | | 1,314 | | | | 1,822 | | Subsidiaries and joint operations (1) | | | 1,621 | | | | 1,915 | | | | 1,534 | | | | 1,621 | | | | | | | | | | | | | | | Total | | | 3,443 | | | | 3,503 | | | | 2,848 | | | | 3,443 | | | | | | | | | | | | | | |
| (1) | There are a number of matters, for which it is not possible at this time to provide a range of possible outcomes or a reliable estimate of potential future exposures, and for which no amounts have been included in the table above. |
A contingent liability is a possible obligation arising from past events and whose existence will be confirmed only by occurrence ornon-occurrence of one or more uncertain future events not wholly within the control of the Group. A contingent liability may also be a present obligation arising from past events but is not recognised on the basis that an outflow of economic resources to settle the obligation is not viewed as probable, or the amount of the obligation cannot be reliably measured. When the Group has a present obligation, an outflow of economic resources is assessed as probable and the Group can reliably measure the obligation, a provision is recognised. The Group has entered into various counter-indemnities of bank and performance guarantees related to its own future performance, which are in the normal course of business. The likelihood of these guarantees being called upon is considered remote. F-86
The Group presently has tax matters, litigation and other claims, for which the timing of resolution and potential economic outflow are uncertain. Obligations assessed as having probable future economic outflows capable of reliable measurement are provided at reporting date and matters assessed as having possible future economic outflows capable of reliable measurement are included in the total amount of contingent liabilities above. Individually significant matters, including narrative on potential future exposures incapable of reliable measurement, are disclosed below, to the extent that disclosure does not prejudice the Group. | | | | Uncertain tax and royalty matters | | The Group is subject to a range of taxes and royalties across many jurisdictions, the application of which is uncertain in some regards. Changes in tax law, changes in interpretation of tax law, periodic challenges and disagreements with tax authorities, and legal proceedings result in uncertainty of the outcome of the application of taxes and royalties to the Group’s business. Areas of uncertainty at reporting date include the application of taxes and royalties to the Group’s cross-border operations and transactions. Details of uncertain tax and royalty matters have been disclosed in note 6 ‘Income tax expense’. To the extent uncertain tax and royalty matters give rise to a contingent liability, an estimate of the potential liability is included within the table above, where it is capable of reliable measurement. |
| | | | Samarco contingent liabilities | | The table above includes contingent liabilities related to the Group’s equity accounting investment in Samarco to the extent they are capable of reliable measurement. Details of contingent liabilities related to Samarco are disclosed in note 4 ‘Significant events – Samarco dam failure’. |
| | | | Demerger of South32 | | As part of the demerger of South32 Limited (South32) in May 2015, certain indemnities were agreed under the Separation Deed. Subject to certain exceptions, BHP Group Limited indemnifies South32 against claims and liabilities relating to the Group Businesses and former Group Businesses prior to the demerger and South32 indemnifies the Group against all claims and liabilities relating to the South32 Businesses and former South32 Businesses. No material claims have been made pursuant to the Separation Deed as at 30 June 2019.2020. | | | |
34 Subsequent events On 18 August 2020, the Group announced that, as part of its ongoing review of its portfolio, it will pursue options to divest its interests in BMC, NSWEC and Cerrejon. Execution of these options, including demerger of an independent, listed company and trade sale opportunities, may take time and, as such, the Group is not able to estimate the financial effect of any future transaction and these assets have not been classified as held for sale as at 30 June 2020. On the same day, the Group also announced that it will continue to optimise its petroleum portfolio through the exit of later life assets, including an intended exit from Bass Strait, and farm-downs of the longer dated options. Execution of these options may take time and, as such, the Group is not able to estimate the financial effect of any future transaction and these assets have not been classified as held for sale as at 30 June 2020. Other than the matters outlined in the Financial Statements,above, no matters or circumstances have arisen since the end of the financial year that have significantly affected, or may significantly affect, the operations, results of operations or state of affairs of the Group in subsequent accounting periods. Other items 35 Auditor’s remuneration | | | | | | | | | | | | | | | | 2019 | | | 2018 | | | 2017 | | | | | US$M | | | US$M | | | US$M | | | | | | | | | | | | | | | Fees payable to the Group’s auditors for assurance services | | | | | | | | | | | | | Audit of the Group’s Annual Report | | | 4.033 | | | | 3.909 | | | | 3.381 | | Audit of subsidiaries, joint ventures and associates | | | 5.275 | | | | 13.902 | | | | 7.040 | | Audit-related assurance services | | | 4.089 | | | | 4.039 | | | | 3.597 | | Other assurance services | | | 0.594 | | | | 1.343 | | | | 1.849 | | | | | | | | | | | | | | | Total assurance services | | | 13.991 | | | | 23.193 | | | | 15.867 | | | | | | | | | | | | | | | Fees payable to the Group’s auditors for other services | | | | | | | | | | | | | Other services relating to corporate finance | | | 0.055 | | | | 0.104 | | | | 0.042 | | All other services | | | 0.482 | | | | 0.553 | | | | 0.589 | | | | | | | | | | | | | | | Total other services | | | 0.537 | | | | 0.657 | | | | 0.631 | | | | | | | | | | | | | | | Total fees | | | 14.528 | | | | 23.850 | | | | 16.498 | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | 2020 | | | 2019 | | | 2018 | | | | | US$M | | | US$M | | | US$M | | Fees payable to the Group’s auditors for assurance services | | | | | | | | | | | | | Audit of the Group’s Annual Report | | | 11.196 | | | | 6.764 | | | | 6.585 | | Audit of the accounts of subsidiaries, joint ventures and associates | | | 1.262 | | | | 5.127 | | | | 5.369 | | Audit-related assurance services required by legislation to be provided by the auditor | | | 1.815 | | | | 1.358 | | | | 1.363 | | Other assurance and agreed-upon procedures under legislation or contractual arrangements | | | 2.003 | | | | 1.266 | | | | 10.533 | | | | | | | | | | | | | | | Total assurance services | | | 16.276 | | | | 14.515 | | | | 23.850 | | | | | | | | | | | | | | | Fees payable to the Group’s auditors for non-assurance services | | | | | | | | | | | | | Other services | | | 0.400 | | | | 0.013 | | | | – | | | | | | | | | | | | | | | Total other services | | | 0.400 | | | | 0.013 | | | | – | | | | | | | | | | | | | | | Total fees | | | 16.676 | | | | 14.528 | | | | 23.850 | | | | | | | | | | | | | | |
AllIn FY2020, all amounts were paid to EY or EY affiliated firms. Fees are determined, and predominantly billed, in US dollars.
In each of FY2019 and FY2018, all amounts were paid to KPMG or KPMG affiliated firms.firms, being the Group’s auditors for these financial years. Fees arewere determined in local currencies and are predominantly billed in US dollars based on the exchange rate at the beginning of the relevant financial year. F-87
Fees payable to the Group’s auditors for assurance services For all periods disclosed, no fees are payable in respect of the audit of pension funds. Audit of subsidiaries, joint ventures and associates comprise auditsthe Group’s Annual Report comprises fees for auditing the statutory financial report of the Group’s subsidiaries, joint venturesGroup and associates including additionalnon-recurring audit fees in FY2018 in connection with the sale of the Onshore US oil and gas assets. Audit-related assurance services comprise review of half-year reports andincludes audit work in relation to compliance with section 404 of the US Sarbanes-Oxley Act.
Audit-related assurance services required by legislation to be provided by the auditors mainly comprises review of half-year reports. Other assurance services comprise assurance in respect of the Group’s sustainability reporting.reporting, economic contribution reporting, and comfort letters, and in FY2018, non-recurring fees in connection with the sale of the Onshore US oil and gas assets. Fees payable to the Group’s auditors for other services Other services relating to corporate finance comprise services in connection with debt raising transactions. All other services comprisenon-statutory assurance based procedures, advice on accounting matters, as well as tax compliance services of US$0.269 million (2019: US$0.013 million; 2018: US$ nil) and tax advisory services of US$0.131 million (2018:(2019: US$ nil; 2017:2018: US$0.027 million) nil).
36 Not requiredRequired for US reportingReporting 37 Deed of Cross Guarantee BHP Group Limited together with wholly owned subsidiaries identified in Exhibit 8.1 – List of Subsidiaries entered into a Deed of Cross Guarantee (Deed) on 6 June 2016. The effect of the Deed is that BHP Group Limited has guaranteed to pay any outstanding liabilities upon the winding up of any wholly owned subsidiary that is party to the Deed. Wholly owned subsidiaries that are party to the Deed have also given a similar guarantee in the event that BHP Group Limited or another party to the Deed is wound up.
The wholly owned Australian subsidiaries identified in Exhibit 8.1 – List of Subsidiaries are relieved from the requirements to prepare and lodge audited financial reports.
A Consolidated Statement of Comprehensive Income and Retained Earnings and Consolidated Balance Sheet, comprising BHP Group Limited and the wholly owned subsidiaries that are party to the DeedNot Required for the year ended 30 June 2019 and 30 June 2018 are as follows:
| | | | | | | | | Consolidated Statement of Comprehensive Income and Retained Earnings | | 2019 | | | 2018 | | | | | US$M | | | US$M | | Revenue | | | 22,660 | | | | 20,434 | | Other income | | | 2,881 | | | | 3,188 | | Expenses excluding net finance costs | | | (14,610 | ) | | | (12,693 | ) | Net finance costs | | | (414 | ) | | | (470 | ) | Income tax expense | | | (2,317 | ) | | | (2,218 | ) | | | | | | | | | | Profit after taxation | | | 8,200 | | | | 8,241 | | Total other comprehensive income | | | 10 | | | | 12 | | | | | | | | | | | Total comprehensive income | | | 8,210 | | | | 8,253 | | | | | | | | | | | Retained earnings at the beginning of the financial year | | | 48,442 | | | | 45,979 | | Net effect on retained earnings of entities added to/removed from the Deed | | | (34 | ) | | | 48 | | Profit after taxation for the year | | | 8,200 | | | | 8,241 | | Transfers to and from reserves | | | (31 | ) | | | (15 | ) | Shares bought back and cancelled | | | (5,199 | ) | | | – | | Dividends | | | (6,655 | ) | | | (5,811 | ) | | | | | | | | | | Retained earnings at the end of the financial year | | | 44,723 | | | | 48,442 | | | | | | | | | | |
F-88US Reporting
| | | | | | | | | Consolidated Balance Sheet | | 2019 | | | 2018 | | | | | US$M | | | US$M | | ASSETS | | | | | | | | | Current assets | | | | | | | | | Cash and cash equivalents | | | 13 | | | | 2 | | Trade and other receivables | | | 4,875 | | | | 3,977 | | Loans to related parties | | | 4,255 | | | | 16,730 | | Inventories | | | 1,677 | | | | 1,649 | | Other | | | 92 | | | | 90 | | | | | | | | | | | Total current assets | | | 10,912 | | | | 22,448 | | | | | | | | | | | Non-current assets | | | | | | | | | Trade and other receivables | | | 40 | | | | 73 | | Loans to related parties | | | – | | | | 151 | | Inventories | | | 326 | | | | 323 | | Property, plant and equipment | | | 31,508 | | | | 31,009 | | Intangible assets | | | 362 | | | | 444 | | Investments in Group companies | | | 33,123 | | | | 27,354 | | Deferred tax assets | | | 442 | | | | 329 | | Other | | | 59 | | | | 68 | | | | | | | | | | | Totalnon-current assets | | | 65,860 | | | | 59,751 | | | | | | | | | | | Total assets | | | 76,772 | | | | 82,199 | | | | | | | | | | | LIABILITIES | | | | | | | | | Current liabilities | | | | | | | | | Trade and other payables | | | 4,790 | | | | 3,425 | | Loans from related parties | | | 13,682 | | | | 15,719 | | Interest bearing liabilities | | | 104 | | | | 115 | | Current tax payable | | | 694 | | | | 1,053 | | Provisions | | | 889 | | | | 952 | | Deferred income | | | 6 | | | | 6 | | | | | | | | | | | Total current liabilities | | | 20,165 | | | | 21,270 | | | | | | | | | | | Non-current liabilities | | | | | | | | | Trade and other payables | | | 8 | | | | 3 | | Loans from related parties | | | 7,689 | | | | 7,870 | | Interest bearing liabilities | | | 143 | | | | 191 | | Non-current tax payable | | | 75 | | | | – | | Deferred tax liabilities | | | 542 | | | | 573 | | Provisions | | | 2,136 | | | | 2,475 | | Deferred income | | | 14 | | | | 18 | | | | | | | | | | | Totalnon-current liabilities | | | 10,607 | | | | 11,130 | | | | | | | | | | | Total liabilities | | | 30,772 | | | | 32,400 | | | | | | | | | | | Net assets | | | 46,000 | | | | 49,799 | | | | | | | | | | | EQUITY | | | | | | | | | Share capital – BHP Group Limited | | | 1,111 | | | | 1,186 | | Treasury shares | | | (31) | | | | (5 | ) | Reserves | | | 197 | | | | 176 | | Retained earnings | | | 44,723 | | | | 48,442 | | | | | | | | | | | Total equity | | | 46,000 | | | | 49,799 | | | | | | | | | | |
F-89
38 New and amended accounting standards and interpretations The Group adopted IFRS 16/AASB 16 ‘Leases’ (IFRS 16) in the Group’s Financial Statements from 1 July 2019. The adoption of other new or amended accounting standards or interpretations applicable from 1 July 2019, including IFRIC 23 ‘Uncertainty over Income Tax Treatment’, did not have a significant impact on the Group’s Financial Statements. The Group has also early adopted amendments to IFRS 9/AASB 9 ‘Financial Instruments’ (IFRS 9) and IFRS 15/7/AASB 15 ‘Revenue from Contracts with Customers’ (IFRS 15) in these Financial Statements from 1 July 2018. The adoption of other changes to IFRS applicable from 1 July 2018, including IFRIC 22 ‘Foreign Currency Transactions and Advance Consideration’, did not have a significant impact on these Financial Statements. IFRS 9 Financial Instruments
This standard replaces IAS 39/AASB 1397 ‘Financial Instruments: RecognitionDisclosures’ (IFRS 7) in relation to Interest Rate Benchmark Reform.
All new and measurement’ (IAS 39). It revises the classification and measurement of financial assets and financial liabilities, introduces a forward looking ‘expected credit loss’ impairment model and modifies the approachamendments to hedge accounting. Upon adoption of the new standard on 1 July 2018, the Group adjusted the opening balance sheet, with no restatement of comparatives required. Adoption impacts include: At 1 July 2018, the Group reassessed the classification and measurement of financial assets and liabilities based on the business model by which they are managed and their cash flow characteristics.
Financial assets previously classified as loans and receivables of US$17.7 billion were recategorised as amortised cost. The Group’s available for sale (AFS) shares of US$33 million were designated as fair value through other comprehensive income (FVOCI), while investments in shares after 1 July 2018 will be designated at fair value through profit or loss (FVTPL) or FVOCI on an investment by investment basis.
Other AFS investments of US$47 million were classified as held at FVTPL because they are not investments in shares and their cash flows do not consist solely of payments of principal and interest. The adoption of IFRS 9 has not resulted in any changes to the classification of financial assets held at FVTPL or to the classification or measurement of financial liabilities.
Financial assets carried at amortised cost are tested for impairment based on expected losses, whereas the previous policy required that impairments were recognised only when there was objective evidence that a credit loss was present. Upon adoption of IFRS 9, an expected credit loss provision of US$7 million against cash and cash equivalents and trade receivables was recognised in retained earnings.
From 1 July 2018, the Group has applied the amended rules on hedge accounting which enable closer alignment between the Group’s risk management strategy and the accounting outcomes. IFRS 9 broadens the scope of arrangements that may qualify for hedge accounting and allows for simplification of hedge designations. Other changes under the standard mean that hedge effectiveness is only considered on a prospective basis with no set quantitative thresholds and voluntaryde-designation of hedges is prohibited.
Certain of the Group’s existing derivatives hedging foreign currency notes and debentures, were in qualifying fair value and cash flow hedge relationships and have been treated as continuing hedges. The opportunity to apply simplified hedge designations under IFRS 9 will continue to be assessed for future hedge relationships. Risks present in the derivative only, such as counterparty credit risk, are not part of the hedge designation and will continue to be recognised through the income statement.
Foreign currency basis has been separately measured as a cost of hedging and movements continue to be recognised in reserves, with US$176 million being reclassified from the cash flow hedging reserve into the cost of hedging reserve on transition. The hedging reserves at transition will continue to be transferred to the income statement over the life of the underlying notes and debentures.
The impact of adopting IFRS 9 on Total equity as at 1 July 2018 is as follows:
| | | | | | | US$M | | Total equity as at 30 June 2018
| | | 60,670 | | Impairment provision resulting from application of the Expected Credit Loss model
| | | (7 | ) | | | | | | Total equity as at 1 July 2018
| | | 60,663 | | | | | | |
F-90
The table below summarises the change in classification and measurement of financial assets and liabilities upon adoption of IFRS 9 on 1 July 2018.
| | | | | | | Measurement category under
IAS 39
| | Measurement category under
IFRS 9
| Financial assets
| | | | | Derivative contracts
| | FVTPL | | FVTPL | Investment in shares
| | AFS | | FVOCI or FVTPL | Other investments
| | AFS or FVTPL | | FVTPL | Cash and cash equivalents
| | Loans and receivables | | Amortised cost | Trade and other receivables
| | Loans and receivables | | Amortised cost | Provisionally priced trade receivables
| | FVTPL | | FVTPL | Loans to equity accounted investments
| | Loans and receivables | | Amortised cost | Financial liabilities
| | | | | Other financial liabilities
| | FVTPL | | FVTPL | Trade and other payables
| | Amortised cost | | Amortised cost | Provisionally priced trade payables
| | FVTPL | | FVTPL | Bank overdrafts and short-term borrowings
| | Amortised cost | | Amortised cost | Bank loans
| | Amortised cost | | Amortised cost | Notes and debentures
| | Amortised cost | | Amortised cost | Finance leases
| | Amortised cost | | Amortised cost | Other
| | Amortised cost | | Amortised cost |
IFRS 15 Revenue from Contracts with Customers
This standard modifies the determination of when to recognise revenue and how much revenue to recognise. Revenue is recognised when control of the promised goods or services passes to the customer. The amount of revenue recognised should reflect the consideration to which the entity expects to be entitled in exchange for those goods or services.
The Group has applied the full retrospective transition approach, resulting in the restatement of comparative information. Comparative information in the consolidated income statement has been restated to reflect changes in the presentation of treatment costs and refining charges (TCRC) included in concentrate sales contracts.
Concentrate sales contracts require the Group to physically deliver concentrate with the contractual sales amount reflecting the final refined metal content delivered, reduced by TCRC. Revenue was previously recognised at the gross value of the final refined metal content delivered with contractually agreed TCRC recorded as an expense. Under IFRS 15, TCRC will instead be recognised as a reduction to revenue, reflecting the consideration that the Group expects to receive from the customer. This will have no net income statement impact as applying this change would have reduced revenue and expenses by US$522 million for the year ended 30 June 2019, US$509 million for the year ended 30 June 2018 and US$395 million for the year ended 30 June 2017, with no impact on profit after tax. This change has no impact on the basic and diluted earnings per ordinary share.
Revenue includes both revenue from contracts with customers, which is recognised under IFRS 15 and provisional pricing adjustments, which are recognised under IFRS 9. Following adoption of IFRS 15 provisional pricing adjustments will be separately disclosed in the notes to these Financial Statements as other revenue. The impact of all other measurement differences identified between IAS 18 and IFRS 15 was immaterial at 1 July 2018.
F-91
Issued but not yet effective
The following new accounting standards and interpretations will become effective for future reporting periods and may have a significant impact onbeen endorsed by the income statement or net assets of the Group.EU.
IFRS 16 Leases This standard provides a new model for lessee accounting under which all leases, with the exception of short term (under 12 months)IFRS 16 replaces IAS 17/AASB 117 ‘Leases’ (IAS 17) including associated interpretative guidance and low-value leases, will be accounted for bycovers the recognition, on the balance sheetmeasurement, presentation and disclosures of a right of use asset and a corresponding lease liability. Lease costs will be recognisedleases in the income statement over the lease term in the formFinancial Statements of depreciation on the right of use assetboth lessees and finance charges representing the unwind of the discount on the lease liability.lessors.
The standardTransition impact
IFRS 16 became effective for the Group from 1 July 2019 and the Group has elected to apply the modified retrospective transition approach, with no restatement of comparative financial information. For existing finance leases, the right of useright-of-use asset and lease liability on transition will bewas the IAS 17/AASB 117 ‘Leases’ (IAS 17)17 carrying amounts as at 30 June 2019. As allowed by the standard,IFRS 16, the Group has elected: except for existing finance leases, to measure the right of useright-of-use asset on transition at an amount equal to the lease liability (as adjusted for prepaid or accrued lease payments); not to recognise low-value or short termshort-term leases on the balance sheet. Costs for these lease arrangements will continue to be expensed;sheet; to only recognise, within the lease liability, the lease component of contracts that include non-lease components and other services; to reflectadjust the impairmentcarrying amount of right of useright-of-use assets on transition by adjusting their carrying amounts for related onerous lease provisions that were recognised on the Group balance sheet as at 30 June 2019. Where the Group is the operator of an unincorporated joint operation and all investors are parties to a lease, the Group will recognise its proportionate share of the lease liability and associated right of use asset. Where the Group is the sole signatory to a lease, and therefore has the sole legal obligation to make lease payments, the lease liability will be recognised in full. Where the associated right of use asset is sub-leased (under a finance sub-lease) to a joint operation, for instance where it is dedicated to a single operation and the joint operation has the right to direct the use of the asset, the Group will recognise its proportionate share of the right of use asset and a net investment in the lease, representing amounts to be recovered from the other parties. If the Group is not party to the lease contract but sub-leases the associated right of use asset it will recognise its proportionate share of the right of use asset and a lease liability which is payable to the operator.
The applicationAdoption of IFRS 16 requires certain significant judgements, estimates and assumptions including whether the Group controls the right to direct the use of assets in certain contractual arrangements, the likelihood of extension and termination options being exercised, the separation and estimation of non-lease components of payments, the identification and valuation of in-substance fixed payments and the determination of the incremental borrowing rate relevant in calculating lease liabilities.
The impact on transition is expected to resultresulted in an increase in leaseinterest bearing liabilities of approximately US$2.3 billion, right of useright-of-use assets of US$2.2 billion and net adjustments to other assets and liabilities of US$0.1 billion. The Group is required to recognise these leases applying the incremental borrowing rate that takes into account the currency, tenor and location of each lease.billion at 1 July 2019. The weighted average incremental borrowing rate applied to the Group’s additional lease liabilities at 1 July 2019 iswas 2.1 per cent. The Group will recognise leases enteredcent taking into after 1 July 2019 usingaccount the interest rate implicit in the lease, where this is readily determinable.currency, tenor and location of each lease.
F-92
The following table provides a reconciliation of the operating lease commitments disclosed in note 32 ‘Commitments’ in the 2019 Annual Report to the expected total lease liability to be recognised at 1 July 2019: | | | | | | | | US$BM | | Operating lease commitments as at 30 June 2019 | | | 1.91,905 | | Add: Leases which did not meet the definition of a lease under IAS 17 (1) | | | 0.7686 | | Add: Cost of reasonably certain extension options (undiscounted) | | | 0.191 | | Less: Components excluded from lease liability (undiscounted) | | | (0.2190 | ) | Less: Effect of discounting | | | (0.2191 | ) | | | | | | Total additional lease liabilities recognised on transitionat 1 July 2019 | | | 2.32,301 | | | | | | |
Leases recognised under IFRS 16, which did
| (1) | These relate to freight contracts known as continuous voyage charters (CVCs). Generally CVCs were not considered leases under IAS 17 given the supplier has the right, whether exercised or not, to substitute the named vessel. However, these rights are not considered substantial substitution rights under IFRS 16. Additionally, the Group has the right to direct the use of the vessel throughout the period of use due to the ability to designate the destination port for each voyage and make changes to relevant decisions within the scope of contractual constraints. Consequently, the CVCs meet the definition of a lease under IFRS 16. |
The Group’s activities as a lessor are not meet the definition of a lease under IAS 17, relate to freight contracts known as continuous voyage charters (CVCs). The lease assetmaterial and liability associated with all index-linked freight contracts, including CVCs, will be remeasured at each reporting date basedhence there is no significant impact on the prevailing freight index (Baltic C5 index). Freight indices, which reflect demandFinancial Statements on adoption of IFRS 16. Amendments to IFRS 9 ‘Financial Instruments’ and supplyIFRS 7 ‘Financial Instruments: Disclosures’ – Interest Rate Benchmark Reform The London Interbank Offered Rate (LIBOR) and other benchmark interest rates are expected to be replaced by alternative risk-free rates by the end of CY2021 as part of inter-bank offer rate (IBOR) reform. The amendments to IFRS 9 and IFRS 7 provide temporary relief from applying specific hedge accounting requirements to hedging arrangements directly impacted by these reforms. The Group has early adopted the amendments resulting in no impact on the Group’s hedge accounting. As outlined in note 22 ‘Financial risk management’, the Group has foreign currency and US dollar denominated loans and debentures at fixed interest rates. The Group uses interest rate swaps and cross currency swaps to convert most of its fixed interest exposure to a floating USD LIBOR. The interest rate derivatives are designated into fair value hedges. The reliefs provided by the amendments allow the Group to assume that: USD LIBOR remains a separately identifiable component for vessels, have shown historic volatility. the duration of the hedge; for the purpose of assessing the effectiveness of the hedge relationship the USD LIBOR rates referenced by fixed-to-floating rate swaps in the fair value hedge relationships do not change as a result of IBOR reform. The accounting for these contracts continuesamendments were applied retrospectively, including to evolvehedging arrangements designated as hedges during the period, and will continue to apply until the uncertainty arising from the reforms with respect to the timing and the amount of the underlying cash flows that the Group is monitoring industry practice. The Group’s finance lease obligations at 30 June 2019 are currently included inexposed to ends. A project has been established to assess the Group’s net debt (note 19 ‘Net debt’). From 1 July 2019, net debt will includeimplications of IBOR reform across the Group’s total lease liabilities.
The Group, has developed lease accounting systems, processes and controls which will be used to account formanage and execute the Group’s lease contracts following transition. Practical application of the standard continuestransition from current benchmark rates to develop in a number of areas and thealternative benchmark rates. The Group will continue to monitor developments and assess any implicationsamendments to certain accounting standards covering the accounting for the expected lease liability on transition to alternative rates which were released in August 2020 and post transition accounting.will be applicable to the Group in future reporting periods.
Other interpretations issuedIssued but not yet effective
The adoption of other changes to IFRS applicable from 1 July 2019, including IFRIC 23 ‘Uncertainty over Income Tax Treatments’ is not expected to have a significant impact on these Financial Statements.
A number of other accounting standards and interpretations, along with revisions to the Conceptual Framework for Financial Reporting, have been issued and will be applicable in future periods. While these remain subject to ongoing assessment, no significant impacts have been identified to date. These standards have not been applied in the preparation of these Financial Statements. The classification of future acquisitions may be impacted by the change in the definition of a business under the amendments to IFRS 3/AASB 3 ‘Business Combinations’ effective for the Group from 1 July 2020. F-93On 29 April 2020, the IFRS Interpretations Committee issued an agenda decision on the application of IAS 12 ‘Income Tax’ when the recovery of the carrying amount of an asset gives rise to multiple tax consequences, concluding that an entity must account for distinct tax consequences separately. The Group is in the process of evaluating the implications of the agenda decision. Changes to the Group’s accounting policy for income tax will be implemented from 1 July 2020 on a retrospective basis.
5.2 Not required for US reportingReporting 5.2A Reports of Independent Registered Public Accounting Firms 
Report of Independent Registered Public Accounting Firms To the members of BHP Group Limited and BHP Group Plc Opinion on the Financial Statements We have audited the accompanying consolidated balance sheet of BHP Group Limited, BHP Group Plc and their respective subsidiaries (the “BHP Group” or “the Group”) as of 30 June 2020, the related consolidated income statement, consolidated statement of comprehensive income, consolidated statement of changes in equity, and consolidated cash flow statement for the year ended 30 June 2020, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the BHP Group at 30 June 2020, and the results of its operations and its cash flows for the year ended 30 June 2020, in conformity with International Financial Reporting Standards (“IFRS”) and interpretations as issued by the International Accounting Standards Board. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the BHP Group’s internal control over financial reporting as of 30 June 2020, based on criteria established in Internal Control-Integrated Framework (2013), issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), as applicable and our report dated 22 September 2020 expressed an unqualified opinion thereon. Basis for Opinion These consolidated financial statements are the responsibility of the BHP Group’s management. Our responsibility is to express an opinion on the BHP Group’s consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the BHP Group in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matters The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the Risk and Audit Committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective or complex judgements. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
| Samarco dam failure provisions and contingent liabilities |
Description of the Matter | As described in Notes 3, 4, and 33 to the consolidated financial statements the BHP Group recorded losses of US$176 million for the year ended 30 June 2020 and had provisions of US$2,051 million for the Samarco dam failure as of 30 June 2020. The Group recognises a provision when it has a present obligation, an outflow of economic resources is probable, and the obligation can be reliably measured. |
| Auditing management’s estimate of the Samarco dam failure provisions and contingent liabilities was complex and highly judgemental due to the significant estimation uncertainty in determining the completeness and timing of future cash outflows, as well as the extent of the Group’s legal obligations to fund the costs under the Framework Agreement. In particular, there was significant judgement in determining the nature and extent of remediation activities, the cost estimates for remediation and the number and categorisation of impacted people entitled to compensation. As a result of these inputs the provision has a significant estimation uncertainty and a wide range of potential outcomes. |
How We Addressed the Matter in Our Audit | We obtained an understanding, evaluated the design, and tested the operating effectiveness of the Group’s controls in determining the Samarco dam failure provisions. Specifically, we tested management’s controls over the significant assumptions as described above and the completeness and accuracy of data used within management’s estimates. |
| To test the provisions, we performed audit procedures that included, among others, assessing methodologies and testing the significant assumptions discussed above and the underlying data used by the Group in its analysis. We tested a sample of cost estimates used to source documents such as court decisions outlining compensation levels. We compared the nature and extent of activities included in the forecasted cash flows to the Framework Agreement. We tested the mathematical accuracy of the models. To assess management’s ability to forecast we compared the prior year’s forecasted cash flows to actual results. |
| To assess the status of claims we held discussions with internal and external counsel regarding ongoing Samarco dam failure litigation matters. In addition, we obtained legal confirmations and inspected communications with the Group’s external legal counsel. |
| We evaluated the competence and objectivity of the Group’s experts who assisted management in estimating the provision by considering the scope of work, their professional qualifications, and remuneration structure. We also assessed the adequacy and completeness of the disclosures within Notes 3, 4, and 33 to the consolidated financial statements. |
| Long-lived asset impairment |
Description of the Matter | As disclosed in Notes 11 and 30 to the consolidated financial statements the Group had US$72,362 million in property plant and equipment and US$2,585 million in equity method investments as of 30 June 2020 and recorded an impairment charge of US$492 million primarily related to Cerro Colorado for the year ended 30 June 2020. The Group assessed the recoverable amount of Cerrejón; no impairment charge was required. The Group performs impairment assessments for all cash generating units (CGU) where there are indicators of impairment. Where such indicators exist, the Group determines the recoverable value based on the higher of the value in use (VIU) or Fair Value Less Cost of Disposal model (FVLCD) for each CGU. Previously impaired assets are reviewed for possible reversal of impairment at each reporting date. There were no reversals of impairment in the period. |
| Auditing management’s assessment of impairment indicators and subsequent impairment estimates was complex due to the high degree of estimation uncertainty in forecasting the future cash flows for each CGU. Specifically, the forecasted cash flows were sensitive to changes in significant assumptions, such as forecast commodity prices, reserve quantities and discount rates. |
How We Addressed the Matter in Our Audit | We obtained an understanding, evaluated the design, and tested the operating effectiveness of the controls over the Group’s process to identify indicators of impairment and the assessment of the recoverable amounts of CGUs for which an indicator of impairment was identified. |
| We performed an independent analysis for indicators of impairment. Our procedures involved assessing the key inputs such as forecast commodity prices, reserve quantities and discount rates. |
| Our testing of management’s estimates of the recoverable amount for Cerro Colorado and Cerrejón CGUs included, among others, evaluating the significant assumptions used and testing the completeness and accuracy of the underlying data. We involved our valuation professionals to assist in assessing the reasonableness of commodity prices by comparing the forecasted price assumptions to analysts’ and broker forecasts and those used by other market participants. In addition, our valuation professionals assisted in testing the discount rates used, including a comparison to external market data and evaluating whether the valuation methodology used was consistent with industry practice. We compared the projected cash flows against approved budgets and plans and performed a retrospective comparison to actual historical data for the material cashflow forecasts. In addition, we performed sensitivity analyses over the significant assumptions used within the impairment forecasts. |
| To test the reserve quantities, we examined the information provided by the Group’s experts and we involved our mining and oil and gas reserve professionals to assist in the assessment of the reserve estimation methodology against the relevant industry and regulatory guidance. |
| In addition, we tested the mathematical accuracy of the models used and assessed the competence, qualifications, and objectivity of management’s internal and external specialists. Finally, we assessed the adequacy of the disclosures within Notes 11 and 30 to the consolidated financial statements. |
| Closure and rehabilitation provisions |
Description of the Matter | As disclosed in Note 14 to the consolidated financial statements, the Group recorded US$8,810 million in closure and rehabilitation provisions as of 30 June 2020. Provisions for closure and rehabilitation are recognised by the Group when there is a present legal or constructive obligation, it is more likely than not that an outflow of resources will be required to settle the obligation, and the amount can be reasonably estimated. |
| The Group estimates the individual site provisions using the expected value of future cash flows required to close and rehabilitate the relevant site using current restoration standards and techniques and taking into account risks and uncertainties. Individual site provisions are discounted to their present value using currency specific discount rates aligned to the estimated timing of cash outflows. |
| Auditing management’s closure and rehabilitation provisions was complex and highly judgemental due to the significant uncertainty inherent within the key assumptions in the evaluation. Specifically, there was significant judgement in determining the expected life of the site, estimated cost and extent of rehabilitation activities, timing of activities, and the discount rates used. As a result of these inputs the provision has a significant estimation uncertainty and a wide range of potential outcomes. |
How We Addressed the Matter in Our Audit | We obtained an understanding, evaluated the design, and tested the operating effectiveness of controls over the Group’s closure and rehabilitation provision estimate process. Specifically, our procedures involved testing the controls around the significant assumptions used within the estimate, including the Group’s process for identifying legal and regulatory obligations for closure and rehabilitation, and the completeness and accuracy of data used within management’s estimate. |
| Our testing of the closure and rehabilitation provisions included, among others, comparing the provisions to the approved closure cost estimates prepared by management’s internal specialists, which included the expected operating life of a site. With the assistance of our environmental professionals we evaluated a sample of closure and rehabilitation provisions for operating and closed sites within the Group. Our testing included evaluating the closure and rehabilitation plan based on the relevant legal and regulatory requirements. In addition, we compared the timing of future cash flows and cost estimates against the closure and rehabilitation plan, environmental studies, and industry practices. We evaluated the discount rates used against market data. |
| We tested the mathematical accuracy of the Closure and Rehabilitation provision calculations and assessed the competence, qualifications, and objectivity of management’s internal and external specialists. Finally, we assessed the adequacy of the disclosures within Note 14 to the consolidated financial statements. |
| | | /s/ Ernst & Young Ernst & Young We have served as BHP Group Limited’s auditor since 1 July 2019 Melbourne, Australia 22 September 2020 | | /s/ Ernst & Young LLP Ernst & Young LLP We have served as BHP Group Plc’s auditor since 1 July 2019 London, United Kingdom 22 September 2020 |
Ernst & Young, an Australian partnership and Ernst & Young LLP, a limited liability partnership registered in England and Wales, are member firms of Ernst & Young Global Limited. Ernst & Young Australia liability limited by a scheme approved under Professional Standards Legislation.
Report of Independent Registered Public Accounting Firms To the members of BHP Group Limited and BHP Group Plc Opinion on Internal Control Over Financial Reporting We have audited BHP Group Limited, BHP Group Plc and their respective subsidiaries’ internal control over financial reporting as of 30 June 2020, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the “COSO criteria”). In our opinion, BHP Group Limited, BHP Group Plc and their respective subsidiaries (the “BHP Group”) maintained, in all material respects, effective internal control over financial reporting as of 30 June 2020, based on the COSO criteria. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated balance sheet of the BHP Group as of 30 June, 2020, the related consolidated income statement, consolidated statement of comprehensive income, consolidated statement of changes in equity, and consolidated cash flow statement for the year then ended 30 June 2020, and the related notes (collectively referred to as the “consolidated financial statements”) and our report dated 22 September 2020 expressed an unqualified opinion thereon. Basis for Opinion The BHP Group’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying section 2.10 Risk and Audit Committee Report / Management’s assessment of internal control over financial reporting. Our responsibility is to express an opinion on the BHP Group’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the BHP Group in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audits included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. 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. | | | /s/ Ernst & Young Ernst & Young Melbourne, Australia 22 September 2020 | | /s/ Ernst & Young LLP Ernst & Young LLP London, United Kingdom 22 September 2020 |
Ernst & Young, an Australian partnership and Ernst & Young LLP, a limited liability partnership registered in England and Wales, are member firms of Ernst & Young Global Limited. Ernst & Young Australia liability limited by a scheme approved under Professional Standards Legislation. 
Report of Independent Registered Public Accounting Firms To the members of BHP Group Plc and BHP Group Limited: Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated balance sheetssheet of the BHP Group (comprising BHP Group Plc, BHP Group Limited and their respective subsidiaries) as of 30 June 2019, and 2018, the related consolidated income statements, consolidated statements of comprehensive income, consolidated statements of changes in equity, and consolidated cash flow statements for each of the years in the three-yeartwo-year period ended 30 June 2019, and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the BHP Group as of 30 June 2019, and 2018, and the results of its operations and its cash flows for each of the years in the three-yeartwo-year period ended 30 June 2019, in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board. We also have audited,Revision due to a Change in accordance with the standardsAccounting Standard, Revision of Segment Reporting, and Change in Definition of Net Debt
As discussed in Notes 3, 4, and 30 of the Public Company Accounting Oversight Board (United States) (PCAOB),consolidated financial statements, BHP Group adopted an amendment to IAS 28 ‘Investments in Associates and Joint Ventures’ as of 1 July 2019, which required reclassification of certain exceptional items. Also, as discussed in Notes 1 and 19 of the consolidated financial statements, BHP Group’s internal control over financialGroup revised certain segment reporting and changed the definition of net debt, respectively. All revisions have been retrospectively adjusted as of 30 June 2019, based on criteria established inInternal Control– Integrated Framework (2013) issued by the Committee of Sponsoring Organizationsand for each of the Treadway Commission, and our report dated 17 September 2019 expressed an unqualified opinion onyears in the effectiveness of the BHP Group’s internal control over financial reporting.two-year period then ended. Basis for Opinion These consolidated financial statements are the responsibility of the BHP Group’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOBPublic Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matters: including our assessment of risks of material misstatement
The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved challenging, subjective, or complex judgements. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
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|
F-94
| | | Critical audit matter
| | How the matter was addressed in our audit
| Samarco dam failure
Loss from equity accounted investments, related impairments and expense: US$1.0 billion
Provision: US$1.9 billion
Contingent liability disclosures
| As discussed in Note 4 to the consolidated financial statements, there are a number of complex accounting judgements and disclosures made by the Group resulting from the Samarco dam failure, including:
• Determining the legal status of claims made against Samarco, the Group, and BHP Billiton Brasil Ltda and the resulting accounting treatment;
• Determining the extent of BHP Billiton Brasil Ltda’s legal obligation to provide funding to Samarco and the quantification of that obligation in line with the requirements of the Governance Agreement, Framework Agreement, and Preliminary Agreement; and
• Disclosure of contingent liabilities associated with the various claims and other circumstances that represent exposures to Samarco and the Group and that cannot be reliably estimated.
We identified the evaluation of the accounting treatment of the Samarco dam failure as a critical audit matter due to the high degree of estimation uncertainty, which required especially challenging auditor judgement in:
• Assessing the status, the Group’s accounting treatment, and disclosure of potential and existing legal claims; and
• Assessing the key assumptions the Group used to determine the provision recorded by BHP Billiton Brasil Ltda in relation to its potential funding obligations, including:
• Cost estimates to remediate the Samarco dam failure;
• Nature and extent of remediation activities; and
• Timing of cash flows.
| | The primary procedures we performed to address this critical audit matter included the following:
• Testing certain internal controls over the Group’s accounting and disclosure process relating to the Samarco dam failure. This included controls over the Group’s review of legal claims and assessment of the accounting treatment and controls over the determination of key assumptions such as the cost estimates to remediate the Samarco dam failure, nature and extent of remediation activities, and timing of cash flows;
• Assessing the existence of legal and/or constructive obligations under the Samarco shareholders’ agreement, Brazilian law, and the Group’s public statements;
• Assessing the key assumptions the Group used to determine the provision recorded by BHP Billiton Brasil Ltda in relation to its potential funding obligations by:
• Comparing the nature, timing, and extent of remediation activities described in the Framework Agreement with those included within the cash flow forecasts;
• Testing a sample of cost estimates included in the provision to underlying documentation, such as the Group’s external engineering reports;
• Evaluating the scope, competency, and objectivity of the Group’s experts involved in the determination of the cost estimates by considering the work they were engaged to perform, their professional qualifications, and reporting lines; and
• Evaluating the historical accuracy of prior year’s forecasted cash flows by comparing to current year actual cash flows.
• Assessing the status of claims and disclosures relating to contingent liabilities through inspection of the Group’s internal legal documentation, inquiry of internal and external legal personnel, Group finance, and members of the executive leadership team, and inspection of documentation provided by external legal counsel.
|
F-95
| | | Critical audit matter
| | How the matter was addressed in our audit
| Impairment of non-current assets
Property, plant, and equipment: US$68.0 billion
Impairment of property, plant, and equipment, goodwill, and other intangibles (pre-tax): US$0.3 billion
| As discussed in Note 11 to the consolidated financial statements, the Group is required to perform impairment tests for all assets where there is an indication of impairment. As part of their assessment of indicators of impairment, the Group determines an estimate of future cash flows for each cash generating unit (“CGU”), considering different internal and external factors.
The Group determined that there was an indicator of impairment for the Jansen CGU and therefore estimated its recoverable amount and compared it to its carrying value, and calculated that no impairment is required.
The determination of the future cash flows in the process for identifying impairment indicators and the Jansen CGU recoverable amount use forward looking estimates which are inherently difficult to determine with precision. There is also a level of judgement applied by the Group in determining the key inputs into these forward looking estimates, including:
• Future commodity prices;
• Reserves;
• Future production volumes;
• Discount rates; and
• Future capital and operating expenditures.
We identified the assessment of possible indicators of impairment and the evaluation of the recoverable amount of the Jansen CGU as critical audit matters. This was due to the complex auditor judgement and level of specialised skills needed to evaluate the key inputs noted above.
| | The primary procedures we performed to address these critical audit matters included the following:
• Testing certain internal controls over the Group’s impairment assessment process including controls over the Group’s assessment of indicators of impairment and controls over the determination of key inputs such as future commodity prices, reserves and future production volumes, discount rates, and future capital and operating expenditures;
• Evaluating key inputs used in the Group’s impairment indicator process and the determination of the recoverable amount of the Jansen CGU by:
• Evaluating future commodity prices by comparing to published commodity price reports and research reports from external parties;
• Comparing future capital and operating expenditures and reserves to the latest approved mine plans and long term budgets. We assessed the Group’s ability to budget accurately by comparing prior years’ estimated cashflows to actual results;
• Evaluating the scope, competency, and objectivity of the Group’s experts who produced the reserve estimates used in the valuations by considering the work that they were engaged to perform, their professional qualifications, experience, use of industry accepted methodology, remuneration structure, and reporting lines;
• Involving our valuation professionals with specialised skill and knowledge, who assisted in comparing key inputs such as discount rates to external market data; and
• Performing sensitivity analysis on the key inputs including: future commodity prices, future production volumes, future capital and operating expenditures, and discount rates.
• Additional procedures performed over the evaluation of the recoverable amount of the Jansen CGU included:
• Challenging estimated future capital expenditures by:
• Comparing the capital expenditures to a report prepared by the Group’s external expert with specialised skills; and
• Testing a sample of future capital expenditures to current third-party quotations.
• Evaluating the scope, competency, and objectivity of the Group’s expert who assisted in determining the capital expenditure estimate by considering the work that they were engaged to perform, their professional qualifications, experience, and remuneration structure.
|
F-96
| | | Critical audit matter
| | How the matter was addressed in our audit
| Closure and rehabilitation provisions
Closure and rehabilitation provisions: US$7.0 billion
| As discussed in Note 14 to the consolidated financial statements, the Group incurs obligations to close, restore, and rehabilitate its sites and associated facilities. The majority of the Group’s assets are long-life assets, which increases the estimation uncertainty relating to future cash flows. The size of the closure and rehabilitation provisions are significant relative to the Group’s financial position.
Closure and rehabilitation activities are governed by a combination of legislative requirements and the Group’s policies. Estimates over the life of mine and reserves are made by the Group in determining its closure and rehabilitation provision.
We identified the evaluation of the closure and rehabilitation provisions as a critical audit matter as complex auditor judgement and specialised skills were required to evaluate:
• The life of mine including the reserves and production profile;
• The interpretation of legislative requirements;
• The costs associated with future rehabilitation;
• Discount rates; and
• The timing of future rehabilitation costs.
| | The primary procedures we performed to address this critical audit matter included the following:
• Testing certain internal controls over the Group’s process to estimate closure and rehabilitation provisions, including controls over the determination of key inputs such as life of mine reserves and production profile, discount rates, and the amount and timing of future rehabilitation costs;
• Involving our environmental professionals with specialised skills and knowledge, who assisted in assessing the estimates of life of mine and reserves used by the Group. We evaluated a sample of mine closure and rehabilitation provisions, based on the known reserves and the expected production profile of the reserves;
• Assessing the nature and extent of the work performed by the Group’s mine closure engineers in identifying future rehabilitation activities against our independent interpretation of the legislative requirements and the Group’s policies and assessing the timing and likely cost of such activities. We evaluated the methodology used by the mine closure engineers against industry practice and our understanding of the business;
• Evaluating the scope, competency, and objectivity of the mine closure engineers based on the work they were engaged to perform, their professional qualifications, experience, remuneration structure, and reporting lines; and
• Evaluating the discount rates applied to calculate the net present value of the provision. The assumptions used by the Group to determine the discount rates were compared against market available data including risk free rates.
|
F-97
| | | Critical audit matter
| | How the matter was addressed in our audit
| Taxation
Income tax expense (including royalties): US$5.5 billion
Non-current deferred tax assets: US$3.8 billion and non-current deferred tax liabilities: US$3.2 billion
Contingent liability disclosures
| As discussed in Note 6 to the consolidated financial statements, the Group has operations in multiple countries, each with its own taxation regime. The nature of the Group’s activities triggers various taxation obligations including corporation tax, royalties, other resource and production based taxes, and employment related taxes.
We identified the assessment of the Group’s uncertain tax matters as a critical audit matter because complex auditor judgement and specialised skills were required in evaluating the Group’s interpretation of tax law in multiple countries, and its estimate of the associated provisions, tax charges, and contingent liability disclosures across the various tax obligations.
| | The primary procedures we performed to address this critical audit matter included the following:
• Testing certain internal controls over the Group’s uncertain tax position process, including controls over the Group’s assessment of tax law and the process to estimate the associated provisions, related tax charges, and contingent liability disclosures;
• Involving our tax professionals with specialised skills and knowledge, who assisted in evaluating the Group’s tax obligations by:
• Inquiring with the Group’s Tax team and inspecting internally and externally prepared documentation to evaluate current disputes and uncertain tax positions; and
• Evaluating the Group’s conclusions regarding the status, possible outcomes, and associated exposures and the related accounting treatment.
• Inspecting settlement documents with applicable taxation authorities. We compared the total amount in the settlement documents to the cash paid and the release of the provision; and
• Assessing the Group’s disclosures in respect of tax and the associated contingent liability disclosures.
|
/s/ KPMG LLP KPMG LLP We have served as the BHP Group’s auditor since 3 May 2002.from 2002 to 2019. London, United Kingdom 17 September 2019 (except as to Notes 1, 3, 4, 19 and 30, which are as of 22 September 2020) /s/ KPMG KPMG We have served as the BHP Group’s auditor since 3 May 2002.from 2002 to 2019. Melbourne, Australia 17 September 2019 F-98
Report of Independent Registered Public Accounting Firms
To the members of BHP Group Plc (except as to Notes 1, 3, 4, 19 and BHP Group Limited:
Opinion on Internal Control Over Financial Reporting
We have audited the BHP Group’s (comprising BHP Group Plc, BHP Group Limited and their respective subsidiaries) internal control over financial reporting30, which are as of 30 June 2019, based on criteria established inInternal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the BHP Group maintained, in all material respects, effective internal control over financial reporting as of 30 June 2019, based on criteria established in Internal Control – Integrated Framework (2013) issued by the COSO.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the BHP Group as of 30 June 2019 and 30 June 2018, the related consolidated income statements, consolidated statements of comprehensive income, consolidated statements of changes in equity and consolidated cash flow statements for each of the years in the three-year period ended 30 June 2019, and the related notes (collectively, the consolidated financial statements), and our report dated 1722 September 2019 expressed an unqualified opinion on those consolidated financial statements.2020)
Basis for Opinion
The BHP Group’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying section 2.13.1 Risk and Audit Committee Report / Management’s assessment of internal control over financial reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the BHP Group in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorisations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorised acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
F-99
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. 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.
| | | /s/ KPMG LLP
KPMG LLP
| | /s/ KPMG
KPMG
| | | London, United Kingdom
17 September 2019
| | Melbourne, Australia
17 September 2019
|
| | | | | KPMG, an Australian partnership, and KPMG LLP, a
UK limited liability partnership, member firms of the
KPMG network of independent member firms affiliated
with KPMG International Cooperative (“KPMG
International”), a Swiss entity.
| | KPMG’s liability limited by a scheme approved
under Professional Standards Legislation. | | KPMG LLP
Registered in England No OC301540
Registered office: 15 Canada Square, London, E14 5GL
For full details of our professional registration please
refer to ‘Regulatory Information’ under ‘About/About
KPMG’ at www.kpmg.com/uk
|
F-100
5.3 Directors’ declaration In accordance with a resolution of the Directors of BHP Group Limited and BHP Group Plc, the Directors declare that: | (a) | in the Directors’ opinion and to the best of their knowledge the Financial Statements and notes, set out in sections 5.1 and 5.2, are in accordance with the UK Companies Act 2006 and the Australian Corporations Act 2001, including: |
| | (i) | complying with the applicable Accounting Standards; |
| | (ii) | giving a true and fair view of the assets, liabilities, financial position and profit or loss of each of BHP Group Limited, BHP Group Plc, the Group and the undertakings included in the consolidation taken as a whole as at 30 June 20192020 and of their performance for the year ended 30 June 2019;2020; |
| (b) | the Financial Statements also comply with International Financial Reporting Standards, as disclosed in section 5.1; |
| (c) | to the best of the Directors’ knowledge, the management report (comprising the Strategic Report and Directors’ Report) includes a fair review of the development and performance of the business and the financial position of the Group and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that the Group faces; |
| (d) | in the Directors’ opinion there are reasonable grounds to believe that each of BHP Group Limited, BHP Group Plc and the Group will be able to pay its debts as and when they become due and payable; |
| (e) | as at the date of this declaration, there are reasonable grounds to believe that BHP Group Limited and each of the Closed Group entities identified in Exhibit 8.1 –- List of Subsidiaries will be able to meet any liabilities to which they are, or may become, subject because of the Deed of Cross Guarantee between BHP Group Limited and those group entities pursuant to ASIC Corporations (Wholly-owned Companies) Instrument 2016/785; and |
| (f) | the Directors have been given the declarations required by Section 295A of the Australian Corporations Act 2001 from the Chief Executive Officer and Chief Financial Officer for the financial year ended 30 June 2019.2020. |
Signed in accordance with a resolution of the Board of Directors. Ken MacKenzie ChairmanChair
Andrew MackenzieMike Henry
Chief Executive Officer Dated this 5th3rd day of September 2019 F-1012020
5.4 �� Statement of Directors’ responsibilities in respect of the Annual Report and the Financial Statements The Directors are responsible for preparing the Annual Report and the Group and Parent company Financial Statements in accordance with applicable law and regulations. References to the ‘Group and Parent company Financial Statements’ are made in relation to the Group and individual Parent company Financial Statements of BHP Group Plc. UK company law requires the Directors to prepare Group and Parent company Financial Statements for each financial year. The Directors are required to prepare the Group Financial Statements in accordance with IFRS as adopted by the EU and applicable law and have elected to prepare the Parent company Financial Statements in accordance with UK Accounting Standards and applicable law (UK Generally Accepted Accounting Practice). The Group Financial Statements must, in accordance with IFRS as adopted by the EU and applicable law, present fairly the financial position and performance of the Group; references in the UK Companies Act 2006 to such Financial Statements giving a true and fair view are references to their achieving a fair presentation. The Parent company Financial Statements must, in accordance with UK Generally Accepted Accounting Practice, give a true and fair view of the state of affairs of the parent company at the end of the financial year and of the profit or loss of the parent company for the financial year. In preparing each of the Group and Parent company Financial Statements, the Directors are required to: select suitable accounting policies and then apply them consistently; make judgements and estimates that are reasonable and prudent; for the Group Financial Statements, state whether they have been prepared in accordance with IFRS as adopted by the EU; for the Parent company Financial Statements, state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the Parent company Financial Statements; assess the Group and parent company’s ability to continue as a going concern, disclosing, as applicable, related matters; use the going concern basis of accounting unless they either intend to liquidate the Group or the parent company or to cease operations, or have no realistic alternative but to do so. The Directors are responsible for keeping proper accounting records that disclose with reasonable accuracy at any time the financial position of the parent company and enable them to ensure that its Financial Statements comply with the UK Companies Act 2006. They are responsible for such internal control as they determine is necessary to enable the preparation of Financial Statements that are free from material misstatement, whether due to fraud or error, and have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Group and to prevent and detect fraud and other irregularities. Under applicable law and regulations, the Directors are also responsible for preparing a Strategic Report, Directors’ Report, Directors’ Remuneration Report and Corporate Governance Statement that complies with that law and those regulations. The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Group’s website. Legislation in the United Kingdom governing the preparation and dissemination of Financial Statements may differ from legislation in other jurisdictions. F-102
5.5 Not required for US reportingReporting 5.6 Included as Itemitem 5.2A 5.7 Supplementary oil and gas information – unaudited In accordance with the requirements of the Financial Accounting Standards Board (FASB) Accounting Standard Codification ‘ExtractiveActivities-Oil and Gas’ (Topic 932) and SEC requirements set out in Subpart 1200 of RegulationS-K, the Group is presenting certain disclosures about its oil and gas activities. These disclosures are presented below as supplementary oil and gas information, in addition to information disclosed in section 1.13.11.11.1 ‘Petroleum’ and section 6.3.16.4.1 ‘Petroleum reserves’. The information set out in this section is referred to as unaudited as it is not included in the scope of the audit opinion of the independent auditor on the Financial Statements, refer to section 5.6 ‘Independent Auditors’ reports’. On 28 September 2018, BHP completed the sale of 100 per cent of the issued share capital of BHP Billiton Petroleum (Arkansas) Inc. and 100 per cent of the membership interests in BHP Billiton Petroleum (Fayetteville) LLC, which held the Fayetteville assets. On 31 October 2018, BHP completed the sale of 100 per cent of the issued share capital of Petrohawk Energy Corporation, the BHP subsidiary which held the Eagle Ford (being Black Hawk and Hawkville), Haynesville and Permian assets. The financial and non-financial impact of the Onshore US assets is included in the supplementary oil and gas information presented below. The financial andnon-financial impact of these assets has been footnoted beneath each applicable table. Refer to note 2728 ‘Discontinued operations’ in Section 5.1 for further information. Reserves and production Proved oil and gas reserves and net crude oil and condensate, natural gas, LNG and NGL production information is included in section 6.2.26.3.2 ‘Production – Petroleum’ and section 6.3.16.4.1 ‘Petroleum reserves’. F-103
Capitalised costs relating to oil and gas production activities The following table shows the aggregate capitalised costs relating to oil and gas exploration and production activities and related accumulated depreciation, depletion, amortisation and valuation provisions. | | | | Australia | | United States (1) | | Other (2) | | Total | | | Australia | | United States (1) | | Other (2) | | Total | | | | | US$M | | US$M | | US$M | | US$M | | | US$M | | US$M | | US$M | | US$M | | Capitalised cost | | | | | | | | | | | | | | | | | 2020 | | | | | | | | | | Unproved properties | | | | 10 | | | | 808 | | | | 576 | | | | 1,394 | | Proved properties | | | | 17,079 | | | | 12,538 | | | | 1,743 | | | | 31,360 | | | | | | | | | | | | | | | | Total costs | | | | 17,089 | | | | 13,346 | | | | 2,319 | | | | 32,754 | | Less: Accumulated depreciation, depletion, amortisation and valuation provisions | | | | (11,423 | ) | | | (8,726 | ) | | | (1,370 | ) | | | (21,519 | ) | | | | | | | | | | | | | | | Net capitalised costs | | | | 5,666 | | | | 4,620 | | | | 949 | | | | 11,235 | | | | | | | | | | | | | | | | 2019 | | | | | | | | | | | | | | | | | Unproved properties | | | 10 | | | | 875 | | | | 458 | | | | 1,343 | | | | 10 | | | 875 | | | 458 | | | 1,343 | | Proved properties | | | 16,514 | | | | 11,751 | | | | 1,625 | | | | 29,890 | | | | 16,514 | | | 11,751 | | | 1,625 | | | 29,890 | | | | | | | | | | | | | | | | | | | | | | | | | | | Total costs | | | 16,524 | | | | 12,626 | | | | 2,083 | | | | 31,233 | | | | 16,524 | | | 12,626 | | | 2,083 | | | 31,233 | | Less: Accumulated depreciation, depletion, amortisation and valuation provisions | | | (10,867 | ) | | | (8,339 | ) | | | (1,302 | ) | | | (20,508 | ) | | | (10,867 | ) | | (8,339 | ) | | (1,302 | ) | | (20,508 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | Net capitalised costs | | | 5,657 | | | | 4,287 | | | | 781 | | | | 10,725 | | | | 5,657 | | | 4,287 | | | 781 | | | 10,725 | | | | | | | | | | | | | | | | | | | | | | | | | | | 2018 | | | | | | | | | | | | | | | | | Unproved properties | | | 10 | | | 4,528 | | | 202 | | | 4,740 | | | | 10 | | | 4,528 | | | 202 | | | 4,740 | | Proved properties | | | 16,258 | | | 43,885 | | | 2,424 | | | 62,567 | | | | 16,258 | | | 43,885 | | | 2,424 | | | 62,567 | | | | | | | | | | | | | | | | | | | | | | | | | | | Total costs | | | 16,268 | | | 48,413 | | | 2,626 | | | 67,307 | | | | 16,268 | | | 48,413 | | | 2,626 | | | 67,307 | | Less: Accumulated depreciation, depletion, amortisation and valuation provisions | | | (9,984 | ) | | (33,437 | ) | | (2,065 | ) | | (45,486 | ) | | | (9,984 | ) | | (33,437 | ) | | (2,065 | ) | | (45,486 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | Net capitalised costs | | | 6,284 | | | 14,976 | | | 561 | | | 21,821 | | | | 6,284 | | | 14,976 | | | 561 | | | 21,821 | | | | | | | | | | | | | | | | | | | | | | | | | | | 2017 | | | | | | | | | | Unproved properties | | | 94 | | | 5,284 | | | 165 | | | 5,543 | | | Proved properties | | | 16,190 | | | 41,837 | | | 2,404 | | | 60,431 | | | | | | | | | | | | | | | | | Total costs | | | 16,284 | | | 47,121 | | | 2,569 | | | 65,974 | | | Less: Accumulated depreciation, depletion, amortisation and valuation provisions | | | (9,085 | ) | | (30,969 | ) | | (1,984 | ) | | (42,038 | ) | | | | | | | | | | | | | | | | Net capitalised costs | | | 7,199 | | | 16,152 | | | 585 | | | 23,936 | | | | | | | | | | | | | | | | |
| (1) | Net capitalised costs includes Onshore US assets of US$ nil (2018:(2019: US$ nil; 2018: US$10,672 million; 2017: US$11,803 million). |
| (2) | Other is primarily comprised of Algeria, Mexico, Trinidad and Tobago and the United Kingdom (divested 30 November 2018). |
F-104
Costs incurred relating to oil and gas property acquisition, exploration and development activities The following table shows costs incurred relating to oil and gas property acquisition, exploration and development activities (whether charged to expense or capitalised). Amounts shown include interest capitalised. | | | | Australia | | | United States (3) | | | Other (4) | | | Total | | | Australia | | | United States (3) | | | Other (4) | | | Total | | | | | | US$M | | | US$M | | | US$M | | | US$M | | 2020 | | | | | | | | | | Acquisitions of proved property | | | | – | | | | – | | | | – | | | | – | | Acquisitions of unproved property | | | | – | | | | 38 | | | | 6 | | | | 44 | | Exploration (1) | | | | 38 | | | | 278 | | | | 370 | | | | 686 | | Development | | | | 232 | | | | 676 | | | | 100 | | | | 1,008 | | | | | | | | | | | | | | | | Total costs (2) | | | | 270 | | | | 992 | | | | 476 | | | | 1,738 | | | | | US$M | | | US$M | | | US$M | | | US$M | | | | | | | | | | | | | | 2019 | | | | | | | | | | | | | | | | | Acquisitions of proved property | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | Acquisitions of unproved property | | | – | | | | 5 | | | | – | | | | 5 | | | | – | | | | 5 | | | | – | | | | 5 | | Exploration (1) | | | 44 | | | | 190 | | | | 492 | | | | 726 | | | | 44 | | | | 190 | | | | 492 | | | | 726 | | Development | | | 132 | | | | 792 | | | | 54 | | | | 978 | | | | 132 | | | | 792 | | | | 54 | | | | 978 | | | | | | | | | | | | | | | | | | | | | | | | | | | Total costs (2) | | | 176 | | | | 987 | | | | 546 | | | | 1,709 | | | | 176 | | | | 987 | | | | 546 | | | | 1,709 | | | | | | | | | | | | | | | | | | | | | | | | | | | 2018 | | | | | | | | | | | | | | | | | Acquisitions of proved property | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | Acquisitions of unproved property | | | – | | | | 9 | | | | – | | | | 9 | | | | – | | | | 9 | | | | – | | | | 9 | | Exploration (1) | | | 25 | | | | 418 | | | | 291 | | | | 734 | | | | 25 | | | | 418 | | | | 291 | | | | 734 | | Development | | | 195 | | | | 1,548 | | | | 34 | | | | 1,777 | | | | 195 | | | | 1,548 | | | | 34 | | | | 1,777 | | | | | | | | | | | | | | | | | | | | | | | | | | | Total costs (2) | | | 220 | | | | 1,975 | | | | 325 | | | | 2,520 | | | | 220 | | | | 1,975 | | | | 325 | | | | 2,520 | | | | | | | | | | | | | | | | | | | | | | | | | | | 2017 | | | | | | | | | | Acquisitions of proved property | | | – | | | | – | | | | – | | | | – | | | Acquisitions of unproved property | | | – | | | | 12 | | | | 62 | | | | 74 | | | Exploration (1) | | | 32 | | | | 471 | | | | 235 | | | | 738 | | | Development | | | 360 | | | | 1,034 | | | | 18 | | | | 1,412 | | | | | | | | | | | | | | | | | Total costs (2) | | | 392 | | | | 1,517 | | | | 315 | | | | 2,224 | | | | | | | | | | | | | | | | |
| (1) | Represents gross exploration expenditure, including capitalised exploration expenditure, geological and geophysical expenditure and development evaluation costs charged to income as incurred. |
| (2) | Total costs include US$1,178 million (2019: US$1,275 million (2018:million; 2018: US$1,970 million; 2017: US$1,744 million) capitalised during the year. |
| (3) | Total costs include Onshore US assets of US$ nil (2019: US$331 million (2018:million; 2018: US$1,081 million; 2017: US$608 million). |
| (4) | Other is primarily comprised of Algeria, Canada, Mexico and Trinidad and Tobago. |
F-105
Results of operations from oil and gas producing activities The following information is similar to the disclosures in note 1 ‘Segment reporting’ in section 5.1, but differs in several respects as to the level of detail and geographic information. Amounts shown in the following table exclude financial income, financial expenses, and general corporate overheads. Further, the amounts shown below include Onshore US however the disclosures in note 1 ‘Segment reporting’ in Section 5.1 do not. Income taxes were determined by applying the applicable statutory rates topre-tax income with adjustments for permanent differences and tax credits. | | | | | | | | | | | | | | | | | | | | Australia | | | United States (7) | | | Other (8) | | | Total | | | | | US$M | | | US$M | | | US$M | | | US$M | | 2019 | | | | | | | | | | | | | | | | | Oil and gas revenue (1) | | | 3,404 | | | | 2,675 | | | | 610 | | | | 6,689 | | Production costs | | | (752 | ) | | | (568 | ) | | | (118 | ) | | | (1,438 | ) | Exploration expenses | | | (44 | ) | | | (162 | ) | | | (229 | ) | | | (435 | ) | Depreciation, depletion, amortisation and valuation provision (2) | | | (917 | ) | | | (621 | ) | | | (103 | ) | | | (1,641 | ) | Production taxes (3) | | | (198 | ) | | | – | | | | (25 | ) | | | (223 | ) | | | | | | | | | | | | | | | | | | | | | 1,493 | | | | 1,324 | | | | 135 | | | | 2,952 | | Accretion expense (4) | | | (80 | ) | | | (34 | ) | | | (13 | ) | | | (127 | ) | Income taxes | | | (530 | ) | | | (193 | ) | | | (267 | ) | | | (990 | ) | Royalty-related taxes (5) | | | (164 | ) | | | – | | | | – | | | | (164 | ) | | | | | | | | | | | | | | | | | | Results of oil and gas producing activities (6) | | | 719 | | | | 1,097 | | | | (145 | ) | | | 1,671 | | | | | | | | | | | | | | | | | | | 2018 | | | | | | | | | | | | | | | | | Oil and gas revenue (1) | | | 3,229 | | | | 3,747 | | | | 421 | | | | 7,397 | | Production costs | | | (701 | ) | | | (1,312 | ) | | | (121 | ) | | | (2,134 | ) | Exploration expenses | | | (25 | ) | | | (270 | ) | | | (254 | ) | | | (549 | ) | Depreciation, depletion, amortisation and valuation provision (2) | | | (1,045 | ) | | | (2,842 | ) | | | (81 | ) | | | (3,968 | ) | Production taxes (3) | | | (171 | ) | | | – | | | | (1 | ) | | | (172 | ) | | | | | | | | | | | | | | | | | | | | | 1,287 | | | | (677 | ) | | | (36 | ) | | | 574 | | Accretion expense (4) | | | (81 | ) | | | (46 | ) | | | (14 | ) | | | (141 | ) | Income taxes | | | (418 | ) | | | (723 | ) | | | (124 | ) | | | (1,265 | ) | Royalty-related taxes (5) | | | (103 | ) | | | – | | | | – | | | | (103 | ) | | | | | | | | | | | | | | | | | | Results of oil and gas producing activities (6) | | | 685 | | | | (1,446 | ) | | | (174 | ) | | | (935 | ) | | | | | | | | | | | | | | | | | | 2017 | | | | | | | | | | | | | | | | | Oil and gas revenue (1) | | | 2,876 | | | | 3,479 | | | | 356 | | | | 6,711 | | Production costs | | | (533 | ) | | | (1,515 | ) | | | (200 | ) | | | (2,248 | ) | Exploration expenses | | | (32 | ) | | | (242 | ) | | | (206 | ) | | | (480 | ) | Depreciation, depletion, amortisation and valuation provision (2) | | | (814 | ) | | | (2,592 | ) | | | (91 | ) | | | (3,497 | ) | Production taxes (3) | | | (158 | ) | | | (4 | ) | | | – | | | | (162 | ) | | | | | | | | | | | | | | | | | | | | | 1,339 | | | | (874 | ) | | | (141 | ) | | | 324 | | Accretion expense (4) | | | (56 | ) | | | (32 | ) | | | (14 | ) | | | (102 | ) | Income taxes | | | (361 | ) | | | 386 | | | | (142 | ) | | | (117 | ) | Royalty-related taxes (5) | | | (104 | ) | | | – | | | | – | | | | (104 | ) | | | | | | | | | | | | | | | | | | Results of oil and gas producing activities (6) | | | 818 | | | | (520 | ) | | | (297 | ) | | | 1 | | | | | | | | | | | | | | | | | | |
F-106
| | | | | | | | | | | | | | | | | | | | Australia | | | United States (7) | | | Other (8) | | | Total | | | | | US$M | | | US$M | | | US$M | | | US$M | | 2020 | | | | | | | | | | | | | | | | | Oil and gas revenue (1) | | | 2,535 | | | | 1,101 | | | | 350 | | | | 3,986 | | Production costs | | | (575 | ) | | | (161 | ) | | | (80 | ) | | | (816 | ) | Exploration expenses | | | (37 | ) | | | (271 | ) | | | (252 | ) | | | (560 | ) | Depreciation, depletion, amortisation and valuation provision (2) | | | (906 | ) | | | (476 | ) | | | (75 | ) | | | (1,457 | ) | Production taxes (3) | | | (177 | ) | | | (1 | ) | | | (13 | ) | | | (191 | ) | | | | | | | | | | | | | | | | | | | | | 840 | | | | 192 | | | | (70 | ) | | | 962 | | Accretion expense (4) | | | (78 | ) | | | (24 | ) | | | (10 | ) | | | (112 | ) | Income taxes | | | (275 | ) | | | (35 | ) | | | (157 | ) | | | (467 | ) | Royalty-related taxes (5) | | | (85 | ) | | | – | | | | – | | | | (85 | ) | | | | | | | | | | | | | | | | | | Results of oil and gas producing activities (6) | | | 402 | | | | 133 | | | | (237 | ) | | | 298 | | | | | | | | | | | | | | | | | | | 2019 | | | | | | | | | | | | | | | | | Oil and gas revenue (1) | | | 3,404 | | | | 2,675 | | | | 610 | | | | 6,689 | | Production costs | | | (752 | ) | | | (568 | ) | | | (118 | ) | | | (1,438 | ) | Exploration expenses | | | (44 | ) | | | (162 | ) | | | (229 | ) | | | (435 | ) | Depreciation, depletion, amortisation and valuation provision (2) | | | (917 | ) | | | (621 | ) | | | (103 | ) | | | (1,641 | ) | Production taxes (3) | | | (198 | ) | | | – | | | | (25 | ) | | | (223 | ) | | | | | | | | | | | | | | | | | | | | | 1,493 | | | | 1,324 | | | | 135 | | | | 2,952 | | Accretion expense (4) | | | (80 | ) | | | (34 | ) | | | (13 | ) | | | (127 | ) | Income taxes | | | (530 | ) | | | (193 | ) | | | (267 | ) | | | (990 | ) | Royalty-related taxes (5) | | | (164 | ) | | | – | | | | – | | | | (164 | ) | | | | | | | | | | | | | | | | | | Results of oil and gas producing activities (6) | | | 719 | | | | 1,097 | | | | (145 | ) | | | 1,671 | | | | | | | | | | | | | | | | | | | 2018 | | | | | | | | | | | | | | | | | Oil and gas revenue (1) | | | 3,229 | | | | 3,747 | | | | 421 | | | | 7,397 | | Production costs | | | (701 | ) | | | (1,312 | ) | | | (121 | ) | | | (2,134 | ) | Exploration expenses | | | (25 | ) | | | (270 | ) | | | (254 | ) | | | (549 | ) | Depreciation, depletion, amortisation and valuation provision (2) | | | (1,045 | ) | | | (2,842 | ) | | | (81 | ) | | | (3,968 | ) | Production taxes (3) | | | (171 | ) | | | – | | | | (1 | ) | | | (172 | ) | | | | | | | | | | | | | | | | | | | | | 1,287 | | | | (677 | ) | | | (36 | ) | | | 574 | | Accretion expense (4) | | | (81 | ) | | | (46 | ) | | | (14 | ) | | | (141 | ) | Income taxes | | | (418 | ) | | | (723 | ) | | | (124 | ) | | | (1,265 | ) | Royalty-related taxes (5) | | | (103 | ) | | | – | | | | – | | | | (103 | ) | | | | | | | | | | | | | | | | | | Results of oil and gas producing activities (6) | | | 685 | | | | (1,446 | ) | | | (174 | ) | | | (935 | ) | | | | | | | | | | | | | | | | | |
| (1) | Includes sales to affiliated companies of US$7562 million (2018:(2019: US$75 million; 2017:2018: US$8375 million). |
| (2) | Includes valuation provision of US$12 million (2019: US$21 million (2018:million; 2018: US$596 million; 2017: US$102 million). |
| (3) | Includes royalties and excise duty. |
| (4) | Represents the unwinding of the discount on the closure and rehabilitation provision. |
| (5) | Includes petroleum resource rent tax and petroleum revenue tax where applicable. |
| (6) | Amounts shown exclude financial income, financial expenses and general corporate overheads and, accordingly, do not represent all of the operations attributable to the Petroleum segment presented in note 1 ‘Segment reporting’ in section 5.1. |
| (7) | Results of oil and gas producing activities includes Onshore US assets of US$ nil (2019: US$431 million (2018:million; 2018: US$(465) million; 2017: US$(564) million). |
| (8) | Other is primarily comprised of Algeria, Canada, Mexico, Trinidad and Tobago and the United Kingdom (divested 30 November 2018). |
Standardised measure of discounted future net cash flows relating to proved oil and gas reserves (Standardised measure) The following tables set out the standardised measure of discounted future net cash flows, and changes therein, related to the Group’s estimated proved reserves as presented in section 6.3.16.4.1 ‘Petroleum reserves’, and should be read in conjunction with that disclosure. The analysis is prepared in compliance with FASB Oil and Gas Disclosure requirements, applying certain prescribed assumptions under Topic 932 including the use of unweighted averagefirst-day-of-the-month market prices for the previous12-months,year-end cost factors, currently enacted tax rates and an annual discount factor of 10 per cent to year end quantities of net proved reserves. Certain key assumptions prescribed under Topic 932 are arbitrary in nature and may not prove to be accurate. The reserve estimates on which the Standard measure is based are subject to revision as further technical information becomes available or economic conditions change. F-107
Discounted future net cash flows like those shown below are not intended to represent estimates of fair value. An estimate of fair value would also take into account, among other things, the expected recovery of reserves in excess of proved reserves, anticipated future changes in commodity prices, exchange rates, development and production costs as well as alternative discount factors representing the time value of money and adjustments for risk inherent in producing oil and gas. | | | | Australia | | United States (1) | | Other (2) | | Total | | | Australia | | United States (1) | | Other (2) | | Total | | | | | US$M | | US$M | | US$M | | US$M | | | US$M | | US$M | | US$M | | US$M | | Standardised measure | | | | | | | | | | | | | | | | | 2020 | | | | | | | | | | Future cash inflows | | | | 11,526 | | | | 12,997 | | | | 1,660 | | | | 26,183 | | Future production costs | | | | (4,027 | ) | | | (4,943 | ) | | | (494 | ) | | | (9,464 | ) | Future development costs | | | | (4,124 | ) | | | (3,242 | ) | | | (433 | ) | | | (7,799 | ) | Future income taxes (3) | | | | (187 | ) | | | (880 | ) | | | (473 | ) | | | (1,540 | ) | | | | | | | | | | | | | | | Future net cash flows | | | | 3,188 | | | | 3,932 | | | | 260 | | | | 7,380 | | Discount at 10 per cent per annum | | | | (642 | ) | | | (1,586 | ) | | | (94 | ) | | | (2,322 | ) | | | | | | | | | | | | | | | Standardised measure | | | | 2,546 | | | | 2,346 | | | | 166 | | | | 5,058 | | | | | | | | | | | | | | | | 2019 | | | | | | | | | | | | | | | | | Future cash inflows | | | 18,292 | | | | 18,076 | | | | 1,807 | | | | 38,175 | | | | 18,292 | | | 18,076 | | | 1,807 | | | 38,175 | | Future production costs | | | (4,710 | ) | | | (4,917 | ) | | | (459 | ) | | | (10,086 | ) | | | (4,710 | ) | | (4,917 | ) | | (459 | ) | | (10,086 | ) | Future development costs | | | (3,860 | ) | | | (4,516 | ) | | | (226 | ) | | | (8,602 | ) | | | (3,860 | ) | | (4,516 | ) | | (226 | ) | | (8,602 | ) | Future income taxes | | | (2,551 | ) | | | (1,657 | ) | | | (711 | ) | | | (4,919 | ) | | Future income taxes (3) | | | | (2,551 | ) | | (1,657 | ) | | (711 | ) | | (4,919 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | Future net cash flows | | | 7,171 | | | | 6,986 | | | | 411 | | | | 14,568 | | | | 7,171 | | | 6,986 | | | 411 | | | 14,568 | | Discount at 10 per cent per annum | | | (1,926 | ) | | | (3,396 | ) | | | (94 | ) | | | (5,416 | ) | | | (1,926 | ) | | (3,396 | ) | | (94 | ) | | (5,416 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | Standardised measure | | | 5,245 | | | | 3,590 | | | | 317 | | | | 9,152 | | | | 5,245 | | | 3,590 | | | 317 | | | 9,152 | | | | | | | | | | | | | | | | | | | | | | | | | | | 2018 | | | | | | | | | | | | | | | | | Future cash inflows | | | 17,398 | | | 28,012 | | | 2,124 | | | 47,534 | | | | 17,398 | | | 28,012 | | | 2,124 | | | 47,534 | | Future production costs | | | (5,345 | ) | | (11,182 | ) | | (501 | ) | | (17,028 | ) | | | (5,345 | ) | | (11,182 | ) | | (501 | ) | | (17,028 | ) | Future development costs | | | (3,842 | ) | | (6,554 | ) | | (189 | ) | | (10,585 | ) | | | (3,842 | ) | | (6,554 | ) | | (189 | ) | | (10,585 | ) | Future income taxes | | | (1,919 | ) | | (1,236 | ) | | (901 | ) | | (4,056 | ) | | Future income taxes (3) | | | | (1,919 | ) | | (1,236 | ) | | (901 | ) | | (4,056 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | Future net cash flows | | | 6,292 | | | 9,040 | | | 533 | | | 15,865 | | | | 6,292 | | | 9,040 | | | 533 | | | 15,865 | | Discount at 10 per cent per annum | | | (1,713 | ) | | (3,783 | ) | | (129 | ) | | (5,625 | ) | | | (1,713 | ) | | (3,783 | ) | | (129 | ) | | (5,625 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | Standardised measure | | | 4,579 | | | 5,257 | | | 404 | | | 10,240 | | | | 4,579 | | | 5,257 | | | 404 | | | 10,240 | | | | | | | | | | | | | | | | | | | | | | | | | | | 2017 | | | | | | | | | | Future cash inflows | | | 18,407 | | | 23,537 | | | 1,954 | | | 43,898 | | | Future production costs | | | (6,663 | ) | | (11,176 | ) | | (534 | ) | | (18,373 | ) | | Future development costs | | | (3,714 | ) | | (6,451 | ) | | (208 | ) | | (10,373 | ) | | Future income taxes | | | (1,508 | ) | | (18 | ) | | (746 | ) | | (2,272 | ) | | | | | | | | | | | | | | | | Future net cash flows | | | 6,522 | | | 5,892 | | | 466 | | | 12,880 | | | Discount at 10 per cent per annum | | | (2,104 | ) | | (2,426 | ) | | (108 | ) | | (4,638 | ) | | | | | | | | | | | | | | | | Standardised measure | | | 4,418 | | | 3,466 | | | 358 | | | 8,242 | | | | | | | | | | | | | | | | |
| (1) | Standardised measure includes Onshore US assets of US$ nil (2018:(2019: US$ nil; 2018: US$1,932 million; 2017: US$1,962 million). |
| (2) | Other is primarily comprised of Algeria and Trinidad and Tobago. |
F-108
| (3) | Future income taxes include credits to be received as a result of Petroleum operations and the utilisation of future tax losses by the Group. |
Changes in the Standardised measure are presented in the following table. | | | | 2019 | | 2018 | | 2017 | | | 2020 | | 2019 | | 2018 | | | | | US$M | | US$M | | US$M | | | US$M | | US$M | | US$M | | Changes in the Standardised measure | | | | | | | | | | | | | Standardised measure at the beginning of the year | | | 10,240 | | | 8,242 | | | 8,987 | | | | 9,152 | | | 10,240 | | | 8,242 | | Revisions: | | | | | | | | | | | | | Prices, net of production costs | | | 3,821 | | | 5,540 | | | (96 | ) | | | (5,633 | ) | | 3,821 | | | 5,540 | | Changes in future development costs | | | (228 | ) | | (358 | ) | | 275 | | | | 330 | | | (228 | ) | | (358 | ) | Revisions of reserves quantity estimates (1) | | | 1,268 | | | (166 | ) | | 2,961 | | | | (229 | ) | | 1,268 | | | (166 | ) | Accretion of discount | | | 1,178 | | | 1,016 | | | 1,147 | | | | 1,313 | | | 1,178 | | | 1,016 | | Changes in production timing and other | | | (618 | ) | | 946 | | | (1,611 | ) | | | (310 | ) | | (618 | ) | | 946 | | | | | | | | | | | | | | | | | | | | | | | | 15,661 | | | 15,220 | | | 11,663 | | | | 4,623 | | | 15,661 | | | 15,220 | | Sales of oil and gas, net of production costs | | | (5,029 | ) | | (5,091 | ) | | (4,301 | ) | | | (2,980 | ) | | (5,029 | ) | | (5,091 | ) | Acquisitions ofreserves-in-place | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | Sales ofreserves-in-place(2) | | | (1,489 | ) | | (26 | ) | | (15 | ) | | | – | | | (1,489 | ) | | (26 | ) | Previously estimated development costs incurred | | | 545 | | | 1,068 | | | 718 | | | | 1,005 | | | 545 | | | 1,068 | | Extensions, discoveries, and improved recoveries, net of future costs | | | (33 | ) | | 502 | | | (401 | ) | | | 145 | | | (33 | ) | | 502 | | Changes in future income taxes | | | (503 | ) | | (1,433 | ) | | 578 | | | | 2,265 | | | (503 | ) | | (1,433 | ) | | | | | | | | | | | | | | | | | | | | Standardised measure at the end of the year (3) | | | 9,152 | | | 10,240 | | | 8,242 | | | | 5,058 | | | 9,152 | | | 10,240 | | | | | | | | | | | | | | | | | | | | |
| (1) | Changes in reserves quantities are shown in the Petroleum reserves tables in section 6.3.1.6.4.1. |
| (2) | Onshore US assets disposal.disposal in 2019. |
| (3) | Standardised measure at the end of the year includes Onshore US assets of US$ nil (2018:(2019: US$ nil; 2018: US$1,932 million; 2017: US$1,962 million). |
Accounting for suspended exploratory well costs Refer to note 11 ‘Property, plant and equipment’ in section 5.1 for a discussion of the accounting policy applied to the cost of exploratory wells. Suspended wells are also reviewed in this context. The following table provides the changes to capitalised exploratory well costs that were pending the determination of proved reserves for the three years ended 30 June 2019,2020, 30 June 20182019 and 30 June 2017.2018. | | | | | | | | | | | | | | | | 2019 | | | 2018 | | | 2017 | | | | | US$M | | | US$M | | | US$M | | Movement in capitalised exploratory well costs | | | | | | | | | | | | | At the beginning of the year | | | 794 | | | | 668 | | | | 770 | | Additions to capitalised exploratory well costs pending the determination of proved reserves | | | 297 | | | | 186 | | | | 258 | | Capitalised exploratory well costs charged to expense | | | (9 | ) | | | (62 | ) | | | (69 | ) | Capitalised exploratory well costs reclassified to wells, equipment, and facilities based on the determination of proved reserves | | | (42 | ) | | | 2 | | | | (155 | ) | Other | | | – | | | | – | | | | (136 | ) | | | | | | | | | | | | | | At the end of the year | | | 1,040 | | | | 794 | | | | 668 | | | | | | | | | | | | | | |
F-109
| | | | | | | | | | | | | | | | 2020 | | | 2019 | | | 2018 | | | | | US$M | | | US$M | | | US$M | | Movement in capitalised exploratory well costs | | | | | | | | | | | | | At the beginning of the year | | | 1,040 | | | | 794 | | | | 668 | | Additions to capitalised exploratory well costs pending the determination of proved reserves | | | 120 | | | | 297 | | | | 186 | | Capitalised exploratory well costs charged to expense | | | – | | | | (9 | ) | | | (62 | ) | Capitalised exploratory well costs reclassified to wells, equipment, and facilities based on the determination of proved reserves | | | (6 | ) | | | (42 | ) | | | 2 | | Sale of suspended wells | | | (65 | ) | | | – | | | | – | | | | | | | | | | | | | | | At the end of the year | | | 1,089 | | | | 1,040 | | | | 794 | | | | | | | | | | | | | | |
The following table provides an ageing of capitalised exploratory well costs, based on the date the drilling was completed, and the number of projects for which exploratory well costs has been capitalised for a period greater than one year since the completion of drilling. Exploration activity typically involves drilling multiple wells, over a number of years, to fully evaluate and appraise a project. The term “project”‘project’ as used in this disclosure refers primarily to individual wells and associated exploratory activities. | | | | 2019 | | | 2018 | | | 2017 | | | 2020 | | | 2019 | | | 2018 | | | | | US$M | | | US$M | | | US$M | | | US$M | | | US$M | | | US$M | | Ageing of capitalised exploratory well costs | | | | | | | | | | | | | Exploratory well costs capitalised for a period of one year or less | | | 210 | | | | 124 | | | | 120 | | | | 120 | | | | 210 | | | | 124 | | Exploratory well costs capitalised for a period greater than one year | | | 830 | | | | 670 | | | | 548 | | | | 969 | | | | 830 | | | | 670 | | | | | | | | | | | | | | | | | | | | | At the end of the year | | | 1,040 | | | | 794 | | | | 668 | | | | 1,089 | | | | 1,040 | | | | 794 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2019 | | | 2018 | | | 2017 | | | 2020 | | | 2019 | | | 2018 | | Number of projects that have been capitalised for a period greater than one year | | | 13 | | | | 17 | | | | 14 | | | | 14 | | | | 13 | | | | 17 | | | | | | | | | | | | | | | | | | | | |
Drilling and other exploratory and development activities The number of crude oil and natural gas wells drilled and completed for each of the last three years was as follows: | | | | Net exploratory wells | | | Net development wells | | | | | | Net exploratory wells | | | Net development wells | | | | | | | | Productive | | | Dry | | | Total | | | Productive | | | Dry | | | Total | | | Total | | Year ended 30 June 2020 | | | | | | | | | | | | | | | | Australia | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | United States (1) | | | | – | | | | – | | | | – | | | | – | | | | 1 | | | | 1 | | | | 1 | | Other (2) | | | | 1 | | | | 1 | | | | 2 | | | | 1 | | | | – | | | | 1 | | | | 3 | | | | | | | | | | | | | | | | | | | | | | | | | Total | | | | 1 | | | | 1 | | | | 2 | | | | 1 | | | | 1 | | | | 2 | | | | 4 | | | | | Productive | | | Dry | | | Total | | | Productive | | | Dry | | | Total | | | Total | | | | | | | | | | | | | | | | | | | | | | | Year ended 30 June 2019 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Australia | | | – | | | | – | | | | – | | | | 1 | | | | – | | | | 1 | | | | 1 | | | | – | | | | – | | | | – | | | | 1 | | | | – | | | | 1 | | | | 1 | | United States (1) | | | 1 | | | | – | | | | 1 | | | | 33 | | | | – | | | | 33 | | | | 34 | | | | 1 | | | | – | | | | 1 | | | | 33 | | | | – | | | | 33 | | | | 34 | | Other (2) | | | 4 | | | | 2 | | | | 6 | | | | – | | | | – | | | | – | | | | 6 | | | | 4 | | | | 2 | | | | 6 | | | | – | | | | – | | | | – | | | | 6 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | | 5 | | | | 2 | | | | 7 | | | | 34 | | | | – | | | | 34 | | | | 41 | | | | 5 | | | | 2 | | | | 7 | | | | 34 | | | | – | | | | 34 | | | | 41 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Year ended 30 June 2018 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Australia | | | – | | | | – | | | | – | | | | 1 | | | | – | | | | 1 | | | | 1 | | | | – | | | | – | | | | – | | | | 1 | | | | – | | | | 1 | | | | 1 | | United States (1) | | | 1 | | | | 1 | | | | 2 | | | | 84 | | | | 1 | | | | 85 | | | | 87 | | | | 1 | | | | 1 | | | | 2 | | | | 84 | | | | 1 | | | | 85 | | | | 87 | | Other (2) | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | | 1 | | | | 1 | | | | 2 | | | | 85 | | | | 1 | | | | 86 | | | | 88 | | | | 1 | | | | 1 | | | | 2 | | | | 85 | | | | 1 | | | | 86 | | | | 88 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Year ended 30 June 2017 | | | | | | | | | | | | | | | | Australia | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | United States (1) | | | – | | | | – | | | | – | | | | 80 | | | | – | | | | 80 | | | | 80 | | | Other (2) | | | 3 | | | | 2 | | | | 5 | | | | 1 | | | | – | | | | 1 | | | | 6 | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | | 3 | | | | 2 | | | | 5 | | | | 81 | | | | – | | | | 81 | | | | 86 | | | | | | | | | | | | | | | | | | | | | | | | | |
| (1) | Includes Onshore US assets net productive development wells of 33 (2018: 84; 2017: 79)nil (2019: 33; 2018: 84) and net dry development wells of nil (2018: 1; 2017: nil)(2019: nil; 2018: 1). Onshore US assets had nil net exploratory wells in 2020, 2019 2018 and 2017.2018. |
| (2) | Other is primarily comprised of Algeria, Mexico and Trinidad and Tobago. |
The number of wells drilled refers to the number of wells completed at any time during the respective year, regardless of when drilling was initiated. Completion refers to the installation of permanent equipment for production of oil or gas, or, in the case of a dry well, to reporting to the appropriate authority that the well has been abandoned. F-110
An exploratory well is a well drilled to find oil or gas in a new field or to find a new reservoir in a field previously found to be productive of oil or gas in another reservoir. A development well is a well drilled within the limits of a known oil or gas reservoir to the depth of a stratigraphic horizon known to be productive. A productive well is an exploratory, development or extension well that is not a dry well. Productive wells include wells in which hydrocarbons were encountered and the drilling or completion of which, in the case of exploratory wells, has been suspended pending further drilling or evaluation. A dry well (hole) is an exploratory, development, or extension well that proves to be incapable of producing either oil or gas in sufficient quantities to justify completion as an oil or gas well. Oil and gas properties, wells, operations, and acreage The following tables show the number of gross and net productive crude oil and natural gas wells and total gross and net developed and undeveloped oil and natural gas acreage as at 30 June 2019.2020. A gross well or acre is one in which a working interest is owned, while a net well or acre exists when the sum of fractional working interests owned in gross wells or acres equals one. Productive wells are producing wells and wells mechanically capable of production. Developed acreage is comprised of leased acres that are within an area by or assignable to a productive well. Undeveloped acreage is comprised of leased acres on which wells have not been drilled or completed to a point that would permit the production of economic quantities of oil and gas, regardless of whether such acres contain proved reserves. The number of productive crude oil and natural gas wells in which the Group held an interest at 30 June 20192020 was as follows: | | | | | | | | | | | | | | | | | | | | | | | | | | | | Crude oil wells | | | Natural gas wells | | | Total | | | | | Gross | | | Net | | | Gross | | | Net | | | Gross | | | Net | | Australia | | | 352 | | | | 176 | | | | 153 | | | | 53 | | | | 505 | | | | 229 | | United States | | | 60 | | | | 25 | | | | – | | | | – | | | | 60 | | | | 25 | | Other (1) | | | 57 | | | | 21 | | | | 8 | | | | 4 | | | | 65 | | | | 25 | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | | 469 | | | | 222 | | | | 161 | | | | 57 | | | | 630 | | | | 279 | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | Crude oil wells | | | Natural gas wells | | | Total | | | | | Gross | | | Net | | | Gross | | | Net | | | Gross | | | Net | | Australia | | | 353 | | | | 176 | | | | 162 | | | | 54 | | | | 515 | | | | 230 | | United States | | | 61 | | | | 24 | | | | – | | | | – | | | | 61 | | | | 24 | | Other (1) | | | 59 | | | | 22 | | | | 8 | | | | 4 | | | | 67 | | | | 26 | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | | 473 | | | | 222 | | | | 170 | | | | 58 | | | | 643 | | | | 280 | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (1) | Other is primarily comprised of Algeria Mexico and Trinidad and Tobago. |
Of the productive crude oil and natural gas wells, 43133 (net: 18)62) operated wells had multiple completions. Developed and undeveloped acreage (including both leases and concessions) held at 30 June 20192020 was as follows: | | | | Developed acreage | | | Undeveloped acreage | | | Developed acreage | | | Undeveloped acreage | | Thousands of acres | | Gross | | | Net | | | Gross | | | Net | | | Gross | | | Net | | | Gross | | | Net | | Australia | | | 2,152 | | | | 823 | | | | 963 | | | | 393 | | | | 2,152 | | | | 823 | | | | 766 | | | | 279 | | United States | | | 105 | | | | 39 | | | | 828 | | | | 776 | | | | 98 | | | | 36 | | | | 844 | | | | 800 | | Other (1)(2) | | | 146 | | | | 57 | | | | 3,526 | | | | 2,869 | | | | 146 | | | | 57 | | | | 3,926 | | | | 3,445 | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | | 2,403 | | | | 919 | | | | 5,317 | | | | 4,038 | | | | 2,396 | | | | 916 | | | | 5,536 | | | | 4,524 | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (1) | Developed acreage in Other primarily consists of Algeria and Trinidad and Tobago. |
| (2) | Undeveloped acreage in Other primarily consists of Barbados, Canada, Mexico and Trinidad and Tobago. |
Approximately 126833 thousand gross acres (59(411 thousand net acres), 1,6121,089 thousand gross acres (932(655 thousand net acres) and 1,257264 thousand gross acres (889(256 thousand net acres) of undeveloped acreage will expire in the years ending 30 June 2020, 2021, 2022 and 20222023 respectively, if the Group does not establish production or take any other action to extend the terms of the licences and concessions. F-111F-106
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